on by credits obtained in England. Formerly, the export of British goods to America was carried on in the usual way, by the English houses charged with the orders, transmitting the invoices and bills of lading to their correspondents in the United States, and receiving bills on Europe in return. And in the same way, vessels destined for China or India, took with them either specie, or articles, whether of American growth or British manufacture, suitable to the demands of those markets. A very different method of management would appear to have grown up in the course of the last few years. The great importing houses in America have adopted the plan of establishing agents of their own in the principal foreign ports or districts, whether in Europe or the East with which they are connected. These agents are furnished with credits upon some of the principal houses concerned in the American trade, which allow them to draw for the amount of the same by bills for four months. In the first instance, the houses granting the credits were accustomed to require as a security in return, the invoices or bills of lading of the shipments made, and to remit them to their correspondents in America. Latterly, however, this precaution has fallen into disuse. It was thought unnecessary in the instance of some great houses whose credit could not be questioned; and once dispensed with in respect to these, the like indulgence was gradually required by others who had less claim to it and in the spirit of confidence and competition which is the effect as well as cause of over-trading, it was found difficult to refuse it. In this way many

American houses were carrying on commercial operations to a very large extent entirely upon credits obtained in England, for which they had given no collateral security whatever. The precarious nature of such a system in its inevitable tendency to abuse, is obvious. In itself, however, it seemed the more plausible from the circumstance that the bills drawn by the American agents and accepted by the English houses were at four months. Consequently as the goods purchased by them here were commonly sent to America within one month, and sold before the lapse of two, there was ample time, supposing them to be founded on real transactions, for the remission of funds to England to meet the acceptance before it became due. It was, perhaps, principally from this circumstance, that bills of this kind had come to obtain particular favour in the English money market.

We need not stop to point out the evident abuses to which such a system of credit was liable. One, however, should be mentioned, which it is believed was of no unusual resort. As the bills drawn were for four months, it was easy for the less scrupulous American houses to pay off one credit before it became due, by obtaining a similar one on another house; and when once in the market, it was difficult to distinguish the paper thus obtained from that which was issued upon more regular and legitimate transactions. The ramifications of this system, as far as English houses were concerned, though they had struck deep had apparently not extended themselves far. The business of making these advances on American ac count, is said to have been almost

entirely confined to seven houses; six in London and one at Liverpool; and it has been stated, that the amount of the acceptances of these houses have, at times within the last two years, amounted to no less a sum than fifteen or sixteen millions sterling; while the actual capital in their possession to meet this enormous amount of engagements has been estimated at less than one-sixth of the whole.

That a system thus factitious should terminate in disaster was inevitable; and the catastrophe was likely to be accelerated by the reaction which was already beginning to take place from the spirit of speculation and over-trading which had simultaneously been indulged in England. We have already stated the heavy drain for bullion that began to set in upon the Bank in April 1836, in consequence of the derangement that had taken place in the commercial transactions of this country. In order to check the efflux from her own coffers, the Bank, as we have seen was obliged to raise the interest charged on her discounts above the market rate; a circumstance that compelled her to lend a portion of her funds to the money dealers, who employed them in the discount of good bills. It happened that the paper so purchased consisted, in a great degree, of American bills drawn in the manner we have already described; and it was then, that the Bank directors became first acquainted with the enormous amount of engagements of this kind which were afloat in the market.

The fact naturally alarmed the Bank, and the step which they took with a view to check the further progress of the system, may be said to have given the first shock to its

existence. The directors, it seems, sent instructions to the agent of their establishment at Liverpool, to reject the paper of certain American houses. By some unaccountable indiscretion in the parties concerned, the order became known; and the immediate consequence was the general discredit of the houses principally concerned in these transactions. Notwithstanding, however, this untoward circumstance, the houses in question still continued to carry on their operations; and it has been stated, that at the commencement of the present year, the outstanding acceptances of the three leading establishments of Wildes, Wiggins, and Wilson, amounted to no less a sum than the enormous one of five millions and a half sterling. At length, however, the system came to a crisis, and about the beginning of March, the three houses we have named, found it necessary to suspend their payments. The fact, as may be supposed, occasioned the greatest alarm in the commercial world. The engagements of the other American houses, amounted to a sum not less than that which we have specified as incurred by the three already mentioned; the whole has been estimated at little less than twelve millions sterling. A failure to an amount like this might have produced consequences of irreparable injury to commercial credit in all its branches, and under these circumstances, the Bank considered it an act of public duty, to come forward to their assistance. This was done, and so far effectually, that the three London houses before spoken of, were enabled to continue their operations until they had greatly diminished the amount

of their engagements. But a shock was not the less given to the whole system of money transactions in America, which combined with the difficulties that already

The peculiar importance attaching to the operations of the Bank of England in the present year, induces us to subjoin the following remarks on the comparison of her liabilities and assets during that period. The average of the month ending December 12th,as compared with the average of the month, ending the 10th of January, shows an increase in the circulation of 129,0007., a decrease in the deposits of 6,075,000l., and an increase in the stock of bullion of 1,917,000. Whence, it appears, that the decrease inthe liabilities is 5,946,000/. and this represents the decrease in the total quantity of money in the month ending the 12th December, as compared with the month ending the 10th of January, in so far as regards the administration of the currency by the Bank of England.

The variations in the stock of bullion

seem to have taken place in the following manner and proportions:

In the month ending the
4th of April, as compared
with the month, ending
the 10th of January, there
is an increase of
In the month ending the
27th of June, as compared
with the month ending
the 4th of April, there
is an increase of
In the month ending the
19th of September, as
compared with the month
ending the 27th of June,

£

69,000

981,000

there is an increase of 1,647,000 And in the month ending the 12th of December, as compared with the month ending the 19th of September, there is an increase of Being a total increase of 4,917,0007. The changes and fluctuations in the circulation will appear from the following statement:

....

In the month ending the

2,220,000

4th of April, as compared

with the month, ending

the 10th of January, there is an increase of

£

.18,486,500 .10,726,000

5,824,000

Upon this return, there is further to be observed, that there being a decrease of 1,179,0007. in the liabilities in the month, ending the 12th of December, as compared with the month ending the 19th of September; while upon the same compare there is an increase of 2,220,000l. in the stock of bullion; it is visible, that in the intervening period, the Bank of England must have cancelled paper money to the amount of 3,399,0007., and this by means of a diminution of its securities to the same extent.

The same remark applies to the yearly comparison. The decrease in the liabilities in the month ending the 12th December, as compared with the month ending the 10th of January, is 5,946,000, while upon the same compare there is an increase in the stock of bullion of 4,917,0007., and therefore it is evident, that in the intervening period, the Bank must have cancelled paper moneyto the amountof 10,863,0007. and that its securities have been diminished to the same extent.