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From the beginning of CHAPTER I. GOLD AND SILVER AS MEDIA OF EXCHANGE IN EARLY TIMES
The progress of mankind would be seriously limited if trade were confined to barter, and a Medium of Exchange was found to be necessary at a very early stage of civilisation; the article which is used as a Medium of Exchange becomes by a natural process the Standard of Value for transactions into which the element of time enters.
Both silver and gold have been used as Media of Exchange from time immemorial. One of these metals might be the Medium of Exchange in one country, or at one time, and the other might be used as the Medium of Exchange in another country or at a different time, but it is beyond doubt that both metals were used simultaneously by the great nations of antiquity -- the Babylonians, the Assyrians, the Lydians, the Persians, the Egyptians, the Greeks, and the Romans.
It will be obvious that where both silver and gold were used as Media of Exchange in the same country, or in adjoining countries, the question of the rate of exchange between the metals themselves became one of great importance.
If their relative value was changing from day to day, or even from hour to hour, as it does at the present time, their usefulness as Media of Exchange would be greatly impaired.
Contracts extending over a considerable period of time would probably have to be made in one metal, and the Government of the day would be involved in difficulties in connection with its revenue and the payment of tribute.
If both metals are used in the same country as Media of Exchange it is essential that there should be an agreement as to the ratio at which they are to exchange for each other, and it is very desirable that this should be the case if they are used separately in countries which have intimate commercial relations. For this reason we find that from the earliest times there was a fixed ratio of exchange between gold and silver. It was not always the same, nor was it necessarily the same in all places at the same time, but there was generally, if not always, a well-known ratio in all places where both metals
An enactment has been discovered which is believed to be of the era of Menes, the first historical ruler of Egypt, fixing the rate of exchange at one of silver to two and a-half of gold. Its date is believed to be about 3800 B.C. were used, and this ratio sometimes remained unchanged for very long periods.
In the great Empires of antiquity there was always a fixed ratio, and the same ratio was maintained in the Babylonian, Assyrian, Lydian, and Persian Empires.
The conquest of Persia by Alexander the Great, the plunder of the East of its accumulated wealth in gold and silver by that conqueror, and the confusion that followed his death seem to have led to alteration of the ratio.
A great empire which dominates surrounding countries by its wealth and population, as well as by force of arms, can maintain a fixed ratio over a large area. A number of smaller kingdoms, with conflicting interests, cannot do so except by agreement to use the same ratio, and such agreement was in those days impossible....