transactions op section f. 617 



Appendix. 

 The Third War Loan. By D. Drummond Eraser, M.Com. 



Is another War Loan necessary ? In the event of the continuance of the 

 War till the end of the current financial year our expenditure will exce«d our 

 revenue by not less than 1,000,000,000/. Towards this the second War Loan 

 is raising GOO,000,OOlW. To be able to borrow on such a colossal scale the Govern- 

 ment must dominate and attract the savings of the people. The bulk of the 

 proceeds of this borrowing — four-fifths — is expended in this country. Such a 

 vast expenditure stimulates trade. This enlarges the natioiial income and 

 increases the savings of the people. A Government compulsory loan would 

 intensify the savings by a forced reduction of expenditure, especially with regard 

 to some of our imports. It must be remembered that it is as vital a necessity 

 to reduce our imports as it is to increase our exports. 



I suggest that the Government should adopt the banking principle of bor- 

 rowing cloy hy day directly from the people, in a simple and popular form. I 

 propose the issue of Treasury War Bonds in three forms : repayable in three, 

 five, seven, or ten years, at a fixed rate of interest payable half-yearly ; the 

 interest for the first half-year to be calculated from the date of investment to 

 the end of the first half-year ; a provision to be made on the back of the bonds 

 for a transfer and a new bond to be issued when the transfer is completed. 



1. A Treasury War Bond for l.OOOZ. or any multiple thereof. 



2 A Treasury War Bond for 100?. or any multiple thereof payable in ten monthly 



instalments. 

 3. A Treasury War Bond for 5?. or any multiple thereof — scrip vouchers of 5s., 



10s., and \l. to the amount of bl. or any multiple of 5?., to be accepted 



as well as cash ; holders of bonds not exceeding 100?. to receive their 



interest each half-year without deduction of tax. 



In the national interest it is of the utmost importance that the Treasury War 

 Bonds should be taken up by the people direct. It is notorious that the anti- 

 quated syste.ai of the other two loans, with their ' short-time ' limit for appli- 

 cation and payment, has not attracted the bulk of the people ; and, in conse- 

 quence, the banks have subscribed for a considerable portion of the two War 

 Loans. This, after all, is the money of the people once removed. The bankers' 

 real function is to be the custodian of the people's cash resources — deposits ; 

 60 per cent, of which is employed to liquefy the people's ' quick assets ' — bills 

 and advances — which fructifies wealth. The bankers ehould only finance the 

 Government temporarily through Treasury Bills over the counter, maturing; 

 three, six, nine, or twelve months after date.^' 



To the timid banker who sees a dangerous competitor in the Government, 

 I would say that, in spite of the fact that during the first ten months of the War 

 the Government had raised 600,000,000/. from the first War Loan, Exchequer 

 Bonds, and Treasury Bills, the deposits of the banks had actually increased m 

 the same period 200,000,000/. I would remind him that since the banks have 

 taken their branches to the homes of the people, the deposits during the present 

 generation ha\e increased 200 per cent. I would further remind him that the 

 business of the country is conducted with an incredible smoothness through the 

 bankers' clearing houses by means of the crossed cheques, the daily average 

 number of which exceeds one million. It was Gladstone who first freed the 

 cheque from its legal disabilities. He was warned by the timid banker of his 

 day that he was placing a very dangerous weapon in the hands of the people. 

 The municipal corporations, the Lancashire cotton mills, &c., have already 

 educated the people with undoubted success in the banking principle of borrow- 

 ing money day by day direct from the people, for short periods, at a fixed rate 

 of interest. If the bankers, brokers, and financial houjes act for the Bank of 

 England, on behalf of the Government, in receiving applications for the Treasury 

 War Bonds, and also in repaying or renewing them, then the Government could 

 obtain the necessary money, when needed, by recurrent popular advertisements 

 in the daily press. 



^^ Mr. A. H. Gibson supports this proposal. 



