best be joined with some commentaries on provincial and joint-stock banking, to which let us now turn.

Government, to preserve the Bank-of-England-monop oly, having enacted that no partnership exceeding six persons should become bankers, and the Bank of England having refused to establish branches in the provinces, it happened, during the latter half of the last century, when the industrial progress was rapid and banks much needed, that numerous private traders, shopkeepers, and others, began to issue notes payable on demand. And when, of the four hundred small banks which had thus grown up in less than fifty years, a great number gave way under the first pressure-when on several subsequent occasions like results occurred-when in Ireland, where the Bank-of-Ireland-monopoly had been similarly guaranteed, it happened that out of fifty private provincial banks, forty became bankrupt and when, finally, it grew notorious that in Scotland, where there had been no law limiting the number of partners, a whole century had passed with scarcely a single bank-failure, legislators at length decided to abolish the restriction which had entailed such mischiefs. Having, to use Mr. Mill's words, "actually made the formation of safe banking-establishments a punishable of fence”—having, for one hundred and twenty years, maintained a law which first caused great inconvenience and then extensive ruin, time after time repeated; Government in 1826 conceded the liberty of joint-stock banking: a liberty which the good easy public, not distinguishing between a right done and a wrong undone, regarded as a great boon.

But the liberty was not without conditions. Having previously, in anxiety for its protégé, the Bank of England, been reckless of the banking-security of the community at large, the State, like a repentant sinner rushing into asceticism, all at once became extremely solicitous on

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this point, and determined to put guarantees of its own devising, in place of the natural guarantee of mercantile judgment. To intending bank-shareholders it said—“You shall not unite on such publicly-understood conditions as you think fit, and get such confidence as will naturally come to you on those conditions." And to the public it said— "You should not put trust in this or that association in proportion as, from the character of its members and constitution, you judge it to be worthy of trust." But to both it said "You shall the one give, and the other receive, my infallible safeguards."

And now what have been the results? Every one knows that these safeguards have proved any thing but infallible. Every one knows that these banks with Stateconstitutions have been especially characterized by instability. Every one knows that credulous citizens, with a faith in legislation which endless disappointments fail to diminish, have trusted implicitly in these law-devised securities, and, not exercising their own judgments, have been led into ruinous undertakings. The evils of substi tuting artificial guarantees for natural ones, which the clear-sighted long ago discerned, have, by the late catastrophes, been made conspicuous to all.

When commencing this article, we had intended to dwell on this point. For though the mode of business which brought about these joint-stock-bank-failures, was, for weeks after their occurrence, time after time clearly described, yet nowhere did we see drawn the obvious corollary. Though in three separate City-articles of The Times, it was explained that, "relying upon the ultimate liability of large bodies of infatuated shareholders, the discount houses supply these banks with unlimited means, looking not to the character of the bills sent up, but simply to the security afforded by the Bank endorsement; yet in none of them was it pointed out that, but for the

law of unlimited liability, this reckless trading would not have gone on. More recently, however, this truth has been duly recognized, alike in Parliament and in the Press, and it is therefore needless further to elucidate it. We will simply add, that as, if there had been no law of unlimited liability, the London houses would not have dis. counted these bad bills; and as, in that case, these provincial joint-stock-banks could not have given these enor mous credits to insolvent speculators; and as, if they had not done this, they would not have been ruined; it follows, inevitably, that these joint-stock-bank-failures have been law-produced disasters.

A measure for further increasing the safety of the provincial public, was that which limited the circulation of provincial bank-notes. At the same time that it estab lished a sliding-scale for the issues of the Bank of England, the Act of 1844 fixed the maximum circulation of every provincial bank-of-issue, and forbad any further banks-of-issue. We have not space to discuss at length the effects of this restriction: which must have fallen rather hardly on those especially-careful bankers who had, during the twelve weeks preceding the 27th April, 1844, narrowed their issues to meet any incidental contingencies; while it gave a perennial license to such as had been incautious during that period. All which we can notice is, that this rigorous limitation of provincial issues to a low maximum (and a low maximum was purposely fixed) effectually prevents those local expansions of banknote circulation, which, as we have shown, ought to take place in periods of commercial difficulty. And further, that by transferring all local demands to the Bank of England, as the only place from which extra accommodation can be had, the tendency is to concentrate a pressure which would else be diffused; and so to create panic.

Saying nothing more, however, respecting the impolicy

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of the measure, let us mark its futility. As a means of preserving the convertibility of the provincial bank-note, it is useless unless it acts as some safeguard against bankfailures, and that it does not do this is demonstrable. While it diminishes the likelihood of failures caused by over-issue of notes, it increases the likelihood of failures from other causes. For what will be done by a provincial

banker whose issues are restricted by the Act of 1844, to a level lower than that to which he would otherwise have let them rise? If he would, but for the law, have issued more notes than he now does-if his reserve is greater than, in his judgment, is needful for the security of his notes, is it not clear that he will simply extend his operations in other directions? Will not the excess of his available capital be to him a warrant either for entering into larger speculations himself, or for allowing his customers to draw on him beyond the limit he would else have fixed? If, in the absence of restriction, his rashness would have led him to risk bankruptcy by over-issue, will t not now equally lead him to risk bankruptcy by overbanking? And is not the one kind of bankruptcy as fatal to the convertibility of notes as the other?

Nay, the case is even worse. There is reason to believe that bankers are tempted into greater dangers under this protective system. They can and will hypothecate their capital in ways less direct than by notes, and may very likely be led, by the unobtrusiveness of the process, to commit themselves more than they would else do. A trader, applying to his banker in times of commercial difficulty, will often be met by the reply-"I cannot make you any direct advances, having already loaned as much as I can spare, but knowing you to be a safe man, I will lend you my name. Here is my acceptance for the sum you require they will discount it for you in London." Now, as loans thus made do not entail the same imme

diate responsibilities as when made in notes (seeing that they are neither at once payable, nor do they add to the dangers of a possible run), a banker is under a temptation to extend his liabilities in this way much further than he would have done had not law forced him to discover a new channel through which to give credit.

And does not the evidence that has lately transpired go to show that these roundabout ways of giving credit do take the place of the interdicted ways; and that they are more dangerous than the interdicted ways? Is it not notorious that dangerous forms of paper-currency have had an unexampled development since the Act of 1844? Do not the newspapers and the debates give daily proofs of this? And is not the process of causation obvious?

Indeed, it might have been known, à priori, that such a result was sure to take place. It has been shown conclusively that, when uninterfered with, the amount of note-circulation at any given time is determined by the amount of trade going on-the quantity of payments that are being made. It has been repeatedly testified before committee, that when any local banker contracts his is sues, he simply causes an equivalent increase in the issues of neighbouring bankers. And in past times it has been more than once complained, that when from prudential motives the Bank of England withdrew part of its notes, the provincial bankers immediately multiplied their notes to a proportionate extent. Well, is it not manifest that this inverse variation, which holds between one class of bank-notes and another, also holds between bank-notes and other forms of paper-currency? Will it not happen that just as diminishing the note-circulation of one bank, merely adds to the note-circulation of other banks; so, an artificial restriction on the circulation of bank-notes in general, will simply cause an increased circulation of soms substituted kind of promise-to-pay? And is not this sab