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unavoidable, but that pressure is much increased in severity by the separation of the banking from the issue department. The case is generally stated as if the Act only operated in one way, namely, by preventing the Bank, when it has parted with (say) three millions of bullion in exchange for three millions of its notes, from again lending those notes, in discounts or other advances. But the Act really does much more than this. It is well known, that the first operation of a drain is always on the banking department. The bank deposits constitute the bulk of the unemployed and disposable capital of the country; and capital wanted for foreign payments is almost always obtained mainly by drawing out deposits. Supposing three millions to be the amount wanted, three millions of notes are drawn from the banking department (either directly or through the private bankers, who keep the bulk of their reserves with the Bank of England), and the three millions of notes, thus obtained, are presented at the Issue Department, and exchanged against gold for exportation. Thus a drain upon the country at large of only three millions, is a drain upon the Bank virtually of six millions. The deposits have lost three millions, and the reserve of the Issue Department has lost an equal amount. As the two departments, so long as the Act remains in operation, cannot even in the utmost extremity help one another, each must take its separate precautions for its own safety. Whatever measures, therefore, on the part of the Bank, would have been required under the old system by a drain of six millions, are now rendered necessary by a drain only of three. The Issue Department protects itself in the manner prescribed by the Act, by not re-issuing the three millions of notes which have been returned to it. But the Banking Department must take measures to replenish its reserve, which has been reduced by three millions. Its liabilities having also decreased three millions, by the loss of that amount of deposits, the reserve, on the ordinary banking principle of a third of the liabilities, will bear a reduction of one million. But the other two mil-