There is very little mystery about the effect of an increase in the production of gold. The more we put into the market the less valuable will it become. If we double the quantity of gold in circulation, it follows that an article which could be bought for a sovereign will not be sold for less than two sovereigns. The price of the article is thus said to rise, whereas the value, or, properly speaking, the purchasing power of the gold, for which it is exchanged, is said to fall. An increase in the stock of gold ought, therefore, to lead to a rise in prices, and to a fall or depreciation in the value of the metal. In 1853 some foolish persons therefore predicted that gold would soon be as cheap as silver; and yet, though the supply was trebled, gold was not trebly depreciated in value. “Undoubtedly some effect,” says Mr. Walpole, “was consequently made on prices; but the effect was probably only slowly and gradually felt. Gold was absorbed in vast and unprecedented quantities in the arts, and the supply which was actually available for barter was not immediately augmented to the same degree.”[94] It is difficult to understand how so able a writer has been led into an error which must vitiate every deduction drawn from the effect of the Australian gold discoveries on the prosperity of the English people, in the Victorian period. Nobody has ever been able to estimate even approximately the amount of gold that is absorbed in the arts. All that we know is that the amount is so small, that it could not affect such an enormous increase in the supply as that which came from Australia.[95] Besides, as gold did not fall much in value, it was not likely that it would be much absorbed in the arts. But, then, what became of all the gold that was so suddenly poured into England from Australia? Some of it was absorbed in coinage,[96] but not enough to account for the absorption of the vast quantity that remained. The key to the puzzle is, in truth, to be found in the statistics of commerce which we have already cited. [Illustration: THE CONVEYING OF AUSTRALIAN GOLD FROM THE EAST INDIA DOCKS TO THE BANK OF ENGLAND. (_After the Engraving in the “Illustrated London News.”_)]