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(2.) By cost of production remaining unchanged in 

 regard to all commodities, excepting gold, whose 

 cost of production had increased absolutely. 



(3.) By a uniform increase in cost of production of 

 various commodities, but associated with a still 

 more marked increase in the cost of producing 

 gold. 



(4.) By a uniform reduction in the cost of producing 

 various commodities, excepting gold, whose 

 cost of production had declined at a lesser 

 ratio. 



(Diagram II.) 



Now, whether we accept or reject one or other of these four 

 possible causes, the relative purchasing power of commodity 

 over commodity, excepting gold, would not be disturbed 

 in the slightest degree. Even in respect of gold, it is only 

 the industrial part which w r ould be economically altered. The 

 position reserved for money, by its appreciation, relatively, as 

 in example 1 and 4, and absolute appreciation as in examples 

 2 nnd 3, would not in any way disturb their exchange 

 values with each other in any way. 



If nominal rates of wages and nominal profit fell uniformly, 

 or rose uniformly with prices under all these differing con- 

 ditions, the wage-earners' or investors' purchasing power 

 would also be undisturbed, however higher or lower his 

 nominal wages or rates of profit might be. But if nominal, 

 wages and nominal profits remain stationary while nominal 

 prices fell generally, the industrial world would be greatly 

 improved, because it would mean a real increase in the 

 purchasing power of man's services. And as fully 70 per 

 cent, of breadwinners buy commodities with services, not 

 with commodities, we have no reason to doubt the largeness 

 of the benefit to mankind from a general reduction of 

 prices of commodities under such circumstances. 



Any disturbance or depression of trade is therefore due to 

 other well-understood economic causes, occurring periodically 

 in cycles, and is in no way due to a general decline in 

 prices. 



Decline in Prices, Not Due to Absolute Appreciation of Gold. 



Although there is a very marked decline in recent years 

 in the prices of commodities, the rate of decline is far from 

 being uniform iu respect of different commodities. 



