make upon any one kind of security, so as to keep the amount within
due limits. If too large a sum is advanced on one kind of security,
and that security should become much depressed in value, the banker
may be caught between two fires: on the one hand, the customers who
have deposited this security will, from its fall in value, have become
financially weakened, and perhaps not be in a position to repay the
advances; and on the other hand, if the banker wish to repay himself
by realising the securities, he may find that the margin of value has
run off, and what can be obtained by selling the securities in the
market will not cover the advances, or possibly, for the time being,
they will prove to be unsaleable. Thus he will be left in the dangerous
position of having a considerable proportion of his assets indefinitely
locked up, and a certain number of his customers in a weak and reduced
condition financially.

Neglect of the precaution of spreading advances over different
suitable classes of investment has brought many banks to ruin in the
past, and under similar conditions would do so in the future. This
danger is not now so pressing as in former times. Owing to the present
custom of establishing branches, and to amalgamations, the operations
of banks are now frequently spread over wide areas, and therefore
automatically their advances tend to spread over many more industries
and securities than was formerly the case. When banks were more local,
their prosperity rose or fell with the industry and conditions of their
particular district.

We see then there is danger in locking up too large amounts in advances
on any one class of security. But there is an equal danger in advancing
too large sums to a few customers. A firm may be of very good standing
and report, and keep a first-class and highly remunerative account with
its banker. From time to time it has advances from its banker, which he
is very glad to make, and which are regularly repaid. But a time may
come when an advance may not be repaid when due; instead, a further
advance is asked for. This is made without question, and probably
further advances, always increasing and never reducing. After a time
the banker may become a little fidgety, and cautiously suggest a
reduction, but will probably be told that ample funds will come to hand
shortly. When this time comes the funds may not have been received,
and the customer may insist that he _must_ have further help, or he
will not be able to meet his obligations. The banker should require
ample cover before advancing further sums; but if he is weak and yields
to pressure, matters will go from bad to worse, until the customer
may practically rule and command the bank, the two concerns will be
involved together, and when the customer “goes” the banker will go too,
or at the best suffer a big and weakening loss—not only loss of money,
but loss of credit, which will affect him seriously in the future, and
may ultimately cause his fall.

This danger is not a hypothetical one. It is unfortunately founded on
fact. It was this cause which led to the disastrous and all-reaching
failure of the City of Glasgow Bank. When the position of that bank
was examined it was found to have lent as much as six million pounds
among four customers. Gilbart says: “Almost every bank that has failed
can point to some one, two, or three large accounts to which it mainly
attributes its failure.”

On looking at the last column of our table we see that all the banks
hold assets in excess of liabilities to the public; the excess is in
respect of the capital and reserve fund. As an additional security for
the depositors, each bank has only a part of its subscribed capital
paid up. The remainder, the uncalled capital, constitutes an extra
reserve for the benefit of the depositors.

The profits made by joint-stock banks are high, the majority of
dividends varying between 10 and 20 per cent.; and notwithstanding such
satisfactory dividends, large reserve funds have been accumulated from
undivided profits. These reserve funds in some cases equal, and even
exceed, the total of the paid-up capital. It may be added that many of
the banks are popularly credited with holding other reserves which do
not appear in their balance sheets.

CHAPTER X

THE BILL-BROKERS

The business of the bill-broker is one that has grown up during the
past century—chiefly during the latter part of it. A bill-broker
acts the part of an intermediary between banker and merchant. At
first glance the need of such an intermediary is not very apparent,
considering the large number of banks now in existence which keenly
compete for business. On looking further into the matter, however,
the importance and utility of the bill-brokers, both to banker and
merchant—that is, to those who wish to buy bills and those who have
them to sell—become apparent.

To undertake the business of discounting bills successfully great
knowledge and discrimination are necessary; knowledge that can only be
obtained by experience, and discrimination by keeping in touch with
the changes occurring in the standing and position of the mercantile
and financial community. As with the rest of the world, merchants
and financiers do not stand still; they progress or they fall back.
Many bills which in 1893 would have been treated as first-class paper
are now, in 1903, looked at askance; while the acceptances of many
firms who were unknown ten years ago are now readily taken. It is the
business of the bill-broker to keep himself thoroughly informed of the
“standing” and “position” of the mercantile community, so that he can
readily discriminate good bills from doubtful ones.

A bill-broker does not confine his operations to what is called “bank
paper”—that is, to bills accepted or endorsed by one of our well-known
banks or leading finance houses—but he is prepared to deal in bills
accepted or endorsed by members of the ordinary mercantile community,
provided he is satisfied as to the position of the parties whose names
appear on the bills. These latter bills are called “trade bills.” The
rate for discounting such bills is always somewhat higher than the rate
for bank paper because of the slightly greater risk.

The bankers of the present day discount a large number of bills for
their customers in the ordinary course of business. Bills obtained
from this source, however, do not meet a banker’s requirements in
several particulars. For one thing, the amount of bills offered
directly to bankers for discount is not sufficient, as a general rule,
to satisfy their demands; and, moreover, a banker has no power of
regulating the supply of bills offered to him in this way. One day he
may be asked to discount bills to a very large amount, when he is not
anxious to increase the amount of his holding of bills; on another day
he may wish to increase his holding, but none may come forward. And
lastly, with bills offered for discount by ordinary customers a banker
has no power of so picking his bills that he can ensure having a large
amount of bills maturing at any given period, when he anticipates that
he will require to increase his cash. But all these conditions can be
met by dealing with the bill-brokers. A banker can obtain bills to any
desired amount from the bill-brokers, he can regulate the supply of the
same according to his wishes, and he can stipulate that the bills sent
in by the bill-brokers are to mature within any given time—thirty days,
sixty days, ninety days, and so on; and he is thus in a position to
provide automatically for an expected demand for cash at certain times,
by the maturing of bills.

Bankers therefore find it easier, and, owing to the broker’s
specialised knowledge of the position of parties, on the whole safer,
to buy bills from the bill-brokers than to try to obtain directly all
that they require. Bills so purchased possess a further advantage, for
not only are they secured by the names on them, but, in addition, they
usually carry the guarantee of the bill-brokers as well; and this, when
dealing with large and wealthy firms, is a distinct advantage. It must
also be remembered that there are a large number of banks—principally
country banks—who are so situated that in the ordinary course of
business they never have what is called “A1 paper” offered to them for
discount, and yet they require to invest a certain amount of their
funds in such bills. These institutions of necessity make use of the
bill-brokers to satisfy their needs.

In consideration of the bill-broker’s guarantee, and of having had the
advantage of his knowledge in selecting and collecting bills, a banker
is content to buy bills from a broker at a slightly lower rate than the
ruling market rate, usually ⅛th or ¹/₁₆th per cent. per annum lower.
For instance, if bank or first-class paper is quoted in the market at
2⅜ths per cent. per annum for bills due in three months’ time, bankers
would buy such bills from the broker at 2¼ per cent. The broker thus
makes a turn of about ¹/₃₂nd per cent. on the deal, but in active times
this “turn” is often divided with the merchant from whom he buys. This
profit may seem small, but when the enormous turnover of a bill-broker
is taken into consideration, it is apparent that the total profits
derivable from this business are very considerable. This is confirmed
by the satisfactory dividends paid by the two or three public companies
conducting discount business.

Looking at the other side of the question, persons who have good bills
to discount find they have a readier market in the bill-brokers than
in the banks, and practically all the first-class bills throughout the
country find their way to the London market for discount.

In order to keep their connection, bill-brokers must be prepared to
do business in good bills at any time, to practically any amount; and
to be in a position to do this, they rely either on borrowing the
necessary funds from the banks, or on selling some of their stock of
bills in hand to the banks. The interest on the call and short-notice
money borrowed from banks is on an average materially lower than the
rates at which bills are discounted, and consequently a profit is made
by the bill-broker (who holds the bills he buys), of the difference
between the two rates; and when bills are sold to the banks a turn is
made on the transaction, as we have already seen. Competition among the
various brokers, however, is always tending to keep down rates, and
consequently the profits of the business.

Bill-brokers also buy very large amounts of trade bills from colonial,
and in some cases foreign banks, which are endorsed by the banks in
question. These bills, when not held by the brokers, are sold to
various banks throughout the country, and of course form a first-class
security. It may be mentioned that it is not the custom now for any
London bank to rediscount bills which they may have discounted for
their customers, and only in very rare instances do country banks adopt
this course, though the names of two or three of such sometimes appear
as endorsers.

Unlike a banker, a bill-broker has to pay interest on all his working
funds, and this makes him anxious always to utilise those funds to
their fullest extent. Unlike a banker also, he has no large reserve
of idle funds to keep for meeting sudden demands. Should such demands
arise, he relies on being able to borrow from banks or elsewhere,
sufficient funds to meet those demands, or, as a last resort, to obtain
assistance from the Bank of England.

As regards the funds with which the bill-brokers conduct their
business, we have already seen that they are largely borrowed from
various banks. The business is very simple, and is marked by an absence
of any kind of red tape. Every morning the representatives of the
brokers call on the banks with which they do business, and ascertain
whether the latter wish to lend any more money, or if any of the money
already borrowed is required to be repaid; at the same time usually
arranging the rate to be paid for money. They also ascertain if the
banks wish to buy any bills, and arrange the rate for such business.

In the case of money being lent to a broker, he simply sends in
security to cover the advance, and draws a cheque on the banker for the
agreed amount. In the case of money being “called in” by a banker, the
broker sends in his cheque on some other banker for the sum called, and
takes away a corresponding amount of security.

The securities deposited by bill-brokers for loans of this class
consist either of first-class bills or what are known as “floaters.”
“Floaters” are bearer securities of the highest class, such as Consol
certificates, the debentures of certain Indian railways, the bonds of
the Corporation of London and the London County Council. They obtain
the name of “floaters” from the fact that they float from bank to bank,
as one bank calls and another lends.

In the case of a banker buying bills from a broker, the broker sends
in a parcel of bills which roughly amount to the agreed figure, and
draws a cheque for the amount less the discount. It is not usual for
brokers to endorse the bills they so sell, but they give the banker a
continuing guarantee in respect of all the bills which he may buy from
them from time to time.

It frequently happens at certain seasons of the year when there is a
pressure for money, or on special occasions—such as on the issue of
a big public loan, when a large amount of bankers’ floating balances
is temporarily withdrawn—that heavy demands are made on brokers to
repay money they have at “call” from the bankers. The brokers are then
placed in the position of having large sums to repay, and as none of
the banks are lenders, they are forced to apply to the Bank of England
for assistance. The brokers are then said to be “in the Bank,” and they
usually try to get out as soon as they can, in order to escape the
higher interest there demanded from them. Formerly the Bank of England
declined to discount any bills for brokers and would only make them
temporary advances. This rule, however, is now relaxed, and the Bank
will either discount approved bills at the “official” rate, or make
temporary advances. The bills discounted with the Bank of England are
not supposed to have more than sixty days to run before maturity, and
must bear the names of at least two British firms, one of which must be
the acceptor.

The advances made by the Bank of England are not at “call,” as with
other banks, but for a fixed number of days, never less than three, and
sometimes for as many as ten. The rate charged varies from Bank Rate to
½ per cent., or even 1 per cent., above that rate.

It follows from this that when brokers have to obtain assistance from
the Bank, the rate for money in the open market at once begins to
stiffen, as demand exceeds supply; and if any considerable amount has
to be borrowed from the Bank, the outside rate will rise until it is on
a level with the Official Rate; or even slightly higher, if the Bank is
charging above the Official Rate for its advances.

Generally speaking, the aggregate amount of money from all sources
available for the use of the market keeps approximately at a level
figure, but a portion of it is not always in the same hands; and it is
this shifting balance of market money which really controls the rates
charged for the use of the whole of the money. If this shifting balance
finds its way into the Bank of England, all rates harden, owing to the
competition among brokers to obtain money without applying to the Bank.
On the other hand, if the shifting balance passes into the coffers of
the bankers, the competition among them to lend their funds will tend
to reduce the rate of interest which can be obtained for the use of the
money.

CHAPTER XI

THE CLEARING HOUSE

A work dealing with the subject of the Money Market would not be
complete without reference to the Clearing House—the institution by
which our enormous financial operations are adjusted. Without such
arrangements as are carried out so practically and automatically by the
Clearing House, it would be impossible to carry on our present trade,
and our banking system could not have developed into such a high state
of efficiency as we at present find.

Although our Clearing House has now been established for more than a
century and a quarter, London cannot lay claim to be the originator of
the clearing system. Edinburgh established such a system some years
before its adoption in London, and a somewhat similar arrangement
appears to have been in vogue in certain continental towns, it is said,
since the sixteenth century.

Up to the year 1775 all the cheques which a London banker held on
other London bankers were presented daily to the bankers on whom
they were drawn, and paid in cash or notes. Such a system was very
inconvenient to both the collecting and the paying bankers, as not
only did it entail the trouble of sending out clerks to present the
various cheques, but every banker was bound to keep an unnecessarily
large stock of cash and notes in his till, in order to be prepared to
meet in cash any demand which might be made upon him. There was also
considerable risk in the clerks’ carrying about such large amounts of
notes and gold.

In the year 1775 certain of the private bankers of London arranged a
scheme between themselves whereby to minimise this inconvenience and
risk. They hired a room in which the representatives of each bank met
daily, and exchanged the cheques and bills which they held on each
other. The _balances only_ which each bank had either to receive or pay
were settled in cash. By this means a great saving was effected in the
use of actual cash, and the risk of transfer of large sums from bank to
bank was to a large extent reduced.

At a later date the use of actual cash was still further economised.
Each of the banks represented in the Clearing House was compelled by
regulations to keep an account at the Bank of England. After this
regulation came into force, instead of cash being paid or received at
the end of the day, as was formerly the case, each banker’s account at
the Bank of England was either credited or debited with the balance due
to or by him on the aggregate of his daily transactions.

When the Clearing House was first established it met with much
opposition, although its advantages were so apparent. Several of the
largest bankers refused to countenance it. In course of time, however,
the great advantages it possessed wore down all opposition, other
bankers joined the “clearing,” a regular set of rules was drawn up for
the conduct of its business, and a committee of bankers was appointed
to supervise its working.

On the establishment of joint-stock banks in 1833 they were prohibited
from enjoying the facilities of the clearing system, owing to the
jealousy of the private banks. It was not until 1854 that this jealousy
was overcome, and the joint-stock banks permitted to join the Clearing
House; but the Bank of England did not take advantage of the system
until ten years later.

In the year 1858 the Country Clearing system was established. Under
this arrangement all cheques on country banks held by other banks are
passed through the Clearing House into the hands of the London agents
of the banks on which they are drawn. The London agent sends by post
each night to the various country banks which he represents, a parcel
of cheques consisting of the whole of the cheques on each respective
country bank which have been passed to him through the clearing. Each
of the country banks has thus but one remittance to deal with each
morning, instead of numerous remittances from banks situated all over
the country. On the other hand, the trouble to which each bank was
formerly put of forwarding all country cheques received direct to the
various banks on which they might be drawn was done away with.

The West End and suburban banks of London cannot, by reason of
distance, be directly represented in the Clearing House. A system,
however, is in operation by which practically the total of their daily
transactions becomes merged in the total figure of each day’s clearing.
Cheques presented to these banks by other banks are paid by what is
known as a “payment.” A “payment” is in effect a draft on their head
office or clearing agent, and these drafts are passed through the
Clearing House.

By these various developments it has come about that the vast
majority of bills and cheques passing through the hands of bankers,
throughout the country, become focussed in the London Clearing House,
and the returns of that institution, showing the total of the daily
transactions with which it has dealt, consequently afford a good
barometer of the state of trade throughout the country, the figures
rising or falling as prosperity or depression affects our commercial
condition. The returns are now published weekly, and the figures there
shown are stupendous in their amount—the average daily clearing on
ordinary days for the year 1902 amounting to £15,559,600, and on Stock
Exchange settling days to £38,961,800, while the grand total for the
year amounted to the record figure of £10,028,742,000.

Without going into detail as to the exact mode of procedure carried out
in the working of the clearing system, we will roughly delineate the
manner in which the transactions are brought to a head at the close of
each day’s work.

The clerks of each bank represented in the Clearing House make
out a summary at the end of each day, showing the amount of the
“articles” (cheques, bills, and drafts) which they have handed to the
representatives of other banks, and the amount of the articles handed
to them by other banks, and the difference of these two figures shows
the net amount which has to be received or paid as the result of the
aggregate of all their transactions.

All the clearing banks must keep an account at the Bank of England, and
a nominal account is kept at the Bank, called the “Clearing Bankers’
Account.” At the close of each day the amount owing by each bank, which
on balance has to _pay_, is debited to that bank’s account at the Bank
of England, and credited to the “Clearing Bankers’ Account”; while as
regards those banks which have to _receive_ on balance, the “Clearing
Bankers’ Account” is debited, and the account of those banks credited.
Thus while the Clearing Bankers’ Account at the Bank is automatically
balanced each day—as, in the aggregate, the credits of one set of
banks must be balanced by the debits of the other set—the whole of the
enormous total of transactions thus brought to one head is settled by a
few dozen entries in the books of the Bank of England.

Quite recently, and not before it was absolutely necessary, the
building of the Clearing House was largely extended, and the internal
arrangements reorganised, giving greater facility for the work carried
out there; and an innovation has been made in supplying Burroughs’
Automatic Adding Machines for the use of the clerks of the house. About
one hundred and forty of these machines are now in use, and though when
they are all at work the Clearing House is certainly not the quietest
spot in the City, yet the convenience and great economy of time and
labour resulting from their use cannot be fully appreciated by any
except those in daily touch with the work.[3]

[Footnote 3: Since the first edition of this book was published a new
clearing has been established, called the “Metropolitan Clearing.”
By means of this new system, cheques on various branch and private
banks situated within a certain radius of Lombard Street are collected
through the medium of the Clearing House and the head offices of the
various banks, and the total of such collections is brought into the
daily general settlement of the “House,” thus swelling the already
enormous figures. This system has certainly increased the efficiency
and unification of the Clearing House, and it has almost entirely
eliminated the well-known “walk clerk.”]

CHAPTER XII

FOREIGN EXCHANGES

In the course of this book reference has been made on several occasions
to the influence on the Money Market of the foreign exchanges. It
will be impossible in the course of a short treatise such as this to
enter fully into details and technicalities. Anyone wishing to obtain
a fuller explanation of the subject cannot do better than study Mr.
George Clare’s book entitled _The A B C of the Foreign Exchanges_.

Bills of exchange have been used in settling commercial transactions
since very early times. The Romans appear to have employed them to some
extent, but it is to the early Italian, and even more to the early
Jewish merchants, that we owe the development of the system. By the
fourteenth century the use of bills was firmly established, and their
form, and the laws and customs relating to them, were much the same as
at the present day.

Before inquiring into the effects which the foreign exchanges have on
our Money Market, we will state clearly what a foreign bill of exchange
really is. When a foreign bill is bought, what is it that is bought?
The transaction is simply this, that so much money is paid here for
the right to so much currency of a certain country to be delivered at
once, or at a given date, at a certain place, to the buyer of the bill
or to his nominee. The bill itself is merely an order to pay, and the
transaction resolves itself into bartering so much money of one country
for so much money of another country, to be delivered at a specified
place and time.

The value of the imports of the United Kingdom for 1901 was 522
millions of pounds, and of the exports 348 millions, together nearly
900 million pounds; and to understand how these huge transactions were
settled financially, it is necessary to have some knowledge of the
principles and customs of foreign exchanges. It is common knowledge
that we do not pay gold for our imports nor receive gold for our
exports. The imports are paid for mainly by the exports, the balance
being made up of sums due to us for interest on capital invested
abroad, for repayment of money invested abroad, and for freights,
etc. _Some_ gold, however, does enter into the settlement of these
transactions. This gold is sent from country to country, centre to
centre, and further on in this chapter we shall see the causes of these
movements and the effects arising from them.

There are certain technical terms used in connection with the foreign
exchanges which must be clearly understood before it is possible to
follow the various fluctuations in exchange rates, and the effect on
our monetary position which such fluctuations produce.

We will consider one or two transactions between London and Paris as
a practical illustration of these terms. Suppose a London merchant,
A, owes to a Paris merchant, B, 25,000 francs. How can he pay that
debt, and how much will it cost him to do so? He may either buy a
draft on Paris and remit it to B, or instruct B to draw on him, or he
may actually send gold. For the moment we will assume that he decides
to send gold. How many sovereigns will A have to send so that B may
receive the equivalent of the 25,000 francs due to him?

There are two ways of looking at a sovereign: one is that a sovereign
_is_ a sovereign, a coin of the realm, which everybody is pleased to
possess; the other is as a piece of the precious metal which, by our
English law, contains 7·988 grammes of standard gold—standard gold, by
our law, consisting of eleven parts pure gold and one part alloy. A
franc, or rather a twenty-franc piece, can be looked at in the same two
ways. According to French law, a kilo of gold, containing nine parts
pure gold and one part alloy, is coined into 155 twenty-franc pieces.
From these two sets of figures, by a simple calculation, we find that
the pure gold in one sovereign is equal to the pure gold contained in
25·2215 francs; that is, that as regards intrinsic worth, one sovereign
is equal to 25·2215 francs, and this exchange of 25·2215 (usually
regarded as 25·22) is what is known as the “Mint Par” between England
and France. A Mint Par represents the fixed intrinsic value of the
currency unit of one country, expressed in terms of another country,
which uses the same metal as a standard of value.

Thus when A sends gold to Paris to liquidate the debt, he must, on this
basis, send sovereigns containing in the aggregate just the quantity of
pure gold contained in 25,000 francs. This at the Mint Par of 25·22 is
about £991 5_s._ 6_d._ But A must also pay for carriage and insurance
of the parcel of coins, and these charges, we may assume, will amount
together to 10 centimes per £, which, on the remittance in question,
would amount to £3 18_s._ 7_d._ The total cost will therefore be £995
4_s._ 1_d._, which represents an exchange at the rate of about 25·12½.

Therefore if A liquidates his debt to B by sending gold, for each
sovereign expended he only obtains the right to 25·12½ francs in Paris.
This rate is called the “Export Specie Point,” or “Export Gold Point,”
between England and France, and when the Paris exchange falls to this
figure, we may expect gold to leave us for Paris, as gold is then as
cheap a mode of remittance as bills.

Let us now reverse the position and assume that B in Paris owes A in
London £1,000, and that he decides to send gold to pay his debt. What
rate of exchange will result from this transaction?

To pay in gold he will have to send such a number of twenty-franc
pieces that the gold in them shall be equal to the gold in 1,000
sovereigns; that is, as we have seen, 25,220 francs. But B will have to
pay for carriage and insurance at, say, an average rate of 10 centimes
per £1—that is 100 francs—making a total cost of 25,320 francs. This
is an exchange of 25·32, and is called the “Import Specie Point” from
France to England. When the exchange reaches this figure, gold should
leave Paris for London. As a matter of fact, gold does not always
come to us when the exchange is at this figure, as the Bank of France
interposes difficulties in the way of the export of gold. This has the
effect of preventing gold coming in any large quantities unless the
exchange rises above the Import Specie Point of 25·32. So we see that
the Mint Par of London with Paris is 25·22 nominally—the Import Specie
Point (gold to us) about 25·32, and the Export Specie Point (gold from
us) about 25·12½.

In the same way the Mint Par and the gold points can be calculated with
any foreign centre which has gold as the basis of its currency. With
silver using countries these points cannot be fixed. Gold is with them
a commodity only, and its value is measured in silver prices. With
us and other gold using countries the reverse is the case as regards
silver. Hence with silver using countries no common measure exists for
determining the rates.

It is important for those concerned with this business to have firmly
fixed in mind the Mint Par and Gold Points of London with Paris,
Berlin, and New York; as of all exchanges these three are by far the
most important, and have the greatest effect on our Money Market.

The figures relating to Paris have already been given. Those of Berlin
are:—

    Mint Par 20·43 (marks to a sovereign).
    Import Gold Point about 20·52.
    Export Gold Point about 20·33.

As with France, the export of gold from Germany is hindered by the
Reichsbank. That institution, on the other hand, places facilities at
the disposal of importers of the metal. For this reason gold does not
come to us readily when the exchange rises to the figure at which we
should otherwise expect it to come, and conversely, gold frequently
leaves us before the rate has fallen to the nominal figure at which we
expect it to go.

    With New York the Mint Par is $4·866 to £1, or 49⁵/₁₆_d._ to $1;
    the Import Gold Point is $4·89½ to £1, or 49_d._ = $1;
    and the Export Gold Point is $4·83½ to £1, or 49⅝_d._ = $1.

When an exchange is between the Mint Par and the Import Gold Point,
it is said to be “for us,” or “favourable”; and when an exchange is
between the Mint Par and the Export Gold Point, it is said to be
“against us,” or “unfavourable.”

The reasons for these terms are apparent on giving the matter a little
consideration. If an exchange is tending to such a figure that gold
is likely to come to us, it is regarded as favourable, because if
gold does come, it strengthens the Reserve of the Bank of England;
and a strong Reserve means a low value for money here, which is
generally considered to be good for trade. The reverse applies to the
“unfavourable” exchange.

Having now arrived at an understanding of the terms Mint Par and Export
and Import Gold Points, we will consider how and why rates fluctuate
between these figures. As regards the merchants A in London and B in
Paris, we have so far assumed that they have settled their indebtedness
in gold. Such a mode of settling debts is unusual in international
transactions; the ordinary course for A to follow would be either to
buy a draft on Paris and remit it to B, or for B to draw a bill on A
and sell it.

If the aggregate of debts between England and France exactly balanced,
it can be assumed that in theory the exchange would stand at the Mint
Par, because the total amount of drafts for sale would exactly equal
the demand. But amid the multitudinous transactions of modern business
we never are in a position to know when the mutual transactions of
two countries balance, and the fluctuations in the rate of exchange
are primarily due to the relative degrees of urgency of buyers and
eagerness of sellers—to a question of supply and demand.

Let us suppose that as a result of the aggregate dealings between
France and England, France at one period owes us more than we
owe her. Now it will be apparent that in the settlement of the
transactions comprised in the aggregate, the merchants in France
will find a difficulty in procuring sufficient drafts to settle all
their indebtedness, and consequently there will be a likelihood of
some of the merchants there having to send gold and bear the cost of
remittance. Hence there will be competition among them to obtain what
bills are offering—demand will exceed supply—and rather than be forced
to send gold, buyers of drafts on London will be willing to pay more
for them than the face value represented; that is, they will be willing
to pay more than Mint Par.

For example, B in Paris owes A in London £1,000. He wishes to buy a
draft for that amount, and expects to pay only 25,220 francs for it.
He will find that there are many buyers who are competing for the
available drafts, and to secure a remittance he perhaps may offer
25,250 francs, that is, an exchange at the rate of 25·25. Possibly he
may obtain his draft at this price; but if buyers are urgent, sellers
will take advantage of the situation and raise their price still
further. If the demand continue, the price may be raised to such a
level that B will find that he can send gold without incurring extra
expense. When this level is reached, gold is likely to pass from Paris
to London.

Now we will suppose the contrary of this supposition; that is, that
England owes more to France than France to England. Under these
conditions a debtor in London will find a difficulty in procuring a
draft on Paris. He may try to procure it at the rate of 25·22 francs,
but he will find others competing for the available drafts, and he will
be forced to buy at a lower rate of exchange, say 25·17. Competition
will result in further reductions, until a point is reached when it is
as cheap to send gold and pay the cost of transmission; that is, when
the rate falls to about 25·12½.

Thus though one sovereign is always equal to 25·22 francs, coin for
coin, yet the price of bills expressed in these coins will vary within
certain limits according to demand and supply.

The exchange in London on Paris, or any other centre, will always
tend to keep approximately level with the exchange at that centre on
London. As an illustration, let us take an extreme case. Suppose
we quoted Paris at 25·20 and Paris quoted us at 25·30. A foreign
banker in London, on seeing these quotations, would wire to his
Paris correspondent to draw on him for, let us say, £1,000 and sell
the draft, which would realise 25,300 francs. At the same time he
would draw on his Paris friend for 25,300 francs and sell the draft
in London, for which, at the rate of 25·20, he would receive £1,004
nearly. The Paris correspondent would be cleared, as he has drawn and
sold a draft for 25,300 francs, and he has paid a draft drawn on him
for the same amount; but the foreign banker in London has received
£1,004, and only has to provide £1,000 to meet the draft drawn on
him, leaving a profit of £4. He would not be the only one to perform
this little operation, however, and the combined action of all such
arbitrage dealers would promptly level quotations.

We will now turn our attention from theories to some actual facts,
and examine how the business in foreign bills is conducted in London.
The usual meaning of the term “Bourse” or “Exchange” is a place
where merchants assemble to transact their business. We have our own
famous Royal Exchange, although nowadays it is hardly famous for the
meetings of merchants. It is a building which has survived its original
purpose, but it is of interest as being an historic relic of the place
where the foundation of our great commercial supremacy was laid.

In the early part of the sixteenth century the London merchants met
at regular times at some rendezvous in Lombard Street to transact
their business. As their transactions and the number of the merchants
represented increased, inconvenience arose, and in 1564 Sir Thomas
Gresham offered to erect a suitable building for the merchants’ meeting
house if the City would provide the site. This offer was accepted,
and the land where the Royal Exchange stands was purchased by a
subscription of the citizens—a Mansion House fund. The edifice was
duly built, and opened for business in 1571 by Queen Elizabeth. It was
unfortunately destroyed by fire in 1666; rebuilt, and again destroyed
in 1838. The present building was then erected, dating 1844, and the
late Queen Victoria attended in state to open it, as is commemorated in
one of the pictures exhibited in the building. The opening of the first
building by Queen Elizabeth is the subject of another of these pictures.

The merchants in various trades used to assemble in groups, in corners
and round the various pillars of the building; but it very soon became
too small for this purpose, and as the various groups waxed bigger and
wealthier, they gradually deserted the building and erected exchanges
of their own, such as the Stock Exchange, Coal Exchange, Hop Exchange,
Metal, Wool, Corn, etc., exchanges. At the present day the Exchange is
used only by the money merchants and a few dealers in some of the less
important industries who occasionally meet there in the afternoon.

The money merchants hold their meetings in the Royal Exchange on
Tuesdays and Thursdays, which days are called “post days.” This term
is a survival of the times when the foreign mails were despatched only
twice a week.

The principals of the great foreign banking houses and a few brokers
are the only persons who attend “’Change.” As a result of the business
then effected and the negotiations entered into, certain rates of
exchange are arrived at as the ruling rates of the day. After the
meeting the brokers publish a list of these rates, which is called
the “Course of Exchange.” A specimen “Course of Exchange” is here
appended:—

                       LONDON COURSE OF EXCHANGE
                     TUESDAY, SEPTEMBER 8TH, 1903
    ---------------------------------+---------+---------------------
                                     |         | PRICES AS NEGOTIATED
                                     |         |      THIS DAY.
                                     |  TIME.  |---------+-----------
                                     |         |   FROM  |    TO
                                     +---------+---------+-----------
    Amsterdam, Rotterdam, etc.       | Short   |  12·06½ |  12·07¾
      Ditto                          |3 Months |  12·3¾  |  12·4½
    Antwerp, Brussels, etc.          |    ”    |  25·37½ |  25·42½
    Paris                            | Cheques |  25·17½ |  25·18½
      Ditto                          |3 Months |  25·32½ |  25·37½
    Marseilles, Lyons, etc.          |   ”     |  25·32½ |  25·37½
    Zurich, Basle, etc.              |   ”     |  25·35  |  25·40
    Hamburg, Berlin, and German Bank |         |         |
      Places                         |   ”     |  20·58  |  20·62
    St. Petersburg                   |3 Months |  24¹⁵/₁₆ |  25¹/₁₆
    Moscow                           |   ”     |  24¹⁵/₁₆ |  25¹/₁₆
    Vienna, etc.                     |   ”     |  24·17½ |  24·22½
    Madrid                           |   ”     |  34¼    |  34½
    Other Spanish Bank Places        |   ”     |  34¼    |  34½
    New York                         | Demand  |  48·6½  |   48·7[4]
      Ditto                          | 60 Days |  48¹¹/₁₆ | 48¹⁵/₁₆
    Rome and Italian Bank Places     |3 Months |  25·40  |  25·45
    Lisbon and Oporto                |   ”     |  42     |  42⅛
    ---------------------------------+---------+---------+-----------

[Footnote 4: This quotation is for £10, and is not now in use. The
present mode of quotation is for dollars to the £ only—as 4·87.]

The rates quoted in the table indicate the number of foreign coins
given for one sovereign, with the exception of those on Spain,
Portugal, Russia, and the United States. For Spain the quotation is the
number of pence given for the peso, for Portugal the number of pence
for a milreis, for Russia the number of pence for a rouble, and for
America the number of pence for a dollar.

In London all rates are quoted _as they are quoted at the foreign
centres on London_, with the exception only of Spain, where London
quotes so many pence to the peso, while Spain quotes piastres to the
£1; Russia, where we quote so many pence to the rouble, and Russia so
many roubles to £10; and New York, where we quote so many pence to
the $1, while New York quotes so many dollars to the £1. With regard
to the New York quotation, however, London now as frequently uses the
quotation of dollars to the £1 as pence to the dollar.

Except when otherwise stated, the rates quoted in the “Course” are for
bills having three months to run, or in technical language, they are
the rates for the “Long exchange.” Rates quoted as “cheque,” “sight,”
or “demand,” are known as the “Short exchange.”

The rates of the Long exchange are arrived at as follows: We will
suppose that a merchant in London has to pay a debt in Paris of 25,000
francs, and for simplicity we will assume that the sight rate on Paris
is 25. If the merchant buys a sight draft on Paris for 25,000 francs
and remits it to his creditor, it closes the transaction, and the
remittance has cost the merchant £1,000.

But if instead of buying a sight draft at this rate he bought a three
months draft, what would be the result? When he sent this draft to his
friends in Paris they could not credit him with it at once, and so
close the transaction, as they would then be out of their money for
three months. So the parties in Paris to whom the draft was remitted
would discount it with their banker, and credit the London merchant
with the _proceeds only_. He would also be charged for a bill stamp,
and in addition, he would be liable for any contingencies which might
arise, interfering with the due payment of the bill, until payment was
actually made. So instead of the London merchant being credited with
25,000 francs, he would only be credited with 25,000 francs _minus_
discount at the French market rate, say 4 per cent. for three months =
250 francs, and _minus_ the bill stamp = 12·5 francs, that is 24,737·5
francs. Moreover, he would be under liability on his endorsement of
the draft until its maturity, and for this he ought to receive some
consideration. Consequently when the London merchant buys his bill,
if a three months bill is offered him instead of a sight draft, he
demands an allowance in the rate sufficient to cover interest at the
foreign market rate, plus stamp, plus allowance for contingencies. And
the rate for such a transaction will be arrived at as follows: First,
as the presumed sight rate is 25, to this must be added three months’
interest at the foreign market rate (say at 4 per cent.) on 25, which
is ·25, bill stamp at ½ per mille must also be added, say ·01¼, and an
allowance for risk which we may take at ·00¾. Thus the rate for such a
three months draft would be 25 + ·25 + ·01¼ + ·00¾ = 25·27.

Now at this new rate, or “long rate” of 25·27, let us suppose our
merchant to buy and remit a draft of 25,270 francs for £1,000. His
friends in Paris will then credit him with the full amount of his debt,
and a little more, being the allowance for risk.

It must be distinctly borne in mind that adding interest, etc., to the
“sight” rate to obtain the “long” rate only holds good when we are
dealing with rates quoted in _foreign currency_, and that when we deal
with rates quoted in _sterling_ we must deduct these allowances from
the short rate instead of adding them.

It will be noticed that two prices are quoted opposite each centre in
the “Course of Exchange.” These prices do not represent the figure at
which bills can be bought and sold, like Stock Exchange quotations. As
regards the “long” rates, the two prices indicate the price ruling for
different classes of paper, _bank_ paper and _trade_ paper. Bank bills
will discount abroad at a lower rate than commercial bills, as with us;
and therefore in calculating the long exchange on bank bills a smaller
amount has to be allowed for interest than with commercial bills.
Hence, of these two quotations the lower rate is for bank paper, and
the higher rate for trade paper.

As regards the two rates for short quotations, the explanation is that
“demand” bills are understood to mean any draft having up to ten days
to run. A bill which is not due for ten days is, of course, not worth
as much as a draft due at once. The standing of the parties to the
draft also affects the quotation to some extent.

There is still to be considered the important question of how the
Foreign Exchanges are connected with our Money Market, and how they
influence and are influenced by the Bank Rate and the value of money in
England.

It is evident that if the market rate of discount for first-class
paper is higher in London than in Paris, a French banker will earn
more interest on his money if he buys London bills than if he buys
Paris bills. But when dealing with foreign bills, “exchange” comes into
the question as well as interest. This further factor introduces an
element of speculation which is not present with the home article.

Suppose, for example, the Paris market rate to be 3 per cent. and the
London rate 4 per cent.—the cheque exchange standing at 25·22 and the
long rate in Paris of bills on London consequently at about 24·97. A
banker in Paris buys a three months bill _on_ London for £100, paying
for it 2,497 francs. When the bill falls due it can be sold as a
sight draft. If the _short_ exchange remains at 25·22 it will realise
2,522 francs, showing 25 francs as the interest for three months on
the amount invested, that is at the rate of 4 per cent. per annum, as
against 3 per cent. per annum, which is the rate which would have been
earned in France for these three months. If when the bill matures the
short exchange is, say, 25·12, for the £100 draft the interest will be
15 francs only, or at the rate of 2½ per cent. per annum. On the other
hand, if the short rate is 25·32 when the draft matures, the interest
will be 35 francs, or about 5½ per cent. per annum.

Thus there is a wide fluctuation in the interest that may be earned
on a foreign bill. When the French exchange is low, and the rate of
interest ruling in London is above that ruling in Paris, there is
consequently an incentive for a French banker to invest in English
bills; for not only is the rate of interest greater than would be
obtained in Paris, but the chances are in favour of a rise taking place
in the rate of exchange, which will, of course, be to his advantage.

From this it follows that when our _interest_ is _above_ that ruling at
foreign centres, and the exchanges on us are _low_, a heavy investment
demand from continental bankers sets in, in order to take advantage,
not only of the higher interest obtainable in London, but also of the
possible profit on the exchange. This demand will not only have the
effect of stopping a further fall in exchange rates, but will often
send them in the opposite direction. If, from some cause or other, the
rate remains low, the continental holders of our bills will keep them
until they become due and so earn the higher interest. If the rate
rises to any extent, certain holders will at once begin to sell, as
they will have earned their interest for the time they have held the
bills, and seeing their way to secure a certain profit on the exchange,
they think it well to take this, and employ their money in some other
centre which promises more profit.

We can now appreciate the value and importance of this investment
business. When our interest is high and exchanges low, it indicates
that we are having more or less of a money squeeze at home, and the low
exchanges threaten an export of gold, which would make matters worse.
The continental banker then steps in for his own profit, and benefits
us at the same time, as, by his action, he tends to support or raise
the exchange, and thus to stop the outflow of gold. He also places some
of his capital at our disposal, as continental bankers, when investing
in foreign paper, usually only buy first-class bills. There is only
a limited amount of these bills for sale on the Continent, and so
the continental bankers adopt the course of instructing their London
representatives to buy what they require, and remit funds to cover the
purchase.

When exchange rates rise and point to a possible inflow of gold to
London, continental bankers cease their investments and realise their
holdings, thus stopping the rise of rates and, for the time at any
rate, the possible inflow of gold.

Thus the investment business in foreign bills acts really as a pendulum
to the exchanges, steadying the fluctuations and having a most
important influence on the export and import of gold.

We are now in a position to understand how it is that a change in our
Bank Rate is so clearly allied with the question of foreign exchange.
If we find that exports of gold threaten us, which may reduce our
“Reserve” below the figure at which it is desired to maintain it, the
Bank of England will increase its official rate. If this increase in
rate is then followed by the Market, or, if the Market lags behind,
steps be taken to compel it to follow suit, we hold out the advantage
to the continental bankers of an increased interest over what they
can earn at home, and a prospective profit through a possible rise in
exchange. Then, in all probability, their purchases of London bills
will gradually have the effect of raising the rate and stopping the
outflow of gold.

CHAPTER XIII

THE MONEY ARTICLE OF THE PRESS

The Money Article of the daily Press is regarded so much as a part
of the usual information provided for the public, that few readers
pause to consider the large amount and far-reaching character of the
information which is supplied therein: information gathered from all
quarters of the globe—sifted, summarised, and placed before the public
in a concise form. The amount of practical and useful knowledge derived
from a perusal of Money Articles depends entirely upon the reader.
Without some knowledge of the Money Market and financial matters
generally, the articles resolve themselves into a mere record of the
rise and fall in price of various commodities—money, bills, stocks,
and shares. With knowledge, however, these articles may be said to
represent to the reader a mirror, in which the affairs of the whole
world are pictured, though in a somewhat mercenary manner.

The genesis of the Money Article was about the year 1825. Previous
to that date a few of the leading papers published a list of the
prices of the stocks and shares then dealt in on the Stock Exchange,
but practically nothing further than the list appeared. About the
above-mentioned year, however, public interest in Stock Exchange
matters received a great stimulus, and the editors of certain papers
then commenced to devote more attention to the matter than they had
previously done. As the subject gradually became of more and wider
interest to the public at large, the papers devoted more and more
attention to it. The advent of limited liability companies enormously
increased the number of persons interested in Stock Exchange matters,
and the Money Article then became an important and integral part of
every paper of standing. At the present time, as previously noted,
the Money Article really reflects the financial matters of the whole
world, and any event which causes a change in the natural or political
conditions of any country the world over is sure, sooner or later, to
have its effect noted in one of the paragraphs of the Money Article.

There are two ways of reading a Money Article. The first, and probably
by far the most popular method, is merely to glance at, or “skip
over,” the information respecting the condition of the Money Market,
the price of money, the discount of bills, foreign exchanges, Bank
Return, etc., and to turn to the supposedly more interesting subject of
the fluctuations in prices on the Stock Exchange, and especially of the
prices of those securities in which the reader has a pecuniary interest.

The other method of reading these articles, and certainly the most
profitable method, is to read thoughtfully _all_ the information, and
to note the connection of cause and effect in relation to the various
items mentioned; in fact, to read the articles as a homogeneous whole,
and not simply to dip into them here and there; and the reader who so
reads his Money Article will be surprised to find what an insight into
the present and, to a certain extent, the future financial position he
acquires thereby.

The City Editor of a paper has a vast amount of information to supply
to the public, and a limited amount of space in which to present
that information, and the result is that these articles are usually
decidedly “terse”—not to say abrupt—in style: a fact is briefly stated,
and the probable effect of such fact is added, though no information is
given as to why such an effect should result from such a cause, which
is left to the reader to fathom out as best he can.

Money Articles may be roughly divided into two sections: the first
deals with the Money Market proper, the foreign exchanges, gold
movements, etc., and the second with Stock Exchange matters. These two
sections may appeal to somewhat different classes of the community; but
the connection between them is so intimate, and they act and react on
each other so frequently, that they cannot be dissociated. The first
section of the article more nearly affects the subject-matter of this
book than the latter portion, which is amply dealt with in another book
of this series.

Money Articles almost invariably commence with a paragraph which
is really a general summary of the events which have transpired in
the Money Market on the day of writing. The first paragraph, though
consisting of only a few lines, often teems with information to those
that can read it aright. Nearly all the subjects with which it deals
have been dealt with in the course of this book, and therefore it will
only be necessary to enumerate them here.

The condition of the Money Market is first noted in reference to
the supply and demand of “call” and “short money,” as between the
bill-brokers, the banks, and the Bank of England; the rates are quoted
at which money was lent at “call,” “overnight,” or for “short periods,”
and mention is made of any transactions in this market entered into by
the India Council. Passing on from this, any facts are mentioned which,
on the day in question, _have_ had, or on the following day _will_
have, any important bearing on the position of the short loan fund.
These items comprise reminders of the falling due of any instalment
on large new public issues, the payment for or repayment of Treasury,
India, or Corporation bills, etc.

The question of discount rates is then dealt with, and a note is
usually made as to whether or no the banks are “working”; that is,
whether the banks are buying bills from the brokers, or refraining from
so doing. The paragraph then usually concludes with a reference to
exchange rates.

The article then proceeds to note any import or export of gold which
has taken place on the day in question, and any variation which may
have occurred in the price of gold. Importers of the metal know that
they can always sell their gold to the Bank of England at the minimum
price of £3 17_s._ 9_d._ per standard ounce, and therefore the price
never falls below this figure. If there is any foreign demand for gold,
the exporters will bid above this price, and secure what is offering,
unless the Bank of England raises its buying price, as it sometimes
does in times of stringency. It is of interest to note the origin of
imports and the destination of exports of gold; and, at the same time,
to follow the movements in the exchange rates of London with these
places of origin or destination. The action of the Bank of France and
of the Reichsbank in retarding exports will frequently become visible
in these figures, as will also the action of the latter institution in
facilitating imports of the metal into Germany. A note will at times
appear that so much gold has been sold for Germany at such a price, and
if the foreign exchange table in the same article be referred to, it
will often be found that this gold has left us for Berlin in spite of
the exchange being well above the nominal export specie point.

The expression that “the Bank bought so much gold to-day” appears to
cause difficulty in some minds, in that some people cannot understand
how the Bank benefits by buying gold. “What can be the use of the
Bank buying gold?” they say. “It must give gold for gold, which won’t
alter its position in the slightest!” This matter is a very simple one
really, and explains itself with a little thought. The usual procedure
of dealing with an import of gold is for the importer, or his agent, to
hand the gold to the Banking Department of the Bank of England, which
_credits_ him for the value of the gold. Of course, if the importer
were then to draw out this amount in gold the Bank would not be
benefited, but this does not happen under any ordinary circumstances.
The Banking Department passes the gold on to the Issue Department in
exchange for notes, and the extent to which the Bank benefits is shown
in the ensuing Return, when “Other Deposits” will be increased, owing
to some account having been credited for the gold received, and on
the other side of the account “Notes” will be so much higher; that
is, the Reserve and Ratio will both be increased. The figures of the
Issue Department will be increased on each side by the amount of gold
received and notes issued.

The question of silver is then dealt with in the article. This question
is not now of such importance as was the case a few years ago, when
the bi-metallic theory was so much to the fore. The position of silver
is very different now from what it was up to quite recent years. For
many centuries previous to about thirty years ago, the price of silver
as compared with that of gold was about as 15 is to 1; in other words,
an ounce of silver was worth about 5_s._, and an ounce of gold about
75_s._ to 80_s._ This state of things has now entirely disappeared,
however, and we find silver fluctuating rapidly and extensively in
price—having in the course of the year 1902 been as low as 21⁹/₁₆_d._
per ounce.

The reason for this fall in the price of silver is not far to seek;
supply has largely exceeded demand. Several countries which had been
large consumers of silver for currency purposes have, during the last
thirty years, thrown over their silver system and adopted gold in its
place, as a standard of value. This, of course, largely decreased the
demand for the metal, and in addition it threw a large amount of silver
out of circulation and on to the market. The supply of the metal has
also been largely increased, owing to extensive discoveries of new
mines, and to improvements in the method of mining, which have made it
possible for mines of a low grade of ore to be worked at a commercial
profit.

The paragraph in the article relating to silver is of chief interest
to those who have commercial transactions with silver using countries,
and also to those who are interested in companies whose business is
conducted in such countries. These companies earn their revenue in
silver, but pay their dividends in gold, in addition to often paying
for much of their material in gold. Therefore the rate of exchange
between such countries and London, which rate is of course subject to
the price of silver, is of material interest to the holders of such
stocks.

The price of the Mexican dollar is frequently noted in the “silver”
paragraph of Money Articles. Mexican dollars circulate freely on the
coast of China, in spite of many efforts which have been made to
supplant them. When the dollars arrive in China the merchants who
receive them put their “mark” on each coin, which thereafter circulates
freely; the merchants’ “marks” being looked on by the populace as
a proof of genuineness. In London, Mexican dollars are dealt in by
weight, and as they are coined in silver nine-tenths fine, their price
should consequently be a little less per ounce than the price of bar
silver; but demand sometimes exceeds supply, when the price of the
coins rises somewhat considerably above their intrinsic worth.

The Indian price of silver is also noted in the article: this price
refers to the number of rupees which have to be given for one hundred
tolas of silver; the tola being an Indian weight equal to ·375 ounce,
and the silver being about nine-tenths fine.

Up to this point the information given in Money Articles is of
daily occurrence, and attention is then turned to various items of
intelligence according to the day of the week or month. For instance,
the day after ’Change is held in London, a paragraph is inserted
dealing with the various alterations which have been established
in exchange rates since the previous post day, and the “Course of
Exchange” is usually printed, more or less in full. On Friday mornings
the Bank Return is published, and the City Editor adds his own notes
on the same, calling attention to, and explaining as best he can, any
alterations which have occurred since the previous return. On Friday
also, the return of the Bankers’ Clearing House makes its appearance.

On Wednesdays and Thursdays the traffic returns of various railways
are published. These returns are of interest as exhibiting the state
of trade throughout the country as a whole, as well as the position
of individual lines. In considering railway traffics, and comparing
them with previous results, care must be taken to bear in mind any
alteration which may have taken place in the price of labour, coal,
or material; as an increase in gross profit may be quite offset by an
increase in any one of these items, and _vice versâ_. It is also of
interest to note that an increase or decrease in the _gross_ earnings
of a railway, the chief business of which consists of passenger
traffic, has far greater effect on the _net_ earnings than does a
similar increase or decrease have on a line the chief business of which
consists of goods traffic. Passenger trains run whether they are full
or empty, and therefore an increase in the takings from passengers
means, very largely, so much more net earnings; whereas goods trains
usually run only when traffic offers, and therefore extra traffic means
considerable extra expense. In considering the probable results of
railways doing business in silver using countries, the influence of the
price of silver must not be overlooked.

On the seventh day of each month the Board of Trade publishes a return
showing the exports, imports, and re-exports of goods for the previous
month. This return is summarised in the following day’s Money Article,
and when this is read in conjunction with the Clearing House Return and
the Traffic Returns, the three together form a very good barometer of
the state of our trade. In studying the figures of the Board of Trade,
and comparing them with previous returns, it is important to remember
that _values_ only should not be considered, but _quantities_ as well
as _values_; we may have imported considerably more of a certain
commodity, but paid less for it, or imported less and paid more.

In many articles two tables relating to the foreign exchanges appear
daily; one of these is a table of the rates of interest for money
ruling in the principal financial centres of the Continent, and
the other is a table of the exchange rates prevailing in foreign
centres for drafts _on_ London. The first of these tables is of use
as providing one of the factors necessary to calculate the “long”
rate from the “short” rate; it is also of use as being a guide to the
comparative value of money in various centres, and thereby indicating
the likelihood of foreign bankers investing their funds in London
bills, or of withdrawing such investments. The second table indicates
the movements in rates which are taking place on the Continent
between our “’Change” days, and it is of use to those persons who
have considerable sums to pay to, or receive from, foreign centres.
As was noted in the chapter dealing with the foreign exchanges, the
rates between any two given centres always keep nearly on a level, but
there is at times a slight variation. Advantage can be taken of this
variation by persons having transactions with such centres, and this
table affords necessary information in the matter.

The foregoing items of news comprise the Money Market portion of the
article, and attention is then given to the Stock Exchange portion.
This portion is divided into several paragraphs, each one of which
deals with a special and well-recognised class of stock, or “market,”
as it is called.

First we have the paragraph dealing with the “gilt-edged market.”
This market comprises securities of, or guaranteed by, the British
Government (Consols, local loans, etc.), Bank stock, and colonial
and municipal issues. The whole of this market is largely under the
influence of the price of money, and, at present, of excess of supply
over demand. The supply of Government stocks has, of course, been
increased owing to the requirements of the late war, which led to a
further issue of Consols, in addition to the creation of the War Loan
and Transvaal Loan. In addition, a very large amount of colonial and
municipal loans has been offered to the public during the course of the
last few years. These issues have been far in excess of the demand,
with a consequence that the market has been glutted with securities
of this class, resulting in an all-round depression of prices. This
depression has been deepened by the knowledge of the many new issues
which are only awaiting a favourable opportunity to be launched on the
public.

The next paragraph in most Money Articles deals with the “Foreign
Market”—Spanish, Turks, Russians, Tintos, etc. In this section
securities are dealt with which have a more or less international
character, and in which dealings on foreign stock exchanges have often
considerably more importance than the dealings on our own Exchange.
Hence this section is not so much under the influence of the price of
money as it is under the influence of the attitude and condition of
foreign centres, especially those of Paris and Berlin.

Home railways are then dealt with, and then American rails, which
latter are, of course, largely under the influence of New York and its
magnates. Then comes a paragraph dealing with colonial and foreign
rails, which are largely under harvest influences, and the internal
condition of the country in which they do their business. Then follow
paragraphs on the miscellaneous and industrial sections, and lastly a
paragraph on the mining market.

The miscellaneous and industrial section is chiefly notable for the
large number and different character of the securities there dealt
in, comprising the shares of banks, breweries, insurance and finance
companies, iron, coal, and steel concerns, waterworks, etc., besides
the shares of numerous manufacturing and catering companies. Much
speculation exists in certain classes of these shares, but it is
a noticeable fact that the issues of many of the sound industrial
concerns have withstood the recent severe wave of depression far better
than have many securities which are supposed to be of a considerably
higher status.

Following this there usually appear dividend announcements, reports
of company meetings, and a number of miscellaneous notices. Although
these notices mostly explain themselves, and are of interest only to
persons connected with them, yet one or two items which appear from
time to time are of somewhat more general interest. It is of frequent
occurrence to find in this portion of the article a notice that
“tenders for Treasury Bills will be received at the Bank of England on
such a date.”

Treasury Bills constitute a Money Market and not a Stock Exchange
security, and they belong to the unfunded debt of this country. They
were first issued in 1877, and were promptly recognised, both in our
own and foreign markets, as being bills of the highest possible class.
These bills are issued from time to time to suit the necessities of
the Government; they have a currency of three, six, nine, or twelve
months, and are of great assistance to the Chancellor of the Exchequer
in enabling him to regulate the finances of his department.

Treasury Bills are always issued by the tender system, and those
persons who wish to acquire some of these bills must make their
application through a London banker. The tender must state how much per
cent. will be given for such an amount of bills, and those who tender
at higher figures will, of course, obtain an allotment in preference to
those tendering at lower ones.

Besides Treasury Bills, several other classes of security are, from
time to time, issued by tender; for example: India bills, London County
Council bills, Corporation and Colonial stock. This system of issue is
not a popular method so far as the general public are concerned, as it
is not properly understood; and when the public do endeavour to obtain
investments in this manner, they often make ludicrous and expensive
mistakes by tendering at a figure far above what would easily obtain an
allotment.

Another item of interest which appears among these “notices” is the
notice of issue of stock at _fixed prices_. Such notices appear plain
on the face of them; but, on comparing the price of issue with the
market price of similar stocks, care must be taken not to overlook the
fact that very frequently certain allowances have to be taken off the
nominal price of issue. These allowances are in respect of the stock
being only paid up by instalments, while interest is often paid on
the full nominal amount; and often, in addition, a full six months’
interest is paid only three or four months after the issue; besides
which the stock can frequently be paid up in full at any time, under
rebate. Such considerations as these should always be borne in mind, as
they have a material bearing on the _real_ price of issue.

The article concludes with a list of “closing prices,” and of “business
done” on the Stock Exchange on the day in question. The closing prices
are estimates only, supplied by certain members of the House, and
though affording a very good guide to the course of prices, they cannot
be relied upon for any out-of-the-way securities—actual dealings in
which may be impossible at the prices quoted.

From this brief examination of the usual contents of a Money Article,
the large amount of information embodied in such becomes apparent,
and also the necessity for a certain amount of technical knowledge to
enable a reader to grasp, and make full use of the information there
placed at his service.

CHAPTER XIV

CONCLUSION

In the course of this book we have briefly surveyed the rise and
development of the banking system of England. We have studied
the establishment and growth of the Bank of England, the gradual
elimination of the private banker, and the wonderful development of
joint-stock banking, and we have noted the causes which led to London
becoming the financial centre of the world, and also the various
factors which constitute our Money Market.

From a weak beginning we have seen our system of finance develop into
a mighty machine; but we have seen that, although it is mighty, it is
a machine of very delicate construction, and that it needs the most
careful attention on the part of those connected with its working. A
breakdown in one of its parts may mean wreck for the whole concern,
and bring with it, not only unparalleled individual distress, but
actual danger of an acute form to the whole nation.

The weakest spot of our system arises from the custom of the cash
reserves of the bankers being kept with the Bank of England, that is,
the one-reserve system. The total deposits held by the banks of the
kingdom may be roughly estimated at one thousand million pounds, and
practically the whole of this vast sum is repayable in cash on demand.
But banks conduct their business on the law of averages, assuming that
the demands for cash will be met by the deposit of cash—that what
is paid out to one set of customers will be paid in by another set;
and, while keeping sufficient till money to tide over the variations
of demand and supply from day to day, they maintain no other reserve
of cash, beyond the balance at the Bank of England,—or with a London
agent, through whom such balances are in effect passed on to the Bank
of England. Thus the Bank of England is the reservoir from which all
banks expect to be able to draw cash in time of need.

When we turn to the Bank Return, what cash do we find is retained to
meet such a heavy contingent liability? In the figures of the “Return”
given in chapter vii., the “Reserve” stands at about twenty-five
million pounds only; and with regard to this Reserve, it must be
remembered that the Bank is peculiarly open to foreign demands in
addition to home demands. Such a reserve is slender, to say the least
of it, and the strengthening of the “Reserve” to a figure more in
keeping with our increased liabilities is, or should be, constantly
before the authorities who have the control of our banks. This matter
will have to be faced some day, and the longer action is delayed the
more difficult will it become to grapple with it.

Various schemes for increasing our reserve have been put forward from
time to time: one suggestion was that banks should retain a safety
reserve of gold in their own keeping; another that a bankers’ bank
should be established, to hold the reserves of other banks in place
of the Bank of England; a third, that each bank should maintain a
larger balance with the Bank of England, on the understanding that that
institution should increase its reserve in respect of such increased
balances. These schemes have each their advocates and opponents, but
with each the result to the banks would be a loss of profit, for each
would involve more money lying idle. This loss of profit is at the root
of the whole difficulty.

This brings us to consider the question of competition among bankers,
which at present is very keen, and which quite conceivably may lead to
dangerous results unless kept within reasonable bounds.

The tendency of the time is towards the absorption of the smaller and
weaker banks of the country by the large joint-stock banks. In itself,
this is not an undesirable feature, in that it places the banking
system, as a whole, on a sounder footing. Another feature is the
establishment of branch offices throughout the length and breadth of
the land. This gives facilities for capital to flow readily from one
part of the country where it may be in excess, to another where it is
in demand.

The joint-stock banks, however, are keen competitors among themselves,
new branches being established wherever the possibility of securing new
business exists, or where existing connections are threatened by the
incursions of some other bank.

This multiplication of banking offices is of decided convenience to
customers; it saves them the trouble of sending long distances to pay
in, or to draw wages, etc.

In the race for business, however, rates are cut down to attract
custom, and risks are perhaps undertaken which would not be entertained
if competition were not so keen. These risks may not be large
individually, but collectively they may amount to a large sum. They
possibly tend to lock up resources in _one class_ of security, which,
as we have seen, is a source of danger. This is especially the case in
new and growing districts, where much accommodation is asked for on
the security of house property, and for the purpose of developing new
estates. There is, in fact, a growing tendency at the present day to
transfer to banks business which formerly went to building societies;
and if this system is encouraged, it is likely to result in a large
portion of a bank’s advances becoming of a fixed nature and unavailable
in case of need.

Mr. F. E. Steele, in a lecture recently delivered to the students of
the London Chamber of Commerce, called attention to another danger
resulting from undue competition. He said:—

    “There is another phase of competition which should be
    touched upon. This phase I do not remember to have seen
    specifically dealt with in treatises on banking. I refer
    to the growing tendency on the part of banks to ear-mark,
    for the benefit of particular depositors, securities
    which should form a free asset; a security to the general
    body of its depositors. You will find now in some balance
    sheets, either in the investment column or as a footnote,
    that a certain portion of the bank’s investments are held
    for public bodies, such as county councils, borough
    councils, corporations, etc. In order to secure the
    accounts of these bodies the banker hypothecates to them
    certain securities, such as Consols, which would otherwise
    be held for the benefit of its depositors in general.
    This tendency to tie up assets which should be free
    should be narrowly watched by the public, and carefully
    controlled by bankers. That it should be resorted to in
    some cases seems inevitable. It is done by some of the
    best and soundest banks. But it is a course which should
    be resorted to as little as possible.”

In conclusion, we will turn from the question of the Money Market
itself to the army of individuals who spend their lives in the service
of the various institutions forming the Money Market. By far the
largest number of these individuals are connected with our various
joint-stock and private banks. It is commonly thought that the life
of a bank clerk is an easy one. Jerome K. Jerome, in his amusing book
_Three Men in a Boat_, in referring to the occupation of his friend
George, says, “He sleeps in a bank from nine till four, when they wake
him up and put him outside.” Common ideas, however, are frequently
not quite correct, and though certain members of the fraternity, who
happen to be situated in country and suburban districts, do not suffer
from overwork, yet as regards those connected with London and the large
centres of industry, their life is an arduous one,—often tedious in
its sameness,—the hours of work are not short, and the remuneration,
although adequate, is not generally on the scale that some time ago
was popularly believed to be the happy lot of the bank clerk. Still,
one’s life is what he makes it, and the idea embodied in Napoleon’s
saying—that every soldier carried in his knapsack a marshal’s bâton—is
equally true of the banking profession.

Every junior on entering the service of a bank has before him the
prospect of ultimately rising to occupy a position of importance and
respect, even to the position of general manager of his bank, if he
so equips and conducts himself as to be fit for and worthy of such
promotion.

The facilities and inducements to self-improvement placed before bank
clerks of the present day are much greater than in bygone times. Many
classes are held and lectures given dealing with banking subjects.
Examinations are held, and many banks recognise and reward the success
of their clerks at these tests of knowledge. Technical knowledge,
however, is not everything; common sense, good judgment, tact, and a
cool head are also necessary in order to become a successful banker or
financier, but these qualities are of much more value when combined
with sound and good technical knowledge.

Greatness is not thrust upon any bank clerk, but it is in the power of
all, if they will, to achieve it, to a greater or less degree.

APPENDIX

THE GOLD RESERVE

Since the remarks concerning the Gold Reserve were written (chapter
xiv.) much interest has been aroused in the matter by a suggestion made
by Mr. J. Herbert Tritton, the President of the Institute of Bankers.

At the opening of the last session of the Institute (November, 1903)
the President, in his inaugural address, after referring to many
current and important topics, passed on to the subject of the visible
gold reserves, and made the following novel suggestion. By Mr.
Tritton’s courtesy his remarks on this matter are here reproduced in
full.

“VISIBLE GOLD RESERVES

“The ever-pressing question of this country’s visible reserves of
gold, quiescent during the war, is again attracting attention.
Theoretically, everyone would admit that larger reserves of gold in
this country are desirable; many would go further and say necessary;
but any, even the smallest, step in the direction of action is at once
barred on the ground of expense. At whose cost is the reserve to be
held? £15,000,000 at 3 per cent. is £450,000 a year, and this must
almost inevitably come out of somebody’s pocket. Bank of England
stockholders and ordinary bank shareholders would be mulcted, or
would think they were, to the extent, say, of a second income tax
of 1_s_. in the pound on their dividends. Of course, the question
is, in its essence, of national importance, but the Treasury of this
country never allows itself to be influenced by considerations of this
character—nor, indeed, have the English people for the last fifty
years expected either Government help or Government interference in
their financial or commercial affairs. Pardon the interjection, but
I, for one, say long may this country be not only self-reliant, but
free; free to trade as each member of it shall choose, unshackled and
uninfluenced by Government restrictions or Government encouragements!
We may, perhaps, cherish a faint hope that the new Chancellor of the
Exchequer may realise that he has taken with him from the Post Office,
liabilities as a banker, £144,605,088 in respect of Post Office Savings
Banks, and finds in his new office a further sum of £52,505,081 in
respect of Trustee Savings Banks, making together £197,110,169, liable
to be repaid in gold; and realising this as a banker, may be less
obdurate than his predecessors. But it would not be wise to expect
much from Downing Street: if the thing is to be done we must do it
ourselves. That a solution of the question is supremely necessary I am
convinced, however great the initial difficulties may be; and that it
is not beyond attainment if the best energies and the best brains of
the banking community be devoted to it, I am also persuaded. Mr. R.
H. Inglis Palgrave gives in his new book, _Bank Rate and the Money
Market_—a book which every banker should possess and read—page 104, the
following table:—

                                                         Proportion per
                                                           cent. of
           Capital, Deposits,     Average Reserve,        Reserve at
            and Circulation.      Bank of England.     Bank to Liability
                                                             as of
                                                          all Banks to
                                                           the Public.

       1872    £584,000,000            £12,100,000              2·06

             Deposits, Current
          Accounts and Circulation
          of all Banks publishing
              accounts in the
               United Kingdom
                   were:—

       1894    £721,400,000            £25,800,000              3·58
       1895     794,600,000             29,900,000              3·75
       1896     797,700,000             34,600,000              4·33
       1897     816,400,000             25,100,000              3·07
       1898     838,300,000             22,900,000              2·73
       1899     869,300,000             21,200,000              2·44
       1900     889,600,000             21,400,000              2·41
       1901     888,100,000             24,046,000              2·71
    [5]1902     904,100,000             24,166,000              2·67

[Footnote 5: _Banker’s Magazine._]

“The Bank of England reserve, which constitutes the only real reserve
of the country, is shown here in its true light from our present
point of view. A further outside reserve of, say, £15,000,000 would
only, it is true, serve to restore the proportion to that of the year
1896, but it would ensure the present maximum becoming, in effect,
the future minimum, and here would be a great gain in an extra sense
of security in troublous times. Should a gold panic at any time
seize upon the public, it would matter little whether the ratio of
Bank of England reserve to the aggregate liabilities were 2·50 or 5
per cent., suspension of cash payments would ensue. A credit panic,
as distinguished from a gold panic, can usually be assuaged by a
suspension of the Bank Act and an overissue of bank-notes. A further
object of an increased gold reserve is that not only the periodic and
well-recognised, but the unexpected and perhaps heavy withdrawals of
gold may be met without recourse to violent measures such as those to
which the market is too often subjected. If this were clearly seen to
be not only the intention, but the practical working of the fund, an
objection which, I admit, is of great weight would be fairly met, and
minor objections would almost disappear.

“The objection to which I refer is this. Gold is meant to circulate,
not to be hoarded, and any proposal permanently to withdraw such an
amount as £15,000,000 from circulation and, as it were, entomb it again
in the bowels of the earth, stands self-condemned. No such entombment
is suggested, as far as I know, but the formation of a fund for use—a
fund which, on occasions, would pass into circulation—international,
if not national—and would have a steadying effect on the pulse of the
Empire, the Bank of England rate. How can we set about securing it? Let
us glance at the tabulated bank balance sheets of the country. From
which of the items on the assets side could such a sum be withdrawn?
Loans and discounts? No. Investments? No. Buildings? No. Money at call?
No. Cash in hand and at Bank of England? This, _ex hypothesi_, is the
item to be increased. The reasons I need not give, but it appears
tolerably plain that no plan involving a permanent diminution of any
item on the asset side would meet with a favourable reception from
practical men. Is it possible, if these items cannot be conveniently
decreased, to obtain the amount by a fresh creation of credit, an
addition to loans and discounts, and an equivalent addition to the
other side of the account? Please understand that I am considering the
case quite apart from the Bank of England.

“Here I am directly and once again challenging critics, who do not
agree in my view of the non-elasticity of the Money Market, to show
how, in their view, the alleged elasticity of the market may be
utilised to produce a fund of £15,000,000. My contention is that only
by the increase of the note issue or by increase of capital can it be
reached. Suppose the bankers were authorised to issue £15,000,000 of
£1 bank-notes. How could these be kept in circulation unless they were
legal tender? Of what use would they be if they took the place of gold
in our tills? This plan, under which alone could credit be created,
would be futile to attain our end. There remains only the creation of
new capital, unless our friends, whom I am challenging, and to whom we
are looking to give us a discussion which cannot fail to be interesting
under the auspices of Mr. A. C. Cole, who has undertaken to read a
paper on ‘Notes on the London Money Market,’ can show us some adequate
alternative. If each bank of the kingdom increased its paid-up capital
20 per cent. by an issue of a Three per cent. Preference Gold Stock,
the fund could be attained. The proceeds should be devoted in each
individual case to the acquisition of a corresponding amount of gold,
in addition to present holdings, and this gold should be deposited
at the Bank of England, but not merged in the Bank figures, so as to
stand week by week intact, and shown under a separate heading in one
aggregate, though, of course, the absolute property of each bank in
detail. Carefully thought out arrangements whereby, under a joint
committee of the bankers and the Bank of England, whenever occasion
arises, a percentage of each holding should be transferable to the
credit of each bank in the books of the Bank of England should be
made, the gold thus forming an addition to their reserve until again
withdrawn and added to the Bankers’ Gold Fund.”

Needless to say, this suggestion, coming from such an authority,
caused much comment in monetary circles, and was generally received as
a valuable contribution to the various schemes having for an end the
settlement of this important matter.

In certain quarters, however, the scheme was held to be an
impracticable one; and at a subsequent meeting of the Institute of
Bankers, Mr. Cole, a director of the Bank of England, spoke as follows:—

    “As regards the proposal to increase the capital of the
    banks, my reply is that the floating of a loan in this
    market of £15,000,000, or of £100,000,000, will not add
    one single golden sovereign to the bankers’ cash reserves.

    “We can only increase our stock of gold in this country by
    getting it from abroad. To do that we must offer to the
    holders of gold abroad something that they will take in
    exchange for their gold.

    “A loan in this market to increase the capital of the
    banks, to be subscribed for by the public who have
    deposits with them, is merely transferring a liability
    now existing on the part of the bankers to the public,
    from their depositors to their shareholders. The only way
    the bankers can increase their cash in hand, or balances
    at the Bank of England, is by following the method now
    pursued, namely, calling in their short loans so that the
    market has to borrow at the Bank of England. To put their
    position permanently on a sounder basis they must agree
    that instead of calling in their loans temporarily, they
    must all keep permanently larger balances at the Bank of
    England. Then the gold reserves of the country will be
    increased, provided that the Bank of England maintains
    its usual ratio of cash to liabilities. Taking that as
    45 per cent.—the average proportion for the last twenty
    years ending 31st December, 1903, has been 46·6 per
    cent.—a permanent increase of £15,000,000 to the bankers’
    balances would increase the gold reserve of the country by
    £6,750,000, and bring the average holding of the Bank of
    England in the Banking and Issue departments combined up
    to about £40,000,000. The reason for desiring to have a
    rather larger stock of gold at the Bank is that the export
    then of a few millions is of relatively less importance.
    But we do not want more than is requisite for the easy and
    safe working of our system. To sit on a hoard of unused
    gold is to do away with the advantages of banking. What
    is requisite is for this country to retain the power of
    attracting gold when it is required. Neither the system
    of banking nor the bankers can give it that power, for it
    is dependent, not on them, but on the successful business
    energy and activity of the nation. Of course, in order
    to attract and retain here the amount of gold mentioned
    above, the Bank of England must adjust its rate to
    circumstances, but with the increasing supplies of gold,
    actual and prospective, a reasonable rate is likely to
    suffice.”

These remarks caused some discussion, during which it was pointed out
that under Mr. Tritton’s proposal the banks would collectively form a
gold fund of £15,000,000, at a cost to themselves of £450,000. Under
Mr. Cole’s proposal, however, for the banks to increase their balances
at the Bank of England by the sum of £15,000,000, the extra gold
held in the country would only be increased by the sum of £6,750,000
(according to the proportion of the reserve held to public liabilities,
which has been 45 per cent. on an average for the last twenty years),
while the Bank would make a considerable profit from the remainder of
the increased balances—a profit earned entirely at the expense of the
banks.

It was also pointed out that the requisite gold could be acquired by
offering a slightly higher price for it, thus retaining imports of the
metal which would otherwise be bought up by exporters. Finally, it was
stated by one speaker of eminence in the banking world, that in his
opinion the matter was not one for the banks to deal with alone, the
additional gold not being required for the sole benefit of the banks,
but for the security of the community at large.

The matter here rests for the present, but when it has to be settled,
as doubtless it must at some time, the ideas and suggestions contained
in these discussions will probably become of importance.

INDEX

    Active circulation, 59
    Advances to customers, 92, 100
    Amalgamations, 80, 164
    Arbitrage, 131

    Bank Act of 1844:
      Main provisions of, 29;
      suspensions of, 35, 36, 38
    — of France, 127, 149
    — paper, 139
    — post bills, 69
    — rate, 74, 139, 143
    — return: the first issued, 32
    Bankers’ balances, 65, 90
    Banking department, 62
    Berlin: specie points, 128
    Bill-brokers, 51, 90
    — — guarantees, 108
    Bills under discount, 92, 100
    Board of Trade Returns, 154
    Branch banks, 80, 164
    Buying gold, 149

    Call and short money, 50, 94, 147
    Cash payments: suspension of, 12
    ’Change, 134
    Circulation: active, 59
    Clearing House, 79, 115
    — — Returns, 119, 154
    Closing prices, 160
    Competition, 163
    Continental investment in London bills, 140
    Country clearing, 117
    Course of exchange, 135

    Deficiency bills, 70

    Exchange: favourable or unfavourable, 128
    — long, 136
    — short, 136, 139
    Exchequer bills, 51, 92
    — — closure of by Charles II., 5
    Export specie points, 126

    Favourable exchange, 128
    Fixed price of issue, 159
    Floaters, 111
    Fluctuations of exchange rates, 129
    Foreign bankers, 46, 54, 110, 139

    Gold movements, 123, 142
    — reserves, 162, 169
    Goldsmiths, 4, 19

    Import specie points, 127
    Indian Government, 52
    — price of silver, 152
    Investments, 91, 97, 99
    Issue department, 57
    — at fixed price, 159
    — by tender, 158

    Joint-stock banks, 19, 21, 49, 77

    Limited liability, 79, 145
    Liquid assets, 93
    Lombards, 3
    Long exchange, 136

    Mexican dollars, 152
    Money market, 47
    Monopoly of joint-stock banking, 10, 15, 23, 76

    New York specie points, 128

    One-reserve system, 67, 162

    Par of exchange, 125
    Paris: specie points, 127
    Post days, 134
    Premises, 93-100

    Rediscounting, 110
    Reichsbank, 34, 128, 149
    Reserve, 73, 143
    — capital, 83
    — funds, 83, 104
    Royal Exchange, 132

    Short exchange, 136, 139
    — loan fund, 49, 113
    Silver, 150
    Specie points, 126
    Stock Exchange, 52, 96, 156
    Suspension of cash payments, 12
    — Bank Charter Act, 35, 36, 38

    Tender system, 158
    Till money, 60, 90
    Tower of London: seizure of moneys, 4
    Trade bills, 106, 139
    Traffic returns, 153
    Treasury bills, 51, 148, 158

    Unfavourable exchange, 128

    Visible gold reserves, 169

    Ways and means, 70
    Window dressing, 95

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    =RAILWAYS.= By E. R. MCDERMOTT, Joint Editor
      of the _Railway News_, City Editor of the _Daily News_.

    =THE STOCK EXCHANGE.= By CHAS. DUGUID,
      City Editor of the _Daily Mail_,
      Author of the “Story of the Stock Exchange,” etc., etc.

    =MONOPOLIES, TRUSTS, AND KARTELLS.= By F. W. HIRST.

    =TRADE UNIONS.= By G. DRAGE.

    =THE BUSINESS OF INSURANCE.= By A. J. WILSON,
      Editor of the _Investors’ Review_,
      City Editor of the _Daily Chronicle_.

    =THE ELECTRICAL INDUSTRY.= By A. G. WHYTE, B.SC.,
      Editor of _Electrical Investments_.

    =LAW IN BUSINESS.= By H. A. WILSON.

    =THE MONEY MARKET.= By F. STRAKER, Fellow of
      and Lecturer to the Institute of Bankers and Lecturer to the
      Educational Department of the London Chamber of Commerce.

    =THE SHIPBUILDING INDUSTRY.= By DAVID POLLOCK, M.I.N.A.,
       Author of “Modern Shipbuilding and the Men Engaged in It,”
       etc., etc.

    =THE BUSINESS SIDE OF AGRICULTURE.= By A. G. L. ROGERS, M.A.,
      Editor of the last Volume of the
      “History of Agriculture and Prices in England.”

    =THE BUSINESS OF ADVERTISING.= By C. G. MORAN.

    =THE COTTON INDUSTRY AND TRADE.= By S. J. CHAPMAN.

    =CIVIL ENGINEERING.= By T. C. FIDLER.

    =THE IRON TRADE OF GREAT BRITAIN.= By J. S. JEANS.

    =THE BREWING INDUSTRY.= By JULIAN L. BAKER, F.I.C., F.C.S.

    =THE AUTOMOBILE INDUSTRY.= By GEOFFREY DE HOLDEN-STONE.

    =MINING AND MINING INVESTMENTS.= By A. MOIL.