ABSTRACT
We have seen that McCulloch had, in addition to the analysis examined earlier of the other monetary effects on the level of activity, a developed analysis of the various effects of inflation and deflation on much of which he followed Hume and Harris and differed significantly from Ricardo. Monetary causes in general ranked high with him. Despite the depressant effects of government expenditure with its high import content1 and its 'improductive consumption',2 and despite also war-time destruction of capital,3 Britain had experienced substantial war-time inflation and prosperity followed by substantial peace-time deflation and depression. The importance of such monetary effects, coupled with the fact that a paper inflation where that paper was convertible was bound to be followed ultimately by a more than proportionately harmful deflation made the problem of control of the monetary system especially crucial. It is to the problem of banking control that we must now turn.
