PRESENT MONETARY PROBLEMS 169 



working automatically on the .price level through changes in the 

 quantity of gold within that nation. If gold is withdrawn, prices 

 fall, exports of goods are increased, and in due time the gold begins 

 to return until the country's quota of gold reaches an equilibrium 

 adjusted to the relative demands of other countries. The move- 

 ment of goods forms the variable in the process which aims at a 

 correction of the quota of gold, whenever the equilibrium has been 

 disturbed. The shipment of gold is the initial cause; the movement 

 of goods is a consequence. 



In support of this view, the orthodox view, it is held that gold 

 will flow wherever its exchange value is highest. The flow of gold 

 will make it abundant in the receiving nation, and thus raise general 

 gold prices there, or, vice versa, will lower prices in the countries 

 from which gold is taken. The possession of 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 move- 

 ment 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 orthodox teaching of Ricardo 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 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 considerable means in firearms for protection 



