ABSTRACT
We have seen that in the case of consistent deflation practical experience moved faster than theory. The same is true, only to a much higher degree, of exchange clearing. The system in its rudimentary form of bilateral clearing agreements was in operation in many countries before any theoretical basis had been created for it. Under the stress of practical necessity, practical statesmen tumbled upon this solution before they were advised to do so by economists. Dozens of bilateral exchange clearing agreements were adopted before the economists began to take notice of the system. Indeed, it was the London Chamber of Commerce, a body consisting of practical business men, that was the first to realise the broader implications of the exchange clearing system. In its memorandum published in 1932 it advocated the adoption of exchange clearing as the fundamental point in its general monetary and economic reform scheme.
