of that day along the essential lines of the quantity theory, tho there were many monetary fallacies current at that time.  The experience in England during the Napoleonic wars, when the money of England was inflated (by the forced issue of large amounts of bank notes) and prices rose above those of the Continent, led to the modern formulation of the theory by Ricardo and others about 1810.  The discovery of gold in California and Australia in 1848-50 greatly increased the gold supply, and gold prices rose throughout the world.  Between 1870 and 1890 the production of gold fell off while its use as money increased greatly, and prices fell.  A great increase of gold production has occurred in the period since 1890.  In part the rising prices since 1897 are explicable as the periodic upswing of confidence and credit, but in the main doubtless they are due to the stimulus of increasing gold supplies.[10] These are but a few of many instances in monetary history, which, taken together, make an argument of probability in favor of the quantity theory so strong as to constitute practically an inductive proof.

[Footnote 1:  The old-fashioned miser, however, withdraws his hoarded gold for the time from its usual monetary function as an indirect agent and treats it as a direct good yielding to him psychic income by its mere possession.]

[Footnote 2:  See on kinds of income, Vol.  I, p. 26 ff.]

[Footnote 3:  See secs. 1 and 2 of this chapter; also Vol. 1, especially pp. 31-38 and 353-355.]

[Footnote 4:  This means actually gratuitous, for any real difficulty in getting metal to or from the mint operates as a cost in the conversion of bullion into money, or vice versa; e.g., the gold may be in Australia and the mint in London.]

[Footnote 5:  See Vol.  I, pp. 138 ff. and 361 ff.

FIG. 1.  GOLD PRODUCTION OF THE WORLD, 1493-1914.

The changes in gold production here shown have bearings not only upon problems of money, but in some respects upon nearly every modern economic problem.  Compare in the present connection this figure with Figure 3, in Chapter 6, Section 4, showing changes in index numbers of prices.

[Illustration:  FIG. 1.  GOLD PRODUCTION OF THE WORLD. 1493-1710.  AVERAGES FOR PERIODS BEFORE 1870]]

[Footnote 6:  This formula is presented by E.W.  Kemmerer in “Money and Prices” (2d ed., 1909), p. 15 ff.]

[Footnote 7:  See above, ch. 3, sec. 6, table.]

[Footnote 8: 

  PER CAPITA CIRCULATION OF MONEY (ESTIMATED) IN THE UNITED
  STATES IN VARIOUS YEARS.

1800......$4.99 1850......$12.02 1890......$22.82
1810...... 7.60 1860...... 13.85 1900...... 26.93
1820...... 6.96 1870...... 17.51 1910...... 34.33
1830...... 6.78 1880...... 19.41 1915...... 35.44
1840......10.91
]

[Footnote 9:  On the function of deposits, see below, ch. 7, sec. 11.]

[Footnote 10:  Consult Figure 1 in ch. 4 and Figure 2 in ch. 6 for the graphic presentation of these and related facts.]