TRANSAGTIOWS OF SECTION F. 597 



a further addition of about 2O0,000,CX3O/. to their credit balances by the end of 

 the year, provided in the meantime tliey do not sell any of their investments 

 to the public. Sir R. II. Inglis Palgrave writes : ' There has been, in 

 fact, very little hoarding on the part of the public recently, far less than I 

 remember took place during the panic of 1866. That some hoarding had taken 

 place is clear from amounts in gold vviiich have been produced in connection 

 with payments for the new 4^% War Loan, but there is no evidence as to the 

 date when these hoards were made. There are always people who will hoard.' 

 Another correspondent suggests a reason for the absence of hoarding by the 

 public — the ' war measures ' were put into operation before the banks were 

 reopened after this country entered the fray. He continues : ' Had not special 

 measures been taken to prevent hoarding — such as the Moratorium and the 

 special appeal to the patriotism of the public — I feel sure that hoarding would 

 have taken place on a scale hitherto unknown. What produces hoarding is 

 panic ; and if the Government had not prolonged the August Bank Holiday as 

 they did, the panic that set in on the outbreak of hostilities between Germany 

 and France and Russia would have become so violent that the whole of com- 

 mercial England would have become bankrupt. The fact is the Govermnent 

 did not give " hoarding " a real chance.' 



(iii) Emergency Measures to meet the Need for Currency. 



With regard to the Emergency Measures taken to meet the immediate need 

 for currency, the most important step taken by the Government was the issue 

 of Currency or Treasury Notes. The reason for this Note issue was that on the 

 outbreak of war the banks feared a run on their deposits, and knew that they 

 had not sufficient legal tender to meet possible demands. Their other resources 

 were also solidified, and they felt that if they parted with considerable sums in 

 gold the public might hoard it until after the War. There was also some 

 apprehension that the supply of the circulating medium for ordinary business 

 purposes might be insufhcient. It was therefore resolved that small notes 

 of one pound and of ten shillings each should be issued by the Treasury. 

 These notes were made legal tender — that is to say, they might be employed 

 in paying a debt exactly in the same way as gold and silver coin or Bank 

 of England notes can be used for that purpose. Arrangements were made for 

 cashing the Treasury Notes in specie on demand at the Bank of England, and 

 we learn from the Bank that the exchange of Currency Notes for gold is a 

 matter of daily occurrence there, and, in fact, has been so since the notes were 

 first issued. No mention, however, of the fact that Currency Notes are payable 

 in gold at the Bank of England has appeared on any of the notes which have so 

 far been issued. 



The issue of these notes was a bold experiment; some difference of opinion 

 prevails as to the wisdom of the step, and there is more doubt as to the 

 advisability of continuing, and possibly of increasing, the amount of Govern- 

 ment Notes in circulation. Some of the objections were referred to by Mr. 

 Huth Jackson in his presidential address to the Institute of Bankers in 

 November 1910, and are now endorsed by Sir Inglis Palgrave.-* Mr. Huth 

 Jackson quoted on this occasion from the w'orks of Mr. Conant, who is a 

 recognised authority on Banking and was the United States Delegate at the 

 Hague Conference, and who wrote in his ' History of Modern Banks ' as 

 follows : 



' A Government paper currency has rarely been issued to promote the con- 

 venience of commerce, and has seldom contributed to that end. Experience, as 

 well as theory, has proved that Government paper money is essentially different 

 in character from banking paper, and opens a Pandora's box of evil for every 

 nation which uses it. The difference between a Government paper currency 

 and bank notes is not one of experience or accident merely ; it is a difference 

 which is fundamental. Banking paper is based on business transactions, and is 

 limited by their demands; Government paper is based upon the will 

 of the State, and is limited only by its necessities. The almost 



^* Part of the statements made here were given by Sir Inglis Palgrave in an 

 article on the ' Government Note Issue ' in the Bankers' Magazine, for April 

 1915, and are repeated with the permission of the Editor. 



