of this important proviso.  Gold as currency was so convenient and perfect that its perfection has been improved upon by this ingenious device, which prevented its actually passing from hand to hand as currency, and substituted for it an enormous mass of pieces of paper which were promises to pay it, if ever the holders of the paper chose to exercise their power to demand it.  By this method gold has been enabled to circulate in the form of paper substitutes to an extent which its actual amount would have made altogether impossible if it had had to do its circulation, so to speak, in its own person.  From the application of this great economy to gold two consequences have followed; the first is that the effectiveness of gold as a standard of value has been weakened because this power that banks have given to it of circulating by substitute has obviously depreciated its value by enormously multiplying the effective supply of it.  Depreciation in the buying power of money, and a consequent rise in prices, has consequently been a factor which has been almost constantly at work for centuries with occasional reactions, during which the process went the other way.  Another consequence has been that people, seeing the ease with which pieces of paper can be multiplied, representing a right to gold which is only in exceptional cases exercised, have proceeded to ask whether there is really any necessity to have gold behind the paper at all, and whether it would not be possible to evolve some ideal form of super-paper which could take the place of gold as the basis of the ordinary paper which is created by the machinery of credit, which would be made exchangeable into it on demand instead of into gold.

It is difficult to say how far the events of the war have contributed to the agitation for the substitution for gold of some other form of international currency.  It would seem at first sight that the position of gold at the centre of the credit system has been shaken owing to the fact that in Sweden and some other neutral countries the obligation to receive gold in payment for goods has been for the time being abrogated.  The critics of the gold standard are thus enabled to say, “See what has happened to your theory of the universal acceptability of gold.  Here are countries which refuse to accept any more gold in payment for goods.  They say, ’We do not want your gold any more.  We want something that we can eat or make into clothes to put on our backs.’” This is certainly an extremely curious development that is one of the by-products of war’s economic lessons.  But I do not feel quite sure that it has really taught us anything new.  All that has ever been claimed for gold is that it is universally acceptable when men are buying and selling together under more or less normal circumstances.  It has always been recognised that a shipwrecked crew on a desert island would be unlikely to exchange the coco-nuts or fish or any other commodities likely to sustain life which they could find, for any gold which happened to be in the possession of any of them, except with a view to their being possibly picked up by a passing ship, and returning to conditions under which gold would reassume its old privilege of acceptability.