New York
THE MACMILLAN COMPANY
1917
All rights reserved
Copyright, 1917
By THE MACMILLAN COMPANY
Set up and electrotyped. Published May, 1917.
[Pg v]
To
B. M. A., III
AND
J. C. A.
WHO OFTEN INTERRUPTED THE WORK
BUT NONE THE LESS INSPIRED IT
[Pg vi]
[Pg vii]
The following pages have as their central problem thevalue of money. But the value of money cannot be studiedsuccessfully as an isolated problem, and in order to reachconclusions upon this topic, it has been necessary to considervirtually the whole range of economic theory; thegeneral theory of value; the rôle of money in economictheory and the functions of money in economic life; thetheory of the values of stocks and bonds, of "good will,"established trade connections, trade-marks, and other"intangibles"; the theory of credit; the causes governingthe volume of trade, and particularly the place of speculationin the volume of trade; the relation of "static" economictheory to "dynamic" economic theory.
"Dynamic economics" is concerned with change andreadjustment in economic life. A distinctive doctrine ofthe present book is that the great bulk of exchanging growsout of dynamic change, and that speculation, in particular,constitutes by far the major part of all trade. From thisit follows that the main work of money and credit, as instrumentsof exchange, is done in the process of dynamic readjustment,and, consequently, that the theory of money andcredit must be a dynamic theory. It follows, further, that atheory like the "quantity theory of money," which rests inthe notions of "static equilibrium" and "normal adjustment,"abstracting from the "transitional process of readjustment,"touches the real problems of money and creditnot at all.
This thesis has seemed to require statistical verification,and the effort has been made to measure the elements in[Pg viii]trade, to assign proportions for retail trade and for wholesaletrade, to obtain indicia of the extent and variation ofspeculation in securities, grain, and other things on theorganized exchanges, and to indicate something of theextent of less organized speculation running through thewhole of business. The ratio of foreign to domestic tradehas been studied, for the years, 1890-1916.
The effort has also been made to determine the magnitudesof banking transactions, and the relation of bankingtransactions to the volume of trade. The conclusion hasbeen reached that the overwhelming bulk of bankingtransactions occur in connection with speculation. Theeffort has been made to interpret bank clearings, both inNew York and in the country outside, with a view todetermining quantitatively the major factors that give riseto them.
In general, the inductive study would show th