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dr.bob
169201.  Tue Apr 24, 2007 4:08 am Reply with quote

Quote:
Also, the first day of the year was altered from 25 March to January 1, creating even more problems because it upset the timing of annnual payments and complicating tenancy agreements.


Typical south-of-the-border bias! ;-)

As suze pointed out in post 119933, Scotland had already changed over to using January 1st as the start of the year 152 years previously. Another example of Scotland leading the way and England playing catch-up (blimey! I sound like an SNP candidate)

Though I guess such England-centric facts aren't too surprising given the source:

Quote:
S: Popular Disturbances in England 1700-1870, John Stevenson, Longman 1979

 
Flash
170272.  Fri Apr 27, 2007 5:30 pm Reply with quote

Mat points out that there might be a bit of Gen Ig (or at least a note) associated with the idea of being entitled to exchange banknotes for gold.

The Gold Standard (the rule that all currency in issue needs to be backed by government holdings of gold) is not used by any country in the world any more - it has been replaced by a fiat (faith) system which means that currency has value simply because a government says it has. In the UK the Gold Standard was dropped during the 1st WW, adopted again in 1925, then abandoned in 1931.

The principle objection to a fiat system is that it permits a government to effectively confiscate its citizens' money by inflating.

Did anybody labour under the misapprehension that it is still possible to go into a bank and demand gold to the value of their banknotes?

 
Gray
170283.  Fri Apr 27, 2007 6:52 pm Reply with quote

*sheepishly puts up hand*

 
MatC
170313.  Sat Apr 28, 2007 4:44 am Reply with quote

Flash wrote:
it has been replaced by a fiat (faith) system


So, does Fiat the car mean "faith"?

 
MatC
170314.  Sat Apr 28, 2007 4:45 am Reply with quote

Flash wrote:
Did anybody labour under the misapprehension that it is still possible to go into a bank and demand gold to the value of their banknotes?


"I promise to pay the bearer on demand" - what are they promising to pay me?

 
Flash
170349.  Sat Apr 28, 2007 7:06 am Reply with quote

MatC wrote:
So, does Fiat the car mean "faith"?


Actually no, because I was wrong in stating that it means that in the case of the currency. The word refers to the fact that the currency's value derives from a governmental declaration (fiat).

Quote:
Latin "let it be done", 3d person singular subjunctive present, from fieri, used as passive of facere to make.


And also because FIAT the car comes from Fabbrica Italiana Automobili Torino.

Sorry.

 
MatC
170350.  Sat Apr 28, 2007 7:15 am Reply with quote

Bloody Europeans, taking liberties with our language.

Doesn't the Pope issue fiats? I do find it rather quinteresting that the currencies of the world rest solely on "So mote it be."

 
Flash
170351.  Sat Apr 28, 2007 7:19 am Reply with quote

Quote:
The "...Promise to pay the bearer the sum of ..." on Bank of England notes has nothing to do with legal tender status. The promise to pay stands good for all time and means that the Bank will pay out the face value of any genuine Bank of England note no matter how old.

The promise to pay also holds good for damaged notes, as long as enough of the note survives to prove that it was genuine and no previous claim for it has been received. The Bank's mutilated notes department receives some 25,000 claims a year for anything from fire or water damage to notes eaten by all manner of household pets. ...

The first fully printed notes appeared in 1855 relieving the cashiers of the task of filling in the name of the payee and signing each note individually. The phrasing "I promise to pay the bearer on demand the sum of ..." was introduced at this time and remains to this day.

http://www.livingstonemusic.net/moneyscam.htm

Quote:
In the 18th Century, there was a clearing-house system of banking in the United Kingdom. Banknotes, which circulated as money, were issued by private banks. These bearer notes were claims on gold held by the bank - hence the common preamble which still persists in modern Bank of England notes, "I promise to pay the bearer on demand X pounds." In that time period, that promise was actually true: a person could take a note to the bank which issued it and ask for it to be exchanged for gold. Thus, for a long time, all paper notes were issued by private banks on the basis of the gold they had in their vaults.

In Scotland, however, there was a slight exception: banknotes often had a clause that allowed the bank to suspend convertibility. Although banks were legally required to pay the bearer in gold bullion, they could temporarily suspend that conversion should they find that necessary. The suspension clause in Scottish banks was the way that system responded to clearing house "bullying" trick - whereby several banks would surreptitiously hold back notes issued by bank Z and then, one day, they would all collectively unload the notes upon bank Z and demand redemption. Naturally, as it was a fractional reserve banking system, bank Z would not be able to redeem them all. If convertibility was required by law, then bank Z would have to declare bankruptcy. This sort of ruination by a clearing house cartel against a loner bank was not uncommon in Europe and North America. Thus, Scottish law allowed for a temporary suspension of convertibility. This clause, however, was banned in 1765 and henceforth Scottish banks were required to pay the full amount on demand.

However, in 1797, rumors that French soldiers had landed on English soil led to a widespread bank run in Britain. Customers hurried to their banks demanding immediate redemption of their notes in gold bullion. The British government, realizing the dangerous consequences of the run allowed banks to suspend convertibility of the notes issued by the Bank of England.

The crisis, then, was properly averted, but the government did not quickly restore convertibility. Rather, they permitted banks to continue issuing notes without necessarily respecting their convertibility into gold. An intellectual debate proceeded immediately as lawyers, bankers and statesmen lined up for and against the maintenance of convertibility of notes into gold. On the one hand, there were the "Bullionist" group, which argued for convertibility; arrayed on the other side were the "Anti-Bullionist" who preferred the status quo of suspension.


From a good article at:
http://cepa.newschool.edu/het/schools/bullion.htm

 
MatC
170355.  Sat Apr 28, 2007 8:07 am Reply with quote

Are clearing banks no longer called clearing banks?

 
Flash
170358.  Sat Apr 28, 2007 8:27 am Reply with quote

As far as I know they are.

 
MatC
170364.  Sat Apr 28, 2007 9:08 am Reply with quote

So - does that mean they're called it but they're not it?

 
Flash
170366.  Sat Apr 28, 2007 9:42 am Reply with quote

Yes, they are both it and called it, if I've understood you aright. A clearing bank is a bank which is a member of a clearing system, an organisation which sits in the middle of all its members and matches up deals. So if you write a cheque on your account at the NatWest in favour of someone who has an account at the Midland, and he writes one to someone who's with Lloyds and another to someone else who's with the NatWest then the whole lot gets thrown into the clearing system and netted off, and the clearing system says "NatWest owes us a million quid today, and we owe the Midland half a mil and Lloyds half a mill" or whatever.

Each clearing bank deals only with the clearing house, not directly with the other banks. And any bank which is not a clearing bank will have to access the clearing system via another bank which is.

 
MatC
170369.  Sat Apr 28, 2007 10:04 am Reply with quote

That's what I thought, but was puzzled by this:

Quote:
In the 18th Century, there was a clearing-house system of banking in the United Kingdom. Banknotes, which circulated as money, were issued by private banks.


That sounded a bit past tense.

 
Flash
170371.  Sat Apr 28, 2007 10:23 am Reply with quote

Oh, I see. Maybe a better way to express that would have been "By the 18th Century therewas already a clearing-house system ..."

 
dr.bob
170867.  Mon Apr 30, 2007 8:54 am Reply with quote

Quote:
In Scotland, however, there was a slight exception: banknotes often had a clause that allowed the bank to suspend convertibility. Although banks were legally required to pay the bearer in gold bullion, they could temporarily suspend that conversion should they find that necessary. The suspension clause in Scottish banks was the way that system responded to clearing house "bullying" trick - whereby several banks would surreptitiously hold back notes issued by bank Z and then, one day, they would all collectively unload the notes upon bank Z and demand redemption. Naturally, as it was a fractional reserve banking system, bank Z would not be able to redeem them all. If convertibility was required by law, then bank Z would have to declare bankruptcy.


After the Bank of Scotland's monopoly expired in 1716, the Royal Bank was set up in 1727 and they tried exactly this trick to force a take-over of BoS. The Royal Bank was aided and abetted by merchants who thought that BoS were being stingy with credit, and by the English government who were worried that the BoS supported rebellious Jacobites.

After suspending conversion of their notes for a while, BoS came up with a cunning plan to ward off this kind of attack in the future. When their banknotes came back into circulation they added an "interest option." Basically this said that, upon presentation of the note to the bank, the bank could choose to either pay the bearer the value of the note there and then or, alternatively, pay the bearer the value of the note plus 5% interest in six month's time. The mere presence of this clause killed off the idea of creating a run against the bank, and so the bank was not forced to actually use this option. The Royal Bank followed suit to prevent a run against their currency until the contentious clause was declared illegal in 1765.

s: http://economics.about.com/cs/moffattentries/a/scot_banking_2.htm

 

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