BANKING FACILITIES 
upon the attention of the country by the recurrence of A-D.1776 
commercial crises. 
There was wide-spread and severe disaster in 1825, The was 
failure of Spain to retain her hold over her colonies had iar 
opened up Mexico and Spanish South America as fields for 7 18% 
the sale of English goods, and the investment of English 
capital. This gave rise to a sudden development of mining 
speculation’, and a large exportation of English manufactures; 
while there was also a considerable response on the part of 
the English public to the demands of the new republican 
government for loans for public purposes’. As a conse- 
quence a rapid drain of gold began, and the Bank failed to 
check it by contracting its issues; since large quantities of 
paper were put into circulation by the country banks, and 
merchants were compelled to realise, there was an inflation 
of prices. After credit had thus unduly expanded, the Bank 
decided that a sudden change of policy was necessary, and in 
May 1825 contracted its issues. Alarm spread, and many of 
the country banks were unable to meet their engagements, 
or honour the notes which they had issued; a deficiency of 
the circulating medium was in consequence brought about. 
[t became impossible to borrow money on any terms? and 
numerous important firms failed; but the Bank had been 
able to hold its own, partly by utilising £1 notes; bullion 
began to come from France; and the Bank, by issuing freely 
as soon as the worst was over, replaced the gap in the circu- 
lating medium that had been caused by the discredit of the ih led 
aotes of country banks. renewed 
The disasters of the time were alleged to be due to the oousmer the 
policy which had been pursued in granting a monopoly to mpsegely 
the Bank of England, as against other companies. This was Puke, 
323 
+ McLeod, Theory and Practice of Banking, 1. 110. 
¢ The conversion of the English debt in 1824 and reduction of interest on 4 per 
cent. stock to 83 per cent. caused investors to look out for foreign securities that 
offered higher rates. Ib. m. 108. 
8 The usury laws, which rendered interest above 59/, illegal, proved an obstacle 
to prevent lenders from offering money at the high rates which the state of the 
market justified. Jb. 112. 
¢ This was Lord Liverpool's opinion: “ What was the system in existence at 
present? Why the most rotten, the most insecure, the very worst in every 
respect that could possibly be conceived. Any petty tradesman, any grocer or