ABSTRACT
In the previous issue of this journal, Mr G. Silverstolpe levels a number of criticisms against an essay I published in Dagens Nyheter in April this year. A ‘Postscript’ to that article, which appeared immediately afterwards in the same newspaper, seems to have escaped his attention. It is quite true that when I wrote the first article, I imagined that the war loan that had then just been taken out would bring in its train an increased emission of national bank notes, or of loan-office bills — which amounts to the same thing, since the latter are the basis for the emission of national bank notes and are included in the metal reserves held by the German Central Bank. But already in the ‘Postscript’ I had pointed out that according to later reports, this would probably not be the case: ‘It looks’, I wrote, ‘as if, so as to avoid as far as possible the inconvenience of issuing new notes, things have been arranged in such a way that the new loan will be paid in chiefly by means of credit transfers, changes entered in the bank books.’ At the same time I emphasized that ‘in reality, however, this makes no difference whatsoever. It is all the same whether the new monetary buying power that is placed at the disposal of the state by the loan manifests itself in an increased quantity of bank notes, or credits with the banks (i.e. at bottom, an increase in the velocity of circulation of money). If this monetary buying power is obviously disproportionate to the stock of goods for which it is ultimately to be exchanged, then a progressive depreciation of paper money is still unavoidable.’
