MONEY FALLACIES. 
369 
plished. But while over-expanded credit is possibly a more 
frequent cause of depression than any other one, it is by no 
means more frequent than all other causes combined. Of 
other causes it is perhaps unnecessary to speak at present. 
There is another mistake involved in the call for more 
money to be issued by the Government. Forced issues of 
money by the Government cannot increase, except tempo¬ 
rarily and for a very brief time, the amount of money in 
use beyond what would have been supplied by the spon¬ 
taneous action of trade without Government interference. 
The amount of money in use is governed by thp law of de¬ 
mand and supply, and this law is still supreme, whether the 
Government forces issues of money or not. The only quali¬ 
fication to this action is that a stiffening or relaxation of the 
relative demand is not instantly followed by a correspond¬ 
ing variation in the supply. It takes a little time to attain 
the readjustment. 
The experience of many countries during the last two 
centuries has taught us that any great increase of currency 
beyond the demands of trade first displaces the gold money 
of the country, and, if still further pressed, results in infla¬ 
tion, in which there is a nominal but not a real increase of 
money. The process by which the displacement of gold 
money is thus effected is through a rise of prices, which 
always follows a large increase of the circulation. More 
money means a nominal increase of the buying capacity, 
which leads to increased demand for produce, and a general 
rise of prices follows; but when prices in general have thus 
risen, there being no corresponding rise in other countries, 
the country becomes unfavorable for foreign buyers who 
seek to purchase lower elsewhere. But it becomes a favor¬ 
able country for foreign sellers, who urge sales and find ready 
buyers. In a short time an “ unfavorable balance of trade ” 
is thus developed, the balance against the country steadily 
grows, and the premium on sterling, exchange rises until it 
passes the “ shipping point.” Then gold flows abroad. If 
the redundancy of money is not relieved by this outflow of 
