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COIN, CURRENCY 
 
 AND 
 
 COMMERCE 
 
 An Essay in Exposition of their Actual Relations 
 
 and Containing Outlines of 
 
 Monetary Theory 
 
 BT 
 
 PHILIP A. ROBINSON 
 
 NON IN SOLO 
 
 PANE VIVIT HOMO 
 
 WASHINGTON 
 
 THE NEALE COMPANY 
 
 431 ELEVENTH STREET NORTHWEST 
 MCM 
 
 n 
 
Copyright, 1900, by 
 
 THE NEALE COMPANY 
 
 A II Rights Reserved 
 
Inscribed 
 to the Memory of 
 
 ALEXANDER HAMILTON 
 Chief Author of the Constitution of the United States 
 
 and the 
 
 FIRST FINANCE MINISTER 
 
 under tkfit Frame of Government. 
 
CONTENTS 
 
 PAGE 
 
 Preface S 
 
 PART I 
 
 FUNDAMENTAL RELATIONS OF A MONEY AND ITS VALUE. 
 
 CHAPTERS I-X. 
 
 I. — Rudiments of Money and Exchange — Func- 
 tions of Money 17 
 
 II.— Natural History of Money Material— Qualifi- 
 cations Therefor — Current Medium . . 24 
 III.— ^Relation of the State to Money — Minting — 
 Standard Substance and Unit — Coinage Sys- 
 tem — Money of Account .... 29 
 IV. — Economic Relations of Money — A Carrier of 
 Value — Source of Its Value — Balance of 
 Trade — Effect of Monetizing a Commodity 35 
 V. — Money Market — Price of the Currency— Value 
 of the Money Unit in Trade — Appreciation 
 and Depreciation — Peculiarities in Demand 
 
 and Supply of Money 44 
 
 VI. — Delimitation of the Value of Money — Cost of 
 Producing Money and of Obtaining It in 
 
 Trade 51 
 
 VII. — Regulations of the Value of Money — Contrac- 
 tion of Currency and of Circulation— Proper 
 Volume of Money — How Obtained and 
 
 Regulated 62 
 
 VIII. — Mercantile Appreciation of Money — Panics . 74 
 IX. — Economic Cheapening of Products — The Final 
 
 Standard and Measure of Value and Wealth 86 
 X. — Government's Concern with Coined Values — 
 
 Seignorage 92 
 
4 Contents. 
 
 PART II 
 
 MONEY OF DEPENDENT CIRCULATION — CONCURRENCY OF INDE- 
 PENDENT MONIES. 
 
 CHAPTERS XI-XVIII. 
 
 PAGE 
 
 XL — Representative and Credit Money — Subsidiary- 
 Coin— Legal Tender — Redemption . . 105 
 XII.— Pure Credit Currency — Certificates — The 
 
 "Treasury Note" of the United States . • 120 
 XIII. — Representative Currency of Values in General 141 
 XIV. — Currency Depreciations — Fiat Money — Inter- 
 ference of Current Media — Gresham's Law 147 
 XV. — Effects of Currency Depreciations— General 
 Prices — Debts — Taxes — Government Obli- 
 gation's and Expenses — Wages — Invest- 
 ments — Poor Creditors — Ancient and Mod- 
 ern Conditions 158 
 
 XVI.— Demonetization of a Joint Standard Metal — 
 
 The Illustration, 175 
 
 XVII. — Bimetallic Systems 192 
 
 XVIII. — Foreign Trade and Home Prices — Gold Coun- 
 tries and Silver Countries — Newton's Rule 206 
 
 PART III 
 
 AS AMONG THE NATIONS AND AS BETWEEN THE METALS— COINAGE 
 
 SYSTEMS AND THEIR GEOGRAPHICAL EXTENT— THE 
 
 PROBLEM OF THE STANDARD. 
 
 CHAPTERS XIX-XXV. 
 
 XIX. — Coinage Systems — International Money and 
 
 International Currency .... 217 
 XX. — An International Coinage with Two Inde- 
 pendent Monies . . . .' . . 223 
 XXI. — Haphazard Bimetalism — Blind Theories — The 
 
 Matter of Ratio 229 
 
 XXII. — Foreign Trade of Silver-Standard Countries 241 
 XXIII. — Essence of the Standard Question — Co-exist- 
 ent Co-standards Impossible . . . 246 
 
 XXIV.— The Best Standard 252 
 
 XXV.— A Lone Standard with Two Metals as Money 261 
 
PREFACE. 
 
 In the second half of the nineteenth century there 
 has been an incessant agitation of all questions of 
 monetary science and national finance. The large 
 developments in mining money material have in 
 great part occasioned this many-sided discussion, and 
 have led to some innovations in monetary theory. In 
 particular, those developments in their production have 
 led to a fresh going-over of the relations of the two 
 leading money metals, — in connection with the prog- 
 ress of international affairs, to proposals for an inter- 
 national currency, and, indeed, to the formation of 
 certain groups of states into monetary unions. 
 
 The effect, however, of all the experience of tlie 
 period has been not to disturb, but to confirm, the 
 principles and general laws of monetary science; the 
 body of the science, though elaborated and reduced to 
 form by Mill and Jevons and Walker, remains essen- 
 tially as it was understood by Locke, Newton and Ham- 
 ilton. This science, taken comprehensively and in 
 view of all its relationships, constitutes a large and 
 intricate department of economics; it has exercised 
 some of the acutest minds that the world has known — 
 Aristotle, Copernicus, Newton, Mill. As a study it 
 becomes even more arduous and complicated through 
 the accumulation of masses and mazes of pertinent 
 statistics. 
 
 By thought, however, it is still possible for any one 
 to. understand its essentials. And a well-grounded 
 
6 Preface. 
 
 comprehetision of the principles of money is most 
 important for those who are charged with the decision 
 of questions of monetary administration, or who have 
 in any way to participate in or contribute to such 
 decisions, because the currency is so intimately and 
 thoroughly bound up with the economic, and hence 
 with the general, welfare of society. Such an under- 
 standing, accordingly, must be of the highest import- 
 ance to the members of a republican state, in order 
 that they may not become blind followers of the blind, 
 and so consent to measures that would make against 
 , their, well-being. Especially at this time is a knowl- 
 edge, of the elements of monetary sdenoe iieedful as. a 
 defense against the statistics jugglers, who manipulate 
 the accessible collections of figures so as to throw a 
 cloud of statistical dust over the subject. It is easy 
 thus to mislead the uninitiated, especially as there is a 
 prejudice in favor of statistical tables, no matter how 
 gotten up. Figures won't lie of themselves, but they 
 may be made to by misreporting and garbling. It is 
 best, therefore, to be initiated into the doctrine so as 
 to make our own independent and original interpreta- 
 tion of the facts of monetary history. The indoctrina- 
 tion is not to be had by gaping at arrays of tabulated 
 sales and prices; we must first know how to read 
 these, and that faculty is to be acquired only by 
 studying the theory of the matter. 
 
 Just as observing the operation of a machine and 
 inspecting its parts and construction cannot yield an 
 essential and com.petent understanding of it save to 
 one who has a knowledge, intuitive or acquired, of 
 the theory of its operation. One can calculate the 
 
Preface. 7 
 
 working of the device when he knows the principles 
 it works by, the forces it brings into play and how it 
 has them related; then, also, he can tell the effects or 
 modification in its parts or their arrangement, or test 
 the (plans of other machines involving the same prin- 
 ciples and forces and properties. So when one under- 
 stands the elements of monetary theory, or knows the 
 forces and relations of things underlying this class of 
 phenomena, he is in a position to check the points in 
 any argumentation, detect twists and gaps in logic, 
 cind judge intelligently whether a given financial 
 scheme will work as represented. 
 
 Monetary science, then, is a most important branch 
 in the education of a republic; accordingly, it should 
 be taught elementally in the schools. It may well be 
 the lack of such instruction that left many statesmen 
 in such an attitude on the currency question, that, in 
 the midst of their public careers, they changed their 
 minds, having got new light and made fresh study of 
 the subject on the occasion of its recent extensive agi- 
 tation. Too commonly our statesmen are well 
 acqixainted with no science save that of "practical" 
 politics, and, to a varying extent, commercial and 
 criminal jurisprudence. 
 
 Two or three specimens of the awry and incompe- 
 tent thinking that is common with monetary questions 
 may well be given here. One often hears someone of 
 the populace expounding the doctrine to his fellows. 
 Tom and Bill fall into a financial discussion across the 
 breakfast table and over the morning paper. Tom 
 explains that the more money there is in circulation 
 the cheaper it is ; presently he is saying, as if it were 
 
8 Preface. 
 
 a corollary to this, that "in the same ratio everything 
 is cheaper," has a lower price. He gets stuck in mak- 
 ing the converse of Ms first proposition, in translating 
 the price of the medium into common prices, the price 
 of things in the medium. There is a failure of clear 
 thought, traceable to, or dependent on, the poor meth- 
 ods of school instruction, which now too generally 
 seek to avoid mental exertion by the pupil. The first 
 chapter in the economic education of a republic must 
 be supplied in the mathematical class-room. There lies 
 the foundation of sound science and the formation of 
 habits of thought that will make safe guides. One 
 must be familiarized with correlatives and reciprocal 
 relatioins, as powers and roots, division by a fraction, 
 inverted ratios, etc. It is even good training in the 
 elements of finance to measure a yardstick with a ten- 
 foot pole and vice versa. The more strictly logical 
 part — detection of non-sequiturs, illicit or insufficient 
 premises, etc. — ^will come later in studying the eco- 
 nomics ; it is but a development of open-eyed common 
 sense. 
 
 Again, there is confusion of thought and illogical 
 conjunction of distinct spheres of control in connect- 
 ing the oppressions by usurers and monopolists with 
 the material of the money in which their gains are 
 received, and in seeking to correct such economic 
 abuses by alterations of the currency organization, as 
 if the sins of the money-changers were to be done 
 away by giving them a new money or by giving their 
 property to others. Coinage legislation cannot hinder 
 the manipulation of property and of exchanges, nor 
 prevent men from hoarding their coin or placing it 
 
Preface. 9 
 
 where they please. A money monopoly, if it exists, 
 may be done away by permitting fresh mintings of the 
 money material and allowing men to buy money with 
 whatever valuable they can produce. This is ihe logical 
 reduction — a reduction to the absurd — of a great catch- 
 cry of economic sedition and mutiny. That branch 
 of economic legislation, sumptuary or not, which 
 restrains men from pushing the advantages of wealth 
 to an oppression of their fellows is quite distinct from 
 the coinage branch. 
 
 Again, the hazy, flickering half-light in which many 
 fancy they see how a coinage relates itself to interna- 
 tional trade or to foreign coinages, only illustrates a 
 too prevalent mental habit, a common, but remediable, 
 deficiency of tliought and of the disposition to think. 
 Men seem to believe they are expressing not merely 
 a fundamental truth but a solvent principle, adequate 
 and perfect in application to financial problems of 
 larger scope, when tihey declare for "a dollar that will 
 be worth a dollar the world over," or for "money 
 equal to the best in the world." 
 
 Now, other countries have no dollar under which 
 ours, if cheapened, would be discounted in trade with 
 them. A letter of credit or a draft to pay a balance 
 would be bought with gold as before. It would cost 
 more dollars, but they would be paid here, and the 
 question whether the purchaser received more in the 
 same proportion for his products, or how nearly the 
 same, is the pertinent question, and is mainly a domes- 
 tic one; in international exchange it is not a question 
 of cutting the metal small or large. 
 
10 Preface. 
 
 If the reference be to the comparative efifect of a 
 cheapening of the currency on foreign and domestic 
 commerce, or to the comparative results in trade with 
 silver-using and gold-using countries from a change 
 of standard-^-thO'Se are questions too complex to be 
 settled with brusque platitudes; exclamations do not 
 explain. 
 
 It is idle to think or speak of these things unless we 
 can use the time and exert the attention necessary to 
 reach a tangible issue. Complicated relations and intri- 
 cate cases must be analyzed before they will be plain, 
 before they can be taken in at a glance or the gist of 
 them touched with a maxim or an apothegm. To brush 
 a question lightly with phrases and leave it is a poli- 
 tician's trick. 
 
 Other instances of defective economic thinking, 
 signs of inertness of brain, frequently appear in con- 
 nection with topics discussed in the following pages, 
 e. g., the subject of pages 229 and 230. 
 
 McMaster, the historian, thinks it quite possible to 
 have sound finance xmder a popular government, not- 
 withstanding the slowness of the people to see what 
 their interests require, which he illustrates by a num- 
 ber of examples of their behavior with reference to 
 their currency. It is not to be expected, nor is it 
 necessary, that a majoirity of the people shall know the 
 subject as thoroughly as the doctrinaires ; yet it should 
 be possible to establish among them, as a permanent 
 qualification for self-government, a general and fun- 
 damental understanding sufficient to enable them 
 always to choose well their leaders, and to come to 
 
Preface. 11 
 
 safe conclusions without taking at each crisis a new 
 term in the ruthless school of experience. 
 
 The larger recognition monetary science is receiv- 
 ings and the wider attention given to its study, may 
 proibably inject more of scholarship into politics and 
 help to produce a crop of better equipped statesmen. 
 
 There are times when scientists and philosophers, 
 with nothing but sheer understanding to qualify them 
 specially for a part in public affairs, make the best 
 statesmen. Sound monetary theorists may, if enabled 
 to control legislation, save a state from great evils. 
 Thus, in 1695, a little group of strong-minded, clear- 
 thinking men, Newton, Montague and Locke, saved 
 the English coinage from falsification and debasement, 
 and the English nation from the distress that would 
 have followed such action. 
 
 The design in the present essay is to make a sug- 
 gestive outline study, stimulating to genuine thought 
 and presenting in a helpful order the topics embraced 
 in the general subject of money. It is hoped that the 
 work may serve in some degree as a primer and horn- 
 book for a considerable class of inquiring minds, and 
 enable them to test the validity of particular theories 
 and opinions, and to answer the most essential ques- 
 tions they may meet in reading or consulting more 
 elaborate and professional works. While the related 
 fields of mining, assaying, banking, and mercantile 
 speculation are necessarily entered or .touched in a 
 comprehensive view of money as variously related on 
 its several sides, the whole theory and practice in those 
 departments is outside the present plan, is of import- 
 
12 Preface. 
 
 ance only to specialists and professors in those lines, 
 and may be found in the corresponding technical 
 treatises. 
 
 Nor can this outline be of any use to those for whom 
 a knowledge of the elements and principles of mone- 
 tary science is made impossible, or else futile, by the 
 fixed preconceptions and prejudices which possess 
 their mind's. 
 
 The standpoint taken is that of the people — of all 
 who are concerned with the current medium of 
 exchange. The interest of clearness is made pre- 
 dominant; it is believed that the arrangement and 
 division of the matter will conduce to a clear and com- 
 prehensive view; it is sought to make the individual 
 statements as concise as is consistent with perfect 
 clearness. To the same end it is hoped that a few 
 repetition's and some amplitude of expression at cer- 
 tain points may be pardoned. This indulgence will 
 perhaps be granted the more readily to an endeavor 
 to guide those who would make a fresh and original 
 survey of the field. The aim is, further, to give due 
 prominence to the various elements in proportion to 
 their importance in the economic affairs of society, to 
 treat the several topics in a methodical division and 
 sequence, agreeing with the natural relations of the 
 matters discussed, and to bring to the light the vital 
 connections and bearings of the forces and interests 
 involved. 
 
 As Lord Bacon says, "Truth is bom oftener of error 
 fihan of confusion." And in general a wiser judgment 
 comes with the open eye that sees clearly the few 
 main elements than with the most exhaustive inspec- 
 
Preface 13 
 
 tion of clouds of minute detail and ramification. The 
 latter often misses some main points. If our study of 
 such a subject as this, or of any subject in economics, 
 is to avail us, we must keep close to the ground and 
 never lose sight of basal principles. 
 
 As a new and systematic arrangement of history 
 and theory that is old and of argument and discussion 
 which, if not new, is otherwise widely scattered and 
 mixed with much matter not essentially relevant to 
 the present purpose, this essay is submitted to the 
 thought of the public. That there is room for a book 
 on the plan adopted here is scarcely doubtful; how 
 far this effort is calculated to occupy that room is not 
 for the author to judge. 
 
 P. A. R. 
 
 Washington, D. C, March, ipoo. 
 
COIN, CURRENCY AND COMMERCE 
 
 PART I 
 
 CHAPTERS I-X 
 
 Fundamental Relations of a Money and Its 
 Value 
 
CHAPTER I. 
 
 RUDIMENTS OF EXCHANGE AND OF MONEY — MONE- 
 TARY FUNCTIONS. 
 
 Money is that form of purchasing power which, by 
 the selection of commerce and the sanction of law, is 
 establishfed as the common medium of exchange and 
 the common measure of value. The terms "purchas- 
 ing power," "exchange," and "value" are, of course, 
 understood in the commercial, or mercantile sense; 
 the last term, though, as we shall find, may sometimes 
 be used in a special sense, and means generally the 
 same as purchasing power. 
 
 The above definition is not a complete description: 
 it does not describe all the attributes and incidents of 
 money, and the requisites of a perfect money material ; 
 but it defines what money specially is, expressing its 
 essential and peculiar constitution and office. 
 
 Money, then, is an institutiion of commerce. In no 
 society did trade ever get any considerable develop- 
 ment without specializing and using- some form of 
 value as a money; nor, without money, can a mercan- 
 tile class, a class making trade its business, arise in 
 the industrial world. 
 
 Yet, commerce antedates money, and may dispense 
 with it, as it may with the mercantile class ; money is 
 not a necessity, but a convenience, in exchange. Com- 
 merce without money, or where any iorm of property 
 may, in a given case, become the mean for the ex- 
 
18 Fundamental Relations. 
 
 change of two other forms and a standard for com- 
 paring their values, is barter. It is common with 
 children and savages, and occasionally in the most 
 advanced societies. We may discriminate two grades 
 of barter, (i) where each party to the transaction 
 desires what he receives for his own use, (2) where 
 the thing received is desired in order to obtain there- 
 with a third article in another trade. Instances of 
 the former would be the exchange of a deerskin for a 
 bow and of one horse for another, with or without 
 "boot;" of the latter, the swapping horses with the 
 design of selling the one received for something else, 
 as for a third horse or for money, and the exchange 
 of sled for skates in order to buy three books of a boy 
 who has no skates and for the sake thereof will give 
 up the books. It will be noticed that the second grade 
 is a step towards money, and that money itself may 
 indirectly be bartered for; one horse, in the example, 
 serving as a money to mediate between money and the 
 horse first sold. M'ercantile transactions, buying to 
 sell, are possible under barter: and the second form 
 of it reduces to the first on the understanding that 
 trade may be the personal use for which a thing is 
 desired. 
 
 Barter ceases and money begins to be when the 
 thing to be applied thus in further purchasing is so 
 generally desired that it may be exchanged for any 
 commercial thing that its possessor may want. Should 
 a primitive community have two or more commodities 
 equally qualified in this respect and otherwise, circum- 
 stances or chance would select and establish one of 
 them as the common medium; two or more could 
 
Rudiments of Exchange. 19 
 
 share the same field in common, being translatable 
 into each other, as, under barter, all commodities by 
 turns, and in relation to their producers, assume the 
 mediating function; but the exchange medium tends 
 to become .one; its homogeneity is required and forced 
 by the interests of industrial society. 
 
 To serve as such medium, a commodity must be 
 generally obtainable throughout the community, but 
 need not . be of domestic origin ; and it must have 
 always a ready market, but its ultimate consumption 
 need not occur at home. We may perhaps uncover to 
 fuller light the roots of the matter by putting some 
 primitive cases. Such an example would be found in 
 a community where wool was largely used, being got 
 from a neighboring settlement by way of barter, and 
 worked into cloth by each family: wool and woolens 
 would constitute their money, mediating between food 
 products, other clothing articles, . tools, ornaments, 
 labor, etc. If the society produced as well as con- 
 sumed the wool, and about as generally, producing at 
 the same time the flesh of sheep as food, very likely its 
 money would be constituted of the animal itself, as 
 the live sheep would then be the leading commodity 
 used, or, in the commercial sense, consumed. Abo- 
 riginal moneys are of this description — something of 
 universal and personal use, whether more or fewer 
 members of the community participate in making or 
 finding it. 
 
 The necessary ready market may be secured abroad, 
 by a pioneer settlement in a beaver country, for 
 instance, where the people trade beaver skins at the 
 exporter's for goods which he buys with the skins 
 
20 Fundamental Relations. 
 
 elsewhere; or by a rustic community engaged in rais- 
 ing broom-corn, which iJiey similarly exchange at the 
 store of the manufacturer and exporter of brooms. 
 In such cases the middleman most likely has to use a 
 different and foreign money in converting the exports 
 into imports, while the former of these — ^beaver skins 
 or broom-corn — ^passed as exchange medium through 
 the society producing them. As soon as a community 
 acquires any foreign trade, its money, though not 
 neceissarily as such, is a subject of that trade. In a 
 similar manner (only with the intervention of a third 
 substance as a measure, not as an exchange medium) 
 rural communities use as commercial medium, to a 
 certain extent, eggs and otlier farm products, which 
 the grocer takes in exchange for goods he brings from 
 a distance, then sells for the medium: wherewitii he 
 procures those goodis; from the farmer's standpoint, 
 his products, to this extent, mediate between his 
 expense in producing and the supplies into which the 
 products are converted at the store. 
 
 When a common medium (used generally in all the 
 commercial transactions of society) has been evolved, 
 there is money, according to the primitive definition 
 by Aristotle,* which represents the primary, basal 
 function of money. 
 
 By the time the chosen commodity has acquired 
 general use and recognition as the means of facilitat- 
 ing exchanges, the values of the things exchanged 
 through its intermediation are estimated in terms of it, 
 
 * "Money is an intermediate commodity designed to facilitate 
 an interchange of two other commodities." 
 
Functions of Money. 21 
 
 and there are prices, i. e., determinations of commer- 
 cial values in quantity-terms of a substance taken as 
 the standard valuable. Commerce, then, h^s a stand- 
 ard thing of value, with which all other objects of 
 commercial valuation are compared and by wihich they 
 are judged. The commercial estimation of personal 
 and other services, or valuables, where wool, e. g., or 
 tobacco, has been hit upon as the common medium 
 through which other valuables are exclianged and into 
 which they have become convertible, is expressed in 
 pounds of wool, or of tobacco, and this rating becomes 
 uniform, customary in the land, and fixed, subject 
 only to occasional variations. 
 
 This, is the natural and historical evolution of 
 moneys, — through commercial selection a thing is 
 adopted as the common medium of exchange, and 
 then, necessarily, as the common measure of value, in 
 which function it quickly acquires the sanction of cus- 
 tom and thereby of law. The essential particulars 
 that it is itself of intrinsic value, or that it has the 
 property it measures and by virtue of which things are 
 mutually exchangeable, with or without an interme- 
 diary, and that it is adopted in and through their inter- 
 change, are true of every form of money that any 
 sodiety has ever employed. 
 
 It appears to be matter of doubt, or of dispute, with 
 some thinkers, which of the two functions of money is 
 the prior one. The truth is, while they are concomi- 
 tant in every transaction, one is primary historically, 
 the other logically after the establisihment of money. 
 There is for the first time a motive as well as a neces- 
 sity for using a substance as a commercial measure 
 
22 Fundamental Relations. 
 
 when it has already been settled on as a medium. Men 
 do not measure values save with reference to an 
 exchange or when the things so measured are for sale ; 
 therefore, they measure with the medium of exchange. 
 In Barter each article is measured by the other. When 
 by the use of a medium ,an exchange is effected 
 through two subordinate exchanges, there are two 
 measurings: each article in turn is measured by a 
 third one, and for the reason that this last is the chosen 
 intermediary. The medium exists to avoid barter; 
 that it shall measure is incidental to this service. While, 
 therefore, as in barter, there is a mutual measuring of 
 two values against each other precedent to each 
 exchange, there is no common pricing of things in the 
 measure of a commodity without the prior certainty 
 that if exchanged they will be exdhanged through that 
 commodity as a medium. . Aristotle, of course, recog- 
 nized the money-substance as a measure, a measuring 
 valuable ; and he saw, what many now fail to see, that 
 this measure must be "some one thing," must have 
 unity and uniformity throughout a state and its vari- 
 ous industrial traffic. He defines property as "any- 
 thing that can be measured by money;" but this does 
 not give his conception of money, which, naturally, he 
 had previously defined.* 
 
 * Aristotle's definition of property, however, reminds of the 
 third use of money, derived from tlie second as that is from the 
 first, the function, namely, of representing commercial value, 
 whereby, in common parlance, property, wealth and money are 
 often synonymous. Money, then, exchanges, measures, sym- 
 bolizes, property. 
 
Commerce and Legislation. 23 
 
 When commerce changes the standard form of 
 value, adopting a different commodity as money, the 
 new medium does not, of course, retreat to a position 
 near the barter stage, but is at once invested with all 
 the attributes of its predecessor, whose office it is to 
 fill more perfectly. 
 
 Commercial custom alone monetises commodities, 
 makes them to be money: when a government sets 
 about establishing a coinage, or monetary system, it 
 does not search the catalogue of eligible substances 
 and select therefrom, but it takes the money material 
 or materials as given, taking it as of course and of 
 necessity tliat the money is to consist of the commodi- 
 ties already in use as such. And in enacting any 
 monetary legislation, even in demonetizing a substance, 
 depriving it of the monetary functions (sO' far as law 
 may do this, in reforming the monetary relations of 
 things) the legislature can deal with none but the sub- 
 stances particularly elected beforehand by the mer- 
 cantile world. Commerce and its institutions ante- 
 date and direct legislation. 
 
CHAPTER II. 
 
 NATURAL HISTORY OF MONEY MATERIAL QUALIFI- 
 CATIONS THEREFOR^CURRENT MEDIUM. 
 
 The representative and standard of property and 
 value has been supplied, in various circumstances, by 
 all three realms of physical nature. Its desirability 
 may depend on utility in the grosser or the aesthetic con- 
 cerns of individual and social life. The money materials 
 of the most savage and of the most refined societies get 
 their value chiefly as trinket and ornamental ware, 
 though the progress of science and the arts has found 
 many new uses for the money metals, including not a 
 few in which the materially useful and tiie purely 
 ornamental are combined. Barbarous peoples also use 
 such perishable goods as cloth and cattk: the latter 
 was the standard valuable of <\he: primitive Aryans, or 
 at least in the prehistoric states of the most important 
 European branches of the family. Our word "pecu- 
 niary" is an evidence of the fact, as its etymology 
 takes us back to a time when its original, pecus, had 
 as wide an application, representing property in general. 
 
 It was an early and important step in the evolution 
 of the money commodity to discard the domestic ani- 
 mals for more handy and durable matter. Durability 
 is one of the first requisites for money, the next, 
 indeed, after that of inherent value. Besides other 
 obvious advantages which it gives, there is a striking 
 difference between the effects of monetizing or de- 
 
Money Metallic. 25 
 
 monetizing perishable and durable matter, as will 
 appear (Chapter IV). This and other desirable quali- 
 ties thie money material acquired in becoming metallic: 
 thenceforward it is a contest between the metals. After 
 du'tability the other requisite physical properties are 
 four, as follows: (2) portability; (3) divisibility with- 
 out loss, i. e., without any minutest portion losing its 
 proportionate value; to this end a substance must 
 admit of perfect reunion after division. These two 
 quafities are necessary for the corporeal circulation of 
 money, and to make it thorougihly tractable, so as to 
 mediate smdll exchanges. (4) Uniformity, wihereby 
 each piece is the same in all substantial qualities 
 (texture, color, etc.) with every other piece of the same 
 coinage. The money material, then, should be per- 
 fectly homogeneous, of divisible without producing any 
 dissimilarity of substance in the separated portions. 
 This fourth qualification is essential to a thoroughly 
 reliable money. (5) Impressibility, whereby the legend, 
 authenticating and rating the piece as money, may be 
 delineated' sharply in the very substance, and partake 
 of its durability. (6) An aesthetic qualification, less 
 important than the foregoing as a physical property, is 
 attractive appearance, or beauty, which is given to 
 metals in fine texture, and brilliant lustre and color. 
 
 The metals best qualified in these particulars, gold, 
 silver and copper, early occupied the domain of money 
 under civilization, or when men began to explore the 
 earth for its mineral treasures. Naturally, the popu- 
 lations of a country employ, at least in the beginning, 
 that one of the more eligible metals that the country 
 yields most abundantly, or which is found most acces- 
 
26 Fundamental Relations. 
 
 sible from abroad, if the native supply of any of them 
 is too meagre. This would be the more inevitable the 
 more a state was isolated. From this cause we find 
 even some of the coarser metals in primitive monetary 
 service: thus iron was used at first in ancient Sparta 
 and Byzantium, and, until the most modem period, 
 platinum was money in Russia, w,here it was chiefly 
 produced. 
 
 Some metals, otherwise eligible, are debarred by 
 their rarity: so aluminum, which was first extracted 
 too late to compete in this service, was, besides, for 
 many years obtained with such difficulty and expense 
 that it remained commercially too rare for money. In 
 view of the way property is monetized, a commodity, 
 to be eligible for such use, must already be a not un- 
 common commercial factor. Most of the common 
 "useful" metals are excluded from the money list by 
 their deficiency in one or more of the six physical quali- 
 fications, as will be seen on applying those require- 
 ments as tests. They rust, tarnish, do not resist abra- 
 sion or fracture, cailnot be suitably marked save 
 roughly by casting in molds, etc. In the first and 
 fifth particulars gold atid silver must be reinforced 
 with alloy, while copper and nickel must be mixed, or 
 somehow softened. 
 
 Related, through their various adaptabilities, to the 
 mind and estimation of man, metals have value; inci- 
 dental to which essential quality there are two other 
 extra-physical requisites to a good money material, 
 involving tJie ratio of the magnitude of value to the 
 bulk or weight in which it resides (which ratio we 
 may term specific value), and the character as to 
 
Silver and Gold. 27 
 
 permanence of this ratio: i. e., the money material 
 should (7) contain much value in little matter, and 
 (8) have a steady value. The substance must not 
 be cheap in the price or estimation of other valuables. 
 Aluminum, perhaps, is now disqualified for large use 
 ■ as money on this account, not having qualities that 
 make it precious, however easily it may be obtained. 
 This qualification of high specific value includes 
 the mechanical one of portability (No. 2), and is of 
 importance in relation to trade between distant places, 
 as we shall see. Silver and gold are here as clearly 
 superior to all the other common metals as they are to 
 most of them in the sixth qualification ; while gold is in 
 this respect more .highly qualified than silver for the 
 great mass of commercial business. We may now dis- 
 criminate between the two leading money metals; for 
 gold takes pre-eminence both for material compactness 
 and chronological steadiness of value. Physically, 
 even, these two substances are in monetary gradation : 
 gold is the less destructible, as our chemists show that 
 it is much less readily soluble, while silver will tarnish 
 and participate in forming other substances, in associa- 
 tions where gold is not changed. In point of physical 
 permanence, indeed, silver ranks belbw nickel and 
 platinum. In permanence of value, also, the rank next 
 to gold may belong to one of these metals or to copper 
 rather than to silver, which, however, is on the whole 
 more desirable than they for money. Steadiness of 
 money value, and the comparative merits of gold and 
 silver in respect thereof, are important points in con- 
 nection with the business relations of the people and 
 with the governmental regulation of the coinage posi- 
 
28 Fundamental Relations. 
 
 tions of the two commodities, — in whidh coimeotions 
 they will be treated. 
 
 While no commodity is perfectly stable, absolutely 
 uniform, in value, and though we may not assert that 
 every change of the standard commodity has been 
 towards greater stability, there is a remarkable general 
 tendency, not yet fully worked out everywlhere, towards 
 a more valuable monetary substance. This tendency, 
 if not attributable to a conscious search for stability, 
 has, at least in modern times, worked to that result. It 
 is doubtless due more directly to the greater conveni- 
 ence and portability of considerable sums in the more 
 valuable medium, and to the function, or character, of 
 money as the type and representative of value : it seems 
 natural that that which is not only the standard, or 
 measure, of value, but also stands for value, — ^^stands 
 forth as the symbol and representative of purchasing 
 power, or wealth, — should be that commodity, other- 
 wise available, which possesses that power and quality 
 in the highest degree. 
 
CHAPTER III. 
 
 RELATION OF THE STATE TO MONEY — MINTING — 
 STANDARD SUBSTANCE AND UNIT — COINAGE SYS- 
 TEM — MONEY OF ACCOUNT. 
 
 With the most primitive moneys, metallic or other, 
 the terms of each transaction must, at first, have been 
 determined independently of all. others, the parties 
 agreeing to the amount of the purchasing medium 
 upon sight and inspection of the same, measuring or 
 parceling it out in some rude method, inexactly in 
 many cases, and according to the convenience of the 
 moment, thus making a price de novo, and estimating 
 the quantity and quality of the purchasing value in the 
 same original manner as the value purchased. This, 
 but for the medium, was barter; it was before the 
 medium had come to measure nicely and uniformly. 
 Afterwards, the merchants, who made the medium a 
 currency, or current money, would provide pieces of 
 uniform quantity, giving such fixed quantity a name, 
 or denomination; these pieces would then pass current 
 either by weight or by tale (number) ; though, in fixing 
 a metallic price by the latter reckoning, the weight of 
 each piece would, in the first instance, be a basic datum. 
 Prices could be made in these pieces without giving 
 them a particular name ; e. g., we read of things being 
 bought for so many "pieces of silver." 
 
 Still everyone must, without assistance, look to the 
 wortlh of his money, to the customary or standard quial- 
 
30 Fundamental Relations. 
 
 ity and quantity of the pieces paid him, until govern- 
 ment fixed such standard value as a binding article of 
 custom, fraudulent infringements of which are like 
 fraudulent dealings in barter, occasions for the inter- 
 vention of courts of justice. The first and most essen- 
 tial function of the state in relation to money, viz : to 
 punish counterfeiting, is derived from its general cog- 
 nizance of the criminal and inequitable acts of its citi- 
 zens. 
 
 But this punitive authority must have power to 
 guard against the offenses it punishes, and to provide 
 for their detection: to these ends it must be allowed 
 to put upon the money pieces a design including secret 
 and intricate details. In the line of this service is that 
 rendiered tihifough the signature, or "image and super- 
 scription," which makes money recognizable by ttie 
 people, certifying the pieces as money and attesting 
 their full value according to the standard of the name 
 they bear, and so avoiding the need of weighing them 
 in each transfer. This lettering, etc., can be certain 
 and uniform only when performed by some one agency 
 for the entire community ; since it is done on behalf of 
 every individual, whether as utterer or receiver of 
 money, and as the service is bound up with the juris- 
 diction of controversies involving money accounts and 
 amounts, it is a function of government. This authen- 
 tication, and the preparing the surface bearing its 
 tokens, presupposes the same agency dividing the con- 
 stituent substance into equal portions of proper quan- 
 tity, and securing its uniform quality. The minting 
 business, then, naturally falls into the hands, or at least 
 under tiie control, of the state, 
 
•Standard Unit. 31 
 
 Having a money material, or standard commodity, 
 a definite quantity of it must be set up as a measure 
 wherewith to reckon abstract value and to name prices. 
 This quantity of the substance is the monetary unit, or 
 standard unit of value. The measurement of value is 
 peculiar in this, that it requires a standard commodity 
 and then a standard quantity tliereof, defined or meas- 
 ured with reference to bulk or gravity (weight). In 
 metallic measurement commerce, as constrained 'by the 
 nature of things, fixed at once on the latter mode, by 
 weight. Value estimation or measurement, then, in- 
 volves all the elements of weighing (measuring grav- 
 ity) added and applied to the distinguishing element 
 of a standard substance. 
 
 The above definition of the monetary unit is in 
 merely physical terms, and looks simply to the physical 
 aspect of the matter. The standard unit of value is, 
 in reality. and in exact terms, the value of a definite 
 quantity of the standard natural substance. Value alone 
 can measure value, just as physical properties can be 
 measured only with themselves, as heat or distance 
 are estimated only in units of heat-force or length. 
 Since the value used to measure with must be that 
 residing in some commodity, and as there is no com- 
 modity whose value is certainly invariable, the meas- 
 urement of value has this further peculiarity, that it 
 must be done with a variable unit or measuring portion. 
 
 First the -quality of standard metal has to be deter- 
 mined: it is made "standard"* when. alloyed to -the 
 required fineness, i. e., admixed with a certain propor- 
 
 *The Eijglish .commonly use ,th.e word " sterling " in this 
 sense. 
 8 
 
32 Fundamental Relations. 
 
 tion, by weight, of alloy to pure metal. Different 
 monetary communities and unions may use money 
 metal in different degrees of fineness : thus the British 
 standard is higher than the American, as it contains ^ 
 of fine gold, while the latter is j\ fine. 
 
 O'f the standard metal a definite amount in grains is 
 the standard minting unit, and, being minted, passes 
 as the standard unit of value : but it is observable that 
 the real unit of value is the pure metal such piece con- 
 tains, irrespective of the alloy. The unit is prescribed 
 as so much fine metal; and it is ordered' to be minted 
 at such a standard of fineness, mixed with so much 
 alloy. So with any larger or smaller pieces that may 
 be minted: they are mixed in the standard proportion 
 and their value is that of their fine metal. 
 
 It is unnecessary that all the pieces should be of the 
 standard metal. Some of them (the larger or smaller 
 denominations, according as the standard money metal 
 ranks lower or higher in specific value) will be formed 
 of suitable quantities of other money metals. With 
 these the above rule, as to the values of minted pieces, 
 applies only to their intrinsic values, since, in their 
 monetary character, they represent a certain weight of 
 the standard money metal', unalloyed. 
 
 Nor is it necessary that the pieces minted of the 
 standard metal include one piece which contains the 
 money tmit: that that metal should circulate in unit 
 denomination. Strictly, indeed, it is unessential that 
 any of the circulation should be out of the standard 
 substance : if none of it is, the money of circulation is 
 wholly representative (though in part it will be so only 
 in legal theory), every piece being referable to a unit of 
 
Denominations, Coinage 33 
 
 unininted standard. By an unminted unit-standard 
 every piece is measured, even where the staiidard 
 money circulates, if, as in the United States, it is want- 
 ing in unit denomination. 
 
 All the pieces minted have definite numerical rela- 
 tions with the standard unit, containing or representing 
 multiples or sub-multiples of it. Some of these are units, 
 having particular names, and are related to one another 
 and to the standard unit by integral factors. In the 
 monetary systems organized in modem times there is 
 a constant factor ( lo) for this scale. Tlhey are there- 
 fore decimal systems. The remainiwg pieces are 
 mostly halves, quarters and; doubles of the various 
 units. ' 
 
 Whether the various pieces circulate independently 
 or representatively, their designations, consisting, sev- 
 erally, of the proper unit name and numerical prefix, 
 are the monetary denominations. 
 
 In determining how great the standard unit shall be, 
 and what monetary substances shall be adopted to hold 
 or stand for its parts and multiples in the different 
 denominations, government again consults commercial 
 usage and convenience. 
 
 Tlhe minted pieces are coins, and tiie business of pre- 
 paring them for circulation, including the regulation 
 of the conditions and amounts of mintage in the several 
 grades, as well as the various processes of the assay 
 and the mint, is coinage. This business devolves on 
 the state functionaries before mentioned, — in the lan- 
 guage of theory, on the coinage committee of the peo- 
 ple, viz : the general legislature and the officers of the 
 mint. Tlie United States Constitution recognizes it as 
 
3-4 Fundamental Relations. 
 
 a function of sovereign government in giving the 
 National Congress power "to coin money," and recog- 
 nizes its real nature in coupling that power with (the 
 power "to fix the standard of weights and measures." 
 
 The system of the coins, the series of minted values, 
 with the rules by which they are compounded in mint- 
 ing, inter-related in exchange and graded in monetary 
 function, is a coinage, or. 3i' coinage system. 
 
 Upon the coinage system is based the currency, whiah 
 consists of (o) coins . either containing or representing 
 the money unit or some convenient multiple or part 
 thereof, (6) paper pieces similarly representative. 
 However dependent, therefore, particular current pieces 
 may be on values extraneous to their own substance, 
 they bear :the denominations of the coinage system, 
 and are all conformable members of one monetary sys- 
 tem with the indepemdent coins. 
 
 And though the standard unit be not coitied, it is 
 nevertheless the base of the money of account; its name 
 and the other unit names, related and interconvertible 
 by the factor of the scale on which the coinage is 
 framed, constitute the monetary table of denominate 
 numbers. These names are things dirertly dealt with 
 in business accounts ; are the elements of bookkeeping, 
 the significant synlbols with which that science is con- 
 cerned. 
 
CHAPTER IV. 
 
 ECONOMIC RELATIONS OF MONEY — ^A CARRIER OF 
 VALUE — SOURCE OF ITS VALUE — BALANCE OF 
 TRADE — EFFECT OF MONETIZING A COMMODITY. 
 
 From the incidental property of money as the rep- 
 resentative and symbol of wealth, and from the acci- 
 dent that a particular agency coins it and' is sometimes 
 said, and even empowered, to "regulate its value," 
 there springs a misconception of the place of money in 
 the economic system and of its relations to individual 
 and national prosperity. The value of money, the 
 money value of coin, is conceived to be called into 
 being by the process of coinage: it is thought, or rcrttor 
 imagined, to settle upon, not to reside in, the coin. 
 To the original value of the raw metal a new kind of 
 value is believedtobe added^by the creation and stamp 
 of the coining authority. In the commoner and crasser 
 form of the misunderstanding, the idea would be trans- 
 lated better by saying that the new value,, created 
 through coinage; displaces the original' and ordinary 
 value. 
 
 This special "money" value, factitious and extrinsic, 
 or intrinsic to the stamp rather than' to the substance, 
 is made a species by itself, separate and extraordinary 
 in nature and incidents. It. is' true a piece of money 
 may be given extra force in relation to debts, but that 
 is not value nor a purely monetary feature. And 
 (what is more pertinent here) the purchasing, power 
 
36 Fundamental Relations. 
 
 of gold and silver coin is readier and steadier than of 
 some other things; but this distinction was character- 
 istic of their material before coinage, and its prior pos- 
 session by those substances was a reason for their 
 selection as money. The statement, "there is an unlim- 
 ited demand for money" is true only when "money" is 
 used in the derived and generalized sense of "prop- 
 erty" or "wealth ;" it cannot be true in its regular and 
 commonly accepted meaning, that money by distinc- 
 tion, in the strict form of coin and its representatives, 
 is desired in unlimited quantities. It is not true for 
 the nation ;* it is not true of individuals, except misers, 
 those who secrete cash in strong boxes, and these make 
 small demand for money, i. e., do not offer much goods 
 for sale. 
 
 Every form of property, money included, is worth 
 just what it will fetch in some or any other form, and 
 this is the measure of its desirability. The cash in all 
 the bank vaults of your city is no more desirable than 
 a house on Fifth Avenue, a coal mine, or a railroad, 
 each of these being its equivalent in value. Indeed, 
 most men would prefer the purchasing power in one 
 of the three latter forms, its possession and revenue 
 being thus more secure : and if one were presented with 
 so much money, he would probably convert the most 
 of it into other forms as soon as convenient. 
 
 If it be said that money is desired in limitless quan- 
 tities pierely as a means of obtaining things, it is to be 
 answered in the first place that money is no more use- 
 
 * The topic, quantity of money needed in a country, will be 
 found in Chapter VII. 
 
Production of Money. 37 
 
 ful here than other marketable property: moreover, a 
 little reflection should dissipate the fallacious idea that 
 money, the instrument of exchange, really obtains 
 things. In strictness, money is the means of getting 
 things, satisfying wants, in the hands of no other per- 
 sons than those who dig and scrape the money metal 
 from the earth. All others obtain their goods through 
 other services, through selling other valuables: it is 
 accidental, though convenient, that they sell indirectly, 
 through a medium, or in two successive transactions. 
 
 If it be said that money is desired specially for loan- 
 ing at interest, — property pays interest in other forms 
 as well, and it is only because of this fact that money 
 can be loaned on interest at all. 
 
 The production of money, then, the business of 
 extracting it from^ earth, is one of the several ways in 
 which by labor, always by some manner of exertion, 
 men procure satisfaction of their material wants. The 
 man who rides to mint with his saddle-bags full of 
 gold is prepared to get himself served in various ways 
 and at the same time do the community a service : by 
 spending this purchasing power he enables others to 
 make more sales and so promotes the general pros- 
 perity. Always when money comes to the community 
 In this way, as purchasing power, as an addition to tihe 
 common stock of valuables, a general benefit results, 
 yet only so far as an increased consumption of other 
 products is induced thereby ; nor is the benefit less or 
 different if the gold makes its purchases through pro- 
 ceeds at the goldsmith's instead of at the mint, for 
 where the expense of coinage is not defrayed out of 
 the bullion brought, and so more coin is returned to the 
 
38 Fundamental Relations. 
 
 owner than his metal is worth, that expense is paid out 
 oft the common treasury', thus offsetting, to the com- 
 munity the extra value received in the coin.. And 
 sometimes the goldsmith's is the better market. 
 
 Now., in this relation, the production, of money does 
 not differ from or surpass that of other commodities : 
 value for value they have equal purchasing power, and, 
 finding a market, equally enlarge the markets of other 
 products. And, like value produced in other forms, 
 the purchasing power thait comes intothe. community in 
 the form of money represents, an expesnse of precedent 
 values as well as labor, risks, etc. Somebody earned 
 it, got it by skill, shrewdness, daring,. application,, etc., 
 and so it is with all property. Money value, does not 
 differ in origin and nature from that it exchanges and 
 measures ; it cannot be made from nothing nor im- 
 parted by any kind of stamp: it cannot.be made a free 
 gift to a community nor to an individual without 
 diminishing the- property of others. - 
 
 As the advantage, to the state or individual^ of pos- 
 sessing a carload of. wheat depends on the- price of 
 wheat, so the advantage of a pound of gold depends 
 on the price of. gold: each is to be gauged by tiie quan- 
 tity of other goods it will obtain^ just as in barter. 
 The relations of values are not changed by the institu- 
 tion of money. Yet it appears to be a presupposition 
 of some far-reaching monetary conclusions (or asser- 
 tions) that the possession or marketing of a pound of 
 gold or silver offers the same increase of wealth and 
 prosperity, no matter how much .those metals may have 
 cheapened in the purdhase oi other comraoditiesy and 
 that swelling the currency with any form of money. 
 
Foreign' Trade. 39 
 
 regardless of its purchasing power, cannot fail to be a 
 national benefit. 
 
 Related to th« half-superstitious notion of a peculiar, 
 stamprderived- value of money in domestic trade, is 
 the fallacy that a nation's wealth and prosperity are 
 measurable by the quantity of money- metal that it 
 holds ready for market, and by the preponderance of 
 debit or credit cash balances in foreign trade. The 
 imj>ortance of money as the, reservoir of value, in 
 whidb it- is stored for future use, is often exaggerated. 
 It is unduly emphasized as the carrier in which value 
 is best insured and the form promising the surest repro- 
 duction. Henoe, when a nation includes money in its 
 exports for the year, the balance of trade is said to 
 be against it: i. e., when, on comparing the sales and 
 purchases of other commodities, the latter are in excess 
 and a shipment of money is made to balance. While 
 this opinion of money and the balance may in general 
 prov^ correct, dties not the proper interpretation of 
 this balance, as favorable, adverse, or neutral, turn 
 upon the particular circumstances in each case ? upon 
 the prior condition and prospective plans of domestic 
 industry? upon the country's status as a producer of 
 money metal and upon the relations of foreign produc- 
 tions to the development and ongoing of its internal 
 commerce? An individual may in a given year spend 
 more money than he receives, and yet a closing inven- 
 tory show a net gain in his present property, the basis 
 of future revenue. A nation may have a surplus of 
 gold in its vaults, as it may of wheat in its granaries, 
 and advantageously lay out a part of it abroad in 
 exchange for supplies needed to bridge the passage or 
 
40 Fundamental Relations. 
 
 lay the foundation to next year's profitable operations. 
 Thus the values may be embodied even more resource- 
 fully than if they were held in money. The United 
 States' incurring the payment of gold balances to 
 Europe on account of the new railroads does not imply 
 a real loss, unless the railroads fail of net earrangs. 
 
 The production of money — gold and silver — in some 
 countries is extensive enough to make the foreign pur- 
 chases mostly with money, and then leave a surplus 
 for storage of profits. Thus it is with South African 
 gold and Mexican silver. Under normal conditions, 
 or when neither party makes a sacrifice to meet a 
 calamity or waste already incurred, trade is mutually 
 profitable, whether conducted wholly as barter or in 
 part with money. The selection of a commodity as 
 . an intermediary and stanckird does not alter tihe utility 
 of the purchasing power stored in it. An exportation 
 of money metal means a national loss only when it is 
 paid for goods that, normally, should come from native 
 production: this happens only as a result of misfor- 
 tune or mismanagement at home. Nor is the com- 
 parative disadvantage smaller or different if tihe 
 nation's money is bought abroad with other commodi- 
 ties when there are native sources from which enter- 
 prise and skill might obtain money metal. 
 
 In view of the basic principle of exchanges, that 
 products are marketed at a profit to each party, the 
 question of loss or gain by exportation of money is 
 seen to be related to the matter of money exchange, 
 and we see that when this is in our favor, or when 
 money is more abundant at home than abroad, so that 
 prices are lower there than here, the consequent drain 
 
Effect of Monetizing. 41 
 
 of surplus cash to the dearer money market cannot be 
 said to entail a national injury. The export of gold, 
 then, pays an adverse balance only so far as it means 
 an immediate consumption of value that should have 
 been kept in store, i. e., an immediate consumption of 
 profits or earnings, or so far as the. gold should have 
 been exchanged for native products that were not 
 produced or else remained unsold and unsalable. Of 
 suich calamitous traffic balances wars and famines 
 may be the inducing causes. 
 
 Where the outflow is excessive, carrying off not 
 only the money held in reserve, but also a part of that 
 in active circulation, a contraction of domestic com- 
 merce is induced, which causes further losses to indi- 
 viduals. 
 
 But while their monetization has niot changed the 
 nature and relationships of the gold and silver values, 
 it has enhanced those values. The purchasing power 
 of a monetized commodity is at any moment, or in 
 presence of a given supply, greater than it would other- 
 wise be, since the additional use enlarges the demand. 
 Here, ag'ain, is nothing but conformity to general 
 economic law : and the value of a monetized substance 
 is still wholly commercial, existing by virtue and in 
 the ratio of the total demand for the substance, and in 
 exact proportion to its maximum exchangeability, i. e., 
 according to the definite minimum quantity of it requi- 
 site to obtain certain definite quantities of other com- 
 modities. 
 
 The efifect On value of monetization or the reverse is 
 not the same for all commodities. It is greater the 
 
42 Fundamental Relations. 
 
 more perishable the thing is: thus' the enhiancement of 
 value given a less durable comimodity by using a por- 
 tion of it as money cannot accrue to hardened gold 
 or silver from like cause, for virhile a monetary supply 
 of the former would quickly wear out and require fre- 
 quent replacement, thus causing a rapid consumption 
 of the substance, metallic coins wear 20, 30, or 50 
 years, and when the stamp has disappeared through 
 abrasion most of the substance remains. Wherefore, 
 metallic moneys only receive increments through the 
 expansion of commerce, and so call for much less metal 
 than if they had to be renewed completely and fre- 
 quently. Even in a state whose commerce is develop- 
 ing and increasing rapidly, the unlimited coinage of 
 any but a rare metal will keep the channels of exchange 
 filled with medium, and is liable to outstrip that rate 
 and inflate the volume of currency to a rise of prices. 
 It may be observed that no substance, not even the 
 most perishable, will advance in specific value becaluse 
 of being monetized, if the expense of producing it 
 should be reduced in proportion to the increment of 
 consumption due to its use as money. 
 
 This peculiarity of the monetary, and of most of the 
 commercial, consumption of gold and silver in not 
 destroying irrecoverably their substance, will be found 
 important in monetary science. 
 
 Another point, noteworthy here touching money 
 metals, is that monetization and its opposite affect the 
 value of the substance monetized in proportion to the 
 fraction of the visible stock of it needed to carry on a 
 given volume of commerce. Suppose gold and silver 
 stand at the value ratio of 20:1, and that it would take 
 
Relative Increment of Value. 43 
 
 three-fourths the output of gold to supply the needed 
 increase to the world's moneys, while twenty times 
 that quantity of silver would be five-sixths the corre- 
 sponding output of white metal, then would it advance 
 silver more to make the addition in silver than it 
 would advance gold to make it in gold. 
 
CHAPTER V. 
 
 MONEY MARKET PRICE OF THE CURRENCY VALUE 
 
 OF THE MONEY UNIT IN TRADE ^APPRECIATION 
 
 AND DEPRECIATION PECULIARITIES IN DEMAND 
 
 AND SUPPLY OF MONEY. 
 
 Monetization, or any other circumstance affecting 
 value, influences uniformly the entire mass of the 
 money metal: the rise or fall is not confined to the 
 coined portion. An ounce of gold has its one pur- 
 Chasing power, determined by the law of supply and 
 demand, in whatever form it may be foiuid, saving 
 only the differences caused by the expense of impress- 
 ing particular forms, as coins, chased and graven 
 ware, etc. 
 
 In the present chapter, however, we are to treat the 
 coined portion, money, distinctly from the remaining 
 body of extant metal, as a separate article, or factor, 
 of commerce, with its own peculiar market and value 
 determinants. Afterwards the connection of this value 
 to that of the bullion is to.be shown. 
 
 As general prices, stating the values of things in the 
 nomenclature of the coinage system, express the cor- 
 relative purchasing powers of every other form of 
 value with money, and of money with every other form 
 of value, so the price of money might be named in 
 some selected valuable, which would thus become the 
 measure of the common measure, a measure a step 
 remoter, and perhaps more nearly ultimate, than 
 
Variation in Price. 45 
 
 money. Commercial convention, however, has adopted 
 a more general and representative method for express- 
 ing the value of money, putting this expression on a 
 base as wide and solid as may be, and making it 
 express a correlation as even as possible between 
 money and the great mass of commodities. This 
 method places in antithesis to money the few commer- 
 cial staples of the greatest importance, and from an 
 average of their money prices deduces a symbol for 
 the price of money, by letting the number loo repre- 
 sent that average as it stood in a certain year, and with 
 that standard deriving numerical symbols (as, 98, loi, 
 etc.) for the corresponding averages in other years. 
 These symbols set forth the varying general level of 
 the purchasing power of money.* 
 
 When the price of a thing advances it is said to 
 appreciate, while money depreciates with reference to 
 that thing, and vice versa when a price is lowered. And 
 of course the comparative value of the article in ques- 
 tion varies towards every other valuable as it does 
 towards money. Now when money appreciates or de- 
 preciates generally, and the symbol just alluded to 
 varies accordingly, either of these words denotes a 
 change in the prices of all valuables, except so far as 
 some few may be exempted from the operation of the 
 force inducing the variation; but not in the values of 
 things as compared with one another, — though in 
 these latter relations particular variations, from differ- 
 ent causes, may occur at the same time. The price of 
 
 * This system may be found explained and illustrated in a 
 paragraph of the article "Bimetallism" in Chambers' Ency- 
 clopedia. 
 
46 , Fundamental Relations. 
 
 money and general prices being in antithetical correla- 
 tion, a rise of the former is a 'fall of the latter, and 
 vice versa. 
 
 We shall the better and more readily comprehend 
 the peculiarity of the money price and market by at- 
 tending to the relationship of money as the medium 
 for the conversion of values. Its price depends on the 
 demand for it and the supply of it in mafket, con- 
 formably to the same law with the lilings priced and 
 exchanged by its measure. These products are to be 
 exchanged, i. e., they make demands for one another 
 as they would in barter: the difference is, they make 
 a call for money in the first place and store up their 
 value in it briefly as an intermediate stage, whereby 
 the demands of all products for one another constitute 
 the demand for money. Correspondingly the supply 
 of the latter is the sums offered for goods, represent- 
 ing the demands of other goods, previously converted 
 into the money. Not only the demand for money, 
 but also the demand (or supply) of money, in the mar- 
 ket, really represent the mutual demand and market 
 of products for one another. 
 
 The demand for money, then, is the quantity and 
 value of goods on the market, and its supply (so far 
 as determining its price is the question) is the amount 
 of it in actual circulation, or, more accuratdy, the 
 actual circulation of it. Here we must pause to see 
 what the actual circulation, or market supply, of 
 money is. 
 
 It comprises two factors, (i.) the quantity, and (2) 
 the efficiency, of money in circulation. As will appear 
 later, the current money of a people is neces^jily 
 
The Circulation. 47 
 
 homogeneous, resting on one atid the same base : if the 
 coinage is not fundamentally homogeneous, not all the 
 coin will be of the currency. Nor does the actual cir- 
 culation comprise all the extant currency : some part 
 of this in any district is out of circulation, viz : what- 
 ever money takes no part in moving crops or transmit- 
 ting to consumption any of the yearly or half-yearly 
 outputs of productive industry and mercantile enter- 
 prise. Of the money that does circulate, the demand 
 for goods is greater the more rapidly it circulates : the 
 rapidity of circulation is the efficiency of money. This 
 is promoted by the use of bank cheques, clearing- 
 house balances, and other such devices of the mone- 
 tary middle-men, which form a mercantile enlarge- 
 ment of the volume of currency, and, representing 
 monies actually owned, enable them, while passing in 
 other transactions, to double their services by back- 
 ing these credits. 
 
 But we have not quite done with the first factor of 
 monetary circulation. The quantity of medium also 
 is reinforced by the use of property credits, which re- 
 lieve coin and its general representatives of a portion 
 of their tasks, and constitute a commercial substitute 
 for money, of particular and limited circulation. 
 These credits mediate sometimes with and sometimes 
 without a physical token, as personal or corporation 
 notes (white paper). In general, they are more re- 
 stricted locally than the money-credits above men- 
 tioned, and they do not represent actual money : their 
 base is property, or, more directly and universally, the 
 belief in property back of them, commercial faith. Like 
 property, such credit is measured in terms of the 
 4 
 
48 Fundamental Relations. 
 
 reigning coinage, and credits, in their sphere, form a 
 homogeneous supplement to the currency. Through 
 them a part of the demand for goods is made, and 
 credit becomes a factor of the price of money. To this 
 part also of the circulation the coefficient of efficiency 
 is to be applied, as the extent to which credit mediates 
 exchanges, or the rapidity and extent of the negotia- 
 tion of its paper tokens, since partly on this depends 
 the volume of credit business. 
 
 The whole monetary circulation, or supply, may be 
 summed up in a formula, thus: v. m. X r- + v. cr., 
 where v. m. is volume of money, r. the rapidity of its 
 circulation, and v. cr. the volume of credit transactions. 
 And as the price of an article is in the inverse ratio of 
 its supply and the direct ratio of the demand for it (or, 
 mathematically, p= 4), the formula for the price of 
 
 market supply of goods . 
 
 money will be, ^^^-^ ^ : i- e. (to express 
 
 V. m. X r. + v. cr. 
 
 it in a formal sentence), the price of money is directly 
 proportional to amount of valuables in market (the 
 demand for money), and inversely as the total mone- 
 tary circulation (the supply of purchasing power in 
 monetary form). 
 
 It may not need saying, though certainly those who 
 study the history of prices need to bear in mind, that 
 a sensible variation in any one of the price factors will 
 vary the price accordingly unless or until a compen- 
 sating change is effected in that or another factor. 
 Thus, if the volume of money in actual circulation suf- 
 fers a great and sudden contraction, the other elements 
 not varying, general prices fall and money is higher. 
 
Level of Prices. 49 
 
 By reflecting that the old prices, formed under competi- 
 tion, gave only a fair profit to producers, we under- 
 stand how this effect is compensated automatically by 
 a lessened production of merchandise which cuts dbwn 
 the numerator of the above ratio, unless this change is 
 forestalled by a compensation in the denominator, an 
 increase, for the money remaining in circulation, of the 
 coefficient rapidity, and an addition to the volume of 
 credit business. But we shall see how a monetary 
 contraction is soon remedied in the volume of money 
 itself, variation in which, and by consequence in the 
 price, has an automatic check. 
 
 Likewise, when commerce expands and the price of 
 money advances on account of an increased supply of 
 products in market, the same automatic regulation and 
 restoration through volume of money ensues. 
 
 The fundamental conditions of production remain- 
 ing unchanged, there is, under freedom, a persistence 
 of the price of money, the level of general prices being 
 subject to only brief and slight disturbances. Where 
 an unnatural money, or abnormal conditions of money 
 production, are foisted upon commerce, the statement 
 will not hold. But the fundamental conditions of pro- 
 ducing merchandise gradually change and improve. 
 When goods are produced more cheaply, they will be 
 more abundant, but even the same output will make 
 a stronger demand for money, since each piece, costing 
 less, will, unless the output is restricted or monopo- 
 lized, offer for less money, which is just how an 
 increased supply works to cheapen goods and raise the 
 value of money against them. Now an enhancement 
 
50 Fundamental Relations. 
 
 of the worth of money from this cause alone (lessened 
 cost of that which buys it) is apt to be permanent. 
 
 In considering the price of money, final reference is 
 had to definite quantities of the fine metal. Denomi- 
 nations disappear as criteria, save as they answer to 
 an unvarying quantity of the money substance. In 
 comparing prices in dififerent countries, therefore, or in 
 the same country under different coinage conditions, 
 we must reckon by mere weight or translate the units 
 into each other. If the weight of metal in the unit is 
 reduced, the factor volume of money in our formula is 
 cut down, unless the number of pieces be correspond- 
 ingly increased: in the former case the effect of the 
 change would be to advance the price of money, though 
 nominally it would remain as before; in the latter, it 
 would really not be changed, though nominally reduced. 
 
CHAPTER VI. 
 
 DELIMITATION OF THE VALUE OF MONEY — COST OF 
 PRODUCING MONEY AND OF OBTAINING IT IN 
 TRADE. 
 
 We have seen what the market value of money is: 
 our next inquiry should be, What determines, or limits, 
 this purchasing power? Here again the conformity of 
 money to the principles that govern all valuables is 
 apparent. The rule just adduced for other products 
 applies equally here, — The value of money is de- 
 termined by the cost of producing it. And as in gen- 
 eral, so in this special instance, the rule is perfectly 
 applicable only under commercial freedom, when pro- 
 duction, distribution and consumption are unforced 
 and unconstrained. 
 
 Of the product money, the metal is the raw material, 
 the coin the form finished for market : and, of course, 
 the cost of its production comprises all the expenses 
 of procuring and working the material (which latter 
 includes all the processes of the mint, even the final 
 stamping), and of guarding it and the finished pro- 
 duct. 
 
 The value of money, the cost of obtaining it in mar- 
 ket, is kept even with the cost of producing it, or at a 
 pretty uniform margin over the latter, by two in- 
 fluences, counterparts of each other: (i) Competition, 
 acting on the principle that men will produce at a cer- 
 tain minimum profit; (2) the correlative of this,. that 
 
52 Fundamental Relations. 
 
 men will not produce unless at such a profit or a 
 greater. As Mr. Mill states it, "The latent cause of 
 the agreement [between the value of money and the 
 cost of producing it] is the variation that would other- 
 wise be induced in the supply." That is, if money was 
 worth much more than it cost, production would be 
 stimulated and the supply increased until its price, or 
 the value of the unit, had been reduced to the limit 
 of competition. Could money become wortjh less than 
 it cost, production must cease until the ratio of supply 
 to demand had fallen to a point at which production 
 would be competitive. 
 
 Cost of production is not the average cost of an out- 
 put, but the highest cost to any competing producer, 
 i. e., the highest cost of any part of an output that does 
 not transcend the demand at that price. When the 
 ratio of supply passes above that mark, those who pro- 
 duced at that cost must go out of the business, and pro- 
 duction, while increased, is confined to those who can 
 produce at a less cost, which now determines the price, 
 and leaves less profit by the piece of the product, under 
 the increased competition of those who buy with it. 
 Small producers whose expense is greater than the 
 ruling cost cannot compete, while small producers with 
 exceptional advantages in point of expense make an 
 extra profit. This highest competitive cost, which 
 keeps price within a near margin to itself, is that of 
 the great bulk of the output, the general cost. When 
 the price falls, owing to cheaper production, it is in 
 view of the greater abundance ensuing or expected to 
 ensue therefrom. 
 
Cost of Production. • 53 
 
 The propositions in the last two paragraphs are ex- 
 pressive of general economic law, applying to all com- 
 modities that have a general market, including the 
 money metals, and separately, the coined money itself. 
 That the original cost of producing precious metal de- 
 termines its market value, and therefore that of the 
 coins and other articles made of it, save for the added 
 expense of coinage or other particular operations,^s 
 not fully admitted by all writers : some seek to exempt 
 the precious metals from the laws of commerce.* Thus 
 it is argued that "the effects of all changes in the con- 
 ditions of production of the precious metals are at 
 first, and continue to be for many years, questions of 
 quantity only, with little reference to cost of produc- 
 tion." But are the questions of quantity separable 
 from those of cost of production? The discovery of 
 more abundant supply, of sources from which a given 
 quantity can be obtained more quickly, implies the 
 attainment of less costly production: unless its cost 
 were less, additions to supply could not be greater or 
 more rapid. 
 
 A chief influence misleading these thinkers is their 
 neglect of the point that the money material must be 
 in demand for uses besides money, a point made 
 already by Aristotle. This appears from such remarks 
 as the following: "The knowledge that a commodity 
 can be produced at less cost will cause a reduction of 
 its value ; this is not true of money." But how is this 
 effect caused with other commodities? Only by a 
 
 * There is, indeed, one way whereby they may be so exempt- 
 ed : but only in application to debts. See Chapter XV. 
 
54 Fundamental Relations. 
 
 slackening of present demand : it does not wait for the 
 immediate competition of producers, because buyers 
 will wait for the larger supply. Now why will not 
 the news that gold or silver is to be obtained at less 
 cost operate similarly to defer purchases of the pro- 
 ducts of technical skill containing the metal, a;nd so 
 through temporarily shortened demand hasten the an- 
 ticipated fall? There are here, as in the other cases, 
 the same ultimate reasons for the expectation to pre- 
 cipitate the thing expected. And if the supply cannot 
 be increased indefinitely, neither does the consumption 
 destroy, but merely appropriates, the metal. As we 
 shall presently see, such an effect on the money metal 
 is speedily translated into the coinage. Again, — "a total 
 stoppage of fresh suppUes from the mines would not 
 be felt for some years in the increased value;" * * * 
 Why not, considering that demand is steadily increas- 
 ing and requires that a certain addition, approximately 
 determinate, should be made to the stock each year in 
 order to prevent that rise in value. * * * "and," so 
 runs the rest of the sentence I was quoting, "an in- 
 creased amount of production, though more rapid in 
 its operation, takes some time to produce an effect." 
 How much time it takes, under modem conditions, 
 may be judged from the course of prices after the dis- 
 coveries of gold in the middle of this century. The 
 price of gold fell so rapidly, approaching the new cost 
 of production, that abnormal profits soon ceased, save 
 irregularly for rare finds (which may occur at any 
 time under whatever ruling cost), and the profits of 
 the regular mining fell off on a steep sliding scale, 
 even before the cost rose towards its old mark on ac- 
 
Worth of the Coin. 55 
 
 count of the sources becoming less prolific. In 1853 
 (so quick was this cheapening) the silver coins of the 
 United States had to be reduced in weight to keep their 
 intrinisic suffideiitly below their nominal value by a 
 gold measure. Still quicker and more definitive has been 
 the fall of silver under the increasingly large and 
 cheaply obtained additions to its stock.* 
 
 The monetary effects of the first supplies of money 
 metal obtained from the New World by the Spaniards 
 in the i6th century traveled more slowly. Adam 
 Smith calculates that prices in England were not 
 affected until 1570, and that they had not done rising 
 in consequence of the new money before 1640. But 
 at that period all commercial changes were propagated 
 very slowly, commerce was hampered by custom and 
 by State regulation much more than it is now, com- 
 munication was slow, intercourse between nations was 
 impeded and restricted. Where prices could be regu- 
 lated and coinage restricted by the uncommercial Hat 
 of a dull mediaeval government increments to mone- 
 tary supply had less dhance to produce their proper 
 effect. Some districts escaped this effect, or felt it late, 
 because of their isolation. Still, as fast and as far as 
 the new American money could penetrate European 
 markets, it elevated prices, until the demand for money, 
 under commercial expansion, began to increase at a 
 rate about proportionable to that at which supply was 
 augmented. This does not appear to be denied. 
 
 Nor is it likely to be disputed that the price of 
 money never falls below the point fixed by the highest 
 
 *The monetary aspects of this silver depreciation are no- 
 ticed at more length in Chapter XVI. 
 
56 Fundamental Relations. 
 
 competitive cost of production. A rise in the general 
 cost of increasing the supply without a corresponding 
 rise of the market value would imply an alteration in 
 demand that could result from nothing else than a 
 radical revolution in human interests. If, indeed, the 
 supply could be increased much faster at the present 
 regular cost, the value of money must fall, unless the 
 demand were quickened correspondingly. But here, 
 as elsewhere, abundance and cost of a given quantity 
 are correlative and inversely proportional to each 
 other, and value follows cost down to any degree of 
 cheapness, as that of water or air. As a matter of fact, 
 the demand has always proved strong enough to make 
 the important sources profitable — those which have 
 successively yielded the great mass of the world's 
 stock — profitable at their respective costs, and even 
 when worked the most freely; unless, indeed, we 
 may credit recent statements claiming that quite 
 productive silver mines in Germany and the United 
 States are deserted by reason of the extraordinary 
 (and, as some assert, artificial) cheapness of that 
 metal. This, however, is merely a case where the 
 cost of production drops from one point to another, 
 so excluding the competition of some producers and 
 cutting the profits of others : which of them was estab- 
 lished by force as the ruling cost will be understood 
 better after considering the subject of the next chap- 
 ter. It is not made to appear that production has been 
 suspended at the important and pralific mines. 
 
 As to the upper limit of the value of money, it is 
 scarcely tenable that it can be raised above the highest 
 competitive cost save by the creation of a monopoly 
 
Maximum Cost. 57 
 
 of gold and silver production, and this monopoly 
 would require a world-wide organization: then, as 
 usual when competition is destroyed, the price would 
 be dictated. The old method of raising the value of 
 motley by governmental restriction of production from 
 the mines or through the mints, is no longer feasible, 
 and its object has ceased to be politic. Under free- 
 dom, this" limit of the highest cost of the gross produc- 
 tion can be broken only by the demand coming to in- 
 crease at a much greater rate, or by the general failure 
 of production, or by a conspiracy of these influences. 
 Thus, indeed, the production of money could be plated 
 beyond the pale of economic law, and, like the rarer 
 gems, gold and silver would command uncommercial 
 prices : and at once they would be unfit for money. — 
 While it is undeniable that government can, in a 
 limited and temporary way, vary the demand for these 
 metals by altering their relations as monetary sub- 
 stances, it is not easy to imagine how an artificial im- 
 petus could be given to demand strong enough to pro- 
 duce the effect in question. As a matter of fact, when 
 old sources grow less prolific new ones are discovered 
 and, so far, the rate of production has kept pace with 
 the rising natural demand. When the output and 
 general cost of the metal have long been unaffected by 
 changes in the conditions of production, the tendency 
 of its value is still downward rather than upward, the 
 average profits falling off by insensible degrees. As 
 a fall in cost of production must in a measure check 
 itself through the resulting rise of general prices, 
 which reacts in higher prices for mining labor and 
 supplies, so, correspondingly, when that cost begins to 
 
58 Fundamental Relations. 
 
 rise on account of shrinking yields from the active 
 sources, this increase of cost and the consequent fall 
 of prices check themselves by enabling- producers to 
 resume. or commence profitable work at poorer mines, 
 when what the metal will purchase more than replaces 
 the expense of obtaining it from such sources. 
 
 In view of what others have written about cost and 
 quantity, we may not waste time in glancing at a pair 
 of cases, purely hypothetical and, from the standpoint 
 of t,he history of gold and silver production, well-nigh 
 impossible. There was never a fall in the value of 
 money on account of an increased quantity unaccom- 
 panied by a fall in the cost. Suppose (i) the output to 
 be increased at the present cost : if the demand is in- 
 sufficient to take it all at that price, money may fall 
 locally and temporarily, at a loss to producers, but the 
 next year's or month's output will be smaller. Again, 
 regardless of quantity, a reduction of cost inevitably 
 influences value, and unless offset, varies the same. 
 (2) Let the production remain steady in quantity, while 
 its cost is lowered : money will soon depreciate, unless 
 demand is strengthened enough to turn production to 
 poorer sources, selecting a new cost as value determi- 
 nant; when, until richer ores and deposits are re- 
 vealed, the owners of the former more productive 
 mines will gather fruit of rare good luck. 
 
 Throughout the preceding paragraphs it is implied 
 that original production of precious metal merely 
 augments a constant supply, thus constantly increas- 
 ing; over against which a standing and gradually en- 
 larging demand is implied. The increment of demand 
 includes the new demand for use in the arts and that 
 
Gauge of Current Value. 59 
 
 for use in exchange, and is due to the expansion of 
 commerce and civiHzation. Have not students of the 
 subject observed that the strengthening of demand has 
 always at once been compensated, and generally anti- 
 cipated, by fresh sources of supply? Indeed, the new 
 discoveries create a great part of the new demand by 
 their extension of trade and colonization. Marked 
 discrepancies between the increments of supply and 
 demand cause variations in the value of money. De- 
 mand, a factor of all valuation, has a latent and vari- 
 able influence to hold up the highest profitable competi- 
 tive cost of production, which, accurately expressed, 
 is the highest cost of supply, — of supplying the de- 
 mand. 
 
 Now the purchasing power of an ounce of gold or 
 of silver is nearly uniform amongst all nations that 
 have mutual dealings, aiid its average is the highest 
 cost at which any portion of the latest output was pro- 
 duced to meet, or profit by, the demand. The whole 
 extant mass of the metal, thus uniformly valued by 
 the ounce, includes all, in whatever form, that has 
 been inherited from the past: all this, some of it per- 
 haps thousands of years old, is estimated according to 
 present cost of production. As the price of a crop or 
 of any periodic output of a commodity sinks to a uni- 
 form level with any surplus that may appear, so the 
 value of a remainder from previous production, what- 
 ever it may have cost originally, is limited to that of 
 the product now first marketed. And so each new 
 accession to the world's supply of money metal re- 
 duces tihe whole surviving body of it to the value deter- 
 mined by cost of supply at the present period. The 
 
60 Fundamental Relations. 
 
 amount brought over from previous years and cen- 
 turies, at the highest value that would be refused for 
 it, represents a section of the demand; at the lowest 
 that would be taken for it, constitutes a portion of the 
 supply. If its possessors should produce to market 
 anew any quantity less than enough sensibly to 
 strengthen the supply, their profit is its worth by the 
 rule of the present cost of supply less what it costs 
 them, — less nothing if they received it as a free legacy. 
 
 The purchasing power of money (i. e., of a:n ounce 
 or pound of money metal) has greatly diminished in 
 the long run through the ages, when we measure it 
 by an unchanging standard, or by a product whose 
 physical conditions vary but little, like the strength 
 and work of muscle. That this purchasing power, 
 measured in general merchandise, has increased in- 
 stead of decreased in the modern industrial period, 
 is due to the greater absolute cheapening of such 
 commodities, — an enormous reduction in the original 
 elements of their production, the time and hand work 
 involved. It is in this diminution of the time and 
 labor requisite to produce a given quantity of metal, 
 as well by reason of improved and quickened processes 
 as of the greater extent and richness of the modern 
 sources, — that we find the reconcilement of lower pur- 
 chasing power with diminished cost of production: 
 while an ounce of metal will buy less labor than 
 anciently, the labor necessary to produce it has dimin- 
 ished in still greater measure. 
 
 Another point relevant in this connection concerns 
 the mutual relations of gold and silver values : a refer- 
 ence thereto may fitly close our review of this branch 
 
Cost Reduced Indirectly. 61 
 
 of the matter, though we anticipate here a topic of a 
 later chapter (XIV). The cheapening of silver, or of 
 money in silver-using nations, has had the efifect to 
 cheapen gold, and vice versa, because many countries 
 formerly had free and independent money of each 
 metal, and lowering the cost of one would make its 
 coin preferable for money, displacing the other from 
 such use and sending it to countries whose money was 
 constituted of it alone, or increasing therewith the sup- 
 ply to the arts. This result from the swollen stream of 
 gold about 1850 was forestalled in the United States 
 by the Congressional Act of 1834, which in effect de- 
 monetized silver as independent money: yet, even the 
 small silver coins, overvalued as they were, had their 
 intrinsic worth raised above their representative gold 
 value by the sinking of the latter, and, but for the 
 recoinage of 1853, would have been swept from cir- 
 culation. In such cases the proce^ss is reversed, be- 
 ginning not at the mines, but in the market, where 
 first the ratio of supply is raised and the cost of a metal 
 lessened through its abandoning one of its uses : this 
 naturally results in lowering the competitive cost of 
 production and the relinquishment of its poorest 
 sources. At the same time, the enlarged use of the 
 displacing metal must check its own fall. 
 
CHAPTER VII. 
 
 REGULATION OF THE VALUE OF MONEY CONTRAC- 
 TION OF CURRENCY AND OF CIRCULATION — 
 PROPER VOLUME OF MONEY — HOW OBTAINED 
 AND REGULATED. 
 
 Now the general average value of an ounce of 
 money metal, an average, it is worth repeating, fixed 
 by present cost over the world's commercial neighbor- 
 hood, and not' as an average of the different costs at 
 all periods in which the total stock has been pro- 
 duced, — ^this average persistently tends to express 
 itself in the price of the coinage of each nation: the 
 "cost of obtaining money" in the general market 
 tends to conform to the ruling cost of original 
 production. And this tendency works on the same 
 principles governing the supply of increments, 
 to the common stock. Variations of the value of 
 an ounce coined from an ounce uncoined, owing 
 to changes in the ratio of monetary supply to 
 that of the ruling staple commodities, stimulate or re- 
 tard production to the mints. If the price of money 
 in a country, rising above the general level, increases 
 the margin of profit at the present cost of supply, ( i ) 
 native sources will be worked' more extensively: a 
 higher cost, fully replaced by the worth of the metal 
 when coined, prevails for a time in that country. (2) 
 It becomes profitable to have ornaments and utensils 
 of the metal in question coined up. (3) Production in 
 
Movement of Coin and Prices. 63 
 
 Other lines for export is stimulated: it pays to sell 
 lower abroad, or to buy foreigm coin at a dearer rate in 
 order to have it coined over for the still dearer domestic 
 market : i. e., the worth of money has risen to the cost 
 of producing it thus from foreign coin. If it is a gold- 
 using country, native silver, among other things, may 
 be produced more largely, going abroad to buy gold. 
 
 In these ways the ratio of money supply will be re- 
 stored: in a given case the last two, or even the last 
 one, may suffice, speedily replenishing the coinage, and 
 bringing its value to the general level of that of the 
 metal in the world's markets. 
 
 In the opposite case of the worth of money sinking 
 below that level, the processes are reversed: original 
 production slackens, coin and bullion go abroad to 
 buy where the metal aflfected is dearer, or they 
 are diverted to the melting pots of artisans; since 
 thus more can be recovered on the cost at which such 
 coin or bullion is held. Presently the money plethora, 
 in proportion to the domestic commerce, is remedied 
 sufficiently to re-establish in the coinage its usual ap- 
 proximation to the average purchasing power of the 
 metal. 
 
 If the country is commercially new, extensive and 
 productive, and is developing rapidly but without a 
 considerable yield, as yet, of money, its fresh demand 
 for that will doubtless stimulate production through- 
 out the world, raising for a time the world's valtiation 
 and the rulirug cost of supply. The effect is reversed if 
 the chief product is money, or where the nation is 
 wealthy but commercially stagnant or retrograde. 
 
 6 
 
64 Fundamental Relations. 
 
 Thus the supply and value of a nation's money, 
 unless this is non-metallic, are regulated automatically 
 in the economic ongoing of the world: attd general 
 prices, so far as determined by supply of exchange 
 medium, seek a constant level. A question that exer- 
 cises the minds of those who have not mastered the 
 first principles of economics is, how to define the 
 quantity of money needed in a country. The question 
 is rather an academic one, of little practical import, 
 since the industrial world automatically supplies itself 
 with all the medium it has occasion for, yet it deserves 
 our attention by reason of the false ideas that are cur- 
 rent in connection with it. 
 
 This quantity may be stated as the amount neces- 
 sary to transact the business of the country. Formerly 
 Locke and others undertook to reduce the matter to 
 certain statistical particulars of this business, thus: 
 taking the year as the basic period of the circulation, 
 they allowed as a sufficient volume of money the 
 sum of all stated annual payments plus the annual 
 sums of the payments recurring at shorter inter- 
 vals, divided each by the denominator of the frac- 
 tion that the period is of a year, as, the fifty-second 
 part of the amount paid yearly in weekly wages, the 
 half or quarter of the interest accruing, the twelfth of 
 ground rents, the whole of taxes and other yearly 
 rates. Such a statement might be accurate enough for 
 the conditions obtaining in the seventeenth and eigh- 
 teenth centuries, and helpful to governments that arbi- 
 trarily restricted the money supply. But for present 
 conditions it would be a most inadequate and super- 
 ficial representation, while for any free or diversified 
 
Quantity of Medium. 65 
 
 mercantile state it sheds no clear light over the matter 
 and does not disclose its basic elements. 
 
 In tihese days we hear much of the per capita circu- 
 lation, as if there was a proper amount to each soul 
 of the population. But the sole significance of such a 
 calculation is to show how much value the people may 
 have temporarily lodged in the monetary reservoir: it 
 has no necessary conformity to the amount of their 
 transactions. 
 
 We shall look to the core of the matter when we 
 seek the criterion in view of the service of money as 
 the medium of exchange : as a measure of value it is 
 concerned in many transactions, especially between 
 distant places, where it does riot assist as a medium. 
 With this view some might say that the right 
 quantity is the amount that will maintain the 
 level of general prices: i. e., there should be enough 
 money to buy all the valuables that may be placed on 
 the market. To this end, however, the money itself 
 must be for sale, and at any time a considerable but 
 indefinite portion of the money issued is withheld from 
 circulation. Moreover, money does not constitute the 
 market for goods, it is but the medium, often merely 
 the measure, by which products make a market 
 for one another. When there is superfluous produc- 
 tion in any line, whether of labor or commodities, no 
 amount of money in circulation vnll assure a market 
 for the surplus, while the demand for goods created by 
 the production of money from the mines is compara- 
 tively slight : there is no single great staple product of 
 the United States whose yearly output does not exceed 
 
66 Fundamental Relations. 
 
 in value that of the money metals in that" country. 
 There may also be over-production of money as' of 
 other commodities: the demand is limited, and if 
 considerably surpassed by supply there is an over-coin- 
 age, money falls, and the fresh demand for goods 
 caused by the increment to money supply falls off in 
 proportion to the rise of prices. 
 
 The debtor, indeed, desires this rise of prices, as 
 a debtor, or he whose indebtedness exceeds has sales 
 at present rates. And there are writers who suppprt 
 the poor debtor in clamoring for more money and 
 rising prices. Now, debts and credits aside, the effect 
 of the rise of products to be sold is balanced, and, for 
 many people, more than balanced, by the simultaneous 
 rise of products to be bought. In a subsequent chap- 
 ter I shall undertake to demonstrate that a large pre- 
 ponderance of ^ evil must result from a rapid rise of 
 prices due to a depreciation of money, as well as from 
 a sudden fall owing to its appreciation. 
 
 Those who insist that the best supply of money is 
 that which gives the largest amount per head of the 
 population, and that rising prices must be beneficial,, 
 are logically committed to the doctrine that the right 
 quantity of money is the greatest denominational 
 amount that can be issued to circulation. Now under 
 automatic regulation of money supply, on the prin- 
 ciples adduced at the beginning of this chapter, an over- 
 production thereof, or an increase large and sudden 
 enough to induce a. disturbing advance of general 
 pricesi can hardly occur with one homogeneous 
 money, constituted of a metal . having world-wide 
 
Absorption of Money. 67 
 
 uses.* To escape, therefore, the upper limit of prices 
 the natural regulation must be superseded: to this 
 end government is often solicited, and sometimes per- 
 stiaded, to issue representative paper, or else depend- 
 ent coin of a secondary metal, in amounts that would 
 render such currency irredeemable in the basal money, 
 which is thereby superseded and displaced from the 
 currency. This party teach that the production (or, 
 as they consider it, the creation) of money should be, 
 not merely without exact limitation, but absolutely 
 without bounds as to either numerical amount or 
 unit value. 
 
 No one, probaibly, will object to the increased coin- 
 age of money, . provided the coinage be kept homo- 
 geneous and that the increment is absorbed itito the 
 circulation. When the fresh output of' wheat is at once 
 bought up at the customary price and no surplus re- 
 mains on the market, the output is absorbed and -wheat 
 is not cheapened. So if a fresh increment to money 
 supply, homogeneous with the existing currency, goes 
 on tmceasingly to mediate exchanges, always meeting 
 some product offered for it, there is an expansion of 
 commerce which absorbs the new money and prevents 
 it from affecting prices; this expansion, being an in- 
 crease of products to be exchanged for one. another, 
 is a new increment to demand for commercial medium. 
 Or if, because of a disproportionate production of 
 money, men have been compelled to do without ready 
 
 * It is believed that there can be found no record or trace of 
 a deranging or harmful rise of prices due simply to lower cost 
 of producing money metal. 
 
68 Fundamental Relations. 
 
 money, i. e., to have inQO'nvenient recourse to barter 
 and credit in their transactions, or to defer or omit 
 purchases, there has been a contraction of the currency, 
 which the new money reheves. Only in these two 
 ways can money be absorbed into the circulation in- 
 stead of remaining on the market to lower prices ; and 
 the cases are really one, the sole distinction being in. 
 respect of the stage at which the money appears, — in 
 the one case preventing, in the other curing, the con- 
 traction. ^ 
 
 New money may to some extent replace credit even 
 when this has not been strained and credit business 
 pushed to an undue extreme. This fact that credit 
 methods, at least if over-taxed, offer an inlet for new 
 money, when this makes purchases that would other- 
 wise be made by credit, implies that in such methods 
 commerce finds a reserve purchasing force, an elastic 
 medium to span gaps in the monetary circulation. 
 This positive working of credit to keep up purchases 
 and maintain the real supply of money at an adequate 
 level is quite extensive, — far more so than its negative 
 influence to admit, by intermitting its own offices, new 
 money to the circulation: for the institutions of credit 
 traffic have become as positive and fixed as ajiy com- 
 mercial institution, and will not suspend any consider- 
 able portion of their business in order to give new 
 money employment. It is interesting to notice how 
 barter, not wholly discarded on account of the adop- 
 tion of a common medium, is revived in connection 
 with modem wholesale traffic between distant places, — 
 goods to go from one city to another being paid for 
 directly and wholly, though perhaps at a later time. 
 
Exchange and Medium. 69 
 
 with goods that are to pass in the reverse direction. 
 It is well observed how the cimount.of credit transac- 
 tions, in which things are bought and sold by giving 
 and taking credits in exchaiige, steadily increases with 
 modern improvements, and especially through the 
 multifold barter of credits for one another, as in the 
 clearing houses. The growth of commerce, therefore, 
 goes on with proportionably less dependence on direct 
 mediation with money. 
 
 Exchange will not be balked by lack of a medium: 
 if two men wish to trade the fact presupposes that each 
 possesses something, and they will infallibly devise a 
 way to compass the exchange though neither of them 
 has a cent or a farthing in money. The purchasing 
 power, or salableness, of one's goods or labor does not 
 depend on money, or a particular transitional or inter- 
 mediate form of property: according to their amount 
 in terms of a common measure they are an efficient 
 basis of credit, and so readily purchase other valuable. 
 A man who has not such purchasing power cannot 
 buy, be motiey ever so plenty: ability to buy may be 
 given to him gratis, and most conveniently in the form 
 of money. But who shall make the gift? He must 
 earn the money in some way, as did those who pro- 
 duced it, — fetched it to the mint and had it coined. 
 Markets never fail nor prices fall for lack of mere 
 medium. 
 
 Should general purchases fall far below their nor- 
 mal ratio to supply of goods, prices must drop: this 
 may happen as well from general over-production as 
 from failure of consumption; and cons'umption, be it 
 ever remembered, is not in reaHty made with money. 
 
70 'Fundamental Relations. 
 
 but with Other . products ; the producers of money-^a 
 small class — are the only consiuners who get goods by 
 money. All classes obtain products by taeaxis oi their 
 particular products : a failure of consumption means a 
 failure of production. The absence of buyers in the 
 general market may, in part, be the translation of fail- 
 ure of production from the money mines : but it is 
 only thus, as a general commercial cause, that a shrink- 
 age of the relative volume* of money can contribute 
 to a fall of prices. Yet the failure of bujring may as 
 well and in as great measure be due to diminished 
 outputs from another class of mines, as iron, lead or 
 coal, or from some other particular industry, agricul- 
 tural, manufacturing, etc. And as a matter of fact 
 short crops, a reduction of farmers' purchasing power, 
 much more powerfully (and more frequently) cut the 
 market and j price of other. goods than a total failure 
 of the year's output of money could depress general 
 prices, if the production of money was to be resumed 
 the next year. In the latter case, the effect of the rela- 
 tively contracted volume of money would be inde- 
 pendent of its use as a medium, which service might 
 not be impaired in the least, as credit, by its elasticity, 
 would come into fuller play and supply the deficiency. 
 Thus a reduction of the volume of current money 
 in proportion to the volume of business by no means 
 necessarily involves a contraction of the circulation. 
 The latter phenomenon, a financial stringency, is com- 
 monly mistaken for a contraction of the currency, and 
 then, under the latter name, is regarded as cause, while 
 it is but effect. It is really a general contraction, or 
 
 * The currency contraction alluded' to on p. 68. 
 
Contractions. 71 
 
 comparative suspension, of trade and industry, emanat- 
 ing from influential shortages or suspensions in some 
 particular lines, which in turn are due to special first 
 causes, one or more. The symptomatic effect is scarce 
 buyers and falling prices: there is commonly money 
 enough technically "current," but much of it is kept 
 out of the circulation, which thereby is "contracted." 
 
 Whatever induces a fall of prices, a second and me- 
 diate effect is to quicken production to the mints by 
 one or more ways, as stated in the first paragraph of 
 this chapter. If the direct cause was a currency con- 
 traction, a prior cause, a step remoter and nearer the 
 real source, is likely to be discernible in an excess of 
 foreign purchases: the money went abroad where it 
 could buy cheaper or get better satisfaction for present 
 wants, and so left the country short for home buying. 
 When prices at home start downward, a new influx of 
 money enlarges the contracted home market : thus the 
 fall is speedily checked and cannot become marked, 
 unless the new money is withheld for a further fall or 
 for the same reason that contracted the circulation. 
 And it would be inconsistent to suppose that this will 
 be done when the trouble is occasioned by a deficit of 
 the monetary purchasing power. 
 
 When, therefore, the depression of prices is serious 
 and obstinate, since the increased value and conse- 
 quently stimulated production of money did not check 
 and remedy the trouble in its first stages, the fact 
 proves that the stringency was not caused by a de- 
 ficiency of money : it is a disorder of the economic sys- 
 tem, and must run its course. Nor, in such cases, does 
 the extra mintage, though, as always, it ceases when 
 
72 Fundamental Relations. 
 
 the level of prices is restored, mainly produce that re- 
 sult. For, as in the milder cases when the currency is 
 simply depleted, the value of money is re-established 
 on the basis of original cost of production only by the 
 removal of the cause that induced the disturbance. 
 When this is efifected, the old money returns, and the 
 new then for the first time freely flows, to the channels 
 of traffic. Upon business revivals, accordingly, the 
 circulation is apt to overflow and raise prices tempo- 
 rarily above the normal limit: there is a commercial 
 rebound. 
 
 It is plain, then, that a serious or a lasting dq>res- 
 sion of general prices is impossible in a country that 
 has any money of unrestricted coinage; unless the 
 world's sources of money metal utterly fail. In that 
 case the world's coinage systems must be reconstructed 
 with smaller units, or other metals chosen for mone- 
 tary service. 
 
 It is plain, too, if the foregoing course of thinking 
 is sound, that the question of the right quantity of 
 money is inseparable from that of the value of money 
 and the conditions and methods of trade ; that the elas- 
 tic force of credit gives quite a range within which the 
 quantity may be limited; that this adequate quantity, 
 like the actual circulation, is as variable from hour to 
 hour as the face of the sea or of the sky ; and that, Uke 
 the price value of money, it can be expressed only in 
 a general and indeterminate formula. This formula 
 would be : 
 
 The needful, or normal, volume of currency = 
 
 quantity of goods in market , , ,. 
 
 _• normal value of money ~ ^"'""'^ °^ ^'^^'^ exchange s 
 
 rapidity of circulation 
 
Volume of Circulation. 73 
 
 In this complex fraction the factor, normal value of 
 money, is a commodity factor, viz: the price of tiie 
 money unit in quantity of the representative com- 
 modity or of the representative mixture of commodities. 
 So that the fractional part of the main numerator re- 
 duces to a number, the number of dollars or other 
 money units, and consequently the whole formula be- 
 comes such a number. The reader will observe that 
 this equation is derived by algebraic transformation 
 from that for value of money, given near the close of 
 Chapter V. 
 
CHAPTER VIII. 
 
 COMMERCIAL APPRECIATION OF MONEY PANICS. 
 
 In this chapter it is proposed to explain the serious 
 and sudden lowering of general prices, as illustrated 
 by the most noted instances in American history. The 
 explanation will postulate some principles to be eluci- 
 dated hereinafter, yet the incidental and latent part they 
 play here does not require that the present topic be de- 
 ferred and the proper order disarranged. This chap- 
 ter and the following one can, however, be skipped 
 without missing preparation for the subsequent sec- 
 tions of this study. 
 
 In this examination we shut from view the unob- 
 trusive and quickly remedied currency appreciations, 
 those price fluctuations due to irregularities in the pro- 
 duction or outflow of money, and which index com- 
 paratively slight unevennesses in the volume of domes- 
 tic trade : we confine attention to the heightened valua- 
 tion of money from commercial causes, from circum- 
 stances affecting the price of money on the money side, 
 i. e., acting not on general products but on money and 
 its employment ; in such influences finding the forces 
 that induce the great contractions of circulation, or 
 financial stringencies. 
 
 This behavior of commerce as to the use of money 
 depends on one or other of two causes, the cheapen- 
 
Sources of Panic. 75 
 
 ing* of money by tampering with the substance of 
 its unit, and the unprofitable investment of money. 
 The latter is unsuccessful speculation, all business be- 
 ing speculative, but with various degrees of security : 
 to affect general trade and prices its operation or con- 
 templation must be on an extensive scale and directly 
 involve a large section of the national industries or of 
 the population. On this principle, much swindling 
 has been perpetrated : on account of visionary hopes 
 built on suggested possibilities or interested repre- 
 sentations, shares of companies formed for mining 
 or land improvement, or with vaguer and more com- 
 plex foundations, command fabulous premixmis for 
 a moment: then the meagre and inadequate basis is 
 discovered, the blown bubble bursts, and thousands 
 are left penniless. And on the former principle, 
 through adopting a cheaper or fluctuating value-unit, 
 nations, following blind guides, have often cheated 
 and fined themselves : it has come to pass that 
 even the threat and prospect of such money is sufficient 
 to induce commercial courses that precipitate a large 
 measure of the eflfect its actual adoption would work. 
 
 In the inflation of John Law's gigantic bubble, the 
 scheme organized through his "Company of the 
 Indies," the two principles were united: the money of 
 the French people was made to stand for, or upon. 
 
 * Previous explanations, it is hoped, will have prepared for un- 
 derstanding that there can be an appreciation of money and 
 higher prices — i. e., cheaper denominations in the current me- 
 dium—at the same time; these prices might be still higher if 
 the former money stood at its former valuation. 
 
76 Fundamental Relations. 
 
 shares in that rainbow bonanza.* And, indeed, we 
 may say that always a monetary system forms of the 
 nation a joint stock company, in which all are con- 
 strained to be shareholders: all participate in a com- 
 mon loss when the share unit, which is here the money 
 unit, is depreciated. 
 
 Where the speculation is organized by private com- 
 panies to be forewarned is to be forearmed: at least 
 the investments, when made, are voluntary and a loss 
 is not anticipated. But when trade and industry 
 will be touched sorely by a proposed measure of 
 government regulation, the avoiding pecuniary re- 
 verses depends on the wisdom of the legislature; since 
 the direct effects of the measure, once it is taken, can 
 not be escaped but by abandoning tiie affected business, 
 which action does not parry the blow, but weakens 
 somewhat its damaging force. Under such applica- 
 tion, therefore, either principle may work in two ways, 
 by realization or by anticipation. The effects of (i) 
 new money or (2) of laws changing radically the con- 
 ditions of investments in respect of competition or 
 other industrial relations, may not be apprehended 
 till they are experienced : or, where the business facul- 
 ties are sufficiently alive and forethoughtful, it is seen, 
 or felt, that to continue under the conditions to be im- 
 posed will really be making investments anew and on 
 an unfavorable basis; wherefore producers seek to 
 forestall the change and at once prepare to suspend 
 or contract their operations. 
 
 * See Perry's Political Ecopomy, p. 364, ff , and the passages 
 there cited. 
 
The Depression. 77 
 
 Plans involving the unremunerative investment of 
 capital, when their execution begins or is anticipated, 
 produce panics co-extensive with the constituency of 
 the institution promoting the scheme: if a single pri- 
 vate bank fails there is a panic among the creditors, 
 the influence of which is propagated in widening cir- 
 cles with diminishing force. On the national scale, 
 where government is the promoting institution, we 
 may describe it as a panic terror when the calamities 
 burst in an unexpected flood, and a panic fear if they 
 are realized and reduced by anticipation. 
 
 In either sort the economic progress and effects of 
 these revulsions are in general as follows : The losers, 
 actual or prospective, feel a pecuniary straitening and 
 curtail purchases. The general markets are thus apt 
 to be affected first by slackening demand, especially 
 where producers in one or more important lines are 
 seized with. a panic fear lest their markets are to be 
 crippled: they discontinue or reduce their outlay in 
 labor and the material elements of their business. Thus 
 one or more great products — cotton, iron, labor, trans- 
 portation, etc. — are affected directly, the earnings and 
 purchases of the producers — planters, mine owners, 
 skilled workmen, freight companies, etc. — are cut 
 down, and the depression, as lowered demand, travels 
 from market to market. All suspend or restrict pro- 
 duction in the same ratio, and share losses proportion- 
 ably, except as it may be contrived to throw the bur- 
 den of damages upon labor. An inseparable twin of this 
 process is forced selling, sometimes beginning with 
 efforts of failing concerns to raise money for creditors : 
 but always as stocks of goods find falling markets, they 
 
78 Fundamental Relations. 
 
 offer at any figure to make sale. Those who produce 
 such goods to the trade, or their raw material to the 
 factories, find a shrunken demand, and as demand falls 
 off through the markets in close association, their sup- 
 plies become "long" and cut prices inevitably. 
 
 The low selling means a heightened demand for 
 money, as the curtailed buying means a shortened sup- 
 ply — a contraction of the circulation,: together they in- 
 duce a decided appreciation of money. On either side 
 further particulars are noticeable, (i) Purchases for 
 luxury and culture are largely cut off : when they stop 
 buying for the conduct of business men retrench all 
 expenses, buy only necessaries and these from hand 
 to mouth: many have suddenly become poor and can 
 buy little, while the rich cling tiglitly to their cash. 
 As workingmen are thrown out of employment or 
 wages are cut down, labor buys much less: there is 
 more starvation in garrets and new beggary in the 
 streets. (2) Men who were employers or salaried offi- 
 cers enter the ranks of wage^workers at low rates. 
 Plate, jewelry and ancestral furniture are sacrificed, 
 demanding money wherewith to get bread, clothing 
 or shelter. 
 
 Nor is the shortened supply of. money appreciably 
 built up by the ornaments and other ware of precious 
 metal which is minted up to stave off starvation and 
 houseless nakedness. Though such money is thrown 
 at once on the market, it is quickly secreted, joining 
 the hoards that are withheld till prices shall reach bot- 
 tom or clearer openings appear for profitable invest- 
 ment. , 
 
The Recovery. 79 
 
 Under modern conditions these mercantile crises 
 with industrial stagnation and falling prices, develop 
 and spread with extraordinary swiftness. In a few 
 weeks from the first alarm the disorder traverses a 
 continent and is immediately ushered in in all its viru- 
 lence, to last for months : more than a year may elapse 
 before business fully revives and prices recover a nor- 
 mal level. Meanwhile much capital is idle or seeks 
 foreign investment: at home markets are all confused 
 and uncertain ; it is a mystery where prices will finally 
 bring up, or when. A change is wrought in the mer- 
 cantile psychology: openings that previously would 
 have been embraced with eager confidence are dis- 
 trusted and rejected. 
 
 At length, when the collapse has spent its force, 
 business revives on previous lines, save that the 
 calamitous branch is avoided and some others get a 
 relatively enhanced cultivation: or when the effects of 
 the departure from the established financial system or 
 mercantile policy, unless finally averted, are definitely 
 realized and precisely ascertained, a readjustment to 
 future conditions, monetary and other, sets in : the lines 
 of enterprise are re-formed, with a contraction here, 
 a compensatory enlargement there, first, production 
 in certain lines can be resumed on a calculable basis : 
 seeing a clearer issue men begin to take advantage of 
 the low prices. Purveyors follow producers to the 
 markets, where both get larger stocks. The process 
 of trade depression is reversed. Money, new and old, 
 flows in a fresh, rising tide through all the hives and 
 avenues of production and distribution. The state of 
 mercantile faith also is reversed: sensitive though 
 
80 Fundamental Relations. 
 
 elastic, it was quickly and completely prostrated: 
 with money returning and prices rising, it rebounds to 
 sanguine confidence. Here and there in reckoning 
 on the fresh demand for goods, the mark is over-shot : 
 in consequence there is over-buying, and the prices . 
 thus affected mount for a season to an untenable 
 height. 
 
 The foregoing may serve as an outline sketch of the 
 natural history of those spasmodic contractions of the 
 market supply of money which have mistakenly been 
 attributed to a felt insufficiency of the volume of cur- 
 rency. 
 
 We should pause to note their effect on the value 
 of money to loan. This varies according to the prin- 
 ciple by which they occur. When a panic results from 
 a fear of the money in which returns will be made, 
 rates of interest are raised. The enhanced risk of 
 losing part of the principle must be compensated. In 
 this case, therefore, the loaning price of money is high 
 at the same time that its exchange price is high, — an 
 abnormal phenomenon. In fact, it is the retention 
 and withdrawal of money from investment by loans, 
 as well as its retention for subsequent sale as a com- 
 modity, that, under the apprehension of poorer cur- 
 rency, precipitates the fall of general prices. (If this 
 fear is afterwards realized, the effect, of course, will 
 be to raise prices generally, but not the fixed principal 
 or rate of loans made before.) 
 
 Where, however, the panic and crippling of markets 
 springs from the expectation of certain productions 
 losing their market, or from losses incurred through 
 
Effects on Loans. 81 
 
 certain forms of investment, the influence on interest 
 earnings is normal. In most directions, openings for 
 investment are neither presented nor acceptable to the 
 capital set free. Many legitimate branches become 
 foolhardy speculation, shunned by both the practical 
 producer and the silent partner or financial backer. So 
 far, the change in demand to hire money is balanced 
 by that in supply to loan. A few forms of security, 
 however, will still be eligible in the capitalist view: 
 with reference to these the increase in supply is not 
 compensated on the side of demand. However panic- 
 struck, capital will accept such stable security as farm 
 mortgages and government bonds, whether state or 
 municipal. But while government borrowing may be 
 enlarged in consequence of the depression, the openings 
 in the agricultural line will be more or less shrunken ; 
 though the agricultural and grazing interests suffer the 
 least from a severe general depression, as being the 
 original and basal industries; wherefore, some of the 
 capital thrown out of its former employment buys 
 land as well as mortgages thereon. Nor will the fact 
 that some productions by a lucky chance balance their 
 share in the common shrinkage with added foreign 
 markets offer an increase to business chances and swell 
 the demand for money to hire. On the whole, then, 
 the rate of interest in such case will fall, corresponding 
 to the rise in the exchange price of money. 
 
 It will be seen, accordingly, that the effect on the 
 loaning price of money affords a test to decide whether 
 a given panic occurred for fear money would soon be 
 cheapened, or that great losses were being, or about 
 to be, suffered in the mercantile sphere. The com- 
 
82 Fundamental Relations. 
 
 parison also shows the greater viciousness of the 
 former cause. 
 
 In the United States four nota;ble and instructive 
 commercial crises have been induced within a period 
 of sixty years, viz: the panics of 1837, 1857, 1873, 
 and 1893. The first of these had a monetary origin, 
 but was a financial reign of terror : the danger was not 
 suspected till the ruin fell upon the country. It was 
 due not to distrust, but to misplaced trust. Confidence 
 had been reposed in a fictitious currency which State 
 banks had been permitted to foist upon the people. 
 This currency being made legal tender for private 
 debts and accepted by government in payment of pub- 
 lic dues, gave those banks an opportunity, which they 
 freely improved, to speculate in the public lands, then 
 being sold at a nominal price to encourage their settle- 
 ment. A section of land would be bought for a few 
 of the "wild-cat" dollars these banks issued, then sold 
 to settlers for good money at a slightly lower nominal 
 price, which gave a clear profit to the banks, as their 
 paper currency really cost them nothing. When, in 
 1837, the Government announced in a circular that it 
 would no longer accept the bank notes in payment for 
 land, they at once fell into universal distrust and came 
 home for redemption in such quantities that the banks 
 had to suspend "specie" payments, i. e., declare they 
 had not the gold to redeem their notes in. This cur- 
 rency becoming waste paper in the hands of its hold- 
 ers, and standing henceforth for nothing but their 
 dead losses, was in itself sufficient to induce a partial 
 paralysis of trade and industry, inaugurate a season of 
 
The Panic of 1837. 83 
 
 forced selling and slack buying, and depress prices, as 
 commerce swiftly returned to the specie basis, and its 
 promoters realized forcibly their losses. But the panic 
 was ushered in with a crash when some of the honester 
 bankers tried to redeem their notes by selling what 
 property they had at lower prices, which immediately 
 brought down the value of all such property, an3, 
 mediately, that of all property. 
 
 The panic of 1857 bad a different origin, springing 
 from commercial speculation which is not based on 
 spurious money. There was a failure in the trans- 
 portation line: large investments had been made in 
 railroads that proved unable to pay expenses. As the 
 stock yielded no dividends and rapidly deteriorated, 
 its owners placed it on the market at sacrificing prices. 
 The infection spread to other lines: producers finding 
 demand was falling short, and fearing an extensive 
 and inevitable reduction of prices and profits, dimin- 
 ished production, and, by selling at a sacrifice of profits, 
 tried to forestall the necessity of selling still lower. 
 Here the trouble was aggravated by the low customs 
 duties which had been in operation for some time, and 
 by debilitating the home market for many staple 
 products, had diminished the power of the national 
 commerce to resist the depressing influence of unsuc- 
 cessful speculation on a great scale. In 1837, too, the 
 industrial system had been weakened by a like cause; 
 the middle point had been passed of Mr. Clay's com- 
 promise sliding scale of tariff rates. 
 
 Another terror originating in business reverses 
 seized the country in 1873. Like that of 1837, its 
 introductory stage was bank failures, beginning with 
 
84 Fundamental Relations. 
 
 that of a leading banking concern in Philadelphia, Jay 
 Cooke & Co. Depositors ran to the banks all through 
 the country to recover their deposits, fearing lest their 
 banks would soon suspend as others had done already. 
 For example, the failure of principal and sureties on 
 one or more large notes held by a bank might render 
 this in turn unable to meet an obligation when pre- 
 sented : the bank would then be broken. The cause of 
 this panic, in turn harking back to the main principle 
 of that of 1837, is clearly traceable to unsound 
 currency. During and immediately after the Civil 
 War prices had ranged very high in the irredeemable 
 paper constituting the mo^ney of the nation. As con- 
 fidence in the Government and hope of an ultimate 
 return to the specie basis were recovered, these prices 
 had gradually fallen, thus putting business on the 
 basis of failing speculation, for it was done largely 
 on credit and with borrowed capital. 
 
 The panic of 1893 took rise wholly in fear, on both 
 the purely monetary and the general mercantile prin- 
 ciple. Perhaps the' distresses of the three former 
 crises, — vividly portrayed by those who had passed 
 through them and in the popular histories, — ^had 
 schooled the commercial world in forecasting such con- 
 ditions and judging their effects. It is gratifying, in- 
 deed, thus to believe in the country's capacity to 
 learn from experience. At any rate, altered condi- 
 tions were dreaded in respect both of money and of 
 markets : the danger seemed imminent that the Gov- 
 ernment might so alter the status of silver in the coin- 
 age system as to reduce the currency to a basis in that 
 metal, and by consequence greatly cheapen the unit of 
 
A Double' Fear. 85 
 
 accounts and measures of value.* Still more probable 
 did it appear that the markets for most of the great 
 staples would be impaired seriously by legislation 
 scaling down the customs duties intended to protect 
 those productions in their domestic markets.f That 
 this latter apprehension was the more influential 
 may also be inferred from the fact that loaning rates 
 were but sUg'htly and locally affected. The usual 
 train of developments ensued of course : forced selling, 
 low prices; incomes and wages suspended or reduced; 
 buying for consumption foregone," for production de- 
 ferred till prices should perchance find a stable bot- 
 tom ; the towns and highways full of misery, beggary 
 and sedition. 
 
 * It does not yet appear that this danger has wholly and 
 permanently passed, 
 t This project was, to a considerable extent, carried out. 
 
CHAPTER IX. 
 
 ECONOMIC CHEAPENING OF PRODUCTS THE FINAL 
 
 STANDARD AND MEASURE OF VALUE AND WEALTH. 
 
 It would be too digressive, in an essay on money, 
 to go into a systematic and analytical discussion of the 
 industrial, as distinguished from the monetary, influ- 
 ences that go to limit or vary the prices of commodi- 
 ties. An instance showing how remote and powerful 
 at once such influences may be, is furnished by the 
 history of the first Crusade and has been finely de- 
 scribed by the historian Gibbon.* 
 
 Of course the general laws of correlated supply and 
 demand and the highest cost of production that the 
 natural circumstances of each commodity and the 
 demand for it will admit of, are always and every- 
 where in force: the exceptions, rare and unimportant, 
 being a few articles of extreme luxury, the supply of 
 which is always short of demaiid. 
 
 A force that has been operating at an increasing rate 
 through the nineteenth century to cheapen all products 
 through lowered cost, is the stream of industrial inven- 
 tions, not only c'heapening and quickening the processes 
 of manufacture of particular products, but also, in gen- 
 eral, reducing the cost of transportation, and so mak- 
 ing the new crop fields and sources of material of imme- 
 
 * See the Decline and Fall of the Roman Empire, ch. Iviii, 
 the text to note 33. 
 
The Case of Labor. 87 
 
 diate and world-wide avail, besides fetching all produc- 
 tions to market at less expense and with smaller loss of 
 time and value. The increase in amounts consumed has 
 not nearly sufficed to balance this influence; though 
 that increase has been great and steady from the mul- 
 tiplication of consumers and the enlarged consumption 
 by the former numibers of population. Nor has money 
 (metallic gold and silver) by sharing, as it has, in this 
 effect, absolutely cheapened enough to compensate much 
 of this rise in its relative purchasing power, due to the 
 cheapened production of general commodities. 
 
 A product wholly exceptional in this point is labor. 
 Under the absolute cheapening of money, unless the 
 supply of labor (its demand for money) were propor- 
 tionately augmented, wages should experience a nomi- 
 nal advance, i. e., an advance in weight of metal regard- 
 less of its increased, stationary or diminished purchas- 
 ing power. And, in the long run, this effect has taken 
 place, save where and when the cost of labor has been 
 reduced by increased competition or that of cheaper 
 hands. And since, as a matter of fact, the value of 
 money, in general merchandise, has risen, human toil- 
 ers have, within the century, enjoyed a double incre- 
 ment of prosperity, — receiving more for their toil, and 
 having the purchasing power of the original wage, or 
 of each given portion of their money, enhanced. Where 
 cost of an article has been reduced in the element of 
 labor, it has not been in the matter of wages, but in 
 the time employed. 
 
 And here, in the orderly unfolding of the present 
 line of inquiry, we meet a more perfect and absolute 
 standard of value than any form of money. Labor, 
 
88 Fundamental Relations. 
 
 as an economic product with a commercial market 
 and rating, has no absolute valuation in any other 
 product: all values are relative and vary by any 
 change affecting commercially either the things in 
 which they reside or that with whose value they are 
 compared. Labor, however, differs from other pro- 
 ducts in that its value has not been affected on its own 
 side, — ^by changes in itself or its normal circumstances. 
 This peculiar product, measured in time-units, is tlie 
 nearest approach to the absolute known to economic 
 science : it is the one economic finality. A day's work, 
 the giving up a day to exertion for hire, means 
 something pretty constant and irreducible in the view 
 of matikind. And labor is the one ultimate and indis- 
 pensable requisite to obtaining any and every commer- 
 cially valuable thing, i. e., regularly and generally valu- 
 able in commerce. Should any commodity come to 
 drop from tlie upper air to one's hand at call, it- would 
 lose its commercial value, just because the element of 
 labor had vanished from the means of possessing it. 
 The constant tendency of all things to cheapen in 
 terms of labor is more than a sign of the advancing 
 subdual of matter and material forces by man : it testi- 
 fies to the truth that labor is the ultimate and uniform 
 means of obtaining and occupying them; while the 
 sign and fact signified, taken together, declare labor to 
 be the uniform unchanging measure of values. All 
 commercial wealth represents labor as the one univer- 
 sal constituent, though the labor represented in a par- 
 ticular property may not have been the exertion of its 
 present possessor. Again, the important truth that 
 "time is money" can be affirmed only on the double 
 
The Ultimate Measure. 89 ' 
 
 theory that money is a valuable commodity, and that 
 labor is the uhimate measure of values : since labor is 
 the source of value and the only product measurable 
 in time. In both its terms, therefore, the proverb rep- 
 resents real value, and so illustrates the first essential 
 of money material. 
 
 That human effort is, in the last analysis, the criterion 
 of value, becomes plain when we consider what is the 
 real meaning of expressions of value in terms even of 
 money. A thing is worth what it costs or will fetch 
 in market, i. e., the exertion of human faculty requisite 
 to obtain the thing or the money that stands as its 
 price: the money is only a medium between the thing 
 and the effort. Erroneous judgments are often formed 
 of the dearriess or cheapness of things because account 
 is not taken of the cost of money in time and exertion. 
 When a man's wage is two dollars a day an article 
 that he pays one dollar for is cheaper than it is at 
 seventy-five cents with his daily earnings at one dollar 
 and twenty-five cents. The same principle applies to 
 painstaking and attention of any kind, though not 
 estimated by the day or week and though its earnings 
 be combined with the profits on capital accumulated 
 by past efforts. The final test is, how much human 
 effort and time does it take to balance and obtain the 
 goods sought in exchange? 
 
 It is because they do not see the intermediateness of 
 the money standard and the finality of the labor stand- 
 ard that men often clamor for such a treatment of the 
 currency as will make it more abundant (in nominal 
 quantity) and a given denominational amount of it 
 easier to obtain : they want a rise in the selling rate of 
 
90 Fundamental Relations. 
 
 their products, oblivious of the inevitable simultaneous 
 and compensating rise in the rates at which their pro- 
 ceeds must buy, and of the fact that the price of what 
 they sell and that of what they buy, taken together in 
 ratio, represent the price of the goods bought, meas- 
 ured in the effort required for producing and selling 
 the things sold. To take the standpoint of labor (the 
 product whose price is called wages), the compensa- 
 tory advance of the things it buys is always earlier and 
 generally higher than the rise in its own remuneration. 
 In no case is the selling price completely realized until 
 converted into the prices of goods to be bought. It is 
 like an equation: if each member is affected equally 
 and in the same sense, the result is not changed. Peo- 
 ple are wont to fix their gaze too separately and 
 exclusively on the first price, — ^that of the product they 
 sell, — while a just interpretation regards this as but a 
 partial translation, of labor into objects desired. A 
 rise in the selling price of a product, if met by a corre- 
 sponding rise in the other member — ^the prices of 
 its purchases — raises not its purchasing power: the 
 price in producing effort, or the power of the basal 
 standard, is unaffected. A general and uniform rise 
 of prices promotes no interest, unless they are to fall 
 again before some part of the receipts under the rise 
 is spent : labor, therefore, cannot profit by such a rise, 
 even if it includes a simultaneous and proportionate 
 advance of wages. But a rise in the purchasing power 
 of earnings — ^wages and profits, — a rise in the value of 
 money due to the economic cheapening of general 
 commodities, means increased prosperity. And this, 
 being translated, means simply a strengthening of the 
 
Governmental Influences. 91 
 
 purchasing power of hum'an faculty exerted through 
 portions of time, or of time spent in labor. 
 
 From the commercial side, furthermore, tihe prices 
 of commodities, or of particular classes thereof, are 
 often influenced (generally to reduce them) by the acts 
 and policies of governments: by granting monopolies 
 (which raises the prices concerned), by, levying im- 
 posts and other taxes, by subsidies to transportation, 
 by measures of "internal improvement" (as it is called 
 in the United States), and by commercial treaties and 
 other acts done in exercise of the sovereign power to 
 regulate commerce. A special means, less direct than 
 some of the foregoing, but more efficient than aiiy or 
 all of them, has been the granting letters patent for 
 new and useful inventions. By securing to inventors, 
 for stated periods, the exclusive right to the produc- 
 tion of machinery, and to production by processes 
 involving new and useful combinations of mechanical 
 and chemical elements, governments have co-operated 
 with and furthered the spontaneous movements of 
 necessity, and of desire to multiply and cheapen the 
 comforts and conveniences of civilization. More con- 
 sciously representative of the people than it was a cen- 
 tury or two ago, enlightened by broader views of the 
 public utility and of its own mission, the state has been 
 prompted to advance in many ways the industrial wel- 
 fare of its own separate community and of the world 
 at large. 
 
CHAPTER X. 
 
 government's relation to coined values 
 
 seignorage. 
 
 On the monetary side, government cannot legiti- 
 mately influence prices. Initially, it is true, the state 
 may assist in selecting the unit-names; and even in 
 determining the price numerals by fixing legally the 
 commercial predetermination of the standard unit. 
 But with determining how many grains of metal form 
 the equivalent of a pound or yard of merchandise, gov- 
 ernment has nothing to do ; nor can it vary that amount, 
 save only momentarily, surreptitiously, and with refer- 
 ence to certain classes of persons and products: and 
 this awry and partial influence it can exert only by 
 tampering illegitimately with the money unit, and so 
 falsifying the money of account.* 
 
 Such intermeddling, arbitrarily altering the values 
 of the price units, is illegitimate both on other grounds 
 and in particular, because, so far as it is effective and 
 really varies the quantity of metal paid, it belies and 
 dishonors the state guardianship of the honesty apd 
 uniformity of the currency : • it is the reverse of that 
 guardianship, — it betrays a trust and makes both gov- 
 ernment and citizens counterfeiters in tiheir payments. 
 
 This, we should again remind ourselves, is the one 
 
 * This differs from the attendant falsification of accounts (due 
 bills or debts) to be noticed hereafter. 
 
Authentication of Coins. S3 
 
 primary and essential function of government in rela- 
 tion to money, viz: to provide for the honesty and 
 uniformity of the values issued and uttered under 
 monetary denominations of estdalished and recognized 
 force. Perfectly uniform value through a long time 
 may not be possible, but the approximation thereto in 
 the uniformity of the physical standard (quantity of 
 metal) is possible, and is all that is required. Uni- 
 formity in the other sense, or homogeneity of the cur- 
 rency in all its pieces and throughout its circulation, is 
 attainable and commercially necessary : it is secured in 
 the same way, — ^by making each piece, of any denomi- 
 nation, consist of the same weight of fine metal. 
 
 Even where private coinage has obtained, the state 
 has assumed to guard and assure to the buyer the full 
 uniform value — ^weight and fineness — of the coin. In 
 ancient Rome, before the state took the affairs of 
 minting exclusively into its own hands, a tribe or indi- 
 vidual could have metal coined into pieces bearing the 
 name or sign of such private coiner; but those coins 
 also bore a stamp attesting, from the state, their genu- 
 ineness and full value. In Attica, also, the separate 
 demes had a like privilege under the oversight of the 
 central Athenian government. In America, though 
 there were a mint in every State and State coats-of- 
 arms on every coin, there could be no real State coin- 
 age, for, to insure the essential uniformity of the coin- 
 age throughout the country, the Federal authority 
 must still conduct or supervise through its agents all 
 the refining and minting processes. To the same end 
 sovereign government alone determines or should 
 determine the conditions of the issue of all forms of 
 
94 Fundamental Relations. 
 
 credit money: such money ought to be of one credit, 
 that of the central government or real state, which 
 may, with exclusive control, keep such currency homo- 
 geneous with itself and with the metallic coinage. 
 Wherefore, the emission of bills of credit is prohibited 
 to the separate States of the American Union. For 
 this general purpose of securing all purchasers of 
 money against fraud and loss in that connection, by 
 making each piece quickly recognizable of full value, 
 or the stamp and signature uniformly trustworthy, 
 government, also provides, as best it can, against 
 counterfeiting all forms of currency. 
 
 The particular authorization of the American Con- 
 gress to regulate the value of coined money might 
 seem superfluous, as already involved in the grant of 
 the coinage power itself, if it referred to changes of 
 the value of denominations through variation of the 
 standard unit. The intent of the Constitution here we 
 may learn from the fact that a duplex coinage system, 
 based on both gold and silver, was in prospect, and 
 from the associated power to regulate the value of 
 foreign coins. The latter authority is exercised by 
 ascertaining and publishing the values of those coins in 
 terms of the domestic units: this requires a compari- 
 son of the quantity of fine metal to which the foreign 
 denominations answer with that of the standard imit, 
 and also, where the coins in question are of another 
 metal than that in which this unit is taken, an account 
 of the value ratio established between equal weights 
 of the two metals. Foreign coins allowed to pass by 
 weight and not by tale are assayed, to ascertain their 
 fineness, or proportion of pure metal, and rated as 
 
Regulation of Coins. 95 
 
 bullion on that basis : as, so many cents to the penny- 
 weight, or a certain weight for lOO cents. 
 
 As to the value of domestic coin, there are no two 
 sets of denominations to be compared, and to regulate 
 this value is to ascertain and declare a legal monetary 
 ratio between the two coin metals. When the govern- 
 ment was organized it was believed that the ratio of 
 their market values would be so steady that by choos- 
 ing a coinage ratio approximately identical thereAvith, 
 the two ratios would keep so nearly identical as to 
 maintain a practical parity of the two varieties of coin 
 in trade : if they did not, this power to regulate the 
 coin values would enable Congress to readjust the 
 coinage ratio and promulgate new values for the coins 
 of one metal in terms of the other, which latter would 
 thus become the sole metal of the standard unit, if it 
 was not so already, at least to the extent of the coin 
 then circulating. The regulation, then, of the value of 
 money coined under a particular systefn has to do with 
 the mutual relations of its members, and would include 
 the placing one element of the extant currency at a 
 premium over the other. For instance, it might at one 
 time have been announced and decreed that the gold 
 coins in circulation were worth in silver a dollar and 
 some odd cents for every gold dollar they contained, 
 thus recognizing silver as the standard, or vice versa, 
 that the silver dollar was worth but ninety-odd cents, 
 thus making gold the standard and a cent the hun- 
 dredth, a dime the tenth, of a gold dollar. If the occa- 
 sion had arisen gold would have been declared at a 
 premium rather than silver at a discount, the latter 
 being regarded as the standard metal in the coinage 
 
 7 
 
96 Fundamental. Relations. 
 
 law then in force. Such a declaration would have 
 covered the payment of debts* in one or the other 
 coin, and, being repeated at every sensible change in 
 the value ratio, might have kept both in circulation. f 
 The object in such a case might be attained by order- 
 ing a recoinage at the new ratio : such action, however, 
 would not be in regulation of the value of money left 
 in the hands of the people, but in exercise of the orig- 
 inal power. By neither course is the standard varied 
 or prices influenced : if such a result accompanies the 
 change, it is due to a commercial cause, — ^variation in 
 the cost of the metal. 
 
 But if, in the exercise of coinage authority, the 
 quantity of fine metal in the unit is varied, the effect is 
 quite different: nominal prices, are moved by govern- 
 ment's action. When such action is taken it is always 
 to diminish the unit, and so it raises nominal prices. 
 This movement of the value of denominations may be 
 effected also by substituting for the existing unit an 
 inferior value in another metal or in credit currency: 
 the most modern depreciations have occurred in one 
 or the other of these latter modes. The former of them 
 arises, as we shall see, when the two metals run paral- 
 lel or independent in the coinage and one gets over- 
 valued therein with reference to the other : yet in sub- 
 sidiary coinage we shall find an application of this 
 regulative overvaluation that does not change the unit 
 or influence denominational values; which, therefore. 
 
 * In pursuance of the principle of keeping the "obligation of 
 contracts unimpaired." 
 t See forward, p. no. 
 
Powers of the State. 97 
 
 and because it promotes the convenience of trade, is 
 a perfectly regular and legitimate exercise of authority. 
 
 Both the power to alter the value of the unit and 
 that to regulate or interpret the value of one species of 
 coin in ratio to another appear to be authentic preroga- 
 tives, inherent in the idea of sovereignty; they have 
 been exercised repeatedly by nearly every state that 
 has been organized, and have never been questioned 
 nor discarded. They have analogues in the unlimited 
 powers of the state to regulate commerce and to levy 
 taxes and duties : there is a restrictive force latent in 
 them all. The possession, however, of undoubted 
 authority is one thing; whether, and how far, particu- 
 lar circumstances will excuse its application is another. 
 
 Before noticing in detail the administrative deprecia- 
 tions of the currency, with their motives and economic 
 effects, several topics have to be considered; and this 
 point is to be observed, that in controlling the mintage 
 government can raise the value of money, by requiring 
 the Mint's customers to pay the expenses of coinage 
 and taking an extra toll out of their bullion : so increas- 
 ing the cost of coinage, and making the residue, coined 
 of full value and handed back to the bullion-holder, 
 represent to him a larger outgo than formerly. The 
 effect of which is that the producers' valuation (cost 
 of production), and consequently the mercantile price, 
 of the coin is enhanced. 
 
 Seignorage. 
 
 The minting toll is called seignorage, though in the 
 technical nomenclature of the British Mint it is distin- 
 
98 Fundamental Relations. 
 
 guished as brassage when it just covers the actual 
 expense of coinage (wages of mint officials, etc.), the 
 term seignorage being applied only when an excess 
 above that expense is charged. From the effect on 
 profits of producers to the Mint there is a limit to such 
 a tax, to exceed which would be to stop coinage and 
 close the mints. 
 
 The question has been mooted whether the state 
 ought thus to make the money producer defray the 
 cost of coinage or to make that cost a charge on the 
 public treasury. The question does not arise as to 
 representative coin, since its mintage is wholly a state 
 enterprise: none but the state may produce such cur- 
 rency. While the state buys its bullion for the pur- 
 pose at the market price, the metal is, in the coinage, 
 so overvalued with reference to the basal money that 
 the gross profit, on paying out the coin, more than 
 balances the cost of mintage. 
 
 The case is different of the principal coinage, to 
 which the mints are open for unrestricted production 
 on private account. 
 
 The business of producing precious metal from the 
 mines and that of producing money through the mints, 
 like other lines of production, have their necessary and 
 regular expenses, going to make up cost of production. 
 As with other products, so with money that cost 
 includes the expense of the last operation, completing 
 the preparation for market; and again, as with other 
 products, this final item is added to the previous ones 
 in forming the market price. In producing to the arts, 
 the refined bullion is the finished product, but not in 
 producing to the money market, or general traffic: 
 
The Public Coiner. d& 
 
 coin costs more than bullion, and an ounce of metal in 
 coin will buy more general merchandise tha:n an ounce 
 uncoined. It cannot, therefore, in the least mulct the 
 money producer that he pays the expense of coinage, 
 which is the one essential operation in the production 
 of coin and simply puts the goods in shape for the 
 market he is seeking. On the other hand, for the 
 state to defray that charge, and so bear a portion of 
 the cost of production, must reduce that cost in effect, 
 or to the money producer, and would, the effect of 
 other conditions being unaltered, ' proportionably 
 cheapen money and raise prices : so that no gain accrues 
 to the producer from relieving him of the expense. 
 An attempt to subsidize lines of business where com- 
 petition must keep rates corresponding with actual cost 
 will necessarily fail. 
 
 Moreover, since there is no advantage in having 
 prices high, whether in denominations or in ounces of 
 metal, the state would pay the cost of coinage, with- 
 out compensation. It is the peculiar case where cheap- 
 ening does not benefit the consumer, — a fact springing 
 from the nature of monetary consumption. The uni- 
 versal but indirect public concern in the matter in no 
 way requires that the state should become a partner in 
 the production by making coinage free to the pro- 
 ducer: normally, government, as mint conductor, is 
 merely the hireling of the coin manufacturer. 
 
 To take the standpoint of the latter, — though we 
 held that there is no competition to keep the price of 
 money down, and so that he would gain by having his 
 product finished gratis, still it would be as just that 
 the man who brings bullion to mint and takes away 
 
100 Fundamental Relations. 
 
 the coin should suffer toUage as that he should do so 
 who brings corn to mill and takes away the grist ; or 
 that the man who fetches a hide to be tanned and car- 
 ries off the leather should pay for the service ren- 
 dered; or that the horse-breeder, retaining the foal, 
 should pay his stud-fee. 
 
 This does not justify the government, under ordinary 
 conditions, in taking a larger seignorage than required 
 to pay mintage expenses : the excess would be a tax on 
 production, and such taxation should have a special 
 excuse, applying to the particular industry or arising 
 from special public exigencies. Government's relation 
 to the money business not being that of a partner, the 
 idea that profit to the national treasury should accrue 
 therefrom is unfounded. Nor is it congruous with 
 right political theory for the state to discharge with a 
 view to replenishing ks treasury any of its functions 
 instituted for the convenience of the people, or any at 
 all except those the very purpose of which is to collect 
 a revenue. The people do not make their money* thus 
 in common, though they may save it to some extent by 
 economical administration, and though it may some- 
 times happen that the receipts from fees in bureaus 
 organized to serve the people commercially, as post- 
 ofEce, registries of land titles, etc., or mints, exceed the 
 disbursements on account of the same offices, since it 
 is impossible to keep the rates adjusted with minute 
 accuracy to the expenses as varied by varying volume 
 of business, etc. 
 
 * The phrase is used here in the sense of,— acquire property. 
 
Mint Tolls. 101 
 
 Seigiiorage, then, is just and expedient, but it has 
 a just limit, and that, ordinarily, is the expense of coin- 
 ing the metal up, as nearly as this can be ascertained.* 
 
 .It is also advantageous in these three particulars: 
 ( I ) It has tihe effect to store up in the toll bullion that 
 amount of the treasury's resources, thus creating a 
 sinking fund, which may be recurred to by coining the 
 seignorage. (2) Since the coin will be more valuable 
 than the metal by the cost of coinage, it is in less dan- 
 ger of melting down, and the circulating volume 
 thereof is more equable. (3) The seignorage offers a 
 sort of fly-wheel faculty for steadying a drop in price 
 of money through lowered cost of original production 
 of the metal or reduction, by the course of foreign 
 trade, in cost of obtaining it. This faculty would be 
 brought into action by charging an extraordinary coin- 
 age rate, which would restore and maintain the cost. 
 Thus, also, the other two advantages would be en- 
 hanced. 
 
 Such a condition would form the extraordinary cir- 
 cumstance and the public exigency alluded to above, 
 which would justify a tax on money production.. This 
 phenomenon, however, a commercial depreciation of 
 money so great and rapid as to endanger mercantile 
 
 * The United States has always made its mint charges and 
 deductions on the basis of actual expense, or of reimbursement 
 for any advance payment before the deposit was coined, when 
 it has not coined gratis and delivered to the depositor the same 
 weight of coin that he deposited in bullion. This is true also of 
 the charges for the striking of national medals, etc. (authorized 
 by the Coinage Act of 1873) , and for the execution of foreign 
 coinage (authorized by a special Act, January 29, 1874). 
 
102 Fundamental Relations. 
 
 interests through confusion of prices and loss of 
 credits, is improbable in the economic life of any 
 nation: for it would have to spread over the whole 
 commercial world* 
 
 *In the United States the term "seignorage" appears tc be 
 restricted to designate the profit accruing to the Treasury from 
 the manufacture of subsidiary or token coins, i. e., from the 
 purchase of bullion at its market value and the production 
 therefrom of coins whose face value is greater than their 
 intrinsic value. It is the net balance of such coins over the 
 number equivalent, at their current value, to the price paid for 
 the bullion. See Chapter XI, in particular page io8. By the 
 Act of February 12, 1873, the profits of the silver coinage 
 therein provided for were set apart as a special fund, called the 
 silver-profit fund. This is still maintained. 
 
COIN, CURRENCY AND COMMERCE 
 
 PART II 
 
 CHAPTERS XI-XVIII 
 
 Money of Dependent Circulation — Concurrency 
 OF Independent Monies 
 
CHAPTER XI. 
 
 REPRESENTATIVE AND CREDIT MONEY — SUBSIDIARY 
 COINAGES — LEGAL TENDER — REDEMPTION. 
 
 A glance, at once sweeping and scrutinizing, over rep- 
 resentative money, should here continue our survey of 
 state monetary regulations, and precede what is to be 
 said of currency depreciations arising thereunder. Rep- 
 resentative money consists of pieces of paper or metal, 
 suitably and authentically stamped or printed, which 
 pass as tokens, or in lieu, of actual money, — ^to the 
 amount of the denominations imprinted on their faces. 
 So long as these are trustworthy signs of money, they 
 form a convenient sort of currency, — uniform, readily 
 exchangeable, and current with money itself. 
 
 Such currency, then, is of two kinds, paper and 
 metallic: the first may specially be designated credit 
 money; the second is conveniently distinguished as 
 token money, or subsidiary coin : though both circulate 
 merely as tokens of real money, and the metallic variety 
 rests partly, as the paper does wholly, on government 
 credit. Again, both kinds might be called subsidiary, 
 or secondary forms, in distinction from the principal, 
 or primary, coin, which they represent. The metallic 
 variety is to be considered first, in Ihe subdivisions of 
 subsidiary and subordinate coin. 
 
 To introduce the topic, some account is necessary of 
 discrepancies between denominational value and com- 
 mercial value, or intrinsic purchasing power. There 
 have been periods in the history of many countries 
 
106 Currency and Standard Unit. 
 
 when there were two kinds of real money, a double 
 and heterogeneous primary coinage, each of the two 
 metals being coined in the same system of denomina- 
 tions and flowing together in the stream of traific. 
 Now, in such cases it has been found tha,t after a time 
 one of them disappears from those chaiinels, prices 
 being determined and exchanges mediated in the other 
 alone. It has been observed, further, that the coins 
 driven from circulation are undervalued in comparison 
 with their associates of tlie other metal : e. g., that the 
 quantity of metal in such a coin of the denomination, 
 say, of the unit, was commercially, or for non-monetary 
 use, worth more than twice the metal in a coin of the 
 other kind, the denominational and currency value of 
 which was one-half that of the first coin. In other 
 words, either there was a discrepancy at the start be- 
 tween the commercial and coinage ratios, or else, 
 from some commercial cause, the adjustment of those 
 ratios got deranged, the former ratio having varied 
 through appreciation of the one metal or depreciation 
 of the other relatively to its fellow and to general mer- 
 chandise. 
 
 The cheaper metal, if the disturbance be due to its 
 depreciation, falls to a discount in making purchases: 
 but since its debt-paying power remains intact, that of 
 the companion metal must, value for value, propor- 
 tionately diminish. Consequently, the cheaper money 
 persists in circulating, becomes more abundant and 
 begins to be offered in all transactions in preference to 
 the dearer. Prices, therefore, are raised nominally, 
 being adjusted to this depreciated coin ; then, if in any 
 purchase the dearer is offered, its premium is not reck- 
 
Overvalued Coin. 107 
 
 oned, and the seller reaps an extra profit. Hence the 
 dearer money, value for value, falls below the cheaper 
 also with respect to purchasing power in general trade. 
 The nominal value of the depreciated coin is first dis- 
 counted to its commercial value: after the readjust- 
 ment of prices the commercial value of the relatively 
 appreciated coin is discounted to its nominal equality 
 with the cheaper. The result for the coins underval- 
 ued by the new standard is that they find their way as 
 fast as possible to places where their nominal does not 
 slight their actual value, — ^to the money-changer's 
 drawer, thence to the channels of foreign trade and the 
 artisan's melting-pot. If the discrepancy should be 
 due to a positive appreciation of the one metal, so that 
 its coins are undervalued, prices, following always the 
 overvalued currency, remain unchanged; the appre- 
 ciated coins at once go to a premium on 'Change and 
 retire from circulation as in the former case. Now 
 where the primary money is monometallic, advantage 
 is taken of lilie influence of an inequality of the ratios 
 to give a money use to a second metal a:nd to provide 
 coins of more convenient size for the higher or lower 
 denominations according as the principal coinage is of 
 the less valuable or the more valuable metal. Such 
 subsidiary coinage is overvalued, each piece containing 
 less of the fine metal than it takes to equal its denomi- 
 national value in the basal coin: e. g., the United 
 States half-dollar contains less than half the silver 
 which is the value equivalent of the gold consti- 
 tuting the standard dollar, and less than a tenth of 
 the silver equivalent to the gold in a half-eagle. 
 The overvaluation is extensive enough to with- 
 
108 Currency and Standard Unit. 
 
 stand any probable or precedented fluctuation of the 
 commercial ratio: if the metal thus treated is that 
 whose value tends downward in relation to the other, 
 the changes are likely only to accentuate the over- 
 valuation. Such is the case with British and Ameri^ 
 can subsidiary silver: yet for about fifteen years after 
 1850 the intrinsic value of such coin in Great Britain, 
 which alone at that time had a subsidiary silver coin- 
 age, must have approached their token value in the 
 fundamental gold; owing to the great commercial 
 depreciation of the latter metal relatively to silver, 
 which in the United States greatly multiplied the exist- 
 ing undervaluation of the silver coins as independent 
 money, and so hurried from circulation those that still 
 remained and led to the law of 1853, providing for thie 
 future coinage of the fractional silver pieces as de- 
 pendent (subsidiary) coins, i. e., at a ratio over-\3hxmg 
 them. By this means the smaller coins are made 
 worth more as currency than as bullion, or the con- 
 tained metal is of higher price in the money market 
 than in the metal market: thus they are secured from 
 melting down and from exportation as bullion to make 
 coins in other countries, — unless, indeed, the coinage of 
 some country should overvalue the metal still more in 
 relation to the primary metal, or price money. But 
 since in this way the prinoipal money, or standard coin- 
 age, is undervalued in ratio to the subsidiary, some- 
 thing must be done to prevent the latter from expelling 
 the former out of the circulation and replacing it as 
 standard money of business and prices. This is effected 
 by limiting the amount of debt that may, in any one 
 instance, be discharged by offering subsidiary coin 
 
Representative Coin. 109 
 
 in payment; or, in monetary parlance, by restricting 
 the "legal-tender quality" of such coin. Consequently 
 the primary money or its representatives of the larger 
 denominations (unit-multiples) and unlimited tender 
 power will be required for the larger payments and 
 the great bulk of business, the subsidiary coin (in unit- 
 fractions) being restricted to making "change" in 
 these larger transactions and mediating the smdlest 
 ones: e. g., upon the institution, in 1853, of silver 
 token currency in the United States, the amount of 
 debt, public or private, for which those fractional 
 tokens were legal tender in one payment was fixed at 
 five dollars as the maximum: subsequently (by Act of 
 June 9, 1879) this maximum was doubled. 
 
 As is well understood, the very smallest denomina- 
 tions are coined only as tokens and of metal baser than 
 silver, as nickel and copper: this has been so in the 
 United States from the institution of the coinage sys- 
 tem in 1792. And the legal- tender quality of such 
 coins is reduced proportionately, being restricted here 
 to twenty-five cents (Act of February 12, 1873, sec. 
 16). 
 
 The status of representative in relation to principal 
 coin may be illustrated from the history of subsidiary 
 silver in this country. In the beginning, as at pres- 
 ent, the three leading fractional denominations, — half- 
 dollar, quarter-dollar and dime, — were struck in silver 
 only. But at that time silver and gold were coined 
 independently as two primary monies at the fixed 
 ratio of 1 : 15, and these fractional pieces were minted 
 of full value, containing each the proportion of the 
 metal in the standard silver unit answering to the frac- 
 
110 Currency and Standard Unit. 
 
 tions that their denominations were of the unit (save 
 that the dime was slightly under its proportional 
 weight), and they were as final and independent 
 money as the largest silver coin, the unit or dollar. 
 The above coinage ratio was based on the commer- 
 cial, which did not change sensibly for several years. 
 In 1806, however, it was found that owing to silver 
 having become worth a little more the dollar coins 
 were being bought for export. From the same cause 
 their coinage had already practically ceased, only 321 
 of them having been minted in 1805. Consequently, 
 by Executive order of May i, 1806, it was directed 
 that all silver deposited at the Mint should be coined 
 in the smaller denominations. These fractional pieces 
 do not appear to have been affected as much. The 
 dollar was the best piece to export and the smaller 
 pieces were needed at home to cash small balances. 
 So that, to a great extent, they persisted in the circu- 
 lation. But before the dollar coinage was suspended, 
 there was a period of four years (1797-1800) in which 
 no half-dollars were coined and six years (1798-1803) 
 during which no quarters were minted. The inter- 
 mission in quarter-dollar coinage for the seven years 
 1808-1814 is of less significance, as there was a largely 
 increased issue of half-dollars all through that period. 
 Yet most of these may have quickly abandoned the 
 circulation. 
 
 By 1820 gold had appreciated in the market rela- 
 tively to silver, and the gold coins of the United 
 States, undervalued in domestic circulation, disap- 
 peared in foreign trade and left the home market to 
 paper currency. In 1834 the coinage ratio was changed 
 
Recoinages. Ill 
 
 from IS : I to i6: i by diminishing the weiglit of the 
 gold coins. The new ratio again undervalued silver 
 slightly. In consequence, gold became the standard, 
 and silver retired before it save in so far as the frac- 
 tional silver persisted in circulating, by reason of its 
 great convenience as change, and in spite of the fact 
 that it was worth more as bullion than as money after 
 the gold unit came to prevail. A readjustment of the 
 ratio, or a new adjustment favorable to silver, appears 
 to have been attempted in the Act of January 18, 
 1837, which reduced the standard weight of the silver 
 dollar from 416 to 4125^ grains.* Then, as we have 
 seen, the gold unit was further depreciated about 1850 
 from a commercial cheapening of the metal, thus en- 
 hancing the pressure to banish silver from the circu- 
 lation and making its coinage still more unprofitable 
 compared with selling it to the arts and to foreign 
 trade. The dollar coin had immediately left the circu- 
 lation, as had been intended: but also the fractional 
 silver had nearly all gone the same way, as was inevi- 
 table, though not intended nor desired. Hence, the 
 law of February 21, 1853, making these fractional de- 
 nominations an overvalued token currency, and direct- 
 ing that the Mint should purchase bullion for their 
 coinage to the profit of the Treasury.f What they 
 
 *The weights of the gold and the silver dollar, as fixed in 
 1834 and 1837, respectively, have never since been altered. 
 
 tit does not militate against the statements in the text, that 
 the coinage of the silver dollar, resumed with the issue of 1000 
 such coin in 1836 and 300 in 1839, was continued on a small 
 scale (though the production of the unit coin, and of halves and 
 quarters as well, came near the vanishing point in 1851-52); 
 8 
 
112 Currency and Standard Unit. 
 
 thenceforward represented, as correlative redemption 
 money, was either gold coin or the silver dollar, which 
 was not touched by this law. According to a later 
 provision of Congress (Act of June 9, 1879), the silver 
 tokens are redeemable in lawful money (of either 
 metal or its paper representatives) when presented in 
 sums of twenty dollars or a multiple thereof. 
 
 "Hie other variety of subsidiary coin is made in 
 higher denominations: the silver dollars of the United 
 States are an example of it in unit denomination; in 
 France, where the money unit is smaller, it occurs in 
 multiples of the unit as well. The distinctive feature of 
 this variety is its unlimited legal-tender force. A state 
 with a currency based wholly on the cheaper metal, if 
 
 nor that gold bullion continued to be desposited at the Mint 
 and coined into half-eagles and quarter-eagles during the 
 period 1818-1833. Silver halves and quarters were coined 
 throughout the period (the '6o's and early '70's) when frac- 
 tional United States notes — "shin-plasters" — coiistituted the 
 stock of small change, but they did not circulate much. It 
 should be noted in this connection that in both the period of 
 undervaluation of gold and that of undervaluation of silver 
 no seignorage or deduction of any sort was charged on 
 deposits of bullion at the Mint, unless in reimbursement for 
 paying a depositor in advance of coinage. (Act of 1792, sec. 
 14; Act of 1834, sec. 2.) Again, the fact that no action sus- 
 pending the issue of the silver dollar or of any gold coin was 
 taken after the suspension of the former in 1806, does not show 
 that the occasion did not recur. Monetary regulations have 
 been kept distinct from the outward regulation of commerce 
 since Jefferson's administration. It may well be noted that 
 the order discontinuing the coinage of silver dollars by reason 
 of their exportation was followed the next year by the Em- 
 bargo Act and in 1809 by the Non-Intercourse Act 
 
The Silver Dollar. 113 
 
 it used gold money at all, must have it in this form, — 
 coined to represent the higher denominations and 
 qualified to pay the largest amounts ; while, as under a 
 system based upon it, gold could not be made to fur- 
 nish convenient small change. But, like its fractions, 
 the silver dollar is now overvalued, though at a dif- 
 ferent ratio ; is representative of gold, though on dif- 
 ferent legal grounds; and restricted in volume, or 
 amount coined, though of unimpaired current strength. 
 
 The change in the legal status of the silver dollar, 
 unaffected by the Act of 1853, began in 1873 when the 
 coinage of the standard or independent silver dollar 
 (of 4i2j^ grains) was prohibited and a sole standard 
 fixed in gold. Thus silver was formally demonetized 
 as primary money, while this effect had actually been 
 reached already under the ratio of 1834, supplemented 
 by the lower cost of gold due to the opening of new 
 sources in Australia (1845) and Cahfornia (1849-185 1), 
 which made the dollar coinage unprofitable for use 
 as United States money. 
 
 The increased production of silver bullion, dating 
 from the discovery of fresh sources in Nevada in 1867, 
 and the discontinuance of the unrestricted production 
 of silver coin in Germany in 1870, had made the metal 
 so much cheaper that the independent coinage of 
 the silver dollar at the ratio which before had made it 
 unprofitable would now be profitable. Accordingly, 
 the minting of dollars, as well as hcdves and quarters, 
 had an enormous increase, beginning in 1869. Hence 
 the Act of February 12, 1873, abolishing the standard 
 silver dollar, now so cheap that a shifting to that stand- 
 ard must seriously impair private obligations and un- 
 
114 Currency and Standard Unit. 
 
 settle domestic commerce, — and substituting the 
 trade-dollar, of 420 grains, which was made subsi- 
 diary, like the other silver coins, with legal-tender 
 limit at five dollars.* It was in compromise with an 
 effort to re-establish the coinage of the silver dollar 
 as an independent money that the Act of February 28, 
 1878, was passed, over Executive veto, providing for 
 the coinage of a limited number of ounces into dollars 
 at the old ratio (that of the Act of 1837), but on ac- 
 count of the government, and from bullion purchased 
 for the purpose, as in the case of the trade-dollar and 
 the other subsidiary silver coins after June i, 1853, 
 and as with the "minor," or base-metal, coinage. 
 
 *By the Act of July 22, 1876, the trade-dollars were deprived 
 of all legal-tender force, and the Secretary of the Treasury was 
 authorized to limit their coinage to such an amount as he 
 should deem sufficient to meet the demand for them to export. 
 Their coinage finally ceased in 1878, having continued through 
 five years. February 19, 1887, the authority to coin such dol- 
 lars was repealed, and provision made to exchange them for 
 "standard" silver dollars or subsidiary silver coin, and for 
 their retirement and recoinage at public expense. A last 
 enactment relating to these coins was contained in a proviso 
 to a clause of the Sundry Civil Appropriation Act of March 3, 
 1891, as follows: 
 
 "Recoinage of Silver Coins : For recoinage of the uncur- 
 rent fractional silver coins abraded below the limit of toler- 
 ance in the Treasury, to be expended under the direction of 
 the Secretary of the Treasury, one hunderd and fifty thous- 
 and dollars : Provided, That the Secretary of the Treasury 
 shall, as soon as practicable, coin into standard silver dollars 
 the trade-dollar bullion and trade dollars now in the Treasury, 
 the expense thereof to be charged to the silver profit fund." 
 
The Gold Dollar. 115 
 
 Since the metal in these dollars is overvalued in ratio 
 to gold (owing to the lowered cost of silver) and their 
 legal-tender power is unUmited, they should, by the 
 principle already stated, supplant the gold money: the 
 reason they do not is that they themselves rest on and 
 represent gold. They are convertible to gold and kept 
 at a parity therewith, because by legal definition there 
 is now but one dollar, and that is a defined weight of 
 gold: and the name "one dollar" stamped on a piece 
 of silver can only mean that portion of gold ; — ^it must 
 be interpreted by the legal definition of the unit. This 
 is true unless the law of 1878 amended that of 1873 
 in respect of this definition, restoring the double mean- 
 ing of "dollar" in the coinage system, which it did not. 
 Moreover, it is a declared purpose of the govern- 
 ment to maintain the parity of all current "dollars," 
 or of the unit in both gold and silver,* on a gold basis, 
 since the real dollar is of gold: this has an effect to 
 keep the silver "dollar" as "good as gold" in popular 
 estimation. 
 
 This status of tlie United States silver dollar, as just 
 explained, accounts for the fact that that dollar buys 
 more than its weight of bullion silver, or of a silver 
 coinage that circulates on its own basis, carrying no 
 value but its inti-insic value ; such as the Mexican dol- 
 lar, which, though it contains more silver than the 
 United States dollar, is worth but half as much, ac- 
 cording to the present value of the white metal. One 
 American dollar buys two Mexican, because it stands 
 
 ♦Acts of July 14, 1890, November i, 1893, and March 14, 
 1900. 
 
116 'Currency and Standard Unit. 
 
 for a gold dollar. Since this dependent and repre- 
 sentative relation of the United States silver dollar is 
 the only fact whereby its enormous superiority to its 
 weight in its own metal can be accounted for, the fact 
 of that superiority is a proof that such is its relation. 
 
 But it is not merely faith in a government which 
 keeps the silver up to the gold standard. That this 
 factor, the public credit, is correlated with the quantity 
 of overvalued coin in circulation, and that much de- 
 pends on keeping bounds set to the issue of such cur- 
 rency, appears also from the situation in France and 
 the other countries of the "Latin Union" (Belgium, 
 Switzerland, Italy, Greece, Rouraania, Servia and 
 Spain). 
 
 The Latin Union maintains a double-coinage system 
 in which silver is overvalued even more than it is in the 
 United States, and yet allows gold to circulate abun- 
 dantly beside it. This is effected solely by restricting 
 the issue of silver, without impairing its debt-paying 
 capacity or guaranteeing its parity with gold. The 
 restriction of its amount would appear to be closer and 
 proportionably narrower than it is with us. Theoreti- 
 cally both metals are standa,rd, and legally the silver 
 coinage is independent, though not free. In reality it 
 is subsidiary and representative of the gold standard; 
 which it does not displace because it is insufficient in 
 quantity to buy the gold up. Nor can anyone amass 
 credit enough to borrow it all on speculation, and pay 
 interest in silver or have the interest coupons pass for 
 money. Moreover, there is little or nq_outward tend- 
 ency of gold from these countries: the commerce of 
 most of them is chiefly at home or with other members 
 
Restricted State Coinage. 117 
 
 of the Union. Their enormous expenditures as states 
 (to support the governments and carry on their opera- 
 tions) are made at home and affect only the domestic 
 circulation and equilibrium. French gold, by far the 
 most abundant of these Latin monies, shrinks from 
 foreign investments generally, — ^indeed, little goes out 
 for industrial or commercial exploitation of French 
 colonies, — while its volume is augmented steadily by 
 the favorable balances of France's foreign trade. 
 
 Under sudh conditions those governments need not 
 define the unit solely in gold, or publicly recognize 
 their obligation to keep the current measure steady and 
 all the circulation utiiform, i. e., to maintain the 
 equality of the overvalued and restricted coinage to 
 the standlard. Their system is secure, as ours is, until 
 the restriction on silver seems likely to be removed. 
 
 The grounds of the obligation in question disappear 
 where both metals are coined without restriction and 
 on private account, when commerce comes to a basis 
 and a single standard in the One overvalued. The obli- 
 gation arises only where business is established on a 
 monometallic base and the rival metal is thrown into 
 the currency as a coinage overvalued from the start 
 and limited with the express purpose of keeping the 
 measure of values and the basis of commerce undis- 
 turbed. 
 
 If our present silver dollars were not coined exclu- 
 sively on public account, if any holder of silver bullion 
 might become a coin-producer, their issue, even though 
 limited, could hardly fail to expel gold and raise prices, 
 as then government could scarcely be expected to keep 
 them at par on a gold basis. On such a plan, govern- 
 
118 Currency and Standard Unit. 
 
 ment might go on buying the amount of metal to be 
 coined, but instead of paying the market or buUion 
 price as it does now, would pay the currency or legal- 
 tender price of the coin, and so would turn t!he profit 
 of coining at an overvaluation into the pockets of the 
 bullion-holders thus patronized. But the current 
 parity of such a coinage with the unrestricted coinage 
 forming the monetary basis, can be secured only by 
 making it convertible in the latter through the agency 
 of the national treasury, which cannot become charged 
 with this redemption, except at a loss, unless it first 
 receives the profits of the coinage. Consequently any 
 attempt to maintain on private account an overvalued 
 coinage of full legal-tender quality, even though 
 limited in amount, must end in coming to a new basis 
 in the restricted coin while the unrestricted withdraws 
 from circulation. And, in fact, the proposals, made 
 during the pendency of the standard-silver coinage 
 bill of 1878, for a limited coinage of the silver 
 dollars to the profit of private producers, had in 
 view the removal of the limitation at an early 
 day, so that silver might be free to occupy the 
 position of standard thus accorded to it and to fill the 
 room yielded to it in the circulation. It is noticeable,, 
 further, that not even if the Treasury coins silver at 
 an overvaluation solely on its own account, is it secure 
 against loss in redeeming such coin wihen the bullion 
 is bought on a falling market ; for then on redemption, 
 the coin is worth less in the market than, it was when 
 issued. 
 
 The risk of loss by redeeming fractional silver, of 
 limited tender-quality, is nil; for such coins are indis- 
 
Government Credit. 119 
 
 pensable as change, and will therefore not seek re- 
 demption unless issued in sudi excess of the needs of 
 trade that there accumulates i"n its tills a superfluity 
 which would be more useful in money of unlimited 
 tender-power. Nor, though the overvalued silver dol- 
 lar might desirably be replaced with paper,* is there 
 serious danger of its seeking conversion unless the 
 amount coined exceed the credit of government. If 
 this sihould fail to bear up the silver currency, the 
 holders of the latter would try to get it changed to 
 primary money or use it in paying debts : for such dol- 
 lars would then be as cheap as their contained metal, 
 sinking to a discount with gold and becoming easier to 
 obtain. Before the Treasury could buy back as many 
 of them as its means admitted of, and as in any event 
 the bulk of them would remain outstanding in the cir- 
 culation, they would drive out the dearer money and 
 shift trade to a silver basis with an elevation of current 
 prices. It is government credit, then, that spans the 
 gap between the nominal and intrinsic values of these 
 dollars, as of all token coins, keeps them at a monetary 
 par with gold and makes them assist, instead of ex- 
 pelling, the primary money. The resources and hon- 
 esty of government unite in determining its credit: 
 each element is indispensable to make good its guar- 
 antee of honest and uniform dollars throughout the 
 currency. 
 
 *An extension of the facilities theretofore furnished for hold- 
 ing this currency in paper form by means of silver -rcertificates, 
 was provided in sec. 7 of the Act of March 14, 1900. 
 
CHAPTER XII. 
 
 PURE CREDIT CURRENCY CERTIFICATES. 
 
 The pieces of currency called credit money are 
 mioney potentially, — ^by commanding money. The 
 paper, in distinction from the metallic, variety has no 
 intrinsic value, and rests wholly on the credit of the 
 organ issuing it. In recognizing and accepting such 
 currency, one recognizes the ability and readiness of 
 somebody to furnish money at call. The paper pieces 
 are either certificates that the Treasury holds coin 
 "payable to bearer on demand" or general promises 
 to pay coin, — ^promises by government or some insti- 
 tution authorized to make them, — ^which may 'be as 
 good as coin certificates. In any sort, behind and be- 
 neath their circulation is the belief that the money- 
 property they purport to represent will be forthcoming 
 when asked for. The paper is the representative of 
 value, value in the form of money, the money itself 
 being the representative value, i. e., the representative 
 form, or commercial standard and depository, of value. 
 
 Government has nothing to do with the lowest form 
 of circulating credit, viz: the notes or drafts of indi- 
 viduals and private corporations. Such paper, whether 
 white or blue, circulates by indorsement of payee, and 
 its sphere of circulation is coterminous with that of the 
 maker's or drawer's credit. 
 
 When such local bills of credit are enforced as 
 money, i. e., made a legal tender for debts, they are 
 
Bills of Credit. 121 
 
 money according to the strict definition, — they form 
 a kind of paper currency. The authorization of the 
 separate States to charter banks of issue, — in violation 
 of the constitutional prohibition of the States' emitting 
 bills of credit,— inaugvtrated in Jackson's administra- 
 tion the reign of a currency of that kind. Of course it 
 made a heterogeneous and inconvenient medium, as 
 the bills thus emitted, and made current by govern- 
 ment's acceptance, had as many bases of credit as there 
 were banks of issue : for they were not connected with 
 the State treasuries. This was that "wild-cat" money 
 which played such havoc in 1837. 
 
 At present the bills of credit issued by local banks 
 are not carelessly foisted an the country to any amount 
 regardless of the power of redemption, but are limited 
 in amount and effectually endorsed by the general 
 government, so that they are homogeneous with one 
 another, all resting ultimately on the national credit 
 like the other forms of paper money, — ^with which also 
 they accordingly maintain a steady parity. This 
 security is effected through salable, interest-bearing 
 bonds of the government, deposited and held in the 
 national treasury* in sufficient amounts to cover the 
 circulation of the banks. The notes constituting that 
 circulation, and issued to the banks by the Comp- 
 troller of the Currency, may equal, but not exceed in 
 amount the par value of the bonds deposited for their 
 security. And the amount of notes issued to any 
 banking association may not exceed the amount of its 
 
 ♦Public money deposited with banks is secured to the gov- 
 ernment in the same way. 
 
122 Currency and Standard Unit. 
 
 capital stock actually paid "in. The Comptroller of 
 the Currency is authorized to require additional de- 
 posits of bonds or of lawful money in case the market 
 value of the bonds originally deposited falls below 
 their par value. Previously to the Act of March 14, 
 1900, there was a certain degree of fixed security, pre- 
 established on constituting any association a bank of 
 issue, provided against loss from such a fall, in the 
 limitation of the circulating notes of banks to an 
 amount less than the par value of the bonds deposited 
 to secure them. The margin of difference protected the 
 holders of bank notes against loss from that extent 
 of depreciation in government credit. For many 
 years this extra safeguard has been needless, but when 
 the national banking system was instituted (1863) the 
 credit of the United States was not what it is now. 
 
 Bank notes, however, are a specialized form of paper 
 money : a simple and more obvious form is had in gov- 
 ernment's own notes, based immediately on its re- 
 sources and redeemable at the instance of the bearer. 
 Of course with these obligations there is no question 
 of interest, as they are themselves current money and 
 legal tender : though they be procured in exchange for 
 bullion at the Mint, one does not obtain them by giv- 
 ing up a readier money, as he does in buying bonds. 
 It should perhaps be said here that at present two 
 va,rieties of government notes are recognized in our 
 country, viz : United States notes and Treasury notes. 
 The distinctive and generic characters of each are that 
 they are government obligations, payable on demand 
 and without interest. 
 
Public Debt and Redemption. 123 
 
 These government notes constitute a national 
 debt, — a standing debt that bears no interest. The 
 bank notes imply as their basis a bonded, or interest-, 
 bearing, debt. And how can there be a safe, uniform 
 or remediable credit money that neither is nor repre- 
 sents a government indebtedness? The bills of the 
 Bank of England, Bank of France, etc., rest finally on 
 the credit of those states, and the ratio of the market 
 value to the face value of those bills indicates in 
 each case the status of the national exchequer, the 
 standing of the state as a business person or firm. So 
 it was with Mr. Hamilton's "Bank of North America" 
 and its successor, the "Bank of the United States," 
 whose loans did so much to stimulate industry and 
 build up national prosperity when the century was 
 opening. 
 
 Both the bonds and notes — bills of credit — of govern- 
 ment represent the coin in which they are payable. 
 The notes are payable "in coin," and as there are at 
 present coins in both gold and silver legally possessing 
 standard unit value, — in either kind at option. Under 
 the policy to maintain the parity of gold and silver 
 and of all current dollars, the Treasury waives 
 this option and leaves it to the holder of the note. The 
 bonds also, when not expressly to be paid in gold, are 
 payable in coin, i. e., in whatever coin may be the basis 
 of the business of the government and nation accord- 
 ing to the monetary policy prevalent. The bank notes 
 being, in the first instance, payable in just that coin, 
 would also come to be redeemed in it if the bonds 
 should have to be re-sold and the proceeds used 'to re- 
 deem: for those proceeds depend on what the bonds 
 are payable in. And if either the bank notes are re- 
 
124 Currency and Standard Unit. 
 
 deemed in government notes, or the proceeds of the 
 bonds used to redeem are reaHzed in government notes, 
 the result is the same, and is as good as specie redemp- 
 tion so long as the government's notes are at par. So 
 that the cash value of the baiik notes is the same in any 
 event provided government's credit holds out, aiid is 
 always uniform with that of government bills of credit 
 of like denominations. 
 
 I. The United States notes, known popularly as 
 "Greenbacks," date,, like the national banks, from the 
 time of the Civil War, and rest on the general credit — 
 honesty and resources — of the government. In the 
 market they bore, at different times, various values be- 
 low their face value, but after the end of the Rebellion 
 came in sight they appreciated steadily ; on the ist of 
 January, 1879, when their redemption in coin began, 
 they had long stood at par. For, this "Resumption 
 of Specie Payments" had been provided for and adver- 
 tised four years ahead, in the Act passing on January 
 14, 1875. By this the duty was devolved on the Sec- 
 retary of the Treasury of redeeming the legal-tender 
 United States notes in excess of $300,000,000 in a cer- 
 tain ratio to new issues of national-bank notes, the 
 banks being authorized by this Act to increase their 
 circulation : redeeming an amount equal to "eighty 
 per centum of the sum of national-bank notes so issued 
 to any such banking association . . and to continue such 
 redemption as such circulating notes are issued until 
 there shall be outstanding the sum of three hundred 
 million dollars of such legal-tender United States, 
 and no more. And on and after the first day of Janu- 
 ary, anno Domini, eighteen hundred and seventy-nine. 
 
United States Notes. 125 
 
 the Secretary of the Treasury shall redeem, in coin, 
 the United States legal-tender notes then outstand- 
 ing, on their presentation for redemption at the office 
 of the assistant treasurer of the United States in the 
 city of New York, in sums of not less than fifty dol- 
 lars." At that time "coin," in relation to large sums, 
 meant gold unequivocally, and so these notes, in sums 
 of $50 and upward, became, in efifect, gold certifi- 
 cates.* To efifect this redemption the Secretary of 
 the Treasury was authorized to use any surplus reve- 
 nues, supplementing them, if necessary, by selling 
 bonds of the United States for coin. 
 
 *By Joint Resolution of July 22, 1876, the Secretary of the 
 Treasury was authorized, "under such limits and regulations 
 as will best secure a just and fair distribution of the same 
 through the country,'' to issue fractional silver coin in ex- 
 change for such notes. But that issue was limited to $10,000,- 
 000, and the legal-tender notes were here simply an interme- 
 diary in substituting silver for fractional paper currency ; they 
 were not to reissue save on the retirement and destruction of 
 a like amount of such paper, the same amount, representing 
 the destroyed fractional paper, being carried to the sinking- 
 fund. This proceeding was devised primarily to quicken the 
 distribution of an amount of subsidiary coin and the substi- 
 tution of silver for the fractional currency — then an anomalous 
 and troublesome fiat money, — thus subserving both the credit 
 of government and the convenience of domestic commerce. 
 That substitution, provided to be carried out through direct 
 exchange and redemption of the fractional currency with the 
 coins, had been required by the Act that reconstituted the cir- 
 culation generally — that of January 14, 1875,— and also by Act 
 of April 17, 1876, which latter also required that the fractional 
 currency so redeemed should be accounted as a part of the 
 sinking-fiind. 
 
126 Currency and Standard Unit. 
 
 , II. The Treasury notes were instituted by the Act 
 of July 14, 1890, and are so named because with them 
 the Treasury Department was directed to buy silver 
 for coinage into "standard" dollars. They were given 
 unlimited legal-tender force, like those dollars. In 
 the Act of February 28, 1878, no mode of payment 
 for the bullion was specified. Doubtless under that 
 law purchases had been made partly with United 
 States notes, but mostly, it should appear, with dol- 
 lars coined from preceding purchases, or the certifi- 
 cates authorized by the same Act to be issued for 
 deposits of such coin. Any Treasury note, then, first 
 appeared in exchange for silver bullion. These notes 
 were not silver certificates, however, though the 
 amount outstanding at any time was to be just equal 
 to "the cost of the silver bullion and the standard 
 silver dollars coined therefrom, then held in the 
 Treasury purchased by such notes;" and though it 
 was directed that two million ounces should be coined 
 each month until July i, 1891, and afterwards "as 
 much as might be necessary to provide for the re- 
 demption of the Treasury notes." For these were to be 
 redeemed, on demand of the holder, in gold or silver 
 coin at the discretion of the Secretary of the Treasury, 
 "it being the established policy of the United States to 
 maintain the two metals on a parity with each other." 
 The carrying out that policy gave the actual option to 
 the holder of the note. Accordingly, it was found 
 necessary to establish and maintain a reserve of 
 $100,000,000 in gold in order to secure the Treasury 
 notes. This placed them on a special footing as com- 
 pared with the "United States" notes. 
 
Redemption Fund. 127 
 
 Now, however, by Act of March 14, 1900, a gold 
 reserve of the maximum amount of $i5biOOO,ooo is 
 provided for the redemption of both classes of notes 
 together. If the Secretary of the Treasury is unable, 
 by the methods prescribed in the Act, to keep the 
 fund of. gold coin and bullion at or above the mini- 
 mum limit of $100,000,000, it is made his duty to bor- 
 row enoug'h money to raise the ftmd to the maximum 
 limit and' to issue and sell bonds for the debt so 
 incurred. It is also provided that when notes are 
 redeemed they shall be held as part of the reserve 
 until they can be replaced with gold, when they may 
 again be paid out for any lawful purpose, except "to 
 meet deficiencies in the current revenues." These 
 two provisions hark back to the experience of the 
 Treasury with the former redemption fund of the 
 Treasury notes, in President Cleveland's second term, 
 when the revenues of the government fell short of its 
 expenses and that reserve dwindled, whether through 
 irregular drafts upon it to meet expenses, or by the 
 notes coming home for redemption in large amounts ; 
 so that it became necessary to sell bonds in order to 
 replenish the fund. 
 
 Other paper representatives of money are coin and 
 bullion certificates, which certify that a stated weight 
 of bullion or amount of coin has been deposited with 
 govermnent and is held for their redemption. For 
 convenience they are substituted in the circulation in 
 the room of the metal, bearing its value, commercial 
 and monetary, and having no credit quality further 
 than as resting on the faith of government as trustee 
 for the holders of the certificates. 
 
128 Currency and Standard Unit. 
 
 I. Bullion Certificates.— By Act of March 3, 1853, 
 an assay office is required to be established in the city 
 of New York for the receipt and for the melting, etc., 
 of gold and silver bullion and foreign coin, the treas- 
 urer thereof to be the assistant treasurer of the 
 United States in New York ; and it is enacted that this 
 officer shall give the usual receipt, stating the weig'ht 
 and description of the metal or coin; and also, after 
 the operations of melting, etc., shall issue his certifi- 
 cate of the net value, payable in coins of the same 
 metal as that deposited, and receivable during sixty 
 days from its date in payment of all debts due to the 
 United States at New York. This, in effect, makes 
 such certificates money over a certain locality and 
 during a limited period. They are made payable at 
 either the Mint of the United States or the office of 
 the assistant treasurer in New York, at the option of 
 the depositor, to be expressed in the certificate. 
 
 II. Coin Certificates, silver and gold, are made 
 receivable everywhere and at all times for all public 
 dues, and may be reissued without restriction. Legal- 
 tender quality is not expressly given them, and need 
 not be, since commerce at once gives them the stand- 
 ing of, the coin they represent, having implicit faith 
 in the integrity and ability of the keeper of that 
 money, and government's acceptance of them com- 
 pletes the circuit and brings them to full equality with 
 the rest of the current medium through the whole ex- 
 tent of its circulation. These certificates are issued 
 on deposits of gold and silver coin, respectively, with 
 the Treasurer or any assistant treasurer of the United 
 States. 
 
Coin Certificates. 129 
 
 1. Silver Certificates were instituted in connection 
 with the "standard" silver coinage in 1878. In the 
 Act providing for that coinage their issue was author- 
 ized in denominations of $10 and upwards, corre- 
 sponding with the denominations of United States 
 notes. By Act of August 4, 1886, the denominations 
 were reduced, — that of $5 was made the largest and 
 those of $10 and above were to be exchanged for 
 those of $5 or less. Now, by Act of March 14, 1900, 
 it is prescribed that at least nine-tenths of their total 
 volume shall be in denominations of $10 and under, 
 an amount not to exceed one-tenth being authorized, 
 in the discretion of the Secretary of the Treasury, in 
 denominations of $20, $50 and $100; and that when, 
 in order to keep within this limit, denominations of 
 higher than $10 are retired and canceled and lower 
 denominations substituted, the change is to be oflEset 
 in the currency by the opposite retirement and can- 
 celation of a like amount of United States notes of 
 lower denominations than $10 and the substitution of 
 such notes in denominations of $10 and upward. A 
 bill for $10 is to be had in either form. Probably it is 
 worth while to notice these details in passing. 
 
 2. Gold Certificates — provided for by the Act of 
 March 14, 1900 — may be issued in denominations of 
 not less than $20; one-fourth at least of the amount 
 outstanding must be in denominations of $50 or less ; 
 in the discretion of the Secretary of the Treasury they 
 may be issued in denominations of $10,000, payable to 
 order. In two cases their issue may be suspended: 
 (i) In the discretion of the Secretary of the Treasury, 
 when the amount of United States notes and silver 
 
130 Currency and Standard Unit. 
 
 certificates in the general fund of the Treasury ex- 
 ceeds $60^000,000; (2) his authority to issue is sus- 
 pended in case the gold coin in the reserve fund for 
 the redemption of United States notes and Treasury 
 notes falls and remains below $100,000,000. In these 
 provisions relating to gold certificates we see an eiJect 
 of the recently increased outputs of gold and gold 
 coin ; just as in the legislation of 1849-1853 providing 
 new denominations of gold coins — the double eagle 
 and ofiie-dollar pieces (March 3, 1849) a-i^d the three- 
 dollar piece (February 21, 1853)* — and providing for 
 gold bars or ingots with the weight and fineness 
 stamped on them, and for bullion certificates, etc., — the 
 influence of the new gold of that time is manifested. 
 
 III. Currency Certificates are the remotest form 
 of money, representing deposits of United States 
 notes, and so standing at a second remove from the 
 actual metal. Their status in the circulation is like 
 that of the coin certificates ; and for all- three varieties 
 the monies they represent (silver dollars, gold coin, 
 and United States notes, respectively) are held 
 as trust funds by the Treasury and may not be paid 
 out except to redeem the certificates for which they 
 are severally pledged. 
 
 So, then, we have in the United States all these 
 grades, species and varieties of current medium (about 
 eight sorts), ranging from stamped bars or disks of 
 the refined and alloyed metal (which pass by weight), 
 down to currency certificates, which represent the cur- 
 
 * The coinage of the three-dollar and one-dollar pieces was 
 discontinued by Act of September 26, 1890. 
 
Homogeneity of Current Medium. 131 
 
 rent obligations of the government to pay the stand- 
 ard coin. 
 
 Just as, in order to monetary homogeneity, there 
 must be but one economic commodity used as a stand- 
 ard of value, and but one authority coining or stamp- 
 ing it for currency, so, too, all the paper money of a 
 country must rest on the credit of one and the same 
 finaiicial organ or agency, if the whole paper currency 
 is to be homogeneous with itself. Every piece of 
 credit money should depend finally ' on the faith and 
 competence of the same agency. To this end, where 
 a portion of the paper currency consists of notes or 
 certificates of the national treasury, a clear connection 
 must be maintained between that organ and any other 
 organ or body, local or general, that is permitted to 
 function as an emitter of bills of credit. A conclusive 
 reason, then, why the one security of credit money 
 should be that of the general government, is that this 
 organ is, at any rate, involved somewhat in the credit- 
 money business. Another reason is its office as sole 
 authority over coinage, — all independent monetary 
 functions should reside in the same head functiona,ry. 
 A third reason, underlying also its coinage office, is 
 its prominence, centrality, power and responsibility, — 
 the fact that all persons and interests within the nation 
 look to its authority. Finally, the parity of the paper 
 with the metallic currency is most feasible when botli 
 are effectively controlled by one central power. 
 
 The convenience and security of domestic trade re- 
 quire that every portion of the circulating medium 
 should be, name for name, of equal value with every 
 other portion and equally good for utterer and receiver 
 
132 Currency and Standard Unit. 
 
 in any two different parts of the country. To this end, 
 there must be one metallic standard for money and 
 one credit standard for its representatives, that there 
 may be no preferred coin and no preferred paper in 
 the currency: while the maintenance of territorial 
 uniformity and denominational homogeneity must be 
 commatted to one central authority, which, tO' do 
 the office, must have substantial control of all 
 branches of the currency. This function, like the 
 guarding of the purity and authenticity of the cur- 
 rency from counterfeiters, naturally belongs to the 
 central or national government. Only by such unity 
 and centrality of financial administration can coin and 
 paper severally be kept homogeneous throughout a 
 country : while their mutual parity, not always assured 
 under this singleness of control, is impossible without 
 that. A people or community that does not rest the 
 value of all its money on the guarantee of a single 
 central organ cannot, however united otherwise, be a 
 nation financially or commercially. 
 
 PRESENT STATUS AND RELATIONS OF THE TREASURY 
 NOTE." 
 
 The peculiar origin and status of the "Treasury 
 note" and the fact that financial discussion has often 
 been focused intently upon it, appear to justify a par- 
 ticular examination of that form of bill of credit, 
 though this necessitates adding a special section to 
 the present chapter. 
 
 The Treasury notes have always been re-issued 
 after redemption, i. e., the Treasury has paid them 
 
Redemption of Credit Money. 133 
 
 out again in disbursements. Then large holders of 
 them could bring them to the Treasury again for re- 
 demption. Thus an "endless chain" of calls on the 
 government for gold coin was made possible by plac- 
 ing a special gold reserve behind these notes. This 
 possibility was first realized when, as twice happened, 
 the notes were suddenly presented in such quantities 
 that new bonds had to be made and sold to restore the 
 reserve. 
 
 This increased the expenses of government by the 
 interest on the new bonds. It had to pay out so much 
 basal money — wihile its gold receipts were not over 
 half its revenue — that it must borrow more and swell 
 its interest charges. To state the case from another 
 standpoint, government had to pay current debts so 
 rapidly (redeeming in coin is only paying current debt) 
 that it must create a time-debt, must increase its inter- 
 est-bearing indebtedness in order to meet the obliga- 
 tion it had assumed with respect to a part of its non- 
 interest-bearing debt. 
 
 The incident just mentioned illustrates finely the de- 
 pendent, non-intrinsic quality of credit money, whereas 
 the usual infrequency of redemption makes some re- 
 gard it as real, or basal, money. Thus McLeod, the 
 British banker and economist, holds that money is a 
 representative of debt, and so defines it. "Without 
 debt," he says, "there can be no money." If we look 
 to the historical development of money, and consider 
 it, as originally it was, dissociated from state authority, 
 we sihiall see the error of that view. Only when the 
 word "money" is used loosely in the sense of "cur- 
 rency" (paper money), can it be said to stand for debt, 
 
134 Currency and Standard Unit 
 
 and then the debt is but a mediate condition between 
 the currency and real money : the , condition being due 
 to the surpassing convenience and comparative worth- 
 lessness (very low specific value) of the substance of 
 which, in the physical sense, the currency consists. 
 Furthermore it is only the debt of govertiment-r— a debt 
 created for the purpose— that is g'enerally so repre- 
 sented, — not an ordinary, economic debt. So far from 
 money representing debt, it is more correct, in such 
 cases, to say that debt represents money, and takes the 
 place of the latter according to the credit of the debtor 
 (or trustee) , i. e., the security of the property covered 
 by the debt (or trust). This is the true relation. 
 
 To return from the digression of the preceding para- 
 graph: our Treasury might have canceled its redeemed 
 notes. Then, in issuing bonds to get the gold in which 
 it redeemed them, it would have merely substituted an 
 interest-bearing debt for a lion-interest-bearing debt. 
 As when a man gives a time note with interest for 
 funds whereby to pay current bills without interest. 
 When the Treasury reissues the notes, it simply has 
 recourse to its credit in making payments to the 
 amount reissued: its current indebtedness is increased 
 on account of its current expenses exceeding its cur- 
 rent revenues. Instead of leaving some bills unpaid it 
 contracts a debt to the public generally. Nothing, 
 therefore, is to be specially charged to the redemption 
 of the notes except the interest on the funded debt 
 whereby gold was replaced in the Treasury. 
 
 iBut why was the gold reserve established? Why 
 need these notes be redeemed in gold ? They need not 
 be, if the government were willing to put the country 
 
Discriminative Redemption. 135 
 
 on a silver basis at the existing coinage ratio, and nul- 
 lify the statute which defined the monetary unit in 
 gold. Either that enactment must be made practically 
 void, or that clause of the Act of July 14, 1890, requir- 
 ing silver to be coined for the express purpose of pror 
 viding for the redemption of the notes, must be made 
 of no use or force. The second alternative was chosen. 
 To have forced their redemption in silver would 
 have made that metal the standard, for thougli 
 legally they were payable "in coin" — specie of either 
 metal, — yet to impose that whose coinage unit is the 
 less valuable would imply that the other is preferable 
 and would be felt as an injury. Such action would 
 be a failure to uphold currency to the gold level, 
 and so would thwart the purpose of the resumption of 
 specie payments. It would be renouncing the uni- 
 formity and indifiference of the several divisions of the 
 currency by discriminating and impoang a choice be- 
 tween them. The discrimination, once it is made or 
 distinctly foreshadowed, will travel to trade at once :* 
 gold will be withdrawn and hoarded, silver dol- 
 lars will become the measure of trade values and 
 the standiard for fixed charges and debts. When the 
 
 * The notes, it is to be observed, are returned to the Treas- 
 ury by men whose business is dealing in money, who see and 
 feel the difference between five dollars gold and five overval- 
 ued pieces of silver each stamped "One; Dollar," who know 
 when it becomes a question of the comparative intrinsic values 
 of the two units, who are never deceived in finance by mere 
 names ; men who are in touch with foreign trade and exchange, 
 who, we may note in passing, take charge and account of every 
 effect on the current medium, whether caused by government's 
 action or by mercantile exploitation. 
 
136 Currency and Standard Unit. 
 
 redemption of Treasury notes in silver was imminent 
 on account of the volume of them issued, the fear was 
 lest it would "send gold to a premium," i. e., lead to a 
 silver standard. The situation was relieved by repeal- 
 ing (November i, 1893) the statutory obligation to 
 buy silver with such notes to a certain minimum every 
 month. 
 
 Until the recent Act was passed (March 14, 1900) 
 some remainder of the danger and difficulty existed in 
 the volume of notes already extant, much of which 
 has been redeemed more than once. To maintain the 
 gold standard, or, in other words, to keep the com- 
 mon measure of value sensibly uniform, requires their 
 redemption in gold, and this has been carefully pro- 
 vided for in the Act mentioned. Since the discon- 
 tinuance, in 1893, of the purchase of silver and issue 
 of Treasury notes, and after the discussions leading to 
 that repeal, it should seem to have become easier to 
 cut loose from the ostensible silver basis of these 
 notes and to recognize the necessity, by the principle 
 of maintaining the current parity of all dollars, for a 
 uniform gold redemption of all government obliga- 
 tions. But the question specially mooted of late 
 about the Treasury notes has been, shall their reissu- 
 ance be stopped, or shall they no longer be reissued 
 save in exchange for gold? The Act authorizes the 
 Treasury to exchange them for gold or to use them 
 in redeeming or purchasing bonds or for any other 
 lawful purpose, with the exception noted above. So 
 that, like the United States notes, they are virtual 
 gold certificates, although they may not be reissued 
 for deposits of gold as the ofihers may. Since the 
 
Cancelation and Substitution. 137 
 
 United States notes are now classed with the Treasury 
 notes in respect of their redemption, it becomes even 
 more important than before to retire the latter alto- 
 gether on redeeming them'. Now for notes with- 
 drawn and canceled some substitute must be pro- 
 vided in the fiscal operations: government must pay 
 out something else where formerly it paid out the 
 notes. If its revenues and expenses were in such ratio 
 that it could avoid using so much of its credit in meet- 
 ing expenses, well and good; there is no objection to 
 canceling the notes without substituting other forms 
 of credit money. 
 
 If, however, the Treasury is not so well off, which 
 it generally is not, it must disburse other credit cur- 
 rency or subsidiary coin in place of the notes retired. 
 Accordingly, it is provided by sec. 5 of this Act that 
 as fast as silver dollars are coined under provisions of 
 the Acts of July 14, 1890, and June 13, 1898 (their 
 coinage having been suspended in 1893), from bullion 
 purchased under the former Act, an equal amount of 
 Treasury notes shall be retired and canceled and on 
 their cancelation silver certificates shall be issued 
 against the dollars so coined. And by sec. 8 the 
 Treasury Department is authorized to coin any of that 
 bullion into subsidiary (fractional) pieces in denomi- 
 nations to meet the requirements of trade, and under 
 the limitation that the amount of such coin outstand- 
 ing at any time shall not exceed $100,000,000; — and 
 whenever any such coins are made an amount of 
 Treasury notes equal to the cost of the bullion con- 
 tained in them is to be canceled. Now the difference 
 between the effect of retiring the notes against an 
 
138 Currency and Standard Unit. 
 
 equal issue of silver and that which their simple re- 
 demption in such coin would have, is that the amount 
 of silver passing into circulation (in coin or by certifi- 
 cate) under the arrangement adopted is definitely 
 limited : the process cannot be repeated with the same 
 notes. And since the purchase of silver for the stand- 
 ard coinage has 'been stopped, Commerce can calculate 
 its ability to hold the definite quantity already in the 
 Treasury, when it appears in the currency, and the 
 ability of government to hold it up to the gold level, 
 without the prospect, or at least without the certainty, 
 of large additions to the stock. 
 
 But neither the cancelation of the notes, as arranged 
 for, nor the emphatic, and, it should seem, superfluous 
 re-enactment of the gold standard in the first section 
 of the late Act, will prevent the natural effect of cast- 
 ing any mass of overvalued but legal-tender dollars 
 on the market. Our security must be found in the 
 limited stock that may be coined. The latest pro- 
 visions of law reduce the bullion bought under the 
 Act of 1890 to the same relation, and give it the same 
 monetary influence, as that bought under the Act of 
 1878. Only, through the haggling and suspension 
 and restriction and resumption taking place in the 
 interval, time has been gained in which to dissipate 
 and postpone the effects of those purchases and their 
 coinage. 
 
 Both in assimilating the Treasury note to the 
 United States note in point of redemption and in pro- 
 viding for the cancelation of the former against fresh 
 issues of silver coin. Congress practically allows that 
 no special note and redemption fund need be estab- 
 
Undermining the Standard. 139 
 
 lished on purchasing silver and coining it, to any ex- 
 tent that commerce will bear, and that the introduc- 
 tion of the Treasury note and the establishment of the 
 gold reserve were only a sort of juggling with the 
 currency to procure a large consumption of silver and 
 still secure the gold standard against it. 
 
 On one side, doubtless, the Treasury notes, payable 
 "in coin" and afterwards backed with a minimum re- 
 serve in gold, were thrown out as a buttress to the 
 gold standard, retarding and shadowing the flow of 
 silver into the circulation., But while the establishment 
 (1878) of the silver dollar on a partial — or "limp- 
 ing" — standard basis carried a subsidiary coinage to 
 extremes, and while the rapid preparation and admis- 
 sion of silver to the currency was something of a 
 strain on the credit of the government, — ^the Treasury 
 notes and gold reserve also constituted a menace to the 
 gold standard, in thus recognizing the superiority of 
 the yellow metal and inviting a run on the Treasury 
 after it, especially whenever, in a fiscal emergency, the 
 reserve might have to be drawn upon for current dis- 
 bursements. If, when the reserve was depleted, the 
 notes had been redeemed in silver, as was once 
 threatened, the silver unit would have become the stand- 
 ard, the silver currency being no longer subordinate 
 under the fiscal policy: just as, while silver dollars 
 were being coined, and before the Treasury notes 
 were given out in lieu of new coin, to redeem United 
 States notes (or certificates of deposit thereof) in such 
 coin would have been to shift the standard. 
 
 It is to be observed that the gold reserve is no special 
 backing of the silver dollars or 'silver certificates. Their 
 
140 Currency and Standard Unit. 
 
 current equality with gold depends on the good faith 
 and general credit of the government, just as before 
 any gold reserve was provided. The only connection 
 between silver and Treasury note, with respect to the 
 currency, was the temporary withholding a part of the 
 former from circulation, made possible through buying 
 it with the latter. In the upshot of the business we find 
 that we have added so much subsidiary and limping- 
 standard silver to our current medium, and have 
 issued such an amount of government notes, which 
 we will pay in gold until it is convenient to substitute 
 silver. And so we reach hard-pan at last. 
 
 The only clear use, therefore, of the Treasury note 
 and gold reserve has been to the producers of silver. 
 The scheme was a great concession to that interest in 
 that it served to extenuate and continue the silver- 
 purchase compromise of 1878. Otherwise it was a 
 needless specialization in credit money to the advan- 
 tage of a certain class or number of creditors. 
 
 Yet, the early minting of the bullion, and a conse- 
 quent swelling of the issue of silver, as if the silver- 
 producers had been paid in their own coin in the first 
 instance, has been inevitable from the start. For the 
 government is hardly in a position to buy and hoard 
 silver permanently without using it, — no more than it 
 is to buy and hold without use a mass of oak, or 
 wheat, or cotton. 
 
CHAPTER XIII. 
 
 REPRESENTATIVE CURRENCY OF VALUES IN GENERAL. 
 
 Since coin values may, and generally do, circulate 
 completely in their paper representatives., the question 
 is natural, may not other forms of value be circulated 
 as easily in the same maimer? This question has been 
 answered aflSrmatively by some thinkers, including our 
 distinguished philosopher,* Benjamin Franklin. Espe- 
 cially it has been conceived that land values mig'ht thus 
 serve as money. It was landed money that Franklin ad- 
 vocated. The French tested this theory experimentally 
 in their revolutionary epoch: the paper certificates 
 issued and made legal tender by the first French Repub- 
 lic were styled assignats, i.e., assignments (of land). 
 That currency proved to be anything but safe or steady 
 and was soon abandoned as unmanageable. Underlying 
 the theory of land money, two ideas are discernible: 
 (i) the conception of land, a part of the solid earth 
 itself, as the most fundamental substance in economic 
 relations (which it is with reference to geography and 
 biology), seeing that it is the one commercial thmg 
 most necessary to life ; and (2) that paper money, since 
 
 * So-called: but was he not rather scientist? His bent, along 
 all the lines of his thinking,— political, social and physical,— 
 was experiment more than deduction or the application of given 
 first principles: or else, like some others who work with the 
 philosophic spirit, he overlooked or undervalued some of the 
 principles involved the most fundamentally. 
 
142 Currency and Standard Unit. 
 
 it may circulate for decades without being once re- 
 deemed, can as well as not represent a form of value 
 inconvenient to deliver. The truth i§ that trade is 
 sensitive on every point of the redemption of the 
 credits it circulates : in circulating them it distinctively 
 contemplates their redemption; for while the rabble 
 ig'norantly pass the bills as money, the large traffickers 
 whose transactions are the life of commerce and whose 
 acceptance makes bills of credit function as media of 
 exchange, will not accept these unless they are readily 
 redeemable. So incessantly aware is commerce of the 
 representative character of a paper medium, The test 
 of a successful paper currency is ready redeemability 
 to any extent : the French assignats collapsed because 
 they could not stand this test. Trade, jealous of a 
 tangible foundation to the credits it circulates, fre- 
 quently tries and proves in practice their converti- 
 bility. 
 
 This matter of ready convertibility into the com- 
 modity represented is one important point with refer- 
 ence to the question what commodity shall be money : a 
 second is that the money itself, to which paper credits 
 may be converted, is useless until exchanged for goods. 
 Now (i) it is too difficult to arrange a landed money 
 so as to provide for ready redeemability. Can the 
 state maintain for the purpose an indefinitely great 
 reservation of lands of about uniform value? Or may 
 all the land, or all agricultural realty, in the country 
 belong to the state on some socialistic scheme, the 
 holders to be ejected and given a new allotmient as 
 government forecloses the quasi mortgage on a tract 
 adapted to redeem credits held by some one who wants 
 
Land as Money. 143 
 
 land? (2) Supposing this first point met, there must 
 be real estate brokers who will give all kinds of goods, 
 or tickets entitling thereto, in exchange for parcels of 
 land or claims thereon: i. e., the brokers must be as- 
 sociated with firms furnishing all forms of value, per- 
 sonal service included. 
 
 In any event, the national banks, and to a certain 
 extent the national treasury, must, on the basis of 
 such money, be converted into real estate offices : 
 the fiscal bureau of government must become a 
 gigantic registry of land claims and title-deeds. 
 The process could doubtless be simplified by plac- 
 ing treasury and bank in direct connection with 
 the houses at which general merchandise and labor 
 were to be bought : but then such merchaiits or those 
 to whom they sold the paper, would frequently be fore- 
 closing money-mortgages. As the holder of such 
 money-credits, or paper currency, must first exchange 
 the same for land-titles, and then the latter for tickets 
 to general valuables, the currency might as well itself 
 consist of tickets to all forms of value (land included), 
 in other words be redeemable in any sort of commer- 
 cial value. This would reduce the system to one of no 
 money, no form of value being adopted as a standard 
 for other forms. 
 
 As to redemption and practical use the difficulty and 
 queerness of a land money are but little less or differ- 
 ent from those attaching to a labor money, in the case 
 of which the banks would be formed by syndicates of 
 labor contractors likewise associated with estaiblish- 
 ments retailing general merchandise (here including 
 land), and the monetary denominations would be time- 
 
 10 
 
144 Currency and Standard Unit. 
 
 work or piece-work in the various employments, as 
 they must be amounts of acreage when land is money. 
 In respect of uniformity and steadiness of value, how- 
 ever, such labor money would be clearly superior to 
 any landed money. But either quickly reduces to an 
 absurdity as seen above, involving the dilemma of a 
 patriarc;hal and communistic administration of a barter 
 system on the one hand, or an absolutely iiat money, 
 which is economic despotism, on the other. 
 
 A more feasible, yet still awkward, scheme would be 
 the use of public land as a secondary commercial 
 money, the paper certificates entitling the holder to a 
 number of gold dollars' worth of such land, and the 
 acreage represented depending on the specific value of 
 land in the specified district at the time the bill was 
 presented, at a land office. This would connect the 
 general land office with the Treasury and make local 
 land offices into a sort of sub-treasury: under some 
 conditions the public lands might be resorted to as a 
 monetary sinking-fund to reinforce the national 
 treasury. 
 
 As to founding a currency on agricultural products, 
 which are not only as heterogeneous as the earth from 
 w^hich they are raised, variable in value from season 
 to season, and for the same season never uniform in 
 quality even within the same locality, but also are 
 easily destructible and rapidly deteriorate, — ^the gov- 
 ernment would simply furnish a market for the 
 favored products, standing as a fearless middleman to 
 take off his hands the crops of any farmer who might 
 apply, and issuing therefor certificates designed to 
 
Currency of Farm Products. 145 
 
 circulate till they reached the dealers in the goods 
 represented. 
 
 Such a scheme offers nothing but the greatest in- 
 convenience and uncertainty as regards money, with 
 no advantage save to the favored producer. It is 
 equally applicable to other than agricultural lines of 
 production. Carried out in any way it must involve 
 a great measure of communism. The only such project 
 yet suggested that would have any point under 
 governments of the present order (and the point to 
 this one is against it) is, that government should loan 
 to farmers on security of growing crops, taking the 
 risks of hEirvest and market, and issuing and forcing 
 in circulation certificates representing the antici- 
 pated value of the crops. These would be consti- 
 tuted an intermediate, a merely transitional form 
 of money: for whether government in redeeming 
 them gave metallic money for the bills of sale 
 on the goods, or made certificates to the goods 
 a legal tender, — the goods must finally be sold for 
 regular money, and that before they suffer loss or 
 damage. In the second case the risk, or the loan on 
 such security, is shifted from government to the people 
 receiving the certificates in payment of debts : and in 
 either case the care and storage of the goods must be 
 a public charge. 
 
 The cause prompting the suggestion of this scheme 
 (in 1892) was the failure of some farmers to make 
 ends meet. Now, that which would secure a loan from 
 government, or certificates circulated by trade, would 
 be accepted by those who make a biisiness of lending 
 money, while the discount on crop futures at the 
 
146 Currency and Standard Unit. 
 
 national exchequer must be at least as large as at the 
 counters of money-lenders and speculators. 
 
 No essential reason appears why such financiering 
 would not be as properly based on manufactures or 
 minerals as on farms or their stock and produce. But 
 there is no sense in coining up the surplus or futures 
 of any class of producers that may be impoverished or 
 find an insufficient market. This applies to miners, 
 even those producing metals having in a good degree 
 most of the qualities required in a money metal. 
 
 Broader reasons, extra-financial bearings, also ren- 
 der such schemes reactionary and pernicious: these 
 considerations, however, do not concern us closely 
 here, where such financial suggestions would not be 
 mentioned bad they not been urged by popular leaders 
 and commanded a large following in a great part of the 
 country. Moreover, they serve to throw a light on the 
 nature and relations of money. The justification for 
 the notice taken of them is implied in the preface to 
 this essay. 
 
CHAPTER XIV. 
 
 CURRENCY DEPRECIATIONS FIAT MONEY INTERFER- 
 ENCE OF CURRENT MEDIA — GRESHAM'S LAW. 
 
 Having surveyed the different kinds of currency we 
 are prepared to discuss their several depreciations: it 
 must be observed in this discussion that it is deprecia- 
 tion of the current medium we are considering; i. e., 
 its cheapening in trade, as shown in the consequent 
 rise of prices, and not necessarily the cheapening of 
 all the basal money. Where parallel moneys have been 
 instituted, and a difference of value afterwards arises 
 between their units, the metal base of one appreciates 
 generally, and the other depreciates relatively to it 
 only, without affecting general prices: for in such a 
 case the unaltered money remains the current measure, 
 as has been heretofore indicated. And one may de- 
 preciate generally and be demonetized, the other there- 
 fore appreciating relatively to it (and continuing the 
 common measure) without affecting prices, as will 
 appear from example later on. As neither of these 
 effects constitutes a depreciation of current medium, 
 they are both outside the scope of the present chapter. 
 Further, the monetary depreciations now before us 
 are such only as are effected by governmental action 
 on the currency. I. A fundamental coinage may be 
 debased in two ways, (a) by enlarging the proportion 
 of baser metal in alloying, thus reducing the fineness ; 
 (&) by making each piece smaller, — ^with less fine 
 
148 Currency and Standard Unit. 
 
 metal than has been established therefor. The gain 
 to government from reserving, in one or both of these 
 ways, a portion of fine money metal, has induced many 
 debasing recoinages in ancient and modern states, the 
 most important occurring at Athens, Rome, London 
 and Paris. Such debasements have been peipetrated 
 also for the sake of their inevitable effect to raise 
 nominal prices, — a great advantage to governments 
 much indebted to their peoples. II. In the case of 
 parallel monies depreciaition may be caused, (a) by 
 instituting a dual standard, to replace a single, at a 
 ratio of weights of fine metal that overvalues the new 
 standard metal in relation to the old, its companion; 
 (&) supposing their parallel coinage to be started at 
 the ratio that produces parity of value in the coins, 
 a subsequent change in the value ratio, or in the coin- 
 age ratio of weights^ will give the field to the money 
 that thus comes to be overvalued and drives out the 
 other: money will be correspondingly cheaper. In the 
 latter case the result would follow_a change in the 
 commercial ratio, which would not be due to govern- 
 mental action: but no such variation could alter the 
 value of currency imles's government had monetized the 
 fluctuating metal as an associate or co-ordinate money. 
 III. Credit money depreciates and expels the basal 
 coin, (a) in consequence of an overissue, where the 
 amount issued passes the extent of the credit the issuer 
 has with commerce; (6) by a weakening of that credit, 
 as through change in government's economic status or 
 in its circumstances as regards stability, the burdens 
 or tasks laid upon it, etc. In the case of an overissue 
 necessitated by extraordinary expenses (e. g. the paper 
 
Depreciated Units. 149 
 
 emitted by the Union government in the American 
 Revolutionary and Civil Wars) the disproportion of the 
 amount issued to the credit behind it may be accounted 
 for partly on the side of each factor (the amount and 
 the credit). 
 
 On the credit side the bills emitted by the Conti- 
 nental Congress were weak, not only from the strait- 
 ened circumstances of that government, but also from 
 the nature of its origin and public status. The paper 
 currency entailed by our Civil War was at the start, 
 and until 1879 remained, irredeemable; i. e., the gov- 
 ernment would not undertake to redeem in specie its 
 current notes. As these "greenbacks" were issued un- 
 der exceptional circumstances and in order to tide the 
 government over a critical passage, the point to which 
 they fell was not determined by their number and the 
 initial fact of inconvertibility, but mainly by the bottom 
 to which the national credit sank; the uncertainty and 
 decline of which affected the bonded debt as well, rais- 
 ing its interest rates. In reality the irredeemable 
 quality of the greenbacks was conditional, — merely 
 nominal and temporary. It might well be thought if 
 the people's warfare was successful, their government, 
 especially as being that of a democratic republic, 
 would early contrive to make its 'bills payable. Ac- 
 cordingly, after the prosperous conclusion of the war, 
 government's credit steadily strengthened, and its 
 paper correspondingly appreciated. As the prospect 
 of the resumption of their payment became clearer and 
 nearer, the value- of the greenbacks kept advancing: 
 shortly before resumption was enacted they stood at 
 par with money (gold). 
 
150 Currency and Standard Unit. 
 
 Some countries have a paper currency of fixed and 
 permanent inconvertibility. That such is not real, in- 
 dependent money is discernible from the fact that 
 in the settlement of adverse foreign balances such 
 countries must pay in merchandise : that is, the balance 
 will stand to the credit of the creditor na/tion until it 
 will take more goods. The payment may, indeed, be 
 in paper, the material of the domestic money, as well 
 as in wheat, rice, etc., but such material is received 
 according to a standard and measure that has no part 
 in gauging its value in the form of money within the 
 debtor nation. On the other haiid, nations using 
 metal money pay balances always in money metal and 
 according to the same measure (weight) by which 
 the purchasing power of the domestic currency is de- 
 termined. If paper currency is representative (con- 
 vertible) then, however depreciated it may be, its value 
 is gauged by the. weight of the metal represented that 
 the mind of commerce believes it to stand for. Paper 
 strictly inconvertible is Hat money, wholly dependent 
 on the power of government. While wholly artificial, 
 it is independent in the sense of having no relation to 
 another medium or standard. Occupying completely 
 the monetary realm, it measures values by itself, ac- 
 cording to the quantity issued. But it is money only 
 so far as the domestic trade of the nation on which it 
 is foisted by the arbitrary authority of a government. 
 
 Such a currency is often clamored for by those in 
 pecuniary straits and without comprehension of the 
 nature of money and of its economic relation to them- 
 selves. While the demand for fiat money rests gen- 
 erally on the assumption that statutory money need 
 
Fiat Money. 151 
 
 not have intrinsic value, in order to have all purchasing 
 power, still it is desired only as a substitute for intrin- 
 sic values, for actual property. Fiat money is no one's 
 first or unconditional choice: its partisans are almost 
 exclusively poor debtors, those who find it hard to get 
 money or to keep it when got, and who mistake the 
 cause of the difficulty. That fiat money cannot satis- 
 factorily replace commercial, or self-valuable, money 
 is shown by the fact that those who ask for the former 
 no longer rate money at so high a price after they get 
 it in the fiat style. In it, even under their usage, the 
 denominations shrink in value. Artificial money can- 
 not be contrived that will equal natural money : it never 
 gyves with the commercial money it displaces. The 
 fiatists themselves prefer the purchasing power of the 
 rich man's money, even after fiat money has driven it 
 from the highways of traffic. In its exile this, the real 
 representative of property, is coveted by all. 
 
 With some fiatists the bottom principle appears to be 
 that, intrinsic value being necessary, fiat will create 
 this, will instil into a piece of paper complete commer- 
 cial purchasing power. Were this so, the will of gov- 
 ernment could alone limit the wealth of the community, 
 the rich would be the foremost in urging the issue of 
 fiat money, all could be made rich, and a national debt 
 need never be incurred. There is, indeed, a fiat ele- 
 ment in token coinage: but it is slight, convenience 
 makes it tolerable, and the enforced debt-paying power 
 of such coin is limited to small sums. Debt-paying 
 power is an attribute of property and of real money : 
 the same may be imparted by government to mere 
 paper, or rather to its sign and superscription on the 
 
152 Currency and Standard Unit. 
 
 paper, simply by virtue of its authority to cancel debt 
 by fiat. This is the only portion of value in fiat; to 
 the extent of this element it has value, purchasing 
 power : for, anything that will pay indebtedness is, so 
 far forth, desirable. This explains why fiat money 
 has any value at all, and . why its value is so small in 
 comparison with the self-valuable money whose denomi- 
 nations it assumes. 
 
 Anything valuable, no matter what the source of its 
 value, and, therefore, according to what has just been 
 said, fiat money, becomes cheap or loses value in pro- 
 portion to its abundance. Wherefore it is impossible 
 to maintain the value of any kind of money, fiat in- 
 cluded, utider a largely swollen issue and circulation 
 thereof; — as impossible as to produce self-existing 
 value by fiat or to increase enormously the production 
 of silver, gold or any other commodity without depre- 
 ciating the same.* Representative money, as already 
 intimated, sinks as it surpasses the credit of the organ 
 emitting it or as the commodity represented depreci- 
 ates: credit money measures according to the credit 
 behind it, its measure shrinking as that credit sinks. 
 
 The fiatists are more logical, though not more 
 rational, when they take the ground that there can be 
 no such thing as a self-valuablef money : that govern- 
 
 * Yet some main tain, that a certain sort of money, consisting 
 partly of fiat and partly of a much depreciated substance (silver), 
 could be issued to any extent without falling short of the stand- 
 ard of the initial valuation of its unit, — the size of the 
 unit having been fixed on the basis of a former specific value 
 of the substance. 
 
 t This involves the proposition that there is no intrinsic, or 
 self-existent, value in any form of property. 
 
Divergent Units. 153 
 
 ment is always the creator of money, i. e., of the form 
 of purchasing power held in money, in coin. This 
 doctrine has lately been held forth with much eclat in 
 the United States by Mr.W. M. Harvey and others. It 
 is derived from a misconception of the relation of gov- 
 ernment to money, wherein that relation is regarded 
 as primary, essential and fundamiental, whereas it is 
 only and wholly secondary, incidental and subsidiary. 
 Probably the use of paper as credit money, as token 
 and representative of the value held in real money, 
 contributes to mislead the unthinking. For in 
 reading this paper they see that is issued by gov- 
 ernment equally with coin and that it bears the same 
 denominations: while in handling it they observe that 
 it passes for goods at like rates. They fail, however, 
 to discern that it does so only when truly representa- 
 tive, when thoroughly backed with real (commodity) 
 money. 
 
 The rationale of depreciations has been given in the 
 introduction to subsidiary coinage (Chapter XI) : for 
 there is an overvaluation of the same principle and 
 force when two coins of values disproportionate to 
 their denominational ratio are placed in circu- 
 lation together, whether they be of the same or 
 different metal^ — whether the divergence' is caused 
 by making one coin of a less quantity of metal 
 of the same kind as the other, or by making it of 
 a different metal and having it contain a quantity 
 too small to equal in value a piece of the 
 other filling the same denomination. It is unneces- 
 sary to an interference of two gold coins (or two silver 
 ones), neither being a token, that they be of the same 
 
154 Currency and Standard Unit. 
 
 denomination: it is enough if their denominations are 
 of the same system and have a dififerent ratio from 
 that between the quantities of metal in the coins, as 
 where denominations are io:i, but quantities of con- 
 tained metal 12 :i ; or where the ratios are 2:1 and 3 ;2, 
 respectively. Nor, to produce interference of coinages 
 of two metals is denominational identity of the coins 
 of dififerent species necessary, but only that they all be 
 of the same system and series, i. e., referred to one 
 standard unit of denominations (money of account), 
 bearing the name of that unit or of some fraction or 
 multiple thereof: a disparity between the ratio of the 
 denominations and that of the values of metal con- 
 tained in coins of different species bearing such de- 
 nominations, the disparity arising from a depreciation 
 of one species, makes it (the overvalued coinage) 
 supervene in the circulation. The principle and. 
 working of depreciated paper also are the same: for 
 credit is of the same financial stuff, the same mercan- 
 tile essence, as coin, and is measured under the same 
 system. When the credit lying under a piece of 
 paper money is lowered, when faith in the ability or 
 willingness to fulfil the promise is weakened, the 
 worth of such note is diminished in ratio to coin of its 
 denomination (or to a piece of metal that would fill 
 the denomination), and there are two uneven concur- 
 rent measures, as in the two former cases. 
 
 The withdrawal of the more valuable before the less 
 valuable money was, perhaps, first noticed in the case 
 of inequalities of the first kind, or between coins of 
 one metal. Coins abraded by long service, and so 
 diminished in value, were seen to circulate just as well, 
 
Gresham's Law. 155 
 
 and even more freely and constantly than, coins of 
 fresh mintage and full weight : if one wished to hoard 
 money or to hold it .for a considerable time, he would 
 keep it in coins of the latter description, lest for his 
 next use the lighter ones should be of less value, accord- 
 ing to their weight of metal. A punched piece, indeed, 
 would not continue to pass at its face value: its loss 
 of value being too obtrusively noticeable, and not the 
 slow, im.perceptibly gradual effect of doing its office 
 as a medium. Now, the knowledge of the unimpaired 
 status of a coin which had lost value by this latter 
 process would lead to the secret paring and clipping 
 of coins in a way to alter their shape and broad, ob- 
 trusive aspect as little as possible; the parings being 
 taken to a goldsmith or back to the mint.* 
 
 These natural and fraudulent reductions in the 
 hands of the people would have the same effect — to- 
 retire the money of full value and establish a depre- 
 ciated currency — as an overvalued coinage at the mint. 
 Both causes effected depreciations that fell under the 
 observation of Sir Thomas Gresham,t and which, sub- 
 jected to his scrutinizing study, yielded the generaliza- 
 tion known as Gresham's law, the laiw, namely, that the 
 poorer of two sections of a body of current money will 
 expel the dearer from circulation. 
 
 * The comparative disappearance of this practice is probably 
 not to be attributed to increased virtue in the community so 
 much as to the increased difficulty of doing it both in a method 
 sufficiently cheap and with an effect sufficiently secure from 
 detection. 
 
 t The great English merchant and financier of the sixteenth 
 century : he was for a long time negotiator of loans to the 
 British Crown and founded the Royal Exchange. 
 
1^ Currency and Standard Unit. 
 
 The determining force in this operation of the poorer 
 money, whether overworn or overvalued coin or dis- 
 credited paper, is its unimpaired legal-tender quality: 
 i. e., a tender of it in payment of debts is as effective 
 to discharge them as a tender of the better money. 
 Some influence, perhaps, may be allowed to the greater 
 abundance (in most cases) of the poorer currency and 
 to its acceptance in cash transactions by those ignorant 
 of the change in value, but that which makes the 
 cheaper expel the dearer medium and prevents the 
 concurrency of two measures of value and two sets of 
 prices, is the state's enforcement of their equality in 
 paying debts, operating as indicated on page 162. A 
 counterpart of the principle lies in the concomitant 
 refusal* of trade to recognize the cheapened legal 
 tender as the par of the more valuable money, or 
 the money of the previous standard. Sellers will have 
 more, denominationally, of the former for the same 
 commodity, in any new transaction : it takes less of any 
 form of value to buy a given number of shillings or 
 dollars in the cheapened currency. That is, the 
 other money is dearer. 
 
 While government cannot create purchasing power 
 (commercial value) in the form of money by direct 
 enactment, it can by enactment create debt-paying 
 power; just as it may also enact a pardoning power 
 for crimes. It may reduce or cancel the burden of his 
 debts for the debtor, atid diminish or destroy the worth 
 of his credits for the creditor. It can repudiate its 
 
 * Which government no longer tries to balk, as it used to 
 do, by statutory regulation of prices. 
 
Debts and Purchasing Power. 157 
 
 own* debts and enable its citizens to repudiate theirs. 
 And its ability to enact debt-paying power, or to have 
 debts falsified and discharged in whole or part with 
 empty names, depends on the impossibility of its enact- 
 ing purchasing power. In money of the new and low- 
 ered standard it takes more pieces of a given denomi- 
 nation to buy a given quantity of goods, — one piece or 
 a given number of pieces buys less. As the creditor 
 gets o^nly as many pieces on the lower standard as he 
 would have received on the former higher standard, 
 his credits when turned to money have less value: 
 reversely, the debtor gets more pieces for the same 
 quantity of his products newly marketed, whereby it 
 takes less of those products, or less expense, to pay his 
 debts. Now . if enactment had availed to endow the 
 reformed currency with as much purchasing power as 
 the old possessed, the prices would not be raised of 
 the things sold by the debtor to get money to pay his 
 debts with: money, by denominations, would be just 
 as hard to get as before, and so, in the prices of things 
 sold, would confer no additional debt-paying power. 
 
 * Government is a great and constant debtor : it is always 
 helped by any kind of monetary depreciation. See below, tax- 
 rates, p. 167 f. 
 
CHAPTER XV. 
 
 EFFECTS OF CURRENCY DEPRECIATIONS GENERAL 
 
 PRICES DEBTS TAXES GOVERNMENT OBLIGA- 
 TIONS AND EXPENSES WAGES INVESTED 
 
 AMOUNTS — POOR CREDITORS — ANCIENT AND 
 MODERN CONDITIONS. 
 
 A general rise of prices is the primary effect of a 
 cheapened medium of exchange: it depends on the 
 impossibihty of evolving purchasing power by legis- 
 lative enactment. Prices rise just as, and more than, 
 when money becomes cheaper and more abundant 
 owing to a diminished cost of producing the primary 
 money metal, coined without restriction. 
 
 These higher prices mislead the unthoughtful to an 
 advocacy of cheaper currency: without thinking of 
 their debts, often without having debts, they fancy a 
 plain advantage will accrue from having higher fig- 
 ures to enter in their sales-books ; not reflecting that if 
 they get more, in currency denominations, for their 
 products, they must also pay more for the products 
 of others, which they have to buy. At the same time 
 they lose sight of the fact that money cannot satisfy 
 their wants : that whether cheaper or dearer it is but a 
 special form, or representative, of value, going between 
 other values to expedite their exchange. 
 
 But this delusion is supported by a certain weight of 
 authority: some economists argue as if a general rise 
 of prices was necessarily an unmixed benefit to all. I 
 
Balanced Variations. 169 
 
 know a farmer who bought his farm when agricultural 
 property (and other property also) was high, nomi- 
 nally: he has found it impossible to sell save at an 
 apparent loss, owing to the subsequent fall in farms. 
 After reading an essay by Bland, Stewart, Jones, Har- 
 vey, Andrews, etc., in favor of silver inflation, this man, 
 if he were inconsiderate enough, would lay the book 
 down, thinking, "That's what's the matter: if money 
 was plentier my farm would 'be worth more; I could 
 sell it to advantage. Or I could keep it to advantage, 
 as farm produce would rise too. Those fellows in 
 the Reviews must be right : the government can create 
 value so, — give extra value to things." Well, suppose 
 money to be so affected that his farm rose to its old 
 price or higher: would it really be worth any more 
 under the new conditions? Would the money got 
 from its sale or the sale of its produce buy any more 
 than the money that would have been received from 
 selling before under the former standard? For the 
 price of everything has gone up : the purchasing power 
 of one thing towards others has not increased. If sell- 
 ing at the previous price by the old measure means 
 selling at a loss, so also dtoes selling at the present 
 price by the new measure: if the latter represents a 
 gain, so would the former. Nor does it matter if the 
 fall in the price of farms, after our friend bought his, 
 was also a fall in their value, — if they dropped owing 
 to special causes .that did not affect other property : it 
 is impossible to recover the loss by a uniform elevation 
 of general prices, such as must ensue from a cheap- 
 ening of the currency. 
 
 11 
 
160 Currency and Standard Unit. 
 
 If it be said that a rise of prices so caused is not 
 general, then, accordingly, legislation thus affecting 
 the currency is class legislation, favoring at the ex- 
 pense of the rest those whose products are advanced. 
 But this is not true. And if it were, the advantage 
 could not become general for the favored class : 
 through competition, indeed, it would quickly vanish 
 for that class as a whole. For such a rise is not 
 due to quickened demand. Circumstances (cre- 
 ated in part, it may be, by governmental meas- 
 ures) sometimes afford a wider market or a 
 stronger demand for certain productions, thus raising 
 their prices and furnishing occupation for more pro- 
 ducers in those lines. This will normally work a gen- 
 eral advantage, by enabling, and requiring, those pro- 
 ducers to buy more, in turn raising the prices of other 
 goods; which again affects in like manner still other 
 branches of production, — and so on through the whole 
 circuit of commerce. Throughout its field there is 
 increased production, buying and selling; more wants 
 satisfied; greater and wider prosperity. But a cause 
 that effects a mere advance in rates, without aug- 
 menting the amounts and net profits of production, 
 cannot yield a fresh burst of prosperity. 
 
 When prices rise in consequence of enlarged produc- 
 tion and increased relative supply of the money metal, 
 there is some compensation for sh'runken credits in 
 increased sales, owing to the extended buying of the 
 metal producers : then it is not merely an all-around ele- 
 vation of rates in denominations or money of account; 
 there is more trade. Suppose, however, the metal in 
 question has been coined restrictedly at an overvalua- 
 
Coinage Depreciation. 161 
 
 tion, to represent coin of another metal as the staiid- 
 ard : then, should the former be coined freely and inde- 
 pendently, yet still at the overvaluing ratio, the first 
 effect will be a cheapening of the currency before pro- 
 duction of the metal can be affected; prices quickly 
 leaping up as such coin falls at once to its own bot- 
 tom. This, as before indicated (Chapter VIII), will 
 curtail general production and all business : it induces 
 a panic. Any gain by way of increased production of 
 'the metal, thus caused, can ensue only afterwards and 
 upon the basis of the new standard. A sudden and 
 sweeping reduction of the value of money according 
 to the cost of this metal, must precede the further 
 gradual fall, accompanied by expansion of trade due 
 to increased output from the mines : Which latter is 
 the only effect to allow for with a metal already con- 
 stituting the standard money. 
 
 Nor are loans the easier for a cheapening of the cur- 
 rency. Money is no more plentiful for anybody rela- 
 tively to the sums required for current expenses : there 
 is no more to spare for investment. When, however, 
 real prosperity is rising, when markets are strength- 
 ening, then, whatever the value of the standard unit, 
 many are accumulating surpluses, greater or smaller, 
 over present Heeds. Savings banks get filled with 
 deposits. It is then that real values are added to the 
 common national stock, and that money, the standard, 
 representative, and mediate value, is in really greater 
 supply : it is drawn from abroad. 
 
 The form of value that a currency depreciation can 
 and does really move relatively to other values, is 
 debts, the dead horses of trade. With reference to 
 
162 Currency and Standard Unit. 
 
 Other things, while the cost of money is lessened, so 
 also is the amount it will purchase : its purchasing 
 power is altered equally and in the same sense with 
 the variation in the cost of obtaining it. But credits 
 fall with the price of money, because their worth 
 remains the same by denominations, or in nominal 
 price. In reality other values cannot rise, but credits 
 must fall. Each member of the commercial world is 
 helped in so far as his debits exceed his credits.* Debts 
 are reduced, proportionably with the cost of money, 
 because their denominational sum is fixed : the law 
 will not readjust it to the altered currency. Whereby, 
 when money is cheapened and it takes less expense 
 of property to get a given number of pieces of any 
 denomination or a given number of units of any 
 grade, at the same time that number will pay as great 
 an amount of debt as the like nominal sum (and hence 
 a higher value) in the dearer money prevailing when 
 the debt was contracted would have paid. So that the 
 debtor gains. But the creditor loses what the debtor 
 gains, because of the lower purchasing power of the 
 new money in which the debt is paid, or, from the 
 other side, because of the equal and reverse variation 
 in the cost of obtaining it by selling a credit or col- 
 lecting a debt. Whereas, the nominal cost of obtain- 
 
 * As regards this effect it m^kes no difference whether the 
 change in the value of money results from a cheapening of the 
 basal coin or from injecting beside it a cheaper currency that 
 supplants it by force of its legal-tender quality. It is the 
 latter case when a coinage that has been overvalued and up- 
 held by another metal comes to be executed independently at 
 the same ratio. 
 
Debts and Credits. 163 
 
 ing things with it by its standard is increased propor- 
 tionably as the cost, reckoned in the same way, of 
 obtaining it with other things than credits is lessened.* 
 The minus value of the debt and the plus value of the 
 credit shrink together and in the same measure. Con- 
 sidering, then, that the transfers involved in a depre- 
 ciation are confined to domestic commerce, there is 
 neither gain nor loss to the community, provided he 
 to whom value is transferred by canceling part of his 
 debt will use it as wisely as his creditor who loses the 
 like amount. 
 
 The -only nominal price, then, that remains un- 
 changed when the measure of value (monetary denomi- 
 nations) is depreciated, is the price of a pecuniary obli- 
 gation, the price fixed in a sale completed, a contract 
 carried out. Such is the efifect of legal tender applied 
 to the cheapening money.f Now, making the creditor 
 
 * Let us take an example : A bushel of wheat, having 
 risen in price along with other commodities, exchanges for 
 more money, — for instance, a larger number of dimes and 
 half-dimes. Each of the pieces now costs less to obtain with 
 wheat, or costs less wheat, there being more of them to the 
 same quantity of the grain, or fewer kernels to be assigned 
 to each dime or half-dime. But if wheat could remain at the 
 old price (nominal worth), while other commodities advanced, 
 money would, in reality, cost more to obtain with it than for- 
 merly, on account of the fall in the general purchasing power 
 of money. See page 89 f . 
 
 t Hence the full phrase, "legal tender in payment of debts," 
 used in the Constitution of the United States. In exercising 
 its power to make something else than gold and silver coin 
 a legal tender in payment of debts, and when it imparts this 
 quality to an anomalous subordinate coinage, as it once did. 
 
164 Currency and Standard Unit. 
 
 accept th€ new, cheaper currency at the same rate as 
 the old, or else lose the whole credit, is an impairment 
 of the obligation of contracts. That is the reason of 
 the prohibition to the States to make anything but gold 
 and silver coin a legal tender in payment of debts, 
 which prohibition is immediately followed by that of 
 passing any law impairing the obligation of contracts. 
 In prohibiting to the Congress the power to pass any 
 such law the Constitution made it impossible for Con- 
 gress to coin a standard unit that will be sensibly less 
 valuable in the circulation than the existing one, or 
 pass an Act cheapening the money of the nation, 
 lowering the common standard of value, without 
 violating the Constitution. And, let it be repeated, 
 that standard is lowered when a coinage that has been 
 kept at par with a higher standard than its own by its 
 coins being made, in some way, representative of 
 higher i'ntrinsic values in another metal, is reduced to 
 its own base- and the names borne by its coins are inter- 
 preted with sole refereace to the metal they contain. 
 The power of Congress is limited thus in respect of 
 the ways and extent in which it may reform a coinage 
 system it has established, and as to the degree and 
 nature of the alterations it may constitutionally make 
 in "coining money and regulating the value thereof."* 
 
 viz: in partially remonetizing silver, February 28, 1878, — 
 Congress adds "except virhere otherwise expressly stipulated 
 in the contract." 
 
 *In this there is no hint that Congress went beyond its au- 
 thority in reducing ,the weights of the gold coins in 1834, — 
 gold was a comparative stranger and prices were determiaed 
 by a lower standard than the former gold unit ; — nor in reduc- 
 
Obligation of Contracts. 165 
 
 Thus by a cheapening of the currency is the obliga- 
 tion of all contracts impaired, unless, when its depre- 
 ciation is due to changing the metal it is based on and 
 the coinage of one metal remains the same as before, a 
 contract provides specifically for payment in that coin 
 or in its terms. Of course no specification of particu- 
 lar form or class of money will keep such an obliga- 
 tion whole if the basal coinage itself be cheapened and 
 a smaller standard unit of value, without change of 
 name, be provided in that same metal and placed at 
 the base of the entire monetary system. 
 
 Since, through cheapened money, a man gains on 
 his debts and loses on his credits, those only realize 
 therefrom a net gain whose balance sheets are adverse, 
 who owe more than is owed them. The farmer before 
 mentioned will gain if his farm is mortgaged : the pay- 
 ing interest on fixed sums is easier. Of taxes it is 
 
 ing the weights of the silver coins in 1837, — the reduction was 
 slight and silver was not ruling prices. Nor yet should we 
 conclude that the Legal Tender Act of 1862, which foisted the 
 United States notes upon the country, of itself raised prices 
 much. The rise of prices in that period was chiefly a rise of gold 
 prices, — ^prices taken in the gold measure were higher; this 
 rise being due to the War itself, operating both more directly 
 and through consequent tariff legislation. There was a mer- 
 cantile appreciation of the staple products. The change in 
 general prices was not simply a question of the depreciation 
 of the currency below the gold standard. And in general 
 commerce has a certain choice as to its reception and treat- 
 ment of a bill of credit, which it has not with a piece of gold 
 or silver, — the monies of the world. To a considerable extent 
 its faith is its own, as regards the home government and the 
 domestic currency depending on that. See page 149. 
 
166 Currency and Standard Unit. 
 
 Otherwise, as the valuation on which they are assessed 
 will soon rise in harmony with the nominal (price) 
 advance of all market values. Heavy mortgagors and 
 others deeply in debt have a direct interest in currency 
 depreciation, whidi is one method of relieving them. As 
 such relief is not given only at the expense of the cred- 
 itors of these impoverished persons, but involves all 
 creditors, including those to whom the creditors of the 
 impoverished are debtors, the application of this 
 method is not only very inequitable, but, at least under 
 modern conditions, must work much hardship. In effect 
 it is precisely like the ancient method of "tabulee rasce" 
 and "tabula nova" at Rome, — "erased accounts," "new 
 accounts," which meant an arbitrary discharge from 
 all debts and forfeiture of all credits, or their reduc- 
 tion on a scale enacted and proclaimed by government. 
 Since the losses caused by this debt reduction bear 
 with various degrees of severity on different classes, 
 entailing the heaviest and most real hardships on those 
 whose comfort and security depend on some small 
 credits, an improvement, in this point, on either of the 
 foregoing methods would be found in the assumption 
 by the state of the troublous debts and mortgages. The 
 charge would thus be distributed amongst all who, 
 directly or indirectly, supply revenue to the Govern- 
 ment, falling lightly, perhaps insensibly, on each indi- 
 vidual. One objection to such "state aid" would be 
 that the relieved themselves thus contribute to the 
 relief, — which, however, would mitigate the other 
 offense, that it would in a measure make them national 
 paupers. Yet by the method of depreciated money 
 they become paupers to the same extent, only the 
 
Relation of State Finances. 167 
 
 charge is not borne generally but imposed on selected 
 victims. So far, then, the weight of argument seems 
 to be in favor of aid dealt out from the general treas- 
 ury: and remains so even after this further point is 
 made on the other side, that by manipulating the cur- 
 rency the facts of their insolvency and relief at the 
 expense of others is concealed from the poor debtors, 
 mostly unthinking persons, and so their self-respect is 
 not impaired, nor the spirit of self-help weakened in 
 them, as they might be with the other method. But, 
 though the support accruing to distressed debtors from 
 a cheapened currency were a clear public benefit, and 
 whether extraordinary accesses of pecuniary distress 
 would not wisely be left to seek their own remedies or 
 appeal to other than governmental agencies, as the 
 most of such troubles must do, — there are two or three 
 economic evils inevitably resulting from a currency 
 depreciation that more than outweigh all the good it 
 would do the impoverished. These will appear as we 
 proceed. 
 
 Government, the state, is always in the debtor class : 
 nobody owes it ; it will not loan and will collect its dues : 
 but it is steadily in debt to the holders of its notes and 
 bonds and to its servants, the personnel imme- 
 diately discharging its various functions. The 
 general fact here stated explains several historic 
 depreciations, which need not be detailed here. 
 Depreciation does not diminish revenue : the same 
 scale of ad valorem taxation gives increased- nomi- 
 nal sums according to the general rise of prices. 
 Again, such dues are paid in the best coin of 
 the mints: and if the change in the monetary system 
 
168 Currency and Standard Unit. 
 
 has left two monies legally concurrent, as gold with 
 depreciated paper or silver, the imposts are returned in 
 gold on a gold valuation, when government does not 
 lose, or in gold on the valuation of the actual currency, 
 when government gains according to the premium. So 
 with specific duties; and if these are receivable in the 
 cheaper "currency," their rates would properly be ad- 
 vanced in adjustment* to a general rise in prices. In 
 any case the state will not be mulcted at the receipt of 
 custom or of excise. Now then, if it does "not lose in 
 receipts, will it gain in point of disbursements? As 
 regards the bonded debt and interest thereon, if the 
 cheapening be ,of a paper or a co-standard metallic cur- 
 rency, and the debt is expressly guaranteed in coin of 
 the other metal, of course the obligation cannot shrink : 
 otherwise a depreciation involves its shrinkage. As to 
 government's current expenses, it cannot save by mak- 
 ing its general purchases with a cheaper money, since 
 the cheaper the money the less it will buy. But the 
 salaries of its employees are ftxed and payable in cur- 
 rency or legal tender. The state shares here the advan- 
 tage of the full debt-paying power injected by enact- 
 ment into the currency: for of course a price or rate 
 that is fixed in terms (denominational sum) is affected 
 like a debt. Government would readjust specific im- 
 posts, or make any readjustment that would not affect 
 its treasury adversely, long before it would indemnify 
 the great mass of its servants by raising the terms of 
 
 *If this is inconvenient, then it should seem that the superi- 
 ority of specific to ad valorem taxation is enhanced by its 
 requirement of , and harmony with, a steady monetary standard 
 and System. 
 
Wages. 169 
 
 their wages. Here the state participates in the reign 
 of a universal law, the law, namely, that the price of 
 labor is the first price to fall when money appreciates 
 and the last to rise upon its depreciation.* 
 
 It is an instance of the economic subjection of labor 
 and of the economic advantage taken at every point by 
 craft and power over weakness and simplicity: the 
 wage-earner is taken unawares. His helplessness here, 
 as at other points, might be more or less remediable 
 through tfades-unionism if a depreciated currency 
 were to fall now on one of the more advanced nations : 
 yet there must remain a great mass of unorganized and 
 ignorant toilers to incur this loss. This is a condition 
 precedent for the miseries that have been inflicted on 
 the populace by debasements of their current medium, 
 especially in France, where they used to clamor and 
 riot against the government, demanding money that 
 would buy them bread. The debased coins whose pur- 
 chasing power had been cut to one-half or less within 
 a few decades were doled out at little or no advance on 
 old rates to those living from hand to mouth, laboring 
 for hire or making wares they at once converted, 
 through the current medium, to the bare necessaries of 
 existence; in selling which necessaries dealers always 
 sharply discounted the new currency on its first appear- 
 ance. Such people, even if the nature of the alteration 
 in the currency and the cause of the rise of prices be 
 within their understanding, and though they realize the 
 
 *Striking illustration of this law appears in a report on the 
 resumption of specie payment in Chile. This report, addressed 
 to the Secretary of State by Mr. Strobel, then U. S. Minister 
 to Chile, was published in 1896. 
 
I'^O Currency and Standard Unit. 
 
 effect that will be worked thereby in liieir economic 
 situation if they go on selling their labor, and wares at 
 the old prices, are not in a position to insist on the 
 adjustment of these prices to the changed conditions. 
 On the other hand, those who sell the necessaries of 
 life are, by the indispensableness of their goods, so re- 
 lated to the consumer of them as easily to advance their 
 price to keep even with the lessened value of currency 
 denominations. And the large producers in any line, 
 having something to live on while they wait, can en- 
 force such adjustment, if necessary, by holding their 
 goods and stopping production. But the laborer can- 
 not wait, cannot withhold his goods, the toil of his 
 hands and the sweat of his brow, without unendurable 
 hardship. Under the ruling spirit of commerce, the un- 
 regenerate mercantile spirit, men will take every 
 method that the civil law cannot or does not condemn 
 under penalties, to get inequitable gain out of those 
 with whom they have commercial relations. And so, 
 on the ground of custom maintaining old prices for 
 the labor they buy, employers make "sweat-shops" and 
 slave-fields of their factories and plantations whenever 
 the worth of current money falls. Just as, in any ap- 
 proach to a panic, they make the most of "shortened 
 market" and falling prices (which they are quick to 
 anticipate and overestimate, as excuses for cut-downs 
 of wages more than proportionate, in most cases, to 
 the fall of general prices). A large part of the hard- 
 ships of the people in the Civil War period, which a 
 recent clamorer for cheaper money has perversely 
 characterized as "good times," arose from the reluc- 
 tance of wages to rise when the necessaries of life were 
 
speculative Opportunities. 171 
 
 much advanced in price, — ^an advance due partly to 
 increased consumption* and lessened production")" be- 
 cause of the war, partly to the issue of ^.cheaper money 
 occasioned by the war. 
 
 An issue of such money, under the law of its rela- 
 tion to wages and other prices, gives opportunities 
 to speculate in labor, and in things whose cost 
 is included mainly in labor: for the producer 
 buys low (in wages) and sells high, at advanced 
 prices, and he buys and sells in the same de- 
 preciated currency. Another speculative advantage 
 thus offered is in trading, — buying, with borrowed 
 money, before the rise of prices, selling after it 
 and repaying the loan in the new, cheaper currency. A 
 notable exaimple of this was given in ancient Athens 
 under Solon's economic legislation, called the "burden- 
 lightening," in favor of the farmers, who were, almost 
 to a man, heavily mortgaged, because of large losses, 
 sustained in some seasons through competition against 
 which they could not keep up and in others through 
 failure of harvests. These men formed a strong party, 
 importunately clamoring for governmental relief. Solon, 
 who made himself the lawgiver of his country, be- 
 thoug'ht him how he might administer the relief with- 
 out making the mortgagees feel it as at their expense. 
 He decided he could best secure this end by instituting 
 a new coinage, in which each piece should be reduced 
 
 *Particularly in textile manufactures. 
 
 tParticularly in cotton and cereals. In several lines there 
 were fewer to compete as producers, while demand was strength- 
 ened for many products and did not slacken for any, — at least 
 for no staple. 
 
172 Currency and Standard Unit. 
 
 about one-foui-th in weight of fine metal, the new 
 pieces, of course, being receivable for debts as equals 
 of the old pieces, since they bore the same well-estab- 
 lished names. There were doubtless shrewd financiers 
 who, knowing of this measure before it was enacted 
 or could operate on prices, bestirred themselves to 
 borrow money and buy up lands at the prevailing low 
 price, and, after the rise of prices which ensued, sold 
 or worked their lands at a great profit, paying back 
 in the new coinage the purchase money they had bor- 
 rowed. 
 
 The creditors of these men may have been wealthy 
 and able to bear the loss without inconvenience. But 
 suppose the loans made up from the small savings of 
 the poor, those with a bare pecuniary competence: the 
 loss of the fourth part, or any part, of their invested 
 savings must entail hardship, perhaps indigence, pos- 
 sibly beggary. Now, in the modern world there is a 
 poor creditor class, consisting of the great mass of de- 
 positors in savings banks and the majority of those 
 holding annuities, policies of life insurance, etc. Out 
 of the aggregate of these little deposits and premiums 
 the banks and insurance companies advance large 
 sums to the great channels of industry and traffic. 
 On the small creditors of such money-brokers, and on 
 small investors in municipal and corporation bonds 
 and the like, the losses inevitable upon a cheapening 
 of money, a lowering of the value-standard by which 
 they are paid interest or principal, — fall with telling 
 severity. In fact, under the modern system of the 
 economic world, the losses thus incurred by the poor 
 creditors will generally overbalance the like gains of 
 
Fixed Rates 173 
 
 the poor debtors: i. e., the aggregate sum of these, 
 credits held by persons who do not owe but whose 
 estates are largely comprised in such claims, exceeds 
 the aggregate sum of the debts of those who have no 
 credits. On the same side, as we have seen, are to be 
 reckoned the losses and hardships of wage-earners. 
 If, as will happen in some cases, the same person 
 gets wages earned by his labor and interest earned by 
 his savings, on neither score is the evil lessened by 
 this circumstance: he suffers a double injury. The 
 interest-bearing principal is a fixed denominational 
 sum, the interest rate is fixed in the note or bond, 
 and the nominal rate of wages is extremely reluc- 
 tant to rise and balance their virtual fall caused by 
 the cheapening of money. On the whole it seems 
 certain that any depreciation of the debt-paying and 
 wage-ipaying medium will, in any advanced society, 
 work far more hardship than relief. Nor is it to be dis- 
 regarded that both the injury in the one case is to 
 somebody's private and unearned enrichment, and the 
 relief in the other comes only with somebody's cheating 
 others of their just returns. 
 
 Historians praise Solon for his financial legislation: 
 it was a boon to Attica: it assuaged the miseries of a 
 large class without distressing others. This could be 
 done for the reason that the poor-creditor class did not 
 then exist and the wage-earning section of the indus- 
 trial community was also undeveloped. The manual 
 labor was done by slaves, savings banks were a refine- 
 ment of mercantilism as yet unthought of : there were 
 money-lenders, but they were capitalists who loaned 
 only their own property. The modem industrial sys- 
 
174 Currency and Standard Unit. 
 
 tem is altogether a later development: under its con- 
 ditions the feat of Solon cannot ^isily be repeated. 
 
 Besides the positive hardships of those reduced to 
 penury or deprived of a part of the income which had 
 only sufificed to maintain them comfortably, we are to 
 reckon the losses of the wealthy investors, even, it 
 may chance, of the holders of national bonds, 
 amongst the wrongs, the fraudulent deprivations, 
 inflicted through every species of currency de- 
 basement. While private credit may not necessarily 
 rise when faith is strengthened in the state's financial 
 administration, nor be always and everywhere com- 
 mensurate therewith, yet it must sink when the public 
 credit falls. This ruin of financial faith and the con- 
 sequent check and impediment to all the streams of 
 exchange, makes a grave and tenacious distemper 
 afflicting the land in which such repudiations are 
 enacted. Markets for products may not be impaired 
 thereby: they may merely shift promoters and con- 
 stituents. Credit institutions, however, are discredited, 
 and credit concerns and transactions avoided : a limb 
 of the commercial organism is paralyzed. 
 
CHAPTER XVI. 
 
 DEMONETIZATION OF A JOINT STANDARD METAL 
 
 THE ILLUSTRATION. 
 
 Having considered the kinds and effects of deprecia- 
 tions, let us next take a view of the commercial aspect 
 of demonetization. Calling in a paper currency de- 
 monetizes nothing, — ^not even if it be fiat, for then 
 there's nothing to demonetize, fiat being an immaterial 
 force: while if the paper be representative its discon- 
 tinuance would mean simply that the money will now 
 appear bodily in the circulation instead of through a 
 representative; the value passing in exchange having 
 formerly been the same as now, and resident in the 
 same substance. 
 
 A discontinuance, in any degree, of the use of a metal- 
 lic currency demonetizes the metal to that extent, and 
 makes its specific value lower than it would otherwise 
 be in proportion to the quantity of the metal thus dis- 
 placed or prevented from minting, or both. A limita- 
 tion of legal-tender force involves that the mintage 
 shall not be unlimited in quantity : but where the latter 
 is already restricted it is possible to fix, or to lower, a 
 maximum to which such coin shall be receivable in 
 single payments, without diminishing its use and so 
 without further demonetizing it. Not, however, in 
 every case or to every extent would this be possible: 
 e. g., in the United States at present, where silver dol- 
 lars are represented by certificates which the govem- 
 
 12 
 
176 Currency and Standard Unit. 
 
 ment keeps paying out in sums of from $5 to $500, the 
 maximum must remain high in order that all the silver 
 coined may be used. 
 
 The practical problems in this connection arise with 
 reference to demonetizing one of two metals that have 
 both been accorded unlimited legal-tender power, and 
 depend upon a. limitation of that power in one of them, 
 or upon enacting or enhancing a restriction of the 
 quantity that may be coined or made the basis of cur- 
 rency, or upon a combination of such occasions. For 
 the sake of the clearer illustration let us put the case 
 of the largest and abruptest alteration : suppose two 
 metals to serve as money concurrently, independ- 
 ently, and unrestrictedly as to both legal tender and 
 extent of coinage; will the complete demonetization of 
 one of them enhance the value of the current medium 
 and lower prices, as a depreciation, or lowering that 
 value, raise prices? There are two intermediate effects 
 through whichi alone we can conceive this result to 
 ensue, namely, (i) a contraction of the currency and 
 (2) an enhancement of the value of the metal left as 
 its base. The metal demonetized is the cheaper and the 
 one that, at the coinage ratio, inclines to overvaluation. 
 Should the extant coin of a metal partially demonetized 
 remain, after or without recoinage, in the circulation as 
 a part of the subsidiary coinage, there, would of course 
 be no immediate effect on the volume of the currency. 
 Nor will there be if such coin is redeemed through the 
 other metal and sold (of course at a loss to the state) 
 to silversmiths ; for its redemption means that its place 
 in the currency is supplied. As to the future, the addi- 
 tional supplies to the fundamental coinage are now 
 
Demonetisation. 177 
 
 drawn from the other metal. Whether or not before 
 the enactment of its monetary supremacy it had been 
 undervalued and driven from circulation, or a compe- 
 tent conspiracy of circumstances had kept the value 
 ■ratio of the two metals even with their coinage ratio, — 
 now the law referring the value of money to the cost 
 of producing the money metal applies to it alone. The 
 same is true of the factor efficiency, and the deficiencies 
 of circulation that may induce temporary discrepancies 
 between the price of money and the cost of its produc- 
 tion. A panic arising just after such a change would 
 have its natural effect. But a panic, a general fear for 
 investments, cannot come out of such a demonetization, 
 which affects no credit adversely, and threatens no one 
 with shorter or slower profits, except perhaps the pro- 
 ducers of the metal whose monetary use is diminished : 
 as to which the following is to be thought. 
 
 The demonetization of a metal has an effect to 
 cheapen it in proportion to the quantity thrown upon 
 the market from the currency and. to the capacity that 
 commerce had to absorb new money, i. e., to consume 
 metal as money, or, rather, in proportion to the part of 
 that capacity that had been occupied by the demone- 
 tized metal: which capacity depends on the rate of 
 trade expansion. To that extent, and that only, can 
 the metal's market and worth be affected. 
 
 To return to the other metal, made, by the change in 
 question, the sole basal money, and to the circulation 
 and prices which depend upon it. Just as a general 
 failure of commercial confidence (faith in markets) 
 will contract the circulation and lower prices, so, on 
 the other hand, a sensible contraction is impossible if 
 
178 Currency and Standard Unit. 
 
 the industrial community is willing to use money, to 
 invest it in trade, manufacture, transportation. The 
 residual capacity above mentioned does not constitute 
 an insistent or inevitable demand for money: from the 
 peculiar nature of money and of monetary consumption 
 of a metal. The volume of trade and the rate of its 
 expansion fluctuate irregularly while the incoming 
 stream of coin and coin securities or bullion securities 
 continues uniform; and vice versa, the flow of new 
 money from mint and treasury varies in either sense, 
 while the volume of trade is steady or expanding at a 
 steady rate : — ^both without affecting general prices. So 
 elastic, both tensile and contractile, is the circulation of 
 money : so much take-up it has. This property, though, 
 of resisting price changes, has its limits. Still, beyond 
 those limits the latent influence of the potential rise in 
 the value of money which would otherwise be realized, 
 operates to supply, from the original sources, any de- 
 ficiency which the means* of promoting the efficiency 
 of the present volume of money would be inadequate 
 to prevent : i. e., the inflow of new money, in the metal 
 left as the standard of value, will be enlarged. This 
 potential rise in its value is what the demand for money 
 consists in, so far as there is a demand: and all the 
 resources and devices will be employed in succession 
 and in natural course to prevent a vacuum in the 
 sphere of the exchange medium. 
 
 Here the point will perhaps be made that while the 
 volume of money may thus be kept adequate, its price, 
 together with that of the metal, will advance, because 
 
 * Mentioned in Chapter VI. 
 
Silver Demonetized. 179 
 
 the freshened demand for money constituted of the 
 chosen metal, creajtes an enlarged market and demand 
 for that metal. Well, extending a market need not 
 raise the price : it will not if there be no practical limit 
 to production of the article. This condition is fulfilled 
 in sufficient measure in the case of money. The 
 sources, even of gold, have no apparent limit: on the 
 whole their limits are getting more and more remote. 
 If the quantity of metal stored in forms of merchan- 
 dise should be laid under increased contribution to 
 monetary supply, this, indeed, would argue a rise in 
 the cost of money, a rise that might he permanent, 
 though the amount for circulation were thus for a long 
 time maintained. But before this could happen the 
 sources of the world's supply must fail, and the auto- 
 matic devices, based on extension of credit operations, 
 for avoiding a trade stoppage or deficiency of circula- 
 tion. In the event of such failure, and not before, will 
 the larger monetary use of another metal be missed: 
 and even then its partial demonetization in the interval 
 is not to be regretted, but its partial or sufficient 
 remonetization to be effected. 
 
 There was a decade of silver demonetiza,tion begin- 
 ning in 1869. Complete demonetization, or rather 
 reduction of silver to a subsidiary coinage, was exe- 
 cuted by Germany and by the Scandinavian Union. In 
 1873 the Latin Union put a restriction to the coinage 
 of its biggest silver piece, (worth 5 francs) : in 1878 
 it stopped altogether the private coinage of that piece. 
 In the former year the United States abolished the 
 standard in silver, which until then had formed, nomi- 
 nally, an associate standard with gold; reducing silver 
 
180 Currency and Standard Unit. 
 
 to be only the constituent of a subsidiary coinage, in- 
 augurated in 1853. I" the latter year, 1878, and about 
 a year before the resumption of specie pajmients, a Bill 
 passed providing for silver dollars of full legal-tender 
 power but coined only at the instance of government, 
 in discretionary amounts vyithin fixed limits. These 
 two Acts together, then, had an effect just like that 
 of the silver legislation of the Latin Union, completed 
 about contemporaneously with the American: the 
 effect, namely, of partially demonetizing silver, — caus- 
 ing it, in its standard character, to go limping, as the 
 French say. A period of silver depreciation had com- 
 menced shortly before the. epoch of demonetization, 
 in consequence of greatly increased production from 
 new and rich mines. While demonetization gave a 
 brief added impetus to the decline, this continued 
 from the same cause that started it: cost of pro- 
 duction had fallen owing to new sources and pro- 
 cesses; and, since demand at the old price was not 
 much augmented, competition had been effectual to 
 lower the price in accordance with the lessened cost. 
 Whence the overvaluation at the established coinage 
 ratios, and wherefore the ensuing demonetization, to 
 prevent currency depreciation. 
 
 The advocates of silver remonetization ascribe the 
 depreciation of the metal to its demonetization : some 
 of them argue that the commercial demand for silver 
 is still strong enough to take the entire product, as if 
 this showed that the fall of the metal cannot have had 
 a commercial cause. But they should all see this, 
 that if the demand is in the old ratio to supply, quan- 
 titatively expressed, it is on the basis of a new and 
 
Decline of Silver. 181 
 
 lower price: cheapening a thing brings it within 
 reach of more consumers. The increased consump- 
 tion, relative to civilization and population, pre- 
 supposes the cheapening as an indispensable condition 
 precedent. So that the question is reduced to this: 
 could the world have put into money and kept at the 
 old price all the extra product (the relative increment 
 of mining output) that has been taken by jewelers, 
 silversmiths and artisans at a much lower price? Was 
 trade suffering so for more medium ? Were exchanges 
 prevented for lack of it? The average yearly output 
 since demonetization began has been far in excess of 
 the average annual capacity the arts and trade had in 
 that period to absorb at the former price, supposing 
 the relative monetary use of silver not to have been 
 reduced anywhere, and allowing an increase of the de- 
 mand for it in both directions, either according to the 
 increased consumption of general products subsequent 
 to demonetization or according to the rate of increase 
 in both kinds of silver consumption prior to demoneti- 
 zation. The rate of production outstrips the rate of 
 absorption possible under the old cost. 
 
 Moreover, it would be difficult to show that the 
 whole result of American legislation from 1873 to 
 1893 was a diminution — even a relative diminution — 
 of the use of silver as money : if, indeed, such was the 
 result and change in ,the Latin Union. In fact, the 
 action of the United States, instead of furthering, par- 
 tially offset, the reduction effected in Europe. The 
 American Act of 1873 did not reduce the mintage then 
 going on: instead, it provided an extensive use for 
 silver in the large "trade-dollar," the coinage of which 
 
182 Currency and Standard Unit. 
 
 exceeded, from its first year, that of the standard silver 
 dollar in any previous year. The Act of 1878 restored 
 the metal to standard coinage and furnished it a con- 
 sumption far exceeding what it had in both standard 
 and subsidiary coinage at any time before it was for- 
 mally demonetized. This was continued substantially 
 until 1894. Silver had been effectually demonetized 
 as standard money many years before 1873 : almost no 
 silver had been used as such money since 1837. Be- 
 tween 1836 and 1873 there were but two years (1843 
 and 1846) in which over $2,000,000 in standard silver 
 coin was issued from the mints. The issue of those 
 two years, as through that period generally, was 
 mostly in half-dollars. The silver kings did not seem 
 to be aware of losing their hold on the money market 
 by the Act of 1873 : this only took away that part of 
 the market which had continued in relative disuse 
 even since the opening of the Comstock lode in 1867. 
 Could the suspension or restriction of a market they 
 had resorted to so slightly, have depreciated their 
 product ? Their protests first began, or became ener- 
 getic and insistent, in 1893, when they faced the pros- 
 pect of losing the large though limited market they 
 had enjoyed for fifteen years at the National Treasury. 
 To return to gold and the circulation and prices 
 during this period: — ^Applying the principles stated 
 above,* the place in the circulation that had been occu- 
 pied by silver as standard money and would have con- 
 tinued to be filled by it as the years went on if it could 
 have kept its old value and remained a standard with- 
 
 *Pp. 177-8. 
 
Mintage of Gold and Silver. .183 
 
 out driving: gfold out, — we should expect that room to 
 be taken by gold in those countries that diminished the 
 coinage of silver. And such is the fact: the rajte of 
 increase of gold money is found to have advanced. 
 Even in the United States, where the coinage of silver 
 has increased instead of diminishing, where the 
 amount of silver money of full legal tender that has 
 been issued every month from 1877 to 1894 far ex- 
 ceeds the largest issue in any year before 1873, the 
 gold money increased much more rapidly after the lat- 
 ter year than it had previously done. The gold mint- 
 age of 1873 exceeded that of 1872 by more than two- 
 thirds; that of 1874 exceeded that of 1873 by more 
 than a third; the average issue from 1874 to 1882 did 
 not fall from this high rate, arid in 1882 the issue was 
 a good fifth greater than that of 1881. And so it has 
 continued to the present : the increments to the stock 
 of gold in the currency have not fallen off. In the last 
 years they have again much enlarged, in an effort of 
 the vis medicatrix natures of the economic system to 
 right its condition after the panic of 1893, and in resto- 
 ration of what went abroad to pay interest : although 
 most of the gold exported is in bars and represents 
 no drain on our general circulation. And yet, though 
 the silver coinage that was required from 1873 on in 
 continuation of former issues has been more than sup- 
 plied, from gold and silver, there are those who assert 
 an increasing deficiency in the circulation since 1873. 
 Nothing had been heard to this effect until after 1893, 
 no intimation that transactions were prevented or 
 hindered by lack of medium. The outcry of poor 
 debtors for money is not to be taken as a demand by 
 
184 Currency and Standard Unit. 
 
 those who have things to sell that are salable and not 
 riding an oversuppUed market. If the mortgagees 
 cry, it is for property, and not merely a mean for ex- 
 changing property. What the mortgagors want is a 
 depreciation which does bring gifts to poor debtors 
 in relation to their debts, but under which, while they 
 buy and sell more denomination dollars, they buy and 
 sell no more property. They allege a contraction to 
 cover a demand for an inflation. The mortgagee 
 would be as well suited with a gift of any other salable 
 as of money. 
 
 There is, indeed, one class of ^vo^trty-owners who 
 urge a need of a fuller circulation than can be had 
 with "gold alone," — the owners of the property that 
 would be given a wider market by its free coinage. 
 But if silver were coined freely, at the ratio demanded, 
 gold would be expelled, it would be "silver alone," 
 and the circulation would not be fuller, but only 
 cheaper — ^the stream would have no more volume, but 
 would be shallower. In urging that free coinage 
 would increase the market for other goods by enlarg- 
 ing the purchases made by silver, it is neglected how 
 limited the market of the currency is for a metal, be- 
 ing merely proportionable to the expansion of domes- 
 tic trade divided by the rapidity of circulation : so that 
 beyond this narrow limit the output of coin is no 
 additional purchasing force. The stream becomes no 
 greater or more pervasive : you may get more pounds 
 of silver for your wares, but you get no more value. 
 Moreover, if the market for general produce may thus 
 be really enlarged, why not coin freely copper, 
 aluminum and other metals, as well as silver, and 
 
An Unnatural Market. 185 
 
 much non-metallic property also, that the benefit may 
 be as great as possible, both on the side of those 
 whose property is labeled as money and of those who 
 sell other property therefor. In urging the need of 
 extended markets the argument of a currency con- 
 traction is abandoned. The need of more market 
 means that things are cheap from excess of supply 
 over demand, — natural demand, or quantity of 
 use within the territory accessible to the goods. 
 If, now, an artificial market be created by en- 
 larging the production of something and stamp- 
 ing it as money, there is a merely nominal dear- 
 ness given to general products owing to the over- 
 flow of the money product, — and , who is profited ? 
 Only the producers of money, and their retiu-ns fall 
 off as the money market . gets surfeited and their 
 product — coin — cheapens. Presently it comes to pass 
 that they can gain as much or more in some other 
 business. Under free coinage of anything a contrac- 
 tion due to insufficient issues of money is impossible : 
 panic is the cause of contraction (suspension or strin- 
 gency of business), and contraction is of the circula- 
 tion rather than of the currency, or quantity of stuff 
 prepared for circulation. 
 
 But it is asserted that the metal itself, gold as bul- 
 lion, has appreciated during the period in question. 
 This must mean either thait the cost of producing gold 
 has advanced or that its producers are making in- 
 creased profits. The latter hypothesis involves a sup- 
 pression of competition, in effect a gold "trust," which 
 cannot be, since it must include all, from whatever 
 country, who enter the general markets with consid- 
 
186 Currency and Standard Unit. 
 
 erable quantities of gold money. The former hy- 
 pothesis implies that the sources throughout the world* 
 generally have begun to fail. But they have not. The 
 diminution from the average Califomian output ( 1849- 
 1874) has been made good from new fields in the 
 Rocky Mountains and Alaska, while the stream of 
 new gold has been swollen from fresh sources in South 
 America, Africa, Asia and islatids. Whether or how 
 soon the earth is likely to fail to yield enough of this 
 metal according to its present monetary use and the 
 weights now used as standard units, and according to 
 new requirements of expanding trade, is another ques- 
 tion to be considered in its place. (Chapter XXIV.) 
 Finally, those who raise the cry of scarcity of money 
 to cover the demand for a cheaper money, quote price 
 statistics showing that in most classes of common mer- 
 chandise there was a marked reduction in the twenty 
 years following 1873-. The champions of money as 
 constituted by the portion of value forming the exist- 
 ing unit, reply that this lowering of prices, instead of 
 proving an appreciation of the currency, is explained 
 by the force of new economic inventions, mechanical 
 and other, and by the introduction of quicker, safer 
 and less expensive transportation. Indeed, on the 
 other hypothesis the crowning effect of the economic 
 progress of civilization is denied. This effect has been 
 to eliminaite much of the time, labor, cost of storage, 
 risk, etc., involved in producing and marketing most 
 
 * The world, it will be remembered, is one gold or silver mar- 
 ket; if the supply falls in any country more will be brought into 
 that country to take advantage of its dearness, until equilibrium 
 is restored. See pages 62 f . , 206 f . 
 
Course of Prices. 187 
 
 classes of goods, — the total of whidh is summed up in 
 lower cost of production. Now gold has been less 
 affected in this sense than the fabrics of the mill and 
 the laboratory; less than non-metallic minerals; less 
 than products of farm and forest; less than other 
 metals; less than aluminum or silver.* It is easy, 
 then, to see why all these things have depreciated as 
 towards money. The steady prices that several com- 
 modities have maintained, aside from temporary fluc- 
 tuations, must, unless explained by special causes 
 counteracting the alleged appreciation of the cur- 
 rency, confute those making this allegation, since a 
 change in the value of money must affect the price of 
 everything: accordingly, when confronted with the 
 constant or slightly advanced prices of some agricul- 
 tural products, they affirm ati increased ratio of de- 
 mand to supply, due to the increment of demand ex- 
 ceeding that of supply. But this would as well offset 
 a lowering of original cost of such goods as an appre- 
 ciation of money. However, no more, if as much, 
 is to be attributed to heightened demand in these cases 
 than to exemption from influences to lower the cost. 
 Moreover, as to almost every class the ratio has 
 changed in the other sense: supply has outstripped 
 demand; in some instances there has been overpro- 
 duction. This is to be a.dded to the effect of lowered 
 cost, or reckoned as a result of it accentuating the 
 bearing on prices. In the horse market, for instance. 
 
 * This point is developed more fully in a later passage, 
 (page 253-4), where it is more closely germane; here a full 
 statement of it would be too digressive. 
 
188 Currency and Standard Unit. 
 
 this has happened, and at the same time demand has 
 fallen off instead of increasing, owing to the recent 
 development and extended application of mechanical 
 and electrical means of conveyance and locomotion. 
 In some cases, too, a freer competition accounts, in 
 part at least, for a fall. 
 
 But we may perhaps best leave this matter of gen- 
 eral prices, their course and just interpretation, to the 
 trained experts in trade statistics. Tables drawn up 
 by men of the best talent and training in this depart- 
 ment, men of the most disinterested views in handling 
 statistical data, who are animated solely by the scien- 
 tific spirit and in whose hands such figures are least 
 likely to mislead, — pla.inly show that the classes of 
 commodities kept at a pretty constant price level dur- 
 ing the two decades in question and which were found 
 at as high a mark at the end as at the beginning of the 
 period, are too numerous to admit a candid belief that 
 they severally had been held up by special influences 
 affecting each class separately, and too various to sup- 
 port the theory that any one cause or set of causes had 
 singled them out in a special group, leaving all other 
 things untouched.* 
 
 When the steady influence of industrial evolution in 
 making goods more easily obtainable, obtainable with 
 less and less exertion and expense of time, and so 
 with less and less of whatever may have constant 
 value, when this influence through the period is fully 
 allowed for, it will be recognized that the issue of 
 
 * See an article by Edward Atkinson in the Forum for April, 
 189s, and the authorities there adduced. 
 
Wages and the Gold Unit. 189 
 
 money has been copious enough to fill , the room cre- 
 ated by the rise of new classes and varieties of mer- 
 chandise, and the contemporary expansioti of trade, if 
 not also to resist slightly the economic influences de- 
 pressing prices. 
 
 A more simple and faithful criterion for a rise in the 
 value of money is to be found in the course of the 
 price of labor: did wages fall? is a crucial question, 
 and its answer is as weighty as the deduction from the 
 broadest survey of other prices, however accurately 
 combined and however justly interpreted. When 
 money appreciates, wages, under a law previously ad- 
 duced, suffer speedy reduction. Those who impeach 
 gold as a sole standard commodity allege that wages 
 were sinking during the years under review, except 
 where artificially kept up by the resistance of labor 
 organizations. This involves an absurdity, — the at- 
 tainment of despotic power by labor unions, so that 
 they dictate terms to capital, and, in favor of their 
 product, suspend the working of a force (scarcity of 
 money, by hypothesis) otherwise operating univer- 
 sally. Capital is not so weak, especially when backed 
 by natural law in the economic world. If the charge 
 be well founded, strikes have held wages up in the 
 United States well-nigh universally during the inter- 
 val : a comparison of the rates obtaining in 1872 and 
 1892 shows that they had risen or at least kept their 
 range in all departments.* In a few instances overpro- 
 
 *Is it not so? One may securely appeal to the recollection 
 of the observing reader, or leave the determination to his per- 
 sonal investigation; for which many guides are to be had in 
 recent review articles and in the indexes and reference-books 
 of public libraries. 
 
190 Currency and Standard Unit. 
 
 duction or the competition of foreign (particularly 
 Canadian and Italian labor) induced local and tempo- 
 rary depressions. Protective tariffs cannot be adduced 
 as keeping up the price of labor, or of anything, against 
 a currency appreciation during the period. For in the 
 first place there was no restriction on the immigration 
 of foreign labor: all classes were open to the competi- 
 tion of their fellow-craftsmen in Europe by the migra- 
 tion of the latter. Secondly, the American tariff sys- 
 tem was in full operation at the beginning of the 
 period, and, on the whole, was not strengthened in 
 power to segregate the American market and restrict 
 it to domestic products. The strikes were generally 
 unsuccesful and, unless at the very end of the period, 
 when special circumstances induced a deep and uni- 
 versal depression of business, they had mostly the pur- 
 pose of enforcing an advance instead of opposing a 
 cut-down. 
 
 In taking leave of this topic two points further are 
 to be made : ( i ) the drop in the prices of commodities 
 that occurred early in this period was due to the recov- 
 ery from the effects of the War, and then to the dis- 
 placement of the depreciated war currency: it was 
 the ascent of the value of money as it became sounder 
 and returned to the specie basis, i. e., to the gold basis 
 which held before the war (standard silver being un- 
 dervalued and non-current) and which was the real 
 standard all along, greenbacks being at a discount. 
 The elevation of money was the wearing-off of this 
 discount, or of the premium on gold, which the 
 cheap paper had expelled from trade. It was the 
 return of price to the normal rating rather than 
 
How Prices Fell. 191 
 
 its descent therefrom. (2) It is remarkable that an 
 appreciation of money charged to a cause operating 
 at and from the beginning of a period of twenty years, 
 should remain imnoticed until the very end of the 
 period, when a real contraction of the circulation (not 
 of the currency) took place under a panic having par- 
 ticular causes immediately preceding it. This phe- 
 nomenon has already been met and accounted for in 
 this discussion.. It affected prices commercially, 
 shortening the trade supply of money and inducing a 
 mercantile stagnation. 
 
 13 
 
CHAPTER XVII. 
 
 BIMETALLIC SYSTEMS. 
 
 Occasion has arisen already in this essay to describe 
 in part the joint monetary use of two metals. A more 
 general account of the different bimetallic arrange- 
 ments, of their modes and incidents, is iiow in order. 
 The arrangements with one of the metals as subsi- 
 diary coin, two varieties of which were considered in 
 a former section, are the most recent, as they depend 
 on a certain advancement in monetary science. 
 Whether the tedious method of weighing the pieces of 
 silver and gold, of such size as it happened, repeating 
 the process in each transaction, was ever practiced 
 when both metals were used as medium, is doubtful. 
 However, the simplest bimetallic arrangement was 
 where each passed independently at its commercial 
 value, by weight. Where the pieces passing as money 
 were scarcely differentiated from bullion, only the 
 weight being authentically stamped on them to avoid 
 the necessity of weighing, when there were no name- 
 units but the names of the weight-units for comparing 
 the quantities and values of metal, no denominations 
 but the names of the weight units with "gold," "sil- 
 ver," or "copper" added or prefixed, as "pound of 
 silver," "talent of gold," " silver drachme," "copper as,"* 
 
 * The taleni and drachme were certain weights of gold or 
 silver in ancient Greek monetary arangements ; the as was a 
 weight of copper constituting the base of the Roman system. 
 
The Commercial System, 193 
 
 etc., — of course in such a system the metals are com- 
 pared at the ratio of the values of equal weights. 
 Croesus appears to have been the first to organize a 
 regular bimetallic system, with gold and silver. His 
 system was a commercial one, with the gold pieces so 
 proportioned as to exchange, — a certain number 
 against a certain other number, — with the sil- 
 ver pieces struck by the Greek coast cities of 
 Asia Minor. International money consists to- 
 day of silver and gold substantially on this basis, 
 exchanging for each other according to the existing 
 value ratio: the national names of coins, when coins 
 participate in foreign trade, are wholly insignificant, 
 except so far as international courtesy permits them 
 to vouch for so many grains of refined metal. The 
 earliest arrangement for the joint use of the metals in 
 a domestic currency was a form of this commercial 
 system. But it had a denominational standard in one 
 of the metals, making the system monometallic as re- 
 gards the standard unit, and bimetallic in circulation, 
 since any amount of each metal could circulate at its 
 own value. Thus in the Middle Ages at Constanti- 
 nople the gold bysant seems to have been the primary 
 unit, with silver an associate commercial money, while 
 the silver mark was the standard unit in Germany, the 
 silver solidus in some Latin countries, and the silver 
 pound in England : with all these three gold formed an 
 allied money. In England a change in the value ratio of 
 equal weig:hts was at once applied to the legal ratio of 
 the mintage, and announced to trade by royal procla- 
 mation: it must have been inconvenient making small 
 payments in coins of the readjusted metal, until they 
 
194 Currency and Standard Unit. 
 
 were recoined, and of course there was a loss to the 
 holders of the coin that had depreciated. (The owner 
 of any property naturally loses if its value falls, legal 
 tender being a device that shifts the loss from him who 
 holds nwJney-property at the time of its depreciation 
 to his creditors.) In the times just mentioned gov- 
 ernment undertook to prescribe money prices of goods 
 by arbitrary enactment : it seems something of a com- 
 pensation that it did not undertake to fix the relative 
 prices of the money metals as circulating media, and 
 to hold payments to an unalterable legal-tender valua- 
 tion of silver in gold and vice versa. This is the 
 natural system of co-ordinate bimetalism, where one 
 metal forms a standard money and beside it the other 
 stands oti its own base, serving as an assistant or 
 collateral medium, measured and measuring by its 
 weight, or by a system of denominations distinct from 
 those of the primary metal while correlated with them. 
 Where, however, the same primary unit is struck 
 in both md;als, in unrestricte'3^ quantities of each, and 
 the law regards that denominatio^n, in whatever weight 
 or color, as always identical with itself, and where 
 there is no provision for keeping the coinage ratio 
 equal to the commercial, — we have an artificial ar- 
 rangement to which by some writers the name "bimet- 
 alism" is appropriated; i. e., they give the name by 
 distinction to this variety of bimetallic arrangements, 
 as if bimetalism meant that and nothing else. This 
 system may exist without an explicit declaration of 
 law that a certain quantity of each metal shall be called 
 by the name of the fundamental unit of money of 
 
The Double Standard. 195 
 
 account; though some writers* restrict still further 
 the use of the term "bimetalism," using it only where 
 a double standard is struck in the wording of the stat- 
 ute. Yet where the standard unit is declared in but 
 one metal, a double standardf is enacted at the ratio 
 adopted, if both metals are accorded unlimited mintage 
 and legal-tender power: unless one species is to be 
 redeemable in the other, which is absurd, since only 
 when a coinage is subordinate and conducted solely 
 with metal bought and owned by government can 
 it be subject to the redemption or backing of a differ- 
 ent metal. Whether, then, a standard unit is declared 
 in one or both metals, in the case of the parallel coin- 
 ages we are considering, a real bi-standard (though it 
 be nominally a single standard) is created in point of 
 law, and a nominal bi-standard$ in point of fact. For 
 in either case an actual single standard quickly estab- 
 lishes itself, on one of them becoming overvalued at 
 the mint (i. e., when the value ratio changes so that, 
 e. g., a coin of the one by denomination ten times the 
 unit is worth more than ten times a coin of the other 
 of unit denomination) the coin so overvalued will 
 drive its associate from circulation and remains (bye) 
 as the sole trade standard. 
 
 The difference, therefore, between Hamilton's and 
 Jefferson's plans for organizing the American coinage 
 
 * Those who exalt the force of statute in monetary relations. 
 
 t Called by some co-standard. From the standpoint of the 
 metals each is a co-standard with the other: from that of the 
 denomination unit, this is a double standard, or bi-standard, 
 with constituents in each of two metals. 
 
 % One might fitly write it bye-standard. 
 
i96 Currency and Standard Unit. 
 
 was but a nominal one : both proposed the essentials 
 of a legal bi-standard at the same ratio and with the 
 same quantities of metal in all the coins, both states- 
 men fixing the coins on the same scale-system of mul- 
 tiples and sub-multiples of the denomination unit. 
 The effect would have been no different if Hamilton's 
 recommendation, — a declaration of the dollar unit in 
 gold as well as in silver, — ^^had been carried out: the 
 gold dollar, though uncoined, existed in the propor- 
 tionate weight. In what was written a moment ago, 
 the view was accepted that the clause: — "Eagles: 
 each to be of the value of ten dollars, or units, and to 
 contain two hundred and forty-seven and four-eighths 
 grains of pure, or two hundred and seventy grains of 
 standard, gold ;"* meant to fix the ratio of gold to sil- 
 ver, the standard; and not to name another standard 
 unit in gold : but in enacting that ten dollars in gold 
 should be coined, the unit, dollar, was, to all effects 
 and purposes, established in gold. In the same way 
 coining the half-dollar in silver, independently and not 
 subsidiarily, would fix the weight of the dollar in silver 
 (i. e., the weight of the silver dollar), even had the lat- 
 ter not been coined or declared to be the unit. 
 Whether the standard unit is coined or not depends 
 on convenience as affected by the bulk and weight of 
 the coin. 
 
 Nor is it essential that either of the principal metals, 
 forming parallel currencies, should be coined of the 
 standard unit of value, the account-unit: the money 
 
 * From the Act establishing a mint and regulating the coins 
 of the United States, approved April 2, 1792. 
 
Parallel Coinages. 197 
 
 will be the same if the standard metal be a third, as 
 copper, and the coined denominations be chiefly gold 
 and silver in large multiples of the standard unit. 
 Such a copper unit was actually set up by the general 
 government in the United States shortly before the 
 formation of its present constitution: the denomina- 
 tion of that unit (the half-cent) being overvalued in 
 coining. And so the Act of 1792 might have estab- 
 lished a copper unit, a weight of copper, of the value, 
 say, of one one-hundredth of twenty-seven grains of 
 standard gold, and called it the cent: the gold and silver 
 coinages would have had the same mutual relations 
 that they did have. Their values would have been de- 
 termined, as they actually were, by their weight and 
 the specific value of the metals constituting them; 
 while in reckoning they would have been called 100, 
 or 500, or 1000 cents, as the case might be. Under 
 such a system the copper coins of unit denomination 
 or the double of that would conveniently be over- 
 valued and in actual service rank as subsidiary coin. 
 
 There are, then, three general modes of combining 
 metals in monetary use, namely : as parallel indepen- 
 dent monies on a commercial basis; as principal and 
 subordinate monies; and as parallel monies at a fixed 
 ratio. The last becomes the firet if the legal ratio is 
 kept in accord with the commercial: which becomes 
 possible only when all the sources of at least one of 
 the metals are owned and controlled by governments 
 having a common monetary plan ; — ^and that is always 
 impossible. 
 
 Except on the basis of independent, i. e., commer- 
 cial, rating there cannot be a practical co-ordinate 
 
198 Currency and Standard Unit. 
 
 bimetalism and bimetallic prices: under a system of 
 coinage at a fixed ratio there is bimetalism in the cur- 
 rency and in price only so long as the values of like 
 denominations in different colors are the same, and 
 then the legislative enactment of their identity is 
 superfluous. A slight discrepancy of the ratios sufifices 
 to retire one species, leaving its fellow as sole stand- 
 ard medium and price regulator. (In the United 
 States a discount of less than one per centum on the 
 overvalued coin has had that effect.) The fiat 
 bimetalism then amounts to nothing, save Avith refer- 
 ence to debts. In the nature of the matter is it fixed 
 that a real and permanent bimetallic system, in the 
 sense of a currency parallelism of the metals, can be 
 had only in the simple, natural and honest form that 
 has to its foundation intrinsic commercial value: 
 where bimetalism means a co-ordination of the metals 
 it means two distinct and independent monies. A 
 double mdney, one based on two co-ordinate elements 
 is impossible: the values of their coins may at times 
 happen to be one, just as a bushel of oats may some- 
 times just equal in value a half-peck of wheat: but 
 then the two substances are independent. They refuse 
 to be one in trade until they are one in physical compo- 
 sition, by a mixttire in which each loses its separate 
 entity. A workable bi-standard may be had by com- 
 bining gold and silver in a new substance different 
 from either; (electron, I believe they call it). Then 
 they become one standard, or, rather, the ingredients 
 of one, more fluctuating than the stabler and less so 
 than the more variable of its constituents. In using 
 this alloy we should cease to regard its components, 
 
Co-ordinate Monies. 199 
 
 just as the copper and zinc are not thought of in using 
 brass. Money would thus surely be one thing, though 
 the determination of its value would be complex. Gold 
 and silver would then be securely harnessed at a fixed 
 ratio. Yet their value ratio would still remain free 
 and independent, and, combined with their ratio in the 
 alloy (money) and their respective ratios to general 
 merchandise, would determine the value of the money. 
 But, because the simple metals would be universally 
 preferable for artistic and commercial uses, to many 
 of which it would be physically impossible to apply 
 the mixture, commerce v/ould never adopt this arti- 
 ficial money : were it enacted by law, an independent 
 gold* money would be kept alongside it by commerce. 
 The money of free, self-conscious trade must be a 
 natural commodity under commercial demand. 
 
 If commerce really wants two co-ordinate monies 
 let there be one standard, ordinary money coined, and 
 an assistant money, running, if necessary, in paper rep- 
 resentatives of bullion. If the two be put on the coin- 
 age system and unit-scale, then, when the denomina- 
 tions and amounts come to have different values in the 
 different colors, there will be two sets of prices, — for 
 the first time real bimetallic prices will be known: a 
 consequence of the establishment of two monies that 
 can be permanently co-ordinate. And the two will be 
 differentiated in point of the use trade makes of them. 
 For convenience they should preferably be coined on 
 wholly different unit-scales, the units and denomi- 
 nations being different in the two coinages: so that 
 
 * Why gold will be argued later (Chapter XXIV). 
 
200 Currency and Standard Unit. 
 
 instead of "silver dollar" and "gold dollar" we would 
 say "dollar" and "shamrock," for instance, or "pinar," 
 to distinguish the currencies. If such an arrangement 
 would be cumbrous and laborious, it is yet what men 
 should advocate if they want co-ordinate bimetaUsm 
 and bimetallic prices. 
 
 Or, if there must be a second primary money, a 
 second commodity whose owners and producers are to 
 be enabled to circulate it as a medium of trade, and it 
 is desired that this shall circulate on the same unit- 
 scale and denomination-system with the ordinary 
 money, let government stamp it in convenient chunks 
 of diiferent and well correlated weights, and bearing 
 no name but the weight, so that in any state of the 
 ratio the pieces might pass as so many dollars' 
 and cents' worth, — these units being qf the standard 
 money. Or if it be too heavy and bulky in pro- 
 portion to its value (in other • words, if its 
 specific value is too small) for convenient bodily cir- 
 culation, yet (unlike baled hay) is sufficiently . com- 
 pact to admit of inexpensive storage, let government 
 provide storage and custodians aiid issue to its owners 
 certificates of deposit in the sums, i. e., weights, de- 
 sired. In either of these ways the substance or its 
 representative would readily circulate with the stand- 
 ard money, however the value of the commodity might 
 fluctuate. 
 
 In a sense, indeed, "bimetallic prices" obtain under in- 
 dqjendent coinage at a fixed ratio : in the sense, namely, 
 that prices alternate, no one may foresee how rapidly, 
 between the two metals as standards. Yet, even in 
 this sense, it is plain that bimetallic prices cannot be 
 
Bimetalism at Fixed Ratios. 201 
 
 said to "prevail," as there can be but one price stand- 
 ard at a time. It has been sliown how, under such an 
 arrangement, the metal that becomes overvalued in 
 coinage drives the other from circulation and rules 
 alone in domestic exchange. Three or four instances 
 can be giveii from American history, with the "money 
 of the Constitution." When the United States coin- 
 age system was inaugurated it was uncertain what the 
 commercial ratio was: the coinage ratio differed 
 between different countries: the commercial varied 
 somewhat bdiween the seaports of the eastern and 
 western Atlantic shores, a:nd even between different 
 parts of the American and European continents, owing 
 to_ the various costs of transportation from the mines, 
 then a considerable factor. Jefferson's expressions 
 show that he could hardly settle on a ratio commanding 
 his confidence, and would have been more confident 
 in a ratio slightly different from the one adopted. 
 However, he trusted partly to the force of govern- 
 ment fiat to make a bimetallic currency on that or any 
 ratio in its vicinity. But fiat would not do: gold, 
 which the ratio adopted (15 to i) at first slightly 
 overvalued, retired the silver; presently the commer- 
 cial ratio changed, silver became overvalued and the 
 gold withdrew. Then, in 1834, advantage was taken 
 of this impotence of fiat, in order to restore gold to 
 the circulation and prevent the return of the silver 
 dollar, without expressly legislating silver out of its 
 position as a standard : it was done by taking twelve 
 grains, standard gold, from the eagle, or one and two- 
 tenths grains, standard gold, from the dollar in gold ; 
 
202 Currency and Standard Unit. 
 
 which again slightly overvalued the yellow coins.* 
 Thus was the futility of a mere coinage valuation of 
 one metal in another demonstrated at least three times 
 in the same country within fifty years. 
 
 Whether, supposing the parallel coinages to be 
 started at the exact com'mercial ratio, the currency is 
 likely to remain synchronously bimetallic, or in rela- 
 tion to one and. the same month or year, one may 
 judge from the first two instances above cited, and 
 others that may be drawn from English monetary 
 history, which show that the slightest discrepancy in 
 the ratios — three or four grains of silver in the bal- 
 ance of a pennyweight of gold — will displace the 
 undervalued coin. The conclusion from those facts 
 is reinforced when they are talcen in connection with 
 these following: — That there are two factors, cost of 
 obtaining gold and cost of obtaining silver, a varia- 
 tion in either of whicib will induce a variation in the 
 commercial ratio : That it has never happened and is not 
 to be expected that when the variations occur in both 
 values at the same time and in the sarne direction they 
 exactly ofifset each other, leaving the ratio unchanged : 
 That these costs, or values, are subject to frequent 
 fluctuations, incalculable and imperceptible before- 
 hand, from several causes, including variations of con- 
 sumption in the arts, i. e., variations in demand at a 
 given cost: That, finally, the metal markets are in- 
 creasingly sensitive to such eflfects at the sources of 
 production and in the spheres of consumption, owing 
 
 *The eagle was reduced to 258 grains standard and 232 
 grains fine. 
 
Bimetalism at Fixed Ratios. 203 
 
 to greater quickness of communication and greater 
 speed and cheapness of transportation, whereby the 
 metal market has become one for all the western 
 world ; and that the money market is in quicker sym- 
 pathy with the metal, from the closer touch of all the 
 stations of trade with the money changers, so that 
 both are more nicely responsive to ups and downs in 
 the metal markets. Accordingly, from these causes as 
 well as from the more rapid and extensive develop- 
 ments in producing the precious metals, the chrono- 
 logical tables of their value ratios show an increasing 
 frequency and extent of variation. This appears quite 
 natural and inevitable, seeing that the ratio is a mat- 
 ter of commercial chance, which gains in variety and 
 complexity of factors. 
 
 It is alleged that France maintained a double stand- 
 ard currency for about seventy-five years, ending in 
 1873, on a ratio (i5j4 to i) which during the most of 
 that period differed from the commercial. This allega- 
 tion is in support of the contention that law can defy 
 the natural, or value, ratio. Now, it is conceivable 
 that something peculiar in the antecedent conditions 
 of French life and domestic trade, matters of habit and 
 tradition, should have rendered a slight disagreement 
 of the ratios of no effect : or that France was so pecu- 
 liarly situated in respect of foreign trade as practically 
 to be isolated from the gold market of the world : or 
 even that some special use and demand, Oriental or 
 other, for silver might have been supplied through 
 France and so have kept it dearer to her than to the 
 rest of Latin Christendom. But it is not true that 
 French trade and mintage were insensible to a dis- 
 
204 Currency and Standard Unit. 
 
 crepancy of the ratios. It is allowed, even by those 
 urging the "rehabilitation of silver," that the French 
 coinage of gold nearly ceased altogether about 1823, 
 and again twenty years later : and these were the two 
 occasions within the seventy-five years on which the 
 commercial ratio decisively drew away from that of 
 the French coiimge. Both times it became nearly 
 16:1:* before, between, and after those times it kept 
 close to i^Yz-.i. Soon after the next marked di- 
 vergence the Latin Union limited the coinage of silver 
 in order to prevent a depreciation of the currency. 
 
 Fortunately for business the withdrawal of gold 
 in the two cases cited did not cheapen the currency 
 and alter prices, because the divergence was not due 
 to the depreciation of the coin that became overvalued 
 and remained in circulation, but to the appreciation 
 of the coin that became undervalued and retired. The 
 reverse was true of the parting of the ratios that began 
 late in the '60s. 
 
 In the former cases, inasmuch as the appreciation of 
 gold did not continue long nor mount high (according 
 to a fixed habit of that metal), the French currency 
 may not have been wholly deprived of it when its rise 
 was checked. In the United States the independent 
 coinage of silver did not wholly cease during the 
 period of its undervaluation (1858 being the only year 
 in which no silver dollars were struck). But, like the 
 gold in France, that coinage was at a low ebb: the 
 
 * See a table of the ratio fluctuations, given in several publi- 
 cations: e. g., Prof. Bastable's article (title "Money") in the 
 Encyc. Brit, (gth ed.) 
 
Coin Choosing its Field. 205 
 
 metal was used for other purposes and was exported, 
 the European continental mints being more favorable 
 to it. Doubtless, also, the gold that continued to be 
 coined in the one country, and the silver in the, other, 
 was so treated for convenient use in certain sections of 
 foreign trade. It should be remarked, in passing, that 
 in neither of those instances were the ratios nearly so 
 far apart as they would be now if silver were coined 
 independently at i6 to i, in which event the over- 
 valued coin would form the new and far cheaper base 
 of the currency. I 
 
CHAPTER XVIII. 
 
 FOREfGN TRADE AND HOME PRICES GOLD COUNTRIES 
 
 AND SILVER COUNTRIES NEWTON'S RULE. 
 
 The commercial regulation of the value of money has 
 a base as wide as the country's whole foreign com- 
 merce. A scarcity of money, the formation of an 
 abnormally wide margin between its value in general 
 domestic markets and its cost of production, be'sides 
 encouraging a flow from native sources to the mint, 
 stimulates importation of the money metal, that is to 
 say, exportation of general merchandise. (Prices be- 
 ing low the country is a good place to buy in.) Re- 
 versely, if there is a superfluity of money and the 
 margin in question is shrinking, foreign goods come 
 in to take advantage of the higih prices and metal is 
 drawn off to foreign markets where it is dearer, as 
 well as to domestic melting-pots. Thus foreign trade 
 not only maintains, or restores, the monetary equilib- 
 rium with other countries, but also helps to maintain 
 at home the price level of money with other commodi- 
 ties and to resist spontaneous coinage inflations. The 
 ships that bring in foreign goods, attracted by high 
 prices, may not bring home the metal for which they 
 are directly exchanged, or in which their price is 
 named :* it depends on whether they come from coun- 
 
 * The value against which the cargo is finally balanced, as 
 between the two countries, may consist in part of goods which 
 the nation represented by the ship always buys, or must buy, 
 
International Movements. 207 
 
 tries whose currency is based on that same metal; if 
 not, an exchange will be made, either in the land of 
 high priees or elsewhere, for the other metal ; or they 
 may take the metal first received to trade in countries 
 which do base their currency thereon, and where 
 prices are then lower. It is immaterial whether be- 
 tween any two countries the medium be transformed 
 from one color to another : it's a question of the 
 amount of goods of general consumption a given 
 weight of one metal, or its equivalent in the other, 
 exchanges for in the two places respectively ; of a dis- 
 turbance of the level of the relative supply of precious 
 metal and other valuables; of the comparative value 
 of money metal as between the two countries. And 
 of course the metal brought in exchange may be coin, 
 plate or fresh bullion, or any two, or all three : prac- 
 tically it is bullion anyway as between nations. 
 
 But, regardless of an equilibrium of the value of the 
 precious metals through the trade-connected world, the 
 mutual trade relations of countries with a gold cur- 
 rency and those with a silver currency are affected in 
 an important manner by that difference. In silver- 
 using countries silver prices are always lower than they 
 are in gold-using countries : in other words the cost of 
 silver in the markets of general merchandise is en- 
 hanced because the medium is silver or is based on sil- 
 ver. Likewise gold prices range lower in gold-using 
 countries than, ceteris paribus, they do in silver-using 
 
 in the other country; this is often the case with certain pro- 
 ducts of agriculture, as cotton and wheat. The return cargo 
 may be made up of such goods or of goods lately produced to 
 excess and therefore selling low while most products sell high. 
 14 
 
208 Currency and Standard Unit. 
 
 countries. The presence of a silver medium, therefore, 
 naturally becomes a barrier to importations from gold 
 countries of goods that are produced there or in other 
 gold countries : the dealers whose producing and buy- 
 ing expenses are in gold camnot afford to sell at the low 
 silver rates and compete with native producers. To 
 make it profitable they must have their selling prices 
 in gold translated into silver at the bullion or world's 
 market ratio, which cannot be done in the markets of 
 a country where an ounce of silver, coined or uncoined, 
 will buy more general produce than its equivalent, by 
 the world's rate, in gold will buy. This trade over- 
 valuation of the home metal varies in different times 
 and countries according to particular conditions. Per- 
 haps it becomes pronounced and effective in a large 
 way only where tiiere is considerable inertia of home 
 prices under a general world-wide depreciation of the 
 metal constituting the currency. That is the case at 
 present with the Central American and West Pacific 
 states, which use a silver measure. 
 
 In this way some writers hold that the United States, 
 by having its currency of silver, would monopolize 
 the import trades of Eastern Asia as against gold stand- 
 ard countries ; on the ground that America would then 
 be on a. common silver basis with Asia. But it is more 
 than doubtful if American prices would resist the 
 upward pressure if placed in silver on any other footing 
 than the bullion ratio: American markets are so fully 
 in the tide of the world's traffic and so keenly alive to 
 the world's (i. e., the London) valuation of commercial 
 media. The American markets, unlike the Chinese and 
 
A Mediaeval Example. 209 
 
 the Mexican, cannot be sensibly segregated from the 
 British circle. 
 
 A striking illustration of the principle now before 
 us was given by the state of the Flemish trade with 
 England about 1340, to meet the exigencies of which 
 the English at the suggestion of their King instituted 
 in 1343 the coinage of a gold florin (struck in two- 
 florin pieces). The Flemings, of course, sold their 
 wares at prices stated in their gold money (florins) : 
 the English money was of silver : hence in paying their 
 bills to Flanders EngUsh merchants must translate the 
 gold florin into their own silver coin at the commercial 
 ratio, at its bullion price in Flanders. This made their 
 Flemish purchases cost them dear ; for in England the 
 prices of common goods ruled low in comparison with 
 the price of gold. In other words a given article might 
 be got at home for silver cheaper than it could be had 
 abroad for gold : English traders had to resell Flemish 
 wares at a loss. As Edward III. put it, "by paying 
 gold florins with silver coins our merchants continually 
 lose; let us, therefore, enable them to pay with gold 
 ones."* Such a burden on imports was unwelcome to 
 England at that time, at least in respect of trade with 
 Flanders. To-day in Mexico, where a similar state 
 of things obtains, it is considered an advantage, having 
 the effect of a protective tariff.f 
 
 * Similarly the United States in 1873 began to strike a special 
 silver dollar to take advantage of the low silver prices in 
 Mexico, etc. 
 
 t See an article by M. Romero, then Mexican Minister at 
 Washington, in the North American Review for June, 1895. 
 
210 Currency and Standard Unit. 
 
 Another advantage, or a countervailing advantage, 
 as the case may be, is that thus exports to gold coun- 
 tries are stimulated, which find in lands where trade 
 overvalues silver a good market for the white metal 
 they produce or come by in trade elsewhere. To 
 reverse the standpoint, producers in your silver coun- 
 try can sell advantageously at quite low prices in gold 
 markets, for when the silver bullion equivalent to the 
 gold price is coined at home it has an enlarged pur- 
 chasing power. On the whole, the considerations ad- 
 duced in the last three paragraphs seem to suggest 
 mutual advantage in diversity of coinage systems, or 
 in the division of the world into gold-using and silver- 
 uling countries. 
 
 Quite a different case from either of the kinds just 
 examined appears when a currency system that has 
 been based on one metal is placed on a double base by 
 the addition of a second metal as a co-standard and at 
 a ratio that overvalues it in relation to the original 
 standard. The currency itself fails to become double 
 and to conform to the system arranged for it. Under 
 the natural law governing in all cases of different val- 
 ues of units of the same name, the cheaper becomes 
 the sole standard in circulation. There is then a 
 cheapening of the current unit and medium. Silver, 
 or the currency, becomes dear in the land only so far 
 as prices lag in coming up to the mark answering to 
 that they bore by the former standard. But that 
 would be for the most part only in lines where a de- 
 pression was imminent under the old regime: in gen- 
 eral, trading prices come instantly up to the mark, 
 
New Standard and Cheaper Unit. 211 
 
 even where the element of labor becomes less costly 
 through the reluctance of wages to rise. While wages 
 and perhaps a few other valuables are getting read- 
 justed, to the extent of that influence foreign silver is 
 attracted. We must add to this whatever trade over- 
 valuation may accrue from the cotmtry's coming to 
 the silver base : we are to remember, however, that we 
 are speaking of a country in the full swing of modern 
 commerce. 
 
 Accordingly, little resistance can be offered to the 
 rise of prices from the general btillion appreciation 
 of the metal of the new currency. For a nation freshly 
 to adopt a silver currency whether by express enact- 
 ment or by its overvaluation in a bi-standard system is 
 to elevate or strengthen the market price of that metal. 
 But this tendency would soon be checked: suppose 
 there is no surplus at the existing price, still all the 
 world's sources will be stimulated to greater produc- 
 tion. And since the new demand must speedily fall 
 off after the change of color 'has been completed in 
 the circulation, a fresh surplus would come to market ; 
 to bring back the ratio to or near, perhaps below, its 
 former mark. 
 
 England, indeed, about 200 years ago, in recoining to 
 correct an overvaluation of silver, overvalued gold: 
 but then the mint made an allowance too large for 
 the 'debasement which the silver coin had suffered, and 
 there was no depreciation of silver, or not enough, to 
 balance the excess. To coin silver now at an even ratio 
 with gold it would be necessary to allow for all the 
 cheapening the former has lately experienced. For the 
 
212 Currency and Standard Unit. 
 
 United States to coin at the old rate would allow for 
 nothing but the very slight part the partial demone- 
 tization of silver in this country has had in its deprecia- 
 tion, — and that not in causing, but in failing to with- 
 stand, the fall. Might not the fresh supplies quickly 
 overbalance this, and more? Finally, we are to 
 bear in mind that the rise in prices in such cases 
 is not to be attributed to an increase in the 
 real volume of currency circulating: the nominal 
 volume will of course be swollen, and if the cost of the 
 light metal falls below its price in trade as settled in 
 the readjustment, the numbers in commercial account- 
 books will be inflated still further, corresponding to a 
 further cheapening of the unit and consequent further 
 rise of prices. But there is no more value circulating 
 as medium until the volume of trade increases: for as 
 fast as new silver enters the circulation old gold quits 
 it and goes to gold countries. This effect is even more 
 decided than the importation of silver; for the latter 
 metal now stands on its natural market value and its 
 price as money is higher only so far and so long as 
 special trade conditions favor it, while throughout the 
 entire mercantile field, beginning with the payment of 
 debts, gold is arbitrarily depressed to the extent of its 
 undervaluation. 
 
 Both tliese effects, the inflow of Silver and the out- 
 flow of gold, are but phenomena occurring under the 
 reign of the law, — a law as universal and enduring as 
 that of gravitation, — that things will go where they 
 are worth the most of other things. This law also, 
 in its particular application to money, is Newton's, 
 
A Master at the Mint. 213 
 
 who first thought it out and formulated it. He was 
 led to state it in connection with an example of its op- 
 eration, resulting under the following circumstances : 
 In the reign of William III., under the famous de- 
 basement of silver coin in England, the effects of 
 which are so well described by Macaulay in his history, 
 the gold all left the country. It was thought by recoin- 
 ing at a new rate to correct the discrepancy and keep 
 gold in circulation. Sir Isaac Newton, as Warden of 
 the Mint, managed the recoinage : his task, in which 
 he was greatly assisted by his thorough knowledge of 
 chemistry and mathematics, was performed with rare 
 insight and fidelity. Yet, notwithstanding his breadth 
 of view, he overshot the mark : silver was undervalued 
 and began to leave for the continent. Then he set to 
 rectify this by reducing the amount in silver answering 
 to a gold guinea. In the Third Representation, made by 
 him as Master of the Mint (to which office he was pro- 
 moted in the course of this business), he writes as fol- 
 lows: "The demand for exportation arises from the 
 higher price of silver [coin in general trade] in other 
 places than in England in proportion to gold, * * * 
 and may therefore be diminished by lowering the value 
 of gold in proportion to silver. If gold in England, or 
 silver in East India, could be brought down so low 
 as to bear the same proportion to one another in both 
 places, there would be here no greater demand for sil- 
 ver than for gold to be exported to India. And if gold 
 were lowered only so as to have the same proportion 
 to the silver money in England which it hath to silver 
 in the rest of Europe, there would be no temptation to 
 export silver rather than gold to any other part of 
 
214 Currency and Standard Unit. 
 
 Europe."* It is worth pointing out that the difference 
 here spoken of, of the comparative values of the metals 
 in different places, is not a difference in their value 
 ratio as bullion, but as coin, or in general domestic ex- 
 change : the word coin or money might have been added 
 after the words silver and gold, uniformly through the 
 passage quoted, as the word money was in one place; 
 from this, however, the italicized portion is to be ex- 
 cepted. Nor did this commercial unconformity of the 
 proportional values develop out of the diversity of 
 economic and mercantile conditions of the different 
 places : it was determined in the coinages. 
 
 The international relations of money and the inter- 
 relations of the metals when treated as joint standards, 
 will be considered further in the following and con- 
 cluding chapters of this study. 
 
 *The author of those sentences must have been a genuine 
 thinker, a careful and wide-seeing student. He first saw 
 clearly the application of intermetallic ratios, and of the dif- 
 ferent proportional values of the two metals in different 
 countries. He is the philosopher to Gresham's science, and 
 the only philosopher in money since Aristotle, unless we may 
 add Copernicus or Mill to the class. 
 
COIN, CURRENCY AND COMMERCE 
 PART III 
 
 CHAPTERS XIX-XXV 
 
 As Among the Nations and as Between the 
 Metals — Coinage Systems and their 
 Geographical Extent — The Prob- 
 lem of the Standard 
 
CHAPTER XIX. 
 
 COINAGE SYSTEMS — INTERNATIONAL MONEY AND 
 INTERNATIONAL CURRENCY. 
 
 The value of a coin depends on the quantity of fine 
 metal it contains, and the specific value of the metal; 
 this quantity, again, is determined by the degree of 
 fineness and the gross weiglht of the coin. The quantity 
 in the standard unit differs in different countries that 
 use the same metal as standard money: and the scale 
 factors, or coefficients, by which the denominations, or 
 pieces of circulation, are derived from the unit and 
 related to one another, also differ. Coinage systems 
 generally combine two or more scales: they are now 
 commonly arranged on the decimal as the fundamental 
 scale. The British system, however, is based partly on 
 the duodecimal scale, where the factor of division and 
 multiplication is 12 or a factor thereof (4 and 3). The 
 ancient Roman system employed these factors: the 
 Greeks reckoned by them and also by sixths. Again, 
 all systems are more or less binary, i. e., use the factor 
 2: combining this number with the others as divisor 
 or multiplier one obtains 20, 5, 25, 2}^, etc., as addi- 
 tional denominators of the fractions that denominations 
 are of One another. Besides the unit denominations, 
 the primary unit and those multiples and sub-multiples 
 of the primary unit that have special names, as dime, 
 franc, pfennig, shilling, crown, kopeck, dollar, etc., 
 there are others, consisting of these names and a 
 
218 The Metals and the Nations. 
 
 numerical prefix, as half crown, quarter dollar, five 
 francs, half eagle, quarter eagle, two dollars, etc., some 
 of which are not coined, but circulate by means of 
 tokens or vouchers on paper. In any system all the 
 denominations, however numerous and various, are 
 well correlated and easily reducible to the terms of 
 money of account, i. e., to the two (dollars and cents, 
 francs and centimes) or three (£, s, d) names that 
 are used in reckoning and book-keeping. But, because 
 the systems of the nations were formed at different 
 times, under different conditions and on bases inde- 
 pendently chosen, they are unconformable, and values 
 expressed in one system are not reducible to another 
 by such simple multipliers and divisors : except where 
 they are brought into agreement, or, as in the case of 
 the Latin Union, to practical identity by a positive con- 
 vention. There are many who urge the utility of a com- 
 mon coinage system 'for all nations, with equivalent 
 terms for their several monies of account, and, of 
 course, more or less equality among their pieces of 
 circulation. Several schemes have been suggested 
 for assimilating the coinages of two or more nations, 
 so that their denominations would be compared by in- 
 tegral coefficients. Mr. Bagehot, for instance, has 
 proposed, in The Economist, a scheme for assimilating 
 the British and American systems: and it has been 
 pointed out that with slight changes in the individual 
 coins, the sovereign (English), 2^-francs (French), 20- 
 marks (German), half-eagle (United States) and ^yen 
 (Japanese), could be made equivalents of one another. 
 Austria already coins 4 gulden and 8 gulden (equal, 
 respectively, to 10 and 20 francs) : and of course the 
 
International Money. 219 
 
 systems of the other members of the Latin Union 
 would harmonize wherever the French did. The force 
 of the argument for such changes, based on economy 
 and convenience, is diminished in view of these 
 facts : — that international money, as it is mostly trans- 
 ferred, has already a single measure-system, that of 
 weight; so that unifying the systems of weights and 
 measures would remove any diversity, purely inter- 
 national, in measuring exchange media: — and that 
 travelers in goitag to a foreign land leave behind their 
 native system and hold altogether to that of the coun- 
 try where they stop; the change being effected for 
 them through the letters of credit they buy 
 from home on foreign banking houses. These assimir 
 lations would make it easier to acquire the art of 
 transferring accounts from the system of one country 
 to that of another, would save in the time occupied 
 in such accounting, and might prevent some little 
 loss at the money-changers' in the cases where 
 coin of one realm is actually . swapped for that of 
 another. Moreover (and here we hit a more im- 
 portant matter), the expense would be avoided of 
 minting over the coin thus received from abroad. On 
 the other hand, it should be observed that to urge the 
 importance of such conformability is to confess the 
 force of slight variations and remainders in comparing 
 coined values, — a force, it is well to note in passing, of 
 great moment in any system comprehending two inde- 
 pendent elements. This very weight and pressure of 
 irreducible remainders is the great argument against 
 the inauguration of a system that would abolish them ; 
 as will appear from the following illustration : 
 
220 The Metals and the Nations. 
 
 In 1868 it was suggested to the special British Com- 
 mission then ccinsidering the matter, to make the 
 sovereign equivalent to 25 francs, from which sum in 
 French it differed by containing about a grain more. 
 It was urged that if this small quantity were deducted 
 as seignorage from the bullion brought to the British 
 Mint, the change would not affect prices. Such a plan 
 would work so far as domestic trade is concerned 
 directly, because each piece costs its producer from the 
 mint just as much as before: he has given up just as 
 much when he passes it, — ^the fact that a small portion, 
 formerly passing to its purchaser, was left behind at the 
 mint not being material. Therefore, as no one will 
 offer more of the new coinage for a piece of goods, 
 prices cannot rise. But there is a reflex influence from 
 the foreign trade: the foreign merchant must have 
 more of the new coin, say, by one-fifth of a piece, for the 
 same goods ; e. g., 400 of the old pieces produced 2001 
 of the foreign pieces when recoined, and now, as they 
 exchange at just i to 5, it takes 4004 to yield 2001. 
 Hence the importer must pay more of the new coins in 
 purchasing abroad, and consequently must get more in 
 selling at home. Thus indirectly home prices would be 
 raised. The view of Mr. Newmarch in the case just 
 stated would, then, be correct: he argued, and per- 
 suaded the Commission, that all contracts would have 
 to be altered to allow for the depreciation caused by 
 the proposed deduction in coining. 
 
 This effect would be prevented only if the cost, to 
 the trader, of recoining the pieces that before paid the 
 foreign prices just compensated the extra pieces or 
 grains that would be wanting to the new coin to bal- 
 
International Coin. 221 
 
 ance those prices : whereby loo new pieces, passing in 
 the foreign country without recoinage, would be just 
 equal to lOO of the old ones minus the cost of recoin- 
 ing them. 
 
 Another way to provide coined equivalents to foreign 
 units or pieces of circulation is to establish special 
 coinages for the purpose: as the United States about 
 thirty years ago struck a irade-dollar of the intrinsic 
 value of the Mexican dollar; and Austria, while still 
 holding a currency of inconvertible paper, struck the 8 
 and 4 gulden pieces already mentioned, in adaptation 
 to the system of her neighbors of the Latin Union. 
 Such special monies, when desired for foreign pur- 
 chases, may be bought with the ordinary home cur- 
 rency; the exchange of monies is made at home in- 
 stead of at the foreign port. Importers get such pieces 
 coined and exchange them amongst themselves. If 
 coin minted thus subsidiarily for external trade were 
 made full legal tender at home, and could Gresham's 
 law successfully be defied, there would ensue two sets 
 of domestic prices,* — a confusing and bungling state 
 of afifairs. 
 
 To execute some of the projects of harmonization, 
 like that proposed to the British Commission in i868, 
 only requires action by a single government on its own 
 coinage system. To carry out others would require 
 harmonious action by all the states concerned, but 
 would not meddle with existing standards. The estab- 
 lishment of a monetary union, however, with a com- 
 
 *The two currencies being legal-tender by identical terms, 
 denominations. 
 
222 The Metals and the Nations. 
 
 mon coinage system calls for an international conven- 
 tion and involves the resettlement of the monetary 
 standard. This last point carries the reason why "a 
 common coinage" and "international harmony" are 
 advocated so warmly by those who agitate for the 
 "rehabilitation" of silver. They see that in forming 
 such a union the question of the proper standard for 
 its foundation must be the great question ; that no so 
 fair promise to strengthen silver permanently offers in 
 the unassisted action of any one state : and it is their 
 trust that no standard but a bi-standard, no system 
 but a bimetallic one in which gold and silver would 
 have parallel and independent coinage, can be adopted 
 by such a convention. Should not this principle and 
 purpose, more than any feeling for "harmony," or 
 "convenience," or "economy," be held to account for 
 the apostolic zeal of the advocates of international bi- 
 metalism and the promoters of monetary conferences 
 to that end? 
 
CHAPTER XX. 
 
 AN INTERNATIONAL COINAGE WITH TWO INDEPENDENT 
 MONIES. 
 
 The advocates of an international bimetallife conven- 
 tion are of two classes. ( i ) Those who maintain that 
 the remonetization of silver on an independent footing, 
 if undertaken jointly by three or four of the leading 
 commercial states and if the ratio be carefully selected, 
 would keep the two monies at a lasting parity. They 
 appear to think that the expert financiers of the nations 
 can calculate so nicely the effect of this enlargement 
 of the use of silver on its price, can estimate so closely 
 the future rates of gold production and silver produc- 
 tion, and their fluctuations, as to trim the coinage to 
 a secure and permanent equality with the value ratio. 
 Attributing, as they do, the depreciation of silver to its 
 recent partial demonetization in several countries, they 
 consistently argue that the restoration to its former 
 status would bring back the old value ratio (i6 to i 
 or I5J^ to i) ; while if other causes had (or may 
 have in the near future) any part in cheapening 
 the metal, their influence, it might be urged, would be 
 offset by the iijcrement to the monetary use of silver 
 that would occur from Great Britain's membership of 
 the proposed union, inasmuch as that state did not use 
 silver for primary money during many decades prior to 
 its demonetization. Some profess to believe that a safe 
 ratio could be hit upon even without British co-opera- 
 
 15 
 
224 The Metals and the Nations. 
 
 tion. Perhaps these, perhaps all the disputants in this 
 first class, would hesitate to affirm that the commercial 
 ratio would always be found at an exact parity with the 
 ratio adopted for coinage. Such a position can be 
 taken up only by those who ascribe to government 
 regulations a force, not simply to render- a disparity 
 of no consequence, but to determine absolutely the 
 mercantile ratio. This doctrine may consistently be 
 held by upholders of the theory that government creates 
 the value of money, — ^that the value, in exchange or the 
 arts, of uncoined bullion is determined commercially, 
 but of coin strictly and solely by the force of law. 
 
 This class, then, admit at least the possibility of slight 
 discrepancies, which they maintain could not expel the 
 undervalued coin because to find a dearer market it 
 must go outside the union, and trade with outside 
 places is too small to afford a sufficient outlet. No 
 union, however, is proposed v/hich would include all 
 the important commercial countries of any continent: 
 and it is to be considered that all the members of any 
 such union have commerce, growing year by year, with 
 every region on the globe ; their consulates are in every 
 considerable harbor under the sun. The aggregate 
 trade with Eastern and Western Asia, Eastern Europe, 
 Central and South America must give quite an outlet 
 to the metal discounted by the league of Western 
 Europe and North America ; unless the cost of trans- 
 porting it to those places would offset the gain of ex- 
 changing it there. This condition might be fulfilled 
 if it were a question of sending silver, on its slight 
 undervaluation, from New York to Hong Kong. But 
 in all probability gold would be the undervalued metal, 
 
Outlets for Gold or Silver. 225 
 
 and it would not have so far to go: some of the most 
 enterprising South American communities (Brazil and 
 Chile) use a gold standard ; and the most comprehen- 
 sive league that is mudh' discussed or hoped for would 
 find open conduits for gold in the Dutch trade and that 
 of many British colonies, which control their own 
 monetary affairs, to say nothing of Russia, Austria, 
 Scandinavia and Portugal. Moreover, in applying 
 Newton's law to gold, which has so high a specific 
 value, the cost of transportation is scarcely an import- 
 ant factor: silver may be undervalued more than gold 
 with equal risk of its migration. And for silver, if that 
 should get discounted, a market is not far to seek, in 
 Eastern Asia and Central America. 
 
 In considering the East we should not neglect what 
 the students of .the courses of the precious metals re- 
 port, viz: that the oriental capacity to absorb money 
 metal is exceptionally and abnormally great, because it 
 is received there in almost any quantity without raising 
 prices; which latter fact is due to a mercantile apathy 
 that lets prices remain as fixed by traditional custom, 
 and to an exorbitant proclivity to ornamentation and 
 display which will consume in such uses enormous 
 quantities of precious metal. Accordingly a drain of 
 such metal to the East has long been observed, and 
 constitutes, for western nations, a third form of con- 
 sumption, — ^the other two being the uses as exchange 
 media and in the arts at home. 
 
 The demand for use in the arts is a force co-operat- 
 ing with that expressed in Newton's law: it operates 
 on the smallest margin and regardless of distance or 
 separation from other countries or monetary circum- 
 
226 The Metals and the Nations. ' 
 
 stances obtaining there. Wbeti one metal is under- 
 valued in coinage, i. e., when the other comes into the 
 position of standard, determining prices, the former 
 can be sold to consumers for more of the latter than 
 can be realized by handing it about in trade or in pay- 
 ing debts. Though your bimetallic union (with a bi- 
 standard at a fixed ratio) embraced the entire globe, 
 the metal discounted at the mints would at once occupy 
 many branches of service which had been held by the 
 two metals in common, and its co^nsumption in its own 
 special lines would.be augmented. Gold coin and the 
 gold otherwise destined for coinage would go to the 
 goldsmiths and goldbeaters: gold watches would be 
 far more common, silver watdhes would become a 
 marked rarity. Gold would be cheapened by its de- 
 monetization : silver would advance for a time and the 
 rise of prices due to its accession to the position of 
 standard would be checked temporarily. Thus, suppos- 
 ing the two coinages launched at a parity, a shifting of 
 the monetary relations of the metals occasioned by a 
 cheapening of one of them might possibly induce such 
 changes in the two ratios of supply and demaijd as to 
 erase the depreciation, or, by diminishing it and cheap- 
 ening the other metal, to restore the parity of value at 
 coinage ratio. But this could not be accomplished until 
 the one metal had been displaced and prices raised: 
 for to say that the correction may precede or accom- 
 pany those effects is to deny that the discrepancy can 
 arise, and to affirm that legislative enactment may, not 
 merely affect, but, if it be comprehensive enough in the 
 territorial sense, determine absolutely the commercial 
 value of one metal in the other. How tiie chances and 
 
An International Ratio. 227 
 
 changes of commercial development are to be har- 
 nessed and regulated so as to prevent a variation of the 
 ratio it is difficult to understand. And if a disparity 
 of the ratios should, after a few years, be corrected 
 automatically, that means another change in the value 
 of money. Suppose gold then reappeared in the circula- 
 tion to any extent, how long would it stay? Would 
 there ever be a permanent and reliable settleirient ? 
 But probably it would not come back, not if the ratio 
 were so unfavorable as that of i6 to i : the clear proba- 
 bilities declared by the development of silver produc- 
 tion point to a speedy wiping-out of any rise of silver 
 that might result from enlarging the comparatively 
 unconsuming use of it as money. After the replace- 
 ment of gold had been effected the stimulus to silver 
 production would not be removed, but the quantity 
 the world's commerce could absorb, additional to 
 that already circulating, must fall ofif. On the other 
 side, though it is far easier to cheapen a thing than to 
 enhance its cost permanently, would the cheapening of 
 gold in terms of labor be considerable or lasting? As 
 soon as any depreciation was felt some of the sources 
 would be abandoned, curtailing the increments of sup- 
 ply: and is not the demand for gold specially buoy- 
 ant, — steadying and retarding its fall, against what- 
 ever depressing influence ? 
 
 This reasoning, of. course, would apply as well to the 
 change in monetary status of the metals that would be 
 effected now by coining them, tjie world over, at the 
 same overvaluation of silver, as e. g. i6 to i. The 
 world would come to a silver basis. Suppose inter- 
 national action could remove all basis for the opera- 
 
228 The Metals and the Nations. 
 
 tioii of Newton's law: what extraordinary circum- 
 stances, now existing or at all foreshadowed, could 
 nuUify or suspend Gresham's law in its application to 
 the arts and their use of money metal ? 
 
 If the considerations here adduced are well founded, 
 there will be no lack of a more favorable retreat for 
 any metal undervalued, however little, even by the 
 whole world in concert. 
 
CHAPTER XXI. 
 
 HAPHAZARD EIMETALISM BLIND THEORIES THE 
 
 MATTER OF RATIO. 
 
 (2) There are those in whose view the success of 
 bimetallic unions does not depend on trimming the ratio 
 to allow for purely mercantile influences, and who do 
 not hold it essential that the union include all even of 
 the leading com'mercial nations : they would not be nice 
 aEout disagreements of the ratios nor heed influences 
 from outside the league. The extremists of this class 
 require no ally for a nation of the first commercial 
 rank to make a success of co-standard bimetalism at 
 any ratio it may adopt, and especially if it adopts that 
 of 16 to I. This is the lowest degree of monetary the- 
 ory: but the position is a logical outcome and reduc- 
 tion of the doctrines from which are deduced the argu- 
 ments of the soberest and most scientific advocates of 
 international co-standard bimetalism as a permanent 
 solution of the chief monetary problems. 
 
 The mental disorder which is manifested in various 
 degriees through all grades of bi-standard agitation has 
 two great roots, (a) a misconception of the function, 
 and a wanton exaggeration of the force, of law in 
 monetary affairs: (b) a superstitious faith that nature 
 has somehow contracted a marriage of gold and silver, 
 a marriage on equal terms according to the most mod- 
 ern principles, and has fixed the proportion for this 
 union at or near 16 to i : that any precedence accorded 
 
230 The Metals and the Nations. 
 
 to either, or, at any rate, to gold (the stronger, as hav- 
 ing the higher specific value) is a wicked divorcement, 
 and entails grave economic afflictions. 
 
 The United States, therefore, it is conceived, could, 
 with or without the assistance of one or more European 
 states, keep gold and silver in parallel circulation, no 
 matter what premium the gold coin might bear over the 
 silver ; or, as will more justly express the doctrine, no 
 matter how much gold bullion may be discounted at the 
 mint, no corresponding premium of the gold coin Over 
 the silver will appear in trade. This class conceive that 
 there is something in the economic nature of things in 
 general and of these two commodities in particular, 
 which must keep them parallel and even, as media of 
 exchange and therefore as measures of value, unless the 
 law is partial to one of them, — that is to say, provided 
 the coinage of each is "free and independent :" that this 
 occult force, a sort of monetary vis medicatrix naturce, 
 will prevent the practical effects of any inequality that 
 experts may be able to point out between the legal and 
 the commercial relations of coins of the two metals. 
 They appear to think that if the law amounts to any- 
 thing, if the government interprets its own coinage 
 terms, stamped on the coins, consistently, then any two 
 "dollars" must be at one.* Well, some laws prove 
 
 *The uniformity of denominations is indeed fundamentally 
 important. At present in the United States and in' the Latin 
 Union it is maintained soltely by a thorotlgh-going and well 
 grounded faith in the business integrity of government: statute 
 and stamp — fixing a nominalratio of specific values — have noth- 
 ing to do with it; or, rather, it is in spite of statute giving a 
 subsidiary coinage unlimited legal-tender quality. 
 
Natural Bonds. 231 
 
 wiioHy or partially nugatory: government indeed in- 
 terprets its dollars consistently where it interprets 
 them at all : but there are relations in which it is not 
 allowed to interpret them. Commerce judges and 
 rates coin independently on its own principles: the 
 substance, not the name, is what it looks to. But the 
 co^standard bimetal-list refuses to look beyond the 
 name or beneath the stamp. It is so simple and easy 
 a thing, in his eyes, for government to enforce the 
 ■natural union of gold and silf^er as parallel monies, 
 and to secure at a fixed ratio, by fiat co-opera- 
 tion with "natural law," their compl-ete harmony 
 and the steady reign of "bimetallic prices." They take 
 a pride in expounding that physical qualities have noth- 
 ing to do with the measurement of value, which is a 
 non-physical conception and effect : that your two dol- 
 lars may be put at one as regardlessly of weight or 
 bul'k as of color, since money is neither a steelyard nor 
 a yardstick, and no more measures weight or bulk than 
 it measures color. But value depends on physical quali- 
 ties, which therefore have to do with its measurement : 
 the comparative values of any two things are esti- 
 mated l>y their quantities, denoted in bulk or weight,-— 
 the que!sticii!i being, what quantity of the one is worth a 
 given quantity of the other. Now, a thing that meas- 
 ures must possess the quality whidh. it measures : and if 
 value is the essential requisite of money, this is because 
 it must measure by virtue of that quality in itself, a 
 commercial value like that it measures. Every piece of 
 money must be able to stand an inquisition as to its 
 value, which' depends on the quantity of matter it con- 
 tains or represents. The truths that real, self-sup- 
 
232 The Metals and the Nations. 
 
 ported money must be a valuable commodity and that 
 any piece of circulation measures by the substantial 
 weight it has or represents, not by the name it bears, 
 stand together as theorem and corollary. 
 
 To state that pieces of different metals have equal 
 values involves that if either piece were increased or 
 diminished, the equality would vanish: the co-stand- 
 ardists in effect deny this ; so closely do they hug the 
 name and the obtrusive superficial stamp, applied by 
 authority. When a piece of gold equals in value a 
 piece of silver, the coincidence is not the work of po- 
 litical fiat, the effect of the same name stamped upon 
 them : it is -the result of a conformity — ^accidental or 
 else attained by painstaking research and manipula- 
 tion — ^to the commercially established ratio of weight 
 of equal worths. In thinking of value and its measure- 
 ment we must not neglect its elements : just because 
 it is a non-physical idea, there is no material thing 
 that, even in the hands of political authority, can 
 measure it with a reference to its pure metaphysical 
 nature. And there can be no handy metaphysical meas- 
 ure because nothing metaphysical can be exchanged 
 commercially, or reduced and scaled by mercantile 
 tables. However, advantage is taken of the relation- 
 ship between the mental and the material: the desires 
 of man are so related to the things he' desires that the 
 desires, and the resulting values attached to the things, 
 may be compared and measured through the things 
 themselves, by attending to their quantity (to which 
 desire is proportionate) and to its measurement. 
 
 The basal assumption of the men who teadh that the 
 United States alone could establish a factitious trade 
 
Bond of Foreign Trade. 233 
 
 ratio that would replace or supplant the natural com- 
 mercial one, or could restore the latter to the mark of 
 i6 : I by coining independently at that ratio, differs 
 only in degree of violence and wantonness from the 
 postulates of the men who think the commercial 
 ratio would be brought to that point or near 
 it, and kept there permanently, if an indefinite 
 number of states joined in a monetary union. There 
 is more difference as to what the theories neglect 
 or overlook. What the latter shut their eyes to is dis- 
 cussed in the preceding chapter. The former do not 
 see the reflex action of foreign on domestic prices nor 
 appreciate how quickly its influence must travel through 
 all the channels of home trafiEc. They hang much on 
 the words fr^ee and independent, not only as between the 
 metals, but also as between the nations. They appear 
 to believe that our independence of England, now of 
 more than a century's standing in political affairs, 
 should embrace every department of commerce and 
 finance: perhaps — such is the force they attribute to 
 statute law — the monetary system is in their view more 
 a political than a commercial affair. At any rate, they 
 would have the affair conducted without looking for 
 European co-operation, or, as they are pleased to put 
 it, without submitting to European dictation, and would 
 have abrogated the present monetary relationships with 
 Europe. Now, as has been said, law cannot dictate 
 values to commerce : as idle is it to declare a monetary 
 and commercial independence of Europe, or to decree 
 a separation of monetary from commercial affairs. 
 And so long as trade with Europe continues, so long 
 will it be impossible to exempt the purchasing power 
 
234 The Metals and the Nations. 
 
 of an mdepdndent coin here from the influence of Euro- 
 pean trade. That could be done only by enforcing an 
 interdict of such trade. Some deceive themselves in 
 looking at the fact that the total of all amounts passing 
 in our domestic trade exceeds that of the trade with 
 Europe: no matter; this proportion does not destroy 
 the connection and mutual influence of home and for- 
 eign commerce. The European traffic might be much 
 smaller and still afford an outlet for all our gold if it 
 were undervalued, and an inlet to Europe's silver 
 until the former gold prices had received complete read- 
 justment to the silver basis. Neither metal could long 
 be kept, in domestic exchange, sensibly above or below 
 the world's level. The closest index of that level is 
 in Lombard street of London. 
 
 The general rise of prices, in case the United States 
 were to coin the metals independently at i6 to i or at 
 any ratio undervaluing the present gold-standard dollar 
 in comparison with the silver one, would start at Bos- 
 ton, New York and other marts of importation. The 
 importer must pay as much gold as before to the trans- 
 Atlantic consignor. As soon as his individual stock 
 of gold on hand is exhausted, he must pay in silver, or, 
 what is the same, buy gold with silver. Anybody hav- 
 ing gold will not sell it for less here than' it will buy 
 abroad. Vice versa, the gold will be tra:ded, in tlie 
 metal markets, for silver to pay debts: and will leave 
 the money-changers for foreign purchase and invest- 
 ment. The importer, then, having to pay as high in 
 gold, must sell at higher prices in silver, in order to 
 make a profit or even get his money back : his returns, 
 in silver, must overbalance his expense in silver terms. 
 
Intermetallic Rates. 235 
 
 Then, the retailers of those imports must also get higher 
 prices, and, in succession, their customers must Hke- 
 wise make up for increased expenses, as stated in terms 
 of the new money: the "comer grocer" must pay in 
 higher figures and sell in higher, and so with all buyers 
 and sellers all along the line. 
 
 These "bimetallists," as they style themselves, appar- 
 ently believe that the United States can "absorb and 
 use at i6 to i all the silver that would remain after the 
 wants of other countries have been supplied, and if that 
 can be done it solves the problem, because so long as 
 this country is prepared to coin silver at the rate of 
 $1.29 per ounce in gold, every other nation requiring 
 silver must take it at that rate, thus helping to sustain 
 one ratio." Well, it could absorb and use that much or 
 any quantity, even if coined at 16 to i or any other ratio 
 overvaluing the metal : but the point is it could not be 
 using gold at the same time ; nor use the silver at coin- 
 age valuation in pricing anything but debts. Though 
 in paying debts an ounce of silver would make coin 
 worth $1.29 in gold, otherwise that rate is a fiction and 
 the coinage Act a dead letter. The statement is wholly 
 unwarranted that other nations must take it at that 
 rate and pay 30 grains of gold for 480 grains of silver, 
 unless that is the market rate: nor can the United 
 States take "at that rate" more than what it requires 
 for subsidiary coinage, the government buying the 
 stock at the market rate. This must be true unless 
 the unrestricted coinage at 16 to i by the United 
 States alone will cause the market ratio to be as 16 
 to I : if the sentence just quoted means to say simply 
 
236 The Metals and the Nations. 
 
 that, it is queerly constructed, yet, as before, represents 
 wild presumption and savors of doctrinal bravado. 
 
 It was demonstrated already in Washington's ad- 
 ministration how impotent is any legislative act 
 "regulating" the value of a coin by declaring that it 
 shall be equivalent to a stated number of units in 
 another metal: it all depends on whether such legal 
 valuation coincides with that of the market. The 
 force represented by Newton's rule of the interna- 
 tional flow of monies will forever overbear all facti- 
 tious legislative equalizations of coined values, just as 
 his theory of gravitation must always represent the 
 cosmic force of the physical universe in preference 
 to the rude contrivances whereby cosmic phenomena 
 had formerly been accounted for, and which admitted 
 of stoppages of heavenly bodies in their courses. The 
 only way to impede the working of that law and the 
 exportation of an undervalued metal to where it will 
 exchange in ordinary trade at its commercially deter- 
 mined ratio or at an overvaluation, is by prohibiting 
 under heavy penalities its removal from the coun- 
 try: just as Russia used to prevent her irre- 
 deemable paper from altogether supplanting gold 
 coin by sending to Siberian exile any subject 
 caught uttering such coin to a foreigner. (The 
 gold mines in the Ural have been under exclusive state 
 control since 1820. ) The arbitrary fixing the price of 
 one metal in the other belongs to an outworn system of 
 public economy: to the time when prices of general 
 commodities and wages were fixed by law, as they were 
 by Diocletian, the Roman emperor, and by the sove- 
 
Accommodation of Metallic Values. 237 
 
 reigns of the middle ages ; when sovereignty carried 
 the right of despotic oppression. 
 
 But, then, as to the doctrine that the free and inde- 
 pendent coining of the metals by the United States 
 alone and at i6 to i will so enhance the value of silver 
 as to bring the commercial rate to that point and pre- 
 vent gold coin bearing a premium. On what is this 
 assertion grounded? On the assumption that the 
 people of the United States can coin up all the over- 
 plus of silver above what the outside world wants for 
 all purposes and will pay for, not at the present rate 
 (some i6 or i8 grains of gold to an ounce of silver), 
 but at the rate of $1.29 in gold (30 grains) per ounce 
 of silver, and above what the Americans themselves 
 will buy for the arts at that rate, — that they may cast 
 all that coin on their home markets without raising 
 prices ; or, if prices be raised, that gold is to be cheap- 
 ened so as to be worth only 16 of silver to i of gold : 
 for by hypothesis they are to be brought to a commer- 
 cial ratio at that mark. But how is the gold to depre- 
 ciate ? The hypothesis involves that it shall not leave 
 the circulation: accordingly it is to lose none of its 
 monetary use in proportion to its use for all purposes. 
 Dr. Andrews argues this cheapening as a consequence 
 of the recent augmented outputs of gold from the 
 fields: his idea appai^ently is that an appreciation of 
 one metal and depreciation of the other combined will 
 bring them to even values at 16 to i. It is strange 
 that this depreciation, springing from* the greater 
 abundance already secured through the swollen out- 
 puts of ten or fifteen years is to show itself only on the 
 inauguration of the independeiit coinage of silver, so 
 
238 The Metals and the Nations. 
 
 as to run parallel with that metal. Naturally it should 
 have appeared already in rising prices in gold-using 
 countries. Which is the opposite of what Dr. Andrews 
 and his school have been claiming zealowsly. At this 
 point they do not appear to reckon with the influence, 
 in keeping silver depressed, of the partial dejaaonetiza- 
 tions of that metal in Europe, wlhich influence they else- 
 where make much of as explaining the depreciatiom of 
 silver, and which would not be reversed by the sole 
 action of the United States : nor with the greatly aug- 
 mented rate aiid lessened expense of silver production, 
 giving quantities year by year, compared with which 
 the silver quota of the increase, at normal prices, in 
 the circulating medium of Europe ^nd America to- 
 gether would be a bagatelle. An unconditional state- 
 ment, such as these agitators give, naming the exact 
 ratio which is to prevail after their measure is enacted, 
 should represent a most searching and complete ex- 
 amination of all the factors and relations of the prob- 
 lem, and a perfectly accurate allowance for the com- 
 parative status of metals in foreign monetary use, and 
 for the relative rates of production and mercantile 
 demand of the precious metals during such time as it 
 is proposed to keep them at the ratio named. For 
 those who take Dr. Arendt's view that the sources of 
 gold are about exhausted, their reckoning should 
 allow with precision for the consequent appreciation 
 of that metal. How is it possible to see so clearly and 
 estimate so atecurately all these elements and their re- 
 lations, — especially those of the future? Can these 
 matters be thus precisely forecast and estimates made 
 fit to command the implicit reliance which so many 
 
Ratios of Production and Value. 289 
 
 appear to place in them? While it is impossible to 
 predict the ratio that will supersede in any contin- 
 gency, do not the probabilities, allowances being made 
 on all hands, strongly indicate for the situation as 
 affected by the proposed sole action of the United 
 States, a ratio much nearer the present than i6 : i ? 
 
 What causes a good deal of the confused thought 
 and error about ratio is the idea, itself a piece of con- 
 fusion, that 'the value ratio should naturally be that of 
 the extant weight of the metals, or of the weights pro- 
 duced in the near past : and that under free coinage of 
 both, those ratios must coincide. Now, for the ratio 
 of production to be as 15 to i does not make this the 
 value ratio nor necessarily cause that ratio to approach 
 tihoB point. Rather, if the ratio of production should 
 coincide with a present value ratio, — let that be 15:1, 
 8:1, or even lower, — it would enlarge the difference 
 in value, the ratio of the dieaper to the dearer sub- 
 stance : for thus the supply of the cheaper in relation to 
 demand would be increased more than that of the 
 dearer. 
 
 When the value ratio was 4 to i there was much less 
 than four times as great a weight of silver as of gold 
 effectively on the market : in fact, the gold outweighed 
 the silver; it is known to have been at one period the 
 more abundant metal. To make the ratio i : i the 
 weight of silver extalit, other conditions remaining the 
 same, must fall far below that of gold. This is be- 
 cause the intrinsic values of the two substances, com- 
 pared on a perfect equality of the visible, accessible 
 quantities, are so different. The existing ratio of 
 value, then, is far from representing the ratio of 
 16 
 
240 The Metals and the Nations. 
 
 weights of the total extant quantities of the metals, 
 these totals being always much nearer identity than 
 the values of equal weights. The value ratio is a com- 
 posite ratio, being the comparison of the supply of the 
 one relatively to the demand for it with the supply of 
 the other relatively to the demand for that, or, mathe- 
 matically — 
 
 demand for gold 
 
 Value ratio of equal weights = ^^ ■ 
 
 demand for silve r 
 supply of silver 
 
 The comparative values depend on all the elements 
 of the demand for each as well as on their supply. 
 Were the ratio of values inversely as the ounces ex- 
 tant (about 12 : i), it would imply that if the number 
 of ounces of each metal were the same, the ratio would 
 be as I to i, and that should the ratio of quantities be 
 reversed, that of the specific values would be reversed 
 also : in other words, that the demand for each is the 
 same, and the value of the aggregate extant quantity 
 of each the same; that there is nothing to create a 
 difference in specific value but variation in supply. 
 
CHAPTER XXII. 
 
 FOREIGN TRADE OF SILVER-STANDARD COUNTRIES 
 WHEN SILVER FALLS. 
 
 The more thougiitful European advocates of the bi- 
 standard, in particular M. Cemuschi, the reputed 
 founder of the school of international bimetalists, per- 
 ceive that the enactment by the United States of a 
 silver coinage for private account at a ratio anything 
 like i6 : i, must at once demonetize gold and establish 
 silver monometalism in that country. This, M. Cer- 
 nuschi says, would prove an immediate advantage to 
 America, and an indirect one to Europe : for that the 
 siharper competition and resulting distress to which it 
 would subject gold-standard Europe must induce the 
 latter to join America in a "bimetallic" convention, in 
 order to escape the drawback. Count von Mirbach 
 shares this view so far as relates to Asiatic trade, 
 which, he says, would be absorbed totally by the 
 United States if it should go over to the silver basis. 
 Therefore, if the Europeans seriously feared lest the 
 United States may coin silver freely at i6 to i, they 
 should, to avert calamities from themselves, be ready 
 with overtures for a bi-standard convention. The 
 latter nation, on the other hand, must be equally inter- 
 ested in avoiding such a convention, or in Europe's 
 adherence to gold, in order that the advantages of the 
 silver standard may not be lessened by sharing them 
 on equal terms with other countries: certainly they 
 
343 The Metals and the Nations. 
 
 would vanish utterly if all the world adopted that 
 standard. ' 
 
 But the advantage of "belonging in the silver col- 
 umn" is a good deal overrated : the doctrine is a parti- 
 san prejudice of the silver men. The theory depends 
 on the idea that silver prices in silver countries are 
 lower, at least when silver is declining, than would 
 correspond to the gold prices were gold the standard : 
 that things are cheaper and expenses lower in silver 
 countries than in gold countries. We have seen how 
 this principle is said to operate in Mexico, — as a pro- 
 tective tariff on the productions of gold countries 
 which that country also is fitted to raise, or which can 
 be bought from silver countries. Are not the lower 
 Mexican prices, however, largely the efifect of extra- 
 monetary conditions, — of the social condition and 
 mode of living of the Mexican producer, and, partly 
 underlying that, of the climate and natural qualities of 
 the country? 
 
 A just interpretation of, or inference from, the inertia 
 of prices in silver countries under a decline of silver 
 must take account of the extent of their trade with 
 gold countries, in relation and proportion to their do- 
 mestic trade and their trade with other silver countries. 
 Where prices are stationary under such conditions, — 
 as at present in Mexico and China, — ^there is a general 
 independence of foreign supply, at least from gold 
 countries. In other words, the effect set forth on page 
 234 of this essay, and previously illustrated at page 
 208, fails for the reason that the cause does not reach 
 those places so as to affect common prices, the 
 prices of necessaries. Do those who import to China 
 from gold covmtries sell anything to the Chinese for 
 
A Bounty on Exports. 343 
 
 less silver than they did 25 years ago, except those 
 articles which are sold elsewhere for less gold than 
 they were then ? 
 
 It is claimed further, in behalf of the bi-stand- 
 ard, that not only is the silver country protected 
 from competition, but that thus, in effect, a bounty is 
 placed on her exports, enabling her producers to under- 
 sell those who produce by the gold standard, even in 
 the home markets of the latter. That in this way 
 prices are lowered, and returns ruinously cut, in gold 
 countries when an industry is developed in a silver 
 country so as to furnish a surplus for export and enter 
 into competition" with that industry in the gold coun- 
 try ; or when silver depreciates, inasmuch as prices are 
 not then correspondingly advanced in silver countries 
 and therefore expenses are reduced. 
 
 Upon analysis, in view of the law making for inter- 
 national equilibrium of value of money, it is plain that 
 this efifect of a "bounty on exports" is restricted to 
 times when a money metal declines and' to countries 
 using that metal as the standard, where prices are 
 under restraint through isolation or other causes:' in 
 the absence of such restraint it can endure only while 
 supply and value are seeking their levels in the cur- 
 rency; and in general the level is not long disturbed 
 by a fall. Whait call is there, anyway, for trying to 
 prevent by international legislation, and on behalf of 
 certain nations, the effects of a natural change in the 
 value of a certain metal ? And is it clear that the evils 
 of the remedy would not be more sure, sudden and 
 far-reaching than those of the malady ? For the rem- 
 edy proposed is to fix an international bi-standard, 
 
344 The Metals and the Nations. 
 
 which, even though it should hit the ensuing commer- 
 cial ratio, must give an upward sweep to prices owing 
 to the immense additional amount of mintage that 
 would quickly follow, thus unsettling business. There 
 is no more reason, however, for admitting the bi- 
 standardist claim of a fall in gold prices as caused thus 
 indirectly, across national boundaries, by the depre- 
 ciation of silver, than for the claim of such a fall as 
 due directly to the demonetization of silver. 
 
 The arguments in support of this claim are drawn 
 mostly from agricultural data ; and chiefly from the fall 
 of grain prices. Count von Mirbach said in 1895 that 
 for some years the price of grain had not sufHced to 
 pay the German cost of production. The situation 
 would seem to have been no better in England, where 
 the agricultural depression (which there always means 
 a shortage in wheat returns, either from deficient yield 
 or poor markets) has been marked for a number of 
 years. Wheat acreage and the ratio of production to 
 consumption appear to have been diminishing. Now, 
 the champions of silver attribute the depression of the 
 grain interest in Europe wholly to the lowered cost of 
 production in silver countries (Argentina, Mexico, 
 etc.) ; and this in turn to the depreciation of silver, 
 which, in their view, if not altogether due to restrictions 
 of silver coinage in gold countries, could at any rate 
 be corrected by an international bi-standard conven- 
 tion. Experts in the grain trade, on the cither hand, 
 tell us that the competition so ruinous to the European 
 farmer comes ffom gold countries (the United States 
 and British America). Improvements in rail and 
 water systems of transportation, and the competition 
 
Price of Grain. 245 
 
 of these agencies, have so lowered freight rates, and 
 the American grain fields so greatly surpass the Euro- 
 pean in fertility and ease of cultivation, that it is far 
 from strange if the American cost of production to 
 the European market is less than the European cost. 
 Moreover, most of the wheat product shipped from 
 America is already milled, and its cost, as compared 
 with flour grown and ground in England, represents 
 a further cheapening in the highly developed systems 
 and processes of the American flouring mill, as well 
 as in the methods and machinery of harvesting, and 
 the large scale of operations in both field and mill. 
 The great American surplus is what has brought the 
 price down : the fall of price is not limited by the cost 
 of the dearest production when the market can be 
 stocked full by less expensive production. When a 
 surplus comes to light the price at which it will sell 
 rather than be carried over to another season deter- 
 mines the price at which any fresh shipment can be 
 marketed, and cuts the profits of middlemen on stock 
 already put on the market. Crops proportionably 
 scant always bring the price up : the year 1895, with a 
 comparatively shortened yield and advanced price of 
 wheat, witnessed for the ordinary economic cause, 
 and to the error of the monetary explanation, of the 
 previous depression in that industry. As civilization 
 advances, there is no likelihood that with civilization's 
 most staple cereal production can permanently out- 
 strip consiunption, though the cost may be reduced 
 by the discovery of new methods, ithe cultivation of 
 new fields, and the invention of new improvements in 
 the machinery of preparation for and transportation 
 tp the markets. 
 
CHAPTER XXIII. 
 
 ESSENCE OF THE STANDARD QUESTION CO-EXISTENT 
 
 CO-STANDARDS IMPOSSIBLE. 
 
 So long as definite portions of two metals are equal 
 in value and one of them is taken as the standard for 
 value measurement, the other also may be so regarded, 
 whether the law says so or not : and if a bushel of grain 
 is worth a standard dollar, it may be taken as a unit of 
 value. So of a dollar's worth of cloth or anything else : 
 just as a copy of .the standard unit of length in the 
 Patent Office may be used as well as the original. 
 Likewise, again, an exact equivalent, in another sub- 
 stance, of the brass troy pound weight* used by 
 the Mint would give the same results in weighing. 
 Either of two metallic weights coincident in value 
 may be called the standard unit of value and each is 
 then a co-standard with the other: but the value, the 
 real unit of that which is measured, is one and the same. 
 There can be but one standard at a time in the measure- 
 ment of anything, — ^value, time, heat, length, weight, 
 mechanical power, electric voltage. Your bi-standard 
 is possible, is a reality on the same occasion or in the 
 same transaction, only when it means a real single 
 standard. When the coincidence of value is gone, you 
 no longer have a single standard nor a co-standard ; no 
 
 *This was procured in 1827 by the Minister of the United 
 States at London. 
 
Variable Measures. 247 
 
 more than you have for length when one of your yard- 
 sticks becomes longer than the other. Your two units 
 will not now work as one, and you have indeed a 
 double standard, two standards, which calinot both be 
 used in the same measurement; though one may be 
 used on one occasion and the other on another; — the 
 long one may be applied in buying and the short one 
 in selling, as dishonest dealers do with their measures 
 of length, weight or capacity. It is like a metallic 
 yardstick which contracts and expands with changes 
 in temperature. 
 
 Suppose a ship-master goes to a tropical country and 
 buys lumber, measuring it on that occasion with a me- 
 tallic bar under a temperature of 95° F. ; then unloads 
 in January on a wharf in New York in an atmosphere 
 65° or 70° colder, and sells to box-makers or others, 
 who in using the lumber saw it in short pieces. Let 
 him measure here with the same bar : in the inter- 
 val it will have shrunken in accordance with what 
 physicists term- its co-efHcient of expansion; thus 
 he sells more feet of lumber than he bought, 
 and gains thereby. But his customers lose by the 
 change: the measure makes them buy more feet in 
 January than it would in June. The importer, with a 
 measure varying thus, gains through buying in the heat 
 and selling in the cold. Likewise suppose an inter- 
 national bi-standard system to be estabhshed at coinci- 
 dence of coinage and value ratios: after a time silver 
 will be announced as cheaper : instantly that standard is 
 shrunken, the unit named in it is no longer at one with 
 thait of its fellow, and will not buy as much. Like our 
 skipper's metal bar it is no longer the same measure. 
 
248 The Metals and the Nations. 
 
 does not carry the same degree of the property it meas- 
 ures. Your silver dollar is now discounted by mer- 
 chants in comparison with its former worth: it is a 
 short dollar, and a larger amount, by this new standard, 
 is required to balance a given piece of goods. Its 
 holder may protest with the lofty indignation of an 
 archangel militant that it's just as big a dollar as ever, 
 that it bears the same name, and, what is more, the 
 same name with the gold unit, which the trader allows 
 has lost none of its value. But it won't do : though the 
 utterer of this great dollar easily persuades his creditor 
 to accept it at par with its former seS.i, as though equal 
 weights of a substance were necessarily equal values, 
 even at different times : here, however, the force of 
 legal tender comes in. 
 
 One may, in point of form or name, discriminate 
 three sorts of standards: the double stand!ard (bi- 
 standard), the joint standard (co-standard), and the 
 single standard (uni-standard). We see the first 
 where two standard moneys are coined at a fixed ratio 
 divergent from the value ratio : this gives two measures, 
 one of which quickly prevails, and there is a single 
 standard. The second appears (only to disappear pres- 
 ently, giving place to the first) when the coinage ratio 
 is coincident with the commercial, in which case as the 
 values are the same we have in reality a single meas- 
 ure. The third (more durable) arrives when there is 
 ' one standard substance and a unit derived from it 
 alone;* when the idea of seizing down two metallic 
 
 * The actual single standard can be silver even when there is 
 .nominally a single standard in gold. See the note, page 257. 
 
Value Monometric. 249 
 
 values and fixing their fluctuating relations in a last- 
 ing harmony is given up ; when the futility is perceived 
 of the endeavor to fashion for values a monetary vise, 
 out of a name, an image, or a superscription. Under, 
 any of these systems we see that there is always a sub- 
 stantial single standard, that value is inevitably mono- 
 metric. 
 
 If value is thus, in the nature of things, necessarily 
 monometric like all other properties of things, and if 
 a real plurality of standards for measuring it is a moral 
 and physical impossibility, then is it not wise to em- 
 brace the single standard openly, as the more progres- 
 sive states have lately been doing. Seeing that the 
 chances of the silver and gold standards remaining 
 long in harmony, — of the units in silver and gold stay- 
 ing at one, — are so slight as appears from the increas- 
 ing changeableness of their value ratio and their ever- 
 widening divergence in every economic aspect,— is it 
 not the part of prudence to give up the vain struggle 
 for a co-standard ; — the efifort to avoid a lone stand- 
 ard in name by hatching out fanciful dualistic chimeras 
 from the force of political law and in accordance with 
 superstitious ideas of economic relationships, notions 
 formed under rude conditions when the economics of 
 things and of industrial society were but half developed, 
 and that unsymmetrically, — when, indeed, economic 
 laws were more or less inoperative. The wisdom of 
 professing and abiding by a single standard may be 
 urged from the standpoint of the largest public expe- 
 diency and equity : in another point of view, it is but 
 making a virtue of necessity. 
 
2S0 The Metals and the Nations. 
 
 Hamilton and Jefferson alike advocated the commer- 
 cial as the only right coinage, ratio : the former said, 
 "There is no better rule in any country for the coinage 
 th'an the commercial proportion;" the latter said, "The 
 ratio of value between gold and silver is a mercantile 
 question altogeither." But they regarded this mercan- 
 tile ratio as something permanent and uniform, and so 
 thought that when it was ascertained the coinage might 
 safely be Hxed on that basis. They were uncertain 
 what the ratio was, and in fact it differed in different 
 European countries and on the opposite sides of the 
 Atlantic. If those Sitatesmen were here to-day, when 
 the cost of transporting silver to Europe is a much less 
 considerable factor, and its value ratio to gold is all 
 but uniform throughout the entire Atlantic world, when 
 that ratio is quickly ascertainable to the thousandth of 
 the unit of comparison, when it fluctuates more and 
 more rapidly and extensively, and the fluctuations are 
 quickly registered in prices in all countries that use 
 silver and have an extensive trade with gold coun- 
 tries, — ^is it probable that under these conditions they 
 would undertake to organize a co-standard? Their 
 words show that they desired a double standard only 
 on the understanding that it should be in effect a 
 single standard: but that idea could not be realized 
 save through a happy-go-lucky chance, and how inse- 
 cure sudh a coincidence is, if it was ever realized, has 
 been shown many times in the subsequent life of their 
 country. 
 
 We have seen that the fathers of our monetary or- 
 ganization did not hit the true ratio closely enough to 
 make their bi-standard safe, — ^to make it single: that 
 
An Elusive Coincidence. 351 
 
 Isaac Newton, with all his acumen, could not strike it 
 in two trials. To determine what will be the ratio at 
 once, in the circumstance of a given change in the 
 monetary relations of the metals, whether on the part 
 of one great nation or more, depends on questions 
 that no statistics, however manipulated, can ade- 
 quately answer. And how much darker the problem 
 is when it is proposed to secure permanence, allowing 
 for future commercial changes : how much surer is 
 failure when future developments are defied. 
 
CHAPTER XXIV. 
 
 THE BEST STANDARD. 
 
 What substance, then, shall be elected the standard 
 money, the material of which our one standard unit is 
 to be made? That commodity, of course, which pos- 
 sesses in the highest degree the qualities required in a 
 standard of value. The chief requisite is steadiness of 
 value. On this account it is better to demonetize that 
 one of two legal standards which threatens by its 
 increasing cheapness to expel the other and establish 
 a cheaper unit, than to monetize such cheaper material, 
 making it a co-standard at a ratio which makes the 
 unit in it of less value than in its fellow, and so leads 
 to the result avoided by the former course. The for- 
 mer course is the one which the nations generally have 
 been following: the latter is the one that a certain 
 party and school of reconstructionists is urging the 
 United States to adopt. 
 
 In this point of stability, as well as in that of porta- 
 bility, gold excels silver. The statistical tables of gold 
 and silver production show that the supply of the latter 
 has augmented with far more irregularity than that of 
 the former. In this respect silver has come to have 
 pretty much the status of an ordinary manufacture, 
 and the rate of its production has come largely under 
 the control of man, — i. e., within the power of man to 
 force it. General Butler has argued that this fact about 
 silver mining, its being carried on with machinery and 
 
The Metals and Labor. 353 
 
 reduced, as regards labor, to the common industrial 
 basis, makes the metal of steadier value than gold. 
 But it is plain that thus it is subjected to the cheapen- 
 ing influence of mechanical progress : while, in accord- 
 ance with its smaller specific value by bulk and weight, 
 the cheapening of transportation by the same means 
 affects its cost to produce more than the cost of gold. 
 In proportion to this difiference between the metals, 
 gold is less liable to overproduction, i. e., its produc- 
 tion is less likely to be stimulated beyond the capaicity 
 of the market at a present price, and slackens quicker 
 in response to any fall in market. In other words, the 
 cost of producing gold is less easily forced down. 
 Thus the statistician informs us that "Gold is found in 
 sixteen of the nineteen Departments of Peru, but min- 
 ing operations are now in general attended with little 
 success. Many gold fields have been abandoned or 
 are worked only by natives." This illustrates the 
 point, and refutes the claim of a recent enhancement 
 of the value of gold : if gold should become worth a 
 little more, or when other fields become less produc- 
 tive, the Peruvian fields will be worked more exten- 
 sively. General Butler's point that silver is in closer 
 touch with labor seems hardly well taken : it might be 
 so if factory labor were the true type ; but the product 
 of the factory is scarcely a representative or measure 
 of brute toil; it represents too large unearned ele- 
 ments. The position of gold is much more conserva- 
 tive: its continued large dependence on unassisted 
 human exertion in searching and in performing the 
 operations of extraction makes it a faithfuler repre- 
 sentative of days' work, — the most ultimate and inert 
 
364 The Metals and the Nations. 
 
 measure of values. So that the very fact of its unique 
 economic status makes its value steadier. 
 
 The very fact, again, of the manifold superiority of 
 gold to silver in preciousness, in commercial value, is 
 well-nigh conclusive proof of its superior stability. It 
 is a law, nearly, if not quite, universal, that the higher 
 the specific value of a commodity, the more inert that 
 value is. This is true not only in comparing valuations 
 by a common measure, but also in comparing the per- 
 centages that the movements are of the values moved. 
 For example, take two commodities that are compared 
 by weight and let the value of a pound of the one be to 
 that of a pound of the other as 1 8 to i in units of a third 
 valuable thing : then while the second is varying i % of 
 the common measure, the first will vary not simply less 
 than i8% of it, but probably less than i%. Suppose 
 wheat is worth $i per bushel, and Indian corn one-half 
 the same dollar: vi^heat is the steadier if it varies less 
 than ID cents while corn varies 5 cents ; but the chances 
 are that wheat will in that time vary less than 5 cents. 
 Or take iron and copper: let copper be worth $35 per 
 ton and iron of a certain grade $20; the former is the 
 steadier if it shifts less than $1.75 in the ton to the lat- 
 ter 's change of $1, but probably copper alters in that 
 period by less than $1. Are not diamonds, in the 
 long run, of steadier value than gold? Their unfitness 
 for money results from other qualities than stability 
 and portability. 
 
 This is one reason why the higher value of gold has 
 recommended it as a standard of value, and assists in 
 explaining the historical evolution of money material 
 as commerce has successively rejected a commodity of 
 
Succession of Standard Cotnmodities. 255 
 
 lower for one of higher specific value.* The develop- 
 ment of trade between separate states, especially across 
 seas, always brings into use metallic money. The 
 Greeks and Romans began with cattle: early in his- 
 toric times we find them using copper and baser metals : 
 these, as trade sprang up with over-sea communities, 
 were replaced by silver. Finally gold appeared from 
 Asia, and thenceforth more and more assumed the 
 functions of money, which it discharged at first as a 
 commercial associate of silver. It was in the reign of 
 silver, as the first international money of those states 
 and as the first medium of traffic difiFerentiated as a 
 business, that the monetary functions were first dis^ 
 tinctly recognized: for we find that the Greek and 
 Latin words for "money" are the words meaning silver 
 in those languages. The German word for money, geld, 
 illustrates the progress of this evolution, leading to 
 gold as the standard of value and the chief money 
 material. 
 
 For this position the more valuable commodity is 
 specially recommended by the greater ease and less 
 expense of transporting a given value in it : for the 
 chief money material means not only the standard for 
 money of account in all business, but also the property 
 passed in cashing the largest balances. These take the 
 largest quantities, and generally require their transpor- 
 tation between the most widely distant places, con- 
 cerned in a nation's home or foreign trade. This is 
 
 *In Greece the earliest known coins were of iron : whatever 
 was first in Italy [Etruria] the earliest Roman coinage was of 
 copper. 
 9 
 
356 The Metals and the Nations. 
 
 especially true of international money, and as traffic 
 with alien lands developed we easily see why all states 
 in their formative epochs have turned from copper to 
 silver or from silver to gold. 
 
 Gold has not, however, banished copper, much less 
 silver, from the world's mints : even under a gold stand- 
 ard these metals have important uses as alloys and sub- 
 sidiary coin. In mediaeval and modern times, as well 
 as in antiquity, silver has to some extent shared with 
 gold the functions of primary money, dne of them 
 being on a commercial basis. In modem times it has 
 also disputed this sphere at a fixed ratio, and generally 
 with success, as we have seen. Slowly but surely gold 
 is crowding it, not out but down. Silver resigns its 
 share in the standard business with extreme reluctance, 
 aiid naturally, as it is a specially lucrative business for 
 silver, whidh can so readily overpower gold in a part- 
 nership on fixed terms and assume a monopoly of the 
 monetary field. In discarding co-standards and bi- 
 standiards monetary societies have always made their 
 standards of gold. Great Britain in 1816, North Ger- 
 many in 1869, the Scandinavian Union in 1871, the 
 Latin Union in 1873 ^"^d 1878, the United States in 
 1873 and 1900. Other states, that used the silver 
 standard, have replaced it with gold. The Nether- 
 lands, in 1872, and within the last decade Brazil, Chile, 
 Austria-Hungary, British India, Japan and Russia.* 
 
 * It was in 1878 that the gold standard was securely estab- 
 lished in the Latin Union by stopping the coinage of silver for 
 private depositors. The action of the United States in 1900 
 has the effect only of a more emphatic and explicit re-enact- 
 
A Permanent Standard. 357 
 
 The partisans of a co-standard bimetalism profess 
 an apprehension lest the world's output of gold may 
 prove insufficient to maintain prices if the leading 
 commercial states continue to base their currencies on 
 it alone. They point to abandoned gold fields, and to 
 the fact that the maximum yearly output yet recorded 
 was made many years ago. Grant for a moment that 
 they are right : yet upon evidence that the cost of money 
 was rising or about to rise through failure of gold 
 supply, the circulation could be kept up and the cost 
 of its unit kept down by recoining and reducing care- 
 fully the weight of the unit. A recoinage is a little ex- 
 pensive, but would be a trifling burden and inconven- 
 ience as compared witih cheapeliing the currency by 
 making it of silver, which would be the sure result of 
 attempting to reinforce gold with silver and inaugurat- 
 ing a bi-standard, at any ratio acceptable to the silver 
 party, and, indeed, ultimately at a present value ratio. 
 If the adjustment .referred to should make any gold 
 
 ment of the single standard in gold. This country, as well as 
 the Netherlands and the states of the Latin Union, have a 
 nominal bi-standard; they give unlimited legal-tender force to 
 certain silver coins, the issue of which is so restricted as to 
 make them really subsidiary. In one state, Russia, while gold 
 is the nominal standard silver is the actual standard, or lately 
 was, as stated in a "note by the United States Treasury" in 
 the Consular Reports for September, 1898. This we must 
 attribute to a lack of sufficient restrictions on the issue of sil- 
 ver. The case would be the same in the United States if the 
 restrictions on the coinage of the silver dollar should be re- 
 moved without formally disenacting the single gold standard. 
 It was not until 1897 that the gold standard was legally 
 enacted in Russia. Likewise, the value of the silver florin of 
 the Netherlands continued to fluctuate until 1880. 
 
258 TTie Metals and the Nations. 
 
 coin too small, that denomination, if indispensable, 
 might be replaced with overvalued silver as a token. 
 Already in America that is the form in which the unit 
 circulates, wihen not itt treasury or bank notes. If five 
 dollars at the present level should ever equal too little 
 gold to be coined, that particular coin might be dis- 
 continued and the denomination kept circulating in 
 paper, which it is now for the most part. 
 
 The alarms, however, about deficiency of gold do not 
 appear well grounded. The world's annual output h^s 
 for some years been increasing, — as some bi-standard- 
 ists were allowing even before 1897, when new gold 
 began to appear from the rich deposits of the Klon- 
 dike. While the Australian output has dwindled, 
 and the Californian fell off for a time, rich mines 
 and fields have been opened in the Rocky Moun- 
 tains, in South Africa and in Venezuela and 
 Guiana. These are pouring out large streams which 
 are swollen by tributaries from new sources in Alaska, 
 Siberia, Cape Horn. In Mexico large veins are re- 
 ported which have scarcely begun to be worked: the 
 Ural Mountains continue their yield unabated: the 
 Chilean, Peruvian and Scandinavian mines are not 
 exhausted. Latterly the Californian output has in- 
 creased: for 1894 it was larger than for any year 
 between that and 1886. In 1871 it had fallen^ to about 
 one-third more than it was in 1894: after 1871 it rose 
 again; of course there must be ups and downs, espe- 
 cially in the product of individual localities. So far the 
 fresh supplies have proved quite equal to the increased 
 use of the metal due to its enlarged share of the money 
 business. Have not the recent adoptions of gold as 
 
Nature's Store of Gold. 259 
 
 sole basal motiey followed the discovery of new 
 sources, promising large additions to the world's stock ? 
 Mexico may become a gold-using country when her 
 auriferous rocks are worked systematically and she 
 gets more fully into the currents of the world's traffic, 
 thus following the course of her forward cousin, Chile. 
 
 The world's visible stock of gold is augmenting 
 much faster thaii it was fifty years ago: unless it is 
 added to at a still greater rate it may be undesirable, 
 as it appears improbable that all the world shall use 
 a gold standard. Some nations will gain more on a 
 silver basis, with silver depreciating, if, like Mexico, 
 they have an important native production of silver, 
 exceeding in value that of gold, and if they export to 
 gold countries largely for cash, or have gold bal- 
 ances to their credit : while at a steady exchange be- 
 tween gold and silver, and with prices correspond- 
 ing, there is nothing to lose, as between nations, 
 in paying or getting paid in either metal rather than 
 the other. Still, the most of the world^s business is 
 already on a gold basis, the silver countries doing a 
 very small part of it, even in proportion to their area 
 and population. 
 
 I'f it be said that there must be a limit to the store of 
 gold in the earth and so to the potential supply of the 
 world, a sufficient reply is given in the point that this 
 limit applies equally to silver: but so, too, is there a 
 limit to the possible volume of the world's commerce. 
 Moreover, if we are to look so far ahead, we must give 
 some weight to the assurance of geological science that 
 nature renews her deposits of gold in the same 
 
260 The Metals and the Nations. 
 
 locality.* Another thing, — will the convenient media- 
 tion of the world's exchanges always require as great 
 a volume of circulation as at present, in proportion to 
 the volume of commerce? Certainly the making ex- 
 changes by transfer of credits, without the physical 
 passing of a definite commodity medium, is the most 
 important development in the mechaiiism of modem 
 commerce. Is the development yet complete? Begin- 
 ning as the visibly transferred medium of exdha:nge, 
 money is now more and more restricted to its second 
 function as the measure and standard of value ; which 
 function it discharges perfectly without passing in its 
 own substance. And the efficiency of money of circula- 
 tion, whether primary or secondary, — does it not in- 
 crease? The more rapidly a piece passes from hand 
 to hand the larger the amount of trade it will mediate. 
 
 * See articles on this subject in the Cosmopolitan for 1895. 
 
CHAPTER XXV. 
 
 A LONE STANDARD WITH BIMETALISM IN THE 
 COINAGE. 
 
 Against the menace of falling prices, apprehended in 
 a universal gold standard, there is another resource, 
 outside the golden treasures yet concealed in the earth's 
 crust and the mass accumulated in hoards and plate, 
 which a rise of value would release to the market, — a 
 resource that can be employed without danger of inter- 
 metallic conflict: I mean the collateral use of silver. 
 The use of one metal as commercial money in associa- 
 tion with the other as the standard is, as we have seen, 
 well precedented in monetary history. On such a plan 
 an unlimited quantity of silver might circulate at its 
 commercial value according to a gold measure; cotir 
 veniently through certificates attesting the weight of 
 fine silver to which the holder was entitled. There 
 would need to be made from time to time an authorita- 
 tive declaratio^n of the worth of silver, — ^than which 
 could anything in monetary administration be easier?* 
 In making up a sum with such paper a little subsidiary 
 coin must be used to supply odd remainders : this, too, 
 would be as easy as it is to make change under exist- 
 
 *The worth of silver is ascertained now once a year or 
 oftener by the Director of the Mint in order to the declaration, 
 required by law, of the value of foreign silver coins as well as 
 the other foreign coins. 
 
262 The Metals and the Nations. 
 
 ing systems. As the basis of a bimetallic convention 
 some such scheme was proposed by the Danish delegate 
 at the last (1891) monetary conference. The holder of 
 silver titles would thus of course realize a loss when 
 the value of such property fell : but the lessening of 
 property through a fall of market rates is a necessary 
 incident to the holding of property at all. No form of 
 property is exempted from mercantile shrinkage, nor 
 can be by any law : silver, or even gold, as standard 
 money suffers more or less depreciation, and then 
 what saves the owner of money from loss? The loss 
 of the owner of silver arising from its depreciation 
 would be no less real, though it might be less sensible, 
 if silver were the standard money; and in that case 
 prices must be affected more or less. Whereas, under 
 the scheme suggested no depreciation of silver could 
 disturb prices. 
 
 The gold standard, then, by no means necessarily 
 involves gold monometalism : silver may be used 
 therewithal as money of circulation to any extent 
 desired. Even at a fixed ratio this may be had by keep- 
 ing silver on a subsidiary basis. With gold the stand- 
 ard, as best fitted for that service by its superior con- 
 densation of value in weight and bulk, whereby it is 
 more convenient for the larger and more important 
 exchanges and for the conduct of the great mass of 
 trade, — there is still a large place for silver as a rep- 
 resentative of such standard in the smaller and more 
 numerous transactions and in making up odd re- 
 mainders: for this service, in turn, the white metal 
 is best fitted by its lower specific value, which gives 
 pieces of convenient size in representing the smaller 
 
Feasible Bimetalism. 263 
 
 denominations. Such bimetalism, where the accessory 
 metal is of limited coinage conducted as a state enter- 
 prise, so as to make the coin representative of, i. e., 
 redeemable in, the standard money, is the only bimetal- 
 ism that has ever been found to work permanently. 
 We find it carried into large operation to-day in the 
 United States, not only with the fractional pieces, but 
 also with the dollars, these, or their certificates, being 
 exchangeable at the Treasury with the government's 
 notes, which in turn the holder may at his option con- 
 vert into gold. This equality, under the declaration 
 of the statute that all dollars should be maintained at 
 a common par, makes the overvalued silver dollar as 
 much a token as the half-dollar, the quarter and the 
 dime, whose redemption is specifically provided for, 
 but rarely demanded. The case is substantially the 
 same in the states of the Latin Union and in the Neth- 
 erlands ; these all limit and overvalue their largest sil- 
 ver coin, while making it full legal tender, as does the 
 United States with its silver dollars. Such "limping 
 standard" ' money is really token money: everywhere 
 it is used the credit and honesty of government, 
 whether or not under specific legislative enactment, is 
 depended on, with the restriction of its issue, to keep 
 it practically convertible with gold. 
 
 This is the only workable bimetahsm. General But- 
 ler, in arguing the practicability of the co-standard 
 undter free coinage of both metals, pointed out that 
 while the ratio of silver to gold in the coinage of Great 
 Britain is i6 to i,you may step across the Channel and 
 find silver coined at 15^^ to i concurrent with gold as 
 money of final settlement, i. e., as money with full legal- 
 
264 The Metals and the Nations. 
 
 tender force. But why is this possible ? Simply because 
 silver is not a co-standard in Fratice any more than in 
 England, although its relation to gold is somewhat dif- 
 ferent in the two countries : in both it is accessory and 
 representative, but in France it ,has fuller swing in the 
 circulation. If it were coined freely at such overvalua- 
 tion it would drive the gold out as gold drove silver 
 when the ratio under the co-standard regime in France 
 overvalued the former. Butler's idea was that it makes 
 no difference what your ratio is, so that it overvalues 
 silver. He dare not, he said, put full value into the 
 silver dollar, for fear it would become undervalued and 
 exported: time has shown what foundation there was 
 for his fears. However, it is safe enough to overvalue 
 the silver coin so long as its mintage is restricted and 
 made a state business : if coined freely at the over- 
 valuation the silver is undoubtedly safe from exporta- 
 tion ; but you have no more a co-standard than before ; 
 the gold stops circulating and you have a silver basis 
 with an unmixed silver circulation. 
 
 The advocates of co-standard bimetalism undertake 
 to fix the name "monometalist," as a brand of oppro- 
 brium, upon the adherents of the single standard : this 
 is misleading and unjust; the most ardent partisans 
 of gold as the standard contend warmly for a copious 
 circulation of silver as a following and auxiliary money. 
 It would do to call them mono-jtowrfard-ists (if the 
 hybrid word is receivable) ; their first principle is unity 
 and singleness of measure. But the one standard does 
 not preclude the use of two, or more, metals as cur- 
 rency, — money of circulation : if necessary, aluminum 
 might be added, either on the status of the silver dol- 
 
Bimetalism and Sole Standard. 865 
 
 lars or on that of the fractional pieces. It is for states- 
 men in finance to consider what is the limit of security 
 in the monetary use of the secondary metal. 
 
 The Act of 1878 is spoken of properly enough as the 
 remonetization of silver, i. e., as enlarging its use for 
 money jointly with gold though on the basis of the lat- 
 ter. And when the partisans of silver argue, as some of 
 them do openly, that their mietal should be the standard, 
 with gold as an auxiliary, they call this bimetalism. 
 But when they write down the States of the Latin 
 Union, the Netherlands, etc., as bimetallic, they do so 
 with the implication that these countries maintain co- 
 standards : their systems are adduced as of the same 
 sort that the United States would have under free 
 coinage of the metals at 16 to i. This is untrue, as 
 we have seen : rather are those na/tions, as monetary 
 states, of the same class with the United States at pres- 
 ent, — ^their silver coinages being restricted and subsi- 
 diary. Were it otherwise we should now see in those 
 countries silver monometalism, — the standard silver* 
 and the currency throughout monometallic on the sil- 
 ver basis : which will yet be seen in the United States 
 if that country follows the leading of its silver-tongued 
 orators. The very men, therefore, who would bring 
 their antagonists under condemnation as monometal- 
 . ists, relying on a want of discrimination in the public, 
 are themselves most deserving of the epithet. 
 
 The revolution involved in the plans of the silver 
 party would be as fruitless of public good as it would 
 be reactionary and retrogressive in the clhoice of money 
 material. The solid backing, if not the conscious mo- 
 tive, of the movement resides in the interests of silver 
 
S66 The Metals and the Nations. 
 
 property which would secure an opening to the mints 
 and so to a big-ger market. But why should the interest 
 of silver outweigh all other commercial interests? In 
 magnitude it is among the least of them : no great agri- 
 cultural or manufacturing, — yes, or mining, — interest 
 but surpasses it in any of the leading countries of the 
 world. Where its output is, relatively to othier single 
 products, of the greatest value, there is the fairest ex- 
 cuse for giving it precedence and conforming to its 
 interests: though even there the advantage of coining 
 it freely depends more on the special elements of the 
 trade with gold countries. The value of the world's 
 stock of it is far from augmentiwg proportionably with 
 the bulk. Nor can a market be given it that will make 
 it equally precious with gold, — not though all the 
 nations of the earth should build upon it their cur- 
 rencies: a gold medal will always outshine and over- 
 rank a silver medal, regardless of any positive conven- 
 tion. The relations of the values of two substances 
 •reside in the fixed natures of the substances and' of 
 man who estimates and compares them. Any attempt 
 to reverse or alter the natural relations of any two 
 things or entities must end in dead failure, preceded 
 by more or less of disaster. 
 
INDEXES. 
 
 18 
 
SUBJECT INDEX. 
 
 Arabic numerals refer to pages, Roman to chapters. 
 
 Aboriginal Money, 19. 
 Abraded Coins, 114, 154. 
 Absorption of Money, 67, 177. 
 Accounting, 34. 
 Act of Congress, April 2, 
 
 1792, 109, 196. 
 Act of Congress, June 28, 
 
 1834, 61, 110, 164. 
 Act of Congress, Jan. 18, 
 
 1837, 111, 165. 
 Act of Congress, Marcb 3, 
 
 1849, 130. 
 Act of Congress, Feb. 21, 
 
 1853, 55, 61, 108, 111, 130. 
 Act of Congress, 1862, 165. 
 Act of Congress, Feb. 12, 
 
 1873, 101, 109, 113, 181f. 
 Act of Congress, Jan. 29, 
 
 1874, 101. 
 
 Act of Congress, Jan. 14, 
 
 1875, 124f. 
 
 Act of Congress, April 17, 
 1876; (Joint Resolution) 
 July 22, 1876, 125. 
 
 Act of Congress, Feb. 28, 
 
 1878, 114f, 118, 126, 129, 
 164, 182. 
 
 Act of Congress, June 9, 
 
 1879, 109, 112. 
 
 Act of Congress, Aug. 4, 
 1886, 129. 
 
 Act of Congress, Feb. 19, 
 
 1887, 114. 
 Act of Congress, July 14, 
 
 1890, 115, 126, 135, 137. 
 Act of Congress, Sept. 26, 
 
 1890, 130. 
 
 Act of Congress, March 3, 
 
 1891, 114. 
 
 Act of Congress, Nov. 1, 
 
 1893, 136. 
 Act of Congress, June 13, 
 
 1898, 137. 
 Act of Congress, March 14, 
 
 1900, 115, 119, 122, 127, 
 
 129, 136fE. 
 Appreciation, 45. 
 Appreciation of Money, 74fC, 
 
 176, 190. 
 Asslgnats, 141. 
 
 Balance of Trade, 39f. 
 Bank failures, 82, 84. 
 Bank of England, 123. 
 Bank of France, 123. 
 Bank of North America, 123. 
 Bank of the United States, 
 
 123. 
 Banks, National, 121, 124, 
 
 143. 
 Banks, State, 82, 121. 
 Barter, 18, 29, 68. 
 
270 
 
 Subject Index. 
 
 Base metals, 25ff, 109. 
 
 Bimetalism, Ch. XVII and 
 pp. 222, 261. 
 
 Bimetallic prices, 198ff. 
 
 Bimetallic convention, ques- 
 tion of, 223f, 241. 
 
 Bi-standard, 195, 198, 211. 
 
 Brassage, 98. 
 
 Bullion certificates, 128. 
 
 Capital, investment of, 77, 
 
 79, 81; see also Loans. 
 Certificates as currency, 47, 
 
 127fC. 
 Circulation, 46fE, 64£f, 70ff, 
 
 178. 
 Coin certificates, 128. 
 Coinage, United States, lOlf, 
 
 109fC. 
 Coinage systems, 34, 217. 
 Coins, 33. 
 Commerce, depression of; 
 
 see Contraction and Pan- 
 ics. 
 Commerce, Laws of; see 
 
 Economic Principles. 
 Commodities; see Products. 
 Commodities as money, 24f£, 
 
 144ff, 255. 
 Competition, 51f, 57, 76, 87. 
 Comstock Lode, 182. 
 Confidence, 79f; see also 
 
 Credit. 
 Consumption, 69. 
 Consumption, monetary, 42, 
 
 54, 177, 227. 
 Contraction, 41, 48, 68, 70, 
 
 76f, 177. 
 
 Contraction of circulation, 
 
 74, 78, 80, 185, 191. 
 Contraction of currency, 68, 
 
 71. 176, 185. 
 Contracts, obligation of, 164. 
 Co-ordinate Monies, 197ff, 
 
 261. 
 Co-standard, 196, 201, 203, 
 
 210, 223, 248ff, 264. 
 Cost of production, 51fC, 97, 
 
 187. 
 Cost of supply, 56, 59f, 62f. 
 Counterfeiting, 30, 94. 
 Credit, 174. 
 Credit in circulation, 94, 
 
 115fE. 
 Credit money, 120fC, 148f. 
 Credits, value of, 162f. 
 Credits in circulation, 47, 
 
 61f. 
 Currency, 29, 34, 46f, and 
 
 Part II generally; see also 
 
 International Coinage. 
 Currency certificates, 130. 
 Custom, 21fE, 29, 33. 
 Customs duties; see Tariffs 
 
 and Taxation. 
 
 Debasements, 147f, 155, 211. 
 Debts, 35, 53, 66, 151, 156f, 
 
 161ff. 
 Debts and currency, 133f. 
 Demand for money, 36, 178. 
 Demand and supply of 
 
 money, 46f, 52, 59, 78. 
 Demonetization, 23, 175ff. 
 Demonetizations, 61, 111, 113, 
 
 179ff. 
 
Subject Index. 
 
 271 
 
 Denominations, 29, 33, 129, 
 
 217f. 
 Depreciation, 45. 
 Depreciation of money, 54f, 
 
 58, 60f, 66, 106. 
 Depreciations of money. 111, 
 
 147fE, 153. 
 Depreciations of money, 
 
 effects of, 158ff. 
 Dollar, Mexican, 115. 
 Dollars, comparison of, lllff. 
 
 Economic principles, Ch. 
 I-X, XIV, XV, XVIII, 
 XXI-XXIV; in particular, 
 pp. 21fe, 52f, 57, 231, 233, 
 235, 249. 
 
 Efficiency of money, 46f£, 
 178, 260. 
 
 Electron, 198. 
 
 Evolution of money, 19fE, 
 255. 
 
 Exchange; see Barter, Com- 
 merce, Commodities, Con- 
 traction, Credit, Expan- 
 sion, Foreign exchange. 
 Foreign trade, Money. 
 
 Expansion of circulation, 
 178, 185. I 
 
 Expansion of commerce, 49, : 
 59, 67f, 161, 178. 
 
 Exports, "bounty on," 243. ; 
 
 Fiat money, 124f, 150ff. 
 
 Finance, national, ch. XII , 
 passim. 
 
 Fineness, 31f. ; 
 
 Foreign exchange, 40. 
 
 Foreign trade, 20, 39, 62f, 71, 
 107f, 114, 150, 206f, 219f, , 
 224f, 233f, 242f. \ 
 
 Fractional currency, 125; see 
 also Subsidiary Coin and 
 Minor Coin. 
 
 Functions of government, 
 23, 30, 33, 91, 92fE. 
 
 Functions of money, 20fl, 28. 
 
 Gold, 25, 27, 42, 54fe. 
 
 Gold, coinage of, in U. S., 
 
 130, 183. 
 Gold, demand for, 227. 
 Gold, price of, 185. 
 Gold, supply of, 113, 257ff. 
 Gold, value of, 253f, 266. 
 Gold as standard, 255fe, 262, 
 
 264. 
 Gold standard in U. S., Ill, 
 
 113, 138. 
 Gold certificates, 129. 
 Gold and Silver, 60. 
 Gold and Silver, mutual price 
 
 of, 235. 
 Gold and Silver, relations of, 
 
 to labor, 253. ■ 
 (See also Silver Countries 
 
 and Gold Countries.) 
 Government, relations of, to 
 
 money, 27, 35, 55, 57, 67, 
 
 76, 107f, 131, 151, 153, 156, 
 
 195, 230, 232, 243. 
 Grain, 244f. 
 "Greenbacks," 124, 149. 
 Gresham's Law (106), 155, 
 
 214, 221, 226, 228. 
 
 Hoarding, 78. 
 
 Homogeneity of money, 19, 
 47, 66f, 93f. 
 
272 
 
 Subject Index. 
 
 Homogeneity of the circula- 
 tion, 116f, 119, 121, 123, 
 131f, 135f. 
 
 Horses, 187. 
 
 Interference of monies, 106f, 
 
 llOf, 135, 153ff. 
 Intermetallic prices, 235. 
 Intermetallic standards, 248. 
 International coinage, 219fE, 
 
 223. 
 International conferences, 
 
 222. 
 International money, 193, 
 
 219. 
 Intrinsic value, 21, 32, 105, 
 
 151. 
 Invention, 86, 91, 186. 
 
 Labor,. 60, 77, 169ffi. 
 Labor as money, 143. 
 Labor as standard of value, 
 
 87ffl. 
 Labor and Investment, 81. 
 Land as money, 141ff. 
 Latin Union, 116, 179ff, 204, 
 
 218, 256, 263fC. 
 Legal tender, 109, 163f, 175, 
 
 248. 
 Legal Tender Act, 165. 
 Level of money supply, 62f. 
 Level of prices, 65ff. 
 "Limping standard" (114ft), 
 
 139, 180. 
 Loaning by the state, 145. 
 Loans, 37, 80. 
 
 Machinery, 245. 
 Market value, 52f; see also 
 Cost of Supply. 
 
 Markets, 63, 69ff, 77. 
 Material of money, 19ff, 36, 
 
 and Ch. II. 
 Measurement, 231, 246. 
 Metals as money, 25, 255. 
 Middle Ages, 55, 86, 193. 
 Minor coin, 109, 114. 
 Minting, 30, 51, 62, 71, 98fe. 
 Monetary system, 76. 
 Monetization, 23, 41, 44. 
 Money as a commodity, 38, 
 
 41f, 46, 5111, 59, 66. 
 Money as measure, 21f, 65, 
 
 69. 
 Money as medium, 21f, 46, 
 
 65, 69. 
 Money as representative, 22, 
 
 28, 35f, 120. 
 Money defined, 17. 
 Money market, 44ff, 61. 
 Money of account, 34. 
 Money unit, 31, 50, 
 Money unit, price of, 72. 
 Monometalism, 193, 195ff, 
 
 262, 265. 
 Monopoly, 57, (76). 
 Mortgages, 81, 165, 183. 
 
 National debts, 123ff, 133f, 
 
 149, 151. 
 Natural relations, 231, 243, 
 
 249. 
 Nature, supposed law of, 
 
 229f. 
 Newton's Rule, 213, 228, 236. 
 
 Overproduction, 65f. 
 Overvaluation, 195, 198, 201, 
 204, 211. 
 
Subject Index. 
 
 273 
 
 Panics, 77ff. 
 
 Paper in currency, 119-140, 
 141fe. 
 
 Par of exchange, 40. 
 
 Parallel coinages, 195ff. 
 
 Patents, 91. 
 
 Per capita circulation, 65f. 
 
 Poor creditors, 172. 
 
 Poor debtors, 151, 166, 171. 
 
 Price of money, 46fE, 62. 
 
 Prices, 21f, 29, 44, 49, 55, 
 65fE, 71f, 78, 92, 96, 106, 
 156; (during period 1873- 
 1895) 186ff. 
 
 Prices, rise of, 89f, 158fE. 
 
 Primary money, 105fE, 194, 
 197, 199. 
 
 Primitive monies, 19fl, 24, 
 29. 
 
 Production of money, 37f, 
 40, 42, 53ff, 67f. 
 
 Products, general, 45fE, 60, 
 62f, 69f, 73, 77, 160. 
 
 Products, cheapening of, 86fE. 
 
 Property in money, 22, 28, 
 37fE. 
 
 Purchasing power; see Cost 
 of production. Cost of sup- 
 ply, Demand for money. 
 Intrinsic value, Monetiza- 
 tion, Money as a com- 
 modity. Production of 
 money. Property, Value. 
 
 Qualifications for money, 21, 
 
 24fiE, 
 Quantity of money, 46ff, 64fC. 
 
 Kailroads, 43, 83. 
 
 Ratio, coinage, 95, 109fC, 135, 
 
 153, 194fE, 223, 241, 250. 
 Ratio, market, 208, 250. 
 Ratio of production and 
 
 value, 239. 
 Ratios of variation, 254. 
 Re-coinage, 257. 
 Re-coinages, 111, 213 
 Redemption, 112, 118, 133, 
 
 135f, 138f, 142f. 
 Redemption funds, 126f. 
 Regulation of coinage, 27, 
 
 33, 94fe. 
 Regulation of value of 
 
 money, 35, 55, 57, 94£e. 
 Regulation of supply and 
 
 value of money, 62fE. 
 Representative currency, 
 
 108f£ (coin), 120fe, 141fe. 
 
 I 
 
 Scandinavian Union, 179, 
 
 256. 
 Secondary monies, 144. 
 Selgnorage, 97fE. 
 Sliver, 25, 27, 42, 54fC. 
 Silver, supply of, 113. 
 Silver, coinage of in U. S., 
 
 182f. 
 Silver certificates, 129. 
 Silver countries and gold 
 
 countries, 61, 63, and Ch. 
 
 XVIII, XXII, XXIV. 
 Silver dollar, 112fC. 
 Silver dollar, coinage of, 
 
 suspended, 110. 
 Silver dollar, coinage of, re- 
 sumed, 111. 
 Silver dollar, demonetized, 
 
 113, 181f. 
 
274 
 
 Subject Index. 
 
 Silver dollar, partially re- 
 monetized, 114. 
 
 Sixteenth century, 55. 
 
 Sovereignty, incidents of, 97. 
 
 "Specie circular," 82. 
 
 "Specie payments," resump- 
 tion of, 124. 
 
 Specific value, 26, 152, 230, 
 240. 
 
 Speculation, 75, 173. 
 
 Standard, change of, 111, 117. 
 
 Standard, double, 106, 109f, 
 248. 
 
 Standard commodity, 3 If, 
 255. 
 
 Standard measures, 246f. 
 
 Standard unit, 31, 75, 92£e 
 (96), 115. 
 
 Standard value, 29. 
 
 Strikes, 190. 
 
 Subordinate coin, 108, 112, 
 139f, 197. 
 
 Subsidiary coin, 105fC. 
 
 Supply of money, 52f, 56, 59. 
 
 Supply, level of, 62f. 
 
 Surplus, value of, 59. 
 
 Tariffs, 83, 85, 190. 
 
 Taxation, relation of, to cur- 
 rency, 165, 167f. 
 
 Token money, 105, 151. 
 
 "Trade-dollar," 114, 221. 
 
 Transportation, 83, 86, 91, 
 186, 203, 244. 
 
 "Treasury notes," 122, 126, 
 132fE. 
 
 Treaties, commercial, 91. 
 
 Undervaluation, 106 ; see 
 Overvaluation. 
 
 Unit, standard, 31, 75, 92tt, 
 192. 
 
 United States, administra- 
 tion of JefCerson, 110, 112 
 
 United States, administra- 
 tion of Jackson, 121. 
 
 United States, administra- 
 tion of Hayes, 114. 
 
 United States, administra- 
 tion of Cleveland, 127, 136. 
 
 United States, coinage of, 
 108ff, ISlff. 
 
 United States, panics in, 
 82fE, 197f, 201, 204. 
 
 United States, Civil War pe- 
 riod of, 84, 124, 149, 170. 
 
 United States, Revolution 
 period, money in, 149. 
 
 United States Constitution, 
 33, 94, 164, 197, 201. 
 
 United States Mint, lOlf, 
 246, 261. 
 
 United States Patent Office, 
 246. 
 
 United States bonds, 121f, 
 125, 133f, 168. 
 
 United States notes, 122, 124, 
 127. 
 
 Value, 17, 21, 24, 69. 
 
 Value, measurement of, 31, 
 73, 231, 249. 
 
 Value, standard of 87ff, 255. 
 
 Value, unit of, 31. 
 
 Value of Money, 35, 41f, 51, 
 72; (see also Cost of Pro- 
 duction, Cost of Supply, 
 Production of Money). 
 
 Value of money, expression 
 of, 45, 48. 
 
Subject Index. 
 
 275 
 
 Value of money, stability of, 
 27f, 253fE. 
 
 Values, rates of variation in, 
 254. 
 
 Volume of money in circula- 
 tion, 48ff, 70, 72. 
 
 Volume of money, regula- 
 tion of, 62fC. 
 
 Wages, 87fE, 169fE, 189f. 
 
 Wheat, 245. 
 
 "Wild-cat" money, 82, 121. 
 
INDEX OF PERSONAL AND PLACE NAMES. 
 
 Alaska, 186, 258. 
 Andrews, Dr. E. B., 159, 237f. 
 Arendt, Dr. — , 238. 
 Argentina, 244. 
 Aristotle, 20, 53, 214. 
 Asia, 186, 208, 225, 255. 
 Asia Minor, 193. 
 Athens (Attica), 93, 148, 
 
 171, 173. 
 Atkinson, Edward, 188. 
 Australia, 113, 258. 
 Austria-Hungary, 218, 221, 
 
 225, 256. 
 
 Bagehot, Walter, 218. 
 Brazil, 225, 256. 
 British America, 244, 258. 
 Butler, Gen. B. F., 252f, 263f. 
 Byzantium, 26. 
 
 California, 113, 186, 258. 
 Central America, 208, 224f. 
 Cemuschi, M. — , 241. 
 Chile, 169, 225, 256, 258. 
 China, 242. 
 Clay, Henry, 83. 
 Constantinople, 193. 
 Croesus, 193. 
 
 Diocletian, 236. 
 
 Edward III., 209. 
 England, 193, 209, 211f£, 233, 
 244; see also Great Britain. 
 Europe, 233. 
 
 Flanders, 209. 
 
 France, 75, 112, 116f, 169, 
 
 203, 264. 
 Franklin, Dr. Benj., 141. 
 
 Germany, 56, 113, 179, 193, 
 
 244, 255f. 
 Gibbon, Edward, 86. 
 Great Britain, 108, 217, 220, 
 
 256, 263. 
 Greece, 116, 192f, 217, 255; 
 
 see also Athens. 
 Gresham, Sir Thomas, 155. 
 Guiana, 258. 
 
 Hamilton, A., 123, 195f, 250. 
 Harvey, W. M., 153, 159. 
 
 India, 213, 256. 
 Italy, 116, 255; see also 
 Borne. 
 
 Japan, 256. 
 
 JefCerson, T., 110, 195, 201, 
 250. 
 
 Law, John, 75. 
 Locke, John, 64. 
 London, 148, 208, 234. 
 
 Macaulay, T. B., 213. 
 McLeod, H. D., 133. 
 Mexico, 40, 209, 242, 244, 258. 
 Mill, J. S., 52, 214. 
 
278 
 
 Index of Personal and Place Names. 
 
 von Mirbach, Count — , 241, 
 244. 
 
 Netherlands, 256f, 263. 
 Nevada, 113. 
 New York, 125, 128. 
 Newmarch, — , 220. 
 Newton, Sir Isaac, 213, 251. 
 
 Paris, 148. 
 Peru, 253, 258. 
 Portugal, 225. 
 
 Rome, 93, 148, 166, 217, 236, 
 
 255. 
 Romero, M., 209. 
 Russia, 26, 225, 236, 256f. 
 
 Scandinavia, 225, 258. 
 
 Siberia, 258. 
 Smith, Adam, 55. 
 Solon, 171, 173. 
 South Africa, 40, 186. 
 South America, 186, 224. 
 Spain, 55. 
 Sparta, 26. 
 
 United States, 55f, 61, 65, 
 208, 230, 235, 237f, 241, 244, 
 252, 258, 265. (See also 
 references in the Subject 
 Index under Act of Con- 
 gress and United States.) 
 
 Venezuela, 258. 
 
 William III. of England, 213. 
 
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