Nothing could save the empire from a convul- | statements on either part led to no decisive resion but such a large increase in the majority sult. Each side was only rendered the more on the Catholic question as might render such confirmed in its own opinions; and the Cathimprudent conduct as was openly announced olic question was thereby rendered an ulcer: Parl. Deb. impossible. A little while, and it ated sore in the empire, which affected all the xii. 208, 214; would be too late; a brief time, and adjoining parts so seriously, that it became eviAnn. Reg the opportunity now in their hands dent it could not be cut out without endanger, 1825, 62, 63 would be lost forever." But these ing the whole body. CHAPTER XXI. BRITISH EMPIRE FROM THE MONETARY CRISIS OF DECEMBER, 1825, TO THE EMANCIPATION OF THE CATHOLICS IN MARCH, 1829. 1. THE year 1826 opened with such universal consternation and depression in all Gloomy pros- classes, from the effect of the terripects of the ble monetary crisis at the end of nation in the the preceding year, that the conbeginning of 1826. sideration of that crisis exclusively engrossed the public mind, and scarcely any other topic occupied the attention of Parliament in the next session. All classes were suffering alike. The banks, struck with terror from the numerous failures which had taken place, could hardly be prevailed on, on any terms, or any security, to make advances to their customers; the merchants, dreading the continued fall in the price of commodities, declined entering into speculations; the manufacturers, finding their usual orders awanting, or seriously diminished, contracted their operations; the workmen, thrown out of employment, became desperate, and vented their despair upon the machinery, which they imagined was the cause of all their suffering. The immense issue of paper without any gold to support it to the extent of £8,000,000 in three weeks-in the end of December, had indeed arrested the panic, but it had not restored confidence; and Government, by refusing to issue exchequer bills, a relief which had always been afforded on similar occasions in time past, effectAnn. Reg. ually prevented for long the restora1826, 1, 2; tion of credit, or the extension of any Martineau, relief to the industrious and suffering i. 367, 369. portion of the community.1 the iron districts, strikes to arrest the fall of of bonded The universal suffering attracted, as well it Houses, but afforded scarcely any 2 Parl. Deb The general distress, as usual in such cases, 2. led to serious acts of riot and disActs of riot- turbance in several of the manufacing in vari- turing districts. On all sides the ous places. most appalling proofs of wretchedness were afforded, and in some quarters alarm-sition from the landed interest, passed both ing disorders took place. The recent improvements in machinery were generally regarded as the main cause of the general suffering; and in Lancashire the indignation of the operatives against what they deemed an invasion of their birth-right, broke out in various and most melancholy acts of outrage. It was a woeful spectacle to see the streets of Manchester, and the chief towns in its vicinity, filled with vast crowds, sometimes ten thousand in number, whose wan visages and lean figures but too clearly told the tale of their sufferings, snatching their food from bakers' shops, breaking into factories and destroying power-loom mills, and throwing stones at the military at the hazard of being shot, rather than relinquishing an object on the attainment of which they sincerely believed their very existence depended. Serious riots took place in Carlisle, in the course of which a woman and child were shot dead; and in Norwich, where twelve thousand weavers were employed, an alarming disturbance, attended with great violence, ensued. In all What Government should have done at this juncture was then distinctly point- 4. ed out by some of the ablest and Real causes of most experienced men in Parlia- the distress, ment, though unhappily without and its remedy. any effect. The terrible crisis which the country had just gone through was obviously owing to something wrong in the currency; but a great difference of opinion prevailed as to what that error was. The partisans of Administration, and the whole Whig party, were unanimous in holding that the mischief had all originated in the extravagant speculation of the two last years, which had been unduly fostered by the perilous and excessive issue of bank-notes by the country bankers, great part of whom had no sufficient capital to support them; and the only remedy they could devise was to suppress small notes altogether, and render the 7. Continued. currency not only in all its parts dependent on | after the Bank should have resumed cash paythe retention of gold and silver, but below £5 ments. And yet during the whole of this reto consist entirely of it. The friends of the riod, from 1777, manufactures had flourished country bankers, on the other hand, maintained notwithstanding the absence of the small notes. that nothing could be imagined so perilous, as "The alarm felt on this subject, if founded in at this time, when the country had so recently reason at all, must be grounded on the come through a severe monetary crisis, to tam- idea that the circulation will be diper with the currency, and, in endeavoring to minished by the whole amount of the put it on a more stable footing, in a great meas- notes withdrawn; and, doubtless, if that were ure to extinguish it altogether. The debates to be the case, a very serious check to industry are of the highest interest, for they relate to and the operations of commerce might be anone of the most momentous and decisive changes ticipated. But nothing is clearer than that no recorded in English history, and which was at- such danger is to be apprehended. During the tended with the most important results; and three years ending with 1822, twenty-five millthey are extremely curious and instructive, as ions of gold sovereigns had been coined, and affording an example of the ease with which a of these £7,200,000 were shown by the returns powerful party can succeed in deluding the to have been exported, and perhaps £10,000,000 public mind, and conducting a nation, amidst in all had left the country. Of these £1,000,000 universal applause, to the very measures most had returned in the close of last year; so that destructive to its prosperity, and in the end the gold circulation might fairly be taken at subversive of its institutions. £16,000,000. The country bankers' circulation, as measured by the stamps issued in 1825, had been £6,000,000 in that year; and supposing double that number to be the amount of notes actually in circulation, the amount will be only £12,000,000-considerably within the gold which has been coined during the three years succeeding 1819. The present amount of country bank-notes in circulation does not probably exceed £4,000,000; while the bank-notes of the Bank of England, in the end of 1825, had risen to £25,000,000. It is chimerical, therefore, to apprehend any undue contraction of the currency from the suppression of small notes; it is only exchanging a perilous and unstable for a firm and secure circulation. bill suppress notes. On the part of Government it was argued by 5. Lord Liverpool, the Chancellor of Argument by the Exchequer, Mr. Huskisson, and Ministers in Mr. Canning: "The monetary crisis support of the which this country has recently uning small dergone is evidently owing to the mad speculation of the last two years; and that speculation has been mainly fostered by the vast increase in the issues of country bankers' notes which took place during that period of delusive prosperity. In 1822, before the mania of speculation began, the stamps issued for country bank notes were about £4,200,000 annually; in 1824, when the mania set in, it rose to £6,000,000; and in 1825, when the mania was at its height, it amount- "There are two ways of effecting this with ed to no less than £8,000,000 annually. This drawal; and the only question realwas the amount of stamps usually issued for ly for consideration is, which of the Continued. new notes: the amount actually in circulation two is safest, and likely to occasion was in general about 50 per cent. more at each least inconvenience to the community. The period, and in 1825 amounted to £14,000,000. one is, by enacting that no more small notes The notes of the Bank of England had also in- should be stamped after a certain future period; creased during the same period, but in a much the other, to allow those already in circulation less degree: the increase in that quarter was to run a certain course till a fixed period, and only £3,000,000-from £19,000,000, in round prohibiting any new ones to be created. Govnumbers, to £22,000,000. The great increase ernment, after mature deliberation, have dein the currency, therefore, has been in the coun-termined upon the last of these methods. try bankers' notes; and they are chargeable with all the disasters which have ensued. The only way to prevent a repetition of the evil is to lay the ax to the root of the cause from which it sprung. 6. 8 No new notes are to be henceforth allowed to be stamped; those already in circulation are to be allowed to circulate for three years, but no longer. In consequence of certain differences between the banking systems of Ireland and Scotland, particularly the latter, it is not proposed, in the mean time, to extend the Act to either of these countries; though it is difficult to see any good reason, on principle, on which such a difference is to be long continued. 9. "Such a measure is no innovation; on the contrary, it is the opposite system Continued. which is an innovation. In 1775 an Act passed prohibiting the issue of bank-notes for a limited time, and in 1777 another passed, which permanently prohibited "By cautiously and gradually, in this manthe issuing of notes under £5. This continued ner, withdrawing the small notes from to be the law until 1797, when, amidst the neces- circulation, one inestimable blessing Continued sities of the French war, the suspension of cash will be attained-the poor will in a payments took place until two years after a great measure be saved from the pressure and general peace, and it became necessary to le- ruin consequent on a monetary crisis. Who galize and reissue small notes, as the gold had are the persons among whom, in the first place, all been withdrawn. This suspension was not these small notes circulate? The poorer classes founded on any belief that the small-note sys- of the community-those to whom the possestem was at all connected with the prosperity sion of a one-pound note is comparative riches. of agriculture, commerce, or manufactures; on And when, from the scanty earnings of hard the contrary, all parties were agreed that they labor and persevering economy, they have should be withdrawn as soon as possible, and amassed three or four pounds, how can they no one contemplated their continued circulation | now lay it by but in that kind of money? We have been told, and told truly, that in many districts these notes constitute the whole circulating medium. In what, therefore, must the poor man put his trust but in that paper; and if it fails him, what becomes of his savings? The necessary consequence of such a state of things is, that when an alarm begins, when he hears of failures, the poor man rushes forward to the bank to get his notes exchanged for specic, and the bank, overwhelmed with demands, is obliged to stop payment. He follows the torrent, he increases the difficulty, he adds to the distrust; and to the universality of these feelings may be traced a great portion of the late disastrous events. It is evident, therefore, that the power of issuing these notes is the chief source at once of the insecurity of country bankers, and of the wide-spread misery which their failure occasions among the poor. The resumption of cash payments in 1819 was unanimously agreed to by the Legislature; but the work was incompletely done, as long as small notes were allowed to remain in circulation. Now is the time to carry it fully out, and avoid all the dangers we have encountered, by establishing the currency upon a safe and lasting foundation. 10. "Till small notes are suppressed, this most desirable result never can take place. Continued. Experience has proved that, however plausible in theory that pari passu circulation of notes and specie may be mutually exchangeable, in practice it can not exist. The one inevitably destroys the other. People all prefer notes to coin; for what reason it is difficult to say, but the fact undoubtedly is so. If crown notes and half-crown notes were issued, crowns and half-crowns would disappear; and if one-pound notes are to be allowed to continue to circulate, sovereigns will speedily become a rarity. There never was a gold circulation in general use in the country, except in Lancashire, where no country notes existed; and when, in 1822 and 1823, the Bank of England was most anxious to supply the country with gold, the sovereigns sent down by one coach returned by another. Great sacrifices had already been made to effect the introduction of even a partial metallic currency in the country, and these sacrifices had been made in vain. A large supply of gold had been obtained at a great expense, and it was got only that we might see it depart, and be compelled to purchase it again at a double expense. The curreney of the country can never be placed on a solid basis unless country banks are prohibited from issuing notes, except such as are of a considerably higher denomination than the current coin, so as to save it entirely from the competition of the paper currency. Concluded. "The principle of the measure, therefore, can be resisted only by those who 11. maintain that the pecuniary interests will be best secured by proscribing a metallic currency. Its necessary effect will be to give solidity to the banks themselves, by compelling them to maintain a portion of their circulation in gold instead of worthless paper, and thus avoid those ruinous runs which have proved fatal to so many of the most respectable establishments. It will prevent the wide-spread misery which such failures now induce, for the savings of the working classes will be laid by in specie; and as it will form the chief medium of circulation, the greatest panic can not produce a run. Let the Bank of England retain in its coffers as much gold as may be necessary for the ordinary circulation of the country, for the exigencies of Government, and to enable it to adjust an unfavorable state of foreign exchanges. Let every country bank be governed by the same rules, and compelled to keep an amount of gold proportioned to its operations; and this will not only give them security, but occasion a sensitiveness to occurrences likely to cause a pressure on the country banks, which will tend to the secu- i Parl. Deb. rity of the whole kingdom. The issues will be kept within due bounds, and the gold will be kept within the kingdom." xv. 170, 174, 218; An. Reg. 1826, 9, 11, 13, 15. measure, On the other hand, it was argued by Mr. Baring, Mr. Heygate, and Mr. Gur- 12. ney, all great mercantile men- "The Argument proposed measure is alike inadequate against the to meet the evils complained of, and proposed ill suited to the present state of the country. What is the cause of the embarrassment now so generally felt by all classes? Is it not the sudden contraction of the currency, and consequent destruction of credit at the close of last year? And what remedy does Government propose for the evil? To contract it still more. Taking the currency at £20,000,000, and the chasm produced by the recent failures in it at £3,500,000, the proposed measure will produce a further chasm to the extent of £7,000,000, with which it will be impossible to carry on the commerce of the country. The postponement of the suppression of small notes for three years is no alleviation, but rather an aggravation of the evil, for it is the nature of the human mind to exaggerate impending evils: nothing is so bad in reality as it appears in prospect. The country bankers, having the suppression of small notes hanging over their heads, must, as a matter of necessity, contract their issues, and this can only be done by refusing accommodation to their customers, and calling up such advances as they have already made. This will of necessity stop industry in numberless channels. This stoppage is what is now going on, and the proposed measure will seriously tend to aggravate it. The extent to which this evil is spreading no man living can estimate, and it will probably lead to consequences which none can contemplate without horror. How is the gap which is to be made in the circulation to be filled up? and if it is not supplied, how is the industry of the country to be supported? As a measure of present relief, the proposed measure is unwise and inappropriate; as a measure of prospective secu> rity it will be nugatory. 13. "The country bankers, of whose improvi dence and mad speculation so much is said, are in truth the only persons Continued. who have not speculated, and who have exerted all their influence to arrest the spirit of speculation among their customers. A prudent regard for their own safety forced this course of conduct upon them. Where did the extravagant speculation which has been attended with such ruinous consequences origin ate? In Manchester and Liverpool, a district | far from their having had any share in bringin which, as well as all Lancashire, no small ing it about, they were its first victims; and notes at all were in circulation. Where did it the real cause is to be found in the monetary next spread, and assume its most dangerous as-operations of the metropolis, where their notes pect? In the Stock Exchange of London, a city did not circulate, and with which they had no in which, and for sixty-five miles around, no concern whatever. bankers' notes can be issued. In 1720, the only year in which wild speculations at all similar to those of the last year prevailed, there were no country banks or bankers' notes; and in 1797, when the run took place upon the banks, which rendered the suspension of cash payments a matter of necessity, there were not only no country small notes, but no Bank of England small notes in circulation. It was the failure of the seven great bankers in London, in whose hands the bills of more than a hundred country bankers had been placed, which occasioned the greater part of the country failures; and had it not been for the solidity of the country bankers, the catastrophe would have been far greater than it actually was. So far from the country bankers having begun the mischief, and their notes having been the means of spreading it, it was the merchants and capitalists of Liverpool, Manchester, and London, without small notes, who began it, and the small notes of the country bankers were only brought in at the close of the day to arrest its devastation. "The distress which the crisis produced, and which was much more serious than 15. Government seemed to be aware, will Concluded. be increased rather than diminished by the proposed change. The very exertions of the country bankers to prepare for the intended change had already most fearfully augmented the general distress. They were indeed preparing; but they were preparing by screwing, almost to destruction, every farmer, manufacturer, or other customer in the country, from whom they could get their money. Was this the way to relieve a country already suffering under a shortening of credit and want of money? Unless Parliament allowed them more time to meet the new order of things, utter ruin to all the small shop-keepers, manufacturers, and farmers in the country must ensue. The question is not, what is theoretically best, but what, in the circumstances, is most expedient?-and the general distress which pervades the country districts is the first thing to which, in discussing questions of this nature, Parliament is bound to attend. The present measure can be productive of nothing but evil. What is really required, and would relieve the distress, is to establish joint-stock banks on such principles as to induce persons of capital to enter into them, to introduce silver as a standard of currency as well as gold, and to relieve the Bank of England from those incum- 1 Parl. Deb. brances connected with Government xv. 198, which at present render it impossible 220; Ann. for it to come forward on a crisis to Reg. 1826, relieve the public distress." 11, 14. both Houses. "The embarrassments which have been experienced are always ascribed to over14. trading; but there is a great deal Continued. of injustice in this imputation. By far the greater part of it is to be ascribed to the fluctuations in the currency, which no prudence on the part of the mercantile classes could avert, and no wisdom foresee. In 1823 and 1824, the Bank had accumulated a very great treasure, amounting at one time to £14,000,000, in their coffers; and their circulation was proportionally extended, which, as a matter of Ministers carried their measure by an overcourse, led to a proportionate increase of the whelming majority, Mr. Baring's 16. country bankers' issues, which always increase amendment, that "it is not expedi- The bill is carwith those of the Bank of England. In con- ent, in the present disturbed state of ried by a large sequence of the quantity of money thus thrown public and private credit, to enter majority in into the market, interest fell to 4 and 3 per upon the consideration of the bankcent.; and of course, as it could be got on ing system of the country," having been lost such easy terms, speculations of all sorts were by a majority of 193, the numbers being 232 to proportionally extended. This ere long led 39. In the House of Lords the preponderance to a run, as such a state of things must al- was equally great, the numbers being so deciways in the end do, on the Bank for gold to sive that the matter was not pressed to a divicarry on the immense undertakings thus set on sion. The prohibition to issue £2 and £1 notes foot, great part of which were in distant coun- was at the same time extended to the Bank of tries, and could be conducted with nothing England, by a majority of 66 to 7-in the face else; and then the Bank, in its own defense, of a protest by Mr. Gurney, that "if Governwas compelled suddenly and violently to con- ment destroyed all the country bankers' notes, tract its issues. The banks were compelled to and at the same time stopped the issue of small do so, for the first duty of the directors is to notes by the Bank of England, they would look after their own interests; but still the leave the country in a state of destitution of consequences were the same. The London which they could form no adequate conception." bankers, hard pressed themselves, called upon This observation produced no sort of imprestheir correspondents in the country, who again sion, and it passed into a law that stamps for called upon their customers, and soon every £2 and £1 notes should no longer be issued creditor came to take his debtor by the throat. either to the Bank of England or country banks, Then came the panic, which in such circum- and that, at the expiration of three years from stances was inevitable, and the Bank was too March, 1826-that is, in March, 1829, 2 Parl. Deb. much fettered by its engagements with and ad--their circulation should be pro- xv. 352, vances to Government to be able to afford the public any relief. That is the simple account of the whole catastrophe, and what had the country bankers to do with inducing it? So hibited altogether in England.2 353. Mr. Canning said, upon this question being brought to a vote, that "he hoped the decision of it would be regarded as decisive of the prin |