SUPPLEMENT. The latest Supplement of the author was received when this edition had advanced as far as the article Petersburgh. Such portions of it, however, as have not been incorporated with the preceding pages, will be found in the present Supplement, with the letter S. affixed to each.- -Additions to the body of the work in the last English edition are also inserted here, being distinguished by affixing to them the letter A.-AM. ED. Do. entering coastwise, 826 Vessels built in Baltimore-3 ships, 1 barque, 11 brigs, 43 schooners, 1 sloop, Wheat flour, barrels Do. do. half barrels Rye do. barrels Corn meal, hogsheads Inspections during the year 1840. 736,479 Butter and lard 30,515 Butter stands. half bbls. 124 174 5,816 Lard 12,593 Beef cattle and hogs 83 50 Increase over last year, 21,329 head, or 11,262,808 1,228 hhds. 40,608 Lumber feet 32,000,000 Sole leather and rough skirting, sides 201,587 Lime bushels 101,339 do. 176,256 cords 155,193 410 Salted fish, various kinds, bbls. and bbls. 89,636 Total barrels and half barrels, BANKS. BANK OF ENGLAND.-It is apparent from the table on the following page, that there has been a very heavy drain for bullion upon the coffers of the Bank since November and December, 1838; and much diversity of opinion has prevailed as to the causes of this drain, and the nature of the efforts made by the Bank to defeat it. But the circumstances that occasioned the drain seem, notwithstanding, to be sufficiently obvious. The harvest of 1838 was the most deficient that has occurred in this country for several years; and, in proof of this, it is sufficient to mention, that while the quantities of foreign wheat and wheat flour entered for consumption in the United Kingdom in 1836 amounted to only 30,108 quarters, and in 1837 to 244,275 quarters, they rose in 765 Account of the Issues, Securities, Bullion, and Surplus or Rest, of the Bank of England, as published in the Gazette, according to the Act 3 & 4 Will. IV. cap. 98. 1838 to the enormous amount of 1,848,477 quarters, exclusive of a large amount of other grain. It should, however, be mentioned that the imports in 1838 only amounted to 1,355,119 quarters, about 500,000 quarters of the quantity taken into consumption in that year, having been previously imported in bond. Now, as the corn in bond had, no doubt, been all, or mostly all, paid for when imported, it is clear that the sum to be paid to foreigners for corn entered in 1838, was not so great by nearly a third part as, at first sight, it would appear to bé. Still, however, the importation in 1838 was very large; it was also in a considerable degree unprecedented, being nearly three times as great as in 1837, more than five times greater than in 1836, and about twenty times as great as in 1835, so that from its suddenness it had a comparatively great effect in raising prices abroad. It was all but impossible that this extraordinary increase in the importation of foreign corn should not seriously affect the Exchange, and occasion a heavy drain for bullion. And by a singular coincidence, it so happened, that at the particular period when increased payments began to be required for foreign corn, there happened to be an unusual deficiency in the ordinary means of making them. In consequence of the real or supposed scarcity of cotton in the United States in 1838, and of the support given by the United States Bank, and other monied institutions in the United States, to the cotton planters and holders, a very considerable rise took place in the price of cotton: the necessary effect of this rise was to lessen the purchases made by the manufacturers, and to force them to narrow their business; so that at the very moment when a large extra foreign payment had to be made, there was an increase in the price, and consequent falling off in the production and export of cotton fabrics-that is, of by far the greatest article of export from this country. Vast quantities of American securities had also been purchased in our markets; and this necessarily either occasioned the transmission of money to America, or lessened the returns from that country, and in so far lessened our means of meeting the foreign demand for corn. The discredit of the Belgian Bank in the autumn of 1838 may also be mentioned as having occasioned a considerable extra demand for bullion. It is not, therefore, to be wondered at that the exchange became unfavourable, and that there was a heavy drain for bullion on the Bank. But it is less easy to form a fair estimate of the measures taken by the Bank to meet this run. On the whole, however, we are inclined to think that on this, as on most similar occasions, the Bank evinced too much tenderness for what she conceived to be the interests of commerce, and did not vigorously enough commence reducing her issues when the drain for bullion had fairly set in. We, however, cordially approve of the Bank's policy in negotiating credits abroad, and endeavouring to restore the exchange to par by selling bills on the Continent, rather than by giving bullion for notes. In fact, sound policy would seem to dictate that the Bank should always hold a considerable amount of easily convertible foreign securities, and draw bills against them when the exchange is unfavourable. The plan of accumulating a large stock of bullion to be kept locked up in the Bank's coffers for no purpose whatever, except to meet the demand occasioned by a fall in the exchange, seems to be a very clumsy and costly device for doing that which would be more easily and cheaply done by the Bank holding foreign securities, and having credits on some of the principal foreign banks. She might, were she to adopt this plan, dispense with the half of what is now reckoned the proper supply of bullion; holding, in its stead, productive securities, which might always be sold at an advantage when the exchange is against us, or which might be pledged to the foreign banks for temporary loans. What merchants want during an adverse exchange, is good foreign bills, it being only in default of such that they export bullion; and the Bank, by supplying them with such bills, and getting, of course, her notes in exchange, is able to diminish her issues quite as effectually as if her notes were sent in for bullion. Another advantage of this plan is, that it goes far to obviate that internal discredit and alarm that are apt to be produced when the stock of bullion in the Bank is reduced unusually low. In fact, had the Bank not acted, in part at least, on this plan during the current year, the probability is that she must have suspended payments. In June and July last, the stock of bullion in her coffers was reduced to about 3,500,000l.; and as the drain still continued, had she endeavoured to meet it in the ordinary way, by paying away bullion for notes, her stock of the former would very speedily have been reduced so low as to occasion à home demand for it, which the Bank could not have met. The Bank should never, if it be possible to prevent it, allow her stock of bullion to sink below 4 or 5 millions; and she may always keep it above this amount, in so far at least as the foreign demand is concerned, by selling bills drawn against foreign credits or securities. The Bank should also, consentaneously with the selling of bills, adopt the most efficient measures for preventing the notes she receives for them from getting again into circulation, either by raising the rate of interest, or by refusing (though the latter be a much more questionable policy) to discount certain classes of bills. It should always be borne in mind, that however a drain for gold may originate, the fact of its existence is of itself a conclusive proof that gold is more valuable abroad than here, and consequently that the currency is redundant. We are not, therefore, of the number of those who censure the Bank for having raised the rate of interest to 6 per cent. On the contrary, this was a measure that seems to have been imperatively required by the circumstances under which she was placed. At the same time, however, it must be admitted that the Bank allowed her stock of bullion to be reduced far below what is consistent either with her safety or with the safety of the great interests involved in her stability. She did not avail herself of her credit abroad so soon or so consistently as she might have done; and she does not appear to have made that early, systematical, and continuous reduction of her issues, required to adjust the exchange, and to bring the currency to its proper level. It is probable, indeed, as matters have turned out, that less hardship has been inflicted on individuals by the course the Bank has taken, than if she had resolutely followed up the course pointed out by principle, and withdrawn from circulation the notes received for bullion delivered for exportation and for foreign bills. But it is always bad policy, in such cases, to trust to fortuitous occurrences; and, in the long run, the safest plan, or that dictated by principle, is sure to be the best. BANK OF IRELAND.-Account showing the Circulation of the Bank of Ireland from 1823 to 1836, both inclusive. Instead of the paragraph, vol. i. page 109, of this edition, beginning, "The committee seem to think that some regulation should be enacted,"-read the following: The committee seem to think that some regulation should be enacted, providing that a certain portion of its capital should be paid up before a bank begins business. But the better way would be to prohibit all advertising of nominal capital. This, in fact, is a mere device by which to entrap and delude the public. A bank is announced with a capital of 1,000,000, 2,000,000%., or 3,000,000l.; and a great number of people, perhaps the majority immediately conclude that there can be no risk in dealing with an establishment possessed of so great an amount of property. But what is the fact? The capital advertised is nominal merely; not more perhaps than a tenth or a fifth part of it has been received into the coffers of the bank, and we have nothing better than the statement of the bank proprietors, or their agents, that they will pay up the remainder, if necessary; of which necessity they of course are to be the only judges! Practically this is neither more nor less than a fraud upon the public; it is a contrivance for making 10,000l. pass in the public estimation for 100,000%; and for procuring the same degree of credit to its holders. This, however, is not all. Where is the security that if a greater amount of capital were really required it would be forthcoming? The notion that the bulk of the shareholders in many, we are pretty sure we might safely say most, of the joint stock banks now in existence could pay up the full amount of their shares, is too ludicrous to deserve notice. We might as well call upon a man worth 51. to extinguish a debt of 500%. There can be no doubt, therefore, unless it be meant to affirm that deception and fallacious statements are indispensable to the success of joint stock banking schemes, that all advertising of nominal capitals should be put an end to; and that no association should be allowed to represent its capital as exceeding the sum actually paid up by the proprietors. But though this would obviate one source of fraud and deception, there would still be abundant means of practising on the credulity of the public at the disposal of parties inclined to use them. Admit that a bank has a capital of 500,000l. actually received into its coffers, what is to hinder the directors from lending out the whole of this sum, or even more, to themselves or to partners in the bank? or supposing them not to do this, who can tell whether the entire capital, or some considerable part of it, be not wholly engulphed in ruinous speculations? It is indeed alleged, and truly too, that this could not happen with any "respectable" bank, that “gentlemen of character" would not lend themselves to such transactions! Unluckily, however, there are no decisive marks or tests by which the public can, à priori, say what is or what is not a "respectable bank," or who is, or is not a "a gentleman of character;" and it is not a little hazardous in such matters to indulge in speculative remarks. Hence it is that all banks are held to be respectable, that is, solvent, till the event prove the contrary; and that all gentlemen connected with banks are held to be "men of character," paragons in fact, of honour, honesty, and even intelligence, till their fraud or ignorance has involved hundreds or thousands in bankruptcy and ruin. We do not state these circumstances in order to raise any prejudice against joint stock banks or other associations, for they apply equally to one, or to a small number of indivi duals; but we state them to show the folly of placing any reliance on statements as to the capital of any bank, or the character of its managers. Such statements may be either true or false; but, as the public cannot tell which, they are plainly good for nothing. The only real security is to be found, if it exist at all, in the names of the partners responsible for the debts and obligations of the bank. The number of such partners is a very inferior consideration. There cannot, in truth, be a greater error than to suppose that because a bank has a great number of partners, its security may be safely depended upon. A single individual worth 100,000/. is an incomparably better security than fifty individuals worth 2,000l. each; and a hundred individuals worth 1,000l. would hardly be any security at all; at least for a sum of 10,000l. or 20,000l. A private bank with six, may be a safer place of deposit than a joint stock bank with six hundred partners. Every thing depends upon the available wealth of those responsible for the debts of the concern; and hence the propriety and justice, whether the firm consist of one or of many partners, of publicly declaring and specifying their names. We are decidedly hostile to a proposition we have heard mooted, and which seems to be countenanced by the committee on joint stock banks, for obliging all banks to establish a guarantee fund; that is, for obliging them to accumulate a portion of their profits as a reserve stock. But where is the security that such reserve would be always deducted from profits? The truth is, that bankrupt and fraudulent concerns, and none else, would gain by such a regulation; inasmuch as it would enable them, by appearing to be prosperous, the better to deceive the public, and to blind them as to the real state of their affairs. It is a good deal worse than absurd to induce the public to depend on guarantees that cannot be enforced, and which, consequently, must be good for nothing. The knowledge of who the partners are in a bank, and their unlimited responsibility, are the only securities that, speaking generally, are worth a pinch of snuff. If these cannot protect the public from fraud or loss, nothing else will; and the question will come to be, not whether the system should be reformed, but whether it should be abated as an incurable nuisance. On this ground also, we should be disposed to dissent from any attempt to prevent, by legislative enactment, the making of loans upon the credit of bank stock. We do not question the advantage of such a regulation, provided it were honestly carried into effect. But it is useless to say that, whenever the parties were disposed to defeat such a course, it would be quite inoperative.-S. We have elsewhere (Dict. vol. i. p. 86.) said, that if the Bank of England could, with fety to herself, pay interest on deposits, as is done by the Scotch banks, it would be of the greatest service to the public. The joint stock banks formed, or being formed in the city, are undertaking this function, and are offering a fair rate of interest on deposits. If they succeed in this, they will confer no slight advantage on the community, and will become, as it were, so many savings banks for the middle classes, and for the rich as well as the poor. But the responsibilities this system will bring along with it are neither few nor small. A bank with a numerous body of partners of undoubted wealth and integrity that should give 2 per cent. interest on all deposits of 10l. and upwards, how short soever the period for which the deposit might remain in the bank, would, there is little doubt, speedily have ample funds at its disposal. In quiet and prosperous times, the system would work exceedingly well; and the bank and the public would be vastly well pleased with each other. But when the cycle of prosperity has gone by, and the cycle of adversity has begun; when the waters are out and the winds begin to blow; it is doubtful whether either the bank or its depositors may feel quite at ease. The former will probably raise the rate of interest; but it is doubtful whether that will have the wished-for effect. Should the exchange set against us, and the Bank of England be forced to narrow her issues, and should bankruptcy and a feeling of insecurity begin to prevail, as they have done hitherto on all similar occasions, a run for deposits may, and most probably will, be made upon the bank; and in such a case her situation, however well she may have been managed, will be most critical. She will be compelled to dispose of, or pledge securities in a market where they may be all but unsaleable; and it will be impossible for her suddenly to pull up in discounting, without exposing herself to the imminent danger of extra loss, by bringing on the stoppage of those who have been accustomed to trust to her for loans. It will be said, perhaps, that this is all imaginary, and that nothing of the sort ever occurs in Scotland! But it would really be about as much to the purpose to say that nothing of the sort ever occurs in Japan. London is the pivot on which the foreign exchanges turn, and when they become depressed, many of the London depositors will do what the Scotch depositors never so much as dreamed of; that is, they will demand their deposits, convert them into gold, and either send this gold abroad, or get a profit from those who will. From this source of annoyance and loss the Scotch banks are perfectly free; and this, by exhausting the resources of the London banks, and subjecting the weaker ones to difficulties, occasions discredit, and, in the end, runs or panics. Nothing, therefore, can be more perfectly futile than to contend that, because this system has proved profitable for the Scotch banks, it will also be profitable for the London banks. We do not presume to affirm that such will not, and we hope that it may, be the case. But it would be rather illogical to affirm, because wheat succeeds remarkably well in the vale of Gloucester, that it will succeed equally well on the Welsh mountains. The joint stock banks may, if they do not already, endeavour to obviate some of the difficulties now stated, by declining to pay interest on deposits unless they lie for a certain time, or by stipulating for a certain notice before they are paid. The first condition would, however, be of little effect in the evil day; but, either the one condition or the other is altogether subversive of what is meant by granting interest on deposits, and goes far to make the announcements to that effect little better than a hoax upon the public. All, or nearly all, the existing banks, are banks of deposits in this sense of the word; that is, they give interest on deposits of a certain amount, provided they be not called for till after the lapse of an agreedon period, and that the depositors give them no farther trouble. But it is doubtful whether money deposited at 2 per cent. under such conditions, and still more under an engagement to give notice of demand, be as well laid out as if it were deposited with the Bank of England, or any other bank of undoubted solidity, at no interest, but payable on demand. Most men of business would, we believe, prefer the latter. Nobody, indeed, not wishing to get into difficulties, would be disposed to deal with any bank that required notice of demand; and it is questionable whether any such stipulation should be sanctioned by law.-S. After the paragraph ending in the middle of page 110 of this edition, read the following: But it is unnecessary to go back, even so far as 1836, for conclusive proofs that the issues of private banks are not governed by any principle other than the supposed interests of the parties. We have already seen that the Bank of England did not contract her issues so vigorously or systematically as she should have done when the supply of bullion in her coffers began to be reduced towards the end of 1838. Still, however, she did reduce her issues. During the quarter ending the 18th of September, 1838, the issues of the Bank of England amounted to 19,655,0007.; and they were progressively reduced till, in the quarter ending the 30th of June, 1839, they amounted to 18,101,000/, being a reduction of about 14 million. The reduction was also accompanied by a rapid diminution of the bullion in the Bank's coffers, by a rise in the rate of interest, and by great apprehensions in all moderately well-informed quarters as to what might be the ultimate result. Now what was the conduct of the joint stock and private banks during this period? Did they make any reduction of their issues, or did they so much as abstain from increasing them? No such thing! on the contrary, their issues, which amounted to 11,364,9621. at an average of the quarter endir. VOL. II-3 T 97 |