CURRENCY NOTE. This familiar form of British paper money is issued by the State in virtue of the powers conferred by the Currency and Bank Notes Acts, 1914• This legislation. was hurried through at the outbreak of the World War, when fears were entertained that depositors might withdraw large amounts from the banks, so that an "emergency currency" to meet the anticipated drain was prepared. The notes so provided were made unlimited legal tender and were payable in gold at the option of the holder, during office hours at the Bank of England. The notes themselves were from the first issued in denominations of one pound and ten shillings. The issues were intended to safeguard the banks ; the issuer being the Bank of England acting for the government, and the banks borrowing notes being required to pay interest on the amount borrowed at current bank rate, at that time io%.
The exigencies of the War soon compelled the government to abandon the idea of treating the currency note as an emergency issue, to be retired as soon as possible. The notes, except so far as they were directly backed by gold, represented a profit to the issuer, that is, the State, and their use economized gold coin. It was only at the end of 1919 that a brake was put upon the volume of currency notes which the State might manufacture with profit. The Treasury Minute of December 15, 1919, imposed a limit, known as the Cunliffe Limit, in virtue of which the uncovered note circulation in any year was not to exceed the maximum uncovered circulation of the previous year. The maxi mum uncovered circulation for 1919 being taken as £320,608,000, the limit for 192o was this amount. In subsequent years the limit has varied as follows:-192I, 1317,600,000; 1922, 1309,988,000; 1923, 1270,183,000; 1924, L248,191,000; 1925, 1248,145,000; 1926, L247,902,000; 1927, L246,011,000. These figures do not indicate the outstanding circulation, because notes issued but covered by gold or Bank of England notes are not affected. The gold formerly held by the Treasury against the Note has now been replaced by a more than equivalent holding of Bank of England notes, the covered issue of currency notes now stand ing at £56,250,000, the proportion of reserve to liabilities being usually in the neighbourhood of 18 to 19%. Under the Gold Standard Act, 1925, the notes are convertible into gold bars of 400 ounces minimum weight.
For further details, see PAPER MONEY, BANKING AND CREDIT and MONEY. (T. E. G.)