L I B RARY OF THE U N IVEIRSITY or ILLINOIS e>a7s V.I7 THOUGHTS ON THR iaefiumption of Casl) i&apments BY THE BANK; AND ON THE CORN BILL, AS CONNECTED WITH THAT MEASURE: IN A LETTER^ ADDRESSED TO The Right Honorable the Chancellor of the Exchequer, BY A. Hx CHAMBERS. BANKER, BOND-SmEET. llonDon : PUBLISHED BY T. EGERTON, NEAR WHITEHALL ; AND J. M. RICHARDSON, OPPOSITE THE ROYAL KXCHANGE, CORNHILL. 1819 Printed by G. Hayden, Brydgos-street, Covent liu'dtu. TO The Risht Honorable the 'o CHANCELLOR OF THE EXCHEQUER Sir, Understanding that it is the intention of certain parties to bring before Parliament the question of the Bank of England's resuming Cash payments, and io make it imperative on that body so to do, I trust, that both you, and the nation at large, will pardon the presumption of an humble individual, in freely offering his sentiments on the subject ; naturally con- ceiving, that the circumstance of his having been bred in the monied world, (to which nearly forty years of his life have been devoted,) may have afforded him an ojjportunity of forming more correct ideas on so intri- cate a question, than perhaps the generality of person* 2 who have not had rhe benefit of such an education, Le is under that impression induced to submit his opinions to the general consideration of the Legislature, before a measure, so replete with danger, if not with posi- tive destruction, to the commerce of the country, be adopted. 1 beg to premise that I have no interest bejond that which appertains to other persons of property, for 1 st^nd perfectly isolated, and by no means court the favor of the Bank directors, of which indeed they arc quite sensible. I have no connexion with them beyond the ordinary civilities induced hy individual friend- ship or acquaintance, as I have, on most occasions, be?u more disposed to question the resolutions and proceedings of the Directors than to give them ray un» •vqualified approbation. I trust, therefore, I shall stand acquitted of any undue influence on my mind in submitting the following observ^ations to you on a sub- ject of such national importance ; — the public welfare being the only object — ^the only end I have in view. In taking an impartial review of the relative situa- tion of the Bank of England with the country— as to its resumption of cash payments, it is highly expedient to consider the benefit likely to accrae, with the injii^^ likelj to be sustained bj the measure, and then, cart- iully to weigh the advantages against the disadvantages — the conveniences against the inconveniences, and, in the true spirit of commercial calculation, allow the ba- lance to direct our judgment and confirm our decision. The most prominent and not less lamentable incoo- yenience attending the bank restriction is, the frequency of the crime of, and the consequent numerous prosecu- tions and convictions for, forgery. The more extended the circulation may be, the wider, it must be admitted, is the field in which frauds may be practised ; yet can any one imagine, that if live or six millions of one pound notes were withdrawn from circulation, and gold substituted for them, that forgery would cease ? indisputably it would liat. The encrease of forgery may, ifi a great degree, be attributed to the improvement in the art of engraving; in which line there are numbers of artists with improved talents ; the facility of imitating the Bank note is con- sequently greater, and, while lying witliin the power of numerous individuals, the crime must be more frequent. The Directors of the Bank of England, however, are exerting every nerve to render it more difficult, if not almost impossible to forge their notes, and little doubt is entertained that in a great measure their humane efforts will be crowned with success. Should the Bank resume cash payments, then will another door be opened to fraud, and coining become more prevalent, as forgery declines. Great stress has been laid by some on the depre- ciation of the bank note, when gold rises above the coining price of £3. 17s. lO^d. per ounce; admitting the fact to be so, and that, if a person be desirous of exchanging notes for gold, he is compelled to pay 5 per cent, more for the obiainmeiit of the precious metal— will that be a reason sufficiently strong to in- duce the nation to risk its present prosperity, merely to be enabled to say that a man may have nine guineas, one half guinea and sixpence, in exchange for a ten pound bank note ? That high-sounding -word-^Exc/iange, is then brought forward in aid of the argument. The gene- rality of writers on this subject have fixed their eyes on the Bank of England as the arbiter^ and conceive that the payinff in gold, or the continuance of a restriction on its issues of coin, regulates the course of exchange ; not reflecting that the Bank is rather an occasional receptacle for a redundancy of gold, than a source or mine whence the metal may be derived. The operation of the Bank is to prevent the price of gold sinking below £3. 175. \0\d. as at that price •t is ever ready to receive it, by issuing its notes in ex- change. If, for instance, ten millions were to be car- ried to the Bank, and notes given to that extent;-— when called on, the Bank would be able to restore the full amount. — But if the Bank issue notes on govern- ment securities, it will naturally look to Government for their redemption ; and so with respect to discounts — if the Government and the Acceptors pay the Bank, that body will, of course, be ready to discharge its ob- ligations — but not otherwise. There can be no question that when gold can be re- ceived for paper even handed, or, in other words, when gold can be procured for its representative value on pa- per, the exchange will continue with less variation ; but this may be considered a consequence of the regularity 6 of exclmngc, rather than a cause of it ; yet, even when the Bank pay in specie, there will be occasional varia- tions produced by difierent causes j — transfers from one country to another — for goods bought or sold — from emigration in any great degr^ ; — an army paid in an- other country, or any other circumstance, increasing the quantum of negotiable paper. Those writers who have exercised their peni^ on ex- change seem none of them io be clear in their ideas, or to have hit on the true cause of its variations ; they have merely considered the drawing and re-drawing of one country on another — whether, when the bills be- come due, they will or will not be paid in specie; and the relative value of that coin in which they are to be discharged. Unquestionably these considerations have their weight and bearings on the subject ; still every ©ne who has ventured to predict, has been propheti* cally wrong. Oiight we not rather to consider national industry, science, and talent, as the grand regulators of ex-* change ? these combined will ever direct its course ; the principal object therefore is to excite productive labor and industry, and whenever the people shall be fully employed, then will the exchauge work itself in favor of tlie nation. The beneficial effects of this tm- ployment spring up iniperceptibly, and can only be observed in the results produced ; — scarcely ever in their progress or detail. To excite the national powers becomes then the im- perative duly of the State— and how can tjiese powers be set in motion so effectually as by credit and a paper circulation? the first being only a private assurance between individuals — the second, a public and trans- ferrable promise to pay. Check the transferrable claim, and the grand impetus is injured, which at pre- sent cannot suffer diminution, without immediately ar- resting the progress of labor: without payment man will not work ; and if he cannot be paid in money, recourse must be had to a transferrable promise ; but it is immaterial to the labourer whether he work for gold or a turnpike ticket, provided that ticket will procure him the necessaries of life. Tl)is position has been fully illustrated during the late long and arduous struggle ; for although the national debt has abundantly encreas- ed, yet has it been accompanied by an extension of na- tional and domestic credit equal to its support, while %\ie resoijrces of the country have been commciujurate to 8 its burdens, and every thing has prospered. Houses liave been built — roads formed — canals cut — bridges erected — and agriculture most wonderfully advanced; nor is there a county that has not had its enclosures, or scarcely a science or manufacture that has not been improved ; and these all owe their prosperity to what has been called a fictitious circulating medium. Even bharity, the offspring of abundant riches, in England has been most profuse — nay, almost unlimited. All these result from national wealth — not the accumula- tion of gold ! In England's most prosperous days twenty -five millions of specie was as much as it could boast of possessing. How long would twenty-five mil- lions support its inhabitants ? one, two, or six months. — Can gold then be considered as national wealth ?— We surely must look to something else ! In taking a comprehensive view of our national cir- culating medium it will be requisite to consider its amount in relation with that of the national debt, which it is called on to support, as well as with that of the various agricultural, manufacturing, commer- cial, and professional transactions, each demanding a given quantity to supply their respective daily wants ; for it would be preposterous to imagine, that one 9 thousand millions of debt. — an improved agriculture — flourishing manufactures — extended commerce, and professional expenses, can be supported and carried on ^^ith the limited means that existed when the debt did not exceed two hundred millions— when the coun- try possessed not a quarter of its present trade, and agriculture was almost in its infancy. Any one who attentively considers the subject will readily perceive that the issues of accommodation from the Bank of England have not kept pace with the encrease of debt, a debt which could not be supported by the existing bank notes in circulation, were it not for the co-opera- tion of bankers' credit, country bank paper, and in- dividual credit between party and party. To the three vowels I, O, U, are attached more ope- rative excellence, more powerful efficacy, than is gene- rally imagined ; their combinations give an impetus to every transaction, and urge man and beast into action, without which, the present system could not exist a week ; they form the vital principle which directs and animates the whole community, and their being withdrawn would bring about instant annihila- tion to the prosperity of the empire. 10 For the moment — let the benefit resulting from the resumption of cash payments be considered, and in the opposite scale let some of the inconveniences be placed. First, if the bank note were convertible into gold, any one might have the satisfaction of saying that he had gold in his purse, instead of bank paper, which, to an advocate for cash payments, might be cause of exultation ; but would it give him a grain more wheat with which to make his bread, or an ounce more meat Vfiih whicii to support nature ? The goldsmith might, it is true, obtain gold for his trinkets or for exportation on better terms, at the expense of the Bank, and the Exchange might, for a very short period, be brought more in favor of the nation : but these are objects of little importance. On the other hand, the Bank Directors, if compelled to pay in specie, would naturally say that, as the na- tion called on them to pay, in like manner they must "call on the Government and on individuals for the dis- charge of their acceptances, which could only be done ^by re-payment in their notes, thus diminishing the quantity outstanding against them. Does any man, the warmest advocate for taking off the iBank i-estriction, rcfiect on what must be the inevitable consequences of 11 such a proceeding ? The Directors, by discontinuing th It recals to me- mory an anecdote of two persons discoursing on reli- gious faith ; the one had every assurance in Religion— the other none. If I am wrong*, said the man with faith, I am but where I am, but if right — where are you? The extensive operations of a single bank-note, as supporting credit, explain what has been an enigma to many, who, without this explanation, could never form a conception as to what was the cause of a daily or weekly plenty or scarcity of money ; any one who now considers the subject attentively, will instantly perceive, that the Bank's refusing to issue a few hun- tho usand pounds on discountable bills, in the 13 course of (he week, will produce the latter effect; the occasional extension of discount, or issue of paper, either by the Bank or the Government, or the with- holding it, giving rise to, or checking a credit at the lowest computation, in a sixty-fold ratio. Thus £100,000 wonld give a daily credit, amounting in the whole to 6,0n0,000, or take up bills to the amount of 100,000 daily, for sixty successive days, before the original bank note became repayable into the Bank. For instance, A. obtains money, say £1000, on his bill, discounted at sixty days date, given for goods the 29th October, with three days grace added, which three days are supposed to have run off before the bill is converted, and due the 1st of January, on which day it is to be repaid. On the 2d November, A. pays it to B, who with it takes up his acceptance before given— on the 3d, jC. does the same— -on the 4th, D. the same, and so on for sixty days ; thus giving in the way of credit, sixty times the actual amount of the note ; or, what is the same thing, contributing to the general operations of commerce, £1000, for each of sixty days. The payment of Duties on any particular day, on West or East India produce, into the Bank, on account 14 of Government, causes a temporary scarcity. In like manner the accumulation in the public cofters from taxes to pay the quarterly dividends, uniformly cre- ates a scarcity for the time being, which would be most severely felt, did not the necessities of the Ban- kers and merchants carry them to the Bank with their bills in their hands to have their wants relieved ; when, ere a few hours have expired, the circulating wheel is again set in motion, and all goes on prospe-' rously, to the comfort and satisfaction of the majority of the monied world ; hence it happens that money is more plentiful on Fridays ; — Thursdays being appro- priated for discounting London drawn bills. On Wednesday preceding the day for general discounts, money is usually more scarce. It may be adduced in opposition to this argument, that whenever money is in abundance, the discounts at the Bank are less, proceeding not from a want of bills, but that the merchants do not so freely apply to the Bank for assistance. This fact being granted, still the money {i.e. bank notes) almost invariably flows in the first instance from the Bank, whence in general it can only proceed , for 1^ it rarely occurs that the profit upon merchandize can by itself be so considerable as to make money plenti- ful ; if it had that effect, the exchange would instantly turn in favor of England, and the price of gold would decline. In times of plenty, individuals having an excess of money, supply the place of the Bank, by discounting paper, with the profit resulting from any favorable speculation in the funds, in which the Government be- comes a loser, in proportion as the public is the gainer ; this state, however, of the monied market seldoiii hap- pens, but when the funds rise considerably above the price at which the contracts for loans have been made ; individuals then enabling the bankers to discount: this acts precisely in the same manner as if proceeding di- rect from the Bank. The Government, to enable the Commissioners to purcliase, obtains advances from the Bank, or on the sale of Exchequer bills ; while the profit accruing to individuals from the sale of stock to the Commissioners, although it may not exceed one or two millions, establishes the plenty alluded to ; and acting as an almost incomprehensible source, esta- blishes an extended credit. The Bank, in one way or another, is the original lender, and to it the nation nijist 16 look for the support of general credit. Recently, when the three per cents, had risen to 84, money instantly became in great abundance, so vice versa now tliat the funds have fallen considerably below the price at which the last Exchequer bills were funded, and that the Commissioners have invested ten millions, perhaps after the rate of five per cent, loss to the individuals supplying the stock, money has become more scarce and more in request, so as even to cause inconvenience , to many individuals ; now if half a million thus creates distress, what would the withdrawing four or five mil- lions occasion ? certainly more than a tenfold incon- venience, as compared with that lately experienced ; because, although five millions may, on paper, be but ten times half a million, yet panic would come in aid, and thus multiply the evil with accumulated force. It is to these fluctuations that the extension or diminu- tion of credit, acting either way in perhaps an hundred fold degreCj is to be attributed ; a»d it is by the favora- ble changes in loans, that individuals have amassed such large fortunes, which indeed the country could never support, did not the fortunes so accumulated furnish, in the aggregate, a supply to the annual collection of taxes ; and thus, in a great degree, uphold their own 17 iftCoine. Those who possess this species of property, seem for ever jealous of, and at variance with the landed proprietor ; they cavil at every advantage or chance of prosperity which he appears to enjoy ; forgetting, that if the landed proprietor did not par- ticipate in the general benefit, by raising the price of the produce of the soil, the fund-holder could not receive his dividend. The stockholder is ever upon the alert to exclaim against any rise in the price of grain and envious of the landed proprietor raising his rent. Whenever any proposition is even hinted at to enhance the price of corn to enable the grower to cultivate it, and which chiefly supports the monied iuterest, he becomes alarmed in the extreme, lest the price of corn should be raised to its due standard. It is the equilibrium alone which can regulate all money transactions — which can bring the exchange to par — gold to its regular price; and possibly bring back the former in favor of England. At this junc- ture stockholder, manufacturer, and even landed pro- prietor, are all troubled and uneasy at not possessing gold the instant demanded— ever true to the nature of man — ready at all limes to accept of an advantage, D 18 though reluclant to make the smallest sacrifice for its attainment. Had it never occurred to place a restriction on the Bank payments, where would the funded interest be at this moment — or the landed either ? for it equally affects both-T-and yet combined with the manufacturer, all are clamorous for something they know not what, be- yond that which must lead to the destruction of all — l)y throwing impediments in the way of Govern- ment. Were such transactions wholly confined to the Bank, which discounts the greater portion of mercantile bills, the credit would be confined to sixty-fold, as the note could only pass into the Bank, once in a day, and a fresh note made out for a new bill the succeed- ing one ; but the action on bills in the Bank is limit- ed, compared with the operation which takes place out of the Bank — for the note not only serves to pay bills, but it discharges drafts for all stock transac- tions in which the drawing and redrawing are enor- mous, and only adjusted at the settling house, where ' frequently an hundred thousand pounds may be ad- justed by one single note of <£1000; for instance, A, 19 has an account with Wilkinson and Co. and draws upon that firm for ^100,000. B. has a similar account with Robertson and Co. and draws upon them for 99,000 ; Robertson and Co.'s clerk exchanges the draft for ninety-nine thousand, with Wilkinson and Co. giving a note for £1000. which makes up the £100,000. In this instance it is clear to the compre- hension of every one, that the single thousand pound note supports the credit of £100,000. — ior supporting and generating credit are nearly synonimous terms, though not exactly the same. Is a system, which thus excites and sustains the energies of the nation, to be endangered ? and for what ? merely to try an experiment, as to whether the Bank's resuming payment in specie will so far act on the price of gold, as to reduce it io £3. 17s. lO^d. per ounce — and on exchange, so as to make it turn materially in ftivor of England. The consequences must be manifest to the most common understanding, and they are too serious to render it prudent that the project should be entertained one moment, even in contemplation. The frequent animadversions cast on the conduct of the Bank Directors for encreasing their dividends ^^0 previous to a general discharge of their notes with gold — and the unfavourable deductions made, that, from the circumstance of their having so done, they ure bound, in common justice, to pay in specie in July — call for a reply. The question turns on one single circumstance—!' would it be politic or impolitic in the Bank so to do?-r— reserving our judgment unbiased by any latent species of resentment against that establishment — under an impression that it has erred. Admitting the act to have been premature, or even injudicious, will that be a reason sufficiently cogent to justify a measure which would entail ruin on many in- dividuals, and inextricable difficulty on the whole community? to render stagnate every exertion, and paralize every species of profitable labor; and that from a principle of party spirit — rancour — retaliation, and possibly less justifiable motives. Let every man who is a well wisher to good order and regular government be cautious how he afl'octs the current proceedings of the Bank. Tlie more wily and disaffected know, full well, th^t whilst tho Bank 21 remains unassailed, little is to hoped for — aware of its being the grand pillar on which the stupendous system of the state is supported, they predict, and with reason, that if they could but once attack with success, and shake this national bulwark, the whole fabric would soon fall to the ground. Hence it behoves every legis- lator to become jealous of the insidious artifice, to weigh ■well the inevitable consequences, and reflect how soon such mistaken notions may recoil on himself; for there is scarcely a single station in society which would be exempted from its baneful influence. In justification of the Bank Directors, candour must allow that they had no alternative but to increase their dividend 2| per cent, that is, as it was termed, increase the capital stock one fourth — or to expose all the trans- actions of the Company, and at one view exhibit how much was lent to Government — what on discount and other securities, and what the amount in bullion, &c. They wisely adopted the more prudent meiisure, and satisfied the clamours of the proprietors. The deplorable eOfects of checking circulation by the want of daily discounts, even for a very short period, have recently been evinced in France, and had 22 neajy proved fatal to the majority of capitalists ; this, indeed, would inevitably have been l!)e case, had it not been for the assistance alForded by English capital. The Bank of Paris, from the great demands on it, was compelled to curtail its accommodations, and lessen its discounts ; the consequence, every one knows, was a most serious depression in the price of the public funds, and the ruin of many individuals. Those little acquainted with the subject may con- sider the circumstance of the fall in price of a national stock, or that of individuals becoming bankrupt, as of trivial importance; as, indeed, such events may be considered when the effect of any accidental cause ; and objectors may ask of what general importance is the failure of this or that concern ? — forgetting that mercantile men are like a number of wooden pins f— one overthrown knocks down many — all shake and are placed in a state of trepidation, not knowing who will fulfil his engagement — who will not ; for if Thomas does not pay John, John cannot pay Wil- liam. Mankind are, and, in society, inevitably must be, dependent upon each other, existing but by mu- tual support. Individuals may fail to the injury of their connexions ; but a public injury, sustained from 23 any false stroke of state policy, may produce conse- quences irretrievably fatal to the prosperity of the whole Empire. The experiment of compelling the Bank to pay in specie is by no means a trifling one— it is unprece- dented—the national Credit can only be compared to a banking house — once check its credit, and it becomes scarcely possible for it to resume its commanding station. Let any one contemplate what would be the result of the Bank of England's withholding from circulation, only for two months, six, eight, or ten millions ; during the intermediate period between money going out of the kingdom and its return, if peradventure it did ever relurn! and which it must of necessity have recourse to, if obliged to resume cash payments j the foundation of every man's credit would be shaken, and the public funds reduced 40 or 50 per cent, in value. This, acting on real property, would bring that down to a level, and ths man who conceived that he possessed an estate worth £100,000, on which he had borrowed £50,000, would discover that lie was destitute of the propcTt3' he onccpoisesscdi in short, it is easy to foresee tliat every ^4 thing would be suspended and thrown into confusibn. The Taxes would not — could not be collected — the Dividends would not be paid — the Agriculturalist must cease to employ, for want of capital to pay his way— the Manufacturer would be unable to satisfy the Ar- tizan on Saturday night, from the check credit must receive by the failure of Country Banks, and every undertaking or business, as well as the Country at large, would be thrown into a state of anarchy and tumultuous distraction. Whenever public credit shall be shaken by any Yevere shock or impolitic measure, the value of lands must consequently fall, since the public funds, in a great degree, are the counterpoise of their estimated value. In purchases, generally speaking, Stock is the representative of the Land, the bank notes being the medium only or pivot on which the transfer rests for a very short time ; the estate is in fact converted into a given quantity of claim upon the national re- venue, and if those claims diminish in their value, the Jland must lose its powers in a proportionate degree. Suppose, for example, an estate to be valued at the pre- sent moment at £200,000. annihilate the national debt, and reduce the circulating medium of paper, and it 25 might not produce £ 5,000. Then would also follow a reduction of wages of every kind, from twenty shil- lings per week to one shilling, or from ten shillings per week to one penny per day, as it was in former times— the quarter of wheat would be reduced to three or four shillings — meat one halfpenny per pound; and to what would it all tend, but to an equalization of labor and prices with the quantity of money or circulating medium ? Supporting, therefore, the price of the public funds is of the greatest importance to the landed interest, for this regulates and fixes the value, not only of lands, but of almost every other species of property. It may be asked, when is the period at which the Bank is to resume cash payments, or is it never to arrive ? To which it may be answered, whenever the price of gold shall be so far reduced as to bring it down to 31. I7s. I0\d. per ounce. This would pro- bably be brought about by raising the importation price of corn to ninety or one hundred shillings, and thus encouraging the English Agriculturalist toemploy thos« individuals who at present remain a dead weight on the Poor's Rates, and, continuing in a state of irido" E 26 leiice from the waul oi" occupation, are fed by foreign com, whilst they ouglit to be employed in raising their subsistence at home. If corn ceased to be re- turned for merchandize and manufactures exported, it is natural to presume, that a considerable portion of gold would be substituted in payment for goods received, or, if not, that foreign articles, liable to pay their respective duties, on importalion, to the increase of the Revenue, would be sent in exchange ; now, as the Revenue augmented, the Government would the sooner be enabled to discharge its debt to the Brmk, &nd place tlie finances of that body in a more ftivor- able situation, by returning the irotes received from, and which are now outstanding against, it. With respect to the Corn-bill, as a relative measure connected with the Bank resuming Cash payments, I cannot but reply to some of the arguments adduced against it, when debated in the Houses of Parliament. An honorable member of the House of Commons ironically asked, if it would be advisable to raise, by restrictions on the importation of Corn, the price to such a point as to enable the farmer to use a '* water- ing poi" to encrcase his quantity ? On that aubject 27 an issue is joined with the wortliy member, whose opinions on most points are entitled to the highest res- pect; but he must not be allowed to withdraw under the persuasion, that policy turns the argument in his favor — quite the contrary ; for, his opinions, on re- consideration, jnay possibly be somewhat altered, by laying down the following position for his reflection, viz. that if, by employing all the idle hands, or hus- bandmen out of work, throughout the Kingdom, they would be enabled to produce more corn than would supply their wants, ^watering pot and all,) — if their labors produced only one pint of wheat from each man, beyond his own support, it would be the most politic measure which could be adopted. Whqtt can be so strong an incentive as holding up to the Agri- culturalist the expectation of remuneration by an extended price ; or, at least, the reasoiiable assurance that he should have no foreign competitors, on more favored terms than himself, if he had not an e;«tclusive market ? It may be laid down as an incontrovertible axiom, that man, in every country ought, by some means, to gain his own subsistence, and not depend on a foreign supply for that which can be raised at home. Ought 28 he not to make any sacrifice rather than resign his claims to independence by supporting himself, and becoming a proud and useful member of society ; de- manding froni his country a just recompense for his exertions, instead of being obliged, reluctantly, to exist on alms, because compelled to remain unem- ployed, On the subject of the right in the labourer to expect a just and adequate compensation in return for his exertions, it may not be improper