-a result which he said was very good, and which, no doubt, is so, if (which we do not now deny) the extraordinary expenditure is good and proper.

This loss on exchange arises, as the report of Mr. Goschen's Committee showed, in two ways; first, from the depreciation of silver; and next, from the increase of the Council drafts-of what may be called the tribute from India. As to the first, Lord George explained very clearly that the Government had no intention of touching now any of the remedies which have been proposed-either the suspension of silver coinage, or the introduction of a gold one, or an adjustment of the land revenue. And he assigned what seem to us to be excellent reasons for so doing, which we need not, however, give at length, as we have at various times placed them before our readers. He said, too, what is well known, but what it is nevertheless desirable to have confirmed by official authority, that the natural remedies were operating, that the price of Indian commodities measured in silver had not risen, and that in consequence a great encouragement had been given to the exports from India, which would cause a demand for silver here, and would relieve the market. And we may now expect that this process will go on more rapidly than before. One great cause of hesitation has been the fear that Government might "do something," something that might be anything, and which would derange the usual course of business. But now that the wise policy of the Government has been announced, there will no longer be any such fear of disturbance.

Mr. Goschen added on this point the weight of his authority -especially great, as having recently elaborately investigated the whole subject, as chairman of the late committee-to that of the Government. He showed at length that none of the plans which had been proposed were at present at all fit for adoption. And he said especially that he had seen statistics which seemed to show that prices had not risen in India, which all other information confirms. And even without statistics, common-sense would show that such is likely to have been the case. A great rise in the price of all commodities through a country using a metallic currency only requires a great increase in that currency

to carry it on. But no such amounts of silver have gone to India, or anything like them, as the following figures show :

And therefore silver prices cannot have risen, for there has been no silver to raise them with. The indisposition to admit this arises from not understanding the distinction between the depreciation of silver, which we elsewhere explain,1 as against gold in a market where it is not a money, and its depreciation as against commodities in a market where it is a money. When this distinction is clearly seen there is no longer any difficulty in this part of the subject.

As to the second element in the loss by exchange-the "tribute," as it may be called-the Government stand in a very different position. They are bound to do something here, for they have to bring home their money from India. But they are not bound to bring it home except in the way in which they lose the least-or rather, they are bound to bring it home in that way. There could be no objection at times to their lending money in India and borrowing it at home at the same moment, if the time did not appear favourable for bringing it home. And they can choose any mode of remittance they think best; it is merely a matter of business, like the remittance of any other money. And this Lord George Hamilton very well explained. Of course, however, the finance policy of the Government should be calculable, and the amounts for which it is going to draw on India should be made known some time in advance, as otherwise they will make business uncertain, and so diminish it.

1 See Chapter X.

X.

THE DIFFERENT EFFECT ON TRADE OF A CHEAPENING OF THE PRECIOUS METALS, AND OF A DEPRECIATION OF INCONVERTIBLE PAPER.

We showed last week that neither the depreciation of an inconvertible paper, nor the appreciation of an artificially limited coin, produces as a rule any effect on trade. What an English exporter to America gains on the one hand, in the additional price for his goods, consequent on the depreciation of greenbacks, he loses on the other, by the additional price which he has to pay for gold, or a bill payable in gold, which he requires to bring that price to England. Greenbacks are of no use here, and their depreciation upon an average, though by no means always in every particular case, affects the prices equally of all things. It is a local depreciation, beginning in a particular country, affecting alike all the property and products of that country, but affecting nothing out of it.

But it is necessary to distinguish this most carefully from a depreciation of the precious metals caused by a large new supply. That new supply is a new exportable product, sent from the country of its origin through the world, and thus affects more or less, in proportion to its magnitude, the world's trade.

Suppose, for simplicity, that silver were the only precious metal in the world-that all nations used it as money, and that none of them used gold in that way at all-the process of depreciation by such new supplies as are expected from Nevada would be this prices in Nevada and in the rest of the United States would rise; in consequence, imports into the United States would tend to increase, exports from them would tend to decrease, and so an unfavourable "balance of trade," as the phrase is, being created, silver would be exported; it would be the best way in which America could pay for her imports, and she would so pay for them. On the other hand, the country from which those imports came-suppose it was India-would receive that silver, and in proportion as it received more and more, its prices would be more and more raised. What happened, in consequence of the new silver, in the country of its origin, will again

happen in the country of its first receipt. Imports into that country will be stimulated, exports from it checked, an unfavourable balance of trade created, and silver will be sent to the countries which it has to pay. Then, in their turn, these countries-the countries of second receipt, as we may call themwill undergo all the same changes. The depreciation of a depreciated paper is a stationary depreciation, fixed in the country which makes the paper; but that of a precious metal is a travelling depreciation, which passes slowly over the civilised world, altering trade everywhere, creating a new article of export, first from one country and then another, and in consequence, generating a new trade of export to pay for it in the country which receives it.

The modus operandi of this process is much affected in the usual state of the world by there being two precious metals used as money-gold and silver-and also by gold being in many ways the principal of the two; but though the detail is changed, the principle is the same. In a country which uses gold only as a standard currency, silver is a commodity having its price only in gold, just as silk or cotton; that price goes up and down in the same way, and is quoted in the same way. And London is the principal centre of the wholesale commerce, and especially of the new wholesale commerce, of the world. We buy more readily than any other nation, for we have much more money than any other of equal enterprise; and, therefore, all great business requiring new capital on a sudden comes here. Accordingly the new silver for the most part goes not straight to India and the East, where it is a money, but to England, where it is a common article, and we send it over the world and to the nations where it is a money. But this is only a change in the route of the depreciation. It interposes a sort of house of call, it does not change the essence of the matter.

No doubt the first effect has been to advertise and make far more obvious than it would otherwise have been the depreciation of silver. If silver had been our money, as gold is, we should scarcely have been as yet conscious of its being depreciated. A few millions more silver (from Germany or elsewhere) would have gone into the Bank, would have eased the money

market, and have tended to raise prices. And we should have had to pay for that silver, just as we pay for the gold which does come. But this process would have been very gradual-probably, as yet, nearly unfelt. The ready demand for silver as a currency in England would have much maintained its value here. You could not have depreciated it much without increasing its quantity-both the quantity in the Bank and the quantity in out-of-door circulation-very largely. But as silver is not a money (except as a token), not a money regulating prices, not a money which more and more is wanted as the value falls more and more, there has been no new English demand of equal or comparable size. Some more silver may, in consequence of the cheapness, have been taken for the arts, but this is all. The actual supply from Germany and the apprehended supply from America have come to a market which other circumstances have made bare of demand. They generated no new demand, and in consequence there is a great fall in the value of silver in England. The travelling depreciation has come here, and has been intensified, as has been shown.

This sudden fall in the value of silver in England has caused a corresponding alteration in the exchange with the countries whose money is silver. As is well known, between two countries which use the same metal for money, there is a natural and fixed par of exchange. A certain weight of that metal of a certain fineness, in the currency of one of these countries, will always exchange for an equal weight of like quality in the currency of the other. But between two countries, one which employs gold and the other silver, there is no such natural par. The relation between the two currencies depends on the amount of the one metal which will exchange for a given amount of the other. When, as now, that amount much varies in England, there is an immediate change in the relation of the English gold currency to foreign silver currencies, because the amount of gold which it would take here to buy any given amount of silver, to export it and coin it into those silver currencies, varies.

And this is the process by which the depreciation travels on another step. Silver being cheaper here, more of it will be bought and sent to the countries where silver is money. But