MR. COWELL'S LETTERS ON PAPER CURRENCY.

WITH some ingenuity, these Letters are more pompous than pro- found : but as the currency must soon be dealt with in the form of a renewal of the Bank Charter, and as Mr. CowELL's plan is not without speciousness, which appears to have imposed even upon a Finance Minister, we will briefly glance at the particular plan, and the subject generally.

The principle of Mr. COWELL is, to have a paper currency which shall be an exact representative of gold, fluctuating as it would fluctuate, and " automatic" or self-regulating in its nature. The propriety of these two propositions appears self-evident ; but Mr. COWELL occupies a good many pages in endeavouring to establish that the demand for gold and silver is natural, universal, ever ope- rating, and insatiable, with some other opinions of an analogous kind, which whether true or false seem unnecessary to the establish- ment of the two main conclusions. The manner in which Mr. COWELL would carry his principle into effect is as follows— I. "That Commissioners be appointed by act of Parliament to sit every day from eleven o'clock a. m. to two o'clock p. m., with orders to give paper certifi- cates of deposits of gold returnable on demand.

2. " That every day at two p. m. they expend two-thirds of all the gold they shall have received during the day in the purchase of as much of the public debt as it will command, thus restoring to the market of the world' two thirds of whatever gold they may have taken, and reserving one• third in their coffers.

3. "That every day from the hours of eleven to two, they return to sack persons as may present certificates, all the gold which the certificates so pre- sented shall evidence is due.

4. "That on any day in the course of which they shall have returned more gold than they have received, they sell at two o'clock as much of the Public Debt held by them as will establish the exact relation of one to three between their reserve of gold and their certificates outstanding at that hour.

5. " That every day at three o'clock p.m , they publish an account of the total amount of gold they may have received during the day, and of the total amount they may have returned, adding the total amount of gold in their coffers at three o'clock, of certificates outstanding, and of Stock held, at that hour."

"The paper certificates will constitute the paper currency ; and, issued in the manner I have described, there is no room for control, regulation, discretion, or interference of any sort. The Commissioners are mere automatons; their actions are purely automatic ; and if Mr. Babbage could invent a cast-iron ma- chine to perform the functions which I have required from them, he would supply the best instrument that could be devised for carrying the plan into execution.

"By this process, the Commissioners, as far as the present state of the paper issues can be ascertained, would constantly hold about 30,000,0001. worth of the Public Debt ; the interest of which, less the expense of their establishment, &c., could hardly be less than 800,000/. per annum ; and this would go in aid of

the revenue. In addition to this profit, the country would derive another, re- sulting from the loss and destruction of certificates. "The proposed proportion between the reserve of gold and the cost of the Pub- lic Debt held by the Commissioners, and between the reserve and the amount of their certificates outstanding—viz. one of reserved gold to two of Public Debt, and to three of certificates—is quite arbitrary. The maintenance of these precise proportions is not supposed to be essential to the plan, and the public observation of its action for a few years might very probably show that more profitable ones could be established."

It is a vital objection to this project, that the prices of the Public Debt are fluctuating and not fixed : the practical operation of the plan would be to turn, not the currency, but the working of the currency, into a great state gaming-table, in which the odds would probably be against the Bank. For example, last spring, the Three per Cents touched 97 ; in the summer, they were upon 93, involving a loss of 4 per cent against the public between securities bought at the former period and sold at the latter : since that time they have risen again to about 95, involving a gain of 2 per cent. Measured, indeed, over a series of years, the transactions would in peaceful and prosperous times show a gain ; but measured by briefly recurring fluctuations, there would probably be a loss. A high price of the Funds and a full currency may not indeed be

identical, but they are often collateral—when money is a drug se- curities rise, when it is in demand they fall : so that the tendency of this plan, if not its certain operation, would be to force the public to buy dear and sell cheap ; whilst the necessity for selling would still further depress the market. But, whether, taking the saving of interest into account, there might be an eventual profit or a loss, no one would think of establishing a national hazard-bank of this kind.

Mr. RAGUET, an American economist, to whom the plan was privately submitted, and who approves of it generally, has overlooked the ever-operating evil, but foresees a possible and most conclusive mischief- " Against the soundness of this plan," says he, " I am not able to see any objections. How far a general panic, arising from war or domestic disturbance, might render it difficult to sell Public Securities in a time of emergency, you are better able to judge than I am."

Mr. RAGUET or any one is able to judge that, under such cir- cumstances, the gold would be rapidly drawn away, the Funds

sold, if they were sold at all, at a ruinous loss, and the scheme probably end in reducing us to a state of barter and a national bankruptcy.

After all the projects that have been promulgated on the subject, we believe there are but two modes in which a sound currency—that is, a paper currency identical with gold—can be established. One is to issue notes only on a deposit of coin or bullion; in which case, every note is an actual representative of so much precious metal. The benefit to the public in this case is the convenience of paper in paying or receiving large amounts. The only public gain that could accrue would be the saving in the wear of the coin and the loss of notes ; which last, however, is a private misfortune. The public injury would arise from the efforts ne- cessary to procure a sufficient quantity of the precious metals to supply the vacuum now represented by paper, and the loss of interest on the capital lying dead. But as regards safety and soundness, every condition is fulfilled. Commercial panics could have no effect, (beyond their inevitable effect in suspending business and deranging private transactions,) and stoppage would be physically impossible, for when the last sovereigns were drawn the last note would be extinguished.

The other mode was first suggested by Mr. HORSLEY PALMER, in his examination before Lord ALTHORP'S Bank Committee : but

the fast-and-loose conduct of the Bank, in never keeping to any rule whatever, compelled Mr. PALMER to play fast-and-loose with his own invention; and it was reserved for Mr. JONES LOYD to define the proposition, and to unfold the principle on which it was grounded,—namely, that a sound paper currency could only repre- sent gold, and not aim at being something better. The principle and management are simple and automatic. With a full currency, a certain proportion of bullion (practically held to be one-third) should be retained in hand, from which point the action of the notes and bullion should be identical ; that is, an increase in the issue of notes should exactly correspond with the increased deposits of bullion, and notes presented for bullion should be immediately cancelled. The " automatic" character of this plan is self-evi- dent : any attempt to improve or control destroys it. Its perfect

safety is more problematical. Some persons, and if our memory serves us Mr. TOOKE among the number, consider one-third bullion too low a proportion, and prefer a half. For mere commercial derange- ment, one-third appears ample : it seems difficult to conceive any state of prices, in a country like this, which would permit the ab- straction of one-third of its circulating medium without naturally stopping the drain for gold; for although the Bank has been run very close without any apparent stoppage of the drain, it must be borne in mind that in such cases the Bank has never allowed the currency to be diminished, but kept issuing notes from one counter as fast as they were paid in at another, or faster. In a demand for bullion springing out of warlike operations, and conjoined, as it would be, with, trading derangements, one-third might not suffice. In a home panic arising from political and commercial causes combined, with each individual looking to gold as a means of guarding himself from personal difficulties, this principle might altogether break down. Indeed it was declared by the Bank au- thorities, before Lord Avreoer's Committee, that there was no meeting apolitical demand. The proportion principle, therefore, though generally safe, cannot be pronounced safe under all circuua- stances. A public (opposed to a mercantile) demand for gold for the gold itself, must always produce bankruptcy : whether, by that time, the state of public affairs might render national bankruptcy only a secondary evil, may perhaps admit of dispute.

Those ingenious persons who are constantly trying to get some- thing out of nothing, often dilate upon the national profits to be made by the currency. It is to be apprehended that in their cal- culations they confuse the profits of banking, or perhaps of the bankers, with the interest that may be saved on the notes in circula- tion for which no corresponding amount of bullion is retained. It is that alone which can afford a national profit, under any safe or indeed under any management of the currency kept apart from the trade of money-lending. Where the deposit of bullion is equal to the amount of notes issued, of course no profit from this source can accrue. If the reserve of bullion was one-third of the general circulation, it is probable that Mr. COWELL'S estimate is correct, and that the interest saved would run about three-quarters of a million annually : if the notes were not convertible on demand, but kept or attempted to be kept on a par with gold by some of the schemes promulgated with that intention, the national gain might be extended to something more than a million. A large sum abstractedly, and not unimportant even to our revenue : but, when we look at the apathy with which a Minister is permitted to plunge the nation into an expensive war in one place by neglecting his duty, in another place by intermeddling, and in a third by listening to the idle tales or exaggerated fears of subordinate agents—nay, when we look at the annual expenses incurred to keep us prepared for re- mote dangers—it seems a penny wise and pound foolish economy to allow any gain of this kind to stand in the way of a currency purely metallic. The rise in the value of the precious metals which would follow the withdrawal of twenty or five-and-twenty millions from the general market of the world, with the consequent increase in the value of money, and the commercial derangement the efforts to procure such a stock of bullion would produce, are more cogent arguments against the attempt. But, whatever may be done as regards the nature of the currency, it is essential that it should be made automatic and self-regulating; and this can only be accomplished by compelling the Bank of England to separate their functions as bankers from their functions as managers of the currency—supposing the Bank of England should be allowed to retain this last function at all. Looking, however, at the state of our finances, the influence of the Bank, and the power of the Country Banks which issue paper, it is pos- sible that Sir ROBERT PEEL will not be able to do what he feels right, but be forced to execute what others will permit. "Fallen cherub to be weak is miserable "; and the Premier may find, when too late, that strength is not only necessary for changes and reforms, but indispensable properly to carry out alterations which time, in a complex condition like ours, is continually rendering imperative.