Since the war we have had too much gold and too much capital, even at a time when unemployment was low. I mean too much bank capital. It follows that, as conditions of banking are at present, we cannot have high proportionate gold reserves in the joint stock banks simultaneously with a high proportionate reserve in the Bank of England. This can only be done by stopping the wheels of commerce, or slowing them down by advances of the Bank of England rate to attract gold from abroad. But the gold must flow in as rapidly as the liabilities rise, unless the Bank of England stops lending too. Trade must be penalized whichever action be taken, and merchants and others would rather have low ratios than be penalized. They would suffer, and the country would share their sufferings. To refuse to lend would have serious consequences and would be the surest way to hasten a panic. CHAPTER XIX THE SUPPLEMENTARY INFLOW If there must be in the country, for the benefit of the country’s trade and commerce, for ensuring its prosperity, a loanable fund, why should no provision be made for what I call the supplementary inflow? If no provision of this kind is made by a nation, how can we reconcile this with national foresight? In carrying on business on the soundest principles of finance business concerns allow amply for contingencies by building up reserve funds. If this be sound in individual business, it should be sound in national business. We cannot logically have contrary business principles for the nation and the individual, for in that direction confusion lies. The nation trades on its capital. It is a vast undertaking, with a colossal capital. It incurs huge liabilities, but against them it has huge assets. Why should it not have amongst these assets large hidden reserves? Some wealth depreciates, while other wealth appreciates. Some wealth is destroyed, while new wealth is created. Wealth is not destroyed by war alone. It is destroyed by new desires, new inventions--which destroy the wealth brought into existence by former inventions and bring ruin on some industries and men,--new fashions, and by lack of hope and diminishing confidence. On the Stock Exchange in recent years we have seen continual depreciation. But other assets may at the same time have greatly appreciated. We cannot get more gold than nature will produce, and every ounce taken from her store lessens that store. And the store will diminish as the future needs of the world grow. The gathering of the gold and the garnering of it, like the garnering of seed we fear to sow, must be done at the expense of our wealth production. The harvest of wealth must be less because of the scantier seed sowing; in other words, because of the diminished capital employed. Instead, therefore, of the gold coming out of the nation’s profits, it would come out of the nation’s capital, for unused capital is not used capital.