the issue of notes payable in specie on demand. In cases where the liability of shareholders was to be limited, they were established by an act of the local legislature, but down to a late period banking was, generally speaking, quite free, and all individuals and associations might issue notes, provided they engaged to pay them when presented. Nay, in some states the issuers of notes were entitled even to decline paying their notes on demand, or offer to pay twenty-four per cent. interest to the holders for the period between the refusal to pay and the actual payment. Need we be surprised if, under these circumstances, with no actual obligation to pay in cash, the banks did not scruple to issue their notes ad libitum? In 1830 the total amount of notes in circulation was 66 million dollars; in 1834 the amount reached 94 millions; and in 1836 they amounted to 140 millions! At last a crisis came, with its usual concomitants, losses and despair. On July 11, 1836, the Secretary of the Treasury instructed the receiver of public money in the western and south-western states to take nothing in payment for the public lands but gold or silver or notes payable in specie, and this necessitated a restriction of operations. Immediately after a want of confidence was created. The abundance of fancied riches, the wild hopes of unheard-of profits, and all the dreams which a speculative mania is sure to engender, suddenly disappeared, and a crash ensued, when every bank suspended payment. A contraction of notes became then a necessity. But sad was the condition of trade when, with no chance of having gold or silver, the fictitious paper too was disappearing. Then merchants had nothing to pay their debts with. The manufacturers had to suspend their production. The labourer had nothing wherewith to buy his bread. By degrees, of course, matters mended. The delusion incident to an enormous paper circulation, which gave a fictitious value to everything, and stimulated adventure and speculation to an extravagant extent, was succeeded by the substitute of the precious metals and paper redeemable in specie, and thus credit was gradually restored; but the revulsion proved itself conducive to disaster, and no sooner had the crash of 1836 ended than another occurred in 1839, when nearly every bank became again shipwrecked.

That some remedy was required to a state of things so injurious, everyone was convinced. But the Legislature was powerless and no principle was settled. In the state of New York a general banking law was passed in 1838, providing that banking associations should deposit with the comptroller part of or all their capital, and receive from him power to circulate an equal amount of circulating notes. A security fund was organised, to be made by a deposit demanded from all the banks, to meet any loss from the bankruptcy of any banks. But these measures were at best of a partial operation. No check was thought possible to an in

discriminate issue, and it was in vain that the Secretaries of the Treasury commented severely on the indiscretion of the banks, and on the extreme laxity of their operations. Mr. Webster, one of the most eminent statesmen, held strong opinions on the subject, and would fain have legislated at once upon it. In an able address to Congress he said, 'I hold it to be of the utmost importance to prove, if it can be proved to the satisfaction of the country, that a convertible paper currency may be so guarded as to be secure against probable dangers. I say, sir, a convertible paper currency, for I lay it down as an unquestionable truth, that no paper can be made equal and kept equal to gold and silver but such as is convertible into gold and silver on demand. But I have gone further and still further than this, and I contend that even convertibility, though itself indispensable, is not a certain and unfailing ground of reliance. There is liability to excessive issue of paper while paper is convertible at will. Where, then, shall a regulator be found? What principles of prevention may be relied on? By subjecting all banks to the rule which the most discreet of them always follow, by compelling them to maintain a fixed proportion between specie and circulation, without regard to deposits on one hand or notes payable to bearer on the other.' Mr. Webster, in 1838, held the same views as were propounded in 1844 by Sir Robert Peel, and as were vigorously defended by Lord Overstone before and after that time. Without attempting to take any guarantee for deposits, he held it incumbent on the Legislature to take measures for the protection of the circulation. But Mr. Webster was not supported in his views either in the Legislature or among bankers and financiers, and no attempt whatever was made to introduce any such measure as he foreshadowed. Meanwhile the prosperity of the United States increased apace. In 1830 there were in the United States 880 banking institutions, with an aggregate capital of $145,000,000, and a circulation of $61,000,000; whilst the population was 12,000,000, and the total amount of imports and exports was $144,000,000. After thirty years, not without many occasional relapses, not free from grave blunders and serious failures, the United States, in 1860, possessed 1,562 banking institutions, with a collective capital of $421,000,000, and a circulation of $207,000,000; whilst the population increased to 31,000,000, and the aggregate amount of imports and exports was $762,000,000. In moments of aberration there was gloom indeed on the American horizon, but that gloom became soon eclipsed by the bright lustre of a long course of general prosperity.

CHAPTER XI.

RELATIONS WITH INDIA AND CHINA. THE OPIUM WAR. Early Means of Communication with India.-Privileges of the East India Company.-The Case of Monopolies.-Renewal of the Charter.-Remonstrances against the Monopoly.-Repeal of the Charter.-Triumphs of the East India Company.-Monopoly of the China Trade.-The Hong Merchants.-Introduction of Tea.-The Price of Tea.- British Relations with China. The Opium Trade.-Prohibition of the Use of Opium.--Seizure and Confiscation of Opium, and the Treaty of Nanking.

Or all the British possessions, India is doubtless the largest and the most important. Its wide territory, its mighty population, its rich treasures, its gorgeous scenery, and its motley races, all contribute to invest India with a charm sufficient to attract many nations to its shores; whilst its staple productions, its spices and aromatics, its precious stones and wrought silks and cottons, have been held in estimation among all civilised nations. During the Middle Ages the Italian republics were the channel by which the produce of the East found its way to Europe. By means of caravans, and the navigation of rivers, the produce of India found its way to the shores of the Mediterranean, and from the ports of that sea was carried by the traders of Venice and Genoa to the different countries in the North of Europe. But great was the hardship endured in the conveyance of such merchandise. Whichever route was chosen, it was equally difficult and dangerous. Some traders took the way of the Persian Gulf to the cities on the Tigris and Euphrates, regions where Solomon built cities, Tadmor in the wilderness, and store cities in Hamath,' making Babylon and Nineveh the Manchester and Birmingham of Mesopotamia; and thence brought their goods, by means of caravans, to cities along the eastern shores of the Mediterranean, enriching in their course Antioch, Palmyra, Tyre, Sidon, and the whole of the seaports of Phoenicia and Palestine. Others went by caravans, through Beloochistan and Persia, to the cities of Syria, and along the shores of the Caspian Sea to the towns on the Euxine. Others went to the north, through China, across the deserts of Tartary, to Moscow and the cities of Central Europe; and others, again, took the way of the Red Sea to cities in Arabia, and in after time to Alexandria in Egypt. We know how extensively the Tyrians traded with India; how they brought into Palestine all sorts of

rarities of blue cloths and broidered work, in chests of rich apparel, bound with gold and made of cedar. That was indeed the age of romance in commercial enterprise, but time changed all this. When Vasco di Gama doubled the Cape of Good Hope, and found a passage by sea to the land of promise, the course of trade was turned into quite another direction. Instead of the plodding Italians came the daring Portuguese and the industrious Dutch, and nation after nation appeared in the field, till the English arrived, who might well say with Waller

Ours is the harvest where the Indians mow;

We plough the deep, and reap where others sow.

It was on December 31, 1600, that the East India Company1 was first incorporated, for fifteen years, with the exclusive privilege of trading to all parts of Asia, Africa, and America, beyond the Cape of Good Hope eastward to the Straits of Magellan ; except such countries or ports as may be in the actual possession of any Christian prince in amity with the Queen. The Company was invested with great prerogatives. It had the right to make peace and war, to maintain forces by sea and by land, to make laws, to inflict penalties, to grant exemptions, and to impose customs duties. It was, moreover, allowed to export annually 30,000l. of the precious metals, then the principal means of exchange with India, on condition of reimporting an equal amount of the same within six months after the accomplishment of a voyage. The first expedition took place in 1601 with five ships under the command of Lancaster. They approached Acheen in Sumatra, and thence they sailed to Java, from which place Lancaster sent a ship to Malacca, laden with a rich cargo of spices. He loaded also other ships with other products of India, and came back to England after an absence of two years and a half. The success of the first voyage stimulated many others. But as yet they were undertaken on the personal account of the adventurers, each of whom provided the necessary funds. It was only in 1613 that a social fund of 418,000l. was subscribed by the Company in equal shares. By that time the Company had ob

The Company was constituted 'one bodie corporate and politique in deed, by the name of "The Governour and Company of Merchants of London, trading unto the East Indies."

2 In the first voyage James Lancaster, in 1602, established commercial relations with the King of Acheen, at Priaman in the island of Sumatra, with the Moluccas, and at Bantam, where he settled a factory, or house of trade, in 1603. In 1604 the Company undertook their second voyage, commanded by Sir Henry Middelton, who extended their trade to Banda and Amboyna. Captains Sharpey, Hippon, Saris, and Best were the commanders of subsequent voyages. In 1614 a factory was settled at Surat; in 1616, at Calicut and Cranganore. In the year 1708, when the two companies were united, factories were already established in the Red Sea at Aden and Mocha, in the Persian Gulf and Persia, on the western side of India, on the eastern side of India in Bengal, in the Malay Peninsula, in Sumatra, in Borneo, in Celebes, in the Moluccas, in the China seas, in Japan, and in the Atlantic Ocean.

tained important advantages from the Grand Mogul at Delhi, especially the power to establish a factory at Surat, on the coast of Malabar; and other factories had been established for trading in other localities, without the least intention, however, of constituting them forts or places of strength for territorial conquest. But the Company excited the jealousy of the Dutch and Portuguese, and dissensions and wars were the consequence.

During the civil war in England, the commerce of India was neglected, and the affairs of the Company were much embarrassed; so much so, that in the interregnum Cromwell dissolved the Company, and for three years trade was left free. But the Company was soon reinstated, and, favoured by Fortune's smiles, it became possessed of the island of Bombay, which Charles II. received as a marriage portion from Catherine of Aragon. The great difficulty, however, of the Company was to keep out 'interlopers, who tried to wrest some portion of the Indian trade from their hands, and for that purpose, when the charter was renewed in 1683, they obtained power to seize any ship and merchandise of such interlopers. The legality of such power was contested by Captain Sandys, however, in the case of monopoly,' which ended in favour of the interloper, all monopolies being against common law. Yet the King interdicted Captain Sandys from trading in the East Indies, and so the Company preserved its privileges intact. In 1698 a new company was formed, styled The English Company Trading to the East Indies,' and, for a time, two corporations existed, both pretending an exclusive right to trade in the same country; but it was soon found that two companies belonging to the same nation could not carry on the same trade either with profit to themselves or to the benefit of the country. The London Company had besides purchased the greatest part of the shares of the English Company, and thus the whole subject having been referred to Lord Godolphin, the two companies were united in 1702. In progress of time, however, as we have already seen, in consequence of their military exploits, under the leadership of Clive, the Company acquired extensive possessions in India, and thenceforth, without ceasing to be a commercial company trading, the Company became, for all intents and purposes, a state within a state. Partly in consequence of this change, and partly through the financial difficulties in which the Company was involved, a board was appointed in 1780 to control all the operations which in any wise related to the civil or military government or revenue of the territories and possessions of the East India Company.

Ten years after this, previous to the renewal of the charter in 1793, a searching enquiry was instituted into the effect of the monopoly exercised by the Company in the Indian trade; and though the charter was renewed till 1813, power was granted to