A certain proportion of the capital which flows into the London short loan fund is invested in securities by the bill brokers and the discount houses, and, as the said securities are deposited with the bankers from time to time against temporary advances, it follows that their choice is largely restricted to those of and guaranteed by the British Government, because the margin exacted on the so-called gilt-edged varieties is considerably less than that demanded upon the more fluctuating stocks and shares. The bankers themselves invest largely in the same class, and they also employ vast sums in the short loan market; so that when the market rate for bills is higher than the interest received upon, say, Consols, the bankers are disposed to sell some of their Consols in order to obtain the higher rates ruling in the outside market. Obviously, then, any accretion or diminution in the short loan fund at once affects the prices of gilt-edged securities. If the Bank rate be high, and also representative, Consols ought to fall, and, conversely, if the Bank of England's rate be low, trade dull, and the market rate of discount smaller than the return on Consols, gilt-edged securities should rise. If this be the case, a low Bank rate must give an immediate incentive to speculation in securities, and, therefore, the condition of the short loan fund is intimately connected with the prices of stocks and shares, but more particularly with those securities in which lenders in the money market largely invest. The banks--let the condition of the money market be what it may--must, of course, always invest a certain proportion of their resources in Consols, but the sum so invested is not constant. Again, powerful business firms and companies hold Government stock as reserves against contingencies. The Government makes large purchases in the Consol market on account of the Post Office Savings Bank and the Sinking Fund, while numerous other "bull" points could be given. However, the fact remains that cheap money provides a strong inducement to large speculative purchases of Consols. The large capitalists and those persons whose credit is good can borrow at, and sometimes even slightly below, Bank rate on Consols from the banks, which are satisfied with a small margin against possible depreciation on Government securities. If, therefore, we examine the period between February, 1894, and September, 1896, when the Bank rate was stationary at two per cent., it will be possible to illustrate this tendency. Day-to-day money was then sometimes quoted at one per cent. and under, and this state of affairs occasionally extended over protracted periods.