English Public Finance from the Revolution of 1688: With Chapters on the Bank of England

HAVING reviewed the financial measures adopted at the beginning of the war to save the general business situation, and especially to protect the banks, let us turn to a consideration of the direct financing of the requirements of the Government itself. The immense figures involved are a matter of common knowledge. They are summarized as to the classes of expenditures and as to sources of receipts in the tabular statements printed below. These will be found to repay careful study.

We may now consider the financial methods used.

It must be frankly admitted that the expenses of the war were financed by inflation methods. Not, however, the same kind of inflation practised by all the Continental nations of immense issues of bank notes. England did issue non-interest bearing circulating notes--the Currency (Treasury) Notes already mentioned--but the aggregate of £356 million outstanding at the close of 1919 looks very modest alongside of the billions of notes issued; for example, by the Bank of France. The inflation was of a more subtle kind but perhaps even more potent. It was inflation by the use of bank deposit credit.

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