’Do you advert to these two circumstances with a view to regulate the general amount of your advances?—­I do not advert to it with a view to our general advances, conceiving it not to bear upon the question.

And Mr. Harman, another Bank director, expressed his opinion in these terms:  ’I must very materially alter my opinions before I can suppose that the exchanges will be influenced by any modifications of our paper currency.’

Very few persons perhaps could have managed to commit so many blunders in so few words.

But it is no disgrace at all to the Bank directors of that day to have committed these blunders.  They spoke according to the best mercantile opinion of England.  The City of London and the House of Commons both approved of what they said; those who dissented were said to be abstract thinkers and unpractical men.  The Bank directors adopted the ordinary opinions, and pursued the usual practice of their time.  It was this ‘routine’ that caused their moderation.  They believed that so long as they issued ‘notes’ only at 5 per cent, and only on the discount of good bills, those notes could not be depreciated.  And as the number of ‘good’ billsbills which sound merchants know to be gooddoes not rapidiy increase, and as the market rate of interest was often less than 5 per cent, these checks on over-issue were very effective.  They failed in time, and the theory upon which they were defended was nonsense; but for a time their operation was powerful and excellent.

Unluckily, in the management of the matter before us—­the management of the Bank reserve—­the directors of the Bank of England were neither acquainted with right principles, nor were they protected by a judicious routine.  They could not be expected themselves to discover such principles.  The abstract thinking of the world is never to be expected from persons in high places; the administration of first-rate current transactions is a most engrossing business, and those charged with them are usually but little inclined to think on points of theory, even when such thinking most nearly concerns those transactions.  No doubt when men’s own fortunes are at stake, the instinct of the trader does somehow anticipate the conclusions of the closet.  But a board has no instincts when it is not getting an income for its members, and when it is only discharging a duty of office.  During the suspension of cash paymentsa suspension which lasted twenty-two yearsall traditions as to a cash reserve had died away.  After 1819 the Bank directors had to discharge the duty of keeping a banking reserve, and (as the law then stood) a currency reserve also, without the guidance either of keen interests, or good principles, or wise traditions.

Under such circumstances, the Bank directors inevitably made mistakes of the gravest magnitude.  The first time of trial came in 1825.  In that year the Bank directors allowed their stock of bullion to fall in the most alarming manner: