Competitive Banks of Issue. 
883 
Illustrations of such a course of events were obtained from the 
history of the Bank of England and of France. * 1 The power 
intrusted to a single establishment, as in the case of the banks re¬ 
ferred to, may easily be a disastrous one to the credit of the public 
outside of itself, for as Lord Overstone said, a private banker, 
if he mismanage, must suffer the penalty and be bankrupt, but 
if the Bank of England mismanage it can save itself at the ex¬ 
pense of the entire country. 2 
A large portion of the influential school of economists who 
argue for the advantages of freedom in trade, have applied this 
principle throughout, to every department of industrial activity. 3 
Competition it is thought can as effectually check unsound and 
dangerous practices in the issue of bank notes as in any other 
form of business enterprise. Chevalier thought those who 
opposed the freedom of banks also opposed the construction of 
railroads and the freedom of exchange. 4 A single bank of issue 
tends to rest its credit upon the deposits lying in its vaults. 
Competitive issue will, however, confine the extent of note emis¬ 
sion to capital stock and legitimate resources. 5 A monopoly 
bank, attempting to force as large an issue as possible into cir¬ 
culation, cheapens the price of credit. While this directly tends 
to promote speculation, it throws some portion of the money of 
private capitalists out of employment. This money flows into 
the bank, and the latter, unwilling that it should lie idle, in¬ 
creases still farther its advances to the public. Thus a process 
of displacement goes on during the progress of which an enor- 
banks, it would not be difficult for them in like manner to bring back 
their finances to a state of order. 
1 Bank of France in 1805,1314, 1870-71. Bank of England, 1797,1803, 
etc.,Cf. Chas. Gide “Prin, of Pol. Econ.” (Trans.) Boston, 1892, p. 310. 
2 Report of committee of H. of C. on commercial distress, 1847-48, N. 
5192. 
3 The school of free competition would remove the issue of legal ten¬ 
der notes from the category of state functions. The tendency at the 
present time is, however, in the opposite direction. Some form of the 
privileged bank system exists at present in Holland, Belgium, Austro- 
Hungary, Russia, Denmark and Norway as well as in France and Eng¬ 
land. 
4 Wolowski, “Journ. des Econ.,” vol. 41,1864, pp. 165-166. 
5 Coquelin “Rev. d. d. Mondes,” vol. 24,1848, p. 459. 
