THE SILVER STANDARD AND THE DISLOCATION OF ITS PARITY 409
silver. On the other hand, during the second period, the “ or ” which characterized the first period was deleted by the silverdemonetizing and suspending decrees. In other words, the first period was characterized by the prevalence of bimetallism under which the two metals could be used inter-changeably 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 cannot 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 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
In support of this was cited the authority of Jevons, who said*:—
“ Whenever different commodities are thus applicable to
the same purposes their conditions of demand and exchange
are not independent. Their mutual ratio of exchange cannot
vary much for it will be closely defined by the ratio of their
utilities. Beef and mutton differ so slightly that people eat them
almost indifferently. But the wholesale price of mutton, on
- Theory of Political Economy, 4th ed./, 1911, pp. 134-36.