been enormous, not more than two joint stock banks have suspended payment, by which a loss was sustained by the public, so that their operation seems to have been better regulated with us than in America.

But perhaps it is erroneous to attribute panics and distress to the operation of any one system per se, without viewing it in connexion with others, which subjects us to the same inconvenience whatever circumstances may arise. The immediate cause of the panic in 1825 arose from an internal demand for gold, and of 1836 has been occasioned by a foreign demand for the same precious metal. Hence it has been inferred by one set of theorists, that no system of banking, however perfect in itself, which shall be based on, the liability to pay in gold, can furnish a circulating paper medium for the great commercial dealings of these countries, without subjecting us to occasional panics.

Now while we declare our firm unflinching adhesion to the principle of Sir Robert Peel's bill and the currency system as at present constituted, we are not so bigotted as to affix a sweeping condemnation to the theories that may be suggested to remedy the inconvenience to which unquestionably it is subject. Protesting our adherence to a metallic check on paper circulation, we shall for the information of our readers pass in review the arguments adduced against it, and the remedies proposed to correct its defects.

Gold is not the best possible standard and truest representative of property, says the author of a pamphlet, signing himself J. M. C. 1st., because in order to be so, the accumulation of gold should keep exact pace with the increase of property, so that the same amount of gold should always co-exist with the same amount of property, but this cannot be the case. From the authority of Jacob's inquiry into the production and consumption of the precious metals, as well as from other sources, it appears, that for twenty years, viz. from 1809 to 1829, instead of a corresponding increase there has been a positive diminution throughout Europe of the precious metals over the production, of no less than 66, 611,440, and that the diminution must still go on (as the produce of the mines is not equal to the consumption), while the property and population which it is intended so faithfully to represent, continue progressively increasing; nor will the reduction of its application to being the test of national prosperity as to the balance of trade be less objectionable; because it would be impossible to confine the application to the proof of a balance between two countries; for so long as our currency is payable in gold, it will be demanded on every commercial or political excitement which produces panic. Hence the more we increase our trade and prosperity the greater must be our danger and suffering, when by any senseless or designed panic the rapidly increasing productions of these countries are arrested in their legi

timate and beneficial career, dragged back to this tortuous measure of value, and compressed into its narrowed dimensions, to the temporary embarrassment of the whole leading community.

2ndly. That the more extended the trading concerns (especially if interest) of any country, the greater circulating medium she must require, and the greater her distress, should this currency be deranged; also, that the more extended those concerns, no matter how profitable or sound they may be, the greater danger there is of derangement under our present system. Thus the construction of rail-roads require the use of from ten to twelve millions. While our trade and resources fully justify the cost of these undertakings, though no national loss is sustained, yet the outlay is an immediate advance of so much capital to be gradually returned. During the process of this money changing hands, by some foreign operation a general distrust is created-a contraction of currency becomes inevitable, and thus the large though temporary increase of circulation greatly adds to the distress. The extended nature of her operations render the position of England very different from other

countries.

3rd. While silver is at the present day almost universally the circulating medium, in Great Britain alone the golden standard is erected. The national bank is obliged to supply any quantity of that metal which may be demanded at a fixed price, no matter how dear or scarce it may be, and should it again become equally abundant and useless as money, the bank is obliged to take all that is offered to them at a fixed price until their coffers are filled to repletion, then follows over issue, over trading to relieve this distress. The rigid adherence to this principle inflicts a severe hardship on the establishment by obliging them to regulate through their operation the course of exchanges, whenever deranged, no matter by what operation. To these two sources of perpetual and unjust embarassment, the writer, signing himself J. M. C., is inclined to attribute the evils which have arisen from commercial panics, and which he declares are inseparable from the present system. The power of the directors is complained of, when they merely act upon the principle of self-preservation. In the late panic, though they were desirous of doing every thing in their power to keep the distress from spreading, they were unable to supply the legitimate wants of the commercial community. Feeling their stock of bullion decrease, they dare not discount, although the paper offered was as good as their own, and they knew that the consequence of refusing was certain injury to legitimate and profitable trade, and would reduce many industrious and wealthy traders to the brink of ruin. When they are thus obliged to lay on the "pressure," as they have no power of discriminating as between trades, it must be done universally; and although there may have been an excession of the manu

facture of one community, as for instance of silk or cotton, yet there may be a real demand for wool or iron. But this enters not into the account, the embarrassment of one is the embarrassment of all, whereas, under other circumstances, the overwrought production might find its own level and correct its excess. While trade continues subject to these unnatural shocks, enterprise languishes, foreign orders are disappointed, and other countries are driven to the development of their own internal resources to relieve themselves from the inconvenience of this uncertainty.

We have now laid before our readers as distinctly as the nature of the subject would permit us, the defects of the rival systems of a paper accommodation and a gold standard. We are not so presumptuous as to hazard our individual opinions upon a subject which has engaged the attention of men of the highest acquirements. Can any substitute be discovered for the present standard and circulating medium, which shall not only be safe but sufficient for all the purposes of this great and rapidly increasing commercial community, while it shall be free from the violent consequences to which it is now so frequently subjected. Are the precious metals really wanted as nutriment to the commercial body, and can all the arteries be better supplied, and the whole system preserved in a more healthy state, by having the sustaining principle generated and perfected in itself? These are questions which we are free to confess it is not within the reach of our financial sagacity to determine. We shall content ourselves with giving at full length the eureka of the author before us, leaving it to the acumen of our readers. The substitute he proposes is founded on the instrumentality of the national debt, and runs thus :

"The establishment of an Imperial Bank of Issue, with a Capital of One Hundred Millions.*

"Such Bank to be wholly independent of Government, but obliged to lodge with Commissioners, nominated by Parliament, such paid-up capital; to be by them invested in 3 per cent, or other stock as may be approved.

"The Bank to be then at liberty to issue their Notes (stamped by the Commissioners) to the extent of Fifty Millions, which Notes are to be consituted THE STANDARD AND LEGAL TENDER,' for the United Kingdom. "Notes of £100. each and upwards, to carry interest at the rate of three halfpence per diem, from one year after their date of issue.

Should an increased circulation or issue be at any period found necessary, on appliction to Parliment, it can be obtained on condition of double such additional sum being lodged with the Commissioners for public safety.

66

Any Holder of One Thousand Pounds in Imperial Notes, may demand

"This does not require the abstraction of any capital, nor necessarily prejudice other establishments, not being intended as a Bank of Discount."

from the Bank, Government Stock for them, at a regulated price; while the Bank shall also have the liberty of requiring from the Commissioners, Stock for any sum not less than a Million, on cancelling Notes to half that amount."

He would further restrict the paper circulation to these notes alone. They are to be supplied by the bankers generally, at the same rate which their own notes cost at present, cost for manufacture, stamps, and the interest on the stock of gold which they are obliged to keep by them under the present system, and which would be unnecesary under the new. Such a circulation would at once remove all possibility of the recurrence of a panic, caused by a demand for gold, and ensure the public against a loss by paper. It would, he imagines, be a complete cure for the evils detailed in the first part of this paper, as attending the joint stock accommodation system, where the banker is also the money maker, or credit broker, and would at once sever the unnatural connexion at present existing between these two branches. It would be solid, because it would be based on the national resources, being good for eight hundred millions, and capable of expansion to meet the constant increase of population and production, which he has demonstrated that gold, or all the precious metals never equitably can. If gold should be required to obtain the produce of any other country, where the balance of trade was not in our favour, the ability to procure it would continue the same as it does at the present moment, while the new system would tend to increase its circulation, as neither banks nor individuals, would any longer object to exchange it for a medium equally valuable and secure.

Since the gold standard was erected in America, a fresh inconvenience to trade has asisen, which may serve to put some of these positions in a strong light. The Americans retain the gold which they have got hold of, under the impression that the possession of it evidences the balance in their favour, while they are shipping their produce at a tremendous sacrifice, or remitting bills of exchange at 3 per cent. positive loss. Now if their money is not due to England, there can be no inducement to ship gold to that country, and if the balance of trade is in favour of England, either the gold must come or something more valuable in its stead.

Such is the substance of J. M. C.'s theory for a new monetary system, and we leave it without comment, to be digested by the curious in currency.

If a paper currency be declared to be a legal tender, but not convertible at pleasure into the precious metals, it is evident, inasmuch as such paper can neither be exported when the issues are unduly limited, that it is not possessed of the same principle of self-contraction and expansion inherent in a currency consisting of the precious metals, and that, consequently, its value must always depends on the extent to which it has been issued compared with the demand.

Let it be supposed, to illustrate this principle, that the currency of any particular country consists of 50 millions of gold sovereigns; and let it be further supposed, that government withdraws these sovereigns, and supplies their place with 50 millions of bits of engraved paper called one pound notes, and declared to be a legal tender: under such circumstances it is obvious, supposing the same quantity of commodities to be brought to market, that their price would undergo no change whatever. It is true, that in the case now supposed, no one would exchange the produce of his labour for money, on the ground that that money was itself a commodity, on which an equal quantity of labour had been expended, and which could be advantageously used in the art, but because it was the universal equivalent, or legal tender used by the society, and because he knew that it would be willingly received as such by all who had produce to dispose of.

The essential difference, then, between a currency consisting wholly of the precious metals, and one consisting wholly of inconvertible paper, is this, that the value of the former, in any particular country, can never differ, either permanently or considerably, from its value in others; and that its value, as compared with commodities, depends on the comparative cost of their and its production;whereas the value of the latter, in any one country, may vary to any conceivable extent from its value in others; and its value, as compared with commodities, does not depend on the cost of producing it and them, but on the extent to which it has been issued compared with the demand. If a guinea commonly exchanges for a couple of bushels of wheat, or a hat, it is because the same expense has been incurred in its production as in that of either of these commodities; but if these commodities exchange, when the currency consists of inconvertable paper, for a guinea-note, it is because such is the proportion which, as a part of the aggregate mass of commodities offered for sale, they bear to the supply of paper, or of money in the market.

It results from these principles, that convertibility into gold and silver, at the pleasure of the holder, is not necessary to give value to paper money and that, if perfect security could be obtained, that the power of issuing it would not be abused, or that it would always be issued in such quantities as would render a one pound note uniformly equivalent to the quantity of standard gold bullion contained in a sovereign, the precious metals might be entirely dispensed with as a medium of barter, or used only to serve as small change.

Unluckily, however, no such security can be given. This is a point with respect to which there can be no differencse of opinion. The widest and most comprehensive experience shows, that no set of men have ever been invested with the power of making unrestricted issues of paper money, without abusing it; or, which is the