If, therefore, banks cease to lend in order to keep up a high ratio of reserves to liabilities, what will be the inevitable effect of this upon the reserve of the Bank of England? They will drive borrowers, as has been explained in former chapters, to the Bank. As the Bank begins to lend, so will the ratio of its reserve to its liabilities drop. Mr. Cole says the Bank of England will always lend _at a price_. If, then, the Bank’s ratio drops, then the ratio of the reserves of the joint stock banks must fall, seeing that they hold their reserves at the Bank of England. The ratio will then drop in proportion to the aggregate bank liabilities of the kingdom. The only remedy, then, is for the Bank of England also to refuse to lend. But Mr. Bagehot and other critics say this would bring on and aggravate a crisis. So far from refusing to lend, banks, they say, must lend liberally, with both hands. How, then, are the Bank of England and the other banks to lend liberally without increasing their liabilities and reducing the proportion? The proportion could be maintained only by an inflow of gold proportionate to the rise in the liabilities. How are we to start this inflow at the critical moment and maintain it? It cannot be done. There can, however, be an automatic inflow, but only of legal tender notes, and legal tender, from the standpoint of bank solvency, is as potent as gold. We cannot produce gold at will, but we can produce paper at will. Our gold reserves should be controlled, as I have insisted already, not solely by the arbitrary output of gold, but by the output of the nation’s wealth, and by the nation’s needs, and no artificial obstacles should arrest the growth of national wealth. We do put obstacles in the way. Banks must keep an eye on their approximate reserves. This is why they refuse to lend at times, and send wealth-producers to the Bank of England. We have to put up with this in our present system. But to say that some hypothetical ratio, which no one can agree upon, will save us in certain grave, incalculable contingencies is as untenable as many another economic hypothesis which has no relation to the complexity of human character and temperament. But the theorists have insisted in years past, it is not the national needs we have to consider in a time of crisis; it is the international claims upon us. Look, they say, at the enormous foreign credits here, placing unlimited power in the hands of foreigners to take gold from us _in the time of war_. Well, the war has come, the greatest of all wars, the war we and the world most dreaded, and all these pre-existing fears have not been realized. Foreign credits are offset by foreign liabilities here. Instead of gold being taken abroad in great quantity the exact opposite has occurred, and why should it never recur? Gold has come to London in quantities never dreamed of and never experienced, proving that the dimensions of this hypothetical danger were greatly magnified.