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The Financial and Commercial Crisis Considered

April 19, 2010

The recurrence at the present time of one of those visitations of commercial and financial distress of which I have, during a long life, experienced so many, has once more forced upon the consideration of Parliament and the public the interminable subject of banking and circulation. Whatever may be the variance of opinions on other parts of the subject, it seems by all admitted, that the general condition of commerce is sound and satisfactory ; and the truth of this position is sufficiently proved by the fact, that the intensity of the pressure has been attended with no unusual amount of failures or bankruptcies — the storm, however severe, has as yet cast few or no wrecks on shore.

The prudence and sagacity of merchants not being in fault, we are naturally led to look for our difficulties in the derangement of our monetary system ; and there, beyond all doubt, they will be found. It is singular that, in proportion to the abstruse nature and inherent difficulties of a subject, men are apt to be positive and dogmatical in their theories, undaunted by adverse experience and repeated disappointments. The various schemes for regulating the action of Banks have been propounded with unhesitating confidence, and pronounced to be unfailing, although every real trial of this great practical problem proves that it still remains to be solved ; and even the, to me, always unintelligible theories of the Birmingham school of philosophers are still maintained with perseverance by persons of great ability, who seem unconscious that, beyond the circle of their own town, the whole world is against them. The last notable settlement of this endless controversy was by the Bank Charter Bill of 1844, and the great leaders on both sides of the House of Commons are resolved to defend it, in spite of the unfortunate fact that on the first occurrence of what is called a crisis the failure is apparent in the evidence of a state of embarrassment and difficulty never exceeded. Mere speculative reasoners defend their theories with sufficient obstinacy ; but men who are, who have been, or who expect to be ministers of state, cannot so easily afford to be in the wrong, or to confess themselves to be not infallible. It is therefore stoutly maintained in the House of Commons by the leaders of both parties and their numerous partisans, that, look about you as you may for the cause of our difficulties, the last Charter of the Bank, with its whimsical restrictions and provisions, was an act of wisdom ; and if it be hinted that it has failed upon the very first experiment, the answer is ready, which during nearly half a century that I have now watched these questions has invariably been given by every successive minister, that the stupid Bank Directors — those scape-goats so conveniently at hand — have spoilt the wisdom of the Legislature.

Alexander Baring

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