. They "think that the stringent principles of
the Act (of 1844) have often had the effect of preventing dangerous
developments, and the fact that they have had to be temporarily
suspended on certain rare and exceptional occasions (and those limited
to the earlier years of the Act's operation, when experience of
working the system was still immature) does not," in their opinion,
invalidate this conclusion. So they propose that the separation of the
Issue or Banking Departments should be maintained, but that in future
if an emergency arose requiring an increase in the amount of fiduciary
currency, this should not involve a breach of the law, but should be
made legal (as it is now under the Currency and Bank Notes Act of
1914), subject to the consent of the Treasury.

It is not proposed at present to secure the circulation of paper
instead of gold by legislation. The Committee considers that "informal
action on the part of the banks may be expected to accomplish all
that is required." If necessary, however, it points out that
the circulation of gold could be prevented by making the notes
convertible, at the discretion of the Bank of England, into coin or
bar gold. The amount which, in the opinion of the Committee, should be
aimed at for the central gold reserve is L150 millions (a sum which is
already almost in sight on its figures quoted above); and "until
this amount has been reached and maintained concurrently with a
satisfactory foreign exchange position for a period of at least a
year," it thinks that the policy of reducing the uncovered note issue
"as and when opportunity offers" should be consistently followed. How
this opportunity is going to "offer" is not made clear; but presumably
a reflow of notes from circulation can only happen through a fall in
prices or a reduction in bank deposits by the liquidation of advances
made to the Government, directly or indirectly, by the banks.

Concerning the difficult problem of replacing the Bradbury notes by
Bank of England notes of L1 and 10s., an ingenious suggestion is made
by the Committee. It observes that there would be some awkwardness
in transferring the issue to the Bank of England before the future
dimensions of the fiduciary issue have been arrived at; and it
suggests that during the transitional period any expansion in Treasury
notes that may take place should be covered, not as now, by Government
securities, but by Bank of England notes taken from the Bank. By