The Sun.
London, England, 1866-08-27 00:00:00

The War of the Banks.

The vast ruin wrought by the late financial panic in
England has excited attention far and wide, and will
furnish a subject for deep thought and discussion for a
long period to come. The Fortnightly Review has taken
up the question, and proposed a measure in the number
under discussion. The matter is ably worked out from
the beginning to tho end—from the causes of panics to the
effects, from the reasons to the remedy :
"Ever and anon the Banks of Europe engage in a dis-
astrous international struggle. Disastrous, but not
to them. They need no declaration of war by the ,
Crown—neither do they wait for the sanction of Parlia-
ment. They declare war for themselves, and they raise
the supplies out of the pockets of the community. The
community at large, and especially the commercial and
industrious classes, are but the pawns, common soldiers,
unpaid for their service, with which—that is, at whose
expense—the Banks carry on the contest. Governments
have an interest in avoiding war, because it impairs their
resources ; but the promoters of this new kind of inter-
national conflict have no such motive for keeping the
peace. The Banks pay themselves for making others
fight, and their gains augment in proportion to the
severity and duration of the conflict How
often during the last few years have we seen this inter-
national warfare declared—this conflict waged, and the
losses inflicted ? In 1857, in 1864, and again this-
year, in greater or lesser force, wo have seen
this strife carried on. In almost all cases the Bank
of England assumes the initiative in the contest;
the proclamation of war proceeds from the Bank-parlour
in Threadneedle-street. The simple announcement that
the Bank of England has raised the rate of discount,
spread like wild-fire over Europe by the wires of the
telegraph, makes every bank at once stand to its arms,
and engage in the conflict. A weak state, when menaced
by its neighbours, may yield ; but the banks do not yield,
—they unfailingly accept the challenge—they at once engage
in the war. Why should not they, when, whatever be
tho issue, the loss does not fall upon them, and when the
only certain result of the war is to augment their gains ?
"Let us take a case, say that of 1857, or of any subsequent
crisis. What is the mode of procedure ? What is the
form of the war ? The Bank of England raises the rate
of discount; that is the first step, the declaration of war.
Why does the Bank take this course ? It does so, wo are
told, partly to prevent the export of gold, partly to bring
more gold into the country. To retain or acquire a cer-
tain amount of gold, that is the motive for this international
war of the banks. . . . The worship of that canonised
metal, discarded as an antiquated heresy in this country
for a century and a half, has of late been revived in a more
slavish form. And ever and anon the Bank of England
adopts the most extreme measures towards the community,
for the sake of wringing from other countries, or of pre-
venting them getting from us, a portion of the yellow
metal, so insignificant in amount as hardly to equal in
value the property of not a few private individuals
amongst us.
" Such is the cases belli. Let us next see how the war
thus declared is carried on. The Bank of England, for the
sake of keeping or acquiring a certain quantity of gold,
raises the rate of discount. What follows ? The banks of
all other countries immediately follow suit. They also
raise the rate of discount. They may have had no
pressure upon them, and this is usually the case; there
has been no special demand upon them for money, either
in notes or specie; but the moment the Bank of England
raises its rate of discount they also raise theirs. In some
countries the bank rate is usually lower than it is here ; in
other countries it is usually higher. But whenever the
Bank of England raises its rate, the rate is raised in all
other countries likewise—France within the last few
mouths furnishing a noteable exception.
" What is the consequence ? Simply this, that the posi-
tion of the various banks of Europe remain unaltered.
The inducements to export or import gold between country
and country remain exactly the same as before. The re-
sult of this international war of the banks is simply nil. It
is a game of perpetual ' check' to try the others ; and the
game goes on, the Bank of England taking the initiative,
and being always met by ' check' until matters come to a
dead-lock ; and the game ends by leaving the belligerents
as regards one another, exactly in statu quo ante bellum.
They gain nothing from ono another; the banks of one
country do not attract a single ounce of gold from the
banks of Europe. The results of their belligerent policy,
on the part of the banks of Europe, is, as we have said, as
regards one another, simply nil. Tho process, so far as the
international strife fur gold is concerned, is absolutely
useless. This fact of itself suffices to condemn the policy
recently pursued by the banks. The policy is useless to
attain the object for which it is put in force. Instead of
drawing gold from other countries, the inducement to ex-
port or import gold, as a question between country and
country, remains the same as before. Surely, then, it
must strike every intelligent observer that this interna-
tional war of the banks is a most preposterous thing. It
is commenced by the banks of some country (usually
England) which experiences a casual and transient drain of
specie ; but as the banks of other countries now instanta-
neously raise their rate in proportion, nothing comes of it •
Even in 1864, when our minimum rate was raised to 9 per
cont., no gold was attracted either from the Continent or
from the United States of America ; one small parcel of
French coins (which would not circulate in this country
until they were recoined) was all that arrived
" Check trade, and money at once becomes plentiful
This is precisely the principle on which the banks now-a-
days act. The only, or at least the chief, the most im-
portant, the grand use of gold is, as international currency,
to settle the trade payments which have to be made be-
tween one country and another. Kill trade, and the
amount of these international payments is at once dimi-
nished. Tho war of the banks does kill trade ; this is its
only effect ; and not in our country only, but in every
country whore a like policy is in vogue. Hence every
season of an exorbitant bank rate is followed by a collapse
of trade, and specie thereupon accumulates in the banks
simply because the ordinary demand for it has been checked.
When the Bank rate is raised to 10 per cent., the industrial
classes, whether merchants, or shopkeepers, or manufac-
turers, aro ruined by scores. They have not only to pay
an exorbitant rate for the discount of bills, by which so
much of our trade is carried on, but at the same time the
markets aro so depressed that they cannot make their
usual sale except at a depreciation of from 20 to 30 per
cent."

Hence hundreds of them are ruined, and the rest con-
tract their operations to a minimum. Trade is paralysed,
and hence money accumulates in the banks, simply because
it can no longer be employed. The only use of money is
to carry on trade; the banks destroy the sole object for
which money exists. They make money plentiful at such
times, in exact proportion as they render it useless. In-
stead of facilitating the expansion of trade, their great
principle of action nowadays is to keep it in check by re-
peated stranglings."
The system is a revival of "protection" in its worst
form,—a revival of the exploded doctrine, that the wealth
of a country is increased by encouraging the imports, and
repressing the exports of the precious metals. That doc-
trine was wrong, and being wrong was more likely to bo
injurious than to succeed in the object ; and so it is our
monetary system lessens instead of increasing our wealth.
It begins by killing the export trade, for manufacturers at
once contract their operations and merchants their home
orders; while the imports being ordered some time before
the sudden rise in the rate of discount (these rises are al-
ways sudden); the importer is committed and must abide the
result.

The war to the banks is most profitable, their dividends
increasing in proportion as they raise the rate. " Why,
then," asks our author, "do they ever halt in the process ?"
As well ask a farmer why he does not shear his sheep
twice over. . . . A ten per cent. rate means wide-spread
ruin and failures among our commercial and manufacturing
classes, and loss of employment and actual want to tens of
thousands of our working classes. It is strange, too, to
observe that this collapse of trade occurs first and to the
most serious extent in the very country which provokes

this bootless international strife. As the bank rate all
over Europe goes up and up, the Bank of England always
taking the initiative, the event which at length stops the
process is a break-down of trade Li England itself. The

war which the Bank of England is the first to declare,
which, but for it, indeed, might never be waged, inflicts
its losses most speedily and most heavily upon ourselves.
Is this wisdom ? is it civilisation ? It is barbarism and
folly, practised, too, chiefly at our expense.
"While making trade free by our commercial legislation
wo keep it all, every branch of it fettered and in bondage
by our monetary enactments. While trade expands, when
wo desire above all things that it should expand, we con-
trast the means by which alone it can be carried on. Can
anything more absurd be conceived ? What else can we
expect but convulsion and damage when we combine with
an over-expanding trade a contracted and inelastic cur-
rency? Our folly is like that of a man who should plant
a growing oak in a vase of iron. He carefully waters and
manures the tree, desiring that it should attain its amplest
proportions, and he wonders why ever and anon the tree
droops, or the vase is shattered. So it is with our pre-
sent incongruous and incompatible systems of trade and
banking. Trade is ever and anon strangled by the banks,
and When, as sometimes happens, our restrictive monetary
system is shattered in the struggle, our legislators com-
placently replace the broken fetters, and leave our mone-
tary system to strangle trade anew.
"Nor is gold the only cause for which the Bank of Eng-
land wages war. Often a demand for notes is the only
reason. In no other country but England do banks con-
sider such an event as a cases belli. The one evil is occa-
sioned by a natural, the other by a purely artificial cause.
The latter cause is simply this ; that our banks aro no
longer permitted to utilise their credit, by the issue of notes
to meet a temporary requirement for domestic currency.
Such a requirement always arises whenever there is either
a monetary or a commercial crisis. At such a time au in-
creased demand for currency takes place when the demand
for capital is actuallylessened. It happens (1) because com-
mercial credit is thereby lessened, causing money to be
required in payment instead of bill ; and (2) because, ow-
ing to the depression of the market caused by the high
bank-rate, merchants prefer to cash a larger portion of
their stock of bills than usual rather than lose 20 or 30
per cent. by making forced sales of their goods. The po-
sition is an increased demand, not for capital, but for cur-
rency. More of the currency issued by banks is wanted
in exchange for, and also to replace, the decrease in the
currency of trade, i.e., bills. A temporary increase of
bank notes is all that is required. Andes these notes are not
meant to bo cashed, and never are cashed, such a transient
addition to their circulation in no way creates a difficulty
for the banks. But such a remedy for our ever-recurrent
times of difficulty is now prohibited by the Bank Act, and
the consequence is immense disaster to our national indus-
try, and also an artificial cause for the Bank of England to
commence that international war of the banks which we
have already described."
The Review recommends that banks should not hold their
reserves of securities in the Government stock of their
own countries, but of those to which the main drain of
gold flows. For instance, the Bank of England, on selling
or borrowing on Government securities, is paid in its own
notes. But if it held the reserve in securities of, say,
France, India, and the United States, the drain to these
countries might bo met by the sale of their stocks, and
enable the Bank to give drafts upon these places equiva-
lent to specie, and thereby, pro Nato, prevent any export
of the precious metals. We confess that we do not see
this. Such sales would be paid also in notes of the Bank,
unless the securities wore sent for sale to the country caus-
ing the drain; nor would the demand for gold in that
country be extinguished by shipping to it their national
promises to pay. The process might help, although the
reviewer considers it clumsy and trifling compared to th 3
improvements which will yet be made in the science of
banking. "Banking must assume an international form.
In all departments this is the tendency of the times. The
barriers of seclusion behind which communities have so
long kept themselves apart from their neighbours aro being
thrown down. In finance—that most cosmopolitan of all
trades—we already see the new system of concert freely
adopted. 'English, French, Germans, Russians, Ameri-
cans may all be found subscribing to the same loan, or co-
operating financially in the same enterprise. Banking will
and must follow the same onward course. Financially, at
least, Europe is becoming one community, and one of the
immediate wants of the times is the establishment of a
Bank of Europe." . _

Having carried our readers to the Reviewer's main
remedy for the prevention of panics caused by drains of
gold, we will for the present leave this subject, and here-
after show bow the proposed bank should be constituted and
what service it would perform. Already the merchants of
America are moving in the matter as regards the exchanges
between the United States and Europe, but it would bo
more advantageous to the world that the bank should re-
gulate the exchanges between every nation. The measure
when carried out—and some day or other it must be car-
ried out— should be made as broad as possible ; the broader
the basis on which it is to stand the more useful it is likely
to prove.

Execution at Manchester,

MANCHESTER, Aug. 25.

James Burrows, aged 18, convicted at the recent
assizes of the murder of John Brennan, an Irish
labourer, at Hopwood, was executed this morning
at the New Bailey Prison. A great number of people
assembled to witness the excutiou, which took place
on the north-eastern side of the prison in New Bailey-
street. A portion of the wall had been removed so
as to admit of a door opening upon a small scaffold
on which stood the gallows. Hundreds of people
present had taken their stand in front of the drop
yesterday evening, and remained all night. The
scene was one entirely novel to the great majority
of the people here. The numbers in front of the
scaffold began visibly to increase so early as 4 o'clock.
By 5 o'clock there were fully 6,000 people assem-
bled, with only a slight sprinkling of women among
them. As the pressure of the crowd increased many
became so worn and fatigued even so early as six
o'clock as to cry out with brutal impatience to those
above them in the windows on the north-east side of
the street to know the time. Every foot of space
from which the merest glimpse of the gallows could
be got appeared to be occupied before the time fixed
for the execution. There could not be fewer than
20,000 people assembled, after great numbers had
turned back, deterred by the impossibility of finding
standing room. Among the crowdbefore and on each
side of the drop there were apparently a good many
mill hands, labourers from foundries, and other work-
shops where unskilled labour is employed, and country
people, besides the commonest dregs of the idle and
dissolute. An old man, conspicuous because of his
height and bare white head and flowing beard, who
had found his way into the very densest of the crowd,
from which escape was hopeless till all was over, be-
came an object of painful interest to those more
favourably situate—swayed helplessly backward
and forward, and whirled round in the constant
eddyings and movements of the multitude from side
to side of the street, till he appeared almost dazed.
Some men fainted from the heat and pressure, and
water had to be poured down from windows to
those willing to assist in restoring them. For hours
the great majority behaved much as they would
have done at a wake or fair. The laughter at times
was most boisterous, and their way of showing their
humour and drollery of ten took the form of practical
jokes. Sometimes men's; hats were rudely seized
and thrown backward and forward over the heads
of others and battered till rendered worthless. At
such times the taste for this kind of amuse-
ment would spread so rapidly that every one waa
to take off his own covering in self-defence, and
multitudes remained for a time bareheaded. At in-
tervals some one or two men with switches would
commence beating people back, so as to form a ring
for prize-fighters, or for some exhibition and such
rough pleasantries to relieve the monotony of the
hour were continually recurring, and the hum and
noise ofvoices would rise at times almost to a roar.
About six o'clock the first real relief to the impa-
tience of the people was afforded by the door in the
prison-wall being opened, and the appearance of
Calcraft and some workmen on the scaffold to make
preparations for the execution so many had come to
see. The workmen had come, among other things,
to enclose the scaffold and drop in a drapery of
black cloth, and as the draping progressed it soon
became evident that the cloth would be carried so
high as to afford only a very limited view of what
was to take place, and then cries of indignation
burst forth, which again gave place to shouts of
laughter at some slight mischance occurring through
the nervousness or clumsiness of the workmen.

As the time neared 8 o'clock great impatience was
manifested, and cries of " Hats off !" and " Time,
time," followed. Precisely at 8 o'clock the prison
door opened, and the murderer, the hangman, and
several officials stepped upon the platform. The
murderer was a pitiful object to look at as he stood
trembling with his pinioned hands raised and his
eyes directed upwards. By those who stood within
100 yards of the scaffold little more than his head
could be seen above the drapery. All being in readi-
ness, the white cap was drawn over his face, and one
.end of the halter being already round his neck, Cal-
craft had but to lift the other to a hook on the drop.
Then the bolt was withdrawn, and the guilty crimi-
nal disappeared behind the drapery. Only the top
of his head could then be seen even by people on a
level with the scaffold. The whole proceeding so far

as it was public lasted barely 30 seconds. The peo-
ple appeared wholly unprepared for its suddenness,
and a shock seemed almost visibly to pass through
the whole assembled mass. A slight scream burst
from some of the women, and several fainted. A
man on the leads of the warehouse opposite the gaol
sank down in a fit, and blankets had to be passed
up to make a bed for him till means could be adopted
for his safe removal.
The murderer left the following statement in the
hands of the chaplain for publication :
"I, James Burrows, do acknowledge that I have, by slid"
denly cutting off the life of John Brennan, made his Wif°
widow and bis children fatherless. May God help thou'
My sin is ever before me now ; and, rather than Heger 5
miserable life on earth, I would wish to cast myself on the
mercy of God. I acknowledge the righteousness of his 10
and the laws of my country. As Ido not wish to make 14
speech on the drop, I beg, through this paper, which I /10,1
asked the chaplain to write out for me to sign, to warn all
young people of both sexes to be obedient to their parents+
not to neglect the Sabbath, the school, and the Bible, and
against all profaneness and debauchery, and especially
A
against evil company—my ruin. My last word is, may Go`"
be merciful to be a sinner, through Jesus Christ's sake,
Amen. "JAMES Bunnell's.
"From the condemned Cell, Aug. 25.
" Witness, JAMES GRETREX, Warder."