Excerpt from book: DOES CREDIT ACT ON THE GENERAL LEVEL OF PRICES? BY A. J. UTLEY. IT is conceded by all standard writers on political economy that the value of money ? that is, its purchasing power ? is fixed and regulated by the amount of money available for use. John Stuart Mill says : If the whole money in circulation was doubled prices would be doubled. If it was only increased one-fourth, prices would rise one-fourth. There would be one-fourth more money, all of which would be used to purchase goods of some description. When there had been time for the increased supply of money to reach all markets, or (according to conventional metaphor) to permeate all the channels of circulation, all prices would have risen one-fourth. But the general rise of price is independent of this diffusing process. Even if some prices were raised more, and others less, the average rise would be one-fourth. This is a necessary consequence of the fact that a fourth more money would have to be given for only the same quantity of goods. General price, therefore, in any such case would be one-fourth higher. The very same effect would be produced on prices if we suppose the goods diminished, instead of the money increased: and the contrary effect if the goods were increased, or the money diminished. If there were less money in the hands of the community, and the same amount of goods to be sold, less money altogether would be givon for them, and they would be sold at lower prices; lower, too, in the precise ratio in which the money was diminished. So that the value of money, other things being the same, varies inversely as its quantity; every increase in quantity lowering the value, and every diminution raising it, in a ratio exactly equivalent. This is known as the quantitative theory of money, and is recog...