I have taken this extreme case in order to make emphatic the principles involved in all

The _hoondees_ they purchase are for the most part those of traders, small and large, at rates of discount ranging from 9 to 25 per cent per annum, but the _hoondees_ they buy and sell to each other, which are chiefly the traders’ _hoondees_ bearing the Shroffs’ own endorsements, rule the rates in the native bazaar, and are generally negotiated, during the busy season, at from 5 to 8 per cent discount. ‘ In England especially, except a few sums of no very considerable amount held by bullion dealers in the course of their business, there are no sums worth mentioning in cash out of the banks; an ordinary person could hardly pay a serious sum without going to some bank, even if he spent a month in trying. Taking all these causes of loss together, I do not think we should overestimate the wastage of rupees from the circulation in placing it between half a crore and a crore annually. The fact that the Government of India have drifted into a system and have never set it forth plainly is partly responsible for a widespread misunderstanding of its true character. Obviously also, as soon as the ‘division of labour’ is really established, there is a difficulty about both of these principles. But the currency of a small state, such as Genoa or Hamburgh, can seldom consist altogether in its own coin, but must be made up, in a great measure, of the coins of all the neighbouring states with which its inhabitants have a continual intercourse. And bankers are in even greater terror. Peel wrote to him a letter of which the following is a part: ‘We have been placed in a very unpleasant predicament on the other question–the issue of Exchequer Bills by Government. This is the method of making its money go the farthest, and of enabling it to get through the panic if anything will so enable it.

This discussion will have served to make clear a distinction highly important to the problem of the Indian Bank Rate. It is at a panic and just before a panic that the business of the Bank is most exacting and most engrossing. FIXED AND CURRENT DEPOSITS (IN £1,000,000) ┌───────────────–┬────–┬────–┬────–┬────–┬────–┬────–┬────–┬────–┬────–┐ │ Bank. In normal years they cannot be relied on to prevail for more than about three months.

The difficulty is this: if the Bank decline to discount, the holders of the bills previously discounted cannot pay.

Not only did they keep their reserve from the beginning at the Bank of England, but they did not keep so much reserve as they would have kept if there had been no Bank of England.

│ 1. Lowe, which say that the Banking Department of the Bank of England is only a Bank like any other bank–a Company like other companies; that in this capacity it has no peculiar position, and no public duties at all. The Bank of England thus has the responsibility of taking care of it. The necessary information is not given you.

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