The Express.
London, England, 1865-10-16 00:00:00

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LONDON. MONDAY. OCTOBAB 16.

Tms remedial measures adopted by the Bank of
England in the week before last have thus far been
unproductive. The drain of bullion, not, be it
observed, from abroad, but simply to meet the
wants of our internal circulation, lies been un-
checked, while the reserve has been hardly main•
tamed at its former point, notwithstanding that
the Bank has borrowed nearly 800,000/. on Go-
vernment stock. It will appear strange that
while our rate of discount is on the average two
per cent. higher than in Paris, Visans, Frankfort,
Amsterdam, and Hamburg, we should not have
received such supplies of gold from the Continent
as would have prevented not only the decrease
last week of 447,491/. in the bullion, but would
have actually caused an augmentation. As, however,
we have before had occasion to observe, the flow
of gold theory works very imperfectly in practice.
It is true that within the last few days we have
received nearly 400,0001. from New York, Africa,
Australia, and the West Indies, but even the most
enthusiastic supporters of the theory will hardly
contend that these amounts have been attracted here
by the beneficial working of a rate of 7 per cent. The
anomaly is thus shown that gold is regularly sent
us from those countries where the rate of interest
is almost invariably much higher than in London,
while from others where it is usually lower we get
little or nothing.
The recent arrivals of specie have certainly come
at a most opportune moment. The position of
the Bank was every day getting weaker, and the
apprehension that the rate of discount would have
to be put up to 8, or even 9 per cent. was gradually
spreading and exciting the usual distrust. In
almost every item the last account compares un-
favourably with the previous year, when the
rate was two per cent higher, and trade was
passing through a semi-crisis. The following are
the principal figures :

1864. 1865.
Pablic deposits ..... £7,021234 . • ... £7,228,737
Other deposits 13,206,313 ...... 13,506,498
Government securities 10,172,343 ...... 9,811.342
Other mantles
Roam (noire end coin) 6,438,973
Bullion
An increase is thus shown of over two millions
in the other securities, and a decrease of almost
1,400,090/. in the reserve, and of 270,0001.
in the bullion. It is not surprising, therefore, that
the announcement of the arrival of the Fes.: with
nearly half • million from Australia was welcomed
with • feeling of intense relief, which will be
strengthened by the news of the further supplies
last week. The commercial world was beginning
to fear that a panic was at hand—the eared way
to bring it about—but the danger has been averted
by the fortuitous arrival of about a million in
specie. The present day appears to be pregnant
with examples of the ill working of our monetary
system. The law of supply and demand, so often
insisted upon, proves entirely at fault, but a for-
taunte accident makes up for the deficiency.
The advocates of the Bank Charter Act have
evidently been entirely unprepared to find that a
mere demand for currency for internal circula-
tion has been accompanied by a pressure
as severe as if we were exporting specie
by millions. Trade experiences • sudden
revival owing to the receipt of large orders from
America, and in the manufacturing districts the
mills are once more actively employed. There is
no doubt that an unusually extensive amount of
business is now being done, and that merchants
and manufacturers have never bad a surer chance
of realizing large profits. In order to do this,
however, there is an inevitable absorption of notes
and coin, and a consequent demand upon the re-
sources of the Bank. The reserve necessarily de-
clines, and in order to counteract this movement
no plan is open save to render these business
operations as unprofitable as possible. In other
words, the rate of discount is raised to a point so
as to materially increase the charges in carrying
out the orders from the United States, and, as a
consequence, to drive the demand elsewhere. It
le probably to this reason that the recent changes
in the Bank of France account, unusually heavy
as they are, are chiefly due. A difference of 2
per cent. in the rate of discount gives to French
traders • considerable advantage over our own.
The effect of the free-trade system has now
placed both nations upon nearly the same level in
the point of production. Many proofs have lately
been shown that the impulse thus given to foreign
manufacture has enabled it to compete guesses-
fully in markets where formerly we had the
entire command. Unshackled by the restric-
tions which weigh upon English trade,
our neighbours can take full advantage of
the revival in commerce which has been lately
witnessed. The Bank of France account for the
past week shows a decline in the bullion of
• 1,326,0001., an increase in the bills discounted of
1,207,0001., and in the circulation of 412,0001.
These changes, which would have been thought
exceedingly disastrous if they occurred at our own
Bea, are in Paris considered with truth to be
eminently satisfactory as evincing the increased
activity is French commerce. As for any feeling
of alarm, that is not even thought of ; increased
circulation means increased business, and there is
ea end of the matter. The expedient of hamper-
ing trade for the sake of bolstering up • system of
currency which with us has admittedly failed is
one that finds no favour on the other side of the
Channel, and it is to be hoped never will.