Page:The Bank of England and the State, 1905.djvu/31

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The Bank of England and the State.

deavouring to meet all the necessities of a crisis: it still fills such a position that the whole of the country looks to it to extricate it from a difficulty, but it does not command any longer the same proportionate resources it commanded in the old times. It is unable at this moment, in the face of the 600 millions of deposits entrusted to other banks, to take up the same position as in times past." And he goes on to tell us that he, at that time Chancellor of the Exchequer, was engaged, with the assistance of the authorities of the Bank of England, in devising some actual scheme to strengthen the permanent reserves of the country. It was a second reserve to be managed by the Bank of England that he was contemplating, and he calls upon the great banking institutions to take their share in endeavouring to bring about the desired result.

Here you have the method described which, in my opinion, is the only one by which the reforms, which bankers are unanimous in advocating, can be obtained: the initiative of the Government in consultation with the Bank of England and with the co-operation of the great banking institutions. What Lord Goschen had in his mind at that time was the issue of £1 notes, and the gold which was to be the basis for this issue was to form a second central reserve. In addition to this he desired the strengthening of the general cash reserves of the banks. The issue of £1 notes did not commend itself to the public: I do not think Lord Goschen is quite right in stating that the banking world alone hung back. General objections were taken to the idea, and he himself now admits that he was not an enthusiast for such notes. Personally, I think the amount of gold in actual circulation is so small that I should prefer not to deplete it further, but to create a separate and quite independent, gold reserve.

Lord Goschen impressed upon bankers the necessity of keeping larger cash reserves, and to a great extent I believe this appeal has been loyally responded to. Banking amalgamations must also have contributed to larger reserves being generally held. Whether the burden has been shared equally by all is