How then did the German Government obtain this vast power over the Bank?
The answer is, that it obtained it by means of the bankers' balances, and that it did so in two ways.
First, the German Government had a large balance of its own lying at a particular Joint Stock Bank.

That bank lent this balance at its own discretion, to bill-brokers or others, and it formed a single item in the general funds of the London market.

There was nothing special about it, except that it belonged to a foreign government, and that its owner was always likely to call it in, and sometimes did so.

As long as it stayed unlent in the London Joint Stock Bank, it increased the balances of that bank at the Bank of England; but so soon as it was lent, say, to a bill-broker, it increased the bill-broker's balance; and as soon as it was employed by the bill-broker in the discount of bills, the owners of those bills paid it to their credit at their separate banks, and it augmented the balances of those bankers at the Bank of England.

Of course if it were employed in the discount of bills belonging to foreigners, the money might be taken abroad, and by similar operations it might also be transferred to the English provinces or to Scotland.