an ounce of gold, while the credit of the giver is unimpaired, is worth neither more nor less than the gold itself.
It is not, however, with ultimate or average, but with immediate and temporary prices that we are now concerned. These, as we have seen, may deviate very widely from the standard of cost of production. Among other causes of fluctuation, one we have found to be the quantity of money in circulation. Other things being the same, an increase of the money in circulation raises prices; a diminution lowers them. If more money is thrown into circulation than the quantity which can circulate at a value conformable to its cost of production, the value of money, so long as the excess lasts, will remain below the standard of cost of production, and general prices will be sustained above the natural rate.
But we have now found that there are other things, such [pg 336] as bank-notes, bills of exchange, and checks, which circulate as money,