Ill

THE RETURN TO GOLD

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works, for example, of the great Lord Over-stone, will remember how many years it took,and what bitter and disastrous experiences,before the monetary reformers of a hundredyears ago established the pre-war policy ofbank-rate and bank-reserves (which, in its day,was a great advance), in the teeth of the opposi-tion of the Bank of England .

The other issue is of practical and immediateimportance. Last year it was a question ofwhether it was prudent to hasten matters bydeliberate Deflation; this year it is a question ofwhether it is prudent to hasten matters by aremoval of the embargo against the export ofgold. This year, like last year, the bankers,faced with the practical problem, are a littlenervous. I think that this nervousness isjustified for the following reasons.

In common with many others, I have longheld the opinion that monetary conditions inthe United States were likely, sooner or later, tobring about a rising price level and an incipientboom; and also that it would be our right policyin such circumstances to employ the usualmethods to curb our own price level and toprevent credit conditions here from following inthe wake of those in America . The result ofthis policy, if it was successful, would be agradual improvement of the sterling exchange;and it would not need a very violent boom inAmerica to justify a rise of the sterling exchangeat least as high as the pre-war parity. I have,therefore, maintained for two years past that a