by Daniel Defoe
One office for loan of money for customs of goods, which by a plain
method might be so ordered that the merchant might with ease pay the
highest customs down, and so, by allowing the bank 4 per cent.
advance, be first sure to secure the 10 pounds per cent. which the
king allows for prompt payment at the Custom House, and be also
freed from the troublesome work of finding bondsmen and securities
for the money--which has exposed many a man to the tyranny of
extents, either for himself or his friend, to his utter ruin, who
under a more moderate prosecution had been able to pay all his
debts, and by this method has been torn to pieces and disabled from
making any tolerable proposal to his creditors. This is a scene of
large business, and would, in proportion, employ a large cash, and
it is the easiest thing in the world to make the bank the paymaster
of all the large customs, and yet the merchant have so honourable a
possession of his goods, as may be neither any diminution to his
reputation or any hindrance to their sale.
As, for example, suppose I have 100 hogsheads of tobacco to import,
whose customs by several duties come to 1,000 pounds, and want cash
to clear them. I go with my bill of loading to the bank, who
appoint their officer to enter the goods and pay the duties, which
goods, so entered by the bank, shall give them title enough to any
part, or the whole, without the trouble of bills of sale, or
conveyances, defeasances, and the like. The goods are carried to a
warehouse at the waterside, where the merchant has a free and public
access to them, as if in his own warehouse and an honourable liberty
to sell and deliver either the whole (paying their disburse) or a
part without it, leaving but sufficient for the payment, and out of
that part delivered, either by notes under the hand of the
purchaser, or any other way, he may clear the same, without any
exactions, but of 4 pounds per cent., and the rest are his own.
The ease this would bring to trade, the deliverance it would bring
to the merchants from the insults of goldsmiths, &c,, and the honour
it would give to our management of public imposts, with the
advantages to the Custom House itself, and the utter destruction of
extortion, would be such as would give a due value to the bank, and
make all mankind acknowledge it to be a public good. The grievance
of exactions upon merchants in this case is very great, and when I
lay the blame on the goldsmiths, because they are the principal
people made use of in such occasions, I include a great many other
sorts of brokers and money-jobbing artists, who all get a snip out
of the merchant. I myself have known a goldsmith in Lombard Street
lend a man 700 pounds to pay the customs of a hundred pipes of
Spanish wines; the wines were made over to him for security by bill
of sale, and put into a cellar, of which the goldsmith kept the key;
the merchant was to pay 6 pounds per cent. interest on the bond, and
to allow 10 pounds percent. premium for advancing the money. When
he had the wines in possession the owner could not send his cooper
to look after them, but the goldsmith's man must attend all the
while, for which he would be paid 5s. a day. If he brought a
customer to see them, the goldsmith's man must show them. The money
was lent for two months. He could not be admitted to sell or
deliver a pipe of wine out single, or two or three at a time, as he
might have sold them; but on a word or two spoken amiss to the
goldsmith (or which he was pleased to take so), he would have none
sold but the whole parcel together. By this usage the goods lay on
hand, and every month the money remained the goldsmith demanded a
guinea per cent. forbearance, besides the interest, till at last by
leakage, decay, and other accidents, the wines began to lessen.
Then the goldsmith begins to tell the merchant he is afraid the
wines are not worth the money he has lent, and demands further
security, and in a little while, growing higher and rougher, he
tells him he must have his money. The merchant--too much at his
mercy, because he cannot provide the money--is forced to consent to
the sale; and the goods, being reduced to seventy pipes sound--wine
and four unsound (the rest being sunk for filling up), were sold for
13 pounds per pipe the sound, and 3 pounds the unsound, which
amounted to 922 pounds together.
Pounds s. d
The cooper's bill came to . . . . . . . . . 30 0 0
The cellarage a year and a half to . . . . 18 0 0
Interests on the bond to . . . . . . . . . 63 0 0
The goldsmith's men for attendance . . . . . 8 0 0
Allowance for advance of the money and
forbearance . . . . . . . . . . . . 74 0 0
======
193 0 0
Principal money borrowed . . . . 700 0 0
=======
893 0 0
Due to the merchant . . . . . . . . . . 29 0 0
=======
922 0 0
By the moderatest computation that can be, these wines cost the
merchant as follows:-
First Cost with Charges on Board. Pounds s. d
In Lisbon 15 mille reis per pipe is
1,500 mille reis; exchange,
at 6s. 4d. per mille rei . . . . . 475 0 0
Freight to London, then at 3 pounds per
ton . . . . . . . . . . . . . . . . 150 0 0
Assurance on 500 pounds at 2 per cent. . . 10 0 0
Petty charges . . . . . . . . . . . . . 5 0 0
=======
640 0 0
So that it is manifest by the extortion of this banker, the poor man
lost the whole capital with freight and charges, and made but 29
pounds produce of a hundred pipes of wine.
One other office of this bank, and which would take up a
considerable branch of the stock, is for lending money upon pledges,
which should have annexed to it a warehouse and factory, where all
sorts of goods might publicly be sold by the consent of the owners,
to the great advantage of the owner, the bank receiving 4 pounds per
cent. interest., and 2 per cent. commission for sale of the goods.
A third office should be appointed for discounting bills, tallies,
and notes, by which all tallies of the Exchequer, and any part of
the revenue, should at stated allowances be ready money to any
person, to the great advantage of the Government, and ease of all
such as are any ways concerned in public undertakings.
A fourth office for lending money upon land securities at 4 per
cent. interest, by which the cruelty and injustice of mortgagees
would be wholly restrained, and a register of mortgages might be
very well kept, to prevent frauds.
A fifth office for exchanges and foreign correspondences
.
A sixth for inland exchanges, where a very large field of business
lies before them.
Under this head it will not be improper to consider that this method
will most effectually answer all the notions and proposals of county
banks; for by this office they would be all rendered useless and
unprofitable, since one bank of the magnitude I mention, with a
branch of its office set apart for that business, might with ease
manage all the inland exchange of the kingdom.
By which such a correspondence with all the trading towns in England
might be maintained, as that the whole kingdom should trade with the
bank. Under the direction of this office a public cashier should be
appointed in every county, to reside in the capital town as to trade
(and in some counties more), through whose hands all the cash of the
revenue of the gentry and of trade should be returned on the bank in
London, and from the bank again on their cashier in every respective
county or town, at the small exchange of 0.5 per cent., by which
means all loss of money carried upon the road, to the encouragement
of robbers and ruining of the country, who are sued for those
robberies, would be more effectually prevented than by all the
statutes against highwaymen that are or can be made.
As to public advancings of money to the Government, they may be left
to the directors in a body, as all other disputes and contingent
cases are; and whoever examines these heads of business apart, and
has any judgment in the particulars, will, I suppose, allow that a
stock of ten millions may find employment in them, though it be
indeed a very great sum.
I could offer some very good reasons why this way of management by
particular offices for every particular sort of business is not only
the easiest, but the safest, way of executing an affair of such
variety and consequence; also I could state a method for the
proceedings of those private offices, their conjunction with and
dependence on the general court of the directors, and how the
various accounts should centre in one general capital account of
stock, with regulations and appeals; but I believe them to be
needless--at least, in this place.
If it be objected here that it is impossible for one joint-stock to
go through the whole business of the kingdom, I answer, I believe it
is not either impossible or impracticable, particularly on this one
account: that almost all the country business would be managed by
running bills, and those the longest abroad of any, their distance
keeping them out, to the increasing the credit, and consequently the
stock of the bank.
OF THE MULTIPLICITY OF BANKS.
What is touched at in the foregoing part of this chapter refers to
one bank royal to preside, as it were, over the whole cash of the
kingdom: but because some people do suppose this work fitter for
many banks than for one, I must a little consider that head. And
first, allowing those many banks could, without clashing, maintain a
constant correspondence with one another, in passing each other's
bills as current from one to another, I know not but it might be
better performed by many than by one; for as harmony makes music in
sound, so it produces success in business.
A civil war among merchants is always the rain of trade: I cannot
think a multitude of banks could so consist with one another in
England as to join interests and uphold one another's credit,
without joining stocks too; I confess, if it could be done, the
convenience to trade would be visible.
If I were to propose which way these banks should be established, I
answer, allowing a due regard to some gentlemen who have had
thoughts of the same (whose methods I shall not so much as touch
upon, much less discover; my thoughts run upon quite different
methods, both for the fund and the establishment).
Every principal town in England is a corporation, upon which the
fund may be settled, which will sufficiently answer the difficult
and chargeable work of suing for a corporation by patent or Act of
Parliament.
A general subscription of stock being made, and by deeds of
settlement placed in the mayor and aldermen of the city or
corporation for the time being, in trust, to be declared by deeds of
uses, some of the directors being always made members of the said
corporation, and joined in the trust; the bank hereby becomes the
public stock of the town (something like what they call the rentes
of the town-house in France), and is managed in the name of the said
corporation, to whom the directors are accountable, and they back
again to the general court.
For example: suppose the gentlemen or tradesmen of the county of
Norfolk, by a subscription of cash, design to establish a bank. The
subscriptions being made, the stock is paid into the chamber of the
city of Norwich, and managed by a court of directors, as all banks
are, and chosen out of the subscribers, the mayor only of the city
to be always one; to be managed in the name of the corporation of
the city of Norwich, but for the uses in a deed of trust to be made
by the subscribers, and mayor and aldermen, at large mentioned. I
make no question but a bank thus settled would have as firm a
foundation as any bank need to have, and every way answer the ends
of a corporation.
Of these sorts of banks England might very well establish fifteen,
at the several towns hereafter mentioned. Some of which, though
they are not the capital towns of the counties, yet are more the
centre of trade, which in England runs in veins, like mines of metal
in the earth:
Canterbury. Salisbury. Exeter. Bristol. Worcester. Shrewsbury.
Manchester. Newcastle-upon-Tyne. Leeds, or Halifax, or York.
Warwick or Birmingham. Oxford or Reading. Bedford. Norwich.
Colchester.
Every one of these banks to have a cashier in London, unless they
could all have a general correspondence and credit with the bank
royal.
These banks in their respective counties should be a general staple
and factory for the manufactures of the said county, where every man
that had goods made, might have money at a small interest for
advance, the goods in the meantime being sent forward to market, to
a warehouse for that purpose erected in London, where they should be
disposed of to all the advantages the owner could expect, paying
only 1 per cent. commission. Or if the maker wanted credit in
London either for Spanish wool, cotton, oil, or any goods, while his
goods were in the warehouse of the said bank, his bill should be
paid by the bank to the full value of his goods, or at least within
a small matter. These banks, either by correspondence with each
other, or an order to their cashier in London, might with ease so
pass each other's bills that a man who has cash at Plymouth, and
wants money at Berwick, may transfer his cash at Plymouth to
Newcastle in half-an-hour's time, without either hazard,
or charge,
or time, allowing only 0.5 per cent. exchange; and so of all the
most distant parts of the kingdom. Or if he wants money at
Newcastle, and has goods at Worcester or at any other clothing town,
sending his goods to be sold by the factory of the bank of
Worcester, he may remit by the bank to Newcastle, or anywhere else,
as readily as if his goods were sold and paid for and no exactions
made upon him for the convenience he enjoys.
This discourse of banks, the reader is to understand, to have no
relation to the present posture of affairs, with respect to the
scarcity of current money, which seems to have put a stop to that
part of a stock we call credit, which always is, and indeed must be,
the most essential part of a bank, and without which no bank can
pretend to subsist--at least, to advantage.
A bank is only a great stock of money put together, to be employed
by some of the subscribers, in the name of the rest, for the benefit
of the whole. This stock of money subsists not barely on the
profits of its own stock (for that would be inconsiderable), but
upon the contingencies and accidents which multiplicity of business
occasions. As, for instance, a man that comes for money, and knows
he may have it to-morrow; perhaps he is in haste, and won't take it
to-day: only, that he may be sure of it to-morrow, he takes a
memorandum under the hand of the officer, that he shall have it
whenever he calls for it, and this memorandum we call a bill. To-
morrow, when he intended to fetch his money, comes a man to him for
money, and, to save himself the labour of telling, he gives him the
memorandum or bill aforesaid for his money; this second man does as
the first, and a third does as he did, and so the bill runs about a
mouth, two or three. And this is that we call credit, for by the
circulation of a quantity of these bills, the bank enjoys the full
benefit of as much stock in real value as the suppositious value of
the bills amounts to; and wherever this credit fails, this advantage
fails; for immediately all men come for their money, and the bank
must die of itself: for I am sure no bank, by the simple
improvement of their single stock, can ever make any considerable
advantage.
I confess, a bank who can lay a fund for the security of their
bills, which shall produce first an annual profit to the owner, and
yet make good the passant bill, may stand, and be advantageous, too,
because there is a real and a suppositious value both, and the real
always ready to make good the suppositious: and this I know no way
to bring to pass but by land, which, at the same time that it lies
transferred to secure the value of every bill given out, brings in a
separate profit to the owner; and this way no question but the whole
kingdom might be a bank to itself, though no ready money were to be
found in it.
I had gone on in some sheets with my notion of land being the best
bottom for public banks, and the easiness of bringing it to answer
all the ends of money deposited with double advantage, but I find
myself happily prevented by a gentleman who has published the very
same, though since this was wrote; and I was always master of so
much wit as to hold my tongue while they spoke who understood the
thing better than myself.
Mr. John Asgill, of Lincoln's Inn, in a small tract entitled,
"Several Assertions proved, in order to create another Species of
Money than Gold and Silver," has so distinctly handled this very
case, with such strength of argument, such clearness of reason, such
a judgment, and such a style, as all the ingenious part of the world
must acknowledge themselves extremely obliged to him for that piece.
At the sight of which book I laid by all that had been written by me
on that subject, for I had much rather confess myself incapable of
handling that point like him, than have convinced the world of it by
my impertinence.
OF THE HIGHWAYS.
