It was within that London-centric system that Bagehot wrote. I shall be at once asked—Do you propose a revolution? He was always anxious, again, to impress on those about him that a subject could not be studied with the help of figures and accounts alone. If the banks are bad, they will certainly continue bad and will probably become worse if the Government sustains and encourages them. Indirectly, bankers will be benefited or injured with the country in which they live; but practically, and for the purposes of their daily life, they have no need to think, and never do think, on theories of currency. If a 'branch,' such as the National Provincial Bank opens in an English country town, were opened in a corresponding French one, it would not pay its expenses. They thus developed that side of banking which was free from legal restriction and at the same time gave the commercial community the most perfectly safe, elastic, and adaptable form of currency that the world has yet seen.
Of course if the Act of 1844 really were, as is commonly thought, the primum mobile of the English Money Market, the source of all good according to some, and the source of all harm according to others,—the extreme irritation excited by an opinion on it would be no reason for not giving a free opinion. Most people seem to think they can just cherry pick some of his claims to justify their own beliefs or policies, and leave aside the other ones. Spelin Bauer, Charles William Dabney, Louis Grossman, William Torrey Harris, Frank Egbert Bryant, Joseph Villiers Denney, Fred Newton Scott, Albert S. Since Bagehot wrote, the process that he foretold of the growth and predominance of the joint stock banks has gone so far that they have not only almost obliterated the old private firms, but have taken out of the Bank of England's hands the business of providing currency and regulating the London money market, except on special occasions. So anyone who reads it probably already interested in finance. It speaks mainly of four sets of persons—the Bank of England, Joint Stock Banks other than that Bank, private bankers, and bill-brokers; and I am much afraid that neither will altogether like what is said of then. Here the proportion is 6.
Private London bankers did indeed issue notes down to the middle of the last century, but no joint stock company could do so. Deposit banking is of this sort. Bagehot never fully recovered from a bout of he suffered in 1867, and he died in 1877 from complications of what was said to be a cold. Certainly not the bill brokers. For more than a century after its creation notwithstanding occasional errors the Bank of England, in the main, acted with judgment and with caution. There has never been a distinct resolution passed by the Directors of the Bank of England, and communicated by them to the public, stating even in the most general manner, how much reserve they mean to keep or how much they do not mean, or by what principle in this important matter they will be guided. Our statesmen, it is true, are much more blamed, but they have generally served a long apprenticeship to sharp criticism.
But a creditor who takes fright will not wait, and if he wants bullion in a hurry he must come to the Bank of England. If free banking was so effective, why did it disappear? This efficient and instantly-ready organisation gives us an enormous advantage in competition with less advanced countries—less advanced, that is, in this particular respect of credit. No advances indeed need be made by which the Bank will ultimately lose. That London and Liverpool should be centres of East Indian commerce is a geographical anomaly, which the Suez Canal, it was said, would rectify. Inevitably the shareholders of the Bank of England will dislike this great difference; more or less, they will always urge their directors to diminish as far as possible the unproductive reserve, and to augment as fall as possible their own dividend. So great a difference in the management must cause, and does cause, a great difference in the profits.
Perhaps this is an exaggeration; but confined, as of course it was meant to be, to civilised Governments, it is not much of an exaggeration. In fact, the whole plan would seem to an Englishman of business palpably absurd; he would not consider it, he would not think it worth considering. The country where deposit banking is most diffused is Scotland, and there the original profits were entirely derived from the circulation. It is impossible to arrive at definite figures on this subject because the banks do not, in their published statements, give any clue to the details of which their cash holding is composed—how much of it is coin and how much consists of Bank of England notes. The holders of the cash reserve must be ready not only to keep it for their own liabilities, but to advance it most freely for the liabilities of others. The banking history of England has been the same, though we have no country bank accounts in detail which go back so far.
And such a constant difference indicates, I conceive, that the two are not managed on the same principle. But they need not attend to that council unless they think fit; they are appointed to watch over the national interest, and, in so doing, they may disregard the murmurs of the 'régents' if they like. Another book he wished to see written was an account of the differences in the administrative systems of England and , by which he had been greatly impressed, the differences not being in detail, but in fundamental idea and in form, so that no judicial or other officers in the one were represented in the other by corresponding functionaries. It assumes that what works most easily when established is that which it would be the most easy to establish, and that what seems simplest when familiar would be most easily appreciated by the mind though unfamiliar. Bookplate of University of Illinois business and finance professor Emerson Gammack, author of a well-known book on insurance.
And we may well think this a great deal, if we examine the position of other banks. Secondary citations are strictly prohibited. Since most of the profit on the fiduciary issue goes to the Government the difficulty of introducing any change tending towards its abolition is redoubled; but as a matter of theory it is safe to say that a majority of well-informed City opinion is now in favour of making the Bank of England note a pure and simple bullion certificate. On the contrary, much more cash exists out of banks in France and Germany, and in all non-banking countries, than could be found in England or Scotland, where banking is developed. It is due, not to any action by the Bank of England, but to an external process arising out of the development of the other joint stock banks and the rapidity with which they have multiplied offices, sowing their banking crop all over the country. I started out believing God for a nicer apartment than I had. He attended , where he studied mathematics and in 1848 earned a in intellectual and moral philosophy.
But: We are also adding some footnotes and a second Appendix provided later that is, after Bagehot's death in 1877 : specifically, material from the 12th Edition 1906 and from the 14th Edition 1915. For this I have several reasons,—one, that if you say anything about the Act of 1844, it is little matter what else you say, for few will attend to it. If all those creditors demand all that money at once, they cannot have it, for that which their debtors have used, is for the time employed, and not to be obtained. His observations on finance are often cited by , most recently in the wake of the which began in 2007. Very commonly the panic extends as far, or almost as far, as the bank or banks which hold the reserve, but does not touch it or them at all. Fast-paced and highly-charged, it is a hotbed of financial activity whose impact is felt not just nationally, but globally.