e
outbreak of war. The audacity of the step will be understood when it is
realised that probably something like L300,000,000 of bills fall due over a
period of three months.[1] The necessary money was lent without security,
the Government promising not to demand repayment until twelve months after
the end of the war. A proportion of this advance will be in the nature of
a loss, though how much it is quite impossible to say. By this measure,
in the event of the bills not being met by those who have promised to pay
them--the acceptors--the liability which would ordinarily have fallen upon
the drawers and endorsers through whose hands the bills had passed has been
removed. The State has advanced to the commercial community a huge sum of
money, risking the total loss of some part of it, in order to set in motion
the machinery of international exchange. Further steps, however, were
taken. The general moratorium expired on November 4. Useful as it had
been, it still left many traders in financial difficulties because of
the impossibility of collecting debts owing to them in enemy and other
countries. The Government, therefore, appointed a committee representing
the Treasury, the Bank of England, the Joint Stock Banks, and the
Association of Chambers of Commerce of the United Kingdom to authorise
advances in approved cases to British traders carrying on an export
business in respect of debts outstanding in foreign countries and colonies,
including unpaid foreign and colonial accepted bills which cannot be
collected for the time being. It is safe to say that no Government ever
took such gigantic measures to meet a great crisis.[2] The Prime Minister,
speaking at the Guildhall on November 9, 1914, summarised as follows the
effects of the steps taken: "The foreign exchanges are working in the case
of most countries quite satisfactorily, and the gold reserves at the Bank
of England, which were 40 millions on July 22, and which had fallen on
August 7 to 27 millions, now stand at the unprecedented figure of 69-1/2
millions. The central gold reserve of the country after three months of the
war amounts to L80,000,000, almost exactly twice the amount at which it
stood at the beginning of the crisis. The bank rate, which rose, as you
know, to 10 per cent, has now come down to 5, a figure, I think, not in
excess of that at which it stood this time last year. Food prices have been
kept at a fairly normal level, and though trade has been curt