The Liverpool Standard and General Commercial Advertiser.
Liverpool, Merseyside, England, 1840-07-07 00:00:00

TO THE PEOPLE OF GREAT BRITAIN

EDINBURGH, JUNE 18, 1840.—1 haVe lately addressed you
on the subject of the protection of agriculture, and I believe
with approbation.
I now to speak of what is termed Banking ; and my reason
is, that after patiently reading the vast variety of essays upon
this subject, and considering the various hints given of the
proceedings of the secret committee of parliament, I have
come to the conclusion, that the subject is not understood,
not in the slightest degree understood ; and that every fresh
layer of speculation, is only burying it deeper.

What is wanted in this case is, first, A PRACTICAL KNOW-
LEDGE OF THE SUBJECT; second, a habit of thinking upon
political subjects generally, and above all, of writing, which
is the test of thought ; and lastly, some clearness of head,
and faculty of expression. I happen to possess the two first
requisites from accidental circumstances. The parties I now
address will speedily be enabled to judge whether I possess
the last. _ . .

—BANKING, as it is called, is nothing mysterious ; but
strange to say. the name is as absurd as any opinion that has
ever been broached about it. Money-changing is its origin,
and money-changers must have been coeval with the first
trading of one state with the other. In Judea the money-
changers seem to have sitten even in the porches of the
temples. They are a caste in India still, and still at little
benches. In Italy the same custom prevailed at first, and in
Italy a bench is called a bane; and hence the origin of the
term banking ; that is to say, doing business at a bench.
LENDING MONEY upon PLEDGES was evidently soon com-
bined with money-changing ; and this is another step in what
is termed banking. That as a public business seems to have
come from Lombardy to Lombard-street; as the blue or gilt
pills still borne in the arms of the MEDICI, the great Florence
Physicians, and afterwards money-lenders, are still seen over
the doors of all pawn-brokers, or money-lenders upon pledges.
Up to this point, the issues of the money-lenders, were always
in coin. _ _

It was in Holland that the circulation of paper first arose,
and this from accident. The people finding it dangerous to
keep specie in their private dwellings, deposited it in the
town-houses, under the care of burgo-masters or magistrates,
taking their receipts for the amount. These receipts soon
began to pass from hand to hand, and even to be transmitted
to a distance. They were found so much more safe and
portable than money, that they speedily began to bear a pre-
mium ; the difference, namely, began the expense of trans-
mitting them from one quarter to another, and bullion. This
is the third step in banking ; issuing and transmitting an
accredited obligation in place of money, and this obligation
deriving its credit, from being an acknowledgment for

money.
The fourth and last step in banking was, issuing the obli-
gations of persons of CREDIT, without the intervention of
money ; that is to say, obligations. for which no money had
been deposited, but proceeding from persons who were sup-
posed capable of judging that those to whom they lent their
obligations were solvent, and that through their solvency the
banks (as places for transacting money matters were now
termed), would be solvent also. This is the fourth and last
step in banking, and it is evidently a great one ; in so far as
it economises the use of actual currency or bullion in the
carrying on on of transactions, and makes a bill of exchange
(as bank-notes are), equal to the gold or silver token ; and
this bill of exchange often testifying only an exchange of
credits, instead of commodities.

A mixed measure of great importance has arisen in con-
currence with these, namely, the depositing of money in
banks by persons who do not in the meantime require it, that
it may be lent to others who do require it. This also leads
to a great economy of capital, and multiplication of its
power ; for it renders every portion of the capital of a dis—
trict, at all times available. In Scotland it is usual to obtain
interest on such deposits, though always less than is obtained
by the bank. The difference between the interest paid and
charged, remunerates the bank for the trouble and risk of
re-lending, and the depositors become in reality sharers in
the profits of the banks. This facility is of great use in two
ways :—lt enables a capitalist not desirous of great activity,
still to derive something from his capital, without lending it
pernianently out; and it enables persons of industry and
judgment, but wanting in capital, to get into the field of pro-
fitable industry, without crowding it, and after a time to retire
in like manner, to moderate profits with reduced risk. It
was necessary to say this much, to bring all the points into
view that may hereafter require to be referred to and
from this it will be seen, that the uses of what we term bank-
ing, are—

Fi7:st—To facilitate business, by the exchange of the moneys
of different countries, or of the obligations of different in-
dividuals, for something that will circulate where business

is to be done.
Second—To effect payments at a distance, with ease and
safety, by means of accredited obligations,—commonly

called letters of credit, or of exchange;
Third—To increase' thepower of capital,—b.: bringing it into
deposit in known places, and where the use of it way be

obtained, on terms that are known.
And, lastly—To economise the use of BULLION, as the re-
presentative of capital or acquired property, by substituting

therefore an accredited circulation of paper

These are the uses, and ALL the Uses of what we term
banking, and, though few, they are obviously very important.
I do not intend to go much further in the way of explana-
tion. It seems only necessary I should show that I under-
stand the subject. But as it has been said, that the com-
mittee of parliament were engaged for three days, in consider-
ing whether deposits in banks, were to be considered circula-
tion, I may be allowed as many minutes to clear up that mat-
ter, and to show generally what circulation is.
Every thing that circulates property, is pro hac vice, circu-
lation :—A. bank note, a bill of exchange, an exchequer bill,
or any other document of public or private debt, an ingot of
gold or silver, or any other valuable metal—a jewel, &c, all
are circulation, if they are received, and circulate property.
But if the gold and silver, or the jewel, has been turned into
articles of use, or the circulation is effected by exchange of
commodities in use, or for use, the transaction is termed
barter. .

Again—nothing can be 'termed circulation that is not in
use as circulation. Even gold and silver coins, deposited in
a bank, are no more circulation while so deposited, than if
they were again returned to 'the earth. But if they lie in the
bank, .ready for circulation, they'are 'a power of circulation.
But nothing is actually 'circulation, that it is not daily and
hourly required in the transactions of the State. The amount
required for this; forms the circulation of the State, whatever
may be its character ; whether it be in bullion, bank notes,
bills of exchange, or bartered commodities. DEPOSITS of
PROPERTY may be termed CAPITAL ; and if accessible for
use, it is, as I have said, a power of circulation; but it is
no more circulation, while out of use, than manure deposited
is manure—till applied to the field.
If it is possible, therefore, that the committee of parlia-
ment and their witnesses have been employed for three days
in considering whether deposits are circulation, it is clear
that they have been considering in that committee, what they
ought to have considered at home; and have only been en-
deavouring to instruct themselves, instead of being in a situa-
tion to instruct the country. And gentlemen acquainted with
HORACE should remember, that he has not written anything
more true than this :

Si me intelligere vales,
Ante omnia necesse est, ut—

Tu ipse intelligas

I must now consider all the collateral views of this subject
to be understtood, as I have fully studied them, and I think
understood them ; and if from what I have said, the public
shall be of opinion that I do understand them, they will in
the mean time receive from me the following propositions,
as proper and necessary to be adopted, for the regulation of
this very important matter.
First, of what should NOT BE.
There should not be A SOLE BANK OF ISSUE. It is true
this has been proposed even by Chancellors of Excheoer ;
and it is still, I believe, strenuously contended for by the
establishment that hopes to be instated as sole source of cir-
culation, and seriously meditated by persons looked up to as
statesmen. But if this is contemplated by statesmen, it is
proper to say at once, they are very ignorant statesmen. It
would no doubt be very profitable for any bank to have two
per cent. on the whole paper currency of this kingdom ; but
it is exceedingly impudent to expect it, from the following
considerations among others :—First, from its excessive
amount. Next, from its presupposing that the FORTUNES
of the WHOLE KINGDOM should be trusted to the paper ob-
ligations of a few men, elevated into bankers, from the ex-
tent of their capital and not of their capacity ; who would
thus become responsible for the prudence of all the banks in
the kingdom to whom they might lend their currency ; and
who, by seeking this responsibility, in addition to a respon-
sibility already excessive, show that they are very imprudent
themselves. But lastly, and yet more particularly, because
their avowed object is, to regulate the whole proceedings of
the kingdom in matters of trade !—And how? By regula-
ting what they term the exchanges. Now, it is impos-
sible to enter into the briefest explanaton of that subject, in
this place ; but the idea is certainly the very height of ab-
surdity ; and its effects would be, the moment we had ac-
quired more money than our neighbours, as compared with
our wants, to cause us to throw that money away ; and the
moment we had less in proportion to our wants, to cause us
to throw our property away, to seek more money, merely to
bring what they term exchanges to a par. It would be sys-
tematically making a trade of the instruments of trade, and
without the least necessity. The Brentford tailor on horse-
back, whipping and spurring and curbing, all at the same in-
stant, would be but a slight type of this sole regulating esta-
blishment ! But, though the madness of the tailor may be
ludicrous, there is something serious in the destruction of the
horse : and we may rely that such would be the fate of this
country, under the tailors of Threadneedle-street, were they
installed as they have the modesty to desire. The power
they already possess, has, according to the Manchester mer-
chants, repeatedly caused fluctuations in the value of pro-
perty to the extent of thirty per cent !—and were the
country placed at their feet, as they desire, there would
be no limit to their power, but in their own discretion.
No sovereign that has ever lived, has ever possessed a power
equal to what would be the power of a sole bank of issue, or
even its meanest director.

Second, There should be no UNLIMITED ISSUES, by BANKS,
HOWEVER N uatEttous. We see the cousequence of this in
AMERICA ; where the circulation of banks is almost as much
depreciated, as the assionats of the most profligate govern-
ments. RICARDO has said, " experience shows that neither
a state nor a bank has ever has the unrestricted power of
issuing paper money, without abusing that power." It
would be exceedingly easy to demonstrate, that the checks,
as they are termed, that have hitherto been devised, are
nearly nominal in every view; or, if they may in some de-
gree save the banks, they are even pernicious as the public is
concerned, by tending to strip the failing bank of all its
ready funds ; that is, to carry PREFERENCES to the extent of
the last ready penny.

Third, There sliould be NO ISSUES AT ALL, WITHOUT
WELL DEVISED SECURITIES. The propriety of this regula-
tion is self-evident. _ __ .. .

And lastly, As the privilege of issuing paper currency,
however secured, is a privilege to COIN, in a substance of no
value—a privilege not granted either to the STATE, or to the
KING in this country, it is clear that the State should be re-
munerated for this permission to individuals ; and for the
trouble of superintending and guaranteeing the system.
I will give my views of the mode of regulating and distri-
buting the currency, so far as in paper ; of making the banks
entrusted with supplying it, at once independent and safe; of
remunerating the country for permitting and guaranteeing
this species of currency, which at once economises and cre-
ates capital, and accelerates industry ; and I will do this in
a very few, and clear, and simple propositions; self-acting,
and of self-evident utility.

In the meantime, I trust I have given a very clear view of
BANKING, AND ITS USES; and in that have shown, that, if
considered by itself, (as it ought to be,) it is a very simple
matter. Collateral subjects attach themselves, and if al-
lowed, may complicate the individual subject to any extent.
But this ought not to be allowed; and never will be allowed,
where the subjects are understood. They are collateral but
not identical. D. BAIN.
P.S.—I will give the regulations I propose in one week.
Ins
htehd a
the ms eanti
generallym a
elhsoppoesstihbilse.preparatory paper may be pub-

AN IRISH CALCULATION.—The weekly Freeman's Jour-
nal, in reference to a dispute as to the sole right of fishing in
the Shannon, claimed by a lessee under the corporation of
Limerick, says, " should the plaintiff succeed he will be bene.
fitted £3OOO a-year ;on the other hand, it is stated, that
2,500 individuals, who now obtain their living by the fisheries
of the Shannon, will, in that case, be deprived of their means
L n-
l Journal,
of subsistence." Ergo, 2500 individuals exist on £3,000 per
renrua 1, or 245. per annum each. There is no exaggeration
Well may this veracious print be called the Freeman's
Jo
fiwsbheenrmit
fishermen's
onlydeliberatelymeans
omfaekxeisteit appear
existence
are u
that 2 , 500
Shannonone
penny per day. .