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.

* 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.

1814

1815

£24,801 £22,700 £47,501 £13,602 £18,285 £2,874 £29,316 £15,865

1818

27,775 20,507

48,282

1819 25,227 15,701

40,928

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

Banks, for which the Bank of England was in no way to be censured; or its action may have produced great commercial convulsions, for which bankers and country Banks were by no means chiefly responsible. The action of both, however, is always to be taken into account, in every attempted explanation of a great rise in prices, of great speculative movements, and of great financial revulsions, and in applying the proper remedy. Whichever be at fault, the cause will always be found in a nut-shell: in an issue of of notes and credmoney, its, which act powerfully upon prices, for the reason that they do not represent merchandise, but debt. Englishmen have been taught, that only such paper is deserving the name of money as displaces a corresponding amount of coin; and that the only paper that effects such displacement is bank-notes. The moment there is a disturbance, or any great movement in financial affairs, they instantly begin, for a proper explanation or remedy, to pore over the tables of the amount of issue of Bank of England notes. They might as well infer the wealth of the nation from the petty sums hoarded in its vaults, or measure the volume and effect of an Amazon or a Niagara by the contracted and noiseless flow of their Thames. As the action of the private Banks and bankers does not enter into their calculation, they cannot get rid of the conviction that the quantities with which they are dealing make up only a small part of those necessary to a proper equation, to a proper understanding of the situation. In the uncertainty as to the future, all monetary and commercial operations are brought to a dead stand, to resume their wonted movement only when time shall have fully revealed the extent of their conjectures and fears.

By the terms of its charter the Bank was forbidden to make loans to the government without the sanction of Parliament, for fear that it might at some time become involved in the precise condition in which it found itself in 1795 and for a long time thereafter. It had, however, from a very early period, been in the habit of making advances on such Treasury bills of exchange as were made payable at it. These advances, or "discounts," as they may be more properly termed, were usually for small sums only. Such transactions were made subjects of complaint on the part of the Bank, if the sums so advanced reached at any one time £50,000. During