TOPICS OF THE DAY.
THE SCARCITY.
WHILE the country is labouring under a compulsory fit of short Commons, divers distinguished persons are toiling at discussions on banking and currency ; as though the Bank of England were the "general shop" at which the people could obtain their bread and grocery and any convenient advances on pawned pledges. Certain curious phenomena are observed. Scarcity of money is coincident with high prices. There are large orders for manufac- tures; but cotton is dear, money to buy the raw material and pay wages is scarce ; and thus, coincidentally with a brisk demand, i trade s dull. The energies of the country are unimpaired, but at every turn its active traders knock their elbows against that un- usual enclosure in which they are cooped, "want of accommoda- tion." While they are suffering from lack of cash, they see good atore of bullion in the Bank Issue Department, and they cast eyes of longing at the glittering treasure. How convenient it would be if they could divide it amongst them ! It is the thing of which they feel the immediate want. What hinders them from getting at it The Bank Charter Act of 1844. Yes, they think, that is the cause of all their trouble: it prevents that " elasticity" in the circulating medium which would make it adequate to the wants of the country and the time ; it is the act of 1844, therefore, which wants altering. Many forms of the change supposed to be requisite were pro- pounded in Parliament on Monday night. Mr. Hume wants free trade in banking. Why, with one exception, there is free trade in banking. Banking is the trade in coin and credit ; there is no restriction on the trade in coin ; there is none on the trade in credit, except such regulations as accompany enabling privi- leges. The Bank of England, for instance, has a monopoly within a certain distance of London—the exception to the free trade of other banks, and the right to issue notes which are a "legal tender" ; and any restrictions imposed on the Bank of England do not operate as air abatement of the trade in the current coin of the realm and the credit of the partners to the Bank, but as abatements or regulations of privileges permitted to the Bank over and above the right of free trade. In like man- ner, the privileges allowed to country- banks, such as in the protection of their paper against frauds, and many other ena- bling laws, far exceed any restrictions imposed upon them. In- deed, their trade in the current coin of the realm and in the credit of their partners is absolutely free; only the laws which increase their powers of trading are not conferred with a total absence of qualification. When you talk of "free trade in banking," you either mean the abrogation of those privileges,—a serious act of privation ; or you mean a licence above the law,—which is to confer powers without corresponding obligations ; or you mean nothing definite,—and that, we suspect, was Mr. Hume's case when he proposed "free trade" as a substitute for the act of 1844.
Mr. Newdegate's substitute is an inconvertible and unrestricted supply of paper—an indefinite issue of I 0 Us and private as- signets. Mr. Finch wants a limited dose of inconvertible paper.
Mr. Brown suggests an issue of 30,000,000/. in one-pound notes, against 20,000,0001. Government securities and 10,000,000/. of gold, to be kept by the Bank as a basis of convertibility. It is desired and assumed, not that such a plan would add to the "circulation," but that it would disengage 20,000,000/. of the sovereigns now engaged in general circulation, to be sent abroad for the purchase of food and raw materials. It is more than doubtful whether the public would cooperate in such a measure, by taking the one-pound notes ; which could scarcely be forced on a people exceedingly repugnant to a small paper money. One- pound notes are particularly liable to be destroyed, forged, and to get very dirty ; they are to be seen North of the Tweed—and also smelt. The Scotch rather like them ; but public distrust of one-pound notes is traditional in England, and it is not to be ex- pected that Parliament would again undertake to declare that a gold sovereign and the paper pound are of the same value. If the stated amount of capital were disengaged, there is no security that a proportionate amount would not be absorbed in railway speculation, which is only waiting for what it may devour in " easier " times; and then we should be where we were, excepting that we should have bits of paper in lieu of sovereigns. Nor even, as we shall see presently, if the capital were really disen- gaged, and protected by some special law against the railway speculator, is it clear that we should be in a better or safer position. • Lord George Bentinck, and his Chancellor of the Exchequer, Mr. Disraeli, talk as if they would repeal the act of 1844; which would of course open the sluices to a flood of country bank notes. The extreme superficiality and partiality of these views would be less striking in mercantile men, to whom, immersed in the de- tails of commerce, the phenomenon closest before their eyes ap- pears in exaggerated proportions, shutting out all beyond ; but statesmen, who survey the field from a higher region, should take a wider range.
The real difficulty is not one of currency. The primary master- cause of the peculiar pressure, and of the worst economical hard- *hips that attend it, is the coincidence of lavishness with scarcity. The peculiarity of the pressure is, that high prices are coincident with shortness of money, because a casual scarcity in two vitally important articles has been immediately preceded and accom- panied by extravagant expenditure. The deficiency of food in Ire- land causes a huge gap in the national larder, which would de- mand vast sacrifices to supply it. That supply is impeded by a deficiency of the cotton crop, which causes a defalcation of the raw material in a main national staple, at the same time drawing larger payments for a less quantity of material. That, again, might be managed, if we had all our past savings at command ; but we have just sunk enormous sums in railways, which are not an exportable or exchangeable commodity.
The want is, not currency, but disposable capital, the thing which currency represents. Currency, the medium of exchange, only en- ables the trader to shift about goods from holder to holder; but we have not the available goods to shift. We have not made the cotton pieces ; we have scanty supplies of cotton, which is goods that may be made ; we have not enough food for the labour to be employed in making up those goods ; we cannot get at the sovereig-ns that represent that food, without an exchange of goods in demand. There may be opportunities for trade ; but in business, as well as in household expenditure, there may be luxuries and advantages which you must not enjoy, be- cense you can't afford it. You would be glad enough to make your fortune by any of the thousand safe speculations that are in active prosecution around you,. but if you have not the cash, nor that immediate prospect of cash which constitutes credit, you can't afford it. The country at large is in that state. It has locked up some hundreds of millions in railways ; and now that it wants capital to invest in cotton or to expend in food, it cannot afford it. • The remedy is indicated by the causes of the evil : dearth can only be encountered by economy, lavishness repaired by parsi- mony: to husband the resources and the supplies which we have, and to be lavish no more, is the shortest and safest road to ease. All must be content to pinch: we must eat less, profit less, accept less wages. Early to be content with less, is the way to insure the continuance of some.
Our position for adopting such a course is in many respects i
most favourable. Trade, t is echoed on all sides, was never in a " sounder " state ; by which is meant, that its operations—rail- ways always excepted—are of such a kind that instant produc- tiveness is proportioned to action. Action may be suspended ; but the sickle is held against the wheat-stalk, the loom lies with the thread in it, the steam-engine stands with the steam up; and the first movement will add to the thing deficient—available capi- tal. There is not a breath of doubt as to the currency : that would indeed be a calamity, but it is one which we are spared. We know our embarrassments; but the sovereign that we ring upon the table answers with its well-known voice, the bank-note is un- suspected, there is no run upon the banks in town or country to withdraw deposits in mere panic. People do not keep on feeling the safety of their banker with checks enough to knock a house down in testing its stability. We have the command of the corn-markets of the world : knowing that, however close run, our accounts are solidly true—knowing that we trust, not in forced contributions on trade, but in the proverbial abundance of free markets—the nations have made England the entreflot for supplying the hungry world with corn : we live in the market, having the preemption of neighbourhood. While all are hard pressed, we have the advantages arising from the free circulation of trade, unimpaired credit, and solid internal wealth. Where all are put upon short commons, we have the first supplies and the pick of the market. We cannot by any possibility have a better position. One of ease and abundance may be imagined, but it is not within existing realities. To alter our position in those respects, were to damage it. If we try to shut in and en- trap the supplies of the market, we cease to be the entrepOt—to be the market, and so lose the preemption. If we add some fac- titious and nominal currency to that which represents our solid available capital, we shake trade to pieces.
Now we see that, although the act of 1844 debars us from no "accommodation," even of a temporary kind, which is worth having, to tamper with it would add one more crowning calamity to the list of disasters : it would break up that solid state of trade, that unabated confidence, which are the rock and life- breath of hope. For we have not only a present but a future. When in the na- tural course of events the adverse seasons shall take a favourable turn, having everything so tight and trim as it is, we shall from that moment start fair. To let loose now, would, without bring- ing any certain benefit, altogether weaken us for renewed activity teen. When the period of easy circumstances arrived, we should be incapable of it. In the attempt, by banking tricks and specu- lative manceuvres, to get up an appearance of possessing a dis- posable capital that does not yet exist, we should be wasting, by anticipation, the resources of the future—continuing the very process of lavish waste which the railway mania encouraged, and which has deprived us in great part of available resources.
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