What applies to cloth applies to gold, so that its value, on the world market, is also determined by the average labour-time required for its production, but this calculation must also, now, take into consideration these different levels of productivity, in each country. Marx quotes Ricardo.
““Money would have the same value in all countries”” (Note *, p 175)
And, he sets out the implication of Ricardo's position.
“Adjusted for the international scene this reads: when circulation is in a normal state, the amount of money in each country is commensurate with its wealth and industry. The value of money in circulation corresponds to its real value, i.e., its costs of production: in other words, money has the same value in all countries. Money therefore would never be transferred (exported or imported) from one country to another. A state of equilibrium would thus prevail between the currencies (the total volume of money in circulation) of different countries. The appropriate level of national currency is now expressed in the form of international currency-equilibrium, and this means in fact simply that nationality does not affect the general economic law at all.” (p 175)
But, we, now, have to ask what causes this equilibrium to be upset, and the value of money to differ in one country compared to another. In the national economy, it arises because either
a) the aggregate value of commodities falls, but the amount of currency remains the same, so that the currency is devalued, and prices rise – inflation, or
b) the aggregate value of commodities remains the same, but the amount of currency rises, causing its devaluation, so that prices rise, or
c) the amount of currency rises, relative to any change in the aggregate value of commodities, causing it to be devalued, and prices to be inflated.
“so now the same effect is achieved by export and import from one country to another.” (p 175)
The implication of this is that, in a country where the prices of commodities have risen, and the value of gold coin has fallen below the value of gold bullion, the value of gold would be reduced compared to in other countries. By the same token, the prices of commodities would be higher than in other countries, so that commodities would be imported, and gold exported. This would continue until the value of gold in the country rose to its international value, and so when its domestic prices fell.
“Just as previously the output of gold continued until the proper ratio of values between gold and commodities was re-established, so now the import or export of gold, accompanied by a rise or fall in commodity-prices, would continue until equilibrium of the international currencies had been re-established. Just as in the first example the output of gold expanded or diminished only because gold stood above or below its value, so now the international movement of gold is brought about by the same cause. Just as in the former example the quantity of metal in circulation and thereby prices were affected by every change in gold output, so now they are affected similarly by international import and export of gold. When the relative value of gold and commodities, or the normal quantity of means of circulation, is established, no further production of gold takes place in the former case, and no more export or import of gold in the latter, except to replace worn-out coin and for the use of the luxury industry.” (p 176)
On this basis, balance of trade deficits are caused, according to Ricardo, by an excess of money, in the deficit country. Marx quotes Ricardo,
“"The exportation of the coin is caused by its cheapness, and is not the effect, but the cause of an unfavourable balance'” (Note **, p 176)
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