nOG TRANSACTIONS OF SECTION P. 



(C) The Bank of England undertakes not to claim repayment of any amounts 

 not recovered by the acceptors from their clients for a period of one year after 

 the close of the War. Until the end of this period the Bank of England's claim 

 will rank after claims in respect of post-Moratorium transactions. 



(D) In order to facilitate fresh business and the movement of produce and 

 merchandise from and to all parts of the world, the Joint Stock Banks have 

 arranged, with the co-operation, if necessary, of the Bank of England and the 

 Government, to advance to clients the amounts necessary to pay their acceptances 

 at maturity where the funds have not been provided in due time by the clients of 

 the acceptors. 



The arrangements announced on September 5, 1914, have since had a most 

 important influence in rehabilitating the bill market and the exchanges. 



(ii) Was there Hoarding owing to War? 



(A) By Banks. — In the initial stages of the crisis some of the Joint Stock 

 Banks unfortunately attempted to hoard their gold stocks at a time when the 

 public wanted gold for holiday requirements. They paid out Bank of England 

 notes instead of gold. This action caused a large number of people to whom 

 notes had been paid to take them to the Bank of England to change them into 

 gold which was required for holiday purposes. According to Sir R. H. Inglis 

 Palgrave, this encashment of Bank Notes and so-called ' run on the Bank ' 

 would have passed unnoticed ' had not the access to the Bank been rendered diffi- 

 cult by the fact that since they were strengthening the ceiling of their vaults what 

 would have been a throng was magnified into a crowd. Some people to enjoy 

 the entertainment went to cash 5l. notes.' Mr. Gibson observes that the other 

 banks during the week ending August 5 withdrew large amounts of gold and 

 notes from the Bank of England, where the Reserve fell during this week from 

 26,875,194?. to 9,966,649L— a difference of nearly 17,000,000?. 



(B) Bi/ the Public. — It is pleasing to record^ that with a few ignominious 

 exceptions there was practically no hoarding of gold by the public. Since the 

 outbreak of the War, however, there has been a gradual internal absorption of 

 gold, the Bank of England having lost to provincial circulation the very large 

 amount of 21,936,000?. in gold up to July 28, 1915, and from July 29, 1914. 

 This absorption of gold must be considered as serious in view of the fact 

 that the Treasury Notes outstanding on July 28 amounted to 45,387,000?. These 

 notes have been absorbed by the home circulation since the outbreak of war, 

 and should have displaced approximately their equivalent in gold. The Bank 

 of England notes in circulation have also increased since July 29, 1914, by 

 3,825,000?. Therefore the total absorption of additional currency by the 

 country since July 29, 1914, has been 71,148,000?. Doubtless, the holding of 

 additional currency stores by the banks accounts for a large part of the absorp- 

 tion, but it is impossible to say how much, and some of the outflow is 

 undoubtedly due to the increased currency requirements consequent on the 

 extensive military mobilisation and the increased prices of commodities. Against 

 the Treasury Notes outstanding on July 28, 1915, the Government held 

 28,500,000?. in gold coin and bullion, which amount, however, has been accumu- 

 lated out of gold received from abroad since the commencement of the crisis, 

 and has not been displaced from home circulation. 



If the public were hoarding gold to anything like the extent of 50,000,000?. 

 to 60,000,000?., one would naturally expect the Savings Banks to have experi- 

 enced an abnormal amount of withdrawals since the commencement of the 

 crisis. The reports, however, of the Savings Banks for the year 1914 proved, 

 almost without exception, how trivial had been the influence of the crisis on 

 their accumulated funds, the main influence exerted having been a slight 

 check to new business. 



There is evidence that the Joint Stock Banks have increased their reserves 

 of currency since the commencement of the War, because their cash reserves 

 have considerably increased. They have not necessarily done so, however, for 

 the purposes of hoarding. They require additional currency to support their 

 vastly increased deposit liabilities. By their subscriptions of 100,000,000/. to 

 the first War Loan they indirectly created credits to a similar amount, and their 

 subscriptions of about 200,000,()(X)?. to the second Loan will also reflect itself in 



