[Levi Philos]

A SUCCESSFUL VENTURE

How wise they were is proved by the event. The success of this first creation of State money was so great that it was rapidly followed by others. In June 1819 the question of the market became ever more acute, and it was agreed to finance the rebuilding of it, not in the orthodox manner by raising a loan. but by the State creating the necessary notes "interest free."

The following comment made by the finance committee at a later date shows how successful the venture had become. It was at the time when a further issue of notes was made to diminish the interest bearing debt to the States. The finance committee declared: "The States could increase the number of notes in circulation without danger up to 10,000 in payment of the debt, and the committee recommends this course as most advantageous to the States' finance, as well as to the public, who, far from making the slightest difficulty in taking them, look for them with eagerness."

And so the story went on. On 29th March, 1826, a further issue was authorized to re-build Elizabeth College which had been founded in 1563 by Queen Elizabeth, and some parochial schools. The Bailiff of that time - Daniel de Lisle Brock - in his address to the States Assembly expressed his belief that the creation of this new money was of great benefit to the States, and caused no inconvenience because of the great care with which it was issued.

Various other creations of new money took place for projects of re-building, widening the streets of St. Peter Port, reconstructing some of its buildings, making new roads and public works of many kinds. The experiments continued over a period of 20 years, by which time the people of Guernsey had developed from a depressed unhappy state to a position of prosperity and happiness. The following brief quotation shows how improved was the situation as a direct result of the wise and statesmanlike action of the Island Parliament. Daniel de Lisle Brock, to whom, it seems much of the credit must go, said in 1827:"To bring about the improvements which are the admiration of visitors and which contribute so much to the joy, the health, and well being of the inhabitants, the States have been obliged to issue notes amounting to £55,000. If it had been necessary, and if it were still necessary, to pay interest on this sum, it would be so much taken from the fund earmarked to pay for the improvements made and to carry out new ones."

To talk of joy, health and well being is a very different story from the position in 1815, when it was "little or no trade, little or no disposable revenue, and no prospect of employment for the poor." But this happy state of affairs was not to the liking of everyone, and opposition to the idea of the Island States creating their own "debt free" money had been growing over the years, particularly among the banking interests on the island. A new bank, called the Commercial Bank was founded in 1830. This institution, together with the old bank, failing to prevent the growing prosperity of the islanders, began to issue notes at its own discretion, flooding the island with paper money. Reference has already been made to the care exercised in deciding the quantity of money to be issued by the States, and now Daniel de Lisle Brock sought to restrain the private banks from this anti-social activity.

There remains on record his spirited speech to the States' meeting held in September 1836 on this subject, and the following two extracts are of particular interest.

"No one has the right to arrogate to himself the power of circulating a private coinage on which he imprints for his own profit an arbitrary value."

"With these facts before our eyes we must realize the necessity of limiting the issue of paper money to the needs and customs, and the benefit, of the community in general. Permission cannot he granted to certain individuals to play with the wealth and prosperity of society."

In spite of all, however, the banks finally won the day. Despite a careful search of the records, no explanation of what actually happened can be found - merely an exchange of letters between representatives of the banks and the Bailiff of the Island. In this, the former suggested that the States should cease to make further issue, should withdraw £1,500 from circulation, and have no more than £40,000 in circulation. To this proposal the Bailiff agreed. Having read the account of his fighting speech to the States, it is difficult to understand what combination of forces caused him to give way. But at least it can be said that the inhabitants of the island benefited materially from the monetary experiment which took place, when the island Parliament created its own money - ' interest free' over 150 years ago.

POSTSCRIPT

Although the original experiment came to an abrupt end in 1836, there was a further development in 1914, just after the outbreak of the first world war. The demand for an increase in the supply of money was then so great that the Royal Court passed an Ordinance making State notes and those issued by the Banks legal tender. But the Banks were prohibited from increasing their note issue, and all additional notes were issued by the States.

There was a great demand for these States notes, and they first had to be printed locally by two firms in the island, the Star Company and the Guernsey Press Company, who were able to provide what proved to be very serviceable five shilling and ten shilling notes. These were later replaced by notes printed on proper bank note paper with the customary watermark. The local banks have now been absorbed by the Big Five, so that there is no other local note issue, other than that of States notes, which circulate alongside the more familiar Bank of England notes.

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FYI from Levi Philos