360 
sonal expediency ; by any disposition to 
prefer the interests of monopoly com- 
panies, of powerful combinations, and 
of leading individuals in the money- 
market, to those of the unprivileged, in- 
dependent, and in the aggregate far more 
important commerce of the country, it 
would be reasonable to expect from his 
superintendance a wiser conduct of the 
exchequer. A pamphlet is the form in 
which a man of intellect may most unaf- 
fectedly advertise his power of mind, 
and his comprehension of science : it is 
then for his country to remark his expe- 
dient destination, and to invoke at the 
appropriate emergency his aid. Lord 
King ought to be heard in his own 
words, 
<© Ttmust however be evident, that the ad- 
vantages which thus result from the use of 
a paper currency depend altogether upon the 
fact of its exactly supplying the place of that 
coin which it represents; and this quality 
can only be possessed by a currency which 
is immediately convertible into specie at the 
option of the holder. So long as this power 
of conversion continues, the notes in cireula- 
tion must be considered as equivalent to spe- 
cic; since they exist only by the choice of 
the public, who, if they preferred gold and 
silver, might immediately receive thei in ex- 
change. But when the obligation to pay in 
coin ceases, the currency no longer’ retains 
this determinate value, but whatever may be 
the credit or solvency of those by whom the 
paper is issued, it becomes capable ef being 
depreciated by excess of quantity. ‘That the 
power of inmediate conyersion into specie is 
the only circumstance which can prevent 
this excess, or maintain the value of any 
paper currency, is practically shewn by the 
occasional discount upon exchequer bills and 
other government securities bearing interest, 
of which the payment is ultimately certain. 
A currency exposed to such fluctuations 
must evidehtly be a very unfitmedium of ex- 
change or standard of value. 
«© As all paper credit depends essentially 
upon confidence, it is one ofthe evils of the 
system to be exposed to great derangements 
in. consequence of panics which produce 
runs, or sudden demands for cash, upon the 
banks which issue the paper. Jt now ap- 
pears that for some time prior to February 
1797, and indeed during the whole of the 
year 1796, the bank of England had been Ia- 
ouring under dithculties originating in an 
unfavourable exchange, but which were. 
much aggravated byan extension of its issues 
to government, and’an increasing demand for 
specie accasioned by public alarm. In con- 
sequence of this demand the directors found 
it necessary to diminish the issue of their 
notes, which in the beginning of the year 
1797 were teduced: from -the average of be- 
Le 
HISTORY, POLITICS, AND STATISTICS. 
“sessions + *~ 
/ 
tween ten and eleven millions to nearly eight 
millions and a half. Had confidence been 
speedily restored, this reduction would pro- 
bably have enabled them to survive the dan- 
ger. But the executive government having, 
for some reasons, thought it necessary to ex~ 
press their apprehensions of an invasion, and 
to take measures of precaution against hostile 
attacks, a general panic ensued, and a de- 
mand for specie from all parts of the country 
was made upon the bank of England. This 
brought affairs toa crisis: and the 25th of 
February 1797 the directors represented to 
government their inability to perform their 
engagements to their creditors, and their ap~ 
prehension that, unless some immediate step 
was taken for their relief, the bank would be 
exhausted of the whole of its cash. 
‘In this new and difficult state of things 
it is an important question to determine what 
is the system of conduct which true policy 
would have dictated. In cases of private 
commercial establishments of acknowledged 
solvency recourse is often successfully had, 
upon such occasions, to associations of the 
rincipal creditors. It seems highly proba- 
le, that a similar measure would, in this in- 
stance, have been attended with similar good 
effects ; and that the impending danger night 
have been prevented by an association of the 
merchants and bankers of London to sup- 
ort the credit of the bank, which would have 
bets followed by other associations in all the 
great and commercial towns. Engagements 
of the same kind might have been entered 
into by the individuals of both houses of 
arliament, grounded upon such inquiries 
into the solvency of the bank, and the causes 
of its failure as those which in fact took place. 
“If a positive law for the suspension of 
payments had been found unavaidable, it 
should have been limited to a peremptory 
time, under the most solemn parliamentary 
engagement that it should not again be re- 
newed ; and immediate provision ought to 
have been made for answering the demands 
of the public for gold by a new coinage to a 
considerable amount. Such a measure could 
not have been attended with any serious dif- 
ficulty or expence ; but had it even occasion- 
ed some degree of embarrassment, yet ne 
sacrifice was too great for the support of com- 
mercial credit and national faith ; and some 
straggle for such important objects might 
surely have been expected from that finan- 
cial courage and fertility of resources, which 
upon occasions of a very different nature dis- 
tinguished the measures of the late adminis- 
tration. 
«© Instead, however, of trying the effect of 
these natural and obvious remedies, recourse 
was at once had to the most violent means. 
An order of council was issued on the 26th — 
of February for restraining the bank from — 
payments in cash; and the restriction was_ 
confirmed by an act of parliament, which - 
‘was afterwards renewed during the existing: 
y 
