DISTRESS AT BIRMINGHAM--“ MONEY LAWS:' Timm has been a meeting
of the Birmingham Union, at which .much was said OE the subject a the distress of the country; and, in particular, a most painful picture was exhibited of' the miseries of the working population in and about Birmingham. Mr. ATTWOOD stated that labourers, who received sixteen shillings per week during the war, now received only eight shillings, while they paid the same rents for their cottages as formerly. Mr. EDMONDS gave an appalling account of the increase of pauperism : the num- ber of paupers on the parish-books, which was 10,000 in 1825, having increased to 17,000. Both these gentlemen ascribed this dismal state of things, in a great measure, to the operation of the present laws relating to the currency ; which they stigmatised by the most energetic terms of abuse in our language. The existing evils are said to arise from the combined opera- tion of the return to cash payments and of the abolition of the smaller paper currency ; " both of which effects are frequently ascribed to PEEL'S Bill. Thus, Mr. EDMONDS says, "The Bill, commonly known as Peel's Bill, was a kind of magical instru- ment by which the Oligarchs contrived to extract money out of the pocket of the labourer, and place it in their own. In 1827 and 1828, country bankers were rendered by this measure incapable of issuing small paper." A correspondent, too (whose letter we insert, and with whom we generally, though not in every point, agree), says, that " not satisfied with making the bank-note ex- changeable for gold at the pleasure of the holder, PEEL forbade us even to hold notes of lower value than five pounds, though we might desire it ourselves." PEEL, no doubt, may be said. to have done this as well as the other, inasmuch as he was in office at the time. But PEEL'S Bill, by which name the measure of 1819 is designated (to which alone our remarks last week were directed), did no such thing. The abolition of the small note currency was a separate and distinct measure, carried into effect by an act passed in 1826, the operation of which was suspended till 1829. It would lead us into too wide a field to consider, at present, the effects of the measure of 1826; but we shall inquire how far the existing distress is to be ascribed to the restoration, in 1819, of the long-established money standard. In the first place, is there any necessity for a money standard? Such a necessity has always been ranked among the first princi- ples of currency, and is maintained by every writer of au- thority on the subject. We do not find that even the enemies of PEEL'S Bill impugn this principle, with the single exception of a writer in the True Sun newspaper; who has been advocat- ing, in a long series of articles, a scheme for a paper currency wholly independent of any other standard than the discretion of the Government of the country, by whom the extent of the issues is to be regulated. We have not followed the series of specula- tions with sufficient regularity to entitle us to form a decided opi- nion on the merits of this scheme of a National Bank,—though we do not conceive that the discretion of any set of men is to be relied on as a substitute for a fixed principle. At present, we shall simply remind our readers of the considerations on which a fixed money standard has hitherto been held to be necessary. It will not do for coins to be mere counters, or symbols of value. They must have a value of their own, independent of and equal to any conventional or nominal value assigned to them. The use of money was but a step from barter : in place of each man exchanging his own goods for goods belonging to his neigh- bour, he found it better to collect a commodity of a value univer- sally recognized, easily kept and transported, and which every other man would readily take in exchange for his goods. This commodity was found, by the common consent of mankind, to exist in the form of gold and silver. Money thus came into use without public regulations; and those regulations, when introduced, merely did what private individuals could not do with- out infinite difficulty—ascertain the weight and quality of the pieces of money. The whole amount of the money laws, applicable to metallic currency, is to make the public aware that a certain piece of gold consists of a certain weight and fineness. A pound weight of gold of a certain fineness is ordered to be coined into forty-six sovereigns and a small fraction ; and an ounce of gold is thus equal, in money, to 3/. 17s. laid. This in no degree affects the value of the gold as a commodity. An ounce of coined gold will continue to be exchangeable for the same value in goods as if it had not been coined.
Paper currency is not money. It has no intrinsic value. It merely confers a right, on the holder, to receive from somebody else a certain quantity of money. Its value, therefore, is merely the value of the money which it entitles the holder to receive, or which, in other words, it represents. This value depends on the confidence that the party who has issued it is able, when called on, to substitute the reality for the representative. The only standard of paper currency, therefore, is the value of metallic money. Metallic currency is liable to an inconvenience. Though gold approaches nearer to a permanently uniform value than any other commodity, yet its value is not free from change ; and a falling off in the supply of gold will, therefore, raise its value in com- parison with that of other commodities, or, in other words, lower their prices. Paper currency is liable to the great inconvenience, that it seems impossible, at all times, to regulate its amount so that its 'The shall correspond with that of the money which it represents.
The parties who issue paper currency may be able, at one time, to keep in circulation a much larger quantity than at another; and,
from this, two consequences may arise.. The difference in the quantity of paper may cause. a difference in the value of . spot% as compared with other commodities ; or, a difference may take place between the value of paper and that of specie. These imperfections have been the cause of the derangements in our money system, and the disputes to which they have given birth. Of the two evils attending paper currency, the last-mentioned —its depreciation below the value of specie—is by far the greater. But that evidently, can never take place so long as the established principle of making paper convertible, at the will of the holder, into gold, is adhered to. It was solely by the departure, in 1797, from that principle, that this evil was occasioned. The other evil, however, of a general alteration in the whole value of the cur- rency, may take place, even though paper is convertible; but then, it will speedily cure itself. Suppose that, by an over-issue of paper, the quantity of the currency is so much increased that its whole value is depreciated, and prices of commodities raised at home, then the gold will be sent out of the kingdom to places where its value is greater, and the holders of paper will, for that purpose, demand gold for it; so that the excess of currency will speedily be reduced. Accordingly, none of the evils of permanently depre- ciated currency were felt previous to the suspension of cash pay- silents in 1797. After that measure (with the necessity or merits of which, at present, we meddle not,) the value of paper began to fall below the value of gold. The check to over issues, which we have just pointed out, no longer existed. Bank paper being no longer con- vertible into gold, gold could not be depressed by the excess of paper, nor could the exportation of gold have any effect in re- storing the equilibrium. There was no limit to the issues of paper, but the confidence of the public in the solvency of the Bank of England and the Country Banks. But that confidence was shaken. In 1814, 1815, and 1816, between two and three hundred banks stopped payment; and their notes became, in general, waste paper. This immense contraction in the circu- lating medium, of course, raised its value; and immediately after- wards, in 1817, the value of paper was nearly on a par with gold. The removal of the excessive difference between the value of Bank of England paper and gold has been ascribed, by the True Sun, to "the selfish fears of the Bank." This is a mistake. The annihilation of the Country Bank paper produced the effect; and the Bank of Eangland, in place of contracting its issues (by which only it could have contributed to this result), actually extended them. For three years before 1814, the average issues of the .Bank were about twenty-three millions; for the above-mentioned years, 1314, 1815, and 1816, they were about twenty-six millions; and in 1317, they were twenty-seven millions. The conduct of the Bank was in this instance just the reverse of that imputed to it.
At the time, then, that PEEL'S Bill was passed, the enor- mous redundancy of the paper currency, which had been caused solely by abandoning the established check of its convertibi lity into gold, had been reduced, by circumstances with which neither the Government nor the Bank of England had any im- mediate concern, to its natural amount ; and its value was restored nearly to a level with that of gold. After the expe- rience of the train of disasters which had arisen from throwing aside the standard, was it not of urgent moment to re-establish it, and thus to prevent a recurrence of such evils ?—And was it not a fitting time to seize the opportunity of doing so, when circum- stances had brought back the currency to within a trifle of the standard value? Every one who acquiesces in those great prin- ciples of currency, of which we have endeavoured to give a sketch, must answer in the affirmative. But it is contended that great evils have arisen from this mea- sure. This we have not disputed: but the question is, whether the remedy is worse than the disease; and we deny that it is so. Only conceive the consequences of having a paper liable to be issued to any amount, in seasons of blind confidence and feverish excitement, and then withdrawn or destroyed in the hour of disas- ter and panic; and to conceive them, it is only necessary to read the history of the last thirty years. Now, what are the evils of the return to the standard? They consist, it is said, in an immense rise in the value of the currency, and, consequently, a ruinous fall of prices. It is admitted that PEEL'S Bill must have caused some rise in the -value of the currency; but not to such an extent as to be charge- able with the consequences ascribed to it. Before PEEL'S Bill passed, the paper currency had actually returned very nearly to its standard value. In 1817, it was within 2i per cent, of the standard, after a series of ruinous fluctuations from a depression of 25 per cent.; and, by the time the Bill passed, it was again exhibiting a tendency to depression. The greatest part of rise, therefore, could not be ascribed to PEEL'S Bill, except by a hysteron proteron of the grossest kind. The substitution of gold for paper must certainly have caused a rise corresponding to the demand for gold which it produced. We stated this, on the authority of a well-informed writer, Mr. VACCULL'OCH, at thirty millions,—a sum which, we remarked, could not very much affect the price of gold in all the markets of the world. The True Sun* asks us to explain, "how, on the sup- position of the comparative abundance of gold, the diminished Egaductiveness of the American mines, for these last twenty years, been felt so much—although the difference between the returns for that period and for the preceding twenty years does not agnount to tayirtg.ntillioner, We will answer the question by ano- ther. How does the True Sun know to what precise extent the diminished productiveness of the American mines has been felt ? If he says, by the fall of prices, we rejoin, that this fall proceeds from the diminished value of commodities much more than from the increased value of money. " Were the influence of the decreased productiveness of mineson prices," says MACCULLOCIT, " estimated at from 5 to 10 per cent., it would be decidedly beyond the mark."
The fall of prices, indeed, is the great practical evil deduced from PEEL'S Bill. It is the theme of the invectives of the speakers of Birmingham ; who seek its remedy in the abolition of the Money Laws. We find a statement in the Morning Chronicle (extracted from a Birmingham paper), of the fall of prices there ; and its ex tent, indeed, is enormous. But the Morning Chronicle ascribet this to many causes independent of the rise of the currency; an there is one which it omits,—namely, that many fabrics manufac- tured at Birmingham and other places, though of the same deno- mination as formerly, are of inferior quality and produced at smaller cost. The other causes of the diminished prices of com- modities are notorious. The cost of internal productions has been diminished in many ways; and the prices of foreign produce are diminished by increased freedom and extent of importation. The prices of many articles have been depressed by excessive pro- duction. In 1820, for example, the quantity of iron produced in England and Wales was about 400,000 tons : 690,000 tons were produced in 1827, and 700,000 last year; while the demand is cer- tainly not greater than in 1820.
The True Sun alludes to the effects of PEEL'S Bill in regard to the National Debt. In so far as that measure produced any rise in the value of the currency, it increased the real amount of the Debt; and this is an evil, certainly. This evil, according to our computation of it, might have been prevented, had the Bill, instead of returning to the old standard, at which the currency had not exactly arrived, made the legal standard correspond with the actual value of the currency,—in other words, the standard ought to have been 4/. is. 6d. instead of 3/. 178. 10d. per ounce. This was the real error of PEEL'sBill; though the small difference between these standards could have produced but an inconsider- able part of the vast effects sometimes ascribed to the mea- sure. The True Sun asks, "what above all, have been the effects of PEEL'S Bill upon the system of credit, by which our commercial prosperity was in a measure created, and so long up- held?" We answer, that its effects have been to overturn a false and hollow system of credit, based upon the issue, without check or control, of enormous masses of worthless paper, which, like the gold of the magician, disappears, and leaves only rubbish behind. Such an effect is one of its greatest blessings. In these observations, we have purposely abstained from the question as to the effects produced on the currency by systems of Banking. The Report of the Committee of the House of Com- mons, now sitting, ought to contain materials for consideration on that subject; and we shall wait for the Report, and its Evidence, before mingling in the controversy. We do not know what the gentlemen of the Birmingham Political Union mean by the "abolition of the Money Laws." Do they mean that gold is no longer to be coined, or that paper is no longer to be convertible into gold ?—or do they mean that a new standard is to be established? Some such meaning they may have, as Mr. ATTWOOD speaks of coining fourteen shillings into a pound sterling. But what would be the effect of this?-11 would enor- mously diminish the value of the currency; and would derange, in a frightful degree, every subsisting transaction. It would be ruinous to all creditors; and they are a body whose rights de- mand equal care with those of the debtors. In the case of the public creditors, it must be remembered, that though the present Government securities, granted during the depreciation of the cur rency, are of much higher value than at first, yet an immense pro- portion of the present holders have purchased them with money of the present value. An "equitable adjustment" is generally re- garded by practical men as an impossible thing. It is therefore our unshaken conviction, that nothing can be more absurd, than to think of relieving the country by a factitious amount of depreciated currency.
* The True Sun complains, that in our expostulation with the Herald last week., (for abusive dogmatism, where a modest tone would have been becoming), we used, without acknowledgment, some of its stores of thought. If we did, it was without being aware of it : we are not in the habit of borrowing from any source without acknowledgment, and least of all in the case of a paper like the True Sun, which, though clever, active, zealous, and better known than some that have flourished longer, is still but a few months old. The truth is, the exposition alluded to belonged to the A. B. C, of politi- cal economy, and must have occurred to any body but, in respect to the manner of stating it, there may be a better and a worse—and we nope ours was not the least intelligible.
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