to the conditions under which the restriction would become actually operative would then be likely to cause even greater apprehension than the limitation of the Act of 1844.”  Certainly if, during a foreign drain, for every million of gold that went out, another two millions of credit, over and above, had to be cancelled, it is easy to imagine a very jumpy state of mind in Lombard Street and on the Stock Exchange.  Sir Edward and the Committee seem to be agreed as to a limit on the note issue, but of the two limiting systems the old one advocated by the Committee, though apparently more severe, would seem to have much less alarming possibilities behind it.

A point on which the commercial world does not seem to have made up its mind, however, is whether there should be a limit at all.  Under the old Act there was a limit which could only be passed by a breach of the law.  Under the Cunliffe proposal the limit could be passed with the consent of the Treasury.  Sir Edward has not told us of what machinery he proposes for the passing of the limit which he lays down; but in view of the great apprehension that an approach to the limit point would, as shown by the Committee, produce, it is clear that there would have to be a way round.  In Germany there is no limit; you pay a tax on the excess 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.