when all articles entering into consumption are symbolized. "Full currency" was borrowed from the Bullion Committee. It meant with them the equilibrium of the currency. If it were more than full, if it were redundant, then the rates of exchange rose, to be brought down again only by a reduction of the excess, by export of coin, which was the only part of the currency that could be exported. The reason that gold goes forward is not because the proper equilibrium in the circulating medium common to all commercial countries has been disturbed, but for the reason that, from an excess of instruments of expenditure, the country in which such excess exists has created debts which can be discharged only by an exportation of coin, in default of the ordinary subjects of commerce. The holding, by the Bank, of an amount of gold unusually large, is always proof that the currency is, or, rather, that production and trade are or have been, in an unhealthy condition; that liquidations to a large extent have taken place; and that the business public, in their distrust, or want of opportunities, have deposited in Bank the balances due them, which have been liquidated in gold, for safe-keeping and to wait a favorable turn of affairs. A large amount of gold in its vaults, therefore, indicates the exact opposite of what it is supposed to indicate. With the Bank of England it is always a prelude to, or always follows, great speculative movements. It is the rule with it to issue notes against the coin it holds. If the amount be large, the issues act correspondingly upon prices and upon expenditure. As a necessary consequence, gold is drawn from the Bank to meet such expenditure, and in the adjustment of balances that necessarily arise. This done, the gold returns to it again, to be made the basis of loans to be drawn from, and again to be returned in manner described. As the viciousness of the system is not seen, the same inflations and contractions periodically occur, alike disastrous to itself as to the public, until their regular recurrence has come to be regarded as a necessary law or condition of all currencies. There can be no doubt that the condition of the country in 1836 and 1837 seemed to call for extraordinary exertions on the part of the Bank; nor that, in making them, it was guided by the most laudable intentions. In November of the former year, the Northern and Central Bank, which had thirty-nine branches, and whose central office was at Manchester, finding itself in trouble, applied to the Bank of England for help to the extent of £500,000. This, after some hesitation, was granted, from fear of the consequences that might follow the failure of such an extensive concern. It was soon found that the sum first applied for was by no means sufficient, and further aid had to be granted, till the whole amount reached £1,370,000. This application was quickly followed by one from a leading London house, which was granted upon the guarantee of other houses. Applications for aid to other concerns, both in London and in the provinces, followed; which were granted for the same reason as the preceding. To meet the demands for such aid as was regarded indispensable to avert a general crash, the Bank advanced, in a short time, fully £6,000,000. The final repayment of these advances, and the great relief they seemed to afford, might be considered as a precedent to be followed in similar emergencies. It must, however, so long as the Bank is conducted as at present, be regarded as a very questionable one. The Bank makes its loans by issuing its own obligations, payable presently, for those of its borrowers or of other parties, payable at a future day. The safety of the transactions on its part is in having its obligations circulate as money, until those upon which they were based become payable. In ratio as they are returned, previous to the maturity of the securities for which they were issued, the Bank must pay out a corresponding amount of its own means. It should never attempt to loan its capital, or to make loans that are likely to impair its amount. This is always to be held in reserve to meet such portions of its liabilities as are not seasonably returned to it by its securities. As its issues, however, so far as their credit is maintained, serve to it as capital, it is under the greatest temptation, in an active demand for money, to make an excessive use of them. In case of a temporary pressure, were its loans properly made, it might act with a good degree of liberality, by increasing them to a considerable amount; as in such case there would be a reasonable probability that all its issues, however made, would be seasonably returned. But as itself is its chief customer, that is, as it makes its loans chiefly in the purchase of governments, not, perhaps, to mature within the time that its notes will find their way back to it, it is, when subjected to a drain of specie, in the dilemma of being liable to have the issues it may be called upon to make immediately presented for payment in coin, or notes, or to aggravate the alarm and run upon it by refusal to make any. In such a state of things, to discount the best paper may be as fatal, in its immediate consequences, as to discount the most worthless. It can neither act nor refuse to act with safety. It is impossible for it to liquidate all its obligations upon the moment, and this is what a panic calls upon it to do. As it is, it is wholly incompetent to manage or allay it. Its real and only safety, as well as that of the public, is in rendering panics, or any considerable aberration in production and trade, impossible, by making no issues that will not be taken care of by the borrowers, by discounting no paper and taking no securities that have not a constituent in merchandise. - The advances that were made in 1836-37 seemed to have accomplished their object; but, after all, they only perhaps postponed, while they aggravated, the crisis which was already inevitable. In 1839, after a partial recovery from 1837, the Bank was again subjected to a drain far more excessive than that of the former year; a drain which indicated a most unsound condition of affairs, which had, perhaps, been only skimmed over, instead of being healed. It was finally driven to make large loans at the Banks of France and Hamburg, to save it from what seemed to be impending bankruptcy. Mr. Palmer was very probably correct in ascribing the drain upon the Bank, or a considerable part of it, to the rapid formation and increased operations of the joint-stock Banks. It was inevitable, in the outset, that their action, for the want of adequate experience and training, should have been somewhat eccentric, and should have led to excessive expenditures, not only in consumption, but in enterprises of various kinds. As the notes of the Bank were then legal tender, they constituted the reserves of all other issuers. It had thus to stand in the gap, and make good, from reserves held to meet its own liabilities, the mistakes and losses of every petty issuer in the kingdom. For all this, it was by no means prepared. The losses sustained by the joint-stock and other Banks, and from over-production and over-trading, proportionably reduced its means, as well as those of the public. Its condition for a long period after 1837 was one of great comparative weakness, for which all the issuers of currency, including itself, were responsible. From the passage, in 1826, of the Act authorizing the formation of joint-stock Banks, and especially from 1833, previous to which no considerable number of these were in operation, a great revolution has been going on in the monetary system of the kingdom. Instead of holding reserves applicable only to its own operations, it has now, from the fact that its notes are legal tender, to hold them for those exceeding in amount ten times its own; and if its managers do not yet comprehend the principles upon which a symbolic currency must rest, they make good the lack by an excess of caution, which now holds out the signal of alarm at the least freshening of the breeze and the slightest turn of the vane. Mr. Palmer had no sooner laid down his pen than he was instantly assailed on all sides, with no little vehemence, by a crowd of writers, the most distinguished of whom was Mr. Loyd, -Lord Overstone; whose reply chiefly deserves consideration from the fact, that it prepared the way for the Act of 1844, of which he was the originator and virtually the author. "The principle upon which the Bank professes to be guided in the regulation of the currency," said Lord Overstone, is this: to meet its outstanding liabilities, consisting of circulation and deposits, it holds at its disposal securities and specie; and its principle of action is, to keep the amount of its securities fixed, and to leave any variation in the amount of circulation and deposits to be balanced by a corresponding variation in the amount of specie. This principle was set forth by the Bank Directors in their evidence before the Parliamentary Committee, previous to the last renewal of the charter, and was recommended principally upon the ground, that the effect of it would be to render the Bank a passive agent, and that all variations in the amount of specie would thus become the result, not of any direct action on the part of the Bank, but solely on that of the public. If they demanded specie, it could be obtained only by paying in notes or diminishing deposits; and if, on the other hand, the specie was increased, there must at the same time be a corresponding increase in the amount of circulation or deposits. Under this view of its probable action, the principle above stated met with a degree of acquiescence which a more close examination of the subject will hardly warrant. "The Bank, it must be observed, acts in two capacities: as a manager of the circulation, and as a body performing the ordinary functions of a banking concern. The duties of these two characters, though very often united in the same party, are in themselves perfectly distinct. In the principle laid down by the Bank for its own guidance, the separate and distinct natures of these two characters has not been sufficiently attended to. The rules applicable to its conduct as manager of the currency are mixed with the rules applicable to its conduct as a simple banker, and the rule or principle under discussion is the result of this mixture. As a manager of the currency, it is undoubtedly a sound rule by which to guide itself, that against the amount of notes out it should hold at its disposal securities and specie; that the amount of securities shall be invariable; and that, consequently, all fluctuations in the amount of notes out shall be met by a corresponding fluctuation in the amount of specie on deposit; and thus the public, and not the Bank, will be made the regulators of the amount of the circulation; and that amount will, by this principle, be made to fluctuate precisely as it would have fluctuated had the currency been purely metallic. "For the regulation of the conduct of the Bank as a manager of the currency, this rule is perfectly unobjectionable, and rests, indeed, upon the soundest principles. "But when the same rule is further applied to the regulation of its conduct as a banking concern, it is necessarily found to be wholly impracticable. It is in the nature of banking business that the amount of its deposits should vary with a variety of circumstances; and, as its amount of deposit varies, the amount of that in which those deposits are invested (viz., the securities) must vary also. It is, therefore, quite absurd to talk of the Bank, in its character of a banking concern, keeping the amount of its securities invariable. ... "The rule is, 'that, the securities being kept equal, any diminution in the amount of specie may be met by a corresponding decrease in the aggregate amount of circulation and deposits.' The possible consequence is, that a large diminution of specie may take place, and be met, not by a corresponding decrease of circulation, but solely by a decrease of deposits. Thus, a heavy drain upon the treasury of the Bank might take place under this rule, without any contraction of the currency by which that drain is to be checked or the Bank to be protected. "To those who are practically conversant with banking business, or who have reflected upon the nature of it, it can hardly be necessary to point out the simple considerations, that banking deposits are necessarily variable in their amount and duration; and that, with such variation, the amount of the securities held by the Bank will fluctuate. It is, therefore, unreasonable to talk of the invariable amount of a banker's securities; and this observation is equally applicable to banking business when conducted by the Bank of England as when it is conducted by any other body. On the other hand, I apprehend there will be no difference of opinion, amongst those who have reflected upon the principles of paper currency, as to the soundness of the rule, that the amount |