The rise in the rate of discount acts immediately on the trade of this country.

Prices fall here; in consequence imports are diminished, exports are increased, and, therefore, there is more likelihood of a balance in bullion coming to this country after the rise in the rate than there was before.
Whatever persons--one bank or many banks--in any country hold the banking reserve of that country, ought at the very beginning of an unfavourable foreign exchange at once to raise the rate of interest, so as to prevent their reserve from being diminished farther, and so as to replenish it by imports of bullion.
This duty, up to about the year 1860, the Bank of England did not perform at all, as I shall show farther on.

A more miserable history can hardly be found than that of the attempts of the Bank--if indeed they can be called attempts--to keep a reserve and to manage a foreign drain between the year 1819 (when cash payments were resumed by the Bank, and when our modern Money Market may be said to begin) and the year 1857.

The panic of that year for the first time taught the Bank directors wisdom, and converted them to sound principles.

The present policy of the Bank is an infinite improvement on the policy before 1857: the two must not be for an instant confounded; but nevertheless, as I shall hereafter show, the present policy is now still most defective, and much discussion and much effort, will be wanted before that policy becomes what it ought to be.
A domestic drain is very different.