cause. Such a currency necessitates incessant calculations of the value of the 'money' they receive and pay out, as its purchasing power in relation to commodities, transport charges, rents, and all other things for which it is exchanged, varies from week to week, or even from day to day.

How soon the restoration of the Standard can be effected, after the emergency which necessitated the depreciation is over, must depend on circumstances. If the depreciation has gone very far a compromise may be needed, the restored valuation adopted being appreciably less than the old 'par.' If the inconvertible paper has become absolutely worthless, as was the case with the rouble, the mark, and the Austrian krone, a fresh start may have to be made with a new standard coin. Fortunately for us there has been no need to consider at what level we should resume payment of notes in gold, but only when it would be safe to do so. As already observed, it is natural that the Government's decision should have been opposed by some theorists, who are not fully satisfied with a Gold or any singlecommodity standard, and indulged in the hope of getting some other method adopted; and also by people whose business arrangements would be disturbed by the change. The objection of the latter was not to the Gold Standard in principle, but to its being restored at the particular time determined on. Unfortunately there could, in the nature of things, never be a resumption date at which no one would be inconvenienced, and, if the Government had waited until such a date had arrived, the reform would never be carried out at all.

On the other hand, there has been a very general consensus of opinion that some time, and somehow, our monetary standard had to be fixed once more, and the common-sense view has always been that it should be fixed at the old 'par.' Any other solution was regarded as likely to damage the country's credit, which it certainly would have done, and to injure many public and private interests, not only here, but abroad. At the same time the less hopeful feared that it might be necessary to 'resume' at a lower level, on account of the long period during which the New York sterling exchange remained below gold parity by an amount which was

eceive

a rough measure of the depreciation of the pound. The upward movement of the exchange since March 1924, has made it possible to adopt the bolder course, and in i spite of the opposition of a small body of economists, of whom the most conspicuous is Mr J. M. Keynes, the Government took it. Soon after the decision had been acted on, Mr Keynes endeavoured to frighten the public with a pamphlet specially directed against the Chancellor of the Exchequer containing, among other assertions, the following: 'The monetary policy, announced in the Budget, being the real source of our industrial troubles, it is impossible to recommend any truly satisfactory course except its reversal.' The policy thus denounced had hardly been in operation three months when Mr Keynes penned this extravagant sentence, and several others like it. It is impossible that so great an effect could have been produced in so short a time; and it is, besides, common knowledge that the coal trouble and most of our industrial troubles were with us many months, and even years, before Gold Standard Resumption began to be talked of. Mr Keynes also asserts that 'the policy of deliberately intensifying unemployment, with a view to forcing wages reductions, is already partly in force.' A pamphlet conceived in the reckless spirit which characterises these two pronouncements does not deserve the attention to which Mr Keynes's work is usually entitled, and which it has hitherto obtained; but 'The Economic Consequences of Mr Churchill' has, nevertheless, had the honour of being discussed, and effectually answered, by Sir Henry Strakosch in the 'Times,' and Lord Bradbury in the Financial News.' The attack on the policy of Resumption has also been replied to by Dr Walter Leaf in the Westminster Bank Review' for August.

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Now that the Gold Standard is once more, to all intents and purposes, re-established, trade will probably begin to feel before long the good effect of a fixed value for the pound sterling-that is, as fixed a value as any Standard can have. We had been fully accustomed before the War to a state of things in which the 'bill on London' embodied a definite value, measured in gold, and a good many people hardly realised, even during the War, that that value had been impaired at all, although they were

conscious of a number of very disagreeable facts of an economic kind arising from it. The dangerous part of our monetary war finance, the issue of inconvertible notes, was kept within bounds by the Treasury. The fact that the increase of 'purchasing power' necessitated by the War was partly supplied in the form of a great increase in bank credits, which are more easily reduced, when no longer needed, than notes, made it easier for the Treasury to avoid the excessive note issues which imperilled the financial position of France and Italy by greatly depreciating their currencies. In spite of the warnings of 'modern' economists, who do not wish to 'fix' the Standard at all, but to modify it at intervals, all the countries whose affairs have come down to bedrock are finding that the only safe rules are the old ones. Several of them are re-establishing, or have established, metallic (gold) currencies: France and Italy, the two important countries whose currencies are still depreciated, have not, it may be surmised, yet given up the hope that their 'standard' moneys may eventually come back to their 'par value,' without their taking special measures to produce that result. Even if their hopes are not realised they are unlikely to try experiments in the directions of fixing' the franc and lira by reference to internal price Index Numbers, as the modern school would advise. As for the United States, it may safely be said that that great country, whose currency has been unaffected, is committed more than ever to the Gold Standard, being the holder of much the largest stock of the metal. It is true that the Federal Reserve Board, its central banking authority, is rather too much under political influence to be regarded as a thoroughly safe guardian of the monetary policy of the country. But the Board is by no means wholly political, and the American Banking community is a very powerful body, and has, so far, prevented unwise politicians from doing much mischief since it was constituted. It is, however, a misfortune that the original idea of the Federal Reserve Board, as a body to be kept free from political influence, has only been partially maintained.

Perhaps the experience of our cousins in this respect has not been without its use for us, as it may have strengthened the determination shown here to 'keep

the Government out of the banking business,' as far as possible. Mr Keynes and others hanker after the enactment of banking and monetary arrangements by which prices and, as he hopes, credit cycles' might be controlled in the interests of far-reaching social reforms.' The idea of devising means for getting rid of variations in the 'purchasing power of Money' is not a new one. It may be admitted to be in theory a desirable end. No one denies that Gold varies in purchasing power from time to time. Over long periods it has varied considerably, and, theoretically, it may vary from year to year. Very likely it does; but the variations during short periods are too small to make it worth while to alter the valuation, and disturb contracts, in order to meet so minute a requirement. Few men, or women, whether engaged in business or not, would like to be obliged for the pleasure of theorists to calculate their receipts and expenditure in accordance with periodical revisions of the Pound sterling, or the Dollar, or the Franc, based on a 'Tabular Standard,' which is a standard based on an Index Number obtained by combining a number of prices. An Index Number, in its simplest and oldest form, is a figure based on a list of commodity-prices, 'weighted' arbitrarily in accordance with the estimated relative importance of the separate articles included in the list; the sum of the prices thus weighted' is divided by their numerical total, and the resulting average is the 'Number.' Much thought, ingenuity, and hard work have been expended during the last forty years by Prof. Edgeworth and others in improving this instrument of economic investigation; and the crude arithmetical average is now, as a rule, replaced in modern tables by a more accurate mathematical expression termed the Median,' which has as many prices above as below it. Index Numbers are useful as indications of changes in the general level of prices, but it is not safe to employ them except as evidence that there has been some change; as evidence of its amount they are not to be implicitly trusted. There are many Index Numbers in use, and they generally differ, and not always consistently, in the extent of rise, or fall, shown. Index Numbers and Tabular Standards involve conceptions which, though familiar to economists, and

not unknown to other persons interested in economics, are not easy of comprehension to the many; and when the ordinary man of business, professional man, and intelligent workman find, on inquiry, that the economists are not agreed as to what Tabular Standard should be used in order to arrive at a right measure of 'purchasing power,' and are still more at variance as to how it should be used, they will prefer to retain the Gold Standard. Prof. Irving Fisher, an American economist of deservedly high reputation, who has made a profound study of the subject, and is strongly in favour of a method of his own, has no illusions as to the immediate practicability of any scheme for finding a substitute for gold. Before such a substitute can be found, there must,' he says, 'be much investigation and education of the public.' That is the last word on the matter, for the present. But, there is no reason why repayment in terms of a Tabular Standard should not be provided for in arranging a contract for long Deferred Payments of any kind, if the parties to the contract are willing. It would be best to leave the selection of the Table to those concerned, though, no doubt, there would be busybodies who would do their best to get some Standard or other stamped with Government approval. If a Tabular Standard was found to be of use over long periods, its use over shorter periods might gradually become fairly common. But such an evolution of an idea which depends for its success on complete confidence in a Table is likely to be slow, and, meanwhile, there is nothing at the present time that can conveniently take the place of Gold as a measure of value in Europe and America, at any rate. For practical purposes and over short periods it is a good measure of value, and even if it were a worse one than it is, it possesses for all men at this stage of the world's history the transcendent merit of being accepted as a settlement of debts.

Mr Keynes is in favour of 'stabilising' the currency in terms of internal prices, without reference to the foreign exchanges. He regards the exchanges generally as what he calls a 'shock-absorber,' to take up and neutralise the effect of changes in international goldcredit' to which, he thinks, wages in this country cannot be adjusted rapidly enough. The exchanges have, during