I admit that this conclusion is very inconvenient.  In past times it has been a great aid to the Bank and to the public to be able to decide on the proper policy of the Bank from a mere inspection of its account.  In that way the Bank knew easily what to do and the public knew easily what to foresee.  But, unhappily, the rule which is most simple is not always the rule which is most to be relied upon.  The practical difficulties of life often cannot be met by very simple rules; those dangers being complex and many, the rules for encountering them cannot well be single or simple.  A uniform remedy for many diseases often ends by killing the patient.

Another simple rule often laid down for the management of the Bank of England must now be abandoned also.  It has been said that the Bank of England should look to the market rate, and make its own rate conform to that.  This rule was, indeed, always erroneous.  The first duty of the Bank of England was to protect the ultimate cash of the country, and to raise the rate of interest so as to protect it.  But this rule was never so erroneous as now, because the number of sudden demands upon that reserve was never formerly so great.  The market rate of Lombard Street is not influenced by those demands.  That rate is determined by the amount of deposits in the hands of bill-brokers and bankers, and the amount of good bills and acceptable securities offered at the moment.  The probable efflux of bullion from the Bank scarcely affects it at all; even the real efflux affects it but little; if the open market did not believe that the Bank rate would be altered in consequence of such effluxes the market rate would not rise.  If the Bank choose to let its bullion go unheeded, and is seen to be going so to choose, the value of money in Lombard Street will remain unaltered.  The more numerous the demands on the Bank for bullion, and the more variable their magnitude, the more dangerous is the rule that the Bank rate of discount should conform to the market rate.  In former quiet times the influence, or the partial influence, of that rule has often produced grave disasters.  In the present difficult times an adherence to it is a recipe for making a large number of panics.

A more distinct view of abstract principle must be taken before we can fix on the amount of the reserve which the Bank of England ought to keep.  Why should a bank keep any reserve?  Because it may be called on to pay certain liabilities at once and in a moment.  Why does any bank publish an account?  In order to satisfy the public that it possesses cashor available securitiesenough to meet its liabilities.  The object of publishing the account of the banking department of the Bank of England is to let the nation see how the national reserve of cash stands, to assure the public that there is enough and more than enough to meet not only all probable calls, but all calls of which there can be a chance of reasonable apprehension.