be added another most material consideration, the great probability of eventually increasing his capital by a rise in the Public Funds. If, then, pecuniary accommodation is not to be procured on mortgage at legal interest in London, the great Money Mart, where the National Bank, and Bankers in general, are in good credit, it is not astonishing that the shock occasioned by the failure and discredit of the Provincial Banks, should have thrown so many parts of the country, under existing circumstances, into such a seemingly irretrievable state of distress, for want of a sufficiency of secure currency, so amply possessed by the metropolis.. It is not to be denied that much and severe distress has shown itself in London: but may not this, in a great measure, be attributed to the destruction of trade and credit in the country? No arguments were necessary to prove, that the country has suffered to excess, from the deteriorated and worthless paper currency with which an unprincipled set of men, calling themselves Bankers, had overwhelmed it.' But, previously to submitting a Plan, by the adoption of which, I presume to think that every town, and even village in the kingdom, might, in respect to pecuniary accommodation and secure circulating medium, be placed on as good a footing as the metropolis,-it seemed necessary to show, by the foregoing observations, that the former are now totally deprived of such advantages. I would propose that facilities should be given for any person possessing stock in the Government funds, to transfer the same, or any part thereof, in trust, to some authorised public functionary or functionaries, as security for any promissory notes he might choose to issue. 2 Thus; suppose an office for the registration and management of such transfers be established, under the controul of the Accomptant-General of the Court of Chancery. AB possessing 10,000/. five per cent. stock, transfers the same to the said Accomptant General, in trust as a security for 10,000l. in notes, See note A. 2 The Court of Chancery is offered as an example, because it is already in the habit of holding immense sums in trust. Several other public departments might answer the purpose as well, or even the Bank of Eng land itself. which he means to issue payable to bearer on demand. On this transfer being made, and A B paying adequate ad valorem fees towards the support of such an establishment, the AccomptantGeneral will be authorised to deliver to him printed notes of the following, or any other form that legal advisers might better approve, to the amount of 10,000l., in such several sums as A B might wish that amount to be divided. I promise to pay CD or bearer, on demand, the sum of ten pounds, as security for which I assign ten pounds five per cent. annuities, transferred for that purpose to the Accomptant General of the Court of Chancery. (Signed) A. B. I certify that A B has transferred to the Accomptant-General of the Court of Chancery, ten pounds five per cent. annuities, as security for the payment of this note, which will be transferred to the bearer in default of payment. (Signed) P. G. These notes' would, I conceive, possess all the solidity which those of the Bank of England do (the security of Government and that of the drawer;) and they might be issued in discounting bills, or by way of loan in any part of the kingdom, with as much facility and benefit to the Public, as Bank of England notes are in London. They would, in some degree, have an advantage over the Bank of England notes for country circulation, inasmuch as their genuineness might be ascertained in that part of the country where they originate and are most likely to be kept in circulation, by reference to the drawer, as well as at the office in London where the security for them is lodged. The want of some such criterion in different parts of the country has been the cause of the insecure country notes being preferred to those of the Bank, which it was feared might be forged. Private persons might lend such notes on security as well as bankers, or use them in payments to great advantage. Thus, suppose a person's dividend to amount to one thousand pounds, which he usually keeps by him for his current expenses, by immediately returning the dividend into stock, and taking up secured notes for the amount, he economises his property greatly by its being made to yield him an interest till the time he has occasion to expend it. And if, at the period of the ensuing dividend be 'They would be equal in value to gold; for gold coin of the same nominal value could produce no greater income than 5 per cent. coming due, he has any surplus, this, at least, will have been producing interest in the funds where it remains. That Provincial Banks issuing only these secured Notes would have a preference, there cannot be a shadow of doubt, nor is there reason to believe that any solid Bank would hesitate to adopt the measure; for, although the profit upon the circulation of such notes might not be so great as upon an unlimited number issued without any security, still the profit would be sufficiently considerable to induce competitors upon the new plan in every town in the kingdom; and thus, without any compulsory or restrictive measures on the part of Government towards existing Country Banks, considered by Adam Smith' to be absolutely necessary for public security, a most cruel evil would be remedied, which has, in the course of the last twenty-five years, been the ruin of many thousands of the poor and middle classes of society in the country, and at length has greatly contributed to plunge both agriculturist and manufacturers into one general abyss of misfortune. For example, suppose a new Bank established in a country town, which, together with its vicinity, requires a circulation of notes to the amount of a hundred thousand pounds; what would be the probable profit? Four Gentlemen undertake the business, having each 25,000l. five per cent. stock, which may, for argument sake, be supposed at par. This stock they transfer in trust, and receive certified notes to the amount of their capital, which they issue on the securities at 5 per cent.; consequently, besides the dividends on their stock, they get 5,000l. per annum by the issue of their paper. But, allowing one thousand per annum for expenses, and the necessary cash to be kept in coffers yielding no interest, they will receive four thousand a year as the profit of a business which may be conducted with less trouble or risk than any other where a capital is required. It should be observed, that, till the Bank of England resumes payments in gold, the sum necessary to be kept on the premises would be very trifling, for these notes having an equal security with those of the Bank of England, there would be very little danger of a run upon the firm. The profit from keeping drawing accounts I have not included, though it would perhaps, at such an establishment, be sufficient to defray the charges for which I have allowed the thousand per annum. Such a Bank would not necessarily be confined to the issuing of notes to the amount of the 100,000l. they start with, as they themselves might procure money on the securities on which they had advanced their notes, and therewith purchase more stock and obtain more secured notes to circulate at interest. • See note B. Persons travelling on the Continent, or going to our colonies in America, or the East Indies, would derive very considerable advantage from the plan of security notes. Instead of selling out stock to obtain bills or letters of credit, which cannot be done without loss of the interest of money, at least during the voyage, they might leave their funds well secured at home, and probably sell their notes at a considerable premium when they arrived, as remittances to England. For instance, in Jamaica, bills on England are generally at a premium of from ten to fifteen per cent., and are not made due till ninety, days after sight, consequently, nearly five months must elapse before they are paid. A gentleman leaving London in April with 1000l. in notes, secured on stock, the dividend on which becomes due at Midsummer, instead of Bills or Letters of Credit, probably arrives in June, sells his notes, than which a more secure remittance cannot be obtained, at a high premium, they being payable at sight instead of three months after, and gets his dividend on his stock to Midsummer. The difference to bim between this mode and bills taken from London, would be from 40l. to 50l., besides having the opportunity of keeping his money at interest in the English stocks, if he should not have occasion to use his notes in Jamaica. There can be no doubt but these notes would be bought up with avidity in all the British colonies, particularly if some regulation were made by which the purchaser would be entitled to the future interest accruing on the stock. It seems evident that such regulations would enable the colonists to realise, without risk, their property in England, which at present, for those in India particularly, is frequently difficult, expensive, and hazardous. It was at first my intention to have gone much more into particulars, and not only to have detailed every circumstance which I conceived necessary for carrying such a plan into immediate and complete execution, but to have enumerated the many other momentous advantages which in my view would accrue to the nation and the public in general from its adoption: however, upon reconsideration I am of opinion that the Sketch I have given is sufficient to show the possibility of remedying the evil, and in some degree rendering that very considerable proportion of the capital of the kingdom, which has been borrowed for the use of the state, and consequently withdrawn from Agriculture, Manufactures, and Commerce, still available for public accommodation, by renewing, through its means, the "grand wheel of circulation," which, from the rottenness of its materials, has been rapidly decaying, and has now hardly more than one cog left that can be depended upon. Few persons commence business in any way without a great proportion of borrowed capital; but the State, as I have before observed, has borrowed nearly all that is to be lent; and therefore, till something be done to release, or render it available to the enterprising, ingenious, and industrious, there will be the less chance of our manufacturers being able, as formerly, to undersell in foreign markets, or our agriculturists to increase the produce of the land now under cultivation, or extend their exertions to the MANY MILLIONS of uncultivated acres capable of giving employment and subsistence to the immensely increased, and still increasing, population of the empire. As the Author means to pursue the subject occasionally (if it be necessary) till this or some better plan, for the security and accommodation of the country, shall have been universally adopted, he will be thankful for any hints or information that he may be favored with; particularly, as to the present state of banking in the different towns; what places stand in most need of solid banking establishments; the causes and effects of the failures that have taken place; and indeed any communications that may serve for a History of the Provincial Banking System: which may be addressed free of postage. NOTES. It has been estimated, that since the commencement of the war with France, in 1793, country bankers, and other petty issuers of local notes, have failed for the amount of at least THIRTY MILLIONS STERLING, a sum nearly as great as the whole secure circulating medium of the country used to be, previously to that period. It should be recollected that "those bloodsuckers" had absorbed most of the gold currency that used to circulate in the country, by substituting their small notes, many years before gold became scarce in London, or the Bank of England suspended cash payments, and began to issue one and two pound notes. There are the strongest grounds for believing that these measures would never have become necessary on the part of the Bank, had not the small country notes been thus substituted for gold and silver, in almost all parts of the kingdom, excepting London and its immediate vicinity. Had the Bank been obliged to continue replacing the drain of the precious metals, occasioned by such bankers, it must soon have exhausted its coffers, and been ultimately reduced to as insolvent a state as most of them, by being obliged to purchase bullion at 20 or 25 per cent. above the Mint price, to supply coin which would have disappeared as soon as issued. It seems impossible that a currency of gold and silver should be maintained in any country where specious adventurers may, through the folly or infatuation of the public, be suffered to substitute for it their insecure promissory notes. It would appear, therefore, that the Bank of England |