286 INTERNATIONAL TRADE 
NUE a) 
Taw 
lating medium consisted of inconvertible paper, and the entire 
structure of credit and money rested on inconvertible paper. The 
gold produced at the domestic mines continued to be exported, as 
it had been in 1850-60. And it was now solely and simply an arti- 
cle of export — a commodity exported precisely as any other metal 
would be. When it left the country, it did not deplete the mone- 
tary supply; it was not in circulation, and could not be. The 
movement of prices was necessarily controlled by quite other forces 
than the greater or less abundance of specie, the inflow or out- 
flow of metallic money. 
A conclusion of importance follows: namely, that one striking 
phenomenon of this period (1865-79) which we have found to 
be in accord with theoretical analysis, is— in a way at least — 
not at all in accord with it. This is the change in the relation 
between imports and exports which set in after 1873. True, a 
reversal of the kind — an excess of exports replacing an excess of 
imports — is what we should look for. But obviously it could not 
come about thru the mechanism contemplated in the Ricardian 
theory. Our expectation might be to find steps of some such sort 
as this: first, an abrupt stoppage (after the crisis of 1873) of loans 
made to the American borrowers; then a flow of specie out of the 
United States, to fill the gaps made in the balance of payments as 
the loans ceased ; a fall in American prices because of the outflow of 
gold ; and thereupon, at last, an increase in merchandise exports. 
But no such chain of events could possibly have appeared in the 
United States after 1873. The country’s currency was not on a 
gold basis. No gold could flow out of its circulating medium be- 
cause none (virtually none) was in it. The changes in imports and 
exports which we should expect did indeed take place. Prices did 
fall abruptly after 1873 — prices in terms of paper money. Ex- 
ports rose, imports declined. But the immediate and direct links 
of connection in all these changes were with the phenomena of the 
business cycle, perhaps also with those of paper money ; not with 
those of the international movement of specie. The general 
outcome was such as the ruling theory of international trade 
would predict; but the machinery by which it was brought