It may indeed be said that the money thus taken from the Banking Department of the Bank of England would return there immediately; that the public who borrowed it would not know where else to deposit it; that it would be taken out in the morning, and put back in the evening.  But, in the first place, this argument assumes that the Banking Department would have enough money to pay the demands on it; and this is a mistake:  the Banking Department would not have a hundredth part of the necessary funds.  And in the second, a great panic which deranged the Clearing-house would soon be diffused all through the country.  The money therefore taken from the Bank of England could not be soon returned to the Bank; it would not come back on the evening of the day on which it was taken out, or for many days; it would be distributed through the length and breadth of the country, wherever there were bankers, wherever there was trade, wherever there were liabilities, wherever there was terror.

And even in London, so immense a panic would soon impair the credit of the Banking Department of the Bank of England.  That department has no great prestige.  It was only created in 1844, and it has failed three times since.  The world would imagine that what has happened before will happen again; and when they have got money, they will not deposit it at an establishment which may not be able to repay it.  This did not happen in former panics, because the case we are considering never arose.  The Bank was helping the public, and, more or less confidently, it was believed that the Government would help the Bank.  But if the policy be relinquished which formerly assuaged alarm, that alarm will be protracted and enhanced, till it touch the Banking Department of the Bank itself.

I do not imagine that it would touch the Issue Department.  I think that the public would be quite satisfied if they obtained banknotes.  Generally nothing is gained by holding the notes of a bank instead of depositing them at a bank.  But in the Bank of England there is a great difference:  their notes are legal tender.  Whoever holds them can always pay his debts, and, except for foreign payments, he could want no more.  The rush would be for bank-notes; those that could be obtained would be carried north, south, east, and west, and, as there would not be enough for all the country, the Banking Department would soon pay away all it had.

Nothing, therefore, can be more certain than that the Bank of England has in this respect no peculiar privilege; that it is simply in the position of a Bank keeping the Banking reserve of the country; that it must in time of panic do what all other similar banks must do; that in time of panic it must advance freely and vigorously to the public out of the reserve.