14 



W. G. Langworthy Taylor 



evidence of money given to the banker, and that the latter loans 

 out the money deposited, and also the other inconsistent idea that 

 paper money, whatever be its source, is a long-time standard of 

 value^ — those misconceptions will necessarily influence legisla- 

 tion and furnish an excuse for restrictions which hinder rather 

 than further business. It is impossible to obtain scientific legis- 

 lation in advance of the movement of popular opinion. This is 

 a wise provision of an over-watching Providence, which has put 

 the welfare of the whole people above that of any particular in- 

 stitution, such as banking, and which decrees that the imper- 

 fections of particular institutions shall not be removed until the 

 whole people has been educated to grasp the fundamental prin- 

 ciples. 



§ 12. There have been two main questions to work out in 



has ^'een"ife" banking legislation: one as to the elasticity of the currency, and 



form taken by the Other, subordinate to the first, as to the assimilation of notes 



idea within to dcposits. In early times, notes were used almost exclusively, 



circle^" *"^ the deposit business came in gradually, and for a long time it was 



not considered that it was really banking. When the question of 



the influence of credit upon crises first arose, bank credit was 



almost entirely in the form of notes. During the suspension of 



specie payments in England, at the time of the Napoleonic wars, 



an investigation into the operations of what was known as the 



"bank restriction act" of 1797, whereby the Bank of England 



was allowed temporarily to refuse payment on its notes, and in 



consequence of which the price of gold and of exchange rose 



considerably, led to the making, on June 8, 1810, of the famous 



" Bullion Report," which is one of the most carefully considered 



documents that ever issued from a legislative committee. 



The " Bullion Report " is mainly taken up with a convincing 

 argument that the rise in foreign exchange and in commodity 

 prices was due to inflation of Bank of England notes, as a con- 

 sequence of the exemption of the Bank from the obligation to pay 

 specie on demand. The keynote of the Report is that financial 

 legislation is interference, and that " sound money " is furthered 

 by leaving the banker exposed to his natural obligation as a 

 debtor. But the " Bullion Report " saw clearly the need of loan- 



128 



