which made our market the centre of the
world's finance, endeavoured to give back the control of the central
gold reserve to the Bank of England by suggesting, among other things,
that the other banks should hand over their gold to it. They omitted
to discuss the serious question of the greater difficulty that the
Bank is likely to find in future in controlling the price of money in
the market, owing to the huge size that the chief clearing banks have
now reached. But a central gold reserve under central control was
evidently the object at which they aimed. Sir Edward will have none of
this. He says that if this were done the position of the Joint Stock
banks would be weakened, though he does not explain why, since they
would obviously hold notes in place of their gold and so would be able
to meet their customers' demands, now that the latter are accustomed
to the use of notes for pocket money. He points out that "the gold
which was held by the Joint Stock banks before the war proved most
useful.... At the beginning of the war the banks paid out gold,
satisfied the demands of their customers for small currency, and thus
eased the situation until currency notes became available." He seems
to have forgotten that the banks, or most of them, refused to part
with their gold, paid their customers in Bank of England notes which,
being for L5 at the smallest, were of little use for pocket money, and
so drove them to the Bank to get gold; and we had to have a prolonged
bank holiday and a moratorium. Sir Edward is in favour of three gold
reserves, one to be held by the Government, one by the clearing banks,
and one by the Bank of England. If there were differences between the
three controllers of the reserve at a time of crisis the consequence
might be disastrous.

In view of the admiration expressed by Sir Edward for the new American
system which is so clearly based on central control it is rather
illogical that he should be so strongly in favour of independence on
this side of the water. His opinion is that "the policy of the Joint
Stock banks ought to be to make themselves independent of the Bank of
England by maintaining large reserves in their vaults." Independence
and individualism are a great source of strength in most fields of
financial activity, but in view of the great problems that our money
market has to face there seems to be much to be said for co-operation
and central control, at least until we have got back to a