Purchase of this book includes free trial access to www.million-books.com where you can read more than a million books for free. This is an OCR edition with typos. Excerpt from book: CHAPTER VI THE EUROPEAN MONETARY SITUATION European Central Banks There has been no end of discussion in the literature of post-war finance of the continued inflation of European currencies. It is a matter of common knowledge that many of the European countries have been able to keep their financial heads above water only by the continuous resort to the desperate expedient of the printing press. The truth is that in nearly all of Europe east of the Rhine the manufacture of paper currency has proceeded since the Armistice at a much more rapid rate than during the war period itself, and at a rate that hardly finds a parallel in history. In the nations of western Europe the only difference is one of degree. This chapter analyzes the condition of the European monetary and banking systems for the light they throw upon the general economic situation in Europe. The increase of paper money in circulation in Europe has largely been brought about by bank note issues. That is to say, the paper money has been issued mainly by the banks rather than by the governments direct. Accordingly, an appreciation of the significance of the monetary situation requires an understanding of the process by which the currency is issued and of the effects of such issues upon the condition of European bank reserves. Only a few relatively simple considerations are involved. In each of the European countries there is a central bank, comparable in its functions to the federal reserve banks of the United States. In brief, these central banks are bankers' banks, that is to say, they make loans to and hold depositaccounts for the individual private banks, much as the individual banks make loans to and hold deposits for private . individuals. In normal times the ordinary banks do not need to borrow m...