nd the discounts.

3. The notes issued are controlled by a fixed ratio of gold to notes
or of the cash balance to notes.

4. This fixed ratio may be lowered by the payment of a tax.

5. The notes should not exceed three times the gold or the cash
balance.

As will be remembered, the Cunliffe Committee recommended that the
division of the Bank of England into an Issue Department and a Banking
Department, should be retained; that the old principle by which above
a certain fixed limit all notes should be backed by gold, should also
be retained, but that if at any time a breach of this rule should
be found necessary it should be possible, with the consent of the
Treasury, and that Bank rate "should be raised to a rate sufficiently
high to secure the earliest possible retirement of the excess issue."
Since it was formerly only possible to exceed the limit on the
fiduciary issue by a breach of the law, under the Chancellor of the
Exchequer's promise to get an indemnity for it from Parliament, and
since Treasury tradition insisted on a 10 per cent. Bank rate whenever
such a breach was permitted or contemplated, it will be seen that the
Cunliffe Committee proposed some considerable modifications in our
system and hardly justified Sir Edward's assertion that it "proposed
that the Bank should continue to work under the Act of 1844 as
heretofore."

At first sight there seems to be a good deal of difference between Sir
Edward's ideal and Lord Cunliffe's, but is not the difference to
a great extent superficial? Whether the Bank be divided into two
departments, each presenting a separate account, or its whole business
be regarded as one and stated in one account, seems to be rather a
trifling question. And the arguments put forward for their several
views by the two champions are not strikingly convincing. Sir Edward
wants only one account, because he thinks the consequence would be a
stronger reserve and fewer changes in bank rate. But a mere change of
bookkeeping such as the amalgamation of the two accounts would not
make a half-pennyworth of difference to the extent of the Bank's
responsibilities and its ability to meet them, and it is on variations
in these factors that movements in bank rate are in most cases
decided. On the other hand, Lord Cunliffe and his colleagues argue
that the main effect of putting the two departments into one would be
to place deposits with the Bank of England in the same position as
regards conv