The Right of Coining Bank Notes. - 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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The Right of Coining Bank Notes.
According, to the view which I adopt, the issue of notes is more analogous to the royal function of coinage than to the ordinary commercial operation of drawing bills. We ought to talk of coining notes, as John Law did; for though the design is impressed on paper instead of metal, the function of the note is exactly the same as that of a representative token. As to the right to issue promises, it no more exists than the right to establish private mints. For our present purposes that alone is right which the legislature declares to be expedient to the community at large. As almost every one has long agreed to place the coinage of money in the hands of the executive government, so I believe that the issue of paper representative money should continue to be practically in the hands of the government, or its agents acting under the strictest legislative control. M. Wolowski, in his admirable works on banking, has maintained that the issue of notes is a function distinct from the ordinary operations of a banker; and Mr. Gladstone has allowed that the distinction is a wholesome and vital one. Bankers enjoy the utmost degree of freedom in this country at present, in every other point, so that it is wholly a confusion of ideas to speak of the unrestricted emission of paper representative money as a question of free banking.
Professor Sumner and others have objected to the Bank Charter Act, that it cannot be regarded as a scientific settlement of the currency question, inasmuch as no other nation had adopted the same principles. Quite lately, however, the German Imperial government has adopted the main principle of a partial deposit, adding to it the liberty of increasing the issues under a tax of 5 per cent., an arrangement which I have described under the name of the Elastic Limit System (p. 226). This provision appears to be designed to avoid the suspension of the law during times of crisis, and it is quite possible that we might with advantage introduce a similar modification into our own currency law. But the fine or tax upon the excessive issue ought surely to be much more than 5 per cent., and in this country should certainly not be less than 10 per cent.
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