The paper currency system is, therefore, a great advance upon the old banknote system. It is transformed wealth, and as the cheques represent the deposits, rising and falling in amount with them, then the deposits must be transformed, reproducible wealth. The note system, based on no wealth, was credit. Returning to the Issue Department of the Bank of England, we see that £11,015,100 of the total note issue is based upon the sum of money owing by the Government to the Bank, and that £7,434,000 is based upon other securities of a gilt-edged order, making a total of £18,450,000. The balance is based pound for pound on gold. It will be seen, therefore, that if every note was presented to the Bank to be converted into gold, over £18,000,000 of these notes could not be converted. Some have suggested that in that event, in order to provide the gold, the securities could be sold for gold, the Government debt could be converted into bonds, and they also could be sold. But as this need could arise only in a panic, when every one clamoured for gold, and all who had securities were trying to sell them for gold, the Bank of England would find it impracticable to sell securities for gold. Such securities, if they are to be sold at all, must be sold at other times, and the gold must be acquired then if the note issue is to be made absolutely convertible. Personally, I think the need is too remote, too much in the realm of dreams, to be entertained gravely. The gold could perform better services to the community than to be hoarded in this fashion. Since the year of the Bank Charter Act we have had three serious panics in the country. Now the Act was passed to prevent panics. As it did not prevent panics, the theories on which the legislation was based proved untenable. Panics are not automatic. It was probably thought by many that they were, and that they could be ended in automatic fashion. It is impossible to foresee how a panic will arise. According to every plausible theory, a panic should surely have been the immediate consequence of the European War. Not only should a panic have arisen then, but it should have been by far the worst panic this country has ever faced. But no panic resulted, and all plausible theories have been inoperative. Previous panics have been allayed by the actual suspension, or by the potential suspension, of the Bank Act. That is to say, by the knowledge that the Bank of England would have power to issue note currency to any amount, unbacked by the deposit of gold. In other words, by the knowledge that sufficient legal tender would be provided, _at a price_, for the needs of all solvent people. The need, then, is currency--just as a person prostrated by fever needs a tonic to restore him to convalescence. When the need is rightly met, all is well. To withhold the remedy would feed the disease. Instead of being checked, the disease would grow.