Banks do and must speculate to some extent. It is unavoidable. If they did not speculate they would not incur bad and doubtful debts. But they must keep their speculations within the most prudent limits. This most of them undoubtedly do. Traders complain that they are, indeed, too cautious in this respect, that they do not lend freely enough. There have been, indeed, most bitter complaints on this head since the outbreak of the war. But we cannot reasonably insist upon banks being ultra-cautious, and in the same breath complain of their cautiousness. We cannot reasonably insist upon them keeping large gold reserves, thereby diminishing their loan capacity, and with equal reason insist that they shall lend with increased liberality. This is as impossible as trying to reach two goals simultaneously, when each lies in a direction opposite to the other. The man in the street would say you cannot eat your cake and have it. When a bank lends to a man or firm on good security, it cannot be sure, of course, that that man or firm will be able to pay off the loan when it falls due. We may, if we wish, call this a speculative chance, but the bank is considerably safeguarded by the security it possesses. Public confidence is based, therefore, upon the soundness of banking methods. It is an article of belief with us that banks become gravely imperilled when confidence breaks down. It is when confidence is destroyed that runs on banks commence. Fear seizes the public, it develops into panic, depositors clamour for their deposit money, and banks either successfully meet these runs, or close their doors. But so long as confidence is strong and unimpaired, sound banks keep safe. The safety of banks depends, therefore, upon this feeling of confidence in them, and this feeling of confidence, in its turn, is based upon the intelligence and common sense of the public. Up to now this intelligence and common sense have been triumphant. They have triumphed in a crisis unparalleled in the history of the British Empire, in that very crisis, in fact, which the prophets always feared would show their superficiality and vulnerability. The predictions of the prophets have not been realized. This is because human genius and human wisdom have been mightier than human fear and apprehension, because the nation had supreme faith in the Government, in the economic strength of the Empire, and in the might of its navy and army. And if the prophets have prophesied falsely in this supreme situation, they are just as likely to prophesy falsely in other potential emergencies. CHAPTER VI THE SUPERSTRUCTURE OF WEALTH