promissory notes for circulation was to be confined to one body. In the form adopted by Parliament, all existing issuers were permitted to retain this privilege, but none were to be hereafter admitted to it, even in the place of those who might discontinue their issues: and, for all except the Bank of England, a maximum of issues was prescribed, on a scale intentionally low. To the Bank of England no maximum was fixed for the aggregate amount of its notes, but only for the portion issued on securities, or in other words, on loan. These were never to exceed a certain limit, fixed in the first instance at fourteen millions.[1] All issues beyond that amount must be in exchange for bullion; of which the Bank is bound to purchase, at a trifle below the Mint valuation, any quantity which is offered to it, giving its notes in exchange. In regard, therefore, to any issue of notes beyond the limit of fourteen millions, the Bank is purely passive, having no function but the compulsory one of giving its notes for gold at 3l. 17s. 9d., and gold for its notes at 3l. 17s. 10½d., whenever and by whomsoever it is called upon to do so.
The object for which this mechanism is intended is, that the bank-note currency may vary in its amount at the exact times, and in the exact degree, in which a purely metallic currency would vary. And the precious metals being the commodity that has hitherto approached nearest to that invariability in all the circumstances influencing value, which fits a commodity for being adopted as a medium of exchange, it seems to be thought that the excellence of the Act of 1844 is fully made out, if under its operation the issues conform in all their variations of quantity, and therefore, as is inferred, of
- ↑ A conditional increase of this maximum is permitted, but only when by arrangement with any country bank the issues of that bank are discontinued, and Bank of England notes substituted; and even then the increase is limited to two-thirds of the amount of the country notes to be thereby superseded. Under this provision the amount of notes which the Bank of England is now at liberty to issue against securities, is about fifteen millions.
