INFLUENCE OF EECENT GOLD DISCOTEBIES ON PEICES. 433 



before the decline in the value of money they had been fairly 

 adjusted. 



To return, however, from this digression. I think that sufficient 

 has been said to establish the fact that a considerable advance in prices 

 has within the last five or six years taken place not only in Califor- 

 nia and Australia, but in this country and throughout the Continent 

 generally, as well as in Great Britain and the rest of Europe. 



To what causes, then, is this phenomenon due ? I answer — firstly, 

 and chiefly, to the recent gold discoveries ; secondly, and in a lesser 

 degree, to the war and other local and temporary causes. 



It is with the former of these causes only that we have now to do. 

 Before entering, however, on a discussion as to the degree of influ- 

 ence or mode of operation of the gold discoveries in effecting the 

 results which I assign to them, it may not be out of place to make 

 some brief remarks in reference to the general fundamental laws 

 regulating prices. 



The relative values of commodities are commonly estimated by re- 

 ferring them to the common measure or standard of value — money ; 

 in other words, by their relative prices — the price of every commo- 

 dity being its value in money. The relative prices of different 

 commodities at any given time are of course an accurate index of 

 their relative values at that time. And if our standard of value 

 were (like our standards of weights and measures) invariable, the 

 relative prices of the same commodity, at different times, would 

 also indicate accurately its relative values at those times. The fall or 

 rise in the price of any article would shew precisely the fall or rise 

 in its value. But our standard of value is not thus invariable, nor 

 indeed can it be, inasmuch as the precious metals, which form the 

 standard, are themselves liable (though not to the same extent as 

 most other commodities) to fluctuate in value. 



It is obvious then that a change of the price of any article may 

 arise from two distinct classes of causes, either those affecting the 

 intrinsic value of the article itself, or those affecting the value of 

 the money with which it is compared. 



Now the values of all commodities (gold and silver included) are 

 determined ultimately and permanently by their cost of production, 

 temporarily and proximately by the relation existing between their 

 demand and supply. The value of any article, considered as deter*- 

 mined by the relation existing between the demand and supply, is 

 styled its " market value ;" while its value, considered as regulated 

 by its cost of production, is termed its "natural value." The market 

 value of most commodities is constantly changing, now rising above 



G* 



