ROMANCE OF PAPER MONEY

Dominion, Volume 10, Issue 3059, 21 April 1917, Page 3

ROMANCE OF PAPER MONEY

WHEN ENGLAND HAD SIXPENNY NOTES CURIOS, OF FINANCE . In England paper money was instituted in tha year 1694, when the Bank of England was founded, writes R. Burnett, in the "Daily Express." The paper then used, however, applied mostly to bills of exchange and large payments, thcro having been no small notes in thoso days. "If," a writer at the time said," "the. bank can circulate its foundation of £1,200,000 without having more than £300,000 lying flead at onco time with another, the said bank will bo in effeot as £900,000 fresh money brought into tho nation." The Bank of Scotland, established the following year with a capital of £100,000 sterling, was really the first to issuo bank notes in the ordinary sense. An old chronicler asserts that "its notes went for four or fixo times the value of the cash in bank, and that so much as tho amount of those notes exceeded the cash "in'bank was a clear addition to tho money of that nation." But the Bank of Scotland was more national or general than the Bank of England, as its notes, many of which were as low as 20s. sterling, passed in payments throughout the whole country, whereas the Bank of England was of little use outside London. Paper Credit, Although Mr. William Paterson, a Scotsman, founded both these banks, Mr. Montague was the 'first to organise the new ciroulating paper credit in EngiahU by issuing bills from the Exohequer and contracting for their being' circulated for ready money on demand.' _ Many of thoso first Exchequer bills were for sums as low as £5 and £10, and "were of very good use at that time, when there was so great scarcity of silver. Sloney during the recoinage." Lik§ the recent! Exohequer bonds, advertised as "£6 ss. for £5," these notes, being allowed 7} per ceni. interest gpon rose to be better than par. They did much to support the general trade of the nation till the new money was issued from the mint. , During the hard times of 1697 bajik notes were quoted as low as 13 and 14 per cent, discount. New capital was thereupon required, and the bank was allowed to issue an additional number of notes," not exceeding the total increased capital. Paper credit thus supplied the' place of running cash, and greatly multiplied tho kingdom's stook. This . artificial wealth, which necessity had introduced, "made us less feel tho want, of that real treasure which the war and our losses at sea had drawn, out of the nation." But perhaps that wonderful year o£ war success, 1759,. did nlbre to lower the credit of the country than any previous period. Tho unusual scarcity of gold and silver led the Bank of. England to issue cash notes for £10, which proved very convenient for payments. Notes Abused. Useful as bank notes were as a substitute for current money, they were not without their abuses. Notes called bank notes for 10s.', '55., and such like were issued by obscuro persons in\ many villages in Scotland, and notes of ss. down to 6d. were in circulation in Yorkshire, "to the great injury of the industrious thereby' almost entirely banishing silver out of the circulation." To put a stop to this evil' all notes under 20s. were prohibited to be ourrent after June 1,1765, and all notes wore made payable on demand in 1766. Never in history, until 1914, did papor money play such an important part in the oredit of the country as in tho year 1797, when Pitt's Suspension of Cash Payments Bill, suspending cash payments for 25 years, was introduced. For some years before this, "owing to tho enormously expensive operations of tho war, subsidies to foreign princes, and tho largo sums payable in bullion for cargoes and freights of . neutral ships taken, causing gold to bo carried abroad 1 to a very alarming amount," tho Bank of England had limited their advances,upon Treasury billsy and had requosted Mr. Pitt to make his arrangements accordingly. The total sum owing by the Government to tho Bank then was under £10,000,000, only about sufficient to carry on the war lor, two days just now. No Gash payments. Nevertheless, fit a Privy Counoil on February 26, 1797, it was considered "indispensably necessary for tho public service that tho Bank of . England should forbear issuing any cash in payment until the sons» of Parliament can be taken on tho subject." Both discounts and dividend warrants, however, wore to be paid in bank notes. Merchants and bankors wcro not less patriotic then than now. Next day, at the Mansion House, a meeting of inerchants and bankers "did most readily dcclare that .we will not refuse to receive bank notes, and wo will do our utmost endeavours to make all our payments in tho same manner." In a few days all transactions of every kind wont oa as if nothing had happened, and people did not percoivo any difference in bank notes not convertible into money, and solid gold and silver, and that money itself." The immediate consequcnco of, tho Suspension of Cash Payments Act and of tho suddon withdrawing of gold money from circulation was the issue of £1 and £2 notes, and within a 'week of tho meeting of tho Privy* Council Parliament had sanctioned what the Bank had done. Within a month the previous Acts prohibiting the circulation of notes under 20s. in Scotland wore also repealed., A moratorium for any debt or demands whatsoever, excepting sums under 205., was also issued, and this sheltered tho banks for withholding payment of any of their notes. A few large firms were also allowed to issue notes payablo on demand under 20s. value, notabl,v : the Carron Iron Company in Scotland.