War-time financial problems

THE QUANTITY THEORY 139

This seems to be an obvious truism if we make due
^allowance for what is called the velocity of circula-
tion. If more money is being produced, but the
larger amount is not turned over as rapidly as the
currency which was in existence before, then the
effect of the increase will inevitably be diminished,
and perhaps altogether nullified. But other things
being equal, more money will mean higher prices,
and less money will mean lower prices.

But, as has been said, the question is very
greatly complicated by the addition of credit instru-
ments to the volume of money, and this complication
has been made still more complicated by the fact
that many economists have refused to regard as
money anything except actual metal, or at least
such credit instruments as are legal tender, that is
to say, have to be taken in payment for commodities,
whether the seller wishes to do so or not. For
example, many people who are interested in currency
questions would regard at the present moment in
this country gold, Bank of England notes, Treasury
notes, and silver and copper up to their legal limits
as money, but would deny this title to cheques.
It seems to me, however, that the fact that the
cheque is not and cannot be legal tender does not in
practice affect or in any way impair the effectiveness
of its use as money. As a matter of fact cheques
drawn by a good customer of a good bank are received
all over the country day by day in payment for an
enormous volume of goods. In so far as they are
so received, their effect upon prices is exactly the
same as that of legal tender currency. This fact is