whole capital of the Bank, amounting to more than 11 millions, must be lost before the holders of their notes can be sufferers from any imprudence they may commit. Why is not the same principle followed with respect to the country banks? What objection can there be against requiring of those who take upon themselves the office of furnishing the public with a circulating medium, to deposit with Government an adequate security for the due performance of their engagements? In the use of money, every one is a trader; those whose habits and pursuits are little suited to explore the mechanism of trade are obliged to make use of money, and are no way qualified to ascertain the solidity of the different banks whose paper is in circulation; accordingly, we find that men living on limited incomes, women, labourers, and mechanics of all descriptions, are often severe sufferers by the failures of country banks, which have lately become frequent beyond all former example. Though I am by no means disposed to judge uncharitably of those who have occasioned so much ruin and distress to the middle and lower classes of the people, yet, it must be allowed by the most indulgent, that the true business of banking must be very much abused before it can be necessary for any bank, possessing the most moderate funds, to fail in their engagements; and I believe it will be found, in by far the major part of these failures, that the parties can be charged with offences much more grave than those of mere imprudence and want of caution.

Against this inconvenience the public should be protected, by requiring of every country bank to deposit with Government, or with commissioners appointed for that purpose, funded property or other Government security, in some proportion to the amount of their issues.

Into the details of such a plan it is not necessary to enter very minutely. Stamps for the issue of notes might be delivered on the required deposit being made, and certain periods in the year might be fixed upon, when the whole or any part of the security should be returned, on proof being given, either by the return of the cancelled stamps, or by any other satisfactory means, that the notes for which it was given were no longer in circulation.

Against such a regulation no country bank of respectability would object; on the contrary, it would, in all probability, be most acceptable to them, as it would prevent the competition of those who are at present so little entitled to appear in the market against them.

SECTION V.

A Practice which creates a great Mass of Mercantile Inconvenience-Remedy

proposed.

AFTER all the improvements, however, that can be made in our system of currency, there will yet be a temporary inconvenience to which the public will be subject, as they have hitherto been, from the large quarterly payment of dividends to the public creditors,an inconvenience which is often severely felt, and to which, I think, an easy remedy might be applied.

The national debt has become so large, and the interest which is paid quarterly upon it is so great a sum, that the mere collecting the money from the receivers general of the taxes, and the consequent reduction of the quantity in circulation, just previously to its being paid to the public creditor in January, April, July, and October, occasions, for a week or more, the most distressing want of circulating medium. The Bank, by judicious management, discounting bills probably very freely, just at the time that these monies are paid into the Exchequer, and arranging for the receipt of large sums immediately after the payment of the dividends, have, no doubt, considerably lessened the inconvenience to the mercantile part of the community. Nevertheless, it is well known to those who are acquainted with the money market that the distress for money is extreme at the periods I have mentioned. Exchequer bills, which usually sell at a premium of five shillings per 100l., are at such times at so great a discount that, by the purchase of them then, and the re-sale when the dividends are paid, a profit may often be made equal to the rate of 15 to 20 per cent. interest for money. At these times, too, the difference between the price of stock for ready money, and the price for a week or two to come, affords a profit, to those who can advance money, even greater than can be made by employing money in the purchase of exchequer bills. This great distress for money is frequently, after the dividends are paid, followed by as great a plenty, so that little use can for some time be made of it.

The very great perfection to which our system of economizing the use of money has arrived, by the various operations of banking, rather aggravates the peculiar evil of which I am speaking; because, when the quantity of circulation is reduced, in consequence of the improvements which have been adopted in the means of effecting our payments, the abstraction of a million or two from that reduced circulation becomes much more serious in its effects, being so much larger a proportion of the whole circulation.

On the inconvenience to which trade and commerce are exposed by this periodical distress for money, I should think no difference

of opinion can possibly exist. The same unanimity may not prevail with respect to the remedy which I shall now propose.

Let the Bank be authorised by Government to deliver the dividend warrants to the proprietors of stock a few days before the receivers general are required to pay their balances into the Exchequer.

Let these warrants be payable to the bearer exactly in the same manner as they now are.

Let the day for the payment of these dividend warrants in bank notes be regulated precisely as it now is.

If the day of payment could be named on or before the delivery of the warrants, it would be more convenient.

Finally, let these warrants be receivable into the Exchequer from the receivers general, or from any other person who may have payments to make there, in the same manner as bank notes, the persons paying them allowing the discount for the number of days which will elapse before they become due.

If a plan of this sort were adopted, there could never be any particular scarcity of money before the payment of the dividends, nor any particular plenty of it after. The quantity of money in circulation would be neither increased nor diminished by the payment of the dividends. A great part of these warrants would, from the stimulus of private interest, infallibly find their way into the hands of those who had public payments to make, and from them to the Exchequer. Thus, then, would a great part of the payments to Government, and the payments from Government to the public creditor, be effected without the intervention of either bank notes or money, and the demands for money for such purposes, which are now so severely felt by the mercantile classes, would be effectually prevented.

Those who are well acquainted with the economical system now adopted in London throughout the whole banking concern, will readily understand that the plan here proposed is merely the extension of this economical system to a species of payments to which it has not yet been applied. To them it will be unnecessary to say anything further in recommendation of a plan, with the advantages of which in other concerns they are already so familiar.

SECTION VI.

The public services of the Bank excessively overpaid--Remedy proposed.

MR GRENFELL has lately called the attention of Parliament to a subject of importance to the financial interests of the community. At a time when taxes bear so heavily on the people, brought upon them by the unexampled difficulties and expenses of the war, a

resource so obvious as that which he has pointed out will surely not be neglected.

It appears by the documents which Mr Grenfell's motions have produced, that the Bank have, for many years, on an average, had no less a sum of the public money in their hands, on which they have obtained an interest of 5 per cent., than 11 millions; and the only compensation which the public have derived for the advantage which the Bank have so long enjoyed is a loan of 3 millions from 1806 to 1814, a period of eight years, at an interest of 3 per cent., -and a farther loan of 3 millions, without interest, which the Bank, in 1808, agreed to afford the public till six months after the definitive treaty of peace, and which by an act of last session was continued without interest till April 1816 From 1806 to 1816, a period of ten years, the Bank have gained 5 per cent. per annum on 11,000,000l., which will amount to

During the same time, the public have received the following compensation :-the difference between 3 per cent. and 5 per cent. interest, or 2 per cent. per annum on 3,000,000l. for eight

years, or

From 1808 to 1816, the public will have had the advantage of a loan of 3,000,000l. without interest, which at 5 per cent. per annum would amount in eight years to

£480,000

£5,500,000

Balance gained by the Bank,

1,200,000

1,680,000

£3,820,000

3,820,000l. will have been gained by the Bank in ten years, or 382,000l. per annum, for acting as bankers to the public, when, perhaps, the whole expense attending this department of their business does not exceed 10,000l. per annum.

In 1807, when these advantages were first noticed by a committee of the House of Commons, it was contended by many persons, in favour of the Bank, and by Mr Thornton, one of the directors, who had been governor, that the gains of the Bank were in proportion to the amount of their notes in circulation, and that no advantage was derived from the public deposits further than as they enabled the Bank to maintain a larger amount of notes in circulation. This fallacy was completely exposed by the committee.

If Mr Thornton's argument were correct, no advantage whatever would have resulted to the Bank from the deposits of the public money-for those deposits do not enable them to maintain a larger amount of notes in circulation.

Suppose that, before the Bank had any of the public deposits, the amount of their notes in circulation were 25 millions, and that they derived a profit by such circulation. Suppose, now, that Government received 10 millions for taxes in bank notes, and deposited them permanently with the Bank. The circulation would be immediately reduced to 15 millions, but the profits of the Bank would be precisely the same as before; though 15 millions only were then in circulation, the Bank would obtain a profit on 25 mil

lions. If, now, they again raise the circulation to 25 millions by employing the 10 millions in discounting bills, purchasing exchequer bills, or advancing the payments on the loan for the year for the holders of scrip receipts, will they not have added the interest of 10 millions to their usual profits, although they should at no time have raised their circulation above the original sum of 25

millions.

That the increase in the amount of public deposits should enable the Bank to add to the amount of their notes in circulation, is neither supported by theory nor experience. If we attend to the progress of these deposits we shall observe, that at no time did they increase so much as from 1800 to 1806, during which time there was no increase in the circulation of notes of 5l. and upwards; but, from 1807 to 1815, when there was no increase whatever in the amount of public deposits, the amount of notes of 5l. and upwards had increased 5 millions.

Nothing can be more satisfactory on the subject of the profits of the Bank, from the public deposits, than the report of the committee on public expenditure, in 1807. It is as follows:

"In the evidence upon this part of the subject, it is admitted that the notes of the Bank are productive of profit; but it appears to be assumed that the Government balances are only so in proportion as they tend to augment the amount of notes; whereas your committee are fully persuaded that both balances and notes are and must necessarily be productive.

"The funds of the Bank, which are the sources of profit, and which constitute the measure of the sum which they have to lend (subject only to a deduction on account of cash and bullion) may be classed under three heads.

"First, The sum received from their proprietors as capital, together with the savings which have been added to it.

66 Secondly, The sum received from persons keeping cash at the Bank. This sum consists of the balances of the deposit accounts, both of Government and of individuals. In 1797, this fund, including all the balances of individuals, was only 5,130,1401. The present Government balances alone have been stated already at between 11 and 12 millions, including bank notes deposited in the Exchequer.*

"Thirdly, The sum received in return for notes put into circulation. A correspondent value for every note must originally have been given, and the value thus given for notes constitutes one part of the general fund to be lent at interest. A note-holder, indeed, does not

By some of my readers the words "including bank notes deposited in the Exchequer" may not be understood. They are bank notes never put into circulation; neither are they included in any return made by the Bank. They are called at the Exchequer special notes, and are mere vouchers (not having even the form of bank notes) of the payment to the Bank from the Exchequer of such monies as are daily received at the latter office. They are the record, therefore, of a part of the public deposits lodged with the Bank.