The drain of 1847, however, was much more severe than this--and in order to show the operation in a somewhat analogous case, we shall suppose the efflux of bullion to proceed to the extent of a second £4,000,000. The effect would necessarily be very similar to that just described, except that it would be more strongly marked in its features. According as the demand for accommodation would increase, and as the Bank would approach the exhaustion of the £11,000,000 of unrepresented notes allowed to be issued at 2 per cent., it would be obliged to raise the rate of discount still higher, so that, by the time that the efflux of the second £4,000,000 would be complete, the rate of discount would probably be not less than 5½ or 6 per cent., and as this rise would undoubtedly have considerable effect in checking the increased demand for accommodation, we may confidently assume the consequent contraction of the circulation to be at least one million of the four. The total issues therefore would have assumed this position:-- Issued on bullion £16,000,000 ” at 1 per cent. 11,000,000 ” at 2 per cent. 10,000,000 ----------- £37,000,000 exhibiting a rise in the rate of discount, from 4 to 5½ or 6 per cent., and a decrease of £2,000,000 in the amount of circulating medium, as the total effect produced by a drain of £8,000,000 of bullion. And should the drain proceed no further, we have ample data both in theory and practise, for assuming that this rise in the rate of interest would draw over foreign capital in the purchase of securities--that this contraction in the currency would lower prices sufficiently to stimulate the export of commodities, without paralyzing industry--and that through the combined operation of the two agencies, the bullion would be slowly but certainly recovered, with the smallest possible detriment to commercial interests. The case of a drain arising out of military expenditure presents no peculiar feature of difficulty, as compared with the preceding. Should the loss of gold continue to the extent of another £4,000,000, making £12,000,000 altogether, the chief point of difference would be, that the exhaustion of the £11,000,000 of unrepresented notes allowed to be issued at 2 per cent., would necessitate a recourse to the issues at 4 per cent.; and that this would require a proportionate rise in the rate of discount, in order to render such issue adequately profitable to the Bank. But a rise in the rate of discount to 6 or 6½ per cent., would allow the Bank a profit of 2 or 2½ per cent. out of such issue, over and above the governmental charge; we may, therefore, assume that such a rise would suffice as an inducement for the Bank to draw on those issues. And supposing that a rise to 6 or 6½ per cent. would produce a contraction in the demand for accommodation of a single million, as before, the total operation on the issues would be as follows:--