We know that efforts are made, by raising the Bank rate, to replenish the reserve automatically from outside sources. But whether the gold flows in or not, it does not disprove the fact that a high proportion in the independent joint stock banks and in the independent Bank of England cannot be maintained at simultaneous moments except by a simultaneous refusal to lend. It needs no exceptional power of imagination to picture what would result from this action. It would have the same consequences as a great destruction of capital by war or any other calamity. If we had an elastic legal tender system, to provide for what I call a supplementary inflow of legal tender, we could avoid many inconveniences from which the money market and the nation suffers. The supply of liquid capital in a perfect economic system should keep pace with the output of wealth. But our system is not perfect. Progress must necessarily be impeded by artificial and arbitrary restrictions. I think, too, we could simplify the problem by segregating the composite deposits of a bank. These deposits are an aggregation of what I call, for lack of something more precise, pure deposits and loan-deposits. The loan-deposits are debts to the bank, which the bank has power to call in. If these loan-depositors have legal power to withdraw money on demand, the banks have power to withdraw from many of them on demand. On the approach of a crisis, or stringency, they do this, though in certain contingencies such withdrawals might precipitate a crisis. Nevertheless, the important fact remains that they have power to call them in. If we set the gold reserves against the pure deposits we shall find that the reserve is invariably high. But why do we want a high proportion? Why do we wish to hoard gold, when we know that the hoarding of gold is more harmful than beneficial? To avoid a panic, the critics and seers say. But a panic is not a mathematical problem; it is a psychological problem. If mathematics could save us from fear and madness we could then automatically ensure general sanity and common sense. What mathematical proportion will save us from a panic? Who is to lay down the proportion? Where are we to draw the magical line of safety? Is it to be an exact proportion or an approximate proportion? Is it to be an universally exact or universally approximate proportion? Or is it to be an individually exact or approximate proportion? There can be no exactitude, particularly if we include the Bank of England. In mathematics, however, we must have exactitude, for half per cent below the formula might be fatal. And if in order to keep up the proportion simultaneously in Lombard Street and Threadneedle Street lending ceases, then the crisis comes, despite the proportion.