, 1874-04-18

nrCCGuuB
could mol o1iat. Tho bankor wonid become Z
moro collecting clork. 1t Ia essential TINT tho
dcpositor should leave portion Of the proceeds
In tho bankers hands Tor nsroa moro or loas
Spg Sger ds asassr ets tsnfor Go oss no
tho broker in hfclnlng Lane, find tho second rrin-
olpal and charge n commission. Ho acts differ
entity; ho hceents tito deposited olioch q debt
trcnta tho proceeds as fund Which ho l,as bor-
rowcd for his own ,pnrroacs, earning profit in
bis own why. That way consists In finding out
Rolno who wlaheB to borrow, md X ho ID sat-
Of this borrower, ho lonls him tho moann ho
obtnnod from tho depoBitor. 1Iore We havo
TIE SECOND PRINCIPAL,
the borrower on discount or otherwise. !hon
70 ihe borrower7 In monoy3 Again, bankors'
books reply, No: Ho bids tho borrower draw
upon him, or, which Ia tho samo thing, gives him
a check TOR tho amount wanted on loan or dis-
the deposition and tho check granted by the bank
moot at the Clearing. House; they cancel each M
other, and nothing whatovor mood pass. The
effect inside OF tho bank In two lines In ts lodg-
or: ono recording dobt duo by, aeconu
dobt due to, tho bank.
But wo havo not yet reached
THE EsBENCE Or BANNING,
the object Of itB existence; we must now call up
tho borrower on discount or l0nu for oxhmtna-
tior. Why doos ho wnnt to borrow2 What does
| lle do with the check which tho banker author
lied him to draw? 70 buy goods with II, m
swer; !; mono other Is possible; for checks, IKE
than to pass goods. to exchange them. No doubt
it will bo said that tho borrowers object Is often,
| in times Of panic, almost aololy to pay, debt
that nsunt bo faced but this docs not nltor tue
rcal faots Of Tho banking Bituatlon. It only in-
tcrposoa q middle stage, shifting Of debt within
| tho banking community; tllRt clamoroue dobt
was itself croatcd by the purchase of gooda.
Thus we perceive what banking doos-the
1 MI tf4sots
| IT EXCHANGES GOODS;
from goods 1t takes its beginning, and IN goods
1t mootH with its end, It's dopositor sold sugar.
placed tho chocs ho got ut the bunk, declined
lis salo Of sugar entitled him, and heggod hiH
banker to find some ono who desired to procure
1ncaus for buying goods. and to onable him g., to
obtain, Say silk, by, moans of tho sugar. Ihia u
IS genuine, natural. actual banklng-tho end 1T
| was devised to accomplish.
1Iany consequences flow from this analysis.
First. The Hocrot, tho force OF a1l banking, lies
not in tho banker. but in hia principals! Tho
this purchasing powor is wholly derived from
tho sale OF goods effected by his deposition. If,
therefore, We seek to learn what is occurring or
likely to occur in tho banking world, wo must
and borrowers Thia is the grand lesson to learn
from our examination OF banking. In the next
place. we anumorato hero, az NC Were bound to
| do, the universal
| LAW OF SUPPLY AND DEMAND
The depositor auppiaH; tho borrower on dis
count domnnds; the price Of tho article in tho
market, OF the purchasing power, depends on tho
relation between the supply and tho domand.
This ia tho law Of the banking markot, as Of all
too firmly. You will find many disturbances and
commotions in 1t, juBt as tho sioge Of Paris
wonderfully disturbed the prices of meat and
biscuit, md gave value to rats; nay moro; l
price Of the article in tho rate Of discount, geno.
1atod by cauHcs infinitely moro, artificial
and imaginative than g surrounding forco
ot & armed d. men; .+ls But i ws tso,. wish ,om TO-
ooko %oEkions IT, It will % be al tho y moro neeo-sary e
mnintain our footing on the ono pile Of aolid
! ground-the law Of supply and demand. Wo
must nevor forget it for an instant. If doposal-
tors haye had good harveHta or argo mercantile
profits, and arc in no hurry to employ their
gains whilst the state Of tho world ofors fairly
romunoratiyo fields for capital, the rate will tend
to lower Lowell. II. on tho contrary, harvoats
hnvo boon bad, and farmers mako no deposits or
MERCHANTS hayo not been successful, whilst on
tho other side borrowers repay tho bank with
difficulty or may hive been entirely ruined and
cannot answer to the calls Of their bankers, then
the rato will fly upward swiftly. and loans and
This brings uH to .....-.-
THE RESERVE, THE PROTECTIVE ruSp,
which tho conditions Of most banking rem
lcrs Indispensable. Tho banker does not know
when his depositors will domnnd tho roturn OF
those funds which they placed in his hands, nor
can bo suro that those to whom he has lent
them will DO ablo to fulfill their engagoments
with him and repay him loans which he is forced
to recall to meet the demands Of his depositots.
An infinity Of motives may net on dopoaltors to
require repayment; an infnity OF commercial
CAUSES may disable or ruin his borrow
thoss mndo ' On G discount, count cannot DO reclaimed
by him before stipulated time. Tho action OF
tho speculative. or needy, or distressed, doposi-
itor may be sudden, sharp. and poremptory. The
solvency Of tho bank may bo at stake; its credit,
or oven it's existence, u1ay be compromised: In
ordinary times it relies on tho average Of lonna
and Withdrawals in times OF excitement IT ro'
quires . stock OF cash, proviio,ualy provided, to
tho rosorve; and tho great point to grasp con.
cerning it is that it IL provided tor safety a1e
safety only; that the safoty Of the bank IL ita
sole raisan d'etre-the ono solitary motive Tor II
oxistonca. Analysis rovcals no other "
whichever sdo we regard the reserve. safety
against stoppago is tho only foature it dlBclosoB
hut WHO Is TO DETERMINE
the aize Of the reaerve to bo maintained Eacl
bank itself, according to tho nature Of ita bust
ness. An agricultural bank, supported matnl,
by the discounts Of landowners or provincia
shopkoepers and farmers, will be exposed to for
fluctuations its RESERVE. even III tho worst 9
timoB, may be aafely allowed to ronain exceed
ingly small. On the other hand, q great bank
ut sucll places as Bristol or Liverpool encounter
much vaster changes in the fortunes and til
, wants Of its customers. Long oxpcflonc
! alono Gun determine tho point of Beou
rity. But tho working of British commerce ha
, , 1nado most Of tho reserves Of Dritieh banks tt
,, converge upon London. Country bnnkers re
for their reserves on funds which they keep witl
, | London banks; and London bankers, in turn
! pour their unemployed balances into tho Danl
Of England, which thus becomes the great ma
!, tional reserve for tho wholo Kingdom. Very i'm
portant consequences flow from this conplicato
fact of which shall notice some presently
, , Hero will moroly make the admission that til
vaults of tho Bank OF England aro, in the main
. the magazine which lolls tho spare stock Q
gold Of oil England.
2 THE FRAME WORK OF DASKIN1
3 now lies open boforo you; ita loading element
aro plainly visible; tho principals and their brc
ker, their creation alad their relatlons to enc
4 the banlcr Ii an agent who lends tho spare good
- - Of one mau to. be used by another; that Ill
: function ls to effect exchanges Of property pc
~ cise1y as a sovereign; tha. tho RESOURCES Ii
1 l.. rts,o1 cf,n1 Ho1