MR. COWELL ON THE CURRENCY.
TO THE EDITOR OP THE SPECTATOR.
Oswestry, 10th October 1843. Sin-T read with interest your article upon this subject in your paper of the 30th ultimo, and entirely agree (as I believe most of your readers will) in the views you took of the matter. The comments of your Birmingham corre- spondent in last week's Spectator clearly expose the fallacy of supposing that a mixed currency, regulated on the principles advocated by Mr. Coweth, would fluctuate exactly as a currency purely metallic would. Your correspondent, however, deals most leniently with the theory, in assuming, as an example of how it would operate, a fluctuation in the bullion of a million only : he would, I conceive, have been quite justified in exhibiting the operation of Mr. COWELL'S plan under fluctuations which have actually been experienced.
On the 18th December 1838, the bullion in the Bank of England was 9,794,000L According to Mr. COWELL'S theory, therefore, the notes then in circulation ought to have been 29,382,000/. ; and the Public Debt held by the proposed Commissioners 19,588,0001. From that date there set in a heavy drain upon the bullion ; which, on the 3d September 1839, had sunk to 2,406,000/ Now, if the relative proportions betwixt bullion and debt on the one hand and notes under issue on the other had been sustained,-if, as required by Mr. Cower,is theory, three millions had been taken from the circulation for every million taken from the bullion,-the total circulation of England on the 3d September 1839 would have stood at 7,218,0001. Our currency within the space of nine months would have been forcibly reduced from about nine-and-thirty millions to nine!
It will be said, perhaps, that the operation of the principle would have pre- vented such a diminution in the bullion as that instanced ; that the con- traction in the circulation, which would have been coincident with the drain upon the bullion, would have rendered money so scarce and dear in this country as inevitably to have turned the exchanges long before the bullion could have sunk to the minimum of September 1839. Be it so: but at what cost would this forcible action upon the exchanges have been achieved ? We know what did happen during the drain, and under the application of a principle leniency itself compared with the iron severity of the principle proposed. We know that the Bank of England, alarmed at the continuance of the drain, suddenly raised the rate of discount on 16th May, from 4 to 5 per Cent ; on 20th June, to si ; and on 1st August, to six per Cent (and some six-and-thirty millions in dis- counts alone most have passed under the yoke at this enormous rate*); and that, 'finding even these measures inefficient, the Directors contracted a loan with the Bank of France of two millions and a half, offered the Dead-weight for sale, and, as a finishing-blow to credit, resolutely rejected the discount of every bill bearing the indorsement of any provincial bank of issue in England. Well, the result of these proceedings upon the paper currency was merely this-that the circulation, which stood at 17,449,000/. when the bullion was at the highest, stood at 17,896,000/. when the bullion was at the lowest ; that is to say, a diminution of some seven millions in treasure had been coincident with a positive increase in notes. If, then, measures so violently and mis- chievously coercive are resorted to when a drain sets in upon the merely metallic portion of the currency, what refinement of torture must he .put in requisition when a drain three times as great would be absorbing the circula- tion at the same period of time? If such measures were necessary under a pressure upon the currency to the extent of 6,941,0001., (the decrease in trea- sure, minus the increase in notes,) what conceivable financial atrocities must have been perpetrated under a pressure to the extent of 29,552,0001.-the joint decrease in the bullion and circulation which would have followed the rigid en- forcement of Mr. CoweLes theory ? Assuming, however, that no diminution at all comparable with this could have been accomplished or would have been necessary,-assuming that the drain would have been checked long before September 1839,-the current of the ex- changes, nevertheless, is not of a nature to be reversed in a single day by even the moat violent and summary expedients. No known corrective but was ad- ministered in 1839; and yet the exchanges ran dead against England for nine successive months. Of what duration the process of turning the exchanges might be made the action of Mr. CownLes theory, I will not attempt even to hazard a guess ; but this much is certain, that unless the working of his theory had arrested the drain before the expiry of the first month after it set in, a pressure upon the currency would have been condensed into that single month of greater intensity than was gradually diffused, as things happened, over a period extending through the greater part of a year : for the drain reached nearly two millions in the first month; which would have taken six millions from the circulation, end :consequently, eight millions from the currency, in a single month.
1 fully participate in your doubts as to a in of 800,0001. per annum being probable from a currency so administered. If, at the present day, with credit ample, buoyant, and expansive, with money in unparalleled abundance, and every pulse of our commercial system visibly quickening into strong and healthy action-if, under such circumstances as these, a sale even to the extent of twenty or thirty thousand is sufficient to affect the value of the Public Se- curities, what magnitude of effect is likely to follow the forced sale of successive • Theaverage of bills under discount from 1st August 1839 to 27th February 1849, (when the rate was lowered again to 5 per cent,) reached 7.300,0001. As this amount must have run off every six weeks, (the limit to the lcons,) and as the continuance of the 6 per r cut rate embraceilfoe periods of six weeks each, it follows, as stated, that upwards o: six-and-thirty millions passed discount at 6 per cent.
millions, during a period labouring under falling prices, commercial difficulties, and general discredit, and menaced with such another drain as that of 1839 ?
Mr. Covezza, may rightly describe his theory by stating that " the proposed Commissioners would be mere automatons; that their actions would be purely automic; and that if Mr. Babbage could invent a cast-iron machine to per- form the functions required of them, he would supply the best instrument that could be." A self-acting machine might possibly carry out the principle under any exigency of circumstances ; it not being given to such instruments to un- derstand or care whether they worked evil or good, calamity or advantage, tore living flesh or ground dead bones : but the man, be he commissioner or auto- maton, had need be cast in iron who would seek in such another year as 1839 to enforce the principle to its fall extent.
Previous page
