ABSTRACT
One of the first of the theories of orthodox economics, which enjoys considerable respect, but which deserves to be most searchingly studied, is the theory of the automatic tendency of gold to distribute itself in due proportion between the several gold-standard countries. The demand for gold for arts and trades being small in comparison to the demand for it for financial purposes, the most important "demanders" are the Central Banks of the gold-standard countries, whose demand is practically limitless at the price. At which they are obliged by law to give out currency notes in exchange for gold. When gold flows into a country, the importer of the metal, or the man who buys it in the open market immediately upon importation, either deposits it directly with his bank, or sells it to the Central Bank. At the legal rate is obtaining in payment a cheque which he deposits at his bank.
