The reason of the gold embargo in Great Britain and in France, in the United States and in Germany at this time is that it is of recognized importance that there should be available a sufficient supply of gold to safeguard the paper money issued by these nations. For unless the paper currency is always freely exchangeable for gold the people would be unwilling to receive the paper money on a par with gold. When the paper money is not on a par with gold the people immediately would pay their debts in terms of the cheaper currency, and every contract in the country would be disturbed by the standard measure of value of contracts being thus suddenly impaired. People in the United States, for example, enter into millions of contracts measured in terms of dollars and they do not say a gold dollar, unless it be in some formal important contract, so that if the dollar in paper money should not be equal in value to a dollar in gold, all those owing dollars in such current business would meet their debts in the paper dollar. All business people recognize the importance of maintaining the American dollar at par in domestic transactions. It was a day of triumph after the Civil War when the United States reached a point at which “resumption of specie payment” occurred; a never-to-be-forgotten day in America’s financial history. The American people would not submit for a moment to have their paper money worth ninety-nine cents on the dollar; they demand it shall be worth a hundred cents on the dollar, yet we are faced with the astonishing condition that an American gold dollar in New York, under embargo, is worth only 67 cents in Spain at 28.50 cents per peseta normally 19.30 cents.

In other words, a gold dollar in New York worth sixty-seven cents in Spain must have fifty per cent. added to it to buy one hundred cents’ worth of Spanish oil in Barcelona. It takes three such gold dollars in New York to be worth two gold dollars by weight in Spain.