Page:Blackwood's Magazine volume 062.djvu/133

1817.] which, apart from its propriety, does not strike us as particularly clever. The point at issue was rather a trivial one; for Sir Robert, as usual, did not apply himself to the main body of the argument: he neither impeached the facts nor the conclusions of Mr Alison, but fastened upon an incidental point of no great value or importance. The attack, however, had this good effect, that it elicited a reply from Mr Alison, in which he points out so distinctly the results of the restrictive measure, that we cannot do better than transfer an extract from his Postscript to our pages. It is proper to observe, that this Postscript was published two years ago, and we leave the public to judge of the accuracy of Mr Alison's observations:—

"Whoever," says he, referring to the Banking Act of the preceding year—"whoever considers these proisions with attention, will see that they practically introduce two things: 1st, A limitation of the issue of Bank of England notes to £14,000,000 on securities, with the addition of the specie and bullion transferred to the issue department:—2d,. [sic] A limitation of any further issue to the amount of such securities, bullion and specie. It is the avowed object of the Act to base the circulation of the bank on these three things. And the opinion of its supporters has been repeatedly expressed that they constitute the only safe foundation of banking operations. If, therefore, the specie is drawn out by the holders of notes who are declared entitled by the Act to have their notes paid at £3, 17s. 10½d. an ounce of gold, it follows, of course, that the notes in circulation must be diminished in the same proportion. They cannot issue notes beyond the £14,000,000, except in exchange for specie or bullion—the most effectual of all ways for limiting the issue to their amount.

"Now, suppose a bad harvest, such as we have narrowly escaped, occurs, when undertakings of a gigantic nature are on foot, and a large quantity of specie is drawn from the bank to purchase foreign grain or other subsistence, what, under the existing law, must be the consequence? Must it not be that the paper circulation of the Bank of England, and of course of every other bank, will be simultaneously and rapidly contracted? Their own notes pour in to be exchanged for specie to buy foreign grain, or make the necessary remittances to foreign undertakings. They cannot issue new ones beyond the £14,000,000, except in exchange for specie or bullion, which is the very thing they are every day losing, and which is bought up in all parts of the country for foreign exportation. The result is inevitable, that their notes must be called in as rapidly as the sovereigns go out. The screw must be put on; the circulation must, at all hazards, be contracted. If £10,000,000 of sovereigns are drawn out to buy foreign grain, or to meet a demand for gold in foreign states, £10,000,000 worth of notes must be drawn in to equalise the paper with the stock of gold and silver above the £14,000,000 authorised to be issued on paper securities. The circulation will thus be diminished by £20,000,000, or nearly a third of its amount, and that at the very time when the public interests most loudly call for its extension.

"That may occur, too, at a time when speculations the most weighty are on foot, and the currency previously in circulation is most required for the wants of the community! The evil will not thereby be doubled: it will be quadrupled. Like all mischievous panics, its effects will go on as the squares. Is it possible to con- template such a state of things without the most serious apprehensions: without deep regret that it should be established and perpetuated by acts of parliament? Does it not annul the best effects of a paper currency, that of having an elastic quality which causes it to expand when the metallic currency is contracted, and so obviate the ruinous and lasting effects of such temporary diminution on general credit? Is it surprising, when such is the law, that the mercantile classes watch the sky; that rain for a month in autumn gives a serious shock to credit, and that stock of all kinds rises or falls with the changes of the barometer? The Banker's Act of 1844 should be styled—'An Act for the more effectual transferring of panics from agriculture to commerce,