hands of the Bank of England; but apart from the difficulty of enforcing such a recommendation, and applying it fairly not only to London Clearing Banks, but to all the banks, there is this objection, that according to the system now prevailing, the Bank of England would employ about 60 per cent. of such increase in the market, and only about 40 per cent. would represent the actual increase in the reserve; the advantage to the community, therefore, would not be proportionate to the sacrifice made.
A second reserve of gold would not be created: far better would it be if banks decided on increasing their own cash reserves, to keep them in their own vaults in gold or notes. It is very probable that a movement in this direction has taken place in many quarters, and that the cash reserves of many bankers are not now represented entirely by their balances in the Bank of England, or by what is generally described as their till money; but that they do hold actual cash reserves not used in their daily business; and that is, after all, the real meaning of a reserve. Individual action, such as this, useful as it is, doe not, however, fully meet the case either; and what we should, in my opinion, aim at, is the creation of a second central gold reserve to be held by, and managed under the supervision of, the Bank of England. Towards the solution of the question in such a way my own efforts have been directed.
One more incident that occurred during the last few years appears to be worthy of mention in considering the relation between the State and the Bank of England, an incident which shows that there are still considerable and important powers affecting the currency which the Act of 1844 has left to the discretion of the authorities of the Bank. According to the provisions of the Act of 1844, the Issue Department of the Bank was authorised to issue notes against an amount of silver bullion not exceeding one-fourth part of the gold coin or bullion held; but this power was acted upon only to a very slight extent until 1850, and again in 1860 and 1861, otherwise all issues have been made against gold. In 1897 considerable excitement was caused when it appeared that certain proposals had been laid before our