placed in Germany useful things in the place of useless tools for exchanging of which there were already enough. But by being retained in Germany and lent to borrowers it not only was unproductive of all good, but it really engendered mischief peculiarly its own. The borrowers took to buying German goods; prices rose in the shops and warehouses all over the country; profits were realised, and wages gained advances; and then the evil consequences soon appeared upon the scene. An increase of spending broke out all round; there was money in hand; it was applied to buying things pleasant and enjoyable A higher style of living was adopted in other words, a larger and more rapid consumption of wealth prevailed. And what was obtained in exchange? The gold, which did not restore the wealth consumed, but only transferred existing things from one set of hands to another. Did not the German humourist stand on the ground of solid sense when he exclaimed, 'Let us have another war, and let the Germans have to pay the indemnity?' Had he not the acuteness to perceive that if much harm is to be averted, the sooner an excess of gold is sent out of the country the better? Let those who bewail exports of gold, and record its imports with delight, ponder over his words and the facts that elicited them." : The worth of a gold coin, its power to buy, we have seen, consists in the value of the metal of which it is made. This is proved, independently of general considerations, by two facts. Sovereigns are constantly melted abroad and converted back into bullion. This would not be done if the coin was not worth the metal. It would be sent back to its home where the additional value would be realised in the payment of commodities purchased there. Secondly, international balances of trade are regularly paid by bullion. That bullion is valued according to its weight, its standard of fineness being of the required quality. It reckons for as many sovereigns as its weight would furnish, whilst the value, consequently, of that weight of sovereigns is the price or market value of the commodity for which it is exchanged. But the value of the metal may fluctuate. Like other metals, it is subject to the law of demand and supply. If the mines yield a larger quantity of gold for the same amount of labour, the supply is increased, and the metal becomes cheaper. More of it must be given for other commodities which have not changed; general prices rise. Or again, if the demand for it were diminished, if a large quantity of it was thrown on the market, the same result would follow; it would suffer depreciation, the supply being in excess. Such has been the fate which has overtaken silver by its demonetiation in Germany and the augmented productiveness of the mines. The point to observe is that this loss of value is in no way occasioned by fluctuations in the circulation. Prices are not governed by the greater or smaller quantity of sovereigns circulating, but by the changes which occur in the value of the precious metal. If the circulation is superabundant, the excess returns into store; in France, to the tune of some seventy millions of pounds. But, stored-up coins do not tell on the prices of the shops; French goods are not made dearer, in gold coin, by them. But if the supply over the whole world is made larger by the causes named above, then gold stands at a lower value; and in every country it counts for less in being exchanged for commodities. But this principle has been pushed too far by many economists of an older school, and by some even of the present day. The changes in the value of the circulating coin of a people were extended to what occurred within its own territory. It was laid down, and is still, as a fundamental principle, that the quantity of money in a country regulates the aggregate prices of all commodities. This is perfectly true of all the world. If the whole stock of the precious metals varies largely, either in the way of excess or deficiency of supply relatively to the wants of all mankind, then these variations of the market tell on the worth of the precious metals, and alter prices proportionately. But when this truth was supposed to hold equally good of a single nation, such as England, and when it became a favourite idea to regulate speculation, to control the rate of discount, to guard against crises, or to raise trade from depression by adding to or diminishing the money of a country, by acting on the exchanges, as it was called,the relative position in which nations stand towards each other in modern commerce was forgotten, and the prescribed rule thus became nothing but a fallacy. The civilised nations of the world are not single and isolated markets. Their intercourse with one another is easy, rapid, and most extensive. Under such circumstances it is quite impossible that such a commodity as gold should have different values in different countries. Gold has small bulk and weight compared with its worth. It can be easily made to travel, and a very small difference of relative value would speedily send it on its journey to the locality where its purchasing power was greatest. A Frenchman or Hollander who discovered that a deficient supply of gold had made gold dearer and lowered general prices in England would instantly order purchases of these cheapened articles and would pay for them with gold. Or if the opposite effect had been produced, if a superabundance of gold in England had raised the prices of commodites within her border, he would reverse his operation and send over goods to be sold at these higher rates, bringing away gold in exchange, and reaping a profit by the transaction. These forces keep the value of gold at the same level amongst great trading communities. There is not a particle of proof of any variation in value. The Bank of France accumulated some seventy millions of pounds of the precious metal; did anyone ever hear that prices had gone up in consequence in the shops and warehouses of France? So again, in England, there is a much larger quantity circulating in summer than in winter; has anyone spoken of a change of prices, or of buyers waiting till winter to make their purchases when the reduced circulation, upon this theory, lowers prices throughout the land? This mistaken idea was one of the dreams which led the authors of the Bank Charter Act to imagine that they were controlling the money market of England and acting on the movements of trade by the management of bank-note issues. An important distinction must be drawn in reference. to the amount of the circulation. The same aggregate amount of cash transactions will not always require the same quantity of money. The same coin may effect few or many transactions according to the circum In a gambling-house the same afters in a quarter of an weeks or months be used In a nation buyers and sellers live ree is given, a much Nangisted by much fewer but 7 mot & the next grovided, and no more; for out the cash business, be AVC Chaar tezing here spare stocks and dige a Age nu-i merchants, shopkeepers, miliconas se cu echanges, and newspapers ****Party. We thus make a deduction of much MARQUÍ Yate that the question of the distribution We provous metals is at bottom only a question of the sacrelal habits of Sferent localities. A nation is not the poorer for having little gold coin, nor the richer for having much, if only it has enough. The precious metals dow to countries of low civilization, of political macuity, where the law is weak and justice uncertain, also to nations using large banking reserves, of which more hereafter. But they find scant resting places in Lands of high commercial development, where property wate and the recovery of debts easy and to be relied upon, and where the owners of goods are willing to Part with them for cheques and bills and similar pro of deferred payment. There is probably no in the world which in comparison with the |
