This process was often repeated in the Middle Ages. A ruler, either by
making a higher seigniorage charge or by coining on his own account,
debased the quality or reduced the weight of the money of his realm.
For a time the new coins, having the same monetary use, circulated at
par with the old coins. The ruler, pleased with this almost magical
power of getting a revenue with little trouble, continued to issue
coins until suddenly the heavier coins began to be exported or melted,
and the value of the other money fell, to the mystification alike of
the prince and of his people. The reason is now perfectly plain: the
number of coins was not kept within the proper limits and they went
down to their bullion value. The only way a further profit could be
made in this way was to debase the coin again. By successive steps the
coinage came to consist almost entirely of cheaper alloy.

§ 8. #The gold-exchange standard.# In a number of silver-using
countries and colonial dependencies near the end of the nineteenth
century, the fluctuations of the value of silver in terms of gold was
a constant source of difficulty in the payment of foreign obligations
to gold standard countries. Yet there were strong reasons in the
habits of the people and in the industrial conditions of the country
to forbid the adoption of gold and the disuse of silver as the actual
money in circulation. The method adopted, that of the gold-exchange
standard, involved these features.

(1) Closing the mints of the country to the free coinage of silver, as
was done most notably in India in 1893 and in Mexico in 1904.

(2) Adoption of a fixed ratio of exchange between the silver coins in
circulation and some gold coin which is made the standard of value in
all transactions (as the dollar or the pound sterling), the money in