CANADA 
227 
again thru the inflow of specie by way of New York — all this 
could persist only because of the continuing loans. Had it not 
been for the loans, the expansion of credit by the banks must have 
come to a halt. As it was, notwithstanding occasional interrup- 
tions, the round was repeated year after year. Specie did flow into 
Canada: the entire circulating medium did enlarge ; in essentials, 
what happened did conform to the previsions of theory. 
Next, and again quite in accord with theoretical expectation, 
prices in Canada rose sharply. Here, it is true, our experiment 
becomes somewhat impure. Another factor complicated the situ- 
ation, namely the advance in prices which was taking place the 
world over. It will occur at once to the conversant reader that 
the level of prices in all western countries had begun slowly to rise 
in the years just before 1900, and that the rise became marked in 
the decade succeeding; a consequence, as is generally agreed, of 
the steadily increasing supply of new gold from the mines. What 
then is to be expected in Canada, on grounds of theory, is a rise 
greater than that appearing elsewhere. More particularly we 
should expect a greater rise than in Great Britain, the lending 
country. Precisely this is what happened. Whatever method 
of measuring the advance in prices be applied — weighted or 
“unweighted” mean, an index for all commodities or one for 
selected commodities — Canadian prices rose much more than 
British. Taking the year 1900 as the base (100), the weighted 
index for Canada was 136 in 1912, 132 in 1913. It was but 113 
in Great Britain for both years. And as compared with the 
United States — a neutral country, so to speak — Canada again 
showed an exceptional advance. During the earlier years of the 
period, until about 1910, Canadian and American prices showed 
a roughly parallel upward movement ; but in the later years, when 
borrowing was on the largest scale, the Canadian went distinctly 
higher. 
For our purpose, however, this gross movement of prices is less 
significant than the price changes of the several separate classes 
of commodities — imported goods, exported goods, domestic 
goods. On grounds of theory we should expect not a uniform