A LETTER 
 on the 
 
 Propose* New 
 COLONIAL FUNDING SYSTEM. 
 
 William BANCKS. 
 
 Bewdley Mills, Rice Lake, 
 
 Deo ember 10, 1836. 
 
 To the Editor of the 
 Upper Canada Herald. 
 
 ft. ' 
 
 A' 2 7 
 
A BETTES 
 
 ON THE 
 
 PROPOSED NEW 
 
 COLONIAL FUNDING SYSTEM. 
 
 Bewdley Miels, Rice Lake, 
 December 10. 1836. 
 
 To the Editor of the Upper Canada Herald. 
 
 Sir, 
 
 The polite attention with which you favored 
 my last communication, causes me to anticipate the 
 pleasure of seeing y;ur early notice of ties. I am 
 not going to give any further statements in support 
 of my finance system, which lias been so often 
 before the public ; the principles are now being 
 acted upon, and I have little doubt of the system 
 ultimately being generally adopted. At present I 
 want to solicit your attention, and through your 
 medium, the attention of the public, to a plan for 
 forming a Colonial Funding System. The liberal 
 grants which are now being made by the Parlia- 
 ment, and the necessity for the immediate applica- 
 tion of those grants for the advancement ol the 
 country, make the subject of the best manner to 
 procure the “ways and means” one of great import- 
 ance. My finance system, by introducing a cur- 
 rency drawn upon time instead of treasure, I am 
 perfectly aware is not at all understood by many; 
 by many mis-understood, and by many seen m 
 noints of view not exactly consonant with t heir ideas 
 of their own interest. Far from shunning discussion, 
 1 court even criticism on any subject I write on 
 
, - 
 
 t/ 
 
 f) 
 
 nublicly, but allow me to say there is a vast differ. 
 
 If justice over 
 
 ^5^S'.b£S - ";“r»r 
 
 to about £500,000, be it more or less, no conse^ 
 quence to the argument, bu say £30- 
 
 indebted half a million, if consequently has £dU, 
 000 per annum to pay for interest besides be^g^n 
 
 a state of surveillance to its creditors. 1 art o my 
 plan is to convert this debt into a Stock _ bearing 
 per cent, interest; the due payment of ‘h‘ 3 interest 
 should be guaranteed by the Government »nd mo 
 be found by taxes on the Colony. I am aware y 
 this means the interest is at present raised, but if 
 this stock, or any part of it, be sold, the government 
 avoids the onus of the debt to the amount sold, and is 
 responsible only tor the interest. It wi e s te 
 who are to be the purchasers of this slock . Cer- 
 tainly the present creditors of the Government 
 should have the first offor to purchase, and if it 
 were not all bought up by them, op:n the sale to the 
 public. Except it were bought by individuals re- 
 siding in the Province, in expectation of the slock 
 rising in the market, many emigrants newly arriv- 
 ing in this country would be glad to avail themselves 
 of an opportunity of being able to place their surplus 
 or not immediately required capital so safely, and at 
 the same time receive full legal interest for it. iou 
 will say many will be fearful to invest because there 
 is a possibility this stock may fall m the market, 
 and consequently they may lose the difference; this 
 stock I assert cannot be depreciated below par, whilst 
 the Government remains at all stable, and its secu- 
 rities bear 6 per cent, interest, instead of a deprecia- 
 
3 
 
 tion taking place, l will endeavor to prove there is 
 every probability of this stock rising in the market, 
 but of this further anon. I will now take a review 
 of the result of this operation. Suppose the pre- 
 sent Government creditors buy all the stock, the 
 single advantage to the country is its freedom from 
 the onus of the debt, being only bound to pay the 
 interest. This in itself is a desideratum, and the 
 creditors are as well off, for where the principal 
 cannot be paid, every one must be satisfied with the 
 punctual payment of the interest. Is not the whole 
 of the funded debt of Great Britain on this prin- 
 ciple? Do you think it would be wise or polkic to 
 liquidate our national debt? 1 decidedly say no . — 
 I am prepared to prove my opinion, but this is 
 wandering from the subject. Allowing all this 
 stock had been taken by the Province creditors, is 
 it not reasonable to suppose many other persons 
 who did not stand in that situation would be glad 
 to purchase this description of security? There 
 is no necessity for any supposition on the subject, 
 for there are many such persons, which being the 
 case, this stock must rise in the market, then I 
 recommend the Government to create a fresh stock 
 to the amount of £500,000 bearing 5£ per cent, 
 interest, let this transanction, if necessary, have the 
 Imperial sanction, and let the responsibility of Eng- 
 land be pledged for the due payment of the interest. 
 The way to create this stock is for the Canadian 
 Government, to declare it will give its liabilities to 
 the amount sanctioned by Parliament, (£500,000,) 
 and presuming there are applicants that purchase 
 the whole of this stock, a query arises, what is to 
 be done with the purchase money? My plan of 
 outlay is, the Government should advance the sum 
 it had leceived for this stock to various companies 
 who would give approved security for it to effect 
 public improvements at G per cent, interest, with 
 the understanding the repaying of the principal 
 should be at the option of the borrowers so long as 
 the interest was regularly paid ; the Government is 
 
4 
 
 enabled to do so, it receives on this principle, and 
 can consequently lend on it. You perceive my 
 system has first relieved the public from the burden 
 of the debt, and limited its responsibility to the inte- 
 rest only, consequently saving the contingency of 
 interest, it is free from obligation, and this new 
 stock does not involve the Government, because 
 the money it borrows is lent out on undeniable se- 
 curity, bearing a higher interest than it wives. 1 
 have a twofold object for making a difference in the 
 interest of these two stocks. I will call one the 
 ‘‘ De i ),t btock »” and lhc other the " Loan Stock.” 
 JNly first reason for making the difference between 
 the interest allowed and the interest received of 
 ha f pei cent, was, that the undertaking should pay 
 the expense of the conducting, and secondly it 
 would be giving the present public creditors half 
 more interest than the purchasers of the loan stock. 
 
 1 he advance th»j Government makes to the bor- 
 rowers of its funds will be metallic, or the notes of 
 companies made payable on demand,— for its own 
 obligations it receives nothing else therefore,— it 
 wifi not be necessary for it to avail itself of my time 
 currency , but you see the principles of my time 
 currency acting throughout this system— the Go- 
 vernment sells without capital, and lends without 
 capital. Suppose this Loan Stock of £500,000 be 
 all disposed of, the natural tendency of this stock 
 will bo to rise in the market, consequently the first 
 purchasers have the best chance to derive benefit 
 ,r °m a rise. Suppose this stock advances from par 
 to 110, there must have been a gain to the country 
 from the original price of £50,000. So soon as 
 stock had borne a premium of 10 per cent, or up- 
 wards, for two months, I would advise the Govern- 
 ment then to create, or more properly add to its 
 . oan ktock a further sum of a million, and appear 
 m the market as sellers. A superficial observer 
 will say by so doing I shall depreciate the price of 
 stock already in the market. Nothing of the kind, 
 the Government should not sell this new stock for 
 
5 
 
 jess than 110, therefore it only prevents the rise of 
 stock until it has disposed of i ts last addition. Now 
 Sir, I think I can call your attention to a feature in 
 this system that perhaps you are not aware of, that 
 is, the immense revenue the Government begins to 
 derive from it. Say it sells a million of stock at. 
 110, it only issues its obligations at par, or gives 
 £100 of stock for £100, and merely pays the inte- 
 rest on £100; — thus the public gain ten pounds on 
 every hundred, or £100,000 by the sale of a million 
 of stock. It may be said it is only supposition on 
 my part that thi3 stock will rise. Allow me to ask, 
 was not our three per cent, consols issued at 60 as 
 par, and is not ihe same stock now 90 or upwards 1 
 consequently there must be a profit of fifty percent, 
 on the original stock to any who bought at par, 
 therefore this stock must have been the means of 
 immensely increasing the wealth, and consequently 
 the prosperity of the country. Bur. our Canadian 
 stock would prove a source of profit to the Canadian 
 public the public of Great Britain do not enjoy; — 
 their stock was created to borrow money that was 
 laid out, though in necessary not profitable ways, 
 and to pay debts already contracted. Now ail our 
 stock, with the exception of the present debt, (and 
 in fact the major part of it also was,) will be laid out 
 in the improvement of the country. I think, with 
 a very few words I can make this appear plain to 
 you, and you must observe what 1 term the Debit 
 Stock is either sold to the present creditors of the 
 Government, or to persons to pay them off, and the 
 country is still burdened with taxation to pay the 
 interest. By the first advance of loan stock, the 
 Government gains nothing— it merely borrows on 
 interest on one hand, and lends for the same inte- 
 rest within half per cent, on the other, and cannot, 
 in either of these cases, derive any advantage from 
 the rise of its stock, but my plan of Government 
 bringing to market a fresh amount of stock after 
 the old has risen to a certain price, and selling it 
 at the original price, which it. can do with justice ; 
 
6 
 
 (in fact with justice it could do no other,) you see 
 the immense profit that must accrue, and the ample 
 funds provided for any required purposes. Do you 
 not perceive this is nothing more than further ex- 
 emplification of my time currency principle, only 
 differently applied. Permit me to take a transient 
 review of the effect this funding system will have 
 generally. In the first place, funds are provided 
 to the amount of stock sold for public improvement, 
 and gold or notes payable on demand are issued to 
 effect these improvements, thus creating no respon- 
 sible debt ; but before I proceed further, I would 
 have all these stocks made legal tender to the amount 
 of twenty-five pounds and upwards, the advantage 
 of so doing must be self-evident, especially to the 
 banks; for, supposing this stock made legal tender, 
 it would enable the banks to iuvest all their present 
 vaulted capitals in it, and receive 5£ per cent. inte. 
 rest for it, besides being gainers to whatever amount 
 the stock may rise : this stock being made legal 
 tender at current price, for any amount upwards of 
 twenty-five pounds, protects the banks from vexa- 
 tious applications for cash above that amount, but 
 if a bank were to have its own notes presented to it 
 for an amount it could not transfer stock for, it 
 should be considered in the same light as it would 
 be now if it could not or did not pay its notes on 
 demand; but a circumstance of this kind never will 
 happen, except a bank be in very bad repute. 
 
 This funding system, if carried into operation, 
 [and I see nothing to prevent it,] will form an indis- 
 soluble bond of union between the government of 
 the people, — a bond the most binding — the bond of 
 interest — the Government will be placed in a truly 
 paternal position; what Shakspeare says of mercy 
 may then be justly applied to the Government, “ it 
 blesseth him that gives and him that takes. ” I am 
 not fond of using poetical quotations in bringing 
 forward a finance system ; but this is apt. If I have 
 money, and as at present can procure little or no 
 interest for it, is it not a blessing or benefit to me* 
 
7 
 
 the Government being in that situation, it can allow 
 me per cent, interest for it, with every probability 
 of greatly increasing the principal by "the advance 
 of the stock I purchase? — and is it not a blessing* 
 or a benefit to a country, when the Government is 
 able to advance money for necessary improvements, 
 without taxing the country for even the payment of 
 the interest for the money advanced? The banks 
 must advocate the system, for it incontestibly con- 
 verts the r vaulted capital into a profitable fund, 
 and enables them to meet the demands on them 
 with far greater facility than at present they can do, 
 and consequently they can increase their business 
 to their own profit, and to the advantage of the 
 public. 
 
 Permit me to give a hint, that if acted upon, will 
 prove of the greatest advantage to Banks, and would 
 protect them in a great measure from the vexatious 
 demands that are frequently made on them for cash, 
 with no other motive than to annoy or destroy them, 
 thereby curtailing their power to discount freely, to 
 their own loss and the public detriment. My pre- 
 ventive plan is to allow the Banks days, or more 
 properly weeks , of grace for every demand made on 
 them for cash for £100 or upwards. For instance* 
 
 1 take £100 or upwards to a Bank of its notes, and 
 demand cash ; it should be allowed to give me for 
 these notes what 1 may term its Grace Bills , payable 
 one month after dale , bearing interest ; then at the 
 expiration of this Grace, the cash must be forthcom- 
 ing. Surely no one that understands Banking can 
 object to this regulation, and certainly no Banking 
 Company would object to it; indeed, our proximity 
 to the States renders a safeguard from immediate 
 drainage of our specie absolute aj necessary as a pub- 
 lic measure. I certainly need not enlarge on this 
 topic, but trust I shall have the satisfaction of seeing 
 it adopted. I will now endeavor to shew the diffe- 
 rent probable investments in these funds, and the 
 certain demands that will be made for the money 
 invested, if the interest be as I suggested, guaran - 
 
8 
 
 Ued in England {though not at all a necessary measure} 
 and the stock for twenty-five pounds and upwards 
 made legal tender (this is a necessary measure.) The 
 first purchasers will undoubtedly be the present Gov- 
 ernment Creditors ; their stock, which I termed the 
 “debit stock’* will bear half per cent, more interest 
 than any after created stock, and if the present 
 creditors* do not purchase this stock, the Govern- 
 ment would create a stock at per cent, and pay 
 them off ; now surely no men that can see the least 
 into their own interest will make it necessary for 
 the Government to do this. The second created 
 stock, which I called the “Goan Stock” for J05OO,- 
 000 or any other approved amount, there is no doubt 
 but the Banks would immediately purchase this stock; 
 in fact I would recommend them to have the privi- 
 lege of so doing before the public, and the amount of 
 this stock should be regulated by the investments of 
 the Banks, and their investments should be limited 
 to their present specie capital. Thus, sir, I have in 
 all probability disposed of the first and second created 
 stock. I will now remind you of the position the 
 Government, the Government creditors, and the 
 Banks stand. The Government has released itself 
 from the principal of a debt, and is merely responsible 
 for the interest, and has in its coffers (I will presume) 
 the entire vaulted Banking Capital in the Colony, 
 (which it is bound to pay 5£ per cent, for) and ready 
 to loan it under the sanction of an act of Parliament 
 for any public improvements thus authorized at 6 
 per cent, interest, under satisfactory security, which 
 in general would be merely on the undertaking itself, 
 as if the interest be paid the loan may be perpetual, 
 and if the interest were not paid by the work, the 
 parties applying for the loan, or the District, should 
 be held responsible for both principle and interest: 
 the Government must be made secure to give its 
 funded system universal credit. The present public 
 creditor will then hold a security bearing a half per 
 cent more interest than any other stock, which he 
 has the power of converting into cash by the sale of 
 it, or to keep it till a rise, (and I will prove that a 
 
9 
 
 rise must take place) in the stock, enables him to 
 sjJl it tor a profit, therefore I think he is decidedly a 
 ga.ner by the Institution, and the Banks are in an 
 incomparable . tetter situ.ti on. 1 will instance the 
 U . U bank It has, or ought to h ive, £200,000 me- 
 tallic capital in its vaults, which it would now be 
 able to convert into a stock bearing ox per cent in- 
 terest, consequently, this funding system increases 
 its prohis eleven thousand pounds per annum and 
 that stock being made legal tender for any amount 
 upwards of twenty-five pounds, is just as available 
 to it as if it had retained the Capital in its vaults. 
 My opinion is, and long has been, the “ Golden 
 Image’ worship has been the cause of more com - 
 mercia , and consequently national, distress, than is 
 generally imagined. Will any one tell me why the 
 fixed property of the Country, the interest of the 
 Country, and the good faith of the Country, are not 
 as ht when combined to make a legal tender of as 
 gold ? Then why go to Mexico and Peru for our 
 legal tender. 1 would commercially use gold as a 
 medicine, not make food, a kind of “staff of life’’ of 
 it. Presuming the Banks had taken up ibis second 
 stock, they would of course, as well as the h riders 
 ot the 0 per cent stock, appear in the Market at 
 the Exchange (and an Exchange there must be) as 
 sellers ; now the public have an opportunity of buy- 
 ing, Emigrants with capitals, and Foreign Purcha- 
 sers; indeed, the investments that will be made by 
 this last class, or more properly under this head , will 
 be to an amount, I plainly see, but I dare not men- 
 tion, fearing I might be thought taking a romantic 
 or visionary view of the subject. I am perfectly 
 convinced in a few months the 5^ per cent, stock 
 will advance to £100 (and the 6 per cent, more in 
 proportion) then the Government should add to its 
 former 5^ per cent, stock a million more, which it 
 should offer for s ale at £110, according to the prin- 
 ciples formerly laid down in this letter, which it is 
 bound to sell at that price ; if stock falls below £110 
 before the Government has disposed of its proposed 
 amount, it should withdraw from the market as sel- 
 
10 
 
 lers ; neither should the Government sell for more 
 than JC110 till the stock had obtained a further ad- 
 vance of £5 or risen to £115. This arrangement 
 for Government disposals of stock would prevent 
 any great speculative rise, and obtain funds for re- 
 quired purposes. Do you not perceive this plan puts 
 it out of the power of the Government to make it at 
 its option either a Bear or Bull account ! its only 
 interest would be to do the latter, and if that were 
 done by artificial means its exclusion from a Bear 
 account would prevent its deriving any benefit. I 
 think it highly improper for a Government, or any 
 concerned in it, to be able by fictitious means 
 to cause a fluctuation in the funded property, or in 
 the currency of the country. But perhaps it may 
 not be out ot place for me to explain what is meant 
 by a Bear and Bull account, as doubtless, many of 
 our readers are not acquainted with the technicals 
 of “ Change Alley.” A Bear is a person who sells 
 stock to be delivered at a certain time, consequently 
 it is his interest to do all in his power to depress or 
 tear down the slock, that he may have the less to 
 deliver ; the Bull is he who buys, and consequently 
 his interest is to endeavor by all means to raise or 
 toss up the slock that he may receive the more. 
 But these are gambling kinds of transactions that 
 in my funded system can take place only on a limited 
 scale, and that only on the Bull account, for upon 
 a rise of five pounds at all times the Government 
 can step in if it has any demand for money, (and 
 when will it not have ?) and immediately pms the 
 Bull by the nose till it has disposed of all its own 
 stock ; as for the Bear account, 1 trust the steady 
 prosperity of the country will prevent its occurrence, 
 though candidly 1 do not so see the means of muz- 
 zling him. I will at once go to the maximum price 
 this stock will attain, that is, to a par with the En- 
 glish funds, why not ? It will have, or ought to 
 have, the same security for the payment of its in- 
 terest, this must raise it to equal value, and I assert 
 this Canada Stock will be of more intrinsic value 
 than the English Stock, this latter Stock ha» 
 
11 
 
 no collateral security to enable it to pay the in- 
 terest of its debt, much less the principal ; now 
 the Canada Stock (except the Debit Stock) 
 has the most ample security, not only for the pay- 
 ment of its interest, but for the principal itself, 
 though by its system it is impossible for it being re- 
 quisite ever to make a demand for it. 
 
 Under all its disabilities, J see what the funded debt 
 of Great Britain has done for it; it is natural to 
 presume the major part of this debt was contracted 
 at par 60 (1 know it was) and it now amounts to 
 £800,000,000 as a debt, for which the country is 
 liable for the interest, but owing to the prosperity 
 of the country, or the confidence in the administra- 
 tion, or want of the means of more profitable in- 
 vesting properity, this stock from 60 par, is risen 
 to 90, consequently there must be twelve hundred 
 millions of stock in the market, which must have 
 been productive to the country generally of a profit 
 of £400,000,000, for if I bought at £60 and can now 
 sell at £90, I must have gained 40 per cent on my 
 purchase, besides having my interest (all the Gov- 
 ernment is bound for) regularly paid ; but our home 
 government does not stand in the same advantage- 
 ous position for acting upon a funding system, as the 
 Canada Government does. This latter derives half 
 per cent for its advances more than it pays liabili- 
 ties, besides having the principal of its obligations 
 most amply secured on an improving security. 
 
 I am aware you may say “spoken” to this last 
 position, but it is at all events taking a different view 
 of the same landscape. But to return to my propo- 
 sal of taking the maximum price, this Canada stock 
 may raise, to say from (par) 100 to 150. Bu- 1 need 
 not tell you this is not the just proportion between 
 the advance of 5 percent stock from £60 to £90 
 and stock bearing 5| per cent, interest in the same 
 ratio, but ought to be quoted at £165, and to aid my 
 probabilities I will say the £100 stock rises to £150, 
 consequently the public as sellers gain £50 on the 
 £100, and make 9 per cent, when it pays only 
 per cent., therefore on this high priced stock 
 
they may loud money at 4 per cent., gain i per cent, 
 and pay f)£ per cent. It would have taken some 
 consideration from an able Financier to have placed 
 a Government in this position, yet strange as it is 
 true; if it be not true please to correct me. My 
 Funding System, undeniably strengthens the hand 
 of the Government, throws immense patronage into 
 it, but places no rod in it , leaves it no means of mak- 
 ing an improper use of its increased influence. I 
 am aware I have prolonged this subject beyond the 
 usual limits of a newspaper communication, but I 
 trust you will overlook this impropriety frohn the ne- 
 cessity of a full statement of all the bearings of the 
 subject being brought forward at once, and as a con- 
 clusion I will sum up w hat I think can and ought to 
 be done, that is Government should avail itself of its 
 credit to procure iunds for the improvement of the 
 Country without borrowing or making itself respon- 
 sible for more than the interest of the sum requisite 
 for effecting this very desirable purpose, and if the 
 plan 1 have laid down does not enable the Govern- 
 ment* to do so, and at the same time increase the ac- 
 tual wealth of the country, independent of the value 
 of the improvements, 1 have written a great deal to 
 a little purpose; but until I am shewn the contrary 
 I shall be of the opinion I have not done so. Is it 
 not easier and more beneficial for Government to avail 
 itself of its credit to improve and enrich the country, 
 than to pay old debts , and carry on unprofitable and 
 expensive wars'! I shall reserve further remarks on 
 this subject for a future letter. There being no con- 
 flicting interests to prevent this funding system going 
 into operation, I anticipate the pleasure of seeing its 
 merits fairly discussed. Under this impression l 
 conclude. 
 
 Believe me to remain with respect, 
 
 Most truly yours, 
 
 WILLIAM BANCKS, 
 
 PRINTED BY C. F. FOTMERG1LI., PALLADIUM OFFICE, 
 YORK STREET, TORONTO. 
 
16 8 £0 a .4