Since, then, the position of the Bank of England was stronger, alike as regards assets, bullion, and reserve of notes, in September, October, and November, than in the previous weeks; since there was no drain of gold from the country; and since the demand for capital was lessened by the contraction of trade, -why, we repeat, was the Bankrate raised?

As yet we have found not a shadow of reason for such a step on the part of the Bank. On the contrary, all the facts hitherto passed in review would lead one to expect a fall, instead of a rise, in the rate of discount. The only other point to be considered is, the disquietude in the cotton-trade at the end of August and beginning of September, in relation to its natural effects upon the banking establishments. The chief consequence of such disquietude was to lessen the amount of business, and the demand for capital; and also, by the diminution of orders, to lessen the export of gold to pay for cotton. These results did take place; and obviously their tendency was not to increase the rate of discount, but to lower it. As a set-off against these causes for a lowering of the Bank-rate, there was one, and one only, of a different character-it was this: In ordinary times, when the markets are in their usual condition, and when sales can be made on the usual terms, merchants and manufacturers generally have a certain portion

diminished. There are no means of accurately testing the amount of our internal trade, but as regards the other portion of our national industry namely, our foreign trade the decline which took place is evidenced by the official returns of the Board of Trade. Our exports stood thus,-showing a decline of nearly 14 per cent (13.8) in the three last months of the year, compared with the five months previous:Sept.

Oct.

Nov.

:

Dec. £ £ £ £ 14,687,942 12,871,491 12,065,213 12,095,437

of their bills which they do not require to discount. They keep these bills (to use the financial phrase,) "in their portfolio." But when, from any cause, the markets become depressed-when buyers are few, and sales can only be made at a loss-the merchant has to take his reserve of bills to the bank to get them discounted. As he cannot make his usual sales, he has recourse to these bills in order to procure the means of carrying on his business. Hence, when the cotton-market became depressed at the beginning of Septemberalthough the fall in price at that time was not more than 5 per cent

doubtless many cotton-merchants and manufacturers brought out their reserve of bills in order to get them discounted. This circumstance, taken by itself, would increase the demand for loanable capital; but that it was neutralised, and more than neutralised, by the contraction of trading business, and the other circumstances which we have passed in review, is shown by the statistics which we have given of the position of the Bank. It certainly would never of itself have sufficed to produce any banking difficulties; yet, as this is actually the only feature of the case which can be conceived to have influenced the Bank of England in raising its rate of discount, let us see if the case was bettered by the course adopted by the Bank.

The difficulty to be met was the stagnation of the cotton-market,

owing to a temporary and wholly baseless disquietude. How then did the Bank meet it? By adopt ing a course which still further, and to a fearful extent, depressed the cotton-market-converted disquietude into panic-aggravated a passing difficulty into a prolonged disaster; and moreover, extended the embarrassment and depression, from a single branch of trade, to the general trade of the country. As regards the cotton-trade-although the original disquietude, produced by the peace-rumours, was at an end by the third week of September-the effect of the high Bank-rate, and concomitant contraction of credit, sufficed to produce a continued and steadily increasing depression of the markets until at the end of October the average prices of cotton and cotton goods were about 30 per cent below the prices current on the 8th September, when the Bank-rate was raised to 9 per cent.

When a disquietude arises in any branch of trade, it is quite reasonable that banks should be chary of dealing with the firms connected with that line of business. If the cotton-merchants became disquieted as to their position-however baseless the cause of their disquietude, -the banks were unquestionably justified in looking askance at the bills which these firms brought to them to be discounted, and in refusing to discount the bills of any of these firms whose solvency seemed to be imperilled by the prevailing disquietude. But to raise the minimum rate of discount for all bills, to exact a higher rate of usage from the general trade of the country, is quite a different thing. The very disquietude in the cotton-trade tended to lessen, and actually did lessen, the amount of business carried on, and accordingly diminished to an equal extent the demand for capital on loan. So that, we repeat, a fall in the rate of discount would have been more natural than a rise, especially as, as we have shown, the position of the

Bank was in every respect stronger at the time the rate was raised to 9 per cent, and during the two months when it was kept at that height, than during the previous period when the rate stood at 7 and 8 per cent.

The extent of the calamity which overtook the mercantile and manufacturing classes in autumn last is evidenced by the increase of failures to twenty times their ordinary amount, by the diminution of our export trade, and by the tens of thousands of the working classes thereby thrown out of employment. And yet, in monetary circles, the country is congratulated that the evil was no worse. "Thanks to the Act of 1844," it has been said, "the crisis did not culminate in a disaster like that of 1857." The truth is rather, that but for the action of the Bank, there would not have been any crisis at all. For a few weeks there would have been a temporary depression, of no great magnitude, in a single branch of trade. That would have been all. But so far from the difficulty having been alleviated, as it ought to have been, the action of the Bank not only aggravated it fourfold as regards the cotton-trade, but extended the calamity to the whole industry of the country.

Owing to the monopoly of the currency established by the Act of 1844, banks, instead of being the allies of trade, have become its masters, and occasionally its tyrants. As the whole note-issues of England are dependent upon "the Bank," and as all the other large banks have to carry on their business by means of its notes, it can play the part of despot at its pleasure. It has not more capital to lend than the other banks-on the contrary, the London joint-stock banks of themselves have five times more capital to lend than the Bank has. It is its virtual monopoly of the privilege of issuing notes that gives the Bank its tremendous power. It is not its amount of capital, but its monopoly of the means of lending

capital, that gave to it its despotic supremacy. All the other large banks have to go to it for the means of lending their capital. And hence, however great may be the amount of deposits, or loanable capital, in the banks of the country, they are at the mercy of the Bank of England for the means of lending that capital; and the rate of discount is made dependent mainly upon the terms which the Bank of England chooses to demand for the use of its notes.

Under this monetary monopoly our banks are no longer free agents. If any of them desires to adopt a trusting and generous policy towards Trade, it is unable to do so. It has no power to compete on fair terms with the Bank of England. If any banks desire to help Trade to tide over a temporary difficulty, while the Bank of England adopts the opposite course of raising the rate of discount, these banks find that their customers, whom they have been trusting and helping, are soon ruined by the depression of the markets which never fails to follow the raising of the rate of discount by the Bank of England. Accordingly they soon abandon the attempt, and simply follow the example of the Bank, which they are powerless to resist, leaving Trade to its fate.

Banks were meant to be the allies of Trade, and they would be so, for their own interest, but for the artificial state of matters created by our monetary laws. A recent case exhibits, on a small scale, the wise and timely aid which banks mayand, if under natural conditions, would-render to the community in times of temporary difficulty. We allude to the failure of Attwood and Spooner's bank at Birminghan. By that failure hundreds of traders and farmers were suddenly deprived of their whole reserve funds. In the end they will lose nearly one-half of their money, but in the first place the loss was total. Several months must elapse before a dividend would be paid. What were they to do?

They had bills to meet, rents to pay, and also the weekly wages to their work-people. In this emergency

the Birmingham Joint-stock Bank at once stepped forward to assist the sufferers. Without a moment's delay that bank allowed many of the sufferers to open accounts with it. It gave them cash-credits, in short, and allowed them to draw upon it to a certain amount. By this means the disaster was minimised; whereas an opposite policy would have aggravated it, and paralysed the whole trade of Birmingham. The joint-stock bank which thus acted, did so not from any mere feeling of generosity, but simply as a matter of self-interest. It knew that many of the sufferers from the failure of Attwood's bank, although temporarily short of funds, were perfectly solvent, and, with timely help, would be able to carry on business successfully as before, so that the money advanced to them was safe. And at the same time the bank knew that henceforth it would obtain these men as new customers. Therefore, although the policy of the Birmingham Joint-stock Bank in this matter may rightly be called generous, it was not less wise and profitable for itself. A similar policy would be adopted on a larger scale in times of temporary commercial embarrassment, if the banks could safely adopt such a course. But as long as the Bank of England acts on the opposite principle, and makes in the difficulties of trade only an excuse for raising its rate, it is impossible for other banks, who of themselves have no means of lending their capital, to alleviate the embarrassment.

In what way this pernicious monopoly of the Bank of England may be abolished, and the rate of interest be made dependent solely upon the natural causes which ought to regulate it—namely, the amount of loanable capital, and the extent of the demand for that capital-we shall show in a subsequent article. But we think we have already demonstrated two points of import

Square. The young ladies were both out. Lady Bridget had taken advantage of the chaperonage of a newly-married rather fast female cousin, to go to a ball. Lady Ursula had gone to a solitary tea with a crabbed old aunt. Lady Broadbrim was in her own sitting-room, lying on a couch behind a table covered with papers. She looked wearily up when I entered, and held out a thin hand for me to do what I liked with. "How good of you to come, dear Frank," she said. It was the first time she had ever called me Frank, and I knew she expected me to acknowledge it by pressing her fingers, so I squeezed them affectionately. Broadbrim said if I wanted to make sure of you I ought to have brought Ursula's name into the telegraph, but I told him her mother's would do as well.”

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'What does the " I am afraid I mentally said old girl'—" want, I wonder. It must be really serious, or she would have shammed agitation. There is something about this oily calm which is rather portentous. Then she has taken care to have every member of the family out of the house. What is she ringing the bell for now?”

"Tell Lady Ursula when she comes home that I am engaged particularly, and will come up and see her in her bedroom before she goes to bed," said Lady Broadbrim to the servant who answered it.

"Does not Lady Ursula know of my having come to town in answer to your summons ?" I asked.

No, dear child! why should I inflict my troubles upon her? Even Broadbrim, to whom I was obliged to speak more openly, only suspects the real state of the case. I have reserved my full confidence for my future son-in-law."

I lifted up my eyes with a rapturous expression, and played with a paper-knife. She wanted me to help her on with an obvious remark, which I declined to make; so, after a pause, she went on with a deep sigh:

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What sad news we keep on

getting of those poor dear Confederates, Frank."

"Let us hope they will recover," said I, encouragingly.

"Oh, but they do keep on falling so, it is quite dreadful."

"There was no great number of them fell at Wilmington."

"How stupid I am," she said, "my poor mind gets quite bewildered. I was thinking of stock, not men; they went down again three more yesterday, and my broker declines altogether to carry them on from one account to another any more. I bought at 60, and they have done nothing but go down ever since. I generally go by Lord Staggerton's advice, and he recommended me to sell a bear some months ago; but that stupid little Spiffy Goldtip insisted that it was only a temporary depression, and now he says how could he know that President Davis would replace Johnston by Hood."

"Very tiresome of Davis; but you should have employed more than one broker," I remarked. "Persons of limited capital and speculative tendencies should operate mysteriously. Your right hand should not know what your left hand is doing."

I

Hush, Frank! you can surely be business-like without being profane. I was completely in Spiffy's hands; Lady Mundane told me she always let him do for her, and "— here Lady Broadbrim lowered her voice-"I know he has access to the best sources of information. used to employ Staggerton, but he is so selfish that he never told me the best things; besides which, of course, I was obliged to have him constantly to dinner; and his great delight was always to say things which were calculated to shock my religious friends. Moreover, he has lately been doing more as a promoter of new companies than in buying and selling. Now Spiffy is so very useful in society, and has so much tact, that although there are all kinds of stories against him, still I did not think there was any