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 was then 6 per cent., should be immediately raised to, and held at, 8 per cent., and that steps should be taken to make this rate effective in the market. He showed that we were suffering from the effects of speculation, credit expansion and high prices and that dear money was a check on all these evils. "That European nations, and England among the number, with the enormous losses they have sustained should have money at 5 per cent. and 6 per cent. while the United States and Japan with an incomparably smaller need for new capital should have very much higher rates is a financial paradox which it is impossible to sustain." And he maintained that "it is useless for the Government to squeeze out the part of the credit expansion for which public borrowing is responsible if money is kept so cheap that a reduction in credits created for Government is balanced by an increase in credits created for private persons." Against the suggestion that the contraction of credit, if necessary, could be much more cheaply brought about if the banks would agree to ration their customers, Professor Pigou urged that it was not possible to expect the banks, at the expense of their own profits to refuse credit to customers of good standing who offered sound security.

Theoretically it was a strong case admirably