CONTENTS

XV

medium of exchange. A standard for deferred payments. The precious
metals manifest considerable stability of value. Demand for money
varies with use of substitutes as media of exchange. Economy effected
by deposit banking and clearing houses. Settlement of clearing
balances effected in various ways. A large class of exchanges
habitually effected with cash. In these, prices cannot rise and remain
high unless the money supply is adequate. The efficiency of money.
The quantity theory. The elements involved. Changes in the
amount of goods exchanged modify relation of price-level to moneysupply.
 The extent of credit facilities available limited by amount of
cash reserves. Improvements in organisation of credit equivalent to
increase of money-supply. Verification from experience. Where it
need not be looked for. Found both in régime of inconvertible paper
and of metallic basis of valuations. Definition of money. A full and
final means of payment, freely accepted. Legal tender. Representatives
 of money. Cost of production of money-metal and its value,
Non-monetary uses of precious metals. Hoards and reserves
distinguished. Idle money in dull times. Hoarding an extreme
example of slow circulation. Amount of coin in circulation dependent
on what men wish to keep on hand, but that links it with the volume
of trade and level of prices. No need to distinguish the work of
money as a store of value . 160-180

PAGES

CHAPTER XII

PAPER CURRENCY, AND MODES OF REGULATING ITS ISSUE

AUTHORITIES
See note at head of Chapter XI. and
DUNBAR. . “Chapters on the Theory and History of Banking.”
CoNaNT. , “History of Modern Banks of Issue.”
BAGRHOT ST amhbard Street

Bank-notes and cheques represent equally a banker’s liability and the
holder’s claim. Depositors voluntarily creditors of a bank, noteholders
 involuntarily. Arbitrary manipulation of the supply of currency
restrained by requirement of redemption on demand. Depreciation
results from inflation, which commonly, though not necessarily, results
from irredeemability. Injurious results of depreciation. Entire
freedom of issue exemplified in the United Kingdom formerly.
Maximum limit of issue asin France, English country banks, and in
Canada. Provision against depreciation for geographical reasons.
Security of notes in case of insolvency of issuer. Limitation of issues
of Scotch and Irish banks and of Bank of England. German banknote
 issues, and elastic limit to fiduciary issue. Swedish note-issues.
United States paper currency partly fiduciary, partly against equivalent
gold deposit. Proportional reserve requirement of Holland and