It is true the Bank of England has to lend the money by which they are filled.
Since then the Bank of England, as a bank, is exempted from the perpetual apprehension that makes other bankers keep a large reserve the apprehension of discredit–it would seem particularly necessary that its managers should be themselves specially interested in keeping that reserve, and specially competent to keep it.
On the other hand, as the Bank carries on itself a large discount business, as it considers that it is itself competent to lend on all kinds of bills, the bill-brokers are its most formidable rivals. Policy as to how much of the gold should be kept in London and how much in India has fluctuated from time to time.
The Bank of France keeps the money of the State, and the State appoints its governor. But it is of great importance to point out that our industrial organisation is liable not only to irregular external accidents, but likewise to regular internal changes; that these changes make our credit system much more delicate at some times than at others; and that it is the recurrence of these periodical seasons of delicacy which has given rise to the notion that panics come according to a fixed rule, that every ten years or so we must have one of them.
His aid may be most efficient. We give at the foot of this paper a list of articles, comprising most first-rate articles of commerce, and it will be seen that the rise of price, though not universal and not uniform, is nevertheless very striking and very general. _ in a quarter of a year), an additional rate of nearly 2½ per cent per annum must be earned in India as compared with the rate in London. If therefore such a saving period follows close upon an occasion when foreign credits have been diminished and foreign debts called in, the augmentation in the effective quantity of gold in the country is extremely great. Deposit banking is of this sort.
Nor is this the worst. A good banker will have accumulated in ordinary times the reserve he is to make use of in extraordinary times. He proved, that in the years preceding both 1847 and 1857 there was a general rise of prices; and in the years succeeding these years, a great fall. After a commercial crisis, 1866 for example, two things happen: first, we call in the debts which are owing to us in foreign countries; and we require these debts to be paid to us, not in commodities, but in money. The effect of this cheapness is great in every department of industry. CHAPTER IV.
But an Indian writer, in a position to know the facts, could throw much useful light on a question where I must necessarily be content with somewhat doubtful conjecture. They believed that so long as they issued ‘notes’ only at 5 per cent, and only on the discount of good bills, those notes could not be depreciated. And yet I propose to retain that system, and only attempt to mend and palliate it.
 It was supposed that in the third quarter of 1911 the Bank placed not less than £4,000,000 worth of gold bills at the disposal of the Austro–Hungarian market in order to support exchange.