foreseeing certain ruin in their path, stood ready to sacrifice themselves upon what they believed to be the altar of their country's good. The attitude of England to the French republic was in every respect selfish and unjustifiable; but when the liberties of France were surrendered to a remorseless and unprincipled despot, the only course for England was to fight the battle to the bitter end. Her crowning triumph would have been wholly impossible but for the aid furnished by the Bank. By means of it, she availed herself of the whole financial power of the nation; and was enabled to carry on for twenty years a struggle in which, without the Bank, she must have been ignominiously driven from the field.

The action of the Bank in restricting its issues, to which it rigidly adhered in endeavoring to save itself from what appeared to be nothing less than certain destruction, precipitated the crisis which was impending, and which could not then probably have been avoided. In a period of eighteen months, it reduced its circulation from £14,017,510 to £8,640,250,- a reduction of nearly one-half. A wide-spread panic was the natural result of the unexampled distress which was caused, and by which all classes were alike affected, and greatly increased the run for coin. The Directors, now fully comprehending the situation, sent, on the 21st of February, 1797, a deputation to Mr. Pitt to ask him how much longer he thought the Bank should continue to pay specie, and when he should think it advisable for him to interfere. Mr. Pitt replied that, as a preliminary step, the affairs of the Bank should be examined by a secret committee; to which request the Directors promptly assented. The specie on hand on that day was reduced to £1,272,000. It was evident that it could go on no longer; and, on the 25th of February, a meeting of the Cabinet was held, and an "Order in Council" issued, directing the Bank to suspend all payments in specie until the sense of Parliament should be known. Accompanying this order was a statement of the Directors, that the affairs of the Bank were in a prosperous condition, and that it was possessed of ample means for the ultimate payment of all its liabilities. Its specie was reduced, on the day of the suspension, to £1,086,000. With the announcement of the suspension, the panic instantly subsided. The relief was immediate and complete. The merchants and bankers of London, immediately

upon the announcement, held a meeting, at which they resolved, "That, being highly sensible how necessary the preservation of public credit is at this time, we do most readily declare, that we will not refuse to receive bank-notes in payment of any sum of money to be paid us; and we will use our utmost endeavors to make all our payments in the same manner." This resolution was subsequently signed by nearly four thousand individuals and firms. The Bank immediately began to expand its issues; increasing them within one week by the sum of nearly £2,000,000. Confidence being fully restored, a return flow of specie into it immediately set in; for the run upon it, for some time previous to the suspension, was not caused by the foreign demand, but by hoarding in consequence of the distrust which had prevailed. The foreign exchanges had for some time previous to the suspension been in favor of the country, and continued in its favor for a considerable period thereafter. An Act of Parliament was speedily passed, "for continuing for a limited time the restriction contained in the Minute of Council for the 25th of February, 1797, on payment of cash by the Bank." By this Act the Bank Directors were indemnified for having complied with the Order in Council. They were forbidden to pay cash, except in sums under 208.; but, if any person lodged specie with them, he might be repaid in kind to the extent of three-fourths of the sum deposited, provided such sum were not less than £500. Payments, in the notes of the Bank were to be deemed as payments in specie, if accepted as such. The notes were also to be received in payment of taxes; and no debtor was to be held to special bail, unless the affidavit stated that payment in bank-notes had not been offered. The Act was continued in force till June 24th of the same year. The Bank was also at the same time authorized to issue notes under £5. Within six months after the suspension, it held £4,089,620 in specie and bullion against £1,086,000 held by it on the day of the suspension. On the 28th of February, 1798, one year after the suspension, the amount of specie held equalled £5,828,940. The amount of notes outstanding on the day of the suspension was £8,640,250. The amount on the 31st of August, 1797, was £11,114,130; on the 28th of February, 1798, £13,095,320; and on the 28th of February, 1799, two years after suspension, £12,959,800. These changes were a decisive proof of the healthy condition

of production and trade, and the ease with which they adjusted themselves on a sound basis the moment apprehension and uncertainty as to the future were removed. Nothing could have been more admirable than the conduct of the Bank. Relieved of the necessity of paying specie, it increased in one year its coin reserves in ninefold greater ratio than its liabilities in the form of notes. It had seldom or never been in a stronger position than it was during the two years after its suspension; and early in 1799, it signified its ability, and, with the consent of government, its willingness, to resume payment. But the latter, influenced by other considerations than those which relate to commercial and mercantile affairs, replied that it was inexpedient to resume in the present state of the country. With the suspension of specie payments came the abundant harvests of 1797 and 1798. Wheat fell to 418. the quarter in January, 1799. The seasons of 1799 and 1800 were unpropitious, and the price of wheat rose in May of the first year to 61s. the quarter; and, at the end of the year, to 948. 2d. the quarter. In June, 1800, it rose to 134s. the quarter; and, in March, 1801, to 1568. the quarter. The market price of gold, however, remained at the mint price, £3 178. 6d., till June, 1800, when the price of foreign gold suddenly rose to 48. 6d. the ounce. Early in 1801, the value of domestic coins had risen 18. per ounce; and foreign exchange, payable in bank-notes, particularly in Hamburg, was depressed 14 per cent below par. The cost of remitting gold from London to Hamburg at the time did not exceed 7 per cent. The difference between the rate of exchange and the cost of remitting specie could only result from depreciation of the currency.

The restriction of specie payments had been continued by various acts, the last of which was to expire within six months after a definitive treaty of peace (with France) was signed. This was concluded at Amiens, on the 27th of March, 1802. Although the Bank at that time signified its readiness to resume, the restriction was continued till March 1st, 1803. The price of gold, which averaged £4 5d. the ounce for 1801, and £4 48. the ounce for 1802, fell in 1803 to £4 the ounce, and continued at that figure till 1809, when it rose to £4 10s. the ounce, or to a premium of 13 per cent; the restriction having been, of course, continued for this period. The sudden

rise in 1809 caused great alarm; and, early in 1810, a Committee was moved in the House of Commons by Mr. Francis Horner, "to inquire into the cause of the high price of gold bullion, and to take into consideration the state of the circulating medium and of the exchanges between Great Britain and foreign parts." The Committee consisted of twenty-one members, among whom were those most distinguished in the kingdom for their experience and knowledge in monetary and commercial affairs. Among these, in addition to the chairman, were Alexander Baring, Henry Thornton, William Huskisson, and Spencer Perceval, then Chancellor of the Exchequer. The Committee, in the course of their inquiries, examined thirty persons, most of them eminent merchants and bankers and thoroughly familiar with all the operations of business and trade. They submitted their Report on the 8th of June, 1810; but this was not considered in Parliament till the

1 Statement showing the average market price, in bank-notes, of bullion, and the average value and average percentage of depreciation of the notes of the Bank of England, in each year from 1797 to 1821 inclusive.

The highest point to which gold rose was £5 10s. the ounce, on the 6th of August, 1813. The premium equalled 29 per cent.

following year. It reported that the price of gold bullion, which by the regulations of His Majesty's mint was £3 178. 10‡d. per ounce of standard fineness, was during the years 1806, 1807, and 1808, as high as £4 in the market. Toward the close of the year 1808, it began to advance very rapidly, and continued very high during the year 1809; the market price of standard gold in bank-notes fluctuating from £4 98. to £4 128. the ounce; the market price at £4 108. the ounce being about 151 per cent above the mint price. The Committee then proceeded to inquire as to the cause or reasons for such advance; and ascribed it, in the conclusion of their Report, to an excessive issue of notes by the Bank. The Bank, on the other hand, contended that, from the manner in which it conducted its business, that is, as it only discounted paper based upon and representing actual mercantile transactions, and payable within short and fixed periods, the currency could not be in excess. It was contended, also, by the public more than by the Bank, that the price of gold had risen in consequence of the excessive demand for it upon the Continent; that the value of its notes was not depreciated. The Committee, however, assumed that its notes were depreciated; and that the only check upon over-issues was a liability for the redemption of its notes upon demand; or that its issues should be made in reference to the state of foreign exchange; and that, specie payments being forbidden, the Bank was bound to conduct its operations in reference to the latter test or standard.

"It is important," said the Committee, "to observe, that when the Bank was bound to answer its notes in specie on demand, the state of foreign exchanges and the price of gold did most materially influence its conduct in the issue of its notes, though it was not the practice of the Directors systematically to watch either the one or the other. So long as gold was demandable on their paper, they were speedily apprised of a depression of the exchange, and a rise in the price of gold, by a run upon them for that article. If at any time they incautiously exceeded the proper limit for their advances and issues, the paper was quickly brought back to them by those who were tempted to profit by the market price of gold or by the rate of exchange. In this manner, the evil soon cured itself. The Directors of the Bank, having their apprehensions excited by the reduction of their stock of gold, and being able to replace their loss only by restricted purchases of bullion at a very losing price, naturally contracted their issues of paper; and thus gave to the remaining paper, as well as to the coin for which it was interchangeable, an increased value; while the clandestine exportation