Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1920-05-05
From Other Viewpoints
Price Levels md Increased Wages.
ny ,. LAURENCE I.0UGHIIN.

The changes In the level OF prices due to
ony cause effeoting tho value OF gold are. BY
the very nature of things. less active than
these working the side OF the production Of
goods. That IL. gold being imperishable Eek
cent by abrasion. loss by shipwreck, etc.> the
annual supply keeps piiing W the totalrs'ock
in the world. In 1880 the stock NOT
$4,000. 100000 to sS.cooioon."no: now II is more
than five timcs as great The discovery OF
gold in lS4S-lsSO had added BY 1875 as much
more as had existed in 1870
Although the quantity OF gold had been
doubled. prices did not rise moro than about
Il per cont. Why? Because demand
snranR up for the increasing supply and
prevented further fall in tho value OF gold.
Since then the large annual production OF gold
has kept up Hence annual changes in supply
have less effect relatively on the larger fatal.
Pour bucket OF water into a harrel and 1t
raises the level; but IL poured Into lake it
makes little Impression the levnl II is true
that on the gold side there has been Erca;
addition to tho supply, hut along with IL has
come a great incttasc in the demand for gold.
Therefore we cannot look for serious changes
In prices from changes tho gold side: at
The best they would be very slow
The quick and extreme fluctuations OF prices
must be caused by forces. like changing costs
working on the production side. or on the
goods side OF the p:ce ratio.
Another source Of error must be Kept under
watch rrice is Expressed In the standard
money: hut when talking nbout the quantity
Of money that cffected prices thare is no uni
form thinking Should the quantity OF money
That is, in this country gold. although the
standard. IL seldom used as medium Of
change. The tact is that price king be-
tween goods and gold goes FIRST; and after
prices fixed medium Of exchange s later
devised for the enact prices previously agreed
upon
For instance an Iowa farmer when selling
his wheat to an elevator then and there agrees
on the price The buyer then ships il TO Chi
cago. drawing bill "a Chicago purchaser
This bill OF exchange. accompanied with n bill
of ladinB 10 show tho transaction la n verit-
nblo one is discounted q bank. That is,
the value OF the carload Of wheat Is coined
at the bank into credit OF payment.
by deposit account which can he drawn on
by CHECKS But note this important fact: the
figures In this bill OF exchange. this form of
credit. were obtained by multiplying tho num-
Der of bushels purchased by the price per
bushel In short. tho price was aet before tho
bill was drawn. The credit operation had
nothing to do with fixing the price. Hence
/: is not correct to say. theoretically, that the
quantity OF money and the amounts OF credit
FIX the level of prices. Devices chosen rs
media OF exchange. whether hills OF exchange
o. checks or bnnk notes. may rise or fall In
amount without In Themselves affecting either
the gold or tho goods in the price ratio
An SooE rs we grasp the simple principles
regulating prices OF which the chief have
been presented above. We are better prepared
10 pass judgment the YeHcd problems In
vOlvcd in prices and high cost or living which
all of us have to face today Some OF tho
schrmes pronosed to lower the high cost OF
living through lowering prices pay little Mt
tcntion to the forces working on tho goods
side of the price ratio to gold. II In assumed
that prices kept high because much gold
haa como to this country. because OF our In
vorhhc balance OF trade, because OF an In
nation of credit. In truth. the main causes OF
high prices arc at work tho costs OF pro-
duction Of goods land not gold or credit.
Such conclusion Is st once apparent to tho
business man who deals with factory costs.
lie knows Only too wcll that increasing costs
tand consequently higher prices) have been
due to higher wages paid for the same-or, In