.>^^, ,/ UNIVERSITY OF CALIFORNIA AT LOS ANGELES "'' ■.'v' '"'■■'■; )ENVER CHAMBER OF COMMERCE BULLETIN AA^AA^AAAA ***-**-^*****'***4 I njTJTnjTr^njiriJTJxnJxrLnjTJT.rLrijuTJT^^ Ji^' 'f^s, '/^ i^M 'f^ 'i^ ''/^\yf^ '/f^'' ''r^\ ''^' '^^' ■'^■' '^^" R/^sn ri-!^ ri?^ I'i^ a[5ir3lsira[si[al5i[i[5irzj[5i[g[Fira[5i[ai5ifa .1 1 ZjlS]R]LS]R][sira][sif5]lsifH][51R]IS ■*****■* * AAA41A * ruTJinjTnJTJTJiJxnJTJ^JTTUTrirLriJiJ^^ VOL. I. MAY, 1894. SUBSCRIPTION, $1.00 PER YEAR. SINGLE COPIES, 2S CENTS. NO. 1 PRINCIPLES OF rioney gSl Kittredgt BuiX€iiae 13BNVEK, COI-O^ and Coinage ^ BUCHANAN, nns\nnru\rurinj\Tuu\njuuTJ\ru\Jxnsiruxnnnsuuini^ P^a" il^llf^ii^ faBi si[a g[E^^[a^g[H^ fa[5] rz][5ii^[yil][5]Rl[si [tl[5i R][5iR][^ ^y. ]s}m mm ^m MM PUBLISHED QUARTERLY. Chamber of Commerce Building. P O BOX 1504. DENVER. COLO. \. \ ( o Principles of MONEY AND COINAGE BY THOMAS B. BUCHANAN. DENVER: THE CHAMBER OF COMMERCE AND BOARD OF TRADE. 1894. Entered according to Act of Congress, in the year 1894, by THOMAS B. BUCHANAN, In the ofRce of the Librarian of Congress at Washington, D. C. 6- THE DENVER CHAMBER OF COMMERCE AND BOARD OF TRADE. .a CO Denver, Colo., March 14, 1894. TO THE PUBLIC "The Principles of Monej'' and Coinage," by Hon. T. B. Bu- v- chanan, is published for those who desire information upon the ,, topics of which it treats. There is no more important question "Z before the people of America or the world to-day than that of bimetallism and the character of the money with which the busi- ness transactions of the world must be conducted. It is believed that a change is taking place in public sentiment favoring the • more liberal ideas and the more liberal use of silver as a money metal. Om- chief object in this publication is to encom'age the study of the money question, which is of vital importance to om* nation at the present time. All accruing profits from the sale of this publication wiU be turned over to the American Bimetallic League. Respectfully, W. N. BYERS, President Denver Chamber of Commerce. EDW. B. LIGHT, Secretary Denver Chamber of Commerce. 389Jil3 Marietta, O., March 3, 1894. I have seeu part of the uiauuscript prepared by Mr. T. B. Buchanan, which is about to be published in book form under the auspices of tlie Denver Chamber of Commerce. Fx'om the well known character of Mr. Buchanan's writings on the money question and especially fi'om the chapters I have seen of this book, it is not too much to assure ithe reader that in this volume he will find a most complete, full and clear statement of the es- sential fcacts and argruments covering not only the subject of bimetallism, but the whole money question. A. J. WARNER, President American Bimetallic League. Denver, Colo., March 14, 1894. DENVER CHAMBER OF COMMERCE: Gentlemen— I have gone over Mr. T. B. Buchanan's manu- script quite carefully, and am more than pleased with the manner in which he has handled the subject of "Coinage." His method is systematic, his stj'le agreeable and his logic both simple and convincing. I have, for the pasit three years, been convinced that on the general subject of the philosophy of money and exchange Mr. Buchanan is one of the best informed men in the countiy, and that conviction received full confirmation from my examina- tion of his last effort. A discussion of economic questions is at best dry and unattractive, yet, since modern political questions have become economic and industrial in their character, the peo- ple are more and more beginning to discuss and determine the principles xmderlying them. I am satisfied his book will be read with great interest and must be productive of much benefit. Very truly yours, C. S. THOMAS, Chairman Committee on Bimetallism. The contents of this small volume are in the main a series of papers contributed to the Daily Rocky Mountain News in the spring of 1892, revised and somewhat enlarged for the use here made of them, with two new papers added. They are in a highly condensed form respecting those points upon which there is genei'al agreement in the intelligent public mind, as the purpose of the writer was simply to aid if possible in clearing up some of the darker and more uncertain phases of a very impor- tant subject. To assist in accurately defining words and phrases which are being constantly used and abused in current discus- sions and to more clearly describe and emphasize some facts which are essential to a right understanding of what is now or wiU soon become the topmost question in American politics. So far in the present agitation of the coinage question in this country, a persistent effort has been made to have the subject of the free coinage of silver appear to the average citizen as a mat- ter of local importance only— local to the silver producing States, thrust by them upon congress for narrowly selfish ends, and a matter in which the people of other States could only feel a languid or semi-philanthi-opic interest. It is not so. It is not merely a "silver question," but a question of the common welfare. States and nations which do not produce an ounce of silver are more vitally interested in the result than the few States of the American republic which have silver mines, for it is a question of work and wages and food and shelter and covers the whole field of life, commerce, industry and property rights in all the States and all the nations. At best these papers exhibit only a gi'inning skeleton of the money question. The subject must be clothed with flesh and blood and made warm with life to be vorv ntfraetivc to the vi. PREFACE. average reader of books. This must be done by making tbe prac- tical application of the principles here sought to be elucidated, to tlie every day affairs and home life of the people. The papers are neither historical nor statistical but the author hopes they will furnish a key or clue by which to correctly inter- pret both history and fignires. If they have any merit it will not become apparent by a single careless or desultory reading. Books are mainlj' useful as suggesters of thoughts, and not as containing assertions which should be believed simply because they are printed. Read and think and if you are not perfectly familiar Avith the subject then read and think agalin. T. B. B. Sable op (Contents. FIRST PAPER. VALUE DEFINED AND ITS SOURCE ASCERTAINED. Commercial Value 13 What Is It? (Definitions of 13 eminent writers) 13 What Is the Source or Cause of Value? 15 What Is the Cause of Its Fluctuations? 16 Illustration 1 and 2 16 Cost of Production (defined) 17 How Value Is Measured 18 Price (defined) 18 "Mint" Price 19 SECOND PAPER. VALUE STILL FURTHER CONSIDERED. "Intrinsic Value"— Illustration 21 "Face Value"— (Meaning of Phrase) 22 "Nominal Value"— (Meaning of Phrase) 23 "Real Value"— (Meaning of Phrase) 23 "Stamped Value"— (Meaning of Phrase) 23 "Legal Tender Value"— (Meaning of Phrase) 25 "Representative Value"— (Meaning of Phrase) 25 "Coinage Value"— (Meaning of Phrase) 25 "Fixed Value"— (Meaning of Phrase) 26 "Fictitious Value" — (Meaning of Phrase) 26 viii. TABLE OF CONTENTS. Labor aud Value 27 Land, Labor aud Value 27 The Word iu Other Connections 27 Only One Kind of Value 27 THIRD PAPER. ORIGIN AND DEFINITION OF MONEY— ITS VALUE AND NOMENCLATURE. Origin of Money 29 Barter— Illustration 29 Money Defined 30 Money and Law 31 The Value of Money 33 Names and Numeration of Money 34 "Honest Money" 35 FOURTH PAPER. ANALYSIS OF THE FUNCTIONS OF MONEY. As a Mediuiii of Exchange 37 As a Measure of Value 37 As a Legal Means of Payment 40 Illustration No. 1 4° Illustration No. 2 4o Othea* Functions 4i Standard 4i Interest upon Money 42 FIFTH PAPER. THE STANDARD METAL MONEY SYSTEM. Its Evolution 43 Free Coinage 45 Monetization and Demonetization 47 TABLE OF CONTENTS. ix. SIXTH PAPER. ABOUT TOKEN MONEY. Token Money 49 The Value of Token Money 51 Another Theory 53 Paper Tokens 53 Counterfeiting 53 SEVENTH PAPER. FURTHER OBSERVATIONS UPON STANDARD COIN MONEY. The Pivotal Point 55 Theory of "The Dump" 56 Another Exploded Fallacy 57 Important Deductions 57 How the Standard Metal Is Distributed 58 A Paradox— Illustration 59 A Ruse 60 EIGHTH PAPER. TOKEN MONEY— PREMIUM ON GOLD— HISTORY INTER- PRETED—PAR OF EXCHANGE. Volume of Token Money 61 The Ancient Theory 62 Two Conclusions, 1 and 2 62 Premium on Gold 63 Historical Phenomena Interpreted 64 The Explanation 65 Par of Exclian^e 65 Illustration No. 1 '''5 Illustration No. 2 ''S TABIvE OF CONTENTS. NINTH PAPER. GRESHAM'S LAW. The Law Extended 70 Illustration 71 The Morals of the Case Illustrated 71 Gresham's Law a Fact. 72 TENTH PAPER. ELEVENTH PAPER. TWELFTH PAPER. 73 MONOMETALLISM AND BIMETALLISM. Monometallism— Defined Bimetallism — Defined 74 The Standard Coin Theory as Respects Legal Tender 75 The Creditor's Side 76 The Debtor's Side 76 The Economist's View 77 The Constitutional Arbiter .- 77 MONOMETALLISM AND BIMETALLISM CONTINUED. The Mistake of an Economist 79 The Error Analyzed— 1—2— 3^— 5 80 The Ratio of Coinage — Illustration 83 MONOMETALLISM AND BIMETALLISM CONTINUED. More of Monometallism 87 National Bimetallism 88 Not a Failure 91 TABLE OF CONTENTS. xi. The Compensatory Feature 92 The Automatic Feature— Illustration 93 United States Experience 94 French Experience 94 Nothing Arbitrary 95 THIRTEENTH PAPER. IN TEli NATIONAL BIMETALLISM. The Object of International Bimetallism 98 How Parity Is Achieved 99 Hypothesis 99 A More Important Matter 100 Objections to Bimetallism— 1—2— 3— Examined 103 FOURTEENTH PAPER. "FREE" COINAGE OF THE AMERICAN PRODUCT— THE GREAT FALL OF PRICES AND THE CONSEQUENCES— THE REMEDY— THE CONSTITUTIONAL POWER AND DUTY OF CONGRESS IN THE PREMISES. The Great Fall of Prices and Cause 109 Another Cause Assigned no Examined — 1—2 no The Rise of Gold and Fall of Silver in Effects of Falling Prices 112 Upon the Merchant 112 Upon the Manufacturer 113 Upon the Wage Earner 113 Upon the Farmer 113 Upon the Debtor n4 Upon the Creditor n 5 Upon New Enterprises and Their Promoters n5 General Phenomena n6 xii. TABLE OF CONTENTvS. The Remedy 1 16 An Awful Crime ii6 Regulating the Value of Money 117 The Unit of Value 118 FIFTEENTH PAPER. THE BRITISH INDIA MONEY PROBLEM. The Value of the Rupee 121 A Digression 123 The Change Made in India 124 The Method of Redemption 125 Reasons Supporting the Experiment— 1—2— :.! 125 Why a Change Was Made— 1—2— 3— 4— 5 127 India Exchange 129 To Stop the Fall of Silver 1 29 SIXTEENTH PAPER. A "FIAT" OR PAPER MONEY SYSTEM-LABOR NOTES- CONCLUSION. The Theory of an Exclusive Paper Money System i->2 The Value of Paper Money j ,2 Objections— 1—2— 3 j , , Labor Note Money j , . Conclusion j,c pFineiples of jVIoney and Coinage. FIRST PAPER. VALUE DEFINED AND ITS SOURCE ASCERTAINED. Commercial Value. The beginning of aU knowledge of the subject of money is to obtain a clear and correct conception, of that phenomenon of all exchange known as commercial or ex- change value. We must inquire, first, What is value? Second, What is its source or cause? Third, What is the cause and law of its fluctuations? Foiu'th, How is it measm'ed and expressed in the cm-rent transactions of ti-ade? These questions lie at the very threshold of aU profitable and conclusive investigation of the subject and vmless properly solved all subsequent thought and effort will but multiply doubts and confusion in the mind of the student and increase the clouds of mystery about the subject. Value is the one unbroken thread which permeates every part of the mazy web of business where money and the language of money prevails. To use another figure, it is the heart or pith of the tree which extends through every part from the smallest root beneath the soil to the flower which blooms on the topmost twig. Let us proceed then, and with the gi-eatest care, to find the proper answers to the foregoing earliest and most vital queries. What is Value? To define it accurately and In few words is a task of gi'eat difliculty. Nevertheless when once it is cleai'ly conceived in the mind it will appear eminently simple. So the average reader must not feel appalled at the first sight of the words and phrases used by the following eminent writers upon the subject, for after a little study and reflection they will prove not to be so formidable as they at first appear. Here we 14 PRINCIPLES OF MONEY AND COINAGE. liave more than a baker's dozen of definitions by prominent and well-known authorities: "The ratio in which commodities in open market are ex- changed against each other."— Cairnes. "Value is the power which an article confers upon its pos- sessor, irrespective of legal authority or personal sentiments, of commanding in exchange for itself the labor or the product of the labor of others."— F. A. Walker. "Value is the measm'e of the resistance to be overcome in obtaining those commodities or things required for our purposes —of the power of nature over man."— H. C. Carey. "The ratio between two services exchanged." — Bastiat. "Always and everywhere the ratio of mutual piu*chase estab- lished between two services by their exchange." — Perry. "The quality (of things) which makes them exchangeable against other goods."— Roscher. "The relation resulting from exchange." — Levassuer. "The value of a product or a service can be expressed only as the product or service which it obtains in exchange. If I exchange the thing A against B, B is the value of A and A is the value of B." — Cherbuliez. "Proportion in exchange." — Jevons. "Value is a relation between the physical properties of things on the one hand and man's wants on the other."— Laveleye. "Value is a relative expression and implies a comparison of one commodity with anothei*." — ^Fawcett. "Value is the power or capacity of exchanging for labor or for other commodities."— J. R. McCuUoch. "Purchasing power." — Wayland. Let us add another definition in one word, though a long one, viz.: "Exchangeability." These are the definitions of eminent and competent scholars and authors and yet it appears singular that no two writers, in the great multitude upon this subject, have ever defined value in the same words. It cannot be doubted that each of these authors possessed a clear conception of value, but still they vary in their definitions not only in words, but to some extent in idea. Witli one it is a ratio and with another a proportion which con- stitutes the difference between value and price. One makes it a PRINCIPLES OF MONEY AND COINAGE. 15 result of exchange, while exchange is the evidence of value already existing. These slight differences however only empha- size the difficulty of the task heretofore mentioned, but not all these writers were happy in the choice of words. It will repay the careful student, especially if a beginner in this line of in- vestigation, to dwell awhile upon these various definitions and to analyze and test them by hypothesis and experience; and by "hypothesis" is meant merely to "suppose a case," which is a very familiar mode of reasoning. What we esteem as a possession and can part with for a price, has value. What we use and need, but cannot have with- out an effort and some sacrifice, has value. The foregoing definitions of value apply not only to money but to everything which has value. What is the Source or Cause of Value? What has been said of value itself will indicate its cause or som-ce. We have wants. Urgent needs. Those of the most primary importance are food and shelter. These wants arise witli the first breath of life and are constant to the last breath. They are natural wants, essen- tial to human existence, and are imposed by the laws of physical natiu'e. Following these are a vast number of others greatly differing in degree of actual necessity and dependent upon taste, custom, education and a great diversity of circumstances and varying largely in different individuals, in different nations and communities, according to their relative progress in civilization. But in the present point of view everything used is a thing wanted, irrespective of the kind of use, the necessity of the use, its propriety, healthfulness or any other consideration. Here," then, as the first term of the formula of value creation, viz. : A use, a want, a demand. But this alone is not sufficient to create value. We use and need air to breathe, and yet atmospheric air has no commercial value. We want and must have water, and yet water has no value except under peculiar conditions. What are these peculiar conditions? Simply a limitation of supply. This then indicates the second factor i-equired to produce commercial value, and the formula of value creation is then, use, coupled with limitation of supply; or, as ordinarily stated, demand and supply. The student will find a profitable exercise in testing by all the methods he may be able to devise this statement of the origin or genesis of value. Let him east about in liis mind for any one IG PRINCIPLES OF MONEY AND COINAGE. of tke many thousand tilings which has a price in the market, and see if it is not amenable for that value to the requirements above stated. The deductions and conclusions of monetary science have not always the precision of mathematical demonstra- tions, in fact rarely so; but this law of value creation is believed to be exclusive, universal and immutable. Commercial value can never arise in any other way. What is the Cause of its Fluctuations? A little observation shows us that valuable things are exchanged in different propor- tions one to another, and that these proportions vary frequently and sometimes widely. Illustration— One bushel of wheat is sometimes equal in exchange to two bushels of corn, sometimes more, sometimes less. So also with all commodities and proper- ties in an open market. They shift their relations of value con- tinually. This is caused by the varying relations of demand and supply. The production of useful things is subject to so many contingencies, such as climate and war and pestilence; of fashion and caprice; of fires and floods and a long catalogue of accidents and incidents. If at any time the supply of a thing is lessened where the demand remains the same, the value of that thing rises as compared to all other things not similarly affected. The reverse effect is produced when the demand is lessened while the supply remains the same. It is well to note in passing that the word "demand" in this connection means a want accompanied with the ability to pay for the thing wanted. A pauper may covet or want aU the goods in a store without the ability to pay for a tin whistle. Such a demand produces no effect upon the ratios of exchange. Like- wise the word "supply" means that number or store of things which are offered or held ready for exchange within reasonable reach of the demand as to situation and time. It is not the total quantity in existence of any particular thing which constitutes the supply affecting prices or ratios of value, but the quantity offered in exchange or available for use. Sometimes this matter resolves itself into a question of the number of buyers and sellers respectively. Illustration No. 1.— Suppose the yield of wheat in the" United States in any given year is far in excess of the aver- age but one person owns it aU, or, if a number of persons own it, they combine and act as one. Instead of a fall in the price of wheat, it would be maintained or advanced, for by means of the control they exercise there is no available supply below a given price. Illustration No. 2.— Suppose there are one thousand PRINCIPLES OF MONEY AND COINAGE 17 employers demaudiug the services of live thousand laborers and there are eight thousand laborers seeking employment. This statement would seem to imply low wages. But if these eight thousand laborers combine in a union so as to act as one man and not thousands, the ratio between employers and laborers is changed for all practical purposes into one thousand demanders upon the one side as against a single supplier upon the other, for the eiglit thousand laborers speak with one voice and act as one man. When brought to the last analysis, all ai'tificial changes in prices by tariff laws, patent laws, trusts, pools, uniious and com- binations of whatever name, are found to be effected through manipulation of demand and supply, tJie great natural and uni- versal law of value. Cost of Production. Reverting to the first illustration under the last preceding head, the question may be asked, Why is a bushel of wheat generally or usually worth more than a bushel of corn? The answer is, because it generally or usually costs more to pro- duce it. Cost of production affects two results; first, it deter- mines the general relations of value in an open and free market, as that between wheat and corn before mentioned; second, it determines the minimum price of a commodity; which Is to say, that if a thing will bring less in the market than it costs to pro- duce it, production will cease until such time at least as the price to be obtained wiU return such cost, and this is secured through a diminished supply by cessation of production. The phrase "cost of production," must be also held to mean present or current production whether the particular thing in question be comparatively indestructible, as say, gold or silver, or a perishable commodity such as strictly agricultural products. Some writers have sought to be more accurate by calling it the cost of reproduction. It would manifestly make no difference in the present value of a piece of gold how much it cost tlie miner of a hundred or a thousand years ago to get it from tlie earth, and there is much of several metals now in use which were mined long ago. So also with a wagon or plow made thirty years ago, and which we may suppose for the present piu-pose, to be an acceptable implement now. So far as cost of production cuts any figure in its present price it must make it conform to the present cost of producing as good an implement. It must be said further, that tlie same law holds in cost of production as in determining the margin of rents. The landlord 18 PRINCIPLES OF MONEY AND COINAGE. may appropriate as reut all liis land produces above that which is produced upon the poorest land which men are compelled by their necessities to cultivate. So with miners of the precious metals; the bonanza owner can appropriate as profit all his mine produces in excess of that produced by the leanest mine that it will pay to operate. This rule also applies in all manufactures for a free market. The skilled and ingenious and industrious man can appropriate as profits all he can save in cost from what it costs tlie most indolent and slovenly competitor who is able to find a market and live at his business. These faots and prin- ciples are important to be considered in connection with current estimates of the cost of producing silver where calculations are made only upon the product of the richest mines. Other essential considerations however, take the precious metals entirely out of the list of products direcly amenable in point of value, to cost of production. Silver and gold are not "produced" in the sense that wheat and corn are. They are simply found where nature has in some past age "hid the shining mischief underground." The farmer can increase the yield of wheat at will. One grain planted in congenial soil will in a few months gi'ow into four score. The silver miner may spend a lifetime hunting for a mine and never find it. More value has been expended in the search for both gold and silver than was ever returned from discovered mines. It is the same fascination which keeps in operation the gambling table, where the "bank" is nearly always ahead, that maintains the chase for gold. How Value is Measured. Value can be conceived and ex- pressed only in terms of comparison. We must put two things against each other in cm- minds before we can form any idea of it, and then by comparison we measure the one by the other. This matter will be ftirther considered in treating of the value measuring function of money. Price. If A and B are exchanged, A is the price of B and B is the price of A. Hence price is the value of one thing expressed in terms of another thing; and hence also, price is the ratio of exchange. The figiu-es 2 and 5 express a ratio. The figures 2, 5 and 8 express a proportion. Two make a ratio, more than two a proportion. When sugar is sold for 6 cents a pound, we are comparing money and stigar, and get the result, lit) equals 6 cts, which is to say the values of the two bear that ratio to each other; but in fact the money is no more the price of the sugar PRINCIPLES OF MONEY AND COINAGE 19 than the sugar is the price of the mouey. The dittereuce between price and value is, that the former expresses the relation between two things only, while value means the general relation existing in the mass of valuable things. Value is general, price is specific. It is sometimes the case (that the pa-ice of a thing expressed in money may fall, while its value remains unchanged. Illustration. —Imagine a score of things set before you on the same level, like apples upon a shelf. Now raise one of them considerably above the others. All the others wiU be low as compared to this one, but stiU occupy the same general relation to each other which they did before. If the one you elevate be the one with which you compare each of the others in expressing its price, then the price of all the 19 others has fallen. If, on the contrary, you depress the one with wiiich you compare all the others in determining prices, the reverse effect will be produced. Prices will have risen, while in fact the general or value relation as between, the 19 things has not changed. It appears to be a clearly established fact that the present low gold prices of all staple commodities throughout the commer- cial nations is not due to any general change in the value rela- tions of all these things towai'd human labor or exertion in their production, but merely to an exaltation of gold, the one thing with w'hich comparison is made in ascertaining and expressing prices. This is the innermost liernel involved in the present con- test iipon the money and coinage questions in the view of the political economist. As all exchanges in modern and civilized commerce are made -^ and reckoned in terms of money, price is now generally defined and understood to mean the ratio of exchange between money and aU other things, expressed in terms of the money. We never say dollars or cents are worth so much wheat, but that wheat is worth so many dollars or cents; but it is not well to lose sight of important facts that lie back of mere custom or habit. Mint Price. Tliis phrase is often used iu connection with transactions at a free mint, to indicate how many dollars and cents will be given by the mint for a certain weight of the coin metal. Vov instance, according to law the United States mint makes .$'20.()7 from one ounce of gold, and that is said to be the "mint price" of gold per ounce. We consequently say that gold is "worth" $20.67 an ounce, but that results from the simple fact that the mint coins an ounce into twenty dollars and has 67 cents 7~, 20 PRINCIPLES OF MONEY AND COINAGE. left over wiiicli it gives to tlie owner of the gold in silver, nickels and cent pieces, using the portion of metal left over to put with another larger batch and so on. The $20.67 which the depositor of the gold has received is merely his own metal which he brought but put into a different form and given a new and different name. It is not compared to anything else to get at a price, but is simplj^ worth $20.67 because it is $20.67. A thing is always equal to itself. A thing is always worth itself. To get at a price we must compare two different things, while in this case there is but one thing being considered. The phrase is con- sequently a form of expression to indicate how much or what money a certain quantity of metal will make, and does not express any value at all, either general or specific. When the owner takes his $20.67 and exchanges it for wheat or corn or labor then he will find out what the price of his gold is and know its value as well. Some years since the w'riter was assured by a gentleman claiming to be an expert in these matters, that the English gov- ernment had placed a "forced and fictitious value" upon gold by compelling the Bank of England to pay £.3 17s 10 l-2d for each ounce of gold deposited with it. The fact is that the Bank of England acts as agent for the English mint and gives in exchange for each ounce of gold brought to it the amount above named in coin, because that is what the gold will make when coined, just as a depositor of gold at an United States mint gets $20.67 as above described, and there is nothing in either transaction at all affecting either the value or the price of the metal. PKI>X'irLES OF MONEY AND COINAGE. 21 SECOND PAPER. VALUE STILL FURTHER CONSIDERED. The paramount importance of tlie one thing commercial value, amongst all the things and circumstances to be considered in analyzing the money question, makes no further apology neces- sary in behalf of another short paper upon that theme. It will be mainly devoted to pointing out a variety of common errors and misconceptions concerning value, and their causes. " Intrinsic Value." This phrase is frequently used in dis- cussing the money question, and by persons of repute and great learning, thus implying at least two kinds of value which play a part in the operations of commerce, and particularly as respects money. Even John Locke, the philosopher and acute thinker of two hundred years ago, made frequent use of the word, spelling it with a final "k," after the manner of his time, as qualifying the value of money. It must be said however, that it is not of fre- quent use by the more competent writers upon the subject in later times, as its inappropriateness is almost universally seen and acknowledged. The word "intrinsic" means inward, inter- nal, inherent, residing Avithin; and applied to that value which is the subject of commercial transactions, and which is expressed by price, means that value is an inherent property or quality in things and not simply an external relation. If commercial value were intrinsic it would be constant and unchangeable under the very circvimstances where we observe gi'eat fluctuations. Illus- tration.— The ratio of value between wheat and gold has changed very much in recent years. Sixty pounds of wheat would for- merly exchange for $1.25 in gold. That is to say, that one bushel of wheat was worth about 30 grains of gold and they would exchange in the open market in that ratio. Now the same weight of wheat will bring but 00 cents in gold, or about 14 grains of that metal. If it be really a fall in the value of wheat, has wheat 22 PRINCIPLES OF MONEY AND COINAGE. cliauged in any essential, inherent characteristic or chemical con- stituent? Would the most exhaustive analysis of wheat show any mutation whatever in its inherent elements? Sm-ely not. Upon the other hand, if this change be due to an increased value of gold, sm-ely the gold has not changed in any intrinsic property or quality. Reduced to a finer point, the price of wheat changes daily and sometimes hourly. Is it possible even to suppose that, when wheat goes from 62 to Gl or 62 1-2 cents a bushel, which it may within the limits of an hour in some markets, that the wheat has become altered in some mysterious and corresponding man- ner in any essential quality? We know it has not. Value is not intrinsic, but distinctly extrinsic — an external re- lation of things. Very frequently the word intrinsic is used to indicate a condition or quality which is permanent, reasonable or usual as compared to one which is believed to be apparent or temporary or unusual; but when used as qualifying value it is inappropriate and misleading. "Face Value." This phrase would imply that the value of a piece of money, whether metal or paper, is in some way or other expressed or indicated on its face, which is not true. If a coin or piece of paper money had inscribed or printed upon its face something like the following: "This piece of money will be freely land voluntarily accepted in any open market of the United States, at any time it may be offered, as the full equivalent in exchange for one bushel of wheat (or other commodity), and by any person having the wheat for sale," and there was the fullest assiu'ance that the statement would in every case be verified, then there would be a face value for such a piece of money, but not other- wise. Not a fixed value by any means, but the thing thus desig- nated would be reasonably certain always to have some value. But no such legend appears upon the face of any money. The phrase is simply used to indicate that the piece of monej^ to which it is applied has equal acceptance as of equivalent value with other pieces of the same name. In this country we use a number of different "dollars," as of gold, silver and different kinds of paper dollars, and all of equal value in the market with the stand- ard, which is the gold dollar. To say that any given dollar is "worth its face," or will go at its "face value," is simply to say that its value is the same as that of other dollars in common use, be that what it may. PRINCIPLES OF MONEY AND COINAGE 23 "Nominal Value." Since all civilized peoples, aud some only semi-civilized use money of some kind in maldng their ex- exchanges and payments, the habit is universal of expressing the prices of all things by the names of money pieces. In fact that is perhaps the chief convenience which money supplies. With us all values and prices are conveyed to the mind by the use of the names "dollai*s" and "cents." It is an easy and natural as- sumption therefore, tliat these words, taken alone, mean some certain and fixed value. Sucli howevei", is not the case. They are but names of things, just like hat, plow, wagon, bench, brick, etc. The value of a thing is entirely separate from its name. Its name is always the same, while its value may change daily. Men may meet and talk about horses f.nd cattle aud sheep and cotton and a thousand other things and never think of prices or any v:due; aud yet when they talk of dollars and cents there are no other ideas but those of value and pi'ice in tlieir minds. This is merely the result of habit in reclvoning tlie value of everything else by tlie names of money pieces, and would be the same if we used pieces of bmmt clay called "brick" for money pieces and as the medium of exchange. Then by force of habit, the word "brick" would have the same significance to us that "dollar" has now. Where taxes or dues are made payable in a certain stand- ard dollar, and other dollars are subsequently received as the equivalent of the first in such payments, the latter are said to be received at their "nominal value," which is only to say that as both have the same name they shall have the same acceptance. But in no case does the name of money, taken by itself, express Its value nor any value. •« Real Value." Quite often this expression occurs in con- trast to "nominal" value, but with just as little justification. All value is real. A thing mas' have a relation of value toward other things to-day and none to-morrow, but nevertheless it is real while it lasts. The value attaching to some things may be more or less permanent than that attaching to others, but such circumstance affords no proper ground for the belief tliat tlie value in eithei* case is of a different kind from the other, or has any different source or quality. "Stamped Value." Tf the name of money expressed its value or it was in any way indicated on its face, then it would appear reasonable to suppose that the stamp really created its value. At any rate, the belief is quite prevalent that congi-ess can, by means of the stamps of the mint or a printing press, directly 24 PRINCIPLES OF MONEY AND COINAGE. confer value upon pieces of paper or metal. As evidence of this power we are referred to the effect produced upon a piece of silver at the present time iu the United States. Before it is stamped it will only command in exchange a little more than one- half of a gold dollar. After it is stamped it will exchange as the fuU equivalent of a gold dollar. The same thing is observed when the silver metal is compared to commodities. It will buy nearly double as much after it is coined as before. We are also referred to a greenback dollar. Before it is stamped or printed it is an almost worthless bit of paper. After it is stamped it will ex- cliange even up for a gold dollar. These are facts, and very plausible ones too, as supporting the assumption that a stamp may and does create value; but they are very delusive facts un- less rightly understood. If the answer to this greenback example be that it is merely a promise to pay and has a value simply as the evidence of a conti'act by a responsible party to deliver to the bearer a valuable thing, to wit, a gold dollar, upon demand, then we are referred to the case of the silver dollar where no such contract exists, either by express terms or implication. There the same phenomenon appears— value conferred by the stamp of a mint. Notwithstanding these appearances, the fact remains that use, with limitation of supply, are the exclusive factors in giving birth to value. The stamping of a piece of paper or metal into the form and with the name of money does not create a use (de- mand) for it. The use or demand already exists. The act of the government in such case is wholly an act directed to supply- ing such existing use or demand. People have been using money for generations. They are educated to it, and it is firiuly fixed in their habits and thoughts; has in fact, become a second natiu-e to them, a part of their lives, to dispense with which would be like changing an essential mode of their existence. Money, by certain names, is also an essential ingredient of every existing contract amongst them, and for all these reasons the demand for money is positive and imperative. It is thus that use, the first factor in the value formula, is accomated for. Now, if the gov- ernment can supply this demand with a money which the people will use as the equivalent of all existing money, will qualify it by legal tender for all the special uses Avhicli any existing money has. and will properly limit the (luantity. such money Avill have the value of any existing money. So it is that our present token silver dollars have a value equivalent to gold, and not merely PRINCIPLES OF MONEY AND COINAGE. 25 '^ because thej' have receivetl the stamp of the mint. If the people would refuse to use them to an extent that would ca\ise a re- / dundancy in volume in their hands or upon tlae market, it would soon be discovered that they had less value than before. By re- dundancy of volume is meant a larger supply as compared to the uses. "Legal Tender Value." Legal tender laws do not fix the value of money, for that cannot be done except by complete con- trol of supply and demand. Under given circumstances a legal tender coin or piece of paper money would have a greater value than if not a legal tender; but such result must always follow as an effect of an increased or wider or siu-er use, and not as a direct result of the legal tender provision. There can be no such thing as "legal tender value." A more extended analysis of the scope and effect of legal tender laws wiU appear in a later paper. "Representative Value." Some writers upon this subject have conceived the idea that a piece of money, regardless of its material, has no value of its own but is merely a ticket or coun- ter which represents the value which attaches to oither things. This cannot be the case imless the piece of money be construed as the evidence of a contract between the holder of it upon the one hand and the issuer of it upon the other, whereby the issuer agrees to deliver to the holder upon demand, some definite thing or quantity of something. This is neither the theory nor the fact with reference to standard coin money. There can be no such thing as representative value, except what may be held to apply to a promissory note or other instrument of like character, and then the promise of delivery must be specific as to number or quantity. "Coinage Value." This, like many other words and phrases often used in reference to the subject, cannot be taken literally. It is applied in most cases to the material out of which token coins are made. Since the mints of tlie United States were closed to the free coinage of silver dollars, the g'overnment has pur- chased large quantities of silver witli which to make token dol- lars. It pays for that bullion its market price as quoted in g'old, say 75 cents per ounce. Out of each ounce it coins .'?1.29, because by putting 371 1-4 grains in each dollar, the 480 grains consti- tuting an ounce will make $1.29 of coin. Hence $1.29 is said to be the "coinage value" of an ounce of silver, as distinguished from 75 cents, the commercial value of the material in the mar- 26 PRINCIPLES OP MONEY AND COINAGE. ket as measured by comixirison with the gold doUar. We could with the same propriety use the same form of speech toward coppei- and niclvel metal, for both of these are purchased In con- siderable quantities for coinage on government account. About $1).G0 of live cent pieces are made out of oue pound of nickel and about $4.50 of copper cents out of one pound of that metal. But in no case is the phi-ase intended to indicate the value of the metal, nor even of the coins after they are made. " Fixed Value." It is rare if ever, in human experience that there exists such a complete and rigid control of both demand and supply as would be necessary to cause a fixed value with respect to anything. It is certainly not the case with money of any kind; for the verj^ existence of the money necessarily implies its distri- bution amongst a large number of persons whose wants and habits vary, and the quantity of money being offered in exchange will be greater or less one month with another and one year with another. Plenty or scarcity of money available for use or ready to be exchanged will have the same effect upon its value as the same circumstances will upon the value of any com- modity. Variations in the value of money from such circum- stances are however, by no means as great as the variations with respect to commodities. But general and persistent hoarding will increase the value of such part as remains in circulation, as evidenced by falling prices which always attend such conditions. Money has no "fixed" value. In other things a fixed value can only result from the strictest monopoly of supply, and then there is some risk of a fluctuation of demand which no monopoly can surely control. " Fictitious Value." The value which pertains to token coins is sometimes called a "fictitious" value, and that word is used in contradistinction to the word intrinsic; but as there is but one source and kind of value, and that which pertains to a token coin is the same in every feature of origin and quality as that of a standard coin, there seems to be no pi-oper ground for calling it fictitious, nor for calling any instance of value a fictitious one. The mere fact that anything has a greater value at one time than another, or in one state or condition than in another, affords no reason in itself for supposing that a fiction has been created. The determination of values is one of the severest, commonest and most practical facts of everyday human experience. From its nature and source v:due is a verv fluctuating thing. PRINCIPLES OF MONEY AND COINAGE. 27 Labor and Value. The relation between labor and value may be stated thiis: Labor produces all valuable things which are created or fashioned by human agency. But not all labor creates value. It AAill be wasted if directed toward useless ob- jects. A use or demand for a thing must first exist. That being granted, then labor bestowed in supplying that demand will be rewai'ded with value, and subject to certain conditions and limi- tations heretofore indicated under "Cost of Production," the re- ward should be proportioned to the amount of labor and sldU requii'ed in the production. -^ Land, Labor and Value. Land, in the broadest meaning of the word, includes all that is on it and in it, in a state of natiu-e. The use and demand for land is the first and most indispensable requirement of human existence. It has a commercial value just in the proportion that the quantity or area subject and available for certain uses is limited. A lot in the center of a large city is worh more than one in like situation in a small citjs worth more near a city than at a greater distance. It is useful in a city merely as space, or for its area; in the country, for its fertility. But whether in a city or town or in a rural region, the value of land does not arise from labor directly expended in its creation, for no man or men made the land, and in all countries the most valuable land is perhaps that which never received a stroke of human labor. It arises solely from the presence of a large popu- lation and its needs, and the limitation of the area which can supply those needs. Hence it is held by some that as land values arise from the presence, the labors and the needs of the mass, they should be appropriated and administered for the benefit of the mass. As society creates the value, that society should enjoy it. This value of land when appropriated by individuals is termed the "unearned increment." The Word in Other Connections. When we speak of a "val- uable" citizen, a "valuable" medicine, a "valuable" agent or in- sti'umentality, a "valuable" adjunct, a "valued" friend, or an idea of great "value," etc., etc., we use the word as a synonym for useful, effective, beneficial or appropriate, and do not mean that value which is expressed by a price. Only One Kind of Value. Finally, let it be said respecting value, that there is but one kind in any manner involved in com- mercial processes. It is the same in all kinds of money. The same in the money as in the commodity. One kind and no more. 28 PRINCIPLES OF MONEY AND COINAGE. oue soiu'ce and no other. The habit of speaking of "money value" and "commodity value," referaing to a token silver dollar and its material in some other form, is useless and confusing. A table has a value as a table. Split it up into kindling wood and it is no longer a table, and consequently no longer has the uses nor the value of a table. Being kindling wood, it has the value of kindling wood. The same is true of a token silver dollar. "Ham- mer the fiat out of it," as sometimes said, and it is no longei' a doUar, but something else. Not being a dollar, nor having the uses of a doUar, it no longer has the value of a dollar. There is no such thing as "fiat value." PRINCIPLES OF MONEY AND COINAGE. 29 THIRD PAPER. ORIGIN AND DEFINITION OF MONEY— ITS VALUE AND NOMENCLATURE. Origin of Money. The liistOTj of money, in the broader meaning of that term, is quite well known to the great majority of persons, also the long list of things which have been used as money by different nations tribes and communities of people in all parts of the world and in all stages of civilization. The use of some ai'ticle for that purpose appears to immediately follow the institution or recognition of private pi'operty; and hence a people in a very low state of civilization soon discover and ap- preciate its convenience. It can never precede the recognition of private property because it is not needed until the exchange of property and services arises— until buying and selling begins. The particular time in the world's history when some com- mon medium of exchange was adopted is not known, nor the people who first resorted to the expedient. Like nearly all hu- man institutions it was undoubtedly a product of evolution— a custom which grew gradually out of the necessities of the people, as their intelligence and commerce increased. Barter. The first exchanges were by barter, in which the value relations of things were agreed upon without reference to any common measm-e. Horses, cattle, sheep, sMns, ornaments and crude tools and weapons of war were exchanged, the one directly for the other, in the ratio in which they were generally esteemed in the tilibe or community. As man's power over na- ture increased, the vanious items of property increased; and it soon became very inconvenient and wasteful of both time and effort for one individual who had a surplus to find the individual who had a pressing and present want to correspond, and whose surplus corresponded exactly with the want of the first party. Thus by degrees and from necessity some one article of property 30 PRINCIPLES OF MONEY AND COINAGE. came into use as a common medium of exchange, and vory ■itwm aajJM^Ji tt'a.H^n fif >Bifcwaftitt*Miiiii> Mninrllinm of ivrhuim^ and very soon as we lind in liistory, tliis medium of exchange became the thins in which the comparative wealth of individuals was reckoned. So it came that men Avere said to possess or be worth so many cattle, or sheep, or ponies, or slaves, just as we now say a man is worth so many dollars. The thing, no matter what it was, which thus became, by a process of natural selection the medium of exchange, became the money of that people. The main features of barter exchange are however more per- fectly preserved in the processes of modern commerce than most people imagine. Now, instead of bartering our labor or com- modities directly for the food and the different items of om* needs, we first barter them for money, and then barter the money for other things. As Mr. Bonamy Price aptly says, exchanges with monej' are merely pi'ocesses of "double barter." It m-ay be doubted whether the saving of time and labor in the actual process of exchange is the greatest benefit derived from the use of money. The advantage of having a common measure bj" which to estimate and compare values is at least an equal convenience. However this may be, both these functions of money are inddspensible in modern commerce. Imagine the difiiculty of constructing a Price Current or market report, if there were no one thing with which to compare all other things, and in the terms of which to quote prices. lUvxstration.— One poimd of wool is equal to four pounds of cotton, and six pounds of cotton are equal to one and a half pounds of coffee, and ten pounds of coffee are equal to three yards of cloth, and one yard of cloth is equal to two pounds of butter, and six i)oimds of butter are equal to one axe. Now, how many pounds of wool does it take to buy five axes? This would be one of the common problems of trade if we had no money nor money names by which to measure and express prices. Money Defined. Volumes have been written to answer the quesion, "What is money?" Many writers have pursued the sub- ject all around the world and thi-ough the realms of psychology and back again, and certainly to very little profit. Whatever is used by a people as a common medium of exchange, a common (^easure of value^and as a means of paying debts, that is money. These are the chief uses of money, and as Professor F. A. Walker has very well said, whatever does the money work is the money thing. It is much easier to define money than value. It is also ^^ '-^^ '-t)^ PRINCIPLES OP MONEY AND COINAGE. 31 mueli easier to define money than to correctly analyze and ex- / hibit the manner in which it discharges its different functions as we shall see in the next paper. In our time and country the people use pieces of silver and gold and nickel and copper and paper as money. All these pieces are money with us, because they each and all discharge the functions of money. If any people use cattle, or skins, or shells as a common medium, a com- mon measure and a common means of payment, then such is the money of that people. One kind of money may be better than another, one material may be better suited to such uses than an- other, and all money may not have precisely the same legal func- tions, but nevertheless what is used for money is money. Money and Law. To say that any particular thing is a com- mon medium of exchange and a icommon measure of values and means of payment, means that it is in general use for such pm*- poses. If this common use is a purely voluntary one, a resiilt of habit or custom or convenience or all three together, then the thing so used is money though there be no statute law upon the subject. If individuals are in the habit of contracting in terms of the thing in such common and voluntary use, then the courts should and would enforce such contracts, for in these mat- ters it is their function to interpreit and enforce contracts, not to make them. As money, in the primary meaning of that word, signifies merely that thing or those things which are in common use among a people for the purposes before described, and as this common use means a general custom or habit, and as custom is law in the absence of statutes, it is only in this qualified sense that law is the cx-eator of money. But statue law is not essential T^^/^^i'-t to the existence of money. ' > Much the larger part of the uses of money are not compul- -^ soiy by means of positive enactment, but pm"ely voluntary on the part of the citizen. I am not aware that there is any law in this country nor among any civilized people, compelling the citi- zen to sell his commodities or iproperty for money, nor indeed to sell at all. Circumstances compel him to do so, not statute law. The money of a people is their chief instrument of association in a commercial and industrial sense. The citizen who would refuse to accept or use or recognize money would find himself as completely isolated in a crowded mod(>rn mart of trade as Robinson Crusoe in his island home. It would be impossible for such a person to supply his wants if he attempted to live as a modern, civilized and intelligent being. lie might be ever so in- 32 PRINCIPLES OF MONEY AND COINAGE. cUistrious, so far as sucli a habit would permit the opportunity, antl be able to create by his labor a profusion of valuable com- modities; but if he refused to use money as the instrument of their exchange he would perish in the midst of abundance. If his products happened not to be those which he could eat and wear, he Avould starve and freeze in the possession of great wealth. It is thus that we are all the subjects of our environ- ment. Often the victims of our surroundings. It is thus also, that Ave are impressed with the prime importance of the func- tions which money performs in modern and highly organized society, notwithstanding that nineteen-twentieths of the uses of money are entirely voluntary, so far as statute law is concerned. Because of these facts and circumstances, a dearth of money stops exchanges, arrests progi'ess and begets social confusion, dis- integration and decay. A total absence of money would be a con- dition of social death — a relapse into barbarism. In the past, as society became more and more complex, in- dustry more and more diversilied, the number of useful things vastly multiplied, the v^^ants of people correspondingly increased and their ingenuity and enterprise more and more stimulated, the money of the people has become a matter of more and more vital importance. As these tendencies grew, uniformity in money became of greater necessity, for whereas in an earlier period a neighborhood money might answer all practical requirements, at a later time the people of different neighborhoods, cities, com- mimities and states, occupying different latitudes, under differ- ent climates, with different natural elements and resources and consequently different products, found it advantageous to be more intimately associated in commerce. The gi*owth of transporta- tion facilities has constantly aided and emphasized the necessity and advantages of wider commercial intercoiu'se. So that finally the control of money was given over to society in its largest organized form, national government, to be by it fabricated regu- lated and supplied to the people. Local customs have gi*a dually crystallized into national laws, and now at this day, the inter- national featiu-es of the subject seem to be the leading features. The thought here occurs, if the experience of mankind has finally demonstrated it to be advantageous and necessaiy to have a common money standard for tlie purpose of facilitating interna- tional commerce, why .should nations interpose absurd laws of taxation to cripple and hinder such intercourse? PRINCIPLES OF MONEY AND COINAGE. 33 lu exercisiug the delegated power of coutrol aud udmiuistra- tiou of the subject of money, the goverumeiit of the United States never until recent j^ears, assumed to discard and prohibit the use in standard form of any money which the custom aud habits of the people have sanctioned in the past, and with which they were still content. This was done in 1873 with reference to the silver metal. Similar action about the same time by many Em'opean nations has made the silver question a chief topic of discussion all over the earth, even to the remotest islands of the sea. The circumstances of this action and the motives which prompted it are undergoing critical investigation. It cannot be m'ged in de- fense tjiat it was done to secure a greater uniformity in standard betw'een the nations, for the silver metal was at the time that policy was inaugiu'ated, a common standard with more than nine- tenths of the inhabitants of the globe. As we proceed with these chapters the diligent reader may be able to divine a motive for it. The Value of Money. Here we recur again to our first and principal topic— value. It is the most vital feature of any money. As we have heretofore discovered that there is but one kind of value and no more, and that has just one source and no other, it follows then that tlie value of money is in no respect different from that which pertains to all other valuable things. It has the same source and is in every aspect subject to the same laws. The writer speaks from experience in asserting that there is great satisfaction realized by the perplexed student of the sub- ject when this one central fact is clearly and comprehensively grasped. The mystery of the money question begins to disappear. As the only means of ascertaining the value of any commodity is to find out how much of something else it will obtain by ex- change, it is the same with money. As aU commodities fluctuate in value with the variations of supply and demand, just so with ^''V^Xrz money. Some things fluctuate more than others, owing to the uses they have, because they are perishable, or because of many other contingencies. If the thing selected for money iises be of the more fluctuating kind all the worse; if of the less fluctuating kind all the better. Mr. Walter Bagehot, a merchant and broker of London was a very bright and voluminous writer upon the subjects of money and finance in recent years and one of his books entitled "Lom- bard Street," has received high encomiums in intelligent financial circles. Yet throughout this book he treats the rate of interest ns the value (price) of money. Such mistakes are however very 34 PRINCIPLES OF MONEY AND COINAGE. couimon, but should not be made by experts. Illustration. — Sup- pose you meet an acquaintance upon 'Change and ask him, "What is wheat worth to-day?" He answers, "Sixty cents a bushel." In a few moments you meet another and ask him, "What is money worth to-day?" He answers, "Six per cent." In the first answer you get the price of wheat, while in the second you get the rate of hire. The rate of interest is no more the value of money, nor its price, than the money j'ou pay the liveryman for a day's use of a horse is the purchase price of the animal. So different are they in fact, that often when money is dearest in piu'chasing power it is cheapest in rate of interest. Borrowing money is not buying money, but simply hiring it upon an agree- ment to return it. Names and Numeration of Money. The United States and France and some other countries have decimal systems of money. With us the "dollar" is unit or one. Our table of money is this: 10 mills make 1 cent. • 10 cents make 1 dime (formerly written disme). 10 dimes make 1 dollar (unit). 10 dollars make 1 eagle. In practice however . we ignore the dime and eagle denomi- nations and reckon only in doUars and cents. Sums less than one dollar we call so many cents. Sums greater so many doUars, though they may run to thousands or millions. We rarely or never use the "mill" denomination (a word anglicized from mille, thousand, because it is the thousandth part of a doUar) except for estimating and levjnng taxes. We have never had a coin nor piece of money of that name. It is an ideal division of a cent for convenience in mathematical calculations and is an illustra- tion of what is known as "money of account," although that phi'ase is sometimes differently and incorrectly applied. The use of the word mill is more convenient than to express the same thing in either decimals or vulgnr fractions of a cent. Whatever the value of a dollar, the one-hundredth part of that is the value of a cent, and the thousandth part the value indicated by the word mill. Three points may be especially noted here: First, the words "dollar" and "cent" are mere names of things, and do not and cannot, taken alone, express any value whatever. Second, every dollar is composed of 100 cents, no ma.tter what its value. And hence, third, the phrase "sixtj--cent dollar," is a solecism-^n ab- PRINCIPLES OF MONEY AND COINAGE. 35 sui-dity. The difference in value between dollars cannot be prop- erly expressed by alloting more or less cents to tbe one or the other. That would be like distingnishlng a large circle from a smaller one by saying that one contained only 300 degrees. The circle described by the equator is of 360 degrees, and the cir- cumference of a mustard seed just the same number. "Honest Money." If this phrase has any meaning, it must indicate that money which never varies in its value or purchas- ing power. As value attached to money as well as everything else, is a proportion amongst things that must necessarily shift with every change of quantity or supply upon the one hand and demand or use upon the other, it follows as a plain matter of common sense deduction that there is not now and never has been in the history of the world a money of unchanging value, and lience no such thing as honest money. Science aud morals de- mand the nearest approximation possible, and this demand and need will in all probability become more and more empliatic as civilization progresses. PRINCIPLES OF MONEY AND COINAGE. 37 FOURTH PAPER. ANALYSIS OF THE FUNCTIONS OF MONEY. As a Medium of Exchange. Little more need be said of this function of money. It is very well understood generally, and its gi-eat importance and convenience well appreciated. In the mod- em forms of money it is usually subdivided into pieces of differ- ent names and values so as to afford every means of offering equivalents in exchange for the greatest as well as the smallest items of property or services to which people attach value. Where the fiftieth part of the cheapest day's labor of ten hours, has an equivalent in a coin (the one-cent piece) as with us, there is no need for a smaller denomination for pm-poses of actual exchange. As a Measure of Value. The manner in which money per- forms this second function is more or less clearly described by most writers upon the subject but not often in a manner to make it entirely comprehensible by the common mind. This is really the "standard of value" function instead of the legal ten- der feature to which the large majority of authors give that name. We measm*e the value of all other things against the value of money; and this custom grows naturally and inevitably out of the use of money as a medium of exchange. The universal habit of measuring values by and expressing the result in terms of money, makes the money the standard of value, whether we call it so or not. To measure a thing implies and malvcs necessary a standard of comparison. In measm"ing length we use some in- strument having a definite length called a "yard" or a "foot," and by comparison determine how many times the one is con- tained in the other. In measuring weight we take an object having a definite and fixed specific gravitj% call it a "pound," put it upon one end of the balances and the thing to be measured Cweighed) upon the other, and by comparison or testing deter- mine how many times the one is contained in the otlier. So 389213 38 PRINCIPLES OF MONEY AND COINAGE. likewise iu measuring value, we take something wliicli has value, call it a "dollar," and then compare, not the thing itself, but the value of the dollar, with the value of the thing we are measui-iug, and find out how many times the one is contained iu the other. The reader will observe that we compare length with length, weight with weight and value with value. He will also observe thai length weight and value are the essential qualities or fea- tures of the measures respectively, and not the particular material of the measure or standard in any case. He will still further observe the analogy presented in these different measures, and for the moment it appears to be perfect. Here is founded what has been called the "yard stick theory" of money, which like the most injurious of all fallacies is just half a truth. We have considered the analogies, now let us con- template the conspicuous wanft of analogy in three most impor- tant respects: First — Length and specific gravity are qualities of matter which are cognizable by one or more of the five senses. Value is not. We can neither see, hear, taste, feel nor smell it. It has no physical proportions, neither form nor substance. Second — The first above noted gives rise to the second vrant of analogy, and that is in the method of applying the measure of value as compared to those of weight and length. One person, acting indepeudentlj% can measure cloth and weigh sugar but cannot apply the measure of value. The market price of any given commodity is the ratio of exchange between it and the money expressed in terms of the latter, as "dollar," "cents," etc.; but that ratio is not determined by any individual but by the concurrent judgment of the mass of traders in that particular thing, both buyers and sellers. A single swallow does not make a spring, neither does a single transaction make a market price. So while it takes at the least two persons to make a transaction, it requires more yet to apply the measm-e of value in that way required to establish a market price. The judgment or opinion of the mass of traders is based upon tlieir general knowledge and experience of the relative quantities of money seeking ex- change upon the one hand and of the commodity upon the other, and the demand for each. As before remarked, money is essen- tially a social instrument. One man alone would never need any money. Two men together nor even three or more, would ever need or have use for it. As money is a product of PRINCIPLES OF MONEY AND COINAGE. 39 association, all its chief functions are those requiring the partici- pation of a number of persons in applying and administering. While it is readily admitted that monetary science is not one of the exact sciences, yet all men of large experience in business will testify to an astonishing precision in determining prices in modern centers of trade. When wheat is worth 90 cents per bushel it will fluctuate in the chief markets by the one-eighth of a cent a bushel; that is, by the 720th portion of its price, when the total price in question is but one-fom-th part of the wage for eight hours of sliilled labor. Third— The third sad lack of analogy is this: Length and weight are stable and comparatively unchangeable qualities of matter. Value is a mercurial and ever-shifting relation of things. WTiat a vast difference! Take a yardstick and measure off a yard of cloth and lay both away in a secure place for a fortnight or a twelvemonth or longer, then take them and compare again and 5'ou will find them equal in length. Take a dollar and go into the market and buy its worth of the same cloth and lay both away for the same length of time, then take them out and go into the market again and ascertain their then relative value. The chances are at least ninety-nine in one hundred that they are not now equivalents. It is probable that they have not re- mained equivalents for any five days together in the whole time. Whether it is the fault of the dollar or the cloth is a constjint cause of dispute— a perennial quarrel in politics. The yardstick does not vary in its length from time to time. The pound weight is the same year in and year out and decade after decade. Not so with the value of a dollar, nor any other piece of money in the known world. All expansions and contractions of the money volume affect the integrity of the money measure. All expansions and contractions of the numbers of people using it, and their pro- ducts seeking exchange, the money volume remaining the same, have the same effect. With yardsticks and pound weights the quality to be determined is fixed, both in the measure and the thing to be measured. In the case of money it is not a fixed quality in either the measure or the thing to be measured. Pound weights and yardsticks are never subjects of contention in our politics. The "money question," like evil doing, is always with us. The foregoing considerations abundantly account for it. It is the lament of economists that AA-ith all the progress made in the arts and inventions, no stable or fixed measure of values has ever been devised. There is no improvement to note in this 40 PRINCIPLES OP MONEY AND COINAGE. important particular since the earliest dawn of civilization. At the different times when cattle or coon skins or tobacco were money, there was probably a better eciuilibrium maintained be- tween the mass of money and commodities respectively than in later times with a much more convenient money. To aggravate the case greatly too, tlie art of manipulating the fluctuating measure of values is being constantly better understood and more practiced to subserve sinister ends. As a Legal Means of Payment; (Legal Tender), xnis third function of money is what is called by nearly aU the leading writers of the world the "standard of value" function. It is clearly a blunder— a misnomer— to do so. The confusion and per- plexity that have resulted from this almost universal error have added immeasm'ably to the difHculty of a right understanding of the mone}' question. The favorite manner of describing the princi- pal functions of money is as follows: 1. A medium of exchange 2. A measure of value; 3. A standard of value; and by all, this third function is further defined as that conferred by legal tender laws. A very few of the later writers came to perceive the incongruity in the usual definition, but only one, Professor Laveleye, fully corrected the blunder, and the language employed in the definition used in this paper is that of the last named authority. In a later chaptei" in this volume the reader will dis- cover how some rather pretentious authors upon this subject have been misled on this important point. The legal tender feature has really less to do with the value of money than either of the other chief uses, and has no direct nor immediate connection whatever with the measuring of the value of either the money itself or of other things. Why then, should it be called the "standard of value" feature, since it has no quality of standard and little or nothing to do with value? Legal tender laws have one object only— to define and inter- pret contracts. Illustration No. 1.— If A, for value received, gives his note to B, promising to pay at a given time so many "dollars," legal tender laws define and declare what particular thing or things are meant by the word "dollars" in such a contract, and the courts will enforce specific performance. Illustration No. 2.— If individuals or coi-porations become indebted, the one to the other, in the absence of any specific contract as in trespass or damage for any one of a thousand causes, the courts declare the obligation in terms of "dollars," and as before legal tender laws PRINCIPLES OF MONEY AND COiNAOE. 41 tletiue tlie word. A dollar whicli by law is a legal tender will dis- charge auj- debt, tliougb iu the meantime the dollar may have -^ become \Yo rthless . ' Specific performance is the essence of legal tender laws, and they do not pm-port to guarantee the value of money at all. To illustrate how little legal tender alone may have to do with the value of money, or the burden of a debt, consider our present token silver dollar. It is a legal tender and will discharge any debt made or declared in the simple term of ,-j; "dollars." Yet being entirely subsidiary to gold, the only "stand- '^ ard" coins in use among us, the silver dollar possesses the value of the gold dollar; is measured by the gold dollar; exchanges commodities at gold prices, and pays the value of gold in the discharge of debts. The same is true of greenback dollars for they are also a legal tender. If gold rises in value under our present money system, our silver and greenback dollars do the same. If gold should fall, they fall. National bank notes and other forms of paper money in use by us, and which are not a legal tender, have just as much to do in determining prices iu the markets as does the silver dollar and the influence of all in that direction is exerted in subordination to the standard gold coins, for reasons which will appear hereafter. As payment may legally be made with any legal tender dollar, without regard to its value or purclaasing power, it follows of course that the legal tender feature constitutes no standard of value; and when we consider that the value of siich a dollar at any gven time is wholly de- pendent, in a primary way, upon the value of some other dollar, it adds emphasis to the fact that it constitutes no "standard." Other Functions. Money is termed an "universal equivalent." a "store of value," etc., etc., but all other uses of money whatso- ever are found to be incidental and subordinate to the three chief uses analyzed in this paper. Standard. Other and various uses of this word are often made in conuecton with this siibject. The United States statutes prescribe that all coins, both standard and token, shall be of a certain weight of metal, and such is termed the "standard" weight. The act of 1878 providing for the coinage of the present silver dollar termed it the "standard" dollar. It is hard to account for this unless upon the presumption that legal tender alone made a standard of value. It is more prol>able however, that as the bill orignally provided for the free coinage of the silver dollar, thus making it in fact a standard dollar, and that when that 42 PRINCIPLES OF MONEY AND COINAGE. feature of the measure was stricken out the title of the bill was not amended to correspond. So in all treasury reports and offi- cial documents the Bland dollar is called the standard silver dol- lar, when it is in no important or scientific sense a standard of or for anything. The word is also applied to the metal out of which standard coins are made, when alloyed to the degree re- quired by the laws. In the United States gold and silver bullion when alloyed to the extent of one-tenth as required by statute for the purposes of coinage are termed "standard bullion," as distinguished from pure metal, which is called "fine." Interest Upon Money. The rate of hire of money, interest, usury (all syuouynious) is a mere incident of its use and not a function, nor having any necessary connection with its most beneficial offices. If money bore no interest whatever it would still answer every salutary purpose of its selection or creation. .Money is a social instrumentality and a public necessity; and it is unreasonable and illogical that its quantitj^ character and con- trol should be placed or permitted to be in the hands of those who profit only by a perverted use of it, whether it be the metallic or paper money. PRINCIPLES OF MONEY AND COINAGE. 43 FIFTH PAPER. THE STANDARD METAL MONEY SYSTEM. Its Evolution. All the commercial nations of the world have in all essentials the same sj'stem of money at the present time. They differ only in the metal used as the standard and in the less important details. This system so generally in vogue may be properly termed The Standard Metal Money System and con- sists of standard metal coins supplemented by token coins and a great variety of paper notes and bills. Other systems are possi- ble. Some other system may be better; but the object of the writer at the present time is to deal with the practical and pres- ent facts of the money question and not to propound new theories. At a very early stage in the process of evolution of human society, gold and silver were discovered and some use was made of them. As they existed in limited quantities and cost labor to produce in usable form, they soon acquired a value. As people increased faster than the metals could be produced, and as their brightness, dm-ability, malleability, ductility, divisibility and other pi'operties became known and appreciated, they came to be more generally desired and consequently their value grew. At a later stage it was discovered that a comparatively small piece of either gold or silver was considered the equivalent in value of other quite large and unwieldy possessions. At a time in the world's history when rights of propertj'^ were not so well protected as now— when violence reigned and might was the only arbiter of rights— it was often very convenient for a rich man to be able to convert his herds and lands and slaves into a form of property that he could hide from the bandit or a robber king. Hence he wanted gold or silver or both for that reason. They answered his purpose well. It is easy to account for the use of gold and silver as medi- ums of exchange. At first they were handled in pieces of varied 44 PRINCIPLES OF MONEY AND COINAGE. sizes and shapes aiul their values estimated by their weight. After awhile for the sake of couveuieiice, the metals were molded into pieces of iiniform size. Tlieii in course of time these pieces were s;iven names. Thus may be traced the origin of our word dollar. Joachim owned a silver mine in Bohemia. The locality was known as Joachim's-dahl (dale). The miner of Colorado would have rendered it "Jake's gulch." Joachim sold his silver in pieces of uniform size weight and appearance, and these pieces came to be known as Joachim's-dahlers. Then as dahlers merely, and finally was evolved our word "dollar." As both silver and gold can be alloyed to a considerable degree without much altering the appearance of the metals, and as it was very inconvenient for tradesmen and others to carry scales with them to weigh the metals as they might be offered in pay- ments and in exchange, it became necessary to have some gen- eral and public certifier to the fineness of metal and the weight of any particular piece. It was further readily observed to be a great convenience to have the metals divided into pieces of differ- ent sizes and weights so as to facilitate exchanges of things of very small value as well as those of greater. One thing more was needed to complete the convenience of these pieces for purposes of exchange, and that was that the pieces of different sizes should each have a name so that people might become accustomed to it and readily undex'stand what was meant whenever that name was used. Now in order that this certification of fineness and weight and the uniformity of names should be preserved and all com- mand the confidence of the people, it was necessary that it be done by one person, a competent and responsible person, and also one clothed with the necessary authority and power to pre- vent the introduction of false or debased pieces of the same name by dishonest persons to cheat the people. Hence it could be done by no one so appropriately as by the king. He only had the requi- site power to enforce uniformity and prevent counterfeiting. At any rate he claimed it as his prerogative as the father of his people, according to the patriarchal theory from which all human government is derived. He was all the more eager to do so be- cause he saw in it a possible source of revenue. So the king established his mint with the necessary ma- chinery, which centuries ago was very crude, and invited the people to bring him their gold and silver to be coined, and for PRINCIPLES OF MONEY AND COINAGE. 45 this service lie took, saj' one piece out of every hundred as his "seigniorage." This after paying ror the alloy (which was soon discovered to be necessary to harden the metal and prevent it wearing- so fast) and paying the expenses of the mint, consti- tuted his revenue from that source. And thus was instituted free coinage, and the fabrication of what is known as "standard" metal money. The king stamped his own image upon the pieces to gratify his vanity perhaps, or possibly in the hope that through this device his people might grow to love him as much as he knew they loved the money. In addition to this the names of the pieces were stamped upon them, the date and the name of the kingdom or empire. This process of coinage is now common to all the commercial nations of the present day which have mints. Some of the less impontant countries have no mints, but use the standard coins of other countries which coins are recognized by their laws and customs. The generation which firsit witnessed the institution of what we may term this national system of coinage were accustomed to handling tlie metals by weiglit and knew the values of com- modities in their rnarlcets as expressed by different weights of gold or silver, and in that way only. But when this system of coinage was besiiu proclamation was made of the weight and fineness of metal in each coin of a particular name, and ex- changes were soon adjusted to the uniform coin system. Illus- tration. — If in any market a given weight of barley was being exchanged for a certain weight of silver, and when the coins appeared it became known that five pieces of a certain name con- tained that same weight of silver, then the price of the barley at once became five such pieces by whatever name they had. Probably the next succeeding generation lost all Icuowledge or thought of the weight of metal in the coins because of the acquired habit of reckoning all transactions merely by tlie names of money pieces, and at the present time not one person in ten ■/jousand the country over can tell the precise weight of pure gold metal in the standard gold dollar. A uirill fewer number realize the fact that in every transaction of t^^ amount of one dollar they are practically eitlier buying or selling 23.22 grains of fine gold, although the money handled at the moment, if any, may be either silver or some form of paper. Free Coinage. It is verj' important to carefully note a few features of free coinage. 4t; PRINCIPLES OF MONEY AND COINAGE. First.— The -word 'Iree," as used in this connection does not necessarily mean without charge, but rather without limit as to quantity or ownership of the metal. The privilege of having metal coined is open to everybody and to all the metal. The value of the metal has been determined before-hand by its quantity and the demand for it, and its coinage does not pm'port to affect its value at all, and cannot do so, except as it may extend its uses and thus increase the demand for it. When there is no charge for the service or alloy at a free coinage mint, then it is called "free and gratuitous coinage," and this is not tautology. In recent times charges for coining the standard metal have been re- duced to, or almost to, the gratuitous point for reasons which will be noted when I come to speak of the Par of Exchange. Second.— The value of standard coins is always and every- AA'here the value of the fine metal they contain, or as some choose to term it, their "bullion value." No variation or diftereuce of value between coined and uncoined metal can possibly occur, ex- cept to the extent of the mint charges or the cost of getting the bullion to it. This parity of value between coins and bvillion is the distinguishing characteristic of standard metal money, and this parity or equality of value cannot be maintained by any other means than by free and gratuitous coinage. If the mint makes any charge whatever for coinage, then the coins will have just that much greater value as they come from the mint than the bullion as it goes in because the coins have uses which the bul- lion has not and this obstacle of a change stands between the two. Third— Free coinage is in no sense a gratuity or special favor bestowed upon the original owner of the metal. As we have seen, it was first adopted wholly as a matter of convenience to the public, and it still remains so. The gold and silver miner happens to be the producer of the money commodity; but the fact that their products are the ones used for money does not deprive them of their commodity nature. Both gold and silver, like wheat and cotton and iron, are alike subject to thait great law of demand and supply. Free coinage is no special protec- tion to them, for with it they can only obtain in exchange for the metals what they will bring in a free open and world wide market. Fourth— A metal which is accorded free coinage into money pieces is called a "money metal." The reason it is so called is because the bullion of that metal can be used to better advantage PRINCIPLES OF MONEY AND COINAGE. 47 than the coin in the international exchanges and settlement of balances; and it maj- be and often is used in domestic transac- tions as the equivalent of coins. Another fact follows upon this and makes it truly a '"money metal" because the supply of money in the commercial sense consists of the combined mass of both bullion and coins. The bullion is potential monej' because it may be almost instantly converted into coins or their current equivalents. In sketching the evolution of standard money in this number I have treated both gold and silver as alike subjects of that pro- cess. The historical fact is however, that silver much more than gold was the metal concerned, for all the older nations used silver almost exclusively in their earlier periods and a very large ma- jority of the people of the world still use it as their only standard money. It is quite important for the sake of clearness in discussion of this subject to note that only the metal which is accorded free coinage by any nation is a "money metal," and that the metal which is coined free in any country constitutes the metallic stand- ard for that people. Monetization and Demonetization. To monetize a metal is to admit it to free coinage at a mint. To demonetize a metal is to refuse free coinage to a metal which has theretofore had that privilege. And nothing is free coinage which does not compre- hend all the metal in the world if its owners see fit to bring it to the mint, for its object is to merge the value of the coin into that of the mass of the metal of which it is made — make them one, weight for weight. PRINCIPLES OF MONEY AND COINAGE. 49 SIXTH PAPER. ABOUT TOKEN MONEY. There are only two kinds of money, primarily considered, in the standard metal money system. These are standard money and supplementary money. The first of these has been already de- scribed and defined. The second embraces every other kind used concurrently with the standard. Illustrated by reference to the moneys now in use in the United States, the gold coins alone are standard, while all silver coins, greenbacks, treasury notes, bank notes, certificates of all kinds and nickel and copper coins consti- tute the supplementary money. It would perhaps be interesting to some readers to have a history of the evolution of these various forms of supplementary money, but it would be voluminous and is not essential to the present pm'pose. We can rest assured however, that all forms of it and particularly the paper, really sprang from that prolific mother of all inventions human necessity. Two facts are how ever worth noting. First, that it would in this day and age be utterly impossible to conduct the exchanges of the world by the use of standard money alone. Second, that the large volume of supplementary money in use has had an important effect in modi- fying the value of the standard coins and thus made more stable the ultimate measure of values. If all forms of supplementary money were withdrawn it would precipitate revolution upon every civilized country of the world through the increased value of the standard money and the consequent shrinkage of prices. Token Money. All coins not made by free coinage are prop- erly designated as "tokens," and this name applies to all present 'A 50 PRINCIPLES OF MONEY AND COINAGE. United States coins except gold. It is also by some applied to all forms of paper money as well, and so used includes all that I have above comprehended by the word supplementary. The leading characteristic of token coins is the disparity of value between the coins as tiiey pass from hand to hand in their use as money, and that of ■their material when in some other form. Consider the various token coins in common use amongst us. Our silver dollar maintains an equal value with the gold dollar in all domestic transactions, while the value of its material h:is ranged from about 94 cents down to 53 cents compared to the same gold dollar. The same is true but to a greater extent, of the minor silver coins such as half dollars quarters and dimes. When we turn to our nickel 5-cent pieces the difference is stiU greater. When measm-ed against the standard gold dollar, the nickel metal is, I think, worth about 40 cents a pound. When a pound of it is made into 5-ceut pieces they will exchange even in any of our domestic markets for about $5.00 in gold. A similar difference is discovered In the copper 1-cent pieces. It takes about 150 of them to weigh a pound, and that number have the exact value of $1.50 in gold, while a pound of copper metal is only worth about 13 cents in gold. The foregoing reference to 5-cent nickel pieces is based upon the presumption that they are pure metal, while the fact is I believe, that they are three-fourths copper. Here then we observe different token coins ranging in their "bullion value," so called all the way from about 8 cents to above 94 cents as compared to the standard gold dollar, and yet having a commercial value equal at all times and everywhere within our borders to the gold dollar. This is a point in the subject that begets much perplexity in the minds of many people and deserves some careful attention and explanation so, if possible the exact facts and reasons for this state of things may become apparent. Let us inquire: First— Is it necessary to use a costly or valuable material for the making of token coins? It would seem not. The value of the material of a token seems to have no connection with nor influ- ence upon its value as a piece of money. As the value of the material ia our silver dollar has varied all the way from 53 cents up to 94 cents in the last fourteen years, without producing the slightest effect upon the current exchange value of the coin, there PRINCIPLES OP MONEY AND COINAGE. 51 is certainly no immediate connection between the two. Likewise we observe that liowever nickel and copper may fluctuate in the market, those fluctuations produce no effect whatever upon the value of S-cenl; pieces or 1-cent pieces. The oflScers of our govern- ment have been able at aU times within the last fourteen years to buy with a silver dollar much more metal than was required to make a silver dollar. And with nickel at 40 cents per pound they can buy for 8 nickels enough metal to make 120 nickels. As it appears there is no connection, near or remote, between the value of the material in a token and the current exchange value of the coin as a piece of money, why should the government (the people) use a costly material for such purposes? Is it not a need- less waste? It surely is, and hence the conclusion to which all thoughtful people have come witli reference to our present system of coinage of silver dollars. If there is no sufficient reason why silver should be coined into standard money (the result of free coinage), there is no sufficient reason why it should be coined at aU. The question which arises in choosing the material for token coinage is one of convenience only and not one of value. Second— Is the value of a token coin as money a different kind of value than that which pertains to its material when devoted to other uses? Or, in other words, is there any justification or necessity for the use of the word "intrinsic" in describing the value of the copper in a cent piece to distinguish it from the value the cent has as money? It appears not. As we have here- tofore observed, value grows out of use combined with a limita- tion of quantity, and a 1-cent piece has a value proportioned to its uses as money, while the mass of copper metal has a vahie pro- portionate to its uses in a thousand ways in the mechanic arts. But it is the same kind of value in each case, differing only in degree. The Value of Token Money. I have heretofore referred to the rather general belief that the stamp of a mint or printing press could distinctly create value, and the reasons for such belief. But as a result of the most acute investigation possible there is but one source or cause of commercial value, we must look a little below mere surface appearances for the true explanation of the value of token coins. We have only to refer to the formula of value creation in one of the earlier numbers of this series of papers to account for the OJ. PRINCIFLES OF MONEY AND COINAGE. value of token coins, viz.: Use, coupled with limitation of supply. The value of a token is referable to precisely the same cause as the value of gold, silver, iron, wheat, corn, wool or cloth, or any other of the ten thousand commodities of the markets. With all these other things the limit of supply is the ability or willingness of men to dig, smelt, cultivate, harvest, shear and weave, or the capacity of the earth to yield. It is what may be termed a nat- ural limitation. As respects token coins it is an artificial or legislative limitation. As to the other term of the equation of value, use, it is created and enforced by the laws, customs, habits, convenience and neces- sities of modern and civilized commerce. Simply stated, it is the need of money which begets its use. Money being a social in- strument, it is properly furnished by society, which in its organ- ized capacity, is the government. As the government properly claims the exclusive right and power to make or coin money, and must do so with regard to token money because of the necessity of enforcing a limitation of quantity, it compels the use of token money very effectively in a negative way, by simply fm'nishing no other kind adapted to the small transactions of trade. The government further induces, fortifies and guarantees the use of token money, by making it a legal tender to itself in payment of dues and postal charges, in sums proportioned to its total volume amongst the people. Added to this is the guaranty of use and a protection in the use, by means of laws making it a legal tender up to a certain amount between individuals. Legal tender laws are a powerful factor in creating and sus- taining the uses of monej^ upon which depends its value, and es- pecially so of token money. A citizen knows that if he accepts a token coin for his products or services, he can dispose of it in the payment of a debt or taxes without loss. What one citizen can do another can do, and thus the universal and voluntary ac- ceptance and use of token coins within the jurisdiction of the government instituting them. The parity or equality of value of token and standard coins within the jurisdiction of the government is accounted for in the equivalence of use. If ten dollars of token coins will discharge a debt as effectually as a ten-dollar gold piece, it has the same uses to that extent; so that if the volume of the tokens be rigidly limited to a definite total amount proportioned to the total use and need for them, there is no scientific reason why they should PRINCIPLES OF MONEY AND COINAGE. 53 not have an equal value v\-ith the standard coins. As before sug- gested in these papers, the value of a standard coin arises out of, and is proportioned to the world wide uses, as compared to the world wide supply of that particular metal; so the value of token coins arises from the national needs and uses as compared to the national supply. Another Theory. Another method of accounting for the value of token money, and the one of more general acceptance among the people perhaps because it is more generally asserted, is Avhat may be termed the specific redemption theory. It is alleged that token coins depend entirely for their value upon the promise and provision made by the government for tlieir redemption in stated sums, in standard money. This theory might continue to meet general acceptance but for the reason that it is in collision with a stupendous fact of experience. The present silver dollar is a token coin and exists and circulates in large volume, has done so for fifteen years, and during all tliat time at an unerring par with the standard gold coins and there is not now and never has been any promise or provision of law for its redemption in any other kind of money. AVhen theory and fact contradict each other in so conspicuous a manner, theory must give way. Paper Tokens. If paper notes, or promises to pay, issued or guaranteed by the national government, be considered a part of the token money of the country, their value can be accounted for more reasonably upon the groimds first above' outlined, than be- cause of the hope or promise of specific redemption as so gen- erally asserted. The fact that an irredeemable paper token may become as valuable as any standard coin is conceded by the lead- ing economists of the world. Their value is simply a result depending upon the willingness of the people to use them and the volume of the supply. Counterfeiting. A money coin made by anyone or anywhere except by an autliorized othcer of the government at an United States mint is a counterfeit, though it should contain more pure metal than the genuine, if that were probable. With respect to standard coins, however the real object of the statute against counterfeiting is to prevent the people from being cheated by the circulation of coins having the appearance of tlie genuine, but really composed of some cheaper material. With respect to token coinage it is for a different purpose. First, it prevents all inter- ference with the right and duty of the government to rigidly regu- 54 PRINCIPLiES OF MONEY AND COINAGE. late the supply of such coins, a thing essential to the preservation of their value in the hands of the people; and secondly, it pre- serves to the public treasury, where it properly belongs, the profits arising ft'om such coinage. PRINCIPLES OF MONEY AND COINAGE. 55 SEVENTH PAPER. FURTHER OBSERVATIONS UPON STANDARD COIN MONEY. The Pivotal Point. An effort was made in the last two num- bers to make clear the distinction between standard and token coins. It is a very important distinction and one arising entirely out of the manner in which they are made. Free coinage makes the first, limited coinage the latter. The prime object of free coinage is to preserve the parity or equality in value between coins and bullion, and not in any sense to confer a favor upon the owners of the metal. It is not only essential to this parity that the process of coinage be substantially without expense to the buUion owner but there must be no limit whatever to the quantity of bul- lion that may be coined if offered. As there is a par of value be- tween standard coins and bullion of the same metal, then it fol- lows of course that there is no profit to the bullion owner in hav- ing his metal coined. If the admission of a metal to the mint for free coinage, which has heretofore been denied that privilege, causes an appreciation in the value of the metal, all the existing stock of that metal everywhere must participate in the rise to the some extent, bar- ring only the cost of transportation to the open mint. If silver should now be admitted to our mints for free coinage, after hav- ing been denied that privilege for the period of about nineteen years, it would increase the value of the metal just to the extent that such coinage created new and additional uses for the metal and thus increased the demand for it, and no more. And by whatever degree it increased the exchange value of United States silver bullion, it would increase the value of the metal evei-y where else. This is tlio tlieory of the case, and I can conceive of no con- tingency in the practical operations of commerce that would cause anv serious deviation from this law of value. 56 PRINCIPLES OF MONEY AND COINAGE. We cuu liud contirmatiou of this view of the case by con- sidering the status of our gold coins in all possible contingencies. They are standard, and at present our only standard coins, be- cause the only ones made by free coinage. Put a 20-dollar gold piece into the melting pot and convert it into a nugget and you have lost nothing of value by that operation, for the mint will make it again into a 20-dollar gold piece without charge. Carry it in your pocket to England. It will not be current there as money because the common run of people there do not recognize it by its name nor know the amount of gold in it nor its fineness. But hand it to the Bank of England, the agent of the English mint and it will be coined into sovereigns for you free of charge,' and you will discover that you have lost nothing whatever of value in the change. Bring the sovereigns back to the United States and you will find that they are not cui'rent money, because not one person in one hundred knows what a sovereign is, how much gold it con- tains, what the fineness of tlie metal, nor indeed whether it be gold or some base imitation. But hand your sovereigns in at the United States mint and they will be changed again into a $20-gold piece, the identical thing you started with. Not an iota of value has been either gained or lost. If you had extended yom' travels and taken the sovereigns to France and had them converted into 50-franc pieces, and taken those to Germany and had them converted into 20-mark pieces and brought those back to the United States the result would be the same. The fact is then clearly apparent that standard coins are In their essential of value nothing but pieces of buUion. The fact is equally apparent too, that in the metal money sys- tem the value of all the money in use is by and through the stand- ard coins, anchored to the mass of metal of which they are com- posed. The value of the standard coins rises and falls, ebbs and flows with the vicissitudes of the supply and demand for that metal in the markets of the world, and the value of all token and supplementary money rises and falls with that of the standard. The standard coin is thus the pivotal point of the metal money system. The Theory of "The Dump." A year or two ago, in the earlier stages of the present discussion of the coinage question, it was widely and frequently charged that if the mints of the United PRINCIPLES OF MONEY AND COINAGE. 57 States were opened to the free coinage of silver doUars as former- ly, it would be the signal for the starting of cargoes of silver from all parts of the world to be "dumped" upon our mints for the profit it would afford to the owners of the foreign silver. It is a sign of progress made in the knowledge of this subject that but little if any reference to the dumping business can be found in the discussions of the year 1893. There is never any profit to be made in carrying metal to a free mint, nor in carrying a money metal from one nation to another. The Mexican mints are free to silver; the Indian mints were so up to June 1893, and yet neither had any attraction for pi'oducers of United States silver bullion. Standard coins are simply bullion, and the change from bullion form to coin form is simply for convenience and in no manner affects the exchangeable or commercial value of the metal except In the incidental way heretofore mentioned. Another Exploded Fallacy. The impression so diligently cultivated in many quarters that the silver miner of tlie west seeks free coinage of his -product in order to realize a profit to the extent of the difference between 70 cents an ounce and $1.29 an ounce, the "mint price" of silver if coined into standard money at the present weight of the silver dollar, is a mere jugglery with Avords and figures. The miners' silver will not command a single pound more of wheat, corn, iron or any other product of the labor of others then than now, except to the extent that free coinage increases the actual use and demand for that metal throughout the woi-ld. Important Deductions. Some legitimate and unavoidable deductions from these fundamental facts are important and prac- tical: First— Any increase of use and demand for either gold or sil- ver in any quarter of the commercial world tends directly to in- crease the value of money in all the nations which malvc either metal its standard; and any disuse or lessening of the demand will have the reverse effect. Second — While it may be true tliat it is tlie whole volume of current money of all kinds in a country which constitutes the measure of values and determines prices, nevertheless the value of the standard is the primary factor in determining that of all supplementary kinds. Third— All effort to decrease or depress the value of the stand ard in any one country by multiplying issues of token or supple 58 PRINCIPLES OF MONEY AND COINAGE. meutary mouey is I think, useless. It is unreasonable to believe that by multiplying token silver dollars or paper dollars in the United States alone we can cheapen gold or reduce it in purchas- ing power here below the plane of value it occupies in other nations. Any such apparent effect must in the nature of things be very short lived — merely temporary. To cheapen money is to raise prices, and if it were possible to reduce the pm'chasing power of gold with us it would at once seek those markets where it would command more of other things, transportation and tariffs considered, than it could at home. There is no doubt but an in- ordinate issue of supplementary money will cheapen gold, but that cheapening process is at once signalized by its exit from use as money. It cannot be cheapened by that process and still be re- tained in use. The same law holds here as in the exchange of other property. A man will always carry his goods to that market where he can get the most for them. At most, the cheapening effect (raising of prices) produced by increased issues of supple- mentary money, is only in the proportion that such increase bears to the total A^olume of all kinds of money in all the nations which use the same metal for standard. This would be infinitesimal when applied within any practicable limit to meet the present emergency in the United States. How the Standard Metal is Distributed. By the remark above it is not intended to say that each individual owner or any indi- vidual owner of gold would go abroad and carry his gold with him to dispose of it in foreign countries. The movements of the stand- ard metal from nation to nation are mainly determined by prices and the effect which prices have upon balances of international trade. If gold is cheap with us, which is the same as to say prices are high, then foreign customers for our goods buy in other and more favorable markets. For the same reason exactly we have a motive to increase our purchases abroad, because we get for a lit- tle gold there what will bring much gold at home. The result is an adverse balance of trade and the gold must go to satisfy it. It is thus that the money metals are distributed amongst the com- mercial nations and the equilibrium in the value of the metals maintained. As a result of these operations the value of the mon- ey metals is likened to the sea, which seeks a common level all around the earth, but nevertheless bears upon its surface tempor- ary undulations or waves. But both gold and silver, whether in coin or bullion, are sim- ply property to be bought and sold like other property, and it PRINCIPLES OF MONEY AND COINAGE. 59 is possible of coui'se at any time for au individual or any number of persons to carry goods or secm-ities to a foreign country, sell them for gold or silver and ship the metal bodily out of that coun- try and in defiance of the state of general trade balances. But such operations are made at an immediate loss to the parties en- gaged, are out of the normal course of commerce and are never engaged in except for extraordinary reasons. When a money met- al is thus carried against the cm-rent of trade, it must be hid away or kept out of such cm-rent or it will soon find its way back. A Paradox. In confirmation of the statement here made that an increase of token money will not in any marked or propor- tionate degree cheapen the standard money or always stay its rise in value even, reference is made to the facts of om- experience in the last fom-teen years. In 1877 the total volume of current mon- ey in existence within the United States was less than $800,000,000 and yet prices were nearly or quite forty per cent, higher then than they are now, with a total volume of par and cm-rent money of more than $1,500,000,000. Population and property have not increased at a ratio to justi- fy this fall of prices when also accompanied with so large an in- crease in the volume of money. This fact is not a contradiction of the fundamental formula of value heretofore given, but rather a vindication of it. Money has become more valuable and prices have fallen because of a contrac- tion of the world's supply of standard money. If this be the cause of the disease, an increase of the volume of supplementary or tok- en money in any one nation is not applying the right remedy nor at the proper point. All that has been said above of standard gold money must necessarily be true of silver money and metal whenever and wherever it is made standard by free coinage. Illustration.— As an illustration or test of the assertion that it is the value of the standard coins in use thnt determines the cur- rent value of all supplementary and subsidiary money, let us sup- pose that in pursuance of the necessary legislation by some prac- ticable method, all our gold coins were reminted and the quantity of pure metal in them increased, say twenty-five per cent., i. e. the gold dollar would be made to consist of 29 grains instead of 23.22 grains as at present. It woiild surely cost more to buy the larger quantity of gold than the smaller, and hence the new dollar would be more valuable than the old. But all our supplementary 60 PKINCIPLES OF MONEY AND COINAGE. dollars would become more valuable in the same degree, for the same reasons which operate to make all dollars equal to the gold now, would operate then and with the same result. If this be true, then why should not a rise in the value of our gold coins, as a result of a general and world-wide rise of that metal, produce the same effect? If the addition of a few hun- red millions of token coins or paper notes would not keep the value of the gold dollar at the same level, although the quantity of metal in it was say, doubled or trebled, how could it do so if the same result as to its value was produced by new demands in other quarters of the world? A practical illustration of this matter was furnished in this country by the legislation of 1834 wlieu the gold dollar was re- duced in weight from 24.75 grains to 23.22 grains, tine metal. That act made the gold coins cheaper than before and cheaper by a small margin than the silver dollar, which latter tended at once to disuse and all paper money ceased its parity witli the silver and conformed to the gold coins. (In speaking here and elsewhere of the "gold dollar," I do not mean the gold dollar coin, but the proportionate weight of gold to the dollar. The gold eagle of 1834 contained 232 grains of tine gold which was 23.2 grains to the dol- lar, but no dollar coin was then made.) So to alter the value of our money under present conditions it is only necessary to change the weight of pure metal in the gold coins. If Congress were to provide for the recoinage of our gold money, prescribing 18 grains of fine metal to the dollar, prices would at once rise twenty-five per cent, and our paper money would be at par with tlie new gold coins, just as it is now witli the present ones. A Ruse. The extremely low prices now prevailing for all sta- ple products has caused a cry of anguish and begotten a demand for more money. It is proposed in some quarters to satisfy this demand by additions to the volume of supplementary money in the form of bank notes. To the mind of the well informed and discriminating economist, this proposition appears only in the light of a ruse or feint, for an increase of that kind of money can- not create any permanent reaction in prices. PRINCIPLES OF MONEY AND COINAGE. 61 EIGHTH PAPER. TOKEN MONEY CONTINUED-PREMIUM ON GOLD— HIS- TORY INTERPRETED— PAR OP EXCHANGE. Volume of Token Money. Althougli out of its logical order, it may liere be stated that the maximum amount of token and sup- plementary money which can be floated at par with the standard coins, is indefinite. Not without a limit by any means, but where that limit is no one knows. There appears to be no economic law fixing such limit with auj- degree of certainty. All readers of these papers will remember that great apprehensions were ex- pressed in certain quarters fourteen years ago when the coinage of token silver dollars began, that they would drive from use the standard gold coins. They did not do it. In every succeeding year since 1878 the same cry of alarm has been raised, but still the gold stays with us. In the meantime the annual rate at which token money has been issued has increased from about twenty- four millions under the original Bland law, so-called, of 1878, to about thirty-four millions under tlie Sherman law. And still the gold stays with us, and all forms of money are still at par with each other. If it were settled by economic laws Just what proportionate amount of token money could be maintained at par with the standard and no more, surely tlie country would have been in- formed of it. But that there is a limit, no one can reasonably doubt. All that can bo said upon that point is that we have not yet exceeded the maximum limit. How, fast we are approaching that point by the arbitray addition of about thirty-four millions a year to the total volume is uncertain, for this is a rapidly grow- ing country both in population and wealth, nnd coTisequently there is a constantly increasing and legitimate demand for more money to maintain easy working marlcets. 62 PRINCIPLES OF MONEY AND COINAGE." One fact should uot be forgotten, however, and that is that with tlie constant increase of the kind of money mentioned, prices have continued to shrink steadily from year to year. The Ancient Theory. Tlic doctrine presented by the great majority of political economists is, that if a nation increases the volume of its supplementary or local money and thus cheapens the mass of its money and causes a rise of prices, it will cause an export of a corresponding amount of its standard money by means of the creation of an adverse balance of trade as explained in the previous paper. Likewise, if a nation contracts the value of its supplementary money, it will cause an importation of the standard metal to take its place, by thus creating a favorable balance of trade, and hence a nation is helpless to either increase or diminish its volume of money permanently, while in the use of a metal standard, for by whatever amount it increases or diminishes the volume of subordinate money, reversely it will diminish or increase the volume of its standard money. It is very probable that the great outcry against the coinage- of token silver dollars above referred to was based upon this widely accepted theory, and the consequent belief that every addition of one million dollars of these tokens would be the cause of a loss of one million gold dollars by export, and it would only be a ques- tion of time, and very short at that, when the United States would be denuded of its gold, and the silver dollar at the value of the fine metal it contained would become by a bungling and indi- rect method the pivot or standard of our money system. But how have the facts corresponded with this tlieory? The coinage of token silver dollars was inaugurated and presisted in for about thirteen years, notwithstanding the opposition. Nearly or quite four hundred and twenty millions of them were added to the volume of our domestic money in that time, and from the be- ginning of this coinage, and continuing for many years, the amount of our gold money steadily increased. And even now (1893) when the so-called Sherman law has superseded the Bland- Allison act, making a still larger monthly addition of the same class of money, and after two years of this enlarged issue of mon- ey, it is estimated that the United States possesses about as much gold as any nation on earth and it still remains the measure of vahie of our markets. Two Conclusions. A fair consideration of the foregoing facts seem to establish two conclusions: PRINCIPLES OF MONEY AND COINAGE. 63 Fii-st— That the ancient theory above set forth is sadly in need of some amendment. Second— That a much hirger volume of supplement;u-y money may be floated at par with a metal standard when issued by the government and fortified by a full legal tender quality, than if the same was issued by individuals or corporations, without legal ten- der and dependent for value upon a precarious promise of a spe- cific redemption in some other form of money. Premium on Gold. The particular form of the calamity which it was predicted would befall the country in case of an ex- cessive issue of legal tender toiien coins, has been represented to be a premium upon gold. But no one has to my knowledge un- dertaken to explain in precise terms just why and how that event, even if it should come to pass, would prove a calamity to the general public. Even if gold should be driven from the money circulation of this country, it could not be properly said to bear a premium in any sense that would unfavorably affect the interests of the mass of the people. Those who had heretofore entered into contracts to deliver gold, or in other words, had contracted gold debts, would have to buy the gold with which to pay them or pay the equivalent value in other money if their creditors would consent. In either event it would take no more property to pay the debt than if gold had remained in current use and at par with other money, for prop- erty wiU be rated just that much higher in the markets. In other words, by just as much as the .then standard dollar (silver) is lower in value than the gold dollar, by just that amount will prices of all produce and property be higher than now. In point of fact the advantage will be upon the side of the debtor, for the disuse of gold in our money system will tend directly to depreciate that metal, and a given quantity of wheat, corn, cotton or meat will command more gold then than it will now. But the main fact to which I desire to direct attention is that if gold should command any premium for any purpose, it would cease to be currently u?ed as money and would cease entirely to be the measure of value in our miirkots. If ''driven to a premium." as it is sometimes expressed, it will at the same time cease to enter into the reckonings of the people in their daily transactions, as the word "dollar" in all market quotations will then mean the silver dollar and not the gold. -^i 64 PRINCIPLES OF MONEY AND COINAGE. The phrase "premium on gold" simply means that it would cost more to get a gold dollar than a silver dollar or the dollar that constituted the then standard of the markets; and if so, prices of all property and services would be higher. This would not be considered a calamity by the producing classes. Historical Phenomena Interpreted. If the total volume of money in any country consists of standard coins as the only un- limited legal 'tender and a supplemental money of token coins or paper notes of very limited or no legal tender function, and the volume of the latter be largely increased, or for any other reason it becomes reduced in its current value, then the standard coins will remain the measm-e of value in the markets, while transac- tions will be made in the supplemental money at a discount as compared to the standard coins. This was the condition prevail- ing in the United States prior to the war of the rebellion, when the notes of a vast number of State and private banks consti- tuted the paper money of the country. If the bulk of the supplementary money be an unlimited legal tender and its volume be so largely increased as to cause it to de- preciate below the value of the standard coins, the latter will altogether cease to be used as current money, and the supple- mental money, paper though it be, will become the measure of values in the markets, and the former standard coins and metal will be relegated to the commodity list, and be dealt in, if at all, strictly as such, like iron, copper, wheat or cotton. During and for some time after the close of .the late civil war, greenbacks having been made unlimited legal tender, with the single exception as to customs dues, they became the standard of all our domestic markets and gold ceased to discharge any money function with our people. Not because gold coins had been shorn by law of any of their former money functions, but simply because the people had a cheaper instrument for all such pur- poses. Whereas, the sign .? in all our domestic market reports and quotations of prices from 1S62 to 1879 meant the legal tender greenback dollar, prior to that time and since 1879 and up to date, it means the gold dollar or its equivalent in commercial value. A widespread impression that but for the single exception in , the prescription of legal tender to the greenbacks, they would V I have been at all times as valuable, dollar for dollar as gold coins, is a mistake.'^ Their volume, when combined with all the other \ PRINCIPLES OF MONEY AND COINAGE. 65 forms of money supplemental to them, was too great. It is quan- tity that determines value and not legal tender alone. The Explanation. The reason for the facts recited under the last preceding head will be found more at length in the next paper, but suffice to say here that a money which is acceptable as a medium of exchange and a legal tender in payment of debts, if increased in volume to an extent to cause it to sink in value below that of the previous standard metal coins, then such in- creased money will become the standard of the markets at its cheaper value simply because of the natural desire of every in- dividual to pay as much debt as possible with as little of his com- modities or labor as possible. The same motive which causes evei'y man to seek the highest price prompts the use of the cheap- est money which will answer his purposes, for the one thing im- plies the other. Par of Exchange. Reverting again to the subject of standard coins, one of the chief merits of the system is that it affords a "par of exchange" between nations. The particular meaning of this phrase can best be presented as follows: Illustration No. 1.— A Par of Exchaage— Suppose a New York merchant receives a bill rendered for goods bought in London. The bill amounts to say £100 in English money. The question arises: What is a pound? The merchant proposes to sell the goods for United States dollars and cents, and very naturally he wants to know what they cost him in dollars and cents. How is he to. find out? He knows that he owes the London merchant £100, but how many dollars does he owe him? It is not difficult to ascer- tain imder present conditions. A pound sterling contains 113 grains of fine gold. An United States standard dollar contains 23.22 gi-ains of fine gold. Divide the 113 by 23.22 and you get 4.8G.G, Avhich is .?4.8G.G, and the bill for the £100 is equal to $48G.G0 of our money. Gold is the standard metal of both nations, and the standard coins of each are related in value precisely as they are related in weight of fine metal. The English gold coins are eleven-twelfths fine, while ours are nine- tenths fine, but that makes no difference. The alloy in coins cuts no figure whatever in their value, whether they be standard or token. This relation of value between a pound sterling and the gold dollar is a fixed one and never varies, because both are made of gold and both have free coinage, and any fluctuation in the 3 66 PRINCIPLES OF MONEY AND COINAGE. metal in the one country applies equally and instantly to the other, which exhibits again the reason for free coinage. Illustration No. 2.— Want of Par of Exchange— Suppose the same New York merchant buys goods in Bombay and receives a bill reading, say 1,000 rupees. Now what does rupee mean? He seeks the same information he wanted in the other case. Wants to know how many dollars his goods cost him. Upon inquiry he finds that the rupee is made of silver metal, is coined free and is the standard coin of India. He fm-ther finds that it contains 165 grains of fine silver, is to all intents and purposes merely a piece of silver bullion, just as the pound sterling and gold dollar are pieces of gold bullion. But what is the relation of value between dollars and rupees? There is no fixed relation at all. The only means of finding out what his goods cost him is to look up the market price of silver. If silver bullion be quoted at 86 cents an ounce, then the 165 gi-ains in a rupee is worth 29 1-2 cents, and 1,000 rupees mean $295, which is the cost of his goods in United States dollars, gold standard, if he pays for them on the day that silver is quoted at 86 ceuts an ounce. Suppose he has a competitor in the same line of goods next door and both buy the same goods in the same quantity in India and at the same price in rupees. A pays for his when silver is worth 86 cents an ounce. B waits a few days and pays for his when silver is quoted at 90 cents an ounce. A pays $295 for his goods and B $310, and both pay the same price in rupees. So it is discovered that there is no fixed relation of value between rupees and doUars because there is no longer any bimetallic bond between them. The same want of par of exchange exists between this coun- try and our neighbor Mexico, which also has a silver standard. Take 100 silver dollars of our money and you can exchange them for 100 dollars of gold. Take the gold to Mexico and you can sell it for about 140 Mexican silver dollars, which contain more pure silver metal than our own. Then bring the Mexican silver dollars back to the United States with you and sell them as silver bul- lion (all the use you can make of them) at 86 cents an ounce, and you get what you started with, 100 American silver dollars or gold dollars, just as you please. This illustrates the difference between a standard coin and a token coin, although both are made of the same metal, have the same name and, for that matter, have precisely the same weight PRINCIPLES OF MONEY AND COINAGE. 67 and fineness. If one be a token and the other free coined and standard, there is no more intimate relation of value than if the one was made of gold and the other made of leather. The foregoing illustration in reference to the Indian rupee applies to the time prior to the closing of her mints in June, 1893; and transactions between citizens of the United States and Mexico are subject to the same conditions at the present time. While both countries use the same name "dollar" and the dollar is the unit of money in both countries, they do not refer to the same standard. PRINCIPLES OF MONEY AND COINAGE. 69 NINTH PAPER. GRESHAM'S LAW. Sir Thomas Gresham was born in London in the year 1519. He was the son of a merchant and was himself a successful merchant in early life, but also developed a considerable talent for diplomacy and especially in the line of financial affairs. The period of has life covers the whole of the reigns of Elizabeth and Mary and portions of those of Henry VIII. and Edward. He was in money matters consulted by the crown and ministers of state and entrusted with many important commercial negotiations with adjacent countries on the continent. From the frequency with which we meet the phrase "Gresh- am's law" in the discussion of the subject of money and coinage it might be inferred that this gentleman made some remarkable discovery in monetary science analogous to those of Herschell and Galileo in astronomy or of Davy in chemistry. But in fact what has been dignified by the name of Gresham's law is only one of the simplest facts of every day experience in commerce. It had been observed in England that the new coins as they came from the mint would soon disappear from the channels of circulation and that it was only those which were considerably worn by use that were generally handled by the people in making their exchanges and payments. This was at a time when all the silver coins of England were made by the process of free coinage, and were consequently standard, just as all silver coins were formerly in the United States. The question arose with those in authority, why is this? Why do the good full weight coins dis- appear and only the lighter and those much worn remain in use as money? Upon investigation it was discovered that only the new and full weight coins could be exported without loss to the owner, because when rcr-fivfd in rdhr-r countries it was a bnllidn only 70 PRINCIPLES OF MONEY AND COINAGE. and by weij^lit and not by count or by name or "tale," as it is usually termed, as they circulated at home. If worn coins were exported the exporter would lose in the transaction whatever the coins had lost in weight by the abrasion in use, whereas a worn coin would cost him as much at home as a new one just from the mint. It was also discovered that manufacturers in selecting coins for making jewelry and plate would, of coiu-se, take the new ones of fuU weight for such purposes, and for precisely the same reasion. They would get more metal a/t the same cost. Mr. GreshajB lis credited with making these discoveries and the combination of the fact and the reason for it constituted originally what came to be kno'wu as "Gresham's law." As usually stated the law is, that "bad money will always drive out good money," and as originally illustrated above this way of stating it is correct. A much worn sovereign or crown or shilling, while it went from hand to hand in England freely by those names, and was paid and accepted without question, yet in strictness they were not what they piu-ported to be, for each of these coins were standard and purported to have a certain weight of pure metal in them when they did not. The critical reader will however observe that the bad coins did not really drive out the good ones, for the good ones were merely appro- priated to uses which the others could not so well serve, thus leaving only the poor coins for general domestic money purposes. It is also to be observed here that this original statement of Gresham's law can only apply to standard coins, for tokens can never in any country be used for manufacturing purposes or ex- port without loss to the owner. No jeweler in this country will use oui- present silver dollar to make a trinket when he can take the same dollar into the market and buy the amount of silver bullion it contains for 70 cents and have 30 cents of gold value left. The Law Extended. In after years the fact that the cheaper of two metals when coined into standard money will supplant the dearer in use, is also caUed an effect of Gresham's law, because it Involves the same principle in commerce, to wit: A constant effort to achieve results at the smallest cost. If it is not the same it is at least the corollary of that law of labor, a persistent attempt to supply our wants with the least exertion. PRINCIPLES OP MONEY AND COINAGE. 71 People will alwaj-s pay their debts willi the inouey that costs them the least and as a rule regardless of the morals of the transaction. Upon the other hand creditors are equally intent upon exacting the money that costs the most and with equal blind- ness to any moral quality of the transaction. ALL this is simply to say that everybody is "on the make" in a practical way, and the matter of morals is generally left to the speculations of the phil- osophers. Illustration. Suppose that A owes a debt of 100 bushels. Not bushels of potatoes or of parsnips, but simply "•bushels." Suppose bushels of wheat and corn are each and alike legal tender for the discharge of such an obligation, and where an alternative exists the option always rests with the debtor. Now if wheat be twice as valuable as corn by the bushel it is easy to divine which wiU be the medium of paynu'Ut. The cheaper is certain to be used and particularly so if the debtor has the right to cai'ry a bushel of either to the town hall and have it stamped (free coinage) as a legal bushel for such payment. Substitute the word "dollar" for bushels in this illustration and we discover the operation of Gresham's law in the use of standard money in making payments. The cheaper wiU be the one in use. Another mode of arriving at the same result will be foimd in the operation of the markets. If one money be dearer than an- other the cheaper will become the measure of value in the mar- ket, for whoever has property to sell can get more of the chaiper money for it and each will pay the same amount of debts and taxes. The Morals of the Case Illustrated. Some critic may say that tlif option of payment in the above illustration amoimts to nothing more than the offer of an opportunity to defraud and he will illustrate: Suppose A borrows bushels of wheat and when the debt is due wheat is worth double what corn is, and yet the debtor pays in corn. Is not that dishonest? I answer, perhaps so and perliaps not. It will depend entirely upon what the value of the wheat was when borrowed as compared to the value of the wheat and the corn respectively when the debt was paid. The moral obligation of the contract is that the debtor shall repay the precise value he received; and if wheat has advanced in value since ne made the debt, and corn at the date of payment has pre- cisely the value of the wheat when borrowed, then to pay in corn squares with the most rigid interpretation of the moral law. 72 PRINCIPLES OF MONEY AND COINAGE. Gresham's Law a Fact. In recent discussions of the coinage question in and out of congress, Gresliam's law lias been often impeached and pronounced a myth because the coinage and use of the present silver dollar has not driven gold coins from circu- lation as money and from their position as the standard of the markets. The facts of the situation seem not to be clearly under- stood. This application of Gresham's law is predicated upon a difference in value between two or more kinds of money. There has been no difference of value between silver dollars and gold coins in recent years in the United States. Our present silver dollar is a token which every day and hour since its coinage began in 1878 has been equivalent in value to the gold dollar within the limits of use of United States token money. Whenever for any cause om* silver doUars come to have less value in our markets than gold doUars, then Gresham's law will come into play, and it wiU soon be discovered that the cheaper money has replaced the dearer. The application of the words "good" and "bad" in statements of the operation of Gresham's law are also very misleading. The dearer money may be the bad money and the cheaper the good. Our gold coins may be the bad, and our silver dollar, at its bullion value, the good money. It all depends upon the value that each has or may have under given circumstances, and the value that a dollar ought to have to justly discharge the obligation of a con- tr.-U't. PRINCIPLES OF MONEY AND COINAGE. 73 TENTH PAPER. MONOMETALLISM AND BIMETALLISM. The preceding numbers of this series have been devoted to the discussion and presentation in brief scope of fundamental facts and principles. The remainder of the series will be mainly taken up with the application of these principles in the two com- peting systems of metallic money commonly designated as mono- metallism and bimetallism. Monometallism. I can do no better in defining this term than to adopt the language of the late Professor Laveleye ("Ele- ments of Political Economy"), :^ writer of great learning and ability. It is as follows: Monometallism: "The monometallic system only accords free coinage and unlimited legal currency (legal tender) to pieces of one metal— either gold, as in England, or silver, as in Austria." (The situation in Austria has been changed since the above was written.) This definition is certainly very simple and easily understood. Free coinage and unlimited legal tender for pieces of one metal only. It is to be observed that in the coinage no arbitrary nor force measures are employed. Free coinage is merely "accorded" to the metal. It is presumed that owners of the metal will offer it for coinage, or at least a sufllcient quantity of it to answer the needs of domestic commerce. The assaying, alloying and stamping of the metal is generally a gratuitous service perfoi-med by the gov- ernment officials, and for reasons which have been heretofore explained, and as it offers the readiest and cheapest means to the metal owner of converting his product into other forms of prop- erty, no further inducement is necessary to enable the mints to get the metal. 74 PRINCIPLES OF MONEY AND COINAGE. It matters not what the quautity or quaUty or material of the token coinage in use with the standard coins, nor what the paper notes; where only one metal is admitted to free coinage and the coins so made are in use and at par with the other money, the condition is one of monometallism— one-metallism. If the quan- tity of other or supplementary money be so largely increased as to depreciate it as compared to the standard metal money, the latter will go out of use (if any considerable portion of the sup- plementary money be an unlimited legal tender) and a condition of suspension of specie payments ensues. A country in such a condition is said to be a monometallic country theoretically, but the standard is not "effective." Bimetallism. Here we will also adopt Professor Laveleye's definition, as it is entirely accurate. Bimetallism: "The monetary system of the Latin Union is called the double standard or bimetallic system, because it permits in principle the free and unlimited coinage both of gold and silver pieces, to each of which it gives legal currency (legal tender)." The reference to the Latin Union above was of course before it had closed its mints to silver. Here again we observe the word "permits" in the English translation which was made by Professor Pollard of Oxford, and is undoubtedly the right word. No compulsion is employed in bringing the metals to the mints, nor is any element of force im- parted to the coins as the metal is returned to the owner, beyond that necessary in the making of any kind of legal tender money. The coins as they go foi'th fi-om the mint have no greater value than when the metal went into it, and the value transferred in a compulsory payment by means of these coins is neitlier less nor greater than the particular pieces of metal have in the open mar- kets of the world as bullion— as a commodity. The same facts apply here as in the case of monometallism. It matters not what the supplementary money may be, whether it be a legal tender or not, or of what it may be made. Bimetal- lism—two metallism— cannot exist in any form or degree unless the mint be open to two metals. The simplicity and clearness of the foregoing definitions afford no opportunity nor excuse for the great amount of jugglery with words about the coinage which has lately characterized the utterances of many leading legis- lators and financiers in discussing this subject. That the fore- going definitions are scientific and accurate is abundantly shown by analysis of the effects of the policies indicated. PRINCIPLES OF MONEY AND COINAGE. 75 Legal tender tokens of one metal with free coinage imd legal tender of the other does not constitute bimetallism of any kind. The ratio in weight between token and standard coins is a mat- ter of no seientitic nor economic importance. The fact tliat unr present silver dollar and gold coins have the ratio of 16 to 1 in weight is not of the slightest practical significance and consti- tutes no featm-e of bimetallism, so long as the mints are closed to the free coinage of the silver dollars. It should be particularly noted also, that the foregoing defi- nition of bimetallism does not even remotely imply that coins of both metals shall circulate together all the time nor even at any time. The language is, "permits in principle the free and unlimited coinage, etc." Owners of both metals may not offer them at the mints on the same day nor in the same year but the mint must be open to receive either or both at all times. A bi- metallic condition may exist where only one metal is in use among the people, and with all the benefits which the friends of bimetallism claim for it. This feature of the subject wiU be ftu-ther considered in later papers. The Standard Coin Money Theory as Respects Legal Tender. With reference to the legal tender feature conferred upon the coins it should be remarked particularly, that according to the strict metal money theory, there shoidd be no other unlimited legal tender money besides the coins which issue from a free mint. Such was formerly the practice in all the chief commer- cial countries, but in recent years there has been a wide depart- ure from that rule. In the United States we have made paper dollars (greenbacks) practically an unlimited legal tender. Later we made silver dollars of limited coinage unlimited legal ten- der. When the Latin Union closed its mints to silver, that day every silver coin in France, Belgium, Switzerland and Italy be- came a token, but they were not shorn of their legal tender qual- ity and have not been up to this time. This innovation has been always and everywhere stoutly re- sisted by the creditor classes. As there is no barrier to the de- preciation of paper money or token coins except the virtue and wisdom of legislative bodies, creditors fear that such will not be sufficient, especially in times of panic and commercial depression, and partictUarly in popular governments. As heretofore pointed out the value of all supplementary money, both pnpor and token 76 PRINCIPLES OF MONEY AND COINAGE. coius, is liable to depreciation by too great au issue of tliem. They always liave a value in excess of that of the material of which they are made when in commodity form, and while their quantity is properly limited will have a value equal to that of standard coins; but the great outcry iu the United States since the coinage of token silver dollars began in 1878, betrays the ex- treme nervousness of the creditor class lest the limit of prudence be passed in the matter of volume and they drop below the stand- ard gold coins in value while still retaining their legal tender quality. They have no objection whatever to receiving either greenbacks or silver certificates in payment of either the interest or principal of their claims so long as these kinds of money have the value of gold coins. But the possibility of a different order of things is what creates apprehension and the possible weight of the precedent, if it should once be established/^ The Creditor's Side. We Avill allow the creditor to state his case thus: "If I lend my money for five, ten or twenty years and only standard coins are legal tender in payment of my claim, the only risk I take in being paid a depreciated money is tliat new mines of the standard metal may be discovered somewhere iu the world and its quantity be thus so largely increased as to result in a general depreciation of its value. But if a depreciation takes place it must be world wide, and that I perhaps cannot avoid, and that rislc I must assume." "But if metal tokens or paper notes are made legal tender for the discharge of my claims, a legislature or congress of men who profess to believe that there cannot be too much of any good thing may so increase the volume of printed money or cheap tokens as to reduce their value to one-half or one-quarter that of the standard coins, and when the principal of my claim becomes due I may be legally paid in a money that is comparatively worth- less." The Debtor's Side. Now we will let the debtor state his case: "If I and all my class are required to pay only standard coins, or by a favor, the equivalent in value of the standard coins, with decreasing production from the mines and large increase of population and property and use and demand for money, I am sure to have to pay a much greater value than I received. Besides that, if the legal tender quality be limited to the standard coins, this alone would so increase the use and demand for them as to largely increase their value. More than this. I can see no reason PRINCIPLES OF MONEY AND COINAGE. 77 why a money which is good enough to pay a debt of $5 is not good enough to pay a debt of $5UU or any larger amount. A money which is made legal tender at aU must be legal tender for all. Besides this, you are and must be dependent in the end upon the virtue and integrity of the very power you affect to distrust. It is only in virtue of the laws Avhich proceed from congresses and legislatures in this democratic age that you can enforce col- lection of your debt at all. Finally, any money which is not sus- tained in its uses by some legal tender provision is verj' liable to be buffeted about and discounted and discredited by the money changers to the loss and annoyance of those who handle but small sums." If there were not at least two sides to this matter, it would not be a question. But to this there is a tliird side and tliat I will caU The Economist's View. When A borrow^s of B a sum of money upon contract to retiu-n it at a given time, besides paying an agreed rate of hire for its use in the meantime (interest), A receives a certain value or purchasing power, and his contract, strictly construed, is to return the same value or purchasing power which he received, no more and no less. To do less than that is a wrong* to B, the lender. To be compelled to do more than that is a wrong to A, the borrower. Now money is a thing which is constantly fluctuating in value and that being true, how in the world is exact justice to be insured in the dealings be- tween A and B? Exact justice cannot be insured but it should be approximated as nearly as possible. The Constitutional Arbiter. The fathers of our government were in many respects wise men in their day and generation and in some important respects their wisdom and foresight were re- markable, as illustrated by subsequent events. They knew that dollars of any kind would fluctuate in value, and that the neces- sity for regulation of their value was imperative, even when the commerce and industry of the people was but a fraction of what it is to-day. Hence the Constitution of tlie United States says: "Congress shall have power to coin money and regulate the value thereof * * *," etc. This power of regulating the value of money was essential to prevent one class of citizens from rob- bing another under the forms of law, and no safer and more ap- propriate repository of that power existed in our form of govern- ment than- the congress of the United States. 78 PRINCIPLES OF MONEY AND COINAGE. Congress is not limited in the means it may employ in that duty of regulation except by the laws of natm-e. Of the power and duty of congress in reference to tliis subject more will be said hereafter. This digression upon the subject of legal tender was necessary to illustrate the reason of the claim made that only free coined money should be made unlimited legal tender, viz.: That its value, theoretically considered at least, is not so liable to depreciation as that of token coins and other forms of supplementary money. But the innovation men- tioned is in all probability a permanent one in this coimtry at least. In the next number I shall point out how this legal tender feature of standard coins, in conjimction with the faulty defini- tion of the third function of money heretofore remarked, has caused some serious blunders in recent writings upon the subject of bimetallism. PRINCIPLES OF MONEY AND COINAGE. 79 ELEVENTH PAPER. MONOMETALLISM AND BIMETALLISM CONTINUED. The Mistake of an Economist. The most pretentious book yet published in this country upon the subject of Bimetallism is that by J. Lawrence LaughMn, then assistant professor of Po- litical Economy at Harvard College (but now occupying a similar position in the Chicago University), published in 1886, entitled "The History of Bimetallism in the United States." It contains much valuable matter of an historical character, but unfortunately the deductions and arguments of the author are of little or no force because based upon a complete misconception of his sub- ject. The following are Professor Laughlin's definitions: Monometallism: "Its advocates regard gold as the least varia- ble of the two metals, and as best suited for large payments." National Bimetallism: "The selection of both gold and silver by an individual state as legal payment of debts to any amount, at a ratio fixed without regard to the legal ratios of other states." International Bimetallism: "An agreement between the chief commercial nations of the world on one given ratio (e. g., 15 1-2:1) would, in the opinion of this other school, keep the value of silver relatively to gold invariable, and so cause the concurrent use of both metals in all the countries of such a league." It is quite apparent from these definitions that the professor regards the whole matter of the metallisms to turn upon the point of legal tender alone. If there were any doubt with reference to this, it would be removed by reading the following from the preface of his book: "Money has three functions to perform: As a medium of ex- change (to transfer value), as a common denominator of values 80 PRINCIPLES OF MONEY AND COINAGE. (to compare values), and as a standard of deferred payments. Now, bimetallism is concerned only zcilli this last function.'" I have italicized these last words, as they are conclusive as to the meaning and understanding of the author in question. This error of the learned professor is directly traceable to another and very common one, heretofore pointed out in these papers, viz.: That money is a standard of value solely because and by means of it being made a legal tender. Thus those who study the subject in a casual way and write boolis by rote or as mere copyists, are good vehicles for the perpetuation of error. If bimetallism consisted of legal tender only of coins of two metals, then we have it at present in the United States, and this author so asserts Avhen in speaking of National Bimetallism he says: ''An example of this system is to be found at present in the United States," etc. Then, with the most singular predilec- tion for error he asserts, "Monometallists" (and he is one,) "hold that national bimetallism is an impossibility for any length of time, since as soon as one metal in the market falls slightly be- low the legal ratio, the other metal will be driven out of circula- tion." When the foregoing was written, the Bland token silver dollar had been undergoing coinage at the rate of more than two mil- lion dollars per month for eight years, and the silver metal had already dropped, not "slightly," but largely below the legal ratio and yet gold had not been "driven out of circulation." To make this mistake all the more apparent, it is only necessary to call attention to the fact that the Bland dollar continued to be coined for four years after the publication of the above statement and until more than four hundred millions had been added to the mass of money in the country, and until silver had lost more than one-third of its value as compared to gold in the ratio of 16 to 1, and still the gold coins remained in circulation and do so to this day, late in 1893. The Error Analyzed. If the foregoing misconception of the subject was confined to any one person or a few, it would not justify any particular effort to dispel it; but a rather wide ac- quaintance with the current literature of the subject and a close observation of the course of discussion in the press and in con- gress induces the belief in the mind of the writer that a rather widespread mystification exists upon this point. Senator Sher- man of Ohio has recently said there are "several kinds of bimet- PRINCIPLES OP MONEY AND COINAGE. 81 allisin," while iu reality there is but one kind worthy of mention or the attention of statesmen and affecting in any considerable degree the interests of the masses of the people in their commer- cial relations. First— The word bimetallism is one of recent use, and appears only in the supplement of the 1S8S edition of "Webster's diction- arj". It is derived from the Latin word "bis," twice or two, joined to the English Avord metal, and signifies literally, two metals. It is there incorrectly defined as the legalized use of two metals as money at a fixed relation of value. This definition is by no means complete nor accia-ate. Under that system the use of the metals would be legal whether of the same value or not; and an absolutely fixed relation of value is a thing Avhich economists re- gard with considerable doubt and is not an essential in scientific bimetallism. Second— The prime reason which has sustained the standard metal money system amongst the nations hitherto, is that by free coinage of the metal, in addition to all that is gained in the way of convenience and certainty etc., the value of the coin is made one with, on a par or level with, the world's mass of that metal. There is nothing national, local, conventional nor accidental in that value. The value of a coin of that kind is substantially the same as that of a like weight of the same metal anywhere and everywhere else in the world, because it has so great value in proportion to weight or bulk, that one grain of it will pay for transporting one hundred grains round the earth. It is only by means of free and gratuitous coinage that this result, essential to the fundamental idea of standard metal money, can be secured. Third— By establishing such a standard coinage and giving the coins by legal tender laws all the uses which money will serve, they afford a point or standard in fact by which to gauge or regulate the volume of all supplementary money, which, for reasons of convenience if no other, the commerce and industries of the people demand. Either by a process of redemption of these supplementary dollars in the standard dollars, or by and through their equivalent uses in domestic commerce (mainly by the latter, I think), all these supplementary dollars are made to have the same value as the standard, and hence all transactions in the markets and payments made with the latter, are prac- tically the same in point of the value involved, as if made by or witli the stnndard coins. 82 PRINCIPLES OF MONEY AND COINAGE. Foiu-th— Keeping carefully in view tlie foregoing points, let us inquire: (1) Is the value of om- present silver doUar on a par or level with the same quantity of the silver metal in this coun- try or elsewhere in the world? It is not. A silver dollar will buy nearly twice as much silver metal here at home as it contains. (2) Is the value of our present tive-doUar gold piece on a par or level with the same quantity of the gold metal elsewhere in the world? It is. It will never buy here nor elsewhere any more gold metal than itself contains. (3) In paying a debt with our present silver dollar do we transfer only the value which that quantity of silver metal has in the markets of the world? Not at all; but, on the contrary, we transfer the exact value which a gold dollar has. (4) In exchanging silver dollars for commodities, do we give for the latter the value which that weight of silver metal has, either in that particular market or in any other market in the world? Not at all, but in every case we give the value w^hich that number of gold dollars have, and that is the same in all markets. (5) In oiu- use of the present token silver dollar, has it maintained any steady relation of value whatever to the quan- tity of silver metal which it contains? Not at all. It would not exchange for the same quantity of silver metal on hardly any two days together within the last twenty years; but in all that time would buy exactly the same quantity of silver that the gold dollar would buy. Fifth— In view of all the foregoing facts and circumstances, can the diligent reader discover any equality of functions, effects or influences as concerns the two metals, as metals, that would justify their being grouped together under the term bimetalhsm? If that word can be properly applied to gold and silver under the present conditions of their use in the money system of this country, then the word has no important economic significance, for the fact that our present metal token dollar is made of silver has no more to do with its value than if it were made of tin or zinc or copper, or a compound of all three for that matter. It would be just as reasonable and scientific to call our present system a quadro-metaUism because we use four metals altogether in the different denominations of om- money; and it is not going beyond the limits of exact statement of fact to say that the value of copper in the mai'kets of the world has just as much (influence upon either the purchasing or paying power of our one-cent pieces as has that of silver metal upon our silver dollar. The difference in legal tender between tlae dollar and cent pieces has nothing PRINCIPLES OF MONEY AND COINAGE. 83 whatever to do with ihe quantity of property or hibor the citizen must give for either. The joining of free coinage and legal tender, which must be done in every trulj' standard coin, insm'es two results: First, that the seller of commodities shall receive that price Avhich a com- parison of his goods with a given quantity of metal which is free to go in and out of all the markets of the world will afford to him; and, second, that the money thus obtained (if in standard coin) will pay any debt he may owe. The Ratio of Coinage. The first preliminary to the inaugu- ration of bimetallism is to determine how much metal shall be put into the coins respectively. As we have no gold dollar coins now, it is more precise to say that the first task is to select a dollar quantity of each metal, and the ratio of comparison of weights between those qtiantities constitutes the ratio of coinage. This is not a task to be arbitrarily and recklessly performed, for we have seen that value, the all important element in the whole money problem, is not a thing created directly by legislative en- actment. Congress can only increase or decrease value by acts conforming to the great natural laws of value. Hence in deter- mining the ratio for bimetallic coinage, we must go into the mar- kets of the world and ascertain in what ratio the metals exchange for each other in the natural operations of commerce. If one have artificial aids by legislation or custom in any particular mar- ket, proper allowance must be made for that. If the other be subjected to special disabilities by custom or law in any particu- lar market or generally, allowance must be made for that. It is the average world wide ratio when on a basis of perfect equality that we seek. When found, or the nearest approximation can be ascertained, then that is the ratio for bimetalMc coinage. If it be found that one pound of pure gold metal be the average equiv- alent in exchange for fifteen and a half pounds of pure silver metal, at the time of inaugiu-atiug the coinage, then such is the proper ratio for coins; and if, as in the United States, we make a standard gold dollar of a certain number of grains of pure gold, then we must put just fifteen and a half times as many grains of pure silver in a silver dollar. When bimetallic coinage was first inaugurated in the United States under the mint act of 1702, the ratio adopted was one of gold to fifteen of silver. Afterwards, in 1803. France adopted bimetallism at a ratio of coinage of one of gold to fifteen and a li.'ilf of silver. 84 PRINCIPLES OF MONEY AND COINAGE. In 1834 the ratio of coinage was changed by congress to one of gold to sixteen of silver (15.98, to be precise). Notwithstanding the long discussion of the subject in congress and the many able investigations and reports of committees upon the subject, the significance of an open French mint at the ratio of 1:15 1-2 seems to have b6on entirely overlooked. The adjustment of the weights of the standard coins to the new ratio was made by recoining the gold coins and reducing the amount of metal in them about G 1-4 per cent. The weight of pure rhetal in the silver dollar was not changed, and remains to- day in our token silver dollar just as it was in the standard silver dollar of 1792. The result of this change dn ratio was that gold became the metal in use in standard coins and silver went as bullion to other countries. This tendency of silver to disuse as money extended to the point that half-dollars, quarters, dimes and five-cent pieces disappeared and there came an embarrassing dearth of small change in the channels of trade, for here, as elsewhere in the commercial world, the silver metal is the only one of the two adapted to such uses because of the great value of gold as com- pared to its bulk. This scarcity of change occm*red however from the fact that all minor silver coins up to this time were standard, just as the dollars were, contained a full proportionate amount of metal with the dollars and were made by free coinage. To preserve the silver change at home, congress in 1858, closed the mints to the free coinage of smaller silver pieces, reduced the amount of metal in them, confining their coinage to the mate- rial bought by the government for that purpose, limited their number to the discretion of the secretary of the treasury and thus made them tokens. It is not the object of bimetallism, as will be hereafter more particularly set fortli, to secure an absolute parity of value be- tween the metals at the coinage ratio, but in order to realize its benefits the ratio of coinage must approximate that which exists or would exist between the metals in the open markets of the world, where neither Inliored under any special or artificial legis- lative or conventional disability. Dm'ing the long debate upon the repeal of the purchasing clause of the Sherman act at the special session of congress in the present year, numerous propositions were made to change the heretofore existing ratio of 16 to 1, and in the House votes were taken upon the ratios of 17 to 1, IS to 1, 19 to 1 and 20 to 1. PRINCIPLES OF MONEY AND COINAGE. 85 Singularly enough, though, all these propositions of change were predi^t^ upon the assumption that the weight of our gold coins shouM remain as they are and the silver doUar should be ad- justed to them. The ratio of 20 to 1 was quite popular for awhile, and no one, to the knowledge of the writer, ever suggested that the adjustment of the coinage to such new ratio should be made by reducing the doUar quantity of the gold metal, rather than increasing that of the silver metal. It seems not to have been perceived that if there were any ground of equity demanding a change of ratio, that the change should be made in the coin that had fluctuated most and departed fm-thest from the general relation of value it bad heretofore sustained toward all other property and toward the mass of existing indebtedness. If it is conceded that the troubles which now afflict the in- dustries and commerce of gold standard nations are caused by an increase in the value of gold, the standard of prices, then any readjustment of the coinage ratio which implies the continuing of the gold coins at their present weight of fine metal is merely robbery approved bj- the most solemn forms of legislation. It being first ascertained that the divergence in the value of the metals in recent years is almost wlioUy due to an appreciation of gold, and if it appears that because of great and permanent changes in the relative quantities of the metals being produced in the world gold is to be permanently scarcer in the future, then a change of ratio for bimetaUic coinage from 15 1-2 or 16 to 1, to a ratio of 20 to 1, would be imperatively demanded by such con- ditions. But the adjustment of the coinage to stich changed ratio should be made by reducing the gold dollar quantitj' of metal. Every consideration of justice, sound statesmanship and common honesty would demand such action, under the state of facts here assumed. The weight of our standard coins after such an adjustment, reckoning on pure or "fine" metal, of coui'se. would be 371 1-4 grains of silver to the dollar as at present, which divided by 20 would give 18.56 grains of gold for the dol- lar quantity of that metal instead of 23.22 grains, as at present. The weight of best opinion in the world however upon this matter of ratio for bimetallic coinage is, that there is no existing good reason for so great a change, nor any change. The precious metals have not changed in their relative quantities to such an extent as to make any change of ratio necessary. The former bimetallic nations of Europe coined at a ratio of 15 1-2 to 1, while the United States mints were open at 10 to 1. As a matter of 86 PRINCIPLES OF MONEY AND COINAGE. expedieiiL'y mainly, it is desirable that all the nations which have or propose to have a bimetallic coinage should adopt the same ratio. But, as will hereafter appear, this is not essential to the realization of the benefits of bimetallism. It is hardly necessary to say to the reader who has carefully thought out the subject of these papers up to the present point, that a ratio of coinage between token and standard coins is a matter of no economic significance whatever. It could only have a practical bearing when for any cause the standard coins should leave the channels of use and the legal tender token become the standard. Like the safety catch in an elevator it is only useful in case of accident. PRINCIPLES OF MONEY AND COINAGE. 87 TWELFTH PAPEE. MONOMETALLISM AND BIMETALLISM CONTINUED. More of Monometallism. When but one metal is admitted to the mint for free coinage without limit, so long as specie pay- ments prevail, all the money of such a country is subjected wholly in point of its value to the fluctuations of that one metal. If an upward fluctuation takes place, either by reason of a posi- tive lessening of the production from the mines in the face of an increase of popvilation and property, or an increased demand upon existing stocks of the metal by the adoption of it alone by some nations which have heretofore used tiie other metal, or both metals, for standard money purposes, such event will be signalized by a shrinkage of prices and a general lessening of expected returns in all active enterprises— a general increase in the burden of all debts, and finally widespread paralysis of busi- ness and a condition of panic and bankruptcy. There are two alternatives of relief from such a misfortune. The first is to recoin the standard pieces, reducing their weight of fine metal. The other is to abandon that metal as a standard and .substitute some other in its place. The first remedy is an extremely difficult one to apply. Because of the peculiar nature of the ills suffered and the great difficulty of proving their pre- cise source, the process of reducing the weight of coins would be stoutly resisted by all that powerful class who benefit by the appreciation of the standard and who can easily make it appear to tlie mass of the people that such a process is merely a method of theft. So long as tlie mass of even fairly intelligent people believe that a gold coin is the one thing in all the wide world that has a fixed value, and so long as cabinet ministers and mil- lionaire pamphleteers in the most solemn ex cathedra manner as- sure the people that a gold coin is the only money known In hu- man historv tliaf never cheated anybody, the task of correcting 88 PRINCIPLES OF MONEY AND COINAGE. the standard by the menus indicated is next to impossible. The typical individual of the creditor class has abundant leisure and ready means to secure proper attention to his interests from con- gresses, parliaments and crowned heads. The farmer in his field, who to do his best can only run a dead heat with a ten per cent, mortgage, has no time nor facility for studying the more intricate features of the money question, and either lacks or re- fuses to exercise the power necessary to protect his Interests. Wlien congress passed the funding act of 1871, it expressly de- clared that the bonds therein authorized should be paid "in coin of the present standard of weiglit and fineness," thus deliberately abdicating its constitutional power and duty of "regulating the value" of the coins, by pledging payment in certain coins regard- less of their value. To add to this remarkable exhibition of sub- serviency it two years later struck out of existence one of the standard coins, which action could not fail under the operation of economic laws as certain as any sequence of cause and effect, to increase the value of the remaining one. But the object of these papers is mainly to exhibit principles and leave the intelligent reader to apply them for himself to past or current events. Any attempt to equitably adjust the money standard by reducing the weight of the standard coin would, in view of such contracts as that named, meet with a charge of violation of plighted faith, repudiation, etc., etc. A nation with a monometallic standard is like Mazeppa bound help- lessly to the back of the Ukraine .steed io be carried wherever fancy, greed or fear may lead. The remedy which bimetallism affords for such conditions is applied automatically, and that fact constitutes the chief merit of such a money system. National Bimetallism. Tlio distinction which Prof. Laughlin makes between national and international bimetallism is not in itself objectionable, but upon tlie other hand serviceable, in af- fording a better means of comparing two phases of that system of money. The criticisms in the previous paper were based upon his apparently total misconception of what bimetallism is. When any one nation accords free coinage and unlimited legal tender to money pieces of two metals at a ratio approximating the normal market relation between the metals and without regard to'tbe ratio that may characterize the coinage of any other nation, such a policy may properly be termed one of na- tional bimetallism. Siich in fact has been the only phase of bi PRINCIPLES OF MONEY AND COINAGE. 89 metallism ever realized or experienced iu the United States. As heretofore meutioued when the United States mint was first established and opened for coinage under the act of 1792, both silver and gold were admitted to free coinage at the ratio of 15 to 1; and the resulting coins continued in concm-rent circulation amongst the people, at the least up to the year 1810, and to a considerable extent for several years after that date. From about the year 1820, gold coins had ceased to be used to any great ex- tent, and the silver metal became the sole standard of the mar- kets. This condition continued until 1834, when congress changed the ratio of coinage from 15 to 1 to 16 to 1. That is, the dollar quantity of gold in the coins was reduced 1 1-2 grains, which changed the gold dollar from one-fifteenth to one-sixteenth the weight of pure metal in the salver dollar. From this time on to the suspension of specie payments at the beginning of the great civil war, gold instead of silver was the measure of our markets although the change from the one to the other was grad- ual and not characterized by the least shock nor slightest dis- turbance to the business of the country. In fact gold did not entirely replace the standard silver coins imtil about 1850, after the beginning of the great output from the California gold placers. . The importance of this particular matter will justify a fm*- ther explanation of the situation at the cost of a little repetition of what was said in the next preceding paper in discussing ratio. Concurrently with the events above briefly narrated it must be considered that beginning in the year 1803 the French mint was all this time open to the free coinage of both gold and silver, with full legal tender at a ratio of 15 1-2 to 1. That is diu'ing all this time, when the United States was proposing to coin both metals, first at the ratio of 15 to 1 and afterwards at a ratio of 16 to 1, the French mint was coining at a ratio of 15 1-2 to 1. In France one could have 20 francs in gold and 20 francs in silver and that amount of their silver coins were just 15 1-2 times the weight of the gold coin. In the United States we could have !p20 in silver and .$20 in gold and the $20 in silver was just 16 times heavier than the gold, reckoning pure metal in every case. Now if the coins of the two metals were at par in France, circulated concurrently and were freely exchanged the one for the other, with free coinage of both prevailing there, an United States owner of silver bullion could take 15 1-2 pounds of it to the French mint, have it coined and exchange it for one poinid of gold nnd 90 PRINCIPLES OF MONEY AND COINAGE. by briiigin.i;- his oue pouiul of jiold to the United States mint and haviug it coiued Ue could exchaujje it for lU potiiids of silver and have a half pound of silver for his profits, less the expense. This could be done provided the metals were also at par in this coun- try at the ratio of 16 to 1. The difference between a ratio of 15 1-2 to 1 and 16 to 1 is a difference of 3 per cent.— that is $3 in every hundred, $30 in every thousand, $300 in every $10,000 and $3,000 in every $100,000. This it will be readily perceived is a good margin for a profitable trade, where transactions can be made so rapidly as with these metals. But under the conditions above assumed, the French owner of gold would have the same motive to send his gold to the United States, have it coined and exchange it for silver, for he could get 3 per cent, more silver for it here than he could at home. The final result of such conditions, if they could exist for any great length of time, would be that France would lose all her gold and the United States all her silver. It (is really not necessary to suppose that the coinage of the metal would be necessary in effecting these exchanges, for stand- ard metal and standard coin of the same metal are always at par at the mint and in the country where it is accorded free coinage. But the process of exchange above supposed was not what really took place. The result which actually succeeded upon the conditions named was, that the par of value between the metals ceased in the United States while it was substantially maintained in France. United States owners of silver would no longer ex- change it for gold at the ratio of 16 to 1, simply because they could get more for it at the French mint, and as they ceased to make that exchange, there of course was no motive for the French owner of gold to send his metal here for such purpose. There was also a lack of all motive on the part of the United States producer or owner of silver to offer it at the United States mint for coinage for that process was not necessary to qualify it for export. In fact, a standard metal is in much better shape for export an the form of bars than in the form of coins. The very curious student of the subject may ask, "Why could France maintain the parity of the metals at her ratio of 15 1-2 to 1 and thus attract silver from the United States, rather than the United States maintain the parity at 16 to 1 and attract gold from France?" There arc two sufficient answers to the query, either of which may account for the phenomenon. PRINCIPLES OF MONEY AND COINAGE. 91 Fii-st— Where the mints of two uatious of considerable com- mercial importance are open to the free coinage of both metals at different ratios, the one having the ratio most nearly approximat- ing the actual ratio of value existing in the open markets of the world will secure the parity and maintain it, if either can or does. Subsequent observations have demonstrated the fact that the French ratio was more nearly the actual market ratio than that of the United States. Second— The great users and consumers of the silver metal for centm-ies have been the people of Southern Asia and the East Indian archipelago, while the western hemisphere has been for the same length of time the great producer of that metal. France lay in the track between the producer and the greatest consumer, and had besides, during a greater part of the time in question a preponderating trade and influence in the commerce of the far east to say nothing of her contiguity to the other states of Eu- rope where then and now is concentrated the international ex- changes of the world. The simple matter of international com- mercial preponderance would determine where the margin was no greater than three per cent., if any reason beyond that first assigned was desired. Not a Failure. Because of the fact that the bimetallic coin- age laws of the United States prior to 1873 did not at all times secure the concurrent use of the coins of both metals, the system has been pronounced a failure. If the object of bimetallism Is only to secure so trifling a matter as the continuous and equal use of money of two different colors, then it was a failure. If monetary science has no more important bearing upon human welfare than is implied in the color or name of the metal which a people may use as a standard of value, then students of the subject had better burn their text books and give tlieir attention to something of greater importance. But the professed scientists who declare the former bimetallic laws of the United States a failure for the reason above given, are oblivious to the one great distinguishing merit of the system and its basic principles. The first and cliief object of bimetallism is to secure to the people through longer periods of time, a money of approximately un- varying value with which to meastu-e their products and dis- charge their contracts. Not the same dollar with us, nor the same material all the time, but a dollar of the same value all the time if possible. If it be important and essential to justice, if not to peace and good order in society, to have a yard-stick of unvnry- 92 PRINCIPLES OF MONE\ AND COINAGE. ing leugth or a pouud of unvaiying weight, why is it not of equal importance to have a dollar if possible of unvarying value ? Imagine for one moment the confusion and injustice that would be wrought if our yardsticks should vary in length to the extent of fifty or seventy -five per cent, in one, two, three, five or ten years! How long would it take to precipitate the country into commercial and even social chaos, if our pound weights should vary even to the extent of 5 or 10 per cent, in ten years? Yet it is the testimony of very competent and orthodox observers that in recent times the money standard has varied more than one hundred i>er cent, in the com-se of a few years. The only circumstance that has saved society in the more ad- vanced commercial nations from anarchy as a result, has been the difficulty in detecting the real facts of the situation so far as the large majority of sufferers are concerned. This is proba- bly another case where "ignorance is bliss." So far from a concurrent use of both metals at all times being a sine qua non to bimetallism the system, as a system, is based fundamentally upon that fact of human nature and expe- rience known as Gresham's law, by which the cheaper money will always be used in preference to the dearer. This law is the basis of its "compensatory" featiu-e, so highly commended by many of the most accomplished economists of the present and recent times. The Compensatory Feature. It is the compensatory feature of bimetallism which is the great factor in maintaining stability in the money standard. When the mints of a nation are open to the free coinage of two metals, under the conditions heretofore named as to ratio, the cheaper of the two will be the effective standard. If in the course of time the standard metal in use rises in value and becomes dearer than the other metal at the ratio fixed, then it at once tends to disuse and the heretofore dearer metal begins to replace it. This process is in strict ac- cordance with Gresham's law. And in accordance with the fun- damental value formula heretofore considered, so soon as the dearer metal tends to disuse because of its comparative dearness, that very disuse tends to cheapen it, or at least to stay its rise. On the conti-ary, the increased use of the heretofore cheaper metal tends at once to stimulate its value, and thus influences set in from opposite directions which tend directly and in a most PRINCIPLES OF MONEY AND COINAGE. 93 effective manner to hold the two luetals in equilibrium— at one- ness—in point of that all important attribute, their value. Illusti-ation.— The manner in which national bimetallism will secm-e a unit of money of less varying value for the use of a people than where that unit is confined to one metal, may be represented to the eye as follows: Take a pencil and draw across a piece of paper from left to right a serpentine or wave line. That will represent the ups and downs or fluctuations in value of one of the metals. Then draw another such line across the paper in the same vertical space as the first— that is, over the first line— and so arranged as to cross the first line at more or less frequent intervals. This will represent the fluctuations of the other metal. Now take the pencil and draw in the space imme- diately below these lines another, representing the lower line of the figm-e presented by the other two. That is. beginning with the lower line on the left hand, trace its counterpart on the paper until you come to a point of intersection and then take the down- ward dip of the other line and so on to the end. When com- pleted it will be observed that the last line more nearly approxi- mates a straight line than either of the others taken separately. This is the figure used by Prof. W. Stanley Jevons, a late and very able English economist and is an apt illustration of the subject. The Automatic Feature. The coming and going of the money metals in a couditiou of bimetallism is entirely according to nat- ural laws, and no artificial force or restraints are required or im- plied at any stage of the processes nor in any condition possible to arise. There is no scramble for the metals by different nations. If one goes out of use in any bimetallic country because of its rise in value, it goes freely and with a godspeed to the parting gTiest. If those in any quarter of the world who may be benefited by an increase of the value of a monej^ metal, as those largely interested as debt holders, seek to monopolize or make a corner on the metal, bimetallic countries at once let go of it and use the other. When it can again serve a good purpose in the coun- try from which it fled or was drawn, it is not necessary to pm*- sue it and capture it on hostile shores and drag it to an unwill- ing captivity. It will come itself in obedience to the natural laws of commerce which are vastly superior in minuteness of detail and in the beneficence of their results to arbitrary statu- tory enactments. The mints of a bimetallic country are always open to welcome either metal whenever it is offered. The auto- 94 PRINCIPLES OF MONEY AND COINAGE. matic action of bimetallic laws would be a strange contrast to that now being witnessed on the world's monetary stage. lu obedience to inspirations imparted from the caverns of tlie world's creditors, governments are grabbing for the yellow metal. The cry goes up from the dens of the money changers in all the debt ridden nations, "Hold on to your gold!" It is to their profit. The prompting of science and common sense is, "Let go your gold." No disaster could be greater nor more deserved, and no disappointment keener to the debt mongers of England and Eu- rope than for the United States to open its mints to silver and dump the whole mass of its gold upon them, if the laws of trade would permit it to go thither. Such an event would be the signal for a great depreciation of that metal which is the last thing they desire or hope to see. United States Experience. During the bimetallic era in the United States, althougli for a part of that time silver was the sole standard in use and during another part, gold, yet never at any time did the gold dollar and silver dollar differ in value to a greater extent than three per cent. Although we used the cheaper of the two, first silver and then gold, the cheaper was never but three per cent, under the dearer, and for important reasons it may justly be doubted whether there was not at all times a practical par between the metals so far as they affected the interests and transactions of all except those who transferred very large sums at the chief ports of international trade. It was impossible for gold, when in use as the standard, to rise above that margin of three per cent, as compai'ed to silver, for if it had done so it would have been discarded and silver would have sup- plied its place and the resulting disuse would have destroyed the increased value of the gold. It was impossible for silver, when in use as the standard, to rise above the margin of three per cent, as compared to gold, for precisely the same reasons. And thus was equilibrium in value between the metals maintained and a comparatively stable measure of value secured. French Experience. INI. Micliol Chevalier, the leading French economist of the time, writing in 58-57. directed the attention of the creditor class to the great probable depreciation of gold likely to result from the largely increased output of that metal which had recently occurred from the mines of California and Australia. He suggested that it be demonetized and for justification re- ferred to the fact that the original unit of value of France was a silver franc piece, and that thus l)y logical deduction and equita- PRINCIPLES OF MONEY AND COINAGE. 95 ble coustructiou every existiuy cumr;iL-i lo pay fraucs moaut a definite weight of silver metal and not gold. He was referring to a time long anterior to the year 1803, when the French bimetallic system was inaugm-ated. The same com-se of reasoning applied to om* times and in this country, if sound at all, would establish the justice and propriety of making the silver dollar of 371.25 grains fine metal the sole legal tender dollar for that dollar of that weight of silver metal was designated as the unit of our money system in the original act of 1792. But this historical reference is mainly valuable as exhibiting the fact that in the creditor's estimation it is the cheaper money that is always "nasty" and "dishonest" money, no matter what the material of it nor whether it is cheaper than it ought to be. It illustrates simply a trait of human nature and not a principle of monetary science. But M. Chevalier does not claim a greater variation than 4 per cent, between gold and silver money in France up to the time at which he wrote, and when both metals were being freely coined at the ratio of 15 1-2 to 1. This was at a time too, when the full effect of the great increase of gold had been realized in the commercial nations. The strong probability is that the 4 per cent, of that writer, if not a matter of hearsay entirely, was con- fined to a single and exceptional transaction, for the weight of testimony of contemporaneous and subsequent observers is that there never was a difference of value between the metals suffi- cient to exclude either from current use in the markets, nor to make two prices on any commodity in France, the one a gold price, the other a silver. Authoritative statistics do sho-^ how- ever, that there was a greater influx of gold into France than of silver; and that silver was more liberally remitted from France than gold. But the prominent historical fact as a whole is a triumphant vindication of the potency of bimetallic laws in pre- serving parity between the metals, even under most adverse cir- cumstances. At a time when the relative output of gold was much greater than that of silver in more recent times, bimetallic laws held the metals within a small margin of the point of parity, allowing the most extreme claim in that respect of those who advocate the monometallic system. Since the repeal of those laws the divergence between the metals has now reach(>d a maximum of more than SO per cent. Nothing Arbitrary. Tlio cirfful reader will note the fad that in neither monometallism nor bimetallism is there any attempt 96 PRINCIPLES OF MONEY AND COINAGE. to fix values or regulate value directly by law. The former can- not be done. In bimetallism the regulation of the value of stand- ard money is by appeal to natural laws in automatic action. In monometallism such regulation must be by positive statutory en- actment, if done at all, with all the friction and confusion that such a course necessitates. As a matter of fact, under the latter system no regulation whatever is practicable. An appreciating money standard must and will impoverish the masses of the peo- ple, and for the evidence we need only look out over our own land at this time. We are reaping the bitter fruits of gold mono- metallism. The effects are cumulative. Prices have gradually declined. The process of destroying commerce and industry has been quite like that of murdering the recalcitrant by a reputed device of the Inquisition where the stone walls of a cell were made to close upon the occupant by slow and almost impercepti- ble degrees, impelled by a powerful but hidden enginery. PRINCIPLES OF MONEY AND COINAGE thirtee:s'th paper. INTERNATIONAL BIMETALLISM. "NVlieu two or more nations agree upon a ratio for tlie free coinage of two metals into monej' piece? witli unlimited legal tender to the coins of each and open then mints to such coin- age, that constitutes wliat is technically linown as international bimetallism. Here, as in national bimetallism, there must be ab- solute impartiality in tlie treatment of the metals by government. The mints are merely opened to receive and coin the metals whenever and by whomsoever offered. Any tariff placed upon either metal, or any other discrimination favorable to the one at the ex- pense of the other, breaks the par of value between different lots of bullion of the same metal and at the same time necessarily destroys the par of value between the coins and some portion at least of the metal of which they are made. It creates a local, conventional or conditional value in the coins, Avhich is the very thing that the fundamental theory of standard coin money will not tolerate. Illustration.— If the mints of the United States were opened to both gold and silver and a high tariff were imposed upon importations of gold, all our gold coins woidd at once become tokens subsidiary to the silver standard and governed in their exchange value by that of the standard silver coins. If silver .should rise in value with a general rise in that metal, tlie gold coins would rise with them, and thus would cease their relation of parity toward the gold coins which issue from the "free mints of other nations and also Avitli the mass of that metal. The result would be silver monometallism. The metals must be absolutely free to come and go at the will of their owners. Any restriction of any nature whatsoever placed upon either destroys the compensatory features of the system which is its one great and distingulshnig merit. If a dam or dj'ke was built across Boston harbor at its nnrrowosf outer 4 98 PRINCIPLES OF MONEY AND COINAGE. limits reacliiug above the liigli tide marlc, it wordd not only cease to be a liarbor but the level of the water inside would be deter- mined by altogether different laws and circumstances than those which govern the sea outside. The water could rise to a great height inside regardless of the proper sea level; and the harbor might become a parched sandbank despite the abundance of water in the ocean. Many suggestions have been offered recently injecting new and heretofore unheard-of conditions into the coinage problem. They generally come from persons who have failed to grasp the fundamental principles necessarily involved. It is sufficient to say that if the metal money of a country is not to be anchored in point of its value to the world's mass of that metal, then there is no longer a standard metal money in the true and scientific sense, for the fact that it is made of metal is no longer of any broad economic significance. Paper money supplemented by tokens of the cheapest suitable and available metal is much to be preferred. The fundamental conditions of bimetallism are very simple, easily understood, and will not bear variation. Fix the ratio, open the mints, clothe both coins with equal legal tender and then, laissez fa ire— let them alone. The Object of International Bimetallism. The condition of international agreement and concert of action is insisted upon by many as it assiu-es a greater certainty as to the parity of the metals and consequently their concurrent use at all times by the nations parties to the compact. With such agreement and con- cert of action both of these results are reasonable expectations. They may in fact be considered certainties, particularly if the nations concerned be of the foremost nations in point of popula- tion and commerce. The object of international agreement is to involve as large a mass of people, of property and commodi- ties and of the metals as possible. The ultimate object of a con- siderable and very influential class, the world's creditors, is to put about the system, if bimetallism be restored at all, every possible safeguard against a drop in the purchasing power of money, which in their chronic and unreasonable fear they think must be inevitable in every change of standard in a condition of national bimetallism. It may be considered by some as a singular fact that very rich men are never distinguished for the posses- sion of the judicial faculty and yet it is easily accounted for upon philosophical principles. In this very mercantile and material PRINCIPLES OF MONEY AND COINAGE. 99 age, a keen perception and appreciation of tlie equities is an obstacle to the acquirement of great wealth. Only those who are by nature education or habit somewhat blind to every inter- est except their own and to every person except themselves, make the great successes in life, in a material sense. Hence as a rule rich men should not be judges nor legislators. The same can be said of dishonest poor men. How Parity is Achieved. Prof. W. G. Sumner of Yale Col- lege is upon record as saying that international bimetallism is impossible, no matter how many nor how important the nations which join in the agreement. This was not given in a tentative form but in the most positive, unconditional and dogmatic lan- guage. An English writer of great industry if not of wide celebrity, is equally positive as to the impossibility of the scheme and assigns for a reason that gold and silver are not and cannot be produced upon exactly parallel lines of cost, and hence cannot move along in time on precisely parallel lines of value. Relative values he asserts, after Ricardo and many later economists, are determined by cost of production; and as 16 ounces of silver can never be produced, or for any great length of time at the same cost as one ounce of gold, they cannot for any great length of time have the same value. Reference has been made in a previous paper of this series to the subject of cost of production and attention directed to a necessary difference in the meaning of the word "production" as applied to the precious metals and as applied to the cereals and a host of other things. It has an important bearing upon the point under discussion. But it will not be necessary to repeat it here nor enter into a prolix argument upon the point. The whole gist of the matter can be presented in the following: Hypothesis. — Suppose all the nations of the world entered into a bimetallic agreement. This agreement then would comprise all the people in the world and all the gold and silver in the world. An essential condition in this agreement is that all will use both metals for money purposes so long as they are at par in value, and if they diverge in value at any time, all will cease to use the dearer and center the money uses upon the cheaper (Gresham's law). Now as the money uses of each metal are the cause of not less than 50 per cent, of its value (Jevons piits it at over 50), then we have the following conditions: If either metal rises in value sufficient to destroy its practical parity with the other in money uses it loses half its value by being discarded as 100 PRINCIPLES OF MONEY AND COINAGE. money. If either metal falls iu value the same results would be necessarily implied toward the other. But how can the dearer metal be 50 per cent, cheaper than the other V If it were possible, then Ave could have this remarkable equation: Plus 3 per cent, equals minus 50 per cent. So the "impossibility" of international bimetallism resolves itself into a bald abstu-dity. This theoretical demonstration is however entirely unneces- sary to the practical man. He knows it can be, because it has been. France alone maintained the parity between the metals accurately enough for all practical business purposes for more than sixty years, and under the most unfavorable circumstances as concerned the relative quantities of the metals produced in that period. A More Important Matter. The possibility of international bimetallism is no longer seriously questioned. But is it prac- ticable, and is it desirable? Is it a reasonable expectation that any considerable number of the leading nations can effect such an agreement in view of the intensity of national and race prejtidices and of existing com- mercial jealousies? While the mere fact of such an agreement or concert of action, if based on just conditions, cannot be shown to confer any advantage upon one nation to the prejudice of another, nor to deprive any one nation of the opportunity to se- cure a commercial advantage over a competitor in some imagin- able future contingency, yet nations are very loth to enter into such treaties and engagements. As to the desirability of stich an agreement upon the part of the people of the United States, there may be grave doubts. It would depend largely, in the existing emergency, and for that matter at any time, upon the ratio for coinage upon which stich agreement could be effected. The point of danger would be in adjusting the coinage of the different nations to the new ratio, if a radically different one than any that has heretofore prevailed in national coinages should be found essential to the arrival at any agreement whatever. It may be easily foreseen that this last is a matter that wiU not be overlooked in such a conference. The adjustment of the coinage to the new ratio, whether it be a wide departure from any previously existing ratio or not. is properly a matter of domestic economy only, and could not be surrendered to the adjudication of an international commission without abdicating one of the most vital functions of local or national government. Illustration. — Suppose an international PRINCIPLES OF MONEY AND COINAGE. 101 commission should agree upon a ratio of say '2i to 1 as the proper one aud the ouly practicable one as a basis for interna tioual bi- metallism. And suppose that the conference further agrees that all the nations concerned shall adjust their several coinages to this new ratio by leaving their gold coins as they are now, aud increasing the Aveight of metal in their silver coins to make them 24 times as heavy as the gold. On behalf of such adjustment it may be urged that all existing contracts for the payment of money in all the uations represented, are measured by and paya- ble in such gold coins, or in other coins or moneys of the present value of such gold coins. Hence the inauguration of interna- tional bimetallism upon such an adjtistment of the ratio would be made without in the least disturbing existing relations between debtors and creditors and without a taint of repudiation or bad faith, etc., etc., etc. All this sounds pleasant and would look to be fair to more than nine-tenths of the people who have made no special study of the subject; and yet it involves one of the most monstrous and rapacious propositions that ever emanated from a state council in the dark ages. It would involve an adjudication of the rights of property of every fariiier planter aud other property owner and taxpayer in the United States! Are they willing to submit such important interests to the determination of a court made up of aliens in blood, political inspiration and traditions and perhaps sitting in a foreign land? A circumstance of great moment has an important bearing upon this matter. Little or no European stocks or bonds are owned by American citizens; and hence we have no reas>ni to be particularly concerned as to how any state in Europe may adjust its coinage ratio. But American obligations are held in England and Europe to the amount of many millions. They will not be so indifferent. It may be thought that the foregoing is entirely imaginary, and that the people have nothing to fear, as any agreement made by any commission must be ratified by congress before it will become effective. Very true, but since many propositions have been made lately in our congress to change the ratio of coinage, and every one, so far as my knowledge goes, has taken for grant- ed that the adjustment would be made by increasing the weight of metal in the silver dollar, perhaps the danger is not altogetlier imaginary if international agreement is seriously considered as a possibility. After all. tlie foregoing is only a suggestion of one 102 PKINCIPLES OP MONEY AND COINAGE. of the mauj' clearly foreseen obstacles that may cause thinking and well-informed people to regard the whole matter as an en- tirely visionary scheme. Experience is worth something. Pour international confer- ences have already been held in which the United States was rep- resented. The first, that of 1867, had an important influence in precipitating the existing financial woes upon all the nations which accepted its fatal recommendations; and the other three have utterly failed to make the slightest progress toward rem- edying the blunder or the crime, which ever it was. As an indi- cation of the want of progress upon the subject (and it will serve to correct a popular misapprehension as well) the last conference, which assembled at Brussels, was not called to deliberate upon the restoration of bimetallism at all. The language of President Harrison's invitation was simply to consider "a more extended use of silver in the currencies of the world." It was distinctly claimed upon the floor of the conference that bimetallism, or the free coinage of both gold and silver, was excluded as a subject of discussion and deliberation, because not named in the official programme made up at Washington. If the fourth conference has not yet reached the subject how long will it take to get to the proposed agreement? A reading of the testimony and correspondence embraced in the report of the Lord Herschell commission on the Indian cur- rency question will exhibit the deep regret and disappointment of prominent officials of the English government in India that the subject of bimetallism had not been submitted to the Brussels conference. To those who are interested in this particular feature of the subject (and it promises to be more prominent in the near future than at present) there are two considerations worthy of reflec- tion. First— The adjustment of our national coinage to the ratio that may be selected by international agreement must be left to the people of the United States through their congress. It can- not properly be submitted to the discussion and judgment of any council of foreigners whatever. It involves questions of domestic concern only. It involves questions of equity and morals be- tween our own. citizens, and if patriotic pride and the spirit of independence is not entirely dead in this land, any proposition to turn this matter over to the adjudication of foreign debt mon- gers must be promptly resented. PRINCIPLES OF MONEY AND COINAGE. 103 Second— Since when did the United States government lose its power to do all the necessary legislating upon this or any other subject, which the welfare of our people demands? We are assured day by day by a powerful and influential press, and by scores of politicians, the "degenerate sons of noble sires," that om* government "cannot inaugurate free coinage of silver and gold alone." We must asli the consent or co-operation of Eng- land or some other nation or several of them. Why should we ask it? They are not explicit in their answer to tliis question. Not one of the whole crew has ever offered an answer that will bear examination. If a power has grown up in the world in later years that transcends or dominates the power of the great- est nation on earth, and that was unknown to the fathers of this republic, let it be described and named and pointed out in precise terms. There may be a power, and of comparatively recent origin, which aspires to universal supremacy in all fiscal affairs, but whj' should men educated to liberty voluntarily bow in chains before this shoddy potentate? Whatever of good is possible for human laws to accomplish is possible for United States laws to accomplish. Gresham was an Englishman, but neither Gresham nor England made Gresham's law. It is merely a fact of nature. Gravitation is not Newton's law, but nature's law. And the United States government can adapt and conform her money legislation to nature's laws just as intelligently as any nation or aU the nations. Objections to Bimetallism. The grounds upon which the bi- metallic policy is combatted are very limited and uncertain. In fact the large majority of the most tlioughtful and influential of the political economists of the world are bimetallists. It is true that many who occupy chairs of political "economy and social science in institutions of learning have sought admission to the pages of magazines and the columns of newspapers to denounce it in recent years, but they are not of that class of scientists re- ferred to above. The growth of what in recent years has been called the money power and which toolc root in the "Funding System," which is scarcely yet two hundred years old, has had an important influence upon the teachings of political science as it emanates from richly endowed chairs in the great colleges. It may seem invidious to write it, but is nevertheless true, tliat very often the teacher of science is nothing more nor better than the hired attorney of special interests. AVlienevor tlie University of Penn.sylvania comes to have a free tnidc professor of political 104 PRINCIPLES OP MONEY AND COINAGE. economy, or a text book not specially doctored to suit the local interests of a few citizens of that state; or whenever a professor of political science in a collejjfe with a million dollar endowment fund can tell the whole truth about the Funding System, the study of true science will be elevated and dignified. First— A common objection to bimetallism, and especially in its national form, is that it does not secure an absolute parity between the metals at the ratio of coinage. Consequently that it does not secure an equal and concurrent use of coins of both metals at all times. Since that ft not its scientific, ultimate and equitable object, the objection has no force. It is equally true that it does not make the hair grow on bald heads, but is none the less a desira- ble thing. If it is more desirable to have an oak yardstick than to have one that is all the time just three feet long, then there is something reasonable in the objection. If the housewife had rather get only half as much sugar at tlie store just for the satis- faction of having it weighed out to her by a brass pound weight instead of an iron one; or if the farmer would prefer to give three bushels of Avheat rather than one to pay his debt or taxes, just for the sake of paying it in a gold dollar rather than a silver dollar, and especially when he only sees and uses the same i^aper dollar in either case, then there niny be some common sense in the objection. Second— It is alleged that the phrase "double standard," which is sometimes applied to the bimetallic system, is a contradiction of terms. That the word "standard" is singular, and that it is impossible to measure against two different standards at the same moment and if we could we could not arrive at a single result. This phase of the subject is very confusing to some statesmen. They claim to have minds which cannot comprehend this matter, and in that respect the claim may be true. If one of these statesmen should go into a cross-roads store in the State of Kentucky to buy a web of his favorite blue jeans where the storekeeper had two yardsticks, one of oak and the other of hickory 1:imber, but both of the same length, he would wonder how such a thing could be possible. He would be mysti- fied exceedingly. How there could be two standards, made of tAvo different kinds of wood, and each have the same length would appear to him a Avork of magic, a species of hocus-pocus, a thing incomprehensible. Being a democrat, or thinking he is, because of the peculiar construction of his peculiar mind, he piuxciPLES uF ^k)ni:y and coinage lo:. would have liis jeaus measured with the hiekory timber only. To his queerly coustructed mind the word "leui^lh" means hiokory timber. While other miuds cau couceive of space or extensiou separate aud apart from any kind of timber, he caimot. If only hickory timber were to become extiuct theu all space or distance in his estimation would be abolished. Now suppose that this storekeeper should discover that his hickory yardstick wotdd occasional!}^ swell and stretch, either from being dropped into the whisky barrel or for some other cause, while a similar accident or circumstance had no such effect upon his oak yardstick, but ratlier the contrary effect— created a tendency to shrink. A happy thought occtirs to him, for he is a just man and loves equity. He takes the two yardsticks and glues them together aud makes what he calls a bi-Iigneous standard for yard meastu-e. The stretching tendency of the one is counteracted by the shrinking tendency of the other, and the result is an unfluctuating yardstick. He would probably lose the custom of the Kentucky statesman, but would gain a reputation for fair dealing. We have brass pieces, iron pieces, bronze pieces and composi- tion pieces, each of which we call a '•pound" weight. Tlie use of these various pieces throughout the country does not imply that we have as many different pounds (meaning the degree of specific gravity which constitutes the pound) as we have pieces of metal, but rather that each piece possesses the same specific gravity. When we use the brass piece on the balance we are not compar- ing our goods or measm-ing them against brass, but measuring it against a certain heft, weight or specific gravity of the brass piece. The material of these pieces is of little or no importance, except in point of convenience, but the heft or heaviness is the essential matter. Is it then true that because we have four or five or more different kinds of metal pound weights in the United States that we have as many standards of weight? To avoid the state of confusion which reigns in tlio minds of the Kentucky statesman, we must however bear in mind tliat heaviness and value are not in all points strictly analogous. Weight is constant and value is changeable. When we contract in terms of "pounds" this year we know that the weight of the pound will be the same next year. When we contract in terms of "dollars" we have no assurance that the value of dollars /will be the same next year. Bimetallism is a device to increase the probnl)ility that they will be of the same value from yonr to lOG PRINCIPLES OF MONEY AND COINAGE. year. When we contract this year in view of a dollar of a certain value we want the dollar with which we are required to fulfill that contract next year to have the same value. Is there anything unjust, wicked or scandalous in that? Third— A third objection, and one having some real founda- tion in economic fact, is this: That whether in the national or international form, bimetallism makes the cheaper metal the controlling factor in determining the measure of values. In a case of national coinage only, if one of the metals shall for any cause develop a tendency to fall in value, it will become the standard and the value of all money is thus depreciated. In the case of international coinage, even if any number of nations should join in the compact, a persistent decline in either of the metals will drag the othex with it, though they still maintain a practical parity, and thus in any and every event those who benefit by the cheapening of money have most of the chances in their favor. This is all true and the objection must stand for all it is worth. To exhibit the matter more precisely, the creditor class and those who have fixed incomes under a condition of interna- tional bimetallism cannot profit by a fluctuation of the money standard, except there be an advance in the general value of both the metals; while all others may reap at least a temporary benefit by an absolute fall of either one. To all of this the answer is, that inasmuch as no money of fixed value has ever yet been invented, and as an upward fluctu- ation benefits the few at the expense of the many, while a down- ward fluctuation benefits the many at the expense of the few, therefore the greatest good to the greatest number demands that system of money in whieli the probability of a downward fluctu- ation predominates. If legislation upon tliis subject is but the assignment of chances to this or that class — and it is largely so — then it is entirely in accord with democratic institutions to give to the majority of persons the majority of the chances. PRINCIPLES OP MONEY AND COINAGE. 107 FOUETEENTH PAPER. "FREE" COINAGE OF THE AMERICAN PRODUCT— THE GREAT FALL OF PRICES AND THE CONSEQUENCES— THE REMEDY— THE CONSTITUTIONAL POWER AND DUTY OP CONGRESS IN THE PREMISES. It has been frequently suggested within a few years past that the free coinage of the United States silver product only would be a happy solution of the vexed coinage question and one entirely in harmony with the long practiced fiscal policy of our govern- ment, whereby the whole people are taxed for the benefit of a few. Since the so-called "protection" policy has been long main- tained mainly upon a sentiment of hate or spite toward England, regardless of all considerations touching its economic soundness and the effect upon ourselves, and as England is gold monometal- lic in her money policy and unfriendly to the use of silver for standard money pm-poses, this seems a good opportunity to brace up the silver metal on such protective theory. In addition to this, the manufacturing barons propose to ally to them more closely the silver barons by giving the latter "some of the pork." It is hardly necessary to say to the intelligent reader that this idea of free coinage is a total misconception of tlie cliaracter and purpose of the economic money policy which bears that name. The proposition netessarily implies the, total exclusion of all for- eign silver, either by a prohibitive tariff or by some other act making foreign metal contraband. A few of the more palpable objections to such a policy are presented as fallows: First— It would not change in any feature or>Kiuality our present silver dollar. It is now a mere tolien and would continue to be so. Like our nickel pieces and paper dollars it would, for the time being at least, have a value equal to gold within our borders and a very different one outside. Like the present silv(^r dollar and tlio coppors nnd nickels and paper dollars It would be lOS PRINCIPLES OF MONEY AND COINAGE. entirely subsidiarj' to the gold coins, rising in valne as they rise and falling as they fall, and would not in any sense, near or re- mote, seciH'e the smallest featm-e of a true and scientilic bimetal- lism. Second— If at all practicable, it would inaugurate a policy with reference to token money coinage which would become very offensive to the people of the whole country when they came to understand it. There is a very large profit in the coinage of tokens, and here- tofore that profit has accrued to the public treasury— to the whole people. To permit the producers of the particular material used for such purposes to pocket the profit, with no recompense in any shape to the ptiblic therefor, would be a job that would smeU to heaven. Just as well may congress allow the owners of the one American nickel mine the 'free" coinage, to the extent required, of their product into 5-cent pieces; and to the owners of copper mines the "free" coinage of their metal into 1 and 2-cent pieces, to the extent that the secretary of the treasury might think it necessary to supply the country with tliat kind of diange. Only a step further but not one particle different in principle, congress might allow some favorite owner of a paper mill to have "free" coinage (printing) of his product into $10 notes made legal tender for all debts. AVhat a bonanza that would be! There have been dishonest kings and tyrants in the past who sought illegitimate profits from the free mints, by stealing pure gold or silver from the standard coins and supplying its place with some worthless alloy or not supplying it at all; but to make a free gift of the profits on token coinage to favored individuals would be a wrongful act of such vast proportions as to be without a parallel in even medie- val times. If silver possesses exceptional .merits as a material for token coinage, then let the government continue to purchase and coin the required amount for such purposes, and turn the profit on such coinage into the public treasury as heretofore. If it does not possess that distinguishing merit, then make the tok- ens of something else and something cheaper, so the profit to the treasiu-y will be all the greater. If silver is not needed for stand- ard money it is not needed for any money, for alluminum is much more appropriate and convenient for metal tokens. Coinage should be conducted on intelligent, business-like and equitable principles. The Great Fall in Prices. Economists, with scarcely an ex- f^eption coincide in det<'Vinining the eras in the i>ast history of PRINCIPLES OF MONEY AND COINAGE. 109 the world wheu great fluctuations iu the vahie of the precious metals have occiu-red. For instance, that the discovery of the western hemisphere at the close of the Fifteenth century resulted in a vast addition of both gold and silver to the treasiu'ies and money supply of Europe. As the increased quantities of these metals cheapened them, prices rose in all the commercial coun- ti'ies and an tmiversal era of social and industrial prosperity was realized. There was a quickening of all enterprise and a stimu- lating effect realized iu every department of human exertion. As the accumulated stores of the metals in the newly discovered Americas became distributed all over the world and because of the large increase in the mass of propertj- as a direct result, and of population as an indirect result, there came a time again of increasing relative scarcitj' of the metals for money supply. That is, instead as before, that property and products would command more and more of the precious metals in exchange, the metals wottld command more and more of products and property as time went on. General prices were shrinking. This was the condition at the beginning of the present ceutm-y and continued to be the general rule until the discovery of the great gold de- posits of California and Australia, when a reverse movement in prices set in. The fltictuations of the value of the metals during all the time referred to up to an early part of the present century were a restilt of entirely natural causes, the same which now operate with reference to those products of human industry which are free to flow in and out of all the markets of the world. While it is true that prior to the time named, the rtilers of Spain, which country was the direct and primary recipient of tlie great buUc of the new treasure from the new world, conceived the mistaken idea that the nation which obtained and held the largest quantities of gold and silver was necessarily the richest and strongest, made laws arbitrarily forbidding the export of the metals from within her borders, such laws had little effect in restraining the movements of the metals. But about the year 1690, there arose the Funding System, tlie precursor of our present enormous, complicated and alarming system of public and corporate indebtedness. This had assumed considerable proportions at the close of the Napoleonic wars, about 1816, and England soon after demonetized silver and confined the measure of values and legal means of payment of large amounts to gold alone. 110 PRINCIPLES OF MONEY AND COINAGE. It is a singular and suggestive fact tliat ttie two great eras for money metal demonetization should be the eras of greatest public indebtedness— 1815 to 1820 and 1871 to 1875; and that in case of England and the United States it should be accomplished at a time when coin payments in all private transactions were suspended. Following the recent epidemic of silver demonetization and which was joined in by the United States, France, Germany, Holland, Italy, Norway, Sweden, Denmark, Belgium, Switzer- land, Greece and the Austro-Hungarian empire, and lastly India through British intervention, there set in a world wide fall in prices which has persisted for 20 years and with no definite pros- pect of cessation. In saying above "world wide," reference is made to aU the nations named and wherever else that prices are measm*ed by gold. This last great fluctuation of the metals, no matter whether altogether a rise of gold or partly a fall of silver, was not occa- sioned by natural causes, but is distinctly due to artificial and legislative interference. The increased demand for gold occa- sioned by the centering of all the chief money uses upon that metal in so many of the chief industrial nations has caused that metal to rise in value as compared to all other things; and as it is now the primary measure of value in all the nations named, prices have shrunk proportionately. Another Cause Assigned. While a lai'ge majority of those favoring a single gold standard concede an appreciation of that metal as a result of the causes above named, yet a few endeavor to account for the great fall in prices in another manner. They assert that prices have fallen because of a lessened cost of pro- duction following the introduction of modern and improved meth- ods and machinery in nearly all the industries. The principal reasons for thinking this a mistaken view are these: First — The fall in prices is confined to gold standard counti'ies, while all nations have participated more or less in the advantages of modern improvements. It is also observed that in southern Asia and in the islands of the Indian ocean, where there has been the least advance in improved methods of production, those countries which use the gold standard have suffered a fall in prices, while those which use the silver standard have not, but on the contrary a moderate rise in the general scale. PRINCIPLES OF MONEY AND COINAGE. Ill Second— "But," say the gold monometallists, "it so happens that silver has declined in value to the same extent as other com- modities and from the same cause, and this accounts for the fact that the value relation between silver and these other things re- mains about the same, and prices quoted in silver have not changed." This is a remarkable claim. It would be a wonderful coincidence if true. So extraordinary, in fact, as to strain the faith of the most credulous. We are asked to believe that the processes of producing silver from the mines and corn and wheat and cotton and other staple products of the fields, had all of them just happened to be cheapened at the same time aud to the same extent, while those affecting the production of gold have not been improved nor changed. What shaU be said when the fact is taken into account that gold and silver are to a very large ex- tent produced from the same mine, in the same rock, with the same tools and machinery, by the same laborer, by the same stroke and at the same wages, and are carried to the same smel- ter by the same railroad and at the same cost of freight. They are Siamese twins in their natural state in the rocks, and remain so until the last stroke of labor is delivered in their production and fitting for use, which is that of the refiner. It is only then that they are divorced. The Rise of Gold and Fall of Silver. Even if it could be demonstrated that the increased production of silver in recent years is because of its cheaper extraction, that does not meet the issue presented in the coinage question. Gold can have appre- ciated in value even if silver has depreciated because of its greater plenty. To prove that silver is cheaper is not proving that gold has not risen. To prove that silver has become cheap by no means avoids or refutes the charge that prices have fallen be- cause of a rise of gold. When the United States, France, Ger- many and all the other states named abandoned silver for stand- ard money aud vied with each other in a scramble for the world's gold, it is not only natural but inevitable that gold should rise in value and that prices should fall. Just that thing has occurred and the consequences are before intelligent mankind in an unpre- cedented prostration of industry, bankruptcy, idleness, poverty and a threatened disintegration of societ5^ That is one probli»m. All this has nothing to do with tlio cheapness of silver. That is another matter. When we turn to consider the fate of silver, we would naturally expect a large actual depreciation of that metal, both because of the larger production and its abandonment as 112 PRINCIPLES OF MONEY AND COINAGE. staudard mouey by these same uatious. The critical observer is astouislied that the fall of silver has uot beeu greater. Many are puzzled to account for its persistence in maintaining level relations of value with the great mass of agricultural products. The reason that there has not been a greater absolute fall of silver may be found in the fact of its being absorbed to so great an extent by the thronging millions of southern Asia, and its pm*- chase to so large an extent until very lately by the government of the United States for purposes of token coinage and for deposit as secm-ity for paper notes. If silver had really and absolutely fallen in value to the extent represented by the difference between its present price and $1.29 per ounce, its par price in the ratio of 16 to 1 with gold, every silver mine in the Rocky Mountains, ex- cept a very few of the richest bonanzas, would long since have been closed and abandoned. It may be asserted with a very near approximation to the fact, that there was no absolute fall in the value of silver until the close of the Indian mints in June, 1893. What appeared to be a fall was merely a decline in its gold price because of an appreciation of the latter metal. The Effects of Falling Prices. In presenting the conse- quences of shrinking prices upon a people of diversified interests, it is perhaps best to consider the effects upon different avocations rather than with reference to individuals. Upon the Merchant.— In all the different lines of mercantile business, those goods for which there is the greatest demand because of the greatest consumption, are called staples; and be- cause of the keenness of competition they are handled on small margius of profit. Because of the active (Competition, the selling price must and does conform closely to the current price in whole- sale markets regardless of the cost of any particular lot to any particular retailer. Hence a falling market will deprive the retail merchant of all expected profit upon the bulk of his sales, if it does not inflict actual and continued loss. Purchases are cur- tailed and stocks kept at the minimum, while expenses of rents, insm-ance, wages, interest and taxes, etc., cannot be made to con- form to the diminished and unprofitable business. What is true of the retailer is also true of the wholesaler, the jobber and finally the manufacturer and the producer of raw material. Bankruptcy finally ensues, for all efforts to borrow monej' and shuffle over the temporay '"bad spell" but digs the pit of misfortune deeper when the decline persists through years and decades. Every cm*- ijailment of expenses, by the discharge of help or reduction of PRINCIPLES OF MONEY AND COINAGE. 113 wages but aggravates the trouble by destroyiug the purchasiug and consumptive power of the community. Upon the Manufacturer.— When the market for goods is de- stroyed through the inability of the people to buj- and use them, the manufactm-er finds his stock dead upon his hands, and also an expensive plant and an interest and tax account that is as persistent as time itself and that knows no night rfor holiday nor Sabbath. Even monopoly is of no fm-ther benefit, for its advan- tage is only realized in sales, and no sales can be made. Upon the Wage Earner.— Wages are not so immediately an- swerable to the money standard as commodities, for the reason that what the wage earner sells is a part of himself and not a senseless, inert commodity. It is his skill and his muscle and where all the higher grades of labor are organized, as at present in all the leading nations, the rate of wages is determined largely by artificial combinations to control the suppls' of it. So the cur- tailed consumption which attends a long-continued decline of prices, is prolific of strikes and lockouts. The alternatives pre- sented by organized labor are full wages or no wages. If the business derangement is temporary and of short duration, the employer will be made to suffer nearly the whole loss; but if it be profound and fundamental such as a constantly exalting money standard necessarily implies, the result will be no wages at all, an enforced and prolonged want of employment, until finally starvation enforces a conformity to the increased purchasing power of money. When the laborer lacks employment, the wealth producing process stops, but time and interest and taxes go on in their resistless march. Upon the Farmer.— Agriculture in this country is the chief of what economists call tlie "extractive industries," as distinguished fi-om manufacturing industries. All its products are staple, and hence are those selected by scientists and experts to test the fluc- tuations of the money standard. Never since the corn laws of England has there been a tariff which was even claimed by its friends to directly benefit the farmer, and even in the case of the corn laws, it was abtindantly demonstrated by Cobden and Bright that the hereditary land owner and not the actual farmer, was the person benefited. The farmer's products are as a rule free to go in and out of all markets. Tliey are the chief products of the land, essential to human existence, and are produced and sold and consumed in the largest quantities. Hence they are especially sensitive to all changes in the money standard. A 114 PRINCIPLES OF MONEY AND COINAGE. change of one-half of a cent per bushel in the price of wheat in the Chicago market, when it is quoted at from 60 to 70 cents, is a marked fluctuation, when a difference of four or five or even ten cents on a pair of shoes or hat of the same price would hai'dly be noted. Steadily falling prices of farm products rediice the power of the farmer to consume the product of the manufacturer; brings constantly increasing disappointment in the reward for his labor; destroys his ability to meet the fixed charges of debt, interest and taxes; and finally converts him from an independent land owner into a spiritless tenant. If he is not in debt the in- sidious operation of a constantly exalting money standard wiU bring him into debt, and once in its meshes escape is next to impossible. Upon the Debtor.— If every man's debts were fixed in terms of his own products or services, the condition of aU debtors would be much more secure than under any money system. That is, if the laborer's debt was payable in so many days' labor, the farm- er's in so many bushels of Avheat, corn, potatoes or head of cattle, etc., etc., the debtor would have control of the means of pay- ment. But it is not so. Debts are payable in money only. When a debt is contracted there is no assurance that money wiU be of the same value when the time arrives for the discharge of the contract. If the standard of money appreciates, the debtor may be required to pay twice the value which he received. Such is the efCect produced by falling prices when they result from an appreciating money standard. The result is bankruptcy and peniu-y to the debtor. His debt is fixed in terms of "dollars," re- gardless of their value, while his means of payment are entirely subject to the value of the dollars, and as they rise his property shrinks proportionately. People who are neither debtors nor creditors in the ordinary meaning of those words, but property owners, also suffer. Taxes are a fixed charge, and all property owners are debtors to that extent. Aside from national, state or municipal taxation, rates of transportation are, in an economic sense, a tax upon the com- munities to which they afford facilities; and as all railroad corpo- rations are debtors to enormous amounts, they can to a great ex- tent shift their increased burdens upon their patrons. Viewed broadly, it is a perfectly transparent fact that all indebtedness of whatever kind or natm-e and its interest drain is a bm-den upon the productive energies of the people. PRINCIPLES OF MONEY AND COINAGE. 115 Upon the Creditor. — It is a relief to find some person or class who is benefited by an appreciation of money. The only benefi- ciaries of such a condition are those who live upon usury (inter- est) or upon fixed incomes. Both are properly included in the phrase "creditor class." The creditor has a contract to be paid a given and fixed number of dollars. As the dollars rise in pur- chasing power they represent more and more of commodities and services. If money should double in value, his wealth is doubled, although it may still be reckoned by the same number of doUars. Persons holding long tenure or life positions in public, corporate or private service are in a similar position. They are the receiv- ers of money and not the payers, in the sense that what they re- ceive is a fixed sum, while that which they are required to pay out for subsistence is not fixed in amount. Stated otherwise, what they sell (their services) is at a fixed price, while they buy at the market rate, which is constantly lower and lower. Every person in active business under current methods is to a greater or less extent both a debtor and a creditor; but it is only those who are permanently and largely creditors who derive a net benefit from an appreciation of the money standard. If a person owns property (not money) of the cm'rent value of $5,000 and is at the same time a creditor for money loaned to the extent of $3,000, he would not be benefited but injured by an appreciat- ing standard; for the loss on his property is greater than tlie gain on his money. This would be the effect in estimating direct results; and the indirect resvdts to such an one would be vastly more injm'ious, for no one with so small a loanable capital can live upon its income, and the demoralization of industry and de- preciation of all other property would destroy opportunities to supplement the income by that derived from other sources. Upon New Enterprises and Their Promoters.— Falling prices stop progress and development. This is one of the most baleful effects of the increasing value of money, and is keenly felt in new countries where the presence of virgin natural resources is a strong and constant temptation to incur debt. For this reason new countries are always debtor countries. Tliere are new cities and railroads to build, new mines and farms to open and a thou- sand avenues for the profitable employment of the loanable capi- tal which accumulates in older countries and communities, where such circumstances no longer exist. But owners of money are like owners of any other kind of property; they will not part with that which is increasing in 116 PRINCIPLES OF MONEY AND COINAGE. value iu exchauge for a thing which is decreasiug iu value. This condition of things will first stop buying and selling because of the want of a buyer, and may for a time increase the amount of money offered on loan; but if the depreciation continues so as to destroy the ability of borrowers to pay even the interest, then lending will cease and the money is hid away in vaults ard strong boxes, the wheels of business cease to turn and the social and industrial condition becomes one of complete stagnation. It is often characterized as a want of "confidence," and so it is; a lack of confidence in everything but money, but entirely too much confidence in that. People will always have confidence enough in that Avhich is growing in value, and little in that which is de- preciating. General Phenomena. These things will be observed ^vhen an appreciating money standard has wrought its perfect work: Cheap food and empty stomachs; cheap clothing and rags or nakedness; overflowing wealth and abject poverty. Men starve in sight of the farmer's bursting barns. The farmer, well fed perhaps, but coatless and in hiding from his creditor. Crime in- creases, and if there is neither wisdom nor virtue in ihe rulers, violence will ensue, and social order be destroyed. The Remedy. Depreciate money! Make it of less purchasing power. Make a cheaper standard. Restore the ancient landmarks of value which have been so insidiously removed. Restore the just equilibrium between property and labor and contracts. Make it possible for a debt to be paid with money of the same value as that in which it was contracted. By this means restore confi- dence in property and the products of labor, and thus make labor and property to be in demand. Depreciate money, and the cords are severed which now bind the people to this body of death. Open the mints to the free coinage of silver and every strong box will fly open and its contents come forth to start the wheels of business, stir into activity every branch of industry and in- spire with hope a despairing people. Owners of money will then thrust it upon those who have none, in exchange for property which now has no price. Transfer the appreciating tendency from money to property and the products of labor. An Awful Crime. No matter what differences of opinion may exist as to monetary policies and the details of the subject, one fact appears with the clearness and brightness of a calcium light. Men and women by millions, willing to work for their daily broad, are denied the opportunity. AYork is the God-appointod PRINCIPLES OF MONEY AND COINAGE. 117 way of getting au honest living in tliis world, and it cannot be denied to people witliout the commission of an awfnl crime by somebody. The mouumetallists are in the saddle and have been for many years, and must assume the responsibility for existing conditions. Regulating the Value of Money. The Constitution of the United States says the congress shall have power * * * "to coin money, regulate the value thereof and of foreign coins, and to^;ir the standard of weights and measures." I have italicized two words in this quotation for the purpose of directing especial attention to them. Here are foiu* different measures concerning which it is made the dutj^ of congress to prescribe standards, to wit: The measure of value, the measure of length, the measure of weight and the measure of bulk. AVith regard to the last three, the language of the constitution is that congress shall have power to "fix," that is, to make stable, definite and invariable a means of determining them. This it is possible for congi-ess to do, for length, weight and bulk are practicallj^ fixed conditions of matter. But with regard to the measure of value, an all im- portant function of the money which the congress is to coin and control, a different word is used. Value is not a fixed relation of things. It cannot be made stationary and immutable. Hence, instead of Congress fixing the A'alue of money, an impossible task, it was ifiade its duty to "regulate" the value of the money. It is just as essential to have a dollar of fixed value as a yard or foot of fixed length, or a pound of fixed weight. But natural laws intervene to prevent. So the duty of regulating this stand- ard is specially delegated to the same department of government which is authorized to make the standard. As we have hereto- fore pointed out, that which is \ised as a mediiim of exchange necessarily becomes the measure or standard of value; and hence the power to coin the mone.y of a people necessarily car- ries with it the power to prescribe a standard of value, for the one act includes the other. Tliese two functions of money above nnmod are inseparable. But liow sliall congress regulate the value of money? How can it be done? It nuist lio clearly manifest that congress can only increase or decrease the vahie of money in conformit.y with the immutable natural law of value creation. As the v.-ilue of money, like that of everything else, arises from iiso (demand) upon the one side and a limitation of supply upon the otlier, tlien conirress must eifliei- inr-rease or decrease the di inaiid or 118 PRINCIPLES OF MONEY AND COINAGE. decrease or increase the supply. There are no other alternatives. But if gold is the standard money, can congress increase the quantity or supply of gold? Certainly not; but it can increase the number of money units in the present stock of gold, by re- ducing the quantity of metal in each. Prices are quoted and con- tracts made in terms of money units— dollars. So if the standard metal, taken in the mass, rises in value, then every money vmit made of that metal rises correspondingly. Congress can require the coins to be reminted, and if it thinks wise and just, have only half as much metal put in each dollar. That will double the number of gold dollars in a given mass of the metal and affect their value accordingly. While congress cannot increase by an act of legislation the quantity of gold, it can very easily increase the number of gold dollars. This is the only alternative under the single standard system. Another method is to reinstitute genuine bimetallism and make the original silver dollar again a standard coin. This would re-establish the automatic method of regulation, the advantages of which, when we come to contemplate the extreme friction and confusion and expense attending a change in the weight of stand- ard coins, are incomparable. Both of these methods, it will be observed, affect the value of money by dealing with the supply term of the fundamental formula. When we consider the habits, education and current methods of business of the people of the United States, it would seem impracticable, if not impossible, to deal effectively with the den and term of the formula. The main pm'pose however of what is said under this head is to direct attention to the fact that it is the duty of congress under the constitution to regulate the value of money; that that necessarily means to raise or lower its piu'chasing power, and that such result can be effected only by dealing with the supply of or the demand for money. The Unit of Value. The Constitution of the United States says nothing about a unit of value. The act of congress of 1792 establishing the United States m'nt also prescribed a uniform money system for the country, and in doing so formally adopted our present decimal system and prescribed the weight and fine- ness of the silver metal which should constitute the doUar coins and denominated them "dollars or units." That is, the dollar is 1. All coins of greater value than the dollar were multiples of it, and all of less value, decimals of the dollar. The word "units" as used in this act was undoubtedly only intended to designate PRINCIPLES OP MONEY AND COINAGE. 119 the unit of the money system, and not to pi-escribe what has been sought to be done since, a unit of value. But the revised statutes of the United States, Sec. 3511, contains a rather remark- able phi-ase. It says: "The gold coins of the United States shaU be a one-dollar piece of the standard weight of 25.8 grains, which shall be the unit of value," etc., etc. Prior to the time of the enactment of this statute there" had been dollar coins made of both gold and silver, both equally legal tender, and what is perhaps more significant, there were paper units or dollars which were also legal tender without limit. But nowhere in all the legislation upon this subject, prior to the en- actment of the above statute, had the phrase "unit of value" ever occurred. The significance of the phrase is to be considered in two important bearings: First— If it has any sensible interpretation it means that all contracts and judgments in terms of money or "dollars," shall thereafter be held to mean gold dollars of the weight of metal therein prescribed, or, at the least, the value of such gold dollars. If greenback dollars, or silver dollars, or treasury notes, shall thereafter be maintained as legal tender, such legal tender quality shall apply only to the extent that these various other dollars have value as compared to the gold dollar. Illustration. — Suppose that for any one or more of many reasons that gold coins should cease to circulate or remain the standard of our markets, and the silver dollar becomes such standard. This implies a differ- ence in value between them, say to the extent of one-tenth or ten cents on the dollar. That is, the silver dollar is worth only 90 cents in gold. Then if the apparent intent of the statute in question is to be realized, the silver dollar could only be used to pay 90 cents of debt, as the debtor has contracted to pay the value of a gold dollar, for that is the only dollar that has been made a legal unit of value, and he has made his contract in full view of the statute. It was the evident intent of the statute to avoid the fact that there were several kinds of legal tender dol- lars and to commit the people, the country and the coiu-ts to a specific contract to pay the value of gold dollars under any and all circumstances. Second— What view can we take of this statute after consid- ering the constitutional duty of congress to "regulate the value" of money? Is it proper or constitutional for congress, for and on behalf of the people, to solemnly agree to pay the value of a given, specific dollar of a given and specific weight of metal. 120 PRINCIPLES OF MONEi AND COINAGE. wheu it is charged by the fuudamental law with the power and obligation to change that weight or select some other metal or make some other kind of a dollar it equity demands it? To do so is to abdicate, or attempt to abdicate, one of its most impor- tant constitutional functions. Congress as well as the states is forbidden by the constitution to enact ex post facto statutes or laws impairing the obligations of contracts. Has not congress by this act attempted to make every con- tract entered into by any citizen since that date and in terms of money, a special contract to pay the value of gold dollars of a definite weight of metal? Ordinarily and heretofore, as was said in defining the scope and purpose of legal tender laws, any con- tract for the payment of dollars could be discharged by the pay- ment of any legal tender dohar by name or tale, regardless of its value. But here is a statute apparently making it an essential and specific stipulation of every contract, to pay, not any par- ticular dollar, but an amount equal to the value of a particular dollar, and to fortify such contract against all efforts for legiti- mate relief, in the ex post facto provision of the constitution itself. PRINCIPLES OF MONEY AND COINAGE. 121 FIFTEENTH PAPER. THE BRITISH INDIA MONEY PROBLEM. The closing of the East India mints to the free coinage of silver in June, 1803, brought to a climax the panicky conditions which had prevailed in the United States since the Baring fail- ure In London in the fall of 1890. The event named leaves the republic of Mexico the only considerable country in the world which coins silver into standard money. China and Japan still maintain silver standards, but use Mexican silver dollars mainly, while in the north of China silver bullion in other forms is often used as a medium of exchange. The standard coin and money unit of India is tlie rupee, a coin containing 165 grains of fine silver. "Since the closing of her mints, these coins have become mere tokens and no longer have the characteristics of genuine standard money; but they still continue the only unit coins in use there, and all transactions are as before reckoned in rupees. The previous coinage policy of India was a free coinage but not gratuitous, for the government made a charge of about 2 per cent, for tlie service of coining. The effect of this was to give the rupee a value of 2 per cent, above that possessed by a like weight of silver bullion, but that relation of value between the rupee and bullion was a fixed one, and did not and could not vary. The Value of the Rupee, ^^■ll(•^ gold mid silver were at par in the ratio of 16 to 1 (the former ratio of coinage in the United States) tlie relative value of dollars and rupees were precisely that of their Aveiglit, barring only tlie - per cent, charge at the Indian mints. Leaving out of view for ihc pi'osent the Indian mint charge, we ascertain tlic former relative value of rupees as follows: As 371 1-4 grains of fine silver was one dollar in the United States and 10.") grains of fine silver was a rupee in India, then the vahie of llie latter in tei-ms of our nionev was just as 122 PRINCIPLES OF MONEY AND COINAGE. much less tlian one dollar as 1G5 is less than 371 1-4. Stated in the form of a sum in simple proportion, as 371 1-4 grains are to 100 cents, so are 165 grains to — cents. The answer is 46.0, the value of a rupee in cents. But when the United States resumed specie payments in 1879, the word "dollar" no longer meant 371 1-4 grains of fine silver, but 23.22 grains of fine gold, for the mints had been closed to silver and only gold was coined into standard money. Silver was no longer a money metal with us, but simijly a commodity to be bought and sold by some other standax'd than itself. As nearly all the nations of Em'ope closed their mints to silver between the years 1871 and 1879 and adopted gold coins as their only standard money and measure of values, the gold metal be- gan to rise in value because of this increased use of and dcnuand for it, and the par of value between it and silver at about the ratio of 16 to 1 was destroyed. Instead of being able to buy . ne ounce of gold with 16 of silver, it tooli 17 of silver, then IS and 19, and so on until now it takes about 29 ounces of silver to buy one of gold. Since 23.22 grains of fine gold is now the standard dollar of the United States, we find the present value of an Indiiin rupee (supposing it still to be standard) in terms of cents, by this pro- cess: As 23.22 grains of fine gold, our standard dollar, rvill buy 29 times that weight of silver, which is 673.38 grains, and as 23.22 grains of fine gold is one dollar or 100 cents, then what part of that 100 cents will 165 grains of silver equal? We resort to another sum in simple proportion, thus: As 673.38 gi*ains are to 100 cents, so are 165 grains to — cents; and we find the an- swer to be something over 24 cents. To ascertain the former and present value of the Indian rupee in terms of English money, we make the following calcu- lations: The English pound sterling, or "sovereign," is a standard coin containing 113 grains and a very small fraction of fine gold; and the pound is divided into 20 shillings and each shil- ling into 12 pence, making 240 pence to the pound. As the pres- ent market ratio between "the metals is, say 1 to 29, then the 1V^ grains of gold will buy 29 times that weight of silver, which is 3,277 grains. As the pound sterling is 240 pence, then we have the following sum: As 240 pence are to 3,277 grains, so are — pence to 165 grains. We find the answer to be something over 12 pence, or one shilling. To ascertain the value of the rupee when the metals stood in the market ratio of 1 to 16, we multiply PRINCIPLES OF MONEY AND COINAGE. 123 the 113 grains by 16, which gives 1,S0S. Then our statement is, as 240 is to 1,808 so is — to 1G5, and find the answer to be nearly 22 pence— 1 shilling 10 pence— as the former value of a rupee in terms of English money. Thus by the rise of gold the relative value of the rupee has declined from 22 pence to 12 pence Eng- lish money, and from 46 cents to 24 cents in United States money, both being gold standard. The foregoing calculations are based upon the assumption of an open mint in India. Since her mints have been closed to sil- ver, her rupee coins are nov^ tokens or fiat money, with no fixed relation of value between them and either gold or silver metal. A Digression. To digress a moment, it may be both interest- ing and profitable to indicate the method of comparing the values of foreign moneys and goods with the same in our own countrj'. Illustration. — Suppose a citizen of Mexico and one not before well posted upon the subject of money standards, should arrive in the United States for the first time and though ignorant of our language, should observe the exchanges made amongst us of goods for silver dollars and vice versa. He is cm'ious. By some method he discovers that our silver dollar has less fine metal in it than the Mexican silver dollar, and yet it will buy about twice as much goods. He begins to think silver is worth a gi-eat deal more in the United States than in Mexico and a great specu- lation can be made by shipping silver from that country to this, exchanging it for goods and taking the goods to Mexico and ex- changing them for silver and repeating the operation until he very soon becomes rich in the business. We will also suppose the goods to be such as are not subject to any tariff duty in his own country. If he attempts the money making scheme he will soon learn the difference between token and standard money. He will find on arrival here with his first shipment of Mexican bullion (and the same if it is in Mexican coin) that the United States mints will not coin nor recoin it for him. He will discover that his metal, in whichever form it may be, is worth no more in ex- change for goods than it was at home, and that the silver dollar which ho had before seen used in trade amongst us was nothing but a token for gold, made so by a limited coinage on govern- ment account. Wliile silver dollars in Mexico were merely pieces of bullion of a special pattern made at a free mint, and had no greater exchange value than that same quantity of the metal in any other form, the silver dollar of the United States was made and iispd in a vorv diffcront iiiannfi'. niid tliat thf two wore no 124 PRINCIPLES OF MONEY AND COINAGE. more of kiu iu point of their value than if made of entirely differ- ent metals. Aud liis vision of millions will dissolve like Colonel Sellers' eye water speculation. To determine and compare the value of coins and prices of goods anywhere in the world, with the same tilings at home, you must first know what is the effective standard coin of your own country, aud which metal it is made of. Next, you must ascer- tain what is the effective standard coin of the country and the market concerning which you are seeking to make the compari- son, and wliieli or wliat metal it is made of. If both are made of the same metal, then put them on the scales, for they are re- lated in value just precisely as they are in weight, reckoning fine metal only. If they are made of different metals, then you must consult the open bullion market relation of the two metals, as they are exchanged the one for the other, at the leading centers of commerce. But in no case do token coins cut the slightest figure in the matter. Nor is it of the smallest importance even, in this connection, whether the token coins be legal tender or not. It is rather a remarkable circumstance that doubts can exist in the mind of any intelligent student of this subject as to whether the United States has now an effective gold standard; or that it has ceased to have for a single day since the resumption of specie payments in 1879. It is even more remarkable that any expert would assert that British or any other brokers could at any time in the last 15 years, or any other time, buy United States silver bullion at say 90 cents an ounce and carry it to the Indian mints and by the simple process of free coinage there make a large profit iu the transaction. The Change Made In India. During all the years since 1873, when the nations began to discard silver for standard money and the consequent I'ise of gold began, the growing disparity between the standards of India and England has given much concern to the officials of both countries. After much correspondence be- tween the Indian and home governments and long waiting and anxiety on the part of the former for the adoption of some just and equitable international ratio of coinage, the Indian govern- ment at last, by Sir David Barbour one of its officials, recom- mended a scheme for the abandonment of the silver standard by India and the adoption of the gold standard. This was approved by an English commission appointed for the purpose of the in- vestigation, with Lord Herschell as the chairman, and the change was inaugurated in June, 1893. PRINCIPLES OF MONEY AND COINAGE. 125 The methud was neither complicated nor mysterious. It con- sisted merely in closing the Indian mints to the free coinage of silver which made the existing silver coins of India simply tokens, and then the practical redemption of these tokens in gold, at a fixed and arbitrary valuation to begin with. Just before the closing of the mints the value of the rupee in gold was 1 shilling 2 1-2 pence English money. The scheme of change contemplated their redemption at the rate of 1 shilling 4 pence English money. The Method of Redemption. It is not contemplated in the scheme that there shall be, for the present at least, any gold re- demption fund maintained in India, either at the banks or In the hands of the Indian government officials, but the condition sought to be brought about by limiting the manufacture of rupees and their consequent appreciation in the course of time, is this: If an Indian merchant buys goods in England, he can pay for them in rupees through the methods of exchange by going to his banker and buying sterling exchange at the rate of one shilling four pence for each ruppee in bank to his credit. Likewise, if a London produce broker buys wheat, cotton, tea or other pro- duct in India, he can pay for it by going to his bank and buying rupee exchange at the rate of one rupee for each one shilling fom* pence to his credit. As a matter of fact international trade is mainly made up of transactions of mutual purchase and the one offsets the other. It is not intended to say that the individual purchaser and importer of Indian goods in England is necessarily himself a seller of a like amount of English goods to India; but because of the invention of bills of exchange and the facilities of- fered by banks and clearing houses, the result in the case under consideration is precisely the same as if he were. At any rate, it is hoped by the financial authorities engineering the change, that as the arbitrary valuation sought to be given the rupee in this change was but .slightly above the market value of its material at the time, that the gap would be easily closed, and that the rupee would thus become fixed in its relation of value to English gold money. It is not altogether improbable but the scheme will be sticcessful. Reasons Supporting the Experiment. Many persons more or less expert in tliis feature of monetary science had grave doubts about this plan of furnishing India a gold standard without at least for the time being, furnisliing India some gold money. An effective gold standard without any gold seemed to thorn an ab- surdity. But some recent experiences of leading count i-jes in 126 PRINCIPLES OF MONEl' AND COINAGE. monetary policies liad great weight with the authorities in caus- ing them to launch the experiment. I will enumerate the more important instances referred to: First— When France closed her mints to the free coinage of silver about 1875 there was in circulation a very large mass of silver coins which were unlimited legal tender, and which at once became tokens. Their value as they passed from hand to hand and in and out of the banks was no longer referable to that of the material out of which they were made and bore no fixed relation whatever thereto. AVhile the silver metal fell off very rapidly in its gold price, these silver coins remained stead- fastly at par with the gold coins and have remained so up to this time, and still retain their full legal tender equality. There was no provision of law for their redemption in gold and no actual right of redemption either by general or special contracts. Second— When the United States resumed specie payments in 1879, it was upon the single gold standard, for gold was the only metal admitted to free coinage and gold coins came into imme- diate use, so far as the people cared to use them, and all other forms of money became at par with them. Nearly a year before the day fixed by law for resumption, the government began the coinage of token silver dollars (Bland law). They were made unlimited legal tender, and were wholly irredeemable by any provision of law, either express or implied. Their coinage con- tinued at the rate of two millions per month up to July, 1890. More than four hundred million dollars altogether have been coined and passed into use either as coins or by means of certificates, and all have remained at an unerring par with gold coins up to date. While a redemption fund of $100,000,000 in gold was provided for the legal tender greenbacks, no redemption fund, either near or remote, has ever been provided or suggested for these silver dollars. While the material in the silver dollar has dropped as low as 55 cents compared to the gold dollar, yet the coin itself has always maintained an equal purchasing power, or exchange value, with gold. These instances hardly satisfied the doubters, for as France and the United States both used standard gold coins alongside of their silver tokens, it remained to be imagined that this coin- cidence of use had some mysterious influence in producing the parity. Third— A third instance was however found exactly in point. The island of Java is a Dutch dependency, a part of what is PRINCIPLES OP MONEY AND COINAGE. 127 sometimes called "Netherlands India," containing, with the adja- cent straits settlements, a population of twenty millions of peo- ple. The money in use is the Dutch guilder or florin, a token silver coin made in Holland and used also in Holland as a token subsidiary to its standard gold coins, but not by law redeemable in gold either in Holland or Java. There are no gold coins used in Java, and yet by means of this guilder (and some smaller tokens) the exchanges and payments in trade in the Island of Java and between Java and Holland and other countries of Europe are kept at a fixed relation of value to Holland's gold standard. The guilder was, up to about 1875, coined free at the Holland mint, and was consequently up to that time a standard coin and while such was introduced into use in Java. Afterwards when the mint of Holland was closed to silver, the guilder continued in use both in Holland and Java wholly unaffected by the fluctu- ations of the silver metal in its relations to gold. It was in view of and because of these experiences of other nations that British financiers and statesmen consented to the present method of giving India a gold standard without any gold. Why a Change Was Made. A careful examination of the reasons assigned why a change of standard in India was deemed desirable will throw a strong side light upon the subject, much to the profit of people of other nations if they care to study the matter. It is much easier to see the mote in our neighbor's eye than the beam in our own. First— There are a large number of Englishmen in civil and military employment in India who are upon fixed salaries paya- ble in rupees. Their homes are in England, the families of many remain in England, their children are educated there, and their savings are converted into English money and sent back tliei*e. Since gold has so largely appreciated these men find their sal- aries very much shrunken when they come to convert them into sovereigns. Formei-ly 10 rupees would buy a pound sterling. Now it takes 15. All this class have had a serious grievance, and they are as a body influential with India's British governors. Second— India owes to citizens of Great Britain a large sum of money advanced in biiilding her railways, canals and for many other purposes, which is a debt payable principal and in- terest in gold and the means to pay which is raised largely, if not exclusively, by taxation. The yearly payments of interest alone are estimated at a sum equivalent to ."^SO.OOO.OOO of our 128 PRINCIPLES OF MONEY AND COINAGE. money. Taxes are levied iu India puj'able in silver rupees. The officials at tlie beginning of the tiscal year would estimate the number of rupees that would be required to pay the interest due the coming year, taking the rupee at its then value in English gold, say for illustration, 22 pence per rupee, and lay the tax ac- cordingly. But before the end of the year came the rupee liad dropped (gold risen) to 20 pence to the rupee. The result woiild be a deficit. They wouldn't get rupees enough to pay the debt. The next year they would estimate the rupee at 20 or 19 pence and increase the taxes so as to yield more rupees, but very likely before the year was up the rupee would only be worth 18 pence in gold (another upward hitch in that metal) and another deficit would be the result. And so on year after year levying more and more taxes but still a deficit at the end of each year, until the limit of endurance upon the part of taxpayers had been reached, or was thought to be, when something else must be done. Third— Now for the taxpayers. The people who pay the taxes in India are not conscious that silver has become cheap. The price of their commodities in rupees has not gone up. They get no more upon the average for their wlieat, their cotton, their tea, nor any other product than they did in former years. A rupee costs them as much as it ever did, so the result has been, as the tax gatherers demanded more and more rupees year by year, it took more and more wheat and cotton and all other products to meet the demand. If the reason for the increase of taxation had really been a fall in the value of silver, it would have made no difference to the Indian farmer for he woidd have received more silver for his products and could have paid more taxes and still stood in the same condition as before. This condition of things in India (and a like experience in Mexico) seems to be conclusive that the world wide trouble is due to a rise in gold rather than to any great fall in silver. Fourth— As it affects the English capitalist and discourages the investment of sterling money. India is of vast territorial ex- tent and comprises 240,000,000 or more of people. There is an inviting field for the inA'estment of money in the development of natural resom-ces and supplying the conveniences and needs of so numerous a people just on the threshold of modern civiliza- tion. If an English capitalist converts his wealth into money for the purpose of investing it in Indian enterprises, he has it in gold or its equivalent. To invest it in India he must convert it PRINCIPLES OF MOJSEY AND COINAGE. V2\) iuto silver. He parts with a thing wliich is iucreasiug iii vahie for a thing- which, we will say for the pui-pose of our argument, is stationary in value. When he has prosecuted his Indian un- dertaking for Ave or ten years, to his satisfaction so far as nom- inal profits are concerned, and comes to reconvert his capital with accrued profits into gold again, he finds that it takes all his present capital and his profits also to get back the original gold he started with, so rapid has been the appreciation of that metal in the meantime. So he finds in the end that if he had buried his gold for five or ten years he would now be just as well off and have saved all the risk and labor of active business. So it is that appreciating money discourages active enterprise always and everywhere. Fifth — As it affects the English trader. This cause of com- plaint has been presented for the intelligent reader in what has heretofore been said in these pages in illustration of Par of Ex- change. India Exchange. In all discussions and news of interna- tional business with India, referring to a time previous to the recent closing of the Indian mints, where mention is made of the price or rate of "exchange" on that country, if the word silver is substituted for exchange, it will be more intelligible to many people and they mean the same thing. So also now in reference to "Eastern Exchange," meaning bills on China or Japan. To Stop the Fall of Silver. The object of the present British policy in India is not to stop the so-called decline in the gold price of silver. To close the Indian mints to that metal could not logically operate otherwise than to accelerate that decline by cutting off one of the greatest demands for the metal. It was to cut loose or separate the Indian money system from the silvoi- bullion market of the world and tie it, so to speak, to tlie world's gold metal market. Now the gold price of silver may sink to any imaginable level and it will nol affect the value of the Indian rupee nor the prices of commodities in any Indian market. The value of the rupee is now like that of the United States silver dollar, wholly divorced from that pertaining to tlu> metal in other forms. Whatever actual and absolute fall has occm-red in tlic value of silver could not directly injure any interests except that of silver mining and tliose intimately connc^'led witli it in the mining regions. It could not increase the farm moi-tgages in Illinois, 130 PRINCIPLES OF MONEY AND COINAGE. nor throw out of employment and plunge into banla-uptcy and misery hundreds of thousands in the Middle. Eastern and Southern States. But the rise of gold can do and has done all this evil. Stop the rise of gold and the appearance of a "fall" of silver will disappear. PRINCIPLES OF MONEY AND COINAGE. 131 SIXTEENTH PAPER. A "FIAT" OR PAPER MONEY SYSTEM— LABOR NOTES- CONCLUSION. Auy elementary treatise, such a: this pui'ports to be, would be incomplete without some reference to the cardinal doctrines underlying what is often termed in popular parlance "fiat" money or a fiat system of money. It is hardly necessary to say that the word "fiat" has no proper significance in connection with this subject. The word means a decree, a declaration, a thing done or said. As sometimes tersely stated, if congress shall by law- cause to be printed upon a piece of paper the legend, "This is a dollar," and shall make it a legal tender for all debts, that such a piece of paper is a dollar and as good as any dollar. No one can reasonably question any part of this statement except perhaps as respects the goodness of such a dollar. As the word dollar is simply and only a name, it is perhaps within the constitutional power of congress to confer any name it pleases upon auy thing it pleases. It is certainly the natural right of any individual to do ttie same thing, provided he avoids the statutes against slander. So also, as congress has been given by the constitution discretionary power over the whole subject of money, it may make such a piece of paper by that name a legal tender in the payment of debts and dues; but the mere ex- ei'cise of a constitutional power by congress in bestowing a name and decreeing a legal tender, is not all that is necessary to make a good money. The most essential quality of money is valu(>, and all the congresses and potentates in the world combined can- not by simple decree or edict create an iota of value. No doubt the thoughtful reader of these papers has had frequent occa.uon to revert to the first two numbers and the formula of value crea- tion there set forth. The one natural, universal and immutable law governing the creation of commercial value has the same supremacy over the powers of congresses and human govern- 132 TRINCIPLES OF MONEY AND COINAGE. ments of all kinds as has the law of gravitation or that of the chemical affinities. Congress may have the power to compel the acceptance of a worthless thing in tlie requital of a debt; but tiie exercise of that naked power alone does not make the worthless thing valuable. The Theory of An Exclusive Paper Money System. The fore- going remarks do not however fairly indicate the scientific basis of the paper money theory. Its more intelligent advocates are well aware of the great natural law of value and make their sys- tem to harmonize with it. It is asserted that the material of money is not an important matter, but that value is the chief of all the essentials. There is no function of money which demands that it shall have any particular hardness or softness or density or weight or ductility or malleability or color or any other special physical characteristic. That it shall have the necessary vahie and be convenient to handle and transport is all that is impor- tant. If its material be indestructible all the better, for that saves the cost of replacement. If it can have the requisite value without a great cost in its production, then there is that much of human labor saved in the creation of a tool of exchange, a net gain to society. It is claimed that an exclusive paper money can be made to possess the more important of these merits in a pre- eminent degree. The Value of Paper Money. But the question arises, how can an irredeemable paper dollar be made to have the value which pertains to a gold or a silver or some other metal dollarV The answer offered is, that everything has a value proportioned to its uses as compared to its volume fir quantity, and that there is no discoverable reason why this law should not and does not apply to paper dollars as well as gold dollars or any other kind. Gold has a value only because people use it and want it and there is a natural limitation of the supply. If people will use and want paper dollars and there is a reliable artificial limitation of sup- ply, why should they not have an equally great value? Further than this, as stability in value is the prime requisite of a just and honest money, paper is better than gold because the supply which is the main factor in value fluctuations is under complete control and can be regulated by a per capita or some other rule with much greater precision th m in the case of gold, which is subject in its value to its world wide use and the accidents of its production from mines, as well as the great variety of its ap- plications in the industries and arts. A superior convenience is PRINCIPLES OF MONEY AND COINAGE. 133 claimed for paper mouoy, because the difference between small and large sums is merely a matter of denominations, while with " gold a larger sum must necessarily be a greater bulli and weight than a smaller sum. Finally, as touching the value of papor money, it is claimed to depend wholly upon the answers to two questions: First— Will the people use it, seek it, strive for it, prize it and give their labor and property for it? Second— Will its volume or quantity be properly and rigidly limited? Objections. Tlie main objections to a paper money system are as follows: First— That because its value depends upon its quantity or volume, and because its material is so abundant and cheap and the process of its manufacture so simple and inexpensive, there can be no assurance tliat a congress elected by popular vote, and amenable in a large degree to the temporary whims and passions of the masses, will prove superior to the temptations to an ex- cessive issue and its consequent depreciation. Second — That as such a money would necessarily be a na- tional and domestic money only, there could be no fixed relation of vahie between it and the money of other nations which use a standard metal system, nor even with that of another nation which used the same system with other money names and per- haps a more varying volume. There could be no par of exchange between nations. Third — That such a money, though meeting with universal national acceptance, and though properly regulated in volume, would nevertheless be ultimately dependent for its value upon the stability of tlie particular government instituting it. Govern- ments have potent and insidious foes both within and without; and through force of education or a natural instinct, a large num- ber of people demand a money which will sm'vive the destruction of governments and the wreck of all civil institutions. Pieces of gold or silver bullion alone constitute such a money, in con- venient form. The instinct which prompted their selection orig- inally for money uses, as related in a former paper, is still strong in the minds of a majority of persons. It may be imcompliment- ary to our reason and the quality of our patriotism, but it is true, that we demand a degree of security and sanctity for that par- ticular part of our wealth which consists of money, wliich we are willing to forego or disregard witli respect to all other kinds of property. There is a charm about money which is concrete and 134 PRINCIPLES OF MONEY AND COINAGE. immediately convertible wealth, that does not attach to other valuable things. Labor Note Money. There is still another kind of money, confined as yet to the realm of speculative philosophy, wliich it may be worth while to mention, more for the pm-pose of illus- trating a fundamental money principle, than for anything prac- tically important about it. This is what may be called Lfabor Notes. Heretofore we have considered standard metal money made of gold or silver, token coins and so-called fiat paper. With respect to each of these kinds the reader has observed that the money itself is valuable and that there is no fixed relation of value between a piece of any one of these kinds of money and any item of property or quality or kind of service for which it may be exchanged. Prices will vary. The value of the com- modities upon the one hand or that of the money upon the other, is entirely free to fluctuate with every changing relation of sup- ply and demand, and exchanges made are upon terms agreed upon between the individual owners or as a result of what Adam Smith calls "the higgling of the market." Not so with labor note money. All commodities, properties and services are rated by authority according to their cost of production in labor, taking an hour or a day as a unit of time by which to estimate the labor, classifying it according to skill, etc. The producer receives labor notes in terms of "units" to the amount of the cost of the product in hours of toil. The product is labeled with such cost in a like number of "units," and that is its price in labor notes to any one who offers them in exchange. No increase or decrease of out- standing labor notes nor of the commodities in store will affect prices. The exchange relations between them are fixed and un- fluctuating. Such notes have no commercial value such as attaches to and characterizes money m aU of the forms heretofore con- sidered. They are merely "store orders," transferable by de- livery, for any one of a thousand things, at a fixed ratio of re- demption. In other words, they are society's orders on society's store, and can no more be said to have a commercial value than could the order of a great employer written in pencil, directing one employe to deliver to another employe a spade. Such a sys- tem of money and exchanges would be possible only in case gov- ernment is organized into a gigantic corporate monopoly, in which every citizen is an equal stockholder, which contsitutes a condi- tion of ideal socialism. PRINCIPLES OF MONEY AND COINAGE 13". Conclusion. The Funding System, with its accompimiment of a vast and increasing mass of private indebtedness; and usury or interest, the baneful concomitant of all debt, constitute fea- tures of the existing fiscal situation of the world of an impor- tance that can hai-dly be exaggerated. It is not too much to say that debt and usury are the most serious existing menaces to our civilization. But the limits of this small volume do not per- mit a more extended analysis or reference to these topics than has been heretofore made. The issue of paper money supplementary to a metal standard is a matter of great importance, but decidedly of minor impor- lance when compared to the selection and adrainisti-ation of tlio metal standard Itself, so long as such a system is maintained and made effective. Likewise also, every form of credit which may be used as a substitute for money. All are subordinate to the metal standard. Bank credits which to some extent consti- tute a substitute for money, and which devices and their wide use and gi'eat convenience are often urged as a means of avoiding or diverting arguments directed to the metal standard, are especially subordinate to the metal money basis, and constitute the weakest and most dangerous featiu-e of existing fiscal devices. , jp^'^^^^^gaa.aAs^p:^^^^^^ fl UNfON . " > PACIFIC DENVER {~^(J FtanKtKumbuii Recemer R EACHES an Agricultural • ■ • • Section Second to None in the United States PRINCIPAL TOWNS LOCATED ON THIS LINE IN NORTHERN COLORADO ARE Finest Potatoes in the World are raised in this Section T FORT COLLINS, Population 3,500 LONGMONT, Population, 2,000 LOVELAND, Population, r,500 GREELEY, Population, 2,500 THROUGH LINE DENVER TO TEXAS AND ALL PRINCIPAL CITIES IN THE SOUTH DA Y IN THE ROCKIES When in Colorado, don't fail to visit THE LOOP This is the onix line that can offer a trip through the Rocky Mountains and return same dav, from Denver. FRANK TRUMBULL, Receiver. F. B. SEMPLE, General Passenger Agt. DENVER, COLO. UNIVERSITY OF CALIFORNIA AT LOS ANGELES THE UNIVERSITY LIBRARY This book is DUE on the last date stamped below /5ft:. 2 3 195f \K. %'i HECD LD-URO JAN 2 6 1976 Form L-9 20fn-l,* 42(8519) X^'; ."■,;V;-VVr;r,;.'.. ' - '.'s^vy ^.^>'v'' n^V-',.-',' V-;. 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