The ‘Economist’ did not say that the system of a single bank reserve was a good system, but that it was the system which existed, and which must be worked, as you could not change it. It follows from what has been said that there are always possible and very heavy demands on the Bank of England which are not shown in the account of the Banking department at all: these demands may be greatest when the liabilities shown by that account are smallest, and lowest when those liabilities are largest. │ Rate. e.
But it will be well to say a few words at once with a view to avoiding misunderstandings on two points. This is due to the fact that the Government Treasuries, the Presidency Banks, and possibly other banks and large merchants, use the notes as a convenient method of avoiding the custody of large quantities of silver during the slack season when rupees are not wanted. It is for comparatively large payments that the sovereign may gradually come into use, and for these it is essentially a rival to the note. In 1909 it was found that the borrowers on the approved list could not take the full amount of the balances available for loan; and, in order to obtain employment for the funds, the broker was instructed, as a temporary measure, to deposit the excess amount from time to time with leading London banks, usually for periods of between one and three months.
To the authorities in India it presented its other face. They stand, broadly speaking, in an exceedingly strong financial position supported by large reserve funds. . 5. A more miserable catalogue than that of the failures of the Bank of England to keep a good banking reserve in all the seasons of trouble between 1825 and 1857 is scarcely to be found in history. The manufacture of iron being stimulated, all persons concerned in that great manufacture are well off, have more to spend, and by spending it encourage other branches of manufacture, which again propagate the demand; they receive and so encourage industries in a third degree dependent and removed. It seemed to follow that their ultimate objective must be the last—namely, a currency of gold. On October 30, 1908, these balances had sunk to £1,196,691. Certainly in many controversies facts far less striking have been alleged as proving it. France indeed, before 1789, was an exception. But I will give my explanation for what it is worth. Very commonly the panic extends as far, or almost as far, as the bank or banks which hold the reserve, but does not touch it or them at all. Banking is a very peculiar business, and it depends so much upon credit that the least blast of suspicion is sufficient to sweep away, as it were, the harvest of a whole year.
If the interest of money be raised, it is proved by experience that money does come to Lombard Street, and theory shows that it ought to come. If possible, that alarm is best met by enabling those persons to pay their creditors to the very moment.
The old practice of bill-broking, which Mr.