ABSTRACT
According to orthodox theory, the total amount of currency which might be issued in any country was linked by a more or less constant ratio to the amount of gold held in that country. With the adoption of gold as the standard, therefore, it was reasonable to hope that the supply of the medium of exchange would increase with approximately the same steadiness as the volume of trade. From the earliest days of the emergence of a real international gold standard, it has been assumed that there exists an automatic tendency towards a proper distribution of the metal between countries using it as their standard. With the growing use of bank credit to augment the supply of monetary units, the theory was only modified by the assertion that the volume of bank deposits subject to transfer by cheque would be tied in a fairly steady ratio to the quantity of gold in the country by reason of orthodox banking policy.
