Chapter 5b: Grains vs Silver in terms of the temporal aspect of value

15At distant times, equal amounts of labour will be bought more nearly with equal amounts of wheat, the worker's subsistence, than with perhaps any other commodity.

  • Every other commodity, however, will buy a varying amount of labour depending on the amount of subsistence it can buy.
  • 16 The real value of a wheat is more stable from century to century than from year to year, compared to metal money.
    Gold & silver prices

    17 Labour, therefore, is the only universal and accurate measure of value.



    When To Use Real And Nominal Prices

    18 Although it is useful to have real and nominal prices for long term leases, it is not useful in common and ordinary transactions.

    19 "At the same time and place the real and the nominal price of all commodities are exactly in proportion to one another."

    20 At distant places, differences in real and nominal prices exist.



    Nominal Prices and Arbitrage

    21 Nominal price has become more of a concern than real price because all purchases and sales are transacted in nominal prices.

    22 However, real prices are more useful in trades done between two different times and places.



    The History Of Metals in Coinage

    23 Commercial nations have used gold coins for large payments, silver for moderate purchases, and copper for smaller ones. 24 The Romans used only copper money until five years before the first Punic war, when they first began to coin silver.
    Roman As coin
    Roman As
    25 The Northern Europeans used silver.

    Gold Versus Silver

    26 The values of gold and silver money were not fixed by any law. 27 In time, people established laws to set the values of gold and silver. 28 If the law changes, then the difference becomes more than nominal again. 29In reality, the value of the most precious metal regulates the value of all coins.30 Because the regulation disregards the physical degradation of coins, it raises the real value of silver.
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    Next: Chapter 5c: Coin Reformation