le wonder that some people should
think that we have enormously increased our wealth during this most
destructive and costly war, and should then feel hurt and disappointed
when they find that this new buying power is robbed of all its
beauty by the fact that its efficiency as buying power is seriously
diminished by its mere quantity.

Such being the state of affairs--a great mass of new credit and
currency based on securities--it is clear that our currency has been
deprived for the time being of that direct relation with its gold
basis that used in former time to regulate its volume according to
world prices and our international trade position. As the Committee
says, "It is not possible to judge to what extent legal tender
currency may in fact be depreciated in terms of bullion. But it is
practically certain that there has been some depreciation, and to this
extent therefore the gold standard has ceased to be effective." Very
well, then, what has to be done to get back to the old state of things
under which there was a more or less automatic check on the creation
of credit and the issue of currency? This check worked by a system
which was elastic and simple. It was not entirely automatic, because
its working had to be controlled by the Bank of England, which, by the
action of its discount rate, could, more or less, quicken or check the
working of the machine. Legal tender currency could only be increased
by imports of gold; and exports of gold reduced the available amount
of legal tender currency; and since a stock of legal tender currency
was essential to meet the demands upon them that bankers made
possible by creating credits, there was thus an Indirect and variable
connection between the country's gold stock and the extent to which
bankers would think it prudent to multiply credits. If credits were
multiplied too fast, our currency was depreciated in value as compared
with those of other countries and the exchanges went against us and
gold either was exported or began to look as if it might be exported.
If it was exported the legal tender basis of credit was reduced and
the creation of credit was checked. If the Directors of the Bank of
England thought it inadvisable that gold should be exported they
could, by raising the rate of discount and taking artificial measures
to control the supply of credit, produce, without the actual loss of
gold, the effects which that loss would have brought about.

The keystone of