The Bamberg herald. [volume] (Bamberg, S.C.) 1891-1972, 1907-12-26

to loan freely on good security to
prevent panic, and it does loan free
sly, making the borrower, however,
pay roundly for the accommodation.
This is practically fning the borrow
er, and the. men in actual need of the
money pay the fine, which, however,
is sufficient to prevent people not IN
actual need from borrowing, from
precautien or fear. A rise in the
rate of discount of the Bank of Eng
land is therefore danger signal to
the entire civilized world. Some
where trade conditions are disturbed.
If the disturbance is long continued:
gold is required at its centre, and
this is applied for at the bank,
which, by rapid advances on its dis
count rate, seeks to fine the borrow
ers 50 heavily that they will be COM
PEELED to stop. This is necessary,
because, should the gold reserve of
the bank become too low, a knowl-
/ edge of the fact would become quick
} " public, and the necessities of the
panic stricken centre elsewhere,
would, if carried far enough, create
( a panic in England itself which
might bring the bank down in ruin,
sIsd the insolvency of the bank means
the insolvency of England. The f.
nancial public, watching the gradual
exhaustion of the banks gold de-
nnsit., knows that this means the
bank spower to make loans freely is
becoming impaired, consequently a
contraction of credit will take place
! if the drain continues. Each mer-
chant begins to husband his resour-
ces, and to extend less and less
credit to brother merchants until,
following the gold depletion, fnan-
cial stringeney is in full force, and
that IS the condition that is apt to
turn to panic. Gold is drawn from
the Bank of England by foreign
! countries sending good bills or Sc
curities to London, discounting them,
and taking away the proceeds in gold
coin or bullion. A case in point was
that of the sale Of $4,000 tons of
American copper on November II.
This Immediately gave American
merchants a credit of some SIS, ,0O0,-
900, against which they could Of
course draw. /.
When a panic assumes sway other
banks can, if necessary, strengthen
their reserves by selling stock they
have loaned on, but this the bank IT
self cannot do, because it is the only
lender, and only by loans can large
purchases be made. II the bank will
not lend no stock can be bought.
The Bank of England is bankers
bank. Nearly all other banks keep
their reserves with it. If it fails
they fail; 1t bears the brunt of
every panic, aad is really the finan-
cial barometer of the world. When
other bankers fear an approaching
ing panic they will call in their
loans in order to strengthen
their reserve. The Bank of England,
under such conditions, is called on to
discount bills that other banks re-
fuse to discount. To loan on securi-
ties that other banks refuse to loan
on. When the business of other
banks contracts. that of the Bank of
England expands, it being, as it
were, the final tribunal in the courts
of finance. If the Bank of England
refused to loan or discount at periods
of incipient distrust, the action
would precipitate an immediate
panic, not alone in England, but
throughout the world.
England is the greatest monied
power in the world. The ready
money available there is for the
markets of the world. 1t can be,
and is, loaned out to everyone, for
every legitimate purpose. =
The money resources of a nation
must be gauged,by it's bank balance,
not by the actual money it claims to
possess. France has more money
than England, and is perhaps a rich
er country, but the money of France
is boarded, while that of England is
banked and borrowable. This gives
the nation it's great power over the
markets of the world. A million
dollars in a bankers hands is great
power, but the same sum scattered
in a thousand hands has no power.
No one knows where to find it, or
how to get the use of it. So the
great banking nations are ever the
nations to which other countries come
!; for their financial needs, and Eng
land is the greatest of money lend
ers.=. Yet English, bankers are not
themselves direct lenders either to
foreign governments or foreign
brokers; they lend to those who lend.
H. w. FINLAYSON,
450 Broadway, New York.