No doubt all precautions may, in the end, be unavailing.  ’On extraordinary occasions,’ says Ricardo, ’a general panic may seize the country, when every one becomes desirous of possessing himself of the precious metals as the most convenient mode of realising or concealing his property, against such panic banks have no security on any system.’  The bank or banks which hold the reserve may last a little longer than the others; but if apprehension pass a certain bound, they must perish too.  The use of credit is, that it enables debtors to use a certain part of the money their creditors have lent them.  If all those creditors demand all that money at once, they cannot have it, for that which their debtors have used, is for the time employed, and not to be obtained.  With the advantages of credit we must take the disadvantages too; but to lessen them as much as we can, we must keep a great store of ready money always available, and advance out of it very freely in periods of panic, and in times of incipient alarm.

The management of the Money Market is the more difficult, because, as has been said, periods of internal panic and external demand for bullion commonly occur together.  The foreign drain empties the Bank till, and that emptiness, and the resulting rise in the rate of discount, tend to frighten the market.  The holders of the reserve have, therefore, to treat two opposite maladies at once—­one requiring stringent remedies, and especially a rapid rise in the rate of interest; and the other, an alleviative treatment with large and ready loans.

Before we had much specific experience, it was not easy to prescribe for this compound disease; but now we know how to deal with it.  We must look first to the foreign drain, and raise the rate of interest as high as may be necessary.  Unless you can stop the foreign export, you cannot allay the domestic alarm.  The Bank will get poorer and poorer, and its poverty will protract or renew the apprehension.  And at the rate of interest so raised, the holdersone or more-of the final Bank reserve must lend freely.  Very large loans at very high rates are the best remedy for the worst malady of the money market when a foreign drain is added to a domestic drain.  Any notion that money is not to be had, or that it may not be had at any price, only raises alarm to panic and enhances panic to madness.  But though the rule is clear, the greatest delicacy, the finest and best skilled judgment, are needed to deal at once with such great and contrary evils.

And great as is the delicacy of such a problem in all countries, it is far greater in England now than it was or is elsewhere.  The strain thrown by a panic on the final bank reserve is proportional to the magnitude of a country’s commerce, and to the number and size of the dependent banks—­banks, that is, holding no cash reservethat are grouped around the central bank or banks.  And in both respects our system causes a stupendous strain.  The magnitude