Representation of Foreign Bankers in London. - William Stanley Jevons, Money and the Mechanism of Exchange [1875]
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Money and the Mechanism of Exchange (New York: D. Appleton and Co. 1876).
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Representation of Foreign Bankers in London.
The result of this centralization of banking transactions in London, is that colonial and foreign bankers find it very desirable to have agents, or even head offices in London. At the present time there are no less than 60 important colonial and foreign banks which have their own London offices or houses. These include the principal Australian, New Zealand, and Indian banks, and a number of minor banks, established by English capitalists to cultivate the trade of the minor states of Europe, South America, China, and the East. In addition to the above 60 banks, there are fully 1000 foreign and colonial banking houses in correspondence with London bankers, so that almost every town in the world which can maintain a bank at all, has the means of correspondence with some member of the London banking system. The foreign bankers vary greatly in the importance of their transactions, and some of them would, according to English ideas, be considered merchants rather than bankers; but, in the aggregate, their transactions must be exceedingly large. It must almost inevitably follow that transfers of money will be more and more made through London. Just as this city is the link of connection between each English country banker and each other one, so it may, and probably will by degrees, become the link between the most distant parts of the world. But the greater becomes the profitable burden of financial business thrown upon Lombard Street and Threadneedle Street, the more it behoves us to take care that our currency system is maintained upon the soundest possible basis. It is requisite, too, that our bankers, financiers, and merchants should regulate their operations with a thorough comprehension of the immense system in which they play a part, and the risks of derangement and failure which they encounter by over-severe competition. No one doubts that alarming symptoms have during recent years presented themselves in the London money market. There is a tendency to frequent severe scarcities of loanable capital, causing sudden variations of the rate of interest almost unknown thirty years ago. I will therefore in the next chapter offer a few remarks intended to show that this is an evil naturally resulting from the excessive economy of the precious metals, which the increasing perfection of our banking system allows to be practised, but which may be carried too far and lead to extreme disaster.
Chapter XXIV
The Bank of England and the Money Market
We commenced the study of money with the barter of ordinary commodities, and money appeared in the first place as some common commodity handed about as a medium of exchange. By degrees, however, the subject assumed a greater and greater degree of complexity. The metals took the place of other commodities as currency, and delicate considerations began to enter concerning token and standard coins. From metallic representative money, we passed to paper representative money, and finally discovered that, by the cheque and clearing system, metallic money was almost eliminated from the internal exchanges of the country. Pecuniary transactions now present themselves in the form of a room full of accountants, hastily adding up sums of money. But we must never forget that all the figures in the books of a bank represent gold, and every creditor can demand the payment of the metal. In the ordinary state of trade no one cares to embarrass himself with a quantity of precious metal, which is both safer and more available in the vaults of a bank. But in international trade, gold and silver are still the media by which balances of indebtedness must be paid, and serious consequences may arise from any disproportion between the amount of transactions carried on, and the basis of gold upon which they are settled.
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