extravagant a result came to be thought desirable by the Directors. It is evident that the Bank might add immensely to its loans without causing any perceptible diminution in its unemployed reserve, for whatever went out in loans would directly flow back in deposits. It is, indeed, more strictly correct to say that either nothing or very little would go out at all, because the new loans would be taken out in the form of credit. What, then, is to prevent the Bank from underbidding the brokers until it gets to the point of stopping their operations, and drawing all the bills to itself? Evidently no want of power. There is, however, happily, a restraint, which under all circumstances must operate to a considerable extent, and if it did not exist I see nothing upon the principles now prescribed by leading statesmen of all parties for the conduct of the Bank, which would prevent us from coming to penny discounts for thirtyone day bills as companions to the penny omnibuses. That restraint is, that the Bank Directors do not possess the knowledge of individuals which would enable them to take away business to any extent from the private bankers or the brokers. In fact, they never succeed in doing so. The Bank may, however, place increased funds in the hands of private bankers and brokers, so as to facilitate and push an extension of discounts by the latter at a time when the expansion of Bank credit is already excessive. Further, however, and infinitely more important, is the manner in which the reduction of the Bank rate acts as a stimulus to the whole multitude of discounters through the empire, to use to the utmost the means at their disposal. A reduction in the rate of discount by the Bank is always taken as a signal that money is abundant, and likely to be more so. Advances may then be made and risks run in Glasgow or Liverpool, which would not be hazarded if there were the least doubt of the ability of the lenders to fall back, in case of need, on the overflowing resources of the London money market. The Bank thus everywhere raises the wind, and the whole of the aggregate of the paying power is ex panded in volume by a mere blast from the bellows in Threadneedle Street. Reaction after Speculative Excesses. The survey of the machinery of the money market, and of the manner in which speculative excitements are fostered, would be incomplete without an attempt to show the nature of the painful process by which such disorders are corrected. The disorder specifically consists of an immense and complicated series of engagements-wheel within wheel, fold within fold-to make money payments, which from miscalculation and dishonesty cannot be effected. Those engagements may be to pay calls in joint-stock companies by individuals who subscribed beyond their means, and generally every industrial enterprise, which is either very slow or altogether fails in making the expected return, leaves the parties concerned unable to meet the demands upon them. But the acutest form of the disorder is that which arises from the creation of an immense mass of mercantile bills, each of which is or ought to be drawn against some portion of commodities on its way to consumers, which, if laid in at prices suited to the real supply, will in due time draw back out of the aggregate of income their precise money equivalent. Repayments thus constantly flowing up from the retail dealers, or to exporters from their correspondents abroad, come in a continuous stream, and if calculations be exact all goes well. If stocks be laid in at too high prices, or foreign demand fails, the friction of the commercial wheels becomes growingly perceptible; but all still moves on, because, with general confidence, one series of bills swells out, as it were, under another, and prevents the collapse which would otherwise take place. At length stocks accumulate to a point which causes the demands upon the banker for money to become dangerously large, or which in some way excites his suspicion, and then the tide begins to turn. As soon as a banker feels that his own liabilities can be ex tended no farther, reaction has set in'. He diminishes his accustomed accommodation, and at once the whole system begins to drag, not at one point, but at all points. The demand for money everywhere presses upon the supply, and the supply everywhere dwindles and shrinks away from the demand. That portion of the whole which consists of bank credit does literally become less; bankers, having the power to let it decline, do, by letting their daily payments flow into them, exercise that power. The stocks of merchants who have money engagements to meet are pressed upon the market, and the fall of prices is precipitated. Each fluctuation marks a violent transfer in the previous distribution of property, to the loss of him that had goods, to the gain of him that had command of the money power. A single wave of price affecting a large stock may sweep the foundation clean from under a great house that has stood for three generations. One pile falling brings another to the ground. Crash follows crash. Alarm spreads, and it becomes doubtful who will stand. Every one desires to acquire or retain in his possession money in one of the three forms of gold, bank-notes, or bank credit, which are universal equivalents. The third and most important of the three elements being, under these circumstances, in a state of continuous contraction, there is evidently some point at which that contraction, if pushed far enough, would compel a general suspension of mercantile engagements. No solvency would prevent this any more than stores full of corn and other goods would have enabled a merchant of Ohio, in 1836, to make a metallic payment when there was scarcely a dollar within the boundary of the State. The transferable bank credit being itself the main instrument by which all the larger mercantile contracts are fulfilled, the destruction of that instrument, when once carried to a certain point, must necessarily render the performance of those contracts a total impossibility. 1 A drain of gold causing the Bank of England to contract its advances, accelerates and aggravates the reaction; but all the phenomena of a ruinous contraction of credit may take place without any drain of gold, and in spite of the efforts of the Bank to diminish the pressure, as was the case in 1810-11. Misery produced by a Commercial Crisis. The amount of human suffering produced by what is called a commercial crisis, is something which probably no human mind will ever be able fully to conceive. In a country possessing no organized credit system the march of an invading army may waste and desolate the region through which it passes, but in the great multitude of homes the ordinary peaceful movement of life is undisturbed. The misery produced by a despotic government is more general, but even in that case tyranny usually falls into a procedure sufficiently habitual to enable the mass of men to know what they have to expect. But a commercial crisis, during its continuance, subjects vast numbers to an anxiety so keen as to be comparable to nothing but the agony of the rack itself. And the unhappiness which it produces is by no means confined to those who are tortured with doubt as to their power of meeting great commercial engagements. The calamity is diffusive. From every suffering centre the agony shoots through innumerable nerves into all the neighbouring regions of the social body. Multitudes, who hardly know what a speculation is, find the ground on which they stand suddenly drawn from beneath them, and the bread of their children snatched out of their hands by the convulsive workings of the mechanism which speculation has disordered. Dangers of a high Commercial Organization. Yet, whatever effect a particular act of unwise legislation, or the misconduct of a particular institution, may be supposed to have in aggravating disorders of this kind, it is certain that they do in substance spring from the whole moral state of the nation; that is to say, from the passions which are suffered to sway the great body of the intelligent middle class, acting upon a highly-refined and elaborate organization of credit. It holds good universally that, in proportion as bodies are highly organized, they have likewise the capacity of acute suffering. The two things go together and cannot be separated. Of the varied orders of the brute creation, there is not one which has any true experience of the sad inheritance of man, "Of ghastly spasm, or racking torture, qualms Of heart-sick agony, all feverous kinds, And moon-struck madness, penury, atrophy, Nor amongst men themselves are the most intense agonies known except to the gifted few, who are endowed beyond others with the lofty privilege of looking before and after; and who are so often ready to cry out with the prophet, "Behold and see if there be any sorrow like unto my sorrow!" This liability, then, to the paroxysms of commercial disorder belongs to England in virtue of an economical organization surpassing in delicacy and complexity anything of which the world ever before had experience. The ties which connect man with man and class with class are minute and multifarious beyond example; and that which France, knowing the thing more in desire than in experience, calls solidarité, or universal interlacement and community of interests, is the great fact which in England makes it impossible to have any virulent local disorder in society without universal suffering. No Cure but a Moral One. The pretension, however, that the industrial derangements to which England is liable may be cured either by legislation or by any changes in our social mechanism, must be condemned in the same sentence with the nostrum of the quack. The source of the disorder lies in the highest, that is, in the moral, nature of man, which, if it is not raised and ennobled in proportion to the advances which he makes in wealth and intelligence, H |