WAR AND FINANCE.

King Country Chronicle, Volume IX, Issue 741, 30 January 1915, Page 3

WAR AND FINANCE.

In the course of an interview survey of the effects of the war upon finance Professor Chapman, of Manchester University, in an address to members of the Bankers' Institute, divided the monetary and credit which had been created into two classes — the first, those of the currency, and the second the problem of the financing of production and exchange. The former difficulty, he declared has been solved for the time being and there should be no trouble in keeping it continuously solved. The new currency had helped to relieve the strain, but it had not yet completed its work. With less than£4C,ooo,ooo £1 and 10s notes in circulation, it was evident there waß much gold still in oE the people. It was significant that of the £10,500,000 drawn from the Bank ofj England between July 29th and August sth, less than £3,500,000 went abroad, and that the gold obtained from abroad between August sth and October 7th exceeded by about £2,000,000 the increase of the gold reserve. Possibly some extra gold was being held by other banks and some £5,000,000 was lying to the credit of the Treasury Note Issue Redemption Account; but, allowing for this. it was evident that the amount outside banks must be considerable. One thing that non-combatants could do to furnish aid in the national crisis was to pay their gold into a bank, and take paper in exchange. A sovereign in the Bank of England was worth a hundred in the pockets of the people, and probably worth several that were publicly unrecorded in the coffers of other banks. He questioned the necessity of a high bank rate as a normal thing for new business in the futare, suggesting tha + by a system of differential treatment, based as far as possible on a line drawn at the outbreak of the war, new business should be afforded the facility of cheap credit. It might be necessary, too, from time , to time in the future, to discourage payment of debts abroad in gold, and thi3 would be effected by a high discount rate on foreign bills; but at the same time it might be desirable to continue the encouragement of home trade, and the substitution of home division of labour for international division of labour, and a low rate for the financing of the home trade effected this.