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Subject Area: Law

Bentham to Sir Francis Baring. - Jeremy Bentham, The Works of Jeremy Bentham, vol. 10 (Memoirs Part I and Correspondence) [1843]

Edition used:

The Works of Jeremy Bentham, published under the Superintendence of his Executor, John Bowring (Edinburgh: William Tait, 1838-1843). 11 vols. Vol. 10.

Part of: The Works of Jeremy Bentham, 11 vols.

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Bentham to Sir Francis Baring.

“Q. S. P., 23d December, ’99.

“Dear Sir,—

Permit me to cast myself upon your experienced kindness for an answer to the question on the other leaf. I am sensible that nothing better than mere conjecture can be given, and that conjecture of the lowest kind; but from you any sort of conjecture would afford me a degree of satisfaction not to be derived from any other source on a subject in which I happen just now to take a particular interest.—Believe me to be, with all respect, yours ever.

“1. Whereabouts may be the amount of Bankers’ paper (payable on demand) habitually in circulation?

“2. If no particular sum can be mentioned, is it supposed to be more or less than that of the Bank of England?

“Questions added.

“3. Has any and what addition been made to the quantity of Bank of England paper in consequence of the issue of £2 and £1 notes?

“4. What is the rate of interest allowed to customers by such of the bankers as allow interest? as per Sir F. B.’s Observations, 2d edit. p. 18.”

To which Sir Francis replies:—

“1. The bankers in London have no circulating paper payable on demand. The country banks always have; but a distinction should be made between paper payable on demand originally, and what becomes so, in consequence of the lapse of the time for which it is issued—this is partly explained in what I have said about the Exeter and Newcastle banks; for instance:

“Exeter issued originally notes on demand, which formed a small part, (about one-tenth of their circulation,) the remainder being at twenty or twenty-one days after sight with interest.

“Newcastle issued all their paper to commence interest six months after date, and thus payable on demand, conceiving it the best means to keep their paper out; for whoever took out fresh notes must wait six months before interest commenced.

“It is impossible to form an estimate, or even a guess at the amount, which must vary with the more or less internal trade of the country. The proportion of notes issued originally payable on demand must be small; but it requires a return of the practice of the great banks to know the degree to which that amount is augmented by the means I have described.

“2. The preceding will explain why no answer can be given to this; but the total quantity or amount of the paper of the country banks must very much exceed that of the Bank of England in my opinion; but doctors always differ.

“3. An addition has been made, no doubt; and the sum would have been very much larger, if the notes had been for guineas instead of pounds. The number which are in circulation may be large, but I cannot think the value or amount to be considerable. I am clearly of opinion that it forms no important part in the circulation of the country. It was convenient at the time: it may be so now, and hereafter; but that is the extent of its importance.

“4. The rate of interest from country banks will vary: some are so low as 2½ per cent., but the most are from 3 per cent., and upwards. It is probable that war and partial distress may have varied the rate paid by the same banks.

“You should read the report of the House of Lords on examining the Bank; but you must not positively rely, that what are stated as facts, are so in truth. I forget the instances, except some in the evidence of Henry Thornton, which he gives as receiving information from others, but in which he has been misinformed.

“The subject of circulations generally is very tender and difficult at present, for we must have many shocks and convulsions before it can settle in a sound basis; in the meanwhile, it moves quietly and with facility for those who proportion their enterprises or operations to their means; as the distress and failures of 99 out of 100 which have happened in the last six months, has been owing to imprudence, &c., of the parties.”

And Bentham acknowledged the communication thus:—