discount. The immense competition at present in the city of London appears to promise no return to 2 or 3 per cent. for loans, &c., as we have seen. Every shilling that can be laid hold of is eagerly seized by this or that finance company or bank, who bid against each other to obtain deposits. In this way enormous sums of money are collected by these institutions at short call, and are employed in a hundred enterprises where a larger rate of interest can be obtained for the loan than is paid to the depositors. This works all very well until the depositors become panic stricken, and all demand their money at once. The stages necessary for procuring the money which is lent to a railway company, for instance, for nine or twelve months, need not be gone through; suffice it to show that a healthy rise in the rate of discount, occasioned by an increase in the legitimate trade of the country, becomes unduly augmented by the pressure of these companies for similar accommodation, when even a part of their deposits are withdrawn from distrust or otherwise. There is also a class of capitalless speculators, who are often encouraged in their bottomless enterprises by obtaining credits with certain companies, which is an easier method than getting cash in the ordinary way of discount.

It will be obvious that, when possible, many of these bills will be discounted, and will be the very paper to do the most mischief when the abnormal pressure comes, being, as a rule, based upon nothing. Many of these companies, in order to obtain any business at all, have encouraged the creation of a great deal of bad paper, and thus a dangerous and permanently increased demand for credit and accommodation has become established, which must tend to enhance its price and, consequently, keep up the rate of discount.

CHAPTER IX.

ON BANK-NOTES.

Historical Memoir from the Establishment of the Bank of England Suspension of Cash Payments, 1793-Resumption of Cash Payments, 1821-Panic of the Year 1825-Renewal of the Bank Charter, 1833-Bank Acts of 1844 and 1845-Clauses of the Act of 1844 relating to Bank of England Notes-Clauses of the Act of 1844 relating to Country Bank Notes-Effects of the Act on the Country Note Issues-Irish and Scotch Bank Acts— Present State of the Fixed Issues-Remarks on the Regulation of Bank Note Issues.

THE only approach to paper money in this country, previous to the establishment of the Bank of England, was the issue of receipts by the goldsmiths for money lodged in their hands, which receipts were frequently circulated in the same way that bank-notes are at present.

Correctly speaking, the issue of bank-notes commenced with the Bank of England, in 1694, although there was at that time a most important difference between those documents and the issues in use now, inasmuch as the Bank then allowed interest at the rate of 2d. per cent. per diem on its

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notes. By the charter of the Bank, it was prohibited from borrowing in excess of its capital, which was at first fixed at 1,200,000l.; and it would seem that the full amount was issued very quickly, for, in a pamphlet published by Mr. Godfrey, the deputy-governor in 1695, he mentions that the interest paid on notes was 36,000l., which would be about the sum required if the limit was attained; the practice of allowing interest on notes seems, however, to have been very soon discontinued.

Bank-notes, shortly after their introduction, had a very serious ordeal to go through, and one which cannot be attributed in justice to the authorities of the Bank. For some years previous to the establishment of the Bank of England, the scandalous custom of clipping the silver coin had been carried on to a great extent, in spite of severe laws enacted against it. In the summer of 1695 the evil had gone to such a length, that thirty shillings in silver coin was required to purchase a guinea. In the early part of 1696 a new silver coinage was issued to the Bank. Previously, silver had almost disappeared from circulation, it having been exported to purchase gold, the profit thereon being so great. When the new silver was coined, there naturally ensued a rush to procure it, and the Bank was

obliged to repay, in silver of full weight, the notes it had previously issued in exchange for clipped and debased coin. The loss thereon was of course very large; but that was not the whole of the evil, the new silver could not be procured quickly enough to meet the demand, and in consequence a notification was published partially suspending cash payments.

Bank-notes on this fell to 20 per cent. discount, and to counteract this an expedient was adopted of a very bold, but, as it turned out, entirely successful, nature. This was an increase of capital, the subscriptions to which were to be received at par, in bank-notes, which stood then at the abovementioned discount, and in exchequer tallies which were still more depreciated. Upwards of 1,000,0001. was thus subscribed, and the withdrawal of that sum from circulation had the effect of raising the remaining part to its nominal value. It should here be mentioned that, although Parliament did in the year 1697 pledge themselves not to establish by legislative enactment any corporation in opposition to the Bank of England, there was nothing to prevent any private body of men from doing so until the year 1707, when a bill was passed prohibiting any number of persons exceeding six from