had exceeded all due bounds. On the 10th of May there was a general run upon all the London banks. It was said, but we cannot say with what truth, that one great bank alone paid away £2,000,000 in six hours. After banking hours it became known that the great discount house of Overend, Gurney & Co. had stopped, with liabilities exceeding ten millions-the most stupendous failure that had ever taken place in the city. The result of such a catastrophe was easily foreseen; not another bank could have survived the next day; and that evening the Government again authorised the Bank to issue at discretion, at not less than 10 per cent. The Bank advanced £12,225,000 in five days: but the panic passed away.

Thus again the RESTRICTIVE Theory wholly failed: the EXPANSIVE Theory saved the country, and was the only means of saving the Bank itself, as well as every other bank, from stopping payment.

Thus we see the entire failure of Sir Robert Peel's expectations. He took away the power of unlimited issues from the Bank, and imposed a rigorous numerical limit on its powers of issue, under the hope that he had prevented the recurrence of panics. But the panics recurred with precisely the same regularity as before; and, therefore, in this sense too, the Act has failed: and when panics do occur, it is decisively proved that it is wholly incompetent to deal with them.

17. It has been seen that it is a complete delusion to suppose that the Bank Act carries out the "Currency Principle." It might be supposed, perhaps, that if it did really carry out the "Currency Principle," it might prevent panics arising. General experience, however, entirely negatives this view. In 1764, the most terrible Monetary Crisis which had up to that time occurred, took place at Amsterdam and Hamburg, where the banks were really constructed on the "Currency Principle."

A decisive example of this took place at Hamburg in 1857. A similar Monetary Crisis took place there, as here, and the Bank being constructed on the "Currency Principle," had no power to issue Notes to support Credit. The Magistrates were obliged to issue City Bonds to support the Credit of the merchants, exactly as the Government had issued Exchequer bills in England in 1793. Here also the RESTRICTIVE Theory wholly failed, and it

was found necessary to adopt the EXPANSIVE Theory to avert universal failure.

These disasters took place where there was no Currency at all, but what represented bullion: and they are conspicuous examples that panics occur just as readily under a purely Metallic Currency as under a Paper Currency,

The experience of every other country exactly confirms the experience of England. At Turin the bank was constructed on some principle of limitation: but in 1857, during a monetary panic, it was found necessary to suspend its constitution, and allow it to issue Notes to support Credit.

The very same thing was conspicuously proved in 1873. In Austria, in North Germany, and in America, the Banks were all constructed on some analogous principle of limitation on their issues. But in the severe monetary panic in each of these countries, it was found necessary to suspend their constitutions, and authorise them to issue at discretion to support commercial Credit.

Thus universally throughout the world it is proved by abundant experience, that the RESTRICTIVE Theory cannot be maintained after a monetary panic has reached a certain degree of intensity; and that it is absolutely necessary to adopt the EXPANSIVE Theory to avert universal failure.

18. The supporters of the Act of 1844 strenuously maintain that it is the complement of, and in strict accordance with the principles of the Act of 1819, and the Bullion Report. But such statements are utterly incorrect: and the following are the fundamental differences of principle between them

I. The Bullion Report declares that the mere numerical amount of notes in circulation, at any time, is no criterion whether they are excessive or not.

The Theory of the framers of the Act is that the Notes in circulation ought to be exactly equal in quantity to what the gold coin would be if there were no Notes: and that any excess of Notes above that quantity is a depreciation of the Currency.

Is this principle of the supporters of the Act in accordance with the principle of the Bullion Report?

II. The Bullion Report declares, and the supporters of the

Act of 1819 maintained, that the sole test of the depreciation of the Paper Currency is to be found in the Price of Gold Bullion, and the state of the Foreign Exchanges.

Ricardo says "The issuers of paper money should regulate their issues solely by the price of bullion, and never by the quantity of their paper in circulation. The quantity can never be too great nor too little, while it preserves the same value as the standard."

According to the supporters of the Act of 1844, the true criterion is whether the Notes do or do not exceed in quantity the gold they displace.

Is the doctrine of the supporters of the Act of 1844 in accordance with the principles of the Bullion Report, and of the Act of 1819?

III. It was proposed to the Bullion Committee to impose a positive limit on the issues of the Bank, to curb their powers of mismanagement. The Bullion Report expressly condemns any positive limitation of its issues: and Peel in 1819, and in 1833, fully concurred in this condemnation.

The Bank Act of 1844 specially limits the issues of the Bank. Does the Bank Act of 1844 coincide with the principles of the Bullion Report and the doctrines of Peel in 1819 and 1833 ?

IV. The Bullion Report, after discussing the most important monetary crises which had occurred up to that time, expressly condemns the RESTRICTIVE Theory in a monetary panic, and says that it may lead to universal ruin: and recommends the EXPANSIVE Theory.

The Bank Act enacts the RESTRICTIVE Theory by Law: and prevents the EXPANSIVE Theory from being adopted.

Does the Bank Act of 1844 agree with the doctrines of the Bullion Report, and of Peel in 1819 and 1833, on this point?

In 1793 the Bank adopted the RESTRICTIVE Theory; and when all commerce was on the brink of ruin, the Government, by issuing Exchequer bills, adopted the EXPANSIVE Theory, and

commerce was saved.

In 1797 the RESTRICTIVE Theory was carried out to the end, and the result was the stoppage of the Bank.

Proposals for an Economical and Secure Currency, § 3.

In 1825 the RESTRICTIVE Theory was adopted for three days, and when commerce was again on the brink of ruin, it was suddenly abandoned; the EXPANSIVE Theory was adopted, and commerce was instantly saved.

In 1836 a great crisis was imminent: the Bank, foreseeing it, adopted the boldest measures before it came on, and made immense advances to sustain commercial credit: the policy was successful, and averted a general panic.

Peel, in introducing his measure of 1844, said that we must never again have such discreditable occasions as 1825, 1836, and 1839 but since 1844 we have had 1847, 1857, and 1866. On each of these occasions the RESTRICTIVE Theory was enacted by Law and on each occasion the Government was obliged to come forward and authorise the Bank to break the Law, to abandon the RESTRICTIVE Theory and adopt the EXPANSIVE Theory. And by so doing universal ruin was averted, and the Bank itself saved from stopping payment.

Experience, therefore, has indisputably proved that the Bullion Report was framed with truer wisdom and scientific knowledge of the Principles of Paper Currency than the Bank Act of 1844. The only deficiency in the Report was that it failed to point out the proper means by which the Paper could be kept at par with gold. But the true principle of controlling the Paper Currency is now well understood to be by adjusting the RATE of DISCOUNT by the Foreign Euchanges, and the state of the bullion in the Bank.

Examination of the Arguments alleged for maintaining the Bank Act.

19. It has now been clearly shewn that the Bank Act has completely failed both in THEORY and PRACTICE. It has been shewn that it is based on a DEFINITION of the word "Currency," which is entirely erroneous in Commercial Law, and in Philosophy -that it professes to adopt a Theory of Currency, which it has entirely failed to enforce-that if the Directors choose, they can mismanage the Bank quite as easily under the Act as before it. Lord Overstone justly pointed out that the radical vice of the Bank principle of 1832 was that the Bank might be completely drained of gold without a single note being withdrawn from the

hands of the public: the Bank Act was expressly framed with the intention of compelling the Directors to withdraw notes from the public exactly as gold was drawn out of the Bank. But it was decisively proved in April, 1847, that the Bank Act had precisely the same radical defect as the Bank principle of 1832; the Directors allowed many millions of gold to be withdrawn from the Back without withdrawing a single note from the public, and the pretended "Mechanical" action of the Act wholly failed to prevent them doing 80-that the Act was expressly framed with the expectation that it would prevent commercial panics, and that it has wholly failed in doing so: and hitherto panics have recurred with the same regularity as before-and furthermore, although the Act is in no sense whatever the original cause or source of these crises, yet when they do occur, and they reach a certain degree of intensity, the operation of the Act, by visibly limiting the means of assistance, deepens a severe monetary pressure into a panic, which can only be allayed by its suspension, and a violation of its principles.

In every one of these respects the Bank Act has completely failed: and in regard to these things its credit and reputation is utterly dead and gone. It is, therefore, necessary to examine fairly the arguments alleged in its favour, and the reasons urged why it should still be maintained.

The supporters of the Act, allowing that it has failed in some respects, yet maintain that the Directors having committed the same mischievous errors as they had done before it, it arrested their mis-management much sooner than would otherwise have been the case; and that when the panic did occur, it was only through the Act that the Bank had 6 millions of gold to meet the crisis; and that by this means the convertibility of the Note was secured.

So far as regards the crisis of 1847, it must be admitted that there is much force and truth in this argument. The Directors at that date shewed that they had not yet acquired the true principles of Banking, and it must be conceded that it was entirely owing to the Act that they were checked in their mistaken policy while there was still six millions of gold in the Bank.

But the same ground of censure did not apply to the crisis of 1857. In the interval between 1847 and 1857, the Directors