0- \ 
 
 /■ 
 
THE BRITISH CREDIT SYSTEM. 
 
 V INFLATED BANK CREDIT 
 
 AS A SUBSTITUTE FOU 
 
 "CURRENT MONEY OF THE REALM." 
 
 THE WAY "TO PAY DEBTS WITHOUT MONEYS." 
 
 AND TO MAKE "THE RICH RICHER 
 
 AND THE POOR POORER." 
 
 BY 
 
 HEKRY CAREY BAIRD. 
 
 P IT I L A D E L P II I A: 
 riENEY CAREY BATHD & CO., 
 
 INDUSTRIAL PUHLISHERS, BOOKSELLERS, AND IMPORTERS, 
 810 WALNUT STREET. 
 
 1875. 
 
BANK INFLATION IN ENGLAND. 
 
 - From the Puilabelphia Piiehs, March 15, 1875. 
 
 To the, Editor oj the Press : — 
 
 The entire stock in trade of the American bullionist, the thing with 
 which he frigl)lciis people who are wholly ignorant of finance, the means 
 he uses to perpetuate his power as the great middlenuui, the parasite 
 jjar excellence as a dealer in credit, is "Inflation." The only inflation, 
 however, which he pretends to see himself, or wishes otliers to see, is 
 that of the little monetary instrument — the circulating note, the peo- 
 ple's rivuiet that irrigates the whole land, and brings peace and pros- 
 perity in rills to all classes, rich and poor alike, and with these results, 
 power to the State. He wholly ignores inflation of the great monetary 
 instrument, bank and other credit, the Mississippi of currency, an infe- 
 rior substitute which men are forced to use when the law places an 
 arbitrary limit upon the one of superior quality, the "current money 
 of the realm." 
 
 In no other country in the world has the bullionist held such supreme 
 control during half a century as in England, in none other has he as a 
 credit monger so nicely "feathered his nest" at the expense of the peo- 
 ple; in none other is the yawning gulf which divides rich and poor 
 more steadily widening, and the most potent instrumentality in pro- 
 ducing this state of afl'airs has been the contraction of the volume of the 
 little monetary instrument, " the current money of the realm," and the 
 inflation of the great m^onetary instrument, bank credit. How this 
 great middleman interest is worked, what imnien;^e power it wields, and 
 what profits 4t realizes from insignificant means, are clearly shown by 
 the statement of The London and County Banking Company, of 
 London, December 31, 1814 : — 
 
 That institution had a capital of .... £1,200,000 
 llesecve 600,000 
 
 £1,800,000 
 But its loans were as follows : — 
 
 On call £3,050,922 
 
 Discounted bills and advances . . . . . 14,113,465 
 
 Drafts accepted 2,780,005 
 
 £19,944,392 
 
What a grand sj'stcni of "inflation"! An irresponsible jn'ivate 
 institution, witli £1,800,000 of capital and reserve, addint? £19, 944, 392 
 to tlie purchasinc^ power of those who borrowed its credit, precisely as 
 much so as would an addition of £19,944,302 to the circulating: medium 
 of the country add to the purchasing power of the whole people I But 
 this was not all. This institution held cash on hand to the amount of 
 £2,4(51,448, being almost equal to tlie full amount of its ca[)ital, reserve 
 undivided profits, and subscriptions paid on account of new shares. Still 
 further, it held government and other stocks and securities, and real 
 estate to the amount of £2,506,547. 
 
 Now how have these results, as magical as those which came from 
 Aladdin's hunp, been acconi|)lished ? Why, by lending an ever-incrensing 
 volume of credit, which is l)ased on a fixed sum of money or credit called 
 capital, and receiving it, orthat of similar English banks, in deposits, in the 
 aggregate amounting to the almost unparalleled sum of £19,892,586, 
 which deposits are, by means of checks and the clearing-house, kept 
 floating round in a circle among these banks — the balances between the 
 banks being settled without the use of a single jiound sterling of money, 
 but by checks on the Bank of England.* Be it reineral)ered, too, that 
 this London and County Banking Company has no circulation of its 
 own, but, that where it does use notes they are those of the Bank of 
 England. 
 
 The result of the business of the bank for the past year, after paying 
 large salaries and other expenses, was dividends amounting to 20 i)er 
 cent., that too, in a land where the public fund-holder is content with a 
 trifle over 3 jier cent., and the small depositor in the Postal Savings 
 Bank with 2^- })er cent. 
 
 Is it not high time that the British government ceased to limit the 
 volume of the "current money of the realm," and thus to legislate in 
 the interest of such a set of vampires as the London and County Banking 
 Co. ? The English reformers have now been at work for half a century, 
 and they have really accomplished nothing of material advantage to the 
 
 * To show liow very small an ainoiint of banking deposits aro made in the 
 foi'm of money we pivo liie following statenuint, made by .Sir John Lnhbock 
 before the .Statistical Society in June, ISiif), in whiidi he analyzed a sum of 
 i;ii),UOO,OUO paid into his baulc by curttomers : — 
 
 Checks and bills ...... £1 8,395,000 or tJT per cent. 
 
 Uank of England notes .... 408,000 i 
 
 Country notes ..... 7n,liOO ^ 3 per cent. 
 
 Coin 118,000 J 
 
 From which statement it appears that only 3 per cent, of banking deposits 
 are paid in the foi'm of money, tliat is, noles and coin ti'gether, an.l a little 
 more than .'. per cent, iu specie. — i'aUersuu^s Science of Finance ^ pp. 5, G; 
 Edinburgh, 18US. 
 
))CO))lo. Lot t'.iam concentrate their whole eifort npoii monetary reform. 
 Lei them demand that current money of the realm shall take the place 
 now held by an inHated bank credit, and they will find that the power of 
 the peoj>le over the accnmnlations of the past will soon show itself, and 
 will bless and prosjjor the many instead of the f(!W, as at iircKont. 
 
 The great, insolvablo problem of the jaiblic debt of Great Britain 
 awaits ill the near future an easy solution. Let the goverument t;d\0 
 from the Bank of England and all other banks the right to issue circu- 
 lating notes, and issue them itself jn exchange for consols, allowing the 
 people full liberty to decide upon the volume of such notes, and making 
 them at all times interconvertible with consols. These notes will take 
 the jilace of mere unsubstantial bank credit, and flowing out among the 
 people will disseminate the force now centralized in the hands of a few 
 bank officers, stockholders, and borrowers, and enable the people, the real 
 source of national wealth and power, to contribute almost immediately, at 
 least as much toward the payment of the public debt asthey did from 1810 
 to 18:^2, before resumption of specie ])ayments, or £16,000,000 per annum ; 
 besides which the debt will certainly be carried at 2 per cent, per annum 
 interest, instead of 3 per cent., and this alone will rapidly lighten its 
 burden.* Li addition to all of these advantages credit, misnamed "financial 
 crises," will soon be a thing of the past, and the great body of the people 
 of Groat Britain will clearly see, as many do now among us, that "in 
 the interchangeability (at the option of the holder) of national paper 
 money with government bonds bearing a fixed rate of interest, there is 
 a subtle principle that will regulate the movements of finance and com- 
 merce as accurately as the nujtion of the steam-engine is regulated by 
 its ' governor.' Such paper-money tokens would be much nearer perfect 
 standards of payment than gold and silver ever have been or can be.'' 
 That all of these things will come to i)ass, and even in Great Britain, in 
 the not very distant future, and that they will finally and forever drive 
 pauperism from those islands, is my firm conviction. 
 
 HENRY CAREY BAIRD 
 
 * The public debt of Great Britain is^^ow £779,283,245 = $3,787,31G,570, aud 
 loiisequenily a iciluction of 1 per cent, per unmiin iiitere.st would give an im- 
 uediiite annual relief of $37,873,1 G.'). In lilty .ve.ir.-*, however, there would be a 
 laving to tlie people and tin? Htate of $(5,40!), (.154, 51)3, l)e!ng the difference be- 
 vveen !<1(!, 003,217, 111, the amount of the debt at the expiration of that time. 
 It compound interest, at 3 per cent., and §10,193,51)2,548, its amount at 2 per 
 
CAPITAL AND CURRENCY. 
 
 Including an atlcmi-)t to show irluif if is that England loans and 
 what our Government and Iiailroads borrow from her. 
 
 [a REjni^xnr) ccisi.iii'Mf'.VTiuN.] 
 
 To the Editors ofllic Bodon Daibj Adcrrlincr: — 
 
 Permit- nic to ask the favor that you will allow me to make a critical 
 examination of an important Hcntcnco in the rejoinder of " W. E.-' to 
 Mr. Wendell Phillips on "Ca))ital and Currency," in your pa[)er of the 
 18th inst. The sentence is as follows: — 
 
 "I said," says W. E., "that, in order to make the rale of interest, 
 permanently lower in this country, it would l)c necessary to make llie 
 supi)ly of loanable capital larger than it now is, rvlalivchj to the demand 
 for it, and that this could be done only by borrowing abroad, or by slow 
 accumulation at home — in short, that capital, and not currency, w;is 
 the thing needed to satisfy Mr. Phillips's desire, and that capital could 
 not be created by any act of legislation." 
 
 The question which meets us at the very threshold of this investiga- 
 tion, and demands an answer, is, What in capital?- Without this an- 
 swer, and, in addition, an analysis of that which W. E. calls " loanable 
 capital," \vc shall remaiii in ignorance as well of the nature of our con- 
 clusions as of our premises ; we shall, indeed, not know what it is that 
 we are talking about. 
 
 Capital has been defined by an eminent American economist as " the 
 instrument by the aid of which jjroduction is directed to the uses of 
 man," and oxists, as he adds, in the form of land and its improvements, 
 ships, ploughs, mental development, books, corn, roads, steam engines, 
 money, and that confidence between man and man which is known as 
 credit. This latter has been characterized by a very acute and able 
 Scotch economist, R. 11. Patterson, as "our invisil)le capital." Let us 
 now inquire what is the "loanable caiiital" to which W. E. refers, and 
 the supply of which may, as he thinks, be increased "only by l;orrowing 
 abroad or by slow accumulation at home ;" and sec if it is not mere 
 credit, the "invisible capital" of Mr. Patterson. Let us trace out the 
 manner of organizing and subsequently of working one of those greatest 
 
6 
 
 of nil the credit institutiona in Iho world, a, London hunk, and sec if wo 
 cannot Ihorohy slicd sonic li<i:lit iipon llic problem. 
 
 The stocU sniiscribed Cor in a new hank in London is paid for almost 
 entirely hy means of checks drawn against deposits in the Bank of Eng- 
 land, or other London banks, and which do not actnally represent money 
 in hand, hnt credits on the hooks of these bardvs. The operation, then, 
 is but the mere transfer of the ownership of credits from individuals or 
 corporations to tlie new l)ank, and these credits usually remain with the 
 Dank of England, while they continue to be the property of the new 
 bank. Customers now come to the new bank and ask loans or discounts 
 on stocks, l)onds, jjromissory notes, and bills of exchange, and credits 
 are carried to their respective accounts on the books of the hank and are 
 called (h'pOfiils. Some j)arts of these deposits are transferred l)y means 
 of checks to the creditors of these depositors, and of them some may re- 
 main with the hank as deposits to the credit of the new parties, while 
 others are taken to other hanks and deposited with thorn. But a small 
 amount is drawn in notes or specie, and even of this a portion soon finds 
 its way back to the new bank or goes to other banks. The "loanable 
 capital" thus loaned, is, hy the aid of chocks, made to perform the same 
 functions as circulating notes and specie, and by the aid of the London 
 clearing house is kept revolving round in a circle among the banks, the 
 balances being paid not hy moans of money, hut simply by checks dravrn 
 ui)oii the Bank of England, where all of the other bank's keep their 
 accounts. Indeed, the deposits from day to day received from the pul)lic 
 by the London hanks and bankers consist of little else than the checks 
 which transfer the ownership of deposits already held by the various city 
 and country hanks,''' the original sources of the production of ichich 
 deposits are loans. 
 
 The deposits created hy the new bank, as long as they arc not drawn in 
 either notes or specie, admit of new loans in this and other hanks, as much 
 so as if the first loan had not been made, and new "loanable capital" is 
 called into existence and still further loans arc made, creating new deposits 
 
 * "To show how very small an amount of banking deposits aro made in the 
 form of money, we give th« following statement, made by Kir .John Lubbock, 
 before the Statistical Society in June, 1SG5, in which lie analyzed a sum ot 
 £19,000,000 paid into his bank by customers : — 
 
 Clieoks and bills . . . . T £18,395,000 or 97 per cent. 
 
 Bank of England notes .... 408,000 \ 
 
 Country notes ..... 79,000 l 3 per cent. 
 
 Coin ' 118,000 J 
 
 From which statement it appears that only tlu-ee per cent, of banking depos- 
 its are paid in the form of money, that is, notes and coin together, and a little 
 more than one-half per cent, in specie." — Patterson' s Science of Finance, p]). 5, 6; 
 Editburgh, 18G8. - 
 
T 
 
 — these latter hclnrr worlvod round in the same vicious circle tlironpfii tlic 
 clearin<i^ liouso, with the actual payment of hut a small amount of money. 
 How this results is well ilhistratcd by the statement of The London 
 AND County Banking Company, December, lU, iST-1: — 
 
 Thnt institution had a capital of £1,200,000 
 
 Ke.servo (;00,(iOO 
 
 £1,800,000 
 
 Its loans were as follows: — 
 
 On call £;"!,050,922 
 
 Discountc'l bills and atlvanoes ..... 14.110.4(15 
 
 Draft-s aocoptoil ........ 2,7^^0,005 
 
 £19,044,302 
 
 Besides which, it held fi^ovcrnmcnt and other securities and real estate 
 to the amount of £2,500,547, and cash (mostly deposits to its credit in 
 the Bank of E-.gb.nd) to tlio amount of £2,401,448— this latter item 
 representing almost exactly the amount of its capital, reserve, undivided 
 profits, and subscriptions to new shares, or, in a word, the whole of its 
 worldly ]iosscssions. How then is it enabled to make such large 
 loans, or to hold securities and other property to such an amount as 
 £22,450,939, seeing that in addition to doing and having these things, 
 it holds all of its own worldly possessions in hand, in cash, or in the 
 Bank of England? Wliy, by means of a gradual growth of debits re- 
 presenting loans, which give rise to credits called deposits, the latter 
 constituting "loanable capital," tlic steady "evolution" of which is ren- 
 dered possil)lc so long as these deposits arc not demanded in notes or 
 specie, but are transferred by means of cheeks and clearing-hou.ses. With 
 the London and County Banking Company these credits called deposits 
 had, on December 31, 1874, reached an aggre{_-ate of £19,892,580.* 
 
 * Bank loans and the resulting deposits accumnlato in business cnntres in 
 proportion to tlin ability ol' tlioso centres to work bank cretlit.s throngli checks 
 and clearing-lionses, without demanding ci: dilating noti-s or spoi;;o. In ^^lnall 
 towns doing business with rural populations tliey do not accuuiuiate largely, 
 because a demand for circulating notes or specie, almost the only circulating 
 mediums there used, soon follows loans and draws upon the actual resources 
 of the banks. In other wonls, these rural banks bank mainly upon their own 
 resources, and not upon their credit, as city banks so largi-ly do. In France 
 these loans and deposits do not accumulate because the people generally use 
 money and not checks in their business affairs. M. Piiuud, iManager of the 
 Comptoir (VEscomptc, of Paris, testified before the French Cotruiissiou of In- 
 quiry, 1S(35-(j8, that the greatest efforts had been made by that institution to 
 induce French merchants and shopkeepers to adopt English habits iu respect to 
 the use of checks and the keeping of bank accounts, but iu vain; their preju- 
 dices were invincible; "it was no use reasoning with them, tl.'oy would not do 
 it, because they would not." The private deposits in tlie Bank of France and 
 its branches, May 20, 1875, were but $73,823,2(50, while the deposits iu the 
 banks of New York City, June f), 1875 — nearly all private — were $2133,424,100. 
 The private loans and discounts of the Bank of France and its branches, May 
 
8 
 
 « 
 
 These deblls and credits, these loans nnd deposits are well nigh vvith- 
 ont any financial base whatever, foi* the reason that the base upon which 
 they are snpposcd to vest is little else than credits (dei)()slts) with the 
 Bank of Eiif^laiid, which themselves only rest upon the same specie and 
 loan to the nation (national del)(. due the bank), u[)on which the Hunk of 
 Eng'land bases its own operations, re<:^ardlcss of those of tlio London 
 and County Bnnkin|^ Coniitnny, and the other I)anks which koep their 
 accounts with it. Once cancel both these debits and credits, use the one 
 to i)ay llie other, and the great volume of this "slow accumulation" of 
 "loana!)le capital" would instantly collapse and shrink from some 
 £24,912,^81 to about £2,4(;],448! Perform the same process with 
 three or four other large London banks, and it would result in a total 
 colinpse of British Ihiance, trade, commerce, and industry I 
 
 How is it then, that a country, the instrument of payment of which 
 is of such an inflated and ticklish natufe, is able to lend so much 
 "money," so much "loanable capital" to almost the whole world be- 
 side ? The answer is, that the carrying of these loans is rendered pos- 
 sible by reason of this system of bank credit, v.'hilc bills of exchange 
 drawn against merchandise shipped to the borrowing or other countries, 
 or against interest due on former loans, prevent the shipment of money — 
 the latter behujthe actual foDa of capital ivliich the borroioing couniry 
 needs, vo country having j-Uenty of loMch, ever being wider the necesHily 
 ofbccominy a borrower. Thus does the rest of the world get none of the 
 thing it most needs, but merely goods, for which it does not then pay ; 
 or a funding of the interest which it then owes, or both ; the individual 
 consumers of the goods or the debtors for interest paying, however, 
 while the borrowers have their indebtedness carried by and through the 
 credits in favor of foreigners, created by means of goods then or pre- 
 
 20, 1875, were but $118,243,800, while those of the banks of New York City wore 
 $281,401,100. Onr country, being one of vast area compared with its popuha- 
 tion, cannot bniUl up and work a genera! .'system of inlhited bank credit like 
 that of Great Biilain, and nin;-t tiierefore, if for no other and better reason, 
 have a full voluuie of " current money of tlie realm, " as Krance has, or stagnate 
 and annually waste labor-power worth tliousaiuls of millions of dollars, and 
 at tlie same time be dependent iipon foreigners for ''loanable capital." While 
 on May 1, 187-3, tlib National Hanks of the United States had — 
 
 Capital $497,717,143 
 
 Surplus fund 131,404,008 
 
 Undivided profits .'jr),S49,959 
 
 $(J84,971,710 
 
 Their loans and disconnts were .... $904,574,114 
 
 or but about 40 per cent, in excess of the net resources of these banks. This, 
 too, was in .^pito of the fact of the inflation of the l)anks of New York and ether 
 large citii^s, which banks are included in this return. (Note — June 20, 1875.) 
 
9 
 
 vionsly piirohaKecl, and which nre soon wholly consnmGtl, whilo the dcl)t 
 for them veinains a ponnancnt charge upon their country at con) pound 
 interest. All the while the Lorrowing country amuses itself wilh the 
 idea that it is getting money for the reason that the individual liorrow- 
 ers of these credits obtain payment in bills of exchange for which in 
 their own country they get money or baidi credit; while at the same 
 lime, the lending country could not stand up under the eflects of parting 
 with so many goods without payment, did not bank credit at home sup- 
 ply an available substitute for it. 
 
 The evidence of the inability of Great Britain to loan actual money 
 in any great amount, to foreign countries, is found in the fact that the 
 transfer of the $15,500,000 indemnity under the Geneva award, which 
 she had to pay to our government, she, for prudential reasons, effected 
 gradually by means of bills of exchange and securities instead of money, 
 the thing which was to be paid; and the further fact that the Bank 
 of England served notice upon Mr. Boutwell that in case he attempted 
 to draw specie from London for certain loans there negotiated, that 
 institution would step in and break up his combinations and contracts; 
 in other words, cut off the supply of loans — the " loanable capital" 
 — from the banks and bankers who were iibout to buy the bonds, be- 
 cause these bank loans were not to be allowed to float round among 
 the London banks in the form of deposits, but were to be drawn in specie 
 for shipment.* The lesson to be learned from these facts is, that Great 
 Britain with all her boasted wealth and power never willingly gives up 
 that most royal of all things, money, that species of capital which com- 
 mands on the instant, indeed calls into being, almost all other forms of 
 capital; without a struggle and the attempt or desire to force off in- 
 stead something which she values less. • 
 
 Seeing now, as we do, what is the nature of the great bulk of the 
 instrument of payment in Great Britain, may we not ask, why our legal 
 tender note, our democratic currency, backed as it is by the whole credit 
 and all of the resources of a great and wealthy country, and which freely 
 
 * "When the negotiations were going on in London for thp sale of the largest 
 araount of Uiiitod Blates bonds that have ever bcou f^olil there at one tinio, it 
 was foreseen by the Bank of England that a quantity of coin would aijcunuilate 
 as the proceeds of these bonds to the credit of the government of the United 
 States. As a matter of fact, there was an accumulation of about $21,000,0(.!0. 
 Tiie Bank of England, foreseeing that there would be an acouuiulatiou of coin 
 to the credit of the Unitod States which uiiglit be taken away bodily in specie, 
 gave notice to the officers of the Treasury Department of the United States that 
 tlie power of that institution would bo arrayed against the whole proeeeding 
 unless we gave a pledge that the coin should not be removed, and that we would 
 reinvest it in the bonds of the United States as they were oUbred in the markets 
 of Loudon. We were compelled to do it." — Spcjch of Hon. G. S. Boutwell in 
 U. S. iJenatc, January 22, ISl-i. 
 
10 
 
 elrculates among tlio whole people, is not quite as good as it? Why is 
 it not better, since it has at once this broad and firm foundation, and is 
 not open to the charge of being an instrument for centralizing jjowcr in 
 the hands of a few, who can manufacture, borrow, inflate, contract, and 
 manipulate such a monopolist credit currency as that of Great Britain? 
 It is indeed better, and is as truly capital, and when once it is made at 
 all times interconvertible, at the pleasure of the holder, with U. S. bonds 
 bearing a fixed rate of interest, not exceeding 3.G5 per cent., it will be the 
 most nearly jierfect in the world. Then will its volume lie neither more nor 
 less than h demanded by the industry, commerce, and trade of the ichole 
 people, and not only will these people, but the State, be saved from im- 
 mense taxation, in the form of interest now paid to a few domestic 
 manufacturers of credit, but we shall l)e emancipated from our long and 
 disastrous dependence upon Great Britain for credit, " loanable capital" 
 which seldom comes to the country in any form but that of merchandise 
 or extenaed interest or dividends. Our own national and full-volumed 
 money circulating throughout the country, and setting an unemployed 
 people to work, will gather up, as a saving fund, billions of millions of 
 minutes, which would otherwise be lost, and without a single stagnant 
 product, or an unoccupied arm, we shall soon be enabled to produce in 
 one year, in addition to our present product, more merchandise than 
 all that we have borrowed from Great Britain within half a century. 
 An " act of legislation" which shall bring such fruits will indeed bo 
 one which will "create" both capital and wealth, and will shower bless- 
 ings upon 43,000,000 of human Abeings, drive pauperism from out che 
 land, by leading to a more eqtiitable distribution of God's gifts to man, 
 and result in a higher, a truer, and a more enduring civilization. 
 
 Will then Massachusetts, *nd New England generally, still continue to 
 stand in the way of at least a trial of such a law ? If they do they 
 will assume an immense, a dreadful responsibility, which sooner or later 
 they will be forced to acknowledge, when surrounded by yet still greater 
 ruin, they are obliged to try that law, and trying it, they realize the 
 beneficence of its workings amongst the people, and the independ'^ ^ce 
 and power it confers upon the State, an independence the celebration 
 of which will in no sense be a mockery, as must be that of any other, 
 while our government is at the mercy of foreign credit-mongers. 
 
 HENRY CAREY BAIRD. 
 
 Tkemokt House, Boston, March 25, 1875. 
 
BULLIONISM AND BANK INFLATION. 
 
 IIoiv they travel hand in hand tocjcther. 
 
 TJie way the English '■''pay debts without moneys" 
 
 * 
 
 From the PiiiLADELPniA IxQUinER, August 4, 1875. 
 
 To the Editor of The Philadelphia Inquirer — 
 
 My friend, Judge Kelley, having in a recent letter given some rather 
 startling Bgures regarding the London and County Banking Company, 
 of London, exliibiting the extent to which that institution carries the 
 system of inflation of bank credits, I desire to place before your readers 
 the evidence that those figures give but little more than a fair average 
 specimen of the state of the London banks generally. To that end I 
 have compiled from the supplement to the London Economist, May 15, 
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 From the fore,Q;oing fifjnvcs it would seem that in London, nt Icnst, 
 they liavc learned how " to pay dol)ts without moneys," a lesson that 
 Andrew Yarranton, the father of English ])oliticnl economy, desired to 
 teach to his countrymen at as early a date as 1077 ; to-day nearly idl 
 of the liirgo debts in that city ljoin^i>: paid l)y mere bank credits, which have 
 obsolnrely little or no monetary fonndtttion whatever. 
 
 WiUi a cai)itid and reserve or surplus of £12,753,059, of which nearly 
 the whole, or £12,545,003, is invested in public securities, real estate, 
 etc., these institutions have £?raduallj accumulated n line of loans of 
 £100,504,385, resultinj? in credits to the borrowers or their assigns, 
 called deposits, almost wholly the out-growth of the ie loans, of 
 £100,005,085. So long as there is no extraordinary de.nand for pay- 
 ment outside of it, these deposits are readily kept afloat through and l)y 
 means of the clearing-house. 
 
 These oeposits, which are worked through checks, become an instnunent 
 of payment as i)otent as would be the addition of £100,000,000 to the 
 money of Great Britain. In other words, they are in their eil'eet equal 
 to the doubling of the gold circulation of the realm, which is now esti- 
 mated by the highest authorities at £ 100,000,000, but with this difference, 
 that the deposits being worked by the few, they become an instrument 
 for the aggrandizement of those few and for the enslavement of the 
 many These credit-mongers and those in our own country understand 
 this full well, and when ihey cry out against "inflation" they pretend to 
 be oi)posed to the very thing they are in favor of. What they are really 
 opposed to, is having such a normal volume of "current money of the 
 realm" as will obviate all necessity for that immense volume of bank 
 credit, through the use of .which they annually levy taxes upon the 
 public to the amount of Inuidreds of millions of dollars. 
 
 The "cash" £14, 580, 360 held .by the London banks above named, 
 small as it is compared with their liabilities payable on demand, consists 
 largely of mere deposits (credits) with the Bank of England, thus con- 
 stituting the latter the almost exclusive base upon which rests this 
 towering superstructure of bank credit. The Economid has recently 
 said " t'le reserve of the Baidv of England is the only reserve the nation 
 possesses, and has not been increased in jiroportion to the very great 
 amount of the demands to which the bank is now ex[)Osed, as compared 
 to those it had formerly to meet." The weight of these "demands" 
 may be inferred from the fact that during October and November, 1874, 
 the deficiency of the baidc note reserve of the Baid< of England, as com- 
 pared with the mere bankers' balances in its hands, ranged from £734,000 
 to £2,478,000. The reason why the burden has so increased, is found 
 in the fact that, while since 1844, th.e trade of Great Britain has increased 
 many fold, the circulation of coin has increased but little, and that of 
 notes not issued on coin or bullion actually in hand, not at all. Hence 
 the growing trade has annually to call u|)on baidis for an increasing 
 
14 
 
 volume of tlieir inferior substitute, credit, cireulatiiij^ tlirougli the Lou- 
 don and otlicr elcariug-liouses.* 
 
 Judge Keliey and tlie gatliering hosts of wliich he is now tlio nckuowl- 
 cdgcd leader, only demand that tiie people of this country shall no 
 longer be i)hu.'ed under the tyranny of such legislation as limits the 
 money of the country below the actual wants of business, to be followed 
 by the creation of an inflated, expensive, and unstable bank credit sys- 
 tem like that of England. To that end, tliey advocate a full volumed 
 currency, at all times interconvertible with United States bonds bearing 
 a fixed rate of interest, not exceeding 3.65 per cent. Siich a currency 
 will in time cause nearly all business to be done for cash as in 1804-5, 
 and will save us from those desolating crises which, sooner or later, in 
 Great Britain, here, or elsewhere, follow an inflated credit sul)stitute for 
 a sufficient volume of "current money of the realm. "f 
 
 IIENIIY CAREY BAIRD. 
 
 PiiiiiADELi'HiA, August 2, 1875. 
 
 * lu 1844 tlio deposits in the following banks were : — 
 
 Loudon and County £1,231,000 
 
 London Joint Stock 2,24.),000 
 
 Loudon and Westminster .... 2,(;7iJ,(H)0 
 Uuiou I,r)i)],0u0 
 
 '£lJ■i■^xm 
 
 In 1874 they were : — 
 
 London and County i:iO,892,.'')S6 
 
 London Joint Htock ..... 20,527,270 
 
 London and Westminster .... o0,01 5,11)4 
 
 Uuiou 14,122,111 
 
 i:S4,r;57,lG7 
 
 t The ticklish nature of the British system of inflated bank credit is well 
 shown by the following from The Ecvnoniint, the highest English authority on 
 finance, July 10, lb7'> : — 
 
 "There can be little doubt that we have very narrowly escaped a panic. 
 The great mercantile disasters which have followed so rapidly one after another, 
 the failure of two bill brokers, and above all, the very serious losses avowed by 
 our joint stock banks, and especially by the London and Westniinsti'r (the one 
 whose business is hvrtrest, and whose repute greatest) would, in former times, 
 have nearly or quite slwikeii the fouutbation of credit. *'J'ha mercantile disasters 
 which primarily caused the panic of IS.')?, were certainly not much greater; per- 
 haps they were even less. The main cause to which we owe our escape is the 
 increase of the cash reserve in the banking department of the Bank of luigland. 
 The panic of iS57 found the bank with a reserve of X2,70U,!K)O ; the late events 
 found it with one of £10,:]44,000, which luid increased to £12,38r/,000 befoie 
 the second group of failures came. And it is to this great improvement tliat 
 we owe our present safety. As was natural, the great increase of the fund 
 which wo hold to give confidence in times of alarm, liul the effect of creating 
 that confidence. Eveu as it is, we, on a former occasion, showed that we have 
 but narrowly escaped. If a war had broken out between France and Germany 
 just belore these events when it was so much feared eveu by many wiio ought 
 to know, and if, as is most likely, like the previous similar war of 1870, it had 
 caused Xl), 000, 000 to be taken liom our banking reserve for the Continent, these 
 great calami'ies would have found the bank with a probably insufficieut reserve 
 instead of a Bulficient one. But, n»jvertheless, in comparison with such times as 
 1857, much praise is justly duo to .the present po'icy of the Hank. Though it 
 did not provide for the contingency, which was near occu'rin it did provide 
 for the coutiugeuoy which did hajipen, and we all have to be grateful to It." 
 
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