LETTERS TO THE EDITOR.

THE BANK RATE.

[To -the Editor of the SPECTATOR.] SIR,—Commenting on the fact that the Federation of British Industries has protested against a rise in the Bank Rate, the City editor of the Times quaintly remarks :— " Incidentally the Federation's letter reminds us of the petition signed by 500 -merchants which in 1819 was presented against a Bill for the restoration of the gold standard. The merchants feared that the fall in prices accompanying the restoration would injuriously affect trade, but the historian reports that in the event these fears proved to be unfounded, and that the advantage to the community of re-estah6shing the gold standard was incalculable."

The real facts in connexion with the repeal of the Restriction Act are most interesting and are as follows :— The Restriction (of cash payments by the Bank of England) Act of 1797 was due to expire on July 5th, 1819. A number of petitions were submitted—those referred to in Parliament as the more important being from London, Bristol and Leeds—to the House of Commons, praying that the Restriction Act might "be continued beyond July 5th, 1819."

The result of these petitions was that the Bank Cash Payments Act, which prohibited the Bank from paying cash during that Session, was passed on April 6th, 1819.

Committees were then appointed both by the Lords and Commons to report as to the advisability of the resumption of cash payments. The recommendations from both Houses were almost identical—the Lords' Report, however, being generally considered the more able.

The main recommendation of the Lords' Report, issued on

May I2th, was :— " That from and after December 1st, 1819, or at latest February 1st, 1820, the Bank of England shall be required to pay its notes in gold bullion if demanded in sums not less than 60 ounces at the price of. £4 is. per ounce, that.on November 1st, 1820, or at such other date as may be fixed, the price shall be reduced to £3 19s. 61, and that on May 1st, '21, the Bank shall pay its notes, if demanded, in gold bullion, in sums of not less than the value of 30 ounces at the price of £3 17s. 10d. per ounce."

An important petition was presented by Lord Lauderdale to the House of Lords on May 21st asking that resumption of convertibility at par should be further delayed. The result was that the Bill as finally amended provided for restraint of cash payments until February 1st, 1820, and postponed convertibility at par till May 1st, 1822.

In the eighteen months following June, 1819, the sum withdrawn from circulation amounted to £4,000,000. The consequent contraction in trade which ensued from this contraction in currency enabled the Rank to propose that cash payments should be resumed on May 1st, 1821, instead of on May 1st, 1822, and this step was legalized,

Alison describes the results thus :.--- " Nothing in this disastrous contraction of the currency at a period when its expansion was so loudly called for sustained the national industry or averted a general bankruptcy but the fortunate circumstance that the obligation on the Bank to pay in specie was by the Act of 1819 only to commence on February 1st, '20, and this enabled that establishment in the preceding autumn,, when the crash came, not only not to contract its issues, but even in a slight degree to increase them. The effects of this sudden and prodigious contraction of the currency were soon apparent, and they rendered the next three years a period of. ceaseless distress and suffering in the British Islands. The accommodation granted. by bankers diminished so much in consequence of the obligation laid upon them of paying in specie when specie was not to be got, that the paper under discount at the Bank of England which in 1810 had been £23,000,000, and in 1815 not less than £20,660,000, sunk in 1820 to £4,678,000 and in 1821 to £2,676,000."

The first Lord Ashburton referring to the petitions coming from all quarters remonstrating against the state of suffering in which so many classes were involved said that :—

" The difficulties of the country then arise from this : that you have brought back your currency to its former value so far as regards your income, but it remains at its former value so far as regards your expenditure."

Mr. Attwood on June 11th, 1822, speaking on Mr. Western's motion for appointment of a Committee to consider the effect of the Bank Cash Payments Act of 1819, said :—

" To enhance the value of money, to raise the price of gold, we have lowered that of all other commodities, while at the same time we have left the great payments of the nation raised from the sale of these commodities. Strange, indeed, would it be if such a system was not to have produced the general and long continued distress which we see around us. The reduction effected in the amount of money in circulation has been nearly one-half of that employed in supporting agricultural, commercial and manufacturing industry. Hence these classes are unable to obtain much more• than half the return they obtained from their industry before the alteration took place, and yet all their great money engagements remain the same. This is the origin of that state of things which in its result leaves the landowner without rent, the merchant with- out profit, the labourer without employment or wages, which revolutionizes property and disorganizes all the different relations and interests of society."

The quotation made by the City editor of the Times is taken, if I remember rightly, from Thomas Tooke's-A History of Prices and the State of the Circulation. Tooke's history is what it purports to be and is in no other respect a history of the times. The only point in which he was concerned was the contraction and expansion of prices. Trade and employ- ment were outside his vision and any reduction in prices, whether caused by the flooding of the country by bankrupt stock or otherwise, appeared to him a cause of satisfaction. Alison's History of Europe, 1815-1852, deals conclusively with Tooke's miscomprehensions. Vide Vol. 2, p. 398, et seq.

The Manchester (Peterloo) Riots and the Cato Street Conspiracy were the first and more obvious results of the terrible destitution and fierce unrest caused by the 1819 Act.

Even the " prodigiously abundant " harvests of 1822 and 1823 and the Act of 1822 authorizing the further issue of £1 and £2 notes were unable to stave off for long the disaster induced by this pernicious Act. Speaking of the crash of 1825 the Home Secretary (Mr. Huskisson) said the country was then " within twenty-four hours of barter." The nation's credit was saved by the providential discovery of a box of Bank notes that had previously been " overlooked " in the Bank of England—vide evidence given before the House of Commons Committee, 1882.—I am, Sir, &c., A. S. B.