What then, subject to this preliminary explanation, is the amount of legal tender held by our bankers against their liabilities?  The answer is remarkable, and is the key to our whole system.  It may be broadly said that no bank in London or out of it holds any considerable sum in hard cash or legal tender (above what is wanted for its daily business) except the Banking Department of the Bank of England.  That department had on the 29th day of December, 1869, liabilities as follows: 

Public deposits 8,585,000 L
Private deposits 18,205,000 L
Seven-day and other bills 445,000 L
Total 27,235,000 L

and a cash reserve of 11,297,000 L. And this is all the cash reserve, we must carefully remember, which, under the law, the Banking Department of the Bank of England—­as we cumbrously call it the Bank of England for banking purposes—­possesses.  That department can no more multiply or manufacture bank notes than any other bank can multiply them.  At that particular day the Bank of England had only 11,297,000 L. in its till against liabilities of nearly three times the amount.  It had ‘Consols’ and other securities which it could offer for sale no doubt, and which, if sold, would augment its supply of bank notesand the relation of such securities to real cash will be discussed presently; but of real cash, the Bank of England for this purpose—­the banking bank—­had then so much and no more.

And we may well think this a great deal, if we examine the position of other banks.  No other bank holds any amount of substantial importance in its own till beyond what is wanted for daily purposes.  All London banks keep their principal reserve on deposit at the Banking Department of the Bank of England.  This is by far the easiest and safest place for them to use.  The Bank of England thus has the responsibility of taking care of it.  The same reasons which make it desirable for a private person to keep a banker make it also desirable for every banker, as respects his reserve, to bank with another banker if he safely can.  The custody of very large sums in solid cash entails much care, and some cost; everyone wishes to shift these upon others if he can do so without suffering.  Accordingly, the other bankers of London, having perfect confidence in the Bank of England, get that bank to keep their reserve for them.

The London bill brokers do much the same.  Indeed, they are only a special sort of bankers who allow daily interest on deposits, and who for most of their money give security.  But we have no concern now with these differences of detail.  The bill brokers lend most of their money, and deposit the remnant either with the Bank of England or some London banker.  That London banker lends what he chooses of it, the rest he leaves at the Bank of England.  You always come back to the Bank of England at last.  But those who keep immense sums with a banker gain a convenience at the expense of a danger.  They are liable to