on the
great debts of the world will buy twice as much, and the debtor nations
are put at a terrible disadvantage as to the creditor nations personally?
Is that honest?

A very safe test of any theory is to follow it to its logical conclusion.
Take your "honest" money argument, on the basis of twenty years'
experience, and see where it will take you in the near future. The dollar
which buys two bushels of wheat or sixteen pounds of cotton is "honest,"
you say, and a dollar which buys but one bushel or eight pounds is not. By
and by, if your fallacy prevails, the dollar will buy three bushels of
wheat or twenty-five pounds of cotton, and will then, by your reasoning,
be much more "honest" than now. Is that your idea? How much lower must
prices go before you will admit that gold has gained in purchasing power?

=But it cannot be that prices have fallen because of the scarcity of
money, for the low rate of interest now prevailing proves that money is
abundant and cheap.=

That is a very old fallacy, and a singularly tenacious one, as it seems
that no amount of experience drives it from the minds of men. Look over
the history of our panics and you will find that after the first
convulsion is past the banks are soon crowded with idle money, and the
rate of interest falls. Take notice, however, that the money lenders
always declare that they must have "gilt-edged paper." Interest on
first-class securities is never lower than in the hardest times which
follow a particularly severe panic, and the reason is obvious: all
far-seeing business men know that prices are likely to fall, and,
consequently, investments become unprofitable: therefore they do not
invest; therefore they do not want money; therefore they do not borrow,
and idle money accumulates. This is a phenomenon always observed in hard
times. In good times, on the contrary, when investments are reasonably
sure to be profitable, there is naturally an increased demand for money,
and so the rate of interest rises. As a matter of fact, however, interest
rates, when properly estimated, have been for several years past very much
higher than previously--that is, the borrower has, in actual value, paid
very much more; so rapid has been the increase of the purchasing power of
money, that the six per cent. now paid on a loan will buy more than the
ten per cent. paid a few years ago. In addition to that, the value of the
loan has been steadily increasing. Make a calculation fo