Part 7

There is one conclusion, however, as we have already observed, on which a large majority of the highest authorities, scientific and practical, are fully agreed, viz., that the present system of currency is extremely defective, and ought to be amended in the ensuing session of Parliament. The restrictive clauses of the Act of 1844 are, we think, likely to be repealed whenever the subject is presented for reconsideration. But if the remedial measures are confined to the mere repeal of those provisions; there will be little practical difference between the new system and that established by the law of 1819. We must once more repeat, that neither experience nor sound principle would justify the placing so serious a responsibility as the unrestricted issue of notes unrepresented by bullion, under the uncontrolled direction of the Bank of England. And if this be admitted, the question at once presents itself what is the nature of the control which the State ought to exercise over such issue. It must not consist of the simple limitation of the number of notes issued; for either that would be ineffectual, or would repeat the error of the Act of 1844. Nor must it consist of the legislative enactment of certain rates of interest at which the Bank should accommodate the public; for that would be an unwarrantable interference with the functions of the Bank. We know of no other legitimate course, therefore, save that already propounded, viz. the imposition of certain rates of interest on the amount of notes which the State may authorize the Bank to issue, and which the latter would not issue unless it derived a profit from the transaction. The adoption of this course would not involve the assumption of any undue prerogatives on the part of the Government; for if the State consents to transfer the privilege of issuing paper money from itself to any banking company, it unquestionably possesses the right to require an adequate equivalent for the exercise of the privilege thus transferred. And if the principle be once admitted, that the State has the right to impose certain equitable rates of interest upon the unrepresented issues of the Bank of England, we think it follows indisputably, on grounds which we need not here repeat, that the mode in which those rates should be assigned, should be that of an ascending principle.

To proceed still further, we think it no less expedient that whenever our currency system shall undergo revision, that revision shall be made as complete as practicable. And if so, we do not see how the subject of the country banks of issue can escape consideration. The advantages of having a single bank of issue are now so generally admitted that the chief, if not the only difficulty which would be likely to obstruct the question would be that relating to the mode of protecting the country banks from any unnecessary loss arising from the deprivation of their privilege. And of several methods in which this might be accomplished, we think by far the best and simplest would be that of allowing the present banks of issue to retain the privilege for a certain equitable number of years, on the single condition of gradually diminishing their issues, on such a plan that they would altogether cease at the expiration of the stipulated period. The question of the number of years that should be allowed is a matter of detail; but, for our part, we consider that ten would be amply sufficient for this purpose. The gradual substitution of Bank of England paper for the notes withdrawn would present no difficulty; as all that would be necessary is, that the Bank of England should be permitted to increase its normal issues on equitable conditions in proportion as the country notes diminished, until, at the expiration of the stipulated period, the former would have totally replaced the latter. We see no objection, therefore, either of principle or of practice, to any of the leading features of the plan we have just propounded: and so far as the minuter details are concerned, we think they might safely be entrusted to the care of any intelligent body of public men who would honestly endeavour to carry the principles themselves into execution.

THE END.

Transcriber’s Notes

Punctuation and spelling were made consistent when a predominant preference was found in this book; otherwise they were not changed.

Simple typographical errors were corrected; occasional unbalanced quotation marks retained.

Ambiguous hyphens at the ends of lines were retained; occurrences of inconsistent hyphenation have not been changed.

A vertical white blemish near the left margin partly-obscured the text of many page images. Transcribers were able to reconstruct the affected words, but the line also went through the second digit of some numbers, particularly in multiple occurrences of what was judged to be “£11,000,000”. It is possible that the correct value for some of those was “£14,000,000”.