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The Pamphlet Collection of Sir Robert Stout: Volume 14

The Bank of England Monopoly

The Bank of England Monopoly.

Money is the measure of all other commodities. A monopoly of money, therefore, must be the worst of all monopolies, whether men realize it or no.

Banking (or dealing in credit) is one form of trade. It should, therefore, on the face of things, be as free as any other form of trade : law and custom to the contrary, notwithstanding.

It is well to nail these, the true colours of the political economist, to the mast, before going into action on what are wrongly supposed to be the abstruse and complicated questions of banking and currency.

Under the Bank Act of 1844, as passed by Sir Robert Peel, England—the financial centre of the world—is still in durance, though her shipping has increased six-fold, and her commerce eight-fold, in the interval of 42 years since elapsed.

The provisions of that Bank Act are so contrived that in this country, with all its immense accumulations—

Its 642 million pounds' worth of annual imports and exports,

Its 5,511 million pounds of annual money transactions through the clearing-house,

Its 631 million pounds of profits yearly charged with Income Tax,

Its 134 millions of money annually paying death duties,—to say nothing of landed property—any foreign country may, almost any month, by arranging the weekly withdrawal of 2 millions of bullion, run up the rate of discount from three per cent, to four per cent., from four per cent, to five per cent., from five per cent, to six per cent., and so on, until credit—on which British trade lives and moves and has its being—is strangled, the trade and commerce of the whole world stunned, and irretrievable ruin inflicted upon multitudes of the most deserving and honest citizens, not to say taxpayers.

The principal provisions of this Bank Charter Act are briefly these :—
1.That after 1844 no new bank should be permitted to issue bank notes, and that no bank whatever should issue a note in London, or within 65 miles of London. There is monopoly with a vengeance.
2.That banks enjoying the right of issue previously to 1844, should be forbidden to extend it, whatever might be the future expansion of business. Even James I. granted no monopoly to be matched with that.
3.That a fixed amount of £14,000,000 in notes might in future be issued by the Bank of England, page 119 against a like amount lent to government by the Bank. All further issues to be covered by bullion in the Bank's coffers, of which bullion not exceeding one-fourth may be silver. (This last proviso has proved of none effect, as millions of silver may not pay one £5 note.) It will be seen that the Bank note, then, depends for its validity upon the validity of the Exchequer note. What a waste, then, is the payment of large sums annually to the Bank by Government for use of its notes! It is surely evident that the notes of the Exchequer, guaranteed by the whole realized property of the United Kingdom, must be superior to those of a small corporation whose paid-up Capital and Reserve funds do not altogether aggregate 20 millions of money.
4.That beyond this limit the Bank should at all times enjoy the right of issuing to any further amount for which it held bullion specially reserved in its cellars. Perronet Thompson says: " It is a semi-barbarous notion of policy which cannot conduct a paper currency without saying 'Take these 20 million pounds' worth of gold and see them well casked and marked and lettered, and then let them be stowed away in a dry cellar, and only looked at now and then, to see that nobody has run away with them and that the casks have not gone to decay;' "and he further dryly remarks that deposits of that character are impolitic in a country that desires to hold out no encouragement to invasion or civil commotion, for 20 millions would be £100 a piece to 200,000 men, the finest prize-money offered since the Creation. The bullion reserve the Bank can always increase by raising the rate of discount, and as this process, costly and often ruinous to the trading public, is generally very profitable to the Bank (and to all bankers and capitalists), the directors resort to it freely on slight pretext. Witness the following record:—

Movements of the Bank Rate and Price of Consols.

Rates of Discount
Highest Lowest. Average for 12 months. Changes in the Year.
1840 5 5 5 None
1841 5 5 5 None
1842 5 Jan., Feb., and March 4 8 last months Three
1843 4 4 4 None
1844 4 Eight first months 2½ 4 last months One
1845 3½ Nov. and Dec. 2½ first 9 months Two
1846 3½ 1st 8 months 3 last 4 months One
1847 7¾ November 3½ January Seven
1848 5 January 3 Nov. and Dec. Four
1849 3 1st 10 months 2½ December 3 Two
1850 None
1851 3 3 3 None
1852 2½ Jan., Feb., and Mar. 2 last 8 months 2 1/12 Two
1853 5 3 last months 2¾ January Four
1854 5½ May, June, and July 5 1st 4 & last 5 mos. 5 Two
1855 6 Nov. and Dec. 3½ July and August Six
1856 6¾ November 4½ July, Aug., Sept., & Four
1857 9¾ November 5½ Aug. & Sept. June Seven
1858 5 January 2½ December Three
1859 4 May 3½ 1st 4 & last 5 mos. Four
1860 5 Nov. and Dec. 2¾ Tanuary Five
1861 7½ Feb. and March 3 Nov. and Dec. Eight
1862 3 June, Nov., and Dec. 2 Aug., Sept., & Oct. Five
1863 7½ December 3½ May Six
1864 9 Sept. and Oct. 6 March Nine
1865 7 October 3¼ Tune and July Eight
1866 10 June and July 3¾ December 7 Ten
1867 3½ January 2 last 5 months Three
1868 3 December 21st 10 months Two
1869 4½ May 2½ Sept. and Oct. Seven
1870 5 August 2½ last 3 months 31/8 Four
1871 4½ November 2 August 27/8 Ten
1872 6[unclear: ?] November 3 first 3 months 4[unclear: ?] Nine
1873 8[unclear: ?] November 3¼ Aug. and Sept. Nine
1874 6 December 2¾ June Nine
1875 4½ January 2 September Eight
1876 4[unclear: ?] January 2 May to Dec. inclus. 2[unclear: ?] Four
1877 4[unclear: ?] November 2 January to Apl., 2[unclear: ?] Eight
1878 5[unclear: ?] November 2 February Ten
1879 4½ January 2 May to October 2[unclear: ?] Six
1880 3 Jan. to May inclusive 2½ July to Nov. Three
1881 5 Nov. and Dec. 2½ may, June & July., Seven
1882 5 13/16 February 3 Apl., May, Jne., & Jly 4[unclear: ?] Seven
1883 4¾ January 3 Ma., Ap., & last 3 ms. 3 9/15 Eight
1884 5 December 2 July, Aug., & Sept. 2 19/20 Eight
1885 5 Jan. and Feb. 2 June to Oct. (in.) 3 Six
Prices of 3 per cent. Consols.
Highest. Lowest. Average of 12 months.
92[unclear: ?] May 87 October 90¼ 1840
90 April 88[unclear: ?] October 89[unclear: ?] 1841
94[unclear: ?] December 89[unclear: ?] February & Jan. 92 1842
96¾ April 93[unclear: ?] June 95¼ 1843
100[unclear: ?] December 97¼ January 99[unclear: ?] 1844
100¼ January 94[unclear: ?] December 98[unclear: ?] 1845
96¾ June 94¾ December 95¾ 1846
92 January 82 October 87¼ 1847
87[unclear: ?] January 82 March and April 85½ 1848
96½ December 91½ March 92½ 1849
97¾ December 95[unclear: ?] February 96½ 1850
98¾ November 96½ March 97[unclear: ?] 1851
101¼ December 96½ January 99[unclear: ?] 1852
100[unclear: ?] May 92 October 97¾ 1853
95¼ September 87½ April 91[unclear: ?] 1854
93 March 87[unclear: ?] October 90½ 1855
95[unclear: ?] July 91 February 31[unclear: ?] 1856
93[unclear: ?] June 89 October 99[unclear: ?] 1857
98[unclear: ?] October 94¾ January 96[unclear: ?] 1858
96¼ November 91½ May 95[unclear: ?] 1859
95 June and January 93 October 94 1860
93[unclear: ?] November 89[unclear: ?] June 91½ 1861
93¾ Oct. and Nov. 91[unclear: ?] June 93 1862
93½ May and September 91 December 92[unclear: ?] 1863
91½ April 88 September 90[unclear: ?] 1864
91 April 87½ December 89½ 1865
89¾ November 86¼ May and June 88 1866
94[unclear: ?] September 90¾ April 93 1867
94[unclear: ?] June 92[unclear: ?] December 93[unclear: ?] 1868
93 November 92[unclear: ?] December 92[unclear: ?] 1869
94[unclear: ?] May 90¾ August 92[unclear: ?] 1870
93½ May and August 91½ February 92¾ 1871
93[unclear: ?] May 91[unclear: ?] December 92½ 1872
93½ May 92 December 92½ 1873
93¼ May 92 March 92½ 1874
94¾ August 92[unclear: ?] January 93¾ 1875
96 7/12 August 93[unclear: ?] January 95 1876
96 11/16 November 94¼ May and June 95[unclear: ?] 1877
96 3/16 May 94¼ October 95 3/16 1878
98¾ May 96¼ February 97½ 1879
99 15/18 November 97½ August 98[unclear: ?] 1880
100 13/16 April 98[unclear: ?] January 100 1881
102 1/16 November 99¾ August 100½ 1882
102[unclear: ?] April 99 13/16 July 101 3/16 1883
102[unclear: ?] April 99[unclear: ?] December 101 1884
100½ November 96¼ April 99[unclear: ?] 1885

5. Under government supervision the Bank was divided into two departments; one of issue, the other of banking; and a certified statement of the transactions in both such departments was to be published weekly by the government.

6. That all notes of the Bank should be legal tender except at the Bank's own counter.

7. For the facilities and monopoly thus conceded, the Bank should pay to the government annually £180,000 and the profits upon all issues above £14,000,000. How these profits are estimated does not appear. While in consideration of the Bank undertaking the entire management of the Public Debt, government agreed to pay the bank annually a percentage amounting then to £248,000, but now only to £201,594.

8. In case of private banks ceasing to issue notes, the Queen in Council may authorize the Bank to increase its issues by two thirds of the amount so withdrawn. In 1855 this power was exercised, and further note-issues of £475,000 against stock were sanctioned—such being two thirds of the amount of then discontinued private issues.

Let us review the operation of the first four of these stipulations, premising that a somewhat similar arrangement followed with regard to the Bank of Ireland, and special provisions were permitted for Scotland; but in both countries the amount of circulation was closely restricted. No new banks of issue were permitted, and in consequence no new bank has been established in either country since, as far as we know.

1. Since 1844 the extension of joint stock enterprise, and the growth of confidence in the limited liability banks having become great facts, we find, forty years later, the following anomaly, viz.: that while the Bank of England has a subscribed paid-up capital of £14,553,000, with a reserve fund of £3,022,492, some 73 banks founded since 1844 have a subscribed capital of £75,100,000 (£33,030,000 of it being paid up), and a combined reserve fund of page 120 over £10,000,000, but these banks dare not issue a single £5 note, though all f them should unite to guarantee its payment. A a sample of the wisdom and of the motives of thoe who framed the Peel Act, we might here quoe the words of Lord Overstone in the House of Lords on 3rd. December, 1857. Speaking then upon he subject of Joint Stock Bank facilities this prominnt upholder of Monopoly in Credit said,—"There lad grown up in this country, and had been raplly developed within the last ten or fifteen years, a also system of credit and of holding deposits at call arrying interest, a system which had grown up to an enormous extent, and which was still growing, and if that evil was not corrected, it would certainy overturn our monetary system altogether. That ws not an isolated opinion of his own; but there was scarcely a man, of enlarged views and experience, in the city of London, who did not entertain the same views. It was indispensable that the attention of Parliament should be directed to that subject."

2. That the number of English banks enjoying the petty right of a fixed issue in 1844 has become small by degrees and beautifully less, until in 1885 their combined note issue was 2¾ millions, while 42 years ago it was 9¾ millions. On the other hand the Bank of England, whose note issue was 15¾ millions in 1840 (i.e., 6 millions above theirs), was 24½ millions in 1885 (i.e., 21¾ millions above theirs). The following table traces the progress of these changes, and shows the facts concerning Scotland and Ireland.

Bank Notes in Circulation (month of December each year).
England and Wales. Scotland. Ireland.
Month ended. Dec. Bank of England. Private and Joint-Stock Banks. Chartered and Joint-Stock Banks. Bank of Ireland. Joint Stock Banks. Totals. for United Kingdom. Months ended. Dec.
£ £ £ £ £ £
1840 15,714,200 9,49,102 3,510,534 3,198,175 2,382,124 34,560,135 1840
1845 22,015,000 7,791,161 3,804,031 4,404,975 3,311,855 41,327,022 1845
1850 19,757,000 6,B0,354 3,345,019 2,647,600 2,209,359 34,095, 1850
1855 19,554,000 6,90,914 4,400,763 3,424,025 3,619,254 37,898,956 1855
1860 20,812,000 6,32,987 4,688,839 3,212,225 3,835,375 38,861,426 1860
1865 21,294,000 5,786,918 4,903,980 2,744,950 3,910,290 38,656,138 1865
1870 24,458,000 5,638,131 5,650,073 3,219,050 4,350,566 42,721,820 1870
1875 27,003,000 4,24,963 6,277,058 3,205,250 4,762,023 46,572,894 1875
1880 26,285,000 3,66,502 6,018,594 3,115,000 3,931,728 42,816,824 1880
1881 25,689,000 3,92,190 6,073,083 3,285,350 4,191,116 42,630,739 1881
1882 25,757,000 3,67,150 6,366,444 3,482,350 4,851,294 43,924,238 1882
1883 25,170,000 3,190,692 6,542,066 3,001,100 4,173,415 42,237,873 1883
1884 24,812,000 3,31,271 6,399,310 2,827,675 3,920,352 41,090,608 1884
1885 24,458,000 2,51,473 6,372,985 2,575,150 3,908,062 40,166,270 1885

3. On three occasions, viz., 1847 (when the issues were not exceeded), 1857 (when they had to be exceeded by two millions), and 1866, the operation of the Act of 1844 has been illegally suspended by government—not to relieve commercial distress, but—to save the Bank from stopping payment. Immediate relief and cessation of panic has followed in every case, showing that the crises were artificial and unnecessary: created, in fact, by a bad law badly administered.

4. To ascertain the practical working of this portion of the Act the following table will be useful. Note especially the column headed "Bullion,"

Liabilities of the Bank. Assets of the Bank. Rates of Discount.
Quarters ended Notes in Circulation. Deposits. Total. Securities Bullion. Total. Average for the month. Average for the year. Quarters ended
Dec. 1840 £16,440,000 £6,337,000 £22,733,000 £22,078,000 £3,511,000 £26,589,000 5 per cent. 5 per cent. Dec. 1840
Dec. 1841 16,972,000 7,369,000 24,341,000 22,768,000 4,486,000 27,254,000 5 per cent. 5 per cent. Dec. 1841
Dec. 1842 19,230,000 9,063,000 28,293,000 20,560,000 10,330,000 30,890,000 4 per cent. 4¼ per cent. Dec. 1842
Dec. 1843 19,098,000 11,751,000 30,849,000 21,067,000 12,855,000 33,922,000 4 per cent. 4 per cent. Dec. 1843
Dec. 1844 21,166,000 13,661,000 34,817,000 23,500,000 14,466,000 37,966,000 2[unclear: ?] per cent. 3½ per cent. Dec. 1844
Dec. 1845 22,151,000 16,112,000 38,263,000 27,770,000 13,742,000 41,512,000 3½ per cent. 2¾ per cent. Dec. 1845
Dec. 1840 21,380,000 15,993,000 37,379,000 25,771,000 15,090,000 40,861,000 3 per cent. 3¼ per cent. Dec. 1846
Dec. 1847 20,058,000 15,574,000 35,632,000 29,492,000 9,798,000 39,299,000 6 per cent. 5 per cent. Dec. 1847
Dec. 1848 18,744,000 15,310,000 34,054,000 23,630,000 13,886,000 37,516,000 3 per cent. 3¾ per cent. Dec. 1848
Dec. 1849 19,391,000 17,548,000 36,939,000 24,059,000 16,045.000 40,104,000 2½ per cent. 3 per cent. Dec. 1849
Dec. 1850 20,386,000 18,391,000 38,777,000 25,968,000 15,951,000 41,919.000 2½ per cent. 2½ per cent. Dec. 1860
Dec. 1851 20,752,000 17,085,000 37,837,000 25,103,000 15,915,000 41,018,000 3 per cent. 3 per cent. Dec. 1851
Dec. 1852 24,295,000 19,461,000 43,756,000 25,562,000 21,367,000 46,929,000 2 per cent. 2 per cent. Dec. 1852
Dec. 1853 23,369,000 18,232,000 41,601,000 29,402.000 15,462,000 44,864,000 5 per cent. 3½ per cent. Dec. 1853
Dec. 1854 21,003,000 14,758,000 35,761,000 25,328,000 13,619,000 38,947,000 5 per cent. 5 per cent. Dec. 1854
Dec. 1855 20,430,000 16,257,000 36,687,000 28,620,000 11,301,000 39,921,000 6 per cent. 4¾ per cent. Dec. 1855
Dec. 1856 20,728,000 15,601,000 36,329,000 29,484,000 10,105,000 39,589,000 6¼ per cent. 5¾ per cent. Dec. 1856
Dec. 1857 21,070,000 19,296,000 40,366,000 35,025,000 8,788,000 43,813,000 8½ per cent. 6¾ per cent. Dec. 1857
Dec. 1858 21,435,000 20,490,000 41,925,000 20,098,000 18,985,000 45,083,000 2½ per cent. 3¼ per cent. Dec. 1858
Dec. 1859 22,413,000 21,516,000 43,929,000 30,117,000 17,002,000 47,119,000 2½ per cent. 2¾ per cent. Dec. 1859
Dec. 1860 21,482,000 18.750,000 40.232,000 29,433,000 14,009,000 43,442,000 5 per cent. 4¼ per cent. Dec. 1860
Dec. 1861 21,180,000 13,124,000 39,304,000 27,993,000 14,653,000 42,646,000 3 per cent. 5¼ per cent. Dec. 1861
Dec. 1862 21,129,000 21,985,000 43,114,000 30.961.000 15,351,000 46,312,000 3 per cent. 2 per cent. Dec. 1862
Dec. 1863 21,730,000 20.805,000 42,535,000 31.777,000 13,934,000 45,711,000 7½ per cent. 4½ per cent. Dec. 1863
Dec. 1864 20,771,000 19,070,000 39,841,000 29,670,000 13,636,000 43,206,000 6½ per cent. 7½ per cent. Dec. 1864
Dec. 1865 21,819,000 13,365,000 40,184,000 30,613,000 13,601,000 44,214,000 6½ per cent. 4¾ per cent. Dec. 1865
Dec. 1866 23,728,000 22,740,000 46,468,000 33,110,000 17,478,000 50,588,000 3¾ per cent. 7 per cent. Dec. 1866
Dec. 1807 24,706,000 23,850,000 48,556,000 29,960,000 22,561,000 52,521,000 2 per cent. 2½ per cent. Dec. 1867
Dec. 1368 24,336,000 22,409,000 46,745,000 33,935,000 13,981,000 52,918,000 3 per cent. 2¼ per cent. Dec. 1868
Dec. 1869 23,910,000 21,305,000 45,215,000 32,373,000 18,827,000 51,200,000 3 per cent. 3¼ per cent. Dec. 1869
Dec. 1870 24,539,000 24,196,000 48,735,000 29,513,000 22,311,000 51,824,000 2½ per cent. 3 per cent. Dec. 1870
Dec. 1871 25,625,000 28,010,000 53,635,000 33,827,000 22,952,000 56,779,000 3¼ per cent. 2[unclear: ?] per cent. per cent. Dec. 1871
Dec. 1872 25,983,000 26,645,000 62,628,000 34,468,000 21,379,000 65,847,000 5[unclear: ?] per cent. 4[unclear: ?] per cent. Dec. 1872
Dec. 1873 26,219,000 25,079,000 51,298,000 33,633,000 20,869,000 54,502,000 5¼ per cent. 4¾ per cent. Dec. 1873
Dec. 1874 26,877,000 23,740,000 50,617,000 82,679,000 21,023,000 63,707,000 6 per cent. 3¾ per cent. Dec. 1874
Dec. 1875 28,356,000 26,267,000 54,623,000 34,134,000 23,579,000 57,713,000 3 per cent. 3¼ per cent. Dec. 1875
Dec. 1876 28,565,000 33,043,000 61,608,000 33,440,000 31,272,000 64,712,000 2 per cent. 2 per cent. Dec. 1876
Dec. 1877 27,762,000 25,188,000 52,950,000 32,953,000 23,128,000 66,081,000 4 per cent. 2[unclear: ?] per cent. Dec. 1877
Dec. 1878 80,282,000 30,324,000 60,606,000 38,326.000 25,501,000 63,827,000 5 per cent. 3¾ per cent. Dec. 1878
Dec. 1879 28,296,000 35,650,000 63,946,000 37,016,000 30,041,000 67,057,000 3 per cent. 2[unclear: ?] per cent. Dec. 1879
Dec. 1880 26,829,000 31,350,000 68,179,000 34,839,000 26,406,000 61,245,000 2[unclear: ?] per cent. 2¾ per cent. Dec. 1880
Dec. 1881 26,237,000 28,633,000 64,870,000 37,096,000 20,876,000 57,972,000 5 per cent. 8 per cent. Dec. 1881
Dec. 1882 26,351,000 27,410,000 53,761,000 36,147,000 20,751,000 56,898,000 6 per cent. 4 per cent. Dec. 1882
Dec. 1883 25,683,000 29,205,000 64,888,000 35,669,000 22,355,000 68,024,000 3 per cent. 3 2/15 per cent. Dec. 1883
Dec. 1884 25,222,999 29,346,720 64,569,719 36,336,691 20,360,721 56,697,412 5 per cent. 2 19/20 per cent. Dec. 1884
Dec. 1885 24,621,423 29,344,372 53,965,795 34,643,349 20,826,856 55,470,205 3 15/31 per cent. 3 per cent. Dec. 1885
page 121

"Convertibility."

The following table shows how far the Bank of England can contribute support to the fiction of a metallic currency when her last sovereign and her last shilling have been exhausted. The figures may be filled in from the official Bank Return of any date latest to hand. As an instance we give that issued for the week ending 23 Sept., 1885.

Liabilities.
Note-issued £37,239,120
Deduct, held by the Bank 12,905,585
£24,333,535
Public deposits 4,386,448
Other deposits 28,526,333
Seven days and other bills 166,244
£57,412,560
Assets.
(In the issue department) Gold Coin and Bullion £21,489,120
(In the banking department) Gold and silver coin 891,106
22,380,286
Balance which the Bank could not pay that day, either in gold or silver £35,032,274

Now, no monopoly, excepting, perhaps, the Post Office, ever yet operated beneficially to the public, and this monopoly of the Bank of England, which is the foundation of a gigantic Trades Union of Money Lenders, is the most trade-destructive combination in existence. There will be no "fixity of tenure" in business until such an abomination is made an end of, and how to do this with safety to the public credit has been often suggested by sound economists.

Under the 1838 Banking Law of New York every bank was allowed to issue as many notes as it pleased on first depositing (with the Comptroller of the State) Stocks of the American Government, or of the State of New York, at not exceeding par value. Receipts for such deposits were stamped on the face of each note before it went into circulation, the breach of this proviso incurring heavy penalties. The notes were payable in hard money under all circumstances, and in case of any being dishonoured the public officer was required to sell Deposited Stocks to the full amount, and make good the payment.

For the United Kingdom we recommend a modification of this law, viz., perfect freedom of issues by anyone who first deposits (at the Mint) Bullion or Consols for the full amount, the Government receipt for the same being stamped upon the face of the note previous to issue, under heavy penalties. In case of failure to pay any note according to its tenor, the Master of the Mint to be required to sell securities by auction and pay the note within three days. On the other hand the securities and the interest thereon remain the property of the depositors, and may be reclaimed at any time on returning an equivalent number of notes.

One disadvantage incidental to the present restricted system has been that under its operation there is but one Gold Reserve, that one becoming unduly sensitive upon slight pressure. Under such a freed and improved system as is here advocated, many banks would be compelled to keep reserves, and the security for safe currency, no less than for extended facilities in trade, would be proportionately increased.

But no note must be compulsorily made legal tender. Joint notes of two, three, or six banks would speedily come into use (fully as safe security as any notes yet issued by this monopolist bank, with but three millions of reserve fund), and credit—rescued from the hands of a class—would expand far and wide, on a secure and ever-improving basis, to the untold benefit of British commerce and industry. How much credit has to do with our commerce may be gathered from figures already cited. How little actual coin or money is needed for it can be surmised from the following as from other of our statistical tables:—
Coinage. Amount of Gold, Silver, and Copper Moneys Coined at the Royal Mint from 1840 to 1885 Inclusive.
Gold. Silver. Copper. Total.
Year. £ £ £ £
1840 Nil. 216414 3136 219550
1841 378472 96175 8848 483495
1842 5977051 192852 1764 6171667
1843 6607849 270606 10080 6894535
1844 3563949 626670 7246 4197865
1845 4214608 647658 6944 4899210
1846 4334911 559548 6496 4900955
1817 5158440 125730 8960 6293130
1818 2451999 35442 2688 2490129
1849 2177955 119592 1792 2299339
1850 1491836 129096 448 1621380
1851 4400411 87868 3584 4491863
1852 8712270 189596 4312 8936178
1853 11952391 701544 10190 12664125
1854 4152183 140480 61538 4354201
1855 9008663 195510 41091 9245264
1856 6002114 402529 11418 6476000
1857 4859860 373230 6720 5239810
1858 1231023 445896 13440 1090359
1859 2649509 647064 8512 3305085
1860 3121709 218403 37990 3378102
1861 8190170 209484 273578 8673232
1862 7836413 148518 352800 8337731
1863 6997212 161172 151648 7,310,032
1864 9535597 535194 18069 10,088,861
1865 2367614 501732 57493 2,920,839
1866 5076676 493416 50624 5,620,716
1867 490397 193812 33301 723,510
1868 1653384 301356 16328 1,971,008
1869 7372204 76428 20832 7,409,464
1870 2313384 336798 32704 2,682,886
1871 9919656 701514 7616 10,628,786
1872 15261442 1243838 47413 16,552,691
1873 3384568 1081674 46218 4,512,460
1874 1461565 890604 65632 2,417,801
1875 243264 594000 69813 907,077
1876 4696048 222354 61450 4,980,452
1877 981468 420948 51146 1,453.562
1878 2265069 613998 17024 2,896,091
1879 35050 549054 44051 628,755
1880 4150052 761508 19264 4,930,824
1881 ... 997128 39349 1,030,477
1882 ... 209880 42560 252,440
1883 1403713 1274328 33450 2,711,491
1884 2324015 658548 69290 3,051,853
1885 2973487 702918 57568 3,733,973

The Cheque System.

About the year 1772 the Banks of London discontinued the issue of promissory demand notes payable to Bearer, and thenceforward advanced to their customers by crediting in their books. To facilitate this reform they gave to such customers books containing a number of bills of exchange, drawn upon the Banker, payable to Bearer on demand. To obviate difficulties arising from the absence of any acceptance upon this new form of Bill, and to make the Cheque as like a Bank Note as possible, it was established as a custom among Bankers that possession of a customer's funds by a Banker should be equivalent to acceptance. Cheques became, therefore, a substitute for Bank Notes.

page 122

Now, according to Macleod ("Mechanism of Banking," c.vii., "Princples of Economics,") everyone who really understands the subject has declared that banking advances practically augment the capital of a country—a doctrine, by the way, which Mill considered a doctrine of robbery—and if it be true, judge how far retching must have been the benefits of the Cheque System by means of which the ordinary business of London and other Banks has been simplified with "the daily creation of millions of promises to pay."

Mulhall, in his "Dictionary of Statistics," states that in 1839 the ratio of Cheques to Notes and Coin was 93.2 as compared with 6.8, but that in 1881 the proportions were relatively 98.9 to 1.1, This is, of course, for London only.

The Clearing House.

The new system had but been three years in operation before the Cheque-issuing Banks found the advantage of periodically adjusting their debts by mutual Releases, as had been done in the sixteenth century by the French Merchants, whose bills were all made payable at the Fair of Lyons, and as had already been practised in 1775 by Banks in Edinburgh. What is called the Clearing House was thus established, and until 1854 consisted merely of a meeting of private Bankers who exchanged Cheque claims with one another daily, and paid only the net differences in Cash or Bank Notes. In 1810 the thrty-six private banks that "cleared" had a total duly average of £4,700,000, and were able to settle ill their balances by some £220,000 in notes. In 1154 the Joint Stock Banks, rigidly excluded thus far from the Clearing House, were preparing to organise one of their own, when suddenly some half dozen of them were admitted to its benefits, from which, however, the Bank of England was shut out until 1864. It was stated in evidence to the House of Commons that, prior to the admission of Joint Stock Banks, the London and Westminster used to be compelled to keep £150,000 in notes to meet its daily "Bankers' charges" alone. What must have been the aggregate waste of trading capital forced thus upon the community?

We proceed to summarise the transactions thus daily settled without the intervention of a single Bank Note:—
Year. Annual Amount cleared in Millions.
1839 £980
1868 3,425
1866 3,026
1870 8,914
1871 4,828
1872 5,916
1878 6,071
1874 5,937
1876 5,686
1876 4,963
1877 £5,042
1878 4,992
1879 4,880
1880 5,794
1881 6,357
1882 6,221
1883 6,929
1884 5,799
1885 5,511

Summary of Banking Statistics, 1870-1880.

The following statement is calculated from a series of voluminous Returns published by the Board of Trade, and which were furnished to that Department by the Bank Managers of the United Kingdom. A few Banks refused to furnish information, including the Bank of Ireland and three other Irish Banks. Such English and Welsh Banks as did not send Returns, only represented, in 1880, a total of £4,000,000 Paid-up Capital. The Scotch figures are in every respect complete.

1870. Paid-up Capital Reserve. Deposits and other Liabilities not including Note Issues. Discounts and other advances. Investments. Other Assets, including Cash and Deposits at call or short notice. England and Wales................. (Including Bank of England.) £35985,993 £11,110,293 £205,500,940 £164,245,609 £60,437,072 £59,849,927 Scotland ...................... 9397,000 ... 2,697,329 ...67,922,238 ... 59,776,667 ...... £120,280,999 20,702,197 Ireland.............. 2590.207 531,592 ......12,033,920 .....13,413,932 ...... 3,818,547 £51,973,199 £14,339,214 £285,517,098 £237,436,208 £150,807,743 1880. England and Wales.............. £48.874,108. ... £17,922,505 ......£293,945,780 .. ... £207,861,242 ......£42,300,991 ......£88,384,168 (Including Bank of England.) —— " —— and £53,605.863 £130,685,159 Scotland.......... 9,040,500 .... 4,134,910 82,776,228 ... 62,998,158 ..... 39,453,191 Ireland......................... 3,124,766... ... 1,164,868 ...... 17,722,536 .. ... 17,693,483 ... 6,503,192 £61,015,374 £23,222,283 £394,444,544 £288,552,883 £176,641,542 and 53,605,863

Movements of Bullion and Specie

To and from the United Kingdom.
1860 1865 1870 1875 1880 1882 1884 1885
£ £ £ £ £ £ £ £
1 Africa, West Coast of Imports 101,322 132,277 123,359 140,908 189,317 161,917 186,458 331,218 1
Exports ... ... ... ... ... ... ... ...
2 Africa, South Coast of Imports 19,170 56,139 6,056 255,809 248,314 74,717 198,243 617,517 2
Exports 50,619 19,469 160,655 152,275 84,805 34,125 100,000 18,250
3 America, U. States of Imports 4,792,582 4,534,560 10,380,785 11,438,891 1,253,932 8,022,249 7,701,410 3,713,556 3
Exports 1,727,220 65,918 94,374 665,939 5,545,407 121,622 2,192,135 305,343
4 America, Central Imports ... ... ... ... 11,236 ... ... ... 4
Exports 123 3,046 8,646 11,694 29,361 14,570 16,260 9,457
5 America, British North Imports 36,393 139,837 709,405 12,434 3,823 18,498 23,492 39,949 5
Exports 9,003 83,394 127,586 81,050 162,382 88,921 273,722 34,351
6 Argentine Confederation Imports ... ... ... ... ... ... ... ... 6
Exports 4,500 186,657 682,761 616,400 800,410 484,660 733,280 1,730,570
7 Australia Imports 6,719,857 5,051,491 6,486,225 6,673,942 8,691,123 3,051,554 732,467 3,906,514 7
Exports 29,720 41,202 52,700 34,325 202,000 280,800 964,448 148,801
8 Belgium Imports 595,256 210,035 190,343 889,343 569,240 486,880 923,045 1,150,489 8
Exports 211,415 617,982 4,822,456 1,313,862 39,521 32,997 87,837 163,047
9 Brazil Imports 190,219 416,854 401,295 326,922 372,507 462,474 152,517 497,316 9
Exports 524,312 1,376,671 106,921 977,697 658,921 156,194 437,385 192,240
10 China (including Hong Kong) Imports ... ... 543,401 454,399 38,069 41,071 68,521 1,191,660 10
Exports ... ... 134,681 863,131 1,125,702 446,775 761,134 375,135
11 Denmark Imports ... ... ... ... ... ... ... ... 11
Exports ... 21,792 68,872 270,986 50,335 200 754 ...
12 Egypt Imports 14,410 317,427 778,956 540,566 13,210 302,786 147,348 206,211 12
Exports 9,426,122 4,388,522 8,154,793 65,130 1,094,620 1,007,627 1,644,555 8,886,960page 123
13 France Imports 4,039,196 1,161,876 1,527,327 8,415,269 4,186,671 4,475,509 3,678,853 8,511,979 13
Exports 11,315,346 4,962,805 4,064,319 7,701,174 775,662 3,640,160 896,480 1,609,216
14 Germany Imports 419,717 184,415 21,625 1,564,621 623,614 611,233 434,283 635,016 14
Exports 397,379 565,400 838,011 6 507,433 592,807 749,578 302,820 3,199,385
15 Gibraltar Imports 27,390 84,899 95,165 147,982 24,822 78,327 39,696 74,516 15
Exports 144,906 ... 11,521 35,000 23,080 100 8,000 75
16 Granada, New Imports ... ... ... ... ... ... ... ... 16
Exports 12,437 51 37,038 20,650 66,143 53,775 46,535 12,376
17 Holland Imports 10,171 433,978 8,283,843 14,511 261,497 868,396 209,555 33,552 17
Exports 134,913 1,027,497 1,340,077 1,257,592 342,939 406,466 1,426,988 468,088
18 India, British Imports ... 474,758 578,137 213,502 194,355 77,682 54,853 850,910 18
Exports ... ... ... 3,308,988 5,187,328 7,231,222 8,969,952 7,532,574
19 Indies, Danish West Imports ... ... ... ... ... ... ... ... 19
Exports 50,170 210 63,441 19,110 ... ... ... ...
20 Indies, Spanish West Imports ... ... ... ... ... ... ... ... 20
Exports 41 24,772 292 9,900 1,850 ... ... ...
21 Malta Imports 38,385 2,807 185,692 139,611 65,892 25,539 4,840 6,846 21
Exports 51,001 30,021 103,574 54,871 141,260 46,180 20,000 193,834
22 Mauritius Imports ... ... ... ... ... ... ... ... 22
Exports ... ... 7,952 5,000 1,585 456 150 50
23 Mexico, South America (except Brazil), and West Indies Imports 5,515,048 7,376,036 5,282,778 4,748,966 3,063,496 3,905,463 5,128,688 5,619,017 23
Exports ... ... ... ... ... 35 ... ...
24 Portugal, Azores, and Madeira Imports 255,603 806,018 46,331 16,415 6,010 472,283 67,228 92,676 24
Exports 602,476 82,415 242,860 613,457 567,377 818,800 818,576 780,816
25 Russia Imports 169,109 19,637 120,840 ... ... ... 100 ... 25
Exports 1,573 ... 49,234 1,000 ... ... ... ...
26 Spain and the Canaries Imports 11,715 26,751 18,011 51,856 53,847 277,738 399,158 657,275 26
Exports 756,064 1,412,408 437,007 2,270,063 442,887 1,432,149 1,213,614 752,580
27 Turkey Imports 3,228 1,408 255,121 2,640 44,224 25,952 21,952 14,609 27
Exports 109 303 569 22,000 4,000 160 ... 1,127
28 Other Countries Imports 19,425 30,917 420,913 ... 1,349,920 179,156 145,196 160,340 28
Exports 85,319 181,929 259,350 886,315 949,061 3,941,686 1,084,647 362,830
29 Total Imports 22,978,196 21,402,211 29,455,668 33,264,789 16,253,883 23,619,484 20,377,903 22,810,166 29
30 Total Exports 25,534,768 15,092,524 18,919,690 27,628,042 18,889,503 20,989,258 21,999,222 21,783,105 30
Excess £2,556,572
of Exports
£6,309,687
of Imports
£10,535,978
of Imports
£5,636,747
of Imports
£2,635,620
of Exports
£2,630,226
of Imports
£1,621,319
of Exports
£1,027,061
of Imports