CHAPTER 26 
THE UNDERLYING PRINCIPLES 
THE theoretical analysis given in Part I of this book and 
the discussion of the problems of verification in Part II 
have rested thruout on the assumption that one and the same 
metal — gold — is the basis of the circulating medium of the 
trading countries, and moves freely between them. It is obvious, 
however, that the machinery of the flow of specie, of prices, of 
money incomes rising or falling because of the specie movement, 
of readjustment thru a new level of prices and money incomes in 
each of the countries — all this cannot operate, or at least cannot 
operate in the same way, where the monetary systems rest on 
different bases. Where there is paper in one country and gold 
in another, or gold in one and silver in another, the entire mechan- 
ism is different. The compensating, correcting, stabilizing influ- 
ence of gold movements ceases to be operative. It becomes a 
question whether in its absence the substantive outcome also is 
different. How, for example, do our conclusions on the barter 
terms of trade apply? It has been among the major objects of 
the present volume to ascertain in what way and to what extent the 
general reasoning on the barter terms of trade is found applicable 
in the concrete working of international trade. That same prob- 
lem presents itself where there are different monetary systems 
and dislocated foreign exchanges. The presumption no doubt is 
that the ultimate phenomena of trade between nations will not 
be essentially different because of differences in their monetary 
systems. Just as trade between individuals will presumably be 
conducted on the same terms under a money régime as under 
barter, and on the same terms under one monetary system as 
under another, so also with regard to trade between nations. But 
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