Page:Georg Freidrich Knapp - The State Theory of Money (1924 translation).pdf/251

Rh exchange. The height of the sea on the coast is affected mainly by the tides, but also to a small extent by the wind.

Suppose that England with its gold standard and India with its silver standard were the only two countries concerned. The silver price is fixed at 60 pence in London. Now sellers appear in the market who are satisfied with 59 pence an ounce for a given quantity of bullion. The buyers of this cheap silver convert it into rupees and offer it as a means of payment for India. The rupee exchange then falls a little, but as it is settled pantopolically it does not depend only on the fact that these people have bought their silver cheap, but on a thousand other and earlier circumstances, which still have an effect. The exchange may fall a little, but not necessarily from 60 to 59.

The case is analogous when the sellers of silver can from industrial reasons get 61 pence an ounce, because there are buyers who are willing to pay that price. This high rate will cause a certain number of rupees to be melted. The rupee exchange would perhaps rise a little, but not to 61 pence, for there are plenty of other causes at work.

Those who imagine that the rupee exchange follows the silver price (whether 59 or 61) are conceiving the valuta exchange as depending only on the bullion market, an error impossible to those who hold the pantopolic view of the valuta exchange.