CURRENCY AND PRICE MOVEMENTS 121 
instruments in circulation, the problem in so far as it 
oncerns the relation between money and prices remains 
he same. There are two effects which run counter to each 
other. The first is to increase the demand for existing 
goods and create a tendency to a rise in prices; this 1s 
followed by increased facilities for production, in so far as 
demand has stimulated the acquisition of means of pro- 
duction, and this creates a tendency to a fall. 
Although we have become familiar through practica 
daily experience with the idea that credit may be, as it 
were, deliberately fertilised, it is surprising to find that 
the idea emerges from this analysis of the problem that 
an increase in the quantity of money may stimulate pro- 
duction and * create wealth.” And these two conceptions 
are usually so little identified with each other in the minds 
of economists that some have even explicitly disallowed the 
second of the influences to which we have referred.! But 
it should be observed that a mere increase in demand ma 
be enough to stimulate production ; a number of manu- 
facturers will be able to produce more with the material 
and labour at their command. Moreover, the transfer o 
purchasing power to undertakings which are in process o 
reation or development creates one of the conditions 
equired for technical progress ; and so by promoting the 
exploitation of latent resources and encouraging the more 
profitable methods of use of production this non-material 
and somewhat artificial form of wealth of which a monetary 
instrument consists may become the origin of real wealth. 
Obviously the normal method of attaining this end is 
to put into circulation as quickly as possible the money 
1 Certain economists before the classical school, in particular the financier 
Law, had pointed out the stimulating effect of an increase in the quantity 
of money. While implicitly recognising this idea when investigating credit, 
he economists of the classical school contest it when they come to deal 
ith money. Being chiefly concerned with fighting the “wealth” fallacy, 
hey state that money will only facilitate transactions, as oil lubricates the 
works of a machine, and refuse to allow any creative power. 
We have, indeed, observed that though an increase in the circulation 
increases production by stimulating transactions, its power is limited by the 
possibility of putting to better use means of production which already exist.