Is last Number, we observed that war was teaching us many lessons, which would fully compensate the present inconveniences, if we do but lay those lessons to heart. We then pointed out the baneful revolution taking place in the character of our population, and the prospective dangers arising from the purely urban character which our civilisation is assuming. This month we desire to direct attention to another lesson of the war, relating to a matter of still more direct interest than the former, and one which, fortunately, can be very much more easily remedied. We allude to our Currency-system,-one of the most artificial fabrics that the ingenuity of false statesmanship ever devised for the torture of a community. The subject is one which can hardly fail to secure for itself consideration,--for it is one which affects the community in all its branches, and in its tenderest point-the pocket. No class is so poor, no district so isolated, as to escape. Every measure affecting the currency of a country, affects the condition of every man in it, from highest to lowest. The employment of labour, the rates of wages, the weight of taxes and the National Debt, the prices of food and of everything else, are directly influenced by every ebb or flow of the circulating medium --which is, in truth, to the body mercantile precisely what the life-blood

VOL. LXXIX.-NO. CCCCLXXXIII.

is to our physical frame. It underlies every development of mercantile life; and every variation in its quantity or quality makes itself instantly felt, for good or evil, through every part of the commercial structure. But it is as subtle in its operation as it is wide in its effects. Hurt a limb, or any particular organ of the body, and any one sees at a glance what is the matter; but vitiate or diminish the blood, and the symptoms, while becoming universal through the frame, gives less certain indication of the precise origin of the evil. So it proves with variations in the currency. Merchants and tradesmen experience every now and then grievous shocks to their prosperity or solvency; for the last forty years commercial earthquakes have recurred at nearly regular intervals; yet the greater part of the sufferers are still in ignorance of the primary cause of these shocks, or of the only preventive against their

recurrence.

It is not difficult to account for this bewilderment. Part of it, doubtless, is due to culpable apathy on the part of our trading-classes, in not inquiring into a matter which so immediately affects them; but the much larger portion of the bewilderment is owing to the mixed nature of the phenomena to be investigated. A disease with many symptoms is the most difficult to understand; and of all

the preceding or accompanying circumstances, those which are most obvious and tangible are ever apt to be exclusively regarded. The casual eating of an unripe apple, for instance, is more likely, by the generality of persons, to be set down as the cause of a child's fever, than the subtle miasma that may have smote the boy at random in the streets, and been brooding in his veins for days before its manifestation. So also, it is recorded of the Duke of Wellington that he had been laboriously reading through a ponderous blue-book on Oxford University, and that he partook heartily of apple-pudding the day before his death; and we opine that if an ordinary jury had given vent to their unaided opinion, they would have been more likely to attribute the Great Duke's death to the blue-book and the apple-pudding than to the insensible influence of the cold sea-air upon his aged frame, to which the Faculty incline to attribute it.

Superficial judgments of this kind have done much to keep attention away from the defects of our Currency Laws. The various monetary crises which have convulsed this country have hitherto presented complicated phenomena. Over-trading and undue speculation have on these occasions been more or less rife; and as these are unhealthy symptoms which every one understands, the common mind goes no farther, and contents itself with attributing the whole disaster to these causes, irrespective of the others beyond its ken. It seldom raises its eyes to the fountain-head of the mischief. It does not see, on the one hand, that the existing currencylaws are themselves a provocative to over-speculation, when gold is plentiful; and on the other, that a restriction of the currency, which is made to accompany every efflux of gold, is itself a most potent agent for converting good speculations into bad ones, -thus, whenever a Crisis comes, producing a semblance of overspeculation, when in truth there may have been none. It is this unhappy contrivance of the Legislature that has kept the trade of the country for long years past in a state of intermittent ague, passing from cold to hot, and then back again

from hot to cold,--and ever and anon culminating in a septennial crisis, severe enough to set every bone in our bodies a-shaking, and making Credit, the very life-spirit of the community, temporarily give up the ghost.

Nations, like individuals, when they are well-off, make ills for themselves. And thus Peace-the long blessed forty years' peace now vanished,-which might have been spent by us softly as a dream and happy as a holiday, was converted by our foolishness into a season of nightmare crises. We could not rest and be thankful. If there was no enemy to spring mines against us, we could at least blow up ourselves. As ingenious as the Boy's own Book, which shows how to make artificial earthquakes and volcanoes by burying a certain fulminating mixture which in due time explodes of its own accord, Messrs Horner and Ricardo tried their 'prentice hands in imparting to the currency a volcanic organism, the expansions and contractions of which have since then periodically strewed the country with ruins. The country has barely been able to stand this rough treatment in times of peace,

in war it will be impossible. A man may carry on a false regimen so long as he is surrounded by circumstances otherwise favourable,-but subject his system to a strain, and the bad effects of the regimen become at once apparent and unbearable. So it is now with the British (and other nations, too, in a lesser degree) and their monetary laws. The war is demolishing the theories of the Bullionists by a reductio-ad-absurdum demonstration, and at the same time is compelling the trading community to give attention to a subject which they have too long neglected. "We all want to know why we are paying 8 per cent for our advances," said a first-class tradesman the other day; and others, who have less credit or longer bills, might name a rate even 3 or 4 per cent higher. We shall make an attempt to enlighten them.

Fortunately, the present crisis is of a kind which serves to exhibit the errors of our currency-system with more than ordinary clearness. Instead of being complicated by real or imaginary over-trading, it is al

lowed on all hands that, in the present instance, trade was never more sound or speculation more in abeyance. In fact, the commercial classes -imbued, perhaps, with more than usual wariness from the prevalence of war-have been found by the crisis so firmly and securely planted, that even the doubling of the rates of discount, and the great contraction of credit, have hitherto failed to raise the number of bankruptcies much above the usual rate. Let us mark the origin and progress of the Monetary Crisis of 1855,-the last of a dread series which, we trust, will now at length be brought to a close.

In the merry month of May' last, all was sunshine in the world of trade and commerce; and people stood astonished to see the rate of discount, which had risen so high in the previous year, falling again as rapidly as it had risen. War, it was thought, had changed its character; and the fact of our commerce being little affected was held as a proof that a state of hostilities with so isolated and semi-barbarous a Power as Russia would be attended by none of the aggravations experienced in former wars. And these inferences would have been wellfounded, but for one important exception overlooked-namely, the operation of the GOLD-SCREW. In that same month of May, the final rupture of the negotiations at Vienna, and the contemporaneous announcement of a loan to Turkey, were a sufficient warning of what was coming, to those who understood the workings of our currency-system. Such persons could foresee a coming rise of interest quite as easily as they understood the cause of the low rate then current. They knew that the recent fluctuations in the money-market had been due solely to the operations of the Bank, acting in accordance with the regulations imposed upon it by the Act of 1844. By that Act it is provided that in proportion as the stock of gold in the Bank diminishes either by an internal panic, producing hoarding, or, what is

usually the case, by an efflux of gold to pay for goods in other countries— the bank-notes in circulation must be likewise diminished. This the Bank does by selling portions of its Government Stock, and cancelling the notes received in payment,-and also by raising its rate of discount, and, either directly or indirectly, refusing to accommodate the tradingclasses to the same extent as formerly. The effect of these proceedings is, by making money scarce and consequently more valuable, to lower prices; whereupon it becomes profitable for foreigners to make large purchases of stocks and goods of all kinds in this country,-and so the gold again returns to us in payment of these purchases thus made to our loss. This took place in the course of the winter of 1854-5. Foreigners then preferred taking our goods to taking our gold; and accordingly, last spring, the Bank found its coffers filling with gold,-while its circulation of notes, in consequence of its previous pulling-in of them, was at a comparatively low ebb.* Now, the greater the amount of gold in the Bank, the greater the expenses of that establishment, every million of gold lying unproductive in its vaults, being, at 5 per cent, a loss of £50,000 a-year. As this store of bullion mounts up, therefore (and the Bank has no power to prevent the increase, being bound to give £3, 17s. 10d. the ounce for it, whether they want it or not), the Directors seek to reissue their notes in similar proportion, with the view of deriving that profit from their paper-money which they cannot get from their locked-up gold. But here the Directors encounter a difficulty. By their previous contraction of the currency and high rates of discount, they have checked enterprise in the country, and when the gold comes back to them again, they usually find that the demand for monetary accommodation is not in proportion to the increase of their profitless bullion. This was visible all through last spring and the great part of summer,

in the large amount of " reservenotes" in the hands of the Bank,these reserve-notes being the amount of paper-money which the amount of gold in their possession legalises the Directors to issue, but for which they have not got customers. In this state of matters (that is to say, being forced to get their notes into circulation in order to compensate the loss of interest on the gold in their vaults, and at the same time finding little demand for them on the part of the mercantile community) the Directors adopt the only course left to them, namely, to reduce their rate of discount, in order to create a demand for their notes. This process we saw going on throughout the first half of last year; so that the rate of discount, which stood at 5 per cent on the 1st of April, by successive reductions fell to 3 in the middle of June.

All was then sunshine and golden expectations; and although words of warning were not unspoken, the public went complacently to sleep on the roses, and the Economist deliberately congratulated the community that, low as the rate of discount then was, there was good reason to anticipate that this pleasing state of things would be lasting. But scarcely was the congratulation uttered, when all began to change. Midsummer-Day saw the reaction commence. The tide then turned, and the bullion began to flow out of the Bank twice as fast as it had flowed in. So rapid was the decrease, that the stock of gold in the Bank, which amounted to £18,200,000 on the 23d June, was reduced to £10,682,000 on the 26th October,-being a diminution of £7,500,000 in four months, or at the rate of half a million per week all through that period. It was not till the 6th of September that the Bank Directors took the alarm, but then they began to put on the screw" most energetically, so that, in six weeks' time, the rate of discount was raised from 3 to 6 and 7 per cent for

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first-class bills of two or three months' date; while bills that had longer to run had to submit to still higher rates, and, if not of first-class quality, could not be discounted at all!

Examine for a moment the effects of this upon the property and trade of the country. Trade was in a very healthy state when this monetary crisis commenced, and partly owing to this circumstance, and still more to the general belief that the Government would suspend the Act of 1844 if matters grew worse, no general panic has arisen to destroy credit throughout the kingdom. Nevertheless, the injury experienced by the community has been very great. Let us see, first, how the holders of money-investments have fared. On the 1st September, Consols stood at 91; in seven weeks afterwards they had fallen below 87-so that every one of the many thousand owners of the £800,000,000 of funded property who wished to sell out at that time, could only do so at a sacrifice of £40 on every £1000 of stock. The fall in the value of railway shares during the same period was, taking a low estimate, 8 per cent; so that the £300,000,000 worth of railway shares were depreciated by the money-crisis to the extent of £80 on every £1000, or £24,000,000 on the whole. Lastly, the capital invested in commerce and manufactures, estimated at £600,000,000, underwent a depreciation of at least 8 per cent; so that any one making sales of their property must have submitted to a dead loss of £80 on every £1000. And thus the movable property of the nation, amounting to about £1,600,000,000, became depreciated, in the space of a few weeks, to the extent of upwards of a hundred millions sterling. Of course, no one sold at such a time but those who feared a still greater fall, or whose circumstances compelled them to do so; but this latter class were more than usually numerous, especially among the holders of