American writers, the elements of which would possess no value apart from their special use as money.

We are now in a position to see that the money of any given community is the legally recognised PoWER whereby we can command both the services and products of every member of that community. Further, that if the money is manufactured of gold or silver, its POWER is so far extended as to enable us to command the services and products, not only of those who are legally compelled to recognise the money, but of practically every people in the world whose products or services we may consider worthy of attention. As the operation of demanding and obtaining what we desire in exchange for money, is popularly known as a "purchase,” we can accurately describe gold and silver money as THE GREAT PURCHASING POWER.

At this point a question arises which has caused, perhaps, even more discussion than past attempts to define the nature and functions of money: and this is,-What determines the force or strength of the Great Purchasing Power? Why does money command sometimes more, sometimes less, of the products of man's industry?

The question has been answered by Mill thus : "Money is a commodity, and its value is determined like that of other commodities, temporarily (by demand and supply, permanently, and on the average, by cost of production. Per contra Mr. McLeod argues that value does not spring from the labour of the producer, but from the desire of the consumer; and that consequently the value of money, like that of commodities, is determined solely by demand and, supply" by the quantity of it in circulation compared to the • operations it represents."

The matter is not difficult of solution if we concern ourselves with facts rather than abstract theories. Some commodities can always be produced at man's will in unlimited quantities ; others can only be obtained by "fits and starts," and in comparatively small supplies, no matter how powerful the desire for them may be. Obviously the ultimate value of the latter is based upon demand and supply, and that of the former upon cost of production.

Amongst those commodities the demand for which is without limit, whilst the supply is comparatively small and irregular, are gold and silver. The value of these metals in bygone ages was never measured by the labour expended upon their production (indeed, in many instances, the metals were accidentally found in the beds of water-courses, &c.), but by the strength of the desires of those who wished to acquire them-a strength which the beauty and rarity of the desired object largely influenced. It is the same to this day with rare

stones, ancient coins, and all curiosities, the supply of which is irregular and limited. Their value is not in any way connected with their cost of production, but with the desires of those who wish to possess them.

Now the strength of human desire is by no means constant, nor is it even capable of exact measurement. The same pearls which this

year may be of great value, are some years hence less esteemed and sought for. The same gold, the possession of which gratifies certain men of the West Coast of Africa, doubly gratifies certain other men of Europe. The quantity of commodities for which the precious metals were exchanged before the adoption of the metals as money, must, in face of such facts, have originally been determined by the strength of the demand of those who desired to possess the metals; and as this demand was incapable of exact measurement, the quantity of commodities generally given in exchange for gold and silver must also have been incapable of exact definition. Such transactions as took place between those who found the precious metals and those who desired to possess them, however, must have gradually led to the establishment of a certain rough exchange value, the limits of which were sufficiently widely recognised to enable mankind by degrees to utilise first silver, and afterwards gold, as instruments of commerce. And within these limits eventually arose those early monetary values to which we trace the level at which prices generally have now arrived.

We have already noticed that when silver and gold were first used as money, the exchange value of the money was determined by the value of the gold and silver as commodities. We have also noticed that with the general adoption of the precious metals as the principal monetary instruments, the position came at length to be reversed: and at the present day the value of gold and silver freshly unearthed is determined mainly by the purchasing power of the gold and silver money already in existence. Inasmuch as the demand for gold and silver money is unlimited, whilst the new supplies of such money, compared with the stocks already in existence, are not only small and irregular, but at the same time largely beyond human control, it follows that the purchasing power of the money now in existence depends principally upon supply and demand, and not upon the expenditure of labour and other matters incurred in the production of that supply.

We thus have two arguments that bring us to this same conclusion, that the value of gold and silver money (that is the strength of the Great Purchasing Power) is but very remotely connected with the cost of the production of The

the precious metals. It is determined mainly by the quantity in circulation compared with the work it is called upon to perform. level at which prices generally have now arrived is the result of a long adjustment, the nature of which we have already sketched. Fluctuations in prices generally, are indications of changes in the strength of the Great Purchasing Power; indeed, such fluctuations are the only evidence we have that the value of money is subject to alteration. If the same quantity of sugar can now be bought for one sovereign which formerly cost three sovereigns, it is evident that the relative values of sugar and sovereigns have considerably altered. The alteration may have arisen (1) from the sugar having fallen in value when compared with commodities generally, (2) from the sovereign having increased in value when compared with commodities generally, or (3) from a combination of both causes. is evident, however, that we cannot even approximately determine the true nature of the alteration unless we examine the changes, if any, in the prices of commodities generally. If we find that the prices of some commodities have risen whilst those of others have fallen, we can only conclude that these changes have been brought about by something affecting the supply, demand, or cost of production of the commodities. But if we find that the prices of practically all commodities have risen or fallen,

It