The Press.
London, England, 1857-12-12 00:00:00

1194

he said truly, " is a very unimpassioned eaten-
" lating transaction. It is founded on a know-
" ledge of our resources, and upon the necessi-
" ties of those who in foreign countries
" require our aid, and, however inex-
" orable the demand, it is one which is
" acted on almost in an instant by the results
"of reason and calculation." Perhaps, in-
deed, he was not literally correct in
saying that it is acted on " almost in an
instant;" for, as he remarked last
night, the experience of the present crisis
has proved it to be a " great national ob-
ject " that the Bank should keep a large
reserve in bullion, expressly because it is not
easy to stop a foreign drain of gold in a very
short time. This can only be effected by
raising the rate of discount, and, as we have
lately seen, the Bank had to raise its rate of
discount from five t ) ten per cent. before the
demand on our bullion reserve of gold was
effectually checked. We are strongly disposed
to think that the Bank of England might have
prevented the mere currency portion of the
panic altogether, had it been their recognised
principle to keep a larger bullion reserve
than they had usually considered sufficient,
and had they consequently not been reduced
so low as they were at the time when their
effective measures for resisting the foreign
drain eventually took effect But waiving this
point, Mr. DISRAELI is certainly right in saying
that the two principles involved respectively
in a foreign drain and an internal panic are
completely different, and that the Bank Act of
1844 errs so greatly in this, that it compels the
Directors to treat the two phenomena as if
they were identical, whereas that which puts a
stop to the former inevitably aggravates the
latter.

A foreign drain of bullion is a very intelli-
gible phenomenon. It simply consists in a
contest between other countries and this
country for the possession of a certain species
of capital of which, at the moment, the supply,
in more than one country, is not equal to the
demand. It is " rectified," as the phrase is, by
merely raising your price above that of the
other countries. When it became necessary to
pay ten per cent. for all loan capital in England,
it became more profitable to borrow in other
countries where the charge was less, and
to pay debts to this country by sending
here the commodity which had a greater
temporary value here than anywhere else—
namely, gold. That is, in technical language,
the exchanges were rectified, and a supply
began to flow in of that which we wanted, and
commodities which we wanted less were taken
in payment for that supply. The Bank
attained its purpose of preventing a further
drain on its bullion by rendering it more
profitable to send bullion to England than any
other kind of commodity. The Act of 1844
does nct in any way injuriously affect the
action of the Bank on such a condition of
things as this.
But an internal drain in a panic—for there
cannot be an internal drain except in a case of
panic—is a phenomenon of a totally different
description. We have shown with some care
that circulation does not vary except with an
increase or diminution of transactions. No
one cares to have money in his pocket merely
for the sake of having it in his pocket. We
rather prefer, even if we cannot employ it
profitably, to keep it more safely than we can
keep it in our pockets. What, then, can an
internal drain mean? It means simply this,
that whenever there is any fear of banks
breaking bankers are anxious to have more
than they usually need in order to satisfy an
uneasy public ; and even private traders
to some extent prefer the danger of
having more than it would usually be quite
safe to keep in their own possession, to the
danger of finding that their own bank has
stopped payment. Hence this internal drain
is not of a commercial nature at all. It is
indefinitely increased by a mere breath of
suspicion; it almost vanishes away before any
evidence which proves that sound ordinary
trade can go on without any violent shock.
But Sir llonEar PEEL'S Act legislates for this
case exactly as it would for a genuine com-
mercial deina:,(l for gold. It raises the price
for loans, adding an additional reason
to traders to get loans while they can,