The Theory and Practice of Banking

for which the bank is likewise liable, and of the specie in its coffers) no accurate estimate can be formed of the positive difference between the present and the former circulation." Mr. Boyd therefore, expressly includes Bank Credits, or Deposits, under the title Currency, and as his notion of Currency was ready money, it is quite evident that Cheques were also Currency in his opinion, because we have seen that Mercantile Law considers Bank Notes, Cheques, and Bank Credits, as all equally ready money

Whether this opinion of Mr. Boyd's gained any adherents we cannot say; but, in opposition to this novel doctrine, Mr. Henry Thornton, one of the authors of the Bullion Report, said *—“ A multitude of bills pass between trader and trader in the country in the manner that has been described; and they evidently form, in the strictest sense, a part of the Circulating Medium of the country." And in a note on this passage he says-“Mr. Boyd in his publication addressed to Mr. Pitt on the subject of the Bank of England issues, propagates the same error into which many others had fallen, of considering bills as no part of the circulating medium of the country."-After quoting the above passage from Mr. Boyd, he says-" It will be seen in the progress of this work, that it was necessary to clear away much confusion which had arisen from the want of a sufficiently full acquaintance with the several kinds of paper credit, and, in particular, to remove, by a considerable detail, the prevailing errors respecting the nature of bills, before it could be possible to reason properly upon the effects of paper credit"

Certainly no influential person at that time adopted such an opinion, and we may quote a passage from the speech of the Marquis of Tichfield, one of the most distinguished of the rising men of the day, on Mr. Western's motion, in 1822, regarding the Act of 1819. He said "Economy of money was, by contrivances to spare the use of it, according to the description of his right honourable friend, by substitution of the precious metals in the shape of voluntary credit. Every new contrivance of this kind, and every one improved, had that tendency. When it was considered to how great an extent these contrivances had been practised, in the various modes of Verbal, Book, and Circulating Credits, it was easy to see that the country * Inquiry into the Nature and Effects of the Paper Credit of Great Britain, p. 40.

had received a great addition to its Currency. This addition to the Currency would, of course, have the same effect as if gold had been increased from the mines." Here, therefore, we see it explicity stated that Credit, in ali its shapes and forms, was independent, exchangeable property, of the value of, and producing the same effects as, gold

10. The question "What the term Currency includes ?" was much discussed before the Committee of 1840; but it is only necessary to state here the views of those witnesses whose opinions prevailed with the framers of the Bank Charter Act of 1844

Mr. GEORGE WARDE NORMAN, a Director of the Bank of England, was asked

1691. "Are there any grounds for considering the deposits of the Bank of England as Currency ?—No, I think not

1692. "Do you consider that any deposits, merely in their character of deposits, can be considered as Currency ?—No, I do not

1693. "Will you state what, in your opinion, forms the distinction between Currency and deposits ?-I consider that, looking broadly at deposits and Currency, they are quite distinct; they have little to do with each other. But I conceive that the use of deposits is one of the banking expedients, which is available for economising currency, along with a great many others. I do not consider them as Currency or money. I ought to observe, perhaps, to the Committee, that I employ the words 'money' and 'currency' as synonymous. Deposits are used by means of transfers made in the books of bankers; and these afford the means of adjusting and settling transactions, and pro tanto dispense with a certain quantity of money; or they may be set off against each other, from one banker to another, to a certain extent, and thus produce the same effect. Still they possess the essential qualities of money in a very low degree

1694. "Do you entertain a similar opinion as to Bills of Exchange? Yes, exactly; I think they are also used to economise Currency. I look upon them as banking expedients for that purpose; but they do not possess fully the qualities which I consider money to possess

1695. "Will you explain the difference between the functions

which money will perform and those which Bills of Exchange or deposits will perform ?-To answer that question fully, one must, I am afraid, take rather a wide view; but I look upon it that the three most essential qualities money should possess are that it should be in universal demand by everybody, in all times and all places; that it should possess fixed value; and that it should be a perfect numerator. There are other qualities; but I think these are the most essential. Now, when I look at all banking expedients, I find they do not possess these qualities fully. They possess them in a very low degree; and, therefore, as we see took place in the autumn of 1835, with a very large increase of the deposits of the Bank, the circulation diminished, and there was every appearance of the effects of contraction: there was an increased influx of treasure; and I conceive from that there were lower prices. By a numerator I mean that which measures the value of other commodities with the greatest possible facility. If we look at all these banking expedients, we see that they possess the three qualities which I have mentioned in a very much lower degree

1696. "Will you state in what respect ?-I can only take them one by one. A Bill of Exchange is an instrument commonly payable at some future time, at a certain place, and to some particular individual; it is of no use to any other individual, except it is indorsed to him. A man cannot go into a shop with a Bill of Exchange and buy what he wants; he could not pay his labourers with a Bill of Exchange. The same with a banker's deposit, he can do nothing of that sort with that; he can do with less money than he would otherwise employ, if he has Bills of Exchange, or bankers' deposits; but he cannot, with Bills of Exchange or bankers' deposits, do whatever he could with sovereigns and shillings. By a banker's deposit, I mean a credit in a banker's books; nothing more nor less than that

11. Mr. SAMUEL JONES LOYD, now Lord OVERSTONE, was asked

2655, "What is it that you include in the term circulation ?— I include in the term circulation, metallic coin, and paper notes promising to pay the metallic coin to bearer on demand.

2661. "In your definition, then, of the word circulation, you do not include deposits ?-No, I do not