598 TRANSACTIONS OP SECTION F. 



invariable rule of Government paper issues is that one begets another, 

 until the entire volume exceeds the legitimate demands of business, 

 upsets values, and goes beyond the reach of restriction of the metallic 

 standard. . . . Even a limited issue of paper is maintained at par by 

 a Government with much greater difficulty than by a well-regulated bank. 

 The reason is fundamental. The Government has no quick assets. It is not 

 wealth in the abstract that currency must represent, but quickly negotiable 

 wealth. The Government has only two resources (beyond the cash in hand) — 

 the pledge of public property and the power of taxation. The peculiar strength 

 of a banking currency lies in the enormous mass of quick assets behind its 

 demand liabilities.' 



The objection made by Mr. Huth Jackson is so strong that it ought really 

 to be decisive as to the continuance of the Currency Notes. Should there be 

 any doubt on the subject there are several practical objections which ought to 

 be remembered. One of these is the great risk of forgery. Another is the 

 question whether they may not be a heavy expense to the State. A third 

 objection is that a very large issue of them would have an effect upon prices, 

 rhe amount of these notes issued is not, like the notes of a bank — payable in 

 specie on demand, dependent upon the requirements of business, but it depends 

 on the wants of the Government, which are completely different. The Cur- 

 rency Notes are made payable at the Bank, and, of course, they will be paid 

 by the Government eventually — but, as mentioned before, the fact that they 

 are payable at the Bank is not stated on them. There is hence — as the Cur- 

 rency Notes are not practically subject to the constant inspection at the issuing 

 bank which ordinary notes payable in specie on demand are — a much greater 

 risk of forgery. (We may add that a constant system of ' exchange ' for the 

 small not«s of the issuing banks in Scotland and Ireland assists in obtaining the 

 same results in their case.) 



Again, small notes as those for 20s. and 10s. circulate among a much less 

 educated class than the larger notes of the Bank of England do, and they thus 

 rapidly become soiled, in which state it is almost impossible for any person to 

 decide whether they are genuine or not. The first notes were very poorly 

 executed. To render them safer from forgery a better design for the notes has 

 .since been employed, but the facilities for copying and reproducing any design 

 by various processes are very considerable and no great dependence can be 

 placed on the goodness of the design for preventing forgery. Sir Inglis Palgrave 

 says : ' Ready payment in coin on demand gives the best security against this. 

 In the United Kingdom during the period of the suspension of specie payments 

 at the beginning of the last century ^° the one-pound notes of the Bank of 

 England were largely forged, while forgeries were far less frequent among the 

 bank notes of the higher denominations.' 



Sir Inglis here quotes a table showing the actual uurabers of the forgeries in 

 each denomination of notes over a series of years : ' After the war between 

 France and Germany in 1870, notes as small as five francs were issued by the 

 Bank of France. These were frequently forged. The Bank of France thought 

 it desirable to pay all their notes, whether genuine or otherwise, in order to 

 avoid the inconvenience which refusal to pay any of their notes might have pro- 

 duced. This I remembered hearing at the time. To be quite sure I inquired at 

 the Banlc of France last year, while the business of the bank was being carried 

 on at Bordeaux, whether I was correct, and the Secretary of the bank assured 

 me that the facts were as I have stated. He added that great precautions were 

 taken and that the eventual loss was but small.' 



There is hardly any need to enlarge on the great disadvantages which arise 

 from forgery in the notes which form part of the general circulation of a 

 countiy. Whether extensive forgeries of the notes are in fact taking place wo 

 do not know, and one of our correspondents says that ' all known coiners not 

 in prison are now engaged in the manufacture of munitions.' Besides these 

 difficulties which are inseparable from an issue of small notes, there is also the 

 practical question whether there may not be an expense to the State from the 

 issue of the Currency Notes. The figures on August 26, 1915, are as follows : 



" The suspension of specie payments lasted from the year 1797 to 1821. See 

 article on 'Suspension of Specie Payments,' Palgrave's Dictionary of Political 

 Economy, vol. iii., p. 501. 



