If the bankers gratify the merchants, they must lend largely just when they like it least;

But the possessor of money has rarely been willing to pay anything; he has usually and rightly believed that the borrower would discover him soon. The interest of capital having been reduced in such countries, he argued, by the necessity of continually resorting to inferior soils, they can undersell countries where profit is high in all trades needing great capital. Very much of it is repayable at demand, or at very short notice. In Lancashire there is little or no circulation of country bank-notes; but there is a great circulation of bills drawn upon London at two or three months’ date. , these bills being cashed in London out of the Gold Standard Reserve.

But its effect was very important. They renewed India Bills (which were eventually paid off in December 1912) when they could have very well afforded to discharge them.

To have an interesting occupation which brings dignity and power with it pleases them very much. In years of normal activity, therefore, there may be considerable stores of rupees lying idle in the reserves beyond what is required for the safety of the currency. There has never been a distinct resolution passed by the Directors of the Bank of England, and communicated by them to the public, stating even in the most general manner, how much reserve they mean to keep or how much they do not mean, or by what principle in this important matter they will be guided.

The theory of her arrangements seems to be that she depends on her bank rate after the British model; but in practice her bank rate is not easily rendered effective, and must usually be reinforced by much unseen pressure by the Reichsbank on the other elements of the money market.

At last a scheme was hit upon which would relieve their necessities.

In a short time they substituted ruin for prosperity and changed opulence into insolvency. The amount of the present business of private banks is perfectly unknown. According to these ideas, the proper principles of note issue were two—first, that the function of note issue should be entirely dissociated from that of banking; and second, that “the amount of notes issued on Government securities should be maintained at a fixed sum, within the limit of the smallest amount which experience has proved to be necessary for the monetary transactions of the country, and that any further amount of notes should be issued on coin or bullion. CHAPTER X. A good deal of experience with regard to note issues has now been accumulated elsewhere which ought some day to prove useful to India if her English rulers can sufficiently free themselves from their English traditions and preconceptions. It assumes that what works most easily when established is that which it would be the most easy to establish, and that what seems simplest when familiar would be most easily appreciated by the mind though unfamiliar. But we cannot assume that even this reduced total is truly employed as a medium of exchange.

The Bank directors now fear public opinion exceedingly; probably no kind of persons are so sensitive to newspaper criticism.

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