tinued to take all money paid in as a consideration for allowing an inscription on the books of the bank to the credit of the depositor. The sums which thus flowed through the bank into the treasury would, with the previous bank funds, make up the quantity needful for the convenient discharge of the commercial payments of Venice. As this amount fluctuated from year to year, and during each year, with the course of commerce, a very effective mode of accommodating the supply of bank funds to the exigency of the demand came obviously into use. When the payments in bank were heavy, and the bank funds in great demand, money flowed freely into bank, and the credits were proportionably increased. When an occasional demand for the precious metals arose, the holders of bank funds could readily dispose of them at a slight reduction for coins. The purchasers of bank funds were sure of meeting soon a demand for them; for the demand for a medium in which the ever-recurring payments of debts were made so much exceeded in intensity the occasional demand for specie for exportation, or any other use, that during the whole existence of the bank, with very slight exception, the bank fund was at a large premium over coins, so large that it was finally fixed by law at 20 per cent."

"The republic could well afford to maintain a liberal policy towards an institution so important, both as a fiscal and commercial agent. That the inhabitants of Venice were satisfied, we cannot doubt, as not an objection was ever made to the bank, at least none is extant; neither book, nor speech, nor pamphlet, have we found, in which any merchant or dweller in Venice ever put forth any condemnation of its theory, or its practice. There was no hesitation in carrying money to the bank, so long as it was not doubted that the bank funds would purchase specie without a loss,

whenever it might be needed; and the uniform premium of bank funds settled that point. Under such a system, the regular payments of trade would proceed with a rapidity and economy previously unknown, so far as the history of commerce informs us."

*

*

"It is worthy of remark, that this very efficient mode of adjustment discovered and used so largely at this early period in the history of commerce, was not dependent for its efficacy on the guarantee of the republic. That guarantee sprung out of the mode in which the bank originated: this convenient method of liquidation sprung from the use of this new substitute for money."

*

"The facility of payment furnished by the bank, which made it the admiration of Europe, honorable at once to the government and merchants of Venice, and a support to the pride and power of its people, consisted in substituting, as a medium of payment, the debt of the republic for current .coin. * * The government took the coins one time for all, giving therefor a corresponding credit in the bank; and allowed the depositor or lender to transfer his claim upon the republic in payment of his debt, in place of transferring over the coin in each payment. Whatever men can employ in payment of debts, they will be willing to receive in payment, and this independent of any legal compulsion."

t

"Experience soon evinced the power and convenience of this mode of payment. These bank credits were divisible to every desirable degree, and they could be transferred with a readiness, speed and safety, beyond all comparison, superior to any mode of paying in coin. The same sum or credit might be kept in such rapid circulation, as to effect an amount of payments, in a specified time, far beyond any possible movement of coin. This rapidity became a great

economy, for a much less sum of credits was made to effect a given amount of payments with far greater speed than could have been attained with coin. But this economy resulting from an increased speed and power of circulation was still more important, arising from the fact that the coins which were deposited as the basis of the credit were very soon again restored to the usual channels of circulation by the payments of government. Thus the coin was not withdrawn from its proper functions, and the credits remained a perpetual fund, to be employed in large payments. This system of payments was so well adapted to the exigencies of commerce, that it was maintained in full vigor, in the great commercial city of Venice, for almost four hundred years. It was an institution or device of the credit system, for by its aid payments were effected, and that to a vast amount annually, without any use of coins or bullion. It only perished, when the city itself fell, at the conquest of Italy by Napoleon; but the conqueror carried off no coin, no penny of

prey. The credits of the bank were crushed under the rude touch of an invading foe. They were lost to the proprietor, but no equivalent passed into the hands of the destroyers. If the holders of these credits suffered, the invaders were not enriched. In assuming the sovereignty of Venice, the conqueror assumed the right and duty of making good these bank credits."

The Venetian government was careful at all times to provide for the wants of the public. In course of time it became necessary to establish in the bank a department for the custody of coin or bullion, which the owner might desire to use. Deposits of this kind were subject to the order of the owner, who could reclaim them at pleasure, or transfer them in the same manner as bank credits. This feature of the bank prove eminently useful to the public, but did not

lead to any diminution in the funds of the bank itself, as the demand for inscriptions of credit was always greater than the supply. The original capital of the bank was 2,000,000 ducats, but it rose to about 5,000,000 in the 18th century, and to over 14,000,000 (about $16,000,000) at the close of its long and remarkable career.

The history of the bank of Venice establishes several important facts of deep significance to the American people at the present time. The inscriptions of credit of the bank were simply evidences of indebtedness of the government, bearing no interest, which constituted a medium of exchange. The law which required all bills of exchange payable in Venice to be paid at the bank, unless otherwise expressly stipulated, was apparently an arbitrary requirement, but it worked no injustice; on the contrary it increased the strength of the bank inscriptions, and resulted in greatly promoting the facilities of commerce and in making Venice the commercial metropolis of the world for centuries. The evidences of indebtedness, which the government in the first instance required its creditors to take, it in effect made a legal tender for private debts, which was no more than just. The large premium which these inscriptions bore was not due to any act of the government, but to the value attached to them by the public. It rose to as high as 30 per cent., when the goverment found it necessary to impose a limitation, which was fixed at 20 per cent. This premium on inscriptions of credit in a bank, which were not redeemable or payable in gold, (mere "rag money" they might be styled) which existed for centuries, is inexplicable on any theory which can be advanced by the bullionists. The Venetians were enabled, by the use of their irredeemable inscriptions of credit, to achieve a degree of power and prosperity, which they retained for centuries, that proved a

constant source of envy and wonder to the rest of the world; and during the whole time they never once suffered from commercial crashes or money panics, such as are experienced in England and the United States every six to ten years. It has been a matter of surprise that other nations witnessing the prosperity of Venice did not imitate her example, but that is not half so strange as the fact that the people of the United States, having experienced the great advantages of even partial legal tender paper money, should blindly cling to the rotten and disastrous specie basis system of banks of issue.

THE BANK OF GENOA.

The Bank of Genoa was established early in the 13th century, and, like the Bank of Venice, had its origin in the necessities of the State. The loans upon which it was based were not, however, forced, but were the spontaneous offerings of the people. The creditors of the bank became a very powerful body. In the course of time the bank adopted various new devices, and its system became greatly complicated. According to Colwell, the Bank of Genoa was the first to originate the bank note, which has since played so important a part in the affairs of the world. It met with the same fate that befell the Bank of Venice at the time of the French invasion under Napoleon.

THE BANK OF AMSTERDAM.

The Bank of Amsterdam was established in 1609 on the theory that deposits once made could never be withdrawn. For nearly two centuries it enjoyed great credit, and contributed largely to the prosperity of Amsterdam. Coin and bullion were also received on special deposit, and could be reclaimed by the owner at pleasure. The fact that deposits

once made could not be withdrawn, resulted in the bank/