Gold as measure of value and as standard of price has quite distinct specific functions,and the confusion of the one with the other has led to the most absurd theories.Gold as materialised labour-time is a measure of value,as a piece of metal of definite weight it is the standard of price.Gold becomes the measure of value because as an exchange-value it is compared with the exchange-values of other commodities;in its aspect as a standard of price a definite quantity of gold serves as a unit for other quantities of gold.Gold is the measure of value because its value is variable;it is the standard of price because it has been established as an invariable unit of weight.Here,as in all cases of measuring quantities of the same denomination,stability and exactitude of the proportions is essential.The necessity of establishing a quantity of gold as the unit of measure and its aliquot parts as subdivisions of this unit has given rise to the idea that a fixed ratio of values has been set up between a definite quantity of gold,whose value is of course variable,and the exchange-values of commodities.But such a view simply ignores the fact that the exchange-values of commodities are turned into prices,into quantities of gold,before gold becomes the standard of price.Quite irrespective of any changes in the value of gold,different quantities of gold will always represent the same ratio of values with regard to one another.lf the value of gold should fall by 1,000per cent,then the value of twelve ounces of gold would still be twelve times bigger than that of one ounce of gold,and so far as prices are concerned what matters is only the proportion of the different quantities^of gold to one another.Since,on the other hand,a rise or fall in the value of an ounce of gold does not in any way affect its weight,the weight of its aliquot parts remains likewise unaffected;gold can thus always serve as a stable standard of price,regardless of any changes in its value.[3]
As a result of an historical process,which,as we shall explain later,was determined by the nature of metallic currency,the names of particular weights were retained for constantly changing and diminishing weights of precious metals functioning as the standard of price.Thus the English pound sterling denotes less than one-third of its original weight,the pound Scots before the Union only 1/36,the French livre 1/74,the Spanish maravedi less than 1/1,000and the Portuguese rei an even smaller proportion.
Historical development thus led to a separation of the money names of certain weights of metals from the common names of these weights.[4]Because the designation of the unit of measure,its aliquot parts and their names is,on the one hand,purely conventional,and on the other hand must be accepted as universal and indispensable within the sphere of circulation,it had to be established by legal means.The purely formal enactment thus devolved upon the government.[5]Which particular metal served as the material of money depended on the given social conditions.The standard of price is of course different in different countries.In England,for example,the ounce as a weight of metal is divided into pennyweights,grains and carats troy;but the ounce of gold as the unit of money is divided into 37/8sovereigns,the sovereign into 20shillings and the shilling into 12pence,so that 100pounds of 22-carat gold (1,200ounces)equal 4,672sovereigns and 10shillings.
But in the world market,where state frontiers disappear,such national features of the standards of money disappear as well and are replaced by measures of weight generally used for metals.
The price of a commodity,or the quantity of gold into which it is nominally converted,is now expressed therefore in the monetary names of the standard of gold.Thus,instead of saying a quarter of wheat is worth an ounce of gold,one would say in England it is worth £317s.10/2d.All prices are thus expressed in the same denomination.The specific form which the exchange-value of commodities assumes is converted into denominations of money ,by which their value is expressed.Money in turn becomes money of account .[6]
The transformation of commodities into money of account in the mind,on paper or in words takes place whenever the aspect of exchange-value becomes fixed in a particular type of wealth.[7]This transformation needs the material of gold,but only in imagination.
Not a single atom of real gold is used to estimate the value of a thousand bales of cotton in terms of a certain number of ounces of gold and then to express this number of ounces in £.s.d.,the names of account of the ounce.For instance,not a single ounce of gold was in circulation in Scotland before Sir Robert Peel's Bank Act of 1845,although the ounce of gold,called £317s.10/2d.as the British standard of account,served as the legal standard of price.Similarly,silver serves as the standard of price in exchange of commodities between Siberia and China,although this trade is in fact merely barter.It makes no difference,therefore,to gold as money of account whether or not its standard unit or its subdivisions are actually coined.During the reign of William the Conqueror,one pound sterling,at that time a pound of pure silver,and the shilling,1/20of a pound,existed in England only as money of account,while the penny,1/240of a pound of silver,was the largest silver coin in existence.On the other hand,there are no shillings or pence in England today,although they are legal names of account for definite fractions of an ounce of gold.
