“A loan in this market to increase the capital of the banks, to be subscribed for by the public who have deposits with them, is merely transferring a liability now existing on the part of the bankers to the public, from their depositors to their shareholders. The only way the bankers can increase their cash in hand, or balances at the Bank of England, is by following the method now pursued, namely, calling in their short loans so that the market has to borrow at the Bank of England. To put their position permanently on a sounder basis they must agree that instead of calling in their loans temporarily, they must all keep permanently larger balances at the Bank of England. Then the gold reserves of the country will be increased, provided that the Bank of England maintains its usual ratio of cash to liabilities. Taking that as 45 per cent.—the average proportion for the last twenty years ending 31st December, 1903, has been 46·6 per cent.—a permanent increase of £15,000,000 to the bankers’ balances would increase the gold reserve of the country by £6,750,000, and bring the average holding of the Bank of England in the Banking and Issue departments combined up to about £40,000,000. The reason for desiring to have a rather larger stock of gold at the Bank is that the export then of a few millions is of relatively less importance. But we do not want more than is requisite for the easy and safe working of our system. To sit on a hoard of unused gold is to do away with the advantages of banking. What is requisite is for this country to retain the power of attracting gold when it is required. Neither the system of banking nor the bankers can give it that power, for it is dependent, not on them, but on the successful business energy and activity of the nation. Of course, in order to attract and retain here the amount of gold mentioned above, the Bank of England must adjust its rate to circumstances, but with the increasing supplies of gold, actual and prospective, a reasonable rate is likely to suffice.” These remarks caused some discussion, during which it was pointed out that under Mr. Tritton’s proposal the banks would collectively form a gold fund of £15,000,000, at a cost to themselves of £450,000. Under Mr. Cole’s proposal, however, for the banks to increase their balances at the Bank of England by the sum of £15,000,000, the extra gold held in the country would only be increased by the sum of £6,750,000 (according to the proportion of the reserve held to public liabilities, which has been 45 per cent. on an average for the last twenty years), while the Bank would make a considerable profit from the remainder of the increased balances—a profit earned entirely at the expense of the banks.