War-time financial problems

138 INTERNATIONAL CURRENCY

with each one of them is, of course, obviously im-
possible, since the rate at which, for example, wheat
and pig-iron are being produced necessarily varies
from time to time as compared with one another.
Variations in the price of wheat and pig-iron are
thus inevitable, but it can at least be claimed by
idealists in currency matters that some form of
currency might possibly be devised, the amount of
which might always be in agreement with the
amount of the total output of saleable goods, in the
widest sense of the word, that is being created for
man's use.

It need not be said that this desirability of a
constant agreement between the volume of currency
and the volume of goods coming forward for exchange
is based on what is called the quantitative theory of
money. This theory is still occasionally called in
question, but is on the whole accepted by most
economists of to-day, and seems to me to be a mere
arithmetical truism if we only make the meaning of
the word " currency " wide enough; that is to say, if
we define it as including all kinds of commodities,
including pieces of paper and credit instruments,
which are normally accepted in payment for goods
and services. This addition of credit instruments,
however, is a complication which has considerably
confused the problem of gold as the best means of
ultimate payment. Taken simply by itself the
quantitative theory of money merely says that if
money of all kinds is increased more rapidly than
goods, then the buying power of money will decline,
and the prices of goods will go up and vice versa.