pending over the country, our commercial classes are now more free from such demands upon their resources than they have been for many years."

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These are weighty statements. Here is a writer-a recognised authority-carefully considering the whole subject, and speaking with all the official returns and private trade-circulars before him. Here is a man who, in the presence of a great danger, anxiously scans all parts of our position, to see if there are any weak points, and can find none. Again and again, the Times' expressed a similar opinion. For example, on the 9th October, when the Bank began to raise the rate of discount, the leading journal in its City article remarked: As regards the broad trade of the empire, it is impossible to discern the cause of fear. Month by month our commercial payments increase in magnitude, and yet are met with a punctuality never surpassed. All the leading bankers will testify that thus far there is an absence even of those premonitory symptoms which invariably warn them of the possibility of a coming struggle, long before the community at large have become awakened to it. Hence the belief may be confidently indulged that, although with our universally diffused transactions we must necessarily participate in every shock that occurs elsewhere, our commercial prosperity is destined still to continue a marvel to the world." The "Times' and Economist' were right in these statements as to the soundness of our trade. What, then, caused their anticipations to be so lamentably falsified by the issue? Instead of remaining a marvel to the world," what caused our trade to break down utterly, covering the country with wrecks and misery? The Times' and 'Economist' erred in their calculations simply because they looked only to the state of trade, and overlooked the effect which the American panic would produce upon our monetary system. It was the failure

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of the latter which occasioned the failure of the former. The cause of the crisis of 1857 was not bad trade, but a defective currency-law. It was not the fault of our commerce, but of our monetary system. After the crisis had done its work, indeed, the impression became general that our commerce had been running wild; and the numerous bankruptcies and suspensions were appealed to as showing that such must have been the case. This was an ex post facto argument of a most inconsequential kind. That thirty thousand soldiers died in a week's time-that week having witnessed a battle-is certainly no proof that the army to which they belonged was in a frightfully bad sanitary condition. Doubtless the ailing soldiers of an army are sure to be knocked over in a hand-tohand fight, but the proportion of such cases is insignificant; and thousands more perish who, but for the battle, might have lived in health and strength for the natural term of existence. The country knows to its cost that the failures and suspensions in 1857 were disastrously numerous; but the question remains, What was the cause of them?

The supporters of the cry of overtrading founded their charge against the commercial classes on the fact that the export trade in 1857 was greater than it had ever been before. It had increased six millions above the highest amount in any previous year. True, in some of the previous years, there had been an increase not only as great, but three times greater. That was undeniable: but, said the supporters of the overtrading theory, that does not matter: it is now obvious that our merchants and manufacturers have carried trade beyond the limits which the capital of the country can support. The amount of the increase on the year may have been only six millions, but these six millions have been an excess. An export-trade of 122 millions, they said, is a forced and inflated trade, beyond the requirements of the world,

and greater than our accumulated wealth can support. And when the exports fell-in consequence of the crisis, and of the stagnation of trade which followed-they appealed to this fact as a proof of the justice of their opinion, and said that this reduction in the amount of exports was simply owing to the country having returned to its normal amount of trade and of production. For the time, they had it all their own way. No one could bring positive proof that they were wrong. It might be though it was not probable-that British trade had reached and temporarily exceeded the maximum which the requirements of the world permitted. But even if this had been the case, it was certainly unfair and ungenerous so bitterly to taunt the commercial classes, in the midst of their disasters, with recklessness and insanity, merely because they had exceeded a limit which-supposing it had existence-could not possibly be discovered save by actual experience.

But what is to be thought of such an allegation now? Actual experience has been acquired, and what does it show? Look back at the column of "our Nilometer," which we give on a previous page, and see how insignificant was the increase of trade which was thought to be "reckless overtrading," and the cause of all our calamities, seven years ago. Such an increase appears a bagatelle, and the ill-fated year, as figured in the returns of its trade, is passed over by the eye as a very ordinary one. Despite the limit which theorisers assigned to it as its ne plus ultra, British trade has continued to increase, and to an extent which throws all former years into the shade. No sooner was the year of stagnation, which necessarily followed the crisis of 1857, at an end, than trade not only resumed its old rate of progression, but began to exceed it. In 1859 the exports were eight and a half millions greater than those of 1857; in 1860 they were fourteen millions greater; and last year they were twenty-four

and a half millions greater than in 1857. Yet no crisis came: the country was eminently prosperous, and every one rejoiced in the marvellous expansion of our industry and enterprise. Even the terrible cotton - dearth failed to reduce our exports to their amount in 1857; and if any such reduction were to take place, it would justly be regarded as one of the greatest calamities which could befall us. A steady increase of trade on the part of this country is what may naturally be expected, and is much to be desired. In truth, if we consider the annual increase of our wealth and of our population, and the increasing facilities for trade with other countries, it will be evident that when the Board of Trade returns are no greater for one year than for its predecessor, such a fact indicates not merely that we are not gaining ground, but that we are losing it. When the amount of labour in this country is annually increasing, and better markets are being opened for the produce of that labour, it is alike unnatural and unfortunate if our exports do not likewise show an annual increment.

Although the excess" of exports shown by the Board of Trade returns was the chief ground upon which the charge of over-trading was brought against the commercial classes in 1857, another circumstance, peculiar to the times, contributed notably to make the charge popular with the general public. This was the publicity then for the first time given to the examination of bankrupts. Failures, which previously would have passed unnoticed by the public, then began to be reported in full detail in the newspapers, and became the subject of conversation in every city and marketplace in the kingdom. Scandal-lovers delighted to recount the extravagance of the bankrupt in his wines, furniture, and housekeeping,-how much went to keep up his dog-cart, and how much was lavished on his mistress; while men of business dilated upon the nature and extent

of the "accommodation-system," by which this reckless speculation and extravagance were carried on. It was the revelation of these cases that was new in 1857-not their occurrence. Such exceptional cases are, have been, and will continue to occur in every large and active commercial community. One may as well hope to sever shadow from sunshine, or evil from good in this world, as to find a condition of trade in which many cases of recklessness and mismanagement do not co-exist with legitimate and profitable enterprise. Caeteris paribus, the more numerous a population is, the greater the amount of poverty, folly, and crime; and in like manner, and from the same cause, the brisker trade is, the more numerous will be the cases of bad trading. We may regret this, as we deplore the other imperfections of human nature, but we cannot help it. It is a clog upon prosperity, but not a barrier to progress. The population of these islands has doubled since this century began, and we are afraid to say how much more numerous are the cases of crime and poverty amongst us now than they were sixty years ago; but, despite these drawbacks, the nation has advanced immensely in its social condition and prosperity. Progress in Trade is just like progress in anything else. There may be, and doubtless are, a greater number of bad failures now than in former times, but certainly there are not more in proportion to the amount of trade carried on. And if, in 1857, among the scores of bankruptcy cases revealed in detail to the public, there were some of more than usual shamelessness and recklessness, it must be also remembered that there were dozens of cases of suspensions-probably representing in value one-half of all the failures that then occurred-in which the assets of the firms not only covered all their liabilities, but greatly exceeded them.* It may well

be asked, how came this to be? Here, at least, there was no overtrading." The fault must have lain not in trade, but in something else. And that thing is the very element of the question which the supporters of the over-trading" theory desire to overlook. It is that something in the circumstances of the country" which, as we have previously suggested interrogatively, on certain occasions makes our commercial classes appear to be over-trading when in truth they are not. This element is the operation of the Bank Act; and this it is, and not periodical insanity on the part of the trading community, which is the fundamental and originating cause of our recurrent crises. They are not commercial," but monetary crises. It is commerce indeed that suffers, but it is our monetary system which deals the blow. The commercial community is the vile corpus in which the disease chiefly operates, producing misery and ruin; but it is the system pursued by the Bank, under Act of Parliament, which is the source and efficient cause of the calamity.

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Apart from the fatal operation of the Bank Act, what was the nature of the difficulty which our traders had to encounter? We cannot answer this question better than in the words of the Times.' Commenting on the large failures that were taking place, it said: "Messrs Dennistoun have houses in New York and New Orleans, and the almost total cessation of remittances from those points has rendered the stoppage unavoidable. What has caused Messrs Naylor, Vickers, & Co., and Messrs Dennistoun to stop? The simple fact that each succeeding mail from America arrived without bringing them remittances of bills to enable them to apply for discount. Their capitals were ample." + "Any firm with fair capital and credit is always prepared to meet a short strain;

+ Times,' November 9, 1857.

but few can be expected for weeks and weeks to discharge the cost of wages, raw material, and all the other items in the manufacture of the goods they have shipped, when the returns for these goods are stopped by a convulsion so violent and so little foreseen that it is likened on the spot to an attack of epilepsy." * Such was the embarrassment which our traders had to meet,-sudden unforeseeable, and neither arising from nor revealing any fault on their part. The embarrassment, also, was as temporary in its nature as it was artificial. "In America," said the 'Times,' on the 13th of October, "the arrears now due to England and the Continent are enormous, and are accumulating every week; and the moment the panic there subsides, and the influence of the fortnightly gold arrivals again begin to be felt, the scarcity of bills upon us may be as remarkable as their present abundance. There is, consequently, nothing to excite apprehension that the disturbance will be protracted."+ This, then, was the whole difficulty -perfectly artificial in its character, and temporary in its duration. Any man of common sense will wonder that so slight a difficulty should have led to so tremendous a crisis. Our traders had capital enough, but they could not get money. Their credit was unquestioned, but our credit-system had wholly given way. Again we ask, Why was this?

A word will explain the matter. A drain of gold-though, as we have shown, a merely superficial event, in no way necessarily connected with national loss, or expressive of national indebtednessunder our present system, is the grand cause of the recurrent "crises" which inflict such vast losses upon our commercial classes. In 1857, in consequence of the panic and temporary suspension of cash-payments

'Times,' Oct. 26, 1857.

by the banks in the United States, there was a delay in the usual remittances from that country; and also, a million and a quarter of gold was sent thither from this country, partly for the purpose of purchasing American stocks, then unduly depreciated. Such investments, made by our capitalists, were as legitimate, and at least as profitable, as if iron or cotton goods had been exported to an equal value. But the export of property in specie, under our present system, has a very different effect from the export of property of other kinds. Merely temporary as was this absence of our usual reserve stock of specie, the operation of the Bank Act was such as to occasion an internal drain likewise, and ultimately, and very rapidly, shook down our fabric of trade altogether. The operation of the Bank Act, when a drain of gold takes place, is threefold-viz., 1. To raise the rate of discount even for first-class commercial bills to an exorbitant height; 2. To render many bills (i. e., the form of currency by which all our larger money transactions are carried on) unnegotiable which in other circumstances would have been esteemed as perfectly good; and, 3, at the culmination of the crisis, so to reduce the available resources of the Bank as to render that establishment incapable of lending the customary assistance to firms upon any terms,-even though the solvency of these firms be as unquestioned as that of the Bank itself, and though their suspension would cause a panic which would endanger the position_of every bank in the kingdom. example, in November 1857, the great house of Peabody & Co., temporarily embarrassed by the suspension of payments in America, applied to the Bank for the loan of nearly a million sterling, which the Bank, with its power of issue restricted by the Act of 1844, was

Ibid., Oct. 13, 1857.

For

unable to give; and all London tottered, for it was known that if that great firm went down, dozens more would fall with it, and the panic would become universal. The suspension of the Bank Act alone prevented this catastrophe, by relaxing the arbitrary fetters on the Bank's issues, and thereby enabling it to advance the sum required. We may add, so thoroughly solvent, indeed excessively wealthy, was this temporarily embarrassed firm, that the private property of the chief partner was of itself held by the Bank to furnish sufficient security for this enormous, but urgentlyneeded, loan. * But if Peabody & Co. were saved - and we rejoice that they were so-why were the Dennistouns, Nayler, Vickers & Co., and many others, sacrificed? The circumstances of all these firms were alike,-why was their fate different? Each had an ample capital-each, from no fault of its own, was temporarily embarrassed; why then was not the required assistance given equally to all? Simply because we have an unworkable Bank Act which it is a point of honour with some theorists, and a point of self-interest with all money-dealers, to uphold to the last, though trade and industry go to wreck and ruin.

Without discounts, there can be no trade. A stoppage of discounts on the part of the Bank brings the whole fabric of industry to the ground. The rate of discount has been extremely high of late. Trade has now to pay twice as much for its usual discounts as it did in similar circumstances ten years ago. It may be, though it certainly is not probable, that the profits of traders are so much greater now than formerly that they can afford to pay these higher rates of discount and if such be the case, bankers of course are quite justified

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in exacting them. Bankers have to make a profit on money, just as traders make a profit on goods; and the higher they can raise the rate, the better for themselves. But there is one point about which there can be no dispute. Trade must have discounts. Yet, under the existing regime, these fail trade at the very times when they are most urgently required. The Bank turns its back upon Trade: the Act says, No-you cannot have your bills discounted upon any terms," even while there are six or seven millions of gold in the Bank. Those millions are wholly withdrawn from Trade: they were set apart, in 1844, for the purpose of securing the convertibility of the note,—a convertibility, be it noted, which is never endangered, seeing that the public never want gold if they can get notes. Moreover, there is a great blunder in the framing of the Act; videlicet that these six or seven millions are absolutely useless for the purpose for which they were set apart. When the Bank has exhausted its powers of issue as restricted by the Act, it has still these millions of gold on hand-yet not one sovereign of that immense sum can be used, either for discounting purposes or in exchange for notes, without violating the Act. The reserve, in fact, as established by the Act, is useless. These seven millions cannot be used to cash a single note, so that they are helpless to preserve convertibility. Yet for the sake of keeping up this inert deposit, these millions are withdrawn from banking purposes, and the whole commerce of the country is periodically sacrificed. A drain of gold comes-a panic and "crisis" ensue-the Bank restricts its discounts, and Trade is brought to the ground. This, in brief, is the position. How long will it be allowed to last?

VOL. XCVI.-NO. DLXXXVIII,

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