CHAPTER II y 
WHAT MISLED MR. CHURCHILL 
HE arguments of Chapter I are not arguments 
_|_ against the Gold Standard as such. That is a 
separate discussion which I shall not touch here. They 
are arguments against having restored gold in condi 
tions which required a substantial readjustment of all our 
money values. If Mr. Churchill had restored gold by fixing 
the parity lower than the pre-war figure, or if he had waited 
until our money values were adjusted to the pre-war parity, 
then these particular arguments would have no force. But 
in doing what he did in the actual circumstances of last 
spring, he was just asking for trouble. For he was commit 
ting himself to force down money-wages and all money- 
values, without any idea how it was to be done. Why did he 
do such a silly thing ? 
Partly, perhaps, because he has no instinctive judgment 
to prevent him from making mistakes; partly because, 
lacking this instinctive judgment, he was deafened by the 
clamorous voices of conventional finance; and, most of all, 
because he was gravely misled by his experts. 
His experts made, I think, two serious mistakes. In 
the first place I suspected that they miscalculated the degree 
of the maladjustment of money values, which would result 
from restoring sterling to its pre-war gold parity, because 
they attended to index numbers of prices which were irrele 
vant or inappropriate to the matter in hand. If you want 
to know whether sterling values are adjusting themselves to 
an improvement in the dollar exchange, it is useless to con 
sider, for example, the price of raw cotton in Liverpool. This 
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