Bank rate and the money market in England, France, Germany, Holland, and Belgium, 1844-1900;

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J

BANK RATE
AND THE MONEY MARKET

BANK RATE

AND THE MONEY MARKET

IN ENGLAND, FRANCE, GERMANY
HOLLAND, AND BELGIUM

i 844- i 900

By R. H. INGLIS PALGRAVE, F.R.S.

EDITOR OF THE "DICTIONARY OF POLITICAL ECONOMY"

DEMONSTRATIO LONGE OPTIMA EST EXPERIENTIA

Francis Bacon, Novum Organum

LONDON

JOHN MURRAY, ALBEMARLE STREET

1903

[All Rights Reserved]

PREFACE

The fact that the rate of discount charged at the Bank of
England fluctuates more often and more severely than the rate
at any other of the important banks of Europe led me to
consider what the causes of this instability might be. There
are several ways in which the position of the English Money
Market is different from that of any other country, all which
might have an influence in this direction. Among these are
the constant liability to sudden and large demands for specie
for export, and the long-standing arrangement by which the
whole specie reserve of the entire country is placed practically
with one bank alone, the Bank of England, thus causing any
demand of this character to centre there. These reasons are
of weight, but they appear hardly sufficient to account com-
pletely for what has occurred. After endeavouring fruitlessly
to find explanations among the ordinary conditions of business
for the great fluctuations in the rate of discount which have just
been referred to as characteristic of the London Money Market,
I was led to investigate the question whether the legal obli-
gations under which the Bank of England carries on its
operations could have anything to do with these fluctuations
and consequently with the rate of interest charged.

No other bank, as will be explained further on, carries on
its business under similar conditions. The banks on the con-
tinent of Europe are conducted under strict rules — stricter
rules in some ways than those in force at the Bank of
England. But at none of these banks are there conditions
at all corresponding to those imposed by the Act of 1844.

To make this investigation out thoroughly required much
purely statistical work, on which I have now been engaged for

vi PREFACE

_.

a long period. I put forward the results, not as my personal
opinion, nor as a criticism of the principles on which the Bank
Act is founded, but as an analysis of what has occurred since
that Act came into force.

In carrying this work out, I have continued the investigation
commenced by myself in 1873 witn a paper read before the
Economic Section of the British Association at their meeting
at Bradford in that year. This paper was reprinted in the
Journal of the Statistical Society of London for December,
1873, and afterwards published separately in 1874 under the
title of An Analysis of the Transactions of the Bank of England
for the Years 1844-72. Since that date the connection between
the Money Markets of England and of Europe generally has
become so much closer that it was needful to carry the inquiry
further and to include some notice of the transactions of the
Banks of France and Germany. The results of this inquiry are
given in the volume entitled Bank Rate in England, France, and
Germany \ 1844-78, published by Effingham Wilson in 1880.
Subsequent events again called my attention to the subject, and
I read a paper on it under the heading of " The Bank Acts of
1844-5, and the Bank Rate," before the Institute of Bankers,
March 2nd, 1892. I reprinted this paper, in which the rates
charged in Holland and in Belgium were also included, but as
it and my previous publications on the subject are now out
of print, I have been led to investigate the subject again and
have brought the inquiry down to the close of the nineteenth
century.

Thus this investigation, which was begun originally as an
analysis of the accounts of the Bank of England, has gradually
extended itself till it includes not only remarks on the Money
Market of London, but on those of France, Germany, Holland,
and Belgium. In all these countries, as well as in our own, a
very great development in the business of banking has taken
place during the last half-century.

But while business has extended itself very largely among
those countries, this has not been accompanied with the same
constant tendency to fluctuation in the rate of discount as has
been the case in London, nor have the fluctuations been as
sharp.

PREFACE vii

I have not thought it necessary to include the wonderful
growth of banking operations which has taken place in the
United States during the same period, because, although the
growth in that country has been both proportionally and actually
far larger than in Europe, and though the Money Market of
New York is very closely connected with that of London, yet
the circumstances of banking in the United States are so
different from those which obtain in this country and on the
continent of Europe that it did not seem possible to insti-
tute any useful comparison between them, for the purposes for
which this volume is written. These are to call attention to :
The increase needed in our specie reserve ; and the desirability
of maintaining greater stability in the rate of discount.

To take the first point : — The increase needed in our

specie reserve. Whilst the reserve which the Bank of

England keeps is now smaller in proportion to its own

liabilities than it was forty or fifty years ago, it is far smaller

in proportion to the liabilities of the other banks in the

United Kingdom at the present time than formerly. Besides

being smaller, the reserve may be weaker because the amount

of specie required to be held against the note issues is relatively

less. This follows from Clause V. of the Bank Act, 1844,

which enacts that on the extinction of any portion of the note

issue of the country banks of England and Wales an addition

may be made to the issue of the Bank of England against

securities to the extent of two-thirds of the amount of the

country note issue cancelled. The effect of this has been since

1844 to increase the securities in the Issue Department of the

Bank of England to the extent of ^4, 175,000. Of this

amount of securities, ^"3,175,000 has been added since 1880.

For an example of the manner in which this arrangement

occasionally works out, the figures of the Issue Department as

given in the returns of 2nd July, 1879, and 12th November,

1902, are quoted. The balance between the amount of notes

issued, and those in the hands of the public is entered as

"Notes" among the assets of the Banking Department and

forms the greater portion of the reserve of the Bank of

England. The gold held against these notes in 1879 and

1902 is shown in the figures which follow: —

VU1

Notes issued

Notes issued

PREFACE

Issue Department
^49,022,675

^49,022,675

;£49>339»°9°

^49.339,090

Government debt .
Other securities
Gold coin and bullion
Silver bullion

2nd July ', 1879.

£11,015,100

3>984,9°°
. 34,022,675

^49,022,675

12 th November ', 1902.

Government debt .
Other securities
Gold coin and bullion

£11,015,100

7,I59»9o°
• 31,164,090

;£49>339>°90

Notes issued in 1879 £49,022,675
„ in 1902 . 49>339.°9o

Notes issued in 1902, more 316,415
Gold less . . . 2,858,585

,£3,175,000

Gold in 1879 .
„ in 1902 .

Gold less in 1902 .

Securities in 1902 as com-

£34,022,675
31,164,090

2,858,585

pared with 1879, more £3,175,000

It is to the reserve of the Bank of England that the other
banks must have recourse in any time of pressure. The Directors
of the Bank of England consider, no doubt, that the reserve
they maintain is adequate to their own requirements, but it is
only needful to compare it with the vast amount of banking
deposits now held to see how entirely inadequate it is to be
the reserve of all the banks of this country. Matters have
gradually drifted into this position. The arrangement is an
anomalous one, but what we are concerned with now is not
to discuss the manner in which it has arisen, but to consider
how the existing system may be strengthened and improved.

The next point is : The desirability of maintaining greater
stability in the rate of discount. Great instability in the rate
of discount is a very prejudicial thing to the interests of
commerce, and hence to those of banking. The close com-
petition between one country and another renders it a far
greater danger to our business now than previously. A supply
of capital at a fairly low rate, and at a rate which may be
expected to remain tolerably constant, is as important to trade
as a steady supply of food and other necessaries of life to

PREFACE ix

everyone, and of the materials on which he operates to the
manufacturer. Instability in the rate for money tends to
render the results of trade more uncertain than they other-
wise would be, and is sufficient even to prevent business
enterprises from being entertained which otherwise might be
carried out to the advantage of the country. The chapters
which follow show how much more equable the rate of dis-
count has been at the Bank of France and at the Bank of
Holland than in this country. Nearly the same may be
said of the rates in Belgium and in Germany, although in
Germany a higher rate has been charged than in this country ;
in the three other countries named the rates have not only
been more equable, but they have been lower.

In many ways the position of matters is greatly altered
from what it was in the early years over which this inquiry
has extended. Thus to take two directions only in which
the reserve of the Bank of England and the rate in con-
sequence is affected. The first is through the great increase
in the Scotch and Irish circulation. This increase causes
larger demands on the reserve ; these fifty years ago were
comparatively small, but are now of serious importance. The
next is the great increase in the note circulation of the Bank
of England. Every bank note in the hands of the public,
whether held by a banker or a private individual, means so
much the less in the reserve of the Bank. It is doubtful
whether, with the great growth in the use of cheques, a larger
number of bank notes is really required, but the vast increase
in the banking offices of the country, now about 6,700 —
probably not more than 1,000, if so many, in 1845 — of itself
causes a greater number of notes of the Bank of England
to be entered as " issued " at all times. These notes are of
necessity held by the banks in England and Wales as "till-
money," and they can scarcely be said to be in circulation.
If these notes were in the Banking Department at the Bank
of England the reserve would be considerably stronger. The
requirements for Bank of England notes, now that the English
country note issue is almost extinguished, thus help to increase
the instability in the rate of discount. The following pages
will explain all these matters more fully.

•

PREFACE

I have endeavoured in them to bring together the main
outlines of the facts in the belief that the information thus
supplied may lead to a clearer understanding of the subject
generally. And here I desire to express the hope that the
large mass of figures and tables with which many of the follow-
ing pages are filled will not deter anyone who desires to study
the subject from entering on the investigation. Every effort
has been taken to place the facts clearly before the reader, and
to express the calculations on which they are founded in as
concise a form as possible.

Every table was worked out, week by week, and month by
month, into a series of yearly averages, in which form the book
would have been published but for the doubt that this would have
been too cumbersome for the general reader. The statement
has therefore been brought out in groups, principally of ten
years each. This method renders the main results more easily
intelligible, but the absence of the yearly statements omits
necessarily many points in detail which are not without interest
to the student. The tables, however, as they stand show the
history of what has occurred in a clear outline.

Many more persons are interested in banking questions now
than at any previous time, owing to the increase both in the
numbers of the shareholders and of the customers of banks.
To all of these the questions dealt with in these pages are of
interest, treating as they do, not only of the important subject
of the banking reserve of the country, but of the severity of
the fluctuations in the rate of discount.

In conclusion, I have to express my thanks to the pro-
prietors and the editor of the Bankers' Magazine for permission
to employ again materials which I had worked on in that
journal. I desire also to recognise the help given me by
many friends, especially those engaged in banking, who have
assisted me in many ways and by valuable suggestions, for
which I most cordially thank them.

R. H. INGLIS PALGRAVE.

Belton, near Great Yarmouth,
Aprils 1903.

CONTENTS

CHAPTER I

INTRODUCTION

Weekly Return of Bank of England continually studied, p. I — Important points in it omitted
at present time, pp. 1-2 — Table I : Weekly Statements of the Liabilities and Assets of the
Bank of England, with full details, 7th September, 1844, and 1st January, 1848, pp. 2-3
— Table 2: Example of Returns published by order of Houses of Parliament, up to
twenty-five years ago, on which this Analysis of Accounts of Bank of England is based,
pp. 4-5 — Greater publicity as to Accounts of Bank of England desirable, p. 6 — More
publicity given as to Accounts of other Banks now than formerly, less as to Bank
of England, p. 7 — Note circulations of Bank of England, Scotch and Irish Banks
influence Reserve of Bank of England, p. 8 — Important recent Events influencing
Money Markets of Europe and America, p. 9 — Analysis of Transactions of Banks of
France, Germany, Holland, and Belgium included, p. 9 — Rates of Discount at these
Banks, p. 9 — Table 3 : Annual Averages of Transactions of the Bank of England for
the years 1 844-1900, pp. 1 1-1 5 ..... Pages 1-15

CHAPTER II

THE PRINCIPAL DIVISIONS OF THE ACCOUNTS OF THE BANK OF ENGLAND

The principal Divisions of the Accounts of the Bank of England are given in a series of
annual averages, p. 16 — Commencement of Analysis of Table 3, p. 17 — Capital of the
Bank of England, p. 17 — Notes issued, Specie and Securities in Issue Department,
p. 17 — Total Deposits and Bank Post Bills, pp. 17-19 — Private Deposits, p. 18 — Effect of
Chinese- Japanese Loan, 1895-6, p. 18 — Liabilities of the Bank, p. 19 — The Reserve,
pp. 19-20 — Proportion of Reserve to Liabilities, p. 20 — Bankers' Balances, pp. 20-22 —
The Note Circulation, pp. 22-23 — The Bankers' Balances and the Reserve, pp. 23-27 —
The Clearing House — Stock Exchange " Settling " Days, p. 23 — Bankers' Balances with
Bank of England represent " Till Money," p. 23 — Table showing Proportion of Reserve
to Liabilities, and of Bankers' Balances to Reserve, 1846-77, p. 24 — Examination of this
Table, p. 24 — Deposits, etc., of the Bank during panics of 1857, 1866, and 1875, pp.
24-25 — Amounts of " Other Deposits, Balances of London Bankers, Other Securities,
and Reserve " during times of pressure in 1875, 1878, and 1890, p. 25 — The Baring Crisis,
1890, p. 26 — The Other Securities, their increase since 1844, p. 27 — Bills Discounted,
amount not known now, p. 28 — Mr. Thomson Hankey on "Bills" and "Mortgages,"
p. 29 — Average of Coin and Bullion, pp. 30-32 — Issue Department, compelled by Act
of 1844 to receive all Gold Bullion brought to it, p. 30 — Bullion held sometimes larger
in amount than Notes in circulation, pp. 31-32 — Average Rate of Discount, p. 32 —
Divergence between Market Rate and Bank Rate, 1845-1900, p. 32 — Table 4 : Annual
Averages of Bank Rate and Market Rate, and differences between them, p. 33 . 16-33

CHAPTER III

THE BALANCES OF THE LONDON BANKERS WITH THE BANK OF ENGLAND

Desirability of publishing information as to Balances of London Bankers with Bank, p. 34
— No arrangement between the Bank and Bankers as to manner of dealing with
Balances, p. 34 — Table 5 : Annual Averages of London Bankers' Balances with the Bank

xii CONTENTS

of England, 1844-77, p. 35 — Dates when Bankers' Balances exceeded the Reserve,
1844-77, p. 36 — Growth of Bankers' Balances unnoticed, p. 37 — Large part of
Deposits at Bank consists of Bankers' Balances, p. 37 — Desirability of publishing
amounts held by Bankers with the Bank, in order to show of what the Reserve really
consists, p. 37 — Bank of England. Account for the week ending December 26th,
1877, showing Proportion of Reserve to Liabilities in ordinary form, and after deducting
Bankers' Balances, p. 38 — Bankers' Balances cannot form part of Reserve of Bank of
England and of other Banks as well, p. 39 — These Balances are the ultimate Reserve
of all Banks in the kingdom, p. 39 — Practice of loaning out Reserves of Banks
peculiar to this country, p. 39 — Bankers' Balances with the Bank of England included
among its Liabilities, pp. 39-41 — Periodic demands for money, p. 41 — Better
arrangements with regard to Bankers' Balances and the Reserve might be made, p. 42

Pages 34-43

CHAPTER IV

THE BALANCES OF THE LONDON BANKERS WITH THE BANK OF ENGLAND.
HOW FAR THEY FORM AN EFFICIENT RESERVE

Correspondence between Lord Aldenham (Mr. H. H. Gibbs) and Professor B. Price on
the Bankers' Balances, pp. 44-45 — Portion of Balances of Bankers at the Bank of
England only there for "safe custody," pp. 45-46 — Normal and Abnormal Balances
of Bankers, p. 45 — Large part of Bankers' Balances rather "Till Money" than Reserve,
pp. 45-46 — Bankers' Balances should be entered under a separate heading in accounts
of the Bank, pp. 46-47 — Duty of the Bank : Protection of Reserve, p. 47 . 44~47

CHAPTER V

THE PUBLISHED RATE OF DISCOUNT OF THE BANK OF ENGLAND

Change made in 1878 as to the fixed Minimum Rate of Discount at the Bank of England,
p. 48 — The Bank Rate down to 1839, p. 49 — The Bank Rate between 1839 and 1844,
p. 49 — "New System of Discounting" in 1844, p. 49 — Line taken by the Bank with
regard to relative position of Market Rate to Bank Rate in 1844, 1848, 1857, 1878,
pp. 49-50 — Drawbacks to a published fixed Rate, p. 51 — Announcement by the Bank as
to Rediscounting for Bill-Brokers, practice in 1878 and 1890, p. 51 — This unfavourable
to quiet working of the Money Market, p. 52 — Banks on the Continent, Rediscount
freely with Central Bank ; convenience of this arrangement, p. 52 — Bankers hardly
Discount for their customers now so regularly as previously, pp. 52-53 — Development
of Bill-Broking, pp. 52-54 ...... 48-54

CHAPTER VI

THE PUBLISHED RATE OF DISCOUNT OF THE BANK OF ENGLAND

AND THE RESERVE

The Published Rate of Bank not so clear a guide to Market Rate as formerly, pp. 55-56 —
Value of opinion of Bank Directors on fixing Rate, p. 57 — Constitution of Governing
Body of Bank of England, pp. 57-58 — Mr. Bagehot's remarks thereon, p. 58— Continuity
in management needed, p. 58 — Bank should observe a settled policy, p. 58 — Constitu-
tion of Governing Body of Bank discussed in the Report of the Select Committee of the
House of Lords on Commercial Distress, 1847-8, pp. 58-60 — "Want of Permanence
and of Consistency " in System of Government of Bank commented on in that Report,
p. 60 — Need of Authoritative Rate, p. 61 — Joint Committee representing Bank and
London Bankers could fix Rate, p. 61 — Competition for Deposits by Banks undesirable,
p. 61 — Unduly High Rate of Interest on Deposits cause of danger, p. 62 — Fixing the
Rate and keeping the Reserve should go together, p. 62 — Practice of the Associated
Banks of New York of publishing weekly average of Reserves, p. 63 . . 55-63

CONTENTS xiii

CHAPTER VII

BILLS DISCOUNTED AND TEMPORARY ADVANCES OF THE BANK OF ENGLAND

Capital, etc., of Bank of England I7£ millions, p. 64 — Deposits held by Bank how
employed, p. 64 — Division of Securities held by Bank into " Government" and " Other"
Securities, p. 64 — Mr. Thomson Hankey's remarks on Investment of Deposits of Bank,
p. 65 — Amount of Railway Debentures, about 4 millions in 1865, p. 65 — Fluctuations
in the amount of Bills Discounted, p. 66 — Estimated amount of Bills in circulation,
including Foreign Bills, pp. 66-67 — Influence of Bank of England on Discount Market
formerly greater than at present, p. 67 — Bills Discounted and " Other " Securities, p. 67
— Discounters of Bills have recourse to Bank mainly in times of difficulty and pressure,
p. 67 — Temporary Advances made by the Bank of England indicate immediate wants of
business, p. 67 — Fluctuations in Temporary Advances, pp. 67-68 — Fluctuations from
week to week, p. 68 — Influence of periods of pressure distinctly marked, p. 68 — Desir-
ability of continuing information as to Bills Discounted and Temporary Advances from
1875 onwards, p. 68 — Bank of England in same position as any other bank with regard
to its private business, p. 69 . . . . Pages 64-68

CHAPTER VIII

NOTE CIRCULATION OF THE BANK OF ENGLAND, BULLION HELD IN THE ISSUE
DEPARTMENT, AND THE ENGLISH COUNTRY NOTE CIRCULATION

Note Circulation of the Bank of England, Bullion held in the Issue Department, and the
English Country Note Circulation. Description of Table 6, pp. 69-72 — Table 6 :
Monthly Averages of Note Circulation of Bank of England 1845- 1900, p. 70 — Table 7 :
Monthly Averages of Bullion in the Issue Department 1845-1900, p. 71 — Increase in
Note Circulation of the Bank of England, p. 72 — Bank of England Notes in circulation
in London and the Provinces. These Notes take the place of lapsed Country
Note Issues, p. 72 — Increase in Note Circulation compared with increase in Metallic
Circulation, p. 72 — Mr. Newmarch's estimate of Metallic Circulation, p. 73 — Other
estimates of this, p. 73 — Fluctuations in Bank Note Circulation. Times of diminution,
1879-85 ; Times of increase, 1894-1900, p. 73 — Bank Act of 1844 intended to suppress
English Country Note Circulation, p. 74 — Disadvantages of this, p. 74 — Composition
of Circulation of Bank of England Notes, p. 74 — Table 8 : Monthly Averages of Eng-
lish Country Note Circulation, 1845-1900, p. 75 — Increase in use of smaller Notes,
p. 76 — Bullion held by Bank, p. 76 — Increase in Bullion held, p. 76 — Proportion of
Annual Average of Bullion and Annual Average of Banking Liabilities, p. 76 — Propor-
tion of Bullion held to Deposits and Circulation, pp. 76-78 — Relation between Bullion
held and Bank Rate, p. 76 — Table 9 : Showing composition of Bank of England Note
Circulation, 1856-76, p. 77 — Strength of the Bank dependent on Proportion borne by
Specie to Total Liabilities, p. 78 — Proportion smaller in 1900 than in 1894, p. 78 —
— Separation of Issue Department from Banking Department ; some results of this,
p. 78 — Silver Bullion formerly held by the Bank, p. 78 — Question as to desirability
of the Bank again holding Silver Bullion in connection with low quotation for Indian
Exchanges, p. 79 — Silver more distinctly "money" in Europe in 1844 than at present,
p. 79 — Table 10 : Annual Averages of Silver Bullion held in Issue Department of
Bank of England, and proportion of the same to the Gold Bullion and Coin held
during the years 1844-53 an^ in 1860-61, p. 80 . . . 69-80

CHAPTER IX

THE RESERVE AND THE LIABILITIES OF THE BANK OF ENGLAND

Proportion of Specie to Liabilities at the Banks of France, Germany, Holland, and
Belgium, pp. 81-84 — Table 11 : Monthly Averages of Liabilities and Reserve of the
Bank of England, 1845- 1900, PP- 82-83 — Division of Bank of England Account into
Issue Department and Banking Department, p. 84 — Reserve of Notes represents greater

xiv CONTENTS

part of Specie at command of the Bank, p. 84 — Reserve of Bank smaller than Coin anc
Bullion held, p. 84 — Fluctuations in the proportion of the Reserve to the Liabilities,
pp. 84-85 — Description of Table 11, pp. 84-85 — Comparison of Table 11 with Table 12
(Monthly Averages of Minimum Rate of Discount at Bank of England) and with Table
37 and Table 38, p. 85 — Summary of proportion of Reserve to Liabilities between 1845-
1900, p. 86 — Number of Variations in the Rate of Discount between 1845-1900, p. 86
— Mean of the Extreme Variations between 1845 an^ 1900, p. 86 — Years with greatest
Fluctuations in the Rate, 1845-1900, p. 87 — Difference between Rate in Highest and
Lowest Month and Mean of Extreme Variations, 1 845-1 900, p. 87 — Proportion of
Reserve to Liabilities connected in general way with fluctuations in the Rate charged,
p. 87 — Average Rate for each month during the fifty-six years, 1845- 1900, P« %% —
Proportion of Reserve to Liabilities at three dates of sharp pressure, 1847, 1857, and
1866, p. 89 — Act of 1844 only infringed in 1857, p. 89 — Particulars of what occurred
in these crises and also in 1890, pp. 89-90 — Low Bank Reserve accompanied by a
High Rate of Interest, p. 90 — General Averages of the proportions of Reserve to
Liabilities and of London Bankers' Balances to Reserve when rates specified were
charged, 1844-78, p. 90 — Act to Indemnify Bank of England for excess issue over
limit allowed in Bank Act, 1844, 1857, pp. 91-93 — Bill proposed by Lord Sherbrooke
(Mr. Lowe) in 1873 to allow excess issue, pp. 93-94 . . . Pages 81-94

CHAPTER X

VARIATIONS IN THE RATE CHARGED BY THE BANK OF ENGLAND

FROM I 844-I 900

The Rate of Discount a valuable index to the fluctuations in the Money Market, p. 95 —
Description of Table 12, pp. 95-96 — Description of Table 13, pp. 96-103 — This
Table and Tables 12, 14, 37, and 38, giving details as to Rate charged, form chart showing
course of market value of money, p. 96 — Great difference in the course of business
between one year and another, p. 96 — Variations in Rate in different years, pp. 96-101
— Table 12: Monthly Averages of Minimum Rate of Discount of Bank of England,
1 845-1 900, p. 97 — Table 13: Table of Changes in the Rate of Discount charged
by the Bank of England, and the Number of Days at each Rate, in each year, 1844-
1900, pp. 98-99 — Table 14: Bank of England Rates of Discount, 1844- 1900. The
number of days at each Rate arranged from the highest number to the smallest, and
also from the lowest Rate to the highest, p. 100 — Facts shown in Table 13 brought
together for reference in Table 14, p. 101 — Summary of examination of Tables of Rates,
pp. 101-103 — A Low Rate prevalent before 1854 ; High Rates more frequent latterly,
p. 102 — Effect of Chinese-Japanese War indemnity (1895-96) on the value of money,
p. 103 — The vast growth of loanable capital in the country renders it more difficult for
the Bank to maintain the needed hold over the Market, pp. 103-104 — Deposits of
Banks and amount of Reserve of Bank of England, p. 104 — The fluctuations in the
Rates charged by the other Banks of Europe, p. 105 . . . 9S~loS

CHAPTER XI

SOME OF THE CAUSES WHICH INFLUENCE THE RATE OF INTEREST
CHARGED BY THE BANK OF ENGLAND

Relation between the Reserve of the Bank of England and the current Rate of Interest,
p. 106 — Tendency towards lower rates for money during the last thirty-six years, p. 106
— Average Rates for groups of years, 1845-54, 1895-1900, pp. 106-107 — Influence of the
different seasons of the year on the Fluctuations of the Rate and on business generally,
p. 107 — Business activity at certain seasons of the year, p. 107 — Periodic increases of
Scotch circulation, p. 107 — Particulars of Scotch circulation in May, June, October,
November, and December for 1897-1900, pp. 107-109 — The most important causes of
increased Scotch Note Issues in May and November, p. 109 — Reference to monthly
fluctuations in the Rate at Banks of France, Germany, Holland, and Belgium, p. 110
— Connection between demands made on account of Irish and Scotch Note Circulation
and the Liabilities and Reserve of the Bank, p. 1 10 — Mr. Weguelin (1856) on the influence
of the Scotch and Irish Circulation on the Bank of England Reserve, p. no . 106-111

CONTENTS xv

CHAPTER XII

THE SCOTCH AND IRISH NOTE CIRCULATION

Fluctuations in the Irish and Scotch Note Circulation, and connection between this and the
Bank of England Reserve, p. 112 — Increase of Scotch and Irish Note Circulation since
1845, P- I12 — Table 17 arranged to show the influence of the circulation on the Reserve of
the Bank, pp. 112-113 — Dr. Charles Gairdner on the principle by which the holding of
specie is regulated, pp. 113-115 — The Reserve of the Bank of England the only source
from which to draw specie, p. 115 — The specie held not a special security, but an asset
against general liabilities, p. 115 — Fixed Issues of the Scotch Banks, 1 845-1 900, p. 115 —
Fixed Issues of the Irish Banks, 1845-1900, p. 115 — Summary Tables, Scotch and Irish
Note Circulation and Specie held, p. 116 — Clauses of the Bank Act of 1845 which
regulate the holding of specie against the excess Issue in Ireland and Scotland, pp. 1 16-1 17
— Table 1 5 : Monthly Averages of Note Circulation and of Gold and Silver Coin held in
Scotland from 1845-1900, pp. 1 18-120 — Table 16: Monthly Averages of Note Circula-
tion and of Gold and Silver Coin held in Ireland from 1845- 1900, pp. 1 21-123 — Table
17 : Monthly Averages of Rate of Discount at the Bank of England and of Note Circu-
lation and Gold and Silver Coin held in Scotland and Ireland, 1845-1900, pp. 124-131

Pages 1 1 2-13 1

CHAPTER XIII

RETURNS OF THE LONDON BANKERS* CLEARING HOUSE

The Returns of the London Bankers' Clearing House a source of information as to
business activity in the country, p. 132 — Table 18: Monthly Averages of London
Bankers' Clearing House Returns, 1868-1900, p. 133 — Comparison of Monthly
Averages and Annual Averages, p. 134 — Variations of Turnover of Clearing House have
diminished, while those of the Rate of Discount have increased, p. 134 — Totals for
1 868- 1 900, p. 134 — Fluctuations in the Clearing House Returns show no correspon-
dence with those of the Rate at the Bank of England, p. 135 — Months of Highest
Rates at the Banks of England, France, Germany, Holland, and Belgium, compared
with Clearing House Returns, pp. 135-136 — Months of Maximum Note Circulation
in Scotland and Ireland, p. 136 — Transactions of the Clearing House earlier than 1868,
p. 136 — Table 19: Exports and Imports, Clearing House Returns, and total Bank Note
Circulation, years 1861, 1871, 1881, 1891, and 1900, p. 137 . . . 132-137

CHAPTER XIV

THE AUTUMNAL DRAIN

The Autumnal Drain takes its origin from the requirements of the season, p. 138 — Table
20 : Statement showing the Autumnal Movements in Gold and Silver Coin held by the
Bank of England, 1881-1900, p. 138— Influence of the Bank Acts of 1844-5 on the
Autumnal Drain, p. 139 — Gold taken from the Reserve of the Bank of England as
basis of Note circulation in Scotland and Ireland, p. 139 — Examples of this and large
proportion of amount drawn from Bank during the Autumnal Drain on account of re-
quirements of Acts of 1844-5, P- *39 — Effect of this movement on the Bank Rate, p. 139

138-139

CHAPTER XV

VARIATIONS IN THE RATE CHARGED BY THE BANK OF FRANCE

FROM I 844-I 900

Reasons for selecting 1844 as the starting-point of these investigations, p. 140 — Organisa-
tion of Bank of France, pp. 141-143 — Table 21 : Monthly Averages of Minimum Rate
of Discount of Bank of France from 1845-1900, p. 142 — Number of Branches, p. 143
— Description of the business of the Bank of France, pp. 143-148 — Table 22 : Changes
in the Rate of Discount charged by the Bank of France, and the number of days at

xvi CONTENTS

.

each Rate in each year, 1844-1900, pp. 144-145— Table 23 : Bank of France Rate of
Discount, 1 844- 1 900. The number of days at each Rate, arranged from the highest
number to the smallest, and from the lowest rate to the highest, p. 146 — Management
of the Business in times of difficulty, p. 148 — Assistance given to England during the
Baring Crisis, p. 148 — Other Banks in France, pp. 148-149 — Difference between Banking
in England and in France, pp. 148-149 — Difference between number and extent of varia-
tions in the Rate in England and in France, pp. 150-151 — Comparisons from 1890-1900,
p. 151 — Comparison of Rates in years 1847, 1857, 1866, and 1890, p. 152 — Reserve in
the Precious Metals at the Bank of France, p. 152 — Table 24: Gold and Silver held
by the Bank of France, 1 877-1 900, p. 153 . . . . Pages 140- 1

CHAPTER XVI

VARIATIONS IN THE RATE CHARGED BY THE IMPERIAL BANK OF GERMANY

FROM I 844- I 9OO
Origin of the Bank of Germany, p. 155 — Table 25 : Monthly Averages of Minimum Rate of
Discount of the Bank of Germany, 1845- 1900, P- T5^ — Table 26 : Changes in the Rate of
Discount charged by the Bank of Germany, and the number of days at each Rate in each
year, 1844-1900, p. 157 — The Bank of Germany, like the Bank of France, under the con-
trol of the State, p. 158 — Table 27 : Bank of Germany Rate of Discount, 1844-1900.
The number of days at each Rate, arranged from the highest number to the smallest,
and from the lowest Rate to the highest, p. 158 — German Bank Acts of 1875 and 1899,
pp. 158-159 — Supervision and Direction of the Bank of Germany, p. 159 — The supreme
control over the Bank exercised by the Chancellor of the Empire, p. 159 — Number
of Branches, p. 160 — Number of alterations in the Rate of Discount compared with
England and France, p. 160 — Disturbances caused by Gold Currency introduced into
Germany in 1872, p. 160 — Banking more developed in Germany than in France, p. 160
— Other Banks in Germany, p. 160 — Business carried on by the Bank of Germany com-
pared with that carried on by the Bank of France and by the Bank of England, p. 160 —
Comparison of Bills discounted in France and Germany, pp. 160-16 1 — Business of the
Bank of Germany in Current Accounts (Giro-Verkehr), and transmitting money from
one part of the country to another, p. 161 — Note Circulation, pp. 162-166 — Limit of
the authorised Note Issue, pp. 162-163 — Tax on the Excess Issue, p. 163 — Differ-
ence between this system and the system in England, p. 163 — Dangers of the English
system observed by German Legislators, p. 163 — Different place taken in business matters
by the Note Circulation in Germany to that taken by the Note Circulation in England,
pp. 163-164 — Development of the Note Circulation, p. 164 — Further comparison of
Note Issues in Germany and England, p. 166 — Three Limitations on the Note Issue
of the Bank of Germany, (1) the Legal Limit, (2) the tax of 5 per cent, on the excess
issue, (3) the requirement that one-third of the issue should be held in cash, p. 166
— Discount of Bills by Bank of Germany, p. 166 — Foreign Bills held, p. 167 — Pro-
portion of these on England, p. 167 — Inland and Foreign Bills held by Bank, p. 167
— Fluidity of Securities held by Bank, p. 167 — Specie held by the Bank, p. 168 —
Table 28: Coin and Bullion, 1876-1900, p. 168 — Table 29: Annual Averages of Note
Circulation, 1 876-1 900, p. 169 — Occasions when the Note Issue exceeded the Legal
Limit, the Dates of these, and the Duty on the Excess, pp. 169-171 — Rate at the Bank
of Germany compared with the Banks of England, France, Holland, and Belgium,
p. 171 — Tax on Excess Issues, p. 172 — Proposal to adopt in England an arrangement
similar to that in Germany as to exceeding authorised circulation, p. 172 — Bill brought
forward by Lord Sherbrooke in 1873, P« l72 — Injurious effect of High Rates of
Interest on Trade, p. 173 ...... 154-173

CHAPTER XVII

VARIATIONS IN THE RATE CHARGED BY THE BANK OF HOLLAND

FROM I 844-I 900
History of Bank of Holland, pp. 174-175 — President and Secretary appointed by the Crown,
p. 174— System of Management, p. 175 — Branch (Rotterdam), Agencies, and Corres-
pondents, p. 175— Business of Bank of Holland, pp. 175-176— Law of 7th August, 1888,

153

CONTENTS xvii

allows the Bank to buy Bills payable abroad, p. 176— Capital and Reserve, p. 176 — Bill
passed (1884) to Protect Stock of Gold, p. 176 — Holland regards it a duty of the Govern-
ment to endeavour to prevent the Standard of Value which it imposes on its subjects from
fluctuating, p. 177 — The Bank of Holland principally a Bank of Discount, p. 177 — Rate
of Discount at Bank of Holland lower than at any other of the great Banks of Europe,
p. 177 — Variations in the Rate of Discount compared with those at other European
Banks, p. 177 — Table 30: Monthly Averages of Minimum Rate of Discount of Bank
of Holland from 1845- 1900, p. 178 — Table 31 : Changes in the Rate of Discount
charged by the Bank of Holland and the number of days at each Rate in each year,
1844-1900, p. 179 — Table 32: Bank of Holland, Rate of Discount, 1844-1900. The
number of days at each Rate, arranged from the highest number to the smallest, and
arranged from the lowest rate to the highest, p. 180 . . . Pages 174-180

CHAPTER XVIII

VARIATIONS IN THE RATE CHARGED BY THE BANK OF BELGIUM

FROM 1851-1900

Direction of Bank of Belgium, pp. 1 81-182 — Governor and Deputy-Governor appointed by
the King, pp. 181-182 — Branch (Antwerp) and Discount Offices, pp. 182-183 — Business
of Bank in Commercial Paper and Bills, pp. 182-183 — The Country Discount Offices
Private Partnerships, responsible for the business they carry on, p. 183 — Fluctuations in
the Rate of Discount compared with those at the Banks of Holland and France, p. 184
— Specie Reserve of Bank of Belgium comparatively small, p. 184 — Bills Discounted,
p. 185 — Large Proportion of Bills on other Countries held, p. 185 — Average Note
Circulation, p. 185 — Rate of Discount compared with that at Banks of England,
France, Germany, and Holland, pp. 185-186 — Large Proportion of Days at Low Rates,
pp. 185-186 — Comparatively small number of Fluctuations in Rate, p. 186 — Table 33 :
Monthly Averages of Minimum Rate of Discount of Bank of Belgium from 1 851- 1900,
p. 187 — Table 34: Changes in the Rate of Discount charged by Bank of Belgium
and the number of days at each Rate in each year, 1851-1900, p. 188 — Table 35: Bank
of Belgium Rate of Discount, 1851-1900. The number of days at each Rate arranged
from the highest number to the smallest, and arranged from the lowest rate to the
highest, p. 189 . . . . . . 181-189

CHAPTER XIX

THE FLUCTUATIONS IN THE RATE OF THE BANK OF ENGLAND
COMPARED WITH OTHER BUSINESS FLUCTUATIONS

Fluctuations of the Rate at Bank of England, severity of these compared with the fluctua-
tions at Banks of France, Germany, Holland and Belgium, pp. 191-194 — Table 36 :
Summary of Fluctuations, Rates of Discount, Banks of England, France, Germany, Hol-
land, and Belgium, Note Circulation Bank of England, Bullion in Issue Department,
Liabilities and Reserve, English Country Note Circulation, London Bankers' Clearing
House Returns, Scotch and Irish Note Circulation, and Specie held, i845~i900,pp. 192-193
— Fluctuations in London Bankers' Clearing House Returns, p. 194 — Bank of England
Note and English Country Note Circulation, p. 194 — Scotch and Irish Note Circulation,
Fluctuations compared with Bank Rate, p. 194 — Causes which lead to Severity of
Fluctuations in England, p. 195 — Table 37: Number of variations in Rates of Discount
of Banks of England, France, Germany, Holland, Belgium, 1844-1900, p. 196 — Table 38 :
Lowest and Highest Rate charged, and extent of Fluctuation of the same Banks during
each year from 1844 to 1900, p. 197 — Table 39: Number and extent of Annual Fluctua-
tions in Rate of the same Banks from 1844 to 1900 grouped together, so as to show the
extent of the Fluctuations and the number of years in which these Fluctuations occurred,
p. 198 — Demands on Reserve of Bank of England, p. 198 — Division of Issue Depart-
ment and Banking Department separates the resources of the Bank into two parts, and
causes demand to fall on the smaller, p. 198 — Regulations of Act of 1844 compel
purchase of Standard Gold whether needed or not, p. 199 — This may lead at times to
unnecessary accumulation of Specie and consequent Low Rates, p. 199 — Deficiency
of Fluidity in Securities of Bank of England, p. 199— Bills Discounted and Short
b

xviii CONTENTS

Loans at the Bank of England, p. 199 — Influence of Bank of England over Market
formerly greater than now, p. 199 — Balance Sheet of Bank of England compared with
those of the other Banks, p. 200 — Capital of Bank of England compared with those of
the other Banks mentioned, p. 200 — Investments of the Banks compared, p. 201 —
Arrangements which assist other Banks to avoid the Fluctuations in Rate of Discount
and the constant changes occurring at Bank of England, p. 202 . . Pages 190-202

CHAPTER XX

SOME REMARKS ON THE RATE OF DISCOUNT OF THE BANKS OF ENGLAND,
FRANCE, GERMANY, HOLLAND, AND BELGIUM

Some remarks on the Rate of Discount of Banks of England, France, Germany,
Holland, and Belgium. Number of days at each rate compared, pp. 203-210 —
Table 40 : Balance Sheets of Banks of England, France, Germany, Holland, and
Belgium compared, pp. 206-207 — For last twenty-five years the Rate lower in Paris
than in London, p. 209 — Table 41 : Rate of Discount of Banks of England, France,
Germany, and Holland, 1844-1900, and Belgium, 1851-1900. Number of days at each
rate arranged from lowest rate to highest, and proportion per milk at each Rate, p. 209 —
Tendency to greater Variations and number of Fluctuations to be expected, p. 210 —
Foreign money in England and English capital abroad, pp. 210-212 — Table 42 :
Average Minimum Rate of Discount charged by Banks of England, France, Germany,
and Holland for years 1845-1900, and Belgium for years 1851-1900, showing average
for the groups of years and for the whole period, p. 210 — Table 43 : Years in which no
change took place in the Rate of Discount of Banks of England, France, Germany,
Holland, and Belgium, 1844-1900, p. 211 — Bonds of Foreign Governments frequently
held in England, p. 212 — Foreign Bills scarcely held, p. 212 — Arrangements by which
Foreign Banks meet demands arising from adverse exchanges, p. 212 — Demand for
Gold for Export, pp. 212-213— Our Exports and Imports compared, pp. 213-214 —
Table 44: Foreign Trade of United Kingdom (1 861-1900), Imports and Exports, and
London Clearing House Returns (totals at intervals of ten years), p. 213 — Need of
a strong Bullion Reserve, p. 215 — Advantages of London Money Market being the
point where many monetary transactions are carried on, and that this country is so
largely the Clearing House of the World, p. 215 — Disadvantages to business in this
country of sudden and great Fluctuations in Rate of Discount, p. 216 — Supply of
Loanable Capital at moderate rates important to Trade, p. 216 — Table 45 : Average
Monthly Discount Rate, with proportion of each month to Annual Average Rate,
1845-1900, at Banks of England, France, Germany, and Holland, Belgium 1851-1900,
and London Bankers' Clearing House Returns 1868-1900, p. 216 . . 203-216

CHAPTER XXI

CONCLUSION
Fluctuations observed at certain periods in Bankers' Balances when these were made public,
p. 217 — Reasons for these, pp. 217-218 — Great increase of Banking business in the United
Kingdom, p. 218 — Relation of Reserve to Current Rate of Interest charged, p. 218
— Influence of the Foreign Exchanges on Bank Rate, p. 219 — Influence of Bank
of England on the Money Market, p. 219 — Relation of proportion of Reserve to
Liabilities, influence of this and of demands on Reserve connected with Scotch and
Irish Note Circulation on Rate of Interest charged, p. 219 — Increase of Money in the
country between 1851 and 1900 and of Banking Deposits, pp. 219-220— Estimate of
Banking Deposits at present time, p. 220— Increase of Specie Reserves of Banks, p. 220—
Increase of Securities in Issue Department of Bank of England caused by operation of
Bank Act of 1844, p. 220— Clauses of Act of 1844 sanctioning this, pp. 221-222— The
composition of the Reserve of Bank may be thus altered, p. 223 — Example of this,
p. 224— Competition in business between this country and other countries now greater
than ever before, p. 225 — More powerful means of meeting demands on Specie Reserve
needed, p. 225— Greater stability desirable for Money Market of this country, p. 225—
Need of Agreement between Banks as to a sufficient Specie Reserve, pp. 225-226 . 217-226

LIST OF TABLES

TABLE i.

PAGE

Weekly Statement of the Liabilities and Assets of the Bank of England, with full details,
7th September, 1844, and 1st January, 1848 . . ... 2-3

TABLE 2.

An Account of Bank Notes of the Bank of England held by the Public, and of Bank
Notes of the Bank of England held in Reserve by the Bank of England ; also, of the
Rates of Exchange between London, Paris, Hamburgh, and Amsterdam ; also, of the
Total Amount of Bullion ; also, of the Minimum Rate of Interest charged by the
Bank of England ; also, of the Total Amount of Bills Discounted ; also, of the Total
Amount of Temporary Advances ; also, of the Total Amount of Deposits, including the
Balances on the account of the Exchequer, and the Balances held on account of the
London Bankers from the last day of each week from the 7th September, 1844, to the
latest date of the year, both Days inclusive . . . ... 4-5

TABLE 3.

Annual Averages of the Transactions of the Bank of England for the Years 1844- 1900 11-15

TABLE 4.

Annual Averages of Bank Rate and of Market Rate High-Class Bills for the years
1 845- 1 900, showing when the Market Rate was above or below the Bank Rate . . 33

TABLE 5.
Annual Averages of London Bankers' Balances with the Bank of England, 1844-1877 . 35

TABLE 6.

Monthly Averages of Note Circulation of Bank of England, from 1845-1900, in groups of
Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years,
1 895- 1 900, with Summary Table, 1 845-1 900 . . . . . 70

TABLE 7.

Monthly Averages of Bullion in the Issue Department of the Bank of England, from
1845-1900, divided into groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84,
1885-94, and of Six Years, 1895-1900, with Summary Table, 1845-1900 . .71

TABLE 8.

Monthly Averages of Country Note Circulation, England, from 1845- 1900, in groups of
Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years, 1895-1900,
with Summary Table, 1 845- 1 900. . . . • • • 75

xx LIST OF TABLES

TABLE 9.

Table showing Composition of Bank of England Note Circulation. Divided according to
the Denomination of the Notes in Hands of the Public from 1856 to 1876, the latest
date to which this information can be given . . . . > 77

TABLE 10.

Silver Bullion held by the Bank of England 1844-53, 1860-61. Annual Averages of Silver
Bullion held in the Issue Department of the Bank of England and Proportion of the
Same to the Gold Bullion and Coin held during the Years 1844-53 an^ 1860-61 . 80

TABLE 11.

Monthly Averages of Liabilities and Reserve of the Bank of England, 1845- 1900, in groups
of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years,
1895-1900, with Summary Table, 1845-1900 . . . . 82-83

TABLE 12.

Monthly Averages of Minimum Rate of Discount of Bank of England 1845- 1900, in
groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years,
1895-1900, with Summary Table, 1845-1900 . . . . . • 97

TABLE 13.

Changes in the Rate of Discount charged by the Bank of England, and the Number of
Days at each Rate in each Year, since 5th September, 1844 (when the Bank Act came
into operation), to 31st December, 1900 ..... 98-99

TABLE 14.

Bank of England — Rate of Discount — 1844- 1900. The Number of Days at each Rate,
arranged from the highest number to the smallest, and the Number of Days at each Rate,
arranged from the lowest rate to the highest . . . . . 100

TABLE 15.

Monthly Averages of Note Circulation and of Gold and Silver Coin held in Scotland,
1 845- 1 900, in groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94,
and of Six Years, 1895-1900, with Summary Table, 1845-1900. (The returns of the
specie held commence in 1846) . . . . . .118-120

TABLE 16.

Monthly Averages of Note Circulation and of Gold and Silver Coin held in Ireland,
1845-1900, in Groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94,
and of Six Years, 1895- 1900, with Summary Table, 184 5-1900. (The returns of the
specie held commence in 1846) . . . . . .121-123

TABLE 17.
Monthly Averages of Rate of Discount at the Bank of England, and of Note Circulation,
and of Gold and Silver Coin held, in Scotland and in Ireland, 1845-1900, in groups
of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years,
1 895- 1 900, with Summary Table, 1845- 1900, arranged from the smallest to the largest
figures. (The returns of the specie held both in Scotland and Ireland commence with
the year 1846) ....... 124-131

TABLE 18.

Monthly Averages of London Bankers' Clearing House Returns 1868- 1900, in groups
of Seven Years, 1868-74; Ten Years, 1875-84; Ten Years, 1885-94; and Six Years,
1895-1900; with Summary Table, 1868-1900 . . . . 133

LIST OF TABLES xxi

TABLE 19.

PAGE

Exports and Imports of United Kingdom, Amounts passed through the London Bankers'
Clearing House, and the Total Bank Note Circulation of all the Issuing Banks in the
United Kingdom for the years 1861, 1871, 1881, 1891, and 1900 . . . 137

TABLE 20.

Statement showing the Autumnal Movements in Gold and Silver Coin held by the Bank
of England for the years 1 881- 1900 — beginning of September to about the middle of
November in each year . . . . . . . 138

TABLE 21.

Monthly Averages of Minimum Rate of Discount of Bank of France, 1845-1900, in
groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years,
1895-1900, with Summary Table, 1845-1900 . . • . . 142

TABLE 22.

Changes in the Rate of Discount charged by the Bank of France, and the Number of
Days at Each Rate in Each Year, since the 5th September, 1844 (when the Bank
Act came into operation in England), to 31st December, 1900 . . . 144-145

TABLE 23.

Bank of France — Rate of Discount — 1844-1900. The Number of Days at each Rate,
arranged from the highest number to the smallest ; and the Number of Days at each
Rate, arranged from the lowest rate to the highest . . . . . 146

TABLE 24.

Gold and Silver held by the Bank of France, 1877-1900. — Alterations in amounts of Gold
and Silver held from December 31st, 1877, to December 31st, 1900; the year 1877 is
taken as the starting-point, being the earliest from which the Statement can be carried
on continuously . . . . . . 153

TABLE 25.

Monthly Averages of Minimum Rate of Discount of Bank of Germany, 1845- 1900, in
groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years,
1 895- 1 900, with Summary Table, 1845- 1900 • • • . . 156

TABLE 26.

Changes in the Rate of Discount charged by the Bank of Germany, and the Number of
Days at Each Rate in Each Year, from 5th September, 1844 (when the Bank Act
came into operation in England), to 31st December, 1900 . ... 157

TABLE 27.

Imperial Bank of Germany — Rate of Discount — 1844-1900. The Number of Days at
each Rate, arranged from the highest number to the smallest, and the Number of Days
at each Rate, arranged from the lowest rate to the highest . . . . 158

TABLE 28.
Imperial Bank of Germany. Coin and Bullion, 1876-1900 . ... 168

xxii LIST OF TABLES

TABLE 29.
Imperial Bank of Germany. Annual Averages of Note Circulation, 1876- 1900

TABLE 30.

Monthly Averages of Minimum Rate of Discount of Bank of Holland, 1845- 1900, in
groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years,
1895-1900, with Summary Table, 1845-1900 . . . . . 178

TABLE 31.

Changes in the Rate of Discount charged by Bank of Holland, and the Number of
Days at each Rate in each Year, from September 5th, 1844, to December 31st, 1900 . 179

TABLE 32.

Bank of Holland — Rate of Discount — 1844- 1900. The Number of Days at each Rate,
arranged from the highest number to the smallest, and the Number of Days at each
Rate, arranged from the lowest rate to the highest . . . . . 180

TABLE 33.

Monthly Averages of Minimum Rate of Discount of Bank of Belgium, 1851-1900, in
groups of Four Years, 1851-54, and Ten Years, 1855-64, 1865-74, 1875-84, 1885-94,
and of Six Years, 1895-1900, with Summary Table, 1851-1900 . • • 187

TABLE 34.

Changes in the Rate of Discount charged by Bank of Belgium, and the Number of Days
at each Rate, in each Year, from January 1st, 1851, to December 31st, 1900 . .188

TABLE 35.

Bank of Belgium — Rate of Discount — 1851-1900. The Number of Days at each Rate,
arranged from the highest number to the smallest, and the Number of Days at each
Rate, arranged from the lowest rate to the highest . . . . . 189

TABLE 36.

Summary of Fluctuations, Rates of Discount, Banks of England, France, Germany,
Holland, and Belgium, Note Circulation Bank of England, Bullion in Issue Department,
Liabilities and Reserve, English Country Note Circulation, London Bankers' Clearing
House Returns, Scotch and Irish Note Circulation, and Specie held, 1 845-1900 . 192-193

TABLE 37.

Number of Variations in Rates of Discount, Banks of England, France, Germany,
Holland, 1844-1900, and Belgium, 1851-1900 . . ... 196

TABLE 38.

Lowest and Highest Rate charged and Extent of Fluctuation during each year, Banks of
England, France, Germany, Holland, 1844-1900, and Belgium, 1851-1900 . . 197

TABLE 39.

Number and extent of Annual Fluctuations in Rate at the Banks of England, France,
Germany, Holland, 1844- 1900, and Belgium, 185 1 -1 900, during each year, grouped
together so as to show the extent of the fluctuations and the number of years in
which these fluctuations occurred . . . . . . 198

TABLE 40.
Balance Sheets of the Banks of England, France, Germany, Holland, and Belgium 206-207

LIST OF TABLES xxiii

TABLE 41.

PAGE

Rate of Discount, Banks of England, France, Germany, and Holland, 1844- 1900, and
Belgium, 1851-1900. The Number of Days at each Rate, arranged from the Lowest
Rate to the Highest, and the Proportion per mille at each Rate . . . 209

TABLE 42.

Average Minimum Rate of Discount charged by the Banks of England, France, Germany,
and Holland for the years 1845- 1900, and Belgium for the years 1851-1900, showing
Average for the groups of ten years 1845-54 (Belgium, 1851-54), 1855-64, 1865-74,
1875-84, 1885-94, and for six years 1895-1900, and for the whole period, 1845-1900
(Belgium, 1851-1900) . . . . ..... 210

TABLE 43.

Years in which no change took place in the Rate of Discount at the Banks of England,
France, Germany, Holland, 1845-1900, and Belgium, 1851-1900 . . . 211

TABLE 44.

Foreign Trade of the United Kingdom, 1 861-1900 (totals at intervals of ten years).
Showing Excess of Imports over Exports . . . . . . 213

TABLE 45.

Average Monthly Discount Rate, with proportion of each month to Average Annual Rate,
1845-1900, at Banks of England, France, Germany, and Holland, Belgium 1851-1900,
and of monthly average to yearly average at London Bankers' Clearing House
1868-1900 . . . . . . ... 216

BANK RATE AND THE MONEY MARKET

IN ENGLAND, FRANCE, GERMANY
HOLLAND, AND BELGIUM, 1 844-1 900

CHAPTER I

INTRODUCTION

PAGE

Weekly Return of Bank of England con-
tinually studied . I

Important points in it omitted at present
time . ... 1-2

Table I. — Weekly Statements of the Lia-
bilities and Assets of the Bank of
England, with full details, 7th Septem-
ber, 1844, and 1st January, 1848 . 2-3

Table 2. — Example of Returns published
by order of Houses of Parliament, up
to twenty-five years ago, on which
this Analysis of Accounts of Bank
of England is based . . . 4-5

Greater publicity as to Accounts of Bank
of England desirable . . . 6

PAGE

More publicity given as to Accounts of
other Banks now than formerly, less
as to Bank of England . 7

Note circulations of Bank of England,
Scotch and Irish Banks influence Re-
serve of Bank of England . . 8

Important recent Events influencing
Money Markets of Europe and America 9

Analysis of Transactions of Banks of
France, Germany, Holland, and Bel-
gium included . 9

Rates of Discount at these Banks . . 9

Table 3. — Annual Averages of Transac-
tions of the Bank of England for the
years 1844-1900 . . . J.I-15

The weekly return of the Bank of England is always care-
fully studied as supplying much useful information on the
position of the money market. The demands likely to be
made on the " Reserve," and the proportion held by it to the
" Liabilities," form the basis of most of those calculations
which are continually being made by men engaged in business
as to the probability of a rise or fall in the Bank rate of
discount. The form in which the usual statement is made out
supplies a great deal of information, but several very important
points are left unnoticed. Thus, for example, no figures are
now published of several details, the knowledge of which
would be of great service to those engaged in business, as of
the temporary advances made by the Bank or of the Bills
discounted, or of the amount of the Balances kept by Bankers
with the Bank both in London and in the Provinces.

B

INTRODUCTION

[CH. I

As recently, however, as some twenty- five years ago, a
great deal more information used to be given. Returns pub-
lished from time to time by order of both Houses of Parlia-
ment contained a great deal of information on the subject.
Some of the earlier returns are very full of detail both as to
the composition of the deposits of the Bank and the manner in
which they were employed. So many years, however, have
elapsed since even the mo§£ recent of them were published,
that they are now quite matters of "ancient history," and are
unknown to the present generation of business men. To
explain their characters and the class of information which
they give I therefore bring in examples of these, the first,
Table i, being the details of the weekly statement of the
Bank, on 7th September, 1844, tne first return after the Act of
1844 came into operation, and the second, similar details for
1st January, 1848. Both of these are taken from the Report
from the Select (Secret) Committee on Commercial Distress,
1848, House of Commons, Appendix No. 8.

TABLE 1.

Weekly Statement of the Liabilities and Assets of the Bank of England,
with full details, 7th September, 1844, an(i Ist January, 1848.

Circulation-
London
Country

I

14,802,000
6,405,000

Deposits, Public, viz. —
Exchequer Account 2,198,000
For Payment of

Dividends . 315,000

Savings Banks, etc. 501,000
Other Public Accounts 617,000

Deposits, Private, viz. —

Railways . . 30,000

London Bankers . 963,000

East India Co. . 636,000

Bank of Ireland,
Royal Bank of
Scotland, etc. . 175,000

Other Deposits . 5,631,000
Deposits at Branches 1,209,000

7th September, 1844.
£

21,207,000

3,631,000

8,644,000
33,482,000

Public Securities —
Advances on Ex-
chequer Bills —
Deficiency .
Other Exchequer
Bills
Exchequer Bills

purchased
Stock and Annui-
ties

Private Securities —
Bills discounted —
London
Country

East India Bonds
City Bonds, etc. .
Mortgage .
Advances —

Bills of Exchange
Exchequer Bills,
Stock, etc.

Bullion

I

870,000
311,000
12,821,000

113,000
2,003,000

198,000

3,357,ooo

620,000

883,000

661,000

14,002,000

2,116,000

21,837,000
15,209,000

37,046,000

CH. i]

EXAMPLES OF PUBLISHED RETURNS

Circulation —
London
Country

£

12,592,000
6,138,000

Deposits, Public, viz. —

Exchequer Account 8,157,000
For Payment of

Dividends . 150,000

Savings Banks, etc. 15,000

Other Public Accounts 690,000

ist January, 1848.
£

18,730,000

Deposits, Private, viz. —

9,012,000

Railways

London Bankers.

East India Co. .

Bank of Ireland,
Royal Bank of
Scotland, etc. .

Other Deposits

12,000

1,929,000

740,000

181,000
4,626,000

Deposits at Branches 1,035,000

8,523,000
36,265,000

Public Securities —

£ £

Advances on Ex-

chequer Bills —

Deficiency .

—

Other Exchequer

Bills

—

Exchequer Bills

purchased

232,000

Stock and Annui-

ties

10,279,000

Private Securities —

Bills discounted —

London

4,140,000

Country

3,960,000

8, 100,000

East India Bonds

405,000

City Bonds, etc. .

3,999,000

Mortgage .

461,000

Advances —

Bills of Exchange

2,529,000

Exchequer Bills,

Stock, etc.

1,496,000

Bank of England,

i$th January, 1848.

8,890,000

27,501,000
Bullion .... 12,404,000

39,905,000

M. MARSHALL,

Chief Cashier.

The return marked No. 6 in the Appendix to the Report
from the Select (Secret) Committee on Commercial Distress,
House of Commons, 1848, may also be cited, as it carries the
statement back to the date when the Bank Act came into
operation. This return is reprinted, and continued to December,
1856, in the Appendix (No. 13) to the Report from the Select
Committee on the Bank Acts, House of Commons, 1857. Sub-
sequent returns continue a consecutive statement, on a uniform
plan, from the date of the division of the two departments of
the Bank of England, in 1844, to tne close of 1875, containing
particulars which are not disclosed in the ordinary returns, of
the amount of bills discounted, the amount of temporary
advances made by the Bank, and the balances of the London
bankers. The commencement of this Return, extending from
August 31st to December 28th, 1844, is given in Table 2, pp. 4, 5.

The return, however, which was ordered by the House of
Commons to be printed 31st May, 1877, giving the statement J
for the year 1876, while it separates the amounts of the
balances of the Exchequer and of the London bankers from

4 INTRODUCTION

TABLE 2.

Report from the Select (Secret) Committee on Commercial

An Account of Bank Notes of the Bank of England held by the Public, and of Bank
Rates of Exchange between London, Paris, Hamburgh, and Amsterdam ; also, of
Bank of England ; also, of the Total Amount of Bills Discounted ; also, of the Total
the Balances on the account of the Exchequer, and the Balances held on account of
the latest date of the year, both days inclusive.

1844.
August 31

September 7

14
21
28
October 5
12

19

26

November 2

9
16
23

30
December 7

M 14

21
28

Bank Notes.

Held by the Public.

£

20,448,000

20,176,000
19,881,000
19,618,000
19,902,000
20,153,000
20,228,000
21,083,000
21,321,000
20,820,000
20,557,000
20,581,000
20,118,000
19,842,000
19,531,000
19,258,000
19,192,000
19,123,000

Held in Reserve by

the Bank of

England.

£

7,732,000

8,175,000
8,620,000
8,965,000
8,461,000
7,930,000
7,610,000
6,649,000
6,225,000
6,679,000
6,844,000
6,927,000
7,410,000
7,944,000
8,286,000
8,746,000
8,960,000
9,077,000

Rate op Exchange: London on

Paris 3 d/s.

25*47*

25*45

25*45

25*47*

25*52*

25-50

25*52*

25*55

25*57*

»>
25*55

25*57*
25*60

25*57*

M

25-60

Hamburgh.

13*10*
I3'I0f
I3-II

I3-ii|

u

13-11*

13*10*
13-11*

13-12
13-11$

>>
13-12
13*12*

]>
13-11*

11
13-11!

Amsterdam.

I2'3i

'■

12 -4*

12-4

:

I2'3f

12 *4i
12-4*

i2'5i
12-5

12 '4f

"•si
12-5*

CH. i]

EXAMPLES OF PUBLISHED RETURNS

TABLE 2 (continued).

Distress, 1848, House of Commons, Appendix No. 6.

Notes of the Bank of England held in Reserve by the Bank of England ; also, of the
the Total Amount of Bullion ; also, of the Minimum Rate of Interest charged by the
Amount of Temporary Advances ; also, of the Total Amount of Deposits, including
the London Bankers from the last day of each week from the 7th September, 1844, to

Total Amount
of Bullion.

Minimum
Rate of
Interest.

Total Amount of
Bills Discounted.

Total Amount of
Temporary
Advances.

Total Amount of
Deposits, inclu-
ding Exchequer
and London
Bankers.

Balances held on
account of the
Exchequer and

London Bankers
included in the fore-
going Column.

£

15,315,000

Per Cent.
4

£

2,141,000

252,000

£
12,137,000

£
/ 1,572,000 E.
\ 1,480,000 B.

15,209,000

2*

2,116,000

252,000

12,275,000

(2, 198,000 E.
\ 963,000 B.

15,198,000

2,137,000

602,000

12,892,000

("2,976,000 E.
\ 905,000 B.

15,159,000

2,162,000

1,193,000

13,805,000

/3,98i,ooo E.
\ 1,059,000 B.

15,022,000

2,193,000

2,165,000

14,297,000

/ 4, 702, 000 E.
\ 855,000 B.

14,702,000

2,259,000

2,814,000

14,427,000

14,944,000 E.
\ 880,000 B.

14,445,000

2,310,000

2,792,000

16,378,000

/ 946,000 E.
\ 845,000 B.

14,190,000

2,394,000

690,000

12,472,000

/ 684,000 E.
\ 1,07 1,000 B.

14,097,000

2,481,000

577,000

11,847,000

/ 829,000 E.
\ 801,000 B.

14,039,000

2,810,000

625,000

12,228,000

/ 800,000 E.
\ 1,214,000 B.

14,116,000

2,863,000

625,000

11,994,000

/ 1,054,000 E.
\ 1,046,000 B.

14,231,000

3,047,000

1,047,000

11,909,000

/ 1,732,000 E.
\ 797,000 B.

14,366,000

3,094,000

1,128,000

12,676,000

/ 2,753,000 E.
\ 847,000 B.

14,558,000

3,503,000

1,154,000

13,571,000

/ 3,666,000 E.
\ 1,068,000 B.

14,645,000

3,407,000

1,423,000

14,218,000

/ 4,405,000 E.
\ 1,041,000 B.

14,844,000

3,268,000

1,612,000

14,766,000

/5,o93,ooo E.
\ 869,000 B.

14,943,000

3,200,000

2,140,000

15,424,000

/ 5, 842, 000 E.
\ 874,000 B.

14,878,000

3,029,000

2,585,000

15,677,000

/6,284,ooo E.
\ 984,000 B.

6 INTRODUCTION [ch. i

the total deposits, does not continue to furnish either the
amount of "bills discounted" or of the " temporary advances,"
which had been uniformly given from 1844 downwards in the
previous returns. The corresponding return for 1877 is like-
wise deficient in the same manner, and in the return for 1878
the London bankers' balances were altogether left out. Thus
from that date down to the present time bankers are absolutely
ignorant of matters which are of the very highest importance
to them. Every bank knows, of course, its own balance, and
occasionally the amount of that of one or two of its neighbours,
but there is no general knowledge of the amount of the
collective balances of the bankers standing to their credit at
the Bank of England as a whole.

These omissions are to be regretted, quite as much in the
interest of the Bank of England itself as of the public at
large. Discounting bills, and making temporary advances, are
both proper functions of a bank. In the case of the Bank of
England it is especially desirable that there should be no
uncertainty as to the extent of its operation on these points, as
it is mainly in this manner that its control over the outer
market should be maintained. The full possession of that
control, and the power of exercising it rapidly when circum-
stances render it needful, are essential to the security both of
the Bank of England and of the other banks of the country,
and it cannot therefore be an unimportant matter that the
information which shows the action of the Bank in this respect
should now no longer be supplied.

It would also be very valuable if the information given in
return No. 8 in the Appendix to the Report from the Select
(Secret) Committee on Commercial Distress, House of
Commons, 1848, from which the details given in Table 1,
pp. 2, 3, are taken, were continued to the present time. This
return, which is carried back to the year 1832, through the
Appendix to the Report from Select Committees on Banks
of Issue, House of Commons, 1840 and 1841, gives a great
deal of very important information as to the working of the
Bank of England. It is no spirit of idle curiosity, no desire
to pry needlessly into the concerns of others, that seeks for
this information. Those who feel, as all concerned in banking

ch. i] BANKING INFORMATION FORMERLY GIVEN 7

business must, that the enormous extension which that business
has experienced in this country during the last half-century
requires every safeguard to be strengthened, must regret that
a closer secrecy is now maintained on matters on which more
publicity was freely given at previous times when this publicity
was less needed. If that information was valuable in 1832,
1844, and 1848, it would be even more valuable now.

Such information, however, as can be obtained from the
materials at our command on the history of the working of
the money market during the last fifty-six years may be very
useful to all who are engaged in commercial pursuits. These
years have witnessed a very marvellous extension of the
business of the country in general ; and the extension of bank-
ing generally has fully kept pace with the increase in other
directions. It is now often scarcely remembered how recent
any accurate information as to the details of banking is.
When, in the year 1877, * commenced seeking to obtain this
information, I remember being told that to collect it was
impossible. No private banks at that time — and indeed for
many years afterwards — published their accounts. Some even
of the joint stock banks also did not publish their figures. J
These matters are managed in a different way at the present
time. While, however, much more information is now given as
to the position of banks in general, less, as has been men-
tioned, is given as to that of the Bank of England. The
Parliamentary returns formerly published relating to the Bank
of England, which dissected its transactions week by week,
have not been continued since 1878, and though, as men-
tioned above, of late years they have given details less full
than formerly, they contain the record of many important
events. But the very length of these returns is a bar to facility
in consulting them, or in understanding the many important
lessons which may be learned from them. The number of
details, through their very quantity, has a tendency to obscure
a distinct view of the case. The old proverb expresses the
truth exactly : " You cannot see the wood for the trees." It is
hoped, therefore, that the analysis which follows may be of
service by giving a history of the main alterations which have
occurred in the position of the Bank of England during the

8 INTRODUCTION [ch. i

time over which the Parliamentary returns extend. It has been
continued to the end of the year 1 900 by employing the weekly
returns of the Bank. The whole statement will assist us to
trace out some of the causes which have led to the greatly
increased fluctuations which have prevailed in the money
market during some of the last few years.

It should be clearly understood from the outset that the
object of this work is neither a controversial investigation into
the working of the Act of 1844, nor a critical inquiry into the
conduct of the Bank of England. Complete investigation into
the working of that Act would require more space than could
be allotted to the subject here, though it is hoped that the
information given in these pages may be of service by showing
some of the ways in which the Act of 1844 influences our
business system, and bringing back to our remembrance some
points in its working which are often overlooked. With regard
to the Bank of England, that great institution is, from its
position, the acknowledged centre of our banking system ; and
an analysis of its transactions may enable us to see more clearly
the progress of recent events in the financial world. To render
this clear and readily intelligible, a series of tables has been
drawn up. Into these the main points of the work of the Bank
of England for the years from 1844 to 1900 have been con-
densed. Through the arrangements of the Acts of 1844-5,
for convenience spoken of as the Act of 1844 in this work,
the note circulation of the United Kingdom is also connected
with the working of the Reserve of the Bank of England.
Every note of the Bank of England in the hands of the public
means the abstraction of the value of that note from the
Reserve of the Bank. This is equally true whether the note
has been "issued" against gold which has been long in the
coffers of the Bank or against fresh gold just received from
abroad. The gold may remain in the Issue Department, but
the Banking Reserve, which consists mainly of the notes in
the Banking Department, is not strengthened. Every note
issued in Scotland and Ireland, beyond the fixed limit of the
circulation, has the same effect. The way in which this takes
place is explained in Chapter VIII. p. 69 and Chapter XII.
p. 112. Tables have hence been prepared showing the course

ch. i] MODERN INFLUENCES ON MONEY MARKET 9

of the circulation of the notes of the Bank of England, of the
English Provincial Banks, and of the Banks in Scotland and
Ireland for the same period — from 1845 to 1900.

This has been done with the utmost care, and it is hoped
that any error of importance has been avoided*

Since I first began to write on this subject, several events
have occurred which have introduced very important influences
among the money markets of Europe and America. The
limitation in the coinage of silver by the countries forming the
Latin Union ; the resumption of specie payments in France,
and also in the United States ; the change in the standard of
value in Germany from a silver to a gold basis ; the creation
of a gold standard by Russia ; the official alteration in the par
of exchange between this country and India ; the establish-
ment of a currency system in that country, sometimes described
as gold monometallism, sometimes as a bimetallic system ; the
bimetallic system being on a different basis from that formerly
prevailing — namely, on the ratio of 1 to 22 — the one previously
in force in Europe having been on that of 1 to 15 approxi-
mately ; the great development of banking in these countries —
all are events which could not take place without greatly
affecting this country. These events have made it desirable to
carry the investigation further than was first proposed. It has
not been thought needful to form a complete analysis of the
transactions of the Banks of France, Germany, Holland, and
Belgium, in the same manner as that of the transactions of the
Bank of England. A comparison of the rates of interest
charged in the five countries, and of the number of the fluctua-
tions in the rates, gives a sufficient outline for the purpose
desired — an outline of the working of the demand and supply
of money in the leading countries of Europe for the time under
consideration.

Tables relating to the variations in the rate of interest
charged by the Banks of France, Germany, Holland, and
Belgium, drawn up on the same plan as the corresponding
tables referring to the Bank of England, have therefore been
added, and tables giving the number and extent of the altera-
tions of the rates. These are valuable, as giving an outline of
the working of business in those countries ; they also supply a

io INTRODUCTION [ch. i

comparative view of the movements of the rate of interest in
other European centres of business which may enable us the
better to understand the influences which are at work on our
own.

A list of the tables which form the basis of this analysis
precedes this chapter. The table (marked Table 3, pp. 11- 15)
analysing the accounts of the Bank of England in a series
of annual averages follows.

NOTE TO TABLE 3— Pages 11-15

The Annual Averages of "Notes Issued," as stated in the Weekly Returns of the Bank, are
entered in col. 1 ; the Notes held in the Banking Department, in col. 7, p. 11 ; the Notes
held by the Public are entered in col. 39, p. 15. The Notes issued at the Branches and held by
the Public, and those issued in London and held by the Public, are entered in col. 35, p. 14
and col. 37, p. 15. These particulars are given up to the year 1881, when this information
was discontinued. The Annual Averages of the Coin and Bullion held in the Issue Department
are entered in col. 9, p. II. The Coin held in the Banking Department is added to this, and
entered in col. 41, p. 15, containing the Total Bullion held by the Bank ; it is also entered,
with the Notes held in the Banking Department, in col. 21, p. 13, which contains the Reserve
of the Bank. It was notified on the publication of the Return of the Bank of England for the
week ending Wednesday, January 8, 1873, that, with regard to the Deposits in the Return then
issued, the practice was commenced of placing the Chancery Balances under the head of
Government Deposits instead of under that of the ordinary Deposits of the public as hereto-
fore. The average amount was about ,£1,000,000, and to that extent, therefore, the respective
totals have undergone transposition. This must be borne in mind in comparing the amounts
of the Public and Private Deposits from 1844 to 1872, and from 1873 onwards (cols. 13 and
15, p. 12).

During the years 1844-53 tne Bank continually held some Silver Bullion, and also from
November 28, i860, to July 3, 1861. This is included in the amounts given in col. 9, p. 11,
and also in col. 41, p. 15, of this Table. The stock of Silver thus held is shown in
Table 10, p. 80.

Col. 43, p. 15. — Where the average of Bullion is more than the Liabilities, the figure is put in
thick type, as 103, year 1844.

Col. 44, p. 15. — Where the average of Total Bullion is more than the Circulation, the figure is
put in thick type, as 104, year 1876.

The date of the publication of the Weekly Returns was changed from the Saturday (Oct. 31st)
to the Wednesday (Nov. 4th) in the year 1857. It has since been continued on the Wednesday.

The reader must bear in mind that the figures of the yearly statements are annual averages^
and hence do not show the numerous fluctuations in the course of each year, with the exception
of col. 3, which shows the amount of the securities held in the Issue Department on Dec. 31 of
each year.

ch. i] ANNUAL AVERAGES, ACCOUNTS, BANK OF ENGLAND

ii

TABLE 3.
Annual Averages of the Transactions of the Bank of England for the Years 1844-1900.

1

2

3

4

5

6

7

8

9

10

Propor-

Amount of

Propor-
tion of

Propor-
tion of

Propor-

Annual

Proportion
of Notes

Annual

Proportion
of

Annual

tion of

Securities

Securities

Notes

Average of

held in

Average of

Coin and

k'ea.r.

Average of

Notes

held in

in Issue

Issued

Issued

Notes

Banking

Coin and

Bullion

Notes

Issued

Issue

Depart-

against

Securities

against
Bullion

held in

Depart-

Bullion in

in Issue

Issued.

to 1844.

Department

ment

Banking

ment

Issue

Department

1844 = 100.

on 31 Dec.
in each year.

to 1844.
1844 = 100.

(Col. 3).

(Col. 9).

Department.

to 1844.
1844 = 100.

Department.

to 1844.
1844 = 100.

£

£

%

%

£

£

844

27,934,000

IOO

14,000,000

IOO

50

50

7,853,000

IOO

i3,935,ooo

IOO

845

28,619,000

103

14,000,000

IOO

49

51

7,895,000

IOI

14,617,000

'05

846 '<

28,163,000

IOI

14,000,000

IOO

50

50

7,877,000

IOO

14,163,000

102

847

23,765,000

85

14,000,000

IOO

59

41

4,610,000

59

9,769,000

70

848

27,196,000

97

14,000,000

IOO

52

48

9,108,000

116

13,196,000

95

849

28,320,000

IOI

14,000,000

IOO

49

51

9,916,000

126

14,323,000

103

850

29,943,000

107

14,000,000

IOO

47

53

10,545,000

'34

15,949,000

"4

851 !

27,939,ooo

IOO

14,000,000

IOO

50

50

8,466,000

108

13,864,000

IOO

852

34,079,000

122

14,000,000

IOO

41

59

12,222,000

'5(>

20,077,000

'44

853 ;

30,984,000

in

14,000,000

IOO

45

55

8,363,000

107

16,984,000

122

854

27,303,000

98

14,000,000

IOO

51

49

6,594,000

83

13,304,000

g6

855

27,555,°oo

98

14,475,000

103

51

49

7,762,000

99

13,529,000

97

856 !

24,783,000

89

14,475,000

103

58

42

5,135,000

65

10,306,000

74

.857

24,177,000

87

14,475,000

103

60

40

4,696,000

60

9, 702,000

70

.858

31,604,000

"3

14,475,000

103

46

54

11,190,000

'43

17,129,000

123

.859

31,709,000

114

14,475,000

103

45

55

10,429,000

'33

17,272,000

124

L860

28,973,000

104

i4,475,ooo

103

50

50

7,702,000

&

14,498,000

104

L861

26,737,000

g6

14,650,000

104

54

46

6,717,000

86

12,199,000

88

[862

30,175,000

108

14,650,000

104

48

52

9,330,000

"9

15,525,00°

in

1863

28,403,000

IOI

14,650,000

104

52

48

7,730,000

98

13,764,000

99

L864

27,412,000

98

14,650,000

104

53

47

6,849,000

87

12,771,000

92

[865

28,351,000

102

14,650,000

104

52

48

7,263,000

93

13,709,000

99

.866

28,922,000

104

15,000,000

107

51

49

5,764,000

73

14,009,000

IOI

.867

35,249,000

126

15,000,000

107

43

57

11,592,000

148

20,246,000

'45

.868

34,649,000

124

15,000,000

107

43

57

10,727,000

136

19,662,000

141

.869

32,775,000

117

15,000,000

107

46

54

9,322,000

"9

i7,775,ooo

127

.870

34,877,000

'25

15,000,000

107

43

57

11,564,000

'47

19,877,000

142

871

37,880,000

136

15,000,000

107

40

60

13,470,000

172

22,880,000

164

.872

36,911,000

'3'

15,000,000

107

41

59

11,390,000

'45

21,898,000

'58

.873

36,887,000

132

15,000,000

107

41

59

11,220,000

'43

21,887,000

'58

.874

36,550,000

'3'

15,000,000

107

41

59

10,270,000

'3'

21,570,000

'55

.875

38,180,000

'37

15,000,000

107

39

61

10,834,000

'38

23,180,000

166

.876

42,870,000

'45

15,000,000

107

35

65

i5»I37,ooo

'93

27,857,000

200

.877

39,530,000

142

15,000,000

107

38

62

11,635,000

148

24,530,000

176

.878

37,942,000

136

15,000,000

107

40

60

9,885,000

126

22,942,000

'65

.879

46,284,000

166

15,000,000

107

32

68

17,076,000

218

31,297,000

22s

.880

41,661,000

'49

15,000,000

107

36

64

14,748,000

188

26,662,000

igi

.881

38,827,000

'39

i5,75o,ooo

112

40

60

12,678,000

161

23,509,000

i6g

.882

36,791,000

132

15,750,000

112

43

57

10,826,000

'38

21,043,000

'5'

883

37,050,000

'33

i5,75o,ooo

112

42

58

11,522,000

'47

21,341,000

'53

.884

37,751,000

'35

i5,75o,ooo

112

42

58

12,373,000

158

21,991,000

'58

.885

38,722,000

'39

15,750,000

112

41

59

14,072,000

'79

22,972,000

'65

886

35,548,000

127

15,750,000

112

44

56

10,869,000

'38

19,778,000

142

.887

36,377,ooo

130

16,200,000

nb

44

56

11,994,000

'53

20,513,000

'50

888

35,633,ooo

128

16,200,000

Il6

45

55

11,350,000

'45

i9,433,ooo

140

889

36,661,000

'3'

16,450,000

"7

45

55

12,279,000

'57

20,461,000

'47

.890

37,216,000

'33

16,450,000

"7

44

56

12,629,000

161

20,800,000

'50

.891

39,838,000

'43

16,450,000

"7

41

59

14,596,000

186

23,365,000

168

892

40,743,000

146

16,450,000

"7

40

60

14,914,000

igo

24,281,000

'74

.893

41,068,000

'47

16,450,000

"7

40

60

15,192,000

'93

24,618,000

'77

.894

48,689,000

'74

16,800,000

120

34

66

23,439,ooo

299

31,916,000

230

.895

53,191,000

igo

16,800,000

120

32

68

27,312,000

348

36,387,000

262

.896

58,802,000

211

16,800,000

120

29

71

32,290,000

4"

41,980,000

302

.897

50,005,000

'79

16,800,000

120

34

66

22,807,000

2go

33,225,000

239

.898

48,049,000

172

16,800,000

120

35

65

20,602,000

263

31,242,000

224

.899

47,142,000

160

16,800,000

120

36

64

19,263,000

245

30,342,000

218

.900

49,232,000

176

i7,775,ooo

127

36

64

19,797,000

25'

31,663,000

228

12

INTRODUCTION

[CH. I

TABLE 3 {continued).
Annual Averages of the Transactions of the Bank of England for the Years 1844-1900.

11

12

13

14

15

16

17

18

Annual Average

Propor-

Propor-

Propor-

P

ropor-

Date.

of Liabilities on

Deposits (Public

and Private),

and Bank Post

tion of

Liabilities

to 1844.

1844 = 100.

Annual Average
of Public
Deposits.

tion of

Public

Deposits

to 1844.

Annual Average
of Private
Deposits.

tion of
Private
Deposits
to 1844.

Annual Average
of Total D
Deposits.

ion of
rotal
eposits
> 1844.

Bills.

1844=100.

1844 = 100.

18,

.4=100.

£

£

£

£

1844

14,317,000

IOO

5,231,000

IOO

8,069,000

IOO

13,300,000

IOO

1845

16,367,000

114

5,665,000

108

9,643,000

120

15,308,000

115

1846

20,262,000

141

6,254,000

120

13,070,000

l6l

19,324,000

145

1847

15,973,000

III

6,446,000

123

8,668,000

107

15,114,000

113

1848

i5,963,ooo

III

5,154,000

99

9,809,000

122

14,963,000

112

1849

17,211,000

I20

6,086,000

116

10,042,000

124

16,128,000

121

1850

18,822,000

'3'

7,772,000

'49

9,825,000

122

i7,597,ooo

132

1851

17,638,000

123

7,128,000

136

9,351,000

116

16,479,000

I24

1852

20,149,000

140

6,010,000

"5

12,836,000

158

18,846,000

141

1853

19,543,000

136

5,682,000

iog

13,482,000

167

19,164,000

143

1854

15,740,000

no

3,641,000

70

11,016,000

136

14,657,000

no

1855

17,698,000

124

5,005,000

90

11,711,000

145

16,716,000

126

1856

16,864,000

117

4,840,000

93

11,183,000

139

16,023,000

120

1857

17,828,000

124

6,380,000

122

10,677,000

133

17,057,000

128

1858

20,847,000

'45

5,884,000

i'3

14,139,000

17s

20,023,000

150

1859

22,530,000

'57

7,319,000

140

14,393,000

178

21,712,000

163

1860

20,893,000

'45

6,646,000

127

13,518,000

167

20,164,000

15'

1861

18,481,000

120

5,281,000

IOI

12,530,000

155

17,811,000

'34

1862

22,414,000

150

7,052,000

i3S

14,642,000

181

21,694,000

163

1863

21,946,000

'53

7,327,000

140

13,975,000

173

21,302,000

160

1864

20,600,000

144

6,870,000

132

13,199,000

164

20,069,000

'50

1865

21,200,000

148

6,707,000

128

14,000,000

173

20,707,000

'55

1866

22,603,000

158

5,318,000

102

16,746,000

207

22,064,000

16s

1867

26,106,000

182

6,812,000

130

18,790,000

233

25,602,000

ig2

1868

25,619,000

170

4,906,000

94

20,169,000

250

25,075,000

188

1869

23,713,000

its

5,129,000

98

18,087,000

224

23,216,000

'74

1870

26,358,000

184

7,635,000

146

18,100,000

224

25,735,ooo

'93

1871

29,022,000

202

7,071,000

i3S

21,322,000

264

28,393,000

213

1872

29,268,000

204

8,875,000

i6g

19,986,000

248

28,861,000

216

1873

28,900,000

202

9,422,000

180

19,073,000

236

28,495,000

214

1874

25,476,000

178

6,251,000

120

18,847,000

233

25,098,000

i8g

1875

26,749,000

187

5,223,000

99

21,190,000

263

26,413,000

ig8

1876

30,616,000

214

6,793,000

130

23,493,ooo

2gi

30,286,000

228

1877

28,771,000

201

5,838,000

112

22,574,000

279

28,412,000

213

1878

29,077,000

203

5,560,000

106

23,229,000

287

28,789,000

216

1879

36,975,000

255

6,024,000

US

30,624,000

379

36,672,000

275

1880

33,297,000

232

7,861,000

150

26,138,000

323

32,950,000

247

1881

31,954,000

220

7,470,000

143

25,235,000

312

31,519,000

237

1882

29,970,000

237

5,660,000

108

23,606,000

2g2

29, 740,000

223

1883

29,980,000

207

6,924,000

132

23,610,000

2g2

29,783,000

223

1884

31,450,000

217

7,288,000

139

23,984,000

2gb

31,271,000

234

1885

33,626,000

232

6,196,000

118

26,617,000

330

33,451,000

25'

1886

29,352,000

202

4,983,000

95

24,001,000

297

29,177,000

2ig

1887

29,581,000

204

5,377,000

103

24,000,000

297

29,402,000

221

1888

31,141,000

214

6,443,000

122

24, 508,000

303

30,951,000

232

1889

32,742,000

22Q

7,179,000

137

25,362,000

3i3

32,714,000

246

1890

33,574,ooo

231

5,840,000

112

27,526,000

34i

33,364,000

250

1891

38,220,000

263

6,610,000

126

31,414,000

389

38,025,000

286

1892

36,449,000

250

5,856,000

112

30,282,000

374

36,266,000

272

1893

36,209,000

272

5,697,000

iog

30,334,000

375

36,030,000

270

1894

41,105,000

283

6,969,000

133

33,628,000

416

40,943,000

307

1895

48,320,000

332

7,601,000

145

40,585,000

502

48,186,000

361

1896

59,948,000

413

10,418,000

igg

49,390,000

611

59,808,000

449

1897

49,974,000

344

9,982,000

igi

39,835,000

493

49,818,000

374

1898

49,902,000

344

10,501,000

201

39,286,000

485

49,785,000

374

1899

49,722,000

343

10,042,000

igi

39,511,000

490

49,571,000

372

1900

50,049,000

34S

9,285,000

178

40,602,000

503

49,887,000

374

ch. i] ANNUAL AVERAGES, ACCOUNTS, BANK OF ENGLAND 13

TABLE 3 {continued).
Annual Averages of the Transactions of the Bank of England for the Years 1844-1000.

19

20

21

22

23

24

25

26

27

Annual Average
London Bankers'

Propor-
tion of
London

Annual Average
Reserve of Bank

Propor-
tion of
Reserve

Propor-
tion Res.
to Liabili-

Propor-
tion Res.
to Liabili-

Propor-
tion of
London

Annual Average
of "Other"

Propor-
tion of
other

Date.

Balances inclu-
ded in Private
Deposits (Col. 5).

Bankers'

Balances

to 1844.

1844=100.

of England
(Notes & Specie).

to 1844.
1844 = 100.

ties on
Deposits
and Bank
PostBills.

ties, De-
ducting
Bankers'
Balances.

Bankers'

Balances

to Res.

Securities in
Banking Depart-
ment.

Securities
to 1844.

1844 = 100

£

£

%

%

%

£

977,000

IOO

8,500,000

IOO

59

56

11

9,472,000

IOO

1844

1,256,000

128

8,516,000

IOO

52

48

15

12,215,000

I29

1845

1,558,000

160

8,539,000

IOO

42

37

18

16,661,000

176

1846

1,467,000

'So

5,291,000

62

33

26

27

17,241,000

182

1847

2,359,000

241

9,784,000

115

61

54

24

11,967,000

I26

1848

2,131,000

218

10,694,000

126

62

57

20

10,222,000

I08

1849

1,656,000

170

11,219,000

132

59

55

15

11,048,000

Il6

1850

1,666,000

170

9,103,000

107

52

46

18

12,642,000

'33

1851

3,184,000

326

12,764,000

ISO

63

56

25

11,398,000

120

1852

2,259,000

231

8,907,000

103

46

38

25

15,086,000

'59

1853

2,692,000

275

7,290,000

86

46

35

37

14,732,000

'55

1854

3,065,000

3'3

8,366,000

98

47

36

37

15,316,000

162

1855

3,032,000

310

5,772,000

68

34

19

52

17,067,000

180

1856

3,274,000

335

5,347,000

63

80

14

61

20,392,000

2'5

1857

4,639,000

475

12,037,000

141

58

45

39

16,316,000

172

1858

4,256,000

43*

11,076,000

129

49

37

39

18,196,000

192

1859

4,283,000

438

8,451,000

99

40

25

51

20,511,000

216

1860

4,185,000

428

7,611,000

89

41

24

55

18,738,000

198

1861

5,030,000

5i5

10,194,000

120

45

29

45

18,987,000

200

1862

4,726,000

484

8,536,000

IOO

39

22

55

20,176,000

212

1863

4,899,000

502

7,478,000

88

36

16

66

20,296,000

214

1864

5,038,000

5'2

8,089,000

95

38

19

63

20,568,000

217

1865

6,259,000

641

6,745,000

79

30

3

93

22,962,000

242

1866

6,689,000

68s

12,906,000

152

49

32

52

18,235,000

192

1867

6,801,000

696

11,903,000

140

46

27

57

17,647,000

186

1868

6,479,000

663

10,320,000

121

43

22

62

16,822,000

178

1869

6,618,000

678

12,435,000

146

47

29

53

18,622,000

'97

1870

8,390,000

859

14,162,000

166

48

28

59

18,803,000

198

1871

7,609,000

778

12,122,000

141

41

21

63

21,466,000

226

1872

8,586,000

878

12,051,000

141

41

17

71

21,643,000

229

1873

8,341,000

854

11,035,000

129

43

15

75

18,487,000

'95

1874

10,324,000

1055

11,597,000

136

43

6

89

19,163,000

202

1875

11,851,000

1212

15,962,000

187

52

22

74

17,502,000

'85

1876

9,543,000

976

12,478,000

146

43

15

77

18,861,000

200

1877

—

—

10,879,000

127

37

—

—

20,424,000

215

1878

—

—

18,262,000

215

49

—

—

20,836,000

220

1879

—

—

15,997,000

188

48

—

—

19,161,000

202

1880

—

—

i3,775.ooo

162

43

—

—

21,100,000

223

1881

—

—

11,756,000

'38

39

—

—

22,991,000

242

1882

—

—

12,401,000

146

42

—

—

22,124,000

233

1883

—

—

13,306,000

'57

42

—

—

22,561,000

238

1884

—

—

15,137,000

178

45

—

—

21,189,000

223

1885

—

—

12,148,000

'43

41

—

—

20,716,000

219

1886

—

—

13,348,000

'57

45

—

—

19,586,000

206

1887

—

—

12,688,000

'49

41

—

—

19,912,000

210

1888

—

—

13,228,000

'55

40

—

—

21,587,000

227

1889

—

—

13,684,000

161

41

—

—

23,410,000

247

1890

—

—

15,566,000

'83

41

—

—

29,667,000

312

1891

—

—

16,071,000

189

43

—

—

26,227,000

277

1892

—

—

16,982,000

200

47

—

—

25,571,000

269

1893

—

—

25,816,000

304

63

—

—

21,314,000

22s

1894

—

—

29,875,000

35o

62

—

—

22,127,000

233

1895

—

—

34,645,000

407

58

—

—

29,281,000

308

1896

—

—

25,153,000

29s

50

—

—

29,443,000

310

1897

—

—

22,920,000

269

46

—

—

31,805,000

336

1898

—

—

21,191,000

248

43

—

—

32,717,000

345

1899

—

—

21,455,000

25'

43

—

—

29,474,000

310

1900

14

INTRODUCTION

TABLE 3 {continued).
Annual Averages of the Transactions of the Bank of England for the Years 1844-1900.

28

29

30

31

32

33

34

35

36

Annual Average

Propor-

Propor-

Propor-

Propor-

Propor-

of "Other"

tion of

Annual

tion of

tion of

Annual

tion of

Annual Average

tion Pro-

Date.

Securities after

"Other"

Average of

Bills Dis-

Bills Dis-

Average of

Tempo-

of Notes held by

vincial

Deducting Bills

Securi-

Bills Dis-

counted

counted

Temporary

rary Ad-

Public issued at

Circula-

Discounted and

ties, etc.,

counted.

to 1844.

toTotalof

Advances.

vances to

the Branches.

tion to

Temporary

in 1844.

"Other"

1844.

Total Cir-

Advances.

1844 = 100

1844 = 100

Securities

1844 = 100

culation.

£

£

%

£

£

%

1844

5,467,000

IOO

2,690,000

IOO

28

1,315,000

IOO

6,510,000

32

1845

5,732,000

105

4,680,000

174

38

1,803,000

137

7,130,000

34

1846

5,788,000

106

9,030,000

334

54

1,843,000

140

6,770,000

33

1847

5,803,000

I06

9,6l6,000

357

56

1,822,000

139

6,530,000

34

1848

6,216,000

113

4,289,000

'59

35

1,462,000

in

5,830,000

32

1849

6,655,000

122

2,590,000

96

25

977,000

74

5,900,000

32

1850

6,540,000

119

2,66o,000

99

24

1,848,000

140

6,260,000

32

1851

7,004,000

128

4,544,000

169

36

1,094,000

83

6,420,000

33

1852

7,798,000

'43

3,020,000

112

27

580,000

44

6,940,000

31

1853

8,028,000

146

6,137,000

228

41

921,000

70

7,810,000

34

1854

8,007,000

146

6,086,000

226

41

639,000

48

7,380,000

36

1855

8,630,000

'57

6,004,000

223

39

682,000

52

7,040,000

35

1856

8,487,000

'55

6,700,000

249

39

1,880,000

143

6,970,000

35

1857

9,068,000

166

9,474,000

352

46

1,850,000

141

7,000,000

36

1858

11,101,000

202

4,620,000

172

28

595,000

45

6,880,000

34

1859

1 1,648,000

212

5,570,000

207

30

978,000

74

7,660,000

36

1860

11,078,000

201

8,091,000

301

39

1,342,000

102

7,910,000

37

1861

11,136,000

202

6,586,000

244

35

1,016,000

77

7,390,000

37

1862

11,207,000

203

6,239,000

232

33

1,541,000

117

7,480,000

36

1863

10,546,000

ig2

7,402,000

275

37

2,228,000

169

7,440,000

36

1864

9,703,000

177

8,600,000

320

42

1,993,000

'5i

7,570,000

37

1865

9,525,000

'74

8,601,000

320

42

2,442,000

183

7,720,000

36

1866

9,778,000

H9

9,631,000

358

42

3>553>ooo

270

8,480,000

37

1867

10,575,000

193

5,846,000

217

32

1,814,000

138

8,610,000

37

1868

10,783,000

107

5,030,000

187

28

1,834,000

139

8,990,000

38

1869

9,165,000

167

5,808,000

216

34

1,849,000

140

8,860,000

38

1870

8,508,000

'55

6,418,000

239

34

3,696,000

281

8,830,000

38

1871

9,554,000

174

6,411,000

239

34

2,838,000

215

9,320,000

38

1872

10,622,000

i94

6,945,000

238

32

3,899,000

296

9,882,000

39

1873

10,999,000

201

7,737,000

287

36

2,907,000

220

9,999,000

39

1874

11,080,000

201

4,665,000

'73

25

2,742,000

208

10,154,000

38

1875

11,429,000

209

4,402,000

164

23

3,332,000

253

10,383,000

38

1876

—

—

—

—

—

—

—

10,362,000

37

1877

—

—

—

—

—

—

—

10,274,000

37

1878

—

—

—

—

—

—

—

9,989,000

35

1879

—

—

—

—

—

—

—

10,124,000

35

1880

—

—

—

—

—

—

—

9,295,000

35

1881
1882
1883
1884

—

—

—

—

—

—

—

9,114,000

35

1885
1886
1887
1888
1889
1890
1891

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

1892
]893
1894

—

=

=

—

— — .

—

—

—

E

1895
1896

—

—

—

—

—

—

—

—

=

1897

—

—

—

—

-

1898

—

—

—

—

-

1899

—

—

—

—

—

—

—

—

-

1900

—

—

—

—

—

—

—

—

-

ch. i] ANNUAL AVERAGES, ACCOUNTS, BANK OF ENGLAND 15

TABLE 3 {continued).
Annual Averages of the Transactions of the Bank of England for the Years 1844-1900.

37

38

Propor-

33 '

40

Propor-

41

42

43

Propor-

44

Propor-

45

Proportion of

46

Annual Average

tion of

Annual Average
of Total

tion of

Annual Average

Propor-

tion of

tion of

Total Bullion

Annual

of Notes held

London

Notes

of Total Coin

tion of

Bullion

Bullion

Col. 41

Average of

Date.

by Public issued

Circula-

Notes held by
Public.

held by

and Bullion

Bullion

Col. 41

Col. 41

to Liabilities

Minimum

in London.

tion to

Public

held by the

to 1844.

to Lia-

to Notes

Col. 11 and

Rate of

Total

to 1844.

Bank.

44=100

bilities.

held by

Notes held by

Discount.

Cir'lat'n

44 = 100

Col. 1.

Public.

Public Col.39.

£

%

£

£

%

%

%

£

s.

d.

13,740,000

68

20,250,000

100

14,664,000

100

103

72

42

2

IO

0

1844

13,544,000

66

20,674,000

102

15,243,000

IO4

93

74

41

2

13

8

1845

13,482,000

77

20,252,000

100

14,785,000

101

73

73

36

3

6

6

1846

12,593,000

66

19,123,000

94

10,428,000

71

65

54

30

5

3

6

1847

12,256,000

68

18,086,000

89

13,872,000

95

87

77

41

3

14

5

1848

12,538,000

68

18,438,000

9r

15,161,000

103

88

82

42

2

18

7

1849

13,188,000

68

19,448,000

06

16,636,000

"3

88

86

43

2

IO

1

1850

13,040,000

67

19,468,000

96

14,564,000

99

82

75

39

3

0

0

1851

14,970,000

69

21,910,000

108

20,587,000

140

102

94

49

2

3

0

1852

14,792,000

66

22,602,000

in

17,516,000

ng

90

78

41

3

13

IO

1853

13,308,000

64

20,688,000

102

13,997,000

95

89

68

38

5

2

3

1854

12,790,000

65

19,830,000

98

14,181,000

97

80

71

38

4

17

10

1855

12,697,000

65

19,667,000

97

10,932,000

75

65

56

30

6

1

2

1856

12,467,000

64

19,467,000

96

10,118,000

69

57

52

27

6

13

3

1857

13,368,000

66

20,248,000

100

17,847,000

122

86

88

43

3

4

7

1858

13,666,000

64

21,326,000

105

17,928,000

122

80

84

41

2

14

7

1859

13,342,000

63

21,252,000

105

15,239,000

104

73

72

36

4

3

7

1860

12,602,000

63

19,992,000

99

13,009,000

89

71

65

34

5

5

4

1861

i3,355,ooo

64

20,835,000

103

16,380,000

112

73

78

38

2

IO

7

1862

13,224,000

64

20,664,000

J02

14,567,000

99

66

70

34

4

8

2

1863

13,035,000

63

20,605,000

J02

13,482,000

92

65

65

33

7

8

0

1864

13,397,000

64

2I,II7,OO0

104

14,546,000

99

68

69

34

4

15

4

1865

14,679,000

63

23,159,000

114

14,887,000

101

65

64

33

6

19

0

1866

14,828,000

63

23,438,000

116

2i,353,ooo

H5

82

91

43

2

IO

9

1867

14,942,000

62

23,932,000

118

20,838,000

142

81

87

42

2

1

11

1868

14,623,000

62

23,483,000

116

18,825,000

128

79

80

40

3

4

2

1869

14,497,000

62

23,327,000

115

20,776,000

142

79

89

42

3

2

0

1870

15,096,000

62

24,416,000

120

23,588,000

161

81

96

44

2

17

8

1871

15,641,000

61

25,523,000

126

22,585,000

154

77

88

41

4

2

0

1872

15,685,000

61

25,645,000

126

22,665,000

'54

78

88

41

4

15

IO

1873

16,110,000

62

26,264,000

130

22,294,000

152

87

85

43

3

13

IO

1874

16,963,000

62

27,346,000

135

23,923,000

163

90

88

44

3

4

8

1875

i7,37i,ooo

63

27,734,000

J37

28,695,000

196

93

104

49

2

12

1

1876

17,621,000

63

27,895,000

138

25,374,ooo

173

88

91

45

2

18

0

1877

18,068,000

64

28,058,000

138

23,952,000

163

82

85

42

3

15

8

1878

19,111,000

65

29,212,000

144

32,452,000

220

88

HI

49

2

IO

4

1879

17,620,000

65

26,915,000

'33

27,636,000

188

83

103

46

2

IS

4

1880

17,226,000

65

26,321,000

130

24,580,000

167

77

93

42

3

IO

0

1881

—

—

25,985,000

128

21,992,000

149

74

84

39

4

2

8

1882

—

—

25,568,000

126

22,227,000

151

74

86

40

3

II

4

1883

—

—

25,358,000

125

22,907,000

ij6

73

90

40

2

19

1

1884

—

—

24,667,000

122

24,173,000

164

75

98

41

2

17

7

1885

—

—

24,659,000

J22

21,018,000

'43

72

85

38

3

I

0

1886

—

—

24,350,000

120

21,779,000

148

74

89

40

3

7

0

1887

—

—

24,283,000

I20

20,770,000

141

66

85

37

3

5

11

1888

—

—

24,389,000

121

21,410,000

146

65

88'

37

3

IO

11

1889

—

—

24,561,000

122

21,818,000

148

65

89

38

4

IO

5

1890

—

—

25,145,000

124

24,363,000

165

63

97

39

3

5

2

1891

—

—

25,863,000

128

25,519,000

i74

70

99

41

2

IO

7

1892

—

—

25,858,000

128

26,425,000

180

73

102

43

3

1

0

1893

~ ~

—

25,262,000

125

34,309,000

234

83

136

52

2

2

3

1894

—

—

25,815,000

128

38,951,000

263

81

151

52

2

0

0

1895

—

—

26,474,000

131

44,334,000

302

74

168

51

2

9

8

1896

■" ■

—

27,198,000

134

35,571,000

242

71

131

46

2

12

8

1897

~~

—

27,447,000

136

33,561,000

229

67

122

43

3

4

IO

1898

~~~

—

27,878,000

138

32,268,000

220

65

116

41

3

IS

0

1899

—

29,396,000

'45

33,321,000

227

67

114

42

3

19

6

1900

CHAPTER II

THE PRINCIPAL DIVISIONS OF THE ACCOUNTS 01
THE BANK OF ENGLAND

PAGE

The principal Divisions of the Accounts
of the Bank of England are given in a
series of annual averages . 1 6

Commencement of analysis of Table 3 . 17
Capital of the Bank of England . .17
Notes issued, Specie and Securities in

Issue Department . . 1 7

Total Deposits and Bank Post Bills 17-19
Private Deposits . . . . 18

Effect of Chinese- Japanese Loan, 1895-6 18
Liabilities of the Bank . . 19

The Reserve . . . 19-20

Proportion of Reserve to Liabilities . 20
Bankers' Balances . . 20-22

The Note Circulation . . 22-23

The Bankers' Balances and the Reserve 23-27
The Clearing House — Stock Exchange

" Settling " Days . . 23

Bankers' Balances with Bank of England

represent " Till Money " . 23

Table showing Proportion of Reserve to
Liabilities, and of Bankers' Balances
to Reserve, 1846-77 . . 24

Examination of this Table . . 24

PAGE

Deposits, etc., of the Bank during panics

of 1857, 1866, and 1875 • 24-25

Amounts of "Other Deposits, Balances
of London Bankers, Other Securities,
and Reserve " during times of pressure
in 1875, x^78» and l&9° ■ • 25

The Baring Crisis, 1890 . . . 26

The Other Securities, their increase since

1844 . . . 27

Bills Discounted, amount not known now 28
Mr. Thomson Hankey on "Bills" and

"Mortgages" . . 29

Average of Coin and Bullion . 30-32

Issue Department, compelled by Act of
1844 to receive all Gold Bullion brought
to it . . . . 30

Bullion held sometimes larger in amount

than notes in circulation . 31—32

Average Rate of Discount . . . 32

Divergence between Market Rate and

Bank Rate, 1845- 1900 . . . 32

Table 4. — Annual Averages of Bank Rate
and Market Rate, and differences be-
tween them . . . 33

We will now proceed to examine Table 3, pp. 11-15, which
is drawn up for the purpose of assisting us to understand
the operations of the Bank of England by placing before us a
complete summary of its published accounts, from the year
1844 to the close of the year 1900. These are stated in
a series of annual averages. To each of the columns of
amounts which the statement contains columns of propor-
tional figures have been added, which show at a glance the
proportion which the amount for each year bears to 1844.
This method of exhibiting the development of the business will
be found convenient by the reader, who is thus enabled to
compare at one view the whole of the operations of the Bank.
The Bank of England has the largest paid-up capital of any

16

ch. n] DEPOSITS AND BANK POST BILLS 17

bank in the world, being ,£14,553,000 ; the " Rest," or accumu-
lated and undivided profit, averages about 3 millions more.
The total capital belonging to the Bank is therefore about
17J millions.

Notes Issued, Specie and Securities in Issue Department.

Col. 1 of Table 3, p. 11, shows the average amount of
" notes issued " as given in the weekly returns of the Bank. The
securities held in the Issue Department are entered in col. 3,
the notes held in the Banking Department in col. 7. A larger
amount than that held by the Bank is always in the hands of
the public. The notes issued at the branches are given in
col. 35, p. 14, and those issued in London in col. 37, p. 15.
The notes cannot be separated thus later than 1881, as this
information has not been supplied further. The total amount
of the notes in the hands of the public is given in col. 39, p. 1 5.
The notes held by the Bank are also included together with the
specie in the Banking Department in the amount of the reserve
of the Bank, col. 21, p. 13. The total specie held by the Bank,
both in the Issue and Banking Departments, is shown in col. 41,
p. 1 5. The notes held by the Bank have increased proportion-
ally more than those entered as " issued." These have
increased in proportion more than those held by the public, as
cols. 2, 8, and 40 show. The bullion in the Issue Department,
cols. 9 and 10, has increased in proportion more than the notes,
cols. 2, 40. The securities in the Issue Department, cols. 3
and 4, have not increased as much. Hence the proportion of
notes issued against bullion is larger, and that issued against
securities is generally less in 1900 than in 1844.

Total Deposits and Bank Post Bills.

Col. 17 of Table 3, p. 12, contains the yearly averages
of the total deposits of the Bank of England. These are
now in a usual way nearly four times as large as in 1844.
Col. 18 shows the proportion of the deposits in each year
to 1844 and their progress each year. Occasionally, as it
will be seen by the table, the progress has not been uniform,
but on the whole it is continuous. Cols. 13 and 15 show
the averages of the public deposits and of the private deposits.
c

18 ACCOUNTS OF BANK OF ENGLAND [ch. ii

The monthly fluctuations of the bullion in the Issue Depart-
ment are given in Table 7, p. 71, and those of the Liabilities
and the Reserve in Table II, pp. 82, &$. The figures were
largely affected in the years 1895 and 1896 by the payments
made by the Chinese Government to that of Japan. A Chinese
Loan was negotiated at Paris under a Russian guarantee in the
latter half of 1895, some ,£8,000,000 having been paid over in
October, and the remaining £"5,000,000 in the month of
November. The private deposits of the Bank had risen from
an average of about £30,000,000 in 1893 and of £33,000,000
in 1894, to more than £40,000,00 in 1895, and £49,000,000 in
1896. The £13,000,000 lodged on account of the Japanese
Government with the Bank was principally paid in bills, only a
small part having been forwarded in specie. This immense
sum practically never left this country ; a small part was under-
stood to have been repaid, as it came, in specie, but the
remainder was employed in the building of ships, the purchase
of naval and military stores, in these and other ways giving em-
ployment here. It does not appear to figure in the accounts of
the Bank after the spring of 1896. The public deposits, col. 13,
p. 12, are considerably larger now than in 1844, but the increase
in them has been by no means so large as in the total deposits.
Col. 14, which shows the proportion of the annual average to
1844, makes this point very clear. Col. 15 contains the annual
average of the private deposits, and it is in these that the
largest increase has occurred. In 1900 they were five times as
large as in 1844, having been in 1896 six times as large.
Col. 16 shows the proportion in each year; while the growth
has been continuous, it has not been uniform. The amounts
held during the last ten years show a very large increase, and
examining this column gives a better idea of the growth of the
business than any other statement that can be put before the
reader. Col. 19, p. 13, shows the annual averages of the London
Bankers' Balances from 1844 to 1877, the last year in which
they were published. These are included among the private
deposits shown in col. 15. The increase in them during the
period for which the information is given was far larger than
that of any other branch of the business of the Bank — the
increase in them between 1844 and 1877 having been nearly

ch. n] LIABILITIES— RESERVE 19

tenfold. The growth since 1877 has certainly been far larger.
This subject will be dealt with more fully later on.

Col. 11, p. 12, contains the yearly averages of the total
liabilities of the Bank of England, including under this head the
amount of the deposits and of the Bank post bills. From this
point of view we need not take the Bank note circulation into
account, as that concerns the Issue Department and not the
Banking Department of the Bank of England ; the only lia-
bilities, therefore, which have to be taken into consideration here
besides the deposits, are the seven-day and other bills. These
last have declined in amount greatly since 1854, the last year
in which they were over ^1,000,000. From averaging more
than .£1,000,000 in 1844, they have diminished to less than
,£300,000 in 1900. Hence it has not been thought necessary
to tabulate the amounts of the Bank post bills separately.
They are included with the public and private deposits in
col. 1 1, p. 12. During the time under notice a very considerable
increase in the liabilities of the Bank on deposits has taken
place. The liabilities, which averaged about 14^ millions in
1844, averaged more than 50 millions in 1900, having thus
much more than tripled in the course of that time ; this growth,
as will be seen by a reference to col. 12, has been gradual and
continuous. It was not till i860 or 1870 that the average
deposits of the Bank much exceeded its capital ; even at the
present date the deposits are rarely equal to four times the
amount of the capital. This is an unusually strong position
for any bank to occupy. The capital of most banks bears
generally a much smaller proportion to the deposits. In
Scotland the proportion has on average been of late years
14 per cent. In Ireland it is from 19 to 20 per cent. In the
United Kingdom generally the average is 15 per cent., though
with many banks it is distinctly higher. # The position of the
Bank of England in this respect is unusually and exceptionally
strong.

The Reserve.

In a similar manner, though not by any means in a like
proportion, the average reserve has increased. The annual

* See articles on the " Progress of Banking," numbers for January, February,
April to June in Bankers' Magazine. Published by Waterlow and Sons, Limited.

2o ACCOUNTS OF BANK OF ENGLAND [ch. n

average of the reserve, with a statement of the proportion
each year bears to 1844, will be found in cols. 21 and 22, p. 13.
The average reserve, from being 8 J millions in 1844, has
increased to nearly 21^ millions in 1900. In col. 23 is given the
average proportion of the reserve to the liabilities on deposits
and Bank post bills. This is generally very considerable. It
has been as high as 63 per cent, in 1852, and again in 1894;
it was as low as 30 per cent, in 1866. It rose in 1867 to 49 per
cent., and has since never averaged less than 37 per cent. This
proportion was marked in 1878. But the reserve has sometimes
been comparatively low of recent years, and the proportion was
only 43 per cent, in 1 899-1 900. In looking down col. 23, a
distinct, though gradual, diminution in the proportion of the
reserve to the liabilities becomes obvious. And it is not only
the proportion of the reserve to the liabilities which has altered ;
the character of the demands which may be made upon the
reserve has, during the last twenty-five years, undergone a
great, though a gradual alteration. This is indicated by the
great increase in the balances which the London bankers have
kept with the Bank of England ; these amounts are more likely
to be drawn on severely and sharply in a time of pressure than
any other money kept with the Bank of England.

We will now proceed to consider the amounts of these
balances, the proportion which they bore to the reserve of the
Bank of England between the years 1844 and 1877, and their
position at the present time.

Bankers Balances.

Col. 19, p. 13, contains the annual average of the London
bankers' balances from 1844 to 1877, when the publication ceased.
In these there was, as long as the published figures allowed the
matter to be traced, a very considerable and progressive in-
crease, far larger than the increase in the reserve itself. The
particulars of this are not given in the weekly statements, and
it is only the returns published by order of the House of
Commons which supply this valuable information. The
average amount of each year, which was less than 1 million
in 1844, had become more than 9 \ millions in 1877, the latest
date to which the information can be given. By the balances

ch. n] BANKERS' BALANCES 21

of "the London bankers," ft is understood that the balances
of " the clearing bankers " are described. There are, there-
fore, doubtless other amounts than these belonging to bankers,
and really forming a portion of the general reserve of bankers
with the Bank. There are now many important banks located
in the metropolis, besides the London banks properly so called,
among which are Scotch banks, Irish banks, Colonial banks,
and many foreign banks. Most of these do large businesses
in London, and doubtless keep corresponding sums of money
in reserve. There are also large sums of money kept with
the branches of the Bank of England at Manchester, at
Liverpool, and elsewhere, by provincial banks, which often
do business on a large scale, quite comparable with that of
many London banks. These sums are all, properly speaking,
"bankers' balances," and the amounts being kept for the same
purpose, should be included in the same statement. We can,
however, only deal with the figures as stated in the published
returns. The increase of the figures was progressive, and,
so long as it was recorded, proceeded in a far more rapid
proportion than the increase of the reserve of the Bank of
England itself, or of any other branch of its business. Col. 20,
p. 1 3, contains the proportion which the balances of the London
bankers bore during each year to their amount in 1844; this
enables us to follow their fluctuations with facility. In col. 25
the proportion per cent, of the average bankers' balances to the
reserve is given. From being only 1 1 per cent, of the total
reserve in 1844, the proportion increased to 93 per cent, in
1866; and, though it did not always remain at that high
figure, it was more than 75 per cent, in the years 1873-77.
Thus, from being but a small fraction of the reserve in the early
years over which the table extends, the amount increased to
being equal to three-quarters of the average reserve at the date
last mentioned. Col. 24 shows the proportion which the reserve
would have borne to the liabilities if the bankers' balances
had not been included. It shows how largely the bankers'
balances assist to keep up the amount of the resources of the
Bank. It is the practice of the London banks to keep their
principal reserve against immediate demands with the Bank of
England, as being the easiest and safest plan. And as their

22 ACCOUNTS OF BANK OF ENGLAND [ch. ii

business has extended, so they have also increased the balances
to the credit of their accounts with the Bank of England. As
far as the connection between the two can be traced, it appears
that the amounts of the bankers' balances (the bankers' reserves)
were, when the publication of the amounts ceased, much larger
in proportion to their liabilities than they had been twenty-five
years before ; while the proportion of the reserve of the Bank
of England to its own liabilities was somewhat smaller. This
subject is so important that it is dealt with separately in
Chapter III., p. 34. No doubt a very considerable portion of
the increase in the balances of the London bankers is due to
the necessity of holding larger sums at the Bank of England,
consequent on the development of the Clearing House system,
and the admission of the principal London joint stock banks to
that establishment, arranged in the years 1853 and 1854.

The Note Circulation.

The effect of the alterations consequent on the admission of
the Joint Stock Banks to the London Clearing House may be
traced in the diminution of the metropolitan note circulation of
the Bank of England about that time. The annual averages of
the notes held by the public issued at the branches and in
London are shown in cols. 35 and 37, pp. 14, 15, of this table, up
to the close of the year 1881. Since that date no information
has been published on this subject. Between 1844 and 1875
the provincial circulation had increased more rapidly than the
circulation which centres in London. If the same course has
been followed to the present time, nearly half the note circu-
lation of the Bank of England now proceeds from the branch
offices. As mentioned above, a distinct diminution in the metro-
politan circulation, given in col. ^y, p. 15, is observable about
1855. And from that date also, following on the admission of
the joint stock banks to the Clearing House, the proportion
borne by the balances of the London bankers to the reserve of
the Bank of England, which had not ever previously exceeded
20 per cent, of that reserve, rose till, as previously mentioned,
the bankers' balances became, between 1873 anc^ ^77* usually
about three-quarters of the reserve. The total amount held by

ch. n] NOTES— BANKERS' BALANCES AND RESERVE 23

the public and the proportion to that in 1844 are shown in
cols. 39 and 40, p. 15. The note circulation and the bullion in
the Issue Department are stated in Tables 6 and 7, pp. 70, 71.

The Bankers Balances and the Reserve.

The enormous amounts, as ^"109,143,000, May 15, 1901,
which pass through the Clearing House, especially on Stock Ex-
change M settling days," when totals of 60 millions, 70 millions,
and more are often cleared, leave large differences to be adjusted
through the " clearing bankers' " account with the Bank of
England. Due preparation has to be made to meet these differ-
ences, and very large amounts are required on these occasions.

What is paid away by one bank in this manner is, how-
ever, received by another. The " money " remains equally
with the Bank of England, whether it stands to the credit of
one bank or of another bank. Taking the amounts held on
deposit by the bankers in London into consideration, and the
demands which may be made on them on that account, it
would appear that the balances which they keep with the
Bank of England rather represent what should, with strict
accuracy, be called their "Till Money" than their " Reserve."
"Till Money," as everyone concerned in banking knows, is
the amount which every banker is bound to keep close at
hand ready to meet the calls of the moment, as cheques are
presented over the counter. An adequate supply of "Till
Money " is indispensable to the proper conduct of a banking
business, but it cannot be looked upon as a " Reserve." A
"reserve," though equally needed to meet immediate calls,
must be on a far larger scale than the mere amount of cash
necessarily held in the "till." And taking into consideration, as
just mentioned, the vast amounts of deposits held by London
bankers, and the demands which may be made on them at
any time, the balances they keep with the Bank of England
must be considered as the cash needed for immediate require-
ments— that is to say, the " Till Money " — transferred for
convenience sake to the custody of the Bank of England,
rather than a really adequate banking reserve.

The growth and development of the London bankers'
balances and the proportion they stood in to the reserve of

24

ACCOUNTS OF BANK OF ENGLAND

[CH. II

the Bank of England will be clearly shown if we divide the
period from 1846 to 1877 into four groups of eight years each.
This comparison cannot be carried later than the year 1877,
because that was the last year in which the amount of the
bankers' balances was published. The averages are as follows : —

Statement for years 1846-1877.

Averages of the years 1846-53
„ „ 1854-61

„ „ 1862-69

» „ 1870-77

Proportion per Cent, of

Reserve of Bank of
England to Liabilities.

52 per cent.

43

42 „

45 n

Proportion per Cent, of

Bankers' Balances to Reserve

of Bank of England.

21 per cent.

45
60

7o „

"

In the earliest group, the proportion of the reserve was
more than half the liabilities. This proportion, it will be
seen, on the whole declined, while the proportion which the
balances of the London bankers bore to the banking reserve
itself steadily increased. Though the progress of the balances
of the London bankers kept with the Bank of England cannot
be traced through any published statements beyond the year
1877, yet it is well known that they are far larger now than at
that date. And as these amounts are included among the
total deposits of the Bank, it becomes clear how very consider-
able a part of the increase of those deposits is due to this source.
The general effect may be seen by comparing the figures in
col. 17, p. 12, with those in col. 19, p. 13. It might be thought
that these deposits would be the most certain to diminish in times
of pressure, but, on the contrary, they are certain to rise at such
a time. Thus they greatly increased during the panics of 1857
and 1866. Between the 4th and the 25th of November, 1857, the
bankers' balances increased 2 millions ; rising from ,£3,400,000
on the 4th November, to £"5,400,000 on the 25th November.
In 1866 the action of the bankers was more rapid. On the
9th May, 1866, their balances were .£5,000,000; by the 16th
— that is to say, in one week — the amount had increased
nearly 3 millions, the figures being £"7,900,000. Beyond
doubt, a great portion of these sums had been derived from
the Bank of England itself, as the temporary advances during
that time increased nearly 5 millions, and the amount of bills
discounted also increased to about the same extent. The

ch. 11] BANKERS' BALANCES IN TIMES OF PRESSURE 25

reserve of the Bank of England had diminished during the
same time, from the 9th to the 16th May, more than 4 millions,
from ^4, 900,000 on the earlier date, to ^700,000 on the later.
A great portion of that amount had undoubtedly been drawn
by the London bankers. The immediate response to the call
of necessity speaks very well for the manner in which the
reserves of money at short dates were placed, for the prudence
with which the banking business of the country generally was
carried on, and also for the liberality shown by the Bank at
a period of great national peril.

A more recent instance of the manner in which the balances
of the London bankers are increased during a time of anxiety
was shown in the year 1875. On May 31st in that year the
failure of Messrs. Sanderson and Co., the Discount Brokers,
of Lombard Street, was announced simultaneously with that
of the Aberdare and Plymouth Iron Companies, some anxiety
having existed for a short time previous; and on June 15th
the bankruptcy of Messrs. A. Collie and Co. took place,
accompanied with the downfall of a host of minor traders
who were involved in their ruin.

The influence of these events on the balances of the
London bankers was very remarkable. The particulars are
as follows : —

BANK OF ENGLAND.

Other Deposits.

Balances of
London Bankers
(included among

Other
Securities.

Reserve,

Notes and

Coin.

other Deposits).

1875

£

May 5 =

£

May 5 =

£

May 5 =

£

May 5 .

17,209,000

IOO

7,072,000

700

18,923,000

IOO

8,399,000

„ 12 .

17,992,000

JO4

8,346,000

Il8

19,191,000

101

8,804,000

» 19 •

17,030,000

99

7,274,000

103

17,715,000

94

9,159,000

„ 26 .

19,437,000

"3

10,017,000

141

19,055,000

101

10,344,000

June 2 .

21,625,000

126

11,857,000

i6y

21,977,000

116

10,076,000

„ 9 •

20,074,000

116

10,497,000

149

20,099,000

106

II,06l,000

„ 16 .

19,547,000

"3

9,902,000

140

18,334,000

97

12,385,000

,> 23 .

22,847,000

*33

12,399,000

176

21,186,000

"5

13,072,000

A very great rise also took place in the " other " deposits
of the Bank of England in October, 1878. On the 2nd of
that month the stoppage of the City of Glasgow Bank was
announced. The movement in the "other" deposits of the
Bank, consequent on this event, was as follows : —

26

ACCOUNTS OF BANK OF ENGLAND

BANK OF ENGLAND.

[CH. II

September 25
October 2

9
16
23

1878

Other Deposits.

£

20,087,459

2i,938»505
25,967,071

27,321,433
27,859,388

Sept. 25:
I0O
109
I2Q
137
'39

Other

Securities.

£

i7,333>o°o
20,028,000
20,930,000
23,024,000
23,3I2,ooo

Sept. 25 =
100
Il6
121
133
^35

Reserve,
Notes and Coin.

£

12,254,000

10,772,000

10,215,000

8,517,000

9,166,000

A large portion of this increase in the deposits was at-
tributed at the time to additions made to the bankers' accounts,
but as the particulars of the London bankers' balances have
not been published since 1877, the details have not been made
public. A similar movement was observable in November,
1890, and it is desirable to recapitulate the circumstances. The
announcement of the involved position of Baring's was
made by the Bank of England on Friday, November 14th.
The Bank rate had been raised to 6 per cent, as a pre-
cautionary measure, on November 7th, which was Friday — a
very unusual day for a change, the regular day being, as is
well known, Thursday, the Court day at the Bank. It was
nearly a week before the City generally was informed how
matters really stood. On the afternoon of Friday, November
14th, a meeting of leading City men was held at the Bank, and
a guarantee commenced, which, at a further meeting held on the
15th, was brought up to the amount of ^8,000,000-^9,000,000
required to stave off a forced liquidation. In the next return
of the Bank of England the " other" deposits had increased
^6,000,000, which may hence be concluded to have been
added to their balances by the bankers between the 15th
and the 19th. The following statement shows the course of
events : —

BANK OF ENGLAND.

Other Deposits.

Other
Securities.

Reserve,
Notes and Coin.

1890

£

Nov. 5 =

£

Nov. 5 =

£

November 5

29,172,000

JOO

23,128,000

100

11,206,000

12

30,286,000

104

25,067,000

108

11,105,000

19

36,365,000

*25

32,136,000

139

14,552,000

„ 26

34,990,000

120

29,920,000

129

16,503,000

December 3

33>3I3»°o°

114

27,517,000

119

16,673,000

10

32,643,000

112

27,373.00°

Il8

17,007,000

17

33»I99,ooo

114

28,603,000

124

16,763,000

ch. n] THE OTHER SECURITIES 27

In all these periods of pressure the increase in the " other"
deposits has been accompanied by a generally corresponding
increase in other securities. This indicates that in round
figures what has been borrowed from the Bank, or a great
part of it, has been deposited with the Bank. The columns
of proportional figures enable us to trace this point. Pari
passu the increases in the two columns, of the other deposits
and of the other securities, balance each other.

Information at the moment would have been very valuable,
as this would have helped to allay needless alarm. Suitable
precautions against danger sometimes prevent that danger
from becoming serious, and on such occasions it is very desirable
that the extent of the precautions taken should be known.

The Other Securities.

The annual average of the " other" securities held by the
Bank of England is given in Table 3, col. 26, p. 13. Col. 27,
which accompanies this, shows the gradual growth of these.
The amount was, roughly, three times as large in 1900 as it was
in 1844. I have not thought it necessary to tabulate the Govern-
ment securities held by the Bank, which are at the present date
of writing (November 26th, 1902) about £35,700,000, being : —

Government Debt and other Securities in Issue f ^11,015,100
Department . . . . \ 7, 159,900

18,175,000

Government Securities in Banking Department . . . 17,512,457

^35,687,457

The "other" securities in the Issue Department are included
in this statement, since these are Parliamentary securities,
like the "Government debt." These have increased from
,£2,984,900 in 1844 to £7,159,900 in 1902, the increase arising
from the additional amount of note issue allowed to the Bank
on securities through the contraction of the English country
note circulation. This subject, the importance of which is
scarcely generally recognised, is referred to in Chapter XXL,
p. 217. Col. 26, Table 3, contains only the "other" securities
held in the Banking Department. Little is now known as to
the details which make up these securities, but the bills dis-
counted by the Bank and the temporary advances are included
among them. More information on these heads was given

28 ACCOUNTS OF BANK OF ENGLAND [ch. ii

up to the year 1875. I have tabulated this information in
cols. 28, 30, and 33 of Table 3, p. 14. Col. 28 shows the
amount of the "other" securities which would remain after
deducting the bills discounted and the temporary advances
from the total ; and col. 29 gives the corresponding propor-
tion for each year from 1844 to 1875. More than half the
"other" securities thus appear always to have been of a
fixed character during the periods over which our information
extends. Col. 30 shows the annual average of bills discounted,
and col. ^^ the annual average of the temporary advances
made by the Bank. The amount of bills discounted shown
in col. 30 has, at times, been large, and it has fluctuated
greatly. It will be seen that the largest amounts were in the
years when pressure on the money market was the highest,
as in 1846, 1847, I%57> i860, 1864, 1865, 1866. To facilitate
examination into this point, and for convenience of reference, the
annual average of the minimum rate of discount has been given
in col. 46, Table 3, p. 15. The rate charged at the Bank is com-
pared with the market rate in Table 4, p. 2>3- This subject is
dealt with separately, as the statement of the market rate could
not conveniently be brought into the analysis of the accounts of
the Bank. When the rate of interest has been quite low, as in
1844, 1849, and 1850, the amount of bills discounted was small.
It will be seen from Table 4 that during these years the market
rate dropped distinctly below the Bank rate, and those who
required discounts naturally obtained the accommodation they
needed elsewhere. In the last two years for which the informa-
tion can be given — 1874 and 1875 — the average amount was
close to ,£4,500,000. It would appear that this branch of the
business of the Bank has not increased in the same degree as
the deposits have done. The statement in col. 32, p. 14, supports
this impression. It shows the proportion which the bills dis-
counted held to the total of the other securities. Only in two
years during the period in which this point can be examined
into did the bills discounted amount to more than half of the
total of the securities. The proportion in the last year for
which the information was given was less than a quarter of
the whole amount of the securities held. This subject will
be dealt with further on, when the analysis of the accounts

ch. n] A MORTGAGE OR BILL OF EXCHANGE 29

of the other great banks of Europe is proceeded with in
Chapters XV. p. 140, XVI. p. 154, XVII. p. 174, XVIII. p. 181,
and XX. p. 203. Col. 33, p. 14, shows the annual average of
temporary advances. These, it appears, have fluctuated very
considerably. It is difficult, without the aid of information on
the part of the Bank, to form any distinct idea of what the amount
may be now, but the probability is that it is now occasionally far
larger than it was twenty-five years since. It is much to be
regretted that the statement given in the table cannot be
continued to the present time, and that information on this point
and as to the amount of bills discounted is not supplied now.
These are the only items in the account of the Bank in which
any "fluidity" can exist. The remainder of the other securities
held are believed to be principally debenture stocks of the
great railway companies of the country and stocks of the large
municipal corporations. Of " other" securities there were held, on
November 26th, 1902, in the Banking Department ^30,378,633.
On average the amount is now from about 29 to 32 millions,
the difference between one week and another arising, probably
a good deal, from alterations in the temporary advances.

Little is known as to the details, but the description given
in Mr. Thomson Hankey s book on The Principles of Banking,
published 1867, may apply. Mr. Hankey was Governor of
the Bank some years since. He possessed great natural
shrewdness and was a first-rate man of business. He criticises,
in The Principles of Banking, the classes of securities which a
banker should hold, and remarks that "a relative of mine,
C. Poulett Thomson, many years since used to say to me
that nothing was easier to conduct than the business of
a banker if he would only learn the difference between a mort-
gage and a bill of exchange. This saying may appear absurd,,
but I believe it is full of wisdom." Mr. Hankey applies this
principle to bills of exchange ; he means by it to discriminate
between those bills which are based on current transactions and
naturally, as it is said, "turn themselves into money," and
those bills, such as the acceptances of contractors and others,
which, though they no doubt will eventually be paid, may
require a fresh loan to be made to continue them. The prin-
ciple which Mr. Hankey applies is the right principle to act on

3o ACCOUNTS OF BANK OF ENGLAND [ch. ii

when bills are offered for discount. It would be interesting
to learn what proportion of the securities held by the Bank
are now bills of exchange, short loans, or debenture and
municipal stocks, " mortgages " according to Mr. Hankey's
definition.

These, though admirable securities from an investor's point
of view, are not those which are usually held to be suitable
for bankers to place any large part of their money in.

Average of Coin and Bullion.

The yearly averages of the coin and bullion held in the Issue
Department are given in col. 9, p. 1 1. A column with proportional
figures, No. 10, follows, which gives the proportion of the coin and
bullion held to the amount in 1 844. The fluctuations have been
considerable, and the increase not so large as in the deposits and
the reserve. The amount in several years — as in 1847 and 1848,
during the years 1854 to 1857 inclusive, in 1861, and in 1863 to
1865 — was smaller than in 1844. It has not been till compara-
tively recently, in 1876 — and especially from the year 1894 on-
wards— that any marked increase has taken place. The position
of the Bank of England in respect to the gold bullion imported
into this country is peculiar. The Act of 1844 declares in the 4th
section that, after the date when that Act came into operation,
"all Persons shall be entitled to demand from the Issue De-
partment of the Bank of England Bank of England Notes in
exchange for Gold Bullion at the Rate of Three Pounds
Seventeen Shillings and Ninepence per Ounce of Standard
Gold." Hence by far the greater part of the gold brought
into the country makes its way automatically to the Bank, and
the amount held there doubtless represents at times rather the
convenience of the importer than the requirements of the Bank.

What happens when the Bank buys gold is usually this. A
bullion dealer brings bar gold. An advance is made upon it,
pending assay, by the Issue Department. The dealer's account
in the Drawing Office — he is sure to have an account, though it
is not essential to the transaction — is credited with the amount,
and notes to the same sum are transferred from the Issue De-
partment to the Banking Department. After the assay the
exact value of the bar gold is calculated at standard fineness,

ch. ii] COIN AND BULLION— RATE OF DISCOUNT 31

and the balance due to the dealer is dealt with in the same
manner as the original advance. In the Issue Department the
gold held and the notes issued are increased, in the Banking
Department the drawing accounts and the reserve are increased.
Practically all gold brought to the Bank in whatever form is
paid for by the Issue Department in notes. The Act of 1844
places no limit on the issue of notes against gold : in other words,
the Bank is empowered by that Act to issue notes against gold
at the rate of jjs. gd. per ounce standard without any limitation.
A further amount of specie, gold and silver coin, is held in the
Banking Department, besides the bullion in the Issue Depart-
ment. This, except in the years 1867 to 1869, and 1878 to
1 88 1, never exceeded a million regularly till about the year
1885. For the years 1893 to !900 the amount on average has
exceeded two millions. The specie thus held is included in the
statement of the reserve, Table 3, col. 21, p. 13, being in that
case added to the notes held by the Bank, col. 7, and also in
the amount of the total bullion held, col. 41, p. 15, being in
that case added to the coin in the Issue Department, col. 9, p. 11.
The manner in which the accounts of the Bank are divided
between the Issue Department and the Banking Department has
rendered it necessary to make the statement in this form, in
order to show both what the amount of the reserve is, and the
total amount of bullion and specie held.

Col. 43, p. 15, shows the proportion of the total specie and
bullion to the total liabilities — that is, to the deposits and the
Bank post bills. As a rule the specie and bullion are less in
amount than these, the proportion being from 65 per cent, to
81 per cent, in the years from 1895 t0 1900. There were two
years, 1844 and 1852, in which the specie and bullion held
were larger in amount than the liabilities, being in the pro-
portion of 103 and 102 respectively. The figures for these
two years are therefore printed in a thick type to call atten-
tion to this point. Col. 44, p. 15, shows the proportion of the
total specie and bullion to the notes held by the public. The
proportion of the cover in metal to the notes in the hands of
the public has rarely for the last twenty years been much less
than 90 per cent. There have been several occasions in recent
years — in 1876, 1879, 1880, and from 1893 to I9°° — m which

-

32 ACCOUNTS OF BANK OF ENGLAND [ch. ii

the specie and bullion held have been larger in amount than
the notes in circulation. For these years also the figures have
been printed in a thick type — as 104 for 1876. Col. 45 shows
the proportion of the bullion to the liabilities and the notes in
the hands of the public united. This has been, on average,
for many years more than 40 per cent, of the amount of the
liabilities and notes held by the public.

With respect to the " notes issued," the proportions issued
against securities and against bullion are shown in cols. 5 and 6,
p. 11. The average issue against bullion has increased of
recent years.

Average Rate of Discount.

The annual average minimum rate of discount charge(
by the Bank is shown in col. 46, p. 15. This subject is dealt
with more fully in Chapters V. and VI. pp. 48, 55, which dis-
cuss the relations between the rate of discount and the reserve
of the Bank, also in Chapters X. and XI. pp. 95, 106, on the
variations in the rate from 1 844 to 1 900, and some of the causes
which influence it ; and in Chapters XIX. and XX. pp. 190, 203,
on the fluctuations in the rate charged by the Bank compared
with other business fluctuations, with some remarks on the rate of
discount of the Banks of England, France, Germany, Holland,
and Belgium.

To illustrate the increasing divergence between the market
rate and the Bank rate, Table 4, p. ^ ls given showing the
annual average of the Bank rate and of the market rate for
high-class bills for 1 845-1 900, and the differences between the
two rates. Down to 1870 the market rate was occasionally
above the Bank rate. Since that time, however, the market
rate has been constantly and, on average, increasingly below
the Bank rate charged in London. At its provincial branches
the Bank works at the ordinary local rate current. Indeed
complaints are made that the Bank will at times discount below
the rate usual in those places — complaints which are not to be
wondered at considering the large amounts placed with the
Bank of England by bankers, who naturally object to com-
petition of this description, carried on against them with their
own money.

ch. n] AVERAGES OF THE BANK AND MARKET RATES 33

TABLE 4.

Annual Averages of Bank Rate and of Market Rate High-Class Bills for the years
1845-1900, showing when the Market Rate was above or below the Bank Rate.

Annual

Average

Bank Rate.

Proportion of

Annual

Average

Bank Rate

to 1845

Annual

Average

Market Rate

High-Class

Bills.

Proportion of
Annual
Average

Market Rate
to 1845

Difference between

Market Rate and Bank

Rate.

Year.

Market Rate.

(1845 = 100).

(1845 = 100).

More.

Less.

£ s. d.

£ s. d.

s. d.

£ * d.

1845

2 13 8

IOO

300

IOO

6 4

1845

1846

3 6 6

I24

3 i5 0

125

8 0

—

1846

1847

5 3 6

I92

5 17 6

195

14 0

—

1847

1848

3 14 5

139

3 S 0

I08

—

0 9 5

1848

1849

2 18 7

IO9

250

75

—

0 13 7

1849

1850

2 10 1

93

2 s 0

75

—

051

1850

1851

300

112

300

IOO

—

1851

1852

230

80

1 17 6

62

—

0 s 6

1852

1853

3 13 I0

138

3 10 0

117

—

0 3 10

1853

1854

523

190

4 17 6

162

—

0 4 9

1854

1855

4 17 10

181

4 10 0

!5°

—

0 7 10

1855

1856

612

225

5 10 0

183

—

0 11 2

1856

1857

6 13 3

248

6 is 0

225

1 9

—

1857

1858

3 4 7

120

2 is 0

91

—

0 g 7

1858

1859

2 14 7

102

2 10 0

83

—

0 4 7

1859

1860

4 3 7

156

400

133

—

0 3 7

1860

1861

5 5 4

196

S 0 0

167

—

0 5 4

1861

1862

2 10 7

94

2 s °

75

—

o57

1862

1863

482

164

4 5 0

142

—

032

1863

1864

780

276

700

233

—

080

1864

1865

4 15 4

177

5<>7

177

11 3

—

1865

1866

6 19 0

259

682

213

—

0 10 10

1866

1867

2 10 9

94

2 13 4

88

2 7

—

1867

1868

2 1 11

77

2 S 9

76

3 10

—

1868

1869

3 4 2

119

3 7 5

112

3 3

—

1869

1870

320

116

3 5 7

109

3 7

—

1870

1871

2 17 8

107

2 17 10

96

0 2

—

1871

1872

420

153

419

136

—

003

1872

1873

4 15 Jo

177

4 14 0

157

—

0 1 10

1873

1874

3 13 10

138

3 11 1

118

—

0 2 g

1874

1875

3 4 8

120

3 * 9

105

—

0 1 11

1875

1876

2 12 1

97

2 5 3

75

—

0 6 10

1876

1877

2 18 0

108

2 12 s

87

—

077

1877

1878

3 15 8

141

3 ** **

120

—

0 3 9

1878

1879

2 10 4

93

2 2 g

7i

—

077

1879

1880

2 15 4

103

2 10 7

85

—

0 4 9

1880

1881

3 10 0

130

3 * *

102

—

0 8 11

1881

1882

428

154

3 11 1

" 118

—

0 11 7

1882

1883

3 " 4

133

3 4 4

107

—

070

1883

1884

2 19 1

no

2 11 6

86

—

077

1884

1885

2 17 7

107

280

80

—

0 g 7

1885

1886

3 1 0

114

268

78

—

0 14 4

1886

1887

3 7o

125

2 12 11

88

—

0 14 1

1887

1888

3 5 11

123

2 10 7

85

—

0 15 4

1888

1889

3 10 n

132

2 16 11

95

—

0 14 0

1889

1890

4 10 5

168

3 J7 7

128

—

0 12 10

1890

1891

3 5 2

121

2 15 4

92

—

0 g 10

1891

1892

2 10 7

94

1 IS 2

59

—

0 IS 5

1892

1893

3 1 0

114

263

77

—

0 14 g

1893

1894

223

79

*39

39

—

0 18 6

1894

1895

200

75

0 ig 2

32

—

1 0 10

1895

1896

298

93

1 a 5

52

—

0 18 3

1896

1897

2 12 8

98

1 18 6

64

—

0 14 2

1897

1898

3 4 10

120

2 12 11

88

—

0 11 11

1898

1899

3 15 0

140

3 5 0

108

—

0 10 0

1899

1900

3 19 6

148

3 i4 2

123

—

OS4

1900

D

CHAPTER III

; OF THE LONDON BANKER
BANK OF ENGLAND

Desirability of publishing information as
to Balances of London Bankers with
Bank . ...

No arrangement between the Bank and
bankers as to manner of dealing with
balances . ...

Table 5. Annual Averages of London
Bankers' Balances with the Bank of
England, 1844- 1877

Dates when Bankers' Balances exceeded
the Reserve, 1 844-1 877 .

Growth of Bankers' Balances unnoticed .

Large part of Deposits at Bank consists of
Bankers' Balances

Desirability of publishing amounts held
by Bankers with the Bank, in order to
show of what the Reserve really consists

34

34

35

36

37

37

37

Bank of England. Account for the week
ending December 26th, 1877, showing
Proportion of Reserve to Liabilities in
ordinary form, and after deducting
Bankers' Balances . . . 38

Bankers' Balances cannot form part of
Reserve of Bank of England and of
other Banks as well . • • 39

These balances are the ultimate Reserve
of all Banks in the kingdom . . 39

Practice of loaning out Reserves of Banks,
peculiar to this country . . . 39

Bankers' Balances with the Bank of Eng-
land included among its Liabilities 39-41

Periodic demands for money . . 41

Better arrangements with regard to
Bankers' Balances and the Reserve
might be made . . . 42

The subject of the balances which the bankers keep with the
Bank of England requires some further examination. The
amounts of these cannot be carried later than the year 1877,
as the publication of the figures ceased with the close of
that year. It is much to be desired that the publication of
this information should be resumed, but meanwhile all that
can be learned from the consideration of the manner in which
these balances have accumulated must be obtained by the
examination of what has already been made public. This will
be found of service in enabling us to understand better what
is the position of the reserves held by the banks of this country.
Some further remarks on this point will be found in the next
chapter. There has never been any distinct arrangement made
between the Bank of England and the bankers as to the

34

CH. Ill]

AVERAGES OF BANKERS' BALANCES

35

manner in which these balances should be dealt with. It
might, generally speaking, be said that they were held on
the basis of the ordinary arrangement between a banker and
his customer as to a credit account — that the balance should be
withdrawable whenever required.

The annual averages of the bankers' balances for the period
that they have been made public are given in col. 19 of Table 3,
p. 13. For convenience of reference they are repeated here.

TABLE 5.

Annual Averages of London Bankers' Balances with the
Bank of England, 1844-1877.

Proportion of London

Bankers' Balances to

£ 1844(1844=100).

1844 . . . 997,000 . . . IOO

1845

1,256,000

128

1846

1,558,000

160

1847

1,467,000

*5<>

1848

2,359,000

241

1849

2,131,000

218

1850

1,656,000

I/O

1851

1,666,000

I/O

1852

3,184,000

326

1853

2,259,000

231

1854

2,692,000

275

1855

3,065,000

313

1856

3,032,000

310

1857

3,274,000

335

1858

4,639,000

475

1859

4,256,000

435

i860

4,283,000

438

1861

4,185,000

428

1862

5,030,000

5*5

1863

4,726,000

■ 484

1864

4,899,000

502

1865

5,038,000

■ 512

1866

6,259,000

641

1867

6,689,000

• 685

1868

6,801,000

. 696

1869

6,479,000

. 663

1870

6,618,000

678

1871

8,390,000

■ 859

1872

7,609,000

■ 778

1873

8,586,000

. 878

1874

8,341,000

. 854

1875

10,324,000

h055

1876

11,851,000

. 1,212

1877

9,543,000

976

36

BALANCES OF LONDON BANKERS

[CH. Ill

There were many occasions, principally between 1857-77,
on which the balances of the London bankers with the Bank
were fully as large as, and some on which they were distinctly
larger than, the reserve of the Bank of England. Thus : —

On nth November, 1857, the Bank of England reserve was

and the London bankers' balances

On 1 6th May, 1866, the Bank of England reserve was

and the London bankers' balances

On 31st October, 1877, the Bank of England reserve was .

and the London bankers' balances

,£1,462,000
4,649,000
1,203,000
7,930,000
9,678,000

10,069,000

The last statement shows in a very remarkable way the
manner in which the balances of the London bankers have
continued to expand. October, 1877, was a very severe time
of pressure, and the amount of the bankers' balances then
shown was by no means the largest in the return of that
year, but it still largely exceeded the amount attained during
the panic of 1866.

The details of the dates when the bankers' balances ex-
ceeded the reserve are as follows : —

Number of Times when the Bankers' Balances Exceeded the
of the Bank of England in the Years between 1844 and

1847

Reserve
1877.

1856
1857
1858
1865
1866
1871
1872
1873
1874
1875
1877

2

7

2

1

20

4
1
6
6

9

2

61

Divided into four groups of eight years each, the results
are as follows : —

Number of Times when the Bankers' Balances Exceeded the Reserve

of the Bank of England.

Years 1844-53
„ 1854-61
„ 1862-69
„ 1870-77

1
11
21

28

61

ch. m] GROWTH OF BANKERS' BALANCES 37

The reader should compare this statement with the one
showing the proportion borne by the bankers' balances to the re-
serve, given in cols. 19, 20, and 25 of Table 3, p. 13, and the state-
ments on p. 35. It is clear that the tendency of the bankers'
balances to increase is entirely independent of years of panic or
extraordinary pressure, and is the result merely of the natural
growth of the business. Though no absolute panic occurred
during the years 1870-77, there was grave anxiety at times,
some of the causes of which are mentioned on p. 25, and the
balances of the London bankers were more often larger than
the reserve of the Bank of England during those eight years
than in any of the similar groups of years which preceded.

These figures also mark very distinctly that the growth of
the balances of the London bankers increased, in the period
during which they were published, progressively in a larger
proportion than the reserve of the Bank of England. There is
no doubt that they have continued to increase, and in a larger
proportion, up to the present time. In an ordinary way people
who read the weekly accounts of the Bank of England, which
appear in the newspapers every Friday morning, do not
remember this point ; it will therefore be advisable to show
how large a part of the deposits of the Bank consists of the
balances of the London bankers.

As an illustration, the account for the week ending Wed-
nesday, December 26th, 1877, is shown on p. 38. It has been
selected as the most recent example which can be given of the
proportion which the balances of the London bankers bore to
the total deposits of the Bank up to the time when our know-
ledge of this matter ceases. The publication of the amounts
of the London bankers' balances has not been continued since
the end of December, 1877.

If the amounts held by bankers with the Bank, both in
London and the provinces, were published every week, it
would then be clear what the reserve really consisted of ; that
is to say, whether it consisted of money belonging to the Bank
of England itself, and kept to meet the demands which may
at any time be made on it, or whether it consisted of the
reserves of the other banks of the country, placed by them
with the Bank of England for safe custody. If in the pub-

38

BALANCES OF LONDON BANKERS

[CH. Ill

lished accounts of the Bank the amount of the balances of the
bankers were deducted from the ordinary deposits, and a
corresponding deduction made from the reserve, as in the
form "of account given below, it would become obvious at
once that, on the 26th December, 1877 — the latest statement
respecting which these details are available — the deposits of
the public with the Bank of England, instead of being 20
millions, were 1 1 millions, that the reserve available against
the ordinary as distinguished from the banking portion of the
liabilities was less than 3 millions instead of 11^ millions, and
that the proportion of this reserve to the liabilities on deposits
other than those derived from the bankers, instead of being 5 7J
per cent., as the usual statement makes it, was only 23 J per cent.

Bank of England. Account for the Week Ending on Wednesday, the
26th Day of December, 1877. Arranged so as to Show the Proportion of
the Reserve to the Liabilities after Deducting the Balances of the London
Bankers from Both.

ISSUE DEPARTMENT

Notes issued

38,231,530

38,231,530

Government debt
Other securities
Gold coin and bullion

11,015,100
3,984,900

23>23i,530
38,231,530

Proprietors' capital

Rest .

Public deposits .

Other deposits . 20,183,367

Less bankers'
balances

> 8,695,000

Seven-day and other bills

BANKING DEPARTMENT.

£

14,553,000

3,073,356
5,942,869

11,488,367

306,037

35,363,629

Government securities . 13,383,176

Other securities . . 18,441,368
Notes . . 11,433,545
Less per contra 8,695,000

2,738,545

Gold and silver coin . . 800,540

35,363,629

Proportion of reserve to liabilities, shown in ordinary form,
57J per cent.

Proportion of reserve to liabilities, after deducting bankers'
balances from both, 23J per cent.

It was mentioned above that the week's account of the
Bank of England selected here as an illustration is merely-
taken as being the most recent in reference to which this com-
parison can be made, and not for any other reason. It would

ch. in] BANKERS' BALANCES AND THE RESERVE 39

have been easy to select the accounts of other weeks, in which
the proportion borne by the London bankers' balances to the
deposits generally, and also the proportion of the London
bankers' balances to the reserve, would have been considerably
larger than in the one chosen, and consequently the proportion
borne by the reserve to the remainder of the liabilities would
have been far smaller. Or again, it would have been easy
to have taken a week's account in which the whole reserve
was insufficient to meet the demands which might be made
by the London bankers alone. The account of a week
has been taken which is not an extreme instance in any
way. If the ordinary liabilities of the Bank were distinguished
from those incurred to its banking customers, attention would
be more readily drawn to those occasions on which the bank
reserve of the Bank of England was insufficient to meet the
balances of the London bankers.

But whether the accounts of the Bank of England are ever
again published in such a manner as to show these details or not,
one thing is clear — that the balances kept by other bankers
with it cannot really form part both of its own reserve and
of the reserves of the other banks as well. If these amounts
are employed for the one purpose, they cannot be available
at the same time for the other. These balances are the
ultimate reserve of all the banks in the kingdom. There
is no other country in the world, of which the banking system
is known, in which the reserves of the banks are loaned
out in the manner in which they are in this country. This has
been the case here ever since banking in the United Kingdom
assumed its present form. The practice has, therefore, the
plea of usage in its favour, and the plea of usage is an extremely
strong one ; but it is not one which should be followed implicitly
when there are good reasons for a change. It might be undesir-
able to say that these balances should never be loaned out ; but
it is clear that they form that portion of the resources of the
Bank which should be employed with the utmost caution.

The balances of the London bankers with the Bank of
England are included among its other liabilities. In another
sense also, while these balances are practically, as previously
mentioned, of the nature of " till money " — as far as transactions

4o BALANCES OF LONDON BANKERS [ch.

between the banks who own them are concerned — they form part,
and by no means an unimportant part, of the general banking
reserve of the country. These balances are the only reserve
of ready money kept by the bankers of the United Kingdom
beyond the amount of cash in their tills. It is not meant, of
course, by this to suggest the idea that they are by any means
the only resources which the bankers of the country would
have to fall back on in any time of pressure. The amounts
held at " call," and the amounts readily available in other forms,
are very large — far larger than any of the figures now before
us for consideration. But, as far as actual hard "cash" is con-
cerned, the balances at the Bank of England are the only
source from which an immediate supply of " money " can be
obtained by the bankers of the country to meet any immediate
need beyond what they themselves hold in their own vaults.
It is not by any means the whole of these balances which are
available to meet such an immediate need. The bankers have to
bear in mind that a " working balance " has always to be main-
tained against the demands which may arise on account of the
clearing (see p. 22, and Chapter IV. p. 44). And to include the
amounts which these balances represent among the reserves
of the Bank of England, and also among the banking reserves
of the country at large, is really to reckon them twice over. In
order to illustrate this for the period over which information
on the subject is available, namely from 1844 to 1877, a state-
ment has been drawn up showing the proportion which the
reserve would have borne to the liabilities if the bankers'
balances had been deducted both from the reserve and the
liabilities, and also of the proportion which the bankers'
balances bore to the reserve. These show the position in which
the Bank of England would have stood if the London bankers
had held their own balances in Bank of England notes, or in
gold in their own safes.

It has not been possible, in the space to which this state-
ment is of necessity confined, to exhibit what the effect of
making up the accounts of the Bank of England in this manner
would have been on every weekly return of the Bank from 1 844
to 1877 ; but the general effect is shown in cols. 24 and 25 of
Table 3, p. 13. Col. 24 contains the proportion which the

ch. in] BANK RESERVE ALSO RESERVE OF OTHER BANKS 41

average annual reserve of the Bank of England would have
borne to the liabilities if the balances of the London bankers
had been deducted from those liabilities and the same amount
were deducted also from the reserve. Col. 25, p. 13, shows the
proportion of the bankers' balances to the reserve. The gradual
and progressive diminution in the proportion of reserve kept to
the liabilities in general has been already noticed ; but from the
figures recorded in these columns we may see how much
greater and more marked, especially in recent years, that
diminution would have been, had the accounts of the Bank
been made up in such a manner as to distinguish the ordinary
from the special banking liabilities. The average reserve of
the Bank of England would, if the bankers' balances had not
been included in it, have been on average in 1875 Dut 6 per
cent, of the liabilities, and in 1866 but 3 per cent. (Table 3,
cols. 24 and 25, p. 13). We may thus see clearly how largely
the reserve of the Bank of England is composed of money
which is really also the reserve of other banks, and retained
against other liabilities than those which appear in this account
— liabilities which, of banks in the United Kingdom alone, are
many times larger than those of the Bank of England, and
have increased very rapidly in recent years, having been
estimated in 1844 as about 70 millions, in 1856 as 200 millions,
in 1866 as 350 millions, in 1873 as 8°° millions, in 1902 as
about 1,000 millions. From a banking position, there is no
doubt economy in making the Bank of England keep the
reserve of the bankers, but it is equally certain that, from a
general point of view, the doing this tends to place the stress
of every pressure which occurs always on one point — a point
on which many and varied demands all concentrate — demands
for domestic and foreign needs, the requirements for harvest
wages and autumn holiday-makers in England, of farmers in
Scotland, of dealers in Ireland, the requirements of great
nations forming and increasing their gold circulations, the
demands for gold for export as well as for the internal cir-
culation of the country. Of these demands, those caused by
the periodic fluctuations of the note circulation of the Scotch
and Irish banks are specially linked through the provisions
of the Bank Acts of 1844-5 witn tne fluctuations of the

42 BALANCES OF LONDON BANKERS [ch. hi

reserve of the Bank. This subject requires a more special
treatment than can be accorded it here, and it is dealt with
in Chapter XII., p. 112. The more general demands are
referred to in Chapter XIV., p. 138, which describes the
"Autumnal Drain" of specie from the Bank. Great un-
steadiness in the value of money is the result. Several
useful suggestions have from time to time been made on
this matter, and by those whose opinions deserve careful
consideration. But the vis inertice which in this case would
have to be overcome is a remarkably powerful force. It can
only be hoped that those who feel the importance of the
subject will keep it steadily before the public, till an arrange-
ment is agreed to better suited to the necessities of the case
than the present most inadequate method. I am glad to see
the matter referred to in the paper on the Short Loan Fund
of the London Money Market, read before the Institute of
Bankers by Mr. J. Herbert Tritton, on February 5th, 1902.
Much discussion will no doubt have to take place before any-
thing practical is done, but keeping the subject thus before the
minds of business men will assist in arriving at a satisfactory
result. It is to be hoped that we may not require the expe-
rience of another panic, with all its miseries and all its losses,
the extent of which none except those who have experienced
the real brunt of such a season of trial can appreciate, before a
better arrangement is arrived at.

Still it is best to place on record some suggestions as to
what might be done. If our banks were to keep their own
reserves, and publish their accounts weekly or monthly, the
reserves held would undoubtedly be much larger than they
are now, and business would be on a far more solid footing,
and more even in its tenor. Such an arrangement is hardly
likely to be arrived at, and the plan would be open to some
objections. The banking business of the country has been
carried on so long on the One Bank Reserve system that so
great a change as this could not be lightly undertaken. But
if the committee of the Clearing House were to publish the
collective amounts of the bankers' balances with the Bank
weekly, together with the statement of the Clearing House
Returns, this might be useful. If the balances were sum-

ch. m] INFORMATION ON BANKERS' BALANCES DESIRABLE 43

marised in one total the knowledge of the amount could be
dangerous to no one, and would even diminish the risks to
which we are exposed in any time of pressure. There is a
great danger at such times to our highly complicated banking
system from alarm among the ill-informed and ignorant. Their
anxiety would be soothed by a knowledge of the large re-
sources held by the banks ; and to those who have the conduct
of the business such information would be of signal service.
A knowledge of the position of the shoals and breakers to be
avoided in his course, and of the position of the channel through
which he may steer his ship in safety, useful at all times to the
pilot, is essential among the additional perils of the storm.

CHAPTER IV

THE BALANCES OF THE LONDON BANKERS WITH THE BANK
OF ENGLAND. HOW FAR THEY FORM AN EFFICIENT
RESERVE

Correspondence between Lord Aldenham
(Mr. H. H. Gibbs) and Professor B.
Price on the Bankers' Balances . 44~45

Portion of Balances of Bankers at the
Bank of England only there for "safe
custody" . . . 45-46

PAGE

Normal and Abnormal Balances of Bankers 45

Large part of Bankers' Balances rather
" Till Money" than Reserve . 45"46

Bankers' Balances should be entered
under a separate heading in accounts
of the Bank . . . 46-47

Duty of the Bank — Protection of Reserve 47

Considerable information of a very interesting character as
to the manner in which the balances of the London bankers
with the Bank are regarded by the Bank directors, is given
in some letters written by Lord Aldenham, then Mr. H. H.
Gibbs, a well-known director of the Bank of England, pub-
lished in an appendix to a book written by the late Professor
Bonamy Price. # These letters form part of an animated
and interesting correspondence between Lord Aldenham and
Professor B. Price, on the Bank rate, the influx and efflux
of gold, the " regulation of the currency," and other kindred sub-
jects. It is not necessary to enter into the consideration of all
these questions at the present time ; we will content ourselves
with examining mainly two points which are discussed in the
letters, namely, the manner in which the Bank of England views
the bankers' balances kept with it, and the proportion of these
sums which they consider they may make use of in the ordinary
way of business. The opinions of any director of the Bank, and
especially of a past-governor of such experience and standing

* Chapters on Practical Political Economy. By Bonamy Price, Professor of
Political Economy in the University of Oxford. London : C. Kegan Paul and Co.,
1878.

44

ch. iv] LORD ALDENHAM ON BANKERS' BALANCES 45

as Lord Aldenham, are very valuable, and no apology is
needed for quoting from a book which is open to the whole
world to read. The correspondence at the point alluded to
turns first on the question whether the custody of such large
sums as the bankers keep on their accounts at the Bank of
England may not cause some difficulty or even danger to
the Bank. Lord Aldenham in referring to this, and to the
fact that the bankers' account is really an extremely easy one
to arrange for, commences by remarking that " next to the
Government account, the account of the collective bankers is
the most certain and the most intelligible. . . . We know of
the bankers, better than of any account in our books, what
is the minimum balance wherewith they can live. They must
have x on their account (a quantity unknown to all but us),
and x-y therefore — never appears. But if x+y is seen, then
we know that y must remain untouched and uninvested ; must,
in fact, form an addition to our reserve; x is ours for profit
if we like to use it, but y is ours only for safe custody. Where
is the danger? On the other hand, the possession of that
account is of the greatest importance to us, as affording the
most perfect and accurate measure of how far the public can
at all act independently of us." The italics are in the book
quoted from.

In a later letter Lord Aldenham explains " that up to a certain
point (x)" the normal balance of the bankers, was perfectly
intelligible to the Bank ; " (y)y their abnormal balance, is an
element of doubt." These remarks made by Lord Aldenham
appear to confirm the advisability of the step which has been
recommended above, namely, that the bankers should decide
that everything which they keep in hand beyond their working
balances should not be placed to the credit of their clearing
accounts with the Bank, but should be retained weekly under
a separate heading, and not appear in the statements of the
Bank. Such a separation would mark out at once what was
really "reserve," and what was only nominally "reserve." The
bankers' balances up to the point which Lord Aldenham speaks
of, and which may approximately be estimated from the out-
side, are really not reserves to them at all ; they are merely
''till money "on a scale commensurate with their operations,

I

46 BALANCES OF LONDON BANKERS [ch. iv

relatively, that is, to the demands which may be made on them
at any moment in settling the clearing balances. This would
be seen immediately if business in the city were conducted now
as it used to be up to the date when the clearing demands were
still settled by the payment of the actual notes, not by means
of a cheque drawn on the Bank of England. No one could
call the sums held in bank notes in the safe, or the drawer near
the counter, for that purpose, a " reserve." The notes were
merely "till money," and "till money" the amounts which
represent them still remain, though for their own convenience
the banks have advanced a step beyond their primitive practice,
and have agreed to divest themselves of the actual custody
of the notes, and to keep the money itself in Threadneedle
Street. It is impossible to call the sums thus held by the Bank,
which represent cash merely held to meet immediate claims on
the bankers, a reserve. Nor is anything beyond these sums,
the clearing balances as they may be described, of much use to
the Bank of England. The bankers have frequently large
sums on their accounts beyond what they require for settling
the daily clearing demands. These sums, and they are often
very large, are a real reserve to them. But in consequence
of uncertainty as to the length of time this money may remain
with the Bank, it is to be supposed that the directors do not
feel justified in employing the part of the sum which exceeds
the " minimum balance " in the same manner as they do the
part which they know must remain fixed. This amount, Lord
Aldenham says, and truly, with a most proper feeling of the
line of action the Bank should always take, "is ours only for
safe custody." Now if there is an axiom to be observed in
banking, it is that things should always be regarded as they
really are. To have a balance in your hands which you cannot
use is a hindrance to business, and not a help. The bankers'
balances in 1876 fluctuated nearly ten millions between their
lowest and their highest point, and as the lowest may be taken
as approximating to the necessary amount which has always
to be maintained, it is clear that a very serious responsibility,
without any corresponding advantage, must have been imposed
on the Bank. To have placed these sums under a separate
heading would, by Lord Aldenham's own showing, have been

ch. iv] RATE OF DISCOUNT AND PROTECTION OF RESERVE 47

no detriment to the Bank, while the doing so would have tended
to the increase of that comparatively small amount of " unused
money," the smallness of which is so constant and so real
a danger to business in this country.

After all, the point perhaps of most importance in the
decision of the Bank directors on the subject of their discounts,
which is dealt with in the next chapter, is how far their
present intention of governing their dealings in the matter of
discounting by the strict rules of supply and demand can
be reconciled with their old practice of protecting the reserve
when needful, irrespective of the rate of interest ruling in the
market. The two things seem hardly capable of being recon-
ciled with each other. The market rate for " money" may
be very low, and yet a demand for bullion for export may
set in which may require that the rate should be raised. In
circumstances like these — and they may occur any day — which
course are the directors to follow ? It cannot be doubted
that the Bank will be faithful to its old traditions and protect
the reserve. But considering the vast sums continually float-
ing in the outside market, and the sudden and large demand
which may arise at any time out of exchange operations, the
Bank might in all fairness call on those who have so large a
share in regulating the outside market to co-operate with it in
providing a proper reserve to meet the demands which these
operations are at times certain to entail. One thing is clear,
that the fixing the rate of discount, and the custody of the
reserve which is influenced by that rate, should be in the same
hands ; and if the rate fixed by the other banks influences the
market more than it used to do, as appears to be the case, — then ,
the responsibility of providing an adequate reserve should be
shared between them and the Bank of England.

CHAPTER V

THE PUBLISHED RATE OF DISCOUNT OF THE
BANK OF ENGLAND

PAGE

Change made in 1878 as to the fixed
Minimum Rate of Discount at the
Bank of England . . . 48

The Bank Rate down to 1839 . . 49

The Bank Rate between 1839 and 1844 . 49
" New System of Discounting" in 1844 . 49
Line taken by the Bank with regard to re-
lative position of Market Rate to Bank
Rate in 1844, 1848, 1857, 1878 . 49-50
Drawbacks to a published fixed rate . 51

PAGE

Announcement by the Bank as to re-
discounting for Bill-Brokers, practice
in 1878 and 1890 . . . 51

This unfavourable to quiet working of
the Money Market . . . 52

Banks on the Continent, Re-discount
freely with Central Bank — convenience
of this arrangement . 52

Bankers hardly Discount for their custom-
ers now so regxRarly as previously

Development of Bill-Broking

52-53
52-54

The directors of the Bank made, in February, 1878, a change in
their mode of business with respect to discounts, by announcing
that they would no longer feel bound to adhere to the rule of
maintaining a fixed minimum rate as closely as they had done.
This has had in some ways a considerable effect both on their
own transactions and on the money market at large, and is not
unlikely to have more in the future.

To investigate the reason for this change it is needful to go
back some years, and to trace the practice of the Bank with
regard to discounts from the year 1844. The most authentic
record of the history of this is to be found in the reports and
evidence given before Parliamentary Committees, as the
opinions of those who appeared before those Committees are
preserved there in their own words.

Thus the Report of the Committee of the House of Lords
on Commercial Distress, Session 1847-8, contains a historical
statement of great value on these questions. The report of
the corresponding Committee of the House of Commons, also

48

ch. v] BANK RATE A CENTURY SINCE 49

dated in 1848, was referred to in the opening chapter of this
volume. In some respects the report of the House of Lords
is the more weighty document. It was deemed of so much
importance that it was reprinted in 1857. From it may be
learned that for more than a century, down to the year 1839, the
Bank rate never exceeded 5, nor fell below 4 per cent. During
the pressure of 1839 the rate was raised for some months to
6 per cent, but it was reduced to 5 per cent, in January, 1840,
and remained at 4 or 5 per cent, as before, till after the Bank
Act was passed. At that date the market value of money was,
and had been for some time previous, considerably below the
Bank rate, so much so, in fact, that the Bank was entirely "out
of the market." According to the evidence of Mr. H. J.
Prescott, the deputy-governor of the Bank at the time, the
Bank did not then hold "above two or three hundred thousand
pounds of discounts in London, the market rate being at that
time not above if to 2 per cent." The actual sum is mentioned
as being ,£113,000 in August, 1844, when the Bank rate was
reduced to 2\ per cent.

This was the date at which the " new system of dis-
counting," as Mr. Prescott termed it in his evidence, was
adopted by the Bank. The novelty of the system consisted
in the fact that the Bank commenced from the autumn of
1844 to adapt its own rate to the market rate, and with such
effect that the governor of the Bank, Mr. James Morris, in
giving evidence on the same occasion as Mr. Prescott, con-
sidered that by 1848 the Bank held half the discounts then
in the market. "I consider," were Mr. Morris's words, "that
in London the discounts by other parties, the great discount
brokers and bankers, must be equal to the amount which the
Bank holds under discount." And, in answer to another
question, Mr. Morris added, " I think that the discount brokers
and other parties afford altogether to the public an amount
of discount equal to that afforded by the Bank, except in times
of extreme pressure."

These observations made by the governor and the deputy-
governor of the Bank in 1848 show what the position of the
Bank of England was towards the outside market some fifty
years ago. They are supplemented and supported by the

E

[CH. 1

50 THE PUBLISHED RATE OF DISCOUNT [ch. v

remarks made by Mr. Samuel Jones Lloyd (afterwards Lord
Overstone) at the same date, when examined before the "Com-
mittee on Commercial Distress " of the House of Commons.
Mr. Lloyd's evidence was to the effect that the Bank had at
that time become more of a competitor in discount business
than formerly, owing to the fact that it made its own rate con-
form to the fluctuations in the market rate more closely than
it used to do. " The Bank rate," Mr. Lloyd said, " formerly
was 4 or 5 per cent. ; if the market rate of interest was below
4 per cent., the Bank ceased to discount till it got up again
to that point. But in point of fact, latterly the discount
department has become a very active department of the
Bank." Mr. Lloyd's evidence thus confirms the statement
which Mr. Morris had made.

This describes the position of matters in 1848. No great
alteration had occurred in it for nine or ten years, when the
Select Committees of the House of Commons of 1857 and
1858 collected further evidence on the working of the Bank
Acts. Mr. David Barclay Chapman was examined before the
Committee of 1857; by his evidence it appears that the rate
charged by the Bank of England in 1857 was not, as it is at
present, almost invariably above the outside rate, but that it
worked more nearly in unison with it, being sometimes a little
above and sometimes a little below the market rate. When
the Bank rate was very low the market rate was a little lower,
and when the Bank rate was very high the market rate was
a little higher. The evidence of Sir David Salomons before
the Committee of 1858 was to the same effect as that of Mr.
Chapman, and showed that the Bank rate conformed fairly
closely to the market rate at that period. The question asked
by Mr. Hankey and answered by Sir D. Salomons on the subject
was as follows : — " Do you believe that the Bank of England
has generally led or followed the current rate of interest in
the London market ? — I think they sometimes have led and
sometimes have followed ; generally they are supposed to
follow, but I think that sometimes they have led" (1199).
In 1857, however, the first signs of divergence between the
Bank rate and the market rate appear to have occurred.
Sir D. Salomons stated that in December, 1857, the London

ch. v] DRAWBACKS TO PUBLISHED FIXED RATE 51

and Westminster Bank had deviated from the principle of
working in accordance with the Bank. His words were :
" We at that time altered our system. We do not now
follow so closely the Bank rate ; we have, as far as we can,
broken from it, adopting what may be called an expedient
rate, not following the Bank rate so closely as hitherto we
have done" (1145). (Evidence before Select Committee of
House of Commons on the Bank Acts, 1858.)

These statements of Sir David Salomons show the direc-
tion in which matters were tending in his time. The facts
are shown in Table 4, p. 33. Gradually it became a question
whether the publication of a fixed rate by the Bank of
England had not become as much an anachronism as a
permanently fixed rate was in the year 1844. When a fixed
rate was published by the Bank, people could tell at once
whether they could get their business done cheaper elsewhere,
and in this period of sharp competition, such knowledge is
enough of itself to deter them from coming to a bank, the
rate of which they know already. The Bank lost that power
of delicate adjustment of its position to the precise needs of
the moment, which is essential to the maintenance of business.
It cannot, as it were, feel the pulse of its customers as closely
as if its rate were not advertised ; it cannot follow so well
the distinctions made between one class of paper and another
as it could — did a hard and fast rule not exist.

When, in February, 1878, the Bank announced, as men-
tioned above, that it would no longer feel bound to discount
at the published minimum rate, it made a further and perhaps
more important alteration by letting it be known that it would
make advances to the bill-brokers when desired, reverting in
this to its practice before March, 1858.

This was extremely convenient for the bill-brokers, and is
understood to have been used more frequently and for larger
sums since the further change of the Bank's practice in 1890.
Previous to July, 1890, the Bank made advances to bill-brokers
and discount companies on bills, but would not discount the
bills outright. In 1890 the Bank announced that the brokers,
etc., would be allowed to offer for discount at not less than the
published rate, bills not having more than fifteen days to run.

1

52 THE PUBLISHED RATE OF DISCOUNT [ch. v

The currency of the bills has since been extended by degrees
to sixty days. When a banker requires a broker to repay him
his "Call-Money" the only source from which the broker can
obtain the requisite supply is from the Bank of England. The
broker cannot expect to be able to obtain the sum in the open
market, as all available resources there are, as a rule, employed
up to the hilt. He therefore goes to the Bank of England,
pledges what are virtually the banker's own bills, and thus is
enabled to repay the banker. These bills may have but a
very few days to run, but the broker cannot wait till they
have matured. The banker must have his money, and the
broker must find it. The broker has no reserve of unem-
ployed money. He cannot afford to keep a reserve, as he
allows interest at a higher rate than the banker does on
all his deposits. Hence a demand for a comparatively small
sum makes a stir, disproportionally large, in the money
market.

This arrangement is not favourable to the quiet working of
the money market. If the custom generally followed on the
Continent prevailed in this country, and bankers laid them-
selves out to discount freely for their customers, feeling at
liberty to re-discount these bills whenever needed with the
Bank of England, all the work of intermediaries would be
saved, and business would be on a sounder foundation. It is
the custom of banks in foreign centres, as at Berlin, to re-
discount thus habitually. The arrangement is a good one in
many ways ; it helps the central bank to keep in touch with
the smaller business houses which surround it, and it enables
those houses to carry on their business with perfect smoothness.
The smaller banks in foreign business centres re-discount as a
matter of course with the central bank, which is thus supplied
with a large mass of perfectly dependable and rapidly maturing
paper ; but in London if it were known that a bank, even of
the highest standing, habitually re-discounted with the Bank of
England, it would at once be held to be " in extremis." In
times of panic and peril such things, of course, have to be
done, but in the ordinary way of business no London banker
ever dreams of such a thing-. The result is that while
some London bankers discount, and to large sums for their

ch. v] GROWTH OF BILL-BROKING 53

customers, others do not do so, and the customers, many of
very high standing, go to the bill-brokers.

There are several causes which have led to this. In the first
place the habit of a banker's discounting for his customers has
been to a certain extent discontinued, if not dropped, while side
by side with this the bill-broker has stepped in and found his
opportunity. He can be depended on with certainty, while the
reply of the customer's banker may be that he is "not dis-
counting to-day." People do not like being met with this kind
of answer from their bankers. They are far more independent
than they were some twenty or thirty years since. They know
that the brokers are always ready to discount, and will quote
them the exact market price. The banker may not always
follow this as closely as the broker. A very fractional difference
nowadays is sufficient to send a man from his banker to the
broker. The broker discounts the bills with money which
belongs to the banker, who afterwards very probably receives
the paper as "security bills " from the broker.

The London bankers have, to a great extent, built up the
business of the bill-brokers by the course which they have
taken of entrusting large sums to their care. The bankers
have spared themselves some considerable labour by this, and
though they have made a smaller profit from their transactions,
they have gained by the being able to devote a closer attention
to their business generally. There are also, it must be remem-
bered, the banks outside the business centre of the City, who
hold large sums of money without possessing such means of
employing them as the City banker does. Their requirements
have also to be considered. The present division of the work
of our money market between bankers and bill-brokers appears
likely to continue. While on the one hand there is an increasing
tendency towards the exclusion of intermediaries in business,
there is on the other a tendency almost equally strong towards
specialisation. The bill-broker devotes his whole time and
thought towards his subject ; he knows not only the character
and standing of the houses whose acceptances he is willing to
take admirably well, but he becomes able to prognosticate very
closely and with great shrewdness the future position of the
money market, and arranges his dealings accordingly. He

54 THE PUBLISHED RATE OF DISCOUNT [ch. v

keeps his eye fixed not only on the position of affairs in this
country, but on that in other countries as well. A knowledge
of the course of the foreign exchanges is a great assistance to
success in the business. But the practice of the bill-broker to
work without a reserve necessarily tends to focus any large
demand for money immediately on the Bank of England.

The description of their business given by Mr. Samuel
Gurney before the Committee of the House of Lords on
Commercial Distress, Session 1847-8, and the Committee of
the House of Commons also on Commercial Distress, 1848,
and by Mr. David Barclay Chapman before the Committee of
the House of Commons on the Bank Acts, 1857, shows how
different this was from the business of the bill-broker at the
present time. Both Mr. Gurney and Mr. Chapman were
partners in the house of Overend and Gurney at the time of
its highest prosperity. The great development of the business
of bill-broking, money dealing, as it more properly should be
called, has taken place since that time*

Meanwhile, the competition for bills in the discount market
is beyond question extremely sharp at the present day. There
are several large joint stock companies formed for the purpose
of carrying on this class of business, and the number of private
firms engaged in it seems also to grow. Various circumstances
— the increasing supply of money, the power of dealing by
means of telegraphic transfers, and other business arrange-
ments— have all tended to limit the supply of bills, which is
distinctly smaller now in proportion to the supply of money
than it was thirty or forty years since, whilst the competition
for those bills which are in the market is closer than ever.

CHAPTER VI

THE PUBLISHED RATE OF DISCOUNT OF THE BANK OF
ENGLAND AND THE RESERVE

The Published Rate of Bank not so clear

a guide to Market Rate as formerly 55—56
Value of opinion of Bank Directors on

fixing Rate . . • • 57

Constitution of Governing Body of Bank

of England . . . 57-58

Mr. Bagehot's remarks thereon . . $&
Continuity in management needed . . 58
Bank should observe a settled policy . 58
Constitution of Governing Body of Bank
discussed in the Report of the Select
Committee of the House of Lords on
Commercial Distress, 1847-8 . 58-60

" Want of Permanence and of Consist-
ency" in System of Government of
Bank commented on in that Report .

Need of Authoritative Rate

Joint Committee representing Bank and
London Bankers could fix rate .

Competition for Deposits by Banks un-
desirable . ...

Unduly High Rate of Interest on Deposits
cause of danger

Fixing the Rate and keeping the Reserve
should go together

Practice of the Associated Banks of New
York of publishing weekly average of
reserves . ...

60
61

61

61

62

62

63

As mentioned in the last chapter, the Bank of England an-
nounced in February, 1878, that it would, when occasion
required, discount for those of its customers who transacted
business exclusively with it, at a rate lower than that advertised
as the official rate. One result of this has been that the Bank
rate is less a real guide to the value of money than it used
to be, since it is impossible to say how far the published
rate is being adhered to. Events had been gradually drifting
in this direction for some time past. The outer market, which
is compelled to regulate its actions by the strict law of supply
and demand, has constantly recognised this fact. Thus, in
November, 1877, the metropolitan joint stock banks formally
acknowledged that they could not remain bound by the old rule
of allowing interest on deposits at "one below Bank rate," and
undertook for the time an independent course of action. It is
only needful to look in the money articles of the daily papers

55

56 RATE OF DISCOUNT OF THE BANK OF ENGLAND [ch. vi

to see what occurs when the Bank of England alters its rate.
This is still regarded by the other banks as a sign that a change
should be made, though not so closely as in former years. Thus,
on June 6th, 1901, the Bank lowered its rate from 4 per cent, to
3^ per cent., and the joint stock banks dropped their deposit
rate to 2 per cent. On June 13th the Bank reduced its rate
from 3 J per cent, to 3 per cent, and the joint stock banks
reduced theirs to ij per cent.

But such a proof as the one just mentioned of the inability
of the outside market to accept the Bank rate as an index to
the real value of money, important as it was as a sign of
the gradual breaking up of the traditional rule which had
governed the English money market generally for years, is of
far smaller importance than an official recognition by the Bank
directors that the Bank itself can no longer be bound by its own
rate. This, or nothing at all, is the outcome of the recent
alteration in the practice of the Bank, and since it cannot be
supposed that the Bank announced the alteration, and had to
meet the objections which were certain to be made to it, without
intending to abide by its decision, and to act upon it, the con-
clusion appears to be that the Bank rate by itself is distinctly
less a guide to the value of money than it used to be.

The system which has thus almost come to an end
commenced in the year 1844. Up to that date the Bank
rate had been almost always a fixed rate, which for more
than a century was never raised above 5 per cent., or allowed
to drop below 4, irrespective of the market rate of the period.
In 1839, a 6 per cent, rate was charged for some little
time, but with that exception what may be regarded as
the original state of matters continued till 1844, when the
establishment of the principle of a rate to fluctuate according
to the wants of the market was as great an innovation as
the decision of the Bank in 1878. Ancient prestige, actual,
pre-eminence of capital, the fact that they are the bankers
of the Government and the issuers of the only description of
notes which are legal tender throughout England and Wales —
all these circumstances enabled the Bank to take a position
which gave its announcement as to a rate of interest a great
if not a preponderating weight. The Bank of England told

ch. vi] FREQUENT CHANGES IN BANK RATE 57

all the monetary world what it would charge for money, and
all the monetary world in degree followed it. Sometimes it
has happened that the directors have not been right in their
decisions, and have lowered the rate when thev should have
advanced it, or advanced it or lowered it when they ought
to have remained where they were. Sometimes they have
worried the market by needless alterations. Thus there were
in the year 1873 no fewer than twenty-four changes in the
Bank rate, that is to say, twenty-four changes in twelve months.
It is difficult to imagine what events can possibly have occurred
to justify an alteration in the price of money once a fortnight
during a whole year. Since 1890, however, there have never
been more than twelve changes in the twelvemonth Again,
what may be called an experimental rate once occurred, as in
1 87 1, when 2 \ per cent, was charged for four weeks, the only
time when a "quarter" rate has been officially announced. #
Putting, however, these occasions aside, the decision of the
directors of the Bank as to the value of money generally carries
great weight with it. In a market so delicately balanced as
ours, in which the causes of change are so numerous and often
so unexpected, even the best informed must occasionally err.
But the directors, as a body, are men of high standing and of
much experience, acting with a strong sense of the responsi-
bility of their position, and with considerable opportunities of
observing what the demand for money is likely to be. The
fixing the rate is indeed one of the portions of the work of
carrying on the business of the Bank which such a body of men
as the Bank directors are likely to do best. A committee of
men with great and varied commercial experiences, fluctuating
but slightly from year to year, with a head appointed for two
years — which is, broadly speaking, the constitution of the Bank
court — is very well constituted to judge of the value of money
from day to day. It is not so well constituted to meet the
greater difficulties which banking has nowadays to contend
with, and which appear to require that a permanent governor
should be appointed to maintain a more complete control over

* These points are also dealt with in Chapter X., p. 95, which contains Table 13,
pp. 98, 99, showing the changes in the Rate of Discount charged by the Bank of
England and the number of days at each Rate.

58 RATE OF DISCOUNT OF THE BANK OF ENGLAND [ch. vi

the business of the Bank than can be done by any body of
directors, however able and well selected.

The constitution of the governing body of the Bank of
England is a subject which has been frequently discussed, and
it seems impossible to speak on this subject at all without
saying something about it. The remarks on it by Mr. Bagehot
in his well-known work, Lombard Street, are well known* His
opinion was that the appointment of a permanent deputy-
governor " would give to the decision of the Bank that fore-
sight, that quickness, and that consistency in which those
decisions are undeniably now deficient," and, it should be
added, would secure the continuity in the management which
is so much needed. Much must necessarily be left to the
individual authority of the governor, who is usually a cautious
man, with a well-trained business mind ; but — as an example it
is a most dangerous thing that one governor of the Bank should
be able to say that he will, in time of pressure, make advances
on Consols, and that another should, under similar circum-
stances, be at liberty to decline to do so. A settled sound
policy, firmly carried out, is needed, and this should be secured.

Mr. Bagehot's remarks appeared some thirty years since.
Few persons, however, remember that the subject was under the
consideration of the Select Committee of the House of Lords
appointed to consider the Commercial Distress which cul-
minated in the panic of 1847. The report of that Committee,
published in 1848, reprinted in 1857, is a singularly able and
well-reasoned document. The Bank Act of 1844, a new and
comparatively untried measure in 1848, came naturally under
discussion. The question whether any remedial measures to
meet the serious evils which followed the crisis of 1847 were
possible was considered by the Committee. I need not
apologise for quoting from their remarks, keeping the formal
arrangement of capital letters in the document, which looks so
strange to modern eyes. They entered on this branch of their
subject with a recognition of "the Duty and Obligation of
maintaining at all Times the practical Convertibility of the
Bank Note." They considered this the first and most essential
object to be kept constantly in view. The practical questions
which arose were, " Whether this great Benefit is attained with

ch. vi] HOUSE OF LORDS' CRITICISM ON BANK SYSTEM 59

Certainty? Whether it is attained by proper Means, and
whether the restrictions of the Act of 1844 are not attended
with grievous and unnecessary Evils of a collateral Kind ? "
That many of the provisions of that Act were judicious was
readily accepted by the Committee, but the attempt " to enforce
by Law, under all Circumstances, one fixed and inflexible Rule
for the Management of a national Bank of Issue, seems incon-
sistent with the best written Authorities, with the general
Principles of Economic Science, as well as with the Testimony
of many Witnesses of Practical Knowledge and Experience."
... " It is difficult, in the Judgment of the Committee, to
appeal to more demonstrative Evidence on this Subject than is
to be found in the Treasury Letter of the 25th October [1847].
That Letter was a practical Repeal by an Act of Authority of
the restrictive Clauses of the Act. It appears impossible at
once to defend the restrictive Provisions of this Act, and to
justify the Letter, which in this respect abrogated, or at least
suspended, those very restrictive Provisions. The Committee
consider that those Restrictions materially aggravated the
Pressure and produced the Panic of October, 1847. But even
if those Restrictions were originally defensible when enacted,
their Hold on Opinion, as well as their Authority in Practice,
had been materially impaired by the Letter by which they were
superseded — by its acknowledged Necessity and by its un-
deniable Success. The Precedent is established, and its Appli-
cation will inevitably be called for on other occasions." The
report continues, " To leave these Cases, when they do arise,
to be dealt with by the irregular Exercise of the mere Authority
of the Crown and its Advisers, setting aside . . . the express
provisions of a distinct Statute, appears wholly inconsistent
with that Fixity and Order which it is, or ought to be, the
Object of all Law to secure." Two suggestions were "made
to the Committee ; the one an absolute Repeal of the Act of
1844, the other a Continuance of the Act, accompanied by a
Power of Relaxation." As the Committee were of opinion
that many of the provisions of the Act were judicious, it was
the second proposition which they advocated. They discussed
the plans which had been suggested by which such a relaxing
power might be exercised. These resolved themselves prac-

■

60 RATE OF DISCOUNT OF THE BANK OF ENGLAND [ch. vi

tically into three, " a legalised Authority vested in the Govern-
ment ; in the Government and in the Bank conjointly ; or in
the Bank of England alone. . . ." The " third proposal (which
in the Judgment of the Committee is preferable to either of the
two first), namely, vesting this Discretion in the Bank of
England, cannot be disposed of without giving some Con-
sideration to the Constitution of the Bank of E norlands The

o

Objections which have been often urged against the Bank,
more especially if entrusted with a Discretion like that now
under Consideration, are a Want of Permanence and of Con-
sistency derived from its System of periodical Elections of
Governors and Deputy-Governors — the evil Consequences of
filling those high and important Offices as well as the Appoint-
ments to the Committee of Treasury, by a mere Rotation of
Seniority — and the intimate Connection subsisting between the
Directors and the Commercial World of London, which may
cast on them a Degree of Pressure difficult at Times to be
resisted. It appears further to be apparent from the evidence
that the immediate pecuniary Interest of the Proprietors as a
Trading Company may at Times supersede or control larger
and higher Considerations. This ought not to be . . . No
narrow Views of the mere pecuniary Interests of its Proprietory
should exclusively control its Action."

These remarks, made by a Committee of the House of
Lords now more than half a century since, show for what
length of time the subject of the constitution of the governing
body of the Bank has been under consideration. The same
points which required attention in 1848, the want of per-
manence and consistency in the management, the danger that
the immediate pecuniary interests of the proprietors as a trading-
company might supersede larger and higher considerations were
felt as strongly immediately after the passing of the Act of 1 844
as they could be now. No personal criticism, of course, is
intended in these remarks ; they apply naturally to the circum-
stances under which the management of the Bank is carried on.
The length of time that has elapsed doubtless shows how
difficult it is to arrive at any satisfactory settlement of the
question, which is now more important than at any previous
period of our business history.

ch. vi] STANDARD RATE FOR MONEY NEEDED 61

A distinct statement of policy on the part of the Bank as
to the course of action they would follow in any time of business
pressure, as well as on many other points, is now greatly needed.
The Bank may carry out habitually the decision it is understood
to have arrived at in 1878, and admit that it cannot fix a
definite rate for advances. In this case it will be difficult to
establish any other representative body in London whose
resolutions as to the rate to be charged on bills would carry
exactly the same weight as the decisions of an independent
body, such as the directors of the Bank.

The inconvenience, however, of there being no recognised
standard for the rate to be charged for money would be very great.
It is far safest for all bankers, and for those who do business with
them, that there should be such a standard. Since the Bank has
let it be known that it does not mean to be guided by its own
rate at all times, it may become needful to consider what standard
can be established as a substitute for that guidance which will
no longer exist exactly in the same form for the future, and
what is to take the place of the public notice of the Bank rate.
The bankers and bill-brokers of the metropolis seem the fittest
persons to judge of the value of money, and the decision of a
committee appointed by them, working together with repre-
sentatives of the Bank, would be the best substitute that could
be found for the decision of the Bank Court. It would, in fact,
be the opinion of that court, strengthened by the judgment
of those who had the best means of knowing what rate should
be charged. This opinion would be more authoritative than
that of the Bank of England alone. The rate to be allowed
on deposits would naturally follow. This should be fixed not
only for London, but for the country districts as well.

Such an arrangement would tend to check any undesirable
competition for deposits, and would tend to a uniformity of
action between all the bankers of the country generally, and
of the metropolis in particular. All the banks would be repre-
sented on the committee proposed, and their representatives
would concur in the rate to be recommended. Much has been
said on both sides of the question as to whether the allowing
interest on deposits, and the consequent enormous accumulation
of money in the hands of banks, is a desirable thing or not ;

62 RATE OF DISCOUNT OF THE BANK OF ENGLAND [ch.

but the allowing interest on deposits is so entirely the rule that
the question is now not whether the practice is or is not a
desirable one, but how it can best be regulated for the general
advantage.

Again, such an arrangement would tend to check an unduly
high rate of interest being allowed on deposits. The rate
would be known as that which a representative and prudent
body of bankers thought it safe to adopt. Any bank deviating
from the rule would be bound, as it were, to show cause
why it did not follow the example set by such a body of
men. The Banking Committee would not be likely to re-
commend an unduly high rate. Such a rate is dangerous
for two reasons : the one, because an unduly high rate of
interest has a tendency to cause those who allow it to seek
unsafe but highly-paying securities ; the other, because it
has a tendency to cause reserves to be pared down to
a minimum. While speaking on this subject, it is well to
mention that every now and then it is understood that banks
have made no profit whatever on the sums they held on deposit.
No doubt any bank so circumstanced holds other sums belong-
ing to its customers on which no interest is allowed, and from
which and its other resources it derives the means of meeting
its expenses and paying its dividend. But to have the custody
of vast sums, with all the attendant risks, without any resulting
profit to set against these, cannot be a desirable or a safe thing.

In part the plan proposed here has been carried out for
some considerable time. A committee, composed of represen-
tatives of the metropolitan joint stock banks, meets when a
change in the Bank rate is announced, and fixes the rate to
be allowed on deposits in London. It is desirable that this
arrangement should be carried further, and that a uniform rate
should be arranged at these meetings for all deposits held by
banks whether in London or in the country.

To conclude, fixing a rate can hardly be separated from
the custody of the reserve. The metropolitan banks might
have elected, now that the Bank rate stands in so altered a
position, to work without a recognised rate at all as to allowance
of interest on deposits. But the inconvenience of such a course
would have been so great that they have been compelled to

•vi

ch. vi] NEW YORK BANKS PUBLISH RESERVES 63

devise the method mentioned above of establishing a recognised
standard, which in time may, it is to be hoped, be carried
further till it includes all the banking offices throughout the
country. A further advantage of the method here sketched
out would be that it would facilitate the formation and main-
tenance of a suitable reserve. The maintenance of such a
reserve is a duty inseparable from the functions of the body on
which lies the responsibility of fixing that rate which is the
recognised standard for the rest of the community. The pub-
lication of the balances kept by the Clearing Bankers with the
Bank of England would be an assistance to the attainment of
this.

In reference to this question, it may be mentioned by way of
illustration that the Associated Banks of New York habitually
publish weekly the average amount of their own reserves in
specie and legal tender notes. By the National Bank Acts
of the United States, which govern the administration of these
banks, a fixed legal minimum has to be held in this manner.
It is therefore a far more serious thing for the Associated
Banks of New York to publish their figures, which may show
that their reserves are below the legal limit, than it would
be for the English banks to publish the amount of their balances
with the Bank of England, which they keep at the point which
each bank fixes for itself. In the case of the American banks
the legal minimum is a strict and rigid line. In the case of the
English banks, the amount is left to their own discretion. The
practice of the American banks is merely quoted here by way
of illustration. Their action is a proof that publication tends )
towards safety and need not be regarded as any occasion for/

alarm.

/

&-^*^

^^— XJ^X

CHAPTER VII

BILLS DISCOUNTED AND TEMPORARY ADVANCES OF THE

BANK OF ENGLAND

Capital, etc., of Bank of England 17^
millions . . . . 64

Deposits held by Bank how employed . 64

Division of Securities held by Bank into
"Government" and "other" securities 64

Mr. Thomson Hankey's remarks on
Investment of Deposits of Bank . 65

Amount of Railway Debentures, about
4 millions in 1865 . . . 65

Fluctuations in the amount of Bills dis-
counted . . . . 66

Estimated amount of Bills in circulation,
including foreign bills . : 66-67

Influence of Bank of England on Dis-
count Market formerly greater than at
present . . . . 67

Bills discounted and " other" securities .
Discounters of Bills have recourse to Bank

mainly in times of difficulty and pressure
Temporary advances made by the Bank

of England indicate immediate wants

of business . .

Fluctuations in temporary advances .
Fluctuations from week to week
Influence of periods of pressure distinctly

marked . .

Desirability of continuing information

as to Bills Discounted and Temporary

Advances from 1875 onwards
Bank of England in same position as any

other bank with regard to its private

business . .

PAGE

67
67

67
67-68
. 68

68

68

68

The manner in which the deposits held by the Bank are em-
ployed requires our attention. The capital and accumulated
and undivided profits of the Bank of England (the " rest ")
amount together to about ij\ millions.

The securities held by the Bank of England are divided
in the usual weekly statements between the two heads of
" Government " and " other " securities. It has not been
thought necessary to make any further analysis of the Govern-
ment securities held by the Bank than that given in Chapter II.,
p. 27, as a large proportion of these securities, and, in par-
ticular, those held in the circulation department, are so per-
manent in amount for long periods that no detailed statement
appeared likely to be generally useful. The "other" securities
are not included among the statements of monthly averages

64

ch. vn] DISCOUNTS AND TEMPORARY ADVANCES 65

on which a great part of this analysis is based, but as an
investigation into their amount will be of service, the yearly-
averages have been tabulated from the ordinary weekly returns.

The total annual average amount of the "other" securities
will be found in col. 26 of Table 3, p. 13.

The increase in the sums thus held is large, and in a general
way proportionate to the increase in the deposits.

Mr. Thomson Hankey intimated, in his remarks on the
working and management of the Bank of England, that, while
the deposits of the Bank should be invested in good banking
securities, such as bills of exchange, loans for short periods on
good securities, Government stocks, etc., the capital may be
invested in securities of a more permanent description. " With
regard to the investment of the capital, no part of this is re-
quired to be kept in reserve : all may be invested in interest-
bearing securities, which should be of undoubted character, but
not necessarily of the same readily convertible nature as that
part which is held liable to recall of deposits." — Hankey, On
Banking, pp. 13, 14.

The bills discounted and temporary advances have been
separated in the tabular statement from the remainder of the
" other securities " to as late a date as the published returns
permit. It will be observed that the portion of the "other
securities" which does not consist of bills discounted or of
temporary advances, the annual average of which is given in
col. 28 of Table 3, p. 14, fluctuated less in amount for the years
1873 to 1875, the last for which the information can be given,
than the "bills discounted" or the "temporary advances."
Guided by Mr. Thomson Hankey s remarks, we may sup-
pose the sums indicated in col. 26 to be invested in loans to
corporations for local improvements, to railways on deben-
ture stock, in securities of colonial governments, and in other
securities more or less of a permanent character. Mr. H. L.
Holland, deputy-governor of the Bank, stated in 1865 that
the amount of railway debentures held at that time was about
4 millions. The fluctuations in the total amount of the " other "
securities, as compared with those held in 1844, will De found
marked in col. 27 of Table 3, p. 13.

We now proceed to consider the amount of bills discounted

66 BILLS DISCOUNTED AND TEMPORARY ADVANCES [ch.

.

by the Bank of England. The yearly average of these, from
1844 to 1875, is given in col. 30 of Table 3, p. 14. Col. 31
contains the proportion of the yearly average to that of 1844, and
col. 32 shows the proportion of the bills discounted to the total
of the " other" securities. The bills discounted never amounted
to half of the total of the " other" securities. On average they
were something like a third of these. The information about
the amount ceases in 1875. The fluctuations in the amount
of bills discounted was very considerable during the period
over which our information extends. The amount for 1868
was only about one half that of 1866, and was very nearly
similar to the average of 1845. There are larger fluctuations
also shown in the weekly statements than those between these
annual averages.

In 1866 the highest amount was about 16 millions, the lowest about 7 millions*
m 1867 „ 8 „ 4J „

„ 1868
„ 1869
„ 1870

1871

1872

1873
1874
i875

> 7 » 4

7 » 4

10 11 5

11 „ 4
9 » 4

12 » 4

6 „ 3

6 „ 2

::

»

>» ■ »

There was a considerable increase in this branch of the
business of the Bank between 1844 and 1875, after which year
no information as to the amount of the bills discounted has
been published ; but it will be observed that the average of
the three years, 1845-47, rather exceeded the average of the
three years 1873-75, and the whole amount, though large,
can form but a very small part of the total amount of bills,
both inland and foreign, in circulation. The amount of these
bills in circulation, including foreign bills, was estimated by
myself as being from 300 to 350 millions in 1873. The total
now in circulation (in 1902) probably scarcely exceeds, if it
even reaches, the smaller of these figures. Mr. Newmarch s
estimate in 1851 was that the corresponding amounts of bills
in circulation then were from 180 to 200 millions. During
the twenty years between 1850 and 1870 they had largely
increased, but it is not believed that the amount of bills now
in circulation has kept up at all in proportion to the increase

ch. vn] INFLUENCE OF BANK LESS THAN FORMERLY 67

in business generally. The difference in the arrangements of
business nowadays and those existing in 1873, and the manner
in which the official returns as to bill stamps are now made
up, render it difficult to form any reliable estimate of the
account of bills in circulation. The position, speaking broadly,
appears to be that there are fewer bills now afloat than
before in proportion to the amount of banking money held,
and that there is a far keener competition for them.

The influence of the Bank of England in the discount
market has in times past been considerable ; but its influence
in this direction would not appear to be so large as in some
other portions of its business, since its discounts had not
increased in the same proportion as the bills themselves, nor
had the discounts of the Bank continued to increase during
the later years in which the published returns enable us to
trace the business of the Bank in this particular. A large
portion of the deposits, it is believed, has been invested
in more permanent securities. The proportion of bills dis-
counted to "other" securities is given in col. 32 of Table 3,
p. 14, and it will be observed that the proportion of the re-
sources of the Bank placed in bills rather diminished in the
later years over which our information extends. The table
exemplifies the fact, which is generally known, that it is in
times of difficulty and pressure that discounters of bills have
recourse to the Bank. In 1847, 1857, and 1866 the amounts
were large. There are beyond doubt private houses, as well as
public companies, who do a larger business of this description
than the Bank of England. In ordinary seasons the outside
market is willing to accommodate its customers on slightly
lower terms ; and, in discounting bills, those who do the
business at the lowest figure are sure to have the preference.
The immediate wants of business are, perhaps, to be found
most distinctly indicated among the temporary advances made
by the Bank of England, shown in col. 33 of Table 3, p. 14.
No branch of business of the Bank appears to undergo greater
fluctuations than this one, and in none are the influences of
periods of pressure more distinctly marked. The amount for
1872 was three times as large as that in 1844. The business
done in 1852 was not a sixth part of that done twenty years later.

68 BILLS DISCOUNTED AND TEMPORARY ADVANCES [ch. vii

The steady growth of this branch of the business was very re-
markable during the last ten years of which the particulars can
be given. The annual averages will be found in col. 33 of
Table 3, p. 14, and the proportion of each year to the amount in
1844 is given in col. 34. The fluctuations from week to week
are far greater than those shown by the yearly averages.

In 1866 the highest amount was about 8 millions, the lowest about 1 million

N I

» I

I

2

I

2

I

» 2

2

„ 1868

1

1

> <*
4

N 1869

»

5

II 187O

t

9

II I87I

1

6

N *&12

»

10

» 1873

1

7

» 1874

*

8

>, 1875

>i

9

The extension of the scale on which business has pro-
ceeded is curiously marked by the increase in the fluctuations
during the later years in which this information was given.
The requirements of occasional borrowers were actually
greater, and the yearly averages higher, in the years 1870
and 1872 than even in the panic year of 1866.

It is much to be regretted that the information as to
the amounts of bills discounted and of the temporary advances,
given in the returns up to 1875, is now no longer supplied, and
that it is not possible to trace this subject any further.

After all, the Bank of England is, with respect to its
private business, exactly in the same position as any other
bank. It has only a certain definite sum which it can lend,
and this it must husband, and not make advances which do
not naturally turn themselves into money — as those made on
good bills do — on the same terms as advances of the class we
have been speaking of. The resources of the Bank are very
considerable ; but if it made over-large advances on securities
of a fixed character, it would experience the inconvenience of
doing this just as any other bank would do.

CHAPTER VIII

NOTE CIRCULATION OF THE BANK OF ENGLAND, BULLION
HELD IN THE ISSUE DEPARTMENT, AND THE ENGLISH
COUNTRY NOTE CIRCULATION

PAGE

Note Circulation of the Bank of England,
Bullion held in the Issue Department,
and the English Country Note Circu-
lation. Description of Table 6 69-72

Table 6. Monthly Averages of Note
Circulation of Bank of England, 1845-
1900 . . . . 70

Table 7. Monthly Averages of Bullion in
the Issue Department 1845-1900 . 71

Increase in Note Circulation of the Bank
of England . . . . 72

Bank of England Notes in Circulation in
London and the Provinces. These
notes take the place of lapsed country
note issues . . . 72

Increase in Note Circulation compared
with increase in Metallic Circulation . 72

Mr. Newmarch's estimate of Metallic
Circulation . . . 73

Other estimates of this . . 73

Fluctuations in Bank Note Circulation.
Times of diminution, 1879- 1885;
Times of increase, 1894- 1900 . . 73

Bank Act of 1844 intended to suppress
English Country Note Circulation . 74

Disadvantages of this . . 74

Composition of Circulation of Bank of
England Notes . . 74-76

Table 8. Monthly Averages of English
Country Note Circulation, 1845-1900 . 75

PAGE

Increase in use of smaller notes . . 76
Bullion held by Bank . . 76

Increase in Bullion held . . . 76

Proportion of Annual Average of Bullion
and Annual Average of Banking Lia-
bilities . . . 76
Proportion of Bullion held to Deposits

and Circulation . . 76-78

Relation between Bullion held and Bank

Rate . . . 76

Table 9. Showing Composition of Bank

of England Note Circulation, 1856-76 77
Strength of the Bank dependent on Pro-
portion borne by Specie to Total Lia-
bilities . . . . 78
Proportion smaller in 1900 than in 1894 . 78
Separation of Issue Department from
Banking Department ; some results of
this . . . . 78
Silver Bullion formerly held by the Bank 78
Question as to Desirability of the Bank
again holding Silver Bullion in con-
nection with low quotation for Indian
Exchanges . . • • 79
Silver more distinctly "money " in Europe

in 1844 than at present . . 79

Table 10. Annual Averages of Silver
Bullion held in Issue Department of
Bank of England, and proportion of
the same to the Gold Bullion and Coin
held during the years 1844-53 an^ in
1860-61 . . . 80

The amount of notes issued by the Bank now comes under
consideration. Table 6, p. 70, gives the monthly averages
of the notes of the Bank held by the public divided into
groups of years — corresponding to the other tables from 1845

69

70 NOTE CIRCULATION OF BANK OF ENGLAND [ch. vii

TABLE 6.

Monthly Averages of Note Circulation of Bank of England in the hands of the Public,*
from 1845-1900, in groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84,
1885-94, and of Six Years, 1895-1900, with Summary Table, 1845-1900.

1845-54.

1855-64.

1865-74.

1875-84.

Month.

Average for

the Ten Years,

£20,061,000.

Av. of

Ten

Years

= 100.

Average for

the Ten Years,

.£20,388,500.

Average

of Ten

Years =

100.

Average for

the Ten Years,

£24,027,500.

Average
of Ten

Years =
100.

Average for

the Ten Years,

£27,030,700.

Average

of Ten

Years =

100.

January
February .
March
April .
May .
June .
July . .
August
September .
October
November .
December .

1

20,317,100
19,930,900
19,506,900
20,500,400
20,211,300
19,624,500
20,656,200
20,325,900
19,652,400
20,561,800
20,141,600
19,304,900

101
IOO

97
I02
101

98

103

101

98

103

100

90

£

20,253,400
19,806,900
19,619,000
20,715,700
20,488,100
20,048,100
21,086,500
20,840,600
20,365,700
21,181,200
20,573,300
19,684,000

99

97

90

102

100

98
103
102
100
104
101

97

£
23,664,600
23,106,300
22,979,300
24,061,000
24,190,500
23,893,200
24,874,300
24,678,200
24,251,700
24,970,600
24,133,200
23,527,400

98

96

96

100

101

99
103
103
101
104
100

98

£
27,185,700

26,395,500
26,159,900
27,151,300
27,179,200
26,845,600
27,643,400

27,572,900
26,939,900
27,668,900
26,941,700
26,685,200

101
98

97
100
101

99
102
J02
100
102
100

99

Difference : Highest and Lowest
Month, £1,351,000.

Mean of extreme Variations for
i84S-54. 3*5%

Difference : Highest
and Lowest Month,
,£1,562,000.

Mean of extreme Varia-
tions for 1855-64, 4%

Difference : Highest
and Lowest Month,
£1,991,000.

Mean of extreme Varia-
tions for 1865-74, 4%

Difference : Highest
and Lowest Month,
£1,509,000.

Mean of extreme Varia-
tions for 1875-84, 2*5 %

1885-94.

1895-1900.

1845-1900.

Average for

Average of

Average for

Average of

Average for the

Average

of Fifty-six

Years =

IOO.

Month.

the Ten Years,

Ten Years

the Six Years,

Six Years

Fifty-six Years,

£24,883,400.

= 100.

£27,360,924.

= 100.

£23,726,100.

£

£

£

January.

24,571,600

99

26,569,908

97

23,559,6oo

IOO

February

23,882,300

96

26,132,162

95

23,000,100

97

March .

23,922,100

96

24,446,964

97

23,045,600

97

April .

24,799,200

100

27,358,572

100

23,847,900

IOO

May

24,979,100

100

27,377,38o

100

23,834,700

IOO

June .

24,983,500

101

27,510,363

10/

23,535,900

99

July . .

25,797,100

104

28,259,428

103

24,466,500

103

August .

25,631,400

103

28,170,168

103

24,276,900

102

September .

24,962,000

700

27,701,804

JOT

23,716,100

IOO

October

25,503,100

IO3

27,933,3*2

102

24,400,900

103

November

24,838,300

100

27,421,564

100

23,762,600

IOO

December

24,631,500

99

27,449,461

IOO

23,266,400

98

Difference : ]

iighest and Lowe

st Month,

Difference : Highest and

Difference : H

ighest and

£1,914,800.

Lowest Month, £2,127,000.

Lowest Month, i

ji, 466,000.

Mean of exti

•erne Variations fo

r 1885-94,

Mean of extreme Varia-

Mean of extr

jme Varia-

4%

tions for 1895-1900, 4%

tions for 1845-19

00, 3°/.

Not including those held in the Banking Department

CH. VIIl]

BULLION IN ISSUE DEPARTMENT

7i

TABLE 7.

Monthly Averages of Bullion in the Issue Department of the Bank of England, from
1845-1900, divided into groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84,
1885-94, and of Six Years, 1895-1900, with Summary Table, 1845-1900.

1845-54.

1855-64.

1865-74.

1875-84.

Average for

Av. of

Average for

Av. of

Average for

Av. of
Ten
Years
= 100.

Average for

Av. of

Ten

Years

= 100.

Month.

the Ten Years,
£14,625,000.

Years
= 100.

the Ten Years,
£13,645,000.

Years
= 100.

the Ten Years,
£19,356,000.

the Ten Years
£24,436,000.

£

£

£

£

January .

14,815,000

IOI

13,112,000

90

19,236,000

99

23,206,000

95

February

14,833,000

102

i3»354,ooo

98

19,138,000

99

23,620,000

97

March

14,996,000

103

13,789,000

IOI

19,169,000

99

24,291,000

99

April

14,372,000

98

13,714,000

100

18,650,000

96

24,398,000

100

May

14,175,000

97

13,634,000

IOI

18,345,000

95

24,160,000

99

June

14,839,000

102

14,263,000

105

19,928,000

103

25,218,000

103

July

14,945,000

102

14,256,000

104

20,212,000

104

26,049,000

106

August

14,637,000

100

14,102,000

103

19,935,000

103

25,767,000

106

September

14,557,000

100

14,170,000

104

20,196,000

104

25,690,000

105

October .

14,111,000

90

13,438,000

9*

l8,88l,000

98

24,458,000

100

November

14,394,000

98

12,778,000

94

18,903,000

98

23,268,000

95

December

14,824,000

IOI

13,132,000

90

19,685,000

102

23,109,000

95

Difference : Highest and Lowest Month,

Difference : r-

highest

Difference : Highest

Difference : Highest

£885,000.

and Lowest P

rlonth,

and Lowest Month,

and Lowest Month,

£1,485,000.

£1,867,000.

£2,940,000.

Mean of extreme Variations for 1845-54,

Mean of e

ttreme

Mean of extreme

Mean of extreme

3'5%>

Variations for iJ

!55-64,

Variations for 1865-74,

Variations for 1875-84,

S*S7.

4'S°L

5*5%

1885-94.

1895-1900.

1845-1900.

Average for

Average of

Average for

Average of

Average for the

Average of

Fifty-six

Years,

= 100.

Month.

the Ten Years,
£22,883,000.

Ten Years,
= 100.

the Six Years,
£34,149,000.

Six Years,
= ioo.

Fifty-six Years,
£20,613,000.

£

£

£

January

21,020,000

92

33,690,000

99

19,929,000

97

February

22,491,000

98

35,476,000

104

20,486,000

99

March

23,339,ooo

102

35,470,000

104

20,869,000

IOI

April

22,823,000

100

33,512,000

98

20,368,000

99

May

22,634,000

99

34,249,000

100

20,267,000

98

June

24,578,000

107

35,197,000

103

21,419,000

104

July

24,929,000

log

35,023,000

103

21,679,000

105

August

23,924,000

105

35,205,000

103

21,337,000

103

September

23,563,000

103

35,557,000

104

21,341,000

103

October

22,052,000

96

32,806,000

96

20,112,000

98

November

21,609,000

94

32,035,000

94

19,674,000

95

December

21,641,000

95

31,575,000

92

19,881,000

96

Difference : Highest and Lowest

Month,

Difference : Highest and

Difference : Highest and

£3,909,000.

Lowest Month, £3,982,000.

Lowest Month, £2,005,000.

Mean of extreme Variations for

1885-94,

Mean of extreme Varia-

Mean of extreme Varia-

8-5 7.

tions for 1 895-1 900, 6%

tions for 1845-1900, 5%

Gold Bullion in the Issue Department of the Bank of England.

Difference between

Mean of the

the Highest Month and

extreme Variations

the Lowest Month.

during each period.

£

7.

1845-54

885,000

3 5

1855-64

1,485,000

55

1865-74

1,867,000

45

1875-84

2,940,000

55

1885-94

3,909,000

85

1895-1900 .

3,982,000

6

1845-1900 .

2,005,000

5

72 NOTE CIRCULATION AND BULLION HELD [ch. viii

to 1900 — with a summary table of the whole period. This
shows how generally equable the note circulation of the Bank
is. The highest months in the returns from July to October
do not correspond with the highest months in the table of the
rate of discount charged (Table 12, p. 97). They no doubt
represent a demand arising from the annual " Autumnal Drain"
described in Chapter XIV., Table 20, p. 138.

Annual averages of the notes held by the public will be
found in cols. 35, p. 14, and 37 ', 39, p. 15, of Table 3, which give
the country circulation, the metropolitan circulation of the Bank
of England, and the amount of both these united. The ex-
tension of this portion of the business of the Bank was very
small for more than twenty years. On average there had been
hardly any increase up to 1864. Since then there has been a
gradual growth, which advanced to 45 per cent, in 1900.
The notes held by the public are issued partly in London,
partly at the provincial branches of the Bank. The circula-
tion has been divided under these two heads down to the close
of 1 88 1. The returns accessible do not continue this division
to a later date. Up to 1875 the increase in the circulation, as
will be seen by col. 35, p. 14, took place rather in the country
than in the London circulation, which will be found in col. 2>7t
p. 15. While the provincial circulation in 1844 formed only
32 per cent, of the total circulation of the Bank, it formed in 1873
and 1874 about 39 per cent, and from 1878 to 188 1 the provincial
circulation formed 35 per cent, of the total. The whole note
circulation of England and Wales, including the notes issued
by the private and joint stock banks, was ^28,420,000 in 1844,
^32,500,000 in 1877, ^32,400,000 in 1878, and ^30,638,000
in 1900, divided at that date between ^29,396,000 at the Bank
of England and ,£1,242,000 at the English country issuing
banks. Hence the Bank of England notes issued at the
country branches may in some degree have taken the place
of lapsed local note issues, and this may account for the
greater increase of the provincial than of the metropolitan
note circulation. The total increase is, however, small —
smaller than the augmentation in any other portion of the
business of the Bank of England which these returns enable
us to trace, and far smaller than the increase in the metallic

ch. vm] FLUCTUATIONS IN CIRCULATION 1879-1900

73

circulation of the country, which was estimated as being about
105 millions in 1872, and from ^100,000,000 to ;£i 10,000,000
in i883,# by Mr. Newmarch as ^36,000,000 in 1844,! by Sir R.
Peel as between ^30,000,000 and ^35,000,000 (H. of Commons,
April 25th, 1845). While, therefore, the coin in circulation
has increased something like seventy millions, the total note
circulation of England and Wales was in 1900 only two
millions larger than it was in 1844. It is also quite possible
that this increase, small as it is, may prove to be only tem-
porary, as fluctuations of from one and a half millions to two
millions, and even of larger amounts, are not uncommon be-
tween the average of one year and another in the note circu-
lation of the Bank of England. The figures for the years from
1879 to 1885 are examples of this in the way of diminution,
and those from 1894 to 1900 in the way of increase.

Year.
1879

Notes of Bank

of England held

by the Public.

Average.
^29,212,000

Year.
1894

Notes of Bank

of England held

by the Public.

Average.

. ^25,300,000

1880

26,915,000

1895

25,800,000

1881

26,321,000

1896

26,500,000

1882

25,985,000

1897

27,200,000

1883

25,568,000

1898

27,400,000

1884

25,358,000

1899

27,900,000

1885

24,667,000

1900

29,400,000

Table 8, p. 75, contains the averages of the English
country note circulation from 1845 to 1900, divided into periods
corresponding to those into which the other tables contained
in this volume are arranged. The statement is brought in
here, as this will be convenient to those who desire to see
the details of the manner in which the note circulation of
England is made up. Under the operation of the Act of
1844 the country note circulation has dwindled till, from being

;

* Estimates based on Professor Jevons's statement, Investigations in Currency
and Finance, 1884, p. 266 et sea. ; on statement of " Coinage of Gold for Twenty-four
Years," Economist, 29th June, 1872 ; and on papers read by R. H. Inglis Palgrave,
before the Bankers' Institute, February, 1883, on The Deficiency of Weight in our
Gold Coinage, with a Proposal for its Reform, and November, 1884, on the Gold
Coinage: Position of Matters at the Present Time.

t TOOKE and Newmarch's History of Prices, vol. vi. p. 701.

74 NOTE CIRCULATION OF THE BANK OF ENGLAND [ch. viii

(1845 to *847) more than ,£7,000,000, it is now (1902) less than
,£875,000. The note circulation of the Bank of England
has thus apparently hardly filled the void which the re-
duction of the country note circulation has left ; and if the
amount of the notes of the Bank of England held by the
other banks in England as "till money" could be separated
from the remainder, it is probable that the total amount of
notes actually in the hands of the public is smaller now
than it was some fifty years since. Nor is it advisable to
leave this part of the subject without an expression of regret
at the policy followed in framing the Act of 1844, which,
instead of strengthening the country note circulation, was
designed to suppress it, thereby increasing the demands on the
reserve of the Bank at times when the note circulation tends
naturally to expand, and simultaneously depriving English
banks of a branch of their business particularly useful in the
establishment of small branches in remote districts, and thus
developing business and trade in places where this assistance
is most needed. A reasonable stamp duty might have been
charged for the exercise of this privilege, which might have
produced a larger revenue to the Government than that re-
ceived from the note circulation of the Bank, issued against
securities under the provisions of the Act of 1844, beyond the
£"14,000,000 originally permitted by that Act. The notes
could easily have been amply secured, and an advantage to
business maintained. Scotland and Ireland have retained their
provincial note issues. In England a different course has been
followed, to the disadvantage of the country.

The fluctuations in the English country note circulation
have been small ; they do not exactly follow those shown in
the circulation of the Bank of England, partly perhaps be-
cause that has been more in the metropolis, while the country
note issue was largely among the agricultural districts.

Table 9, p. 77, shows the amounts and the proportions
of the different denominations of notes composing the circu-
lation of the Bank of England for the years 1856-76, the
earliest and the latest dates available. The large notes, it will
be seen, formed in 1876 a smaller part of the whole circulation
than they did twenty years previously. The notes from £"20 to

ch. vm] AVERAGES OF COUNTRY NOTE CIRCULATION 75

TABLE 8.

Monthly Averages of Country Note Circulation, England, from 1845- 1900, in
groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of
Six Years, 1895-1900, with Summary Table, 1845-1900.

1845-54.

1855-64.

1865-74.

1875-84.

Month.

Average for

the Ten Years,

£6,794,000.

Av. of

Ten

Years

= 100.

Average for

the Ten Years,

£6,344,000.

Average

of Ten

Years =

100.

Average for

the Ten Years,

£5,118,000.

Average

of Ten

Years =

100.

Average for

the Ten Years,

£3,888,000.

Average

of Ten

Years =

100.

January
February
March
April .
May .
June .
July . .
August
September .
October
November .
December .

£

6,862,000
6,731,000
6,748,000
7,117,000
7,002,000
6,676,000
6,658,000
6,494,000
6,625,000
7,130,000
6,885,000
6,601,000

IOI

99

99

105

103

98
98
96
98
105

IOI

97

£

6,415,000
6,235,000
6,302,000
6,640,000
6,508,000
6,251,000
6,170,000
6,062,000
6,216,000
6,645,000
6,510,000
6,179,000

IOI
98

99
105
103

98
97
95
98
'05
103

97

£
5,268,000
5,112,000
5,085,000

5,375,000

5,272,000

4,963,000
4,886,000
4,826,000

4,955,000

5,375.000
5,236,000
5,061,000

103

IOO

99
'05
103

97
95
94
97
'OS
102

99

£
4,075,000
3,832,000
3,822,000
4,087,000
4,048,000
3,843,000
3,772,000
3,644,000
3,727,000
4,058,000
3,971,000
3,775,000

*o$

98

98

'os

104

99
97
94
96
104
102
97

Difference : Highest and Lowest
Month, £636,000.

Mean of extreme Variations for
1845-54,4*5%

Difference : Highest
and Lowest Month,
£583,000.

Mean of extreme Varia-
tions for 1855-64, 5%

Difference : Highest
and Lowest Month,
£549,000.

Mean of extreme Varia-
tions for 1865-74, 5'5%

Difference : Highest
and Lowest Month,
£443,000.

Mean of extreme Varia-
tions for 1875-84, 5'5 %

1885-94.

1895-1900.

1845-1900.

Average for

Average of

Average for

Average of

Average for the

Average

of

Fifty-six

Years =100.

Month.

the Ten Years,

Ten Years

the Six Years,

Six Years

Fifty-six Years,

£2,366,000.

= 100.

£1,446,900.

= 100.

£4,533,000.

£

£

£

January

2,432,800

103

1,474,000

102

4,639,000

102

February

2,335,ioo

99

1,438,000

99

4,484,000

99

March .

2,393,8oo

IOI

1,482,700

I02

4,507,000

IOO

April .

2,479,900

'OS

1,554,5°°

108

4,756,000

'OS

May

2,478,100

'OS

1,549,300

107

4,685,000

103

June

2,353,400

99

i,457,7oo

IOI

4,457,000

98

July . .

2,315,100

98

1,384,500

90

4,402,000

97

August .

2,217,900

94

1,314,300

9'

4,291,000

95

September

2,222,200

94

1,354,300

94

4,385,000

97

October

2,420,000

102

1,464,300

IOI

4,733,000

104

November

2,417,000

102

1,482,200

102

4,627,000

102

December

2,327,300

98

1,407,000

97

4,426,000

98

Difference : I

lighest and Lowe

st Month,

Difference : H

ighest and

Difference : K

ighest and

£262,000.

Lowest Month, £

240,000.

Lowest Month, i

^465,000.

Mean of exti

reme Variations fc

r 1885-94,

Mean of extr

erne Varia-

Mean of exti

erne Varia-

s's7.

tions for 1895-19C

0, 6 -5 7.

tions for i845~i9<

», 5 7.

CH. VIII

76 NOTE CIRCULATION AND BULLION HELD [

;£ioo remained comparatively stationary; the greater part of
the increase was among the smaller notes, especially among
those for ^5. These, doubtless, as mentioned previously, in
some degree have taken the place of the lapsed English country
issues.

To complete this analysis, the annual average of the total
coin and bullion held by the Bank has been included. This
average will be found in col. 41, Table 3, p. 15 ; the columns
marked 42, 43, 44, and 45 show the proportions which the
bullion has borne to the amount held in 1844, t0 tne liabilities
on deposits and bank post bills, to the note circulation, and to
the total liabilities under these two heads combined. The pro-
portion of the bullion to the liabilities is smaller now than it
was in the earlier years over which this inquiry extends, while
the amount of bullion held has more than doubled (Table 3,
col. 42, p. 15). The monthly averages of the bullion held in
the Issue Department are given in Table 7, p. 71.

A considerable increase, but smaller on the whole than that
in the reserve and than that in the deposits, will be observed to
have taken place in the bullion held. It has been mentioned
that there appears to be no general relation whatever between
the amount of notes issued and the rate of interest charged.
Nor is it easy to trace an exact relation between the amount of
bullion held and the Bank rate. The average held in 1868 was
more than 20 millions, with a discount rate of 2 per cent. ; the
holding in 1873 was about 22 millions, with a rate of 4f per
cent. ; the average held in 1876 was 28 millions, with a rate of
about 2\ per cent. ; the average was, in round figures, 26
millions in 1893, witn a rate °f about 3 per cent., and 33
millions in 1898, with a rate of 3J per cent.; and the differences
shown by the weekly returns are greater still. Thus 7 per
cent, was charged on 9th November, 1872, with ^19,7 50,000
bullion held on the date of the nearest return, while 3 per cent,
was charged on 4th November, 1869, with ^18,500,000, more
than a million less, held in a similar way. Again, 3 per cent,
was charged 10th February, 1875, with 20 millions of bullion,
and 5 per cent, was charged 17th October, 1877, with nearly
23 millions of bullion. Though the total amount of bullion
held by the Bank is a very important thing, the rate of

ch. vin] COMPOSITION OF NOTE CIRCULATION

77

TABLE 9. — Table showing Composition of Bank of England Note Circulation.
Divided according to the Denomination of the Notes in Hands of the Public from
1856 to 1876, the latest date to which this information can be given.

Propor-

Propor-

Propor-

Propor-

tion per

Propor-

tion per

Propor-

tion per
Cent.

tion per

Cent.

tion per

Cent.

£10 to
£100
Notes.

tion per

£5 Notes.

Cent,
to 1856.

1856 =
100.

of £5
Notes to
Total
Circula-
tion.

,£10 Notes.

Cent,
to 1856.

1856 =
100.

of £\o
Notes to

Total
Circula-
tion.

Cent,
to 1856.

1856 =

TOO.

of £zo
to £100

Notes
to Total
Circula-
tion.

1856

6,362,000

100

7.
33

3,928,000

100

7.
21

5,474,000

100

7.
29

1857

6,386,000

TOO

34

3,959,000

101

21

5,530,000

IOI

29

1858

6,299,000

99

32

3,896,000

99

20

5,652,000

103

29

1859

6,678,000

105

32

4,145,000

'05

20

6,121,000

112

29

1860

7,079,000

in

33

4,280,000

iog

20

6,331,000

Il6

30

1861

6,673,000

'05

33

4,045,000

103

20

5,947,000

108

30

1862

6,799,000

107

33

4,080,000

104

19

6,172,000

"3

30

1863

6,755»ooo

106

33

3,949,000

100

19

6,142,000

112

30

1864

7,099,000

112

35

3,966,000

JOI

19

5,996,000

iog

29

1865

7,403,000

116

35

4,085,000

104

19

6,153,000

112

29

1866

8,153,000

128

35

4,462,000

"3

19

6,957,ooo

127

30

1867

8,290,000

IJO

35

4,492,000

"4

19

7,020,000

128

30

1868

8,429,000

132

35

4,562,000

116

19

7,234,000

132

30

1869

8,572,000

'35

37

4,514,000

"5

19

6,940,000

127

30

1870

8,695,000

'37

38

4,436,000

"3

19

6,804,000

124

29

1871

9,182,000

'45

37

4,592,000

"7

19

7,272,000

'33

30

1872

9,704,000

'53

38

4,712,000

120

19

7,373,ooo

'34

29

1873

10,045,000

158

39

4,716,000

120

18

7,313,000

'33

29

1874

10,474,000

164

40

4,790,000

122

18

7,435,000

136

28

1875

10,877,000

171

40

4,934,000

126

18

7,740,000

141

28

1876 10,920,000

172

40

5,003,000

127

18

7,987,000

'45

29

Propor-

Propor-
tion per
Cent, of

Propor-

Propor-
tion per

tion per
Cent, of

Pr

tio

jpor-
nper

tion per
Cent, of

,£300 to

£500

Notes.

Cent, to
1856.

£200 to

;65°o
Notes to

;£l,000

Notes.

Cei
it

it. to
I56.

.£1,000

Notes to
Total

Circula-
tion.

. Tota!
Circulation.

Total
Circula-
tion to

1856 =
100.

Total
Circula-

18

1

56 =
00.

1856.
1856 =

tion.

100.

1856 ...

1,375.000

100

7.
7

1,865,000

/

OO

7.
10

19,004,000

100

1857 ...

1,365,000

99

7

1,796,000

06

9

19,036,000

100

1858 ...

1,590,000

116

8

2,318,000

/

24

XI

19,765,000

104

1859 ...

1,610,000

"7

8

2,256,000

I

21

11

20,8lO,000

iog

1860 ...

1,551,000

"3

7

2,029,000

I

09

10

21,270,000

112

1861 ...

1,444,000

'05

7

1,911,000

I

02

10

20,020,000

'05

1862 ...

1,697,000

123

8

2,098,000

I

12

10

20,846,000

iog

1863 ...

1,740,000

127

8

2,089,000

I

12

10

20,675,000

108

1864 ...

1,676,000

122

8

1,849,000

99

9

20,586,000

jo8

1865 ...

1,694,000

'23

8

J.,761,000

94

9

21,096,000

in

1866 ...

1,831,000

'33

8

1,795,000

g6

8

23,198,000

122

1867 ...

1,827,000

'33

8

1,834,000

98

8

23,463,000

123

1868 ...

I,867,OO0

136

8

1,825,000

98

8

23,917,000

126

1869 ...

I,76l,000

128

7

1,667,000

89

7

23,454,000

123

1870 ...

I,70I,000

124

7

1,676,000

go

7

23,312,000

123

1871 ...

1,774,000

I2Q

7

1,783,000

90

7

24,603,000

130

1872 ...

1,851,000

'35

7

1,885,000

1

01

7

25,525,000

'34

1873 ...

1,784,000

130

7

I,8lO,000

97

7

25,668,000

'35

1874 ...

I,8lO,000

132

7

1,775,000

95

7

26,284,000

'38

1875 ...

1,947,000

141

7

1,849,000

99

7

27,347,000

'44

1876 ...

1,984,000

144

7

1,839,000

98

6

27,733,000

146

N

0TB

.. — For year

5 1

856 t

0 1*

559,

incl

usive, thes<

i ave

rag

es rei

)re

sent 1

:he first 1

5 weeks

. of each

year ; from i860 to 1876, inclusive, the averages are of the whole circulation of the year.

78 AVERAGE OF BULLION HELD BY THE BANK [ch. viii

discount charged does not appear to be usually regulated by it
alone.

To render this more clear, the percentage borne by the
annual average of the total coin and bullion held by the Bank of
England to the annual average of the banking liabilities has been
stated in col. 43 of Table 3, p. 1 5. The fluctuations shown are
considerable ; the proportion, however, hardly has had a tendency
to increase, except in the years 1875-6. In 1852 the average
of bullion was 2 per cent, more than the average of the banking
liabilities. In 1847, 1856, 1864, and 1866 the average bullion
held amounted to 65 per cent, of the banking liabilities. In
1857 it was only 57 per cent, of these. In 1900 it was 67 per
cent. But though, generally speaking, the years when the
average of bullion is low are those when the rate of interest is
high, yet it is not possible to trace the same connection between
the bullion and the rate of interest as between the banking
reserve and the rate of interest.

The proportion of the total coin and bullion held to the
liabilities and circulation united is given in col. 45 of Table 3,
p. 15. Though this point sometimes escapes observation, owing
to the separation of the Issue Department from the Banking
Department of the Bank, yet it deserves the most serious
consideration. The strength of the Bank, in any period of
pressure, depends largely on the proportion which the specie
held bears to its total liabilities. It will be observed that the
proportion which the bullion held bore to the liabilities and
circulation united was the same in 1900 as it had been in 1844,
and smaller than in the years between 1894 and 1897.

What the accounts of the Bank would look like if the
separation of the two departments did not take place is shown
in the arrangement of the balance sheet printed in Table 40,
p. 207.

The Bank of England has sometimes held a considerable
amount of silver bullion. The Bank is empowered by the third
clause of the Act of 1844 to retain in the Issue Department an
amount of silver bullion not exceeding one-fourth part of the
gold coin and bullion held. The Bank has never held so large
a proportion as this. The largest amount which it has held
was ,£2,727,000 on October 3rd, 1846, when the gold bullion

ch. vm] SILVER BULLION AT BANK OF ENGLAND 79

was quoted at ,£12,632,000. For the years from 1844 to 1847
the silver bullion formed, however, a considerable fraction of
the total amount of bullion held, and the annual averages from
1844 to 1853 are given in Table 10, p. 80. On August 20th,
1853, the silver bullion ceased to be quoted in the returns of the
Bank of England, except during the period from November 28th,
i860, to July 3rd, 1 86 1, when the Bank held some silver
bullion, as shown in Table 10, p. 80. The heading and the
space for the entry appeared weekly, however, in the return
for many years afterwards.

The question whether it might not be desirable that the
Bank of England should hold silver bullion again was dis-
cussed, some years since, in connection with the low quotation
for the Indian exchanges. Should such an operation ever be
undertaken by the Bank again, it may be supposed that it
would not be done except under a guarantee from the Govern-
ment, on whose behalf the business would be carried out.
When the Bank Act was passed in 1844, "silver" was far
more distinctly "money" throughout Europe than it is at the
present time.

8o

NOTE CIRCULATION AND BULLION HELD [ch. viii

TABLE ia— SILVER BULLION HELD BY THE BANK OF ENGLAND,

1844-53, 1860-61.

Annual Averages of Silver Bullion Held in the Issue Department of the Bank of
England and Proportion of the Same to the Gold Bullion and Coin Held during
the Years 1844-53.

Annual

Year.

Annual

Average of

Silver Bullion.

Proportion
per Cent, of
Silver Bullion

to Total
Bullion Held.

Average of
Bullion, in-
cluding Gold

and Silver
Coin in Bank-
ing Depart-
ment.

Proportion

per Cent, of

Gold and Coin

to Total
Bullion Held.

Annual

Average of

Total Bullion

and Coin.

£

%

£

%

£

1844

1,640,000

//

13,024,000

89

14,664,000

1845

1,511,000

10

13,732,000

90

15,243,000

1846

2,169,000

15

12,616,000

85

14,785,000

1847

i,373>°°o

13

9,055,000

87

10,428,000

1848

1,125,000

8

12,747,000

92

13,872,000

1849

336,000

2

14,825,000

98

15,161,000

1850

195,000

1

16,441,000

99

16,636,000

1851

34,000

—

14,530,000

100

14,564,000

1852

28,000

—

20,559,000

JOO

20,587,000

1853

19,000

—

17,497,000

100

17,516,000

Gold Coin and Bullion and Silver Bullion in the Issue Department of the
Bank of England, i860 and 1861.

Year.

Gold.

Silver.

Year.

Gold.

Silver.

£

£

£

£

1860. Nov.

28

12,725,000

336.000

1861. March 2

10,981,000

848,000

Dec.

6

12,419,000

511,000

11

27

11,054,000

848,000

11

12

11,768,000

876,000

April

3

11,345,000

848,000

>»

19

11,456,000

1,114,000

11

10

11,525,000

848,000

11

26

10,640,000

1,454,000

n

17

11,520,000

848,000

1861. Jan.

2

10,292,000

1,664,000

»l

24

11,437,000

890,000

11

9

9,870,000

1,627,000

May

1

11,326,000

713,000

»*

16

9,535»ooo

1,470,000

11

8

11,302,000

713,000

11

23

9,344,000

1,445,000

11

15

10,883,000

663,000

>>

30

9,560,000

1,282,000

11

22

10,597,000

564,000

Feb.

6

9,745,000

1,268,000

>i

29

10,825,000

512,000

ft

13

9,903,000

848,000

June

5

10,658,000

412,000

>>

20

10,240,000

848,000

*>

12

10,748,000

362,000

11

27

10,521,000

848,000

11

19

11,155,000

262,000

March 6

10,303,000

848,000

1*

26

11,466,000

212,000

11

13

10,596,000

848,000

July

3

11,150,000

71,000

CHAPTER IX

THE RESERVE AND THE LIABILITIES OF THE
BANK OF ENGLAND

84
84
84

PAGE

Proportion of Specie to Liabilities at the
Banks of France, Germany, Holland,
and Belgium . . . 81-84

Table II. Monthly Averages of Lia-
bilities and Reserve of the Bank of
England, 1845- 1900 • • 82-83

Division of Bank of England Account
into Issue Department and Banking
Department . ...

Reserve of Notes represents the greater
part of specie at command of the Bank

Reserve of Bank smaller than Coin and
Bullion held . ...

Fluctuations in the proportion of the
Reserve to the Liabilities . 84-85

Description of Table 11 . . 84-85

Comparison of Table 11 with Table 12
(Monthly Averages of Minimum Rate
of Discount at Bank of England) and
with Table 37 and Table 38

Summary of proportion of Reserve to
Liabilities between 1845-1900 .

Number of Variations in the Rate of
Discount between 1845-1900

Mean of the Extreme Variations between
1845 and 1900

Years with greatest Fluctuations in the
Rate, 1 845- 1 900

85
86

86

86

87

PAGE

Difference between Rate in Highest and
Lowest Month and Mean of Extreme
Variations, 1845- 1900 • . . 87

Proportion of Reserve to Liabilities con-
nected in general way with Fluctua-
tions in the Rate charged . . 87

Average Rate for each month during the
fifty-six years, 1845- 1900 • • 88

Proportion of Reserve to Liabilities at
three dates of sharp pressure, 1847,
1857, and 1866 . . . 89

Act of 1844 only infringed in 1857 . . 89

Particulars of what occurred in these
crises and also in 1890 . . 89-90

Low Bank Reserve accompanied by a
High Rate of Interest . . . 90

General Averages of the proportions of
Reserve to Liabilities and of London
Bankers' Balances to Reserve when
rates specified were charged, 1844-
1878 . . . 90

Act to Indemnify Bank of England for
excess issue over limit allowed in Bank
Act, 1844, 1857 . . 91-93

Bill proposed by Lord Sherbrooke (Mr.
Lowe) in 1873 to allow excess
issue . . . 93-94

In considering the amount of the reserve of the Bank of
England — that is, of the resources which it can employ to meet
any demand for cash which may be made on it — a different
course, owing to the form of account which was ordained by
the Bank Act of 1844, has to be followed from that which has to
be used in examining the position of almost every other bank in
the world. # In the case of the Bank of France, in that of the

* The National Bank of Egypt divides its accounts in the same manner.
G 81

82

LIABILITIES AND RESERVE, 1845-1900

[CH. IX

TABLE 11.
Monthly Averages of Liabilities and Reserve of the Bank of England, 1845-1900.

Liabilities : Average Average of;

Reserve : Average

Average of

Proportion of

Average of

1845-54.

for the Ten Years,

Ten Yearsj

for the Ten Years.

Ten Years

Reserve to

Ten Years

£17,766,341.

= 100.

£9,211,255.

= 100.

Liabilities 52%

5a70=ioo.

January.

j£i 7,920, 300

IOI

£9,147,300

99

51

98

February

17,891,200

IOI

9,545,800

103

53

102

March .

19,386,000

IO9

IO,l86,IOO

in

53

102

April

17,608,300

99

8,510,600

92

48

92

May

16,678,500

94

8,681,600

94

52

100

June

18,416,100

104

9,902,300

108

54

104

July . .

17,076,700

96

8,927,600

97

52

100

August .

16,363,800

92

8,897,300

06

54

104

September

17,828,200

100

9,510,300

103

53

102

October

17,284,100

97

8,189,000

80

47

90

November

17,269,900

97

8,843,400

g6

5i

98

December

19,473,000

no

10,193,800

in

52

100

Difference : Highest and Lowest Month, ,£3,109,000.

Difference : Highest and Lowest Month, £2,004,000.

Mean of extreme Variations for 1845-54, Q°j0.

Mean of extreme Variations for 1845-54, n70»

Liabilities : Average

Average of

Reserve : Average

Average of Proportion of

Average of

1855-64.

for the Ten Years,

Ten Years

for the Ten Years,

Ten Years

Reserve to

Ten Years

£20,010,683.

= 100.

£8,487,116.

= 100.

Liabilities 42%

42°/o = 100

January.

£20,019,000

IOO

£8,031,000

95

40

95

February

19,855,100

99

8,756,IOO

103

44

105

March .

20,968,300

J05

9,429, IOO

in

45

107

April

20,056,900

IOO

8,187,400

90

4i

98

May

19,479,800

97

8,395,000

99

43

102

June

20,762,500

104

9,444,000

in

45

107

July . .

19,719,400

98

8,410,800

99

43

102

August .

19,106,100

95

8,435,600

99

44

105

September

20,312,200

IOI

9,Ol8,400

106

44

105

October.

19,527,500

97

7,405,700

87

38

90

November

19,363,600

97

7,490,200

88

39

93

December

20,957,800

105

8,842,700

104

42

100

Difference: Highest and Lowest Month, £1,862,000.

Difference : Highest and Lowest Month, £2,038,000.

Mean of extreme Variations for 1855-64, 5%

Mean of extreme Variations for 1855-64, i20/o

Liabilities : Average

Average of

Reserve : Average

Average of

Proportion of

Average of

1865-74.

for the Ten Years,

Ten Years

for the Ten Years,

Ten Years

Reserve to

Ten Years

£25,835,283.

= 100.

£11,177,150.

= 100.

Liabilities 43%

43% = 100.

January.

£25>749,400

IOO

£11,323,900

IOI

44

102

February

25,346,400

g8

11,862,300

I06

47

109

March .

27,520,100

106

12,138,200

108

44

102

April .

26,364,900

102

10,407,600

93

39

91

May

26,046,800

IOI

10,062,900

go

38

88

June

27,793>6oo

107

II,96l,200

107

43

100

July . .

26,505,000

102

11,146,700

IOO

42

98

August .

24,792,300

90

11,172,300

IOO

45

105

September

25,541,700

99

II,758,8oO

105

40

107

October

24,646,600

95

9,688,900

87

39

91

November

24,081,900

93

10,643,700

95

44

102

December

25,634,700

99

11,959,300

107

47

109

Difference : Highest and Lowest Month, £3,712,000.

Difference : Highest and Lowest Month, £2,4/

9,000.

Mean of extreme Variations for 1865-74, 7 U

Mean of extreme Variations for 1865-74, 10 "5°/

Liabilities : Average ! Average of

Reserve : Average

Average of] Proportion of

Average of

1875-84.

for the Ten Years,

Ten Years

for the Ten Years,

Ten Years Reserve to

Ten Years

£30,885,000.

= 100.

£13,669,000.

= 100. Liabilities 44%

44%=IO°-

January .

£30,544,000

99

£l2,I02,500

go

40

91

February

30,582,000

99

13,453,700

99

37

84

March .

33,675,000

iog

14,648,200

107

43

98

April .

31,523,000

102

13,573,600

99

43

98

May

30,334,000

98

13,332,700

90

44

100

June

31,764,000

103

14,695,300

108

46

105

July . .

32,018,000

104

14,715,800

108

46

105

August .

30,209,000

98

14,492,200

106

48

109

September

30,426,000

99

14,939,000

iog

49

111

October.

30,980,000

IOO

12,909,600

95

42

95

November

28,622,000

93

12,562,400

92

44

100

December

29,942,000

97

12,486,300

9*

42

95

Difference : Highest and Lowest Month, £5,053,000.

Difference : Highest and Lowest Month, £2,8

37,000.

Mean of extreme Variations for 1875-84, 8%

Mean of extreme Variations for 1875-84, 9*5%

ch. ix] MONTHLY AVERAGES, LIABILITIES AND RESERVE 83

TABLE 11 (continued).

Monthly Averages of Liabilities and Reserve of the Bank of England, 1845-1900,

with Summary Table, 1845-1900.

Liabilities : Average

Average of| Reserve : Average

Average of| Proportion of

Average of

1885-94.

for the Ten Years,

Ten Yean

for the Ten Years,

Ten Years

Reserve to

Ten Years

£34,199,000.

=100

£15,480,000.

= 100.

Liabilities 45%

45% = 100.

January .

£33>954,000

99

£13,768,000

89

41

91

February

33,814,000

99

l6,I27,000

104

48

107

March .

37,068,000

108

17,056,000

110

46

102

April

34,938,000

102

15,561,000

IOI

44

98

May

34,370,000

IOI

15,241,000

98

44

98

June

35,776,000

105

17,200,000

III

48

107

July . .

36,472,000

107

16,200,000

105

44

98

August .

33,477,000

98

15,578,000

I02

46

102

September

32,603,000

95

15,854,000

102

49

109

October.

33,804,000

99

14,139,000

91

42

93

November

31,867,000

93

14,465,000

93

45

100

December

32,245,000

94

14,572,000

94

45

100

Difference : Highest and Lowest Month, £5, 201,000.

Difference : Highest and Lowest Month, £3,432,000.

Mean of extreme Variations for 1885-94, 7*5%

Mean of extreme Variations for 1885-94, 11%

Liabilities : Average

Average of

Reserve: Average (Average of

Proportion of

Average of

1895-1900.

for the Six Years,

Six Years

for the Six Years, Six Years

Reserve to

Six Years

£51,306,000.

= 100.

£25,890,000. =100.

Liabilities 50%

50% = IOO.

January .

£52,055,000

IOI

£25,906,000

IOO

50

100

February

53,019,000

IO3

28,437,000

110

53

106

March .

55,145,000

107

28,299,000

iog

5'

102

April

50,927,000

99

25,329,000

98

50

100

May

51,774,000

IOI

26,120,000

IOI

5i

102

June

52,813,000

103

26,929,000

104

5i

102

July . .

52,809,000

103

25,939,000

IOO

49

98

August .

51,442,000

100

26,136,000

IOI

5i

102

September

50,132,000

08

26,845,000

104

54

108

October.

49,860,000

97

23,908,000

02

48

96

November

47,640,000

93

23,770,000

92

5o

100

December

48,057,000

94

23,065,000

89

48

96

Difference: Highest and Lowest Month, £7,505,000.

Difference : Highest and Lowest Month, £5,3;

2,000.

Mean of extreme Variations for 1895-1900, 7%

Mean of extreme Variations for 1895-1900, 10*5

%

Liabilities : Average

Average of.

Reserve: Average

Average of

Proportion of

Average of

1845-1900.

for the Fifty-six

Fifty-six

for the Fifty-six

Fifty-six

Reserve to

56 Years

Years, £28,478,000.

Years = 100'

Years, £13,133,000.

Years = 100

Liabilities 46%

46% = loo-

January.

£28,467,000

IOO

£12,485,000

93

44

96

February

28,447,000

IOO

13,715,000

104

48

104

March .

30,662,000

I08

14,364,000

iog

47

102

April .

28,758,000

IOI

12,756,000

97

44

96

May

28.209,000

99

12,747,000

97

45

98

June

29,678,000

104

I4,I7I,000

108

48

104

July . .

29, 192,000

102

13,386,000

102

40

100

August .

27,645,000

97

13,260,000

IOI

48

104

September

27,998,000

98

13,783,000

105

49

106

October.

27,885,000

98

11,904,000

91

43

93

November

26,748,000

94

12,190,000

93

46

100

December

28,051,000

99

12,838,000

98

46

100

Difference: Highest and Lowest Month, .£3,914,000.

Difference : Highest and Lowest Month, £2,46

0,000.

Mean of extreme Variations for 1845-1900, 7%

Mean of extreme Variations for 1 845-1 900, 9%

84 RESERVE AND LIABILITIES OF THE BANK [ch. ix

Bank of Germany, of Holland and of Belgium, the amount of
specie held by those banks is the first point to be compared with
the liabilities. In their case the proportion between these two
items is the main thing to be estimated, but with the Bank
of England, owing to the division of the account into two parts
— the Issue Department and the Banking Department — it is
the amount of the reserve, that is to say, the amount of notes
and coin held in the Banking Department, which has to be
compared with the amount of the liabilities in that department
in order to ascertain the specie which the Bank can dispose of
in case of any pressure. The reserve of notes represents the
greater part of the amount of gold at the command of the
Bank ; this is not the whole amount of coin and bullion held,
but only a part of it. The annual averages of these two items
will be found in cols. 21 and 41 of Table 3, pp. 13, 15. The
amount of the reserve of the Bank, col. 21 of this table, is
considerably smaller than that of the bullion in the Issue
Department, col. 41. The columns of proportional figures
in Table 3 enable the reader to follow what the course of
events has been ; thus, by comparing col. 12 with col. 22, p. 13,
the reader is able to see at a glance that while the liabilities
on deposits and bank post bills have increased nearly 3J times
between the years 1844 to 1900, the proportional numbers
running from 100 to 345, the reserve has only increased 2 J
times during the same period, the corresponding proportional
numbers running from 100 to 251. Col. 23 shows this again
in another manner. It contains a statement of the average
yearly proportion of the reserve to the liabilities mentioned —
namely, those on deposits and bank post bills collectively. The
amount of the circulation is omitted from the estimate of the
liabilities at this point because it is always assumed that the
notes are sufficiently provided for by the specie and securities
in the Issue Department. One of the first points which will
strike the observer is that on average the amount of the
proportion of the reserve to the liabilities became smaller for
the years between 1855-94 than it had been in the years
1845-54, and that in the years 1895 -1900 the proportion
closely resembled that in 1845-54. To make the course of
events clear, the averages of the liabilities and the reserve have

ch. ix] PERIODIC FLUCTUATIONS 85

been recorded in a separate table — Table 11, pp. 82, 83 — which
gives the averages for each month in decennial groups with
columns of proportional figures showing the proportion of the
liabilities in each month to the average for the ten years, and the
proportion of the reserve in the same manner for each period
of ten years from 1845 t0 1900, divided in the same way as
all the other tables are throughout this volume. This table
shows the proportion per cent, of the reserve to the liabilities
during each month, and it contains the monthly proportion of
this percentage for each month to the average for the year.
The last division of this table, which extends from 1 845-1 900,
contains a statement of the proportion of the reserve to the
liabilities during the whole period under notice. A column has
been added, which shows the proportion of the reserve to the
liabilities for each month, and a further column is supplied which
exhibits the fluctuations of the difference between the reserve
and the liabilities, taking the average of these as equal to 100.

A study of all these four columns of proportional figures is
necessary to enable us to follow the history of what has occurred.
In doing this, the footnotes to the divisions, 1845-54 to 1895-
1900, as to the difference between highest and lowest months
and mean of extreme variations, will be an assistance.

On average, it will be seen, by reference to the figures for
the fifty-six years from 1844 to 1900, that the liabilities have
been at their lowest point in the month of November, and
that the proportion of the reserve to the liabilities has been
at the lowest point during October and at a low point in
November and December. The proportions of the monthly
fluctuations during each year are also interesting. They trace
to a great extent the financial history of each year.

It will be necessary to compare with this table Table 1 2, p. 97,
which shows the monthly averages of the minimum rate of
discount of the Bank of England for the same period, divided
into corresponding groups and dealt with in the same manner ;
and also Table 37, p. 196, which gives the number of variations
in the rate of discount, and Table 38, p. 197, which shows the
lowest and highest rate charged and the extent of the fluctua-
tions during each year. These two tables last mentioned
contain similar information for the Banks of France, Germany,

86

RESERVE AND LIABILITIES OF THE BANK [ch. ix

J

Holland, and Belgium. They will be useful also when we

come to consider the rates which are charged by the other

great banks of Europe, but at the present time we will confine

our observations to the Bank of England.

It will be observed that

The Proportions of the Reserve to the Liabilities, 1 845-1 900,
Table II, pp. 82, 83, were —

52 per cent.

1855-64 .

. 42

1865-74 .

. 43

1875-84 •

. 44

1885-94 .

• 45

1895-1900 .

. 50

Thus in the last period (1 895-1 900) the proportion of the
reserve to the liabilities corresponds closely to what it was in
the first period (1845-54).

The number of variations in the rate charged by the Bank
of England was the same in each of these two periods, 1845-54
and in 189 5- 1900. The particulars are as follows : —

Number of Variations in the Rate of Discount, 1845-1900, Table 13, p. 98.

xo4D_^4
1855-64

-5/
. . 89

1865-74

. II3

1875-84

. 66

1885-94

. 77

1895-I9OO

. 27

The correspondence of the number of variations in the
last and in the first divisions of this table is fortuitous. The
number of years in the first division was ten, and in the last
only six. The tendency to fluctuation was greater in the later
period than in the earlier one ; it likewise increased much in the
intermediate years.

The variations between the highest and lowest rates have
also been considerable. They have increased in intensity in
the same manner as the fluctuations have increased in number.

Mean of the Extreme Variations between 1 845-1 900, Table 12, p. 97.

per cent.

1855-64

/
. 11.5

1865-74

• 17-5

1875-84

. . 185

1885-94

. 25

1895-1900

. 21.5

ch. ix] FLUCTUATIONS AND VARIATIONS IN RATE

87

The greatest fluctuation in the corresponding period is as
follows. The year in which it occurred is also mentioned in
this case : —

Greatest Fluctuation in Rate during Periods mentioned) Table 38,^. 197.
1845-54 . . . 1847 . . 5 per cent.

1855-64 . . . 1858 . 55

1865-74 . . . 1866 6-5

1875-84 . . . 1878 ... 4
1885-94 . . . 1889 ... 3*5

1895-1900 . . • 1 "} • • -3

I1900J

The difference between the rate charged in the highest and
lowest month of the same groups and the mean of the extreme
variations for the same is shown in the following statement.
These also show an increase in intensity.

Fluctuations between Rate in Months in Periods mentioned^ Table 12,^. 97.

Difference between Highest
Year. and Lowest Month.

£ s. d.

5

Mean of the Extreme
Variations.

1845-54
1855-64
1865-74
1875-84
1885-94
1895-1900

I 12

i 6

7 per cent.

n-5 »

17-5 »

185 ,,

25 »

2i-5 »

On the whole, the fluctuations between one month and
another have tended to be more severe of recent years, though
they were less severe in 1 895-1 900 than in 1885-94.

While there can be no doubt that the proportion of the
reserve to the liabilities is connected in a general way with
the rate that is charged, yet it will be seen from this sum-
mary that it is not the sole cause which regulates the
fluctuations in the rate. The general principle, however,
applies — the larger the reserve has been, the smaller the
number of fluctuations, and in a degree the severity of those
fluctuations corresponds. It should be noted that of late years,
since 1865, tne differences between the rates charged in the
highest and lowest month have largely increased. Taking the
period as a whole, and arranging the months for the period
1 845- 1 900 from the lowest month to the highest, the particulars
are as follows : —

88

RESERVE AND LIABILITIES OF THE BANK [ch. ix

Average Rate for each Month, 1845- 1900, Table 12, p. 97,
arranged from lowest month to highest.

Fifty-six Years,

Average Rate for

Average Rate,

1845-1900. Months named. £3 I2J. = 100.

£ s. d.

July 3 4 6 89

August

364

92

June

367

92

September

367

92

April

3 6 10

93

March

3 9°

96

May

3 n 0

99

February

3 « 3

99

October

3 17 3

108

January

3 19 1

no

December .

4 1 10

113

November .

4 3 8

116

As the memories of many men of business hardly go
back as far as the last severe crisis, the Act required to
indemnify the Bank of England in respect of their issues
of notes in excess of the legal limit made in November,
1857, is printed at the end of this chapter, and with it the bill
introduced into the House of Commons in 1873 by Mr. Lowe,
afterwards Lord Sherbrooke, the Chancellor of the Exchequer.
The first of these documents will show the force of the legal
impediments to an extension of the note issue of the Bank
beyond the limit fixed by the Act of 1844, and the second
what was considered necessary in 1873 to justify an extension
of the limit.

That the bill proposed by Mr. Lowe did not pass into law
need not be a matter of regret. The requirements of the
bill were pedantic and unpractical. The imposition of a charge
for discounts of a rate of 12 per cent, a rate never yet authori-
tatively attained during our sharpest panics, was enough to
mark the proposal as impracticable. In times of pressure the
right course is to endeavour to allay alarm, not to inflame it.
With any charge beyond 5 per cent, the public becomes uneasy.
A moderate rate for the excess issue like that charged at the
Bank of Germany (Chapter XVI., p. 154) is more advantageous
both for the Bank, the revenue, and the public.

The proportion of the reserve to the liabilities and to

CH. IX]

HIGH RATES IN TIMES OF PRESSURE

89

the bankers' balances was as follows during the sharpest pressure
of the crises of 1847, 1857, and 1866 : —

October 30th, 1847. — Reserve 12 per cent, of the liabilities,

and only sufficient to meet 81 per cent, of the bankers'

balances. Bank rate 8 per cent.
November 1 ith, 1857. — Reserve 7 per cent, of the liabilities,

and only sufficient to meet 30 per cent, of the bankers'

balances. Bank rate 10 per cent.
May 1 6th, 1866. — Reserve 5 per cent, of the liabilities, and

only sufficient to meet 15 per cent, of the bankers'

balances. Bank rate 10 per cent.

The increased severity of each crisis is marked in the
smaller proportion of the reserve both to the liabilities and
the bankers' balances on each of the later occasions. The
principle of the Act of 1844 was actually infringed only in
the panic of 1857.

The particulars of what occurred in 1857 are given, as
incorrect statements are not infrequent. Those for 1847, 1866,
and 1890 are added by way of illustration.

Year and
Month.

Gold Bullion in
Issue Depart-
ment of Bank.

Reserve of
Notes.

Rate
of Dis-
count
per cent.

Year and
Month,

Gold Bullion in
Issue Depart-
ment of Bank.

Reserve of

Notes.

Rate

of Dis-

count

percent.

1847.

1

£

1857.

£

£

Oct. 16

7,990,000

2,630,000

5*

Dec. 16

8,926,000

5,757,ooo

IO

„ 23

7,865,000

1,547,000

8

„ 23

10,209,000

7,426,000

IO

„ 30

8,009,000

1,177,000

8

„ 30

10,905,000

6,065,000

8

Nov. 6

8,426,000

2,030,000

8

1866.

„ 13

8,848,000

2,798,000

8

Mar. 21

i3>554,ooo

7,918,000

6

,, 20

9,526,000

4,228,000

8

„ 28

13,503,000

6,881,000

6

1857.

Apr. 4

13,486,000

6,153,000

6

Oct. 3

10,078,000

4,606,000

5*

„ 11

13,363,000

6,318,000

6

„ 10

9,539,000

4,024,000

6

„ 18

13,042,000

5,738,000

6

„ 17

8,925,000

3,217,000

7

„ 25

13,005,000

5,844,000

6

„ 24

8,777,000

3,486,000

8

May 2

12,712,000

4,839,000

6

„ 31

8,155,000

2,258,000

8

„ 9

12,295,000

4,950,000

8

Nov. 4

7,947,000

2,155,000

8

„ 16

11,851,000

731,000

IO

„ 11

6,666,000

958,000

10

„ 23

11,300,000

831,000

IO

„ 18

6,080,000

1,148,000*

10

„ 30

11,434,000

415,000

IO

>, 25

6,784,000

1,919,000

10

June 6

12,620,000

2,167,000

IO

Dec. 2

6,896,000

2,268,000

10

„ 13

13,696,000

2,729,000

IO

„ 9

7,568,000

3,900,000

10

„ 20

14,174,000

4,067,000

iot

* ^2,000,000 was, under authority of Treasury letter, Nov. 12th, 1857, added to the
securities in the Issue Department in the returns from Nov. 18th to Dec. 23rd, 1857, both
inclusive. The strict limits of the Act of 1844 were only exceeded in the returns of 18th and
25th Nov., 1857. — Palgrave, Dictionary of Political Economy, vol. i. art. by Mr. W. Fowler,
"Crises," pp. 462-6.

t Reduced to 8 per cent. August 6th.

90

RESERVE AND LIABILITIES OF THE BANK [ch. ix
Figures from Nearest Return.

Date.

Gold Bullion in Eank
in both departments.

Reserve of Notes.

Rate of Discount
per cent.

1890.
Oct. 15

„ 29
Nov. 12

„ 19

,, 26
Dec. 10

m 17

„ 24

£
19,793,000
i9,759,ooo
19,137,000
22,558,000
24,683,000
24,832,000
24,375,000
23,338,000

£
10,275,000
10,600,000
10,024,000
13,378,000
15,309,000
15,904,000
i5,797,ooo
14,205,000

5
5
6
6
6
5
5
5

The general averages of the proportions of the reserve to
the liabilities and of the London bankers' balances to the
reserve when the various rates specified were charged between
the years 1844 and 1878 are given in the table which follows.
This statement has not been carried further, because since the
amounts of the London bankers' balances have not been
published since 1877, ^ *s not possible now to make any similar
statement up to a later date complete. It will be observed,
however, that in general the principle that a low figure for
the reserve accompanies a high rate of interest holds good.
There does not appear to be any corresponding connection
between the proportions which the bankers' balances bear to
the reserve and the rate charged.

General Averages of the Proportions of the Reserve
to the Liabilities, and of the London Bankers'
Balances to the Reserve, when the various Rates
specified were charged — 1844 to 1878.

Bank Rate of
Discount per cent.

Times Charged.

Average

Proportion per

Cent, of Reserve

to Liabilities.

Average

Proportion per

Cent, of London

Bankers' Balances

to Reserve.

IO

2

18

86

9

5

28

73

8

15

30

78

7

21

32

67

6*

2

29

53

6

28

36

61

Si

6

37

56

5t

33

36

67

H

20

43

58

4

40

56

64

34

30

45

56

3

35

45

57

•i

18

5o

50

*i

1

59

38

2

8

50

73

Number of changes
in rate . . .

} 264

—

—

ch. ix] INDEMNITY TO BANK— EXCESS ISSUES— ACT 1857 91

The following is the Act required to indemnify the Bank of
England against the legal risks it ran by exceeding the limits
of issue prescribed by the Bank Act of 1844 in 1857 : —

Anno Vicesimo Primo Victoria Regince, Cap. i.

An Act to indemnify the Governor and Company of the Bank of
England in respect of certain Issues of their Notes, and to
confirm such Issues, and to authorize further Issues for a Time
to be limited. [12th December, 1857.]

Whereas by the Act of the Session holden in the Seventh and Eighth 7 & 8 Vict.
Years of Her Majesty, Chapter Thirty-two, "to regulate the Issue of c. 32.
Bank Notes and for giving to the Governor and Company of the Bank of
England certain Privileges for a limited Period," the Governor and
Company of the Bank of England are prohibited from issuing Bank of
England Notes either in the Banking Department of the Bank of England
or to any Persons or Person whatsoever, save in exchange for other Bank
of England Notes, or for Gold Coin, or for Gold or Silver Bullion
received or purchased for the Issue Department of the said Bank under
the Provisions of that Act, or in exchange for Securities acquired and
taken in the said Issue Department under the Provisions therein con-
tained : And whereas under the said Act and an Order in Council issued
under the Provisions thereof the Amount of Securities to be acquired and
taken in the said Issue Department stands limited not to exceed the Sum
of Fourteen million four hundred and seventy-five thousand Pounds :
And whereas by a Letter dated the Twelfth Day of November last the
First Lord of the Treasury and the Chancellor of the Exchequer informed
the Governor and the Deputy Governor of the Bank of England that
Her Majesty's Government had observed with great Concern the serious
Consequences which had ensued from the recent Failure of certain Joint
Stock Banks in England and Scotland, as well as of certain large mer-
cantile Firms chiefly connected with the American Trade; that the
Discredit and Distrust which had resulted from these Events, and the
Withdrawal of a large Amount of the Paper Circulation authorized by the
existing Bank Acts, appeared to Her Majesty's Government to render it
necessary for them to inform the Bank of England that if they should be
unable in the present Emergency to meet the Demands for Discounts and
Advances upon approved Securities without exceeding the Limits of their
Circulation prescribed by the Act of One thousand eight hundred and
forty-four, the Government would be prepared to propose to Parliament
upon its meeting a Bill of Indemnity for any Excess so issued ; and that,
in order to prevent that temporary Relaxation of the Law being extended
beyond the actual Necessities of the Occasion, Her Majesty's Government
were of opinion that the Bank Terms of Discount should not be reduced
below their then present Rate ; And whereas the Governor and Company

92

Issues of
Bank of
England
Notes
since 12 th
Nov.,1857,
in excess
of those
authorized
by Law
confirmed
and made
valid.

The Re-
striction
on the
Amount of
Securities
to be taken
in the Issue
Depart-
ment
suspended.

RESERVE AND LIABILITIES OF THE BANK [ch. ix

of the Bank of England have since the said Twelfth Day of November
One thousand eight hundred and fifty-seven issued Bank of England
Notes in exchange for Securities acquired and taken in the said Issue
Department beyond the Amount limited by Law, and it is expedient that
the Acts of the said Governor and Company in relation to the Matters
aforesaid should be confirmed, and that the Restriction on the Amount of
the Securities to be acquired and taken in the said Issue Department
should be suspended for a limited Time : Be it therefore enacted by the
Queen's most Excellent Majesty, by and with the Advice and Consent of
the Lords Spiritual and Temporal, and Commons, in this present Parlia-
ment assembled, and by the Authority of the same, as follows :

I. All such Issues of Bank of England Notes as may have been made
by the said Governor and Company, or by their Order or Direction, since
the said Twelfth Day of November One thousand eight hundred and fifty-
seven, although beyond the Amount authorized by Law, and all Acts
necessary for the making of such Issues, and for the acquiring and taking
since the said Twelfth Day of November One thousand eight hundred and
fifty-seven Securities in the Issue Department of the Bank of England
beyond the Amount authorized by Law, shall be confirmed and made
valid; and the said Governor and Company, and all Persons who have
been concerned in such Issues or in doing or advising any such Acts as
aforesaid, are hereby indemnified and discharged in respect thereof, and
all Indictments and Informations, Actions, Suits, Prosecutions, and Pro-
ceedings whatsoever commenced or to be commenced against the said
Governor and Company or any Person or Persons in relation to the Acts
or Matter aforesaid, or any of them, are hereby discharged and made
void.

II. So much of the said Act of the Seventh and Eighth Years of
Her Majesty as limits the Amount of the Securities to be acquired and
taken in the Issue Department of the Bank of England shall be and be
deemed to have been suspended as from the Twelfth Day of November
One thousand eight hundred and fifty-seven, and shall continue suspended
until the Expiration of Twenty-eight Days after the First Meeting or
Sitting of Parliament in the Year One thousand eight hundred and fifty-
eight, subject to the Proviso herein-after contained, and during such Sus-
pension the Provisions of the said Act in relation to the Issue of Bank of
England Notes shall be construed and take effect as if the Restriction on
the Amount of Securities in the said Issue Department, and the Prohibi-
tion of the Increase of such Amount and of the Issue of additional Bank
of England Notes thereon, had not been contained in the said Act :
Provided always, that if before the Expiration of the Time herein-before
limited the Governor and Company of the Bank of England give public
Notice that they have reduced the minimum Rate of Interest required by
them below the Rate of Tender Centum per Annum^ the said Suspension
shall cease.

ch. ix] EXCESS ISSUE— LORD SHERBROOKE— BILL OF 1873 93

III. Upon or before the Expiration or Cesser of the Suspension afore- The Issues

said the Excess of Issues herein-before confirmed shall be reduced to the in f xcess

to be re-
Amount which would have been authorized by Law if this Act had not duce(j on

been passed ; and, subject to the Indemnity and Discharge hereby given, or before

all the Provisions of the said recited Act shall, after such Expiration or the Expi-

Cesser, be and remain in full Force. ? l0~ °

the Sus-
pension.

The bill proposed by Lord Sherbrooke (then Mr. Robert
Lowe) in 1873 to allow the Bank of England to exceed in
certain contingencies the limits fixed for the issue by the
Act of 1844 is printed here in full.

(36 Vict) Bank of England Notes.

A Bill to provide for authorising in certain contingencies a tem- a.d. 1873.
porary increase of the amount of Bank of England Notes issued
in exchange for securities.

Be it enacted by the Queen's most Excellent Majesty, by and with the
advice and consent of the Lords Spiritual and Temporal, and
Commons, in this present Parliament assembled, and by the authority
of the same, as follows :

1. Whenever the First Lord of Her Majesty's Treasury and the Power to

Chancellor of the Exchequer after communication with the Governor authonse

and Deputy Governor of the Bank of England are satisfied — and special

(1) That the minimum rate of interest then being charged by the gSU<j°f

Governor and Company of the Bank of England on discounts England
and temporary advances is not less than twelve per cent, per notes.
annum ; and

(2) That the foreign exchanges are favourable to this country ; and

(3) That a large portion of the existing amount of Bank of England

and other bank notes in circulation is rendered ineffective for
its ordinary purpose by reason of internal panic :

they may, by order under their hands, empower the issue department of
the Bank of England to make, in excess of the authorised issue, a special
and temporary issue of Bank of England notes, by delivering the same
into the banking department in exchange for and on the credit of an
equal amount of Government securities to be transferred to the issue
department, and the said Governor and Company shall pay interest into
the Exchequer on the amount of notes so issued by them at such rate,
being not less than twelve per cent, per annum, as may from time to time
be fixed by the First Lord of the Treasury and Chancellor of the
Exchequer, and in addition thereto the amount of any further profit
which they may derive from the said issue.

94

RESERVE AND LIABILITIES OF THE BANK

[CH. IX

Order may
be re-
scinded or
varied.

Remuner-
ation to
Bank for
expense of
special
issue.

Publica-
tion and
return of
order to
Parlia-
ment.

Construc-
tion of Act
and short
title.

2. The First Lord of the Treasury and the Chancellor of the Exchequer
may, if they think it expedient, by order under their hands, rescind and
vary any order made in pursuance of this Act, and make any new order in
pursuance of this Act,

3. There shall be paid to the said Governor and Company such sum, not
exceeding the rate of two per cent, on the amount of such issue, as may be
agreed upon between the said First Lord of the Treasury and Chancellor of
the Exchequer on the one part, and the said Governor and Deputy Governor
of Vhe Bank of England on the other part, to be a fair allowance to the Bank

for the risk, expense, and trouble incurred by it in making such issue.

4. A copy of every order made under this Act shall be forthwith
published in such manner as the First Lord of the Treasury and the
Chancellor of the Exchequer consider best calculated for giving public
and general notice thereof, and shall be laid before both Houses of
Parliament within fourteen days after it is made, or if Parliament be not
then sitting, within fourteen days after the then next meeting of Parliament.

5. This Act may be cited as the Bank of England Notes Act, 1873,
and shall be construed as one with the Act of the session of the seventh
and eighth years of the reign of Her present Majesty, chapter thirty-two,
intituled " 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."

[Sec. 3, in italics, is thus in the original print of the Bill.]

CHAPTER X

VARIATIONS IN THE RATE CHARGED BY THE BANK
OF ENGLAND FROM 1844 TO 1900

PAGE

The Rate of Discount a valuable index
to the fluctuations in the Money
Market . . • • 95

Description of Table 12 . 95~96

Description of Table 13 . 96-103

This Table and Tables 12, 14, 37, and 38,
giving details as to Rate charged, form
chart showing course of market value
of money . . . . 96

Great difference in the course of business

between one year and another . . 96
Variations in Rate in different years 96-101
Table 12. Monthly Averages of Minimum
Rate of Discount of Bank of England,
1845-1900 . . . 97

Table 13. Table of Changes in the Rate
of Discount charged by the Bank of
England, and the Number of Days
at each Rate, in each year, 1844-
1900 . . . 98-99

PAGE

Table 14. Bank of England Rates of
Discount, 1 844- 1 900. The number of
days at each Rate arranged from the
highest number to the smallest, and
also from the lowest rate to the highest 100

Facts shown in Table 1 3 brought together
for reference in Table 14 . . IOI

Summary of examination of Tables of
Rates . . . 101-103

A low rate prevalent before 1854 ; high
rates more frequent latterly . .102

Effect of Chinese-Japanese War indemnity
(1895-96) on the value of money . 103

The vast growth of loanable capital in
the country renders it more difficult
for the Bank to maintain the needed
hold over the market . . 103-104

Deposits of Banks and amount of Reserve
of Bank of England . . . 104

The fluctuations in the Rates charged by
the other Banks of Europe . . 105

Though the rate of discount charged by the Bank of England
is, perhaps, no longer at the present time so exact a guide to
the movements of the money market as formerly, yet it is still
a most valuable index to the fluctuations in that market, and to
the course of monetary affairs generally, and an examination
into the variations of the rate charged is a necessary part of
an analysis of the transactions of the Bank. The tables which
will be found in this chapter have been prepared for the pur-
pose of giving information on this point. Of these tables,
the first, No. 12, p. 97, gives the average rate of discount
charged month by month by the Bank of England from 1845
to 1900, in groups of ten years, 1845-54, 1855-64, 1865-74,

95

96 VARIATIONS IN RATE, BANK OF ENGLAND [ch. x

1875-84, 1885-94, for the six years 1 895-1 900, and for the
whole period, 1845 t0 1900. The statement has been sub-
divided thus into short periods to facilitate the study of the
fluctuations in the rate by those who desire to give the subject
close attention. It also shows the proportion which the rate
charged in each month bore to the average rate of the decade.
Table No. 13, pp. 98, 99, gives at one view a statement of the
changes in the Bank rate from the date in 1844, when the
Bank Act came into operation, to the close of the year 1900.
It gives the number of changes of the rate in each year, and the
total number of days at each rate in each year. Table 37,
p. 196, shows the number of variations in the rate and the
years in which these variations occurred, and Table 38, p. 197,
shows the range of variation in each year. The Table 14,
p. 100, gives the number of days at each rate, arranged from
the lowest rate to the highest ; and the number of days at
each rate, arranged from the greatest number of days which
each rate lasted to the smallest.

These tables thus form, collectively, a kind of rough chart,
showing the course which the market value of money has taken
during the entire period over which they extend. Some curious
information can be gathered from examining them. First, there
is a great difference, as will be seen from Table 13, pp. 98, 99,
between the course of business in one year and another. In two
years, 1851 and 1895, no change is marked ; in four years, 1844,
1846, 1849, and 1850, there is but one alteration of the rate.
It will be noted that these years in which so little fluctuation
took place all occurred during the first seven years, between
1844 and 1850. By way of contrast, in one year, 1873, no
less than twenty- four changes, one nearly every fortnight,
are marked. Next, if we look down the column in the
table giving the total number of changes in the Bank rate,
we shall be struck with the fact of how much that number has
increased. As far down as the year 1859 the changes are
comparatively few in number. Yet the period from 1844
to 1859 included two panics, those of 1847 and 1857, both
of them of considerable severity. In both of these years, 1847
and 1857, the changes in the Bank rate amounted to nine.
This was considered in those days an almost unprecedented

ch. x] MONTHLY AVERAGES, RATE OF DISCOUNT

97

TABLE 12.

Monthly Averages of Minimum Rate of Discount of Bank of England 1845-1900,
in groups of Ten Years, 1845-54, l855-04, I865~74, 1875-84, 1885-94, and of
Six Years, 1895- 1900, w*tn Summary Table, 1845-1900.

1845-64.

1855-64.

1865-74.

1875-84.

Month.

Average for

Av. of

Ten

Years

= 100.

Average for

Average
of Ten

Average for

Average
of Ten

Average for

Average

of Ten

Years =

100.

the Ten Years,
£3 8*. $d.

the Ten Years,
£4 1 2 s. gd.

Years =
100.

the Ten Years,
£2 16s. id.

Years =
100.

the Ten Years,
£3 3s. nd.

£ s. d.

£ s. d.

£ s. d.

£ s. d.

January

3 5 8

96

4 15 8

103

3 17 8

IOI

3 17 5

121

February .

3 6 0

96

4 16 5

104

3 12 9

96

3 5 11

103

March

3 6 0

96

4 12 5

IOO

3 10 1

92

3 1 7

90

April .

3 7 1

98

4 11 2

08

3 " 11

94

2 15 8

87

May .

3 7 7

99

4 15 8

103

4 3 8

no

2 16 3

88

June .

3 8 4

100

496

97

3 19 8

105

2 15 2

86

July . .

380

99

4 4 5

9'

3 13 10

97

2 14 6

85

August

3 7 10

99

4 3 2

90

3 13 11

97

2 15 9

87

September .

3 7 8

99

446

91

322

82

3 1 3

90

October

3 10 10

104

4 12 4

99

3 19 11

JOS

3 10 10

in

November .

3 15 1

no

5 4 9

113

488

117

3 18 2

122

December .

3 10 10

104

5 3 3

in

3 19 1

104

3 IS 10

no

Difference :

Highest and Lowest

Difference: Highest and

Difference: Highest and

Difference: Highest and

Month, gs. sd

Lowest Month, £1 is. yd.

Lowest Month, £i 6s. 6d.

Lowest Month,;£i 3*. 8d.

Mean of e:

ctreme Variations for

Mean of extreme Vari-

Mean of extreme Vari-

Mean of extreme Vari-

»845-S4» 7%

ations for 1855-64, xi "5%

ations for 1865-74, x7*57o

ations for 1875-84, 1 8*57.

1885-94.

1895-1900.

1845-1900.

Month.

Average for

Average of

Average for

Average of

Average for the

Average

Rate of

Fifty-six

Years = 100.

the Ten Years,

Ten Years

the Six Years,

Six Years

Fifty-six Years,

£3 3s. *d.

= 100.

£3 os. 4d.

= 100.

£3 "J.

£ s. d.

£ s. d.

£ s. d.

January .

4 I I

128

3 6 5

no

3 19 1

no

February

3 6 1

'OS

2 16 5

94

3 11 3

99

March

2 18 6

93

2 16 8

94

390

96

April

2 13 2

84

2 17 8

90

3 6 10

93

May

2 14 2

86

2 17 4

95

3 11 0

99

June

2 10 IO

81

2 10 7

84

367

92

July

290

78

2 IO IO

84

3 4 6

89

August

2 16 6

89

2 13 6

89

3 6 4

92

September

3 4 4

102

2 15 5

g2

367

92

October .

3 10 1

in

3 9 2

i'5

3 i7 3

108

November

3 16 9

122

3 13 4

121

4 3 8

116

December

3 !7 4

122

3 16 8

127

4 I IO

"3

Difference : H

ighest and Lowest

Month,

Difference : H

ighest and

Difference : Highest and

£1 12s. id.

Lowest Month, £

1 6s. id.

Lowest Month, igs. td.

Mean of extreme Variations for

1885-04,

Mean of ext

reme Vari-

Mean of extreme Vari-

•»V.

ations for 1895-ig

00, 2i's70

ations for 1 845-1900, i3"s7o

H

98

VARIATIONS IN RATE, BANK OF ENGLAND

TABLE 13.

[CH. X

BANK OF ENGLAND

Table of the Changes in the Rate of Discount Charged by the

since 5th September, 1844 (when the Bank

Number of Changes.

2%

»i%

*x

3%

3i%

4%

Years.

Rise.

Fall.

Total.

Days.

Days.

Days.

Days.

Days.

Days.

1844

—

I

I

—

—

117

—

-

-

1845

2

—

2

—

—

289

21

55

1846

—

I

I

—

—

—

126

239

—

1847

6

3

9

—

—

—

14

7

177

1848

—

3

3

—

—

—

59

140

40

1849

—

1

1

—

—

39

326

—

—

1850

1

—

1

—

—

360

5

—

—

1851

No ch

ange

—

—

—

—

365

—

—

1852

—

2

2

253

—

113

—

—

—

1853

6

—

6

6

—

14

133

9i

14

1854

1

1

2

—

—

—

—

—

—

1855

4

4

8

—

—

—

—

84

7

1856

2

5

7

—

—

—

—

—

—

1857

6

3

9

—

—

—

—

—

—

1858

—

6

6

—

—

22

301

7

7

1859

2

3

5

—

—

288

35

14

—

1860

8

3

11

—

—

19

12

—

226

1861

3

8

11

—

—

54

49

21

1862

2

3

5

98

—

147

120

—

^Bfl

1863

8

4

12

—

—

—

3i

12

24

1

1864

7

8

15

—

—

—

—

1865

8

8

16

—

—

—

42

21

98

1868

5

9

14

—

—

—

—

11

42

1867

3

3

159

—

56

112

38

1868

2

—

2

324

—

14

28

—

1869

3

4

7

—

—

77

183

21

49

1870

4

6

10

—

—

93

223

9

1

2

1871

4

6

10

70

28

124

66

14

23

1872

9

5

14

—

—

—

123

76

50

1873

11

13

24

—

—

—

35

76

6

1

1874

6

7

13

—

—

42

70

119

8

1

1875

5

7

12

56

—

21

84

147

4

3

1876

1

4

5

255

—

—

14

14

6

2

1877

4

3

7

170

—

7

100

—

3

9

1878

6

4

10

56

—

28

9i

28

2

1

1879

1

4

5

210

—

28

97

—

1

4

1880

1

I

2

—

—

175

191

—

1881

4

2

6

—

—

112

90

35

4

2

1882

3

3

6

—

—

—

147

—

A

2

1883

1

5

6

—

—

—

165

28

14

7

1884

4

3

7

112

—

77

80

35

7

1885

2

5

7

168

—

14

42

49

6

4

1886

4

3

7

78

—

77

62

56

1

7

1887

2

5

7

98

—

14

49

14

15

6

1888

4

5

9

56

—

91

9i

7

3

3

1889

4

4

8

—

—

112

98

8

4

2

1890

4

7

11

—

—

—

70

7

98

1891

4

6

10

—

—

84

126

49

98

1892

1

3

4

176

—

21

149

20

—

1893

6

6

12

—

—

147

134

21

42

1894

—

2

2

312

—

21

32

—

—

1895

No ch

ange

—

365

—

—

—

—

—

1896

3

—

3

254

—

14

28

—

70

1897

2

4

6

133

—

56

141

14

21

1898

3

3

6

—

84

146

7

128

1899

4

2

6

—

—

—

161

96

19

1900

1

5

6

—

—

—

35

21

284

184

216

400

3>409

28

2,997

4»907

i5739

2,698

ch. x] DAYS AT EACH RATE, 1844-1900, ENGLAND

99

TABLE 13 — continued.
MINIMUM RATE OF DISCOUNT, 1844-1900.
Bank of England, and the Number of Days at each Rate in each Year,
Act came into Operation), to 31st December, 1900.

4i%

5%

six

6%

6J%

7%

8%

9%

10%

Total.

Years.

Days.

Days.

Days.

Days.

Days.

Days.

Days.

Days.

Days.

Days.

14

84
98

28

33
14

52

42

35

7

7

43

8

7

2
7

127
27

93
281

102

35

14

63
49

25

39
21

7
40

47

45
14

7
21

49

103

16

86
155
25
55
28

15

34

88

104

105
8

21

56

7

56

84
14

84"
14

7

46

20
127

7

13
9i

27

106

49
56

7

44

57

3i

7

38
21

1
78

3i
11

14

77

10

74
199

4

52

8
102

50
37

19
22

28
24

7

35

21
81

59
13

4

77
1

13

45
96

117

365
365
365
366

365
365
365
366

365
365

365
366

365
365
365
366

365
365
365

366

365
365
365
366

365
365
365
366

365
365

365
366

365
365
365
366

365
365
365
366

365
365
365
366

365
365
365
366

365
365

365
366

365
365
365
365

1844

1845
1846
1847
1848
1849
1850
1851
1852
1853
1854

1855
1856
1857
1858
1859
1860
1861
1862
1863
1864

1865
1866
1867
1868
1869
1870
1871
1872
1873
1874

1875
1876
1877
1878
1879
1880
1881
1882
1883
1884

1885
1886
1887
1888
1889
1890
1891
1892
1893
1894

1895
1896
1897
1898
1899
1900

481

2,012

259

868

9i

577

268

95

141

20,570

IOO

VARIATIONS IN RATE, BANK OF ENGLAND

TABLE 14.

Bank of England— Rate of Discount— 1844-1900. The Number of
Days at each Rate, arranged from the highest number to the
smallest.

Number of Days (20,570)
4,907
3»409
2,997
2,698
2,012

1,739
868

577
481

268

259
141

95
9i
28

Rate Per Cent.

3

2

*i

4
5

3i
6

7

4i

8

Si

10

6J
*1

Number of Days = 1,000.
239
166
H6
131
98
84
43
28
23
13
13
7
5

20,570

1,000

Bank of England— Rate of Discount— 1844-1900. The Number of
Days at each Rate, arranged from the lowest rate to the
highest.

Rate Per Cent.

N

umber of Days (20,5;

to).

Ni

imber of Da

2 . . 3,409 166

»J

28

—

2*

2,997

146

3

4,907

239

Si

i,739

84

4

2,698

131

4}

481

23

5

2,012

98

5i

259

13

6

868

43

H

9i

4

7

577

28

8

268

13

9

95

5

10

141

7

20,570

1,000

ch. x] DETAILS OF VARIATIONS, BANK OF ENGLAND 101

number of variations. If we exclude these two years, we shall
find in the fifteen years under observation, namely, those from
1844 to 1859, only two years, 1855 and 1856, in the first of which
the number of changes was eight, in the second seven ; two
years besides, 1853 and 1858, in which they were six in number ;
in one year, 1859, there were five changes; in one year, 1851,
no change whatever was recorded ; in the remaining seven
years the number of changes varied from one to three. But
from i860 to 1874 a totally different state of things prevails.
If we carry our eyes down this later part of the column we
shall find that, with the exception of the year 1862, in which
there were five changes, no year between i860 and 1874
has less than ten changes recorded as occurring in it, with the
exception of those years which, like 1867 and 1868, were years
of recovery from great commercial depression. In 1872 four-
teen changes were recorded; in 1873, as mentioned before, no
less than twenty-four; and in 1874 thirteen.

Between 1875 and 1900 the yearly fluctuations were not so
numerous. Both in 1875 and 1893 there were twelve, in 1890
there were eleven, in 1891 ten, in 1888 nine, in 1889 eight. In
none of the remaining years did the changes exceed six or
seven. In 1894 there were only two; in 1895, as in 1851,
there were none. The diminution in the number of fluctua-
tions is a help to trade, as is a low rate of interest.

If we examine Table 14, p. 100, in which the facts shown in
Table 13, pp. 98, 99, have been brought together for facility of
reference, we shall find that during the greater part of the time
between 1844 and 1900 the rate charged by the Bank has been,
comparatively speaking, a low one. Out of 20,570 days under
consideration, the Bank rate stood at 3 per cent, or below it,
during 11,341 — that is to say during more than half of the
whole time. And if we take the rates up to 4 per cent,
inclusive, which we may call moderate rates, as even 4 per
cent, can hardly be called a high rate, we shall find that they
comprise more than three-quarters of the whole. A column
has been added to the table for facility of comparison, showing
the proportionate part of the time which each rate has stood at, —
reckoning the whole period as equalling 1,000. This column
shows that during more than half of the whole time a rate of

io2 VARIATIONS IN RATE, BANK OF ENGLAND [ch. x

3 per cent, and below has been charged, and that rates varying
from 4^ per cent, upwards to 10 per cent, have been in force
during one-fifth of the whole period. The whole results may
be summarised thus : From 1 844 to 1 900 a low rate, from
2 per cent, to 2\ per cent., was charged during 6,434 days,
being more than one-quarter of the time ; a moderate rate, not
exceeding 3 per cent, was charged during 11,341 days, more
than half the time ; a rate not exceeding 4 per cent, was
charged during 15,778 days, more than three-quarters of
the time ; and during 4,792 days, little more than one -fifth
of the time, a high rate of 4J per cent, and upwards was
charged.

If we look to table No. 13, pp. 98, 99, again, we shall see the
history of the difficult times between 1855 an<^ l&73 expressed
very clearly, the years in which the Bank rate exceeded 6 per
cent., ranging from 6J per cent, to 10 per cent, all, except 1847,
falling within that period. Earlier than 1854 low rates generally
prevailed. If we except the panic year, 1 847, we shall never find,
down to the year 1853 inclusive, the rate exceeding 5 per cent. ;
and indeed a 5 per cent, rate was then most rarely attained. In
those days a 4 per cent, rate was one of unusual severity. In the
latter part of the table higher rates have become more frequent
Though it may have been but for a week, yet during thirty-six
out of the fifty-six years over which this table extends the
Bank rate has reached 5 per cent. ; even in such a year as 1876,
during which the average rate for the year was but a little
more than half 5 per cent., being only £2 \2s. id. for the
twelvemonth, and in 1877, in which the yearly average was
only £2 185., the same result occurred. Thus also during
thirty-eight years the Bank rate has stood for some time, and
frequently a long time, at 4 per cent. Yet the fact that 4 per
cent, and even a lower rate has been charged for a considerable
part of the year has not prevented the average for the whole
year being high. Thus in 1866, when for a few days as low
a rate as 3J per cent, was charged, the average rate for the
whole year was £6 igs., the highest recorded. Again, in 1873
the rate fluctuated between 3 per cent, and 9 per cent., with an
average of £4. 15s. 10^. Between 1873 and 1900, however,
the rate has never exceeded 6 per cent, though it has stood

ch. x] LOANABLE CAPITAL AND CASH RESERVE 103

at that figure in eight years, namely, in 1874, 1875, 1878, 1882,
1889 (for one day), 1890, 1899, and 1900. #

During the years from 1891 to 1897 low rates generally
prevailed. In 1895 tne rate stood at 2 per cent, without
change, and including that year and 1894, 1896, and 1897 2 per
cent, was charged for 1064 days, equivalent to nearly three
years out of the seven between 1894 and 1900. This, however,
has not prevented the fluctuations in the rate from being fre-
quent and also distinctly marked. The variations have also
become more extreme during the years from 1885 to 1900.

The special circumstances connected with the Chinese-
Japanese War indemnity and the large deposits hence made
with the Bank of England in 1895-6 partly account for the
abnormally low value of money at that time. This subject is
mentioned in Chapter II., p. 18, in reference to the principal
divisions of accounts of the Bank of England.

The further consideration of this subject — the number, the
extent, and the severity of the fluctuations in the rate charged
at the Bank of England — will be continued in Chapter XX.,
p. 203, in which the same points will be taken up in
reference to all the five banks whose operations are discussed
in this volume. Meanwhile it is only right to refer to one
cause of the greater susceptibility to fluctuation in the value
of money in this country of recent years, namely, the vast
growth of loanable capital in the country, and of the money
held by banks and discount houses, in comparison with the
reserve of ready money in the form of hard cash which is held
against these liabilities. The real reserve in actual cash of the
banks of the country is included in the reserve held by the Bank
of England, and though that reserve, as compared with the
amounts held thirty years since, has been augmented of late, yet
the reserve of the Bank has not been increased in proportion
to the demands which may be made on it, and the average
during the last four years dealt with in this statement, 1897-
1900, actually decreased. See Table 3, col. 23, p. 13.

It is advisable in reference to this point to make a note of
the sums held by the banks of the United Kingdom, and to
compare with these figures the amount of the reserve of the
Bank of England.

io4 VARIATIONS IN RATE, BANK OF ENGLAND [ch. x

My own estimate in Notes on Banking, made in 1872, was
that the amount of the capitals, deposits, and circulation of all
the banks in the United Kingdom was at that date —

1872. ^584,000,000

The deposits, current accounts,
and note circulation of all the
banks publishing accounts in the
United Kingdom were — *

1894. ^72 1,400,000

I^95- 794,600,000

1896. 797,700,000

1897. 816,400,000

1898. 838,300,000

1899. 869,300,000

1900. 889,600,000

1901. 888,100,000

Average

Reserve of

the Bank of

England.

^12,100,000

Proportion per cent,
of Reserve of Bank
to Liabilities of all
Banks to the Public.

206

^25,800,000
29,900,000
34,600,000
25,100,000
22,900,000
21,200,000
21,400,000
24,046,000

Meanwhile as the amount of loanable capital outside the
Bank of England has till recently increased in a larger propor-
tion than the amount of loanable capital which the Bank holds,
it has become more difficult for the Bank to maintain that
influence over the market rate which it is needful for it to
exert. The more close is the harmony existing between the
market rate and the Bank rate, the more swiftly is the Bank
able to influence the market rate, and thus to regulate the
amount of its reserve. The more carefully the business of
banking is conducted throughout the country the less will the
danger be of those demands which arise through the results of
inflation of business and overtrading. The influence which
bankers generally can exert over the business of the country
is very great, and considering the extreme delicacy of our
money market, the more needful it is that that influence should
be continually exerted on the side of prudence.

This statement will give our readers a general view of the
fluctuations in the rate of interest charged by the Bank of
England during the period from 1844 to 1900. We propose
in the following chapters to carry the investigation somewhat
further, and to examine also in some detail into the rates

* See Bankers' Magazine, April, 1902. Waterlow and Sons, Limited, London.

ch. x] RATES, FLUCTUATIONS AT OTHER BANKS 105

charged by the Bank of France, the Bank of Germany, the
Bank of Holland, and the Bank of Belgium. Tables have
been added, marked Table 41, p. 209, Table 45, p. 216, which
show at one view the fluctuations in the rates of discount
charged by these banks for the years under consideration ;
Table 3J, p. 196, with the number of variations in the rates of
discount; Table 38, p. 197, which shows the lowest and highest
rates charged and the extent of the fluctuations ; Table 39,
p. 198, with a summary of the number and extent of annual
fluctuations in the rates charged ; and other tables illustrative
of these details. These show generally what the course of
these fluctuations has been.

CHAPTER XI

SOME OF THE CAUSES WHICH INFLUENCE THE RATE OF
INTEREST CHARGED BY THE BANK OF ENGLAND

PAGE

Relation between the Reserve of the Bank
of England and the current Rate of
Interest . . . 106

Tendency towards lower rates for money
during the last thirty-six years . . 106

Average Rates for groups of years, 1845-
1854, 1895-1900 . . 106-107

Influence of the different seasons of the
year on the Fluctuations of the Rate
and on business generally . . 107

Business activity at certain seasons of the
year . ... 107

Periodic increases of Scotch circulation . 107

Particulars of Scotch circulation in May,
June, October, November, and De-
cember for 1 897- 1900 . . 107-109

The most important causes of increased
Scotch note issues in May and
November . . . . 109

Reference to monthly fluctuations in the
Rate at Banks of France, Germany,
Holland, and Belgium . . .110

Connection between demands made on
account of Irish and Scotch Note Cir-
culation and the Liabilities and Reserve
of the Bank . . . . no

Mr. Weguelin (1856) on the influence of
the Scotch and Irish Circulation on
the Bank of England Reserve . .110

A special set of tables has been prepared to illustrate the
relation between the reserve of the Bank of England and the
current rate of interest. These tables, No. n, pp. 82, 83, and
No. 12, p. 97, give the average minimum rate of discount
for each month in the years 1845- 1900, and the corresponding
averages of the liabilities and the reserve in groups generally
of ten years each. The average yearly rate also requires
attention. It is given in col. 46 of Table 3, p. 15.

The average rate of interest charged by the Bank, after
having increased from 1854 to 1866, has diminished, and,
except in 1872, 1873, 1882, and 1890, the tendency has been
towards lower rates for money almost uniformly for the last
thirty-six years.

If we divide the period under consideration into six groups,
— five of ten years each, 1845-54, 1855-64, 1865-74, 1875-84,

106

ch. xi] SEASONS OF GREATEST BUSINESS ACTIVITY 107

1885-94, and one of six years, 1895- 1900 — we shall find that
the average rates in these groups were as follows : —

£ s. d.

1845-54

. .385

1855-64

. 4 12 9

1865-74

. 3 '6 1

1875-84

• 3 3 11

1885-94

.332

I 895- I 900

.304

The average for the whole period 1845- 1900 is £$ 12s.

On referring to Table 12, p. 97, from which these figures
are derived, it will be observed that there is a periodic fluctuation
from one season of the year to another.

In all the periods into which this statement is divided,
the months of winter are generally the time of the highest
charges. In the years 1855-64 the rate in the month of May,
and in the years 1865-74 the rates in May and June, were very
high. But these were exceptions. As a rule the autumn and
early winter months are the times of greatest business activity,
which sometimes affects the rate as late as the months of
January and February. The demands which the home harvest
brings are great ; the demands which foreign supplies of all
kinds entail are more pressing still. The large amounts of
produce then coming forward affect the money market ; and
a deficient harvest (should there be a short supply) usually
manifests itself about the third week in October. The ship-
ments of corn also from America generally commence early
in September, and intensify up to the middle of November.
These causes, and others of a kindred nature which there is
no need to specify, account for the autumnal demand. # They
do not, however, exist in the spring. In the month of May,
a corresponding, though slighter, increase of pressure may be
observed to that taking place in October, November, and
December. The opening up of those sources of importation
which have been locked up by the severity of the winter
probably accounts for a considerable part of the increased
demand for money indicated by a rise in its value. Some effect
also must be assigned to the periodic increase in the Scotch
note circulation in the months of May and November. Any
increase in that circulation beyond the limits fixed by the

* See Chapter XIV., p. 138, "The Autumnal Drain."

108 CAUSES WHICH INFLUENCE RATE OF INTEREST [ch. xi

legislation of 1844 and 1845 causes an immediate demand on
the reserve of the Bank of England for gold. The increase in
the Scotch circulation beyond the limit of 1845 did not become
very distinctly marked till 1856. It has become much more
considerable of late. It will be observed that the Bank
rate in May was for the years 1845-54 below the average
of the year. For the years 1865-74 the rate in May was
higher than in any other month of the years included, except
November. The particulars of the Scotch circulation in May,
November, and December, for the years 1 897-1900, are as
follows : —

Authorised Limit of Scotch Bank Note Circulation (^2,749,27 i) and

Gold and Silver Coin Held.

Actual Circulation.

Gold and Silver
Coin Held.

Average of 1897,

Average of 1897,

£7,33°.°°°-

£5,850,000.

1897.

£

£

May

. 7,566,000

. 5,892,000

June

• 7,875>o°o ..

. 6,340,000

October

. 7,445,ooo ..

. 5,978,000

November

. 8,026,000

. 6,436,000

December

. 7,674,000 .

. 6,211,000

Average of 1898,

Average of 1898,

£7,502,000.

£6,012,000.

1898.

£

£

May

. 7,584,000 ..

. 6,041,000

June

. 7,943,ooo .

. 6,357,000

October

. 7,688,000

. 6,203,000

November

. 8,260,000

. 6,742,000

December

. 8,025,000

. 6,566,000

Average of 1899,

Average of 1899,

^7,859,ooa

£6,431,000.

1899.

£

£

May

. 8,027,000

. 6,360,000

June

. 8,377,000 .

. 6,873,000

October

. 7,972,000 ..

. 6,694,000

November

. 8,544,000

. 7,162,000

December

. 8,208,OOO

. 6,858,000

Average of 1900,

Average of 1900,

£7,959,000.

£6,461,000.

1900.

£

£

May

. 7,963,000 ..

. 6,396,000

June

. 8,463,000

. 6,919,000

October

. 8,Il8,000

. 6,666,000

November

. 8,715,000

. 7,194,000

December

. 8,566,000

. 7,027,000

For the year 1900 the gold held against the extra note
circulation in Scotland in the months mentioned above exceeded
the average holding by .£700,000. The difference between
the highest and lowest holdings of specie is far larger than this,
and forms a perfectly needless demand on the central specie

ch. xi] PERIODIC INCREASE, SCOTCH NOTE ISSUES 109

reserve of the country. This subject is examined into further
in Chapter XII., p. 112, which deals with the Scotch and Irish
note circulations.

It may be desirable to mention here the causes which lead
to these periodic, though temporary, requirements for notes in
Scotland.

11 The main causes of the increased note issues in May and
November are undoubtedly these : —

" 1 st. The payments of rents and interests on mortgages,
which, in Scotland, are almost uniformly made at
the half-yearly terms of Whitsuntide (15th May)
and Martinmas (nth November).

" 2nd. The settlement of all important transactions in herit-
able property, which are also fixed for the same
terms.

" 3rd. The payment of household servants' wages, and in
many cases salaries, at the same period.

11 These payments are to a large extent made through the
medium of bank notes, and thus these notes get into hands
where they remain for a time, many of the parties who receive
the notes having no bank account.

"It is further to be noted : —

" 1st. That on the 4th of the month an unusually large
amount of bills falls due, and if the 4th happens
on a Saturday (the day when the returns are
made up) we generally look for a heavier return
on that account.

M 2nd. The November returns are usually heavier than
those in May, because of the requirements of the
harvest, travellers, etc.

11 3rd. In the country districts the term-day is in many
places regulated by the old style, and thus the
payment of farm rents runs on into June and
December."

This statement is taken from a description of the circum-
stances written to me in 1872 by a well-known Scotch banker,
the late Dr. Charles Gairdner, at that time General Manager

no CAUSES WHICH INFLUENCE RATE OF INTEREST [ch. xi

of the Union Bank of Scotland. Mr. George Anderson, the
Treasurer of the Bank of Scotland, assures me that the circum-
stances described by Dr. Gairdner are equally effective at the
present day.

It becomes desirable to refer at this point to the monthly
fluctuations in the rate of discount charged by the Bank of
England, and to compare them with the corresponding fluctua-
tions in France, Germany, Holland and Belgium. The rates
of the Banks of England, France, Germany, Holland and
Belgium have therefore been tabulated on a similar basis for
the years 1845 to x900, and divided into periods generally
speaking of ten years, the six years 1 895-1 900 being formed
into a separate table. While the tables show some pressure
on the Bank of England in May, and in a much higher degree
in November, the other banks do not appear to experience the
same influence as distinctly. The inference is that the Scotch
demand in May and November may be of sufficient importance
to affect the rate of the Bank of England. If we refer to Table
11, at pp. 82, 83, which contains a summary of the monthly
averages of the liabilities and reserve of the Bank of England
for the years 1 845-1 900, we shall find that the liabilities of
the Bank on average have been low in the months of May
and November ; that the reserve is comparatively weak in the
months of April, May, October and November, and the pro-
portion of the reserve to the liabilities low likewise. Something
may perhaps be due to payments of dividends in the months of
April and October. It is probable that there is some connec-
tion between the demands made on the reserve on account of
the Irish and Scotch note circulation and these circumstances.
The opinion that these demands on the reserve are not
specially connected with the ordinary circumstances of the trade
of the country is supported by a reference to the returns of the
Clearing House when tabulated so as to show the amount of
business passing in each month of the year. The particulars
from 1868 to 1900 are given in Table 18, in Chapter XIII., at
page 133. Those figures do not show any exceptional demand
in the month of November and not a very severe demand in
May, and as the effect of a severe demand in May is not trace-
able in the ordinary course of business of this country, or in the

ch. xi] SCOTCH CIRCULATION AFFECTS BANK RESERVE in

rate charged by the Banks of France, Germany, Holland and
Belgium, and the severity of the demand in November in those
countries is not so great as in England, the inference is that
the fluctuations shown to exist at the Bank of England at those
periods are influenced in some appreciable degree by the require-
ments of the Acts of 1844-5 m connection with the Scotch and
Irish note circulation.

This was noticed so far back as 1856 by Mr. T. M.
Weguelin, who was at that time governor of the Bank.
Mr. Weguelin observed in a letter to the Chancellor of the
Exchequer (Sir G. C. Lewis) on the effect of this demand : —

" Now with regard to the oscillation of the internal circulation of
the country, I may notice that there is periodically a demand for
currency from the Scotch and Irish banks, which, whilst it produces a
most sensible effect upon the Bank of England reserve, is uncontrollable
by any action of the Bank. At certain periods of the year, especially
of the harvest, the demand for currency commonly greatly exceeds the
authorised issue ; and as the excess must be issued on gold deposited in
certain specified places, that gold is withdrawn from the Bank reserve,
to be again restored to it when the reflux of the currency of the Scotch
and Irish banks takes place, which is usually in the months of December
to March. The Scotch banks very generally exceed their authorised
aggregate issue ; but with the Irish banks, although the aggregate issue
is not usually exceeded, yet it often happens that some are in excess,
whilst others are under the authorised amount. But as each bank has
to provide for its own excess, the demand on the London bullion
reserve is as great as if the whole Irish circulation had gone beyond
its limit."

The fluctuations in the note circulation in Ireland have
rarely been as large as those in the note circulation in
Scotland, the periodical fluctuations in which have greatly
increased of recent years, and continue to increase.

The subject is an important one, and, as mentioned above,
requires to be examined into further, owing to the manner in
which specie is required to be held against the excess note
circulations of Scotland and Ireland by the Bank Acts of
1844-5.

This will, therefore, be considered in the next chapter.

CHAPTER XII

THE SCOTCH AND IRISH NOTE CIRCULATION

PAGE

Fluctuations in the Irish and Scotch Note
Circulation, and connection between
this and the Bank of England Reserve 112

Increase of Scotch and Irish Note Circu-
lation since 1845 . . .112

Table 17 arranged to show the influence
of the circulation on the Reserve of
the Bank . . . 112-113

Dr. Charles Gairdner on the principle by
which the holding of specie is regu-
lated . . . 113-HS

The Reserve of the Bank of England
the only source from which to draw
specie . . . . 115

The specie held not a special security, but
an asset against general liabilities . 115

Fixed Issues of the Scotch Banks, 1845-
1900 . . . 115

Fixed Issues of the Irish Banks, 1845- 1900 l lS

Summary Tables, Scotch and Irish Note
Circulation and Specie held . .116

Clauses of the Bank Act of 1845 which
regulate the holding of specie against the
excess issue in Ireland and Scotland 1 16-1 17

Table 15. Monthly Averages of Note Cir-
culation and of Gold and Silver Coin
held in Scotland from 1845- 1900 11 8- 120

Table 16. Monthly Averages of Note
Circulation and of Gold and Silver
Coin held in Ireland from 1845-
1900 . . . 121-123

Table 17. Monthly Averages of Rate of
Discount at the Bank of England and
of Note Circulation and Gold and
Silver Coin held in Scotland and Ire-
land, 1 845-1900 . . 1 24-1 3 1

The course of the Irish and Scotch note circulations, and the
connection between the fluctuations in them and the reserve
of the Bank of England, now require to be considered. By
the Bank Acts of 1845 which refer to the Scotch and Irish
circulations, specie is compelled to be held against any excess
of the issue over the limits authorised by those Acts. The
note circulation in both countries, especially in Scotland, has
greatly increased since 1845, ano^ I have tabulated the figures,
both of the note circulation and of the specie held against it,
in the same groups as for the other statements. These will be
found in Tables 15 and 16, on pages 1 18-120 and 1 21-123. In
these tables the statements follow the order of the months in
each year as they stand in the calendar. As the matter, however,
requires further consideration, owing to the influence which the
requirements of the note circulations for specie have on the reserve

112

ch. xn] SCOTCH CIRCULATION AFFECTS BANK RESERVE 113

of the Bank, I have arranged the figures again in Table 17,
pp. 1 24-1 3 1. In this Table the months are not placed in the
order of the calendar, but in that of the month with the smallest
circulation first, thus proceeding to the highest. The averages of
the Bank of England rate of discount are added, arranged in the
same manner. The columns of proportional figures will enable
the reader to follow the course of events without difficulty. As
a rule it will be observed that the specie held against the note
circulation, both in Scotland and in Ireland, corresponds very
closely in its movements with the note circulation, fluctuating
as the note circulation fluctuates. This is what might be
expected. The specie held by the Scotch and Irish banks
has reference far more to the note circulation than to their
customers' requirements for cash. If the reader will pass his
eye along the table, keeping the columns of proportional figures
in mind, he will find that as a rule the months in which the
note circulation in Scotland and Ireland, the specie held, and the
bank rate are highest, in the majority of instances correspond.
This is not invariably the case, but the recurrence is sufficiently
frequent to suggest a connection between them. The principle
by which the holding of the specie is regulated is described in
a paper by the late Dr. Charles Gairdner, whom I referred to
in the last chapter with reference to the movements in the
Scotch note circulation. I quote from him again here, as I
know of no other statement which explains the point to which I
desire to draw attention, in fewer and clearer words, and have
only to express my regret that Dr. Gairdner has left behind
him so little in writing on these subjects.

Dr. Gairdner headed his remarks on the subject as

The Influence Exercised by the Bank Acts of 1844 and 1845.

11 These Acts proceed on the preamble that i it is expedient
to regulate the issue of bills or notes payable on demand,' and
the mode of regulation adopted is by prohibiting the institution
of any new bank of issue, and imposing on those in existence
certain stringent conditions. It is not my intention on this
occasion to enter on the general question of bank notes, a
question which would require at least one evening to itself;
and I therefore only ask your attention to the manner in which
1

ii4 SCOTCH AND IRISH NOTE CIRCULATION [ch. xii

the regulations of the Bank Act exercise an influence on the
reserves of coin.

*' The general principle of the Acts of both years is that
gold must be held by the banks of issue, individually, for
whatever sum their actual issues exceed their authorised issues.
Under the English Act this general principle is qualified by the
fact that the country banks of issue in England are prohibited
from exceeding, under any circumstances, the amount of their
authorised issues, a prohibition which has the effect of com-
pelling them to use the notes of the Bank of England to the
extent whereby the demand upon them for notes exceeds their
authorised issues. Any expansion of notes in England, then,
beyond the amount authorised in the Act, is necessarily an
expansion of the note circulation of the Bank of England. In
Scotland and in Ireland, on the other hand, the banks may
increase their circulation to any extent in accordance with the
public demand, provided that they have gold at their principal
place of issue to an amount not less than the amount of such
increase, ascertained as I shall presently explain.

" This being the general principle of the Bank Acts, there
has to be noted a very important difference in its application
in England as compared with Scotland and Ireland. At the
Bank of England, where alone in England any expansion of
note issues can take place, the official arrangements of the
bank are divided into two distinct departments — a note-issuing
department and a banking department. From the note depart-
ment no notes can legally be issued, even for an hour, in excess
of the authorised amount, plus the coin in that department.
It follows from this that a sudden demand for notes made on
the banking department sufficient to exhaust their reserve
will create a deadlock.

" In Scotland and in Ireland, on the other hand, no such
deadlock need take place, because any demand for notes, to
whatever extent it may go, may be legally complied with,
provided that on the average of four weeks, ascertained at the
close of business on each succeeding Saturday, the issuing
banks respectively hold, at their principal place of issue, an
amount of gold corresponding with the excess of issue beyond
the authorised amount. Contravention of this provision would

ch. xn] SCOTCH AND IRISH ISSUES, DEMAND FOR SPECIE 115

involve a certain pecuniary penalty on the offending bank ; but
contravention is improbable and unnecessary, because of the
time allowed for strengthening the stock of gold through the
principle of average over four successive weeks." #

The only source, however, from which the gold required
can be obtained is from the reserve of the Bank of England.
This subject has been referred to in Chapter IX. p. 81. The
specie held in Scotland and Ireland does not form a special
security against the note circulation. It is an asset held against
the general liabilities of the issuing bank.

The fixed issue of the Scotch Banks was in 1845 . . . ,£3,087, 209

It was diminished by the failure of the Western Bank

of Scotland, 28th August, 1858 £337,938
„ City of Glasgow Bank, 2nd October, 1878 72,921

410,859

The fixed issue from 1878 to 1900 was . ... £2,676,350

Hence as the notes which had been issued by the Western
Bank of Scotland and the City of Glasgow Bank were taken
up by the other banks, the amount of specie (over £400,000),
which represents the issue allowed by the Acts of 1844-5 to
the Western Bank of Scotland and the City of Glasgow Bank,
is now permanently lodged in Scotland, with some £3,000,000
more held against the excess of the aggregate circulation over
the limit allowed.

The fixed issue of the banks in Ireland remains the same
in 1900 as it was in 1845, ^6,354,494. Ireland is the only
part of the United Kingdom in which the note issue has re-
mained without alteration since the Acts of 1 844-5 were passed.

The following statement shows the difference between the
highest and the lowest months from 1 845-1 900. It shows
how much larger in consequence the demand for specie both
in Scotland and Ireland is now than it was in 1845 : —

* The Constitution and Course of the Money Market^ by Charles Gairdner,
General Manager of the Union Bank of Scotland, Limited. Read before the
Economic Section of the Glasgow Philosophical Society, 20th February, 1888
(J. Maclehose and Sons, Glasgow, 1888), pp. 15-17.

n6

SCOTCH AND IRISH NOTE CIRCULATION [ch. xii

Scotch Note Circulation

Note Circulation.

l845-

1355"
1865-

I875-
1885-

1895-

1854
1864
•1874
1884
1894
1900

and Specie Held.

Specie Held.

1845-I90O

Difference between

the highest

month and the

lowest month.

£

559>°oo

704,000

814,000

1,072,000

1,092,000

1,380,000

839,000

Mean of

the extreme

variations

during each

period.
Per Cent.

8-5

8-5

8-5

9'5

9

9-5

8-S

Difference between
the highest
month and the
lowest month.

£
*i98,ooo

295,000

511,000

819,000

945,000

1,304,000

568,000

Mean of

the extreme

variations

during each

period.

Per Cent.

9
6

8

10

11

8-5

Irish Note Circulation and Specie Held.

Note Circulation.

Specie Held.

1845-1854
1855-1864
1865-1874

1875-1884
1885-1894
1895-I9OO

1845-1900

Difference between

the highest

month and the

lowest month.

£

999,000

1,005,000
1,294,000
1,340,000
974,000
1,057,000

Mean of

the extreme

variations

during each

period.
Per Cent.

9
8

9*5
9*5

7'5
8

Difference between

the highest

month and the

lowest month.

£
-j-262,000

302,000

518,000

512,000

401,000

422,000

Mean of

the extreme

variations

during each

period.

Per Cent.

8

7
IO

8'5
6-5

7

1,103,000 8-5 352,000

* 1846-54 — Nine years in the case of specie held.

1 1846-54 — Nine years in the case of specie held.

See Tables 15, 16, 17, pp. 118-131.

It will be convenient here to quote the clauses of the Bank
Acts of 1845 which regulate the holding of specie against the
excess issue in Ireland and Scotland.

Anno Octavo et Nono Victoria Regince, Cap. xxxvti.

An Act to regulate the Issue of Bank Notes in Ireland, and to regulate
the Repayment of certain Sums advanced by the Governor and Company
of the Bank of Ireland for the Public Service. [21st July, 1845.]

Clause XX. — And be it enacted, That in taking account of the Coin
held by any Banker in Ireland with respect to which Bank Notes to a

What shall
be taken
in the

Account of further Extent than the Sum certified as aforesaid by the Commissioners

by any °f Stamps and Taxes may, under the Provisions of this Act, be made and

Banker. issued, there shall be included only the Gold and Silver Coin held by such

Banker at the several head Offices or principal Places of Issue in Ireland

of such Banker, such head Offices or principal Places of Issue not exceeding

ch. xn] ACTS REGULATING SCOTCH AND IRISH ISSUES 117

Four in Number, of which not more than Two shall be situated in the
same Province ; and every Banker shall give Notice in Writing to the said
Commissioners, on or before the Sixth Day of December next, of such
head Offices or Principal Places of Issue at which the Account of Gold
and Silver Coin held by him is to be taken as aforesaid ; and no Amount Silver
of Silver Coin exceeding One Fourth Part of the Gold Coin held by such to°exc™d
Banker as aforesaid shall be taken into account, nor shall any Banker be the Pro-
authorised to make and issue Bank Notes in Ireland on any Amount of §^elon '
Silver Coin held by such Banker exceeding the Proportion of One Fourth Quarter of
Part of the Gold Coin held by such Banker as aforesaid.— 8° et 90 Gold'
Victoria?, Cap. 37, §xx.

Anno Octavo et Nono Victories. Regince, Cap. xxxviii.

An Act to regulate the Issue of Bank Notes in Scotland. [21st July, 1845.]

Clause X. — And be it enacted, That for the Purpose of ascertaining Mode of

the monthly average Amount of Bank Notes of each Banker in Circula- f-scertam-

tion, the aggregate of the Amount of Bank Notes of each such Banker in average

Circulation at the Close of the Business on Saturday of each Week during amount of

the first complete Period of Four Weeks next after the Sixth Day of Notes of

December One thousand eight hundred and forty-five shall be divided by Sf c^

the Number of Weeks, and the Average so ascertained shall be deemed to circula-

be the Average of Bank Notes of each such Bank in Circulation during Ji,01?' ^

such Period of Four Weeks, and so in each successive Period of Four during the

Weeks; and the monthly average Amount of Gold and Silver Coin &st^our

respectively held as aforesaid by such Banker shall be ascertained in like after 31st

Manner from the Amount of Gold and Silver Coin held by such Banker Decernber»

1845.
at the head Office or principal Place of Issue in Scotland of such Banker

at the Close of Business on Saturday in each Week during the same
Period; and the monthly average Amount of Bank Notes of each such
Banker in Circulation during any such Period of Four Weeks is not to
exceed a Sum made up by adding the Amount certified by the Commis-
sioners of Stamps and Taxes as aforesaid and the monthly average
Amount of Gold and Silver Coin held by such Banker as aforesaid during
the same Period.

Clause XL — And be it enacted, That in taking account of the Coin in taking

held by any such Banker as aforesaid, with respect to which Bank Notes the Ac"

r . count of

to a further Extent than the Sum certified as aforesaid by the Commis- Coin

sioners of Stamps and Taxes may, under the Provisions of this Act, be teld, by

made and issued, no Amount of Silver Coin exceeding One Fourth Part SilverCoin

of the Gold Coin held by such Banker as aforesaid shall be taken into notto ex-
ceed the

account, nor shall any Banker be authorised to make and issue Bank Proportion

Notes in Scotland on any amount of Silver Coin held by such Banker °f ^n,e e

. J Fourth of

exceeding the Proportion of One Fourth Part of the Gold Coin held Gold.

by such Banker as aforesaid. — 8° et 90 Victoria?, Cap. 38, §§ x. xi.

u8

SCOTCH AND IRISH NOTE CIRCULATION [ch. xii

TABLE 15.

Monthly Averages of Note Circulation and of Gold and Silver Coin held in Scotland
1845-1900, in groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94,
and of Six Years, 1895-1900, with Summary Table, 1845-1900. (The returns
of the specie held commence in 1846.)

Note Circulation.

Specie Held.

1845-54.

1846-54. J

'roportion
of Specie
0 Circula-
tion, 32%

Average of

Month.

Average for the Ten
Years, £3,426,000.

Average of

Ten Years

= 100.

Average for the Nine
Years, £1,099,000.

Average of 1
Nine Years
= 100.

Mine Years,
32°/0 =100.

£

£

January

3,426,000

IOO

1,121,000

IQ2

33

103

February .

3,252,000

95

1, 122,000

I02

34

106

March

3,163,000

92

1,113,000

IOI

35

109

April

3,187,000

93

1,063,000

97

33

103

May

3,396,000

99

1,100,000

IOO

32

100

June

3,633,000

106

1,118,000

102

3i

97

July

3,401,000

99

1,070,000

97

3i

97

August

3,359,000

98

1,031,000

94

3^

97

September .

3,364,000

98

1,014,000

92

30

94

October

3,497,000

102

1,055,000

96

30

94

November .

3,710,000

108

1,174,000

107

3^

97

December .

3,722,000

109

1, 212,000

I/O

32

100

Difference : Highest and Lowest Month, £559,000.

Difference : Highest and Lowest Month, £198,000.

Mean of extreme Variations for 1845-54, %'5°L

Mean of extreme Variations for 1846-54, 9°/<>

Note Circulation.

Specie Held.

1855-64.

1855-64.

Proportion
of Specie
to Circula-
tion, 54%

Average of

Month.

Average for the Ten
Years, £4,137,000.

Average of

Ten Years

= 100.

Average for the Ten
Years, £2,233,000.

Average of

Ten Years

= 100.

Ten Years,
54%= IOO.

£

£

January

4,191,000

JOl

2,282,000

102

54

100

February .

3,985,000

96

2,236,000

IOO

56

104

March

3,851,000

93

2,180,000

98

57

106

April
May

3,814,000

92

2,197,000

99

58

107

4,048,000

98

2,242,000

IOO

55

102

June

4»393»000

100

2,299,000

103

52

96

July

4,084,000

99

2,195,000

98

54

100

August

4,011,000

97

2,144,000

96

53

98

September .

4,042,000

98

2,099,000

94

52

96

October

4,242,000

102

2,l8l,000

98

5i

94

November .

4,470,000

108

2,342,000

105

52

96

December .

4,518,000

iog

2,394,000

107

53

98

Difference : Highest and Lowest Month, ,£704,000.

Difference : Highest and Lowest Month, £295,000.

Mean of extreme Variations for 1855-64, 8"5°A>

Mean of extreme Variations for 1855-64, 6"5°/o

Note Circulation.

Specie Held.

1865-74.

1865-74.

Proportion
of Specie

to Circula
tion, 62%

Average of

Month.

Average for the Ten
Years, £4,963,000.

Average of

Ten Years

= 100

Average for the Ten
Years, £3.075.000.

Average of

Ten Years

= 100

Ten Years,
62% = 100.

£

£

January

4,883,000

98

3,044,000

99

62

100

February .

4,687,000

94

2,992,000

97

64

103

March

4,593,000

92

2,923,000

95

64

103

April

4,687,000

94

2,917,000

95

62

100

May .

5,098,000

103

3,108,000

IOI

6l

98

June .

5,243,000

106

3,210,000

104

6l

98

July . .

4,940,000

99

3,044,000

99

62

100

August

4,845,000

98

2,950,000

96

6l

98

September .

4,842,000

98

2,940,000

90

6l

98

October

5,043,000

102

3,047,000

99

6l

98

November .

5,284,000

107

3,300,000

107

62

100

December .

5,407,000

I09

3,428,000

in

t>3

102

Difference : Highest and Lowest Month, £814,000

Difference : Highest and Lowest Month, £511,000.

Mean of extreme Variations for 1865-74, 8 '5%

Mean of extreme Variations for 1865-74, 8%

ch. xn] MONTHLY AVERAGES, NOTES, SPECIE, SCOTLAND 119

TABLE 15 {continued).

Monthly Averages of Note Circulation and of Gold and Silver Coin held in Scotland
1845-1900, in groups of Ten Years, 1845-54, l855-°4> J865-74, 1875-84, 1885-94,
and of Six Years, 1895- 1900, with Summary Table, 1845-1900.

Note Circulation.

Specie Held.

1875-84.

1875-84.

Proportion
of Specie
to Circula-
tion, 72%

Average of

Month.

Average for the Ten
Years, £5, 806,000.

Average of

Ten Years

= 100.

Average for the Ten
Years, ^4, 150,000.

Average of

Ten Years

= 100.

Ten Years,

J2"l0=100.

£

£

January

5,769,000

99

4,191,000

101

73

101

February .

5,456,000

94

4,008,000

97

73

101

March

5,342,000

92

3,912,000

94

73

101

April

5,371,000

g2

3,852,000

93

72

100

May .

5,746,000

99

3,998,000

90

70

97

June .

6,414,000

in

4,529,000

iog

7i

99

July . .

5,766,000

99

4,127,000

99

72

100

August

5,622,000

97

3,915,000

94

70

97

September .

5,671,000

9*

3,923,000

93

6g

96

October

5,860,000

101

4,111,000

99

70

97

November .

6,411,000

no

4,671,000

"3

73

101

December .

6,253,000

108

4, 566,000

I/O

73

101

Difference : Highest and Lowest Month, ^1,072,000.

Difference : Highest and Lowest Month, ^819,000.

Mean of extreme Variations for 1875-84, Q'5%

Mean of extreme Variations for 1875-84, xo0/.

Note Circulation.

Specie Held.

1885-94.

1885-94.

Proportion
of Specie
to Circula-
tion, 73%

Average of

Month.

Average for the Ten
Years, ,£6,115,000.

Average of

Ten Years

= 100.

Average for the Ten
Years, ^4,456,000.

Average of

Ten Years

= 100.

Ten Years,
73% =100.

£

£

January

6,044,000

99

4,500,000

101

74

101

February .

5,706,000

93

4,200,000

94

74

101

March

5,576,000

9'

4,053,000

9i

73

100

April

5,734,000

94

3,947,000

89

6g

95

May

6,431,000

105

4,599,000

103

72

99

June

6,433»ooo

105

4,776,000

107

74

101

July

6,168,000

101

4,422,000

99

72

99

August

6,003,000

98

4,365,000

98

73

100

September .

6,031,000

99

4,431,000

100

73

100

October

6,074,000

99

4,459,000

100

73

100

November .

6,515,000

107

4,823,000

jo8

74

101

December .

6,668,000

jog

4,892,000

no

73

100

Difference: Highest and Lowest Month, ^1,092,000.

Difference : Highest and Lowest Month, ^945,000.

Mean of extreme Variations for 1885-94, 9%

Mean of extreme Variations for 1885-94, 10*5%

Note Circulation.

Specie Held.

1895-1900.

1895-1900.

Proportion
of Specie
to Circula-
tion, 80%

Average of

Month.

Average for the Six
Years, ^7, 471,000.

Average of

Six Years

= 100.

Average for the Six
Years, ^5,981,000.

Average of

Six Years

= 100.

Six Years,
8o7o=1°o-

£

£

January

7,054,000

94

5»755,ooo

96

77

96

February .

6,810,000

9*

5,S33,ooo

93

81

101

March

6,834,000

9i

5,419,000

go

79

99

April

7,054,000

94

5,403,000

go

77

96

May

7,604,000

102

5,981,000

100

79

99

June

7,970,000

107

6,378,000

107

80

100

July

7,583,000

101

6,069,000

JOI

80

100

August

7,451,000

100

5,901,000

99

80

100

September .

7,513,000

101

6,033,000

JOI

80

100

October

7,698,000

103

6,156,000

103

80

100

November .

8,190,000

no

6,707,000

112

82

103

December .

7,890,000

106

6,438,000

108

82

103

Difference : Highest and Lowest Month, ;£i, 380,000

Difference : Highest and Lowest Month, ;£i, 304,000.

Mean of extreme Variations for 1895-1900, 9'57o

Mean of extreme Variations for 1895-1900, 11%

120

SCOTCH AND IRISH NOTE CIRCULATION [ch. xn

TABLE 15 {continued).

Monthly Averages of Note Circulation and of Gold and Silver Coin held in Scotland
1845-1900, in groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94,
and of Six Years, 1895-1900, with Summary Table, 1845-1900. (The returns
of the specie held commence in 1846.)

Note Circulation.

Specie Held.

1845-1900.

1846-1900.

Proportion
of Specie

Average of
Fifty-five

Month.

Average for the Fifty-
six Years, ,£5,164,000.

Average of

Fifty-six
Years = 100.

Average for the Fifty-
five Years, ,£3,362,000.

Average of

Fifty-five

Years =100.

to Circula-
tion, 6s°/o

Years,
65% = ioo-

£

£

January

5,087,000

99

3,360,000

IOO

66

102

February .

4,852,000

94

3,230,000

96

67

103

March

4,754,000

92

3,149,000

94

66

102

April

4,826,000

93

3,111,000

93

to

100

May

5,223,000

IOI

3,368,000

IOO

(>j>

100

June

5,520,000

107

3,572,000

106

6

100

July

5,173,000

100

3,344,000

99

6

100

August

5,059,000

98

3,244,000

90

64

98

September .

5,072,000

g8

3,259,000

97

64

98

October

5,222,000

IOI

3.353.00°

IOO

64

98

November .

5>593>°°o

log

3,676,000

log

66

102

December .

5,590,000

log

3,679,000

no

66

102

Difference: Hig

hest and Lowest Month

, ^839,000.

Difference : Highest and Lowest Month, £56!

!,ooo.

Mean of extrem

e Variations for 1845-ig

00, 8-5%

Mean of extreme Variations for 1 846-1900, 8".

>7.

Fixed Issue, Banks in Scotland, 1845-54

Fixed Issue, Banks in Scotland, 1855

Deduct Western Bank of Scotland, 28th August, 1858

£

3,087,209

£
3,087,209

337,938

Fixed Issue, Banks in Scotland, 1858-78

Deduct City of Glasgow Bank, 2nd October, 1878

Fixed Issue, Banks in Scotland, 1878-1900 .

2,749,271

£
2,749,271
72,921

2,676,350

2,676,350

ch. xn] MONTHLY AVERAGES, NOTES, SPECIE, IRELAND 121

TABLE 16.

Monthly Averages of Note Circulation and of Gold and Silver Coin held in Ireland,
1845-1900, in Groups of Ten Years, 1845-54, l855-04» 1856-74, 1875-84, 1885-94,
and of Six Years, 1895-1900, with Summary Table, 1845-1900. (The returns
of the specie held commence in 1846.)

Note Circulation.
1845-54.

Specie Held.
1846-54.

Proportion
of Specie
to Circula-
tion, 30%

Average of

Month.

Average for the Ten
Years, ,£5,483,000.

Average of

Ten Years

= 100.

Average for the Nine
Years, £1,659,000.

Average of

Nine Years

= 100.

Nine Years,
3°7o = io°-

January

February

March

April

May

June

July

August

September

October

November

December

£
5,803,000
5,789,000
5,665,000
5,630,000
5,520,000
5,235,000
5,041,000
4,931,000
4,946,000
5,423,000
5,930,000
5,885,000

J06
106
103
102
IOI

95
92
go
go

99
108
107

£
1,756,000
1,773,000
1,766,000
1,703,000
1,648,000
1,704,000
1,591,000
1,563,000
1,511,000
1,561,000
1,649,000
1,692,000

106
107
106
102

99

102

96
94
9*
94

99
102

33
30
3i
30
30
32
3'
3'
30
28
27
28

110

100

103

100

100

107

103

103

100

93

90

93

Difference : Highest and Lowest Month, £999,000.
Mean of extreme Variations for 1845-54, 9 %

Difference : Highest and Lowest Month, .£262,000.
Mean of extreme Variations for 1846-54, 8 %
1845, Fixed Issue Banks in Ireland, .£6,354,494.

Note Circulation.
1855-64.

Specie Held.
1855-64.

Proportion
of Specie
to Circula-
tion, 36 7„

Average of

Month.

Average for the Ten
Years, ,£6,287,000.

Average of

Ten Years

= 100.

Average for the Ten
Years, ^2,245,000.

Average of

Ten Years

= 100.

Ten Years,
36 °la — \oo.

January

February

March

April

May

June

July

August

September

October

November

December

£
6,518,000
6,547,000
6,430,000
6,369,000
6,388,000
6,093,000
5,820,000
5,690,000
5,836,000
6,495,000
6,695,000
6,569,000

104
104
I02
IOI
I02

97

g2

go

93
103
106
104

£
2,374,000
2,359,ooo
2,304,000
2,236,000
2,203,000
2,189,000
2,138,000
2,109,000
2,095,000
2,215,000
2,324,000
2,397,000

104
105
103

99

98

97
95
94
93
99
104
107

36
30
36

35
35
36
37
37
36
34
35
37

100

100

100

97

97

100

103

103

100

94

97

103

Difference : Highest and Lowest Month, £1,005,000.
Mean of extreme Variations from 1855-64, 8 %

Difference : Highest and Lowest Month, .£302,000.
Mean of extreme Variations for 1855-64, 7 %

Note Circulation.
1865-74.

Specie Held.
1865-74.

Proportion
of Specie
to Circula-
tion =39%

Average of

Month.

Average for the Ten
Years, ,£6,616,638.

Average of

Ten Years

= 100.

Average for the Ten
Years, £2,582,000.

Average of

Ten Years

= 100.

Ten Years,
39%= 100.

January
February
March
April .
May .
June .

July .

August

September

October

November

December .

£
6,756,000
6,699,000
6,598,000
6,685,000
6,683,000
6,356,000
6,149,000
6,067,000
6,113,000
6,773,000
7,361,000
7,158,000

102
IOI
IOO
IOI
IOI
96

93

92

92

102

in

108

£
2,706,000
2,634,000
2,570,000
2,531,000
2,532,000
2,476,000
2,415,000
2,393.ooo
2,391,000
2,583,000
2,841,000
2,909,000

105

I02

IOO

98

98

95
94
93
93
100
no

113

40
39
39
38
38
39
39
39
39
38

39
40

103

100

100

97

97

100

100

100

100

97

100

103

Difference : Highest and Lowest Month, ,£x, 294,000.
Mean of extreme Variations for 1865-74, 9*5%

Difference : Highest and Lowest Month, £518,000.
Mean of extreme Variations for 1865-74, I070

122

SCOTCH AND IRISH NOTE CIRCULATION [ch. xii

TABLE 16 {continued).

Monthly Averages of Note Circulation and of Gold and Silver Coin held in Ireland,
1845-1900, in Groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94,
and of Six Years, 1895-1900, with Summary Table, 1845-1000.

Note Circulation.

Specie Held.

1875-84.

1875-84.

Proportion
of Specie
to Circula-
tion =44%

Average of

Month.

Average for the Ten
Years, £6,864,000.

Average of

Ten Years

= 100.

Average for the Ten
Years, £3,994,000.

Average of

Ten Years

= 100.

Ten Years,

44 7.= 100.

January

£
7,053,000

103

£
3,148,000

105

45

102

February .

6,914,000

IOI

3,046,000

102

44

100

March

6,758,000

08

2,984,000

IOO

44

100

April .

6,847,000

IOO

2,939,000

98

43

98

May .

6,948,000

IOI

2,942,000

98

42

95

June .

6,725,000

98

2,880,000

90

43

98

July . .

6,363,000

93

2,774,000

93

44

100

August

6,252,000

9'

2,758,000

92

44

100

September .

6,552,000

95

2,802,000

94

43

98

October

7,305,000

106

3,119,000

104

43

98

November .

7,592,000

no

3,270,000

log

43

98

December .

7,349,000

107

3,265,000

109

45

102

Difference : Highest and Lowest Month, £1,340,000.

Difference : Highest and Lowest Month, £512,000.

Mean of extreme Variations for 1875-84, 9*5 %

Mean of extreme Variations for 1875-84, 8*5 °/,

Note Circulation.

Specie Held.

1885-94.

1885-94.

Proportion
of Specie
to Circula-
tion =49%

Average of

Month.

Average for the Ten
Years, £6,358,000.

Average of

Ten Years

= 100.

Average for the Ten
Years, £3,089,000.

Average of

Ten Years

= 100.

Ten Years,
49 7. =100.

January

£
6,454,000

103

£

3,156,000

102

49

100

February .

6,276,000

IOO

3,059,000

99

49

100

March

6,147,000

98

3,043,000

08

49

100

April .

6,317,000

IOI

3,031,000

98

48

98

May .

6,369,000

I02

3,041,000

98

48

98

June .

6,025,000

90

2,974,000

90

49

100

July . .

5,892,000

94

2,927,000

95

50

102

August

5,865,000

94

2,965,000

96

51

104

September .

5,877,000

94

3,041,000

98

52

106

October

6,342,000

IOI

3,186,000

103

50

102

November .

6,839,000

109

3,328,000

108

49

100

December .

6,691,000

107

3,320,000

108

50

102

Difference : Highest and Lowest Month, £974,000.

Difference : Highest and Lowest Month, £401,000.

Mean of extreme Variations for 1885-94, 7*5 %

Mean of extreme Variations for 1885-94, 6'5 %

Note Circulation.

Specie Held.

1895-1900.

1895-1900.

Proportion
of Specie

to Circula-
tion, 49%

Average of

Month.

Average for the Six
Years, £6,383,000.

Average of

Six Years

= 100.

Average for the Six
Years, £3,147,000.

Average of

Six Years

= 100.

Six Years,
497„=ioo.

January

£
6,243,000

08

£
3, 129,000

99

50

102

February .

6,194,000

97

3,115,000

99

50

102

March

6, 190,000

97

3,100,000

99

50

102

April .

6,442,000

IOI

3,062,000

97

48

98

May . .

6,576,000

103

3,135,000

IOO

48

98

June .

6,208,000

97

3,087,000

98

50

102

July . .

5,984,000

94

2,998,000

95

50

102

August

5,995,000

94

3,001,000

95

50

102

September .

6,181,000

97

3,148,000

IOO

51

104

October

6,907,000

108

3,311,000

105

48

98

November .

7,041,000

no

3,420,000

I09

49

100

December .

6,640,000

104

3,253,000

104

49

100

Difference : Highest and Lowest Month, £1,057,000.

Difference : Highest and Lowest Month, £433,000.

Mean of extreme Variations for 1895-1900, 8 %

Mean of extreme Variations for 1895-1900, 7%

ch. xn] MONTHLY AVERAGES, NOTES, SPECIE, IRELAND 123

TABLE 16 (continued).

Monthly Averages of Note Circulation and of Gold and Silver Coin held in Ireland,
1845-1900, in Groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94,
and of Six Years, 1895-1000, with Summary Table, 1845-1900. (The returns
of specie held commence in 1846.)

Note Circulation.

Specie Held.

1845-1900.

1846-1900.

Proportion
of Specie

Average of
Fifty-five

Month.

Average for the Fifty-
six Years, ,£6,313,000.

Average of

Fifty-six
Years = 100.

Average for the Fifty-
five Years, ;&2, 599,000.

Average of

Fifty-five

Years = 100.

to Circula-
tion, 41 %

Years,
4i°/o=:Ioo-

January

6,468,000

102

£
2,699,000

104

42

102

February .

6,416,000

I02

2,648,000

J02

41

100

March

6,306,000

IOO

2,609,000

IOO

4'

100

April .

6,377,000

IOI

2,565,000

99

40

98

May .

6,405,000

IOI

2,560.000

99

40

98

June .

6,096,000

97

2,528,000

97

4'

100

July . .

5,876,000

93

2,452,000

94

42

102

August

5,798,000

92

2,442,000

94

42

102

September .

5,881,000

93

2,469,000

95

42

102

October

6,508,000

103

2,635,000

IOI

40

98

November .

6,901,000

109

2,782,000

ioy

40

98

December .

6,721,000

107

2,794,000

108

42

102

Difference: Hig

hest and Lowest Month, ;£i, 103,000.

Difference : Highest and Lowest Month, ^35

>,ooo.

Mean of extrem

e Variations for 1845-1900, 8*5 V.

Mean of extreme Variations for 1846-1900, 7 '

/.

Fixed Issue, Banks in Ireland, 1 845- 1 900

>£6,354.494

124

SCOTCH AND IRISH NOTE CIRCULATION [ch. xii

TABLE 17.

._ '

Monthly Averages of Rate of Discount at the Bank of England, and of Note Circula-
groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years,
figures. (The returns of the specie held both in Scotland and Ireland commence

1845-

BANK OF ENGLAND.

SCOTLAND.

Rate of Discount, 1845-54.

Note Circulation, 1845-

54-

Specie Held, 1846-54.

Average

Av. of

Average

Av. of

Average

Av. of

Month.

for the
Ten Years,

Ten

Years

Month.

for the
Ten Years,

Ten
Years

Month.

for the
Nine Years,

Nine
Years

£3 Ss. sd.

= 100.

£3,426,000.

= 100.

£1,099,000.

= 100.

£ s. d.

£

£

January

3 5 8

96

March

3,163,000

92

September.

1,014,000

9*

February

360

96

April.

3,187,000

93

August

1,031,000

94

March

360

96

February .

3,252,000

95

October .

1,055,000

96

April .

3 7 1

98

August

3,359,000

98

April

1,063,000

97

May .

3 7 7

99

September.

3,364,000

98

July . .

1,070,000

97

September

3 7 8

99

May .

3,396,000

99

May .

1,100,000

100

August

3 7 10

99

July . .

3,401,000

99

March

I,II3,000

101

July .

380

99

January

3,426,000

IOO

June .

I,Il8,000

J02

June .

3 8 4

100

October .

3,497,000

102

January

1,121,000

102

October

3 10 10

104

June .

3,633,000

106

February .

I,I22,000

102

December

3 10 10

104

November .

3,710,000

108

November .

1,174,000

107

November

3 l5 1

no

December .

3,722,000

io9

December .

1,212,000

I/O

Difference :

Highest and Lowest

Difference : ]

iighest and 1

.owest

Difference : Highest and Lowest

Month, gs. $d.

Month, £559,00

>o.

Month, £198,000.

Mean of extreme Variations for

Mean of ext

reme Variatio

ns for

Mean of extreme Variations for

*845"54> 7%

1845-54, 8-5%

1846-54, 9%

1855-

BANK OF ENGLAND.

SCOTLAND.

Rate of Discount, 1855-64.

Note Circulation, 1855-64.

Specie Held, 1855-64.

Average

Av. of

Average

Av. of

Average

Av. of

Month.

for the
Ten Years,

Ten
Years

Month.

for the
Ten Years,

Ten
Years

Month.

for the
Ten Years,

Ten
Years

£4 la*, gd.

= 100.

£4,137,000.

= 100.

£2,233,000.

= 100.

£ s. d.

£

£

August

4 3 2

90

April

3,814,000

92

September.

2,099,000

94

July .

4 4 5

91

March

3,851,000

93

August

2,144,000

90

September

446

91

February .

3,985,000

90

March

2,l80,OOO

98

June .

496

97

August

4,011,000

97

October

2,l8l,000

98

April .

4 11 2

98

September.

4,042,000

98

July . .

2,195,000

98

October

4 12 4

99

May .

4,048,000

98

April.

2,197,000

99

March

4 12 5

100

July . .

4,084,000

99

February .

2,236,000

100

January

4 15 8

103

January

4,191,000

101

May .

2,242,000

100

May .

4 15 8

103

October

4,242,000

102

January

2,282,000

102

February

4 16 5

104

June .

4,393,000

106

June .

2,299,000

103

December

5 3 3

in

November.

4,470,000

108

November .

2,342,000

'05

November

5 4 9

"3

December .

4,518,000

I09

December .

2,394,000

107

Difference

Highest and ]

-owest

Difference : ]

iighest and I

lowest

Difference : ]

Iighest and Lowest

Month, £1 is. jd.

Month, £704^

K>.

Month, £295,00

>o.

Mean of extreme Variati<

jns for

Mean of ext

reme Variatic

ns for

Mean of ext

reme Variations for

1855-64, 11 -|7.

1855-64, 8-570

1855-64, 6.5%

ch. xn] MONTHLY AVERAGES, BANK RATE, NOTES, SPECIE 125

TABLE 17 {continued).

tion, and of Gold and Silver Coin held, in Scotland and in Ireland, from 1845-1900, in
1895-1900, with Summary Table, 1845-1900, arranged from the smallest to the largest
with the year 1846.)

1854.

IRELAND.

Note Circulation, 1845-54.

Specie Held, 1846-54.

Average for the

Average of

Average for the

Average of

Month.

Ten Years,

Ten Years

Month.

Nine Years,

Nine Years

£5.483,000.

= 100.

^1,659,000.

= 100.

£

£

August

4,931,000

90

September .

1,511,000

9'

September

4,946,000

go

October

1,561,000

94

July .

5,041,000

g2

August

1,563,000

94

June .

5,235,000

95

July .

1,591,000

g6

October

5,423,000

99

May .

1,648,000

99

May .

5,520,000

101

November

1,649,000

99

April .

5,630,000

102

December

1,692,000

102

March

5,665,000

103

April .

1,703,000

102

February

5,789,000

106

June .

1,704,000

102

January

5,803,000

106

January

1,756,000

106

December

5,885,000

107

March

1,766,000

106

November

5,930,000

108

February

1,773,000

107

Difference : Highest and Lowest Month, ^999,000.

Difference : Highest and Lowest Month, £262,000.

Mean of extreme Variations for 1845-54, 90/,

Mean of extreme Variations for 1846-54,

87.

1864.

IRELAND.

Note Circulation, 1855-64.

Specie Held, 1855-64.

Average for the

Average of

Average for the

Average of

Month.

Ten Years,

Ten Years

Month.

Ten Years,

Ten Years

£6,287,000.

= 100.

.£2,245,000.

= 100.

£

£

August

5,690,000

go

September .

2,095,000

93

July .

5,820,000

92

August

2, 109,000

94

September

5,836,000

93

July .

2,138,000

95

June .

6,093,000

97

June .

2,189,000

97

April .

6,369,000

101

May .

2,203,000

98

May .

6,388,000

102

October

2,215,000

99

March

6,430,000

102

April .

2,236,000

99

October

6,495,000

JO3

March

2,304,000

103

January

6,518,000

IO4

November

2,324,000

104

February

6,547,000

IO4

January

2,374,000

104

December

6,569,000

IO4

February

2,359,000

105

November

6,695,000

I06

December

2,397,000

107

Difference : Highest and Lowest Month, .£1,005,000.

Difference : Highest and Lowest Month

£302,000.

Mean of extreme Variations for 1855-64, 8%

Mean of extreme Variations for 1855-64,

77.

126

SCOTCH AND IRISH NOTE CIRCULATION [ch. xii

TABLE 17 {continued).

>te Circula-

Monthly Averages of Rate of Discount at the Bank of England, and of Note

groups of Ten Years, 1845-54, *855-64» 1865-74, 1875-84, 1885-94, and of Six
largest figures.

1865-

BANK OF ENGLAND.

SCOTLAND.

Rate of Discount, 1865-74.

Note Circulation, 1865-74.

Specie r-

!eld, 1865-74.

Average

Av. of

Average

Av. of

Average

Av. of

Month.

for the
Ten Years,

Ten
Years

Month.

for the
Ten Years,

Ten
Years

Month.

for the
Ten Years,

Ten
Years

£3 16s. id.

= 100.

£4,963,000.

= 100.

£3,075,000.

= 100.

£ s. d.

£

£

September .

322

82

March

4,593>°o°

92

April.

2,917,000

95

March

3 10 1

92

February .

4,687,000

94

March

2,923,000

95

April .

3 " 11

94

April

4,687,000

94

September.

2,940,000

90

February .

3 12 9

gb

September.

4,842,000

98

August

2,950,000

90

July . .

3 13 10

97

August

4,845,000

98

February .

2,992,000

97

August

3 13 11

97

January

4,883,000

98

January

3,044,000

99

January

3 17 8

101

July . .

4,940,000

99

July . .

3,044,000

99

December .

3 19 1

104

October .

5,043,000

102

October

3,047,000

99

June .

3 19 8

105

May .

5,098,000

103

May .

3,108,000

IOI

October

3 19 11

™5

June .

5,243,000

106

June .

3,210,000

104

May .

4 3 8

I/O

November .

5,284,000

107

November .

3,300,000

107

November .

488

117

December .

5,407,000

iog

December .

3,428,000

in

Difference : Highest and Lowest

Difference : ]

iighest and Lowest

Difference : Highest and Lowest

Month, £1 6s. td.

Month, .£814, oc

0.

Month, ,£5x1,000.

Mean of extreme Variations for

Mean of ext

reme Variations for

Mean of extreme Variations for

1865-74, 17*5%

1865-74, 8-5°/.

1865-74, 8%

1875-

BANK OF ENGLAND.

SCOTLAND.

Rate of Discount, 1875-84.

Note Circulation, 1875-84.

Specie Held, 1875-84.

Average

Av. of

Average

Av. of

Average

Av. of

Month.

for the
Ten Years,

Ten

Years

Month.

for the
Ten Years,

Ten
Years

Month.

for the
Ten Years,

Ten
Years

£3 3*. nd.

= 100.

£5,806,000.

= 100.

£4,150,000.

= 100.

£ s. d.

£

£

July . .

2 14 6

©

March

5,342,000

92

April

3,852,000

93

June .

2 15 2

86

April

5,371,000

92

March

3,912,000

94

April .

2 15 8

87

February .

5,456,000

94

August

3,915,000

94

August

2 15 9

^7

August

5,622,000

97

September.

3,923,000

95

May .

2 16 3

88

September.

5,671,000

98

May .

3,998,000

90

September .

3 1 3

90

May .

5,746,000

99

February .

4,008,000

97

March

3 1 7

90

July . .

5,766,000

99

October

4,III,000

99

February .

3 5 11

103

January

5,769,000

99

July . .

4,127,000

99

October

3 10 10

in

October

5,860,000

IOI

January

4,191,000

IOJ

December .

3 IS 10

ng

December .

6,253,000

108

June .

4,529,000

iog

January

3 17 5

J2I

November .

6,411,000

no

December .

4,566,000

I/O

November .

3 18 2

J22

June .

6,414,000

III

November .

4,671,000

"3

Difference : Highest and ]

^owest

Difference : ]

lighest and L

owest

Difference : r

[ighest and Lowest

Month, £1 3s. 8d.

Month, £1,072,

000.

Month, £819,00

0.

Mean of extreme Variatic

>ns for

Mean of ext

reme Variatio

is for

Mean of ext

reme Variations for

1875-84, i8-57o

1875-84, 9-5%

1875-84, 10%

ch. xn] MONTHLY AVERAGES, BANK RATE, NOTES, SPECIE 127

TABLE 17 {continued).

tion, and of Gold and Silver Coin held, in Scotland and in Ireland, 1 845-1 900, in
Years, 1895-1900, with Summary Table, 1845-1900, arranged from the smallest to the

1874.

IRELAND.

Note Circulation, 1865-74.

Specie Held, 1865-74.

Average for the

Average of

Average for the

Average of

Month.

Ten Years,

Ten Years

Month.

Ten Years,

Ten Years

,£6,617,000.

= 100.

£2,582,000.

= 100.

£

£

August

6,067,000

92

September .

2,391,000

93

September

6,113,000

92

August

2,393,000

93

July .

6. 149,000

93

July .

2,415,000

94

June .

6,356,000

96

June .

2,476,000

95

March

6,598,000

100

April .

2,531,000

98

May .

6,683,000

IOI

May .

2,532,000

98

April .

6,685,000

IOI

March

2,570,000

100

February

6,699,000

IOI

October

2,583,000

100

January

6,756,000

102

February

2,634,000

102

October

6,773,000

102

January

2, 706,000

105

December

7,158,000

I08

November

2,841,000

no

November

7,361,000

III

December

2,909,000

"3

Difference : Highest and Lowest Month,

£1,294,000.

Difference : Highest and Lowest Month, £518,000.

Mean of extreme Variations for 1865-74,

9'5%

Mean of extreme Variations for 1865-74,

10%

1884.

IRELAND.

Note Circulation, 1875-84.

Specie Held, 1875-84.

Average for the

Average of

Average for the

Average of

Month.

Ten Years,

Ten Years

Month.

Ten Years,

Ten Years

£6,864,000.

= 100.

£2,994,000.

= 100.

£

£

August

6,252,000

9'

August

2,758,000

92

July .

6,363,000

93

July .

2,774,000

93

September

6,552,000

95

September

2,802,000

94

June .

6,725,000

98

June .

2,880,000

96

March

6,758,000

98

April .

2,939,000

98

April .

6,847,000

100

May .

2,942,000

98

February

6,914,000

IOI

March

2,984,000

100

May .

6,948,000

IOI

February

3,046,000

102

January

7,053,000

103

October

3,119,000

104

October

7,305,000

106

January

3,148,000

105

December

7,349,000

107

December

3,265,000

109

November

7,592,000

no

November

3,270,000

109

Difference : Highest and Lowest Month,

£1,340,000.

Difference : Highest and Lowest Month,

£512,000.

Mean of extreme Variations for 1875-84,

9'S%

Mean of extreme Variations for 1875-84,

8'5%

128

SCOTCH AND IRISH NOTE CIRCULATION [ch. xii

TABLE 17 (continued).

Monthly Averages of Rate of Discount at the Bank of England, and of Note Circula-
groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of Six Years,
figures.

1885-

BANK OF ENGLAND.

SCOTLAND.

Ratk of Discount, 1885-94.

Note Circulation, 1885-94.

Specie Held, 1885-94.

Average

Av. of

Average

Av. of

Average

Av. of

Month.

for the
Ten Years,

Ten
Years

Month.

for the
Ten Years,

Ten
Years

Month.

for the
Ten Years,

Ten
Years

£3 3s. id.

= 100.

;£6,II5,000.

= 100.

£4,456,000.

= 100.

£ s. d.

£

£

July . .

290

7*

March

5,576,000

91

April .

3,947,000

89

June .

2 IO IO

8l

February .

5,706,000

93

March

4,053,000

91

April .

2 13 2

84

April .

5,734,000

94

February .

4,200,000

94

May .

2 14 2

86

August

6,003,000

98

August

4,365,000

98

August

2 16 6

89

September .

6,031,000

99

July . .

4,422,000

99

March

2 18 6

93

January

6,044,000

99

September .

4,431,000

100

September .

3 4 4

102

October

6,074,000

99

October

4,459,000

100

February .

3 6 1

105

July . .

6,168,000

IOI

January

4,500,000

IOI

October

3 10 1

in

May .

6,431,000

105

May .

4,599,000

103

November .

3 16 9

122

June .

6,433,000

ion

June .

4,776,000

107

December .

3 17 4

J22

November .

6,515,000

107

November .

4,823,000

108

January

4 1 1

128

December .

6,668,000

109

December .

4,892,000

no

Difference : Highest and Lowest

Difference : ]

■iighest and Lowest

Difference: Highest and Lowest

Month, £i i2J. id.

Month, £1,092,

000.

Month, ,£945,000.

Mean of extreme Variations for

Mean of ext

reme Variations for

Mean of extreme Variations for

1885-94, a5%

1885-94, 9%

1885-94, io'sVo

1895-

BANK OF ENGLAND.

SCOTLAND.

Rate of Discount, 1895

-1900.

Note Circulation, 1 895-1 900.

Specie Held, 1895-1900.

Average

Av. of

Average

Av. of

Average

Av. of

Month.

for the
Six Years,

Six

Years

Month.

for the
Six Years,

Six
Years

Month.

for the
Six Years,

Six

Years

£3 os. +d.

= 100.

£7,47i,°°o.

= 100.

£5,981,000.

= 100.

£ s. d.

£

£

June .

2 10 7

84

February .

6,810,000

91

April .

5,403,000

90

July . .

2 IO IO

84

March

6,834,000

9^

March

5,419,000

90

August

2 13 6

89

January

7,054,000

94

February .

5,533,000

93

September .

2 15 5

92

April .

7,054,000

94

January

5,755,ooo

96

February .

2 16 5

94

August

7,451,000

100

August

5,901,000

99

March

2 16 8

94

September .

7,513,000

IOI

May .

5,981,000

100

May .

2 17 4

95

July . .

7,583,000

IOI

September .

6,033,000

IOI

April .

2 17 8

90

May .

7,604,000

102

July . .

6,069,000

IOI

January

3 6 5

no

October

7,698,000

103

October

6,156,000

103

October

3 9 2

**S

December .

7,890,000

106

June .

6,378,000

107

November .

3 13 4

121

June .

7,970,000

107

December .

6,438,000

108

December .

3 16 8

127

November .

8,190,000

no

November .

6,707,000

112

Difference : Highest and ]

lowest

Difference: Highest and Lowest

Difference :

Highest and Lowest

Month, £1 6s. id.

Month, ,£1,380,000.

Month, £1,304

000.

Mean of extreme Variatio

ns for

Mean of extreme Variations for

Mean of ex

reme Variations for

1895-1900, 21 -5%

1895-1900, 9-5%

1 895-1 900, n°/<

ch. xn] MONTHLY AVERAGES, BANK RATE, NOTES, SPECIE 129

TABLE 17 (continued).

tion, and of Gold and Silver Coin held, in Scotland and in Ireland, 1 845-1 900, in
1895-1900, with Summary Table, 1845-1900, arranged from the smallest to the largest

1894.

IRELAND.

Note Circulation, 1885-1894.

Specie Held, 1885-1894.

Average for the

Average of

Average for the

Average of

Month.

Ten Years,

Ten Years

Month.

Ten Years,

Ten Years

£6,«58,ooo.

= 100.

£3,089,000.

= 100.

£

£

August

5,865,000

94

July . .

2,927,000

95

September

5,877,000

94

August

2,965,000

96

July .

5,892,000

94

June .

2,974,000

96

June .

6,025,000

96

April .

3,031,000

98

March

6,147,000

98

May .

3,041,000

98

February

6,276,000

100

September

3,041,000

98

April .

6,317,000

101

March

3,043,000

98

October

6,342,000

101

February

3,059,000

99

May .

6,369,000

102

January

3,156,000

102

January

6,454,000

103

October

3,186,000

103

December

6,691,000

107

December

3,320,000

108

November

6,839,000

109

November

3,328,000

108

Difference : Highest and Lowest Month,

£974.000-

Difference: Highest and Lowest Month, £401,000.

Mean of extreme Variations for 1885-94,

7'5%

Mean of extreme Variations for 1885-94,

6-s'l.

1900.

IRELAND.

Note Circulation, 1895-1900.

Specie Held, 1 895-1 900.

Average for the

Average of

Average for the

Average of

Month.

Six Years,

Six Years

Month.

Six Years,

Six Years

£6,383,000.

= xoo.

£3,147,000.

= 100.

£

£

July . . .

5,984,000

94

July . . .

2,998,000

95

August

5,995,000

94

August

3,001,000

95

September

6,l8l,000

97

April .

3,062,000

97

March

6,190,000

97

June .

3,087,000

98

February

6,194,000

97

March

3, 100,000

99

June .

6,208,000

97

February

3,115,000

99

January

6,243,000

98

January

3,I29,0OO

99

April .

6,442,000

JOI

May . ,

3,135,000

100

May .

6,576,000

103

September

3,148,000

100

December

6,640,000

104

October

3,311,000

105

October

6,907,000

108

December

3,253,000

104

November

7,041,000

no

November

3,420,000

109

Difference : Highest and Lowest Month,

£1,057,000.

Difference : Highest and Lowest Month,

£429,000.

Mean of extreme Variations for 1895-190

0, 8%

Mean of extreme Variations for 1895-190

0, 7%

K

13°

SCOTCH AND IRISH NOTE CIRCULATION [ch. xn

TABLE 17 (continued).

1845-
( Specie held,

BANK OF ENGLAND.

SCOTLAND.

Rate of Discount, 1845

-1900.

Note Circulation, 1845-igoo.

Specie Held, 1846-1900.

Month.

Av. for the

Fifty-six

Years,

£3 ***•

Av. of
Fifty-
six
Years
= 100.

Month.

Average for
the Fifty-six

Years,
£5,164,000.

Av. of
Fifty-
six
Years
= 100.

Month.

Average for
the Fifty-five

Years,
£3,362,000.

Av. of
Fifty-
five
Years
= 100.

£ s. d.

£

£

July . .

3 4 6

89

March

4,754,000

92

April .

3,111,000

93

August

3 6 4

<?2

April .

4,826,000

93

March

3,149,000

94

June .

3 6 7

92

February .

4,852,000

94

February .

3,230,000

90

September .

367

92

August

5,059,000

98

August

3,244,000

90

April

3 6 10

93

September .

5,072,000

98

September .

3,259,000

97

March

3 9 0

96

January

5,087,000

99

July . .

3,344,000

99

May .

3 11 0

99

July . .

5,173,000

100

October

3»353)°oo

100

February .

3 " 3

99

October

5,222,000

101

January

3,360,000

100

October

3 17 3

108

May .

5,223,000

101

May .

3,368,000

100

January

3 19 1

no

June .

5,520,000

107

June .

3,572,000

106

December .

4 1 10

**$

December .

5,590,000

109

November .

3,676,000

109

November .

4 3 8

116

November .

5,593»ooo

log

December .

3,679.ooo

no

Difference: Highest and I

.owest

Difference :

Highest and Lowest

Difference : Highest and Lowest

Month, igs. 2d.

Month, £839,00

K>.

Month, £568,000.

Mean of extreme Variatio

ns for

Mean of ext

reme Variations for

Mean of extreme Variations for

1845-1900, 13-5%

1845-1900, 8-5°/

1 846-1900, 8'5°/0

ch. xn] MONTHLY AVERAGES, BANK RATE, NOTES, SPECIE 131

TABLE 17 {continued).

1900.

1 846- 1 900.)

IRELAND.

Note Circulation, 1845-1900.

Specie Held, 1846-1900.

Month.

Average for the

Fifty-six Years,

£6,313,000.

Average of

Fifty-six

Years

= 100.

Month.

Average for the

Fifty-five Years,

£2,599,000.

Average of

Fifty-five

Years

= 100.

August
July .
September
June .
March
April .
May .
February
January
October
December
November

5,798,000
5,876,000
5,881,000
6,096,000
6,306,000
6,377,ooo
6,405,000
6,416,000
6,468,000
6,508,000
6,721,000
6,901,000

02

93

93

97

100

101

IOI
102
102
IO3
107

iog

August
July .
September
June .
May .
April .
March
October
February
January
November
December

£
2,442,000
2,452,000
2,469,000
2,528,000
2,560,000
2,565,000
2,609,000
2,635,000
2,648,000
2,699,000
2,782,000
2,794,000

94
94
95
97
99
99
zoo

IOI

102
104.

107
108

Difference : Highest and Lowest Month, £1,103,000.
Mean of extreme Variations for 1 845-1900, 8'5°/0

Difference : Highest and Lowest Month, £353,000.
Mean of extreme Variations for 1846-1900, 7%

/

CHAPTER XIII

RETURNS OF THE LONDON BANKERS' CLEARING HOUSE

The returns of the London Bankers' Clear-
ing House a source of information as
to business activity in the country

Table 18. Monthly Averages of London
Bankers' Clearing House Returns,
1868-1900 . ...

Comparison of Monthly Averages and
Annual Averages

Variations of Turnover of Clearing House
have diminished, while those of Rate
of Discount have increased

Totals for 1868- 1900

Fluctuations in the Clearing House Re-
turns show no correspondence with

132

133

134

134
134

those of the Rate at the Bank of Eng-
land . . . 135

Months of Highest Rates at the Banks of
England, France, Germany, Holland
and Belgium, compared with Clearing
House returns . . . 135—136

Months of Maximum Note Circulation in
Scotland and Ireland . . .136

Transactions of the Clearing House earlier
than 1868 . . . 136

Table 19. Exports andJmports, Clearing
House Returns, and total Bank Note
Circulation, years 1 861, 1871, 1881,
1891, and 1900 . . 137

The returns of the London Bankers' Clearing House provide
one of the best sources of information we possess as to
the activity of business in this country, and to those periods
of the year when that activity is greatest. Much may be learned
from the monthly returns of exports and imports published
by the Board of Trade, but the Clearing House returns bring
the main points as to activity of business together in the most
distinct form available.

In order to show these points clearly these returns have
been tabulated, and as far as possible formed into groups of
years corresponding to those into which the other tables in
this volume are arranged (Table 18). In the case of the
Clearing House returns, however, there was this difficulty :
while the other tables are carried back to 1844 and ^45, the
Clearing House returns have only been published continuously
onwards from 1868. To make the figures correspond as far as
possible, the first seven years, 1868-74, were brought into one
group. This enabled the remaining years to be divided in the
same manner as the corresponding periods have been in the
other tables.

The averages shown are the monthly averages of the turn-
over at the Clearing House. Being thus taken out in months,
they are in the aggregate the twelfth part of the actual turnover.

132

ch. xm] MONTHLY AVERAGES, CLEARING HOUSE RETURNS 133

TABLE 18.

Monthly Averages of London Bankers' Clearing House Returns 1868-1900, in groups of
Seven Years, 1868-74 ; Ten Years, 1875-84 ; Ten Years, 1885-94 > an^ Six Years,
1895-1900; with Summary Table, 1868-1900.

1868-74.

1875-84.

1885-94.

1895-1900.

Month.

Average for the
Seven Years,
£398,669,000.

Av. of
Seven
Years
= 100.

Average for the

Ten Years,
,£464,863,000.

Av. of
Ten
Years
= 100.

Average for the

Ten Years,
£549iSi4i0oo.

Av. of
Ten
Years
= 100.

Average for the

Six Years,
£676,890,000.

Av. of

Six
Years
= 100.

January
February .
March
April
May .
June .
July . .
August
September .
October
November .
December .

£

385,314,000
354,609,000
412,781,000
417,886,000
386,194,000
375»597,ooo
456,721,000
387,185,000
386,693,000
408,231,000
391,855,000
420,971,000

97
8g

104

105
97
94

115
97
97

102

106

£

522,619,000
451,494,000
495,646,000
457,057,000
485,025,000
454,716,000
473,489,000
450,427,000
407,233,000
484,328,000
443,695,000
452,644,000

112

I06

98
104

98
102

97
88
104
96
97

£

576,519,000
549,991,000
593,010,000
531,620,000
555,367»ooo
524,401,000
581,656,000
534,846,000
497,521,000
568,144,000
530,912,000
550,183,000

105

IOO
I08

97
101

95
106

97

9^
103

97
100

£

722,760,000
643,989,000
712,738,000
623,821,000
702,252,000
651,879,000
718,389,000
668,793,000
608,945,000
709,243,000
687, 504,000
672,368,000

107
95

105
92

104

96
106

99
go

105
102

99

Difference : Highest and Lowest
Month, ,£102,112,000.

Mean of extreme Variations for
1868-74, 13%

Difference : Highest
and Lowest Month,
£115,386,000.

Mean of extreme
Variations for 1875-84,
1*%

Difference : Highest
and Lowest Month,
£95,489,000.

Mean of extreme
Variations for 1885-94,
8-5%

Difference : Highest
and Lowest Month,
£"3,815,000.

Mean of extreme
Variations for 1895-
1900, 8*5°/.

1868-1900.

Average of

Month.

Average for the

Thirty-three Years

Thirty-three Years,

= 100.

£5i4,99I,ooo.

£

January .

546,2l6,000

106

February

495,728,000

96

March .

547,044,000

106

April

501,657,000

97

May

524,872,000

102

June

494,897,000

06

July .

547,234,000

106

August .

502,296,000

97

September

466,837,000

9^

October .

534,521,000

104

November

503,457,000

98

December

515,129,000

IOO

Difference : Highest and Lowest Month, £80,397,000.
Mean of extreme Variations for 1868-1900, 7*5 7.

134

RETURNS OF THE CLEARING HOUSE [ch. xiii

But the proportions which they show of the fluctuations result-
ing correspond. That the basis is accurate is shown by
comparing the averages in Table 18, p. 133, with the actual
averages of the periods given. The figures are as follows : —

LONDON CLEARING HOUSE.

Monthly Averages.

1868-1874 . . £398,669,000=700

1875-1884 . . 464,863,000=776

1 885- 1 894 . . 549, 5 14,000 =7J<?

1895-1900 . . 676,890,000=770

Annual Averages.
1868-1874 . . £4,815,144,000=700
1875-1884 . . 5,567,045,000=776
1885-1894 . . 6,599,638,000=777
1895-1900 . . 8,144,458,000=769

It will be observed from Table 18 that the mean of the
extreme variations of the turnover of the Clearing House has
gradually diminished during the period tabulated. In this
respect what has occurred differs from the results shown by the
variations in the discount rate at the Bank of England, which,
with the exception of the period 1895-1900, have continually
increased in intensity during the corresponding time, as shown
in Table 12, p. 97, and Table 36, pp. 192, 193 — having been in-
creasing from 1845 onwards.

Bank of England Rate of Discount.

Mean of the extreme

Periods.

Variations during

each period.

1845-54

7

1855-64

**'S

1865-74

i7'5

1875-84 •

*8?

1885-94 .

25

I 895- I 900 .

21.5

London Bankers' Clearing House.

Mean of the extreme

Periods.

1868-74

1875-84
1885-94
I 895- I 900

Variations during
each period.

%

13

12

S'S
&5

As it may be convenient to follow the progress of the turn-
over of the London Clearing House, the total returns from
1868 to 1900 are given.

LONDON BANKERS' CLEARING HOUSE RETURNS, 1868-1900.

Proportion of

Proportion of

Totals for the amount in each

Totals for the amount in each

Year.

Year.

year to 1868.

Year.

Year.

year to 1868.

£

1868 = 100.

£

1868 = 100.

1868

3,425,185,000

IOO

1885

5,511,071,000

I6l

1869

3,626,396,000

IO6

1886 ,

5,901,925,000

172

1870

3,914,220,000

114

1887

6,077,097,000

177

1871

4,826,034,000

141

1888

6,942,172,000

203

1872

5,916,452,000

172

1889

7,618,766,000

223

1873

6,070,948,000

177

1890

7,801,048,000

228

1874

5,936,772,ooo

173

1891

6,847,506,000

200

1892

6,481,562,000

190

1875

5.685,793,000

166

1893

6,478,013,000

189

1876

4,963,480,000

145

1894

6,337,222,000

185

1877

5,042,383,000

147

1878

. 4,992.398,ooo

I46

1895

7,592,886,000

222

1879

4,885,937,000

H3

1896

7,574,853,ooo

221

1880

. 5,794,238,000

169

1897

7,491,281,000

219

l88l

■ 6,357,059,000

185

1898

8,097,291,000

237

1882

6,221,206,000

l8l

1899

9,150,269,000

268

1883

5,929,404,000

173

1900

8,960,170,000

262

1884

5,798,555,ooo

169

ch. xm] PERIODS OF BUSINESS ACTIVITY 135

As a period of active business is generally reflected in the
discount market by a high rate, it might have been expected
that the months in which most activity was shown in the
clearings would be the months which showed the highest rate
of discount. But this is not the case. The months in which
on average for the fifty-six years, 1845- 1900, the highest rates
of discount have been charged are the months of October,
November, December, and January — the three months at the
close and the earliest month of the year. But the clearing
returns show a generally different range of activity. According
to them the months of greatest business activity are January*
March, May, July, and October — the first and third months at
the commencement of the year, the second month of the second
quarter, the first month of the second half year, and the first
month of the last quarter. January, July and March are all on
a level, October comes next, and then May. It is easy to
understand that these months may very well be periods of
business activity, but it is not so easy to understand why
this being the case the charges for discount at the Bank of
England do not correspond. The activity of business is
indicated by the amount of the cheques in circulation, and it
might naturally have been expected that higher rates of
discount would follow if these depended only on the demands
of business. It may be remarked, in passing, that the highest
months in the returns of the Banks of France, Germany,
Holland and Belgium more or less correspond with each other,
and that at none of these banks are the months of October
and November marked by such exceptionally high rates as at
the Bank of England. In all of them the winter months — and
in the case of France and Holland the months of early spring
also — are months of higher rates than the remainder of the
year. These points are of importance so far as they appear
to imply that the requirements of the Bank Acts of 1844-5
exercise an influence over the rate of discount charged in this
country by causing the rate at some periods of the year to be
higher than it naturally would have been owing to the demands
made through the operation of the Act on the reserve of the
Bank. This point is more fully discussed in Chapters IX. and
XIX., p. 81 and p. 190.

136

RETURNS OF THE CLEARING HOUSE [ch. xiii

Table 15, with the monthly averages of the Scotch note
circulation and of the specie held against it, shows (pp. 1 18-120)
what the requirements for specie for Scotland were in May,
June, November and December. Table 16, pp. 12 1-3, gives the
corresponding information for Ireland. Table 17, pp. 124-131,
compares these points with the Bank rate. The months of
maximum circulation were not precisely the same in Scotland and
Ireland, but for the autumn and winter they fairly correspond.

To facilitate comparison the proportions of the average rate
of discount of each month to the annual average discount rate
at the Banks of England, France, Germany, Holland and
Belgium are added, with the corresponding proportions of the
turnover at the Clearing House in London.

Proportion of Average Monthly Discount Rate to Average Annual Rate, fifty-six years at
Banks of England, France, Germany, Holland, Belgium fifty years, and of Monthly
Average to Yearly Average at London Bankers' Clearing House thirty-three years.

Bank of

Bank of

Bank of

Bank of

Bank of

London

Clearing

House

(SeeTablel8)

Average of

Thirty-three

Years = ioo.

England

France

Germany

Holland

Belgium

Month.

(SeeTablel2)

(SeeTable21)

(SeeTable25)

(SeeTable30)

(SeeTable33)

TVTnnfrli

Average of

Average of

Average of

Average of

Average of

XtXVJtlLil.

Fifty-six
Years = ioo.

Fifty-six
Years = ioo.

Fifty-six
Years = ioo.

Fifty-six
Years =100.

Fifty
Years =100.

January

no

106

106

106

104

106

January

February .

99

104

97

103

99

96

February

March

96

IOI

94

99

95

106

March

April .

93

98

94

96

95

97

April

May .

99

98

96

97

98

102

May

June .

92

95

96

94

96

96

June

July . .

89

95

97

95

96

106

July

August

92

96

96

96

97

97

August

September .

92

96

IOO

96

98

91

September

October

108

103

107

IOI

104

104

October

November .

116

106

109

107

no

98

November

December .

"3

105

no

no

108

IOO

December

There is but little to show what the transactions of the
Clearing House were earlier than the year 1868. It is stated
in the minutes of evidence taken before the Committee of the
House of Commons on the Bank of England Charter, 1832
(No. 3,624, p. 258), that in 1810 "the daily amount of the
transactions of the Clearing House varied from ,£5,000,000 to
,£15,000,000, and that the amount of bank notes paid were
from ,£250,000 to £"500,000." The amount passed by the
principal banking houses in London at the Clearing House in
1839 is given as £941,401,600 {Principles of Money, by John
Wade, 1842, p. 79). These indications are too slight to build
any useful inferences on them as to the course of business in the

ch. xiii] EXPORTS AND IMPORTS, CLEARINGS AND NOTES 137

first half of last century. The figures for 1 868, however, given on
p. 134, allow us to form a rough estimate of the amount in 1861,
and the following table (Table 19) enables us to compare the
exports and imports, the amount of the clearing, and the total
bank note circulation of the United Kingdom at every decade
from 1 86 1 to 1900. It will be seen from this that during the
forty years over which the table extends, while the exports and
imports collectively increased in the proportion of from 100 to
244, the total amount of the clearings increased in the proportion
of from 100 to 320 — a far larger proportion — while the note
circulation had only extended from 100 to 124, an increase of
only about half the growth of the exports and imports. It is
in the clearings that the great extension has taken place, the
paper circulation of the country being now for practical purposes
mainly in cheques, against which, it may be remarked in
passing, no adequate specie reserve has been provided.

TABLE 19.

Exports and Imports of United Kingdom, Amounts passed through the London
Clearing House, and the Total Bank Note Circulation of all the Issuing Banks in
the United Kingdom for the years 1861, 1871, 1881, 1891, and 1900.

Year.

Declared Value

of Exports

and Imports

(See Note i).

Increase

of Exports

and

Imports,
1861 = 100.

Amount of

Clearing in the

Year stated.

Increase of
Clearing
since 1861,
1861 = 100.

Decimal
Proportion

of Total

Exports

and

Imports to

Clearing.

Total Bank
Note Circula-
tion in the

United
Kingdom.

Increase
in Bank
Note Cir-
culation
since 1861,
1861 = 100.

Year.

l86l.
Exports
Imports

£
125,100,000
183,000,000

IOO
160
184
201
244

£

(say)
2,8oo,ooo,ooot

4,826,000,000

6,357,000,000

6,848,000,000

8,960,000,000

IOO

170

22J

245
320

'IIO
'IO3

'89
'01

'84

£
36,585,000

42,060,000

41,791,000

40,296,000

45,460,000

IOO

"5
114

110

124

Total

308,100,000

l86l

1871.

Exports
Imports

223, 100,000
270,500,000

Total

493,600,000

1871

1881.
Exports
Imports
Total

234,000,000

333,9°o,ooo
567,900,000

l88l

1891.
Exports
Imports

247,000,000
373,500,000

Total

620, 500,000

1891

1900.
Exports
Imports
Total

291,192,000
459,893.000
751,085,000

I90O

Note I. — The re-exports of foreign and colonial produce is deducted from the imports in this
statement, thus showing the net amount of imports retained in the country.
t Estimated amount of the clearing.

CHAPTER XIV

THE AUTUMNAL DRAIN

The Autumnal Drain takes its origin
from the requirements of the season . 138

Table 20. Statement showing the Autum-
nal Movements in Gold and Silver
Coin held by the Bank of England,
1881-1900 . . . 138

Influence of the Bank Acts of 1844-5 on
the Autumnal Drain . . .139

Gold taken from the Reserve of the Bank
of England as basis of Note circulation
in Scotland and Ireland .

Examples of this and large proportion of
amount drawn from Bank during the
Autumnal Drain on account of require-
ments of Acts of 1844-5

Effect of this movement on the Bank Rate

139

139
139

This name is given to a movement of coin throughout the
country in the months of autumn, which sometimes reaches
very considerable proportions. It takes its origin, no doubt,
from the requirements of the season, which stimulate employment
in agriculture, and set large masses of the population free for
an autumnal holiday. The following statement shows the
movement of specie from the Bank of England for the years
from 1 88 1 to 1900: —

TABLE 20.

Statement showing the Autumnal Movements in Gold and Silver Coin held by the
Bank of England for the years 1881-1900— beginning of September to about the
middle of November in each year.

Gold Coin.

Silver
Coin.

Received from

Taken for

Taken for

Received from or taken

Total
Decrease.

Increase

Year.

or taken for

Scotland

Ireland

for Home Circulation

or

Abroad on Balance.

on Balance.

on Balance.

on Balance.

Decrease.

Reed, from

Taken for

Reed, from

Taken for

£

£

£

£

£

£

£

£

1881

...

1,772,000

811,000

430,000

...

788,000

3,801,000

60,0OO

1882

...

417,000

838,000

610,000

...

880,000

2,745,000

I9,000

1883

...

413,000

795,ooo

180,000

...

873,000

2,261,000

92,00O

1884

...

1,460,000

765,000

270,000

...

935,000

3,430,000

67,000

1886

...

754,000

660,000

1,110,000

...

252,000

2,776,000

13,000

1886

259,000

...

717,000

330,000

...

39i,ooo

1,179,000

28,000

1887

353,ooo

...

575,ooo

25,000

...

383,000

630,000

57,ooo

1888

...

2,513,000

445,ooo

420,000

...

689,000

4,067,000

141,000

1889

...

2,431,000

612,000

300,000

...

640,000

3,983,000

414,000

1890

...

2,009,000

616,000

480,000

...

1,215,000

4,320,000

174,000

1891

...

1,471,000

478,000

320,000

...

288,000

2,559,ooo

77,000

1892

1,856,000

533,ooo

235,000

...

720,000

3,344,000

153,000

1893

65,000

...

800,000

440,000

724,000

451,000

145,000

1894

74,000

...

584,000

300,000

...

730,000

1,540,000

40,000

1895

...

3,329,000

964,000

178,000

....

1,213,000

5,684,000

104,000

1896

...

1,453,000

539,ooo

108,000

...

348,000

2,448,000

27,000

1897

...

928,000

685,000

300,000

...

137,000

2,050,000

4, 000

1898

...

773,000

829,000

345,ooo

1,523,000

3,470,000

131,000

1899

...

4,905,000

515,000

357,ooo

...

1,149,000

6,926,000

132,000

1900

...

1,052,000

926,000

330,000

163,000

...

2,145,000

49,000

Note. — The figures printed in thick type in the column "Silver Coin," represent an increase.

138

ch. xiv] EFFECTS OF AUTUMNAL DRAIN 139

There is thus an internal ebb of gold in autumn. A
corresponding influx to the extent of from two to three
millions takes place between the months of May and June.

The effect of this autumnal pressure was described in 1857
by the late Mr. William Langton, to the Statistical Society of
Manchester (Transactions, Session 1857-8), and the investi-
gation was carried on, with his accustomed ingenuity and
research, by Professor W. S. Jevons, 1866 {Statistical Society
of London : Journal, vol. xxix.). The pressure is enhanced by
the requirements of the Bank Acts of 1844-5, acting through
the movements of the Scotch and Irish issues. See Tables 15,
16, 17, pp. 118-131.

An amount of gold has to be brought from the Bank of
England to Scotland and Ireland corresponding, on average,
with the amount of notes in circulation. An examination of
the figures contained in Table 20 will show how this works
out. The amounts for 1881 and 1882 will serve as examples.

1881.

1882.

Gold taken for abroad

. £1,772,000

Do. home circulation

788,000

£2,560,000

Do. Scotland

£811,000

Do. Ireland .

430,000

£1,241,000

Gold taken for abroad

£417,000

Do. home circulation

880,000

£1,297,000

Do. Scotland

£838,000

Do. Ireland .

610,000

£1,448,000

£3,801,000

£2,745,000

The amounts moved to Scotland and Ireland are taken out
of the reserve of the Bank under the provisions of the Acts of
1844-5. In *88i more than a third of the total, in 1882 more
than half the total of what was thus drawn was taken under
this influence.

On an average, for the years 1 846-1 900, the rate of dis-
count charged by the Bank of England was higher during the
autumn months, and particularly in November, in connection
with this movement. A somewhat similar movement is trace-
able in the returns of the Banks of France, Germany, Holland
and Belgium.

(For further information see Palgrave, Dictionary of Political Economy,
article on " Autumnal Drain " ; Jevons, Investigations in Currency and Finance,
London, 1884; and R. H. Inglis Palgrave, Evidence before Select Committee
of House of Commons, Banks of Issue, 1875.)

CHAPTER XV

VARIATIONS IN THE RATE CHARGED BY THE BANK OF
FRANCE FROM 1844 TO 1900

Reasons for selecting 1844 as the starting-
point of these investigations . .140

Organisation of Bank of France . 141-143

Table 21. Monthly Averages of Mini-
mum Rate of Discount of Bank of
France from 1845- 1900 • • .142

Number of Branches . . . 143

Description of the Business of the Bank
of France . . . 143-148

Table 22. Changes in the Rate of Dis-
count charged by the Bank of France,
and the number of days at each Rate
in each year, 1 844- 1 900. . 144-145

Table 23. Bank of France Rate of Dis-
count, 1 844-1 900. The number of
days at each Rate, arranged from the
highest number to the smallest, and
from the lowest rate to the highest . 146
[Amounts in Francs

FAGE

Management of the Business in times of

difficulty . ... 148

Assistance given to England during the

Baring Crisis . ... 148

Other Banks in France . . 148-149

Difference between Banking in England

and in France . . . 148-149

Difference between number and extent of

variations in the Rate in England and

in France . . . 150-151

Comparisons from 1890-1900 . . 151

Comparison of Rates in years 1847, 1857,

1866, and 1890 . . 152

Reserve in the Precious Metals at the

Bank of France . . .152

Table 24. Gold and Silver held by the

Bank of France, 187 7- 1900 . .153

converted as 25=^1.]

Chapter X. contained a statement, Table 13, pp. 98, 99, of the
variations in the rate of discount charged by the Bank of
England from 1844 to 1900, commencing with the date when
the Act of 1844 came into force. That date was selected as
the starting-point of this inquiry, because before that period it
had scarcely been the custom of the Bank of England to make
any variation at all in its rate. On some occasions, particularly
in 1839, a higher rate was charged, but the regular Bank
rate was 4 per cent. The market rate might be something
very different, but the Bank did not concern itself with that.
If the market rate was as high or higher than the Bank
rate, the Bank was resorted to for discount purposes ; but if
the market rate was lower, the Bank did not reduce its rate
accordingly. Earlier than the date from which that table starts
— September 5th, 1844 — the rate charged by the Bank of

140

ch. xv] ORGANISATION OF BANK OF FRANCE 141

England is no guide to the market rate, and hence it was of no
service to pursue the investigation further back than that time.

The same date was taken for the starting-point of the tables
of the rate of the Bank of France, as has been done with the
Banks of Germany and Holland, in order to facilitate comparison
between the operations of the different banks. The Bank of
Belgium did not commence operations till 1850.

For a long time before 1844, in France as, generally speak-
ing, in England, the rate of the bank had not varied from 4 per
cent. It stood at that point at the Bank of France from 1820
to January, 1847.

The tables of the rates charged by the Bank of France
correspond in arrangement exactly with those relating to the
Bank of England. The first table, No. 21, p. 142, gives the
average rate of discount charged month by month by the Bank
of France during the period from 1845 to 1900, in groups of
ten years each from 1845-54 to 1885-94, and for the six years
1 89 5- 1 900. It also shows the proportion which the rate
charged in each group of ten years bore to the average rate of
the period. A summary table shows the average monthly rates
for the whole period, 1845-1900. Table No. 22, pp. 144, 145,
gives the number of changes of the rate in each year, and the
total number of days at each rate in each year. A supple-
mentary table, No. 23, p. 146, shows the number of days at
each rate arranged from the greatest number of days which each
rate lasted to the smallest, and the number of days at each rate
arranged from the lowest rate to the highest.

Before commencing this comparison, it will be desirable to
give some description of the organisation of the Bank of
France. The direction of the bank consists of the following
persons : — First, there is a governor and two sub-governors ;
all these three are nominated by the Government, and are
understood to be removable at its pleasure, but this power,
as a matter of fact, is not exercised. Then there are fifteen
directors, who are elected by the proprietors. Three of these
directors must be selected from the class of the receivers-
general, who are connected with the Government, and the
management of the taxes of the country. The receveurs-
gSndraux, or Msoriers payeurs-gdntraux, as they are more

142

VARIATIONS IN RATE, BANK OF FRANCE

r

[CH. XV

TABLE 21.

Monthly Averages of Minimum Rate of Discount of Bank of France 1845- zooo,
in groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, ano> of
Six Years, 1895-1900, with Summary Table, 1845-1900.

1845-54.

1855-64.

1865-74.

1875-84.

Average for

Av. of
Ten
Years
= 100.

Average for

Average

of Ten

Years =

100.

Average for

Average

of Ten

Years =

100.

Average for

Average

of Ten

Years =

100.

Month.

the Ten Years,
£3 igs. sd.

the Ten Years,

£\ 14s. 10 d.

the Ten Years,
£2 i8x. nd.

the Ten Years,
£3 as. id.

£ s. d.

£ s. d.

£ s. d.

£ s. d.

January

4 0 1

101

5 1 9

ioy

4 3 11

106

380

I/O

February .

420

103

4 18 8

104

406

102

3 7 7

I09

March

404

101

4 16 8

102

3 17 8

99

3 4 10

ios

April

400

101

480

93

3 16 0

97

3 1 3

99

May

3 18 10

98

4 11 7

96

3 16 9

97

309

98

June

3 18 0

98

485

93

3 14 0

94

2 17 0

92

July

3 18 0

98

480

93

3 14 10

94

2 17 0

92

August

3 18 0

98

4 7 3

92

3 17 9

99

2 17 2

92

September .

3 18 0

98

480

93

3 17 0

98

2 18 0

93

October

3 19 9

100

4 19 "

™S

4 1 7

103

3 1 4

99

November .

400

101

5 6 8

112

4 4 1

107

360

106

December .

4 0 11

102

5 3 0

108

4 3 0

'OS

360

106

Difference : Highest and Lowest

Difference : Highest and

Difference : Highest and

Difference: Highest and

Month, 4*.

Lowest Month, igs. $d.

Lowest Month,

10s. id.

Lowest Month, its.

Mean of extreme Variations for

Mean of extreme Vari-

Mean of extre

me Vari-

Mean of extreme Vari-

1845-S4. *'5%

ations for 1855-64, xo%

ations for 1865-

74, 6*5%

ations for 1875-84, g%

1885-94.

1895-1900.

1845-1900.

Average for

Average of

Average for

Average of

Average for the

Average

Rate of

Fifty-six

Years = 100.

Month.

the Ten Years,

Ten Years

the Six Years,

Six Years

Fifty-six Years,

£2 17s. gd.

= 100.

£2 8s. &d.

= 100.

£3 11*. gd.

£ s. d.

£ s. d.

£ s. d.

January .

2 19 9

IO4

2 II 9

106

3 15 10

106

February.

2 17 8

IOO

297

J02

3 14 4

104

March -

2 17 O

99

2 9 3

JOI

3 12 6

JOI

April

2 17 O

99

284

99

3 9 10

98

May

2 16 8

98

2 8 2

99

3 10 3

98

June

2 l6 O

97

2 6 8

96

3 8 1

95

July . .

2 l6 O

97

2 6 8

96

382

95

August .

2 16 O

97

2 6 8

96

3 8 7

96

September

2 17 I

99

2 6 8

96

3 8 11

96

October .

2 19 8

103

2 8 I

99

3 13 5

103

November

3 0 0

104

2 10 O

103

3 16 3

106

December

2 19 IO

104

2 12 7

jo8

3 IS 5

105

Difference : Hi

ghest and Lowe

st Month,

Difference : K

ighest and

Difference : Highest and

4*-

Lowest Month, 5

s. nd.

Lowest Month, 8*. 2d.

Mean of extre

me Variations fo

r 1885-94,

Mean of exti

•erne Vari-

Mean of extreme Vari-

3*5%

ations for 1 895-1

900, 6%

ations for 1845-1900, 5'5%

ch. xv] BRANCHES, BANK OF FRANCE 143

properly called, are the Government or Treasury Agents in the
Departments. Five of the twelve remaining directors must
be taken from among merchants, manufacturers, and leading
business men in Paris. Besides these there are the three
censors, who must be chosen from among men engaged in
business and manufactures, and who thus specially represent the
manufactures and the industry of Paris. The governor, the two
sub-governors, and the fifteen directors form the general council.
Nothing is done without the presence and the surveillance of
the censors, who have not the right to vote, though they may
speak and place their opinions on the minutes of the delibera-
tions. Great part of the detail of the management rests with
the two sub-governors, but the directors have the right to
decide and vote on any measure which may come before them.
The directors are understood rather to act as checks on the two
sub-governors than to be the actual managers of the business
themselves. The system is understood to work well in practice,
and the mixture of the more permanent portion of the governing
body, which is selected by the Government, with the portion
which is selected by the shareholders themselves, is an advan-
tage in enabling a regular system of management to be steadily
carried on from year to year. The number of the places at
which banking facilities were given by the Bank of France at
the date of its report in 1902 was 411, divided thus : —

1 Central Office.
126 Branches.
50 Auxiliary Offices.
234 Towns connected.

411 Places recognised as in connection
with the bank.

The branches and places connected with the bank include all
the principal cities and towns of the country. Some of the
branches carry on a very large business, and the amount of
the business done by them in the aggregate considerably
exceeds that done by the head office at Paris. Some of the
branches, however, are small. It was mentioned in the report
for 1902 that no fewer than ten of them were carried on at

144

VARIATIONS IN RATE, BANK OF FRANCE [ch. xv

TABLE 22.

BANK OF FRANCE

Changes in the Rate of Discount Charged by the
since the 5th September, 1844 (when the Bank Act

Number of Changes.

■X

a J 7.

3 7.

3*7.

4 7.

Years.

Rise.

Fall.

Total.

Days.

Days.

Days.

Days.

Days.

1844

No

change

—

—

—

—

—

117

1845

No

change

—

—

—

—

—

365

1846

No

change

—

—

—

—

—

365

1847

1

1

2

—

—

—

—

18

1848

No

change

—

—

—

—

—

366

1849

No

change

—

—

—

—

—

365

1850

No

change

—

—

—

—

—

365

1851

No

change

—

—

—

—

—

365

1852

—

1

I

—

—

303

—

63

1853

1

—

I

—

—

279

—

86

1854

1

I

2

—

—

—

—

253

1855

2

—

2

__

—

—

277

1856

1

1

2

_

1857

4

4

8

—

—

—

—

—

1858

4

4

—

—

99

105

112

1859

1

I

2

—

—

123

I49

93

1860

1

—

I

_

3l7

1861

4

3

7

—

—

—

—

1862

1

3

4

—

—

—

224

104

1863

5

3

8

—

—

—

35

176

1864

4

7

II

—

—

—

—

1865

2

4

6

_

—

126

84

70

1866

2

5

7

—

—

123

85

108

1867

—

2

2

—

214

151

—

1868

No

change

—

—

366

—

—

1869

No

change

—

—

365

—

—

—

1870

4

—

4

—

199

—

3

9

1871

1

1

2

_

1872

—

I

I

__

—

—

—

—

1873

2

2

4

__

1874

—

2

2

—

—

—

—

210

1875

No

change

—

—

—

—

—

365

1876

—

1

I

—

—

219

—

147

1877

—

1

I

270

—

95

—

1878

1

—

I

289

—

76

—

—

1879

1

1

2

'S3

—

212

—

—

1880

1

1

2

I96

92

78

—

1881

2

—

2

—

—

237

56

1882

—

3

3

—

—

—

283

20

1883

—

1

1

—

—

3"

54

—

1884

No

change

—

—

—

366

—

1885

No

change

- —

—

—

365

—

—

1886

No

change

—

—

—

365

—

—

1887

No

change

—

—

—

365

—

—

1888

2

2

4

—

2IO

47

21

4

1889

—

2

2

—

—

327

14

24

1890

No

change

—

—

—

365

—

1891

No

change

—

—

—

365

—

—

1892

—

1

I

—

226

140

—

—

1893

No

change

—

—

365

—

—

—

1894

No

change

—

—

365

—

—

—

1895

—

1

1

292

73

—

—

1896

No

change

—

366

—

—

—

1897
1898

No

change

—

365

—

—

—

—

1

—

1

292

—

73

—

—

1899

2

—

2

—

—

34i

14

—

1900

1

3

4

—

—

229

112

13

48

63

in

2,027

2,579

5,557

1,815

4,5i6

ch. xv] DAYS AT EACH RATE, 1844-1900, FRANCE

145

TABLE 22 — continued.
RATE OF DISCOUNT, 1844-1900.

Bank of France, and the Number of Days at Each Rate in Each Year,
came into Operation in England), to 31st December, 1900.

4i%

5%

si%

6%

61%

7%

7l%

8%

9%

Total.

Years

Days.

Days.

Days.

Days.

Days.

Days.

Days.

Days,

Days.

Days.

12

49
2

16

14
9

40
7

91

8
84

10
11

347
112

14

178

2

37

229
21

85
14

45
42

10
106
308
321

64

72

54

109
II

74
188
188

58

6
163

144

259
58
32

8

12
65

49
148

12

21

9
32

16

117

365
365
365
366

365
365
365
366

365
365

365
366

365
365
365
366

365
365
365
366

365
365
365
366

365
365
365

366

365
365

365
366

365
365
365
366

365
365
365
366

365
365
365
366

365
365
365
366

365
365

365
366

365
365
365
365

1844

1845
1846
1847
1848
1849
1850
1851
1852
1853
1854

1855
1856
1857
1858
1859
1860
1861
1862
1863
1864

1865
1866
1867
1868
1869
1870
1871
1872
1873
1874

1875
1876
1877
1878
1879
1880
1881
1882
1883
1884

1885
1886
1887
1888
1889
1890
1891
1892
1895
1894

1895
1896
1897
1898
1899
1900

353

2,061

120

1,170

8

286

21

4i

16

20,570

146

VARIATIONS IN RATE, BANK OF FRANCE [ch. xv

TABLE 23.

Bank of France— Rate of Discount— 1844-1900. The Number of
Days at each Rate, arranged from the highest number to the
smallest.

Number of Days (20,570).

Rate Per Cent.

Number of Days = 1,000

5.557 3

4,5 l6

4

221

2,579

*i

126

2,061

5

100

2,027

2

98

i,8i5

si

88

1,170

6

57

353

4i

17

286

7

14

120

51

6

41

8

2

21

7i

1

.16

9

—

8

*h

-

20,570

1,000

Bank of France— Rate of Discount— 1844-1000. The Number of
Days at each Rate, arranged from the lowest rate to the
highest.

Rate Per Cent.

Ni

amber of Days (20,570).

Number of Days = 1,000

2 2,027 ... 98

2j

2,579

126

3

5,557

270

3i

1,815

88

4

4,5l6

221

4|

353

17

5

2,061

100

Si

120

6

6

1,170

57

6*

8

—

7

286

14

7i

21

1

8

41

2

9

16

—

20,570

1,000

ch. xvl SYSTEM OF MANAGEMENT, BANK OF FRANCE 147

a loss, which in the aggregate was more than ,£3,000. Some
of these branches have not been long established. They give
collectively very valuable assistance to the trade of the country,
and it is certain that without them the position of the bank
would be very inferior to that which it holds at the present
time. The best description, perhaps, which can be given of
the mode in which the business of the bank is carried on is
to be found in the evidence given by M. Rouland, the late
governor of the bank, before the official " Enquete sur les
principes et les faits generaux qui regissent la circulation
mone'taire et fiduciaire," held in Paris in 1865. Though this
inquiry took place some years since, it is understood that the
general arrangements at the present day remain very much
what they were then. M. Rouland, in describing the organisa-
tion of the governing body of the bank, stated that it consisted
of two perfectly distinct elements, one being the portion
chosen by the State, and the other chosen by the shareholders.
The persons chosen by the State, namely, the governor and
the two sub-governors, are, according to M. Rouland s words,
bound to see that the business of the bank is carried on for
the public advantage. It is their duty to see that the statutes
of the bank are not overstepped, and that the interests of
trade and commerce are attended to. It is from them that
the proposals to raise or to lower the rate of interest appear
almost invariably to proceed. M. Rouland's account was as
follows : — " Nothing of any description which concerns the
great interests of the public, nothing which concerns the
larger duties which the Bank has to perform towards commerce
and industry, nothing of all that class of business belongs to
or is left to the discretion of what he called the interested
party." By this M. Rouland understood that portion of the
governing body which directly represented the shareholders.

"This is a guarantee," M. Rouland continued, "which
ought, of itself, to satisfy any who have any doubts on the
subject. Does the public know it ? Are the public aware that
during sixty-two years it has not perhaps happened twice that
the council has had to propose that the rate of discount
should be raised or lowered ? Does the public know that it is
always the active element of the Government, which, watching

i48 VARIATIONS IN RATE, BANK OF FRANCE [ch. xv

vigilantly over the public interest, has made the proposition ? "
M. Rouland proceeded to say that the two portions of the
governing body have always worked together in the most
perfect harmony, and that in this harmony of the two portions
of the governing body the security of the institution consists.
M. Rouland spoke, and with a just sense of pride, of the part
which the Bank of France had always taken in developing the
commerce and industry of that country. Opinions have, how-
ever, been occasionally expressed that the commercial element
is not sufficiently represented in the general council of manage-
ment of the bank, and that it would be desirable to choose a
greater number of representatives of various branches of
business to form part of the direction.

This opinion is referred to here, but it is only right to add
that the Bank of France has for many years carried on its
business with great intelligence and judgment in the most
essential points. In particular its management during the
period of suspension of specie payments in France, from 1870
to 1874-5, a period of the greatest difficulty, was a brilliant
example of what the conduct of a bank should be under
exceptionally trying circumstances. Again in November, 1890,
at the time of the Baring difficulty, the assistance which the
Bank of France gave to the Bank of England, and the three
millions sterling in gold which it lent at that time, were of the
greatest assistance in enabling the Bank of England to avert
the crisis which seemed so near and was so much dreaded.

The business of banking has not, it must be remembered,
hitherto reached in France anything like the same proportions
which it has done in Great Britain and Ireland. There are
few banks in France at all to be compared with the great
banks of England, Scotland, and Ireland. Of these larger
banks the "Comptoir d'Escompte," the " Credit Lyonnais,"
and the " Societe G6n6rale " are the most important, and do a
considerable business, principally in the larger towns, and there
is besides a large number of very respectable private firms who
carry on banking business with much success and solidity.
The idea of banking is different in France from that held
in this country ; cheques are still comparatively little used.
Specie and the notes of the Bank of France are still the

ch. xv] ENGLAND AND FRANCE— BANKING COMPARED 149

means used for the payment of debts, not cheques, as with
us. But no bank in France possesses anything like the
organisation of the Bank of France, and its position is a very
different one from that of the Bank of England in respect of
its influence over trade throughout the country. Besides Paris,
the bank provided banking facilities in the year 1902 at 411
places in France, including all the most important centres, such
as cities like Lyons, Marseilles, Bordeaux, Havre, Lille, and
Roubaix, down to quite small towns in remote districts. At all
the offices business in discounts and advances is transacted at
the same rates as in Paris. The Bank of France thus regulates
the charges for the use of money throughout the country.

The amounts of the balances kept by other banks with the
Bank of France have never been published in the same manner
as those kept by the London bankers with the Bank of
England formerly were, and hence it is not possible to speak
on the subject with any certainty ; nor is it likely that they ap-
proach anything like the same sums. From both these reasons,
and from the general circumstances of the trade of the country,
the Bank of France is not exposed to anything like the same
sudden demands as the Bank of England. The current of
commercial activity in France flows with a very different and
more equable course than in England. A country which
depends so greatly on agriculture as France, where manu-
factures, commerce, and trade with other countries fill relatively
so much smaller a space in the general activity of the people
than they do in England, will always be likely to follow a more
undisturbed course in the way of business than is, or can be,
the case here. There are much fewer causes to lead to the
vast demands for bullion for export, which occasionally operate
so suddenly and so powerfully on our market. . The sums on
deposit with banks in France are, beyond question, both smaller
in proportion to the numbers and to the general wealth of the
population than in England, and they are also more generally
deposited for longer periods than with us, and are much less
likely to be suddenly required to be repaid. All these circum-
stances unite in causing the demands on the Bank of France
to be of a totally different description from the demands on
the Bank of England, and it is only natural to find that this

150 VARIATIONS IN RATE, BANK OF FRANCE [ch. xv

difference is reflected in the variations of the rate of interest
charged by the two banks. The average rate of discount
charged by the Bank of France has been as nearly as possible
on a level with that charged by the Bank of England for the
period under consideration, the figures being £$ 12^. for the
Bank of England, and £$ I i* 9^- for the Bank of France,
but the duration of extremely high and extremely low rates has
been much shorter in France than in England. Thus, the rate
of the Bank of France has been oftener at 3 per cent, during
the period under notice than at any other rate, and next to
that rate 4 per cent, shows the highest proportion. A firm
which did business with the Bank of England would have
been able to discount its bills at 3 and 2\ per cent, for a
greater length of time there than it would have been charged
the same rates by the Bank of France. Between the 1st
September, 1844, and the 31st December, 1900, which includes
20,570 days, the rate ruled at 3 per cent, and below for 11,341
days at the Bank of England, while it stood at corresponding
rates for 10,163 days at the Bank of France, but while the
Bank of England charged 4 per cent, for 2,698 days, the same
rate was charged by the Bank of France for 4,516 days. The
number of days at 5 per cent, was much the same at both
banks, 2,012 at the Bank of England, and 2,061 at the Bank of
France. In the highest rates of all, the customers of the Bank
of France would have had the advantage. The Bank of France
has never raised its rate above 9 per cent., but the Bank of
England has charged 10 per cent, for 141 days. The Bank
of France charged rates from 6£ to 9 per cent, for 372 days
only, but the Bank of England charged rates from 6 \ to 10
per cent, for 1,172 days. This means that during the fifty-six
years under consideration a customer of the Bank of France
would have had to pay high rates for about one year, while
the customer of the Bank of England would have had to pay
still higher rates for more than three. The fluctuations in the
rate charged by the Bank of France have also been much
less violent than those in the rate of the Bank of England.
Tables 2>7 and 38, on pp. 196, 197, make this very clear. Thus
the fluctuation at the Bank of England has in one year been
as great as 6^- per cent., but at the Bank of France the

ch. xv] ENGLAND AND FRANCE— BANK RATE COMPARED 151

fluctuation has never been more than 5 per cent., and in very
few years has it exceeded 2 per cent.

The number of variations in the rate has been much smaller
in France than in England. During the period between 1844
and 1 900 the Bank of France altered its rate 1 1 1 times ; the
Bank of England altered its rate 400 times. The greatest
number of variations in the rate of the Bank of England took
place in 1873, when there were no less than 24 changes ;
during that year the Bank of France altered its rate 4 times
only. The greatest number of changes in the rate of the Bank
of France took place in 1864, when there were 11 changes, but
in that year there were 15 alterations at the Bank of England.
There is also another curious difference in the course of business
in the two countries to be noted. While during quite recent
years the number of alterations in the rate charged by the
Bank of England remains on average quite as great as in
the earlier years under notice, being 193 between 1844 and
1872, and 207 between 1873 and 1900, the changes in the
rate of the Bank of France have much diminished in number,
having been jj in the former period and only 35 in the later.
We will take the period from 1 890 onward : —

Years i<

$90

-1900.

Bank of England. _.Noof.

Bank of France. a

No. of

Changes in

Changes in

Years.

Rate.

Years.

Rate.

189O .

. II

1890 . .No change

189I .

. IO

1891 .

No change

1892 .

• 4

1892 .

. .

I

1893 •

. 12

i893 •

No change

1894 .

2

1894 .

No change

1895 •

No change

1895 .

. . .

I

1896 .

• 3

1896 .

No change

1897 •

. 6

1897 .

No change

1898 .

. 6

1898 .

. .

I

1899 .

. 6

1899 .

.

2

I90O .

. 6

1900 . ...

4

Changes in

rate . . 66

Changes ir

1 rate .

9

While the average rate charged by the Bank of France,
taking the whole time from 1845 onwards into consideration,
has been closely on a level with the rate charged by the Bank
of England, it is especially noticeable that the rates charged by
the Bank of France have been lower than those of the Bank of
England during the years of panic which have occurred in
England during the same period. Thus, to compare the rates

152 VARIATIONS IN RATE, BANK OF FRANCE [ch. xv

in England and France during the years 1847, 1857, 1866, and
1890 we find : —

Bank of England. ^ate Bank of France. *ate

of Discount. of Discount.

Year. £ s. d.

1847 . . . 4 19 O

1857 . . .630

1866 . . . 3 14 O

189O . . .300

Year. £ s. d.

1847 • • .536

1857 . . • 6 13 3

1866 . . . 6 19 o

1890 . . . 4 10 5

The division of the accounts of the Bank of England
between the Issue and the Banking Departments may have
had something to do with this.

It is a remarkable thing that there should have been so
great a difference in the rate of discount charged during the
year 1866 in two great centres of business activity situated so
close to each other and connected by so many bonds of com-
mercial intercourse. In the year 1878 a similar divergence
took place ; the rate of the Bank of England was £$ 15s. 8d.,
of the Bank of France only £2 45. 2d. for that year. The
year 1890 was the one of the Baring difficulty. The Bank
of France assisted the Bank of England with a loan of three
millions, but its rate remained unchanged at 3 per cent, during
the whole twelvemonth, while the rate at the Bank of England
averaged £4. 10s. $d. It appears, however, that there has
been on the whole of late years a tendency towards a greater
correspondence in the rate of interest charged in both countries.
These points will be discussed further in Chapter XX., p. 203,
in which the fluctuations between the rates of the different
banks referred to are collectively examined into.

The reserve in the precious metals held by the Bank of
France has of late years greatly increased. The details are
stated in Table 24, p. 153.

The Bank of France, we must remember, has had to pass
through very great trials during recent years. Changes in
the form of government, revolutions, wars, and even hostile
occupation, have all disturbed the even course of life in Paris
and in France. The Bank of France has had to bear many
trials of this description, and has met them all with great
courage and prudence. #

* For further information see Reports of Bank of France, translated in August
numbers of Banker? Magazine.

ch. xv] GOLD AND SILVER AT BANK OF FRANCE

i53

TABLE 24.
Gold and Silver held by the Bank of France, 1877-1900.

Alterations in amounts of Gold and Silver held from December 31, iS/?, to
December jit igoo ; the year 1877 is taken as the starting point, being the
earliest from which the Statement can be carried on continuously : —

Gold.

Silver.

Increase.

Decrease.

Increase.

Decrease.

Years Compared.

£

£

£

£

1878 with 1877

—

7,200,000

7,780,000

—

1879 with l878

—

9,680,000

6,780,000

—

1880 with 1879

—

7,568,000

—

232,000

1 88 1 with 1880

3,736,000

—

—

2,636,000

1882 with 1 88 1

. 12,356,000

—

—

2,740,000

1883 with 1882

—

136,000

—

3,596,000

1884 with 1883

2,004,000

—

1,236,000

—

1885 with 1884

6,152,000

—

2,208,000

—

1886 with 1885

3,116,000

—

2,256,000

—

1887 with 1886

—

5,100,000

2,000,000

—

1888 with 1887

—

3,984,000

1,520,000

—

1889 with 1888

10,228,000

—

568,000

—

1890 with 1889

—

5,660,000

—

56,000

1 89 1 with 1890

8,664,000

—

476,000

—

1892 with 1891

14,724,000

—

572,000

—

1893 w*th l892

—

96,000

—

228,000

1894 with 1893

14,332,000

—

—

932,000

1895 wfrh l894

—

4,420,000

—

136,000

1896 with 1895

—

1,532,000

—

284,000

1897 with 1896

1,340,000

—

—

892,000

1898 with 1897

—

5,084,000

12,000

—

1899 with 1898

1,920,000

—

—

2,156,000

1900 with 1899

18,716,000

—

—

2,084,000

£97,288,000

£50,460,000

£25,408,000

£15,972,000

Deduct

50,460,000

—

15,972,000

—

Total increase be- \

tween Dec. 31, f
1877, and Dec. j

£46,828,000

£9,436,000

31, 1900. )

Amount in 1877

£46,544,000

£34,544,000

11 » i900 •

93,372>ooo

43,980,000

More in 1900

£46,828,000

£9,436,000

During the years 1 899-1 900 the silver diminished more than £4,000,000,
while the gold increased more than £20,000,000 during the same period.

December 31, 1902, the gold held was £100,768,000, the silver £43,936,000,
the total being £144,704,000.

CHAPTER XVI

VARIATIONS IN THE RATE CHARGED BY THE IMPERIAL
BANK OF GERMANY FROM 1844 TO 1900

i55

156

iS7

Origin of the Bank of Germany

Table 25. Monthly Averages of Minimum
Rate of Discount of the Bank of
Germany, 1845-1900

Table 26. Changes in the Rate of Dis-
count charged by the Bank of Ger-
many, and the number of days at
each rate in each year, 1844- 1900

The Bank of Germany, like the Bank of
France, under the control of the State 158

Table 27. Bank of Germany, Rate of
Discount, 1 844- 1 900. The number
of days at each rate arranged from
the highest number to the smallest,
and from the lowest rate to the highest 158

German Bank Acts of 1875 and 1899 158-159

Supervision and Direction of the Bank
of Germany . ...

The supreme control over the Bank
exercised by the Chancellor of the
Empire . ...

Number of Branches

Number of alterations in the Rate of
Discount compared with England and
France . ...

Disturbances caused by Gold Currency
introduced into Germany in 1872

Banking more developed in Germany
than in France

Other Banks in Germany .

Business carried on by the Bank of Ger-
many compared with that carried on
by the Bank of France and by the
Bank of England

Comparison of Bills discounted in France
and Germany . . . 1 60-161

Business of the Bank of Germany in
Current Accounts (Giro Verkehr), and
transmitting money from one part of
the country to another . . .161

Note Circulation . . . 162-166

Limit of the authorised Note Issue . 162-163

159

159
160

160

160

160
160

160

PAGE
I63

I63
I63

166

Tax on the Excess Issue

Difference between this system and the
system in England

Dangers of the English system observed
by German Legislators .

Different place taken in business matters
by the Note Circulation in Germany
to that taken by the Note Circulation
in England . . . 163-164

Development of the Note Circulation . 164

Further comparison of Note Issues in
Germany and England .

Three Limitations on the Note Issue of the
Bank of Germany, (1) the legal limit,
(2) the tax of 5 per cent, on the excess
issue, (3) the requirement that one-
third of the issue should be held in cash

Discount of Bills by Bank of Germany .

Foreign Bills held

Proportion of these on England

Inland and Foreign Bills held by Bank .

Fluidity of Securities held by Bank

Specie held by the Bank

Table 28. Coin and Bullion, 1876-1900 168

Table 29. Annual Averages of Note
Circulation, 1876- 1900 . . .169

Occasions when the Note Issue exceeded
the Legal Limit, the Dates of these,
and the Duty on the Excess . 1 69-1 71

Rate at the Bank of Germany compared
with the Banks of England, France,
Holland, and Belgium .

Tax on Excess Issues

Proposal to adopt in England an arrange-
ment similar to that in Germany as to
exceeding authorised circulation .

Bill brought forward by Lord Sherbrooke
in 1873 . ...

Injurious effect of High Rates of Interest
on Trade . ...

[The Reichsmark converted as 20 = ^1.]

166
166
167
167
167
167
168

171
172

172

172

173

Chapters X. and XV., pp. 95, 140, contained an account of the
variations in the rate of interest charged by the Bank of

154

ch. xvi] HISTORY OF BANK OF GERMANY 155

England from 1844 to 1900, and by the Bank of France
during the same period. It is desirable to continue this part
of the investigation by a similar inquiry into the rates charged
during the same time by the Bank of Germany. Strictly
speaking, we ought to speak of the Bank of Prussia and the
Bank of Germany. Originally founded by Frederick II., King
of Prussia, in 1765, as a State institution, under the title of the
Royal Bank, it continued till 31st December, 1846, when it
was reconstituted with the admission of shareholders, and
became a note-issuing bank. Organised in this manner, the
Bank of Prussia continued its operations steadily till 31st
December, 1875, when the German Bank Act of that year
altered its constitution entirely, and greatly enlarged its sphere
of work. From being the financial institution of a compara-
tively restricted country, the Reichsbank became the centre of
the monetary operations of a great empire at the time when
the standard of value of that empire was changed from Silver
to Gold. It is now one of the great banks of Europe, and
therefore we have placed its present name, that of the Imperial
Bank of Germany, at the head of this chapter. The same
dates and the same method exactly have been followed in
constructing the tables which accompany this chapter as with
those which were drawn up in the description of the rates
charged and the fluctuations in them in the case of the other
banks whose operations are described, in order that the com-
parison made may follow precisely the same plan in all cases,
and enable the reader to see how far and to what extent the
same causes have operated in all the countries referred to.

The first table, No. 25, p. 156, gives the average rate of
discount charged, month by month, by the Bank of Germany
during the period from 1845 to 1900; it also shows the
proportion which the rate charged in each month bore to
the average rate of the year. A summary at the end of the
table shows the average monthly rates for the whole period,
1 845- 1 900. Table No. 26, p. 157, gives the number of changes
of the rate in each year and the total number of days at each
rate in each year. A supplementary table, No. 27, p. 158,
shows the number of days at each rate, arranged from the lowest
rate to the highest, and the number of days at each rate,

156

VARIATIONS IN RATE, BANK OF GERMANY [ch. xvi

TABLE 25.

Monthly Averages of Minimum Rate of Discount of Bank of Germany, 1845-1900,
in groups of Ten Years, 1845-54, 1855-64, 1865-74, 1875-84, 1885-94, and of
Six Years, 1895-1900, with Summary Table, 1845-1900.

1845-54.

1855-64.

1865-74.

1875-84.

Average for

Av. of
Ten
Years
= 100.

Average for

Average
of Ten

Average for

Average

of Ten

Years =

100.

Average for

Average
of Ten
Years =

IOO.

Month.

the Ten Years,
£\ 6s. sd.

the Ten Years,
^4 9-y-

Years =
xoo.

the Ten Years,
£4 12s. 2d.

the Ten Years,
£4 5*- ?-d-

£ s. d.

£ s. d.

£ s. d.

£ s. d.

January .

490

103

4 10 4

IOI

4 15 10

IO4

4 10 5

106

February .

480

102

466

97

4 7 9

95

4 2 IO

97

March

464

IOO

4 5 9

9l

4 4 4

91

3 19 4

94

April

460

100

4 5 0

06

460

93

3 18 0

92

May

4 4 IO

g8

465

97

4 12 8

IOO

3 19 2

93

June

440

97

460

97

4 14 0

102

3 17 11

92

July

4 5 8

99

4 5 2

gb

4 15 11

104

3 19 1

93

August

4 5o

g8

4 4 7

95

4 10 8

98

426

97

September.

440

97

488

99

4 7 8

95

4 11 9

108

October .

4 7 8

IOI

4 14 11

106

4 16 8

105

4 16 7

114

November.

480

102

4 17 9

no

4 17 4

106

4 13 6

no

December .

480

102

4 17 5

log

4 18 7

107

4 10 1

106

Difference :

Highest and I

owest

Difference : H

ghest and

Difference : Highest and

Difference : Highest and

Month, 5-r.

Lowest Month,

1 3 s. 2d.

Lowest Month,

1 4 s. ^d.

Lowest Month,

1 8 s. 8d.

Mean of ej

:treme Variatio

ns for

Mean of extr

:me Vari-

Mean of extr

jme Vari-

Mean of extreme Vari-

i845-54i 3%

ations for 1855-

64, 7*5%

ations for 1865-

74,8%

ations for 1875-84, 11%

1885-94.

1895-1900.

1845-1900.

Average for

Average of

Average for

Average of

Average for the

Average of

Month.

the Ten Years,

Ten Years

the Six Years,

Six Years

Fifty-six Years,

Fifty-six

£i 1 3 j. id.

= 100.

£\ 4J. *d.

= 100.

£4 5-r. id.

Years = 100.

£ s. d.

£ s. d.

£ s. d.

January .

4 12

Ill

4 15 1

"3

4 IO O

I06

February

3 9 3

95

403

95

427

97

March

3 7 6

92

3 15 0

89

4OI

94

April

3 7 1

92

3 15 11

90

3 19 11

94

May

3 7 8

92

3 15 9

go

416

gb

June

380

93

3 15 5

go

4 1 3

gb

July

380

93

3 15 8

go

420

97

August

3 9 5

95

3 16 7

9'

4 1 10

gb

September

3 13 2

IOO

416

97

4 4 8

IOO

October .

3 18 10

108

4 14 3

112

4 11 4

107

November

420

112

502

ng

4 12 7

log

December

4 4 9

nb

5 5o

'25

4 13 2

no

Difference : Highest and Lowes

t Month,

Difference : I:

ighest and

Difference : Highest and

1 7*. Bd.

Lowest Month, t

£1 IOS.

Lowest Month, 13J. 3d.

Mean of extreme Variations foj

' 1885-94,

Mean of ext

reme Vari-

Mean of extreme Vari-

«%

ations for 1895-1

900, 18%

ations for 1845-1900, 8%

ch. xvi] DAYS AT EACH RATE, 1844-1900, GERMANY

!57

IMPERIAL BANK OF GERMANY. RATE OF DISCOUNT.

Table 26.

Changes in the Rate of Discount Charged by the Bank of Germany, and the Number of
Days at Each Rate in Each Year, from 5th September, 1844 (when the Bank Act
came into Operation in England), to 31st December, 1900.

Years

No. of changes

3%

3*%

4%

\VL

5 7.

5i7o

6%

6i%

7%

7h%

8%

9%

Total

Years

Rise

Fall

Total

Days

Days

Days

Days

Days

Days

Days

Days

Days

Days

Days

Days

Days

1844

I

—

I

—

—

41

76

117

1844

1845

I

I

2

—

—

204

78

83

365

1845

1846

I

I

2

—

—

121

—

244

—

—

—

—

—

—

—

365

1846

1847

—

I

I

—

—

—

122

243

—

—

—

—

—

—

—

365

1847

1848

I

I

2

—

—

—

256

no

366

1848

1849

—

I

I

—

—

314

51

365

1849

1850

No

cha

nge

—

—

365

—

—

—

—

—

—

—

—

365

1850

1851

No

cha

nge

—

—

365

—

—

—

—

—

—

—

—

—

365

1851

1852

No

cha

nge

—

—

366

—

—

—

—

—

—

—

—

—

366

1852

1853

1

—

1

—

—

273

—

92

—

—

—

—

—

—

—

365

1853

1854

—

1

1

—

—

234

—

131

—

—

—

—

—

—

—

365

1854

1855

1

—

1

—

—

3IO

55

365

1855

1856

3

1

4

—

—

121

7

138

—

IOO

366

1856

1857

4

2

6

—

—

—

—

162

32

82

45

—

44

—

—

365

1857

1858

1

4

5

—

—

330

—

19

II

—

5

—

—

—

—

365

1858

1859

1

1

2

—

—

293

—

72

—

—

—

—

—

—

365

1859

1860

No

cha

nge

—

—

366

—

—

—

—

—

—

—

—

—

366

1860

1861

No

cha

nge

—

—

36S

—

—

—

—

—

—

—

—

—

365

1861

1862

No

cha

nge

—

—

36S

—

—

—

—

—

—

—

—

—

365

1862

1863

1

—

1

—

—

307

58

365

1863

1864

3

1

4

—

—

—

124

128

—

54

—

60

—

—

—

366

1864

1865

3

2

5

—

—

I98

—

64

—

21

—

82

—

—

—

365

1865

1866

1

7

8

—

—

18

45

87

—

79

—

68

—

5

63

365

1866

1867

No

cha

nge

—

—

365

—

—

—

—

—

—

—

365

1867

1868

No

cha

nge

—

—

366

—

—

—

—

—

—

—

—

—

366

1868

1869

1

—

1

—

—

277

—

88

—

—

—

—

—

—

—

365

1869

1870

2

3

5

—

—

150

—

163

—

20

—

—

—

32

—

365

1870

1871

—

2

2

—

—

30O

14

5i

365

1871

1872

1

—

1

—

—

260

—

106

—

—

—

—

—

—

—

366

1872

1873

3

4

7

—

—

53

98

128

—

86

—

—

—

—

—

365

1873

1874

2

2

4

—

—

257

14

56

—

38

—

—

—

—

—

365

1874

1875

2

3

5

—

—

168

—

131

—

66

—

—

—

—

—

365

1875

1876

3

3

6

—

54

210

67

19

—

16

—

—

—

—

—

366

1876

1877

3

4

7

—

214

33

78

40

365

1877

1878

1

2

3

—

—

220

41

104

365

1878

1879

2

3

5

145

—

149

7i

365

1879

1880

2

3

5

—

—

283

22

29

32

—

—

—

—

—

—

366

1880

1881

2

1

3

—

—

233

—

80

52

—

—

—

—

—

—

365

1881

1882

2

2

4

—

—

182

7

1 59

17

—

—

—

—

—

365

1882

1883

—

1

I

—

—

348

17

—

—

—

—

—

—

—

365

1883

1884

No

cha

nge

—

—

366

—

—

—

—

—

—

—

—

366

1884

1885

1

2

3

—

—

303

37

25

365

1885

1886

3

2

5

24O

71

41

—

13

365

1886

1887

—

2

2

234

—

"3

—

18

—

—

—

—

—

—

—

365

1887

1888

2

—

2

26l

—

80

25

—

—

—

—

—

—

—

—

366

1888

1889

2

2

4

212

—

52

12

89

365

1889

1890

2

1

3

—

—

216

—

68

8l

—

—

—

—

—

—

365

1890

1891

1

3

4

91

10

252

—

—

12

—

—

—

—

—

—

365

1891

1892

1

1

2

29I

—

75

366

1892

1893

2

1

3

US

—

108

—

142

—

—

—

—

—

—

—

365

1893

1894

—

2

2

329

—

27

—

9

—

—

—

—

—

—

—

365

1894

1895

1

—

1

315

—

50

—

—

—

—

—

—

—

—

—

365

1895

1896

2

1

3

208

—

76

—

82

—

—

—

—

—

—

—

366

1896

1897

2

3

5

149

43

73

—

100

365

1897

1898

4

2

6

So

213

—

So

IO

42

—

—

—

—

—

365

1898

1899

4

3

7

—

41

126

92

—

94

—

12

—

—

—

365

1899

1900

—

3

3

—

—

—

—

178
3,648

160

15

—

12

—

—

—

365

1900

76

85

161

2,640

178

11,077

i,439

43°

730

50

234

44

37

63

20,570

i58

VARIATIONS IN RATE, BANK OF GERMANY [ch. xvi

arranged from the greatest number of days which each rate
lasted to the smallest.

The Imperial Bank of Germany is, like the Bank of
France, under the control of the State. The Bank Act
of 1875 directs the manner in which this control is exercised
(see pars. 25-31, pp. 158, 159). The business is also regulated
in some points by the Bank Act of 1899.

TABLE 27.
Imperial Bank of Germany — Rate of Discount— 1844-1000. The
Number of Days at each Rate, arranged from the highest
number to the smallest.

ber of Days (20,570).

Rate Per Cent.

Number of Days= 1,000

11,077 4 540

3,648

5

177

2,640

3

129

1.439

4i

70

73o

6

35

43°

Si

21

334

7

11

178

3i

9

63

9

3

5°

H

2

44

7i

2

37

8

1

20,570 1,000

Imperial Bank of Germany— Rate of Discount— 1844-1900. The
Number of Days at each Rate, arranged from the lowest rate
to the highest.

Per Cent.

Number of Days (20,570).

Number of Days = 1,000

3 2,640 ... 129

3i

178

9

4

11,077

540

4i

1.439

70

5

3,648

177

5i

43°

21

6

73o

35

H

5o

2

7

234

11

7i

44

2

8

37

1

9

63

3

20,570 1,000

Section 25. The Imperial supervision over the Reichsbank is exercised
a Bank-Curatorium,* comprising the Chancellor of the Empire, as President
and four other members. One of these four members is named by th<
Emperor, the other three by the Federal Council. This Curatorium meets

* A Board of Inspectors.

ch. xvi] GERMAN BANK ACT OF 1875 *59

once a quarter. At these meetings a report is given of the condition of the
bank and everything connected; it also receives a general account of all the
operations and business arrangements of the bank.

Section 26. The Imperial direction of the bank is exercised by the
Chancellor of the Empire and, under him, by the Board of Directors of
the Imperial Bank. Should the Chancellor be hindered from exercising his
functions, the Emperor will name a substitute.

The Chancellor directs the entire administration of the bank, subject to the
provisions of this Act and the regulations which may be published in accord-
ance with Section 40.* He issues the directions for the Imperial Board of
Directors and for the branch institutions, as well as the rules and instructions
for the officials of the bank, and directs the required alterations in the existing
business arrangements and in the instructions to the officials.

Section 27. The Imperial Board of Directors is the administrative and
executive authority of the bank, and also represents it in public. It consists
of a president and the required number of members, and passes its resolutions
by a majority of votes ; but its proceedings are subject to the prescriptions and
instructions of the Chancellor of the Empire.

The President and members of the Board of Directors of the Imperial
Bank are appointed for life by the Emperor on the recommendation of the
Federal Council.

Section 28. The officials of the Imperial Bank have the rights and duties
of Imperial functionaries. The bank undertakes their salaries, pensions, and
other payments for services, as well as the pensions and assistance given to their
surviving relatives. The salaries and pensions of the Bank Directors are fixed
yearly by the Imperial Budget ; those of the other officials by the Emperor,
yearly, in agreement with the Federal Council on the motion of the Imperial
Chancellor. No official of the bank may hold its shares.

Section 29. The accounts of the Imperial Bank must be submitted to the
Court of Accounts of the German Empire. The Chancellor will determine the
form of the yearly accounts. The decisions on this point are to be communi-
cated to the Court of Accounts.

Section 30. The shareholders take part in the administration of the bank
through the General Meetings, and a Central Committee elected from their
numbers according to the following regulations : —

Section 31. The Central Committee is the permanent representative of the
shareholders in relation to the administration. It consists of fifteen members,
besides whom fifteen substitutes are to be chosen. The members and the
substitutes are chosen by the General Assembly out of the number of those
among the shareholders who have at least three shares in their names. All the
members and substitutes must reside within the Empire, and at least nine
members and nine substitutes in Berlin. One-third of the members retires
annually, but are eligible for re-election. The Central Committee meets at
least once a month, presided over by the President of the Board of Directors
of the Bank, who may also summon extraordinary meetings. The quorum at
these meetings will be at least seven members. The arrangements of the
business will determine when and in what turn the substitutes of members are
called up.

* This section directs the details of the bank management.

160 VARIATIONS IN RATE, BANK OF GERMANY [ch. xvi

The Imperial Bank carries on a very considerable business in
Berlin, and has also branches which form a network covering
the whole of Germany. Including Berlin, there were in 1902
376 offices of the Reichsbank. In this latter respect the
business which the Bank of Germany carries on corresponds
more closely with that of the Bank of France than with that
of the Bank of England. The number of variations in
the rate of discount at the Bank of France and at the Bank
of Germany also corresponds more closely in number than
those at the Bank of England between 1844 and the close
of the year 1900. There were m alterations in the rate
recorded at the Bank of France and 161 at the Bank of
Germany during those years ; while the Bank of England
altered its rate 400 times during the same time.

The year 1872 marks the date of the introduction of the
gold standard into Germany. It could hardly have been
expected that so colossal an operation, perhaps the largest
of its kind which modern times have ever witnessed, could
have been carried into effect without great disturbances of the
money market in the countries employing a gold currency.
This doubtless accounts for much of the unsteadiness of our
money market during the years 1872-5, and for many of the
alterations in the rate of discount charged at Berlin during the
same period.

The business of banking is, on the whole, more developed
in Germany than in France. There are considerable banks
in Hamburg, Frankfort, Bremen, and in other cities of North
Germany, besides many carrying on business in Berlin. Hence
the Bank of Germany has to meet more competition than the
Bank of France.

The business carried on by the Bank of Germany corres-
ponds, as mentioned before, more closely with that carried on
by the Bank of France than with that of the Bank of England.
As in France, the charges for advances and discounts made at
the head office correspond with those made at all the branches.
Both the Banks of France and Germany have many branches,
many more than the Bank of England ; both of them do a
large business in remitting sums of money from one part of
the country to another, and the bills which both of them deal

ch. xvi] CURRENT ACCOUNTS AT BANK OF GERMANY 161

with in the way of their business are comparatively small in
amount. The average amount of the inland bills dealt in by
the Bank of Germany in 1900 was ^85 4s. for each bill. The
average amount of the trade bills discounted at Paris by the
Bank of France in 1900 was ^29 35*. 3d. The average
amount of the bills dealt in by the Bank of England is
believed to be much larger than either of these sums.

The business of the Imperial Bank of Germany on current
accounts (Giro Verkehr) has considerably increased during
recent years. This is the branch of the business in which the
greatest development has occurred, it having increased tenfold
between 1876 and 1900. In its present form the system only
dates from 1876 ; the enormous extension it has received shows
how greatly such a method of making payments was required
in a country with large business transactions, and in which
cheques are but little used, notes and specie being generally
employed. It was established as a means for facilitating pay-
ments between persons in different parts of the empire, and for
economising the use of specie in these transactions. In this it
has been especially successful. The sums paid in specie have
dropped from being 39*5 per cent, of the whole in 1876 to
1 6 '8 per cent, in 1900. It is true that the actual amounts
paid in specie have largely increased ; they were ^330,000,000
in the course of 1876, and ;£ 1,372,000,000 in 1900; but while
there is a substantial increase in most years during the whole
period, the payments in specie have not increased by any
means so much as the total sums, which have increased from
^836,000,000 in 1876 to ^8,182,000,000 in 1900. Hence
while the totals have increased nearly tenfold, the payments
in specie have increased only fourfold. The current accounts
connected with this branch of the business have likewise
greatly increased in number; from being only 3,245 in 1876,
they have increased to 15,847 in 1900. The average amount
to the credit of these accounts has also largely developed ; from
being ,£3,529,000 in 1876, it had increased to ^"25,610,000 in
1900.

It is impossible in this place to go more into detail on this
point. The advantage resulting to business has been extra-
ordinary from the convenience thus given in remitting money

M

i62 VARIATIONS IN RATE, BANK OF GERMANY [ch. xvi

through book entry from one part of the empire to another.
For example, if A B in Leipzic wishes to make a payment to
C D in Berlin, he can pay the amount into the office of the
Reichsbank at Leipzic, and on the following day the amount
is credited to C D on his current account in Berlin. The
person making the payment need not have an account at the
bank. The transfers are made without charge.

The next point to be considered is the note circulation.
It is needful to premise before commenting on this that the
note circulation is a far more important factor in business
transactions in Germany than it is with us. Here cheques,
not notes, are the recognised medium for business payments.
If a sudden increase occurs in the amount of cheques paid
away no one takes any notice of it, or is even conscious of
the circumstance. All that happens is that the clearing-house
returns are augmented, and that the banks on which the
cheques are drawn make provision for meeting them. This
is merely a private matter between the banks and their
customers. No one else is concerned. It is quite a different
thing when notes are in general use, especially when, as in
Germany, the issuing bank is compelled, before placing its
notes in circulation, to make provision according to the law
as to the reserves held against them, and is compelled also
to observe whether or not the amount issued exceeds the limit
allowed by the law. This was originally fixed in Germany by
the Bank Act of 1875. By that law also the issue of small
notes was discontinued. From and after the year 1876 no notes
were allowed to be issued below the value of 100 marks (^5),
and the bank was compelled to observe regulations as to the
conduct of the business which were designed to cause it to
keep its assets in as fluid a condition as possible, thus enabling
it to be always ready to meet any demands which might
be made on it, including those which might arise from the
note circulation.

The limit of uncovered issue — that is, of notes beyond the
amount against which specie and legal tender money was re-
quired to be held in certain proportions — was fixed by the Bank
Law in 1875 at ^12,500,000 for the Reichsbank, increased by
the lapse of the issues of other banks to ^14,811,450 in 1896,

ch. xvi] AUTHORISED AND EXCESS NOTE ISSUE, GERMANY 163

and by the Act of 1899 to ^22, 500,000. As the last-named
extension of the limit, however, did not come into force till a
later period than that we are now considering, no further reference
need be made to it here. The principle is the same, whatever
the actual amount may be. Beyond the fixed limit the bank
was allowed to put notes into circulation on payment of a tax
of 5 per cent, on the excess issue, with the proviso that specie
to the extent of one-third of the total issue should always be
kept in the vaults of the bank, and that against the remainder
good bills should be held. Though a charge of 5 per cent, was
not high, it was sufficient to keep the bank from desiring to
exceed the authorised issue, and for this reason : if the charge
for the advance on which the excess issue was based did not
exceed 5 per cent., the bank made practically no profit from the
transaction. If, however, a rate sufficiently high to enable the
bank to make a profit was to be charged, it would be so high
as to discourage the would-be borrower from seeking to obtain
the accommodation. It has hence been only on public grounds,
from a desire to facilitate business generally, that the Reichs-
bank allowed the legal limit of its note circulation to be
exceeded.

This system of allowing an issue of notes beyond the limit
fixed by the laws on payment of a moderate tax on the notes
put into circulation, was established in contradistinction to the
English system, which, through the arrangements of the Act of
1844, fixed an impassable boundary for the circulation of the
Bank of England, and eventually annihilated the elasticity of
the English note circulation. The German legislators observed
that the absolute restriction of the amount of the uncovered
note issue of the Bank of England on several occasions had the
effect of intensifying crises. The fear that the Bank might
reach the limit of its note circulation, and in consequence might
be compelled to suspend the supply of its notes, which through
their legal-tender character stand on the same level as the
standard of value, had in critical times caused a panic-stricken
multitude to throng to the counters of the Bank of England,
seeking, while it was yet time, to provide themselves, through
discounting bills, borrowing on stock and similar methods, with
a sufficiency of the legal-tender circulating medium. In order

i64 VARIATIONS IN RATE, BANK OF GERMANY [ch. xvi

that the panic might be appeased it has been necessary in
England, as we all know, to grant permission that the Act of
1844, which governs the limit of the uncovered note issue,
should, if necessary, be suspended, although it was only on
one occasion, in 1857,* that the law was actually infringed.
Permission to do this was given in 1847, l&57> an<^ i866.t
These experiences, and the dread of the injury hence resulting
to trade, caused the authors of the German Bank Law to seek
out a different way by which they might meet the emergency
whenever it arose in an automatic manner, without needing
to have recourse to parliamentary authority. They did not
make the permitted amount of note circulation a fixed and
rigid thing, but they allowed the Reichsbank to exceed the fixed
limit of its note circulation when the circumstances of trade
required it. This power was, however, regulated by the
imposition of the tax of 5 per cent., as mentioned above, on the
excess of notes beyond the limit. The Reichsbank was thus
compelled to connect the fact that it had overpassed the legal
limit with raising the rate of discount at least to 5 per cent.

In considering this arrangement it must again be remem-
bered how absolutely different is the place which the note
circulation takes in business ^matters in Germany from that
which it holds in England, where in times of difficulty the
position of the Bank of England note as a legal tender, and thus
as representing gold, causes it to be sought for. In Germany
notes are employed generally where cheques are used with
us for ordinary business transactions — for the common require-
ments of the day. If they cannot be supplied all business
comes to a standstill, hence as business developes the note
circulation increases, and tends to pass beyond limits which
were adequate twenty-five years ago.

The development of the note circulation is shown in Table
29, p. 169. The extent by which the legal limit was over-
passed between 1881 — the first year in which an excess issue
occurred — and 1900, is given in the statements on pp. 169-171.

* See statement, note, p. 89.

t This subject is also mentioned in Chapter IX., p. 88. The Act of Indemnity
required in 1857 is printed at p. 91, and the bill proposed in 1873 DY L°rcl Sher-
brooke to meet similar difficulties is printed at p. 93.

ch. xvi] EXCESS ISSUE FREQUENT OCCURRENCE, GERMANY 165

The German Bank Law requires, in any case, that cash should
be held up to one-third of the note circulation. The average
cover was in practice considerably more than this, having
been in

Per cent.

1880

• 76-47

1885

. . 80'57

1890

. 8r4I

1895

• 92*35

1900

. 71*77

Thus the requirements of the Bank Law were in this respect
amply fulfilled. The limit of the uncovered note circulation,
owing to the vast development of the business of the empire,
gradually became too narrow, as is shown by Table 29, p. 169,
which gives the history of the growth of the note circulation.
That this was not the cause of great disturbance to the busi-
ness world arose from the fact that the Directory of the
Reichsbank met the requirements of the time, which drove the
circulation above the legal limit, by raising the rate of discount
to 5 per cent, only, and further, out of consideration to the
general interests of trade, paid the tax on the excess out of its
own resources. Thus the Reichsbank, while undertaking the
whole responsibility for the excess issue, and the risks of the
extended business which compelled it to be made, received
little or no profit from the transaction, while it had to bear all
the expenses incurred, including the risk of bad debts. It was
not, as will easily be understood, able indefinitely to continue
this consideration for the common good. It has been stated
recently that the customers of the Reichsbank have latterly had
to pay the 5 per cent, duty on the over-issues, and the amount,
duration, and extent of the excesses over the limit increased
so greatly after the year 1895, that in the course of the year
1898 there were sixteen, and in the years 1899 and 1900 twenty
occasions on which the note circulation exceeded the limit.
Between 1896 and 1900 the Reichsbank had to pay the note-
tax every quarter. In the year 1899 the excess continued
during the whole of the fourth quarter of the year, and in
1900 during the same period, except for one return.

In order to make the working of the note circulation of

166 VARIATIONS IN RATE, BANK OF GERMANY [ch. xvi

the Reichsbank clear, it is advisable to point out the essential
difference between the manner in which our own fiduciary
Bank of England allowance, now ^18,175,000, and the German
allowance, originally of ^12,500,000 and now of ^22,500,000,
are treated.* The Bank of England "issues" the ^18,175,000
permanently, whether the amount of bullion held is large or
small, whether the public requires the notes or not. The Bank
of Germany only issues the notes when they are wanted, and
not permanently, exactly as it treats the excess issue. The
Bank of England issues the notes which are not wanted by
the public to itself — they form the "reserve" of the Bank.
When the "reserve" is exhausted, no more notes can be
obtained except by bringing in more bullion, which can be put
behind a further issue of notes, — and for this there is not time
during a crisis, — or by suspending the law which regulates the
note circulation. Our system thus creates an amount of legal-
tender money in reserve which is absolutely limited in amount.
The German system has an equally available amount of issue
in reserve, far less strictly limited, the amount of which is not
shown in the published accounts. Beyond this there is the
power of issue practically of any amount over the legal limit,
provided that one-third of the amount of the notes in circulation
is held by the bank in cash, and that the tax of 5 per cent,
is paid on the excess issue. There are thus three limitations
on the note issue of the Reichsbank. The first is the legal
limit, now ^22,500,000, the second the tax of 5 per cent, on
any excess over this limit, the third the necessity of holding
one-third of the whole circulation in cash.

The largest branches of the liabilities of the Imperial Bank
have now been explained. The most important business on
the credit side of the accounts of a note-issuing bank, and of
the Imperial Bank in particular, is the discount of bills.
Through its dealings with these securities, the bank not only
finds the means for employment of the capital at its disposal,
but also for meeting demands which may be made on it. On
average nearly 80 per cent, of its profit is derived from this
source, while, through the rapidity with which the bills held
fall due, the bank can at any time supply itself with cash by

* Die Reichsbank) Berlin, 1 876-1900 (p. 8 ff.).

ch. xvi] BILLS DISCOUNTED, LARGE AMOUNT, GERMANY 167

simply declining to discount and allowing the bills it holds to
mature. The bills form the largest part of the provision made
for meeting the demands which may be made on account of
the notes. The bank is bound by law to hold in its coffers, in
legal-tender notes of the empire, in gold bars or foreign coins
valued at £69 1 2s. for a pound (German) of fine gold, at least
one -third of the amount of the notes in circulation. The
remainder of the amount of the notes must be represented by
discounted bills.

The bank deals both with inland and with foreign bills ;
of these, on average, 99 per cent, are inland bills, only about
1 per cent, usually being foreign bills. For the year 1900,
however, the proportion of the foreign bills dealt with was
larger, being rather more than 3 per cent. The actual figures
of the bills held December 31, 1900, were as follows : —

From Balance Sheet, Bank of Germany, December 31, 1900.

Bills due within fifteen days . ^18,755,070
Bills due at later dates . . 3i>93i,i94

Bills on foreign places —

England .... 3,734,120

Other foreign places . . Z%lS9

-^50>686>264

3,773,279

Total . . £54,459,543

The great rapidity with which the securities held by the bank
can be turned into cash is obvious from this statement. It will
be seen that one-third of the whole amount of the bills held
became due within fifteen days. A very large proportion of
the bills fall due within even a shorter time than this, the
proportion being —

Within 7 days . . . 19-6 per cent-

Over 7, but within 14 days . .11*2 „

Over 14 days, but within 4 weeks . 16-7 „
Over 2 months . . .52-5 „

Average number of days the bills collectively have to run, 33.

Thus it will be seen that one-fifth of the total amount of bills
falls due within seven days, and about half, including these,
within four weeks. It is difficult to imagine a bill-case of a bank

1 68

VARIATIONS IN RATE, BANK OF GERMANY [ch. xvi

in better condition in this respect. The large amount of bills
held on England shows the importance which the Reichsbank
ascribes to possessing the means of checking any movement of
the exchange in favour of England, and which may draw gold
from Germany. As a rule, not less than 80 per cent, of the
foreign bills held by the bank are bills drawn on England.

Contemporaneously with the growth in Giro Verkehr busi-
ness and in the note circulation, the amount of specie held
has largely increased. The following table shows the yearly
average of the coin and bullion, commencing with the establish-
ment of the Reichsbank. From 1894 onwards the manner in
which the accounts have been made up enables us to separate
the holdings in gold from the remainder of the specie.

TABLE 28.
Coin and Bullion, 1876-1900.

Gold held

German Current Coin

Yearly average

% Proportion

Date.

31st December of

also held 31st December

of published Weekly

of average

each Year.

of each Year.

Returns.

each year to 1876.

£

£

£

1876=100

1876

2,144,170

^■22,885,816

25,529,644

100

1877

3,597,363

19,015,688

26,155,178

102

1878

2,004,126

21,601,193

24,703,583

97

1879

2,976,609

23,993,692

29,711,844

116

1880

3,386,225

22,736,639

28,104,538

110

l88l

3,556,659

22,170,518

27,837,475

109

1882

7,393,024

20,548,404

27,449,237

107
118

1883

5,764,282

22,164,870

30,093,258

1884

3,590,755

22,300,570

29,586,246

116

1885

9,685,330

21,226,709

29,306,530

115

1886

14,377,533

19,097,954

34,655,264

135

1887

17,111,381

21,230,575

38,618,130

151

1888

21,815,444

21,108,600

45,170,134

177

1889

12,233,435

24,496,533

43,579,583

171

1890

11,826,844

26,107,945

40,050,956

157

189I

17,691,253

27,403,189

44,689,455

175

1892

16,231,622

25,666,842

47,103,709

185

1893

16,911,652

^22,975,239

42,294,395

165

1894

35,721,800

1 1 4,989,200

46,716,380

183

1895

28,547,150

14,106,700

50,588,150

198

1896

26,569,350

13,659,450

44,599,400

175

1897

28,403,700

12,924,100

43,572,500

171

1898

25,233,650

12,387,300

42,546,900

167

1899

23,451,350

11,593,950

41,274,000

161

I900

25,031,300

11,460,650

40,856,850

160

A further description of the details of the operations of the
Bank of Germany is not required in this place. A sufficient

* From 1876 to 1893 inclusive the gold coin held among "German Current Coin" is not
stated separately.

f From 1894 to 1900 the amounts are separated.

ch. xvi] NOTE CIRCULATION, ANNUAL AVERAGES, GERMANY 169

outline has been given for the purpose proposed — the compari-
son of the rate of discount ruling in Germany with that in the
other countries referred to.

The following table shows what the development of the
note circulation has been : —

TABLE 29.
Imperial Bank of Germany. Annual Averages of Note Circulation, 1876-1900.

Proportion of each Year

Date.

Note Circulation
Yearly Average.

to 1876.
1876 = 100.

1

1876

34,243*314

100

1877

34,746,45°

101

1878

31,132,084

91

1879

33,383,746

97

1880

36,750,642

107

1881

36,986,370

108

1882

37,348,901

109

1883

36,862,286

108

1884

36,645,303

107

1885

36,372,I32

106

1886

40,108,900

117

1887

43,030,813

126

1888

46,652,116

136

1889

49,365,708

144

1890

49,194,085

144

1891

48,583,303

142

1892

49,236,812

144

1893

49,241,462

144

1894

50,019,195

146

1895

54,779,650

160

1896

54,174,850

158

1897

54,285,200

158

1898

56,229,700

164

1899

57,087,600

167

1900

56,928,050

166

There have been from the year 1881 onwards many occa-
sions on which the note issue has exceeded the legal limit.
The particulars are as follows : —

1881. The Duty on the Excess was ,£1,359, the Amount: —
Dec. 31 ... ^1,304,608

1882. The Duty on the Excess was £"1,637, THE Average £785,234,

the Amounts: —
Sept. 30 . . £961,205 I Oct. 7 . . £609,262

J

'7°

VARIATIONS IN RATE, BANK OF GERMANY [ch. xvi

1884. The Duty on the Excess was £1,702, the Amount :-

Dec. 31 ... £1,633,935

1885. The Duty on the Excess was £137, the Amount: —

Jan. 7 . ... £130,766

1886. The Duty on the Excess was .£1,779, the Amount:—
Dec. 31 . ... £1,708,067

1889. The Duty on the Excess was £11,799, the Average, £3,775,462,

the Amounts: —

Sept. 30
Oct. 7

• £3.59^210
2,261,297

Dec. 31

• £5.473>88o

1890. The Duty on the Excess was £16,392, the Average £2,709,022,

the Amounts: —

Jan. 7
Sept. 30

^2,519,965

4,572,542

Oct. 7 . £5,210,240
Oct. 15 . 1,692,468

Oct. 31 .
Dec. 31

£946,546
1,312,369

1893. The Duty on the Excess was £2,000, the Amount: —
Sept. 30 ... £1,925,885

1895. The Duty on the Excess was £11,203, the Average, £3,583,667,

the Amounts : —

Sept. 30 . £2,304,315 I Oct. 7 . £1,035,495 I Dec. 31 . £7,414,190

1896. The Duty on the Excess was £23,240, the Average, £3,718,410,

the Amounts : —

Jan. 7 . £1,790,576
March 31 . 2,200,411

June 30 . ,£1,716,434
Sept. 30 . 5,977,928

Oct. 7 .
Dec. 31

£3,9i7,639
6,707,43'

1897. The Duty on the Excess was £38,396, the Average £4,095,551,

the Amounts : —

Jan. 7 . £1,564,556
March 31 . 609,477

June 30 . 1,409,857

Sept. 30 . £10,291,477
Oct. 7 . 8,551,835
Oct. 15 . 3,5I3,282

Oct. 31
Nov. 7 .
Dec. 31

£1,951,201

354,184

8,614,091

1898. The Duty on the Excess was £"96,370, the Average, £5,782,203,

the Amounts: —

Jan. 7
March 31

April 7 .
June 30
July 7 .
Sept. 30

£3,028,242
3,523,912

i,o44,953

6,476,171

3,286,168

13,824,846

Oct. 7
Oct. 15
Oct. 23
Oct. 31
Nov. 7

^12,092,073
8,351,869
5,068,560
7,764,228
6,518,472

Nov. 15
Nov. 23
Nov. 30
Dec. 23
Dec. 31

£3,722,995
SOS,^8

1,832,743
1,529,121

14,147,764

ch. xvi] DUTY ON EXCESS ISSUE, GERMANY

171

1899. The Duty on the Excess was £142,365, the Average, ,£6,833,500,

Jan. 7
Jan. 15
March 31
April 7 .
June 30

July 7 •
Sept. 23

£7,354,812

Sept. 30 .

1,704,157

Oct. 7 .

5,495,286

Oct. 15 .

2,631,028

Oct. 23 .

6,935>228

Oct. 31 .

4,762,663

Nov. 7 .

26,489

Nov. 15 .

the Amounts : —

£18,561,653
14,180,528
10,212,781
6,255,572
9>384,i73
7,3I3>353
5,059,260

Nov.

23 •

Nov.

3° •

Dec.

7 ■

Dec.

I5 •

Dec.

23 •

Dec.

30 •

£2,619,674

4,460,641

3,5°9,598
2,518,603

6,803,817
16,880,799

The Duty on the Excess was £125,893, the Average £"6,042,847,

the Amounts: —

£2,052,405 Nov. 15 . ,£2,746,125

14,626,562 Nov. 30 . 1,153,649

12,439,982 Dec. 7 . . 110,585

6,586,951 Dec. 15 . 476,682

3,348,976 Dec. 23 . 3,605,412

6,933,702 Dec. 31 . i7,795,87i
5,807,101

£10,451,808

July 7 •

2,385,019

Sept. 30 .

11,912,966

Oct. 7 .

6,720,991

Oct. 15 .

2,110,761

Oct. 23 .

1,659,229

Oct. 31 .

7,932,165

Nov. 7 .

1900.

Jan. 7
Jan. 15
March 31
April 7
April 15
April 30
June 30

The total amount of duty paid to the Government during the twenty-five
years (1876-1900) has been £474,272.

The tables marked 25 and 26, pp. 156 and 157, describe
the variations in the rate of discount charged by the Bank of
Germany, and the number of days at each rate. In one respect
the figures contained in Table 26 differ from those of any of
the other banks in the fact that at no time has a lower rate
than 3 per cent, been charged. With the Banks of England,
France, and Holland, rates from 2 to 2\ per cent, have occurred,
and with the Bank of Belgium 2\ has not been infrequent.
So low a rate as 3 per cent, was not charged by the Bank of
Germany before 1879, and it did not become frequent till 1886,
and the years between that date and 1898. The 2,640 days
during which collectively it was charged by the Bank of
Germany compare with —

11,341 at 3 per cent, and under by the Bank of England.
10,163 » » France.

12,508 „ „ Holland.

10,623 »» 11 Belgium.

4 per cent, has been the most usual rate charged by the Bank
of Germany, that rate having been fixed for 11,077 days by it.
The more extreme rates have been charged for comparatively
short periods. Those above 5 per cent, lasted at the Bank of
Germany for 1,588 days, as compared with 2,299 at the Bank

172 VARIATIONS IN RATE, BANK OF GERMANY [ch. xvi

of England. And at the Bank of England 141 of these days
were at 10 per cent., a rate charged by no other bank during
the period with which we are concerned. The study of Table 27,
p. 158, which gives the number of days at each rate, shows very
clearly the measures which the Bank of Germany had to take
in order to retain and augment the gold in its possession.1*

Tax on Excess Issues.

One of the propositions which has been made with the view
of mitigating the fluctuations in the rate of interest charged
by the Bank of England has been the adoption of an arrange-
ment similar to that at present in use in Germany, through
which the Reichsbank is allowed to exceed the authorised
limit of its circulation, provided a definite proportion of specie
to the actual issue is maintained, on payment of a tax of
5 per cent, (see p. 163). But it must be remembered that this
expedient, although it allows a greater measure of freedom to
the Reichsbank, does not add a single 20-mark piece to its
store of specie. Hence this measure, although well adapted to
the business requirements of Germany, does not appear equally
suited to our own case. A somewhat similar plan for the modifi-
cation of the Act of 1844 was brought forward by Lord Sher-
brooke (Mr. Robert Lowe) in 1873, but the bill he introduced
did not obtain sufficient support to secure acceptance from the
House of Commons. f It was indeed hardly likely to do so, as
it required the minimum rates for discounts and temporary
advances to be not less than 12 per cent., and the foreign
exchanges to be favourable to this country before "a special
and temporary issue of Bank of England notes " on Government
securities could be permitted. It may be mentioned in this
place that the Bank of England paid to the Treasury out of the
profits of the note issue for the year ended 31st March, 1902 —
the latest statement to hand — ,£194,880 35. The Treasury thus
shares in the profits of the issue. It is more likely to reap
an advantage from this source when the rate charged for the
privilege of "a special and temporary issue" is low, than when,
as in the proposal made by Lord Sherbrooke, the rate is

* For further information respecting the Bank of Germany see Bankers' Magazines
(August, 1902, and before). t This bill is printed on pp. 93, 94.

ch. xvi] HIGH RATES INJURIOUS TO TRADE 173

exaggeratedly high — so high, indeed, as to produce of itself a
serious panic. Those who are not conversant with the ways
of many forms of business in this country, not large indi-
vidually, but of great importance collectively, have no idea of
the injurious effect which high rates of interest produce on the
prosperity of these industries, and how rapidly heavy charges
exhaust all possible profits. This is especially the case when
those engaged in them are people with capitals comparatively
small in proportion to the industries which they carry on.

CHAPTER XVII

VARIATIONS IN THE RATE CHARGED BY THE BANK
OF HOLLAND FROM 1844 TO 1900

tistory of Bank of Holland . 174-175

President and Secretary appointed by the

Crown . ... 174

System of Management . . . 175

Branch (Rotterdam), Agencies, and Cor-
respondents . . . 175
Business of the Bank of Holland . 175-176
Law of 7th August, 1888, allows the Bank

to buy Bills payable abroad
Capital and Reserve

Bill passed (1884) to Protect Stock of
Gold . ...

Holland regards it a duty of the Govern-
ment to endeavour to prevent the
Standard of Value which it imposes
on its subjects from fluctuating .
The Bank of Holland principally a Bank
of Discount . ...

176
176

176

177

177

Rate of Discount at Bank of Holland
lower than at any other of the great
banks of Europe

Variations in the Rate of Discount com-
pared with those at other European
Banks . ...

Table 30. Monthly Averages of Mini-
mum Rate of Discount of Bank of
Holland from 1845- 1900

Table 31. Changes in the Rate of Dis-
count charged by the Bank of Holland
and the number of days at each Rate
in each year, 1844- 1900.

Table 32. Bank of Holland, Rate of
Discount, 1 844-1 900. The number of
days at each Rate, arranged from the
highest number to the smallest, and
arranged from the lowest rate to the
highest . ...

PAGE

177

177

178

179

180

[The Florin converted as 12 = ^1.]

The remarks on the variations of the rate of discount charged
by the Bank of Holland will be best understood when preceded
by a few remarks on its history, which will assist us to under-
stand its position and the class of business it transacts.

During the second half of the last century many changes
were made in the management of the Bank of Holland, the
financial institution which has long exercised the leading
influence over the monetary matters of that country. The
existing bank was founded in 18 14. Various plans, including
the establishment of a Banking Office for the introduction of
an issue of bank bills, date as far back as 1795, but twenty
years elapsed before satisfactory arrangements could be made.
At the present time the President and the Secretary are both
appointed by the Crown. These officers are paid by the bank,

174

ch. xvn] SYSTEM OF MANAGEMENT, BANK OF HOLLAND 175

which owes much of its prosperity to the skill and ability exer-
cised by Mr. C. W. Mees, President from about 1850 onwards,
by his successor, Dr. N. G. Pierson, afterwards Finance
Minister of Holland, and by Mr. N. P. Van Den Berg, formerly
President of the Bank of Java, who took up and now carries
on the work of Dr. Pierson. Besides the President and the
Secretary there are four Directors, who are appointed by the
general meeting of the shareholders with the agreement of
the Commissioners. The Commissioners, who also share in
the management, are appointed by a committee of fifty of the
largest of the shareholders. It is their duty to examine the
annual balance sheet, which they also sign, and their sanction
is necessary for the amount of the dividends. They occupy
in many respects much the same position as the " Censors"
of the Banks of France and of Belgium. The president and
directors are obliged to have their domicile in Amsterdam.
Only Dutch citizens in the possession of full civic rights and
holding not less than fifteen shares can be directors. The head
office is in Amsterdam ; the branch at Rotterdam corresponds
closely to the branch of the Bank of Belgium at Antwerp in
its relative importance to the bank. Nearly 10 per cent, of
the total operations of the bank were transacted in Rotterdam
in 1 900- 1, about 55 per cent, was done in the other agencies,
and 35 per cent, in the head office. There are seventeen
agencies at towns varying in importance from the Hague and
Arnheim to much smaller places like Deventer and Meppel,
one sub-agency, and seventy-two correspondents. The corres-
pondents are divided into three classes. Discounts and loans
on advances on security can be obtained at the branch bank,
the agencies, and the sub-agency, and the correspondents of the
first and second class, of which there are sixty-two. Remit-
tances and the power of receiving short drafts by means of
"assignations," that is, of drafts issued by the bank, are
allowed between all the offices except those of the third class.
A charge of 30 cents (say, sixpence), including the stamp duty
payable to the Government of 21 cents (say, fourpence) on
each transaction, irrespective of amount, has kept these trans-
actions from being very numerous. The turnover in them was
about ^26,000,000 for the year 1 900-1. Cheques are not

176 VARIATIONS IN RATE, BANK OF HOLLAND [ch. xvii

much used in Holland. The notes in circulation, short drafts
and balances on deposit account at the bank, must be covered
by coin and bullion to the extent of 40 per cent. Loans to
a considerable extent are made by the bank on merchandise.
The discount business, though much smaller than that in
Belgium, is considerable. The law of August 7th, 1888,
allowed the bank to buy bills payable abroad. This power
has been used, though not to a very large extent. These bills
are sold when the Foreign Exchanges become unfavourable
to Holland, and when this occurs are as useful to the bank as
the possession of gold. The loans, advances, and discounts on
March 31st, 1902, were about .£8,800,000, divided thus : —

Inland Bills . . . £"3,500,000

Foreign Bills . . . 940,000

Loans and Advances . . 4,400,000

The total discounts for the year 1 900-1 were about
.£27,000,000.

The capital and reserve fund of the bank may be
reckoned as ,£2,000,000. Like the Bank of Belgium, it
keeps in touch with the business of the country through
the operations at its numerous agencies and correspondents,
and it watches the foreign exchanges in the interest of the
country, which is sometimes exposed to considerable demands
for specie. As a rule, the balance of trade is in favour of
Holland, and bullion accordingly flows in freely. But occasion-
ally the tide turns, as was the case in 1882, when a strong
demand for export set in, and the bank's stock of gold, which
about the middle of 1880 had amounted to 80,000,000 of
guilders (,£6,666,600, at 12 guilders = ,£i), decreased to below
5,000,000 guilders (^416,600).

To protect the general interests of the country against the
serious dangers thus threatened, a bill was passed (Act of 27th
April, 1884) empowering the Government, as soon as the state
of the currency should render it necessary, to withdraw from
circulation and to sell in the open market silver coin to the
amount of 25,000,000 of guilders (^2,083,300, at 12 gs. = ;£i),
and to buy gold with the proceeds. Up to the present time,
however, " there has never been any need to put this measure

ch. xvn] FLUCTUATIONS IN RATE, MODERATE, HOLLAND 177

— which in the full sense of the term may be considered as the
safety-valve of the present currency system of Holland — into
force." The existence of this power, which may be regarded
as the equivalent of a " Treasury Letter" to the Bank of
England in a crisis, has doubtless been of service to the Bank
of Holland in difficult times, though the price of silver, and
consequently the amount of gold bullion which could be
purchased with 25,000,000 of guilders, is now (1902) less than
half of what it was in 1884, the price of silver having been
45. 2d. per oz. at the earlier, but only about \s. \od. at the later date.
"The law of 1884 is the unequivocal acknowledgment of the
principle that the State is responsible for the maintenance of
the gold value of the silver currency, and that it is one of the
first duties of every Government that has imposed a standard
of value upon its subjects to take every reasonable precaution
in its power to prevent that standard from fluctuating. "#

Holland is the only country in Europe which has recognised
this duty. The Bank of Holland has, as distinctly as the
Bank of France, endeavoured to keep an equable position
both in ordinary times and in times of pressure. It is princi-
pally a bank of discount, and declines anything that is not
exactly trade paper — even of the most respectable houses.
It has been able to maintain on average since 1845 the lowest
rate of discount of any of the five banks whose operations we
are now describing. The variations in its rate do not much
exceed in number those of the Bank of Germany, and the
extent of those fluctuations has on the whole been moderate.

The number of changes in the rate of discount at the
Bank of Holland has been 173, as against 161 at the Bank of
Germany, in at the Bank of France, and 400 at the Bank
of England, between 1844 and 1900.

Days. %

The number of days at the rate of 3 per cent, and below was . 12,508 . 61
3^ to 5 per cent, inclusive the number was . . . 7,184 . 35

5£ per cent, up to 7 per cent., the highest charged . . . 878 . 4

In all . . 20,570 . 100

The merchant who required discounts would have obtained
this accommodation on the whole at more reasonable terms

* See article by Dr. N. P. Van den Berg, "Exchange between Holland and Dutch
India," Palgrave's Dictionary of Political Economy, vol. i. p. 773.
N

178 VARIATIONS IN RATE, BANK OF HOLLAND [ch. xvii

from the Bank of Holland than at any other of the great banks
of Europe.

Similar tables to those prepared for the explanation of the
transactions of the other banks are given for those of the
Bank of Holland. Table 30 gives the monthly averages of
the minimum rate, Table 31 gives the number of days at each
rate, and of changes in each year, from 1844 t0 1900.

TABLE 30.

Monthly Averages of Minimum Rate of Discount of Bank of Holland 1845-1900,
in groups of Ten Years, 1845-54, 1855-64, 1865-74, l875~84» 1885-94, and of
Six Years, 1895-1900, with Summary Table, 1845-1900.

1845-54.

1855-64.

1865-74.

1875-84.

Average for

Av. of

Ten

Years

= 100.

Average for

Average

Average for

Average

of Ten

Years =

100.

Average for

Average

of Ten

Years =

100.

Month.

the Ten Years,
£2 18s. \d.

the Ten Years,
£$ 16s. od.

Years =
100.

the Ten Years,
£l 1 7 j. od.

the Ten Years,
,£3 Ss. 2d.

£ s. d.

£ s. d.

£ s. d.

£ s. d.

January .

3 1 4

105

404

106

476

114

3 12 2

106

February .

300

103

3 H 11

98

3 18 8

102

3 12 2

106

March

305

104

3 13 0

gb

3 13 3

95

3 11 8

105

April

2 18 3

100

3 10 11

93

3 9 7

9i

3 9 11

102

May

2 17 7

99

3 12 1

95

3 13 10

90

3 9 10

102

June

2 16 0

90

3 11 7

94

3 11 7

93

3 4 8

95

July

2 14 4

93

3 11 0

93

3 13 0

94

3 4 0

94

August

2 14 3

93

3 10 6

93

3 16 2

99

3 3 11

93

September.

2 15 0

94

3 11 11

95

3 13 5

95

3 4 0

94

October .

2 16 10

98

3 19 8

105

3 17 1

100

3 7 6

99

November.

3 2 1

106

464

114

4 4 6

no

3 9 0

101

December .

3 4 0

no

4 10 1

118

4 S 6

in

3 10 9

104

Difference :

Highest and Lowest

Difference : H

ighest and

Difference : H

ghestand

Difference : Highest and

Month, 9;. ga

r

Lowest Month,

iqj. "jd.

Lowest Month.

17 s. nd.

Lowest Month,

8s. 2d.

Mean of ej

ctreme Variations for

Mean of extr

:me Vari-

Mean of extr<

:me Vari-

Mean of extreme Vari-

1845-S4. 8-5%

ations for 1855-

64. 12-5%

ations for 1865-

74, "'5%

ations for 1875-84, 6*5%

1885-94.

1895-1900.

1845-1900.

Average for

Average of

Average for

Average of

Average for the

Average of

Month.

the Ten Years,

Ten Years

the Six Years,

Six Years

Fifty-six Years,

Fifty-six

£2 14s. Bd.

= 100.

£3 2S. +d.

= 100.

£3 6s. 4d.

Years = 100.

£ s. d.

£ s. d.

£ t. d.

January .

2 17 2

105

3 2 9

IOI

3 10 9

106

February

2 14 I

99

2 l8 10

94

3 7 0

103

March

2 13 0

97

3 0 0

96

3 5 7

99

April

2 13 0

97

2 18 8

94

3 3 9

96

May

2 13 6

98

2 18 4

93

3 4 7

97

June

2 12 0

95

2 18 8

94

328

94

July

2 12 0

95

3 3 1

IOI

3 2 11

&,

August

2 14 2

99

3 5 2

105

3 3 11

96

September

2 16 O

102

3 3 4

102

340

96

October .

2 16 6

103

362

106

3 7 4

IOI

November

2 17 0

105

3 6 8

toy

3 11 3

107

December

2 17 5

106

3 6 8

107

3 12 9

no

Difference: Highest and Lowe

st Month,

Difference : h

ighest and

Difference : Highest and

5*. $d.

Lowest Month, 8

s. i,d.

Lowest Month, ioj. id.

Mean of extreme Variations fo

r 1885-94,

Mean of exti

•eme Vari-

Mean of extreme Vari-

5'5%

ations for 1 895-1

900, 7%

ations for 1 845-1900, 8%

ch. xvn] DAYS AT EACH RATE, 1844-1900, HOLLAND 179

BANK OF HOLLAND. RATE OF DISCOUNT.
Table 31.

Changes in the Rate of Discount charged by the Bank of Holland, and the Number of
Days at each Rate in each Year, from September 5th, 1844, to December 31st, 1900.

No. of Changes

2%

a*7.

37,

3*7.

47.

4*7.

5 7.

517.

6 7o

6*7.

7 7.

Total

Years

Years

Rise

Fall

Total

Days

Days

Days

Days

Days

Days

Days

Days

Days

Days

Days

Days

1844

No

cha

nge

117

117

1844

1845

5

—

s

—

237

So

3

—

18

20

37

—

—

—

365

1845

1846

—

2

2

—

—

269

—

S6

40

—

—

—

36.S

1846

1847

1

—

I

—

—

—

—

306

—

S9

—

—

—

365

1847

1848

1

3

4

—

—

181

—

IOI

—

84

—

—

—

—

366

1848

1849

—

1

1

—

315

So

—

—

—

—

—

—

—

365

1849

1850

—

1

1

298

67

365

1850

1851

No

cha

nge

36S

365

1851

1852

No

cha

nge

366

366

1852

1853

2

—

2

299

19

47

36S

1853

1854

No

cha

nge

—

365

—

—

—

—

—

—

—

—

365

1854

1855

2

—

2

—

—

288

14

63

365

1855

1856

3

—

3

—

—

—

266

24

S3

23

—

—

—

366

1856

1857

S

3

8

—

—

—

—

133

64

57

33

28

—

.SO

365

1857

1858

—

6

6

—

—

16

2S8

48

II

13

18

—

I

365

1858

1859

No

cha

nge

—

—

36S

—

—

—

—

—

—

365

1859

1860

No

cha

nge

—

—

366

—

—

—

—

—

—

—

—

366

1860

1861

2

—

2

—

—

336

7

22

365

1861

1862

2

2

4

—

—

I9S

I70

—

—

—

—

365

1862

1863

4

2

6

—

—

82

18?

So

22

26

—

—

—

—

365

1863

1864

5

4

9

72

185

16

16

30

47

366

1864

1865

6

5

11

—

—

"3

84

S8

26

22

18

44

—

—

36S

1865

1866

4

7

11

IO

S9

76

76

107

37

365

1866

1867

2

4

6

—

126

114

89

33

3

365

1867

1868

—

2

2

—

28l

S3

32

366

1868

1869

5

—

s

—

no

23

133

19

23

57

—

—

—

—

365

1869

18V0

4

8

12

—

—

24

73

12s

24

6S

26

28

—

—

365

1870

1871

—

2

2

—

—

208

in

46

—

—

—

—

—

365

1871

1872

5

1

6

—

in

i6S

14

20

8

48

—

—

—

—

366

1872

1873

4

5

9

—

—

8.3

29

217

7

16

13

—

36.S

1873

1874

—

3

3

—

—

—

317

14

17

17

—

—

—

365

1874

1875

—

1

1

—

—

128

237

—

—

—

—

—

—

36S

1875

1876

No

cha

nge

366

366

1876

1877

No

cha

nge

36S

365

1877

1878

2

—

2

—

—

122

160

83

—

—

—

—

—

36S

1878

1879

—

2

2

—

—

217

112

36

—

—

—

—

—

365

1879

1880

No

cha

nge

366

366

1880

1881

3

—

3

—

—

280

6

48

3i

365

1881

1882

4

4

8

—

—

—

81

30

83

153

18

—

—

—

365

1882

1883

1

4

5

—

—

—

206

32

34

20

73

—

—

—

365

1883

1884

—

1

1

—

—

231

135

—

—

—

—

—

366

1884

1885

—

1

1

—

216

149

—

—

—

—

—

—

—

365

1885

1886

No

cha

nge

—

36S

365

1886

1887

No

cha

nge

—

36S

365

1887

1888

No

cha

nge

—

366

366

1888

1889

No

cha

nge

—

365

365

1889

1890

4

—

4

—

291

24

7

2

4i

—

—

—

—

—

365

1890

1891

—

3

3

—

—

324

13

7

21

—

—

—

—

—

365

1891

1892

—

1

1

—

221

I4S

—

—

—

—

—

—

—

366

1892

1893

4

2

6

—

136

83

30

32

—

84

—

—

—

—

36S

1893

1894

—

2

2

—

312

44

9

—

—

—

—

—

—

—

365

1894

1895

No

cha

nge

—

36S

365

1895

1896

2

—

2

—

57

232

77

366

1396

1897

—

1

1

—

—

266

99

—

—

—

—

—

—

365

1897

1898

—

1

1

—

123

242

—

—

—

—

—

—

—

36S

1898

1899

4

—

4

—

172

13

IS

—

77

88

—

—

—

36S

1899

1900

—

3

3

—

—

328

8

13

16

—

—

—

—

36S

1900

86

87

173

1,328

4,737

6,443

3030

2,104

651

i,399

367

226

150

135

20,570

180 VARIATIONS IN RATE, BANK OF HOLLAND [ch. xvii

Table 32 gives the number of days at each Rate arranged
from the highest number to the smallest, and also arranged
from the lowest rate to the highest. For further remarks see
Chapter XIX., p. 190, and Chapter XX., p. 203, which contain
a general statement of the more important business fluctuations
here considered.

TABLE 32.

Bank of Holland—Rate of Discount— 1844-1000. The Number of
Days at each Rate, arranged from the highest number to the
smallest.

Number of Days (20,570).

Rate Per Cent.

Number of Days =

[,000

6,443 3

4,737

2*

230

3,°3°

3i

147

2,104

4

102

1,399

5

68

1,328

2

65

651

4i

32

367

Si

18

226

6

11

150

H

7

*35

7

7

20,570

1,000

Bank of Holland— Rate of Discount— 1844-1900. The Number of
Days at each Rate, arranged from the lowest rate to the
highest.

Rate Per Cent.

Number of Days (20,570).

Number of Days = ]

,ooo.

2 . . . 1,328 ... 65

2j

4,737

230

3

6,443

313

3i

3»°3°

147

4

2,104

102

4*

651

32

5

i,399

68

Si

367

18

6

226

11

H

IS©

7

7

135

7

20,570

1,000

CHAPTER XVIII

VARIATIONS IN THE RATE CHARGED BY THE BANK OF
BELGIUM FROM 1851 TO 1900

Direction of Bank of Belgium . 181 -182

Governor and Deputy - Governor ap-
pointed by the King . . 1 81-182

Branch (Antwerp) and Discount Offices 1 82- 183

Business of Bank in Commercial Paper
and Bills . . . 182-183

The Country Discount Offices Private
Partnerships, responsible for the busi-
ness they carry on . . .183

Fluctuations in the Rate of Discount
compared with those at the Banks of
Holland and France . . .184

Specie Reserve of Bank of Belgium
comparatively small . . .184

Bills Discounted . . . 185

Large Proportion of Bills on other
Countries held . . .185

Average Note Circulation . . . 185

[Amounts in Francs

PAGE

Rate of Discount compared with that at
Banks of England, France, Germany,
and Holland . . . 185-186

Large Proportion of Days at Low Rates 1 85- 1 86

Comparatively small number of Fluctua-
tions in Rate . . . 186

Table 33. Monthly Averages of Mini-
mum Rate of Discount of Bank of
Belgium from 1851-1900 . . 187

Table 34. Changes in the Rate of Dis-
count charged by Bank of Belgium
and the number of days at each Rate
in each year, 1 851- 1900 . .188

Table 35. Bank of Belgium Rate of
Discount, 185 1- 1 900. The number
of days at each Rate arranged from
the highest number to the smallest,
and arranged from the lowest rate to
the highest . . . . 189

converted as 25=^1.]

The rate of discount charged by the Bank of Belgium has
now to be examined. The government of this bank, which
was founded by the Act of May 5, i85o,# is practically
in the hands of the State, in a manner closely corres-
ponding to that of the Banks of France, of Germany, and of
Holland.

The Governor is appointed by the King, who may also
suspend or discharge him. His salary, which is fixed by the
King, is paid by the bank, and the bank also provides him
with a residence, and furnishes it. The Governor presides at
all councils and meetings, and sees to the enforcement of all

* Hence the year 1851 is the first complete year of its operations.

181

i82 VARIATIONS IN RATE, BANK OF BELGIUM [ch. xviii

laws and regulations. It would be his duty to inform the
Government of any act of the council which might be
contrary to the statutes, or adverse to the State, should any
such occur. He has general authority over all the agents of
the bank, and must own fifty shares of 1,000 francs each (say
^40) of the bank stock. The King also selects a deputy-
governor from among the directors of the bank, who acts
instead of the Governor when he is absent. The Directors,
six in number, are chosen by the general assembly. They
must be Belgian citizens, and reside in Brussels. Each director
must own at least twenty-five shares, and cannot be on the
administrative council of any other bank. Each director has
the control of one department or more of the business of the
bank, and has authority over the officers employed there. The
Administrative Council meets three times a week. It also
advises with the Censors, who, seven in number, are appointed
by the general meeting of the shareholders. The Council of
the Censors has control over all the transactions, audits the
books, and votes the budget of expenses prepared by the Ad-
ministrative Council. The Governor, Directors, and Censors
constitute the General Council, which meets once a month, and
keeps the position of the bank generally under consideration.
It also selects a Discount Council, which examines the paper
presented for discount, and determines what to accept or reject.
The business is thus carefully safeguarded.

The Bank of Belgium differs from the Banks of England,
France, and Germany, in the fact that it has, like the Bank of
Holland, one preponderating branch — in the case of the Bank of
Belgium, that at Antwerp — at which a very large proportion of
the business of the bank is done. The bank has branches and
discount offices in the principal cities of the provinces, and in
those other places where the Government considers it advisable.
The bank confines its operations to commercial paper, and does
not discount bills drawn on a bank. It buys bills on foreign
centres — as London, Paris, and Amsterdam. Including Brussels
and Antwerp, there are forty-one offices in all ; these include
places which are important business centres, like Charleroi,
Ghent, Liege, and Verviers, and very small towns like
Pdruwelz and Wavre.

ch. xvm] COUNTRY DISCOUNT OFFICES, BELGIUM 183

Discount offices, Comptoirs d'Escompte, are established
wherever the interests of trade render this necessary. At these
offices bills which conform to the requirements of the statutes
of the bank are discounted. Each office is responsible for the
paper in which it deals. Facilities for discount are given at
most of the agencies of the bank. Discount offices are in
some instances maintained in places which carry on their
business through the medium of the post, corresponding in this
with the Villes rattache'es in connection with the Bank of
France. Under these circumstances it may well be understood
that the operations of the discount offices which are responsible
for the paper they admit to discount are carefully conducted
and watched.

The country discount offices of the Bank of Belgium are
institutions so peculiar in character that a few words of ex-
planation are advisable. They are private partnerships, Socie'te's
en nom collectif, "the title of the firms comprising the name of
one or more of the partners, and the liability of each being
unlimited." (See article on Socie'te's Comrner dales in Palgrave's
Dictionary of Political Economy!) The members, or adminis-
trators, of these firms are approved by the bank. They are
responsible for the due payment of the bills discounted by
them. They do a large business. During the year 1901
they discounted collectively 1,968,897 bills for an amount of
^44,205,960. The share of the discount, Del Credere, which
the bank received for these was .£173,235 ; the share which
the offices received was £43,388.

Del Credere means in this reference an extra commission
received by a broker who undertakes to become surety for the
solvency of the customer for whom he transacts business. *
During the year 1901 more business, as is not unusual, was
done at the country discount offices than at the head office.
This is shown by the details of the business in 1901 : —

{Amounts in francs converted as 25 = £1 throughout this statement.)

The branches discounted . . 1,968,897 bills for ^44,205,956
Antwerp discounted . . . 243,118 „ 15,976,649

Brussels discounted . . . 1,657,972 „ 41,874,454

* See translation of the Report of the Bank of Belgium in the Bankers' Magazine
for November, 1902.

i84 VARIATIONS IN RATE, BANK OF BELGIUM [ch. xviii

In the total amount of discounts the operations

At the country offices represented . . 43 per cent.

Those at Antwerp . . . . 16 „

Those at Brussels . . . . 41 „

As the same rate of discount obtains at all the offices, the
National Bank of Belgium is closely in touch with the business
of the country. The regulations as to the note circulation
direct that the bank shall maintain a stock of specie in hand
equal to one-third of the combined amount of its bank note
circulation and other obligations at sight ; but the Minister of
Finance may at his discretion set aside this obligation, and
authorise the bank to work below the one-third limit. Thus
the bank is practically free in respect of its issues, and in
1 90 1 the specie and bullion held averaged ^4, 500,000, and the
fiduciary note circulation ^23, 500,000.

With reference to the date to which this statement is carried
in the case of the Bank of Belgium, as the bank was not estab-
lished till the year 1851, while the operations of the other banks
referred to in these pages go back to earlier dates, an exact
comparison of the number of the changes in its rate with those
of the other banks is not possible. For the period during
which it has been at work, its fluctuations have corresponded
very closely in number with those of the Bank of Holland ; it
has not been quite as free from changes as the Bank of France,
but it compares well with the other banks in this respect, as
well as in the moderation of the rates of discount charged.

While these moderate charges have been maintained, the
reserve in specie of the Bank of Belgium has never been
large in proportion to its operations. The current accounts
were ,£3,600,000 to the credit December 31st, 1901, and the
bills discounted were ^19,100,000. With notes in circula-
tion at the same date ^26,000,000, the coin and bullion held
stood at .£4,600,000, less than one-fifth of the notes in the
hands of the public. The bank has been enabled to carry on
its operations with this comparatively small bullion reserve
through its skill in discounting, and through the power of
regulating the foreign exchanges which it possesses by means
of the quantity of foreign paper which it holds. In the

ch. xvm] DISCOUNTS AND NOTE CIRCULATION

185

balance-sheet of December 31st, 1901 (p. 207), the bills dis-
counted stood at ;£i 9, 100,000; of this sum the foreign bills
held amounted to ,£6,500,000. Through holding these drafts
on other countries the council of the bank has the means
of operating in any direction when the exchanges are un-
favourable to Belgium. The moderate rates of discount
charged and the comparatively small range of fluctuation
show how carefully, especially of late years, the Bank of
Belgium has maintained this power. Roughly speaking,
one-fifth part of the bills it has dealt with during the last
twenty years have been on foreign countries. A statement
is likewise given of the average fiduciary note circulation —
the amount of which has greatly increased, particularly
during the last twenty years. The considering the manner in
which these points have been managed and the low rate of
discount which has been charged will enable us to appreciate
the caution with which the Bank of Belgium has conducted its

operations : —

Total Operations in Discounts.

Year.

On Belgium.

On Foreign Countries

£

;. Total.

£

1851 .

3,248,000

... 4,192,000

7,440,000

i860 .

29,176,000

... 1,120,000

30,296,000

1870 .

48,200,000

... 5,272,000

53>472,ooo

1880 .

65,880,000

... 13,904,000

79,784,000

1890 .

78,344,000

... 15,876,000

94,220,000

1900

109,988,000

... 27,728,000

• •• 137*716,000

1901

102,057,000

... 82,776,000

... 134,833,000

Average Fiducl

iry Note Circulat

ION.

Year.

£

1851

1,268,000

i860

4,472,000

1870

7,488,000

1880

12,544,000

1890

15,292,000

1900

23,060,000

1901

23,970,000

The rate of discount charged by the Bank of Belgium has
generally been moderate, more than half — 10,623 days out of
the 18,262 days which have elapsed between 1851, the first
complete year of the bank's operations, and 1900 — having
been at 2\ and 3 per cent.

186 VARIATIONS IN RATE, BANK OF BELGIUM [ch. xviii

The number of days at these rates, compared with the
other banks under notice, is as follows : —

Belgium

England

France

Germany

Holland

No. of Days.

10,623 out of 18,262
11,341 „ eo,57o
10,163 „ „
2,640 „ „
12,508 „ „

The number of days at the rate of 3 per cent, and below was

3i t0 5 Per cent, inclusive the number was

5| per cent, up to 7 per cent., the highest charged

In all

18,262

100

In one other point also the Bank of Belgium stands to

advantage as compared with the other banks — this is in the
small number of rates charged.

At the Bank of Belgium 9 rates have been charged, varying from 2J to 7 %

At the Bank of Holland n ,, ,, ,, „ 2 ,, 7 ,,

At the Bank of Germany 1 2 ,, „ ,, ,, 3 „ 9,,

At the Bank of France 14 ,, „ „ ,, 2 ,, 9 ,,

At the Bank of England 15 ,, „ ,, „ 2

10

The Bank of Belgium has thus kept its variations in rates
within more moderate bounds than any of the other banks
named, except the Bank of Holland, during the period under
notice. This in the case of Belgium is somewhat shorter than
in the case of the other banks.

Table $?» P- Ic>7> which contains the monthly averages of
the rate of discount charged, Table 34, p. 188, and Table 35,
p. 189, which give the number of changes in the rate of
discount charged by the Bank of Belgium, and the number
of days at each rate in each year, and also the number of
days at each rate taken collectively, — show very clearly the
course of action taken by the bank.#

* For further information respecting the Bank of Belgium see Bankers' Magazine
for August, 1901, and November, 1902.

ch. xvm] MONTHLY AVERAGES, DISCOUNT RATE, BELGIUM 187

TABLE 33.

Monthly Averages of Minimum Rate of Discount of Bank of Belgium 1851-1900,
in groups of Four Years, 1851-54, and Ten Years, 1855-64, 1865-74, 1875-84,
1885-94, and of Six Years, 1895-1900, with Summary Table, 1851-1900.

1851-54.

1855-64.

1865-74.

1875-84.

Month.

Average for the

Four Years,

■£3 7*-

Av. of

Four
Years
= 100.

Average for
the Ten Years,

£3 IIS. lid.

Average

of Ten

Years =

100.

Average for

the Ten Years,

£3 13s. nd.

Average

of Ten

Years =

100.

Average for

the Ten Years,

£3 7*' 9<t-

Average

of Ten

Years =

100.

£ s. d.

£ s. d.

£ s. d.

£ s. d.

January .

3 IO O

104

3 14 2

IOJ

3 12 6

9*

3 12 8

107

February .

3 IO O

104

3 12 6

IOI

3 8 IO

93

3 7 4

99

March

3 IO O

104

3 10 1

g8

3 6 6

90

3 5 0

90

April

3 IO 0

104

369

93

3 9 10

95

3 4 8

g6

May.

3 9 5

104

390

90

3 14 8

IOI

362

98

June.

350

97

3 8 10

96

3 14 10

IOI

3 1 4

go

July . .

350

97

3 7 9

94

3 IS 1

102

3 1 0

go

August

3SO

97

3 7 1

93

3 15 7

102

329

92

September

350

97

3 11 3

99

3 12 10

99

3 7 5

99

October .

350

97

3 14 9

104

3 17 10

«tf

3 11 6

106

November.

350

97

402

112

420

in

3 18 5

116

December.

350

97

3 19 11

III

3 17 2

103

3 14 2

no

Difference :

Highest and I

/Owest

Difference : H

ighest and

Difference : H

ighest and

Difference : H

ighest and

Month, 5 j.

Lowest Month,

13$. sd.

Lowest Month,

15s. 6d.

Lowest Month,

17*. 5^-

Mean of e.

ttreme Variatio

ns for

Mean of extr

erne Vari-

Mean of extr

:me Vari-

Mean of extreme Vari-

1851-54. 3'5%

ations for 1855-

■64. 9"5%

ations for 1865-

74. 10*5%

ations for 1875-84, 13%

1885-94.

1895-1900.

1851-1900.

Average for

Average of

Average for

Average of

Average for

Average of

Month.

the Ten Years,

Ten Years

the Six Years,

Six Years

the Fifty Years,

Fifty Years

£3 is. id.

= 100.

£3 5*. *<*>

= 100.

£3 8*. id.

= 100.

£ *. d.

£ s. d.

£ s. d.

January .

3 6 9

iog

3 8 5

105

3 11 0

104

February

3 2 0

IOI

3 4 1

99

3 7 4

99

March

2 17 II

95

328

g6

3 5 1

95

April

2 17 0

93

3 1 10

95

3 4 8

95

May

2 19 O

97

3 3 4

97

3 6 11

g8

June

2 l8 O

94

3 4 4

99

3 5 7

g6

July

2 18 7

g6

3 4 5

99

3 5 5

96

August

2 19 O

97

3 3 4

97

3 5 8

97

September

2 19 I

97

3 3 4

97

3 6 11

98

October .

329

IOJ

3 6 10

103

3 10 7

104

November

3 5 11

108

3 8 4

105

3 14 8

no

December

3 6 10

iog

3 9 10

107

3 13 3

108

Difference : Highest and Lowe

st Month,

Difference : I

ighest and

Difference : Highest and

qs. lod.

Lowest Month,

is.

Lowest Month, 10s.

Mean of extreme Variations fo

r 1885-94,

Mean of ext

reme Vari-

Mean of extreme Vari-

8%

ations for 1895-3

900, 6%

ations for 1851-1900, 7*5%

188 DAYS AT EACH RATE, 1851-1900, BELGIUM [ch. xviii

BANK OF BELGIUM. RATE OF DISCOUNT.

Table 34.

Changes in the Rate of Discount charged by the Bank of Belgium, and the Number of
Days at each Rate, in each Year, from January 1st, 1851, to December 31st, 1900.

Years.

Number of Changes.

a* 7.

37c

3 J 7.

4 7o

4*7.

s 7.

si 7.

67o

7 7.

Total

Years.

Rise.

Fall.

Total.

Days.

Days.

Days.

Days.

Days.

Days.

Days.

Days.

Days.

Days.

1851

No

chan

ge

__

_

__

365

^__

__

__

365

1851

1852

—

1

I

—

218

—

148

—

—

—

—

—

366

1852

1853

No

chan

ge

—

36S

365

1853

1854

No

chan

ge

—

365

365

1854

1855

No

chan

ge

—

365

365

1855

1856

1

—

1

—

271

—

95

—

—

—

—

—

366

1856

1857

2

2

4

—

—

209

77

9

5

65

—

—

365

1857

1858

—

4

4

—

283

40

26

14

2

—

—

365

1858

1859

1

1

2

—

298

67

—

—

—

—

—

365

1859

1860

1

1

2

—

282

—

84

—

—

—

—

—

366

1860

1861

3

2

5

—

IOI

—

234

—

30

—

—

—

365

1861

1862

1

2

3

—

300

—

65

—

—

—

—

—

365

1862

1863

3

—

3

—

24I

—

65

—

12

47

—

—

365

1863

1864

2

4

6

—

—

—

37

—

67

47

215

—

366

1864

1865

3

3

6

—

56

76

153

—

36

—

44

—

365

1865

1866

2

4

6

—

114

—

82

—

99

—

70

—

365

1866

1867

—

1

1

30

335

365

1867

1868

No

chan

ge

366

366

1868

1869

No

chan

ge

36S

365

1869

1870

2

3

5

196

—

84

—

18

21

24

22

—

365

1870

1871

5

6

11

5

8

67

226

8

21

30

—

—

365

1871

1872

6

3

9

IOI

—

108

51

—

69

37

—

—

366

1872

1873

8

8

16

—

—

23

57

7i

59

64

64

27

365

1873

1874

3

6

9

—

—

70

114

IOI

39

—

41

—

365

1874

1875

3

6

9

—

114

22

122

107

—

—

—

365

1875

1876

2

2

253

77

36

366

1876

1877

1

1

2

309

—

56

365

1877

1878

2

1

3

180

—

in

3i

43

—

—

—

—

365

1878

1879

1

3

4

J33

112

102

18

365

1879

1880

1

1

2

147

219

366

1880

1881

4

3

7

—

—

197

40

63

7

58

—

—

365

1881

1882

4

6

10

—

—

40

108

163

37

17

—

365

1882

1883

—

1

1

—

—

324

41

—

—

—

—

—

365

1883

1884

1

1

2

—

229

75

62

366

1884

1885

I

3

4

—

266

26

73

365

1885

1886

2

4

6

221

109

25

10

365

1886

1887

2

2

131

63

171

365

1887

1888

4

2

6

124

126

40

11

—

65

—

—

—

366

1888

1889

1

3

4

—

163

70

92

28

12

—

—

—

365

1889

1890

—

2

2

—

291

19

55

365

1890

1891

No

chan

ge

—

365

365

1891

1892

—

1

1

225

141

366

1892

1893

1

—

1

124

241

365

1893

1894

No

chan

ge

—

36S

365

1894

1895

1

1

290

75

365

1895

1896

1

—

1

116

250

366

1896

1897

No

chan

ge

—

365

365

1897

1898

1

—

1

—

353

—

12

—

—

—

—

—

365

1898

1899

4

2

6

—

216

70

5

74

—

—

—

365

1899

1900

—

2

2

—

—

—

326

13

26

—

—

—

365

1900

77

96

173

3,169

7,454

2,426

3,oi7

643

681

372

473

27

18,262

ch. xvm] NUMBER OF DAYS AT EACH RATE, BELGIUM 189

TABLE 35.

Bank of Belgium— Rate of Discount— 1851-1900. The Number of
Days at each Rate, arranged from the highest number to the
smallest.

Number of Days (18,262).

Rate Per Cent.

Number of Days= 1,000

7,454 • 3

3>i69

»i

174

3.°I7

4

165

2,426

si

132

681

5

\

37

643

4i

35

473

6

26

372

Si

21

27

7

2

18,262

1,000

Bank of Belgium— Rate of Discount — 1851-1900. The Number of
Days at each Rate, arranged from the lowest rate to the
highest.

Rate Per Cent.

Number of Days (18,262).

Number of Days = 1,000

2\ . 3,169

3

7.454

408

3i

2,426

132

4

3>OI7

165

4i

643

35

5

681

37

5*

372

21

6

473

26

7

27

2

18,262

1,000

CHAPTER XIX

THE FLUCTUATIONS IN THE RATE OF THE BANK OF ENGLAND
COMPARED WITH OTHER BUSINESS FLUCTUATIONS

Fluctuations of the Rate at Bank of
England, severity of these compared
with the fluctuations at Banks of France,
Germany, Holland and Belgium 191-194

Table 36. Summary of Fluctuations,
Rates of Discount, Banks of England,
France, Germany, Holland and Bel-
gium, Note Circulation Bank of Eng-
land, Bullion in Issue Department,
Liabilities and Reserve, English
Country Note Circulation, London
Bankers' Clearing House Returns,
Scotch and Irish Note Circulation and
Specie held, 1845-1900 . . 192-193

Fluctuations in London Bankers' Clearing
House Returns . . . 194

Bank of England Note and English
Country Note Circulation . .194

Scotch and Irish Note Circulation, Fluc-
tuations compared with Bank Rate . 194

Causes which lead to Severity of Fluctua-
tions in England . . .195

Table 37. Number of Variations in Rates
of Discount of Banks of England,
France, Germany, Holland, Belgium,
1844-1900 . ... 196

Table 38. Lowest and Highest Rate
charged, and extent of Fluctuation
of the same Banks during each year
from 1844 to 1900 . . . 197

Table 39. Number and extent of Annual
Fluctuations in Rate of the same Banks

from 1844 to 1900 grouped together, so
as to show the extent of the Fluctua-
tions and the number of years in which
these Fluctuations occurred . .198

Demands on Reserve of Bank of England 198

Division of Issue Department and Bank-
ing Department separates the Resources
of the Bank into two parts and causes
demand to fall on the smaller . .198

Regulations of Act of 1844 compel Pur-
chase of Standard Gold, whether
needed or not . . -199

This may lead at times to unnecessary
accumulation of Specie and consequent
Low Rates . . . . 199

Deficiency of Fluidity in Securities held
by Bank of England . . . 199

Bills Discounted and Short Loans at the
Bank of England . . .199

Influence of Bank of England over
Market formerly greater than now . 199

Balance Sheet of Bank of England
compared with those of the other
Banks . . . 200-202

Capital of Bank of England compared
with those of the other Banks men-
tioned . ... 200

Investments of the Banks compared . 201

Arrangements which assist other Banks to
avoid the Fluctuations in Rate of
Discount and the constant changes
occurring at Bank of England . . 202

We are now in a position to compare the fluctuations between
the rates charged by the Bank of England and by the other
great banks of Europe, and also the fluctuations in the propor-
tions between the reserve and liabilities of the Bank, in the specie

190

ch. xix] SUMMARY OF TABLES 191

held by the Issue Department, in its note circulation, in the English
country note circulation, in the Scotch and Irish note circulation,
and in the returns of the London Clearing House. The history
of all these movements is contained in the tables in this volume,
but for the convenience of readers who may find it laborious
to grasp the meaning of the masses of figures which it has
been necessary to employ, Table 36, pp. 192-3, is now added,
containing a summary of the main tables which form the basis
of this statement. References to the original table whence the
information is taken, with its number and that of the page
where it will be found, are given for the assistance of those who
desire to study the subject completely. With each summary a
column of proportional figures has been provided, showing the
arithmetical mean of the extreme variations during each period.

This method has been employed because the differences are
sometimes between rates of interest, such as those charged by
the Bank of England and other banks, and sometimes between
specific amounts, such as those of the reserve and liabilities, of
the specie in the Issue Department, and of the note circulations
analysed. The reader is thus assisted in making the com-
parisons he may desire to draw between each series of figures.
The periods examined are the same throughout the whole
series, being the decades from 1845 to 1894, the six years from
1 895- 1 900, and the total period from 1 845-1 900. The only
exceptions to this rule are, as has been pointed out before,
the operations of the Bank of Belgium, which only date back
to 185 1, and those of the London Bankers' Clearing House,
which only date from 1868. These, though not extending
exactly over the same periods, are yet brought as far as
possible into corresponding divisions for facility of reference.

The first point that will strike the reader is that the varia-
tions of the rate of discount at the Bank of England have been
far more severe since the years 1 845-1 854 than at any other
of the five banks quoted, whether these are examined into in
groups of decades or for the whole period. The column
attached to each table showing the mean of the extreme
variations during each period taken brings out the facts very
clearly. The rate charged by the Bank of France has been
the most uniform, but though the rates in Germany, Holland

192

FLUCTUATIONS IN THE RATE

[CH. XIX

TABLE 36.

Summary of Fluctuations, Rates of Discount, Banks of England, France, Germany,
Department, Liabilities and Reserve, English Country Note Circulation, London

Bank of England Rate of Discount

Bank of England Note Circula-

(see Table 12, p. 97).

tion (see Table 6, p. 70).

Difference between

Mean of the extreme

Variations during

each Period.

Difference between

Mean of the

Years.

the Highest Month

and the Lowest

Month.

the Highest Month

and the Lowest

Month.

extreme Vari-
ations during
each Period.

£ s. d.

7.

£

7.

1845-1854 .

9 5

7

1,351,000

3'S

1855-1864 .

1 1 7

**'$

1,562,000

t

1865-1874 .

1 6 6

ns

1,991,000

1875-1884 .

1 3 8

18$

1,509,000

25

1885-1894 .

1 12 1

25

1,914,800

4

1895-1900 .

1 6 i

2 IS

2,127,000

4

Total Period, 1845-1900

19 2

'3'S

1,466,000

3

Bank of France Rate of Discount
(see Table 21, p. 142).

Bank of Germany Rate

of Discount

(see Table 25, p. 156).

Bank of Holland Rate

of Discount

(see Table 30, p. 178).

Years.

Difference
between the

Highest
Month and
the Lowest

Month.

Mean of the

extreme

Variations

during each

Period.

Difference
between the

Highest
Month and
the Lowest

Month.

Mean of the

extreme

Variations

during each

Period.

Difference
between the

Highest

Month and

the Lowest

Month.

Mean of the

extreme

Variations

during each

Period.

1845-1854 .
1855-1864 .
1865-1874 .
1875-1884 .
1885-1894 .
1895-1900 .

Total Period, 1845-1900

s. d.
4 0

19 5

10 1

11 0

4 0

5 M

8 2

7.

2S
10

6'J
9

SS

£ s. d.

5 0

13 2

14 3
18 8
17 8

1 10 0

13 3

7o

3

7'S

8
11
12
18

8

s. d.

9 9
19 7
17 11

8 3
5 5
8 4

10 1

7.
S'S

I2'5

us

6S
SS

8

SCOTCH NOTE CIRCULATION AND SPECIE HELD AGAINST IT
(see Table 15, pp. 118-120 and Table 17, pp. 124-131).

Note Circulation.

Specie Held against it.

Years.

Difference between

the Highest Month

and the Lowest

Month.

Mean of the
extreme Variations
during each Period.

Difference between

the Highest Month

and the Lowest

Month.

Mean of the
extreme Variations
during each Period.

1845-1854 .
1855-1864 .
1865-1874 .
1875-1884 .
1885-1894 .
1895-1900 .

Total Period, 1845-1900 .

£

559,000

704,000

814,000

1,072,000

1,092,000

1,380,000

839,000

8s

ss
ss

9S

9

9S

ss

£
198,000*
295,000
511,000
8l9,O0O
945,000
I,304,O0O

568,000*

7.
9

6S
8
10

1 OS
11

ss

From 1846 in the case of the Specie held.

ch. xix] TABLES OF FLUCTUATIONS, SUMMARY

193

TABLE 36 {continued).

Holland and Belgium, Note Circulation Bank of England, Bullion in Issue
Bankers' Clearing House Returns, Scotch and Irish Note Circulation, and Specie held.

Bullion in the Issue Depart-

Liabilities of the Bank of

Reserve of the Bank of England

ment of the Bank of England

England

(see Table 7,

p. 71).

(see Table n, pp. 82, 83).

(see Table

11, pp. 82, 83;.

Proportion

Difference between

Mean of the

Difference between

Mean of the

Difference between

Mean of the

of Reserve

the Highest Month

extreme Vari-

the Highest Month

extreme Vari-

the Highest Month

extreme Vari-

to Liabili-

and the Lowest

ations during

and the Lowest

ations during

and the Lowest

ations during

ties (see

Month.

each Period.

Month.

each Period.

Month.

each Period.

Table 11,
p. 82).

£

7.

£

7„

£

7.

7.

885,000

35

3,109,000

9

2,004,000

11

52

1,485,000

55

1,862,000

5

2,038,000

12

42

1,867,000

45

3,712,000

7

2,449,000

io'S

43

2,940,000

55

5,053,000

8

2,837,000

95

44

3,909,000

8-5

5,201,000

75

3,432,000

11

45

3,982,000

6

7,505,000

7

5,372,000

105

51

2,005,000

5

3,914,000

7

2,460,000

9

46

Bank of Belgium Rate

of Discount

(see Table 33, p. 187).

Country Note Circula-
tion of England
(see Table 8, p. 75X

Clearing House Returns
(see Table 18, p. 133).

Difference
between the

Highest

Month and

the Lowest

Month.

Mean of the

extreme

Variations

during each

Period.

Difference
between the

Highest
Month and
the Lowest

Month.

Mean of the

extreme

Variations

during each

Period.

Years.

Difference

between the

Highest Month

and the
Lowest Month.

Mean of the

extreme

Variations

during each

Period.

s. d.
5 O*

13 5
15 6

17 5
9 10
8 0

10 0*

7.

35

95

JO'S

13
8
6

75

£
636,000
583,000
549,000
443,000
262,000
240,000

465,000

7.
45
5

55
55
55
85

5

1868-1874
1875-1884
1885-1894
1895-1900

1868-1900

£

102,112,000

115,386,000

95,489,000

113,815,000

80,397,000

7.

13

12

85
85

75

* From 1851.

IRISH NOTE CIRCULATION AND SPECIE HELD AGAINST IT
(see Table 16, pp. 121-3, and Table 17, pp. 124-131).

Note Circulation.

Specie Hele

> AGAINST IT.

Difference between the

Mean of the extreme

Difference between the

Mean of the extreme

Highest Month and the

Variations during each

Highest Month and the

Variations during each

Lowest Month.

Period.

Lowest Month.

Period.

£

7.

£

%

999,000

9

262,000*

8

1,005,000

8

302,000

7

1,294,000

95

518,000

10

1,340,000

95

512,000

85

974,000

75

401,000

65

1,057,000

8

422,000

7

1,103,000

85

352,000*

7

From 1846 in the case of the Specie held.

i94 FLUCTUATIONS IN THE RATE [ch. xix

and Belgium have not been so uniform as in France, none of
these banks show anything like the same extremes of variation
as are found in England. Nor are such fluctuations found
in any other business movements in England of which we
possess any indications as, for instance, in the proportions
between the reserve and liabilities of the Bank or of the specie
in the Issue Department.

The fluctuations in the London Bankers' Clearing House
returns, which represent the amount of business passing from
month to month, do not show any variations so extreme as
those of the discount rate of the Bank of England, nor do
the figures of the note circulation of the Bank of England, nor
those of the English country note circulation, exhibit any
similar movement. This last, though now greatly shrunken
from the position it once held, yet reflected closely while it was
more general than it became of recent years the requirements
of English provincial business, and did this very distinctly when
the note circulation extended more widely over the country.
The returns of the Scotch and of the Irish note circulations show
considerable fluctuations, but these also are not so extreme as
the fluctuations in the rate charged by the Bank of England.

It should be added that these summary tables were brought
together thus with the view of examining whether any corres-
pondence of fluctuation might be found. The only place in
which such a correspondence exists is in the fluctuations of the
Scotch and Irish note circulations, which, through the operation
of the Bank Acts of 1844-5, are brought to bear directly on
the reserve of the Bank of England. The autumnal drain
also must be remembered (see Chapter XIV., p. 138).

It is well to mention here that these tables were originally
drawn up in much greater detail, principally in annual, some in
monthly averages. In this shape, while the information con-
tained in them was very instructive, they were so cumbrous
that publication was not advisable. The comparison has there-
fore been shown between the fluctuations in the decades into
which the various tables are divided because this was the most
convenient method of placing the information before the reader
in a succinct form. These tables show that the fluctuations in
the rate charged by the Bank of England have been far

ch. xix] FLUCTUATIONS IN RATE, HIGHEST IN ENGLAND 195

greater, more rapid, and more extreme than at any other bank
in Europe.

To make this point perfectly clear Tables 37, p. 196, 38,
p. 197, and 39, p. 198, have been prepared. Table 2>7 shows
the number of variations in the rate of discount charged by all
the five banks in each year from 1844 to 1900; Table 38
the lowest and highest rates and the extent of fluctuation ;
and Table 39 the number and extent of annual fluctua-
tions in the rate — grouped together so as to show the extent
of the fluctuations — and the number of years in which
these fluctuations occurred. This last-mentioned table provides
an interesting compendium of the number and extent of the
fluctuations. These are arranged in order from the lowest
rate of fluctuation to the highest. From it we learn that at
no bank but the Bank of England were there during three
separate years fluctuations so large as of 5 J, 6, and 6J- per cent.
With the exception of the Bank of Germany, and this only
during one twelvemonth, no bank, except the Bank of England,
has shown fluctuations of more than 4 per cent, and 5 per cent,
in one year. In the majority of years the fluctuations at the
other banks did not exceed 1 or 2 per cent. Hence, while the
range of fluctuation at the other banks has been low, it has
been high at the Bank of England.

There can be no doubt that to the borrower, and every man
in business practically must at times be a borrower, this high
range of fluctuation has been a very serious disadvantage.

In a statement like the present it is impossible to put before
the reader more than the merest outline of the subject. No
doubt the commercial position of England — the vast foreign
trade of the country as shown by the enormous amounts of the
exports and imports (see Table 44, p. 213) — the manner in
which London is the clearing house of the world — all expose
the London money market to sharper and more sudden demands
for specie than any other business centre. The demands for
specie are most closely connected with the rate of discount.
The point for us to consider should be : Is our system arranged
on the best plan to meet these demands ? Our method of
keeping all the banking reserves of the country with one bank
enables a great economy to be practised in our specie reserve ;

196

FLUCTUATIONS IN THE RATE

[CH. XIX

TABLE 37.

Number of Variations in Rates of Discount, Banks of England, France, Germany,
Holland (1844-1900), and Belgium (1851-1900).

Bank of England.

Bank of France.

Bank of Germany .

Bank of Holland.

Bank of Belgium.

Years.

No. of Variations

No. of Variations

No. of Variations

No. of Variations

No. of Variations

Years.

in Rate.

in Rate.

in Rate.

in Rate.

in Rate.*

1844

I

No change

I

No change

—

1844

1845

2

No change

2

5

—

1845

1846

I

No change

2

2

—

1846

1847

9

2

I

1

—

1847

1848

3

No change

2

4

—

1848

1849

1

No change

I

1

—

1849

1850

1

No change

No change

1

—

1850

1851

No change

No change

No change

No change

No change

1851

1852

2

1

No change

No change

1

1852

1853

6

1

1

2

No change

1853

1854

2

2

I

No change

No change

1854

1855

8

2

I

2

No change

1855

1856

7

2

4

3

I

1856

1857

9

8

6

8

4

1857

1858

6

4

s

6

4

1858

1859

5

2

2

No change

2

1859

1860

11

1

No change

No change

2

1860

1861

11

7

No change

2

5

1861

1862

5

4

No change

4

3

1862

1863

12

8

I

6

3

1863

1864

IS

11

4

9

6

1864

1865

16

6

5

11

6

1865

1866

14

7

8

11

6

1866

1867

3

2

No change

6

1

1867

1868

2

No change

No change

2

No change

1868

1869

7

No change

I

5

No change

1869

1870

10

4

5

12

5

1870

1871

10

2

2

2

11

1871

1872

14

I

1

6

9

1872

1873

24

4

7

9

16

1873

1874

13

2

4

3

9

1874

1875

12

No change

5

1

9

1875

1876

5

I

6

No change

2

1876

1877

7

1

7

No change

2

1877

1878

10

1

3

2

3

1878

1879

5

2

5

2

4

1879

1880

2

2

5

No change

2

1880

1881

6

2

3

3

7

1881

1882

6

3

4

8

10

1882

1883

6

1

1

5

1

1883

1884

7

No change

No change

1

2

1884

1885

7

No change

3

1

4

1885

1886

7

No change

5

No change

6

1886

1887

7

No change

2

No change

2

1887

1888

9

4

2

No change

6

1888

1889

8

2

4

No change

4

1889

1890

11

No change

3

4

2

1890

1891

10

No change

4

3

No change

1891

1892

4

I

2

1

1

1892

1893

12

No change

3

6

1

1893

1894

2

No change

2

2

No change

1894

1895

No change

1

1

No change

1

1895

1896

3

No change

3

2

1

1896

1897

6

No change

5

1

No change

1897

1898

6

1

6

1

I

1898

1899

6

2

7

4

6

1899

1900

6

4

3

3

2

1900

Total
Variations

400

in

161

173

173

Commenced operations in 1851.

ch. xix] FLUCTUATIONS IN RATE AT THE FIVE BANKS 197

TABLE 38.

Lowest and Highest Rates charged and Extent of Fluctuation during each year, Banks
of England, France, Germany, Holland (1844-1900), and Belgium (1851-1900).

Bank

Bank

Bank

Bank

Bank

OF

England.

of France.

of Germany.

of Holland.

OF

Belgium.

Year.

«_,

M

(i

„

•J

k

«

f .

rt

g

VI .

■

44

</) .

k

Year.

8 «

2 d
0 0

id

CJ 0

4> «j

V U

2d

u 0

is c«

0) <D

3n
0 0

0 *j

4) V

h

•J*

£*

3*3

m

°04
h3^

ffi*

3-3

fa

3*

w«

3 \3

fa

OrvJ

ST*

3 -^

fa

S*

3--
fa

1844

No

chan

ge

No

chan

ge

4%

4l%

1%

No

chan

ge

—

1844

1845

«i%

31%

1%

No

change

4

5

1

2i%

51%

3%

—

1845

1846

3

31

1

No

chan

ge

4

5

1

4

51

11

/~V_

1846

1847

3

8

5

4%

5%

1%

4l

5

1

4

5

1

Operations

1847

1848

3

5

2

No

chan

ge

4l

5

1

3

5

2

commenced

1551.

1848

1849

•)

3

1

No

chan ge

4

4l

1

21

3

1

—

—

1849

1850

aj

3

1

No

chan ge

No

chan

ge

2

2I

1

—

—

1850

1851

No

chan

ge

No

chan

ge

No

chan

ge

No

chan

ge

No

chan

ge

1851

1852

2

2i

1

3

4

No

chan

ge

No

chan

ge

3%

4%

1%

1852

1853

2

5

3

3

4

4

5

1

2

3

1

No

chan

ge

1853

1854

5

51

1

4

5

4

5

1

No

chan

ge

No

chan

ge

1854

1855

31

7

31

4

6

4

4l

1

3

4

1

No

chan

ge

1855

1856

4)

7

21

5

6

4

6

2

4

51

11

3

4

1

1856

1857

5i

10

41

5

9

5

71

21

4

7

3

3i

51

2

1857

1858

S

8

51

3

5

4

61

21

3

7

4f

3

5

2

1858

1859

t$

4l

2

3

4

4

5

1

No

chan

ge

3

4

1

1859

1860

•ft

6

31

31

4i

No

chan

ge

No

chan

ge

3

4

1

1860

1861

3

8

5

41

7

21

No

chan

ge

3

4

1

3

5

2

1861

1862

2

3

1

31

5

11

No

chan

ge

31

4

1

3

4

1

1862

1863

3

8

5

31

7

31

4

4l

1

3

5

2

3

51

21

1863

1864

6

9

3

41

8

31

4l

7

21

41

7

21

4

6

2

1864

1865

3

7

4

3

5

2

4

7

3

3

6

3

3

6

3

1865

1866

Si

10

61

3

5

2

4

9

5

4i

7

21

3

6

3

1866

1867

2

31

11

21

3

1

No

chan

ge

21

4l

2

21

3

1

1867

1868

2

3

1

No

chan

ge

No

chan

ge

21

31

1

No

chan

ge

1868

1869

i}

4i

2

No

chan

ge

4

5

1

2i

5

21

No

chan

ge

1869

1870

al

6

31

2i

6

31

4

8

4

3

6

3

21

6

31

1870

1871

2

5

3

5

6

1

4

5

1

3

4

1

2i

51

3

1871

1872

3

7

4

5

6

1

4

5

1

2I

5

21

21

51

3

1872

1873

3

9

6

5

7

2

4

6

2

4

61

21

31

7

31

1873

1874

2i

6

31

4

5

1

4

6

2

31

5

H

31

6

21

1874

1875

2

6

4

No

chan

ge

4

6

2

3

31

1

3

4l

11

1875

1876

2

5

3

3

4

1

31

6

21

No

chan

ge

21

31

1

1876

1877

2

5

3

2

3

1

4

51

11

No

chan

ge

21

31

1

1877

1878

2

6

4

2

3

1

4

5

1

3

4

1

21

4i

2

1878

1879

2

5

3

2

3

1

3

4l

H

3

4

1

21

4

11

1879

1880

21

3

1

2i

31

1

4

51

il

No

chan

ge

3

31

1

1880

1881

21

5

21

31

5

11

4

51

11

31

41

1

3l

51

2

1881

1882

3

6

3

31

5

11

4

6

2

31

51

2

31

6

21

1882

1883

3

5

2

3

3i

1

4

5

1

31

51

2

31

4

1

1883

1884

2

5

3

No

chan

ge

No

chan

ge

3

31

1

3

4

1

1884

1885

2

5

3

No

chan

ge

4

5

1

21

3

1

3

4

1

1885

1886

2

5

3

No

chan

ge

3

5

2

No

chan

ge

2l

4

11

1886

1887

2

5

3

No

chan

ge

3

5

2

No

chan

ge

2l

31

1

1887

1888

2

5

3

21

41

2

3

4l

11

No

chan

ge

21

5

21

1888

1889

21

6

31

3

4

1

3

5

2

No

chan

ge

3

5

2

1889

1890

3

6

3

No

chan

ge

4

51

11

21

41

i2

3

4

1

1890

1891

21

5

21

No

chan

ge

3

51

21

3

41

11

No

chan

ge

1891

1892

2

31

11

21

3

1

3

4

1

21

3

1

21

3

1

1892

1893

21

5

21

No

chan

ge

3

5

2

21

5

21

2i

3

1

1893

1894

2

3

1

No

chan

ge

3

5

2

2i

3i

1

No

chan

ge

1894

1895

No

chan

ge

2

2l

1

3

4

1

No

chan

ge

21

3

1

1895

1896

2

4

2

No

chan

ge

3

5

2

21

31

1

si

3

1

1896

1897

2

4

2

No

chan

ge

3

5

2

3

31

1

No

chan

ge

1897

1898

21

4

11

2

3

1

3

6

3

21

3

1

3

4

1

1898

1899

3

6

3

3

4i

11

4

7

3

21

5

21

3l

5

11

1899

1900

3

6

3

3

41

H

5

7

2

31

5

11

4

5

1

1900

198

FLUCTUATIONS IN THE RATE

[CH. XIX

TABLE 39.

Number and extent of Annual Fluctuations in Rate at the Banks of England, France,
Germany, Holland (1844-1900), and Belgium (1851-1900) during each year, grouped
together so as to show the extent of the fluctuations and the number of years in
which these fluctuations occurred.

Bank of

Bank of

Bank of

Bank of

Bank of

Extent of Annual

England.

France.

Germany.

Holland.

Belgium.

Fluctuations

X

Number of

Number of

Number of

Number of

Number of

Years.

Years.

Years.

Years.

Years.*

i

6

4

6

9

7

1

4

17

13

11

13

i*

3

5

6

5

4

2

6

6

13

6

7

H

4

1

5

7

4

3

15

—

3

4

4

34

5

3

—

—

2

4

4

1

1

1

—

44

1

—

—

—

—

5

3

—

1

—

—

51

6

64

1

1
1

—

—

—

—

—

—

—

—

Total .

54

37

48

43

41

Years in which

no change

occurred .

3

20

9

14

9

Years

57

57

57

57

50

* Bank of Belgium commenced 1851.

but on this one bank also all the demands connected with the
note circulation of the country concentrate — both in England,
Ireland, and Scotland — besides all the demands for the internal
circulation of specie, of which an example is shown in the
statement of the autumnal drain on the Bank of England for
the twenty years 1 881-1900 (Chapter XIV., p. 138), and all the
demands for specie for export. These demands all fall on a
reserve arranged as directed by the Act of 1844, which divides
the resources of the Bank artificially into two parts, and causes
the demand to fall on the smaller of them. The Act also has
altered the composition of the reserve through increasing since
1844 the amount of the note circulation allowed to be issued
against securities. See Chapter XXL, pp. 221-224.

The division of the Issue Department and the Banking
Department, although, no doubt, it has advantages, by directing
immediate attention to the amount of free resources which the
Bank has at its disposal, nevertheless tends to render the

ch. xix] FIXITY OF ASSETS, BANK OF ENGLAND 199

amount actually available to meet any sudden demand smaller
than it would be if this artificial arrangement were not followed.
Then while at times the regulations of the Act of 1844 — which
direct the Bank to buy standard gold up to any amount
at a fixed price, whether needed for banking requirements or
not — compel it to allow its reserve to be replenished at the
will of the casual importer of gold — not of the responsible
authorities of the Bank — thereby causing at times an unneeded
accumulation, from which a low bank rate ensues, while at
other times such an accumulation is followed by an opposite
movement, and a tightness in the money market, both these
movements being unconnected with the natural requirements
of trade. All these matters are not without influence on
the constant fluctuations in the rate. Table 7, p. 71, which
contains a statement of the movements of the gold bullion in
the Issue Department of the Bank, gives an outline of these
transactions. An examination of this table, together with
Table 11, pp. 82, 83, which compares the fluctuations in the
liabilities and in the reserve, will be instructive, as will also be
the comparison of the fluctuations in the rate of discount, the
note circulation, the bullion, the liabilities, and the reserve
shown in Table 36, pp. 192, 193. But search where we may
in the accounts of the Bank, the fluctuations in the rate of
discount exceed in severity all the other fluctuations which are
recorded there.

In considering the extent of these fluctuations something
must be ascribed to the deficiency of fluidity in the assets
of the Bank. That the securities held are all of the most
dependable description there can be no doubt, but it is believed
that the greater part by far are fixed securities. Little is now
known as to the amount of bills discounted and of short loans,
from which sources immediate supplies of ready cash can be
obtained, hence this part of the subject can only be spoken of
in very general terms. The general opinion is that the short
loans are only occasionally of any important amount — that the
amount of bills discounted now is but small. The traditions
handed down from the patriarchs of the discount market
respecting the amount of bills held by the Bank thirty or forty
years ago, and their vivid description of the very considerable

200 FLUCTUATIONS IN THE RATE [ch. xix

influence which the Bank of England once exercised over that
market, to which there is nothing corresponding now, joined to
the statement published by the Bank down to the year 1875
(see Table 3, cols. 30, 31, and 32, p. 14), lead to the
impression that the Bank can now hold only a very small part
of its assets in securities of this description. As is well known,
if the Bank of England desires to M take money off the
market " quickly it can only do this by working on its
Consols. It does not hold any large amount of bills, which
maturing rapidly would place it in possession of resources in
cash without disturbing the outside market, nor has it any very
large amount of short loans which it can draw in. Hence the
action of the Bank must always be severe, though its action in
protecting the reserve is most necessary.

If the balance-sheet of the Bank of England is compared
with the balance-sheets of the other banks cited, the difference
of their position will be seen, both in regard to the fluidity of
their resources and also to the amount of bills they hold in
foreign centres.

In order to enable the reader to make this comparison, the
balance-sheet of the Bank of England for February 6th, 1902,
has been given, both as it stands in the weekly returns and as
it would appear if arranged as the balance-sheets of the other
great issuing banks are. This will be found in Table 40,
pp. 206, 207, with the balance-sheets of the Banks of France,
Germany, Holland and Belgium for facility of comparison.

The first point that strikes the reader is the enormous
capital of the Bank of England — more than £"18,000,000,
including the rest or undivided profits. This amount com-
pares with a capital of ,£9,000,000, including profits in addition,
at the Bank of France, and of ,£9,700,000, including reserve,
at the Bank of Germany. This amount is to be raised to
.£12,000,000 by the law of 1899. The capital and reserve
of the Bank of Holland are about .£2,000,000, and of the
Bank of Belgium about £"3,000,000.

In respect of the amount of capital which it possesses the
Bank of England has a great advantage over the other banks.
When we proceed to the specie and bullion held the results are
different. At the nearest convenient dates to that mentioned

ch. xix] CAPITAL, DEPOSITS, BILLS AT THE FIVE BANKS 201

above — the dates will be found given in Table 40, pp. 206, 207
— the holding in specie of the Bank of England was
£36,000,000, including perhaps ;£ 1,000,000 in silver; of the
Bank of France, .£143,000,000, including .£44,000,000 in silver ;
at the Bank of Germany, .£43,000,000, including ,£12,000,000
in silver and divisional money ; at the Bank of Holland,
.£11,450,000; and at the Bank of Belgium, ^4,600,000. The
amounts are given in round figures in all cases. In the deposits
there are great differences. Including public deposits, there
were at the Bank of England .£51,000,000; at the Bank of
France, .£39,000,000; at the Bank of Germany, .£28,500,000;
at the Bank of Holland, ^400,000 ; and at the Bank of Belgium,
.£3,600,000. The differences between the amounts of notes in
circulation issued by the banks are as considerable as those in
the deposits. The notes in the hands of the public were : At
the Bank of England, £"29,000,000 ; at the Bank of France,
.£163,000,000; at the Bank of Germany, ,£74,000,000 ; at the
Bank of Holland, £18,500,000; at the Bank of Belgium,
;£ 2 6, 000, 000.

The great difference, however, between the banks is in the
composition of the securities held. The amount, shown in
Table 40, pp. 206, 207, was .£62,000,000 at the Bank of
England. Few particulars are known, except that a large
amount is held in fixed securities, and it is best not to attempt
conjecture. The Bank of France held .£55,000,000. Of this
over .£31,000,000 was in bills, all at short dates, and about
;£ 2 4,000, 000 in advances on securities, all equally for short
periods. At the Bank of Germany, out of .£64,000,000, about
.£50,000,000 was in bills, none at long dates, including
.£2,100,000 on England and .£8,000,000 in advances on
securities, all also for short periods. About ,£6,200,000 was
invested in securities. At the Bank of Holland, out of
.£10,000,000, about ,£4,400,000 was in bills, more than
.£900,000 of these being on foreign countries. ^"4,000,000
was in loans, also at short dates. At the Bank of Belgium,
out of about £"28,000,000, more than .£19,000,000 was in bills,
;£6, 500,000 of these on foreign countries. £5,000,000 was
in advances on government securities and other advances at
short dates, and about £3,000,000 in investments of a fixed

202

FLUCTUATIONS IN THE RATE

[CH. XIX

character, including those held for the reserve fund. This
rough analysis shows in what different forms of securities
the amounts held by the different banks are invested. The
largest holder of fixed securities is the Bank of England ; all
the other banks hold their funds in a more readily available
form.

The large amount of specie held, the ready preparation
made to meet any emergency, are among the causes which
enable the great banks of the Continent to avoid the constant
changes and the violent fluctuations in the rate which occur in
England. The placing the balance-sheets together thus enables
the reader to examine the facts for himself, in the same way as
the statements in Table 36, pp. 192, 193, enable him to com-
pare the fluctuations in the rate of discount charged by these
banks during the period over which this investigation extends.

CHAPTER XX

SOME REMARKS ON THE RATE OF DISCOUNT OF THE BANKS
OF ENGLAND, FRANCE, GERMANY, HOLLAND, AND BELGIUM

PAGE

Some remarks on Rate of Discount of
the Banks of England, France, Ger-
many, Holland and Belgium. Num-
ber of days at each rate compared 203-2 10

Table 40. Balance-sheets of Banks oi
England, France, Germany, Holland
and Belgium compared . . 206-207

For the last twenty-five years the Rate
lower in Paris than in London . . 209

Table 41. Rate of Discount of Banks of
England, France, Germany, and Hol-
land, 1844-1900, and Belgium, 1851-
1900. Number of days at each rate
arranged from lowest rate to highest,
and proportion per milk at each rate . 209

Tendency to greater Variations and
number of Fluctuations to be expected 210

Foreign money in England and English
capital abroad . . . 210-212

Table 42. Average Minimum Rate of
Discount charged by Banks of England,
France, Germany, and Holland for
years 1845-1900, and Belgium for years
185 1 -1 900, showing average for the
groups of years and for the whole
period . ... 210

Table 43. Years in which no change
took place in the Rate of Discount of
Banks of England, France, Germany,
Holland, and Belgium, 1844-1900 . 211

PAGE

Bonds of Foreign Governments frequently
held in England . . .212

Foreign Bills scarcely held . . .212

Arrangements by which Foreign Banks
meet demands arising from adverse
exchanges . . . .212

Demand for Gold for Export . 212-213

Our Exports and Imports compared 213-214

Table 44. Foreign trade of United
Kingdom (1861-1900), Imports and
Exports, and London Clearing House
Returns (totals at intervals of ten
years) . ...

Need of a strong Bullion Reserve .

Advantages of London Money Market
being the point where many monetary
transactions are carried on, and that
this country is so largely the Clearing
House of the World

Disadvantages to business in this country
of sudden and great Fluctuations in
Rate of Discount

Supply of Loanable Capital at moderate
rates important to Trade

Table 45. Average Monthly Discount
Rate, with proportion of each month
to annual Average Rate, 1845- 1900, at
Banks of England, France, Germany,
and Holland, Belgium 1851-1900, and
at London Bankers' Clearing House
1868-1900 . ...

213
215

21S

216

216

216

A review of some of the more important points of similarity
and contrast in the operations and the rate of discount of the
Banks of England, France, Germany, Holland, and Belgium
will not be out of place here.

In one respect there is a difference between the rate
charged at the Bank of Germany and those charged at the
other banks between the years 1844 and 1900, and that is in
the minimum rate of discount charged. The Bank of England,
the Bank of France, and the Bank of Holland lowered their

203

204

REMARKS ON THE RATE OF DISCOUNT [ch. xx

rates not infrequently to 2 per cent, in the course of those
years. The rate of the Bank of Belgium dropped for a
considerable time to 2^ per cent., but the Bank of Germany
has never charged less than 3 per cent. During the period
under review the rates from 2 to i\ per cent, at the Bank
of England were as below : —

Bank of England, 1844 to 1900,

Days.

2 per cent, for . . .

• 3)409

2j ,, . . • .

28

2£ „ . . . .

. 2,997

6,434

That is to say, for nearly one-third of the whole time the
charges were at these low rates. The average rate charged by
the Bank of France has been fractionally lower than that charged
by the Bank of England, and it has charged less than 3 per cent,
for a considerable period. The rates below 3 per cent, in the
time under our notice were as follows : —

Bank of France, 1844 to 1900.

Days.

2 per cent, for . . .

2,027

2 II • • • •

• 2,579

4,606

Thus, in France extremely low rates only prevailed for
about two-thirds of the time that they did in England. Still
in France the time during which rates of 2 and 2\ per cent,
lasted was more than one-fifth of the whole, a far from
unimportant fraction. The corresponding figures in Holland
are as follows : —

Bank of Holland, 1844 to 1900.
2 per cent, for . . .

22 » • • •

Days.
1,328

4,737

6,065

This approaches very nearly to the number of days at
similar rates in England. In Belgium 2 per cent, has never
been charged ; i\ is the lowest rate quoted by that Bank.

Bank of Belgium, 1851 to 1900. Days.

2 J per cent, for . . . .. 3,169

About half the length of time of low rates in England or
in Holland.

ch. xx] RATES AT THE FIVE BANKS COMPARED

205

While, however, extremely low rates have thus prevailed
for a considerable time in England, and for a long period,
though not equally long, in France, Holland, and Belgium,
the rate at Berlin never dropped to 3 per cent, till 21st March,
1879, and was at 3 J per cent, for 178 days only during the
years under our notice.

The number of days at the rates of 3 and 3^ per cent.,
which we may call intermediate rates, was as follows for all the
five banks : —

Bank of England, 1844 to 1900. Days.

3 per cent, for . . ... 4,907

3} >i • • ... 1,739

6,646

Bank of France,

1844 TO I9OO.

Days.

3 per cent.

for

. .

• 5.557

si

• •

•

■ 1,815
7,372

Bank of Germany,

1844 TO 1900.

Days.

3 per cent.

for

.

. 2,640

3^- >,

• •

•

178
2,818

Bank of Holland,

1844 TO 1900.

Days.

3 per cent.

for .

•

• 6,443

3j

• •

• •

• 3,03°
9,473

Bank of Belgium,

1851 TO 1900.

Days.

3 per cent.

for .

.

• 7,454

3i

•

. •

. 2,426

9,880

Taking the length of time that rates up to 3^ prevailed, the
figures are as follows :-

Days.

Per cent.

of whole Period.*

Bank of England

. 13,080

. 64

Bank of France

. 11,978

• 58

Bank of Germany

2,818

• 14

Bank of Holland

• 15,538

• 75

Bank of Belgium

. 13,049

. 72

The greatest number of days recorded at one rate is that
when the rate stood at 4 per cent, at Berlin.

* The whole period is 20,570 days for the Banks of England, France, Germany,
and Holland; 18,262 days for the Bank of Belgium.

206

REMARKS ON THE RATE OF DISCOUNT

r

[CH.

XX

TABLE 40.

Balance Sheets of the Banks of England, France, Germany, Holland,

and Belgium.

BANK OF ENGLAND.— Issue Department.

Liabilities.

Notes Issued

£

51,899,605

£51,899,605

Assets.
Government Debt .
Other Securities
Gold Coin and Bullion

£

11,015,100

6,759,900

34,124,605

£51,899,605

Banking Department.

Proprietors' Capital

Rest

Public Deposits* .

Other Deposits

Seven-days and other Bills

£

14,553.000

3,561,102

12,338,295

39,051,746
250,019

£69,754,162

Government Securities

Other Securities

Notes

Gold and Silver Coin

£
17,274,486
27,295,812

22,939,995
2,243,869

£69,754,162

* Including Exchequer, Savings Banks, Commissioners of National Debt, and Dividend Accounts.
Dated February 6th, 1902. John G. Nairne, Chief Cashier.

BANK OF FRANCE— Balance Sheet, December ^ist, 1901.
Francs converted as 25 = £1.

Liabilities.

£

Assets.

£

Capital of the Bank

. 7,300,000

Coin and Bullion at Paris and at

Reserve and Profits in addition

the Branches

142,621,904

to Capital

1,700,622

Amount of Bills —

Notes payable to bearer in circu

.

Paris .£12,101,855

lation(head office and branches) 162,888,252

Branches . 19,620,233

Drafts .

1,039,749

31,722,088

Current Account with Treasury

8,098,797

Advances on Bullion, Money, and

Current Accounts and Deposit

Securities —

Accounts —

Paris .£11,861,298

Paris . £28,894,315

Branches . 11,891,898

Branches . 2,581,153

23,753,196

- 31,475,468

Advances to Government (laws

Dividends unpaid, etc., etc.

. 2,626,634

of June 9, 1857, June 13, 1878,

November 17, 1897)

7,200,000

Government Stock (Reserve Fund

» 5*9,230

Disposable Funds, Government

Stock . ...

3,985,092

Immovable Funds, Government

Stock (law of June 9, 1857) .

4,000,000

Amount appropriated to Special

Reserve

336,297

Office and furniture of the Bank

and buildings at the Branches,et

I

rance Sheet, March 31st, 1902.

c. 991,715

£215,129,522

>LLAND— Bai

'2 1 5, 129,522

BANK OF HC

Guilders conver

ted as I2=£i.

Liabilities.

£

Assets.

£

Capital .

1,666,667

Coin, Bullion, etc. .

11,457,222

Reserve .

444,3"

Inland Bills

3,521,660

Notes in circulation

18,502,638

Foreign Bills

940,114

Transfers

126,766

Loan Accounts

3,846,765

Current Accounts .

380,068

Advances on Current Accounts

544,288

Discount on Inland Bills

12,318

Investments — Capital

775,379

,, ,, Foreign Bills

1,542

,, Reserve

62,666

Sundry liabilities .

85,205

Sundry Assets, Buildings, etc.

145,615

Net Profit for distribution

74,194

£21,293,709

£21,293,709

Note. — AW per contra entries, as those of the notes of the Banks held by themselves, etc.,
are omitted so as to show the real position of the accounts.

ch. xx] BALANCE SHEETS OF THE FIVE BANKS COMPARED 207

TABLE 40 {continued).

BANK OF ENGLAND— Balance Sheet, February 6th, 1902.

Arranged so that it corresponds in form with the Balance Sheets of the other Banks given here.

Liabilities.

Capital and Rest .
Notes in Circulation
Seven-days and other Bills
Public Deposits
Other Deposits

£
18,114,102
28,959,610
250,019
12,338,295
39,051,746

>£98,7I3»772

Assets.

Gold Coin and Bullion and Silver
Coin . ...

Government Securities in both
Departments

Other Securities

36,368,474

35,049,486
27,295,812

£98,713,772

IMPERIAL BANK OF GERMANY— Balance Sheet, December 31*/, 1901.
Marks converted as 20 =£1.

Liabilities.

Capital and Reserve . .

Notes in circulation

Amount due on Clearing and

Current Accounts
Deposits (not bearing Interest) .
Sundry Liabilities and Reserve

for Doubtful Debts
Net profits for 1900

£
9,731,962
74,085,220

28,525,014
37,638

556,389
827,875

£113,764,098

Assets.

Gold in Bars .
German Gold Coin

Silver, Thalers
Divisional Money

£9,776,698
21,832,532

6,911,620
4.905,790

31,609,230

11,817,410

43,426,640
Notes of Imperial Treasury (Reichs-

kassenscheinen) . . . 900,281

Notes of other Banks . . 540,130

Bills held, due within fifteen days 16,637,085
Bills held, due at later dates . 31,128,690

47,765,775

Bills drawn on Eng-
land

Bills drawn on other
foreign places

£2,171,987
26,088

2,198,075

49,963,850
Loans . ... 8,071,878

Securities. . . . 6,181,266

Value of Real Property belonging

to the Bank . . . 1,863,360

Sundry Assets . . . 2,816,693

£113,764,098

NATIONAL BANK OF BELGIUM— Balance Sheet, December 31^, 1901.
Francs converted as 25=^*1.

Liabilities.

£

2,000,000

1,144,698

25,973,213

3,580,553

6o7,354

Assets.

Capital paid-up

Reserve Fund

Notes in circulation

Current Accounts .

Stamp Duty, Share of Profits due
to the Government, Employes'
Superannuation, Provident
Funds, Dividend due, etc.

Specie and Bullion

Bills discounted

Securities due for Collection

Advances on Government Secur-
ities . ...

Government and Reserve Fund
Securities

Securities for Current Accounts, etc.

£
4,646,127

19,131,747
2,840,784

2,210,826

3,121,480
1,354,854

£33,3o5,8i8

£33,305,8i8

Note. — AWfler contra entries, as those of the notes of the Banks held by themselves, etc.,
are omitted so as to show the real position of the accounts.

208 REMARKS ON THE RATE OF DISCOUNT [ch. xx

The particulars are as follows : —

Bank of England, 1844 to 1900.

4 per cent, for . . .

4j » • • •

5 »» • • •

Bank of France, 1844 to 1900.

4 per cent, for . . .

4-i » • • •

5 » • • • •

Bank of Germany, 1844 to 1900.

4 per cent, for . . .
4s »> • • •

5 ■ • •

Bank of Holland, 1844 to 1900.

4 per cent, for . . .
4i j> • • •

5 • • •

Bank of Belgium, 1851 to 1900.

4 per cent, for . . . .
4a >, • • •

5 >> • • •

Days.

2,698

481

2,012

5^91

Days.

• 4>5I6

353
. 2,061

6,930

Days.

• 11,077

• i,439
. 3,648

16,164

Days.
2,104

• 651

• i>399
4,154

Days.

• 3,017

643
681

4,341

To make this point thoroughly clear, a summary statement,
marked Table 41, p. 209, is added, showing the number of
days at each rate, arranged from the lowest rate charged
to the highest, for each of the five banks.

It appears from this table that comparatively high rates
were charged for the longest time in Germany; the next longest
in France ; the next longest in England ; the next longest in
Belgium ; and for the shortest time in Holland. But if the
rate never fell below 3 J per cent, in Berlin between 1844
and 1875, it never rose above 9 per cent, and, indeed, stood
at that high point for sixty-three days only during the period
under consideration, that is for a very inconsiderable fraction
of the whole time. The average of the rate, however, charged

ch. xx] DAYS AT EACH RATE, THE FIVE BANKS COMPARED 209

in Berlin has been higher than at London or Paris, in Holland
or in Belgium. The figures are —

£ s. d.

England (1845-1900)

. 3 12 0

France ( „ )

. 3 n 9

Germany ( „ )

.451

Holland ( „ )

.364

Belgium (1851-1900)

.381

Shown in averages of ten years the statement Table 42, p. 210,
points out that on average, from 1875 onwards, the rate of
discount has been lower for the last five-and-twenty years in
Paris than in London.

For the remaining variations in the rate readers should
look to Table 36, pp. 192, 193, in which all the variations of the
rate at each of the five banks are summarised, to all the other
tables there referred to, and to Table 45, p. 216.

There have been at Berlin as well as at Paris, in Holland,
and in Belgium some years in which the rate of discount never
varied at all, and there have been two years, though only two,
at the Bank of England in which a similar occurrence took
place, see Table 43, p. 211.

TABLE 41.

Rate of Discount, Banks of England, France, Germany, and Holland, 1844-1900, and
Belgium, 1851-1900. The Number of Days at each Rate, arranged from the
Lowest Rate to the Highest, and the Proportion per mi lie at each Rate.

Bank of England.

Bank of France.

Bank of 1

3ermany.

Bank of Holland.

Bank of Belgium.*

Rate

Number

Number

Number

Number

Number

Number

Number

Number

Number

Number

per

of Days,

of Days

of Days,

of Days

of Days,

of Days

of Days,

of Days

of Days,

of Days

Cent.

20,570.

= 1,000.

20,570.

= 1000.

20,570

= 1,000.

20,570.

= 1,000.

18,262.

= 1,000.

2

2*

3,409
28

166

2,027

98

...

...

1,328

65

2,997

146

2,579

126

...

...

4,737

230

3,l69

174

3

4,907

239

5,557

270

2,640

I2Q

6,443

3'3

7,454

408

H

i,739

84

1,815

88

178

9

3,°30

147

2,426

132

4

2,698

'3'

4,5i6

221

11,077

540

2,104

102

3,oi7

16s

4*

481

^3

353

*7

1,439

70

651

32

643

35

5

2,012

98

2,061

IOO

3,648

177

i,399

68

681

37

5*

259

13

120

6

430

21

367

18

372

21

6

868

43

1,170

57

730

35

226

11

473

26

6*

9i

4

8

...

5o

2

150

7

...

7

577

28

286

14

234

11

135

7

27

2

7*

...

21

1

44

2

...

...

...

8

'268

*$

41

2

37

1

...

...

...

...

9

95

5

16

...

63

3

...

...

...

10

141
20,570

7

...

...

...

...

...

1,000

20,570

1,000

20,570

1,000

20,570

1,000

18,262

1,000

* From 1851 to igoo.

210

REMARKS ON THE RATE OF DISCOUNT [ch. xx

It will be observed from Table 43, p. 211, that there was
one year alone in which all the five banks coincided in making
no alteration in the rate charged, and that was in 185 1. It is an
entirely fortuitous coincidence that in the period under consider-
ation— Bank of Belgium, 1851-1900 (see p. 188) ; Bank of
Holland, 1845- 1900 (see P- l79) — tne number of changes has
been the same — 173 at both banks. It will assist us in under-
standing the variations in the rate to compare the number of
fluctuations at the different banks during the last ten years
under notice.

Bank of Bank of
France. Germany.

Number of Variations in the Rates of Discount, 1891 to 1900.

Bank of
England.

1 89 1 to 1900 . . 55 •
Total amount of varia- I
tions from 1 844 to 1 900 J

* 185 1 to 1900.

in

36
u6 ..

Bank of
Holland.

23 ..
173 •

Bank of
Belgium.^

13
173

The rate charged by the Bank of France has remained
almost uniformly low during the last ten years.

This tendency to greater variations in intensity, and to
a greater number of fluctuations, must be expected to increase
as commerce extends, and as business transactions in different
countries not only become more numerous, but more closely
connected. As is well known, the amount of foreign money
employed in the London money market has increased greatly

TABLE 42.

Average Minimum Rate of Discount charged by the Banks of England, France, Germany,
and Holland for the years 1845-1900, and Belgium for the years 1851-1900, showing
Average for the groups of ten years 1845-54 (Belgium, 1851-54), 1855-64, 1865-74,
1875-84, 1885-94, and f°r six years 1895-1900, and for the whole period, 1845-1900
(Belgium, 1851-1900).

roportion of each
oupto total period

each
eriod
100.

each
eriod
00.

each
eriod
00.

each
eriod
00.

Years.

Bank of
England.

Bank of
France.

roportion of
oup to total p
£3 us. gd.=

Bank of
Germany.

£ 2 <-;

O »o

2 3 s?

Bank of
Holland.

013 »
§2^

2 ON*

Bank of
Belgium.

52 w

?• a* «•»
2 1s?

oh a

*&"

^&

^bb

04 &

£ s.

d.

7.

£ s.

d.

7.

£ s.

d.

7o

£ s.

d.

7o

£ s. d.

V.

1845-54

3 «

5

95

3 19

5

in

4 6

5

102

2 18

4

88

3 7 0

99

1855-64

4 12

9

129

4 14

10

132

4 9

0

WS

3 16

0

115

3 11 11

106

1865-74

3 16

1

106

3 18

II

no

4 12

2

108

3 17

0

116

3 13 11

109

1875-84

3 3

11

89

3 2

I

87

4 5

1

IOO

3 8

2

103

3 7 9

100

1885-94

3 3

2

88

2 17

9

81

3 13

1

86

2 14

8

83

3 1 1

90

1895-1900

3 0

4

84

2 8

8

68

4 4

2

99

3 2

4

94

3 5 1

96

1845-1900

3 12

0

100

3 11

9

100

4 5

1

100

3 6

4

100

3 8 1

JOO

CH. XX]

YEARS OF NO CHANGE IN RATES

211

TABLE 43.

Years in which no change took place in the Rate of Discount
at the Banks of England, France, Germany, Holland (1845-1900),
and Belgium (1851-1900).

Bank of

Bank of

Bank of

Bank of

Bank of

England.

France.

Germany.

Holland. Belgium.

Years.

Years.

Years.

v Years,
vears. (1851-1900.)

—

1844

—

1844

—

1845

—

.. ' —

—

—

1846

—

—

—

—

1848

—

—

—

—

1849

—

—

—

—

1850

1850

—

—

1851

1851

1851

1851

1851

—

—

1852

1852

—

—

—

—

—

1853

—

—

—

1854 •

1854

—

—

—

—

- 1855

—

—

—

.. 1859

—

—

—

i860

i860

—

—

—

1861

—

—

—

—

1862

—

—

—

—

1867

—

—

—

1868

1868

—

1868

—

1869

—

—

1869

—

1875

—

—

—

—

—

—

1876

—

—

—

—

1877

—

—

—

—

1880

—

—

1884

1884

—

—

—

1885

—

—

—

—

1886

—

1886

—

—

1887

—

1887

—

—

—

—

1888

—

—

—

—

1889

—

—

1890

—

—

—

—

1891

—

—

1891

—

1893

—

—

—

—

1894

—

—

1894

1895

—

—

.. 1895 •

—

—

1896

—

—

—

—

1897

—

— ... 1897

2*

20*

~9*

14* 9*

55t

37t

48 1

43t 4it

—

—

—

— —

all 57

57

57

57 5o

M

fears in which no al

teration took place

t Years of cl

lange.

2i2 REMARKS ON THE RATE OF DISCOUNT [ch. xx

during recent years. When the London rate is lower than
that ruling on the Continent, there is, of course, less induce-
ment for English bills to be held in foreign countries. Hitherto,
though an enormous amount of English capital has been sent
abroad to almost every country in the world, it has been directed
to fixed and permanent investments rather than to employ-
ment in bills drawn on business houses in foreign commercial
centres. The bonds of foreign governments, of foreign railways,
investments in industrial undertakings of almost every class,
have all been largely supported by English capital. There is
no need to make any detailed explanation of this point, as the
fact is so well known. But while the bonds of many foreign
governments are perfectly familiar here, the English banker or
bill-broker has, as a rule, little knowledge of, or experience in,
transactions in foreign bills. Hence, there are very few, it
almost might be said there are hardly any, foreign bills held
in England ; while the reverse of this is the case on the money
markets of the Continent of Europe, where English bills are
very generally held, and form a most useful reserve to those
who hold them in the case of demands arising from an adverse
rate of exchange.

These bills can be forwarded to this country for collection
in case their holders want the money, or the amount repre-
sented may be reinvested in fresh bills as the holders desire
it. No securities can be more convenient to the holders. It
has been the feeling of confidence that first-class English bills
would always be paid in gold which has given them their
position.

In some instances the amounts in bills payable out of the
country in which they are held are specified in the accounts of
the banks whose statements are analysed here. In the case
of the Bank of Germany the particulars of the countries on
which they are drawn are given. The Bank of Belgium gives
full particulars as to the amounts, but does not specify the
countries. The bonds of foreign governments may be said to
hold much the same place in England for these purposes that
commercial bills on England do abroad, and often serve the
purpose of making a remittance. When this occurs it tends
to check a demand for gold for export which would probably

ch. xx] OUR FOREIGN TRADE, EXCESS OF IMPORTS 213

otherwise have arisen. The holding of these bonds in this
country is thus a service to us by preventing a drain on our
bullion reserves, which might have been very inconvenient.
But it must be remembered that the current may equally, when
circumstances favour it, turn in the other direction. When
the value of money rises on the principal money markets of
Europe, or there is any great uncertainty about the prospects
of foreign politics, a very considerable drain on our bullion
reserve may at any time be made through the means of the
English commercial and Treasury bills held so largely abroad.

In connection with this subject attention has repeatedly
been drawn to the fact that our exports of recent years have
not increased proportionately to our imports. As the point is
of importance, I have added a table marked 44 (see below),
giving the amounts of these for each ten years from 1861
to 1900. This should be read in connection with Table 19,
p. 137, which compares the Clearing House returns with the
exports and imports and the amounts of the note circulation
between the years 1861 and 1900.

In col. 1 of Table 44, the gross amount of imports is stated,
and in col. 2 the re-exports of foreign and colonial produce.
Deducting these from the amount in col. 1, the net imports
are shown in col. 3. The British and Irish exports are shown
in col. 5, and the excess of imports over exports in col. 7. Three
columns of proportional figures, Nos. 4, 6, 8, enable the reader
to see at a glance what the progress of events has been. The
exports, the figures of which mark a growth from 100 to 233,

TABLE 44.

Foreign Trade of the United Kingdom, 1861-

12 3 4

1900 (totals at intervals of ten years).

5 6 7 8

Year.

Imports.

Re-exports

of Foreign

and Colonial

Produce.

Net Imports.

Proportion of
Net Imports

to 1861.
1861 = 100.

British and
Irish Exports.

Proportion of

Exports to 1861.

1861 = 100.

Excess of

Imports over

Exports.

Proportion of
Excess of Im-
ports over Ex-
ports to 1861.
1861 = 100.

1861
1871
1881
1891
1900

£
217,500,000
331,000,000
397,000,000
435,400,000
523,075,000

£
34,500,000
60,500,000
63, 100,000
61,900,000
63,182,000

£
183,000,000
270,500,000
333,900,000
373,500,000
459,893,000

IOO
148
182
204
*S*

£

125,100,000
223,100,000
234,000,000
247,200,000
291,192,000*

IOO
178
187
IO7
233

£

57,900,000

47,400,000

99,900,000

126,300,000

168,701,000

IOO

82

172

2l8

2Q1

Including ships, new (not registered as British).

2i4 REMARKS ON THE RATE OF DISCOUNT [ch. xx

have not increased so much as the net imports have done.
These have moved from ioo to 251, and the excess of im-
ports over exports has increased more rapidly still, having
moved from 100 to 291. In the last year under notice, 1900,
the excess of imports amounted to the enormous figure of
,£168,700,000, even after including ships sold to foreign owners,
which are brought in among the exports in 1900, but do not
appear in the statement for 1891 or in any of the earlier
figures. There are many deductions to be made from this
amount before we can understand what the figures really mean.
These deductions arise from the large sums due for freight
and other charges on the goods moved, forming part of the
"invisible exports," with which phrase we have been made
familiar. It is sometimes estimated that there should be
annually due to this country some ^90,000,000 for freights,
and about ^30,000,000 for other charges. I mention these
figures and estimates merely to indicate that there is a very
large deduction to be made from the enormous and increasing
excess of imports over exports, which to the minds of many
thoughtful persons appears such an alarming feature in our
trade. The figures themselves may mislead the reader unless
he remembers the circumstances. The imports are charged at
their value on arrival here, thus including necessarily the cost of
their freight to this country, while the exports represent their
value here, not the price at which it is expected they will be
sold, or the cost of their freight to their destination. That there
must be some substantial set-off of this description is obvious,
as otherwise the business of the country could never have gone
on if we really imported goods to a value so much in excess of
what we had to offer in exchange. Still, after making all
possible allowances of this description, it is clear that this great
and increasing amount of imports may readily be a danger both
to our commercial position and our banking system by turning
the course of the foreign exchanges against us, and perhaps
with a rapidity unexpected by most people. At such times the
sale of " international securities," as they are termed, that is to
say, of bonds and other securities readily saleable on the
principal Stock Exchanges of the world, is as useful as an
export of specie to meet a foreign demand. In the opinion

ch. xx] ENGLISH AND FOREIGN MONEY MARKETS 215

of men entitled to judge, this process has been going on for
some time among us. It is even quite possible that the
country may have been living "above its income" for some
time past without this having been discovered. Though
eventually the fact must become known, yet the process might
go on for a long time till returning prosperity set the balance
straight. The amount of " international securities" held in this
country is said recently to have diminished considerably, while
side by side with this there is believed to have been consider-
able investment of foreign money in British securities. Should
this movement come to an end, or be reversed, it is obvious
how great a demand may arise on our gold reserves. We
cannot, of course, complain if foreign investors desire to possess
securities which we hold, and are willing to purchase them on
terms that suit us, but their doing this undoubtedly strengthens
their power in our money market.

As the communication between the money markets of
this country and of the rest of Europe becomes closer, we
must expect, unless care is taken to obviate their occur-
rence, to see greater fluctuations in our own market. And
the conclusion is obvious, that we are bound to take
every precaution not only as to care in the details of busi-
ness, but also by the formation and maintenance of a large
bullion reserve in this country to enable us to meet the
sudden demands which may, at any moment, be made on us.
We reap a great advantage from the fact that our money
market is the point where so many monetary transactions are
carried on. We reap great advantages also from the fact that
this country is so largely the Clearing House of the World ;
but unless our position in the matter of the specie reserve is a
strong one, we shall be sure one day or another to find that
the circumstances just referred to expose our business transac-
tions to a great peril. We have attained our present position
by unremitting exertion ; the same exertion must be continued
if we desire to maintain it.

The evidence of increasing closeness of connection between
the principal money markets of Europe, which is given by the
tables of variation in the rates of discount charged in them, has
led to these remarks. We must be content to keep a larger

2l6

REMARKS ON THE RATE OF DISCOUNT [ch. xx

supply of "unused money" ready to meet the demands which
may be made at any moment, if we desire to see a greater
uniformity in the rate of discount charged here, and a diminution
of those fluctuations which have of recent years caused so much
inconvenience to our traders, and which are disadvantageous
to the business interests of this country. A full supply of
loanable capital at moderate and fairly uniform charges is at
least as important to the trader as a full supply at reasonable
prices of the goods he deals in, or of the raw materials he uses
in his manufactures. A comparative statement of the rates of
discount month by month at the five great banks of Europe,
with the corresponding movements in the London Clearing
House, Table 45, during the periods over which this investiga-
tion extends, is added below for facility of reference.

TABLE 45.

Average Monthly Discount Rate with proportion of each month to Average

Rate, 1845-1900, at Banks of England, France, Germany, and Holland, Belgium
fifty years, 1851-1900, and of Monthly Average to Yearly Average at London
Bankers' Clearing House thirty-three years, 1868-1900.

Bank of

England

(See Table 12)

Average of

Bank of

France

(See Table 21)

Average of

Bank of

Germany
(See Table 25)

Average of
Fifty-six Years,

£4 SS. id.

Average of

Month.

Average of

Fifty-six

Average of

Fifty-six

Fifty-six

Month.

Fifty-six
Years,
£3 1 2 j.

Years = 1 00.

Fifty-six

Years,

£3 1 1 j. qd.

Years =100.

Years = ioo.

£ s. d.

£ s. d.

£ s. d.

Jan. .

3 19 1

110

3 15 10

106

4 IO 0

106

Jan.

Feb. .

3 11 3

99

3 14 4

104

427

97

Feb.

March.

3 9o

90

3 12 6

101

4OI

94

March

April .

3 6 10

93

3 9 IO

98

3 19 11

94

April

May .

3 11 0

99

3 10 3

98

416

96

May

June .

367

92

3 8 1

95

4 1 3

96

June

July .

3 4 6

89

382

95

420

97

July

August

364

92

3 8 7

96

4 1 10

96

August

Sept. .

367

92

3 8 11

90

4 4 8

IOO

Sept.

Oct. .

3 17 3

108

3 13 5

103

4 11 4

107

Oct.

Nov. .

4 3 8

116

3 16 3

106

4 12 7

log

Nov.

Dec. .

4 1 10

"3

3 15 5

105

4 13 2

I/O

Dec.

Bank of

Holland

(See

Table 30)

Month.

Average of

Fifty-six

Years,

£3

6s. +d.

£

s. d.

Jan. .

3

10 9

Feb. .

3

7 0

March.

3

5 7

April .

3

3 9

May .

3

4 7

June .

3

2 8

July .

3

2 11

August

3

3 11

Sept. .

3

4 0

Oct. .

3

7 4

Nov. .

3

11 3

Dec. .

3

12 9

Average of

Fifty-six
Years = 100.

Bank of

Belgium

(See Table 33)

Average of

Fifty Years,

£3 8j. id.

Average of

Fifty
Years = 100.

London Clearing

House

(See Table 18)

Average of

Thirty-three Years,

^514,991,000

Average of
Thirty-three
Years = ioo.

Month.

706
103

"a

96

97

94

95

96

96

101

loy

no

£ s. d.

3 II O

104

3 7 4

99

3 5 1

95

3 4 8

95

3 6 11

98

3 5 7

96

3 5 5

96

3 5 8

97

3 6 11

98

3 10 7

104

3 14 8

no

3 13 3

108

546,216,000
495,728,000
547,044,000
501,657,000
524,872,000

494,897,000
547,234,000

502,296,000
466,837,000
534,521,000
503,457,000
515,129,000

106

96

106

97

102
96

106
97
9i

104
98

100

CHAPTER XXI.

CONCLUSION

Fluctuations observed at certain periods
in Bankers' Balances when these were
made public . . . .217

Reasons for these . . 217-218

Great increase of Banking Business in
the United Kingdom . . .218

Relation of Reserve to Current Rate of
Interest charged . . .218

Influence of the Foreign Exchanges on
Bank Rate . . . 219

Influence of Bank of England on the
Money Market . . . 219

Relation of Proportion of Reserve to
Liabilities, influence of this and of
demands on Reserve connected with
Scotch and Irish Note Circulation on
Rate of Interest charged . .219

Increase of money in the country be-
tween 185 1 and 1900, and of Banking
Deposits . . . 219-220

Estimate of Banking Deposits at present
time . ... 220

Increase of Specie Reserves of Banks . 220

Increase of Securities in Issue Depart-
ment of Bank of England caused by
operation of Bank Act of 1844 . . 220

Clauses of Act of 1844 sanctioning
this . . . . 221-222

The composition of the Reserve of Bank
may be thus altered . . . 223

Example of this . ... 224

Competition in business between this
country and other countries now
greater than ever before . . 225

More powerful means of meeting de-
mands on Specie Reserve needed . 225

Greater Stability desirable for the Money
Market of this country . . . 225

Need of Agreement between Banks as to
a sufficient Specie Reserve . 225-226

There are several other points in the statements referred to
and contained in this volume which may be indicated, though
they cannot be followed out further. For instance, it was found,
so long as the facts were made public, that the amount of the
bankers' balances with the Bank of England on the second
return in each half-year — that is to say, the second return in
the months of January and July — was considerably above the
total average of each year, and that there was a very marked
augmentation in these amounts during the later compared with
the earlier years included in the returns. Similar though
smaller fluctuations were observable at the corresponding dates
in April and October. These periodic fluctuations are con-
nected with the payments of the dividends on the funds, and on

217

218 CONCLUSION [ch. xxi

other fixed securities. The increase in them is due to larger
amounts of stock held as reserves by the banks of the country
generally, and also to larger amounts of dividends received on
account of customers. It must be borne in mind that the years
from 1844 to 1900 have witnessed a very large development
indeed in the business of banking in the United Kingdom.
Many persons have accounts with a bank now who — or their
predecessors in similar positions in life — would not have had
banking accounts at an earlier period. The increase on the
dates mentioned connects itself no doubt with this alteration in
the habits of the country, and is interesting on that account.

This point is mentioned, among others, which a careful
investigation of the returns relating to the Bank of England,
and tabulated in this volume, will enable the reader to trace.
Many matters connected with the conduct of business, many
incidents in the transactions of the day which have influenced
the adoption of a particular rate on a given occasion, cannot
be recorded in the returns from which the figures in this
statement have been condensed. Thus no indication can be
traced in these returns of the habit said to be indulged in by
some banks of accumulating a large balance at the Bank of
England at the end of the half-year in order to make the half-
yearly balance-sheet look better than it otherwise would do.
This is a despicable practice, which should be discouraged by
the common sense of all bankers.

Only a bare outline can be shown here of events, all-
important to the well-being of the country ; but it is hoped
that this analysis will be of service in assisting us to thread the
history of the past, and in enabling us to see what is needed at
the present time.

One of the subjects which was proposed to be investigated
in preparing this statement was the relation of the reserve to
the current rate of interest charged. A study of this analysis
shows the truth of the usual conclusion, that the rate of dis-
count charged by the Bank of England is regulated more by
j ' the proportion of the reserve to liabilities than by any other
consideration. That the amount of the bankers' balances, and
the proportion they bear to the reserve, may have a bearing
on the rate is very probable, though the influence of this is not

ch. xxi] BANK RESERVE, POINT ON WHICH RATE TURNS 219

clearly marked, and cannot now be traced owing to the
absence of information in the published returns. The move-
ments of the foreign exchanges, quoted for the great European
centres of business — Paris, Amsterdam, Hamburg, Frankfort,
and, we must now add, Berlin, as representative of Germany —
influence the bank rate very greatly, because an unfavourable
exchange is accompanied by an outflow of bullion, and hence by
an immediate diminution of the reserve. It is well known that
the Directors of the Bank, when fixing the rate to be charged,
take the state of the foreign exchanges into consideration.
The Bank possesses still, though other powerful banking
institutions have grown up round it, and appear at first sight
to overpower it, so strong an influence over our money market
that by setting the rate of discount high enough it can always
control the foreign exchanges, although this effect is not now
produced so rapidly as in former years ; hence the foreign
exchanges generally appear to follow, rather than to lead, the
Bank of England rate of discount. All these varied require-
ments— of discounts at home, of specie for export — of every
other demand, affect the proportion of the reserve to the
liabilities — the cardinal point on which the rate of interest
charged by the Bank turns, influenced at times, besides the
regular requirements of business, by the demands made on
the stock of bullion held by the Bank through the movements
of the Scotch and Irish note circulations and the autumnal
drain.

Within the period over which this investigation extends,
the amount of money in the country generally has enormously
increased. The gold in circulation is nearly three times the
amount it was some fifty or sixty years ago. Yet, while the
amount of deposits held by the banks of the country — that is
to say, the amount of loanable capital — has also greatly in-
creased, we have far more frequent and rapid variations in the
bank rate of interest, and often also a high rate.

The explanation of this is that no precautions are taken in
this country as at the Banks of Germany, Belgium, and else-
where to mitigate the pressure of an unfavourable exchange by
holding bills on other countries which can be " melted" when ♦/
the need arises, while the total amount held in reserve has not

220 CONCLUSION [ch. xxi

been increased in a like proportion with the demands which
may be made on the reserve. Meanwhile, from the altered
character of that reserve, which results from the enormous
increase in the bankers' balances held by the Bank of England,
there is a greater liability to sudden demands, owing to the
vast increase in banking deposits throughout the world. In the
United Kingdom alone they have increased fully fourfold
during the last fifty years.

Mr. Newmarch estimated these deposits in 1851 at 260
millions ; to which might at that time be added for foreign
and colonial banks 25 millions, forming an aggregate of some-
thing like 300 millions. My own estimate of the holdings of
the banks in the United Kingdom alone at the present time
is that they approach, if they do not exceed, 1,000 or 1,100
millions.#

This very great increase in the amounts held on deposit
during the last fifty years may at any moment give occasion
for a very considerable demand on the banking reserve. The
reserve held by the Bank itself is now smaller in proportion to
its own liabilities than it was in the earlier years over which
this survey extends. Meanwhile, no preparation whatever has
been made to meet the demands which may arise at any
moment in relation to the general banking liabilities of the
country which have so enormously increased. The bankers
have been exhorted by the highest official authority to increase
their own reserves. They have done so, but have their
efforts and their self-denial in putting aside large sums for
this purpose been adequately met?

While the bankers have, in response to the desires referred
to, notably increased their own specie reserves, the amount of
specie required to be held against the notes issued by the Bank
of England may now relatively be less.

This point has been referred to in the preface, but a more
complete explanation is advisable. The facts are as follows:
The amount of securities in the Issue Department of the Bank
is defined by Clauses II., V., and VI. of the Act of 1844,
and by Schedule (A.), referred to in Clause VI.

* See articles on "Progress of Banking," No. 3 in April numbers (1 894-1 903) of
the Bankers' Magazine.

ch. xxi] ACT 1844— INCREASED ISSUE ON SECURITIES 221

These are as follows : —

Anno Septimo et Octavo Victoria Regince, Cap. xxxii.
An Act to regulate the Issue of Bank Notes, and for giving to the
Governor and Company of the Bank of England certain Privi-
leges for a limited Period. [19th July, 1844.]

Clause II. — And be it enacted, That upon the Thirty-first Day of Manage-
August One thousand eight hundred and forty-four there shall be trans- ment of
ferred, appropriated, and set apart by the said Governor and Company to the Issue
the Issue Department of the Bank of England Securities to the Value of Ey /"*, °
Fourteen Million Pounds, whereof the Debt due by the Public to the
said Governor and Company shall be and be deemed a Part ; and there
shall also at the same Time be transferred, appropriated, and set apart by
the said Governor and Company to the said Issue Department so much
of the Gold Coin and Gold and Silver Bullion then held by the Bank of
England as shall not be required by the Banking Department thereof;
and thereupon there shall be delivered out of the said Issue Department
into the said Banking Department of the Bank of England such an
Amount of Bank of England Notes as, together with the Bank of
England Notes then in circulation, shall be equal to the aggregate
Amount of the Securities, Coin, and Bullion so transferred to the said
Issue Department of the Bank of England ; and the whole amount of
Bank of England Notes then in Circulation, including those delivered to
the Banking Department of the Bank of England as aforesaid, shall be
deemed to be issued on the Credit of such Securities, Coin, and Bullion
so appropriated and set apart to the said Issue Department; and from
thenceforth it shall not be lawful for the said Governor and Company to
increase the Amount of Securities for the Time being in the said Issue
Department, save as herein-after is mentioned, but it shall be lawful for
the said Governor and Company to diminish the Amount of such
Securities, and again to increase the same to any Sum not exceeding in
the whole the Sum of Fourteen million Pounds, and so from Time to
Time as they shall see Occasion ; and from and after such Transfer and
Appropriation to the said Issue Department as aforesaid it shall not be
lawful for the said Governor and Company to issue Bank of England
Notes, either into the Banking Department of the Bank of England or to
any Persons or Person whatsoever, save in exchange for other Bank of
England Notes, or for Gold Coin or for Gold or Silver Bullion received
or purchased for the said Issue Department under the Provisions of this
Act, or in exchange for Securities acquired and taken in the said Issue
Department under the Provisions herein contained : Provided always, that
it shall be lawful for the said Governor and Company in their Banking
Department to issue all such Bank of England Notes as they shall at any
Time receive from the said Issue Department or otherwise, in the same
Manner in all respects as such Issue would be lawful to any other Person
or Persons.

Clause V. — Provided always, and be it enacted, That if any Banker p0wer to
who on the Sixth Day of May One thousand eight hundred and forty- four increase
was issuing his own Bank Notes shall cease to issue his own Bank Notes, securities

222

CONCLUSION

[CH. XXI

in the Issue
Depart-
ment, and
issue addi-
tional
notes.

Account
to be
rendered
by the
Bank of
England.

it shall be lawful for Her Majesty in Council, at any Time after the
Cessation of such Issue, upon the Application of the said Governor and
Company, to authorize and empower the said Governor and Company to
increase the Amount of Securities in the said Issue Department beyond
the total Sum or Value of Fourteen million Pounds, and thereupon to
issue additional Bank of England Notes to an Amount not exceeding
such increased Amount of Securities specified in such Order in Council,
and so from Time to Time : Provided always, that such increased
Amount of Securities specified in such Order in Council shall in no Case
exceed the Proportion of Two Thirds the Amount of Bank Notes which
the Banker so ceasing to issue may have been authorized to issue under
the Provisions of this Act; and every such Order in Council shall be
published in the next succeeding London Gazette.

Clause VI. — And be it enacted, That an Account of the Amount of
Bank of England Notes issued by the Issue Department of the Bank of
England, and of Gold Coin and of Gold and Silver Bullion respectively,
and of Securities in the said Issue Department, and also an Account of
the Capital Stock, and the Deposits, and of the Money and Securities
belonging to the said Governor and Company in the Banking Department
of the Bank of England, on some Day in every Week to be fixed by the
Commissioners of Stamps and Taxes, shall be transmitted by the said
Governor and Company weekly to the said Commissioners in the Form
prescribed in the Schedule hereto annexed marked (A.), and shall be
published by the said Commissioners in the next succeeding London
Gazette in which the same may be conveniently inserted. — 70 et 8°
Victoria^, cap. 32, §§ II., V., VI.

SCHEDULE (A.)

Bank of England.

An Account pursuant to the Act 7 and 8 Vict. Cap. xxxii. for the Week
ending on the day of

Notes Issued

Dated the Day of

Proprietors' Capital

Rest .

Public Deposits (to include
Exchequer, Savings Banks,
Commissioners of Nationa
Debt, and Dividend Ac
counts)

Other Deposits

Seven Day and other Bills

Dated the Day of

£

Issue Department.

Government Debt
Other Securities .
Gold Coin and Bullion .
Silver Bullion

18

Banking Department.

Government

Securities (in
eluding Dead Weight An
nuity)

Other Securities .

Notes ....

Gold and Silver .

18

£

Cashier.

£

Cashier.

ch. xxi] ACT 1844— INCREASED ISSUE ON SECURITIES 223

The effect of Clause V. has been that the issue of Bank of
England notes against securities has since 1844 been increased
by ,£4,175,000. The dates at which this increase took place
and the amounts added are as follows : —

Fixed Issue of the Bank of England.

Amount authorised by the Act of 1844

Add increase since in authorised amount : 1855 — Dec. 7th

n >, 11 1861 — July loth

,, ,, „ 1866 — Feb. 21st

,, ,, ,, 1881 — April 1st

1887— Sept. 15th

„ ,, ,, 1889— Feb. 8th

„ „ ,, 1894— Jan. 29th

„ ,, ,, 1900 — March 3rd

„ „ „ 1902— Aug. nth

. ,£14,000,000

£475,000
175,000
350,000
750,000
450,000
250,000
350,000
975,000
400,000

4,175,000
£18,175,000

Hence the amount of bank notes issued may be larger now
than formerly, and yet the amount of gold required to be held
against the notes issued may relatively be less. This has
occurred on several occasions. For convenience of reference
I will use the example employed earlier in this volume — the
comparison between the position of the Issue Department on
2nd July, 1879, and 12th November, 1902, adding the figures
of the Banking Department at both these dates, as this com-
pletes the statement.

The figures are : —

Issue Department, 2nd July -, 1879.

Notes Issued .

£49,022,675

Government Debt . .

Other Securities

Gold Coin and Bullion .

EPARTMENT.

Government Securities .
Other Securities

Gold and Silver Coin

. £11,015,100

3,984,900

34,022 675

£49,022,675

£49,022,675

Proprietors' Capital

Public Deposits * .
Other Deposits
Seven-day and other Bills

Banking D

£i4,553,ooo

3,171,027

7,279,300

29,957,8i5

293,099

£55,254,241

. £14,480,146

20,024,691

19,485,810

1,263,594

£55,254,241

F. May, Chief Cashier.
Dated July $rdt 1879.

* Including Exchequer, Savings Banks, Commissioners of National Debt, and Dividend Accounts.

224

CONCLUSION

[CH. XXI

Issue Department, 12th November , 1902.

Notes Issued

^49,339,090

£49,339,090

Government Debt .
Other Securities
Gold Coin and Bullion

Banking Department.

Proprietors' Capital
Rest ....
Public Deposits * .
Other Deposits
Seven-day and other Bills

^"14,553,000

3,177,895

8,637,637

39,264,304

136,134

£65,768,970

Government Securities

Other Securities

Notes

Gold and Silver Coin

£11,015,100

7,159,900

31,164,090

£49,339,090

£16,416,132

26,890,956

20,278,055

2,183,827

£65,768,970

Dated November 13th, 1902. J. G. Nairne, Chief Cashier.

* Including Exchequer, Savings Banks, Commissioners of National Debt, and Dividend Accounts.

The notes issued July 2nd, 1879, were ,£49,022,675.
They were balanced by : —

Gold .
Securities

They were divided thus:

£34,022,675
15,000,000

£49,022,675

£29,536,865 in the hands of the public.
19,485,810 held by the Bank.

£49,022,675

The notes issued November 12th, 1902, were £49,339,090.
They were balanced by : —

Gold .
Securities

They were divided thus : —

£31,164,090
18,175,000

£49,339,090

£29,061,035 in the hands of the public.
20,278,055 held by the Bank.

£49,339,090

To recapitulate : —

Notes issued July 2nd, 1879
,, Nov. 1 2th, 1902

Notes issued in 1902 more
Gold less

£49,022,675
49,339,090

316,415
2,858,585

£3,175,000

Gold July 2nd, 1879
,, Nov. 1 2th, 1902

Gold less in 1902

Securities more in 1 902 as com
pared with 1879 .

£34,022,675
31,164,090

2,858,585

£3,175,000

This statement shows what the effect of the working of
Clause V. of the Act of 1844 was on the Issue Department at
the two dates referred to. The notes issued were in November,
J9025 £z l & A 1 5 more than in July, 1879, but the gold held
against the notes was ,£2,858,585 less. To consider these
matters fully would lead me beyond the limits of the subject to
which these pages are devoted. It is sufficient here to call

ch. xxi] ADEQUATE RESERVE A SOURCE OF STRENGTH 225

attention to the amount of the specie held on the two occasions
mentioned above.

It cannot be expected that the duty of maintaining an
adequate reserve to meet the requirements of all the banks of
the country could be accepted by the Bank of England alone,
yet the tendency of business is to leave no unemployed money
outside the Bank of England. To meet ordinary risks a
larger supply of unused money is much wanted. It would
also undoubtedly tend to more equable rates, and this would
be of great advantage to the commerce of the country.
Competition in business between this country and the leading
countries of Europe is now exceedingly severe, and the advan-
tage in the way of discounts which a trader may often obtain
abroad might be quite sufficient of itself to turn the scale
against his English competitor. What is stated in Chapter XX.
p. 203 shows this clearly. Yet we do not seem nearer to the
attainment of a really sufficient reserve now than we were when
the Bank Act of 1844 was passed. To provide a compulsory
amount of reserve by legal enactment would be unadvisable,
but the object desired might be secured if an agreement on
the subject could be attained by the principal banks of the
country.

It is not, in any time of pressure, the amount of capital in
the country which is taken into account, or which governs the
immediate price of money. It is not the amount of coin or of
notes in circulation. It is the actual amount of specie reserve
in hand, and the power of meeting and neutralising the effect
of the foreign exchanges, when unfavourable, which decide
the stability of the money market. Many exceptional causes,
it will be said, have led to the recent fluctuations in the
money market — to the vast number of changes in the rate of
interest in recent years. But with the immensely extended
commerce now carried on by this country, such causes, or
similar causes, will be certain continually to manifest them-
selves, and the only safe course is to be prepared to meet
them. To do this we must be prepared to increase the
amount of " unused " capital in the country, now so exceedingly
and unduly small.

To arrange this will require time, and an agreement between
Q

226

CONCLUSION

[CH. XXI

the principal banks. I trust that the analysis of the trans-
actions of the Bank of England and of the principal Banks
of Europe which this work contains will be of service by
showing clearly what is needed. In banking, the only secure
position is that of strength, and that strength is connected
most closely with the maintenance of an adequate reserve.

It is to the development of such a reserve that the energy
of the Bankers of the United Kingdom should now be directed.

INDEX

Headings in small capitals, as The Autumnal Drain, imply that the whole, or considerable part
of a chapter, is devoted to the subject so indicated

Accounts of the Bank of England — see Eng-
land, Bank of.

Acts, Bank — see England, Bank of; Ger-
many, Bank of; Holland, Bank of.

Aldenham, Lord, on Bankers' Balances — see
Bankers' Balances, England, Bank of.

Autumn, season of great business activity,
107 ; Rate of Discount high during, 139.

Autumnal Drain of Specie and the Reserve,
41-42 ; influence on Bank of England Note
Circulation, 72 ; causes of, 107-108 ; The
Autumnal Drain, 138-139; 1881-1900,
Table 20, 138 ; influence of Bank Acts,
1844-5, on> through Scotch and Irish issues,
139; connection with Bank of England Rate
of Discount, 139, 198, 219.

Bagehot, Mr., his remarks on constitution
of Governing Body of Bank of England, 58.
Bank of Belgium — see Belgium, Bank of.
Bank of England — see England, Bank of.
Bank of France — see France, Bank of.

Bank of Germany, The Imperial — see

Germany, The Imperial Bank of.

Bank of Holland — see Holland, Bank of.

Bankers, London, Joint Committee of, and
of Bank of England could fix rate of dis-
count, 61-62.

Banking, recent development in Europe and
America, 9 ; in France and in England,
difference between, 148-149 ; compared
with banking in Germany, 1 60-16 1, 162,
164 ; business of the country, great increase
in, 218.

Banks, Foreign, practice of re-discounting by,
52; returns of, do not show exceptional
demand in May and November, no;
seasons of greatest business activity shown
by returns of Rate of Discount at, 135 ;
fluidity of resources of, 200 ; see also
France, Germany, Holland, and Belgium,
Banks of.
Ireland, capital, proportion to deposits, 19.
Joint Stock (Metropolitan), effect of ad-
mission to London Bankers' Clearing
House on Bank of England Note Cir-
culation and on Bankers' Balances, 22 ;
development of Bill-broking, effect of
action of, 53 ; undertook, 1877, inde-
pendent course of action with regard to
Bank of England Rate of Discount, 55 ;
see also Banks, Private and Joint Stock,
and Banks, United Kingdom.

Banks, New York Associated, publish average
weekly amount of reserves, 63.

Private and Joint Stock, Accounts of, pub-
lication generally recent, 7 ; Capitals and
Resources, estimates of, 1 872-1 901, and
Reserve of Bank of England, 104 ; ditto,
made by Mr. Newmarch, 1851, and other
estimates, 1902, 220; see also Joint Stock
Banks and Banks of United Kingdom ;
Note Circulation of, see Note Circulation,
English Country.

Scotland, capital, proportion to deposits, 19.

United Kingdom, capital, proportion to
deposits, 19; Bankers' Balances at the
Bank of England, the ultimate reserve
of all, 39 ; practice of loaning out re-
serves of banks peculiar to this country,
39 ; capital and deposits of other banks,
and reserve of Bank of England, 1872-
1901, 104 ; increase of deposits at, and
also throughout the world, 220 ; influence
on reserve, 220 ; see also Joint Stock
Banks.
Baring Crisis, the, 1890, effect of, doubt-
less, on Bankers' Balances, 26 ; assistance

given by Bank of France, 148, 152; see

also Panic, 1890.
Belgium, Bank of: established 1850, 181 :
management, system of, 181-182; trade
of the country and, 184.

Balance Sheet, compared with those of
other Banks, Table 40, 207.

Bills and Commercial Paper, Business in,
182 ; amounts of, discounted, 183-184 ;
foreign, 185 ; total operations in discounts,
185, 201.

Branch (Antwerp) and Discount Offices,
182, 183 ; Country Discount Offices,
separate partnerships, 183.

Capital, compared with Bank of England
and other European Banks, 200.

Deposits, Public, compared with Bank of
England and other European Banks, 201.

Liabilities, Proportion of Specie to, 84.

Note Circulation, Specie held against, and
against other obligations, 184 ; average
fiduciary, 185 ; compared with Bank of
England and other European Banks, 201.

Rate of Discount, Monthly Averages of,
compared with Banks of England, France,
Germany, and Holland, and with London
Bankers' Clearing House Returns, 136;
influence of autumnal movement in gold
shown in returns, 139; compared with
Bank of Germany, 171 ; Variations in,

227

228

INDEX

1851-1900, 181-189; compared with other
European Banks, 184, 186 ; low rates
prevalent, 185 ; small number of rates
charged, 186 ; Monthly Averages of
Minimum, 1851-1900, Table 33, 187;
number of days at each rate, and of
changes in each year, 1 851-1900, Table
34, 188 ; Number of days at each rate,
arranged from highest number to smallest
and from lowest to highest rate, 1 85 1 - 1 900,
Table 35, 189 ; Summary of fluctuations,
together with those of other returns,
1851-1900, Table 36, 193; Number of
variations in, compared with Bank of
England and other European Banks,
1851-1900, Table 37, 196; Lowest and
highest charged and extent of fluctuation
compared with Bank of England and other
European Banks, 1851-1900, Table 38,
197 ; Number and extent of Annual
Fluctuations in, compared with Bank of
England and other European Banks,
185 1- 1900, Table 39, 198; Low rates,
compared with Bank of England and
other European Banks, 1851-1900, 204;
Intermediate rates, compared with Bank
of England and other European Banks,
1851-1900, 205 ; High rates, compared
with Bank of England and other Banks,
1851-1900, 208; Number of days at
each rate, compared with Bank of
England and other Banks, Table 41,
1851-1900, 209; Number of variations,
1891- 1900 and 1851-1900, compared with
Bank of England and other Banks, 210 ;
Average minimum rate charged by, com-
pared with Bank of England and with
other Banks, in groups of years, 1 851-1900,
Table 42, 210; Years in which no change
took place, compared with Bank of Eng-
land and with other Banks, 1851-1900,
Table 43, 211 ; Monthly averages, com-
pared with Bank of England and other
Banks, and with the returns of London
Bankers' Clearing House, Table 45, 216.

Belgium, Bank of: Securities, Composition

of, compared with Bank of England and

other Banks, 201.

Specie, Proportion of, to Liabilities, 84 ;

reserve of, comparatively small, 184 ;

and Bullion, compared with Bank of

England and other European Banks,

201.

Bill brokers, Bank decided to make advances

to, 1878, 51 > arrangements made by the

Bank with, 1890 and subsequently, 51 ;

methods followed in England, unfavourable

to quiet working of money market, 52 ;

development of, effect of action of bankers,

53 ; work without a Reserve, effect of, on

Bank of England, 54.

Bill discounters turn to Bank in time of
pressure, 67.

Bills, difference between bills and mortgages,
29 ; fewer, great competition for, 54 ; not
increased in proportion to business generally,
66 ; in circulation, estimates of, by Mr.
Newmarch, and other estimates, 66 ; see
also England, Bank of, Bills discounted.

Bills, English, held abroad, advantages and
dangers of, 212-213.

Bills, Foreign, few or none held in England,
212 ; see France, Germany, Holland, and
Belgium, Banks of.

Bullion held by Bank of England — see Eng-
land, Bank of, Bullion.

Business, extension in, generally, during the
last fifty-six years, 7 ; autumn, season of
greatest activity in, 107 ; influence of
periodic increase of Scotch circulation on,
107-109 ; activity in the country, Clearing
House returns a guide to, 132 ; seasons of
greatest activity in, shown by fluctuations
in Bank of England rate of discount, in
Clearing House returns, and in those of
rate of discount at Foreign Banks, 135: bank-
ing, of the country, great increase in, 218.

Capital, loanable, greater growth of, in pro-
portion to reserve, one cause of liability
to fluctuation in value of money, 103 ;
loanable, growth of, outside the Bank
greater than that held by the Bank, 104 ; loan-
able, large supply of, essential to trade, 216.

Capital, Banks of United Kingdom — see
Banks, United Kingdom.

Capital, English, abroad, 212, 214-215.

Capital and Deposits of other English Banks
and Reserve — see Banks, United Kingdom.

Capital of Bank of England — see England,
Bank of, Capital.

Cheques, recognised medium for business
payments in England, 162.

Chinese Loan, 1895-6, 18.

Clearing House, London Bankers', effect
of admission of Joint Stock Banks to, on
Bank of England Note Circulation and on
Bankers' Balances, 22 ; returns show no
exceptional demand in May and November,
no; Returns of, 132-137; returns of,
guide to business activity in the country, 132,
135 ; Returns, Monthly Averages, 1868-1900,
Table 18, 133 ; variations in, compared with
those of Rate of Discount, 134; Total
Annual Returns, 1868-1900, 134; Monthly
Rate of Discount at Banks of England,
France, Germany, Holland, and Belgium,
compared with Returns of, 136; Returns of,
compared with Exports and Imports, and
with Bank Note Circulation, 1861-1900,
Table 19, 137 ; Summary of fluctuations
in returns of, together with those in other
returns, 1868- 1900, Table 36, 193 ; fluctua-
tions in returns of, represent business move-
ments, 194 ; returns of, compared with
Monthly Averages of Rate of Discount
charged at Bank of England and at other
European Banks, 1845-1900, Table 45, 216.

Crises, Fixed Note Issue intensifies, 163 ;
see also Baring Crisis, 1890 ; Panics, 1847,
1857, 1866, 1890.

Demands for Specie — see Autumnal Drain ;
Scotch and Irish Note Circulation.

Deposits, Bank of England — see England,
Bank of, Deposits.

Deposits of other English Banks — see Banks,
United Kingdom.

INDEX

229

Discount, Rate of— see England, Bank of,
Rate of Discount ; also under France,
Germany, Holland, and Belgium, Banks of.

European Banks — see Banks, Foreign ; and
France, Germany, Holland, and Belgium,
Banks of.

England, Bank of: Accounts, Principal
Divisions of, 16-32 ; example of Weekly
Return, Bankers' Balances deducted from
both sides, 38 ; division, effect of, 81 ;
division of, 84, 198, 200; Table 40, 206-
207.

Analysis of transactions, an index to finan-
cial events, 8.

Annual Averages of Transactions, Table 3,
1844-1900, 11-15.

Balance Sheet, example of Weekly Return,
Bankers' Balances deducted from both
sides, 38 ; compared with other European
Banks, 200-202 ; Table 40, 206-207 >
compared, 1879 and 1902 (issue against
securities), 223, 224 ; see also Accounts
of the Bank of England and Weekly
Returns.

Bank Acts of 1844-45, influence, working,
8 ; regulation of, as to Bullion at the
Bank, 30 ; influence of Scotch and Irish
Note Circulation on Reserve through
power of issuing notes against gold, 41 ;
designed to suppress English Country Note
Circulation, 74; Effect of, as to Division of
Accounts, 81 ; Act (12th December, 1857)
to Indemnify Bank of England for excess
issue over limit allowed in 1844, 9i~93 ;
Scotch and Irish Note Circulation and
Acts of 1845, 112 ; Dr. Charles Gairdner
on influence exercised by, on Scotch and
Irish Note Circulation, 113-115; clauses
in, regulating specie held against excess
issue, Scotland and Ireland, 116-117; in-
fluence of, on Rate of Discount through
Reserve, 135; Autumnal Drain enhanced
through demand caused by Scotch and
Irish Issues, 139 ; limit of Note Circula-
tion fixed by, 163 ; Act suspended, 1857,
164; permission to suspend granted, 1847,
1857, 1866, 164; plan for modification
proposed by Lord Sherbrooke (Mr. Lowe),
1873, x72 ; division of resources of Bank
into two parts by, causing demand to fall
on smaller, 198 ; composition of reserve
altered by, 198, 223 ; regulations as to
purchase of gold, 199 ; increase of securities
in Issue Department caused by, 220 ;
clauses of, sanctioning this, 221-223.

Bank Post Bills, decrease in these, 19 ; Total
Deposits and, 17-19; deposits, and pro-
portion of Coin and Bullion to, 31, 76;
see also Liabilities.

Bankers' Balances, increase in, larger than
any other branch of business of the Bank,
1844-1877, 18 ; liable to be drawn on in
times of pressure, 20 ; proportion to
Reserve, 1844-1877, 20; Averages of,
20-22 ; increased more rapidly than
Reserve, 21 ; amount of Reserve largely
maintained by, 21 ; effect of admission
of Joint Stock Banks to London
Bankers' Clearing House on, 22 ; and
the Reserve, 23-27; represent "Till

money" rather than Reserve, 23 ; included
in Total Deposits, 24 ; during panics of
1857, 1866, 24 ; of 1875, 25 5 influence of
panics on amount of, 25 ; effect of stop-
page of Bank of Glasgow, 1878, doubt-
less on, 25-26; similar effect of Baring
Crisis, 1890, 26; London Bankers'
Balances with the Bank of Eng-
land, 34-43 ; Annual Averages, Table 5,
1844-1877, 35; in times of Pressure, 1857,
1866, 1877, 36 ; sometimes larger than
Reserve, 36, 37 ; increase of, a natural
growth of business, 37 ; example of pro-
portion of Reserve to liabilities, after
deducting Bankers' Balances from both
sides, 38 ; cannot be Reserve both of Bank
of England and of other Banks, 39;
ultimate Reserve of all the Banks in the
Kingdom, 39 ; practice of loaning out
Reserves of Banks peculiar to this country,
39 ; included among Bank of England
Liabilities, 39 ; How far they form an
efficient Reserve, 44-47 ; Mr. H. H.
Gibbs (Lord Aldenham) on, 44-45;
normal and abnormal, 45 ; portions really
and nominally "Reserve, 45 ; portion
nominally Reserve, only "Till money,"
45-46; portion of, at Bank of England,
only for "Safe Custody," 45, 46; propor-
tion to Reserve in times of panic, 1847,
1857, 1866, 89; proportion of, to Reserve,
and Rate of interest, 1847-1878, 90 ;
periodic fluctuations, 217.
England, Bank of: Bills discounted, amount
of, in times of pressure, 1844-75, 2& 5
influence of Rate of Interest on amount
of, 28 ; proportion of, to total securities,
28 ; and Temporary Advances, 64-
68; amount of, 1844-1875, 65-66; pro-
portion to "other" securities, 66-67;
amount in circulation, 1873-1902, 66.
Bullion, position of Bank of England with
regard to gold bullion imported into the
country, 30 ; what takes place when
brought into the country, 30; see also
Gold.
Bullion, Coin and, held by the Bank,
Average of, 30-31 ; proportion of, to
Liabilities, 31, 76; proportion of, to
Notes held by the Public, 31 ; consider-
able increase in, 76 ; connection with
Bank Rate not easy to trace, 76 ; pro-
portion to Liabilities and Note Cir-
culation, 78 ; proportion of, to Total
Liabilities, strength of Bank depends on
this, 78 ; compared with that held by
other European Banks, 200-201 ; demands
on, through movements in Scotch and
Irish Note Circulation, influence on Rate
of Discount, 219.
Bullion, Coin and, held in Issue Depart-
ment— see Issue Department.
Bullion, silver — see Issue Department.
Business, Private, conducted like any other

bank, 68.
Capital, paid-up, largest of any known
bank, 17 ; amount of, including rest, 64 ;
proportion to deposits, 19 ; large amount
of, compared with other European banks,
200.

230

INDEX

England, Bank of: Deposits, Chancery
Balances included with Government,
since 1873, 10 note ; Total, and Bank
Post Bills, 17-19; Private, largest
increase in these, 18 ; Public, 18 ; pro-
portion to capital, 19 ; Total, Bankers'
Balances included in, 24; "other" De-
posits, increase in 1875, 1878, 25-26 ;
Uniformity of rate for, and for discounts,
advisable, 61-62 ; of Bank, Mr. Thomson
Hankey on investment of, 65 ; Public,
held, compared with those held by other
European Banks, 201 ; see also Liabilities.

Directors, opinion of, as to fixing rate
valuable, 57.

Governing Body of the Bank, Constitution
of, 58 - 60 ; Mr. Bagehot's remarks
thereon, 58 ; Parliamentary Reports,
1848, remarks therein, 58-60.

Governor, permanent, desirable, 57 ; re-
commended in Parliamentary Report,
1848, 60.

Government Securities — see Securities.

Issue Department, Notes Issued, Specie
and Securities in the, 17 ; Increase
in gold and notes issued, 31 ; proportion of
notes issued against bullion and securities,
32 ; Note Circulation Bank of
England, Country Note Circula-
tion, and Coin and Bullion in the,
69-80 ; Monthly Averages of, bullion in
the, 1 845- 1 900, Table 7, 71 ; Silver
bullion held in, 78 ; Silver bullion held,
discussed in connection with Indian ex-
changes, 79; Silver bullion held, 1844-53,
and gold coin and bullion and silver
bullion held, 1860-61, Table 10, 80 j
Gold bullion held in the, during panics,
1847, 1857, 1866, and 1890, 89-90;
Summary of fluctuations in bullion in
the, together with those of other returns,
1 845- 1 900, Table 36, 193; division of,
from Banking Department in accounts,
198 ; Gold bullion in, 199 ; Securities
in, increase caused by Bank Act, 1844,
220; clauses sanctioning this, 221-223;
gold held sometimes less, while amount
of notes issued greater, returns showing
this, 1879, 1902, 223-224.

Liabilities, Total, 19 ; increase in, 19 ;
proportion of Reserve to, smaller in
recent years, 20 ; proportion of Reserve
to, 1846-1877, 24 ; proportion of bullion
held by Bank to, 31, 76; example of
proportion to Reserve after deducting
Bankers' Balances, 38 ; Bankers' Balances
included among, 39-41 ; proportion of
bullion held by Bank to Total, strength of
Bank depends on this, 78 ; The Reserve
and, 81-94 > Reserve and, main point to
consider, 81-84; Monthly averages of
Reserve and, 1845- 1900, Table 11,
82-83 J proportion of Reserve to, 84, 86 ;
proportion of Reserve to, connected with
fluctuations in Rate of Discount, 86-87 5
proportion of Reserve to, in crises, 1847,
1857, 1866, 89 ; proportion of Reserve
to, and Rate of Interest, 1844-1878, 90 ;
Summary of fluctuations in, together with
those of other Banks, etc., 1845-1900, |

Table 36, 193 ; proportion of Reserve to,
influence on Rate of" Discount, 219.

England, Bank of: Management, continuity
in, needed, 58.

Note Circulation, connected with Reserve,
8; "Notes issued," how entered in,
Table 3, 10 note; "Notes Issued,"
Specie and Securities in Issue De-
partment, 17; Annual Averages
of, 22-23 » effect of admission of Joint
Stock Banks to London Bankers' Clear-
ing House on, 22 ; increase of, in the
provinces, 1844- 187 5, 22 ; proportion of
notes to bullion in Issue Department,
31-32; Bullion held in the Issue De-
partment; English Country Note
Circulation, 69-80; Monthly Averages
of, 1845-1900, Table 6, 70 ; influence
of Autumnal Drain, 72 ; increase, 72 ;
in London and in the provinces, 72 ;
may take place of lapsed country note
issues, 72, 74 ; and metallic circulation,
72-73 ; diminution, 1879-1885, increase,
1 894-1 900, 73 ; analysis of notes com-
posing, 74, 76 ; Composition of, 1856-
1876, Table 9, 77 ; proportion of bullion
held by Bank to, 78 ; text of Bill pro-
posed by Lord Sherbrooke (Mr. Lowe)
to allow excess issue, 1873, 93-94; com-
pared with Clearing House Returns and
with exports and imports, 1861-1900,
Table 19, 137 ; compared with Note
Circulation in Germany, 162-164, 166 ;
fixed by Bank Act, 1844, 163; fixed issue
intensifies crises, 163 ; Bank Act, 1844,
fixing limit of issue, suspended, 1857, 164;
permission to suspend granted, 1847, 1857,
1866, 164 ; fixed amount, 166 ; notes
"issued" form part of Reserve, 166;
proposal to adopt tax on excess issue, as
in Germany, 172; requirements in Eng-
land different to those in Germany, 172 ;
Lord Sherbrooke's plan for modification
of Bank Act of 1844, 1873, 172; Treasury
shares profits of issue, 172 ; Summary of
fluctuations in, together with those of
other returns, 1845- 1900, Table 36, 192;
amount of, compared with other European
Banks, 201 ; Clauses of Act regulating
issue of Bank Notes, 221-223 ; fixed issue,
increase of, 1844-1902, 223 ; amount of
notes issued greater, while gold held less,
returns showing this, 1879, 1902, 223-
224 ; see also Note Issue.

Note Issue, legal impediments to extension
of, 88 ; advantage of moderate rate for
excess issue, 88 ; Act to indemnify Bank
of England for excess issue over limit
allowed in Bank Act, 1844, 12th Decem-
ber, 1857, 91-93; see also Note Circula-
tion.

Notes, Reserve of, represents greater part
of gold at command of Bank, 84 ;
amount necessarily smaller than coin and
bullion held, 84 ; during panics, 1847,
1857, 1866, and 1890, 89, 90; see Re-
serve.

Policy of, distinct statement needed, 61.

Railway Debentures held by — see Securi-
ties.

INDEX

231

England, Bank of: Rate of Discount (Rate
of Interest), influence of, on amount of bills
discounted, 28 ; Average, 32 ; and Market
Rate, divergence between, 32 ; Table 4,
1845-1900, shows this, 33; fixing Rate of
Discount and protection of Reserve should
be in same hands, 47, 62 ; The Pub-
lished Rate, 48-54 ; Bank announced,
1878, that it did not feel bound to
adhere as closely as formerly to a fixed
Minimum Rate, 48-51 ; information as
to this, Parliamentary Reports, 1847-8,
1848, 48-49 ; down to 1 839, 49 ; market
value of money considerably below Bank
in 1844, 49 ; Rate between 1839-1844,
49; "new system of discounting," 1844,
49 ; Bank adapted its own Rate to
Market Rate, 1844, 49 > effect of this
down to 1848, 50 ; Lord Overstone (Mr.
Samuel Jones Lloyd) on the Bank Rate,
50 ; position of Bank to outside market
fifty years ago, 50 ; Bank Rate and
Market Rate in 1857, 1858, 50-51 ;
drawbacks to published, fixed, 51 ; action
of Bank helpful to Bill-brokers, 51-54
(see Bill-brokers); The Published,
and the Reserve, 55-63 ; not so clear
a guide to Market Rate as formerly,
55-56 ; Metropolitan Joint Stock Banks,
in 1877, undertook independent course
of action with regard to, 55 ; Bank of
England no longer bound by its own,
56 ; frequent changes in, 57 ; value of
opinion of Bank directors as to fixing,
57 ; standard rate for discount needed,
61 ; joint committee, Bank and London
Bankers, could fix, 61-62 ; advantages of
such an arrangement, 61-62 ; uniformity
of rate allowed on deposits advisable,
61 ; influence of Bank on, less than
formerly, 67 ; not easy to trace con-
nection of bullion held by the Bank with,
76 ; variations in, 85, 86 ; mean of ex-
treme variations in, 86, 87 ; greatest
fluctuation, in each decade, 87 ; difference
between highest and lowest month, 87 ;
proportion of Reserve to Liabilities con-
nected with fluctuations in, 86-87 5 average
for each month, 1 845-1900, 88 ; advan-
tages of moderate, for excess Note Issue,
88 ; during panics, 1847, 1857, 1866, and
1890, 89-90; low reserve accompanies
high rate of interest, 90; proportion of
Reserve to Liabilities and Bankers'
Balances to Reserve, 1844, 1847- 1878,
89-90 ; Variations in, 1844-1900, 95-
105 ; valuable index to fluctuations in the
Money Market, 95 ; description of tables
explaining, 96 ; Monthly Averages of
Minimum, 1845-1900, Table 12, 97 ;
Number of days at each rate and num-
ber of changes in each year, 1844- 1900,
Table 13, 98-99; Number of days at
each rate, arranged from highest number
to smallest, and from lowest rate to
highest, Table 14, 100 ; details of varia-
tions in, 96, 101-102 ; fewer high rates
than previously from 1873-1900, 102-
103; low rates, 1891-1897, 103; and
market rate, harmony between, 104 ;

Some of the Causes which in-
fluence, 106-111 ; Reserve, relation of,
to, 106 ; tendency to lower rates in last
thirty-six years, 106; influence of autumnal
demand and of Scotch and Irish Note
Circulation on, 107-1 10 ; pressure on
Bank in May and November, marked in,
1 10 ; Monthly Averages of, with those of
Scotch and Irish Note Circulation and
specie held, arranged from smallest to
largest figures, 1845- 1900, Table 17, 124-
131 ; returns of, compared with those of
London Bankers' Clearing House, 134 ;
seasons of greatest business activity shown
by, 135 ; influenced by Bank Acts, 1844-
1845, through the Reserve, 135; Monthly
average compared with that at Banks of
France, Germany, Holland, and Belgium,
and with Clearing House Returns, 136;
connection of Autumnal Drain with, 139;
high in autumn months, 139 ; no guide
to Market Rate previous to 1844, 140 ;
compared with that of France, 150-
152 ; compared with that of France in
years of panic, 1847, 1857, 1866, 1890,
152 ; number of changes compared with
those of Bank of Germany, 160, 171 ;
proposal for mitigating fluctuations in,
172; injurious effect of high, on industrial
prosperity, 173; compared with that at
Bank of Holland, 177 ; at Bank of
Belgium, 184, 186 ; Fluctuations in,

COMPARED WITH OTHER BUSINESS

Fluctuations, 190-202 ; variations
comparatively severe since 1845-54, 191 ;
compared with those at other European
Banks, 191-195 ; Summary of fluctua-
tions in, together with those of other
returns, 184 5- 1 900, Table 36, 192 ;
fluctuations in, more extreme than at
other European Banks, 195 ; disadvan-
tages of high range of fluctuation, 195 ;
causes of severe fluctuation, 195-199 '■>
demands for specie, a cause, 195, 198 ;
Number of variations compared with
other European Banks, 1845- 1900, Table

37, 196 ; Lowest and highest charged,
and extent of fluctuation, compared with
other European Banks, 1844- 1900, Table

38, 197 ; Number and extent of fluctua-
tions, compared with other European
Banks, 1844-1900, Table 39, 198; and
Autumnal Drain, 198 ; extent of fluctua-
tions connected with want of fluidity of
assets, 199; Some remarks on, at
the Bank of England and at other
European Banks, 203-216 ; compared
with other European Banks, 203 ; low
rates compared with other European
Banks, 1844- 1900, 204 ; intermediate
rates compared with other European
Banks, 1844-1900, 205 ; high rates com-
pared with other European Banks,
1 844- 1 900, 208 ; Number of days at
each rate compared with other European
Banks, 1 844- 1 900, Table 41, 209 ; Num-
ber of variations, 1 891- 1900 and 1844-
1900, compared with other Banks, 210 ;
Average minimum rate charged by, com-
pared with other European Banks, in

232

INDEX

groups of years, 1845-1900, Table 42, 210;
Years in which no change took place, 1 845-
1 900, compared with other Banks,Table 43 ,
211 ; greater uniformity secured by larger
Reserve, 215-216; Monthly Averages,
compared with other European Banks and
with returns of London Bankers' Clearing
House, 1845-1900, Table 45, 216 ; rela-
tion of Reserve to, 218 ; influenced by
foreign exchanges, 219 ; influenced by
discounts at home, specie for export,
proportion of Reserve to Liabilities,
demands on bullion made through Scotch
and Irish Note Circulation, and the
Autumnal Drain, 219 ; variations, fre-
quent and rapid, 219.

England, Bank of: Rate of Interest — see
Rate of Discount.
Reserve, Note Circulation connected with,
8, 22 ; Scotch and Irish Note Circulation
also connected with, 8, 41-42; The
Average, 19-20 ; increase in, 19-20 ;
proportion of, to Liabilities, smaller in
recent years, 20, 41 ; alterations in char-
acter of demands on, 20 ; proportion of
Bankers' Balances to, 1844- 187 7, 20, 41 ;
Bankers' Balances, proportion of, to the,
21 ; Bankers' Balances and the, 23-
27; Bankers' Balances represent "Till
Money " rather than, 23 ; proportion of,
to Liabilities, 1846-1877, 23-24 ; diminu-
tion of, during panic, 1866, 25 ; amounts
in panic, 1875, 25; in 1878 and 1890, 26;
amount during panics, 1857, 1866, 1875,
36 ; Bankers' Balances sometimes larger
than, 36-37 ; example of proportion of, to
Liabilities after deducting Bankers' Bal-
ances, 38 ; Bankers' Balances cannot be
Reserve both of other Banks and of Bank
of England, 39; proportion of, to Liabili-
ties, Bankers' Balances being deducted,
41 ; all demands centre on, 41 ; Autumnal
Drain, 41-42 ; influence of Bank Acts,
1 844- 1 845, 41 ; how far Bankers' Bal-
ances form an efficient, 44-47 ; por-
tion of normal and abnormal Bankers'
Balances really and nominally "Reserve,"
45 ; portion of Bankers' Balances only
u Till Money," 45-46 ; protection of, and
fixing Rate of Discount, should be in
same hands, 47, 62 ; demands on, in-
creased by suppression of English Country
Note Circulation, 74 ; and Liabilities,
81-94 ; and Liabilities, main point to
consider, 81-84; and Liabilities, Monthly
Averages of, 1845- 1900, Table II, 82-
83 ; proportion of, to Liabilities, 84-86 ;
proportion of, to Liabilities, connected
with fluctuations in the Rate of Dis-
count, 86-88 ; proportion of, to Liabilities,
during Crises, 1847, 1857, 1866, 89 ;
High Rate of Interest accompanied by
low Reserve, 90 ; proportion of, to Lia-
bilities and Rate of Interest, 1844- 1878,
90 ; proportion of Bankers' Balances to,
and Rate of Interest, 1847-1878, 90;
greater growth of loanable capital in pro-
portion to, one cause of liability to fluctua-
tion in value of money, 103 ; does not
increase in proportion to demands on

it, 103 ; Capital and deposits 01 otlier
Banks and, 1872-1901, 104 ; Influence
on Market Rate of Bank regulation of
Reserve, 104 ; relation of, to rate of
Interest, 106 ; the only source whence
specie can be drawn for Note Circula-
tion, Scotland and Ireland, 115; Bank
Acts, 1844-45, influence on Rate of Dis-
count through, 135 ; notes form part of,
166 ; Summary of fluctuations in, together
with those of other returns, Table 36,
1 845- 1 900, 193 ; division of, in accord-
ance with Bank Act, 1844, 198 ; larger
bullion, needed to meet sudden demands,
215-216; greater uniformity in Bank of
England Rate of Discount secured by
larger, 216 ; relation to Rate of Interest,
218; proportion of, to Liabilities in-
fluences Rate of Interest, 219; composi-
tion of, altered by Act of 1844, 220 ;
influence of increase in deposits of other
Banks on, 220 ; need of larger, 224-225 ;
strength of Bank connected with adequate,
225.

England, Bank of: Reserve of Notes— see
Notes.

Rest, amount of, 17, 64.

Securities, Notes Issued, Specie and
Securities in the Issue Depart-
ment, 17 ; Annual Averages of the
Other, 27-30 ; Government, 27 ; pro-
portion of bills discounted to total, 28 ;
held by the Bank of England, want of
fluidity in, 29; amount of "other," in
1902, 29; divided between "Govern-
ment" and "other" securities, 64; rail-
way debentures held by, 1865, amount
of, 65 ; proportion of bills discounted to
" other ■ securities, 1844-1875, 66, 67;
composition of, compared with those of
other European Banks, 201 ; increase of,
in Issue Department, caused by Act of
1844, 220; clauses of Act sanctioning
this, 221-223.

Specie — see Issue Department, coin and
bullion held by ; see also Bullion.

Specie, demands for — see Autumnal Drain,
and Note Circulation, Scotch and Irish.

Temporary advances, fluctuations in, 29 ;
Bills Discounted and, 64-68; im-
mediate wants of business indicated by,

67 ; 1844-1875, 67-68 ; fluctuations in,

68 ; in panic year, 1866, 68.
Treasury Letter, November 12th, 1857, 89 ;

compared with Bank Act (Holland) of
1884, 177.
Weekly Returns, constantly studied, 1 ; more
information formerly than now, 1-2 ;
example of this, Table I, 2-3 ; details in
parliamentary reports, 3, 6-7 ; Table 2,
4 - 5 ; disadvantages of omissions, 6 ;
example of, Bankers' Balances being
deducted from both sides, 38 ; 1879 an<*
1902 compared (issue against securities),
223-224.

Exports and Imports, compared with
Clearing House Returns and with Bank
Note Circulation, 1 861-1900, Table 19,
137 ; excess of imports, a danger to our

INDEX

233

commerce and banking system, 213-214;
returns, 1861-1900, Table 44, 213.

Fluidity, want of, in securities held by Bank
of England, 29 ; extent of fluctuations in
Bank of England rate, connected with
want of fluidity of assets, 199 ; fluidity of
resources of other European Banks, 200.

Foreign Banks— see Banks, Foreign.

Foreign Exchanges, Bank of England
Rate of Discount influenced by, 219.

Foreign Trade of United Kingdom, 1861-
1900, Table 44, 213 ; see also Exports and
Imports.

France, Bank of: Organisation of, 141-143,

147-148 ; business of, method on which
carried on, 147 ; Governor and Sub-
Governors generally fix Rate of Discount,
147-148 ; governing body of, commercial
element sometimes said to be not suffi-
ciently represented in, 148 ; management
of, in times of difficulty (especially in
1870, 1874-5), a°le and judicious, 148;
other banks in France, 148, 149 ; assist-
ance given to Bank of England in Baring
Crisis, 1890, 148, 152 ; facilities given by,
to trade of country, 149.

Balance Sheet compared with Bank of Eng-
land and other European Banks, Table
40, 206.

Branches extend over France, 143, 147.

Capital, amount of, compared with Bank of
England and other European Banks, 200.

Deposits, public, compared with Bank of
England and other European Banks, 201.

Gold and silver held, 1877-1900, Table 24,

.153-

Liabilities, proportion of specie to, 81, 84.

Note Circulation compared with Bank of
England and other Banks, 201.

Rate of Discount, Monthly Averages of,
compared with Banks of England, Ger-
many, Holland, and Belgium, and with
London Bankers' Clearing House Returns,
1845-1900, 136; influence of autumnal
movement of gold shown in returns of,
139; Variations in, 1844-1900, 140-
153; before 1844 did not vary, 141;
Monthly Averages of minimum, 1845-
1900, Table 21, 142; Number of days
at each rate, and number of changes, in
each year, 1844- 1900, Table 22, 144-
145 ; Number of days at each rate,
arranged from highest number to small-
est, and from lowest rate to highest,
1844-1900, Table 23, 146; generally
fixed by Governor and Sub-Governors,
147-148 ; compared with Bank of Eng-
land, fewer changes in, 150-152; with
Bank of Germany, 160, 171 ; with Bank
of Holland, 177; and with Bank of
Belgium, 184-186 ; Summary of fluctua-
tions in, together with those in other
returns, 1845- 1900, Table 36, 192; Num-
ber of variations in, compared with Bank
of England and other European Banks,
1 844- 1 900, Table 37, 196; Lowest and
highest rate charged and extent of fluctua-
tion in, compared with Bank of England
and other European Banks, 1844- 1900,

Table 38, 197 ; Number and extent of
fluctuations compared with those at Bank
of England and other European Banks,
1 844- 1 900, Table 39, 198 ; low rates
compared with Bank of England and
other European Banks, 1844- 1900, 204 ;
intermediate rates compared with Bank
of England and other European Banks,
1844-1900, 205 ; high rates compared
with Bank of England and other European
Banks, 1844- 1900, 208 ; number of days
at each rate compared with Bank of
England and other European Banks,
1 844- 1 900, Table 41, 209; number of
variations, 1 891-1900 and 1 844-1 900,
compared with Bank of England and
other European Banks, 210 ; Average
minimum charged by each Bank compared
with Bank of England and other European
Banks, in groups of years, 1845-1900,
Table 42, 210 ; Years in which no change
took place, 1844-1900, compared with
Bank of England and other European
Banks, Table 43, 211 ; Monthly averages
compared with Bank of England, other
European Banks, and London Bankers'
Clearing House Returns, 1845- 1900,
Table 45, 216.

France, Bank of: Securities, composition of,
compared with Bank of England and
other European Banks, 201.
Specie, proportion of, to Liabilities, 81, 84 ;
and Bullion held, compared with Bank of
England and other European Banks, 201.
France, Banking in, and in England, differ-
ences between, 148-149 ; other Banks in,
besides the Bank of France, 148-149;
compared with Germany, 160-161.

Gairdner, Dr. Charles — see Note Circulation,
Scotch.

Germany, Imperial Bank of: History of,
155; founded originally, 1765, by Fred-
erick II. of Prussia, 155 ; present position
of, 155 ; management under control of
State, 158; other Banks in Germany
besides the, 160.

Balance Sheet compared with Bank of
England and other European Banks, 207.

Bank Act (Germany), 1875, I5S 5 Sections
^-S1* J 58- 1 595 limit of Note Issue fixed
by, 162 ; requirements as to cash held
against Note Circulation, 165.

Bank Act (Germany), 1899, limit of Note
Issue increased by, 1899, 162-163.

Branches over whole of Germany, 160 ;
number of, 160.

Capital and Reserve compared with Bank
of England and other European Banks,
200.

Bills, Inland, dealt in, 161 ; discount of,
most important item on credit side of
account, 166; Inland and Foreign, large
amount of, held, 167.

Current Accounts {Giro Verkekr), 161 ;
convenience in remitting money through-
out Germany by means of, 161- 162.

Deposits, public, compared with those at
Bank of England and other European
Banks, 201.

234

INDEX

Germany, Imperial Bank of: Liabilities,
proportion of specie to, 84.
Note Circulation, important factor in German
business, 162, 164 ; reserves held against,
162-167 ; limit fixed by Bank Act of
1875, 162; increased by Bank Act, 1899,
162-163 > authorised and excess issue,
162-164 '■> tax °f 5 Per cent, on excess
issue, 164, 166 ; compared with English
Note Circulation, 162-164, 166 ; require-
ments of Bank Law as to cash held
against, 165 ; average cover, 165 ; in-
crease of excess issue, 165 ; notes issued
as required, 166 ; three limitations on
note issue, 166 ; legal tender notes and
gold must be held at least for one-third
of notes in circulation, 167 ; Annual
averages of, 1876- 1900, Table 29, 169 ;
dates and amounts of excess issue beyond
legal limit, 1881-1900, 169-171 ; com-
pared with Bank of England and other
European Banks, 201.
Rate of Discount, Monthly Averages of,
compared with those at Banks of England,
France, Holland, and Belgium, and with
London Bankers' Clearing House Returns,
1 845- 1 900, 136 ; influence of autumnal
movement in gold shown in returns of,
139; Variations in, 1844-1900, 154-
173 ; Monthly Averages of minimum,
1845-1900, Table 25, 156; Number of
days at each rate, and number of changes,
in each year, 1 844-1900, Table 26, 157 ;
Number of days at each rate, arranged
from highest number to smallest, and from
lowest rate to highest, 1844- 1900, Table
27» !S8 ; rate below 3 per cent, never
charged, 171 ; number of changes com-
pared with Banks of England and France,
160, 171-172 ; compared with Banks of
Holland and Belgium, 171 ; 4 per cent,
the most usual, 171 ; compared with
Bank of Holland, 177; compared with
Bank of Belgium, 184, 186 ; Summary of
fluctuations in, together with those in
other returns, 1845- 1900, Table 36, 192 ;
Number of variations in, compared with
Bank of England and other European
Banks, 1844-1900, Table 37, 196 ; Lowest
and highest charged and extent of fluctua-
tion during each year compared with
Bank of England and other European
Banks, 1844-1900, Table 38, 197; Number
and extent of fluctuations, compared with
Bank of England and other European
Banks, 1844- 1900, Table 39, 198 ; low
rates compared with Bank of England
and other European Banks, 1844- 1900,
204 ; intermediate rates compared with
Bank of England and other European
Banks, 1844- 1900, 205 ; high rates com-
pared with Bank of England and other
European Banks, 1844- 1900, 208 ; Num-
ber of days at each rate compared with
Bank of England and other European
Banks, Table 41, 1844- 1900, 209; number
of variations, 1891-1900 and 1844- 1900,
compared with Bank of England and
other European Banks, 210; average
minimum charged by, compared with

Bank of England and other Ei
Banks, in groups of years, 1845-1900,
210; Years in which no change took
place, compared with Bank of England
and other European Banks, 1844- 1900,
Table 43, 211; Monthly Averages at,
compared with Bank of England and
other European Banks, and with returns
of London Bankers' Clearing House,
Table 45, 1845-1900, 216.
Germany, Imperial Bank of: Securities held
can be rapidly turned into cash, 167 ;
composition of, compared with Bank of
England and other European Banks, 201.

Specie, proportion of, to Liabilities, 84 ;

held by Bank, 1876- 1900, Table 28,

168 ; and bullion compared with Bank of

England and other European Banks, 201.

Germany, introduction of gold standard in,

1872, and unsteadiness of money market

at time, 160 ; banking in, compared with

England and France, 160-161, 162, 164;

other Banks in, 160.
Gibbs, Mr. H. H. (Lord Aldenham), on

Bankers' Balances — see England, Bank of,

Bankers' Balances.
Glasgow, Bank of, stoppage of, effect doubt-
less on Bankers' Balances, 1878, 25-26.
Gold, regulations as to purchase of, by Bank

of England, Bank Act, 1844, 30, 199 ;

influx in May and June, 139 ; see also

Autumnal Demand.
Gold Bullion — see England, Bank of, Bullion.
Governor of the Bank of England — see

England, Bank of, Governing Body of.
Hankey, Mr. Thomson, on "Bills" and

" Mortgages," 29 ; on investment of de-
posits of the Bank, 65.
Holland, Bank of: established 1814, 174-
175 ; management, system of, 174-175 ;
principally a Bank of Discount, 176-177.

Balance Sheet, compared with Bank of
England and other European Banks, 206.

Bank Act (Holland), 27th April, 1884,
allowing sale of silver coin, compared with
Treasury Letter in England, 176-177.

Bank Law (Holland) of 1888 allowed Bank
to buy bills payable abroad, 176 ; of 1884,
an acknowledgment of responsibility of
State to endeavour to keep standard of
value from fluctuating, 177.

Branch (Rotterdam), agencies and corre-
spondents, 175.

Bills payable abroad, not allowed to buy,
before 1888, 176; inland and foreign
held, 176.

Capital and Reserve, 176 ; compared with
Bank of England and other European
Banks, 200.

Deposits, public, compared with Bank of
England and other European Banks, 201.

Discounts and Loans, 175.

Gold, demand for export of, 1882, 176.

Liabilities, proportion of specie to, 84.

Loans and advances, 176.

Note Circulation, cover in coin and bullion
40 per cent., 176 ; amount of, compared
with Bank of England and other European
Banks, 201.

INDEX

235

Holland, Bank of : Rate of Discount,
Monthly Averages of, compared with
those at Banks of England, France,
Germany, and Belgium, and with London
Bankers' Clearing House Returns, 136;
influence of autumnal movement in gold
shown in returns of, 139; compared
with that at Bank of Germany, 171,
177 ; Variations in, 1844-1900, 174-
180 ; lower, on average, than that at
other European Banks, 177 ; compared
with that at Banks of England, France,
and Germany, 177 ; Monthly Average of
minimum, 1845-1900, Table 30, 178 ;
Number of days at each rate and number
of changes, in each year, 1844- 1900,
Table 31, 179; Number of days at each
rate, arranged from highest number to
smallest, and from lowest rate to highest,
1 844- 1 900, Table 32, 180 ; compared
with that at Bank of Belgium, 184, 186 ;
Summary of fluctuations in, together with
those in other returns, 1845-1900, Table
36, 192 ; Number of variations in, com-
pared with those at Bank of England and
at other European Banks, 1 844-1 900,
Table 37, 196 ; Lowest and highest rate
charged, and extent of fluctuation in,
compared with those at Bank of England
and at other European Banks, 1844- 1900,
Table 38, 197 ; Number and extent of
fluctuations, compared with those at
Bank of England and at other European
Banks, 1844- 1900, Table 39, 198 ; low
rates compared with Bank of England
and other European Banks, 1844- 1900,
204 ; intermediate rates compared with
Bank of England and other European
Banks, 1 844- 1 900, 205 ; high rates com-
pared with Bank of England and other
European Banks, 1844-1900, 208; Num-
ber of days at each rate compared with
Bank of England and other European
Banks, Table 41, 1844-1900, 209; Num-
ber of variations, 1 89 1 -1900 and 1844-
1900, compared with Bank of England
and other European Banks, 210 ; Average
minimum charged by, compared with
Bank of England and other European
Banks, in groups of years, 1845- 1900,
Table 42, 210; Years in which no change
took place, compared with Bank of Eng-
land and other European Banks, 1844-
1900, Table 43, 211 ; Monthly Averages
at, compared with Bank of England and
other European Banks, and with returns
of London Bankers' Clearing House,
Table 45, 1845-1900, 216.
Remittances and drafts, 175, 176.

Securities, composition of, compared with
Bank of England and other European
Banks, 201.

Specie, proportion of, to Liabilities, 84 ;
and Bullion held, compared with Bank
of England and other European Banks,
201.

Stamp Duty, 175.

Imperial Bank of Germany, the — see Ger-
many, the Imperial Bank of.

Imports — see Exports.

Interest, Rate of — see England, Bank of,
Rate of Discount.

Investment of Deposits of the Bank, Mr.
Thomson Hankey on, 65.

Ireland, Banks in — see Banks, Ireland.

Irish Note Circulation — see Note Circula-
tion, Irish, and Scotch and Irish.

Joint Stock Banks — see Banks, Joint Stock.

Liabilities of the Bank of England — see

England, Bank of, Liabilities.
Lloyd, Mr. Samuel Jones (Lord Overstone),
on Bank Rate — see England, Bank of,
Rate of Discount.
London Bankers' Balances at Bank of
England — see England, Bank of, Bankers'
Balances.
London Bankers' Clearing House— see

Clearing House, London Bankers'.
Lowe, Mr. — see Sherbrooke, Lord.

Market, position of Bank to outside, fifty
years ago, 48-51.

Market Rate and Bank Rate, divergence
between, 32; Table 4, 1845-1900, 33;
Bank adapted its own rate to, 1844, 49;
effect of this down to 1848, 49-50 ; and
Bank Rate in 1857, 1858, 50-51 ; Bank Rate
not so clear a guide to, as formerly, 55—56 ;
influence of Bank on, less than formerly,
67, 104 ; Bank of England Rate previous
to 1844 no guide to, 140.

Money, unsteadiness in the value of, 42 ;
market value of considerably below Bank
Rate before 1844, 49; greater growth of
loanable capital in proportion to reserve,
one cause of liability to fluctuation in value
of, 103 ; in the country, greatly increased
during last fifty years, 219.

Money Market, methods as to Bill-broking
followed in England, unfavourable to quiet
working of, 52 ; Rate of Discount, a valuable
index to fluctuations in, 95 ; demands for
specie in London, connected with Bank
of England Rate of Discount, 195, 198 ;
English, connected with foreign, 215 ;
English, largely the Clearing House of
the world, 215 ; influence of Bank of
England on, 219.

Money Markets of Europe and America,
Recent events influencing, 9 ; foreign, con-
nection with English, 215.

Mortgages and Bills of Exchange, differ-
ence between, 29.

New York, Associated Banks— see Banks,
New York.

Newmarch, Mr., estimate of Bills in circu-
lation, 1 85 1, 66; of metallic circulation,
73 ; of holdings of Banks in 1851, 220.

Note Circulation.

Note Circulation, Bank of England — see

Bank of England, Note Circulation.
Note Circulation, Belgium, France, Ger-
many, Holland — see Belgium, France,
Germany, Holland, Banks of, Note Cir-
culation.

236 INDEX

Note Circulation.

English Country Note Circulation :
Bank of England Note Circulation,
Bullion held in the Issue Depart-
ment, 69-80; English Country Note
Circulation, Bank of England Notes take
the place of lapsed Issues of, 72-74 ; Bank
Act of 1844 designed to suppress, 74 ;
demands on Reserve increased by sup-
pression of, 74 ; suppression of, disadvan-
tage to local trade, 74 ; Monthly Averages
of, 1 845- 1 900, Table 8, 75 ; Summary of
fluctuations in, together with those in other
returns, 1845-1900, Table 36, 193.

Irish Note Circulation and Specie, Monthly
Averages, 1845- 1900, Table 16, 121- 123 ;
Table 17, 124-131 ; see also Scotch and
Irish Note Circulation.

Scotch Note Circulation, periodic increase
in, May and November, 107-109 ; peri-
odic increase, influence on business, 107-
108; Dr. Charles Gairdner on causes of
periodic fluctuations in, 109 ; and Specie,
Monthly averages of, 1845- 1900, Table
15, 118-120; Table 17, 124-131.

Scotch and Irish Note Circulation, con-
nected with Bank of England Reserve,
8, 41, 1 12 ; pressure on Bank of England,
May and November, caused by demands of,
no; fluctuations in, noticed in 1856, 11 1 ;
The Scotch and Irish Note Circu-
lation, 112-131 ; and Bank Acts, 1845,
112; fluctuations in specie held against,
113; Dr. Charles Gairdner on influence
exercised by Bank Acts, 1844-45, on, 113-
115 ; Bank of England Reserve, the only
source whence specie can be drawn for,
115 ; specie held, not special security for
notes, but asset against general liabilities,
115; fixed issues, 115; and specie held,
difference between highest and lowest
months and mean of extreme variations,
116; clauses in the Bank Acts regulating
holding of specie against excess issue,
116-117 ; and specie held, Bank of Eng-
land Rate of Discount, arranged from
smallest to largest figures, Monthly Aver-
ages, with those of Bank of England Rate
of Discount, 1845- 1900, Table 17, 124-
131 ; months of maximum, 136 ; influ-
ence of Autumnal Drain, 139 ; Summary
of fluctuations in returns of, and in those
of specie held, together with those of
other returns, 1845-1900, Table 36, 192-
193 ; demands made on bullion held by
Bank through movements in, influence
Bank of England Rate of Discount, 219.

"Other" deposits—^ England, Bank of,
deposits.

4 'Other" securities— see England, Bank of,
securities.

Overstone, Lord, on the Bank Rate— set
England, Bank of, Rate of Discount.

Panics: 1847, proportion of Reserve, London
Bankers' Balances and Liabilities during,
89; Rate of Discount, gold bullion in
Bank and Reserve of notes during, 89;
Bank of England Rate of Discount com-
pared with that of Bank of France, during,

152; permission to. suspend Bank Act,
1844, fixing limit of note issue granted,
164.
Panics: 1857, Bankers' Balances during, 24,
36 ; influence on Bankers' Balances, 25 ;
amount of Bankers' Balances and of
Reserve in, 36 ; proportion of Reserve,
London Bankers Balances and Lia-
bilities during, 89 ; Rate of Discount,
gold bullion in Bank, Reserve of notes
during, 89 ; Treasury Letter issued during,
89 note ; Bank of England Rate of Dis-
count compared with Bank of France
during, 152 ; Bank Act, 1844, fixing
limit of note issue suspended, 164.
1866, Bankers' Balances during, 24, 36 ;
diminution of Reserve during, 25 ; in-
fluence of, on Bankers' Balances, 25 ;
amount of Bankers' Balances and of Re-
serve in, 36 ; fluctuations in temporary
advances during, 68 ; proportion of Re-
serve, London Bankers' Balances and
Liabilities during, 89 ; Rate of Discount,
gold bullion in Bank and Reserve of notes
during, 89; Bank of England Rate of
Discount compared with Bank of France,
152; permission to suspend Bank Act,
1844, fixing limit of note issue granted,
164.
1875, Bankers' Balances during, 25, 36 ;
influence of, on Bankers' Balances, 25 ;
other Deposits, other Securities, and Re-
serve during, 25.
1890, other deposits, other securities, and
Reserve during, 26 ; Rate of Discount,
gold bullion in Bank and Reserve of notes
during, 90; Bank of England Rate of
Discount compared with that of Bank of
France during, 152. See also Baring
Crisis.
Parliamentary Reports, Details of Bank of
"England weekly returns, 2-7 ; Table 2,
4-5 ; information as to the Bank of Eng-
land adhering to fixed minimum Rate of
Discount, Reports 1847-8, 1848, 48-50 ;
information as to Bank of England rate,
Reports, 1857, 1858, 50-51 ; remarks on
constitution of governing body of the Bank,
58-59.
Private and Joint Stock Banks— see Banks,

Private and Joint Stock.
Railway Debentures held by Bank of Eng-
land— see England, Bank of, Securities.
Rate, Market — see Market Rate.
Rate of Discount, Bank of England — see

England, Bank of, Rate of Discount.
Rate of Discount, Belgium, France, Ger-
many, and Holland — see Belgium, France,
Germany, and Holland, Banks of.
Re-discounting, practice of foreign Banks,

52.
Reichsbank — see Germany, Imperial Bank of.

Reserve of the Bank of England — st
England, Bank of, Reserve.

Scotch Note Circulation — see Note Circula-
tion, Scotch, and Scotch and Irish.

Securities of the Bank of England — set

England, Bank of, Securities.

INDEX

237

Sherbrooke, Lord, Bill proposed by, to allow
excess note issue; text of, 1873, 93_94 5
plan for modification of Bank Act, 1844-
1873, 172.

Silver bullion held by Bank, 78 ; discussed
in connection with Indian exchanges, 79 ;
held by Bank, 1844-53, 1860-61, Table 10,
80.

Specie at command of Bank, reserve of notes
represents greater part of, 84 ; demands for
in London Money Market, and Bank of
England Rate of Discount, 195, 198 ; for
export, influence of, on Bank of England
Rate of Discount, 219.

Specie, Autumnal Drain of — see Autumnal
Drain.

Specie held by Bank of England — see Eng-
land, Bank of, Bullion and Coin, and also
Specie at command of Bank.

Specie held by Scotch and Irish Banks —
see Note Circulation, Scotch and Irish.

Temporary Advances of Bank of England
— see England, Bank of, Temporary Ad-

vances.

Bank of England

Treasury Letter — see

Treasury Letter.
Weekly Returns of Bank of England—

see England, Bank of, Weekly Returns.

PLYMOUTH
WILLIAM BRENDON AND SON

PRINTERS

lii^l

UM

KtUU