the cultivation and production within their own territories of such commodities as they were accustomed to buy from the gold nations. Now, the more such commodities they manufacture within their own territories the less they require from gold nations, and the less they require from gold nations the more the manufacturers and producers of the gold nations will suffer from loss of trade. Therefore an increase in the strength of the Great Purchasing Power of the gold nations not only reduces the profits, checks the progress, and tends towards the ruin of both the internal and foreign agricultural and manufacturing industries of those nations, but it at the same time acts as a direct encouragement to the inception and growth of agricultural and manufacturing industries amongst those silver nations, the purchasing power of whose money has remained stationary.

Such are the consequences upon the commerce of the world that must inevitably follow the demonetisation of silver by those nations whom we assumed to be using both silver and gold as money, unless the fresh output of gold from the mines of the world, after the abandonment of silver, be sufficient not only to take the place of the discarded silver, but also to meet the requirements of the increasing population and advancing commerce of the gold-using nations; unless, in short, the level of prices generally, both amongst the silver and gold nations, be undisturbed by the demonetisation of the white metal.

These arguments lead to the following most important conclusions:

(1) That a diminution in the purchasing power of money unfairly benefits the industrial classes at the expense of the money-lending classes.

(2) That an increase in the purchasing power of money not only impedes the progress of both internal and foreign trade to the unfair profit of the money-lending classes, but that it at the same time stimulates the industries of those nations, the purchasing powers of whose moneys are not similarly advancing.

(3) That of the two evils an increase in the purchasing power of money is the more injurious to the well-being, progress, and permanence of a nation.

CHAPTER VIII.

An application of theory to fack-The recent divergence in the values of gold and silver-Cause of this divergence-Nature of the divergence - Index Numbers - Theoretical consequences of fluctuations in the value of money.

A

THEORETICAL consideration of the effects upon the commerce of the world of fluctuations in the measuring and purchasing functions of money having prepared the way for a more practical examination of the subject, it will now be possible to accurately read the lessons conveyed by a reference to certain matters of history, in which monetary legislation has had a far greater influence than is generally understood.

At the close of the last century the principal nations of Europe and America were using both gold and silver as money, whilst the peoples of the East and certain portions of the New World carried on their trade mainly by the aid of silver. In 1816 one nation-the United Kingdom-decided to abandon silver and use only gold as the chief monetary instrument. Portugal followed in 1854. Between 1873 and 1878 Germany, Holland, Belgium, Sweden, Norway, Denmark, and the United States of America also decided to discard silver; and at the same time France, Italy, Switzerland, and Greece closed their mints to the unlimited coinage of the less favoured metal. Since this memorable period Egypt, Austria-Hungary, Chili, and British Honduras have declared in favour of gold, and India has ceased to coin silver.

In general terms it may be said that until twenty years ago Europe and the most advanced portion of America used both gold and silver freely as money, whilst those other portions of the world, the trade of which was of sufficient magnitude to be an object of attention by the great nations of the West, employed silver as their principal aid to commerce. Twenty years ago the Western nations permanently refused to recognise silver other than as a subsidiary form of money, and for twenty years the world has consequently been divided into two parts, one of which has advanced with the instrumentality of silver money, the other under the influence of gold money.

The next matter of history to which it is necessary to give some attention is, that in recent years a most remarkable divergence in the relative values of the precious metals has occurreda divergence so great and so peculiar that no parallel to it can be found in modern times. In the eyes of those who lived in the East, the value of gold has appeared to rise with a rapidity and to an extent before unknown: whilst to those whose careers were confined to the gold-using lands of the West, the value of silver has seemed to fall with an equally amazing rapidity, and in a similarly surprising degree. Numerous Commissions and International Conferences have investigated the causes of this marvellous divergence in values; but although endless reasons have been given to explain the rise in gold (as some contended), or the fall in silver (as others insisted), the results have been unsatisfactory, and the practical outcome on monetary legislation nil.

In order to arrive at a definite conclusion as to the cause and effects of the variation in the relative values of the precious metals, it will be necessary to make a brief examination of the matter by the aid of the propositions laid down in a former chapter. The following figures show the alteration in values which has attracted so wide an attention :