396 Jones—Relation of Economic Crises to Legislation. 
exchange has begun, the depreciation necessary to bring it about 
forms an excuse for general distrust of the issuing bank and its 
circulation. In the sudden rush which succeeds, we have all 
the elements which combine to produce the keenest financial 
distress. * 1 
Here, then, we have an explanation of crises offered by the 
currency school, and to prevent the return of these the famous 
Peel Bank Act of 1844 was conceived. 2 
In the same year with the passage of the bill, Colonel Torrens 
wrote of it; “I believe that it will fully accomplish its object (i. e. 
the perfect assimulation of our currency to the metallic model), 
and that it will effectually prevent the recurrence of those cycles 
of commercial excitement and depression of which our ill-regu¬ 
lated currency has been the primary and exciting cause. ’’ 3 And 
previous to this he had argued, that a disturbance which caused 
the bankers to abandon the rule of restricting the paper to cor¬ 
respond with the fluctuations of bullion, could only arise through 
a neglect of it in the first place. 4 Sir William Clay practically 
agreed with this. 5 
Lord Overstone and a few others seem to have exercised more 
discrimination, and held that the regulation of the currency 
could only prevent such crises as were due to a mismanagement 
of the same. But in so far as this was the cause, the attempt 
give no better evidence of the liability of convertible bank paper to 
depreciation, what are we to think of the minister who gravely effects to 
found a great hank measure on such a principle9” James Wilson, 
“Capital, Currency and Banking/’pp. 58-59; also Tooke, vol IV, pp. 
189-191. 
1 The reason explaining the origin of such fine-spun artificialities as 
this is to be found in the ingrained idea of a quantatitive theory of 
money. To bring appearances into harmony with the theory accepted 
often imposed a severe tax upon ingenuity. 
2 This explanation of crises was more or less exclusively held, but, 
when other causes were admitted to have any influence, the mismanage¬ 
ment of the currency was still considered as co-operating and distinctly 
tending to increase the violence of the general disturbance. Cf. Wagner 
“ Peel’schen Bankacte,” p. 45. 
8 “ An inquiry into . . . the charter of the Bank of England,” etc., 
p. 100. See also Tooke, IV, p. 282. 
4 “ Letters to Lord Melbourne,” pp. 39-43. 
5 Tooke, IV, p. 284. 
