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 ".M
 
 Monetary Problems 
 AND Reforms 
 
 BY 
 
 CHARLES H. SWAN, JR. 
 
 " We demand that some safe plan be adopted whereby our legal 
 tender paper and silver and our silver certificates shall be slowly 
 withdrawn, and gold, gold certificates, and bank notes shall grad- 
 ually take their places. 
 
 " We are opposed to any currency system whereby one party to 
 a contract has the choice of the kind of money he shall tender 
 when the choice is denied to the other party of the kind of money 
 he shall accept, since recent experience shows that such a system 
 creates distrust of all money contracts." 
 
 Mass. Kbkukm Cluh. 
 
 G. V. I'UTNAM'S SONS 
 
 NEW YORK I-ONDON 
 
 2J WkST TwENTV-TIIIKI) StKKP.T .'4 I'.KDI'OKI) Stkkrt, Stkand 
 
 <L\n .'Jiuiclitrbochcr |1rcsB 
 
 I.S97 
 
 • > I
 
 COPYRIGHT, 1897 
 BY 
 
 CHARLES H. SWAN, JR. 
 
 Vbe ftniclterboctier press, 'new IQorft
 
 
 57 
 
 PREFATORY NOTE. 
 
 To many it may seem superfluous at this time to in- 
 flict the public with an essay on the much-discussed 
 ir. money question. Such may say that after the election 
 '■^oi November, 1896, the issue is settled, and we have 
 ■^ nothing more to fear. The election was certainly a great 
 <; victory for Sound Money, but it was not the Waterloo of 
 oQfiatism. If properly used this victory may mark the 
 turning-point and be the Gettysburg of the contest, but 
 the victory must be followed up, and the opportunity 
 ^ must be seized or the country may be in a sad plight. 
 [J Yet scarcely has the echo of the shouts of victory died 
 •" away, when the victors enter on a course of catering to 
 % the silver forces, and the vancpiished are allowed to lead 
 the victors on a crusade for " International Bimetallism," 
 — a crusade which threatens to give new life and hope to 
 tiic silver dogmas. 
 \ To many of the men of the j^resent day it ap])ears 
 ^ that the country has reached a crisis in its history whicli 
 o cannot be successfully met unless there is a forward 
 ^ movement for currency reform in o|)positioii to tin- ])riii- 
 \ ciples of repudiation. At such a time it is the right ol' 
 every citizen to offer suggestions, and tlurcin must rest 
 the author's excuse for this essay. The disease, liow- 
 cvcr, from which America has been suffering has also 
 afflicted other nati<jns to some degree, and tiie principles 
 herein elaborated are designed to be applicable to all the 
 world. 
 
 389165
 
 CONTENTS. 
 
 I. 
 
 I'AGE 
 
 The Origin of Money Real and Represen- 
 tative ....... I 
 
 II. 
 Fiat Money ; Legal Tender . .18 
 
 III. 
 Result of Legal Tendkk and ihe Remedy 39 
 
 IV. 
 
 International Coinage .59 
 
 V. 
 
 SfiMF IIlSTOKIfAL INSTANCES OF f jr, A L TfNDFK 6S
 
 MONETARY PROBLEMS AND 
 REFORMS. 
 
 I. 
 
 THE ORIGIN OF MONEY, REAL AND 
 REPRESENTATIVE. 
 
 The subject of money in its various phases is a sub- 
 ject that touches every individual in the community 
 directly to a large degree, and affects his personal pros- 
 perity, often in an inverse ratio to his power to protect 
 his interests. It is a subject, too, which, in proportion 
 to its importance, is one of the least understood by the 
 people at large ; or, perhaps it would be more correct to 
 say, it was so until the present discussions on the matter 
 opened the public's eyes and aroused a popular interest. 
 Moreover, to a degree peculiar to itself, there exists as 
 to this subject a feeling among those not familiar witli it 
 that it is exceptionally abstruse, technical, and involved. 
 There is supposed to be something particularly mysteri- 
 ous in regard to it. This sujiposition is erroneous. 
 
 Rveryone handles the r irculating medium to some 
 degree, and everyone is therefore interested in obtaining 
 the most desirable money for his goods or services. 
 What system of money will be best calculated to se- 
 
 I
 
 2 MONETARY PROBLEMS AND REFORMS. 
 
 cure to all the surest opportunity for prosperity ? Many 
 answers have been made. A rational solution of the 
 problem would seem to require that one should inves- 
 tigate the origin and functions of money. 
 
 The origin of money will be more plainly pointed out 
 if we consider the functions of money and the condi- 
 tions of life which give rise to the need that those func- 
 tions shall be performed. If the question is asked, 
 " What is money for ? " the most obviously natural re- 
 ply for anyone is, " Money is to buy things." Probably 
 nine persons out of ten would hazard this reply as a 
 guess. This is the very basis from which we must start. 
 
 Money is to buy things. How is the buying to be 
 done ? Smith has something that Jones would like. 
 Jones inquires and finds that Smith will part with it if 
 Jones will give in exchange something which is equally 
 desirable. What this shall be they can determine for 
 themselves. When they have determined, each goes away 
 satisfied, and the trade is done. The article or articles 
 that Jones gives may be one thing or another, but whether 
 a bear skin, blankets, sheep, horses, pieces of metal, or 
 what-not. Smith takes them because he wants them, and 
 it is this fact, that Smith wants them, that gives them 
 their value in exchange, and enables Jones to gratify his 
 wants by parting with them. 
 
 All trade or commerce when reduced to lowest terms 
 is simply a barter as between Smith and Jones. If you 
 can imagine a time or condition when men are so little 
 developed that trading is only just begun, you can well 
 see that it must be confined to what each man individu- 
 ally can spare from a more scanty stock after supplying 
 his immediate wants. At first each man will produce a 
 small surplus, and exchange it only when he feels an im-
 
 THE ORIGIN OF MOXEY. 3 
 
 mediate desire to enjoy the surplus product of some 
 other man. Thus the fisherman may stop catching fish 
 when he has enough for his own family, but if he desires 
 a better house to live in than what he now has, he may 
 strive to catch more fish and exchange the surplus for 
 building materials. But in such exchanges it will often 
 be difficult to make up a fair equivalent in the articles 
 which the parties wish immediately to use. Thus if one 
 man has a cow and is trying to exchange to get a horse, 
 he may find that no one wants to take one cow for one 
 horse, and two cows may be more than a fair price for 
 one horse. He will therefore seek to offer some other 
 desirable article in a f[uantity that sliall make up the dif- 
 ference between the worth of the horse and the cow. It 
 will thus happen that some few articles of general desira- 
 bility will become commonly employed as compromises 
 to cover differences between the two sides of exchanges. 
 These articles will acquire this use by reason of various 
 circumstances that may for the time being make them 
 the most convenient for the purpose, and when in the 
 evolution of industry some more convenient articles may 
 become available, they will naturally tend to be used in- 
 stead ; for man will normallv seek to use those methods 
 of business which experience may show to require the 
 least expenditure of energy. The man who thus ac- 
 cepts one of these common articles of exchange in 
 return for his own products or services will have a rea- 
 sonable assurance that when his own wants require to be 
 satisfied by some special product or service of others, 
 there will be no great difficulty in finding someone glad 
 to receive these common articles to make up any ditfcr- 
 ences between the products he has to offer for immediate 
 use and the products he wishes to secure.
 
 4 MONETARY PROBLEMS AND REFORMS. 
 
 When this stage has been reached, where the com- 
 munity in general is willing to receive the returns for a 
 part of its industry in articles which it must re-exchange 
 in order to enjoy those articles satisfactorily, it is but a 
 short step to take if one says to himself : " I will ex- 
 change all my surplus product for these common articles 
 of general acceptability, and I can keep them until I 
 want some special product of my neighbor, when he in 
 turn will be glad to take what I offer." 
 
 When things have reached this point of development, 
 the first crude money has arisen. What article or ar- 
 ticles may thus be employed as money will depend en- 
 tirely on circumstances, and history shows that a great 
 variety of articles has at various times and places been 
 so employed. Our English word " pecuniary " has been 
 traced back to the Latin " pecus," a flock or herd, and 
 this points to a time when cattle were the chief money. 
 Besides this, furs and farm products of various kinds 
 have been used. Tobacco was money once in Virginia, 
 and potatoes have been so used in this century in back 
 country districts of New England. Blocks of salt have 
 served as money, and shells too. 
 
 But by far the most generally used class of commodi- 
 ties for this purpose has been the class of merchantable 
 metals, iron, tin, lead, platinum, copper, silver, gold, etc. 
 Of these, the last three named have jjractically proved 
 themselves the most available, for a variety of reasons. 
 They are comparatively valuable in small quantities, 
 they are readily worked into convenient form, and they 
 do not deteriorate in quality by age. Each one has a 
 special utility of its own. In most primitive times of 
 general poverty, pieces of copper will answer all the 
 purposes of money. A comparatively large purchase
 
 THE RIG IX OF MONEY. 5 
 
 may not require an inordinate amount -of the metal, and 
 for the petty transactions of the poor a small piece of 
 copper will be more convenient than a minute piece of 
 silver. But as industry becomes more diversified, and 
 prosperity greater, larger transactions will take place, 
 and it will be found more convenient to use the less 
 bulky metal, silver. This again will tend to be displaced 
 in utility by gold in the enormous transactions that later 
 arise. 
 
 Thus far we have traced the rise of money as an article 
 of general acceptability in exchange, and we have re- 
 ferred to the fact that each individual exchange is 
 brought about because each party desires what the other 
 offers, and considers a fair equivalent given. We are 
 not to suppose, however, that all transactions of exchange 
 will rapidly take on the character of exchanges for what 
 we have defined as money. The system of exchanges of 
 products for immediate use, without the employment of 
 money on either side, will still continue, and by a curious 
 reaction will even be facilitated by the custom of using 
 money in many transactions, so that even in the most 
 advanced civilization this system, called barter, will be 
 found to some extent. 
 
 This added facility, above mentioned, arises from 
 another function, which is sometimes said to be per- 
 formed by money, but which more properly may be said 
 to be performed by men by reference to money. This is 
 the comparison of values. Money is not only to buy 
 things, but by referring the values of two articles to the 
 unit of what happens to be money at the time, a com- 
 parison is made between the values of those articles. It 
 is thus that money is said to be the measure of values. 
 Measuring values, as measuring other things, is only a
 
 6 MONETARY PROBLEMS AND REFORMS. 
 
 comparative process. The value to be measured is com- 
 pared with a value well understood, just as a length to 
 be measured is compared with a length well understood, 
 but there is this difference, that while length is a physical 
 property and quite fixed in a given article, value is only 
 a human estimate of desirability, and must be to some 
 degree of a fluctuating nature, even as regards the same 
 article. This estimate may vary, and probably will, 
 somewhat with different individuals at the same time, 
 and yet these different estimates will tend to come to- 
 gether in the public mind, and establish a general uni- 
 formity in one vicinity, or, in other words, a market 
 price for a given time and place. 
 
 There is, however, a third function, commonly per- 
 formed through the use of these articles which have 
 become generally acceptable as money. This third 
 function is the most important of all, and furnishes the 
 occasion for all the present monetary problems and dis- 
 cussions. This function is that performed when money, 
 as we have defined it, is used as the standard of con- 
 tracts for future deliveries. 
 
 It must be remembered that in the primitive condition 
 of mankind, which we have tried to picture, we have not 
 supposed the community has been confining itself to the 
 use of only one article, for a medium of exchange — that 
 is, for money to buy things with. We have supposed, 
 what we may consider a natural development, that there 
 may be several different articles in common use, that 
 each of these may have some peculiar fitness for certain 
 kinds of transactions, and that buyers and sellers will in 
 each case use what circumstances may show to be most 
 convenient. 
 
 Suppose now that Smith has products to dispose of
 
 THE ORIGIN OF MONEY. 7 
 
 and Jones wants them, but cannot to-day furnish in 
 sufficient quantity the article which Smith will accept in 
 exchange. In other words, Smith wishes one of the 
 articles of general acceptability, or what we have defined 
 as money, and Jones cannot give that to-day. However, 
 after he and Smith have determined how much of this 
 article he will give and Smith will take, Jones says that 
 he can and will give Smith just that in ten days, if Smith 
 will agree to wait. Smith may agree. Jones then takes 
 Smith's goods, and comes under an obligation to Smith 
 to deliver at a future day a certain article in definite 
 amount. We have here a debt from Jones to Smith, for 
 in economic contemplation a debt is an obligation to 
 deliver certain goods. The debt may arise in another 
 way ; as, for instance, Jones may go to Smith, and say : 
 " You have a plenty of article X ; give me so much, and 
 in ten days I will give you the same amount of the same 
 kind." Smith may agree. 
 
 In either of these arrangements between Jones and 
 Smith, we have an obligation of indebtedness arising by 
 act of the parties, and this obligation exists above and 
 before any law in deriving its binding effect. Still the 
 law must recognise the obligation in order to assure Smith 
 that Jones shall not skulk out of his contract ; but the 
 function of the law is to jirovide a remedy for violation 
 of the contract. If a law should suddenly say "Jones 
 must deliver twice as much as he promised," that would 
 be an injustice to Jones, and if it should say " Jones need 
 deliver only half of what he ])romised," that would be an 
 injustice to Smith, In either event, one man's right would 
 be handed over to the other, whereas the law should aim 
 to do to both an even and exact justice. This is not to 
 say that, if Jones becomes unable \.o do all he agreed, he
 
 8 MONETARY PROBLEMS AND REFORMS. 
 
 may not sometimes be allowed to start afresh after a 
 settlement in insolvency, but that is an exceptional cir- 
 cumstance. 
 
 Not only does the obligation of this indebtedness arise 
 by act of the parties, but the determination of the article 
 that shall be delivered in discharge also rests in the agree- 
 ment of the parties, and the same grounds that would 
 condemn a law which should increase or decrease the 
 quantity, would likewise condemn a law which should 
 substitute a different quality of the same article or an 
 entirely different article. Smith the creditor is entitled 
 only to what the contract calls for but he is entitled to 
 all of that in quantity and quality. 
 
 When men have become accustomed to the use of 
 metals for the various purposes of money, it becomes of 
 the greatest importance in exchanging the metals for 
 other goods that the recipient of the metal shall know 
 how much of the metal is present and what its quality is. 
 The metals commonly used for money can be combined 
 with less valuable metals to form alloys, and alloys of 
 considerable difference may not differ perceptibly to the 
 unaided senses of man. It is therefore of great utility 
 and convenience that some person of skill shall test pieces 
 of the metals, and shall place on the pieces definite marks 
 certifying to the quality of the piece, or what proportion 
 of fine metal it contains. If this work is done by per- 
 sons who are well known in the business to the public, and 
 in whose skill and integrity the public by experience have 
 confidence, the pieces so marked will be received without 
 question as to their quality. If, further, the weight of 
 each piece is denoted by some distinguishing mark, and 
 each piece is made close to some one weight, another aid 
 will be given to trade, for by simply counting the pieces
 
 THE ORIGIN OF MOXEY. g 
 
 in a group one may know approximately how much of 
 the metal is present in the whole. 
 
 This operation of certifying to the fineness and weight 
 of convenient pieces of the metals is the act of coinage. 
 There is nothing mystical or mysterious about it. One 
 man with skill and honesty can do it as well as another. 
 All that is needed is the proper scientific instruments. 
 Nevertheless it is almost always the fact throughout the 
 world that coinage is a government monopoly. The his- 
 torical reasons that led to the seizure of this function by 
 the authorities lie, doubtless, in the temptations for im- 
 proper profits by falsely certifying to the pieces and re- 
 taining the difference. The temptation was too fascinat- 
 ing for impecunious rulers to resist. They did not wish 
 to protect the public from private speculations, but 
 sought to enjoy those speculations themselves. But 
 however reprehensible may have been the original motives 
 of monarchs, and oligarchies that seized this monopoly 
 from the people, its retention in government hands, when 
 the government is honestly administered, is amply justi- 
 fied by the facilities a government may have for doing the 
 work cheaper and for securing uniformity. Still this 
 operation is not universally in government management. 
 There are exceptions. China, for instance, uses silver 
 for most of its larger transactions, yet this silver has not 
 been certified by the government, but is in large pieces 
 that have passed through the hands of ])rivate refiners, of 
 whom there are many in that land, and who are said to 
 do their work well. 
 
 Thus we have endeavored to ir;i( c tlir orij^iii of money 
 from its first crude beginnings, when man may iisf soiiu" 
 clumsy perishable article as his money, through the period 
 of change in which more convenient moneys will displace
 
 lO MONETARY PKOBLEMS AND REFORMS. 
 
 the less convenient by a natural selection, down to the 
 time when metals become the usual money ; and we have 
 examined the act of coinage as a private and as a pub- 
 lic function. 
 
 It must not be supposed, however, that, when a com- 
 munity has reached the stage of uniform government 
 coinage, though that may be a high grade of develop- 
 ment and the most convenient arrangement it has up to 
 that point had, it is a complete system of exchange for 
 the most diversified industry. 
 
 When a person has a large quantity of money even in 
 the more valuable metals it will be quite bulky and will 
 require especial precautions for its protection against 
 thieves. Suppose now that some few people in the com- 
 munity have especial facilities for caring for large quan- 
 tities of precious articles, and these men are well known 
 for honesty and trustworthiness. It will obviously be for 
 their advantage in spreading their business relations and 
 will protect their customers' interests, for the customers to 
 deliver their surplus money into the hands of these trades- 
 men ; and receive in exchange the promise of the recip- 
 ient in each case to return an equal amount of like 
 material on demand ; in other words the customers 
 receive the indebtedness of the tradesmen. It will soon 
 be evident to all in the business that in order to insure 
 their ability to deliver all they owe when it is required 
 they do not need to keep in their strong vaults every 
 ounce of metal they have thus received. All of their 
 creditors will not want to be satisfied at once, and so 
 part of the money in their possession may be put out in 
 the operations of their business. This is not necessarily 
 betraying their customers' interests, provided the general 
 bulk of their business assets is kept sufficient in value to
 
 THE ORIGIN OF MONEY. II 
 
 cover their obligations, and a sufficient supply of metal 
 is held to meet the demands of the few who may need to 
 use what they have due. So soon as this idea becomes 
 well recognized, there will be a competition to receive 
 money thus for mutual benefit, and tradesmen will offer 
 inducements to their customers thus to trust them. This 
 will usually take the form of an added amount to be paid 
 after a given time over and above the original debt, 
 as interest, and we have the beginnings of banking. 
 
 When the customer delivers his money to his banker, 
 the latter may write his promise of return upon a small 
 paper convenient to keep or to carry, and he may agree 
 to deliver the required amount to anyone whom the 
 customer may point out by writing on the paper. If 
 Jones has purchased goods, and is now paying for them, 
 it may, and probably will, occur to him that, instead of 
 going to the banker and drawing out what he has on de- 
 posit, it will be more convenient to transfer the banker's 
 indebtedness to the seller of the goods by transferring the 
 paper promise the banker gave him, and, as the banker 
 has promised to settle with anyone whom Jones may 
 point out, the seller will be able to get the money when 
 he needs it. If the seller does not immediately need the 
 hard cash and has confidence in the banker, he will readily 
 see the convenience of the arrangement and will probably 
 agree. The seller may in like manner transfer the paper 
 to his own creditor, and he again to another, until finally 
 the paper may have passed through a hundred hands be- 
 fore some one needs to call on the banker for the money. 
 
 In these transactions the paper promise has been used 
 instead of money. It re])resents money, and because the 
 business men have confidence in its integrity, they are 
 willing to receive it. As it represents money and i)asses
 
 12 MONETARY PROBLEMS AND REFORMS. 
 
 current the same as money in these transactions, it may- 
 be called representative money. It has one of the uses 
 of the real money it represents, it has currency ; but 
 there is one important distinction between the real 
 money and the representative money. The real money 
 does not depend on the credit or solvency of any man 
 or set of men, but on the value of the commodity itself ; 
 while the representative money rests upon the goodness 
 of the promise it carries. The ultimate value of the 
 real money rests on the market value of itself, but the 
 ultimate value of the representative money rests on the 
 value of what it represents. The fact that Jones and 
 the others are willing to receive it is because they be- 
 lieve it is good for what it claims. Its acceptability 
 rests in the agreement of the parties, and in that it closely 
 resembles the real money. 
 
 This representative money is a crude bank-note, and 
 in fact the transactions of receiving money on deposit 
 against the paper promises of the receiver, as above de- 
 scribed, are an outline of the process by which bank- 
 notes became introduced into general use in England. 
 
 The bank-notes of the previous description are issued 
 by a comparatively small number of men in the commu- 
 nity, who are in that business and are generally known 
 to merchants. A very similar species of paper, which 
 may have a limited use as representative money, is a 
 note given for a debt by a merchant not in the banking 
 business. This note will be less current as representative 
 money, because of the limited circle of business men 
 who will be familiar with its credit. 
 
 There are, however, other kinds of representative 
 money than the bank-notes and business notes which 
 have just been described. The most important for large
 
 THE ORIGIN OF MONEY. I3 
 
 commercial transactions is the bill of exchange. Sup- 
 pose Jones owes a debt to Smith to be discharged in 
 Jonesville, while Smith is at a distance in Smithville. 
 It may not be convenient to travel to Jonesville to 
 collect the debt, but if Brown, for instance, also living 
 in Smithville owes an equal debt to be discharged at 
 Jonesville, Smith may sell to Brown the claim against 
 Jones by a writing directing Jones to settle with Brown, 
 and Brown can send this written direction to his creditor 
 in Jonesville, who will thus be able to satisfy his own 
 demand. It is true, the creditor may refuse the arrange- 
 ment, but it is so manifestly convenient for all parties, 
 that, if the paper is really good for what it claims, he 
 probably will acquiesce. Such paper when in proper 
 legal form is a bill of exchange, and, so far as the credit 
 of the parties is well known, it may be used in trans- 
 actions to represent money, and thus becomes represent- 
 ative money. 
 
 We have seen that the banker's promissory note will 
 circulate more readily as representative money than the 
 promissory notes or bills of exchange of individual busi- 
 ness men, for the reason that, while the private note or 
 bill may be perfectly secure, the credit of the banker 
 will be much better known. Accordingly it will be for 
 the advantage of a business man who holds a pri\ ate bill 
 or note to exchange it for liis banker's note, and pay the 
 banker a commission for the service in the shape of in- 
 terest or discount. The banker will thus be indebted 
 without intrrt'st on his own notes and will hold an etpial 
 <;laim ivith interest against i)rivate parties. This interest 
 will be his profit and will form the inducement tm the 
 existence of the banking business. Unfortunately, too, 
 it will form a temptation to the banker to issue a
 
 14 MONETARY PROBLEMS AND REFORMS. 
 
 larger quantity of his demand notes than he can safely 
 look out for, and the very nature of his business will ex- 
 pose the public to peculiarly distressing and far-reaching 
 disaster if he becomes bankrupt. Accordingly we find 
 that the government usually places restrictions on the 
 conduct of this business, and the issuing of these notes. 
 Often the latter function is reserved to specially incor- 
 porated banking companies, or banks, which by con- 
 trolling a larger capital are better able to succeed than a 
 private banker in the same line. The restrictions which 
 at various times and in different countries have been 
 placed on banks of issue have been too numerous to 
 mention, and have ranged from what is practically no 
 restriction, to the most rigid cast-iron rules. It must not 
 be supposed, however, that the issuing of promissory 
 notes is the sole or chief function of banks, even in re- 
 lation to representative money. Fully as important in 
 utility and magnitude is the receiving of deposits, subject 
 to be repaid on demand or on presentation of checks, 
 which are a form of bills of exchange. These deposits 
 are, within safe limits, loaned out to business men on 
 good security, and the processes of commerce are thereby 
 facilitated. The checks drawn against such deposits 
 form a very convenient and acceptable substitute for 
 real money, and are therefore a species of representative 
 money. 
 
 The profits of bank-note issues seem so certain and the 
 risks of the issuer so slight, that there is a very seducdve 
 inducement to the authorities to secure some of those 
 profits directly to the government. It is not unknown 
 that a government sometimes issues its own demand 
 notes, and encourages their use as representative money. 
 Such issues are unfortunately usually complicated with
 
 THE ORIGIN OF MONEY. 1 5 
 
 Other matters, and so do not stand on their own merits, 
 but they are quite generally condemned by conservative 
 financiers. Still a general condemnation might in par- 
 ticular instances be unjust. In general it may be said 
 that the government, not loaning money, must put out 
 its notes by making purchases with them, and that as 
 this output cannot of necessity be governed by the re- 
 quirements of trade, the government is less fitted to 
 regulate the amount issued than are banking companies. 
 In other words, the government is doing only one wing 
 of the banking business, and is under the constant strain 
 of standing ready to redeem its notes. Still a govern- 
 ment note issue may possess what is to the common 
 people a great advantage, namely, uniformity, and in 
 special cases may be excusable. For instance, it ap- 
 pears to be true that a questionable bank can best float 
 its notes when they are in notes for small values, because 
 small notes are largely available for transactions with the 
 poor, who, from their ignorance of a bank's credit, are 
 less able to protect their interests by recognizing and 
 rejecting the poorer notes. Accordingly most govern- 
 ments place an inferior limit below which their banks 
 are not allowed to issue notes. If now it seems desirable 
 at a given time to have small notes in general use, it may 
 well be argued that a limited amount of such notes if 
 issued by the government, well secured by provisions for 
 immediate redemption, will better jirotect the i)c)or, and 
 not clog the course of business. If at any time less 
 circulating medium is required, the reduction can readily 
 take place at the top by withdrawals of the larger notes 
 of the banks. 
 
 The last, and to the poor man the most im])ort,int, kind 
 of representative money to be particularly discussed is
 
 1 6 MONETARY PROBLEMS AND REFORMS. 
 
 snuiU-cliange tokens. When, in the evolution of in- 
 dustry, the article in commonest use as money is a metal 
 of considerable value in a small piece, as, for instance, 
 silver, it will still be necessary often to deal with values 
 smaller than can conveniently be offset against a veritable 
 piece of money metal, for the piece will be too small. 
 A need at once arises for a representative money to serve 
 in the place. This need is frequently met by taking a 
 piece of baser metal of less value than the diminutive 
 money to be represented, and stamping on it a mark im- 
 porting that the person or persons issuing it will receive 
 it in business at its representative value, or, when a large 
 quantity of such pieces is presented, will redeem them in 
 standard money. These tokens, if not in excess of the 
 needs of business, and if issued by reliable parties, will 
 circulate at their representative value, which does not 
 depend on the amount of metal present, as in the case of 
 a piece of real money, but on the credit of the issuer ; 
 though, of course, the presence of the metal is a guaranty 
 to the extent of the value of the metal. 
 
 These tokens are in effect promissory notes, and like 
 paper notes may be issued by private parties or by the 
 government. Practically it is almost everywhere a gov- 
 ernment function, and its limitation as such seems to be 
 justified on the same grounds as might justify small 
 government notes on paper, as above explained — namely, 
 to secure uniformity, and protect the poor from im- 
 positions. In lands where silver constitutes the chief 
 money, it is customary to have tokens of copper or 
 nickel alloys ; and in lands where gold is the chief 
 money, in addition to copper and nickel tokens there 
 are usually silver tokens also. 
 
 The circulating medium may thus be classified :
 
 THE ORIGIN OF MONEY. 
 
 17 
 
 a. Real Money. 
 
 b. Representative Money ■« 
 
 ' Private Notes, 
 Bills of Exchange, 
 Bank-Notes, 
 Checks, 
 Government Notes, 
 Tokens.
 
 II. 
 
 FIAT MONEY; LEGAL TENDER. 
 
 It has been pointed out how money originates as a 
 system or method of supplying certain wants felt by the 
 community, and how this is brought about by individu- 
 als who, in seeking to conduct business in a convenient 
 way, become familiar with the use of certain articles as 
 temporary possessions which they will generally have to 
 dispose of in order to reap the result of industry. At- 
 tention has been called to the fact that the use of such 
 articles as mediums of exchange, and to serve all pur- 
 poses of money, is a customary use growing out of the 
 agreements of many different individuals each in pursuit 
 of his own profits. The acceptance of such articles in 
 direct exchange is because each party has bargained for 
 and received what he is disposed to consider a fair 
 equivalent in general. The further use of money as a 
 measure of values is also a matter of habit. The custom 
 of comparing values by referring them to the articles 
 commonly received in exchange is merely a matter of 
 convenience. There is no essential reason why values 
 must be compared with the medium of exchange. So, 
 too, when two persons are bargaining for a future de- 
 livery of some article, the fact that the article finally 
 selected happens to be used as a medium of exchange 
 does not affect the economic nature of the transaction. 
 
 i8
 
 FIAT MONEY ; LEGAL TENDER. 1 9 
 
 From an economic point of view there can be no differ- 
 ence between an obligation to deliver what happens to 
 be a medium of exchange and an obligation to deliver 
 some other article. In either event the selection has 
 been made by the agreement of the parties, and the 
 obligation is as to a certain quantity of a certain thing. 
 It is thus that we may say that in economic contemplation 
 any obligation to deliver specified goods is a debt. It 
 would seem that the obligation made by the agreement 
 of the parties should be altered only by the agreement 
 of the parties. It would seem further that the obli- 
 gation should not be altered indirectly by changing the 
 definition of terms used in the agreement. Nor should 
 the fact that the law looks on a debt for money in a 
 different light from the way in which it looks on a debt 
 for other goods, make any difference as to impairing the 
 obligation. 
 
 If the circulating medium is silver, and a certain weight 
 of silver is known as a quod, then an obligation for one 
 hundred quods is just as much an obligation for a cer- 
 tain amount of silver as if the word silver were specified 
 and the weight told in ounces. If a law steps in and 
 alters the amount or quality of silver or gives the word 
 quod Zi new meaning in that contract, then an injustice is 
 done to one party or the other. Either tiie one is obliged 
 to give more than he agreed ; or, the other is obliged to 
 rest with less than was promised him. 
 
 It may, perhaps, be said that the government has a 
 right and duty to define the monetary unit, but the act 
 of applying a name to a definite amount of metal, so that 
 that name when used in subsequent transactions shall 
 have that meaning, is very different from declaring in 
 effect that the new meaning shall api)ly to existing con-
 
 20 MOXE'J'AA'V PROBLEMS AND REFORMS. 
 
 tracts, in which the term had a distinctly different mean- 
 ing in the contemplation of the parties at the time the 
 contract was made. 
 
 In spite however of everything above said, it is never- 
 theless true that no despotic power of government in 
 disregard of property has been oftener or more universally 
 employed than this power of tampering with contracts ; 
 and that, too, not only by governments professedly des- 
 potic, but even by those claiming to be actuated by the 
 principles of justice and liberty. It would sometimes 
 seem as if the louder the protestations of liberty and 
 justice to all, the more determined a government may be 
 in a tyrannous course of intermeddling with private 
 affairs. 
 
 The state of mind that can give rise to a belief in the 
 rightfulness of a law declaring something a legal tender 
 on a contract, which is of less value than the contract 
 calls for, is an enigma probably impossible of solution. 
 It would seem to be based, however, on a confusion be- 
 tween the moral duty of a contract and the remedy for a 
 contract or that which gives the contract the assurance 
 of fulfilment. The duty of a contract rests on the innate 
 sense, that a man ought to perform, to the best of his 
 al)ility, what he has promised. The remedy for a con- 
 tract is the recognition which the law gives to the duty. 
 Unfortunately, too many men are desirous of escaping 
 from the performance of their contracts, and while the 
 duty of a contract may be said to be before and above 
 the law, without a remedy it is valueless in commercial 
 transactions. The creditor, therefore, is utterly at the 
 mercy of the debtor until the law steps in and recognises 
 the duty, and gives a remedy for the enforcement of the 
 debt. Now as the creditor's power to avail himself of
 
 FIAT MOXEY ; LEGAL TENDER. 21 
 
 the benefit of the debt depends on, and is limited by, the 
 remedy which the law allows, by a confusion of ideas it 
 may be supposed that the creditor's right to a remedy is 
 simply what the law graciously gives. If once this step 
 is taken we have no assignable limit within which the law 
 must refrain from meddling, and we are launched on the 
 turbulent sea of legal-tender enactments. 
 
 One of the earliest and crudest forms of legal-tender 
 laws is an act tampering directly with the standard coin- 
 age. Suppose, as in the case mentioned, the unit of 
 money is a definite quantity of silver called a quod, and 
 the prince or legislature exacts that a piece of silver of 
 only three quarters of the weight of the quod shall be a 
 legal tender for a quod. Obviously the creditors on ex- 
 isting contracts are helj^less, and must receive the little 
 quod or nothing for the big quod promised. Equally 
 obvious it should be that buyers and sellers will receive 
 the little quod, in immediate exchanges, only for its mar- 
 ket value, and there will then be a big quod and a little 
 quod, of different purchasing power, in use in the same 
 place at once. Practically, the same result is reached if 
 one of the old fpiods is made a legal tender for one and 
 one third (piods. Instead, however, of making a little 
 quod by weight or giving a higher name-value to an ex- 
 isting piece of metal, the prince may make the new (piotl 
 of the same weight as the old one, but with an increase 
 f)f the baser alloy present. This accomplishes tiie same 
 result ; and has this advantage that the new (|uod looks 
 like the old, so that the people arc more readily deceived. 
 
 These, then, are the three ways of debasing the stand- 
 ard coin of a country : — either, to reduce tlic weiglit of 
 the piece, and make the reduced [)iece a legal tender for 
 the old piece ; — or, to coin tlie same pieces as before-, but
 
 22 MONETARY PROBLEMS AND REFORMS. 
 
 decree that each shall be a legal tender on existing con- 
 tracts for more than its old name implied ; — or, to coin 
 pieces of the same weight as before but of a reduced fine- 
 ness and to make them legal tender with the old. How- 
 ever, it is not at all unusual to find that when one of 
 these methods is employed in a scheme of debasement, 
 the others are also associated with it. Debasement, prop- 
 erly speaking, refers simply to ap])lying the old name to 
 a lesser amount of metal, and in order to effect an im- 
 pairing of contract rights must be accompanied by a 
 legal-tender law, for otherwise creditors would not re- 
 ceive the smaller coins for more than their market value 
 as stamped metal, but the act of debasement is so univer- 
 sally poisoned with this legal-tender law, that the term 
 debasement is generally used to cover both operations. 
 This matter of debasement in its broad sense is frequently 
 glossed over and condoned by the title of seigniorage, 
 and many economic writers assert that if a slight seignior- 
 age is imposed, only covering the cost of minting, the 
 reduced coins will circulate equally and at the same 
 values as the unreduced coins. 
 
 This is not the place to discuss the correctness of this 
 assertion in fact. It is enough to say that if a coin has 
 hitherto contained one hundred grains, and an equal 
 tender coin of ninety-nine grains is put out, there is at 
 once an invitation to holders of the older full-weight coins 
 to abstract the one grain, and this invitation will in longer 
 or shorter time have the effect of reducing the whole 
 circulation to ninety-nine-grain pieces. However, whether 
 the views of seigniorage advocates are correct or not is 
 aside from the question at issue. To decree a ninety- 
 nine-grain piece to be legal tender on existing contracts 
 for the hundred-grain piece must result in this, that the
 
 FIAT MONEY ; LEGAL TENDER. 23 
 
 creditor will only get ninety-nine grains where he is 
 entitled to one hundred, and this is the injustice against 
 which complaint is being made. If it at any time seems 
 to be desirable to charge a seigniorage of one per cent., 
 for instance, a proper and just way will be to coin one 
 hundred full-weight pieces and deliver ninety-nine of 
 them to the person depositing the metal, rather than to 
 deliver one hundred pieces of only ninety-nine grains 
 each. The depositor receives the same metal in either 
 arrangement, but, if the pieces are full-weight pieces, 
 creditors are protected. 
 
 Another class of legal-tender laws deserves to be men- 
 tioned here. It is that class of laws providing for what 
 is variously called a " least current weight," or " limit of 
 tolerance." These laws are designed not to enrich the 
 prince or state or primarily to defraud, but are supposed 
 to be a protection to trade, from the reasonable wear 
 and tear to which coins are subjected. Such a law will 
 provide that so long as a coin has not lost a certain small 
 proportion of its standard weight it shall be legal tender 
 as if of full weight. On theory there would seem to be 
 no reason for forcing a creditor to accept short weight, 
 even if resulting from reasonable wear, but in i)ractice 
 the amount of injustice accomplished by this class of 
 laws is, comparatively with the injustice of general 
 legal tender, so slight that it is not much considered, 
 though such laws must be an invitation to rub the coins 
 down as near to the limit as possible. 
 
 The method above described for tampering with the 
 money of a country, namely, to debase the coins in weight, 
 fineness, or nomenclature, and apply legal-tender laws, is 
 so barefaced and self-evident a fraud, that it is almost 
 universally denounced, and it is of late years seldom used
 
 24 MONETARY PROBLEMS AND REFORMS. 
 
 by a civilized government. There is, however, another 
 method by which the same nefarious end can be attained 
 under the phiusible pretext of " regulating the value of 
 money " — as if money needed any other regulation than 
 to be let alone to find its own market level. This idea 
 of regulating the value of money has its enthusiastic 
 advocates in all countries of the present day, and has 
 permeated to individuals in all classes of society. It is 
 based on the idea that the order of the government, the 
 fiat of law, gives money its basic value. It is therefore 
 called the doctrine of fiatism, and money that is tainted 
 with this idea is called fiat money. 
 
 The idea is put into practice somewhat thus : Sup- 
 pose again the unit of money is a certain amount of 
 silver called a " quod," and that the business com- 
 munity has made many contracts calling for the de- 
 livery of quods. Each of the contracts has been made 
 on the faith and credit of the quod as a definite amount 
 of silver. At this point the law steps in and says 
 that an arbitrary amount of some other substance shall 
 be a legal tender for every quod due. If the market 
 value of this new article is greater per nominal quod 
 than the market value of silver per quod, of course no 
 debtor will avail himself of his " privilege " to give some- 
 thing better than he owes, but if the market value of the 
 new thing is less than that of silver, of course debtors 
 will take advantage of the fact and pay their debts in 
 the cheaper new money. It would seem to be obvious 
 that, in thus forcing a creditor to take a new article dif- 
 ferent from the one contemplated by the name used 
 when the contract was made, or otherwise to lose 
 the debt, the law is just as unwarrantably interfering 
 with the sacredness of contracts, as when it forces a
 
 FIAT MONEY ; LEGAL TENDER. 2$ 
 
 creditor to rest with a smaller amount than promised of 
 the identical article promised. 
 
 This method of using legal-tender laws is sometimes 
 applied to bulky commodities, sometimes to another 
 metal, and sometimes to the paper promises to pay the 
 standard metal, but the vicious principle is the same in 
 either case, namely, the forced discharge of a contract 
 by delivery of something other than that demanded by 
 the contract. The first case, that of bulky commodities, 
 is very rare and found only in sparsely settled countries, 
 but the last two are unfortunately too common. The 
 second case occurs generally when silver is the standard 
 money, and the law steps in to make a less valuable piece 
 of gold a legal tender on existing contracts, or when gold 
 is the standard money, and the law steps in to make a 
 less valuable piece of silver a legal tender on existing 
 contracts. In either event there is the same injustice 
 done. There is nothing in either silver or gold that 
 makes either act better than the other. The third rase 
 put is that of paper promises to pay. Instead of requir- 
 ing a substantial thing in payment, this law allows the 
 creditor to be put off with the mere jjromise of a third 
 party subject to all the fluctuations or losses which that 
 party's credit may suffer. It may be worse in degree, 
 but in princii)le there is no difference between this sub- 
 stitution of a third party's credit and the substitution of 
 an article not demanded at an arbitrary rate. 
 
 When such a law as has been described is passed, 
 namely a law to allow the substitution of one metal for 
 another, — the law usually fixes a definite amount of the 
 second metal which shall go for a definite amoiint of the 
 first metal, and this amount remains the same without re- 
 gard to the changes in the market prices of the two
 
 26 MONETARY PROBLEMS AND REFORMS. 
 
 metals. The ratio which exists between legally equiva- 
 lent weights of the two metals is called the legal ratio of 
 value. It is obvious that in a given case that metal 
 which is cheaper according to the legal ratio will be used 
 in discharging contracts and, as this will apply even to 
 contracts made when the other metal was the circulating 
 medium, all contracts are thus exposed to the risks of 
 a depreciation in the metal out of circulation. The 
 creditor never gets the benefit of a rise in either metal, 
 but must stand the risks of depreciation in both, unless 
 he has specifically stipulated for one particular metal. 
 This, however, is something that many will neglect to do. 
 Normally it would seem that the risk of depreciation 
 should be offset by the possibility of profit from appre- 
 ciation, — that he who bears one should enjoy the other, 
 but by this system all risk falls on the creditor and all 
 chance for profit on the debtor. It is a game of " heads 
 I win, tails you lose " ; — and this distribution of risk and 
 profit remains the same even when the market ratio of 
 two metals may happen to be the same as the legal ratio, 
 for, whichever way the market turns, the creditor is 
 bound to go down. 
 
 This system is known as bimetallism. The term is 
 rather unhappily chosen, for what it really means is that 
 two metals shall be used as money, whereas the essential 
 feature of what is called bimetallism is the legal-tender 
 law which makes either metal a legal tender at a fixed 
 ratio. It has already been pointed out that in the evolu- 
 tion of industry two or more metals may come to be 
 used as money for different kinds of transactions without 
 the assistance or interference of law. Under such cir- 
 cumstances the metals will circulate at their market 
 values from time to time. Such a system of two metals
 
 FIAT MONEY ; LEGAL TENDER. 27 
 
 would seem to be what should be meant by the term 
 " bimetallism." That term, however, has become twisted 
 into the name of the legal-tender system above described, 
 which would be more accurately named, by the term 
 " alternate tender system " sometimes also applied to it. 
 The basis of the system rests in the fiat theory of money, 
 the idea that it is the right and duty of the law to interfere 
 in the private money contracts of the people, and alter 
 them at pleasure. 
 
 That such a right should be claimed and exercised by 
 a despotic pri7ice is only natural, but that any government 
 claiming to be actuated by principles of justice and 
 liberty should consider such a course, not only justifiable, 
 but even commendable, is a most remarkable phenome- 
 non. Yet at the present day there is a certain class of 
 people who consider opposition to bimetallism as evi- 
 dence of the rankest kind of monarchical sympathies, 
 and consider the principles of bimetallism as inherently 
 a jjart of the theory of popular government. That a 
 ]jrinciple so despotic can be regarded as essentially 
 democratic is most extraordinary. 
 
 The discussions of bimetallism have mostly been waged 
 along the line of its expediency, but this is not the 
 place to go into that field. It would seem, to be sure, 
 that a system founded on the idea, that a creditor has no 
 rights which the government is bound to respect, must 
 necessarily frighten cajjitalists, and impede the free dis- 
 posal of capital, without which no secure pr()s])crity is 
 possil)le. The idea, however, which it is desired to cm- 
 jjhasize here is the inherent injustice of such a system, 
 and that should be a sufficient condemnation. 
 
 The disciples of the bimetallic creed do nf)t agree 
 among themselves as to what is the proper application of
 
 28 MONETARY PROBLEMS AND REFORMS. 
 
 the system. They may be grouped as national and inter- 
 national bimetallists. The national bimetallists wish 
 any one great nation, particularly the United States, to 
 pass their pet law and see whether the market ratio will 
 become the same as the legal .ratio, so that the two 
 metals gold and silver shall be at a " parity." The inter- 
 national bimetallists cry out against this. They say it 
 would be wrong if tried by one government at a ratio 
 differing from the market ratio, but if tried by all the 
 leading nations it would be all right. In either case no 
 desire is shown to start the system on the market ratio. 
 Both national bimetallists and international bimetallists 
 are entirely ready to expose existing creditors to the risk 
 of a fifty-per-cent loss, and insist on the absurd ratio 
 about one half of the present one in the market. 
 
 The alternate tender or bimetallic system supposes in 
 its completeness that both metals are freely coined for 
 all comers, but as this exposes the coins to the fluctua- 
 tions in the market ratios, an apparent bimetallism as a 
 compromise has often been established. In this scheme 
 one of the metals is limited in its coinage to government 
 account and less than the face value of the metal is used, 
 Provision is then made for a direct or indirect redemp- 
 tion of the coins so that they shall circulate at their face 
 values. Besides this they are often limited in legal 
 tender to some small sum. In such a scheme the infe- 
 rior coins so bolstered up may circulate at par, but it is 
 obvious that they do not do so on the value of the metal. 
 It is rather on the credit of the government, and as the 
 government by its legal-tender enactment has put them 
 out at full value it is under an obligation to see that 
 they stay at full value, and, if necessary to that purpose, 
 to redeem them in standard metal. As they are an obli- 
 gation or debt of the government and depend for full
 
 FIAT MONEY ; LEGAL TENDER. 29 
 
 value on the government's credit they are only tokens or 
 representative money, and this is so without regard to 
 whether they are full legal tender or only limited legal 
 tender. The making of metallic credit money legal 
 tender is no different in theory from making paper credit 
 money legal tender. In either case the creditor gets 
 instead of the real monetary metal the credit of a third 
 party, and the fact that in one case there is present a 
 valuable metal to the extent of part of the obligation can 
 make no difference except so far as it may or may not be 
 considered an added security. 
 
 The token coinage of most, probably all, countries is 
 made a legal tender to a limited amount, but this is so 
 generally protected by strict limitations on its issue, and 
 provisions for redemption direct or indirect that it usu- 
 ally circulates at par. Still, as it rests in part on credit, 
 there is a possibility of extraneous depreciation, and on 
 principle it seems improper to throw even that risk on 
 creditors. 
 
 So too, when notes, or pajjer credit money, are made 
 legal tender, there is sometimes a provision for redeem- 
 ing them so that for a time, and it may be a long time, 
 they circulate at par, but nevertheless there is still the 
 possibility of depreciation, and the risk of that is thrown 
 on the creditor. Of this nature are the United States 
 greenbacks since 1879. The notes of tlie Hank of Eng- 
 land are, apparently to be classed here, I)iit in reality 
 their legal-tender quality is modified by the provision 
 that they are legal tender only so long as the bank re- 
 deems them in gold. Thus the legal-tender power ceases 
 to operate as soon as it becomes dangerous, while the 
 greenback remains legal tender in spite of dangerous 
 circumstances. 
 
 Many persons will recognize at once the hardshij)
 
 30 MONETARY PROBLEMS AND REFORMS. 
 
 which a legal-tender law throws on creditors, but will 
 say that the creditor as a rule is a grinding master, rich 
 and heartless, and not deserving of much consideration 
 beside the poor debtor, who is a much-abused fellow. 
 The creditor is taken to be essentially bad, while indebt- 
 edness is considered almost a virtue. It would not be 
 difficult to show, as has often been done that this view is 
 entirely erroneous in fact ; — that the creditor as a class 
 is more apt to be a poor person unable to protect him- 
 self to any degree, and the debtor is as likely as not a 
 wealthy individual or rich corporation ; that the bulk of 
 creditors are the poor who have laid up a small invest- 
 ment, or widows and orphans who are dependent on 
 what is due them, or laboring men waiting for their 
 weekly wages, while the rich debtor is well able to pro- 
 tect his own interests. All this might easily be shown, 
 but it is really aside from the direct point, which is that 
 even and exact justice should be done to both debtor and 
 creditor. 
 
 When an honest man becomes bankrupt, it is right to 
 relieve his necessity by a bankrupt law, nor does that 
 neszlect the creditor, for the creditor's interest then is to 
 get what he can before worse happens. A legal-tender 
 law, however, which makes less an equivalent for more, 
 takes no account of any man's ability to fulfil his con- 
 tracts, but with one fell swoop strikes a horizontal re- 
 duction of debts for all alike, and is in effect a universal 
 bankrupt act. When it is said, as sometimes is, that a 
 legal-tender law is necessary to avoid bankruptcy, such a 
 law is, in reality not an escape from bankruptcy, but the 
 most emphatic confession of bankruptcy. 
 
 It is appalling to consider the amount of injustice that 
 even in enlightened lands has been done to the helpless
 
 FIAT MONEY ; LEGAL TENDER. 3 1 
 
 through this insidious proceeding. The fortunes of the 
 rich have been swept away as by a cyclone, and the hard 
 earned savings of the poor have melted into nothing. 
 
 And the worst of it all is that the perpetrators of these 
 things are often, yes, usually, in the main, honest, well 
 meaning men, who suppose they are acting for the good 
 of the public. Among the wrongs done in Liberty's name 
 legal tender must hold a prominent place. It seems to 
 be almost a mania to rush to legal tender in any public 
 crisis. At the very time when business confidence is 
 most needed, the most deadly blow is struck at that 
 confidence. The apologists of legal-tender paper will 
 tell you that in times of public need gold and silver are 
 cowards, are hidden away, and only the paj)er is left. 
 These people forget to inform you that gold and silver 
 are not persons, but disappear because bad laws have 
 forced out unreliable paper, and have threatened the 
 owners of the metals with unnecessary losses, so that the 
 owners are only taking proper measures for their own 
 safety when they secure their gold and silver. 
 
 If such laws were passed only by those recognized as 
 scheming, unscrupulous self-seekers, it would be com- 
 paratively easy to combat them. The mere statement of 
 the villany would be enough to rouse public indignation 
 to a point where such laws would be impossible. Hut 
 when really honest men honestly believe them right, it is 
 doubly hard to persuade the trusting people that its 
 trusted leaders are wrong. 
 
 Many a man deplores the dangers and wrongs of legal- 
 tender laws, but believes such laws are necessary. The 
 reasons which may induce men to consider these laws 
 necessary may be roughly grouped as due to two causes. 
 First, a desire to introduce some new kind of money ;
 
 32 MOA'ETAKY PROBLEMS AXD REFORMS. 
 
 and second, a belief that money needs these laws in or- 
 der to circulate and pay debts. The first cause may be 
 treated very briefly. If in the evolution of simpler forms 
 of business, a new kind of money becomes convenient, 
 the business community will not need any forcing to 
 make use of what is really convenient, and if it is not 
 really convenient then it should not be forced. A propo- 
 sition may be raised to issue certain paper money, for 
 instance. Paper that is so well secured for payment, 
 and so thoroughly reliable that it possesses the confi- 
 dence of business men, is so manifestly convenient that 
 it will readily be accepted in all kinds of transactions 
 without the intervention of a law; whereas if it is not so 
 reliable as to have the confidence of business men, that 
 is a sufficient reason why it should not be forced upon 
 them. Such poor paper should not be issued. Again, — 
 the lawmakers may believe that there is not enough of 
 one metal to supply the needs of trade, and so may think 
 it necessary to make two metals legal tender at a fixed 
 ratio. If the government simply stamps coins of both 
 metals, that is a perfectly harmless proceeding, and 
 business men can use either or both, as they find con- 
 venient ; but, if they do not find both convenient, that is 
 the very best reason in the world why the undesired 
 metal should not be forced upon them. The desire, 
 then, to introduce a new kind of money, contrary to the 
 convenience of the business world, is not a legitimate 
 desire. 
 
 The second cause for believing legal-tender laws nec- 
 essary is found in a more or less conscious belief in the 
 fiat theory of money, — that money needs these laws in 
 order to circulate and pay debts. This involves an ex- 
 amination of the three uses of money in their relation
 
 FIAT MONEY ; LEGAL TENDER. 33 
 
 to legal tender, — namely, money as used to buy things, 
 money as the measure of values, and money as the stand- 
 ard of contracts for future deliveries, that is, debts. It 
 has been pointed out that real money is some valuable 
 article generally desired, and representative money is a 
 claim for real money ; also, that, in the transaction of 
 buying and selling, the seller accepts the buyer's money 
 because he considers it a fair equivalent. The seller will 
 not give up his goods till sufficient money is offered him 
 to be a fair equivalent, and if a legal-tender law applies 
 a given name to an article only half as valuable as that 
 which formerly bore it, then the seller will, when he dis- 
 covers the fraud, call for money of a proportionately 
 higher name than before, but still in actual value equiva- 
 lent to the goods sold. If the money put forth by law is 
 utterly worthless, trade will be crippled or reduced to 
 primitive barter, but the habit of using whatever is put 
 forth is so generally convenient that, unless the money is 
 positively vile, trade can manage somehow. 
 
 Thus both buyer and seller are in a position to dis- 
 count a legal-tender law, e.xcept through their own igno- 
 rance, which will soon be enlightened by the example of 
 their shrewder comrades. The circulation of money, 
 then, needs no such laws. 
 
 The second use of money is even more unembarrassed 
 by legal tender. This second use is the comjiarison of 
 values, and is entirely a customary mental process. No 
 law can say that a man shall not estimate his possessions 
 as equal in value to stated portions of whatever he chooses 
 to compare them with. 
 
 The real rub comes in regard to the third use of money, 
 namely as a standard of debts. In this connection it is 
 often said that there need to be legal-tender laws in f)rdcr
 
 34 MOXE'I'AKV PROBLEMS AND REFORMS. 
 
 tliat the debtor may know how to discharge his debt ; 
 but how is this? A debt in economic contemplation is 
 an obligation by contract for the delivery of specified 
 goods. The obligation arises by agreement of the par- 
 ties, and the article to be delivered is named by them. 
 Is anything more needed ? If Smith has contracted to 
 deliver one hundred pounds of butter to Jones, does 
 Smith need an act of legal tender to tell him what he 
 must deliver ? Is it not perfectly obvious that a delivery 
 of what is named in the contract is the evident and only 
 fulfilment of the contract ? The principle does not 
 change if the contract calls for a certain quantity of a 
 metal. If Smith has contracted to deliver a certain 
 weight of silver of a certain quality, is not that amount 
 of silver the full and only performance of the contract ? 
 Can it make any difference, if Smith and Jones by lan- 
 guage they both understand have called this certain 
 quantity of silver by the name " one hundred quods " ? 
 The performance or fulfillment of the contract to de- 
 liver goods is the delivery of the very goods specified ; 
 nothing more ; nothing less. A sufficient tender on such 
 a contract is the performance carried as far as it may be 
 without the acceptance of the performance by the cred- 
 itor. What this sufficient tender is, is, therefore, pointed 
 out by the terms of the contract, which designate the 
 performance. This tender and only this tender should 
 be recognized by the law as a legal tender, or a sufficient 
 tender in law on the contract. 
 
 It may be said that this is true as a general statement, 
 but will not be sufficient to cover particular facts. Let 
 us see as to this. Let us examine the principle in connec- 
 tion with the various classes of legal-tender laws, those 
 which provide for less of the metal promised, and those
 
 FIAT MONEY ; LEGAL TEXDER. 35 
 
 which provide some other less valuable metal, thing, or 
 obligation. 
 
 Suppose, then, that a country starts fresh, with no legal- 
 tender laws, or after abolishing its legal-tender laws. 
 Suppose the government simply points out 23.22 troy 
 grains of pure gold as a monetary unit, and applies a 
 name to that unit, calling it a dollar. This meaning of 
 the word dollar will be well understood by the business 
 world, and whenever that word is used in contracts, it 
 will have this definite meaning. A contract to deliver 
 dollars will, therefore, be a contract to deliver a certain 
 amount of gold, and the performance of that contract 
 will be the delivery of that gold. .A. sufficient tender on 
 that contract will be a tender of this full performance. 
 There is no need for any act of legal tender. The defi- 
 nite amount of gold is a legal or sufficient tender on that 
 contract by the very terms of the contract. Not only 
 has the contract fixed the amount of a valuable com- 
 modity to be delivered, but the law has no right to in- 
 tervene and say that a less amount shall do. And this 
 intervention is entirely unnecessary. Nor sliould the 
 fact that the pieces of metal used in paying this contract 
 have lost by wear a small portion of their original weight 
 be a reason for throwing the loss by that wear on llic 
 creditor. To be sure, if the provision for a least current 
 weight exists when the contract is made, that o[)erates in 
 the definition of the term dollar used in the contrac I, 
 but it is not necessary, for the matter is to be delennined 
 by weight, and when the coins are weighed it is no harder 
 to value them at their true weight than at some arbitrary 
 increase over that weight. Moreover, it seems to |)ut the 
 home creditor to a disadvantage as against tlie foreign 
 creditor, for in payments made abroad the Irg.il-lcnder
 
 36 MONETARY PROBLEMS AND REFORMS. 
 
 law cannot run, and the coins will go only for their actual 
 weight, while the home creditor must put up with the 
 loss of the difference which the law may allow. It is 
 only fair to say that the practical injustice from this par- 
 ticular kind of legal-tender laws is very small, but the 
 purpose here is to show that even this kind of legal-ten- 
 der laws is unnecessary. 
 
 In regard to the legal-tender laws which provide for 
 the substitution of some other metal, thing, or obliga- 
 tion, it has already been said, but will bear repeating, 
 that the use of several metals at the same time, and the 
 use of representative money, which rests on some one's 
 obligation, may often be found very convenient, but this 
 very convenience will render such other metals and ob- 
 ligations readily acceptable at their market values for the 
 time being. If they are convenient, no legal-tender law 
 is needed to make them be accepted at their market 
 values, and, if they are not convenient or trustworthy, 
 no law should seek to force them out at an arbitrary 
 rating. 
 
 The last kind of legal-tender laws to be considered 
 may seem to be really necessary. This is the limited 
 legal-tender laws which apply to small change tokens of 
 silver, or other metals. One may say that if a contract 
 calls for a fractional part of the gold unit, and such 
 fractional part is too small to be paid with any gold coin, 
 a positive enactment will be needed to say what shall be 
 a payment. How is this ? Let us suppose that the 
 country with its monetary unit of 23.22 grains of fine 
 gold called a dollar, has perceived the necessity of some 
 kind of small change. Suppose that the government or 
 private parties of well known solvency have issued obli- 
 gations or tokens of paper, silver, bronze, etc., for small
 
 FIAT MONEY; LEGAL TENDER. 37 
 
 fractions of the dollar, and that ample provision for 
 redemption has been made, but no act of even limited 
 legal tender has been passed. The necessity that gave 
 rise to these tokens or representative monies will cause 
 them to circulate readily, for they will possess the confi- 
 dence of the business world. 
 
 Now under these circumstances if a contract calls 
 for a payment of a sum of dollars or fractions of a dollar 
 too small to be made with any common gold coin, the 
 inquiry at once arises, — is there no additional interpreta- 
 tion which we can put on the words of the contract 
 which may fairly be said to be within the intention of 
 the parties? Can it not be said that, if this payment is 
 too small to be made in gold coin, the parties contem- 
 plated that it should be made up of some other circu- 
 lating medium commonly used when the, payment is 
 made, and that a sufficient amount of this other money 
 should be paid to be of the value of the sum due accord- 
 ing to the market values of the monies at the time of 
 payment ? This seems a reasonable interpretation, and 
 by it the necessity for even limited legal-tender laws for 
 tokens is obviated, for by the terms of the contract the 
 tokens are a valid performance of the fractional sum, 
 and so are a sufficient tender. But this difference is to 
 be noted, that by thus interpreting the contract, the repre- 
 sentative money is a sufficient tender only at its market 
 value when paid, so that the creditor gets the full value 
 of his dues, while under a legal-tender hnv a fixed ([uan- 
 tity of the representative money is designated, and any 
 risk of depreciation is thrown on the creditor. Further- 
 more, the objection cannot be raised that tiiis intt-rpre- 
 tation of the contract WDuId open tlie door to allowing 
 an unlimited legal tender of representative money, for, it 
 
 389165
 
 38 MONETARY PROpLEMS AND REFORMS. 
 
 is only when the sum is too small to be paid in standard 
 metal that the reason arises for enlarging the definition 
 of the terms used. In this connection it will be inter- 
 esting to observe that, when cop})er token cents were 
 first issued by the United States, nothing was said in the 
 law about their being legal tender, even for small sums. 
 They were simply left to circulate as conveniency might 
 dictate, and so continued for many years.
 
 III. 
 
 RESULT OF LEGAL TENDER AND THE REMEDY. 
 
 The result of legal-tender laws has been that through- 
 out the world there is a large mass of legal tender repre- 
 sentative money which the various governments are 
 under obligation to keep at par with its nominal value ; — 
 a thing which the different governments in greater or 
 less degree succeed in doing. Thus Great Britain has 
 in round numbers about $112,000,000 of silver tokens, 
 France has about $490,000,000 of the same kind, Ger- 
 many has about $215,000,000 of such money, and the 
 United States has some $625,000,000 of silver tokens 
 and an additional amount of $500,000,000 of legal-tender 
 paper. ()f this burden of the United States all but 
 about $75,000,000 of silver fractional tokens is full legal 
 tender, and exposes the whole business of the country to 
 losses by depreciation. The tokens of Great Britain are 
 legal tender only for limited amounts, and are supposed 
 to be issued only as there is a business need for them. 
 This is the case with $110,000,000 of Germany's token 
 silver, and with $57,000,000 of the French, but both 
 these countries have out large cpiantities of full legal- 
 tender tokens, and the United States has inflicted on 
 itself an atrocious amount of such stuff. The German 
 and French pieces were mostly coined in the first place 
 as real silver money, when silver was high in price, and 
 the pieces contained at that time full value. When silver 
 
 39
 
 40 RIONETAKY PROBLEMS AND REFORMS. 
 
 fell these countries limited the coinage of silver, but un- 
 dertook to maintain the outstanding pieces at par. This 
 naturally threw the circulation value of the pieces on to 
 the governments' credit by the difference between the 
 bullion and the legal-tender value of the pieces, which 
 thus became tokens or obligations of the governments. 
 The effect was the same as if the governments had issued, 
 in exchange for the coins, demand notes secured by the 
 amount of silver bullion in the coins to be held as a 
 metallic reserve, only, instead of issuing paper obliga- 
 tions and holding the metallic reserve in their own vaults, 
 they used the reserve as the material on which to stamp 
 the obligation, and thus each holder of an obligation 
 held also the reserve appropriated to that particular ob- 
 ligation. In the United States the same result was 
 reached, but without any such excuse. The great bulk 
 of the silver tokens of the United States has been de- 
 liberately put out as a government speculation under the 
 laws for purchasing silver and coining silver dollars, 
 which are miscalled " standard " silver dollars, when in 
 reality they are only token silver dollars. 
 
 Such a system is dangerous and clumsy in the ex- 
 treme. It is dangerous in that, like all legal-tender 
 laws, even before depreciation, it throws arbitrarily a 
 risk upon the creditor, and thus threatens the security 
 of all invested capital. It is clumsy for the people in 
 that it uses a heavy, bulky material for representative 
 money. If the people are to carry round a heavy, bulky 
 article, they should have the satisfaction and security of 
 knowing that they are carrying it for its own value, and 
 not as a mere representative. On the other hand, if the 
 government wishes to devote that amount of bulky silver 
 to the purpose of a reserve, it can protect itself better
 
 RESULT OF LEGAL TENDER. 4I 
 
 by issuing non-legal-tender paper against it. The paper 
 will be no better and no worse than the tokens for 
 security, but it will be more convenient for the people, 
 and the government will be able to take advantage of all 
 increase in the market value of the reserve. The gov- 
 ernment will in either case be bound to make up any 
 loss by depreciation of the reserve, but in the case of 
 tokens it cannot take advantage of all gains ; for if the 
 value of the material of the tokens, which is here con- 
 sidered as a reserve, rises above the face value of the 
 tokens, the holder of the tokens will reap the benefit, not 
 the government. 
 
 Besides this great mass of silver tokens the United 
 States has a large amount of legal-tender treasury notes, 
 issued at first in war times, and since increased by sub- 
 sequent legislation. Since 1879 these notes have in fact 
 been redeemed in gold on demand, but the law requires 
 their constant reissue in Treasury disbursements without 
 any regard to the needs of business, so that the redemp- 
 tion of the notes does not at all relieve the government 
 of the burden of supporting them. The same may be 
 said of the silver dollars, which, by being received for 
 taxes and government dues, are in effect redeemed for 
 their face value, but are immediately counted as i)art of 
 the government's assets subject to I>e paid out or re- 
 issued, so that neither species of redemption, the direct 
 by paying gold on demand, or the indirect by receiving 
 for taxes lessens the government's burden. This process 
 of reissue after redemption goes marching right straight 
 on, without regard to any needs of business to use these 
 notes and tokens, and, up to very recently, the number 
 of tokens was constantly I)eing augmented by new issues 
 in anything but homccopathic doses. Every month Busi-
 
 42 MONETARY PROBLEMS AND REFORMS. 
 
 ness had to open its mouth wide and swallow its allot- 
 ment of so many silver pellets. Business naturally 
 protested, and finally its stomach showed unmistakable 
 signs of nausea. Not till then was the dosing stopped, 
 and then only in the face of an attempt to work off the 
 stock in trade of the silver drug upon the poor victim. 
 The constant increase of these two kinds of legal-tender 
 money, silver tokens, and treasury notes naturally alarmed 
 the business world, for no government's credit, or finan- 
 cial potentiality, is illimitable, and a strong fear was felt 
 that the government would be obliged to let this great 
 mass of representative money depreciate. That would 
 mean a loss to all creditors, and a reduction of all 
 invested capital. The existence of this legal tender rep- 
 resentative money was a menace to creditors and invest- 
 ments, and its constant increase was an added menace ; 
 — to say nothing of the national dishonor of failing to 
 maintain this stuff at par ; for the government by its 
 legal-tender laws had pushed this stuff out, and had 
 brought it about that every holder had given value equal 
 to the face value of this legal-tender money, so that the 
 government was under obligation to maintain it all at 
 par, and this involved a redemption in gold when re- 
 quired. To fail would be national dishonor. 
 
 It is sometimes said that the silver dollars are " stand- 
 ard " money, because they are full legal tender. In 
 reality they are tokens, for that very reason. Because 
 they are made a legal-tender for a gold value more than 
 the value of the silver, and because the government by 
 its law has put them out at a fictitious value, it is under 
 obligation to redeem them at that value. They are thus 
 obligations stamped on metal, and fulfil the definition of 
 tokens.
 
 RESULT OF LEGAL TENDER. 43 
 
 As the silver dollars and treasury notes of all kinds 
 were alike mere representative money, and required to 
 be redeemed ultimately in gold, attention was drawn to 
 the supply of gold which the government had for the 
 purpose, and it was found that, in the face of the con- 
 stant increase of obligations, no provision was made for 
 increasing the gold reserve. To be sure, there was a 
 nominal increase of metallic reserve by the deposit of 
 vast masses of silver bullion, but under the law this could 
 be used in redemption only in one way, namely, to coin 
 it into short weight token silver dollars in exchange for 
 paper ; but this was only to exchange one demand obli- 
 gation for another, and was no real redemption. There 
 was no provision for giving a gold dollar's worth of sil- 
 ver, even, in exchange for a dollar note, and no provision 
 for selling the silver to get the actual gold. So the whole 
 strain was thrown on the insufficient gold stock, and the 
 silver bullion was useless, and worse than useless ; for 
 the fear that it might be used in the only way the law 
 allowed added to the dismay. The panic of 1893 was 
 the natural and inevitable result. It was followed as a 
 necessity by the repeal of the silver purchase law, and 
 the injection of legal-tender j)oison was stopped. It was 
 only the injection, however, tliat was stopjjcd. No pro- 
 vision was made for withdrawing the poison already in 
 the arteries of business. That was lift to pollute the 
 commercial system, and the reissue of notes and tokens 
 after receipt or redemption went merrily on. 
 
 With a curious fatuity the very men who had led the 
 country into this condition insisted that a furtlu-r dose 
 of the same medecine was needed, and demanded that 
 the mints of the country should be thrown open to the 
 free and imlimited coinage of legal-tender silver at a
 
 44 MONETARY PROBLEMS AND REFORMS. 
 
 ratio that would put about one half of a gold dollar's 
 worth of silver into the silver dollar. The proposition 
 in effect was that when the government was struggling 
 to maintain a limited amount of token silver at par, it 
 should relieve itself of that burden by assuming the im- 
 possible task of maintaining an unlimited amount. Others 
 have gone even further, and have demanded that, as the 
 chief civilized countries of FAirope and America have 
 involved themselves under the same kind of burden of 
 legal-tender token silver, they should all join in one 
 grand game of repudiation by unitedly opening their 
 mints to the free coinage of legal-tender silver at a ratio 
 of only fifty per cent of its market value. It is hardly a 
 necessity to say that the present writer is heartily against 
 both these schemes of national or international bi-metal- 
 lism, based as tliey are on legal-tender laws in utter 
 disregard of the rights of creditors. 
 
 The legal-tender silver and legal-tender notes are, 
 however, present with us both in America and other 
 countries, and the problem in all lands is, how to deal 
 with them without endangering creditors' rights and in- 
 vested capital, or causing a shock to business. It will 
 be a difficult matter to make any reform, for even among 
 those opposed to opening the mints, either nationally or 
 internationally, to the free coinage of legal-tender silver, 
 there is much inertia. Many will say that the present 
 silver tokens are dangerous, but that we have them, and 
 we may as well keep all that we can keep without de- 
 stroying our credit. In other words, as we have rashly 
 approached a precipice, we must not retreat, but must 
 stay as close to it as we can without going over the 
 brink. 
 
 In order to arrive at any satisfactory solution of the
 
 RESULT OF LEGAL TENDER. 45 
 
 problem, it is necessary to have a clear idea of the ulti- 
 mate end to be attained. The writer trusts that in the 
 preceding pages he has clearly brought out the following 
 ideas, that money when reduced to lowest terms depends 
 on the confidence of the business community ; that this 
 confidence is best secured when business men are free to 
 do business with the kinds of money they prefer ; that 
 the precious metals are generally most acceptable as real 
 money, or the ultimate measure of transactions ; tliat 
 the precious metals are normally accepted for what they 
 are worth in the market as valuable commodities ; that 
 for the purpose of facilitating the process of determin- 
 ing the quantity and quality of a given piece of metal, 
 the government stamps the metals according to some 
 well understood system ; that this stamping or certifying 
 to the weight and fineness is called coining, and for the 
 sake of uniformity may be justified as a monopoly ; that 
 as the sole function of coinage is to certify to the good- 
 ness of the metal, the government has no right to attempt 
 to put a fictitious value on the pieces by legal-tender 
 laws ; that legal-tender laws are unjust in practice, and 
 unjustifiable in theory, either as to their utility or neces- 
 sity ; that the common law of contracts is amply suffi- 
 cient to protect both parties in the discharge of a money 
 contract when disentangled from legal-tender laws, l-iir- 
 thermore, it has been admitted that credit-money or rep- 
 resentative money is needed, but it is claimed that its 
 issue can best be conducted by banks, proj)erly restricted, 
 to be sure, for security, but at the same time able to re- 
 spond to the requirements of business ; though it is freely 
 admitted that for certain purposes, as in small transac- 
 tions, where the poor and ignorant are especially con- 
 cerned, for the sake of uniformity and to |)rotcrt the
 
 46 MONETARY PROBLEMS AND REEORMS. 
 
 poor, a limited amount of government credit or repre- 
 sentative money may be desirable, and that such a case 
 is that of small change tokens of metal or pajjer. It is, 
 however, to be constantly borne in mind that this per- 
 mission or opportunity for government tokens does not 
 involve the making of them a legal tender, which is here 
 as elsewhere bad in theory and needless in practice. 
 
 With these essential features of a thoroughly sound 
 monetary system before us, it is not hard to point out the 
 remedy. The only difficulty is how to attain the end. 
 As the present lamentable condition of the representa- 
 tive money of the world has been brought about by the 
 indulgence in the intoxication of legal-tender laws, the 
 remedy seems most naturally to be the repeal of the 
 legal-tender laws, the gradual redemption of the super- 
 fluous representative money, and the substitution of other 
 and better forms of non-legal-tender representative 
 money to supply the place of the present legal-tender 
 stuff so far as is needed. 
 
 In accordance with the principles herein enunciated, 
 a sound monetary system will provide for the free coin- 
 age of gold ; it may also provide for the free coinage of 
 silver, and any other metals that business men may 
 actually wish to use as standards, but not at any legal- 
 tender ratio between the metals. Each metal will simply 
 be stamped, under perfectly distinct names for the pieces, 
 as to its weight and quality, and left to pass for its own 
 market value, so that on a contract the only legally sufifi- 
 cient discharge or tender shall be the metal named in 
 contract. If, then, business men see fit to draw their 
 contracts generally for one metal in preference to another, 
 no one can find fault, and existing debts, which have 
 been made on the faith and credit of the gold dollar of
 
 RESULT OF LEGAL TENDER. 47 
 
 23.22 grains of line gold, will be amply protected. In 
 order that the government may not seem to throw its in- 
 fluence for the use of either metal in particular, it may 
 be well to provide that the government will receive both 
 metals indiscriminately for their market values at the 
 time of receipt. 
 
 So much for the real money, which will, however, need 
 to be supplemented by representative money. This 
 should consist chiefly of bank-notes issued under some 
 elastic system, possibly such as the well-known Baltimore 
 Plan. The banks should, it would seem, be allowed to 
 issue their notes either as specific silver notes or as spe- 
 cific gold notes, according as the needs of business 
 may require, for it is not at all unreasonable to suppose 
 that, with equal facilities for the use of gold and silver 
 money, the thickly-settled centres of commerce in a 
 country may gravitate to the gold standard, and the 
 more sparsely settled regions of the same country to 
 the silver standard. Besides the bank-note issues of 
 representative money, there may properly be had a small 
 amount of government non-legal-tender re])resentative 
 money, either pajjer or metallic tokens, of small denomina- 
 tions for use in making change and in petty transactions ; 
 but this representative money, whether i)aper or metallic, 
 should be strictly limited in amount with ample provi- 
 sions for redemption and security against too frequent 
 reissue. 
 
 Under this system only the metals will be legal tender, 
 and that, too, not by force of positive enactment merely, 
 but by force of the individual contracts themselves, and 
 it is to be observed that this abolition of legal-tender 
 laws will do away with the " least rurrcnt weight," so 
 that jjayments must be made by weight and full weight
 
 48 MONETARY PROBLEMS AND REFORMS. 
 
 given, as is the case to-day in international transactions, 
 where the foreign creditor gets full weight while the 
 domestic creditor is obliged to be satisfied with short 
 weight. 
 
 Perhaps it may be objected that the introduction, or 
 permission for the introduction, of silver pieces to circu- 
 late only at their bullion values, as gold does, would 
 cause confusion in trade with the silver tokens of the 
 present time, and consequently, any possible conveni- 
 ence of real silver money would be overbalanced ; and 
 the trade dollar, a coin of the description proposed, will 
 be cited as something that was often confused with the 
 legal-tender token silver dollar. The fact of liability to 
 confusion cannot be denied, but the argument to be 
 drawn from it will rather be the reverse, — namely, that 
 if bullion silver coins and token silver coins cannot be 
 advantageously used together, it will be better to use 
 some other material for the needed tokens. If silver is 
 suitable to be used as real money itself when parties so 
 desire, it seems to be too good to serve as the mere mate- 
 rial for representative or token money. In tokens, not 
 the silver but the government's good credit is the basis 
 of circulation. The silver may be worth much or little, 
 but if the credit is good, the token may be maintained. 
 The English shilling piece and the American silver dol- 
 lar have been maintained at par over great changes in 
 the value of the silver material. To use silver as a mere 
 material for tokens, if cheaper materials will do equally 
 well, is to lock up capital needlessly. Then will any 
 other form of representative money do as well as silver 
 tokens for the function which they are allowably to fulfil, 
 namely, to furnish small change. 
 
 The only practical question will be whether the small
 
 THE REMEDY. 49 
 
 change representative money can best be silver, or paper 
 notes ; for the value of copper and nickel used in tokens 
 is not sufficient to raise any question concerning them. 
 Now as between silver tokens and well secured fractional 
 notes, for no other than well secured notes can be con- 
 sidered, what are the comparative advantages and disad- 
 vantages? In the first place the silver tokens can be 
 more easily counterfeited than finely engraved notes, 
 and at a low price for silver the counterfeit silver 
 pieces can be in every way as well executed as the gov- 
 ernment ones. Next, the notes will be more convenient 
 for the people than bulky silver tokens, as witness the 
 marked preference for silver certificates over silver dol- 
 lars. Third, the profits to the government in either issue 
 of a given face value will be the same ; for either issue 
 is in effect a loan without interest, and the profit is the 
 interest on the face value put out. Fourth, it may be 
 said that the holder of a silver token has a pledge of 
 ultimate value for at least a part of the face value, by 
 reason of the valuable silver present, Imi against this 
 may be set the fact that this very presence of a partial 
 value is a strong temptation to the government to over- 
 issue, and make the liolder de])end entirely on this partial 
 security, and furthermore, if the silver of the token is to 
 be regarded as a reserve, the government is not al)le to 
 use that reserve to best advantage, for wliik- it must be 
 ready to make up any depreciation in the value of the 
 metal, if the value rises above the face value of the 
 token, the holder reaps the profit. Lastly, then, how do 
 the ex])enses of a silver token coinage com|)are will) llie 
 expenses of a system of well secured non-legal-tender 
 fractional notes ? The expenses of the silver tokens will 
 be practically represented by the loss of interest on tlie
 
 50 MONETARY PROBLEMS AND REFORMS. 
 
 first cost of the silver bullion used as the material, sub- 
 ject of course to be varied by rise or fall in the value of 
 the silver when the tokens are called in. The expenses 
 of the fractional notes will be practically represented by 
 the loss of interest on the reserve which safety may re- 
 quire to be ke])t. The expenses then of the two systems 
 will compare as the cost of the silver in the first instance 
 compares with the size of the reserve considered neces- 
 sary. Now all important existing silver-token systems 
 were established when the price of silver was so high 
 that the material cost from 80 to 95 per cent, of the 
 face value of the tokens. The United States token 
 silver was first issued in 1853, and 95 per cent, ap- 
 proximately was the price of silver then. It is right 
 and almost necessary to use a high percentage of valu- 
 able material, in order to lessen the inducements for 
 counterfeiting. On the other hand, no one would prob- 
 ably maintain that anything like so large a percentage of 
 reserve would need to be held back of a fractional note 
 issue, which by the very circumstances of the case is to 
 be strictly limited in amount, and is, moreover, of such 
 a nature that business will recjuire the greater part of it 
 to be kept in circulation. If the United States Govern- 
 ment has, even with difficulty, been able to maintain at 
 par one thousand millions of dollars of credit money on 
 the confessedly insufficient reserve of 10 per cent, and 
 less, it would seem that for an issue of so special a nature 
 as is here outlined a reserve never allowed to fall below 
 20 per cent, would be amply sufficient. 
 
 The system of small-change money, which the writer 
 advocates as most convenient to the people and most 
 economical to the government, may be outlined as fol- 
 lows. An issue of non-legal-tender fractional notes re-
 
 THE REMEDY. 5 I 
 
 deemable in gold on demand, receivable for customs, 
 taxes, and government duties, — the amount to be about 
 the same as the present outstanding subsidiary silver, 
 which would be withdrawn, — a special gold reserve for 
 these fractional notes ; at the start the reserve being 
 equal to 30 per cent, of the face value of the notes, 
 which, when redeemed, may be reissued until the reserve 
 has fallen to 25 per cent., when reissue must stop ; and 
 when the reserve has fallen to 20 per cent, it must be 
 replenished by a bond sale or revenue. At any time an 
 additional amount of notes may be issued to anyone who 
 wishes to dej)osit in the reserve their face value in gold. 
 The difference between the 30 per cent, reserve here 
 suggested and the 80 or 95 per cent, first cost of the sil- 
 ver for our tokens is considerable, and seems sufficient 
 to justify the belief that the proposed system would be 
 more economical than the present ; and even at the 
 present low price of silver, which makes the silver in our 
 tokens worth only 50 per cent, it would seem that tlic 
 change to the system of notes with 30 per cent, reserve 
 would be advantageous. To make the change now with- 
 out reforming our other representative money would be 
 but small gain, but in making a complete reform the tokens 
 for small change should not be overlooked. 
 
 As a concrete application ui llie theory, let us note the 
 saving that might have been made if the note system li.ul 
 been used instead of the token system. The token 
 silver of the United States was first issued in 1S53, and 
 about twenty million floilars were |)ut out in the first 
 two years in halves, (juarters, and dimes. .\t al)oul 95 
 per rent, the cost of the silver was about $19,000,000. 
 A 30 per cent, reserve on a fractional note issue of 
 $20,000,000 would have been $6,000,000. The interest
 
 52 MONETARY PROBLEMS AND REFORMS. 
 
 on the difference, namely the interest on $13,000,000 is 
 the needless expense of the government. At 5 per 
 cent, this interest in forty years amounts to $26,000,000, 
 and this is the loss on only a small portion of our token 
 out-put, and does not include the $10,000,000 of depre- 
 ciation of the silver used, so that on that issue of $20,- 
 000,000 the government has needlessly deprived itself of 
 the benefit of $36,000,000. 
 
 The next question is how to proceed to reform our 
 monetary system. There is a general consensus of 
 opinion among really sound-money men that our silver 
 system and paper money system are vicious, and that, in 
 order to reform, we must get rid of our legal-tender 
 notes. The writer agrees with this general opinion. The 
 difficulty comes in regard to the plan to be adopted. 
 Many schemes have been proposed, but they all look 
 only to disposing absolutely of the greenbacks and Sher- 
 man notes, which are the two kinds of our legal-tender 
 paper. Now the writer ventures to believe that the only 
 essential step is to deprive the notes of their venom by 
 repealing the legal-tender function of the notes on private 
 contracts, and the provision requiring and permitting the 
 reissue of redeemed notes. With these two insidious 
 factors removed, the business world could be safely 
 trusted to present the notes for redemption as fast, and 
 only as fast, as there was no longer need for them in the 
 channels of trade. This course too would be more fea- 
 sible, for the notes are a popular form of currency, and 
 the question whether the government should run a note- 
 issuing business is entirely distinct from the question of 
 having the notes legal tenders to be constantly reissued. 
 The repeal of the legal-tender function on private con- 
 tracts would 7iot destroy their receivability for public dues,
 
 THE REMEDY. 53 
 
 or prevent their being allowed as banking reserves for 
 the national banks. 
 
 The next step, and what may be the most difficult, will 
 be to attack the vast mass of silver tokens. This mass 
 consists, first, of about $75,000,000 of limited-tender 
 halves, quarters, dimes, old-fashioned half-dimes, and a 
 few twenty-cent pieces ; and, second, of perhaps $550,- 
 000,000 of full-tender silver dollars. The circulation 
 value of these tokens is secured by the good faith of the 
 government as to the difference between the face value 
 and the value of the silver as bullion. At the present 
 price of silver the bullion in these'tokens is worth about 50 
 per cent.; so that on the $625,000,000 of silver tokens the 
 government's obligation is something like $300,000,000. 
 The great bulk of the silver dollars are represented in 
 trade by silver certificates, which are much more con- 
 venient. This fact is of importance, and furnishes an 
 easy means for solving the problem of getting rid of the 
 tokens. Some such provisions as the following may, 
 then, be enacted, — A system of non-legal-tender frac- 
 tional notes for twenty-five and fifty cents, receivable for 
 government dues such as has been above outlined, shall 
 be established. On and after a certain date in the future 
 the present fractional silver tokens shall cease to be legal 
 tender, but from and after the passage of the act, and, 
 for a time running, perhaps, one year beyond the date 
 when they cease to be legal tender, the government shall 
 receive them at face value for all dues or in exchange for 
 the new fractional notes and, for the convenience of 
 foreign holders, United States Consuls abroad may be 
 authorized to receive them in exchange for drafts on the 
 Treasury at government expense ; from the bullion con- 
 tained in the tokens thus received by the government a
 
 54 MONETARY PROBLEMS AND REFORMS. 
 
 sufficient quantity shall be sold to provide a special gold 
 reserve of 30 per cent, for the fractional notes issued, 
 according to tlie i)lan heretofore outlined. The re- 
 mainder of the bullion will be held with other bullion in 
 the Treasury for purposes hereafter mentioned. On the 
 same day, when the fractional tokens cease to be legal 
 tender absolutely, the silver-dollar tokens shall cease to 
 be legal tender for more than sixty cents apiece, and 
 then only in sums not exceeding sixty dollars of gold 
 value ; but for a limited period thereafter the government 
 shall receive them at the old rate of one dollar each for 
 all dues, or in exchange for silver certificates, and all 
 silver dollars which may need to be paid out in the 
 meantime shall, to prevent frauds on the government, be 
 surcharged with a plain stamp, and be paid and received 
 by the government for only sixty cents each. Silver 
 certificates shall be redeemed in the silver tokens at the 
 new rate, so that for every nominal dollar demanded by 
 the paper a dollar's-worth of the tokens at the new rate 
 will be paid. Thus for certificates of the nominal value 
 of six dollars there will be received by the holder ten of 
 the silver tokens at sixty cents each. United States 
 Consuls may likewise be used to facilitate exchanges for 
 foreign holders. The sum of sixty cents is suggested as 
 the new nominal value merely because the bullion has 
 sunk to between fifty cents and sixty cents, and the new 
 rate cannot be less than the bullion value. 
 
 Besides the above provisions the law must provide 
 that silver certificates when received by the government 
 shall be cancelled, until the nominal amount of certifi- 
 cates outstanding is reduced to the nominal value of 
 tokens held against them at the new rate. This process 
 will be a redemption of 40 per cent, of the present
 
 THE REMEDY. 55 
 
 mass of silver, and there will then be only $330,000,000 
 in silver tokens, with the same amount of silver as is now 
 behind $550,000,000. The last step will be to redeem 
 the difference between the bullion value of the tokens 
 and the face value at the new rate. With the bullion 
 in each si.xty-cent piece worth about fifty three cents, as 
 at present, the margin for the government to cover will 
 be only about ten per cent. When the amount of certifi- 
 cates has been reduced to the nominal value of the tokens 
 held, the law may provide that on and after a certain 
 day, the silver pieces shall cease to be legal tender for 
 anything above their bullion value, but, that for a limited 
 time, perhaps one year, the government will receive 
 silver certificates and silver tokens at their nominal 
 value, and will give in exchange one dollar s-worth of 
 silver bullion for every dollar of nominal value accord- 
 ing to the market price at the time ; all silver tokens 
 held or received by the government will be mutilated 
 and treated as bullion, and the great (juantity of bullion 
 now in the vaults will be used for these redemption pur- 
 poses. At the present price of silver, low as it is, there 
 would be enough amply, for the stock is worth about 
 $100,000,000, and the margin for the government to 
 cover would be only ten per cent, of $330,000,000 or 
 $33,000,000. By thus rating the silver dollar j)icccs at 
 sixty cents each, the ratio in the United States coinage 
 would be changed from the present 16 to i into a ratio 
 of 2G\ to I. A similar scheme applied to English silver 
 tokens would give a ratio of about 23.8 to i ; applied to 
 the l''rcnch pieces it would give 258 to i, and to the 
 Oerman pieces about 23^^ to i. It would thus i)c a long 
 step in the redemption of these silver nuisances. 
 
 When the f omplete redemption haslwcn accomplished,
 
 56 MONETARY PROBLEMS AND REFORMS. 
 
 it will be proper to repeal all legal-tender laws, and, if 
 desired, throw open the mints to the free coinage of 
 silver ivithout any legal-tender ratio, but simply on the 
 basis that the silver coins may, when wished, be used at 
 their bullion value, just as gold coins are to-day. It may 
 be objected that this withdrawal of silver certificates and 
 silver tokens will be a contraction of the currency. To 
 say nothing of the many hoards of gold whose owners 
 would be glad to have them profitably employed free of 
 the danger of legal-tender laws, this objection fails to 
 observe that the silver will still be available at its market 
 value, and that there is plenty of silver to be used on 
 such terms. The objection of the mercantile world is 
 not to silver as silver, but to silver as a forced circulation 
 at an arbitrary artificial rate. The above scheme not 
 only removes the dangerous features from the govern- 
 ment treasury notes, but provides for getting rid of the 
 utterly unscientific and indigestible mass of forced silver, 
 and is thus applicable not only to the United States but 
 to all countries, as France, that are burdened with legal- 
 tender token silver. 
 
 Perhaps some one may argue that if silver were freely 
 coined at its bullion value, the silver standard would 
 result. To this it may be said that since it would be 
 without a legal-tender law, no one would be required to 
 receive the silver for existing debts for more than its 
 worth, and if merchants should happen to find the silver 
 standard more convenient for subsequent transactions, 
 no one could complain. The silver standard is not 
 necessarily in itself objectionable. The objection arises 
 w-hen debts are forced on to that standard at an arbitrary 
 rate. Nor can it be said that the use of two or more 
 metals at rates varying Avith the market, is at all un-
 
 THE REMEDY. 57 
 
 natural. Just such a system arose in England in the last 
 half of the seventeenth century, when the guinea coined 
 by Charles II. to be a twenty-shilling piece was habitually 
 current for twenty-one shillings and over, even up to 
 thirty shillings, when the silver coins were exceptionally 
 bad. A similar system prevails in China, where the 
 metal for large transactions is silver at bullion value, 
 while copper cash for small dealings passes at rates vary- 
 ing with the market. China's system, though clumsy in 
 detail, is based on correct scientific principles, and 
 China has long recognized the idiocy of laws interfering 
 with money. 
 
 To reap the best result from the opportunity to use 
 either metal or both at individual choice, no attempt 
 should be made to place a fictitious value on either 
 metal by restricting the coinage. As the act of coinage 
 is merely a verification of weight and fineness, it should be 
 free to all, subject only to a possible charge just sufiicient 
 to cover the cost of the operation. A metal cannot fully 
 perform its function as a standard, if its coinage is 
 restricted, for the coins then tend to assume the nature 
 of tokens with a margin of scarcity value over and above 
 the metallic value. The action of India in stopping the 
 free coinage of silver in a silver standard country as a 
 step to a gold standard cannot therefore be considcrd 
 sound. 
 
 To make a metal a real standard there must be un- 
 obstructed connection between the coin and the bullion, 
 U)X the coin is merely certified bullion, and there is 
 nothing in the gold standard to make it anymore praise- 
 worthy to force a silver country like India arbitrarily to 
 the gold basis, than it is to force a gold country like the 
 United States arbitrarily to the silver basis.
 
 58 MONETARY PROBLEMS AND REFORMS. 
 
 If in the United States the above outlined repeal of 
 legal-tender laws could be accomplished, what a mag- 
 nificient opening for enterprise the renewed business 
 confidence would give ! Such a result, if once secured, 
 ought to be clinched with a constitutional amendment 
 to prevent backward steps.
 
 IV. 
 
 INTERNATIONAL COINAGE. 
 
 Whether in the world at large a general reform of the 
 present dangerous systems of legal tender can ever be 
 brought about, time alone can tell ; but as a part of such 
 reform, either as a step towards it, or as a final act of 
 jjolish, the gold coinages of the leading commercial 
 countries ought to be brought into some system of uni- 
 formity. 
 
 Probably no one will dispute the desirability of 
 having one unit of account and coins based on that unit 
 throughout the leading commercial countries, but many 
 difficulties have been felt in the past in bringing this 
 about. In default of general action, tlie English Pound 
 Sterling is fast becoming the customary international 
 unit of account, but such custom does not and cannot 
 assimilate coinages. Possibly if the English unit were 
 decimally divided, it would be agreeable to all countries, 
 but hitherto England herself has only discussed sl decimal 
 arrangement, and has even talked of altering the sovereign 
 or taking another decimal unit gold coin. Conscciuenlly 
 other countries have not felt the attra<ti(jns of the sov- 
 ereign. Several plans have been proposed, — perhaps 
 the most prominent was one of thirty years ago to adojil 
 five francs in l-rcm h gold as the unit. The almost fatal 
 objection to this idea is that the I-'rench gold coins do 
 not bear a simple relation to the metric weights in which
 
 6o MONETARY PROBLEMS AND REFORMS. 
 
 they are expressed, and in which probably any interna- 
 tional coins ought to be expressed. 
 
 It is hardly to be supposed that any existing national 
 unit will be accepted, unless for very strong reasons, as 
 national pride will be touched. At the same time it will 
 be well if existing units can approximately be easily 
 expressed in the new system, so that for a time, at least, 
 the old national names may continue to be used conven- 
 iently, and in fact they will continue to be used somehow 
 for some time. The elements of the problem are approxi- 
 mately as follows : A gold coin of convenient size for coin- 
 age and for a unit of account, bearing some simple relation 
 to the metric weights, furnishing an opportunity for 
 decimalizing English money without too great violence to 
 conservatism, and offering convenient approximate values 
 for existing national names. The last quality is perhaps 
 of least importance, for the great object is to establish an 
 international unit of account, so that merchants may un- 
 derstand the state of foreign markets at a glance. 
 
 While the direct adoption of any one existing national 
 unit would probably not be feasible or desirable, as 
 none fulfills the above problem, still a system derived 
 from an existing unit might be possible. It may seem 
 strange to say that a unit may be derived from the 
 English sovereign so as to meet the above problem quite 
 precisely. Yet such is the case, and the writer ventures 
 to suggest the following as a scheme which he has never 
 seen fully elaborated. 
 
 The English sovereign of 20 shillings contains of fine 
 gold 7.32 grammes. Five fourths of this, or 25 shillings 
 will contain of fine gold 9.15 grammes. If the standard 
 fineness for gold is made 915 parts in 1000, a piece of 
 gold of that fineness weighing 10 grammes will contain
 
 INTERNATIONAL COINAGE. 6 1 
 
 9.15 grammes of fine gold, and will equal 25 shillings 
 sterling, or three hundred pence. 
 
 The proposition is, that the leading commercial coun- 
 tries shall adopt the standard of 0.915 in fineness for 
 their gold coins, and shall take ten grammes of such 
 standard gold as the unit of account and coinage. Gold 
 coins will be issued of 5, 10, and 20 grammes. One one- 
 hundredth of this unit will ecpial threepence sterling, and 
 will constitute a convenient sub-unit for retail trade. 
 Threepence sterling contains twelve farthings, so that the 
 conservative Englishman can count for retail sums by 
 threepences of twelve farthings each, instead of by 
 shillings of twelve pence each, and will thus not be de- 
 prived of his dearly beloved duodecimal system while 
 acquiring a decimal system for large transactions. In 
 fact the duodecimal system does have certain advantages 
 for fractional purposes, and the retention of a duodeci- 
 mal step at the end of a system, like a snapper to a wliip 
 is entitled to respectful consideration. As the approxi- 
 mate value of the farthing is \ cent in American money 
 \ sou in French, \\ cents in Netherlandish 2 pfennigs in 
 Cierman, and one kopek in Russian, the ajjproximale 
 value of the threepenny sub-unit will be, 6 cents Ameri- 
 can, 6 sous French, 15 cents Netherlandish, or 24 pfen- 
 nigs German, and for a time at least it would seem wise 
 to unify this relation, and assign these names resi)ectively 
 to these fractions of the sub-unit, by tlius dividing the 
 sub-unit in the different countries. The result will be i 
 sub-unit — 3d=i2 farthings=6 cents or sous=24 pfen- 
 nigs, etc. The dejiarture from the de( imal scale may 
 provoke opposition outside Kngland, but the departure is 
 only apparent, and need not be ])ermanent. It is only ap- 
 parent, because with the slightly new values assigned to
 
 62 MONETARY PROBLEMS AND REFORMS. 
 
 the familiar cent, sou, pfennig, etc., will go a correspond- 
 ing value for the dollar, franc, mark, etc., so that the old 
 names may be used until the new system is fully adopted 
 with complete decimalization (outside England of 
 course). 
 
 The method of applying or introducing the new sys- 
 tem will require care. Of first importance is the pro- 
 tection of existing del)ts ; which will be done by provid- 
 ing that in transmuting debts from the old systems to 
 the new, the amount of fine gold in the old and new 
 units must control the problem and fix the amount of 
 new money to be paid. 
 
 The following table shows the relations between the 
 old systems and the proposed one. 
 
 COUNTRIES. 
 
 Scandinavia 
 
 Russia, Standard 1896 . 
 
 Great Britain 
 
 Austria, New Standard, 
 
 1894 
 
 Netherlands 
 
 U. S. A. and Canada. . 
 
 France 
 
 Austria, 1867 
 
 Germany 
 
 Brazil 
 
 Portugal 
 
 Egypt... 
 
 Great Britain 
 
 Turkey 
 
 Chile, New Standard, 
 
 1895 ... 
 
 Coin or Sum. 
 
 24 Kroner 
 12 Rubles 
 
 25 Shillings 
 
 30 Crowns 
 15 Guilders 
 
 6 Dollars 
 30 Francs ) 
 12 Gulden | 
 24 Marks 
 10 Milreis gold 
 
 5 Milreis gold 
 
 I Pound Egyptian 
 
 I Sovereign 
 
 r Lira 
 
 10 Pesos 
 
 .si 
 
 en „• 
 
 SI 
 
 £0 
 
 9.677 
 
 $6.43 
 
 9.290 
 9-15 
 
 6.17 
 6.08 
 
 9.1464 
 
 6.078 
 
 9.072 
 
 6.03 
 
 9.0279 
 
 6.00 
 
 8.709 
 
 5-79 
 
 8.602 
 8.216 
 
 5-72 
 5.46 
 
 8.128 
 
 5-40 
 
 7-4375 
 
 7-32 
 
 6.614 
 
 4-94 
 4.866 
 
 4.40 
 
 5-49 
 
 3.65 
 
 o . 
 
 .ss 
 > 
 
 I-0575 
 1. 015 
 1. 00 
 
 0.9996 
 0.9914 
 0.9866 
 
 0.9518 
 
 0.940 
 
 0.8979 
 
 0.8883 
 
 0.8128 
 
 0.800 
 
 0.7228 
 
 0.60
 
 INTERNATIONAL COINAGE. 63 
 
 In this table, the last column also shows the relation 
 of one dollar, 2 rubles, 4 marks, 4 kroner, 5 francs, 2\ 
 guilders, and 5 Austrian crowns, in gold, to an assumed 
 par of 50 pence sterling. 
 
 A troublesome factor in the problem is the disposition 
 of the existing gold pieces, which will not readily fit into 
 any new scheme. In this connection it should be noted 
 that the plan contemplates the use of coins strictly at 
 their bullion value in general, so that in the new system 
 there will therefore be no " least current weight," but all 
 large payments will be verified by full weight. For pur- 
 poses of large payments in bulk the present coins can be 
 still used with a degree of convenience after allowing for 
 differences of alloy, as these coins will be weighed in 
 large masses. Thus a kilogram of the new standard 
 gold will be equivalent to one hundred of the proposed 
 units of account, and a kilogram of gold of the present 
 U. S. standard will equal ninety-eight and a fraction ; 
 one hundred troy ounces of tlie new standard will be 
 three hundred and eleven units, and one hundred troy 
 ounces of the present U. S. standard will etpial three 
 hundred and five units and a fraction. 
 
 It will not, therefore, be necessary to rccoin all or 
 even the greater part, immediately, of the existing coin- 
 age. The only rapid recoining rc(piired will ])r ihii 
 needed to supply retail trade, where it is desirable to 
 have the coins correspond with the unit of acccnint, as 
 the pieces so largely i)ass by tale when they are of reason- 
 ably good rpiality. In order to offer an indurcment for 
 the withdrawal and recoinage of the old i)ieces, it will 
 be well to give them a nominal value for future transac- 
 tions by tale, at something under their real value in the 
 new system, so that it will be profitable to use the pieces
 
 64 MOXETARY PROBLEMS AND REFORMS. 
 
 of the new system by tale in retail trade, and to reserve 
 the old pieces for payments in Inilk by weight where 
 the full value can be used, and for recoining. As a 
 further inducement it will be well to recoin absolutely 
 free of charge whatever the usual practice as to coinage 
 charges may be. 
 
 As an example of the course of proceeding in the pre- 
 ceding paragraph, we may take the French Napoleon, 
 which will be worth when of full weight 63.4 sub-units 
 of the new system. A quantity of full-weight Napoleons 
 would be good by weight so that each would cover 63.4 
 sub-units, but if the Napoleon for tale transactions aris- 
 ing subsequently should be rated at just 63 sub-units, 
 there would be the inducement of 0.4 of a sub-unit on 
 each coin to hold them in large masses for payments by 
 weight, while small tale payments would be more eco- 
 nomically made by coins of the new system. 
 
 The approximate values of some prominent gold coins 
 are in the proposed system as follows : 
 
 India i Gold Mohur. . \.\(i\ 
 
 Brazil 10 Milreis, gold. .89 J 
 
 Portugal 5 " " .88| 
 
 Scandinavia 20 Kroner 88 
 
 U. S. A \ Eagle 82-f 
 
 Egypt I Pound 81 
 
 Mexico 5 Pesos, gold. . . .8oi 
 
 England i Sovereign 80" 
 
 Spain 25 Pesetas, gold. .79 
 
 Germany. 20 Marks 78 
 
 Chile, Old standard. .. . 5 Pesos, gold. . . .75 
 " New " ....ID " " .60 
 
 Turkey i Lira 72 
 
 Austria, 1894 20 Crowns 666 
 
 Netherlands 10 Guilders 660 
 
 France and Latin Un . . 20 Francs 63
 
 INTERNATIONAL COINAGE. 65 
 
 Of course the present representative money of notes 
 and tokens will have to be adjusted to the new system. 
 Circulating notes payable in the old system may be ex- 
 changed gradually for notes payable in the new system 
 according to the real relation between the two. The 
 tokens may be treated in a variety of ways. They may 
 be called in and recoined, which would be clumsy and 
 expensive. They may be called in and their places filled 
 by a system of fractional notes, as outlined above. They 
 may be called in for temporary notes, and reissued at 
 convenient ratings in the new system, the government 
 taking either profit or loss. They may be deliberately 
 raised to convenient ratings in the new system by a pro- 
 vision that the government will so receive and redeem 
 them and consider that their par value. This last method 
 is the simplest, but the government takes all loss by pre- 
 senting to the holders the increase in value for which it 
 becomes responsible. Still this would be the best j)lan 
 to follow with the minor tokens of nickel and bronze, on 
 account of its simplicity. As a general rule, the tokens 
 should not be horizontally lowered in value without a 
 redemption, as this is a repudiation of the government's 
 obligation as to the difference. 
 
 The name which the new unit shall bear is of lesser 
 importance. No harm could come from ajjplying a na- 
 tional name to the same coin in different countries, — thus 
 the ten gramme unit of 0.915 gold might be cMlled a 
 Victorian in England, a \Vasfiiti\:;ton in America, a Carnot 
 in France, a Kaiser in Cicrmany, etc. 
 
 Here we have a system that answers the problem. A 
 ten gramme coin will be of convenient size for use, and 
 will be an appro|)riate unit of large value for large trans- 
 actions, while the hundredth will be a convenient retail
 
 66 MOXETARY PROBLEMS AND REFORMS. 
 
 unit. For very large transactions one hundred main 
 units, or one kilogram, will offer a good round large-sized 
 unit by weight. The relation to all the metric weights 
 is thus the simplest possible. The English money will 
 be decimalized as to large dealings without entirely de- 
 priving it of its cherished peculiarities or destroying the 
 j£,. s. d. for those conservative Englishmen who may wish 
 to cling to them. The present names of coins will be 
 applied in all chief countries to similar values in simple 
 convenient relation to the international unit. 
 
 Some may object to the fineness proposed, namely, 
 0.915, and desire either the English fineness of 0.916! or 
 the commoner standard of 0.900. If the attainment of 
 fineness in coins were an absolute matter, the convenience 
 of 0.900 might be urged as sufificient, but at best fineness 
 is only a close approximation, and coins of 0.900 in 
 theory may in fact run from 0.898 to 0.902. On the 
 other hand, 0.915 is a more appropriate grade for a deci- 
 mal system than the endless fraction of 0.916!, which is 
 the theoretical English number. The standard of 0.915 
 has, moreover, one incidental feature which furnishes a 
 link between the metric and English weights. It is this, 
 — 34 grammes of the fineness of 0.915 contain, within 
 one-tenth of a grain, one ounce troy of fine metal. 
 
 If any of the countries concerned should see fit to test 
 the idea of using two metals, gold and silver, without a 
 lei;;al ratio, as was suggested above, it would seem to be 
 well to make the silver system on the same lines as the 
 gold one, namely, — a fineness of 0.915 and coins of 5, 
 10, and 20 grammes. The unit piece of 10 grammes, or 
 its multiple the kilogram, would furnish the unit for sil- 
 ver transactions, and would seem appropriate for adop- 
 tion in the silver using countries. The 10 gramme
 
 INTERXATIOXAL COINAGE. Gj 
 
 piece would have a similarity to the Indian rupee, and 
 that name rupee, or international rupee, is suggested for 
 it. The Indian rupee would equal one and one sixth of 
 the new rupees of lo grammes at 0.915, according to fine 
 silver contents. 
 
 The matter, however, of an international silver coin, 
 is of less importance than that of the international gold 
 coin, and neither can equal in real importance the solu- 
 tion of the real monetary problem in the world, namely, 
 — the abolition of legal-tender laws ; for business can 
 get on with clumsy systems of money, but a vicious sys- 
 tem, that threatens the security of all invested capital, 
 saps the very life of business, and so long as the poison 
 of legal-tender paper and legal-tender silver pollutes a 
 country's monetary system, prosperity must be hindered 
 in a great degree.
 
 V. 
 
 SOME HISTORICAL INSTANCES OF LEGAL TENDER. 
 
 Every country that has a history can show in its own 
 experience cases more or less numerous of debasements 
 of the currency by tampering with the metallic portion 
 arbitrarily, or forcing bad paper into circulation. When 
 a government gets into a tight place, one of its first tempta- 
 tions is to deal fraudulently with its monetary system. 
 
 A complete account of the many instances in which 
 governments have debased their money with no regard 
 for existing contractual rights would fill many volumes, 
 but a notice of a few of them and their general course 
 may be of interest here. For a great mass of facts on 
 the history of mediaeval and modern money, the reader 
 is referred to Shaw's History of Currency, recently pub- 
 lished by G. P. Putnam's Sons. A standard special 
 treatise on English monies is Lord Liverpool's Coins of 
 the Realm, published first about 1800. 
 
 One of the earliest recorded debasements is said to 
 have taken place in ancient Athens under the orders of 
 Solon, though we may well suppose that others before 
 him had performed the trick. While Hannibal was 
 making war in Italy, the Roman money was debased. 
 
 The Greek states of antiquity corresponded somewhat 
 in their currency systems. The commonest coin unit 
 was the silver drachma, but different groups of states 
 used different sets of weights, so that the money was not 
 
 68
 
 INSTANCES OF LEGAL TENDER. 69 
 
 uniform. The Romans may have borrowed their earliest 
 silver coinage system from some debased Greek system, 
 but in the main the Roman coinage was considerably 
 different from the Greek. The chief Roman silver piece 
 analogous to the drachma was the denary or denarius, 
 which in early times weighed about 70 grains troy, but 
 by degrees became degraded to the neighborhood of 60 
 grains in the classical period. As time went on further 
 debasements took place, until in the days of Charles the 
 Great, a.d. 800, it was near enough to 24 grains to be 
 identified with the pennyweight of silver, and as such to 
 form the unit of account in the system then introduced 
 of 240 denaries to the pound. This unit was adopted in 
 England under the name of penny, but to this day the 
 abbreviation for penny is the initial of the hatin denarius 
 in the familiar combination jC- s. d. 
 
 The history of the denary on the Continent has been 
 even sadder than that of its English brother ; for while 
 the English penny sank, like the other English denomi- 
 nations, to about one third of its original value, the 
 denier or denary of France sank almost out of sight in 
 its infinitesimal obscurity. It became only one seventy 
 eighth of its former self, as did the other French units. 
 
 The course of this monetary name unit is typical of 
 many that might be mentioned. One prince or legisla- 
 ture after another continued the debasements till some- 
 times nothing was left of the coin but its name. As an 
 original (piestion one would suppose that a prince or 
 ruler would wish his country to enjoy the honor of a 
 larger and more dignified unit, rather than a small and 
 contemptible one, but the attractions of plunder have 
 proved irresistil)le many times. 
 
 When Charles the Great established one uniform coin-
 
 •JO MONETARY P/iOBLEMS AND REFORMS. 
 
 age for his vast domains, he took for his unit the pound 
 of silver, and coined it into 240 denaries, each of which 
 was therefore one pennyweight. Twelve denaries made 
 one solid, and 20 solids made one jjound. 
 
 After the breaking up of his great empire, monetary 
 confusion ensued. In Germany, particularly, new meth- 
 ods of counting came gradually into use ; especially the 
 systems of guldens and ducats borrowed from Italy. In 
 the lands which afterward became modern France, how- 
 ever, the system of the silver pound continued in use 
 more persistently, though subject to great debasements. 
 By the time of the French revolution, the French pound 
 or livre had fallen to about the value of the franc, which 
 was then substituted for it with a decimal subdivision. 
 
 In England, Charles the Great's system of the silver 
 pound was early adopted, probably in Saxon times, and 
 the denominations of pounds, shillings, and pence have 
 come down to the present day. The pound that was 
 originally used in weighing silver in England was the 
 tower pound, which is fifteen sixteenths of the troy pound. 
 The latter was introduced by Henry VIII. in 1527. 
 The fineness of English silver in the early days was ff. 
 This has been maintained quite constantly, and is to-day 
 the standard sterling fineness. 
 
 The original English pound, therefore, was one tower 
 pound weight of sterling silver |^ fine. It speaks well 
 for English self-control that from the days of Charles the 
 Great in the ninth century until the close of the thir- 
 teenth century this pound unit was preserved almost 
 intact, and even when debasements had become fashion- 
 able they were brought to a close before the unit had 
 been nearly so much degraded as in France. The first 
 debasement of which we have the record was made in
 
 INSTANCES OF LEGAL TENDER. 7 1 
 
 the year a.d. 1300 by King Edward I., who debased the 
 unit by i^ per cent. Thi^ debasement was so sUght that 
 it probably was not done for purposes of royal plunder, 
 but was, very likely, a well meant lazy procedure to 
 adapt the new coins to the worn condition of the old 
 ones. It furnished a convenient precedent, however, 
 which was followed by Edward III. three times. Ed- 
 ward III. left only 80 per cent, of the original pound to 
 his successors. Two other debasements occurred in the 
 fifteenth century, and when Henry VIII. succeeded to 
 the throne the unit was down to 53^ per cent. Henry 
 VIII. indulged in a perfect debauch in the currency, 
 and Edward VI. continued the same policy. The busi- 
 ness of the country got into a terrible state at that time. 
 These two kings not only reduced the weight of the 
 coins, but also tampered with the fineness. Coins were 
 issued as low as -j^j fine. There was so much copper in 
 them that they showed red when a little worn. 
 
 Finally, in the last year of Edward \T.'s reign, a re- 
 form was begun which was continued under Queen 
 Mary and comjileted under Queen Elizabelli. The unit 
 was raised from its degraded condition, l)ut not to tlie 
 position it occupied before Henry VIII. began his 
 career. The fineness was, however, under Elizabeth, 
 restored to its ancient standard of |J. The reformed 
 coinage system of Elizabeth, as established in 1560, was 
 a very convenient one. The troy ounce of sterling silver 
 received the coinage denomination of five sliillings. 
 This arrangement was to facilitate the verification of 
 coins by weight. The arrangement continued until 
 1601, when Elizabeth, not content with the excellent 
 coinage system she had established, — with a royal stu- 
 pidity characteristic of the ;ige, m.ulc a slight debase-
 
 7^ 
 
 MONETARY PROBLEMS AND REFORMS. 
 
 ment, and coined the troy ounce of sterling silver into 
 the clumsy sum of 5^ shillings. 
 
 That was the last legal debasement of England's silver 
 coin. The weight standard of 1601 continued in the 
 coinage of silver till 1817, when the present token silver 
 was introduced. But several propositions for debase- 
 ment were made in the seventeenth century. The most 
 noteworthy, in the time of William III., is described by 
 Macauley. The heroic exertions of the philosopher 
 Locke and others saved their country from the disgrace 
 of another debasement. 
 
 TABLE OF ENGLISH SILVER DEBASEMENTS. 
 
 Date. 
 
 nes employed. 
 
 0. of pence by 
 tale to a troy 
 pound of sterling 
 silver, W of lb. 
 of fine silver. 
 
 0. of troy penny- 
 weights of fine 
 silver in the 
 nominal pound 
 in money, by 
 tale. 
 
 1 
 
 ercentage rela- 
 tion of nominal 
 jound in money 
 )y tale, to origi- 
 nal pound in 
 money. 
 
 
 ta 
 
 ;2; 
 
 •^ 
 
 C^ 
 
 Before 1300 a.d. 
 
 13 
 
 256 
 
 208.12 
 
 100.00 
 
 1300 ; Ed. I. 
 
 *t 
 
 559-2 
 
 205.56 
 
 98.77 
 
 1345 ; Ed. III. 
 
 
 283.73 
 
 187.79 
 
 90.23 
 
 1347 ; " 
 
 
 288 
 
 185.00 
 
 88.8§ 
 
 1354; " 
 
 
 320 
 
 166.50 
 
 80.00 
 
 1403 ; H. IV. 
 
 
 384 
 
 138-75 
 
 66| 
 
 1404 ; Ed. IV. 
 
 
 480 
 
 I I 1. 00 
 
 53i 
 
 1527 ;H. VIII. 
 
 
 540 
 
 98.67 
 
 47-41 
 
 •0^ 
 
 ri543;H.viii. 
 
 \\ 
 
 639+ 
 
 83-35 
 
 40.05 
 
 "^■^ 
 
 1545 ; " 
 
 tV 
 
 1065 + 
 
 50.01 
 
 24.03 
 
 '^1 
 
 1546 ; " 
 
 -1*2 
 
 1598+ 
 
 33-34 
 
 16.02 
 
 -'J 
 
 11552; Ed. VI. 
 
 t\ 
 
 3196 + 
 
 16.67 
 
 08.01 
 
 1553; Kd.VI. 
 
 221 
 2T* 
 
 723-25 
 
 73-67 
 
 35-40 
 
 1553 ; Queen Mary 
 
 w 
 
 726.54 
 
 73-34 
 
 35-24 
 
 1560; " Eliz. 
 
 \l 
 
 720 
 
 74.00 
 
 35-55 
 
 1601 ; " 
 
 «t 
 
 744 
 
 71.61 
 
 34-41
 
 INSTANCES OF LEGAL TENDER. -J I 
 
 The preceding table shows the course of the English 
 silver pound from Edward I. to Elizabeth, according to 
 Lord Liverpool's Coins of the Realm. 
 
 For a table of the debasement of the Scotch pound 
 see the article " Money " in the eighth edition of the 
 Encyclopedia Britannica. By the end of the sixteenth 
 century the Scotch silver pound was equal to only twenty 
 English pence. 
 
 Gold coins were not largely used in England till the 
 fourteenth century. The first English gold coin of which 
 we have records was issued in 1257. It was called a 
 gold penny, penny being then a general name for any coin. 
 The gold penny weighed twice as much as the silver 
 penny and was legalized as equal to twenty pence. 
 Even at this ratio of about 10:1 there was not enough 
 gold in it, apparently, for the people complained, and it 
 was soon withdrawn. A similar experience met Edward 
 IIL's gold florin in 1345, but in July, 1345, an issue of 
 gold nobles was made which began the series of English 
 gold coins. They were rated at \ of a i)ound in money, 
 but were equivalent to i\ of the present pound sterling. 
 
 The course of the F^nglish gold pound unit was gener- 
 ally downward by successive debasements. All three 
 methods were employed, a reduction in weight, a lower- 
 ing of the fineness, and an increased rating for prcccdiiig 
 coins. The ancient fineness was \%\- ilciiry \'II1. 
 introduced the standard of \\ in 1527 hut the two st.uul- 
 ards were employed concurrently till 1666. Tlie gold 
 pound unit of 1345 contained 408 grains of fine gold, 
 but in 1527 it was only 212 grains. Henry VI 11. created 
 confusion in his gold as well as in his silver coins, but 
 in the reform under Queen Mary and Queen Elizabeth 
 a partial return to previous conditions was had. The
 
 74 M0XE7'AJn rKOBLEiMS AND REFORMS. 
 
 gold unit was by James I. in 1605 reduced to 141 grains 
 of fine gold, and in 1619 was 128 grains. 
 
 All through medi.xval and early modern times the Eng- 
 lish kings were greatly annoyed by the export of gold 
 and silver. This was particularly the case in the first 
 half of the seventeenth century. James I. promulgated 
 the theory that all gold and silver brought into England 
 became a perpetual stock never to be taken out again, 
 and stringent laws were passed, prohibiting the export. 
 The laws were often evaded and the export continued, 
 but occasionally some unlucky merchant was severely 
 punished for his democratic disregard of royal orders. 
 The prevention of this export trade was a powerful 
 motive to induce the kings to debase their coin, or alter 
 the legal ratio from time to time, for by giving the out- 
 going metal a higher legal valuation, an inducement was 
 made to keep it at home, but if often happened that the 
 king carried his remedy too far, and simply shifted the 
 export trade to the other metal. 
 
 In 1666 the guinea was first coined, so called because 
 made of gold from the Guinea Coast in Africa. It was 
 intended to be a twenty-shilling piece, but at the then 
 price of gold was worth more, and generally was current 
 at twenty-one shillings or over. During the period of 
 the great recoinage under William III., when the silver 
 coins had been badly clipped, the guinea sometimes rose 
 to thirty shillings. The legal rate of the guinea was fixed 
 in 17 1 7 at twenty-one shillings, which meant 113 grains 
 of fine gold to the pound, and in 1817 the present sov- 
 ereign was introduced, containing 113 grains and serving 
 as the pound unit and chief coin. Thus since 17 17 the 
 legal definition of the gold pound sterling has remained 
 constant, though worn light-weight gold and irredeema-
 
 INSTANCES OF LEGAL TENDER. 
 
 75 
 
 ble bank-notes have at times caused trouble. Through- 
 out the eighteenth century the market price of silver 
 in relation to the mint ratio was generally such as to 
 leave England practically on the gold standard. The 
 gold standard has been on the whole the standard of 
 fact in England since 1700, and in law since 1816. 
 
 The following table, from Lord Liverpool's Coins of 
 the Realm, shows the course of English gold coinages in 
 history. 
 
 TABLE OF ENGLISH GOLD COINS. 
 
 Date. 
 
 Name of Coin 
 
 i 
 
 c 
 c 
 
 "57 
 
 Gold Penny 
 
 1. 000 
 
 '3^5 , , 
 
 Florin 
 
 M4 
 
 »345.July 
 
 Noble 
 
 '347 
 
 
 
 •354 
 
 
 «« 
 
 1403 
 
 
 
 M64 
 
 •' 
 
 
 1464, later 
 
 ) Rial Noble 
 1 Angel 
 
 tl 
 
 1485 
 
 Sovereign 
 
 
 
 f Sovereign 
 
 " 
 
 
 1 Rial 
 
 
 1527 
 
 i Angel 
 
 kl 
 
 
 Geo. Noble 
 
 
 
 1. Crown 
 
 H 
 
 «543-"5S3 
 
 Confusion 
 
 
 
 f Old Sovereign of 1537 
 " Rial " '• 
 
 l.l> 
 
 •553 
 
 " Angel " " 
 New Sovereign 
 
 \ 1 
 
 1601 
 
 . Angel 
 1 Sovereign 
 
 li 
 
 1605 
 
 j Angel 
 1 Unite 
 
 ,WI 
 
 >. 
 
 
 1 
 
 
 
 
 
 
 
 
 
 
 " 
 
 
 ** 
 
 
 ' 
 
 <n = ■ 
 
 
 c 
 
 
 
 
 « 3 
 
 Value of 
 nominal 
 
 !l 
 
 Legal valuation 
 at date eiven. 
 
 c " 
 
 
 pound 
 in terms 
 
 u 
 
 
 
 «t 
 
 i:2c 
 
 of pres- 
 
 M 
 
 
 
 ■3 
 
 
 
 ent sov- 
 
 
 
 
 M£ 
 
 ereign. 
 
 
 
 
 > 
 
 ^1 
 
 
 45 
 
 ij. 8</. 
 
 = £o.oSi 
 
 0.398 
 
 540 
 
 4 776 
 
 108 
 
 6j. 
 
 - .30 
 
 0.950 
 
 3S8 
 
 3.169 
 
 '3^:' 
 
 6f. 8<i'. 
 
 = -334 
 
 1.203 
 
 408 
 
 3.610 
 
 138} 
 
 ** 
 
 
 1.131 
 
 383 -7 
 
 3 • .^95 
 
 120 
 
 " 
 
 
 1.056 
 
 358 
 
 ,m69 
 
 108 
 
 '* 
 
 ** 
 
 0.950 
 
 322 
 
 3.Ssa 
 
 
 Sf. ^d. 
 
 = i:o.4i! 
 
 0.950 
 
 ^57- 9 
 
 2.28a 
 
 1 30 
 
 lot. 
 
 = .50 
 
 1.056 
 
 1 
 
 
 80 
 
 ts.id. 
 
 = ^ -334 
 
 0.704 
 
 V338.7 
 
 i. 113 
 
 340 
 
 20s. 
 
 - Ai.oo 
 
 2.113 
 
 1 
 
 
 340 
 
 22s. 6d. 
 
 = 1.35 
 
 3.112 
 
 1 
 
 
 I30 
 
 80 
 
 I IX. 3d. 
 7S.6d. 
 
 = -561 
 = -375 
 = -334 
 
 1.056 
 0.704 
 
 ' 317.2 
 
 1.877 
 
 7«4 
 
 6s. id. 
 
 0.635 
 
 
 
 57-3' 
 
 V- 
 
 = as 
 
 0.465 
 
 310. 1 
 
 1.859 
 
 340 
 
 v- 
 
 £150 
 
 3. iia 
 
 
 
 120 
 
 «5^- 
 
 - -75 
 
 1.056 
 
 ■159.3 
 
 1.41 — 
 
 80 
 
 \os. 
 
 .50 
 
 0.704 
 
 
 
 174* 
 
 201. 
 
 — 1 .00 
 
 0.695 
 
 160- 
 
 1.41 + 
 
 79 
 
 lof. 
 
 = .50 
 
 157.3 
 
 [••39 + 
 
 173 
 
 201. 
 
 = 1.00 
 
 o.6as 
 I. ass 
 
 157.6 
 
 .'m, 
 
 lot. 
 
 30f. 
 
 = .JO 
 
 = 1. 00 
 
 141.3 
 141.8 
 
 }«a5 +
 
 76 MONETARY PROBLEMS AND REFORMS. 
 TABLE OF ENGLISH GOLD COINS {Continued.) 
 
 
 
 
 2 
 
 c 
 
 
 
 3 4) 
 
 «T3 
 
 B B 
 
 Value of 
 
 r):ite. 
 
 Name of Coin. 
 
 i 
 
 B 
 
 M) 
 
 Legal valuation 
 at date given. 
 
 of troy grai 
 
 to nominal 
 
 in money 
 
 nominal 
 pound 
 in terms 
 of pres- 
 ent sov- 
 ereign. 
 
 
 
 B 
 
 ■« 
 
 
 
 >S, 
 
 °^ 
 
 
 
 
 [« 
 
 ^ 
 
 
 
 
 Z M 
 
 
 i5ia 
 
 J Angel 
 1 Unite 
 
 \u 
 
 71 ' 
 
 lis. 
 
 = ;£.5S 
 
 0.625 
 
 128.5 
 
 '•'37 
 
 H 
 
 iS4i 
 
 225. 
 
 = 1. 10 
 
 ••25S 
 
 128.9 
 
 1. 140 
 
 1613 
 
 30J. Piece 
 
 m 
 
 .96i 
 
 SOf. 
 
 - 1.50 
 
 1.727 
 
 130. 1 
 
 I. .51 
 
 
 305. Piece 
 Laurel 
 1 Double Crown 
 
 ** 
 
 194 
 
 30?. 
 
 = 1.50 
 
 1.707 
 
 128.7 
 
 
 t6ig 
 
 i^ 
 
 140 J 
 7oi 
 
 20.r. 
 I or. 
 
 = 1. 00 
 = -50 
 
 '•139 
 0.569 
 
 V128.8 
 
 W-'38+ 
 
 
 1, Crown 
 
 
 358, 
 
 SJ. 
 
 = -25 
 
 0.284+ 
 
 S 
 
 
 1666 
 
 Guinea 
 
 
 I2pJ 
 
 2cxr. 
 
 = 1. 00 
 
 1 .050 
 
 118.7 
 
 1.05 
 
 1695 
 
 
 '* 
 
 26.f. 
 
 = 1.30 
 
 '* 
 
 91-3 
 
 0.80 
 
 i6g6 
 
 
 14 
 
 (( 
 
 2 2 J. 
 
 = 1. 10 
 
 
 108.2 
 
 0.954 
 
 1717 
 
 
 " 
 
 tk 
 
 2\S. 
 
 = 1.05 
 
 
 "3- 
 
 1. 000 
 
 1817 
 
 Sovereign 
 
 '* 
 
 i^3-3 
 
 ■20s. 
 
 ~ I.OO 
 
 1. 000 
 
 "?■ 
 
 1. 000 
 
 1870 
 
 
 
 
 
 
 
 
 
 The above table seems intricate, but it is simplicity 
 itself beside the coinage histories of some continental 
 lands. 
 
 The course of money in the English colonies in 
 America was rather involved. A good account is to be 
 found in Chalmers's History of Currency in the British 
 Colonies. 
 
 When the colonists first came to America they brought 
 with them the English denominations of pounds, shillings, 
 and pence ; but they had little hard cash to fasten these 
 names upon. The little that they got was chiefly Spanish 
 and Portuguese coin, very prevalent in those days be- 
 cause of the importance of the trade with those countries. 
 These coins were legalized by colonial statutes by 
 applying to them an English name in shillings and 
 pence, supposed at first to show their value in sterling 
 money, but as the commerce of the time frequently
 
 INSTANCES OF LEGAL TENDER. /J 
 
 tended to drain the colonies of money, the colonial 
 governments got into the habit of applying a higher 
 name-value to the pieces than their contents warranted, 
 in the hope that the coins would stay in the colonies. 
 The chief coin was the Spanish silver piece of eight 
 reals ; later called the Spanish dollar. The different 
 colonies applied different denominations to this coin, 
 and from this arose a most confusing series of colonial 
 currencies, long surviving in rural parts where the 
 dollar continued to be called a certain number of 
 shillings ; six in New England and Virginia, eight in 
 New York, and otherwise in other colonies. 
 
 The scheme of rating the Spanish coins prevailed 
 also in the British West Indies. From time to time as 
 money became scarce in a colony a new legal-tender art 
 would be passed raising the denomination of the foreign 
 coins and i)roportionately lowering the colonial standard. 
 Some of these laws, however, provided that existing 
 contracts should not be affected by the new schedule. 
 
 In 1652 Massachusetts coined silver pieces of its own 
 at J of the English standard. Their reputation for 
 quality was very good and they were \'cry jiopular in 
 the West Indies. At the beginning of the eighteenth 
 century the English government (:om])laine(l that the 
 colonies were jjutting too high denominations on foreign 
 silver, and ordered it slopped. The Continental colo- 
 nies obeyed by adopting j)ai)er money. I lie West Indian 
 colonies ado])ted a rating of foreign gold which soon 
 gave them a gold standard. 
 
 This system of foreign coins rated at various denomi- 
 nations of colonial c:urrency pounds, shillings, and 
 pence continued in The British possession in America 
 well into this rentury. .After the United States began
 
 78 MONETARY PROBLEMS AND REFORMS. 
 
 to coin, its coins were introduced into British colonies 
 along side the Spanish, Portuguese, and others. Finally 
 the colonies adopted British Sterling or American 
 dollars and cents at various times during this century. 
 
 Before the change was made the pound currency in 
 the British provinces north of the U. S. was in the 
 following condition. 
 
 Pros-ince. 
 
 Newfoundland 
 
 C.inada 
 
 New Brunswick 
 
 Nova Scotia 
 
 Prince E. I. 
 
 Value of £, Value of ^ 
 
 currency in 
 U. S. gold. 
 
 Laws of 
 
 .845) 
 and 1863 I 
 
 1841 I 
 and 1853 f 
 
 1844 ( 
 and 1852 I 
 
 1836 I. 
 and 1842 I 
 
 18461 
 and 1870 ( 
 
 currency in 
 British gold. 
 
 Value of U.l Value of 
 S. Eagle in Sovereign in 
 
 Colonial 
 currency. 
 
 Colonial 
 currency. 
 
 $4.06 
 4.00 
 
 3. go 
 3-24 
 
 i6j. 8^/. 
 
 i6i. 5d. 
 (I 
 
 13.9. i,d. 
 
 40^. id. Cy. 
 los. Cy. 
 
 24J. Cy. 
 
 24J. ifd. Cy . 
 
 51J. yi. Cy.|25J. 
 61J. 3</. Cy. 30J. 
 
 Cy. 
 Cy. 
 
 In the West Indies the pound currency was worth in 
 British sterling from 13.^. A^d. in Barbados down to 2>s. 
 in the Windward Islands. 
 
 It is interesting to notice that about 1840 Canada gave 
 the U. S. gold and silver coins a peculiar rating. It 
 legalized the U. S. gold coins at five shillings to the dol- 
 lar, but the silver dollars at five shillings and one penny, 
 which was equivalent to $i.oif in gold. This fact 
 should be noticed in connection with the rarity of the 
 silver dollar in the United States before the war. 
 
 When the Continental colonies of Great Britain be- 
 gan the use of ]japer money in the first quarter of the 
 eighteenth century, they entered on a course which, with 
 few exceptions, was continued quite extensively till after 
 the Revolution. The paper was usually over-issued, 
 irredeemable, and depreciated considerably. During
 
 INSTANCES OF LEGAL TENDER. 79 
 
 the Revolution the Continental Congress issued its notes. 
 These were finally of no value whatever. Most of these 
 colonial issues were made legal tender, and as the pro- 
 cess continued, a growing disregard of creditor-rights 
 appeared, .\fter the peace in 1783 many of the states 
 were in a deplorable condition, and sought to relieve 
 themselves by still further cheating creditors. All sorts 
 of old goods of small value were pressed on creditors, 
 who were further held off by a series of laws designed to 
 postpone the settlement of debts to the Greek Kalends. 
 Rhode Island particularly attained an unenviable repu- 
 tation even among her Pharisee neighbors. She was 
 called in derision " Rogues Island." 
 
 All these orgies in the currency finally worked a re- 
 vulsion, and under the Constitution the legal-tender 
 claws of the states were clipped. Congress proceeded 
 under the new powers to provide for a mint. The law 
 of 1792 provided for gold and silver legal-tender coins 
 at a ratio of 15:1. The silver dollar was copied from 
 the worn Spanish dollars then in circulation. Although 
 the law provided for gold coins, too much gold was put 
 into the gold dollar according to the prevailing price, 
 and the country in fact remained on the silver standard 
 where it had before been, so far as the revolutionary 
 paper had allowed it to be on any standard. In 1834 a 
 deliberate change was made, which can be justified on 
 no ground of political morality. The gold coinage was 
 debased about six per cent., so that the gold dollar ( ut 
 under the silver dollar about two per cent. The ratio f>f 
 1834 was 16: I. Its practical result was to establish the 
 gohl standard in fact, and the country's metallic stand- 
 ard since has been in fact the gold standard, exce|)t so 
 far as the greenback prevented any standard. Hut
 
 80 MONETARY PROBLEMS AND REFORMS. 
 
 •whether or not the gold standard was established in the 
 United States by an unjust law, whether twenty or sixty 
 years ago, can be of no concern to-day. The fact that 
 contracts may have been injuriously affected long ago 
 cannot justify attacking existing contracts which have 
 grown up since on the rearranged basis. 
 
 The law of 1834 left silver coinage free. In 1853 this 
 was confined to the silver-dollar piece ; and the frac- 
 tional coins, halves, quarters, and dimes were placed on 
 the footing of government tokens. 
 
 During the Civil War the famous greenback legal- 
 tender acts were passed, by which the notes of the United 
 States were made legal tender in private contracts. 
 These laws excited a prodigious amount of discussion, 
 both as to their expediency, and as to their constitution- 
 ality. As to their enactment their worst enemies must 
 admit that the men who pushed them through were 
 honest in the belief that they were wise and appropriate 
 laws. Their constitutionality was long discussed, but, 
 unfortunately for commerce, they ran the gauntlet of the 
 Supreme Court. The later acts of legal tender in 1878 
 and 1890 are too recent in the public mind to need any 
 remarks. 
 
 The course of the French coinage was closely anal- 
 agous to that of the English, only, as before stated, the 
 livre or French pound was debased far below the English 
 pound. In the French colonies in America, conditions 
 were similar to those in the English colonies, and similar 
 results were produced. Thus, in 1760, in the French 
 West Indies, it took 150 colonial livres to equal 100 
 French livres ; in 1805 it took i66| ; and in 1817 it took 
 180 in Martinique, and 185 in Guadeloupe. 
 
 These are only a few of the multitude of cases where
 
 INSTANCES OF LEGAL TENDER. 8 1 
 
 legal-tender laws have been passed ; often with good 
 motives, but finally with harmful results. The cases 
 given will, however, illustrate the principle, and should 
 serve as a warning to the United States or any other 
 country against taking any further plunge into fiat silver 
 or fiat paper.
 
 C E J V 
 
 ^ jl^iTniis book is DUE 
 
 r/.AiN 
 
 THE UNIVERSITY LIBRARY 
 
 on the last date stamped below 
 
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 ^io!ioinii2lH2l3l4L5i^- L 
 
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 Qic. 
 
 N.^'- ^ \0j-^- 
 
 
 Form L-0
 
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 529 
 
 S97m 
 
 iiiiniii 
 
 699 579
 
 '«»' ^"^ "QUESTIONS OP -rur- 
 '^Parties ana Patronage l^ "^ °'^^- 
 
 76-I„H ^ ^^- ^""•^'- Octavo ■''■■'"• '^anslated by De 
 
 78^Caaadian Ind.n. h ' ''• ''"^'^^^'^ ' "' 
 
 Federation Br'^"^^^' Annexation and Bri^• s ' ^^ 
 
 79-Joint-Met2. ' /"''^' ^"^^^^^ • "^ '"^"^ 
 
 S'-The Problem of P " . ^e. By Makv 
 
 Pape. °^ ^^^^'^^ WisJation. lu. n ' ' ' '^ 
 
 83-A Sound C ■ ■ ■ ■ • ''''"' ^'" ^''''°'"'- 
 
 % a"../kTpTk?Fo^ ^"°^^°^ System. How it „, ', / " 
 
 83-NaturaI Ta3 '"■■• ^^'"^ '°^^''"«^l>e Secured 
 
 paper ^^^^'on. By x„om...s <; c-r. " ' " • 75 
 
 "—iwoney and Prices v r ^- ^Gordon, Clo.h ' ^= 
 
 87-Am:'' ''^^^•'^' ctfth-^- •^"-'^-^OP. author If ^i.- • ^ ^5 
 °J America and Eurooe i „-' * • ' . ^^-^nomy of 
 
 90. -Municipal Reform Ho t " " ' • • 
 
 9X-Mo„etary P,ob,e ' "^"'^^"^-^ ^'- ^'^Vu.v . " '^ 
 
 y Problems and Reform. By chas r, . ' "'^ 
 
 ^^'^^^^'" '"CALIFORNIA 
 
 AT 
 
 LOS ANGELES 
 LIBRARY 
 
 20 
 
 id. 
 75
 
 <»u 
 
 N3 OF TH 
 
 AA 000 599 579 o 
 
 . IIOR INDEX i HE 
 
 lONS OF THE' DAY" SERIES. 
 
 Alexander, E. P.. . 36 
 AJlen, J. II,, No j 
 Atkinson, E., No. 40 
 Bagehot, \\'., No, 28 
 Baker, C W, , No, 59 
 Blair, I,. H., No, 35 
 Boiiham, J. M., No. 61 
 Bourne, E. G., No. 24 
 Bowker. R. R., No. 10 
 Bruce, P. A-.. No. 57 
 Cleveland, C, No. 48 
 Codman, J., No. 64 
 Cowles, J. L., No. Sg 
 Dabney, W. D., No. 60 
 r>e\-lin, T. C, No. <jo 
 Donnell, E. J., No.^. 16, 56 
 Dos Pa&srjs. J. R., No, 38 
 Douglas, J,, No. 78 
 Dugdale. R. L., No. 14 
 I::aton, D. B., No. Si 
 Elirich, L. R., No, 70 
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 Lawton, G, \V,j No, 25 
 
 I»\vell, J. S., Nos. 13, 70 
 
 Lunt, E. C, No. 44 
 
 Moore, J. S.,;No. 50 
 
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 Phelps, E. J., No. ^7 
 
 Iliilpou, H, X.^No, 52 
 
 Pntnam, G. H,, No. 67" 
 
 Rcinscn, D, fi. , No. 77 
 
 Roosevelt, T., No. 49 
 
 Schoenhof, J., Nos. 9, 30, 73, 86 
 
 Schurz, Carl, No. 87 
 
 Shearman, Thos. (}., No. 83 
 
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 .Shriver, ]'.. J., No. 63 
 
 Smith, R. H., No. 26 
 
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 Storey, .M., No. 58 
 
 Strange, D., No, 72 
 
 .Strange, 1),, No. 72 
 
 Swrvr, «". H., No QJ 
 
 Taus-sig, F, \V., Nfjs. 47, 74 
 
 " Tax-Payer," No. 55 
 
 Tonrgce, A. W,, No. 88 
 
 Tyler, I„ G., No. 08 
 
 Wells, I). A., Nn«. 3. "54. 64. 71. 87 
 
 Wheeler, I "<4 
 
 Winn, II . , Nil. jfi 
 
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