Friday, February 19, 2010

The Letters of Malachi Malagrowther

Whoever doubts that a literary figure can influence economic policy need look no further than the "Letters of Malachi Malagrowther".  On February 19, 1826, Walter Scott is preparing the first of these letters for publication.  From his journal:

February 19 (1826).—Finished my letter (Malachi Malagrowther) this morning, and sent it to James B., who is to call with the result this forenoon...

The letters were published on three dates in 1826 (February 22, March 1, and March 8).  Scott's fictional author was purported to be the grandson of Mungo Malagrowther, a character in "The Fortunes of Nigel".

The Malagrowther letters were written to influence public opinion against a proposed reform to the banking system proposed by the British Government.  Among the reforms, issuance of currency notes under £5 would be forbidden.

Scott was vehemently opposed to this measure, as it would effectively reduce the money supply, leading he believed to a depression.  In Scotland at the time, little gold and silver circulated.  Circulation of paper money (credit) enabled the system to function.

Ultimately, the government abandoned its proposal.  Sir Walter Scott is honored for his role in support of Scottish banking by having his portrait on the Bank of Scotland £5 note.

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