the demand, and prices rose considerably. Hence, to a large extent, at least, from bonâ fide causes, and not from any speculative mania, Bowed Georgia cotton rose from 74d. to 18. 6d. per lb.; East India cotton, from 5d. to 18. 1d.; China raw silk, from 168. 6d. to 298. 10d. per lb.; sugar of British plantations, from 298. 11 d. to 418. 5d. per cwt.; coffee, St. Domingo, from 588. to 798. per cwt.2 During the year 1825 another source of excitement occurred in the exaggerated expectations entertained of the trade with the South American states, and the extraordinary accounts of the riches of their mines, as a consequence of their recognition as independent states. If we might believe the statements put forth by parties interested in that quarter, the great Potosi of days gone by had once more been discovered; and, as there are always many ready to take advantage of the least indications of success, and prepared to build for themselves castles in the air, several companies were formed to invest English capital, machinery, and skill in undertakings of all descriptions. Nor was it long before the excitement became a real mania. The shares in such companies as the Real del Monte, the United Mexican, and the Anglo-Mexican rose to an extraordinary value.3 As the Annual Register' said, s Mr. Francis, in his History of the Bank of England, gave the following fluctuations in the prices of shares : Anglo-Mexican. Brazilian Colombian Real del Monte. United Mexican Jan. 11. £158 prem. 70 10 35 82 99 1,350 155 Extravagant as were the expectations entertained of the Real del Monte mine, it does not appear that they were altogether mistaken. In the report of M. Middleton to the Foreign Office, in 1866, it is stated that the original company spent nearly 1,000,000l. upon the mine without being able to declare any dividend; that the mines were subsequently sold to some Mexican speculators 'All the gambling propensities of human nature were constantly solicited into action, and crowds of individuals of every description, the credulous and the suspicious, the crafty and the bold, the raw and the experienced, the intelligent and the ignorant, princes, nobles, politicians, patriots, lawyers, physicians, divines, philosophers, poets, intermingled with women of all ranks and degrees, spinsters, wives, and widows, hastened to venture some portion of their property in schemes of which scarcely anything was known except the name.' Not content with foreign mining, foreign loans became also most attractive investments. No sooner was it understood that the state of Peru had consented to borrow than the utmost anxiety prevailed to lend. The contractors, with scrip in hand, had difficulty in checking the eagerness of a crowd of applicants. Portuguese and Mexican, Greek and Brazilian, Peruvian and Buenos Ayres loans were in equal favour, purchasers little knowing, and caring less about, the financial or economic condition of the states to whom such money was lent. The loans contracted between 1821 and 1825 amounted in all to 48,000,000l.4 for about 27,000l., that they spent on the mines other 80,000l. before they declared any dividend, but that now the total value of produce for the last ten years exceeded 6,000,000l., and the annual profits were 100,000%. FOREIGN LOANS, FROM HYDE CLARK'S PAPER ON THE Debts of Unfortunately there did not exist such an amount of available capital in the country to justify investments so varied and heavy. The amount of public deposits in the hands of the Bank of England, which in 1824 had increased to 7,222,1877., in 1835 diminished to 5,526,635l. The rise in prices of produce naturally encouraged imports, which had to be paid for; and as large sums had moreover to be remitted out for foreign loans and foreign mining, the balance of trade and payments became against us, and an adverse move in the exchanges was the immediate consequence. The exchange with Hamburg, which on November 22, 1825, was at 36.10, on December 20 had risen to 38.1; with Lisbon, from 51 the rate had fallen to 50; and with Paris, at three days' sight, from 25.20 the rate rose to 25.50. With a large importation of produce a great fall in prices became inevitable. Cotton fell from 16d. and 184d. per lb. to 6d. and 7d.; sugar, from 418. to 288.; coffee, from 768. to 478. ; and as the Bank found its bullion diminishing, a diminution of discounts became a necessity. Then companies, hitherto considered most flourishing, suddenly began winding up. Failures commenced. Money was not to be had; and though the usury laws were in force, any price would have been paid for prompt accommodation. But matters daily became worse. House after house succumbed, and the panic became intense, general, and most contagious. Suspicion rested upon everyone, and bankers too, suffering immensely from want of confidence, were compelled to resort to every scheme to allay the unwonted fear. A Cambridge bank advertised that they would afford every facility to holders of their notes to have them exchanged for gold or Bank of England paper. An Oxford bank made a show of such a profusion of gold that everyone was satisfied, and no person thought of demanding it. At Norwich the Gurneys stopped the run by a show upon their counter of a pile of Bank notes many feet thick. But the failure of a banking house at Plymouth, and of a leading banking house in the city, naturally led to a run, and as many as sixty-three country banks succumbed in the crisis. These banks sought in vain the assistance of the Bank to change their notes of 11. and 21. for gold. The Bank itself had no gold to spare. The merchants, too, turned their eyes imploringly to the Bank for help, and it was with great difficulty that they succeeded in getting advances to an extent of 400,000l. on the security of goods. But the difficulty had become so serious for the Bank, that it found itself in the necessity of discovering some extraordinary means of deliverance. We have already seen that the Government had allowed the circulation of notes under 5l. till 1832, but that the Bank of England had ceased issuing them. Now, however, the happy thought occurred to one of the directors that a box of 11. notes, which had never been issued, might opportunely be put in circulation. Permission was obtained from the Government to issue them, and this afforded some relief. Besides this, the friendly aid of the Bank of France was solicited and obtained. A credit was opened in Paris for 2,000,000l., in bills drawn from London at three months' date. And thus, by degrees, a turn was given to the panic, which was gradually allayed as the increase in the rate of interest and the fall in prices caused the exchanges again to rise in favour of this country. The Bank of England has been much censured for having stimulated the crisis by increasing the issue of notes at the very time when its bullion diminished. It was not till December 13, 1825, that the Bank raised the rate of discount on bills and notes not having more than ninety-five days to run from 4 to 5 per cent. Doubtless, as compared with 1823, the amount of Bank of England notes in circulation in 1825 was larger, and, as will be seen from the appended note," the disproportion between the circulation and the bullion on hand became greater and greater, especially when the circulation of country bankers is added thereto. But we should remember that the increase of notes was to a considerable extent owing to the increased trade. Bankers do not create trade; they only facilitate it by the help they are able to afford to their customers. At a time when the means of economising the circulation, such as the clearing house, the system of cheques, and extensive banking accounts, were by no means so great as they now are, any increase of transactions must of necessity have created the want of a larger circulation. It should be noted also that the principal increase in the issue took place towards the end of 1825, when the Bank of England was called to cover the deficiency caused by the sudden contraction of 5 The following table is given by Lord Overstone in his evidence to the Committee on Banks of Issue, 1840, p. 217 : The amount of country bank notes stamped from 1820 to 1825, estimated by the total amount which the stamps might circulate, was as follows:--1820, 3,503,000l.; 1821, 4,438,000l.; 1822, 4,296,0007.; 1823, 4,429,0007.; 1824, 6,724,000l.; and 1825, 8,755,000%. the country bank circulation, and not in 1824, when the mania for companies began. Soon after the crisis was over Parliament met, and the speech from the Throne alluded to the circumstance in the following terms:- The embarrassment did not arise from any political events either at home or abroad; it was not produced by any unexpected demand upon the public resources, nor by the apprehension of any interruption of the general tranquillity. Some of the causes to which the evil must be attributed lie without the reach of direct Parliamentary interposition; nor can security against the recurrence of them be found unless in the experience of the sufferings which they have occasioned. But to a certain portion of this evil correctives at least, if not actual remedies, may be applied; and his Majesty relies upon your wisdom to devise such measures as may tend to protect both private and public interests against the like sudden and violent fluctuations, by placing on a more firm foundation the currency and circulating credit of the country.' The Government was persuaded that the crisis had been greatly aided by the paper currency; that though speculation in trade had been the origin of the evil, and the spirit of gambling carried into every branch of trading had been the beginning, yet it could not have been so extensive if it had not been aided by the state of the currency. In the opinion of the Marquis of Lansdowne, the first effect of an issue of country bank paper is to create an artificial abundance of capital: the accumulation of capital causes a reduction of the rate of interest; by the reduction of the rate of interest facilities are afforded for speculation; speculation produces an effect upon prices; the alteration of prices checks the progress of mercantile exports, and that causes the precious metals to be sent out of the country; and then ensues that lamentable distress which arises from an accumulation of stock purchased at high prices being obliged to be sold at greatly reduced prices under the influence of alarm." The remedial measures proposed by the Government on this occasion were these:-First, that the circulation of notes under five pounds, whether by the Bank of England or by country bankers, should be withdrawn. Secondly, that power should be given to the Bank of England to establish branches throughout the country, in order to supply the vacuum caused by the suspension of so many country banks; and, thirdly, that banks with any number of partners should be allowed to be formed throughout the country within sixty-five miles of London, provided such banks should not make their notes payable in London, nor draw bills on London for a less amount than 50l. It was certainly an anomalous fact that, for upwards of a century, the Bank of England had been the sole jointstock bank, not only in London but throughout England, no banking institution being allowed to be formed with more than six partners, lest it should interfere with the monopoly of the Bank of |