We are constantly being told that the money market is an extremely sensitive organisation. And no wonder! The banks owe hundreds of millions on demand and short notice. Considerably over eighty per cent. of these millions is invested and lent, and as the banks' reserves of gold are small, every sudden demand for large supplies of the precious metals is liable to disorganise the market; and the Bank, which holds the final reserve, is therefore compelled to raise its rate of discount in order to protect the bullion in its Issue Department. But for this very reason capital may generally be borrowed more cheaply in London than elsewhere; and though cash is perhaps dangerously economised, credit is proportionately the more easily obtainable, and the price of a loan is cheaper than would be the case were the banks to maintain a higher ratio of cash to liabilities. They would then have less to lend, and in times when trade was brisk demand would drive up the rate of interest to higher figures than those which prevail under our present system, and reduce the profits of borrowers. The average rate, too, would be greater. The dangers of our system are very apparent, but so are its advantages; and though we consider it pays us to take the risks, it is evident that we cannot afford to neglect the necessary precautions. CHAPTER VI. Weekly Differences in the Return. It were better, before proceeding further, to give a copy of the Bank Return as it appears in the daily papers each Friday, when comparisons are made with the figures of the preceding week, and the various differences carried into distinctive columns. That for the week ended Wednesday, 1st October, 1902, has been selected, in order that the figures may be the same throughout this volume. The statement is given below: Issue Department. ========================================================================= 2 Oct., | | 24 Sept. | 1 Oct., |Increase.|Decrease. 1901. | | 1902. | 1902. | | -----------+-----------------+-----------+-----------+---------+--------- £ | £ | £ | £ | £ | £ 36,080,595| Gold and Bullion| 35,109,950| 33,617,330| ... |1,492,620 53,855,595| Notes Issued | 53,284,950| 51,792,330| ... |1,492,620 30,546,875| Circulation | 29,198,845| 30,401,185|1,202,340| ========================================================================= Banking Department.