The Theory of Money and Credit - Ludwig von Mises [73]
Trade balances are not causes but merely concomitants of movements of money. For if we look beneath the veil with which the forms of monetary transactions conceal the nature of exchanges of goods, then it is clear that, even in international trade, commodities are exchanged for commodities, through the instrumentality of money. Just as the single individual does, so also all the individuals in an economic community taken together, wish in the last analysis to acquire not money, but other economic goods. If the state of the balance of payments is such that movements of money would have to occur from one country to the other, independently of any altered estimation of money on the part of their respective inhabitants, then operations are induced which reestablish equilibrium. Those persons who receive more money than they need will hasten to spend the surplus again as soon as possible, whether they buy production goods or consumption goods. On the other hand, those persons whose stock of money falls below the amount they need will be obliged to increase their stock of money, either by restricting their purchases or by disposing of commodities in their possession. The price variations, in the markets of the countries in question, that occur for these reasons, give rise to transactions which must always reestablish the equilibrium of the balance of payments. A credit or debit balance of payments that is not dependent upon an alteration in the conditions of demand for money can only be transient. [3]
Thus international movements of money, so far as they are not of a transient nature and consequently soon rendered ineffective by movements in the contrary direction, are always called forth by variations in the demand for money. Now it follows from this that a country in which fiduciary media are not employed is never in danger of losing its stock of money to other countries. Shortage of money and superabundance of money can no more be a permanent experience for a nation than for an individual. Ultimately they are spread out uniformly among all economic agents using the same economic good as common medium of exchange, and naturally their effects on the objective exchange value of money which bring about the adjustment between the stock of money and the demand for it are finally uniform for all economic agents. Measures of economic policy which aim at increasing the quantity of money circulating in a country could be successful so far as the money circulates in other countries also, only if they brought about a displacement in relative demands for money. Nothing is fundamentally altered in all this by the employment of fiduciary media. So far as there remains a demand for money in the narrower sense despite the use of fiduciary media, it will express itself in the same way.
There are many gaps in the Classical doctrine of international trade. It was built up at a time when international exchange relations were largely limited to dealings in present goods. No wonder, then, that its chief reference was to such goods or that it left out of account the possibility of an international exchange of services, and of present goods for future goods. It remained for a later generation to undertake the expansion and correction here necessary, a task that was all the easier since all that was wanted was a consistent expansion of the same doctrine to cover these phenomena as well. The classical doctrine had further restricted itself to that part of the problem presented by international metallic money. The treatment with which