The Peel Bank Act of 1844- 
893 
have been subtracted from the circulation, and must of necessity- 
have been replaced by paper, if prices were not influenced. If 
then such money is exported in the course of trade, the level of 
prices will not respond to the equalizing influence which inter¬ 
national trade is supposed to bring about, unless a correspond¬ 
ing amount of notes be withdrawn. The coin which they repre¬ 
sent is gone; but, in this case, gone only from the bank, as its 
place in circulation is occupied by a paper substitute. * 1 Unless, 
therefore, the latter is likewise withdrawn, prices will not feel 
the unfavorable balance and no hindrance remains to check the 
export from continuing to such a point that a depreciation of 
the notes of issue takes place. If these notes cannot be ex¬ 
changed for metallic money there is no limit to the depreciatior 
which may ensue. But, even if they be steadily redeemable, 
although depreciation can then only exist within narrow boun 
daries, it may yet be sufficient to lead to disastrous convulsions 
in trade. 
This misconception of the conditions governing the with¬ 
drawal of notes from circulation under a system of redemption, 
was, as we shall see, the basis upon which Mr. Peel harmonized 
his measure of 1819 with those of 1844. He was quite at 
the standpoint of the currency school in this particular, though 
his confusion is perhaps more profound than that of any other 
member of it. 2 The same argument was advanced by Sir Wm, 
Clay, 3 Colonel Torrens, 4 and others. This is the crucial point 
in the theory responsible for the Peel Bank Act, and its im¬ 
portance for the purposes of this paper is that it formulates a 
theory of economic crises, and that in connection with it, one 
of the chief aims of the Peel Act of 1844 is to prevent the recur¬ 
rence of such convulsions. 
circulation is given in Tooke, IV, pp. 224-227. For Ricardo’s view, Wag¬ 
ner, “Lehre,” p. 100. He criticises Ricardo (Ed. McCulloch), pp. 77-78 
and in general, ch. 7. Cf. Fullarton, “Regulation of Currencies,” pp. 
71-74; quoted also by Mill, Prin. of Pol. Econ., Bk. Ill, ch. 24, § 4. 
1 Wagner, “Lehre,” p. 98. 
2 Wagner, “Lehre,” p. 99. 
3 Torrens, “Inquiry into * * * Renewal of Charter of the Bank of 
England,” pp. 10-15 and 45-50, et suiv. 
4 Tooke, IV, pp. 178-179. 
