Effect of Duties on Imports upon the Value of Gold. 81 



as long as the obstructions which raised them above the com- 

 mon level continue. Average prices being thus raised and 

 held there by arbitrary means, as water is held by a dam 

 across a stream, more money than before will be required to 

 effect the exchanges of the country ; for it is a very plain prop- 

 osition that it requires more money to buy and sell a given 

 quantity of products at a higher range of prices than it would 

 to buy and sell the same quantity at a lower range of prices. 

 One of two things, then, must be done — either average prices 

 must come down to the former level, or the volume of money 

 must be increased. The price of exportables will not yield, 

 to restore the former level, for that is governed by the foreign 

 market. The price of importables will not yield, for that, 

 both in respect to actual imports and domestic products of 

 like descriptions, is governed by the foreign cost and the du- 

 ties added. There is but one remedy left — the volume of 

 money must be increased. How can it be done ? It will be 

 effected in this wise. 



The cost of imports being largely increased, the demand for 

 them will as certainly be diminished — not always in the ratio 

 of the increased cost, but very sensibly diminished. The 

 demand for exports will remain the same, because the cost 

 remains the same, and the imports will no longer pay for 

 them, and the balance must be returned in gold. This pro- 

 cess must go on, and very rapidly too, until the volume of 

 money has been raised the same per cent, that average prices 

 have been increased, and then the equation of supply and 

 demand will be restored upon a new and artificial basis of 

 prices, and the influx of gold will cease. But the ratio of 

 exchange between gold and other things will be changed. 

 "We shall then pay just that much more gold for the same 

 things, in the aggregate, which we before bought for so much 

 less, and so much more than we could again buy for under 

 the natural equation of supply and demand ; and keeping in 

 mind our definition of value — that it is the ratio of exchange 



