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 (Treasury Bills or the bills of exchange of commerce and finance) and investing in securities. If then the bankers raise the rate that they charge for advances and discounts it is easy in theory to assume that those who have borrowed from them will be inclined to repay advances and discontinue discounting, and that there will thus be a reduction in bank balances and a consequent fall in prices; and vice versa when the banks lower the rates that they charge for accommodation borrowers will be encouraged, deposits will expand and prices will go up.

And so we proceed to the ideal set forth by Professor Cassel of Sweden, of a "true bank policy." He tells us on page 103 of his work on Money and Foreign Exchange after 1914 that "the supply of credit must be so regulated that no rise in prices and, naturally, no fall in prices either, takes place. In order to keep demands for credit within the limits of available means, the banks must apply interest rates fixed with that object in view, but in their continual scrutinizing of the demands for credit must also be able to effect the necessary restrictions. The main factor determining interest rates throughout the entire banking system in a country is the central bank's discount rate, and in addition the central bank naturally possesses