clearly. In his pamphlet entitled "Thoughts on the Separation of the Departments of the Bank of England," published originally in 1840, he remarks: VIII. “One difficulty has been suggested as liable to attend the plan of a strict regulation of the paper circulation in accordance with the bullion, which deserves attention. In this country an immense mass of liabilities exist which are subject to be paid on demand, and if, in consequence of panic or any other cause influencing a great number of persons simultaneously, the payment of a large portion of these liabilities should be demanded at the same time, either the circulation must be largely increased or the parties liable to such demands must be seriously embarrassed." After some other remarks, including the possibility of a demand on the Government on account of the savings banks, which demand would be greatly increased at the present time, he says: "The Government has subjected itself to a simultaneous demand, to the extent of the deposits in these banks, fifteen or sixteen millions. What would be the effect of such a demand should it occur?"

At the time of writing (1910) this demand on behalf of the savings banks, it will be remembered, would be more than twelve times the amount named above, while no provision has been made to meet it. Mr. Jones Loyd continued: VIII. 5. "If, after all, the danger is deemed to be of such a nature as to require an efficient provision against it-this is to be found, not in the general abandonment of the attempt to place the management of the circulation under some fixed principle; but in that power, which

all Governments must necessarily possess, of exercising special interference in cases of unforeseen emergency and great state necessity." The deliberate establishment of a law, while foreseeing at the same time that it was certain to be broken, seems a strange thing. Yet this was done when the Act of 1844 was passed. It is now matter of history that three times since Sir Robert Peel established the division of the two departments, in 1847, 1857, and 1866, permission has had to be given to suspend the law, and although the law has only been actually infringed on one occasion, the principle was the same on all three.

So strongly was the inconvenience felt of the existence of a law which it periodically becomes necessary to suspend that in 1873, when Mr. R. Lowe (afterwards Lord Sherbrooke) was Chancellor of the Exchequer, a bill was brought by him into Parliament to "provide for authorizing in certain contingencies a temporary increase of the amount of Bank of England Notes issued in exchange for securities." The provisions of this bill, however, were so cumbrous and exacting-requiring that, among other things, the rate of minimum interest on advances made under it should be "not less than 12 per cent," and that the excess of issue was not to be allowed unless "the foreign exchanges are favorable to this country"— that it was felt to be unworkable and was allowed to drop. To make this matter perfectly clear I will add the text of the bill.

The text of the bill proposed by Lord Sherbrooke (then Mr. Robert Lowe) in 1873, to allow the Bank of England

to exceed in certain contingencies the limits fixed for the issue by the Act of 1844 is printed here in full:

"(36 Vict.) Bank of England Notes.

"A BILL To provide for authorising in certain contingencies a temporary increase of the amount of Bank of England Notes issued

in exchange for securities.

A. D. 1873.

"Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:

"1. Whenever the First Lord of Her Majesty's Treasury and the Chancellor of the Exchequer after communication with the Governor and Deputy Governor of the Bank of England are satisfied

Power to authorise temporary and special issue of Bank of England notes.

(1) That the minimum rate of interest then being charged by the Governor and Company of the Bank of England on discounts and temporary advances is not less than twelve per cent. per annum; and

(2) That the foreign exchanges are favourable to this country; and

(3) That a large portion of the existing amount of Bank of England and other bank notes in

circulation is rendered ineffective for its ordi

nary purpose by reason of internal panic:

they may, by order under their hands, empower the issue department of the Bank of England to make, in excess of the authorised issue, a special and temporary issue of Bank

of England notes, by delivering the same into the banking department in exchange for and on the credit of an equal amount of Government securities to be transferred to the issue department, and the said Governor and Company shall pay interest into the Exchequer on the amount of notes so issued by them at such rate being not less than twelve per cent. per annum, as may from time to time be fixed by the First Lord of the Treasury and Chancellor of the Exchequer, and in addition thereto the amount of any further profit which they may derive from the said issue. "2. The First Lord of the Treasury and the Chancellor of the Exchequer may, if they think it expedient, by order under their hands, rescind and vary any order made in pursuance of this Act, and make any new order in pursuance of this Act.

Order may be rescinded or va

ried.

"3. There shall be paid to the said Governor and Company

Remuneration

to bank for expense of special issue.

such sum, not exceeding the rate of two per cent. on the amount of such issue, as may be agreed upon between the said First Lord of the Treasury and Chancellor of the Exchequer on the one part, and the said Governor and Deputy Governor of the Bank of England on the other part, to be a fair allowance to the Bank for the risk, expense, and trouble incurred by it in making such issue.

“4. 4. A copy of every order made under this Act shall be forthwith published in such manner as the First Lord of the Treasury and the Chancellor

Publication and return of order to Parliament.

of the Exchequer consider best calculated for giving public and general notice thereof, and shall be laid before both Houses of Parliament within fourteen days after it is made,

or if Parliament be not then sitting, within fourteen days after the then next meeting of Parliament.

Construction of Act and short title.

"5. This Act may be cited as the Bank of England Notes Act, 1873, and shall be construed as one with the Act of the session of the seventh and eighth years of the reign of Her present Majesty, chapter thirty-two, intituled "An Act to regulate the issue of bank notes, and for giving to the Governor and Company of the Bank of England certain privileges for a limited period.” [The paragraphs in italics are thus in the original print of the bill.]