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 a very great influence owing to the general advice it is able to give to private banks as to their credit policy." A little later he says that "a fixed value (of the monetary unit) can only be kept up by properly limiting the granting of credit and principally, therefore, by a suitable discount rate."

Now this scheme of regulating prices through credit contraction and expansion, brought about by raised and lowered rates for loans, the rises and falls of which were prompted by movements in the central bank's official rate, was tentatively, and as I venture to believe quite ineffectively tried in this country in 1919 and the following years. As was shown in Chapter V the rises in Bank Rate in 1919 and 1920 were certainly followed by a catastrophic fall in prices, which, however, was accompanied by a further expansion in bank deposits. It was clear that to produce actual contraction of bank credits, under the circumstances then ruling, Bank Rate would have had to go up at a pace that would almost certainly have precipitated panic. The fall in prices happened not because banking credits had been contracted—because they had not—but because, stimulated by the Chinese example, consumers all over the world stuck in their toes like an overburdened, over-beaten ass and refused to