South America, and still more insane loans, amounting to £50,000,000 sterling, to the "healthy young republics," which at that period began their career of selfishness, rapacity, and insolvency.

But in 1836 and 1837, none of these causes were in operation; none corresponding or similar to them had begun to come into action. The world, with the exception of a desperate civil contest in the Peninsular mountains, was undisturbed; continued tranquillity for two-and-twenty years had sufficiently healed the wounds consequent on the transition from war to peace; human industry and intelligence had worked out and explored the durable and safe channels of pacific enterprise. The delusion of the South American republics, like all other phantasmagoria, had passed away; the extravagance of the Rio del Monte shares was forgotten; the mines of Peru and Mexico, ruined by the revolutionary convulsions of twenty years, were set at rest for a half century to come; the currency of England was established on what was deemed a comparatively safe foundation; and after a world of anxiety and suffering, which, by the long-continued distress it occasioned, had brought on organic reforms, and led the nation to the edge of perdition, the perilous change from a paper to a metallic currency had been gone through. Prices had been accommodated to the lowered standard of value; the debts which had thereby acquired an overwhelming magnitude had crushed the debtors, and hosts of insolvent traders, after passing through the Gazette, had been forgotten, or were quietly laid in their graves. The Bill of 1834, declaring Bank of England notes a legal tender everywhere but at the Bank of England, had, in a great degree, obviated the effects, in internal transactions at least, of that prodigious change. Political contention had lost much of its vehemence, and consequent dangerous character; the long depression springing from the general insecurity which followed the passing of the Reform Bill had passed away; commerce and manufactures had revived to an extraordinary degree; the constitution, however violently agitated by preceding changes, had acquired a sort of temporary equilibrium between the increased power of the Commons on the one hand, and the increased vigour and importance of the Peers

on the other; and Britain exhibited the extraordinary and unparalleled spectacle to the world of a vast revolutionary change having been effected, and yet, within a few years, every branch of industry reviving and flourishing as under the shelter of the firmest and most durable constitutional bulwarks.

In truth, the revival of industry and commercial enterprise had been so gradual; it was based on so much solid capital; extended into so many and such safe channels; spread so equally over the world; and was so generally free of the dangerous element of rash speculation, that it was impossible to persuade the great bulk of the mercantile world that the crisis was coming on; and thence, in a great degree, the wide extent and durable character of the catastrophe. The author of this Essay repeatedly warned some of the greatest merchants in Britain, during the winter of 1835-6, and the spring of 1836-when prosperity was so universal, orders so pressing, and prices so high-that a great commercial crisis was approaching, which would equal that of 1825 in severity, and exceed it in duration; but he found hardly any one who could give credit to the gloomy foreboding. It was constantly answered, that the circumstances were essentially different; that the dangerous features of 1825 were happily awanting; that vast sums were no longer sent out of the country in visionary speculations or absurd loans; that prices were not forced up by extravagant speculation; but the orders were at once solid and rational, various and satisfactory-coming in all from different quarters for ready money, or bills at short dates, and evidently based on the firm foundation of increased opulence among the consumers in every part of the world. Inspired with confidence by these flattering appearances, the great bulk of the mercantile and manufacturing world went on, through the whole course of 1835 and the first six months of 1836, purchasing, manufacturing, and speculating with extraordinary activity; and such was the continued and rapid rise of prices during all that period, that almost all these undertakings proved advantageous, and the amount of profits made in every department of business for the whole time was probably unparalleled in the whole annals of the world.

To those, however, who consider the inevitable effect of

considerable and rapid monetary changes upon the course of the precious metals throughout the world, it must appear evident that any such rise of prices, consequent on an extraordinary and unnatural amount of mercantile activity, is fraught with inevitable danger; and that, if it continues for a certain time, and raises prices to a certain height, it must terminate in disaster. Nothing preserves its equilibrium so completely as gold and silver; by no human. means can their value be kept different for any length of time in one country from what they are in others. When prices have risen to any considerable degree in any commercial state, from general confidence and prosperity, the precious metals naturally find their way into other states, where they can be exchanged for a greater quantity of commodities-that is, find a more profitable investment. There is, therefore, a foundation laid in every considerable and sudden rise of prices in one commercial state for a certain and probably rapid reaction; because the precious metals will rapidly find their way out of it, and, exchanges in consequence becoming unfavourable, the banks, which are the great emporiums of metallic wealth, will feel themselves under the necessity, in their own defence, of contracting their issues; and a stoppage will in consequence be given to credit, at the very time when, from the magnitude and universality of speculating, mercantile men, even of the greatest resources, have the most need, in anticipation of their returns, of its assistance.

This effect accordingly took place in this country. Sagacious observers, amidst the general whirl and rise of prices, remarked, through all the spring of 1836, that the exchanges were constantly becoming more unfavourable to this country; and at length they became so to such a degree, and the drain which set in upon the Bank was so violent, that it was evident to every impartial observer that, if measures of defence were not speedily adopted, that great parent establishment, and with it every lesser bank in the empire, must speedily become insolvent. At the same time, it became apparent, from the character and course of mercantile transactions of the parties by whom chiefly this great drain was kept up, and the extraordinary magnitude of their operations, that some new cause had suddenly come into activity on the

other side of the Atlantic, far more powerful in its operation than the mere tendency of the precious metals to flow abroad, in consequence of the change of prices, in quest of a more profitable market than they could find at home. This was especially evident from the quarter to which all the shipments of gold were destined. America was the great centre to which they converged; it seemed as if a vast magnet had suddenly been discovered in that country, invested with the quality of attracting the precious metals from every other part of the world. Now, the ordinary course of mercantile transactions could never account for this direction of the precious metals; for if speculation was rife, and the fever of enterprise ran high in the States of the Union, it ran at least as high in the British Islands and if prices had risen to an extraordinary degree there, they had followed with equal steps on this side of the Atlantic.

Whatever the cause may have been, however, it was evident that the root of the evil lay in this drain of the precious metals to the United States; and to such a length had it gone, and so gigantic were the transactions of the great houses engaged in this traffic, that the affair assumed a national aspect it was a struggle for life or death between the two countries. The ruling party in America openly gave out that they had got the gold, and they would hold it; that the Bank of England would be brought down to its marrow-bones; and that, in the commercial confusion and ruin which must ensue in the British Islands, a revolution was inevitable, and the greatness of England would be at once destroyed. The drain upon the Bank, and the exportation of the precious metals to the United States, had assumed a systematic, gigantic form, to which there is nothing to be found comparable in the whole previous history of mercantile enterprise. For obvious reasons, we do not give the names of the parties engaged in these enormous transactions; to the mercantile world they are well known; to ordinary readers they could serve only to gratify an idle, perhaps hurtful, curiosity. Suffice it to say, that four or five houses, of almost boundless resources and firstrate respectability, were engaged in transactions to the amount of above twenty millions sterling; the general result

of which, amidst a variety of complicated bill transactions, was to import cotton to an enormous extent into this coutry; and to export gold, both in the form of bullion and sovereigns, to a similar amount to the United States. The bills of one of these houses, which fell due in June last, are understood to have amounted to £1,200,000. The bills of these great commercial establishments were almost all discounted or made payable at the Bank of England; and when payment of their contents was received, gold or sovereigns were invariably demanded, and could not, of course, be refused; the moment they were drawn out of the Bank, they were shipped for New Orleans or New York. Thus the drain upon that great fountain of wealth became unparalleled, and in the highest degree alarming; and now that the danger has in a great measure passed, and this perilous traffic has entirely ceased, it is not going too far to assert, that nothing but the most consummate prudence, wisdom, and liberality on the part of its directors, could have averted a recurrence to the fatal step of suspending cash payments, and saved the nation from the calamity which America has undergone, a general public and private bankruptcy.

In these circumstances of danger and difficulty, the Bank had but one course to adopt ; and to the early adoption and steady perseverance in that course the salvation of the mercantile world, from even greater calamities than have actually fallen upon it, is entirely to be ascribed. This was, in mercantile phrase, to put on the screw; to limit their own issues; contract the currency of the country; and bring prices and speculation back to that healthful state when the present alarming drain might no longer endanger the existence of every mercantile establishment in the country. They began to close in June 1836, and resolutely threw out the paper of the greatest and most respectable mercantile firms of the Island; from no distrust of the solidity of these establishments, but from a determination to put an end to the withering traffic which was gradually sucking out of the country the whole metallic currency which it contained. The houses engaged in the North American trade were, of course, the first to suffer, because they were those directly engaged in this perilous course of dealing; but the