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The Pamphlet Collection of Sir Robert Stout: Volume 14

[The Bank of England Monopoly]

Money is the measure of all other commodities. A monopoly of money, therefore, must be the worst of all monopolies, whether men realize it or no.

Banking (or dealing in credit) is one form of trade. It should, therefore, on the face of things, be as free as any other form of trade : law and custom to the contrary, notwithstanding.

It is well to nail these, the true colours of the political economist, to the mast, before going into action on what are wrongly supposed to be the abstruse and complicated questions of banking and currency.

Under the Bank Act of 1844, as passed by Sir Robert Peel, England—the financial centre of the world—is still in durance, though her shipping has increased six-fold, and her commerce eight-fold, in the interval of 42 years since elapsed.

The provisions of that Bank Act are so contrived that in this country, with all its immense accumulations—

Its 642 million pounds' worth of annual imports and exports,

Its 5,511 million pounds of annual money transactions through the clearing-house,

Its 631 million pounds of profits yearly charged with Income Tax,

Its 134 millions of money annually paying death duties,—to say nothing of landed property—any foreign country may, almost any month, by arranging the weekly withdrawal of 2 millions of bullion, run up the rate of discount from three per cent, to four per cent., from four per cent, to five per cent., from five per cent, to six per cent., and so on, until credit—on which British trade lives and moves and has its being—is strangled, the trade and commerce of the whole world stunned, and irretrievable ruin inflicted upon multitudes of the most deserving and honest citizens, not to say taxpayers.

The principal provisions of this Bank Charter Act are briefly these :—
1.That after 1844 no new bank should be permitted to issue bank notes, and that no bank whatever should issue a note in London, or within 65 miles of London. There is monopoly with a vengeance.
2.That banks enjoying the right of issue previously to 1844, should be forbidden to extend it, whatever might be the future expansion of business. Even James I. granted no monopoly to be matched with that.
3.That a fixed amount of £14,000,000 in notes might in future be issued by the Bank of England, page 119 against a like amount lent to government by the Bank. All further issues to be covered by bullion in the Bank's coffers, of which bullion not exceeding one-fourth may be silver. (This last proviso has proved of none effect, as millions of silver may not pay one £5 note.) It will be seen that the Bank note, then, depends for its validity upon the validity of the Exchequer note. What a waste, then, is the payment of large sums annually to the Bank by Government for use of its notes! It is surely evident that the notes of the Exchequer, guaranteed by the whole realized property of the United Kingdom, must be superior to those of a small corporation whose paid-up Capital and Reserve funds do not altogether aggregate 20 millions of money.
4.That beyond this limit the Bank should at all times enjoy the right of issuing to any further amount for which it held bullion specially reserved in its cellars. Perronet Thompson says: " It is a semi-barbarous notion of policy which cannot conduct a paper currency without saying 'Take these 20 million pounds' worth of gold and see them well casked and marked and lettered, and then let them be stowed away in a dry cellar, and only looked at now and then, to see that nobody has run away with them and that the casks have not gone to decay;' "and he further dryly remarks that deposits of that character are impolitic in a country that desires to hold out no encouragement to invasion or civil commotion, for 20 millions would be £100 a piece to 200,000 men, the finest prize-money offered since the Creation. The bullion reserve the Bank can always increase by raising the rate of discount, and as this process, costly and often ruinous to the trading public, is generally very profitable to the Bank (and to all bankers and capitalists), the directors resort to it freely on slight pretext. Witness the following record:—