will be maintained by a large banking reserve, beyond the influence of capitalists and speculators, when controlled and regulated by intelligent, experienced, and impartial Directors. It may often be necessary to reduce the amount of bank-notes in circulation; but all money-panics have been increased in intensity by too great and sudden a contraction of the currency, and by the sudden and enormous rise in the rate of discount. With a large banking-reserve, supported by a large and independent real capital, and under judicious management, the ordinary bank-rate of discount would be between 2 and 3 per cent. and would rarely exceed 4 per cent., and then only under extraordinary combinations of political or natural causes.

A bad harvest causes a sudden and large importation of corn, for which, usually, the payment is in gold. At such a season the exchange of notes for gold will be at its largest. But, take the case of an abundant harvest, safely garnered. Can it be wise to require the same stock of gold to be kept in the Bank of England, when it is known that the gold will not be wanted, as when all the exchanges of corn-growing countries were enforcing remittances in gold?

Such a proceeding would be opposed to universal practice in all the ordinary transactions of

life; and any attempt to fix a reserve which shall fluctuate precisely with the fluctuating wants of the community is manifestly beyond the power of human foresight and design. All that can be wisely done is to allow an ample margin to meet present wants and probable contingencies, to be from time to time enlarged or reduced as altered times and circumstances require.

No mechanical contrivance can be a rational agent or a safe instrument for the issue of banknotes as the currency of a country, nor was there ever any ground to justify such an absurd attempt. It is impossible to maintain that there was any such ground in the face of the fact that, the Bank of England, from the year 1819, to the year 1844, did so manage its notes that, they never suffered a moment's depreciation, and all through that period supplied this country with a perfectly convertible, safe, and confidently trusted currency of paper; and that a highlydeveloped currency of notes in Scotland, founded on an exceedingly slender reserve of gold, had been doing its work with uninterrupted success for more than a century, effecting an unrivalled economy of expensive coin, and intensely valued by the population.* Theorists may say that the

"The Bank Charter Act."-Home and Foreign Review, No. 8, page 414 et seq.

G

convertibility of the Bank Note was in great danger at various times, and that the paper notes of Scotland were inadequately sustained, but the facts refute the charges. Every practical witness declares that, never, since Cash payments were resumed, has the Bank of England Note been held in less estimation than the sovereign; and that, at no time, since that period, has the public preferred gold as safer than the note. The Bank of England has often been severely pressed to supply money to claimants; but the difficulty has been as much in finding notes as gold, and the public was indifferent which of the two they carried away. The supply of Notes was insufficient to meet the demand and to keep up a suitable reserve. There never was a greater run upon the Bank than in the year 1825, and then the stoppage of the Bank was saved by the lucky discovery of one million of unburnt one pound notes. These were eagerly taken by the public, and proved to be the equal and the match of gold. Great authorities have said that the banknote was then exposed to imminent peril; but the very reverse is the truth. The bank-note then, as now, or at any period since 1819, has never been exposed to the slightest risk of depreciation. This fact is the assurance that the solvency of the responsible issuer is a complete guarantee

for convertibility; and it is confirmed by experience, that the Bank of England and the Bank of Scotland have been found to be solvent and responsible issuers. Therefore, if the Bank Act of 1844 have made a solvent and convertible currency, the Bank of England and the Bank of Scotland have done the same before.*

If the state of the bullion in the Bank in 1825, 1847, 1857, and at other periods of alarm, be referred to, and if it be said that the note was brought to the border of the precipice, and the country within the danger of the suspension of cash payments, the inference is wrong. The true answer is, see with how little gold the note circulation of the Bank of England was and can be sustained. Amidst the terror of traders and the crash of falling firms, when panic convulsed every mind, and the strongest houses trembled for existence, when money was not to be had, discount not to be bought, the rate of interest rising, and the whole City on the verge of ruin,— one thing, and one thing only stood unshaken. Bank Directors had lent away all their deposits; the Bank reserve was gone; commerce in vain shrieked for more relief; the Bank tottered to its foundation; but its note never lost the public confidence for one instant. No one asked for gold when the note was offered.

* Ibid. page 415 et seq.

Why was this?

Because the note was the mere instrument of currency for the transfer of debt or commodities; and because the solvency of the note was unquestioned, the number in circulation being in no excess over the daily requirements of the public, and the note being in no way dependent on banking and its incidents, its prosperity or its disasters.

No measure, therefore, was needed to secure the convertibility of the bank-note, which was never in danger, being as secure before 1844, as it has been ever since. All the danger has arisen from the smallness of the Bank's reserve for banking and currency liabilities conjoined. The portion required for paying notes on demand was ample for that purpose, but small in comparison with that which remained, which was much too small for the banking business. It was that inadequacy which caused all the agitation and all the danger, that danger threatening the Bank in its banking affairs only. The danger was in the small reserve of notes, not in the stability of the If a few millions more of notes had been held in the Banking reserve, the cry of danger would never have been heard.

note.

Upon the ground assumed by the framers of the Act of 1844, it is clear that the line should