War-time financial problems

140 INTERNATIONAL CURRENCY

now so generally recognised that the Committee on
National Expenditure has called attention to the
financing of the war by bank credits as one of the
reasons for the inflation of prices which has done so
much to raise the cost of the war. It is, in fact,
being generally recognised that the power of the
bankers to give their customers credits enabling
them to draw cheques amounts in fact to an increase
in the currency just as much as the power of the
Bank of England to print legal tender notes, and
the power of the Government to print Treasury
notes.

Thus it has happened that by the evolution of
the banking system the use of the precious metals
as currency has been reinforced and expanded by
the printing of an enormous mass of pieces of paper,
whether in the form of notes, or in the form of
cheques, which economise the use of gold, but have
hitherto always been based on the fact that they
are convertible into gold on demand, and in fact
have only been accepted because of this important
proviso. Gold as currency was so convenient and
perfect that its perfection has been improved upon
by this ingenious device, which prevented its actually
passing from hand to hand as currency, and substi-
tuted for it an enormous mass of pieces of paper
which were promises to pay it, if ever the holders
of the paper chose to exercise their power to demand
it. By this method gold has been enabled to circu-
late in the form of paper substitutes to an extent
which its actual amount would have made altogether
impossible if it had had to do its circulation, so to