THE BANK AND ITS CHARTER.
TEE-Bank of England stands firm in resisting the pressure of speculative demands for money : the disappointed cry out for " relaxation " ; and the "full Currency" sect, seeing its oppor- tunity, raises a cry of " Down with the Bank Charter Act! " An advocate of the doctrine, if not an organ of the sect, the Morn- ing Post, contains this report, and anticipates the effect of "the measure "— "It must be assumed that there is seine foundation for the report current today, that an application will be immediately made to the Treasury for permission to issue a 'fixed amount of notes in addition to the amount pre- scribed 11 the Bank Charter Act. If this be done, it will unquestionably afford relief to the commercial world, and in all probability will act as much like a charm as did the suspension of the Bank Charter Act on the 25th Oc- tober 1847."
In this passage there are several fallacies to each sentence. We are not indeed told on authority that there is to be any mea- sure at all, but it needs no authority to tell us that any measure of relaxation would give as little relief as it did in 1847. There was no relief from any Government measure in that year, because there was no Government measure. The reader of short memory may be surprised to hear, after reading the passage .just quoted, that there was no "suspension of the Bank Charter Act in 1847." Government, in fact, has no authority to "suspend" the Charter. What Lord John Russell did, as First Lord of the Treasury, was to advise the Bank to enlarge its accommodation, to sanction a departure from the limited allowance of notes issued, to promise an application for a bill of indemnity in ease that were necessary, but to suggest asa means of keeping the accommodation "within reasonable 1. Is," a discount-rate of 8 per cent. In like man- lier, Government could now promise to ask for an act of i indemnity, and would have t for the asking—and a cen- sure with the indemnity. The no-measure in 1847 did have an effect, and it was peculiar. The simple appear- ance of Lord John's letter calmed the panic ; and the fact proved the panic was not caused by the actual want of more notes but by the fear of the people who had worked themselves inth hie panic that they might want more notes. So there was, after all, no substantial need for the measure which Lord John sanctioned if it were needed ; and the Bank did not suspend the rule which it had his warrant—so far as that went—for suspend- mg " precedent" appears to us to be instructive.
How does it apply now ? Backwards. The far-seeing Post saYs, "According to the rumours in circulation, the Bank is not in a much better position than it was in October 1847 "; which is
a confession that the position is not so bad ; and a note from the First Lord, consequently, not so necessary as it was when it was not necessary at all. But even if the position were as bad, the same " remedy " would not apply. The crisis of 1847 was entirely domestic. There had. been excessive speculation ; there were fearful bank crashes in the North ; "accommodation " was shortened abruptly ; and there was a fear, not unnatural, that in the suddenness of the reaction even sound men would be thrown over by the fall of their connexions. Leniency was the policy of the day—" relaxation." The cause of the present difficulty is wholly different. The exces- sive speculation is abroad : money, portable capital, has been drawn out of the country, until we are threatened with having too little for our regular business : there is free trade in capital, and always must be ; but our regular trade can after all outbid the wild trade of the Continent ; we raise the price of capital here, and it stops with us. Lower the price by increasing the commodity, and it would go abroad again. "Relax" the Charter, and it would be for the benefit of the foreign capitalists, from the Pereires to the Grelets. The remedy of 1847 would only increase the present epidemic, and the Charter is not in question.
Except as a reassurance ; and as such it is a stout anchoring- buoy. As proof, take the following passages by the well-informed. City correspondent of the Daily News,—who nevertheless does not scout the " remedy " so vigorously as we might expect. But he faithfully reports facts, and the facts tell their own tale.
The Bank movement [the refusal to make advances on Government se- curities, except Exchequer Bills] does not seem to have been prompted by any immediate increase of demand on the part of the Stock Exchange; money being rother easier in the house,' owing to the release of the divi- dends, coupled with the steady absorption of stock by the public. In the judgment of the Bank authorities, however, this state of things probably constituted a favourable opportunity for the enforcement of the new mea- sure of restriction. Had the announcement been made at a moment when the Stock Exchange was greatly pressed for money, the prejudicial effect upon stooks and shares would have been much more eevere. . . . . In every point of view, the measure is calculated to operate as a great discouragement to all parties who are holding securities upon borrowed money in the hope of a rally. At the same time, it must be borne in mind, that the tightness now experienced is the very weapon upon which the Bank of England relies for the means of warding off the attempts of the Continent to supply itself with money here. Capitalists who have hitherto found no difficulty in raising money on stock for employment in the remittance of gold to the Con- tinent will now find their operations greatly impeded. Meanwhile, the un- diminished confidence of the public is indicated by their constant investments, which will become more active as prices recede ; and the soundness of trade is amply proved */ the absence of commercial embarrassments."
Here, it appears to us, we have ample justification of the course- in which the Bank perseveres,—testimony to the practical efficacy of that course, proof that it is doing good with a minimum of in- convenience, and the fullest refutation of any such project as that of "relaxation" or "suspension." As well cut away the an- choring-buoy because the storm has been fierce, though we seem likely to ride it out in safety ; as well say that if a few loose spars are blown away, we had better let the ship go after them. Really, Bank affairs are material and serious business, and are not to be handed over to those who think that they can be regulated by "a charm."
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