the proportion of paper. The wealth of the community represents an inverted pyramid, which rests on the mechanism of the circulation. The more the amount of wealth increases, the more disproportionate does the support become to the 'superincumbent mass; and the more necessary does it become to strengthen its solidity.' M. Wolowski admits the economy, but never loses sight of its exact extent, and opposes as strenuously as we do ourselves, the notion that an increase of paper issues could for one moment be expected to prove a panacea for the scarcity of loanable capital and consequent high rates of interest. The productive capital of the country is increased, as we have said, by setting free an amount of gold; but it is not the loanable capital-that portion of floating and uninvested capital which is at the disposal of borrowerswhich could be permanently augmented by such a measure. A fraction of a foreign loan, or a branch of one foreign railway, might immediately carry off the momentary addition to the loanable capital made by the issue of additional bank notes, and not only might do so, but probably would do so. So long as we have a convertible currency, the facilities to trade in no way depend on the issue of bank notes. Practically and to all intents and purposes we have a gold currency, but economising, as far as possible, the use of gold for the benefit of all the world, with certain fiscal advantages to ourselves. And we are by all means disposed to carry the economy to the widest extent compatible with prudence, separating, however, entirely the question of cheap or dear money from the question of economy in the use of gold. We require money for internal and external purposes, and cannot separate the two. To attempt to separate the two, or to attempt a circulation simply adapted for the former, would be to sacrifice our foreign commerce, and, above all things, to interfere with that free export and import of capital on which we believe our commercial prosperity to depend.

We believe we have proved conclusively that our currency laws in no ways make money dear. They allow complete liberty to the export and import of capital, leaving them to the laws of supply and demand. Since the passing of the Bank Charter Act, the average rate has indeed been higher, and this fact has been currently laid to the charge of the Act, but with this fact, we contend, the Act has nothing to do. Our readers will not fail to observe that the main point upon which we have insisted throughout this article has been, that money becomes scarce and dear from natural causes and not from legislation, and that the particular cause which we be

lieve to have been in operation of late has been a foreign demand-a demand searching in its nature, and more distinctly apparent than a home demand, because it is represented by a visible efflux of bullion, which all the public can understand, but, on the other hand, a demand which high rates of interest can effectually check. An internal panic, leading to an internal demand for notes or coin, cannot be checked. You may legislate as you will, but you cannot legislate for panics. They occurred under the elastic system. They occur under the cast-iron' system. In the one case men believed in unlimited resources, undertook unlimited engagements, and found in the end, to their cost, that the resources were not unlimited, but limited. In the other case they also undertake unlimited engagements, forget the cast-iron system at the beginning, and only remember it at the end. The catastrophe in the two cases offers a singular contrast. In the first case,

believing in an infinite multiplication of bank notes, men find that they come unexpectedly to an end. In the other case, rushing into a panic because by law the bank notes are limited, people claim to be delivered from the panic by the suspension of the limiting law. Thus in the end it is the elastic system which proves to be a cast-iron' system, because it is there limited by a fact; but the cast-iron' system proves in reality to be the more elastic, because it is only limited by a law. If this is admitted, it results that a catastrophe is certain in the one case, but in the other not unavoidable. Why has the suspension of the Bank Charter Act in both cases, when it has happened, had such an extraordinary effect? Because the panic which it met arose less from men wanting the notes, than from their believing that they could not have them. And the restriction of the Act having kept the circulation of notes within the limits prescribed by this circumstance, a slight temporary addition could be made without danger. Under the elastic system, however, the panic would not arise until the last note had been issued which could safely be issued, and panic would inevitably end in actual disaster. Thus the very reproach of the Act of 1844-the circumstance that it has twice been suspended, and that on each occasion its suspension caused panic to cease-becomes evidence in favour of its main provisions. The Act was not suspended from a defect of the Act, but because the public (and not only the general public, but even the dealers of the monied world) had traded as if the Act did not exist. Its provisions are forgotten until it is too late, notwithstanding the weekly warning that is given by the published returns of the Bank. And the

past year has brought this fact out in the strongest relief. On the one hand, the year 1857 was still comparatively fresh in men's recollections. On the other hand, the general belief prevailed that possibly on the third occasion, instead of permitting the Act to fall and money-dealers to stand, the experiment might be tried of allowing the Act to stand, and money-dealers to fall. The storm-signals were earlier raised. The Bank itself took more vigorous action in time. Men remembered the provisions of the Act before it was too late, and the crisis has been triumphantly conquered.

The most thoughtful opponents of the Bank Charter Act admit its efficacy in most respects, but believe that it is impotent, and even disastrous, in an internal panic, and quote in confirmation of their belief the well-known saying of Sir George Cornewall Lewis, that the harm which happened under the Act in a few days made him doubt whether its great advantages during the whole remaining period were not counterbalanced by that harm. This doubt seems to us to involve the idea that the harm arose because of the Act. But in what way, we may ask, would the Act create the harm? It would probably be answered, by prohibiting an issue of bank notes which might otherwise be issued. Private banks have been prohibited from issuing, and the Bank refuses to issue itself. Thus the possibility of relief has been cut off. But is it true that the Bank Act has cut off the means of relief? If you cannot procure notes, you can procure gold. And if you cannot procure gold you are already on dangerous ground. It is surprising how entirely this fact is overlooked. It is said at a time of panic private bankers must have notes or they must suspend payment, and language is really held as if the circulation consisted exclusively of those notes of which the issue is limited. The circulation is not limited. It is at least as unlimited as the supply of gold in the world. And to say that trade must be brought to a stand still if fresh notes are not issued is to confess that fresh supplies of gold can no longer be had. But if this is the case, it is the strongest reason for not issuing those notes which profess to represent gold.

The argument is often put in another form. An internal panic, it is said, results from a break down of credit, and a break down of credit is equivalent to a decrease in the circulation. To issue bank notes at such a time is simply to replace that deficit in the circulation. No doubt it may sometimes safely be done when the panic is only internal, and when therefore the supply of gold is less a matter of importance. We will not pretend to deny that a special occasion might arise when a

temporary emission of additional bank notes might allay a panic without doing specific harm. But when to meet these special cases it is proposed to give a permanent suspending power either to the Government or to the Bank directors, or in whatever form it may be, it seems to us that it would be sacrificing the certain and undoubted benefits of the Act, in order to meet a case where its suspension may possibly do no immediate harm. We have, we trust, abundantly shown that countries engaged like England in international transactions can rely only on the rate of interest to determine the supply of loanable capital, and that any measures intended artificially to depress the rate of interest disturb the free play of supply and demand. Temporary issues of additional bank notes on such an emergency emphatically constitute such measures; and inverting the sentiment of Sir George Cornewall Lewis, we say of them, and not of the Bank Act, that it may be doubted if any good they can do at the moment, can compensate the lasting injury they occasion.

The events of the late financial year could scarcely be discussed without some reference to the Bank Charter Act. It has notoriously been on its trial. The result has been, that a panic, universally believed to be unavoidable, has not occurred. Had there been any relaxation, had the trading community not felt the imperious necessity of curtailing engagements, had not the possibility of absolutely exhausting the supplies of loanable capital been constantly before the public view, instead of beginning the new year with replenished resources, with improved prospects, and unshaken confidence in our system, we might have had to look back on disasters which, in their magnitude and consequences, might have far exceeded any previous catastrophes. An average rate of interest of seven per cent. has been hard to bear, but the lesson has been learnt, that a scarcity of capital is only to be remedied by outbidding every foreign competitor for the temporary use of that floating available capital which, under the modern organisation of international finance, is invariably attracted to that country which offers the highest price. And however painful the process may have been, we have at least the satisfaction of knowing that, without suspension of any law, without recourse to any empirical measure or questionable makeshift, in perfect harmony with science and statesmanship on the one hand and expediency on the other, it has been found possible to save the commerce of the country by seven per cent.

ART. X.-1. Army and Navy Journal. New York: 1864. 2. Rebellion Record (1863-4). New York.

3. The Bivouac and Battle-field in Virginia. By Captain G. F. NOYES. London.

4. Atlantic Monthly. (April and July, 1863.) Boston.

5. Deux Années de la Guerre Américaine. Par ELISÉE RECLUS. (Revue des deux Mondes, Oct. 1864.)

6. Campagnes de Virginie et de Maryland. Par F. LECOMTE, Colonel à l'Etat-Major Suisse. Paris.

7. Les Etats Confederés Visités en 1863. Par C. GIRARD.

Paris.

8. Report of the Sanitary Commission. Printed at New York for the Commission.

6

THE

HEY make war after a fashion of their own, these Americans ; let them kill each other off as they please: there is nothing for us to learn by studying their campaigns,' was the dictum of a distinguished French officer when the narrative of McClellan's expedition against Richmond was first given to the world by the Prince de Joinville. Containing some partial truth in its first words, this saying has been abundantly contradicted in the event, and its caustic advice remains unheeded, save by those who have no leisure to give to the history of their own time, or who shrink from the toil inseparable from following the thread of a great contest through the scattered and partial notices of the day. Indeed, it is only necessary to indicate, in the briefest manner, some of the main elements in the struggle, viewed solely in its military aspect, in order to understand the immense importance attached to the subject by the press and people of the most civilised nations of the world.

For it is not on the score of its political aspect alone that the present civil war is of interest and value as a study. The world is by no means so near the millennium of peaceful arbitration that we can afford to despise its teachings in a military view; and despite the contempt with which American armies, generals, and strategists have been abundantly favoured from European critics, such as the one above quoted, we are bold to say that these lessons will be the more valued as they are more earnestly studied and better understood. Against the views of this class we might cite the broad facts that it took many years of constant practical acquaintance with Napoleon's grand system of war before his antagonists learnt to master