354 THE (iUESTIONS OF THE DAY. 



most demanded — that is, where profitable use can be made of 

 it — except as hindered by international barriers in cases where 

 any nation uses non-exportable money. 



In such cases the non -exportable money displaces, for all 

 domestic uses, the precious metals, which go elsewhere to per- 

 form their functions in the money or the arts. This is the 

 well-known Gresham's law, which is merely that any person 

 having two kinds of money will pay out the less valuable to 

 him, and keep the other, which is thus withdrawn from circu- 

 lation. In due time this better money finds its way to the 

 banks, usually at a premium, and thence to some other 

 country where there may be use for it. 



The non-exportable money, whether entirely inconvertible 

 or not, adds to the world's stock of money, not its own volume, 

 but the amount of the precious metals which it displaces.* 

 Its extensive use, therefore, must tend to de|)ress the general 

 level of the world's prices, even although it has the effect of 

 raising prices in the country which uses it. 



In a large sense it is true that tlie more money and credit 

 there is in the world at any time, the higher the level of 

 prices. The volume of money does not vary much, but the 

 volume of credit fluctuates greatly.f Credit is confidence in 



*If $1,000,000,000 is assumed as the amount of metallic money which 

 would circulate in a nation in which all money was equal to coin, and subse- 

 quently irredeemable money to the amount of $2,000,000,000 was issued, tlie 

 irredeemable money would simply take the place of the $1,000,000,000 of coin, 

 which would be set free to do its work elsewhere in the world. In this case 

 there is no question that the world's stock of money is actually increased so 

 long as the irredeemable money does its intended work. But it does not add 

 $2,000,000,000; for the excess of issue is not money but inflation. It adds to 

 apparent value in the country using it, but not to real valuta 



f It must not be understood by this that we can make prices bob up and 

 down like corks in rough water, by constantly tinkering with the currency. 

 The operation of money on prices is very slow, which we are apt to forget in 

 our glib discussions of the subject. We can state in a sentence a result which 

 is the work of years. Effects are first felt in the money centers, where those 

 whose business it is to study these movements, foresee what is coming and adapt 

 their business to it. Gradually the effects — possibly not for a year or two — 

 begin to be felt in the rural districts. Before this, however, they have been 



