TRANSACTIONS OF SECTION F. 



603 



As we have said, opinion on the merits of the Currency Note issue differs. 

 Mr. Barnard Ellinger welcomes the issue. 'I think,' he writes, 'if the banks 

 made a great effort to Ray out Treasury Notes and the public were made to 

 understand that it is desirable that they should use them instead of carrying 

 about gold, not only would more gold flow into the Central Institution but an 

 opportunity would not be lost of accustoming the public to the use of one-pound 

 notes, should it be found desirable after the War to retain them as a perma- 

 nent part of our currency, in order to strengthen our gold reserves. If the notes 

 were withdrawn and instead of them one-pound Bank of England notes issued, 

 so made as to be easier to count and handle than the present notes, I think the 

 public would take them willingly and the tellers at the bank would be equally 

 willing to pass them out, as they would not experience the present difficulty 

 of counting them.' 



Mr. Gibson denies flatly that Treasury Notes have had any measurable effect 

 in raising prices. He argues that as the home circulation has absorbed over 

 seventy millions of additional currency since the War began, the twenty-six 

 millions of Notes not backed by gold have simply helped to fill up the additional 

 requirements. He holds that in this country cheques are so much more used 

 than coin or notes that we have practically lived on a paper cunency for some 

 time past. 'A far more interesting and important problem,' he adds, 'is the 

 effect of the 40O millions or so of additional credit created by the banks them- 

 selves subscribing to the last two War Loans and Treasury Bills.' Mr. E. L. 

 Franklin also believes that the issue of Treasury Notes, up to the present, has 

 had no effect in raising prices. The total increase in the circulating currency 

 is not, he thinks, greater than the amount of gold now hoarded by the public. 



Mr. D. M. Mason, M.P., on the other hand, holds strongly that the notes 

 ought to be withdrawn as soon as possible. He maintains that the effect of 

 ' an abnormal issue of paper currency,' whether in bank notes or in Govern- 

 ment notes, is to raise prices. With this view, if stress be laid on the word 

 ' abnormal,' we are inclined to agree. An over-issue, he continues, is less 

 probable in the case of bank notes, as they would be difficult to get into 

 circulation. He sees no objection, however, ' to properly qualified banks having 

 the right to issue notes, and provided the notes are made payable in gold on 

 demand there need be no limit placed upon the issue, as the notes in the event 

 of an excessive issue would probably be at once presented for payment.' 



Each country is only capable of using a certain amount of currency for its 

 daily and yearly requirements. This currency expands and contracts with the 

 demands made upon it. If there is a surplus of currency and loanable credit in 

 a country the rate for money falls and, like every other commodity, seeks a 

 better market. The exchanges turn against the country in such a case and gold 

 flows out until the value of money rises and checks the outflow and in turn 

 tends to attract capital back to this country again. Mr. Mason quotes a letter 

 from the Economist which compares the note circulation of the principal banks 

 of Europe in March 1914 with the circulation a year later 



