England, after all, is only a gigantic workshop, and so long as her shops are busy there is no danger. But have those people who live on incomes invested solely in British securities ever reflected that, were there no work for her shops, this system of credit would collapse like a castle of cards, when their incomes would be gone? Our solvency as a nation depends absolutely upon the skill and ability displayed by British manufacturers, and upon the muscles and intelligence of their workmen. Given a high standard of efficiency and adaptability on the part of our producers, then trade flows to this country, and by trade alone can we support our credit and pay our debts. Small wonder, then, that thoughtful people are becoming alarmed at the apotheosis of Games in this country, and at the large number of idlers who do not take a part in production, but are dependent upon the interest received from investments, which can only be productive so long as our commerce is flourishing.
The capital of this country has been computed by a competent authority at about £10,500,000,000, but doubtless these figures are very wide of the mark. Still, the amount of fixed capital invested in the country must be immense. By "fixed" capital, as distinguished from the floating or loanable capital deposited with the banks and kindred institutions, those investments of a more permanent character are implied. A depositor can demand his money back from his banker, but bank shares he would have to sell on the Stock Exchange—therefore the one is "floating" and the other "fixed" capital. It is the same with Consols, railway shares, and with the shares of all companies in which there is a market. When there is not a market, then the capital is fixed indeed; and there would not even be a market for Consols were the Bank of England drained of its gold. Moreover, during normal times the demand for loanable capital at the banks will help to determine the price an investor will receive should he desire to sell any of his fixed investments.
It consequently amounts to this: The fixed capital of the country cannot be converted or sold unless the banks maintain large cash reserves; so we may truthfully assert that about £10,000,000,000 of capital is erected on a basis of about £71,000,000 of cash. This cash, in its turn, can only be kept in the country while our workshops are busy; therefore it at once becomes apparent that the national aim should be to increase our trade, for the yield, and consequently the value, of British securities is bound to either increase or diminish in proportion as the trade of the country is either flourishing or the reverse. Even the Government can only meet the interest on Consols while the people are in a position to pay their taxes.
Such a statement may come as a shock to those persons who are accustomed to draw their dividends each half-year or year, and to imagine that unless the world came to an end these dividends could not cease; but they would cease were this country to fall hopelessly behind in the race for trade. This is not the old Socialist maxim that "Labour supports the world" put into a new print dress. It is evident that the fixed capital of this country, as represented by stocks and shares, would be mere waste paper unless the banks held sufficient gold to ensure a market for them: and as this gold cannot be kept in the country unless our workshops are able to compete successfully with those of other nations, it follows that the position of those persons who draw incomes from British securities is entirely dependent upon the brains and abilities of the men who direct our industries. How important, then, that the very best talent the nation possesses should be used in trade; and what folly it is on the part of those so-called "superior" persons to sneer at the trader—at him who, without doubt, enables them to draw their incomes regularly!
There was a time when capital, broadly speaking, could only be obtained in London; but since then population has increased all the world over, and as capital is only the savings of labour, it naturally follows that it can now be obtained abroad, and that London is less necessary to the foreign borrower; and, as the world fills up, it must surely become less and less necessary. Yet our gilded youth affects to despise trade. This is somewhat absurd, when it is trade that enables him to live in idleness; and British pride, unless it recognises this fact, may have a bad fall.
The banks of the United Kingdom, roughly speaking, are indebted to the public to the extent of £910,000,000. They only keep till-money in their safes, and are dependent upon the store in the Issue Department of the Bank of England for their reserves of cash. In other words, this £33,000,000 of specie is the foundation stone upon which £910,000,000 of credit rests. It has already been shown in what relation the fixed capital of the country stands to this fund.
The smaller of the provincial banking companies keep their cash reserves with their London agents, who also place their reserves with the Bank of England. Consequently, as the agents include the reserves of these banks with their own deposits, they, like the Bank of England in relation to the bankers' balances, lend out a percentage of the reserves of the smaller banks. It follows, therefore, that the bankers' balances in the hands of the Bank are smaller than would be the case if each bank kept its reserve with it. The London agents are dependent upon the Bank, and the smaller banks upon the agents.
As the store in the Issue Department is the only large collection of specie and bullion in the three kingdoms, and as the amount therein is always extremely small when compared with the huge liabilities which, under certain conditions, it might be asked to liquidate, any considerable depletion of this store makes the owners of large bank balances nervous; for if the Bank of England cannot pay the bankers, then their bankers will not be able to pay them.
Again, the liabilities of the banks are so immense in comparison with their reserves that a very small diminution of the fund in the Issue Department makes owners of capital anxious, whilst a serious drain would probably create a panic; and unless means were devised to allay the panic, it might develop into a revolution; for we are very commercial in these days, and are beginning to realise that mere glory may be bought too dearly. Commercialism, however, is not exactly a fascinating virtue.