THERE are marvels in common life which escape attention, simply from our familiarity with their external appearance. Travellers have often been struck by the insensibility of the inhabitants of a pic turesque country to the natural beauties which are daily before their eyes. And a like insensibility characterises those who inhabit an unattractive scenery. Familiarity does not necessarily beget contempt, but it blunts the habits of perception. If the Scottish mountaineer is insensitive to the sublime and picturesque scenery which surrounds him, so is the peasant of the Landes of France to the dreary monotony of his district; so also is the wandering Arab to the level waste of farspreading sands, only enlivened by the illusions of the mirage. In order to appreciate our condition or surroundings, we must also know the opposite of it. It is proverbial that we only know the value of what we possess, by the loss of it. A stranger to our scenery or condition of life can better than ourselves appreciate its peculiar features. We remember the impression produced by our first visit to Paris after the renovation of that city by the genius of the present Emperor. Sauntering through the environs of the Tuileries and the Louvre, viewing the Place Vendôme, the Place de la Concorde, the Champs Elysées, and the Bois de Boulogne, it seemed to us that the scene immeasurably surpassed anything of the kind to be met with in our own country. And perhaps rightly. Yet, on our return to London, when driving in a hansom on our way home from the railway station, in full view of the Parks, and Piccadilly, and Buckingham Palace, we felt we had been rather hasty in our judgment. We saw more of the grandeur of London than we had done for years; and were made to think

with respect of the impressions first produced upon us by that scene. We were recalled to our first impressions, and felt that they were the right ones. We became conscious that a residence of years in the English metropolis had blunted our sensibility to its grand and peculiar features. It is the same in all departments of life. The man of science who, in his novitiate, has great difficulty in understanding the strange terminology, soon comes to use the hard terms of chemistry or other sciences as if they were equally familiar to all. The preacher in like manner uses terms which are shorthand expressions for abstruse confessions of faith, which perhaps he fully understands, but which to the yearning human hearts of his congregation are but dry bones-phrases hard to be understood, and frequently unintelligible when the listener most anxiously and earnestly seeks to grasp their meaning, and lay them as a comfort to his troubled heart. Thus an outsider is often a better observer of peculiarities, a better appreciator of anomalies and mental difficulties, than they to whom those peculiarities, whether of scenery or of social condition, have become familiar.

Lately we took a friend from the country to see the famous "City" of London, and especially that

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City of Gold" which forms its inner heart. We showed to him the Royal Exchange, the Stock Exchange, the Discount-houses, and other great marts of buying and selling. And the whole affair struck him as strange. He said, "I see no buying and selling." The actual and sole business of the place, which was going on under his very eyes, was invisible to him. He was not blind, but in truth there was nothing like ordinary buying and selling to be seen. Ac

customed to the great agricultural fairs in Scotland, where dealers come from all quarters, each with bundles of notes or sometimes rouleaus of sovereigns, he marvelled and questioned how buying and selling could be carried on without an interchange of money. And when we told him of the immense sums which were changing hands under his very eyes, and which do so daily in these London marts, his wonder, if not his scepticism, was still further increased. Where is the money?" he asked again. "If money is changing hands, where is it?" And when we replied that we did not say that Money was changing hands, but that Capital was, his look and silence assured us that we need not, in that place at least, continue the discussion.

"Where is the money?" Although the question may appear ridiculous to City men, it is a natural and reasonable one. Our friend is a man of excellent intelligence; we would as soon discuss a knotty question of any kind with him as with the most knowing member of the Stock Exchange. Only he had not, like them, from familiarity become insensitive to the real marvels of the City of Gold. Nevertheless, he too had become insensitive, in his own branch of commercial exchange. He forgot that to uncivilised communities, to men who deal only in barter-and the system of barter is not wholly exploded even in Europe-the ongoings at a Scottish fair would be as surprising as those of the City were to him. They would be as much astonished at sensible men giving away their sheep and cattle for bits of paper or of metal, as he at sales where no money is given at all.

In point of fact, on ordinary days (ie., not settling days) in the City of Gold-the great mart of financial and commercial exchanges nothing seems to change hands at all.

But let us follow the men of the Royal Exchange and Stock Exchange the merchants and stock

brokers to their offices, and what do we see? Payment for the stock or goods is made in bits of paper called Cheques, ranging in value from £5 to thousands of pounds sterling; or, as on the Royal Exchange, by bits of paper called Bills-which are promises to pay a certain amount of money at the expiry of a stated period. But look or inquire further, and see what the recipient of these bits of paper does with them. If payment is made by bill, the recipient does not lie out of his money for three or four months (the ordinary term of commercial bills)-he can employ the money profitably in his business: so he takes the bill to a discounthouse-some of which are among the largest and wealthiest establishments in the City, established for the sole purpose of dealing in, or cashing, commercial bills-and receives at once the amount promised to be paid, minus the interest for the three or four months which must elapse before the bill becomes due. And how does he receive the amount? In money? No: but in the form of a chequei. e., an order on a particular bank to pay the amount in money. Well, follow him and see what he does with this cheque. Does he take from the bank the amount in money? Very seldom. He goes to his own bank, and, handing the cheque across the counter, orders it to be placed to his account-to be drawn out afterwards in portions as he may require. The amount represented by the cheque then becomes part of the "deposits" of the bank-part of the capital intrusted to its keeping.

But what are those "deposits"? As we have seen in the case just described, they are not necessarily or generally paid into a bank in the form of money: neither do they exist in the form of money. They are for the most part invisible capital. At least nine-tenths of them exist solely in the form of ledger-wealthi. e., credit-wealth,-representing

real property, but without any money in which to pay them. The deposits in the banks of the United Kingdom amount to about four hundred millions sterling; whereas the total amount of money, whether in specie or in notes, held by all the banks does not exceed (if we deduct the gold held by the Bank of England as a basis for its noteissues) twenty millions.* Here, then, is a strange matter. The banks promise to pay, and are liable to pay, £400,000,000 in money on demand, yet the Money, whether coin or notes, which they hold available for the payment of these deposits, is barely one-twentieth part! How is this?

It is a strange matter truly: yet strange as it is, the whole prosperity of the country depends upon the successful working of this peculiar arrangement. The City of Gold, that city within a city, that inner heart of busy London, is the material capital of this great country, and every fluctuation in its condition affects the whole wealth and industry of the nation. And yet this great capital, where the wealth and trade of the country are centralised, is itself dependent for all its power upon an Invisible Capital, which is the unseen motive-power of all its transactions. This invisible capital is the lifeblood of the place. Powerful as the electric currents, it is equally viewless. Stand like a dictator in the City of Gold, and order to be brought forth all its stores of money, whether gold or bank-notes, and the amount when presented would be totally insignificant compared with the actual wealth of the place and the amount of business carried on. In the banks alone the invisible capital is at least twenty times greater than there is money to represent. And the

imagination is baffled to conceive the far larger amount of capital which is constantly changing hands on the Stock Exchange, Royal Exchange, and Mincing Lane, without the intervention of money at all.

The accumulation of reserve wealth, as witnessed at the present day, is really a singular thing. It is, perhaps, the greatest feat and marvel which civilisation has produced. Yet it must not be thought that the process has reached its fullest development. The world ever moves on: material civilisation ever progresses. The wisdom of one age becomes a folly in subsequent generations. It is curious and interesting to mark the successive steps by which the acccumulation of capital has reached its present development: it is also eminently instructive. It is only by considering the progress of past times in this branch of civilisation, in this department of science, that we can clearly understand our present position, and become alive to the necessities which will ere long impel us to a further advance, and to the principles which ought to regulate our progress.

While we write (Oct. 14), a new embarrassment has befallen "the City" one of those embarrassments which of late years have become more frequent than in any former period in the history of this country. The Bank has suddenly, and by unusually rapid changes, raised the rate of discount from 4 to 7 per cent. And on the 7th instant, after the rate was raised to 7 per cent, first-class three-months bills, such as used to be discounted at the minimum Bank-rate, in many cases could hardly be discounted at all, even at 10 per cent. Why was this? Simply because, as the joint-stock banks and discount-houses them

selves stated, no one knew what further steps in the same direction might be taken by the Bank of England. The cause of the phenomenon, of the facts which have led to the sudden rise of the Bank-rate, was a mystery. There was no export of gold; neither was there any commercial crisis. There was no break-down of credit among the mercantile and manufacturing classes, or even among a certain section of them, such as occurred a year ago. What, then, was the cause of this peremptory action of the Bank, which has produced this disquiet among the banks, and this embarrassment among our merchants and manufacturers? Simply this: that the Trade of the country, which was paralysed by the exorbitant Bankrate a year ago, has begun to recover; and that, in consequence, more bank-notes and sovereigns have been needed for the payment of wages and other retail transactions. That is all—if we except half a million of sovereigns wanted in Ireland, owing to the passing apprehensions occasioned by the Fenian movement. And yet, in consequence of this, the rate of discount has been raised to an extent which is seriously embarrassing to Trade. For the past twelve months the trade of the country, instead of progressing, as it ought to do, has declined-has not been equal to that of the previous year. Yet now, the moment Trade shows symptoms of revival, the Bank of England checks it, and plunges it into new embarrassment by charging an exorbitant rate for the usual advances-i. e., for the discount of

*

the bills by which all our trade is carried on.

It is a startling statement, and yet it is simply the fact, that now more than ever in our history-more than ever even during the twenty years which have elapsed since the passing of the present Bank Acts-the Bank sets itself in opposition to the wants and interests of Trade. In its practice, the Bank now regards every expansion of Trade as an evil which must be checked. How is this? How has it come to pass that our Banking-system, originally established for the very purpose of supporting trade, and allowing it to expand-and which for so many generations accomplished this object satisfactorily, and with immense benefit to the country-now appears in a new aspect, and never feels at ease except when trade is restricted and fettered? How is it that the Banks and Trade, instead of being confiding allies, are now all but open and declared foes ?— that every expansion of the latter is met by a repressive course on the part of the Bank of England?

It is the purpose of this article to explain this strange fact this disastrous change in the working of our monetary system. To understand this change aright—to see how reactionary it is in principle, and how injurious in its practical effects-it is expedient to show what has been the principle upon which our past progress has proceeded, and the means by which that progress has been accomplished. What, in brief, has been our past progress in monetary science-in the economy of capital

1861, 1865,

Imports. £141,012,477 115,670,434

-in the means by which Capital has been brought to the support of Trade? By what means have we succeeded (1) in storing the ever-increasing profits, or reservewealth of the country, and (2) in making these adequate to the support of an ever-expanding Trade?

We need not dwell upon the Origin of Capital, upon which "political economists delight to exercise their theorising ingenuity. We desire to adhere to facts of practical moment at the present day. And in order to enable the public to judge of the present position of monetary science of the real character of our existing monetary system, it is indispensable that we should, in the first place, exhibit the various processes by which the Accumulation of Capital -the storing of reserve-wealthhas been carried on. In proportion as capital has increased, new methods of storing it in a convenient form have been devised. This is a necessity to which the whole past history of civilisation bears witness; and it is a necessity which in the present day, despite the enormous supplies of the precious metals from California and Australia, begins to be felt anew.

Judging by our present social arrangements, the origin of capital would be thus :-A man, either by his superior skill in producing, or by his greater economy in consuming, would acquire more goods than he used. The surplus he would give to others who required it, on their giving to him in exchange some other kind of property, which he would lay by as reserved wealth. As a matter of fact, however, the origin of capital, the accumulation of wealth not needed for its owner's consumption, took place otherwise. Instead of superior skill in producing, or greater economy in using, it was the greater personal power of certain individuals over the rest of the community, which gave them the means of acquiring capital-by exacting it, willingly or unwillingly,

from others. For example—a man famous in war, or otherwise superior to his fellows, became the chief of his people, or one of the chiefs or elders-who, generally by free consent, obtained from the community a portion of their annual produce. A chief or king, in virtue of his office, was supported by payments in kind: and in this way, he acquired a greater quantity of goods than he himself could consume. The surplus was reserve wealth, or capital, which he kept to meet emergencies, or parted with in exchange for labour, or for commodities of a less perishable nature than those which he had, and therefore more suitable for storing.

In order that goods be readily exchangeable, they must be such as there is always a demand for. In the earliest times this was foodgrain or cattle. By-and-by, especially in Eastern countries, apparel also came into vogue as a form of accumulated property. In the East, where the mode of dress is not, like that of modern Europe, fitted to the shape of each person-like our tight coats and trousers-but consists of robes which fit all persons alike, the great and wealthy men turned a portion of their surplus goods into robes and other articles of apparel. Thus a king, or wealthy man, kept large flocks of sheep and oxen, and stores of grain, and also so many dresses-which were likewise in demand, and therefore were exchangeable property. But food is liable to corruption-herds of cattle die in due course-robes also are doomed to decay, through moths and other destructive agencies. But the precious metals next, and to some extent simultaneously, rose into esteem as prized ornaments. They formed articles of apparel which, from their beauty, were prized by all; and, moreover, as they were not liable to corruption, and could be easily carried about, they were soon recognised as the kind of goods most suitable for storing and accumulating,-as the best