RECOVERY OF THE EXCHANGES 43 
given by the definition of the monetary unit 1s the primary 
cause in preventing the value of drafts on foreign countries 
from rising above par or above the fixed parity beyond 
the cost of exporting the gold, i.e., the export gold 
point.} 
Conversely, gold coin, once it is imported from abroad, 
can only represent a given number of monetary units, and 
consequently the selling price of drafts on foreign coun- 
tries, quoted in the national currency, cannot fall below a 
rate given by the ratio between the value of the weight of 
gold imported and that of the monetary units of home 
currency which it represents, less the costs of import 
(import gold point).2 Thus, so long as the Conversion 
1 A distinction is commonly made between the idea of par, 7.e., the ratio 
between the values of two currencies of the same metal, exactly equivalent 
to the ratio between the weights of their respective contents in fine metal, 
and parity, a legal exchange ratio between currencies different in kind, such 
as gold and silver, or gold and paper. Parity is an arbitrary relation, whereas 
par is the necessary result of the respective weights of fine metal, given the 
definition of the monetary units involved. But this definition is itself quite 
arbitrary. Similarly, it is always arbitrary to make a piece of paper represent 
directly or indirectly a certain weight of gold; for instance, the United 
States exchange remains stable in relation to other countries with a gold 
currency within the limits of the gold points which rise above or fall below 
the value of the dollar at par. The exact meaning of this statement is that 
the notes with a face value in dollars, which form the bulk of the United 
States currency, are convertible into a constant weight of gold, this gold 
in turn representing by definition a constant number of the monetary 
units of different countries, so long as conversion is actually possible. 
Similarly, when the paper peso of the Argentine was fixed at 44 gold 
centavos, it represented a certain weight in gold, and this weight in gold, 
although it doubtless corresponded only to 4’ of the former weight of the 
peso, was none the less strictly defined, and also corresponded to a fixed number 
of the monetary units of various countries. The fact that a paper monetary 
unit does not correspond in nominal value to the former gold monetary 
unit implies no essential change in the system. It is true that in making the 
paper peso equal to 44 gold centavos the foreign exchanges were reconsti- 
tuted below the former par, but a new par was set up with the new peso, 
representing 4%; of the weight of gold in the old one. 
2 Here again the difference in procedure between countries with a gold 
currency and those on a gold reserve is superficial; in the former a fall in 
the rate quoted in home currency is limited by the fact that if drafts on 
foreign countries were offered at too high a price, gold would be imported, 
recoined, and put into circulation in the form of coin representing a number