BANK DEPOSITS, PRICES AND CURRENCY 
January 20, 1020 
I am going to ask you to consider with me to-day a 
problem which has been much discussed in the Press 
and in Parliament. Nothing gives so much concern 
to the public at the present time as the great rise in 
prices. Masses of people find almost insuperable 
difficulty in bringing their expenditure within the 
limits of their income and they clamour for a 
remedy. So far as I have seen, the most popular 
proposal for reducing prices is to fix a limit to the 
currency note issue. It is supposed that if the 
currency were strictly limited in amount and at the 
same time had a proper proportion of gold backing, 
prices would not only cease to rise but would begin 
a downward movement towards their former level. 
In this view the increase in currency is regarded as 
the cause of high prices. But is this really the case? 
May it not be that the great increase in currency 
notes is itself only an effect of another cause, a mere 
link in the chain which ends in high prices? What 
is the relation between the increase of currency and 
high prices? What has caused the increase of cur- 
rency? What has caused high prices? This is the 
problem I am going to ask you to consider to-day. 
MONEY AND PRICES 
In examining this question I should like to guard 
myself at once from misunderstanding. It is an 
accepted doctrine that there are three factors gov- 
erning the price of commodities—demand, supply 
and cost of production. Although to-day I propose