How, then, does this fund promptly respond to the demands upon it if the supply of gold flowing into the banks does not keep pace with those demands? If the supply of gold, not loan-deposits, kept pace with the demands then, and then only, could the fund “promptly adjust itself to the demands upon it.” It is elementary knowledge in Lombard Street that when the Bank of England is able, week after week and month after month, to buy up all the South African and other gold coming into the bullion market, that it will tend to increase “credit” and depress loan-rates. We know that the gold will increase the supply of market money more surely than the growth in the country’s wealth. This is because we know the gold will eventually find its way to the banks, increase their gold reserves, and enable them to lend more. It proves, then, that the working of the fund, elastically or otherwise, is dependent upon the flow of gold into the Bank of England. This is because the law has decreed that gold shall be legal tender. Therefore, the supply of money for the help of commerce, for the fettered working of the banking system, is dependent in the ultimate resort upon the law of the land. It is not dependent in the ultimate resort upon the law of supply and demand, because a more powerful law controls the economic law. If the law, then, controls the supply of money, then the law must control the supply of wealth, and the law must control ultimately the prices of labour and of commodities. When liquid capital is provided by the banks a charge is made for it. This rate of interest not only affects the amount of capital that shall be furnished, but it must affect the prices of the product that comes into existence from the use of that capital. If the merchant has to pay a high price for that capital, he must ask a higher price for his product, for he will not use that capital unremuneratively. The greater the abundance of capital employed in the country the greater is the quantity of wealth produced, and the cheaper the capital the lower are the prices of its products. That is to say, the greater are the chances of the community partaking of a larger share of that wealth. If they partake of this larger share it simultaneously increases the collective, or aggregate, powers of consumption. It is indisputable that in times of trade activity the demands for capital grow. Times of depression are coincident with a decline in the demand.