Page:Bankers and Credit (1924).pdf/107

 about the beauties of the bill of exchange as a "self liquidating" instrument; and it is true that a bill drawn on a solvent acceptor against goods on the way to market has outstanding merits as a short investment. But it was not quite right to assume, as happened, that currency based on bills of exchange cannot be multiplied to excess because there must necessarily be goods behind every bill, and so currency could not increase faster than goods. In fact bills are often drawn without goods behind them, on the credit of the parties; and even if it were possible to exclude such kites from being used as the basis of currency it is still possible that several bills might be drawn against one parcel of goods. Goods generally change hands many times on their way from the producer to the final consumer and if they are paid for each time that they are sold by the drawing of a bill at three months and all these bills could be discounted at the Bank and new notes created against them, a ship load of cotton or copper might easily have ten times its value in notes outstanding on its responsibility. And sometimes when goods do not find a final market bills drawn against them are renewed; and when this does not happen there could always be fresh batches coming forward produced in the same way.