Wednesday, August 31, 2016

Money and Money's Worth

As a general rule, the great bulk of the community regard the threats of scientific men with considerable equanimity. We are not much troubled at hearing of the approaching exhaustion of beds of coal, or of the fearful consequences which may be expected to follow if we neglect to restore to the soil the phosphates which we have taken from it. Even Admiral Fitzroy and his drums have not succeeded in frightening the general public as much as would perhaps be desirable, and the doleful lamentations of the currency doctors, who declare that after so many more years of convertible paper England must be destroyed, have a scarcely perceptible effect on the unscientific part of mankind. Sometimes, however, a scientific doctrine is put so clearly, and rests upon facts of which the evidence is so readily accessible to unscientific persons, that it breaks through our equanimity, and raises a real feeling of uneasiness more or less deep and lasting amongst that section of mankind whose interests would be affected by the truth of the doctrines put forward. The practical effect which we were all led to expect from the great gold discoveries was a case of this kind. What had happened was patent to all the world, and the dullest and most ignorant could hardly fail to see how it would affect his interests. A vast quantity of gold was found in California and Australia, which of course poured into every part of the world by the ordinary channels of commerce, and would thus, it was argued, in a short time produce the effect of diminishing proportionally the value of all fixed incomes; so that though it would be easier in future to get ten sovereigns, yet when got they would buy no more than as many sovereigns as could formerly have been got by the same amount of labour—nine for instance, or even seven, or possibly five.

The theory was simplicity itself, the fact upon which it was based perfectly simple and well-authenticated; and the inferences appeared to follow in an unimpeachable manner. Notwithstanding this, time went on, and things remained much as they were. No violent change in prices— such as is said to have followed the original discovery of America appeared, at least in this country, and by degrees the public began to forget its fears and to settle down into the comfortable belief which appears to be the natural consolation of all languid minds—the belief, namely, that theory and practice are very different things, and that though political economists might be very right from their own point of view in asserting that gold would lose its value, those domestic economists whose philosophy is derived principally from household accounts and the rule of thumb, were quite right in thinking that sovereigns were still sovereigns, and that the gold of Australia and California had left their charms substantially unaltered.

No doubt, in a rough sort of way, this was true enough; but strange as such a frame of mind may appear to their neighbours, there are some people in the world to whom contrasts between theory and practice appear not only false but grievous. To a man who has an adequate notion of the value of truth, it is positively painful, and that in no common degree, to believe that no such thing as solid knowledge is accessible upon any subject, and that the most careful conclusions of the most accurate reasoners are less true and substantial than the observations of people who have never taken the trouble either to inform their minds or to exercise their understandings. To such persons the general theory as to the value of gold, which is the fundamental theory of political economy, appears to be far better vouched than any of the mere rule of thumb conclusions of domestic economists can possibly be; from whence it would follow that if the facts asserted to exist by the domestic economists are accurately stated, there must be some other circumstances in the law by which the truth of the general theory can be reconciled with the particular state of facts apparently at variance with it. This suggests an inquiry which, if not so important as those which occupy political economists, may have the minor merit of being a little less dull to the world at large. This inquiry is, whether there is anything in the habits of life and other circumstances of the great bulk of the people of this country which would prevent us from being affected as much as might have been expected by a fall in the value of gold, and might thus lead us to doubt the fact that such a change has actually taken place. Our belief is that not only do such circumstances exist, but they operate so forcibly that the common argument from experience against the fall in the value of gold is as unsatisfactory as would be the evidence of a man who, after taking violent exercise in the open air for some hours, attempted to prove, by appealing to his own sensations, that the thermometer had not fallen since he left his house.

If gold were to fall in value, the effect, of course, would be that each individual sovereign would purchase less after than before the fall, and this would of course diminish the means of every person who had a fixed income. A thousand a year in the funds would buy less food, less clothing, a less comfortable house, &c., than it otherwise would have bought. Let us try to get a rough notion of the sort of effect which this would practically produce in a nation like ours, assuming, as it is obviously proper to assume, that the change came on gradually, and was spread over a considerable time. What manner of people, then, are we who live in this island? Taken as a body, we are immensely rich. We are, as far as accumulations go, the richest nation in the world. If a valuation were made of all the property in the United Kingdom it would probably exceed in amount a similar valuation for the United States. In respect of undeveloped wealth, such as waste lands, and unworked mines the comparison would, no doubt, be the other way; but taken as it stands, our own is unquestionably the richest community in the world. This enormous wealth is, as we all know, very unequally distributed, but the effect of its existence upon every class of the population, even on those who have no other property than their daily labour, is most remarkable; and in nothing is it so remarkable as in our domestic economy. There are, as we all know, two ways of getting rich—getting and saving. The process of getting needs little illustration. It means earning a large income, or making great profits. Saving means the gift of getting the utmost possible amount of use out of every kind of property, and reducing our wants to the smallest possible compass. The art and mystery of it is admirably embodied in such proverbs as are to be found in Poor Richard—a pin a day is a groat a year; a penny saved is a penny got; borrow of your back and belly, for they will never dun you. To get more is the natural resource of rich nations, to save is the expedient of poor ones. It is a self-evident, but not the less an important truth, that very little of our wealth has been saved. Almost all of it has been got by inventions, by lucky speculations, by understanding how to promote and carry on trade. "We have never been a thrifty nation inured to hardship, and thriving by little and little in spite of it, like the Scotch or the French peasantry. We have always played at the gold table, and, like successful people in general, have spent our money as freely as we got it. It is not very profitable to discuss the good and bad side of this way of living, but it has one result which has a great deal to do with the influx of gold. It accustoms all classes of the population to attach less value to money in the proper sense of the word—that is, to gold and silver coin and convertible bank-notes—than is usual in most other parts of the world. It is always hazardous to guess, but there is some ground for the conjecture that in no nation, except, perhaps, the United States, is the practice of hoarding less common than with us. One of the historians (not Mr. Carlyle) of Frederick William of Prussia, the father of Frederick the Great, records that he justified his practice of creating and selling offices by the reflection that there was no other way of getting at the hoards of poor people. Every prosperous peasant, he said, had somewhere or other an old pot, or stocking, with a certain number of thalers in it, painfully collected one by one through a long course of years. "Various authorities, of whom Balzac the novelist, if not the most trustworthy, is far the most picturesque, assert that the same state of things used till very lately to exist all over France. One of the loans raised some years ago for the Crimean war was so contrived as to favour the investment of such hoards, and it is said that the parts of it taken in Brittany (it was allotted in very small sums) were paid for in curious old louis dor and double crowns, older than the Revolution, and worth respectively twenty-four and six of the livres which were the equivalent of the modern ubiquitous franc. They were worn and black with the tarnish of more than one generation, and came out of obscure hiding-places where they had probably eluded the researches of the Chouans, and had, perhaps, enabled their owners to support heroically the tortures inflicted by the chauffeurs.

This for years and years has never been the practice of English people. Every Englishman invests his money in some way or other. If he opens an account with a savings' bank, it is for a purpose—to buy furniture, or start in some small business. In many cases he joins a land society, and by degrees buys himself a house of his own, and half an acre of land. In some large towns he takes shares in a co-operative store, and so becomes, to the extent of his savings, an independent trader. This habit makes those who practise it completely independent of changes in the value of gold, for such changes would never affect the value of fixed property like houses and land, or the profits of trade, in which the labouring classes invest their savings, or the wages of labour, from which they derive the power of saving. These habits not only make the classes which practise them independent of fluctuations in the value of the precious metals, but exercise a considerable influence over the habits of the richer part of the community who live on fixed incomes. At first sight it might appear that there is in this country an enormous mass of persons whom nobody would wish to hurt, and whose whole comfort and position in life would be terribly altered for the worse if any considerable fall were to take place in the value of that which is the measure of their income. The National Debt consists of annuities worth in all something like £28,000,000 a year. If gold fell 15 per cent. in value, this would be equivalent to an income-tax of 15 per cent. on so much of every one's income as is derived from the funds. The same would be true of the interest of all money lent upon mortgage, whether in the common shape of an ordinary mortgage of land with power of sale, or in the shape, which in the present day is so common and popular, of railroad debentures and some sorts of preference shares. To the same extent would fall the incomes of all Government officials and clerks paid by salaries, unless the salaries were raised, and also all incomes dependent on what may be called conventional payments—payments, that is, like the physician's guinea—which are regulated not by competition between man and man, but by a tacit agreement between society at large and the particular class which receives the payment. Another immense class to which the same remark applies are persons whose property is affected by marriage settlements. In addition to the other benefits which those ingenious instruments secure to mankind, one of the commonest is, that they generally assume that the value of gold will never change, as they generally restrict the investment of the trust funds to the purchase of land, Government securities, and mortgage in one or the other of its forms; that is, they provide, except in the case of investment in land, that as many sovereigns as are brought into settlement shall in due time be brought out of it again. It may be said that, whatever the case may be with traders on the one hand, and the labouring poor on the other, persons of this description at all events must be reduced, not perhaps to absolute poverty, but to considerable discomfort, by the gold discoveries. That they will lose by them there can be no sort of doubt; that they have already lost by them considerably is probably true. It can hardly be doubted that Professor Cairnes was right when he maintained, in opposition to leading articles on the subject in The Times, that a sovereign in 1863 was by no means so good a thing as it was in 1853. The fact usually lost sight of is, that these classes share as much as any others, perhaps more than any others (though in a more roundabout way), in the general prosperity of the country, and that therefore the loss to which they have to submit, though no doubt a real one, is one which they are well able to bear, and of which—unless they go into elaborate calculations, and take more trouble to make themselves unhappy than would be sufficient to console them for their losses—they might hardly be positively or distinctly conscious.

To understand how this comes about, it will be necessary, in the first place, to say a little of some of the habits, circumstances, and resources of the class in question. Speaking roughly, they may be classed under three principal heads—namely, annuitants, professional men, and men in the receipt of salaries. The case of annuitants, that is, of persons who live upon the interest of money invested in the funds, on mortgage, or otherwise, in such a manner as to yield a fixed unelastic income, is no doubt the hardest; but let us consider who are the members of this class, and what are their remedies. The cases in which such incomes are very large are probably few, and where they do exist, it would seem that no particular sympathy was due to the persons concerned. To invest a large sum of money in the funds or on mortgage, and simply to live on the proceeds without taking any share in any active pursuit of life, cannot be considered as a scheme of life, giving those who follow it any considerable claim on the sympathies of the rest of the world, if it should appear that the couch, on which they had chosen to recline, turned out a little less luxurious than they had expected it to be. The case of a rich man living up to his income, and finding as years went on that it did not afford him so much enjoyment as at first, must be very uncommon. Annuitants are, generally speaking, quite a different sort of people. They are widows, or unmarried ladies, or men who have retired from active s life. Except exceptions, there are probably few families which are dependent on annuities, unless they are the families of widows.

Whatever may be the numbers of the class of annuitants, and whatever their claims upon the sympathy of the public, it is certain that as gold falls in value, their income will purchase less and less; but let us see whether there are not considerable alleviations provided by the present state of things for this misfortune—whether the general increase of national prosperity does not increase their resources in one direction, as quickly as the fall in the value of gold diminishes them in another?

In the first place, the gold discoveries themselves cut two ways. They not only diminish the value of gold, but they diminish the value of other things as well, by the encouragement which they give to trade. The wealth and population of Australia, California, and British Columbia have increased enormously since, and by reason of, the discovery of gold. The fact that there is abundance of gold there has enabled the Australians to buy ships, and build houses, and breed cattle, and do an infinite variety of other things for which, in the absence of gold, they must long have waited. This comes home to every family in the kingdom. The great difficulty of families with fixed incomes is to provide for the children; but thousands upon thousands of young men have found employment, and have married the same number of young women, upon the strength of the gold which imperceptibly diminished the purchasing power of their family income. A widow with a family of children may have been unpleasantly conscious that, do what she would, the butcher, and the baker, and the tailor seemed to increase and multiply against her; but if one of her sons got employment at Victoria, and sent out for two of her daughters, who got prosperously married there, she would be a gainer on the whole by the gold discoveries. Even in the case of an unmarried woman earning nothing, and having no one dependent upon her, the gold would not be a mere enemy. She would, indeed, get the usual sum from the funds, and that usual sum would not go so far in weekly bills as formerly; but, on the other hand, the gradual growth of the wealth of the nation produces not merely abundance of gold, but abundance of goods. Duties are removed, and the articles on which they were laid become cheaper, manufactures are improved, and manufactured goods fall in price. To some extent this is the effect of the gold discoveries. To a greater extent it is accidentally contemporaneous with them ; but whether there is or is not a connection between the two things, the practical result is that the diminution of income does not, under all the circumstances of the case, mean diminution of comfort. As the pious Sterne beautifully observes, " The wind is tempered to the shorn lamb."

The case of annuitants is the strongest and plainest. The members of professions are in a far more favourable position. It is no doubt true that the payment of professional men is often regulated by custom rather than competition. The doctor's guinea was well known long before modern gold discoveries, and it is difficult to believe that it will ever be much altered. There are, however, ways and means, as all professional men know, of evading this. The lawyer's fee is supposed (at least in many cases) to be as unelastic as the doctor's; but this is not really the case. Briefs are "marked," as the phrase is, on a very different scale in different cases. When the barristers who practise before parliamentary committees said, by their conduct, "If we are to give up the highest prospects of our profession, you must enable us to make fortunes in a reasonable time"—an observation, by the way, which they were well justified in making—they raised their prices, not by direct chancering about the amount of their fees, but by making the discovery that it was necessary that they should have a consultation every day in every case, and that for that consultation they should always get five guineas. It may not be quite so easy for a doctor to add to his guineas; but with a little management the thing may be done. A physician must be very dull if he does not find ways and means of informing you when you have had your guinea's worth of advice, and when another dose at the same price would be advisable. Many physicians, especially in the country, refuse their fee every alternate visit. Should gold fall much in price, they would be less modest; and for the credit of the profession, to which we all owe so much, it ought to be said that most physicians have a considerable margin of voluntary services for which many of their patients would be too happy to pay if the guinea sank to fifteen shillings. The truth about all payments by fees is that they differ from other wages of labour only in form. They are contrivances by which men of such a position in life as to be averse to the details of a bargain are enabled to avoid the unpleasantness of abating the price of their services, whenever they are rendered; but in fact they are regulated, like other services, by supply and demand, though in rather a roundabout way, and thus those who live on them are not really more dependent than their neighbours on the price of gold.

With regard to professional men it must be remembered that there is no body of people in the country whose interests are more affected by the general state of the nation. The physician, the barrister, the attorney, the author, the artist, every one, in short, who lives on the work of his brain, thrives upon good times as much as the navvy or the labourer. It ia the rich patient who sends for the doctor, and though prosperity is usually healthy, it is much more watchful over its health, and much better able to pay for fortifications of it, than poverty. Dives has not so many sores as Lazarus, but he is an infinitely better customer to the physician. So of lawyers. Plenty of money means plenty of buying and selling, plenty of joint-stock companies, plenty of marriages, and, therefore, plenty of contracts, plenty of letters to write, plenty of deeds to draw, and plenty of briefs to deliver, and good fees on their backs. It is when Jeshurun waxes fat that he is apt to kick, and very satisfactory it is for his legal adviser to see him do so. As for authors and artists, national prosperity means speculation in books and newspapers, reviews, magazines; it means the furnishing of houses, the cultivation of taste, the giving of commissions, and the ordering of portraits. A man who has got wits to live upon will not grudge a certain rise in his weekly bills if he finds that with it conies an increasing demand for his intellectual wares, whatever may be their special character. Think what a godsend it must have been to military men when the British public began to spend the revenues of minor Powers in making iron-plates and rifled-cannon knock their heads together, and you get some notion of the way in which people with fixed incomes profit by anything which makes the nation live on a larger scale, and spend its money more quickly than it used.

The case of salaries is simpler than that of professional earnings, though hardly so favourable to the persons concerned. In the case of salaries paid by private persons, there is comparatively little difficulty because they are directly affected by competition. A good clerk, or an active secretary, has a market value; and if he finds his expenses increasing against him, he can get better terms from his employers by the tacit threat of going elsewhere. This is not the case, or at all events it is not the case to anything like the same extent, with salaries paid by the Government; and perhaps there is no class of persons to whom the consequences of a fall in the value of gold, would be so serious as to persons in Government employ. They are almost always at the mercy of their employer. Dismissal from a Government office is, in almost every case, something very like ruin to the person dismissed; at all events, it is equivalent to depriving him of all that part of his income which he earns. The knowledge and sometimes the habits acquired in Government employment are of very little intrinsic value. Outside the walls of the particular office where they were gained, they would sell, generally speaking, for very little. Hence officials in all degrees must practically submit to their superiors. They are at a greater disadvantage than any other class of men. They are not only helpless as against their superiors, but they are also placed under other conditions which expose them in a very helpless way to fluctuations in the value of gold. They are not paid by those who appoint and can discharge them, and this is a very disadvantageous state of things. In the common case master and servant bargain together. The servant can appeal to his master's sense of his own interests, or to his generosity, and the master feels that he personally has to choose whether he will lose a useful servant or pay him higher wages. No man can bargain with the public. The head of a department has power to appoint or to discharge, but he has absolutely nothing whatever to do with the amount of the salaries of the members of his office. That is generally a matter proximately for that curious abstraction called the Treasury, ultimately and substantially for the House of Commons, and a more hopeless task can hardly be imagined than that of trying to drive a bargain with such bodies as these.

Apart from this the salary of Government officers is only a part of their pay, and often not the most important part. In some cases, for instance in the case of officers in the army, it is a secondary inducement to take service. In all the attractions of a quiet life, social position, and perfect security, on condition of reasonably inoffensive conduct, are important parts of the consideration paid by the Government. The effect of this is, that if the public like to drive a hard bargain they can; they even make existing office-holders uncomfortable and get an inferior set of men in future. That they will feel inclined to do so when they get the chance, is highly probable. It should never be forgotten that at the time of the Mutiny of the Nore it appeared that the pay of the sailors had never been raised, though the value of money had altered about 50 per cent. since the standard of it was fixed.

On the other hand it must be said, with regard to Government clerks, that there are few classes of men to whom the general prosperity of the country brings a larger number of indirect compensations for diminutions in their incomes. The great difficulties of all people with fixed incomes is to get their children settled in life. If they manage that, they can for the most part cut their own personal coats to their cloth. Now the general prosperity of the country has everything to do with opportunities of providing for children, and at least as much, possibly more, in the case of Government clerks than in that of other classes. The Government expenditure in salaries must have increased largely in the last ten or fifteen years. The gold colonies themselves have Government establishments of their own, new offices have been set up in England, or old ones extended, and the demand for educated labour in every department of life has increased beyond all calculation. These things enable a man, even if his income is somewhat diminished, to get his sons off his hands far more easily than he could have done thirty or even twenty years ago.

It follows from these illustrations, that though it is no doubt true that the gold discoveries must in course of time reduce, and, indeed, have already reduced, the value of all fixed incomes; the state of society in which we live is such that, even in the case of those classes which might be expected to suffer most severely from the change, circumstances have broken the fall so much that it is scarcely perceptible. What they have lost in one direction they have gained in others, and as they have all undergone the same change, and all at the same rate, both their loss and their gain have been much less striking than at first sight they might have been expected to be. Probably a fair and cheerful person of any one of these classes—a widow, say, living on a small funded income—would say something of this sort: "I think, on the whole, things are rather dearer than they were. Butchers and bakers charge more, and I find clothes expensive, but I have been fortunate on the whole, and ought not to complain. Two of my sons have got provided for. One is in the merchant navy, and another is doing well in Queensland. They help me with their younger brothers, and two of my daughters are married, so that I do pretty well on the whole." The connection between the rise in the butcher's bills and the establishment in life of the children would not be the less real because it is not at first sight apparent. The truth is that the amount of a person's income is only one element towards determining that part of their comfort which depends upon being in easy circumstances. We are all dependent to a much greater degree than we are apt to remember on the general condition of the society to which we belong, and we share in its prosperity as well as in its adversity, though the one truth is much more easily forgotten than the other. Professor Cairnes and other learned men tell us, and probably with truth, that prices have risen so much that a large percentage has come off every fixed income in the last fifteen years; but it would be a great injustice to them to suppose that they meant by this, that a similar percentage of all the pleasures that money can buy had in the same period been taken off the comforts of every family supported by a fixed income. Some prices have actually risen, others have only been prevented from falling, and in so far as this has been the case, the loss of people with fixed incomes has been, so to speak, nominal. They would no doubt have been richer if the world at large had been equally prosperous and busy, and if gold had remained where it was; but if gold had remained where it was, would the world have been equally prosperous and busy? Nothing less striking to the imagination than the prospects opened by the gold discoveries would have induced so many thousands of reasonably comfortable people to transport themselves to the ends of the earth. When they were there they had to work or starve, and not liking to starve, they made efforts in a thousand ways which they would not otherwise have made, and so increased not merely the world's supply of gold, but its supplies of copper, lead, beef, mutton, wool, timber, and all manner of other things. This of course produced a fall in prices corresponding to the rise produced by the gold, and thus the discovery worked round and round in a manner which renders it very difficult to strike the balance of the actual effects produced.

To this direct and tangible effect must be added another, which is not the less important because it cannot be expressed in figures. The world at large rather unjustly view political economists as an iron-hearted race, believing in nothing except statistics, and a set of iron-hearted calculations founded upon them; a charge founded on the fact that they are addicted to what many people consider the bad and even wicked habit of thinking and speaking about one thing at a time, and so arriving at definite results. This leads them to overlook the fact that things of the most indefinite, and so to speak, not practical nature, have a money value; of their own, and often a very high one. This is especially true of everything which rouses the imagination and intellect of the country. If some fine morning a casual traveller in Windsor Park had found a foot or two under the surface a huge lump of pure gold as big as the model exhibited a year and a half ago in the Exhibition, and if nothing more had been required to make it into sovereigns than a force of the A division of police to keep the ground, a certain number of men with axes and wedges to cut it up into lumps, and a sufficient quantity of waggons and horses to carry it to the mint to be coined, the effect would have been very much what would have followed from a realization of Hume's supposition of every man in England finding some morning that he had five guineas in his breeches pocket. It was quite another thing when the discovery was made under such circumstances, that in order to turn it to account all manner of difficulties had to be encountered, all sorts of romantic dangers and adventures to be undergone, all sorts of outlandish regions visited at the expense of every sort of vicissitude. The effect of this was to stimulate the national love of adventure and excitement, to familiarize the comfortable classes with the notion of running considerable risks for the sake of improving their positions, and generally to wake people up, and so increase their wish to be rich, and the efforts which they were willing to make for the purpose. To whatever extent the gold discoveries operated in this direction, they operated to lower prices in general, and to increase the degree of comfort which was to be had at a given price.

How far the gold discoveries have been the cause is, of course, matter of curious speculation, but that the effect has been produced is plain beyond all controversy. We have become a nation of speculators to a degree hardly ever known before. Almost eveiy person in moderately comfortable circumstances is more or less of a trader. He either holds shares in a railway, and so trades as a common carrier, or he has invested part at least of his money in some other scheme, and is a banker, a miner, a hotel-keeper, a baker, a wheelwright, or something else, to the extent of his interest. There are those, no doubt, who turn up their eyes, and sigh over such enormities, but the fact is that since the limited liability companies were authorized, that part of the British public which saves money has gone into business with an ardour which becomes a nation of shopkeepers, and which, by the way, is shared by the French. No doubt many companies are traps, and doleful stories could be told of the ruin of those who have been so unwise as to allow themselves to be overpersuaded into joining them; but it cannot be seriously doubted that, on the whole, they make profits, and those profits are, of course, a clear addition to the wealth of the nation at large, and are altogether irrespective of any fluctuations in the price of gold.

It thus appears that, when viewed not merely in its abstract, but also in its concrete form, it is no easy matter to say what are the effects of the gold discoveries, not on prices alone, but on the comforts of that part of the community which lives on fixed incomes. It is like calculating the effect of a vehement impulse given to a body already in rapid motion, tinder the influence of a variety of opposing forces. The political economists are perfectly right in saying that if gold becomes plentiful, prices must rise. The domestic economists may be equally right in saying, that be that as it may, we are as well off as we were before gold became so plentiful. Thanks to the conjunction of the sun and moon, and their distance from the earth, the tidal wave at the equator may have been unusually high, but what with the peculiar shape of our own little bay, what with the growth of the shingle beach, what with a strong east wind which has prevailed for some time past, we have not been, and we hope swe shall not be, flooded. This is not a conflict between theory and practice, but a case in which one particular application of a wide general theory is qualified by reference to a number of small particular theories, which are quite as true, and require to be attended to, at least as much as the larger ones, before true practical inferences on the subject can be drawn.

There are some other observations which may serve to comfort those who believe that gold has not fallen in value, and who, fearing that when it does the results will be very dreadful, wish to guard against those results. No doubt it is the part of a wise man to do so, where the precautions to be taken are not very troublesome, inasmuch as there can be no doubt that if a man could protect himself from the foil in the value of gold, he would not only not lose by it, which might be the case with his neighbours, but he might get the advantages which would accrue to him from the rising prosperity of the nation into the bargain. These precautions are not in general very troublesome, at least to those who have the management of their own funds. There are some unfailing maxims about investments, of which the first and great one is that nobody gets anything for nothing. This occupies exactly the same place in regard to laying out money as the maxim that you cannot cheat nature holds in mechanics. High interest means bad security, just as low interest means either good security or some collateral advantage. If you buy a large estate you will rarely get three per cent. for your money; you take out the balance in the satisfaction of being a country gentleman. If you get five per cent. you have to pay for it in some shape or other. Either you run a certain risk, or you have to send your money to some outlying place and have a difficulty in getting your interest paid. Money on mortgage and money in the funds may be taken as the types of secure investment. Money in the funds is absolutely safe; the interest is paid with perfect regularity and without the smallest trouble, and the capital, or any part of it, is available at any moment. There is also a scarcely perceptible spice of chance about the amount of the capital. You may gain a little or you may lose a little when you come to realize it. Money ought to be lent on these terms, says the public verdict, at a little more than three per cent. A mortgage with proper care is as safe as the funds, and it is better in one respect; namely, that you are certain to get back the same number of sovereigns as you lend, but on the other hand, the payment is seldom quite regular, the capital cannot be realized in parts, and if called in altogether, six months' notice is required, and trouble may arise about getting it. Taking all this into account, the public has decided that the debtor ought to pay his creditor four per cent. for his money. An ideally perfect security would be one which was absolutely safe, which could be realized in whole or in part at any moment, of which the interest was paid with perfect regularity, and in which the creditor was quite sure to lose nothing when the account was finally closed. From the cases of the funds and mortgages it is obvious that the nearest practicable approach to this ideal security are securities which will pay from three to four per cent. These securities, however, are bargains made in gold. They are contracts to pay so many sovereigns. If the gold rises in value before the completion of the contract, the debtor loses; if it falls, the creditor. The problem then of providing against alterations in the value of gold consists in finding investments which will pay four per cent. and which are not gold bargains. Investments in land are of course the most obvious of them, but unless land is bought in small quantities, and in a purely commercial spirit, it is very difficult to get four per cent. for it. More may be got from houses, but they have to be repaired, and the process of getting the rent, in cases of difficulty, is about as unpleasant as any that can be conceived, to say nothing of the intricacies connected with it. Railway stock (as distinguished from debentures) is independent of the value of gold, as the companies might raise their fares if gold fell; and the same may be said of all trading companies. An intelligent person, searching over Europe, might probably find investments of this kind which would both be safe and pay high interest.' Perhaps when he had done so he would discover that if he had stayed at home and minded his own business, he would have earned with the same amount of time and trouble more than an equivalent for the extra percentage.

It would be out of place to launch upon the wide ocean of inquiry what the question of investments suggests. It is enough to say that no great genius is required to take effectual precautions against the bad effects which a fall in the value of gold may produce on a man's income, the collateral circumstances which do in practice prevent him from feeling the pinch of the change are so numerous, that it is not reasonable to be yery unhappy on the subject.

The whole controversy is deserving of attention, not only on account of its practical interest, but because it affords as good an illustration as will readily be found of the extreme difficulty of applying scientific theories to an actually existing state of facts. Until the apparent contradiction between theory and practice had been fully described and commented upon, it never occurred to any one that the practical inconvenience of the gold discoveries would be diminished by any of the other facts which existed at the same time. One theory after another was put forward as to the reason why gold had not sunk in value, whereas the question ought to have been, why the fact that gold had fallen in value made so little practical difference. Many parallel instances might be mentioned, all of which, if examined, would be found to supply illustrations of the fundamental unsoundness of the common contrast between theory and practice.

Cornhill Magazine, January 1864.

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