Ill

THE RETURN TO GOLD

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ive judgement to prevent him from makingmistakes; partly because, lacking this instinct-ive judgement, he was deafened by the clamor-ous voices of conventional finance; and, mostof all, because he was gravely misled by hisexperts.

His experts made, I think, two serious mis-takes. In the first place, I suspect that theymiscalculated the degree of the maladjustmentof money values which would result from re-storing sterling to its pre-war gold parity, be-cause they attended to index numbers of priceswhich were irrelevant or inappropriate to thematter in hand. If you want to know whethersterling values are adjusting themselves to animprovement in the exchange, it is useless toconsider, for example, the price of raw cottonin Liverpool. This must adjust itself to a move-ment of the exchange, because, in the case ofan imported raw material, the parity of inter-national values is necessarily maintained almosthour by hour. But it is not sensible to arguefrom this that the money wages of dockers orof charwomen and the cost of postage or oftravelling by train also adjust themselves hourby hour in accordance with the foreign ex-changes. Yet this, I fancy, is what the Treasurydid. They compared the usual wholesale indexnumbers here and in America, and—since theseare made up to the extent of at least two-thirdsfrom the raw materials of international com-merce, the prices of which necessarily adjustthemselves to the exchanges—the true dis-