New-York daily tribune. [volume] (New-York [N.Y.]) 1842-1866, 1857-11-21
On thu 5th intt the Rank of E0elAud raised

On the oth Intt. the baDk Oh E0ghnd frisco us
minimum rate Of discount from S per cent. at
which it was fixed on October ~, to 0 per cent.
This enhancement unprecedented as il is IN tho
history Of the Bank since the resumption OF its
cash payments, has, We presume, not yet reached
its highest point. 1t is brought about bya drain Of
bullion ard by decrease in what is called the re-
serve of notes. The drain Of bullion acts 10 oppo
cite drectons-gold being shipped to this country
in consequence Of oar bankruptcy, and silver to
the East, in consequence Of the decline Of the eK.
port trade to China and India, and the direct Gov
erpment remittances made for account Of the East
India Company. Ia exchange for the silver thus
wanted, gold must be sent to the continent Of
Europe.
AZ to the reserve of notes and the influential part it
plays in the London money market tits necessary to
refer briefly to Sir Robert Peels Bank act Of 1874
which affects not only England, but also the United
States, and the whole market lof the world. Sir
Robert Peel, backed by the banker Lloyd, now Lord
Overstore e, and number Of influential men beside,
proposed by bis act to put into practice sttsct-
ing principle for the circulation of paper money,
according to which the latter would exactly con-
form in its movements Of expansion and contrac-
ton to the laws Of purely metallic circulatiOn and
all monetary crises, as he and his pirtisans affirmed,
would thus be wsrded off for all time to come. The
Bank of England is divided into two depsrtments-
the issuing department and the banking depart
ment; the former being simple mauufacsOry Of
notes and the latter the real bank. The issuing
department Is by law empowered to issue notes
TO the amount of fourteen millions sterling
sum supposed to indicate the lowest point,
beneath which the actual circulation will
never fall, the security for which is found 10 the
debt due BY the British Government to the Bank.
Beyond these fourteen millions, no note can be is
sued which 10 not represented in the vsuts Of the
issuing department by bullion 10 the same amount
The aggregate mats Of notes thus limited 10 made
over to the banking department. which throws
them into circulation Consequently, if the bullion
reserve in the vaults Of the issuing department
amounts to ten millions, it can issue notes to the
amount Of twenty four millions, which are mad,
over to the banking department If the aetna
circulation amounts to twenty millions only, the
four millions remaining in the till of the banking
department forms its reserve of notes, which, in
fact constitutes the only security for the dc posts
cenhded BY private Individuals and by the State to
the banking department
Suppose now that drain Of bullion sets IN, and
successfully abstracts various quantities of bullion
from the Issuing department, Withdrawing for in.
stance, the amount of four millions of gold. In this
case four millions of notes will be cancelled; the
amount Of notes issued BY the issuing department
will then exactly equal the amount Of notss in circu
lstion and the reserve Of d'posabs notes in the till
of the banking department viii have altogether Dis
sppeared. The banking department therefore, win
not have single far.hiDg left to meet the claims Of
is dcpositors and consequently will bscompelsd to
declare itself insolvent; an act affecting its public
as well as its private deposits and therefore To-
voying the suspension Of the payment Of the quar-
tery dividends due to the holders Of public funds.
The banking department might thus become bank
rupt while ak millions Of bullion were stu hsaped