Financial Legislation and its Limitations. 



15 



ing according to the demands of business ; in other words, that 

 business makes money, that the amount of loans is practically 

 equal to the amount of business. And it went further and in- 

 dicated that deposits performed the same function as notes. This 

 statement at that early period is so remarkable that it deserves 

 quotation : 



The effective currency of the country depends upon the quickness of 

 circulation, and the number of exchanges performed in a given time, as 

 well as upon its numerical amount ; and all the circumstances, M^hich have 

 a tendency to quicken or retard the rate of circulation, render the same 

 amount of currency more or less adequate to the amount of trade. A much 

 smaller amount is required in a high state of public credit, than v^^hen 

 alarms make individuals call in their advances, and provide against acci- 

 dent by hoarding; and in a period of commercial security and private con- 

 fidence, than when mutual distrust discourages' pecuniary arrangements 

 for any distant time. But, above all, the same amount of currency will 

 be more or less adequate, in proportion to the skill which the great money 

 dealers possess in managing and economizing the use of the circulating 

 medium. Your committee are of opinion, that the improvements which 

 have taken place of late years in this country, and particularly in the dis- 

 trict of London, with regard to the use and economy of money among 

 bankers, and in the mode of adjusting commercial payments, must have 

 had a much greater effect than has hitherto been ascribed to them, in 

 rendering the same sum adequate to a much greater amount of trade 

 and payments than formerly. Some of those improvements will be found 

 detailed in the evidence : they consist principally in the increased use of 

 bankers' drafts in the common payments of London ; the contrivance of 

 bringing such drafts daily to a common receptacle, where they are bal- 

 anced against each other; the intermediate agency of bill-brokers; and 

 several other changes in the practice of London bankers, are to the same 

 effect, of rendering it unnecessary for them to keep so large a deposit 

 of money as formerly." 



§ 13. The Bank Act of 1844, known as Peel's Act, professed 

 to be founded upon the principles of the " Bullion Report," 

 which, however, in some respects, was profoundly misinterpreted 

 by the Act, for the " Bullion Report" was infused with the spirit 

 of freedom that prevailed at the time that it was written; 

 whereas Peel's Act endeavored to restrict the issues of the Bank 



The "Bul- 

 lion Report " 

 clearly per- 

 ceived the 

 organic nature 

 of the bank 

 loan, and 

 partly indi- 

 cated the eco- 

 nomic identity 

 of the deposit 

 with the 

 bank note. 



Peel's Act 

 misinterpreted 

 the " Bullion 

 Report," 



" " The Bullion Report," Sound Currency, vol. II, no. 14, p. 23 ; found 

 also in W. G. Sumner's History of American Currency, Appendix. 



129 



