’So long, therefore, as any individual, or association of individuals, may issue notes of a low value, to be used in the common transactions of life, without lodging any security for their ultimate payment, so long is it certain that those panics which must necessarily occur every now and then, and against which no effectual precaution can be devised, must occasion the destruction of a greater or smaller number of banking establishments, and by consequence a ruinous fluctuation in the supply and value of money.’ (Edinburgh Review, February, 1826.)

This was a period of great speculation in England.  In the year 1823 no less than 532 companies were chartered, with a nominal capital of 441 millions sterling.  These speculations were fostered by the increasing volume of bank paper.  The evil increased, and was allowed to exist until the year 1844, when a stop was put to the further increase of the volume of bank circulation, and to the further incorporation of joint stock banks.

We learn one lesson here, which may have a good effect upon us if we will bear it in mind in our future legislation, and take warning from the experiences of our contemporaries.  We allude to the obvious necessity in a country like ours, and, indeed, in any country, of maintaining a national moneyed institution as a check upon the vacillation, expansions, and contractions which mark the policy of small banks of issue.  This national institution, while free from individual profit, and without power to grant individual favors, should create and perform the functions of a national currency, and execute all the details required by or for the national treasury.  Its chief utility would be as a check upon the excess to which all joint stock banks are liable—­a sort of controlling and conservative power to prevent that mischief which our past experience shows has been the result of paper money when issued merely for private gain.

The advantage, the convenience, we may say the necessity, of a national circulation of paper money, are fully demonstrated by our own past history, and by the history of European nations.  This circulation should be dictated by the wants of the National Government, and convertible, at the will of the holder, into specie.  With these obvious restraints it would accomplish its ends and aims.

The Bank of England, in its early stages, was endangered by various and extraordinary circumstances.  Within three years of its establishment it was compelled to suspend payment to its depositors in cash, and issued certificates therefor payable ten per cent. every fortnight.  In 1709 the Sacheverell riots occurred in London, and fears were felt that the bank would be sacked; but this violence was obviated by well-trained troops.  In 1718 John Law’s bank was established in France, and for two years kept the people in a ferment.  This was followed by the South Sea scheme in England, in 1720, ’a year (the historian Anderson says) remarkable beyond any other which can be pitched upon for extraordinary and romantic projects.’  The bank, of course, suffered by these speculative measures, and was repeatedly exposed to a run upon its specie resources.