Preliminary remarks. - Establishment of the Bank of England. - Suspension of Cash Payment in 1696. - Increase of the Capital of the Bank. - Acts creating the Bank monopoly. - Issue of Notes for £15 and £10.-Discontinuance of issue of Notes by London Bankers. - Suspension of Cash Payments in 1797. - Issue of £1 Notes. - Effect of the Suspension on the Bank of England circulation. - Depreciation of Bank Notes. - Peel's Currency Bill. - Cash Payments resumed . -Panic of 1825. - Establishment of Branches by the Bank of England. - Country Joint-stock Banks of Issue legalised . -Bank of England Notes made legal tender. - Establishment of Joint-stock Banks in London. - Monetary crisis of 1836. - Monetary crisis of 1839. - Bank Act of 1844. - Clauses affecting the Bank of England. - Clauses affecting the Country Banks. - State of the fixed issues of Country Banks. - Average issues of Country Banks. - Irish and Scotch Banks Acts, 1845. - State of the fixed issues in Ireland and Scotland. - Average issues in Ireland and Scotland. - Average issues of Bank of England. - Average issues of United Kingdom. - Working of the Acts of 1844-5. - Panic of 1847. - Panic of 1857. - Panic of 1866. - Controversy as to the opening of Scotch Banks in England.

In treating of bank notes, which with gold and silver form the basis of the monetary system of this country, it is not intended to go into those abstruse discussions so dear to the hearts of writers on banking and kindred subjects. Whether bank notes are or are not rightly described as "money,'"' whether they should be called 'currency," or "circulating medium," have been the themes of endless dissertations in which no two writers agree, save and except that each one characterises what his predecessors have written as absurd.

These minute definitions, interesting as they are in themselves, appear to be somewhat out of place in a practical treatise. It may not be strictly accurate to call a Bank of England note money, bearing on its face simply a promise to pay a certain sum, but being also equivalent to, and interchangeable for, money at will, it seems almost a quibble to say that it is not the thing itself. It may be taken as an established fact that bank notes are the most convenient and economical form of currency yet invented; with these indisputable advantages the points for consideration appear to be, who should issue them? and under what regulations should they be issued? The first of these questions cannot yet be said to have been decisively answered in the United Kingdom, bank notes being issued by three distinct classes under different conditions, although in each case a benefit is secured by the State, either by direct payment or by stamp duty.

1st. The Bank of England, whose notes are backed partly by government securities, and partly by bullion.

2nd. The English country bankers, with fixed issues wholly unsecured.

3rd. The Irish and Scotch banks with fixed issues also unsecured, but allowed to exceed the limit, provided that the excess be covered by gold.

The tendency, however, of the law is to extinguish the issues of the country banks in England.

But as to the regulations under which notes should be issued, legislation has most emphatically declared that bank notes shall be payable in gold on demand, with this modification, that country banks in England have the option of paying their notes in Bank of England paper or gold; but this can hardly be said to be a violation of the principle.

That it is a wise determination to have bank notes strictly and immediately convertible will hardly be questioned in the present day, although there may be differences of opinion as to the best mode of securing it. An inconvertible currency cannot but be an unmitigated evil to the country adopting this means of staving off present liabilities, though of course there are cases where it is unavoidable. Still it can only be compared to the remedy of the spendthrift, who flies to the money lender for relief from temporary embarrassment, and finds himself in a few months with his difficulties increased and multiplied. An inconvertible currency naturally tends to drive gold out of circulation, and thus creates a difficulty in the settlement of international dealings; it introduces an element of uncertainty into all commercial transactions, giving them more or less the character of gambling, and, moreover it will generally be found that the inconvenience and loss arising from this uncertainty press more severely upon the poorer classes than on the wealthy who can protect themselves to a certain extent.

And if when a country suspends cash payments injustice is done to the creditor by compelling him to receive a debt in currency which was contracted in gold, so when cash payments are resumed, it is equally unjust to oblige a debtor to discharge in gold liabilities incurred in paper.

Properly speaking paper currency in this country dates from the establishment of the Bank of England in 1694, although before that time the goldsmiths, who were the bankers of the day, issued receipts for money lodged in their hands, and these receipts frequently passed from hand to hand like our bank notes.

There was a most important difference between the bank note as first issued by the Bank and those of our day, inasmuch as there was an allowance of interest at the rate of 2d. per cent. per diem during the time of circulation, thus combining to the holder the advantages of an exchequer bill with those of a bank note.

By the charter of the Bank it was prohibited from borrowing a larger sum than its paid-up capital, fixed at first at £1,200,000; and it would seem that the full amount was quickly issued, for in a pamphlet published by Mr. Godfrey, the deputy governor in 1695, he states the interest paid on notes at £36,000, which would be about the requirement if the limit were attained; the practice of allowing interest on notes was, however, very soon discontinued.