And now we see the practical results of the two policies: when all commercial and banking Credit was on the verge of universal ruin it was saved and restored by the Expansive Theory in 1793: in 1797 the Restrictive Theory was carried out to the bitter end, and the result was the Stoppage of the Bank.

A consideration of all these circumstances induced the Bullion Committee to condemn the Restrictive Theory in the most emphatic terms: and all the greatest mercantile authorities of the period, including Peel himself in 1819, entirely concurred in these doctrines: and he said that no limitation of the Bank's power of issue could ever be prescribed at any period however remote. That period however came in 1844.

The next great crisis was in 1825. Ever since the beginning of 1824 there had been a continual drain of bullion which the Bank took no means to stop. It fell from 13 3/4 millions in March 1824, steadily and continuously to barely 3 millions in November 1825, when every one felt a crisis to be impending. The papers discussed the policy of the Bank, and it was generally expected that it would rigorously contract its issues. The panic began on Monday the 12th December 1825, with the fall of Pole, Thornton and Co., one of the principal City banks, which drew down with them forty country banks. A general run began upon all the city bankers. For three days the Bank pursued a policy of the most severe restriction. Mr. Huskisson said that during 48 hours it was impossible to convert into money, to any extent, the best securities of the Government. Exchequer Bills, Bank Stock, East India Stock, as well as the public Funds, were unsaleable. At last when universal stoppage was imminent, the Bank completely reversed its policy. On Wednesday, the 14th, it discounted with the utmost profuseness. Mr. Harman said - "We lent by every possible means, and in modes we had never adopted before: we took in stock as security: we purchased Exchequer bills: we made advances on Exchequer bills: we not only discounted outright, but we made advances on deposit of bills of exchange to an immense amount: in short by every possible means consistent with the safety of the Bank, and we were not, on some occasions, overnice; seeing the dreadful state the public were in we rendered every assistance in our power." Between Wednesday and Saturday the Bank issued £5,000,000 in Notes, and sent down to the country a large box of £1 notes, which they accidentally found. This bold policy was crowned with the most complete success:

the panic was stayed almost immediately, and by Saturday was over.

The circumstances of this crisis are the most complete and triumphant example of the truth of the principles of the Bullion Report, and of the Expansive Theory: and signally vindicate the wisdom of Peel in 1819, when he refused to adopt the Restrictive Theory, and impose a numerical limit on the Bank's issues, and which he again protested against in 1833.

The next crisis was in 1837: but the Bank foreseeing it, judiciously anticipated it, and made the most liberal issues to houses which required it. By thus adopting the Expansive Theory in good time, nothing more occurred than a severe monetary pressure, which was prevented from deepening into a crisis entirely by the judicious conduct of the Bank.

Up to this period Sir Robert Peel had passed through two phases of opinion with regard to the Currency Question. When comparatively a young man he had formed one of that famous majority which had voted that a £1 note and 1s. were exactly equal to a £1 note and 7s.: or that 21 is equal to 27. In 1819 he completely adopted the doctrines of the Bullion Report and became a disciple of the school of Horner, Huskisson, Thornton, and Ricardo. But in 1840 a new school of Currency Theorists had arisen of whom the most distinguished were Mr. Jones Loyd, now Lord Overstone, Colonel Torrens, Mr. Norman and others. These influential persons saw that notwithstanding the undoubted truth of the doctrines of the Bullion Report, there was some incurable vice in the management of the Bank of England, which had, beyond all dispute, greatly conduced to prepare the way for the great commercial crisis of 1825 by its extravagant over-issues of Notes. They found that the Bank was totally unable to manage itself on the principles it professed to be guided by. They traced the original source of all Commercial crises to the excessive issues of Notes by banks. They adopted the definition of "Currency" as being Money and Bank Notes only payable to bearer on demand, to the exclusion of all other forms of Paper Credit: and they maintained that the only true principle of issuing Notes was that when Notes were issued they should be exactly equal in amount to what the specie would be if there were no Notes.

These doctrines being strenuously urged by a number of able and influential persons, completely converted Sir Robert Peel, who now entered on the third phase of opinion with respect to the Currency Question, and by the Bank Act of 1844 he endeavoured to give effect to these doctrines.

Peel therefore determined now to adopt the Restrictive Theory, and to impose by law, what every eminent authority of former times including himself had solemnly condemned - a numerical limit on the issues of the Bank.

The Bank Act was passed amid general applause, but as said above, on the very first occasion on which its powers were tested in April 1847, it completely failed to compel the Directors to carry out its principles, and one-third of its bullion ebbed away, without any appreciable diminution of the amount of its Notes in. circulation.

But in October 1847 a far severer crisis took place. The Bank made immense advances to other banks and houses to prevent them from stopping payment. But numerous Banks and Commercial Houses did stop payment, and the resources of the Bank were exhausted. At last after repeated deputations to the Government to obtain a relaxation of the Act, and with the stoppage of the whole commercial world imminent, the Government authorised the Bank to issue Notes at discretion. And what was the result? The panic vanished in 10 minutes. No sooner was it known that Notes might be had if necessary, than the want of them ceased. The whole issue of Notes in consequence of this letter was only £400,000 and the legal limits of the Act were not exceeded.