206 THE GENERAL THEORY OF EMPLOYMENT bk. IV

in exchange for a debt on the terms indicated by themarket rate of interest. Perhaps a complex offer bythe central bank to buy and sell at stated prices gilt-edged bonds of all maturities, in place of the singlebank rate for short-term bills, is the most importantpractical improvement which can be made in the tech-nique of monetary management.

To-day, however, in actual practice, the extent towhich the price of debts as fixed by the bankingsystem is “effective” in the market, in the sense thatit governs the actual market-price, varies in differentsystems. Sometimes the price is more effective inone direction than in the other; that is to say, thebanking system may undertake to purchase debts ata certain price but not necessarily to sell them at afigure near enough to its buying-price to represent nomore than a dealer’s turn, though there is no reasonwhy the price should not be made effective both wayswith the aid of open-market operations. There is alsothe more important qualification which arises out of themonetary authority not being, as a rule, an equallywilling dealer in debts of all maturities. The monetaryauthority often tends in practice to concentrate uponshort-term debts and to leave the price of long-termdebts to be influenced by belated and imperfect reac-tions from the price of short-term debts;—though hereagain there is no reason why they need do so. Wherethese qualifications operate, the directness of the rela-tion between the rate of interest and the quantity ofmoney is correspondingly modified. In Great Britainthe field of deliberate control appears to be widening.But in applying this theory in any particular case allow-ance must be made for the special characteristics of themethod actually employed by the monetary authority.If the monetary authority deals only in short-termdebts, we have to consider what influence the price,actual and prospective, of short-term debts exerciseson debts of longer maturity.