States constitution and the supremacy of law and order as conceived by the authors of the constitution.

It seems that, of the three candidates, Mr. Wilson has the best chance of carrying the election. But to succeed he must hold all the votes that went to the Democrats at the congressional elections two years ago—for the country has been normally Republican ever since the Civil War-and his ability to do this, despite the generally high regard in which he is held, is doubtful. The election would surely have been his had he been opposed only by Mr. Taft. With Mr. Roosevelt in the field there is nothing sure for Mr. Wilson; for it must be remembered that the vote two years ago was rather a protest against Mr. Taft and the Republicans than a vote of popular confidence in the Democratic party. At that time the Democrats had been in a minority in Congress since 1897, and they had certainly done nothing to warrant a vote of confidence. They had not even conducted an extensive propaganda in the constituencies against the Payne-Aldrich bill. That work had been left to the ten and fifteen cent magazines, which, like the insurgent Republicans, had concentrated their attack on the increased duties on cottons and silks, and in particular on the notorious Schedule K, with its lavish protection for the wool-growers of the inter-mountain states and the woollen manufacturers of New England, New Jersey, and Pennsylvania. Mr. Roosevelt will certainly draw largely from the vote that went to the Democrats at the congressional elections, and he will also attract to his support tens of thousands of votes which, except for his candidature, would in this election have gone to the Socialists. The probability is that Mr. Taft will fall into the third place.

To be elected President a candidate must secure at least 266 out of the 531 votes in the electoral college-a clear majority of the whole number, which consists of one vote each for every senator and congressman. Conditions are so uncertain that within two weeks after Mr. Roosevelt's nomination in August even Republican newspapers were conceding the probability that neither Mr. Wilson nor Mr. Roosevelt nor Mr. Taft would secure a majority of the electoral college. There need consequently be no surprise in England if the cablegrams from New York and Washington of November 6 and 7

convey the news that the election, like that of 1876, has been thrown into the House of Representatives.

In this case the House must act before March 4, 1913, when Mr. Taft's term and that of the existing Congress expires; and the election will be made, not by the House of Representatives to be chosen on November 5, but by the existing House, in which the Democrats have a majority. An election by the present House of Representatives would mean that Mr. Roosevelt would be out of the running; although by the terms of the constitution the House is directed to choose among the three candidates obtaining most votes in the electoral college. The vote is taken by states-each state, no matter what its congressional delegation, having only one vote. In the present House, in spite of the large Democratic majority, the Democrats control exactly one half of the states; and it is conceivable that, even in the House of Representatives, it would be impossible to obtain a clear majority for Mr. Wilson. While the choice of the President, in case of the failure of the electoral college to act, is relegated to the House, the choice of the Vice-President is the function of the Senate; and if the House fails to elect a President, the constitution provides that the candidate elected as Vice-President by the Senate shall become President.

POLITICS AND PRICES.

I. Monetary Economics.

By W. W. CARLILE. Ed. Arnold. 1912.

2. The Standard of Value. By Sir DAVID BARBOUR. Macmillan.

1912.

3. An Introduction to the Study of Prices. By WALTER T. LAYTON. Macmillan. 1912.

4. The Meaning of Money. By HARTLEY WITHERS. Smith, Elder, and Co. 1909.

5. La Science Economique. By YVES GUYOT. Paris: Librairie C. Reinwald.

1907.

6. Report of the Gold and Silver Commission. 1888. (C. 5512.) 7. Articles in 'Statist,' 'Economist,' and 'Economic Journal.'

IT'S

T'S all the fault of the Government: it's entirely the 'fault of the Government.' This was the answer made by the head of one of the great banking houses of London when questioned by the present writer as to the causes of the fall in the price of Consols, and it expresses a view widely held in the City. That some further examination of the problem is needed will be admitted even by those who are most convinced that the Government is primarily to blame. There is indeed always a danger that economic facts may be twisted to political uses, and, at this moment, some tariff reformers even go so far as to suggest to popular audiences that the increase in the price of food-stuffs during the past few years is due to free trade a proposition too obviously dishonest to require refutation. In the following pages, then, an attempt will be made to consider the causes, political and economic, underlying the fall in the price of gilt-edged securities and the contemporaneous phenomenon of the rise in the price of many staple commodities.

At the outset it is desirable to repudiate any intention or inclination to dogmatise. The considerations involved are so numerous and so complex that it is never possible to feel confident that one has taken account of all the essentials of the problem and given the proper weight to each. The utmost that can be done is to present what appears to the writer to be the truth as cautiously and as fairly as possible.

Starting, then, from the emphatic verdict quoted above, the

first precaution which suggests itself is to ask how far the fall in Government securities is a peculiarity of Great Britain. Figures available to everyone show that it is not. The question has been frequently examined by the leading financial papers, and it is unnecessary to do more than quote their conclusions. On July 27 of the present year, the Economist' published the following table comparing the position of the leading securities of our own and five other European Governments:

It will be seen that in every case there has been a heavy fall both as compared with last year and with the year 1906. Therefore clearly it is unscientific to attribute the whole fall in British securities to the wickedness of the present British Government. It may be added that public opinion both in France and Germany is equally perturbed about the fall in Government securities. In the month of July last, the French Minister of Finance made a speech at a public ceremony on the subject of 'Rentes,' and talked of a conspiracy to depreciate the national stock ('Economist,' July 27, 1912). In the same month the Berlin press published articles deploring the continued fall in Imperial Three per cents.

The disease is therefore not confined to ourselves; but it will be noticed that the figures in the above table show that, with the exception of the Danish Gold Loan, British securities have fallen more heavily than those of other Governments. This extra fall is all the more noteworthy because the British Government is reducing debt at a fairly rapid rate, while almost all the other countries are still adding to their liabilities. Here, then, is a point which clearly needs special explanation, but before attempting to discover that explanation it is better

to deal with the causes of depreciation which are common to all countries.

The first and most obvious cause is the enlargement of the area of reasonably safe investment. The resources of the world are being developed with extraordinary rapidity, and all these developments call for capital. Till recently the rank and file of European investors were rather shy of putting their money abroad, with the result that the price of home securities was forced up-possibly to an exaggerated height. In the opinion of the 'Statist' the high level attained in the nineties by first-class securities, and especially by Consols, was altogether abnormal. It was due to the distrust of foreign and colonial investments created by such events as the Baring crisis, the revolutions in Brazil, Argentina, and Chili, the collapse of Australian land speculation and of Australian banking (see 'Statist,' Feb. 10, 1912). Since that period these extra-European countries have re-established themselves in the estimation of the European investor, with the result that the price of home securities has relatively declined.

It may be added that, as regards our own country in particular, a very important change has been effected by the enlargement of the area of trustee investments. In one sense this is a political influence, for there is little doubt that the admission of colonial securities to the list of trustee investments was primarily due to Mr. Chamberlain's desire to confer some financial favour upon the Colonies. The value of the favour is very considerable, for it has meant an appreciable lowering of the rate of interest at which the Colonies can borrow. According to the Statist' (Feb. 10, 1912), in the year 1900, when Colonial Government inscribed stocks became trustee securities, their total amount was £220,000,000, and this figure has since been brought up to £350,000,000. A saving of even I per cent. on these huge sums is a tremendous boon to colonial taxpayers. British owners of trust funds have also benefited by being enabled to obtain a higher rate of interest. Per contra, the credit of the British Government has been lowered, and this involves a contingent loss to British taxpayers. On balance the change was probably justified, for it was hardly fair to the owners of trust funds to maintain at their expense an artificial demand for Consols.