The Sun.
London, England, 1842-02-07 00:00:00

THE BANK OF FRANCE.

The Debats has a long article on the last officia.
returns of the Bank of h ranee, in which we find the
following remarkable passage :--" One of the s causes
which ensures to the Bank of France a high degree
of credit, is its never leaving itself without a proper
amount of specie. It has always a large amount on
hand, and, consequently, the faculty on the part of
the public of exchanging notes for specie is not a
fiction. But prudence itself has its limits, and if a
bank should constantly have on hand an amount of
specie equal to that of its notes in circulation,. One
would have a right to say to it, that its privilege of
issuing notes is illusory, or at least sterile, and that
the public derive no advantage from such a privilege
so practised, except that of having a more portable
circulating medium. One would have a right in
such a case to declare that the Bank did not allow
the country to participate in the benefit inherent
in the institution of banks of circulation, viz. that
of diminishing the amount of dead capital. A bank,
which should always keep its notes in circulation,
balanced by an equivalent sum in specie, buried in its
cellars, would not, correctly speaking, be a bank of
circulation, and the high privilege of making paper-
money might be taken from it without danger to
itself or to the country. We ask the Bank of Prance
whether it is in the situation which we have men-
tioned ? In 1841, the average amount of its notes in
circulation-was 224 millions, and the average of its
metallic reserve was 210 millions. In 1840, the
average amount of notes in circulation was 208 mil-
lions, and that of the metallic reserve 222 millions.
Thus in 1840 the Bank of France had more specie
locked up than it had notes in circulation, and in
1841 the amount was nearly balanced. The dead
capital of the Bank is, therefore, excessive. If the
specie which is thus locked up, and rendered unpro-
ductive, in a country which wants capital for the
promotion of industry, were the property of the
Bank, it might reply, that it had a right to do as it
liked with its own. But this specie is not that of the
Bank. It belongs to the State, and to the private in-
dividuals who have accounts with the Bank. When
the Legislature conferred upon the Bank of France
the privilege, in virtue of which the funds of the
State and those of the public are brought to it, with-
out any interest being demanded, it was certainly
expected that the funds so entrusted to the Bank
would be made to fructify to the profit of national in-
dustry, without prejudice to the profit of the Bank.
Now, in order to attain this object there are two means
which may be adopted at the same time: One is to in-
crease the amount of the notes in circulation by the
creation of notes of a smaller value than 500 f., the ac-
count current of the Bank remaining the same. In the
branch-offices of the Bank ofFrance, in the departments,
notes of 250 f. each are issued, and why should not this
be done in Paris ? What inconvenience even would
there be in issuing notes of 100 f., to replace the gold
coin which has disappeared from our territory ? In
England, the great bulk of the paper circulation is
composed of notes of 125 f. (50 ; in Austria, the
notes are chiefly of 5 florins (12f. 50c.) ; and, in
Prussia, there are notes as low as a dollar each
(3f. 80c.) The notes of the Bank of France ought.
also to be made a legal payment of taxes. By this
means the notes would circulate in every part of
France, but, for security, in the first instance, the
power of paying taxes in notes of the Bank of France
might be limited to the chef-lieux of the departments.
If, in this way, 300 millions more were to be added
to the circulating medium, it would be exactly the
same as if France were enriched to that amount, for
a similar amount now unproductively locked up, might
be rendered productive. A machine, a, chemical ap-
paratus, a route, and a canal, have all a productive
power. Specie, however, is only a sign of exchange.
Of itself, it has no value, it creates no value, and adds
no value to any already existing." .
This locking up of capital in France is not pecu-
liar to the Bank of France. It is a very general
error, and may be in a great measure, perhaps, at-
tributed to the shock which was created many
years ago, when by an excessive and indeed ,Trd
development of the system of paper-credit, all con-
fidence in paper-money was destroyed. M. Balzac,
in one of his works, says :—" It is impossible to.
form an idea of what is passing in the rural dis-
tricts. It is a fact that three millions of families
annually lock up fifty francs, and thus take one
hundred and fifty millions from the circulating
medium, and the science of political economy teaches
us that a five franc piece, which passes
during the day through a hundred hands, becomes
equal in value to five hundred francs, as the means of
commerce and industry." 111. I3alzac 'goes on to say
that the peasant locks up his money for ten years
until he can employ it in the purchase of land, and
he supposes that the locking up system is more ex-
tensively adopted by the petite bourgeoise than even
by the peasantry. The other remedy, which the
Debats recommends for the evil of which it complains,
is the augmentation of the number of branch banks in
the departments, in order that greater facilities may
be given to commerce and manufactures. It contends
that as the Bank has a privilege which enables it to
hold more than 200 millions of specie, belonging to
the State and the public, It is but just that it should
devote a portion of this capital to the creation of new
and numerous branch establishments, and thus justify
its claim to the title which it bears of Bank of France. I