alne),a continuing balance-of-payments deficit of the type usually discussed in balance-of- payments theory ultimately requires credit creation to keep it going.This in tum implies that either of two causes:too low a ratio of international reserves relative to the domestic money supply,so that the mic policy relyon the natural by credit creation.In both cases,the problem is associated fundamentally with the power of tin banking systemstocreate money which acceptable backing Toconclude that balance-of-payments problems are ssentially moneary is notofoure to assert that they are attributable to monetary mismanagement-they may be,or they may be "eal"forces in the face of which the playa.The conclusion does mean,however,that the distinctions which have sometimes been drawn between monetary and real disequilibria,for example by conepts not logically valid-though such,carefully used,may be helpful in isolating the initiating causes of disequilibriumor the most appropriate type of remedial policy to follow. Formulation of the balance of payments as the difference between aggregate payments and aggregate receipts thus illuminates the monetary aspects of balance-of-paym nts disequilibrium, which this approach sheds on the policy problem of oorrecting a deficit,by relating the balance of payments to the overall operation of the economy rather than treating it as one sector of the eomy to be analysed by itsel An excess of aggregate payments by residents over aggregate receipts by residents is the taker by the community of residents considered as a group (excluding,as always,the foreign exchange authority)though itmust be gied that this technique ignores many of the complications that would have to be investigated in a more detailed analysis. Two sorts of aggregate decision leading to a balance-of-payments deficit mav be "stock"decisions and "flow"decisions:a (stock)decision to alter the composition of the community's assets by substituting other assets for domestic money,and a(flow)decision to spend currently in excs of current receipts.Since both real goods and securitiesar assets to domestic money,and current expenditure may consist in the purchase of either goods ,the balane-of-payment type decision ①With the cor nity defined to include ther teefietdwawinsse