When rupees are issued, the government, instead of being able to place to reserve the whole

The Position of the Chancellor of the Exchequer in the Money Market.

The difficulty of the subject is due to it. As in India their exchange policy was evolved gradually. If you say that the Bank shall always hold one-third of its liabilities as a reserve, you say in fact that this one-third shall always be useless, for out of it the Bank cannot make advances, cannot give extra help, cannot do what we have seen the holders of the ultimate reserve ought to do and must do. Deposit Banking is indeed so small on the Continent, that no large reserve need be held on account of it. A drain of gold can only come about if foreigners choose to turn into gold claims, which they have against us for immediate payment, and we have no counterbalancing claims against them for equally immediate payment.

The principle of which we are in search is, therefore, that the sums borrowed on relatively short notice in either country should not exceed the assets located there. But none of them, except a few of the largest, are believed at all to gain business.

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