“Any sudden event which creates a great demand for actual cash may cause, and will tend to cause, a panic in a country where cash is much economised, and where debts payable on demand are large. In such a country an immense credit rests on a small cash reserve, and an unexpected and large diminution of that reserve may easily break up and shatter very much, if not the whole, of that credit. Such accidental events are of the most various nature: a bad harvest, an apprehension of foreign invasion, the sudden failure of a great firm which everybody trusted, and many other similar events have all caused a sudden demand for cash.” A banker therefore fortifies himself against any sudden or unexpected call by keeping much more cash in his till than he is ever likely to require in normal times; by maintaining a large balance with the Bank of England—which to all intents and purposes is equivalent to “cash” in the till; and by lending out large amounts to bill-brokers, which advances are fully secured, and are repayable either on demand or at short notice. He is able to arrange the amount advanced in this way from day to day—by lending further sums or calling in loans—according to the circumstances of the moment, so that he can maintain that amount in “cash” or “bank balance” which he considers necessary for his safety. So we see that “cash” and “balance” at the Bank of England together constitute a banker’s first line of defence—they are, so to speak, his “firing line”—and the money which he lends to the bill-brokers constitutes the “supports” to the “firing line.” The next defence which a banker maintains against possible pressure is represented by the amount invested in securities. Investments yield on an average a higher return than sums lent at short notice or call; but it must be remembered that securities are not so easily realised, if the necessity should arise. Of these investments a large portion is represented by Consols, as, in case of need, these can always be sold for cash at very short notice, or in case of great pressure doubtless the Bank of England would be willing to make advances on the security of this stock. Of securities guaranteed by the British Government, other than Consols, there will probably be a large holding, although these securities might not in time of panic be so readily realisable as Consols. Yet it is probable that the Bank of England would, in order to avert disaster, accept such stocks as security against advances. Other high-class securities which yield a somewhat higher return will also probably be held to a large amount. A banker, however, should not rely too much on these securities for purposes of realisation in time of monetary pressure, it being quite possible that at such times there would be no buyers of any class of securities with the probable exception of Consols.