The Atlantic Monthly, Volume 01, No. 04, February, 1858. Various
modern historians have described them, and because the more philosophical impute to them an active agency in the origination of that moral corruption and lack of political principle which hastened the advent of the great Revolution. Louis XIV. having left behind him, as the price of his glory, a debt of about a thousand millions of dollars, the French ministry, with a view to reduce it, ordered a re-coinage of the louis-d'or. An edict was promulgated, calling in the coin at sixteen livres, to be issued again at twenty; but Law, an acute and enterprising Scotchman, suggested that the end might be more happily accomplished by a project for a bank, which he carried in his pocket. He proposed to buy up the old coin at a higher rate than the mint allowed, and to pay for it in bank-notes. This project was so successful that the Regent took it into his own hands, and then began an issue of bills which literally intoxicated the whole of France. No scenes of stock-jobbing, of gambling, of frenzied speculation, of reckless excitement and licentiousness ever surpassed the scenes daily enacted in the Rue Quincampoix; and when the bubble burst, the distress was universal, heartrending, and frightful. With millions in their pockets, says a contemporary memoir, many did not know where to get a dinner; complaints and imprecations resounded on every side; some, utterly ruined, killed themselves in despair; and mysterious rumors of popular risings spread throughout Paris the terror of another expected St. Bartholomew.
In this case the phenomena were the more striking because they were gathered within a short compass of time, and took place among a people proverbial for the versatility and extravagance of their impressions. The French are an excitable race, who carry whatever they do or suffer to the last extreme of theatrical effect; and for that reason it might be supposed that the tremendous revulsions we have alluded to were owing in part to national temperament. But similar effects have been wrought, by similar causes, among the slower and cooler English, with whom commercial disturbances have been as numerous and as disastrous as among the French, only that they have been distributed over wider spaces of time, and controlled by the more sluggish and conservative habits of the nation. Some twenty years before Law made his approaches to the French Regent, another Scotchman, William Patterson, had got the ear of Macaulay's hero, William, and of his ministers, and laid the foundations of the great Bank of England. It was chartered in 1694, on advances made to the government; and gradually, under its auspices, the vast system of English banking, which gives tone to that of the world, grew up. Let us see with what results; they may be expressed in a few words: every ten or fifteen years, a terrific commercial overturn, with intermediate epochs of speculation, panic, and bankruptcy.
We cannot here go into a history of this bank, nor of the various causes of its reverses; but we select from a brief chronological table, in its own words, some of the principal events, which are also the events of British trade and finance.
1694. The Bank went into operation.
1696. Bank suspended specie payments. Panic and failures.
1707. Threatened invasion of the Pretender. Run upon the Bank,—panic. Government helped it through, by guarantying its bills at six per cent.
1714. The Pretender proclaimed in Scotland. Run upon the Bank,—panic.
1718-20. Time of the South-Sea Bubble. Reaction,—demand for money,—Bank of England nearly swept away,—trade suspended,—nation involved in suffering.
1744. Charles Edward sails for Scotland, and marches upon Derby. Panic. Run upon the Bank,—is obliged to pay in sixpences, and to block its doors, in order to gain time.
1772. Extensive failures and a monetary panic. The Bank maintains the convertibility of its notes for several years, at an annual expense of £850,000.
1793. War with France,—drain of gold,—Bank contracts,—panic,—failures throughout the country,—universal hoarding,—one hundred country banks stop,—notes as low as five pounds first issued,—general fall of prices.
1796. An Order in Council suspends specie payment by the Bank.
1799. Numerous failures,—chiefly on the Continent. The pressure in England relieved by an issue of Exchequer bills.
1807-9. Great speculations in flax, hemp, silk, wool, etc.
1810. Recoil of speculation,—extensive failures, and great demand for money.
1811. Parliament adopts a resolution declaring a one-pound note and a shilling legal tender for a guinea.
1814-16. Heavy losses and bankruptcies,—failure of two hundred and forty country banks,—the distress and suffering of the people compared to that in France after the bursting of the Mississippi Scheme.
1819. Law passed for the resumption of specie payments in 1823,—after a suspension of twenty-seven years.
1822. Great commercial depression throughout Europe,—agricultural distress,—famine in Ireland.
1824. Speculations in scrips and shares of foreign loans and new companies, to a fabulous amount.
1825. Recoil of the speculations,—run upon the banks,—seventy banks stop,—a drain of gold exhausts the bullion of the Bank.
1826. Depression of trade,—government advances Exchequer bills to the Bank.
1832. A run for gold,—bullion in the Bank again alarmingly reduced.
1834-7. Jackson vs. Biddle in America produces considerable derangements in England,—drain of gold,—great alternate contractions and expansions,—severe mercantile distress.
1844. Renewal of the Bank Charter, limiting its issues,—great speculations in railroad shares, to the amount of £500,000,000.
1845. Recoil of the speculations,—immense sacrifice of property.
1846. Drain of gold,—large importations of corn,—alarm.
1847. Drain of gold continues,—panic and universal mercantile depression,—Bank refuses discounts,—forced sales of all kinds of property,—the Bank Charter suspended.
1857. The experiences of 1847 repeated on a more injurious scale, with another suspension of the Bank Charter Act.
Now this record does not show a brilliant success in banking; it does not encourage the hopes of those who place great hopes in a national institution; for the Bank of England is the highest result of the financial sagacity and political wisdom of the first commercial nation of the globe. A recognized ally of the government,—at the very centre of the world's trade,—enjoying a large freedom of movement within its sphere,—conducted by the most eminent merchants of the metropolis, assisted by the advice of the most accomplished political economists,—sanctioned and amended, from time to time, by the greatest ministers, from Walpole to Peel,—it has had, from its position, its power, and the talent at its command, every opportunity for doing the best things that a bank could do; and yet behold this record of periodical impotence! Its periodical mischiefs we leave out of the account.
In the United States, we have suffered from similarly recurring attacks of financial epilepsy; we have tried every expedient, and we have failed in each one; we have had three national banks; we have had thousands of chartered banks, under an infinity of regulations and restrictions against excesses and frauds; and we have had, as the appropriate commentary, three tremendous cataclysms, in which the whole continent was submerged in commercial ruin, besides a dozen lesser epochs of trying vicissitude. The history of our trade has been that of an incessant round of inflations and collapses; and the amount of rascality and fraud perpetrated in connection with the banks, in order to defeat the restrictions upon them, has no parallel but in the sponging-houses. A Belgian philosopher, from the study of statistics, has deduced a certain order in disorder,—or a law of periodicity in the recurrence of murders, suicides, crimes, and illegitimate births; and it appears that a similar regularity of irregularity might be easily detected in our cyclic bank explosions.
With the sad experiences of other nations before us,—with the rocks of danger standing high out of the water, and covered all over with the fragments of former wrecks, we have yet persisted in following the old wretched way. What a humiliating confession! what a comment on the alleged practical discernment of this practical people! what a text for radicals, socialists, and all sorts of Utopian dreamers! If the mischiefs of these monetary aberrations were confined to a mere loss