Nowhere do conservative notions consider themselves more in place than in currency; yet nowhere is the need of innovation more urgent. One is often warned that a scientific treatment of currency questions is impossible because the banking world is intellectually incapable of understanding its own problems. If this is true, the order of Society, which they stand for, will decay. But I do not believe it. What we have lacked is a clear analysis of the real facts, rather than ability to understand an analysis already given. If the new ideas, now developing in many quarters, are sound and right, I do not doubt that sooner or later they will prevail. I dedicate this book, humbly and without permission, to the Governors and Court of the Bank of England, who now and for the future have a much more difficult and anxious task entrusted to them than in former days. J. M. KEYNES. _October 1923._ CONTENTS PAGE PREFACE v CHAPTER I THE CONSEQUENCES TO SOCIETY OF CHANGES IN THE VALUE OF MONEY 1 I. As Affecting Distribution 5 1. The Investor 5 2. The Business Man 18 3. The Earner 27 II. As Affecting Production 32 CHAPTER II PUBLIC FINANCE AND CHANGES IN THE VALUE OF MONEY 41 1. Inflation as a Method of Taxation 41 2. Currency Depreciation _versus_ Capital Levy 63 CHAPTER III THE THEORY OF MONEY AND THE EXCHANGES 74 1. The Quantity Theory re-stated 74 2. The Theory of Purchasing Power Parity 87 3. The Seasonal Fluctuation of the Exchanges 106 4. The Forward Market in Exchanges 115 CHAPTER IV ALTERNATIVE AIMS IN MONETARY POLICY 140 1. Devaluation _versus_ Deflation 142 2. Stability of Prices _versus_ Stability of Exchange 154 3. The Restoration of a Gold Standard 163 CHAPTER V POSITIVE SUGGESTIONS FOR THE FUTURE REGULATION OF MONEY 177 1. Great Britain 178 2. The United States 197 3. Other Countries 204 INDEX 207