ABSTRACT
The high prices before 1930 were often erroneously attributed to a sudden and violent permanent increase in the efficiency with which gold was used. This error led to the expectation that high prices would continue. The small increase in the efficiency in the use of gold is easily offset by other factors. The total credit outstanding was high in proportion to total gold supply, indicating that the gold was fully used. A proper control of bank credit is important, but credit cannot control prices when a country is on the gold standard. This would require that the world value of gold be controlled. If the exchange value of gold were reduced by one-half, its use in industry would be more than doubled. Gold is so readily movable that it is world supply and world demand, rather than location that control its exchange value.
