care and with more detail many of the subjects that I have touched upon, but have left in a shadowy state owing to inability to obtain fuller knowledge about them, or possibly failure to understand even that which was available.
An underlying thought in my work in this book is a repudiation of the quantitative theory of money. If that theory were sound, if the inflation of currency were the cause of high prices, there would be reason to expect the continuance of a high level of prices for a long time to come, and there would be good grounds for a writing-up of values rather than a writing-down to the basis of 1913. The economic events since 1913, however, have done more to disprove the quantitative theory than anything else in the controversy of 300 years and the working of things under the Federal Reserve Act in the United States have afforded a visible demonstration of the hoary fallacy.
The mechanism of expansion and contraction under the Federal Reserve system was concisely described in the monthly review of the Federal Reserve Bank, Sept. 1, 1921, in the following words: “The extent to which the Reserve system’s power of expansion is availed of varies, of course, with the credit needs and conditions of the country; growing when demands are great and diminishing when demands subside. Expansion and contraction of reserve credits are therefore the result of the increasing or decreasing demands of member banks, rather than a cause of the increase or decrease in the amount of loans made by member banks to their customers.”
Before concluding this lengthy preface I am bound to make acknowledgments to many friends who have
