Page:Stabilizing the dollar, Fisher, 1920.djvu/83

Sec. 8] Holland, England, Switzerland, Italy, France, Norway, Sweden, Germany, Austria, Russia.

8. Price Movements Vary with the Money Supply

The ups and downs of prices roughly correspond with the ups and downs of the money supply. Throughout all history this has been so. For this general broad fact the evidence is sufficient even where we lack the index numbers by which to make accurate measurements. Whenever there have been rapid outpourings from mines, following discoveries of the precious metals used for money, prices have risen with corresponding rapidity. This was observed in the sixteenth century, after great quantities of the precious metals had been brought to Europe from the New World; and again in the nineteenth century, after the Californian and Australian gold mining of the fifties; and, still again, in the same century after the South African, Alaskan, and Cripple Creek mining of the nineties. Likewise when other causes than mining, such as paper money issues, produce violent changes in the quantity or quality of money, violent changes in the price level usually follow.

The war has furnished important examples of these points. In the United States the curve for the quantity of money in circulation, and the curve for the index number of prices run roughly parallel, the price-curve seeming to follow the money-curve after a lag of one to three months. It was in August, 1915, that the quantity of money in the United States began its rapid war-made increase. One month later, prices began to shoot upward. In February, 1916, money