HISTORICAL SKETCH OF THE PRIN of this interest, which, in the sequel, CIPAL BANKING COMPANIES OF EU- became the Bank of Venice. This ROPE. * The disorders which universally arose in rude ages from the diminution of the quantity of standard bullion contained in the coins of different countries, are now repro duced in another form, and often to a still more ruinous extent, in the depreciation of their paper currency. 66 ANONYMOUS. might probably be effected in the following manner:-As the interest on the loan to Government was always paid punctually, every registered claim in the books of this office might be considered as a productive capital; and these claims, or the right of receiving this annuity, must have been soon transferred, by demise or cession, from one person to another. This practice would, in the sequel, suggest to holders of stock the simple and easy method of discharging their mutual debts by transfers on the office books, and as soon as they became sensible of the advantages to be derived from this method of accounting, bank money was invented. The Bank of Venice was essentially a deposit bank. Though established without a capital, its bills bore at all times an agio, or premium above the current money of the republic. The invasion of the French in 1797 occasioned the ruin of this establish ment. WHEN the public attention has been so much excited by the discus sions relative to the Bank of England, the following historical sketch of the principal banking establishments throughout Europe will perhaps not be unacceptable to our readers. With some slight variations, it is principally extracted from the Cours d'Economie Politique" of M. HENRI STORCH, published at Petersburgh in 1815, but we have added a variety of particulars. In many points of view this sketch will be found to be extremely interesting. It shews, by an almost universal experience, the ruinous consequences which have invariably resulted from permitting either the government or private individuals to tamper with the currency; while, by shewing that the paper of the different Continental Governments constantly fell in value as its quantity was increased, and rose in value as its quantity was diminished, it affords a practical proof of the truth of the theory which teaches, that by sufficiently limiting the quanto about 9 per cent. less than their tity of paper money, its exchangeable value may be raised to any conceivable extent. We have annexed a short notice of the Bank of England; and expect to be able, on an early occasion, to give our readers the most satisfactory account that has hitherto appeared of the Bank of France. BANK OF VENICE.-This was the most ancient bank in Europe. Neither the date nor the circumstances which led to its establishment are exactly known. Historians inform us that in 1171 the Republic being hard pressed by war, levied a forced contribution on the richest of its citizens, giving them in return a perpetual annuity at the rate of 4 per cent. An office was established for the payment *From the Scotsman. BANK OF AMSTERDAM.-This bank was founded in 1609, on strictly commercial principles and views, and not to afford any assistance, or to commix with the finances of the State. Amsterdam was then the great entrepot of the commerce of the world, and of course the coins of all Europe passed current in that city. Many of them, however, were so worn and defaced as to reduce their general average value mint value, and, in consequence, the and giving a credit on its books, or "bank money," for the deposits. The Bank of Amsterdam professed not to lend out any part of the specie deposited with it, but to keep in its coffers all that was inscribed on its books. In 1672, when Louis XIV. penetrated to Utrecht, almost all who had accounts demanded their deposits at once, and they were delivered to them so readily, that no suspicion could be left of the fidelity of the administration of the Bank. Many of the coins then brought forth bore marks of the conflagration which happened soon after the establishment of the Bank, at the Hotel de Ville. This good faith was maintained till about the middle of last century, when the managers secretly lent their bullion to the East India Company and to Government. The usual oaths of of fice" were taken by a religious magistracy, or rather by the magistracy of a religious people, that all was safe; and the good people of Holland believed, as an article of their creed, that every florin which circulated as Bank money, had its metallic constituent in the treasury of the Bank, sealed up and secured by oaths, honesty, and policy. This blind confidence was dissipated in December 1790, by a declaration that the Bank would retain L. 10 per cent. of all deposits, and would return none of a less amount than 2500 florins. 66 Even this was submitted to and forgiven. But four years afterwards, on the invasion of the French, the Bank was obliged to declare that it had advanced to the States, and the East India Company, more than 10,500,000 florins, which sum they were deficient to their depositors; to whom, however, they assigned these claims. Bank money, which previously bore an agio of 5 per cent. immediately fell to 16 per cent. below current money. This epoch marked the decay of an institution which had long enjoyed an unlimited credit, and had rendered the greatest services to the country. The amount of the treasure of the Bank of Amsterdam, in 1755, was estimated, by Mr Hope, at 33,000,000 of florins. BANK OF HAMBURGH.-The Bank of Hamburgh was established in 1619, on the model of that of Amsterdam; its stock originally consisted of German crowns, called specie dollars. In 1770, in order to obviate the inconvenience arising from the receipt of bad coins, it was arranged that the Bank should receive bullion as well as coin; and it soon afterwards ceased keeping any account in coined money. The Bank now receives specie in ingots or foreign coins, as bullion only, which renders the money or paper if this Bank the least variable standard of any in Europe. Its standard is 47 of pure metal, 1 of alloy. Those who deposit pay less than one-half per cent. for the security, and one to one and a half per cent. for refining; when they re-demand their deposit in the proper standard, which few do, but for a profit on the metal beyond this charge, preferring at all other times the Bank money. The Bank also lends on the deposit of Spanish dollars, by giving its receipts payable to bearer; the charge for this accommodation is only 3s. 4d. per month, or 2 per cent. per annum. The loans are limited to three months, when the deposit is retired, or the loan renewed. The Bank of Hamburgh is the best administered of any in Europe; its business and accounts are the most open and best known to the public. Its governors are responsible, and frequently renewed. When Marshal Davoust retook Hamburgh, (4th of November 1813,) he seized on all the treasure he found in the Bank, amounting to 7,500,000 marcs banco: part of this treasure has been restored by France. BANK OF VIENNA-Was founded by Maria Theresa, in the seven years' war. The Empress issued simple "bills of credit," for 12,000,000 of florins, ordering a proportion of the taxes to be receivable in this paper only. This regulation, by obliging those who had taxes to pay to purchase bills, gave them at first a value superior to metallic currency. But the necessities of Government having led to their excessive issue, gold and silver were gradually withdrawn from circulation. At length, in 1797, (a curious coincidence,) the Bank became altogether unable to pay its paper in specie on demand, and was relieved from this obligation, while at the same time its notes were ordered to be received as legal money. Their depreciation soon followed, but was accelerated and exaggerated by the expedient of creating a copper coinage, of little value; 100 lb. of copper being coined into 2400 pieces, and stamped as of the value of 600 florins, which were made the standard. During the subsequent years of the war, the Government, fearing to add to the already exorbitant weight of taxation, and without credit, had no other resource but to add to the quantity of paper in circulation. In 1810, above 1,060,000,000 of paper florins had been issued, and a florin of silver was then worth no less than 12 or 13 florins in paper. The depreciation could be carried no farther, without risking the safety of the State; and in February 1811, the Government declared it would issue no more; and ordered the current paper money to be liquidated at ONE-FIFTH part of its nominal value, in a new paper money, called "Bills of Redemption," to be retired by a sort of sinking fund formed by the sale of ecclesiastical property. The misery and destruction of property that was thus occasioned may be conceived, but cannot be described. Though the new paper, in point of intrinsic worth, was no better than the former, the reduction of its quantity alone served to assist its currency and support its value. In May 1812, 100 florins silver would exchange for only 186 of this paper, while the former had fallen below 12 to 1. From a statement, by Mr Haldimand, of the value of Austrian paper money in 1815, 1816, 1817, and 1818, printed in the Appendix to the Lords' Report on the State of the Bank of England, it appears, that in the month of April 1815, 100 silver florins were worth 489 paper florins; and that on 12th December last, 247 paper florins were worth 100 silver ditto. The value of paper has been gradually increasing since 1816. BANK OF STOCKHOLM,-One of the most ancient, dates from 1657, and was established by the Government. Its capital was 300,000 specie-crowns. It issued notes bearing interest, and payable to bearer. It borrowed at 4 per cent. and lent at 6. It was so well administered, that at the death of Charles XII. its capital had augmented to 5,000,000. Another Bank was afterwards established, and soon united to the first. They now made advances to the Government and to the Nobility, increa sed their paper to 600,000,000 of crowns of copper, or about L. 8,000,000 of our Sterling. This issue was excessive. The Bank paper could not be liquidated even in copper, and fell to the 96th part of its nominal value. In 1762 the Government owed the Bank more than 80,000,000 of silver crowns, or above L. 3,000,000 Sterling. Gustavus III. for a time, by strong and wise measures, remedied much of this disorder, but destroyed at last his own labours, by making war on Russia: from this time the country has been deluged by a paper-money without value, and has been so completely stripped of metallic currency, as to be obliged to use notes of the low value of sixpence! BANK OF COPENHAGEN-Was founded by royal authority in 1736, with a capital of 500,000 crowns: in 1745, in the tenth year of its establishment, it applied to Government to be relieved from the obligation of discharging its notes in coin: it continued, however, to issue paper, and to make advances to the State, and to individuals. The public suffered; but the proprietors gained; their dividend was so large, that the shares of the Bank sold for three times their original deposit. In 1773, when the Bank had issued 11,000,000 of paper crowns, the King returned their deposits to the shareholders, and becoming himself sole proprietor, carried this issue to 16,000,000. Specie immediately disappeared, and Government was obliged to issue paper notes of a single crown. The evil being come to its acmê, a remedy was attempted. In 1791, all further emission was forbidden, and a progressive liquidation ordered. A new Bank, called the "Species Bank,” was created, with a capital, in shares, of 2,400,000 specie crowns. This Bank is independent of the government; and the directors, sworn to be faithful, are, in all that relates to its affairs, relieved formally from their oath to the Sovereign. Its issue of paper was limited to one and ninetenths (less than double) of the specie in its coffers. The former Bank was to retire annually 750,000 of its paper crowns. By these means it was calculated to relieve Denmark in less than fifteen years from its oppressive load of paper money; but the event did not justify this expectation. When once the gangrene of a forced State paper money has seized on a country, neither the Government nor individuals can extirpate this "caries" of the public economy, by mild and slow operations.. Only a decided, prompt, and radical measure can relieve a country sinking under an increasing depreciation. In 1804, the new notes lost 25 per cent. compared with the currency in which they were payable; the notes of the old Bank were at a discount of 45. In October 1813, the depreciation was such, that 1800 crowns in paper were offered for one crown of silver! BANK OF RUSSIA.-Russia, too, has her paper money. On the 29th of December 1768, the Empress Catherine, at the commencement of the war against the Turks, established the Bank of Assignats, designed to issue notes of bills payable to bearer. In the manifesto, these notes were declared, in general terms, and very indistinctly, "to be payable in current money." This doubt, however, was soon dispelled. In the first months of their issue it was ascertained that they would be discharged in copper only, in imitation of the Bank of Stockholm. But this was as impossible as it was improper. The value of copper was too small and too variable, and the difficulty of its transportation rendered it impracticable for this purpose. Only gold or silver could be the standard. The notes, therefore, soon ceased to be notes of credit, and became merely a State paper money. This paper money, how ever, by its convenience, the moderation of the Government in its issue, and the regulation, that it should be received instead of specie in all the Government Treasuries, bore a value above its nominal par with silver. In the first eighteen years, only 40,000,000 (equivalent then to nearly L. 5,000,000 Sterling) were in circulation, and no note for less than twenty-five roubles, or about L. 5, at the exchange of that time. This li mitation of quantity, with the real advantages of paper currency, made the assignats so agreeable to the public, that, until 1788, they preserved an agio, or premium, of five per cent. above copper money, and silver had not more than three per cent. premium in its favour. In 1774, at the peace of that date, paper was on a par with silver. In 1786, the Empress created a Loan Bank, and increased the mass of assignats to 100,000,000, engaging to carry it no farther; but the wars with Turkey, Sweden, Poland, and Persia, occasioned the failure of this engagement in the year 1790. At her decease, in 1796, the assignats in circulation amounted to about 160,000,000 of roubles. This increase was too great and too sudden, and necessarily led to depreciation. In 1788, paper was at discount; in 1795, it had sunk nearly one-third, and metallic currency had disappeared so much the more, because paper notes of 10 and of 5 roubles were issued, and all payments made in paper or copper. The progress of the depreciation will be rendered more evident by the following statement, which we extract from another part of M. Storch's work. Account of the Number of Paper Assignats in circulation in Russia from 1786 to 1814 inclusive, and of the variations in their value as compared with silver. Since the peace, the Russian Government has made every possible exertion to lessen the quantity of paper money. From a Report of the Finance Minister, M. Gourieff, dated 9th April last, it appears that about 118 millions of assignats have already been withdrawn from circulation, and it is estimated that in the next two years an additional 100 millions will be cancelled. This has been partly effected by funding the assignats, and partly by exchanging them at certain rates for gold and silver roubles, of which there has been of late a very extensive coinage. In consequence of the diminution of their number, the relative value of the assignats has advanced considerably; and the paper prices of all commodities have proportionally declined. BANK OF ENGLAND.-It will be seen from this sketch of the history of the principal continental banks, that their connection with their respective governments has been the radical defect of their constitution, and the real cause of the various disorders we have thus briefly detailed. The lending of large sums to government is a transaction altogether incompatible with the real nature of banking, and which could not fail to prove fatal to any company who were obliged to pay their notes on demand. If previously to a loan being made to government, the currency was sufficiently abundant, and paper on a par with gold, it is obvious that the additional supply of paper thus thrown into the market would sink its value, and there would be a run on the Bank for gold for exportation. Thus circumstanced, unless the bank had immense surplus funds which it could easily convert into cash, or bullion, it would stand an extreme risk of being obliged to stop payment, and would at all events suffer considerable embarrassment and difficulty. If a considerable amount of paper had been borrowed by government from a bank on long credit, without supposing its issue to have been in excess, it might nevertheless expose the establishment to great hazard. In the case of either real or imaginary dangers, arising from political or other causes, a run is always made on the banks; and if their funds are locked up, or not available, the consequences must inevitably prove fatal. Circumstances of this nature caused the crisis of 1797, and the Restriction Act. The issues of the Bank of England were not at that time super |