And there is no doubt that the publication of the Bank account gives more stability to the money market than any other kind of precaution would give.  Some persons, indeed, feared that the opposite result would happen; they feared that the constant publication of the incessant changes in the reserve would terrify and harass the public mind.  An old banker once told me:  ’Sir, I was on Lord Althorp’s committee which decided on the publication of the Bank account, and I voted against it.  I thought it would frighten people.  But I am bound to own that the committee was right and I was wrong, for that publication has given the money market a greater sense of security than anything else which has happened in my time.’  The diffusion of confidence through Lombard Street and the world is the object of the publication of the Bank accounts and of the Bank reserve.

But that object is not attained if the amount of that reserve when so published is not enough to tranquillise people.  A panic is sure to be caused if that reserve is, from whatever cause, exceedingly low.  At every moment there is a certain minimum which I will call the apprehension minimum,’ below which the reserve cannot fall without great risk of diffused fear; and by this I do not mean absolute panic, but only a vague fright and timorousness which spreads itself instantly, and as if by magic, over the public mind.  Such seasons of incipient alarm are exceedingly dangerous, because they beget the calamities they dread.  What is most feared at such moments of susceptibility is the destruction of credit; and if any grave failure or bad event happens at such moments, the public fancy seizes on it, there is a general run, and credit is suspended.  The Bank reserve then never ought to be diminished below the ‘apprehension point.’  And this is as much as to say, that it never ought very closely to approach that point; since, if it gets very near, some accident may easily bring it down to that point and cause the evil that is feared.

There is no ‘royal road’ to the amount of the ’apprehension minimum’:  no abstract argument, and no mathematical computation will teach it to us.  And we cannot expect that they should.  Credit is an opinion generated by circumstances and varying with those circumstances.  The state of credit at any particular time is a matter of fact only to be ascertained like other matters of fact; it can only be known by trial and inquiry.  And in the same way, nothing but experience can tell us what amount of ‘reserve’ will create a diffused confidence; on such a subject there is no way of arriving at a just conclusion except by incessantly watching the public mind, and seeing at each juncture how it is affected.

Of course in such a matter the cardinal rule to be observed is, that errors of excess are innocuous but errors of defect are destructive.  Too much reserve only means a small loss of profit, but too small a reserve may mean ‘ruin.’  Credit may be at once shaken, and if some terrifying accident happen to supervene, there may be a run on the Banking department that may be too much for it, as in 1857 and 1866, and may make it unable to pay its way without assistanceas it was m those years.