As to the Bank of England, however, this is denied.  It is alleged that the Bank of England can keep aloof in a panic; that it can, if it will, let other banks and trades fail; that if it chooses, it can stand alone, and survive intact while all else perishes around it.  On various occasions, most influential persons, both in the government of the Bank and out of it, have said that such was their opinion.  And we must at once see whether this opinion is true or false, for it is absurd to attempt to estimate the conduct of the Bank of England during panics before we know what the precise position of the Bank in a panic really is.

The holders of this opinion in its most extreme form say, that in a panic the Bank of England can stay its hand at any time; that, though it has advanced much, it may refuse to advance more; that though the reserve may have been reduced by such advances, it may refuse to lessen it still further; that it can refuse to make any further dis counts; that the bills which it has discounted will become due; that it can refill its reserve by the payment of those bills; that it can sell stock or other securities, and so replenish its reserve still further.  But in this form the notion scarcely merits serious refutation.  If the Bank reserve has once become low, there are, in a panic, no means of raising it again.  Money parted with at such a time is very hard to get back; those who have taken it will not let it gonot, at least, unless they are sure of getting other money in its place.  And at such instant the recovery of money is as hard for the Bank of England as for any one else, probably even harder.  The difficulty is this:  if the Bank decline to discount, the holders of the bills previously discounted cannot pay.  As has been shown, trade in England is largely carried on with borrowed money.  If you propose greatly to reduce that amount, you will cause many failures unless you can pour in from elsewhere some equivalent amount of new money.  But in a panic there is no new money to be had; everybody who has it clings to it, and will not part with it.  Especially what has been advanced to merchants cannot easily be recovered; they are under immense liabilities, and they will not give back a penny which they imagine that even possibly they may need to discharge those liabilities.  And bankers are in even greater terror.  In a panic they will not discount a host of new bills; they are engrossed with their own liabilities and those of their own customers, and do not care for those of others.  The notion that the Bank of England can stop discounting in a panic, and so obtain fresh money, is a delusion.  It can stop discounting, of course, at pleasure.  But if it does, it will get in no new money; its bill case will daily be more and more packed with bills ‘returned unpaid.’