we see the vague alarm with which the withdrawal of gold from the Bank filled the hearts of men who looked only at gold, and never gave a thought to the facts of banking, to the state of the two principals of all the banks, their depositors and their borrowers. But the real forces at work soon asserted themselves. "The consequence is a large excess of unemployed funds available for short loans at rates nominally of about 3 per cent." Within a few days, the Times adds, "the question of the reduction of the rate at an early date was under discussion," and yet the difference effected in the reserve was but trifling. Nevertheless the very journal which makes these comments on October 22, whilst it declares 66 that there are hardly any notable rates for short loans, so difficult is it to employ money," adds that the "general position is not one whit altered, and we are almost certain to see the Bank of England forced to go higher before we can see the tide turn. The utmost the 5 per cent. rate can be said to have done is to produce a short pause in the export of bullion. It has not perceptibly turned the exchanges in our favour."

It is not a little extraordinary that a writer who had just pointed out that the money market was gorged with supplies which it could with difficulty lend, should notwithstanding think it natural that the Bank of England should raise its rate still higher because gold was leaving its vaults, and the exchanges were still against England. And by what machinery is the Bank to prevent the export of gold by fixing a rate of interest on advances which no one will pay? The rate of 5 per cent. becomes a dead letter -it acts, it would seem, upon nothing, for it never

comes into living existence by the side of another market, filled with supplies working at 3. It can attract no capital abroad to the discount market, for that capital would have to go into the 3 per cent. market, an interest no better, probably, than what the foreigner could obtain in his own country. Why not say at once that the Bank of England has no connection at such times with the discount market, that its policy regards its own private interests alone?

The motives which influence the Bank of England's terms of lending are not identical with those which induce bankers to lend on totally different terms in the money market of trade. Why then should these personal motives of the Bank of England be proclaimed in every organ of the press, and, strange to say, by almost every man who lives on discount, as the rulers of those loans from banks on which every great commercial business in so large a measure depends? The ratio of its gold reserve to its liabilities is the Bank of England's individual affair: why should a change in that ratio be hoisted up as a signal of what rate of discount ought to be charged by bankers under different conditions of business?

But it is said by many that the Bank of England has charge of the bullion of the nation, and that it is its duty to take care that the country shall always be provided with an ample stock of that indispensable metal. But who or what has imposed this duty on a private company? How came it to be involved in this obligation to patriotic self-sacrifice? Did ever votes of its shareholders pass the resolution-"Think not of our interests, think only of our country's good?" They must

have been wonderful shareholders, indeed, had they done so. It may be that the directors of the Bank believe in. the theory of a strong reserve in quiet times,-though they despise it in a money market crisis,—and act upon this belief when gold is leaving the country, to the extent of giving up the profits of discount for the sake of winning back the treasure to their vaults; in that case, no business at their discount office at 5 per cent., and their rivals working at 3 per cent., are the natural products of such a policy.

At the same time, I beg distinctly to remark that it is not intended by these observations to pass any judgment whatever on the policy adopted by the Bank of England of demanding a different rate of discount from that which prevailed in the general banking market. The management of the Bank's loans naturally and necessarily rests entirely in their own discretion. There are endless considerations of vast moment involved in the administration of so vast an institution which are unknown to the outer world, but which must powerfully influence the line of action pursued by its Directors. All that is here intended is to indicate that the Bank frequently carries out a policy of its own, no doubt called for by its particular position, and to point out some of the consequences which follow exceptional action.

In this matter of gold exported from England, it is always forgotten that gold, or currency, is utterly useless for every other purpose than for serving as a tool of exchange, and that if one nation for the time takes away an unusual quantity, because it chanced to have sold more to England than it has bought, it will soon find that

at has acquired a quantity of costly machinery lying idle, and will put it to its proper work of buying. Gold comes and goes, ebbs and flows internationally, precisely as sovereigns move up and down a single country. The want for a larger or smaller quantity of these tools of exchange varies in particular localities at different times; but that any people ought to part with their wealth to buy a metal in order to keep it locked up for ever is to counsel folly. It is impossible to acquit the French administration of the Bank of France of inexplicable conduct in massing up a gigantic heap of metal of sixty or seventy millions sterling unless it is influenced by some special motive undiscoverable by the outer world. That gold, exchanged for foreign goods, to be employed as capital, would enrich France, enlarge the income of the nation, and provide augmented necessaries and enjoyments for the people. The gold in the Bank's vaults is metal practically restored to the mine; only it has cost enormous expense to purchase it, in order to reduce it back to an unproductive nullity.

Another excuse often pleaded for raising the Bank rate as the stock of gold diminishes asserts that it is the duty of the Bank directors to protect the perfect solvency of the bank-note which circulates under its name; but this plea misconceives the position given to the Bank of England by the Bank Charter Act of 1844. For every note above fifteen millions there are sovereigns stored in the issue department. The directors are not called upon for a moment's thought about notes until the circulation is reduced to fifteen millions; below that point, the Bank would be obliged to pay out of its own resources gold demanded upon notes presented for pay

ment. But the circulation never descends to so low a figure, and in all probability never will, so expanding is the business of the nation, and so increasing, in consequence, is its want for a supply of these particular tools of exchange. Any argument, therefore, drawn from the bank-note for strengthening the reserve of the Bank of England is completely irrelevant and idle.

The issue whether the movements of the gold, or the ratio of its Reserve to its liabilities rules the rate of discount admits of being decided by a test which cannot be contradicted. It is the rate of the Bank of England and its Reserve which are spoken of. Further, it is the directors of that Bank who fix that rate at their pure discretion. Can we learn on what ideas or what principles they act in fixing that rate?

Mr Hucks Gibbs, an ex-Governor of the Bank, tells us plainly, "The Directors of the Bank of England (as a body, I know, one and all, I believe) do not hold the principle of a rate governed by mere fluctuations of gold, and do not act upon it.'

"That they do not govern the rate is as plain as the sun at noon. The gold comes and goes and the rate very often stays unmoved."

"The amount of the Reserve and its ratio to our liabilities cannot be fixed by any hard and fast line but are capable of very wide variations."

After such information has been given authoritatively to the world, whoever henceforth speaks of the movements of the gold as ruling the rate of discount, asserts a fact which is untrue, and distinctly contradicted by those who make the rate.