Contents xrv ments adopted by our own Mint explained— Gold is in our own country the only standard of value, since silver and copper money are merely subsidiary coins pages 357 — 370 Chapter VI. On the Value of Money, ' Value of money ' is an ambiguous expression — It is popularly used to describe the current interest, as represented by the JBank-rate of dis- count — In Political Economy, value of money means the purchasing Sower of money— Hence the value of money increases as general prices ecline, and vice verad — The value of cold in bullion must be the same as the value of gold when converted into money — The fallacy of oon- siderinff that the value of gold has remained unchanged, beciEiuse the price of gold never varies — The value of money is determined by the same laws as those which regulate the value or price of all mineral produce — <jk>ld is devoted to two distinct purposes : first, it is coined into money ; secondly, it is employed for purposes of art and manu- facture—The quantity of gold required for the last of these two pur- puses does not varv greatly from year to year — Hence any increase in the quantity of gold produced must be almost entirely converted into coin — The amount of money any country requires partly depends upon the amount of its wealth, and partly upon the number of times which any commodity is bought and sold for money — The amount of money which a country kee])s in circulation is no accurate measure of its national wealth — A country requires a greater amount of money in circulation as its wealth and population increase — In the case of an ordinary commodity, the demand is equalised to the supply, by either a rise or fall in the price of the commodity — But the price of gold is a meaningless expression ; hence, in the case of money, the demand is equalised to the supply by a rise or fall in the value of the precious metals — The demand for a commodity varies with its price, but the . ratio of this variation cannot be precisely defined, for it varies greatly with different commodities — This last proposition illustrated by examples— The demand for the precious metals varies, eceterU paribuAf precisely in the inverse ratio of their value, if uniformity in general prices is preserved — If we suppose that the precious metals are solely employed as money, a nation has a demand for a greater or less amount of money, in order to maintain general prices unchanged — Hence, if the wealth and population of a country increase, the demand for money will increase —It is most important that the value of gold, or, in other words, that general prices, should fluctuate as little as possible— The supply of gold is cceteris paribus increased if the value of gold advances, because gold-mining becomes more profit- able — But an increase in the value of gold is caused by a deficiency in its supply— Hence an increased demand for sold stimulates an increased supply ; consequently the demand is equalised to the supply, and thus a tendency is brought into operation to preserve uniformity in general prices — This process of equalisation is analogous to that which takes place with regard to every other commodity — In the absence of any counteracting circumstances, the value of the precious metals must increase if the cost of obtaining them is increased, and vice verad their value must decrease if the cost of obtaining them is diminished by the discovery of more productive mines. 37 '-386 Digitized by
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