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• A History of Banking In Great Britain;
• Chapter I.: Banking In England.
• Section I.: A Record of Beginnings.
• Section II.: Foundation of the Bank of England.
• Section III.: An Era of National Development.
• Section IV.: State of the Irish Currency.
• Section V.: Failure of Currency Reform—inflation and Reaction.
• Section VI.: The Committee On Banking of 1840.
• Section VII.: On the Bank Acts of 1844 and 1845.
• Section VIII.: Commercial Crises.
• Section IX.: Monetary Panics.
• Section X.: General Conclusion.
• Chapter II.: Banking In Scotland.
• Chapter III.: The Theory and Mechanism of Banking.
• Chapter IV.: Definitions of Economic Terms.
• Chapter V.: The Theory of Value.
• Section I.
• Section II.
• Section III.
• Chapter VI.: The Theory of Credit.
• Section I.
• Section II.
• Banking In Russia.
• Chapter I.: The Early Stages of Money and Credit.
• Section I.: Prefatory.
• Section II.: Introduction of Paper Money.
• Section III.: Financial Reconstruction Under Alexander II. And the Founding of the State Bank.
• Chapter II.: Methods and Operations of the State Bank.
• Chapter III.: Banking Vicissitudes From 1862 to 1875.
• Chapter IV.: The Eastern War Period.
• Chapter V.: Private Banks.
• Chapter VI.: The Bourse.
• Chapter VII.: The Precious Metals.
• Chapter VIII.: Foreign Exchanges.
• Chapter IX.: The Debt and Finances of Russia.
• History of Savings-banks In the United States.
• I.
• II.
• III.
• IV.
• V.

SECTION I.

PREFATORY.

IN examining the credit system of Russia, the fact that first of all strikes us is that it has always been conducted, if not in accordance with invariable principles, yet at least after a uniform method and one which has conformed to the political policy of the Empire.

The State is the great dispenser of favors, the general manager of all affairs of its subjects. It exercises its control according to its own ideas, but with a very sincere desire to further all those interests of which it assumes the care; to profit by the experiences of other countries, while avoiding their mistakes, and to excel them if possible; but its success has been only such as a bureaucracy, more or less intelligent, is capable of attaining. That the intelligence of this bureaucracy has not always been equal to the mission it has undertaken; that its final aims have not remained constant, but have varied with the controlling powers and their advisers; that the highest interests of the State have often been construed in a sense adverse alike to the dictates of wisdom and the economic progress of the country; that the tutelage exercised by the State over commerce and industry has not always been to their advantage,—all of this will be made sufficiently manifest in the history of the Russian banking system which is to be here laid before the reader.

That system is to-day what it has been for more than a century. The issue and circulation of money are entirely in the hands of the State. There have been brief intervals when emancipation from that control has appeared possible, and even in the way of being accomplished; but they have yielded no result.

Before treating of note circulation as it now exists, it may be well to take a rapid glance at the monetary situation in the period when paper money was unknown.

Such information as is procurable upon this branch of the history is fragmentary, and must be culled from certain personal memoirs rather than from records of incontestable historical value. However, aside from the influence of local peculiarities, the history we are about to sketch is parallel to the experience of all countries.

Until the middle of the seventeenth century there was no copper money in Russia, except one small coin called a “poul.” There were in circulation some gold and silver pieces of foreign origin and some small silver coins of Russian mintage. The Government, which held a monopoly in more than one branch of commerce, sold its merchandise to foreigners for ducats or thalers, and had the receipts recoined at the local mints to its own great profit. About 1650, three new silver coins were introduced which, according to the statements of all the chronicles of the time, partook very largely of the character of counterfeit money, having the appearance but not the weight of coins of an intrinsic value greater than their own. Russian subjects were forbidden to pay out these coins in the purchase of imported goods, the Government fearing that such a course would result in raising the price of imports. Somewhat later, it was deemed advisable to debase even the copper coins, and the difference between their official and real value soon became so great that farmers refused to bring their products to market. A contemporaneous writer states that for 160 copecks the Czar bought enough copper to make coins officially valued at R. 100, thus giving them a fictitious value about sixty-five times as great as their real value.

According to Meyerberg, the Czar put in circulation more than R. 20,000,000 of this money. This traffic, by which the Czar Alexis is said to have gained R. 20,000,000, produced numerous revolts, resulting in massacres and the execution of some citizens. Yet such is the force of actual facts that even a Czar Alexis could not keep his spurious copper roubles at par, and their price, which, up to March 1, 1659, had been 104 copecks at Moscow and 103 at Novgorod, gradually declined. On January 1, 1663, the quotation at Moscow was ten copper roubles for one of silver, and on June 15th it was fifteen at Moscow and twelve at Novgorod. That is to say, the fictitious rouble was valued at only 6⅔ per cent. of par in Moscow and 8⅓ per cent. in Novgorod. A general increase in prices resulted. Naturally the blame was laid upon speculators and forestallers, and many accused of these offences were convicted. Nevertheless, in 1662, the Government acknowledged the force of accomplished facts; but it consulted its own interests even in the readjustment. The copper coins were called in at 1 per cent. of their nominal value; but, inasmuch as their real value was 1.6 per cent., many citizens preferred to keep their copper and turn it into household utensils; so the poorest citizens, who were unable to bear the expense of this change, were the chief sufferers.

Less than a century later, copper was once more called upon to play the rôle of Providence for the imperial treasury. It is said that Peter the Great boasted of having carried on all his wars without contracting a debt. In order to do so, he had found it sufficient at first to debase all the gold and silver coinage, and afterward to issue large quantities of five-copeck copper pieces. These latter gradually drove out the other coins and remained practically the only form of money in Russia until the beginning of the reign of Catherine II.

At this period our sources of information become more abundant and more authentic. We need merely mention, however, that the official debasement of the currency was all the more disastrous because it had as an ally, or rather as a competitor, counterfeiting on private account. An official report of 1740 accuses Russia’s dishonest neighbors, Poles and others, of this treacherous rivalry against the State. No greater indulgence was shown to these malefactors than had been extended a century earlier to those who trafficked in roubles. It was decreed that every person coming from a foreign land and found in possession of copper copecks should be hanged at the frontier. But the culprit usually escaped if he had the good fortune to reach the Senate with an appeal from this grievous sentence. As early as 1730, the depreciation had become so great that the Government itself refused to accept its copecks in payment of taxes; and in 1731 it authorized the public to melt them for domestic uses. There was, nevertheless, some sense of the obligation resting upon the State to redeem at par the copecks it had issued. But the Czar’s advisers constantly protested against the burden which such a transaction would lay upon the Treasury; and, in 1744, they made an estimate of the loss, putting it at R. 4,000,000—an amount much beyond the then available resources of the Treasury. Nevertheless, it was imperative that something be done; and, on May 11, 1744, it was announced that, on and after August 1st, the public treasuries would refuse to accept five-copeck pieces except as the equivalent of four copecks, and that, after October 1, 1745, they would be taken for only three copecks; and a further reduction to two copecks was to become effective on August 28, 1746. No further change was made until 1754. Then it was resolved to issue copper money at the rate of R. 8 to the “pood” (about 36 pounds avoirdupois); and, with this end in view, dealers in copper were forbidden to retain more than one-fourth of their stock. This was almost a return to monetary honesty; for, from 1728 to 1740, the pood of copper had been coined into R. 40. In 1755, the last five-copeck pieces of the old mintage were called in at two copecks each. It had been feared that large quantities of counterfeit money would be brought forward for redemption; but an official report of April 8, 1757, shows that there were presented altogether only R. 3,250,000, or R. 205,723 less than the State itself had issued. Evidently, a large number of persons had concluded to pocket their loss and had melted down their copper money. As for counterfeiters, they found their occupation gone as soon as the coins ceased to have a value that made their manufacture profitable.