yment of
debts, with certain exceptions; the Bank of England under a guarantee from
the Government that the latter would meet the loss, began discounting,
or buying for cash, approved bills of exchange accepted before war was
declared, many of which are hardly likely to be met by the people liable
for payment. These steps were taken swiftly and boldly and allayed the
panic. But more was needed; such measures were not in themselves sufficient
to put the machinery of foreign exchange into operation again and the
suspension of this method of settling international indebtedness was having
serious effects. To carry on international trade, and to supply ourselves
with the produce on which the very existence of the community depends,
without the machinery, is a thousand times more difficult than to conduct
our home trade by means of direct barter. Without going into technical
details, it may be said that the purchase of bills by the Bank of England,
whilst relieving the last holder from loss, did not extinguish the
liability of persons whose names had appeared on the bills as acceptors,
endorsers and drawers. This was true of traders and commercial people not
only in this country but also in other parts of the world. In the face of
these liabilities, in most cases unexpected, it was hardly likely that
they would increase their liabilities under new bills. Consequently the
remittances coming to London shrank to next to nothing. As bills of
exchange--or their equivalent--are the means by which both importers
and exporters get paid for their goods, the difficulty of getting paid
naturally began to have a serious effect on trade. As the figures of
foreign trade during August show, cargoes were being held up. It was clear,
therefore, that if this country were to continue to receive supplies of
corn and meat, of cotton and wool, of hides and timber, something further
must be done. The question the Government had to decide was what steps
could be taken to safeguard the food of the people, and to avoid a crushing
volume of unemployment through the lack of the raw materials of industry.
The produce was there; what was needed was to start the flow of the
particular kind of currency--"credit money"--which would expedite exchange.
The course taken by the State was to advance money to the large bill
bankers or "accepting houses" in London to allow of the due payment of the
enormous number of bills falling due in the three months succeeding th