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 increased by this £20,000. This addition to deposits has been directly caused by the credit created by the borrower's bank.

The same result appears if a bank buys bills of exchange from a bill broker—it parts with so much cash at the Bank of England which the broker transfers to his bank, so increasing both its cash and its deposits. Again, if a bank makes an investment by sending a broker into the Stock Exchange and buying, for example, £100,000 worth of Consols, it pays the seller £100,000 by a draft on its balance at the Bank of England. Its holding of cash is thus reduced by £100,000, its holding of investments is increased by the same amount, but the seller of the Consols pays into his own bank £100,000 of new credit, which has been created by the purchasing bank. The same thing happens when a bank, instead of buying securities on the Stock Exchange, invests by subscribing directly to a new issue made by the Government or any other borrower. The only difference is that in this case it hands over a draft on its balance at the Bank of England to the issuer of the loan instead of to someone who is selling through the market. As before, its cash is depleted, and its investments are increased by the amount of the transaction, but