And further, the Government have not until quite lately held more sterling resources altogether than have been required for the stability of the system.
In the autumn of 1864 there was especial danger; but, by a rapid and able use of their new policy, the Bank of England maintained an adequate reserve, and preserved the country from calamities which, if we had looked only to precedent, would have seemed inevitable. The Viceroy’s minute was unfavourable. New wants are mostly supplied by adaptation, not by creation or foundation.
These are wanted in all industries, and in any general increase of prices, they are sure to rise much more than other things. By painful events and incessant discussions, men of business have now been trained to see that a large banking reserve is necessary, and to understand that, in the curious constitution of the English banking world, the Bank of England is the only body which could effectually keep it. There is, _prima facie_, some danger to the stability of the Indian financial system in the fact that its money market is largely financed by funds raised, not permanently but for short periods, in a far–distant foreign centre.