352 SECTIONAL TRANSACTIONS.— F. 



State subsidies — had to take place. In addition the Reich had to provide 

 funds — in the form of fresh share capital — to enable the banks to carry on. 

 The Reich now possesses the majority of shares in two and an important 

 holding in the third of the largest Berlin banks. Combined with the 

 increased importance of previously existing public banks, this new develop- 

 ment gives the State virtual control over the entire German banking system. 

 It is impossible at the moment fully to gauge the significance of this increased 

 influence of the State ; nor is it possible to predict with certainty the 

 developments in the immediate future. It is, however, fairly certain that 

 a return of the banks to their full private status will not be possible for 

 a long time. Moreover, political developments have already lifted this 

 question out of the realm of economic considerations. As for the ability 

 of the State to manage the banking system, it is more than doubtful whether 

 the Reich will be able to undertake the issuing and promotion business, 

 although the pure deposit banking might be administered publicly. It is 

 not impossible, therefore, that we may see a new specialisation arise ; and 

 the most important result of the events of last year may be the final dis- 

 appearance of the ' mixed ' type of German credit bank. 



Wednesday, September 7. 



Prof. J. R. Bellerby. — Inflation ; the international remedy. 



It is widely agreed that the remedy for depression in this country involves 

 a recovery of 30 per cent, or more in wholesale prices. This in turn would 

 entail the expansion of credit and possibly of currency. Under every 

 definition these measures would be termed ' inflation ' : let us then boldly 

 describe the remedy by its true name and set our minds to the task of 

 developing it. Its diflficulties and possible ultimate dangers need careful 

 examination. 



The most serious risk is not that inflation may be overdone, but that 

 we have lost all power to set it in motion. The traditional methods of 

 expanding credit by reducing the Bank Rate and buying securities are 

 apparently ineffective. There is a ban on public works. And no State 

 action seems now possible for creating that psychological effect which 

 might set the wheels of industry in motion. There remains one suggestion, 

 which is put forward here for criticism. In essence, it is that new money 

 should be created by the banks and transferred, via the Government, to 

 to the needy as a gift outright. 



Mr. J. Morgan Rees. — Some assumptions underlying the problem of 

 equilibrium between Production and Consumption. 



Equilibrium is defined for the purpose of this paper as that production 

 of goods and services which can be consumed at a given price level such 

 as would occupy the maximum productive powers and give maximum 

 employment. 



The classical economists and the problem. Certain underlying as- 

 sumptions no longer valid. Economic realities and the persistence of 

 dis-equilibrium. Do these realities force economic analysis towards an 

 ethical basis ? 



Where initiative rests. Responsibility should be conscious for main- 

 taining a balance. The monetary system and the relation between price 

 levels, bank rates and unemployment. The power of money and credit ; 

 policy of central banks towards stabilisation of price levels. 



