196 MODERN MONETARY SYSTEMS 
intended to prevent any speculative purchase of yellow 
metal. On the whole, it amounts to a return to the system 
of variable rates of purchase which existed before the French 
Revolution,! but with this difference, that the scaling, 
instead of being arbitrary, would be automatically drawn 
up in accordance with variations in the purchasing power 
of the currency. 
But what would be the effect of this method? Would it 
even have the practical result of the legal method described 
above in altering sums due under long-term contracts by 
applying to them a coefficient set up in accordance with 
the purchasing power of the currency? 
The truth is that our author appears to have been the 
victim of an extraordinary illusion which demonstrates 
the danger of reasoning in the abstract without regard to 
the real economic facts. He admits that the value of the 
dollar will increase and that therefore the price of goods 
in dollars will fall because it will be known that the dollar 
contains a larger quantity of gold—nay, from the mere fact 
that the dollar will represent more gold, even though the 
public is not aware of it; for he says, most people will 
continue to use the ordinary media of exchange (whether 
gold or silver coin or fiduciary currency) without ever 
knowing what has happened, and he believes that his 
argument is fortified by the precedent of the adoption of 
the gold exchange standard in India, in the Philippine 
Islands, etc., which made of the “‘gold not in circulation” 
the basis of the monetary system. 
Now the first effect of such a system would, as the 
author himself recognises, obviously be to dissociate the 
exchange value of a given weight of gold from that of the 
monetary unit which the system of free coinage, implying 
a permanent correspondence between the monetary unit 
and a given weight of fine metal, had made identical. On 
the other hand, trade would continue to be effected and 
valued in terms of the monetary unit, whether embodied 
1 This has been clearly pointed out by M. Deschamps in the above- 
mentioned discussion. See Journal de la Société de Statistique de Paris, 
March 1913.