It may be mentioned that prior to 1765 it had been customary to issue notes under £1 in Scotland, but in that year they were forbidden.

The following figures, extracted from the 'Appendix to the Report on the Bank Charter' 1832, will give an idea of the wonderful effect the suspension of cash payments and the issue of small notes combined had upon the Bank circulation; unfortunately as the country banks made no returns, it is not possible to say to what extent they were influenced.

* Notes above £5 and po3t bills, + Notes under £5.

By this it will be seen that whilst the circulation, or profitable part of the Bank's business, rapidly expanded, the bullion, or unprofitable part of its resources, was usually lower than when the notes were convertible.

Although in the absence of returns from the country banks the amount of their circulation during the period of suspension cannot even be guessed at, there can be no doubt that it must have been largely inflated when the increase in the number of banks is noted. In 1797 country banks numbered 270, in 1810, 721, and in 1813 they had risen to 940.

It will hardly be worth while to follow the course of the paper currency through the vicissitudes of the next few years, or to trace the gradual depreciation, first of Bank of Ireland, and later of Bank of England notes, a depreciation which was earnestly denied by the directors of both banks, they contending that gold had risen instead of the note having fallen in value. These and other controversies of the day may as well be passed over in silence as points on which there is now no difference of opinion. Mr. Macleod* gives a table showing the market price of bullion, and consequent real value of the bank note at various dates during the suspension, by which it appears that down to 1804 the depreciation was but nominal, after which it became greater year by year, until on the 6th August, 1818, the market price of bullion was £5 10s. per ounce, making the £1 note equivalent to 14s. 2d. in coin; this was the extreme point of depreciation.

The Peace of Amiens, concluded on the 27th March, 1802, compelled the Bank to be ready to resume cash payments in a month from that date; but Mr. Addington, then Prime Minister and Chancellor of the Exchequer, brought in, and persuaded Parliament to pass, a bill prolonging the restriction until the 1st March, 1803. Then it was again continued until the following session, by which time war having again broken out, the resumption was postponed until six months after the conclusion of a treaty of peace. This period expired in March, 1815, but again war intervened after the escape of Napoleon from Elba, so there was a further postponement to July, 1816, then to 1818, and finally by the provisions of Peel's Currency Bill a gradual resumption took place.

This celebrated Act, passed in 1819, continued the restriction acts until the 1st of May, 1823, when they were finally to cease. Between the 1st of February and the 1st of October, 1820, the Bank was bound to cash its notes in bullion, at the rate of £4 Is. per ounce; from the 1st of October, 1820, to the 1st of May, 1821, at £3 19s. 6d. per ounce; and from the last date to the 1st of May, 1823, at £3 17s. 10 1/2d. per ounce; in each case the notes presented

* Macleod, ' On Banking,' vol. ii, p. 78.

wore to be of the value of 60 ounces of gold. The date for the absolute resumption was afterwards expedited to the 1st of May, 1821, when it actually took place after twenty-four years of inconvertibility. It may be mentioned that by this time the Government had repaid £10,000,000 of the money borrowed of the Bank.

Cash payment having now been resumed, the country bank notes for £1 and £2 were by the existing Acts of Parliament doomed to extinction within two years. But in 1822 a fall in prices, which had been in progress for some time, and commenced even before the passing of the Currency Bill, became very serious and excited great alarm. The opponents of the Currency Bill attributed the fall in prices to the contraction of the currency, though it now appears that there is great reason to doubt whether any contraction did actually take place; however, they had sufficient power to obtain a respite for the small notes until 1833.

An attempt was at the same time made to induce the Bank of England to consent to the establishment of joint-stock banks beyond a radius of sixty-five miles from London, as a means of improving the quality of the country note issues, but although an extension of the charter for ten years was offered as a consideration for the concession, the negociation fell through.

The country banks then resumed the issue of small notes, prices rose rapidly, and speculation was engendered to a vast extent, taking principally the form of subscription to joint-stock companies, both at home and abroad. All went on well and apparently prosperously until the latter end of 1825, when the amount of bullion in the Bank began to diminish, and the Directors in consequence restricted the discount accommodation to the public. Then came the change; the companies formed during the speculative mania found their shares rapidly falling in the market; country banks failed by the dozen, and several influential London houses also. A fearful panic set in and ruin stared every one in the face.

In this crisis there was a general rush to the Bank of England for assistance, and nobly was the call responded to. Mr. Harman, a Director, in his examination by the committee of secrecy in 1832, says:* "We lent it (money) by every possible means, and in modes that we never had adopted before; we took in stock as security, we purchased exchequer bills, we advanced upon exchequer bills, we not only discounted outright, but we made advances on the deposit of bills of exchange to an immense amount; in short, by every possible means consistent with the safety of the Bank. And we were not upon some occasions over nice; seeing the dreadful state in which the public were, we rendered every assistance in our power."