ABSTRACT
The foundation of the gold standard is the tying of the value of the monetary unit to the value of gold by the fixing of the price of gold. In as much as gold is a commodity with a world market, it has a world value, and therefore the gold standard gives a world value to the monetary unit itself. The fractional rise which will suffice to start movements of gold thither will not be great enough to have any considerable effect on its exports or imports of goods. When a gold standard country finds one of its neighbours absorbing gold in this way, it has to find the gold which it is compelled to export from the reserves of the Central Bank. The use of the gold standard gives a new significance to the conception of the foreign exchange market as an organisation for the clearing of debts.
