Now comes the question how to keep the right level or equilibrium,-how to construct the Bank of England so as to make it faithful to its mission for protecting the trade and industry of this country.

CHAPTER X.

THE BANK OF ENGLAND: AND THE

ORGANISATION OF CREDIT.

HAVING Considered the Bank of England as at present constituted for the disorganisation of credit, the more important question next comes to be considered,-how the Bank of England may be constituted for the organisation of credit.

It is said that, the rise in the price of loanable capital is due, in a great measure, to the growing availability and diffusion of English capital for foreign purposes, and that this growing availability and diffusion are, in their turn, the consequence of the new organisation provided by the comparatively sudden and vast expansion of the Joint-Stock system, and of the birth of so many financial companies capable of undertaking the largest operations.

It is also said that- At first sight it may seem that, the searching competition of the new Companies, which sucks into the money-market and condenses into large and available streams

countless rills of savings scattered up and down the country, which were not reached before, ought, by bringing more unemployed capital into the market,

to lessen its value and lower the rate of interest.' It is also said that, such would be the case, but that the distributive and diffusive power of the new companies is even greater than this attractive and condensive power. That the centricapital is made

petal force by which our home to gravitate towards our home centre is vastly increased by the new organisation, and that this of itself tends to lower the rate of interest. But that the centrifugal force by which, under the new system, capital, once condensed, is scattered all over the world instead of being allowed to accumulate at home, is greater still, and thus the rate of interest, instead of being lowered is raised, and the rise in the rate is probably, therefore, not temporary, but permanent.*

If all this be true, though, as here stated, it is not, that would only go to prove that, the Bank of England, which was framed and constituted under another and different state of things, is ill adapted to the present state of things; and that the evils of its constitution, then less visible and less felt, were more bearable; now more visible and more felt, are less bearable.

* Edinburgh Review, January, 1865, No. 247, page 227.

As before shown, the rise in the rate of interest is but the sign of the evil. The evil is in the disturbance of the equilibrium in the value of money between foreign countries, and the rate of interest rises to restore the equilibrium.

This disturbance has always existed, more or less, though formerly less noticed, because less perceptible; but when extraordinary calls for capital began to be made for correcting this difference, then the consequent disturbance of the currency began to be felt in the rise of the rate of interest.

Any attempt to prevent those calls from being answered must be useless.

The trade in capital, or savings, must be as free as the trade in any other commodity; and freedom of trade assumes protection to traders. against monopolies, as well as against restrictions and impositions.

Protection to Traders is quite a different thing from protection to Trade. Deprive the trader of the means of obtaining money necessary for carrying on his trade, and you are bringing down upon the country all the evils of protection in its worst form, for you are helping one class against another, the large capitalist against the small capitalist. So, as you make it difficult to obtain money, as a means of carrying on trade, you

are, in the same proportion, protecting one class of traders against another class, and their loss is the loss of the whole community.

Such is, in effect, the present working of the Bank of England. More or less it has always been so, but much more so since the passing of the Bank Act of 1844.

If it were admitted that, raising the rate of interest in the country where capital is abundant, is one of the means of equalizing the value of money between that country and other countries where capital is less abundant, yet that is not the best means, nor one of the means necessary or expedient for the Bank of England.

Entrusted by the country with a fictitious capital, having no real existence,—and allowed the use of it free of cost,-for such is, in effect, the special and exclusive privilege to the Bank of England of the gratuitous issue of its notes to the amount of £14,650,000,* there can be no good reason why the whole benefit of the credit so acquired should not be secured to the country.

In this arrangement, for the sole purpose of economising gold, it was no part of the original object or intention to bestow a benefit on the Bank of England. The sole object and intention was to save so much capital for the benefit of the country. * Now £15,000,000. See Note, page 129.