212 LARGE FARMS AND CAPITALIST FARMERS 



outflow of gold, restricted their issue of notes. A panic followed. 

 Out of 350 country banks in England and Wales, more than 100 

 stopped payment ; their promises to pay were repudiated ; and 

 their paper was destroyed at the expense of the holder. The ruin 

 and the loss of confidence were widespread ; those who escaped 

 the crash hoarded their money instead of making investments in 

 mercantile undertakings. But the destruction of so much paper 

 temporarily restored the proportion between the gold in the country 

 and the paper by which it was represented. 



In 1797 a second crisis occurred. Alarmed at a prospect of 

 invasion, country depositors crowded to withdraw deposits and 

 realise their property. There were runs on the country banks, and 

 such heavy demands for their support were made on the Bank of 

 England that, on Saturday, February 25, 1797, the stock of coin 

 and bullion had fallen to under 1,300,000, with every prospect of 

 a renewal and an increase of the run on the following Monday. On 

 Sunday, February 26, an Order of Council suspended payments in 

 cash until Parliament could consider the situation. The merchants 

 of London came to the rescue of the bank. They guaranteed the 

 payment of its notes in gold ; the national credit was saved, and 

 the worst of the threatened crisis was averted. But the failures 

 of country banks were again numerous. Once more the same 

 process was repeated. Paper money in large quantities was 

 destroyed at the cost of its holders, and the balance between the 

 promise and the ability to pay was again readjusted. The experi- 

 ence was not lost on agriculturists, who found that their land was 

 not only the most remunerative but the safest investment. 



Under the Bank Restriction Act of 1797, the Bank of England 

 suspended payment in coin. In other words a paper currency was 

 created which was not convertible into gold.' The Act was origin- 

 ally a temporary expedient. But it was not till 1821 that the 

 bank completely resumed payment in specie. No doubt the 

 effect of the Act was to aggravate the tendency of prices to rise. 

 Yet the measure was probably justified by the exceptional circum- 

 stances of the war and of trade. It supplied the Government with 

 gold for the expenses of our own expeditionary forces, as well as 

 for the payment of subsidies to our allies. It also enabled the 

 country to carry on the one-sided system of trade to which we 

 were gradually reduced by the Continental blockade. Our exports 

 of manufactured goods were excluded from European ports. Con- 



