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A TREATISE ON MONEY

BK. Ill

represented pioneer work. We could calculate amore accurate P a now; which Mr. Snyder has en-deavoured to do. But the more accurately we cal-culate P 2 , the clearer does it become what a hotch-potch standard the Cash-transactions Standard is andhow unreliable as a guide to the Purchasing Power ofMoney.

A further objection to the Fisher Equation, par-ticularly in its application to British banking statistics,is to be found in its neglecting to take explicit accountof the distinction between Cash-deposits and Savings-deposits and of the use of overdraft facilities. Im-plicitly fluctuations in these factors can be allowed forby variations in the velocity of circulation. But, fromthe standpoint of qualitative analysis, this fails to putus on the right track for discovering what sort ofcircumstances will change the velocity of circulation.I should add, however, that this objection may beless applicable to American banking statistics. ForAmerican statistics distinguish between Time-depositsand Demand-deposits (and it is the latter only whichProfessor Fisher includes in his M), which correspondsroughly to the distinction between Savings-depositsand Cash-deposits ; whilst overdraft facilities mayplay a lesser part in America in economising theholding of cash.

In any case it is not difficult to remedy this defect;and it may be worth while to do so, as follows :

(1) Let w = the proportion of Cash-deposits to

Total deposits,

so that M w = the volume of Cash-depositsand M(1 -w)= the volume of Savings-deposits.

(2) Let w' = the proportion of unused overdraft

facilities to the Cash-deposits,

so that M iviv' = the unused overdraft facilities,and Mw(l + w') = the total volume of cash facilities.