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A TREATISE ON MONEY

BK. Ill

Marshall’s thought in his Evidence before the Goldand Silver Commission , x none the less because hebelieved that it was through speculation or speculativeinvestment that the new money found its way outinto the world. 2 An account of the matter almostidentical with Marshall’s had been published a shorttime previously (1886) by Sir Robert Giffen. 3 ProfessorPigou ’s theory of Bank-rate seems to descend almostexclusively from this strand of Marshall’s thought.He conceives of Bank-rate as acting directly on thequantity of bank credit and so on prices in accordancewith the Quantity Equation. 4 Mr. Hawtrey ’s scatteredremarks in his Currency and Credit seem to be on thesame lines. 6

In the same way Professor Cassel explains that theprice-level is regulated by the Bank-rate because theBank-rate regulates the supply of the means of pay-ment. I do not gather from his Theory of SocialEconomy, chap. xi. § 57, that he conceives of a fall ofBank-rate as operating to raise the price-level, exceptin so far as it causes, or is associated with, the supplyof “ newly created bank media of payment ” : “Ifthe banks thus succeed in getting new bank media ofpayment into circulation, and if on that account thequantity of media of payment increases in a largerproportion than the production and exchange of com-modities, the general level of prices is bound to rise.” 6

1 E.g., Official Papers, p. 48 : “I do not myself put the rate of discountinto the first place ; my own way of looking at it was rather to lay stressupon the actual amount of money in the market to be loaned ”.

2 Cf. Official Papers, p. 52 : “ There is more capital in the hands ofspeculative investors, who come on the markets for goods as buyers, and soraise prices ”.

3 Essays in Finance, second series, Essay II., Gold Supply, the Rate ofDiscount and Prices.

* E.g., Industrial Fluctuations, p. 241. At least so I understand him;for he has written no clear or systematic account of his views.

6 Currency and Credit, chap. ix. pp. 132, 133 (3rd edition).

6 Op. cit. (Eng. trans.) p. 478. Cf., also, Fundamental Thoughts inEconomics, p. 128 : “ The supply of means of payment, and therefore alsothe purchasing power of the unit of money, is regulated essentially by thebank-rate ”.