the course pursued by the Bank from January to April was extremely erroneous and detrimental to the public interest, and was only stopped by the positive provisions of the Act; and, if that system of procedure had not been so stopped, it must have ended in the most disastrous consequences

36. Mr. George Carr Glynn had been of opinion before the Act passed that the division of the Bank into the issue and banking departments was a desirable experiment, but after the experience of the preceding year, considered that it had decidedly failed

37. The Committee of the Commons presented their Report on the 8th June, 1848. It entered into no philosophical examination of the correctness, or the contrary, of the opinions of the witnesses; it aspired to and attained to no higher function than acting as a kind of preface to the mass of evidence, but concluded by stating the opinion of the Committee that it was not expedient to make any alteration in the Act of 1844. The Report of the Committee of the Lords was presented in July, and was a much more elaborate production. It not only examined the evidence at considerable length, but pronounced an opinion of its own, and recommended that the Act should be so far amended as to introduce a discretionary relaxing power, which was only to be exercised during the existence of a favourable foreign exchange

38. On the 22nd of August Mr. Herries moved that the House would, early next Session, take the Report into consideration, which motion was negatived. In the next Session he made another attempt to induce Parliament to alter the Act, but without avail

39. After the severe medicine the body commercial had been subjected to by the great crisis of 1847, which there can be little doubt was of great service, by removing houses that had been insolvent for years, the commerce of the country was estab

lished on a sounder basis, and had gone on, generally speaking, with great prosperity, up to the autumn of 1857. The chances of war led to a great demand for shipping, and, of course, much speculative dealing in that property. This occurred especially at Liverpool, in the autumn of 1854, and led to some very extensive failures. The revelations which ensued from these failures disclosed that the same inveterate and abominable practices of accommodation paper were again rampant. Fictitious bills to an enormous amount were fabricated among persons who were in the same species of business, and were negotiated all over the kingdom. Other parties resorted to practices even more disgraceful still, if possible. These great failures, which are too well known to require naming here, gave credit a very serious shock; in addition to which, a considerable number of persons who were engaged in extravagant over-trading in Australia, suffered severe losses. There is nothing to call for special remark except that a great drain of bullion began from the Bank of England at the end of June, and continued rapidly and steadily till the middle of October. On the 23rd June it stood at £18,169,000, including the coin and bullion in both departments; and by the 13th of October it was reduced to £11,752,300. The causes of this great outflow are not sufficiently ascertained for us to reason upon them with accuracy. Some attributed it to the purchases of corn which the high price of wheat here caused to be made for importation-some to operations of the Bank of France. Time will probably furnish us with more satisfactory and accurate information. What the causes were is of comparatively slight moment. We are happy to say that the Bank of England acted, in this case, with a promptitude and decision most favourably contrasted with its former errors. The rate of discount was rapidly raised, to enhance the value of money. On no former occasion had the rise been so frequent and extensive in so short a time; but the effect produced was most salutary

40. The following table, taken at intervals, shows the bullion in the Bank, and the rate of discount

For several preceding weeks the Economist reported the Money Market to be as tight as it could well be. But on the 29th of December it said

"The Money Market continues as stringent as it can well be, and no bills can be discounted under the Bank rates. Paper at long dates cannot be discounted on any terms. The great extent of our trade, as indicated by the returns for November, confirms the suspicion awakened by the continued demand for money, that trade has received no serious check from the advance in the rate

of discount, and is still more extensive than prudence warrants, or in the end will be justified"

41. This most judicious conduct on the part of the Bank, which merited nothing but the most unqualified commendation, excited a great clatter amongst a certain number of people who think that money is to be created ad libitum by writing "promises to pay" on bits of paper, when there is no money to pay them with, and who think it possible to send one's money abroad and also to have it at home. The papers were filled for weeks with letters and articles exhibiting all the rank follies which were once prevalent on the subject of the price of corn, and which have been so admirably exposed by Adam Smith. But in this respect a most marked and healthy change has been of late years most manifest in the majority of public writers. The great majority now understand that the rate of discount is the true regulating power of the paper currency, and, instead of assailing the Bank with howls and execration when it does its duty in raising its rate, they, with a few exceptions, now universally commend it. This is great, real, and sound progress in the spread of true Economic science

42. At the end of this year the Queen exercised the power reserved in the Act of 1844, to enable the Bank of England to extend its issues to not more than two-thirds of the amount of those of any banks of issue that might cease to issue notes. From the passing of the Act up to this period forty-seven banks, whose authorised issues amounted to £712,623, ceased to issue their own notes, and, on the 13th December, 1855, the Queen in Council issued an order authorising the Bank of England to increase its issues to the amount of £475,000 upon public securities. But this is not the bonâ fide increase to the issuing power of the Bank. For in the year 1854 the Clearing House was organised on a better plan, and whereas before that an average amount of £200,000 of bank notes was required to adjust its transactions, by the new system these were totally dispensed with, and no notes at all are now required. Moreover, by the admission of the joint stock banks to the Clearing House, they are saved from keeping an enormous amount of notes to

meet the "bankers' charges," which may safely be calculated at £500,000. These notes, therefore, are now available to the Bank to use for commercial purposes, and, consequently, are to be considered as so much additional power of issue to the Bank, which has thus in reality acquired an increased power of issue to the amount of £1,175,000 since the Act of 1844. Up to February, 1857, seven other banks, whose aggregate issues amounted to £111,020, have ceased to issue notes, but no further power was granted to the Bank to extend its issues until 1866

43. For several months after the beginning of 1856 the Money Market continued in a state of great "tightness," and the bullion in the Bank scarcely varied. The lowest was on the 26th April, when it stood at £9,081,675; after that it gradually rose, and the rate of discount fell in summer to about 44 to 4, but in October the bullion fell very considerably again, and discount rose to 7 and 8 per cent., and a pressure followed of about the same severity as in 1855, and continued with very little variation to the end of the year

The Crisis of 1857

44. The crisis we have just been considering was the inevitable termination of a multiplicity of derangements of the proper course of commerce. No one conversant with commercial history could fail to foresee that the entanglements of so large a portion of the public with railway speculations, and the losses caused by the failure of the harvest must produce a crisis. We have seen that this crisis gave a fatal blow to the prestige of the Bank Act of 1844, which was enacted in express contradiction to the opinions of the most experienced authorities of former times, whom it professed to follow. They had always protested against imposing a numerical limit on the issues of the Bank. The experience of the crisis of 1847, amply confirming that of 1793, 1797, and 1825, shewed that such restrictions cannot be maintained in the paroxysm of a great crisis without endangering the existence of the whole mass of commercial credit

The crisis we are now going to describe was of a very different nature. It burst upon the world in the most unexpected manner.