"Thedearnessofeverything,"saysHume,"fromplentyofmoney,isadisadvantage,whichattendsanestablishedcommerce,andsetsboundstoitineverycountry,byenablingthepoorerstatestoundersellthericherinallforeignmarkets。""Wherecoinisingreaterplenty;asagreaterquantityofitisrequiredtorepresentthesamequantityofgoods;itcanhavenoeffect,eithergoodorbad,takinganationwithinitself;anymorethanitwouldmakeanalterationonamerchant'sbooks,if,insteadoftheArabianmethodofnotation,whichrequiresfewcharacters,heshouldmakeuseoftheRoman,whichrequiresagreatmany。Nay,thegreaterquantityofmoney,liketheRomancharacters,isratherinconvenient,andrequiresgreatertroublebothtokeepandtransportit。"
　　Ifthisexampleweretoproveanything,Humewouldhavetoshowthatinagivensystemofnotationthequantityofcharactersemployeddoesnotdependonthenumericalvalue,butthatonthecontrarythenumericalvalueisdeterminedbythequantityofcharactersemployed。Itisquitetruethatthereisnoadvantageinevaluatingor"counting"commodityvaluesingoldorsilverofdiminishedvalue;andasthevalueofthecommoditiesincirculationincreased,therefore,nationsinvariablydecidedthatitwasmoreconvenienttocountinsilverthanincopper,andingoldthaninsilver。Intheproportionthatnationsgrewricher,theyturnedtheless—valuablemetalsintosubsidiarycoinandthemorevaluablemetalsintomoney。Hume,moreover,forgetsthatinordertocalculatevaluesintermsofgoldandsilver,neithergoldnorsilverneedbe"present"。Moneyofaccountandmeansofcirculationareforhimidenticalphenomenaandheregardsbothascoin。Becauseachangeinthevalueofthestandardofvalue,i。e。inthepreciousmetalswhichfunctionasmoneyofaccount,causesariseorfallincommodity—prices,andhence,providedthevelocityofmoneyremainsunchanged,anincreaseordecreaseinthevolumeofmoneyincirculation,Humeinfersthatincreasesordecreasesofcommodity—pricesaredeterminedbythequantityofmoneyincirculation。HumecouldhavededucedfromtheclosingdownofEuropeanminesthatnotonlythequantityofgoldandsilvergrewduringthesixteenthandseventeenthcenturies,butthatsimultaneouslytheircostofproductiondiminished。AlongwiththevolumeofimportedAmericangoldandsilvercommodity—pricesroseinEuropeinthesixteenthandseventeenthcenturies;commodity—pricesareconsequentlyineverycountrydeterminedbythevolumeofgoldandsilverwhichthecountrycontains。Thiswasthefirst"necessaryconsequence"
　　drawnbyHume。Pricesinthesixteenthandseventeenthcenturiesdidnotriseinstepwiththeincreasedamountofpreciousmetals;morethanhalfacenturyelapsedbeforeanychangeatallwasnoticeableinthepricesofcommodities,andevenafterthisaconsiderabletimeelapsedbeforethepricesofcommoditiesingeneralwererevolutionised,thatisbeforetheexchange—valuesofcommoditiesweregenerallyestimatedaccordingtothediminishedvalueofgoldandsilver。Hume——whoquitecontrarytotheprinciplesofhisownphilosophyuncriticallyturnsunilaterallyinterpretedfactsintogeneralpropositions——concludesthat,inconsequence,thepriceofcommoditiesorthevalueofmoneyisdeterminednotbytheabsoluteamountofmoneypresentinacountry,butratherbytheamountofgoldandsilveractuallyincirculation;inthelongrun,however,allthegoldandsilverpresentinthecountrymustbeabsorbedascoininthesphereofcirculation。[2]Itisclear,that,ifgoldandsilverthemselveshavevalue,quiteirrespectiveofallotherlawsofcirculation,onlyadefinitequantityofgoldandsilvercancirculateastheequivalentofagivenaggregatevalueofcommodities。Thus,ifwithoutreferencetothetotalvalueofcommodities,allthegoldandsilverthathappenstobeinthecountrymustparticipateasmeansofcirculationintheexchangeofcommodities,thengoldandsilverhavenointrinsicvalueandareindeednotrealcommodities。
　　ThisisHume'sthird"necessaryconsequence"。AccordingtoHume,commoditieswithoutpriceandgoldandsilverwithoutvalueentertheprocessofcirculation。
　　He,therefore,nevermentionsthevalueofcommoditiesandthevalueofgold,butspeaksonlyoftheirreciprocalquantity。Lockehadalreadysaidthatgoldandsilverhaveapurelyimaginaryorconventionalvalue;thiswasthefirstbluntoppositiontothecontentionoftheMonetarySystemthatonlygoldandsilverhavegenuinevalue。Thefactthatgoldandsilveraremoneyonlyastheresultofthefunctiontheyperforminthesocialprocessofexchangeisthustakentomeanthattheirspecificvalueandhencethemagnitudeoftheirvalueisduetotheirsocialfunction。[3]Goldandsilverarethusthingswithoutvalue,butintheprocessofcirculation,inwhichtheyrepresentcommodities,theyacquireafictitiousvalue。
　　Thisprocessturnsthemnotintomoneybutintovalue:avaluethatisdeterminedbytheproportionoftheirownvolumetothevolumeofcommodities,forthetwovolumesmustbalance。Althoughthen,accordingtoHume,goldandsilverentertheworldofcommoditiesasnon—commodities,assoonastheyfunctionascoinhetransformsthemintoplaincommodities,whichareexchangedforothercommoditiesbysimplebarter。Providedtheworldofcommoditiesconsistedofasinglecommodity,e。g。,onemillionquartersofcorn,itwouldbequitesimpletoimaginethat,iftwomillionouncesofgoldexisted,onequarterofcornwouldbeexchangedfortwoouncesofgoldor,iftwentymillionouncesofgoldexisted,onequarterwouldbeexchangedfortwentyouncesofgold;thepriceofthecommodityandthevalueofmoneywouldthusriseorfallininverseratiototheavailablequantityofmoney。[4]Buttheworldofcommoditiesconsistsofaninfinitevarietyofuse—values,whoserelativevalueisbynomeansdeterminedbytheirrelativequantities。
　　HowthendoesHumeenvisagethisexchangeofcommoditiesforgold？Heconfineshimselftothevagueabstractconceptionthateverycommoditybeingaportionofthetotalvolumeofcommoditiesisexchangedforacommensurateportionoftheexistingvolumeofgold。Thedynamicmovementofcommodities——
　　amovement,whichoriginatesinthecontradictionofexchange—valueanduse—valuecontainedinthecommodities,whichisreflectedinthecirculationofmoneyandepitomisedinthevariousdistinctaspectsofthelatter——
　　isthusobliteratedandreplacedbyanimaginarymechanicalequalisationoftheamountofpreciousmetalspresentinaparticularcountryandthevolumeofcommoditiessimultaneouslyavailable。
　　SirJamesSteuartbeginshisinvestigationofspecieandmoneywithadetailedcriticismofHumeandMontesquieu。Heisindeedthefirsttoaskwhethertheamountofmoneyincirculationisdeterminedbythepricesofcommodities,orthepricesofcommoditiesdeterminedbytheamountofmoneyincirculation。Althoughhisexpositionistarnishedbyhisfantasticnotionofthemeasureofvalue,byhisinconsistenttreatmentofexchange—valueingeneralandbyargumentsreminiscentoftheMercantileSystem,hediscoverstheessentialaspectsofmoneyandthegenerallawsofcirculationofmoney,becausehedoesnotmechanicallyplacecommoditiesononesideandmoneyontheother,butreallydeducesitsvariousfunctionsfromdifferentmomentsincommodityexchange。
　　"Theseuses"（ofmoneyininternalcirculation）"maybecomprehendedundertwogeneralheads。Thefirst,paymentofwhatoneowes;thesecond,buyingwhatonehasoccasionfor;theoneandtheothermaybecalledbythegeneraltermofready—moneydemands……Nowthestateoftrade,manufactures,modesofliving,andthecustomaryexpenseoftheinhabitants,whentakenalltogether,regulateanddeterminewhatwemaycallthemassofready—moneydemands,thatis,ofalienation。Tooperatethismultiplicityofpayments,acertainproportionofmoneyisnecessary。Thisproportionagainmayincreaseordiminishaccordingtocircumstances;althoughthequantityofalienationshouldcontinuethesame……Fromthiswemayconclude,thatthecirculationofacountrycanonlyabsorbadeterminatequantityofmoney。""Thestandardpriceofeverything"isdeterminedby"thecomplicatedoperationsofdemandandcompetition",which"bearnodeterminedproportionwhatsoevertothequantityofgoldandsilverinthecountry"。"Whatthenwillbecomeoftheadditionalquantityofcoin？"——"Itwillbehoardedupintreasures"
　　orconvertedintoluxuryarticles。"Ifthecoinofacountry……fallsbelowtheproportionoftheproduceofindustryofferedforsale……inventionssuchassymbolicalmoneywillbefallenupontoprovideanequivalentforit。""Whenafavourablebalancepoursinasuperfluityofcoin,andatthesametimecutsoffthedemandsoftradeforsendingitabroad,itfrequentlyfallsintocoffers;
　　whereitbecomesasuselessasifitwereinthemine。"
　　ThesecondlawdiscoveredbySteuartisthatcurrencybasedoncreditreturnstoitspointofdeparture。Finallyheanalysestheconsequencesproducedbythediversityintherateofinterestobtainingindifferentcountriesontheexportandimportofpreciousmetals。Thelasttwoaspectsarementionedhereonlyforthesakeofacompletepicture,sincetheyareremotefromoursubject,namelysimplecirculation。[5]Symbolicalmoneyorcreditmoney——Steuartdoesnotyetdistinguishthesetwoformsofmoney——canfunctionasmeansofpurchaseandmeansofpaymentinplaceofthepreciousmetalsindomesticcirculation,butnotontheworldmarket。Papernotesareconsequently"moneyofthesociety",whereasgoldandsilverare"moneyoftheworld"。[6]
　　Itisacharacteristicofnationswithan"historical"development,inthesensegiventothistermbytheHistoricalSchoolofLaw,thattheyalwaysforgettheirownhistory。Thusalthoughduringthishalfcenturytheissueoftherelationbetweencommodity—pricesandthequantityofcurrencyhasagitatedParliamentcontinuouslyandhascausedthousandsofpamphlets,largeandsmall,tobepublishedinEngland,Steuartremainedevenmoreof"adeaddog"thanSpinozaappearedtobetoMosesMendelssohninLessing'stime。Eventhemostrecenthistoriographerof"currency",MacClaren,makesAdamSmiththeinventorofSteuart'stheory,andRicardotheinventorofHume'stheory。[7]WhereasRicardoimprovesuponHume'stheory,AdamSmithrecordstheresultsofSteuart'sresearchasdeadfacts。TheScottishproverbthatifonehasgainedalittleitisofteneasytogainmuch,butthedifficultyistogainalittle,hasbeenappliedbyAdamSmithtointellectualwealthaswell,andwithmeticulouscareheaccordinglykeepsthesourcessecrettowhichheisindebtedforthelittle,whichheturnsindeedintomuch。
　　Morethanoncehepreferstotakethesharpedgeoffaproblemwhentheuseofprecisedefinitionsmighthaveforcedhimtosettleaccountswithhispredecessors。Thisis,forinstance,thecasewiththetheoryofmoney。
　　AdamSmithtacitlyacceptsSteuart'stheorybyrelatingthatapartofgoldandsilveravailableinacountryisusedascoin,apartisaccumulatedasreservefundsformerchantsincountrieswhichhavenobanksandasbankreservesincountrieswithacreditsystem,apartservesasastockfortheadjustmentofinternationalpayments,andapartisconvertedintoluxuryarticles。Hequietlyeliminatesthequestionabouttheamountofcoinincirculationbyquiteimproperlyregardingmoneyasasimplecommodity。[8]ThisnotentirelyartlessslipofAdamSmithwaswithmuchpomposityfashionedintoadogma[9]byhisvulgariser,theinsipidJ。B。Say,whomtheFrenchhavedesignatedprincedelascience,justasJohannChristophGottschedcallshisSchonaichaHomerandPietroAretinocallshimselfterrorprincipumandluxmundi。ThetensioncausedbythestruggleagainsttheillusionsoftheMercantileSystempreventedAdamSmith,moreover,fromobjectivelyconsideringthephenomenaofmetalliccurrency,whereashisviewsonpapermoneyareoriginalandprofound。JustasthepalaeontologicaltheoriesoftheeighteenthcenturyinevitablycontainanundercurrentwhicharisesfromacriticaloranapologeticconsiderationofthebiblicaltraditionoftheDeluge,sobehindthefacadeofallmonetarytheoriesoftheeighteenthcenturyahiddenstruggleiswagedagainsttheMonetarySystem,thespectrewhichstoodguardoverthecradleofbourgeoiseconomyandstillcastitsheavyshadowoverlegislation。
　　Investigationsofmonetarymattersinthenineteenthcenturywerestimulateddirectlybyphenomenaattendingthecirculationofbank—notes,ratherthanbythoseofmetalliccurrency。Thelatterwasmerelyreferredtoforthepurposeofdiscoveringthelawsgoverningthecirculationofbank—notes。
　　ThesuspensionofcashpaymentsbytheBankofEnglandin1797,theriseinpriceofmanycommoditieswhichfollowed,thefallinthemint—priceofgoldbelowitsmarket—price,andthedepreciationofbank—notesespeciallyafter1809weretheimmediatepracticaloccasionforapartycontestwithinParliamentandatheoreticalencounteroutsideit,bothwagedwithequalpassion。Thehistoricalbackgroundofthedebatewasfurnishedbytheevolutionofpapermoneyintheeighteenthcentury,thefiascoofLaw'sbank,thegrowingvolumeofvalue—tokenswhichwasaccompaniedbyadepreciationofprovincialbank—notesoftheBritishcoloniesinNorthAmericafromthebeginningtothemiddleoftheeighteenthcentury;afterwhichcamethelegally—imposedpapermoney,theContinentalbillsissuedbytheAmericanGovernmentduringtheWarofIndependence,andfinallytheFrenchassignats,anexperimentconductedonanevenlargerscale。MostEnglishwritersofthatperiodconfusethecirculationofbank—notes,whichisdeterminedbyentirelydifferentlaws,withthecirculationofvalue—tokensorofgovernmentbondswhicharelegaltenderand,althoughtheypretendtoexplainthephenomenaofthisforcedcurrencybythelawsofmetalliccurrency,inrealitytheyderivethelawsofmetalliccurrencyfromthephenomenaoftheformer。Weomitthenumerouswriterswhoseworksappearedbetween1800and1809andturnatoncetoRicardo,becausehenotonlysummariseshispredecessorsandexpressestheirideaswithgreaterprecision,butalsobecausemonetarytheoryintheformhehasgivenithasdominatedBritishbankinglawuptothepresenttime。Likehispredecessors,Ricardoconfusesthecirculationofbank—notesorofcreditmoneywiththecirculationofsimpletokensofvalue。Thefactwhichdominateshisthoughtisthedepreciationofpapermoneyandtheriseincommodity—pricesthatoccurredsimultaneously。TheprintingpressesinThreadneedleStreetwhichissuepapernotesplayedthesameroleforRicardoastheAmericanminesplayedforHume;andinonepassageRicardoexplicitlyequatesthesetwocauses。Hisfirstwritings,whichdealonlywithmonetarymatters,originatedatatimewhenamostviolentcontroversyragedbetweentheBankofEngland,whichwasbackedbytheMinistersandthewarparty,anditsadversariesaroundwhomweregroupedtheparliamentaryopposition,theWhigsandthepeaceparty。ThesewritingsaPpearedasthedirectforerunnersofthefamousReportottheBullionCommitteeof1810,whichadoptedRicardo'sideas。[10]TheoddfactthatRicardoandhissupporters,whomaintainedthatmoneywasmerelyatokenofvalue,werecalledbullionistswasduenotonlytothenameoftheCommitteebutalsotothecontentofRicardo'stheory。
　　Ricardorestatedandfurtherelaboratedthesameideasinhisworkonpoliticaleconomy,buthehasnowhereexaminedmoneyassuchinthewayinwhichhehasanalysedexchange—value,profit,rent,etc。
　　Tobeginwith,Ricardodeterminesthevalueofgoldandsilver,likethevalueofallothercommodities,bythequantityoflabour—timematerialisedinthem。[11]Thevalueofothercommoditiesismeasuredintermsofthepreciousmetals,whicharecommoditiesofadeterminatevalue。Thequantityofmeansofcirculationemployedinacountryisthusdeterminedbythevalueofthestandardofmoneyontheonehand,andbytheaggregateoftheexchange—valuesofcommoditiesontheother。Thisquantityismodifiedbytheeconomywithwhichpaymentsareeffected。[12]Since,therefore,thequantityinwhichmoneyofagivenvaluecanbecirculatedisdetermined,andwithintheframeworkofcirculationitsvaluemanifestsitselfonlyinitsquantity,moneywithinthesphereofcirculationcanbereplacedbysimplevalue—tokens,providedthattheseareissuedintheamountdeterminedbythevalueofmoney。Moreover"acurrencyisinitsmostperfectstatewhenitconsistswhollyofpapermoney,butofpapermoneyofanequalvaluewiththegoldwhichitprofessestorepresent。"[13]
　　Sofar,therefore,Ricardohasassumedthatthevalueofmoneyisgiven,andhasdeterminedtheamountofmeansofcirculationbythepricesofcommodities:forhimmoneyasatokenofvalueisatokenwhichstandsforadeterminatequantityofgoldandisnotavaluelesssymbolrepresentingcommodities,asitwasforHume。
　　WhenRicardosuddenlyinterruptsthesmoothprogressofhisexpositionandadoptstheoppositeview,hedoessoinordertodealwiththeinternationalmovementofpreciousmetalsandthuscomplicatestheproblembyintroducingextraneousaspects。Followinghisowntrainofthought,letusfirstofallleaveasideallartificialandincidentalaspectsandaccordinglylocatethegoldandsilvermineswithinthecountriesinwhichthepreciousmetalscirculateasmoney。TheonlypropositionwhichfollowsfromRicardo'sanalysisuptonowisthatifthevalueofgoldisgiven,theamountofmoneyincirculationisdeterminedbythepricesofcommodities。Thevolumeofgoldcirculatinginacountrythereforeissimplydeterminedbytheexchange—valueofthecommoditiesincirculationatthegiventime。Nowsupposingthattheaggregateamountoftheseexchange—valuesdecreases,becauseeitherasmalleramountofcommoditiesisproducedattheoldexchange—values,orthesameamountofcommoditiesisproducedbutthecommoditiesrepresentlessexchange—valueasaresultofanincreaseintheproductivityoflabour。
　　Orletusassumebycontrastthattheaggregateexchange—valuehasincreased,becausealargervolumeofcommoditieshasbeenproducedwhileproductioncosts'sremainconstant,orbecauseeitherthesameorasmallervolumeofcommoditieshasalargervalueasaresultofadeclineintheproductivityoflabour。Whathappenstotheexistingquantityofmetalincirculationinthesetwocases？Ifgoldismoneyonlybecauseitcirculatesasamediumofcirculation,ifitisforcedtostayinthesphereofcirculation,likepapermoneywithforcedcurrencyissuedbytheState（andRicardoimpliesthis）,thenthequantityofmoneyincirculationwill,inthefirstcase,beexcessiveinrelationtotheexchange—valueofthemetal,anditwillstandbelowitsnormallevelinthesecondcase。
　　Althoughendowedwithaspecificvalue,goldthusbecomesatokenwhich,inthefirstcase,representsametalwithalowerexchange—valuethanitsown,andinthesecondcaserepresentsametalwhichhasahighervalue。
　　Goldasatokenofvaluewillfallbelowitsrealvalueinthefirstcase,andriseaboveitinthesecondcase（oncemoreadeductionmadefrompapermoneywithforcedcurrency）。Theeffectwouldbethesameasif,inthefirstcase,allcommoditieswereevaluatedinmetaloflowervaluethangold,andinthesecondcaseasiftheywereevaluatedinmetalofahighervalue。Commodity—priceswouldthereforeriseinthefirstcase,andfallinthesecond。Themovementofcommodity—prices,theirriseorfall,ineithercasewouldbeduetotherelativeexpansionorcontractionintheamountofgoldincirculationoccasioningariseaboveorafallbelowthelevelcorrespondingtoitsownvalue,i。e。,thenormalquantitydeterminedbytherelationbetweenitsownvalueandthevalueofthecommoditieswhicharetobecirculated。
　　Thesameprocesswouldtakeplaceiftheaggregatepriceofthecommoditiesincirculationremainedconstant,buttheamountofgoldincirculationeitherfellbeloworroseabovetheproperlevel;theformermightoccurifgoldcoinwornoutincirculationwerenotreplacedbysufficientnewoutputfromthemines,thelatterifthenewsupplyfromtheminessurpassedtherequirementsofcirculation。Inbothcasesitisassumedthattheproductioncostofgold,oritsvalue,remainsunchanged。
　　Torecapitulate:iftheexchange—valuesofthecommoditiesaregiven,themoneyincirculationisatitsproperlevelwhenitsquantityisdeterminedbyitsownmetallicvalue。Itexceedsthislevel,goldfallsbelowitsownmetallicvalueandthepricesofcommoditiesrise,whenevertheaggregateexchange—valueofcommoditiesdecreasesorthesupplyofgoldfromtheminesincreases。Thequantityofmoneysinksbelowitsappropriatelevel,goldrisesaboveitsownmetallicvalueandcommodity—pricesfall,whenevertheaggregateexchange—valueofcommoditiesincreasesorthesupplyofgoldfromtheminesisinsufficienttoreplaceworn—outgold。Inthesetwocasesthegoldincirculationisatokenofvaluerepresentingeitheralargerorasmallervaluethanitactuallypossesses。Itcanbecomeanappreciatedordepreciatedtokenofitself。Whencommoditiesaregenerallyevaluatedinconformitywiththenewvalueofmoney,andcommodity—pricesingeneralhaverisenorfallenaccordingly,theamountofgoldincirculationwilloncemorebecommensuratewiththeneedsofcirculation（aresultwhichRicardoemphasiseswithspecialsatisfaction）,butitwillbeatvariancewiththeproductioncostsofpreciousmetals,andhencewiththerelationsofpreciousmetalsascommoditiestoothercommodities。AccordingtoRicardo'sgeneraltheoryofexchange—value,theriseofgoldaboveitsexchange—value,inotherwordsabovethevaluewhichisdeterminedbythelabour—timeitcontains,wouldleadtoanenlargedoutputofgolduntiltheincreasedsupplyreduceditagaintoitspropervalue。Conversely,afallofgoldbelowitsvaluewouldleadtoadeclineintheoutputofgolduntilitsvalueroseagaintoitsproperlevel。Theseoppositemovementswouldresolvethecontradictionbetweenthemetallicvalueofgoldanditsvalueasamediumofcirculation;theamountofgoldincirculationwouldreachitsproperlevelandcommodity—priceswouldoncemorebeinaccordancewiththestandardofvalue。Thesefluctuationsinthevalueofgoldwouldinequalmeasureaffectgoldbullion,sinceaccordingtotheassumptionallgoldthatisnotusedasluxuryarticlesisincirculation。
　　Seeingthatevengoldintheformofcoinorbullioncanbecomeavalue—tokenrepresentingalargerorsmallervaluethanitsown,itisobviousthatanyconvertiblebank—notesthatareincirculationmustsharethesamefate。Althoughbank—notesareconvertibleandtheirrealvalueaccordinglycorrespondstotheirnominalvalue,"theaggregatecurrencyconsistingofmetalandofconvertiblenotes"mayappreciateordepreciateif,forreasonsdescribedearlier,thetotalquantityeitherrisesaboveorfallsbelowthelevelwhichisdeterminedbytheexchange—valueofthecommoditiesincirculationandthemetallicvalueofgold。Accordingtothispointofview,inconvertiblepapermoneyhasonlyoneadvantageoverconvertiblepapermoney,i。e。,itcanbedepreciatedintwoways。
　　Itmayfallbelowthevalueofthemetalwhichitprofessestorepresent,becausetoomuchofithasbeenissued,oritmayfallbecausethemetalitrepresentshasfallenbelowitsownvalue。Thisdepreciation,notofnotesinrelationtogold,butofgoldandnotestakentogether,i。e。,oftheaggregatemeansofcirculationofacountry,isoneofRicardo'smaindiscoveries,whichLordOverstoneandCo。pressedintotheirserviceandturnedintoafundamentalprincipleofSirRobertPeel'sbanklegislationof1844and1845。
　　Whatshouldhavebeendemonstratedwasthatthepriceofcommoditiesorthevalueofgolddependsontheamountofgoldincirculation。Theproofconsistsinpostulatingwhathastobeproved,i。e。,thatanyquantityofthepreciousmetalservingasmoney,regardlessofitsrelationtoitsintrinsicvalue,mustbecomeamediumofcirculation,orcoin,andthusatokenofvalueforthecommoditiesincirculationregardlessofthetotalamountoftheirvalue。Inotherwords,thisproofrestsondisregardingallfunctionsperformedbymoneyexceptitsfunctionasamediumofcirculation。
　　Whendrivenintoacorner,asforinstanceinhiscontroversywithBosanquet,Ricardo——entirelydominatedbythephenomenonofvalue—tokensdepreciatingbecauseoftheirquantity,——resortstodogmaticassertion。[14]
　　IfRicardohadpresentedhistheoryinabstractform,aswehavedone,withoutintroducingconcretecircumstancesandincidentalaspectswhichrepresentdigressionsfromthemainproblem,itshollownesswouldhavebeenquiteobvious。Buthegivesthewholeanalysisaninternationalveneer。
　　Itiseasytoshow,however,thattheapparentmagnitudeofscalecaninnowayaltertheinsignificanceofthebasicideas。
　　Thefirstproposition,therefore,was:thequantityofspecieincirculationisnormalifitisdeterminedbytheaggregatevalueofcommoditiesincirculationestimatedintermsofthemetallicvalueofspecie。Adjustedfortheinternationalscenethisreads:whencirculationisinanormalstate,theamountofmoneyineachcountryiscommensuratewithitswealthandindustry。Thevalueofmoneyincirculationcorrespondstoitsrealvalue,i。e。,itscostsofproduction:inotherwords,moneyhasthesamevalueinallcountries。[15]Moneythereforewouldneverbetransferred（exportedorimported）fromonecountrytoanother。Astateofequilibriumwouldthusprevailbetweenthecurrencies（thetotalvolumeofmoneyincirculation）ofdifferentcountries。Theappropriatelevelofnationalcurrencyisnowexpressedintheformofinternationalcurrency—equilibrium,andthismeansinfactsimplythatnationalitydoesnotaffectthegeneraleconomiclawatall。
　　Wehavenowreachedagainthesamecrucialpointasbefore。Inwhatwayistheappropriatelevelupset,whichnowreadsasfollows:inwhatwayistheinternationalequilibriumofcurrenciesupset,orwhydoesmoneyceasetohavethesamevalueinallcountries,orfinallywhydoesitceasetohaveitsspecificvalueineachcountry？Justaspreviouslytheappropriatelevelwasupsetbecausethevolumeofgoldincirculationincreasedordecreasedwhiletheaggregatevalueofcommoditiesremainedunchanged,orbecausethequantityofmoneyincirculationremainedconstantwhiletheexchange—valueofcommoditiesincreasedordecreased;sonowtheinternationallevel,whichisdeterminedbythevalueofthemetal,isupsetbecausetheamountofgoldisaugmentedinonecountryasaresultofthediscoveryofnewgoldminesinthatcountry,orbecausetheaggregateexchange—valueofthecommoditiesincirculationinaparticularcountryincreasesordecreases。Justaspreviouslytheoutputofpreciousmetalswasdiminishedorenlargedinaccordancewiththeneedforreducingorexpandingthecurrency,andinaccordancewithittolowerorraisecommodity—prices,sonowthesameeffectisachievedbyexportandimportfromonecountrytoanother。
　　Inacountrywherepriceshaverisenand,owingtoexpandedcirculation,thevalueofgoldhasfallenbelowitsmetallicvalue,goldwouldbedepreciatedinrelationtoothercountries,andthepricesofcommoditieswouldconsequentlybehigherthaninothercountries。Goldwould,therefore,beexportedandcommoditiesimported。Theoppositemovementwouldtakeplaceinthereversesituation。Justaspreviouslytheoutputofgoldcontinueduntiltheproperratioofvaluesbetweengoldandcommoditieswasre—established,sonowtheimportorexportofgold,accompaniedbyariseorfallincommodity—prices,wouldcontinueuntilequilibriumoftheinternationalcurrencieshadbeenre—established。Justasinthefirstexampletheoutputofgoldexpandedordiminishedonlybecausegoldstoodaboveorbelowitsvalue,sonowtheinternationalmovementofgoldisbroughtaboutbythesamecause。Justasintheformerexamplethequantityofmetalincirculationandtherebypriceswereaffectedbyeverychangeingoldoutput,sonowtheyareaffectedsimilarlybyinternationalimportandexportofgold。Whentherelativevalueofgoldandcommodities,orthenormalquantityofmeansofcirculation,isestablished,nofurtherproductionofgoldtakesplaceintheformercase,andnomoreexportorimportofgoldinthelatter,excepttoreplaceworn—outcoinandfortheuseoftheluxuryindustry。Itthusfollows,"thatthetemptationtoexportmoneyinexchangeforgoods,orwhatistermedanunfavourablebalanceoftrade,neverarisesbutfromaredundantcurrency"。[16]
　　Theimportorexportofgoldisinvariablybroughtaboutbythemetalbeingunderratedoroverratedowingtoanexpansionofthecurrencyaboveitsproperleveloritscontractionbelowthatlevel。[17]Itfollowsfurther:sincetheoutputofgoldisexpandedordiminishedinourfirstcase,andgoldisimportedorexportedinoursecondcase,onlybecauseitsquantityhasrisenaboveitsproperlevelorfallenbelowit,becauseitisratedaboveitsmetallicvalueorbelowit,andconsequentlycommodity—pricesaretoohighortoolow,everyoneofthesemovementsactsasitsowncorrective,for,byaugmentingorcurtailingtheamountofmoneyincirculation,pricesarereducedagaintotheircorrectlevel,whichisdeterminedbythevalueofgoldandthevalueofcommoditiesinthefirstcase,andbytheinternationallevelofcurrenciesinthesecond。