Indeed one might know a priori that gold as a measure of value or medium of exchange, could have no more effect on the relations or movements of the things exchanged than a shadow on the substance which casts it; and that if sent across from one nation to another in any other capacity, there would be as little chance of its going back again without cause, and by its own initiative, from some magical property inherent in itself, as of a sack of iron or coal.

To begin with, then, we deny that any passage of gold, as such, can, in its function as a medium of exchange for the payment of trade balances, have any permanent effect on the relative prices of any commodity whatever, in any two countries engaged in trade with each other. It may be true that if all the inhabitants of a country suddenly discovered that an island had risen from the sea which could supply them with everything cheaper than they could get it at home, they would go on buying these products and paying for them in gold until there was neither coin left in the country nor an industry left at work, except those of porters, restaurant proprietors, and retailers, etc., to distribute the good things they had got so cheaply; but to imagine that they could continue to sit there and enjoy this life of cheap lotus-land delights after their last coin had gone, in the belief that those coins would all come rolling back to them again while they slept, and so enable them to repeat the delightful experience indefinitely, would be indeed to postulate a rare simplicity in that shrewd, highly developed product of civilization, the modern commercial mind.

It is more reasonable to believe that like children who should come across a cage of lions for the first time, and put their hands through the bars to stroke them as if they were kittens, or men determined to get to Klondike in midwinter who should begin by selling their clothes to pay for the journey, their first experience would be likely to be their last. But the truth of the situation will be better seen if we suppose that there is no gold or money at all in the world, but that all things are directly exchanged by barter. Then it would be apparent that between a country which produced everything cheaper than another country and the less fortunate country, there would be no trade at all, any more than there is at present between Europe and the Arctic Circle. The inhabitants of the stronger industrial nation would naturally do all their exchanges among themselves, as there would be nothing to tempt them to go farther afield to buy things which could only be produced at a greater cost, not at a less, than at home. The weaker nation would also do all its exchanges with its own people, as it could not sell anything to the other nation, which already produced all things cheaper than it was able to do.

And the consequence would be, that trade far from going on between these nations for ever, would as we should know and expect, never get started at all! Now the introduction of gold or money instead of barter cannot possibly make any difference. As a mere commodity for purposes of luxury or adornment, it is by our hypothesis already more cheaply produced in the stronger industrial nation than in the weaker, just as iron or coal is, and so there would be no point in opening up trade in it, for the same reasons as those just given; while as a mere medium of exchange it can have no effect either, inasmuch as it is then, like a railway ticket, only a token, and whether it be gold, or silver, or copper, that is used, a large gold coin or a small one, will make no difference whatever except as a matter of convenience. On the other hand, if gold is wanted to hoard as a provision against the future, then it becomes again a mere commodity like any other, like, for example, the diamonds and precious stones in which, on account of their permanent value, or the general belief in their permanent value, the wealth of so many Eastern princes is invested; and although gold, like a world Emperor standing in the midst of the local kings owning his sway, has a higher rank as a commodity than any other on account of the relative stability and permanence as a wealth-embodying token which its accepted recognition by all men everywhere and at all times gives it; still, there is no more reason why, as a commodity, its purchase or sale (and its movement in consequence from one country to another) should affect the prices of other things, as of coal or iron or corn, than a sale of diamonds or jewels, or of corn or iron or coal; nor why it alone of things should have the magical property of automatically passing backwards and forwards between nations, alternately raising the prices of all things and then depressing them, like the boy on the centre of our see-saw. For its movements as a commodity have not altered anything else that could by any possibility raise or depress prices; they do not lessen the cost of producing anything so as to make that thing cheaper in the market, - as a new and better machine or process would do, - nor does the gold itself that passes find its way as such into the pockets of any class of persons through the legitimate competition of industry, whether of masters or men; it does not make employers give their workmen higher wages, nor does it give the employers themselves higher profits, and therefore it does not create the greater demand in proportion to supply which is necessary before prices can rise.