, 1874-04-18
THE CURRENCY QUESTION.
Bank Reserves and the Rate
Of Discount.
Commercial Crises-.-Thoir Causes and
Consequences,
Lecture Of Prof. Donamy Price, at
Bristol, Eng.
Published from the Authors Manu-
script by the New York Bulletin,

Published from the Authors Manu-
script by the New York Bulletin
Tho rate Of discount is matter OF supreme
Importance to the trado Of England. Discount
10 the foundation Of English commerce Of evory
kind, OF, rather, tho grand machine Win which
II works. Ita rate, that Is, the charge paid for
the great services which 1t renders tells heavily
On eyery pnrt Of tho industry Of tho 1lation; 1t
nfrccts tho profits Of merchants and mRnufac-
turers, enlargcs or contracts thoir operations,
influences nightly tho quantity Of wealth pro-
duccd, and bears with great power on tho ON
,,loymont OF tho working olasBoa md tho PROF.
Icrity Of the whole country. Such forco, 40
powerful for good or OWL, calls for tue most
oareful study; but, unhapptly for tho tradors
and tho workmen Of England, discount is as OBJ
soure as 1t is important. It is region Of dark-
ness aud int,icacy, jungle through which no
highway OF knowledge has yet boon cut, which
no scientific explorer has lald opon to tue light
Of day, which remnins mystery and vague
anxioty for every trader. Hcnce 1t is a fold In
which experience imparts no wisdom: Tor events,
rs they roll on, arc not understood as to thosr
CAUSES or thcir laws and no ono eau fool auro
that combination which has happenod once will
over occur again. 1t thus becomes
TIE PREY OF THEORY.
In no departtnent Of human life does theory run
so riot, s ever throwing up such tncessaut, such
universal shoots Of wild, rank, unsctontitlo doc
triuo as in TINT which is called tho Money Mar
kot. Every man has theory about money;
every practical man hnts mysteriously TINT he
Possesses doctrine which tho uninitiated aro
incompetent to understand aud well.nigh every
banker rules his oporati ons when ho has any
rules at all, by ideas evolved out of tho inner
consciousness Of the banking mind, without tak-
Ing the slightest trouble to teat them by those
facta which the world suppoaes him to bo the
sole possessor. On discount and it's rate, confu-
sion and chaos abound on every side, and trad
ers lie at the mercy Of ideas for whose truth
they have no guarantee whatever.
Tho oauBo Of ali this mischief, which often
rises to national disaster, is partly to be found
In the nature Of the subject itsolf, in
THE FATAL FACILITY
with which every ono can speak about money
and banking. 1t ia SO easy to emit ideas about
them that scarcely my one will DO st the pains OF
studying the matter methodically. Even writer's
on political economy are boBet by the universal
temptation, and small indeed is the help Which
they here give to tho public. Political economy
ought to take shame to itsolf for the state in
which the subject Of money is found in tts trea-
tBes Theirs, however, ia d scientific reproach !;
often needless and heavy loss. trust, therefore,
I may DO allowed to impress upon you the ex-
tremo deairabloness Of instituting
on this vital subject; Of setting up schooling
for every trader as regular and thorough as what
he receives in arithmetic, or chemistry, or any
other scientific matter. 1t ia OF tho utmost con-
sequence that exact and careful analyaes Of tho
facts Of banking and OF commercial lifo should
DO vigorously carried out; every doctrine traced
to Its first elements; every principle doducod
from tho grounds which warrant 1t. Dr. such Z
process alone can any knowledge or opinions at
to DO depended upon, be acquired, and whas is
fixed aud what is necessarily variable. In the na-
ture Of the subject, be determined.
now proposo to ie{ before yo% the results Ct #
will be for you to Judge Of it's accuracy.
Discounts fact Of banking. It's rate is the
payment given to bankers in return for tho as
nstance Which they give to trade. The frat
question, therefore, that meots us is what Is d
bank7 We shall get no path through the wildor-
ness till We accurately underRtand the nature of
bank and OF tho things which it performs. To
this question, gave In my Oxford lectures on
the princplea OF currency, the answer that q
bank is an
INSTITUTION FOR THE EXCHANGE OF DEBTS.
It IL accurate, fully believe, but that is much
too abstract, and too much confined to the move-
pnents which take place within the bunk itseIf
It leaves out the outor world-the depoaltor and
tho borrower on their way to and from tue bank
prefer, therefore, to give definition which
places moro vivldly before the eyes the relations
between the banker and thoao with whom he
deals. say, then, that banker ia a broker, AL
agent between two principals as true . broker,
though varying in dotai|s, hs any in h1incing
Lano. His action consists in obtaining certain
means or resources from one set Of men and
transferring thon, to another set. Ho Ia q trans
foror only and thR cardinal fact brings out into
proper prominence the vastly greater Importance
Of tho two men between whom the banker
stands, than the banker hlmsof.
tvrY III n - 4YFi
thus received and transferred BY tho banker
Money, I hear on all sides: bankers deal in
money; who thinks Of anything elBo about a
bank but money? II by money is meant coin
aud bank notes, then answer, most assuredly
the things which banks reooiyo and transfer are
not money, Bankers have very little to do Will
money-far leBs than railways and other kinds oi
rendy-money business. Theory and experience
establish this fact. Long ago estimated, it
Frazer's Magazine. q banks receipts in none,
at one in thirty, Sir John Lubbock subsequent
1y analysed nineteen millions received by tht
banking house Of Robarta l. Co., and found tlla
only Il per cent Of gold. That disposcs Of tht
matter thoroughly the pith and core Of bank
ing is not money; 1t is. not tho thing handled
the thing that passes; and conae9uontl
thoughts and talk about money. will not give 80,
access to tho essence aud inmost hoart of bank
Again, then, ask: II money is not the thin,
that q bank tranafers aa tho substance he deal
in, what is It:
PLA1NLY-rnorEnTY, GOODS:
q bank exists for the sole purpose Of plaoin
goods in now hands. A brief examination vii
coon make this clear. In what form does
banker obtain the moans he transfers2 OF wba
are the ninety-aeyen parts Of his receipts com
posed? OF debts;. Of sums Of money ex
pressed on pieces Of paper, acknowledged to b
due, and which 1t il the business OF banker t
collect. They arc money due. md tho banko
can insist on their boing aottlcl In money. Blu
cnn fhav ha m nald ? HobartN d Co. nna,ye,
No: Tkoy do not collect thom In none,
They arc paid by being SGT OF agaips
counter dobts at tho Clearing House or else
where, just aa in Q marchont'a debtor a1l
Items Of single lines. Our analysis must trave
yet farthor Back, and inquire how these debt
came into existence. What arc thoy? The
wcro born from the saloB Of gooas-oyery ono c
them. Bear in mind carafally that we ~
tracing theao debts at their origin-when tile
4iral os,tonot1 ti,o hnnLi,1u ,xord-n0t ,ylon tlG