A History of Prices, and of the State of the Circulation, from 1839 to 1847 inclusive; with a General Review of the Currency Question（vol. IV）

Claims Supported by This Source

1. Contemporaneously with the Act of 1844 coming into operation (notice of September 5), the Bank of England lowered its official discount rate from 4% to 2.5% for first-class bills and 3% for promissory notes, and in March 1845, to 2.5% for both. This was a lower rate than the Bank had ever adopted, and at the same time, the form of notice as a "minimum rate" began (pp. 60–61, 294).
2. The low rate of interest and abundant bank loans aided the railway speculation that was in progress in September 1844, and the speculation reached its peak in the summer (September) of 1845. The same low interest rates also encouraged fixed capital investment other than railways and investment in foreign railways (pp. 294–296, 301).
3. On October 16, 1845, the bank rate rose to 3%. The rise in interest rates at this time was attributed to the provision for the deposit of about £14.6 million with government agents for railway schemes to be submitted to Parliament, and the first pressure of calls on lines sanctioned in the previous session. On November 6, it rose to 3.5%. By the end of October, a "panic" to sell at high prices occurred, and in less than two weeks, the prices of old and new shares fell below the levels of two or three months prior (pp. 66–67).
4. The collection and payment of the deposits were completed by the end of February 1846, at which time the market rate of interest reached 5%. From June to November 1845, the Bank's bullion decreased from £16.5 million to £13 million (p. 71).
5. In January 1847, calls on British and foreign railway lines were estimated at over £6 million in total, and the rate rose to 3.5% on January 14 and 4% on January 21. Bullion decreased from £12.9 million at the end of January to £9.2 million on April 24, and the rate rose to 5% on April 8. In the third week of April, only first-class bills due in May and June were discounted at 5.5% (pp. 72–73).
6. By the end of August, the high rate of interest was severely felt in all businesses requiring credit, and dissatisfaction grew with the large amount of capital sunk in the construction of new railways. In September, a series of bankruptcies of large commercial houses followed (pp. 76–77).
7. Changes in the bank rate in 1847 (13 times): Jan 14, 3.5%; Jan 21, 4%; Apr 8, 5%; Apr 15 (term conditions removed); Aug 2 (1 month 5%, 2 months 5.5%, longer 6%); Aug 5, 5.5%; Sep 2 (loans until Oct 14 at 5%); Sep 23 (2 months 5.5%, 3 months 6%); Oct 1 (due within 14 days 5.5%, loans on public securities stopped); Oct 25, 8% (Government Letter); Nov 22, 7%; Dec 2, 6%; Dec 23, 5%. On Jan 27, 1848, to 4% (p. 330).
8. The bank rate ranged from 2.5% to 9% from September 1844 to January 1848, and the market rate rose from 4% to 12, 15, and 20% from April 1847 to January 1848, before returning to below 4% (p.400).
9. Author's assessment: If the Bank had maintained its rate in 1844–46, the bullion in the summer of 1846 would have been nearly 18 million pounds, allowing for a raise to 5% at the end of January 1847 and 6% in April. Under the Act of 1844, the Bank considered itself absolved of the responsibility for "the regulation of the currency," which encouraged competition at low rates (pp.296, 379–382).

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