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 important is deflation not of the outstanding aggregate of purchasing power but of the flow of purchasing power." But this new complication seems to upset the whole theory of the control of prices through money rates. There is a great deal to be said for the belief that higher rates will tend to restrict the volume of credit, as long as this belief is not pushed to extremes. But now Mr. Hawtrey, finding that the fall of 1920 was not produced by a restriction of credit, because credit was not restricted, begins to bark up quite a new tree and tells us that what really matters is restriction of the flow of credit.

Everybody recognizes that the effect of the quantity of money in relation to goods in raising and depressing prices is complicated by the pace at which the owner of the money turns it over, and this is one of the reasons why some of us doubt the efficacy of the remedy that Mr. Hawtrey proposes for all our economic ills. But it seems to be making a new claim on our credulity to expect us to believe that because Bank Rate goes up therefore people are certain to make less use of their bank balances and turn them over more slowly. If the rise in Bank Rate makes them expect a fall in prices it may through psychological influence produce this effect. But at the end of July 1914 we