CORN-LAWS, CURRENCY, ANT) BANKING. WITHIN these last five years the

difficulty of getting bread and getting money has been more than doubled. Between 1835 and 1840, the price of wheat has been below 40,s. and above 80s.

During the saute period, the rate of interest has varied from 3if to 6 per cent. at the Bank of England, and amongst private money- dealers from 2 per cent. to any amount which necessity must pay to avert bankruptcy and ruin. After every allowance has been made for mitigating causes, the misery inflicted by such extreme fluctuations in the first necessary of life, and in the medium and measure of all business transactions, must have been extensive and intense. We have in these fitcts, and the consequences flowing from them, causes enough to produce irritation and dissatisfaction among the masses,

though political feelings may have directed them to Chartism. Disconcerted in their best-considered plans, embarrassed in meet- ing their engegements, trembling on the verge of bankruptcy, or actually bankrupt, the mercantile and trading classes can hardly have been otherwise than ill at ease. Nor can the non-productive labourers, as they are called, and the people who live upon their incomes, have been altogether satisfied when they found their means commanding little more than half the usual quantity of ne- cessaries. Hence various symptoms of various kinds, according to the nature of' the class affected. The masses looked to an exten- sive change, to be effected even by violence, for the evils which oppressed them : part of the trading connnunity attacked the Corn- laws, part fell foul of the Bank of England,—though neither class seems to have possessed that certainty of view which supports men through a course of' action. More philosophical minds set them- selves to a scientific investigation of the circumstances ; and the result has been a variety of publications upon the subject, and, when neglect would be no longer borne with, the appointment of a Parliamentary. Committee to inquire into Banking.

The question of Currency—or, to express the general meaning with more exactness, the cost of the things which currency pro- cures—does not, however, require any temporary circumstances to give it interest ; flu it is one of the most important matters in social economy. We can no more escape from its influence than we can from the air we breathe. It is optional with traders by vocation to engage hi dealings beyond their sphere, or in specula- tions within it ; it is optional with those who are not dealers to connect themselves with those who are, or with their undertakings: however deplorable the effects which flow from the fitilure of ex- tensive schemes or of princely houses, the shareholders or deposi- tors are actors in the drama of their own ruin, and have chiefly themselves to blame. But no prudence can guard against the distress troduced by fluctuations such as have latterly taken place in England. Their effects extend to the most helpless and recluse, and bear upon them with double force. As with animals under tbs. air-pump, (to use a well-known simile,) the functions of the whole economy are deranged without any visible cause : the first symptoms of oppression successively pass into gasping, con- vulsions, and syncope ; when, a fitymtrable change taking place, the more robust, which have not perished, revive to he victimized in sonic future experiment. subject so important in itself—of such late, and untbrtunately of such frequent pressure upon the public—and which the National Council now is occupied with con- sidering after its fitshion—may challenge a full examination. This A will be convenient to take under the three divisions into which it naturally falls.

PRINCIPLES.

There seem to be three separate modes in which the fluctuations we have suffered from can be produced; though in practice they may all operate together, and perhaps generally do. 1. Arbitrary alterations in the amount of the currency, that is, in the quantity of money. 2. A forcible interference with the supply of CO1111110.. dities. 3. An unusual increase (Jr diminution of that supply front natural causes. Let us briefly illustrate each head. It requires no great reflection to perceive, that if the quantity of money were miraculously doubled, we should all be as we were. Those who now have sixpence would have a shilling, but as they would have to pay a shilling where they formerly paid sixpence, the gain would be nothing. In like manner, if the quantity of money were reduced one-half, only a nominal result would ensue : people who have a shilling now, would then have sixpence, but the sixpence would be as valuable as the shilling. Practically, however, these changes, save by another miracle, would not take place at once ; time would elapse before the new money would find its true level, and that with great inconvenience and difficulty to every one. But when that level was reached, either of the two great classes of society would be plunged in a state bordering upon ruin or destitution. If the quantity of money were doubled, all persons receiving fixed money incomes—annuitants, landlords whose property was leased, per- sons remunerated by salaries, and day-labourers and operatives, (for experience shows that wages rise very slowly, and never in . proportion to the rise in prices)—would have their means of sub- sistence lowered by one-half, to the advantage of their creditors and employers. If, on the other hand, the quantity of money were reduced by one-half, all those having to pay fixed amounts would have to pay double what they engaged to pay, till they could place their engagements upon a new footing. The merchant, fer ample, who had discounted a bill, would find double the difficulty he had anticipated in taking it up when it became due, or in dis- counting another ; and so on with all other classes. Allowing (and the allowance must be considerable) for the counteracting causes by which nature always strives to remedy the violence or folly of man, we have, by a sort of refinement in misfortune, borne both these inflictions within these five years. We have had bread and money rise to more than double their former value. This state of things might be induced without any direct change in the circulation, by a forcible interference with the supply of commodities. For the extreme and at the same time the most palpable instances, recourse must be had to war, whose essence is force. After the plunder of a town, we are told by military writers, the most valuable commodities forcibly supplied are a mere drug, and vast sums of money have been made by buying them up from the soldiers. In districts ravaged by war, or blocked up by a cordon rnilitaire with only scanty means of access, the prices of common necessaries rise to a most enormous height ; and as the money is gradually drained away, first the poor, and then all classes, die or endure the severest privations, till the place is re- lieved or compelled .to submit to the enemy. The late rise in tea is another example, though iu a different form. The cheapness of a forcible supply effected by law, is perhaps visible in free commu- nities in the instance of soldiers quartered upon publicans; and in despotic or very backward states the examples are pretty numerous. The instances of dearness meet us at every turn. All taxation is of this nature, when its operation is partial or fluctuating. Duties like those levied upon the Continent at the gates of towns, ren- dering wine or other articles dearer within the walls than in the adjoining district, are of this kind. But our own Corn-laws are the most gigantic example. It is calculated by Mr. Tooxn, that the cost of the late importations of corn amounted to ten millions; great part of' which, perhaps all, had to be paid for in gold. And this drain alone would have diminished the circulating medium by an amount sufficient to produce the most enormous rise in the value of the remainder ; as may be seen in the history of any article, where the mere apprehension of deficiency will more than double its price.

There is, however, a third disturbing cause, which might pro- duce all the evil of grinding the middling classes and reducing the poor to destitution or death ;* and this is a deficiency produced by natural causes. Bad seasons, or any similar inflictions, are of course beyond the reach of man ; but though neither law-makers nor institutions can prevent these natural evils, it is cheering to observe how they are mitigated by science and civilization. The famines which occasioned such horrible depopulation throughout Europe in ancient times, and still produce very lamentable effects in Asia and Africa, have for us lost much of their horror. A more extended and scientific cultivation renders failure less °stem- sive and less frequent ; iMproved communication enables one place

to profit by the surplus of another ; a better mode of living al- lows a reduced scale of food to be adopted without certain loss of health ; the extent of our commerce permits foreign substitutes for sustenance to be used to some extent, and the wealth of the com- munity commands whatever other nations may have to spare. But though legislators cannot create these results, they are very able to

check them ; and such is the operation of the Corn-laws. By com- pelling us to rely upon a Very limited space for the growth of our

supplies, they destroy the probable chance that half the globe would give us, of' balancing a failure in one country by an average, if not a higher crop in another. When bad seasons do occur at home,

WO hot only have to pay a sort of Minim price to other nations,

but have to pay it in the most inconvenient way—exporting gold, which disturbs our currency and deranges every man's business, instead of' exchanging manufactures, whose price, rise to what it might, would be the extent of the evil. It is the difference between parting with a piece of fitrniture and a tool in daily use. These three modes of operating upon price seem pretty well to exhaust the subject ; and the practical question now before the country is, how litr each of these has been instrumental in pro-

* lt is well known to statists and economists, that in years of dearness the number of deaths considerably increase, and diminish in years of cheapness: the pinched and half-starred being most obnoxious to diseases, and less capable of resisting their attacks. ducing the late fluctuations, and in what proportion. Can any duced, or rather should be suffered to reduce itself, by the amount remedies be found, and what are they ? These are the points of that demand : and the simplicity and safety of this rule seemed more less mooted in the publications named below,* and in from the press, though nominally alike admirable and equal to all emergencies, it being almost im- or

many others that have issued

the vriters may confine themselves to discussions on bank- ing. It will be convenient to state the leading opinions as to N

the origin of the evil, before attempting to offer any judgment of e'

they had gotten their charter, never kept to this rule, their advo- our own. PRACTICAL CAUSES. curities, deposits, circulation, and bullion all together, in an unin- According to the Chamber of Commerce of Manchester, the telligible manner. But the Bank did not keep the posteriori rules invented for them either. Let us now see how, as it seems, sole cause of the commercial panic and distress has been the

improper expansions and forced contractions of the currency the only safe rule for the management of the currency, was acted by the Bauk of England; and the Chamber estimates at forty ten niillions. The heaviest pressure upon the Bank, and the greatest the manufacturing and trading interests of the country " by the risk of its insolvency, were during the months of July, August, and misconduct of that great establishment. The two high authorities WILLIAM September last: the store of bullion bad then fallen to 2,800,000/., TOOK E and SAMUEL JONES LOYD both demur to this

sweeping conclusion. Freely admitting that the Bank of .England

so mismanaged its circulation as to be on the verge of bankruptcy, and, according to appearances, ces, only saved from stopping payment culation was only one million and three quarters. In other by a discreditable resort to some Paris bankers for assistance, had the circulation been purely metallic, it would have bee and to our iw T esent monetary system. he cause of the disturb- slices in the money-market in 18:37 and 1839 they attribute to various circumstances, of which the completest summary is drawn up by Mr. TOOKE.

4' On the minor fluctuations of the treasure between 1832 and 1836, it is

ssary to dwell, as they entailed no consequences worth mentioning. d " 2. The negotiation of Dutch and other foreign securities attracted by the cently so nearly run the Bank aground, those which hare been most distinctly " By the financial state, I mean our over-importation of American securi- Chamber of Commerce. As for lending the money, intrusted to

of th * A

History of P rices, nod. e State of Circulation, to 18 39 and 1839; with 11e . th

Pr.ces, froM 1793 to 164.

A Letter to 3. It. Smith, Esq., President of the Manchester Chamber of Commerce.

Ens. President or ths mourhesier Chamber of Commerce. By IY

SAMKL JONKS

possible, that if the usual circulation was thirty millions, for ex- ample, it could bear a natural reduction to nearly twenty millions without stopping the efflux of gold. As, however, the Bank, after

cates said it was to be understood in another sense; and mixed se-

and but for the assistance from the Continent, it is supposed would have been exhausted ; whilst the reduction of the cir- words, n of supply and demand to operate without tampering with, or check.

Such audacious rashness or inconceivable blindness seems most

unaccountable, and merits much severer censure than has been bestowed upon the Bank.

We are of course aware, that with a metallic currency the drain toe and the early part of 1837, were— dilation at an earlier period, and carrying that reductionfurther. The excessive credits to the United States of America, creating a tern- Mr. Tools]; conceives that the intensity of suffering would be as porary balance of papnents against this country for American accounts. great and perhaps greater by this process—the only advantage

low rate of interest here. being safety to the Bank and to our monetary system. But we ' " 3. An internal demand, although to no great extent, for Ireland. must question this doctrine. Of course involved men will stop 0 If to these hail been added a demand, in the autumn of 1836, for foreign then, as they do now, only sooner ; but they will not have so much corn, by a deficiency of our own harvest, the coffers of the Bank would have opportunity for injuring or involving others by their vain attempts been in as imminent danger of exhaustion in 1837 as in 1839.

tt at extrication. Men who have outstepped the line drawn by pru- of the causes of the heavy balance of foreign payments, which have re-

dent forethought, will not have so much time to strive to evade

operative may be classed under the following beads. loss by probably throwing it upon somebody else. But we ques- a I. The large importations of threign corn, the computed amount of which, tion whether the aggregate amount of loss will be so great, and we in the two years, was to the amount of about ten millions sterling. think more caution will obtain in transactions. The panic of 1825-6 " 2. The state of financial and commercial relatioas with the United States has not been useless—as was seen during the late pressures ; and of America.

when men knew that they must cease to look for prizes in the ties, which were created chiefly by bonds of the separate States, and by the lottery of Bank relief, but trust to their own resources, greater United States Bank, and other American banks and joint stock companies. prudence and a more independent tone of feeling are likely, we " By the commercial state of our relations with that country, as basing think, to grow up in the trading world. contributed to the recent derangement, I mean, not only a renewed tendency One point, however, has struck us as connected with the Bank's which there might be to an excess of mere mercantile credits, but mainly the peculiar circumstances of the cotton-trade. maintaining the circulation at so high a point, whilst natural circum- "3. The state of credit on the Continent of Europe." stances would have diminished it ; but we throw it out as a sugges-

To these may be added, perhaps, the Bank's anxiety to lessen its tion rather than an opinion. If the drain for gold had been stopped dead stock of bullion, by volunteering an export of gold to Ame- at an early period, must not our importations of wheat have been rice ; and, according to Mr. Loin, art over-issue of the Country less ? or if we had had the wheat, must not the pressure upon the Banks, in opposition to the Bank of England's attempt to reduce money-market have been greater. If these questions are an- the circulation. The impropriety of this, however, is denied, and swered in the affirmative, it would appear, that whilst the Bank has the alleged effimts of it are said to be overrated both by the Man- been endeavouring to (what is called) support commerce, with an ehester -Chamber of Commerce and by Mr. TOOKE ; and we think eye moreover to its own profits' it has really risked insolvency to

with truth. benefit the landlords by diminishing the pressure of the Corn-laws. Let us now look at the theta of the ease as regards the Bank of Should a reform in the management of the currency take place, England. The circulation in 1835 had decreased by a million and and our circulation represent gold, without experiments at tanking a quarter at the end of the year, and the bullion augmented by it something better, a state of things analogous to that of the last nearly seven hundred thousand pounds. It does not therefore two years would grind the trading or the labouring classes, or both, appear that the over-issues of the Bank had any thing to do with so severely that the Corn-laws, we suspect, would be swept away stimulating speculations in 1836, as alleged by the Manchester by acclamation. RENtEDIES.

them for that purpose by the East India Company and other In looking at the remedies, some points may be dismissed alto- parties, they merely exercised their business as common bankers ; gether. Deficiency from natural causes cannot be remedied ; when and if they had not done so, sonic one else would. It is no time- it comes it must be borne. Disturbing circumstances in foreign thin of the Bank of England, either as manager of the currency or countries—as of late in America, or from the sanguine nature or in any other capacity, to pay interest upon capital and keep it folly of men, or from force whether actual or anticipated—cannot locked up, lest money should become too plentiful and lead to be guarded against by any rule. They must be prevented, or met,

tbolish speculations. by the prudence of statesmen and the public upon the special

In 1838-9 the conduct of the Bank is much more censurable, occasion. But bad laws and bad management are within our (though on different grounds front those complained of by the power ; and these are principally the structure of the Bank—its Chamber of Commerce,) and it strikes us, to a greater extent than mismanagement of the circulation—the pmer allowed to Country either Mr. TOOKE or Mr. LOYD has made palpable. The rule laid Bankers of issuing notes—the Corn-laws. down by the Bank fir the management of the currency, when the Upon the tirst point, we agree with the view formerly put forward last renewal of their charter was at issue before the Committee of by Mr. Lou), and now repeated with the increased confidence the House of Commons, some people understood in this sense,—in arising from further consideration and the evidence of experience— a natural state of things, the stock of bullion should be one-third qf that the functions of the Bank as a manager of the currency, are the circulation, and when the exchanges turn against this country not only incompatible with those of genteel banking. but also dia- and a demand for gold takes place, the circulation should be re- metrically opposed to them. The simple duty of a bank of issue

charged with the management of e circulation is to keep its

marks ou the cor0.1..tics. and some or the alterations proposed ill 11111. Banking paper money as nearly as possible a true representative of the metal s■stem. Ity 'room is TOOKE, Esq., P.E.S. Being it continuation of the History of tbr which it is substituted. having fixed the proper proportion RUIIVIrkS 1111 the M:magement or the Circulation ; and on the condition and conduct of which the bullion should bear to the paper, it is their duty to 1111.1k atilt: Country iSAlell.4, during the year 1839. By SAMUEL diminish the circulation of their notes in the same ratio as the pub- JoNEs lie diminishes their stock of bullion. Making their paper better Ily SlmtEr..losEs LOV1I. than gold, or " protecting" commerce, or any other matter of this Effects of the Administration of the Bank of EngLind. Reply to a Letter of Samuel kind, is beyond the fimetion and the power of Bank Directors. Junes Loyd. Esq. lly J. E. Smolt, Esq., l're,i.irnt of the Manche:der Chamber of Commerce. Neither ought they to be placed in a position to be swayed .by Rawls Or the toimioistrotion or ow Bank or England. A seeund Letter to J. 11. Smith, pressure from without ; or to be tempted, by the hope of a high IAN% dividend for their shareholders, to postpone reducing their issues till stoppage stares them in the face, and then be driven to forced and sudden contractions of the currency, and to other expedients by which ruin is averted in desperate cases. These opposite functions the Bank Directors are now called upon to fulfil ; and, if we may judge by their conduct, without any clear perception of their difference. The result has been, two ex- tensive derangements of the circulation, and all their consequent embarrassment and loss, within four years, and an all-but stoppage of the Bank of England. Mr. Tonics:, we perceive, differs with Mr. LOYD upon part of this view ; holding that the issues of a manager of the currency may be properly enough mixed up with the deposits of a.banker. This opinion is not supported by any conclusive reasoning ; and if the arguments were better than they are, the nature of the two things is so essentially different, that we should still agree with Mr. LOYD. The deposits are money already in circulation, trusted by depositors to the banker ; who lends such part of them to others as he may deem prudent. If he miscalculates this amount, he must, by the sale of his securities, buy back again from the money already in cir- culation enough to repay the depositors their demands, or become bankrupt. But in these transactions there is no disturbance of the currency ; it is a mere transfer of money already existing from one person to others. But if an establishment thinks fit to lend its deposits largely, and instead of buying them back again, when the depositors recall their money, it pays these depositors with its own notes, here there is a. tampering with the currency by the amount of the notes improperly issued. Nor does this seem a mere ossible ease. The highest average of the Bank deposits in 1838-9 was 11,535,000/. ; the securities at the same period 22,792,0001.: the lowest average of deposits was 5.952,000/., with securities 22,764,000/. Now it seems to us quite inconsistent with legitimate banking business to have the deposits reduced by one-half without any reduction in the securities; the whole demand of the depositors being in fact borne by the bullion, to enable the Bank to keep afloat its notes. Would any other establishment, whether private or joint- stock, have risked such a proceeding ? No doubt, the motives of the Directors were good, being principally to support the trading • interests, though dashed by a regard to the Bank dividends. But the effect of the union of two incongruous functions seems to ope- rate as injuriously in the conduct of their own private banking, as it does in their management of the public currency. The plan of Mr. LOYD we therefore hold to be just and sound—that the manage- ment of the currency should be separated from the business of banking : if practicable, with the Bank of England as at present constituted; if not, with a new constitution, or by a National Bank. This last, however, must be regarded only as an ulterior resource, on account of the apathy of the public, the indifference or cor- ruption of Parliament, and the sinister interests which sway Minis- ters. Better have the Bank of England, with a compulsory law to regulate their proportion of bullion to circulation, than a National Bank to furnish a series of Newport-Monteagle jobs. The second point—the Bank of England's mismanagement of the currency—has been for the most part disposed of in the preceding remarks; but it may be observed, that all author'ties, however they differ upon other points, agree in denouncing the manage- ment of the Bank.

As regards the Country Banks of issue, we suspect that more im- portance is attributed to them than they really possess, and that Mr. LOYD censures them too heavily. The gravamen of the charge against them amounts to this. Between September 1837 and June 1839, they had increased their circulation by two millions ; the Bank of England having done precisely the same thing for a great part of the time—to a less extent if the gross amount of their notes be looked at, but to a very much greater if we regard the diminution of bullion. The chief disadvantage of these banks is, that we have in practice a double standard, soon, indeed, reducible

to one, but working mischief till the reduction is effected. Their interests and their operations often run counter to those of the Bank of England ; so that while the regular manager is reducing the currency in obedience to the rate of exchanges, the volnnteers are issuing paper in obedience to the demand of' their customers, rendered more urgent by the action of the principal bank. This no doubt is a general inconvenience, with perhaps some local ad- vantage to set it off; but we do not think with Mr. TooKe or Mr.

LOYD, that these subordinate issuers can effect much. mischief, bound as they are to pay in Bank of England notes. In fact, we find that when the Directors applied the screw in earnest, they in three

mon' ns (from June to September 1839) reduced the country cir- culation by nearly a million and a quarter out of' twelve millions and a quarter. Still, their operation, so for as it goes, is inconve- nient, and would be mischievous under a proper management at the Bank; and the reform, to be complete, would require their abolition. Unless it was a complete reform, we suspect the country banks of issue are rather an advantage than otherwise. In sudden and desperate contraction, they may prevent local dis- tricts which have nothing to do with the foreign markets from suf- fering dreadful inconvenience ; and before this local amount has time to operate upon the whole circulation of the country, the "crisis" is past, and the bankers are obliged to gradually take up any redun- dancy. Attempts at getting these bankers to issue notes in times of pressure for the purpose of procuring bullion, are quite unlikely to succeed. If they did, the notes would be returned immediately upon the issuer for Bank of England notes, without which the bul- lion could not be gotten ; and the banker must immediately set about restricting his own circulation, since Bank of England. notes

(his bullion) would no more be accessible to him than to the per- son he had been foolish enough to accommodate. After all, however, it would appear that the Corn,laws.have been in conjunction with bad seasons, the real primary cause of all the evil which has afflicted us. Without them, the drain upon the Bank would not have taken place to such a serious extent ; with- out them, the currency would not have been disturbed and the interest of money doubled ; without them, though the price of bread must have been higher, it is questionable whether it would have risen any 'thing like 120 per cent.; whilst the increased demand for goods instead of gold would have tended to mitigate the evil by stimulating manuilicturing industry, instead, as under the present Corn-laws, of' depresssing it.