IMPROVED METHODS OF PRODUCTION.
In order to justify their position it becomes necessary for the advocates of continued demonetization of silver to insist that the fall of prices is not due to the rise in the value of gold but to improved methods of production.
Whatever the cause to which it is to be ascribed, the undoubted fact is that a fall of prices throughout the western world set in concurrently with the reduction of the world's money volume by the demonetization of silver. It was well understood at the time by those who had given consideration to the subject that demonetization alone would effect that result. This is manifest from an article in the London Daily News, a paper of exceedingly large circulation, quoted in the Journal of the Statistical Society of England for 1873, page 395. Referring to the adoption of the single gold standard by Germany the Daily News said:
As the annual new supply of gold throughout the world is reckoned at little more than £20,000,000 ($100,000,000), and the usual demand for miscellaneous purposes is very large, it follows that, if the German Government perseveres in its policy, the strain upon the existing stocks and currencies of gold will be most severe. For a time, at least, unless the annual production of gold should suddenly increase, the money markets of the world are likely to be perturbed by this bullion scarcity, and the fall in the value of gold——
which means the rise in prices that for some time had prevailed;
of which so much has been heard, will be checked or reversed.
The yield of gold did not "suddenly increase," and the intelligent prophecy of the Daily News was fully realized, not merely to the extent of a check to the rising prices; (or, as it is styled by the Daily News, a check to the "fall in the value of gold,") but to the extent of an immediate rise in the value of that metal, and a persistent and deplorable fall in the general range of prices.
This prophecy that the "fall in the value of gold" would be checked by the demonetization of silver; or, better, reversed by it, was welcome reading to the creditor and income classes of England and of the world.
That it was "reversed," and the value of gold appreciated, is as plain as that; one being subtracted from two, there is but one for a remainder.
The immediate fall in prices of commodities was the natural, the anticipated, and the deliberately intended result of that movement.