PAPER MONEY ROMANCE.

Manawatu Herald, Volume XXXIX, Issue 1705, 28 April 1917, Page 1

PAPER MONEY ROMANCE.

WHEN ENGLAND HAD SIXPENNY NOTES. CURIOS OP FINANCE. The importance of paper money is again emphasised to-day, says an English writer, by the re-issue of the currency notes under an improved and more elaborate design than the first hurried impression of 1914. In England paper money was instituted in the year 1694, when the Bank of England was founded. The paper then used, however, applied mostly to bills of exchange and large payments, there having been no small notes in these days. “If,” a writer of the time said, “the bank can circulate its foundation of £1,200,000 without having more than £300,000 lying dead at one time with another, the said bank will be in effect as £900,000 fresh money brought into the nation.” The Bank of Scotland, established the following year with a capital of £IOO,OOO sterling, was really the first to issue banknotes in the ordinary sense. An old chronicler asserts that “its notes went for four or five times the value of the cash in bank, and that so muc.li as the amount of those notes exceeded the cash in bank was a clear addition to the money of that nation.” But the Bank of Scotland was more national or general than the Bank of England, as its notes, many of which were as low as 20s sterling, passed in payments throughout the whole country, whereas the Bank of England was of little use outside London. PAPER CREDIT. Although Mr William Paterson, a. Scotsman, founded both these banks, Mr Montague was the first to organise the new circulating paper credit in England by issuing bills from the Exchequer and contracting for their being circulated for ready money on demand. Many of those first Exchequer bills were for sums as low as £5 and £lO, and “were of very good use at that time when there was so great scarcity of silver money during the re-coinage.” Like the recent Exchequer bunds, advertised as “£(i 5s for £5,” these notes, being allowed 71 per cent, interest, soon rose to be better than par. They did much to support the general trade of the nation till the new money was issued from (he Mint. During the hard times of .1697, bank notes were quoted as low as 13 and M per cent, discount. New capita! was thereupon required, and the Bank was allowed to issue an additional number of notes not exceeding the total increased capital. Paper credit thus supplied the place of running cash and greatly multiplied I lie kingdom's stock. This artificial wealth, which necessity had introduced, “made us less feel the wan! of that real treausre which the war and our losses at sea had drawn out of the nation."

But perhaps that wonderful year of war success, 1759, did more to lower the credit of the country than any previous period. The unusual scarcity of gold and silver led the Hank of England to issue cash notes for £lO, which proved very convenient for payments. NOTES ABUSED. Useful as banknotes were as a substitute for current money, they were not without (heir abuses. Notes called bank-notes for 10s, ss, and such like, were issued by obscure persons in many villages in Scotland, and notes of 5.> down to (id were in circulalion in Yorkshire, “to the great injury of the industrious manufacturers, thereby almost entirely banishing silver out of the circulation.” To put a stop to this evil, all notes under 20s wen' prohibited I<> he current after June Ist, 7765, and all notes were made payable on demand in 1766. Never in history, until 19)4, did paper money play such an important part in the credit of the country as in the year 1797, when Pit Us Suspension of Cash Payments Bill, suspending cash payments for twenty-five years, wq.-i introduced. For some years before I his, “owing to the enormously expensive operas tions of the Avar, subsidies to foreign princes, and the large sums payable in bullion for cargoes and freights of neutral ships taken, causing gold to be carried abroad to a very alarming amount,” the Bank of England had limited their advances upon Treasury (fills, and had requested Mr- Pitt to make his arrangements accordingly. The total sum oAving by the Government to the Bank then Avas under £10,000,000, only about sufficient to carry on the Avar for two days just now.