I know no sense in which the terms, demand and supply of money, can have relevance to the problem of the value of money. There is one sense in which the terms can be used which fits in with the modern supply and demand-curves, and that is the sense in which they are used in the money market. Demand for money comes from borrowers; supply of money from lenders. The price paid is a money-price, the curves express the short time money-rates, the rental of money, in terms of money, for stated periods of time. There is a relation, later to be investigated, between the rental of money, the money-rate, and the value of money, but the two are in no sense the same. It should be noted, too, that we are here concerned with "money-funds" rather than with money in the strict sense,--distinctions and relations in this connection properly belong at another stage of our inquiry. Whenever the terms, demand and supply of money, appear in the following pages, they will be used in the sense developed in this paragraph. Demand and supply are superficial formulae. They cannot touch a problem so fundamental as that of the value of money. CHAPTER III COST OF PRODUCTION AND THE VALUE OF MONEY When the cost theory was a labor theory, as with Ricardo, the expression, cost of production of money, could have a definite meaning. It meant the labor-cost of producing the money metal. Even in this form, it is recognized that cost of production has a looser connection with value in the case of money than in the case of most commodities, because the supply of money metal is large and durable, and the annual production affects it slowly. But cost of production theories, in the form of labor theories, or labor-abstinence-risk theories, have little standing in modern economic theory. Ricardo himself saw the break-down of the pure labor theory; and Cairnes, Ultimus Romanorum, so limited and modified the "real costs" doctrine as to leave little validity in it, even on his own showing. The prevalent doctrine of cost of production runs in terms of "money-costs"--and hence is of no use when the problem of the value of money itself is to be solved.