But nevertheless, as we have seen, the policy of the Bank has frequently been deplorable, and at such times the defects of its government have aggravated if not caused its calamities. 12.
As the Bank of England lends money to keep up the bankers’ balances, at their usual amount, and as by means of that usual amount whatever sum foreigners can get credit for may be taken from us, it is not possible to assign a superior limit (to use the scientific word) to the demands which by means of the bankers’ balances may be made upon the Bank of England.
But the Gold Standard Reserve, although about £1,000,000 worth of Consols was sold out in order to be ready for use in a more liquid form, was kept so far intact. Only under one or other of two conditions could loans from the Cash Balances be important: first, if the proceeds of taxation tended to accumulate in the Government Treasuries in the autumn and winter months so that the balances tended to be above their normal level at the busy season; and second, if the Government were to pursue the foolish policy of habitually keeping more ample balances than they really required.