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working of the money market during the course of the war, and it now remains to sketch the history of these developments as they evolved. The effect of the measures taken for meeting the crisis of Aug. 1914 was to leave the market very amply supplied with funds created by the Bank of England for the assistance of the accepting houses for discounting pre-moratorium bills and for financing the Government. The " other deposits " at the Bank of England, which stood at 42 millions in the middle of July, had risen to 168 millions by the beginning of Dec., though they declined to 128 millions at the end of the year. Bank rate had been hastily reduced, from the 10 % to which it had been raised on the eve of war, to 5% when business was reopened after the prolonged Bank Holiday of Aug. 1914, and remained at this point until July 1916. The market rate of discount for 3- months' bills had risen to Sj% at the end of July 1914 and first emerged into a quotable condition on Aug. 24 at 5 %, rapidly descending to 3% by the middle of Sept. and ending the year 1914 at a shade over 2j%. A 350,000,000 War Loan at 3!% issued in Nov. of this year drew very little response from the public and a large part of it was taken by the Bank of England and was subsequently repaid to it out of the proceeds of the War Loan of 1915. By far the greater part of the advances under which the Treasury notes had been originally issued to the banks had been very promptly repaid and henceforward Treas- ury notes were almost entirely issued under the system already described in exchange for credit at the Bank of England. There Were a considerable number of issues which raised their total butstanding to 117 millions. Ways and Means advances, of which i million were outstanding when the war began, had reached 58 millions on Dec. 31 1914.


 * In 1915 extreme ease and weakness of discount rates at first

p.gain prevailed. The market rate for 3 months was below if % In Feb. although Bank rate remained at 5% throughout the year. In April, however, the market was steadied by the begin- ning of the system under which Treasury bills were offered at fixed rates which were at first 2j% for 3 months, 3!% for 6 months, 3!% for 9 months. On May 8 i2-months' Treasury bills were also put on continuous offer at 3! per cent. Towards the end of June the complexion of the market was altered by the appearance of the great 4^% War Loan offered by Mr.

McKenna, who had become Chancellor of the Exchequer in May in succession to Mr. Lloyd George, who had taken charge of the newly created Ministry of Munitions. This loan, in- cluding conversions of 35% War Loan, Consols, etc., produced total applications for 900 millions, the actual cash receipts being 585 millions. During the second half of 1915 the market rate for 3-months' bills was close up to Bank rate and rose above it in the middle of Nov., remaining so until the end of the year. By this movement the market was merely following the official fixed rate for Treasury bills on offer, which was raised to 42% for all dates in Aug. and to 5 % in November. An important new departure was instituted during this autumn by which the Bank of England took money from the other banks at a fixed rate. When the system began the terms were 43 % for a month, but the period was soon shortened to three days. By this means the rate for short money was effectively screwed up, since the banks naturally did not lend below the rate that they could get from the Bank of England; but its chief object was to get money direct for the Government at cheaper rates than on Treasury bills.

In 1916, with Treasury bills still " on tap " for all dates at 5 %, the market rate remained steady slightly above that level until March, when the Treasury rates of discount were reduced to 4^% for 3 months, 4!% for 6 and 9 months and 5% for 12 months. On this the market rate for 3 months promptly dipped to a shade above 4^ %, and remained so until the middle of June, when it jumped to 5 % again when the official rate for all dates was raised to 5. The first half of this year was notable for the beginning on Feb. 21 of the issue of War Savings Certificates for 155. 6d., to be repaid at the end of five years at i or to be convertible into cash with interest accrued at any time after they had been held for a year. Since then the privilege of holding these certificates has been continued for another five years, at the end of which they will be repaid at i 6s. By the issue of this in- genious and attractive security the savings of the poorest were brought to bear on the problem of war finance and an enormous increase has been secured in the number of citizens who have a stake in the country by being holders of Government obligations (see SAVINGS MOVEMENT). A campaign for the purpose of bring- ing home to all the need for saving during the war had been or- ganized by the Parliamentary War Savings Committee in 1915

Bank of England

Total Deposits

Total Securities

End of Year

Highest

Lowest

End of Year

Highest

Lowest

1913 1914.

1915

1916

1917 1918 1919

1920

71.343,555 154,987,891 161,649,874 178,843,038 166,170,777 241,200,306 199,851,122 189,859,334

71,343.555 180,548,003 273,176,698 178,843,038 268,732,015 241,200,306 230,010,622 191,149,003

45.492,483

53,713,186 136,798,248 132,587,088 161,811,401 152,175,628 111,612,495 115.955,156

65,336,807 121,043,658 144,915,726 163,649,111 153,191,740 230,776,674 199,246,783 193.893,040

65,336,807 149,844,663

245,353,124 163,649,111 250,976,135 230,776,674 220,281,576 193,893,040

38,212,049 41,860,118 115,460,762 105,789,175 137,216,026

141.371,957 102,612,974 117,438,601

AGGREGATE BALANCE-SHEET OF BANKS OF THE UNITED KINGDOM

(Excluding Bank of England)

(ooo's omitted)

LIABILITIES

T?_J -r

1913 1914 1915 1916 1917 1918 1919 1920

Capital and Reserves Undivided Profits Deposits. . . . . Acceptances Notes, Drafts, etc

114,076

6,453 1,032,986

67,534 24,984

113,061 6,436 1,135,606 53,96o 28,799

112,130 6,OO9 1,243,736 66,863 36,790

110,746

5,959

1,444,427 75,492

45,212

114,989

7,633 1,705,842

7i,i3i

52,755

125,051 7,376 1,988,347 63,458 63,839

139.651 7,602 2,356,271 158,500 65.395

162,087 8,858 2,492,061 109,896 61,985

1,246,033

1,337,862

1,465,528

1,681,836

1,952,350

2,248,071

2,727,419

2,834,887

ASSETS

Cash in hand and Money at Call. Investments Discounts and Advances Premises and Cover for Acceptances

293,576 191,041 682,966

78,450

339,668 225,298 701,372

7L524

330,535 421,999 631,580 81,414

454.223 439,628 693,736 94.249

527,739 463.518 873.592 87,501

611,532 519,783 1,025,248 91.508

586,585 602,164 1,366,576 172,094

580,363 558,848 1,561,337 134.339

1,246,033

1.337.862

1,465,528

1,681,8-56

1,952,350

2,248,071

2,727.419

2,834,887