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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 payment. 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." (p. 5 30).

"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.

APPENDIX.

TARIFF REVISION IN THE UNITED STATES, AND THE AGITATION FOR FREE TRADE.

Before Congress adjourned in the autumn a sub-committee was appointed to inquire concerning advisable alterations in the tariff and the internal revenue laws. The sub-Committee consists of Messrs Ward (chairman), Gibson, Tucker, Burchard, and Banks. The on dit in New York is that this sub-Committee is strongly in favour of reducing to six or seven hundred the present 2,200 articles subject to tariff duties, prohibitive or protective. Mr Ward is described us being overwhelmed with masses of letters and petitions: "99 per cent. of these communications represent individual interests, and demand protection for the articles which the writers produce, and a free list for the raw materials they consume." Meanwhile the Free Trade Club of New York have prepared and issued a timely and able petition for presentation at Washington, and are said to be obtaining to it an excellent array of signatures, not only among the general public, but from merchants and manufacturers as well. Here are a few passages :—

"The policy of fostering our domestic manufacturers by protective duties was begun a hundred years ago, and we are now no nearer the promised goal than we were at the close of the war of the Revolution. The system was introduced under the idea that with a little temporary assistance the industries selected for this favouritism would become strong and independent. But from duties averaging about 8y£ per cent, in 1789, with the time of protection limited to seven years, the system has advanced to duties of 40, 50, 60, and even 125 per cent., with the limit of time entirely removed. The same industries are protected now as were protected at the beginning; and, so far from being made strong and independent, they have through all these years compelled the steady increase of duties by their cries for help, and are to-day in

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