as to replenish it by imports of bullion.

This duty, up to about the year 1860, the Bank of England did not
perform at all, as I shall show farther on. A more miserable history
can hardly be found than that of the attempts of the Bankif indeed
they can be called attempts--to keep a reserve and to manage a foreign
drain between the year 1819 (when cash payments were resumed by the
Bank, and when our modern Money Market may be said to begin) and the
year 1857. The panic of that year for the first time taught the Bank
directors wisdom, and converted them to sound principles. The
present policy of the Bank is an infinite improvement on the policy
before 1857: the two must not be for an instant confounded; but
nevertheless, as I shall hereafter show, the present policy is now
still most defective, and much discussion and much effort. will be
wanted before that policy becomes what it ought to be.

A domestic drain is very different. Such a drain arises from a
disturbance of credit within the country, and the difficulty of
dealing with it is the greater, because it is often caused, or at
least often enhanced, by a foreign drain. Times without number the
public have been alarmed mainly because they saw that the Banking
reserve was already low, and that it was daily getting lower. The
two maladiesan external drain and an internal-often attack the money
market at once. What then ought to be done?

In opposition to what might be at first sight supposed, the best way
for the bank or banks who have the custody of the bank reserve to
deal with a drain arising from internal discredit, is to lend
freely. The first instinct of everyone is the contrary. There being
a large demand on a fund which you want to preserve, the most