PRESENT MONETARY PROBLEMS 167 



plied by its rapidity of circulation? Or, is purchasing power in its 

 ultimate analysis synonymous with the offer of salable goods? 



(8) Have the expenses of production, or progress in the arts, no 

 influence on the general level of prices? 



(9) What is the effect of credit on general prices? 



(10) How do fluctuations in bank reserves actually affect general 

 prices? Does the rate of interest, being paid for capital and not for 

 money, have an effect on prices through its effect on loans? 



(11) By what economic process would a great new supply of gold 

 influence general prices? Only by being directly offered for goods 

 as a medium of exchange? 



(12) Does the Ricardian reasoning in favor of the quantity theory 

 of prices hold in monetary systems where free coinage of the standard 

 money exists and where other devices are used as media of ex- 

 change? If mints are open, how can the coin differ in value from 

 the bullion of which it is made? 



It is safe to say that the thorough discussion of these points, and 

 a satisfactory disposal of them, will aid in the solution of the central 

 monetary problem, not only of the past but of the present time. It 

 is one which cannot be blinked. It arises at every step in popular 

 monetary discussions, and the economists have not given it neces- 

 sary attention. On the settlement of the theory of prices, of the 

 value of money, a host of minor questions which have caused endless 

 and fruitless differences of opinion will disappear. The solution of 

 this matter of theory is of the greatest practical import; it is as 

 important to practical monetary action as a theory of heat is to 

 mechanics. Therefore, let us not be deterred from a struggle with 

 a fundamental matter of theory by any slighting and cheap sarcasm 

 about the futility of theoretical and abstract discussions. As well 

 scoff at the mathematics which lies behind physics and astronomy 

 as theoretical. 



Nor will it be wise to minimize the differences between the old 

 and new points of view in the theory of prices. It may be said that 

 the quantity of money would have an influence on general prices 

 in any theory. True; but that does not touch the crucial point at 

 issue. The quantity theorists make the process of evaluation be- 

 tween goods and money dependent on the actual offer of the money 

 and goods for each other; an increase of transactions in goods is an 

 increased demand for money, resulting, unless the quantity of money 

 is increased, in falling prices. It is needless to say that the facts 

 do not agree with these statements. An inductive economist who 

 would be unwilling to state any principle which had not been the 

 outcome of a study of concrete data could never, under any possible 

 circumstances, have arrived at the quantity theory of money. In 

 no case coming under my observation has there ever been any corre- 



