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case cash is wanted, for large amounts, it will not be gold, but it will be Bank of England notes. Practical, small, everyday considerations determine this matter. If a man wanted £10,000 in cash, even in a crisis he would hardly bring a wheel-barrow to take away 10,000 sovereigns. But would the notes be wanted? The possession of cash would inspire confidence. Bank of England notes are practically State notes. They are based as to £16,800,000 on a debt due by the nation to the Bank of England--as to anything beyond that amount in gold.
A central stock of gold implies free money, unemployed money. We propose to ask all the banks in their own individual interest, and in the interest of the State, to keep 15 per cent. or a percentage of cash-gold-unemployed. That is the banking problem. But this is not all; we can see, the world knows, that the Bank of France holds 121 millions of gold, that the Bank of Russia holds 93 millions, and the Imperial Bank of Germany 45 millions, and that, broad-based upon these vast accumulations, the national finance of those countries is safe, even if a few millions are drawn out to pay the foreign debts of the moment.
We are differently placed-our system is unique-insular. We have many banks, some great, some small. How can each of them preserve that individual freedom in the management of its resources which is implied in a separate existence, and at the same time, let its reserves go to swell the grand national total of the central stock of gold?
One solution seems to me simple. Keep reserves in Bank of England notes. If the banks had 117 millions cash in hand, some 60 millions of it, under such a scheme, would go into the issue department of the Bank of England, or if some lower scale were adopted there would be a proportionately smaller amount held. We should in this mode show the central stock of gold—the free cash to meet sudden calls; the key-stone of English finance would stand clearly visible. No rush for 3 or 4 millions would cause alarm. It is free cash unemployed—visible, that is wanted. Pray let me reiterate. If the banks held their reserve in Bank of England notes, they would have an absolute control of the money, and the Bank of England, as agent for the State, would take care of the gold, but as banker the Old Lady of Threadneedle Street would have no concern, part or lot in the control of these reserves.
We often speak of the effectiveness or ineffectiveness of the control of the Bank of England over rates for money; that controlling power exists, because the bank has in possession the only large store of loanable cash. What would be the effect of a large addition to the cash provision of the banks, individually and generally, and of their holding a large store of unemployed cash ? Is it not probable that if each bank kept its reserve in notes (but this must be true of keeping a percentage in any form), changes in discount rates would follow the natural course of the market, that is to say, the possession of surplus means would lower rates, the effort to maintain declining reserves caused by a foreign demand, or a foreign drain, would bring more demands upon the market, and thus cause a gradual hardening in the value of money? This is a natural way of dealing with differences in the supply of loanable capital.
The banks would endeavour to maintain the percentage of reserve, and this would probably cause rates to move with evenness and regularity, and at the same time, act on the exchanges more quickly. You restore by united action the banking control over the foreign exchanges which the Bank of England is too small herself to secure. No drastic change can be made in a moment : but examination of the problem, with the resolve to find and prudently apply a remedy, can begin. We can get the gold if we pay for it. Foreign Governments and banks have solved similar problems; why not English bankers? I have previously suggested that the Bank of England will naturally be taken into council in any arrangements to be made, and in connection with the scheme for holding reserves in notes, her co-operation would be invaluable. As gold came on to the market the Bank of England could assist the banks to buy it as the basis of reserve.
I have asked three main questions, viz. :(1). Do we need a larger stock of gold? and on the evidence I
have answered in the affirmative. (2). Where should the central stock of gold be kept ? I have
suggested an answer, viz. : In the Issue Department of
the Bank of England. (3). Do bankers generally keep a sufficient percentage of loose
cash ? and I have answered that in the negative, and
given reasons. We need to weigh the possibilities of what Mr. Goschen called our condition of “unpreparedness.” We should aim at keeping our free market for gold on so broad a basis, that the unemployed money of the nations shall continue to come here for employment and with the certainty that when it is asked for it will be repaid.
We should aim at such a condition of affairs, that the ordinary employment of money in the short loan market and on the Stock Exchange shall not on the first call for a few millions need to be disorganised by the withdrawals of the banks; and that it shall not be the necessities of bankers themselves that induce commercial distrust.
The possession of adequate cash reserves means this, that in times of crisis or of panic, the first anxiety of the banker would be, not his own security, but to ensure, by prompt action in helping his own circle of customers, the stability of the mercantile community, which he would be able to calm because he had in his possession unemployed money which he was willing, and was able to use in support of credit during the always brief madness of panic.
To keep adequate cash reserves is a duty that bankers owe to the State.
GEORGE H. POWNALL
The Elements of Sociology. A Text-book for Colleges and
Schools. By FRANKLIN HENRY GIDDINGS, M.A., Ph.D., Professor of Sociology in Columbia University, New York. (New York: the Macmillan Company.) PROFESSOR GIDDINGS' “Elements of Sociology
Elements of Sociology” is written “in response to a persistent and growing demand for an untechnical but scientific and reasonably complete statement of sociological theory, for the use of college and school classes." I do not quite know how much “untechnical” is intended to qualify the meaning of "scientific," or “reasonably " the meaning of “complete": but both qualifications must be taken to be very large before we can say that Mr. Giddings' book satisfies the demand described. I do not mean to deny it important merits. It is throughout intelligent, independent, suggestive, and manifests an unaffected enthusiasm for social progress, and on the whole a just and sober apprehension of the conditions and essential features of such progress. So far as the aim of an elementary treatise on Sociology is to habituate the reader to take the point of view of the science, and to give him useful general ideas, many of which will be more or less unfamiliar, the book seems to me likely to achieve the desired result. But if the aim be to teach precision of thought and sound methods of reasoning on this difficult and complex subject, I can hardly regard it as successful. The analysis is too loose, the generalisations too hasty, there is too much disposition to propound doubtful conjectures as established truths; and, here and there, I find what seem to me curious misrepresentations of familiar historical facts.
I may add that the peculiarities of the author's fundamental view render the book specially ill adapted to provide the intending student of Political Economy with a satisfactory groundwork of social doctrine before he proceeds to his narrower studies of economic relations and laws. The "unit of investigation," in Mr. Giddings' view of Sociology, is the individual “socius," and the essential characteristic of a socius is that he is conscious of and cultivates “ like-mindedness" with other “socii.” Accordingly, throughout the work, a one-sided attention is given to the conscious similarity of human beings: their mental and other differences are not indeed ignored, but they continually receive scanty and inadequate notice. We are told, e.g., that the likeness of human beings is “the basis and cause of social cohesion or unity." Now, as I need hardly say, in any analysis of human society, or history of its development, from an economic point of view, the differences in the qualities and habitual activities of human beings and in their relations to their environment must be prominent from first to last, as causes and effects of economic phenomena.
Nor is it only the economic side of social relations that tends to be thrust into the background by Mr. Giddings' undue stress on the consciousness of similarity: the strictly political aspect of society suffers a similar obscuration. He defines a society as " a number of likeminded individuals who know and enjoy their like-mindedness,” and "cultivate acquaintance and mental agreement”: and tells us that if a number of tolerably like-minded individuals live within a “fairly defined” geographical area,-so that they “ may be called a population"-the “habit of cultivating acquaintance and like-mindedness will extend through the population, so that the population will tend to become a single social group or “natural society.” But this altogether ignores both the cohesive and the separative forces that, in all stages of human development up to the present, have been exercised by the consciousness of membership of the same political society.
A close criticism of a book at once so comprehensive in scope and so slight in its treatment of large and difficult questions would, I think, be out of place here: but the following brief survey will give the reader some idea of its contents.
About two-fifths of the book—Chapters V to XV—are almost entirely concerned with what may be called Sociopsychology. Chapter V gives a classification of the “practical activities of socii,” distinguishing as the primary activities, (1) appreciation or valuation of things and persons, (2) utilisation of which economic activity is a “ moralised and socialised form ”—(3) characterisation, which “consists in so shaping one's own character as to make it more and more nearly adapted to the kind of world in which one lives," and (4) socialisation, consisting in the systematic development of acquaintance and of helpful social relations." Each of these activities is conceived as having its own motive or motives and its own methods,-an attempt being made to separate the motive of utilisation, as “ appetite," from the pleasures of sensation which supply the first motive of “appreciation.” The primary motive of socialisation is the “pleasurableness of acquaintance, companionship, and sympathy"; the "usefulness of social relations” being strangely treated as "secondary and subordinate.” The three first-mentioned activities might be carried on non-socially, but in fact, they are importantly modified by socialisation, -1.c. by the assimilation due to “ the consciousness of kind," defined as “that pleasurable state of mind which includes organic sympathy,