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loons in the Far West--"Please do not by the terms of the Bank's charter, shoot the performer, He is doing his which only retained for it the exclusive Best."

right of issuing notes. Consequently We have arrived at the fact that bor- the Bank's privilege, which was still rowed money is an important element meant to give it a monopoly of jointin an enormous number of transactions stock banking in London, had been in all kinds of business enterprise, so broken down by an unnoticed developimportant that the rate or price to be ment of business; and when the foundpaid for its use will often determine ers of the London and Westminster whether a transaction is toʻ be carried and Joint Stock Banks decided to form out. And we know that Bank Rate is joint-stock companies to take deposits the rate at which the Bank of England and carry out all the other details of is prepared to lend money. And so we banking business, it was found that as begin to see the importance of Bank long as they refrained from issuing Rate, especially when add to notes they could not be prevented from these ingredients the further fact that establishing themselves in the heart Bank Rate indirectly rules the rates of the Bank of England's privileged at which all the other banks and territory. It is a curious and interestmoneylenders in the United Kingdom ing example of the manner in which will lend money, and has a consider- laws are drawn in England with re able effect on the rates asked by sults quite contrary to the intention of moneylenders in other countries. And their introducers. now are beginning to see why The example of the pioneer joint-stock everybody “makes such a fuss" when banks was quickly followed, but, by anBank Rate goes up or down.

other curious development, the formaThe Bank of England, as is well tion of all these new rivals, instead of known to every one who has read

degrading the Bank of England to the Macaulay's History, was founded to position of a mere one among many, give financial assistance to the Gov- established it more firmly than ever, ernment of William III., and was as the bell-wether of a numerous and given a monopoly, as far as joint-stock

fleecy flock. For the new banks found companies were concerned, of banking it convenient to bank with the Bank of business, which then consisted chiefly England, and deposit with it their of issuing notes. Private firms had

necessary reserves of cash, apart from already developed businesses and could the small amounts that they kept ready not be made to suppress themselves; in their tills to supply the demands of but no other company consisting of their customers. If you look at the more than six members was allowed balance-sheet which your bank tucks to start as banker. In 1833 the Bank's into the pocket of your passbook every monopoly was restricted to a radius

half-year, you will see that among its of 65 miles round London, and at the assets it includes an item of "cash in same time it was discovered that even hand and at the Bank of England." the monopoly that it possessed had Thus established as the bankers' bank already been upset by the development and acquiring a host of new and rich of banking business, which had by this customers, who collected deposits for it time begun to be more and more a all over the kingdom, the Bank of Eng. matter of taking money from depos- land was greatly strengthened in its itors and lending it to borrowers, and position, and was enabled to fulfi less a question of issuing notes. This much more easily and cheaply Its pridevelopment had not been allowed for

mary duties as banker to the Govern

ment and leader of the London money pression-fluctuates. And the price of market.

money fluctuates because it is reguThis explanation was necessary, to lated, like the price of everything else, show how it came about that Bank by variations in the supply and demand, Rate indirectly rules the rates at I apologize for the use of this horrid which all other banks and money- old phrase, with its reminiscences of lenders are prepared to lend. There is the Manchester School and the study no obligation on other banks, when of political economy, but one cannot the Bank Rate is raised, to follow it get away from the fact that if a thing by charging more to their customers is plentiful and not much wanted it for accommodation, but when the most will be cheap, and if it is scarce and important moneylender leads the way, wanted eagerly it will be dear. This it is natural that others should follow, only throws us back on the necessity especially when it is a question of for discovering why money should be charging more for an article of general more plentiful at one time than at anuse; and it is now established as a other, and also why the demand for it matter of convention and custom that should vary. And perhaps it will be when Bank Rate goes up, the rate that worth while first of all to find out what the other banks allow to their depos- inoney really is. itors-or pay to those who lend them Many things have been money at money-is also raised, and It follows various stages of the world's history. from this that they have to recoup In very early days cattle appear to themselves by charging more to those have been the chief medium of exwho borrow money from them.

change and standard of value, and we As to the effect of a movement in find in Homer that expensive treasures Bank Rate on the price of money all

assessed worth

many over the world, this will be better ap- beeves, while a bride is mentioned as preciated when we arrive, later on, at bringing a dowry of 100 oxen. In this the fact that London is not only the connection somebody once perpetrated most important money market in the a joke about "current kine of the world, but the only money market, in realm,” but perhaps it would be kinder the real sense of the phrase, to which to forget it. Tobacco, bullets, hides, borrowers can apply.

and many other commodities have fulIf we can now claim to have won filled the functions of a currency in our way to a point at which the im- primitive or frontier communities, the portance of a movement in Bank Rate chief essential required from this kind has been made more or less clear, it of money being its ready acceptability must be admitted that the question in the place where it is used. Other why it should move at all has not been essentials which the more fastidious dealt with. “Why can't the tiresome demands of growing civilization bave thing keep quiet,” and why should not required are portability, durability, money always be available at a fixed and, as far as possible, steadiness in price, without any of these fluctuations value. These essentials have been in its value which startle the nerves found best in the precious metals, gold of the City and cover the contents bills and silver, which were the money of of the evening papers with terrifying the Middle Ages, and still are imporlegends in huge letters?

tant items in the fluid and elusive comBank Rate goes up and down be- pound which is the money of to-day. cause the price of money-of which In the richest and most civilized Bank Rate is the most important ex- countries gold has gradually ousted




silver, and as a medium of exchange gency. But it is admitted as an axiom has been itself, to a great extent, of sound banking that a certain amount ousted by paper, though it still re- of actual gold must be held in the mains the basis on which the paper is country-the chief store being kept in ostensibly founded. The circulation of the vaults of the Bank of Englandbank notes, payable on demand in gold, to protect the mercantile community was the first step towards this general against the awkward consequences use of paper money, and now in the that would ensue if anything like a United Kingdom-the country in which scramble for the metal took place. banking facilities have been brought to Thus it comes about that most montheir highest perfection-bank notes etary transactions are now carried out have themselves been largely super- by the exchange of pieces of paper, but seded by the safer and more convenient the supply of money depends, indeficheque, the most perfect form of credit nitely and to a certain extent, on the instrument that has yet been devised. supply of gold.

In England the use of paper money That the demand for money should has been developed to such a high fluctuate is also obviously reasonable. point that it has been calculated that At first sight it would seem that everynearly 99 per cent. of our monetary body always wants as much money as transactions are carried through with- he can get, and in this sense it may be out the use of coin; but it must be re- said that the demand for money is inmembered that gold, coined or in the variable, inexhaustible, and incalcuform of bullion, is always at the back lable. But the demand for money, in of the paper.

Every bank note is a the sense in which the phrase is used promise to pay gold to the bearer on in mercantile circles, means a demand demand; every cheque gives the holder for loans on the part of folk who have a right to demand notes or gold. Con- the necessary security to offer and sequently, though our development of credit to pledge; and they naturally the use of paper money has economized expand their demands when they see the use of gold to an extraordinary ex- a chance of using money profitably in tent, every piece of paper is still a any kind of enterprise or speculation. certificate representing a right to so Consequently the demand increases much gold, and as we shall see later, when trade is active and a general it is only in England that this is so, spirit of buoyant enterprise is abroad not only in theory but in practice. in mercantile circles. There is also a

The consequence of this important regular tidal movement in the demand fact is that the supply of inmoney de- for money, when crops are harvested pends to a certain definite extent on either at home or abroad. This makes the supply of gold. There is, of course, itself felt keenly, for in the far-off never enough gold in the country to country districts where banking is little cash all the pieces of paper that are developed, crop movements require flying about in payment for all kinds actual currency to finance them, and of transactions; this is not necessary, consequently we find that in the aubecause most of the pieces of paper are tumn season there is, under normal mere book entries between banks, and circumstances, a regular demand for are crossed off against one another gold in the great agricultural countries without intervention of coin, so that a such as the United States, Egypt, and store of gold is only wanted for the Argentina. Hence it is that in the aufew cases in which coin is used, and tumn we commonly hear of "tight to act as a reserve in the case of emer- money' in the City.

We have thus arrived at the follow- England notes to the Bank and change ing conclusions: That the Bank Rate, them, there and then, into sovereigns. or price at which the Bank of England No other centre gives this facility. If will lend money, rules the rates it does not suit the Bank of France to charged by other moneylenders in Eng part with gold, a holder of its notes is land, and affects those current else- liable to be paid in silver five-franc where; that money is wanted when pieces, mere tokens, intrinsically worth trade and speculation are active and about half their face value. In Gerwhen crops are being harvested; and many the obligation to pay gold exists that the supply of money depends to in theory, but in practice the Reichsa certain extent on the amount of gold bank makes matters so unpleasant to which is held in the vaults of the Bank

those who ask it for gold when it of England.

does not want to part with it that even A demand for money in the United “Captain von Köpenick" would hesi. Kingdom is naturally met by drafts on tate about raiding its store. In New this store kept by the Bank of Eng. York it is generally easy to obtain land. We have seen that it is the gold; a holder of a draft on a New bankers' bank, and consequently has York Bank asks to have it paid in gold to meet any requirements that fall on

certificates, one of the many forms of the other banks. But it also is true American paper currency,

and exthat a demand for money in the great changes the certificates into gold at producing countries abroad also falls

the Treasury. But the possession of a to a greater or less extent on the Bank

credit in New York does not give an of England. This happens partly be.

absolute right to a gold certificate, and cause England is the only country it is quite conceivable that the supply which has sufficient commercial cour

of them might be made difficult. It folage and self-reliance to buy the goods lows from this great advantage_the that all other lands produce, without

importance of which it is difficult for imposing artificial restraints on their

those not actually engaged in business importation, and so is the great mart to

to measure-possessed by London as a which all surplus produce tends to be

monetary centre, that London is the sent. The magnitude of her purchases,

world's banker, and that commercial especially when crops and raw mate

transactions all over the world are setrial are coming to market, gives the

tled by a draft on London, the only sellers the right to demand gold, and

place where the possession of a draft gold is practically an English product gives the immediate and unquestioned owing to the large number of gold right to its equivalent in gold. And mines in other countries owned by

here we see a very important reason English shareholders. But another

why active trade elsewhere is likely to very important reason why a demand

affect, sooner or later, the Bank's store for gold elsewhere is likely to fall on

of gold. London lies in the fact that of the

And if any accident happens any. great financial centres London is the

where, if one of those moments arrives only one in which the obligation to pay when gold, immediately and on demand, is recognized as an essential part of the

the teeming earth

is with a kind of colic pinch'd and banking system. Any one who re

vexed, ceives a cheque in England can get gold for it or Bank of England notes; and a San Francisco earthquake reand he can then take the Bank of sults, we find that British insurance companies, with their enormous world- And the result of this measure is that wide business, have to make good money in London is worth a higher nearly half the realized losses, and price, and foreign traders and finanhere again is another pull on London's ciers are encouraged not to withdraw gold store.

money from London but to leave it So that when we have active trade there, and to send more money to Lonall over the world, with great expan- don, to earn the high rates that it comsion and development going on in more mands. And so, though London cannot backward countries, and at the same get much gold out of other foreign centime there is great speculative activity tres, because of the difficulties that among the dare-devil operators of the they place, as we have seen, in the New York Stock Exchange, and then way of its export, a high Bank Rate the autumn season arrives with har- checks its withdrawal and enables us vests to be financed and paid for, and to keep the proceeds of our gold mines at the same time San Francisco claims as they come in from South Africa and are coming forward for settlement, and elsewhere. fears of Socialistic legislation at home As originally given, the above explaare making investors put money into nation of the Bank Rate and its move foreign securities and so increasing the ments was summed up by the compull that foreign countries have on our ment that "it all seems very stupid." gold store, it is not surprising to find I agreed readily, and, hoping that femthat the gold in the Bank's vaults has inine intuition might flash out a new been reduced to a point at which the and ideal currency system, free from directors are obliged to take energetic barbaric dependence on the supply of measures for its protection.

a metal, pressed for a suggestion of And this they do by raising the rate improvement. But our hostess gave or price at which they will lend money, the signal and the opportunity was and so influencing all the other money- lost. lenders in London to do the same.

Hartley Withers. The Cornhill Magazine.


To'kaya was a fine specimen of a scalp was clean shaven, and chin and Malay of the last generation. He was cheeks were kept free of occasional some fifty years old, but time had had hairs by the use of tweezers. The little apparent effect upon his wiry striking feature of his face was a small, agile frame. He was a short man, not fierce, closely cropped moustache of more than five feet four inches in rather coarse, bristly hairs, whose al. height, of neat trim build, with square most snowy whiteness afforded a brilshoulders and small hands and feet; he liant contrast to the smoothness of his had little superfluous flesh, but the face and head and to the rich olive curves of his arms and chest showed a brown of his complexion. muscular development considerably were somewhat sunken, with an exgreater than would have been expected. pression of suffering and patience, but His head was small and well shaped, the crows' feet at their corners often its poorest feature being a broad and curved into unexpected lines of humor. somewhat flat nose. The whole of his In every expression the old man showed

His eyes

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