Any sudden event which creates a great demand for actual cash may cause, and will tend

each, and that is our English banking. But if there are sovereigns on their way from Australia and ready to be diverted to India, or if there are surplus sovereigns available for export at Alexandria, it may be a good deal cheaper to buy these sovereign than to get gold bars from London. They are liable to lose them if the bank fail. And this can only be effected by advancing on all good Banking securities. They would soon be obliged to draw out every shilling. A modern Government is like a very rich man with very great debts which he cannot well pay; its credit is necessary to its prosperity, almost to its existence, and if its banker fail when one of its debts becomes due its difficulty is intense. on Government securities; for all the rest it must have bullion deposited.

s. Let us know precisely who is to keep the banking reserve.

[27] That is to say, they deposit their surplus rupees during the summer in the Currency Reserve, holding their own reserves in the form of notes; and when the drain of rupees begins up country for moving the crops these notes have to be cashed. I should prefer, therefore, that the Indian Cash Balances should be held, so far as possible, in notes, thus increasing the capacity of the Currency Reserve, and that all advances should be made in form from the Currency Reserve. When, therefore, we are considering what proportion of liquid reserves ought to be maintained, or what part the note issue plays in supplying the much needed element of elasticity in the busy season, it is of the active rather than of the gross circulation that we must take account. Before that all Oriental trade went to ports in the South of Europe, and was thence diffused through Europe. The amount of the advance is the main consideration for the Bank of England, and not the nature of the security on which the advance is made, always assuming the security to be good. .

28.

│ 1,200,000│ │Credited to Paper │ │ │ │ │ │ Currency Reserve │ │ │ │ │ │ in England │ 1,000,000 │ 2,545,000│ 1,988,000│ 400,000│ │Purchase of silver │.

If we are to judge from the experience of recent years, India inclines to use her gold reserves, Austria–Hungary her foreign credits, first. per rupee. The ‘loanable capital,’ the lending of which caused the rise of prices, was lent to enable it–to augment. In a panic, and at a general collapse of credit, no such banker will probably be found. │ Balances. Why Lombard Street is Often Very Dull, and Sometimes Extremely Excited.

│1908. But it will be said–What would be better? What other system could there be? We are so accustomed to a system of banking, dependent for its cardinal function on a single bank, that we can hardly conceive of any other. of fresh money ready to come into the market. We require to know the magnitude of possible _variation_ in these items, rather than the absolute amount of the various annual payments which India has to make, in order to gauge the possible balance of indebtedness against her.

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