London, Friday, Sept. 9,1853. 

When I told you in my letter of August 30, that the Vienna Note was "re- 
jected" by the Porte, inasmuch as the alterations demanded by it and the 
condition of immediate and previous evacuation cannot be considered other- 
wise than as a refusal of Russia's pretensions, I found myself in contradiction 
with the whole Press, which assured us that the alterations were insignificant, 
not worth speaking of, and that the whole affair might be regarded as settled. 
Some days later, The Morning Chronicle startled the confiding stockjobbers 
with the announcement that the alterations proposed by the Porte were of 
a very serious character, and by no means easy to be dealt with. At this 
moment there exists only one opinion, namely that the whole Eastern 
Question has come back to its point of issue, an impression in no way 
impaired by the complete publication in yesterday's papers, of the official 
Note addressed by Rescbid Pasha, to the Representatives of Austria, France, 
Great Britain, and Prussia, dated August 19, 1853. 

That the Russian Emperor will reject the Turkish "alterations" there is 
not the slightest doubt. Already we are informed by the Assemblée Natio- 
nale, the Paris Moniteur of the Emperor of Russia, that, "according to 
correspondences received to-day at Paris, the first impressions produced on 
the Cabinet of St. Petersburg were by no means favorable to the modi- 
fications proposed by the Porte. Whatever may be the resolution of that 
Cabinet we must prepare ourselves beforehand to take it coolly and to 
repress our fears. We have to consider that even were the Russian Cabinet 
to refuse the proposed change of the note, there would remain the resource 
of fresh negotiation at Constantinople." The intimation contained in this last 
hint, that Russia will attempt to gain another delay of the decision of the 
dispute is confirmed by the Berlin Lithographic Correspondence: "The 
Austrian government has presented a memorial to the Emperor Nicholas 
containing new propositions of modification, and it has undertaken to termi- 
nate the crisis in a manner quite different from all previous attempts." In 
a letter published by the Vienna Wanderer from Odessa dated 26th Aug. the 
solution of the Oriental question is stated "to be not so near at hand as was 
expected by some people. The armaments have not been suspended for one 
day, and the army in the Principalities continually receives reinforcements." 
The Cronstadt Satellite positively announces that the Russian troops will 
take up their winter-quarters in the PrincipaHties. 

A note issued from Washington could scarcely have produced a greater 
sensation in Europe than your editorial remarks on Capt. Ingraham. They 
have found their way, with and without commentaries, into almost the whole 
weekly press of London, into many French papers, the Brussels Nation, the 
Turin Parlamento, the Basle Gazette, and every liberal newspaper of Ger- 
many. Your article on the Swiss-American alliance having simultaneously 
been reprinted in a number of German journals you may consider the follow- 
ing passage from an article of the Berlin Lithographic Correspondence as 
partly addressed to you: "Some time since the press has had various occa- 
sions to pronounce itself on the United States theory with regard to inter- 
vention. Very recently the Koszta affair at Smyrna has renewed the dis- 
cussion, and this affair is not yet terminated, when already foreign and native 
journals hold out the prospect of an intervention on the part of the United 
States in favor of Switzerland, if it should be threatened by an attack. To-day 
we are informed that several Powers have the intention of making a collective 
declaration against the doctrine of international right put forth by the United 
States, and that we may hope to see those Cabinets arrive at a perfect 
understanding. If the American intervention theories were not refuted in a 
peremptory manner, the extirpation of the revolutionary spirit in Europe 
would meet with an insuperable obstacle. We may add, as an important fact, 
that France is among the Powers ready to participate in this remonstrance." 
On this last point, the Constitutionnel of Tuesday last takes good care not 
to leave any doubt, when it says: "It is necessary to be candid in all things. 
It is not as a citizen of the United States that Koszta is defended against 
Austria by the agents of the American Republic, but as a revolutionist. But 
none of the European Powers will ever admit as a principle of public law 
that the Government of the United States has the right to protect revolution 
in Europe by force of arms. On no grounds would it be permitted to throw 
obstacles in the way of the exercise of the jurisdiction of a government, under 
the ridiculous pretense that the offenders have renounced their allegiance, 
and from the real motive that they are in revolt against the political con- 
stitution of their country. The Navy of the American Union might not always 
have such an easy triumph, and such headstrong conduct as that pursued 
by the Captain of the St. Louis might on another occasion be attended with 
very disastrous consequences." 

The Impartial of Smyrna, received to-day, publishes the following inter- 
esting letters from Schumla: 

"Schumla, Aug. 8, 1853. 
The Commander-in-Chief, Omer Pasha, has so ably distributed his troops, 
that on the first emergency, he may within 24 hours concentrate at any point 
on the Danube, a mass of 65,000 men, infantry and cavalry, and 180 pieces 
of cannon. A letter I received from Wallachia, states that typhus is making 
frightful havoc in the Russian army, and that it has lost not less than 13,000 
men Since its entry into campaign. Care is taken to bury the dead during the 
night. The mortality is also very high among the horses. Our army enjoys 
perfect health. Russian detachments, composed of 30 to 60 soldiers, and 
dressed in Moldavian uniform, appear from time to time on the opposite bank 
of the Danube. Our general is informed of all their movements. Yesterday 
1,000 Roman Catholic Albanians arrived. They form the vanguard of a corps 
of 13,000 men expected without delay. They are sharpshooters. Yesterday 
there arrived also 3,000 horse, all of them old soldiers, perfectly armed and 
equipped. The number of our troops is increasing every day. Ahmet Pasha 
started yesterday for Varna. He will wait there for the Egyptian forces, in 
order to direct them to the points they are to occupy." 

"Schumla, Friday, Aug. 12, 1853. 

On the 9th inst. two regiments of infantry and one battery of light artillery, 
belonging to the guards of the Sultan, started for Rasgrad. On the 10th we 
got news that 5,600 Russians had encamped themselves on the bank of the 

Danube near the port of Turtukai, in consequence of which the outposts of 
the two armies are only at the distance of a rifle-shot from each other. The 
gallant Colonel Skander-Bey has left for that post, with several officers. 
Omer Pasha has established telegraphs, with a view of having communicated 
to the headquarters at every time of day or night the events passing on every 

point of the river. We have had continual rains for some days past, but the 
works of fortification have none the less been continued with great activity. 
A salute of cannon is fired twice a day, at sunrise and sunset. We hear nothing 
of this sort from the opposite side of the river. The Egyptian troops, after 

having undergone their quarantine at Constantinople, will embark for Varna, 

whence they are to be directed to Babadagh. The Brigadier Izzet Pasha 
expects them there. In the district of Dobrudja-Ovassi 20,000 Tartars have 
assembled, in order to participate in the war against the Russians. They are 
for the greater part ancient emigrants, who left the Crimea at the time of its 
conquest by Russia. The Ottoman army, whose strength augments every day 
by the arrival of troops, both regular and irregular, is tired of passiveness, 
and burns with the desire of going to war. It is to be feared that we shall have 
one of these days a transit across the Danube without superior orders, 
especially now that the presence of the Russians, who show themselves on 
the opposite bank, adds to the excitement. Several physicians, Mussulmans 
and Christians, left some days ago, in order to establish military hospitals 
on the European plan at Plevna, at Rasgrad, at Widdin, and at Silistria. On 
the 11th there arrived from Varna two superior English officers. They have 
had a long audience with Omer Pasha, and have visited the fortifications, 
attended by several Turkish officers. They have found them in a perfect state 
of defense, provided with ample magazines, baking-stoves, fountains of 
fresh water, etc. All these fortifications are constructed with the greatest 
solidity. The most severe discipline prevails among our troops." 

"Schumla, Monday, Aug. 15, 1853. 
On the 13th, the English General O'Donnell arrived from Constantinople. 
He had an interview of two hours’ duration with Omer Pasha, and left on 
the following day, attended by an aide-de-camp of the Commander-in-Chief, 
for the purpose of inspecting the fortifications. Yesterday three batteries and 
an immense train of ammunition arrived from Varna. To-morrow a re- 
inforcement of one battery, two battalions of infantry, and 1,000 horse, will 
leave for the port of Hirsova. The engineers at this place are busily engaged 
in restoring the fortifications destroyed by the Russians in 1828. Turkey may 
have unbroken confidence in her army." 

The Earl of Fitzwilliam addressed a letter on Thursday last to the meeting 
of Sheffield cutlers, in which he protests against the monstrous assumption 
with which Parliament was closed by the heroic Palmerston, that "reliance 
was to be placed on the honor and character of the Emperor of Russia." 

Mr. Disraeli has summoned his constituents to meet him at Aylesbury on 
the 14th inst. The Daily News of yesterday attempted, in a long and dull 
article, to combat what Mr. Disraeli is supposed by it to be likely to tell his 
electors. Such a performance I think The Daily News might have left with 
greater propriety to its venerable grandsire, The London Punch. 

It is now the fourth time since January that the rate of interest has been 
raised by the Bank of England. On Sept. 4, it was fixed at4 percent. "Another 
attempt has been made to reduce the circulating medium of the country— 
another effort to arrest the tide of national prosperity," exclaims The London 
Sun. On the other hand, it comforts itself with the consideration that the Bank 
of England has lost much of its mischievous power in consequence of the 
Peel Act of 1844. 
The Sun is mistaken in what it fears, and in what it hopes. The Bank of 
England has as little as any other bank, either the power of expanding or of 
contracting the currency of the country. The really mischievous powers 
possessed by it are by no means restricted, but on the contrary strengthened 
by the Peel Act of 1844. 

As the Bank Act of 1844 is generally misunderstood, and as its working 
will become, in the approaching crisis, of paramount importance not only 
to England but to the whole commercial world, I propose briefly to explain 
the tendency of the act. 

Peel's Bank Act of 1844 proceeds on the assumption that the metallic 
circulation is the normal one; that the amount of the currency regulates 
prices; that in the case of a purely metallic circulation, the currency would 
expand, with a favorable exchange and with an influx of bullion, while it 
would be contracted by an adverse exchange and a drain of bullion; that a 

circulation of bank notes has exactly to imitate the metallic circulation; that 
accordingly there had to be a degree of correspondence between the vari- 
ations in the amount of bullion in the vaults of the Bank of England and the 
variations in the quantity of its notes circulating among the public; that the 
issue of notes must be expanded with a favorable, and contracted with an 

unfavorable exchange ; lastly, that the Bank of England had the control over 

the amount of its notes in circulation. 

Now there is not one of these premises which is not utterly fallacious and 
contradictory to facts. Suppose even a purely metallic circulation, the 
amount of currency could not determine prices, no more than it could de- 

termine the amount of commercial and industrial transactions; but prices on 
the contrary would determine the amount of currency in circulation. Un- 
favorable exchanges, and a drain of bullion, would not contract even a purely 
metallic circulation, as they would not affect the amount of currency in 
circulation, but the amount of currency in reserve, sleeping in the banks as 
deposits, Or in private hoards. On the other hand, a favorable exchange and 
a concomitant influx of bullion, would augment, not the currency in circula- 
tion, but the currency deposited with bankers or hoarded by private in- 
dividuals. The Peel Act, therefore, starting upon a false conception of a 
purely metallic circulation, naturally arrives at a false imitation of it by a 
paper circulation. The idea itself, that a bank of issue has acontrol over the 
amount of its outstanding notes, is utterly preposterous. A bank issuing 
convertible notes or advancing notes generally, on commercial securities, 
has neither the power of augmenting the natural level of circulation nor the 
power to cripple it by one single note. A bank may certainly issue notes to 
any amount its customers will accept; but, if not wanted for circulation, the 
notes will be returned to it in the form of deposits, or in payment for debts, 
or in exchange for metal. On the other hand, if a bank intend to forcibly 
contract its issues, its deposits would be withdrawn to the amount needed 
for filling up the vacuum created in the circulation. Thus a bank has no power 
whatever over the quantity of circulation, whatever may be its power for 

the abuse of other people's capital. Although in Scotland banking was practi- 

cally unrestricted before 1845, and the number of banks had considerably 
increased since 1825, the circulation declined, and there was only £1 (of 
paper) per head of population, while there was in England £2 per head, 
notwithstanding that the whole circulation below £5 was metallic in England 
and paper in Scotland. 

It is an illusion that the amount of circulation must correspond to the 
amount of bullion. If the bullion increases in the vaults of a bank, that bank 
certainly tries by all means to extend its circulation, but, as experience 
teaches, to no purpose. From 1841—43, the bullion in the Bank of England 
rose from £3,965,000 to £11,054,000, but its total circulation declined from 
£35,660,000 to £34,049,000. Thus the Bank of France had, on March 25,1845, 
an outstanding circulation of 256,000,000f., with a bullion reserve of 
234,000,000f.; but on March 25,1846, its circulation was 249,404,000f., with 
a bullion reserve of only 9,535,000f. 

It is an assumption no less incorrect, that the internal circulation must 
diminish in the case of a drain of bullion. At this moment, for instance, while 
the efflux of bullion is going on, $3,000,000 have been brought to the mint 
and added to the circulation of the country. 

But the main fallacy rests on the supposition that demand for pecuniary 
accommodation, i.e. loan of capital, must converge with demand for addi- 
tional means of circulation; as if the greater amount of commercial trans- 
actions were not effected by bills, checks, bookcredits, clearing-houses, and 
other forms of credit quite unconnected with the so-called circulation. There 
can exist no better mode of verifying the faculty of Bank-accommodations 
than the market rate of interest, and no more efficient means for ascertaining 
the amount of business actually done by a Bank, than the return of bills under 
discount. Let us proceed on this twofold scale of measurement. Between 
March and September, 1845, when with the speculation-mania the fictitious 
capital reached its utmost hight and the country was inundated with all 
possible enterprises on an immense scale, the rate of interest being nearly 
2V2 per cent., the circulation of Bank notes remained nearly stationary, while 
at a later period in 1847, the rate of interest being 4V2 per cent., the price of 
shares having sunk to the lowest ebb, and discredit spreading in all directions, 
the circulation of Bank notes reached its maximum. 

The note circulation of the Bank of England was £21,152,853 on the 
17th April; £19,998,227 on the 15th of May; and £18,943,079 on the 21st of 
August, 1847. But while this falling off in the circulation occurred, the 
market-rate of interest had declined from 7 and 8 to 5 per cent. From the 
21st Aug., 1847, the circulation increased from £18,943,079 to £21,265,188 on 
Oct. 23. At the same time the market-rate of interest rose from 5 to 8 per 
cent. On the 30th of August the circulation was £21,764,085, the interest paid 
in Lombard-st. amounting to 10 per cent. Take another instance: 

Bank of England. 

Bills under Discount. Notes in Circulation. 
Sept. 18, 1846 £12,321,816 £20,922,232 
April 5, 1847 18,627,116 20,815,234 

So that the Banking accommodation in April, 1847, greater by 6,000,000 
than that of Sept., 1846, was carried on with a less amount of circulation. 

Having exposed the general principles of Peel's Bank Act, I come now to 
its practical details. It assumes that £14,000,000 of bank notes form the 
necessary minimum amount of circulation. All notes issued by the Bank of 
England beyond that amount shall be represented by bullion. Sir Robert Peel 
imagined he had discovered a self-acting principle for the issue of notes, 
which would determine with mechanical accuracy, the amount of the circula- 
tion, and which would increase or diminish in the precise degree in which 

the bullion increased or decreased. In order to put this principle into practice, 

the Bank was divided into two departments, the Issue Department and the 
Banking Department, the former a mere fabric of notes, the latter the true 
Bank, receiving the deposits of the State and of the public, paying the divi- 
dends, discounting bills, advancing loans, and performing in general the 
business with the public, on the principles of every other banking concern. 
The Issue Department makes over its notes to the Banking Department to 
the amount of £14,000,000, plus the amount of bullion in the vaults of the 
Bank. The Banking Department negotiates those notes with the public. The 
amount of bullion necessary to cover the notes beyond £14,000,000, remains 
in the Issue Department, the rest being surrendered to the Banking De- 
partment. If the amount of bullion diminish beneath the circulation exceeding 
£14,000,000, the notes returning to the Banking Department in discharge of 
its advances, or under the form of deposits, are not reissued nor replaced, 
but annihilated. If there were a circulation of £20,000,000, with a metallic 
reserve of £7,000,000, and if the Bank were further drained by an efflux of 
£1,000,000, all the bullion would be requested by the Issue Department, and 
there would not remain one sovereign in the Banking Department. 

Now everybody will understand that this entire machinery is illusory on 
the one hand, and of the most pernicious character on the other hand. 

Take, for instance, the Bank returns in last Friday's Gazette. There you 
find, under the head of the Issue Department, the amount of notes incircula- 
tion stated to be £30,531,650, i.e., £14,000,000 + £16,531,650-the latter sum 
corresponding to the bullion reserve of last week. But turning to the head 
of Banking Department, you will find £7,755,345 in notes in its assets. This 
is the portion of the £30,531,650 not accepted by the public. Thus the self- 
acting principle determines only the £30,531,650 in notes to be transported 
from the Issue Department to the Banking Department. But there they 
remain. As soon as the Banking Department comes into contact with the 
public, the amount of circulation is regulated, not by Peel's Act, but by the 
wants of business. The self-acting principle, accordingly, extends its opera- 
tion not beyond the vaults of the Bank premises. 

On the other hand, there occur moments, when the Bank of England, by 
her exceptional position, exercises a real influence, not only on English 
commerce, but on the commerce of the world. This happens in moments of 
general discredit. In such moments the Bank may, by raising in accordance 
with the Peel Act, its minimum rate of interest, correspondingly with the 
efflux of bullion, and by refusing her accommodation, depreciate the public 
securities, lower the prices of all commodities, and enormously aggravate 
the disasters of a commercial crisis. It may, in order to stop the efflux of 
bullion and to turn the exchanges, transform every commercial stagnation 
into a monetary peril. And in this manner the Bank of England has acted and 
was forced to act by the Peel Act in 1847. 

This, however, is not all. In every banking concern, the heaviest liabilities 
are not the amount of notes in circulation, but the amounts of notes and 
metals in deposit. The banks of Holland, for instance, had, as Mr. Anderson 
stated before a Committee of the House of Commons, before 1845, 
£30,000,000 in deposit, and £3,000,000 only in circulation. "In all commercial 
crises," says Mr. Alex. Baring, "for instance, in 1825, the claims of the 
depositors were the most formidable, not those of the holders of notes." 
Now, while the act of Peel regulates the amount of bullion to be held in 
reserve for the convertibility of notes, it leaves Directors the power to do 
with the deposits as they please. Yea, more. The very regulations of this act, 
as I have shown, may force the Banking Department to stop the payment 
of the deposits and of the dividends, while bullion to any amount may lie 
in the vaults of the Issue Department. This happened, indeed, in 1847. The 
Issue Department being yet possessed of £61,000,000 of bullion, the Banking 
Department was not saved from bankruptcy but by the interference of 
Government suspending, on their responsibility, the Peel Act, on 25th Oct., 
1847. 

Thus the result of the Peel Act has been that the Bank of England changed 
its rate of interest thirteen times during the crisis of 1847, having changed 
it only twice during the crisis of 1825; that it created amid the real crisis a 
series of money panics in April and October, 1847; and that the Banking 
Department would have been obliged to stop but for the stoppage of the act 
itself. There can, therefore, exist no doubt that the Peel Act will aggravate 
the incidents and severity of the approaching crisis.