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 as a medium of payment imposed the rough and ready regulation arising from the limit on their supply. By the use of paper money convertible into metal, it has been possible to combine this regulation with great expansion and elasticity; and as long as convertibility is retained as the foundation stone of the monetary edifice, the only question that is open to argument is the extent to which this expansion and elasticity should be allowed to proceed.

Sir Edward Holden wanted a greater degree of expansion to be secured by a note issue, not limited absolutely by the amount of gold in the country, but expanding in proportion to the amount of gold. As the Committee was able to show, this system, if really effectively working, raises possibilities of disturbance and dislocation much greater than under the system of an absolute limit. With an absolute limit as we had before the war, if a million pounds' worth of gold is taken from the Bank of England a million pounds' worth of notes have to be cancelled. Under Sir Edward's proposal of a three to one proportion, if a million pounds' worth of gold were exported three million pounds' worth of notes would have to be cancelled. The Committee were surely right in pointing out that the apprehension of this