MONEY 
131 
accommodation and discounting as much as 
possible, and to that end might put up the 
Bank rate ; but conceivably other banks 
might have placed very large reserves with the 
Bank of England, repayment of which they 
had the right to ask for in gold, and they might 
feel that they were in an absolutely secure 
position and could safely undertake an even 
greater mass of credit business. Consequently 
the other banks might keep their discount rates 
down, so that the only effect of the action on the 
part of the Bank of England would be to drive 
its customers away to the other banks. As 
a matter of fact this seldom or never happens. 
It has become a custom, broadly speaking, for 
all the banks in the country to follow the lead 
of the head custodian of the bullion reserve, 
that is the Bank of England, in the matter 
of the discount rate. How and why this 
custom arose, and in what way the Bank 
of England takes steps in exceptional circum 
stances when it becomes necessary to force 
some discounters to follow its lead, are inter 
esting questions which, however, we shall not 
proceed to consider here, since our present 
purpose is to merely show how the activities 
of banks affect the quantity of money in a 
country, and not to discuss the principles and 
practice of banking as a business.