The discussions on the currency, however, had a good effect, because the Bank Charter Act of 1844, which secured the convertibility of the note, was the outcome of such deliberations.

After the American War there was a period of prosperity throughout Europe. The usual course of events followed, viz., an era of speculation. This was shown by the Bank of England's note circulation, which rose from £6,000,000 in 1784 to £11,500,000 in 1792. In the autumn of the latter year a series of failures occurred. On the 15th February, 1793, a house of considerable magnitude, deep in corn speculations, failed, and on the 19th the Bank of England refused to discount the bills of Lane, Son & Fraser, and that firm suspended payment next day with liabilities of nearly £1,000,000. A great number of respectable firms were involved through this failure. In the meantime the panic affected the bankers. The failure of banks commenced at Newcastle, and although the partners in the banks at that place were opulent, yet their assets were locked up in securities which could not be realised, and consequently they were obliged to suspend payment. The banks of Exeter and of the West of England were almost the only institutions which survived the crisis.

The failures were attributed to houses issuing notes without a sufficient reserve.

A committee of the House of Commons recommended the issue of exchequer bills, which was adopted by the Government and had the effect of restoring confidence. When it was known that capital could be borrowed then the alarm subsided.

The next banking crisis occurred in 1797, when some banks at Newcastle were in difficulties, and the situation became so critical that an Act was passed allowing the Bank of England to suspend payment. It was thought that the laws affecting the Bank of England and also of the currency were the cause of financial troubles, but as Professor Jevons states at a later period : "I must maintain then that under the present system the English currency is governed by the natural laws of supply and demand of a metallic currency and not merely by artificial regulations. If the terms are interpreted aright we have already a natural and free trade system of currency, and I venture to take this auspicious expression free trade from those who use it wrongly, and who confuse the free manufacture of currency with free trade in capital, the true business of the banker."

In 1807 the South American Continent became independent, and speculation with that country was soon at its height. It is stated that clerks with about £100 capital were allowed by the banks to have discount accounts amounting from £5000 to £10,000. By such means the bankers supported speculations, and consequently credit sustained a shock in 1810.

We have the following report of it: "The failures of houses of the highest respectability both at London and at different provincial towns of Great Britain have within the last month (August, 1810) been unprecedented in number and importance. A West India broker who had been considered the first in his line was, we are told, the prime cause of the stoppage of a banking house whose credit was previously unimpeached. The several banks in the country connected with the London house of course shared his fate, and from them the evil spread to merchants and manufacturers, traders, and in short to the very servants and dependants of these. . . . Speculation in Spanish wool, an article which has fallen about 50 per cent., was considered as the origin of the unlooked-for disaster."

Fourteen years later, viz., in 1824, speculation was again active. The people had entirely forgotten their losses through lending so much capital to South America. A large number of companies were floated for constructing railroads, mines, canals, gas, etc., in number about 624, with a nominal capital of £372,000,000. This was followed by a rapid rise of prices, but in a very short time there was a corresponding fall.

The bankers lent money to persons who speculated in all kinds of commodities. They were able to do this by means of issuing a large amount of bank notes, which however they could not pay on demand. Unbounded credit was followed by distrust, and a run upon the banks quickly followed. The Bank of England very unwisely refused to discouut any more bills, and this intensified the crisis, which culminated in a panic.

On the 22nd November, 1825, Sir W. Elford's bank at Plymouth stopped payment, and this was followed by Wentworth & Co., a great Yorkshire firm, the well-known house of Messrs. Pole & Co., besides three or four more London banks and sixty-three country banks. On the proposition of the Government, the Bank of England issued £1,000,000 of £1 notes, which fortunately happened to be in their possession, and also lent large sums by means of discounting bills. These measures afforded great relief to the merchants in London.

The Bank of England's note circulation rose from £19,000,000 (August, 1825) to £25,000,000 (February, 1826).

The bankers suffered immensely from want of confidence, and they tried every possible scheme to stop the run.

A Cambridge bank advertised that it would afford every facility to the holders of its notes for the purpose of having them exchanged for gold or notes of the Bank of England.

An Oxford bank showed so much gold on its counter that every one was satisfied as to its position, and one at Norwich stopped the run by displaying large quantities of Bank of England notes upon its counter.

The following tables will show the fluctuations in prices and the effect of the crisis on the Bank of England:

Synopsis Of Crisis Of 1824

The country soon recovered from the effects of this crisis, and scarcely ten years had elapsed before the mania for speculation was again rife.