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send him forward publicly, on account of the prejudice that has been artfully excited against the old diplomacy.
WILLAM MELLISH, ESQ.
MR. MELLISH, Mr. Thornton, and the other bank directors, are men to whom the country owes great obligations for their prudence and moderation. Ever since 1797, when the bank ceased to
in specie, the amount of discounts has depended on the discretion of the directors: previous to that time it depended greatly on the means that the bank had of making payments; but since then there has been no check of the kind on the issuers of
The amount of notes in circulation at one time
was on an average about fourteen millions: it is now about twenty-two millions, of which nearly
five millions are of one and two pounds. That is as a supply for the guineas and silver that were till then in circulation. In reality, then, the discounts can only be said to have increased about three or four millions, which, in comparison to the expenditure of the country, bears a very small proportion*.
At the same time that the former check has been removed, one of another nature has been instituted. Previous to that time the amount in circulation was a secret to all but the directors, who were moreover sworn to keep that secret; but since then an annual account has been given to parliament of the amount.
This account is but a very inefficient check, as parliament assumes no power of interfering; but what is most to the credit of the directors, is the firmness and moderation with which they have listened to the abuse thrown out on their admirable establishment.
* The revenue, and particularly the portion that goes to pay the dividends in the funds, absorbs a greater or less quantity of the circulating medium, in proportion to its amount. As the revenue is more than doubled since 1797, so the augmentation of bank notes may be said to be very small in proportion.
Many members of opposition bave spoken of bank notes as being merely pieces of paper; and the bank has been represented as in a state of insolvency, though nothing would have been more easy at any time than for the directors to give positive proof of the contrary, by withdrawing all their notes from circulation.
Such a mode of demonstration would indeed have been attended with danger to the country, but with none to the bank, further than as it is an establishment in the country. As the bank directors did not choose to let themselves be provoked to take that method of vindicating their conduct, we shall take a less violent and dangerous one, and show how the bank is solvent, how every note is a real value, and how it might, at any
all the notes off without any difficulty.
A bank note formerly was a promise to pay in gold: it still purports to be such, though it certainly is no such thing; but by the way in which the bank is constituted, not a single note can be issued that has not a value deposited that insures payment to its amount.
Were the bank to be obliged to prove its solvency, it inight do thus. There are twenty-two millions in circulation, and probably about three millions in
specie, the rest of the deposit consists in nineteen millions of securities, that will be paid in bank notes in two months*
The bank would then only have to refuse to give any more discounts to merchants, or accommodation to government, and begin paying in specie till the three millions were gone. The three millions would be sufficient to pay demands as fast as the money could be counted for four weeks, during which four weeks eleven millions of notes would return, or come in as a matter of course, in order to pay the securities that would in that time fall due: at the end of four weeks there would be no more money; but then by that time fifteen millions would have been withdrawn from circulation, and there would only remain seven millions with the public. One of two things would then happen. Either the public would request the bank to issue more notes, other
* The refusal of the bank to discount, unless another were to replace it, would make a revolution in the mercantile world. It is therefore supposing what could not, with the eyes of government open, take place; but that makes no difference to the reasoning here, as simply a demonstration of the solvency of the bank. That is a question abstracted from the effect it might or might not produce on the country. VOL. 2.
wise trade could not go on; or the stoppage of issues would be continued, and in four weeks more, the whole of the seven millions would be withdrawn, and there would not remain one bank note in the hands of the public*.
This operation, which is very practicable, so far as the bank is concerned, would prove its solvency beyond all shadow of doubt; but the probable result of such a trial would be, that before the end of one week, the public would be convinced of its solvency, and find a necessity for calling on the bank to discount as usual.
It is true that a bank note is of no value intrinsically, in regard to the material it is made of; neither are the title deeds of an estate in themselves of value; but as they are the means by which the
* It is true, some of the government securities would not be taken up in that time; but what would be better for the bank would be, that the first day it refused to discount, it might sell exchequer bills and other securities for four or five millions, and as bank notes would be received in payment, that would be so much more retired from circulation, than we have calculated in the first four weeks. It is one thing that makes it more blameable to ridicule the paper money, that as the bank receives nothing but its own paper, its paying in gold is impossible. When it received gold it paid the same.