Our banking system is bad in the extreme; it has been everything by turns, but what it ought to be, and nothing long. It is not only bad itself, but it communicates evil to everything around it. It is an epidemic that arrests and affects all classes; a plague that corrupts and kills high and low, poor and affluent, without distinction—a thousand incidents have taken place in this city within a year [London in 1842] which exhibit our monetary affairs in a most deplorable condition . . . . I have seen, last spring, a bill broker go from house to house, of an afternoon, with the bills of a country bank, accepted by first rate firms in Lombard street, and cash could not be got for them at five per cent. interest and one and a half per cent. commission. I have known, about the same time, a man with £10,000 Exchequer bills, unable to raise £4,000 upon them at his banker's, and that bank one of the best in Lombard street. I have known a city banker, at the beginning of last year, confess, in a mixed company, that he would be glad to allow ten per cent. for money for six months to come. At the same time, I have known another banker in Lombard street pay eight per cent. for an advance of money on Exchequer bills; and ten per cent. to be charged on the discount of a bill of Exchange, the acceptor of which was then, and still is, a Bank Director. These are facts that tell the true story of our banking system—these are realities that prove our distress . . . . While they last, credit is prostrate, labor fails of its market, and property almost ceases to be wealth . . . . Our currency has resembled the shifting sands that impede the navigation of some of our most capacious harbors, and shifting sands that impede the navigation of some of our most capacious harbors, and defy the skill of the most experienced mariners. We have been dealing with a series of experiments, and each succeeding writer has distinguished himself by showing where and how it was that the last experiment had proved a particular failure. . . . The Bank of England had the complete control and absolute management of the finances of the whole country, and the losses which the country has now, for fifty years or so, sustained by repeated abuses of that currency in the hands of the Bank, have been incalculable; so wild and extravagant have been the alternate expansions and contractions; so suddenly and capriciously have the value of money and prices been jerked up and tossed down, that it is not unreasonable to compare the Bank Directors to a set of awkward showmen at a fair, with the trading interests of the nation in a great ill-contrived swing-swong, which at one moment they fling up high in the sky, and at another bring down so low as to drag the ground and rake the gutters with it. . . . The habit of tampering with the currency was contracted by these gentlemen at an early period. We can trace it distinctly as far back as 1782, and find it persevered in up to 1839, invariably with the same pernicious results. . . . A heavy panic, fraught with great commercial distress, ran through the years 1783 and 1784, which has been brought home to the Bank by more than one conclusive witness. . . . . . In 1814, the Dutch ports were opened, the harvest was deficient; and that most searching of the calamities, to which our artificial condition is exposed, no sooner visited the land, than the importation of foreign corn occasioned a great decline in the price of this principal article of agricultural produce, which gradually extended to the price of commodities generally. Unprecedented suffering now took place; the storm swept the country through, and raged with increasing violence until 1819, by which time the agricultural and banking interests generally were reduced to the lowest pitch of distress. Farmers were insolvent everywhere; mercantile firms became bankrupt by thousands and levelled their connexions indiscriminately in the dust; whilst as to the bankers, between those who either partially suspended business or wholly broke, in the years 1815 or 1816, there was a diminution of no less than 240 firms. . . . In noticing the moving causes of the calamities of 1816, we should bear in mind that the cessation of hostilities on the continent was an established condition of the long promised resumption of cash payments. Much of the panic then existing is referable to a proposal for carrying that measure into effect, in 1818.

The Bank made some preparations for the change by a partial contraction of its issues. But the depression of all the leading interests of the country was too intense, and the notion was quickly abandoned.

In the midst of this fall of prices, what operation in business could proceed without loss or ruin? There has been no firm in which the capital of the merchant, none in which the capital of the manufacturer, could be invested without the half of it being sacrificed during this calamitous period. We have been thrown back upon a condition of events in which all industry and enterprize have been rendered pernicious or ruinous, and where no property has been safe, unless hoarded in the shape of money, or lent to others on double security.

The reward of labor being destroyed, the laborers, who can each produce four times as much of the comforts of life as they and their families could possibly consume, are starving while superabundance reigns around them. They find no employment, because the organ of industry, which is money, does not exist in sufficient quantities to give productive classes a reward for their exertions. The peasant idly wanders about, and looks over the hedge of the uncultivated farm, where the land is suffering for want of his labor, but at the same time the farmer has neither the profit nor the labor to bring the land into cultivation.

Of the bankruptcies that then took place, and of the extreme depression of our manufactures and commerce, it would be impossible to give any exact account. Prices fell forty per cent. In the manufacturing districts there was no employment for the workmen; merchants stopped payment in numbers, not because they were insolvent and had no property, but because no market was to be had for their goods, no discount for their bills, no advance upon their stocks. It was a rare and melancholy sight to behold English merchants going through the Gazette in numbers, while their warehouses were full of commodities, and their characters unimpeached for knowledge of business, integrity and exemplary conduct; yet such were the incidents that characterized the panic of 1836.

. . . . . There was another panic in 1839 which may be said to have extended itself by a series of fits and convulsions all though the years 1840 and 1841, at which date our commercial system was reduced to the lowest ebb of distress. The number of banks which stopped or disappeared during this interval was unusually great, the difficulty of getting money as rigid as ever, find the stagnation of our commerce, the scarcity of good merchant paper, extreme. . . . Late in 1840 began the storm which, continuing to rage all through 1841, and not even as yet (in 1842) blown over, has swept away, during its protracted and ruinous courage; an unusual number of banking establishments. A history of these misfortunes, in their various details, is here out of the question; to trace the separate cases to their source, and detail at length their consequences, would fill a volume, and then, in all probability, leave the subject unexhausted. I had prepared a summary of the losses occasioned by the different failures amongst the private and joint stock banks during the last two years, but the amount appears so formidably large on the one side and so small on the other, that it would be invidious to publish it. . . .

Against the actual exhaustion of its treasure by a drain through the foreign exchanges, the bank, under almost any circumstances, has the power of protecting herself; but to do this she must produce upon the money market a pressure ruinous from its suddenness and severity; she must save herself by the destruction of all around her.

We, the undersigned, iron masters and coal masters of the Staffordshire iron and coal districts, think it our duty respectfully to represent to His Majesty's Government the following facts:

1. That for the last five years, ever since what is called the panic of 1825, we have found, with very slight intermissions, a continually increasing depression in the prices of the products of industry, and more particularly in those of pig and bar iron, which have fallen respectively, from upward of 81. per ton to under 31. per ton, and from £15 per ton to under £5 per ton.

2. Against this alarming and long continued depression, we have used every possible effort in our power to make bread. We have practiced all manner of economy, and have had recourse to every possible improvement in the working of our mines and manufactories. Our workmen's wages have in many instances been reduced, and such reduction has been attended with, and effected by, very great distress; but the royalties, rents, contracts, and other engagements, under which we hold our respective works and mines, have scarcely been reduced at all, nor can we get them effectually reduced, because the law enforces the payment in full.

3. The prices of the products of our industry having thus fallen within the range of the fixed charges and expenses which the law compels us to discharge, the just and necessary profits of our respective trades have ceased to exist, and in many cases a positive loss attends them.

4. Under these circumstances, we have long hesitated in determining what line of conduct our interest and our duties require us to adopt. If we should abandon our respective trades, our large and expensive outlays in machinery and erections must be sacrificed at an enormous loss to ourselves, and our honest and meritorious workmen must be thrown, in thousands, upon parishes already too much impoverished by their present burthens to support them; and, if we should continue our present trades, we see nothing but the prospect of increasing distress and certain ruin to all around us.

5. In our humble opinion, the great cause which has been mainly instrumental in producing this depression and distress in our respective trades, and among the productive classes of the country generally, is the attempt to render the rents, taxes, royalties, and other various engagements and obligations of the country, convertible, by law, into gold, at £3 17s. 10 1/2d. per oz. This low and antiquated price of the metallic standard of value is no longer capable of effecting a just and equitable distribution of our products between the producer and the consumer; it renders incompatible the permanent existence of remunerating prices, without such a reduction of taxation as we cannot hope to see effected in time to afford us any relief—and it thus tends, ultimately and surely, to destroy the industry, and the peace and happiness of the country.

6. That until the establishment of a circulating medium of a character better suited to the various and complicated demands of society, and to the increased transactions and population of the country, and more competent to effect an interchange, and preserve a remunerating level of prices in the products of industry generally, we can see no prospect of any permanent restoration of the prosperity of our trades, or of the country being able to escape the most frightful sufferings and convulsions.

We, therefore, most respectfully, but very earnestly, request the early attention of His Majesty's Government to these great facts and considerations, and we insist that they will recommend to Parliament the speedy establishment of some just, adequate and efficient currency, which may properly support the trade and commerce of the country, and preserve such a remunerating level of prices as may ensure to the employers of labor the fair and reasonable profits of their capital and industry, as well as the means of paying the just and necessary wages to their workmen.

Our country gentlemen must learn to penetrate the arcana of the Exchanges, and fathom the depths of the banking system, if they mean to preserve their broad acres from the grasp of the mortgagee, and their title deeds and mansions from the blaze of revolutionary fires. Difficult and obscure, indeed!! Yes, the subject is difficult, just as difficult to the public comprehension as is a juggler's trick, by which, with a “heigh, presto!!” he conjures the half crown we thought we had safe in our pocket into his own. How the money vanished it is not so easy to say; but it is nevertheless certain that we had it, and ought still to have it, but he has got it. So it was exactly with the currency juggle. Few of the sufferers can explain or understand how it happened, but the fact is very plain to them that they have somehow lost a great deal of money, and other persons have got hold of it. A little consideration, however, may, we think, render the nature of the trick intelligible to the simplest. It is very clear that those who are in business pay nearly the same sum in taxes, at present, as when the goods they deal in sold for double their present prices; so that they really pay two hundred weight of wool, or of cheese, or of sugar, or two pieces of cloth, linen, or calico, or two tons of iron or hardware, to the tax gatherer, for one that they formerly paid; and the taxes, reckoned in goods, which is the only sure way of knowing their cost to the producers of goods, by whom they are paid, are clearly twice as high at the end of sixteen years of peace, as they were at the close of a long war!! Is it wonderful then that the productive classes are laboring under severe distress? That peace, which usually brings plenty, has thrown away her emblematic horn, and selected hunger for her motto!! And can there be any doubt that the fall in prices, which has wrought this fearful evil, is the necessary result, foretold by ourselves and many others at the time, of the legislation of 1819 and 1826, which, by crippling the banking system of England and attempting a currency of dear metal for one of cheap paper, has caused a continually increasing scarcity of money and contraction of credit!!

If we succeed in showing that the unjust restrictions, kept up by the present laws, on the circulating medium of exchange, have had the effect, within a few years past, of silently but forcibly transferring a vast amount of property from the possession of one class to that of another, who had no just right or title to it—of covertly despoiling, in short, one portion of the community, namely: the persons engaged in industry, for the benefit of another portion, the owners of fixed money obligations, payable out of the labor and capital of the former—it will be acknowledged that, until the laws which have perpetuated and continue to sanction this wholesale swindling are repealed, there is no safety for property; nor can there be any reliance on the stability of those institutions, of which a confidence in the security of property is the indispensable foundation.

The sufferers here most correctly attribute their losses to the late increase in the value of money, but they seem to look for relief in a deterioration of the standard. In this view we do not concur with them, only because we think so desperate a remedy is not necessary, for that other and unexceptionable plans may be resorted to for the relief of industry . . . . Next to a direct increase of the supply of the precious metals, the most obvious resource seems to be to augment the efficiency of that which we possess, by a degradation of the standard—in other words, by diminishing the intrinsic value of the coinage; cutting, for instance, our sovereigns, shillings and other pieces of money, into two or more parts, which should each, by law, retain the nominal value of the whole. This is, in substance, the proposal which seems to find most favor with the persons who have spoken or written on the subject of the currency for some years past. It is this, as we have seen, that is advocated by the iron trade, and by their powerful champions, the Messrs. Atwood. It is this to which Mr. Westen, and a large body of agriculturalists have been long pointing as the only practicable mode of permitting them to come to an equitable adjustment with their creditors, public and private. . . . . . . We acknowledge, indeed, the force of the retorts levelled by the advocates of this alteration against their opponents, when the necessity of preserving the national faith inviolate is thrown in their teeth. They ask, with bitterness, and with justice, too:

“Is faith to be kept only with the monied interests? Was no good faith to be kept with the landholder, the merchant, the manufacturer, the vast laboring population who bore the weight of the national struggle, who cheerfully made great and numerous sacrifices during the war, and who continue the real strength and greatness of the Kingdom? No faith whatever was kept with them. They, through their representatives, engaged themselves to a debt of so many pound notes—but not to the same number of sovereigns—to a debt consisting of money, at its then value, but they protest being held responsible for the same annual sum now that its value has been artificially doubled. Does not good faith require that the scale should be held fairly between debtor and creditor? Was it consistent with the national faith, upon the plea of arresting the progress of depreciation in 1819, to turn the tables wholly the other way, and, by reviving an obsolete standard, to give to monied obligations a value that is a command over the produce and property of others, which the persons originally forming those contracts could never have contemplated, and which consigned at once to overwhelming and unmerited ruin, the commerce, the manufactures and agriculture of the empire?”

We freely admit the weight of these remonstrances. We acknowledge that, through an overstrained anxiety for observing the letter of the national faith, the spirit of the obligation was disregarded and a gross injustice committed on the great body of producers throughout the Kingdom, as well as on all debtors. It is true—

“Nothing could be more honorable than the feeling which induced our statesmen to return to the ancient standard; but, to our sorrow, their estimate of its effects was much below the mark. They did not see what a revolution of property would ensue. They consulted our honor, our reputed solvency, but not our real means. Mr. Ricardo told them the change would be five per cent. Events have proved it fifty. . . . There remains another course for consideration; one which we have urged for some time past upon the public, as the true mode of relief from our monetary difficulties. . . . We mean the removal of the mischievous restrictions which now fetter the circulation of credit through this country, and the concession of the free right of commerce to provide itself with whatever instruments it may require for effecting its exchanges uninterfered with by those officious legislative intermeddlings which experience has sufficiently proved to be fatal to almost everything they touch, but to nothing so much so as to the currency. It is physically impossible to carry on the commerce of the civilized world by the aid of a purely metallic currency—no, not though our gold and silver coins were every tenth year debased to a tenth!! Why, in London alone, five millions sterling ($25,000,000) are daily exchanged at the Clearing House in the course of a few hours. We should like to see the attempt made to bring this infinity of transactions to a settlement in coined money. Credit money, in some shape or other, always has, and must have, performed the part of a circulating medium to a very considerable extent. And by one of those wonderful compensatory processes which so frequently claim the admiration of every investigation of civil as well as of physical economy there is in the nature of credit an elasticity which causes it, when left unshackled by law, to adapt itself to the necessities of commerce and the legitimate demands of the market. . . . The only measures which appear to us to be needed upon the expiration of the Bank Charter, are: 1st. That all banks be required to deposit security in Government stock to the full amount of the notes they issue. 2d. That the law be repealed which forbids the issue of notes under five pounds. 3d. We would make the notes of metropolitan banks only convertible into bars of bullion, on the plan of Mr. Ricardo, and allow the notes of country banks to be paid in those of the metropolitan banks.”

So early as December, 1794, the Court of Directors (of the Bank) represented to Government their uneasiness on account of the debt due by the Government to the Bank, and anxiously requested a repayment of at least a considerable part of what had been advanced. In January, 1795, they resolved to limit their advances upon Treasury bills to £500,000; and, at the same time, they informed Mr. Pitt that it was their wish that he would adjust his measures for the year, in such a manner, as not to depend on any assistance from them. On the 11th of February, 1796, they resolved, “that it is the opinion of this Court, founded upon the experience of the late Imperial loan, that if any further loan or advance of money to the Emperor, or to any of the foreign States, should, in the present state of affairs, take place, it will, in all probability, prove fatal to the Bank of England.”

The bank failures that then occurred were the more distressing, as they chiefly affected the industrious classes, and frequently swallowed up in an instant the fruits of a long life of unremitting and laborious exertion. Thousands upon thousands, who had, in 1813, considered themselves as affluent, found they were destitute of all real property, and sunk, as if by enchantment and without any fault of their own, into the abyss of poverty!! The late Mr. Horner, the accuracy and extent of whose information on such subjects will not be disputed, stated in his place in the House of Commons, that the destruction of the country bank paper, in 1815 and 1816, had given rise to an universality of wretchedness and misery, which had never been equalled, except, perhaps, by the breaking up of the Mississippi scheme in France.

Every country has a certain number of exchanges to make; and whether these are effected by the employment of a given number of coins of a particular denomination, or by the employment of the same number of notes of the same denomination, is, in this respect, of no importance whatever. Notes which have been made a legal tender, and are not payable on demand, do not circulate because they are of the same real value as the commodities for which they are exchanged, but they circulate because having been selected to perform the functions of money, they are as such received by all individuals in payment of their debts. Notes of this description may be regarded as a sort of tickets or counters to be used in computing the value of property, and in transferring it from one individual to another. And as they are nowise affected by fluctuations of credit, their value, it is obvious, must depend entirely on the quantity of them in circulation as compared with the payments to be made through their instrumentality, or the business they have to perform. By reducing the supply of notes below the supply of coins that would circulate in their place were they withdrawn, their value is raised above the value of gold; while by increasing them to a greater extent it is proportionally lowered.

Hence, supposing it were possible to obtain any security other than convertibility into the precious metals, that notes declared to be legal tender would not be issued in excess, but that their number afloat would be so adjusted as to preserve their value as compared with gold nearly uniform, the obligation to pay them on demand might be done away. But it is needless to say that no such security can be obtained. Whenever the power to issue paper, not immediately convertible, has been conceded to any set of persons it has been abused, or, which the same thing, such paper has been uniformly over issued or its value depreciated by excess.

In 1793, 1814, 1815, 1816, and in 1825, a very large proportion of the country banks were destroyed, and produced by their fall an extent of ruin that has hardly been equalled in any other country. And when such disasters have already happened it is surely the bounden duty of Government to hinder by every means in its power their recurrence.