chapter  XXIII
4 Pages

Do. -THE VOLUME OF THE CURRENCY

In fact, however, this equilibrium is rarely or never attained; it is constantly being disturbed by changes in the Demand and Supply of currency, and the banking system is constantly adjusting itself to these changes and endeavouring to re-establish the equilibrium which has been disturbed. In order to investigate these conditions it is necessary to corne closer to the actual facts; in particular to consider the method by which the cheque currency is issued and the manner in which its supply is, and should be, controlled. In this investigation we are concerned only with a part of the banks' lodgments; only with the volume of lodgments on current account which are employed for cheque-making purposes and which constitute the volume of the cheque currency. It will be convenient, therefore, to neglect altogether the lodgments obtained by the banks on deposit account, and to proceed for the present on the assumption that these resources are obtained only in exchange for chequemaking facilities. This assumption will not affect the substance of the argument, and will greatly simplify the wording.