on the improved position of our working classes, and on the fact that eighty shillings will purchase to-day, roughly speaking, as many of the necessaries of life as a hundred and twenty shillings did thirty years ago. We ascribe this increased abundance to our laws, our habits, and our national qualities. We fail to perceive that this movement is the result of events which affect, in a general way, the course of affairs over the whole world. Stranger still, according to a well-known economic law, the reverse should naturally have been expected. The production of gold during the last decade has exceeded anything historically recorded. It is true that good authorities tell us that every sovereign costs forty shillings to extract and bring to the mint; but, once brought thither, its cost is forgotten, and the sovereigns which issue from the mint influence the markets of the world without any reference to the expense incurred in their production. The whole production of gold in the world from 1492 to 1800, a period of about three centuries, was, according to the best estimates, over 500,000,000l. The production during the nineteenth century was 1,500,000,000l., or three times that amount; while, during the last ten years, the amount mined was larger than that raised in the three centuries referred to. Moreover, the production of gold was nearly twenty times as large during the last ten years of the nineteenth century as it had been during the first ten, although those years had been considered at the time as years of extraordinary abundance.

This increase in the stock of gold held in the world might have been expected to raise prices largely. It is difficult for us to conceive how small was the stock of gold in this country at the beginning of the last century. Tooks supposed that 8,000,000l. might have remained in circulation in 1800 (an outside supposition).' Between that date and 1816 the stock of gold at the Bank of England never exceeded 7,600,000l.; and sums so low as 3,000,000l. and even 2,000,000l. were not unknown. Our mint practically ceased to work. When it began again to coin gold in 1817, the amount was very small. Between 1817, the year of the resumption of specie payments, and 1829, 44,000,000l. were minted, of which rather more than a third was estimated soon afterwards to have been exported or used up in manufactures. The coinage

of England, small as it might be, was almost the only gold coinage of importance at that time. The world now coins gold at the rate of about 50,000,000l. a year. It is computed that the production of gold goes on at the rate of fully 70,000,000l. a year, with a high probability of a considerable increase. There is a larger number of fields in which gold mines can profitably be worked; the quantity of labour which can be employed on the industry has distinctly increased; and great improvements have been made in the methods of dealing with the ore. It now pays to extract gold from ore which, even in recent times, could not be profitably worked. All this will materially assist to increase the production.

To make the position of matters clearer, I will quote the figures of the amounts of gold estimated to have been in use in the world at different periods.

The year 1492 is taken as a starting point, that being the date of the discovery of America. The stock of 16,000,000l., which is believed to have then existed in Europe, represents all that was left of the huge amounts accumulated in the Roman Empire, held by some to have been not far from 400,000,000l. about the time of Augustus. Jacob, whose Historical Enquiry into the Production and Consumption of the Precious Metals' is the classical authority on that subject, has shown how rapidly a stock not recruited by fresh supplies from the mines becomes worn out and lost. The diminution appears extraordinary; but Jacob's estimate is fully supported by that of Jevons, who, in his 'Principles of Economics,' regards the life of the precious metals, whether in coin or in the form of plate, as not exceeding two centuries; so evanescent is wealth in its most treasured form. These calculations may help us to understand how large in former years were the accumulations of the precious metals, and how rapidly and entirely they have been dispersed.

* 'Banker's Magazine,' October 1902.

The activity of the mints of the world in coining gold, during the latest ten years of which the operations can be chronicled, has been unexampled. The production of gold, according to the Mint Report of the United States for the ten years 1894-1903, was rather more than 500,000,000l. The coinages of gold during that time were, in round numbers, 580,000,000l. ; and the value of that metal used in the arts and manufactures was 130,000,000l. A good deal of old material, jewellery and other things, is used in manufactures; and large quantities of the coin of other countries are continually being recoined. These facts, joined to the probability that the figures as to the production are understated, assist to explain the discrepancy between the figures of the production and the coinage. Of the amount coined during the ten years referred to, the mints of the United Kingdom and Australasia account for more than 150,000,000l., the United States for nearly as much, Russia for over 140,000,000l., Germany for 60,000,000l., France for 30,000,000l., and Austria-Hungary for 32,000,000. These six countries

were estimated to hold in 1903 more than 83 per cent. of the whole stock of gold in the world. It is difficult to say how much of the coinage of the last ten years has gone into circulation; but it is highly probable that, taking into consideration the recoinages and the amount used in arts and manufactures, the addition to the active circulation of the world does not exceed half the recorded production, if, indeed, it is as much; and the set-off against this in the diminished use of silver is very large in proportion to the addition to the circulation in gold.

That the coin in current use varies in value, as was mentioned a few pages back, is an idea that occurs to few. But its purchasing power is constantly subject to change. At first sight, this seems incredible. The coin, if unused, remains unaltered; even when in constant circulation the diminution in value from wear and tear is comparatively small. Yet, while the condition of the coin may remain thus stable, its utility, that is, its purchasing power, may undergo great change.

'

Now, if there is any economic theory which has received a general acceptance, it is the Quantity Theory of Money.' Among recent writers, the theory is very ably explained by Dr N. G. Pierson in his 'Principles of

Economics.' Dr Pierson, who has been Prime Minister of Holland and is well known as an economist, states in that book, in the clearest manner, that the supply of money determines what the value of money shall be.' According to this theory, prices are determined by the relation between the demand for, and the supply of, money. The demand is expressed by the quantity of goods offered for money, that is to say, for sale. The supply consists of the money in use, whatever the material of which it is made or the form of the pieces which are available. The goods to be exchanged through the instrumentality of money remaining the same, an increase in the supply of money will, according to this theory, raise prices; conversely, a decrease in the supply of money will lower prices. The Quantity Theory' of money is, it will be seen from this, simply the application of the general principle that value is determined by demand and supply. There has been much written about the ' Quantity Theory," and it has been much cavilled at; but no one has ever yet seriously undertaken to show what determines the value of money, that is, prices, if supply and demand do not.' It is not to be supposed that the effect on the increase in the quantity of money will follow the exact alteration in the quantity; but so firmly rooted has been the theory in the minds of men, that it was practically the basis of Peel's Bank Act of 1844. However tempting a discussion of Sir Robert Peel's opinions on this subject might be, I must not be drawn aside into considering this point further. It is true that it was the quantity of notes that he desired to control; but it was as representing money that he desired to regulate their quantity. I quote him here merely as a conspicuous instance of the general belief in the truth of the Quantity Theory.'

We have seen that there has been a vast increase in the supply of gold, while contemporaneously prices generally have gone down. How, then, are we to account for the fact that this enormous increase in the supply of gold has failed to produce the expected result? A rise in prices was to have been expected. Theory supported this view; and experience shows that, in similar circumstances, a rise has actually occurred. A marked increase in prices followed the discovery of the mines in Australia and the almost coincident opening of the mines

of California. The subject was naturally much discussed. Professor Cairnes wrote on it; and, in France, Michel Chevalier's work, 'La Baisse probable de l'Or,' appeared. The volume was translated by Cobden and attracted much attention. The position of persons in the receipt of fixed incomes became the subject of much discussion; the loss which they would suffer was considered. In some instances salaries were even raised. The result in present circumstances has been very different. I will try to furnish some explanation of this.

It sounds like a paradox, but it is a fact that the vast increase in the stock of gold throughout the world has rendered the influence exercised by additions to that stock slower in coming into action, and smaller in effect. Besides this, in the first place, the increased commercial and industrial activity which followed these discoveries of gold itself caused a fresh demand for money, which has hindered the increase in the amount of gold coin from having the influence which was expected, and prevented prices from rising proportionately to that increase. In the next place, the effect of the increased supply of gold has been diluted by the fact that many countries which had no gold currency before the recent discoveries have subsequently established one, and many other countries which already employed gold have employed it to a larger extent.

The most important factor, however, in the matter has probably been the demonetisation of silver. This has practically caused gold to stand as the main, if not the sole, standard of value in a very large part of the world. The East-taking that description in its largest geographical sense-so long immovable in its habits, has begun to change them, and is now rapidly relinquishing the use of silver as currency. A large part of the gold recently discovered has been employed in making up the deficiency thus caused. Between 1893 and 1903 fully a third of the coinage of gold was required to act as a substitute for discarded coinage of silver.

Silver is dethroned from the position it held when, whether in banter or in earnest, the poet Philips wrote:

'Happy the man who, void of cares and strife,

In silken or in leathern purse retains

A Splendid Shilling,'