Re: PAPER MONEY CONTROVERSY, ENGLAND 1856

Thanks for posting a very interesting and informative article.


Mark M. wrote:
National paper money


ISSUED BY GOVERNMENT
FOR INTERNAL AND COLONIAL CIRCULATION
LEGAL TENDER FOR DEBTS AND TAXES.



SHOWING THE SOPHISTRY OF "MERCATOR," IN THE "TIMES,"
WHO CONFOUNDS MONEY AND CAPITAL.



Being a Reprint of Articles taken from the "Sun" and "Derbyshire
Courier," January 15th, 1856.


NATIONAL PAPER MONEY.

(From the Derbyshire Courier.)

WHEN one has laughed at the amusing nonsense put forth
by the Times in its articles professing to be answers to Mr.
Salt, and begins to reflect what is the real matter in discussion
between the parties, it turns out to be simply this: the Times
holds that the circulating medium of the country should be
based upon gold, and Mr. Salt that it should rest on the 6000
millions which constitute the "capital" of the nation.

The Times wants to know how the "promise to pay" is to be
kept if we are not always ready to convert the Bank Note in a
certain quantity of gold of ascertained fineness. Now this
"promise to pay" is, after all, merely a legal fiction. It is very
much like the conventional fiction by which a Government
official, after informing you that "my Lords are not prepared
to take any steps" to redress your grievance, signs himself
"Your obedient humble servant." Take the Bank return
published in the Times of December 22nd. The active circulation
of Notes this return states to be, for the week, ending
December 15th, £18,581,300 - the bullion in both departments,
£11,306,338. So here are upwards of seven millions of
"promises to pay" for which no gold is provided. The
English Banks issue eight millions, the Irish six, and the
Scotch three, without any gold for the basis of their issues.
So here at this moment are about 24 millions of "promises to
pay" rushing about the country unprovided with the means
of keeping the said promise.

Does this give the people of England any anxiety? Is every
man asking "Can I always get gold for this bit of paper?"
Not at all. We all know that if a pressure, such as that of
1847, were to come the "promises" would fail to be kept.
But we know also that the Banks of Issue have, for the most
part, plenty of capital, and that the Bank of England is perfectly
solvent. We know also that if a panic were to take
place, Government would "suspend the operation of the Bill
of 1844" (which is the Parliamentary phrase for the Bank
stopping payment), that "inconvertible" notes would be issued
till gold came back, and that as soon as nobody wanted gold,
the Bank would be ready to keep its "promise" and to pay
everybody

But the "promise to pay" is in reality kept after all. The
Bank Note is "convertible" into food, lodging, clothing, and
everything which a man wants, including the Times newspaper.
It was so from 1797 to 1812; it would be so again under a
Bank Restriction Act, or legal tender paper. "Show us the
formula," says the Times, for a Bank Note. Very well. If the
Times wishes MR. SALT to adopt instead of the formula of
"yours respectfully" at the end of his letter, the plain straight-
forward "formula" of "your uncompromised opponent," there
can be little objection to it. Do away with "promise to pay"
if you like, and let Government issue Notes the simpler in
expression the better with "£1 Receivable for Taxes at Her
Majesty's Exchequer" impressed on them, and duly authenticated
by the proper stamp and signature. We think that the
Bank would manage this better than a Government department,
and should have the business in their hands as agents
of Government.

We have repeatedly approximated in this country to a
Representative Paper Money, and nothing but the ignorance
of the people of money's real value and use has prevented us
from deriving the greatest advantages from a cheap, unfluctuating,
and at the same time expansive paper currency. We
invite attention to an instance given by MR. MACAULAY in his
recent work (Vol. 4, p. 698).

"Another and at that conjuncture (1696) more effectual
substitute for a metallic currency owed its existence to the
ingenuity of Charles Montague. He had succeeded in
engrafting on Harley's Land Bank Bill a clause which empowered
the Government to issue negotiable paper at the rate
of threepence a day in a hundred pounds. In the midst of the
general distress and confusion appeared the first Exchequer
Bills, drawn for various amounts, from a hundred pounds
down to five pounds. These instruments were rapidly distributed
over the kingdom by the Post, and were everywhere
welcome. The Jacobites talked violently against them in
every coffee-house, and wrote much detestable verse against
them, but to little purpose. The success of the plan was
such that the Ministry resolved at one time to issue twenty
shilling bills and even fifteen shilling bills for the payment of
the troops. But it does not appear that this resolution was
carried into effect. It is difficult to imagine how without
Exchequer Bills the Government of the country could have
been carried on during that year."


Such Exchequer Bills without interest drawn for all
amounts from £1,000 to £1, or lower than 1 if necessary,
would be "everywhere welcome." We should then have a
circulating medium independent of drains of gold, panics, or
hoarding.

"How would you issue it?" the Times may ask. A portion
might he given to the Bank in payment of the Government
debt, and issued by them in July next in payment of the
Dividends.

A suggestion of this nature was recently made by a gentleman
of Manchester, and it seems a very sensible one. The
experiment would thus be tried at first on a moderate scale.

"How much of this paper would you issue?" asks the Times.

The active circulation of the bank from 1819 to 1844 has
varied from 25 to 17 millions, an average of between 20 and 21
millions. Let Government issue this amount, say 20 millions,
an arrangement being made with the Bank, after gradually
paying off the debt due from Government, to allow it to issue,
as trade and commerce might require, a few additional millions.

These things might be done, under good management, without
causing any derangement in our commercial or financial
relations.

We have one word more for the Times. An error, so evident
that it is surprising that it could escape the writer, runs
throughout all their articles on the Currency. He confounds
capital and money. And so he is constantly falling into absurd
contradictions. One day we have spent all our money, and are
poor. On Monday last he says, "Our country is wealthy beyond
computation."

We beg leave to recommend to the notice of the Times
writer an excellent article which we have extracted from the
Sun on this point.



"MERCATOR" v. THE TIMES ON THE CURRENCY.

(From the Sun.)

"Mercator" has based his arguments in support of the Bank
Charter Act of 1844 on the alleged fact that it is not currency,
but capital, that is deficient, and from thence he aims at the
conclusion that no issue of Bank Notes of any denominations
could possibly remove the evil which has occasioned such
serious injury to the industrial population of the country. The
Times follows in the same strain, and utters loud jeremiads on
the deplorable "poverty" of the nation. The existence of
general distress is admitted, on every side. On that subject
bullionist and anti-bullionist currency quacks, and currency
reformers, fully and completely agree. It is the common
starting point; the axiom that requires no proof. The mere
fact that the minimum rate of discount at the Bank of England
is 7 per cent for any bills having more than 60 days to run,
and the consequent limitation of credit, and difficulty of converting
the most unquestionable securities into money, establish
the accuracy of the painful assertion beyond the possibility
of doubt or controversy. But this admitted distress arises
from poverty, say "Mercator" and the Times, and no issue of
paper currency, whether convertible or unconvertible, can
alleviate it! On the other hand, we assert that there is an
ample supply of real capital, and that all that is required is a
sufficient measure and representative of value, a circulating
medium adequate to the wants and exigencies of the nation;
and that, for any practical purpose, it is no more required that
the currency should exclusively consist of the precious metals
than that the yard with which the draper measures his cloth,
or the weights by which the grocer or farmer weighs his tea
or sugar or corn should be made of sterling gold or silver!
Here then a direct and tangible issue is joined, and we confidently
await the verdict of public opinion thereon.

For what is capital? Does it consist solely of money, without
any allowance being made for money's worth? If nothing
but gold and silver can be taken into account, then may the
man possessed of rich and fertile lands, convenient and
gorgeously-furnished mansions, of flocks and herds, or of warehouses
filled to overflowing with costly merchandise, be nothing
better than a mere beggar. All his noble possessions may be
rendered of no value for lack of a few metallic counters, white
or yellow. Capital really consists of accumulated labour in
any form useful or convenient to the community, and also of
the natural gifts of Providence. Gold which requires a certain
amount of labour to extract it from the mines in which it
lay concealed is but one and, perhaps, the least valuable form
of that capital. It is chiefly sought because, by general consent,
it has been adopted as one of the means by which other
really valuable property can be exchanged with facility. It is,
as we have stated, merely the measure and representative of
real property, or true "Capital," and not real property or
"Capital" itself, or, at best, but one form thereof and there
is no more reason why we should not substitute a more philosophical
and convenient "representative" than there was at
the time of the adoption of gold instead of cattle, as the great
medium of exchange, that the old principle of barter should be
steadfastly maintained.



The Income and Property Tax affords a tolerably fair criterion
on which to extricate the actual "Capital" of the
country. We can calculate the value of the lands and houses,
and the various forms of national wealth or capital, producing
income or the means of livelihood. We can also guess at the
amount of wealth not indicated by these returns. The innumerable
flocks and herds, the horses, corn, and furniture,
implements of husbandry, works of art, and the various goods
and chattels comprised under the term "merchandise." These
are the items of actual wealth, and, if they had departed from
the country, we should be poor indeed. But so long as we
retain them, so long as we have possession of things bestowing
on the owners the necessaries, comforts, or luxuries of life, we
shall be rich, although there were not a single ounce of gold
remaining in the country, or in the world.

The true " capital" of the nation has been variously estimated
at from five to eight thousand millions of pounds sterling.
Taking even the lowest calculation that has been offered by
any trustworthy witness, why should the withdrawal of some
eight or ten millions create such wide-spread distress and suffering
when it bears no greater proportion to the general stock
than from one-sixth or one-fifth per cent., or some 3s. 4d. or 4s.
out of every £100? The man who had £1,000 in his pocket
would think it ridiculous to be required to reduce his expenditure,
or to submit to serious privations because he had the
amount diminished by some 30s. or £2. Why should the
nation act differently, or mourn for the departure of some
yellow counters, while its real wealth is not only untouched,
but is daily increasing in value? With five thousand millions
of property, and the thews and sinews of thirty millions of
people, seven millions five hundred thousand whereof may be
assumed to be adult males, and an equal number of adult
females, we are rich indeed, despite the want of gold. We
require but a convenient form of currency, or circulating
medium, to develop the capabilities and display the almost
miraculous elasticity of our natural resources; and that can
only be found in the employment of really national notes of
convenient denominations, the nature whereof we have repeatedly
indicated, and which will pass freely from hand to
hand, inasmuch as they will possess "a purchasing power,"
and every person will know that with these he can command
an amount of the necessaries, comforts, or luxuries of life
proportioned to their nominal value.


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