gold to and fro having been reduced to a minimum between the two cities, the difference can never be very great; but it must not be forgotten that, the interest being taken at a percentage calculated per annum, and the probable profit having, when an operation in three-month bills is contemplated, to be divided by four, whereas the percentage of expense has to be wholly borne by the one transaction, a very slight expense becomes a great impediment.  If the cost is only 1/2 per cent, there must be a profit of 2 per cent in the rate of interest, or 1/2 per cent on three months, before any advantage commences; and thus, supposing that Paris capitalists calculate that they may send their gold over to England for 1/2 per cent expense, and chance their being so favoured by the Exchanges as to be able to draw it back without any cost at all, there must nevertheless be an excess of more than 2 per cent in the London rate of interest over that in Paris, before the operation of sending gold over from France, merely for the sake of the higher interest, will pay.’

Accordingly, Mr. Goschen recommended that the Bank of England should, as a rule, raise their rate by steps of 1 per cent at a time when the object of the rise was to affect the ‘foreign Exchanges.’  And the Bank of England, from 1860 onward, have acted upon that principle.  Before that time they used to raise their rate almost always by steps of 1/2 per cent, and there was nothing in the general state of mercantile opinion to compel them to change their policy.  The change was, on the contrary, most unpopular.  On this occasion, and, as far as I know, on this occasion alone, the Bank of England made an excellent alteration of their policy, which was not exacted by contemporary opinion, and which was in advance of it.  The beneficial results of the improved policy of the Bank were palpable and speedy.  We were enabled by it to sustain the great drain of silver from Europe to India to pay for Indian cotton in the years between 18621865.  In the autumn of 1864 there was especial danger; but, by a rapid and able use of their new policy, the Bank of England maintained an adequate reserve, and preserved the country from calamities which, if we had looked only to precedent, would have seemed inevitable.  All the causes which produced the panic of 1857 were in action in 1864the drain of silver in 1864 and the preceding year was beyond comparison greater than in 1857 and the years before itand yet in 1864 there was no panic.  The Bank of England was almost immediately rewarded for its adoption of right principles by finding that those principles, at a severe crisis, preserved public credit.