English bills being a profitable investment, the price of paper on England at once begins to rise, and when the so-called gold point is reached the precious metals are shipped to these shores, because the premium on bills on England is in excess of the cost of despatching bullion. Every rise in the rate of discount here induces foreign holders of long-dated paper on England to retain their purchases. If they bought three months' bills on England when the Bank's discount rate was three, interest at the rate of three per cent. per annum was deducted from the face value of the bill to make it equivalent to a bill due at sight. Should the minimum rate be raised to four per cent., and were the holders then to remit the bills to this country to be discounted, they would have to submit to a deduction at the rate of four per cent. per annum. In other words, they would lose one per cent. per annum on the transaction. Long-dated bills would therefore be held until near maturity in order to avoid this loss. An accretion to the Bank rate, then, not only attracts gold or capital here, but it also induces foreign holders of long-dated bills on England to keep them in their cases. On the other hand, a fall in the Bank's rate of discount from, say, three to two per cent. might not only slacken the demand for English bills, but it would also cause a considerable number of long-dated bills on England to be sent over here to be discounted, as the foreign holders would naturally be anxious to secure the profit between the three per cent. per annum paid to them, and the two per cent. per annum at which they would then be taken from them. The result might possibly be a temporary drain of gold from this side. But it is when a home and a foreign efflux of gold occur at the same time that the situation becomes serious, and unless immediate action is taken by the directors of the Bank of England to check the outflow, there is always the danger--so small is our gold reserve when contrasted with our exports and imports--that a balance against us at an unlucky moment may create an awkward tension, which, unless speedily relieved, may possibly produce a crisis. We like to flatter ourselves that England is always safe; but so large is the amount of bills offering from day to day in the London money market that the very doubt of there not being sufficient capital in the possession of the banks to discount them creates uneasiness; and if it were thought that the Bank of England, which holds the few millions of reserve upon which hundreds of millions of credit rest, could not retain its gold, excitement would reach fever pitch in this country, for everybody's income would be in danger, and the Government, whose supineness allowed such a state of affairs to develop, would be in danger too. But we know that, in the rate of discount, the directors of the Bank possess an effective instrument to prevent such a catastrophe, and have the experience to use it to advantage.