And the observance of this maxim is the more necessary because the ‘apprehension minimum’ is not always the same.  On the contrary, in times when the public has recently seen the Bank of England exposed to remarkable demands, it is likely to expect that such demands may come again.  Conspicuous and recent events educate it, so to speak; it expects that much will be demanded when much has of late often been demanded, and that little will be so, when in general but little has been so.  A bank like the Bank of England must always, therefore, be on the watch for a rise, if I may so express it, in the apprehension minimum; it must provide an adequate fund not only to allay the misgivings of to-day, but also to allay what may be the still greater misgivings of to-morrow.  And the only practical mode of obtaining this object is—­to keep the actual reserve always in advance of the minimum ‘apprehension’ reserve.

And this involves something much more.  As the actual reserve is never to be less, and is always, if possible, to exceed by a reasonable amount the ‘minimum’ apprehension reserve, it must when the Bank is quiet and taking no precautions very considerably exceed that minimum.  All the precautions of the Bank take time to operate.  The principal precaution is a rise in the rate of discount, and such a rise certainly does attract money from the Continent and from all the world much faster than could have been anticipated.  But it does not act instantaneously; even the right rate, the ultimately attractive rate, requires an interval for its action, and before the money can come here.  And the right rate is often not discovered for some time.  It requires several ‘moves,’ as the phrase goes, several augmentations of the rate of discount by the Bank, before the really effectual rate is reached, and in the mean time bullion is ebbing away and the ‘reserve’ is diminishing.  Unless, therefore, in times without precaution the actual reserve exceed the ’apprehension minimum’ by at least the amount which may be taken away in the inevitable interval, and before the available precautions begin to operate, the rule prescribed will be infringed, and the actual reserve will be less than the ‘apprehension’ minimum.  In time the precautions taken may attract gold and raise the reserve to the needful amount, but in the interim the evils may happen against which the rule was devised, diffused apprehension may arise, and then any unlucky accident may cause many calamities.

I may be asked, ’What does all this reasoning in practice come to?  At the present moment how much reserve do you say the Bank of England should keep? state your recommendation clearly (I know it will be said) if you wish to have it attended to.’  And I will answer the question plainly, though in so doing there is a great risk that the principles I advocate may be in some degree injured through some mistake I may make in applying them.