The subject of Money presents few difficulties, or rather none of any depth, to one who has thoroughly mastered the subject of Value. To all others the difficulties are insuperable. Essay after essay and volume after volume has been written in this country upon Money, by men who would have become good economists and good monetaries, if they had only begun their inquiries at the right place and followed them in the right direction. As we saw in the last chapter that it is impossible for anybody to understand the subject of Credit without first comprehending the matter of Value, so we shall see in this chapter that in the order of Nature Value precedes Money, and that the latter can only be learned in the light of the former. The logical reason for this in general is, that Money itself is always a Valuable, and comes to its function as money only through a comparison of itself with other Valuables.

The thin difficulties that confront the student of Money, who has reached the topic along the proper highway cast up for economical inquiries, arise apparently from two sources; and we will begin our present discussion by first looking at these in their order.

In the first place, Money is the only Valuable that may belong to two out of the three possible categories into which Valuables may be scientifically thrown. All Valuables are either Commodities, or Services, or Credits. These categories never change places. Once a Commodity always a commodity, so long as value can be predicate of it; a personal Service can never take on any other valuable form; and a Credit is ever a credit, and nothing else, until it is annihilated by Fulfilment. Now Money is the only Valuable that ever appears in two of these forms. The same Dollar indeed cannot be both a Commodity and a Credit; but some Dollars are a Commodity cut out from gold and silver, and some other Dollars (so-called) are a Credit issued by Government or parties responsible to government; while Money as a general term properly enough covers both kinds of Dollars, the Commodity-Dollar and the Credit-Dollar. In other words, Money is of two kinds, and only two kinds, either a Piece of valuable metal stamped as to weight and fineness by the image and inscription of CÆsar,—a Commodity; or a Promise to pay to somebody some of these pieces,—a Credit. This unique peculiarity of Money, by which, always a Valuable, it may appear and does appear in two out of three possible predicaments of Valuables, makes a little difficulty at the outset of its discussion, and requires continued care in formulating its scientific propositions.

In the second place, a more considerable difficulty, and yet a slight one still, is found in the fact that the choices and the legislations of men have more to do in shaping the propositions of Money than in most other economical propositions. It is true, that Nature and men coÖperate in the determination of every case of Value whatsoever; while there is a difference in the cases, though perhaps not a distinction, in respect to the fixedness and universality of the natural laws involved, in contrariety to the purely human impulses concerned. The Providential elements in Economics, both the social and the physical, are of course relatively fixed and unchangeable, otherwise Science could not grapple with and classify them; and so also are those principles of Human Nature related to exchanges, which may be said to be universal in their character,—such as, for example, the preference to receive a larger rather than a less return-service, and to render a smaller rather than a larger effort; and at the same time there are other principles of human nature related to exchanges much more variable in their character than these, such, for instance, as the nation's choice of the kind of Money it will use, or the kind of Taxation it will impose. It certainly follows from this, that some Economical laws must be more general than others, owing to a less variation in the human impulses concerned in them: it follows, for example, that the law of landed rents, or the law of the approach of the price of raw materials to that of the finished products, is more universal in its terms of generalization than most of the propositions of Money and Taxation can be.

It seems like a paradox, that those parts of Economics in which the human elements of variable choice may predominate over the relatively fixed laws of nature and of mind, should be just the parts hardest for men to catch clearly and hold firmly; because, we naturally think, that difficulty and mystery are rather to be found in those departments in which an Infinite Mind has been at work upon an infinite plan, and that there is no such profundity in the works of men; but after all, even those natural laws like Gravitation, which are clear and universal as laws, if they be such as the devices of men have to do with, such as may be modified and in a certain sense controlled by human actions, become from that very circumstance liable to some difficulty and perhaps to some mystery. Now all the truths of Money, and as we shall see in the final chapter all the truths of Taxation also, belong to this class of less general generalizations; still, it is scarcely less than foolish to say, that Money is such an elusive and ideal agent that nobody can understand it. That is the language of indolence and lack of penetration. Money is wholly a matter of man's device, though it comes into constant contact with something greater and more fixed than itself; it was invented, just as any other instrument is invented, to accomplish a certain economical purpose; and it would be strange indeed if men by taking pains could not perfectly comprehend what men themselves have wholly devised. We hope, accordingly, in the following paragraphs to clear up completely to all intelligent readers the whole doctrine of Money. The key to unlock all the superficial difficulties (and there are no others) is this: Money is always a Valuable before it becomes money, and continues a valuable independently of the fact that it is money; and, it is always one or other of two kinds, either itself a Commodity or a Promise to pay a commodity. In this chapter, we will not begin with definitions and justify them afterwards, but will come up to them step by step, and, as it were, justify them beforehand.

1. Economical Exchanges may begin, be profitable to both parties, and go forward to a certain extent, without the use of any money at all. As a matter of fact and probably for a long time, while the Civilizations were gathering their inchoate forces for a further progress, men exchanged one Service directly for another without the intervention of any medium. This form of trade is called Barter. King Hiram of Tyre furnished to King Solomon of Judea a certain quantity of cedars from Mt. Lebanon for the building of the new Temple at Jerusalem, and Solomon in return furnished to the Tyrians a certain quantity of wheat and oil, Judea being a fertile agricultural country with no forests, and Tyre a wooded country with no farms. This may well serve us as an instance of Barter, although Money had been in current use in those regions a thousand years before, as is seen in the purchase by Abraham of the cave and field of Machpelah, for which he weighed out "four hundred shekels of silver, current money with the merchants."

It is obvious, however, that while Barter is a good deal better than no exchanges at all, there are inherent and immense difficulties in that form of trade.

(a) Under Barter trade is extremely limited in its personnel. Only those parties can engage in it, each of whom is in position to render to the other just such a Service as the other is in direct and immediate need of, and each of whom also wants another Service in kind and quantity exactly what the second man has to render. It is not enough under these conditions, that a man should have some Service to sell, but he must also find some other man, who not only wants that specific service but who also has some service to render in return just such as the first man wants. If A has wheat which he wishes to exchange for a coat, he must first find a party desiring wheat and also having a coat to sell, and moreover who wants just as much wheat as will pay for a coat, no more and no less; if he wants more, he may have nothing to render for the excess which A is willing to accept; if less, A may have nothing besides wheat with which to help pay for the coat. Even in the simpler states of Society the inconveniences of thus hunting up a specific market for each specific service are very great, and in more advanced states of civilization would become intolerable, if it were possible (as it is not) for Society to become advanced under such conditions.

(b) Barter presents insuperable obstacles to trade in point of place. While men still exchanged in kind, as it is called, and knew no other mode, the purchasing-power of any Service was necessarily confined to that locality, and would not be parted with except in view of a return service actually there present in the same place. There could be no commercial contact without a local contact. The ultimate parties to every exchange must come together face to face. There could be no middle-men or distributors. The market was circumscribed to the hamlet.

(c) Buying and selling under the scheme of Barter is also wretchedly limited in point of time. The fruit-dealer, for example, must dispose of his product quickly, or it perishes on his hands. So of many other commodities. If they are to be sold at all, they must be sold quick. The ultimate buyer must be on hand in time. As the result of these three concomitants of Barter, ten thousand things that are now bought and sold to profit never came to a market or thought of a market, exchanges were so limited in time and place and variety, human associations were so hampered, and the development of all peculiar talents so impeded, that one of the initial steps in the progress of all Civilization has been to hit upon some expedient to lessen these intrinsic difficulties, and so to facilitate Exchanges.

2. The Invention of Money was nothing in the world but the tentative selection by certain people in a certain locality of some Commodity then and there valuable, that is, capable of buying some things then and there, and gradually giving to that commodity by general consent the capacity of buying all things then and there salable. The commodity thus slowly becoming money, whatever it was, had and must have had a limited purchasing-power to start with, because no instance to the contrary has ever been shown, and still more because that peculiar comparison between two things that lies at the bottom in each single case of Value is exactly the same kind of comparison that holds between money and the many things which money purchases; given a valuable in common use as a starting-point, and the transition is easy and natural to a generalized valuable, that is, to a recognized money; the relation of mutual purchase between the commodity and some other things was a common fact to begin with, the making it money was merely the common consent that thereafter it should have a general purchasing-power within the circuit; so that as a simple result, whenever anybody had anything to exchange, he might first exchange it for this selected product, which was valuable before but is now generally valuable, and then with this money-product in hand he could buy whatever he might want at any time or place within the circuit.

It is impossible from the very nature of Value, impossible from that comparison of two distinct Services, that precedes every Exchange, as well under Money as under Barter, that anything except a valuable anterior to and independent of its becoming money, could ever have become money at all. Money makes no alteration in any law of Value, but only substitutes for convenience' sake in every transaction in which it plays a part, a general for a specific purchasing-power; a book, for example, has a specific purchasing-power, since there is somebody who wants it, and is willing to give a sum of money for it; and the owner of the book by the sale of it parts with a product which has only the power to purchase something from a few persons, and receives a product in return which has the power to purchase something from all persons; it is not true to say that the money is worth more than the book, because they are just worth each other, as is demonstrated by the sale; but it is true to say that the seller of the book has substituted in the place of a limited purchasing-power, of which he was proprietor, a general purchasing-power, of which he has now become proprietor; that is, that the command of the money, which has no larger value than the book had, does carry along with it a superior command over purchasable articles generally. In one word, Value in the form of money is in a more available shape for general buying and selling than value in any other form. This is the exact and ultimate expression for all the truth there is in the common vague remark, namely, that Money is something different from all other Valuables; it is different from them in just one respect, namely, while they have the power of buying some things from some persons, it has the power derived from the consensus of Society to buy all sorts of things from all sorts of persons.

This simple change or substitution, which seems in itself so little and easy and natural, has changed in its ever-enlarging results the face of the world! It makes the valuable now selected to be money seem to the minds of men to be a very different thing from what it was before, although the change in itself is slight indeed. It removes most of the inconveniences of Barter as by a stroke of the hand. So soon as a commodity selected to become money by one people comes to be acceptable as such to all other peoples, as is the case with gold, the advantages of its use are vastly multiplied to all. Experience has shown many times over, and reflection will explain to any one, how that there is no other machine that has economized labor like money; no other instrument that plays so deep and broad a part in Production; no invention whatever, unless it be the invention of letters, which has contributed more to the civilization of mankind. Money makes vast distances relatively indifferent; for it is sufficient to constitute a market for any valuable that it is practically wanted anywhere on the round globe, the middle-man paying the seller for it in money transports it thither, and receives back his investment with a profit from the ultimate buyer. So, also, money generalizes any purchasing-power in point of time. The dealer, exchanging his perishable products for money, may keep its power of purchase locked in this form as long as he lists, putting an interval at his own pleasure between selling and buying, and with this generalized power in his pocket he may buy when he will and what he will and where he will. Money, too, makes any purchasing-power portable, divisible, and loanable. A man may carry the value of his farm in his purse, and may divide it up for a thousand different purchases, and especially is able to loan it in this form in order to receive it back again with interest at a future day.

3. It is important to notice in the next place, that, whatever made the commodity selected as money originally desirable and valuable, it has now become desirable and valuable for other and wider reasons. The tobacco of Virginia, for example, in the early days of that Colony, became valuable at first on account of the demand for it as a narcotic both there and in England; but as soon as it was made a legal money in the Colony by the general consent already described, its value depended in part upon another set of causes. Of course Demand and Supply still controlled its value just as before, only certain parties who had not desired it before as a mere commodity thereafter desired it as a current money. Its convenience and necessity as money widened the circle of those parties willing to receive it and glad to render a return for it. It is true, that many now received it only because they could pay it out again to buy something else with; but that made no difference so far as Value is concerned; it was valuable before under a certain limited demand, and continued valuable under an additional and broader demand; we cannot certainly say, that it became more valuable under this new and wider demand, because we do not know how the then combined demand affected the Supply. We may probably say, that the value became steadier if not larger, under the double demand than under the previous single one; and the vital point to mark and remember is, that the value of money, previously valuable as a commodity only, is still maintained under the law of Demand and Supply, just as all other values are, the only peculiarity being this, namely, as a generalized valuable and consequently a potent social agent money is in demand by everybody who has anything else to sell.

It follows from this in necessary sequence, that Money as such, whatever may have been the ground of its original value as a commodity, is always received as money in order to be parted with. It is not bought for its own sake to be used and enjoyed, as most other things are, but is only bought to be sold again. Men will sell everything to buy it, with the sole intent to sell it again to buy something else; and the odd thing about it is, that everybody buys it to sell again, not at all as the speculator buys grain to sell it again at a higher price by the bushel or centner, but, the money remaining constant in their minds, they sell for it something they care less about in order to buy with it something they care more about. Money, therefore, becomes a medium in men's exchanges. The word "medium" in this proposition is to be taken in its etymological and strict sense, as something that comes between two extremes and serves also to relate them to each other. This is not the ultimate characteristic of Money, as we shall see, nor can a final definition be founded here, but it is a good step towards ultimates to see that money is exchanged for other things as a means and not as an end, that it is a great help in exchanging all other valuables but is never exchanged for itself in an ultimate transaction.

Small boys, indeed, sometimes swop cents; but men, the miser excepted, who is under a deplorable fallacy of the senses, use and estimate money mainly as the medium that facilitates the real exchanges of Society. What is actually and ultimately exchanged is the wheat, the cloth, the lumber, the furniture, the commercial service of every kind, and Money is but the instrument making those exchanges easy, which might perhaps go on in part without it, though with difficulty and loss. In short, money is somewhat like a railroad ticket. Transportation to a given place is what is really bought when one pays for a railroad ticket. The proof of the purchase is the bit of paper exhibited. That comes in as a medium between the traveller and the railroad company; and while it facilitates the real exchange, it also partly disguises it. This comparison holds good in the main feature, but in two respects the resemblance fails: Money is not a specific ticket for a single purpose, as the pasteboard is, but is a general ticket (so far as it goes), for all purposes of purchase; and secondly, Money really stands as a value in its own right (so far as any single thing can so stand) at the same time it is serving as a medium, while the railroad ticket does not. Still, we are all desirous to get money, not for the sake of the money itself, but for the sake of those things which the money will buy. We part with money freely and constantly for those things which we care more about. What we exactly care for is what our money will buy, is the conscious command over all services and commodities which the possession of money insures to us. If we could give our own commodity or service or claim, whatever it may be, and receive directly in return the claim or commodity or service which we want, whatever that might be, there would be no need of money at all; but this is always inconvenient, and generally impossible; and, therefore, we introduce a middle term, and money is found to be a good mean to help exchange the two extremes.

4. We are now getting on towards a just conception and a true definition of Money, though two or three more points must still be noted as preparatory to that consummation. As a result of the fact already reached, that money serves as a medium in men's exchanges, it follows of course that the power of money as such a medium is multiplied by what has been called rapidity of circulation, that is, a brisker use of the volume already in circulation will reach the same end as the increase of its volume. As in mechanics, so in money, the whole power is the product of mass and velocity. Money also is like any other tool, the more constant its use the more profitable its agency. The quick movement of a small mass, accordingly, is better than the torpid movement of a large mass, both in what it saves of expense, and in what it presupposes of the general conditions of exchange. The value of the money-volume of any country is a small fraction of the aggregate value of those products which the money helps directly to exchange; and a very small fraction indeed of the aggregate value of all the products which it helps indirectly to exchange through Credit by means of its denominations. We shall see better a little farther on, that Money works not only as a medium direct, itself exchanged against other Services, but also as furnishing those denominations of Value, like the dollar, which are always used in bargaining; and also used in all cases of Credit, in which settlement is not made by money but by offsetting one piece of indebtedness against another, and these denominations can arise only from the use of money as a direct medium. Therefore, we may say that the hub and the spokes and the rim of the wheel of exchange consist of personal services and commercial credits and all material commodities except money, while, to borrow the famous comparison of Hume, "Money is but the grease which makes the wheel turn easier." It would be a vast mistake to suppose, as some of the ancients did, that the grease is really the wheel.

While Money thus facilitates the revolution of the wheel of Exchange, it follows too from its nature as a medium, that the dimensions of the wheel as a whole are vastly greater than they would have been but for the Money. Money indeed helped to exchange the products that already existed and were coming into existence at its first invention, but by far the largest part of products since have come into existence largely through the agency of Money. We get quite too low a view of the functions of this potent agent, if we think of it merely as an aid in circulating products, that would have existed whether or no; some products would certainly have existed whether or no, and money would surely be of great use and convenience in helping bring these to the ultimate consumers; but this is a partial and wholly inadequate view of the function of Money as a medium of exchange. The fact that such a medium is in universal circulation, and that the present holders of it are ready to exchange it against any sort of Services adapted to gratify their desires, exercises a kind of creative power, and brings a thousand products to the market which would otherwise never have come into existence. Since money will buy anything, men are on the alert to bring forward something which will buy money; and since Money is divisible into small pieces, an incredible number and variety of small services are brought forward to be exchanged against these pieces, for example, into railroad cars and fares of all sorts, which services we have no reason to suppose would ever be brought forward at all were it not for the strong attraction of the money.

5. From this last point of view we may gain another closely connected with it, namely, that Money must be a very important part of the Capital of the world. We have already thoroughly learned that Capital is any product outside of man himself from whose use springs a pecuniary increase. Now any one may see that the monetary medium of any country is the most active and the most essential and the most profitable of all those instruments reserved in aid of further production. The axe, the plough, the spindle, the loom, the wheel, the engine, are all instruments, are all Capital, and they each aid respectively some part or parts of the processes of Production; but Money is a form of Capital which stimulates and facilitates all the processes of Production without exception. Just as we have seen that Money is a form of Value generalized, so is it also a form of generalized Capital, that is to say, it is an instrument capable of aiding all processes of Production in every department, while every other capitalized instrument is capable of aiding but few processes in one department. Without Money, for instance, there could be no thorough Division of Labor, because there would be no adequate means of estimating or rewarding each one's share in a complicated process. By means of Money all services small or great contributing towards a common product are neatly measured, and may be paid for by some one, who thereby becomes proprietor of the whole product; or, if the contributors choose, they may wait till the product itself is sold, and then the money received is divisible without loss to each contributor, according to the service rendered. Thus the influence of Money as Capital pervades the whole field of Exchange from centre to circumference, facilitating every transfer and stimulating new transfers.

Now then, if Money be, as it is, a peculiar kind of Capital, since it is a Medium in all Exchanges, the question becomes pertinent, How much of it is wanted? Clearly, only so much as will serve the purposes which such a medium is fitted to subserve; there should be enough fairly to mediate between the Services actually ready to be exchanged then and there, and also enough fairly to call out other Services proper and profitable in the then circumstances of Society, and whose only obstacle to a profitable exchange then and there is a lack of a facilitating medium. All increase of the volume of money beyond this point, which the very nature of Money itself marks out as the boundary, leads to a diminution of Value of every part of it, to a consequent disturbance of all existing monetary contracts, to a universal rise of prices which are illusory and gainless, to unsteadiness and derangement in all legitimate business, and to a spirit of restless enterprise and speculation which seeks to draw off the excess of money in untried and reckless experiments. The only real subjects of Exchange are mutual efforts, mutual services, as these are expressed in Commodities and Services and Credits, and money is the instrument merely that comes in between the real exchanges to facilitate them; and, therefore, it seems to be perfectly conclusive on this point to remark that the quantity of money needed in any country or the whole world is limited by the number of the services ready to be exchanged, to make easy the exchange of which is the good purpose and sole end of Money.

The physical and mental powers of man, which alone can give birth to commercial services, when considered as they must be in this connection as belonging to a given number of men at a given time and place, are strictly limited of course; and although the presence of money then and there is both a stimulus and an aid to all these men to bring forward services of all sorts to the market, there are obvious restrictions both in their powers and in their circumstances; and the quantity of money needed among them is just that quantity which will fairly act as a medium in exchanging the services which they are able and willing to render to each other. All increase in the quantity of money beyond that point would have, and could have, the only effect of increasing the nominal Prices of Services, without making the services themselves any greater in number or better in quality.

It is with Money exactly as it is with any other form of Capital, allowance being made for the fact that Money is a kind of generalized capital. To illustrate, How many ships does a commercial nation need to employ? As many as will fairly take off its exports and bring in its imports. Ships are wanted for one definite purpose; and when enough are secured to answer that purpose, all additions will lessen the Value, that is, the purchasing-power, of ships generally. So of all instruments whatever. Enough is as good as a feast. Enough is better than more. In regard to every form of Capital, and consequently in regard to Money as such, the point of sufficiency is determined by the quantity of work to be done. And as no law of Congress is required to determine how many ships are best to do the transportation for the people of the United States, so no legislation is needed to fix the amount of Money that is best for the same people, or for any people. As the people find out for themselves how many steam-engines they want to do their work of the year, so they find out without any aid from their legislators how much money they want to make their exchanges of the year. The less Law and the more Liberty on all such points the better for all concerned.

Let the reader notice in passing, as a corollary from what has just been shown, that when forms of Credit like bank cheques come into growing use to make payments with and settle balances, they displace to a large extent commodity-moneys, like gold and silver, which would otherwise have to be employed. Speculations, and even scientific discussions, over the needful amounts of gold and silver for money in the United States, have usually overlooked this essential consideration of displacement; and one result of this has doubtless been too large a coinage of the precious metals, to the hazard of their stable value, and especially to the hazard of the permanent maintenance of the gold standard. Men forget in their zeal for Money that it is nothing but a Tool, and that the multiplication of tools beyond the amount of work to be done by means of them always makes the tools a drug; and they are apt to forget also that the cheaper and more convenient substitutes for metallic moneys, namely, forms of Credit, are all the time and more and more taking the place of the older moneys, which, nevertheless, must still be kept at the foundation, though a lessened quantity of them be needful for circulation.

6. We must now carefully sink our analysis one grade deeper, in order to reach the bottom characteristic of Money, and so to formulate an ultimate definition of it.

The only quality common to all valuable things is the fact that they are all salable; and if these various and multitudinous valuables are ever to be made in any way commensurable with each other, it must be by means of one of their number assumed as a standard of comparison with the rest. Comparisons can only turn on points of likeness. The single respect in which all valuables whatsoever resemble each other is their common possession of purchasing-power, be it more or less. Therefore, as a yardstick, itself possessed of length, and because it is possessed of length, if assumed as a standard of comparison with other objects that have length, may be used to measure all such objects whatsoever, and may accurately express in units or fractions of itself the simple length of anything and everything; so, any valuable may be selected as a standard with which to compare all other valuables, and by means of the terms of which to express numerically the reciprocal relations between all valuables whatsoever. This is just what is done whenever any valuable is selected as Money; and this is the exact and single purpose of such selection.

What is the precise change, then, in the valuable chosen as Money when it becomes money? This: it was a valuable before, else it could not by any possibility serve the present purpose, but now it has become a standard valuable, with which other valuable things may be compared in the single point of their value. Valuables are now commensurable. That is all. But that is a great deal. As we have already learned to the nail, Valuables are all Services; and now some one Service has been selected from the rest, capable in its very nature of measuring all the rest, and so capable of becoming immensely useful to mankind.

What, accordingly, is the bottom characteristic of Money? And where shall we find the terms for an immutable definition of it? The core of Money is this quality of being a Measure of Services, taken on in addition to the usual and universal qualities constituting anything a Valuable. This additional quality arises under the choices and action of men, just as the ordinary qualities constituting anything a valuable arise under the choices and action of men. But it is an additional quality, distinctly conferred, and vastly important. The valuable chosen as Money was a Service to start with, was constantly rendered as such then and there, and was consequently fitted by qualities already possessed to assume a further and a unique quality, namely, the capacity to measure and express relatively to itself all other valuable Services whatever.

As each and every Valuable is the outcome of a comparison instituted by two persons as between two things, as is thoroughly unfolded in the first Chapter, it is not at all strange, rather it is natural and inevitable, that there should arise in connection with Valuables as a whole class some such further comparative measure, as Money is now shown to be; because, without some such common measure of Services in general, itself a Service of the same kind, it would be inconvenient, not to say impossible, to carry on any considerable traffic anywhere. For instance: a baker has only loaves of bread, and wishes to buy a hat, a horse, a house. How many loaves shall he give for each? Unless there be some common Service, in the terms of which these differing Valuables can be expressed, and by means of which they can be brought into commercial relations with each other, it would be an awkward piece of business to effect even the three exchanges; and every time the baker wished to buy another article, there must be a rude and slow calculation from independent data, in order to decide upon the terms of the exchange. Let now some Common Service be introduced, in the terms of which each of these values can express itself independently, and the difficulty disappears in an instant. "My loaves are worth ten cents each," says the baker. "My hat is worth ten dollars," says the hatter. Their saying so does not indeed make it so; that matter is a preliminary; but each has come to that approximate conclusion by a relatively easy comparison of two Services, his own and another common one; and if the loaves will duly bring ten cents and the hat ten dollars, the terms of their own exchange are one hundred for one, and there is no need of parleying. So of the rest; so of everything that is ever bought and sold. Money becomes by common consent a Measure of them; because it measures them, it makes the interchange of them a very facile matter; because it measures them, it easily becomes a medium between them; and, accordingly, because the money rendered is itself a Service, it is a natural and universal measure of all other Services.

Money is a current and legal measure of services. With this final definition of "Money" the writer is more than willing to take all the risks. It was new when propounded many years ago in one of the editions of his earlier book. All subsequent testings of it in form and substance have but confirmed the original confidence in it. The word "legal" in this definition is not always to be pressed to its utmost signification, but denotes anything sanctioned by law or usage equivalent to law. The other words are to be taken in their full and technical meaning. It is believed that, while this definition is short and simple, it just covers the whole ground and no more. It is not enough that a certain valuable be "legal" as Money; it must also be "current" in order to be a true money. In the United States between 1862 and 1879, to take an example, gold coins, though legal tender all the time for all debts public and private, were not "current" in the full sense of that term, and hence were not the Money of the country. Till the last-mentioned date, the gold dollar of 25⁴/₅ grains standard fine was required by law to pay customs-taxes with and the interest on the public debt, and was used to a small extent in a few branches of private business, and was not otherwise in the hands of the people. These dollars, accordingly, were not strictly money, but bore a premium over the "current" money of the country. To be Money, then, a Valuable must be recognized as money by law or custom as strong as law, and also circulate among all classes of the people as a medium in their exchanges.

But we are bound to observe that Money becomes a medium in men's exchanges, because it first became a measure in their Services. Some economists think that these two functions are separate, and are of equal rank; but it is easy to see that one only is original, and that the other is derived from that. Even Aristotle perceived that Money is a Measure, inasmuch as he defined property "anything that can be measured by money." We may be pretty sure, in opposition to Professor Jevons, in his Money and the Mechanism of Exchange at page 13, who thinks there are four characteristics of Money, that Money as such has but one primary characteristic difference from other forms of Value, namely, this measure-quality, this standard-quality, this publicly recognized function as a common measure to which all other valuables are constantly referred. This additional attribute put upon a money-valuable by law or custom is not what makes it valuable, since an ounce of uncoined gold standard fine is worth within a very small fraction as much as an ounce of gold coins, but it makes the money a far more convenient instrument to purchase with, inasmuch as money, having now the attribute of making all other valuables easily commensurable with itself, becomes at once something which everybody is ready to receive, because everybody knows in general what its power will be to purchase all other things. In other words, Money becomes a medium in exchanges just because it has already become a measure of Services in general; and there are not consequently two prime functions of Money, still less four, but only one. This view seems to simplify the whole subject of Money very much; and we may be sure that it will be found to be scientifically correct, and that we shall find many means of testing its accuracy as we go on.

To maintain, as we do, that "Money is a measure of Services," is much better than to say, in connection with many economists, that "Money is a Measure of Value." That phrase is objectionable because Value is always relative to two Services exchanged for each other; and to say that money is a measure of that relation is neither so simple nor so ultimate as to say that it is a measure of each of the Services entering into that relation. The Services may be conceived of and spoken of separate from the Value into which they merge, although they come into existence solely for the sake of that resultant Value, and it is more exact and final to propound that Money, itself a Service, is a measure of all other Services considered as constituent elements of the Values into which they fall. We are not without strong hopes, accordingly, that competent economists will concede, that here is a radical improvement in the nomenclature of our Science.

In the place of our expression and definition, and the foregoing explanation consequent upon its use, President Walker in his Money, pages 280 et seq., prefers the mathematical and excellent phrase, "the common denominator in exchange"; Professor Bonamy Price, in his Practical Political Economy, page 363, shows his fondness for the formula (and it is a good one), "the tool of exchange"; and Henry Dunning Macleod, in his Elements of Banking, page 17, insists with much less reason, that "Money is the representative of Debt." He says: "The quantity of money in any country represents the amount of Debt which there would be if there was no money; and consequently when there is no debt there can be no money." The unfortunate use by some countries of a paper money, which is indeed a form of debt, gives some plausibility to the notion that Money is a representative of Debt; and perhaps the fact that Money is often used to pay debts previously contracted, and that debts are almost always contracted in the terms of Money, may give some additional plausibility to this view; but as Macleod himself goes on to say that "no substance possesses so many advantages as a metal for money," and that "all civilized nations therefore have agreed to adopt a metal as money, and of metals, gold, silver, and copper have been chiefly used," we do not see how he can logically hold that a gold dollar, or a gold sovereign, whose value is as substantive and independent as that of any Valuable in the world can be, becomes through coinage and circulation "a representative of Debt." Instead of saying as he does, "where there is no debt there can be no money," it may be confidently asserted on the other hand, where all transactions are settled at once in solid money there can be no debt.

7. Having thus looked into the nature of Money, and seen what is its one essential characteristic, and its one obvious and universal function as the result of that, it will help us now in our further discussion, to examine some of the material commodities that have served as Money at different times and places.

Cattle appear to have been the earliest money of which there remains any record. Homer, near the middle of the sixth book of the Iliad, indicates in the following lines that oxen were an incipient money in the Heroic age:—

We cannot certainly infer, when it is said in Genesis that "Abraham departed out of Egypt very rich in cattle and silver and gold," that any of these were anything more than articles of valuable merchandise; but on the other hand it is certain from the Latin name of Money, Pecunia, which is derived from the root pecus, which means "cattle," that Cattle were the Money of the early Romans; and Pliny writes expressly that King Servius Tullius stamped the first bronze money of Rome with the image of cattle, undoubtedly indicating by that some equivalence in current value between the two. At any rate cattle have been used as Money among pastoral peoples very widely in place and in time, and are still so used in various parts of Africa.

In the region of the Euphrates and Tigris the precious metals became money in very remote antiquity; for the art of coining, and all other arts, came thence westward to the Greek cities of Asia Minor, and to Greece itself, and we learn that Pheidon, King of Argos, coined silver money on a scale derived from the East in 869 B.C.; and a better proof still is the fact that burnt clay tablets are found in the Royal Library at Nineveh, discovered by Layard, which are really credit-money, notes issued by the Government, and made redeemable in gold and silver money on presentation at the king's treasury. Tablets of this character are extant bearing date as early as 625 B.C. But the gold and silver money must have been circulating a long time in their own right as valuables, before such a credit-money, such a promise-money, as those tablets are, could have originated in connection with them. Abraham, who himself migrated from "Ur of the Chaldees" about 2000 years B.C., not long after reaching the Mediterranean, "weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant." This is expressly said to be "money" and "current money." Perhaps it was coined money. At any rate, it was cut and piece money. It was indeed weighed out, and not counted out. This is still the more accurate and speedy manner, when the facilities for the weighing are present. The Bank of England at this day weighs, and not counts, the coins received and paid out. The Romans first coined silver money in 269 B.C., and gold money in 207 B.C., and gold coins were stamped in Greece about the time of Alexander the Great, say 333 B.C.

Other metals than those called precious were also early used as money. Long before Pheidon's silver coinage in Greece, copper skewers were used as money in that country, of which six made up a drachm, which was afterwards both a coin and a unit of weight, the coin being worth about 17 cents of our money, and the weight being about 66 grains avoirdupois. The word drachm is derived from d???a, a handful; and the sixth part of it, called an obol, from the Greek word meaning a spit, became also both a coin and a weight, all which makes it evident that these were used in connection with roasting meat, and that one skewer or obol was originally a unit both of value and of weight. In Adam Smith's day, in certain districts in Scotland, nails were still used as small money, which is a forcible reminder of these old Greek skewers. Iron became money in Sparta; money of lead was known to the ancients, and is still current in the Burman empire; the earliest Roman coins were of copper, which were cast rather than stamped, for no die would have sufficed for pieces so large and heavy, and the denarius was the unit divided into ten asses, the denarius being nearly the equivalent of the Greek drachma whether of copper or silver, because the Romans reckoned from the first the ratio of copper to silver as 250:1; bronze is a mixture of copper and tin, and brass of copper and zinc, and copper coins with both these admixtures—used for the purpose of hardening the copper, it being a general law of metals that a mixture of two is harder than either—have been very common in ancient and modern times; Sicilian, Roman, and old British coins of tin alone are known to have been struck; and Herodotus makes the statement that the Lydians of Asia Minor were the first to make a coinage of electrum, which, as some claim, was a mixture of gold and silver, and of which ancient specimens are still existing.

Cowry shells are still used in the East Indies, and also in Africa in the place of small coins, and have sometimes been imported into England from India to be exported in trade to the coast of Africa, being reckoned in Bengal at about 3200 to a silver rupee, which is about 46 of our cents. The New England Indians also used beads or shells of periwinkles (white) and of clams (black), of which 360 made up a belt of wampum, as they called it, the black being counted worth twice as much as the white; and the English colonists accepted the wampum in their exchanges with the Indians, regarding a string of white as equal to five shillings, and a string of black to ten shillings, and afterwards made it legal tender among themselves for small sums, and even counterfeited it. Cakes of tea have passed as money in India, and elsewhere; and it is said, that at the great annual fair at Novgorod, in Russia, the price of tea has first to be determined before the prices of other things can be settled upon, since that is a kind of standard of Values in that great mart. Salt has been current money in Abyssinia; cod-fish in Ireland and Newfoundland; and beaver-skins in New Netherlands, New England, and the western parts of America.

We do not here try at all to give a full list of the things that are known to have been used in the early states of society as money; and there would be no ground for surprise in any list, however large and varied, when we remember how great is the need of some such form of value generalized in order that exchanges may grow to any considerable size and vigor. Two points only need now to be noted, (1) that the tendency everywhere has been sooner or later to come to the metals as the best form of money, and among the metals to reach gold and silver as the only ultimately satisfactory materials for Money; and (2) that no instance has ever been found in the whole stretch of inquiry over all the earth, of anything becoming a Money that had not been previously a Valuable. We might be perfectly sure of this beforehand, without any search at all among the moneys of primitive times and states of civilization, because, from the very nature of the case nothing could ever serve the purpose of Money except what was already a valuable to make the comparison with,—nothing could ever possibly serve as a measure of services except a service. It has several times been claimed, that actual exceptions to this law have been historically discovered, but when the alleged exceptions have been closely scrutinized they have been found to be apparent only. To take two or three of the most plausible examples: the Carthaginians had a kind of leather money, which originally enclosed bits of the precious metals, and circulated in virtue of them, though they afterwards came to circulate as bits of leather only, as counters and pledges, in a way that will be explained later. According to the Venetian traveller, Polo, China had in the thirteenth century a money made of the bark of the mulberry tree, cut into round pieces and stamped with the name of the sovereign, which money it was death to counterfeit or to refuse to take in any part of the empire. If we had the whole history of this money, it would surely ally itself either with the other commodity-moneys now being treated, or with the modern credit-moneys made legal tender to be treated hereafter. It is just as certain as anything can be, that these circles of stamped bark did not start out as money in their own right. The French writer, Montesquieu, asserted that there was in use in the last century among the people of the coast of Africa, what he called "an ideal money," "a sign of value without money," the unit of which was called a macoute, which was subdivided in ideal tenths, called pieces. This statement was startling, as implying a denomination without the thing denominated, as implying a standard of value which had no basis in a valuable thing. It was afterwards discovered, however, that this money of account had its origin, just as we should suppose it must have had, in an actual macoute, a piece of stuff, a fabric, which they had used first as a commodity-money, and afterwards its name as a money of account. A valuable thing may become money, and then its name may become a denomination of value, and still later a bit of leather or a bit of paper may be called by the same name, and in a certain sense take the place of the same thing. All this will be as clear as day pretty soon.

8. Contrary to what has often been affirmed by Economists, the real measure of Services is the service itself, the thing-dollar and not the denomination-dollar. The denominations are used in bargainings and calculations as representatives of the money itself, and thus indeed in a secondary sense serve as measures; but the subtle connection between the thing and its name, between money and its denominations, and the differences between the two, need to be clearly unfolded, because most of the current fallacies about money take their rise just at this point. An illustration will best serve us here. The original measure of Services in France and England and Scotland was the pound weight of silver. No coin of that weight was ever struck; but the pound of silver was cut into 240 coins called pence. Twelve of these pence were called a solidus or shilling. Thus, as applied to silver, the symbols lb. and £ denoted equivalent weights, the former of uncoined metal, the latter of metal coined. But in course of time, more "pence" than 240, and at last in Elizabeth's reign 744 "pence were coined out of a lb. of silver." Yet all the while 240 of these pence were called a £. £ and lb., both a contraction of the Latin libra, were no longer equivalent. The lb. of weight continued stable; the £ of money had dwindled to less than one-third. Yet the name pound continued to attach to 240 pence, although the pence embodied a less and less quantity of silver. Each actual penny had less silver in it, and though it was still called a penny as before, the denomination, though spelled and sounded as before, represented less silver, and therefore less value, than before. The denominations, then, always follow the fortunes of the coins, whose names they are, to the frequent loss and shame of the unthinking, who suppose the same name must represent the same thing. Unfortunately it does not.

Take another illustration. In 1834 the gold eagle of the United States was reduced in weight from 270 to 258 grains troy, and the alloy increased from one part in 12 to one part in 10. These changes took out more than 6 parts of gold from every 100 parts in all the gold coins of the country. Yet all these coins bore the same names as before. The things denominated changed, but the denominations changed not. Other things remaining equal, the coins lost six per centum of their purchasing-power, or in other words, general prices rose in that proportion; the measure became so much smaller; and the names, eagle, dollar, outwardly unchanged, varied simultaneously and equally with the change in the coins.

Also, coins are liable to change in their function as a measure of general Services from unavoidable changes in the general purchasing-power of the precious metals themselves. If for any reason an ounce of gold will buy less of general Services than formerly, of course the coins cut from that gold will buy less than formerly; and this change in the measure is followed instantly and inevitably by a corresponding change in the meaning, though not in the spelling, of the denomination. Not so with all other tables of denominations. These have a basis independent of the things which they help to measure. The French metre, for example, is not variable by the lengths or breadths or heights of the things it measures, but is an invariable unit of length the world over; so is one of Troughton's inches; but this feature does not hold at all of the denominations of Money; because sovereigns, dollars, marks, francs, are denominations of Value, which is itself a variable relation. Such denominations, consequently, are not an independent standard to which values themselves can be referred, as lengths are referred to metres and inches, but vary with the varying purchasing-power of the coins themselves. The "dollar," as a denomination, means more or less, just according as the "Dollar," as a coin, buys, that is, measures, more or less.

Still, essential as is the point now made to any just understanding of the subject of Money, it is vastly important for all the interests of Exchange that the accepted measure of Services be as little liable to fluctuations as possible, especially in all cases in which lapse of time is involved before the exchange is fully consummated. An inflexible standard there cannot be from the very nature of the measuring, but also from the very nature of all measuring, the money-standard should be and should be kept as nearly inflexible as it possibly can be. For the same reason in kind, only multiplied a thousand-fold in force, that the bushel-measure should be of the same capacity in sowing-time and in harvest-time, to sell and buy by, always a bushel, no more and no less; and the yard-stick an inflexible measure of length, always 36 of Troughton's inches, no more and no less; so, as far as it is possible in the nature of Values, ought the current measure of Services, and hence its denominations, to represent, year in and year out, a uniform degree of purchasing-power.

9. This brings us logically to the historical fact, that, no matter what measure of services any people may have adopted in their primitive times, there has always been a steady force at work tending to displace these in favor of gold and silver. This has become the universal result the world over among all advanced peoples. Governor Bradford in his History of Plymouth Colony gives a quaint account of the origin of money among the Pilgrims, and in connection with that of the fee-simple in lands: "The Pilgrims began now highly to prize corn as more precious than silver, and those that had some to spare began to trade one with another for small things, by the quart bottle and peck; for money they had none, and if any had, corn was preferred before it. That they might, therefore, increase their tillage to better advantage, they made suit to the governor to have some portion of land given them for continuance and not by yearly lot, for by that means that which the more industrious had brought into good culture (by such pains) one year came to leave it the next and often another might enjoy it; so as the dressing of their lands were the more sleighted over and to less profit; which, being well considered, their request was granted."

The neighboring Colony of Massachusetts, settled about ten years later, used Bullets for small change, reckoning them at a farthing apiece, and made them legal tender for debts of less than one shilling; for larger exchanges Wampum and Beaver-skins were long used; but the steady force just spoken of induced Massachusetts in 1652 to supplant these with a silver coinage of her own, called the Pine-tree shillings and sixpences and threepences and twopences. This mint existed (sometimes idle) for over 30 years, but all the pieces coined bore the dates of 1652 or 1662. In 1691, the two Colonies were forced into one government through a new charter granted by William and Mary; and after lengthened trials of inferior moneys, not needful to be described now, Massachusetts determined in 1749 to have no other than silver money circulate in the Colony, and became thereafter till the Revolution the so-called "Silver Colony," and business rapidly and steadily revived and enlarged in consequence of the change, and in contrast with the rest of New England.

Gold and silver, thus ever urging their way in to take the place of tentative and transient standards, and ever coming back again to stay if displaced for a time by cheaper and changeable moneys, have never been anywhere of equal value, weight for weight. An ounce of gold has always been more valuable than an ounce of silver. Probably in the Euphrates country where coinage began, and certainly in Asia Minor deriving thence its weights and measures, gold was strictly the standard with silver as subsidiary to that; in Greece, when Philip's victories established a double standard there, gold was reckoned relatively to silver as 1:12½; in the Roman world, where silver had been the standard after 217 B.C., Augustus CÆsar legalized gold as a co-standard in the ratio of 1:12; in 1717 a double standard was established in Great Britain, gold being rated in the coinage as 1:15¹/₅ of silver, but in 1816 by a law still in force, gold was made the sole standard for the United Kingdom, the legal use of silver being limited to 40s. in any one payment; in France the legal relation of gold to silver was fixed in 1803 as 1:15½, and so continued till 1876; in the United States the ratio first established, in accordance with the recommendation of Alexander Hamilton as Secretary of the Treasury, was 1:15, but in 1834 this was changed to the relation of 1:15.98, and so it remains to this day; in 1871, the new German Empire adopted the sole gold standard, and limited silver to the amount of 20 marks in any one forced payment, still allowing the old silver thaler to circulate at the rate of three marks to a thaler; and since 1875, the Scandinavian Union permits gold alone to be coined for private persons, and limits the debt-paying power of silver to 20 crowns. A crown is 26.78, and a mark 23.82, of our standard cents.

Moreover, the relative value of gold in silver never continues the same for any great length of time, even after the law has sought to ascertain and fix it. Indeed, any law fixing the ratio between the two has very little, if any, effect towards maintaining the ratio. Demand and Supply determine the value of the precious metals each in each at any one time as absolutely as they decree the value of Hindoo rice in silver. France managed to maintain her legal ratio at 1:15½ for 73 years, because all the conditions were on the whole favorable; but when the Germans threw a portion of their silver on the world's market in hopes to reach the single gold standard, and the mines of Nevada poured forth on the same market their millions of silver, the ratio could no longer stand, the right of private individuals to have silver coined for them was taken away in behalf of the government, and only the five-franc silver pieces continued to be legal-tender to all amounts, the other silver coins becoming then (1876) only legal to pay debts to the amount of fifty francs. A franc is 19.29 of our standard cents.

And this brings us to notice what are called subsidiary coins. France, England, Germany, and the United States have debased their smaller silver coins in weight, so that the nominal value of these coins is from 7 to 15% above their bullion value. For example, two halves, four quarters, ten dimes, of our silver since 1875 weigh 385.8 grains, which is also the exact weight of the French five-franc piece, while our standard silver dollar weighs 412½ grains, both ⁹/₁₀ fine, so that our "subsidiary" silver is debased in weight 6.48%. There are three advantages in thus treating the smaller silver: (1) there is so much clear profit to the Government minting them, thus lessening taxation; (2) a security to the peoples that they shall not lose their convenient small change by export to neighboring countries; and (3) this scheme allows a very considerable rise in the market value of silver without tending to throw the subsidiaries out of circulation. As these are never legal-tender except to very small amounts in domestic trade, there are no serious objections to their use in limited quantities. The English can pay debts in their silver to the amount of £2, and we in ours to the extent of $5. Coins of copper and of other inferior metals are also subsidiary in principle and motive. Our 5-cent and 3-cent nickel pieces are 75 parts copper and 25 parts nickel, and the 1-cent piece is 95 parts copper and 5 parts tin-zinc; and debts of 4 cents can be paid in 1-cent pieces, of 60 cents in 3-cent pieces, and of 100 cents in 5-cent pieces.

10. The steady experience of civilized men for two milleniums and a half seems to demonstrate, that gold and silver constitute the best Money; and we must now investigate the reasons, one by one, why they are the best money. The reasons appear to be three. Of these the first is by much the most important.

(1) The first and main reason why gold and silver make the best money is to be found in their comparatively steady general Value. Since Money is a Measure of all other valuables, its success as a measure must depend on its own steadiness of value, and gold and silver meet this test better than anything else. Money is a valuable, and not in any sense a representative of value; except as to the subsidiaries, a coin does not owe its value at all to the stamp impressed upon it or to the law authorizing it, since the metal in it is worth as much out of the coinage as in it; coin-values arise under the same conditions as all other values, and are variable by any change in any one of the four elements which alone can vary the value of anything; and it would seem that nothing more is needed in order to remove the last vestiges of the dark cloud which has so long overhung this subject of Money, than to familiarize ourselves first of all, as we have already done, with the true doctrine of Value in general, and then to hold fast the truth exemplified on every hand, that the value of Money is just like every other value. Let us examine then, first, why the value of gold and silver is so steady.

(a) On account of the comparatively steady Demand for these metals. Gold and silver are wanted for two general purposes: first, to be used as money, and second, to be used in the arts; and the usual estimate is, that about ²/₅ of the aggregate quantity in the world is in the form of money, and the other ³/₅ in the form of plate and utensils and ornaments. Now, so far as the element of Desire controls Value, the purpose for which any article is desired is a matter of indifference. The aggregate desire for it for all purposes, accompanied with the offer of something with which to buy it, constitutes the Demand; and the more universal the desire, no matter for what use, the steadier the Demand and so far forth the steadier the Value. It is a point still too little noticed, that the combined demand for the precious metals for all uses is what helps determine their general value, and not the demand for them as coin alone; just as the value of barley is regulated partly by the demand for it for food, and partly by the demand for it for malting purposes. Hence an ounce of bullion of the standard fineness destined for the smelting-pot of the artisan is worth within a very trifle as much as an ounce of coined money.

For example, by the law of the Bank of England an ounce of standard gold (¹¹/₁₂ fine) is coined into £3 17s. 10½d., and the Bank is obliged to buy all bullion and foreign coins of the standard fineness offered to it at £3 17s. 9d. per ounce,—a difference of only three half-pennies. Now, gold and silver are so indispensable in the form of money, so beautiful in the form of ornaments, so well adapted to serve the purposes of luxury and love of distinction, and so really useful in the arts, that the Demand for them is constant and well-nigh universal; and should there be in the progress of civilization a lessened demand for them for purposes of personal ornamentation and luxury, and a less quantity be required for coins on account of the multiplied use of cheques and other credit-forms, as seems likely in both cases, a greater quantity will doubtless be required for all the other uses old and new, and so, as the Demand in the past has been steady, and probably steadily increasing, there is every reason to expect the same course of things for the time to come. Moreover, it contributes to the steadiness in value of the gold and silver coin, that there is at hand at all times, in the form of plate, a reservoir from which a chance chasm in the coin may be replenished, or an extra demand for it answered.

(b) On account of their tolerably uniform Cost of Production. Not Desires only but Efforts as well determine Value. Supply is the correlative of Demand; and when to a steady demand there answers a steady supply realized under conditions of pretty uniform difficulty, there will be as a matter of course a pretty steady Value. Nature herself, that is to say, God himself, has indicated in a manner not to be mistaken the intention, that these precious metals should be the Money of the nations. They are scattered all over the earth, and so scattered that the cost of their production has been on the whole pretty steady ever since civilization and commerce began in earnest. God is a God of order throughout all His works. Corresponding to the nature and necessities of men is the whole structure of the outward world. Science builds only on these predetermined lines of Order. Induction is only possible where original Resemblances run through great departments of phenomena. To be enabled to buy and sell to any considerable extent in order to meet their subjective wants, men must have an objective measure of mutual Services, and this measure must be a valuable steady in its purchasing-power: very well; such a possible measure was all provided for beforehand, when the foundations of the earth were laid.

The precious metals have always been obtained in one or other of two ways: by surface diggings and washings, and by rock-mining. Both were employed in the very beginnings of Civilization. There is a description in the book of Job (chapter xxviii) of the way in which the ancient mines were wrought, and of the worth of the ores:

These methods and difficulties in rock-mining, thus poetically and beautifully delineated, have been substantially the same from that early day to the present time; and, consequently, there have been but two or three striking changes in the general value of gold and silver in the commercial world during the last 500 years, at least changes owing to easier and larger Supply. The discovery of the mines of Potosi in 1545, and the large influx of silver into Europe from those and other American sources, together with the irrational stimulus thereby given to the working of European mines under the false impression not even yet wholly dissipated that Value can be clutched bodily in mining, so increased the stock of silver, that its value as measured in grain or other commodities declined in Europe in 70 years after 1570 to about 25% of its previous purchasing-power. Adam Smith expresses the opinion in his Wealth of Nations, that silver did not perceptibly fall before 1570, nor continue to fall further after 1640. The discovery of gold deposits on the Pacific coast of the United States in 1848, and a similar discovery in Australia in 1851, enlarged the annual supply of gold for the world from $40,000,000 in 1848 (Chevalier), to an average of $136,000,000 for the five years ending in 1859 (Jevons); and the latter writer estimated the fall of gold in general commodities from 1845 to 1862 at about 15%. But with exceptions like these, and similar ones are perhaps not likely to recur, the precious metals have always maintained and seem likely to maintain in the future a considerable uniformity of Value, as estimated by their power to purchase other valuables, so far forth as Cost of Production goes to determine their value. Even the great changes just noted in the cost of the metals issued only gradually in a rise of Prices, which many were able to foresee and thus to provide for, but by which many more were caught and brought into distress and even pauperism. The two classes that suffer the most under a fall in the Value of Money are the wages-receivers and the holders of long annuities and other similar obligations.

(c) On account of their Quantity. The amount of gold and silver in circulation in the commercial world, to say nothing of the quantity so easily brought into circulation from the reservoir of plate, is so vast, that it receives the annual contributions from the mines much as the ocean receives the waters of the rivers, without sensible increase of its volume, and parts with the annual loss by detrition and shipwreck, as the sea yields its waters to evaporation, without sensible diminution of volume. The yearly supply and the yearly waste are small in comparison with the accumulations of ages; and, therefore, the relation of the whole mass to the uses of the world, and the purchasing-power of any given portion, remain comparatively steady. It is probable, that production at the mines might cease altogether for a considerable interval without very sensibly enhancing throughout the commercial world the value of gold, as it is certain, from experience, that a production very largely augmented only very gradually and after a considerable interval of time diminishes its value. The mass of the precious metals has been aptly compared with the heavy balance-wheel in mechanics, which preserves an equable and working condition of the machinery under any sudden increase of the power, and even when the power is for a moment withdrawn.

Just at this point a caution is needful. Because it is affirmed that the great amount of the precious metals is a ground of their firm value, it must not be supposed that we are going beyond our general doctrine, and introducing another element, namely, Quantity, besides the four elements, which, as we have so often alleged, can alone vary the value of any Service. Quantity, in itself, is not an element capable of varying the value of anything, but taken in connection with durability, it is an element of what might, perhaps, be called with propriety the Inertia of Value, and tends to keep the purchasing-power of gold and silver where it is. Value and Steadiness of Value are two distinct ideas. The present value of an ounce of gold is decided by four things alone, two Desires and two Efforts; but other elements besides these may help determine that that ounce of gold shall have ten years from now a purchasing-power approximately the same as now. It will depend of course in the last analysis upon the relation of the then Demand to the then Supply; yet the vast quantity of the precious metals in existence, combined with their durability, prevents those fluctuations in the Supply which are so destructive to a steady value. It is not with them as with the fruits and the cereals, whose value varies perpetually with the seasons, and which are so perishable that they must be sold quick or never. Gold and silver are almost indestructible, and the existing mass is not liable to be lessened except by wear and accident, and in so far as the annual production from the mines exceeds the yearly waste there is a natural provision made for the natural increase of Demand to supply the wants of the world for money and for the arts without much disturbing the relation of the Demand and the Supply; and so Quantity in connection with durability helps preserve to them a tolerably steady value from generation to generation.

(d) On account of their Fluency. Gold and silver are in demand the world over. Having great value in comparatively small bulk, they are easily transported from Continent to Continent; and whenever from any cause they become relatively in excess in any country, and so lose there a portion of their previous purchasing-power, there is an immediate motive in profits to export them to other countries, in which their power in exchange is greater, and thus the equilibrium tends to restore itself. The proposition is, The value of gold and silver is kept pretty steady throughout the commercial world by the facility with which they are carried from points where they are relatively in excess to points where they are relatively in deficiency. In any country or place where the precious metals are temporarily in excess, the prices of general commodities as measured in them will rise of necessity, because the unit of measure is smaller than it was; and for the same general reason, the country temporarily lacking in these will experience in consequence a fall of general prices. There is, therefore, a private gain in carrying these metals to those countries in which their power of purchase is the greatest owing to the lack of them, because more commodities can be obtained in exchange for them than at home; and private motives here coincide, as indeed they generally do, with public welfare, since what the traders do in carrying gold and silver abroad with an eye to their own interest only, helps maintain at home and abroad the steady value of these commodities.

This law of the distribution of the precious metals by Commerce, and the equilibrium of their general value resulting therefrom, is as natural and beautiful as the law which preserves the level of the ocean, or that which balances the bodies of the planetary system. This has come at length to be recognized by the nations, and the laws which used to forbid by heavy penalties the exportation of gold and silver are all swept away, and these metals are now free to go and do actually go wherever they can obtain the most in exchange. It is absurd to suppose that their owners would carry them out of a country unless they were worth more abroad than at home; and, therefore, the prejudice which still exists in this country (the relics of itself) is a senseless prejudice. The gold is not given away, it is sold, and sold for more than it will buy at home; otherwise nothing in the world could start on its foreign travels. There is the same kind of gain in this as in all other exchanges of commodities, with this great incidental advantage in addition, that its general value is by this means kept pretty uniform throughout the commercial world.

Unluckily for the darker and middle Ages, so far as they took their cue and thought from the Romans, the latter, in the teeth of the sound view of Aristotle, looked upon Money as something quite different from other forms of salable things, looked upon it in short as an end in itself, as something to be gained and not readily to be parted with. If this were the right view of Money, as it is not, then the policy to spring from it might well be,—Get all the money possible into the country, and let as little as possible out! Just this came to be the policy of the Romans. In one of his Orations, Cicero says, "The Senate solemnly decreed both many times previously, and again when I was consul, that gold and silver ought not to be exported." The other and the true opinion, that money is bought and sold like any other valuable, and that its sole peculiar function is as a means to further sales, was indeed held and argued at Rome, as we learn incidentally from a passage in the Institutes of Justinian; but the false though plausible opinion, that money is ultimate, and not mediate, is said in the same passage "to have prevailed"; and accordingly this superficial view of money, and that it "ought not to be exported," constitute what may be called the Bullion Theory, and it is the first general theory of Sales ever promulgated. The Romans brought it forth, and other nations took it from them. It could never stand in the light of Reason, and still less amid the exigencies of practical Commerce.

It is an illustration of the continuity of human thinking as well in wrong as in right directions, that the second main theory of Sales, which has long been styled the Mercantile Theory, is a prolongation and expansion of the first. That gave an undue weight to gold and silver over other goods in trade, and forbade their export: this did the same thing too, but also tried to swell the exports of other goods beyond the worth of current imports, so as to get back a balance in gold and silver: both alike interfered with the international fluency of the precious metals, to the constant detriment of all parties to the restrictions. The common principles of both Theories may be thus expressed: Gold and silver are the things to get; they are worth more than what they will buy; therefore let us get all of these in that we can, and let as little of them out as we can; and let us work all our trade so, that others shall have to give us a balance back in gold and silver. These false postulates and inferences wrought centuries of woe in the world of commerce, because all the leading nations became devotees simultaneously to this scheme of each shrewdly plundering the rest. The germs of this Mercantile Theory appear first in France, when Phillippe le Bel, in ordinances of 1303 and 1304, put his hand in as king to mend the movement of trade, to forbid the export of gold and silver, to fix the price of wheat and to forbid its export, and to lessen imports by prohibitions of them. "Considering that our enemies might profit by our provisions, and that it is important to leave them their merchandise, we have ordered that the former should not be exported nor the latter imported." The famous Colbert, who laid down many financial maxims that are good, thought nevertheless, that he could so manage the foreign trade of France that she should get the better of her neighbors, and embodied his plan in the tariff of 1664. We will let him state his plan in his own words: "To reduce export duties on provisions and manufactures of the Kingdom; to diminish import duties on everything which is of use in manufactures; and to repel the products of foreign manufactures by raising the duties." The principle of the Mercantile Theory was never better or briefer expressed than by Ustariz, a Spaniard, in 1740: "It is necessary rigorously to employ all the means that can lead us to sell to foreigners more of our productions than they will sell us of theirs, as that is the whole secret and the sole advantage of trade." Too many nations knew the "whole secret" at the same time, and accordingly the "sole advantage" to any became exceedingly small. England was as deep in the sloughs and wars and losses of this false system as any of the rest.

It may be laid down as an axiom, that no country will ever export for the sake of buying other things those things which are more needful for its own welfare at home. So long as human nature continues what it is, what it always was, what it always will be, no persons in any nation will ever export gold and silver except to buy therewith other valuables then and there more important to them and consequently to their country. There need not be the slightest fear that any nation which cultivates its own commercial advantages under freedom will ever lack for a day a sufficient quantum of the precious metals; because under freedom these metals will always go, and go in just the right proportions, to and from those countries which produce and offer in exchange those desirable Services which other countries want. The greater the enterprise and skill, the keener the development of all peculiar and presently available resources, the more honorable and free the commercial system, so much the surer is any nation whether it be a gold-bearing country or not, of securing all the gold and silver which it needs. This is so, because there will be a good market to buy in, an abundance of good and cheap goods will be there, and they who have gold will resort thither to buy. But such a free and enterprising nation will also want to buy other things besides gold and silver, and other things than those itself can make or grow to advantage, and when enough of the precious metals is secured for money and the arts, the residue will be exported, perhaps to the very countries from which it originally came, in payment for some products which those countries have an advantage in producing.

The United States, for example, is a gold- and silver-bearing country, and exported in the years 1850-60, both inclusive, $502,789,759 in coin and bullion, according to the official Report on the Finances, 1863; and during the same period imported from other countries $81,270,571 in coin and bullion. Where was the famous and fallacious "balance of trade" in that case? The United Kingdom, on the other hand, is not a gold- and silver-producing country at all, but it is the central market of the world for the precious metals all the same, its imports and exports of them are immense in all directions, because it is an enterprising country within the lines of Nature in agriculture and manufactures and commerce, and is not afraid to allow its people to buy and sell freely with all the world. Where lies in the technical sense the "balance of trade" between Great Britain and the rest of the world? Who can tell? All that is known, and all that is worth knowing, is, that all that trade is immensely profitable to all the parties to it wherever situated.

Now, there is always a double advantage in these free movements of coin and bullion in exportation and importation. In the first place, more and better commodities are secured to the countries exporting, whether they be gold-bearing or not, than the gold could have bought in those countries, otherwise it would not have been carried abroad, that being the sole motive that stirs it from its present haunts; and in the second place, the benefit to the countries importing is the market for their own commodities created by the gold brought in, for we must never forget that a market for products is products in market, is a benefit also in naturally and easily filling up a chance deficiency in the quantum of coin there, and incidentally too a benefit to the world as tending to keep in equilibrio the purchasing-power of the metals everywhere. This last is especially seen when new and pregnant sources of supply are opened in any country. For example, in the United States about the middle of the century the stock of gold was more than doubled in ten years' time; unless by much the larger part of this had been carried abroad in commerce, it would have inevitably depreciated the whole mass and disturbed the prices of everything; but by causing the new gold to impinge on the whole world's stock, the shock of the new production on the measure of Services, though perceptible, was reduced and deadened. The world's mass of the precious metals is comparatively torpid beneath the action of an accretion which would break down by its weight the metals of a single nation. Therefore, in conclusion on this topic, the Fluency of gold and silver, by which they pass easily in commerce to those places where their present value in exchange is greatest, or to such countries as India and China which have shown for centuries a wonderful power to absorb the metals of the West, and return as easily when the conditions are reversed, or when a larger use of paper-credits releases some portion of the coin, tends powerfully to make their general value uniform throughout the world, and consequently to make them the best medium of Exchange and the best measure of Services.

(e) On account of this Circumstance, that every general rise or fall in the value of gold and silver tends quickly to check itself. This principle, indeed, is applicable more or less to the value of all commodities, but owing to their quantity and durability and fluency pre-eminently applicable to the value of the precious metals. The check is double in either direction. First, let us suppose that the purchasing-power of an ounce of gold or silver be rising: then, production will be stimulated at all the mines, and the more stimulated as the rise is more; and this new and enlarged Supply will tend to check a farther rise, and unless the permanent Demand has been in the meantime intensified, to bring back the value to the old point; moreover, when there is a rise in the value of the coin, a less quantity is required to do the same amount of business; and the demand for gold which causes the rise tends to be checked by the rise itself, because a lessened quantity is needed for money-use in consequence of the rise. If the exchanges mediated by money have become permanently greater than before, then of course the Demand will continue greater than before, and the rise in value may be maintained.

And just so, mutatis mutandis, of a fall in the purchasing-power of the coin. The production of the metals is thereby slackened at the mines, and the lessened Supply tends naturally to enhance the value; and if the same amount of business is to be done as before, there is a stronger demand for money while the fall continues, and this new Demand helps also to bring back the old value. All this is in the interest of a steady value.

(f) On account, lastly, of this Circumstance, that a stronger Demand for Money is met in either one of two ways, by increasing the stock of coin, or by an increased rapidity of circulation of that on hand. It is exceedingly fortunate that a brisker demand for money, especially if it be but temporary, does not necessarily enlarge the Supply or alter the value, but only hurries round the existing money. Oscillations in the Demand are responded to by a slower or a more rapid circulation. This tends admirably to keep the value of the existing-stock of money steady within certain limits. Ignorance of this principle, or indifference to it, has caused mighty mischiefs in the United States. In General Grant's administration, for instance, the cry that a larger volume of money was needed "to move the crops" was disastrous in its results. The truth is, that the volume of Money in the United States was then, and has been ever since, by much too great, considering its character, as we shall see by and by. The multiplying and fructifying nature of Rapidity of Circulation has never been understood by our national financiers. When, however, enterprises are multiplying and Exchanges are being permanently increased in number and variety, then there must be a larger volume of money, and this larger amount is secured in the ways already indicated, with perhaps slight disturbances of value, but the temporary ebbs and flows of business should have no effect at all on the mass of money, but only on its movement, and its value consequently would scarcely be disturbed.

These Six grounds appear to be satisfactory and sufficient to account for the superior steadiness of the value of gold and silver, so far as their value is determined by considerations relating to these metals themselves. We now proceed to the two reasons additional to this why gold and silver constitute the best Money.

(2) The second general reason why gold and silver make the best money is found in the fact that Governments have little to say or do about the Value and Quantity and Mode of Circulation of such Money. In respect to Credit-Moneys, like our own Greenbacks and national Bank-Bills, the Government has everything to say. When we remember how governments are constituted, that they are only a transient Committee of the citizens for special purposes; of what sort of persons they commonly consist; the variety of subjects they are obliged to consider during short periods of office; the absence for the most part of expert knowledge among them; the enormous blunders they have made in the past in all financial measures; and that those who know the most about their action in the past and present in such matters have the least confidence in their ability to act wisely; the better we shall see the strength of the grounds of this second reason. In all essential respects money of gold and silver regulates itself. These metals came to be money and continue to be money in the main sense independent of the enactments of any Government. The people chose them: they choose them still. As we have seen, coins do not owe their value to the stamp of the Government, since the metal in them is worth within a trifle as much before coinage as after. Coinage publicly attests the quantity and quality of the metal in the coin, and that is all. Of the value of their coins governments say nothing. They can say nothing. That depends on men's judgments, and not on edicts at all. No law of the United States can add directly an appreciable fraction to the value of a gold dollar. The law makes it consist of 25⁴/₅ grains troy of gold ⁹/₁₀ fine, the mint so stamps and attests it, and thereafter it takes its own chance as to value.

Some Governments charge a little something for coining for their People, and some do not. What is charged is called seignorage. England coins gold for all comers at a seignorage of .032%, which is practically a free coinage. France charges for gold .216%; and by the law of 1874, the United States charge nothing for coining gold. It is left to the People to say how much money they will have coined; and, having received it back from the mint, they may do just what they please with it; they may hoard it, they may melt it, they may sell it at home in purchase, and they may export it in foreign trade, at will. Now, it is a great gain, an immense relief, to have a Money with which the Government has nothing to do except to mint it; a money that asks no favors, needs no puffing, never deceives anybody, knows how to take care of itself, is always respectable and everywhere respected.

(3) The last general reason why gold and silver make the best Money is to be found in their physical peculiarities, in accordance with which they are (a) uniform in quality, (b) conveniently portable, (c) divisible without loss, (d) easily impressible, and (e) always beautiful.

Pure gold and pure silver, no matter where they are mined, are exactly of the same quality all over the earth. Not so with iron and coal and copper. Gold is gold, and silver is silver. The gold mined to-day in California differs in no essential respect from the gold used by Solomon in the construction of the Temple, and the silver out of the Nevada mines is the same thing as the silver paid by Abraham for the cave of Machpelah. Nature with her wise finger has thus stamped them for the universal money; and a universal coinage, that is, coins of the same degree of fineness, and brought into easy numerical relations with each other in respect to weight, and current everywhere by virtue of universal confidence in them, though bearing the symbols preferred by the nation that mints them, is one of the dreams and hopes of economists, that will be realized in some

Gold and silver are sufficiently portable for all the purposes of modern Money. Their weight is little relatively to their value. A thousand dollars in gold are not indeed carried so easily as a Bill of Exchange or a Bank-note; and expedients are easily adopted, and have been in use since the days of the Romans (really since the later days of the Assyrians), by which the transfer in place of large masses of coin is for the most part obviated; and these expedients have all been explained at length in the foregoing chapter on Commercial Credits. But for the ordinary exchanges for which they are designed, gold and silver coins are portable enough. The writer has carried across the ocean, incased in a glove-finger and borne in a vest-pocket, a troy pound of English sovereigns, worth about $230, scarcely conscious of their weight though easily reassured of their presence by a touch of the hand. The experience of those countries, like France and Germany, in which the Money has been and is still mostly metallic, has not pronounced it onerous on account of its weight; and, at any rate, it is better to accept all the other immense advantages of gold and silver money, together with some inconvenience as to weight, if one chooses to insist on that, than to adopt substitutes every way inferior as money, except that they are lighter in our purses. They are unfortunately "lighter" in other respects also.

Moreover, gold and silver differ from jewels and most other precious things, in that they are divisible without any loss of value into pieces of any required size. The aggregate of pieces is worth as much as the mass and the mass as much as the pieces. This is a great advantage in Money, because for the convenience of business a considerable variety of coins is required, and the proper proportion of each kind to the rest is a matter of trial, and if any kind be minted in excess of the demand nothing more is required than to remint in other denominations, and the whole value is thus saved to the country in the most convenient form.

Then, gold and silver are easily impressible by any stamp which the Government chooses to put upon them. Indeed in their natural state they are too soft to retain long the impress of the die. Accordingly for coinage purposes they are always alloyed with another metal, chiefly copper, since by a chemical law whenever two such metals are mixed together the compound is harder than either of the two ingredients. Most of the Nations now use in their gold and silver coins ¹/₁₀ alloy, but England still adheres to her ancient rule of ¹/₁₂ only. So compounded coins receive readily and retain for a long time with sharp distinctness the legend and other devices chosen for them to bear. In monarchical countries the head of the reigning sovereign is usually stamped upon the current coins; in all countries national emblems of some sort; quite recently some of the coins of the United States have been made to bear the appropriate legend "In God we trust"; so that patriotic and even religious associations are connected with the national Money. Although the alloys harden the coins, yet after long usage they will lose a part of their weight by abrasion, and Governments usually indicate a short weight, after coming to which the coins are no longer a legal tender for debts. Thus an English sovereign weighs 5 pennyweights 3¹⁷¹/₆₂₃ grains, containing 113¹/₆₂₃ grains of fine gold, and when it falls below 5 pennyweights 2¾ grains, it loses its legal-tender character.

Lastly, gold and silver when coined into Money are objects of great beauty. This is no slight recommendation of these metals for the money of the world. They are clean. They are beautiful. People like to see them, and to handle them, and to have them. Their perfectly circular form, the device covering the whole piece, the milled and fluted edges, the patriotic emblem, whatever it be, the religious or other legend, and their bright color, are all elements in their beauty. The educating power over the young of a good coinage well kept up, Æsthetically, historically, and commercially, is a matter of consequence to any country. A whole people handling constantly such money cannot fail to receive a wholesome development thereby. The new German coinage, for example, in contrast with the old moneys of the German States, furnishes a good illustration of all this. The new German coins from highest to lowest are very beautiful, and have already tended and will tend more and more, other things being equal, to a true German nationality.

11. Silver is much inferior to gold as a metal for Money, for this main reason, that it has proved itself much less steady in its general value; and its value is less steady, because it is subject to greater changes in its Supply and greater variations in its Demand. As an example touching Supply, we cite the fact, that the annual silver product of the world doubled in the third quarter of this Century, rising from an average of $40,000,000 yearly, 1851-61, to $80,000,000 in 1875; and that Nevada alone yielded in 1876 as much as the whole world yielded twenty years before. Then, too, Demand, that is, effective public opinion, does not hold to silver as it does to gold for a standard of Values. The action of England in 1816, of the United States in 1853, of Germany in 1871, of Scandinavia in 1874, and of the Latin Union in 1876, in legally making gold the sole standard of Services and silver subsidiary to that, of course affected more or less the Demand for silver as Money, and thus varied its value. We have at hand the data to demonstrate the effect of these two causes combined: the average price of silver in gold from 1833 to 1874, in the London market, which is the bullion market of the world, was for the 40 years just about 60 pence per ounce, never falling below 58½ and never rising to 63. At 60 pence per ounce (444 grains of pure silver, standard English silver being .925 fine) the ratio of gold to silver is 1:15.716. But between May, 1875, and July, 1876, when both the above causes had come into full action, silver dropped in the London market to 47 pence per ounce, a fall of 21%, and a ratio of gold to silver of 1:20. The price gradually rose again to about 53 pence per ounce, and remained in that general neighborhood till 1882, between which date and 1890 the sagging process went on to the general result of 25% discount as compared with the old average of 60 pence in gold per ounce of silver.

These facts settle the question adversely to the fitness of silver to become an independent Measure of Values. When, however, it is designed that gold and silver shall circulate together in some numerical relation to each other as Money, it becomes needful that Government shall fix as well as it can, not the general value of either but the relative value each in each for the time being. But this specific value, too, goes on to regulate itself independently of government edicts. No matter how well the work is done at first by ascertaining the actual ratio in which they are exchanging in a free market, it will certainly require revision from time to time. This is what is called Bimetallism. The reader will now perceive the fundamental and ineradicable difficulty with the bimetallic system, which has led by bitter experience nearly all the European nations to abandon it. It especially becomes us to understand how the United States have fared in a century's attempt to keep in equilibrio as a conjoint and legal Measure of Services both gold and silver in a fixed numerical relation.

Alexander Hamilton as the first Secretary of the National Treasury, entering upon excellent preparatory work done both by Robert Morris and Thomas Jefferson, guided the action of Congress in establishing the Mint in 1792, and really determined the weight and fineness of the first federal coins and their relative value each in each, the silver coins being struck in 1794 and the gold ones in 1795. The silver dollar was copied from the Spanish milled dollar of commerce, which contained 371.25 grains of pure silver, and that has been the exact content of our national silver dollar from that day to this. The halves and quarters and dimes were exactly proportioned in weight and fineness to their units. Hamilton supposed that gold was then worth in Europe 15 times as much as silver, and advised consequently that the gold dollar should contain 24.75 grains pure, and that both dollars should be alloyed at the English rate of ¹/₁₂, thus making the silver dollar weigh 405 grains and the gold dollar 27 grains; but Congress, while enacting the gold dollar just as the Secretary recommended, preferred to alloy the silver dollar by 44.75 grains instead of 33.75, thus making its weight 416 grains. Alloy is of no account in value.

From the ratio of 1:15 fixed by the act of Congress in accord with Hamilton's opinion as to the relative value of gold in silver to be maintained in the coins, unforeseen and important consequences followed, since that was not the true ratio of their value at the time in the markets of the world; an ounce of gold was worth more at that time than 15 ounces of silver, and, accordingly, was worth more out of the coinage than in it, and was therefore exported in preference to silver in payment of foreign balances, especially after France had changed the relative legal value to 1:15½, which happened in 1803; and of course the gold refused to circulate here under those circumstances, being undervalued in the coinage, thus giving a neat illustration of the economical law to be unfolded under the next numerical heading, namely, that the cheaper money will always push the dearer out of the circulation. Not till 1834 was the attention of Congress so strongly drawn to this fact and consequence, as to secure an enactment to remedy it; and this coinage law of 1834 rated gold to silver as 1:15.98. The weight of the gold dollar was at the same time reduced from 27 to 25.8 grains, and the alloy increased from ¹/₁₂ to ¹/₁₀. These changes of 1834 increased the relative legal valuation of gold in silver 6.53%. But this in turn was going too far in the opposite direction; gold was not worth 1:15.98 in the bullion markets of Europe; France was holding steady her ratio of 1:15.50; and, consequently, the commercial current of the metals was now reversed, silver passing in preference to Europe to liquidate the balances of trade, and gold beginning to come to the United States, where it would buy more than 3% more silver than in Europe.

Three years after the above changes, that is, in 1837, the standard of ⁹/₁₀ fine instead of ¹¹/₁₂ was applied by law to silver also, and this altered fineness made a change in the weight of the silver coins necessary, if the ratio of 1:15.98 was to be maintained between the gold and silver. Accordingly, the weight of the silver dollar, and of two halves, four quarters, and so on, was reduced from 416 grains to 412½, that is to say, less alloy was put into the silver coins, but the fine silver to the dollar was kept just as it was, namely, 371.25 grains. Since 1834 there has been no change in the gold dollar and its multiples, and since 1837 there has been no change in the silver dollar-piece, and the legal ratio of value between gold and silver in our coins is still 1:15.98, since the silver dollar of 1878 and onwards to 1890 corresponds in weight and fineness with the dollar of 1837.

Still, notwithstanding the pains taken and the changes made from time to time to keep the two metals in legal equilibrio, there never has been any considerable period in the century now drawing to a close, during which gold dollars and silver dollars have circulated freely and indifferently in the United States. Sometimes it has been the one kind, and sometimes the other kind, but never both kinds at the same time. The present writing is in the spring-time of 1890: both kinds of dollars are legal tender for all debts public and private in the old-time ratio; the national Government professes to be indifferent whether it pay out gold or silver in redemption of its paper-moneys, but after all, with the exception of the Pacific States and a few special branches of business in the cities of the East and of the Middle, gold coins are not now in common circulation, the bank drawers crowded with silver dollars feel little of the weight and see little of the shine of the gold coins, and if any of these chance to be paid out to ordinary bank-customers they are pretty certain to return in speedy deposit. The theoretical bimetallism of the United States has been a practical though alternate monometallism with various incidental and concurrent disadvantages and losses.

By 1853 these disadvantages of a long-attempted double Measure of Services made legal tender for all debts had become plain enough to everybody, for experience had demonstrated that the Value of gold and silver each in each was not constant but constantly variable; and Congress then wisely determined to make Gold alone the legal tender, except in sums below $5. In connection with this great change in the coinage, a lesser one was introduced at the same time, namely, to reduce the weight of the silver half-dollar and its subdivisions, so that their nominal value in the coinage should be considerably above their metallic value, and their exportations be thus prevented. Accordingly, the half-dollar was reduced in weight from 206¼ to 192 grains, and the smaller coins proportionally. This was in imitation of the English legislation of 1816, and brought into this country a subsidiary silver coinage, which still continues, and of which a nominal dollar's worth weighed 6.91% less than the Silver Dollar, which was not mentioned one way or the other in the law of 1853, but which was then worth about three cents more than the gold dollar, and was of course wholly out of circulation.

Through the influence of the late Samuel B. Ruggles, these subsidiary silver coins were brought in 1875 into harmony with the silver-system of France and the Latin Union. Their five-franc silver piece which is also ⁹/₁₀ fine, weighs just 25 grams or 385.8 grains; a dollar's worth of our subsidiary silver, as we have just seen, weighed 384 grains; and it was, therefore, needful to add only a slight fraction of weight to our smaller silver coins in order to knit a real connection between them and much of the European silver. Two halves, four quarters, ten dimes of our silver since 1875, are debased in weight (not in fineness) 6.47% as compared with the standard silver dollar. A more important coinage connection with Europe was knit through our first five-cent nickel pieces, each of which weighs just five grams, and five of which laid along in order measure exactly a decimetre in length. These were the first official applications of the Metric System on the part of the United States. The nickel pieces, both the five-cent and the three-cent, are 75 parts copper and 25 parts nickel; and the one-cent piece is 95 parts copper and 5 parts tin-zinc. Debts of 4 cents can be legally paid in one-cent pieces, of 60 cents in three-cent pieces, of 100 cents in five-cent pieces, of 500 cents in subsidiary silver, and of any amount in gold coins or in silver dollars.

12. A money inferior in general value will, so long as it circulates locally, drive a superior money out of the circulation. This proposition is a fundamental and universal one in monetary Science. The only exception to it is found in token-coins, and in subsidiary silver so far as that has the token-quality, that is, so far as its nominal is above its bullion Value. The main motive in coining tokens is to make sure for its own local uses of a nation's small change. Token-money is worthless for export, is only designed for the smaller exchanges, is legal tender only for very small sums, and is acceptable only on local and conventional grounds. The exception aside, the above proposition is a pervading and controlling Law of Finance and has been illustrated over and over again in every Age and Nation. It is as solid as the substance of truth can make it, although it looks at first sight like a paradox. We naturally think that what is excellent all round tends rather to displace what is inferior in spots, but with Money the exact reverse is the law; and the perfect coin of full weight, instead of driving out the light and the debased pieces, is always itself driven out of the circulation by them.

The reason for this becomes obvious the moment we ponder the nature of Money. Money is always a Valuable, taking on in addition under Law or Custom the function of serving as an instrument of Exchange. As money, nobody wants it except to buy with, and so long as the Government and the community treat light coin and full coin as of equal value, receiving them indifferently in payment of debts and of taxes, it is clear that nobody will give in payment of debts and of taxes that which is really worth more so long as that which is really worth less will go just as far. The inferior pieces will abide in a market where they will fetch just as much as the superior pieces, while the superior pieces will take on a form or migrate to a place in which some advantage can be gained from their superiority. Thrown into the crucible, or exported in commerce, this superiority immediately manifests itself; and therefore into the crucible or into the channels of foreign trade it might be confidently predicted beforehand that such money would be thrown, and all experience testifies with one voice that exactly those are the destinations of such money.

Aristophanes, the Greek comic poet, in the 5th century before Christ, seems to have been the first writer who noticed that good coins of full weight are apt to be crowded out of the circulation by the lighter and poorer pieces, and he, mistaking the cause of this, satirized his countrymen unmercifully for preferring bad coins to good, and demagogues, like Cleon, to honorable citizens for rulers. The following are the verses:—

Sir Thomas Gresham, financier of Queen Elizabeth and founder of the Royal Exchange and of Gresham College in London, was the first thinker to understand fully and explain scientifically what Aristophanes and others had noticed as a fact, and what in its explanation may hence properly be called "Gresham's Law." We will append a few historical illustrations of the fact and the law as instructive in many ways.

(a) The City of Amsterdam founded its famous Bank in 1609, because no other way seemed to open of preventing the clipped and worn foreign coins then and for a long time circulating in that great Mart of Trade from driving out completely the good money of full weight, which the Mint of the City had been constantly pouring in. The Bank was devised as a municipal Institution with this intent; it was a Bank of Deposit only; it took in all the old coins at their bullion value only; and then had them reminted at full weight; it gave the depositors credit on its books in the terms of the new money for all of the old they chose to bring in; it then adjusted accounts between merchants and all other of its customers by mere transfers on its books; the City required all debts falling due in Amsterdam to be paid in the new "bank-money," which took away all uncertainty from Bills of Exchange drawn on Amsterdam, which were previously liable to be paid in the clipped and worn coin, and were therefore sometimes at as much as 10% discount in other cities; this simple requirement brought these foreign bills to par, and kept them there; the full-weighted money now stamped by the city Mint abode in the circulation, being now the sole Measure of Services there; and thus it became the interest and convenience of every business man in Amsterdam to have these simple dealings with the Bank, which in turn enjoyed unlimited credit in the commercial world for almost two hundred years.

(b) The great English Recoinage of 1696 was completed under the imperatives of Gresham's Law. Graphically does Macaulay describe the causes and the effects of this in his 21st Chapter. The old silver coins had been stamped under the hammer; few of them were perfectly circular; the edges were neither milled nor fluted; the legend was not so near the edge as that the letters were impaired by a little clipping; it was easy to pare off a pennyworth or two, and then pass the coins along; it was profitable to do it, and in vain that Elizabeth enacted that the clipper must suffer the penalties of high treason; nearly all the coin of the realm became mutilated, and about 1660 a new process of coinage was brought in. A mill worked by horses fabricated the new coins on better principles. They were exactly round, and the edges were inscribed with a legend, and they were all of just and equal weight. They were thrown out to pass current with the hammered money, and it seems to have been expected that they would soon come to displace it. But they did not. Both were received at first without distinction by the individual traders and by the public tax-gatherers. But the milled money soon came to be scarce, and the old money grew constantly worse. The lighter the old coins became, the scarcer became the new ones; for who would pay two ounces of silver when one ounce was legal tender? The new money was melted, was exported, was hoarded, but circulate it would not. At length the lightest pieces began to be refused by some people, and other people demanded that their silver should be paid to them by weight and not by tale, and there was wrangling over every counter, and a dispute at every settlement, and the coin was really so diverse in its value that there was no longer any measure of value in the kingdom; business was in utmost confusion, society was by the ears, poor people were unmercifully fleeced, and shrewd ones grew enormously rich; and the Jacobites secretly exulted in the hope of being able to avail themselves of the prevailing discontent to overthrow the scarcely established revolutionary government of William and Mary; when, by the joint counsels of two such philosophers as Locke and Newton, and two such statesmen as Somers and Montague, the government took the bold resolution of recoining all the silver of the kingdom. An early day was fixed by Parliament after which no clipped money could pass except in payments to Government, and a later day after which it could not pass at all.

(c) Gresham's Law has had beautiful illustrations in the monetary history of the United States. We have already seen the reason why the first silver dollars of 1794 could not compete in currency with the gold coins of 1795,—the silver was under-valued in the legal ratio 1:15,—it would have been much nearer the European market at 1:15.5. There was another reason operative in the same direction from the beginning, which did not, however, come to the notice of the Government till ten years later. Only 321 silver dollar-pieces were coined in the year 1805; and May 1, 1806, there stands an order from President Jefferson to the Director of the Mint,—"that all the silver to be coined at the Mint shall be of small denominations, so that the value of the largest pieces shall not exceed half a dollar." The presidential reason given for this order is,—"that considerable purchases have been made of dollars coined at the Mint for the purpose of exporting them, and that it is probable that further purchases and exportations will be made." The coinage of silver dollars thus suspended was not resumed for 30 years. What was the matter with these dollars? Nothing, only they were too valuable. Hamilton had adopted for his new dollar the exact weight in fine silver of the normal Spanish-Mexican dollar, then and for a long time the unit of the thriving West India commerce; clipped and worn coins of this popular stamp had slipped into circulation in large numbers throughout the United States, and driven out the new and good pieces in accordance with a principle much better understood now than then; the President's order itself was not very intelligent, inasmuch as two halves, four quarters, or ten dimes, were then equal in weight and purity with the dollar-pieces, and as a matter of fact were almost (if not quite) equally driven out by the smaller Spanish-Mexican coins. The "four-pences" and "nine-pences" ("York shilling") of that coinage were almost exclusively the small change of New York and New England during the first half of this century. The "dimes" and "half-dimes" of our own mintage, though long legalized, were but slowly naturalized. The coin-changes of 1853, already described, gave a fair chance for the first time to our smaller silver coins.

The last native illustration of Gresham's Law will force us to anticipate here the discussion under the next numerical heading, so far as to assume that there is such a thing as paper money, and that the Law now in hand works in connection with that as well as with diverse forms of metallic money. In 1862, Treasury notes, commonly called Greenbacks, made a legal tender for debts though not bearing interest, were issued by the national Government to the amount of $450,000,000. Of course, under these circumstances they depreciated in value as compared with the gold dollars, which gold dollars they were unfulfilled promises to pay. Just so soon as the greenback dollars fell fairly below the gold dollars in value, the latter left the channels of trade in a very few days' time. Down sank the greenbacks gradually below the subsidiary silver coins in value, and the latter obediently and utterly abandoned the commercial field. At last the greenbacks went down even below the level of the copper cents, which at that time cost the government about half a cent each, and this invariable law of money swept the circulation bare of coppers, and the people had to resort for their smallest change to postage-stamps and shin-plasters and other abominations. Happily, the country survived to see these processes exactly reversed, and the old law confirmed on its other side. When, after a considerable interval, the paper dollar appreciated to the proper height, it was interesting to watch the copper cents put in a prompt re-appearance; after a still larger appreciation of the paper, back came in abundance the subsidiary silver; and as the day of the redemption of the paper drew near, silver dollars and gold dollars greeted smilingly their old acquaintances of the street.

13. So far we have treated only of Coin-Money in its two forms, substantive and subsidiary. The latter may now be dismissed as of little consequence in itself, and as already elucidated fully: the latter is the only Money that stands in its own right as a commodity, and the only Money that can give birth to the Denominations of Value, such as sovereigns, dollars, marks, and francs. What is a Dollar? A dollar is 25⁴/₅ grains of a metal compound coined, of which nine parts are pure gold and one part a hardening alloy. It is a definite quantity of a thing definitely and legally described. It is a visible and tangible and well-known commodity. Government is competent, if it pleases, to alter the quantity of gold that shall constitute a dollar, although the People will quickly and roughly readjust the prices of Services to a changed measure of them; it is competent even to make a dollar out of silver, as our Government has tried to do (for the most part vainly) for a century, though it is not competent to cause both dollars to circulate as such at the same time; but civilized and advanced Governments are not practically competent to make a Dollar out of anything else than gold and silver.

Money is a current and legal Measure of Services; for the end and in the way in which Money alone originates and becomes current its material must be a valuable commodity; and after centuries of experiments and exclusions no civilized People now tolerate any other commodity in this relation than gold or silver. Such a selected commodity becoming in the manner already explained an actual medium passing from hand to hand in Exchanges, impresses its name on the minds of men as an ideal measure of services, which measure they can use, and do constantly use, without handling at the time the commodity itself. But these ideal-dollars, these denomination-dollars, need to be kept in check by a constant recurrence to actual, palpable thing-dollars. The denomination only comes into existence in connection with the use of the thing, cannot possibly exist independently of it, and needs constantly to be reduced to it (as it were by actual contact) in order to be useful as a measure. Just as men talk about inches, and calculate by inches, in thousands of cases in which no actual inch is used as a measure, and in every case of doubt, dispute, or difficulty have recourse to the actual inch, and thus the ideal inch is kept steady in the minds of men by frequent reference to the outward standard; so the mental measure of services, which men insensibly acquire from the use of the objective measure, needs to be kept true by actual and frequent contact with that measure.

But besides this Thing-Dollar and its Denomination, which always go together like a man and his shadow, there is one other kind of Money, namely, the Promise-Dollar. We must now attend to this. What is a Dollar-Bill? How does it read? It is always a Promise of some Issuer to pay to bearer One Dollar, that is to say, this legal and definite quantity of a precious metal. There is no mystery here. There can be none. A Dollar is a tangible and weighable commodity. A Dollar-Bill is a Promise to render this commodity to bearer on demand. The difference is the same in kind as that between a bushel of corn and a man's promise to his poor neighbor to give him a bushel if he will come for it. It depends on the man, on his ability and character, how much the corn-promise is worth; and so it depends on the issuer, on his ability and character, how much the coin-promise is worth. The Issuer may be of such standing as to be able to secure for his promises that they become "a current and legal measure of Services"; and if so, they become Money under the definition.

There is, then, such a thing as Paper-Money, though many high authorities are reluctant to concede, that any mere promises can be money at all. For ourselves we cannot refuse the courtesy of the term "money" to paper-promises-to-pay-coin, which our Country makes a legal tender for all debts, public and private. The making them legal tender, however, does not alter their nature one particle. They are still promises,—and nothing more. Their Value depends in all cases upon the character and resources of the Issuer; their Currency may be quickened (at some rate of value) by their being made a legal tender. Nothing can by any possibility become a Money unless it first be a Valuable. The essential characteristic of Money is its possession of a generalized purchasing-power. The Value of a promise depends on one set of causes, with which we are now very familiar,—the same causes on which the value of everything depends; the Generalization of any purchasing-power into money depends upon another set of causes, of which the action of a Government in legislation may be one.

Paper-Money, as now defined, may be issued by Banks with or without an indirect government sanction, or through the direct action of Government. The Bank of England has been issuing since 1694 paper-money under a series of Charters granted by the Government, which becomes thereby in a manner responsible to the bearers for the redemption, that is, the fulfilment, of the direct promises of "The Governor and Company of the Bank of England"; since 1863 the so-called National Banks of the United States have issued promises-to-pay, designed to circulate as money, under the direct authority and quasi-endorsement of the national Government; and since 1862 that Government has been putting out directly its own promises commonly called "greenbacks." These last have rested and now rest for their value solely on the good faith of the People as between themselves. By a separate and additional act of legislation, which it is mischievous as well as unscientific to confound with the original promise-legislation, this particular paper-money was and is legal tender for debts, which collateral circumstance whether wise or unwise neither changes the nature nor lessens the obligation of the original promise to pay coin. No so-called Decision of the Supreme Court can abolish or abridge a natural and scientific distinction. Money is at bottom of two kinds only: the first kind is an intermediate and equivalent merchandise, Coin; and the second kind is Promises to pay this to a bearer on demand, Paper Money.

The only way to make any promise respectable is to fulfil it in due time. The only way to make Paper Money a decency is to hold sacred in action the promise that distends it. The United States undertook in 1862 and onwards to make its own plain promises respectable by a different method, namely, by legally asserting in substance that the promise is its own fulfilment, and needs no other; and in this persistent undertaking encountered a miserable failure throughout; because the People also persisted in estimating the promise solely in the light of the prospect of its literal fulfilment. The greenbacks at one time lost two-thirds of their normal value under the working of such estimation. This question of the relation of two kinds of Money to each other is a question of Economics, and not of Constitutional Law; or rather, it is a question of common sense and common honesty, and the judgment upon it of nine men learned in the Law is no whit better than the judgment of nine other intelligent men.

As Money is analyzable into two varieties only, Coin and Paper, so Paper Money falls into two classes, Convertible and Inconvertible. A convertible paper money consists of promises that are always kept by the issuer according to their terms, that is to say, that are paid in specie at the will of the holder. An inconvertible paper money is only another name for unfulfilled promises. Is it any wonder that unfulfilled promises to pay invariably become less valuable than that which they promise to pay? They are valuable to start with, else they could not become money, and they are valuable because men suppose the promise will be kept: they are commonly valueless to end with, because men lose faith in the fulfilment of a promise long delayed. This is the simple secret of the depreciation of inconvertible money so soon as the amount of it passes a certain limit, and so soon as a certain time has elapsed after its issue and the issuer shows no signs of keeping his word. As money is only a measure of Services, and as possible Services are limited at any one time and place, and consequently as the amount of money needed for healthful business is limited also, a steadily convertible paper money, provided the limit of quantity be not overpassed, will constitute a tolerable money. But this limit of quantity is apt to be overpassed, whether the paper money be convertible or inconvertible, and especially in the latter case, because the temptation to issue promises to pay in excess of the means of promptly redeeming them always besets the issuer on account of the gain to him in such issue at least for a time. This temptation has been yielded to first or last by every nation, and probably by every corporation, that has ever issued paper money. The Bank of England has been on the whole the best managed Bank of Issue in the world, and its Bills (Promises) have gained the most confidence and the widest circulation. This is because they have been kept by the Issuers convertible from the beginning, with the exception of two comparatively brief intervals of time. As already related under the last general proposition, the silver coins of the realm were much worn and clipped when the Bank was established in 1694, the Bank, however, had received them on deposit of customers at their full nominal value; but after the Recoinage began in 1696, it was obliged under the law to redeem its Bills in new coin of full weight, that is, for perhaps 9 ounces of silver received, it was now bound to pay 12. Consequently its enemies, the Jacobites, made a "run" upon the Bank by collecting up its Bills to a large amount and presenting them for payment. The Bank was obliged to suspend payment, at first partially, and then generally. In February, 1697, the Bills were 24% below par. The Promises could not be kept, and therefore they drooped in value according to man's estimation of the probability of their becoming again convertible, which happened in the course of that year under a new charter and privileges from Government to the Bank.

Just 100 years after the first suspension of specie payments, in 1797, when the War of the French Revolution made such demands upon the English for money, the Bank broke its solemn promises the second time, and did not formally resume payments until 1821. Government and the business men of London did their best to hold up the credit of the notes during the suspension, but they were not made a legal tender for debts. Government received them at par for taxes, and provided that business payments in notes would be held as payments in cash if offered and accepted as such. Debtors, having tendered bank notes, which the creditor refused, had certain privileges before the law which other debtors had not. The notes therefore had a quasi legalization, but not a forced circulation. The bank was also authorized at this time to issue £5, £2, and £1 notes. Cautiously issued at first, bank paper continued at par for several years after the suspension, which proves that when government possesses the monopoly of issuing paper money, and carefully limits its quantity, and both receives and pays it out at par, it may keep an inconvertible paper at par, or even by sufficiently limiting its quantity carry it above par. But this truth does not make an inconvertible paper a good money, because it does not make it a self-regulating money, and because government is not wise and firm enough to fix and maintain a proper limit. Though Parliament intended in successive acts to confirm to the Bank of England the monopoly of banking by enacting that no partnership of more than six persons should take up money on its own bills, yet the common law assured to private persons and smaller partnerships the right to do this; and private bankers multiplied after the suspension, since they were allowed to pay their notes in Bank of England notes. Thus the quantity of paper money gradually increased till in August, 1813, the Bank of England notes were at 30% discount in gold.

The United States, both as Colonies and as a Country, have had varied and instructive experience with inconvertible paper Money. We will glance at two or three specimens only. The first issue of Treasury Notes, commonly called Greenbacks, given by Congress the quality of legal tender for all debts, public and private, except duties on imports and interest and principal of the national bonds, was made in April, 1862, and was justified in Congress and out solely as a war measure. An aggregate of $450,000,000 was put out in all, of which $87,000,000 were afterwards taken in, and the balance was still circulating in 1890. In one month after the first issue of $150,000,000, these greenbacks began to droop in value as compared with gold; in four months, when the second batch of $150,000,000 was authorized, their depreciation was already marked and firm; and in nine months, when President Lincoln reluctantly gave his approval to the third issue of the same amount in order to pay off the soldiers and sailors, he uttered a solemn protest against the policy of thus inflating the current money, which, he said, "has already become so redundant as to increase prices beyond real values, thereby augmenting the cost of living to the injury of labor, and the cost of supplies to the injury of the whole country." In March, 1863, $50,000,000 of paper promises for fractions of a dollar were authorized, redeemable in sums of not less than three dollars in greenbacks, and receivable for all dues to the United States less than five dollars, except for duties on imports. Subsidiary silver coins have since taken the place of these fractionals. In July, 1863, the greenback dollar had lost one-quarter of its nominal value; in July, 1864, it had lost almost two-thirds of its nominal value, as its lowest point was reached in that month, namely, 35 cents as compared with the gold dollar; in July, 1865, it had risen to 70 cents; in July, 1866, it stood at 66 cents, just two-thirds of a dollar proper; and from that time it slowly rose, with many fluctuations, till New Year's, 1879, when it became legally and actually redeemable in gold and silver. Its variations for the sixteen years, however, cannot be counted by the number of years, nor even by the number of days; for they were numerous on each business day, and, as Comptroller Knox says, "can only be numbered by tens of thousands." What a Measure of Services that was!

Between 1863 and 1879 the Bills of the new national Banks were redeemable in the greenbacks only, that is to say, one species of national promises-to-pay were paid on demand by another species of similar promises, both alike inconvertible into coin; and, as a natural consequence, the bank-bills bobbed up and down in value in servile obedience to the inconvertible legal tenders.

Massachusetts Colony was the first constituent of the present United States both to mint silver, and to issue irredeemable promises to pay it. Under the false impression that only Money made inferior to Sterling would stay in the Colony, Massachusetts began to mint in 1652 silver shillings and sixpences and threepences purposely debased in weight (including seigniorage) 22% below sterling. The silver for these coins came in mostly from the trade with the West Indies, to which were now shipped peltry, fish, various forms of lumber, beef, pork, pease, cattle, and horses, for which they took mainly sugar, molasses, rum, and silver. "They would have brought more silver and less rum and other merchandise, had the first been in greater request at home." (Bronson.) John Hull, the mint-master took out 15 pence out of every £ for his own pay, and grew rich by the process. That was over 6%. In 1662, a twopenny piece was added to the series, and the mint existed (sometimes idle) for over 30 years, but all the pieces coined bore the dates of 1652 or 1662. This paucity of dates is commonly and perhaps properly accounted for on the ground that coining in the colony was contrary to the prerogative of the Crown; but it is to be added that John Hull was not a man to get new dies so long as the old ones would answer his purpose. The law forbade the exportation of these pieces under the penalty of thereby forfeiting one's whole visible estate; because, though this money was much worse than sterling, there was a worse money than this circulating in the colony, and Gresham's law began to crowd it from the first, and to some extent it was both smuggled out and clipped down. But it furnished a sort of standard, nevertheless, and tended to keep the later money within distant sight of the silver, and became the reason why in New England there were six shillings to the dollar. The Spanish pillar dollar, which was the standard in the West Indies, was worth 4s. 6d. sterling; and in 1672 a law was passed in Massachusetts allowing these dollars to circulate at 6s. provincial, which was a discount on the home pieces of 25%. Ever after there were six shillings in a dollar in New England. Hull's money is called the "pine-tree" coinage, and was the only coin money minted in the country till after Independence.

Also in 1690 Massachusetts set the first example, which was imitated 20 years later by the other New England Colonies and by New York and New Jersey, of issuing "Bills of Credit" to meet the expenses of the two disastrous Expeditions against the French in Canada. Those Bills were not made legal tender in private payments, and pains were taken to keep up their credit, but they were depreciated from the first, and came to be very much depreciated. Massachusetts and Connecticut made their bills receivable for taxes at a premium of 5%, laid special taxes for their redemption, and from time to time called in portions of the issues. In 1718 Connecticut enacted that a debtor tendering these bills should not be liable to legal execution on his estate or person for the payment of that debt, an expedient, as we have seen, resorted to by England in the great Bank restriction of 1797-1821. These early New England bills bore no interest, were not loaned out by the colony, and were a convenient though dangerous means of anticipating the income of future taxes; but after 1712 a paper money scheme originating in South Carolina came into favor in the colonies, which was, to open loan-offices for the issue of colony bills on the mortgage of land, the interest on which helped to pay the colony expenses, the principal of which at first, and on being paid back and re-loaned, furnished a capital to borrowers, while the bills themselves furnished a money for the people. Pennsylvania had the best luck with this scheme of all the colonies which tried it: as early as 1729 Benjamin Franklin became thoroughly possessed of John Law's notion, that paper money may be "based" on land or other valuables, saying in a pamphlet of that year that "bills issued upon land are in effect coined land": Pennsylvania bills nevertheless were at 46% discount in 1748. Some of the later colony bills bore interest, some were of a "new-tenor," so-called, designed to take up the old ones,—Virginia in 1755 made hers a legal tender for debts,—some were issued in bounties for Indian scalps and for various manufactures and fisheries, but all ran one road of depreciation and gave birth to one set of results. Connecticut managed her issues the best of the colonies, and yet Bronson says of the state of things in that colony in 1749, "Trade was embarrassed and the utmost confusion prevailed: no safe estimate could be made as to the future, and credit was almost at an end: no man could safely enter into a contract which was to be discharged in money at a subsequent date: prudence and sagacity in the management of business were without their customary reward."

John Law, a shrewd Scotchman, born in Edinburgh in 1671, son of a goldsmith, with an innate talent for finance and well educated, was the first to give scientific form and color to the false theory that paper money represents commodities of some sort, and may be issued to an amount equal to the value of these. "Any goods that have the qualities necessary in money may be made money equal to their value. Five ounces of gold is equal in value to £20, and may be made money to that value; an acre of land is equal to £20, and may be made money equal to that value, for it has all the qualities necessary in money." The fallacy in these words of Law is patent enough to any one who will stop to think a moment about the nature of Money. Because land, for example, has value, it does not follow that it has "all the qualities necessary in money"; and, as a matter of fact, it lacks the precise quality necessary in money, because, though it has purchasing-power, it cannot from its very form and nature become a generalized and current purchasing-power. Money is indeed a valuable thing, but that does not prove that all valuable things can be money. With this radical vice of Law's view was wrapped up another, namely, that there may be in any country as much paper money as the sum of the values of all its valuable things. Now, we have learned perfectly, what escaped the acute intellect of John Law, that Money is only a valuable measure of all other salable Services; and therefore, that the amount of it that can be made useful at any one time and place is strictly limited, and bears very little relation to the sum of the values present at that time and place.

Scotland fought shy of Law's idea when he published it there in 1705, and so did Paris the first time he visited that city, in which and in other cities he gambled successfully and talked finance to princes and statesmen fascinatingly; but when he returned to Paris in 1715 with his ill-gotten fortune, he gained the ear of the Regent Duke of Orleans, who permitted him to found a bank there, in which were incorporated some sound principles of monetary science as well as the prime fallacy of his system. The bank bought a portion of the State Debt, just as the Bank of England had done, and laid in also a fair stock of coin, and thereupon issued a paper money. For a couple of years, or so, the bank surpassed all hopes, for Law had touched a spring till then but little known in France, the potent spring of Credit. But his whole thought, meditated on for years, could not be expressed through a private bank. The State should be a banker; it should collect all its revenues into a central bank, and attract the money of individuals to it as deposits; besides, the State has public property of vast value, on the strength of which paper money can be emitted and made legal tender; and thus the State, instead of borrowing, should lend to all on easy terms and the profits thus accruing would lessen or abolish taxes. Nor was this all. The State should also be a merchant; the whole nation should form a commercial company, a body of traders, whose common treasury should be the State bank. Commerce by individuals creates great wealth; why should not the organized commerce of a State make everybody rich? The discounts of the bank, and the profits of the trade, would surely provide for the public service without taxation. These vast ideas were actually carried out. Law's bank became the Royal Bank, issuing a paper money guaranteed by the State and resting back upon the value of all national property. The money was receivable in taxes, nominally redeemable in coin, and made a legal tender. It actually bore at one time 5 and 10% premium over gold and silver. People were anxious to exchange their coin for notes. Meanwhile a commercial company was formed in connection with the bank, to which the State ceded at first the monopoly of the commerce of Louisiana and of the Canada beaver trade for twenty-five years, and the soil of Louisiana forever; under the auspices of which New Orleans was founded, and named from the Regent, the patron of the grand system; and in succession, the monopoly of tobaccos, the rights of the Senegal Company, of the East India Company, of the China Company, and of the Barbary Company; until, having almost all the commerce of France outside of Europe in its hands, it entitled itself the Company of the Indies. Its shares rose from a par value of 500 francs to 10,000 francs, more than forty times their value in specie at their first emission. To support such speculations, which completely turned the heads of all classes of the people, the amount of paper money reached at last the sum of 3,071,000,000 francs, 833,000,000 more than had been legally authorized to be emitted. The collapse of this most gigantic bubble of history was terrific. Before the close of 1720, the shares of the Company could be bought for a louis d'or, or twenty shillings sterling, and the paper money of course became worthless.

The ghost of John Law reappears gibbering and chattering in some human shape once in a generation or two in all civilized countries. In March, 1890, Senator Stanford of California, himself reputed to be worth $30,000,000, propounded the question in the Senate of the United States, whether it were not advisable for the Government to issue legal-tender notes on the basis of the real estate of the country. His interrogative argumentation implied, (1) that there was a scarcity of Money causing great hardship to individuals and depression to business, (2) that if national bank bills are properly issued on government bonds it is equally proper to base legal tenders on real property, (3) that there is no natural and strict limitation to the amount of Money in a country at any one time, and (4) that as far as he knows there may well enough be as much money in amount as the estimated value of the real estate. All this is John Lawism pure and simple. All this utterly ignores the nature of Money as a valuable measure of all other Services. It also ignores the truth, that an advancing country needs less rather than more Money in amount as it advances, because cheques and other forms of non-money Credits are constantly increasing both absolutely and relatively. It is because this Senator's monetary notions seemed to correspond with those of a majority of the Senate, that it is perhaps proper to give them here a moment's attention.

These supposed legal-tender notes would be secured by a government lien on land and buildings, and by the direct credit of the Government as well; just as the national bank bills are secured by the bonds of the nation held in reserve for that purpose, and also by the direct image and superscription of CÆsar upon every bill. People holding mortgaged real estate could accept a non-interest bearing government lien instead of a 6% or 8% private mortgage, that is, could pay off their mortgages with the legal tenders given them by the Government, the latter taking the lien or new mortgage; and people owning real estate clear could, if they chose, execute a perpetual mortgage to the Government, that is, give up the fee simple to their lands, and receive legal-tender notes to the full amount in return. This would at least relieve the "scarcity" of Money! The volume of national Money at that moment was in round numbers $1,400,000,000; the assessed valuation of the real property of the country was at the same moment at least $15,000,000,000; so that, on this scheme, perhaps $10,000,000,000 of additional legal-tender Money could be issued! Here is paternalism and socialism and John Lawism all combined. Here is a Government of strictly limited and carefully enumerated powers, under a written Constitution as precise as language can make it, containing the solemn declaration that all "powers not delegated to the United States are reserved to the States respectively or to the People," owning or soon to own not only the railroads and the telegraphs but also the major part of the lands of a free country, and going into the mortgage business on the heroic scale!

If this honorable Senator and his like-minded colleagues were tolerably familiar with the financial history of their country, and perhaps they were, they would have known that this precise scheme had had a practical trial in Rhode Island, just before the adoption of the national Constitution. The Legislature authorized the issue of $500,000 in scrip-money based upon the value of the real estate of the farmers of the Colony. The law required a mortgage for twice the amount of scrip-money based upon it, and it was therefore supposed the money would be as good as gold or better. But somehow or other the merchants of the towns could not see the matter in that light. The depreciation of the scrip-money began at once, and the prices of wares ran up in a way that should have set business in active motion, according to all the views of the "scarcity" school. It was therefore enacted by the Legislature, that anybody who refused to accept the scrip at its face value should be fined $500 and lose the right of suffrage! They made it a legal tender! But business refused to boom. The merchants shut up their stores, the farmers could not market their crops, and idleness and rioting set in all over the State. Then the farmers organized a boycott against the towns, and food became scarce. Meanwhile the mortgage legal tenders would not pass at the best for over 16 cents to the dollar! There was more of "enforcing" legislation, and appeal to the courts, but nothing could boost the mortgage-money. The chief result of the experiment was, that Rhode Island gained in this way the title of "Rogues' Island."

No matter how good the cause, how patriotic the People, an inconvertible paper money is sure to run down at the heel. In June, 1775, one week after Bunker Hill, the Continental Congress voted to emit $2,000,000 in "Bills of Credit" issued on the faith of the "Continent." Eleven separate Colonies, New Hampshire and Georgia issuing none, began about the same time their revolutionary issues of the same sort, amounting in all during 1775-83 to $209,524,776. The vice of such irredeemable scrip is, there is no economical limitation of the Supply. The middle of 1777, when Burgoyne was prosperously advancing from Canada towards New York, saw a general fall of the notes both Continental and Colonial, and of course and in consequence a universal rise of the prices of other products. At the close of that year, the average depreciation from silver was not far from 3 to 1; at the close of 1778, it was not far from 6 to 1; at the end of 1779, it was about 28 to 1; the Continental press then rested, after $200,000,000 nominally had been put out, but actually about $40,000,000 more than that, a usual if not universal accompaniment of such issues. When the stuff dropped out altogether in the spring of 1781, the country found no more lack of silver for Money than Massachusetts had found in 1749, when and after she redeemed her outstanding bills of credit at 11 for 1 in sterling silver, £138,649 of which, the share falling to her from the capture of Louisburg, was shipped to the Colony in coin, and she became for the next 25 years the "Silver Colony." Assuming that only $200,000,000 Continental had been issued, Thomas Jefferson carefully estimated that the Nation realized from them $36,367,720 in specie value, or 18% of the nominal value.

14. Whether the Money of any Nation be coin or paper or both, when once it is in the hands of the People, Government has properly nothing to say about the rate of interest at which one person loans this money to another. Usury Laws so-called, prohibiting the lender from taking more than a prescribed rate % for the use of money loaned, under penalties sometimes of the entire interest and sometimes of the entire debt have disfigured the statute-books of all Nations and of all the States of this Union. Such laws cannot justify themselves for a moment in the light of sound principles of Political Economy. Their origin may be explained by a reference to two false views, now happily exploded.

(a) The laws of Moses forbade to the Israelites the taking from one another any interest on money loaned, but at the same time it allowed them to take such interest freely of strangers; the permission in the one case going to show that there is nothing in the taking of interest that is unjust or sinful, and the prohibition in the other being readily explainable from the general purpose of the municipal regulations of Moses, which was to found an agricultural and not a trading commonwealth, in which every family was to possess land that could not be permanently alienated or sold, in which it was a great object to maintain the personal independence and equality of these families, in which the law for the recovery of debts was very summary and effective, lessening the risk of losing the principal, and which was to be and was sedulously separated in its usages from the surrounding nations. It has been well understood for a long time that the municipal code of Moses was local and peculiar, not necessarily applicable at all to the circumstances of other States, and in no sense binding on the conscience of legislators; and yet there doubtless sprang from the prohibition referred to a prejudice against interest, and this prejudice was perhaps deepened in the Middle Ages and onwards by the conduct of the Jews themselves, who, in addition to their sin of persistently growing rich in spite of the endless disabilities laid on them by the people of Europe, always demanded, in accordance with the permission of their great lawgiver, a good rate per centum of interest from those strangers to whom they became money-lenders. The Jews were everywhere hated, and consequently the usury which they practised was hated also. The fundamental absurdity of forbidding in trading communities the taking of interest on sums loaned to a borrower which he was at liberty to use for his own profit, deterred the nations from going to the length of prohibition, unless it might be in the case of the hated Jews. There is a clause of Magna Charta, interesting as showing how early the children of Abraham became the money-lenders of Europe, to the effect that, during the minority of any baron, while his lands are in wardship, no debt which he owes to the Jews shall bear any interest.

(b) Governments formerly deemed themselves competent to determine and fix the general purchasing-power of their own money. Even the Constitution of the United States uses this language: "to coin money, regulate the value thereof, and of foreign coins." There was formerly, and there is still to some extent, a curious and harmful confusion in the public mind in respect to this term, "the value of money." In the only proper sense of the term the value of money means its power of purchasing services in general, and the value of money is high when a given sum of it will purchase much of general services, and low in the contrary case; and a high or low value of money in this true sense depends on a very distinct set of causes from those which determine the high or low rate of interest on money loaned; nevertheless, so long as governments supposed that they could regulate the former, it is very natural that they should also suppose that they could regulate the latter; and although all intelligent governments have given over the idea of being able to regulate the general value of the money they furnish to the people, many of them still adhere to the notion, equally false with the other, that they are able to regulate the loanable value, or the rate of interest, at least to prevent any more than their prescribed maximum rate from being taken. A few simple considerations will sufficiently condemn all usury laws.

(1) It is at once needless and invidious to deny by law to money-lenders, who offer just as honorable and useful services to society as any other class of men, the privilege of selling their service for what it will bring in the market, while other men in every department of business are allowed to exchange their services on the best terms they can make without interference or control. Let us see precisely the nature of the transaction when one man loans money to another. It is a clear case of value. The lender does a service to the borrower, and for this service justly demands a compensation. The service is this: The lender might himself use the money to gratify his own desires. It is his money; he may use it, as he pleases, for his own gratification. Or he may himself employ it productively, and, at the end of the period, receive back his principal with the customary rate of profit. If he surrenders this advantage to the borrower, if he passes over to him the right to use this money, say, for a year, he practises what we call in Political Economy abstinence. For this abstinence he has a right to claim a reward, precisely as the man has a right to claim a reward who foregoes working for himself in order to work for another. This reward of abstinence is interest. The money-lender foregoes an advantage. He performs a service for the borrower; and, therefore, the right to interest stands on just as unassailable ground as the right to wages. Moreover, the loanable value of money varies under Supply and Demand just like other values; there are always those who want to borrow, and always those who want to lend; both parties must be assumed to know their own minds, and to be equally competent to make their own bargains; it is a case of mutual exchange for a mutual benefit, like all other trade; and the current rate of interest is determined at any one time by the actual free exchanges between borrowers and lenders. Now for any government to try to compel a lender by law to take only 6% when his money is worth 8, is a direct violation of the rights of property. It is a forcible and pernicious interference with the freedom of contracts. It is based on the false premise that the loanable value of money is uniform, and that government is competent to determine what it is. No value is uniform. And no government is competent to determine even the maximum price of money loaned, any more than the maximum price of commodities.

(2) Usury laws are almost uniformly disregarded, both by the governments which make them and by the people for whom they are made. Indeed, such laws cannot be enforced in a commercial community. Common sense is outraged by a law which requires a man to part with his property at less than the actual value; and when common sense is against a law, it stands a slim chance of observance. If the legal rate be six, and the actual worth be eight, who lends at six? Not the banks. They require deposits of their customers, the use of whose money shall make up to them the difference between the legal and the actual rate. The modes of evasion are various, but they are adequate and universal. Besides, governments themselves have shown a noteworthy inconsistency in this matter, which incidentally proves the unsoundness of their whole action. While announcing pains and penalties to those who take more than a given rate, they are careful never to bind themselves down to any given rate. Governments are always more or less borrowers, and if usury laws are necessary in order to help borrowers in a pinch, there ought to be a clause in the organic law of every country, forbidding the government to pay and its lenders to take any more than a certain rate per cent. There is no such clause in any organic law. Governments wisely follow the natural market, and borrow low when they can, and pay high when they must. In the last months of Mr. Buchanan's administration, the United States paid 12% on a public loan, and could get but little at that. Sauce for the goose is sauce for the gander, and if usury laws are good for the citizens, some solid reason ought to be rendered why they are not good for the government. The truth is, they are not good for either, since natural laws are perfectly competent to regulate the rate of interest, and do regulate it substantially in spite of a factitious, impertinent, and mischief-making interference.

(3) If Usury laws were not disregarded, they would be even worse in their effects than they are now. We must suppose that their aim is to aid borrowers, and make it easier for them to contract loans. But are borrowers, as a class, any more deserving of the fostering care of government than are lenders? Even if it could make its interference effective, as it cannot, is there any reason why government, leaving these borrowers to make all other bargains, sales, and transfers according to their best skill and judgment, should rush to their rescue only when they propose to borrow money? If they are competent to do their other business for themselves, government pays their capacity a poor compliment in undertaking to help them in the single matter of making loans; and the borrowers in turn have reason to pray to be delivered from their friends, since they, of all others, would be the men especially injured if all the lenders obeyed the usury laws. Suppose that a borrower is in great need of a loan, and that for some reason his credit is now a little weak. Many men would be willing to loan him at 9%, which affords a margin for the extra risk, but at 6, which we will suppose the maximum allowed by the law, he cannot borrow a dollar, because his credit is not quite equal to the best. If, therefore, the lenders obey the law, he, and such as he, must fail. And because it is unlawful to take over 6% he will be obliged to pay those who are willing to violate the law 10 or 12, to compensate them for the risk and odium of such violation, while, under freedom, he could borrow at 8. Moreover, if the loanable value of money at the time be actually 9, while the law only allows 6, many men will attempt to use their own capital productively, who would otherwise loan it, in order to realize the high rate; and this action of theirs still further restricts the loan-market and makes it more difficult to borrow. If, then, the purpose of government be to aid borrowers, no means could be more unskilfully chosen for that end than to pass usury laws, since such laws, so far as they are obeyed, have necessarily the opposite tendency; and even when violated redound to the disadvantage of borrowers, so long as the laws themselves are popularly regarded as of any legal or moral force.

In 1716, the Bank of England, as a great loaning institution, was exempted from the operation of all usury laws: why the bank only, and not other people as well, the Act of Parliament does not state. In 1867, the State of Massachusetts repealed all its usury laws, though 6% is to be understood in the absence of special agreement, and the result has been entirely satisfactory to all classes of the people. Rhode Island had done this previously, and Connecticut did it subsequently, and both have experienced equal satisfaction in the result. Other States will soon follow in their lead; and this relic of ignorance and prejudice will pass away. Adam Smith left the Wealth of Nations disfigured by the concession that governments might properly enough pass usury laws; but it is gratifying to be able to add that he was convinced of his error in that by Bentham's book on Usury, and fully acknowledged his conviction in the spirit of a genuine lover of truth. We conclude, then, that usury laws are needless, since interest, like all other prices, will perfectly adjust itself. They are disregarded, since lenders will loan or withhold their money according to their own keen sense of interest. They are pernicious, since they infringe the rights of property, and tend to prevent weak borrowers from having a fair chance in the market.

The present writing is at midsummer, 1890; and, in order to complete the entire discussion so far as this country is concerned, it is needful to add, that, between 1878 (when specie payments were resumed) and 1890, the circulating medium of all kinds is proven by official statistics of the highest authority to have increased from $805,793,807 to $1,405,018,000, or more than 57 per centum. This circulating medium consists of six formal kinds; namely, gold, silver, greenbanks, bank-bills, gold-certificates, and silver-certificates. Each of these differs in important respects from each of the rest, but all come alike under our fundamental classification of Moneys, as either an intermediate merchandise or promises to render it. This increase is way beyond any increase in the population of the country, and way beyond any apparent or proven increase in the national business; while at the same time the banking facilities of the country, which always spare the use of Money by substituting cheques therefor in the wholesale business and in a large share of the retail business also, have been increasing in equal measure. The number of national banks, especially in the West and South, has been multiplying. The use of cheques has been enlarging in every commercial community in the land. Yet up to the present time all of this vast volume of Money has been kept at par with gold, and consequently at the highest state of efficiency for commercial purposes.

What about the immediate future? Science is not prophecy except in a quite subordinate sense. Congress is loudly threatening at this very moment to more than double the enforced monthly coinage of silver dollars at the public expense for the sole benefit of a comparatively few miners of silver. If this threat be executed upon a long-suffering people of tax-payers, who will have no one to blame but themselves if they tolerate the outrage, Science is willing to venture the prediction, that the monetary standard here will drop from gold to silver within a twelvemonth or two; that general prices will rise much beyond the appreciation of money implied in that drop, though they will be illusory and gainless; that prudent debtors will hold high carnival for a time at the expense of their creditors; that the country will become as empty of gold as a contribution-box is of other money between Sundays; that foreign trade (soon to be explained), already in a sickening decline, under restrictions and prohibitions, will hasten to a practical demise; and that the United States, at once the laughing-stock and the victim to the superior intelligence of other nations, will come through alternate fever and chills to a position of common sense and ultimate recovery.