Money begins to leave the Bank for internal circulation during the summer months in order to meet the demands created by the holidays and the harvest, and then in October there is always the probability of a large outflow of gold to the States to help pay for the crops imported therefrom; while the movement of specie to Scotland in November, occurring as it does just at a critical moment, is likely to cause some apprehension, should the Bank's reserve have been depleted earlier, unless the fact that it is merely a temporary transfer to enable the Scotch banks to comply with the Act of 1845 be thoroughly grasped. The October drain of gold from the Bank when the New York exchange is unfavourable has in it an element of danger, especially if it happen at a time when the reserve at the Bank of England is unusually low; and if loanable capital be then abnormally scarce there is always the risk that the end of the year requirements may produce a tension, which, should credit be bad at the time, may develop into a panic. If the Bank manage well, however, it fortunately often foresees that the autumnal demands may possibly impose a severe temporary strain upon its resources, and by raising its rate in anticipation of a short period of exceptional demand, it attracts gold to itself in order to be thoroughly prepared for possible large depletions of currency later on, for it is easier to accumulate gold before the event than to check an outflow when the movement is beginning to create uneasiness, and to attract attention to the lack of preparedness on the part of the Bank to meet large withdrawals of specie for export. It is not my intention to write a treatise on the foreign exchanges, and I am quite well aware that I have only touched on the fringe of a great subject; but if these illustrations help, however slightly, to elucidate certain of those undercurrents which determine prices, then the sole aim of this chapter has been attained. CHAPTER IX. Banks and the Creation of Credit. We have seen how the Bank of England came to occupy so commanding a position in the money market, and we now have to consider why its rate of discount is still a fairly reliable index to the value of loanable capital. Its advent was extremely distasteful to the private bankers, who then reigned supreme in London, and who were not slow to recognise in the new corporation a formidable competitor, for a company which financed the Government was obviously to be feared. Before 1826 the Bank of England was the only joint stock bank in the country. Its notes gradually drove those of the London bankers out of circulation, and until its joint stock rivals firmly established themselves in the Metropolis, the Bank was in every sense the most powerful institution of its kind in the land.