THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 35Z 
 
 B875 
 V.27
 
 CURRENCY & FINANCE, 
 
 I82g. 
 
 SHORT EXAMINATION 
 
 OF Tin' 
 • OF THK 
 
 CHANCELLOR OF THE EXCHEQUER, 
 
 RFSFEtTI\G THE SMALL CLRRE>a:V; 
 
 K E M A U K S 
 
 ON THE 
 
 FINANCES AND T\XATK.i\ OF THE COT _\TR\ . 
 
 "The exigencies and uses of moufv j/ot lisseniug with its <juantity, so 
 mucVi as its i|uantity is le^.sned, so muf-;. ■nust the share of everv one who 
 ha a ' ight to this money be the less, wln-lher \u: be land'ioliJ»ii ivr his 
 go )r labourer for ' ' hire, or Tr-T''ha"t for his brokerage 
 
 ule not perceivnii; uie T»ioney to '"c gone, are apt to be jealous one 
 of aut'\ ;r," &c. &c. '' T^ut this is imt scrambling amongst oiirsf'vc;s, and 
 helps li^ raore against our wants, than the putting of a short coverlet will, 
 amongst cliildren v.'<io lie together, preservo them all from cold ; some will 
 starve unless the father of the family provide better, and enlarge the scanty 
 covering." — Locke. 
 
 " To think that things could return to what they were before the war, 
 was one of the most dangerous errors that could be entertained." 
 
 Rr. Hon. W. Huskisson, 1815. 
 
 " VV^as it not foolish in the extreme because the paper system wanted 
 regulation it should be abolished at once 1 It would be just as foolish to 
 dash a watch to pieces, because it required regulation. 
 
 Sir JAMts Graham, June 1828. 
 
 LONDON : 
 
 W. H. BRUCE, TRUMP STREET, KING STREET, CHEaPSIDE. 
 
 July, 1828.
 
 THE writer of these few observations has no wish to 
 exaggerate. He would be rejoiced to be able to believe 
 the calculations of the Chancellor of the Exchequer 
 correct. But he feels that they are not, and that they 
 cannot be so ; and so feeling, he thinks it his duty, although 
 with great reluctance, to state the grounds of his con- 
 viction. For if seven, or even five millions of gold will 
 be required instead of two, for the purpose of replacing 
 the small currency, the effort w ill be far greater than can 
 be permanently borne. It will consequently fail, and 
 thousands will be ruined by the mere attempt, to no pur- 
 pose whatever. 
 
 As little is any depreciation of the currency advocated 
 in these pages. Experience has, indeed, proved that the 
 BuUionists of 1819 were far more ignorant of the effects 
 
 A 2
 
 of their measures than the practical men whom they 
 despised, and that they were wholly mistaken in the 
 principle on which they estimated what they called the 
 depreciation of the paper, viz. the difference between the 
 standard and the market price of gold, which fluctuated 
 with every event of the war. But the return to the old 
 standard having been attempted, it is better to endeavour 
 to carry it through, if, indeed, that be found ultimately 
 practicable in a country circumstanced as Great Britain is. 
 Nor is there any thing inconsistent with the strictest 
 adherence to the standard in the continuance of Small 
 Notes, even as they exist at present, much less in the 
 substitution of a fresh Note of a higher amount, and 
 issued according to Mr. Vansittart's plan of 1818, on a 
 deposit which should render it perfectly secure.
 
 THE APPROACHING CESSATION OF THE 
 SMALL NOTES, IN APRIL NEXT. 
 
 Notwithstanding the apparent apathy aucl in dif- 
 ference which has hitherto existed upon this subject, there 
 is no question, which, at this moment, exceeds this in 
 importance, connected as it is with the trade and agricul- 
 ture of the. country, and with the subsistence of the 
 middling and lower classes. The Small Notes constitute 
 the sole currency for wages of labour, in five-sixths of the 
 kingdom ; they are, by law, to cease in April next, and no 
 means by which a substitute to the same extent can be 
 supplied, are yet provided. This ought not to be a question 
 of the profits or convenience of Country Bankers. They 
 are, indeed, entitled to protection like others; but they can 
 have no right to issue money on any other terms than are 
 consistent with the good of the state. 
 
 The effects of this measure on the industrious classes 
 demand immediate attention. 
 
 It is undeniable that every contraction, or reduction, of the 
 amount of currency tends to raise the value of money, and 
 in proportion, to lower that of o/Agj* property, — to produce 
 ruin and distress amongst the industrious and labouring 
 classes, especially those possessed of small capital, — and to 
 add to the burden of the national debt and taxation. The 
 only individuals benefitted will be, as Mr. Locke says, 
 *' monied men," amongst whom must be classed all mort- 
 gagees and proprietors of the national debt, as well as all 
 pensioners and holders of offices and sinecures, vvho, like 
 Lord Grenville, and many others, are paid ,1 fixed amount 
 in hard money. The less money, therefore, they allow to 
 exist in a country, the greater are their incomes, in pro- 
 portion with those of others, and with the prict^ of com-
 
 6 
 
 modities ; but there seems no reason why the working 
 classes should be sacrificed to the unproductive. 
 
 It is clear that a paper currency, provided it be secure 
 in itself, and payable in the legal standard, possesses the 
 advantages of cheapness and convenience over a currency 
 of silver or gold. 
 
 It is equally certain, that the amount of currency has 
 been already greatly reduced in consequence of the panic 
 of 1825, and of the subsequent measures of Government, 
 and that much of the existing pressure on the community, 
 and defalcation of the revenue, have arisen from that 
 source. It is admitted, even by their advocates, that the 
 two measures about to be carried into effect, — the one to 
 prohibit Scotch Notes in England, the other to put an end 
 to all Small Notes in England, in the next spring, — will 
 add to the existing embarrassment and depression. The 
 extettt to which this will be the case, is involved in doubt 
 and difficulty. 
 
 The amount of circulation to be annihilated is, neverthe- 
 less, most important ; for upon it depends, not only the 
 wisdom, but even the ultimate practicability, of these 
 measures. 
 
 If the calculations of the Chancellor of the Exchequer 
 be correct, they may be carried into operation, (for a time 
 at least) although even then, with a considerable degree of 
 additional pressure on the nation ; but if, as appears to be 
 clear even to demonstration, those calculations do not 
 reach half, or perhaps the third part of the amount to be 
 provided, then it may be safely affirmed that no decision of 
 Ministers, no speeches of Bullionists, no Acts of Parlia- 
 ment, can carry them through. Thousands and hundreds 
 of thousands may be seriously injured, and great distress 
 created by the attempt, but it must fail ; and the voice of 
 a suffering people will be heard at last in the House of 
 Commons.
 
 Surely, then, it is the part of wisdom to hesitate, and, 
 before Parliament separates, to examine and enquire. 
 
 First, To what amount will the small currency be 
 annihilated, and gold provided. 
 
 Second, Whether measures so harsh and violent, are 
 really necessary for the maintenance of cash payments, and 
 for the public interest. 
 
 The most obvious mode of answering the first question 
 would be to obtain, as in the case of the Scotch Banks, the 
 information from the Country Bankers themselves ; nor 
 does there seem any reason why they should withhold, or 
 any probability that they would withhold^ information on a 
 question so simple as the present amount of their small 
 currency only. 
 
 But let us examine, as far as we are able, the calcu- 
 lation of the Chancellor of the Exchequer, which is as 
 follows : — 
 (1) £9,700,000 £1 Notes, stamped in 1822-3-4 and 5. 
 
 (2) Deduct Vs of the above, 
 probably in the hands of 
 the Bankers, unissued in 
 
 1825 £1,900,000 
 
 (3) Deduct also the amount 
 of Scotch £1 Notes stamp- 
 ed, and in circulation, 
 leaving out those in circu- 
 lation unstamped £1,700,000 
 
 (4) Deduct further, probably 
 discredited, cancelled, and 
 withdrawn, at and by the 
 
 panic of December, 1825 2,750,000 
 
 (5) Likely to be further with- 
 drawn by the 5th ApriU 
 
 1829 1,300,000 
 
 £7,650,000 
 
 £2,050,000 
 
 Leaving £2,050,000 as the amount to be withdrawn, 
 and replaced by gold.
 
 That this calculation is most erroneous, and that it was 
 not drawn up by any one practically acquainted with the 
 matter, is most certain. Indeed, the errors are precisely 
 such as a practical man could not easily have fallen into, 
 unless he had been a very dull one. 
 
 The first great error lies in the article marked (2), for 
 it is certain that the reserve formerly kept of Notes 
 stamped, but not issued, and which the Chancellor of the 
 Exchequer estimates at £1,900,000, have since 1826, 
 found their way into circulation. In consequence of no 
 fresh stamps bein^ allowed to replace the old Notes worn 
 out, no Banker has now any quantity on hand ; such is the 
 demand for them on the one hand, and the natural desire 
 to use them before they are prohibited, in April next, 
 on the other, that no inducement exists to keep such a 
 reserve, nor, in point of fact, does it exist. 
 
 The second error consists in deducting £1,300,000 for 
 Notes likely to be tvorn out by the 5th of April, 1829; for 
 the question is not what will remain in circulation at that 
 time, but the amount in circulation now. 
 
 The third error consists in omitting altogether the £1 
 Notes of the Bank of England, and which equally come 
 under the same prohibition. 
 
 The fourth error is in wholly omitting the extra quantity 
 of gold, which every country Banker must keep by him, to 
 meet his larger Notes, which he now generally pays in his 
 own small Notes, gold being scarcely ever demanded, or 
 wished for by the public. 
 
 Taking into account the circumstances, the calculation 
 will probably stand nearly as follows:—
 
 9 
 
 9,700,000, amount of £1 Notes stamped in 1822-3-4-5, 
 450,000, add for Bank of England £1 Notes. 
 
 10,150,000. 
 
 Deduct for Scotch Notes as before 1,700,000 
 Deduct for cancelled and worn out 
 
 by, and since, the panic, &c, 2,750,000 
 Deduct additional, probably worn 
 out since, to this time, instead of 
 
 1,300,000 650,000 
 
 5,100,000 
 
 5.050.000 Notes now in circulation. 
 
 rAdd for additional quantity of gold to be 
 2 100 000 - kept by the country Bankers, say 600 
 (^ Banks, at o€3500 each, on an average, 
 
 C Amount of extra quantity of gold to be 
 
 7.150.0001 , . f .1 R L "f 17 i\i 
 (^ drawn out oi the Bank oi i^ngland. 
 
 This calculation is upon the data given by the Chan- 
 cellor of the Exchequer, and it is corroborated by other 
 modes of considering the subject. — 
 
 Take, for example, six hundred Banks, at only £9000 
 each, and the result is £5,400,000 of small Notes in circu- 
 lation. There are many Banks which have more than 
 four times that amount yet out, and it must be indeed a 
 small establishment which does not equal the above named 
 sum. 
 
 Consider further, that with the exception of the Metro- 
 polis, and a part of the adjacent counties, and a pajt of 
 Lancashire ; all England, including the great counties of 
 York, Lincoln, Devon, and Cornwall, have little or no 
 other species of small circulation. 
 
 It is, indeed, true that the Chancellor of the Exchequer 
 fortifies his calculation by assuming that, in April 1829, 
 there would be no Notes in circulation older than January
 
 no 
 
 1825. Nothiug can be more erroneous than this assump- 
 tion. If inquiry were to be made, it would be found that 
 Notes dated as far back as 1820, and even further still, 
 are yet in constant and frequent circulation. 
 
 These details are dry and uninviting, but MOST im- 
 portant.' — That the calculation which has deceived the 
 Chancellor of the Exchequer, and, through him, the House 
 of Commons, is totally and widely incorrect, the slightest 
 practical inquiry on the j)oints above referred to, will 
 satisfy him. He will at once discover, that nearly the 
 whole of the £1,900,000, and the greater part of the 
 £1,300,000, ought not to have been deducted; and that he 
 ought to add the amount of the small Notes of the Bank of 
 England, and the additional stock of gold which must be 
 kept in the drawers of the country Banker. 
 
 Here, then, let the Government pause. Let them ask 
 if seve7i additional millions of gold could be safely and 
 permanently spared by the Bank of England. Let them 
 ask, in this case, how that Bank would stand in the event 
 of another panic ; and let them reflect that the panic of 
 1793 existed when there were no one pound Notes, and 
 that the panic of 1825 was stopped in its career, by an 
 issue of Notes of that description. 
 
 It is here necessary to advert to another and very dan- 
 gerous calculation of the Chancellor of the Exchequer; 
 viz. that there are about twenty-two millions of Sovereigns 
 in circulation at the present time ; a calculation which 
 does not appear to have even the shadow of a foundation. 
 For on what does it proceed ? On the amount coined at 
 at the Mint. — Now, when it is considered that the 
 exchanges have, since that period, been considerably and 
 frequently against this country, and that the Sovereign 
 may now be lawfully exported, and is a new and perfect 
 coin, without the deduction even of seignorage ; how can 
 any one say what proportion has left this country, without
 
 Jtl 
 
 returning, either in the pockets of travellers and smug- 
 glers, or for the purpose of balancing the exchange ; or has 
 been melted down abroad, or at home, for. purposes of use 
 or of ornament ? But admitting that Sovereigns will sup- 
 ply the place of the paper, and that there are plenty in the 
 coffers of the Bank, still it is obvious that the Country 
 Banker can only procure them by paying for them in Bank 
 Notes; to obtain which he must sell property, or draw 
 in advances, or do both. 
 
 That the prohibition to issue small Notes after April 
 next, will reduce the amount of currency, and consequently 
 add to the existing embarrasment, to a degree far beyond 
 the ideas of the Government, appears certain from this 
 consideration: — The Country Banker must, in common 
 prudence, prepare to pay off all his small Notes in a short 
 time. As in general he does not keep more money at 
 command than is necessary for the safety of his concern, 
 he can only do this by selling fixed property, or by recalling 
 advances he has made in his district, to individuals who 
 will be obliged to meet this extraordinary, and, in most 
 cases, unexpected demand, by a sacrifice of the whole or 
 part of their com, machinery, or stock in trade. As these 
 sales will come nearly at the same time, and as no new 
 capital will be created in lieu of that which is to be can- 
 celled, the buyers will not be in proportion to the sellers, 
 and a proportionate sacrifice must take place. How- 
 many industrious individuals will be ruined or destroyed, 
 it is difficult to say; nor icill the depression he temporary. 
 It will extend over many years, and it will fall on those 
 who are already incumbered, and least able to bear it. 
 Scotland and Ireland are excluded from the above calcula- 
 tions, because, fortunately for them, their representatives 
 acted with spirit and with union. Thus half the evil has 
 been postponed, not averted ; for there exists a secret 
 party of cold calculating political economists, who will
 
 n 
 
 never be satisfied until they have subjected every portion 
 of the British Empire to their dominion. " Divide et 
 impera" is their motto, and they seem likely to succeed. 
 
 It may be asked, does there exist a real necessity for so 
 harsh a measure : 1st, either for the security of cash pay- 
 ments, or, 2d, for the public safety and credit. 
 
 Why the existence of one pound Notes, payable in 
 specie on demand, should make cash payments more 
 insecure than they would be with £5 Notes; and why 
 their circulation is not equally dangerous in this view in 
 Scotland and Ireland as in England, no man can say. 
 But, in point of fact, the circulation of Sovereigns renders 
 cash-payment less secure and easy, instead of being more 
 so; for it withdraws them from the Bank of England, which 
 is thus, in the event of a panic, left with half the treasure 
 which it ought to be able to bring to bear against a sudden 
 demand for the larger Notes. 
 
 To illustrate this, we will suppose that, at the last panic, 
 the place of the small Notes had been previously supplied 
 by Sovereigns from the Bank, — the quantity which would 
 have remained there, would have been utterly inadequate 
 to meet the demand for the large Notes, and the bank 
 must infallibly have stopped payment. 
 
 So true is this principle, that the plan of the late Mr. 
 Ricardo, by which gold would have formed no part of the 
 circulation, and the legal tender would have been in bars 
 of gold by the Bank, is probably the only one by which the 
 system of cash-payments can, for any length of time, be 
 kept up in this country. 
 
 There are indeed two objections only, which have been 
 advanced with any colour of reason against the small Notes, 
 viz. — 
 
 That they drive out of circulation a gold coin of a simi- 
 lar amount ; 
 
 And that their insecurity has caused much distress to 
 the lower classes, amongst whom they chiefly circulate.
 
 13 
 
 That these objections are greatly exaggerated, is clear, 
 when we reflect that, in a considerable portion both of 
 Lancashire, and of the home counties. Sovereigns and one 
 pound Notes circulate indiscriminately ; and that this was 
 long the case whilst the Bank of England continued to 
 issue small Notes. 
 
 And, with reference to their insecurity, it ought to be 
 known, that out of 770 country Banks, 63 only stopped 
 payment ; that out of that number, 23 have since paid in 
 full, and 31 are now making arrangements ; and that those 
 who failed by the late panic, have, upon the average, paid 
 a dividend, of 17s. 6d. in the pound. But whatever 
 weight there may be in these objections, they may be 
 easily obviated by the following plan: — 
 
 PLAN PROPOSED. 
 
 That such persons as think proper to deposit security 
 with Government, according to the principle laid down in 
 the Bill brought into Parliament by Mr. Vansittart, in 
 1818, be permitted to issue Notes of £2, or £3, at their 
 option. 
 
 The details of that Bill may be easily modified and 
 improved. Its principle is excellent; viz. that security to 
 the satisfaction of Commissioners shall be deposited for 
 every small Note 4 such security to be returned for an 
 equal value of Notes paid, and that in the mean time such 
 Notes shall bear the stamp of security by such deposit. 
 The expense of the Commissioners to be discharged by a 
 small per centage on the Notes. 
 
 To such Notes what objection can exist ? They would 
 be a cheap and a secure currency. Being of a higher 
 amount than the Sovereign, they could not drive it from 
 circulation. They would mitigate much of the pressure 
 and misery which must otherwise take place. 
 
 If it be said that this plan would give the holder of a
 
 14 
 
 small Note an advantage in security over the holder of a 
 large one, it may be replied, that the latter is better able to 
 judge of the credit of a Banking Establishment than the 
 former, and at all events that he will not be in a worse 
 situation than by the law, which compels the payment in 
 full of all the small Notes without exception. 
 
 If it be said that they will be issued to excess, it may 
 be replied, that the deposit of security, will effectually 
 prevent their being issued for the purpose of raising a 
 speculative capital, and will throw the issue into the 
 hands only of solid establishments. 
 
 If it be contended, that on such terms few persons 
 would issue Notes at all, it may be replied, that those 
 who decline issuing them are not injured by the measure ; 
 that in all probability a sufficient amount would be issued 
 by respectable houses, for the sake of the legitimate pro- 
 fit and convenience which they would occasion, and that, 
 at all events, in the mean time, the small Notes 7iow in 
 circulation might very safely he permitted to he re-issued, 
 for the short period during which they tcould last. 
 
 And it would be a further and great advantage, that the 
 amount in circulation, from time to time, would be accu- 
 rately known to commissioners, and to the Government. 
 
 These remarks are worthy of the serious consideration 
 of a paternal Government, which does not wish to sacrifice 
 the debtor to the creditor, either national or private. 
 Let it be remembered, that whoever urges the extinction 
 of the small paper currency, urges, under the specious 
 disguise of " sound principles," and " public faith," the 
 increase of the national debt, the increase of the taxes, 
 the augmentation of every sinecure, pension, and salary, 
 and of every public and private debt and incumbrance in 
 the kingdom. If, in 1819, Mr. Peel had in so many words 
 proposed to add 300 millions to the national debt, he would 
 have been scouted. In fact ^ though not in name, his Bill
 
 15 
 
 <lid this, if there be any truth in the principles of the 
 Bullionists; and yet he believed, and possibly still believes, 
 himself to have been, on that occasion, a public benefactor. 
 
 Many other interesting questions will soon demand the 
 consideration of a Government which claims and desires 
 to be just, consistent, wise, and benevolent. 
 
 It may well be asked, whether it would not be wise 
 to re-impose some of the taxes which were taken off in the 
 last few years, viz. those on spirituous liquors, wine, silk, 
 leather, tobacco, &c. &c. 
 
 Whether those taxes were not chiefly on luxuries, and 
 could therefore be easily borne ? Whether some of them 
 were not pernicious luxuries ; and whether, in particular, 
 the increased consumption of gin has not, at the same 
 time, injured agriculture, by decreasing the consumption 
 of beer, as well as demoralized the people I 
 
 Whether the consumer has profited, as he ought, by 
 the repeal of these taxes 1 Whether it would not be wiser 
 in every view, and more justly popular, to repeal all the 
 few remaining direct assessed taxes, such as those on 
 windows, &c. ; and thus to consult the health and orna- 
 ment of the country, and get rid of surcharges, appeals, 
 &c. &c. ? 
 
 Whether the re-imposition of these taxes, or a portion 
 of them, would not form the means of strengthening the 
 Goverimient in the eyes of foreign nations, and of up- 
 holding the sinking fund without adding to the national 
 debt? 
 
 Whether the nation is not bound to keep up a real sink- 
 ing fund, both by pledges direct, and indirect, and by the 
 example of the wisest and most enlightened of foreign 
 nations? To the credit of this fund is to be ascribed the 
 low rate at which this country was able to borrow money 
 in the late war, and the great reductions in the 5 and 4 per 
 cents, made since the peace.
 
 16 
 
 Why Ireland should have the liberty of exporting her 
 poor, and her produce, duty free, to Great Britain, and 
 yet be exempt from land tax, small tithe, and poor's rate? 
 
 To what end we continue a system of policy, which thus 
 enables til*' absentee Irish land-owner, to extract to him- 
 self more vK the produce of the land, than the land-owner 
 of this or any other country, and that at the expense and to 
 the injury of Great Britain? 
 
 Why the right to take tithe in kind in England is not 
 commuted for an annual payment, varying with the price 
 of corn ; and the annoyance of the present system thus for 
 ever removed? 
 
 If political economists would apply themselves to what 
 is useful, and practicable, they might render themselves as 
 great a blessing to the country, as they have of late years 
 been the reverse. 
 
 THE END.