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BILLS  AS BASIS                  273

if they were issued against bills of exchange, which
in due course would have to be paid off." Again,
" it seems to me that notes should not be issued
against Government securities which may or may
not be paid off, but against bills of exchange which
must be met at due date/' This advantage about
a bill of exchange is a very real one to the individual
holder who can always put himself in funds by letting
the contents of his portfolio " run off " ; but is there
much in it as a safeguard against excessive issue of
currency in times of exuberance ? In such times
bills that fall due are pretty sure to be replaced by
new ones drawn against fresh production—since
over-production is a common symptom of com-
mercial exuberance—or against a resale of the goods
on which the original bills were based. As long as
anyone who can show produce can be certain to get
credit and currency, the notion that the maturing
of bills of exchange can be relied to restrict currency
expansion within safe limits is surely a dangerous
assumption. The principle of a fixed limit, to be
broken in case of real need, but only after some
ceremony has been gone through giving notice of
the fact that a crisis has been reached, seems rather
to be required by the psychology of speculative
mankind. But even if Sir Edward's preference for
bills of exchange as backing for notes has all the
merits that he claims that is no reason for urging
the repeal of the Bank Act to secure their use.
Because the Bank Act does not forbid it: it merely
says, " there shall be transferred, appropriated and
set apart by the said governor and company to the