SOME EXPERIENCES UNDER PAPER MONEY 34 
speculative ventures the world over, interrupted for a short «nao 
by the Franco-German war and then stimulated by the very 
operations connected with the indemnity of 1871. It was the 
up-stage of a world-wide business cycle. When the crisis came in 
1873, loans to American enterprises ceased almost at once, and only 
such contracts and commitments were maintained as could not © 
undone. In a year or two, by 1876, there was even an opposite 
movement; a considerable repayment of loans was called for and 
was effected. So things ran until in 1879 a new cycle started; 
then under different monetary conditions, and with results not 
significant for the purpose in hand. The episode with which we 
are here concerned ended with the year 1878. 
I have spoken of the currency situation as stable. It would be 
more accurate to speak of it -as stationary. The total volume 
of paper money remained virtually the sume. But population and 
the volume of transactions continued to advance. Setting aside 
the fluctuations, by no means negligible, in credit conditions and in 
velocity of circulation, there was a steady undercurrent of pressure 
on the money supply and so a tendency toward a decline of prices. 
The process was that often described at the time as “growing up 
to the currency,” a very irregular growth, but one that on the 
whole did take place, and that needs to be allowed for in inter- 
preting the long-run trend of the price movements. 
Observe now on the chart (page 396) ' what took place in the 
rates of foreign exchange and in the prices of goods. First, as to 
foreign exchange. The rates of exchange (sterling), and the quoted 
price of gold in terms of paper, necessarily moved together, and the 
price of gold may be used to indicat: the course of exchange. That 
price, the gold preminm, had remained fairly stationary, tho with 
some declining ten. “50 to 1869, ranging from 140 
to 135. In 187 uply, and in the remaining 
vears of boom, fr. ~ined at about the figure 110. 
After the crisis to ned for a while still stationary, 
and indeed showed ad in 1875. In the course of 
1877 and 1878, it weil steaus, w= at last, with the resumption of 
t Based on Professor Graham's fiuies, pp. 237, 253 of the article cited above.