400 Jones—Relation of Economic Crises to Legislation. 
contraction of notes, could not fail to seriously affect trade. 
The disturbance thus caused, or arising from any other rea¬ 
son whatsoever, displayed itself most quickly, not in a de¬ 
preciation of notes, but in the amount of credit in use which 
supplemented, and in part dispensed with, the need either of 
gold or notes. When any considerable part of this credit, there¬ 
fore, was destroyed, the demand came, not for gold alone, be it 
observed, but for gold or notes. By the provisions of the act, 
however, notes could only be issued, in 1847, (above the sum of 
£14,000,000), in exchange for gold. For all the securities, coin, 
and bullion turned over by the Banking to the Issue Department; 
the former had received only £8,175,025 in notes, the remainder 
being already in circulation. 
When, therefore, in 1847, the demand came for accommodation 
at the bank, the stock of notes was speedily depleted. And, in 
addition, yet another thing happened that had not been con¬ 
templated by the theorists of the “currency” school; the drain 
transferred itself to the gold in the Banking Department with¬ 
out bringing in a corresponding amount of notes, which might 
be presented to the Issue Department for coin to replenish 
the gold balance. This was done in the most natural way 
by a presentation of checks calling for deposits. 1 Had the 
bank been free to temporarily increase its note issue this 
call for gold would have been averted, 2 but no notes were to 
be gotten, even to meet the most temporary demand, without a 
like sacrifice of the already rapidly disappearing gold. 3 This 
condition of things speedily became intolerable. The discount 
was raised to practically prohibitive rates. Mr. Tooke had pre¬ 
dicted that under the undisturbed working of the act, discount 
might rise as high as ^0 per cent. 4 What had been foreseen 
took place; the ministry suspended the act, or rather took the 
responsibility of the bank’s disobeying it. The effect of this 
1 Macleod “Banking,” Vol. II., pp. 342-313. 
2 In 1825, upon the issue of notes, the gold immediately flowed back 
into the vaults of the bank, showing that what was wanted was a me¬ 
dium of exchange in which everyone could trust. Baron Ashburton, 
“The Financial and Commercial Crises Considered,” pp. 11-13. 
8 Cf. J. S. Mill in “Westminster Rev.” June, 1844, p. 596. 
4 Tooke, Vol. II., ch. IV., pp. 179-181. 
