I have placed these proposals in the order of their probable efficacy to effect their purpose. I thought it would frighten people. Fraud, in the face of such a committee, would probably never be attempted, and even now it is a rare and minor evil.
Is that government sufficient to lend well and keep safe so many millions? They are governed, as every one knows, by a board of directors, assisted by a general manager, and there are in London unrivalled materials for composing good boards of directors. In 1844 the liabilities of the four great London Joint Stock Banks were 10,637,000 L. As some recompense for these restrictions, the Presidency Banks have been allowed to hold a portion of the Government balances without payment of interest.
I fear it would rather make both worse. By the present constitution of the Bank, the attention of its sole rulers is most apt to be diverted from the Bank’s affairs just when those affairs require that attention the most. The sums of money which I lend for country bankers on discount are fifty times more than the sums borrowed for country bankers. e. . Prices have been rising, as it is, much faster than is healthy and in a way very disadvantageous to such a creditor nation as Great Britain, to whom large sums fixed in terms of gold are annually due. The change was, on the contrary, most unpopular. They would soon be obliged to draw out every shilling. But I am bound to own that the committee was right and I was wrong, for that publication has given the money market a greater sense of security than anything else which has happened in my time.
Those in which the capital is used not to work the business but to guarantee the business.
In 1907–8 the adverse balance of indebtedness was largely due to a change in the trade balance;—on the one hand, goods ordered during the boom continued to pour into Bombay for some weeks after they had become unsaleable, thus continuing for a time a large supply of bills on India, while, on the other hand, the failure of the monsoon and consequent anticipations of a scanty harvest cut off a considerable part of the normal supply of trade bills on London. . As a result of these various measures, the rupee remains the local currency in India, but the Government take precautions for ensuring its convertibility into international currency at an approximately stable rate.
But the demand did not expand, and the very large issue of currency immediately before and just after the closure of the Mints proved sufficient to satisfy the demand for several years to come;—just as a demand for new currency on an abnormally high scale from 1903 to 1907, accompanied by high rates of discount, was followed in 1908 by a complete cessation of demand and a period of comparatively low rates of discount. I have argued that £40,000,000 may be, perhaps, at present a suitable amount to be held by Government in its sterling Reserves. Various suggestions have been made as to what restrictions would be proper.