There was also the internal problem which arose because some of the public and some of the banks took to the evil practice of hoarding gold just at the wrong moment, and consequently there was no available supply of legal tender currency except in the shape of Bank of England notes, the smallest denomination of which is L5.  It is known that our bankers had long before pointed out to the Treasury that if ever a banking crisis arose there would, or might be, this demand for a paper currency of smaller denominations than L5; this suggestion got into a pigeon-hole at the Treasury and was deep under the dust of Whitehall by the time experience proved how big a gap in our financial armour had been made by its neglect.  If the L1 notes, with which we are now so familiar, had been ready when the war broke out, or, still better, if the Bank of England had been empowered and instructed to have an issue of its own L1 notes ready, it may at least be contended that the moratorium, which was so bad a financial beginning of the war, might have been avoided.

But this opening crisis was a short-lived matter, and was promptly dealt with, thanks to the energy and courage of Mr Lloyd George, who was then Chancellor of the Exchequer, and saw that things had to be done quickly, and took the advice of the City as to what had to be done.  The measures then employed erred, if at all, on the side of doing too much, which was certainly a mistake in the right direction if in any.  What is much more evident is the fact that not only had there been no attempt to provide against just such a jolt to our financial machine as took place when the war began, but that, quite apart from the financial machinery of the City, no reasoned and thought-out attention had been given to the great problems of governmental finance which war on such a scale brought with it.  There is, of course, the excuse that nobody expected the war to be on this scale, or to last so long.  The general view was that the struggle would be over in a few months, and must certainly be so if for no other reason because the economic strain would be so great that the nations of Europe could not stand it for a long time.  On the other hand, we must remember that Lord Kitchener, whom most men then regarded as representing all that was most trustworthy in military opinion, made arrangements from the beginning on the assumption that the war might last for three years.  So, while some excuse may be made for our lack of financial foresight, it does seem to have been the duty of those whose business it is to manage our finances to have thought out a complete scheme to be adopted in case of war if at any time we should be involved in one on a European scale.  Instead of which, not only would it appear that no such endeavour had been made by our Treasury experts before the war, but that no such endeavour has ever been made by them since the war began.  All through the war’s history many of the country’s mistakes have been based on the encouraging conviction that the war would be over in the next six months.  This conviction is still cherished to this day, and there can be no doubt that if those who cherish it hold on to it long enough they will come right some day.