Lyman E De Wolf.

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

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demand, or bank-note, down to the present time, is a public lie
and a public frauds sanctified and made honorable, only, by
almost two hundred years legislation.

If, however, the bank paper was issued, as in the case first
above supposed^ then the debtor, with one and a half per cent,
coin, or bullion added to the Banks own paper, and which had
been previously issued for the debtor's papei", would have taken
up that paper. Neither bank, nor debtors, had paid coin for it.
Neither the debtor's paper, or the bank-paper, represented or
denoted coin ; but goods, wares, merchandize, products and
labor. No coin had been used, or was needed in making these
purchases, and it was not needed to give any validity, power, or
value, to the bank-notes, or the notes and bills of exchange,
which had been given in exchange for the property. The bills
of exchange, and promissory notes, puid for the property pur-
chased. The bank-bills were given by the Bank in exchange
for these, and the bank-bills were a just payment to the Bank,
for the same paper, for which they had been previously

It is claimed, however, that some pretended connection of this
bank-paper, with coin and bullion as a base, is necessary to
check over-issue of bank-paper, in other words, that the property
for which this paper is originally issued, and for the exchange
of which property, it is solely issued, is not a good fund upon
which to rely for redemption of the paper. If, however, as has
been seen, the paper issued by the Bank, and circulated, is made
as in the case supposed, it denotes simply the property it
exchanges, then no snch base pretence as a " gold base " is
necessary, and that no such base has ever existed in fact, is


fully attested by sad exi^erience, of nearly two hundred years,
both in Europe, and in this country.

There are modes of issuing paper money however, which are
both honest and safe, and which therefore needs no counter-
checks to prevent over-issues. Indeed, no over-issues would
occur, under an honest system. One of these modes which has
been thoroughly tested, is the circulation of a pubhc debt. The
efficiency of this mode of furnishing a currency, was fully
demonstrated by the Bank of Venice. Its success has never
yet been equalled. The only modification of that system, which
an advancing civilization requires, is the substitution of treasury-
certificates for a credit on the books of a bank, and the state, or
government itself, should be substituted for the Bank. The debt
itself, cut up into bills, called greenbacks, or legal money, would
have furnished and would still furnish the most perfect, cheap,
uniform, and just money ever instituted for the reason that it
could be backed up by the property of the nation, sustained by
just laws.

The Bank of England had this public debt in large amounts,
and if British statesmen and the Bank-Court had desired a really
good and reliable medium of exchange, instead of private gain,
and the creation of an engine of power — that boon was then —
and is now, within their reach. They could always have given
the public debt, cut up into legal-tender notes, or treasury-
certificates in such denominations as would suit the demands, or
the convenience of the business public.

If the Bank had even, only been required to pay its notes in
specie p«ri/?as5M with the payment of the note, individual, or
public liability for which the Bank paper had been issued — the
Bank could have complied with that requisition.

If, however, specie is so essential (which is denied) to the
validity and use of the bank-note, it can be secured by making it
payable in gold or silver coin only, at two, three, or six months,
when the time expires at which, the specie must be had to meet
both demands — the specie paid on the securities could then be
paid, if necessary, for the bank-note. And it was the only
practical way, it could have been done.

It may be very convenient, to be able to demand specie when-
ever it is wanted for any useful purpose, but it is a costly
convenience to require it by law, when it is not needed or
wanted for any purpose, but merely to satisfy the demands of


an arbitrary law. Especially so, when law-makers kuow, or
ought to know, that compliance with such a demand, upon the
principle, upon which the Bank of England is instituted, and the
manner in which business must be done, under such a law, is
frequently, simply, an utter impossibiUty.

It would be a very great convenience frequently, for a hungry
man who wants a dinner to-day, to be able to get such a daguer-
rotype likeness of his dinner, to be furnished at ninety days
hence, that would satisfy the cravings of hunger of the present
moment. But such a convenience under known laws could not
reasonably be "expected. Yet, it would be as reasonable an
expectancy, as the issue of demand-notes for three-raonth-notes,
and to expect these deraana-notes, would not be presented for
payment — or to expect the ninety-day-notes, or national-bonds,
will furnish the specie to meet the requirements of to-day.

The principle which gives to paper-money whatever of effi-
ciency it possesses, is the balancing power of credit, not coin.
If A. buys of B. £10,000 worth of goods, or lands, and gives
his notes for that sum, j^ayable at ninety days, the best fund
with which to pay A.'s £10,000, is B.'s notes, and if B. transfers
these notes to the Bank for its paper, then the Bank-notes, are
the best fund to pay B.'s notes to the Bank, and this is the prin-
ciple which underlies this whole banking-system.

But ever since the institution of the Bank of England, and
its paper-issue, it has always been claimed, that the safety of
bank.paper, depends upon having a certain relative proportion
preserved, between the amount of paper-money issued, and the
coin or bullion, to be kept on hand for the purposes of redemption,
and one-third seems to be the amount, which is generally relied
on as a safe proportion.

Experiments based upon this principle, have continued to be
made in England, from the institution of the Bank, and from
tliat day, to this, and have cost the people ten times more, than
all the advantages to be derived from the hoarded coins ; and
in the end have proved the whole system, to be a magnificent

Undoubtedly the same principle should be applied to money,
whether it is aggregated, or held by the individual, as is applied
to every other commodity in every other branch of business.

If a penny-sheet of paper, will make as good an instrument
of title, to transfer a farm worth |10,000, as would a piece of


gold worth ten thousand dollars also, then j^aper should be used
for that purpose ; and if a farm can be transferred in that
manner, so can the products of that fai-m, and every other com-
modity, and the gold is not essential for any such purpose. But
it does not thence follow, that paper can supply the place of the
farm, in production, nor that it can supply the place of gold as a
commodity — but every function which gold performs as money,
can be equally well performed by paper and at not a tithe of the
expense, or cost of gold. Gold and silver, like other commodi-
ties, should be furnished and used for any purpose for which they
are designed.

The wrong committed by the Bank of England, was : First ;
in agreeing to pay their notes in specie, when it did not have the
specie with which to pay ; second, in issuing notes, payable on
demand, to be exchanged for notes having two, three, and four
months to run, when the only fund for the redemption of the
bank-notes, was these individual notes.

No excuse can justify such an act. Individuals cannot
honestly transact business in this manner, neither can corpora-
tions, or banks.

If the Bank had issued only its notes, payable on demand, that
it was prepared to redeem, or if on time, not payable sooner than
the paper taken in exchange for its notes, then no susjiension of
specie payments would have occurred, nor would its business
require its circulation to fluctuate with ihe demand for gold, for
exportation to meet the foreign demand. Hence the internal
trade would not continually be deranged if not destroyed, to
enable the Bank to meet the requirements of the foreign com-
merce. All legitimate trade through whatever medium efiected,
is a mere exchange of articles. The natural wants of man
must be supplied with, or without gold, or silver, as occasion may
require. It is a great fallacy to imagine that the medium of
exchange must fluctuate in supply, as the precious metals fluctuate
in quantity. Both, in the domestic and foreign trade, commodi-
ties are principally distributed through the medium of promis-
sory notes, and bills of exchange, very little use is made of either
coin or bullion, except to settle balances, and these are com-
paratively small. The use of these metals even for this purpose,
in civilized nations unless engaged in some special branch of
trade, or whose industries have been disturbed by war, or some
similar unnatural cause, are very limited indeed. But issuing


bank-notes together with the whole business of banking, is a
monstrous monopoly. Its profits in comparison with the service
rendered are enormous. Concealment of the gross outrages
inflicted by the system upon the rights of the people is absolutely
necessary for the further continuance of the wrong. Hence its
complicated legal machinery, and the ostentatious display of
securities, and of gold and silver.

In England, and in this country, the gold and silver base idea,
and the promise to redeem are kept constantly before the people.
The very frauds of the system itself, are used to instil into their
minds the importance of these false ideas.

For the purpose then of exposing this popular delusion, and
bringing the people to see, that it is their deposits, and their
property, or its avails, which furnishes the capital — that the
enrichment of the banker, and capitalists, at their expense by
law, is the object of the system.

We have shown, that deposits constituted the only available
capital of the Bank of England. That its funds were loaned to
the Government, and the issue of bank-notes, in the first instance
not on gold and silver, but upon promissory notes and bills of
exchange which had not even the poor merit of being due. It
was for the pui-pose of speculating in these securities, that these
bills were first issued in large quantities. Through this same
instrumentality the practice is not only continued, but ninety-
nine dollars out of every hundred of the fund for redemption of
these bank-notes, comes from securities given for the people's
property, and lodged in the Bank.

If it is not seen, that the potency of the bank-paper, is derived
from the necessity of having it to meet the demand for the pay-
ment of the notes lodged with the Bank, when there is no other
fund for their redemption. Certainly the suspension of the Bank
for twenty-five years, will demonstrate the fact beyond the power
of successful contradiction.

Whatever may have been the designs of the originators of the
Bank at the outset — without doubt they intended to make use of
the immense powers granted in their charter in every way in
which such use could be rendered available as a matter of profit.
And both they and their customers soon perceived that the use
of credits in account, were much more effective in making pay-
ments, than by the circulation both of bank-notes and coin.

The discount of business paper, and the credit in account


goon fai* exceeded bank-notes and coin deposits. The bank, b)-
this simple method, became the bookkeeper of its customers ; at
least to the several amounts discounted for them.

It charged the same discount for a credit in account that it did
upon a loan of coin, or bank-notes. This soon became the most
important, as well as the most profitable, branch of its business.
Keeping accounts was not so expensive as issuing notes. No
distinction was made, however, in the account as to the source
from whence the credit originated, nor was there any distinction
made between that and coin or bank bills as to the use to be
made of the credit in payment of debts. These credits, there-
fore, answered the same purpose in making payments as coin or

£20,000 in private notes, could not be made available in pay-
ment of debts — deposited in Bank £19,800, could be as eftective
in making purchases or payments, as would be so much coin.

This business was of course profitable to the Bank, but it
involved a heavy risk. For by being thus credited, it became
immediately payable in coin, which the Bank did not have.

As has been shown, if this credit had been payable only at
the maturity of the paper for which the credit had been given —
this was as far as the Bank could safely go, and this would have
answered every legitimate purpose of credit, and that was all
that the Bank had to grant A more convenient mode of adjust-
ing the large demands of cdmmerce, could not well be devised.
It combined all the advantages of set- off, rapid circulation and
safety. It required no meeting of debtor and creditor to adjust
accounts, no risk of bank-notes, counterfeiting, theft, robbery, or

The merchant with his order or check could at any time make
all his payments, if he desired, without the trouble of leaving his

The Bank by this credit on their books, had after the example
of the Banks of Venice and Genoa, inaugurated a system, by
which without either gold or silver bullion, or even bank-bills,
the payments in large, as well as in the smaller transactions of
commerce could be made.

The Bank of England, therefore, it will be readily seen, is the
fruitful parent of all the modern heresies, and robberies included
in banking. "A gold base," "elasticity," and '< convertibility
of a currency," and other similar cabalistic terms used to cover


up the wholesale swindling and out-right robbery of modern
banking, are from the same source.

These periodical revulsions and financial disasters, which occur
every few years have the same common parentage. The Bank
of England first established these false theories respecting money.
It first issued notes, payable on demand, and gave credits, or
exchanged them for securities payable at a future day, vaiying
in time from one to four months, yet relying wholly upon the
forbearance of the public, not to present them for payment in
sufficient quantities, to embarrass the operations of business.

Banks from that period of time down to the present, have
continued to issue notes payable on demand, to be exchanged
for time-securities, payable at from one, to four months after
date, just as was, and is now being done by the Bank of Eng-
land. These bills or notes, while they bear no interest, bring
interest to the Bank. Interest though it produces nothing,
accumulates much faster than the increase of property by the
annual productions of labor. Besides, there is no provision
made, for an increased issue of notes, to answer the increased
demand, to pay the constantly cumulating interest.

If then the issue of paper to-day, is sufficient to answer all
the legitimate demands of business ; twelve months hence, from
increased production, and for the reason here mentioned, it may
fall far short of supplying the demands of business; and to
return to the lender his principal and interest. Each returning
year is liable to answer, not only its demands for money, but
the cumulative interest of preceding years, until at last, a failure
of crops, or adverse foreign exchange, brings the business com
munity, as well as the banks satisfactory evidence, not only that
bank money upon such a base, needs redemption, but that every
man who deposits his money in bank, needs his own, to a much
greater extent than is in the power of the bank to supply. The
result is, that the business of the country soon gives way beneath
these accumulated burthens. A collapse, or a financial crash
follows. Manufacturing ceases, trade languishes, business comes
to a dead stand, disappointment, poverty, wretchedness and
ruin, follow in their train. The business community are gravely i
told, that there has been too much speculation, too much manu- ,
facturing, too many engaged in the same business, too miicli
production. In short, too much of everything, but an honest
reliable money, instituted at cost, and solely for the purpose of


making a just exchange of this there is not too much. But what
is the difficulty with the banker's money f The currency is
inflated. Thei-e is too much paper afloat, and not gold enough
to redeem it, say the bankers. But how stood the gold account
for the long years previous to this when the paper was issued?
Was there then gold sufficient to redeem the paper ? We answer
nay. There was gold on deposit to be sold as a commodity for
use, or to settle balances of trade, but as has been shown not a
dollar for redemption of the paper, and very seldom is there a
dollar really issued on gold, except it is deposited as is required
by the Bank of England. This Bank issues £14,000,000, based
entirely on national bonds, if it issues above that amount it is
upon a deposit of gold. But it has also been seen, that the
amount of payments made by a simple credit on the books of
the Bank, far exceeds both the issue of bank-paper, and the
deposits of coin and bullion.

Where then, we again enquire, is the gold-base? The paper on
the £14,000,000 bonds, is not pretended to be based on gold,
neither is the credit on the books of the Bank, by which a much
larger amount of payments are made. Where then is the infla-
tion? There is no more inflation when the demand for
redemption is made, than there was when the money was issued.
The only difi'erence is, that gold, which the Bank never had, is
demanded, and was not required when the Bank made the issue.
Does any one enquire that if this is true, how could this paper
have been so long, and so extensively circulated ? We answer,
because the great operations of commerce are not carried on by
gold and silver, but by CREDIT. It was so carried on in the
I7lh century, as we have already shown, in the case of the
Banks of Venice and Genoa, it is so carried on to-day.

Merchandize and raw materials were at the origin of the Bank
of England, as now, purchased and sold for promissory notes
and bills of exchange. Changing these securities into bank-
notes, complicated, but did not change the character of the
transaction. There has been no time since the dawn of civiliza-
tion, when there were not in the hands of individuals, notes and
bills of exchange to represent the chief transactions of com-
merce. The average time of this credit may have been from two
to four months. Whatever it may have been, there were always
bills of exchange and promissory notes extant to show that
individuals had undertaken to pay every specific sum in a certain


specified time. To some extent this paper was always circulated
in making purchases and payments, but its use was always
limited either to intimate acquaintances, or to the guarranty of
the seller, or obligee, named in the paper.

It was upon paper of this class, which could not have been less
than £5,000,000, that the Bank of England commenced its paper-
issues. On the continent various expedients had been resorted
to for the purpose of making this paper available in purchases
and payments without the use of coin. The Banks of Venice
and Genoa, had to a great extent utilized this paper for these
purposes. And the large exchanges of commerce in Europe and
Asia too, had at, and previous to this period of time been
effected through the instrumentality of public fairs. The same
mode is still pursued to some extent, though much less than
forniei-ly. Yet they occupy a somewhat prominent place on the
confines of Europe and in Asia.

The Russians sell or exchange with the Chinese, in fairs held
at Kiachta, in Mongolia, their furs, skins, Russia leather, woolen
cloths, German and Russian heavy linens, cattle and precious
metals, for silk, raw, and manufactured, porcelains, sugar,
rhubarb, nankins, etc.

Merchants found it a convenient mode, of making payments at
these fairs. Bills of exchange were accordingly made payable at
the various fairs, which were held at intervals of from three to
twelve months. The fairs accordingly regulated the time, and
fui'nished the means of payment.

The modes of payment differed according to the custom of
the place where tlie fair was held. Those made at the city of
Lyons, in France, will serve as a model for the rest. There were
four fairs held here every year. Kings or Epiphany began in
January, Easter in April ; August in that month ; and All Saints
in November; Four "PAYMENTS" were also held, one for
each fair. The Epiphany payments were held, all March ; those
of Easter, all June ; those of August, all September ; and those
of Easter, all November. Engagements to a vast amount, aris-
ing out of other transactions besides those occurring at the fairs
were made payable at these Payments, by bills of exchange,
book accounts, and otherwise.

An account was here opened for all in their books with each
Payment by name. This exhibited Avhat sum each accountant
had to pay, and what was due to each. The balance of this


account determined what each person had to pay more than he
was to receive, or to receive more than he was to pay. Bills
payable at future Payments were thus expressed : " Pay to A.
B, at next Easter Payment, etc." If Easter fair had then com-
menced, if to be paid at that fair, " at the current Easter Pay-
ments." Those who could not attend sent a duly authorized
agent. " Every Payment was opened with ceremony. The
Provost Marchand came to the exchange with his Register and
six Syndics — two French — two Italians — and two Swiss, or
Germans, and these after a short discourse to the assistants,
recommending probity in trade, and observance of the laws,
customs, and usages of the place, and these were then read, and
the clerk drew up a process verbal of the opening of the Pay-
ment. Savary thus describes it :

" It is admirable to see the manner in which bankers and
merchants of Lyons make their acceptances and payments
among themselves of the bills of exchange which they draw,
and which are remitted to them from every part of Europe,
payable at the Payments, for there will be paid sometimes in
two or three hours a million of livres, without disbursing a
penny in money — that is indeed surprising to those who do not
know how it is effected. It may not be out of place to explain
it here :

" The opening of every Payment is made on the first day of
the month, excepting holy days, for each one of the four annual
Payments. Dui-ing two hours each day set apart for that pur-
pose, is held an assembly of the principal merchants of the place,
both French and foreign in the presence of the Provost of mer-
chants, or, in his absence, before the oldest magistrate present,
in which assembly commences the acceptance of bills of
exchange, payable at the current Payment. This continues till
the sixth day of the month inclusive, after which the holders of
bills may protest them for non-acceptance during the rest of the

*' Formerly acceptances were made verbally, and not by writ-
ing ; but the bankers and merchants of Lyons carried a little
book called a Bilan, in which to make acceptances. They
entered in it all the bills of exchange drawn upon them, and
which were pi-esented by those who were the holders. An
acceptance was signified by the mark of a cross on the margin
of the book in which they had registered the bills which denoted


that the bill was accepted ; but if they wished to deliberate
whether they would accept the bill or not, they put a letter V.
on the margin, which signified (vu, seen) that it had been
presented ; and when they refused to accept, they put S. P.,
wliich signified (sous protest) that it was under protest, that is
to say, that the bearer ought to protest it within three days alter
the current Payment, that is, on or before the third of the fol-
lowing month.

But now acceptances are made in writing, in pursuance of the
third article of the law of June, 1667, for reasons which will be
mentioned in their place.

" On the third day of the month of Payment, they fixed the
rate of exchange between Lyons and all foreign places. This
was done at a meeting of merchants, foreign and domestic, in

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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 11 of 19)