434 ISELUEXCE OF IIECE> T T GOLD DISCOVERIES OX PRICES. 



and now Broking below its natural value — which latter is happily 

 described by Adam Smith as that "centre of repose and continuance" 

 which the former is ever struggling to attain. The extent and 

 frequency of these fluctuations of the market value of a commodity 

 must depend on the degree and manner in which the relation of 

 its supply and demand is liable to disturbing influences. 



In this respect the precious metals differ from almost all other 

 commodities. While most other commodities are exposed to sudden 

 and very great variations in value, the changes in the the 



precious metals have generally been very slow and gradual.* And it 

 is this quality which eminently qualifies them to act as a general 

 standard of value. So accustomed, indeed, are we to witness conti- 

 nued fluctuations in the market values of most commodities, arising 

 whollv from accidental causes affecting their demand and supply, 

 and so seldom do we witness any change in the value of gold or 

 silver, that when in reality the value of gold and silver is changed 

 and the price of all other commodities thereby affected, we are slow to 

 admit the fact, and persuade ourselves that the change in prices is 

 due to any cause save the real one. And yet a little reflection will 

 serve to convince us that, when the rise or fall of prices is general 

 and affects all commodities to the same extent or nearly so, the 

 natural inference is that such a change must be due to an alteration 

 in the value of money and to nothing else. 



To resume the argument. It is plain that the rise in the 

 general level of prices of commodities must result either from 

 a general increase of the cost of production of commodities or a re- 

 duction in the cost of production of the precious metals — or, again, 

 from some cause or causes increasing the demand for commodities 

 generally, or diminishing the demand for the precious metals. Of 

 these four supposable causes by which (in theory at least) the phen- 

 omenon under consideration might possibly be occasioned, it will, 

 I think, be shown in the sequel that the efficient causes really are — 



1st. A reduction in the cost of production of the precious metals 

 consequent on the recent gold discoveries. 



2nd. A diminution in the supply and simultaneous increase in the 

 demand for m mv of the most important staples of commerce — the 

 result partly and indirectly of the gold discoveries, and partly and 

 more directly of the war and other causes. 



• The c imparative uniformity and steadiness in the value of the precious metals arises 

 from this, that the existing supply of the metals is so great and the demand for them so 

 universal, that the relation between the demand and supply is not liable to be materially 

 aifected by any accidental disturbances of cither. 



