a paramount influence over the destinies of mankind. While the paper issued by a Bank, that it may return without effort on its part, should always symbolize merchandise, it is perfectly competent for a government, without a dollar in its vaults, to issue a currency which shall, by its power of levying and collecting taxes, return to it automatically, after having performed all the functions that could have been performed by coin in a similar use. If its revenues equal, say, £30,000,000 annually, and it issue during the year £10,000,000 of its notes receivable in the payment of taxes, these would (the taxes being certain to be paid) be maintained very nearly or quite at the par of coin, from the uses they served. If they would pay taxes equally with coin, they would be preferred by taxpayers to coin. The debts due from the people to the government and taxes that are levied may be called suchare a consideration which may give its notes a high value. Such debts take the place of merchandise, which must form the basis and security of loans made by Banks. A considerable portion of the issues of the Bank were from the outset constantly employed by the public in manner described, and returned to the former as its fiscal agent. Such as were not taken in in this manner were sufficiently provided for by the commercial paper discounted; the deposits in the form of coin providing adequate reserves. The issues of the Bank, compared with their present magnitude, were for a long time on a small scale. Its notes in circulation, from 1694 to 1716, averaged only about £800,000 annually. From 1716 to 1770, the annual average did not much exceed £4,000,000; and from 1770 to the suspension of payments in 1797, only about £8,500,000 annually.

Although the Bank, as the issuer and manager of the currency, stood out in bold relief, and was for a long time the paramount financial power, it was at no period the only one. As early as 1650, the merchants of London were accustomed, for greater security, to deposit their surplus cash with the goldsmiths. The holders of such deposits as were likely to remain for some time undrawn loaned them, and thus realized a considerable revenue. It was in this way that banking became a trade, and deposits were solicited in the same manner that customers are solicited by merchants at the present time.

The receipts given for deposits would naturally circulate as currency. In time, checks were drawn against them; so that, before the establishment of the Bank of England, the greater part of the surplus cash of the merchants was regularly deposited, and was loaned, drawn upon, and disbursed, precisely as are deposits with London bankers at the present day. The establishment of the Bank was violently opposed by the goldsmiths, the bankers of that time, — and undoubtedly made a serious inroad upon their operations. As, however, every great institution like the Bank must regulate its affairs by strict and inexorable rules, the mass of borrowers would prefer to deal with private bankers, although paying a greater rate of interest, from the better accommodations they could secure ; so that, during the whole period of its existence, large amounts of loans were made, and paper discounted, by private bankers, whose issues, in form and kind, were precisely similar to those made by the Bank. After the relations of the latter to the government became changed, so that it could rely upon it as its chief customer, the Bank naturally withdrew from the field of discount, leaving it in the hands of private parties; although during the period of Restriction, when it was under no obligation to take in its notes in coin, it discounted business paper very largely. It ceased to be, relatively, the great instrument of commerce it once was; and was content to loan its deposits on the highest form of security at very low rates, certain from their amount of being constantly in the receipt of very large revenues.

While the Bank has had the competition of private bankers during the whole period of its existence, a competition so effective as to drive it in great measure out of the discount market of the metropolis, it has for the last hundred years had that of country Banks, which at one time rivalled it in the amount of their note circulation, and, perhaps, far exceeded it in the extent of their operations. By common law, any person might become a banker, - might issue notes and receive deposits; or, to quote the language of Lord Liverpool in a speech delivered in Parliament in 1826, when the subject of authorizing joint-stock Banks was under consideration: "small tradesmen -a cheesemonger, a butcher, or a shoemaker, may open a Bank. The exclusive privileges of the Bank of England do not touch such cases; but an association of persons

with sufficient fortune to carry on a banking business with security was not permitted." Lord Liverpool seems to have been the first to recognize the glaring absurdity and disastrous consequences of allowing the issue of notes to serve as money, at the same time restricting the number of those who unite for their issue to six persons or less. If any other party than the Bank were allowed to issue notes, the most careful provision should have been made that "small tradesmen, -cheesemongers, butchers, and shoemakers," not, perhaps, masters of a shilling, should not exercise a function which the greatest authorities on monetary science declare to be a prerogative of government, and which, certainly should not be exercised by any but those of undoubted substance. No other evidence is needed of the utter ignorance and folly which has uniformly characterized the legislation of Parliament upon the subject of money, than that an Act like that of 1708 should have remained untouched till 1826. It was then only so modified as to allow banking associations of more than six members to be formed in England, for the issue of notes, at places sixty-five miles distant from London.

Only a small number of country Banks were in existence. prior to the war of American Independence. They increased very rapidly after the conclusion of peace. It was at that period that those great improvements were made in the mechanic arts which so enormously increased the productive industry of the nation, and which enabled it to bring to a triumphant conclusion the gigantic struggle with France. The creation of country Banks was, in a great measure, due to the progress made in manufactures and commerce. They were the natural result of the increased wealth, and increased necessity for a symbolic currency. There were, according to Thornton, 353 country Banks in operation in 1797, 366 in 1799, and 386 in 1801. No account of these institutions was required by government; and there was no means of ascertaining the amount of their note circulation till 1804, when a stamp duty was imposed. It was admitted, however, that the amount of duties paid was by no means an accurate measure of the amount of notes issued. It was not until 1808 that country Banks were required to take out licenses. The

1 Knight's History of England, vol. viii. p. 200.

number of licenses issued in 1809 was 702; showing an increase, in a period of five years, of 316 Banks. In 1814, the number of licenses taken out was 940. No statements were ever furnished of the amount of capital invested, of deposits received, nor, till 1833, of the amount of notes issued; the amount of the latter till that time being only a matter of inference from the number of stamps sold.1

Although the amount of issues of London bankers and of country Banks was in great measure a matter of conjecture, it is certain that for nearly a hundred years past by far the greater portion of the exchanges were effected by them. In 1795, the average amount of commercial bills under discount at the Bank equalled only £2,996,000. The average amount under discount in the whole country must have been tenfold greater. In 1796, the bills under discount averaged £3,505,000. The amount gradually increased after the suspension, reaching as high as £20,070,000, in 1810. The Bank began to withdraw from this kind of business so soon as it was seen that preparations must be made to resume.2

As the notes and credits issued by the bankers and country Banks exerted, in ratio to their amount, precisely the same influence over the operations of production and trade as those of the Bank of England, and as we are in great measure ig

1 Statement showing the number of licenses issued to country Banks, and the number of commissions of bankruptcy issued against them, from 1809 to 1832, inclusive.

2 Statement showing the average note circulation of the Bank of England and of the country banks; deposits in the Bank of England; the amount of

norant of the amount of the former, compared with those of the latter, it is impossible to say how much of the aberration or disturbance occurring from time to time in commercial affairs was due to the one, and how much to the other. It was possible that the greatest degree of disturbance may have arisen almost wholly from the action of bankers and country

commercial bills under discount by the bank; the amount of private deposits held by the bank; and the amount of loans by the bank upon public and private securities from 1814 to 1832 inclusive.

(000s omitted; thus, £1,000 £1,000,000.)

Statement showing the amount of commercial bills under discount at the Bank