Memphis daily appeal. [volume] (Memphis, Tenn.) 1847-1886, 1866-04-20

IlFls On TWO Occtsipuss ne LCotAtON @"
follows on the LAST
NJ. Hubert Delisle asked how-the mu'
hal dependence OF the banks of England
and France being admitted-it would be
possible to prevent money from being
drained from the Bank Of France to the
| Bank Of England, when the rate of dis
count is higher in the latter than the
former, except by raising the rate in
France?
M. Emile Pereire. In the circulation
| Of capital and in the stock OF coin and
bullion Of the Bank of France are two
/ distinct things. When people owe they
must pay. If cotton be wanted in the
manufactures the cotton must be paid
/ for. II it cannot be paid with fabrics OF
other productions il must be paid with
coin. because before all things the raw
material is wanted. All that Is indie
( pendent of the Bank Of England. II ttis
England that wants the cotton, ana moi
France, why should France empty hel
| Golfers TO fill those of the Bank of Eng.
land? The bill of 1913 has not had the
| effect to prevent coin from arriving OF
leaving; il is a limitation of notes and
not of coin. Because the Bank of Eng
Hand is constituted in such a way that its
issues Of notes, without a corresponding
value in coin and bullion, cannot be su'
perior to the 1000, 600 sterling of gov
eminent stock which forms its capital,
and that then, If for wantOfnotes the bank
is Obliged to raise its discount to five, six
or seven per cent, il does not result that,
interest being here at three or four, OuI
money will go to England If IL has NO
need to 90 there and il has no need to
go if we are not the debtors of England.
President IN. ROuher). That is the
/ great point. You are bringing out what
YOU said relative TO exchanges.
NJ. Emile Pereire. 1 will be clear and
precise. I take the example in all its
vigor-the Bank of England puts its dis
count at seven per cent, and we have il
at three. 1t is commonly said, Since
our discount is at three, we viii send all
our money to England to employ it al
seven" But it is not necessary in order
to do that TO send money to England.
Bills Of exchange in London can be taken
and kept in the pOrtfOiiO-in that way
the discount OF seven per cent. Is secured
without any displaclng Of money, for, as
l have already shown you, gold cannot
leave France unless the exchange on
London amounts 20 25rr. 3I5c., in which
case the banker who might have taken
London paper to get seven per cent.
hOUlA Ia HE lakA Dt5iAGo k4lt DlVAAL EOL1-
ing from the rise in the exchange. But
in such circumstances a rise in the ez-
change il not to be feared. The bills OF
exchange of all Europe are in great part
centralized at Paris, and thence they 20
in different directions; consequently one
can find at Paris as much paper on Lon
don As one wants, especially when 1 re-
peat, France, for the balance Of her own
exchanges, isuot the debt0TO of England. Is
that operation taking place 1T this mo-
ment? There is now November last q
difference Of two per cent. between the
rate of discount of the Bank Of France
and that of the Bank of England SO
that according TO the preiudices thar pre-
vail spectators might profit by the
difference Of two per cent. to empty the
I'LL of the Bank of France and fill that Of
the Bank Of England. But that Is not
done. There does not 90 and there car
not 20 q sovereign TO England, because
the exchange is at 25fr. 94c. 1t 3 I'M
possible to send gold from here to Lon
don, and vet there is a difference of two
per cent. in the rate Of discount. IL I
insist on the exchanges, it is because the
question is very important, ana is one
vita which I am very familiar. Ask the
first bill brokers at Paris and they will
tell you that at this moment the sover-
eign sterling in short paper on London is
bought at Paris at 25fr. 22lc.,
and in paper Of three months at
l5fr. 27lc., less the discount Of
seven per cent. A small profit
is, therefore, made on this difference
Of discount paper il taken at a higher
price when it is tong in order TO obtain
a higher discount. What is true for TWO
,.- g...E fa H~rr. for #hraa aud fwsro for
four. l do not say that the same would
be the case for ten or twenty-five must
not push things to extremes. II, exag-
gerating the formula I have given, I
speak Of the maintenance of the discount
at three per cent. by the Bank of France
and the elevation 70 seven Of that Of the
Bank of England, there would be q diff
ference Of four, which would be eXtraOr-
binary and could not be continued long.
But how would it be corrected? Would
il be by gold leaving the Bank Of France,
or by the return Of gold to the Bank Of
England by other channels? You shall
see. II during a month or two thatstate
Ofthings were to eXist-mOney being very
abundant here, while the Bank of Eng
and continued to discount at seven per
cent.-the result would be such au ad-
vantage in taking at Paris paper on Lon
don that none or much less would be
presented 10 the Bank of England, which
would permit that bank to reconstitute
its stock Of notes by the falling due of
bills in its portfolio; and thus the equiii-
brium which is prescribed tOi by the act
of the year 1874 would be promptly re-
established, and without the least in the
world producing on the till orthe Bank of
France what is called a d~ain-G magical
V II ~ ~ -.-
lgFifers like noise on the minds Of children
IN the dark. It is the same law as that of
the ciphon for LIQUIDS level is rs-estab-
lished without displacing capital by the
single fact OF the temporary retention al
Paris of the bills Of exchange Of the Con-
tinent.
NJ. DiEiehthal. need no other argu-
ment than that which N. Pereire has
presented, 10 show the perfect depeud-
ence Of the two countries Is regards the
rat 3 O~fdiscount. What does he tell us
That ii the discount be at three per cent.
atParis, aud ~ eve at London, bank
ers will hasten to Paris, which is the
great market Of exchanges, TO take bills
on London they will sell their securi-
ties, and receive in exchange paper on
Paris with which they will buy paper on
London. But suppose the contrary case,
All the bills that have on London I
send to London, and 1 realize my capt.
tai to buy bills on Paris. The effect of
the difference Of Iherate Of interest, when
10 is higher at London than at Paris, is
then To keep OUT Of England, by the
attraction of high interest, bills Of eX-
change which but for that would go to be
negotiated at London.
NJ. Emile Fereire. By the Bank Of
England?
NJ. D'EichthaL. BY the Bank Of Eng
land and that would place It under the
necessity of Increasing its issue. What
does the Bank Of England do IN raising
its rate of discount II cOmpels eli bills
which would 10 presented 10 il to be dis
counted, to remain on the continent, and
that renders money less rare in England,
and dear in France. You are mutually I
dependent, and In that state Of things
the exchange necessarily rises. Such Is
the enevitable result Of the situation
II. Perelre has so well explained. f.
No, e is not necessary % send coin
Abroad; but wneD capital becomes rare
and dearer among our ueighbors, if you
10 not detain it in France, they will como
10 take It; or, ia other tcrias. the debt
England has contracted remains
IN your hands, and il Is your capital
pays the goods England has
bought. You have no cotton 70 buy in
y0u say. Granted but the debt
Jf England comes into France, aud il is
yOu who give credit to England.
N, Emile Pereire. Welendto England.
We give her credit for the amount Of cur
productions, for those which we have ex-
ported but We do not lend her money.
There is consequently no danger for our
metallic reserves.
II. DlEichthal. You lend to England.
That is the clearest explanation that has
been given. The adversaries of NJ.
oereire's opinion never said ANYTHING
OF more decisive than what he
las Just said. No, il is not possible for
to remain high In England and
Ow in France an assimilation must ne
,essarily take place, and If you have the
mprudence not to submit to that law. in
hese days, when the conveyance of cap
tai Is 50 easy, you render your position
dangerous BECAUSE the defcitOf coin will
'e manifested, not little by little, but all
4 once; because without a warning,
hose who . o speak do not occupy them
elves with what Is taking place. who's are
described bg their business, will believe
hat the situation continues to be like
THAT il was, whilst in reality capital has
rarer; and 50, instead ofseeing a |
ueeessive rise in the rate OF discount
7hich would permit them 10 reduce
heir operations, they will BE- exposed 70 8
uddsn and important differences-to
hose Jumps In the rate Of interest Of
yhich commerce complains so loudly. !