If you say that the bank shall always hold one-third of its liabilities as a reserve,


I will begin by discussing this question on the first hypothesis—that what the Government has been accumulating is intended to serve as a currency reserve only—and will return later to the problem of a reserve held for wider purposes, and of the possible magnitude of the balance of international indebtedness against India. A busy season will soon come when the Government might lend some part of its reserves in India without endangering in the least the stability of its system and to the great advantage of Indian trade. The Government is, therefore, one of the largest dealers in foreign exchange, and does for itself business, which Colonial Governments, for example, who have a certain amount of similar transactions to carry through (though on a far smaller scale), would do through a bank. It was in every sense the only banking company in London. The first panic of which it is necessary here to speak, is that of 1825: I hardly think we should derive much instruction from those of 1793 and 1797; the world has changed too much since; and during the long period of inconvertible currency from 1797 to 1819, the problems to be solved were altogether different from our present ones. The reasons that may make him inclined to do this are, first, that to increase the proportion of his cash balances held in sterling puts him in a stronger position in a case of emergency; second, that selling Council Bills at a good price now will enable him to meet the Home Charges later on when he might not be able to sell his Bills at so good a price (in this case the transference of cash balances from India to London is only temporary); third, that it may put him in a stronger position for carrying out impending loan transactions at the most favourable moment; and fourth, that cash balances held in London can be made to earn a small rate of interest. This Bank was started in 1904 under European management by a firm engaged in floating oil companies and other highly speculative enterprises.

But this idea has no present relation to the constitution of the Bank of England. The duration of the bill varies with the custom of the trade; it may be two, three months, or six weeks, but there is always a bill. Nevertheless, I hesitate as to its expediency; at any rate, there are other plans which, for several reasons, should, I think, first be tried in preference. But the English money is ‘borrowable’ money. But they undoubtedly had the result that the authorities published to the public much ampler details than were previously available.

We can do so in this case. [54] The cost of sending gold to India depends, however, on complex causes, varying considerably from time to time, and is often a good deal less than ⅛d.

This last item is probably considerable and is not adequately accounted for in the trade returns. All such changes being out of the question, I can propose only three remedies. │. The real history is very different. . This constant levelling of our commercial houses is, too, unfavourable to commercial morality.

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