It is a familiar economic phenomenon that price changes are not uniform or instantaneous, but spread in waves from commodity to commodity and from country to country. This can best be understood by tracing the effect of new supplies of gold. When the miner sends his gold to the assay office and thence to the mint he receives at once the money equivalent for it at the rate of $18.60 an ounce. This money he will either spend or deposit in a bank. If he spends it, his purchases of goods will quicken the demand for them and so tend to raise retail prices. The merchant who receives the money uses it to replenish his stock and his buying will tend to increase wholesale prices, and so on through the entire business cycle. If the miner, instead of spending his money, deposits it in a bank similar results will follow. With increased gold reserves the banks will have larger funds available both for time loans to merchants and for call Loans to stock exchange brokers.1 Lower interest rates, which are likely to accompany increased bank reserves, will quicken stock exchange transactions in securities, and increase dealings in, and the prices of, speculative staples such as cotton and grain. The merchant and the manufacturer, also, find it easier to borrow money, and so with rising prices and improving markets the demand for genera] merchandise and for labor is stimulated.

1 Johnson: Money and Currency, p. 128.

In a period of rising prices like that of recent years, wages are generally last to respond to the change. The wage-earner and the recipients of fixed incomes, therefore, are at a disadvantage in that they have to pay higher for all commodities while their money incomes remain fixed or advance but slowly. In general it may be said that a rise in price is felt first in speculative securities and commodities, then in the wholesale business, next in the retail trade, and last in wages and rent.

The disturbance of prices caused by a large increase in the supply of money without a corresponding increase in exchanges is transmitted not only from commodity to commodity and from group to group, but also from country to country. The country producing and using the new supplies of gold will ordinarily be the first to feel the effect of the resulting rise in prices, but it cannot permanently retain more than is needed, unless the new gold is substituted for other forms of money which are retired to make a place for it. Rising prices in the gold-producing country will tend to increase imports and decrease exports of merchandise and so create an international balance that will necessitate the export of gold. Thus, in time each country will get its proportionate share of gold and prices. in all gold standard countries will tend to readjust them, selves at the higher level.