creases the drain of the precious metals for exportation, which is a leading feature of this stage in the progress of a commercial crisis: the continuance of which drain at last endangering the power of the hanks to fulfil their engagement of paying their notes on demand, they are compelled to contract their credit more suddenly and severely than would have been necessary if they had been prevented from propping up speculation by increased advances, after the time when the recoil had become inevitable.
§ 3.To prevent this retardation of the recoil, and ultimate aggravation of its severity, is the object of the scheme for regulating the currency, of which Lord Overstone, Mr. Norman, and Colonel Torrens, were the first promulgators, and which has, in a slightly modified form, been enacted into law.[1]
According to the scheme in its original purity, the issue of
- ↑ I think myself justified in affirming that the mitigation of commercial revulsions is the real, and only serious, purpose of the Act of 1844. I am quite aware that its supporters insist (especially since 1847) on its supreme efficacy in "maintaining the convertibility of the Bank note." But I must be excused for not attaching any serious importance to this one among its alleged merits. The convertibility of the Bank note was maintained, and would have continued to be maintained, at whatever cost, under the old system. As was well said by Lord Overstone in his Evidence, the Bank can always, by a sufficiently violent action on credit, save itself at the expense of the mercantile public. That the Act of 1844 mitigates the violence of that process, is a sufficient claim to prefer in its behalf. Besides, if we suppose such a degree of mismanagement on the part of the Bank, as, were it not for the Act, would endanger Ihe continuance of convertibility, the same (or a less) degree of mismanagement, practised under the Act, would suffice to produce a suspension of payments by the Banking Department; an event which the compulsory separation of the two departments brings much nearer to possibility than it was before, and which, involving as it would the probable stoppage of every private banking establishment in London, and perhaps also the non-payment of the dividends to the national creditor, would be a far greater immediate calamity thau a brief interruption of the convertibility of the note; insomuch that, to enable the Bank to resume payment of its deposits, no Government would hesitate a moment to suspend payment of the notes, if suspension of the Act of 1844 proved insufficient.
