August 3, 1916 
LAND & WATER 
Treasury Notes 
Their Present Advantage and Permanent Value 
By Arthur Kitson 
II 
THAT saving quality of the British race known 
as adaptahility — which has become our pro- 
verbial characteristic — may be regarded both 
as a national blessing and a national curse. 
Its influence has made us the hope as well as the despair 
of our Allies. Whilst it has made us the greatest colonis- 
ing people in history, it has also made us the most un- 
prepared and ill-equipped nation for meeting emergencies. 
Conscious of the fact that we are capable of quickly im- 
provising plans and methods enabling us to meet new 
conditions, we instinctively postpone even the dis- 
cussion of dangers, until the dreaded events are actually 
happening. 
This habit of procrastination has inade us a byword 
among the nations for sloth and improvidence. And 
one can almost sympathise with the Germans in their 
cry of " hypocrisy " on their finding this apparently 
unmilitary, decadent, pacific, indolent race suddenly 
converting itself into a military power of the highest 
order, as capable of heroic deeds and as full of martial 
ardour as themselves ! Had the Germans understood 
the psychology of the British people as they under- 
stand themselves, they could not have fallen into such a 
fatal error as to suppose us incapable ol what we are now 
achieving. A future writer might be justified in charac- 
terising us as a race of " Houdinis." As all the world 
probably knows, Houdini is the man who allows himself 
to be bound with ropes and tied in a sack or nailed in a 
box and thrown into the sea, and within the space of a 
few minutes he is seen calmly swimming to shore as 
though nothing unusual had happened. The British 
nation apparently loves to show its skill in surmounting 
obstacles and getting safely out of tight corners. 
By all the rules of warfare and common sense our Ex- 
peditionary Force should have been annihilated in the 
first two or three weeks of the war. To-day — two years 
after the beginning of hostilities— we are attacking the 
enemy in superior numbers and with superior weapons. 
Two years ago our army was numerically inferior to that 
of Serbia or Greece, whilst our munition works com- 
pared to those of Germany were absolutely insignificant. 
At the end of those two years we find ourselves as well 
equipped as Germany was after forty years preparation ! 
Our Currency System. 
Take again our currency and banking systems. When 
war broke out we found ourselves bound hand-and-foot 
by a ridiculous restrictive parliamentary Act which for- 
bade the Bank of England to issue legal tender notes 
without an equivalent of gold reserves. The gold had 
vanished — much of it to Germany — through the lack of 
foresight on the part of our Government, and the opera- 
tion of the Bank Charter Act. And it was impossible 
to secure supplies from abroad in time to save the country 
from an impending catastrophe. The credit system 
built up under this suicidal measure collapsed— as 
every intelligent writer predicted it would — as soon as 
a great crisis was in sight. The nation was brought 
face to face with a panic of unprecedented magnitude. 
In any other country panic must have ensued. 
A meeting of the bankers was called at the Bank of 
England and a three days' holiday proclaimed during 
which a safe and simple remedy was devised by one 
of our greatest bankers, and within twenty-four hours 
the whole situation was changed. What threatened to 
be a terrible financial storm became a dead calm. 
Treasury notes were issued in denominations of one pound 
and ten shillings to the extent of the country's needs. 
Sovereigns and ten shilling pieces were gradually called 
in and the people hitherto accustomed only to gold and 
silver coins — nay — even taught by foolish financial 
writers to regard paper money as dangerous and un- 
reliable — immediately adapted itself to the new cir- 
cumstances. 
The credit of the British Nation — unsurpassed in 
quality in the commercial history of nations — has 
taken the place of gold since August, 1914, and circulates 
without let or hindrance from one end of the country to 
the other. Confidence was immediately restored, and 
as far as financial accommodation is concerned, no one 
would imagine we were in the midst of the greatest war 
in history. So much for our adaptability ! 
Time to Learn a Lesson. 
But it is surely time to learn a lesson. Adaptability 
is a good quality, but like a good memory it may some day 
fail us, and then will come the deluge. Having success- 
fully avoided the financial storm to which wars give 
rise, it is time to consider what is to happen after peace is 
declared. The issue of Treasury notes was distinctly 
a war measure. There are at present something like 
£120,000,000 of these notes in circulation and the 
Treasury holds £28,000,000 in gold as a sort of basis for 
them. Already there are indications that efforts will 
be made in certain circles to get rid of them when the 
war is over. 
The public will be told that having served their pur- 
pose during the war, as soon as the crisis is over they 
will be no longer needed. This movement which, if 
successftU, would deprive our industrial and trading classes 
of this most efficient and absolutely safe medium of exchange, 
and would make money much dearer, should be resisted 
by everyone who wishes to save the country from the horrors 
of trade depression and unemployment. Under the 
plausible excuse of desiring to reduce prices, certain 
money-trading concerns are already pointing to the 
Treasury notes as the main cause of the high prices 
prevaihTij:;. Their real motive is to reduce the supplj' 
of legal tender in order to raise the purchasing power of 
gold. It should be remembered that a general fall in 
prices means a shortage of money, and a consequent 
falling off in the effective demand for commodities. 
And this means a slackening of production, reduction 
of wages, unemployment, sometimes ending in industrial 
stagnation. 
There are infinitely greater economic evils than high 
prices. In fact a high level of prices is the usual accom- 
paniment of industrial prosperity — except in cases where 
the supplies of commodities are either cut off as the 
result of war (as is the case in Germany and Austria) or 
the consequence of famine, from natural causes. But 
where — as in America — trade and industries are flourish- 
ing as they have never flourished before, prices are 
abnormally high. Money is the mechanism of exchange. 
To reduce suddenly its volume below that necessary for 
carrying on business is to create every kind of economic 
disaster, bankruptcy, starvation and ruin ! It will be 
found that every attempt in the past to do what some 
of our financiers are already suggesting we should do 
after the war, has been attended invariably by com- 
mercial, industrial and social distress in the acutest form. 
What our Cobdenites have christened the " hungry 
forties," was a period of severe monetary restriction, 
and the social miseries endured by millions of our people 
were due more to the unfortunate financial policy in- 
augurated by our legislators (whose knowledge of 
monetary science was absolutely mediieval) than to the 
Corn Laws. 
Again, when, through the instigaticn of certain in- 
ternational financiers, the United States Government 
was induced to destroy millions of greenbacks which had 
carried them safely through their Civil War, America 
paid the inevitable penalty of an industrial crisis with all> 
its accompanying social horrors. 
With the return of our armies, the problem of produc- ■« 
five emploj'ment will become a \exy serious one and all 
our financial resources and facihties will be taxed to the 
utmost. Are we to throw away the most important 
national credit instrument we possess at the bidding of 
certain money-traders whose object is to enhance the 
value of their own commodities — gold and credit ? It 
is surely of jnfiniteK' greater importance to ensure 
