In the most enlightened seats of commerce money fluctuates in price like any other article that is in general use, that is influenced by the laws of supply and demand, and those who have any of it can obtain a price according to the market rate. Banks are the institutions which buy and sell money, and, like corn, or iron, or coal merchants, know the current rate when you apply to them. If you wish to leave money with them, they give you a higher or lower rate of interest per cent. according to circumstances. As a rule, more is allowed for long periods of fixed deposit than short; but some institutions will not allow so much per cent. for a long period as for a short, such rate depending upon the appearance of the market at the moment. There are many different circumstances which influence the price of money, and there are always agencies at work which tend to raise or lower it. The use of banks is to go hand in hand with commerce. They take the money of those who do not know how to employ it, and lend it to those who do, to the advantage of all three classes, and so what before remained idle is now made profitable. Like a thousand little rivulets which run into

one mighty stream, and float the commercial navy

of England from London to the sea and distant climes; so the small depositors make one mighty sum, that can be employed in agriculture, railways, and a hundred different enterprises by which all classes are benefited, and the poor man can approach nearer to the privileges enjoyed by the rich. The profession of a banker, then, is to employ the money of other people, as we have before stated, to the advantage of those more immediately interested, and for the improvement of the community generally.

The next great function of a bank, after properly utilising the metallic currency of a country, is to provide a cheaper and more agreeable form of currency in the shape of bank-notes. The great power for good or for evil which is placed in the hands of banks by allowing them a paper issue, demonstrates the necessity of some impartial supervision, and we naturally look to the State-as the highest in authority, and therefore carrying the greatest weight, both moral and physical to control the amount of paper currency which may be put in circulation by banks. Mr. Ricardo says, p. 214, After the establishment

of banks, the State has

6

not the sole power of

coining or issuing money. The currency may as

effectually be increased by paper as by coin; so that if a State were to debase its money and limit its quantity, it could not support its value, because the banks would have an equal power of adding to the whole quantity of circulation.' Again, farther on, Mr. Ricardo's opinion of the importance of banks as regards their office as paperissuers to the public is conveyed in the following paragraph: A currency is in its most perfect state when it consists wholly of paper money, but of paper money of an equal value with the gold which it professes to represent. The use of paper instead of gold substitutes the cheapest in place of the most expensive medium, and enables the country, without loss to any individual, to exchange all the gold which it before used for this purpose for raw materials, utensils, and food, by the use of which both its wealth and its enjoyments are increased.' There are many who object to the State having anything to do with controlling the operation of banks or their paper issues; but it must be borne in mind that there is a wide difference between the State being the issuer and the State controlling the issues of others. The State is the highest power that exercises control over public affairs, and is the motive power-so to

speak of the empire, acting in obedience to the people's will. It is, therefore, reasonable to suppose that the Government, who are furnished with every assistance in the shape of legal advice, &c., should be the most competent power to control the operations of those institutions which are intrusted to an unlimited extent by the people.

6

Hear Mr. M'Culloch in his Commercial Dictionary,' p. 67, Necessity of insuring the conversion of bank-notes into coin: The taking of measures to insure the convertibility of bank-notes into coin is a matter which cannot be safely left to the discretion or judgment of individuals, but which must be settled by Government. No bank-notes should be permitted to circulate about the equivalency of which to the coins they profess to represent there can be the smallest room for doubt. It is alleged, indeed, that in this, as in most other things, we may safely trust to the prudence and sagacity of those who deal with banks; and that, if left to themselves, the public will very rarely be deceived. But the widest experience shows that but little if any dependence can be placed on this doctrine. The public is very apt to be misled, in the first instance, in giving confidence to or taking the paper of individuals or associations; and though

24

'There

that were not the case, the condition of an individual or company may change, from bad or expensive management, improvident speculation, unavoidable losses, and fifty other things of which the public know nothing, or nothing certain. The fact that any particular banker who issues paper enjoys the public confidence is at best a presumption merely, and no proof that he really deserves it.' have unfortunately been innumerable instances in which it has turned out that bankers who have long been in the highest credit, and whose notes had been unhesitatingly accepted by the public, have been found to be, on the occurrence of anything to excite suspicion, quite unable to meet their engagements.' From a report on the Extension of the Privilege of the Bank of France, in 1840, we find the following: Le droit d'émettre des billets est très avantageux; mais aussi il est si dangereux que l'Etat doit ou s'en réserver l'exercice ou le régler de manière à en prévenir les abus.' Mr. Ricardo, at p. 408, remarks, 'But if the public require protection against the inferior money which might be imposed upon them by an undue mixture of alloy, and which is obtained by means of the Government stamp when metallic money is used, how much more