if it be not convertible into gold at the will of the holder, but is only exchangeable for other paper, the banking interest must possess peculiar advantages over the other members of the community. Merchants can thus be assisted with facility and safety; and, in proportion as they are aided in their speculations by the emission of this easy coinage, opulence will appear to be general, and the necessaries of life will increase in price. The issuers of paper have, at the same time, an opportunity of drawing the gold into their own coffers; and while the national bank withholds its payments in specie, the inferior banks are countenanced in giving only paper for paper. It may suit the advocates for paper credit, to represent gold as an unproductive article but it is an article of universal estimation, it has an intrinsic value, it requires no confidence, and it makes the holder absolutely rich." Paper, on the other hand, is merely a representative of something ideal: its only value rests on credit; and it may become worthless on the failure of those whose promise it bears. Ought the principal part of the money of a country, then, to be of this description? Ought gold to be monopolized? Or can it conduce to the general wel fare, that it should be forcibly with-holden from circulation ?

The conduct of the Bank in stopping its issues in specie may be justified on the ground cf necessity; since it had been obliged to furnish the minister with much of its coin, to be sent in subsidies to foreign princes: but the plea of necessity does not obliterate the obligation to pay on demand; nor can it be argued that paper is the best of all money, because gold is not to be procured in exchange for it. Paper credit should be nothing more than paper credit, acceptable at option; and bank notes ought not to be a legal tender. Mr. Burke said of them that they were of value on Change, because they were of no value in Westminster Hall; and to give them a higher importance is to create a very artificial and perilous state of society.

From these remarks, it will be inferred that our sentiments do not uniformly coincide with those of Mr. Thornton: but we shall now endeavour to exhibit the prominent features of his publication, that our readers may judge for themselves.

The work is divided into eleven chapters. After a variety of introductory observations on commercial credit and commercial capital, on trade by barter, on bills of exchange, discountable notes, fictitious bills, bank notes, &c. Mr. Thornton proceeds to a consideration of the institution of the Bank of England, and to explain the reasons of the suspension of its cash payments. These, he maintains, were neither a too great issue of paper nor too great loans. On this subject, he observes that,

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• The Bank of England is quite independent of the executive vernment. It has an interest, undoubtedly, (of the same kind with that of many private individuals,) in the maintenance of our financial as well as commercial credit. It is also in the habit of lending out a large portion of its ample funds on government securities of various kinds, a comparatively small part only, though a sum not small in itself, being lent to the merchants in the way of discount. The ground on which the bank lends so much to government is clearly that of mutual convenience, as well as long habit. It is the only lender in the country on a large scale; the government is the only borrower on a scale equally extended; and the two parties, like two wholesale traders in a town, the one the only great buyer, and the other the only great seller of the same article, naturally deal much with each other, and have comparatively small transactions with those who carry on only a more contracted business. The bank, moreover, in time of peace, is much benefited by lending to government. It naturally, therefore, continues those loans, during war, which it had been used to grant at all antecedent periods. It occasionally furnishes a considerable sum to the East India company. If, indeed, it lent more to the merchants during war, and less to the government, the difference would not be so great as might, perhaps, at first view be supposed. If, for instance, it furnished a smaller sum on the security of exchequer bills, that article might then be supposed to fall in price, or, in other words, to yield a higher and more tempting interest; and the bankers, in that case, would buy more exchequer bills, and would grant less aid to the merchants; they would, at least, in some degree, take up whichever trade the Bank of England should relinquish. The preference given by the bank to the government securities, is, therefore, no symptom of a want of independence in its directors: they are subject, in a much greater degree, to their own proprietors than to any adminis tration. The strong manner in which the directors of the bank, at the time antecedent to the suspension of their cash payments, insisted on having four millions and a half paid up to them by the govern ment-a payment which, though demanded at a very inconvenient time, was accordingly made-may be mentioned as one sufficiently striking mark of the independence of that company. There is, however, another much more important circumstance to be noticed, which is conclusive on this subject. The government of Great Britain is under little or no temptation either to dictate to the Bank of England, or to lean upon it in any way which is inconvenient or dangerous to the bank itself. The minister has been able to raise annually, without the smallest difficulty, by means of our funding system, the sum of no less than between twenty and thirty millions. The government, therefore, is always able to lessen, by a loan from the public, if it should be deemed necessary, the amount of its debt running with the bank. To suppose that bank notes are issued to excess, with a view to furnish means of lending money to the minister, is, in a high degree, unreasonable. The utmost sum which he

could hope to gain in the way of loan from the bank, by means of an extraordinary issue of bank notes, could hardly be more than four

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or five millions; and it is not easy to believe, that a government, which can raise at once twenty or thirty millions, will be likely, for the sake of only four or five millions (for the loan of which it must pay nearly the same interest as for a loan from the public), to derange the system, distress the credit, or endanger the safety of the Bank of England. This banking company differs in this most important point from every one of those national banks, which issue paper, on the continent.'

It may be mentioned, as an additional ground of confidence in the Bank of England, and as a circumstance of importance in many respects, that the numerous proprietors who choose the directors, and have the power of controlling them (a power of which they have pru dently forborne to make any frequent use, are men whose general stake in the country far exceeds that particular one which they have in the stock of the Company.'

The proprietors of it themselves are not likely to approve of any dangerous extension even of their own paper; both they and the directors know the importance of confining the bank paper, generally speaking, within its accustomed limits, and must necessarily be supposed to prefer its credit, and the paper credit of the nation, to the comparatively trifling consideration of a small increase in their own dividends; an increase which would prove delusory, if it should arise from that extravagant issue of bank notes which would have the effect of depreciating all the circulating medium of the country, since it would thus raise upon the proprietors of bank stock, as well as on others, the price of all the articles of life.'

The bank itself is known to have experienced, at former times (as appears from the evidence of the directors given to parliament), very great fluctuations in its cash; and, in one period of returning peace and prosperity, a reduction of it below that which took place at the time of the late suspension of its cash payments: the amount of gold in the bank, at any one particular æra, is, perhaps, therefore, on the ground of this experience, not now considered by the commercial world as having all that importance which was given to it when the bank affairs were involved in greater mystery. It is perfectly well understood among all commercial men, that gold coin is not an article in which all payments (though it is so promised) are at any time intended really to be made; that no fund ever was or can be provided by the bank which shall be sufficient for such a purpose; and that gold coin is to be viewed chiefly as a standard by which all bills and paper money should have their value regulated as exactly as possible; and that the main, and, indeed, the only, point is to take all reasonable care that money shall in fact serve as that standard.

This is the great maxim to be laid down on the subject of paper credit. Let it, then, be next considered what is necessary, in order sufficiently to secure that, whatever the circulating paper may be, gold shall be the standard to which the value of that paper shall conform itself. It is no doubt important, that there should be usually in the country a certain degree of interchange of gold for paper, for this is one of the means which will serve to fix the value of the latter.'

REY. MAY, 1802..

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The suspension of cash-payments at the Bank is thus explained:

A short time before the suspension of its cash payments, the gold in its coffers had been reduced materially through an unfavourable balance of trade. The exchange with Europe had, however, so far improved for some time preceding the suspension, as to have caused gold to begin again to flow into the country. When it was thus only beginuing to return, the fear of an invasion took place, and it led to the sudden failure of some country banks in the north of England.. Other parts felt the influence of the alarm, those in Scotland, in a great measure excepted, where, through long use, the confidence of the people, even in paper money of a guinea value, is so great (a circumstance to which the peculiar respectability of the Scotch banks has contributed), that the distress for gold was little felt in that part of the island. A great demand on the Bank of England for guincas was thus created, a demand which every one who can possess himself of a bank note is entitled to make by the very terms in which the note is expressed. In London, it is observable that much distress was beginning to arise, which was in its nature somewhat different from that in the country. In London, confidence in the Bank of England being high, and its notes maintaining their accustomed credit, its guineas were little called for with a view to the mere object of London payments. The guineas applied for by persons in London, were, generally speaking, on the account of people in the country. The distress arising in London, like that which took place in 1793, was a distress for notes of the Bank of England. So great was the demand for notes, that the interest of money, for a few days before the suspension of the payments of the bank, may be estimated (by calculating the price of exchequer bills, the best test that can be referred to, as well as by comparing the money price of stocks with their time price) to have been about sixteen or seventeen per cent. per ann. The bank, on this occasion, pursued, though only in a small degree, the path which a reader of Dr. Smith would consider him to prescribe, as in all cases the proper and effectual means of detaining or bringing back guineas. They lessened the number of their notes, which, having been for some years before near eleven millions, and having been reduced, for some time, to between nine and ten millions, were at this particular moment brought down to between eight and nine millions.'

Differences of opinion, undoubtedly, may exist as to the exact degree in which the notes of the Bank of England ought, under any given circumstances, to be diminished. It may be hoped, however, that at least one point has now been fully and completely established, namely, that there may be an error on the side of too much dimi nishing bank notes, as well as on the side of too much increasing them. There is an excessive limitation of them, as every one must admit, which will produce failures; failures must cause consternation, and consternation must lead to a run upon the bank for guineas, There must, in short, then, be some point at which the bank must

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stop in respect to the reduction of its notes, however progressive may be the drain upon it for guineas.

But if its notes are not lessened or if even they are lessened, but are not entirely extinguished, it is then in the power of any one who can possess himself of a bank note to possess himself also of guineas, as long as the bank pays in guincas; and it will be found to follow, moreover, that the bank is thus rendered liable to be totally exhausted of guineas. I mean, that it is liable to be totally exhausted of them, however great their number may have been, if it determines to maintain even the smallest number of notes. By maintaining, that is to say, five millions, or two millions, or even one million, of notes, the bank cannot avoid being exhausted" (sup posing the alarm to rise high enough to do it) of even five millions, or ten millions, or, if it had them, of twenty or fifty millions of guineas. It will depend, in such case, on the degree of alarm, and not on the maintenance of the greater or of the less quantity of notes, whether the guincas shall be more or less rapidly called for from the bank; or, in other words, the bank may be as much exhausted of guineas if it maintains five millions of notes as if it maintains ten millions, provided the alarm is only the same in the one case as in the other. If, therefore, the maintenance of the five mil lions of notes is sure to produce more alarm than the maintenance of ten, then the maintenance of the larger quantity of notes will serve to diminish the demand for guineas, and the maintenance of the smaller number to increase it.'

We apprehend that this mode of reasoning will not be gene rally understood; and, when understood, that it is an argument which tends to prove the insecurity of the bank when it resumes its payments in specie.. Indeed, it is admitted by Mr. T. that the Bank of England is placed, by the very nature of its institution, in a situation in which it may not be possible to avoid a temporary. failure in the regularity of its cash payments.' According to Mr. T.'s mode of explaining the operation of exhaustion, this position may be true: but the Directors of the Bank must act unwisely if they allow of this process, or conduct their business under so palpable a disadvantage.

Mr. Thornton will not admit that the government was either the more remote or the more immediate cause of the suspension of the cash paymens at the bank; except so far as the war. in general, or the particular circumstance of a remittance of a subsidy to the Emperor a short time before the event in question, might be considered as affecting the balance of trade. This is a mode of stating a material fact so as to conceal it, or to drop it out of the argument. How can the government be said to have neither immediately nor remotely diminished the power of the bank to pay in cash, when it is acknowleged in the same sentence to have drawn millions of its specie from

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