War-time financial problems

90 OUR BANKING MACHINERY

Moreover, the check imposed upon our banking com-
munity by the need for an appeal to the Treasury
before it can extend its note issue beyond a certain
point often acts with a salutary effect, and the view
has even been expressed that if that check were
taken away from our system it might be difficult,
if not impossible, to maintain the gold standard
which has been of such enormous value in building
up the prestige of London as a financial centre, I
do not think there is much weight in this argument,
since, under Sir Edward's plan, the note issue could
only be increased against discounts, and the Bank,
by the charge that it made for discounts, would still
be able to control the situation. From the practical
point of view of the present moment, a strong objec-
tion to the scheme is that it would open the door to
fresh inflation by unrestricted credit-making just
when the dangers of this process are beginning to
dawn even on the minds of our rulers,