It circulates by virtue of the insignia of government
Convertibility only useful in preventing an excess
The insignia of government cannot create values
Convertibility a very inadequate test of the propriety of issue
Government should be the issuer of currency

The saving effected thereby

Government greatly the loser by issuing money

Ricardo's doctrines of Free-Trade

Prices controlled by the least favored, not by the most favored, producers 228

His assumptions wholly opposed to the fact

His doctrine of rent the sequence of that of prices

His plan for an economical and secure currency

To be made equal to coin by a provision of bullion

Eminently practical as a man of affairs

No bullion to be used, from the inconvenience of reaching it
Puerility of his scheme.

Discharged of all sense the moment he took up his pen

THE BANK OF ENGLAND.

Price of bullion from 1813 to 1819

Act of Parliament of 1819 requiring the Bank to resume

Provision made for resumption

The Bank resumes May 1, 1821

List of speculative enterprises brought upon the money market (note)

Extent of the speculative mania

Action of the government

Saved from suspension by the discovery of a package of notes

Communication addressed by Lord Liverpool to the Bank

Evil of an excessive issue of paper money

The remedy an improvement of the country paper

Evil not caused by small notes

The Bank of England to give up its exclusive privileges, and establish

branch Banks

Country Banks to be allowed to increase the number of their partners

Lord Liverpool's plan adopted

240

241

Committee of the House of 1832 upon the extension of the Bank Charter

Matters to which its attention was directed.

Whether there should be one or several issuers of the currency

If only one, should that be the Bank of England?

243

243

What checks to be provided to secure a proper management of Banks

of Issue

Its labors consisted chiefly in the examination of experts,

Testimony of the experts opposed to every principle on which currency is

based

Involved the subject in still greater obscurity and error

Evidence of the representatives of joint-stock Banks

These Banks successfully compete with that of England

The latter a great disturbing element in financial affairs

Its action corrected and neutralized by that of the joint-stock Banks

The latter the great issuers of the currency

Management of the Bank . . .

Evidence of J. Horsley Palmer, President, and other Directors

Its issues not based upon bills, but upon government securities

Discount of bills left to Banks and bankers .

247

248

252

252

253

254

Rule of the Bank to hold coin and bullion equalling in amount one-
third its liabilities

The currency then even or full

Starting with this amount, all fluctuations left to take care of themselves 256

An outflow of bullion to be left to work its own cure

256

If excessive, the Bank might regulate its issues by reference to the

exchanges

If its assets were in bills, their payment would return its notes without
effort on its part . .

State of the exchanges an inadequate rule for its action

Mr. Palmer undertakes to account for the failure of the rule.

261

"The Causes and Consequences of the Pressure in the Money Market,"

1837 . .

It did not reduce its issues, for the reason that the demand was domestic,

not foreign.

264

When the exchanges were even or favorable, it supplied all the currency

wanted

Existence of joint-stock banks incompatible with that of the Bank of

England. . .

267

Inadequacy of his explanation

267

The Bank governed by no rules

267

Its reserves to have reference to domestic as well as to foreign trade

269

Its issues the cause of an unfavorable state of the exchanges.

270

Made when they are even or favorable

270

A large amount of gold in the Bank evidence of a depressed condition of

production and trade

271

Never to be made the basis of loans

271

Extraordinary demands upon the Bank in 1837

272

Its efforts to meet them only serve to postpone the crisis

272

Reply of Mr. Loyd (Lord Overstone) to Mr. Palmer.

274

"Reflections Suggested by a Perusal of the Pamphlet of Mr. J. Horsley

Palmer," 1837 .

"The Bank acts in two capacities: as a manager of the circulation, and

as a body performing the ordinary functions of a banking con-

cern"

These two functions wholly distinct.

As a manager of the currency, the rule stated by Mr. Palmer perfectly

274

274

275

275

Wholly impracticable when applied to the regulation of its conduct as a

banking concern

275

correct

As an issuer of currency, it can keep the amount of its securities uniform 275

Cannot, as a banking concern. . .

275

The amount of its circulation to be represented by a fixed amount of

securities, and by the bullion it holds.

By such means only can a currency be obtained varying in amount as it

would have varied had it been metallic.

It leaves the issue of currency to parties incompetent to their duties

Disturbing influence of joint-stock Banks. .

276

277

Remedy, the strengthening of the monopoly of the central issuer

Issue of circulation to be subject to the supervision of a Committee

Committee of the House appointed to consider the subject of Banks of Issue 281

The value of bank-notes regulated by precisely the same laws which regu-

late the value of coin

282

The former the common medium of exchange, in all transactions, at all

times, and in all places, and that too in endless succession

Deposits, business worked; notes, the means by which they are worked. 283

Lord Overstone the real author of the act of 1844.

No difference in principle between the several forms of paper money

Had no conception of the nature of symbolic money.

The incoherency and absurdity of his statements and illustrations.

The extension of the Charter of the Bank

A natural distinction between the notes and deposits of Banks

Notes affect the exchanges, deposits do not

Currencies of Ireland and Scotland . .

Notes and deposits to be dealt with upon different principles
His argument a refinement upon Lord Overstone's distinction
Example of the United States against plurality of issue

Supported by Sir Charles Wood (Lord Halifax)

By Mr. Goulburn, Chancellor of the Exchequer

.

291

291

292

292

292

Their ignorance of banking systems of the United States

An account of these systems.

293

293

Those of the other have no support but its bills

No immediate effect produced by the Act

The issues of one legal-tender, receivable for the revenues, and supported by

all the specie of the Bank.

No considerable amount of reserves needed by the former

To be held by the department whose issues have no extraordinary support

Rise and progress of the railways of the kingdom

Vast sums invested in them in 1845 and 1846

300

The panic confined to the issues of the banking department

Parliament called together. .

302

302

Speech of the Chancellor of the Exchequer

302

During the panic, the Bank discounted all bills offered

The Bank held responsible for the suspensions of 1847, 1857, and 1866

The public, not itself, to determine the amount of its issues

Has no discretion but to discount all bills coming within its rules

The advantages assumed for the Act wholly imaginary

Committees of Parliament of 1848.

The Act "has verified every principle upon which it was established"

Suspension of the Act approved by the officers of the Bank

The amount of circulating medium the effect, not the cause, of inflation

of prices . .

An inconvertible currency, not issued in excess, cannot

314

Money has two functions,- one as an instrument of exchange, the other

as the subject of contracts for future payments

Value essential only in the latter

Tooke never mastered a single principle in monetary science.

His poverty in ideas and style

JAMES R. MCCULLOCH.

Epitomizes all the speculations and conclusions of the Economists

Gold can be raised to any pitch of value, by limiting its quantity

Debased coins may be made to circulate at their nominal value.

The most valueless substances may be made to circulate as money

Impossible to control the movements of coin

To raise its value in reference to itself

Or to cause valueless articles to circulate

The solvency of issuers has no influence over the value of paper money.

It circulates for the reason that it is legal tender, and for the reason that

320

321

322

322

a circulating medium is indispensable..

322

How an inconvertible currency may be maintained at the value of coin

The price of paper money measured by its value

323

323

High cost of gold and silver an objection to their use as money

A cheaper money should be "fabricated"

The high cost of gold and silver the reason of their use

325

Every one seeks to convert that which he has to sell into higher forms of

value.

The principles of the Economists incompatible with the existence of society 325

Supports the Act of 1844 ..

Opposes plurality of issue from the example of the United States

His incredible ignorance and assumption.

Scotch Economists and metaphysicians wanting in the reasoning faculty

The cause

327

328

Practical sense of the nation

329

Close resemblance to the Puritan emigrants to the United States

The habit begets the illusion that money is wealth in a peculiar sense.

It is not money with which things are purchased

No one's income derived from the precious metals.

The farmer converts his products into money, in order to "leave the

laborer more leisure for work, and the landlord for being idle". .

"No more insignificant thing, intrinsically, in the economy of society

than money

"It is a machine for doing quickly and commodiously what could be

done, though less quickly and commodiously, without it.".

Mill's description of the nature and functions of money borrowed from

Adam Smith

331

331

The use of gold and silver as money proves them to be capital in a peculiar

sense

.

331