The sun. [volume] (New York [N.Y.]) 1833-1916, 1876-01-24
The Financial Bulletin on Finance.

papers To Congress.
| The Financial Bulletin on Finance.
The thcorizing which now attempts to
| show that the volume OF the money crcu-
| lation docs not affect prices, forciby re-
minds us Of that which was adopted in Eng
| land in 1910, to prove that there was mt that
| time no excess of paper money In vogue
| Though the foreign exchanges were against
England, and though gold was at n pre-
MUM, II was held that these results were
not owing to any excess of paper money,
but to various incidental and accidental
circumstances of trade and speculation,
the condition OF war, the operations i'm
gold, and certain occult influences, which
only persons of extraordinary financial and
practical insight could understand. The
paper-moncy mon of that day made n
most intrepid stand, headed by VANsIT-
TART and other capable theorists, and
were even backed by some of the best
practical heads in the Bank of England.
But their foundations were washed away
by IIoRNER's Bullion Report, and by the
discussions in Parliament, OF CANNING,
PEEL and others; aud to-day the sound
fnanciers of England. that is to say, the
overwhelming proportion of bankers and
traders i'm money, and the largely dominant
portion of authoritative writers on finance.
stand on the impregnable doctrines Of
the Bullion Report.
We cite the contrast 10 show that there
Is no financial dogma. however unsound.
thnt cannot be fortified by quotations
from the thoorctic opinions of writers and
.ip.u. of nj Ia. ..F
and ability. There never was, and hardly
can be. more conspicuous example OF
theory COMPOUNDED by argument first, and
by time and experience afterward, than
the one To which we refer. The authori-
ties quoted by the Financial BWictu
against the doctrine that prices areaffcctcd
by the volume of the circulating medium,
we therefore dismiss rs having no real
bearing on the point ut issue.
We have heretofore referred to the time
Of the discovery Of the South American
and Mexican mines in the sixteenth century
to show a most extraordinary rise Of prices
I'm Europe. We have also called attention
to the increase of prices since tine develop
ment of the Californian and Australian
mines. and the notorious fact, notorious
AhA'hF hNhA ifhANl't ~ Nfli hS AilN fNhI-
try, that the price of living has every
where largely increased since that period.
For these unque,tIoned results, we Of
fer the simple and manifest reason of the
everywhere known and acknowledged
fact that there is an increased abundance of
money. We consider that the cases are on
such "A commanding scale. and are so palpn-
Bile TO thounivcrsal apprehension that they
finish the argument 10y a demonstration.
Yet no doubt an ingenious speculator on
possible causes could show that the COM
mon sense of mankind Is altogether at
| fault on this subject, and that prices would
have risen still faster If no South American
| or Mexican silver. and no Californian or
| Australian gold. had ever been discovered.
But. facts aside, We conceive that the
argument that an increased or inflated
volume of the circulation has no effect on
prices Is precisely equivalent to the dogma
asserted by the Bank of England in 1910,
that though n purchaser could buy com
modities ten per cent. cheaper with gold
than with bank notes vet it was impossi-
bic that the notes had deprecated: and
ii was thought this notion was proved by
good and satisfactory reasons. Absurd rs
IL seems To lis at tins day II, authors could
not be- brought 10 reluquish it.
This argument also, in effect denies that
IN the city OF New York to-day gold Will
buy commodities cheaper than preenbacks.
Thus il We say an enlargement of the cir
culatiOn does not enhance prices, then
prices areuot enhanced by the existing vol
ume of paper money. The assertion Is pre-
ciseiy equivalent 10 the denial of the fact
| that one hundred dollars IN gold will buy
more than one hundred dollars in our bank
notes. What is the price Of cotton IN the
Liverpool MARKET What is il here IN gold
/ but the same price. minus freight and
charee>i But what is its price in paperf
| Twelve OF fourteen per cent. more. Now
can anybody undertake to say that if
our paper money could be instantly
brought to par with gold, or made redeem
able at once in q gold-paying bond worth
par in gold, the price of cotton would
Immediately advance twelve or fourteen
per cent. in price in the Liverpool market 2
Yet this i what the theorists must say who
deny that resumption would cause a fall
of prices, which is the same Us denying that
volume affects price
We hold II to be as near n sclf-cvident
proposition as anything in finance can he,
that prices OF commodities depend, every
thing else being equal, on the volume of
the circulating medium. This is only say
ing that thirty yards OF cloth is thirty
yards of CLOTH and that il you alter the
length of your yard stick to two feet
you Will have more yards, and If you
lenGthen your measure TO four feet you
Will have fewer yards. To be sure the
comparison is not absolutely accurate, but
the illustration is complete. 1t is nothing
to the purpose to show that this rule does
not fully account for all the fluctuations
in prices. This is only because many elc-
meuts enter into all financial problems,
and prices rise and fall from various other
causes But the one fixed guide by which
all market prices are finally controlled, is
the volume OF money by which those
prices are measured,
1t is not possible to get away from this
general proposition, rs Gov. TlLDEN and
the BWietM think they do, by assuming
thut tlp volume OF money in oirculofiOu