CURRENCY. 131 



the goldsmiths became the recipients of customers' balances, 

 and joined the function of bankers to that of dealers in 

 plate. For deposits left with them they gave receipts, which 

 were naturally transferred from hand to hand, and became 

 a paper credit based on the security of cash. As these gold- 

 smiths' notes circulated, the banker who issued them, and 

 got experience of how they were employed in currency, 

 learnt that his liability to the depositor was only to pay him 

 the equivalent of his deposit, and not cash so to say earmarked 

 for him. Then he gradually came to see that the amount 

 of cash which he must keep in hand to meet current demands 

 was only a fraction of his liabilities, and that he could em- 

 ploy his customers' balances for his own advantage, as long 

 as his notes would continue in circulation. 



The profits made by the bankers were very large, if we 

 can trust the statements made about the rates at which they 

 discounted foreign and home bills. But the rate of exchange 

 was liable to very severe fluctuations, and the goldsmith who 

 had discounted foreign bills might very well find that the 

 profit which he expected on a discount might be suddenly 

 extinguished, or even turned into a loss by the fluctuations 

 of the market. Besides, they distrusted even their own 

 strong boxes, and sought a safer place of deposit. In 1672 

 the goldsmiths had deposited over ; 1,300,000 in the Ex- 

 chequer. Charles, who had just got an enormous grant from 

 Parliament, as grants at that time were reckoned, seized on 

 the goldsmiths' money, or rather that of their customers, and 

 appropriated it. He promised to repay it with interest, but 

 though he paid interest for a short time, he dropped the 

 interest soon, and never troubled himself about the principal. 

 The goldsmiths' debt, as it was called, was acknowledged in 

 1701, to the extent of a moiety, and is in origin the oldest 

 part of our public debt. 



Now the seventeenth century was emphatically the age of 

 joint-stock enterprise, and what one man or a private part- 

 nership could do, an association of traders could do equally 



