170 MONEY AND CREDIT 



from purely local dangers. Other countries than ours have enor- 

 mously increased their trade, but they have not added in the same 

 proportion to their gold circulation. In truth, the old-fashioned 

 theory of international price-changes needs restatement in vital 

 parts. It will be found that forces affecting the prices of goods, 

 such as demand and supply of those goods, are of primary influence in 

 affecting prices, quite independent of the action of a medium of 

 exchange, which often comes into existence, in fact, as a consequence 

 of the exchange of goods. The movement of specie is not the end 

 of commerce, but specie moves as an instant consequence of com- 

 merce. The monetary changes follow, and do not precede the opera- 

 tions in merchandise. 



VI 



Bimetallism 



Bimetallism was eagerly taken up by writers as a means of in- 

 creasing what was once regarded as a deficient supply of the world's 

 metallic circulation. The decline of prices, which in this country 

 began in 1866 and not in 1873, was attributed to a scarcity of 

 " money ' throughout the world. Therefore, if silver could be 

 added to or retained with the circulation of gold, the larger quantity 

 of metallic money would, it was believed, support or even raise the 

 general level of prices. The theory of prices, assumed as a matter 

 of course in this exposition of bimetallism, was the quantity theory. 



Throughout the recent writing and speaking on monetary topics, 

 both in Europe and America, if not also in Asia, there has been 

 a very general subsidence of interest in bimetallism. The demand 

 for silver has been believed to be unnecessary because of the enor- 

 mous production of gold in recent years. That is, by the old quan- 

 tity theory on which bimetallism was based, some authorities - - and 

 more politicians have saved their consistency by accepting the 

 gold standard. 



The logic and character of bimetallism cannot escape so easily. 

 If the quantity theory falls, the whole artificial structure of bimetallic 

 argument falls; and the gold standard cannot possibly be supported 

 by intelligent minds on any such basis of theory. The facts are too 

 ugly. In the diagram which I have constructed here, it must appear 

 to the most casual student that if the fall of prices on or about 1873 

 was due to a scarcity of gold, then since the supply of silver has been 

 greatly increased, and especially since the supply of gold has been 

 about quadrupled since 1850, we ought to have witnessed a phe- 

 nomenal rise of prices in the last decade or two. The movement of 

 prices on the diagram has been generally downward, or at least not 



