LONDON, March 25, 1875. MY DEAR SIR STAFFORD,-Thank you for your note of the 15th, and for the return of my letter. I send it you back, copied out afresh with some few verbal alterations for the sake of greater clearness, and with a P.S. addressed to the first half of your note.

As to the "doubt" expressed in the second half ;-certainly the action you describe would, as you say, add to the amount of Notes with the Public.

I have said that the fluctuations of the Note-circulation have a tidal character-have their ebb, their flow, their spring and neap-which can be calculated with certainty, if not with numerical exactness. The abnormal addition to which you refer, would be like a volcanic wave, and would disturb all ordinary tidal calculations.

It is a PANIC which you describe—a panic which takes the form of Note-hoarding; and when that happens, nothing can quench the fire but its burning out, or a cessation of the fear as unreasonable as its beginning, or—a Deus ex machina.

But this is a matter rather of Banking than of pure Currency, though the Currency has been disturbed by the disappearance of a certain number of Notes, which have ceased for the time to circulate.

In such a case, a forced and temporary addition to the legal Issue of the Bank of England—an injection of fresh blood, in the shape of an extra million or two of Notes, into the veins of the sinking patient, Commerce-may avail sometimes, by quieting men's minds and supplying their immediate necessities, to remedy the inconvenience caused by the abnormal demand for Notes, (not to circulate for the uses of commerce, but to be withdrawn from circulation,) but no permanent addition to the Fiduciary Issue could have any such effect, or indeed, as I have shown, any beneficial effect at all.

You say, in your note, "if you cannot check the drain of Gold by raising the rate of Discount." But the Bank can always check the drain of Gold by that means, when the Gold has to be procured by borrowing from it, and so it must always be procured in the last resort. I will say more. The bank, by acting in time, can always prevent, if not a panic, yet certainly the dangers which lead to a panic. When a panic has once set in, our power is gone.-Sincerely yours, HENRY H. GIBBS.

P.S.-I may add a corollary to my long letter of the 12th. It is this:

That the Fiduciary Issue is of no importance whatever to Commerce :

And that the only appreciable profit or advantage springing from that Issue accrues to the Issuer-i.e. to the State, which is the real Issuer-and to the Bank, which, as the agent of the State, takes a portion of the profit for its trouble in the administration of the Issue.

LONDON, May 5, 1875.

MY DEAR SIR STAFFORD,-I send you the print of my two letters to you, and I have only to add a word of explanation of one term in the first of them.

By "Notes with the Public" we understand those Notes which are in the hands of other persons than the Bank of England.

Looking at it from an "Issue Department" point of view, the Notes which we hold are as truly "Notes with the Public" as are those held by a man in Berwick-upon-Tweed; for the Bank, in its banking capacity, is one of the Public.

But the distinction is a proper one as made in my letter; because, from a "Banking Department" point of view, the Notes so held by us form the greatest part of our Reserve; and it is the quantity of our Reserve only, and not the amount of the Notes in the tills of other people, which is acted upon by the Export and Import of Gold.—I remain, very truly yours,

HENRY H. GIBBS.

TURNBULL AND SPEARS, PRINTERS.

A LIST OF

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A LIST OF

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PUBLICATIONS.

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