large, but a small, proportion to its income. Credit performs so large a part of the business of exchange, and so large a proportion of the incomes is paid and spent from month to month, week to week, and day to day, that we may safely set down the currency as being no more than equal to one-fifth or one-sixth of the annual incomes. The incomes annually spent in England and Wales cannot be less than four hundred millions, while the currency of coin and notes equal to coin is not more than seventy millions. The gold in circulation scarcely exceeds forty millions. In order, then, to sustain a gold circulation of eighty millions, which would be necessary if gold were depreciated one-half, the spending income of the whole community must be raised to double what it is at present. Some of the incomes being absolutely fixed, and others nearly so, the enhancement must be all the greater, in those which are as it were most nearly in contact with the new gold. In any case, the revolution to be thus accomplished must be more momentous than almost any peaceful change of which history contains a record1. 'The slowness of the process of depreciation has been noticed by Mr. Fullarton in the following passage :-"It is in these causes only we have to seek for an explanation of that very striking phenomenon in the history of prices, the exceedingly slow and gradual process by which the great revolution of prices which followed the discovery of the South American mines was effected; and, what might seem still more unaccountable, the tardy reluctance with which the first downward impulse was given to prices in France, even under the overwhelming pressure of the assignats." It was not, in fact, till the year 1570, sixty-eight years after the first considerable shipment of specie from South America by Ovando, forty-nine years after the capture of Mexico, and twenty-eight years after the mines of Potosi had been at work, that any very sensible effect was produced on the general prices of commodities in England; nor have we any evidence to show that the advance commenced in France, in Spain itself, or in any other country of Europe, at a much earlier period. It is likewise an authentic fact, attested by Mr. Arthur Young, that in May, 1791, after the assignats had been for eight months in circulation, and after many hundred millions of them had been issued, the prognostics of enormous depreciation which had been pronounced by M. Decretot and M. Condorcet, were not verified;" that the expected rise of commodities had not taken place; that corn 66 Before attempting to trace its initial stages, it is necessary to examine somewhat minutely that all-important part of the monetary system of England which is called the MONEY MARKET. had rather fallen in value; and that the discount on the paper (from 7 to 10 per cent.) was not higher than it had been at Bordeaux in September, 1790, the first month of its creation. Yet, by 1796, the value of the assignat was reduced to the three-hundredth part of its nominal amount. CHAPTER VII. THE MONEY MARKET. "Shylock. Three thousand ducats, for three months, and Antonio bound. "Bassanio. Have you heard any imputation to the contrary? 66 Shylock. Ho! no, no, no, no! My meaning, in saying he is a good man, is to have you understand me, that he is sufficient: yet his means are in supposition: he hath an argosy bound to Tripolis, another to the Indies; I understand, moreover, upon the Rialto, he hath a third at Mexico, a fourth for England,—and other ventures he hath, squandered abroad. But ships are but boards, sailors but men; there be land-rats and water-rats, water-thieves and land-thieves; I mean, pirates; and then, there is the peril of waters, winds, and rocks. The man is, notwithstanding, sufficient ;-three thousand ducats;-I think I may take his bond." MERCHANT OF VENICE. The Dealers in the Money Market. THE money market, like the greater portion of the commodity from which it derives its name, is invisible. It exists only as a creation of the mind. Sometimes the imagination pictures it as floating between the Bank of England and the Mansion House, as a man, according to his temperament, vaguely conceives his soul to hover about his head or his stomach. But, in truth, the money market, like the principle of life, is everywhere. It is the nervous system of the whole material organization of society; its governing masses being in London, but filaments through which, with electric speed, sensations are received and impulses transmitted are spread out through all parts of the kingdom. Of course it happens that, like M. Jourdain speaking prose, many worthy persons belong to the money market without knowing it. From the Bank of England at one end, to the thrifty maid of all work who deposits her savings at the other, it includes all who are lenders or bor rowers of money. In the centre of the whole, grand and gigantic, stands the Bank of England, like Jupiter among the Olympians, able at times to hold all the rest suspended by a chain. Next in order come the private bankers of the City, the aristocracy of the profession, who, with their clearing-house, form, in the way already explained', one united institution. Outside these, and by an illiberal and absurd regulation excluded from the clearing-house, stand the various joint-stock banks, from the London and Westminster, operating with three millions of deposits, to the youngest member of the family which starts with a modest capital of fifty thousand pounds. In appearance, humbly beneath all these, but in truth familiarly amongst them, glide about the brokers, an altogether peculiar class of men, like Oliver Le Dain, Barber Premier of Louis XI., caring more for the substance than the show of power. It is their business to know, and they do know, everybody and everything which can have the remotest practical relation to money. They have the mesmeric faculty of thought-reading. The exact figures of a merchant's balance sheet, though a profound secret between him and his head clerk, they know how to decipher in the quiver of his lip or the wrinkles of his eye. They can tell a bad bill by the feel, and if there be a taint of bankruptcy within miles, they snuff it in the air. These are the architects who build the most lofty and delicate portion of the edifice of credit, and under their skilful hands its fairy pinnacles shoot far into the clouds. Ever on those dizzy heights, where their work of doing and undoing is incessant, they tread the edge of precipices like alpine goats, and though it be but a hair between them and destruction, that hair is almost always sufficient. Not distant in space, but in a wholly different atmosphere, are the bankers of the West End, some of them with a history going back to the time when Charles II. plundered the goldsmiths. These are the bankers of the peerage and the country 1 Page 18. gentlemen, sharing somewhat in their calmness and easy strength. The pulse does not beat here with the quick stroke of Lombard Street, nor are they the men foremost in a crisis to go up with white lips to the Chancellor of the Exchequer. Humbler, and yet akin to these, are the provincial bankers of the rural districts, excellent men in their way, pleasant in stories of hair-breadth 'scapes in panics and convulsions; not too strict to lend now and then upon a mortgage, and think it a good banking security, knowing every tree and hedgerow in the acres which it pledges, but thoroughly useful withal, from their local knowledge and connections, and who would be ill replaced by the stipendiaries of a central and distant board'. Then there are the joint-stock banks, all fairly proud of the storms they have so bravely weathered, some of them, and good ones, too, in that beautiful but stagnant west, others in the north, full of its active energy, sometimes rash, but always capable of learning wisdom from disaster. Still beyond are the bankers of Scotland, the most distant of the provincials, but nowise provincial in knowledge or skill. Keen and alert without the Lancashire hardihood; scientific, yet practical; valuing good theories, but yielding up no facts; able to sift the wheat from the chaff of the economists, and not afraid to cross 'I am not able to see the great evil which is thought by some high authorities to have been inflicted on the country banks by the Act of 1844. The whole of the reasoning in this work goes to show that the fundamental principle of that measure was erroneous; but the new gold promises to render its main provision a dead letter. The pressure of the "strait waistcoat" can scarcely be felt any more. But putting out of view the main principle, the details of the measure were a masterpiece of practical skill. Antecedently it could scarcely be thought possible to interweave a mass of materials so heterogeneous into one uniform system, without crushing or arbitrary violence. Yet this was done. Considering the views of the legislator, every existing interest was handled with the utmost tenderness. The law took effect, as it were, over their heads, and until the shock was given to the Bank of England there was no disturbance. As to the limitation of country issues, it is surely a trifling matter whether they may be a million more or less. What is a million of capital distributed amongst all the bankers of England? This acknowledgment appears to me to be due to the memory of a great man whose errors were borrowed, but whose skill in practical statesmanship was all his own. |