at the Committee on National
Expenditure has called attention to the financing of the war by bank
credits as one of the reasons for the inflation of prices which has
done so much to raise the cost of the war. It is, in fact, being
generally recognised that the power of the bankers to give their
customers credits enabling them to draw cheques amounts in fact to
an increase in the currency just as much as the power of the Bank of
England to print legal tender notes, and the power of the Government
to print Treasury notes.

Thus it has happened that by the evolution of the banking system
the use of the precious metals as currency has been reinforced and
expanded by the printing of an enormous mass of pieces of paper,
whether in the form of notes, or in the form of cheques, which
economise the use of gold, but have hitherto always been based on the
fact that they are convertible into gold on demand, and in fact have
only been accepted because of this important proviso. Gold as currency
was so convenient and perfect that its perfection has been improved
upon by this ingenious device, which prevented its actually passing
from hand to hand as currency, and substituted for it an enormous mass
of pieces of paper which were promises to pay it, if ever the holders
of the paper chose to exercise their power to demand it. By this
method gold has been enabled to circulate in the form of paper
substitutes to an extent which its actual amount would have made
altogether impossible if it had had to do its circulation, so to
speak, in its own person. From the application of this great economy
to gold two consequences have followed; the first is that the
effectiveness of gold as a standard of value has been weakened because
this power that banks have given to it of circulating by substitute
has obviously depreciated its value by enormously multiplying the
effective supply of it. Depreciation in the buying power of money, and
a consequent rise in prices, has consequently been a factor which
has been almost constantly at work for centuries with occasional
reactions, during which the process went the other way. Another
consequence has been that people, seeing the ease with which pieces of
paper can be multiplied, representing a right to gold which is only in
exceptional cases exercised, have proceeded to ask whether there is
really any necessity to have gold behind the paper at all, and whether
it would not be possible to evolve some ideal f