WAR CHEST NEEDED.

Marlborough Express, Volume XLII, Issue 110, 11 May 1908, Page 6

WAR CHEST NEEDED.

, j —<t»~" AN IMPORTANT LECTURE.

(Post Correspondent.)

LONDON, March 27. Sir Robert Giffen, the famous statistician, delivered a very "important lecture on Wednesday, at the Royal United Service Institution, on "The Necessity of a War Chest in this* country, or a greatly increased gold reserve." It may be remembered that I have more than once called attention to this most serious questionl, which politicians and the public in general seem: to view with profound indifference. Sir Robert points ed out that a war between England and Germany, or the United States, would bring upon us, as well as other civilised States,1 quite unprecedented calamities and dangers. IN EVENT OF WAR. In such a case there would be a stoppage, or great contraction, of the volume of imports and exports between the belligerent States, and those dependent upon them. As a consequence the commotion in the whole banking world would be quite unexampled, and the interference with the regularity of trade would mean widespread ruin to merchants and bankers. In the event of "a war alarm there would be a run on the-banks by Home and foreign depositors, and he questioned whether money would .come back to Londbn if this country should be involved in a doubtful war with possibilities of defeat and invasion. In investigating the problem of whether our present cash reserve arrangements were adequate or not, they were met with the suggestion that no preparation could be adequate, ana that the Government could hardly do anything else than order a general suspension of specie payments. The possibility of avoiding a resort to inconvertible paper was, surely,- worth aiming at. At present our banking system liabilities could be put at least at 910 millions of pounds, and against this- vast sum there w,as almost literally no provision except the banking reserve of the Bank of England— about 20 to 25 millions, which y , with the stock of bullion, might be increased to 40 millions. The money of ordinary banks could not be parted with in an emergency, and it seemed extraordinary that they should keep no cash reserve. > A REAL DANGER. The demands on English banks, continued Sir Robert Giffen, quite apart from a panic at.first, might easily be-' come overwhelming, and a paltry 50 millions reserve would dwindle in a day or two. A system which would work well under the 50 million, limit might be destroyed by a strain which would require 100 milion pounds. The banking position in this country was one of real danger in the event of ~k great war. The Ranking community was the primary institution. Yet the I Government might co-operate to j strengthen the banking system, by ac- • cumulating a considerable sum in cash for a rainy day. This should be done in time of peace, and the normal reserve added to whenever possible. The question of the banking reserve ought to be regarded as the essence of the whole contract between the Government and the Bank "of England, the former either increasing its payment for services rendered, or foregoing part of the sum. for the privilege of note issue. Englishmen had overdone I .their trust in banking, they relied too much on their banks to pull them through an emergenncy, and their ■ normal balances were at too low a | level, thus weakening the reserve i strength and the power of the banker. j The secret was to keep a good cash reserve to meet emergencies, both ! nationally and individually. Another leading authority, Sir Felix Schuster, maintained that in the case of. a sudden outbreak of warwe should j be in a very serious position. We must have an efficient navy, but the

difficulty of gold reserves would arise before the first shot was fired.

These remarks from such eminent authorities "give one furiously to think"—and not pleasantly, espjecially seemg /that yre are already using up our "war chest' 3 in time of peace by the continuance of,a war income-tax. However, I am glad to observe to-day that this very serious matter is now being taken up with much earnestness by various institutions concerned with commerce and finance. The imminence of the peril seems "at-last to be clearly recognised, as alsd ' the urgency of prompt practical measures towards averting, or minimising, the grave danger which confessedly exists as regards alike our national safety and. our public credit. It is certainly high time that the .matter should receive attention, and that attention is not being given to it one minute too soon.