An Example of Communal Currency: The facts about the Guernsey Market House

CHAPTER VIII

Chapter 92,849 wordsPublic domain

THE END

One can imagine the enthusiasm and the satisfaction with which the majority returned home. One anticipates a triumphant report in the Bailiff's best vein; and expects that the banks will in future have to confine themselves to the operations permitted to English banks, while the States restore equilibrium by causing the withdrawal of superfluous notes and confining future issues, once again entirely in their own hands, to quantities proportioned to the needs of the island.

With surprise, the subsequent proceedings are found to be on quite different lines. Truth is stranger than fiction. The prosaic facts are as follows:--

The Bailiff in presenting his _Billet d'Etat_ to the States Meeting, 29th March, 1837, reported on the arrangement made by the Committee with the two Banks. He brought forward no proposition on the matter on which the States should deliberate. He simply states that:--

"After some preliminary conferences the Committee received the following letter:--

'To D. De Lisle Brock, Esq., Bailiff, etc., etc., etc., Guernsey, 8th Oct., 1836.

Sir,

To settle the differences now existing between the States and the Banks, and to promote an amicable adjustment between them, we propose:

That the States should withdraw immediately L15,000 of their Notes, nor have at any time more than L40,000 in circulation, give up all Banking transactions, and cease to collect the notes of the Banks.

In consideration thereof the Banks engage whenever they draw bills either on London or Paris, to take States' Notes for one half at least of their amount and to pass them to the public as their own.

The Banks further engage to supply the States annually with L10,000 in cash, each bank to provide for one half, by payments of L250 at a time, and this free of expence and in exchange for States' Notes.

The above agreement to remain in force until three months notice be given by either party to the others to annul the same.

We remain respectfully, Sir,

_Signed_ for Priaulx, Le Marchant & Co. Thomas D. Utermarck, Abraham J. Le Mesurier.

For the Commercial Banking Co., H. D. G. Agnew } T. De Putron } Managers.'

"And asked M. Le Bailiff to reply as follows:--

'Court House, Guernsey, 9 Oct., 1836.

Gentlemen,

The Committee named by the States on the 21st September for the purpose of conferring with the Banks which you represent, on the subject of the one pound notes current in this island, have taken into consideration the proposals which you have transmitted to them, under yesterday's date, 8th Oct.

The Committee adopt those proposals as the basis of the arrangement so desirable to be entered into, and from this day to be in force between the States and the Banks.--They do so, because the States may at any time, within 3 months, release themselves from the obligations which that arrangement imposes; and above all, because the sacrifice of pecuniary gain on the part of the States which it may deem to occasion, will be more than compensated by the harmony and good feeling which it will tend to promote among the inhabitants, and which constituting the chief happiness of a well regulated community, can hardly be too highly estimated.

With sentiments of a like friendly nature, sincerely entertained by the Committee towards yourselves, and the rest of their fellow citizens,

I have the honour to be, Gentlemen,

Your obedient humble servant

Daniel De Lisle Brock, President of the States' Committee.'

"In consequence of this arrangement the Committee decided that L10,000 sterling of the total one pound notes in circulation on account of Fountain Street should be withdrawn as a Savings Bank loan at an interest of 3 per cent. per annum. Also that five thousand of those forming part of the old debt, called the Permanent Debt, should be withdrawn to be converted into obligations at 3 per cent. per annum."

In the discussion at the States Meeting on a proposition to authorise the payment of a sum spent on repairs to the coasts, there were references by three Members of the States to the fact that the expenditure of the States would be increased by having to pay interest on the 15,000 L1 notes withdrawn from circulation.

The same fact is alluded to in a few words by Daniel De Lisle Brock himself in his _Billet d'Etat_ to the States, 20th September, 1838. Commenting on the Finance Committee's Report, he tabulates five items of annual loss, among which is found the terse remark, "The founding of the commercial banks causes an annual loss of L450."

Although the States thus agreed not to issue any more Notes, to complete the history it should be recorded that these L40,000--to be perfectly accurate the total amount in 1906 was L41,318--are still in circulation in the Island.

CONCLUSION

As stated in the Introduction, the writer has determined, though somewhat tempted, not to discuss the interesting and debatable points that arise from a consideration of this subject. He is satisfied, for the present, with placing the facts before the public. He leaves those facts for abler minds than his to make such use of as they may desire. Great care has been taken to record only that for which there is chapter and verse.

But he would like, in conclusion, to remark that it seems to him that the States, even to-day, still derive some little benefit from having a portion of their "Debt" on which they pay no interest. This may be gathered from the following table made up from facts taken from the _Billet d'Etat_ presented to the States 22nd August, 1906, at which meeting the writer was an interested spectator.

Summary of the indebtedness of the States of Guernsey:--

------------------------------------+------------------+--------------- | Balance 31 Dec., | Interest paid | 1905. | during 1905. ------------------------------------+------------------+--------------- | L | L States General Account Obligations | 68,570 | 1,953 19 3 Special Loan Obligations | 57,500 | 2,295 0 0 Notes of _20s._ each payable to | | Bearer | 41,318 | nil "Rentes" estimated capitalised | | indebtedness thereon | 7,059 | nil Departmental borrowings | 33,000 | 965 8 0 | | Paid by Depts. | | to General | | Account. +------------------+--------------- Total indebtedness | L207,447 | ---- ------------------------------------+------------------+---------------

The circulation of these Notes in the Island to-day is, if nothing more, an interesting relic of an interesting financial policy which certainly was in vogue in Guernsey for over 20 years (1816-1837).

The mystery surrounding the abrupt catastrophe is yet undeciphered and is likely to remain so, as there seems no material from which to glean what took place during those few but momentous days between the 21st September and 9th October. Was there treachery? was it but the inevitable fate of the "best-laid schemes o' mice and men"? or was it a unique and deplorable economic tragedy?

APPENDIX

We have not yet discovered anything with reference to a successful plan at Bath to which Daniel de Lisle Brock here alludes (see page 40). We assume the reference to Liverpool is to the fact that during a time of financial panic the Liverpool Corporation was empowered by Statute 33, Geo. III., c. 31 (10th May, 1793), to issue notes of L5, L10, L50 and L100 for value received or other due security.

This Act entitled "An Act to enable the Common Council of the Town of Liverpool in the County of Lancaster on behalf of and on account of the Corporation of the said Town to issue negotiable notes for a limited time and to a limited amount," was passed after the Corporation of Liverpool had failed to obtain a loan of L100,000 from the Bank of England.

The L50 and L100 notes bore interest not exceeding the lawful rate and at 12 months' date. The L5 and L 10 notes were payable to bearer on demand without interest. The total issue was at no time to exceed L300,000. Returns had to be forwarded to the House of Commons from time to time. From one of these returns we learn that the notes issued to 28th February, 1795, amounted to L140,390, based on security valued at L155,907 16s. 6d. In a report forwarded 23rd April, 1794, it was stated that L52,985 worth of notes were in circulation at that date.

Great care was taken in the issue of the notes. The Committee of the Corporation that was responsible for the same met daily.

In order to give a wider utility to the notes, London correspondents were appointed and a large number were made payable in London. This made it possible for the Corporation itself to apply to the Committee for a large loan of L50,000.

The security on which advances were made were very various. It included cotton, timber, iron, hops, whale oil, bills of exchange, ships on the stocks and the Alt rates.

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For further particulars of this interesting incident, the reader is referred to Sidney and Beatrice Webb's _English Local Government_: "The Manor and the Borough," p. 485, and to E. C. K. Gonner's Article, "Municipal Bank Notes in Liverpool, 1793-95," which appeared in the _Economic Journal_, Vol. VI., 1896, pp. 484-487, to whom the writer is largely indebted for the above facts.

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100 YEARS AGO

Guernsey Experimented Successfully with Communal Currency,

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