War-time financial problems

230 THE CURRENCY REPORT

Joint Stock banks have formed the foundation of a
great growth in their deposits, which have also been
swelled by the creation of credits in connection with
the subscriptions to the various War Loans. . . .
The greatly increased volume of bank deposits,
representing a corresponding increase of purchasing
power and, therefore, tending in conjunction with
other causes to a great rise of prices, has brought
about a corresponding demand for legal tender
currency which could not have been satisfied under
the stringent provisions of the Act of 1844." Here
we have the story of bad war finance put as clearly
as it can be. Because the Government was not able
to raise all the money needed for the war on sound
lines—that is, by taxation and loans to it of money
saved by investors—it had recourse to credits raised
for it by the Bank of England and the other banks
against Treasury Bills, Ways and Means Advances,
War Loans, War Bonds, and loans to customers who
were taking up War Loans, etc. Thereby as these
credits created fresh deposits there was a huge
increase in the community's purchasing power ; and
since the supply of goods to be purchased was
stationary or reduced, the only result was a great
increase in prices which made the war, perhaps,
nearly twice as costly as it need have been and pro-
duced all the suspicion and unrest that has already
been referred to. Considering that the Committee
included an ex-Governor of the Bank and the Perma-
nent Secretary to the Treasury it could hardly have
been expected to use much plainer language concern-
ing the failure of our rulers to get money out of us