s issue and go on merrily. In America it would
seem that the German system has been taken for a model. In his speech
on January 29th Sir Edward quoted Senator Robert Owen, who was the
principal pioneer of the Federal Reserve Bill through the Senate, as
follows:--"The central idea of the system is elastic currency issued
against commercial paper and gold, expanding and contracting according
to the needs of commerce.... It is of great importance that the volume
of these notes should contract when the commerce of the country does
not require the notes to be circulation, and the reserve board can
require them to be returned by imposing a tax upon the issue.... Under
the reserve system a financial panic is impossible. People will
not hoard currency nor hoard gold when they know that they can get
currency or get gold when required.... America no longer believes
a financial panic possible, and therefore the business men, being
perfectly assured as to the stability of credits, do not hesitate to
enter manufacturing and commercial enterprises from which they would
be deterred under old conditions of unstable credit." Well, let us
hope the Senator is right and that America is right in believing that
a financial panic is no longer possible there. But one cannot help
feeling that such a belief may be rather dangerous in the minds of
people so ready to take rose-coloured views as our American cousins.
The Federal Reserve system has worked beautifully in a period in
which American finance has had nothing to do but rake in the enormous
profits of American production at the expense of warring Europe and
lend part of them, to be spent in America, to the Allied belligerents.
It may work equally well if and when the problem to be faced is
different, but it will be interesting to see--for those of us who live
to see--what sort of a tax will be needed to "require" America, in one
of its holiday moods, to return currency that it thinks it needs and
the Federal Reserve Board regards as redundant.

Another point on which Sir Edward lays great stress, in his attack
on the Bank Act of 1844 and the Committee which supports its main
principles, is the beauty of the bill of exchange as backing for a
note issue, as opposed to Government securities. "There is," he says,
"no automatic system for the redemption of currency notes as would be
the case if they were issued against bills of exchange, which in due
course would have to be paid off." Again, "i