then it is clear that the change must be due to something affecting the supply of, or demand for, money which has not similarly affected the supply of, or demand for, commodities. From the above it follows that if the supply of money from the mints or from the printingpresses of Government be greater than the demand for that money, as represented by the number and value of the purchases made. amongst any given people, the value of the money will fall, the strength of the Great Purchasing Power will diminish, and prices generally will rise. On the contrary, if trade and population increase so rapidly that the demand for money be relatively greater than the supply of money, precisely an opposite effect will be produced, and prices generally will fall. And now we have a practical theory of money in place of the old erratic "medium of exchange" hypothesis, a theory which, founded both on facts that are past, and on facts of which we all have every-day experience, will enable us not only to construct a system of money better adapted to the requirements of the world than the systems now current, but what is of more immediate importance, to perceive the consequences to English trade of the currency legislation by which our present monetary system was established. In answer to the question, What is money? we can now reply— Money is: (1) The Great Purchasing Power. And we can add that the strength of the Great Purchasing Power fluctuates according to the quantity of that Power in circulation compared to the amount of work to be done by it. CHAPTER VII. The legislation of 1816 examined by the light of a practical theory of money-Effects on internal trade of fluctuations in the purchasing power of money-Effects on international commercee-Conclusions theoretical. IT T will be remembered that when Lord Liverpool recommended his king to outlaw silver and use only gold as England's chief monetary instrument, he was of opinion that this course was the best way by which the inconveniences arising from the disappearance now of the silver coins, now of the gold pieces, consequent upon the different legal ratings of gold to silver in the various States of Europe, could be effectively overcome. And inasmuch as an international agreement to establish one uniform rating of gold to silver was then quite outside the sphere of practical politics, there can be no doubt that Lord Liverpool's recommendations, although supported by historical references that were both defective and inaccurate, nevertheless presented the best means out of the monetary difficulties of the time. Of the truth of this conclusion we can have no better evidence than the fact that the inconveniences experienced during the last and previous centuries are now unknown with our present currency system; and this system is to all intents and purposes the outcome of Lord Liverpool's suggestions. The ultimate effects upon English commerce of the abandonment of one of the metals which had for centuries served as the principal money of the world, were matters that neither Lord. Liverpool nor Sir Robert Peel could possibly have foreseen. In those days not only was international trade as we now see it undreamt of, but even its coming magnitude and vital importance to England could not have been realised; a nation who believed that money was simply a medium that facilitated the exchange of commodities, would not suspect that this growing trade could be in any way prejudiced by what appeared in the light of an improvement in the "medium." On the contrary, such an improvement was calculated to further facilitate trade transactions and so prepare the way for an increase in commerce. Moreover, it must be noted that this view was apparently supported by facts, for not only was England's progress during the larger portion of the present century the envy of the whole of Europe, but this progress, being attributed in some measure to England's novel currency system, caused foreign statesmen to look upon the new system with favour, and consequently influenced them in their ultimate resolve to follow England's example and also outlaw silver. Let us now regard England's currency laws from the standpoint of the practical theory of money set forth in the preceding chapter. As money is the Great Purchasing Power and Stimulus to Industry, what are we to think of that legislation which deliberately abolished a portion of the money which had served England for nine centuries, and which continues to serve a half of the world to this day? Does not such legislation of necessity involve the abolition of a portion of the Purchasing Power of the English nation, and also a portion of that stimulus to industry to the aid of which the nation to a certain degree owes existence? its Undoubtedly. But we must remember that the strength of the Great Purchasing Power fluctuates according to the quantity of the Power in circulation compared with the amount of work to be done by it. If, therefore, one portion (silver) of the Great Purchasing Power be abolished, it is obvious that unless a supply of the other portion (gold) be made sufficiently large to both take the place of that abolished, and at the same time meet the demands consequent upon increase of population and advance of commerce, the strength of the remaining portion (gold) of the Great |