ourse to credits raised for it by the Bank of
England and the other banks against Treasury Bills, Ways and Means
Advances, War Loans, War Bonds, and loans to customers who were taking
up War Loans, etc. Thereby as these credits created fresh deposits
there was a huge increase in the community's purchasing power; and
since the supply of goods to be purchased was stationary or reduced,
the only result was a great increase in prices which made the war,
perhaps, nearly twice as costly as it need have been and produced
all the suspicion and unrest that has already been referred to.
Considering that the Committee included an ex-Governor of the Bank
and the Permanent Secretary to the Treasury it could hardly have been
expected to use much plainer language concerning the failure of our
rulers to get money out of us in the right way for the war and
the vigour with which they made use of the demoralising weapon of
inflation.

It followed as a necessary consequence that the volume of legal tender
currency had to be greatly increased. As prices rose wages rose
with them, and so much more "cash" was needed in order to pay for a
turnover of goods which, fairly constant in volume, demanded more
currency because of their inflated prices. As the Committee says in
its Report (page 5): "Given the necessity for the creation of bank
credits in favour of the Government for the purpose of financing war
expenditure, these issues could not be avoided. If they had not been
made, the banks would have been unable to obtain legal tender with
which to meet cheques drawn for cash on their customers' accounts. The
unlimited issue of currency notes in exchange for credits at the Bank
of England is at once a consequence and an essential condition of the
methods which the Government have found necessary to adopt in order to
meet their war expenditure."

The effect of these causes upon the amount of legal tender currency
(other than subsidiary coin) in the banks and in circulation is
summarised by the Committee in the following table:--

"The amounts on June 30, 1914, may be estimated as follows:--

"Fiduciary Issue of the Bank of England L18,450,000

"Bank of England Notes issued against
gold coin or bullion 38,476,000

"Estimated amount of gold coin held
by Banks (excluding gold coin held
in the Issue Department of the
Bank of England) and in public
circulation 123,000,000