been shown that were all the interests of a community or nation maintained in perfect equilibrium, its exchanges might be effected almost wholly by the use of symbols. Such a condition of equilibrium, as perfect as is possible in any country, was, probably, obtained in the New England States under the system described. Only a small amount of specie had to be maintained at the central point; while such country Banks as had sufficient credit in Boston, or an abundance of good bills which could be readily sold in the market, had to keep on hand only such amount as was required by way of change. As the contracts or bills upon which the currency was issued ran off on an average every ninety days, the currency was retired within the same periods. So perfect was this system, that it is not probable that at any period there was a necessity for the suspension of the Banks composing it, arising out of their own condition. In 1837, 1847, and 1857, they followed the suspension of the Banks of other parts of the country, only for selfprotection. They were, in all instances, the last to suspend and the first to resume. With the adoption of this system for the whole country, with New York as the central point, the issuing of the currency might, without the least danger or apprehension, be thrown open without regulation or restraint. The public, for their own safety and convenience, would impose limitations upon issue and provisions for redemption far more stringent and adequate than can ever be provided by law. The currency so issued would reflect, and be entirely adapted to, the wants of the country; and would be regulated as to its quantity by the same laws by which the quantity of a metallic currency, or of bills of exchange, is regulated. For Englishmen to draw their reasons against competition of issue, and in favor of a single issuer, from the assumed system of the United States, is as absurd and inadequate as for a traveller to describe London from observations made among the mud huts of Ireland, or the New England States from those made among the tribes of savages of the Pacific coast.

The Act of 1844, among other things, provided:

1. That on and after August 31, 1844, the issue of notes by the Bank should be wholly distinct from its general banking business, and managed by a Committee of Directors, under the name of "The Issue Department of the Bank of England."

2. That there should be transferred to the Issue Department securities to the value of £14,000,000 (since increased to £15,000,000); of which the debt owed by the government to the Bank, amounting to £11,015,100, was to form a part; and also such gold coin and gold and silver bullion as the Bank at that time possessed, not needed to conduct the operations of the Banking Department. In exchange therefor, the Issue Department was to deliver over to the Banking Department an amount of notes equalling in nominal value the securities held by the former, that is, £14,000,000, and the bullion so transferred to it. No increase was to be made to the securities in the Issue Department. Their amount, however, might be decreased to any extent, and again increased, but not beyond the limit prescribed. The amount of securities and coin and bullion transferred to the Issue Department at the time equalled £28,351,295; that is, £14,000,000 of securities, £12,656,200 of gold coin and bullion, and £1,695,095 of silver bullion. The notes delivered at the time to the Banking Department equalled £8,175,025; the balance, that is, £20,176,070, being at the time in the hands of the public. The amount of gold and silver coin-retained by the Banking Department equalled £857,765; making the total capital with which it began business £9,032,790. The only mode by which this department, as well as the public, could draw coin from the Issue Department was a presentation of notes, which were cancelled as they were taken in. The coin and bullion drawn, in theory, entered into circulation in ratio to the amount of notes withdrawn. The Department of Issue was required, upon an increase of its coin or bullion, to issue to the Banking Department a corresponding amount of coin. By these contrivances the circulation was, in theory at least, to be always uniform in amount; such amount to depend not upon the action of the Bank, but upon that of the public.

3. The amount of silver bullion in the Issue Department. was never to exceed one-fourth part of the gold coin and bullion held by it.

4. The Issue Department was required to purchase, in exchange for its notes, all standard gold bullion, at the rate of £3 178. 9d. the ounce.

5. If any banker issuing notes on the 6th of May, 1844, should cease such issue, the Bank might, by the permission of

government, increase its issues upon securities equal to twothirds the amount so lapsed.

6. After the passage of the Act, no person, other than a banker who was lawfully issuing his own notes on the 6th of May, 1844, should issue bank-notes in any part of the kingdom.

7. Any banker who should cease to issue his own notes, from any cause whatever, after the passage of the Act, was not to resume their issue.

8. All existing Banks of issue were required to certify forthwith the places, name, and firm, at, and under which they issued notes during the twelve weeks which preceded the 27th of April, 1844, and the average amount of such issue; and no Bank or banker was, for the future, to be allowed to exceed the amount of such average; if, however, any two or more Banks of issue had become united within the said twelve weeks, the issues of the united Bank might equal the aggregate of those composing it. If two or more Banks became united after the passage of the Act, each of less than six partners, the new Bank might issue notes equalling the amount of the separate issues; but if the partners in the new or consolidated Bank exceeded six members, then its right of issue was to cease.

Such, in its more important features, was the Act of 1844. Its effect was, in the place of one, to create two Banks of issue. The first was to hold, or was assumed to hold, at all times, means (securities and coin) equal in value to its liabilities, and sufficient for their immediate conversion into coin. The credit or value of these, consisting wholly of notes, was further sustained by their being made legal tender everywhere but at the Bank; and also by being receivable in payment of the revenues, which exceeded the notes by three times the amount ordinarily in circulation; so that, should the means provided for their redemption wholly fail, their value, from the uses to which they could be applied, could never fall much, if any, below their par in coin. In case of a panic, their holders owing debts due, either presently or in the future, including the revenues and taxes of all kinds, would have no motive to convert them into coin, for the reason that it would be of no greater value to them than notes, wherever the latter could be used. With the provision described, a few millions

in coin would be all that would ever be required for the Issue Department to hold to meet all demands likely to be made upon it. Experience has shown that such arguments or inferences would have been entirely correct. No panic that has occurred since the Act went into effect has ever caused a considerable reduction in the amount of notes in the hands of the public. A large part of the coin held by the Issue Department always has been, and always will be, wholly superfluous to its objects. The holders of its notes are the very parties who do not want the coin for them, and would not draw it if they could; at least, so long as they were assured that they would discharge their own liabilities.

The provision made for the conversion of the liabilities of the other Bank- that is, of the Banking Department, which is equally with the former a Bank of issue, and whose issues and liabilities are, equally with notes, payable on demand in coin is a small amount of coin, and the notes of the Issue Department which it may happen to hold. The Banking Department, of course, always holds securities exceeding its liabilities; but these are not coin, nor are they immediately convertible into coin. Its issues have no other support than that described. They are not legal tender, nor are they receivable in the payment of the revenues. It would naturally be supposed, that, if something like the present system were to be established that is, if the Bank were to be divided, as at present, into two departments, the amount of coin that would be transferred to that of issue would be only so much as would be required to meet the demands liable to be made upon it: the balance, whatever it might be, which would always be the greater portion of what the Bank might hold, would be allotted to the Banking Department, as the one chiefly concerned in production and trade, and upon which rest the whole commercial and financial interests of the kingdom. This is an obvious mode of reasoning; but reason had no more to do with the matter of the present organization of the Bank than it has with the shape or color of an amulet which is to serve as a fetish to shield one from harm.

The passage of the Act of 1844 exerted no apparent influence at the time; for, so long as there was no considerable

demand for money, it was immaterial in which till of the Bank its notes lay, or what proportion of them was in the hands of the public. So long as the condition of production and trade existing at the time of the reorganization remained unchanged, the Act was a dead letter. At that very time, however, causes were at work that were soon to put it to the test. The mania for the construction of railways, which culminated in 1847, had already gained no little strength. Up to the 17th of November, 1845, the amount already expended upon the completed railways in the United Kingdom equalled £70,680,877; that expended, or to be expended, upon those in process of construction, £67,317,325. The amount which the companies chartered up to January 1, 1849, were entitled to raise upon share capital and debentures, equalled £320,000,000, as follows:

mass.

The total amount called up in 1847 by the railway schemes put upon the London market, including foreign railways, equalled the enormous sum of £47,000,000, or more than £800,000 weekly. During the same year, the greatest fluctuation in the amount of bank-notes in circulation equalled only about £1,500,000. The monetary transactions having reference to railways were carried on almost wholly by means of checks drawn against deposits; the notes of the Bank, as well as country Banks, being hardly a make weight in the general The enormous amount expended on account of these works, in 1846 and 1847, would have produced a financial crisis, even had the crops for those years been favorable. They proved very unfavorable. The Irish potato crop, which began to fail in 1845, was almost wholly cut off in 1846 and 1847. Large importations of food had to be made, requiring the exportation of considerable amounts of gold, but not sufficient to seriously affect the money market, or the ability of the Bank, as the great monetary institution of the kingdom, to lend. It was the immense investments in railways, many of which proved unproductive, and the consequent stimulus given to all branches of production and trade, and which affected every class and every interest in the kingdom, that caused, by