THE FIRST MEASURE 237

brought into play there will be very grave danger of
a credit expansion in this country and a foreign drain
of gold which might jeopardise the convertibility of
our note issues and the international trade position
of the country. . . . We are glad to find that there
. was no difference of opinion among the witnesses who
appeared before us as to the vital importance of
these matters." The first measure that they put
forward as essential to this end is the cessation at the
earliest possible moment of Government borrowings.
" A large part of the credit expansion arises, as we
have shown, from the fact that the expenditure of the
Government during the war has exceeded the
amounts which they have been able to raise by
taxation or by loans from the actual savings of the
people. They have been obliged therefore to obtain
money through the creation of credits by the Bank of
England and the Joint Stock banks, with the result
that the growth of purchasing power has exceeded
that of purchasable goods and services." It is
therefore essential that as soon as possible the State
should not only live within its income but should
begin to reduce indebtedness, especially the floating
debt, which, being largely held by the banks, has
been a cause of credit creation on a great scale.
" The shortage of real capital must be made good by
genuine savings. It cannot be met by the creation
of fresh purchasing power in the form of bank
advances to the Government or to manufacturers
under Government guarantee or otherwise, and any
resort to such expedients can only aggravate the ,
evil and retard, possibly for generations, the recovery