terms, however much their customers may desire to have their notes. Hence a monopoly of banking currency has been conferred upon the banks of issue existing prior to 1844, but especially upon the Bank of England. And as many of the minor banks are losing or abandoning their power of issue, in order to free themselves from other restrictions (such as the prohibition against their having an office in London) imposed upon them in favour of the Bank of England by the Act of 1844, the monopoly practically possessed by the Bank of England is growing stronger every year.

We have seen that the War of the Banks is mainly, if not wholly, occasioned by the action of the Bank of England. Ever and anon it raises its rate exorbitantly. And every year the state of matters is becoming worse. Why is this? Firstly, because the amount of banking currency in this country was fixed in 1844, and (speaking roundly) cannot increase; while at the same time trade and the monetary requirements of the country are rapidly increasing. Nor has the Bank of England (which is the only English bank which can extend its note-issues) any motive to increase its issues in proportion to the wants of the community. On the contrary, it makes a far larger profit by keeping the currency below the adequate amount. Hence, under the present system, we have a fixed currency and an ever-expanding trade. It is like chaining the living with the dead. It is the torture system of Mezentius applied in the bosom of civilisation and in the middle of the nineteenth century. In the year of grace 1844-will it be believed by subsequent times?-the further use of paper-money in the British Isles was prohibited by Act of Parliament. What is the consequence? Since that time the monetary condition of the country has retrograded to what it was prior to the close of the seventeenth century. In the latter half of the nineteenth century our monetary system is as much restricted as it was in the seventeenth and previous centuries. Now, as then, we must make all the necessary additions to our currency, and also to our means of storing capital, in the form of specie. Since 1844 our trade has trebled in extent, and the amount of capital stored in banks has also trebled. Owing to each of these causes, the monetary requirements of the country have likewise increased. We require more money to carry on the exchanges of trade, and more money also must be kept on hand. by the banks. But for the development of the cheque system and the clearing-houses-not to speak of the gold discoveries -we should have been brought to a dead-lock ere this. As the returns of the Mint show, we have added about a hundred millions sterling to our metallic currency since 1844; and yet, in spite of this, our currency is becoming every year less adequate to our growing wants. Moreover, we have now exhausted all the possible palliatives of this reactionary system. The cheque system is now in

universal use, and by the entrance of the Bank of England into the clearing-house, that system also has attained its full development. We have economised our money to the fullest extent, and hence the shackles upon our monetary system now begin to show their disastrous effects unmistakably. As long as the economy of the cheque system and the clearing-house was imperfectly established, and when the unexpected gold discoveries came to the rescue, the evil effects of the reactionary monetary system established in 1844 showed themselves only, although most calamitously, at intervals. Now their effects are becoming permanent. The produce of the new gold-fields has reached its maximum, and appears likely to decline; and the banking appliances of cheques and the clearing-house have already been in full operation. Under the present system there is nothing more to be done, or to be looked for; and hence every year we shall have to suffer more and more from the evils of an artificially restricted currency. The national industry and prosperity will more and more be subjected to disastrous checks from the co-existence of a fixed currency with an ever-expanding trade.

This is the first and most fundamental form of the evil which now afflicts the community; but this is not all. For, secondly, this artificial and most antiquated restriction upon the currency is combined with a system of monopoly—a monopoly conferred upon the banks of issue established prior to 1844, and especially upon the Bank of England. The effect of this monopoly is twofold. In the first place, the Bank of England (the only English bank permitted to extend its issues upon any terms), being freed from all competition, has no motive to make its note circulation adequate to the growing requirements of the community. It may extend its note-issues indefinitely, if it chose to supply itself with gold. But it never takes any step towards obtaining such a supply. Under the present system, why should it? It is far more profitable for the Bank to keep the currency inadequate, than to meet the wants of the public by providing itself at times with more gold, upon which more notes can be issued. Whenever the inadequacy of the currency makes itself felt, in the most numerically trifling degree, the Bank gets a famine-price for its goods-for money, the commodity in which it deals. If no importation of foreign corn were permitted, a bad harvest, a scarcity in the supply of food, would always be a source of increased profits to farmers. As the supply of a necessary of life decreases, the price of it increases in geometrical ratio. People must have food, and any diminution in the ordinary supply at once raises its value to a famine price; so that an inadequate harvest becomes to farmers much more profitable than an abundant one. Just so is it with the monetary circulation. If the public require two million more notes from the Bank of England, this increased demand (although barely one

tenth of its ordinary issues) sends up the rate of discount 100 per cent.! Or if, owing to a withdrawal of gold, its circulation is reduced two millions below its ordinary amount, a similar result ensues. It is true that the Bank could proportionately extend its issues in the first case, and prevent their contraction in the second case, by taking mcans to increase its stock of gold. But it never does take any such step. It is far more profitable for the Bank to allow the currency to become inadequate. For example, on the discount of eighteen millions of bills at 10 per cent. the Bank makes three-fourths more profits than if it were to extend its issues and discount twenty-four millions of bills at the ordinary rate, 5 per cent. The Bank of England, we repeat, although greatly favoured by the State, conducts its business simply like a private establishment; its only rule is to make as large a profit as it can. Why, then, should not it, and all the other banks, support the present system, which, by rendering the currency ever and anon inadequate, enables them at no cost or trouble to themselves to double their rate of profits?

The existing monopoly of banking currency is a grievance of a very practical and demonstrable kind. The Bank of England and its satellite banks of issue not only gain more from the restricted currency established in 1844, but the Bank can actually alter the level of the rate of interest throughout the country simply by an alteration in its own practice. This is a startling statement; but the truth of it is patent to every one who chooses to look at the facts. It is a fact-as the weekly returns of the Bank show-that the Bank now charges 8 per cent., when until lately, in similar eircumstances, it used to charge only 4 or 41 per cent. By this means the level of the rate of interest in this country has been permanently raised, and in consequence of the Bank's action a similar result has to some extent been accomplished throughout Europe. The general result is, greatly increased profits to banks, finance companies, and all dealers in money, obtained at the expense of trade and industry, the employers of money.

England is the great seat of monetary crises. As Egypt is the mother-country of the plague, and India of the cholera, so is England the prolific source of the monetary epidemics which so recurrently

(1) For example, at any moment during the last three months, the Bank of England might have borrowed five millions in gold (or twice that amount, if it had wished), upon security of the Government Stock which it has in its banking department, from the Bank of France, which has simultaneously been suffering from a plethora of specie. But the Bank did nothing of the kind: it has not stirred a finger to provide itself with more gold in order that it might extend its note-issues. The consequence is that for three months past our commercial and manufacturing classes have been oppressed by a minimum bank-rate of 10 per cent., while their French competitors are only paying 3 per cent. What would be said if wheat in France were selling at 35s. the quarter, while in England it was selling at £5 the quarter? Under a right system, the former case would be as impossible as the latter is now.

In all

devastate and oppress the trade and industry of Europe. questions of reform it is well to begin at home: it is well to operate first where we can do so without extraneous impediment. In this case especially, it behoves us to set our own house in order first: for it is here that the conflagration which consumes the profits of trade and industry begins. It is here, also, that the conflagration commits the sorest ravages. And the first thing to be done, is to abolish the present monopoly of banking currency. Whatever be the conditions which Parliament may think fit to impose upon the issue of banking currency, let all banks alike subject to these conditions have equal rights. Let monopoly in banking die, as monopoly in all other trades has died. Secure the currency by all means. Take whatever precautions Parliament may judge necessary to secure the validity of the note. But let all banks be equal in the eye of the law. Subject to the same conditions, let every bank alike have the power to issue banknotes. What these conditions should be, it is not needful for our present object to discuss. Let fair play, free trade, and a wholesome competition be established, and the great point will be attained.

At the same time there is no difficulty in stating what these conditions should be. Secure the substantial value of the note-issues, by a deposit of Consols (set apart for the note-holders) with a Government official; and thereupon let each bank be at liberty to issue notes to nine-tenths of the current value of the consols which it has deposited, leaving the banks to secure the convertibility of their notes into specie by the means which they find most suitable. To lay down a fixed rule as to how the convertibility of bank-notes is to be secured is sheer absurdity. The circumstances of every bank vary, according to the different wants of its customers. Some banks are closely connected with the foreign trade of the country, others are solely connected with the home trade. The customers of the former class of banks ever and anon require payment of their deposits, or of their discounted bills, in specie, for the purpose of export; the latter class are never subject to any such demand. And the great majority of banks belong to the latter class. Their customers are tradesmen, shopkeepers, farmers, landowners, or private individuals who do not trade at all, and none of whom ever require payment of their deposits in the form of specie. Some banks, therefore, require to keep on hand a very large amount of gold-not, indeed, to cover their note-issues, but their deposits and discounting business; whereas other banks, and the great majority, hardly require to keep on hand any gold at all. To apply the same rule to banks so differently circumstanced would be absurd. It would be "the bed of Procrustes" over again. The only sensible arrangement is, as we have said, to secure the substantial value of all banking currency by a deposit of Government securities, and to leave the convertibility of the notes to be

secured by the banks themselves,-each bank, under the penalty of bankruptcy, being left to secure the convertibility of its notes by the means which its own experience shows to be sufficient.

Our remedy for the War of the Banks, it will be seen, assumes a twofold shape. In the first place, we have proposed to remedy the transient ebb and flow of the precious metals-those temporary oscillations which, though under the present system productive of immense disasters, no more affect the normal equilibrium of the precious metals than the tides do the margin of the sea-by the establishment of a Bank of Europe, which would in effect be the bank for all the leading banks of the world. By means of it the cheque-system as between banks would become international. The Bank of Europe would be the clearing-house of all the leading banks of the world. Moreover, we doubt not, in course of time, if not at once, it would become the fountain of an international paper money. Say that the banks connected with it, besides issuing the large drafts upon it required by merchants or capitalists who otherwise would have to export specie, were allowed to issue drafts or bills upon it down to a minimum of £20: what would ensue? The advantage to the general community would be nearly as great from this source as trade would derive from the larger drafts. For example, any one who was going to travel on the Continent, passing from country to country, would take with him five or ten of these £20 drafts upon the Bank of Europe, and everywhere when he presented one of these drafts (or large bank-notes) he would receive the amount in the money of the particular country in which he was then residing. He would cash one of these drafts in France, another in Italy, another in Turkey, Austria, or Russia, according to the course of his travels; and everywhere these drafts would be honoured, and paid to him in the currency which he required.

Thus the establishment of a Bank of Europe, such as we have proposed, would confer three important advantages. In the first place, and most important of all, it would obviate, to a great extent, the transient ebbs of specie from one country to another, which at present are the bane of trade, and constitute no small embarrassment to banks. Secondly, it would furnish merchants and capitalists with a much more convenient form of making international payments than they at present possess, when commercial bills are not to be had; for instead of the troublesome process of exporting specie, they would get drafts which they could send by post. And thirdly, if drafts of comparatively small amount were issued, any tourist or traveller would obtain a supply of really international currency in a much better form than is possible at present; in fact, in the very best form it is possible to have.

The two latter advantages are of merely subordinate importance.