The fall of prices of raw materials, and the still greater fall of the prices of manufactured articles, in consequence of the rapid improvements of machinery, had the effect of greatly extending the consumption both at home and abroad, and there was consequently a considerable extension of both the home and foreign trade, and the revenue was flourishing. But while the fall of prices was in progress, the importers, and the manufacturers, and the mining interests were, in some branches, suffering severely.* And allusion was made, as we have seen, in the King's speech at the opening of parliament in February, 1830, to complaints of distress among the manufacturing classes in some parts of the kingdom. There had, at different times during the fall, been a rally of markets from the influence of opinion that they had seen their lowest. Under the influence of this opinion, the importers and manufacturers were occasionally induced to extend their stocks; but fresh supplies, at a reduced cost, repeatedly disappointed their expectations, and entailed losses upon their previous

Among the branches of business that suffered severely in this interval, was the private East India trade. Early in 1830, a very extensive failure of one of the principal banking and mercantile firms of Calcutta occurred, and was followed at intervals of some months by four or five other great establishments, which had been of long standing, and once possessed of vast wealth. It was computed that the aggregate of the engagements of the houses that failed at Calcutta between 1830 and and 1832, amounted to little less than fifteen millions sterling. In two or three instances their immediate connections in this country were involved and failed also. But as the principal part of the engagements of the Calcutta houses was confined to India, there was not so much of loss or discredit felt here in consequence of those failures, as was to have been apprehended from the enormous scale of their business. A full account of those extraordinary failures, and of the circumstances which led to them, as also much very valuable information respecting the fluctuations in the private East India trade, will be found in the evidence of G. G. de H. Larpent, Esq., before the committee of the House of Commons on manufactures, commerce, and shipping, in 1833.

purchases. The repetition of disappointments naturally abated confidence in the maintenance of markets, and the usual buyers became discouraged from embarking freely, even at the reduced prices, by a feeling of distrust, from having been before mistaken as to the probable sources of supply, and the lowest possible cost of production.

But as a state of rising markets, and eventually a high range of them, in consequence of supplies having for some length of time fallen short of expectation, or of the estimated rate of consumption, is usually followed, first by stagnation, and then by reverses; so a long course of falling markets is eventually followed by a reduction of stocks, while the consumption is extended; and this state of things is the precursor of improved markets, and of a period of prosperity in the branches of trade to which the previous distress from low prices had applied. Accordingly the fall and low range of prices observable through a great part of the interval now under consideration, laid the foundation for the activity and generally prosperous state which, as we shall have occasion to see, prevailed among the manufacturing, and mining, and trading classes, in the three years following the present epoch.

SECTION 3. State of the Circulation from 1828

to 1832.

The circulation, as far as related to the regulation by the Bank of its issues, was, in the interval now under consideration, in a more equable state than in any of the preceding epochs (with the exception of that between 1803 and 1808), notwithstanding that in this interval the suppression of the small note country circulation had been accomplished. And it should seem therefore that

the substitution of the metals for those small notes had served only to absorb the gold which had flowed into the country by the balance of trade, and which would otherwise have created an incumbrance of treasure in the Bank of England in 1828, such as it experienced between 1821 and 1824.

The most considerable of the variations in the position of the Bank, in this interval, were in the amount of its treasure. These variations, however, although considerable, did not approach in extent to those which occurred in the interval which has recently passed under review. From February, 1827, to August, 1828, the amount varied only from 10,159,020l. to 10,498,880l. But in the six months from February, 1828, to August, 1829, there was a reduction of bullion to the extent of upwards of three millions and a half, while the other elements of the position of the Bank at those two periods, had undergone a comparatively inconsiderable variation. The following is a comparative statement at the two periods:

innumerable minute causes which collectively produce considerable movements of the metals, the following circumstances which may have operated in this reduction.

1. The completion of the substitution of a metallic for the small note country circulation, which, however, after August, 1828, must have been a very insignificant amount.*

2. The war in the East of Europe, between Russia and Turkey, which distinctly drew an amount of about one million from the treasure of the Bank. Mr. Horsley Palmer, in his evidence before the Bank Charter Committee in 1832, p. 14., observing upon a demand upon the coffers of the Bank, although the exchange was apparently favourable, said, "There may be a temporary demand, and I may instance the years 1828 and 1829, as periods when there was a demand, at a high rate of exchange, for about a million of gold for the supply of the Russian army."

3. A considerable pressure on the money market of the United States in 1828 and 1829, as the consequence of extensive overtrading in 1827.†

This substitution of coin for the small note circulation proceeded to its completion apparently without any perceptible derangement of the circulation, and coincidently with a great advance in the price of corn.

It was with reference to the pressure on the money market in the United States in 1828, that Mr. Biddle, president of the United States Bank, published some observations in one of the American newspapers in 1828. After a clear exposition of the general principles of banking, he adds, "These simple elements explain the present situation of the country. Its disorder is overtrading brought on by over-banking. The remedy is to bank less and to trade less. During the last year, money was very abundant, that is, the demand for coin being small in proportion, the banks distributed freely their discounts and notes. This plenty concurred with other causes, especially the expectation of a new tariff, to induce an increased importation of foreign goods, and at the same time furnish great facility for procuring them on credit." "The course of business has been this: A merchant borrows from the banks and sends abroad

4. An importation of foreign corn, to a considerable extent, in consequence of the deficiency of the harvest of 1828 in this country.

5. A drain for Ireland, in consequence of discredit by the excitement prevailing in that country, and a run against the Provincial Bank. The sums that went for that purpose were supposed, according to the evidence of Mr. Palmer (p. 32., Bank Charter Report), to have amounted to about one million in 1828.

It is probable that not any one of those causes would alone have produced any perceptible effect on the circulation, or in the general position of the Bank; but collectively they produced a considerable impression, although, as will be seen, they had not the effect of reducing the Bank treasure much below seven millions, and that only for a short interval, after which a reflux to the full extent of the original drain occurred. There was some pressure

100,000 dollars in coin, or he buys bills from one who has shipped the coin. With these he imports a cargo of goods, obtaining a long credit for the duties sends them to auction, where they are sold, and the auctioneer's notes given for them. These notes are discounted by the bank, and the merchant is then put in possession of another 100,000 dollars, which he again ships; and thus he proceeds in an endless circle, as long as the banks, by discounting his notes, enable him to send the coin, and tempt him to do so by keeping up prices here by their excessive issues. The banks therefore begin by diminishing or withdrawing these artificial facilities, leaving the persons directly concerned in this trade to act as they please with their own funds, but not with the funds of the banks. The immediate consequence is, that the auctioneers can no longer advance the money for entire cargoes; that they no longer sell for credit, but for cash; that the price of goods falls; that instead of being sold in large masses, they are sold slowly, and in small parcels, so that the importer is not able to remit the proceeds in large amounts. This diminishes the demand for bills and for specie to send abroad. In the meantime the importer, finding the price of his goods fall, imports no more; and the shipper of coin, finding less demand for exchange, and that he can make more of his money by using it at home than by exporting it, abstains from sending it abroad."