to operate by transfer. In any case, there is a new piece of positive capital created, as an addition to the pre-existing stock of absolute paying power. All previous holders of gold and notes and credits could make payments to some definite amount, and now there is yet another person who can pay a definite sum in addition.

This new credit may be called a loan-credit, to distinguish it from credits previously corresponding to notes and gold held dormant. The aggregate of loan-credits, therefore, opened by bankers constitutes a clear addition to the previous stock of money. As the gold lent out of the original bullion deposit hoards rendered the corresponding bullion receipts an addition to the previous aggregate of money, so now the loans made out of deposits represented by credits leave a corresponding amount of those credits operating as a real independent power, when its basis is removed. And just as a large portion of the first loans of deposited gold came back again in new deposits, so we must now conceive the loan-credit opened by the banker as being, in effect, a delivery of the amount in notes and gold to the borrower, and an immediate receiving back of the whole, or a part of the same, as a new deposit. We have now a deposit originating in a loan,- and if such deposits could always be distinguished from the mass of original deposits, the subject would be simpler; but as soon as the borrower makes a payment, by transfer to a depositor-perhaps in payment of salary, or in exchange for goods-the credit assumes the outward garb of an original deposit, because it is held by a depositor who does not possess it by a loan. But the aggregate of new money, or paying power, created by loan credits, is still always a definite and ascertainable quantity, because it must exactly correspond to the loans made by bankers. These loans correctly measure the addition made to the previous aggregate of money; because each of them, if left as credit, is clearly an addition; if transferred as a credit, is also clearly an addition; and if drawn out in cash, must leave some equal amount of deposit credit unpro

C

tected, and therefore is still an addition, by the cash drawn out, to that aggregate out of which cash payments could previously be effected.

Here, then, we have the third element of money, or paying power, in our threefold aggregate fairly eliminated; but the first glance at it is almost enough to repel the attempt to reduce it to any law, for it varies not merely from year to year, but from week to week, and from day to day; the whole outline which marks its upper limit being in one constant and tantalizing play of fluctuation. It varies from day to day, because a banker issues daily new loans on discount, and receives the repayment of old ones on the expiration of the securities on which they were lent. It is a cardinal principle of his art that the loans shall be for short periods, that he may have the gross amount perfectly under his control. He keeps his ship well in hand, as seamen say, by setting exactly as much canvas as he can take in, to the last flutter, if needful, between the moment in which he first sees the storm-cloud, and that in which he is struck by the squall. Sudden and dangerous, indeed, are the squalls to which bankers are sometimes exposed. The vulgar imagine that the great danger is a run for gold in exchange for bank-notes; but the greatest danger is in a run for deposits. The former makes the cash in the reservoir squirt out through pin-holes, the latter opens the floodgates. The banker grants every loan-credit at his peril, for it makes him liable to pay two parties with the same money. As, from the constant intermingling of transactions, each series of such credits becomes in its turn the foundation of a second and even a third series, the delicate structure is continually rising, while its base of cash is growing smaller, until its fragile proportions, contrasting with the vast weight of the transactions which it sustains-as in the case of the Crystal Palace itself-mingle awe with the admiration of the spectator. Light as it looks, however, it is equal to its burden, in all ordinary times; and, in extraordinary, we have seen how, with facility and speed, its upper stories can be made to shoot down

into the lower, like the tubes of a telescope, until only the more solid walls are left standing in front of the danger. It is a true fairy wonder; and of all the social architects who have to deal only with material interests, the bankers are those whose art gives the most distinct sense of the ascendancy over matter of a spiritual power.

London Private Banks form one Bank.

The private bankers of London, in consequence of the institution called the clearing-house, must be considered, with regard to the power of payment by book-transfer, as all one bank. In the clearing-house three millions are paid daily in this way, with a small sum in gold and notes for balances. Thus the most momentous alterations in property are effectedcorn, sugar, wines, cottons, woollens, hardware, shares, funds, ships, houses, the solid land itself, all passing to new owners by a line or two from the pen of a book-keeper. What a mechanism is this, and, as human beings are its parts, what a moral discipline there is in it! What clearness of thought, exact subordination and obedience, patience, punctuality, fidelity are indispensable, to prevent it from playing off into irretrievable confusion! We are so accustomed to this beautiful order, that we never imagine what its disruption would be, though in truth an opening of the earth beneath our feet, and an upboiling of the nether abyss, would scarcely spread a wider devastation; but happily its harmonious revolution goes on from year to year with unbroken continuity, "unhasting, unresting," like the spheres in their silent path.

The bankers, then, by their loans, are constantly manufacturing this third element of money, pouring it out now with a full, now with a sparing hand, and watching always the rise and fall of the level within, according as the outgoing or incoming stream is of greater volume. The quantity of bankmade money thus kept at the disposal of the public is evidently at any moment equal to the difference between the

amount of the deposits and the amount of the cash held in reserve to meet them. At some period or other there were gold or notes appropriated, as it were, to each deposit, and such as are now no longer in their place must have been taken out on loan. It is indeed the old story of the bullion taken away from behind the bullion receipts, except that here it is taken not from the bottom of the hoard, but from the top and without concealment. Yet this must be received with some grains of allowance, for bankers are shy in talking of the amount of their reserves, imagining a little mystery useful, and apt to be haunted with the image of a rush of depositors. But my belief is, that the bankers of Great Britain, as a body, excluding for special reasons the Bank of England, do not keep by them, in cash, one-tenth of their deposits; yet those deposits, judging from Mr. Newmarch's estimation of discounts, must be more than one hundred millions sterling, operating, in addition to the bank-notes and gold outside the banks, as MONEY, whether capital or income'.

Mr. Newmarch's Estimate of Discounts.

Mr. Newmarch's estimate of bills (inland and foreign) under discount at one time in Great Britain, including London, is this:

This one item of information, the aggregate of banker's deposits, which might have been ascertained without alarm to the most timid, and which would have outweighed in value all the crude theories that swell the blue-books, was not ascertained

This exceeds a conjectural estimate', which I myself made, of the London discounts, but upon very inferior data, before the paper of Mr. Newmarch appeared. The authority of Mr. Newmarch, however, upon a question of this kind, ought to have the greatest weight, from his familiarity with both the theory and practice of banking, and the caution and conscientious care shown in his investigations. This aggregate of discounts must be taken according to the previous explanations to represent the amount of bank-made money existing at one time in Great Britain. There will still remain, of course, what may be called original deposits, or those made of savings out of income, to be taken into view, in order to conceive correctly the extent of this great paying power, kept in action over and above the mere amount of bank-notes and gold, by the contrivances of our monetary system. No doubt different portions of the aggregate exist in very different states of activity, from the large balances of income belonging to noblemen and country gentlemen, which may lie long unmoved at Charing Cross, to the merchant's credit in Lombard Street, upon which he is daily operating by his cheque-book, and which rises and falls with a velocity altogether startling to the slow rural mind. I have said that reserves are not kept equal to one-tenth of these deposits, in cash, because bills of exchange, however short and good, are still not cash; neither are consols or Ex

before the last committee. I quite expected that the information would have been got at, in some way, by Mr. James Wilson, who showed himself fully aware of its importance in his speech upon the appointment of the committee.

1 It was founded chiefly on the discounts of New York, the amount of which is, very wisely, published at regular intervals. The imports of New York being ascertained at the time to be about half those of London, and the tonnage of vessels entering its port in a still greater proportion, the inference suggested itself that the transactions forming the foundation of bills of exchange might in New York be equal to half those of London. But as the purely internal exchanges are greater here, it seemed right to take the amount of the London discounts as being four or five times greater. The New York discounts at the time being about £10,000,000 sterling, this would have given at most £50,000,000, whereas Mr. Newmarch's estimate, founded on the most valuable data and prepared with great labour, makes them £78,000,000.