account of them, worked. These principles are:—
"1. One bank of issue not divided into departments.
"2. Notes are created and issued on the security of bills of exchange and on the cash balance, so that a relation is established between the notes issued and the discounts.
"3. The notes are controlled by a fixed ratio of gold to notes, or of the cash balance to notes.
"4. This fixed ratio may be lowered on payment of a tax.
"5. The notes should not exceed three times the gold or the cash balance."
It will be seen that on these principles indefinite expansion can be secured. The basis of your note issue is not to be as it was in our case before the war—gold except for a fiduciary issue, the amount of which was fixed—but bills of exchange with a certain proportion of gold (one-third in Sir Edward's view), which proportion, again, can be reduced apparently at will by the payment of a tax. Thus, if the community will only draw enough bills of exchange and pay a certain amount of tax, it can have as much legal tender currency as it thinks it wants. Much was said, in the discussion that Sir Edward's proposal aroused.
