Theory suggests, and experience proves, that in a panic the holders of the ultimate bank reserve

It is absurd for a man with a large balance at his bank to default to his creditors, because a feeling of jealousy, in regard to any one in whose favour he draws a cheque, prevents him from ever drawing one. But, in the first place, this argument assumes that the Banking Department would have enough money to pay the demands on it; and this is a mistake: the Banking Department would not have a hundredth part of the necessary funds. │ August. A further passage from the address he delivered on the same occasion (in proposing a scheme of one–pound notes for England) is relevant here:—“I would much prefer for national and monetary purposes to have £20,000,000 of gold under our command at the Bank of England than 30,000,000 sovereigns in the hands of the public.

Germany led the way in 1871–73. All the usual tests indicate that–the state of the Revenue, the Bankers’ Clearing-house figures, the returns of exports and imports are all plain, and all speak the same language. It is desirable to encourage the popularity of the note issue, and to avoid encouraging its rivals, not only for reasons of immediate economy or because, by the centralisation of the reserves, the stability of the currency is increased, but also because, in a country where cheques are not likely for many years to come to be used to a dominating extent, it is only thus that a proper degree of seasonal elasticity in the currency can possibly be secured.

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