VALUE OF GOLD

23

people think there is going to be a general rise of
prices they think—without knowing it—that gold is
going to fall in value, and act accordingly. Their
joint judgment is more likely to be wrong than their
joint judgment about iron or tin or houses because
they do not take the particular circumstances affecting
 the commodity into consideration. This is perhaps
 the explanation of the fact that at one period
for no definite discoverable reason people generally
overestimate the prices of the future and therefore
cause a boom in the prices of the present with the
result of subsequent fall and depression.
Whatever the cause of a boom, the high prices
which mark it are synonymous with a low value of
gold, which seems in strange contradiction with the
ordinarv visw “at in a boom ‘every one wants
money.” But th: contradiction disappears if we
bethink ourselves what every one wants the money
for: it is to buy commodities and services in
hopes of making a profit because “ things are going
up.” People may want money, but they only want
it because they want commodities and services;
the fact that commodities are supposed to be going
up makes it desirable to lay money out on them at
once : if the money is kept, it will not buy so much.
The pressure is not to add to money stocks by selling,
but to deplete the stocks of money by buying as far
as can be done without too great inconvenience and
risk. Individuals and banks will try their hardest
to carry on with the smallest possible stocks of gold,
when gold is the one important thing which they do
not expect to rise in value.
Thus, even if every one always paid in gold for
everything immediate’ on receiving it, a preponderance
 of expeci-tinn oi higher general prices (lower
value of golc) in the future would to some extent
raise general pices (lower the value of go'™ in the