The Bank and the Great French War
IN 1793 when England was drawn into the maelstrom of war in Continental Europe, brought about by the French Revolution, the Bank was in a strong condition. Its capital had reached £11,786,000--all loaned to the Government. It had a surplus ("The Rest") of over £3,000,000. It had notes outstanding for £11,600,000. Its specie reserve was about £5,000,000. William Pitt was Chancellor of the Exchequer. The war came to him and to his confreres as a surprise. The English people had been watching the revolutionary proceedings in France with great interest. They had not expected that England would be involved. Pitt and his government had made all of their plans for a long period of peace in which to fully recover from the losses of the American War which were still keenly felt.
Therefore the determination to engage in war with France found the Government unprepared, the Exchequer empty, or relatively so, and the country still aghast at the burden of debt which had accrued from the American War and the other wars of the eighteenth century. General business conditions were bad, due to a succession of bad harvests and the culmination of a period of overtrading. Many country bank failures were occurring. The Bank of England itself became alarmed, contracted its credits and raised the rate of discount. To relieve the situation the Government had found it necessary to authorize a special issue of Exchequer bills to be loaned to merchants.
It was in the midst of such financial conditions that Pitt