CHAPTER 17 
INTERNATIONAL PAYMENTS IN RELATION TO MONETARY SYSTEMS 
WE proceed now to a different aspect of the problem of veri- 
fication. The preceding chapters have dealt with the direction 
into which a country’s labor and capital are turned, with the 
character of the national industries, with the accord of industrial 
development, with the theoretical forecast. These are matters of 
substantive outcome. What we have now to consider is not so 
much the substantive result as the mechanism by which the result 
is brought about.! 
The mechanism is that of international payments. Interna- 
tional payments, obviously a part of the general subject of inter- 
national trade, have had much more attention in the literature of 
the subject, and especially in its recent literature, than compara- 
tive costs and international values. But they have rarely been 
treated in their relations to these underlying problems. I propose 
in the following chapters to examine them from just this point of 
view : to consider how the actual payments made by one country 
to another are related to the remoter and more fundamental 
problems of international trade. The inquiry will involve of 
necessity some consideration of still another field in economics, 
namely, the theory of money and prices. The present chapter, 
which is introductory in character, will be given chiefly to those 
aspects of monetary theory which are closest to the theory of 
international trade. 
To begin, let it be emphasized once more that all the trade — 
virtually all — is carried on thru transactions between individuals 
! The reader will bear in mind that this Part thruout is concerned with those 
countries only and those times in which the monetary systems are on a gold basis. 
The mechanism of international trade under inconvertible paper is reserved for 
treatment in Part ITI. It is the gold standard which has the wider and more endur- 
ing range, and is of the greater theoretical and practical importance.