The strain, too, on our banking reserve which is caused by the demands of the bill-brokers, is also more dangerous than it would be under a natural system, because that reserve is in itself less.  The system of keeping the entire ultimate reserve at a single bank, undoubtedly diminishes the amount of reserve which is kept.  And exactly on that very account the danger of any particular demand on that reserve is augmented, because the magnitude of the fund upon which that demand falls is diminished.  So that our one-reserve system of banking combines two evils:  first, it makes the demand of the brokers upon the final reserve greater, because under it so many bankers remove so much money from the brokers; and under it also the final reserve is reduced to its minimum point, and the entire system of credit is made more delicate, and more sensitive.

The peculiarity, indeed, of the effects of the one reserve is indeed even greater in this respect.  Under the natural system, the billbrokers would be in no respect the rivals of the bankers which kept the ultimate reserve.  They would be rather the agents for these bankers in lending upon certain securities which they did not themselves like, or on which they did not feel competent to lend safely.  The bankers who in time of panic had to help them would in ordinary times derive much advantage from them.  But under our present system all this is reversed.  The Bank of England never deposits any money with the bill-brokers; in ordinary times it never derives any advantage from them.  On the other hand, as the Bank carries on itself a large discount business, as it considers that it is itself competent to lend on all kinds of bills, the bill-brokers are its most formidable rivals.  As they constantly give high rates for money it is necessary that they should undersell the Bank, and in ordinary times they do undersell it.  But as the Bank of England alone keeps the final banking reserve, the bill-brokers of necessity have to resort to that final reserve; so that at every panic, and by the essential constitution of the money market, the Bank of England has to help, has to maintain in existence, the dealers, who never in return help the Bank at any time, but who are in ordinary times its closest competitors and its keenest rivals.

It might be expected that such a state of things would cause much discontent at the Bank of England, and in matter of fact there has been much discussion about it, and much objection taken to it.  After the panic of 1857, this was so especially.  During that panic, the Bank of England advanced to the bill-brokers more than 9,000,000 L., though their advances to bankers, whether London or country, were only 8,000,000 L.; and, not unnaturally, the Bank thought it unreasonable that so large an inroad upon their resources should be made by their rivals.  In consequence, in 1858 they made a rule that they would only advance to the bill-brokers at certain seasons of the year, when