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Subject Area: Political Theory
Subject Area: Law

Bentham to P. Colquhoun. - Jeremy Bentham, The Works of Jeremy Bentham, vol. 10 (Memoirs Part I and Correspondence) [1843]

Edition used:

The Works of Jeremy Bentham, published under the Superintendence of his Executor, John Bowring (Edinburgh: William Tait, 1838-1843). 11 vols. Vol. 10.

Part of: The Works of Jeremy Bentham, 11 vols.

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Bentham to P. Colquhoun.

“I have been turning my thoughts a little (and but very little) to the effects of your circulating medium plan, and I see in it a vast resource for government. Why should the Charter of the Bank of England be renewed? or why should bankers exist at all? Neither the one nor the other contribute to augment the property of the country; while by dealing in money and assisting monopolizers, who are always hurtful to every state, they acquire immense fortunes by availing themselves of a resource which properly belongs to the state, and which, under a proper system of management, would not only ease the country of the pressure of war taxes, but would even enable government to pay off the national debt. I daresay you are already convinced of this, from the consideration you have given the subject. But this is not all the good it would produce: those commercial distresses, which beget distrust and produce ruin to many respectable individuals, while they disturb the beneficial intercourse of commerce, could rarely happen.”

And again on the 29th November:—

“1. I should conceive the circulation of country banker’s paper to be equal at least to the paper of the Bank of England. No human being can form any accurate judgment of what may be afloat and current at the same time. It must hang upon conjecture, and the best opinion on this subject will be obtained from men of commercial knowledge and good judgment: I should conceive Sir Francis Baring’s ideas on this subject of importance. As far as my judgment goes, I should suppose the country circulation of Great Britain about eleven or twelve millions. Mr Burdon will not leave town till parliament meets.

“2. I had conceived the circulation of the paper of the Bank of England to exceed ten millions; but Mr Allardice is no doubt right. Since the payment of specie has been suspended, I should conceive the bank may have extended its circulation one-fourth. This, however, is judging only from appearances: the fact cannot be ascertained. The merchants complain of the directors being less liberal in discounts than the present pressure requires, although they have certainly stretched considerably, and it is probable that their circulation is greater than it ever was. The addition of one, and two, and five pound notes, within the last eight years, must have increased the circulation in a certain degree; but it does not go very far beyond the metropolis.

3. “The country bankers keep very little specie. It varies according to the credit and opulence of the bankers. In proportion as bankers possess confidence in the country, the less specie is required. They have nothing to fear, but from a run upon them, arising from want of confidence, whether proceeding from the credit of the house being shaken, or from public calamity. It is usual for bankers in the country to exchange each other’s notes once or twice a-week, and the balance is always paid by a bill on London. An extensive credit here is what they trust to more than specie, for supporting them in any exigency; and the want of the means of obtaining this credit, restrains circulation, and prescribes a limit, in proportion to the capital of the bankers. It does not happen once in seven years, that a country banker is called upon to pay specie to any extent; and it seldom happens at a distance from the metropolis, that gold coin is to be met with. The risk of light guineas has reconciled the people to notes, and nothing else is in circulation. A considerable amount in silver (comparatively speaking) must be kept at the country bankers’ houses for change—at least this was the case before the five-pound notes were issued. I should not conceive the gold equal to one-eighth, if so much, of the amount of the notes in circulation; but this is mere opinion. It is the interest of the banker to have as little as possible, and he will act on this principle. If he sees no danger, he will have little or none; if otherwise, he will get temporary supplies from the metropolis.

“If we could suppose a case, where a sudden demand to the amount of one-fourth of the circulation of the different country banks was to be made for specie, I think all of them must stop, because they could not, in that case, assist one another. In this view, specie is not the foundation upon which notes are issued; but the credit of the issuers, and their known property and responsibility. It is this that quiets the public mind, since a general impression prevails that the specie is, at all times, very inconsiderable in the coffers of the bankers.”

Bentham applied to Sir Francis Baring for information, in a note dated 23d December, 1799.