Page:Bankers and Credit (1924).pdf/94

 They were both causes, and, as the system was worked, neither could have happened without the other.

Such was the effect of the war on the London Money Market. The gold standard was a fiction and it worked on a basis of cash provided by the Government's borrowing from the Bank of England and the printing of Government paper currency. The evil effects upon the community were a great addition, through the consequent rise in prices, to the cost of the war, the violent redistribution of income that follows from the same cause, and the suspicion, suffering and misunderstanding that thence arose. On the other hand it was in favour of producers and of all who use borrowed money and may have helped to stimulate their efforts for war production.

This fact that rising prices are in favour of producers is, within very strict limits, unquestionably an argument on the side of currency expansion and a reason why most producers who think about currency matters are in favour of it. To make the matter clear let us consider what would happen if the volume of currency of all kinds were doubled over-night and the consequent doubled competition for an unchanged volume of goods doubled prices all