CREDIT DEMANDS CASH 231

in the right way for the wax and the vigour with
which they made use of the demoralising weapon of
inflation,

It followed as a necessary consequence that the
volume of legal tender currency had to be greatly
increased. As prices rose wages rose with them, and
so much more " cash " was needed in order to pay
for a turnover of goods which, fairly constant in
volume, demanded more currency because of their
inflated prices. As the Committee says in its Report
(Page 5) : " Given the necessity for the creation of
bank credits in favour of the Government for the
purpose of financing war expenditure, these issues
could not be avoided. If they had not been made,
the banks would have been unable to obtain legal
tender with which to meet cheques drawn for cash
on their customers' accounts. The unlimited issue
of currency notes in exchange for credits at the Bank
of England is at once a consequence and an essential
condition of the methods which the Government
have found necessary to adopt in order to meet their
war expenditure/*

The effect of these causes upon the amount of
legal tender currency (other than subsidiary coin)
in the banks and in circulation is summarised by the
Committee in the following table :—

M The amounts on June 30, 1914, may be estimated

as Iullows :••—

Fiduciary Issue of the Bank of

England ............ £18,450,000

Bank of England Notes issued against
gold coin or bullion...... 38,470,000