THE DEPRECIATION OF CURRENCY AND RISING PRICES.
[To THE EDITOR OF THE "SPECTATOR.'1 Sin,—In your issue of 14th inst. I note a letter from Mr. George Briscoe on " The Depreciation of Gold and Rising Prices." In this letter he very ably shows the effect which the quantity of currency has upon prices generally and upon the price of wheat in particular.
I now wish to draw attention to the fact that your Corre- spondent, in the instances which he has given of the rise of prices through this cause, has bad regard only to the increase of currency through the supply of gold, and that be seems to have disregarded any decrease of the currency which may have taken place through the withdrawal of silver from the currency.
I see that he says that from the large increase in the supply of gold from California and Australia which began in 1850 there was a rise of prices of about 40 per cent. in the decade 1861-70 which was succeeded by a fall of approximately 34 per cent. in the period from 1870-90. He then goes on to say that a new phase was opened up when the discoveries in South Africa, &c., increased the supply of gold about fourfold, and he adds that we may feel surprised that prices have not increased more than 31 per cent., and that the level of prices now reached is still 18 per cent. lower than that prevailing during the period 1861-70.
In these remarks there is nothing said about the withdrawal of silver from the currency—the withdrawal of silver in so far as being legal tender to any amount. Yet it seems to me that this has perhaps had as much to do with the quantity of the currency, and consequent rise or fall of prices, as has the increase in the supply of gold. This I regard as the cause why prices fell after 1870, for shortly after that date Germany declared that silver should no longer be legal tender to any amount, and Germany's action was soon followed by some- what similar action on the part of France and the United States of America. Then, again, after 1890 there were similar changes made in India and also in Japan, so that these countries put in a demand for gold : in this I think that we have a plain explanation why prices have not risen higher with the vast supply of gold from South Africa, &c.—I am, Sir, &c., G. J. FORSYTH GRANT. Edinburgh.
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