For instance, simply with the differences in question to go upon, it may be said that the return shows that the market has borrowed largely from the Bank, "Other Securities" being up over £5,000,000. Part of this amount increased "Other Deposits," and a transfer was also made to "Public Deposits" in order to pay the Government for £2,000,000 of Treasury bills, while the accretion to "Government Securities" seems to indicate that the Government borrowed a certain sum from the Bank on Ways and Means, and that loans were made to the market on this class of security.
In London the "loan account" system is greatly in evidence among the banks. That is to say, when a customer is granted a loan for, say, £10,000, his current account is credited £10,000, and a loan account, opened in his name, is debited £10,000. The interest is calculated upon the loan account, and the advantage resulting to the banks is too evident to call for explanation in these pages.
When loans are made by the Bank of England, accounts which increase "Other Securities" are debited, and other accounts, which increase "Other Deposits" are credited—if the loans are made to the public. Should the loans be made to the Government, "Public Deposits" and "Government Securities" also increase proportionately from the same cause. The Bank, because it keeps the bankers' accounts, occupies a peculiar position in relation to these entries, and that position will be discussed in a later chapter.
The notes in the Banking Department have decreased £2,694,960 and the specie £17,314, so, if we add these two sums together, the total, £2,712,274, represents the diminution in the reserve. A glance at the Bank's liabilities shows us that they have increased appreciably, and as the reserve has shrunk considerably, it follows that the ratio is very much smaller than that of the previous week. Indeed, the reserve had not fallen so low since May; and the monetary outlook being uncertain, the directors, as a precautionary measure, raised the rate of discount.
Next, suppose that we wish to ascertain the amount of cash which has been withdrawn from the Bank to meet the demand within the country. The bullion in the Issue Department is £1,492,620 down, and the coin in the Banking Department £17,314; so the Bank has lost £1,509,934 in coin and bullion. But £730,000 was exported during the week; therefore, if we deduct £730,000 from £1,509,934, the difference, £779,934, is the amount that is gone into home circulation.
But, it may be asked, how can one ascertain the amounts of the exports and imports of the precious metals? Late in the afternoon of each day the Bank exhibits a statement on its walls giving this information, and it was from these placards that it was ascertained that the sum in question had been sent abroad. Hence it is possible to learn how much cash was withdrawn from the Bank for home requirements during the week, or, better, the amount of the efflux on the day of the publication of the return.
But, as has already been explained, these deductions are not always reliable.