The object is to stay alarm, and nothing therefore should be done to cause alarm

Adie. After these banks had been long established, they began to do what we call banking business; but at first they never thought of it. And the proof is, that for more than ten years after the suspension of cash payments the Bank paper was undepreciated, and circulated at no discount in comparison with gold. This would be a reversion to the policy of 1907–8, since abandoned, when one–half of the profits of coinage was thus diverted. Those balances are no doubt in a state of constant fluctuation; and very possibly during the time that the German money was coming in some other might be going out. He would know which way criticism was coming. For the five years following there was a steady annual demand for fresh coinage (low in 1901–2, high in 1903–4, but at no time abnormal) and the Mints were able to meet it with time to spare, though there was some slight difficulty in 1903–4. I am here speaking of bankers in the English sense, and in the sense that would surprise a foreigner. Accordingly, many excellent men of business are quite ready to become members of boards of directors, and to attend to the business of companies, a good deal for the employment’s sake. If possible, that alarm is best met by enabling those persons to pay their creditors to the very moment. In most great periods of expanding industry, the three great causes–much loanable capital, good credit, and the increased profits derived from better-used labour and better-used capital–have acted simultaneously; and though either may act by itself, there is a permanent reason why mostly they will act together.

Previous to 1893 the Government were bound by the Coinage Act of 1870 to issue rupees, weight for weight, in exchange for silver bullion. At all events, such a Governor, if he understood his business, might make the fortunes of fifty men where the Prime Minister can make that of one. If we turn from the mechanism of remittance to the question of Government remittance as a whole, this can be explained most clearly by reference to a hypothetical India Office balance–sheet. And the history of banking has been the same. We now see how intimately the management of Council Bills and of Government remittance is bound up with the Gold–Exchange Standard. They both tend to grow together, if you begin from a period of depression. The Shroffs, who finance nearly the whole of the internal trade of India, rarely, if ever, discount European Paper and never purchase foreign or sterling bills. But, on the contrary, there is no country at present, and there never was any country before, in which the ratio of the cash reserve to the bank deposits was so small as it is now in England.

In the meantime I pass to a description of the Paper Currency as it now is—insisting, however, that when we come to consider how it may be improved, the circumstances of its origin be not forgotten. In most great periods of expanding industry, the three great causes–much loanable capital, good credit, and the increased profits derived from better-used labour and better-used capital–have acted simultaneously; and though either may act by itself, there is a permanent reason why mostly they will act together.

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