# Bankers and Credit/Chapter 6

Not only did the effects of the war on our currency and banking system stir to fresh efforts those who had always wanted to reform it, they also produced a host of new critics with new suggestions for its improvement. They may be divided roughly into three classes: those who find the way to economic salvation in unlimited issue of paper money which they generally call by some other name; those whose doctrine and intention are vague or incomprehensible; and those who want, either with or without a return to the gold standard, to set up machinery by which the level of prices is to be kept steady through official, and sometimes international, regulation of the volume of credit.
In considering the doctrines put forward by these several classes we are faced with the difficulty that it is not always easy and it is sometimes quite impossible for ordinary folk to understand what currency reformers really want to do, and it is also interesting to note ​that sometimes they make a definite movement to a new position.
This was the case with the veteran champion of what he believes to be banking reform, Mr. Arthur Kitson. This versatile critic has several embodiments. In one, though he vehemently denies that he is in favour of unlimited credit, he uses expressions that seem inevitably to lead to that ideal. In another—as shown in his Fraudulent Standard, apparently written in 1917—he advocates a system of so regulating the supply of money that "it preserves the uniformity of an invariable index number" (page 132), and so seems to join hands with the stabilizers. In another he declares himself the champion and interpreter of the new economic apostle, Major Douglas, whose scheme he apparently swallows whole. In the last year of the war he had published in the Times Trade Supplement a series of articles on banking and currency problems and I was highly honoured by being asked to reply to them. They, together with my replies and other works of his, have now been published in a little paper book called Money Problems—(Dolby Brothers, High Street, Stamford). In the article published in the June Supplement, Mr. Kitson told us that "if the British public would only grasp the ​fundamental truths of Economic Science they might learn that a future of boundless wealth and prosperity is theirs, provided they have the will and determination to secure what is well within the bounds of possibilities. . . . We must first decide to break with the past by getting rid of our bankrupt political and economic ideals and methods, our conservatism, our ignorance and superstition."
So far most of us will follow him. "We must rid ourselves," he continued, "of those foolish laws—the relics of the ignorance and prejudices of our forefathers—such as the Bank Charter Act and other parliamentary restrictions." He went on to show that wealth is the product of two prime factors—man and nature—generally termed labour and land, and asked how it is, "with an unlimited or practically unlimited supply of these two factors," that wealth is, or hitherto has been, so comparatively scarce? And he answered the question by saying that "a study of the currency and bank methods of all industrial nations for the past century will convince every unprejudiced person that the scarcity of wealth and the limited amount of production has been due primarily to the legally restricted supply of money" (page 32).
It was indeed a most hopeful theory. ​Everything else needed for wealth we were alleged to have in practically unlimited supply; all that we lacked was money, and war had shown how easily money could be multiplied. We only had to make Mr. Kitson our Currency Controller, or Currency Creator—for with his theory he would surely have scoffed at the notion of control—and give him a free hand to print, and boundless wealth was within our reach.
And yet one or two points in his argument are not quite clear. Is it really true that we have a practically unlimited supply of "man" and of "nature"? There is indeed quite a large number of men in this country, but how many of us are really well equipped for increasing its wealth, trained to do our jobs as they ought to be done and eager to work as hard as it would be necessary for us to work before boundless wealth began to look like being our portion? Is one in a hundred an optimistic estimate? And as to "nature," there is plenty of it lying about in the world, but much of it is not ploughed or tilled, means of communication are not yet all that they should be, and some considerable additions to plant and machinery seem to be required before we can be sure that lack of money is the only bar to an endless flow of milk and honey.
​Mr. Kitson, however, has no such doubts. "Since," he says, "sales were limited by the amount of money or credit offered, it followed that production was necessarily limited by the quantity of money and credit available for commercial purposes." It did not seem to occur to him that a larger volume of production might easily have been carried on with the same amount of money by a readjustment of the price level. But after all, what has happened since then has quite sufficiently answered Mr. Kitson. If unlimited money was all that was needed to secure abounding prosperity, it ought now to be evident in Russia, whose inhabitants are in fact living in a state of economic chaos that appals all who contemplate it. Mr. Kitson would doubtless reply that circumstances in Russia were exceptional. In his view "the average business man is growing tired of having to go hat in hand to solicit 'favours'" (referring to getting accommodation from banks) "which he claims should be given to him as a legal right." This may be so, but most business men of my acquaintance see very clearly that if everybody had a legal right to as much credit from the banks as he thought fit to demand the amount of credit created would in times of optimistic exhilaration so rapidly outstrip the supply of ​goods, that a wild orgy of competitive buying would almost certainly end in disaster; and that the ultimate end of such a policy is complete worthlessness of money and a return through chaos to the barbarisms of barter.
In 1921, however, Mr. Kitson was dining with some friends, including well-known financiers and merchants. The conversation soon turned on the industrial paralysis that then prevailed which was attributed by various speakers to various causes. As he describes the scene in a preface to a subsequently published work, entitled Unemployment, he seems to have dealt faithfully with his companions. "The writer's turn came last and he expressed himself as being in entire disagreement with every member. Not one of the reasons so far urged for our industrial woes would stand even the most superficial investigation, and consequently the remedies suggested were not only worthless but foolish." He went on to attribute the depression to a deflation policy announced about twelve months before by Mr. Chamberlain, and maintained that industrial and social conditions would grow worse until this policy of credit contraction was reversed. He was finally challenged by his opponents to furnish a remedy for unemployment and industrial depression. The result ​was a new series of articles, and a new book, as already mentioned, in which Mr. Kitson, after recommending various minor means of credit increase, such as paying pensions and unemployment allowances, not by rates and taxes but by the issue of fresh currency (page 38), and the conversion of the floating debt (which in the early part of 1921 was not far off £1,000,000,000) into legal tender currency (page 43), finally decided that the system suggested by Major Douglas in his remarkable books entitled Economic Democracy and Credit Power and Democracy, would in his judgment "effectively solve the whole problem of unemployment, trade depression, and all their attendant evils, and if adopted universally remove the causes which have been so fruitful in provoking wars and which if not speedily removed must soon give rise to fresh and more desolating wars than any yet waged."
Everyone interested in currency matters had already heard much of Major Douglas and his scheme which was adopted and ventilated at length by the New Age, at that time the well written and interesting organ of the Guild Socialists, led by Mr. Orage. I had made an honest and determined effort to read one of Major Douglas's books, and having failed to understand how the scheme could work, had ​asked the Major to lunch and spent some very pleasant and interesting hours with him, at the end of which there had been no deflation in my bewilderment. I knew that this was probably my fault, and I was really cheered when Mr. Kitson, having first stated that the problem of unemployment "when properly understood is so simple that the average schoolboy ought to be able to furnish a satisfactory answer," went on to the Douglas scheme as a solution. For it seemed safe to suppose that if the matter was really as simple as it seemed to Mr. Kitson, he would be able to translate the Douglas scheme into something that an ordinary intelligence could grasp. And as he went along in his leisurely discursive manner he certainly let fall by the way some most encouraging gems of assertion, as for instance (on page 33) when he said that "even to-day the labour of less than 10 per cent. of the population will readily suffice to maintain the entire inhabitants of this country in a high state of comfort." But it is when he begins to summarize Major Douglas that the prospect really begins to dazzle (page 55): "The potential wealth of this country is far beyond the dreams of avarice, and under a system of co-operation and goodwill everyone might by contributing a trifling amount of labour, receive a share of all the ​good things of life sufficient for his well-being, contentment and happiness. Every member might thus receive an income from the State instead of being taxed. By gradually replacing the wage system with a system of dividends, by giving a share to each and every member engaged in an industry in that particular undertaking, the evils now resulting from unemployment would disappear."
It was a mouth-watering prospect. Instead of paying taxes I should dun the Inland Revenue Department for emoluments due to me, and the wage earners would beat their tools, not into ploughshares but the more comfortable shares that have dividends attached. And then came the scheme. What may be described as Major Douglas's major premiss is a belief based on "a system of costings" that "the purchasing power distributed to the public by the industrial system in all countries could not possibly enable them to purchase more than a small proportion of the goods made, even if these were offered at the minimum price of bare costs." If this were so the inevitable results would appear to be a chronic and ever growing glut of unsold goods and the whole of industry in the hands of receivers; and yet somehow industry has managed, in spite of a system which is "inherently suicidal," to sell its ​output and maintain through some centuries an appearance of chequered but rather ample prosperity. However, "to meet the discrepancy," says Mr. Kitson (page 56), "between prices and purchasing power distributed, Major Douglas proposes that producers shall sell their products below cost at a price which shall bear the same ratio to cost as the total national consumption of all commodities does to the total national production of credit. The difference between such prices and cost of production is to be made good by a draft from the Treasury on the national credit account. Under this scheme, price, instead of being a function of money, becomes a function of production. Hence any over issue of money cannot affect prices and the evils resulting from inflation under our present system are therefore eliminated."
Well, all this must evidently be quite clear and simple to Mr. Kitson, but he surely might have told us what Major Douglas really meant when he said that products were to be sold below cost price at a price bearing the same ratio to cost as the total national consumption of commodities bears to the total national production of credit. For these remarks are not really simple at all except to very clever people, and what we want to know is how the total ​national consumption of commodities at any given moment is to be estimated, unless almost half the population is kept busy weighing, measuring and checking the consumption of themselves and the other half; and if so, what becomes of the theory that the labour of less than 10 per cent. will suffice to keep us all in a high state of comfort? And what is the total national production of credit, and who is to measure it and how?
As to how the system was to work by which goods were all to be sold below cost price, and the difference between prices realized and cost of production was to be made good by a draft on the national credit account, was another matter that cried aloud to be explained. Apparently, to take a concrete example, a bootmaker who made boots out of materials that cost him fifteen shillings a pair and with the help of labour that cost him five shillings a pair, would have to sell them for something less than a pound a pair and could get back the difference from the Treasury in the shape of a draft on the national credit account, whatever that may mean. He has thus made nothing out of the transaction, but has received with the assistance of the Treasury as much as he paid out. Is he expected to go on carrying on the business of a bootmaker for nothing to the extent of the ​demands upon him and his neighbours, and what is he to live on in the meantime if he continually receives only as much as he pays out? And if everybody is doing the same thing what has become of that glorious system with which we were so lately dazzled, by which everybody was to be a shareholder living on a comfortable stipend from the State? Nor is confusion on these points lessened by an endeavour to understand the "exemplary scheme" drawn up for special application to the mining industry. In fact, the Douglas scheme as expounded by Mr. Kitson was at least as incomprehensible as when drunk from the original fountain.
Fortunately it was proved that inability to appreciate the Douglas scheme was not necessarily the result of my middle-aged prejudice; for it was weighed in the balance and found wanting by the Labour Party, which in a pamphlet entitled "Labour and Social Credit" subjected it to most effective analysis through a Committee whose distinguished members included such well-known economists as Sidney Webb, G. D. H. Cole, Hugh Dalton, J. A. Hobson, Sir Leo Chiozza Money, R. H. Tawney and Arthur Greenwood. It expressed inability to understand how the aggregate surplus of production over ​consumption of the whole nation can be computed. "It is impossible to add together yards of cotton, tons of coal, gallons of milk, and additional cottages, schools and factories otherwise than in terms of money; and the money valuation is dependent on the price to be set upon each of the different commodities." This is a very palpable hit for it was part of the Douglas scheme, as noted above, that the cost of each article was to depend on the relation of total consumption to total production.
The Major's amazing proposal to let each manufacturer make good the loss caused by selling goods below cost of production, by a draft from the Treasury on the national credit, seems to the Labour Party critics to be "equivalent to a continuous flooding of the nation with paper money which would rapidly sink in value." This would inevitably take the form of a rise in prices, which no authoritative fixing could prevent. "Major Douglas," they continue, "denies that this issue of paper would inflate prices, on the ground that it is issued against 'real credit' or a 'potential productivity.' But first let it be noted that no provision appears to be made for cancelling any of these notes, which would therefore increase indefinitely. Secondly, the people who receive the notes will presumably wish to spend them, ​and in the last resort, to spend them on buying goods. In the result, either prices must go up in face of the abundant purchasing power and limited supply of consumable goods, or if all prices could be rigidly controlled by law, the money demand would far outrun available supplies. Short of a bureaucratic rationing system, some parts of the country and some consumers would find themselves with no goods at all. In fact, we should be back in the worst experiences of the war, in soaring prices, inadequate supplies, queues and the rest of it—only very much more so."
Such are the terms, or some of them, in which the Douglas scheme is dismissed by the Labour Party. Those who think that the matter is worth study will find this critical examination useful and, though distinctly severe, quite fair on the whole. In one respect, however, I think that Mr. Webb and his colleagues scored what they thought was a bull's-eye, but was really a miss, because they had not appreciated the true beauty of Major Douglas's intentions. It was in discussing his proposal that a new and special banking company should be set up for each industry, and that this banking company should be given the right by law to furnish, in return for shares, a steady increasing proportion of the additional capital required from time to ​time by the existing capitalist employers in the industry.
Everyone engaged in the industry was to be, as such, a shareholder in the bank. All wages and salaries were to be paid by the directors of the industry into the bank, and the employees would draw cheques on the bank to meet their living expenses. But the bank having the right to provide a proportion of the new capital required, would in the case of the Miners' Bank—the shareholders in which are all the persons employed in the mining industry—"find itself owning a steadily increasing number of shares in the steadily increasing total share capital of the colliery companies without the miners having had to put up any money at all." "This sounds delightful," say Messrs. Webb and company. "Unfortunately, it overlooks the elementary need for the Miners' Bank to have the capital before it can supply it to the colliery companies in return for their new issue of shares."
But they surely do Major Douglas a rather grave injustice. To such a monetary magician there would be no difficulty about producing the capital simply by another draft from the Treasury on the national credit account, or, perhaps still more simply, by giving all the new banks the right of unlimited note issue and ​making their note issues legal tender. By this system every industry can have as much capital as it likes without any regard for the needs of others, all of which would be supplied by their own tame banks, and all workers in all the industries, being shareholders in all the banks, would thus become capitalists without having to go through the effort of saving. Major Douglas has perhaps rather spoilt this part of his scheme by saying the bank as such shall pay no dividend. This seems rather mean and cheeseparing, and surely everybody would be much happier if they all had 10 per cent. dividends paid into their accounts. As to what would happen to prices with all the banks ladling out capital as fast as their industries asked for it—but we have Mr. Kitson's assurance that price under the Douglas scheme becomes "a function of production" and "hence any over issue of money cannot affect prices."
Major Douglas's Labour Party critics having dealt faithfully, as shown, with the Major, proceed to lay down that the "social control of credit and the banking system" may best be achieved by the nationalization of the joint stock banking system and the energetic development throughout the country of municipal banks. Well, the cobbler will talk leather ​and Socialists still talk nationalization and municipalization. But it has already been noted that the several Socialist Governments that have come into power since the war have shown, when it came to practical measures, remarkable unanimity in nationalizing nothing. Bankers point out with some force that their business is the very worst for the State to try to work, because banks managed by Government officials, with the possibility that banking facilities might begin to be influenced by political considerations, might very easily produce a most unsavoury state of affairs. Mr. Kitson's claim to a moral right to credit for everybody who wanted it, would be better than the political right of gentlemen prominent on local caucuses to special tenderness on the part of national and municipal bankers.
It is interesting to note that Mr. Webb in an article published in the Contemporary Review of July 1918, argued that the process of bank amalgamation was preparing the way for the nationalization of the business, therein agreeing with many critics of the process, but only proposed that what may be called the routine half of the matter—taking deposits, issuing cheque books and so on—should be handed over to Government officials, the money lending side of it being still left to private enter​prise, as not yet ripe for nationalization. Since it calls for discrimination, decision, quickness and courage, and all these qualities official training tends to destroy, Mr. Webb was evidently wise in following Solomon's example and proposing to bisect the baby. Bankers maintain that banking could no more work than a baby could live in two separate sections.
Another admirer of the Douglas scheme was Professor Soddy, who, however, only went so far as not to imply "that the scheme might not be a great improvement upon the present one." He might have told us how it was going to work. But he classes it as a temporary palliative, "for no system founded upon usury can be stable," and leaves it, thereby adding to the many disappointments of his pamphlet on "Cartesian Economics, the Bearing of Physical Science upon State Stewardship." As it happened, this reprint of his two lectures to the Student Unions of Birkbeck College and the London School of Economics, delivered in November 1921, came into my hands just after I had been reading again some of Huxley's essays and wishing that we could have in these tangled days some words of counsel from that keen, calm thinker and clear writer. Surely these great scientific men of to-day ought to have something to say about straightening out ​our economic tangle. And then came this pamphlet with one of our greatest scientific names upon it, and I looked for light at last. Professor Soddy states his intention to try to bring the existing knowledge of the physical sciences to bear upon the question "How do men live?" He says that the modern economist, for whom he evidently has a most hearty contempt, seems to have forgotten that there is such a question.
To illustrate it he asks what makes a railway train go. He admits that in one sense or another the achievement may be claimed by the engine driver, the guard, the signalman, the manager, the capital, the shareholder, the scientific poineers who discovered the nature of fire, the investor who harnessed it, labour which built the railway and the train, but "the fact remains that all of them by their united efforts could not drive the train." This seems to be a sort of fact that an ordinary mind might almost have hit upon without the help of a great scientist, and when Professor Soddy goes on to say that "the real engine driver is the coal" he seems to imply, by contrast, that the coal, by its sole, unaided effort could have driven the train without the assistance of all the other factors. Whereas if the capitalists and the engineers and the navvies had not financed and ​planned and built the line, even the coal could hardly have sent the train very far on its journey.
Professor Soddy's main quarrel with what he calls "orthodox economics" is that "it confuses the substance and the shadow, it mistakes debt for wealth, and is guilty of the same mistake as the old lady, who, when remonstrated with for over-drawing her account, promptly sent her banker a cheque for the amount." Many economists are certainly in the habit of explaining themselves carelessly enough to have given this impression to Professor Soddy; but he surely, in bringing this very serious charge against a body of earnest and industrious workers of misunderstanding the very root of their problem, might have cited an example or two, or at least given us a few references to look up, in proof of this sweeping assertion. As it is we are left in doubt as to whom the Professor means as exponents of orthodox economics.
Is this really the "scientific" method of dealing with a problem—just to make an assertion, unsupported by evidence of any kind except the Papal ipse dixit of an eminent Professor? It seems to be so, for he further observes "the fact is that the economist, ignorant of the scientific laws of life, has not ​arrived at any conception of wealth, apart from the elaborate code and enactments of legal conventions which give to the individual in actual non-possession of wealth the right to acquire it, whereas I, from the application of the laws of energy to the problems of how men live, have arrived at such a conception."
We may leave the economists to deal with the Professor's charges if they think it worth while. To us ordinary folk it would be useful if he would be clearer as to what this conception really is. He has already confused and puzzled us by his example of the train and the coal, and on the subject of wealth he is even more bewildering. For he tells us that "the wealth of a community can only be increased by production and discovery, not by acquisition and exchange. In commerce and exchange for every plus there is a precisely equal minus." Has he really tumbled into that schoolboy's pitfall which makes folk believe that every merchant or dealer who makes a profit inflicts a loss on somebody else? It seems so, but surely Mark Twain was nearer the truth when he tells us how Tom Sawyer exchanged a tooth, lately pulled out of his own head, for a tick possessed by Huckleberry Finn, and the two boys then parted "each feeling wealthier than before." They were wealthier because each had got ​something that he wanted more than the article disposed of. When Professor Soddy lectures and writes and otherwise distributes the learning for which he is so eminent in his real field, he surely exchanges that learning for goods which he buys with the fees that he receives and so confers a double advantage by handing over knowledge to those who need it and taking goods from those who have made them and passed them on through the merchants for sale.
When we come to the narrower problem of money, the Professor is acute and illuminating. He sees that the quantity of money as compared with that of goods is the most important item in its value, "It ought to be in precisely the same relation to the revenue of wealth as a food ticket becomes to food supply, or a theatre ticket to a theatrical performance" (He surely means to the seats in the theatre). Again, the "currency must be regulated pari passu with the changing revenue, issued as the latter expands and destroyed as the latter contracts. Since it would neither be given away in the first nor taken away in the second event, but used to buy back old, or taken in exchange for new State Loans, the community as a whole would share the prosperity of good times as well as the stringency of bad ones, instead of only ​the latter as under the existing system" (pages 16, 17).
This proposal for expanding and contracting the currency by debt redemption and debt issue might evidently be difficult and expensive to work and recent experience has shown that it is possible for an expansion of currency to coincide with a heavy fall in prices. But all this question of the possibility of keeping prices steady by expanding currency and credit like a concertina will have to be discussed more fully later on. We should have been glad of more light on it from Professor Soddy, for it is not really quite as simple as he seems to think. He says that he "will be asked by those who are unaware of the proposals made by Gesell on the Continent and by Kitson in this country, how is it possible to fix the purchasing power of money? The answer is simple enough: By fixing it, that is, by printing more as average prices, determined by Index Numbers, tend to fall and by withdrawing it from circulation as they tend to rise." This may be a "simple enough" answer, but as will be seen practice might be rather more difficult than precept. And one feels all the more confidence in doubting whether the Professor is really well-informed on the subject about which he lays down the law with such magnificent conviction, when one ​finds that when he does condescend to give a few facts they look remarkably like figments. "It is," he says (pages 18, 19), "on record that a group of American financiers on one occasion, having sold British and bought American securities in advance, removed £11,000,000 from the Bank of England and put it into circulation in America, with the result that the prices of the securities they had sold fell greatly in value and those they had bought rose correspondingly." Surely when a distinguished Professor is lecturing to groups of young students he should not make statements of this kind without some attempt at corroborative evidence. Where is this amazing fairy tale "on record"? The Professor admits that this instance is an extreme one, but goes on to say that "when one inquires further as to who is in charge of the calibration arrangements that fix the purchasing power of money much that has hitherto seemed inexplicable about our time becomes clear. These powers are wielded, by private banks, like the Bank of England, in the steadfast interests not of the community but of the creditors of the community. Whereas no changes of revenue, so long as the currency remains constant, affect the relative proportion of the whole revenue secured by creditors, any increase of currency diminishes ​their relative share, and hence is known as inflation, while any decrease increases their relative share and hence is called sound finance." This passage appears to mean that in the interest of creditors the Bank of England continually works to reduce the amount of currency in the country. If so, its effort has been singularly futile, seeing that at the end of 1869 (as shown in Bagehot's Lombard Street) its own note issue was £33,250,000 and at the end of 1913 it had grown to £52,250,000, to say nothing of its expansion to £144,000,000 at the end of 1922. Surely the Professor might have asked some office boy in the City a few elementary facts about what happens there, before making assertions that are so amazingly incorrect. Can this really be the system on which our greatest scientific minds conduct investigations?
A scheme with some theoretical attractions was worked out by Mr. Henry Lowenfeld in a book called Back to Prosperity published in 1923 (Effingham Wilson). He proposes that "a Corporation should be formed, composed exclusively of bankers, representatives of the entire banking interests of the country. The Government should authorize this Corporation to issue the 'money' of the country and should make that 'money' the exclusive legal ​tender money. The sole business of this Corporation should consist in discounting bills with its own notes and coins. In this way, the new money will first of all pass into the hands of banks, and through them be put into circulation. The members will jointly and severally guarantee the new money issued by the Corporation, and also undertake that no money be put into circulation unless it is fully covered by bills in hand. The value of bills discounted, and consequently the amount of money in circulation, must be strictly adjusted to the existing requirements of Trade. Consequently there will never exist either a dearth or a superfluity of cash. The rate of discount charged must invariably be so adjusted that the purchasing power of money is kept as steady as possible."
Mr. Lowenfeld thus endeavours to unite in his scheme the beauties of the self-paying bill and the self-redeeming note, and regulation by expansion and contraction of cash, and also the price of credit. The strict adjustment to the requirements of trade would be likely to be a matter of difficulty, but he is working along the same line as the scientific stabilizers who will be considered later.
Another assailant of the gold standard is Mr. C. J. Melrose, who in Money and Credit ​(Collins, 1922) argues for a currency of which each unit shall stand for a "true credit" and be a certificate of delivery—"a just demand to the return of an equivalent for what has been given up to be consumed by others." It will be noted that his expressions are somewhat vague, but his book is dignified by a "Foreword" from Professor Irving Fisher. Mr. Melrose contends, very truly, that his certificate money "is wholly within human control and only requires strict honesty and the aid of reasonable precautions to eliminate fluctuations entirely." But these requirements are, at present, rather a large order; and in the matter of money human control has not, in the last nine years, covered itself with glory.
An original touch in the attack on the gold standard is provided by Mr. Chas. P. Isaac who, in The Menace of Money Power (Jonathan Cape, 1921), implies that it is the cause of bad weather and bad harvests. He says in a Note to page 110: "It is interesting to note that, while bad harvests are usually thought to be the cause of financial crises, the truth seems to be that credit restrictions generally precede had harvests. The harvests prior to the credit restriction of 1826 (when notes under £5 were prohibited) were exceptionally abundant. Those following the Act of 1833, ​which allowed the Joint Stock Banks, were similarly plentiful. The harvests of 1842-44 were very good, but when Peel's Act was passed bad harvests resulted"; so now we know why we had such a miserable summer in 1922.