C^^'iVER3.TY OF 
 __ ri-LlNOIS LIBRAI^Y 
 
 A*. JL'adana-chav.?a:gm 
 
 STACKS
 
 A LETTER ' \y 
 
 TO THE 
 
 ? -JHT. HON. GEORGE CANNING, 
 
 TO EXPLAIN 
 
 IN WHAT MANNER THE INDUSTRY OF THE PEOPLE, 
 AND THE PRODUCTIONS OF THE COUNTRY, 
 
 ARE Connected with, and influenced by, 
 
 INTERNAL BILLS OF EXCHANGE, 
 
 COUNTRY BANk NOTES, AND COUNTRY BANKKKS, 
 
 BANK OF ENGLAND NOTES, AND BRANCH UANKS. 
 
 ■' i 
 
 WRITTEN 
 
 TO EXPOSE SOME OF THE PREVAILING FALLACIES ON 
 THESE SUBJECTS; 
 
 THAT THE LAWS PASSED UNDER THE INFLUENCE OF THOSE FAL- 
 LACIES, WILL GREATLY OBSTRUCT AND INJURE THE OPERATIONS 
 OF industry; and have NO POWER TO EFFECT THE PURPOSE 
 DESIGNED BY THEM. 
 
 WITH A POSTSCRIPT 
 
 ON THE TENDENCY OF THE WAGES OF LABOUR IN ENGLAND 
 AND IRELAND TO BECOME EQUAL, 
 
 AND TUE CONSEQUENCES RESULTING THEREFROM EXEMfLlFTED. 
 
 HENRY BURGESS, E^^. 
 
 ILOntlOU : 
 
 PRINTED AND SOLD BY HARVEY AND DARION, 
 
 <> r: AC ECH U UC H-STR E ET. 
 ♦SOLD ALSO BY J. PIDOWAV, PICCADILLY. 
 
 4 Jt
 
 
 CONTENTS. 
 
 PAGE. 
 
 Introductory Remarks. Objects of the inquiry stated .... 2 
 
 The error of considering overproduction as the principal 
 
 cause of commercial embarrassment 6 
 
 On the prevailing fallacies respecting the currency. 
 Errors in parliamentary proceedings pointed out, 12. How 
 excess in the circulation is first generated, 13. Impracti- 
 cable for the Bank of England to prevent excess, 1 6. Bills 
 of exchange perform all the functions of currency in most 
 parts of the country, 18. The amount and importance of 
 them, 20. May be kept in circulation without the aid of 
 bank notes or coin, 21. The amount not less than 300 
 millions, 24. Errors of parliamentary inquirers, 26. 
 Other fallacies, 29 12 
 
 Country banking, where and amongst what classes of the 
 peo])le established, 35. The manner of its becoming con- 
 nected with the operations of industry explained, 37. 
 Often vicious in its practice during the period of its be- 
 coming most extended, from 1795 to 1815, SQ. An apo- 
 logy for this, 42. Scotch banking tends infinitely more to 
 promote speculation, 44. Losses by bankers' failing over- 
 rated, 52. Important change amongst bankers in favour 
 of prudence and sound principles took place about 1815, 
 54. The importance of country banking upon those 
 sounder principles shown, in promoting production, 60. 
 it tends to equalize the employment of labour, to keep 
 steady profits upon stock, 65. Amount of cash credits in 
 Ena;Iand, G7 ^, v 35 
 
 359354
 
 IV CONTENTS. 
 
 PAGE. 
 
 On the state of the currency in January, 1826. 
 The prudence and propriety of a change in the law con- 
 sidered, 69- The country banking system shown to be less 
 identified with speculation than the Scotch and Bank of 
 England systems, 73. Impolicy of adopting measures to 
 curtail the power of country bankers, 76. Misappre- 
 hension as to the general policy of the measure mani- 
 fest, 77 69 
 
 Branch banks of the Bank of England shown to be bad, 
 
 in principle and practice, as substitutes for country banks - 87 
 
 The alleged evil of paper money, and the tendency 
 OF the laws passed in 1826, TO regulate the cur- 
 rency OF England, briefly considered. Paper mo- 
 ney convertible into gold recommended 9^ 
 
 Summary. Regulations respecting the currency sug- 
 gested. Conclusion 117 
 
 POSTSCRIPT. 
 
 The important changes in our political condition, effected by the 
 mechanical skill, enterprise, and genius of the people, not 
 duly attended to by public men. Steam navigation tends 
 to equalize the wages of labour in England and Ireland. 
 Its consequences exemplified , 133
 
 A LETTER, S^c. 
 
 London, 10//^ October , 1826. 
 Sir, 
 
 On the 24th July, Mr. Huskisson honoured 
 me by an interview on the subject of the unprece- 
 dented interruptions to industry and the distresses re- 
 sulting therefrom, in the manufacturing and great traf- 
 ficking parts of the country. He gave me the most 
 patient attention, and manifested the most anxious 
 desire to obtain information, and to devise a remedy 
 for the evil. I fear that I did not succeed in changing, 
 in the smallest degree, any opinions he had adopted, as 
 to the cause of the existing disorder ; and consequently 
 I did not obtain his concurrence in the remedy neces- 
 sary to be applied, in order to curtail the present, or to 
 prevent future evil. The subject, however, is mo- 
 mentous, fallacies prevail ; and so evident to my mind 
 it appears that calamities will be protracted or speedily 
 renewed, by continued perseverance in error, that I 
 shall now endeavour, presumptuous as it may appear, 
 to arouse your attention to an unprejudiced considera- 
 tion of this important matter. 
 
 B
 
 2 
 
 I presume to address you, because I am convinced 
 that no person has had access to any of his majesty's 
 ministers, who has possessed, in an equal degree, the 
 means of making, from extended personal observations, 
 an inquiry into the causes of the present miserable state 
 of the active and industrious portion of the community. 
 If you will honour me by reading the following obser- 
 vations, you will find, I believe, that the subject is pre- 
 sented to you in a diiferent light from any in which you 
 have hitherto viewed it. 
 
 INTRODUCTORY REMARKS. 
 
 Divers circumstances and indications may be ob- 
 served in the political world at the present moment, 
 which, I apprehend, will have a powerful tendency to 
 prolong existing fallacies and to create fresh errors. 
 
 Money has, by various means, been so pushed out 
 in London, and drawn thither from the channels of 
 industry^ as to become singularly abundant. This 
 has had the effect of unlocking securities and commo- 
 dities, and of giving to them a marketable value. Two 
 months ago, the holders of these found that to convert 
 them, at almost any price, into cash, was absolutely 
 impracticable. By this operation of rendering money 
 plentiful in London, not only have the securities of pri- 
 vate persons, of public bodies, and of foreign states, 
 been raised into marketable property, but commodities 
 also, which were before stagnant in the docks and 
 warehouses, and valueless, have now convertible prices. 
 And thus have the owners of these goods become worth 
 many millions sterling more than they were worth two
 
 3 
 
 months ago, without an eflfort, or a single operation in 
 industry; with the exchanges remaining (except in- 
 significant vibrations) precisely the same; and with 
 gold, bank-notes, and euglish circulating paper bearing 
 at the same time, in this country and throughout 
 Europe, one uniform relative value. Let us take care 
 not to be deceived by these indications, but proceed 
 to inquire, patiently and without prejudice, into the 
 causes of our embarrassments — see if the prosperity has 
 yet extended to the country, and ascertain if it be likely 
 to be permanent. 
 
 London is the great money-change for the world ; 
 it is, however, merely a point of collection and dis- 
 tribution for commodities : excepting, to a small ex- 
 tent, silks and a few articles of luxury, none of the 
 valuable productions of the nation are fabricated in 
 London. It is to the country, therefore, we must 
 look for the indication of any good arising out of the 
 abundance of money in London. Has there been any 
 eflfect from this, or any other cause, upon the energies 
 of industry in the country, on which we can found a 
 reasonable hope for renewed prosperity, to such an ex- 
 tent as will be the means of giving permanent employ- 
 ment to the destitute poor, and at wages adequate to 
 their subsistence ? I answer, N'o. During the last 
 two months I have passed through most parts of Eng- 
 land. I have traversed several times that important 
 district from Leeds to Liverpool, and through the prin- 
 cipal manufacturing parts, deliberately, to enable me to 
 make accurate observations. I have conversed with 
 great solicitude, and I believe with an unprejudiced 
 mind, with export merchants, bankers, inland traders, 
 
 B 2
 
 4 
 
 manufacturers, stamp distributors, and workmen ; and 
 the sum of my experience is, that there is but little 
 probability of renewed industry, to the extent of af- 
 fording full employment to the poor, and therefore but 
 little chance of an advance in the prices of wages : that 
 if wages do rise, it can only be by increased operations 
 in manufactures and commerce : that if these be again 
 augmented, it must be by the aid, not of the Bank of 
 England only, but also of circulating credit and country 
 bankers. In that case our money system will be again 
 deranged ; therefore, that the recent measures respect- 
 ing the currency are unwise and impracticable, being 
 either destructive to industry, or perfectly unavailing to 
 accomplish the end designed. 
 
 In regard to the change for the better that we are 
 now witnessing, all that can be said is, that a check 
 has been given to any further decline. The pro- 
 ducing powers of this country were in a state of rapid 
 declension. That rapid declension has stopped. Let 
 us now, therefore, adopt measures of precaution against 
 future evil, and to promote returning good. 
 
 The number of unemployed workmen has diminish- 
 ed, but no change has taken place which will raise the 
 profits of the masters, or that will universally or gene- 
 rally afford any profit upon stock engaged in manufac- 
 tures. Consequently there will be no adequate employ- 
 ment for the poor : wages cannot rise, and the distress, 
 though diminished, will continue to be great ; and I 
 affirm it as my opinion, that if measures are persisted 
 in that ought to be abandoned or modified — if increased 
 facilities of acquiring food and of disposing of the pro- 
 ducts of their industry be not afforded, to those classes
 
 engaged in maturing the productions of the country, 
 there will be a falling off, to the extent, at the lowest 
 estimate, of 200 millions, in the valuable productions of 
 the kingdom, during the five years commencing with 
 the year 1826. Taking these productions to consist of 
 two parts out of three mere labour, which, on the ave- 
 rage, is about the mark, there will result a clear loss to 
 the nation of 133 millions. This, if founded in truth, 
 must be matter of deep interest to a statesman, and 
 requires patient inquiry, and deliberate, anxious at- 
 tention. 
 
 So many causes have operated to bring about the 
 present lamentable and embarrassing state of things, 
 that it is difficult, and perhaps unwise, to refer it prin- 
 cipally to any one cause ; but I purpose, in a very brief 
 manner, to show that the evil of our condition is not 
 owing to over-production, but that it is owing, mainly, 
 to this. — That the paper circulation of this kingdom is 
 an engine of tremendous power, the magnitude, force, 
 and operation of which has never been examined and 
 ascertained ; therefore, that nobody has been aware to 
 what degree the pursuits of industry were dependent 
 upon circulating credit ; and that parliament has conse- 
 quently passed laws respecting the currency, deeply af- 
 fecting the productive powers of the country, in igno- 
 rance of the manner in which the paper-currency is 
 connected with, and inseparable from, the industry of the 
 kingdom. That the members of the legislature have 
 not at any time been sufficiently informed of the 
 amount of the different portions of the circulating me- 
 dium : that they have not known that the different 
 kinds of currency into which the whole may be divided.
 
 6 
 
 were performing different functions : that, while one 
 portion of it was used solely by the inert and consum- 
 ing classes of the people, another and a different por- 
 tion was used entirely by the producing classes, for 
 whom it was the sole medium of exchange. That, to 
 the consequence of public men not knowing in what 
 manner the whole productive industry of the country 
 was connected with, and regulated by, that portion of 
 the currency which alone, throughout the British 
 islands, served the farmer, the grazier, the labourer, 
 the miner, the manufacturer, and all the various traders 
 connected with these — may be traced a great part of 
 the calamities we have endured — calamities of which 
 the history of the last nine months forms the third and 
 the gloomiest chapter. After endeavouring briefly to 
 analyze the paper currency as it existed in 1825, 1 pur- 
 pose, in conclusion, to show how great is the error of 
 expecting any material and immediate benefit from the 
 establishment of branch-banks of the Bank of England ; 
 and that different measures from any hitherto an- 
 nounced, are requisite to restore and preserve the na- 
 tional prosperity. 
 
 OVER-PRODUCTION. 
 
 Before I enter upon the chief object of my inquiry, 
 permit me to say a few words upon the improper appli- 
 cation of the doctrine of over-production. As applied 
 to the productions of the earth, it is manifestly absurd 
 and out of place at the present time. As applied to
 
 manufactures, it is not absurd, only in those manufac- 
 tures where supply quickly follows demand. In regard 
 to those wliich are matured by slow and complicated 
 processes, it is in the present circumstances utterly in- 
 applicable, and has produced infinite mischief. 
 
 The evil is not over-production. I do not mean to 
 deny that, in a country circumstanced like Britain, we 
 shall at different periods produce more than there is, at 
 some particular junctures, a demand for; and I admit, 
 in a limited sense, that we witnessed this in the year 
 1825. But this is dn inevitable consequence insepa- 
 rable from the principle of active industry, and is there- 
 fore no evil, on the long-run, to the nation. It 
 may produce local and temporary inconvenience and 
 individual suffering, but these would soon pass away 
 if the people were left, without the interference of 
 the government, to bring themselves right by means 
 which their own good sense and experience would 
 suggest. If a man's fields yield this year more hay 
 than the cattle can eat, he must have more land 
 grazed and less mown next year. If spinners and 
 weavers spin and weave more yarn and cloth than they 
 can sell, they must spin and weave less next year, and 
 dig more of their own or their neighbours' ground for 
 potatoes. It would be as wise for a husbandman, who 
 had a fine spring of water, to stop it up or injuriously 
 to obstruct its flowing, because after using all that he 
 desired for his cattle and domestic purposes, the surplus 
 injured his estate, by flowing through it ; as it would 
 be for a statesman to take from the community any of 
 the means of bringing forth or maturing the valuable
 
 productions of a country, because they were sometimes 
 produced in too great abundance. Let the husband- 
 man train the surplus water over his fields, to irrigate 
 and fertilize, and let the statesman open new markets 
 for the surplus productions. If any remained beyond 
 what could be appropriated by these means, let them 
 flow away by new channels, without price, to people 
 who never possessed such conveniences. They who 
 have, for the first time, partaken of the pleasures af- 
 forded by these profitless overflowings, will soon be 
 rendered tributary to our skill and industry, when they 
 find that without paying tribute the conveniences will 
 be withheld. 
 
 To the imprudent efforts of the sanguine and enter- 
 prising we are indebted for many of our best markets 
 for British manufactures. Without such men, the fo- 
 reign trade of this country would never have attained 
 one half its present amount. It' is not, as they say who 
 would impose restrictions upon our industry, that when 
 we make more goods than we can sell to profit, it is the 
 same as making them to throw into the sea. Though 
 no profit may be derived by the individuals, great bene- 
 fit may result to the nation, from their misdirected or 
 mistimed exertions. A thousand instances might be 
 adduced, from naercantile practice, to prove this. The 
 most remarkable that occurs to me, is that of Sir Robert 
 Peel, who was the first man, I believe, that sent British 
 cotton goods to the East Indies. His penetrating saga- 
 city led him to believe that India would become a great 
 market for our manufactures. But when he mentioned 
 the subject to Mr. Pitt, to obtain the sanction of the go- 
 vernment, the minister smiled, and said, " Send coals
 
 9 
 
 to Newcastle." The adventure was unfortunate, and 
 Sir Robert Peel reaped not profit, but loss. Might he 
 then as well have thrown his cottons into the sea ? 
 Let the annual export of ten millions or twelve mil- 
 lions of our manufactures into the east, which we 
 have, or might have, supply the answer. 
 
 If the eager and sanguine masters, rather than con- 
 sent to the entire destruction of their property in mills 
 and machinery, and the total abandonment of the 
 habits of their lives, were, for a short time, to employ 
 their workmen in making goods to throw into the sea; 
 even to permit that would be infinitely better, than to 
 adopt opinions, which, in their consequences, lead the 
 benevolent, unwittingly, to scatter premiums for in- 
 dolence and vice all over the populous districts. 
 
 Any measure which will have power enough to pre- 
 vent occasional over-production, will have power enough 
 to injure, mortally, the productive energies of the peo- 
 ple ; and in exact proportion as we diminish the power 
 of production in our own manufactures, we give a pre- 
 mium to the manufacturers of other states : in this man- 
 ner our rivals will become strong, as we become weak. 
 
 He who supposes it is possible so to regulate 
 our manufacturing concerns, as to apportion at all 
 times production to demand, must have the most 
 limited knowledge of manufacturing and mercantile 
 operations. The clothier of Newbury caused the fleece 
 to be shorn from the sheep, and the coat made from 
 the same fleece, to be worn upon the man's back, be- 
 tween the rising and the setting sun. But so remote 
 from this state of things is the condition of the manufac- 
 turers of Great Britain, who depend upon foreign de-
 
 10 
 
 mand, that the operations of a day must have reference 
 to circumstances spread over several years. This is 
 especially the case with those who are engaged in 
 fabricating almost all the productions of the loom. 
 Without looking back to ascertain the time required 
 for the supply of all things requisite for his trade, and 
 supposing the manufacturer to have his workmen and 
 machinery in proper order, the raw materials and dye- 
 ing wares ready at his hands ; he must look forward, 
 before he can give out his work — to the state of the 
 export-merchant, the import-merchant, the wholesale 
 dealer on the coast, and the inland store-keeper; the 
 seasons when only the goods can be worn, as well as 
 the times when the materials for remittances can be 
 collected and shipped. If the measures of government 
 had not prevented them, many manufacturers would, 
 during the last six months, have been making goods 
 which could not be dealt out to the consumers till eight 
 or ten months from the present day. Yet these goods 
 ought to have been in preparation ; and distant as are 
 the points of production and consumption asunder, if 
 Englishmen cannot supply the demand. Frenchmen 
 or Germans assuredly will. There has been no abun- 
 dant supply of manufactured goods for six months 
 past, and if a bad harvest had occasioned a large im- 
 port of corn, we could not have paid for it in the pro- 
 ductions of British labour, but we must have sent out 
 gold to purchase the corn. 
 
 Already those injurious consequences, which I look 
 forward to being extensively developed, in the course of 
 years, are partially manifest. I could name parties who 
 have received orders of great amount, for goods which
 
 11 
 
 cannot be supplied, because, at that particular time of 
 the year, when, in accordance with all former practice, 
 the manufacturers would have made the goods in antici- 
 pation of a demand, which comes only once a year, 
 those acts respecting the currency were passed, which 
 bound them to inactivity and idleness. The demand 
 for these goods comes to England in the summer, as 
 it has every summer, for a series of years. Now, for 
 the first time, it cannot be supplied. Recourse, for 
 ought I know, may be had to Germany for a cheap 
 and imperfect substitute : cheapness and habit may 
 give a preference to the substitute, and thus may an 
 important branch of manufacture be for ever lost to 
 England. 
 
 I deny, altogether, that there has been any over- 
 production during the last six months. The measures 
 in February last, respecting the currency, were avow- 
 edly designed to prevent the recurrence of specula- 
 tion and over-production. Taking into consideration 
 the circumstances of other countries, whose productions 
 enter into competition with those of England, I be- 
 lieve it will be found, that those measures have no 
 tendency whatever, by the proposed mode of their opera- 
 tion, to prevent the alleged evil for a continued course 
 of years ; but, on the contrary, strong reasons may 
 be urged, to prove that they have a direct tendency 
 to provide for the more frequent recurrence of the 
 alternations of scanty supply and glutted markets. As 
 regards England, they will be found powerful to crip- 
 ple her industry ; as regards our rivals, they will be 
 found powerful to aid their productions.
 
 12 
 
 ON THE PREVAILING FALLACIES RESPECTING 
 THE CURRENCY. 
 
 Three capital errors have pervaded all the 
 parliamentary investigations respecting the currency, 
 up to the present time. 
 
 The first is, that the Bank of England has been re- 
 garded as the prime mover and great regulator of the 
 currency. The notes of the Bank of England have 
 been viewed as composing the greatest portion of the 
 paper circulation of the country, and the only portion 
 worthy of much investigation. Whereas, though the>^ 
 Bank of England has great power to cause a contrac- 
 tion of the paper currency, when it has become en- 
 larged, it has no power to prevent an extension to a 
 given amount of considerable magnitude. 
 
 The second is, that, when proceedings were adopted 
 by parliament, which had the effect of contracting the 
 amount of the Bank of England paper, it was imagined 
 that the contraction applied to the whole of the Bank 
 of England paper issued, whereas it applied only to 
 two-thirds of the amount; and those two-third parts, 
 the only portion which was really performing the func- 
 tions of a circulating medium; the other portion being, 
 for all the purposes of circulation, defunct. Thus, for 
 example, when a contraction of four millions only out 
 of twenty-four was contemplated, it was actually a 
 contraction of four millions out of sixteen. Or, instead 
 of one-sixth of the whole, it was, in effect, one-fourth 
 of the whole.
 
 13 
 
 The third is, that the circulation of promissory notes 
 and internal bills, payable after date, have never formed 
 a subject of inquiry, and have scarcely even been ad- 
 verted to, in any of the proceedings respecting the cur- 
 rency. It might not have been known that there ex- 
 isted such a species of currency, or that it formed any 
 considerable part of the circulating medium of the 
 country. Yet this part of the currency was perform- 
 ing the functions of circulation as much as Bank of 
 England notes and country bank-notes, and its amount 
 was upwards of ten times the amount of all the Bank 
 of England notes. 
 
 Suppose a state of things in which demand and sup- 
 ply are both torpid ; in which state the amount of the 
 circulating medium is low, and that which exists is 
 comparatively stagnant, the first impulse to quickened 
 circulation is an increased demand for commodities. 
 This increased demand arises first in those parts of the 
 population most subject to changes in their circum- 
 stances, and consequently, it springs up primarily 
 amongst people engaged in manufactures and com- 
 merce, and is usually created by our foreign customers 
 requiring an additional supply of something that we 
 have to sell. If they wanted to buy nothing but co- 
 lonial or foreign produce, their purchases would be 
 confined to the sea-ports, where the whole of the ope- 
 rations consequent upon the purchases would be com- 
 plete. This would cause very little addition to the 
 circulating medium, and the increase would be imper- 
 ceptible. But if they purchased British manufactured 
 goods, the increase of the currency would be immedi- 
 ate and perceptible, and the magnitude of the increase
 
 14 
 
 would be in proportion to the extent of tlie increased 
 demand and the duration of it. A demand for all 
 our manufactures, of any given amount, would not, 
 however, cause in each manufacture a corresponding 
 increase of the currency; but that increase would be 
 regulated by these circumstances: the raw material, 
 whether obtained at home or abroad : the proportion 
 of raw material and labour in the wrought fabric: 
 the number of distinct traders through whose hands 
 all the materials have to pass, of which the perfect 
 thing manufactured is composed, before it is shipped 
 at the sea-port. An example from our two staple 
 manufactures, cotton and wool, will elucidate this. 
 A merchant arrives from Moscow with a credit of 
 £20,000. upon Baring, to purchase cotton-twist at 
 Blackburne, and stuff goods at Norwich. He buys 
 his twist of a spinner, and desires him, on a given 
 day, to draw a bill at ninety days date upon Baring, 
 for the amount. The spinner, finding the demand 
 for twist increased, goes to Liverpool to purchase 
 cotton, without delay, lest it should advance; and the 
 cotton-broker draws a bill upon the spinner at ninety 
 days, for his cotton. In this transaction, only two 
 bills for internal circulation are created ; that upon 
 Baring, and that upon the spinner. The cotton- 
 broker may, in consequence of this sale, direct a bill to 
 be drawn upon him from New Orleans, but that will 
 not augment our circulating currency. The effect of 
 a demand for Norwich goods, made from British wool, 
 is very different. The manufacturer sells, as in the 
 other case, his goods for a bill on Baring. He then 
 writes into Yorkshire for his yarn, and desires the
 
 15 
 
 spinner to draw a bill upon him for the amount of 
 the order he transmits. The spinner goes to Wake- 
 field to buy wool, and another bill is created. The 
 wool-commissioner at Wakefield writes to a v^'ool- 
 stapler in London for a further supply of wool, and 
 the woolstapler in London writes to a collector in 
 Kent to weigh and pack some farmer's wool, and to 
 draw a bill upon him for the amount ; which bill the 
 collector discounts with a Kent banker, to pay the 
 farmer in country bank-notes for his wool. In this 
 process, instead of two, five or six bills and the coun- 
 try banker's notes are put into circulation. Besides 
 this, a considerable part of the cost of Norwich goods 
 consists of dyeing and finishing. Bills are created by 
 the claims of the dyer upon the manufacturer, the 
 drysalter upon the dyer, &c. 
 
 The manner in which the increased number of work- 
 men employed in consequence of this demand for goods, 
 causes an augmentation of the circulating medium, is 
 the same in both cases. It first causes an application 
 to the banker, for a larger amount of notes to pay his 
 weekly wages. More money being paid for wages, the 
 receipts of all shop-keepers are increased ; they experi- 
 ence a greater demand for goods ; and they must re- 
 plenish, or their stock will be run out. Consequently, 
 one shop-keeper will transmit to a cheesemonger in 
 Cheshire, a bill, who will take it to a country banker 
 for notes, to pay a dairyman for cheese, to supply his 
 shop- keeping customer. Another bill will be sent to 
 a Norfolk cornfactor to buy corn, who will obtain 
 country bank-notes to pay the farmer for his wheat. 
 Anotlicr to Belfast, for butter, and so on.
 
 16 
 
 These details, though tedious, are necessary for the 
 purpose of exhibiting a fundamental error, into which, 
 I think, all the inquirers respecting the currency have 
 fallen, and which has been productive of incalculable 
 mischief: they shall not be inconsiderately extended. 
 
 I have endeavoured, by this simple explanation, to 
 describe the train of circumstances which show the 
 manner in which the paper-currency of the kingdom 
 begins first to be augmented. We have nothing to do 
 with the Bank of England notes. Bills of exchange 
 give the first motion to the increased circulation of 
 commodities. This creates internal bills, payable after 
 date, and country bank-notes, payable on demand. 
 But the Bank of England has no means of knowing, 
 from its own operations, that any increase of the cur- 
 rency has taken place, till the first-created bills of the 
 increased class are becoming due; and then there will 
 be more applications for discounts, to obtain notes to 
 pay the augmented sum ; or rather, to facilitate the 
 exchanges of these bills, (for but few are actually paid 
 in bank-notes,) at the clearing-house, and among the 
 London bankers. What means, then, have the di- 
 rectors of stopping the first advances towards excess ? 
 
 Bills which circulate freely along with country bank- 
 notes of the larger denominations, and which are used 
 conjointly with them for the same purposes, are not 
 usually drawn at more than two months date ; but in 
 two months, in a state of things, when the circulation 
 of commodities and of money is greatly quickened, 
 the increase of the currency may be very great. I 
 believe the increase may be fifteen or twenty millions, 
 without that increase being in the least perceived by
 
 17 
 
 the Bank of England, or a single additional note is- 
 sued by that establishment. How fallacious it is, 
 then, to suppose that the Bank of England has the 
 power to prevent any augmentation of the currency. 
 The universal opinion is, that the amount of Bank 
 of England notes in circulation was first increased and 
 caused prosperity. The increase of bank issues Jbllows 
 after the first steps of renewed activity, and rarely, if 
 ever, goes hefore. Subsequently, indeed, continued 
 prosperity is accompanied by the augmented issues of 
 the bank. 
 
 To explain the second error will occupy but a very 
 few words. None of the committees on the currency 
 have adverted to the circumstance, that full one-third 
 of the notes of the Bank of England, that are at any 
 time issued, are locked up in the coffers of the Lon- 
 don and country bankers. An amount of bank-notes, 
 at all times, and under all circumstances, is kept by 
 every banker, as a guard. This sum may be increased; 
 but no prudent banker, who understands the princi- 
 ples of banking, will permit it to be decreased. It is 
 true that, in case of alarm, when money-matters are 
 greatly disturbed, and unexpected demands may be 
 made, the rich banker augments this supposed amount, 
 because he will at all such times keep his bank doubly 
 guarded ; and the poor banker, for lack of power, will, 
 at the same time, be compelled to part with some of his 
 customary guard, to save his bank. But this alters 
 not the matter. Bank of England notes, to a given 
 amount, are at all times fixed as immovably, in the 
 banker's office, as his safe ; and it would be as correct 
 
 c
 
 18 
 
 to say, that the banker's counter was a part of the 
 circulating medium, passing from hand to hand, and 
 representing the exchanges of commodities, as to call 
 this a part of the circulation which was really perform- 
 ing the functions of a circulating medium. The amount 
 so locked up, is, I believe, never less than eight mil- 
 lions sterling. And all the circumstances which caused 
 an extension or a contraction of the issues of the Bank 
 of England, have had reference to that portion of 
 Bank of England notes which exceeded the sum of 
 eight millions. Thus, if the bank issues were twenty- 
 four millions, and a contraction to the amount of four 
 millions took place, the effect, as regarded the public, 
 was a lessening of the amount of this part of the cir- 
 culating medium of four out of sixteen. 
 
 Notwithstanding the various parliamentary com- 
 mittees that have investigated the subject, have passed, 
 almost without notice, that part of the currency con- 
 sisting of bills of exchange, it would need no effort to 
 convince any man practically acquainted with the 
 affairs of the country, that this is beyond all com- 
 parison the most important part of the circulation. 
 Therefore, this third principal error will require to 
 be dwelt upon a little longer. 
 
 Bills of exchange have long ceased to be merely an 
 instrument of commerce, to render perfect a mercantile 
 transaction between country and country ; and internal 
 bills have become gradually more and more a part of 
 our circulation : they have ceased to be so currently 
 used by the manufacturers, in payment of small sums 
 under ten pounds, as they were thirty to forty years 
 ago, owing to the high rate of stamps upon small sums.
 
 19 
 
 Bills above the value of ten pounds form now as com- 
 pletely a part of the currency, as Bank of England 
 notes or country bank-notes. They are used to pay for 
 minerals — for all kinds of raw produce used in manu- 
 factures — for all the principal articles of food or cloth- 
 ing; and recently, in some cases, for mere labour. If 
 a butcher in the north of England buys cattle, he pays 
 for them partly in these bills, and partly in country bank- 
 notes. If a miller buys corn, or a mealman or baker 
 flour, he does the same. If a Yorkshire wool-buyer 
 purchase wool of the farmers in his own county, or 
 in Northumberland or Lincolnshire, he pays for it 
 partly in these bills, partly in country bank-notes ; or 
 sometimes wholly in one kind, sometimes wholly in the 
 other. In the manufacturing districts of Yorkshire 
 and Lancashire, no man, generally speaking, thinks of 
 paying for any commodity above the value of ten 
 pounds, otherwise than in a bill after date. This prac- 
 tice is now very general throughout the northern and 
 midland counties, and is increasing in other parts. 
 Except in the north, however, these bills do not circu- 
 late generally or freely amongst farmers and graziers; 
 and where they do so circulate, those persons have a 
 great reluctance to take any but bills drawn by 
 bankers upon bankers : this reluctance was increasing 
 before the year 1825. 
 
 Although we are told by the very highest authority *, 
 that " it has been a common artifice, practised by 
 those who have written on paper-currency, to confound 
 paper-credit with paper-currency," the distinction ap- 
 
 ♦ Earl of Liverpool's Letter to iht King, page 220. 
 
 i-1 o
 
 20 
 
 pears to me to be purely speculative. What is a bank 
 post-bill ? A bill for £lOO. payable after date, which 
 to-day is paid at Folkingham for wool, to-morrow at 
 Melton for horned cattle, the next at Leicester for 
 sheep, and the succeeding day at Oundle for bark, is 
 as much a part of the circulating medium, represent- 
 ing the transfer of commodities from hand to hand, 
 as a bank-note for £lOO. that performs the same 
 office in the same manner. Indeed, if this be an arti- 
 fice, it appears to be admitted, that we practise the 
 same artifice, by confounding " even the higher sorts of 
 paper-currency with the inferior sorts:" — a Bank of 
 England note for £50. with one for five pounds, which 
 is indisputably true : the bank-notes and the bills are 
 all paper-credit and all paper-currency. 
 
 It is extremely difficult to form an accurate estimate 
 of the amount of these internal bills of exchange, 
 during a period of prosperous trade. One man stated, 
 that there were drawn upon his house, and he had 
 accepted bills, to the amount of eight millions sterling, 
 running and being undue at one time. He was a 
 banker. I could mention two men ; one a merchant, 
 the other a manufacturer, not connected with each 
 other, who kept up a circulation of these bills to the 
 amount of three millions. This was previous to 1815. 
 Any man, not a banker, might as well have attempted 
 to circulate money in the moon, as to endeavour to 
 accomplish the same thing since 1815. 
 
 The evidence collected from estimating stamp-issues 
 is most imperfect, both in regard to bills and country 
 bank-notes ; but that which is not liable to suspicion 
 may be gathered from parliamentary proceedings.
 
 21 
 
 Mr. Richardson's testimony to the bullion committee 
 of 18] 0, proved that the amount paid daily at the 
 clearing-house of the forty-five London bankers was 
 five millions. And Mr. Thomas, the clerk of the 
 clearing-house, confirmed that statement to the same 
 committee ; and he further proved that this large sum 
 was paid by exchanging the amount of one banker's 
 claim upon another, except the small balances re- 
 maining after arranging those exchanges ; and that 
 £.220,000 was the whole sum wanted in bank-notes 
 or coin, to pay the balances, and to complete the opera- 
 tion of paying daily a sum of five millions sterling. He 
 stated the amount of five millions to be about the sum 
 paid in the ordinary course of daily business ; and that, 
 on the settling days of the Stock Exchange and India 
 prompts, the amount was fourteen millions. 
 
 I am not aware that, since 1810, any evidence has 
 been taken which throws much additional light upon 
 this matter : the payments at the clearing-house con- 
 tinue to be made in the same manner. But the amount 
 must now much exceed the amount in 1810, because 
 the manufactures and commerce have greatly increased 
 since that period, particularly in the counties of York 
 and Lancaster, where the great mass of bills are first 
 put into circulation. Nine tenths of the amount of all 
 bills are paid, when due, at the clearing-house. 
 
 To illustrate and establish what I deem an important 
 position respecting the currency, I have shown, in a 
 note *, how this sum of £. 220,000 might be entirely 
 
 * If every banker who pays at the clearing-house would provide 
 himself with a little pass-book, and open in it forty-four accounts
 
 32 
 
 dispensed with, and a sum of five millions be paid every 
 day, vi^ithout the intervention of a single pound in bank- 
 i^ptes or coin. 
 
 with his brother bankers, the balances could be carried every day 
 to the credit or debit of each other; and these balances settled, 
 with interest upon every entry, monthly or quarterly. It may be 
 said that this postponement of the settling would increase the sum 
 liable to loss by failure. To secure themselves, the bankers might 
 all agree to subscribe a sum each, corresponding to the average 
 amount of his daily payments at the clearing-house; and let the ag- 
 gregate amount be placed in the funds, to be available for securing 
 any deficiency from failure. As the balances only would require 
 to be paid, probably £.200,000 would be sufficient for the purpose. 
 
 There is now a sort of understanding amongst these bankers, 
 that each is pledged to all the rest not to fail in the clearing. Great 
 and unexpected demands caused a breach of this rule by Pole and Co. 
 on the day of their first stoppage in December last ; and that cir- 
 cumstance stimulated, in conjunction with their anxiety for the 
 public good, Messrs. Loyd, Smith, and Robarts, to obtain from the 
 Bank of England the loan which enabled Messrs. Pole and Co. to 
 continue to pay another week. We shall soon see that it is only ne- 
 cessary to carry the effects of this sort of corporate feeling a little fur- 
 ther, to witness a self-elected money-corporation, which would be, witli 
 all the supports of its influence in the country, ten times more 
 powerful to aid or prevent excess of circulation, than the great 
 money-corporation of the Bank, established by law. 
 
 All that can be required, therefore, to effect these immense daily 
 payments without bank-notes, is a pass-book with forty-four ledger- 
 entries, and the risk and trouble of carrying notes backward and for- 
 ward will be prevented ; eight or ten thousand pounds in interest 
 will be annually saved ; and a capital of £. 220,000 liberated for 
 reproduction. 
 
 If the saving of eight or ten thousand pounds per annum in this 
 manner, were considered too trifling for the bankers to divide, let 
 the amount go to form a superannuation-fund, to stimulate the zeal 
 and cheer the old age of their clerks.
 
 2a 
 
 It has been shown that the daily payments in the 
 ordinary course of commerce, at the clearing-house, are 
 five miUions. Strike off from this sum one million for 
 London payments ; and seeing that several London 
 bankers make their payments at their own banks ; that 
 all bills discounted at the Bank of England, or made 
 payable there, are not presented at the clearing-house ; 
 that many bills are paid in the country, especially at 
 Bristol ; that bills also are paid in London by private 
 traders, and not at banking-houses — it must be evident, 
 that four millions for each day is an amount far below 
 the actual sum of bills of exchange paid every day in 
 England. After estimating the average length of date 
 of these bills, and multiplying the number of days by 
 four millions, we shall be able to guess, near enough, 
 the gross amount of circulating bills of exchange. 
 Almost all bills drawn according to the established 
 usage of different trades, are made payable at periods 
 exceeding three months after date. 
 
 Bills are, in the usual course of trade, drawn for the 
 sale of the raw materials of our principal manufactures, 
 as follows : 
 
 For Cotton, three months. 
 
 Iron, three and six months. 
 
 Flax and hemp, . four and six months. 
 
 Hides, four months. 
 
 Silk, six, eight, and ten months. 
 
 German wool, ... four and six months. 
 
 Spanish wool, . . . four and eight months. 
 
 English wool, . . . two, three, and four months. 
 
 The bills in payment for manufactured goods, as
 
 24 
 
 well as those for colonial and home produce, used for 
 food, fire, dyeing, or domestic purposes, are drawn at 
 various dates : the average may be about eighty days. 
 Bankers generally, with partial exceptions, draw all 
 bills for the purposes of trade at two months, except 
 in Lancashire, where the established practice amongst 
 bankers and traders is, to draw bills at three months ; 
 the deviation from which is the exception to the rule. 
 And in consequence, a bill at three months is consi- 
 dered in Lancashire and part of Yorkshire, which, as 
 regards bills, is almost half the kingdom, to be a money 
 'payment. 
 
 The Bank of England have recently extended their 
 rule for discounting bills. Instead of excluding all 
 bills that had more than sixty-five days to run, they 
 now discount three months' bills : a proof of their 
 knowledge that a great amount of good bills were 
 drawn at three months after date. 
 
 From this imperfect sketch, it will be obvious that, 
 to take the whole mass of circulating bills as being 
 drawn at an average period of seventy-five days, the 
 estimate will not be too high ; and four millions, the 
 amount paid each day at the clearing-house, multiplied 
 by seventy-five, will exhibit a mass of circulation 
 amounting to three hundred millions. 
 
 A large amount of these bills is, either from the 
 magnitude of the sums or the length of time to run 
 before the bills become due, ineligible for performing 
 the functions of currency ; therefore, in describing that 
 portion of them which enters into circulation con- 
 jointly with bank-notes, or country bank-notes, we 
 cannot take more than one half of the estimated amount
 
 25 
 
 of the whole. But a sum of one hundred and fifty 
 millions of bills of exchange, is, in the ordinary course 
 of affairs, at all times in circulation, representing the 
 transfer of commodities as much as any other descrip- 
 tion of currency. 
 
 By the arrangements of the clearing-house, and other 
 contrivances, nine-tenths of this amount, after circulat- 
 ing and performing the functions of currency equally 
 with Bank of England notes and country bank-notes, 
 is now paid when demandable, without the intervention 
 of bank-notes ; and if the issuers of those bills drawn in 
 Great Britain and payable in London, were, in drawing 
 the bill, to insert a clause, making it obligatory upon 
 all who received it, to cause it to be paid when due, to 
 one of the forty-five London Bankers who exchange at 
 the clearing-house, this amount of circulation would be 
 kept up, if the bankers settled their balances monthly 
 or quarterly, in the manner before described, without 
 the aid of a single bank-note. 
 
 The Bank of England have, within a few years, de- 
 termined not to discount any bills that are not made 
 payable at a banking-house, however rich the acceptors 
 might be ; and it is quite as reasonable for the drawer 
 of a bill to stipulate that it shall be received only by one 
 of the clearing-house bankers. If the Bank of England 
 would not discount bills with this clause in, they would 
 be readily discounted by others, if the security were 
 unexceptionable.. It is well known that the Scotch 
 bankers inserted in their notes an optional clause, to 
 pay them either when demanded, or six months after 
 that time.
 
 26 
 
 However, I am not recommending any change in the 
 manner of drawing bills ; but merely showing the 
 possibility of upholding a paper-circulation, without the 
 aid of bank-notes, or coin, during a time of what is 
 called cash payments. Bills generally pass throifgh 
 one or other of the established channels, to be presented 
 for payment ; consequently, the present practice, which 
 causes nine-tenths to be paid at the clearing-house, is 
 so nearly in this state, that no change can be necessary 
 for any practical purpose *. 
 
 It seems to have escaped observation, that out of 
 London the notes of the Bank of England are scarcely 
 
 * It is curious to observe the working of this affair. At one 
 of the city meetings in December last, for upholding credit, a 
 gentleman earnestly recommended, that, from the extreme diffi- 
 culty of obtaining bank-notes, traders should pay due bills, by 
 other bills not due, held by the parties who had accepted the due- 
 bills. If this project had been carried into execution, under the 
 sanction of, and by the management of the bankers, (who did not, 
 however, interfere,) the formation of a monied corporation not esta- 
 blished by law would have been perfect; and we should have wit- 
 nessed an association of persons, who have the power to support a 
 paper currency, performing all the functions of a circulating medium, 
 to the amount of three hundred millions, existing independent of 
 the Bank of England, and never requiring a farthing in coin or bank- 
 notes to uphold their circulation — an instructive commentary upon 
 the law, which had settled the question for ever. I know that this 
 state of things is never likely to occur in England; but after seeing 
 that in America the people were compelled to accept, as legal money, 
 that which was payable fifteen years after the date ; and that in 
 Scotland the bankers could make their notes current with an optional 
 clause to pay them either on demand or six months after demand — 
 there is no knowing what effect may be produced by the pressure of 
 circumstances. It is right to contemplate possibilities.
 
 27 
 
 ever used in commercial dealings. As an engine of 
 commerce they perform, with some exception, no other 
 function than to uphold the more inportant parts of 
 paper-currency. And if no more Bank of England 
 notes were wanted than those which at present repre- 
 sent the transfer of commodities from man to man, I 
 am convinced that four millions would be more than 
 an ample quantity. With an unimportant exception, it 
 is other circulating credit, and not Bank of England 
 notes, which is, in one sliape or another, representing 
 all the transfers of moveable property throughout the 
 kingdom. \V"e shall presently see, when we come to a 
 more particular analysis of the circulating medium, for 
 the purpose of showing in what manner it is connected 
 with the industry of the country, how important it is to 
 keep this in view. 
 
 The great source of error is, the habit of looking 
 upon the issues of the Bank of England as the principal, 
 when they were only the auxiliary. The use of inap- 
 propriate terms is a means of protracting error : the 
 paper-currency of England has been described as a 
 column, the base of which is the paper of the Bank of 
 England. In one sense the metaphor is applicable, 
 but in no other : you may break down all the rest, 
 and leave the paper-currency of the Bank of England 
 standing. But the bullion committee of 1810 thought 
 that no paper-currency could be increased till that of 
 the Bank of England had been enlarged. In this error 
 they have been followed by all parliamentary' inquirers, 
 to the present day. " The paper of the country bankers," 
 the committee say, " is a superstructure raised on the 
 foundation of the paper of the Bank of England : the
 
 28 
 
 foundation being enlarged, the superstructure admits of 
 a proportionate extension." The committee evidently do 
 not express what they mean : they mean, that country 
 bank-paper is raised upon the Bank of England paper, 
 and not upon the foundation of that paper. But the 
 principle is far more erroneous : I have show^n which is 
 the base or broadest part, and which is first enlarged ; 
 and, I think, rendered it manifest that the paper of the 
 Bank of England is the last to be extended. It ap- 
 pears to me, therefore, that the members who drew 
 up that report, mistook the apex for the base. 
 
 The theory of the committee, in the same paragraph, 
 about an excess of country bank-notes causing a local rise 
 in prices, and sending all people to London, to buy cheap 
 commodities, seems to me equally luminous. London, as 
 an emporium for foreign and colonial produce and ma- 
 nufactures, is at all times resorted to by the purchasers 
 of these goods ; but that has nothing to do with the 
 state of the currency. Who that had a correct notion 
 of the working of the currency, would think of sending 
 people from a distance in the country to London, to 
 buy corn, cattle, cheese, wool, bacon, coal, lead, iron, 
 &c, by an excess of country bank-notes, as compared 
 with Bank of England notes. 
 
 Every body appears to imagine, that it is in the 
 power of the Bank of England to force out and keep 
 out a greatly increased quantity of its paper, without 
 commercial transactions first creating a demand for it. 
 In a period of general distrust of all other paper- 
 currency. Bank of England notes may be greatly aug- 
 mented ; but not otherwise. Unless increased com- 
 mercial dealings first open all the channels of circula-
 
 29 
 
 tion, the increased issues will soon return to the bank; 
 and 1 believe, therefore, that all the expedients to 
 which the directors might resort for the purpose of 
 increasing their circulation, — lending on mortgage, on 
 goods, or on stock, &c. would be perfectly unavailing, 
 to support for a long duration an increased issue, un- 
 less there were a simultaneous movement in commer- 
 ciral dealings, which does not necessarily take place, 
 and a renewed activity in manufacturing operations. 
 These expedients of forcing out money, by the bank, 
 will tend in some circumstances to increase commer- 
 cial transactions, and renew activity in manufacturing 
 concerns ; but the extent of this effect wholly depends 
 upon the times when such expedients are resorted to. 
 If after a long period of stagnation, in commercial and 
 manufacturing concerns, they may produce a consider- 
 able effect, if not counteracted by prolonged distrust 
 and alarm. If after a short period of stagnation, the 
 effect, in putting commodities in motion and renewing 
 manufacturing activity, will be scarcely perceptible. 
 
 Besides the fallacies of a general character, to which 
 I have briefly adverted in the foregoing observations, 
 there are some opinions of a more particular applica- 
 tion, which the sanction of great names has rendered 
 current at this day, and has given to them, as I think, 
 an unmerited importance. 
 
 We have heard much lately, of a doctrine which 
 goes the length of preventing all persons, but 
 those of solid capital and great pecuniary resources, 
 from entering into trade, or remaining in it. It ap- 
 pears to me that the advocates of this doctrine, mani- 
 fest either an incapacity to understand the principles
 
 30 
 
 which have caused the commercial greatness of Eng- 
 land, or an unaccountable negligence in examining 
 those principles, and tracing their practical conse- 
 quences. A man of solid capital, great pecuniary re- 
 sources. What does this mean ? It must mean that 
 a man is rich, and that he, in addition to being rich, 
 derives great power from the reputation of riches. It 
 is proper, they say, that only such a man should be 
 permitted to enter into trade and obtain credit. I might 
 be content with the simple declaration, that, where one 
 man, in manufacturing concerns, who has begun to 
 trade, being rich, has even added to his riches^ (I go 
 no further,) one hundred men have become rich, 
 who began to trade with little or no property. But 
 let us endeavour to analyze the matter a little, and we 
 shall see that this must be the case. 
 
 A comparatively rich man wants the great stimulus 
 for exertion in dirty traffic, the desire of wealth for 
 enjoyment and distinction ; but he has plenty of in- 
 citement for avoiding it, and partaking of pleasure. 
 The possession of money, and his credit, afford him 
 the ample means of present enjoyment, and his youth 
 is spent in a manner which precludes the possibility 
 of his acquiring the proper habits of a suecessfid 
 tradesman. He is a man who has been educated 
 with other men whose principal objects in life are the 
 pleasures of society. He is desirous of distinction 
 and advancement in this class, and his days are past 
 in devising means of rising into notice among those 
 whose friendship and intercourse confer upon him a 
 distinction more valuable than wealth. He trusts to 
 his capital, and to those principles of commercial
 
 31 
 
 usage, which connect credit with property rather 
 than with industry, skill, and frugality, to furnish him 
 with the ready means of increasing his expenses, as 
 he feels the repeated claims upon his purse. Before 
 he arrives at middle life, and this is the important 
 matter, his habits are altogether estranged from the 
 habits of prudent men in business. They must dine 
 in thirty minutes, at some time between twelve and two 
 o'clock, and away back to business. But he must 
 dine at an hour recognised in society, apart from the 
 chance of interruption or intrusion for the remainder 
 of the day, on subjects of trade. If such a man, after 
 a lew years, does not run away with the wreck of 
 his property, into a lodging-house at Bath or 
 Brighton, he will become bankrupt. The man who 
 commences to trade upon a small capital, has obtained 
 that property, either by saving a part of the wages of 
 his own labour, or it has been given to him by his 
 father; it being small, he finds the difficulty of bor- 
 rowing, and will watch with carefulness the appro- 
 priation of the sum borrowed. He has the strongest 
 motive in the world to increase his property, because 
 all around him are pressing forward in the same pur- 
 suit of gain ; and the concurrent testimony of his 
 neighbours and competitors has taught him, that that 
 is the one thing needful to insure the respect and 
 approbation of his friends and the world. The seduc- 
 tions of society have no influence upon him, because 
 the quality of his own mind and manners repel him 
 from all contact with the votaries of leisure and 
 refinement ; and the habits of his life become fixed in 
 the routine of careful industry, before he can have
 
 32 
 
 acquired property enough to render his company in 
 society an object of desire merely for his wealth. 
 
 If the rule of confining credit to men of solid capi- 
 tal, mean, giving credit to men who have acquired 
 solid capital by their own exertions, persons of this 
 description want little or no credit ; therefore, the effect 
 would be to banish credit altogether, or nearly so. 
 
 If doctrines like these had prevailed fifty years ago, 
 and had remained in vogue to this day, where would 
 have arisen manufactures and commerce, the right arm 
 of power? Not in the British dominions. And the 
 continued prevalence of these doctrines may now drive 
 the manufacturers employed to produce for forefgn 
 consumption, to other states, where the astonishing 
 power that we have derived from them may rise up, 
 and be arrayed against us. The manufactures of 
 Britain are the growth of centuries ; but their prodi- 
 gious increase has taken place during the last fifty 
 years. A just opinion exists, founded upon a know- 
 ledge of the history of trade, that it has been found to 
 be extremely difficult to transfer manufactures from 
 one country to another. Recent events have removed 
 much of that difficulty ; and if we omit to reflect upon 
 the altered circumstances of the world, when we con- 
 sider this subject, we shall be led astray. Such is now 
 the facility of personal communication, so quickly does 
 intelligence spread, and so readily would people trans- 
 fer their labour and their capital from one state to 
 another, while political hostility sleeps, that five years 
 of retrograde action, arising from harassing inter- 
 ference with our manufactures, would be quite long 
 enough to enable us to predict with certainty, that the
 
 33 
 
 ascendency of England, in manufacturing power, will 
 soon be no more. 
 
 There can be no surprise, that many great captalists 
 are found ready to applaud a doctrine which tends to 
 give them an exclusive monopoly. If they can induce 
 ministers, by one act of legislation after another, to 
 exclude all but men of solid property from participating 
 in any of the benefits of a system of credit, it will be 
 as good as a direct act of incorporation for exclusive 
 trading to the capitalists. Nothing could be more 
 opposed than this, to the principles and practice of 
 British commerce. If it should be brought into per- 
 fect operation, it will be destructive of the very cmi- 
 mus of national prosperity, and will drive youthful en- 
 terprise, and manly, vigorous industry, to other states. 
 
 One is astonished that a knowledge of the early 
 history of almost all persons who have risen to wealth 
 and distinction by manufactures, should not lead men 
 to doubt the efficacy of this favourite commercial creed. 
 There is hardly a man amongst them, that did not be- 
 gin to trade upon credit, without solid capital. People 
 collect the bills made out in the hand-writing of Sir 
 Richard Arkwright, when he was a barber, and shaved 
 for a penny a beard ; and though these may never sell 
 for so much as an Italian manuscript, whoever contem- 
 plates the descendants of this man of genius, skill, and 
 industry, but of unsolid capital^ in the possession of 
 the fine estates and vast revenues of some of the an- 
 cient nobility of the land, will regard them as curious 
 ^nd prizable relics. 
 
 Circumstances on a level with this, indicative of the 
 
 D
 
 3i 
 
 low condition of the possessors of other renowned 
 names, might be culled from a narrative of their strug- 
 gles in the first stages of their career of wealth, but 
 the facts are notorious ; and not one of these men 
 could have risen from his low estate, if the principle of 
 confining credit to persons of solid capital, had been in 
 rigid exercise. 
 
 A great misconception prevails, that, when a coun- 
 try bank fails, the labouring poor suffer greatly by 
 holding its notes. Wages are usually paid between 
 five and eight o'clock on Saturday evening. The notes 
 that labourers receive are paid away to shopkeepers 
 before eleven o'clock the same night. If the banker 
 have failed before the notes are paid to the labourer, or 
 do not open his bank on Monday morning, the notes, 
 by law, revert to the master who paid them. If they 
 be held beyond the time of the bank opening, the 
 notes are kept at the risk of the holder, who is very 
 rarely a poor labourer. If the labourer have saved 
 money, and placed it in a bank that fails, he is enti- 
 tled to great commiseration ; but he is then a man of 
 capital, and must take upon himself the responsibility 
 of managing his own affairs. You have recommended 
 to him the savings' bank, and offered him inducements 
 to deposit his money therein. If he prefer another 
 security, and sustain injury thereby, he has no more just 
 claim for your interference on his behalf, than the man 
 has who lends money to the Greeks, and sustains loss. 
 When a banker fails, the public sustains but little di- 
 rect loss by holding the small notes. Almost all the 
 small notes are either then in the possession of shop- 
 keepers indebted to the bank; or they take means to
 
 35 
 
 obtain them, because they can be paid for their full 
 nominal value, in discharge of the banker's claim on 
 the sliopkeeper. The law frowns at this, but it has 
 not yet prevented the practice. Printed handbills 
 are yet posted up in the shop windows in Yorkshire, 
 offering to take AVentworth's notes at their full value, 
 {hi real value ten or twelve shillings in the pound,) in 
 payment for goods, although the bank failed ten months 
 ago, and has paid no dividend. 
 
 In point of fact, when a bank fails^ the loss to the 
 labourers, by withdrawing from the masters the means 
 of continuing their employment, is a hundred times 
 the extent of that which they sustain by holding their 
 notes. Where the labourers of England have lost one 
 penny by the breaking of the banks, they have lost 
 one pound by even the threat of withdrawing the 
 small notes from circulation. 
 
 COUNTRY BANKING EXPLAINED. 
 
 I now proceed to describe the different kinds of 
 paper-currency circulating in different parts of the 
 kingdom, and to explain how they are connected with 
 industry ; in order that we may perceive how any con- 
 siderable changes in the currency are likely to affect 
 the productions of industry. 
 
 We must take a cursory survey of the population 
 of Great Britain. What parts of the population of 
 tlie British islands are engaged in bringing forth and 
 
 D 2
 
 36 
 
 maturing the productions that constitute the national 
 wealth ? And what parts are engaged exclusively in 
 collecting, distributing, or consuming these produc- 
 tions? — All those people employed on the coast- 
 fisheries, in all mining, agricultural, and manufac- 
 ing concerns, are engaged in producing. And these 
 we find, by reference to a map and the population 
 returns, occupy almost the whole surface of the 
 country, and amount to almost the whole of the 
 active part of the population. What kind of currency 
 do these people use, to facilitate their operations? 
 With the exception of those who are employed in 
 manufacturing a few articles of luxury in London, a 
 trifling silk manufacture in London, and about 70,000 
 people {not more, who use bank-notes) in, and about, 
 Manchester, none of these important classes of the 
 people use Bank of England notes or gold coin. The 
 great points of collection and distribution, for produc- 
 tions, are London and Liverpool. In these places, 
 Bank of England notes are used to represent the trans- 
 fer of commodities; in Liverpool partially, and in a 
 very limited degree ; in London, more generally and 
 more extensively. 
 
 I have enumerated all the parts of the country 
 where the notes of the Bank of England are, gene- 
 rally speaking, used in the transactions of mercantile 
 business. Paper-currency, however, of some kind or 
 other, not that of the Bank of England, is universally 
 used as a circulating medium amongst all the produc- 
 tive classes of the community. Let us examine how 
 this important instrument has come into general use.
 
 37 
 
 and ascertain whether it can be taken away without 
 injury. 
 
 Sixty years ago, the country banking system of 
 England had a very confined range of operation ; it 
 had then become connected with agriculture, and par- 
 tially with the mining interest, but to a very limited 
 extent indeed with the manufacturing interest. Many 
 large manufacturing towns had no bank, till within 
 fifteen years of the present time; and one, containing 
 a population of thirty to forty thousand people, had 
 none till within the last four years. The wealthy 
 farmers and country gentlemen began to resort to 
 country banks, to deposit their surplus capitals ; some- 
 times on interest, sometimes without, according to the 
 time that the money remained with the banker, and 
 the terms upon which he received it. This money 
 was lent out again partly in the neighbourhood, but 
 more of it went to London, to be lent by agents to 
 the government, the merchants, and large traders; 
 and in some cases, to the proprietors of mines. It 
 was not till a more recent period, that the agricul- 
 ral bankers commenced the practice, now carried to so 
 great an extent, of lending money, by means of Lon- 
 don agents, to manufacturers, upon bills or circulating 
 credit, payable after date. 
 
 This was the state of the banking business in this 
 country, when the discovery in the sciences and the 
 inventions in the arts, connected with mining and 
 manufacturing concerns, began to produce their won- 
 derful results. 
 
 Watt and Arkwright, and all the enterprising men 
 that were called into activity by the productions of
 
 38 
 
 their genius, found a system of banking established, to 
 lend them support with capital, and to furnish them 
 with a circulating medium. If there had been no such 
 system of banking as this in existence, which collected 
 the surplus capital of the country wherever it was 
 abundant, and sent it to those parts where it was most 
 wanted, our manufactures could not have made any 
 rapid progress ; and it is not unlikely, that some fo- 
 reign state would have started with us, in a manufac- 
 turing career, upon nearly equal terms. This system 
 of collecting capital from those who have too much, 
 and lending it to those who have too little, when per- 
 fectly organized, as it is in England, has the same 
 effect in affording equal money advantages to all the 
 departments of industry, as roads and canals have in 
 equalizing the prices of provisions and commodities in 
 a country ; and in both cases the more free from ob- 
 struction, and the more direct and expeditious the 
 communication, the better. Hence the creation (as in- 
 deed it was) of internal bills of exchange, which were 
 wanted as conductors from the reservoir to the object 
 requiring supply. An instrument more perfect than 
 a bill of this sort is, for its purpose, could not be de- 
 vised. No cumbrous deeds to consult upon, settle, and 
 engross : no lawyer, witness, or travelling expenses ; or 
 time lost to complete the security. Secure from rob- 
 bery, easily transmitted, and having, in law, so long as 
 the parties lived, all the power and validity of the most 
 formal instrument. (I know how much the practice of 
 making these bills has been abused, especially in Scot- 
 land. I am not defending an abuse, but explaining a 
 system.)
 
 39 
 
 But though our manufacturers could not readily have 
 obtained a sufficient supply of capital, if some such sys- 
 tem of borrowing and lending as that of country bank- 
 ing had not been already oi'ganized, the practices here- 
 tofore resorted to in some parts of England, Scotland, 
 and America, testify that they would have created 
 for themselves a spurious circulating medium, for the 
 purpose of paying wages, infinitely worse, in all its 
 characters, than the small notes of country bankers. 
 And so great is the urgency of that necessity, which 
 would at all times, when it was required, create this 
 spurious currency, that unless one half the manufac- 
 tories be permanently stopped, whenever the bill to pre- 
 vent the circulation of small notes comes into operation, 
 this worst kind of paper currency will again be adopted ; 
 and I believe that no law can be framed to prevent 
 this effect taking place, in one shape or another. 
 
 It may be said that country banking, as it is now 
 carried on, has arisen, principally, into operation and in- 
 fluence, within the last thirty years. The convulsions 
 in credit, in the year 1793, had produced a great dearth 
 of capital, in every department of industry : and the 
 circumstances of the country were such, as to afford the 
 most profitable employment to every man who had 
 skill, and industry, and capital united. Nothing could 
 be more natural than that an intimate connexion should 
 immediately be formed between those who were en- 
 gaged in collecting the surplus capital, wherever it 
 was abundant, and creating additional representative 
 capital by putting tlieir own credit into circulation, 
 and all the productive classes of the community. This 
 business was found to be very profitable to the bankers.
 
 40 
 
 and they extended their dealings. The new bankers 
 who sprung up offered greater advantages ; and instead 
 of waiting for applications from the borrowers, they 
 began, in many instances, to take very active measures 
 themselves, to lend their money. They either offered 
 money at a less expensive rate to the borrowers, or 
 to lend them more of it when required. It became, in 
 some parts of England, an established rule, that the 
 banker should, besides discounting all bills whatever 
 for his customer, which he had received in the course 
 of trade, hold himself at all times ready to lend an 
 amount equal to one-tenth of the returns in yearly 
 account between the parties; and this without a bill, 
 note, or security of any kind. So that if the returns 
 in a year between the parties were £ 100,000, the 
 trader could, at all times, borrow of the banker 
 £ 10,000. Even this most relaxed rule was, in many 
 cases, greatly abused. Sums, the amount of which far 
 exceeded what this rate would have prescribed, were 
 lent, and no proper discrimination was exercised in 
 selecting the borrowers. Some bankers, knowingly, 
 upon a calculation of profit, encouraged accommo- 
 dation bills ; — a practice almost unknown of late years, 
 all respectable country bankers having, for a long 
 time, been more scrupulous, or having better informa- 
 tion to guide them, in taking such bills only as were 
 drawn for valid transactions, than the Bank of Eng- 
 land. I knew, however, a country banker, in the 
 really vicious times of banking, previous to 1815, 
 who advanced a large sum to a cattle dealer in 
 the north of England, for the purpose of keeping up 
 an immense circulation of accommodation bills, and
 
 41 
 
 thereby augmenting his own commission profit. This 
 cattle dealer employed for many years nearly twenty 
 men, to buy cattle of farmers, in all parts of the king- 
 dom north of Leicester ; and these cattle were paid for 
 by bills which the dealer drew upon his accommodation 
 house in London ; and which were first signed by the 
 master, and then given to the men, in blank, to be 
 filled up by them according to the sums wanted. These 
 men were also employed, at times, to endeavour to get 
 these accommodation bills discounted at country banks, 
 in which endeavours they were, in many instances, suc- 
 cessful. No man could make such machinery as this 
 work since 1815 ; and it is one proof out of a thousand 
 that might be adduced, of the salutary change in bank- 
 ing affairs. 
 
 This was the state of things in lending out money : 
 there was a corresponding action in collecting it in. 
 Many bankers raised the rate of interest upon deposits, 
 and all were glad to get the wealthy to bring their 
 surplus money into their banks. In the agricultural 
 and grazing districts, an intelligent clerk was sent 
 round to all the neighbouring fairs and markets, as a 
 sort of drag-rake, to collect all, but the mere gleanings 
 of the surplus money of the country. In those parts of 
 the country inhabited by farmers and graziers, the 
 bankers attended all the markets, and by offering 
 higher interest, or other influences, collected all the 
 money they could ; while in those parts which were 
 inhabited by manufacturers, the bankers attended the 
 markets to dispose of their notes, and by offering 
 cheaper discounts, obtained all the bills they could ;
 
 42 
 
 allowing, at the same time, their overdrawn acconnt8 
 to be kept at the utmost stretch of borrowing power. 
 In many counties both the wheels of the machine, 
 performing opposite functions, were kept in motion, 
 within the sphere of, and managed by the same 
 bankers. 
 
 I have just now described the state of country bank- 
 ing as, in general terms, it may be said it existed for 
 twenty years; vk. from 1795 to 1815. 
 
 As the state of banking business, during the pe- 
 riod now under our observation, might have afforded 
 some reason for judicious interference, if we pause for 
 a moment to examine the matter, we shall find, that 
 even that state would not have justified the speeches 
 and proceedings passed, and in perspective, against 
 country bankers. 
 
 At no period, except that between 1795 to 1815, 
 could the recent censures of the conduct of country 
 bankers be applied with any reason. That period was 
 suffered to pass without much notice or animadversion ; 
 and it is most unjust to aid and give currency to pre- 
 judices against a class of men, when they are using 
 successsful exertions, by wise and gradual means, to 
 establish the practice of their business upon stable prin- 
 ciples, agreeing with existing habits of trade, and con- 
 ducive to the security and prosperity of the public. 
 
 No one will deny that there was much in the manner 
 of conducting banking affairs, within these twenty 
 years, that was vicious ; but that furnishes no ground 
 whatever, as will be seen presently, for passing a bill 
 in 1826, to suppress one and two pound notes, and for 
 taking other means to cut down country bankers.
 
 4.3 
 
 Let any man examine the circumstances appertain- 
 ing to country bankers, and compare them with circum- 
 stances somewhat analagous in other countries. He 
 will be excited to wonder that a system combining so 
 much power to aid production, and to assist in uphold- 
 ing the pecuniary resources of the state, should have 
 been completed and brought into perfect operation, 
 attended with so little evil. You have stated, Sir, 
 very truly, that these bankers were intrusted with a 
 power almost equal to the king's prerogative of coining. 
 Their system was advancing into full operation and in- 
 fluence, during a period when political affairs tended, in 
 this country, beyond all former experience, to excite 
 production, and to put into motion all kinds of moveable 
 property and their representatives. You permit to be 
 erected in any town or village of the country, a bank — 
 an engine of tremendous power and influence, which 
 can be made in a day, and which, when used skilfully, 
 always leads to wealth ; and you appear surprised that 
 so many of the people are ready to become possessed of 
 this power and influence. The people see, that by tlie 
 possession of this powerful fulcrum, the son of a higgler, 
 whose property was a waggon, four horses, and road- 
 side song, can attain great wealth and borough influ- 
 ence, and can seat himself, with the distinguished men 
 of the country, in the House of Commons ; and you 
 wonder that they should emulate. They see that ano- 
 ther can be lifted by it from a counter to a peerage. 
 Who can be surprised that numbers think that, by 
 skilful management, they may attain some distin- 
 guished point of elevation in the same tempting 
 career.
 
 44 
 
 These observations apply more to the characters of 
 bankers than to their business ; but I think them not 
 unnecessary, at the present time of misconception and 
 prejudice on this subject. So far am I from concurring 
 in the fashionable sentiments against bankers, for their 
 grasping love of gain and reckless spirit of speculation, 
 that if I were called upon to mention any thing which, 
 more than all others, marks the English character for 
 prudence and considerateness, I should select the con- 
 duct, taken on the whole, of the country bankers of Eng- 
 land. And looking at the circumstances of excitement 
 and temptation in which they were placed, and the ex- 
 traordinary power which they acquired, in a sudden 
 manner, by becoming bankers, I should not fear the de- 
 cision of any impartial judgment. 
 
 With a perfect knowledge of all the disasters pro- 
 duced by the failures of banks in Northumberland and 
 Durham, Lancashire, Yorkshire, Lincolnshire, Kent, 
 Hampshire, Devonshire, &c. I aver, that the Scotch 
 bankers have done more to abet a spirit of mercantile 
 speculation, — meaning by that term, not gambling in 
 shares, but something compounded of enterprise, indus- 
 try, miscalculating folly, and cupidity for gain — than all 
 the country bankers of England put together. In the 
 single point of security to the public against failure, the 
 Scotch bankers excel the English : in all other respects, 
 they are greatly inferior to the best and the greatest 
 portion of the English bankers. 
 
 Even the principle of security from failure has, in 
 Scotland, been made to operate in a baneful manner 
 for the public. By the general combination of feeling 
 amongst all classes, created, encouraged, and established
 
 45 
 
 by the bankers, in a manner that gave it the force 
 of law, Bank of England notes, or coin, were scarce- 
 ly ever demanded of the Scotch bankers. Their de- 
 posits of cash, to meet demands, were therefore kept 
 at the lowest possible amount ; and consequently their 
 circulation of notes was upheld at the lowest cost. 
 No prying member could, or would, ask for proofs of 
 excess in their circulation ; and any southern fool who 
 had the temerity to ask for a hundred sovereigns, 
 might, if his nerves supported him through the cross- 
 examination at the bank counter, think himself in 
 luck to be hunted only to the border. Free from the 
 consequences of excess, which attended the English 
 country bankers, and from the censures that were 
 dealt out against the Bank of England directors, 
 upon every increase of their notes, the only security 
 against excess, in the operations of Scotch bankers, 
 was the well known moderation of their desire for 
 gain. The plea, so confidently put forward, of the 
 mutual periodical exchanges of notes amongst the 
 Scotch bankers, operating to prevent a general excess 
 of circulation, is too weak to require an answer. 
 They are all influenced by one principle, and all their 
 actions are directed to the same end at the same time. 
 If their interest lead them to augment the circulation, 
 the proceeding of one and all will take the direction 
 which leads to increase. They might as well tell us, 
 that when two rivulets join and occupy the same 
 channel, each diminishes the water flowing from the 
 other. The notes, though exchanged, are immedi- 
 ately issued again into the general circulation; and the 
 practice of exchanging notes, so far from operating, 
 necessarily, to prevent excess; may, in the unchecked.
 
 46 
 
 unvvatched, irresponsible mode of conducting the note 
 circulation of Scotland, tend to quicken all the opera- 
 tions which produce excess. When one banker sees 
 that another has issued more notes than usual, he is 
 immediately advertised that his rival has taken a step 
 in advance upon him, in the pursuit of gain ; and when 
 profit, without risk, is the object, who will say that 
 any Scotch banker is backward in taking the second 
 step ? 
 
 The principle of limiting the discounts only by the 
 security of the bills, so much reprobated in the prac- 
 tice of the directors of the Bank of England, although 
 exercised by them with extreme moderation, was, in 
 Scotland, in full and unrestrained operation. And as 
 one illustration of this, out of a hundred that might 
 be cited, the Scotch bankers have long acted upon an 
 established custom of discounting, for the travellers of 
 wholesale English houses, the bills, or acceptances, of 
 all the traders and shopkeepers in Scotland, at vari- 
 ous dates, from two to six months, and taking in all 
 classes ; not only the larger traders, but also the 
 smallest shopkeeper, to a little hosier in a village ; the 
 security of the English firm, the drawer of the bill, 
 being in general an ample guarantee against loss. I am 
 not indiscriminately censuring facilities of this kind : 
 the degree alone gives the character to the action. 
 But I have no hesitation in asserting, that to the ex- 
 cess to which the Scotch bankers carried the system of 
 putting individual credit into circulation, may be ascri- 
 bed the extreme suffering of the manufacturers of 
 Scotland during the present year. The currency of 
 Scotland has for several months been contracted in
 
 47 
 
 an unprecedented manner, and the suffering would 
 consequently be the greatest, amongst those whose 
 credit was made to circulate with the frailest supports. 
 The circulation of credit has been forced to an ex- 
 travagant degree in England ; but to so much greater 
 an extent in Scotland, that, in making the comparison 
 at all, we can hardly do it, without injustice to Eng- 
 land. The practice, long acted upon, that I have 
 mentioned, of making every little shopkeeper's credit 
 available for circulation and capital, is, as a system 
 encouraged by the bankers, almost utterly unknown in 
 England, south of Kendal. 
 
 I trust I may here be allowed an observation upon 
 the very different measure of justice which the go- 
 vernment has dealt out to England, from that which 
 it has extended to Scotland. The country banking 
 system of England, with a vast and inestimable por- 
 tion of good, had blended with it a small portion of 
 evil : — the right policy would have been, to correct the 
 evil and leave the good. Not such was the policy 
 pursued ; but in a vain effort to correct the evil, a 
 great portion of the good which the public has been 
 accustomed to derive from the exercise of that system, 
 is, or will be, destroyed. In the banking system of 
 Scotland, there was mixed with much good, a very 
 great portion of evil ; using this term evil, to mean an 
 outrageous departure from those principles, which His 
 Majesty's government have promulgated as just and 
 true principles respecting the currency. Not more in 
 opposition to all the just principles of commerce, were 
 the schemes of that famed Scotchman, Mr. Law, than 
 was the practice of the Scotch bankers in opposition
 
 48 
 
 to these declared principles respecting the currency. 
 To establish this by reference to actual transactions, 
 would subject me to a legal responsibility which I can- 
 not be expected to incur; but I could establish the 
 truth of the position, by facts and circumstances, within 
 my own knowledge, beyond all controversy. 
 
 You have permitted the perpetual circulation of 
 small notes in Scotland, after a parliamentary investi- 
 gation into their merits, which gives them something 
 like a legislative stamp of validity ; while in England 
 you permit, only for a limited time, the circulation of 
 small notes ; having first stamped upon them a cha- 
 racter, which tells every man that they are tainted and 
 proscribed. Did you abstain from pressing the mea- 
 sure against Scotland, because it would interfere with 
 the habits of industry of the people ? The injury to 
 the national industry, by withdrawing the small notes 
 from circulation in England, will be six times the 
 extent it would be by withdrawing the small notes 
 from Scotland. 
 
 The Americans (I speak not of the disgraceful pro- 
 ceedings, in regard to money, under the colonial go- 
 vernments, but of the banking-matters of the United 
 States) had the English system of banking as an ex- 
 ample. In modelling their own after ours, they had 
 only to choose the good and leave the bad. The op- 
 posite rule to this was adopted, and so soon did they 
 quit the guidance of reason in their money affairs, that 
 their bankers' notes became almost assignats ; and no 
 more striking fact could be adduced to prove this, than 
 that eight of their share banks, each with shoals of 
 reputable partners, became bankrupt and insolvent.
 
 49 
 
 All experience shows how difficult it is to regulate 
 this tremendous engine, which gives the power to indi- 
 viduals of creating an amount of the circulating medium 
 of a state, unchecked by wise regulations and judicious 
 laws, to keep it adjusted. 
 
 I have adduced the examples of the Scotch and the 
 Americans, the two most intelligent people in the 
 world, in commercial affairs, to prove, by comparison, 
 that there is no ground whatever for the indiscrimi- 
 nate censure of English country bankers. We ought 
 not to forget, that the period we are contemplating, 
 1795 to 1815, was one, which required all the powers 
 of the British nation, in every department of life, to 
 be called forth. Human wisdom could not devise a 
 plan more calculated to strengthen and increase the 
 productive energies of the country, than the system of 
 country banking; nor could human genius pourtray 
 consequences more vast and important, than those 
 which flowed from the adoption of this system. 
 Without it, the skill and industry of the British peo- 
 ple, in the new range of their exercise into which 
 they were directed, would have advanced by slow de- 
 grees. Obstructed at every step, and struggling with 
 foreigners in the field of competition, we should have 
 reaped but a part, instead of the whole of the golden har- 
 vest ; and fame would never have carried those honiely 
 names, the Watts, the Walkers, the Smiths, the Mar- 
 shalls, the Arkwrights, and the Peels, which now daz- 
 zle our grovelling trade-enamoured imaginations more 
 than those of the Percys and the Howards, far from 
 their forges and anvils, their counters, their spinning 
 jennies, and their looms. 
 
 E
 
 ^0 
 
 lam not now giving an opinion, whether thrs sys- 
 tem has, upon the whole, been conducive to the happi- 
 ness or misery of the people. There can be no doubt 
 that it tended greatly to spread knowledge throughout 
 all ranks ; to increase wealth, and give political power ; 
 and that it carried the country through a contest, 
 which, without such aid, must have been terminated 
 much earlier by a treaty, that would have borne on its 
 front ; the ascendency of France — the debasement of 
 England. I think, therefore, it is a little unfair, that 
 any one who has been united with this system so 
 many years, reaped all its benefits, enjoyed all the 
 triumphs, and crowned by all the honours that were 
 won by its influence ; should now concur in censures, 
 and recommend measures for errors in its exercise, 
 which proceed entirely from mistaken principles, adopt- 
 ed many years ago : those errors being, at the same 
 time, in a safe course of gradual correction, by experi- 
 ence and the influence of wiser notions. 
 
 So important has been the aid which the govern- 
 ment derived from the system of country banking, in 
 acquiring power from it, to render perfect that foreign 
 policy, which they must have considered to be planned in 
 wisdom, and which was executed with the greatest diffi- 
 culty ; and so replete with extenuation, are the errors 
 into which country bankers were betrayed by circum- 
 stances, that I have chosen to apply my apology for 
 their proceedings, to the point of time when their prac- 
 tice had deviated most widely from rectitude. 
 
 It would not be difficult to show, that to circum- 
 stances of mismanagement, previous to 1815, either in 
 the same banking firms, or in the individuals who
 
 51 
 
 managed the banks, might be traced, directly or indi- 
 rectly, the failure of all the principal banks, at the 
 close of 1825. One example, out of many that I 
 could adduce, may illustrate this. 
 
 The firm of Wentworth and Co. in Yorkshire, was 
 formed in the year 1812, to continue a banking buinesss 
 which had existed some years. The managing partner of 
 that firm had formerly been a clerk in a banking house 
 in Yorkshire, which failed in 1810, after he left it, owing 
 to the extent of its dealings, according to the vicious 
 principles of indiscreet bankers, about that period. 
 This individual had subsequently managed a bank as a 
 partner, and, during that management, had never dis- 
 engaged himself from the bad principles of banking, 
 which he had adopted as a clerk in his noviciate : 
 the imprudent practices of this bank were marked 
 accordingly by their intelligent rivals. The bank, how- 
 ever, never failed, and the firm of Wentworth and Co. 
 took the business without any change ; engaging to pay 
 all the debts, and taking all the credits as valid as- 
 sets ; subject, perhaps, to the guarantee of the mana- 
 ging partner. One debt so taken, amounting to up- 
 wards of £40,000. remained unpaid, and unreduced, 
 at the bankruptcy of Wentworth and Co. in December 
 last. The firm of Wentworth and Co. established, 
 since 1815, a new bank at Bradford, consisting of, 
 and managed by, the same partners. This bank was 
 conducted, though not with strict prudence, yet upon 
 safer principles; and speaking of the transactions of 
 this bank alone, it was solvent and prosperous at the 
 failure of Wentworth and Co. What could be a 
 
 £ 2
 
 52 
 
 stronger confirmation, than these and similar circum- 
 stances, of the influence of the principles which ob- 
 tained amongst bankers, previous to 1815; and of the 
 working of the principles of caution and circumspec- 
 tion, since that period. 
 
 I believe that all men who understand this subject, 
 will agree with me in opinion, that, if the same 
 number of failures had occurred amongst bankers, 
 at the close of 1815, as occurred ten years afterwards, 
 their creditors would not have received one half of the 
 amount in dividends, pound for pound, that will be 
 received on the present occasion. And if circum- 
 stances had forced the same degree of pressure upon 
 them at that time, the failures would have been more 
 numerous. 
 
 More than one half of all the country bankers who 
 failed in December last, have either since paid in full, 
 or have convinced their creditors of their ability to 
 do so. Of the remainder, perhaps a few will pay 
 little or nothing; but take the mass of insolvent bank- 
 ers, and of them it may be asserted, that larger divi- 
 dends will be paid, than will be paid by the same 
 number of persons in any other class of traders who 
 became insolvent*. 
 
 * In the Leeds Mercury of September 16, 1826, there are seven 
 advertisements respecting the affairs of insolvents, and twenty-three 
 respecting those of bankrupts, within the district in which that paper 
 principally circulates: (thirty in one provincial paper!!!) Of the 
 latter, two only relate to the bankruptcy of bankers : Messrs. Went- 
 worth and Co. and Messrs. Dobson and Sons. Of all the bankers that 
 failed in December last, none were the objects of more censure and 
 abuse than those bankers, and they certainly were amongst that class
 
 53 
 
 I affirm, not at random, but after inquiry and con- 
 sideration, that I could mention the names of ten 
 
 of failing bankers, whose circumstances were the most desperate and 
 irretiievable. I have been at some pains to inquire into the circum- 
 stances of these thirty bankrupts and insolvents, and I believe not 
 more than two of them will pay, in the wliole, so large an amount in 
 dividends, as the least amount that will be paid by either of these 
 bankers. As some confirmation of this opinion, I extract the follow- 
 ing advertisements and notices, from the same Leeds paper of l6th 
 of September. 
 
 " Wentworth and Co.'s notes, bills, and receipts, for proved debts, 
 will be taken at full value, for superfine black, blue, and drab cloth, 
 (warranted perfect,) by R. Crookshanks, auctioneer and appraiser, at 
 his Scotch and Wilton carpet warehouse, in Minor and Scurr's Yard, 
 Briggate, Leeds. 
 
 " R. C. has just received a fresh supply of Scotch and other carpet- 
 ing, and hearth rugs, which he is selling at reduced prices, for ready 
 money only." 
 
 " In Messrs. Dobsons' Bankruptcy. — The creditors who have 
 proved their debts under this commission of bankrupt, may receive 
 their respective dividends, at the late banking house of Messrs. Dob- 
 sons, in Huddersfield, on the 1 4th day of September, instant, or at 
 an}' time afterwards, between the hours of ten and one; and all per- 
 sons holding any bills, or other securities, proved under the said 
 bankruptcy, will be required to produce the same. By order. 
 
 " Battye and Hesp, Solicitors." 
 " Huddersfield, Sept. 1, 1826." 
 
 " Messrs. Wentworth and Co.'s Bankruptcy. — We have the 
 satisfaction of informing our readers, that the Borthwaite estate, in- 
 cluding the minerals, &c. late the property of Mr. Rish worth, has 
 been sold to Colonel and Mrs. Beaumont for £50,000. Possession, 
 liowever, is not to be given till next February, and of course the 
 purchase money will not be paid till that time. This sale will not.
 
 54 
 
 mercantile and manufacturing firms, by whose failures 
 the public will sustain an aggregate loss, far exceeding 
 in amount, the aggregate loss that the public will sus- 
 tain by the failures of all the country bankers in Eng- 
 land, during the last twelve months. 
 
 I now proceed to explain that, subsequent to the 
 year 1815, a change took place in the opinions and 
 practice of country bankers, which rendered any at- 
 tempts to curtail their influence highly inexpedient; 
 and when coupled with the events at the close of 1825 
 and commencement of 1826, to the last degi^ee un- 
 wise. 
 
 Owing partly to the great contraction of the cur- 
 
 therefore, increase the amount of the first dividend; but will form 
 the basis of the second paj^ment to the creditors, which it is 
 probable will be made early in the spring of next year. 
 
 " The bank of Messrs. Dobson and Son, Huddersfield, commenced 
 the payment of their first dividend, of five shillings in the pound, 
 on Thursday last." 
 
 The affairs of some of the fallen bankers, no doubt, are very bad ; 
 but surely circumstances such as these, taken from that class of bro- 
 ken bankers whose failures were of the worst character, and pro- 
 duced the vjrorst effects, would cause persons of candour to blush, 
 for having, by means of the press, propagated opinions regarding the 
 desperate gambling nature of the general practices of country bankers, 
 so injurious to their moral character, and so monstrously unjust. 
 
 I must beg it to be remarked, that only three out of these thirty 
 advertisepaients relate to persons living in Leeds; that more than 
 one half of them relate to parties living either in Lancashire, or 
 in that part of Yorkshire bordering upon Lancashire. And they 
 were persons whose habits led them to deal with Manchester, and to 
 adopt the bill system of Lancashire, lather Uian the country bank 
 system of Leeds.
 
 55 
 
 rency about 1815; partly to extensive failures, the 
 consequence of pushing credit and circulation to an ex- 
 treme, operating as a direct warning in particular dis- 
 tricts; and partly to an improved state of knowledge 
 of the banking business, — the minds of all considerate 
 country bankers became about that time convinced of 
 the necessity of conducting their affairs with greater pru- 
 dence and circumspection. This change in the prin- 
 ciples of conducting their business, it will be proper 
 more particularly to mark, for the purpose of a clearer 
 comprehension of the present state of things. 
 
 The necessity of interference, in regard to country 
 bankers, has been urged, and measures of the most 
 injurious tendency to the public have been passed, 
 owing principally, I think, to the very nature of the 
 subject precluding a fair statement of facts and circum- 
 stances. The private affairs of individuals, from which 
 a strong case might be made out, cannot be dragged 
 forth, and those who understand the subject are driven 
 to general statements and reasoning thereupon. If the 
 matter could be fairly stated, by references to actual 
 practice and experience, immediate conviction of the 
 truth of the case would follow. Hence a matter of 
 paramount public importance, is dealt with in utter 
 ignorance of its merits ; because, to place it in a just 
 point of view, requires reference to the private con- 
 cerns of individuals, which we are not allowed to dis- 
 close. 
 
 It is true that public failures and bankruptcies take 
 tlie affairs of individuals out of the rule of considering 
 tlieir conduct and transactions, as sealed matters of a 
 perfectly private nature; and an intimate knowledge
 
 56 
 
 of the circumstances of Kensington and Co. Bruce 
 and Co. Pole and Co. Perring and Co. and many 
 others who failed in London ; and of Read, Batson, 
 and Co. Mowbray and Co. Wentworth and Co. 
 Elford and Co. and many others in the country, — 
 would yield matter of deep interest and importance 
 to the statesman, as well as the practising banker. 
 But, as my present purpose is to show, from the 
 general practice of those bankers that now remain 
 in business, and who are, almost without exception, 
 sound in their affairs, and prudent in their habits, that 
 there was no ground whatever for passing measures in- 
 tended to curtail their influence ; and that, to follow 
 those measures up by enacting others more severe, of 
 the same tendency, will be dangerous to the public 
 interests ; — I must take credit for the accuracy of my 
 statements. They are the result of inquiry long pur- 
 sued, and of intimate knowledge of the subject ; and I 
 am confident that all men, well informed on affairs of 
 the country, will confirm, in every particular, my 
 assertions. 
 
 I am acquainted with the partners in a country 
 bank, who began business some time about the year 
 1803. As soon as their intention to open a bank was 
 known, two London bankers, one in a carriage and 
 pair, another in a carriage and four horses, went from 
 London to the town where the bank was to be opened, 
 to solicit the town agency of these bankers. About the 
 same time, one of the partners in this country bank was 
 walking in a street in London, when a gentleman in a 
 carriage, unknown to Mm^ pulled up, and stepping out 
 himself, desired the countryman to get in. " My name
 
 57 
 
 is — , the banker. I am informed tliat you are 
 
 about to open a bank ; and 1 beg to request that our 
 house may be allowed to transact your London business." 
 None of these candidates were elected, but a corre- 
 spondence was opened with another banker in London. 
 These same country bankers, who have kept a deposit of 
 cash in the hands of the London banker, the value of 
 which is equal to four hundred pounds a year of clear in- 
 come, and who never, in the whole course of their busi- 
 ness, except once during the panic of last winter, asked 
 for any accommodation in the shape of loan, discount, or 
 pecuniary favour of any kind, have recently had occasion 
 to change their London correspondent. They are known, 
 by all the bankers in London, to be men of undoubted 
 wealth and extraordinary prudence. The sum they 
 proposed to leave with their London banker, for doing 
 their business, is worth £ 400. a year. Yet so changed 
 are the times, as regards money matters, that these 
 men tried, ineffectually, three London bankers, before 
 they could accomplish their purpose of changing their 
 London account. A London banker told me that he 
 had actually refused the offer of accounts with eight 
 country bankers, although every one of them tendered 
 an adequate deposit of cash, or a sufficiently profitable 
 account. 
 
 This will convey an idea of the change in banking 
 affairs, in London ; and though I am not acquainted 
 with any circumstances in the country which mark the 
 same reluctance for increase of business, upon princi- 
 ples equally safe, yet I affirm, upon a knowledge of 
 these matters, that the change in the country has been 
 of the same kind, and in a corresponding degree.
 
 All country bankers are endeavouring to lessen the 
 accommodation which they have been accustomed to 
 render their customers. Few are desirous of increasing 
 the number of their accounts. Accounts are very 
 rarely solicited to be brought to a bank ; and when 
 applications are made to bankers, to accept fresh ac- 
 counts, they must be backed by a reputation for pro- 
 perty, discreet management, and prudence, in the ap- 
 plicants, or they will have no chance of success. Much 
 greater watchfulness, in regard to the habits of busi- 
 ness and of life, is exercised by the bankers over the 
 persons with whom they have connexion in business. 
 Those country bankers who deviate from this rule are 
 marked, both by their rivals and the public, and a sort 
 of proscription, as to their notes and circulating credit, 
 obtains among all the prudent and intelligent men of 
 business. So strong is the influence of an opinion de- 
 rogatory to the discretion of a banker, that a trader 
 cannot, without injury to his own credit, keep an account 
 with a banker, even of reputed wealth, who is known 
 to conduct his affairs in any manner imprudently. 
 And the reverse of that takes place. A trader who 
 keeps his account with a bank that is known to be con- 
 ducted upon sound and prudent principles, has in that 
 circumstance a source of credit. This is altogether 
 new in the system of country banking, and has grown 
 into operation since the year 1815. Many large traders 
 closed their accounts with their old bankers, resenting 
 what was termed their illiberal conduct, in withholding 
 sufficient advances; but I have known many instances 
 of men of large property, and who tendered lucrative 
 business, being wholly disappointed in their endeavours
 
 59 
 
 to obtain new accounts, on terms so good as those 
 with which they were disgusted when proposed by 
 their old bankers. There is now a general disposition 
 among all bankers, to uphold one another in the exer- 
 cise of prudence. This was the state of things in 
 December last, when the most extensive failures and 
 tremendous convulsions in the monied world occurred, 
 to give undue force and violence, to principles in them- 
 selves salutary. 
 
 It was then obvious to all considerate men, whose 
 minds were guided by experience and knowledge, that 
 the contraction of the circulating medium would be 
 sudden, severe, and ruinous in its consequences. In 
 this juncture it was as much the duty of every man of 
 influence to aid in counteracting the rapidity and vio- 
 lence of this contraction, as it is that of a conductor to 
 place a drag chain on a machine, which would otherwise 
 go down hill, to be dashed to pieces by the force of its 
 own momentum. The bank directors know nothing, 
 practically, of country business ; but their general know- 
 ledge enabled them to appreciate the state of things, 
 and they made, consequently, a judicious and vigorous 
 effort to counteract the evil. If the government, at 
 this juncture, had participated with tliem in the same 
 sentiments, and had suffered the session to pass without 
 increasing the pressure, the elastic force of the national 
 industry would sooner have recovered its power, and 
 the pursuits of the industrious would, by means of re- 
 viving confidence, have been resumed early in the year; 
 instead of the same effect taking place in August, when 
 the energies of the country had been so injured as to 
 render perfect restoration impossible.
 
 60 
 
 The principles of greater prudence and circumspec- 
 tion, by which country bankers now manage their af- 
 fairs, were introduced into practice in the best possible 
 way; viz. by experience convincing the bankers that 
 they were necessary for their own security and advan- 
 tage, and for the public benefit. It was inevitable, that 
 a business of such magnitude and importance, requiring 
 great intelligence and constant attention, should, in its 
 early stages, have been sometimes mismanaged and de- 
 ranged. Regulation, which would not injure its influence 
 upon industry, and supervision in regard to its future 
 operation, was all that it needed from the government, 
 A knowledge of the manner in which it was intertwined 
 with every operation of industry, in the country parts 
 of the nation, would have withheld ministers from pro- 
 posing laws destructive of its influence and effective- 
 ness, when followed up by other enactments, which 
 the principle that dictated those laws will require, to 
 render its operation consistent and perfect. I observe 
 indications, since the dissolution of parliament, which 
 create in me an apprehension, that, without a know- 
 ledge of its merits, there is a settled resolution ulti- 
 mately to destroy the business of country bankers, to 
 substitute what is considered to be a better system. 
 Such an effect may, indeed, be produced, without a 
 settled purpose, by the enforcement of measures, the 
 operation of which has not been properly estimated. 
 
 Let us therefore proceed to examine, more particu- 
 larly, how this system of country banking is connected 
 with industry, and is promoting production. 
 
 Country bankers receive money, on interest, from 
 those who have too much, and lend it to those who
 
 61 
 
 have too little. Avoiding the errors of the imprudent, 
 of times past, they will not give four or five per cent, 
 interest upon loans, when they cannot themselves, with- 
 out difficulty, lend money at five per cent, interest se- 
 curely. They will not, as some of them have done here- 
 tofore, eagerly seek to borrow money, but they will take 
 it when it is brought ; and, if left in their possession, for 
 a stipulated time, will give interest at the rate of 2^, 3, or 
 3 J per cent, according to the facilities that they possess 
 of lending it out again upon a proportionate rate of inte- 
 rest, upon good and convertible security. Then, in re- 
 gard to lending money, the more difficult branch of 
 their business, they employ it partly in public secu- 
 rities, but more generally in discounting the bills of 
 traders, manufacturers, merchants, and bankers. 
 
 In order to show how the country banking system 
 operates to increase productions, let us take an ex- 
 ample or two from the practice of a banker situated in 
 an agricultural district, and one from a banker con- 
 nected with manufacturers. An agricultural bank is 
 resorted to, more for depositing surplus capital therein, 
 than for mercantile business. The banker is, however, 
 desirous of lending in his own neighbourhood, if he can 
 do so securely ; and the only means he has of lending 
 without danger, as regards security or convertibility, is 
 by discounting the bills which the cornfactor, miller, 
 woolstapler, cheesemonger, or hopfactor, draws upon 
 the London factor, for the commodities which he col- 
 lects and transmits ; or the bill which he receives, for 
 the same commodities, from the manufacturing dis- 
 tricts. These bills cannot, however, at all times, be 
 received in a regular manner ; but to possess them.
 
 G2 
 
 depends upon many causes, such as contrary winds, 
 delays upon inland navigation from frosts or floods, 
 &c. &c. which may delay the receipt of the goods, 
 and consequently the remittance of the bills from the 
 manufacturing parts, for weeks or months, and in the 
 same way protract the time at which the trader would 
 be permitted to draw upon the London factor. Still 
 the farmers are accustomed, and expect, to receive 
 payment for their commodities in the notes of the 
 country banker, on delivery. To accomplish this, 
 the trader opens a current account, on interest, with 
 the banker, which, by mutual agreement, enables him 
 to overdraw his account, and to obtain bank notes 
 whenever the farmer wants them. This sort of ac- 
 count is a perfect contrivance in economy, to make 
 capital productive. By receiving or paying the 
 smallest sums for his customers, and charging in- 
 terest for or against himself, upon every entry to the 
 end of the year, the country banker is necessary to 
 make the operations in commerce work, without waste, 
 freely and effectively ; and he who would destroy the 
 country banking system, to adopt that of branch banks, 
 which allows no such facilities, ought, consistently, to 
 make sledges again, the only machines for conveying 
 men and things to and fro on the land, because the 
 polished well oiled axle causes the carriage to be pro- 
 pelled sometimes in a dangerous manner. 
 
 Without this contrivance, the trading in these com- 
 modities, in the country, will be either a sort of mo- 
 noply in the hands of a few overgrown capitalists, 
 who must have larger profits upon their transactions, 
 to cover the loss sustained by keeping an abundant
 
 63 
 
 capital always ready, and part being thereby wasted 
 in unproductiveness ; or the grower must be at the 
 trouble of selling his produce to the consumers : in 
 which case, a man must, perhaps, take a journey of 
 one hundred miles, to sell his commodity. The ex- 
 penses of the journey, on account of the small amount 
 to sell, greatly lessen the profit: he must send his 
 horses thirty miles to deliver the thing sold, instead 
 of five miles to his neighbour, and, frequently, 
 he must take a second journey to obtain payment. 
 Nothing is worse, in farming concerns, than diffi- 
 culties and obstructions in disposing of produce, apart 
 from the increased expense incurred thereby, be- 
 cause they compel the farmer to be frequently from 
 home, to effect sales ; and if there be any one concern 
 of life, that requires, more than all others, the every- 
 day attention of the master, it is husbandry. Thus 
 we see, that the banking system of England decreases 
 in agriculture the cost of production, by affording 
 facilities for the sale of the produce, and by econo- 
 mizing the time of the farmer, his serv^ants, and horses; 
 and it also affords the ready means of making small 
 savings of capital productive, by allowing interest upon 
 deposits, of either large or small sums. 
 
 But it has a more direct effect, as in the following 
 case. An industrious farmer, of a respectable family, 
 has just married and taken a farm. The united por- 
 tion of the young farmer and his wife furnish just 
 capital enough to stock the farm in the old mode of 
 farming; and he may have his crops of grain, scanty, 
 but crops in regular succession. The new mode of 
 farming, however, requires that he should have, in ad-
 
 64 
 
 dition to his crops of grain, green crops of turnips or 
 cabbages, or mangel wurzel ; cattle in the winter to 
 eat them, and to make manure to increase the crops 
 of grain. The young man sees the advantage clearly 
 enough, but where is the money to come from ? His 
 uncle has £7000. in the bank in the market-town: 
 away he goes to borrow some of it. His uncle, how- 
 ever, denies the applicant : he will keep his money 
 where he can have it at a short notice, in case a farm 
 should be offered for sale at a cheap price. The 
 young man then consults his wife's brother, who is a 
 few years older than himself. " I advise you," he re- 
 plies, " to go and ask the bankers, who have always 
 so much of your uncle's money. They lent me all 
 that I wanted when I entered upon my farm, and I paid 
 them the last back again two months ago." The young 
 man goes to the bankers with a recommendation, and 
 a candid explanation of his circumstances, from his 
 brother in law. The bankers hesitate: they do not 
 like to lend their money, for an uncertain period, to 
 remain dead: it is contrary to their rules. But the 
 name, from the uncle's deposit, and from general 
 reputation, is in good savour at the bank, and so they 
 oblige him. In this case, the productions of a farm are 
 increased, perhaps more than one-third, by a country 
 bank causing a new and more productive system of 
 husbandry to be pursued. It can hardly be neces- 
 ssary to state any more, to prove that this effect is 
 produced in every department of productive indus- 
 try. I will show one operation in manufacturing con- 
 cerns. 
 
 A young man has, when starting in life, just capital
 
 65 
 
 sufficient to fill his mill with machinery, purchase his 
 looms, &c. and buy raw materials enough to commence 
 operations ; but all the processes of manufacturing, 
 dyeing, finishing, sale, and transit, cause five or six 
 months to elapse, before any return in money can be 
 derived from the wrought fabric. He makes an ap- 
 plication to a banker, for an advance of money to pay 
 wages and current cash expenses, till he can have a 
 return in bills for his goods. The banker knows the 
 reputable character of the family of the young man : 
 many of them have prospered under his observation, 
 and some of them by his direct instrumentality; and 
 the applicant has a creditable character for prudence 
 and diligence. There is no fear but that one of that 
 stock will attend to the main chance. Therefore, the 
 banker, after saying that he avoids taking any new 
 accounts with parties who require a permanent ad- 
 vance of cash, a rule from which he now hardly ever 
 departs, consents, from the respectability of the con- 
 nexions, and being convinced, by candid, personal ex- 
 planation, that his new customer has a fair prospect of 
 success. 
 
 In this manner the country banking system aids 
 production. It also tends to render prices uniform, 
 and equalize the employment of labourers. In the 
 department of agriculture, it serves, in some measure, 
 the place of public granaries, by enabling those who 
 have credit with a neighbouring banker, to keep their 
 produce over a period of low prices, when sales would 
 yield no profit upon stock. Corn is kept in the 
 country, under the personal inspection of the owner, 
 far better than in warehouses. 
 
 F
 
 66 
 
 In mining and manufacturing concerns, it enables 
 the masters to continue to produce and to manufacture 
 in the absence of immediate demand, upon a fair cal- 
 culation, that the demand will, within a certain time, 
 arrive, to take off the whole of an accumulated stock. 
 Demand may be periodical ; or it may come after in- 
 tervals of unequal duration ; or it may be interrupted 
 by obvious circumstances, which will not prevent it re- 
 curring at no distant day. The proprietors of mines 
 and manufactories weigh these circumstances ; and be- 
 ing loathe to discharge their workmen, continue their 
 operations, (perhaps on a diminished scale,) over a 
 long period, without a demand. Nothing but the 
 country banking system, which allows these parties to 
 borrow sums of money, for a period not exactly de- 
 fined, could enable them, generally, to do this. The 
 stoppage of a manufactory, and discharging the hands 
 therefrom, is in many cases so detrimental to the 
 owner, that nothing short of absolute despair, as to 
 renewed demand, or inability, from want of capital, to 
 continue his operations, could induce him to stop alto- 
 gether. The hands have been trained to make his par- 
 ticular goods in his particular manner ; new hands may 
 make the goods so differently, as to destroy the repu- 
 tation of the master, and put to flight all his best con- 
 riexions. I knew a man of property, who, after try- 
 ing to bribe away the servants of his rival, lived for 
 months, at a distance of two hundred miles from his 
 family, for the sole purpose of picking up all the in- 
 formation he could, in alehouses, from workmen, in 
 regard to the mode of making particular fabrics, which 
 his rival had made better than he, and thereby com-
 
 67 
 
 inanded a market. Examination and analysis of the 
 perfect piece afforded him no adequate knowledge. I 
 have no hesitation in affirming that, under favourable 
 circumstances, the stoppage of a mill by a manufac- 
 facturer, is more injurious to him, than it would be to 
 a farmer to work for two or three years without ob- 
 taining a farthing of profit towards his rent ; and in 
 four instances out of five, it cannot be done without 
 absolute ruin. 
 
 Therefore, the country banking system, under pro- 
 per regulations, would tend to equalize employment — 
 to economy in the uses of money, by lending or bor- 
 rowing small sums on interest — to prevent waste in 
 the efforts of industry, by supplying temporary aid, to 
 render complete, an undertaking which, without such 
 aid, must be incomplete. All this will be lost, if the 
 Bank of England system prevail, to the exclusion of 
 the other. 
 
 What amount of capital may, in England, be made 
 available for reproduction, by means of the open cash 
 accounts of country bankers, it would be difficult to 
 estimate. It consists, in a great measure, of the sav- 
 ings of money lent to bankers on interest, by capi- 
 talists who are not themselves engaged in active pur- 
 suits. The amount so employed, therefore, by any 
 particular banker of established credit, depends upon 
 two circumstances ; the amount of the accumulated 
 capital of his neighbourhood, and the extent of profit- 
 able employment afforded for capital amongst his con- 
 nexions. I could mention several bankers, each of 
 whom has at times lent to his customers more than half a 
 
 F 2
 
 68 
 
 million sterling. I have been acquainted with some of 
 the circumstances of three country banking firms that 
 stopped payment last December, who had, collectively, at 
 the time of their stopping, more than £500,000. owing 
 to them by the public, in these cash accounts. Two 
 of these firms have since paid in full, and are pursuing 
 a reputable and successful banking business. The 
 bankers who stopped payment, however, were not 
 those who either borrowed or lent the most money. 
 On the whole, I think, that, to take forty millions as 
 the amount that is at all times ready to be advanced 
 by country bankers to the public, in cash accounts, is 
 a low estimate. There being more than seven hun- 
 dred country bankers, it allows less than £60,000. to 
 each banker, as the average amount of the sum that 
 may be employed in this manner *. 
 
 * The inhabitants of Leicester, Nottingham, Sheffield, and Leeds, 
 have experienced great reverses in their circumstances, during the 
 last twelve months, and considerable distress has existed in some of 
 these places. Each town contains upwards of 30,000 souls. The 
 country banking system is in full operation in all of them, and its 
 principles are well understood. It is owing, I believe, solely to that 
 circumstance, that the distress was less severely felt than in some other 
 manufacturing towns ; and it affords, upon the smallest favourable 
 change, the most direct means of renovation. The reflecting and dis- 
 creet bankers in these places, know that the prosperity of their respec- 
 tive neighbourhoods has caused their own wealth, and they wisely do 
 all that prudence will permit to sustain that prosperity. The following 
 notice, extracted from the " Leeds Mercury" of October 14, while 
 this pamphlet was in the press, will cast some little light upon this 
 matter. 
 
 ■ " The Wakefield /owrwa/ of yesterday, contains a paragraph stating, 
 that ' the want of circulating capital is evidently one of the great re-
 
 69 
 
 ON THE STATE OF THE CURRENCY 
 
 In January, 1826. 
 
 Before I proceed to show, that no one acquainted 
 with this subject, in all its practical influences upon 
 the habits of industry, and the state and appropriation 
 of capital, can perceive the possibility of the Bank of 
 England rendering similar benefits to the public, to 
 those rendered by country bankers, let us look, for a 
 moment, at the state of this matter, before the mea- 
 sures in parliament were adopted in the last session. 
 
 The effects of the panic, it was then obvious, would 
 be great, upon the value of all existing capital, and 
 upon the means of creating fresh capital, by the ope- 
 rations of industry. Great derangement in the money 
 concerns, of all men who had engagements for time, 
 or who were connected with credit in their dealings, 
 must, inevitably, succeed to such a convulsion. Every 
 considerate man, who appreciated the consequences, 
 manifested anxiety to prevent the calamity from spread- 
 ing to that degree, that capital would be so disturbed and 
 broken up, as to cause the operations of industry to stop, 
 and injure, mortally, the means of renovation. Who 
 
 tarding causes to the progressive improvement of trade;' and that 
 ' ievi or none of the banks will make any advances, even to the best 
 houses.' On which we have to observe, that the generality of the 
 banks of the West Riding are by no means acting upon these narrow 
 and illiberal principles ; but that, on the contrary, they are fostering 
 the rising prosperity, by making the usual advances, in all cases 
 where it can be done with that prudence which they owe both to 
 themselves and to the public."
 
 70 
 
 at that crisis could have supposed it possible, that the 
 government were so little acquainted with the mode 
 of working, and the effects of the paper currency 
 amongst the active classes, as greatly to extend and 
 aggravate, by their proceedings, an inevitable evil ? 
 Public opinion, directed by writers who were either 
 ignorant or malignant, intolerant or base, prevented 
 deliberation, and denied all fair and candid investiga- 
 tion of the matter. I think the foregoing survey, im- 
 perfect as it is, and greatly inadequate to the occasion, 
 does exhibit this subject to be that, which, above all 
 others, requires patient inquiry and anxious consider- 
 ation, in the room of a confident belief in the infalli- 
 bility of a judgment farmed and made up. A few of 
 the country bankers, alone, could explain the state of 
 the country^ as it is connected with their system of 
 banking ; but a doubt was thrown, either upon their 
 sincerity, or upon the soundness of their judgment, 
 because they are liable to be warped by self interest. 
 A case which, in point of strength, far exceeds that 
 presented by Scotland, could be made out, to stay pro- 
 ceedings, till a mature judgment had been formed 
 upon correct information. And justice demands that, 
 as an inquiry has been granted to Scotland and Ireland, 
 England should be allowed to plead her cause. With- 
 out such an inquiry, it is plain to my understanding, 
 that the country banking system must, in a few years, 
 by the combined operations of laws and circumstances, 
 be destroyed in England. 
 
 The system of country banking has been growing 
 up for generations. All men, now living in the country 
 parts of England, capable of directing or managing any
 
 71 
 
 affairs of business, are, in their habits, identified with 
 it. They would as soon expect a tearing up of the 
 public roads, because they afforded the means of bring- 
 ing the produce too rapidly to market, as the injury 
 or destruction of a system, by which all their calcula- 
 tions, in regard to capital for conducting their affairs, 
 have been formed, and all their operations in industry 
 have been arranged. And to expect that this system 
 can be destroyed, and all the private money engage- 
 ments between individuals be fulfilled, and the same 
 amount of rent and taxes be paid, is as reasonable, as 
 it would be to expect that, if the canals were filled 
 up, and all the carts and waggons of the country burnt, 
 coaches and pack horses could as well convey the com- 
 modities to market. If there be no intention abso- 
 lutely to destroy, greatly to injure the system will have 
 the same effect in proportion. All who know how diffi- 
 cult it is entirely to break through habits long acted 
 upon, must be aware that the established connexions 
 and modes of business amongst country bankers, would 
 prevent many of the concerns of individuals from be- 
 coming deranged in an irretrievable manner. Years 
 must elapse before the small note bill can go into full 
 operation, or the rival establishments be fully organ- 
 ized. ..The English bankers, too, implicitly rely upon 
 the principle of equal justice, which is due to all thei 
 king's subjects, for having the same advantages con- 
 tinued to the English public, as have been conceded, 
 after full inquiry, to the Scotch and to the Irish ; yet, 
 with these circumstances, to break the effect of the 
 catastrophe, and which prevented many of the existing 
 establishments of industry from being blown up, the
 
 72 
 
 ruinous effects have been so extensive, as to cause 
 deep and anxious thought, amongst all considerate 
 men, as to what may be the ultimate consequences of 
 continued perseverance in error, respecting the cur- 
 rency. 
 
 At the meeting of parliament in February, when it 
 was obvious that the contraction of the currency would 
 be great, nothing could have prevented all men of in- 
 fluence and power from uniting with the Bank Di- 
 rectors, to ward off a portion of the evil, but that un- 
 fortunate habit of looking at this subject through a 
 microscope, which presented to the vision, with mag- 
 nified effect, nothing but bank notes, country bank 
 notes, and metallic currency, and entirely excluded 
 any extensive view of the subject. The everlasting 
 round of the inner circle, upon which is marked, prices 
 of gold and silver, exchanges, bank issues, and coun- 
 try bank notes, has been examined again and again ; 
 and able men have been summoned, some to explain 
 whatever appertained to this point of the index, and 
 some to that : all who directed and conducted the in- 
 vestigation, being at the same time apparently in igno- 
 rance, that there was an outer circle that they had 
 never looked at, in reference to this inquiry, of infi- 
 nitely more importance, viewed in connexion with the 
 industry of the people, and the prices and amount of 
 the productions of British industry. 
 
 That this outer circle, describing the amount of 
 bills of exchange, is that alone upon which is indi- 
 cated the coming storm, and approaching danger, is 
 manifest. Therefore, to conduct and terminate an ex- 
 amination respecting our currency, without a minute
 
 rs 
 
 investigation of the state of circulating credit, will leave 
 us in utter ignorance qfoiir actual standard. It is now 
 partially admitted, that the legal standard neither 
 regulates our paper currency, nor measures precisely its 
 value. I have endeavoured to show, that neither gold 
 coin. Bank of England notes^ nor country hank notes 
 is virtually our standard: but that hills of exchange 
 alone form our standard. By knowing in what de- 
 gree the amount of this part of the circulation \b plus 
 or minus, from any given point, we may ascertain, 
 and by nothing else can we fully ascertain, the ten- 
 dency to depreciation from excess, or the degree of 
 approaching difficulty from contraction, of the circulat- 
 ing medium. It would appear, therefore, that we have 
 committed a great error, in attempting to destroy the 
 effectiveness of country bankers, to whom circum- 
 stances have eminently given the power to regulate 
 this, our standard ; and who alone can, with the con- 
 currence and judicious assistance of the government, 
 be enabled to regulate it best for the public interests. 
 
 Speculation, which gave rise to the proceedings in 
 parliament respecting the currency, was carried last 
 year to an unjustifiable extent; hut it is a remarlzahle 
 fact, and pregnant with instructioUy that (except 
 amongst bankers) all the large conspicuous failures 
 which occurred hetween July, 1825, and April, 1826, 
 ive7'e among persons who had no connexion with JEt?g- 
 lish country hankers, and who resorted, not to country 
 hank notes, hut to those of the Bank of England and 
 the Scotch hankers, to keep up the excess of their 
 credit circulation, which was the consequence of their 
 amazing speculations. These failures occurred amongst
 
 74 
 
 merchants and booksellers in London, Liverpool, and 
 Edinhurgh, ivhere English country hcrnJe notes are 
 never used. To confine our observation, however, to 
 those persons and occurrences which attracted the 
 most notice, would not be doing justice to the subject. 
 If the circumstances of all the parties who Jailed 
 within that period were examined, it would be found 
 that the far greater proportion oi failures was amongst 
 persons who had most to do with hills and hanh notes, 
 and least with country hanh notes. Consequently, we 
 find that the failures of manufacturers were the greatest 
 and most numerous amongst those who wrought up 
 cotton, silk, hemp, and flax, hecause they had most 
 concern ivith hills; whilst the failure of those who 
 wrought up sheep's wool, (whether in the west, east, 
 middle, or north of England,) leather, iron and other 
 metals, were, in the comparison, small in numbers and 
 amount. 
 
 This brief reference to persons and trades will show, 
 that to English country hanhers does not attach the 
 charge of fostering speculation, and inducing failures. 
 But I can, hy a reference to places, establish the po- 
 sition, not in a stronger, but in a more unanswerahle 
 manner; because this kind of evidence is more conspi- 
 cuous and comeatahle. I will take, proceeding in a 
 zig-zag direction throughout England, a few large 
 places, distinguished for manufactures or considerable 
 traffic, where country banking has been the longest time 
 established, and wliere the system is well understood 
 and beneficially practised ; and I confidently ask any 
 one acquainted with the merchants, manufacturers, 
 and traders in Newcastle, Kendal, Leeds, York, Hull,
 
 75 
 
 Lincoln, Sheffield, Nottingham, Derby, Leicester, Bir- 
 mingham, Wolverhampton, Kidderminster, Worcester, 
 Bristol, Taunton, Yeovil, Exeter, or Norwich, to de- 
 scribe the condition of these places, as to failures, dur- 
 ing the late crisis. I select them, because they are all 
 towns of considerable business, where country banks 
 have been long established, and where, with some ex- 
 ceptions, they have, of late years, been conducted upon 
 sound principles. Great distress existed, in several of 
 these places, amongst the working classes; but ii is 
 notorious that, in many of them, not a single Jailure 
 took place during, or in consequence of, the late con- 
 vulsions ; while in all, the failures have been veryfew^ 
 compared with other towns containing the same number 
 qfinhahitants. 
 
 I ask all those who deny my position that country 
 banking has less tendency to promote speculation, and 
 induce failures, than other systems of banking, to jyrove, 
 by a reference to the failures in Londoji, Liverpool, 
 Lancashire, and all Scotland, where their favourite 
 Ba7ik of England and Scotch notes exclusively cir- 
 culate, that the Scotch and Bank of England systems 
 of banking have less tendency to promote speculation. 
 If they fail to do this, what can be thought of the wis- 
 dom of the late proceedings in parliament, respecting 
 country bankers and Scotch bankers ? 
 
 To all acquainted with the subject, the fact that the 
 great mass of mercantile failures occurred within six 
 miles of St. Paul's, within sixty miles of Liverpool, and 
 in Scotland, is as notorious as that corn grows in Sussex, 
 and sheep graze in Kent. Therefore, this bare sketch, 
 in reference to failures, of persons, trades, and places,
 
 76 
 
 affords an indication so plain and unerring, that any 
 man, who can distinguish sunshine from clouds, will at 
 once see the truth. 
 
 That the system of credit in this country had been 
 greatly abused, is true. But it was in a course of gra- 
 dual amendment. Whoever was practically acquainted 
 with the state of credit for many years previous to 
 1815, and compared it with the state of credit from 
 that period to the close of 1825, knew that the change 
 for the better, in regard to England, has been as great 
 as any man would desire, except those who advocate 
 violent and ruinous changes. This it is that creates 
 alarm, in the minds of all considerate men, for the con- 
 sequences, and it is a circumstance which has marked 
 all the public opinions and proceedings in regard to the 
 currency and banking affairs ; — knowledge of a disorder 
 is first obtained at a time when the disorder has entirely 
 passed away, or has changed its character. For an ope- 
 ration in the human constitution, we require anatomical 
 and physiological knowledge, that the instrument may 
 be directed, not into the vitals ; and the consequences, 
 to the remotest parts of the frame, may be duly appre- 
 ciated. In a measure which may deeply affect the 
 vital energies of industry, we ask that well directed 
 and unprejudiced inquiry may take the place of ill 
 founded confidence : that knowledge may precede legis- 
 lation, in order that the effect of the new laws upon the 
 national prosi>erity may be previously known and wisely 
 considered. 
 
 Mr. Baring, who with his extensive knowledge on 
 most parts of this subject, had not, I believe, a full and 
 perfect comprehension of the manner in which the
 
 77 
 
 industry of the country was connected with different 
 portions of the circulating medium, said, during the 
 convulsions of the last winter, that the one thing re- 
 quired was confidence : he meant, principally, confidence 
 in the merchants and bankers of London and Liver- 
 pool. Mr. Baring did not then imagine it possible that 
 ministers would, in a few weeks, propose measures 
 which would have the effect of prolonging that dis- 
 astrous state of things, and occasioning its recurrence — 
 measures which would destroy confidence and circulat- 
 ing credit in every part of the kingdom, and extend 
 ruin amongst classes of the community, of far more 
 importance to the national prosperity, than all the 
 recently ruined merchants and traders of London — 
 that would cause the operations of industry, in almost 
 every department of manufactures, to be continued for 
 a whole twelvemonth, without producing any return of 
 profit to the capitalist ; and would so paralyze the whole 
 industry of the country, as to entail consequences of 
 indescribable evil to the kingdom. 
 
 At a time when a hundred bankers had stopped 
 payment, and thereby taken out of circulation a vast 
 amount of paper credit, which had ]»erformed the 
 functions of capital, and been made available for pro- 
 duction, in the same manner as that same kind of paper 
 credit had been aiding the operations of industry, and 
 causing production, for thirty years — was it wise to 
 enforce measures which would still more contract and 
 reduce, and render the energies of production power- 
 less ? Could we, at such a juncture, afford to relin- 
 quish the whole of the forty millions of capital derived 
 from the country bankers' current advances to the
 
 78 
 
 public? Could we safely give up nine-tenths of that 
 vast undefined mass of circulation in bills, the amount 
 of which exceeded all the metallic circulation of Eu- 
 rope? And if these general considerations failed to 
 bring conviction to the minds of men in power, were 
 there no particular circumstances at this period, which 
 must, one would conceive, bring home to their under- 
 standings a doubt of the propriety of so hazardous a 
 policy ? Will the free trade measures, if successful, 
 open no field for the employment of British capital ? 
 We have passed laws which tend, unless they be coun- 
 teracted by errors in managing the complicated ma- 
 chine of the currency, to secure to us a great share of 
 the carrying trade of the world ; " for which purpose 
 great capitals are requisite." And if, in this kind of 
 commerce, " wealth, in the first instance, creates the 
 trade, and not the trade the wealth," as Mr. Huskisson 
 truly asserts to be the fact, where can be discovered 
 the consistency, or the wisdom, of enacting laws which 
 must deprive us of that which was as effective for this 
 purpose as wealth ? 
 
 To my apprehension, the modes adopted for relief 
 when the evil was felt, present the same evidence of 
 the subject being ill understood, as those adopted for 
 contraction and correction. Of these, I shall now 
 notice only the advances of money upon goods, &;c. by 
 the bank. All the persons interested in borrowing those 
 advances, whose sentiments I have had an opportunity of 
 collecting, assert that they regretted the advances were 
 ever taken, and that these loans have been productive 
 of evil and not good : a necessary and inevitable result.
 
 79 
 
 owing to the terms on which the money was lent, and 
 the manner of exacting repayment. 
 
 The subject is of momentous import, and it cannot 
 be disposed of without thorough investigation. It is 
 manifest that the measures of regulation which have 
 been decided upon, must utterly fail to effect their in- 
 tended object. If there were no other species of paper 
 circulation than Bank of England notes and country 
 bank notes, they might accomplish their designed pur- 
 pose in the manner proposed ; but so far from the 
 whole question of paper currency being compressed 
 into a consideration of Bank of England notes and 
 country bankers' notes, these, conjointly, amount to 
 very little more than a tenth of the whole. There are 
 700 country bankers constantly issuing notes ; but there 
 are 700 country bankers also issuing, constantly, inter- 
 nal bills of exchange *, payable after date, the amounts 
 
 * " One of these bills (foreign hills of exchange) would often 
 pass through several hands, and be the medium of payment in a 
 number of transactions, before it was finally discharged by the per- 
 son on whom it was drawn. To this extent^ it performed the precise 
 functions of paper money, and led the way to the further use of tliat 
 important substitute." 
 
 MilVs Elements qf Political Economy , pagelOG. 
 
 Mr. Mill is one of the most satisfactory writers on this science 
 that I have read, because he is able and perspicuous; his style 
 simple, and well adapted to convey instruction; and his meaning 
 is not involved in endless repetitions, from an affectation of pro- 
 fundity. 
 
 This is not the proper place to point out errors in the writings 
 of this gentleman, or those of any other; but as he has, in animad- 
 verting upon a doctrine of Mr. Hume, fallen into what I deem a
 
 80 
 
 of which, in the agricultural districts and near to London, 
 is small — in the commercial, mining, and manufacturing 
 districts, immense. And besides these bills of the 
 
 fallacy, upon a part of the subject, connected in a peculiar manner 
 with the object of this letter, I must be pardoned for adverting to it. 
 Mr. Hume ascribed to an augmentation of money the power 
 of increasing productions. " This doctrine,'' says Mr. Mill, " implies 
 a want of clear ideas respecting production. The agents of produc- 
 tion are the commodities themselves, not the price of them. They 
 are the food of the labourer, the tools and machinery with which he 
 works, and the raw materials which he works upon. These are not 
 increased by the increase of money : how then can there be more 
 production ? This is a demonstration that the conclusion is 
 erroneous at which Hume has arrived." 
 
 It seems to me that Mr. Mill here overlooks the first effect of an 
 increase of money, which undoubtedly enables the producers to aug- 
 ment their stock of tools or machinery ; but in affirming or denying, 
 propositions like this, it is the best to begin, in an elementary 
 manner, with the first motion, and trace the effect through every 
 operation, till it has completed the circle. 
 
 Suppose ten men to take a portion of land, to cultivate by spade 
 husbandry, on condition that they find all the tools themselves, the 
 owner of the land engaging to find them food, clothing, seed, and 
 all other requisites, excepting tools, for one half of the gross pro- 
 duce. Their whole capital, however, consists of a guinea, which 
 enables them to purchase spades, &c. just sufficient for five men; 
 and they have no other means of getting tools for the other five. In 
 this difficulty they turn bankers, and create a note for a guinea, pay- 
 able at a time when their products from the land will be matured 
 and marketable. They take the guinea and the note to an iron- 
 monger, to buy spades, &c. for the whole ten. The ironmonger has 
 no objection to take the note at the same value as the guinea, be- 
 cause the iron master will take it of him for iron ; who will take ft, 
 because the coal owner will take it of him for coal; who will take it, 
 because the farmer will take it of him, for corn for the horses that 
 draw the coals ; who will take it, because it will become due at the
 
 81 
 
 country bankers, there are tens of thousands of traders 
 constantly issuing the same kind of paper currency. I 
 have said that this part of the circulating medium was 
 
 exact time when the rent of the land must be paid, upon which the 
 corn grew, and the landlord will take it for that rent; and the land 
 owner finally exchanges the note for potatoes, which he buys of the 
 ten men, who have been enabled, by means of issuing tine note, to 
 produce a quantity for market, which could not have been produced 
 by any other means. 
 
 The maker of tools might not have been able to sell the spades, &c. 
 on a book credit : without the payment of the note, which gives the 
 iron-master another security, he might refuse to sell the ironmonger 
 an additional quantity of iron, and so on throughout the circle. 
 
 It appears to me to be a fallacy, that most writers on this subject 
 adopt, that increase in prices, of all commodities, follows immediately 
 after an increase in money. I believe that increase in prices is 
 scarcely perceptible at all for a considerable time ; and when an aug- 
 mentation of money begins to produce effect upon prices, its influ- 
 ence is partial, and confined principally, either to the public funds, 
 or other public securities, or to such commodities as are most com- 
 monly the objects of dealing and speculation ; and that in all other 
 things its influence is small, for a long period after the money is 
 augmented. 
 
 It is obvious to me, that an increase of money operates so much 
 more immediately and extensively in augmenting production, than 
 in increasing prices, that its influence in that way may have been 
 continued over a whole year, and many of the productions of in- 
 dustry be matured and marketable, before its effect in augmenting 
 prices is great or generally perceptible. 
 
 Even in Great Britain; stocked as every town and populous village 
 is with middle men and dealers, there is no remarkable increase in 
 prices, till the great dealers begin to appropriate large masses, for 
 the purpose of profit, by running up prices. A quick transfer of 
 commodities, by a rapid course of dealing, has far greater immediate 
 influence in causing prices to rise, temporarily, than an increase of
 
 82 
 
 performing the same functions as all the notes of the 
 Bank of England and country bankers, except the 
 
 the currency. And this rapid course of dealing might commence, 
 and be continued for some time, upon mere credit^ fixed in the 
 books, and not circulating in bills; and consequently, without the 
 increase of a single guinea in the circulating money of the country. 
 
 The doctrine of the quantity of money and of commodities bear- 
 ing an exact relative value to each other, though true in the abstract, 
 is false when applied with strictness to practical dealings amongst 
 men. It is true when applied to a long course of years, but it is 
 false when applied to a short period only ; for example, to a period 
 of one or two years. If it were strictly and literally true, that the 
 " first man who came with an additional quantity of money into the 
 market, to purchase commodities, raised the price of commodities, 
 because he came with an additional quantity of money," how comes 
 it that the prices of all commodities are not proportionately raised 
 by an increase of money. The great fluctuations in prices, how- 
 ever, take place in those commodities subject to the monopolizing 
 influence of great dealers, who accumulate masses for the purpose of 
 operating upon prices. In those commodities, the value of which is 
 small, and which are not so subject to the influence of dealing, prices 
 are not liable to great changes. In the remote parts of Lancashire, 
 one of the most densely peopled counties in the kingdom, and the 
 wealthiest county, there has been comparatively very little variation, 
 for fifty years past, in the prices of poultry, and the produce of 
 orchards, &c. 
 
 Appreciating highly as I do the labours of those men who endea- 
 vour to inform the public on the most difficult and important 
 parts of political science, Mr. Mill must pardon me for suggesting, 
 that when he next imagines he has given us " a demonstration 
 that a conclusion is erroneous," it would be as well if he were 
 to go over the ground again ; and by examining the influence 
 of time — of habit — of dealing, upon prices, he would exercise a little 
 more reservation in deciding, without explanation, that " the mo- 
 ment an additional quantity of money does come in contact with 
 commodities, the prices are proportionally raised."
 
 68 
 
 one and two pound notes. Bills, payable after date, 
 circulate amongst the masters of all persons engaged 
 in agriculture, mines, manufactures, and commerce. 
 They are scarcely used at all in payment for labour; 
 but they are, I believe, used in the country, with 
 other paper currency, to pay for every production of 
 labour i except the produce of' gardens and orchards^ 
 and the nets of fishermen on the coast. And in the 
 north of England, the amount of all other species of 
 currency, including coin, would not, in the usual course 
 of business, equal one twentieth part of the amount of 
 circulating bills *. This state of things has existed, 
 with but little variation, for thirty years past ; a fact 
 
 * Being aware how utterly unprepared most men in public life 
 are to appreciate the magnitude ef the amount of the paper cur- 
 rency of this kingdom, I have been careful in keeping all my esti- 
 mates and statements respecting the sums, which were intended to 
 convey correct information, greatly within the truth. On being 
 summoned to give evidence to the committee of the House of Lords 
 appointed in the last session, to enquire into the state of the circu- 
 lation of promissory notes under £5. in Scotland and Ireland, I 
 wrote to Mr. Roby, of the firm of Fentons and Roby, of Rochdale, 
 one of the most skilful and intelligent bankers in the country, desiring 
 him to inform me the amount of local paper, payable on demand, in 
 that neighbourhood, and the relative amount of circulating bills. He 
 answered, that he estimated the amount of the local one and two pound 
 notes, circulating within twenty miles of Rochdale, to be, on the first 
 of December, 1825, ii 590,000. and that the amount of circulating 
 bills was, as compared with Bank of England notes and coin, fifty 
 for one. (See Lords' Minutes (f Evidence, 294; 295.) I own that 
 this statment staggered me, by ttie immensely large proportion given 
 to bills; but I have since had an opportunity of ascertaining that this 
 gentleman made his statement upon an accurate examination of the 
 receipts in his own bank, for years past. 
 
 G 2
 
 84 
 
 which should be constantly borne in mind, during any 
 consideration of this subject. 
 
 If there be no means resorted to, for the purpose of 
 counteracting the effects of the blow which has been 
 struck at country bankers, and if that blow be followed 
 up by others which appear to be contemplated, many 
 of the existing establishments, in almost all depart- 
 ments of industry, will be so crippled, by reason of the 
 diminished capital being inadequate to keep the works 
 in full operation, and all the parts free from waste, in 
 a state of corresponding effectiveness, that capital will 
 no longer yield to the owners a profit ; and, at the same 
 time, it is possible that the rate of profit may be aug- 
 mented, to those who possess large and superabundant 
 capitals. You cannot destroy the power of country 
 bankers, or materially abridge their power, without 
 causing amongst the secondary traders and manufac- 
 turers, (an interest, in the aggregate, far exceeding all 
 others,) great and unprecedented ruin in every part of 
 England, and such an injury to the productive energies 
 of the country, as will never be repaired *. 
 
 * The information upon which I have grounded the opinions ex- 
 pressed in the course of this letter, has been derived principally 
 from private sources. Apart from these private sources, the state 
 of the matter is so notorious, as to render it scarcely necessary to 
 adduce any confirmation of the case from more public affairs. I 
 select, however, one or two facts, from sources not generally made 
 public. 
 
 The gross receipts for tonnage, upon the Leeds and Liverpool 
 canal, were, 
 
 £. s. d. 
 For the first half year of 1824, 49,891 10 4 
 
 Ditto ditto 1825, 51,565 10 6 
 
 Ditto ditto 1826, 44,114 15 7
 
 85 
 
 Look at the vast increase of the manufactures of our 
 rivals, even during the period of alleged over produc- 
 tion, and say if we can yet afford to part with any of 
 
 The principal article carried upon this canal is coal, one of the 
 first necessaries of life. The population of the country through 
 which the canal passes has been rapidly increasing. It is not likely, 
 therefore, that there would be any falling off in the carriage of coal 
 for domestic purposes. And this is strikingly confirmed by the 
 state of the facts. 
 
 Tons of coal carried upon this canal to Liverpool. 
 
 Tons. 
 For the first half year of 1824, 108,872. 
 
 Ditto ditto 1825, 115,558. 
 
 Ditto ditto 1826. 116,486. 
 
 While the tons of coal carried upon the same canal into York- 
 shire, during the same period, were 
 
 Tons. 
 
 For the first half year of 1824, 49,314. 
 
 Ditto ditto 1825, 55,506. 
 
 Ditto ditto 1826, 37,158. 
 
 There can be no doubt that the whole falling off in the receipts 
 for tonnage, was upon merchandise, and upon coal for the manu- 
 factories. 
 
 Similar results may, no doubt, be derived from an inquiry into 
 the receipts from all the canals and roads in the manufacturing dis- 
 tricts. The receipts of the Rochdale and Manchester canal, for the 
 year ending 1st October, 1826, have fallen off upwards of twenty 
 per cent. 
 
 The tolls of the Rochdale and Bacup turnpike road, which let 
 two years ago for £1800. were recently let for ^1300. 
 
 An old commissioner of the road from King Cross, near Halifax, 
 to Burnley, with a branch from the same road, at Todmerden to 
 Littleborough, near Rochdale, told me, that the tolls of that road 
 had increased annually, for twelve years past; and that never, till
 
 86 
 
 the means of giving effect to the operations of industry. 
 Consider the great increase of the export of materials 
 for manufactures, not of cotton and drysalteries only, 
 
 the present period, had a bad state of trade caused a decline in the 
 amount of the receipts of any year, from the amount of the preced- 
 ing year. These tolls, he said, were put up to be let, some months 
 ago, and the highest bidder offered less than £2600. although the same 
 tolls had been let, for years previous, at £S600. per annum. This 
 falling off must be wholly in the traffic of the numerous and exten-_ 
 sive manufacturers living in the valley, through which the road 
 passes, because this road is becoming a great thoroughfare. Four 
 coaches now pass along it twice a day, or fifty-six coaches per week, 
 and not one daily coach passed along it three years ago. These 
 coaches becoming more numerous, in a state of bad trade, is in some 
 degree a confirmation of a Lancashire observation, that the worse 
 the trade, the better the coaches are loaded, and the worse all other 
 public carriages; which is undoubtedly true, to a certain point, and 
 for a limited time: so many people go from home to secure debts, 
 obtain payments, force sales, and assist correspondents in difficulty. 
 
 The receipts from roads and canals afford the best public evidence 
 of the general state of the interior traffic and business of the country. 
 The receipts of the various mills to which the smaller manufactureis 
 resort, in the clothing districts of Yorkshire, with their wool, to have 
 the first processes of the woollen manufacture completed for hire, is 
 a more direct evidence of the state of that particular manufacture, 
 and of the people who are employed in it ; but these mills are not 
 public concerns. Sometimes, however, the state of the trade at 
 these mills is reported in the public papers; and I extract the fol- 
 lowing paragraph relating to it, from the Morning Chronicle of Oc- 
 tober 23, 1826, because I believe it contains a perfectly correct 
 representation. 
 
 " HuDDERSFiELD. — Our accouuts of this week are very gloomy. 
 The fancy trade is nearly extinct, and that of woollen cloth is princi- 
 pally in the hands of a few capitalists, who appear to be prospering, 
 while the lesser manufacturers are sinking into decay. The sales on 
 Tuesday last in the Cloth Hall were cQnsiderable, but the prices are
 
 87 
 
 but also of foreign sheep's wool, which was, till lately, 
 rarely exported, and never to the United States of 
 America. Ask the people of the west of England 
 whether, by destroying circulating credit, the woollen 
 manufacture, the old staple of the country, affording 
 more healthy employment than almost any other manu- 
 facturing occupation, will not be driven to other states. 
 
 Let us proceed to inquire whether the establishment 
 of branch banks, upon the principles by which they 
 are designed to work, will prevent the contemplated 
 mischief. 
 
 BRANCH BANKS OF THE BANK OF ENGLAND. 
 
 On this subject you appear to imagine that branch 
 banks will render, to the public, an adequate circulat- 
 ing medium ; and all the advantages of that system of 
 banking, which has been so deeply injured. I am of 
 a contrary opinion. Their constitution, and the prin- 
 ciples upon which they are to be conducted, are at 
 variance with the established habits and modes of 
 
 not remunerating, even at the present moderate rate of the raw ma- 
 terial. The difficulties under which the manufacturers in this neigh- 
 bourhood are labouiing, will be illustrated by the following fact: — A 
 half yearly mill feast was prepared by a mill owner at Holmfirth, one 
 day last week, in conformity with a custom which has long prevailed, 
 at which all persons who have had work done at the mill are expected 
 to attend, and to settle their half yearly account ; and although the 
 festive board is frequently crowded on these occasions, not a single 
 customer attended."
 
 88 
 
 business in all the country parts of England. There- 
 fore they cannot succeed, without changing the whole 
 practice of business, as it is at present organized and 
 managed ; and if they were successful in their endea- 
 vours to do this, it would take them a whole generation 
 to accomplish their purpose completely. 
 
 The Bank of England will lend money ; but to 
 whom, and in what manner ? This we shall see pre- 
 sently. At any rate, they refuse to borrow on interest. 
 Thus, at once, they take from the community a part of 
 the motive to accumulate capital, by increasing the dif- 
 ficulty of appropriating it; and if they succeed to the 
 destruction of country bankers, they will drive capital 
 to a distance, or to foreign states, for employment. 
 
 We have seen how the country bankers, by borrowing, 
 on interest, the surplus money of the affluent and inert, 
 and lending it to the active, where it would be rendered 
 productive ; became an important link to connect these 
 two classes in mutual interest. The country banker 
 thus became the guardian of the rich nian's property, 
 and a point of support for the industrious. The prac- 
 tice of the Bank of England is altogether different ; 
 and its branch banks will form no link, to connect, for 
 the common purposes of general prosperity, the dif- 
 ferent classes of the community. Unlike a respectable 
 country banker, who takes an active interest in the 
 concerns of his customers, and is ready to advise them 
 in all important matters, the branch banks will have 
 no fellowship or communion with individuals. Their 
 concern is with an instrument called a bill, which is 
 made by any one. They care nothing about the private 
 concerns of their customers : all that they want is a
 
 89 
 
 good looking instrument, which they put into the 
 scale with the same feeling as they weigh a guinea. 
 They will not lend, as other bankers do, for a period 
 not exactly defined ; but the only mode in which they 
 will lend, is by discounting bills not exceeding three 
 months' date — a capital receipt for creating accom- 
 modation bills, especially in those parts of the king- 
 dom where bills do not already form the great mass of 
 the circulation. It therefore appears to me, that if 
 the Bank Directors pursue their business in the branch 
 banks, according to the practice upon which they have 
 begun operations, their offices will be frequented by 
 two descriptions of customers ; vi%. by senseless misers, 
 who are too timid to use any judgment in lending their 
 own money ; and speculators, who, at any cost or any 
 hazard, will raise capital by means of bills, with which 
 they can carry on their trades. 
 
 I am speaking only of banks in the interior. In 
 Liverpool a branch bank may do well, and possibly in 
 Manchester. The habits of business ; the mode of 
 transferring goods from one to another, in great 
 masses ; the absence of country bank notes ; the im- 
 mense circulation of bills payable after date : — all 
 tend to render Liverpool, and, in a less degree, Man- 
 chester, the most eligible of all places for a branch 
 establishment of the Bank of England. Many of the 
 merchants are in the habit of sending bills to agents 
 in London, to be discounted. On tTie whole, there- 
 fore, it is reasonable to expect that business may flow 
 naturally into these channels, when they are formed. 
 At least, there appear none of those obstructions and 
 impediments to success, in Liverpool and ^lanchester.
 
 90 
 
 that one may clearly discern in almost all other 
 places * 
 
 No great mischief can result to the public, from the 
 establishing of them any where, unless encouragement 
 be given to them, hy injuring the co^mtry hanks. 
 When in existence, they may stimulate other bankers 
 to render the greatest possible benefit to themselves 
 and the public. Beyond this they will be nearly in- 
 operative; for it is certain that, if the country bankers 
 be not deprived of their effectiveness, all the best busi- 
 ness of the country will continue to pass through the 
 most respectable of the country banks. The Bank of 
 England is at the present time beat in London, and 
 wherever it has operations, by those important collec- 
 tors of the surplus money of the nation, the country 
 bankers, who offer to lend it on better terms than 
 the Bank. And this is partly owing to the mea- 
 sures which have rendered it dangerous to country 
 bankers to aid the industry of their respective neigh- 
 bourhoods in the usual manner. They will now, like 
 the Bank of England, have something in exchange for 
 their money which they can instantly convert. This 
 effect is, however, yet limited and partial. The time 
 is too short, since any necessity for change was ob- 
 served, for old practices to be generally abandoned. 
 
 * When I perceived the extensive injury which was hkely to 
 be inflicted on the system of country banks, and saw the ob- 
 structions and difficulties that would be thereby thrown into all the 
 operations of business, I became anxious for the establishment of 
 branch banks; but I imagined that they would be conducted 
 upon principles adapted to the established habits of business in 
 the country.
 
 91 
 
 The branch banks may, in some instances, he em- 
 ployed for receiving dividends on stock, and paying 
 the amount in the country; but they never can, 
 upon their present system, become connected ex- 
 tensively with the industry of the country. Even 
 at Liverpool, where the ground seems in some degree 
 to be prepared for them, if the directors continue to 
 show the same ignorance of country business, as they 
 have manifested at Gloucester, all the valuable money 
 transanctions of the place will continue to flow through 
 the private banks. Or a formidable class of money 
 agents will spring up, to lend out, on better terms, 
 some of the surplus money of the country. The bankers 
 at Liverpool may, in the end, be injured notwithstand- 
 ing, by the government directing all the vast amount 
 of taxes collected at that port, to be remitted through 
 this branch of the Bank of England. 
 
 In regarding the two systems, as affording aid to 
 industry, the great and fundamental difference, how- 
 ever, between that of the Bank of England and that 
 of the country bankers is, that the Bank looks alone 
 to an instrument for its security, and the other to an 
 individual; and this difference must operate to pro- 
 duce a prodigious change in the affairs of men in ac- 
 tive life. Adhering strictly to its principles, the Bank, 
 to he secure, can discount bills drawn only by or upon 
 persons of estahllslied and known property t but tlie 
 country bankers employ the money which is entrusted 
 to them by the rich, in lending it out to persons of 
 industry, intelligence, and good character, upon the 
 guarantee, in part, of property to he created by the 
 exercise of those qualities. Hence the intercourse
 
 92 
 
 with the public is altogether different: the one is a 
 personal intercourse, and has reference to moral cha- 
 racter, intelligence, and habits of life ; the other is an 
 intercourse by legal forms. And whoever has wit- 
 nessed the absence from trouble, the freedom from ob- 
 structions, the facilities derived from the confidence 
 of the friendly intercourse of acquaintances, and the 
 difficulties resulting from being permitted to act only 
 upon the responsibility of strict adherence to legal 
 forms, may have some estimate of the changes in 
 money matters, which are likely to take place, by set- 
 ting aside the country bank system, and establishing 
 that of the Bank of England in its stead. 
 
 The effect of this can need no illustration, to per- 
 sons practically acquainted with country business. 
 Even in respect to bills, the inconveniences of the 
 Bank of England system, resulting from attention to 
 form, will be found not unimportant. A bill, how- 
 ever good the security, that has one day to run be- 
 yond the limit, cannot be taken. The omission of a 
 single essential letter ; — an erasure ; — the bill not being 
 accepted, or not properly accepted ; — the want of inter- 
 course with other bankers, for inquiry respecting the 
 credit of persons, or to receive or transmit local 
 claims ; — the want of accommodation to the public in 
 exchanging notes; — are all impediments to business, 
 which do not belong to the country bank system. 
 Unvarying adherence to the strict letter of instruction, 
 which is in some measure unavoidable to delegated re- 
 sponsibility, must tend to drive away all respectable 
 men, accustomed to the confidence and freedom of 
 country business.
 
 93 
 
 In regard to the Bank of England, as in other cases, 
 our judgments have been led astray, by adopting, 
 without consideration, inapplicable terms. The Bank 
 of England is the bank of the state — of the town and 
 country bankers. It is also the bank of London, and 
 partially, in a very limited degree, of Liverpool. To 
 this extent its notes are current, but no fur- 
 ther. We might, therefore, as well call Smithfield 
 and Mark Lane the pastures and cornfields of Eng- 
 land, as call this the Bank of England, in regard to 
 all the interests connected with agriculture, mines, 
 manufactures, and commerce, in all other parts of 
 the country. Its notes are used nowhere but where 
 the national productions are collected and distributed. 
 
 Again, we talk of branch banks. Call them offsets from 
 the mother tree, and the term describes the thing: off- 
 sets, planted in ground unprepared, by hands unskilled in 
 the labour, in an uncongenial soil. Or, to have a choice 
 of terms, call them reservoirs, in aid of the exhausted 
 streams and channels, in seasons of drought, but at all 
 other times useless. Reservoirs, not constructed in the 
 manner of vulgar engineers, to collect from the springs 
 and surplus water of a country ; but so as to be filled 
 by pipes, by means of a mighty engine at a distance, 
 in the same way that the good people of London said 
 they would bring the sea to London, to bathe in. 
 
 Remembering, as I do, with gratitude, the prompt, 
 energetic, and wise conduct of the directors, in De- 
 cember last; feeling, in common with all reflecting 
 men, that, to the exercise of their sagacity and expe- 
 rience, at that crisis, the country owes a great part of 
 what remains, of power to conduct the vast commerce
 
 94 
 
 of Britain ; I must express my unfeigned sorrow, to 
 see the directors in a course of proceeding, and under 
 the guidance of principles, which will tend to lower 
 them from that high station, which they have hitherto 
 occupied in the minds of the intelligent and consider- 
 ate part of the community. 
 
 The small note bill is one of the favourite measures 
 of the administration. Branch banks, intended to be used 
 now, as seamen dojenders, to save us from the effects of 
 a too violent concussion, is another favourite plan. These, 
 with the aid of bills, may, in time, cause the currency to 
 become again too abundant, and then other remedies, 
 tending to contract the circulation more and more, 
 must, sooner or later, be adopted ; and I have no 
 doubt that such are now in the contemplation of the 
 government. But whether they be so or not, at the 
 present moment, is immaterial; so manifest is it 
 to my mind, that, supposing trade to revive tem- 
 porarily, what has been done will be perfectly unavail- 
 ing, to bring into practical operation the principles of 
 the administration respecting the currency, and to 
 continue them in operation ; that other measures, of 
 a far more severe character, must come at the back of 
 these. And I conclude, that the Bank is urged to 
 establish the branches, in order to make the machinery 
 work better, which is designed to effect this purpose 
 hereafter. 
 
 Seeing the effect that has been already produced 
 upon the industry of the country, by the autho- 
 ritative declaration that these principles will be first 
 brought into operation in three years; seeing that 
 thousands of respectable, diligent, and frugal men, in
 
 95 
 
 different classes of the community, who never specu- 
 lated, or deviated in any manner from the habits of 
 business, in regard to money, of their fathers or pre- 
 decessors, have been suddenly dashed into ruin, with- 
 out having the means of saving themselves, any more 
 than they would have from an earthquake : — will not 
 an inquiry be now entered upon, to ascertain what 
 may be the ultimate effects of a perseverance in this 
 course? If this be denied, and the present laws be 
 suffered to go into full effect, accompanied by such 
 ulterior measures as I am convinced must be adopted, 
 to render the present consistent and complete; no man, 
 acquainted with the means by which the industry of 
 the country is upheld, will contemplate any thing but 
 ruin to men of business, protracted or renewed misery 
 to the working classes, and the greatest possible en- 
 couragement to the industry of foreign states. 
 
 Observing, at the present time, in the efforts which 
 ministers are making with the Bank of England, to 
 provide an effectual substitute for money facilities 
 taken away, evidence of an adherence to erroneous 
 opinions ; I have endeavoured to show how futile such 
 efforts must prove, and how certainly any expectations 
 of great good, resulting within a reasonable time from 
 the establishment of branch banks, must end in com- 
 plete disappointment. If the present state of country 
 banking be examined attentively, and without preju- 
 dice, it will be evident that, under proper regulations, 
 that system would continue to afford succour and ad- 
 vantages to the public, which the branch banks of 
 England can never render, by the operations of the
 
 96 
 
 principles upon which they are established : the con- 
 trast, in favour of the old system, is, to my understand- 
 ing, extreme. 
 
 THE ALLEGED EVIL OF PAPER MONEY, AND THE 
 TENDENCY OF THE LAWS PASSED IN 1826, TO 
 REGULATE THE CURRENCY OF ENGLAND, BRIEFLY 
 CONSIDERED. 
 
 Without going into a detailed consideration of the 
 subject, I should briefly define that system of currency 
 to be the best, which facilitated the means of bringing 
 forth the greatest amount of valuable productions to a 
 state ; and which continued to do so for ages. For 
 though this, at the first view, may be considered an 
 imperfect definition, it is, perhaps, less objectionable 
 than it appears. It comprises the consideration of 
 commercial intercourse between nations, and in that, 
 the subject of the exchanges ; because if there be, on 
 the long run, any obstructions to the free disposal of 
 commodities, there will be corresponding impediments 
 to their being produced. It takes in that great moral 
 question of a paper currency encouraging a spirit of 
 gambling speculation in the people, and introducing 
 habits opposed to the regular pursuits of industry ; 
 because whatever tends to bring forth the greatest 
 mass of productions, and continues to do so, during 
 succeeding generations, must also be the means of 
 affording the greatest quantity of employment to the 
 people ; and nothing tends so much to diffuse moral 
 habits and intelligence, as constant employment and
 
 97 
 
 the regular pursuits of industry. I shall presently 
 apply this rule, as a test, to ascertain the effects of a 
 paper currency in Great Britain. But let us first look 
 at the condition of some of those states where paper 
 money has much prevailed, and where it has been sub- 
 ject to the greatest fluctuations in its value, compared 
 with metallic mioney, or commodities. If the con- 
 sequences of occasional depreciation, to the extent that 
 we have witnessed it during the last twelve years, were 
 so injurious and alarming as they are described to be, 
 we should expect that a far greater depreciation in 
 other states, than any known in England, would be 
 followed by great national calamities ; yet, on examina- 
 tion, we shall not find that, even where the issuing of 
 paper money has been most abused, it has produced 
 those disastrous consequences to the state which we 
 are instructed to apprehend, from the slightest devi- 
 ation from rectitude in the practice of those who ma- 
 nage it in England. The consideration is more ab- 
 stract than practical, and sliall be dwelt upon only fgr 
 a moment. 
 
 In Russia, paper money is, or was recently, worth just 
 about one fourth the value of metallic. This, no doubt, 
 produced some embarrassment ; and for want of pro- 
 per regulation, some injustice, by the government com- 
 pelling its servants, military and civil, to receive their 
 pay in paper money ; but we have the authority of in- 
 telligent merchants, connected with Russia, for the 
 fact, that it caused, comparatively, no embarrassment 
 or difficulty in the mercantile and trading operations of 
 the country. 
 
 H
 
 98 
 
 In the United States of America, the system of paper 
 currency has been more abused, during the present cen- 
 tury, than in any other country. Every state through- 
 out the union had a circulating medium, of a different 
 value from the circulating medium of the adjacent 
 parts of the union. Merchants and traders have col- 
 lected tlieir debts in the circulating currency of every 
 state, valuing their receipts at all prices, from 4*. in 
 the pound to 20s. in the pound, according as the paper 
 currency in each state deviated in value from metallic 
 currency. One can hardly imagine a state of currency 
 more entangled with difficulty than this ; and we have 
 abundant evidence of the individual distress produced 
 by the restoration of the currency from this state to a 
 better, in the embarrassment and losses of men in 
 every rank of life, from the highest magistrate and 
 largest land proprietors, to the lowest cultivators ; and 
 from the merchants of the most extensive business, to 
 the huckster in the smallest store. Yet, even in 
 America, there being no great national debt, no very 
 extended money engagements connected with manu- 
 factures and commerce, or the rent of land ; and where, 
 from the cheapness of land and the high prices of la- 
 bour, industry would soon effect savings of capital; — 
 we can discover no great national evils resulting from 
 this, the grossest abuse of the paper system. 
 
 Russia and America are placed in circumstances 
 somewhat similar. In both countries there is a vast 
 extent of land, in proportion to the number of the in- 
 habitants. Population increases in both, with great 
 rapidity. They are both, though not in relative pro- 
 portions, commercial states. Both have been, within
 
 99 
 
 the last fourteen years, subject to the ravages of war, 
 carried on in the interior of their respective countries ; 
 and both their capitals have been in the possession of 
 their enemies. They have both had a greatly depre- 
 ciated paper currency. Yet those countries have 
 regularly advanced, with slight interruptions, in a 
 continued course of prosperity ; and the comforts 
 and conveniences of life have become more and 
 more diffused among the people. Their foreign com- 
 merce has (saving occasional interruptions) been con- 
 tinued in a prosperous condition, and the funds of 
 the American and Russian governments have always 
 met with ready purchasers in foreign states. So power- 
 ful have been the causes of their advancement in 
 prosperity, that in neither country, after this short 
 lapse of time, is there remaining scarcely a vestige of 
 the ravages of war. In America, the effects of war were 
 not felt twelve months after the peace ; and as re- 
 gards the power of Russia, to renovate and advance, 
 look at the present state of her provinces, cities, and 
 capitals : you may walk for miles and miles, over a 
 new and magnificent city, and ask at every turn, 
 Where are the ruins of old JMoscow ? 
 
 Russia and America are not cited as examples in 
 this matter; but merely to suggest, that those who 
 are determined to look at this subject in one point 
 of view only, may overrate the apprehended evil; and 
 that the habit of so overrating it, may cause proceed- 
 ings of a destructive tendency. 
 
 No man will say, that there was any chance what- 
 ever, under any circumstances, of our currency be- 
 coming ruinously depreciated ; or, indeed, that there 
 
 II 2
 
 100 
 
 was any probability of its becoming so much depreci- 
 ated, as it was at several periods between 1800 and 
 181 9. The utmost evil, therefore, that could be con- 
 templated, was not of an appalling magnitude; and I 
 think it extremely unwise, upon every deviation from 
 right practice in the banking and money affairs of a 
 country, to attempt, by new laws, to enforce a better 
 state of things. If the subject be not well understood, 
 before the new laws are enacted, they will fail to ac- 
 complish the object designed, and they will immedi- 
 ately interrupt the operations of industry, and, in our 
 circumstances, permanently injure the prosperity of the 
 country. 
 
 Paper currency is essential to Great Britain. It 
 cannot be had, without a liability to occasional depre- 
 ciation. With the state of the law as it was in De- 
 cember last, the good sense of the people, and the 
 increased knowledge and experience of the ma- 
 nagers and regulators of our money affairs, would 
 effectually prevent an excess again occurring in the 
 circulation, equal in degree to what we have several 
 times experienced, during the last twenty years. The 
 matter, therefore, wanted little but the occasional su- 
 pervision and correction of the government, to render 
 our currency in future, as nearly as that desirable 
 object can be attained, of one uniform value. 
 
 After the experience of the year 1825, there could 
 be no reason to apprehend that mischievous conse- 
 quences would result from the bank note circulation of 
 Scotland and England, where the principles and ma- 
 nagement are in general correct and good. The pru- 
 dent and reputable bankers of England, have conducted
 
 101 
 
 their banking concerns far more beneficially, for the 
 the public, than those of Scotland. But in the de- 
 partment of their management connected with cash 
 note circulation, I consider them to be nearly equal ; 
 and as the Scotch bankers have continued the issuing 
 of small notes so much longer than the English, I take 
 an illustration from the practice of Scotland. 
 
 The Scotch bankers had been in the habit of issu- 
 ing notes to so low a denomination as a pound ster- 
 ling, for fifty years before Dr. Smith wrote his cele- 
 brated book. In the chapter on money, he bears am- 
 ple testimony to the value of a paper currency: "But 
 though the circulating gold and silver of Scotland have 
 suffered so great a diminution during this period, its 
 real riches and prosperity do not appear to have suf- 
 fered any. Its agriculture, manufactures, and trade, 
 on the contrary, the annual produce of its land and 
 labour, have evidently been augmented." If, there- 
 fore. Dr. Smith's opinion of the salutary effect of the 
 Scotch system of banking, which includes the one pound 
 note circulation, be admitted as proof of the benefit 
 to the public, during the first fifty years of its exer- 
 cise; we have only to ascertain whether the same re- 
 sults have attended its progress, during the succeeding 
 fifty years, to establish the position, that a paper cur- 
 rency, including the circulation of one pound notes, 
 has been proved to be beneficial to a state, and that 
 that proof rests on the uniform experience of one hun- 
 dred years. During the last session of parliament, the 
 unanimous evidence of all the statists and economists 
 of Scotland was collected, to prove that the banking 
 system, and especially that part of it consisting of the
 
 102 
 
 small note circulation, had been the main spring of 
 Scotch industry and prosperity ; and that, if it were 
 either destroyed or injured, a great part of the opera- 
 tions of industry would stop. The committees of par- 
 liament appointed to investigate the matter, admitted 
 the proof, by recommending that no proceeding should 
 go on, in regard to Scotland ; the state of the case 
 being, that, previous to investigation, the government 
 had resolved upon a total change of the system, by 
 the destruction of the small note circulation. 
 
 It is, therefore, I may assume, admitted, after a la- 
 borious and protracted investigation into its merits, by 
 many of the ablest members of both houses of par- 
 liament, that, under proper management, the small 
 note circulation, not taking in any amount lower than 
 a pound sterling, is good for a country; and the proof 
 of its benefits rests on the imiform experience of 
 a century. 
 
 It would be a waste of time to dwell upon the dis- 
 tinction that has been made, between a poor country, 
 like Scotland, requiring a paper currency of this kind, 
 more than a rich country. Whether England be, as 
 compared to Scotland, rich or poor, is not the proper 
 question; but whether England have been accustomed 
 to the small note circulation, and whether it can be 
 withdrawn without greatly diminishing her produc- 
 tions, and permanently injuring her prosperity. I 
 think that I have shown, that no part of the bank 
 note circulation of England can, in our present cir- 
 cumstances, be destroyed, without the greatest hazard, 
 and /producing the most mischievous effects, upon the 
 operations of industry in all departments of manufac-
 
 lOfJ 
 
 tures and trade: that a measure, deeply affeeling all 
 the great interests of the country, should have been 
 resolved on, without any inquiry, and without any 
 means whatever of appreciating its effects, will here- 
 after appear one of the most extraordinary circum- 
 stances recorded in the history of legislation. 
 
 Adhering strictly to the principle of having, under 
 all circumstances, an abundant paper currency, I am 
 still one of those who desire to see a fair experiment 
 made of the possibility of sustaining a paper circulation 
 convertible into cash, and that too at the present stand- 
 ard : firstly, because there is no chance whatever, in 
 the present state of public opinion on this subject, of 
 obtaining a candid consideration of any proposition, but 
 one founded upon this basis ; and secondly, because I 
 think no man can have implicit confidence in deciding, 
 that the consequences which might result from the 
 adoption of any other proposition now, would, on the 
 whole, produce a less portion of evil. It is obvious 
 that some injustice attends this, and the practicability of 
 enforcing the rule at all times, and under all circum- 
 stances, may be doubted; but it would operate as some 
 check against excess, by warning the issuers of the con- 
 sequences to be apprehended from imprudent issues. 
 It may, under judicious regulation and management, 
 be a better mode than any other that can be devised, 
 of keeping the circulation as nearly as possible of one 
 uniform value. 
 
 It is plain that, as the Bank of England has been 
 alone resorted to for gold, when it was wanted for ex- 
 portation, the operations of the Bank have been the 
 sole palpable indication of an excess of circulation.
 
 104 
 
 This state of things ought .not to remain. The Bank 
 of England has less power to prevent the first ad- 
 vances towards an excess, than the country bankers ; 
 and the government should take every means to give 
 notice of the approach of danger, to all persons who 
 have power to correct the evil. We place sentinels, to 
 warn us of the hostile advances of our enemies ; and 
 surely, if the excess of paper circulation be an evil of 
 such magnitude as we have a right, from the parlia- 
 mentary proceedings upon it, to conclude that it is, it 
 would be worth while to endeavour to counteract the 
 mischief, by a periodical publication, in the Gazette, 
 of exports and imports, the custom house and other 
 entries, which indicate the internal circulation of com- 
 modities, which generates the circulation of credit, and 
 augments paper currency. This should be accompa- 
 nied by an account of all the stamps issued, the Bank 
 of England issues, the state of exchanges, the amount 
 of coin or bullion imported or exported, the amount 
 paid each day at the clearing house, at the London 
 bankers, &c. I believe no one of the parties concerned 
 would object to this publicity ; and I entertain a de- 
 cided opinion, that this practice alone, after the expe- 
 rience of the year 1825, would have been found suf- 
 ficient to prevent any excess, for at least the term of 
 one generation of man. 
 
 To those who urge the injustice of paying, in a 
 currency of higher value, the interest of a debt bor- 
 rowed in one of a lower value, I have nothing to 
 answer ; except that I believe the circulating medium 
 of the whole world to be more lowered by the abun- 
 dant paper circulation of Britain, than any one is
 
 W5 
 
 aware of. Nor, to my mind, is the usual observation, 
 that if this were the consequence of our abundant 
 paper currency, we should witness a much greater in- 
 crease in the prices of the principal productions of other 
 states than has taken place, a sufficient answer. It 
 appears to me that all writers upon the currency, and 
 especially those who take the side of the bullionists, 
 ascribe too much effect upon prices to the circulating 
 medium, and too little to that produced by a quick cir- 
 culation of commodities. The temporary influence upon 
 prices of a quick circulation of commodities, by the prac- 
 tice of dealing; where the number and condition of the 
 roads, canals, and the coast navigation, afford such facili- 
 ties to its exercise, is, in a small, ricli, and populous 
 country like Britain, prodigious. But not so in a 
 country like France, where similar facilities for the 
 rapid transmission of commodities do not exist. 
 
 Besides, we have never had an abundant paper cur- 
 rency, without frequently repeated checks to its in- 
 fluence by violent contraction. And whoever supposes 
 that an augmentation of the currency is immediately, 
 or very soon after, followed by any material increase of 
 prices, is, I think, under a mistake. In Great Britain 
 and the United States of America, some perceptible 
 influence upon prices may be discovered, at no distant 
 period after such augmentation. But so far from the 
 same effect occurring in France, " the moment an 
 additional quantity of money *" begins to circulate, I 
 am of opinion that years would elapse before any per- 
 ceptible change would take place, generally, in the 
 
 * Sec note, p. 7y.
 
 106 
 
 provinces, unless the depreciation were excessive, and 
 exceeded ten per cent. 
 
 We have been led astray by the application of an 
 undisputed abstract truth — that the quantity of money 
 is the measure of the prices of a given portion of com- 
 modities, to the actual affairs of life ; — without con- 
 sidering the influence of time — of habit, and of cir- 
 cumstances, in its practical operation. 
 
 The reason why a contraction of the currency has 
 an influence so much greater and more immediate, in 
 lowering prices, than an extension of the currency has in 
 raising prices, is, that except for the supply of pressing 
 demands for immediate consumption, contraction puts 
 almost an entire stop to the practice of dealing, either 
 on book credit or circulating credit. 
 
 It is clear, from the stagnation in business, and the 
 extensive failures in all commercial states that have 
 intercourse with us, which take place at all times when 
 we adopt measures to contract our currency, that the 
 state of our paper circulation has a very great effect 
 upon the circulating medium of all other states. 
 By withdrawing an amount of paper currency from 
 circulation in England, we at the same time reduce the 
 credit circulation of the whole commercial world, and 
 simultaneously create a general demand for metallic 
 money. 
 
 If, during the commercial ascendency of Genoa and 
 Venice, it could be a common complaint that all the 
 gold of Europe was drawn to Italy, how much of the 
 gold of the world would now be drawn to England, if 
 no circulation but metallic were permitted ? The 
 commerce of Liverpool alone, (positively, but not rela-
 
 107 
 
 tively,) far surpasses the commerce of the Italian states, 
 taken at the time of its greatest magnitude. Liver- 
 pool, as one point of collecting and distributing com- 
 modities, indicates the relative amount of moveable 
 property possessed by Britain. That commercial state 
 which possesses the greatest quantity of commodities 
 desirable to all men in civilized life, would, if metallic 
 circulation alone were enforced, soon acquire the greatest 
 portion of the precious metals. No man can say what 
 portion, in that case, would belong to Great Britain. I 
 have no means at hand, of knowing the amount of the 
 importation of gold and silver, during the eight months 
 from December to August last. The knowledge of 
 that amount would assist the speculation, by indicat- 
 ing, imperfectly, what would have been the effect of 
 pressing the contracting screw. with redoubled force. 
 
 To consider this subject, without reflecting upon the 
 possible consequences of our proceedings in rival manu- 
 facturing and commercial states, vi^ould be to conduct 
 the inquiry in a confined and partial manner. By 
 withdrawing, suddenly, a great amount of metallic 
 currency from those states, we may cause, in them, so 
 much inconvenience, that they, as well as the Ame- 
 ricans, may be driven, for relief, to adopt the British 
 internal system of banking ; and an engine, which we 
 have found to give great commercial and political 
 power, may be turned against us. 
 
 Imagine the diminished state of paper circulation 
 which existed in England on the 1st Jul}^ 1826, to 
 remain in that state for six months ; and suppose that 
 then, a renewed panic, operating with increased force, 
 seized the public : — that this again produced, as the
 
 108 
 
 former panic appeared to produce, a conviction upon 
 the minds of ministers, that new measures of prohi- 
 bition and contraction of paper money must be re- 
 sorted to ; to restore what is termed a healthy state of 
 the circulating medium. Suppose these concurrent 
 operations to drive out of circulation all internal bills 
 and bankers' notes whatever; and that proceedings are 
 at the same time going on, in all other commercial 
 states, to the same end. We should be reduced, 
 solely, to the circulation of coin and foreign bills of 
 exchange. Suppose this state to continue long enough 
 to produce its natural results. What, in that case, 
 would be the effect upon the prices of all public secu- 
 rities — all fixed and moveable property, throughout the 
 world? We may form an imperfect notion of the de- 
 gree of reduction of prices, by knowing the effect of 
 increasing prices, by the first introduction of the pro- 
 duce of the Spanish mines into circulation : a circum- 
 stance in history, which would throw some faint light 
 upon the subject. This is supposing an impossibility. 
 I deny, however, that to state the supposition is ridi- 
 culous ; because no man can tell how near to this state 
 of things we may be brought, by the continued preva- 
 lence of misapprehension and error, in regard to the 
 state of the currency, and the obvious absence of all 
 power to appreciate the manner in which any intend- 
 ed correctional measures may work. If we have 
 power, by forcing a contraction of the circulating me- 
 dium in this country, to bring about portentous results 
 upon all prices and upon all commercial affairs, our 
 power must also be great to sustain the circulating me- 
 dium of the commercial world in a state of comparative
 
 109 
 
 depreciation ; and by this means to attain, as nearly as 
 we can, in the complex and difficult circumstances in 
 which we are placed, justice to the British public. 
 
 So long as paper currency forms any material part 
 of the circulating medium of this country, there will be 
 periods of extension and contraction of the circulating 
 medium, by the natural force of commercial operations. 
 These excesses must be counteracted, by every wise 
 expedient that can be devised by the government. 
 Our policy, however, has been the opposite of this. 
 When manufacturing and commercial affairs were 
 going into a dangerous state of excess, we heard 
 nothing but acclamations of approbation from all guides 
 and instructors of public opinion ; and we were told, 
 from high authority, to fear nought, for that our 
 prosperity was built upon the most solid founda- 
 tation *. No wonder that the point was passed, where 
 wisdom would have said, " Stop, and retrace, gradually 
 and carefully, your steps." The true policy would be, 
 by measures of precaution at the time of the first ad- 
 vances in error, to prevent a dangerous excess, which 
 I am convinced might have been accomplished, with 
 the state of the law as it existed in 1825. And then, 
 when the rapid contraction of the currency begins, 
 which will always follow excess, (and the recurrence 
 of which no measure can entirely prevent,) to sustain 
 
 * There was certainly a very distinct and strong warning given by 
 Lord Liverpool, in allusion to the extravagant speculations in shares; 
 but it did not go far enough. It was confined, I believe, to a single 
 speech.
 
 110 
 
 and uphold credit should be the policy, and not to 
 destroy. 
 
 It will be said that the opposite policy was adopted 
 in the last session, for the purpose of preventing specu- 
 lation in future, and to regulate the exchanges. In 
 the event of a return of prosperity, we have seen that 
 the measures resorted to will have no power whatever 
 to prevent speculation ; and as regards the exchanges, 
 from the view that I take, it appears a most defective 
 mode of accomplishing the intended purpose, and con- 
 sequently affords but little chance of rendering justice 
 to the principles which dictated the adoption of the 
 laws. 
 
 Whenever the exchanges become unfavourable, the 
 drain for gold is from the Bank of England, and from 
 the Bank of England alone. Would it not be natural 
 to keep the supply as near as possible to the place 
 from whence the drain begins to exhaust, and to keep 
 it in a perfect and entire state, in order that the equi- 
 librium may be restored promptly and efficiently ? If 
 we want to keep a body of water, for the supply of 
 channels liable to occasional exhaustion, we do not 
 scatter it about in a thousand distinct portions, to 
 evaporate ; and which may, or may not, have commu- 
 nications open with the main reservoir ; but we keep 
 it in one mass, to be always ready for our purpose. 
 If, as it is contended, six or eight millions of gold, be- 
 yond the amount which the Bank of England will for 
 its own security possess or command, would be suffi- 
 cient to attain the desired object, why could not the 
 amount be kept at the public expense in the Mint, to 
 be increased or decreased, according as the govern-
 
 Ill 
 
 ment saw the necessity of bringing into operation pre- 
 cautionary measures of regulation, in regard to the cur- 
 rency. Although we have cash payments, yet, in no cases, 
 except during periods of panic, are payments demanded 
 in cash. The least reflection upon the circumstances 
 of this country, would, it seems to me, convince any 
 man of the unlikelihood of our being able to collect 
 gold when it may be wanted, if it be dispersed about 
 the country, in the room of one and two pound notes. 
 The country is filled, in a manner unlike all other 
 states in the world, with commodities that can in a 
 moment be exchanged for gold. The people are liable 
 to panic, and are in a peculiar manner prone to hoard, 
 in cases of alarm. We have recently experienced one 
 panic, and felt its terrible effects. The next panic may 
 be of a worse character than the last ; for there were 
 none of the excitinsj and agffravatinff circumstances 
 last winter, that may attend the next period of panic. 
 Consider how mutiny, famine, domestic insurrections, 
 war, or the threat and expectation of invasion, would 
 increase the evil. 
 
 Gold is not wanted in the country, except for the 
 bankers to reserve against occasional demands for cash. 
 Good and secu?'e paper money would be universally 
 preferred in all the country parts of the kingdom, be- 
 cause it is more portable, attended with less trouble 
 and inconvenience, is infinitely less liable to robbery *, 
 and may be traced and recovered if lost. 
 
 * I know a banker who lost, out of coaches, some years ago, two 
 parcels, at separate times, containing £20,000. in cash notes, and 
 gold : by great exertions he recovered all the notes, but he lost all 
 the gold, amounting to several thuusaml pounds.
 
 112 
 
 Country bankers and all traders ought to be pro- 
 tected by a law, to stay legal proceedings, for a given 
 time, whenever they tendered Bank of England notes 
 for payment of any demand above the value of four 
 pounds. 
 
 In the condition in which we are placed, we should 
 be perfectly satisfied, so long as the state bank can 
 always give gold at the instant of its being demanded ; 
 and this, I think, is the only mode by which we can, 
 under all circumstances that may happen, support 
 cash payments, for a series of years. This would 
 bring the state of the currency under the immediate 
 supervision and control of the government. There is 
 no necessary and inevitable connexion between a pa- 
 per currency and an unfavourable state of the ex- 
 changes. For years subsequent to the suspension 
 of cash payments, in 1797, the value of our cur- 
 rency was high, and the exchanges favourable to 
 England. The circulating medium is more likely to 
 be kept equable by precaution, watchfulness, and pub- 
 licity, than by the plans now adopted, and those which 
 are, to he consistent^ hereafter to be enacted and put 
 in force by the government. These [»lans, indeed, 
 appear to me to be just as wise, to effect their purpose, 
 as it would be to expect that, by increasing the penal- 
 ties of smuggling, and removing all the means of pre- 
 vention, by watching and searching; we should have 
 the best chance of stopping the commission of the 
 crime. 
 
 It would be very unbecoming, in one who so much 
 deprecates the effects of undue confidence on this sub- 
 ject, to arrogate the possession of any peculiar know-
 
 113 
 
 ledge of the more abstract part of the currency 
 question. My claim for attention rests upon the 
 knowledge which I possess of the necessities of the 
 productive classes, in regard to money, and the means 
 of supplying those necessities. I might, indeed, with- 
 out great presumption ask, where is the man who 
 thoroughly understands, in theory and practice, every 
 part of our extended and complicated money system. 
 It is obvious that errors and contradictions may be 
 detected, in almost all writers on the subject. 
 
 Dr. Price, in 1776, asserted, that " any events that 
 should produce a general panic, however groundless, 
 would at once annihilate it, (ixvper circulation y) and 
 leave us without any other medium of traffic than 
 a quantity of specie, scarcely equal, in amount, to the 
 money now drawn from the public by the taxes. It 
 would, therefore, become impossible to pay the taxes. 
 The revenue would fail ; near one hundred and forty 
 millions of property would be destroyed; the whole 
 frame of government would fall to pieces ; and a state 
 of nature would take place. What a dreadful situ- ■ 
 ation !" After indulging in the most dismal fore- 
 bodings, from the state of our paper currency, " I 
 shudder," he says, " at the prospect : a kingdom on 
 an edge so perilous, should think of nothing but a 
 retreat." We disregard the awful warning, however, 
 and advance, without thought or apprehension, amidst 
 these appalling dangers; and we are told by Mr. 
 Mushet, just fifty years afterwards, when our annual 
 expenditure and national debt are more than quadru- 
 pled, and our paper currency increased tenfold, that " it 
 
 I
 
 114 
 
 is of no consequence, whether the currency is all paper, 
 or partly paper and metallic, or entirely metallic, as far 
 as the payment of rent and taxes are concerned." Thus 
 we see that the most laborious and abstruse inquirers 
 know little of the practical operation of the system ; 
 and we know also, that the most popular and confident 
 writers are utterly unable to estimate the money 
 resources and power of this country, and have ren- 
 dered manifest their ignorance of the manner in which 
 the currency is connected with industry : they know 
 absolutely nothing of the amount of different portions 
 of the paper currency, and the various operations to 
 which each part is giving motion. Witnessing these, 
 is calculated to inspire any thing but dogmatism in our 
 opinions, or confidence in the wisdom of proceedings 
 hastily undertaken *. All that I aim at accomplishing. 
 
 * One of the objects which I desire most to attain in this letter, 
 is to lessen that spirit of confidence and dogmatism which is ob- 
 vious in most persons who have written upon subjects comprised in 
 the science of political economy ; and peculiarly manifested in dis- 
 quisitions upon banking and the currency : — a spirit which, I think, 
 tends greatly to bring into popular disrepute the study of one of the 
 most valuable departments of knowledge. In no public man has this 
 spirit been more conspicuous than it was in the late Mr. Ricardo ; 
 and all who have seen, and can duly appreciate, the ruinous effects of 
 erroneous legislation respecting the currency, have a right to censure 
 this dangerous propensity ; because the unprecedented suffering which 
 has resulted from that legislation may fairly be ascribed, in part, to 
 the dogmatism with which he expounded his opinions upon this sub- 
 ject, so imperfectly understood by many of those who had to decide 
 upon it as legislators. This gentleman's doctrine of the effects upon 
 prices being no more than four per cent, by raising the value of the 
 circulating medium from the state of depreciation which it was in
 
 115 
 
 by the few cursory observations on the more abstract 
 part of the subject, is to suggest that, until the bene- 
 ficial operation of any changes can be made clear, it 
 would be wise to leave the people to work themselves 
 out of a condition of difficulty, without any direct 
 legal interference on the part of the government. But 
 for an ill timed proceeding, adopted without knowing 
 its tendency and effects, I am satisfied that any judicious 
 correctional measure respecting the currency might, in a 
 few years, have been put in force, without producing in- 
 jurious consequences. The period of excessive derange- 
 ment, arising from the vicious practice of banking, from 
 1800 to 1815, passed over, apparently without any pub- 
 lic man knowing, except as to the amount of deprecia- 
 tion, in what manner we were in an unhealthy state. 
 Ever since 1815, we have been recovering in England, 
 gradually, but safely. Not only have banking operations 
 been conducted with more pi'udence ; but credits, in al- 
 
 prcvioiis to 1819, to the legal standard, was truly fitted only to a 
 bullion broker, who had never made a single observation upon the af- 
 fairs of mankind but between St. Mary Axe and the Royal Exchange. 
 
 Conscious mental superiority in one who in early life has had but a 
 contracted range of observation, is apt to create an unjustifiable con- 
 tempt for those who derive knowledge purely from practical experi- 
 ence. Nothing, however, is pregnant with more danger in men of 
 theoretic research than this spirit ; especially when it is united with an 
 obstinate belief in self-infallibility. Mr. Ricardo was a memorable in- 
 stance of an able man, who would refuse all knowledge but that which 
 agreed perfectly with the abstract principles acquired in the closet. 
 A familiar illustration of the danger of relying on the infallibility of 
 theoretical conclusions may be adduced. Of all the patents that are 
 taken out for inventions, not one in ten is incorrect in principle : 
 not one in fifty succeeds in practice. 
 
 I 2
 
 116 
 
 most all commerce connected with manufactures, have 
 also been greatly curtailed. Cash transactions have mul- 
 tiplied, and short credits have been forced upon all pur- 
 chasers. 
 
 From the regular and gradually increasing curtail- 
 ment of all credits, with an inconsiderable exception, 
 and the necessity that all tradesmen in wholesale busi- 
 nesses felt of bringing their traffic, in respect to pay- 
 ments, nearer and nearer to the state of cash transac- 
 tions, I entertain not the smallest doubt that a few more 
 years in this course of proceeding would have brought 
 us entirely out of the vicious practice, in regard to credit 
 and banking, which we had adopted and exercised up 
 to the year 1815; and this effect would have been pro- 
 duced by the best means, the progressive accumulations 
 of capital arising from industry. 
 
 If the landowners would take the trouble to become 
 acquainted with their true interest, they would, I think, 
 be zealous advocates for the country banking system ; 
 and would either try to enforce the suggestions which 
 I shall venture to propose, or recommend others more 
 likely to give to that system all possible effectiveness 
 and perfection. Whatever may be said respecting the 
 departments of mines, manufactures, and commerce 
 being supplied profusely with currency ; few men will 
 be hardy enough to assert that the country has sus- 
 tained injury by too much capital being employed in 
 agriculture. The great profits derived by bankers 
 frqm bills, and the quick and immense circulation result- 
 ing from dealing and credit, have naturally disinclined 
 the country bankers from lending money to farmers 
 who can make scarcely any profitable return with them. 
 Better, they think, to discount long dated bills, than ta
 
 117 
 
 lend to farmers upon the best security, but with uncer- 
 tainty as to the time of repayment. How can the most 
 productive system of cultivation be adopted, and the best 
 management persevered in, without sufficient capital ? 
 
 Let the country gentlemen examine this subject, 
 and they will find that the branch bank system has a 
 direct tendency to withdraw capital from agriculture ; 
 and that every means that we take to establish that 
 system, accompanied by corresponding efforts to de- 
 stroy that of country banking, will tend to bring the 
 landowners of England nearer and nearer to the con- 
 dition of those of Poland or Germany. 
 
 SUMMARY— REGULATIONS RESPECTING THE 
 CURRENCY SUGGESTED— CONCLUSION. 
 
 To be brief, is as requisite as to be clear. If I have 
 failed in adhering to the rule, it is not because I do 
 not know its importance. The few remaining observ- 
 ations will be soon terminated. 
 
 The purport of the foregoing, is to produce a con- 
 viction, that the question of the currency has never 
 been thoroughly understood, because it has never un- 
 dergone a proper investigation ; if the true object of 
 an investigation be the direct effects of our paper cur- 
 rency upon British industry and its productions, and 
 its indirect effect upon foreign commerce, and the in- 
 dustry and productions of rival states. In this com-* 
 prehensive sense, all the inquiries to which this subject
 
 118 
 
 has given birth, are no more a just examination of the 
 state of the currency, than a survey of the county of 
 Middlesex, would be all that could be requisite to 
 render a true statistical representation of Great Bri- 
 tain. The consequence of enacting laws in this state 
 of knowledge is, that those laws cannot produce the 
 effect designed ; but they will produce other effects, 
 most injurious to the national prosperity. Hence, that 
 a deliberate re-examination of the state of the circu- 
 lating medium, and of the laws intended to regulate it, 
 must take place. 
 
 I have endeavoured to show, that the measures of 
 the government, respecting the currency, are had both 
 in principle arid practice. Corn and money are as 
 necessary to sustain industry, as air and water are to 
 sustain life. They ought, therefore, to be had freely, 
 and in abundance, but not in excess. If, however, the 
 principle be good, of having a curtailed and greatly 
 restricted currency, the measures adopted to give it 
 effect in practice, have ultimately a contrary tendency. 
 The operation of these measures will cripple the in- 
 dustrious, by taking away a part of their little indis- 
 pensable portion ; but they may greatly encourage the 
 speculative to shift from hand to hand the products of 
 industry, without any legitimate object connected with 
 production or consumption. 
 
 The Bank of England notes are put forth in great 
 issues, upon bills discounted. The ready mode to 
 create bills, is to deal in commodities. Manufacturing 
 is a slow process : it has not the same tendency to cre- 
 ate bills as dealing. The country bankers put forth 
 their small notes in minute portions, divided, almost
 
 119 
 
 infinitely, amongst manufacturers and traders ; and 
 bills come into the hands of manufacturers, strictly- 
 speaking, only when the thing made is ready for 
 sale. To encourage dealing in commodities, there- 
 fore, seems the policy of the government; to trans- 
 fer productions from hand to hand, and at every 
 tranfer to create a bill, which the great bank will 
 discount. To encourage production, by permitting 
 the secondary manufacturers and traders to have that 
 currency to aid the operations of industry, which alone 
 they can obtain, would be to counteract sound princi- 
 ples, in regard to the circulating mediuni. No man 
 of experience, that reflects upon the matter, however, 
 will deny, that to put down country banks, and esta- 
 blish branch banks upon their present principles, is the 
 best possible contrivance that human ingenuity can de- 
 vise for creating speculation — forming habits opposed 
 to the steady pursuits of industry, and obstructing the 
 energies of production. 
 
 It is true, nevertheless, that the powerful influence 
 of dealing and speculation will, at intervals, give in- 
 creased action to industry ; but that increased action 
 will be fitful, and not regular. 
 
 For the alleged reason of preventing speculation, 
 we are aiming to destroy a system which is identified 
 with industry, and which of itself has no tendency 
 to promote speculation ; and we purpose, in its stead, 
 to erect a system which, to exist, must encourage 
 speculation ; because to deal in^ and not to create^ 
 productions, is the ruling principle of its action. The 
 system we would annihilate, is that by which money 
 is received from the inert, who wish to retire from
 
 120 
 
 active life, to be lent to those who desire to be btisily 
 employed in the field of industry. The Bank of Eng- 
 land will not borrow, neither will it lend, excepting 
 by discounting a bill, which, in a great proportion of 
 cases, has no connexion whatever with industry. 
 
 The more this subject is examined, the more evident 
 will the contradiction of principle, by practice, be 
 rendered. We wish to prevent excess in circulation, 
 and to regulate the exchanges ; and we try to accom- 
 plish the purpose, first, by destroying small notes, 
 which have very little influence upon either ; and se- 
 condly, hy establishmg branch hanJcs, which must 
 create hills, because in bills only will they deal: while 
 it is manifest that bills are the soul of speculation— 
 the main spring of excess in the machine of circula- 
 tion ; and that to them, and them alone, all the depre- 
 ciations, and all the derangements in the currency, 
 during the last twenty -five years, may be traced. 
 
 Then, on the other hand, how can it be expected 
 that, by distributing six or eight millions of gold in 
 the country, the exchanges will be kept right ? The 
 gold will probably be required to regulate the ex- 
 changes, during a period of alarm. Looking at the 
 moveable property in this kingdom, can we doubt the 
 power of the people to seize all the gold for the pur- 
 pose of hoarding ; and if the power be manifest, is the 
 inclination to hoard, when alarm takes possession of the 
 minds of people in all ranks, less obvious ? When the full, 
 immediate effect of the panic had driven in nearly all 
 the small notes, there was, except in Manchester, very 
 little, if any, more gold in general circulation in the 
 manufacturing parts of the country. Up to December
 
 121 
 
 last, the circulation of small notes aided the efforts of 
 the Bank to restore the equilibrium, by keeping all the 
 gold in and near to London, and other great points of 
 collection ; from whence it might flow, without any 
 particular obstruction, into the channels exhausted by 
 exportation. But, if the small note bill go into ope- 
 ration, and if the manufactures be continued to the 
 same extent as heretofore, and no trick be resorted to 
 by the manufacturers to pay their wages, by evading 
 the law, the gold must be principally in the densely 
 peopled districts; and he who supposes that it will 
 be readily collected in those districts when it is 
 wanted, knows little of the feelings of the working 
 classes, or of those immediately above them. 
 
 To those who may be of opinion that I attach too 
 much importance to the small note bill, I answer, in 
 the first place, that it is a vain effort to accomplish the 
 purpose designed by it ; and secondly, that that bill is 
 the first introduction of a wedge, which will either be 
 drawn back, for fear of the consequences, or it will be 
 driven home. That I perceive no disposition to draw 
 it back, but every succeeding day a clearer evidence of 
 a resolution to drive it to the heart ; and if it be so 
 driven, the tree will soon wither and die. 
 
 If this were solely a question of degree, and sup- 
 posing that we all admit that the amount of the cur- 
 rency must be reduced, we are proceeding in the most 
 contradictory manner. We take it with one hand from 
 the man of industry, to whom it is the means of !)uy- 
 ing bread ; and we give it with the other to the specu- 
 lator, to astonish the world by the note of his count-
 
 122 
 
 less thousands, and the glittering symbols of his in- 
 comprehensible wealth. 
 
 I have no means of knowing the amount of Bank 
 of England notes in circulation. I will, however, ven- 
 ture an opinion, that that amount would show an in- 
 crease exceeding fifty per cent, upon the lowest amount 
 of 1825. But what is that increase, compared with 
 that which we shall witness, if the prevailing principles 
 on the currency be pushed to their accomplishment ? 
 And what an illustration will the coming events throw 
 upon those inquiries in parliament, which were insti- 
 tuted to examine into the effects of an augmenta- 
 tion of four or five millions of Bank of England notes 
 and country bank notes. 
 
 The machine of the currency which the govern- 
 ment has undertaken to manage, is linked with inte- 
 rests in this country, and possesses a force which 
 render the attempts to regulate it, by the means sug- 
 gested to His Majesty's government, I think, absurd. 
 And though, in speaking of the erroneous opinions of 
 others, it may be thought that 1 have exercised a 
 reprehensible confidence, in proceeding to make any 
 suggestions for the correction of the evil, I feel a dif- 
 fidence proportionate to the diflSculty, the complexity, 
 and the magnitude of the consideration. 
 
 Whether looking at the extent of the subject, and 
 the multifarious and important interests connected with 
 it, it be possible to manage the currency consistently 
 with the principles of the administration, without deep 
 and permanent injury to the national prosperity, is 
 the great problem. From the foregoing observations, I 
 can have no hesitation in affirming my opinion, that the
 
 123 
 
 great means of becoming right in this important mat- 
 ter, is to leave unobstructed the operations of indus- 
 try, that production may go on, and capital accumu- 
 late. That the next principal object of attention is to 
 decrease the liability to excess, in that part of the circu- 
 lation in which excess is always generated ; and there- 
 fore to restrict the amount of the largest portion of 
 the circulation, which is in bills; and not of the 
 smallest, which is in notes. Upon these principles I 
 venture to suggest, but I do not presume to recom- 
 mend without inquiry, as follows : 
 
 1st. Pass a law, to protect from legal proceedings, for 
 fourteen days, all persons who tender Bank of 
 England notes, for a demand above four pounds. 
 
 2nd. Keep a sum of gold, amounting to six or eight 
 milHons, at the Mint, for the sole purpose of ad- 
 justing the circulation ; to be diminished to any 
 given point, in case of alarm and violent con- 
 traction of the circulating medium. 
 
 3d. Make silver a legal tender, for a much larger 
 sum. I cannot, without better information, be 
 satisfied of the propriety of changing the standard 
 from gold to silver. 
 
 4th. Repeal the small note bill of last session, and per- 
 mit one and two pound notes to circulate in Eng- 
 land, as well as in Scotland and Ireland, and upon 
 the same terms; vix. that all who issue them give 
 security to the government, either landed, funded, 
 or personal, against loss by failure. 
 
 5th. Equalize the stamps upon bills, so that the small 
 trader may not be taxed so disproportionately
 
 124 
 
 for the use of tliose instruments of his trade. 
 The tax upon a bill for ten pounds ought to 
 bear some fair proportion to the tax upon one 
 for a thousand pounds. 
 
 6th. Prohibit all men from drawing or accepting a bill 
 exceeding three months' or ninety days' date. 
 Perhaps a very large tax upon all bills that ex- 
 ceeded that term, would alone be sufficient to 
 accomplish the purpose. 
 
 7th. Let the state of money, including all kinds of paper 
 and metallic currency, undergo frequent examina- 
 tion ; and enforce a regular, periodical publication, 
 in a formal and conspicuous manner, of the state 
 of tlie circulating medium, the issues of stamps, 
 &;c. Connected with this, a publication must 
 take place of all those matters that have a direct 
 bearing upon the state of the currency. Exports 
 and imports, with all that distinguishing analysis 
 of home, colonial, and foreign produce ; and the 
 separate materials of each, so easily rendered. 
 And a publication also, as nearly as it could be 
 collected, of the internal circulation of commo- 
 dities, from the custom house and other entries. 
 
 Of these suggestions, the two last only require a 
 remark. 
 
 Those who imagine that the sixth proposition is un- 
 important, are not, I tliink, aware how great would 
 be the tendency of such a regulation to prevent ex- 
 cess. There is, as it appears to me, no other safe, 
 judicious, and effectual mode of reducing the vast circu- 
 lating credit of this kingdom, than by lessening that
 
 125 
 
 part in which excess first commences, which is most 
 capable of being enormously increased, and which has 
 the greatest influence in promoting speculation. The 
 practice of discounting bills, six months after date, was 
 as common in Scotland, as discounting bills under six 
 months and above three, was in England ; and this is 
 the true secret of the extensive and prolonged distress 
 of the manufacturing part of the Scotch community. 
 This was the master vice of the Scotch system of 
 banking, as it will be that of every joint stock or share 
 bank that can obtain a similar hold upon the public 
 opinion, and an equal exemption in practice, though 
 not in law, from liabilities to having claims suddenly 
 demanded, to be paid in Bank of England notes or the 
 coin of the realm. Their small note circulation, which 
 was connected with industry, and necessary to its ope- 
 rations, was not worthy of a protracted inquiry. The 
 cutting off of so large a portion of the representative 
 capital, which, by anticipation, was made available for 
 circulation, would have ten times the effect of the small 
 note bill, in preventing excess, and in leaving, free from 
 obstruction, the means of a speedy restoration to a 
 healthy state in cases of disorder. 
 
 There might be objections in principle, perhaps, to 
 enforcing the absolute prohibition of all bills exceeding 
 three months after date. But by imposing an increased 
 tax upon all bills which exceed two months' date, 
 the government have admitted the principle of the 
 measure which I suggest to be good : only it has ab- 
 surdly, as I think, stopped short in practice. Bills 
 whicli exceed tliice months' date ouglit to pay, at the 
 least, a (juadrupled tax. This would not prevent
 
 126 
 
 entirely all such bills from being drawn, but it would 
 most materially decrease the amount. 
 
 By applying the screw to this part of the currency, 
 to correct an excess in the circulation, it can be done 
 safely, and without much injury ; and if experience 
 render it necessary, the pressure can be increased in 
 this manner without danger ; whereas, by applying it 
 to the circulation of small notes, it cannot be done 
 without the greatest hazard to the pursuits of in- 
 dustry ; and when so applied, it affords no chance 
 whatever, from the contracted range of its power, of 
 keeping the circulating medium properly adjusted. 
 
 The last suggestion I consider so much more im- 
 portant than all the others, that I cannot hesitate to 
 declare my opinion, that this regulation alone, with 
 our recent experience, and in the present state of in- 
 telligence in banking matters, would have been suf- 
 ficient to accomplish every desirable purpose, for a 
 series of years, letting the law remain as it stood in 
 1825. In December last the arch of credit was partially 
 injured. An engineer, practically skilled in this depart- 
 ment of the art, would have applied the usual cement 
 to hold the materials together ; and with the precau- 
 tion suggested in the last proposition, to prevent occa- 
 sional risk from extreme pressure, the immense traffic 
 which had heretofore passed over the fabric, might 
 have continued without danger, unobstructed in its 
 course. To break up the key stones, and reconstruct 
 the arch, was unwise ; because the new materials cannot 
 be cemented with the old, and greater derangement 
 must proceed from the attempt. 
 
 The country bankers and their London agents are
 
 127 
 
 the recognized and almost the sole meters of credit — 
 the established regulators of the paper currency of this 
 country ; and they are every ivhere in exercise-, they 
 know better, practically, than any other public men 
 can, or ever will know, what is requisite to keep the 
 pursuits of industry unobstructed. They know also, 
 fi'om experience and intelligence, acquired by practice, 
 that their greatest interest consists in preventing credit 
 and circulation from running into excess : they want 
 only that information from the government, in regard 
 to the general state of the money affairs of the country, 
 which it is criminal to withhold, to give to them the 
 most perfect power to regulate the paper circulation. 
 
 In this business, or science, as Lord Lauderdale calls 
 it, their faculties have had no fair play. A business the 
 most simple of all the concerns in life, in its practical 
 details, is connected, in cause and effect, with compli- 
 cated considerations of singular and momentous import. 
 The plain and sober man of business, pursuing his avo- 
 cations in detail, is ever and anon unexpectedly struck 
 by something which is forced out by these other con- 
 siderations, which, to him, are purely theoretic or 
 abstract; and therefore have received but little of his 
 notice. While those persons to whom belongs the 
 duty of attending to the considerations of momentous 
 importance connected with banking, know nothing of 
 the detail, and are ignorant of the manner in which 
 banking operations are connected with industry, and 
 are influencing productions. One great means of ren- 
 dering this important affair right, and keeping it so, is, 
 that both these parties should become well informed 
 upon all parts of the subject; and I can suggest no
 
 128 
 
 better means of attaining this desirable end, than 
 collecting the best information, and spreading it in the 
 most effectual manner. Interest, the apprehension of 
 danger, with the state of the law in 1825, would pre- 
 vent country bankers from contributing to excess. I 
 believe that the true cause for apprehension, in January 
 last, was, that all their actions would, for years, tend 
 too much to contract the circulating medium. 
 
 I abstain from remarking upon the suggestion re- 
 specting the keeping of a sum of gold at the Mint; 
 because there are so many persons infinitely more com- 
 petent than I am to explain the practical operation 
 and consequences of such a proposal. I am prepared 
 to recommend a tax, which would be paid with satis- 
 faction by the public, and which would raise a sum, 
 annually, that would pay the interest of the capital so 
 employed. 
 
 In concluding these observations, the only matter of 
 regret with me is, that I have not more power to do 
 ample justice to a matter so important. Considering 
 the nature of the inquiry, and the obvious want of 
 practical information amongst public men, I may have 
 passed too rapidly over some of the important subjects 
 introduced. 
 
 The desire for brevity has caused me to pass over 
 that part relating to branch banks, with very slight 
 notice. A principal object with me being to eradicate 
 some of the prejudices that exist in regard to country 
 bankers ; unless it were the obvious and declared in- 
 tention of the government to convert branch banks into 
 instruments for subverting country banks, they do not 
 seem to require more detailed observations. Enough
 
 129 
 
 has been said, I think, to prove how utterly incompe- 
 tent branch banks are, upon their present principle, to 
 effect any purpose beneficial to the country. 
 
 We hear much encomium on the inestimable advan- 
 tages of public opinion ; but however ready men of in- 
 fluence may be to subscribe to this proposition in the 
 abstract, it is altogether another matter when public 
 opinion is separated into minute portions, and an indi- 
 vidual presumes to exercise that part of it, openly, 
 which fairly belongs to him. If he escape with bare 
 and not uncandid toleration, he may think himself 
 fortunate. I must trust, however, to the evidence 
 which I have endeavoured to give of understanding, 
 and of the capability of rendering clear, parts of this 
 inquiry, not heretofore understood and explained. And 
 as the ascribing of unworthy motives so often interferes 
 with the desire of the candid to estimate, justly, the 
 observations of those who differ from their opinions, I 
 deem it proper to declare that, in submitting these ob- 
 servations to your notice, I have no other interest than 
 that of the public to serve ; and that no banker and no 
 trader whatever has any knowledge of my intention to 
 address you on the important subjects of this letter: 
 that I was urged to undertake it by a desire to ex- 
 hibit, in its true light, a matter little understood in its 
 practical operations and effects. I was instigated also 
 by an anxiety to witness the perfect establishment of 
 those wise principles of commercial policy which His 
 Majesty's ministers have avowed a determination to 
 carry into execution. Nothing, I think, is so likely to 
 prevent the accomplishment of their wishes, as de- 
 
 K
 
 130 
 
 ranging the establishments of industry, and impeding 
 production ; — consequences which must result from per- 
 severance in erroneous opinions, in regard to the mode 
 of regulating the currency. 
 
 This country will rise from its difficulties, if the 
 means of production be uninjured; the channels of com- 
 mercial intercourse be kept unobstructed ; the principle 
 of reciprocal intercourse established ; and if the people 
 be permitted to resort, on fair terms, to new markets 
 for disposing of their produce. Means must be taken, 
 which will have the effect of giving a fair portion of 
 the productions of labour to the mere workman. 
 Monopolies prevent the best application of labour and 
 of capital, and interfere with prosperity. I trust there 
 is not a settled resolution to extend the monopoly of 
 the Bank of England, to the destruction of the system 
 of country banking. 
 
 I am aware that political observers, of extraordinary 
 sagacity and powerful talents, affect to perceive, in the 
 present signs of the times, evidence of the speedy dis- 
 solution of the British system of banking and finance. 
 I can perceive no such indication, unless the errors which 
 I have described may be regarded as furnishing that evi- 
 dence. And I think they who see a perfect analogy in 
 the circumstances of this country and those which per- 
 plexed and overwhelmed the French financiers, previous 
 to the revolution in France, overlook this remarkable dis- 
 tinction ; — that France did not equal England in the 
 power to supply the internal wants of the people; — that, 
 as compared with England, she had very little power to 
 bring home the rich productions of other countries, in 
 exchange for those of her own, which exceeded all
 
 181 
 
 that she could fierself consume ; — and that her small 
 accumulated capital afforded her but very little limited 
 means of engaging in foreign commerce. Fcjreign 
 commerce has hitherto enabled us to pay the interest 
 of the debt, and to bear the burdens of the state ; and 
 to foreign commerce we must resort, for the means of 
 sustaining our finances in future. The productions of 
 husbandry we entirely consume at home. And not- 
 withstanding the present alarm of the landowners, 
 British husbandry will, for ages, continue to supply 
 sufficient, (except luxuries and materials for manu- 
 facture,) for the wants of the inhabitants, without 
 much aid from foreign states. Mines, manufactures, 
 the carrying trade, and commerce, can alone enable us 
 to bear fiscal burdens, unexampled in their pressure. 
 But to enable us to do this, there must be no such 
 obstructions to the free appropriation of capital, as the 
 raising up of branch banks, and subverting country 
 banks, would occasion. Nor must there be any hasty, 
 ill digested plans adopted, for destroying that immense 
 portion of representative capital which has so long 
 been made available for production, in the shape of 
 circulating credit. 
 
 Nothing, during the last fifty years, has operated 
 with equal power, to the system of banking and the 
 steam engine, in producing astonishing results in our 
 social condition. Whether their influence have tended 
 to the ultimate good or evil — to the happiness or misery 
 of the people, cannot now be more than an abstract ques- 
 tion. These are the instruments which have enabled 
 us to conduct a war for twenty years, and to incur an 
 
 K 2
 
 132 
 
 enormous debt; and by them alone shall we be able to 
 pay the interest of the debt, and uphold, upon the pre- 
 sent system of government, the power of the state. 
 You cannot deprive either of one half its power, with- 
 out great hazard; and it would have been as wise to 
 pass a law, to take from all steam engines one half of 
 their mechanical force; as, in our present circum- 
 stances, to pass laws and adopt measures, which will 
 destroy one half the power of banking and credit. 
 
 What, in our present political state, can be more im- 
 portant than these subjects ? Wanting, in common with 
 all public men of his day, that knowledge which the 
 schools cannot give, which enables men fully to compre- 
 hend and justly to appreciate the influence of these 
 causes, Mr. Pitt died, despairing of the resources of his 
 country. And in like manner, the ignorance of the power 
 and mode of operation of the banking and credit sys- 
 tem of Britain, has made the confident prediction of 
 " the decline and fall of the English system of finance," 
 a visionary dream. 
 
 Nothing but ignorance of the manner in which mea- 
 sures respecting the currency work, in checking or 
 promoting productions, can prevent that prediction re- 
 maining, for ages, a proof of the liability of the most 
 acute minds to error, on subjects of currency and 
 finance. And with such liability to error, made mani- 
 fest by almost every man who has written, talked, or 
 acted publicly, in regard to this subject, will not in- 
 quiry be granted, before laws come into operation, the 
 ultimate consequences of which no man has duly esti- 
 mated.
 
 133 
 
 POSTSCRIPT. 
 
 THE IMPORTANT CHANGES IN OUR POLITICAL CON- 
 DITION EFFECTED BY THE MECHANICAL SKILL, 
 ENTERPRISE, AND GENIUS OF THE PEOPLE, NOT 
 DULY ATTENDED TO BY PUBLIC MEN— STEAM- 
 NAVIGATION TENDS TO EQUALIZE THE WAGES 
 OF LABOUR IN ENGLAND AND IRELAND — ITS 
 CONSEQUENCES EXEMPLIFIED. 
 
 There are some circumstances connected with the 
 present political state of England, of a more general 
 character than that particular subject, which forms 
 the main purport of the foregoing letter, to which I 
 must take the liberty of requesting your attention, for 
 a moment. 
 
 Whatever relates to those points of our mercantile 
 economy which are connected with other states, or 
 our own colonies, is often the subject of treaty, or of 
 acts of parliament, and is constantly a matter of dis- 
 cussion in the legislature, and in public offices; there- 
 fore, nothing can be better understood by public men, 
 than customs, duties, commercial treaties, the naviga- 
 tion laws, colonial and shipping regulations. But, 
 excepting in the post office department, whatever re- 
 lates purely to the internal commerce and affairs of 
 the people, is rarely a subject of discussion in parlia- 
 ment, never enters into the routine of official duty, is 
 little understood by public men, and is, therefore, not 
 reflected upon by them, in proportion to its merited
 
 134 
 
 importance. Hardly any thing could be of greater in- 
 terest than some of the subjects that this consideration 
 would lead us into, as connected with the wealth and 
 power of the nation, and the condition of the people. 
 
 What could furnish more interesting matter for ob- 
 servation, or present clearer evidence of the genius 
 and skill of our countrymen, than the discoveries and 
 improvements in husbandry? In many parts of Great 
 Britain they have more than doubled the annual pro- 
 duce, and the intrinsic value of the land. My present 
 purpose is, however, to allude to one subject only, which 
 is in some degree connected with the object of this 
 letter. 
 
 The post office is now managed so, as to prove, 
 that the intelligence which directs its operations is 
 equal to that which is employed in other great mer- 
 cantile undertakings. In no other country in the 
 world can intelligence and money be transmitted with 
 equal expedition, frequency, security, or punctuality. 
 Nor any where else, is the accommodation of the post 
 afforded every day, to small numbers of the people 
 living in remote places, at distances far from the high 
 roads. We all see and feel the conveniences of the 
 post, but we are not in the same manner impressed by 
 the corresponding facilities, afforded by the rapid 
 transmission of persons and property, and therefore, 
 we are not induced to reflect, as we ought, upon the 
 consequences to which these facilities lead. 
 
 A man may now pass a day in business, at JVTanchester 
 or Liverpool, sleep in a steam boat, and pass the next 
 day in business in Dublin. In like manner, a man living 
 at Kendal, Leeds, Sheffield, Nottingham, Derby, Bir-
 
 135 
 
 mingham, or Shrewsbury, may breakfast with his own 
 family on the Monday, and breakfast in Dublin on 
 the Tuesday. All who live within the radius, of 
 which these towns describe the extremity, and Liver- 
 pool is the focus, comprising a population of from 
 three to four millions of people, engaged in all the 
 principal manufactures of the country, have the same 
 facilities every day, by established public conveyances, 
 which perform their operations with almost the punc- 
 tuality of a mail coach, and the prices of which will 
 become cheaper every succeeding year. This is all very 
 well, to allow the English to pass from island to island, 
 with great expedition, and at a small charge. But the 
 Irish have the same facilities for reaching England ; 
 and whoever regards that circumstance attentively, 
 and does not meditate upon the possible results with 
 anxiety, shows a culpable disregard of the circum- 
 stances which are operating to produce extended 
 misery, or a callous indifference to the well-being of the 
 people. The condition of the poor in Ireland is the 
 one great subject of painful interest to all political ob- 
 servers. If the sea did not separate us, we should 
 have such an inundation of Irish labourers, as would, 
 by reducing wages in England, speedily destroy all that 
 remains of old English comforts, which our labourers 
 have possessed for centuries. We are one and the 
 same people ; therefore, the Irish have not only a 
 right to bring their labour to our market, but, as 
 they speak the same language, one of the great ob- 
 structions to the equalizing of the wages of labour in 
 different countries, is also removed. The steam boats 
 pass between the nearest parts of the two islands in
 
 136 
 
 a few hours. The price on deck, between Dublin and 
 Liverpool, (not one of the shortest passages,) is five 
 shillings, subject to reduction by special contract. 
 There are as many steam boats established, as could 
 bring over, in their present regulated courses, a mil- 
 lion of persons in a year, from Ireland to Great 
 Britain. It is scarcely straining a figure, to say that 
 there is a bridge erected between the two countries, 
 and that the two islands are become one. 
 
 If this state of things be not duly considered, and wise- 
 ly dealt with, consequences, infinitely more important, 
 will result from this union, during the ensuing twenty- 
 five years, than those which have resulted during the last 
 twenty-five years, from an act of parliament union. 
 Labour is, in Ireland, on the average, about one half of 
 the price that it is in England. Now mark the conse- 
 quences, and these may be best indicated by a re- 
 ference to existing practical results. I know, not 
 from hearsay, but from personal examination, parts of 
 England, situated from forty to a hundred miles from 
 the coast, where Irish families, in great numbers, 
 come and fix themselves, live and save moneij^ upon 
 weekly wages so small, as to drive English families, 
 consisting of the same number of persons, engaged 
 in the same business, in the same places, to the pa- 
 rish rates for succour. The effect is partial at pre- 
 sent, and takes place principally in mines, manufac- 
 tures, and in the traffic of large towns. Habits are 
 not so easily broken in upon amongst farmers, as 
 amongst manufacturers and traders. There is some- 
 thing, too, in the minds of the English cultivators of 
 the soil, that repels the thought of introducing Irish
 
 137 
 
 labourers, except during the harvest, to mix with their 
 own. They have, in general, plenty of labourers near 
 at hand, who must be supported ; and they have still, 
 in many parts, property enough left to place them 
 above the pressing necessity of adopting the cheaper 
 labour of strangers for that of their neighbours. But 
 the cause is working, and, as sure as water flows down- 
 wards, it will, at no distant day, place England and 
 Ireland, in respect to the wages of labour, and the 
 condition of the working classes of the people, nearly 
 upon a level. Will, or can our rulers raise Ireland to 
 the condition of England ? Or, must England sink to 
 to the miserable state of Ireland? ! ! Whatever can 
 be done, must be immediately put into operation, to im- 
 prove the state of the working classes of Ireland at 
 home; and some circumstances are now going on, not 
 proceeding from acts of the government, but from that 
 principle of approximating, in effect, places, persons, and 
 things, before alluded to, which have this tendency. 
 When the rail roads are completed ; when the perfect 
 facility of communication by steam boats is established 
 with other states, of which the system is capable; 
 when the trade in corn is free, and money can cir- 
 culate as heretofore, in aid of the operations of indus- 
 try; I see no impediment to our rendering, by means 
 of labour, in Ireland, goods as cheap to the continen- 
 tal markets, as the Silesians or other manufacturers 
 can render them. 
 
 Emigration must not be despised, notwithstanding 
 the censure thrown upon it by some acute observers ; 
 but it must be conducted at the charge of the Irish 
 landowners and capitalists ; and it will not be allowed
 
 138 
 
 to proceed long upon so extravagant an estimate of 
 expense, as that which forms the basis of the present 
 calculations. If I err not in the view that I take of 
 this part of the subject, other and very important con- 
 sequences may be made to result from a well organized 
 system of emigration, besides that of merely carrying 
 the surplus number of human beings from Ireland ; 
 and the expense of accomplishing the object may be 
 prodigiously reduced. Emigration upon an extended 
 scale, and the greater the scale the greater the benefit, 
 not only to Ireland, by taking off her spare population, 
 but in other matters also, which may be most advan- 
 tageously connected with it. This will counteract the 
 tendency (as regards contact with Ireland) of steam 
 navigation to injure England. And every ardent 
 friend of his country must pray that no time may be 
 lost in ado[)ting means to ward off the consequences of 
 a more intimate communion, until Ireland shall become 
 so changed, as to render a closer fellowship not a mea- 
 sure of inevitable debasement to England. 
 
 I have briefly alluded to this subject, because it 
 appears to me that mighty changes in the affairs of 
 men, and in the political state of the nation, result 
 from causes which do not attract the due observation 
 of the government. It is only when the aggregate 
 effect has astonished us, that we begin to look at the 
 principle, and to examine the manner of its operation. 
 The system of banking and the steam engine have 
 effected wonderful changes in our political condition ; 
 and their power, and tendency to produce other im-- 
 portant changes, ought to be well understood. 
 
 I do not entirely despair of being able to obtain your
 
 139 
 
 attention to the matters upon which I have taken the 
 liberty to address you, because 1 have observed that 
 subjects of this nature do, on occasions, deeply interest 
 your mind. The striking and eloquent manner in 
 which you have noticed the effects of steam naviga- 
 tion, is a remarkable proof, that, notwithstanding the 
 time claimed by the important considerations of state, 
 no opportunity escapes you of contemplating those 
 astonishing changes that are taking place, by means of 
 the humble operations of industrious life *. 
 
 " * What should we think of that philosopher, who, 
 in writing, at the present day, a treatise upon naval 
 architecture and the theory of navigation, should omit 
 wholly from his calculation that new and mighty 
 power — new, at least, in the application of its might — 
 which walks the water, like a giant rejoicing in his 
 course ; stemming alike the tempest and the tide ; 
 accelerating intercourse ; shortening distances ; cre- 
 ating, as it were, unexpected neighbourhoods and new 
 combinations of social and commercial relations ; and 
 giving to the fickleness of winds, and the faithlessness 
 of waves, the certainty and steadiness of a highway 
 upon the land." 
 
 Mr. Canning's Speeches at Liverpool. 
 
 THE END. 
 
 Han'cy, narion. ami Co. I'rintfn. Cractchurch-nrt««. Loiijon.
 
 a
 
 m4