CONCLUSION 231 
explained by a knowledge of exchange mechanism under 
monetary régimes which require to be exactly described 
and the working of which must be accurately ascertained. 
Finally, we have shown that such phenomena are often 
unconnected with superficial considerations of quantity 
with which they have been connected in the absence of a 
sufficiently detailed knowledge of the data. It has also 
seemed to us that the idea of commodity, far from being 
an essential element in the conception of money, tends, on 
the contrary, to disappear in the course of history; 
and it is impossible to explain in terms of this idea 
monetary phenomena which are directly bound up with the 
theory of value. For we have shown that the idea of 
supply and demand cannot be borrowed from a normal 
market with free competition between buyer and seller 
and applied to quite a different market, such as is created 
by the system of free coinage, where the supply of precious 
metal is always certain to find an unlimited demand at a 
fixed rate. On the other hand, we have shown that if the 
law of supply and demand is applicable to money subject 
to the reserve which may be made in regard to the Quan- 
tity Theory, the volume of currency in circulation is no 
longer in direct relation to the quantity of precious metal 
transformed into currency. Hence the part played by a 
metallic currency and its production in determining the 
value of a monetary unit tends to become smaller. When 
the system of free coinage was established, the value of 
fresh metal was fixed in relation to that of the monetary 
unit ; thereafter it could no longer have any appreciable 
effect on the value of the monetary unit. We have thus 
been led to a more modest, but, as we believe, a more 
accurate definition of the function of gold as an inter- 
national currency; we do not see in it—as is commonly 
supposed—a kind of physical support for abstract monet- 
ary units, but rather as a machine for transforming 
national monetary units into each other at a fixed rate. For 
1We have shown that exchange has become more and more im- 
portant as compared with inflation in bringing about a rise in prices at 
the present day.