Chapter V (6)

What is the use then of arguing about a “pound,” when our paper, if called in, could not by any possibility realise it? We do not in the slightest degree deprecate the discussion at a future time; on the contrary, we most earnestly hope that the whole subject may engage the early attention of the next Parliament, for we are thoroughly convinced that the more it is sifted, the more clear and palpable will become the fallacies of our financial empiric. But we frankly avow our anxiety that he may not be permitted through such a begging of the question, to escape from his present difficulties. Let him show, if he can, that his Act of 1844 was the natural and inevitable result of his previous measures, and then we may be in a situation to condemn the whole of them together. But if it is not so, but a mere device of his own to show his admirable mechanical skill, let him defend it on its own merits. That it has acted banefully on the currency, no man can deny. It is quite clear that it has led to an enormous depreciation of property; and the very fact, that, notwithstanding the unprecedented pressure, the general credit has been maintained, is above all others the strongest proof that the pressure was utterly uncalled for. The point for immediate consideration simply resolves itself into this: are we to leave untouched upon the statute-book, a law which can at any time expose us to the inevitable hardship of a monetary crisis like the present?--Are we to continue and approve of an Act, the operation of which is, in certain circumstances, to drain dry the fountain of our currency, and that at the very time when an expansion of the currency is required? We do not want to hear from Sir Robert Peel, any more than from an itinerant lecturer, his definition of the nature of a “pound.” What we want is a fair current representative for our property, without an adequate supply of which, that property becomes stationary and is depreciated. The depreciation of the last few months has, upon the most moderate calculation, swallowed up at least two years of the surplus capital of the country, and yet we are told that such a state of things is not only necessary but wholesome! We are quite aware that it is in vain to look for any remedy at the hands of the Whigs. They are at present in a state of most hopeless bewilderment on the subject; trusting in the first instance to Sir Robert Peel, and in the next to the chapter of accidents. A good harvest they think will be sufficient to remove all immediate difficulty; prices will again revive, and the monetary distress be forgotten. We pray most earnestly that the first part of their anticipations may prove correct, but we shall not on that account relax in our exertions to overturn a system which may at any moment expose us to the recurrence of a similar calamity.

With very few exceptions the whole of the public press is with us, and we can hardly believe that the intelligence of the nation is not adequate to work out its own relief. In fact, out of the House of Commons there is hardly a single man who does not reprobate the continual tampering with the currency, which, next to his marvellous power of tergiversation, is the leading characteristic of Peel: nor would his measure of 1844 have been carried but for his confident puffing of the merits of his own machinery, and the almost universal belief in his talents as a financial minister. The bankers, and all those--who were familiar with monetary matters, and who, from long experience, were gifted with foresight and sagacity, not only entertained but expressed the most serious doubts as to the permanent working of the act. But all warning was rejected with scorn by our political dictator, who was resolved to have his own way; and at the present moment we are reaping the delectable harvest of our confidence.

We have already spoken, quite fully enough, of the manner in which the unanimous remonstrance of the Scottish bankers was received. The fact that their representation was backed by the unanimous voice of the public, beseeching that they might be left alone without any legislative interference, went for nothing in the eyes of Sir Robert. He had, to say the truth, too much power, and he never was chary in abusing it. He dealt with Scotland as if she were an insignificant colony, too ignorant to regulate her own monetary affairs, and too weak to resist any show of forcible aggression. In the plenitude of his rashness, however, he displayed the same disregard to public opinion in regulating the currency of England; and we shall now proceed to detail a very few of the several warnings which he has received.

In 1844 the following document was laid before him; and we surely do not exaggerate its importance when we say, that it proceeded from a body of men whose opinions, upon monetary subjects, were entitled to be listened to with the utmost respect and deference:--“We, the undersigned bankers of London, are induced, by the importance of the measure and our interest in its success, to address you upon the subject of the Bank Charter Bill, now before parliament. We were led to believe, when the measure was first brought forward, and we feel confident it was generally understood throughout the country, that although it was the intention of her Majesty’s government that the paper Circulation of the Bank of England, in their issue department, should be limited to an amount not exceeding £14,000,000, upon securities, yet, that in the event of any particular crisis arising, a power was to be reserved by the bill enabling the Bank of England, with the consent of the first Lord of the Treasury, the Chancellor of the Exchequer, and the Master of the Mint, to extend their issue upon securities beyond that amount. It is with considerable surprise that we find that the bill now before the House of Commons does not contain any provision for an extension of the issue beyond £14,000,000, upon securities, excepting under the special circumstances named in the fifth clause of the bill now before parliament. We are apprehensive that the absolute limitation of the issue to £14,000,000, without any power of expansion reserved, whether that amount be in itself a proper amount or not, will create a general feeling of uneasiness throughout the country, and, by preventing the satisfactory reception of the measure, will deprive the scheme of many of the advantages it possesses, and interfere with its success. We respectfully submit that the effect of such an absolute limitation _will be to restrict the business of the country by leading to a general withdrawal of legitimate accommodation_, unless some power be reserved by the bill for extending the issue with the sanction of the authorities above alluded to in cases of emergency, to be made apparent to such authorities.”

This memorial, to which were adhibited the signatures of every eminent banking firm in London, was treated by Sir Robert Peel with the most calm and imperturbable indifference. The warning and the danger so distinctly described and foretold had no effect in altering the resolution of the intrepid baronet. He had made up his mind to place the country permanently in commercial fetters, and no representation of the consequences would cause him to swerve from his purpose. It would have been well if at that time he had reflected with a little respect upon the opinions entertained and expressed by his own venerated father--a man of that sound sagacity and peculiar clearness of conception which are incomparably more valuable than talents of an adroit and plausible description. We wish that those few of his old supporters and adherents who are in the daily habit of diluting the monetary notions of their idol, would refer to the views which were enunciated by the elder Peel in his remarkable letter of 1826, addressed to the members of both houses of parliament. It is surely not unfair to recall the words of the father as powerful evidence against the destructive theories of the son.

Sir Robert Peel, senior, writes thus:--"In the enlarged scale of business carried on by this country, embracing a great variety of pursuits, a reliance on a metallic circulation alone ever did, and ever will fail us. Gold, though in itself massy, often disappears in consequence of war or speculation--nay, the breath of rumour itself is sufficient to disperse it. Our domestic concerns are interrupted, and confidence lost, for want of an ample and approved medium of traffic.

"I am no friend to an unrestrained issue of paper money, and saw with concern, in the absence of a due quantity of specie, bills admitted into circulation issued by persons of respectability, possessing property, but evidently unable to meet a sudden and large demand upon them. More than two years ago, I mentioned to a friend, high in his Majesty’s councils, my fears of the mischief likely to ensue if the practice were not discontinued; accompanied with a suggestion to confine future issues of paper money or tokens to the Bank of England and other competent bodies of men, _who would give security in land, the public funds, canals, buildings, or other tangible property_, amounting at least to one-half of the value of their bills or tokens in circulation. My proposition was not favoured with any notice; yet, had it been adopted, I am of opinion that most of the panic and distress now so severely felt in the nation would have been avoided. If such an improvement in the banking system could be made available, gold would become less requisite, and the country be supplied with a stationary medium of exchange originating with ourselves.

"The present panic and distress in the country have been declared by high authority to proceed from ‘overtrading’ and ‘wild speculation.’ Infant nations and establishments are liable to miscarry from want of experience and solidity. TRADING and SPECULATION, being natives of this island, and parents of our wealth and independence, are surely exempt from such an imputation. The same authority has declared, that ‘gold and paper money are incompatible with each other, and cannot exist together.’ _The population and trade of the empire having been much increased, a proportionate increase in the medium of circulation is called for_; and when gold is found insufficient, recourse must be had to paper, which if improved on the principle already suggested, the two substances would be found in the same pocket without disunion.

“Anxious to see our situation ameliorated, I trust the currency may be mended without changing or impairing the national commercial character--which measure, if resorted to, would resemble the policy of diverting from its course a powerful river that had long given fertility and happiness to a large district, merely because, from excessive rains, it had sometimes exceeded its natural limits, and produced partial injury.”

A sounder and a clearer view of the sole legitimate control which government is entitled, for security of the public, to exercise over the issues of the bankers, cannot be found than this. The elder baronet was fully alive to the gross absurdity of the bullionists who literally make toys of their coin. He recognised to its fullest extent the salutary principle that REAL PROPERTY is, after all, the only proper basis of circulation: and he would have laughed to scorn the idea of an arbitrary restricted issue, as the certain means of inflicting a paralytic stroke upon the energies and the enterprise of the nation. The total neglect of this view is the capital error of the son. He depreciates the value of real property, by depriving its possessor of the power to command at any time its cheap and commodious representative; and he forces us, under the most adverse circumstances to hunt for gold, and not improbably to humiliate ourselves in time of need, by an application to the hoarding Russian.

We entreat the public attention to the fact, that the banking system and mode of circulation suggested by the elder Sir Robert Peel, is in fact precisely that which was followed out by the Scottish banks, without failure, without complaint, and with incalculable advantage to the country, before the late premier commenced his wanton interference with our institutions. Heaven only knows what amount of suffering we must undergo until the public mind is thoroughly roused to the evils which have resulted from a weak and imbecile confidence in the nostrums of a theoretical minister, and until the money trade is freed from its present most odious restrictions. But we cannot, and we think we ought not, to conceal our conviction that the present monetary crisis is directly owing to the Restriction Act, and that the whole empire, and Scotland in particular, has reason to curse the hour when Sir Robert Peel thought fit to embark on his financial crusade.

We are glad to see such men as Mr Baring and Mr Newdegate protesting in the lower House, against the iniquity of the present system, and exposing its operations in detail. It is in vain that the Chancellor of the Exchequer--whose deference to the opinions of Sir Robert Peel is so ludicrously displayed--attempts to raise his voice in defence of restriction, and to attribute to other causes the deficiency which he cannot deny. Even Peel himself, as we have already remarked, is fain to blink the question, and to escape from the attacks of his antagonists, by the stale artifice of confounding and contrasting their opinions. The memorable debate in the House of Commons on the 10th of May, has, if we are not widely mistaken, established a principle which must lead to important party results; and we would earnestly beseech those who have the welfare of their country at heart, to make this matter of the currency a leading consideration in the use of their electoral franchise.

We have already shown the manner in which Sir Robert Peel was pleased to treat the respectful remonstrance of the English bankers, and the total variance of his financial views from those which were entertained by his excellent and honoured parent. We now take leave to draw the attention of our readers to a rather remarkable passage in Mr Alison’s late pamphlet, entitled “_England in 1815 and 1845_.”

We need hardly state our reasons for declining to criticise that work. We agree entirely with the views entertained by that eminent writer; and we should be happy indeed, could we state our own arguments with a force and a precision at all commensurate with his. Sir Robert Peel, however, in the course of the year 1845, thought proper to make this pamphlet the subject of his remarks, and concluded, _more suo_, with a sneer at Mr Alison, which, apart from its propriety, does not strike us as particularly clever. The point at issue was rather a trivial one; for Sir Robert, as usual, did not apply himself to the main body of the argument: he neither impeached the facts nor the conclusions of Mr Alison, but fastened upon an incidental point of no great value or importance. The attack, however, had this good effect, that it elicited a reply from Mr Alison, in which he points out so distinctly the results of the restrictive measure, that we cannot do better than transfer an extract from his Postscript to our pages. It is proper to observe, that this Postscript was published _two years ago_, and we leave the public to judge of the accuracy of M. Alison’s observations:--

“Whoever,” says he, referring to the Banking Act of the preceding year--"whoever considers these provisions with attention, will see that they practically introduce two things: 1st, A limitation of the issue of Bank of England notes to £14,000,000 on securities, with the addition of the specie and bullion transferred to the issue department:--2d, A limitation of any further issue to the amount of such securities, bullion and specie. It is the avowed object of the Act to base the circulation of the bank on these three things. And the opinion of its supporters has been repeatedly expressed that they constitute the only safe foundation of banking operations. If, therefore, the specie is drawn out by the holders of notes who are declared entitled by the Act to have their notes paid at £3, 17s. 10½d. an ounce of gold, it follows, of course, that the notes in circulation must be diminished in the same proportion. They cannot issue notes beyond the £14,000,000, _except in exchange for specie or bullion_--the most effectual of all ways for limiting the issue to their amount.

"_Now, suppose a bad harvest, such as we have narrowly escaped, occurs, when undertakings of a gigantic nature are on foot, and a large quantity of specie is drawn from the bank to purchase foreign grain or other subsistence, what, under the existing law, must be the consequence?_ Must it not be that the paper circulation of the Bank of England and of course of every other bank, will be simultaneously and rapidly contracted? Their own notes pour in to be exchanged for specie to buy foreign grain, or make the necessary remittances to foreign undertakings. They cannot issue new ones beyond the £14,000,000, except in exchange for specie or bullion, which is the very thing they are every day losing, and which is bought up in all parts of the country for foreign exportation. The result is inevitable, that their notes must be called in as rapidly as the sovereigns go out. The screw must be put on; the circulation must, at all hazards, be contracted. If £10,000,000 of sovereigns are _drawn out_ to buy foreign grain, or to meet a demand for gold in foreign states, £10,000,000 worth of notes must be _drawn in_ to equalise the paper with the stock of gold and silver above the £14,000,000 authorised to be issued on paper securities. _The circulation will thus be diminished by £20,000,000, or nearly a third of its amount_, and that at the very time when the public interests most loudly call for its extension.

“That may occur, too, at a time when speculations the most weighty are on foot, and the currency previously in circulation is most required for the wants of the community! The evil will not thereby be doubled: it will be quadrupled. Like all mischievous panics, its effects will go on as the squares. Is it possible to contemplate such a state of things without the most serious apprehensions: without deep regret that it should be established and perpetuated by acts of parliament? Does it not annul the best effects of a paper currency, that of having an elastic quality which causes it to expand when the metallic currency is contracted, and so obviate the ruinous and lasting effects of such temporary diminution on general credit? Is it surprising, when such is the law, that the mercantile classes watch the sky; that rain for a month in autumn gives a serious shock to credit, and that stock of all kinds rises or falls with the changes of the barometer? The Banker’s Act of 1844 should be styled--‘An Act for the more effectual transferring of panics from agriculture to commerce, and for perpetuating commercial catastrophes in Great Britain.’”

When we compare the events predicted in this remarkable passage with those which have actually taken place--when we reflect that a bad harvest _has_ occurred, that our gold _has_ been drained, our paper circulation contracted, and the screw put on--we think there are few commercial men in the country who will not agree with us in wishing that Sir Robert Peel had really accepted Mr Alison “as the philosopher who is to instruct us on the currency.” For, most assuredly, there is no kind of philosophy which we can discover in the scheme that is now being tested at the expense of the merchants and manufacturers of the three kingdoms; unless it should be held philosophic that the whole commercial machinery of the country shall be exposed to annual dislocation, and that credit shall hereafter be liable to the present alarming point of contraction. Parliament, as we understand, is about to separate, without doing any thing whatever to remedy this monster grievance. Let the Whigs look to it. They are now to all intents and purposes the aiders and abettors of Sir Robert Peel. They hang upon his words, adopt his principles, and applaud his maxims to the skies. They hear from every quarter of the country the cry of unparalleled distress. An evil much greater than the scarcity is pressing upon the industrious classes, interfering with labour, checking trade, and depreciating the value of every kind of property. Manchester has been nearly at a stand-still, not from want of orders but from absolute want of accommodation; and yet the present ministry have neither the courage nor the capacity to step forward and afford that relief which is in their power, and which the nation is demanding at their hands. If, during the recess, and before a new parliament shall meet, the present lamentable state of matters is to continue, we say deliberately that no British ministry ever exposed themselves to such a frightful load of responsibility. Let them share it with their new ally and master. It may be that he intends, at some future time, to make a second push for popularity by throwing them overboard, and repealing his own most mischievous statute. But we trust that the electors throughout the country will take care that the new representative body shall not be constructed of the same malleable materials as its predecessor, and that no more experiments, involving the national prosperity and fortunes, shall be permitted, for the mere sake of gratifying the caprice and augmenting the vanity of an individual who has already brought the whole of us so close upon the verge of ruin.

_Printed by William Blackwood & Sons, Edinburgh._

FOOTNOTES:

[1] _History of the Conquest of Peru; with a Preliminary View of the Civilisation of the Incas._ By WILLIAM H. PRESCOTT. London: 1847.

[2] El Kebir, or the Great, is a term by which Mohammed Ali is usually designated among the fellahs of Egypt, to distinguish him from the mob of Pashas and the crowds of Mohammed Alis. Napoleon was called also El Kebir, as the greatest among the Ferenk dogs of the West.

[3] _The Life of Jean Paul Frederick Richter._ London: Chapman, 1845.

[4] _Allemagne._ English translation. London: 1813. Vol. ii. p. 339.

[5] A work on the Immortality of the Soul--a favourite theme with Richter.

[6] “Unitarian,” in the Political Dictionary of South America, is opposed to “Federal.” Rosas pretends to govern on “Federal” principles--that is, the separate legislative independence of each province of the “Confederation;” but, in fact, he has made himself a Unitarian, since he _unites_ in himself (by “extraordinary powers,” given to him only for a season, but retained ever since) a supremacy over the other provinces, and over the law and constitution.

[7] Maza, the president of the Sala of Representatives, and a high officer in one of the courts of justice, was murdered in (or close to) the senate house; his son was murdered the same evening; and no judicial inquiries ever took place in consequence. Why?--Because, of course, it was done by authority.

[8] Dollars in Buenos Ayres mean small notes manufactured in London!! they used to be made payable at a national bank, in metallic dollars, and then they represented a silver dollar. This bank has been abolished, thanks to the “Great Restorer of Laws,” and these paper dollars now vary from 1½d. to 4d. The arrival or departure of a vessel of war, with important despatches, will, in one day, cause a doubloon (about £3, 8s.) to be worth, say three hundred dollars, and next day worth four hundred, much to the embarrassment of trade--metallic dollars not being current money.

[9] “Let the Federals live--let the savage, dirty, ruthless Unitarians die!”--or, Up with the Federals--down with the----Unitarians!

[10] Ladies in South America are more passive to parental authority, than in England, in respect to the momentous question of selecting a husband.

[11] _A History of the Royal Navy from the Earliest Times to the French Revolution._ By Sir NICHOLAS HARRIS NICOLAS, G.C.M.G.

[12] _Maritime and Inland Discovery_, Vol. i. p. 230.

[13] If Sir H. Nicolas has no other authority for this fact of its being extinguished by vinegar than the extract which he afterwards gives from Vinesauf,--it does not stand on a very secure basis. “This fire, with a deadly stench and livid flames, _consumes flint and iron_! and unquenchable by water, can only be extinguished by sand or _vinegar_.” The story about the vinegar comes, we see, in very suspicious company.

[14] _Hallam’s Middle Ages_, vol. iii. p. 397.

[Transcriber’s Note:

Obvious printer errors corrected silently.

Inconsistent spelling and hyphenation are as in the original.]