It is certain that in all of these panics the bank has made very large advances

[65] A large part of the former was required for the discharge of some previously existing railway debentures, and for the purchase in England of railway materials chargeable to capital account. If railway stock is 10 per cent dearer this year than last, a speculator who borrows money to enable him to deal must borrow 10 per cent more this year than last, and in consequence there is an augmented demand for loans. So inadequate was his action that at first the fall in exchange was scarcely stayed at all.

He is, on finance, the natural exponent of the public opinion of England. He is the Prime Minister of the Bank Cabinet; and when so important a functionary changes, naturally much else changes too. And in the Bank of England there is a special provision for depriving them of it if they get it. 5, 10, 50, 100, 500, 1000, and 10,000. In France the difficulty of finding a good body to choose the Governor of the Bank has been met characteristically. His capital can bear only a limited number of purchases; if he bought as much as would fill his time from day to day he would soon be ruined, for he could not pay for it. Yet for the reasons already given it would not be worth while in existing circumstances for any one to borrow this sum and remit it to London, until such time as it may be again wanted in Calcutta;—it is better to let it lie idle and wait for busier times. In fact, the Bank of England suffers under two difficulties. There is nothing in law, therefore, to prevent exchange from falling indefinitely. Considerable sums would no doubt be drawn from them, but there would be no special reason why money should be demanded from them more than from any other money dealers. The payment of the dividends for the Government is, therefore, in great part a transfer from the account of the Government to the accounts of the various bankers. Her gold reserve is not large enough for the first expedient to be used lightly. The Balkan War was at this time at an acute stage, but the European situation was only moderately anxious. A firm or a person who have been long known to ‘meet their engagements,’ inspire a degree of confidence not dependent on the quantity of his or their property. │ R. This therefore is the reason why Lombard Street exists; that is, why England is a very great Money Market, and other European countries but small ones in comparison. d. In what form the best paper currency can be supplied to a country is a question of economical theory with which I do not meddle here. But a large part is employed in the purchase (or discount) of bills of exchange. And these losses were made in a manner so reckless and so foolish, that one would think a child who had lent money in the City of London would have lent it better. The Government are free in exceptional circumstances, as we have seen above, to place additional sums with the Presidency Banks on which interest is payable. In addition, the growth of banking in the intervening period has been on a very great scale; and there is, therefore, greater room for disturbance in the short–period loan market.

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