It may be replied, that though our instant liabilities are great, our present means are large; that though we have much we may be asked to pay at any moment, we have very much always ready to pay it with.  But, on the contrary, there is no country at present, and there never was any country before, in which the ratio of the cash reserve to the bank deposits was so small as it is now in England.  So far from our being able to rely on the proportional magnitude of our cash in hand, the amount of that cash is so exceedingly small that a bystander almost trembles when he compares its minuteness with the immensity of the credit which rests upon it.

Again, it may be said that we need not be alarmed at the magnitude of our credit system or at its refinement, for that we have learned by experience the way of controlling it, and always manage it with discretion.  But we do not always manage it with discretion.  There is the astounding instance of Overend, Gurney, and Co. to the contrary.  Ten years ago that house stood next to the Bank of England in the City of London; it was better known abroad than any similar firm known, perhaps, better than any purely English firm.  The partners had great estates, which had mostly been made in the business.  They still derived an immense income from it.  Yet in six years they lost all their own wealth, sold the business to the company, and then lost a large part of the company’s capital.  And these losses were made in a manner so reckless and so foolish, that one would think a child who had lent money in the City of London would have lent it better.  After this example, we must not confide too surely in long-established credit, or in firmly-rooted traditions of business.  We must examine the system on which these great masses of money are manipulated, and assure ourselves that it is safe and right.

But it is not easy to rouse men of business to the task.  They let the tide of business float before them; they make money or strive to do so while it passes, and they are unwilling to think where it is going.  Even the great collapse of Overends, though it caused a panic, is beginning to be forgotten.  Most men of business think’Anyhow this system will probably last my time.  It has gone on a long time, and is likely to go on still.’  But the exact point is, that it has not gone on a long time.  The collection of these immense sums in one place and in few hands is perfectly new.  In 1844 the liabilities of the four great London Joint Stock Banks were 10,637,000 L.; they now are more than 60,000,000 L. The private deposits of the Bank of England then were 9,000,000 L.; they now are 8,000,000 L. There was in throughout the country but a fraction of the vast deposit business which now exists.  We cannot appeal, therefore, to experience to prove the safety of our system as it now is, for the present magnitude of that system is entirely new.  Obviously a system may be fit to regulate a few millions, and yet quite inadequate when it is set to cope with many millions.  And thus it may be with ‘Lombard Street,’ so rapid has been its growth, and so unprecedented is its nature.