It was impossible for Peel not to see the inconsistency of his measure of 1844, with his expressed opinion in 1819 and 1833, that it was inexpedient to limit the issues of the Bank to any fixed amount at any period, however remote, because there were times of commercial difficulty, when an increased issue of notes might be the proper remedy. There is no doctrine more strenuously insisted on by the Bullion Report, by the statesmen of 1819, as well as by the Government in 1833, and Sir Robert Peel himself, at both these periods, than that it was impossible to fetter the discretion of the Bank in its issues. Sir Robert Peel knew that he was now taking away this power from the Bank altogether, and, accordingly, he was obliged to meet this objection. He said :

"It is said that the Bank of England will not have the means which it has heretofore had of supporting public credit, and of affording assistance to the mercantile world in times of commercial difficulty. Now, in the first place, the means of supporting credit are not means exclusively possessed by banks. All who are possessed of unemployed capital, whether bankers or not, and who can gain an adequate return by the advance of capital, are enabled to afford, and do afford, that aid which it is supposed by some that banks alone are enabled to afford. In the second place, it may be a question, whether there be any permanent advantage in the maintenance of public or private credit, unless the means of maintaining it are derived from the bona fide advance of capital, and not from a temporary increase of promissory notes, issued for a special purpose. Some apprehend that the proposed restriction upon issue will diminish the power of the Bank to act with energy at the period of monetary crisis and commercial alarm and derangement. But the object of the measure is TO PREVENT (so far as legislation can prevent) the recurrence of those evils from which we suffered in 1825, 1836, and 1839. IT IS BETTER TO PREVENT THE PAROXYSM than to excite it, and trust to desperate remedies for the means of recovery."

Sir Robert Peel, therefore, deliberately took away the power of the Bank to act in extreme occasions, under the impression that his Act would prevent those extreme occasions from arising. We shall see how this hope was fulfilled.

Sir Charles Wood followed Sir Robert Peel, also adopting the "Currency Principle":

"It is not enough, then, to enact that the Bank notes shall be

convertible. The paper circulation must not only be convertible, but must vary in amount from time to time as a metallic circulation would vary. A system, therefore, of paper circulation is required, which will attain this object, and insure a constant and steady regulation of the issues on this principle. This, and this alone, affords a permanent security for the practical convertibility of the notes at all times, and for the consequent maintenance of the standard."

The Bill was read a second time, after a feeble opposition, by a majority of 185 to 30. It passed through the House of Lords with a very short debate, and no division. Lord Radnor alone protested against it, and it received the Royal Assent on the 19th of July, 1844.

22. The chief provisions of this Act are as follows (Statute 1844, c. 32):- :

1. That after the 31st August, 1844, the issue of Bank notes by the Bank of England should be kept wholly distinct from the general banking business, and be conducted by such a committee of the directors as the Court might appoint, under the name of the "Issue Department of the Bank of England."

2. That on the same day, the Governor and Company should transfer, appropriate, and set apart, to the issue department securities to the value of £14,000,000, of which the debt due by the public to the Bank was to be a part; and also so much of the gold coin and gold and silver bullion as should not be required for the banking department. The issue department was then to deliver over to the banking department an amount of notes exactly equal to the securities, coin, and bullion, so deposited with them. The Bank was then forbidden to increase the amount of securities in the issue department; but it might diminish them as much as it pleased, and increase them again to the limit defined, but no further. The banking department, was forbidden to issue notes to any person whatever, except in exchange for other notes, or such as they received from the issue department in terms of the Act.

3. The proportion of silver bullion, in the issue department, on which notes were to be issued, was not at any time to exceed onefourth part of the gold coin and bullion held at the time by the issue department.

4. All persons whatever, from the 31st August, 1844, were to be entitled to demand Bank notes in exchange for standard gold bullion at the rate of £3 17s. 9d. per ounce.

5. If any banker who, on the 6th May, 1844, was issuing his own notes, should cease to do so, it should be lawful for the Crown, in Council, to authorise the Bank to increase the amount of securities in the issue department to any amount not exceeding two-thirds of the amount of notes withdrawn from circulation.

6. Weekly accounts in a specified form were to be transmitted to Government and published in the next London Gazette.

7. From the same date the Bank was relieved from all stamp duty on their notes.

8. The annual sum payable by the Bank for their exclusive privileges should be increased from £120,000, as settled in 1833, to £180,000. And all profits derived from the Bank by the increase of their issues above the £14,000,000, as prescribed by the Act, shall go to the public.

9. After the passing of the Act, no person other than a banker who was lawfully issuing his own notes on the 6th May, 1844, should issue bank notes in any part of the United Kingdom.

10. After the passing of the Act, it was forbidden to any banker to draw, accept, make, or issue, in England or Wales, any bill of exchange, or promissory note, or engagement for the payment of money payable to bearer on demand, or to borrow, owe, or take up in England or Wales, any sum or sums of money, on the bills or notes of such banker, payable to bearer on demand, except such bankers as were on the 6th May, 1844, issuing their own Bank notes, who were allowed to continue their issues in such manner, and to such extent as afterwards provided. The rights of any existing firm were not to be affected by the withdrawal, change, or addition to any partner, provided the whole number did not exceed six persons.

11. Any banker who ceased to issue his own notes from any reason whatever, after the Act, was not to resume such issues.

12. All existing Banks of issue were forthwith to certify to the commissioners of stamps and taxes, the place, the name, and the firm, at and under which they issued notes during the twelve weeks next preceding the 27th April, 1844. The commissioners were then to ascertain the average amount of each bank's issues, and it should be lawful for such banker to continue his issues to

that amount, provided that on an average of four weeks they were not to exceed the average so ascertained.

13. If any two or more banks of issue had become united during that twelve weeks, the united bank might issue notes to the aggregate amount of each separate bank.

14. The commissioners were to issue in the London Gazette a statement of the authorised issues of each bank.

15. If two or more banks afterwards became united, each of less than six partners, then the commissioners might authorise them to issue notes to the amount of their separate issues. But if the number of the united bank exceeded six, their privilege of issuing notes was to cease.

16. If any banker exceeded his authorised issue he was to forfeit the excess.

17. Every bank of issue was to send a weekly account of its issues, which was to be published in the London Gazette.

18. The mode of taking the average was laid down, and bankers were to permit their books of accounts to be inspected by a Government officer properly appointed, and to make a return to Government once every year, within the first fortnight in January.

19. The Bank of England was allowed to compound with private banks of issue, to withdraw their notes, and issue Bank of England notes, for a sum not exceeding one per cent. per annum, up to the 1st August, 1856.

20. All banks whatever in London, or within 65 miles of it, were allowed after the passing of the Act, to draw, accept, or indorse bills of exchange, not being payable to bearer on demand.

21. The privileges of the Bank were to continue till twelve months' notice, to be given after the 1st August, 1855; and repayment of the public debts, and all other debts whatever.

23. Since the Act was passed, several private bankers have ceased from business; and in terms of the Act the Bank's power of issuing Notes on securities has been increased to £15,000,000. Consequently its total power of issuing Notes is now limited to £15,000,000 plus the amount of bullion held by the issue department.

It was supposed that these provisions ensured that the quantity of notes in circulation, i. e., in the hands of the public, would be

exactly equal to what a metallic Currency would have been, and that the outflow of bullion would by its own natural operation, have the mechanical effect of withdrawing Notes from the public to an equal amount. Having made these provisions, the framers of the Act supposed that they had taken out of the hands of the Bank all power of mismanaging the Currency, and that they might manage the banking department at their own discretion.

To say that the amount of Notes should only be equal to what a metallic Currency would have been, is a very intelligible proposition; and, as we have observed, several banks have been constructed on that principle. But no bank constructed on this principle ever did, or by any possibility could do, banking business for profit. These banks were pure banks of deposit: they did no discount business whatever and if the Bank of England were forbidden to discount, there is no reason why it should not be reconstructed on this principle.

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But if the framers of the Act of 1844 really believed that this Act carried out this theory into practice, no set of men ever committed a more manifest error. It is quite evident that the £15,000,000 of notes issued against public debt and securities are in direct violation of the "Currency Principle." How did the Bank obtain these securities? By purchase. Now, the purchase-money of these securities is in circulation, and the notes created on their security as well. Is it not clear that these 15 millions of notes are an augmentation of currency to that amount? If it be true that these 15 millions of notes are not a violation of the Currency Principle, then the very same argument would shew that the whole National Debt might be coined into notes, and then there would be no more paper in circulation than under a purely metallic currency!!

It is quite clear that this is pure and simple LAWISM; and, if we may coin the funds into money, we may just as well coin the land into money; and then where should we be?

24. Certainly, it is an excellent plan for every one to buy the funds with their cash, and then to be allowed to have it, too, in the form of notes. At all events, so long as this is permitted, let no one laugh at John Law.

But even this does not shew the full extent of the error of those who think that the Bank Act of 1844 enforces the "Currency