d 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. This seems
to be an obvious truism if we make due allowance for what is called
the velocity of circulation. 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 instruments 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 now so generally recognised th