, 1875-12-07

The theoretical 1nnncicrs aro putting their
predictions and opinions about the London
money market on record freely. BAaEuor,
editor Of tho London Etuaomst, BosAMY
Pn1cE, Professor Of Political Economy at Ok
ford, JEyoss, nuthor Of tho best book yet
published on " Money" all agree Tint thcro
is something radically and dangerously wrong
about tho present system. DAdEHoT devotts
some very earnest pagos in lis IS Iolnb rtl
Street to tho porils ot tho e-neservo ar
rangencnt OF the English banks. In his
chapter On the Bank Of England and tho
money market, J1yoSs prophesics that il
something is not done to keep the reserve Of
cash in higher proportion to the liabilitios Of
Tie banks there will DO panics in the future
moro disastrous than those in tho
past. Taking tho average Of tho calculations
Of pALanAyE and A1oxoa, it appears that the
actunl cash roseryo il not more than per
cent Of tho liabilities of tho banks. The OIL
tiro fabric Of Englandss commerce and
finance would DO overthrown il her mer-
Chants and othor lepositors should, on IN
emergency, nsk for moro thnn uno.twontioth
Of tho snms owed them. Should they do
this, tho banks would suspend payment, and
ruin would be universal. In letter to tho
Financier, Prof. DosAM1 Pn1oE attacks tho
Bank Of England for its mistaken policy
about tho relation OF the rate OF discount to
thu export Of gold. It is maxim with tho
Bank Directors to raiso tho rate Of discount
whenever gold IL going out of tho country to
such an cxtent hs to deplete the reserves.
They did this latcly, raising the rate from !.
to per cent, and brought upon themselves
tho exposure Of their loss Of their his
torio control over the money market.
The Bank raised its rate to 1 per
cent, but tho joint-stocl banks refnsod, ~
they had never done before, to follow tho
lend. They resisted thu nttompt Of the Bunk
Of England 10 make all merchants pay an T.
tra charge for their discounts because of tho
political demand from Germany for gold
The Professor discharges o great deal Of
rhetoric at tho heads of tho Bank OF England
Directors. lie aalls their theory "fortutous
doctrine, blilt on no analysis, no knowledge,
but on arbitrary and unBcientif1u assump-
tion," etc. TtiH III not all tint is to bo said.
The theory that tho export Of gold needed to
10 watched and checked any moro than my
other export would bc, of course, absurd in q
free money-maEkst. But tho money-inarlet is
not free. The Bank charter, tho Dnnk act,
and other interfering causea, lave altogetAor
changed it's natural condition. For instance,
tho reserve, inAtend Of being kept by
ench bank against its own liabilities, ID by
successive contrnlizations accumulated in the
Hank Of Eugland. Tho reason for tho Bon
bitiveness Of tho Danle with regard to an ex-
port Of gold beconlea apparent enough when
tho facts are known that ths cash resorye Of
the English banks does not amount to moro
than oua-twentietll Of their liabilities that
most OF this ii in the Bank Of England, and
TINT instant ruin would oyorwholm all Eu.
| gland il that were not forthcoming when de-
nandad. Theory and practice oan never
agree till practice Ia mado right. There il
| no living English economist OF rank who
does not roprobato tho organization OF tho
Hank Of England. i is idle for Prot. PR1oR
to full foul Of practices rendered natural II
not necessary by tho exceeding instability
OF British finance. Tho terrible appro-
hension constantly before tho Dank Of
England Directors is that referred to In the
last number OF tho London Economist, which
says that If the present systam collapscs,
"ths special aud peculiar credit Of England
in tho money y-market will perish withit." The
Econona& takes d hopeful Wow Ut the future,
but tho strongest phrase in which 1t can put
its hopea ia, that while IN peculiar, frail, an
anomalous system it must always bo, We
think thoro is no vital essential defect In It,