The failure of the crops in Ireland led the late Sir Robert Peel to introduce "An Act to amend the Laws relating to the Importation of Corn." It is 9 & 10 Vict. cap. 22, and was passed June 26, 1846. A large reduction was made in the duty immediately; and it was enacted that, after the 1st day of February, 1849, the duty on wheat, barley, oats, etc, should be only 1s. per quarter. And in consequence of the increased distress in Ireland, another Act was passed, in January, 1847 (9 Vict. cap. 1), to suspend, until the first day of the following September, all duties on the importation of corn. In consequence of these Acts, large importations took place, and the prices gradually declined. I have no means of ascertaining the average prices of grain throughout Ireland, but I have obtained from a London corn-merchant the average prices of wheat, barley, and oats, for each year from 1841 to 1851, and taking in each case the prices of the year 1845 as represented by 100, I have calculated the variations per cent. in the subsequent years. On comparing the years 1845 and 1851, we find that the circulation has declined 35.78 per cent., the price of wheat has declined 24 per cent., of barley 21.85 per cent., and of oats 174:0 percent. If we compare the year 1841 with 1851, the decline of the circulation will only be at the rate of 16.7 per cent., while the price of wheat shows a decline of 40 per cent., of barley 25 per cent., and of oats 17 per cent.
From the whole, we infer that the difference between the amount of bank notes circulating in a country at two distant periods cannot be regarded as any correct test of the condition of its inhabitants at those periods, unless we take into account all the circumstances by which that difference is attended-that the decline of the circulation of bank notes in Ireland, from the year 1845 to 1851, is no accurate measure of the distress that has existed in the country, as other causes besides distress have concurred in producing that effect-that in comparing the circulation of 1845 and 1851, we are making a comparison unfavourable to the country, as the year 1845 was a year remarkable for the high amount of its circulation-and that we should indulge in no gloomy inferences as to the condition of the country even if the circulation should never recover its former amount.
Having considered the changes that have taken place in the annual amount of notes that have circulated in Ireland since the passing of the Act of 1845, I shall consider the monthly changes in the amount of the circulation.
Let us take up the returns, and look at any year we please, and we shall find that all the months vary from each other. Beginning at January, the amount of the circulation usually declines-slowly at first, but more rapidly in May, June, and July, until, by the end of August, we arrive at the lowest point. Then, in September, it begins to ascend, and goes on increasing till January, and then again declines till August. Now, let us inquire what are the laws which regulate these monthly variations. I stated that the annual variations were caused by variations in the quantity and price of agricultural produce. But, as no notes could be put into circulation until this produce is brought to market, the monthly circulation must depend upon the quantity of produce brought to market within the month. Now, it has been the custom in Ireland to commence bringing the produce to market immediately after the harvest. Hence arises the increase of the notes in September, and their further increase in the following months. But in the beginning of the year the landlords collect their rents, and receive from their tenants the notes for which this produce has been sold; this brings the notes back to the bank, either to be placed to his credit (if he have an account there), or, otherwise, in exchange for a letter of credit on Dublin, or a bill on London. The circuit of a note, then, is this:-It is obtained from the bank by a corn-merchant, who pays it to a farmer for his corn, which he ships to England. The farmer afterwards pays the note for rent to his landlord, who brings it back to the bank. Every month the bank is issuing and retiring notes; but, from August to January, it issues more than it retires, and hence the amount of notes in circulation increases; and from January to August it retires more notes than it issues, and hence the circulation falls.
We may notice another feature suggested to us by these Public Returns. We observe that a portion of the circulation consists of notes of £5 and upwards, and another portion of notes under £5; and it may be useful to inquire if these two classes of notes are subject to the same laws, and whether they rise and fall at the same time and in exact proportion to each other. Viewing the monthly circulation, we observe that the small notes, like the large notes, are at their lowest amount about the month of August, and at their highest amount about January. But we observe, also, that from August the small notes increase more rapidly than the large ones, and after January they decline more rapidly; so that in every year the proportion of small notes in circulation is greater in January than in August. It may be observed, too, that the circulation of the Belfast banks includes a much larger proportion of small notes than is contained in the circulation of the other banks. To show this, it will be sufficient to analyze one of these returns. Upon the total circulation of all the banks, the proportion of small notes on the 7th of August, 1852, is 4939 per cent.; upon that of the Bank of Ireland, 3473 per cent.; the Provincial Bank, 58.82 per cent.; the National Bank, 59.93 per cent.; and the Belfast Banks, 86.55 per cent.
I have one feature more to notice in these returns-that is, the amount of gold and silver kept by the banks, in order to meet the payment of their notes. For several years past the Act of 1845 has not required the Irish banks to keep any amount of gold or silver, for they have always been below the authorized circulation; but another Act, passed in the year 1828, through the influence of Mr. Spring Rice-(Lord Monteagle)-requires that all notes should be payable in gold on demand at the place of issue. The gold and silver kept by the banks have only been to the amount that they deemed necessary or prudent for the purposes of business.
We observe from these returns that the annual average amount of gold and silver kept by all the banks has varied from 29 to 36 per cent. "We observe, too, that in the years when the circulation has been low, the amount of gold and silver has been higher in proportion than in those years when the circulation has been high. Taking the average of years from 1847 to 1851, the lowest amount of gold, in proportion to its circulation, has been kept by the Bank of Ireland. The proportion varies from 24 per cent. in 1851, to 30 per cent. in 1849. The highest proportion has been kept by the Provincial Bank. It has varied from 38 per cent. in 1851, to 52 per cent. in 1849. We may also state that, in the monthly variations, the lower the circulation the higher the proportionate amount of gold and silver. This arises, it may be presumed, from the circumstance that the banks do not vary the amount of their gold and silver with every variation of the circulation. The proportion of silver to gold kept by all the banks, has varied from 20 to 33 per cent., but the proportion varies very much with different banks.
The amount of gold necessary to be kept against any given amount of notes in circulation is purely a question of management, and depends upon a variety of circumstances. The degree of public confidence the bank may have acquired, the excitable character of the population, the state of commercial credit, the facility of obtaining supplies, and the rapidity of communication with its branches, are all to be taken into calculation by a prudent banker. Gold can now be so readily obtained from England by means of steamboats, and distributed throughout Ireland by means of railways, that so large an amount may not be so necessary as formerly. The railways and the electric telegraph are useful to bankers, and present a striking instance of the utility of scientific discoveries to men of business.