These same facts abundantly prove that gold is not the instrument with which panics are healed, and that no argument can be derived even from the time of great alarm for the maintenance of a huge reserve at all times in the Bank of England. But facts and accurate reasoning count for little in the City. "The public," cries Mr Bagehot, "has faith in the Bank contrary to experience and evidence; the English world believes that the Bank of England will not, almost that it cannot fail." What evidence? What experience? The Bank does not fail; that the public sees and accounts evidence. The object of a great reserve, its advocates proclaim, is to inspire confidence in the public. But the public has confidence already, and is not deceived. It had confidence in 1825, though there was no reserve. The public does not require a fine theory about a large reserve; it possesses evidence, fact; it finds that the Bank has reserve in abundance. That reserve has proved sufficient up to this day; it has done its work. It carried the Bank through 1825, 1847, 1857, and 1866; and unless England is invaded, are worse crises than these to be taken as the basis of calculation? A reserve which weathers such storms is indisputably enough. If the Bank had had more gold in those years, could it have lent more to traders, and mitigated the panic? It 1825 all it needed was a larger supply of printed paper. In 1847 and 1866 it had all the gold which the Suspensions set free and could not lend it. In 1857 it lent 800,000 of such gold, but there was a large stock still to spare, unlent, in the liberated Issue Department.

We are thus brought to the ordinary doctrine of the City, that when gold ebbs away discount is bound to be dear, when it flows into the Bank the rate is necessarily easier. Hence the daily movements of gold are carefully recorded: they are held to explain the banking state of the day, and to supply the means of estimating the immediate future of the money market. Accordingly the exchanges are watched with interest; a favourable exchange announces ease; an adverse exchange calls for counter action by raising the rate of discount, and thus tempting foreign money, as it is called, to flow into the country. Great stress is laid on this self-acting contrivance; the writers who expounded its wonder-working power are rewarded with fame. The Bank is pronounced strong when its reserve increases, and this reserve is measured by the proportion which its gold bears to the Bank's liabilities. The whole mercantile world thinks it natural that if half-a-million has left the Bank's cellar, every trader who has a bill to discount should be made to pay a heavier charge, and when half-a-million has come in, the Bank-rate should be lowered. The absurdity of such an artificial rule becomes transparent, in the presence of the fact that the Bank in crises is not saved, nor enabled to lend by gold, nay, that confidence in its stability in such seasons is not affected by the quantity of its bullion.

The marvel is that traders will not learn the nature of banking, and thus save themselves from being victimized. The great events of panics, when they come on, lie outside of the state of the gold. And this being so, what must be thought of a rule which taxes traders according as the metallic treasure is a little larger or a little smaller- a treasure which must be kept locked up in vaults, which does not add a single shilling to the lending power of the Bank, which cannot be, and is not lent, because the public refuses to have or keep this gold unless ready-money transactions have increased. If in the summer travelling expands, and harvest labourers require sovereigns - gold which is sure to return - up ought to mount the Bank-rate, to the profit of the Bank, and to the injury of the whole trade of the kingdom. If the harvest threatens to be bad, and purchases of corn are being made abroad, an export of gold naturally takes place, but the loss of that gold is bewailed in the City; it was bound to remain locked up in the Bank's vault. The object of a reserve, according to the City, is not to be used in the hour of difficulty, but to remain ever buried. The loss to the capital of the nation by the destruction of its harvest, and the necessity of paying with its products for its food twice over does not excite a moment's thought; the gold, the lost gold, the gold which has escaped from its prison, is in every one's mind, and trade must be taxed to recover the fugitive. Is this the language or the thinking of sensible men? Have these persons the faintest conception of what currency is? The City boasts to be a body of practical men - do they ever look at stern, truthful figures? The last pressure of very high discount in England occurred in the autumn of 1873; what do we find in that year? On October 17 a rate of 6 per cent, with a reserve of 35 1/4 of the liabilities. Three weeks later the same reserve, but a rate 2 per cent, higher. On November 21 the rate rises from 8 to 9 per cent., but in the teeth of the doctrine of the City, the reserve goes up from 34 1/2 to 41 1/2. On November 28 we meet with a reserve of 46 1/8, and discount at 6 per cent. But what says the return of January 1874? The same reserve - 46 ratio of reserve to liabilities; but the rate of discount, what is it? 3 1/2 per cent. Is it not humiliating to hear men exclaim, day after day, that the money market is easier or harder, because some half-million of gold has come in or gone away, in the presence of figures which show such language to be pure nonsense?

What is the harm, the specific harm, of some three or four millions of gold thus departing to foreign countries for food? The Bank is weaker; but what is the meaning of this word, weak? That the Bank is in danger of not meeting its engagements, of coming to a stoppage? The supposition is too ridiculous to deserve notice. The 33 millions of 1866 crush out this absurdity. A bank is strong or weak according as its banking is good or bad, according as its resources derived from the sale of goods are large or small, and those to whom it has lent have preserved or destroyed the commodities which they purchased with the Bank's loans. What in the world has the escape of three or four millions to America to fetch food for a starving people to do with this banking? There are no bad debts involved in the departure of the gold, no chance of the Bank or the whole banking community losing one penny by the operation. When the foreigners in turn begin to buy commodities with this gold, to replace the corn they sent away, the gold is certain to return. What shadow of a pretext is there in all this to raise the Bank-rate because the gold has left the cellar and set out on its travels?