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dard currency-gold would still fluctuate in price, and would command a greater than the fixed proportionate value, whenever. wanted for exportation. Comprising a greater value in a smaller weight and compass, the carriage is less expensive than that of an equal value in silver. Gold will then be at a premium in exchange for silver, as it will also in exchange for paper, whenever preferable as a medium of foreign payment.

On the ordinary retail transactions of trade, these fluctuations would have no influence, and a sovereign be invariably exchanged for twenty shillings or for a pound-note, until the demand for exportation should have raised gold so considerably above the mint price, as to offer an inducement for collecting coin at a premium.?

Were the bank authorized by the legislature to regulate its cash payments on the principle suggested, the speculators in exchanges and dealers in bullion, being prevented from drawing specie from its coffers at an under value, or at less than the price current in the market, could have no notive for exclusively purchasing at the bank, what they might obtain elsewhere on equal terms.

Hence, the danger of a run would be mainly obviated, for the bank, possessing the confidence of the public, cannot have cause to apprehend any extraordinary demand for gold, for purposes of domestic circulation. An extraordinary demand can only be caused by a fall in the exchange and the profits of exportation, and that demand would

be checked by an advance of the price. The bank would however be enabled, from time to time, to replenish its coffers at or about the mint price, and be prepared for every exigency, whilst the occasional profit on the sale, would

probably yield reasonable compensation for the loss attendant on an extra amount of dead capital.

The demand could not, certainly, under any imaginable circumstances, be so great as may be supposed to be possible, in the event of an unqualified repeal of the Bank Restriction Act; and the bank may thus collect an amount of treasure adequate to its security, and maintain at the same time, a circulation sufficient for the purposes of commerce and the public convenience. Whereas, to attain the like security, under the unqualified liability to pay in cash, would require an unattainable amount of treasure, or compel the directors to seek that security by withdrawing a large portion of their notes. The effect of that measure would, as already sta. .

' In Hamburgh, various gold coins, such as Louis-d'ors, Dutch and Danish Ducats, as well as the Ducats of the city, are current. Their prices Auctuate, without producing inconvenience; as in the ordinary course of retail transactions, they generally pass at the nominal value of silver, reç spectively affixed to them. It is when they assume the character of mer chandize, and are purchased with a view to payments at a distant fair, that they bear an agio against silver.

ted, be pregnant with infinite mischief. The exportation of gold, in an unfavorable state of the exchange, tends to correct that state, and to restore the equilibrium,-in the mean time the exporter pays bis foreign creditors at a cheaper rate than by bills.- Gold by this application of it becomes really valuable, by being rendered really useful.

The export of coin, if permitted by law, would effect with equal or greater facility than bullion, the payment of a foreign claim, and afterwards return to circulate again at home. The expense of a new coinage would thus less frequently occur.

In case of any sudden emergency, demanding an immediate payment abroad, government would also be enabled, by the aid of the bank, to transmit coin or bullion, and thus avert the consequence of a ruinous exchange.---This consideration will appear important to those, who know that the loss by exchange enhanced the expense of the late contest, to the amount of many millions.

Thence, in the event of war, the policy of again recurring to an unqualified Bank Restriction Act, is obvious. After an experiment wbich has proved incalculably beneficial, not only to this country but to Europe—a different course were to prefer danger to security, by deviating from that path, which has conducted us to honor and prosperity.

These suggestions are submitted to the public, with the anxious wish that they may lead to the means of conciliating, by a middle course, the conflicting opinions of those, who insist on the necessity of a metallic currency, or of a metallic test of paper currency, by an unqualified repeal of the Bank Restriction Act; and of those, on the other hand, who advocate the safe efficiency of a paper currency without such test.

Many persons of sound judgment do not hesitate to pronounce the dangers attributed to the latter to be wholly visionary, and, it must be confessed, with much appearance of reason ; since that opinion is countenanced by the experience of more than twenty years, during which period, agriculture and commerce have prospered beyond all former example. As these facts, however, are not received as conclusive, in the estimation of many others, whose sentiments, from their rank, their talents, and their influence, claim the utmost deference and consideration, every one will feel a just anxiety to allay their apprehensions, and hail with satisfaction, any safe and practicable system, which shall obtain the concurrence and support of both parties.

To that object do these pages owe their origin, and not to any apparent necessity for a change of system.

It is hoped, that the principles which they promulgate, may remove the objections of the scrupulous theorist

and prepare him to admit, that they make effectual provision for a metallic test of paper currency--a test, which averts the risk of deterioration --which presents no obstacle to the issue of bank paper sufficient for the fair demands of commerce, and yet provides the means of checking its redundancy.

They appear therefore calculated to guard against those convulsive fluctuations in the money value of property, which any material variation in the currency is certain to produce; and to prevent that chasm in the circulating medium, which would be the fatal and inevitable consequence of an unqualified Repeal of the Bank Restriction Act.

Note.-It is a fact of notoriety, that many highly respectable country bankers contemplate an immediate reduction of their paper currency, so soon as the bank restriction shall be removed.-They say prudently, that they will not incur the risk and expense attendant upon the carriage of gold from the Metropolis, in case of any unusal demand upon them. The mischief consequent upon such diminished circulation, can hardly be calculated.-As for instance the corn buyer and grazier pay the farmer in bills upon London—the latter requires small notes for his ordinary expenses -the banker refuses to discount, because he may instantly be called upon to pay his notes in cash.-In any event, whether the Restriction be continued or not, a tender of Bank of England notes in payment, ought still to be, as it now is, a protection against personal arrest.

1

OBSERVATIONS

ON

CREDIT,

WITH RELATION TO THE PROVISIONS OF THE

Bankrupt Law

AND

INSOLVENT DEBTORS' ACTS.

ORIGINAL.

LONDON:

1819.

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