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chequer bills, though some bankers seem to think them so. In 1847, as Mr. Thomas Baring informed the House of Commons, silver bullion was found not to be cash, and Mr. Glyn told one of the Committees that there was a day in 1825 when consols were not saleable for money. All these securities are unquestionably certain to procure cash or money capital for a particular banker when pressed; but they are not certain to procure cash for all bankers when pressed at the same moment. In short, they are not cash in a crisis, which is the time when cash is most wanted. The nearest thing to money which is not properly money, is the credit which one banker may have on another, and which, in such a case as that of the credits held by the private bankers upon the Bank of England, can scarcely be practically excluded; but the admission of it does in effect add, or rather recognise as existing, a sort of fourth story in the edifice of credit, the height of which was sufficiently giddy before. But the settlement of this point is of no consequence in this place, and it should also be added, that even if the foregoing estimate of the aggregate of bank credits should be found excessive, and if it were taken at no more than half the amount, the difference would in no way affect any part of the explanations already given, nor any of the reasonings which are to follow in the present work.

This aggregate, whatever be its amount, forming part of the actual stock of money, is evidently the work of the bankers. It is a gossamer web, woven spider-fashion, out of their personal credit; or rather it is a highly-elastic medium radiating out from and drawn back to the bankers as so many centres, necessarily contracting or expanding in its whole volume as it does so, but governed by impulses, which cannot be fully shown, except step by step, and as the successive portions into which this work is divided present themselves. The whole is an organised and highly sensitive mass, of which each banker is as essentially a part, as each separate ganglion is of the whole nervous system of the human body.

Fluctuations from Confidence and Distrust.

The following remarks are all that can be offered, in this stage of the survey, upon the manner in which fluctuations take place in the aggregate mass of money. To a loan there are two parties-the borrower and the lender. The causes, therefore, which determine the increase or diminution of bank loans must be causes operating upon the wills of these parties. If borrower and lender both be willing, an expansion of loan credit follows. But if there arise a want of will on either side, contraction is inevitable. During a year of speculative excitement both are willing, and there is expansion. When the crisis comes borrowers are more than ever willing, but lenders are not, and there is contraction. After the crisis is fairly over the desire of the borrower for loans rapidly declines, while the desire of the banker to make them as rapidly increases, but the contraction remains almost unaltered.

The concurrence of both parties in an expansion is the result. of that state of the general mind which is called confidenceconfidence, namely, that the revolution of the commercial wheel will continue regular. The borrower takes the loan in reliance on the profitable return which will enable him to repay it; the lender agrees because he sees no cause at work to disappoint the expectation. This regularity depends upon correct estimates being formed, on the one hand, of supplies and cost, and, on the other, of the means of consumers. If the coffee and sugar come to hand, as was expected when the price of the present stock was fixed, and the retailers find their customers make the expected purchases; if the cotton spun by the new machinery finds the foreign buyer increasing his demand; if the railway (rare event!) is finished for the estimate, and becomes busy with all the traffic which was seen in the imagination of the projectors;—then the mechanism of credit rolls smoothly on all its axles. Bills due are promptly paid, high balances are left in hand, and the banker sees no sign of evil in the commercial horizon. Hope lives upon a little, and when

danger is out of sight, the step is short from confidence to presumption, though it is true here, as it always is, that " haughty spirit goes before a fall.”

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When the belief in highly-profitable returns becomes widespread, the immense expansibility of that peculiar kind of money which banks dispense allows almost any amount of it to be applied to commercial enterprises. Then to every sanguine speculator is England herself El Dorado. The spirit of adventure is catching; it gets abroad and floats in the air, and, as the banker inhales it, he, too, yields to the delicious excitement1. Then is the time to give the vessel her head. Sheet after sheet the canvas is shaken out before the welcome gale, until the expanded mass impels the mighty fabric through the water with the lightness and speed of an antelope. But in a moment the sky may be overcast, cries of distress heard on every side, and soon the surface of the ocean covered with masses of the floating wreck.

The correct anticipation of supplies and cost of production on the one hand, and of the means of consumers on the other, being the condition of that regularity which encourages and allows a banker to raise his edifice of credit to the greatest

1 This doctrine is not mine, though I subscribe to it. Here is the original teaching:—“ When confidence is increasing, the spirit of enterprise beginning to expand itself when hope in all its forms is coming into active operation-when prices are rising, profits increasing, and every merchant or tradesman, with a view of benefiting by these circumstances, is desirous of extending his operations,—the banker is looked to by his customers to act in concert with them, to facilitate their operations, and to distribute amongst them all the aid which the extent of his resources enables him to command. It would be difficult to show that it is not his duty, properly understood, to obey this call, and to assist the expanding energies of trade; at all events it would be practically impossible for him to act otherwise; he must conform to the tendency of circumstances about him; he must breathe the atmosphere of opinion which surrounds him, and suffer himself to be moved onward by the stream of events in which he is placed. For the practical truth of this view we may safely appeal to the experience of all who are conversant with business of this nature. banker cannot contract his accommodation at a period when the whole trading and mercantile world are acting under one common impetus of expansion."-LORD OVER

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height, an error in any of these anticipations causes disturbance, and many errors cause manifold and aggravated disturbances. A worm in the cotton pods or an insect in the wheat may baffle the calculations of the keenest intellect in Lombard Street. If the West Riding finds a glut at the antipodes, or if the Russians furnish less than the expected quantity of hemp and tallow, instantly the markets are down or up, and the movement of prices transfers wealth, as measured in money, from side to side like the wand of a harlequin. Then, indeed, the banker has to keep a sharp look-out; he never can know the precise extent of the real disturbance of that balance which constitutes his safety.

It thus appears that the third and probably much the largest portion of our threefold aggregate, which operates as a power of payment in England, is a highly elastic and extensible material; so that, whilst distrust may cause it to shrink up into a comparatively small compass, and even in a certain extreme but still conceivable case to disappear altogether, confidence, on the other hand, that commercial transactions will flow on with an equable or perhaps a very gently increasing speed, may expand it to dimensions almost illimitable. The extreme case would be a general failure of bankers, whose deposits payable on demand, if they were all demanded at once, could not by any possibility be paid. The stability of the banks, however, and the long period during which bank credit has been one of the forms of money, renders a considerable portion of it as certain to remain through every crisis as any part of the gold circulation itself. If it were possible to have a return of the aggregate amount of bank deposits payable on demand, showing how much of the whole belonged to persons who did not obtain the credit by discount or loan from the banker, and how much belonged to those whose credits were created by loans--then the former portion of the aggregate would be all original money, whether capital or income, as being available for every purpose to which money can be applied; and the second portion would show, not the aggregate of loans or discounts-a certain amount of

which is never called in, and which would be included, though disguised and not recognisable, in the foregoing-but a certain very variable excess above that average remaining in the form of loan credit, and which may be called FACTITIOUS MONEY CAPITAL. The return could not be made with exactness, but the distinction exists in the nature of things; and the aggregate of credits, derived from deposits, even though the deposit of A is often partly made up out of the loan advanced to B, is a portion of the aggregate of money which no act of the banker diminishes; whereas the factitious capital runs down, as it were, of itself, when he forbears to keep it up by fresh discounts. The latter element of money is, as has been said, illimitable in a time of confidence, but still its amount at a given moment is never a vague, but always a definite thing. No matter how wild and extravagant the loans of bankers may be, it would always be possible, with sufficient information, on any given day to take pen and paper and put down the exact sum which the rest of the community could pay out in coin, note, or cheque, and then the addition of the bankers' cash reserves would make up the aggregate. That aggregate would, according to the common acceptation, be all MONEY.

It is now necessary to examine somewhat further that portion of the aggregate which is held as Money Capital.

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