millions, their circulation would in like manner be increased from twenty to twenty-five millions.

That this is the practical rule on which they now proceed, may be partly inferred from the explanation of it already given: for Mr. Palmer and Mr. Norman both state that the Bank, subsequently to a period of full currency, regulate their proceedings by the action of the foreign exchanges; and this they could not do, if they regulated their issues at the same time by the action of the deposits. But the subject is rendered more clear by other explanations. Mr. Ward, for instance, states as follows:--

(2080) "The principle is acted upon thus, that "individually as a Director of the Bank, I do not presume to alter the King's currency, but I en"deavour always to bring the paper as nearly as possible to what the currency would be, if no Bank existed, and the currency were all gold."

Now it is quite obvious that their own rule could never harmonize with the principle that they would endeavour to bring their paper as nearly as possible to represent a gold currency: for a gold currency would neither be acted upon by deposits, nor receive undue enlargement, when the circulation was already too great. It would merely increase and decrease to the extent of the influx and reflux of gold produced by the foreign exchanges. And there can be no doubt, therefore, not only from this explanation, but from

the general tenor of the evidence of all the Directors, that what they really mean is, that they do not propose to allow their issues to be altered in any other way except by the foreign exchanges; and this is in strict conformity with the principles of the Bullion Committee and the Committees of 1819, by whose views they profess to be governed.

Having thus discovered the rule by which they are guided, we shall next proceed to consider the manner in which they act upon it. And the first point to which our attention is naturally directed on this head is, to the transactions of the Government in connection with the Bank.

The financial dealings of the Chancellor of the Exchequer with the Bank are dealings in capital, and have no more connexion with the currency, than have deposits, or any other transactions of borrowing and lending. If our currency were entirely metallic, the operations of the Chancellor of the Exchequer, which consist in taking from one class, in the shape of taxes or loans, that which he pays to another, would not at all affect the amount in circulation, nor ought the Chancellor of the Exchequer to act upon the circulation by his dealings with the Bank.

The Bank, indeed, have to communicate with Ministers both on currency and finance-on the latter point as customers, and on the former as

Ministers of the Crown, with whom they are desirous to advise on a matter so important to the interests of the community at large. But the two subjects are totally distinct in principle, and ought to be kept so in practice. In communicating with the Chancellor of the Exchequer on financial matters, the Bank ought not to recollect that they are a Bank of issue; and in communicating with Ministers on the question of currency, they ought not to feel that Government are financially their customers.

The Bank, however, as a matter of convenience, chiefly communicate with the Chancellor of the Exchequer on both these subjects, and as secresy begets distrust, the nature of these communications not being known, the public have been led at different times to entertain a suspicion that the Government have occasionally made an illegitimate handle of the Bank, by inducing them to tamper with the currency, to suit the convenience of the Chancellor of the Exchequer.

This, indeed, might seem to be an unreasonable apprehension, inasmuch as the Chancellor of the Exchequer has no temptation to do anything of the kind. The utmost accommodation he could obtain from the greatest possible extension of issues, which, at the expense and sacrifice of all principle, the Bank could make for his convenience, would not be worthy of his acceptance.

When Government have wanted to borrow large sums, they have never resorted to the Bank, but to the public. Their loans from the Bank are always comparatively trifling. They never at any one time borrowed any sum which they could not have easily obtained on the Stock Exchange through other channels. The securities upon which the advances of the Bank are made are Exchequer Bills, which are as marketable as bank notes, and though the Government usually deal with the Bank as a matter of convenience, there is not, nor ever was, any absolute necessity for their so doing. It is, therefore, a mistake to suppose that Government ever obtained from the Bank any accommodation which they could not have obtained with as much ease, and as much practical facility, without its

assistance.

An undue issue, however, of four or five millions by the Bank would eventually make an extraordinary derangement in the value of all the property in the kingdom, and be productive of infinite mischief in a variety of ways. Yet when we consider that Government have borrowed at the rate of fifty millions per year, we shall perceive that were Government allowed in their dealings with the Bank to operate upon the currency in, comparatively speaking, only a limited degree, how soon the most serious derangement in the latter would be produced. We

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naturally, therefore, expected that a conspicuous line of demarkation between the currency operations of the Bank, and the financial operations of the Chancellor of the Exchequer, would be found always to have been preserved, if but to furnish a short answer to the suspicions of the public.

We were, therefore, not a little surprised to find not only no such distinction spoken of, as always being kept in view by the Bank and the Government, but, on the contrary, that it was distinctly admitted by Mr. Ward (2049), "that "the financial condition of the Government must "always act upon the Bank directly or indi"rectly." We should not, however, have been disposed to have given credit to this very extraordinary declaration, had instances not been pointed out confirmatory of it. One of these is explained by Mr. Ward, as follows:

(1894) QUES." In ordinary circumstances, "where the exchanges have appeared to turn against the country, would the Bank have been "inclined to reduce the amount of issues?"

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ANS." It is the usual practice of the Bank: "it is one consideration generally regarded, and generally acted upon, to reduce the aggregate "amount of issues, in the event of the exchanges "being unfavorable.'

Thus it was the rule of the Bank at this time to contract their issues, in the event of the exchanges being unfavorable, which circumstance, as we have before shown, was considered by the