The practical difficulties of life often cannot be met by very simple rules; those dangers being

[1] 4.

In my opinion this is the truth: since 1844, Lombard Street is so changed that we cannot judge of it without describing and discussing a most vigorous adult world which then was small and weak. The use of credit is, that it enables debtors to use a certain part of the money their creditors have lent them. As soon, therefore, as the withdrawal of the German money reduces the bankers’ balances, there is a new demand on the Bank for fresh discounts to make up those balances. A preference for a tangible gold currency is no longer more than a relic of a time when Governments were less trustworthy in these matters than they are now, and when it was the fashion to imitate uncritically the system which had been established in England and had seemed to work so well during the second quarter of the nineteenth century. But a further analysis will, as I believe, show that this conclusion is entirely false; that the bankers’ deposits are a singularly treacherous form of liability; that the utmost caution ought to be used in dealing with them; that, as a rule, a less proportion of them ought to be lent than of ordinary deposits.

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