APPENDIX . 
CURRENCY NOTES AND THE EXCHEQUER 
IT is obvious that any person or institution exercising 
the power of issuing scraps of paper which pass as £1 
will benefit to the extent of almost £1 for every scrap 
issued, except in so far as gold or other idle treasure 
is kept “ against” or as ‘ cover for” them. 
There are two simple ways by which a government 
issuing or allowing the issue of such scraps or ‘‘ notes ” 
can realize the benefit. (1) It may issue them itself 
directly in payment for goods and services, Or (2) it 
may allow a bank to issue them by way of loan to 
itself and others on such profitable terms as may be 
agreed between itself and the bank. 
Under the first of these plans the benefit to the national 
Exchequer appears in the simple form of a receipt from 
the issue of paper currency in the year of issue: and if 
in a subsequent year some of the paper was redeemed 
by the State, the expense of redemption would appear 
as payments for redemption of paper currency. Under 
the second system the benefit from issue and loss from 
redemption will not appear directly in the Exchequer 
accounts as receipts from issue and expenses of redemp- 
tion in the years in which they occur, but will have to 
be looked for in the relations between the bank and the 
government, and may be spread over many years. The 
compensation paid by the bank to the government 
usually takes the form (as in France) of advances to the 
State at no rate of interest (or at a very low rate supposed 
to be sufficient to cover only the expenses of issue), 
but it also takes many other forms (e.g. the annual 
amount paid by the Bank of England for the privilege 
of its fiduciary issue). When this system is adopted 
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