Makoto
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As the standard of price, say a pound sterling is a quater ounce of gold,
would not change here, a lower 'reservation price' for gold should, as you
say later, always mean in this context a higher gold (or pound) prices of
commodities (the inverse of 'the price? of gold'). If you are one of
speculators having gold as an asset, do you purachase commodities dearer
than the prices offered in a market? Or can you expect to sell your
commodities dearer in order to get gold asset than others just by your
special character as one of speculators? Without somehow inducing a general
changes in opinion of sellers of commodities to raise their prices, the
exchange value of gold as money would not be altered, just by an opinion of
speculators.(M)
Paul
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What is involved here is surely a rise in the
velocity of circulation of money. If we average
the velocity of circulation over the entire stock
of gold coins, then a lower reservation price of
gold is the familiar phenomenon of an attempt to
hold a smaller real balance. A generalised attempt
by all holders of coin to run down their balances,
is a generalised rise in the demand for commodities,
providing the opportunity for general price rises.
Indeed this is the only possible result if we
ignore international trade.
If we factor that in, part of the additional demand
is reflected in increased imports which drive
down real balances directly.