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To continue the history of what has occurred. Strong apprehension was expressed before the separation of the two departments was made that the division would lead to more frequent disturbance of the rate of discount charged by the Bank. These are referred to by Tooke, Volume V, of the History of Prices, page 555:

“The arguments à priori which, previously to the passing of the Act of 1844, I adduced for the purpose of showing the greater liability to frequent and violent transitions in the state of credit, and in the rate of interest, which would attend the management of the Bank of England in a Divided, than in an Undivided, state of the two departments, have been abundantly confirmed and exemplified by the actual working of the measure since its enactment to the present time.”

Tooke referred to this subject in his History of Prices, in the chapter on the anticipations respecting the Act of 1844, Volume IV, page 281, in which he says: “A careful consideration of the various plans which have been submitted to the public for carrying out the currency principle, has led to a confirmation of the opinion which I have before expressed, that under a complete separation of the functions of issue and banking, the transitions would be more

abrupt and violent than under the existing system; unless, and upon this, in my opinion, the question hinges, the deposit or banking department were bound to hold a much larger reserve than seems to be contemplated by any of the plans which I have seen.”

Though the reserve has been considerably increased since the time when Tooke wrote, yet this increase does not appear to have reached the point which he thought necessary, in proportion to the demands made on it.

The tables at the end of this chapter show the minimum rates of discount charged, and the number of the changes in the rate at the banks of England, France, Germany, the Netherlands, from the year 1844 to 1909, and Belgium from the year 1851. It is, of course, impossible to compare exactly the position of business in one country and another, and the demands on the Bank of England are very different in character from those which fall on the banks either of France or of Germany. At the same time, it is an interesting thing to examine this statement, which shows how numerous and how severe the variations in the rate in England have been.

It is also useful to compare the practice of one great bank with that of another. The circumstances of business in this country are, as mentioned before, so different from those of other countries, that it is difficult to compare them closely with each other; but no one can doubt the great advantages which industry and commerce derive from having, as far as is possible, a fairly even rate of discount for sound mercantile paper, nor how greatly those periods of unhealthy excitement, which have occasionally

developed into commercial crises, have been fostered by long periods of very low rates of interest in the money market.

It is also, of course, impossible to argue what might have occurred had the separation of the two departments of the Bank of England not taken place, but, as a matter of history, there can be no question that the fluctuations in the rate of interest which have occurred since have been exceedingly numerous and severe, more so, in fact, than in the case of any other great bank of Europe. No doubt the demands for gold on the London money market are more sudden and greater than on any other money market in Europe, but the question arises whether they have not been accentuated and rendered more severe than they otherwise would have been through the division of the Issue and Banking Departments at the Bank of England.

The statements which follow show

1. The number of changes in the minimum rate of discount charged by the Banks of England, France, Germany, and the Netherlands for the years 1844-1909, and of Belgium for the years 1851-1909.

2. The highest and lowest rate charged and the amount of fluctuation in the rate in the course of the twelvemonth at the same banks for the same period.

3. The number of days for which each rate was charged by the same banks, and for the same periods arranged from the lowest rate to the highest.

4. The number of days for which each rate was charged by the same banks and the same periods arranged from the largest number of days to the smallest.

A study of these tables will enable us to compare in a general way what has occurred at each of the five banks in respect of the rate charged on the bills offered them for discount.

Table I shows that the number of changes in the rate of discount at the Bank of England has been nearly four times as large as at the Bank of France, and more than twice as large as at the Bank of Germany, the Bank of the Netherlands, and the Bank of Belgium. The figures are:


Number of changes, 1844 to 1909.
Bank of England.
Bank of France.
Bank of Germany
Bank of the Netherlands.
Bank of Belgium a


196 188


It should also be noted that at the Bank of England there have occurred during the whole period only 2 years when no change in the rate of discount took place, while at the Bank of France there have been 27, at the Bank of Germany 10, at the Bank of the Netherlands 15, and at the Bank of Belgium il.

Table II shows that the fluctuations between the highest and lowest rate charged for the twelvemonth has been more severe at the Bank of England than at either the Bank of France, the Bank of Germany, the Bank of the Netherlands, or the Bank of Belgium.

The severest fluctuation that has occurred at the Bank of England was in the year 1866. The lowest rate in that year was 372 per cent, the highest rate 10 per cent; the

a From 1851 to 1909.

fluctuation accordingly was 672 per cent. In five other years the fluctuation varied from 5 per cent to 6

per cent.

The fluctuations in order of severity from 672 per cent to 5 per cent at the Bank of England were as follows:

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On looking through the table stating these fluctuations many other occasions will be seen on which the fluctuations at the Bank of England, though not so severe, were very sharp, as, for instance, in the year 1857, when though the total fluctuation was only 472 per cent it was between a rate of 572 per cent and 10 per cent. Fluctuations of this description are very trying to business.

At the Bank of France, on the other hand, no fluctuation more severe than 372 per cent is recorded, and this only on two occasions. These were:


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