promised beforehand to a much greater extent than was in the bargain.

But in finance there was no evidence that any thought-out policy had
been arrived at in order to make the best possible use of the nation's
economic resources for the war when it came. The acute crisis in the
City which occurred in August, 1914, was a minor matter which hardly
affected the subsequent history of our war finance except by giving
dangerous evidence of the ease by which financial problems can be
apparently surmounted by the simple method of creating banking
credits. That crisis merely arose from the fact that we were so
strong financially, and had so great a hold upon the finance of other
countries in the world, that when we decided, owing to stress of war,
to leave off lending to foreigners and to call in loans that we had
made by way of accepting and bill-discounting arrangements, the whole
machinery of exchange broke down because from all over the world the
market in exchange went one way. Everybody wanted to buy bills on
London, and there were no bills to be had.

There was also the internal problem which arose because some of the
public and some of the banks took to the evil practice of hoarding
gold just at the wrong moment, and consequently there was no available
supply of legal tender currency except in the shape of Bank of England
notes, the smallest denomination of which is £5. It is known that our
bankers had long before pointed out to the Treasury that if ever a
banking crisis arose there would, or might be, this demand for a paper
currency of smaller denominations than £5; this suggestion got into a
pigeon-hole at the Treasury and was deep under the dust of Whitehall
by the time experience proved how big a gap in our financial armour
had been made by its neglect. If the £1 notes, with which we are now
so familiar, had been ready when the war broke out, or, still better,