Page:Principles of Political Economy Vol 2.djvu/250

230 there be any well-grounded objection, unless the drain were so great as to threaten the exhaustion of the reserve, and a consequent stoppage of payments; a danger against which it is possible to take adequate precautions, because in the cases which we are considering, the drain is for foreign payments of definite amount, and stops of itself as soon as these are effected. And in all systems it is admitted that the habitual reserve of the Bank should exceed the utmost amount to which experience warrants the belief that such a drain may extend; which extreme limit Mr. Fullarton affirms to be seven millions, but Mr. Tooke recommends an average reserve of ten, and in his last publication, of twelve millions. Under these circumstances, the habitual reserve, which would never be employed in discounts, but kept to be paid out exclusively in exchange for cheques or bank notes, would be sufficient for a crisis of this description; which therefore would pass off without having its difficulties increased by a contraction either of credit or of the circulation. But this, the most advantageous dénouement that the case admits of, and not only consistent with but required by the professed principle of the system, the panegyrists of the system claim for it as a great merit that it prevents. They boast, that on the first appearance of a drain for exportation whatever may be its cause, and whether, under a metallic currency, it would involve a contraction of credit or not the Bank is at once obliged to curtail its advances. And this, be it remembered, when there has been no speculative rise of prices which it is indispensable to correct, no unusual extension of credit requiring contraction; but the demand for gold is solely occasioned by foreign payments on account of government, or large corn importations consequent on a bad harvest.

Even supposing that the reserve is insufficient to meet the foreign payments, and that the means wherewith to make them have to be taken from the loanable capital of the country, the consequence of which is a rise of the rate of interest; in such circumstances some pressure on the money market is