In speaking of the currency it is impossible to doubt that its regulation under any system, however good, must be a delicate operation, demanding considerable knowledge, acute judgment, and sound experience. It ought to be the symbol of trade, and act with the truth of a register for marking the ebbing and flowing of the commercial tide. As it would be monstrous to suppose that the trade of any country can be carried on for any length of time without changes, so it would be unreasonable to expect that the currency of a country, which is the vane and index of the state of trade, can be sustained without fluctuations. As Mr. Gurney, the eminent bill-broker, observed to the Bank Charter Committee of 1832, when demand falls short of supply, money is difficult to be obtained, and of course its value rises. On the contrary, when supply falls short of demand, prices rise, money is more easily acquired, and in proportion to that facility its value descends in the scale.

However, therefore, we may be well able to define what a sound system of currency is, and however confident we may feel in describing what it ought to be, our language must be qualified and our tone subdued when we come to speak of its working, for it would seem, from the very nature of things, to be rather a hopeless aspiration to hold out the prospect of a perfect system. This admission is due to truth, and it may be carried somewhat further than I have now pressed it, inasmuch as there is little room to doubt that Banking and currency are subject to the peculiar infelicity of having the best theories respecting them stamped with a character of extreme simplicity, connexion, and harmoniousness, which, however, when reduced to practice, too frequently abound in confusion, inconsistency, and discord.

With this admission, and without meaning in the slightest degree to deny how arduous it always must be to maintain an uniformly steady currency for any long period, it is now time to show what a paper currency is, what its general operation is, and, after that, what have been the particular fluctuations evolved under its management in this country by the Bank of England.

A mixed currency, such as ours at present, consisting of paper convertible into gold at the option of the holder, was well explained by the late Mr. Huskisson when he said, "Paper currency is so much circulating credit; whoever buys gives, whoever sells receives, such a quantity of pure gold as is equivalent to the article bought or sold. Or if he gives or receives paper instead of money, he gives or receives that which is valuable only as it stipulates the payment of a given quantity of gold or silver; money alone is the universal equivalent, paper currency the representative of that money."

From this it follows clearly, that a paper currency is perfectly sound when the gold it represents is to be had on demand. We may add that when unsound, the degree of its unsoundness is to be measured by the extent of the inability that exists to meet that demand. It is, moreover, easy to perceive, that whether a currency consists of paper, or of specie, or of both, it must, like every other commodity, be depreciated by excess, and raised in value by deficiency. In either case the prices of commodities become deranged, inasmuch as the just proportion is thereupon lost which ought to subsist between commodities and the currency, as the only medium by which their exchangeable value can be accurately measured.

The teaching of truth is sufficiently easy. If you can demonstrate to a man or any set of men that an error has been committed, the error will be readily admitted; but it is one thing to produce this conviction on the mind, and another to prevent the repetition of the same error. The directors of the Bank of England furnish rather a strong case in point, of the weakness of human nature in this respect.

The habit of tampering with the currency was contracted by these gentlemen at an early period; we can trace it distinctly as far back as 1782, and find it persevered in up to 1839, invariably with the same pernicious results. The matter is rendered still more curious by the fact, that these gentlemen appear to have had a distinct perception all the time of what they were about. We are not reduced to the necessity of taking anything for granted in this respect; we are not driven to assume that, as men of business, they must have known that the aggregate value of the currency of a country depends upon the extent of the operations for transacting which it has been provided; that if these increase while it remains the same, a rise must take place in its value; and if, on the contrary, it increases when the operations do not, its value must decline. "'Twas their vocation," as Falstaff says, to learn this; and they have repeatedly confessed they had learned it, at an early stage of their career. Nor could it be otherwise; for suppose the business of the country to consist of any number of operations, no matter how many; and that any amount of notes or sovereigns, no matter what, is required to carry on those operations; if you suddenly put out double the quantity of notes or sovereigns, the operations remaining as they were, you have just twice what you want; and the effect of that necessarily is, that the value of each note becomes reduced at once one-half. Upon no other understanding or terms can the double amount find its way into circulation.

The motto of the Bank directors, therefore, should be Horatian: "------Video meliora, proboque; Deteriora sequor."

Let us descend to particulars. The interference of the Bank with the currency was signalized, before the suspension of cash payments, by calamities which proved as deeply injurious to the public interests as any that ensued after it had become a chartered libertine, beyond the pains of paying gold. A heavy panic, fraught with great commercial distress, ran through the years 1783 and 1784, which has been brought home to the Bank by more than one conclusive witness. "It was much aggravated, if not produced," said Mr. Tooke, the author of the elaborate History of Prices, to the Charter Committee of 1832, "by an enlarged issue of banknotes in March, 1782, and a sudden contraction of them in December of the same year, the reduction in nine months having been from 9,600,000l. to 5,994,000l."The lesson taught the directors in this instance was as full of striking instruction as could be desired. Their average circulation in 1781 was 7,624,765l. and their average amount of coin and bullion 3,071,265l. In 1782 they pushed the circulation up more than two millions, and lost a million of their stock of gold, which in 1783 sunk to the low average of 955,635l.