FOOTNOTES:
[43] The Purchasing Power of Money, pp. 14-71. The Macmillan Company. New York. 1911.
[44] This theory, though often crudely formulated, has been accepted by Locke, Hume, Adam Smith, Ricardo Mill, Walker, Marshall, Hadley, Fetter, Kemmerer and most writers on the subject. The Roman Julius Paulus, about 200 a. d., stated his belief that the value of money depends on its quantity. See Zuckerkandl, Theorie des Preises: Kemmerer, Money and Credit Instruments in their Relation to General Prices, New York (Holt), 1909. It is true that many writers still oppose the quantity theory. See especially, Laughlin, Principles of Money, New York (Scribner). 1903.
[45] See Scott, "It has been a most fruitful source of false doctrines regarding monetary matters, and is constantly and successfully employed in defense of harmful legislation and as a means of preventing needed monetary reforms." Money and Banking. New York, 1903, p. 68.
[46] [For a method of determining the velocity of the circulation of money, see Appendix A.]
[47] It is important to bear in mind that wherever P is used in this chapter it represents the index number, or scale of prices, at which the trade, T, is conducted.—Editor.
[48] An almost opposite view is that of Laughlin that normal credit cannot affect prices because it is not an offer of standard money and cannot affect the value of the standard which alone determines general prices. See the Principles of Money, New York (Scribner), 1903, p. 97. Both views are inconsistent with that upheld ... [here].
[49] This fact is apparently overlooked by Laughlin when he argues that there is not "any reason for limiting the amount of the deposit currency, or the assumption of an absolute scarcity of specie reserves." See Principles of Money, p. 127.
[50] Interesting changes in the magnitudes of the equation of exchange between 1896 and 1914 are given in the appended diagram, which is taken from a reprint of Professor Fisher's article, The Equation of Exchange for 1914, and the War, the American Economic Review, Vol. V, No. 2, June, 1915.—Editor.
[51] Adapted from Irving Fisher. Recent Changes in Price Levels and Their Causes, Bulletin of the American Economic Association. Fourth Series, No. 2, Papers and Discussions of the Twenty-third Annual Meeting, December, 1910, pp. 43-44.
[52] Irving Fisher, The Purchasing Power of Money, pp. 74-88.
[53] Ibid., pp. 149, 150.
[54] Causes of the Changes in Prices since 1896. Bulletin of the American Economic Association, Fourth Series, No. 2, Papers and Discussions of the Twenty-third Annual Meeting, December, 1910, pp. 27-36.
[55] There is a possible error here of perhaps $500,000,000.
[56] The estimate for 1908 is $113,996,000. Cf. U. S. Report of Director of Mint, 1909, p. 80.
[57] Bulletin, Am. Econ. Assoc., Fourth Series, No. 2, 1910, pp. 46-52.
[58] Ibid., pp. 52-61.
[59] Money and Credit Instruments in their Relation to General Prices, 2d edition, 1909. New York: Henry Holt & Company.
[60] The passages referred to are omitted.—Editor.
[61] Kemmerer, Money and Credit Instruments, pp. 9-18, 74-82.
[62] Ibid., pp. 82-8, 121-6, 145-8.
[63] Ibid., p. 9. [See Fisher: Purchasing Power of Money, pp. 175-180.]
[64] The value of gold bullion deposited at the United States mints and assay offices increased from $87,924,000 for 1897 to $205,036,000 for 1907. Figures furnished by the Director of the Mint.
[65] It is noteworthy that the reserves of the New York associated banks for example are usually kept very close to the legal reserve requirements. Cf. Sprague, Crises under the National Banking System, p. 222.
[66] Gold produced before 1492 represents an insignificant part of the existing supply.
[67] Useful tables summarizing all of these index numbers, except those of Canada, are given by Achille Necco, in his article on La curva dei prezzi delle merci in Italia negli anni 1881-1909, in La Riforma Sociale, Sept.-Oct., 1910.
[68] Comparison is for 1897 and 1906, figures for 1907 not being available.
[69] De Launay thinks that the industrial consumption averages somewhere between 40 and 50 per cent. of the annual output, but believes that for several years past the industrial uses have been absorbing a decreasing proportion, though an increasing amount. (The World's Gold, pp. 176-7.)
[70] Bulletin, Am. Econ. Assoc., Fourth Series, No. 2, 1910, pp. 59-61.
[71] Ibid., pp. 61-63.
[72] Ibid., p. 64.
[73] The quotation here referred to is omitted.—Editor.
[74] Ibid., pp. 64-65.
[75] Ibid., pp. 65-67.
[76] Ibid., pp. 67-69.
[77] Adapted from The Purchasing Power of Money, pp. 150-157; and Bulletin of the American Economic Association, Fourth Series, No. 2. Papers and Discussions of the Twenty-third Annual Meeting, December, 1910. p. 70.
[78] David Ricardo, Reply to Mr. Bosanquet's Practical Observations on the Report of the Bullion Committee, Works, pp. 326-328. John Murray. London. 1888.
[79] The Bank could not on their own principles, then urge that most erroneous opinion, that the rate of interest would be affected in the money market if their issues were excessive, and would therefore cause their notes to return to them, because, in the case here supposed, the actual amount of the money of the world being greatly diminished, they must contend that the rate of interest would generally rise, and they might therefore increase their issues. If, after the able exposition of Dr. Smith, any further argument were necessary to prove that the rate of interest is governed wholly by the relation of the amount of capital with the means of employing it, and is entirely independent of the abundance or scarcity of the circulating medium, this illustration would I think afford it.