of panic, which we are not here considering) of the rate of interest whether the money is forthcoming.” I cannot agree with Mr. Cole. If he admits that there is an exception, and the exception works in a time of panic, at the very moment when it is vital to the community that the exception should be removed, then he gives away his case. He admits that the supply is not inexhaustible, for it suddenly dries up when the need is greatest. To say that it is “inelastic at any given moment,” that it is not permanently inelastic, and that there are times when borrowers are driven to the Bank of England, is inconsistent and illogical. If there are moments when it is inelastic, then it cannot be permanently elastic. When soon after the present war complaints were made that banks were not lending freely, and when a warning to them came from the Chancellor of the Exchequer, it furnished further proof of inelasticity in times of difficulty and pressure. Let us now examine further the machinery of the Bank of England and the rate of interest. CHAPTER XIV EXHAUSTIBILITY If what is called the loanable fund were perfectly elastic and “promptly adjusted itself to the demands upon it,” how is it that the value of money, called the rate of interest, is not more uniform? It certainly should be more uniform if it were a fund that automatically responded to the demands upon it, increasing as the output of wealth increased, decreasing when the output of wealth fell off. In a perfect system this would certainly happen; but sound as banking may be within its limitations, we must admit that it is far from being a system of perfection. The fact that the rate of interest is not uniform, that it rises and falls in a capricious and not uniform way, is further proof that the fund is not, as it should be in a perfect or improved system, elastic.