say that the value of the currency was, during this period, maintained above its natural cost level. This severance of value from cost was indeed in Australia of brief continuance, because, the local circulation being small, it required but a short time to double; quadruple, or otherwise augment it as the occasion might render necessary. But throughout the world at large, the process of augmentation, owing to the vast dimensions of its currencies, is one necessarily of slow accomplishment, and, pending its fulfilment, the value of gold is of necessity maintained above the level prescribed by its cost. It is this which at present sustains the value of gold in the general markets of commerce, notwithstanding the cheapening of its production effected by the gold discoveries. Whether that value will ever be lowered in the same proportion, whether gold will ever fall throughout the world at large as it has fallen in Australia and California, depends upon whether the conditions which have lowered its value in them can be generally satisfied— that is to say, depends upon whether the increased supply which such a fall would render necessary can be obtained at the present cost. Into the further discussion of this question I do not now enter,* the object of this paper being to point out the principal issues which the general problem involves, not to attempt their solution. But from the facts which have been stated, we are justified in concluding that, so long as the present want of conformity between the cost and the value of gold continues, so long a constant premium will exist * The reader will find some remarks on this aspect of the question in the Fourth Essay, post, p. 109 et seq. on its production, and so long our supply of gold will continue to increase. But, secondly, let us consider what light our conclusions respecting the gold countries throw upon a question which has been much discussed,-I mean the effect of this movement on the real wealth, the substantial well-being, of the world. That the gold discoveries have added to the real wealth of the inhabitants of Australia and California is indeed exceedingly apparent; but what has been their effect upon the interests of other nations? Has the cheapness of Australian or Californian gold added equally to the effectiveness of their industry, and extended their command over the comforts and enjoyments of life? The answer of some writers to this question has been very strongly in the affirmative; but, with the light derived from the previous discussion, we may perhaps see grounds for arriving at a different conclusion. We have seen that the gain of Australia and California from their gold-fields is confined to that portion of their trade which they carry on with foreign countries; that it is only in so far as they part with their gold that they derive from it any benefit. Now the world, as a whole, has no foreign trade; it has no means of exchanging for the productions of other planets the gold which it produces; from which it seems to follow that, regarded as a single community, the world is incapable of realizing those conditions on which the benefit to be derived from cheap money depends. The conclusion to which this consideration points is, that the operation of the new gold will be confined to causing a new distribution of real wealth in the world without affecting its aggregate amount; and that, consequently, the gain of the gold countries must be reaped at the expense of other nations. This conclusion is no doubt much at variance with prevailing notions, and with the deep-seated prejudices of the "mercantile system;" and will not, therefore, be easily admitted. Nevertheless, if we reflect on the character of the commerce which has arisen out of these discoveries, we may see reason for accepting its truth. The trade between the gold countries and the rest of the world is one in which consumable commodities on one side are exchanged against money, or the materials of money, on the other. A large portion of the industry of the world is, through the medium of this trade, employed in ministering to the real wants -the appetites, tastes, and other human needs-of Australia and California. Let us inquire what is the want to which these countries minister in return. It will be said to the want of more gold-the want of an enlarged circulating medium. True; but what is the foundation of this want? and in what way does its satisfaction promote human happiness? Human industry is not rendered more efficient, nor human happiness more full, by the use of two coins instead of one. Why, therefore, may not the business of production and exchange be carried on upon the former terms? I apprehend that the correct answer to this question is that gold-the great medium of exchange and universal equivalent-having been cheapened in Australia and California, these countries of necessity possess an exceptional advantage in their commercial dealings with the rest of the world, until the gold prices of commodities in other countries are proportionally raised, and that to effect this object-to raise the prices of their productions in proportion to the diminished cost of gold-the quantity of their gold circulation must be increased. The nations of the world have thus by the gold discoveries been placed under the necessity of enlarging their currencies; and this can only be accomplished by parting with their productions in exchange for the required supply. Hence the character of the traffic which we are now witnessing,-a traffic in which consumable goods are exchanged for money, and real for nominal wealth. It is therefore no natural want to which this one-sided trade is subservient, no desire, the satisfaction of which adds an iota to human enjoyment it is merely an artificial requirement, a disagreeable and unprofitable necessity, originating in the gold discoveries, and satisfied at the expense of commercial nations. I am aware indeed that there are writers who regard gold not simply as a convenient medium for the exchange of commodities independently produced, but as in itself a source of productive energy, as "the motive power of all industry and commerce," and who accordingly consider "an addition to the quantity of money to be the same thing as an addition to the fixed capital of a country"†—as equivalent in its effects upon industry to "improved harbours, roads, and manufactories." According to such views the influence of the gold discoveries must be universally * Seyd's "California and its Resources," p. 5. Ibid. beneficial,-beneficial, not merely in relation to the countries which produce the cheap money, but in a still more eminent degree in relation to those which permanently retain it. But in spite of the plausibilities of the mercantile theory, common sense, no less than economic science, will continue to ask how the world is enriched by parting with its real wealth ?-how the well-being of Europe and Asia is promoted by parting with the materials of well-being, receiving in return not materials of well-being, not augmented supplies of wool and tallow, corn and provisions, not those commodities which new countries are specially fitted to produce, and of which old countries are pressingly in need, but what?—increased supplies of the precious metals, a more cumbrous medium of exchange! So singular and abnormal indeed has been the course of industrial affairs hitherto in the gold countries, so strange has been the spectacle of a country abounding in resources which she dares not touch, and drawing from other countries commodities which she is specially fitted to produce,-that it has not failed to attract the attention of thoughtful observers, and to suggest the pertinent inquiry, how long is this state of things to continue? Is the development of the great and varied resources of Australia and California to be perpetually subordinated, if not indefinitely postponed, to the single pursuit of gold-mining? Are the other nations of the world destined to continue for ever labouring in the service of the gold countries, for no other than the barren reward of an addition to their circulation? These questions have been frequently put, but I am not aware that they have as yet been satis |