712 
for some other article which is’ capi- 
tal, they fall into the channel of cir- 
culation as so much’ cirenlating me- . 
dium, and form an addition-to the 
mass of currency. The necessary ef- 
fect of every such addition to the 
mass, is to diminish the relative value 
of any given portion of that mass 
in exchange for commodities. If the 
addition were made by notes convert- 
ible into specie, this diminution of the 
relative vajue of any given portion of 
the whole mass, would speedily bring 
back upon the Bank, which issued the 
notes, as much as was excessive. But 
if by law they are not so converlible, 
of course this excess will not be 
brought back, but will remain in the 
channel of circvlation, until paid in 
again to the Bank itself in discharge 
of the bills which were originally 
discounted. During the whole time 
they remain out, they perform all the 
functions of circulating medium ; and 
before théy come to be paid in dis- 
charge of those bills they have already 
been followed by a new issue of notes 
in a similar operation of discounting. 
Each successive advance repeats the 
same process. If the whole sum of 
discounts continues outstanding at a 
given amount, there will remain per- 
manently out in circulation a corre- 
sponding amount of paper ; and if the 
amount of discounts is progressively 
increasing, the amount of paper, which 
remains out in circulation over and 
above what is otherwise wanted for 
the occasions of the public, will pro- 
gressively increase also, and the money 
‘prices of commodities. will progres- 
sively rise. This progress may be as 
indefinite, as the range of speculation 
and adventure ina great commercial 
country. 
It is necessary to observe, that the 
Jaw, which in this country limits the 
rate of interest, and of course the rate 
at which the Bank can legally dis- 
count, exposes the Bank to still more 
extensive demands for commercial dis- 
couuts. While the rate of ‘commer- 
Gial profitas very considerably higher 
than five per cent. as it has lately been 
in’ mans branches of our foreign 
trade, there is in fact no jimit to the 
‘demands which merchants of pertectly 
good capital, and of the most pru- 
dent spirit of enterprize, may be 
tempted to make upon the Bank for 
accommodation and facilities by dis- 
count. Nor can any argument i il- 
“Report of the Select Committee 
lustration place in a more striking 
point of view the extent to which 
such of the “Bank directors, as were 
examitied before the committee, seem 
to have in theory embraced that doc- 
trine’ upon which your committee 
have made these observations, as 
wellas the practical consequences to 
which that doctrine may lead in pe- 
riods of a high spirit of commercial 
adventure, than the opinion which 
Mr. Whitmore aud Mr. Pearse have 
delivered ; that the samie complete se- 
curity. to the public against any ex- 
cess in the issues of the Bank would 
exist if the rate of discount were re- 
duced from five to four, or.even io 
three per cent. From the evidence, 
however, of the late governor and 
deputy governor of the. Bank, it ap- 
pears, that though they state the 
principle broadly that there can be 
no excess of their circulation, if is- 
sued according to their rules of dis- 
count, yet they disclaim the idea of 
acting up to it in its whole extent ; 
though they stated the applications for 
the discount of lezitimate bills to be 
their svle criterion of abundance or 
scarcity, they gave your committee 
to understand, that they do not dis- 
count to the full extent of such ap- 
plications. In other words, the direc.. 
tors do notact up te the principle which 
they represent as oneperfectly sound 
and safe, and must be considered, - 
therefore, as possessing no distinct and 
certain rule to guide their discretion 
in controling the amount of their 
circulation. : 
The suspension of cash payments 
has had the effect of committing into 
the hauds of the directors of the Baak 
of England, to be exercised by their 
sole discretion, the important charge | 
of supplying the country with that 
quantity of circulating medium which - 
is exactly proportioned to the wants 
and occasions of the public. In the 
judgment of the committee, that is a 
trust, which it is unreasonable to ex- 
pect that the directors of the Bank 
of England should ever be able to 
discharge. The most detailed know- 
Jedve of the actual trade of the coun- 
try, combined with the profound sci- 
esce im all the principles of money 
and circulation, would not cnable any 
man or set of men to adjust, and keep 
always adjusted, the right proportion 
of circulating medium in a country 
to the wants of trade. When the 
