THE OPENING CRISIS 33

arrangements, the whole machinery of exchange
broke down because from all over the world the
market in exchange went one way. Everybody
wanted to buy bills on London, and there were no
bills to be had.

There vfcis also the internal problem which arose
because some of the public and some of the banks
took to the evil practice of hoarding gold just at the
wrong moment, and consequently there was no
available supply of legal tender currency except in
the shape of Bank of England notes, the smallest
denomination of which is £5. It is known that our
bankers had long before pointed out to the Treasury
that if ever a banking crisis arose there would, or
might be, this demand for a paper currency of
smaller denominations than £5 ; this suggestion got
into a pigeon-hole at the Treasury and was deep
under the dust of Whitehall by the time experience
proved how big a gap in our financial armour had
been made by its neglect. If the £i notes, with
which we are now so familiar, had been ready when
the war broke out, or, still better, if the Bank of
England had been empowered and instructed to
have an issue of its own £i notes ready, it may at
least be contended that the moratorium, which was
so bad a financial beginning of the war, might have
been avoided.

But this opening crisis was a short-lived matter,
and was promptly dealt with, thanks to the energy
and courage of Mr Lloyd George, who was then
Chancellor of the Exchequer, and saw that things
had to be clone quickly, and took the advice of the