large commitments of other houses and the speculative public generally to undertakings of various kinds at home and abroad had become a source of danger. No one imagined the danger to be as great as it really was, because it could not be conceived that Messrs. Baring would have allowed themselves to become involved to the extent they did. Still, it was plain enough to cautious and well-informed men of business that it would not be wise to launch out into new schemes of any magnitude in 1890. The consequence was that very few of the new issues offered last year were taken up by the public, and the firms that had underwritten them, and their friends, had to take them up themselves. As their commitments were already as large as was prudent, or larger, this was a source of anxiety to those who were behind the scenes. Besides these special causes for uneasiness the weakness of the Bank of England was regarded by thoughtful persons as adding to the danger which was vaguely felt to be more or less imminent. The reserve was very low at the close of 1889, and the Bank Directors took the very proper step of raising their discount rate to 6 per cent. at the end of December in order to replenish their stock of gold. During the next seven weeks they maintained that rate with praiseworthy resolution in the teeth of the powerful opposition of the majority of City houses, whose plans were hampered by the action of the Bank. Unfortunately the latter did not succeed in raising the market rate of discount above 4½ per cent. owing to the indisposition of the great joint stock banks to aid the Bank of England in a policy which was dictated by a correct prevision of the probable needs of 1890. The usual nonsense about the futilty of piling up a reserve to meet dangers which might never arise was talked and written by the banks and their hangers-on, and finally, towards the end of February, the Bank of England had to reduce its rate again to 5 per cent. without having effected anything worth mentioning in the way of attracting gold, for the million brought, as a special operation, by one of the great houses could not be regarded as a real source of additional strength. It is a great pity that the joint stock banks did not take a wiser view of the situation, for, if they had, and the Bank had been allowed to strengthen itself in the early part of 1890, it would probably have been unnecessary to apply to foreign countries for a temporary supply of gold when the crisis occurred in the autumn. The banks have got thoroughly into the habit of regarding the amount of the reserve of the Bank of England as of no importance, although it is the sole fund in existence to enable them to meet their liabilities if called upon. They fully believe that, if the worst comes to the worst, the Bank will not be allowed to fail, as an ordinary bank would fail if the whole of its cash were gone, and the experience of more than one commercial crisis has shown that this calculation is a safe one, and has consequently encouraged the banks to adhere to their present dangerous practice.
As the summer advanced it became quite clear that the autumn stringency of money, which always occurs in years when trade is active, would be even more marked than usual. Trade was brisk, and a great deal of coin was taken from London for use in the provinces during the first few months in the year, thus weakening the Bank. Many new issues were made, or rather attempted, for the securities offered were not taken up by the public to any great extent, and the issuing houses and their friends who had foolishly underwritten the loans were obliged to find the money for them by selling other securities. In July took place the revolution in Argentina, which produced a financial crisis on both aides of the River Plate, and eventually led to an enormous
