continuously through 1834 and 1835, till, in the last week in December, 1835, its price was 36s. the imperial quarter. As all agricultural contracts were framed on the expectation that wheat would not be much less than 70s. the quarter, this long-continued depression produced the most severe distress. At the same time, however, all the manufacturing interests were in a state of unexampled prosperity from the abundance and cheapness of food. The long-continued low price of corn caused less to be sown in 1835, and the spring of 1836 was unfavourable. These causes combined to raise the price of wheat in 1836, and the harvest time being wet and cold, caused the price to rise to 61s. 9d. in the autumn.

62. The state of extraordinary prosperity enjoyed by the commercial interests during 1833-4-5, gave rise to an immense amount of speculation and dabbling in foreign loans, as if people seemed incapable of learning wisdom from the experience of 1825. The unexpected success of the first railway gave rise to a considerable amount of speculation in the formation of railways. An immense extension of the joint stock banking system economised capital to a great degree, and afforded the means of the most fatal extension of credit. On the 14th August, 1834, Lord Wharncliffe called the attention of the Ministry to the prodigious extension of joint stock banks and their branches, and the insufficient capital they were trading with. The important subject of joint stock banking was brought before the House of Commons in 1836, and a Committee was appointed to inquire into it. The Committee sat during the Session and made two reports, which will be noticed in a subsequent chapter. This fever of speculation reached its acme in the spring of 1836. Mr. Poulett Thompson, President of the Board of Trade, said in the House of Commons on the 6th of May, 1836

"It is impossible not to be struck with the spirit of speculation which now exists in the country, but I believe that there is a great difference in the state of things and what took place in 1825. The spirit of speculation was then turned to foreign adventure of the most extraordinary description; but now speculation is directed to home objects, which, if pushed too far, may be very mischievous, though the consequences may not be quite so mischievous as in 1825. But, really, on turning to any

newspaper, or any price current, and observing the advertisements of joint stock companies upon every possible subject, however unfit to be carried on in the present state of society, every man must be struck with astonishment at the fever which rages at this moment for these speculations. I felt it my duty · some time ago to direct a register to be kept, taking the names merely from the London and a few country newspapers, of the different joint stock companies, and of the nominal amount of capital proposed to be embarked in them. The nominal capital to be raised by subscription amounts to nearly £200,000,000 and the number of companies to between 300 and 400. The greater part of these companies are got up by speculators, for the purpose of selling their shares. They bring up their shares to a premium, and then sell them, leaving the unfortunate purchasers, who are foolish enough to invest their money in them, to shift for themselves. I have seen also, with great regret, the extent to which joint stock banks have sprung up in different parts of the country. I believe, indeed, that great good has arisen from joint stock banks, but the observations I have made with regard to other companies, are equally applicable to many of the joint stock banks that are springing up in different parts of the country, and the existence of which can only be attended with mischief."

63. We have seen, that since the Bank of England had adopted the principles of the Bullion Report in 1827, the method they adopted of carrying them into effect, was to keep their "securities" as nearly as possible even, and to keep their bullion and cash equal to one-half the "securities;" the bullion, cash, and securities being together equal to their "liabilities." Having got the Bank into this position while the exchanges were at par, to throw any action either of increase or decrease of their issues of notes entirely upon the public, either by means of the foreign exchanges, or by an internal extra demand for gold. The Bank was got into this normal condition in October, 1833, when its "liabilities," i. e., the issues and the deposits, were £32,900,000, the "securities" were £24,200,000 and the bullion £10,900,000. Some transactions with the East India Company and speculations in South American stock occurred to derange these proportions in 1834,

and caused an export of specie; but in 1835, the foreign exchanges became favourable and the drain was arrested. But in the meantime the Bank had totally lost all power of preserving the proportion between the bullion, securities, and liabilities it had professed to adhere to. The following table, taken at intervals, will exhibit this very clearly

This was the lowest point which the amount of bullion reached, and the drain was arrested. The above table shews how totally deranged the proportions were to what the directors considered to be a proper position for the Bank. From that time bullion continued to flow in, till, in March, 1836, it slightly exceeded eight millions; but, even then, the securities were three times the bullion, instead of twice, as they ought to have been.

64. The amount of bullion in the Bank was at its height in March, 1836, and then began steadily to decline again; in the middle of July it had fallen below six millions, when the Bank thought it was necessary to endeavour to stop it, and it raised the rate of discount to 4 per cent.. This had no effect, however, in stopping the demand for discount. In September the bullion barely exceeded five millions, and the Bank raised the rate of discount to 5 per cent. Now the bubbles blown in the preceding year and spring of 1836 were fast bursting on all hands.

65. The drain on the coffers of the Bank proceeded at a rapid rate, both from external and internal causes. President

Jackson had determined that the Charter of the National Bank of the United States, which expired in 1836, should not be renewed, and that the currency of that country should be placed on a sounder footing than it had hitherto been, by forming a sound metallic basis. Operations to effect this purpose soon commenced. Immense quantities of American securities of all sorts were imported into England, and negotiated for the purpose of remitting the specie to America. The improperly low rate of discount in this country, favoured by the inordinate multiplication of Banks, enabled a great quantity of these securities of various descriptions to be realised in England, and the cash was remitted to America.

66. The joint stock banks had been blowing the bubble of credit to the utmost tenuity, by re-discounting most of the bills which they discounted. This practice largely increases the proportion of paper currency compared to the metallic basis, and, of course, adds to any peril in times of discredit. The Bank of England, at length, but too tardily, as has almost invariably been the case, awoke to the impending danger, and determined to strike a blow at the distended state of credit. It not only raised the rate of discount to five per cent. in August, but absolutely refused to discount any bills indorsed by any joint stock bank of issue. This was a great blow at the great amount of American securities afloat in the country, as most of those bills had been purchased by the joint stock banks, and re-issued with their indorsement upon them.

67. In the autumn of 1836, the symptoms of the coming storm were very apparent, especially in Ireland. One very large joint stock bank, the Agricultural and Commercial, was known to be in difficulties early in the autumn, and it made several applications to the other joint stock banks in Ireland, and England, and Scotland, for assistance, which they all refused. It also made a call upon its shareholders, which was not responded to. The other Irish banks, foreseeing a stoppage of the Agricultural and Commercial, had been laying in a stock of gold, to meet the run which would necessarily follow the failure of a bank with so many ramifications. The sum in gold which the Irish banks laid in, to provide for the run, was estimated to be not less than

£2,000,000, all of which came from the Bank of England. Much of this was required on account of the extraordinary differences of opinion that were given by the most eminent Irish counsel, as to whether the Bank of England notes were legal tender in Ireland. Three very eminent lawyers held that they were legal tender, and three equally eminent held that they were not. The Bank of Ireland itself thought they were not, and was still less inclined to make the experiment when there was such a difference of opinion among the lawyers. The other banks followed the example of the Bank of Ireland, and provided gold.

68. The catastrophe that had been foreseen took place on the 14th of November, when the Agricultural and Commercial Bank stopped payment, which was immediately followed by a general run upon all the Banks in Ireland; but it was well met, from the care which had been previously taken to provide specie. So great was the state of discredit, that even Bank of England notes were at a heavy discount in Dublin. The Bank of Ireland would only take them in very small quantities from their customers, at a discount of 2s. 6d. each. During all this time, the diminution of bullion in the Bank of England was going on rapidly. At the beginning of October, it had £5,035,000 in bullion, to meet £29,869,000 of liabilities; at the end of November its liabilities were £30,941,000, and its bullion £3,640,000. During December its bullion slightly increased, and in January diminished again. In November, the Northern and Central Bank, with its head office in Manchester, and thirtynine branches in the manufacturing districts, became seriously embarrassed, and applied to the Bank of England for assistance, which the Bank at first refused; but, upon consulting the leading bankers in London, their opinion was that the stoppage of so extensive a concern in the manufacturing districts would very probably bring on a general panic. The Bank, therefore, determined to advance the sum of £500,000, to enable it to meet its engagements, which, upon subsequently discovering that these were much more extensive than had at first been represented, was further increased to the sum of £1,370,000. Early in January, a London banking house applied for assistance to the Bank, and, on the other London bankers giving their