March 12th, 2013

more from Wood's _History_

p 87

Context: during Robert Peel's second term as Prime Minister, he made re-upping the charter of the Bank of England contingent on a variety of things, including regular payments to the government based on the hypothetical profit from circulation, but more importantly, he limited the Banks ability to issue Notes based on the bullion currently in the banks (it was almost that simple). While a variety of people in Parliament had been in favor of this for a while, they had never "won" the debate. But Peel managed this because the Charter was up and his party (the Conservatives) would do what he said.

"The smooth passage of the plan was hardly disturbed when George Muntz, successor to Thomas Attwood's Birmingham seat, asked the prime minister, "What would happen in consequence of there being such an export of gold as would render it impossible for the Bank to pay its liabilities in gold and thereby affect the circulation of the country?"

Remember, this is 1845. Everyone in the room could remember many times that that rule could have come into play, if it had existed before.

"Peel replied that he "would rather decline answering such questions which were merely speculative, and the answers to which could not tend to any practical result...He, however, by no means anticipated such a contingency as that which entered into the speculative mind of the honourable Gentleman."

And remember, this whole thing was designed to create certainty going forward.