If there are times and occasions when banks stop lending and when they call in their loans, then it follows, reverting to market parlance, that the loan-fund is inelastic. If it cannot always and invariably respond to needs, then it cannot conform itself to varying conditions and circumstances. This fact, therefore, supports the contentions of those who say that the fund is inelastic. In my way I say the machinery is far from perfect. It always works with difficulty at the very time when it should work with ease. It will come to a dead stop at the moment when it should be working at high pressure. To make the position clearer I will recall what Mr. A. C. Cole said in his controversy with Mr. Tritton. “I entirely disagree,” he said, “as to the inelasticity of this fund. My view is that the inelasticity is apparent, but not real. By this I mean that it is inelastic at any given moment because, in these days of competition, bankers lend all their available surpluses; but to say that the short loan fund is permanently elastic is quite beside the mark. What does inelasticity of the market mean? It means the want of power of the market to adjust itself to pressure or tension. Now, take the discount market. The supply of money always adjusts itself to the demand. Except in times of panic, good bills are always discountable in London. This Mr. Tritton practically admits in his paper. As regards the large amounts of Treasury bills, Exchequer bonds, etc., of which there has been a marked increase in recent years, owing to the [Boer] war, Mr. Tritton says it is not very clear from what source the funds so invested have arisen. This gives away his case, for it is an admission that the money has been forthcoming. In other words, the supply in the short-loan market has been increased because the demands upon it have been larger, and this will always prove to be the case. The short-loan market is really augmented quicker than any other fund. It is quite immaterial whether the funds belong to owners in this country or to capitalists abroad. The fact remains that the money is available when wanted, or, in other words, the short-loan fund is so elastic that it promptly adjusts itself to the demands upon it, though temporary recourse to the Bank of England may be necessary, while the adjustments take place. The apparent inelasticity of the fund is evidence of what I may call the efficiency of the short-loan market. By efficiency I mean that the total available funds in the market are in constant use. This is not a bad thing for the community, but it implies that on the least strain or dislocation of the machinery of the market, recourse has to be made to what is then the only available source of supply--the central institution. But as the Bank of England is always willing to discount or lend upon good bills, the supply of money in the market is never exhausted. It is simply a question (except in times