286 INTERNATIONAL TRADE

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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 article
 of export — a commodity exported precisely as any other metal
would be. When it left the country, it did not deplete the monetary
 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 outflow
 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 because
 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. Exports
 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