In favour of gold as a standard it is argued that being less extensively used for plate and other mauufactures, it is less an article of commerce than silver, and is confined more specially to the purposes of money. On the other hand, it is contended that gold is used in large quantities for jewellery, watches, and decorative purposes, and that being a more costly material, its consumption in this affects its quantity and value to a greater extent than the use of plate affects the price of silver. And in this argument there is much weight, for it is estimated that the quantity of gold compared with the quantity of silver is as I to 50 ; and their relative value is as 1 to 15. (See Bullion Report,' 1810. Allen's Evidence.) Yet in a long series of years the relative prices of the two metals have not materially varied; but the fluctuation has been very much more in the price of silver than in the price of gold ; a difference of Id. an ounce in each being equal to a variation of 15 to 1 against the standard price of silver as compared with gold.
But it is not sufficient to consider the demand for the precious metals as articles of consumption only; they are suddenly sought for in large quantities for other purposes. If the exchanges be unfavourable to a country, its precious metals are in greater demand for exportation than its commodities; or if there be a foreign war, its metals are in demand for the payment of the troops and for the purchase of food and munitions of war, simply because of their ready convertibility. This applies with peculiar force to gold. It is because of its supe riority as a medium of exchange and standard of value that it is taken.
If it should happen that one country has a largo gold coinage in circulation in addition to all the bullion which is required for the purposes of commerce, while all the adjacent countries use a silver currency, and possess very little more gold than is necessary for its consumption, it is clear that whenever a large demand for gold arises, it must be directed to the country in which there is a gold currency. The gold in the other countries has, in fact, become higher in value from the increased demand, and so soon as the increased value makes it worth while, the gold in the country where it has not yet risen, will be immediately used by all others as a rich gold mine, whence abundance of metal without alloy, and assayed ready to their hands, may at once be grasped, without digging in the earth. No laws and no vigilance can restrain its export ; as soon as it is wanted abroad, it disappears like water through a sieve. Whenever gold is wanted, the coinage of England, if there is not a sufficient supply of bullion, supplies it to those countries having a silver standard ; while if England requires silver it is rapidly drained from those countries.
The extent to which gold is exported when the foreign exchanges are unfavourable may be seen from the returns of bullion retained by the Bank at many different periods. We have already stated the large amount of silver obtained from Franco in 1859.
But it must be recollected that, independently of fluctuations in the prices of bullion, a diminution in the quantity of money circulating in a country raises the value of the remainder, and disturbs its relation to the prices of other commodities. It is in this form that the effects of an abstraction of gold must be felt rather than in the price of bullion ; and though its influence upon prices is very injurious, the cause is not always perceptible. When paper money is added to gold and silver coin as part of the circulation, a country can always command a sufficient quantity of money ; but the drain of its metals has an important influence upon the value of its circulating medium, and upon the operations of commerce.
But the precious metals, even gold, have an inconvenience from their bulk, the dangers of transit in large quantities, and the need of at least occasional assaying. In all commercial nations the use of paper money is almost imperative, and its convenience makes it in various respects desirable even in the internal trade of a country. Its value however as a medium of exchange is merely that it isa guaranteed representative of real value. This guarantee may be alffirded by the issue of paper either immediately by a government, or by its delegated agents ; and no paper can be kept up to its nominal value unless it is known to be readily convertible into real value at any time at the desire of tho holder. The paper money of most of the continental states is at a considerable discount from not beiug so convertible, and the state itself dote not receive it in payment of taxes or duties, for instance, at the full amount it nominally represents. Further informatiou on this subject will be found in the articles BANK and BANKING; BILLS OF EXCHANGE; EXCHANGE; CURRENCY, &C.
Money, as a circulating medium, is either of metal coined for the purposes of commerce, usually stamped with the name and arms of the prince or state that directs it to pass current ; or it is money of account, which may be considered with respect to coins as weights and measures with respect to goods, or as a mathematical scale with respect to maps, lines, or other geometrical figures. Thus moneys of account serve as standards of the value both of merchandise and of the precious metals themselves. It should, however, he remarked, that moneys of account, though they are uniform as a scale of divisions and proportions, yet they fluctuate in their intrinsic value with the fluctuation of the coins which they measure or represent.