as well as public companies, who do a larger business of this description than the Bank of England. In ordinary seasons the outside market is willing to accommodate its customers on slightly lower terms; and, in discounting bills, those who do the business at the lowest figure are sure to have the preference.

The immediate wants of business are, perhaps, to be found most distinctly indicated among the temporary advances made by the Bank of England. No branch of business of the Bank appears to undergo greater fluctuations than this one, and in none are the influences of periods of pressure more distinctly marked. The amount for 1872 was exactly three times as much as that in 1844. The business done in 1852 was little more than a sixth part of that done twenty years later. The steady growth of this branch of the business is very remarkable during the last ten years of which the particulars can be given. The annual averages will be found in col. 25, of Table I., and the proportion of each year to the amount in 1844 is given in col. 26. The fluctuations from week to week are far greater than those between the yearly averages.

In 1866 the highest amount was about 8 millions, the lowest about 1 million.

The extension of the scale on which business is now done is curiously marked by the increase in these fluctuations during recent years. The requirements of occasional borrowers were actually greater, and the yearly averages higher, in the years 1870 and 1872, than even in the panic year of 1866.

It is much to be regretted that the information as to the amounts of bills discounted, and of the temporary advances, which used to be given in the returns up to the close of 1875 is now no longer supplied.

Recently, in September, 1878, the Bank put in force a rule requiring a margin of 5 per cent. on the securities guaranteed by the Indian Government pledged with it. This rule is, however, one of long standing with the Bank. It is always enforced with regard to advances on Consols, and if it had not been invariably required hitherto in the case of securities of the Indian Government, this probably was because these securities have generally been at a premium. Thus a margin was provided. But when the securities stood at par, or a small discount, a margin is needed to cover the advances fully. The rate at which these advances have been made has been sometimes high-two per cent. above the rates charged for discounting bills. But what the Bank probably has said to those requiring these advances has been something like this: "We do not think your demand is one of a mercantile character; it is more like a Stock Exchange demand for short advances than a demand for legitimate trade purposes. If you bring us

first-rate bills, we will discount them at our rate for bills, but we cannot place this demand of yours on the same footing."

After all, the Bank of England is, with respect to its private business, exactly in the same position as any other bank. It has only a certain definite sum which it can lend, and this it must husband, and not make advances which do not certainly return of themselves into money as those made on good bills do-on the same terms as advances of the class we have been speaking of. The resources of the Bank are, doubtless, very large; but if it makes over-large advances on securities of a fixed character, it will experience the inconvenience of doing this just as any other bank would do. It cannot be said that the Bank is following a course otherwise than for the public interest in taking the line which is mentioned above. Whether the Bank may have given too great facilities for advances of this description in times past is another question; but in requiring a margin on the security for advances it is within the strict line of banking.

CHAPTER XIII.

NOTE CIRCULATION OF THE BANK OF ENGLAND AND THE BULLION HELD BY THE BANK.

THE amount of notes issued by the Bank now comes under consideration,

Annual averages of the note circulation will be found in cols. 27, 29, and 31 of Table I., which give the country circulation, the metropolitan circulation, and the amount of both these united. The extension of this portion of the business of the Bank was very small down to the year 1864. The increase up to that date was only about 4 per cent., which had advanced to 26 per cent. in 1872. The note circulation is issued partly in London, partly at the provincial branches of the Bank. The circulation has been divided under these two heads down to the close of 1875. The returns accessible do not continue this division to a later date. Up to 1875 the increase in the circulation, as will be seen by col. 27, was rather in the country than in the London circulation, which will be found in col. 29. The provincial circulation formed in 1873 and 1874 about 39 per cent. of the total circulation of the Bank, while in 1844 it formed only 32 per cent. of it. As the whole note circulation of England and Wales, including the notes issued by the private and joint stock banks, was £28,420,000 in 1844, £32,500,000 in 1877, and £32,400,000 in 1878, so the Bank of England notes issued at the country branches have clearly taken the place of lapsed local note issues, and this accounts for their greater increase than that of the metropolitan circulation. The total increase is, however, small; smaller than the augmentation in any other portion of the business of the Bank of England, which these returns enable us to trace, and far smaller than the increase in the

metallic circulation of the country, which was estimated as being about 105 millions in 1872.* Mr. Newmarch estimated the gold circulation as 36 millions in 1844†. While, therefore, there has been an increase in the amount of coin in circulation of something like 70 millions, the total note circulation of England and Wales was in 1878 only 4 millions larger than it was in 1844. It is also quite possible that this increase, small as it is, may prove to be only temporary, as fluctuations of from 1 million to 2 millions are not uncommon between the average of one year and another in the note circulation, and the note circulation of the Bank of England was smaller during the earlier months of the year 1878 than during the corresponding months of 1877.

The following table shows the amounts and the proportions of the different denominations of notes composing the circulation of the Bank of England for the years 1856-1876, the earliest and the latest dates available. The large notes, it will be seen, form now a smaller part of the whole circulation than they did twenty years since. The notes from £20 to £100 have remained comparatively stationary; the greater part of the increase is among the smaller notes, especially among those for £5. These, doubtless, as mentioned previously, in a great degree take the place of the lapsed English country issues.

To complete this analysis, the annual average of bullion held by the Bank has been included. This average will be found in col. 33 Table I.; the columns marked 34, 35, 36, and 37, show the proportions which the bullion has borne to the liabilities on deposits and Bank post bills, to the note circulation, to the total liabilities under these two heads combined, and to the amount held in 1844. On the whole, the proportion of the bullion to the liabilities has been larger recently than during the earlier years over which this inquiry extends.

The Bank of England has sometimes held a consider

* Estimate based on Professor Jevons's statement, Statistical Society's Journal, 1868, p. 446, and account of "Coinage of Gold for Twenty-Four Years," Economist, 29th June, 1872.

Tooke and Newmarch's "History of Prices," vol. vi., p. 701.

able amount of silver bullion. The Bank is empowered by the 3rd clause of the Act of 1844 to retain in the Issue Department an amount of silver bullion not exceeding one-fourth part of the gold coin and bullion held. The Bank has never held quite so large a proportion as this. The largest amount which it has held was £2,727,000 on October 3, 1846, when the gold bullion was quoted at £12,632,000. For the years from 1844 to 1847 the silver bullion formed, however, a considerable fraction of the total amount of bullion held, and the annual averages from 1844 to 1853 are given below. On August 20, 1853, the silver bullion ceased to be quoted in the returns of the Bank of England, though the heading and the space for the entry appear weekly in the return. Recently, the question, whether it might not be desirable that the Bank of England should hold silver bullion again, has been discussed in connection with the low quotation for the Indian exchanges. Should such an operation be undertaken by the Bank, it would probably now be under a guarantee from the Government, on whose behalf the business would be carried out. When the Bank Act was passed in 1844, "silver" was far more distinctly "money" throughout Europe than it is at the present time.

TABLE XIV.-ANNUAL AVERAGES OF SILVER BULLION HELD BY THE BANK OF ENGLAND DURING THE YEARS 1844-1853, AND PROPORTION OF THE SAME TO THE GOLD BULLION AND COIN HELD.