JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. events of a calamitous trend (which in the imagination of some took the form of a swarm of migratory dragons and with others was represented by a depreciation of the currency) . . ." Kai Lung Beneath the Mulberry Tree.I AN article published three years ago' examined solmie of the views current at the end of the eighteenth century on the responsibility of bankers for the total of their notes, as a first step towards analysing the controversies behind the Bank Charter Act, 1844. It was then suggested that the error, or at best ambiguity, of the crucial passages in the Wealth of Nations conduced about 1790 to an over-facile belief thatcrudely stated-any continuing excess of note-issues above a safe figure was automatically prevented-a comfortable theory reminiscent of John Law. Such a doctrine, which we called the " Smithian" theory to distinguish it from the more sophisticated version later called the "Banking Theory ", was dangerously encouraging to a banking community which was far from experienced.Smith's views did not, however, apply without qualification to the Bank of England, because they were based upon the proviso that notes were issued only against sound commercial discounts, whereas the Bank was constantly a creditor of the Government. As a discounter of Exchequer paper, the Bank could find no guidance in the pages of the Wealth of Nations, and its actions to restrict the noteissue in 1783, 1793 and 1796 seem to have been dictated by instinct, or at best by empirical experience. Moreover, such independent vision as it possessed may have been due to the passing influence of one or two unusually clear-sighted Governors; there was, at least, a significant difference betweeln the criteria of danger accepted in 1783 (the level of the foreign exchanges) and in 1797 (the state of the Cash). The latter change explains why, once the Restriction Act had rendered the Cash inviolable, the Bank appears readily to have succumbed to the view that all was necessarily well with the note-issue; and when called upon in 1810 to expound its views could only produce a " Smithian " defence, which was irrelevant because Smith was discussing only convertible notes.It is the purpose of the present note to carry the story a stage further, from the Suspension of Cash Payments on 26th February, 1797, until the end of 1804. To follow the developing theories through this period necessarily involves reconsidering literature which has already been worked over so often and so comprehensively2 that it is difficult to avoid sheer repetition. It is hoped, however, that as our interest lies less in the theories actually expressed than in their relationship to those which preceded and succeeded them, we may be...
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