immense capital recently invested in joint-stock companies has been drawn from little hoards, which previously lay dormant. But the peculiar feature of the new position is this that instead of keeping their reserve funds in bank, men now invest them in joint-stock enterprises, for the sake of obtaining a higher rate of profits. Banks give a comparatively low rate of interest, for they have to pay themselves for taking charge of deposits, and for finding appropriate employment for their customers' money. But by becoming a shareholder in a joint-stock enterprise, a man employs and invests his money without the help of intermediate parties, and hence is entitled to and obtains the profits of trade subject to no abatement. It might be supposed that, owing to this change, the amount of deposits in the banks I would be diminished-and to some extent this will be the case (making allowance for the increasing wealth of the community); but it must be remembered that the money thus abstracted from the banks is in great part returned to them from another quarter. The decrease in the deposits of individuals is compensated by the deposits of the new companies. Each company opens an account with a bank, and deposits with it its spare funds; so that what the banks lose in one form they gain in another. This change, however, is important in one aspect. Banks do not speculate. They lend their money only on the best and most negotiable securities, and abstain from employing it in industrial enterprise. Hence, although they are of inestimable value in sustaining commerce, they never take direct part in the establishment of new branches of industry, or the development of new national resources. The joint-stock companies, however, do this as their general feature. They make railways, they open mines, they manufacture gas, and engage in all manner of reproductive enterprise. In fact, the distinction may be stated thus:-The companies make the securities upon

which the banks lend. Money on loan, we think, would have become cheap of late years but for the great growth of joint-stock companies. If the great and ever-increasing profits of our people had been deposited, as before, with the banks, these establishments would have had so much money to lend compared with the amount of securities upon which they make their advances, that the rate of interest would have fallen. But the new companies have immensely increased the amount of securities upon which banks are in the habit of lending; they have made almost every man a trader, and supplied him with a form of property which banks will lend upon; and in consequence of this, inter alia, the rate of money has not only maintained itself, but has greatly advanced. In fact, men nowadays keep their reserve funds, not in the banks in the form of money, but in the form of bonds, shares, and coupons negotiable when necessary, and bearing a higher interest than the banks could give. To keep money in bank (save what is absolutely necessary for one's ordinary expenditure) is now an exploded custom. All that we think of commanding, or keeping in reserve, now is, not cash, but the paper representative of property, and the interest which comes to us as the holders of these symbols or title-deeds of wealth.

Strange to say, in this City of Gold, gold cannot be seen. We know, from official returns, that so many millions of gold lie in the vaults of the Bank, and we infer that some thousands of sovereigns are kept in each of the other banks, as small change for their customers' wants. But the precious metal makes no appearance in the business transactions of this City of Money. Bits of paper, with some writing on them, are the potent agents of the scene. Paper, paper everywhere; but no gold— not even bank-notes. Let a man go to buy some shares. He sees the rate they are quoted at, and, going into the dingy office of his broker,

commissions him to buy. The broker runs out into the busy crowded room of the Stock Exchange, finds or calls out for some one who has shares of the kind to sell, makes a bargain at the current rate, and brings back either a cheque or a stamped agreement to purchase, which he hands to his client. Coupons or certificates are given on one side, and a cheque on the other. But no gold-not even notes! The same takes place in the Royal Exchange and Mincing Lane-only bills and produce are there dealt in, instead of stocks. If you pay a man, you give him a cheque. If you discount a bill, you get the produce in a cheque. If you obtain a loan from your banker on stock, the amount is placed to your credit, and you tell your creditor to draw on you, or give him a bill. It is really a strange thing to contemplate so much wealth changing hands: money ceaselessly in transitu—yet not a sovereign to be seen. It is but the ghost of money that occupies the city; or rather, it is money in its most civilised form-convenient and inexpensive. It is the chequesystem the credit-system; and, after all, money itself is nothing else than a form of credit-a thing (whatever its substance) which men by common consent have agreed to recognise as a definite symbol of wealth- —a representative of property.

The truth is, the whole operations of this monetary metropolis would come to a standstill if the payments and exchanges of property had to be carried on in gold. A single dealer sometimes lends, or pays, or receives a million sterling or more in a single day; and dealings to the extent of several hundred thousand pounds are by no means exceptional Occurrences on the part of single individuals. Probably not less than fifty millions of property are changing hands, in loan or purchase -in banks, discount - houses, on 'Change, or in Capel Court-every day. Fancy what it would be if men had to carry about with them such a mass of gold. A stout

porter finds it difficult to carry £500 in gold even for an hour or two. What a sight, then, it would be if the busy hive had to trot about thus burdened! Ants in their hive, carrying about their eggs as big as themselves, would be a joke to it. And consider, too, what insecurity there would be— what occasions for loss of the precious coins-what temptations to theft or robbery-if the transactions in this busy place were so conducted. It would be quite impossible to carry about such a mass of gold as is needed to liquidate the engagements which daily take place. Still more, even if it were possible to carry about these loads of gold, the gold itself could not be got. To suffice for the operations at the banks and on 'Change, fifty millions of gold would not be enough. Yet such an amount of the yellow metal could not be procured. Happily the gold is not wanted. Cheques, bills of exchange, and bank-notes are found to be equally valuable and negotiable-they represent property quite as reliably as gold, besides being infinitely more portable, safe, and convenient. And hence they-or rather, bills and cheques-constitute to all intents and purposes the only currency on 'Change and throughout the monetary city. By means of them, transactions to the extent of tens of millions take place daily, without a single sovereign or even bank-note being visible.

We have styled the narrow but all-important precinct of which we write the City of Gold. Yet we have had to say that no gold is visible there. If gold be regarded as an equivalent expression for wealth and property, our title is correct, for the whole place abounds in wealth, and deals in it. Nevertheless it is the City of Gold even in the literal sense of the term, for its whole existence, all its operations, depend upon the presence of gold in one part of the locality-in the Bank of England. The gold, it is true, is invisible. The thousands who operate there never see it. It lies hid in the strongest chambers

of the Bank, and no one sees it or counts it but the party who makes out the official return. But, visible or invisible, its presence and amount regulates the operations of the Bank, and those operations regulate and affect all the other operations of the precinct. The value of stocks and shares rises or falls, panic or prosperity occur, according as much or little of the yellow dross is reported to be in the occult chambers of Threadneedle Street.

Hence it is that the paragraph in the City Article which is most closely studied is that which relates to the supply of gold. The two brief lines which tell how much gold was taken to the Bank or withdrawn from it, are in reality the vital point of each day's monetary news. If gold is being deposited largely in the Bank, the dealers are all elate, and business and enterprise go ahead; if much gold is being withdrawn from the Bank, every one becomes uneasy; enterprise stands still. How is this momentous effect produced? The practical answer is, that the movements of the precious metal regulate the Bank's rate of discount, and the rate of discount affects the whole industry of the country. If traders can borrow, or get their customary advances, on easy terms, say at 4 per cent, they have every inducement to extend their business and employ as many men as possible; but if they have to pay 8 or 10 per cent, their margin of profit is seriously diminished, if not altogether swept away. Hence every fluctuation in the Bank rate is watched with intense interest throughout the whole country, and most of all in this monetary metropolis. But in this precinct, as elsewhere, the community is divided into two classes which are very differently affected by the changes in the Bank rate. Trade and Money, we have said, are the great powers which together set agoing the whole business of the precinct; traders and money-dealers constitute its population. A high rate of discount is disadvantageous for the trading

and commercial classes, but, on the other hand, it is very profitable to the banks and money-dealers. An increase in the rate is virtually a transfer of a portion of the profits of the former into the pockets of the latter. Bankers like a high rate of discount, the trading classes do not. But both of them are alike interested in watching the movements of gold, as productive of the changes in the rate of discount-or, in other words, in the value of money on loan.

But why, it may be asked, should a little more or less gold in the Bank of England produce such immense effects upon the trade and prosperity of the country? All the engagements which are contracted in this monetary metropolis, as well as throughout the country, although carried on solely by means of cheques and bills, are bound to be met, if required, by payment in the legal money of the country. This legal money is gold and Bank of England notes. Gold, in exceptional times, may not be easily procurable; but the other element of the legalised currency namely, bank-notes-may be manufactured in any quantity. It may be asked, then-by the uninitiated reader, we mean-When gold, at these rare times, becomes scarce, cannot its temporary deficiency be compensated by an increase in the issue of notes-which in the eye of the law, as well as in the estimation of the public, are as valid a tender as gold? It must be remembered, however, that these notes are a legal tender only so long as the Bank is ready to give gold for them on demand. The first duty of the Bank is to take care that it is at all times in a position to do this. It must insure the convertibility of the note. It must always be ready to give gold for its notes whenever such payment of gold is demanded. It is necessary, then, to observe to what extent such a demand for gold-payments is likely to arise, before we can decide as to the propriety of the measures which the Bank takes to meet such a contin

gency. As gold becomes scarce, does the public lose faith in the notes, and rush to the Bank to have them converted into gold? By no means. Experience enables us to speak with perfect confidence upon this point. It is not a question of opinion, but a simple matter of fact. No such loss of confidence in the notes of the Bank has ever occurred, either in our own time, or in that of our fathers and grandfathers. The Bank of England note is a tender which no one ever mistrusts. People take the notes as readily when there is not a spare sovereign in the Bank, as when its coffers are overflowing with the precious metal. Even in times of the direst commercial crisis, of the worst monetary panic, the public ask only for notes. The notes serve their purpose as money quite as well as gold does, and they greatly prefer them. The convertibility of the notes is never endangered, and people would much rather have the notes than an equivalent sum in gold. This is a fact beyond dispute. As a medium of internal circulation as a means of settling accounts among ourselves - Bank of England notes are accepted everywhere and at all times as preferable to specie. Indeed, we may go further than this, and say that a cheque upon a good bank is preferable to either, although it is not a legal tender at all. Gold is quite unneeded by us in our monetary transactions with one another. And even if it were announced that the Bank could not give us gold for its notes for a twelvemonth to come, not one man in a hundred thousand would care. The public at large neither require the gold nor desire it.

Who, then, are the parties whose action at times produces a drain of gold from the Bank? They may be classed under three heads. It may be the Bank of France, or any other great foreign bank, which buys up bills of exchange upon London, and sends them here to be cashed, in order to supply itself

VOL. XCVI.-NO. DLXXXVII.

with gold from the stock kept on hand by the Bank of England. Or it may be our own Government, which, by making loans to a foreign State, necessitates a corresponding export of the precious metals or which, in times of war, has to export specie to provide supplies for its army abroad. Or finally, and as is most frequently the case, it is great capitalists, great money-dealers, who convert their money into gold or silver as best suits their purpose for the time, and who transfer it from one country to another, wherever they can make the largest profits upon it. It is these agencies, and not any mistrust of the notes, which produce the occasional heavy demands for gold upon the Bank of England. It is extremely rare that such drains ever become so great as to be a real and unavoidable embarrassment for the Bank. In times of war, indeed-as, for example, during the long and gigantic contest with France under the First Napoleon-the Government may have to send its last sovereign abroad in order to sustain the military operations of itself and its allies. But, save in such extremely exceptional circumstances, which have occurred only once in our history, the drain of gold for export never assumes a magnitude such as really (that is to say, apart from the artificial restrictions of the present Bank Act) to imperil the position of the Bank. The export of three or four million sterling of specie usually produces such an effect upon the rate of exchange, as of itself to render any further exports of the kind unprofitable; hence the drain ceases. And moreover, as experience amply shows, in two or three months all the gold thus exported returns to

us.

These, then, are the causes which produce the occasional drains of gold from the Bank, and such are the limits by which these drains are circumscribed. But never-not in a single instanceis gold demanded from the Bank

2 C

from any loss of faith in its notes. No one doubts the value of the Bank of England's notes, and the power of converting them into gold is never desired save as a means of procuring gold for export, by the parties and for the purposes which we have specified.

This City of Gold is based upon gold, and the foundation is found to be pre-eminently unstable and perilous. The golden base perpetually oscillates to and fro, and each of its greater oscillations is felt like the shock of an earthquake. It rises and falls, expands and contracts, and sometimes seems to slip away from beneath the City altogether. Then goodly houses go down by the dozen-not because they are illbuilt-not from any fault of the architect or occupants, but simply because the foundation upon which they all stand has given way. Of late years these oscillations have become more frequent and more serious; and every ten years or so, a convulsion takes place-not of nature, but by Act of Parliament-which spreads terror and disaster through the Golden City, and paralyses the whole country as effectually as if an earthquake had strewed with ruins the great seats of our national industry. The merchant and the manufacturer, the shopkeeper and the day-labourer, alike find their trade stopped, and their gains swept away. Suffering and want spread over the land, as if there were a great famine. There is a paralysis of trade, a dearth of employment; and the hard times are felt by the mill-worker and the bricklayer, not less than by the magnates of the trading and commercial world. Is there not something wrong here?

Ought the presence or absence of a few millions of gold to make the vast difference between national prosperity on the one hand, and national disaster and widespread suffering on the other? How will posterity speak of us when it sees that we made the huge fabric of our national industry stand like an inverted pyramid, resting on a narrow apex formed of a chamberful of yellow dross? Will they not laugh at our folly, our barbarism? When the usual supply of gold is temporarily diminished, why should our usual credit-system be restricted in proportion, or totally suspended? Of what use is Credit but to take the place of payments in coin? Was it not for this purpose, and for this alone, that credit and papermoney were adopted? Why, then, not make use of our credit-system as a means of compensating the temporary absence of gold? Why not tide over the difficulty instead of aggravating it? and so avoid the tremendous sufferings which are ever-recurrent under our present system of monetary legislation. Suffering thousands and starving myriads signalise each great monetary crisis. Even during the last year, though the crisis of evil has been escaped, the usurious Bankrate of 9 or 10 per cent has swept away the profits of trade into the pockets of bankers and capitalists. Parliament inflicts misery upon the country out of an antiquated deference to some bits of yellow dross. Is this wisdom, is it humanity, is it civilisation? It is barbarism and folly, preached up by the moneyed interest, the high priests of Mammon, at the expense of the community.