a state of things in which, when capital is plentiful, we may come to see Bank agents jostling bill-brokers in every leading counting-house in the city.

"I know well that the mere approach to such a state of things would be found intolerable, and would only lead to some new banking experiment, or, what would be far worse, to some empirical tampering with the currency. But if upon grounds of public policy, or from any reasons distinct from the pecuniary interest of the Bank, competition is to stop short, it is better to place the limit where it will be most useful.

"I therefore contend for a minimum rate, and not for that alone, but also that, when capital is plentiful, the Bank should refrain from every act tending to throw its own surplus funds upon the market. As to the purchase of stock under such circumstances, it would be evidently worse than the reduction of the discount rate. The latter may not attract any additional borrower, but the purchase of consols or ex chequer-bills absolutely forces the equivalent which is given for them into the mass of capital actively seeking employment. It would take up far too much of your space to advert now to the conduct of the Bank on former occasions, or this would suggest my answer to your argument for the inefficacy of a minimum rate in 1824 and 1835. In the former year, as you are well aware, the Bank commenced its large payments for the dead weight annuities 1; and in 1835, being troubled just as it now is with a superfluity of cash, derived from the West India loan and the assets of the East India Company, it made a special bargain with the discount brokers, by which it obtained the employment of those funds in the market. In other words, it did not then, by reducing its rate, help to render the community inflammable, but, seeing them to be actually in a state almost as explosive as gunpowder, it flung out a lighted torch upon the dangerous mass.

"You deny that the reduction of the bank rate in autumn, 1844, had any influence upon the market. The question is too large for full discussion now. I will only say that your figures for the year which followed show a rising market rate, and therefore a growing scarcity. During that critical period, however, the Bank increased its loans on private securities by no less than £4,000,000. To my mind it seems incredible that that addition, and the impressions which it produced on other lenders, did not help greatly to heighten the speculative fever which was then raging; and I believe that both then, and still more decidedly in autumn, 1846, the wholesome tendency which appeared towards a rise in the market rate was checked by the movements of the Bank, which movements, however, looking to the position of the Bank at both periods, if we are to judge of it as a purely private concern, do not deserve a syllable of censure.

"Before concluding, let me add a word upon your parallel between the trade in money and other branches of commerce. The whole question, is whether there are not special circumstances affecting the former trade, as conducted in England, which take it out of the common category. I maintain that the peculiar and unexampled power which law and custom have given to the Bank of England, constitute such

'See Tooke, vol. ii. p. 179, and the Evidence of 1832.

a circumstance. If, owing to those causes, it commands a very large proportion of the whole amount of capital disposable for mercantile loans in London, there is good ground for maintaining that that great weight should be always thrown into the monetary scale in such a way as to limit rather than aggravate its fluctuation. How the interest of every branch of commerce would be served by this means, supposing it practicable, I need not insist. The general principle of free trade assumes that the fairness of competition is not interfered with by unequal privileges. There is nothing in that principle to prevent Parliament from fixing the fares of a railway, or enforcing regulations on the mercantile navy. There is nothing in it, as I think, to prevent the public interest from fixing a limit to the Bank rate of discount."

CHAPTER IX.

THE NEW GOLD.

"Mammon led them on,—

Mammon, the least erected spirit that fell

From heav'n, for e'en in heav'n his looks and thoughts
Were always downward bent, admiring more

The riches of heav'n's pavement, trodden gold,

Than aught divine or holy else enjoy'd

In vision beatific; by him first

Men also, and by his suggestion taught,

Ransack'd the centre, and with impious hands
Rifled the bowels of their mother earth

For treasures better hid. Soon had his crew
Open'd into the hill a spacious wound,
And digg'd out ribs of gold."-MILTON.

Three Ways of receiving New Gold.

WITHIN a comparatively short period, ten millions of new gold have come into England. It is important to examine through what channels any part of that gold has found or can find its way into the currency. There are three modes in one or more of which it may have arrived in this country.

1. It may have been brought by owners intending to spend the whole at once as income.

2. It may have been brought by, or transmitted for, account of owners intending to invest the amount as capital, and to spend only the annual proceeds.

3. It may have come directly to merchants, or indirectly through exchange dealers, in payment for English exported goods.

It is scarcely worth while to speak of any gold that can have come in the first mode, although it would be that of most direct

influence upon the currency. A few navigators there may be from California or Australia now and then, who rush over to squander their gains, like seamen paid off from a ship; but such sums would be but a drop in the ocean, and its precise effect, whatever it might be, will be explained in considering the effect of additions otherwise made to the aggregate of income.

New Gold as Capital for Investment.

As to gold entering in the second mode, by the supposition it is purely an addition to the existing stock of money capital. The owner of £10,000 in gold coming in that way simply desires to invest it like any other owner of a like sum, whether in the form of gold or bank credit accumulated at home. It is at once, therefore, added to and lost in the pre-existing stock of disposable capital. The owner may hold it in the form of a credit upon the Bank of England, or upon some private bank. The gold flows into the Bank vaults. There is nothing so far which can introduce a single sovereign into the currency. There was already more capital waiting for employment than could be placed out. The additional sum, so far as it goes, tends to lower the rate of discount, and to foster speculation, but that is all. If it is applied to the purchase of consols, it tends to raise them, but in this case the new capital is only transferred to the seller of the consols. The market remains in the same state as before. If, instead of ten thousand pounds, we suppose ten millions to have arrived in this manner, the same principle must hold good. Consols, if the Chancellor of the Exchequer would permit such a thing without conversion, might go to 120. The Bank hoards would be still further enlarged. The enormous flood of capital would beat and dash with turbid and tumultuous waves into all the channels of discount, into every opening of industrial investment. The extravagance and orgies of 1845 might burst out into a yet more fearful development. Speculators of every unsightly form might be generated according to the old fable, like monsters in the slime of the Nile.

The atmosphere might become foul and putrescent with the mephitic exhalations of covetousness, stripped of every vesturę of shame, and the crapulous excesses of coarse natures drawing from sudden wealth only animal enjoyments. Yet would all this leave the bulk of the gold hoards unmoved. For a hundred millions added to income, four or five might be drawn into the currency, but like the violence of the strain would be the violence of the recoil. Crushing, desolating, revolutionary, the recoil would come, flinging up the base to rank and wealth, casting down the noble, enriching the usurer, robbing the widow, rending the social ties on every hand; in one word, demoralising, and hurrying all yet faster down on that steep descent which leads to unknown, but most awful issues. I

suppose the worst. I suppose the utmost activity of capital

coming in the manner I have mentioned, in which case it could only reproduce on a larger scale, and with cycles more rapid and destructive, effects similar to those which have followed from our own accumulations. The best that could be hoped respecting such capital in our present state is, that it would be wholly inactive.

New Gold in Payment for Exports.

But, in point of fact, this is not the mode in which the new gold for the most part either has come or will come to this country. It comes in payment for exported goods. Coming thus, there are two cases which require to be considered separately.

First, the aggregate of exports may not have increased, and the gold may have come only instead of goods which otherwise would have effected the payment; for instance, it may come from Australia instead of wool, which would be the ordinary return.

Secondly, the aggregate of exports may have increased, and the extra portion may have been paid for in gold, the returns in goods for the other portion coming as usual.