THE MONETARY CRISIS 87 
crowns in 1919 to 64,468 millions in 1921, about 569 
of these deposits being made without necessitating any 
movements of specie. 
On the whole, a// this clearly shows that in a country with 
a modern banking system and with modern credit facilities, 
bank holdings as well as credit will increase naturally with a 
rise in prices. After a first call on such liquid assets, of 
which savings may form a part, high prices followed by 
high wages raise the income of sellers who, without any 
necessity for a corresponding movement of specie or notes, 
transfer the sums they collect to their banking accounts, 
which thereupon expand and enable the corresponding 
payments to be made.l 
M. Rasin, in the interesting book in which he describes 
his own work, was careful to emphasise the important fact, 
which corrected his original ideas, that the absence of 
inflation in the usual sense of the term, i.e., of an increase 
in the quantity of media of payment, did not prevent an 
increase in incomes corresponding to the rise in prices.? 
And so the clear result of experience in Czechoslovakia 
—and we have here an exceedingly valuable hint for our 
present discontents—is that a fall in a demoralised ex- 
change may produce the effects commonly assigned to 
inflation, without the latter having occurred. 
The recovery of the crown appears to have been due in 
! This observation does not invalidate the Quantity Theory, in that it 
is the rise in prices which is represented as involving a correlative increase 
in the actual circulation, if not in the stock of currency; but it does 
explicitly disprove the theory of economists like Irving Fisher, Cassel and 
Rist, who, while not otherwise denying the influence of banking machinery 
on changes in the actual circulation, thought that the Quantity Theory 
justified the conclusion that prices could not rise without an increase in 
the metal or fiduciary currency. 
3 0p. cit, p. 74: “For the student of political economy the case of 
Czechoslovakia is particularly instructive. Inflation, with all its conse- 
quences, is not caused by an increase in the circulation alone, but also by 
the excessive rise in incomes among large sections of the population. If the 
theory of quantity were correct, the mark and the Austrian krone should 
have fallen, since in these two countries the currency had been increased; 
while the Czech krone should not have fallen, because, as we shall demon- 
strate further on, the currency had not been increased. But in spite of this, 
the same depreciation affected the Czech krone . . .”