the proper amount of gold seems to be the main consequence, while commerce is regarded as the means to the end.
This manner of treating the problem, however, reverses the true order of events. Commerce is the real objective which lies behind all other phenomena, such as the methods of payment; the movement of money is a secondary operation, dependent on the direction and extent of the shipment of goods. Moreover, to say that gold, like other goods, flows where its exchange value is highest, is a truism; the real question to be settled is, how does the flow of gold take its effect on prices? To say that because it is abundant it raises prices is to assume the whole problem at issue. How does a cheapened mass of gold adjust itself to other goods? What is the price-making process? Are goods priced only by an actual exchange of those goods against the increasing flow of gold? On this point the adherents of the orthodox teaching of Ricardo have offered no light.
The trouble with many symmetrical monetary theories is that they do not agree with the facts. For instance, it has been pointed out that the gold stock of the United States has increased three and one half times from $326,000,000 in 1880 to $1,174,000,000 in 1902; and yet that gold prices in the United States in that period have fallen. This discrepancy between fact and theory is dogmatically disposed of by assuming that the growth of our trade has outstripped the supply of gold. This position is far from tenable; there are no statistical data in existence worth a fig, which could give us the truth as to the money-work, or demand, for gold. To say that our gold has increased at all only because of our phenomenal increase in trade relatively to other countries is to make a statement without proof. Possibly our deplorable silver legislation of the past has forced us to carry more gold than we ought to have held; just as men on the frontier must invest considerable means in firearms for protection from purely local dangers. Other countries than ours have enormously increased their trade, but they have not added in the same proportion to their gold circulation. In truth, the old-fashioned theory on international price-changes needs restatement in vital parts. It will be found that forces affecting the prices of goods, such as demand and supply of those goods, are of primary influence in affecting prices, quite independent of the action of a medium of exchange—which chiefly comes into existence, in fact, as a consequence of the exchange of goods. The movement of specie is not the end of commerce, but specie moves as an instant consequence of commerce. The monetary changes follow, and do not precede the operations in merchandise and securities.
