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 disposal of the other banks, a sum which entitles them to issue for the purposes of the general public, a much larger amount of credit. On the other hand when the Bank of England reduces its securities, either by selling stock or by inducing its borrowers to liquidate their loans by charging them a higher price for them, which it does by raising its official rate of discount, the effect is to contract the basis of credit and to cause a still greater contraction in credit, so that the proportion between cash and credits may be maintained more or less on the usual level.

Thus the system worked in the old days with an efficiency, which roused the envy of the rest of the world, though it was plentifully criticized by those whose withers were galled by its restrictions, which as we now see, had so beneficial an effect in steadying prices. Owing to the terms of the Bank Charter Act it was not possible to increase the volume of legal tender currency in the country, except by attracting gold from abroad in payment either for goods exported, or of debts called in, or of loans raised. Theorists could easily show that a currency system based on gold does not secure perfect stability of prices, because the quantity of gold produced often varies in relation to the