of over 6,000,000 L. And then there comes also a second cause, tending in the same direction.  During a depressed period the savings of the country increase considerably faster than the outlet for them.  A person who has made savings does not know what to do with them.  And this new unemployed saving means additional money.  Till a saving is invested or employed it exists only in the form of money:  a farmer who has sold his wheat and has 100 L. ‘to the good,’ holds that 100 L. in money, or some equivalent for money, till he sees some advantageous use to be made of it.  Probably he places it in a bank, and this enables it to do more work.  If 3,000,000 L. of coin be deposited in a bank, and it need only keep 1,000,000 L. as a reserve, that sets 2,000,000 L. free, and is for the time equivalent to an increase of so much coin.  As a principle it may be laid down that all new unemployed savings require either an increased stock of the precious metals, or an increase in the efficiency of the banking expedients by which these metals are economised.  In other words, in a saving and uninvesting period of the national industry, we accumulate gold, and augment the efficiency of our gold.  If therefore such a saving period follows close upon an occasion when foreign credits have been diminished and foreign debts called in, the augmentation in the effective quantity of gold in the country is extremely great.  The old money called in from abroad and the new money representing the new saving co-operate with one another.  And their natural tendency is to cause a general rise in price, and what is the same thing, a diffused diminution in the purchasing power of money.

’Up to this point there is nothing special in the recent history of the money market.  Similar events happened both after the panic of 1847, and after that of 1857.  But there is another cause of the same kind, and acting in the same direction, which is peculiar to the present time; this cause is the amount of the foreign money, and especially of the money of foreign Governments, now in London.  No Government probably ever had nearly as much at its command as the German Government now has.  Speaking broadly, two things happened:  during the war England was the best place of shelter for foreign money, and this made money more cheap here than it would otherwise have been; after the war England became the most convenient paying place, and the most convenient resting place for money, and this again has made money cheaper.  The commercial causes, for which there are many precedents, have been aided by a political cause for the efficacy of which there is no precedent.