It might be a satisfactory compromise, therefore, if, as a normal practice (but not as a legal requirement), the gold in the Gold Standard Reserve were held “ear–marked” at the Bank of England, but the gold in the Currency Reserve retained in India.
On the other hand, as the Bank carries on itself a large discount business, as it considers that it is itself competent to lend on all kinds of bills, the bill-brokers are its most formidable rivals. A many-reserve system, if some miracle should put it down in Lombard Street, would seem monstrous there.
Alfred de Rothschild went so far as to say that “in fact a gold standard without a gold currency seemed to him an utter impossibility. Unless the Bank of England lend, no stock will be bought. A large bank always tends to become larger, and a small one tends to become smaller. On the other hand, it is necessary to bear in mind that by the second bad year there would have been time for a very great reduction in the volume of imports, on account of the greatly reduced purchasing power of the people, and that this might go a long way towards righting the balance; also that, if there was a considerable liquidation of short–period loans in the first year, it would not be necessary to repeat this to anything like the same extent in the second year.