Some banking failures, a hint of political trouble,—and the old habits will come back, whatever progress

In 1847, even in 1866–the latest panic, and the one in which on the whole the Bank acted the best–there was nevertheless an instant when it was believed the Bank would not advance on Consols, or at least hesitated to advance on them. 1900 19 1909 30½ 1902 21 1910 36½ 1904 25½ 1911 36½ 1906 30 1912 41 1908 31½ 1913 46 The following table gives the average monthly gross circulation in £ million (at 1s. Secondly. Nothing is safe to their minds; indeed, in most countries, owing to a bad Government and a backward industry, no investment, or hardly any, really is safe. But this rule was never so erroneous as now, because the number of sudden demands upon that reserve was never formerly so great. e. ‘There are thirty millions of Exchequer Bills outstanding. I deal only with the primary pre-requisite of effectual foreign payments–a sufficient supply of the local legal tender; with the afterstep–the change of the local legal tender into the universally acceptable commodity cannot deal. All persons who wish to pay a large sum in cash trench of necessity on the banking reserve. ” His first proposals were made in 1876 and 1878. The lender exercises his own judgment on the goodness of the bill. The method adopted on the last occasion of this kind was the offer by the Government of India in Calcutta of _sterling bills on London_ at the rate of 1s. I have taken this extreme case in order to make emphatic the principles involved in all such proposals. ‘The plan,’ says Macaulay, ‘was that twelve hundred thousand pounds should be raised at what was then considered as the moderate rate of 8 per cent.

Even now the Bank of France, which, I believe, by law ought to have a branch in each Department, has only branches in sixty out of eighty-six. The privileged opportunity of which we spoke is singularly conspicuous in such figures; it enables banks to pay much, which without it would not have paid much. These are the chief relevant facts of law. . The policy pursued during 1912 of holding large cash balances in London and of lending them out in the London Market provoked widespread criticism both in India and at home. This is only a single additional instance beyond the innumerable ones given, which shows how deeply our system of banking is fixed in our ways of thinking.

The ordinary foreign trade of a country requires no cash; the exports on one side balance the imports on the other.

An Act of 1905, however, gave full power to the Government to hold the metallic portion of the reserve, or any part of it, at its free discretion, either in London or in India, or partly in both places, and also in gold coin or bullion, or in rupees or silver bullion, subject only to the exception that all coined rupees should be kept in India and not in London. We must never forget that a quarter of a century has passed since 1844, a period singularly remarkable for its material progress, and almost marvellous in its banking development. Of course if the Act of 1844 really were, as is commonly thought, the _primum mobile_ of the English Money Market, the source of all good according to some, and the source of all harm according to others, the extreme irritation excited by an opinion on it would be no reason for not giving a free opinion.

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