Lyman E De Wolf.

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

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presence of the Pi'ovost of merchants.

" On the sixth day, the business of payment commenced, and
continued until the last day of the month inclusively, after wliich
no entries in their Mlans, or book of payments, could be made,
and if any were made, they were held to be void according to

" The Payments of each day were commenced by the mer-
chant and bearers of Mlans, in the hall of the exchange at ten
o'clock in the morning, and terminated at half past eleven, after
which hour no fui-ther payment was allowed.

" The mode of proceeding was as follows : The bankers and
merchants carried to the exchange their bilan of debit and
credit; that is to say, a book in which they had written on one
side what was due to them, and upon the other, what they owed.
They addressed themselves to those to whom they were in debt,
and gave them for debtors, one or more of those who owed, them
a like sum ; this debtor, or debtors being accepted in their place,
the substitution was entered in their books, and the debt was
regarded as paid. All parties did the same, and so the pay-
ments proceeded. At the end of the month, those who owed
more than was due to them paid the amount in ready money to
the holders of bills who had more coming to them than they

"The bills of exchange payable at the Payment, and not paid
before the last day of the month inclusively, were to be pro-
tested within the three first days of the following month.

If a banker or merchant accustomed to carry a book at the


place of payment meets with no one willing to accept him as a
debtor, during the time of payment, he is reported to have
failed. There is no place in the world where merchants are more
ready to give credit than at Lyons ; so, also, there is no place,
where payments are more punctually made ; for, if the time of
payment is permitted to pass one day, the credit of the party is
lost, and he is accounted as bankrupt." Parfait Negociant, par
L. Savary, 4to. 17V7. tome I. Cliap. XII. p. 257.

We have quoted this article on fairs at some length for the
purpose of showing that the great operations of commerce were,
at the time the Bank of England was established, and when it
commenced issuing bank-paper, adjusted by balancing accounts
without the use of coin, and that the Bank by issuing paper,
based upon these commercial securities, and not upon gold and
silver coin, or bullion, only changed the form of balancing the
accounts between the respective parties to these dealings ; that
there is not therefore any honest pretence in claiming, that
bank-paper dej^ends upon either of these metals for their effi-
ciency in the making of exchanges and payments.

The coin and bullion which figures so largely in the bank-
reports is not for the redemption of bank-bills, but to be sold as
a commodity for the settlement of balances, and owned by the
parties depositing it.

The bank-credits and its paper was merely another mode of
balancing the accounts between commercial dealers in these
various exchanges, which had been in use for a great length of

If A. had £10,000 to pay in any given month he might have
promissory notes, and bills of exchange to the amount of
£15,000, due at sixty days, and yet not be able to pay a single
pound of his indebtedness. By depositing his securities with the
bank, a credit was entered on the bank's book for the paper not
due, and upon which credit he was permitted to draw for the
amount of each of his liabilities as they became due, and thus
to extinguish each debt. So far as A. had claims upon others,
which could be balanced through the bank-credit by other claims
on A., there was a mutuality which required no money, coin, or
bullion to adjust the payments, no matter how many millions
were to be adjusted. And as between individuals, so between
nations no money is required to make payments, except to
pay balances.


When, therefore, the Bank of England, undertook for the
mere purposes of gain, to attract business by issuing bank-paper,
and giving credits in account, for individual notes not due on
demand, it opened a Pandora-box of evils to the business-
world, which will never cease until the whole system is

The injury inflicted by the system are two-fold, the losses
occasioned by it, and the more grave injury — a false education
of the people in the belief, that bank-bills owe their value, and
efficiency, to coin and bullion the bank never owned, and which
for the purposes claimed, never existed. The former robs them,
the latter perverts their knowledge, and thereby perpetuates the

Having unfolded the falsity, and the iniquity of this bank-
gold-base-theory in principle some further statistical details of its
practical workings, as gathered from its history, will now be
given in illustration of the correctness of the views here

It has already been shown, that there was a general crash, or
as it is technically denominated, a financial crisis, in 1696, in
which the government and bank-securities were badly discredited
— to relieve the Bank from insolvency, it was permitted to absorb
the indebtedness of the state and the bank into an increase of
its capital stock. What the government had eaten up, and con-
sumed in war, or lust of power, re-appeared in the ghostly form
of a poverty-producing and labor-consuming interest-bond, and
paper-money based on that bond.

In 1708, there was another addition to the bank-stock whereby
the power of the Bank was largely increased, and a re-occurrence
of the financial difficulties similar to those of '96 avoided.
Between 1708 and 1727, in a similar manner and for similar
purposes, the bank-capital, was again increased to near
£9,000,000. In 1745, another financial "crisis" occurred,
which led to a severe run upon the bank ; in order to gain time,
by amusing the public until the Bank could effect measures to
avert an exposure of its insolvent condition by the run, the
directors adopted the bank-device usually resorted to, by these
fraudulent institutions, of paying in shillings and six-pences until
finally it succeeded in allaying the panic, by the more substantial
stool-pigeon bank-device of getting the "principal business men,"
(bank-agents) to subscribe a resolution " declaring their willing-


ness to receive bank-notes in payment of any sum that might be
due them, and pledging themselves to use their utmost endeavors
to make all their payments in the same medium. Of course the
notes of the business men being the only property and security
for the bank-notes — the latter would be a good fund for the
payment of these business-notes to the Bank. It required there-
fore no great sacrifice to fool the public, by this business resolu- .
tion of the business men. Having succeeded in this, occasion'*"'
was offered to increase once more the capital stock, which was
accordingly improved, by raising it to £10,780,000.

In this connection, we must not omit to mention another
important gold-base, device resorted to by the stockholders and
officers of the Bank, to give it credit, in the early period of its
history ; and that was, to make checks for gold, and obtain par-
ties not in the secret, to draw the gold, in order to give the bank,
officers an opportunity to make a full display of their immense
treasures. The gold was immediately returned to the Bank by
the drawee; to be again used for a like purpose. This of course,
soon added to the credit of the Bank, though like the other
gold-base^ it did not add much value to its bills, nor honest
credit to the system.

In 1780, there was another financial "crisis," and in 1762, the
capital stock was increased eight per cent., or to £11,642,400,
The business of the countiy revived, and in 1793, the usual
bank-accompaniment, " a revulsion was on hand ; this continued
for two or three years, and as a prelude to the general crisis of
1697, when by an order of Council, dated Sunday, February 26,
1797, the Directors were prohibited from paying their notes in
cash, until the sense of Parliament should be taken on the sub-
ject. Parliament met, and agreed to continue the restriction
till six months after the signature of a definitive treaty of peace.

This suspension of specie-payments, however, was from time
to time continued up to 1823, twenty-five full years from its

In 1814, '15 and'16, there was a continual panic and crash, and
in 1816, the payments of what had been consumed in war, was
again revived in bonds, and the capital stock of the Bank was
raised to £14,453,000, but in 1825 and '26, and again in '35 and
'36, in '39, 45, '47, '57, and, 1865, were periods of revulsion,
financial disaster and ruin.

In 1844, the British Parliament from its instinctive desire of


regulating everything, passed an Act to Regulate the Issue of
bank-notes, and for giving to the Governor and Company of the
Bank of England, certain privileges for a limited period. "It
enacts that from and after the 31st of August, 1844, the issue
department of the Bank of England shall be separated from the
Banking department; that the issuing department may issue
notes to the extent of £14,000,000, upon securities set apart for
that purpose, of which the debt of £11,010,100, due from the
government to the bank shall form a part ; that no amount of
notes above £14,000,000 shall be issued, except against gold
coin, or gold or silver bullion, and that the silver bullion, shall
not exceed one-fourth the amount of gold coin and bullion.
Any person is entitled to demand-notes from the issuing depart-
ment, in exchange for gold bullion, at the rate of £3, l7s., 9d.
per ounce. Should any banker discontinue his issue of notes,
the Bank of England may, upon application, be empowered by
an order of Council to increase her issue upon securities to the
extent of two-thirds of the issue thus withdrawn ; but all the
profit of this increased issue must go to the government."

This act was passed by Parliament to remedy the su^^posed
evils of an inflated currency, under the insane idea that an issue
of bank-paper upon a deposit of coin or bullion, for any amount
above £14,000,000, the coin would of course redeem the paper,
and thereby save the inflation, it probably having never entered
the heads of the statesmen who framed, nor of the Pai'liament
which passed that famous Act, that the remedy furnished, only
increased the malady.

It will readily be perceived, that the increased issue provided
for by this act, while it increased the bank-paper-faciUties of
trade ; it withdrew from circulation, a corresponding amount of
coin and bullion. If then this bank-paper, in the prosperous
condition of commerce, which its advent would be likely to fur-
nish, should stimulate an excess of importations to the amount,
say £15,000,000 above what the annual productive industry,
through the ordinary channels of business would be able to
supply, what then, would be the beneficial results secured by
the Act ? We answer : none whatever, but on the contrary, the
coin and bullion, upon which the bills had been issued, must now
be had to settle balances of the foreign trade. This would
occasion a corresponding and sudden withdrawal of the bank-
bills from circulation which would soon precipitate a financial


revulsion, ruinous to every branch of domestic industry and

While the Regulation of the issue of bank-notes, upon the
favorite gold-base theory of the British statesmen succeeded, it
did not succeed in annulling the great fundamental laws which
govern the production and distribution of property, though it
set them at defiance. Hence during the last twenty-five years
since the passage of that Act, no less than four severe revul-
sions have visited the British Isles.

The revulsion of 1847, was one of the most severe which has
ever occurred in that country — the failures in London and Liver-
pool alone, in less than sixty days exceeded £41,000,000, the
total loss estimated in the United States money of account was,
$37,774,500. If these losses from financial revulsions, since, and
including that of 1797, have been as severe on an average, as that
of 1847, they will exceed $200,000,000.

There is one peculiarity in this British national debt and bank
legislation, which is now attempted on a large scale, to be re-enacted
over again in this country, and which must not be overlooked ;
and that is, that while the labor, and the business of the country
based on that labor, outside of the Bank, furnishes nine-tenths of
all the means for the support of the government, and for the
present and future redemption of the bank-notes and credits
issued, and granted by the Bank, yet, whenever the annual
industry of the country fails to supply the exorbitant demands
of the government, and the bank excesses, the deficit is sure to
be made up by an increased supply of Bank capital, and of
interest bearing national bonds.

By this bank and bond system, a man must be taxed when he
is born, for being born, and while he lives, he is taxed because
he lives, and when he dies, because he dies, and if he is so
unfortunate as to have an estate, his estate is taxed, because in
taxing the owner out of existence, his estate was not all absorbed
into the hands of the Bankocracy during its owners life-time.

Besides the use of individual capital, which the Bank has to
sustain it, there is a constant stream of public revenues all the
while pouring into the Treasury by taxation ; these funds vai-y in
the amount kept on hand, from two to twelve millions pounds
sterling. On the l7th December, 1852, the Government deposits
were, £10,492,686.

If anything more is needed to show the utter falsity and


rottenness of this gold-base and coin-redemption bank-theory, it
can be best furnished in the monthly and annual Reports of the
Bank. The following is an example : February 28th, 1*798,
circulation, £16,095,830; deposits, £6,148,900; securities,
£16,799,500; bullion, £5,828,940 ; surplus, £3,385,710. February
28th, 1815, circulation, £27,261,650; deposits, £11,702,250;
securities, £44,558,501 ; bullion, £2,036,910; surplus, £7,631,510.
February 23d, 4841, circulation, £16,399,000; deposits,
£6,407,000; securities, £21,344,000 ; bullion, £4,335,000 ; sur-
plus, £2,873,000. February 28th, 1824, circulation, £19,736,990;
deposits, £10,097,850; securities, £18,872,000; bullion,
££13,810,060: surplus £2,847,226.

In all these returns it will be seen that the circulation and
deposits very largely exceed the bullion and coin, while that of
1815 shows an excess of £36,927,990, or in the United States
money of account, $184,639,950, due to the public, over all its
bullion and coin.

The gold-base, and the gold convertible theory of the Bank of
England, is a myth which never had an existence anywhere, but
in the muddled brains of the British public, and those of other
nations, who have been unwise and wicked enough, to follow in
her wake.

But by this double device, England has robbed her industrial
classes of their annual earnings, until about one-eighth of her
population are paupers. And by the capital thus accumulated,
and the adoption of her gold-theories, she has been enabled to
derange the industries of the civilized world ; to make nations
pay her a tribute, of all they possess, and at her bidding to bow
down and worship her GOLDEN CALF.



The banking system of Scotland is the best which has yet been
devised. It presents a contrast compared with the English
system as distinct, and marked, as can well be imagined. As its
origin was different, so lias been its subsequent history. The
Bank of England was instituted as a great engine of state, for
the centralization of power. What would benefit the ruling
classes was duly considered; that which related to the interest
of the governed, received no further attention than was necessary
to subserve the purposes of the governmental class. It com-
menced its cai-eer, with a loan of all its funds, to the govern-
ment; and from that day, to the present, its course has been a
continual round of the most grasping, overreaching acts of
despotism, and fraud, upon the rights of the governed, which the
world's history has furnished. Every great misfortune and loss
of the industrial classes, whether by war, famine, or pestilence,
has been the occasion for an increase of its power. What was
lost or consumed of the people's earnings in war, as has been
shown, re-appeared in a two-fold form of interest to continue to
eat out the people's substance for the benefit of the governmental
class. But not so the Scotch system. The Scotch banks were
created to subserve the interests of commerce. Its active pro-
moters and founders were commercial men, who were well
acquainted with the practical operations of ti-ade, and knew full
well, that the great transactions of commerce wei-e carried on,
not by gold, or silver, but by credit. That to settle a balance
the avails of £1000 of tea which was in the trade, Avas as good,
and even better, than £1000 of gold, which was not in the trade,
and which neither the merchant, nor banker, had. These men
too, were well acquainted with the history of conducting business
and making payments, at the great fairs, which at that time
occupied so prominent a place in the business of the European
world. They also understood that the institution of the banks


of Venice, Genoa, Amsterdam, and Hambm-g was to get rid
of using either coin or bullion, for any other purpose in trade,
but that of a commodity in settling balances.

The Bank of Scotland owes its origin to the efforts of John
Holland, a merchant of London. Its charter was granted by
the Scotch Parliament, in 1695, (Will III. Part 1, § 5.) "Its
original capital was £1,200,000 Scotch, or £100,000 Sterling,
distributed in shares of £1000 Scotch, or £83, 6s, 8d Sterling,

The Act exempted the capital from all public burdens, and
gave it the exclusive privilege of banking in Scotland for 21
years. The responsibility of the shareholders is limif ed to the
amount of their shares. The capital of the Bank was mcreased
to £200,000 in 1744, and in 1804, to £1,500,000.

The Bank of Scotland is the only Scotch Bank constituted by
Act of Parliament. It established branches in 1696, and issued
notes for one pound as early as 1704.

Holland, and some merchants in London and Edinburgh, who
disliked the Bank of England, upon an assurance from the Scotch
Government, that such an Act as was desired, could be had,
drew up a plan, Holland has given an account of his connection
with the Institution of the Bank, in a pamphlet bearing this
ominous title : " The Ruine of the Bank of England, and all
public credit inevitable." Holland, as a merchant, knowing the
practical modes of exchange, had no faith in the effect of legis-
lative enactments. He was probably acting under the delusive
idea that this was an attempt to establish by force of mere
legislative enactment, a money without any regard to the powers
granted, as applicable to the natural uses, to which these legal
powers were applicable.

No nation it is believed, however despotic its power, has ever
been able by mere arbitrary enactment to maintain for any con-
siderable length of time the circulg,tion of a money thus instituted,
at anything like par.

A legal tender is useful to the full extent to which it can be
made practically to operate. If there- are public taxes to be
paid so far as that demand operates, an issue of paper not
exceeding the amount i-equired for the payment of such taxes,
would be at or near par. So of exchanges, the issue of all the
money which is needed to make the exchanges of one useful
article for another, without being obliged to transport any article


in any other manner than what the natural demand for that
article for consumption requires, would keep the money, at or
near par, from its legal and commercial uses in making payments,
although of no appreciable, actual or intrinsic value.

Holland, viewing the provision to loan the money to the govern-
ment as subversive of the legitimate purposes of instituting a
money for commercial uses, was justly suspicious of the power,
and so much so, that he overlooked the great fact, that this bank
charter contained all the powers necessary to enable the Bank to
furnish the facilities of a circulating medium, that was contained
in the Scotch Bank Charter of Holland and others. In addition
to this, the government made it a depository of her power, in
the bond interest capital, and by the constant revenues of the
government. The injury, therefore, which was likely to flow
from instituting the Bank of England, did not lie in the direction
of ruining the credit of the nation, but in the immense grant
of powers and thereby the control and absorption of too large
a portion of the annual productive industry of the country, in
interest and taxes, and such has been the result. All the vast
revenues of the nation are poured into the Bank Treasury, with-
out stint or measure, and through this organized over-taxation,
and double interest, the industrial classes of the nation are per-
petually robbed, and financial revulsions every few years, with all
their attendant evils, follow in their train.

But Holland and his associates, taking . the view above
suggested, were determined that the Scotch Bank should not be
ruined by loaning money to either kings, or government, had a
prohibition against it inserted in their charter. Thus originated
the diverse character and j^ractices of the two institutions — the
English Bank Charter was granted on condition of loaning the
government £l, "200,000 for twelve years, and the Scotch Charter
was allowed its monopoly for twenty-one years, without any con-
cessions, or paying any bonus to the government. The former
therefore, relied upon its concentrated governmental powers and
perquisites for its success — the latter upon conciliating the
industrial and business public by advantages offered.

From these ever-diverging stand-points of government and
motive-power incorporated into these two charters, at the
beginning — the Bank of England has succeeded in establishing
a bank-governmental power, which has effectually crushed out
the rights and liberties of the people — the Bank of Scotland, as


before stated, in establishing the best banking-system yet



The Bank of Scotland started with the design of making
credits, based on property, as contra-distinguished from coin, or
bullion, answer as far as possible all demands of business in
making an exchange. Hence it early issued bank-notes, from
£100 down to £l, and less. It sought to identify itself with the
people, not in seeking patronage of the government, or of a
special class.

The laborer who deposited his £5, stood side by side with the
merchant and the capitaUst. The Bank paid one per cent, less,
than the current rate of interest, on its deposits, and faithfully
returned them on demand.

This system has secured these savings for business purposes,
in place of seeking investment (as in financial language it is
pojiularly denominated) in public stocks, or to be loaned on
bonds and mortgages. The poor feel the same interest in the
safe management of the Bank, as do their more wealthy neigh-
bors. Industry, prudence and thrift, have been promoted by the
line of business thus early adopted by the bank. The hatred
and jealousy of Banks in England, and the United States, finds
no place among the Scotch people. Univei^sal confidence in the
soundness of their system, pervades all classes of society. This
feeling of security no doubt, is very largely attributable to the
liberal policy inaugurated by the Bank of Scotland.

There are forty banks which have established 340 branch
oflfices. These banks are not the rival establishments, like the
English, of a conflicting system striving for supremacy, but are
parts of a harmonious whole. Hence, in no other country is
there a currency so free from fluctuations in quantity, and so
uniformly good, as that of Scotland.

English statesmen with their characteristic itching propensity
for a centralized despotism, have been seeking for more than a
century, for some excuse to engraft upon the Scotch system,
that " sum of all villanies " the English gold-base ; but the Scotch
with equal tenacity cling to their own superior system, without
the "gold-base."

The English cannot understand the Scotch system, but the

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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 12 of 19)