should not be always corrected by instant reference to the foreign exchanges, because there might be at the time an extent of transactions in the country which would be unduly cramped. An adverse state of exchange, of course, creates a demand on the Bank for gold instead of paper; but that will not at all regulate the amount of paper necessary in the metropolis to suit the state of transactions, as before said. The exchanges were unfavourable from Sept. 1830, to the spring of the year; but the same circulation was, in fact, nevertheless required. The value of money was, however, raised. The case did not arise from any mismanagement in the Bank, but from commercial causes, and the political state of the continent. The Bank evinced caution and judgment in regulating the circulation, as well to meet the above contingency as in obedience to the exchanges. An adverse exchange has a tendency to correct itself by diminishing the circulation; but it would not be proper for any public body to compel that diminution with improvident haste. Any proceeding of the Bank of England, having the effect of lowering or increasing prices, certainly operates on the rate of exchange; but any interruption of the transactions of trade, which would diminish dealing, might delay the rectification, by bringing fewer foreign bills into the market. Any thing that tends to diminish the price of goods in this country, tends to lessen the temptation to merchants abroad to send goods to our market, and increases the desire to purchase rather, which, of course, affects the exchange. When the Bank reduces its issues, the result is-first, caution in money dealers, and through them to the dealers in goods; this leads to a reduction of price, and tempts foreigners to buy. A reduction in price has clearly a tendency to improve the exchange. In what space of time the Bank's contractive action may produce this consequence depends on the extent of the operation. At the time of the panic prices fell, notwithstanding a large increase of bank circulation, and the exchanges were thus suddenly brought round. Our commercial transactions alone subject us to occasional adverse exchanges, as is in the nature of things. The exchanges since 1822 have been powerfully affected by foreign loans, more so than by the course of commerce. There appears no measure that the Bank could take, or may now take, to regulate the exchanges, but the customary one of reducing their circulation. Individuals in this country are less likely to enter foreign loan speculations when the exchanges are unfavourable, though only in the degree to which the fact would affect the value of the operation. These affairs may occasion a drain of bullion from the Bank, and there is no mode of prevention other than by increasing the value of money, which, however, will not protect them entirely. The fall of prices that attended the panic altered the exchanges favourably; therefore, so far as the drain of gold for foreign purposes was concerned, the panic itself may be said to have assisted the Bank to recover. An unfavourable exchange to a certain extent shows a lower value of money in this country than its corresponding value on the continent, but not invariably. Other causes may also be assigned; the governments of Europe may be in want of specie, or individuals wish to get possession of it. Gold having accumulated in this country, drained from the continent, a lower value of money

ensued; but there had been a low value of money in London previously to the period alluded to. It was at two-and-a-half per cent. interest up to the end of September, 1830; then it jumped up to four, and has since ranged betwixt three and four; lately, it has been tending to three per cent. Something like a correspondent rate prevailed in the other capitals of Europe. The value of money thus appearing so nearly alike in the different capitals, it seems a question why it should be sent from the one to the other; but it must be borne in mind, among other things, that gold usually bears a premium on the continent, sometimes so high as to invite to exportation without a necessity from the state of exchange, or from the balance of trade being against us. A generally unfavourable exchange is no indication of an excess of paper issue in this country. It is quite a mistake for people to suppose the exchanges can, or ought to be, always in our favour. The state of the exchange is to be estimated by its being worth the while of merchants in London to remit gold instead of bills. There are enterprizing speculators who would bring specie from Paris for a profit of a quarter per cent. One half per cent. would be a good remuneration. The proper mode of estimating the state of exchange with Paris, for example, is to combine the figures given for it in the return with the premium, or agio, upon gold. If the standard of this country was also, like that of France, silver instead of gold, the calculation would be less intricate. The unfavourable exchange subsequent to September, 1830, was not owing to any excess of circulating medium; there had previously been a long course of favourable exchanges, which naturally in time produces the reverse; bullion became scarce abroad. The very operation of gold going out of the country reduces the amount of paper money; this, it is true, raises its value, and thence produces a demand at the Bank for discounts, but only in so far as it is worth while to pay four per cent. for them, which is above the market rate. No material reduction of circulation took place between 1830 and 1832, and probably the exchanges would have come round without any. The country bankers were little affected by the slight contraction. Exchequer bills fluctuated from 41. premium to par, which is a sign of the increased interest value of money. No increase in the number of exchequer bills floating had effect in this. In case the value of money should, immediately after a drain for bullion from abroad, rise to four per cent., so as to create the demand for discounts before mentioned, then it might be necessary for the bank to counteract this demand, either by raising the discount to 51. per cent., or by the sale of securities. It would be injurious to refuse discounts altogether; the latter course would be preferable to that. Fluctuations in the value of money would take place, even though there were no paper money, and to a greater extent, because a circulation of coin does not give the same facilities to transactions. No system of banking can prevent the variations of exchange.

4. Country Bank Circulation preferable to a Circulation by Country Bankers of Notes of the Bank of England, &c. (p. 3598.)

A mixed circulation is the best state of currency. Such a circulating medium as we now have has the most wholesome effect in

controlling these variations. It is not, as assumed, in the nature of a paper circulation that with rising prices there would be enlarged issues, and, with falling, a contraction; having a tendency in each case to increase the prevailing disposition so as to lead to greater fluctuations than a metallic currency would. For, in this, country bank paper is mainly concerned, and that fluctuates wholly and solely with the state of prices and transactions in the district. The amount cannot be increased beyond what is called for. It cannot be governed by any act of the banker. If country banks were compelled to issue Bank of England notes, the effect on prices would be more sudden, because the whole circulation would be immediately controlled through the bank only, and the bank is influenced by the questions of gold and exchanges. Whereas, country paper becomes modified by the interests and wants of the particular town or district; and though it must ultimately follow a reduction of the Bank of England, would do it gradually. The Bank might issue to excess on government securities merely. Part of the excess would remain inoperative, only affecting the rate of interest in London; but, after a time, prices would be affected, and country bankers enlarge their issues; exchanges would soon go against us, which would bring the matter round by forcing the Bank to withdraw the excess. Then the prices, and the country bank circulation, would return to the level from which they rose. In speaking of fluctuations in the value of money not being injurious, witness must be understood to mean its interest value; and the same in all forgone allusions to the said value. It may be a considerable time before an over-issue from the Bank is corrected through an unfavourable exchange, because at the time so large a portion of it remains inoperative. Practically the rise in prices is produced through the discount of bills and loans by country bankers. A great increase of bills takes place from this cause.

5. State of the Country Circulation, and Arguments against the Re-issue of Small Notes by Private Bankers. (p. 3621.)

All the pecuniary transactions of London are discharged in Bank of England notes; and the balances between country bankers being also settled by their agents in town, assume the character of London transactions. Though the balance paid in one day at the clearing-house may be 500,000Z., the parties settling must be prepared with a much larger amount of bank notes. Notes of 1001. and upwards are most of them held by London bankers. The country bank circulation is much reduced from what it was; it ranges now somewhere from 3,000,0002. to 5,000,000l. The amount of stamps is a fallacious guide on the subject; for a banker may have a large mass of notes stamped, yet not in circulation. 8,000,000l. might probably be the sum of the country notes when in their past highest circulation;-the period about 1822, 3, and 4. Since the withdrawal of the 17. notes, the bankers, both in London and the country, have afforded the public all the wholesome accommodation that has been required. There has been no difficulty in getting good bills discounted since 1826; the difficulty has been to get bills enough. Witness would not recommend a renewed issue of

17. notes. The circulating medium in sums so small is better in gold than in paper. If ever a recurrence should be had to such an issue, it should be from the Bank of England alone. The majority of country bankers are opposed to that recurrence. There is much less chance of agitation from there being no 17. notes. Sudden demands have frequently risen with the holders, who are mostly poor persons. Witness thinks that, with gold in circulation, such an alteration of the law would drive it back to London, as the public prefer paper to metallic money. This would increase the mass of gold in the stores of the Bank, and affect the interval which necessarily takes place between an alteration of the exchanges and its effects upon the prices of commodities. The exportation of gold brings back prices; and it is clear, if the Bank have a large stock of it, they could act more freely. But any contraction would have its power on the exchanges, whether the stock of gold were large or not.

6. Speculation excited by Enlargement of Issues.-The Bill Market at present clear of Accommodation Paper, &c. (p. 3662.)

January, 1824, was a period of great transactions; prices were high and business doing in every line. If on the 1st of January there were, as is stated, 14,000,000l. of bullion in the Bank, it would take a considerable time for prices to operate on the state of exchanges. That might have aggravated the distress of 1825. When an increase of country circulation takes place, speculation is promoted. Of late years that speculation has been of a sound character: goods generally have gone through very few hands between the importer and consumer. The present distribution of capital among the traders in the country is, upon the whole, in a healthy and favourable state, and trade generally is very sound. Pecuniary accommodation, administered with discretion, has materially occasioned it to be so. The market is uncommonly clear of what is called "accommodation paper," another proof of the existing healthy state of the currency.

7. Opposed to Publicity of Accounts, and recommends Protection to Private Bankers. (p. 3681.)

In case of a renewal of the Bank Charter, witness can only suggest, as a beneficial alteration, that the Bank should be checked in trespassing upon private banking, by which he thinks the public suffer disadvantages. A publication of the amount of bullion in the Bank would be injurious; there are points in their affairs which it would be well enough to know, but, in the main, caution should be observed. Credit is ticklish in its nature, and by no means aided by exposure. Witness further thinks that publicity of accounts, in a time of panic, would not allay, but increase apprehension. He has never known concealment by the Bank tending to produce false impressions of its conduct. The knowledge the public now indirectly have of what is going on in the Bank gives all the confidence required. Wherever there is exposure, there is, of course, a check on management; but, generally speaking, the affairs of the Bank are at present well managed. This is certainly left at the discretion of the Bank Directors; but there

can be no establishment put on such a foundation as to forbid the chance of mismanagement. Their system, it is true, was once different, but it does not follow that it was bad, and may again be bad; because circumstances differ. Witness thinks it a good mode of proceeding for the Bank to keep its securities at the same amount, and to allow any draft of bullion to act upon the general circulation of the country. They might sell some of their securities with a view to that end, without its being a drawback from the benefits of the described course. Indeed, unless that was done to prevent the variations of exchange acting too suddenly on the circulating medium, it would be bad management. As the state of things changes, the banking system altogether must change; what was advisable in 1825 would not be advantageous in 1832. A publication of the Bank accounts, including its treasure, if made retrospectively at intervals of three or six months, would be a less evil, just inasmuch as it would be a less degree of publication. During favourable times there would be no danger from a published account of bullion; but a statement of decreasing stocks of it would aggravate the evil, and increase the difficulties of the Bank. In December, 1825, it was tolerably well known to the money dealers that the stock of bullion in the Bank had fallen very low, but not to the community at large. As to the persons who at that time received 17. Bank of England notes in the country instead of gold, they would draw no inferences; because such kind of persons think very little about the Bank and its stock of bullion. Witness does not think that, though a publication of accounts for years past might show that the amount of bullion had frequently been very low, it would have any effect to calm the apprehension in moments of difficulty. The Bank of France published accounts, but he does not think a comparison of circumstances bears. France depends infinitely less upon the credit of her bank than we do. His objections, however, apply chiefly to a bullion account ; he does not see any impropriety in the sum of notes in circulation being declared. Such declaration might be weekly, if it were wished, and might properly extend to the country notes, though that were immaterial. Witness has never, in his experience, found the Bank Directors unreasonably reserved towards money dealers. Any information that an individual may have a right fairly to ask is generally accorded. There are yet many things occurring in the establishment that it would be improper to tell any one. In forming his opinion of the danger of a bullion account, witness has not overlooked the increased diffusion of intelligence on such subjects; but he cannot rely upon its controlling capricious runs on the Bank. He moreover thinks, that many who profess to understand the matter, are exceedingly ignorant of it. 8. Opposed to any alteration of the present System. - Does not approve of Joint Stock Banks. (p. 3725.)

He does not approve of the policy of allowing other banks in the metropolis, without any restriction as to the number of the partners, to issue notes; esteeming the Bank of England notes, founded as they are, to be the best circulating medium. The present system works well in London, and he is, therefore, against any alteration, as likely to