BAN 



Should the akrm he great and of long continuance, the 

 bank, by maintaining only a million of notes in circu- 

 Intion, may, by the continual return of thefe, be exhaufted of 

 fifty millions of guineas. Befides, a more permanent caufe 

 of a run upon the bank of England for fpccie is the excefs 

 of the market price of gold above its mint piice. This was 

 formerly occafioned by the dcbafed ilate of gold currency; 

 and the bank has been redaced to the neceffity of coining 

 new guineas, which were immediately melted down, that the 

 bullion might be fold to the bank itfelf at the hif^li market 

 price. In whatever manner the high price of gold is pro- 

 duced, immediate demands are made upon the bank for 

 guineas, in order to export them. Thefe it endeavours to 

 replace, though gold cannot be purchafcd without a conlider- 

 able lofs. A moft unequal competition will thus bi efta- 

 blifhed between the bank, on the one hand, which buys and 

 coins at a great lofs, and the clandelline dealers, on the other 

 hand, who melt and fell at a great profit. If the unfavour- 

 able balance of trade, which has caufvd this high price of 

 bullion, were not of a temporary nature, the bank of Eng- 

 land, by this continued accumulation of unproductive ex- 

 pence, might ultimately be reduced to very great d:llrtfs. 

 Beildes, the excefs of the market price of gold above its 

 mint price may likcwife be produced by too great a quav 

 tity of p;iper-moncy. The bank, indeed, has the power of 

 reflriAing tlie country paper, by limiting its own notes to 

 thofe which are avflually needed for the p-.;rpofcs of circu- 

 lation. It has, therefore, the power in a great degree of 

 preventing that high price of gold, ajid the confcquent 

 drain of its own guineas, which proceed from an exccflive 

 circulation of paper. So long, t'>en, as the bank is 

 liable to payments in fpecic, it has an evident intereft to 

 prevent its own paper, as well as that of the whole country, 

 from being fo exccffive, as to occafion a rife in the price of 

 commodities. To limit the total amount of paper iffucd, 

 and to refort, whenever the temptation of borrowing 

 is ftrong, to fome effeiilual principle of rellriclion ; never to 

 diminifh greatly the fum in circulation, but to let it vibrate 

 only within certain limits; to afford a flow and cautious ex- 

 tenfion of it, as the general trade of the country is enlarged; 

 and to permit a temporary increafe during an extraordinary 

 period of difficulty or alarm : — this, according to Mr. 

 Thornton (ubl infra), is the true policy of an inllitution 

 placed in the circumllances of the bank of England. 



If the bank of England, fays an anoaymous writer 

 (Edinb. Rev. N'. I. p. 196.), mull n^nv be confidereel ns a 

 national eftablifhment, not merely influencing, by the fu- 

 perior magnitude of its capital, the flate of commercial cir- 

 culation, but guiding its movements according to views of 

 public policy, an important revolution has taken place 

 fince the (irll erection of th?.t corporation as a banking 

 cllabliOiment. That power of iffning the medium of ex- 

 change, with the opportunities it implies of varying its 

 quantity and value, which, wlille precious coin was in ufe, 

 was exercifed under the Immediate prerogative of the crown, 

 is now virtuallv invelled in the governor and directors of 

 the bank of England. In the official ciiaracter of that 

 board, fome of the functions of fovcrclgnty are united to 

 thofe of a trader;, and the opportunities of banking profits 

 are blended with a trull and cliarge of the public interell. 

 It will be plcafing if thefe Ihall prove more happily com- 

 patible, than they have been found in other inilanceb-. The 

 organization of this eftablifhment, pofTeffed of fuch means 

 to control the operations of commerce, as well as to facili- 

 tate the advance of financial fupplies, may, into our political 

 conflitution already fo complicated, introduce a new prin- 

 ciple of ae'tion, the effeft of ijjjich cannot be cleai ly difcern- 



BAN 



ed. Perhaps an unbounded field will be opened for the ex- 

 ter.lion of minillerial influence; perhaps an unexpcfted 

 control may be gained to the people, over the views and 

 meafures of the executive. 



The fufpenfion of cafh payments in 1797, was an 

 event, in the opinion of Mr. Thornton, to which the national 

 bank was liable from its very nature ; the probability of 

 which has been too fcudioufly concealed ; and to the recur- 

 lence of which we may look forward. The gold, in the 

 coffers of the bank, had been much reduced by the tffc6l of 

 an unfavourable balance of trade. The alarms of invalion 

 had led to the failure of fome country banks in the noith of 

 England ; this occafioned a fjuther demand of guir.eas 

 from the bank, and a diminution in the circulating notes 

 of London. Tlie directors aggravated the diftrcts, and aug- 

 mented the demand for guinea-;, by unadvifedly fupprefling 

 fome of their notes, inilead of enlarging the quantity. It 

 has alto been alleged, that the loans of the bank to govern- 

 ment, which occafioned a limitation in its dilcount of com- 

 mercial paper, contributed, by their it.diretl and unavoid- 

 able oucration, to aggravate that dill; cis of the circulation 

 which was chiefly produced by other caufes. Although 

 the loans to government could have no tendency to dimmifti 

 the film of notes in circulation, it neverthclefs tended to 

 dillrefs the circulation, by rendering that fum of notes 

 lefs adequate to the wants of commerce, than if they had 

 flowed into the market through the ufual channel of dif- 

 counts. The fufpenfion of payments in fptcie was pro- 

 perly continued, according to Mr. Thornton, from the 

 permanence of thofe circumllances which rendered it origi- 

 nally iiEceffary: — an unfavoui-able exchange, produced partly 

 by our heavy expenditures, but cliiefly aggravated by vail 

 importations of corn ; and the prevalence, till the eve of 

 peace, of alarms about hollile invafions. Mr. Thornton 

 maintains that the circulating paper of the bank of England 

 does not in facl amount now to a greater fum than, upmi an 

 average of years, was in circulation before the fufpenfion of 

 calTi payments. Upon an average of three years, ending in 

 December 1795, their amount, according to the evidence 

 laid before parliament, was 11,975,5731. By a fubfequent 

 ilatement prcfcnted to the houfe of Commons, they amount- 

 ed in December 1800, to 15,450,9701. From t!ie difference 

 between thefe two fums, Mr. 'J^liornton infills that we ought 

 to deducl the amount of two millions, conlilliTig of one a;:d 

 two pound notes, which according to him have difplaced 

 in the circulation an equal fum of guineas. After this 

 deduclion, there Hill remains the fum of 1, 475, 397 h by 

 which the bank paper exceeded in 1800, its average amount 

 before the fufpenfion of cafh payments. But in the fpring 

 of 1 80 1, the governor of the bank ftated to the houfe of 

 commons, that the company had reduced its notes to a 

 fum lefs, by abiiut a million and a half, than their amount 

 in the preceding December. Lord King, in his " Thoughts 

 on tlie Reflricllon of Payments in Specie at the Banks of 

 England and Ireland," 8vo. 1803, difputes the correctnels 

 of Mr. Thornton's flatement ; and alleges, that in the 

 fpring of 1801, the iffue of notes amounted to 16,365,2061. 

 which was ilill farther incrcafed, in the fummer of 1802, to 

 16,747,300!. According to the lall account prefentcd to 

 the houfe of commons, the bank of England notrs in cir- 

 culation amounted to 16,108,560!. If we compare, fays 

 his hndlhip, this fuin with the above average of tlirce years 

 ending in December 1795, even after we add to the latter 

 the wliole two millions of which Mr. Tliorntnn fpeaks, 

 and which feems a very large allowance, the prefent iffue 

 from the bank will be found to exceed that, which was for- 

 merly convertible into fpecie, by fometbing lefs than one- 



fixth 



