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Banks, for which the Bank of England was in no way to be censured; or its action may have produced great commercial convulsions, for which bankers and country Banks were by no means chiefly responsible. The action of both, however, is always to be taken into account, in every attempted explanation of a great rise in prices, of great speculative movements, and of great financial revulsions, and in applying the proper remedy. Whichever be at fault, the cause will always be found in a nut-shell: in an issue of money, of notes and credits, which act powerfully upon prices, for the reason that they do not represent merchandise, but debt. Englishmen have been taught, that only such paper is deserving the name of money as displaces a corresponding amount of coin; and that the only paper that effects such displacement is bank-notes. The moment there is a disturbance, or any great movement in financial affairs, they instantly begin, for a proper explanation or remedy, to pore over the tables of the amount of issue of Bank of England notes. They might as well infer the wealth of the nation from the petty sums hoarded in its vaults, or measure the volume and effect of an Amazon or a Niagara by the contracted and noiseless flow of their Thames. As the action of the private Banks and bankers does not enter into their calculation, they cannot get rid of the conviction that the quantities with which they are dealing make up only a small part of those necessary to a proper equation, to a proper understanding of the situation. In the uncertainty as to the future, all monetary and commercial operations are brought to a dead stand, to resume their wonted movement only when time shall have fully revealed the extent of their conjectures and fears.

By the terms of its charter the Bank was forbidden to make loans to the government without the sanction of Parliament, for fear that it might at some time become involved in the precise condition in which it found itself in 1795 and for a long time thereafter. It had, however, from a very early. period, been in the habit of making advances on such Treasury bills of exchange as were made payable at it. These advances, or "discounts," as they may be more properly termed, were usually for small sums only. Such transactions were made subjects of complaint on the part of the Bank, if the sums so advanced reached at any one time £50,000. During

the American War of Independence, however, such advances rose as high as £150,000. As grave doubts had always existed as to the legality of such transactions, the Bank determined to apply for an Act of Indemnity for the past, and for permission to make such advances in the future to a limited amount. Mr. Pitt, then at the head of the government, brought in a bill for this purpose, with an understanding, as it was claimed, on the part of the Bank, that such advances for the future were not to exceed £50,000, or £100,000 at most, at any one time. Mr. Bosanquet, the President of the Bank, intrusted on its part with the matter, being about to go out of office, left it mainly in charge of Mr. Pitt; who, probably foreseeing the advantage to be gained thereby, pushed through the bill, leaving out the limitation clause altogether. By its passage, he had now the Bank, and with it the whole monetary power of the kingdom, under his control, as there was no limit to the price at which he could sell the securities of the government. There was hardly any, consequently, to the means at his command. He armed all Europe against his great enemy, and waged, while he lived, by no means an unequal contest. If worsted on land, England remained mistress of the seas; making good, in the end, the prediction of Cicero in reference to the struggle between Pompey and Cæsar: "Qui mari potitur, eum rerum potiri." The magnitude of his combinations, and the vast power he was enabled to wield through the Bank, are still the wonder and admiration of the world. The Bank Directors, however, were by no means the willing victims and slaves of their imperious master. In addition to the drain upon the country for military subsidies, large amounts of bullion were sent abroad for other purposes: the amount of exports in 1793 being £2,715,232; in 1794, £8,335,592; and in 1795, £11,040,236: the total for the three years equalling £22,091,060. In addition to the exports of bullion, the amount of Treasury bills made payable or negotiated at Bank increased enormously. The demands of merchants and manufacturers were equally pressing with those of the government. So clamorous were the calls for accommodation, that the Directors, in the latter part of 1794, represented to Mr. Pitt the condition of affairs, and the dangers which threatened. Early in 1795 they adopted a resolution, that, in view of a loan of £6,000,000 to be raised for foreign, and one of £18,000,000

for home purposes, the Chancellor of the Exchequer be requested to make his financial arrangements for the year without aid from the Bank; and that they would make no advances upon Treasury bills, exceeding, at any one time, the sum of £500,000.

Although Mr. Pitt promised a ready compliance with the requests of the Directors, he acted only in reference to his own necessities; and notwithstanding their remonstrance, he wrung from the Bank, in August, 1795, the sum of £2,000,000. In the mean time, the Bank, in face of the loans it was called upon to make, as well as others that were proposed, and which it might have to aid in making, largely increased its issues of notes, although at the same time there was a constant and heavy outflow of specie. Its notes, which in August, 1794, stood at £10,000,000, reached £14,000,000 in February, 1795, the increase being made chiefly in payment of bills drawn upon the Treasury in behalf of foreign governments. The point was already reached at which it could consult its own safety only at the cost of declaring government bankrupt.

As the outflow of specie continued to increase in force, its Directors, in October, 1795, again made a formal representation to the government of their apprehensions growing out of the condition of affairs, and the absolute necessity of a reduction in the amount of their advances. They called its attention to the fact that the representations made at the commencement of the year as to the dangers likely to arise from foreign loans were being fully realized, and that numerous payments were yet to be provided for. They showed the market price of gold to have risen to a considerable premium; and, with the extraordinary call for it which had caused the rise, they declared they could make no further advances. The rumors that new loans were contemplated were at first denied by Mr. Pitt. At subsequent interviews, however, he stated to the Directors that a new loan of £2,000,000 to the Austrian government would be of great aid to the common cause of which he was the master-spirit, the object of which was to humble the power and ambition of France. He stated, at the same time, that if such a loan would hazard the welfare or stability of the Bank, all thought of it should be abandoned. As the Bank had in great measure exhausted its means by its loans to the government, which were, necessarily, very

largely drawn in coin, it had no other alternative than to reduce its accommodations to the public. Its Directors accord ingly announced, that such advances as they could make, day by day, should be divided proportionably among the applicants. This determination caused great alarm and distress in commercial circles. In spite, however, of all expedients, matters continued to go from bad to worse; the Bank, in the mean time, remonstrating in the strongest, and Mr. Pitt always replying in the most compliant terms. On the 14th of February, 1796, the Directors formally represented to Mr. Pitt, “That it is the opinion of this Court [of Directors,] founded on its experience of the effect of the late Imperial loan, that if any further loan or advance of money to the Emperor [of Germany], or other foreign state, should, in the present state of affairs, take place, it would in all probability prove fatal to the Bank of England. The Court of Directors, therefore, do most earnestly deprecate the adoption of any such measure; and they solemnly protest against any responsibility for the calamitous consequences that may follow therefrom." Mr. Pitt replied in his usual strain, that no further loan should be made without communicating with them; that he saw no reason for their apprehension; and that their representations must have been made in a moment of needless alarm.

As the stringent measures adopted by the Bank, for the purpose of contracting its issues, produced great distress among all classes, various propositions were made for relief; and among them, that a Committee of twenty-five members be appointed by Parliament, authorized to issue notes payable six months after date, bearing interest at the rate of 11 pence daily per £100, upon receiving their value in gold and silver, Bank of England notes, or bills of exchange having not more than three months to run. Such a suggestion was made, probably, in consequence of an issue of Exchequer bills for the purpose of arresting the commercial and financial panic of 1793. All such propositions, however, came to nothing. In the mean time, Mr. Pitt applied, in July, 1796, for a loan of £800,000 on Treasury bills (the Bank being already in advance on account of such bills to the amount of over £1,200,000); and for a similar sum in August. The Directors agreed to advance the first sum, but refused to advance the second. Mr. Pitt replied, that without the second the first would be of no use to him, and

they were driven most reluctantly to make both loans. They again addressed an earnest remonstrance to the government, and declared that they yielded to its demands only from fear of the consequences that would follow a refusal. "They consented," they said, "to this measure, in a firm reliance that the repeated promises, so frequently made to them, that the advances on the Treasury bills should be completely done away, may be actually fulfilled at the next meeting of Parliament, and the necessary arrangements taken to prevent the same from ever happening again; as they conceive it to be an unconstitutional mode of raising money, what they are not warranted by their charter to consent to, and an advance always extremely inconvenient to themselves." The immediate response to this remonstrance, so pertinent and reasonable, was a fresh demand upon the Bank for £2,750,000, on the security of the malt and land taxes; which was granted upon condition that the advances on the Treasury bills, then amounting to £1,513,345, were to be paid out of it. Mr. Pitt pocketed the new loan, without paying off any advances that had been made on the Treasury bills. The Directors again demanded payment; as the advances on such bills had increased to £1,554,635, and would, in a few days, be increased to £1,854,635. Mr. Pitt was full of excuses for non-payment, made abundant promises for the future; but hinted at the same time, that a large amount of bills, estimated at £700,000, had come in from San Domingo. He further hinted, at the same time, that he should presently want £200,000 for Ireland. All that the Directors could do was.to repeat their remonstrances, and picture the ruin which now stared them in the face. Pitt, in fact, knew no law but that imposed upon him by the situation in which he was placed. With vast military operations, of which he was the centre, he would have been in the greatest straits for money with tenfold the advances that were made. It was a struggle which of the two mighty geniuses that were brought into collision should become master of the destinies of the world. In all this Pitt simply impersonated the spirit of the nation, then roused to a pitch of fervor and determination which perhaps occurs but once in a nation's history. It was a struggle for every thing the preservation of which gave value to life. It was a struggle which absorbed the will of the nation, and in which the Bank Directors, though