The Express.
London, England, 1867-01-28 00:00:00

HIGH WATER AT LONDON BRIDGE.

Ts= 7h, 5929.
To-Itobsow—blarobag, 90. 27m....„Afterboon, 9b. 3.

LONDON, MONDAY, JANUARY 28.

THE financial position remains almost un-
changed. There have been further withdrawals of
gold from the Bank for the Continent, but latterly
they have been somewhat falling off. The foreign
exchanges also have been generally steady, so thaL
it would appear that the drain of bullion is not
only pretty nigh exhausted, but is not likely to
revive for the present. Our continental neigh-
bours have in fact collected the debts we owed
them, and taken back the capital which they feared
to employ in a country upon which, according to
their absurd idea, a revolution is impending. Pro-
bably some further small sums may go, but there
the question ends. As far as trade is concerned,
this unexpected bullion movement has been of
little consequence. The rate of discount has not
been in the least affected. The best bills could
always be cashed at 3 per cent., or per cent.
below the Bank minimum, and often at 21 and
24. Looking to the state of the Bank,
its resources have not been diminished in
more than an infinitesimal degree. Although
the coin and bullion show a decline in the last
account, compared with the previous week, of
390,0001., the reserve is only 8,000/. less. With
these facts before them, it may seem strange that
the directors did not reduce their rate of discount
last Thursday, especially since the "other securi-
ties" had run off by 388,000/. This, however,
is a question in which the public generally have
little interest. It is of no particular importance
whether the Bank choose to charge 34 per cent.
for the use of a commodity that can be readily got
elsewhere at 3. The outside public will, of course,
deal in the cheapest market. It may be admitted
that the position of the Bank has been compara-
tively strengthened by avoiding a reduction in the
rate (although this conclusion is open to doubt),
but to what purpose? The reserve amounts to
the immense sum of nearly eleven millions, and
there is surely no desire, at all even;.s in these
days, to increase it beyond this point. The
fact appears very simple, that tho posi-
tion of tho Bank is at present so strong
that no conceivable reason can be shown for
making even the most insignificant sacrifice in order
to strengthen it still further. Still, this is a mere
matter of business, which can be most fitly decided
by the directors of the Bank and their consti-
tuents.

It is an evident proof of the defective working
of the Act of 1844 that the precise virtues that
have always been ascribed to it never come into
play except when they are not wanted. The theory
of its supporters is just now being exemplified to
the letter. The Bank has been losing bullien ;
therefore the directors keep up the rate of dis-
count, and, if necessary, would have raised it still
higher. " See how admirably the system works,"
it will be said. "By carrying out the principles
" of the Act in their strict integrity it is evident
" that even a drain of bullion is powerless to
" cripple the resources of the Bank. The reserve
" has fallen next to nothing." Very true ; but
supposing the reserve had fallen half-a-million or
more, money would still have been at 3
per cent. in Lombard-street. It is while
capital is abundant that the repressive system is
found efficient. If the official minimum is 34 per
cent. when 3 rules in the open market it neces-
sarily deters custom. The commercial bills run-
ning off at the Bank are renewed elsewhere. A
great deal of money flows in, and scarcely any
goes out. The theory thus acts with admirable
effect exactly at the moment when no one cares
about it. Let the rate of discount, however, be
at 10 per cent., and somehow the theory when
really required is of no value whatever. It fails
to attract bullion, it causes distrust both at home
and abroad, the reserve is only maintained by
making large sales of Government securities, and
the disinclination of private discounters to do
business sends everybody to the Bank. The high
rate thus tends to multiply demands instead of
diminishing them. The present condition of the
money market is the precise converge to that of
last May. A drain of bullion was then expe-
rienced, which was unchecked by 10 per cent.,
and the financial pressure was extreme. In this
month there is again a partial drain, but it causes
neither uneasiness nor pressure. Confidence once
restored the movement of a few hundred thousand
pounds in gold one way or the other is almost en-
tirely disregarded.
The effect of this slight check to the downward