MONEY

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device  which  could  have  no  effect  upon  the
quantity  of  circulating  money  one  way  or  the
other.  On  the  face  of  it,  the  system  simply
enables  a  person  who  has  deposited  his
money  in  a  bank  to  give  authority  to
somebody  else,  in  the  form  of  an  order,  to
draw  that  money  out  instead  of  his  drawing
it  out  himself.  But  on  peering  more  curiously
into  the  matter  we  shall  detect  that,  once  this
method  of  making  payments  has  appeared,
it  becomes  possible  to  extend  enormously  the
quantity  of  media  of  exchange  in  use.  Cheques
take  the  place  of  cash  instead  of  serving  merely
as  a  means  of  getting  cash.  They  effect
millions  of  pounds’  worth  of  exchanging  without ­
  the  use  of  a  single  sovereign.
We  shall  have  to  enquire  how  the  process
whereby  the  quantity  of  the  media  of  exchange
is  magnified  through  the  agency  of  cheque
payments  is  actually  controlled  in  a  modern
business  economy,  and  what  its  effect  is  on
the  state  of  trade,  but  first  it  will  be  desirable
to  remind  ourselves  of  the  manner  in  which  the
limited  supplies  of  gold  in  the  banks  automatically ­
  stop  the  expansion  of  credit  money  after
it  has  reached  a  certain  figure.  Bankers  from
their  experience  and  from  reading  the  signs
of  the  market  know  approximately  what
demands  to  expect  for  gold  for  exporta-