'We believe it to be due to the combined operation of three causes
cheap money, cheap corn, and improved credit. As to the first
indeed, it might be said at first sight that so general an increase
must be due to a depreciation of the precious metals. Certainly in
many controversies facts far less striking have been alleged as
proving it. And indeed there plainly is a diminution in the
purchasing power of money, though that diminution is not general and
permanent, but local and temporary. The peculiarity of the precious
metals is that their value depends for unusually long periods on the
quantity of them which is in the market. In the long run, their
value, like that of all others, is determined by the cost at which
they can be brought to market. But for all temporary purposes, it is
the supply in the market which governs the price, and that supply in
this country is exceedingly variable. After a commercial crisis, 1866
for example, two things happen: first, we call in the debts which are
owing to us in foreign countries; and we require these debts to be
paid to us, not in commodities, but in money. From this cause
principally, and omitting minor causes, the bullion in the Bank of
England, which was 13,156,000 L. in May 1866, rose to 19,413,000 L.
in January 1867, being an increase 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