In the days when Mr. Bagehot wrote his immortal work, banking was still in the experimental stage. It was slowly developing and learning from experience. As banking has developed, so has the psychology of the British race changed. As the confines of its knowledge have been enlarged, as each generation has arrived in a new environment, and as each generation has become more familiar with and habituated to banking, so are the probabilities of panic lessened. A panic, after all, has a psychological origin, and if, as I contend, the psychology of our race is on a higher plane, and is more dependable than it was half a century ago, then Mr. Bagehot’s criticisms become less forcible as psychological growth proceeds. They must not be taken, therefore, as our criterion to-day, because the test applied to them now is a different test. As the years go on the criticisms will become feebler, and with his profound instinctive knowledge of human nature, I think, were he alive to-day, Mr. Bagehot would modify those criticisms that deserved more consideration in his days than in ours. He would be the first to acknowledge, not only that the banking system has progressed greatly, but that the system is conducted on safer lines than in the times when he lived. CHAPTER XVI SOME PSYCHOLOGICAL PHENOMENA It has been said, and said truly, that the law can exercise much restraint upon the freedom of the individual. It is powerless, however, to restrain madness. Yet it is precisely by artificial methods that we would attempt to restrain madness, to keep individuals and nations in a state of sanity. This cannot be done. If the problem we are dealing with is psychological, we must find a psychological solution. We cannot cure a spiritual disease by a material remedy. If we can grasp the potency of fear growing into that species of madness called panic, we shall be able to grasp the tremendous task of allaying that fear during its earliest symptoms. We should also grasp the immensity of the task when we conceive how the healers of the disease would themselves be afflicted by the disease, and that their fears would confuse their minds and paralyse their actions. Long before the greatest war in history broke out, we were assured by financial and economic prophets that when it did break out this country would be in the throes of the most serious panic it has ever known, and thousands of our business men would go down to ruin in it. These prophecies were based upon the inadequacy of our gold reserves, and upon the top-heaviness of our credit superstructure.