ABSTRACT
Striking changes in bank deposits, governmental debts, and price levels suggested that the influence of money upon the economy at large could no longer be ignored, especially in mature countries such as Great Britain and the United States where financial transactions depended much more upon checks than upon currency. The flexibility of the American banking system depends upon changes in member bank reserves, for deposits based on the loans and investments of member banks, the largest segment of the total means of payment in the entire economy, are directly limited by reserve requirements. The supply of money consists of two parts: currency in the hands of the public and deposits on the books of the banks. Statistics of money shed as much light upon the behavior of the banking mechanism as a census of population reveals about human nature. Superficially, the banks played a minor role during the final spurt of the security markets.
