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Lyman E De Wolf.

Money; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained online

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exemption from taxation, yet it did not get into operation with-
out these wrongs being discovered and thoroughly denounced.

The writer quoted, among other things asserts : " That if it
had been known what kind of a bank was wrapped up in that bill,
many persons would have been willing to lent the government
the money for several years gratis to have obtained such a
charter."

Another writer says : "The nation had been for several years
engaged in an expensive, hazardous and doubtful war; the
government had drained all their projects to raise the necessary
supplies ; but the credit of the nation sunk, occasioned partly
by the divisions of Parhament, the deficiency of the funds, and
most unfortunately by the baseness of our coin, so that neither
our money, nor our credit would pass in market. .. .And when
such an enemy was at our doors, it was too favorable an oppor-
tunity for such a fort as this to be erected, which, though then
designed for our defence, serves now, (1707) to overawe us, and
has turned its cannon against the state it was built to protect. . . .
We are, God be thanked, greatly recovered from that dangerous
crisis, our credit retrieved, our money recoined, great part of our
debts paid, and almost all provided for.". . . .We crowd more to
get our money into the funds, than heretofore to get it out; and
we are freed from any necessity of supporting the wants of the
government. It is therefore, a matter of prudence, whether the
bank ought to be continued longer." ...He concludes as fol-
lows : " If they, (the people) would have their power and
liberties s^fe, by putting it out the power of any to molest them,
and by keeping their elections free, not to repair this fort (The
Bank of England), that overawes them, and by their compassion



95

to the poor tradesmen, and their own interest, not to establish
iniquity by law."

This writer seems to labor under the impression that the
question of right could have something to do with the establish-
ing, or not establishing the Bank. When the Act shows that the
Bank was established as an engine of power to accomplish for
those in power the very object against which this writer declaims,
viz. : to hold the power of the government absolutely in the
hands of those who control the Bank. This it has so effectually
done, that neither reason, justice, nor anything short of revolu-
tion, can remove or change this Bank power. To cliange oi
remove this power is to change the Government itself, and the
false, arbitrary, and unjust principle upon which it is based. And
this principle is, that government is mainly instituted for the
benefit of the governing class. This object is clearly to be seen
in the mode of instituting the Bank, in the powers granted, and
in its practical operations as delineated by its whole history.

It has already been shown, that the Act of Incorporation did
not confer a special power to issue bank-notes, or other paper,
to circulate as money. By a notice dated February 11th, 1695,
notice was given, that the three cjishiers named were tlie only
persons authorized to give notes on behalf of the company, either
for payment of money or bills ; for which the bank was, or would
be accountable.

The first issues of paper were for £20. In 1696, during the
difficulties arising out of a national recoinage, the Bank
suspended specie payments, and resorted to issuing bills under
seal, payable on demand, bearing six per cent, interest with these
bills it redeemed the notes previously issued by the bank, known
as cashiers' notes payable on demand, without interest.

These sealed bills, cashier's notes, and cash, on the 10th ot
November, 1696, were as follows : Sealed bills, £893,800 ;
cashier's notes, £764,196; cash on hand, £35,664. This was a
sorry sum with which to meet in payment £1,657,996 of sealed
bills and notes. That the loans had been made principally to
the government, is evidenced by the fact, that only £231,000 had
been loaned to individuals. To remove the insolvency of the
Bank, the Government allowed it to take up its liabilities by a
Iresh issue of capital stock. The credit of the government at
this time, stood at a discount of from forty to fifty per cent., and
bank-notes from twelve to twenty per cent.



96

The new issue of stock amounted to £1,000,1'71, which with
the original capital made a subscribed capital of £2,201,171.

This large increase of capital would have naturally added to
the credit of the Bank. But the depreciated condition of the
public stocks, and the bills of the Bank furnished an opportunity
to strengthen the power of the Bank, and to rob the people, too
valuable not to be improved. Accordingly Parliament passed
the following strengthening Act, before alluded to, viz. : that
" the common capital and principal stock, and also the real
fund of the government and company, or any profit or produce
to be made thereof, or arising thereby, shall be exempted from
any rates, taxes, assessments, or impositions whatsoever ; during
the continuance of the Bank, etc.

This with the increase of capital raised the stock in a few
months to 112 percent., enhanced the value of the government
securities, gave the bank notes free currency, and thus, by this
aid, the Bank soon recovered from the effects of its suspension.

In 1708, the directors undertook to pay off and cancel
£1,500,000 exchequer bills, issued two years before, which with
interest amounted to £1,775,038, this increased the debt, which
the government owed the Bank to £3,275,028 at six per cent,
interest. The government then allowed the Bank to double its
capital which increased the amount to £4,402,343, and this was
the occasion for another supplemental Act to strengthen the
Bank, this provides that " it shall not be lawful for any body
politic, erected, or to be erected, other than the said governor
and company of tlie Bank of England, or of any other persons
whatsoever, united or to be united in covenants or partnership,
exceeding the number of six persons, in that part of Great
Britain called England, to borrow, owe, or take up any sura or
sums of money on their bills, or notes payable on demand, or
in any less time than six months, from the borrowing thereof."

This proviso virtually placed the whole circulation of demand
notes in the hands of the Bank, and as might have been anti-
cipated, it had a powerful operation on banking, in England. It
is claimed that this Act was elicited by the Mine-Adventure
Company having commenced banking business, and begun to
issue notes. But that may have been the occasion, or a pretence
for passing the Act. Yet the design of creating the Bank of
England from the beginning was to make it an engine of power ;
and step by step that design has been carried out.



97

As the Bank had nothing in its vaults, but certificates of the
public debt to the amount of £1,200,000, it had but three modes
of business left open to be pursued :

1. To lend the money of its depositors, or

2. To issue its own notes, or

3. To employ its credit in discounting bills of exchange and
promissory notes, by a credit to its customers upon the books of
the bank, for the proceeds of paper discounted, and allowing the
])arties to transfer them to others, in such sums as their business
might demand.

The credit of the Bank after the increase of its stock, and the
exemption of its capital from taxation, stood very high, notwith-
standing the disturbance caused by its suspension the second
year after its institution.

All the above named modes of business were combined
together in the operations of the bank, though each are essentially
distinct, and must be so considered, in order to get clear ideas
upon the subject.

A provision for the safe-keeping, holding, and paying out
money is very ancient. When this money is coin, the masses of
men have not sufficient practice in dealing, weighing and testing
of coins, or of bullion, to enable them safely to deal in them.
Hence in every commercial community there is a class of men
who become skilled in handling and testing the qualities of these
metals, and these persons in the early ages were naturally the
goldsmiths whose business aud wares made them adepts in test-
ing qualities, and repositors of coin and bullion. The Saviour,
in the parable, makes the lord of the unfaithful servant say :
" Wherefore then gavest not thou thy money into the bank, that at
my coming, I might have required mine own, with usury." This
clearly indicates that the practice of depositing money with the
bankers, and paying interest upon it, was prevalent at that time.

The goldsmiths of England, at the time the Bank was char-
tered, had been, and were a long time afterwards bankers, or
depositories for others. But as Charles the First and Second,
had committed extensive robberies upon these bankers; their
ability safely to keep the money entrusted to them, was doubted-
The Bank of England, therefore, from its extensive franchises,
and capital, was able at once to command public confidence suf-
ficient to secure it large deposits. One by-law required the cash
should be carefully kept under three or more locks ; the keys

7



98

whereof shall be kept by such three or more Governors, Deputy-
Governor, and Directors ; as the said Court of Directors shall
from time to time empower to keep the same, each of said per-
sons keeping one of said keys."

This provision increased the confidence in tlie Bank as a place
of security, and naturally attracted a large number of depositors
to deposit, who only desired to use their deposits in such amounts
as the ordinary demands of business required. This would leave
a large amount of money in the Bank, which the owners would
not be likely soon to want.

These deposits under the theory of banking, belong to the
banker; subject to payment on demand in like money. In
Europe, and in this country, from the earliest periods of their
history, the practice of loaning these deposits has been universal.
The great gains in banking are largely from this source. As the
aggregation of money is largely for the purposes of gain through
interest, and the control it gives over the value of products.
When these are plenty, and business prosperous, bankers con-
clude that as money comes in rapidly, their interest requires that
it should go out with equal rapidity, to keep up an equilibrium.
But the accelerated motion soon reaches its end — a crash, and
depositors find to their sorrow that while banks are convenient
depositories for money in sunshine ; they are not to be relied
upon for a return of deposits in a storm.

The Bank of England, like other banks, on securities, loans its
deposits, and like other banks, as will be shown, at times is not
able upon demand to return them to the owners. Many such
instances have occurred in its history. But as the Bank through
taxes and interest, is enthroned on the annual industry of the
nation, it sooner recuperates than private banks. Through
governmental aid it has been enabled to sustain itself in its
financial disasters; apparently, without loss to the individual.
The injury is thereby saddled upon the nation ; and not upon
the individual. His deposits are safe, though business is ruined.

For a hundred and seventy-five years however no depositor in
the Bank of England, has ever lost his deposit. While during
that period, by the failure of private bankers ; immense sums
have been totally lost. This safety of deposits, has given the
Bank a very great advantage over private bankers. The Bank
has made immense sums, out of this branch of its business, in
loaning deposits ; and this branch of business has been con-



99

stantly increasing in magnitude and advantage ; up to this
time.

This presents only the simple question, of the advantage
which the Bank derived, Jrom being deemed a more safe deposit-
ory of coin and bullion, than any private bank could be, and the
superior facilities thereby furnished, for loaning deposits, and not
to endanger the rights of depositors.

It has been deemed advisable to separate the functions and
processes of the bank ; not only for the purpose, of giving a
better understanding of the subject of banking, as a whole, but
because banking as it now exists in the United States, takes its
form from the Bank of England. In this Bank too, is con-
centrated, not only all that is claimed to be \iseful in the systems
which preceded it ; but it certainly contains all, that is over-
reaching and destructive, to the rights of the people.

It was also ; not only the culminating point of the despotism
of the past ; but it was the ushering in of a system, which while
it released the bankers and financiers from many of the responsi-
bilities and guarrantees of former systems ; it enabled them to
obtain a double rent, or interest, for furnishing mere counters, or
tallies, of the people's property; and by which, it could be
exchanged.

Henceforth cheating in coinage, robbing bankers and deposit-
ors by the Henry's, and the Charles's, was also at an end. Even
counterfeiting, robbing, cheating, plugging, sweating and boring,
outside of bank franchises, had become contemptibly mean and
insignificant. The Bankers and financiers were now to divide
the spoils with the King and Parliament; and even a limit was
put upon the Kings right to obtain more than his allotted share
of the spoils, without consent of Parliament. And the legitimate
use of coin is now, to be locked up in capacious vaults, to settle
balances of trade, and to cover up, and hide the unmitigated
and unparalleled robbery of the new system. This feat could
only be accomplished, by making the people believe, that the
gold which the bankers do not use, and generally do not possess,
is the real and only base of their system, when in fact the system
was established in its present form to avoid the use of gold.

It is therefore important, not only that the boundary lines
between the old and the new financial system, should be dis-
tinctly marked, and pointed out, but it is also necessary, in a
work which professedly treats on money, that the outlines or



100

distinct processes of both systems should be accurately marked
and well defined.

It should be borne in mind, that up to this period of time, no
regular system of bank bills for any certain defined amount, had
ever been instituted. The title to coin, instead of coin, and the
debt of the State, had been long, and extensively used, as money
by the banks of Venice and Genoa, and with much more
efficiency, than coin and bullion. The latter bank had also issued
bank bills extensively as money ; but not in any defined and
regular denominations as is now being done.

In England too, bills of exchange and promissory notes —
payable at some future specified time, had been extensively used
as a cii'culating medium, but nothing in tlie form of bank-bills
had ever been issued. And it has been shown, that while the
Bank Charter was perhaps one of the most grasping, overreach-
ing grants of power ever enacted. Yet, it nowhere expressly
grants the power, to issue bank-notes.

When therefore the Bank-Government, had obtained a heavy
amount of indebtedness of the State ; as a security for theii
advances, as well as a base for their future bank operations, with
a large proportion of the annual pr


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Online LibraryLyman E De WolfMoney; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained → online text (page 10 of 19)