It is a well understood circumstance, that whenever any unusual stimulus is imparted to the work of production, and the export trade proceeds with more than ordinary activity, the necessary consequence is, that the exports exceed the imports, and that gold flows into the country from those nations which have purchased more largely of our commodities, than they have paid for in their own. Now, whether this gold is converted into coin, and is directly expended in the purchase of commodities or the payment of wages, or whether it is taken to the Bank of England and exchanged for paper, in either case it immediately increases the amount of circulating medium in the possession of the public; in the one case in the form of metal, in the other in the form of bullion notes. And just in proportion as money becomes abundant, prices rise, and the rate of discount falls in a corresponding ratio. This in itself, although in some degree inevitable, is nevertheless a serious evil. But unfortunately, the tendency of the present currency system, instead of alleviating, is to aggravate it. For, as money becomes abundant with the commercial public, it simultaneously increases with those who usually deposit in the Bank of England, and they immediately enlarge the amount of their deposits. Now every addition to the deposits, is really an addition to the unemployed reserve of unrepresented notes in the Bank; in proportion, therefore, as money becomes abundant with the public, the Bank reserve increases; so that it very speedily exceeds the amount which the ordinary rules of sound banking would hold to be necessary for discharging the functions of a reserve. In such circumstances it becomes the immediate interest of the Bank to force the superabundant notes of the reserve again into circulation; and this it can only do by entering keenly into the competition of the loan and discount market, and by proffering advances on more advantageous terms than those allowed by other banks and capitalists. And as the superabundance of money must have already produced a considerable decline in the rate of interest, and a corresponding rise in the scale of general prices, and must have thereby given an impetus to the spirit of undue speculation, so this disastrous competition of the Bank of England for an extended share of business, must not only induce a still further depreciation in the one case and enhancement in the other, but must inevitably impart a very powerful incentive to the rapid progress of speculation.