... We are told by many that there is a vast amount of credit transactions embodied in banking and clearing-house statistics which may be termed "fictitious." That is to say, they are not a part of the necessary work of exchange in a community. For example, the cotton and wheat crops are sold several times over on the exchanges of the country, but not all these purchases and sales are a necessary part of the process of getting the cotton from the planter to the manufacturer. These sales, we are told, are purely speculative and born out of the credit organization, which, it is urged, merely makes the transactions possible.... However,... these exchanges actually exist. All the purchases involved constitute a part of the demand for means of settlement. Therefore they are to be regarded as a proper part of the exchange business of the country, and in some degree they must influence the need for money.... ... The demand for money to effect exchanges includes, first, demand for money for direct exchanges; second, demand for reserves for credit exchanges. Some goods exchange by direct barter and still more probably by indirect barter. If these last exchanges just cancelled one another, the credit paper that grows out of them would also cancel, and no balances would remain to be settled with money. Usually, however, they do not cancel, and the balance must be settled with cash; hence a reserve is necessary.... This demand for reserve is certainly one of the influences that go to determine the value of money. In short, the demand for money includes a demand for direct payment and a demand for reserve.... 3. _Our monetary circulation._--Our per capita circulation, as estimated by the Comptroller of the Currency, has increased from $21.10 in 1906 to $34.72 in 1908.[42] This is larger than the per capita circulation of other great industrial and commercial countries with the exception of France. Why is it necessary and where is it? It is necessary, perhaps, for the following reasons: (a) A larger amount of money is needed in this country because, in the first place, our prices range higher. If the prices of articles commonly consumed range 20 per cent. higher than they do abroad, the people who buy them and pay for them with money need a larger amount to make their purchases. The same cause makes a larger reserve necessary to exchange a given volume of goods by credit. The demand for money, therefore, both for reserve and direct money transactions, is greater on account of the higher scale of prices. (b) The same kind of reasoning applies to our wage scale. Whether the wage scale be the cause of the higher cost of living or the higher cost of living be the cause of the higher wage scale, more money will be needed in proportion to the trade. If wages are paid with checks, more money will be needed by the amount that the reserve must be increased to furnish a basis for the checks.