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PEEL'S  ACT                        85

metal in their vaults, should be fixed at the amount
of their issue at that time. Above the limit so laid
down any notes issued by the banks were to be
backed by metal. In the case of the Bank of
England the limit then established was 14,000,000,
and it was enacted that if any note-issuing bank
gave up its right to a note issue the Bank of England
should be empowered to increase its power to issue
notes against securities to the extent of two-thirds
of the power enjoyed by the bank which was giving
up its privilege. By this process the Bank of
England's right to issue notes against securities,
what is usually called its fiduciary issue, has risen
to 18,450,000 ; above that limit every note issued
by it has to be backed by bullion, and is actually
backed by gold, though under the Act one-fifth
might be in silver. It was thus anticipated by the
framers of the Act that in future any credit required
by industry could only be granted by an increase in
the gold held by the issuing banks. If the Act had
fulfilled the anticipations of the Parliament which
passed it, if English trade had grown to anything like
the extent which it has done since, it could only have
done so by the amassing of a mountain of gold, which
would have lain in the vaults of the Bank of England.
Fortunately, however, the banking community
had at its disposal a weapon of which it was already
making considerable use, namely, the system of
issuing credit by means of banking deposits operated
on by cheques. Eight years before Peel's Act was
passed two Joint Stock Banks had been founded in
London, although the Bank of England note-issuing