The competition for bills had the usual effect of still further lowering the rates, and the Bank of England, in order to participate in the discount business at all, were obliged to follow the market and lower their rate on the 8th July to 3 per cent., and still further on the 29th July and 12th August to 2 1/2 and 2 per cent. respectively. The lowering of the Bank rate was only a sign of the superabundance of money, and after all it did not help them to any particular share in such small volume of discount business as was being done.

At this time, also, a large number of foreign States and limited companies were in very bad odour, and investors sold out their holdings in them and placed their money with their bankers to await better times. This also aggravated the position of matters. The result of all these combined causes was that money during August and September was a perfect drug in the market, and at times was quite unlendable. The best rate that could be got by bankers for loans, when they could lend at all, for a month, was 1 per cent. The Clearing House return for the middle week of August was ten millions less than the corresponding week of the previous year, thus showing the stagnation of trade and the consequent valuelessness of money.

During October, however, the usual drain of gold to the country, and Scotland, and America, coupled with a somewhat unusual drain to Germany for coinage purposes, and to other parts of the Continent, and to South America, depleted the stock of that metal by three and a half millions, and to that extent relieved the London market. Hence rates for loans and discounts began to improve, and with this improvement credit began to revive, and a final departure was made from the period of extreme monetary ease and chronic distrust which had been lying so long over the banking, financial, and commercial world.

Such is a short history of the year 1875-a year which may be most accurately described as being marked by a series of crises, which, constantly recurring, paralyzed credit from its very beginning, and which reached their climax with the failure of Collie in the month of June, a failure which, coming as the last shock to an already tottering fabric, well-nigh, for a time, swept the very name of "credit" out of existence.

The crisis of 1878 was unlike that of 1875, inasmuch as that of 1875 extended over a prolonged period and had its culminating point at a given time; while that of 1878 was comparatively short, but at the same time sharp and decided.

The intervening years of 1876-7, and the greater part of 1878 passed over without any noteworthy incidents except the political ones of the Russo-Turkish war-which lasted from April, 1877, till March, 1878-and our own troubles in Afghanistan, which came to a head in September, 1878. The troubles on the Continent of course paralyzed trade somewhat and retarded the recovery from the depression which had been existing since 1873. At the same time, considerable progress towards recovery had been made, and the comparative quietude of these years helped materially to increase the chances of a speedy and complete revival. Numerous failures, it is true, took place during this period, but they were chiefly of the weaker class of traders, and arose from contracted business and insufficient profit, and had no important bearing on the monetary world. As the event proved, however, the expectations formed of a trade revival were once more doomed to disappointment by the catastrophes which took place in the autumn of 1878.

At this period occurred the crisis of 1878, an event which had for its initial cause the failure of the City of Glasgow Bank, on the 2nd of October. Although this failure, when it did take place, was not an entire surprise in well-informed circles, it came upon the general public like a thunderbolt, and once more shook the fabric of credit to its very foundations.

We have said that the failure of this bank was not an entire surprise in well-informed quarters, and it may be well to explain, that, particularly in London, it had always been looked upon with some degree of suspicion since its temporary stoppage in 1857. And its credit was in no degree improved when, during the last eight or nine years of its existence, it was suspected that instead of having made a departure from the reckless management which brought it into its former difficulties, it still continued in the same evil courses. The point upon which the bank seemed to lay itself open to remark during that period was the free way in which it used its credit on acceptances. It was noticed that its acceptances under credits issued to Smith, Fleming, and Co., and others, were apparently very much larger than the businesses of these firms would legitimately require; and the soundness of this suspicion has, of course, been since proved by the revelations of the liquidators.

But although there was this suspicion in certain minds thus early, it cannot be said that the bank was in any general discredit till about the beginning of 1878. On the 1st of March, Willis, Percival and Co., bankers in Lombard Street, having lost a large sum of money by a Greek firm, failed, and this circumstance tended to turn the attention of holders of bills to all financial institutions not of the first water, Chief amongst these was the City of Glasgow Bank, whose acceptances, at this time particularly, were being pressed for discount in large quantities upon the London bill market.

It was significant of the discredit into which the bank had fallen at this time that the bill brokers, in discounting its acceptances, generally asked, and readily obtained, an extra quarter or half per cent. over the market rate for other bank bills. This was the beginning of the inevitable end. The distrust henceforth was never for a moment allayed. It rather grew more and more pronounced until the month of September, when it came to a head. The Indian banks being large holders of the acceptances of the City of Glasgow Bank, which had been given under credits in favour of the corresponding houses in India of Smith, Fleming and Co., London, and others, and having found great difficulty in getting rid of such acceptances on the London market, instructed, it is said, their agents in the East to buy no more of that paper. This precipitated the crisis. The authorities of the bank in Glasgow found their credit entirely gone, with the inevitable consequence of a stoppage staring them in the face.