PRESENT MONETARY PROBLEMS. 217 



the proper amount of gold seems to be the main consequence, while 

 commerce is regarded as the means to the end. 



This manner of treating the problem, however, reverses the true 

 order of events. Commerce is the real objective which lies behind 

 all other phenomena, such as the methods of payment; the movement 

 of money is a secondary operation, dependent on the direction and 

 extent of the shipment of goods. Moreover, to say that gold, like 

 other goods, flows where its exchange value is highest, is a truism ; the 

 real question to be settled is, how does the flow of gold take its effect 

 on prices? To say that because it is abundant it raises prices is to 

 assume the whole problem at issue. How does a cheapened mass of 

 gold adjust itself to other goods? What is the price-making process? 

 Are goods priced only by an actual exchange of those goods against 

 the increasing flow of gold ? On this point the adherents of the ortho- 

 dox teaching of Eicardo have offered no light. 



The trouble with many symmetrical monetary theories is that they 

 do not agree with the facts. For instance, it has been pointed out 

 that the gold stock of the United States has increased three and one 

 half times from $326,000,000 in 1880 to $1,174,000,000 in 1902; and 

 yet that gold prices in the United States in that period have fallen. 

 This discrepancy between fact and theory is dogmatically disposed of 

 by assuming that the growth of our trade has outstripped the supply of 

 gold. This position is far from tenable; there are no statistical data 

 in existence worth a fig, which could give us the truth as to the money- 

 work, or demand, for gold. To say that our gold has increased at all 

 only because of our phenomenal increase in trade relatively to other 

 countries is to make a statement without proof. Possibly our deplorable 

 silver legislation of the past has forced us to carry more gold than we 

 ought to have held; just as men on the frontier must invest consider- 

 able means in firearms for protection from purely local dangers. 

 Other countries than ours have enormously increased their trade, but 

 they have not added in the same proportion to their gold circulation. 

 In truth, the old-fashioned theory on 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 chiefly 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 conse- 

 quence of commerce. The monetary changes follow, and do not pre- 

 cede the operations in merchandise and securities. 



