value of silver by more than 2 per cent., how was it that a comparatively insignificant rise in the relative production of silver in the second period led to such an enormous rise in the price of gold? What was the controlling influence present in the one case which was absent in the other? Those who held that it was demonetization of silver that was responsible for its depreciation argued that, though alike in every way, the two periods differed in one important [pg 81] particular. What distinguished them was the fact that in the former it was a common practice to define the standard money of a country as a certain quantity of gold _or_ a certain quantity of silver. Prior to 1803 the two metals were rated differently in different countries,¹⁵⁶ but since that date the rating of 1 to 15½ became more uniform, with the result that the monetary standard throughout that period was either 1 gr. of gold or 15½ grs. of silver. On the other hand, during the second period, the “_or_” which characterized the first period was deleted by the silver-demonetizing and suspending decrees. In other words, the first period was characterized by the prevalence of bimetallism under which the two metals could be used interchangeably at a fixed given ratio. In the second period they could not be so used owing to the fact that the fixed ratio necessary for interchange had been abrogated. Now, could the existence or non-existence of a fixed ratio be said to be such a powerful influence as to make the whole difference that set the two periods in such marked contrast? That this was the factor which made the whole difference was the view of the bimetallists. It was said that, by virtue of the monetary system prevalent during the first period, gold and silver were rendered substitutes and were regarded as “one commodity of two different strengths.” So related, the conditions of supply had no effect upon their ratio of exchange, as would have been the case in respect of a commodity without a substitute. In the case of commodities which are substitutes, the relative scarcity of one can give it no greater value in terms of the other than that defined by their ratio of exchange, because by reason of the freedom of substitution the scarcity can be made good by the abundance of the other. On the other hand, the relative abundance of one can not depreciate its value in terms of the other below the ratio of exchange, because its superfluity can be absorbed by the void created in consequence of a paucity of the other. So long as they remain substitutes with a fixed ratio of substitution, nothing originating in demand or supply could disturb their [pg 82] ratio. The two being one commodity, whatever changes take place in the demand or supply of either system beyond the needs of commerce express themselves in the price level exactly as though one of them alone was the money medium; but their ratio of exchange will be preserved intact in any case.