Principles of political economy by Perry Arthur Latham 1830-1905

Author:Perry, Arthur Latham, 1830-1905
Language: eng
Format: epub
Tags: Economics
Publisher: New York, Scribner
Published: 1891-03-25T05:00:00+00:00

point of fact, that Bank just begins to sell its reserve credit, when the credit of the bankers below is exhausted. When they are at the end of their rope, there is generally an abundance of slack rope still in the great Institution above.

Now, as gold can be drawn out of the Bank of England by the cheques of depositors as well as by the presentation of its own notes for redemption, the Rate of Discount becomes a matter of prime importance in the management of the Bank. The whole line of deposits is a line of liabilities to pay out gold, if the depositors demand it; and, as deposits come largely through discounts, whenever there is a strong tendency to draw out gold so as to weaken the reserves of the Bank, the directors have an effectual remedy by raising the rate of discount. The higher the price the Bank charges for its credit, the fewer, so far forth, will be its customers, and the smaller its line of deposits, and the less likely a continuous drain of gold from its vaults. The Bank of England is managed throughout by so simple a manner as the turning back and forth of this magic screw of Discount.

Besides the use of the term " Par of Exchange " in the broad commercial sense in which we have now been examining it, as indicating the substantial equality of international debts as between two countries by the current prices of bills of exchange, there is another and subordinate sense in which the phrase is employed, namely, as denoting the relative value of the coins of one nation in the coins of another. Thus, our present gold dollar contains 23.22 grains of pure gold; the English pound sterling contains 113.001 grains; consequently, there are $4.8665 to the English pound; and this is the " par of exchange " (in the secondary sense) between the United States and Great Britain. Between the United States and France the " par " is $1 to 5.18 francs, since the franc is 19.29 of our cents.

An English shilling equals 24.33 of our cents, the new German " mark " is 23.82 cents, and the new Scandanavian " crown " equals 26.78 cents.

g. Bank Cheques. In substance indeed and even in form, Cheques are Bills of Exchange, but the two have such differing legal incidents, and run so different a course towards extinguishment, that for our purposes in this treatise they should be put under a separate discussion. Bills of exchange are expressly drawn " at sight" or for a day certain, when they become payable by the drawee : cheques say nothing about "sight" or any future date, though they are really drawn at sight, and are payable to bearer on demand: they must, therefore, be presented for payment within the shortest reasonable time (all things considered), in order that the holder may legally claim against the drawer should the banker fail meantime: a cheque is held as

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