If, then, when we speak of gold reserves, we are conscious of their relation to something, what is this something? Is it their relation to the nation’s commerce as a whole, the nation’s needs as a whole, or merely the restricted relationship to bank liabilities? What critics mean is the relation between them and the bank liabilities. But banks are units of a system. They are not a whole in the same sense as the Bank of England is. They are independent entities. There are large banks and small banks and medium-sized banks, and they have liabilities corresponding to their size. Must the small bank have in its safes exactly the same _quantity_ of gold as the large bank, irrespective of its liabilities? Or must the small bank have, not the same quantity, but the same _proportion_? Or are we to aggregate all the liabilities of the banks of the kingdom and all their gold reserves and say whether or not the total quantity of gold is sufficient or insufficient? Even then we must ask: Sufficient for what? Sufficient to meet the total liabilities in a time of crisis? This is what we mean. We mean a ratio, a hypothetical ratio that is to save us from disaster. Now this ratio is constantly fluctuating. It is fluctuating hour by hour, day by day, week by week, month by month, and year by year. It is impossible to keep it rigid. The critics know this, and they say that only an approximate ratio is wanted. But as we can never foretell, never pre-calculate what an approximate crisis will be, an approximate panic, or an approximate run, an approximate ratio may not save us. If mathematics alone will save us, and not common sense, then we must have mathematical precision, seeing that we are dealing with figures, not brains and temperaments. The only way to keep up an approximate ratio is, not to buy gold, as many advocate, and hoard it, but to stop lending, to call in loans, and so raise the ratio figure. Then we can have a relative high gold reserve. We are speaking, of course, in an ideal sense, for there can be no simultaneous precision in these movements amongst a number of independent banks, whose business varies hour by hour. However, in order to maintain their high ratio banks must cease to lend when this ratio threatens to fall. It is useless buying several millions worth of gold--if it could be bought--only to lend more upon it, increase the liabilities and not alter the habitual proportion.