New-York tribune., 1906-06-18
ENGLISH FINANCE.
Proposals for Increasing the Gon
Reserves.

The production of gold steadily Increase. -.
there Is a ceaseless gold famine. The rnins.s
the Transvaal alone yielding 81 sOOOOo .
month"; or over 100000 a year and the hr,,.
OF 1t comes to England in weekly shiprnen,,,
yet 1t is absorbed and distributed so ra,ts,,
that there always seems an abnormal scarr,,y
Of f. The demand for gold for mechanics,
arts was never so great as in this age Of wsa.,s
and luxury. This helps to account for I,s A.
appearances: and there Is a continuou, dsnn.,x
for It from various countries where 4, =.
quired for monetary currency Yet wb.n s.,,
allowance is made for its largely increase
use. IT is not easy TO explain why 80 mn. a. -
remains IN sight in the gold reserves q. -.
Bank of England and tho Joint stock bank.
With the production OF gold at fits rnax,np,
and London The worlds great centrs =,
exchange on the geld basis. this ingots com. ana
go and the stock In the issue departmen, ~
the Bank of England Is no larger than II IA.
thirty years ago. Probably there ts NOR. -
1t in the joint stock banks than there was a.
though II IS open question whether ,hs,
gold reserves are above or below the Isv., a
safety in relation to their liabilities
The reserves OF the Bank OF England ara c.,.
tainly less to-day than they were last wear 40
the note circulation has remained vir,u.ll,
stationary for a long period, although Ger.
uldHys rIduCc anu OIileF commercial cOlnrrtaa
have been enlarging their stocks OF gold ana
doubling their currency. Gold comes 10 rnx.
land freely from The Transvaal California Ar.-
tralia and other fields: but It is not accunulataa
in the bank reserves, which would indsed ha
heavily depicted by temporary pressure II IN.
rate of interest were not raised
Sir Robert PeePs chief object in introduc,nr
the Banking Aot OF 1914 was TO prevent an over.
issue of notes. This was accomplished on Lord .
Overstones advice through the separation ,f
tho banking and issue departments The Cow
ernor and company were left to manage ths
banking business at their own discretion Tn.
issue department was converted into a mechan-
ical device for making the paper notes ou+s,d.
conform automatically with the bullion ,ns,da
Apart from a fixed number of millions secured
oy consols, the note issue has continued =,
represent the bullion in the department. which
does not belong to the bank but TO the holders
Of the notes. and is payable TO them on demand
According to Lord Overstone's view. in his tee
timony before a parliamentary commission
which remains after half a century the he's,
commentary on the English currency systern
the issue department belongs 10 the stats ana
the bank is paid for working IT, but ia M. Al.
lowed any discretion in doing IT, The buu,on
deposited there IS held at the order OF tba ,o+a
holders and IS not in any sense the rsserys AZ
the bank From the passage Of the act N.
note circulation has been dependent on ira
soIu deposits and It's value Is maintained hv
them- Bullion can only be obtained from ths
issue department by the payment Of bank
notes, and as this involves contraction ~ Nh.
currency the increased value Of money br,ng.
the gold back into the country and the drain iz
stopped While the act could not prevent Auct-
uations In the rate OF discount or interest ,e
regulated and limited the note issues by ths
bullion available for their redemption.
Lord Overstone's expectations have been re-
markably fulfilled IN the operation Of the Bank
act. and Sir Robert Peel's Judgment has been
completely vindicated. England has had for
sixty years stable currency and been adequate
ly protected against overissues of paper money.
Only in respect has the operation OF the act
been disappointing 10 fnanciers. The bullion
reserve in the issue department has not IN
creased with the gold production, nor has thu
note circulation been enlarged TO meet the re-
qu1rements OF commerce. Anything Ike an uu-
derissue Of paper was considered impracticabls
by the experts In 1914 and 1857. because their
automatic arrangement was expected 70 supply
as much currency as business interests would
need They were content with regulating paper
issues; they did not regard it as expedient 70
foster them Consequently the gold reserves IN
the Bank of England have remained stationary
during the last thirty years. and there does not
appear to be any practical method OF enlarging
them. has been done in Germany France and
America. There are experts who assert that
the kingdom would be in better condition for
competing with foreign nations and for trans
acting the business of the empire II the note
issue Of the bank were doubled; and since this
would involve an enormous enlargement Of the
bri1iOU IA OP GOLD drain and
the fluctuations OF interest would be diminished
An increased stock of gold IN the issue DEPART
ment would be welcomed generally by capital
lists and bankers If IT could be brought about oy
some method of natural attraction; but tns
ways and means tentatively suggested are con-
denned because reopen1ng OF the controversies
over currency and the Bank act Is not desired.
If Cobdenism be fnaIity IN the estimation OF
manufacturers and the working masses so also
Is the Bank act sacrosanct in the Judgment OF
English bankers
The payment in gold OF over 11,Oooooo OK
securities now in the issue department IS not
practicable. since the government cannot be ax-
pected 10 find so large a sum when expenditures
and taxation are at as high level as az present.
Mr.. Asquith would become most unpopular
Chancellor OF the Exchequer IL he were TO pro-
pose unnecessary an expedient for inereas-
ing the gold reserve The Issue OF II notes
would be a safer experiment, because II Ha'
operated favorably IN other countries; yet N 80
conservative a nation England, where trades
men like to Jingle the soveresns In their tiiI'
and Insist upon making customers write une'.
names on every "hver.' decade or two wouN
be required before radical a change II 1i'
habits of trade could be generally accop'Sa
Mr.. AsquIth has not taken serious We" ..
either OF these proposals; but he has sussesIsS
a readiustunent Of The relations between tno