VI. FOREIGN BANKING AND FINANCE.
Most foreign countries issue metallic money only, except those that are on a paper basis. In general the paper currency is issued by banks, many of which are more or less remotely associated with the government. Some of these banks issue notes on the security of the government or other stocks and bonds, while many emit notes based on no special form of security, but upon the general assets of the bank.
As compared with the United States there are but few banks in the principal foreign countries. England has less than one hundred; Scotland less than a dozen; Canada but thirty-eight chartered banks. As in other foreign countries, the Canadian banks have numerous branches affiliated with the head office. National banks in the United States are prohibited from having branches. The Bank of France, the Bank of England, the Imperial Bank of Germany, the Austro-Hungarian Bank, the Imperial Bank of Russia, are all more or less intimately associated with their respective governments.
GERMAN BANK, BREMEN.
The Bank of England was incorporated by royal charter, July 27, 1694, its incorporators lending £1,200,000 to the government, in return for which the Bank was permitted to issue notes to a like amount. It had a practical monopoly up to 1826, and even now, it is believed, no bank within a radius of 65 miles of London may issue notes. It has suspended specie payments more than once. In 1844, the banking and issue departments of the Bank were separated. One fifth of the reserve may be silver, though in practice the reserve is kept in gold coin and bullion. Its notes are based on gold, except £16,800,000, which are secured by the government debt and other securities. It is compelled to buy all gold offered at a fixed price, paying for it in notes. So it must redeem all notes on demand in gold. When so redeemed they are canceled and, after five years, burned. No notes of a less denomination than five pounds are issued. The Bank checks gold exports by raising the rate of discount. The building covers about four acres of ground, and employs over eleven hundred persons. It is the keystone of the entire system of British credit, and commands the assistance of the Government when needed.
The Scotch banks issue notes on their own credit to the amount outstanding at the time of the passage of the Bank Act in 1844. Their rate of interest is said to be the same at all of their thousand offices. A unique feature of the Scotch banking system is that of cash credits, by means of which a person of good credit may get his checks cashed without a deposit of actual money, the banks simply entering the credits on their books.
The Bank of France has a monopoly of note issues, charges a premium on gold for export, and may redeem its notes in either gold or silver. The Imperial Bank of Germany and a few other German banks issue notes on gold and other securities, and further amounts on their general credit. Beyond a fixed sum, called the emergency circulation, a tax of five per cent is levied. Other European banks are generally modeled on the same leading principle—a central bank of issue, with numerous branches, and associated with the Government directly or indirectly. The Imperial Bank of Russia issues notes practically covered by gold and redeemable in that coin. Japan tried a system of national banks combined with Government paper money, but is now substituting a system of bank notes issued by the Bank of Japan.
VII. UNITED STATES GOVERNMENT DEBT SINCE 1857.
In 1857 the Government owed only $10,000,000 over and above the cash held in the treasury. At the breaking out of the Civil War the debt had increased to about $80,000,000. By August 31, 1865, it had increased to $2,756,000,000, with an interest charge of $150,000,000. In twenty-eight years, down to June 30, 1893, the Government extinguished $1,917,500,000 of its debt, paid $2,364,000,000 for interest on its debt, and $118,000,000 for premium on bonds redeemed, making a grand total of $4,400,000,000, or an annual average payment of $157,000,000 for the entire period.