"By the circulation of the country, do you mean the whole circulation of the country, and not the country circulation? - The whole circulation of the country.

" When you say that, as a general principle, you think it desirable to have one third of bullion in your coffers, against your circulation, you mean to include in that circulation not only your paper out, but all deposits, whether of Government or individuals? - Yes.

"In short, all liabilities to pay on demand? - Yes.

"And you hold the liability to pay on demand, arising from a deposit, to be an equivalent to a note out? - I hold it to be that sort of liability which the Bank are bound to provide for by a reserve of bullion.

"Do you think the liability arising from the deposit to be more dangerous to the Bank as to sudden calls, or less dangerous to it than the same amount out in paper? - Less dangerous.

"According to your description of the principle upon which the affairs of the Bank are conducted, do not the directors of the Bank of England possess the power of regulating the whole circulation of the country? - The Bank are very desirous not to exercise any power, but to leave the public to use the power which they possess of returning Bank paper for bullion.

"Would the exchanges be corrected if the amount of currency was left wholly in the hands of the public? - They have been principally corrected under that management.

"Is the Bank exposed to no inconvenience by waiting to have the correction take place in this method, in preference to itself interfering, by that power, to diminish the circulation in case of a fall of exchange? - No; provided they are adequately supplied with bullion when the exchanges are at par, and which proportion I have stated to be about one-third.

"Does not the Bank, if it think proper, possess the power of extending the currency, or of diminishing it, without waiting for the interference of the public? - It has the power.

"Would the Bank forcibly contract their issues, by a sale of securities, during an unfavourable course of exchange with foreign countries; and would they forcibly extend their issues by the purchase of securities, when the exchange was favourable? - I think not, except under special circumstances.

"You mean to say, that the Bank would not forcibly do that; but that it would leave it to the public to act upon the Bank, and produce the effect at which it would arrive? - I do.

"It appears by the accounts before the Committee, that for the last four years, the amount of securities in the hands of the Bank varied very little; do you consider it important, in the management of the Bank, to keep the securities at nearly the same amount? - As nearly as the same can be managed.

"What is the reason why you think it necessary to keep the securities at the same amount? - Because the public are thereby enabled, without any forced action on the part of the Bank, to act for themselves in returning notes for bullion for exportation, when the exchanges are unfavourable. If the exchanges continue favourable for any great length of time, then the influx of treasure will command an increased issue of paper, and which may derange the proportions; but it does not follow that the Bank ought, upon that account, immediately to extend its issue upon securities. When, however, it is clearly ascertained to be desirable that part of the excess of bullion so received should be returned to the Continent, then it may be necessary for the Bank to reassume its proportion, by transferring part of the bullion into securities, still preserving the proportions of one-third and two-thirds.

"In times of great commercial prosperity, would not the leaving to the public the correction of a redundant currency lead to a greater redundancy, and to excessive speculation? - I think not.

"You have stated one-third of bullion to be, in your opinion, about the proper proportion for the Bank to hold in proportion to its liabilities; is that proportion the result of your experience in the management of the Bank? - Yes, with reference to periods of a full currency." (Report, pp. 11, 12.)

Such, by their own confession, being the mode and terms upon which the currency ought to be managed, and things after a short interval still going as wrong as ever, it is needless to add, that much discontent arose, and many fault-finders presented themselves before the public, to arraign the conduct of the Bank directors. The case of the complainants was certainly a strong one: many facts, and cogent reasoning sustained them; they tried the Bank upon the premises she had herself selected, and convicted the culprit out of her own mouth.

Mr. Horsley Palmer having been the Bank organ to lay down, as certain and positive, a rule of action, the application of which was afterwards questioned, naturally came forward in its defence, and for this purpose published, in 1837, the pamphlet entitled, "Causes and Consequences of the Pressure upon the Money-Market." The points in discussion are instructive in many respects, and in none, perhaps, more so than in the example they furnish of the degree of dependence which is to be placed in the declarations of a body circumstanced as that of the Bank direction. I shall, therefore, make no apology for giving the following abstract of the case.

The charge against the Bank specifically was, that it had mismanaged the currency by violating its own rule of conduct, in not keeping up the required proportions between its liabilities and stock of gold. Against this Mr. Palmer urged, that the proportion had been generally maintained, and that, from December 1833 to April 1835, "the premium upon gold in Paris was nine per mille;" and "there was no demand upon the Bank for bar-gold, and no profit upon the export of that metal." But by March, 1834, whatever may have been the opinion of the directors as to the profit of exporting gold, their bullion had fallen away from 10,200,000l. to 8,753,000l.; whilst, instead of an equivalent reduction in their circulation, - which, according to their principle, should have been contracted under the action of a decreasing stock of gold - the notes out amounted to 18,544,000l. This was an emission of 1,074,000l. of paper in the face of a loss of bullion amounting to 1,447,000l. So much for principles. A gradual diminution of the gold went on until March, 1835, when the reserve of bullion was only 6,295,000l., the circulation continuing as high as 18,152,000l. Here, again, admitted principles were further departed from. All this time, with the exception of two short intervals, during which the Bank, by a violent but not sustained contraction of the circulation, recovered some small portion of its gold, the foreign exchanges, as might have been expected, continued adverse. The published account of November, 1836, gave - circulation, 17,543,000l.; bullion, 4,933,000l. In February, 1837, when the stock of bullion reached its lowest point, the average circulation had advanced as high as 17,868,000l., the bullion being no more than 4,032,000l.