circumstances under the Act have been such as you expected in regard to that?"-"The course of events under the Act has not been at all different from what I should have expected; it was anticipated that the Act would produce this effect, viz., that it would cause a gradual contraction of the circulation, and that, under ordinary circumstances, a certain portion of that contraction of the circulation would fall upon the notes in the hands of the public; at the same time, it was perfectly true that the contraction of the circulation might assume one of two forms,- either a contraction in the numerical amount of the notes in the hands of the public, or, in lieu of that, a contraction in the efficiency of the existing amount of notes; in which form the contraction, on any given occasion, will take place, will depend in some degree on accidental circumstances; it seems to me that two accidents occurred in the year 1847: the mismanagement of the banking business of the Bank in the spring of 1847, and the extraordinary extent of commercial failures in the autumn of 1847; had these two accidents not occurred, I apprehend that the course of things in 1847 would have been precisely identi cal with that which is intimated in the question; viz., that we should have had a considerable export of bullion, and a considerable contraction in the numerical amount of the notes in the hands of the public, followed by a high rate of interest, and that, probably, continuing for several months. That high rate of interest so continuing would have corrected the exchanges, and have gradually brought back the gold; that would, probably, have been the course of things under the pressure of 1847, barring the two accidents already alluded to."

This answer reminds one of Leech's illustration of the Irishman's boat: "And shure if yer honors sit parfectly still, and don't cough or snaze, she'll carry you all illigant." The passengers did cough and sneeze, and the crazy craft went to the bottom.

Committees of Parliament to consider grave questions, as they arise, have come to be institutions with Englishmen. Those appointed previous to and in 1848, to consider the subjects of currency and the Bank, were years in session, and asked and received some twenty-five thousand questions and answers; not one of which, it may safely be assumed, was asked or answered with any appreciation whatever of the laws or principles of paper money, except such answers as were made, in 1810, by the Directors of the Bank, in their examination before the Bullion Committee. It could not be otherwise.

1 The answers to the Bullion Committee of the Directors of the Bank, which maintained its loans to be properly made so long as it discounted bills having sixty days to run, and representing real transactions in merchandise, were at the

With that single exception, all the questions and answers assumed the correctness of the dogmas of Adam Smith, each one of which was wholly without adequate foundation. With such premise it was inevitable that, the greater the number of questions asked and answered, the more involved in confusion and error the subject became. Their almost infinite number, when half a dozen, properly put and answered, would have made the whole matter palpable to the meanest understanding, is of itself full proof of the utter ignorance and chaos of opinion which prevailed. When truth is discovered, opinions are in accord. When it is not, individuality asserts itself, and there are as many theories and explanations as there are parties to give them.

Englishmen assume themselves to be the especial champions of freedom of trade. This is based upon the idea that individuals know better than governments the methods and conditions necessary to their own welfare, and that individual welfare makes up that of society. If one in that country embark in any industrial enterprise, government does not prefer its advice as to its nature and management. If a ship be to be built, it does not insist upon the model. If a bill of exchange be offered for sale, it does not interpose in order that the purchaser may get an equivalent for his money. In all such matters it adopts, to the fullest extent, the laissez faire policy. But, when a person wishes to exchange his own obligation for the notes of the Bank, it then steps in to provide the conditions upon which the exchange shall be made. Why should not the same freedom be allowed in one case as in the other? Why should not the holder of a bill and the Bank enter into any agreement for the exchange of their obligations in whatever form they please? It is not a question of morals, but of affairs. Why should not the Bank determine the proper limit of issue of notes, as the public does the amount of commercial bills proper to be drawn? The answer is, that the issue of paper money is really a function of the government, which, when usurped by

time, and have ever since been, received with derisive jeers. Mr. Bagehot, in saying "that their answers made nonsense classical;" and that "very few persons could have managed to commit so many blunders in so few words," expresses the general contempt felt for the answers, as well as for their authors. Lombard Street, pp. 175, 176.

individuals, is to be tolerated only from necessity, not encouraged. But a note of the Bank does not differ in its nature from, nor has it inherently any higher dignity than, a note or a bill given for a sheep or a cow. The right to issue notes to serve as money was a right at common law previous to the Act of 1844. Are not the Bank and the public competent to decide what is for the advantage of each? If the holder of a bill wish it converted into money, why not allow this to be done in whatever manner suits his convenience or that of the issuer? A currency, to be adequate to its objects, should symbolize all merchandise entering into consumption. If the right to issue notes be unrestricted, the nation, it is urged, will be flooded with them, and the most terrible disasters will be the result. But if notes be not allowed, the money created in other forms will equal the notes which, but for the restriction, would have been issued, and produce precisely the same consequences. But would a perfect freedom in the issue of either form of money be likely to produce the disasters predicted? For every issue of notes or credits it makes, the Bank undertakes to pay out, and, if it make an improper issue, must pay out, an equal amount of coin. It will, therefore, be under no more inducement to spread its notes broadcast than coin, or its liabilities in other forms in the creation of which it is wholly unrestricted. How, then, is an excessive issue of notes to be got into circulation? The Bank will not knowingly fool away its capital. Every borrower, also, undertakes to pay coin, or its equivalent, for the notes and credits issued to him; so that he will take good care to receive no notes that are not of equal value to that which he contracts to pay. Both Bank and borrower are constantly on their guard; neither will incur a liability without receiving an equivalent; and, so long as equivalents are exchanged, no harm can come therefrom, but great good, as the welfare of society depends upon the freedom with which its exchanges are made. The theory, therefore, upon which the Act of 1844 proceeds, is that mankind, that the holders of capital, are not to be trusted with its management; that they are imbeciles, not to be freed from the leading-strings of government. Such is the monstrous conclusion to which the Act necessarily leads.

Among the witnesses examined before the Committee of

1848 were the Governor and Deputy-Governor of the Bank. These were, at last, the loudest in praise of the virtues of the Act of 1844; the object of which, they said, repeating the words of Lord Overstone, "was to place the circulation of the country exactly in the position that it would have been had it been purely metallic." They declared "that, with regard both to the contraction and expansion of the currency, they would both have taken place under the Act precisely in the same mode, and to the same degree had the currency been purely metallic." They had learned their lesson well. They had had enough of parliamentary and financial Petruchios; and were only too happy to purchase quiet, and exemption from further interference, by declaring the same object to be white or black, according to the caprice of their imperious masters. They even volunteered to reproach themselves for their conduct in not arresting the course of the panic, by raising the rate of interest in the spring of 1847. They claimed, however, that the action of the government in setting aside the Act of 1844 was not solicited, and that it was not necessary to the solvency of the Bank, although it was of great use in quieting the panic; which would, probably, have occurred had the Act never been passed. Its severity was greatly mitigated by the action of the government. The great merit claimed by them for the Act was, that when the pressure did come, it left the Bank in the possession of £8,000,000 of coin and bullion, which those who were entitled to draw it did not want, and which those to whom the Bank was indebted to a much greater amount did want, and could not reach. If one-half this sum could have been transferred from the branch in which it was lying wholly useless to the one which was rapidly becoming exhausted of its means, the panic might have been averted without the action of the government, and long before its interference. The timely transfer of such a sum would have saved the nation ten times its amount. The generalship of the Act is that of a commander who fights the battle with only one-half the forces he has in hand, and suffers in consequence, disastrous defeat, although complete victory would have been assured had he brought the other half into the field. There was all the time. an abundance of money; but for fear that the issues of the future might be greatly restricted, every one holding a note or a guinea hoarded it against a wet day. The consequence was

that business men, who had been quietly occupied with their affairs, suddenly woke up to the conviction that the ordinary instruments of exchange might, in a short time, be wholly refused them. It was as if the air necessary to sustain life were to be so reduced in amount as to suffice for only one-tenth the number accustomed to breathe it. Hence the frantic struggle which followed: it was a struggle for dear life. As soon as it was seen that there was to be enough for all, apprehension instantly subsided: affairs at once relapsed into their accustomed routine. Is it wise, every ten years, to put the nation into such an extremity by allowing an institution, upon whose operations the affairs of a world, as it were, turn, to create enormous liabilities, at the same time denying to it all means for their payment?

The Governor and Deputy-Governor, in the conclusion of their evidence, prayed that government would make no alteration in the Act, save perhaps to allow a larger issue of notes upon silver bullion.

The Act of 1844 has been dwelt upon at length, for the reason that it afforded a suitable opportunity for illustrating the principles laid down in the first part of this work, and the opinions prevailing in England, as well as in this country, upon the subject of money; for opinions on this only echo those on the other side of the water. From the vast mass of works on the subject, it is possible only to present the arguments and views of the leading authorities. The literature of money and banking, probably, exceeds in extent that upon any other subject whatever. It is all the same in kind; so that when the theories of a representative writer are presented, those of all others are matters of easy inference. The, science of money, as laid down in the books, bears the same relation to the subject itself that Alchemy did to chemistry. Having once demonstrated that gold cannot be produced by any mixture of the baser metals, it is useless to spend time in proving that it cannot after the method of Geber or of Raymond Lulli. To refute each one of the Alchemists who claimed such power, a life-time would not suffice. So a refutation of Adam Smith may be properly accepted as a refutation of all his followers. So with the Bank. Lord Overstone, the real author of the Act of 1844, was to it what Adam Smith was to