3. In the early days of banking of the modern type in England, gold was not infrequently required to meet runs on banks by their depositors, who were always liable in difficult times to fall into a state of panic lest they should be unable to withdraw their deposits in case of real need. With the growth of the stability of banking, and especially with the growth of confidence in this stability amongst depositors, these occasions have become more and more infrequent, and many years have now passed since there has been any run of dangerous proportions on English banks. Gold reserves, therefore, in Great Britain are no longer held primarily with a view to emergencies of this kind. The uses of gold coin in Great Britain are now three—as the medium of exchange for certain kinds of out–of–pocket expenditure, such as that on railway travelling, for which custom requires cash payment; for the payment of wages; and to meet a drain of specie abroad. Fluctuations in the demand for gold in the first two uses are of secondary importance, and can usually be predicted with a good deal of accuracy,—at holiday seasons, at the turn of the quarter, at the end of the week, at harvest. Fluctuations in the demand in the third use are of greater magnitude and, apart from the regular autumn drain, not so easily foreseen. Our gold reserve policy is mainly dictated, therefore, by considerations arising out of the possible demand for export. To guard against a possible drain of gold abroad, a complicated mechanism has been developed which in the details of its working is peculiar to this country. A drain of gold can only come about if foreigners choose to turn into gold claims, which they have against us for immediate payment, and we have no counterbalancing claims against them for equally immediate payment. The drain can only be stopped if we can rapidly bring to bear our counterbalancing claims. When we come to consider how this can best be done, it is to be noticed that the position of a country which is preponderantly a creditor in the international short–loan market is quite different from that of a country which is preponderantly a debtor. In the former case, which is that of Great Britain, it is a question of reducing the amount lent; in the latter case it is a question of increasing the amount borrowed. A machinery which is adapted for action of the first kind may be ill suited for action of the second. Partly as a consequence of this, partly as a consequence of the peculiar organisation of the London Money Market, the “bank rate” policy for regulating the outflow of gold has been admirably successful in this country, and yet cannot stand elsewhere unaided by other devices. It is not necessary for the purposes of this survey to consider precisely how changes in the bank rate affect the balance of immediate indebtedness. It will be sufficient to say that it tends to hamper the brokers, who act as middlemen between the British short–loan fund and the foreign