losses have not only absorbed the whole of their capital, but have required to replace them further demands to a large amount from their shareholders. In Scotland, these banks, if they could not be kept in the right path, would probably have been compelled to stop before they had wandered so widely. Banks, as we have seen, do sometimes fail in Scotland, but never under circumstances that shake the public confidence in the general banking institutions of the country.1

6. The confidence placed in the banks of Scotland by the public renders them less exposed to inconvenience during a season of pressure.

When a pressure takes place in England, the first objects of suspicion are the banks. People that have money in their banker's hands draw it out, and hoard it. The bankers, knowing that they are liable to these demands, draw in their funds, and make provision accordingly. Hence the capital of the country is rendered dormant at the time when it is most required to be in a state of activity. Banks that issue notes are more liable than others to these sudden demands. But no such feeling exists at present in Scotland. And should the Act of 1845 have the effect of inoculating the people with the love of gold, and by this means place the banks in the same position during a pressure as the banks of England, it must be regarded as a national calamity.

'The failure of the City of Glasgow Bank will immediately occur to the mind of every reader. This institution was brought down by a long course of unsound banking, culminating in fraud. But such faith had the people of Scotland in the banking institutions of their country, that, when the report of the accountants deputed to investigate the state of affairs of the bank was published a week or two after the stoppage, and when the unparalleled nature and extent of the calamity, and the grossness of the mismanagement, were seen, public confidence in the other banks never for a moment wavered.

On this subject we again quote from the letter of Mr. Bell :

"Nor are these benefits, great as they are, the only advantages which we have derived from our system of banking. Our one-pound notes connect and familiarize every artizan and labourer in the country with our banking establishments; and the implicit confidence in our paper currency thus created, and perpetuated by the general experience of the sufficiency of our banks, has on many occasions been remarkably illustrated. It is no exaggeration to say, that at this moment nine-tenths of the labouring classes of Scotland, if they had their choice, would prefer a one-pound note to a sovereign; and, as a consequence of this feeling of security, combined with a sense of the other advantages of the system, no one in Scotland can have forgotten the truly national stand, on behalf of our currency, which was made by rich and poor in the year 1825, when your English economists proposed to visit us with an injury similar to that which was in that year inflicted on England.

"With banking establishments thus pre-eminently possessed of national confidence, no mercantile convulsion has hitherto created any general run on our great joint-stock banks. It has been otherwise in England, where, in consequence of legislative enactments, the public have been taught to regard gold and silver as the only representatives of value. The bond of union between the banks and the mass of the people has thus been severed; and when a monetary crisis occurs, its consequences are incalculably more injurious. With us (though very rarely) runs have been occasionally made on particular banks, but it has been merely to withdraw a deposit from one bank to place it in another; or to exchange the notes of a suspected bank for the notes of one of our national joint-stock banks, the prevailing confidence in our paper currency remaining

unshaken. In this way the disposable banking capital or resources remain in the aggregate unchanged; whereas with you the run is for gold; and the coin thus withdrawn from one bank is not redeposited in another, but hoarded till the panic is over, by which means the entire banking resources of the country are involved in the consequences of the temporary disaster; and this, too, at the very time when these resources are most needed."

III.-Laws of the Currency in Scotland.

In Scotland the lowest point of the circulation is in March, and the highest in November. The advance, however, between these two points is not uniform-for the highest of the intervening months is May, after which there is a slight reaction; but it increases again until November, and falls off in December. The reason of the great increase in May and November is, that these are the seasons for making payments. The interest due on mortgages is then settled, annuities are then paid, the country people usually take the interest on their deposit receipts, and the servants receive their wages. There are frequently large sums transferred by way of mortgage. It is the custom of Scotland to settle all transactions, large as well as small, by bank notes-not by cheques on bankers as in London. It is remarkable that these monthly variations occur uniformly every year, while the amount of the circulation in the corresponding months of different years undergoes comparatively little change.

The circulation of Scotland is at its lowest point in the month of March, is higher in July, and reaches its highest point in November. In the corresponding months of different years there is but little deviation in the amount of the circulation. These facts prove that the circulation of Scotland does not produce any effect upon prices, nor, con

sequently, upon the foreign exchanges. It is hardly neces sary to adduce evidence in proof of the fact that the prices of commodities do not go on increasing from March to November in every year; and if they do not they cannot be regulated by the currency. This regularity in the cir culation shows that it must be governed by some uniform laws, arising from the local circumstances or habits of the country; and this, we think, will always be the case where the banks are passive, and permit themselves to be operated upon by the wants of the trade and commerce carried on in their respective districts.

Though the Act of 1845 does not appear to have had much effect on the laws of the currency, it has had an effect in other ways. It has required the Scotch banks to keep a larger amount of gold in their vaults.

It has also had the effect of inducing the banks to increase their charges, and to decrease the granting of cash credits. The banks are required to keep in their coffers a larger amount of gold. This increased amount yields no interest, and hence to that extent the Act diminishes their profits. To make up the same amount of profit as heretofore, the charges for discounts and advances are increased. This illustrates a principle that we think will always be found correct, that restrictions upon banks are taxes upon the public. This principle is not sufficiently obvious to statesmen, nor even to the public, in England; the mercantile classes have been pleased, rather than otherwise, when laws have been passed injurious to bankers. In Scotland such matters are better understood. The commercial classes have always rallied round the banks; they have had the sagacity to perceive the truth of the principle we have advanced; they know that capital employed in banking must be made to produce an average profit; and if the Legislature causes one branch of business to be less productive,

the bankers must make other branches more productive, in order to render capital employed in banking as profitable as it would be if employed in other occupations. But the Act of 1845 not only increased the charge; it led to a limitation of accommodation. There is no one point on which Scotchmen, of all classes, are more unanimous in opinion, than on the advantages that have arisen to their country from the system of cash credits. This system can exist only with a note circulation. One of its objects on the part of the banker is to increase his circulation. But he has no profit by increasing his circulation of notes, if he must keep in his coffers an additional amount of gold equal to that increase. But gold is the idol of our currency theory. The cash credit system, therefore, with all the virtues it produced, has been offered up in sacrifice to this "golden calf."

The Act has, however, not been successful in imparting to the people of Scotland a taste for gold. The bankers are too wise to issue the gold, unless when it is demanded; and the public are too wise to make such a demand. Hence, when the increase of the currency requires a further importation, the gold is quietly brought from London to Edinburgh, is quietly locked up in the vaults of the bank, and, when no longer required, as quietly sent back again. Of course this is a loss to the banks of issue, but in this way it is less injurious than if put into circulation. Disastrous for Scotland will be the day when the people shall become inoculated with the love of a gold currency. The effect of such a desire in England is strikingly exhibited in seasons of pressure. When such pressures occur in Scotland, the banks, unlike those of England, can employ their whole resources to assist their customers, and to support public credit.

Among the theories on the currency was a notion of