or in round figures, say one-sixth of each of the first two classes, and two-thirds of the last. The very small proportion of the first class of bills may be corroborated by another consideration. The average daily amount passing through the London Clearing House last year, excluding "Fourths of the month " and "Settling days," was nearly 15 millions sterling. The average of the "Fourths "was 18 millions, giving only 36 millions extra during the year, and although, of course, that is but a small proportion of the small trade bills, yet, considering that the total bills created during the year amounted probably to more than 1,300 millions sterling, it shows that, although a very numerous class, one-sixth of the whole is a full estimate. Upon these facts I have therefore estimated the deduction from the full amounts covered by the stamps sold, as The result thus obtained has been submitted to the test of the opposite method of reasoning. The greatest possible difference in bills drawn upon any given denomination of stamp is at once obvious, and the mean difference not less so. It is most probable that in any extended series of transactions, at least any so extensive as the whole commerce of Great Britain, the bills above the mean would balance those below it, unless there were any tendency to draw bills for special amounts which might disturb the average. To whatever extent such a tendency may exist, it is in the direction of drawing for round or even amounts; and if the cost of the stamp is considered at all it is certainly with a view to economy. Therefore we may assume, with considerable probability, that if the average amount drawn should vary from the mean difference, it would be somewhat in excess thereof. A 9d. stamp would cover £75, the least amount drawn upon it would be a fraction over £50, the greatest difference £25, and the mean difference £12. 10s.; giving a deduction of one-sixth or per cent. on £75. 16.66 On a 28. stamp the mean difference of £50 would represent 25 per cent. on £200, the full amount covered; but in larger amounts the proportion rapidly decreases till upon a 50s. stamp the mean rate of deduction is no more than 1 per cent. Taking then the year 1876-7, the latest for which the numbers of each denomination of stamps sold are yet obtainable, and applying this method to each class of stamp, we have a calculation, which though simple as to form is of considerable length, and of which three lines will be sufficient to give here: 10 10 0 810,749 S10,749 81,074,900 75 100 12 10-12% 10,134,362 172,3701,723,700 172,370,000 1001,000 50 0 5% 8,618,500 The net result for the year quoted gives as the probable amount of bills created £1,374,425,920. By the first method we have Value of stamps, £780,434 x 2000-12% = £1,373,563,840. Although the amounts thus obtained are in excess of former calculations, the agreement between the two results is, I would submit, sufficient to reassure us as to the correctness of the estimate; and more especially as the effect of any disturbing tendency would go to increase the amount. Further, on the same point, I must note that 1s. and 2s. stamps, on which we have reckoned considerable deductions, are frequently used to affix to foreign bills of much larger amounts. Calculation upon the above formula will, however, carry us back only to the year 1870; for the years 1854-70 the computation is disturbed by the arbitrary scale of duties on bills above £500, viz.: It was the comparatively small rate of variation between largest and smallest amounts covered by the stamps in this class of bills that materially reduced the general rate of deduction in the estimate just discussed, and it is evident, therefore, that a considerable allowance must be made for the peculiarities of the scale 1854-70. It is, however, probable that to some extent the difference was modified by splitting the amounts drawn for; thus £600 would most likely have been drawn in two amounts upon a 58. and a 18. stamp, instead of upon one for 78. 6d. In order to make a full allowance for the difference, I have therefore deducted, for the years. prior to 1870, 3 per cent. more, making 15 per cent. The results of these calculations, viz: 1858-1869 @ value of stamps × 2000-15 per cent. are given in Table I., Column 3. Whilst these may be taken with, I think, tolerable confidence, as the amounts of bills created in the respective years, we must briefly inquire what proportion was probably in circulation at any one time. In previous calculations the average tenor of the bills formed an important element, but I can hardly pretend to give now any estimate in that respect. Our inquiry, extending as it does over 20 years, renders it probably impossible to make any reliable calculations. The tenor of the bills drawn in any trade will vary somewhat with the state of trade, lengthening when business is slack, shortening when it is brisk. Besides, in such a period as twenty years the practice of trades may vary, as is shown by the important alteration in the usance of the Indian and China trades during the last few years. Again, whatever might be the average with regard to the number of bills, it would probably alter very much when amounts were considered, larger amounts tending towards longer dates. But, although it might possibly be not altogether wide of the mark to assume the average tenor to be three months, and one-fourth of the annual amount to be extant at any given time, the amount in circulation would be altogether a different question. Whether bills of exchange are, or are not, currency, has been in former years the subject of much controversy; but, whatever may be the decision with regard to these instruments in the abstract, I think it can hardly be denied that practically they are not always so. It is well known that a large proportion, both in number and amount, of bills are created mainly for the purpose of discounting, and of these again a considerable portion within a short period. reach the hands of London bankers. It is a maxim, I believe I might say an inflexible maxim, with London bankers never to re-discount; therefore, when once bills are lodged in their bill cases they are practically no longer currency, any more than are debentures or other definitely terminable interest-bearing securities-not so much so in fact as are Exchequer Bills. The amount of bills thus permanently withdrawn from circulation during probably three-fourths of their existence must be very large, as may be seen by the following figures : Discounts of Six London Joint Stock Banks, stating their discounts separately Do. of Six London Joint Stock Banks (including Bank of England) at say one-half their total advances £15,879,000 33,160,000 £49,039,000 To this we might add the amounts of acceptances of London Joint Stock Banks, other acceptances being most generally held against them, = £13,919,000-which with a moderate estimate, for the private bankers, would bring the total in the hands of London bankers to not less than 85 millions sterling. The whole of these bills may be said to be purely investments, differing only from other investments in that the interest has been paid beforehand, and that they are not likely to be sold or dealt in further than by presentation for payment at maturity. The same is probably true of the bills held by some of the large country banks, and particularly by the Scotch and Irish banks, in which case, as the latter have between them some 40 millions of discounts, the above figures might be very considerably increased. There is another class of bills, bankers' short-dated drafts and bank post bills, which are perhaps more entirely in circulation, and of which the amounts are given in Column 4. The average circulation of these bills in England and Wales may be calculated with tolerable precision; but it is impossible to quote the amounts for Scotland and Ireland as the duty is not paid in London and is subject to special arrangements. On examining the third column of the above table, we can trace no special features that may be ascribed to the influence of banking arrangements, nor should we expect to find any appearance other than steady increase, notwithstanding temporary fluctuations due to good or bad seasons. The last column, however, exhibits fluctuations, but without general increase; and this, I think, we may fairly attribute to the increased use of cheques generally, and more particularly to the facilities afforded by the Country Cheque Clearing, which has rendered country cheques available for remittances that were formerly made by bankers' drafts. Attention will naturally be attracted by the remarkable increase in the amount of these drafts in circulation in 1877, I should therefore mention that the next year shewed a decrease no less remarkable, the average amount being £2,609,000, or less than any other year quoted. |