The exchanges, moreover, were not in our favour at this period; another standard rule was thus violated by the Bank. In March, 1834, the 10,200,000l. of gold was reduced to 8,753,000l., therefore a proportionate decrease in the circulation ought to have taken place, that is, if the rule of right was to be observed; but it was not observed. In March, 1834, there was an increase and not a decrease of bank-notes, the amount of which was 18,544,000?. A loss of bullion to the amount of 1,447,000?. was met by an addition to the circulating medium of 1,074,000?. So much for principle, and the rule of regulating the issue of banknotes by the foreign exchanges.

Proceeding to March, 1835, we find the bullion, which had been gradually diminishing, reduced to 6,295,000l.; against which the circulation was kept as high as 18,152,000l. Thus we see the circulation all through, from 1833 to 1834, larger by four millions than it ought by rule to have been. This, it is obvious, was system - the wrong way.

Early in 1836 the wrong system began to be felt. There was, to borrow a well-turned sentence from Mr. Horsley Palmer, "a moral apprehension, in all prudent minds, that there was mischief abroad." And the Bank directors, finding the steed stolen, ran to lock the stable-door in a great hurry, and make all fast. According to City phraseology, money became tight directly. The directors, who blamed the private Banks for the panic of 1825-6, now sought to attribute the rising fever to the joint-stock Banks. A committee was appointed by the House of Commons to inquire into the working of the joint-stock Banking system, and it precipitated the evils it was intended to cure. The proceeding, like the others by which it has been followed, was one-sided and unfair. The inquiry was specifically directed, first, against joint-stock Banks, and then against Banks of issue; but in no instance against the Bank of England, although every man in the slightest degree acquainted with the subject, must have felt that the action of that establishment lay at the root of the evil.

The "moral apprehension" became vivid. The Bank raised the rate of discount to five per cent.; it sold exchequer bills until they fell down to ten shillings discount, and became a drug in the market. The directors then drove the chancellor of the exchequer to increase the interest upon them, first from 1 1/2d. a day to 2d., and afterwards to 2 1/2d. Convulsive efforts were made to stem the flood, but still there was no relief. In Ireland a joint-stock Bank, called "the Agricultural and Commercial Bank," with a large number of branches, suspended payment; and there was a run for gold in Ireland. In England, two long-established Banks failed in Carlisle; as did at Manchester the Northern and Central joint-stock Bank, with extensive branches in most of the manufacturing towns. To this establishment the directors of the Bank found themselves compelled to advance more than a million and a quarter of money. It was a choice of evils: they knew it was wrong to add to the currency at such a moment; but if they did not succour this concern, they feared there would be a general stoppage of the Lancashire Banks. They preferred the lesser evil; they put more than a million of notes into circulation. But the symptoms of the disorder did not abate: Esdaile's Bank, one of the most respectable in London, stopped, notwithstanding a powerful effort to sustain it upon the part of the Bank of England, and other London firms4. Consols fell four per cent.: the Bank tried but could not sell the dead weight. Distrust became general, and credit all but extinct. In vain they sent silver abroad to bring gold in exchange; the discount and commission upon the very first bills in the London market rose to eight per cent., while those of the second class were hardly discountable at any price. Of the bankruptcies that now took place, and the extreme depression of our manufactures and commerce, it would be impossible to give an exact account. Prices fell forty per cent.; in the manufacturing districts there was no employment for the workmen; merchants stopped payment in numbers, not because they were insolvent and had no property, but because no market was to be had for their goods, no discount for their bills, no advance upon their stocks. It was a rare and melancholy sight to behold English merchants going through the Gazette in numbers, while their warehouses were full of commodities, and their characters unimpeachable for knowledge of business, integrity, and exemplary conduct: yet such were the incidents that characterized the panic of 1836.

4 The private Bankers in the City - all except Jones Loyd's, and Grote's, who refused to be parties to the transaction - subscribed 5000l. each in aid of Esdaile's firm, but to no purpose, it became bankrupt notwithstanding.

It should not be forgotten, that all this while there were Banking Committees inquiring into the subject in the House of Commons; there was one before and another after this particular panic: and the only palpable consequence to be traced in connexion with these labours is, that there was another panic in 1839, which may be said to have extended itself, by a series of fits and convulsions, all through the years 1840 and 1841, at which date our commercial system was reduced to the lowest ebb of distress. The number of Banks which stopped or disappeared during this interval was unusually great, the difficulty of getting money as rigid as ever, and the stagnation of our commerce, the scarcity of good mercantile paper, extreme; nevertheless upon one and all of these matters, teeming as they were with mischief, terror, and distress, these committees were as silent, and appeared as indifferent, as if they had occurred in another world, and did not in the most remote degree concern the fortunes or the comforts of the people of England.

In this series of complicated disasters, a bad harvest is again to be noted as a leading fact in the heavy chain of events that dragged after. In 1838 our grain crops failed, and then came a drain of bullion upon the Bank of England to the amount of more than seven millions. In the three following years the harvests were again deficient. Concurrent in part with these adverse circumstances, and rendering their effects still heavier and more protracted, was the American crisis, as it is termed, which can hardly yet be said to have completed the circle of its violence. In 1838 the Bank of England violated its principle of leaving the stock of gold to be acted on by the public only, by sending a million of sovereigns to restore credit in America, but to no purpose; the American difficulties grew still more formidable, and the Bank of England itself became soon after nearly as much straitened as ever. Between January and October, 1839, the drain of specie from its vaults amounted to ten millions. While that process of exhaustion was going on, an attempt was made to check it by selling the dead weight; but as no adequate price could be obtained in the market, a portion was pledged to the Bank of France for a loan of two millions and a half, and another portion to the East India Company for 750,000l. in exchequer bills. Every effort, and all expedients for relief, proved vain; the drain of gold, though suspended while the bills were in course of exchange upon which the foreign loan was based, set in anew as soon as that fictitious diversion had subsided, and proceeded on through 1840 and 1841, in the month of October, in which year the last and most striking evidence of our monetary distress was given, in the published returns of the total amount of the paper circulation of England, which was then under twenty-six millions5, - the lowest sum I believe the country had been reduced to during the present century.