It is well known that British banks and discount houses lend short-period money to foreign countries against bills of exchange, and do so, to a large extent, indirectly—the persons, against whom they have first recourse on the mature of the bill, being some Bri house. To a very large extent, even when a bill arises out of trade transactions both parties to which are foreigners, they are drawn against British Accepting Houses. The houses give, for commission, their guarantee the bills will be met at maru reckoning on their foreign clients putting them in funds to meet the bills in due course. The business is carried on usually as follows: ths Banks depend on the Accept ing Houses and Discount House: the Discount Houses depend on Accepting Houses; and the Accepting Houses depend on the foreign chonta. When the war broke out. the aggregate value of the outstanding bills in London was est mated at £350,000.000, fo a substantial part of which the foreigners were ultimately responsible. A failure on the part of the foreign clients to remit money brought about a complete dislocation.
Why Bills were not Met.
The foreign debtor was to a large extent unable to remit or forced to suspend remittance. He could not send goods in payment of his dues for fear of their being captured: He could not send gold, partly because of the excessive rise in the insurance rates and cost of transit, as also because many countries were not willing to release gold for export. He could not sell securities, because the Stock Exchanges were closed. He could not sell bills of exchange, because it meant fresh business which the Accepting moratorium, which protected nearly all classes of debtors for a peried, in the first instance, of one month, saved the situation, But the problems of getting new bills satisfactorily accepted and of getting them discounted when accepted had to be solved, in order to start a flow of in, jorts—and thus obtain our stores as also enable foreigners to pay their old indebtedness. The Government, therefure, authorized the Bank of England to buy up the premoratorium bills with which the Banks and Discount houses were saddled; the acceptors were permitted to rerccept in case of necessity; and the Government guaranteed the Bank of England against losses on this account, This certainly eased the tension,
Text read from the printed page and cleaned; old type leaves the occasional error.