Against Hume who praised the metallic basis of money because international flows of metal automatically eliminated any positive or negative foreign balance, Steuart explained the absence of self-adjustment by “the imperfection of the metals in performing the functions of money of account.”

To understand that “imperfection” in international relations, Steuart built a theory considering two characteristics of a monetary system in which the unit of account was defined as a quantity of precious metal (say, gold) and the means of circulation was created through the coining of that precious metal or the issuing of a banknote convertible into coin: on the one hand, although the coin was made of gold, gold was not money, because it was not legal tender; on the other hand, although gold was a commodity (having a market price), it was unique in that it had also a legal price. The formalisation of Steuart’s theory in the present paper illustrates how these two characteristics interplayed to determine the relation between exchange, the foreign balance, and the monetary system.

This approach amounted to put the monetary standard central-stage, not only for domestic monetary relations, but also for international ones. This was Steuart’s positive contribution to an unorthodox monetary approach to exchange and the foreign balance.