It would be interesting if we could judge of Professor Jevons' opinion on the state of banking and commerce at a recent period, when there was an abundance of corn at a very low price concurrent with a certain stagnation in trade.

It is beneficial to the community that banks which lend money to unsound borrowers and also foster undue speculation should fail, but unfortunately, on the other hand, many good institutions suffer in consequence of a loss of credit. The cause of these disasters to banking and commerce is principally due to excessive speculation, which results in a crisis or panic.

Whenever we get in this country a rapid accumulation of capital, it is usually accompanied by a great demand for investments, and this sometimes leads to speculative enterprises. For example, capital is expended say in making railways, digging mines, or constructing docks, and would not be reproduced for a long period of years. In order to carry out such enterprises, loans are contracted at banking institutions, and when the time for repayment arrives the borrowers are unable to meet their liabilities. If capital has been sunk in the manner already indicated there is no great accumulation of it in banks, and consequently the bankers' power to lend is diminished. When merchants cannot obtain assistance in order to meet losses or calls on new undertakings they begin to lose confidence in each other, and then we get the culminating point of a crisis, viz., a panic, when suspicion rests upon every one. At such times depositors in banks may demand repayment of their capital, and thus banks are suddenly called upon to meet an additional strain upon their resources.

It is questionable whether it is desirable for banks to largely encourage the system of deposit accounts, because when a feeling of distrust exists in the money market the depositor is the first to demand his money. This was clearly shown in the recent Australian bank crisis. It was also formerly considered by private bankers that it was not the duty of a banker to find an investment for depositors' money. Even at the present time, some banks refuse to take deposits except from their customers.

If bankers have lent money to persons for the purpose of speculation, then they may possibly find themselves in possession of a large quantity of worthless securities which are unmarketable. On the other hand, if they have advanced money on good securities which are saleable, they stand a much better chance of surviving the crisis. At these critical periods the people refuse to see that gold, notes, banks, etc., are mere machinery, and that the crisis is quite distinct from such questions.

It will be important to notice the position and action of the Bank of England during commercial crises, because the returns of that institution give us a good record as to the course of events in the money market. The Bank has been called upon at such times to exercise its great power in order to restore confidence and also to allay the panic which generally occurs. When a withdrawal of deposits from other banks has taken place, those of the Bank of England have generally increased, showing that at such times confidence in the Bank remains.

We will now consider these crises in chronological order.

The first run upon bankers took place when the Dutch sailed up the Thames in 1667. The South Sea Company, which was formed in 1711 for the purpose of trading in the South Seas, was for a time a rival of the Bank of England; and when we consider that the latter institution was in difficulties in the years 1704 and 1709, we can imagine that such was the case.

The South Sea Company, by means of advertisements representing enormous advantages, managed to get the price of its stock raised from £290 on 7th April, 1721, to £890 on the 2nd June, but it fell rapidly and was quoted at £400 on 2nd September. Many of the goldsmiths and bankers had advanced money upon South Sea stock, and when the price of the stock rapidly fell, a run upon the banks occurred. Many stopped payment, and some of the bankers absconded. There was also a run upon the Bank of England, but by a clever scheme it was stopped.

The success of the Pretender in Scotland in 1745 caused a disturbance of credit, when the notes of the Bank of England fell to 10 per cent, discount.

The year 1763 was remarkable as being the first of a series of commercial crises caused by a too great expansion of credit. A large number of failures amongst the merchants of Hamburg affected those trading with that place, and in order to stop the panic the Bank of England made advances to the extent of £1,000,000.

The commercial speculations of 1772 created another panic; this was exemplified by the number of bankruptcies, which amounted to 525. The failure of Messrs. Heale & Co., bankers in Threadneedle Street, intensified the panic, and consequently the Bank of England's aid was necessary to restore confidence.

After the close of the American War in 1782, a large expansion of our foreign trade occurred. Speculation became active, and this combined with an injudicious issue of notes by the Bank caused a drain of specie, which almost caused it to suspend cash payments. It is stated that the country bankers supported all kinds of wild projects by means of the issue of bank notes, and when called upon to pay them were unable to do so.

In the panic of 1793 no less than 100 out of a total number of 400 country banks stopped payment, and the remainder were in a critical condition. The commercial crises were attributed to the monopoly of the Bank of England, combined with its restricted issue of notes at times when a stringency of the money market existed. The fact of a previous destruction of wealth, combined with a depreciation in the value of commodities, was overlooked. No doubt the private bankers supported speculation by the issue of notes, but this was not of itself sufficient to cause a crisis.