41. This circumstance will, no doubt, tend to accelerate, what statesmen of all parties are so anxious to avoid, a thorough and searching investigation into the whole of our Banking system. But, however they may strive to stave it off, such an inquiry will inevitably come. For each succeeding crisis will be more severe than its predecessor. In 1847, the first crisis after the Act of 1844, the Credit system was comparatively small; it had greatly increased in 1857, and the crisis was more severe; in 1866 it had greatly increased, and the crisis was far more terrible; and so it will be in future. Every year the system of Credit is attaining more colossal dimensions, and, like a huge octopus, it now grasps all classes and almost all persons in its embrace. And, like the throes of Enceladus, it will periodically convulse the world, until it is settled on true scientific principles.

That this work is subversive of the dominant opinions of the day is true. But, as the great Attic Tragedian says "Ideas have more power than the force of arms." Ideas are no respecters of persons: they will sap the power of rank, of wealth, of numbers, of authority. This work restores the great line of orthodox opinion so rudely broken of recent years. It is the lineal representative of the ideas of BURKE, of KING, of THORNTON, of HORNER, of HUSKISSON, of the BULLION REPORT, and of the FRAMERS OF THE ACT OF 1819. It adopts and explains their principles so far as they went, and completes their Theory in the point in which it was defective; and the method of giving effect to their doctrines, namely, by adjusting the Rate of Discount by the state of the Foreign Exchanges and the state of the Bullion, which we first developed in 1856, is now universally admitted to be the true method, and adopted by every Bank in the world. The ideas and the doctrines of the men who influenced Peel in framing his Bank Act are now completely discredited and effete, and they want nothing but an examination by competent judicial authority, to be utterly condemned and exploded.

42. There are, in truth, laws of nature in the industrial world, as well as in the physical world; and a systematic attempt to violate them terminates in disaster, as surely and as certainly as a systematic disregard of the laws of nature in the physical world. It may be a long time before the mischief is developed, nay, for a

considerable time the results may appear to be beneficial; but in the long run the faulty principle is sure to produce its fruits

Raro antecedentem scelestum

Deseruit pede pœna claudo.

Now the great law of nature in the industrial world is FREE TRADE. There is nothing more certain in all the range of science, than that exclusive privileges in commerce are great violations of natural right. Trading monopolies are moral crimes. When Parliament sold to the Bank of England the exclusive monopoly of banking, IT SOLD WHAT IT HAD NO RIGHT TO SELL. It had no more right to sell to one body of persons the right of carrying on the business of banking than it had to sell a monopoly of the business of bookselling, or leather dressing, or any other trade whatever. This monopoly was as unjust and as pernicious as any of those which the Commons of Elizabeth and James I. had rebelled against. For a considerable period everything seemed to go well. The Bank of England rendered unquestionable services to the State-so might any other trading corporation in its line-and any other corporation might have done the same, if they had been permitted. But, nevertheless, the principle of the monopoly was utterly vicious; and Time, the avenger, brought retribution at last. Injustice slumbers long, but it is sure to have its revenge at last. When in the natural course of events, the commerce and wealth, and increasing spirit of enterprise, demanded an increased currency, and, save for this monopoly, powerful and wealthy companies would have been formed in the metropolis with ramifications all over the country, these unjustifiable privileges of the Bank prevented them. The Bank would neither supply this currency itself, nor permit any other powerful company to do so. The consequence was that the duty of supplying the necessary currency fell into the hands of any grocer, or tailor, or cheesemonger who chose to call himself a banker. Their power was unlimited. Then came 1793; then 1797; then the long series of disasters from 1810 to 1816; and then 1825.

When, in the course of less than thirty-five years, men had seen the whole of England shaken, from end to end, by those tremendous banking catastrophes, which seemed to be of periodical recurrence, they turned to the example of a country,

where, though there had been commercial difficulties, there never had been any banking disasters at all comparable to those of England. Many private bankers, it is true, had failed, but, except the Ayr Bank, up to 1826 no joint stock bank had failed. A very strong and general demand, therefore, arose for the Scotch system; many persons thinking that because the Scotch banks were joint stock banks, joint stock banks were all that was requisite to obtain security. When, therefore, the monopoly of the Bank was partially broken up in 1826, they expected to enjoy similar prosperity and safety to what Scotland had done; and when, after an experience of fourteen years, they found that the joint stock banks were equally ill managed, and scarcely more secure than the private banks, great and bitter disappointment ensued, and joint stock banking became a byeword of reproach.

But, in truth, the causes of this are very evident. In Scotland the growth of banking had been extremely gradual. The first joint stock bank was founded in 1695, the second in 1727, the next in 1747, and except a few country ones, no new one of any magnitude was founded till 1810. The consequence was that they gradually expanded with the increasing wealth of the country; they grew with its growth. Moreover, they correspondingly increased their capital. When the country required additional accommodation, it was done chiefly by throwing out branches from the parent establishments in the capital, so that they had all the experience and effective control of the superior officers. At present there are but eleven distinct establishments, but these have 878 branches, extending into every village in the kingdom. It is calculated there is a banking office for every 4,000 people. These are all independent institutions, depending upon their own wealth and resources. But when the terrible monetary convulsions in England caused a breach to be made in the monopoly of the Bank, it was only a partial one, a large portion still remained and exercised its deadly influence. When the new joint stock banks were formed they were merely local banks, all as dependent on the Bank of England as the private banks had been. The Bank maintained its exclusive privileges within sixty-five miles of the metropolis; and this was the inherent vice of the English system of joint stock banking. Instead of being independent banks, strong in their own resources, and able of their

own strength to withstand a shock, they were carried on upon the most dangerous principle of re-discounting the bills they bought, as indeed they could not help doing: thus their very existence depended upon the Bank of England and the London bill brokers.

To suppose that this in any way resembled the Scotch system would be a gross fallacy; the English banks were forbidden to have establishments in the metropolis, which, of all others, is the best part of the Scotch system. We have pointed out elsewhere that capital has a tendency to accumulate in certain districts of the country, where there is not sufficient demand for it, and in others there is a greater demand for it than the district supplies. Now, in the English system, the bankers in the former part of the country remit money to London to be held in deposit for them, and in the latter the bankers remit their bills to be re-discounted, and have the money remitted. Now, this legitimate operation, which is all done by one establishment in Scotland, requires three distinct and independent establishments to do it in England, and has given rise to that system of re-discounting which is so perilous and so objectionable. But it is the natural result of the monopoly of the Bank. Because, if it had not been for that, these three establishments would all have been under one control and management; under the present system they are three different and frequently conflicting interests.

And this great violation of natural justice manifested its evil consequences in many other striking ways. No man of common sense now disputes the great principles laid down by the Irish Committee of 1804, the Bullion Report of 1810, and the authors of the Act of 1819, that the paper currency must be governed by the exchanges. But long after the Directors of the Bank of England had learnt this principle, and professed to govern their issues by the exchanges, they complained loudly and justly that their efforts to contract their own issues in an adverse exchange were counteracted by the issues of the country banks, and that as soon as they withdrew their paper, the vacuum was immediately filled up by country issues. The reason is very manifest. The Bank of England, being situated at the heart of the exchanges, felt the danger, and saw the necessity of contracting her issues; the country banks, being situated at a distance, knew and cared nothing about the exchanges; nay, they con

tinually professed that their issues had nothing to do with the exchanges, and, naturally, whenever they saw an opening, issued their paper.

Now, if it had not been for this iniquitous monopoly of the Bank, what would probably have been the condition of English Banking at the present day? There would have probably been thirty or forty great banks in the metropolis, each as great as the present Bank of England, with ramifications and branches all over the country. It would, in fact, have been the Scotch system on a much larger scale-one commensurate with the greater magnitude of the country. It would have been one great monetary nervous system. If this had been the case, they would have been acted upon immediately by the exchanges. London being the centre of the exchanges, any drain of gold would have caused immediate measures of counteraction, which would have been propagated and enforced by the parent establishment all over the country. The tremor of the exchanges would have been instantly felt in every village in the kingdom. Thus, under a natural system, any effect in London would have vibrated through all England, and no country banks could possibly have acted in opposition to the ones in London. And this is the result to which the banking system of the country is slowly gravitating, and which it will ultimately assume. And if this, which is the natural system, had been allowed to grow up from the beginning, we believe that those great banking catastrophes never would have occurred. If any crisis had occurred, they would have stood by and assisted one another, but, when any shock did occur under the unfortunate system which has prevailed, the country banks have all depended on the Bank of England for their very existence.

It is a melancholy reflection that these great changes cannot take place without producing much injury to private individuals. The very obnoxious law itself gave birth to the business of a number of persons, which the removal of the shackles of monopoly must necessarily extinguish. In 1832 the banking witnesses felt that the establishment of joint stock banks would be fatal to the existence of many of the private bankers, and some went so far as to wish to prohibit them on that account. Since these 43 years have passed, we have undergone a mighty revolution of opinion in commercial matters.