The paper currency reserve is thus used to provide the gold which is the first line

But _temporary_ additions, due to seasonal demand, ought to be provided by a suitable organisation of credit money in India herself. It is not likely that we shall leave permanently the most intimate adjustments of our economic organism at the mercy of a lucky prospector, a new chemical process, or a change of ideas in Asia. The complete uncertainty as to the degree of responsibility acknowledged by the Bank of England is best illustrated by what has been said by the Bank directors themselves as to the panic of 1866.

It can stop discounting, of course, at pleasure. A surfeit of gold can do at least as much damage as a shortage. The growth of banking habits in India is, of course, of the utmost importance to the country’s economic development. It subsisted mostly on its note issue, and a little on its remittance business. 12. This cost varies considerably from time to time, but it seldom exceeds ⅛d.

For more than a century after its creation (notwithstanding occasional errors) the Bank of England, in the main, acted with judgment and with caution.

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