242 Mr. Faraday on 



does not, in any influence it may have on prices, affect all 

 prices equally. As the French would say, its " liberatory "' 

 or paying power is limited : particular bills are known only 

 in particular trades. Moreover, the duration of the liberatory 

 power is brief: for the credit money is liable to periodical 

 demonetisation. Thus, as Mr. Goschen pointed out in his 

 Leeds speech, we were, during the recent Baring crisis, on 

 the brink of a collapse of all British credit, which would have 

 meant the instant demonetisation of all the commodities and 

 securities represented by the credit money afloat, gold 

 remaining as the only commodity which would have 

 retained its paying power. The effect on prices would have 

 been the same as the effect on the gold price of silver of the 

 demonetisation of that metal ; the prices of all commodities 

 and securities would have fallen enormously in terms of 

 gold, or, in other words, the value of gold in commodities 

 would have risen enormously, the " unearned increment " of 

 the fortunate holder of gold being proportionately increased. 

 To a certain extent, something like this happens regularly 

 as bills approach maturity, or the date on which the com- 

 modities they represent will be demonetised. As the 

 period of commodity demonetisation approaches, the holder 

 of the commodities becomes a more pressing seller, and a 

 seller against gold, just as the German Government became 

 a seller of silver at declining gold prices when it demonetised 

 the white metal. If a bill is drawn in terms of gold, it is,. 

 practically, against gold money that the merchant sells his 

 goods, for even if he sells in the first instance for silver 

 rupees, he must re-sell his rupees before he can discharge 

 his debt. I do not deny that the continuance of a volume 

 of credit money, the disappearing portions of which are 

 speedily replaced by fresh bills, and which is never wholly 

 withdrawn, does tend to keep up prices, or to lessen the 

 buying power of gold money ; the admission that a 

 ruinous fall of prices would have inevitably followed a. 



