2l6

ESSAYS IN PERSUASION

PART

would employ all their resources to prevent amovement of its price by more than a certainpercentage in either direction away from thenormal, just as before the war they employedall their resources to prevent a movement inthe price of gold by more than a certain per-centage. The precise composition of thestandard composite commodity could be modi-fied from time to time in accordance withchanges in the relative economic importanceof its various components.

As regards the criteria, other than the actualtrend of prices, which should determine theaction of the controlling authority, it is beyondthe scope of this essay to deal adequately withthe diagnosis and analysis of the credit cycle.The more deeply our researches penetrate intothis subject, the more accurately shall weunderstand the right time and method for con-trolling credit-expansion by bank-rate or other-wise. But in the meantime we have a con-siderable and growing body of general ex-perience upon which those in authority can basetheir judgements. Actual price - movementsmust of course provide the most importantdatum; but the state of employment, the volumeof production, the effective demand for credit asfelt by the banks, the rate of interest on invest-ments of various types, the volume of new issues,the flow of cash into circulation, the statistics offoreign trade and the level of the exchangesmust all be taken into account. The main pointis that the objective of the authorities, pursued