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ried 
MISUNDERSTANDING IN REGARD TO CREDIT 451 
of 1772, the inevitable reaction came. The Bank was able A.D. 1689 
to support commercial credit satisfactorily for a time; but > 
the unexpected failure of the Heales!, a large London house, 
through defalcations amounting to £300,000, by one of the 
partners named Fordyce, involved so many other firms in 
disaster that a general collapse ensued, which seemed almost 
as serious as the bursting of the South Sea Bubble. As 
Fordyce had also carried on banking in Scotland, the effects 
of his conduct extended to that country, and brought about 
the fall of various trading houses. Among these was the brought 
newly-founded Ayr Bank, which had been much less success- failure of 
fully managed than its older rivals. A run began on it just %e dor 
a week after Fordyce had disappeared; after eight days it 177% 
had to stop payment. There was still £800,000 worth of its 
paper in circulation, and the distress the failure occasioned 
in Scotland could only be compared with the disaster caused 
by the Darien scheme? 
There was another outburst of commercial prosperity on ioe dogo 
the cessation of the American War in 1782. The sudden disaster in 
opening up of markets encouraged reckless speculation, and 1 
it is said that the Directors of the Bank were incautious in 
their issues and thus fostered the evil?; but they had wisdom 
bo retrace their steps in time. Their gold reserve was re- 
duced to a very low ebb, but they thought it was possible, by 
carefully restricting their issues, to tide over the time till 
specie should arrive, in payment of goods already sent to 
foreign markets. The point of safety would be marked by 
a turn in the exchanges, and they refused to make a loan 
even to Government, in May 1783. It was not till the 
following October that the favourable signs appeared, and 
that they felt justified, with regard to their own safety, in 
extending their issues, by lending to the Government. 
Ten years later, with continued peace, there had been but the 
a great expansion of trading and there were premonitory of rade in 
symptoms of disaster. The period might perhaps have been Tio 
iided over but for the outbreak of the Revolutionary 
War®, Almost immediately afterwards a great firm of corn 
. Macleod, op. eit. 1. 504. 2 Ib. mm. 215, 8 Id. 1. 507. 
\ Tb. 1. 508. 5 See below, p. 674. 
29.9