Chapter II.: The English Bank Restriction.

In the year 1795, the currency of the British Islands consisted of the notes of the Bank ol England, the English country banks, the Scotch banks, the Bank of Ireland, and the Irish country banks, and of coin. By the monopoly clause of the charter of the Bank of England, no banking firm consisting of more than six partners could issue demand notes in England. Strong joint stock banks were therefore illegal, but tradesmen of every grade set up as “ bankers,” and issued notes. These were the “ country banks.” They were not chartered banks, but private bankers who issued notes. The Scotch system was a perfectly free one. There were three great chartered banks. The others were joint stock companies and free partnerships, and they conducted their business solely on business responsibilities. After some unlucky experiments in fancy banking, during the last century, they settled down to solid, conservative methods of operation. They meet with encomiums on every hand, and they deserve them, but the reason why they deserve them is lost sight of by those who fix their attention on the system. The system is the best conceivable; but it involves one indispensable condition of success. It requires vigilance, sagacity, science, and moderation on the part of the bankers. The freer any system is, the more it requires these characteristics. The Scotch banks have succeeded because their managers have possessed these qualities. The same system, on a “ paper basis,” or managed by unreasoning and ignorant avarice, is a short road to ruin. The Bank of Ireland and the Irish country banks were very similar in their organization and relations to the English banks.

The circulation of the Bank of England, in February, 1795, was £14,017,510; its specie,.£6,127,720. The circulation of the English country banks at this time is not known, no statistics having been collected. It was estimated in the parliamentary debate of 1811 to have been from four to six millions. The amount of specie in circulation in 1795 was estimated in the same debates at from twenty-five to forty millions. The Lords' Committee, in 1819, gave this estimate for the circulation before the Restriction:

Lord Liverpool estimated the coin, in 1797, at thirty millions; Mr. Rose, at forty millions; Tooke, after reviewing the evidence, thinks it was at most twenty-two and a half millions.