Monetary Problems of the British Empire

Monetary Problems of the British Empire

Monetary Problems of the British Empire

Monetary Problems of the British Empire

Excerpt

In the first Book, the effects of the financial measures of the British Government and of the Bank of England during the early days of the War are discussed. An examination of the Bank of England figures reveals that the very large rediscounts of premoratorium bills and advances to acceptors were not of as great significance as might be expected; the explanation is that the discounts and advances were successive. As more bills were discounted, others were liquidated; and the proceeds of the advances to the acceptors were used to meet bills maturing at the Bank of England. An examination of Financial statements, Parliamentary questions, bank statements and Finance accounts reveals that virtually all pre-moratorium bills were redeemed in the early months of the War and that the larger part of the advances to acceptors was repaid to the Bank in the first year of the War. The Government made a payment of 28 millions to the Bank and thus took over the advances to acceptors that were outstanding in 1915. Approximately 20 millions of advances had not been repaid at the end of the War. Repayments were on a limited scale in the last three years of the War.

The British moratorium in its international aspects can be justified only if it did not lead to similar measures abroad. Apparently the policies of important debtor nations were determined by other considerations. Moreover, traders of high reputation refused to take advantage of the moratoria.

In Book II, it is pointed out that Ways and Means financing was not as important a cause of inflation as has generally been assumed. Special Deposits were a mechanism for depriving the market of surplus balances, and hence were in a sense deflationary. Similarly, Department Ways and Means were deflationary, because as departmental advances were made, transfers were made from the money market to the Government. This statement holds for the advances from the Currency Notes Account. The . . .

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