C-NRLF 
 
 B 37 73 
 
LIBRARY 
 
 OF THE 
 
 UNIVERSITY OF CALIFORNIA. 
 
 ClMS 
 
LTY SERIES. pub su)o ed e?Y a e r lrf ly ' Single Numbers, 25c. 
 
 VOL. II.-Xo. 1. 
 
 Revision to 1900 
 
 RATIONAL MONEY 
 
 -PARSONS. 
 
 A NATIONAL CURRENCY 
 
 INTELLIGENTLY CONTROLLED IN THE INTERESTS OF THE WHOLE PEOPLE 
 
 AND CAREFULLY REGULATED IN REFERENCE TO THE TRUE 
 
 COMMODITY BASIS, THE REAL CONSTANT OF 
 
 EXCHANGE, BY MEANS OF 
 
 THE MULTIPLE STANDARD 
 
 IN SUCH A WAY THAT 
 THE DOLLAR SHALL REMAIN CONSTANT IN ITS PURCHASING POWER 
 
 FROM MONTH TO MONTH AND YEAR TO YEAR, 
 
 REPRESENTING ALWAYS THE SAME AVERAGE AMOUNT OF COMMODITIES AND SERVICES 
 
 AND GIVING TO ITS POSSESSOR AT ALL TIMES THE SAME AVERAGE COMMAND 
 
 OVER THE WORLD OF PURCHASEABLE THINGS. 
 
 No Copyright. 
 
 On the contrary, an invitation is extended to all to do their utnio-. 
 in every way to spread the truth 
 Newspapers and ina. r -i 
 due credit oulv licit, k<-I. 
 
 
 
 PUBLISHED BY 
 
 C. F\ TAYLOR 
 
 1520 CHESTNUT STREET, PHILADELPHIA, PA, 
 
SAMPLE PAGES OF "RATIONAL MONEY." 
 
 History sanctions an independent paper money 
 of regulated volume. 
 
 Science proves such money to be the best. 
 
 AUTHORITY Distinguished leaders of thought, economists, 
 * statesmen, and financiers approve the prin- 
 ciples on which the plan is based. 
 
 The Power of Paper, with the Multiple Standard. 
 
 The essential attribute of money is general receivability. Money 
 should not be a promise to pay, but to receive, and to see that 
 others receive. Next to receivability the most vital fact of mone- 
 tary science is the movement or non-movement of the money 
 volume. Through this prices may be controlled, a rise or fall pro- 
 duced, or a rise or fall from other causes prevented, or checked 
 and cancelled if it has occurred. Power to control the money 
 volume is power to do justice or injustice between debtor and 
 creditor, laborer and employer, buyer and seller, landlord and 
 tenant, interest receiver and entrepreneur; power to increase the 
 weight and value of every debt public or private, power to pro- 
 duce panic or prosperity, power to regulate industry and deter- 
 mine the distribution of wealth. Such power is an attribute to 
 sovereignty and ought to belong to none but the sovereign people. 
 The money volume should no longer be left to chance or private 
 manipulation, but subjected to intelligent control in the interest 
 of the public. 
 
 Steadiness of value is the morality of the dollar. An appreciat- 
 ing dollar robs debtors and depresses industry. A depreciating 
 dollar robs creditors and may lead to feverish speculation. The 
 creditor should receive the same purchasing power that he lent, 
 the same command over commodities, services, all the means of 
 life and happiness. To accomplish this the dollar must not be 
 based on a gold standard, for the purchasing power of gold is not 
 constant, but exceedingly variable. The same is true of the bi- 
 metallic standard in a slightly less degree. The average purchasing 
 power of gold and silver vibrates a little less than gold alone. 
 Two commodities may be better than one, but 100 or 200 or 500 
 commodities make a steadier base than two. A list of all com- 
 modities would be constant in the sum of its exchange values. 
 If the value of one commodity fell the others would gain what 
 it lost, their purchasing power over it would be increased in the 
 same ratio that its purchasing power over them is diminished, 
 and vice versa if one or more commodities rise in exchangeable 
 value the others fall in like ratio. The true standard is a list of 
 all commodities each one being entered according to its importance 
 in consumption and expenditure. The nearest practicable approach 
 to this is a long list of commodities weighted according to im- 
 portance, each commodity being entered in such amount as to 
 have the same value relatively to the total value of the list, that 
 the consumption of that commodity has to the total consumption 
 of the community. The nearest to all commodities is a large num- 
 ber of commodities so selected as -to fairly represent the various 
 parts and classes of the whole. It is this composite or Multiple 
 Standard which justice and progress require us to adopt. A 'na- 
 tional paper money regulated in volume so as to be in harmony 
 with this standard will constitute a xnierhty power for justice and 
 prosperity. 
 
RATIONAL MONEY 
 
 A 
 
 NATIONAL CURRENCY 
 
 INTELLIGENTLY REGULATED IN REFERENCE 
 
 TO THE 
 
 MULTIPLE STANDARD. 
 
 BY 
 
 FRANK PARSONS 
 
 -KCTURKR IN BOSTON UNIVERSITY LAW SCHOOL; PROFESSOR OF HISTORY AND POLITI- 
 
 CAL SCIKNCK IN KANSAS S. A. COLLEGE; PRESIDENT OF THE NATIONAL LEAGUE 
 
 FOR PROMOTING THE PUBLIC OWNERSHIP OF MONOPOLIES; AUTHOR OF 
 
 "THE WORLD'S BEST BOOKS," "THE PHILOSOPHY OF MUTUAL- 
 
 ISM," "THE TELEGRAPH MONOPOLY," ETC.; MEMBER OF 
 
 THE BOSTON BAR, AND AUTHOR OF " PARSONS* 
 
 EDITION OF MORSE ON BANKS AND 
 
 BANKING," ETC., ETC. 
 
 PUBLISHED BY 
 
 C. F. TAYLOR 
 
 1520 CHESTNUT STREET, PHILADELPHIA, PA. 
 
 1898 
 
PREFACTORY NOTE. 
 In the early spring of 1897, after the subsidence of the remarkable 
 
 "battle of the standards" of the campaign of 1896, I realized the 
 need of two things: 
 
 First A presentation of the historical instances of success with 
 paper money; also the reasons for the failures that are so often 
 cited by the partially informed as final arguments against paper 
 money. 
 
 Second A further development of, and a strong- presentation 
 of the Multiple Standard, which is the only true and rational stand- 
 ard for money the only thing that will give us a normal dol- 
 lar at all times instead of the abnormal gold standard dollar, or the 
 somewhat less abnormal bi-metalic dollar. 
 
 I outlined my plan for such a book and communicated the same to 
 my friend, Prof. Frank Parsons, of Boston University, whose stu- 
 dies had already led him to take advanced views upon the money 
 question in his Arena articles of October and November, 1896. Being 
 myself too busy to undertake the work, I was fortunate (and it was 
 fortunate for the work) in securing the services of so eminent 
 and able a scholar as he, who combines in a phenomenal degree 
 the qualities of investigator, analyst, logician and original thinker. 
 By the ability and thoroness with which Professor Parsons has 
 done the work, he has placed not only myself, but our country and 
 the cause of economics under lasting obligations to him. 
 
 The idea has here-to-fore been quite prevalent that paper money 
 has been a failure in history. This book conclusively shows that 
 many of the popularly considered failures have been successes in 
 the main, and that paper money has succeeded or failed according 
 as the correct principles have been followed or violated. In this 
 respect it is just like the grocery business, brick making, fanning, 
 or any other business undertaking; it will succeed when correctly 
 managed and fail when badly managed. 
 
 Paper money is the money of civilization. It is here to stay. Its 
 history and principles should be known. 
 
 Gold and silver money was evolved by a natural process. The 
 first paper money consisted of promises to pay gold and silver. 
 The idea is still prevalent that paper money is only "represent- 
 ative" money, and that it can "represent" only gold and silver. 
 Why can it not "represent" any kind of wealth, or all kinds of 
 wealth, averaged, as well as gold and silver? The purpose of thus 
 book is to solve this question. 
 
 Money has been defined as "an instrument of association." Per- 
 haps a better definition is an instrument of co-operation. As such it 
 should be made as perfect as possible, and not be allowed to degen- 
 erate into an instrument of oppression. An instrument by which 
 all classes exchange products and services with all other classes 
 should be just to all. 
 
 It is my pleasure to announce that Professor Parsons is preparing 
 a companion work to this on the transportation question. In 
 this day of steam and electricity the transportation question has 
 become of scarcely less importance than the money question. Other 
 works on pressing public questions will follow. 
 
 Philadelphia, August, 1898. C. F. TAYLOB. 
 
AUTHOR'S PREFACE. 
 
 1. The rise and fall of general prices is one of the greatest evils 
 that can afflict a commercial nation. Industry is apt to be unduly 
 intensified by rising prices, and so obstructed by their fall that 
 depression and panic result. The movement of prices changes the 
 distribution of wealth alters the shares that go to labor, capital 
 and management, makes hoarded money more or less valuable, 
 and lightens or intensifies the burden of debt. A buys a farm 
 for $4,000 and borrows $2,000 to help pay for it. In a few years 
 the fall of prices brings his land down to a value of $2,000. But 
 the debt has not shrunk and the creditor takes the whole farm 
 for a loan that was worth but half the farm at the time it was 
 made. At the same rate the creditor class, loaning thruout 
 the country, would acquire the United States in return for loans 
 amounting to half its value. It is estimated according to a careful 
 writer, the Hon. Henry Winn, that the fall of prices since 1873 
 has given the creditor classes of the world, at the expense of 
 debtors, an unearned increment of $3,000,000,000 per annum, equal 
 in eight years to the whole assessed valuation of the United States 
 by the last census, and aggregating, in the quarter of a century 
 covered by the estimate, a sum exceeding the full value of all 
 the property in the country; and this vast value has been paid 
 by debtors in addition to the principal and interest they agreed 
 to pay. No wonder that the creditor classes are anxious to con- 
 trol the money system through which the movement of prices 
 may be governed. And no wonder the debtor classes are anxious 
 to try their hand at managing the machinery of finance. In jus- 
 tice, the money system ought not to be controlled in the interest 
 of any class, but in the interest of the whole people. 
 
 The movement of the price average is chiefly influenced by the 
 movements of money-volume, credits, and production. The easiest 
 of these to control is the money-volume, and the control of this 
 confers the power to govern the movement of prices because the 
 influence of any change in credits or production can be overcome 
 by sufficient increase or diminution of the money volume. The 
 movement of the money volume is the vital monetary fact, the 
 key to the financial situation. Through the control of this move- 
 ment prices may be made to rise or fall or remain substantially 
 steady. This means control of justice or injustice, prosperity or 
 panic, wealth diffusion or congestion. 
 
 Power to control the money-volume is power to do justice or in- 
 justice between debtor and creditor, laborer and employer, buyer 
 and seller, landlord and tenant, interest receiver and entrepreneur, 
 power to increase the weight and value of ?very debt, public or 
 private, power to produce panic or prosperity, power to regulate 
 industry and determine the distribution of wealth, such power 
 is an attribute of sovereignty and ought to belong to none but 
 
iy AUTHOR S PREFACE. 
 
 the sovereign people. Such, a control should only be exercised 
 with judgment and intelligence in the interests of the whole peo- 
 ple, in order that justice and not injustice, fair diffusion and not 
 congestion, prosperity and not panic, may result. At present this 
 vital matter is left almost entirely to chance and private manage- 
 ment. Banks and the vicissitudes of mining and speculations deter- 
 mine th^ movements of money. It is even possible for foreign in- 
 fluences to exert large control over our money and credits, and 
 put new slopes and notches in our price line. This is all wrong. 
 No chance or private monopoly or foreign power should be per- 
 mitted to manage our money or draw a price curve for us. The 
 movement of the money-volume is a public affair, and the ma- 
 chinery for controlling it should belong to the public and be oper- 
 ated by and for the public. A matter of such incalculable moment 
 to the nation, and in relation to which private interest is fre- 
 quently antagonistic to public interest, should not be left to pri- 
 vate control, but should be subject to constant, careful, intelligent 
 public regulation. This is the most important lesson that emerges 
 from the fact and philosophy contained in the following pages. 1 
 A few related thoughts demand some mention here. 
 
 2. Given intelligent public control of the money-volume, with 
 a view to regulating the movement of general prices, what is to 
 be the aim? Shall the price line be made a gradual upward slope 
 to afford a moderate stimulus to industry, till the unemployed are 
 reabsorbed and debtors are eased of the overweight of past obli- 
 gations, or shall the line be level from the start? Much may be 
 said in favor of a temporary upward slope, but on the whole it 
 would seem better to make the line level, and accomplish the other 
 purposes referred to, moderate stimulation of industry, provision 
 for the unemployed, etc., through the establishment of public 
 works, making good roads, planting forests, digging canals, build- 
 ing ships, establishing schools, etc. Meantime providing funds and 
 aiding wealth diffusion by means of progressive income and inheri- 
 tance taxes. The ideal dollar is one that will not mulct either the 
 debtor or creditor, nor encourage speculation, nor depress industry 
 a dollar of constant purchasing power, commanding the same 
 average amount of commodities and services from year to year and 
 
 (*) (For the method of public control see Chapter III.) The fundamental 
 doctrine of the importance of controlling the movement of the money 
 volume in the public interest, may be accepted by all, whatsoever their 
 views about the demonetization silver, metallic redemption, paper money, 
 intrinsic value and other monetary questions. A couple of concrete in- 
 stances of the utility of even a rough control of the money movement 
 may be of advantage here. First, The way to prevent a speculative 
 disaster or shrinkage of credit, etc., from developing into the wide-spread 
 distress we call panic, is to expand the money volume by easy loans or 
 otherwise. That expansion is the proper medicine for the prevention and 
 cure of panics is recognized by the Bullion Committee, Bagehot, Wm. G. 
 Sumner, Pres. Walker, and all the other financial doctors so far as I know. 
 But our private banks refuse to administer the prescription, because it 
 is dangerous to them. For an ordinary bank to increase its loans In the 
 face of panic would be to risk its existence. But the nation is big enough 
 and strong enough to do the work. It can loan money to merchants and 
 business men in times of stringency, with the certainty of averting loss 
 from itself, instead of the danger of bringing ruin upon itself. Second. 
 A moderate increase of the money volume in the fall of the year when 
 the movement of crops, etc., creates a special pressure on monetary facili- 
 ties, would be a step toward Justice to agriculture. 
 
AUTHOR'S PREFACE. 
 
 age to age an ethical, impartial, democratic dollar, a dollar that 
 will act as a fly wheel to keep the national engine working- smooth- 
 ly all the time, instead of producing- or aggravating- industrial dis- 
 aster and explosion. The price line must become a safe horizontal 
 instead of the dangerous zigzag of a bolt of lightning. 
 
 PRICE LINE 1866-1898- GOLD Pftices 
 
 ALDFUCH DATA 1866-1691 "AMERICAN" DATA 1891-8. 
 1660 1870 1880 1890 
 
 -100 
 
 -90 
 
 -80 
 
VI 
 
 AUTHOR'S PREFACE. 
 
 Since 1873 the chain lightning of prices has been golden (see cut on 
 page V), before that time it was bimetallic (as shown in this cut). 
 Neither of these monetary thunderbolts appear to have much affection for 
 the safe and honest horizontal. 
 
 PRICE LINE 1837-1673 BIMETALLIC PRICES 
 
 ALDRICM DATA 1640- 1873.^-1837- '&40 BROAD ESTIMATE FROM 
 DATA OF W* G. 5UMNER & Ml/LHALL'S CITATrONS . 
 
 1640 
 
 1850 
 
 I860 
 
 1870 1873 
 
 -140 
 
 -130 
 
 -120 
 
 -110 
 
 -100 
 
 - 90 
 
 If the weekly or even the quarterly variations had been noted, the 
 lines in both of these diagrams would have been full of saw teeth. If the 
 maximum and minimum price levels had been marked instead of the yearly 
 average, the extremes would have been far greater than those shown the 
 drop in a panic being sometimes more than double that shown by the 
 yearly averages (see p. 57). If actual prices had been taken (instead of metallic 
 prices), we should have found that during the war period of unregulated 
 issue of imperfect legal tender paper, the price line would have soared 76 
 points above the top of the diagram. Altogether these diagrams, full of 
 ruin and injustice as they are, are yet mild representatives of the pres- 
 ent money system. They tell part of its evils, but by no means all, nor do 
 they give full emphasis to what they do tell. 
 
AUTHOR S PREFACE. Vll 
 
 Our prime financial duty is the intelligent public regulation of 
 the money-volume so as to give the dollar a constant purchasing 
 power, yielding the creditor the same average command over com- 
 modities and services that he gave, curtailing reckless speculation, 
 preventing panic, and exercising a beneficent and impartial in- 
 fluence upon wealth production and distribution.* 
 
 3. In performing this duty, what sort of money may be used, and 
 what sort should be used? The answer seems to be that gold or 
 silver or both may be used 3 with paper, redeemable or irredeema- 
 ble monometalism, bimetalism, co-metalism or greenbacks pure 
 and simple. The latter would seem to be the most perfect plan. 
 It is useless to dig gold to do what regulated paper will do as 
 well or better, and the immediate profit to the government on 
 paper issues to replace the metals (over 1,000 millions), would 
 probably pay for the Spanish War several times over. The best 
 money all round, appears to be, not coin or paper on a metallic 
 base, nor currency on a paper base, but paper money on a com- 
 
 ( 2 ) (See Chapters II and III.) This second doctrine also, that the dollar 
 should be constant in its purchasing power, may be held along with diverse 
 views about gold and silver, paper money, intrinsic value, etc., and is In 
 fact held by men of such widely different opinions as Pres. Andrews, 
 Professor Marshall, Pres. Will, Wm. J. Bryan, Fonda, Walker, Mill, Ri- 
 cardo, Henry Winn, Prof. Bemis, Prof. J. Allen Smith, Prof. Laughlin, 
 etc., etc. 
 
 ( 3 ) The metals could not be used as the standard of course. General 
 prices cannot be kept steady in that way. Only the multiple standard can 
 keep the price line level or the purchasing power of the dollar constant. 
 But gold and silver could be used as money of circulation and redemption 
 provided the whole currency, metallic and all were regulated in accordance 
 with the multiple base. 
 
 The multiple standard steady money plan outlined in President B. B. 
 Andrews' "Honest Dollar," edition of 1889, p. 36 to 42, contemplates the 
 continuance of gold and silver redemption, but the metals cease to be the 
 real standard or regulating base of the currency. The fact that the notes 
 issued were redeemable in metal even at a fixed weight would not pre- 
 vent the exercise of considerable control over prices by means of injecting 
 notes into the circulation or withdrawing them therefrom. There is a good 
 deal of friction and inertia about metallic redemption in practice. And 
 to a considerable extent the volume of circulation can be changed by the 
 issue or withdrawal of notes. Prices may be influenced in this way and the 
 value of gold itself altered. One of the plans described by Professor Mar- 
 shall in the Contemporary Review, Vol. 51, also involves metallic redemption 
 by such weight of bullion as is equal in value to the standard multiple 
 unit, at the market price of bullion at the time of redemption. Careful 
 consideration, however, has led me to the conclusion that metallic redemp- 
 tion is not needful, service redemption being entirely sufficient. (See note 
 in Professor Marshall's article just referred to, and Chapter II of this 
 book.) Fixed weight-redemption could only be worked within limits. It 
 would be liable to serious disturbance from foreign influence and from 
 speculation, etc., a promise to redeem in a fixed amount of any commodity 
 puts a premium on cornering that commodity. 
 
 Variable redemption in bullion at its market value in the standard 
 multiple unit would be free from the dangers of fixed weight redemption, 
 but it does not seem necessary or wise to pick out any one or two commo- 
 dities for redemption purposes under the multiple standard. A bill is 
 redeemed every time it buys any commodity or service or pays any debt 
 or tax. When the government gives a bill the legal tender quality, it 
 promises that the bill shall be redeemed in any desired commodities or 
 services at their market value and that Is all the redemption requisite. 
 Such redemption and a regoiaticn of volume to keep the price line steady 
 by the multiple standard will give us the ideal money. 
 
 Once establish a system of public money under reasonable regulations, 
 and there is little doubt it will be honestly and efficiently administered. 
 The Treasury Department has a reputation for accuracy, honesty, and effi- 
 ciency, that is above reproach in respect to all matters wherein its duties 
 have been clearly and definitely prescribed. The maintenance of a uniform 
 price level is a matter so clear und simplo and the processes would be so 
 easily watched and checked, that there is little likelihood of administrative 
 difficulty. (See Chapter III.) 
 
Vlll AUTHOR S PREFACE. 
 
 modity base. While it is true, however, that gold or silver or 
 both, may be used for money and redemption under a steady money 
 plan, yet it must be carefully noted that they cannot be used as 
 standards. The only possible constant in exchange is the com- 
 modity base or multiple standard, and if money is to be kept 
 steady the gold or silver coins or paper bills or whatever else is 
 used as money must be regulated in reference to the multiple 
 standard, and kept in harmony with it. This constant base can- 
 not be represented by any one or two commodities, especially those 
 so prone to irruptions, spasms, heart-failures, and booms as gold 
 and silver appear to be, and subject at bottom to the law of di- 
 minishing return. Men have tied justice and prosperity to a golden 
 kite dreaming it was the solid rock. A change in the value of iron 
 or copper may cause disturbance but does not throw the whole 
 industrial system out of gear. A private monopoly of coal mines 
 or iron or copper mines is bad enough, but a monopoly of the 
 money base is infinite^ worse. A change in the value of gold 
 throws the wealth of those who own the products and property 
 of the country into the hands of those who own the dollars, or 
 vice versa; varies the share of production that goes to labor, and 
 alters the value of every debt. Platinum doubled in value recently 
 without producing any commercial disturbance. A true money 
 system would be as little affected by nights of gold as by nights 
 of platinum. 
 
 The question of a wholesale replacement of metals by irre- 
 deemable paper, important though it is, is nevertheless of minor 
 moment compared to the larger question of regulating the money- 
 volume. Give us public management of the money movement, aim- 
 ing to keep the dollar steady and the price line level, and the 
 main object will be accomplished. Yet it appears quite clear that 
 when gold has lost its importance, as it would under such regu- 
 lation, \vhen fortunes are no longer to be made by its changes 
 of value, it would lose the support of those who defend it now, 
 and it \vould be seen that a currency consisting entirely of irre- 
 deemable paper and subsidiary coin is more economical and more 
 secure from disturbance by changes in mining product or foreign 
 monetary policy, or other cause of variance. 
 
 During the greenback movement years ago, I read a speech by 
 Wendell Phillips, in which he took strong ground in favor of an 
 irredeemable paper money. I had a very high opinion of the 
 famous anti-slavery orator, but this pamphlet considerably injured 
 his reputation so far as I was concerned. I said. "A man who 
 imagines that the government can make something out of noth- 
 ing, or give enormous value to bits of paper by stamping some 
 words on them, is evidently subject to such delusion that it will 
 not do to rely very much on his mental processes." And yet, a 
 few years later, on making a more thorough study of the finan- 
 cial question, I came to see that this judgment of mine was based 
 upon absence of information. I found that substantially all the 
 standard economists agreed with Phillips that government could 
 
IX 
 
 give exchange value to bits of paper by stamping words upon them, 
 making them legal tender for all debts, public and private, and 
 limiting their volume, whether they were redeemable or not; that 
 the sole essentials of sound money are receivability and limitation 
 of volume, "intrinsic value," or value for other purposes than those 
 pertaining to money not being requisite to money, which is not 
 desired for any "intrinsic" utility, but as a means of obtaining 
 commodities and services, a method of accounting like checks and 
 bank books, a title to property like deeds and mortgages, func- 
 tions it will perfectly perform if generally receivable and limited 
 in volume, whether it be made of gold or silver or paper. I found 
 that history confirmed the conclusions of the economists, and 
 Phillips became to me once more the sage and prophet I had 
 thought him in my boy wood. 
 
 4. I still think, however, that the Greenback movement was a 
 mistake. Greenbacks unregulated might be worse than present 
 monies, and the Greenbackers offered no plan for efficient, intel- 
 ligent regulation. 
 
 5. The free silver movement, I think, is another mistake. It is 
 wasting the time and thought of the people on a comparatively 
 unimportant matter. Even if all its supporters claim for it is true, 
 it would amount to very little a mere temporary palliative, soon 
 exhausting its predicted power to raise prices, not attaining jus- 
 tice, not preventing panics, not achieving any intelligent regula- 
 tion in the interests of the public, not reaching the sources of 
 financial difficulty. 
 
 6. There is another movement more to be regretted than either 
 of those just named. I mean the movement to retire the national 
 notes and give the whole money field to the banks. 4 
 
 The people are asked to retire completely from the money ques- 
 
 ( 4 ) The reasons given for this movement are chiefly two: 1. The need 
 of an elastic currency, the bond basis necessary for National Bank uocor- 
 having gradually failed as the National debt has diminished. 2. The ad- 
 visability of putting a stop to the working of "the endless chain." As for 
 elasticity, the kind secured is not the kind desired. A money that expands 
 when there is already too much in the field, and contracts when there is 
 too little, is indeed elastic, but not commendable. The kind of elasticity 
 to be sought in money is one that will lead it to expand on notice of 
 stringency, and to contract on notice of surplusage. The first, or repre- 
 hensible sort of elasticity, is what the bank note schemes will give us. 
 The second, or desirable elasticity is the kind that will belong to a National 
 Multiple Standard Money. 
 
 As for the endless chain, the proper way to get rid of its burdens would 
 be to adopt irredeemable National paper, which, with reasonable regula- 
 tion, would possess all the valuable monetary qualities that belong to 
 gold, without Its weight, or its wobbles, its speculative tendencies, bond 
 proclivities, or foreign affinities. 
 
 The scheme of retiring the Greenbacks and giving the banks the power 
 to issue redeemable notes of their own would still subject the Government 
 to e.ndless chain processes so far as the Government stood behind the 
 notes, and if the Government did not guarantee them, their security would 
 be defective, a substitution of bank promises for Government promises, 
 a substitution of Drivate paper imperfectly secured and without the legal 
 tender quality necessary to independent circulatory power, in place of public 
 money with the best possible security, the National guarantee of full legal 
 tender in its own right, or of redemption in coin legal tenders, 
 or both. So far as the Government is behind the bills you have the endless 
 chain possibility, and so far as the Government is not behind them you have 
 the \yild cat principle of private, non-legal tender bills, issued on private 
 security. 
 
 Who! her the notes are secured wholly by the individual bank issuing 
 
x AUTHOR'S PREFACE. 
 
 tion, and hand over to the banks even that part of the currency 
 which now belongs to the Nation. This is fundamentally wrong. 
 The powers of private banks should be diminished rather than in- 
 creased. Indeed it may be confidently affirmed that if the people 
 are to realize the fullest benefits of a wise monetary system, the 
 banks must become public as well as the management of the 
 money-volume. It is not absolutely essential to control credits 
 in order to control prices, for the expansion, and contraction of 
 credits can be conteracted and overcome by a sufficient change 
 in the money volume. But it would be of great advantage to the 
 people if loans and credits were managed in the public interest 
 as well as the money volume. 6 
 
 them, or are secured, to a certain extent, by a two per cent, or ten per cent, 
 bank note redemption fund, to which all the banks contribute, the principle 
 is the same, a resort to defective security. The little margin of reserves 
 and redemption funds of one bank or any group of banks, or all the banks, 
 may be easily swept away in a crisis, and though there may be assets left 
 on which outstanding notes are a lien, the uncertainty, difficulty, and 
 delay of collection, will bring again the complex caleulations of the old wild 
 cat days, and merchants may have to spend their days ciphering out the 
 value of bank notes presented to them or paid out by them. The very 
 possibility of trouble with bills left out too long in time of panic would 
 make men run for gold on slight intimation of financial embarrassment. 
 No one bank nor group of banks, nor all the banks can offer security 
 approaching the solidity of National security. The Government must guard 
 the notes or else it must issue them itself with its legal tender stamp 
 upon them. 
 
 However the plans for redeemable notes are varied, the substance is 
 always the same. It's a choice between wild cat and endless chain. The 
 bank notes not being legal tender, must rest on redemption in something 
 that is legal tender and therefore will not be thoroughly reliable money 
 unless the Government guarantees their payment on demand. If the Gov- 
 ernment is to be behind the notes it might as well own them. It is folly 
 for the nation to guarantee bills (as in the Gage plan) and then let the 
 banks issue them for their private profit. And if the Government does 
 not guarantee them, the bills are merely private paper, and in times of 
 panic, when reliable money is most needful, no one could tell whether the 
 bank notes were worth anything or not, They would have no legal tender 
 quality to give them an independent value of their own, and a speculative 
 crash, or fall of prices, with a panic run for redemption, might exhaust 
 the redemption fund and gold reserves of the bank, and the whole margin 
 of security, leaving the outstanding notes redemptionless. And when a 
 thing has no legal tender or general receivability in its own right, and can 
 not be redeemed in something that has such legal tender or receivability. 
 it is not good money. We do not want either wild cat bank notes or suction 
 pipes from the public vaults to Wall Street and Europe. The escape from 
 both lies in a National currency divorced from coin, carefully regulated 
 in volume, and enforced in the courts as a full legal tender. 
 
 ( 5 ) Our Government already does a large business in money transfers, 
 and there is no reason why it should not receive deposits and make loans. 
 Nearly all the civilized nations except the United States have postal banks, 
 the powers of which will inevitably be gradually enlarged until they in- 
 clude the whole range of ordinary banking functions. The question is 
 simply this: Shall we be content with private banks run for the benefit 
 of a few or shall we have public banks run for the benefit of all? 
 
 Postal banks will make the people's money absolutely safe, will make 
 the habit of saving more general, will help to secure financial independence 
 for wage-workers, will bring hoarded money into circulation, increase the 
 actual capital of the country, and reduce the current rate of interest. If 
 the Government controls credit as well as money volume, it will not have 
 to contend with the accidents and schemes of expansion and contraction of 
 credits incident to private control. Credit changes will naturally be less 
 than now because the multiple money system will do away with some of 
 the chief causes of credit change. And, on the other hand, if the nation 
 through its banks directly controls the movement of credit as well as tho 
 money volume, it will simplify the problem of keeping the dollar in har- 
 mony with the multiple standard. To omit the banks and their credits 
 from the National Money System is to leave outside a powerful disturbing 
 influence to be continually watched in order to make the proper adjustment 
 of the money volume to counteract the movements of credit. There appears 
 to be a powerful sentiment in favor of postals savings banks. Still greater 
 good will be accomplished by establishing postal banks with full functions 
 instead of dividing the banking powers. 
 
XI 
 
 Our banks are organized for private profit, not for the public 
 weal. In times of rising- prices they naturally issue notes and 
 extend credit to the extent of their power, thereby increasing- the 
 "boom.*' 
 
 In times of falling prices they naturally withdraw their notes 
 and credits in self protection, thereby producing or intensifying 
 depression and panic. They aid the rise of speculative excite- 
 ment, and then in times of danger and collapse they withdraw 
 their assistance from the people just when they need it most. 
 To diminish public money and government action, and increase 
 bank money and bank action, is to increase the instability of the 
 money system, intensifying both speculation and panic, emphasize 
 the evils of rising and falling prices, and place the entire control 
 where it will be used for private gain and not for the public 
 good. The whole machinery and management of money and credit 
 constitute a most vital national interest, and should be put into 
 the hands of trained public servants, acting under careful regu- 
 lations for the people's benefit. Even an ordinary government 
 system would make loans and discounts more difficult or contract 
 them in times of speculative tendency, and in case of stringency 
 would extend their loans instead of calling them in. In England 
 and France the great quasi public banks have adopted this policy 
 to some extent with most beneficent results. 
 
 A solid National credit, regulated in the public interest, is much 
 safer and better for depositors and business interests than the 
 private credit of any bank or group of banks managed for private 
 gain; as much safer and better as National money is safer and 
 better than bank checks or drafts or any other private money; 
 as much safer and better as a National army is safer and better 
 than a motley herd of corporation vassals. Deposits would be ab- 
 solutely safe so long as the United States endures. National cred- 
 its would not shrink under threat of danger, thereby changing 
 the threat into reality, and changing perplexity into panic, nor 
 would they expand to boom dimensions under the stimulus of 
 rising prices, or rich prospects for investments. Neither would 
 there be any difficulty in making discounts. Official bonds, de- 
 ductions from incomes, and other forms of personal responsibility 
 would make cashiers ds careful in the conduct of public as of 
 private banking, more careful, perhaps, because the temptations 
 of speculative gain would be absent. 
 
 Under a system planned to secure the utmost benefits to the 
 people, we should have Postal Banks and a National Money, in- 
 telligently regulated in the interests of justice and stability. In 
 this way the Government would directly control not only the move- 
 ment of money proper, but of credits also. The jagged form of 
 our plunging price line would become a smooth and solid path 
 that commerce could follow with steady certainty. There would 
 be no panics, no cheating of debtors or creditors, no banking aris- 
 tocracy, no "Invisible Empire" scheming to control the money 
 of the country for private aggrandizement, but a steady, just, re- 
 
Xll 
 
 liable dollar, and a democratic financial system, and the profit on 
 loans and monetary transfers, including- the unearned increment 
 or excess above reasonable interest and payment for services ren- 
 dered, would be abolished or converted into the public treasury. 
 
 Speculation, private monopoly, foreign policy, and the varying 
 values of gold, would no longer be able to use the money system 
 as a means of disturbing the fair distribution of wealth, divert- 
 ing to one class the wealth that belongs to another, and jeopar- 
 dizing the National prosperity by slowing or stopping the wheels 
 of industry or driving them at breakneck speed. 
 
 For a summary of the benefits to be derived from National 
 money and scientific finance, the reader is referred to the closing 
 portions of the second and third chapters of this book. 
 
 FRANK PARSONS. 
 Boston, Mass. 
 
CONTENTS. 
 
 Chapter I. 
 PAPEK MONEY VINDICATED BY HISTORY. 
 
 Sixty millions of Demand Notes. 
 
 Silver Certificates. 
 
 The Crisis of 1857. 
 
 County Scrip. 
 
 The Continental Money. 
 
 Leather Money. 
 
 Indian Money. 
 
 North Carolina. 
 
 Connecticut. 
 
 New York, New Jersey and Pennsylvania. 
 
 Pennsylvania Paper Money. 
 
 England. 
 
 France and Germany. 
 
 The Allied Powers. 
 
 Russia. 
 
 Austria. 
 
 Brazil. 
 
 Bank of Venice. 
 
 Fall of Rome. 
 
 The Dark Ages. 
 
 Discovery of America 
 
 A Metal Base a Builder of Debt and an Ally of Gamblers. 
 
 Coin a Coquette. 
 
 A Metal Base a Cause of Industrial Crises 
 
 Coin a Coward. 
 
 Conclusions. 
 
 Chapter II. 
 THE BEST MONEY. 
 
 Purposes of Money. 
 
 Measuring Values. 
 
 Storing the Power of Purchase. 
 
 Standard of Payment. 
 
 Attributes of Money. 
 
 Intrinsic Value. 
 
 The Only Essential Attributes. 
 
 General Receivabiiity. 
 
 Limitation of Volume. 
 Steadiness of Value. 
 Movement of the Money Volume. 
 What Money should be Adopted. 
 
CONTENTS. 
 
 Chapter III. 
 THE MULTIPLE STANDARD. 
 
 Its Nature and Operation. 
 Massachusetts Multiple Standard. 
 Objections. 
 Advantages. 
 
 Chapter IV. 
 THE AUTHOKITIES. 
 
 President Frances A. Walker. 
 President E. B. Andrews. 
 Professor Alfred Marshall. 
 
 " W. Stanley Jevons. 
 
 " Simon Newcomb. 
 David Ricardo. 
 Peter Cooper. 
 
 United States Supreme Court. 
 William Jennings Bryan. 
 Wendell Phillips. 
 Benjamin Franklin. 
 Thomas Jefferson. 
 Abraham Lincoln. 
 For other authorities see Chapters I, II and 111. 
 
 Appendix A. 
 Appendix B. 
 

 CHAPTER I. 
 
 -APER MONEY VINDICATED BY HISTORY. 
 
 Paper money may be based on gold or silver or both, or 
 may rest on the whole body of commodities and values without 
 any specific metallic base. In either case the accuracy with 
 which it conforms itself to its base depends upon the manage- 
 ment of its volume and its legal tender qualities. Paper that 
 is, upon demand, exchangeable for metal at a rate specified 
 by law is said to be "redeemable;" and paper not exchange- 
 able for gold or silver, at a rate established by law, and at 
 the option of the holder in the exercise of a legal right of 
 demand upon the issuer, is said to be "irredeemable." It is 
 more scientific to call the first convertible and the second in- 
 convertible, or to call the first dependent and the second in- 
 dependent, for both are really redeemable in any proper sense 
 of the word. Whenever a bill is taken in payment for goods, 
 taxes, or service of any sort it is redeemed as truly as when 
 it is exchanged for gold or silver. There is a popular im- 
 pression that paper money is unreliable unless it is exchange- 
 able for gold or silver at the option of the holder. Bills that 
 are not redeemable are clearly worthless; and the word re- 
 deemable being confined by previous classification to bills 
 that are exchangeable for coin upon demand, it follows that 
 bills independent of coin are lacking in the essentials of value. 
 By reasoning based on such unconscious monetary puns the 
 people are misled. Bills that are not redeemable (in goods 
 or service) are clearly worthless, but they may be irredeemable 
 in gold or silver and yet redeemable in goods and services to 
 such extent that they will be as valuable or even more valu- 
 able than coin. 
 
 The truth appears to be that men do not accept money 
 for goods and services with a view of converting the money 
 into gold; they accept money for goods and services because 
 
4 PAPER MONEY VINDICATED BY HISTORY. 
 
 they know that other men will accept that same money for 
 other goods and services, and that it will pay debts and taxes. 
 Gold itself is received as money, not as an end but as a 
 means; not because the receiver desires to make use of the 
 gold as such, but simply because it is by law and custom re- 
 deemable in goods and services, at a value determined by the 
 limitation of its quantity and the monetary demand. Law 
 and custom impart the fundamental money quality of general 
 receivability in exchange and payment, and have at other 
 times bestowed a money value on bullets, skewers, nails, shells, 
 skins, feathers, beads, notched sticks, etc. If then, by law 
 and custom our bills possess the qualities that give the metals 
 a money value, if they are redeemable in goods and services 
 and are limited in quantity they will have a monef value 
 of their own whether exchangeable for coin upon demand or 
 not. 1 
 
 All great economists 2 emphatically declare that converti- 
 bility into coin or bullion is not required to maintain the 
 value of paper money, and that legal tender paper "irre- 
 deemable" in coin may be kept at any required value simply 
 by the regulation of its volume. The only use claimed, by 
 any scientist for metallic convertibility is to regulate the 
 volume of the circulating medium, and for this purpose there 
 are much more perfect methods, as will appear hereafter. 
 
 To reason and authority we add the force of fact. The 
 history of England, France, Russia, Austria, Venice, Brazil 
 and the United States most clearly proves that independent 
 paper money, issued as a full legal tender under a stable gov- 
 ernment [and limited in volume to the needs of business, 
 will not depreciate, but forms a far more reliable and equit- 
 able medium of exchange than coin or paper on a metal base, 
 the value of which is governed by chance or private manipu- 
 lation, and is therefore open to ruinous fluctuations. 
 
 If the paper is not a full legal tender, or if it is issued in 
 too great quantity (more than the growth of business can 
 absorb), or if the government is tottering and unable to en- 
 
 0) See Chapter IT. for further reasoning on this point. 
 ( 2 ) See Chapters II., III. and IV. 
 
PAPER MONEY VINDICATED BY HISTORY. 5 
 
 force the legal tender quality, the currency may depreciate 
 in value, as in the case of the French Assignats, the Conti- 
 nental currency, the Confederate scrip, the Colonial money 
 of Massachusetts, etc. The North depreciated most of its 
 money during the War of the Rebellion by denying it a full 
 legal tender quality, and issuing too much of it it was legal 
 tender except for the payment of duties on imports and in- 
 terest on public debt. There were, however, 
 
 SIXTY MILLIONS OF DEMAND NOTES 
 
 that were receivable for public dues and they remained sub- 
 stantially at par with gold thru all the vicissitudes of the war 
 until they were retired. 
 
 The Acts of July 17 and August 5, 1861, authorized the 
 issue of fifty millions of demand notes in denominations of 
 $5 and upwards, bearing no interest and receivable for public 
 dues. The Act of Feb. 12, 1862, authorized a further issue 
 of 10 millions. TJiese 60 millions of notes were afterwards 
 (March 17, 1862) made legal tender. 3 
 
 The first demand notes were issued in August, 1861, being 
 paid out f or ^ salaries at Washington. Before the suspension 
 of specie payments, December 28, 1861, $33,460,000 of the 
 demand notes were in circulation, and the whole amount au- 
 thorized was issued prior to April 1, 1862. These demand 
 notes, not being at the start a legal tender, were received with 
 hesitation by merchants and shop-keepers. Railroad com- 
 panies refused them and leading bankers in New York would 
 not take them except on special deposit. 4 
 
 When the notes were made a legal tender of course these 
 difficulties vanished. 
 
 ( 3 ) Walker, "Money," p. 373, Bolles "Financial Hist. U. S. 1861-1885," p. 
 75, Gen. Weaver's "Call to Action," p. 214, John Jay Knox on United States 
 Notes, p. 89 et seq. ; Statutes of the U. S. 
 
 ( 4 ) An interesting anecdote is told on page 225 of Schucker's life of 
 Secretary Chase. "About the time of the suspension of cash payments, a 
 wealthy New Yorker came into the possession of a large sum approximating 
 to one million of dollars in 'demand notes.' He offered them for deposit in 
 a leading bank of New York, the officers of which refused to receive them, 
 however, in the ordinary course of business, or in any other way than as a 
 special deposit. Having no alternative, the gentleman reluctantly consented. 
 The demand notes being receivable for customs the same as coin, kept pace 
 pari passu with the advance in the price of coin, and when the depositor in 
 the bank withdrew his deposit 'demand notes' were worth nearly or quite 
 one hundred and fifty per cent, premium measured in legal tender." 
 
PAPER MONEY TINDICATED BY HISTORY. 
 
 The notes were of the size of greenbacks and were of the 
 following form: 
 
 Masbfnston, 
 
 ACT OF JULY 17, 1861 
 
 ON DEMAND THE 
 
 -- 
 
 PROMISE TO PAY THE BEARER 
 
 RECEIVABLE IN PAYMENT OF ALL PUBLIC DUES 
 
 Now note the situation; war; gold and silver scarce; specie 
 payments suspended; greenbacks issued for war expenses, a 
 legal tender except for duties on imports and interest on tho 
 public debt; 5 and 60 millions of demand notes, legal tender 
 to the same extent as the greenbacks plus the quality of being 
 receivable for public dues. Coin had three utilities the green- 
 back did not possess coin could be exported, it could pay 
 interest on the public debt, and it could pay duties on imports. 
 The demand notes would pay duties but could not pay in- 
 terest on the public debt, and were not available for exporta- 
 tion. What was the result? I take the answer from page 97 
 of the History of the United States Notes by John Jay Knox, 
 the highest authority on the subject. 6 
 
 PRICE OF PRICE OF 
 DEMAND NOTES GOLD IN 
 DATE. IN GREENBACKS. GREENBACKS. 
 
 1863 May 10 10014 1033/ 8 
 
 June 7 101 104y 8 
 
 July 5 10514 109% 
 
 August 2 10514 115% 
 
 September 6 108 11914 
 
 October 4 122% 123 
 
 November 1 126% 13114 
 
 December 6 125 132 
 
 1863 January 3 129 134% 
 
 February 7 155 157% 
 
 March 7 153 155y 2 
 
 (") The act of February 25, 1862, authorized the issue of 150 millions of 
 U. S. notes, "receivable in payment of all taxes, internal duties, excises, 
 debts and demands of every kind due the United States except duties on 
 Imports, and of all claims and demands against the U. S. EXCEPT for interest 
 on bonds and notes, which shall be paid in coin. Fifty millions of said notes 
 shall be in lieu of the demand treasury notes authorized by the act of July 
 
PAPER MONEY VINDICATED BY HISTORY. I 
 
 The above data show that the premium upon the demand 
 notes kept within a very few points of the premium on gold. 
 February 7, 1863, the difference between the demand notes 
 and greenbacks was 55 points and the difference between the 
 demand notes and gold was but 2 points. 
 
 The slight difference between the "demands" and gold was 
 due to the exportable quality of the latter, and the fact that 
 the notes would not pay interest on the bonds. This in- 
 ability of the notes, together with their power to pay duties, 
 caused their early withdrawal by the government. Mr. Knox 
 says (p. 90): "Efforts were made to retire them as rapidly 
 as possible, for as they were receivable for duties they em- 
 barrassed the government in providing for the gold interest 
 upon the public debt. On July 1, 1863, more than 56 mill- 
 ions had been retired, and a much larger amount of legal 
 tenders (with the exception clause) had been placed in cir- 
 culation." 
 
 Thus we sec what may be effected by the presence or ab- 
 sence of the legal tender quality. 
 
 SILVER CERTIFICATES. 
 
 The Act of February 28, 1878, provided that any holder 
 of the coin (standard silver dollars) authorized by the Act 
 might deposit the same with the Treasurer or any Assistant 
 Treasurer of the United States in sums not less than ten dol- 
 lars and receive therefor certificates of not less than ten 
 dollars each. The coin deposited for or representing the cer- 
 tificates shall be retained in the Treasury for the payment of 
 the same on demand. Said certificates shall be receivable 
 for customs, taxes, and all public dues. The Act of August 
 4, 1886, authorized the issue of silver certificates in denomina- 
 tions of $1, $2, and $5. In Circular No. 123, issued by the 
 
 17, 1861; which said demand notes shall be taken up as rapidly as practicable 
 and the notes herein provided for substituted for them." July 11, 1862, 
 another 150 millions were authorized and March 3, 1863, still another issue of 
 equal amount. 
 
 ( 6 ) John Jay Knox graduated from Hamilton College in 1849, was a 
 banker and bank officer till 1862, when he received a treasury appointment 
 from Secretary Chase; in 1867 he became Deputy Comptroller of the Cur- 
 rency; in 1872 he was appointed Comptroller and held the office till 1884, 
 when he resigned and became President of the National Bank of the Re- 
 public in New York. His History of the U. S. Notes was published in 1884 
 by Chas. Scribner's Sons. 
 
8 PAPER MONEY VINDICATED BY IIISTOKY. 
 
 United States Treasury Department, July 1, 1896, and signed 
 by John G. Carlisle, Secretary of the Treasury, we find on 
 page 11 the following statement: 
 
 "Silver certificates have practically taken the place in cir- 
 culation of the standard silver dollars which they represent. 
 The amount outside the Treasury July 1, 1896, was $331,- 
 259,509, while the amount of standard silver dollars outside 
 the Treasury was only $52,175,998. Neither silver certi- 
 ficates nor silver dollars are redeemed in gold." 7 
 
 Yet these silver dollars and certificates pass at par with 
 gold. Why ? Simply because they are legal tender for debts, 
 duties and taxes, and are not issued in excess. No one takes 
 
 ( 7 ) There is a popular impression that silver certificates are redeemed in 
 gold. This has arisen from confusing the Treasury Notes authorized by the 
 act of July 14, 1890, known as the "Sherman Act," by which the Secretary 
 Qf the Treasury was directed to buy 4% million ounces of silver per month 
 at the market price and pay for the same with Treasury notes redeemable 
 on demand IN COIN (gold or silver in the discretion of the Secretary) and 
 legal tender for all debts, public and private except where otherwise pro- 
 vid.ed in the contract. The purchase clause of the act was repealed Novem- 
 ber 1, 1893, up to which date $155,931,002 Treasury notes had been issued 
 under the Sherman law. "The amount of Treasury notes redeemed in gold 
 up to the close of the fiscal year, 1896, was $80,073,325, and the amount re- 
 deemed in standard silver dollars was $26,247,722." (Carlisle Circular U. S. 
 Treasury No. 123 p. 12.) On March 1, 1897, the Treasury reported $85,546,621 
 of these Treasury notes in circulation. They are redeemable in gold or silver 
 at the Secretary's discretion, but the $363,709,501 of silver certificates issued 
 under the laws of February 28, 1878, and August 4, 1886, are not redeem- 
 able in gold; the law does not authorize their redemption in anything but 
 silver and they are not redeemed in anything but silver. On page 328 of 
 "Coinage laws of the United States" published by authority of the Senate, 
 Secretary Carlisle writes as follows in answer to a request from the Senate 
 for information as to "whether silver dollars or silver coin certificates have 
 been redeemed by the treasury department or exchanged for gold or paper 
 that is by law or practice of the government redeemable in gold:" 
 
 Treasury Department, October 17, 1893. 
 
 To the President of the Senate: 
 
 The law providing for the redemption or exchange of silver certificates, 
 which requires that such certificates shall be redeemed or exchanged in kind 
 or for standard silver dollars, has, so far as this department has information, 
 been strictly complied with by the treasurer of the United States and the 
 various sub-treasury offices, and no gold has been given in return for such 
 certificates or standard silver dollars. J. G. CARLISLE. 
 
 The Secretary proceeds to state that in New York and San Francisco the 
 sub-treasurers have sometimes paid out paper that was by law or practice 
 redeemable in gold, in payment for silver dollars or certificates deposited 
 with those offices. Such payments of gold paper were made not as matter of 
 right nor even at request of the depositor of the silver, but as a mere matter 
 of convenience to the payor, the silver funds specified in the law for the 
 redemption not being at hand at the given time and place. These cases the 
 Secretary says were infrequent and the amounts involved insignificant. The 
 opposite sort of exchange has been much more frequent and considerable, 
 viz., the payment of silver certificates and silver dollars ($167,858,132 from 
 1880 to 1893) in exchange for deposits of gold coin, at the request or with 
 the willing assent of the depositor. 
 
 September 10, 1894, Secretary Carlisle wrote: 
 
 "The department does not redeem either silver dollars or silver certifi- 
 cates with gold." April 29, 1895, he wrote: 
 
 "The policy stated on page 328 of the 'Coinage Laws of the United States' 
 has been pursued by the Treasury Department ever since the passage of the 
 Bland Act." And July 1, 1896, he said: "Neither silver certificates nor silver 
 dollars are redeemed in gold." 
 
PAPER MONEY VINDICATED BY HISTORY. 9 
 
 a silver dollar certificate for a dollar's worth of goods or ser- 
 vice because it is redeemable in gold, for it is not so redeem- 
 able, nor because it is redeemable in silver, for the silver 
 behind it is only worth a little more than fifty cents. No, he 
 takes it at its face because he knows that it will pay a dollar's 
 worth of debt and taxes; and that everybody else in the 
 United States will honor it for a dollar's worth of service or 
 commodities, which makes it as good as a gold dollar, and 
 better, for it is not so easily lost. 
 
 In March, 1897, there were in circulation $363,709,501 
 of- silver certificates, $55,378,762 standard dollars and $60,- 
 709,595 subsidiary silver coin a total of $479,797,858 "re- 
 deemable" only in silver worth a trifle more than fifty cents on 
 the dollar, all of it passing at par with gold because everybody 
 knows it is a good legal tender and will pay their debts and 
 taxes as well as gold. When a merchant or banker or anybody 
 else receives a payment in bills he doesn't stop to see whether 
 they are gold bills or silver bills; he only looks to see if 
 they are genuine. He knows that if they are not counterfeit 
 the government will take them for taxes and duties, the courts 
 will enforce them in satisfaction of debt, and the people will 
 take them for goods and Cervices at their face value, and that 
 is all he wants to know about them. 
 
 THE CRISIS OF 1857. 
 
 The notes of the suspended banks of !N"ew York and New 
 England remained almost or quite at par after the suspension 
 of specie payments in 1857. 8 
 
 COUNTY SCRIP. 
 
 Our counties frequently pay the expenses of constructing 
 public works with county scrip, receivable for county taxes, 
 and even this paper money, with its very limited legal tender 
 qualities, passes at par, if not too largely issued. 
 
 LEATHER MONEY. 
 
 One of the earliest mediums of exchange consisted of the 
 skins of animals, and from this intrinsic money was developed 
 
 ( 8 ) Professor Dunbar of Harvard in the 'Quarterly Journal of Economics 
 Vol. 6, p. 333. 
 
10 PAPER MONEY VINDICATED BY HISTORY. 
 
 a system of representative money consisting of small pieces 
 of leather usually marked with an official seal. Such a cur- 
 rency was long in use in Russia, in China, in Carthage and 
 probably in Rome before the time of Numa. 9 With the 
 growth of trade the transfer of skins and furs would naturally 
 be found an inconveniently bulky method of exchange. Small 
 pieces might be clipped off, and handed over as tokens of pos- 
 session. By fitting into the place from which they were cut, 
 they would prove ownership. After the people became accus- 
 tomed to the circulation of these bits of leather as money they 
 would continue to circulate without regard to what may have 
 become of the skins from which they were cut, 10 and a repre- 
 sentative money was evolved from the use of skins and furs 
 under the operation of the same laws that in later days de- 
 veloped paper money and money of account as substitutes for 
 gold and silver, in order to avoid the trouble and risk of 
 handling the precious metals, the difficulty of obtaining them 
 in sufficient quantity, and the expense and burden of keeping 
 them safely. 11 
 
 INDIAN MONEY. 
 
 When the Mayflower touched New England the pilgrims 
 found the Indians using wampum, or black and white beads 
 made of clam shells and periwinkle shells, as a medium of 
 exchange. The pilgrims adopted this Indian money and it 
 became the chief currency of the early settlers. 12 
 
 Another sort of money used by the Western Indians teaches 
 a lesson our people have shown less power to learn. I heard 
 it described when a boy by an Indian orator who had been 
 educated in our Eastern colleges and who lectured in a most 
 interesting manner on the customs of his people. He said 
 that when a man did a day's work for the government the 
 chief cut a notch in a stick and gave it to the worker, and that 
 notched stick would buy a day's work from any other Indian, 
 or pay for a day's work's worth of the provisions and stores 
 
 ( 9 ) Jevons Money and the Mechanism of Ex., pp. 20, 196-7. M. Bernard- 
 akis' Journal des Economistes, Vol. xxxiii. pp. 353-370. 
 
 ( 10 ) Ibid. 
 
 ( u ) Jevons' Money & Mechanism of Ex. pp. 200-1. 
 ( 12 ) Prof. Sumner's His 
 
 History of Amer. Currency. 
 
PAPER MONEY VINDICATED BY HISTORY. 11 
 
 belonging to the tribe, as the product of property they 
 jointly owned, or purchased with the proceeds from sales of 
 their land, etc., or produced or procured by their joint efforts. 
 Here was a money without a metallic base, not convertible 
 into coin, redeemable only in goods and services, and yet it 
 kept its value and did justice in exchanges, because (1) it 
 was legal tender by custom; (2) the volume of genuine notches 
 was limited by the method of issue and redemption; and (3) 
 as the speaker stated with peculiar emphasis, "No Indian was 
 ever known to counterfeit or inflate the currency." 
 
 NORTH CAROLINA. 
 
 Hon. John C. Calhoun said in the United States Senate in 
 1838: 
 
 "JSTorth Carolina, just after the Revolution, issued a large 
 amount of paper, which was made receivable in dues to her ; 
 it was also made a legal tender, but which, of course, was not 
 made obligatory after the adoption of the Federal Constitu- 
 tion. A large amount say between four and five hundred 
 thousand dollars remained in circulation after that period, 
 and continued to circulate for more than twenty years at 
 par with gold and silver during the whole time, with no other 
 advantage than being received in the revenues of the State, 
 which were much less than one hundred thousand dollars per 
 annum. 13 
 
 CONNECTICUT. 
 
 In early years Connecticut, like Massachusetts and Rhode 
 Island, had overissued bills of credit, and had suffered from 
 their depreciation. She was one of the States prohibited by 
 Parliament in 1751 from issuing legal tender paper, and for 
 twenty years she kept her commerce on a specie base. Be 
 tween October 1771 and October 1774, however, she issued 
 39,000 in bills for the expenses of government, seasonable 
 and sufficient taxes being provided for their redemption. 
 These "irredeemable" bills were not even a legal tender ex- 
 cept for taxes, and yet "as they did not exceed the sums 
 
 ( 13 ) "Money of Nations," p. 65, and Arena, February, 1894, p. 366. 
 
12 PAPER MONEY VINDICATED BY HISTORY. 
 
 required by the trade of the Colony, they did not depre- 
 ciate." 14 
 
 NEW YORK, NEW JERSEY AND PENNSYLVANIA 
 
 during their Colonial days possessed an independent paper 
 money that did not depreciate until the English Parliament 
 destroyed its legal tender quality. 15 The fullest data are ob- 
 tainable in relation to the paper of Pennsylvania, which will 
 therefore be taken as an example of the financial policy of 
 the middle colonies before the Revolution. 
 
 PENNSYLVANIA PAPER MONEY. 
 
 For half a century, beginning in 1723, the colony of Penn- 
 sylvania had an independent or "irredeemable" paper money, 
 which did not depreciate but kept its value, and was an im- 
 portant factor in the unparalleled prosperity of the colony 
 during the period named. The money was issued and the 
 whole financial system managed directly by the Government. 
 Some of the money was loaned at low interest on the security 
 of lands and houses, a part of the principal being repaid each 
 year with the interest. The rest of the money was issued in 
 payment of salaries and other public expenses. The bills were 
 not redeemable in gold or silver, but were made full legal 
 tender, and not being issued in excess of the needs of business, 
 they did not depreciate. 16 
 
 ( 14 ) Dr. Bronson's Connecticut Currency, p. 84. 
 
 ( 1B ) The prices of some exported articles varied considerably after the 
 middle of the 18th century in consequence of changes in the foreign market, 
 but with this exception, prices remained substantially level in the middle 
 colonies during the half century of independent legal tender paper. Prices 
 and exchanges were practically at the same level in New York and New 
 Jersey as in Pennsylvania, while in Massachusetts, Rhode Island and other 
 colonies they rose in 1749 to more than six fold the Pennsylvania rates. 
 
 Franklin's Works (Sparks) Vol. II., p. 351. 
 
 Paper Currency of the Colonies by Henry Phillips, Jr., 1865. 
 
 U. S. Notes by John Jay Knox, p. 5. 
 
 Walker on Money, pp. 321, 322, 314. 
 
 Hist. Amer. Currency by Prof. Sumner, p. 36. 
 
 (i) For details see below, and the following authorities: 
 
 Franklin's Works, edited by Jared Sparks, Vol. II., pp. 254 to 276. 
 
 "Administration of the Colonies," by Governor Pownall of Massachusetts., 
 (London, 1765, fifth ed., 1768). 
 
 "A Discourse Concerning Paper Money," Phil., 1743 by John Webbe. 
 
 Adam Smith's Wealth of Nations, 1776, p. 262. 
 
 "Paper Currency of the Colonies," by Henry Phillips, Jr., Roxbury, 
 Mass., 1865. 
 
 Annals of the Amer. Academy of Polit. and Social Science, July, 1806, 
 article by C. W. Macfarlane. 
 
 Pres. F. A. Walker's book on "Money," p. 322, et seq. 
 
 Hon. John Davis, M. C., in Arena, February, 1894. 
 
 Laws of Pa.; Colonial Records; Journals of Assembly. 
 
 Hazard's Register of Pa. 
 
 Gordon's History of Pa. 
 
 Anderson's History of Commerce. 
 
 Douglass' Summary. 
 
 Gouge's History of Paper Money, Phil., 1833. 
 
PAPER MONEY VINDICATED BY HISTORY. 13 
 
 In 1764 Benjamin Franklin, "full of years and wisdom," 
 wrote of the independent money of the middle colonies : 
 
 "It has continued now nearly forty years without variations 
 upon new emissions, tho in Pennsylvania the paper money 
 has increased from 15,000 to 600,000 or near it. Nor has 
 any alteration been occasioned by the paper money in the 
 price of the necessaries of life when compared with silver." 17 
 
 Pennsylvania was exempted from the Act of Parliament 
 passed in 1751 to restrain the Northern Colonies from issuing 
 legal tender paper, 18 but in 1764 an Act was passed in Eng- 
 land "to prevent paper bills of credit hereafter to be issued 
 in any of his Majesty's Colonies in America from being de- 
 clared to be legal tender in payment of money, and to prevent 
 the legal tender of such bills as are now subsisting from being 
 prolonged beyond the periods for calling in and sinking the 
 same." 19 
 
 A second Act seemingly 20 more stringent and imperative 
 than the first was passed in 1773. The result of these laws 
 was a progressive contraction of the legal tender currency, 
 and a final extinction of the full legal tender quality the bills 
 had so long enjoyed. The consequences were commercial 
 loss, inconvenience and industrial distress of such severity that 
 according to high authority 21 this parliamentary destruction 
 of financial freedom in America was really a powerful factor 
 in causing the compound discontent and resentment that pro- 
 duced the revolution. 
 
 Governor Pownall of Massachusetts said in 1768: 
 
 "I will venture to say that there never was a wiser or 
 better measure never one calculated to serve the interests of 
 an increasing country; that there never was a measure more 
 
 () Franklin's Works (Sparks), Vol. II., p. 351. Testimony that is cor- 
 roborated by careful study of the price lists of the period, 1723 to 1773, see 
 below. The 600,000 named by Franklin, was more than the outstanding 
 circulation of Penn. notes either he did not allow for withdrawals or in- 
 cluded bills of other colonies circulating in Pa. 
 
 ( 18 ) Phillips, p. 23 note. 
 
 ( 19 ) Phillips, p. 25. Other authorities give the date of the act as 1763 
 (Gouge, p. 23, Walker, p. 324). The truth appears to be that the act was 
 proposed in 1763; reasons were given by the Board of Trade for it, and by 
 Franklin and the Colonial Assemblies against it in 1764, and it was passed 
 in the latter year (Macfarlane, p. 63, Phillips, p. 70 et seq., and action of 
 N. J. Assembly in 1764 while the bill was pending). 
 
 ( M ) Cobbett's Parliamentary History does not give this act, but it Is 
 referred to by several authorities. Gouge p. 24. See also Davis, Cooper, 
 Twells, etc., Appendix A. 
 
 ( 2i ) See Appendix. A, 
 
14 PAPER MONEY VINDICATED BY HISTORY. 
 
 steadily pursued or more faithfully executed for forty years 
 together than the loan office in Pennsylvania, founded and 
 administered by the assembly of that province." : 
 
 THE CONTINENTAL MONEY. 
 
 The total circulation of the thirteen colonies just before 
 the ^Revolution was estimated at 12,000,000 of dollars, be- 
 tween 4 and 5 millions of it being specie. 23 In June, 1775, the 
 Continental Congress voted to issue 3 millions of paper; in v 
 November 3 millions more; February, 1776, 4 millions; May 
 and July, 10 millions. The States also issued paper to cover 
 war expenses about 2 millions in 1775 and 3^ millions in 
 1776. 
 
 Before the middle of 1776, 9 millions of Continental paper 
 had been issued, and before the close of the year the emissions 
 amounted to 20 millions. What was the result? Professor 
 Sumner, of Yale, says: "Continental paper for 9 millions 
 was issued before depreciation began. 24 
 
 Including the State issues nearly 12 millions of paper had 
 been put out without depreciation. On the approach of dan- 
 ger a considerable part of the coin had vanished, so that the 
 total circulation was now about 21 millions an addition of 
 75 per cent, to the circulating medium in about a year's time, 
 changing the per capita from $4.28 to $7.05 without depre- 
 ciation. The transformation thus effected ivas equivalent 
 to an addition of $1,200,000,000 to our currency now, 
 changing the circulation from $21 to $37 per head. 
 
 There is high authority for the conclusion that no appre- 
 ciable fall in the value of the Continental money took place 
 until after 20 millions of it had been issued. The historian, 
 Dr. David Kamsay, after reciting the issues from June, 1775, 
 to August, 1776, says: 
 
 "These several emissions amounting in the aggregate to 20 
 millions of dollars circulated for several months without any 
 
 ( 22 ) For those who wish to go more deeply into the history of this 
 interesting matter, a fuller account is given in Appendix A., p. 161. 
 
 P) Phillips' "Paper Cur. of the Colonies," p. 155. 
 
 (24) "History American Currency," p. 44, see also Gouge "History of 
 Paper Money," p. 26, citing the concurrent testimony of Jefferson and Paine 
 to the effect that the issues exceeded 9 millions before depreciation began. 
 
PAPER MONEY VINDICATED BY HISTORY. 15 
 
 depreciation, and commanded the resources of the country 
 for public service equally with the same sum of gold or silver. 
 The United States for a considerable time derived as much 
 benefit from this paper creation of their own, tho without any^ 
 funds for its support or redemption, as would have resulted 
 to them from the free gift of as many Mexican dollars. But 
 there was a point in time and quantity beyond which this Con- 
 gressional alchemy ceased to operate. That time was about 
 18 months from the date of their first issue, and that quantity 
 about $20,000,000." 25 
 
 Upon this statement of the great historian, including the 
 State issues, 25 millions of paper were issued before deprecia- 
 tion occurred. The circulation of the States was nearly 
 trebled, and yet, so intense were the times, the Continental 
 paper passed current at its face value thruout the greater 
 part of the country till near the end of 1776. Such a change 
 to-day would mean the addition of $2,880,000,000 to our 
 $1,600,000,000 of circulation! 
 
 The Continental Congress had no power to tax. It did its 
 best, however, to get the States to tax themselves for the with- 
 drawal of the Continental paper, so that its volume might 
 not become excessive. The States neglected to do this. Early 
 in the proceedings, before depreciation began, Franklin urged 
 that Congress should borrow back its notes rather than unduly 
 increase the mass outstanding. But his wise counsel was dis- 
 regarded, and by the close of 1776 depreciation began, and 
 continued with subsequent issues until 1781, when the Con- 
 tinental paper stood at 500 to 1. The total issues are stated 
 by the American Almanac for 1830 at 357 millions, and by 
 the Merchants' Magazine at 387 millions; but these estimates 
 include re-issues, and the true figure is about 242 millions. 26 
 During the same period, 1775 to 1781, the States issued about 
 209 millions, so that the total circulation of genuine notes 
 in 1781 was $460,000,000 38-fold the circulation of 1775, 
 or a change from $4-28 to $150 per head in seven years. 
 
 (*) History of the United States. See "Finance" in the index, as the 
 paging varies in different editions. See also Walker on "Money," p. 327. 
 
 (26) Prof. Sumner's "Financier and Finances of the American Revolution," 
 1891, Vol. 1, p. 98, and Walker on Money, p. 329, gives nearly the same figure. 
 
16 PAPER MONEY VINDICATED BY HISTORY. 
 
 The rise of exchange is shown by the following table taken 
 from Gouge, p. 26: 
 
 DATE. EXCHANGE AT PHILADELPHIA. 
 
 1777 January 1% per cent. 
 
 March 2 
 
 July 3 
 
 1778 January 4 
 
 August 5 
 
 November 6 
 
 1779 January 7, 8, 9 
 
 February 10 
 
 April 12 to 22 
 
 August 20 
 
 1780 January 40, 45 
 
 March 60 
 
 August 65, 75 
 
 November 80, 100 
 
 1781 January 100 
 
 February 100, 120 
 
 March 120, 135 
 
 April 135, 200 
 
 May 200, 500 
 
 There was not the slightest hesitation among the people 
 about taking the bills at any time they circulated as lively 
 as ever at 500 to 1. On May 31, 1781, they ceased to circu- 
 late, but were afterward bought on speculation at from 400 
 for 1 to 1000 for 1. 
 
 The rapid depreciation of paper from 1776 to 1781 caused 
 a great deal of misery. Dr. Eamsey says: 
 
 "Many opulent persons of ancient families were ruined by 
 selling paternal estates for a depreciating paper currency, 
 which in a few weeks would not replace half of the real prop- 
 erty in exchange for which it was obtained." 
 
 Mortgages, debts, rents, incomes, were swept away; prop- 
 erties changed hands; people could live only by producing, 
 for money withered in their hands; industry and diffusion of 
 property were favored; debtors were freed and creditors 
 ruined results in large part beneficial, but reached by an 
 unjust path. If the States had taxed themselves, or Congress 
 had taken Franklin's advice, the currency might have been 
 kept within reasonable bounds, and diffusion of property, un- 
 burdening of debtors, etc., might have been attained by means 
 
PAPEK MONEY VINDICATED BY HISTORY. 17 
 
 more wise and just. It is needful to remark that in order to 
 sustain the currency, something more would have been neces- 
 sary besides the limitation of the volume of notes issued by 
 Congress and the States by taxation or borrowing; viz.: great 
 care in the execution of the bills would have been requisite 
 in order to prevent imitation, or else a frequent recalling of 
 the circulation to weed out counterfeits, or both; for the 
 reader must not imagine that the depreciation of the Conti- 
 nental money was due entirely to over-issue. Besides the ef- 
 fect of over-issuing genuine bills, the volume of money was 
 enormously increased and its circulation debased by the sys- 
 tematic injection of counterfeit notes. Bolles says: 27 
 
 "Counterfeiting was not confined to individuals. The 
 British Government also embarked in the business. General 
 Howe abetted and patronized those who were engaged in 
 making and pushing these spurious issues into circulation. 
 In the same papers which published British official documents 
 and proclamations might be found advertisements like the 
 following: 
 
 'Persons going into the other colonies may be supplied with 
 any number of counterfeited Congress notes for the price of 
 the paper per ream. They are so nearly and exactly executed 
 that there is no risk in getting them off, it being almost impos- 
 sible to discover that they are not genuine. This has been 
 proved by bills of a very large amount, which have been suc- 
 cessfully circulated.' * * * Persons accompanying an 
 English flag of truce are known to have largely made use 
 of the opportunity for disseminating the fraudulent notes; 
 emissaries from New York endeavored to obtain paper from 
 the mills similar to that used by Congress for its emissions. 
 Many in Great Britain and elsewhere believed that if Conti- 
 nental paper money could be destroyed the Americans would 
 be obliged to submit, from lack of funds to maintain their 
 cause. This is why the British Government promoted so ex- 
 tensively the business of counterfeiting. But General Clin- 
 ton wrote truthfully in January, 1780: 
 
 ( 27 ) Financial History of the United States, 1774 to 1789, pp. 151 to 153. 
 
1 8 PAPER MONEY VINDICATED BY HISTORY. 
 
 "Every day teaches me the futility of calculations founded 
 on its failure. IsTo experiments suggested by your lordship, 
 no assistance that could be drawn from the power of gold or 
 the arts of counterfeiting, have been left unattempted. But 
 still the currency, like the widow's cruse of oil, has not failed 
 the Congress. My hopes on this head, I must acknowledge, 
 were much higher twelve months since than to-day. "With 
 the appearance of an enormous quantity, still it is all the 
 debt which the people have to struggle with, and in this view, 
 and when compared with that of other nations, it shrinks into 
 a very inconsiderable sum. I shall, nevertheless, my lord, 
 continue assiduous in the application of those means intrusted 
 to my care; if they cannot work its destruction, yet they can 
 embarrass the government and make the carrying on of the 
 war more precarious, burdensome, and less energetic." 
 
 Phillips says: "A shipload of counterfeit Continental 
 money coming from Great Britain was captured by an Ameri- 
 can privateer. 7728 
 
 The Continental money did not die a natural death. It 
 was mortally wounded on the field of battle, while bravely 
 fighting for its country, from which metallic money had fied 
 at the first sign of danger. It won the fight before it breathed 
 its last, and conquered Great Britain with all its gold and 
 limitless resources. 
 
 ENGLAND. 
 
 In 1797 the Bank of England, the monetary heart of Great 
 Britain, suspended specie payments, and legal tender incon- 
 vertible paper was the principal medium of exchange till 
 1821, when specie payments were resumed. For the first 
 ten years and more the ^redeemable 77 paper money did not 
 depreciate; afterwards in consequence of excessive issues 
 prices rose considerably. In 1815 the battle of Waterloo closed 
 the war with Napoleon and the period of expansion came to 
 an end. In 1816 England demonetized silver and began to 
 contract the currency preparatory to the resumption of specie 
 payments. Prices fell heavily and continued to fall until 
 
 (*) Cont. Paper Money, p. 71. 
 
TAPER MONEY VINDICATED BY HISTOE Y. 1 9 
 
 the middle of the century, when the floods of gold began to 
 pour in from the newly discovered mines of California and 
 Australia. 
 
 The period of expanding currency 1797-1815, tho an epoch 
 of exhausting war, was a period of remarkable prosperity. 
 Merchants, manufacturers, [farmers, laborers, all classes in 
 the community, prospered in a high degree, and wealth was 
 created in a hitherto unheard of ratio. 
 
 Early in the war with France (which commenced in 1793) 
 metallic money began to disappear, producing financial strin- 
 gency and commercial disaster till specie payments were sus- 
 pended and irredeemable paper came to the rescue. The 
 paper money of England enabled her to put vast armies in the 
 field, to subsidize Europe, to conquer Napoleon, and to de- 
 velop her own resources to an astonishing extent. Wm. Pitt 
 said of the suspension of specie payments that its effect "was 
 like finding a mountain of gold." 
 
 The second period, 1816-1849, the epoch of contraction 
 and appreciating gold, was one of panic and industrial distress. 
 The fall of prices paralyzed business. Profits and wages 
 shrank. Vast numbers of workers were thrown out of em- 
 ployment. Eiots broke out in many manufacturing towns, 
 and agricultural laborers burned corn stacks and hay ricks, 
 for which some of them were hanged. The ruined farmers 
 petitioned the government for loans at low interest, based on 
 land and agricultural products, but they were told the trouble 
 was with the tariff when that was fixed all would be well. 
 But years of tariff and no tariff were alike disastrous. Prices 
 fell 30, 40, 50, 60 per cent., and harvests were abundant, yet 
 the laboring classes were unable to get bread, and famine 
 desolated Ireland. Hundreds of banks were ruined, as were 
 tens of thousands of enterprising merchants and manufactur- 
 ers; and the land holders of England, Ireland and Scotland 
 were reduced in numbers from 175,000 to 50,000, a change 
 precisely contrary to that produced by the expanding paper 
 of France in the years of the Revolution. 
 
 The English period of expansion, 1797-1815, corresponds 
 in our own history to the period from 1 860 to 1866, when the 
 
20 PAPER MONEY VINDICATED BY HISTORY. 
 
 suspension of specie payments and the expanding volume of 
 "irredeemable' 7 national notes produced the same effects that 
 characterized the paper epoch in England. The English per- 
 iod of contraction, demonetization of silver and rising gold, 
 1816 to 1849, corresponds to our period from 1866 to the 
 present time (1897) and the effects have been the same as in 
 Great Britain. 
 
 The course of events in England and America in the eras 
 under consideration may be broadly presented thus : 
 
 CAUSES. RESULTS. 
 
 Danger. Financial stringency and 
 
 Disappearance of coin. Industrial distress. 
 
 Suspension of specie pay- Expanding money. 
 
 ments and issue of incon- Revival of business and mar- 
 vertible paper. velous prosperity. 
 
 Contraction, demonetization Scarcity of money. 
 
 of silver and resumption Rising gold and money and 
 of specie payments. obligations based on gold. 
 
 Panic and industrial depres- 
 sion. 
 
 In view of the immediate revival of business on the sus- 
 pension of specie payments and issue of irredeemable notes 
 in 1797, and the unparalleled prosperity which England en- 
 joyed at home and abroad during eighteen years of expanding 
 paper, in spite of the heavy drain of the war, it may seem 
 strange that England's statesmen should not have learned the 
 laws of money sufficiently well to avoid the contraction and 
 the golden fetters of 1816 and following years. Perhaps they 
 would if it had not been for inherited theories and the in- 
 terests of bond holders. 29 
 
 England might have retained forever the glory of 1815, 
 had she continued the policy of supplying her people with an 
 abundant but not excessive currency, raised the needed rev- 
 
 P) See the fuller account in Appendix B. 
 
PAPER MONEY VINDICATED BY HISTORY. 21 
 
 enue by graded income and property taxes, and continued 
 the public employment and direction of all the "surplus" 
 labor 30 in the country, not in army and navy as during the war, 
 but in the construction of roads and public improvements. 
 
 The same remarks apply to our history for thirty years past, 
 the evils of which in very great part would have been avoided 
 if Congress had made all the war notes a full legal tender 
 to and from the government, placing duties on imports and 
 interest on bonds on a level with all other payments, making 
 the people's money as good as the banker's, and paying the 
 bond holders in the same money that was good enough for 
 soldiers, farmers, mechanics, merchants and manufacturers, 
 and then had been content to take the funds of the wealthy 
 as well as the lives of the poor for the service of their country, 
 establishing a graded income tax that would have made ex- 
 cessive issues of greenbacks unnecessary and, after the war, 
 had increased the volume of the currency (as France did after 
 the German war in '71) and entered upon public improve- 
 ments, in . order to absorb with ease the labor freed by the 
 cessation of hostilities, and provide a currency equal to the 
 new demands of a re-united North and South. 31 
 
 FRANCE AND GERMANY. 
 
 From 1870 to 1878 France kept her inconvertible paper 
 close to par, 32 and finally reduced the premium on gold to 
 zero, not by contracting her currency or resuming specie pay- 
 ments, but simply by expanding the volume of her irredeem- 
 able paper in judicious manner. 33 
 
 The war with Germany left France in a very serious condi- 
 tion. She had been ravaged over nearly half her territory, 
 she had had to maintain not only her own army, but in a 
 
 ( 30 ) The unemployed are not really "surplus," tho often spoken of as 
 such. There is plenty to be done. The unemployed are simply out of place 
 and out of adjustment in our complex system. 
 
 ( 31 ) The history of England during the periods above referred to is so 
 important that we give in Appendix B a fuller account for those who wish 
 to study the subject more deeply. 
 
 (32\ p ro f. Dunbar In the Quarterly Jour, of Economics, April, 1892, p. 
 333. 
 
 ( 33 ) See writings of Henry Carey Baird and Baron Wabnitz, mentioned 
 below, also "Money of Nations," by Warwick Martin, 1880, p. 21. 
 
 3 
 
22 t>APR MOfrEY VltfMCATED BY HISTORY. 
 
 large degree that of her enemy also. In addition to the 
 presence of a victorious invader, her industries had to stand 
 the shock of a domestic revolution. By the peace she lost 
 two of her finest provinces containing a million and a half 
 of her most ingenious and industrious citizens, and was re- 
 quired to pay 5 billion francs (one billion dollars) war in- 
 demnity with 5 per cent, interest on the debt each year. 
 
 Germany had suffered little, had only the partial support 
 of her own army to pay for, her soil had not been devastated 
 by battle, she was full of the enthusiasm of victory and con- 
 quest, and exultant over the billions of gold she was to re- 
 ceive from France. 
 
 What was the outcome? The French bankers made ad- 
 vances to merchants and manufacturers amounting to $36,- 
 000,000 during the first fortnight after the defeat of the 
 French armies in August, 1870, and tho consternation 
 had seized the people at the triumph of the German arms, 
 not one failure of consequence took place, and the loans were 
 promptly repaid. 34 In September, 1870, specie payments were 
 suspended and the notes of the Bank of France were made 
 a legal tender. After the first payment of coin to Germany 
 in 1871, gold went to a premium of 1^ per cent., but the vol- 
 ume of paper was expanded cautiously and the premium fell 
 and finally disappeared. In June, 1870, before the war, the 
 circulation of the bank was $275,000,000; by the end of 1870 
 it had become $460,000,000; by the end of January, 1872, it 
 had been expanded to $490,000,000 and the premium had 
 fallen to 1 per cent.; by the end of October, 1873, it had been 
 further expanded to $614,000,000, when the premium on 
 gold and silver disappeared. Coin now began to come into 
 the country and the bank began to contract its paper volume. 
 By June 25, 1874, the withdrawals amounted to $107,000,- 
 000. The contraction was found to be too great, bringing 
 
 ( M ) A similar course had been followed by the bank in the Revolution of 
 1848, when the inconvertible notes of the bank were made legal tender and 
 immense advances were made to public resources, and to private parties 
 on receipts for merchandise stored in warehouses opened for the purpose by 
 decree of the National Assembly. These merchandise receipts alone were 
 discounted to the value of $12,000,000, and the increase of the currency re- 
 vived business and saved the nation from panic and collapse (H. O. Baird, 
 "Mouey and Bank Credit," 1891). 
 
PAPER MONEY VINDICATED BY HISTORY. 23 
 
 financial distress and industrial depression, especially at Paris. 
 An expansion was immediately begun again and kept up till 
 December 31, 1874, when the paper volume had been in- 
 creased $62,000,000 and the specie $81,700,000 and pros- 
 perity was fully restored. During the early part of the first 
 expansion the debt to Germany was completely paid, not, 
 as Germany expected in French gold, but in German bank 
 notes and bills of exchange on Berlin, Amsterdam, Frankfurt 
 and other German cities and on London. Nearly seven-eighths 
 of the war indemnity was paid in this way, about one-eighth 
 of the seven being in exchange on London, and the other six- 
 eights in German notes and bills. The Germans, elated with 
 success, full of victory and plunder, bought with a lavish hand. 
 The French flooded Germany with advertisements, sold their 
 wines and silks and other luxuries and made the Germans 
 pay a large part of the indemnity themselves. The war fine 
 was really paid in merchandise for which France drew her 
 bills of exchange on the German people who paid their cash 
 into the German treasury. Germany had demonetized gold 
 in 1857 and remained on a silver basis until 1871, when, rely- 
 ing on the expected billions of gold from France, she decreed 
 the establishment of the single gold standard. In fact, how- 
 ever, she only got $54,600,610 in gold and $48,000,000 in 
 silver from France, and the outcome of the whole affair was 
 a contraction of circulation and panic in Germany, forty-one 
 banking houses being compelled to suspend, while France was 
 prosperous beyond the dreams of any one who saw her in the 
 hour of defeat. 35 
 
 Even as late as 1880 the bank had still a large volume of 
 "irredeemable" paper. It made no promise to pay its notes 
 in coin, and yet they were at par with gold, because they were 
 by law receivable for everything gold was receivable for, and 
 they were not issued in excess. 36 
 
 C" 5 ) These and many other facts relating to this period of French history 
 have been given to me by Henry Carey Baird, the noted Philadelphia 
 publisher and economic writer who studied the subject on the ground, and 
 has written numerous accounts of the splendid achievements of French 
 banking in the seventies: "Money and Bank Credit," "The Lesson of German 
 and French Finance," "The Franco-German War Fine of 1871," etc. The 
 detailed official statement of the Bank of France as to the manner in which 
 the indemnity was paid is of the greatest interest. 
 
 (36) "Money of Nations," by Warwick Martin, 180, p. 21. See also War- 
 ren's American Labor, pp. 22-4. 
 
2 4 PAPER MONEY VINDICATED BY HISTORY. 
 
 President Walker, writing in 1876, says: 
 
 "The occurrence of the war with Germany in 1870 caused 
 a suspension by the bank, which has lasted to the present 
 time; but during all this period the condition of her circula- 
 tion has constituted a triumph of sound finance. Altho ir- 
 redeemable, her paper has never been allowed, at any moment, 
 to become greatly in excess. The premium in gold has never 
 gone above 1.5 per cent., and during the greater portion of the 
 period has been five-tenths of one per cent., or even less. 
 The failure of the French armies,' wrote the late Mr. Bage- 
 hot, in November, 1874, 'has not been more striking than 
 the success of French banking.' " 37 
 
 Baron Wabuitz, a distinguished German author, says: 38 
 
 "France had, by the war of 1870, incurred a burden of 
 debt which (in proportion) far exceeded that of the United 
 States. It had been compelled to permit the issue of unse- 
 cured notes, which up to that time amounted to about $240,- 
 000,000, was increased at the very commencement of the war 
 by about $160,000,000, and in December, 1870, received a 
 second increase of about $60,000,000. All these bank notes 
 were given the quality of legal tender. * * * Yet after 
 the conclusion of peace the financial administration had the 
 courage to still further increase the issue of notes in 1871. 
 * * * Instead of fixing a date for the resumption of specie 
 payments, France merely made an arrangement with the bank 
 management, according to which, as soon as the part of the 
 national debt assumed by the bank should be paid back to 
 it, the forcible character of the legal tender notes should 
 cease. * * * The results of this French financial policy 
 have been as follows: (1) The immediate reappearance of 
 coin in circulation. * * * (2) The par exchange of bank 
 notes when their legal tender character was removed. (3) 
 Increasing prosperity of the country, which is so little af- 
 fected by the great commercial and financial crisis visiting 
 the whole world, that even the collapse of the recent gigantic 
 swindling establishments of Philipart made scarcely an im- 
 pression upon the public credit." 
 
 ( 8T ) "Money," p. 366. 
 
 (38) The O i d standard," pp. 25-7. 
 
TAPER MONEY VINDICATED BY HISTORY. 25 
 
 "The contrast between the events in France and the opera- 
 tions which the United States permitted under similar antece- 
 dent conditions, is, as will be confessed, a glaring one.' 7 
 
 France has experienced the bad effects of a currency plan- 
 lessly issued, as well as the benefits of paper properly man- 
 aged. The John Law episode, 1717-1721, was a scheme by 
 which 12 billions of francs were loaned to the King to pay 
 off his debts. The plan was to make the colonial possessions 
 of France one grand mortgage to secure the currency. The 
 notes circulated at par at first, but as the volume became ex- 
 cessive they sank in value. Even under the best conditions 
 mortgage notes could not be converted into land with suffi- 
 cient readiness to drain off the excess of voluminous 
 issues in the interest of an impecunious and ignorant 
 young King, and when the land relied on for redemption 
 of the notes was across the ocean, in the wilds of the Mississ- 
 ippi valley, it is easy to see that people would rather keep 
 the money than pay it to the government for such lands, and 
 so there was nothing to call in the excess, and the over-issues 
 depreciated the currency. 39 
 
 The French Assignats put out by the Revolutionary Gov- 
 ernment, 1790-1796, were also issued against land, and were 
 supposed to be secured thereby. The holders of the notes had 
 a right to purchase with them the lands confiscated from the 
 church and emigrant nobles, but tJic price of the land was 
 not fixed, no proportion was established between land and 
 paper, the holder of the assignats had simply the right to 
 buy land at its market value, and as the assignats depreciated 
 with excessive volume the land rose in price, and the security 
 was shown to be merely a name. 40 Even if a definite value 
 in assignats had been put upon specific portions of land, the 
 convertibility would have been too cumbrous to constitute 
 an efficient limitation on the volume of a currency issued with 
 the reckless prodigality that characterized the Revolution. 
 The land security of Pennsylvania was altogether different; 
 
 f 89 ) Jervons on "Money and the Mechanism of Exchange," International 
 Scientific Series, p. 228. 
 
 Walker on "Money," p. 304. 
 
 Hon. John Davis in Arena, June, 1894, p. 99. 
 \*) Jevons, p. 228. 
 
26 PAPER MONEY VINDICATED BY HISTORY. 
 
 the money was issued on loan to those who already owned 
 realty, and it had to be paid back with interest or the land 
 would be taken by the Government. In this way the rela- 
 tion of the notes to land constituted an effective limitation 
 upon their volume and so prevented their depreciation; but 
 in France the relation of the notes to land had nothing to do 
 with the volume issued by the Government, and little in- 
 fluence in drawing off the excess that was issued. 41 The issue 
 began in 1790, and by the beginning of 1796 over 9 billions 
 of dollars had been issued, 42 $7,200,000,000 of which were 
 in actual circulation 48 a steep ascent in the space of six years 
 from about $20 of money per head to a circulation of $300 
 per head! Imagine a change in six years from our circula- 
 tion of $1,600,000,000 to a circulation of $22,000,000,000! 
 The largest circulation claimed for the United States at the 
 close of the Rebellion was $2,000,000,000. The assignats 
 were rudely executed and easily counterfeited. In addition to 
 the overissue of genuine notes, the country was flooded with 
 counterfeits from England, Belgium and Switzerland. Europe 
 was at war with France and made a business of trying to* break 
 down its money by coumiterfeitinig. The English Government 
 sought to put down the French Revolution as she had tried to 
 put down the American! Revolution by forgery. Wm. Pitt, 
 Prime Minister of England, organized and superintended the 
 business. Seventeen factories were in full operation in Lon- 
 don with a force of 400 1 men, devoted to the production of 
 false assignats. In May, 1795, it was found that 12 to 15 
 billions of francs of forged assigniats were in circulation, 44 No 
 wonder the assignats sank to a small fraction (1-200) of their 
 nominal value. Issued by an unstable government, issued in 
 overwhelming excess, executed poorly and systematically 
 counterfeited with tremendous effect by foreign governments 
 
 ( 41 ) Besides the fact that no fixed relation existed between the land and 
 the notes, there was the further important fact that the title to the land was 
 regarded as doubtful. If the revolutionary government failed and the nobles 
 returned to power, the confiscated lands might be reconfiscated, and those 
 who obtained estates by way of redemption of their assignats might find the 
 security worth less than the paper on which the assignats were printed. 
 
 ( 4S ) Garnier's "Traite de Finances," p. 408. 
 
 () Walker on "Money," p. 344. 
 
 (**) "Assignats and Mandats," by Stephen D. Dillaye, 1877, pp. 32-33. 
 
 Doubleday's Financial Hist, of England. 
 
 John Davis, Arena, June, '94, pp. 91-2. 
 
 Walker's "Money," p. 345. 
 
PAPER MONEY VINDICATED BY HISTORY. 27 
 
 beyond the reach of the French criminal laws, they lacked 
 every element of virtuous paper. If the notes had been care- 
 fully executed in the highest style of art, and called in now 
 and then to weed out counterfeits, and after seven or eight 
 hundred million dollars were issued the further needs of the 
 government had been met by taxation or loan, there is every 
 reason to believe that the notes would have kept their value, 
 and prices would have remained substantially level. In other 
 words, if the same policy had been pursued in 1790 that was 
 afterward followed in 1870, it is probable that the results of 
 1790 would have been similar to those of 1870. 
 
 In 1796 the Revolutionary Government began to issue 
 territorial mandates exchangeable for land in substantially 
 the same way as the assignats. Eight hundred millions were 
 to be used in cancelling assignats at 30 to 1, the rest to serve 
 the government. They rose to 80 per cent, of their nominal 
 value after the first limited emission, but additional issues 
 sent them down to 1-1000 of their face. They were really 
 nothing more than assignats under another name; they had 
 some value for a time because the withdrawal of the assignats 
 at the rate of 30 to 1 materially diminished the volume of the 
 circulation. The paper of the revolution went down with 
 the revolution. The last insurrection was put down by Na- 
 poleon in 1795. In July, 1796, a decree was issued author- 
 izing every man to do business in the money and on the terms 
 he chose, mandates to be taken at their market value. With 
 Napoleon's power, coin and a comparatively stable govern- 
 ment returned to France. Napoleon's wars kept France sup- 
 plied with specie during his ascendency; he took the gold 
 and silver from all the countries he conquered. 
 
 The evils of the rapid depreciation of the curency in the 
 French Revolution were doubtless very great; industrial cal- 
 culations could not be made with any certainty for any con- 
 siderable period in the future, and creditors were cheated to 
 an enormous extent. Two things, however, must never be 
 forgotten. First, that these evils are not inherent in incon- 
 vertible paper, as the French experience of 1870 has shown, 
 but belong to the bad management of the Revolutionary Gov- 
 
28 PAPER MONEY VINDICATED BY HISTORY. 
 
 ernment; and second, that in spite of all its evils, the revo- 
 lutionary paper accomplished wonders; coin was invisible for 
 clanger was in sight; paper was necessary, and the assignats, 
 ill-managed as they were, nevertheless enabled France to con- 
 quer the enemies of liberty on every hand; nation after na- 
 tion with metallic money yielded to the French and their poor 
 paper, debtors thruout the land were liberated, unjustly 
 to a large extent no doubt, but nevertheless liberated, a re- 
 sult in itself a benefit; the first moderate upward trend of 
 prices gave an enormous impulse to industry; the national 
 domains were purchased almost for nothing by the holders of 
 government paper, many large estates were divided into little 
 holdings and became daily more productive from the number 
 and energy of the new cultivators; the diffusion of property 
 that resulted was of inestimable benefit. 45 It was a great thing 
 to get rid of some of the old burdens, oppressions and aristoc- 
 racies, and tho it might have been done in a better and juster 
 way, we must give the rag credit for wiping the slate, even 
 while we recognize that it was not as clean a rag as it should 
 have been. 
 
 THE ALLIED POWEES. 
 
 During the Napoleonic Wars part of the gold and silver 
 of Austria, Prussia, and Russia went into hiding or emigrated 
 of its own notion, and the rest was carried to France by the 
 conqueror, and "coin became improcurable within their ter- 
 ritories." An inconvertible paper money was issued by the 
 Powers, and guaranteed jointly by Great Britain and all the 
 other allies, and this "irredeemable" paper alone rendered pos- 
 sible the vast military operations of the allies which resulted 
 in the defeat of Napoleon. Paper money overthrew him, al- 
 tho his stolen millions of metallic money constituted one 
 of his best props. 46 
 
 RUSSIA. 
 
 Paper money (to the amount of 40,000,000 roubles or $32,- 
 000,000) was first issued in Russia under Catharine II in 
 
 ( 45 ) "History of Europe," by Sir Archibald Alison, Vol. IV., p. 371. 
 
 f* 6 ) Such is the verdict of one of the best and most authoritative Euro- 
 pean writers on finance, "The New Golden Age," by R. JEL Patterson, Lon- 
 don, 1882, Vol. 11, pp. 24-5. 
 
PAPER MONEY VINDICATED BY HISTORY. 29 
 
 1768, on the ground that the copper money, then forming 
 the legal tender was inconvenient. 47 
 
 "The manifesto accompanying the issue of this paper," 
 says Mr. Tooke, 48 "left it in doubt whether the payment to 
 bearer was to be in copper or silver; and acording to Storeh, 
 opinions were still divided when he wrote in 1815. The 
 agio in favor of silver varied only from 1 to 3 per cent, in 
 that interval, from 1768 to 1787, while there was an agio of 
 1.5 per cent, in favor of paper against copper" 
 
 "In 1787 60,000,000 roubles were added, and during a 
 series of wars with Sweden, Turkey, Poland, Persia and 
 France the Russian government, instead of taxing the 
 wealthy, issued new volumes of paper till the amount out- 
 standing in 1810 was computed at 577,000,000 roubles, or 
 $461,600,000, a paper advance in twenty-three years from 
 $1.50 per head to $11 per head. This rapid increase of vol- 
 ume was accompanied by a considerable depreciation. The 
 paper rouble (par value 80 cents) was worth in silver: 49 
 
 72 cents in 1787. 
 48 cents in 1796. 
 36 cents in 1800. 
 24 cents in 1810. 
 18 cents in 1817. 
 
 AUSTRIA. 
 
 For twenty years Austria-Hungary has had a legal tender 
 paper which does not profess to be based on gold or silver or 
 have any relation therewith. The price of gold has fluctu- 
 ated chiefly from political causes, 50 but in reference to commo- 
 dities in general, this baseless, promiseless, irredeemable paper 
 has at no time fallen in value; on the contrary it has appre- 
 ciated, prices have fallen somewhat, 51 the notes not being is- 
 sued fast enough to keep the movement of the currency vol- 
 ume even with the growth of business. 
 
 Jevons, 202, Walker, 366. 
 
 See Tooke's Hist., Prices, ii., 67, 209-16, also i., 103-1 
 
 Mulhall's Diet, of Statistics, title "Money." 
 
 (BO) walker on "Money," p. 368. 
 
 ( M ) Mulhall, tit. "Prices," subhead "Austria-" 
 Tit. "Money" for exchange rates 
 
30 PAPEU MONEY VINDICATED BY HISTORY. 
 
 I said the paper was promiseless; I mean that the issuing 
 government does not promise to pay anything for the paper; 
 it merely promises to receive the paper for debts due it, and 
 makes it legal tender with slight exceptions in cases where 
 coin payment is expressly provided for. This Austrian cur- 
 rency is so well described by Consul-General Post that I quote 
 a few paragraphs from his report: 
 
 "Prior to 1866 the currency of the Empire cconsisted of National 
 bank notes promises to pay silver florins which were the standard. 
 In 1866, however, the government (Austria Hungary) commenced 
 to issue legal tender state notes which do not pretend to be prom- 
 ises to pay anything-, anywhere, at any time. They read on their 
 face, after stating- the denomination, one, five, or fifty gulden as 
 the case may be, as follows : 'This state note will be received 
 and paid out by all imperial and royal depositories and offices for 
 all payments which are not required by law to be in coin.' ' 
 
 "It will be seen that these notes are a promise to receive, not 'to 
 pay,' and that they do not claim to be redeemable, and have no 
 more reference to silver florins than to gold florins. As the Na- 
 tional Bank was compelled to accept these irredeemable state notes, 
 the Government exempted the National Bank by law from redeem- 
 ing its notes, so long as state notes are issued, so that legally and 
 practically the business of the empire is conducted with a paper 
 currency absolutely irredeemable, and having no reference to either 
 silver or gold, its value being derived from its legal tender charac- 
 ter. The average amount of National Bank notes in circulation in 
 1876 was 291,000,000', and of state notes 342,000,000 florins." 
 
 "The legal tender promises to receive issued by the state not 
 only furnish the larger part of the circulation, but fix the character 
 of the entire currency. That currency which some American phil- 
 osophers and statesmen are reported to be dreaming of and longing for, 
 has been established by law, and is in actual use in this country a 
 paper currency with a value stamped thereon, and which costs nothing 
 but the printing. It is not silver, it is not gold, nor is it a promise to 
 pay silver or gold, nor is it a promise to receive as equivalent to silver 
 or gold. It is a paper florin, a legal tender for all debts, except debts 
 which are by express law or by express agreement payable 
 in coin." 52 
 
 BRAZIL. 
 
 Brazil kept an independent paper currency at par with 
 gold for many years, and even sent it to a premium. After 
 the Paraguayan war Dom Pedro refused to paralyze the coun- 
 try's energies by contracting the circulating medium. In- 
 
 ( Ba ) Hon. Philip S. Post, TJ. S. Consul General to Austria-Hungary, Con- 
 sular Reports, July 13, 1878. 
 
PAPER MONEY VINDICATED BY HISTORY. 31 
 
 stead of doing that he decided to stimulate them by vigorous 
 expansion (as France did after the Franco-German war), and 
 the consequence was that within seven years after the war the 
 paper money which, during the war, had depreciated nearly 
 one-half, measured in gold, rose again to par, and even com- 
 manded a premium of If d. in gold. 53 
 
 The appreciation was not accomplished by diminishing the 
 volume of the currency. On the contrary the first step was 
 an expansion, to the enormous extent of 50 per cent, in one 
 year, which was followed by an advance of llf per cent, 
 toward par. It took the United States fifteen years to bring 
 its paper to par with gold via the contraction road, while 
 Brazil reached the same goal in less than half that time, by 
 way of the expansion turnpike. Moreover, our people suffered 
 inexpressible hardships during the journey, while hers were 
 never more prosperous and happy. 64 
 
 The llerschell Commission says: 
 
 "The case of Brazil is, perhaps, the most remarkable of all, as 
 showing- that a paper currency, without a metallic base may, if 
 the credit of the country is good, be maintained at a high and 
 fairly steady exchange, altho it is absolutely inconvertible, and 
 has been increased by act of government out of all proportion 
 to the growth of population and its foreign trade. The Brazilian 
 standard coin is the milreis, the par value of which is 27 d. A 
 certain number were coined, but long since left the country, and 
 the currency is, and has, since 1864, been inconvertible. The in- 
 convertible paper was more than doubled between 1865 and 1888, 
 bnt the exchange was about the same at the two periods and very 
 little below the par of 27 d. It has gone down to 14 d., 
 in 1868, the date of the war with Paraguay, but has risen again, 
 and was in 1875 as high as 28% d. In 1869, when the quantity of 
 paper was increased from 12,648,000 to 18,320,000, the mean 
 sale of exchange showed an advance of 11% per cent." 
 
 Since' the Commission wrote, the currency of Brazil has 
 met with serious depreciation thru enormous overissues, but 
 so long as the conditions of steady value a stable govern- 
 ment and due limitation of the money volume were 
 maintained, the inconvertible paper kept its value.* 
 
 ( B3 ) Report of the Herschell Indian Currency Commission composed of 
 some of the ablest statesmen of England, every member signing the Report. 
 
 (64) The Key Note" by Albert Griffin, pp. 98-9. 
 
 *Paper circulation in Brazil rose from 192,800,000 milreis (196,300,000 gold) 
 in 1889 to 785,941,000 milreis (209,296,090 gold) in 1898. The- government 
 
32 PAPER MONEY VINDICATED BY HISTORY. 
 
 THE BANK OP VENICE. 
 
 In the year 1171 a Venetian fleet was sent to avenge an 
 outrage perpetrated by the Grecian Emperor Manuel upon 
 Venetian merchants in his empire. To meet the charges of 
 this war against the Emperor of the East and sustain the bur- 
 den of hostilities with the Emperor of the West, in which the 
 Republic was also involved, the Duke Vitale, Michael II., 
 had recourse to a forced loan from the most opulent citizens 
 of Venice, each being required to contribute according to his 
 ability. By determination of the Great Council, a Chamber 
 of Loans was established, and the subscribers were guaranteed 
 4 per cent, interest. The contributors were constituted a 
 special board for their own protection and the management 
 of the loan; the book in which the loans were inscribed was 
 authenticated by the Government, and made evidence of the 
 whole amount of the debt, and the proportion belonging to 
 each subscriber. 55 
 
 It was an easy step to commence the transfer of the loans 
 upon the books as a means of paying debts or obtaining 
 money, and the advantages of the book credits seem to have 
 led to a very rapid circulation of the loan. 56 
 
 then began to contract the paper volume so that in August, 1899, it was 
 reduced to 735,759,000 milreis (equal to 219,736,530 milreis in gold or 
 25,717,000). In 1889 paper was at a premium of 1.80 above gold. The next 
 year thru a large increase of volume, it began to depreciate, and by 1898 
 the depreciation rose to 73.40 and 74.50 (the maximum) in March, 1899, 
 three months after the withdrawals of paper began. In August, 1899, when 
 the withdrawals had been going on for eight months, the depreciation was 
 reduced to 70.10. In March, '99, the volume of paper in circulation was 
 773,802,000 milreis, worth 197,087,479 in gold, or almost exactly the sumo 
 as 200,000,000 milreis were worth in 1889. (For further details, see L'Ecou- 
 omiste Europeen, vol. 16, p. 613, Nov., 1899; vol. 17, pp. 324, 389 by Feb. 
 1st, 1900, the volume of paper had been further reduced to 725,719,854 
 milreis.) 
 
 ( M ) McPherson's Annals of Commerce (London, 1805), Vol. I., p. 341. Col- 
 well's "Ways and Means of Payment," pp. 288-9. (Stephen Colwell was a 
 learned and wealthy Philadelphian who collected a large library rich in 
 Italian literature. He made a very careful study of the Bank of Venice and 
 wrote the best history of that institution that has been put into English. 
 It was published by J. B. Lippincott & Co., in 1859. In October, 1878, the 
 Bankers' Magazine of New York commended Mr. Colwell's work in high 
 terms, printed his chapter on the Venetian Bank, saying that it was con- 
 sidered the best account in the English Language. The American Cyclo- 
 pedia, Art. "Bank," cites Colwell as "an eminent economic writer." In 
 fact he is universally regarded as an able and trustworthy writer, which is 
 important in view of fact that his writings furnish the only available source 
 of complete information on this subject for those unable to read Italian. 
 
 ( Be ) Colwell, p. 289. 
 
PAPER MONEY VINDICATED BY HISTORY. 33 
 
 Thus originated the Bank of Venice, which for more than 
 six centuries (until overthrown by Napoleon in 1797) 57 dom- 
 inated the finances of Europe. 
 
 The facility of transfer coupled with the superior security 
 of funds guaranteed by the State, and the regular payment 
 of interest, soon opened men's eyes to the advantages of the 
 Venetian Bank over common banks, and the demand for Bank 
 credits rapidly grew. In an ordinary bank the depositor might 
 lose his money by robbery, or defalcation, or maladministra- 
 tion of the officers; but funds in the Bank of Venice were 
 secure from these dangers. Payment in coin was slow, in- 
 convenient and unsafe. There was a great admixture of coins 
 in Venice, which her widely spread commerce brought from 
 all over the world. These coins not only belonged to different 
 systems and nationalities, but were new and old, counterfeit 
 and genuine, light weight and full weight, and it required 
 special skill to tell the value of the coins. Under such cir- 
 cumstances the ready transfer of book credits by which thou- 
 sands of ducats could be paid in a moment in a medium se- 
 cure from counterfeiting and light weight, of entirely cer- 
 tain value and perfect divisibility, became a matter of the 
 highest importance. If all the merchants of a city had the 
 same banker who kept an account with each one of them, 
 this banker could make all the reciprocal payments without 
 moving a cent of their money. 
 
 The capital of the bank did not consist of gold or silver, 
 but simply of a debt due by the Republic to its citizens. The 
 government took the money and gave in return an inscription 
 on the books of the bank. The Government used the cash 
 in war or foreign expenditures, or turned it again into the 
 channels of domestic commerce. Depositors in this bank 
 could not withdraw their deposits. "It was perfectly under- 
 
 ( 5T ) 1171 to 1797 is the period given by Colwell; by Pres. E. Benjamin 
 Andrews, in his Institutes of Economics, p. 131; by Hon. John Davis, Arena, 
 December, 1893, p. 35; by Wharton Barker, in his Bimetalism, p. 10; see 
 also Hazlitt's History of Venice, Sidney Dean's "History of Banking and 
 Banks from the Bank of Venice founded A. D. 1171, etc"; Edw. H. G. Clark 
 in the North American Review, September, 1885, p. 205; and see the Cyclo- 
 pedia Britannica, the American Encyclopedia, the International Cyclopedia, 
 La Grande Encyclopedie, art. "Banque," p. 251, etc. Prof. Dunbar, in 
 Quar. J. of Econ., April, 1892, says the bank was opened in 1619 instead of 
 1171, and closed by Napoleon in 1806; but the overwhelming weight of 
 authority is against him. 
 
34 PAPER MONEY VINDICATED BY HISTORY. 
 
 stood that no coins passed, neither any right to any, on the 
 transfer in the bank." 58 If the amount of bank credits ex- 
 ceeded the demand for them in business transactions, the Gov- 
 ernment paid off a part of the debt so as to remove the super- 
 fluous funds. When the bank funds were in large demand, 
 the bank was open to receive further loans to the govern- 
 ment. This policy of adjusting the volume of credits so that 
 they should not exceed the needs of business, not only kept 
 the inconvertible credit currency of the bank at par with 
 specie, but, in connection with the peculiar advantages of the 
 credits, kept them for the most part far above the level of 
 gold and silver. 59 
 
 The Government itself made payments by drawing on the 
 bank, and received bank credits into the public treasury on 
 payment of sums due the State. A law was passed that all 
 bills of exchange above 300 ducats might be paid in money 
 of the bank, which could not be refused unless the right to 
 refuse had been stipulated for. 60 In 1423 it was decreed that 
 all bills of exchange payable in Venice should ~be paid in the 
 bank unless otherwise stipulated. 61 
 
 It was further enacted that all payments in gross for mer- 
 chandise and all payments whatever for oil and quicksilver 
 should be in bank. These measures brought the mass of pay- 
 ments of that great commercial city to the State Bank, created 
 a great additional demand for bank funds, and brought large 
 sums into the public coffers. 
 
 The Government no longer paid interest, but the bank funds 
 were exempt from execution for debt and from encumbrance 
 by mortgage, and were not merely legal tender, but the re- 
 quired medium of payment for bills of exchange and pur- 
 chases at wholesale. ISTo promise was made to repay the coin 
 with which new credits were bought. The Government took 
 the coin and used it in foreign wars, etc., and the depositor 
 
 ( 5S ) Colwell, p. 306. 
 
 ( B8 ) Colwell, pp. 6 and 7, 306, 309, 311. Temporarily, during the stress 
 of war on two or three occasions, the government's policy of adjusting the 
 bank funds to the needs of business was not perfectly carried out. (See 
 below note 8.) 
 
 (6) Daru Hist. Venice, Vol 3, p. 73. 
 
 ( 61 ) Colwell, p. 292. 
 
PAPER MONEY VINDICATED BY HISTORY. 35 
 
 had only his transferable credit, 62 which was, however, worth 
 more to him than the coin, else he would not have bought it. 
 The superior advantages of bank funds and the limitation 
 of their volume 63 resulted in sending them to a premium above 
 coin, which rose at times as high as 40 or 50 per cent. When 
 it had risen with various fluctuations to an average of 20 per 
 cent., a new law was passed fixing the agio or premium at that 
 amount, hoping to do away with the fluctuations in the rela- 
 tion between coin and credit; but the law was unsuccessful; 
 the real agio at times fell below 20 per cent, by reason of the 
 sale of bank credits at a discount of 10 or 15 per cent., and 
 at other times rose above 20 per cent, by reason of demand 
 for bank funds, inducing merchants to offer a sur-agio of 20 
 or 30 per cent, in addition to the 20 per cent, allowed by law. 64 
 
 ( 61 ) In the course of time a "Cash Office" was opened as a branch of the 
 Ancient Bank, and in this cash office coin could be deposited and withdrawn 
 at pleasure; but money deposited In the main bank went into tne public 
 treasury and could not be withdrawn. Merchants kept in the cash office 
 money they might find convenient to use directly in trade, and even those 
 who had bills to pay in a short time, making it necessary to carry their 
 money into the ancient branch of the bank, might wish to keep the coin 
 in their power until the payments matured. (Colwell, p. 299.) Experience 
 showed that the establishment of the cash office did not cause any sensible 
 diminution in the business of the main bank. (Savary, Diet, de Com., art. 
 "Banque," p. 276.) 
 
 ( 63 ) Colwell says, p. 311: "The public debt was wisely kept at that amount 
 which not only preserved its value, but furnished the full quantity of cur- 
 rency required for trade, with the means of increasing or diminishing the 
 amount according to the demand." And p. 309: "The money brought in to 
 pay bills was taken by the government as fast as it was received, until the 
 amount of the deposits, or debt of the state, was adequate by rapid circul- 
 ation to the current payments of commerce." After this point was reached 
 in the judgment of the authorities, merchants desiring bank credits would 
 have to buy them of other merchants in possession of the desired credits. 
 And, if the government needed further coin for foreign purposes, it issued 
 bonds or borrowed from the cash office. At times, however, either through 
 temporary departure from this policy and an over production of bank credits, 
 or through a falling off of commerce reducing the demand for bank funds, 
 their value fell somewhat below the usual 20j< premium level; at other 
 times it rose above that level. 
 
 ( M ) Professor Dunbar, in the Quarterly Journal of Economics, April, 1892, 
 sets forth the opinion that the agio or premium of 20# established by law was 
 not due to any superiority of the bank credits, but resulted from the arbi- 
 trary selection of an imaginary ducat 20# more valuable than the real ducat 
 as a unit of account. Upon this point it may be said: (1) That such a com- 
 plication of commercial transactions would seem incredible as a mere arbi- 
 trary regulation. (2) That abundant reasons existed for the preference of 
 bank funds to coin, reasons quite sufficient to produce the recorded phe- 
 nomena without any arbitrary measure. A payment by transfetr of credit 
 was quick and safe and inexpensive, sure to give full value and free from 
 the trouble of counting and valuing a multitude of diverse coins, many of 
 them mutilated and not a few of them depreciated coins of alien origin. 
 (Colwell, p. 306, see also to the point that the agio in ancient banks arose 
 from these natural causes, Jevons' Money and Mechanism of Exchange, p. 
 200, and Adam Smith's Wealth of Nations, Bk. IV., Chap. III.) (3) That 
 Prof. Dunbar's theory does not explain the sur-agio of 20 or 30 per cent. (4) 
 That Prof. Dunbar does not adduce a single fact in support of his assertion, 
 all the citations made by him agreeing far better with the idea that the 
 difference between the bank ducat and the coin ducat was the result of 
 the superior utility and safety of the former. And (5) That historians clear! v 
 state that the agio was first developed by the merchants and afterwards 
 
36 PAPER MONEY VINDICATED BY HISTO&Y. 
 
 fixed by law. Colwell says (p. 305): "The bank's funds rose to 30# premium 
 over the current coins and continued to fluctuate near this high rate until 
 the government limited the premium to 20#." And (p. 308): "The government 
 so far from producing the agio, attempted to limit it to 20$, an attempt 
 which was rendered wholly abortive by the introduction of a sur-agio." The 
 premium was not caused by the government nor by the bank, but by the acts 
 of the merchants themselves competing for bank credits with which to pay 
 their debts. The amount of bank funds was limited as we have seen, and 
 this circumstance together with their superiority to coin in large commer- 
 cial transactions, sent them to a premium. 
 
 In the same article Prof. Dunbar contends that the Bank of Venice paid 
 coin on demand except during suspensions beginning in 1691 and 1717, and 
 some earlier suspensions of uncertain date. This contention appears to arise 
 from a confusion of the main bank with the cash office. Colwell clearly 
 states that money once deposited in the main bank could not be withdrawn, 
 and that the cash office was established on purpose to provide for those who 
 wished to deposit their money subject to call. (Ways and Means of Pay- 
 ment, pp. 299 and 307; see also Diet, de Com. par Savary, art. "Banque," p. 
 276.) 
 
 After stating the inconvertibility of the bank credits as a matter of 
 historic record, Colwell adds the opinion that, "If the credits had been con- 
 vertible at will into the precious metals, the agio could never have origin- 
 ated" (p. 307). On Prof. Dunbar's theory that the main bank was a bank 
 where money could be deposited and drawn out at will, it is clear that no 
 agio could have arisen, since the laws requiring payment in bank would 
 have been satisfied by payment in specie as well as by payment in account, 
 and if credits had been advanced in price, specie would have become at 
 once the medium of payment as the cheaper medium; the debtor owing 1,000 
 ducats and having an account worth 1,200 metal ducats would have gone 
 with the creditor to the bank, taken out his metal, paid his debt with 
 1,000 coins and had 200 ducats left. 
 
 The historic fact that not only an agio, but also a sur-agio existed in 
 Venice, proves the error of Professor Dunbar's hypothesis as to convertib- 
 ility. The debtor had to pay in the main bank; the only way to do this was 
 by transfer of credit on the books of that bank; it could not be done with 
 cash, for there was no cash in that bank (except cash received on loan to 
 the government and in transitu to the public treasury no cash demandable 
 on the credits). As the credits were limited in quantity by the policy of the 
 government, the competition for them among debtors sent them to a 
 premium. That is the story history tells, and it is perfectly clear and con- 
 sistent and apparently the only story that will fit the facts. The debtor 
 could not demand cash for his credits; the government had taken the cash 
 originally given for the credit, and neither government nor bank promised 
 to redeem the credit with cash; the credit was simply a debt due from the 
 government which reserved the right to cancel the debt with cash if it 
 chose, but did not engage to do so within any specified time; if the debtor 
 had a deposit in the cash office and a bill of exchange coming due, he could 
 not draw out his cash and pay the bill with that; the only way to liquidate 
 the bill was by a transfer of credit on the books of the main bank. If the 
 depositor in the main bank could have withdrawn his deposit, the primary 
 purpose of the government in starting the bank, and one of its chief objects 
 in maintaining the institution, would have been defeated; for the government 
 could not have used the deposits in foreign wars without depressing business 
 at home, and incurring the danger of bankruptcy. In the stress of war and 
 disaster, at the very time the government had most need of the money, there 
 would have been a run on the bank compelling disbursement or closing of the 
 bank. This is what did occur to the cash office, but not to the main bank, 
 showing once more that its credits were not convertible. 
 
 In the Quarterly Journal of Economics, January '93, p. 210, Professor 
 Dunbar admits that he made several mistakes in the previous article above 
 referred to. He acknowledges that his assertion that the history of the bank 
 since 1619 had not been written was an error; and that the long suspensions 
 of the cash office were from 1630 to 1666 (36 years) and from 1713 to 1739 
 (26 years), instead of beginning in 1691 and 1717 as he had formally stated. 
 
 In view of these things it is not difficult to imagine that the Professor 
 may have confused the main bank and the branch, and applied the state- 
 ments to the former which related only to the latter. But the most import- 
 ant consideration is that even if we accept all that Professor Dunbar says 
 about the Venetian Bank, our main conclusions in respect to it are not in the 
 least affected. The Professor says that cash payments were suspended for 
 62 years and more, and during these years, at any rate, the bank credits 
 were admittedly inconvertible, whatever view he may take of their character 
 at other times. Yet he admits that the bank credits remained good during 
 the suspensions, with temporary exceptions, when the exigencies of war 
 caused the government to depart from its policy of keeping the bank credits 
 within moderate limits, or the influence of hostilities seriously diminished 
 the volume of business in Venice. 
 
 The Professor explains the continued value of the bank credits in spite 
 of suspensions covering whole generations by saying: "It is plain that a cur- 
 
PAPER MONEY VINDICATED BY HISTORY. 37 
 
 Here we have a currency consisting simply of bank credits 
 having the power by authority of law and usage to pay debts. 65 
 Men were willing to take bank credits in payment of debts 
 due to them because they knew they could use those credits 
 to pay debts due from them. They were more willing, in 
 case of large payments, to take the credits than coin, because 
 of their superior safety and convenience. And when the law 
 increased the advantages of credits over coin by requiring the 
 payment in bank of all bills of exchange and wholesale pur- 
 chases, merchants were ready to give a considerable premium 
 for these bank credits which were most convenient in large 
 transactions at home, and were almost essential to extensive 
 commerce abroad. In consequence of their superior advant- 
 ages as a medium of exchange, these "irredeemable" bank 
 funds, these "fiat" book credits without an ounce of gold or 
 silver behind them, went to a premium above gold and silver 
 in all the great markets of the world, and with slight excep- 
 tions for more than 400 years the precious metals were at a 
 discount as compared with the funds of the Venetian Bank. 66 
 
 Venice had not only the main bank with its "irredeemable" 
 credits in which large payments had to be made, and the cash 
 office for special purposes, but there were also interest bear- 
 ing Government bonds, and these bonds with all their in- 
 
 rency which, for important purposes, is a legal tender, would not lose its 
 ease of circulation by becoming inconvertible, and might even be kept at par 
 with specie, if its supply were strictly limited to the demand for the special 
 purposes referred to, as, for example, in this case, the settlements for 
 exchange. In short, the good credit sometimes enjoyed by the bank after 
 suspending payment, which excited the wonder of foreign observers, is the 
 same phenomenon which has been observed in other cases where inconvert- 
 ibility has not been made the excuse for over issue." Citing the notes of 
 the Bank of England during the first ten years after the suspension of 1797, 
 the notes of the suspended banks of New York and New England after the 
 suspension of 1857, and the inconvertible notes of the Bank of France from 
 1870 to 1878. 
 
 The chief differences between Prof. Dunbar and other writers on the 
 Rank of Venice lie in the matter of dates, the cause of the agio, and the 
 relation of the cash office to the main bank. On the vital point of the value 
 and circulating power of the inconvertible legal tender bank credits he is at 
 one with all the rest. 
 
 C 55 ) Paper money has well been defined as "a portable system of book- 
 keeping." 
 
 ( 6e ) Colwell, pp. 306-310. He further says that the demand for funds 
 that would pay bills of exchange was greater than for gold or silver for 
 export or retail trade or any other xise. The great mass of purchases were 
 made in the first instance by bills of exchange, and the chief operation of 
 payment consisted in liquidating those bills. "To comprehend the extra- 
 ordinary fact of a credit on the books of the bank with no money in its 
 vaults, and not bound to make that credit good in later times even by the 
 payment of interest, or to redeem it in any way, having been for hundreds of 
 years at a high premium over gold and silver, we need only remember that 
 these credits were the funds in which debts were chiefly paid." ((Pp. 306 
 and 307.) 
 
38 PAPER MONEY VINDICATED BY 
 
 terest (profit) and their promise of coin redemption, were 
 quoted at 60 per cent, of their face value, while the bank 
 credits, with no interest and no promise of coin redemption, 
 were at a premium above gold. The quality of paying debts 
 was worth more than the interest and future redemption in 
 coin put together. 67 
 
 For six hundred years Venice had no money panic. In 
 this country as many as ten disastrous panics have occurred 
 ivithin a single life a rate that would have given Venice 
 over a hundred panics during the life of her credit hank. 
 
 The people of Venice appear to have been entirely satisfied 
 with their bank. Colwell says, p. 294: "Not an objection to 
 the bank is extant; neither book, nor speech, nor pamphlet 
 have we found in which any merchant or dweller in Venice 
 ever put forth any condemnation of its theory or practice/' 
 On the contrary, the Venetians had every reason to be proud 
 of their banking system. The law that required all bills of 
 exchange and wholesale purchases to be settled in the bank 
 might seem unjust as intended to give a forced currency to 
 the bank credits ; but it was found to work so well in practice 
 that it brought an immense accession of business to the city 
 and the bank. In fact the bank became a great clearing 
 house, or place of adjustment for merchants of many coun- 
 tries. Merchants everywhere found it convenient to have 
 funds in Venice. It was for centuries the greatest entrepot 
 of commerce in Europe. And the credit bank was, as Colwell 
 says (p. 289): "For many ages, the admiration of Europe, 
 the chief instrument of Venetian finance, and the chief 
 facility of a commerce not surpassed by that of any European 
 nation." 
 
 The Bank of Venice lasted longer than any other money 
 system known to history, and it clearly proved that an 
 "irredeemable" legal tender, receivable in the revenues and 
 
 ( 67 ) Hon. John Davis, in "Money in Politics," Arena for August, '94, p. 
 328: Similar facts occur elsewhere in history. During the Napoleonic Wars 
 the non-interest bearing irredeemable legal tender British paper was worth 
 twice as much as the 3# gold bearing bonds of England. (Ibid., citing 
 Alison's History of Europe.) The same thing was seen during the Rebellion, 
 when our specie bonds were frequently 20# or more below par in coin, while 
 that part of our irredeemable paper which was receivable in the government 
 revenues remained substantially at par with gold. 
 

 PAPE3 MONEY VINDICATED BY HISTOKY. 39 
 
 enforced in the payment of debts, may have far greater 
 convenience, safety and stability than coin or any money 
 redeemabe in com. 68 
 
 In his summary, Colwell says (pp. 7, 8): "The history of 
 these celebrated banks (of Venice and Genoa) furnishes les- 
 sons which would richly repay the most careful attention. 77 
 
 "They demonstrated the efficacy of circulating deposits as 
 a means of payment, and that the deposits were just as ef- 
 fective when they consisted of a debt due from the govern- 
 ment, as if they were gold or silver; and they showed that 
 it was possible to keep the amount of this public debt, as held 
 by the depositors on the books, within a range of amount, 
 which not only prevented depreciation, but kept the deposits 
 always from fiften to thirty per cent, above gold and silver." 
 
 NUMERARY MONEYS OF ANTIQUITY. 
 
 Ancient nations understood that receivability and limita- 
 tion of volume were the essential attributes of money; that 
 intrinsic value was not necessary; and that money could and 
 ought to be regulated. 
 
 The Middle Ages went back to barter and commodity 
 money. Modern nations have not yet outgrown the com- 
 modity money, and "intrinsic 77 theories of barbarous times, 
 but are beginning to understand something of the philosophy 
 of the symbolic money which characterized the civilizations 
 of antiquity, and will probably characterize the civilizations 
 of the future. Some "account of ancient thought and usage 
 may be helpful here. 
 
 Aristotle says in his Politica: "Money (nomisma) by itself 
 is but a mere device which has value only by law (nomos) and 
 not by nature. 77 And in his Ethica: "By virtue of volun- 
 
 C 58 ) The fullest, clearest and most authoritative account of the Venetian 
 Bank in the English language is that contained in Colwell's "Ways and 
 Means of Payment," Philadelphia, 1859. Next to this may be mentioned the 
 series of articles by Hon. John Davis, M. C., in the Arena for December, '93. 
 April, '94, and August, '94. Considering its condensation, the statement of 
 Edw. H. G. Clark, in the North American Review, September, 1885, is 
 admirable. In addition to these and other accounts already named, the 
 curious reader may consult Postlethwaite's Dictionary, London, 1755; Hayes' 
 Negotiators' Magazine, London, 1739; Traite Generale du Commerce, par S. 
 Ricord, 1732; Marperger on Banks, pp. 180 to 189, Leipsic, 1717; Econ. 
 Politique, par Henri Storch, Vol. IV., p. 95; Broggia Trattale delle Monete, 
 Vol. II., p. 270; in Vol. V. of Custodi's collection of the Economist! Italian}, 
 II Banco Giro di Venezia, by Prof. Amadeo Soresina, Venice, 1889, 
 
4:0 PAPEK MONEY VINDICATED BY HISTOKY. 
 
 tary convention, money has become the medium of exchange. 
 We call it 'nomisma' because its efficiency is due, not to na- 
 ture, but to law (nomos), and because it is in our power to 
 regulate it." 
 
 Alexander Del Mar, one of the greatest of modern writers 
 on monetary subjects, gives a fine account of the numerary 69 
 moneys of ancient times. In his "Science of Money/' p. 31, 
 he says in substance: Among highly civilized nations of 
 antiquity, before paper was invented, symbols for such money 
 consisted of porcelain tablets, as in China; thin iron discs, 
 as in Sparta; artistic copper discs, as in Borne; discs of secret 
 composition, as in Carthage; or tablets of stamped clay or 
 leather, as in several other States. Where these moneys per- 
 manently retained their original value it was by means of 
 limiting the number of symbols employed, by protecting them 
 from counterfeiting (which is another point in the limitation 
 of their volume), and by abolishing all other kinds of monies. 
 The bits of material which represented the numbers, whether 
 porcelain, sheet-iron or leather, counted for nothing. The 
 devices or legends upon them promised nothing. Their value 
 was derived from the legal-tender quality and their numbers; 
 from the legal obligation to receive them for debts, fines, 
 taxes, commodities and services of all sorts, and from the legal 
 interdiction of all other kinds of money. Such numerical 
 monies followed pre-existing commodity monies. 
 
 The facts collated by Del Mar exhibit with tremendous 
 emphasis the power and importance of limitation of the mon- 
 etary volume. The statements of Del Mar are so well repre- 
 sented by the selected quotations in President Will's financial 
 lectures that I will use his abstracts of Del Mar's "History of 
 Money in Ancient Countries," instead of attempting the hope- 
 less task of improving upon his selections. 
 
 The numerary monies we are discussing were, as a rule, ab- 
 solutely destitute of "intrinsic" value, possessing practically 
 no commodity value; almost absolutely worthless for any 
 other purpose than money; and yet, when the proper condi- 
 
 ( 68 ) A numerary money is one in which the number and value of the 
 pieces is specifically limited by law. 
 
PAPER MONEY VINDICATED BY HISTORY. 41 
 
 lions of receivability and limitation of volume were observed, 
 they did the work of money, and did it admirably well. The 
 value of these monies was determined, not by their intrinsic 
 quality, not by the labor cost or any other cost of producing 
 them, but by the limitation of the number of pieces and by 
 the legally established and enforced condition that this money 
 should be good for all public and private debts and dues. Here 
 are the abstracts: 
 
 1. China. The Chinese more than once caught sight of the true 
 principles of money, and at times put them into operation. The 
 theory of money is very correctly outlined in a memorial to one 
 of the emperors of the present century. (Chinese Repository ii, 
 279.) It was known, however, in China ages before. At present 
 it is forgotten. 
 
 The cash of the empire was always issued as numerary moneys. 
 Several circumstances at times affected its character, (a) The 
 vicissitudes of the government, leading it to break down the limits 
 set to emissions, (b) Inefficiency in guarding counterfeits, (c) 
 Emission of private bank notes. These circumstances lowered the 
 value of copper cash to its commodity value (p. 41). 
 
 2. Egypt. The gold mines in "Egypt failed for twenty centuries, 
 i. e., until 525 B. C. Egypt must have been without gold * * * 
 yet it could not have been without money; otherwise it could not 
 have maintained its civilization; paste-board, parchment, leather, 
 papyrus, nummulites and scarabei may have been used as money. 
 * * * This money must have been numerary; otherwise it could 
 not have passed, since its commodity value was so slight. 
 
 Over-valued iron money was used in Ivordofan, the pieces varying 
 in weight from 121 to 428 grains each, yet all were of similar value; 
 this fact proves that monetary value is determined by numbers and 
 not by weight. 
 
 Glass numerary money was used under the reign of the Fatimite 
 Caliphs, A. D. 909-1171. It was used continuously or at intervals 
 for upward of six hundred years.. It could not have passed at its 
 "intrinsic value." * * * The author believes these numerary 
 moneys were all badly over-issued and so fell to their commodity 
 value or thereabout (p. 150). 
 
 3. Persia. 1294 Kai Khatu, noti ng the lack of precious metals 
 and the mischief occasioned thereby, tried to substitute over-valued 
 copper coins for gold and silver coins. The scheme utterly failed, 
 (a) No specific limit was set to the emission, (b) The coins were 
 easily counterfeited, (c) The concurrent circulation of gold and 
 silver coins was permitted, (d) The government was weak and 
 despotic. The people were enslaved and ignorant; no confidence 
 was felt in the value of the new coins, which were refused almost 
 as soon as issued. The prince's o wn nephew set the example of 
 
42 PAPER MONEY VINDICATED BY HISTORY. 
 
 refusing- these coins, which after this rapidly fell into disrepute 
 (p. 152). 
 
 4. Greece. The supplies of coining metals were always irregular. 
 Gold and copper had to be imported, while the silver minea were 
 controlled by Athens; hence the other Greek states were compelled 
 to employ numerical moneys. This was resorted to so commonly 
 and at so many different times as to familiarize the Greek mind 
 generally with the idea that money was an institution of law; 
 and hence the name of law, prescription, limit, numbers or nomos 
 was the generic name always conferred upon it (p. 162). (See 
 Aristotle's Definitions of Money in Gide's Political Econ., p. 216, 
 and Senator Jones' silver speech in United States Senate Oct. 18 
 and following dates, 1893, p. 29). 
 
 5. Sparta. The famous iron money of Sparta, upon which Plu- 
 tarch has poured such ridicule, is believed by Del Mar to be a 
 purely numerary money adopted by Lycurgus either because of 
 "scarcity of metals, or of the desire to emancipate the country 
 from the trammels of a metallic basis of valuation." The intrinsic 
 (i. e., commodity) value of this iron was destroyed in advance by 
 dipping the coins while redhot into vinegar. Inflation of the cur- 
 rency was discouraged by absolutely prohibiting the production 
 and importation of gold and silver. There is every reason to be- 
 lieve that Sparta used this system of numerary iron money for 
 three and one-half centuries; that is, until she lost the hegemony 
 to Athens. B. C. 479. After this her fall was rapid (pp. 164, 165; 
 also Boeckh, Pol. Econ. of Athenians, p. 763). 
 
 6. Clazomenae* A numerary money of iron discs was used. The 
 number is not stated. To each was given an arbitrary value prob- 
 ably equal to that of the same weight of gold. Iron having been 
 put into circulation, and naving supplied the place of silver (gold?), 
 the amount of ready money in the state was not diminished. Iron 
 money performed the same service in the state which silver (gold?) 
 had previously done, and the silver which remained could be em- 
 ployed for purposes of foreign commerce. To that extent iron 
 money was identical in its uses with the paper money of modern 
 times. 
 
 Clazomenae, however, was not able to maintain the system (pp. 
 165, 166; also Boeckh, p. 763, and Aristotle, Economics, II., pp. 2, 
 16). 
 
 7. Byzantium, a colony, rose rapidly to affluence and power. Dur- 
 ing the period B. C. 431-404 the favorable condition of its civilization 
 and credit enabled it to employ numerical money. Discs of sheet-iron, 
 having an impression on one side, were employed. Such a disc was 
 known as a "sidareous." As the resources and credit of the govern- 
 ment declined, its money was supplemented by corporative issues. 
 A bank was chartered and given a monopoly; it issued highly over- 
 valued gold and silver coins. The bank afterward ran down, and 
 its issues depreciated to their commodity value (pp. 166, 167). 
 
PAPER MONEY VINDICATED BY HISTORY. 43 
 
 8. Athens. About B. C. 405 a numerary money of copper discs, 
 highly over-valued, was adopted (p. 168). After the Peloponnesian 
 war the rehabilitated republic issued a numerary money of copper 
 discs, highly over-valued; this was receivable for all payments, 
 public dues included, and was nominally redeemable at an inde- 
 finite time in silver; a promise of whose performance we have no 
 record. (Boeckh, pp. 399, 766.) With the Social War, Athens and 
 her numerary system fell together (pp. 171, 172). 
 
 9. Syracuse. About B. C. 387 Dyonisius issued over-valued coins 
 of tin and of silver. He attempted to force their circulation, but- 
 failed. The coins fell to their commodity value. (Perhaps the 
 people feared the tyrant would not receive the coins at face in 
 payment of taxes.) 
 
 10. Carthage. Issued a numerary money of some unknown sub- 
 stance, probably tin, wrapped in leather or parchment. This prob- 
 ably went out of use within the half century after the gold and 
 silver mines of Spain were opened, about B. C. 408. * * * The 
 introduction of gold and silver into Carthage, and its "fatal effects," 
 are noticed by Heeren, IV., 144. (Del Mar, pp. 174-176.) 
 
 11. Eome. The monetary history of Rome is of profound in- 
 terest. Various systems were tried. Del Mar proves exhaustively 
 that the early "Roman system was a numerary one, and that the 
 numismatic relics that have so long been regarded by the learned 
 world as copper coins were essentially irredeemable notes stamped, 
 for lack of paper, on copper and devised and designed to pass in 
 the exchanges for a much greater value than that of the metal 
 of which they were composed." He shows "that from year of 
 Gaulish invasion, B. C. 385, until about the year B. C. 269, the 
 monetary system of Rome consisted of copper nummi, formerly 
 known as Ases; that the whole number of these nummi was limited 
 by the senate; that they were a full legal tender; and that they 
 were rendered secure from counterfeiting by the artistic beauty and 
 mechanical excellence of the pieces, and the vigilance of the law 
 officers:" That between B. C. 269 and B. C. 250 the patrician class, 
 by permission of the senate, introduced the over-valued silver den- 
 arius. That, B. C. 207 the numerical system gave way before the 
 free coinage of silver, and its adoption as full legal tender com- 
 modity money; and that, B. C. 46, Julius Caesar introduced the 
 gold standard, doubtless that he might thereby create a home 
 market for the gold he had secured in Spain and Gaul (p. 186, 
 et. seq.). 
 
 Exploiting, by slave labor, the gold mines of Spain and Gaul, 
 then seizing the sovereign power at Rome, and forcing upon the 
 people the single gold standard, he cleared away an enormous per- 
 sonal debt (25,000,000 sesterces or $1,250,000) and grew enormously 
 rich in a few years. 
 
 "We shall see that the effect of Caesar's policy on the pros- 
 perity of Rome was not so good as upon his own. 
 
44 PAPER MONEY VINDICATED BY HISTORY. 
 THE FALL OF ROME. 
 
 One of the main causes of the downfall of the Roman 
 Empire was the appreciation of the precious metals used as 
 money. 
 
 During her days of conquest, "Rome seized the accumu- 
 lated treasures of Carthage, Spain, Gaul, Greece, Persia, Asia 
 Minor and Egypt, throwing into circulation as money, among 
 her people, what had been hoarded as royal treasure, or de- 
 voted in vast masses to sacerdotal uses, thus raising the prices 
 of all commodities thruout the Empire, but especially in 
 Italy and the countries nearest the capital/ 770 Prices rose al- 
 most 400 per cent, between the Punic Wars and the time of 
 Augustus, 71 and industry flourished; but soon after Rome be- 
 came an Empire a contrary movement began. The influx of 
 precious metals ended when conquest ceased. The product 
 of the mines was not sufficient to maintain the volume of 
 money. A chief source of labor supply for the mines., viz., 
 the slaves captured in war, was no longer available. The men 
 to whom the mines were "farmed' 7 out took only the richest 
 ores and rapidly exhausted the deposits. They also terribly 
 maltreated the criminals and slaves whose labor worked the 
 mines. The value of money increased and prices began to 
 fall. Gold and silver were hoarded. Coin was exported for 
 luxuries. The wealthy had ornaments and trinkets made of 
 gold. The fall of prices ruined the debtor classes, depressed 
 industry and threw the wealth of the world into few hands. 
 Paper money was unknown, and even if it had been under- 
 stood might not have been used, for the Goverment was in 
 the control of the moneyed classes who profited by the ap- 
 preciation of gold. At last the "barbarians appeared on the 
 borders of the Empire, offering a refuge to those who had 
 the courage, born of despair, to attempt an escape from the 
 power of Rome, 77 and many convicts and slaves deserted the 
 mines. Then the barbarians came into the Empire and the 
 first lands invaded were those on the produce of whose mines 
 the world was most dependent for its supply of gold and silver, 
 
 ( 70 ) Genl. Walker's "Money," pp. 124-5. 
 
 ( 71 ) E- B. Andrews' "An Honest Dollar," p. 16. 
 
PAPER MONEY VINDICATED BY HISTORY. 45 
 
 and the "production of the precious metals received a shock 
 from which it was not to recover for more than a thousand 
 years." 72 From 480 to 680 A. D. there does not appear to 
 have been any mining at all, 73 and it was not until the dis- 
 covery of America that the mining of precious ores revived. 
 
 Jacob, who is the leading authority on the subject, esti- 
 mates that in the year 14 A. D., in the time of Augustus, the 
 stock of money in the Empire was 358,000,000. By the 
 year 482 it had sunk to 87,000,000, and the product of the 
 mines had ceased entirely. By the year 806, in the time of 
 Charlemagne, he estimates that the stock of gold and silver 
 in Europe was only about 33,674,000, or less than one-tenth 
 of what it was in the reign of Augustus, and it remained 
 nearly the same until the beginning of the Sixteenth century, 
 when American metal began to make its appearance in Eu- 
 rope. 
 
 President Andrews, of Brown University, says that "Be- 
 tween Trajan (A. D. 98) and Charles the Great (A. D. 768- 
 814) prices had fallen in nearly the ratio of 5 to 1, and the 
 purchasing power of money had increased 400 per cent. The 
 main cause of this tremendous change was the decrease in 
 the volume of money metal used in trade. 74 
 
 As if the cessation of the supplies obtained by conquest 
 and the falling off of the product of the mines were not 
 enough, the value of money was still further increased arbi- 
 trarily by an edict (221 A. D.) depriving silver of its money 
 quality and making gold the only legal tender money. 
 
 The burdens of the producing classes increased with the 
 scarcity of money and the fall of prices. Their debts and 
 taxes remained the same while their labor and property di- 
 minished in value. Their property being at last exhausted 
 without paying their debts, they became the slaves of the 
 creditor class. All incentive to energy was destroyed, agri- 
 culture decayed, industry was paralyzed, the classes that once 
 formed the strength of Borne, from which the invincible le- 
 gions were drawn in former times, were now reduced to miser- 
 
 ( 7a ) Walker, "Money," p. 128. 
 
 ( 7S ) Jacob, "Inquiry into the History of the Precipus Metals," p. 131. 
 
 ( T4 ) An Honest Dollar, p. 1. 
 
46 PAPER MONEY VINDICATED BY HISTORY. 
 
 able dependents ready to welcome any change as a relief, 
 while the ruling classes were enervated by idleness and luxury 
 born of -unearned wealth. 75 "I for one," says President An- 
 drews, "am convinced that the slow contraction of money 
 was among the most potent causes of the dissolution of 
 Borne. 76 
 
 Sir Archibald Alison says: "The two greatest events which 
 have occurred in the history of mankind have been directly 
 brought about by contraction and expansion of the circulating 
 medium. The fall of the Roman Empire so long ascribed in 
 ignorance to slavery, heathenism and moral corruption was 
 in reality brought about by a decline in the silver and gold 
 mines of Spain and Greece." 77 
 
 The failure of the money supply to keep pace with business 
 caused an appreciation of money which meant progressive 
 ruin for all but the very wealthy and powerful, so that at last 
 it is said, a group of 1800 men owned practically the whole 
 known world, and the rest of mankind were dependents, 
 obliged to get permission even to till the soil or labor to earn 
 the means wherewith they might continue to live. The dis- 
 turbance of just distribution of wealth and power resulting 
 from the appreciation of money was a fundamental cause of 
 the industrial, political and moral debasement which destroyed 
 the strength of Rome and made her fall a prey to barbarian 
 invaders. 78 
 
 THE DARK AGES. 
 
 Eor centuries after the fall of the Roman Empire the 
 money volume in Europe continued to shrink. This, how- 
 ever, while a very natural accompaniment, was not the cause 
 
 ( 7B ) Wharton Barker, "Bimetallism," pp. 8-11. 
 
 (76) "A n Honest Dollar," p. 16. 
 
 ( 7T ) Hist. Europe, 1815-1852, Sec. 33. The other "greatest event" was the 
 revival of energy and enlightenment following the discovery of America and 
 the increase of money volume thereby produced of that hereafter. 
 
 ( 78 ) See further on this absorbing topic, Andrews' "An Honest Dollar;" 
 Barker's "Bimetallism;" Walker's "Money;" Alison's "Hist, of Europe;" 
 Jacob's "History of Precious Metals." 
 
 For further discussison of the relation of appreciating money to the 
 fall of Rome, see Del Mar's "Hist. Precious Metals," p. 19, Senator Jones' 
 speech in Senate, October, 1893, p. 117 et seq., and p. 43 of "Facts About 
 Silver," issued by the American Bimetallic League. The dark ages in the 
 Levant, with the decay of Tyre and Sidon, resulted in part at least from 
 appreciating money. Pres. Wills' Lectures on Finance, and Del Mar's Hist. 
 Precious Metals, pp. 9, 10. The dark ages in Japan appear to have been due 
 to the same cause. Del Mar's 'Hist, of Money in Ancient Countries," p. 53. 
 
PAPER MONEY VINDICATED BY HISTORY. 4- < 
 
 of the darkness in this case. The appreciation of money in 
 Rome was a main cause of its fall whereby the darkness of 
 the North enfolded the whole of Europe, but the subsequent 
 shrinkage of money was not the cause of continued darkness. 
 Indeed the destruction of property and the reversion to prim- 
 itive conditions so far diminished production that prices rose 
 considerably in the Fifth and following centuries. For a long 
 period the lack of social organization and the insecurity of 
 possession would probably have neutralized the stimulus of 
 even a very rapid increase of gold and silver. 
 
 In the Ninth and Tenth centuries mining began again, so- 
 cial organization and security improved and commerce grew. 
 Credit money came into use. The Bank of Venice (1171) 
 and the Bank of Genoa (1407) satisfied the needs of com- 
 merce in their localities. But taking Europe as a whole, tho 
 the volume of money increased somewhat from the Ninth to 
 the Sixteenth centuries, population and business increased 
 so much faster in the later centuries of the period that by 
 1510 the value of money was almost, if not quite as great as 
 in the last period of the Empire. 
 
 THE DISCOVERY OF AMERICA. 
 
 In 1492 Columbus made his grand voyage, and in the fol- 
 lowing century the treasures of the new world flowed into 
 Europe. Its money supply was increased about 500 per cent., 
 and prices rose nearly as much, or from a price level of 100 
 to 470, according to the highest authority. 79 "We have already 
 referred to the passage in which Sir Archibald Alison deals 
 with the failure of Roman civilization and the awakening 
 that followed the discovery of America as the two greatest 
 events in history the failure caused by a contraction, the 
 awakening by an expansion of the money volume. He con- 
 tinues: "Columbus led the way in the career of renovation. 
 When he spread his sails across the Atlantic he bore mankind 
 and its fortunes in his bark. The annual supply of the pre- 
 
 ( 79 ) Jacob, Hist Precious Metals. Other estimates by Prof. Leslie, 
 Hume, Alison, etc., place the rise at 200 to 300 per cent. See American 
 Economic Assoc. "Economic Studies," Vol. I., No. 1, p. 30, and Genl 
 Walker's "Money," pp. 81, 135. 
 
4: 8 PAPER MONEY VINDICATED BY HISTOKY, 
 
 cious metals for the use of the globe was tripled; before a 
 century had expired the prices of every species of produce 
 were quadrupled. The weight of debt and taxes insensibly 
 wore off under the influence of that prodigious increase; in the 
 renovation of industry the relations of society were changed; 
 feudalism was cast off; the rights of man established. Among 
 the many concurring causes which conspired to bring about 
 this mighty consummation, the most important, tho hitherto 
 the least observed, was the discovery of Mexico* and Peru."' 80 
 The rise of prices stimulated industry and commerce, reduced 
 the pressure of debts and all fixed charges, rents, pensions, 
 mortgages, etc., swept away the resources of the idle rich, 
 made it increasingly difficult to live without labor,- enlarged 
 the profits of merchants and manufacturers, and enabled the 
 producing classes to throwoff the yoke of the creditor classes. 81 
 Widespread distress resulted to certain classes. "The creditor 
 class was very generally impoverished, if not hopelessly 
 ruined. Debts were, in many cases, almost confiscated by the 
 rapid depreciation of the money in which they were to be 
 paid." 82 Pauperism visited the homes of many who had lived 
 without labor, and misery was the portion of dependents. The 
 benefits, however, that came to current labor far outweighed 
 the evils to those who lived on the fruits of past labor. The 
 lightening of debts, rents, taxes, and all the obligations of 
 the past, the diffusion of wealth, the levelling of classes, the 
 discouragement of idleness and parasitism, and the stimulation 
 of industry thru the increased rewards to the active and 
 skillful members of society more than balanced the evils of 
 depreciating gold, and united with intellectual and moral 
 causes to make the Sixteenth and Seventeenth centuries lu- 
 minous with progress and grand with the mighty energies of 
 a new born hope. Even in its most glorious epoch, however, 
 metallic money bought its benefits with devastation and dis- 
 tress, and sought for progress at the cost of grievous injustice. 
 It is not a wise money system that pauperizes one class to bene- 
 
 ( 80 ) Hist, of Europe, 1815-1852, Sec. 33. 
 
 ( 81 ) Genl. Walker's "Money," pp. 85-89 and 135-6. 
 David Hume's "Essay on Money," 
 
 Alison's "Hist, of Europe." 
 
 ( 82 ) Walker's "Money," p. 136. 
 
PAPER MONEY VINDICATED BY HISTORY. 49 
 
 fit another, and ruins multitudes of honest, law-abiding citi- 
 zens thru the sudden confiscation of resources on which it 
 had previously led them to rely. 
 
 A METAL BASE IS A BUILDER OF DEBT AND AN ALLY OF 
 GAMBLERS. 
 
 The recent issue of 262 millions of bonds in time of peace 
 illustrates one of the serious evils of our metallic system. The 
 necessity the Government is under of redeeming greenbacks 
 in gold upon demand enables scheming men to draw large 
 amounts of gold from the Treasury and then to say to the 
 Government, "Your reserve is getting low; you must have 
 gold or you will be in danger of failure to keep your promise 
 in respect to specie payments; issue bonds and get the gold 
 back again." So the schemers get bonds for their gold, sell 
 the bonds at a premium, take the greenbacks they get for the 
 bonds and draw the gold out of the Treasury again, till the 
 Government is frightened into a new issue of bonds, and so 
 on in an endless chain, with a premium profit for Wall Street 
 on every issue of bonds and nothing but accumulating debt 
 for the nation. It is not wise or just for the nation to go into 
 debt, in time of peace, especially when it can easily raise all 
 the money it needs by taxation. It is wrong to burden the 
 people with needless interest payments for 20 or 30 years on 
 loans not required for public expenditure, but negotiated f or 
 the benefit of the bondholding classes who desire the bonds, 
 as the safest modern means of compelling labor to pay tribute. 
 The Government might start with thirty millions of gold in 
 the Treasury, and thru the repetition of the above described 
 process, issue a billion of bonds, and at the end have only 
 thirty millions of gold in the Treasury and not a thing to 
 show for the billion of debt but some money which it could 
 and should have obtained by taxation without saddling the 
 nation with the burden of an interest bearing debt, and the 
 keeping of a promise (gold redemption) that is of little ad- 
 vantage to any one except the schemers who have found out 
 how to gear it to a bond-printing press and make it turn the 
 people's millions into their coffers as fast as they dare to turn 
 on the current. 
 
50 PAPER MONEV VINDICATED BY HISTORY. 
 
 It is a heavy count in the indictment against our metallic 
 system that it places our industries, our debts and even our 
 Government at the mercy of unscrupulous gamblers, who are 
 able to heap hundreds of millions of useless debt upon the 
 nation, govern to a large extent the general movement of 
 prices, exert great influence over the business interests of the 
 country, capture millions of unearned profit, and bring the 
 Government to its knees before them, offering tribute for 
 their protection all by controlling the floating supply of 
 gold. 
 
 The bond record stands as follows: 
 
 December, 1891, fifty millions of bonds issued to get gold 
 for the Treasury, and in two months the gold thus obtained 
 was gone from the Treasury again. 
 
 March, 1894, fifty millions of bonds, and in three months 
 the gold was gone. 
 
 February, 1895, sixty-two and a half millions of bonds, and 
 by 1896 the gold had vanished again. 
 
 January, 1896, a new issue of bonds brought in $116,- 
 000,000 of gold, nearly the whole of which departed within 
 six months. 
 
 July, 1896, a new issue seemed necessary, but Bryan was 
 nominated; the rising of the people was too serious to be 
 trifled with; it would not do to goad the people further at the 
 very gates of a National election, and the bankers decided 
 that the bond business must rest till after election, to accom- 
 plish which they supplied the Treasury with twenty-odd mil- 
 lions of gold. 
 
 In respect to where the gold went so fast after its capture 
 by the Treasury we have some evidence in one of President 
 Cleveland's messages. 
 
 "The results of previous bond issues," he says, "have been 
 exceedingly unsatisfactory, and the large withdrawal of gold 
 succeeding their sale in open market gave rise to the reason- 
 able suspicion that a large part of the gold paid into the Treas- 
 ury in such sales was promptly drawn out again by the pre- 
 sentation of notes, Treasury notes, and found its way into the 
 hands of those who had only temporarily parted with it in 
 the purchase of bonds." 
 
PAPER MONEY VINDICATED BY HISTORY. 51 
 
 On the $62,500,000 loan the Morgan-Belmont syndicate 
 offered but 104-|, altho United States bonds were selling in 
 Wall Street at the time for 120. The Government was un- 
 willing to accept the bid, but according to Mr. Morgan he was 
 able to persuade the Government by going on to Washington 
 in person and assuring the authorities that they could not get 
 gold except thru him and his associates, and there would be 
 a panic if his figures were refused. 
 
 So Morgan, Belmont, Kothschild & Co. 
 
 Got the bonds for $65,112,943. 
 
 And sold them to jobbers for 69,928,587. 
 
 Who sold them to the public for 73,531,700. 
 
 Profits of speculation on this one deal 8,418,757. 
 
 More than eight millions of dollars in the pockets of gold 
 gamblers that should have gone into the Treasury of the 
 United States. 
 
 The remarks of William J. Bryan on this subject in one 
 of his campaign speeches last year are so fine that I quote 
 them at some length: 
 
 "The first $50,000,000 of bonds were advertised for, and 
 the advertisement stated that only gold would be received 
 for the bonds. Suppose a man had gone to the Secretary of 
 the Treasury with $1,000,000 in greenbacks and Treasury 
 notes and said to the Secretary: 'I want to buy $1,000,000 
 of bonds. 7 The Secretary would have said: 'We can't sell 
 you these bonds for greenbacks and Treasury notes. These 
 bonds are issued to get gold and, therefore, we can only sell 
 them for gold. 7 This man would say : '"Well, if you won't 
 sell them for greenbacks and Treasury notes, I will just de- 
 posit the greenbacks and Treasury notes and have you redeem 
 them in gold. 7 The Secretary would have said: 'Well, that's 
 what we are here for, and would have given him the $1,000,- 
 000 in gold. Then the man would say: 'Do I understand 
 that you have some bonds for sale? 7 'Yes. 7 'Well, here is 
 your $1,000,000 in gold, give me the bonds! 7 7 
 
 "Don 7 t you think that can be done? It can be done. Do 
 you think it would be done? It has been done. When they 
 
52 PAPER MONEY VINDICATED BY HISTORY. 
 
 issued the first $50,000,000 of bonds they drew out $18,- 
 000,000 in gold to pay for those bonds, and to the extent of 
 $18,000,000 the Government had no more than when it com- 
 menced, altho it had agreed to pay interest on $18,000,000 
 of bonds." 
 
 "Then they issued $50,000,000 more and drew out a larger 
 percentage of the gold than the first time. Then they made 
 .the Rothschild contract. There was a contract by which the 
 Government sold to a private syndicate bonds at 104rJ which 
 were at that time worth 120 in the market." 
 
 "That contract contained a stipulation by which the 
 Rothschild and Morgan syndicate agreed for a certain length 
 of time to do their best to protect the Treasury of the United 
 States. They hired two men to back the Treasury. If this 
 Government is going to admit that it depends for its financial 
 existence upon two banking firms, one foreign and one do- 
 mestic, then it puts itself where those people can charge this 
 Government whatever they please." 
 
 "Yet they issued $100,000,000 more. It was suggested that 
 they were going to be issued at private sale, and J. Pierpont 
 Morgan, who had been in the bond deal where they made such 
 a profit on the bonds that he refused to tell about it, when 
 brought before a committee of investigation, after stating 
 that he did it largely because of his interest in the country, 
 refused to tell how profitable it was to be interested in the 
 country just at that time, J. Pierpont Morgan organized an- 
 other syndicate, and it was advertised that he was going to 
 submit a bid for various parties at about 105, and when a 
 circumstance arose that made it necessary for the President 
 to advertise for public bids, did the Morgan syndicate put in 
 a public bid for the same amount it would have at private 
 sale? No, that syndicate waited until just before the time 
 to open the bids, and then their bid was put in more than 
 $5,000,000 above the bid that they expected to put in if they 
 had secured the bonds at private sale." 
 
 "Now that is business sagacity. Of course, no financier 
 would condemn a man who tried to get the bonds at 105 and 
 then had to bid 110 and a fraction and got them. If that is 
 
PAPEB MONEY VINDICATED BY HISTORY. 53 
 
 business sagacity, then I believe it is the business of this Gov- 
 ernment to protect the people against such sagacious finan- 
 ciering instead of turning the finances over to them." 
 
 "You may call it patriotism on their part if you will, but 
 I want that kind of a patriot to serve some other country and 
 not mine. If some petty individual who did not have a high 
 financial standing were to try to beat the Government out 
 of $100 they would put him in the penitentiary and make an 
 example out of him. But if a man tries to beat the Govern- 
 ment out of $5,000,000 lie becomes a patriot, and deserves to 
 be the chief guest where Treasury officials are banqueted. I 
 do not believe the man who manages the financiering should 
 be the bosom friend of the conspirators who never lose an op- 
 portunity to bleed the people." 
 
 But when the metallic system puts it in the power of a few 
 speculators to wreck the credit of the Government, by exer- 
 cising their lawful right to purchase and hold out all the gold 
 they can obtain, is it strange that Government officials anxious 
 to sustain the public credit and filled from boyhood with the 
 belief that the maintenance of metallic redemption is essen- 
 tial to honest finance is it strange that such officials under 
 such circumstances seek to placate the scheming owners of 
 gold and bargain for their help? It is simply the reductio ad 
 absurdum of metallic redemption. 
 
 Writing in 1895, Major Winn, a powerful and careful 
 thinker, used the following significant language: "The most 
 striking display of monetary power is shown by the action of 
 the foreign syndicate in stopping the gold drain of a million 
 or more a week from the Treasury. It seems, with the gain 
 in gold and some expansion by the banks, to have restored 
 confidence and revived business, and to show that, under a 
 gold system, a few men hold National prosperity on tap to 
 be sold to the hiyhcst bidder. In this view the six or eight 
 millions profit paid by Mr. Cleveland seems reasonable. Ter- 
 ror is reported at Washington and a stock decline in Wall 
 Street from fear that these bankers will not protect the United 
 States till October. A great nation grovels at the feet of a 
 foreign syndicate." 
 5 
 
| AVERAGE PRICE OF CONSOLS I&45-60.. 
 
 
 
 
 JULY AUG.SEPT. 
 
 OCT. NOV. DEC- 
 
 pn 
 
 iA 
 
 3E 
 
 D Jg 
 
 95 
 
 Q4- 
 
 X 
 
 
 
 So <x^ 
 
 
 \ 
 
 
 Q 
 
 
 94. 
 
 93 
 
 ^N 
 
 vV 
 
 \ 
 
 \/' 
 
 
 
 V 
 
 A 
 
 \ 
 
 93 
 
 
 
 
 
 
 
 
 
 
 GAZETTE AVERAGE PRICE OF WHEAT, 1846-61. 
 
 Sh5 : JAN FEB. MAR. APR. MAY JUffe. JULY AUG SEPT. OCT. NOV. DEC ; *&. jjt t 
 
 55 
 
 5Z 
 
 55 
 

 I-A-EIt MONEY VINDICATED BY HISTORY. 55 
 
 per cent, in one year from Janunary 1, 1893, to January 1. 
 1894, and nearly 19 per cent, in two years from January, 
 1893, to January, 1895. 8f) 
 
 The farmers sell mostly when money is dear and products 
 cheap, and buy mostly when money is cheap and products 
 dear. The movement of the crops, the settlement of the 
 year's business, the preparation for the Christmas holidays, 
 etc., make special demands upon the circulating medium. In- 
 stead of expanding to meet the need, money becomes more 
 difficult to get in proportion as it is needed, and the strin- 
 gency ruins many honest merchants and debtors of various 
 sorts each autumn, while riches come by the stroke of a pen 
 to the men who devote themselves to studying the movements 
 of money instead of wasting their energies in producing and 
 distributing goods and merchandise, and who are not too 
 scrupulous to use their knowledge to capture for themselves 
 the wealth of the producers. 
 
 The larger variations of value are disastrous in the extreme, 
 especially the appreciation of money. Rising prices may 
 cause a serious injustice to creditors of every class, from bond- 
 holders and mortgagees to savings bank depositors. Labor 
 too may suffer if goods advance in price more rapidly than 
 wages and salaries, which is almost sure to be the case. The 
 stimulation of industry creates a new demand for labor; the 
 unemployed find work, employment is less interrupted; and 
 wages rise, but not till after the rise of goods which gave new 
 energy to production and caused the new demand for labor, 
 so that injustice in the shape of diminished reward for a given 
 amount of labor of hand or brain is sure to result. 
 
 ( 8B ) See the tables published quarterly by "The American." The fall of 
 prices from 1873 to July 1, 1897, using the figures of Sauerbeck and the 
 American, was 49.9 or practically 50#; in other words gold doubled in value. 
 Using the Aldrich tables and the American, the fall would be about 44<* and 
 the rise of gold between 80 and 90 per cent. The Sauerbeck data are con- 
 sidered by economists to be the more reliable. 
 
 Even the quarterly price levels vary in a marked degree. The following 
 figures are taken from Sauerbeck in the Journal of the Royal Statistical 
 Society, Vol. 59, p. 189 (1896). 
 
 1894, 1st quarter price level,.... 65 1895, 2nd quarter price level,... 62.2 
 
 1894, 2nd quarter price level,... 63.3 1895, 3rd quarter price level,... 63.2 
 
 1894, 3rd quarter price level,... 62.8 1895, 4th quarter price level,.,. 62.3 
 
 1894, 4th quarter price level,... 60.9 1895, 1st quarter price level 60.3 
 
56 tAPEB MONEY VINDICATED BY &ISTORY. 
 
 Some writers affirm that rising prices lead to panic, while 
 others believe a rising market to be a blessing so great as to 
 more than offset the injustice to creditors and the scaling down 
 of the wage rate. Each of these views contains a truth, but 
 neither is unqualifiedly true. It is clear that rising prices do 
 not necessarily lead to panic they may lead to remarkable 
 prosperity as during the long age of rising prices that followed 
 tke discovery of America, and in England during the Na- 
 poleonic wars, and in America during the Civil War. There 
 are, however, two ways in which, under the present system, 
 rising prices may lead to industrial disaster: (1) The de- 
 creasing proportion of product that goes to the wage receiving 
 class under rising prices, and the increasing share of the en- 
 trepreneur is apt to augment the production of common goods 
 and necessaries of life beyond the power of the community 
 to buy and consume them. The rich can buy but need only 
 a very limited quantity, the poor need much but can buy 
 little, and their power of purchase is dimmshing relatively 
 to the volume of goods produced; so that there is apt to arise 
 what is called "over-production," which would generally be 
 more accurately described as under-consumption, or false dis- 
 tribution of the power of purchase; tho it is possible, of 
 course, that a particular class of goods may be produced be- 
 yond the amount the community could consume even if every 
 member of it had a full share of purchasing power. On the 
 other hand, if the increasing profits of the entrepreneur are 
 used for the production and consumption of luxuries, or goods 
 and services wanted by the rich and well to do, the new dis- 
 tribution of labor may keep the system in balance and pre- 
 vent the glutting of the market. (2) A rise of prices, espe- 
 cially if rapid, may lead to careless expansion of credit and 
 speculation of a rash and dangerous sort on the part of over- 
 confident and reckless investors, and under our present 
 system, the collapse of these undertakings may involve the 
 entire community. Industry would be safest if protected 
 from any rapid rise of prices as well as from falling prices., 
 But the continuous and emphatic inflation is unwise, throw- 
 ing investors and business men off their guard and leading 
 
PAPER MONEY VINDICATED BY HISTORY. 57 
 
 to collapse and failure of many imprudent individuals, yet 
 it by no means follows that even a rapidly ascending market 
 need produce a panic, if the financial system were sufficiently 
 elastic to check an extreme rise arid soften the reaction re- 
 duce the grade of the upward slope and bring it to a level 
 by a. gradual gen tie change, instead of leaving industry to climb 
 the steep to the top and tumble over a precipice of falling prices. 
 Individual failures there would be under any system, but they 
 would not become the widespread failure and depression that 
 constitute a panic, except for the effect of falling prices, which 
 are by no means a necessary consequence of a period of rising 
 prices, but result from the failure of the legal tender money 
 volume to expand so as to offset the temporary shrinkage of 
 credit. 
 
 The fall of prices acompanying panics is shown in the fol- 
 lowing table. The figures are taken from the data of Sauer- 
 beck, Wharton Barker and the Aldrich Committtee for six 
 of our first class crises: 
 
 PRICE LEVELS JUST BEFORE 
 
 THE PANIC OF SUBSEQUENT PRICE LEVELS. 
 
 1825 117 1827 97 
 
 1837 102 1837 94 
 
 1847 95 1848 -78 
 
 1857 105 1858 91 
 
 1872 138 1875 127 
 
 1893, April, 99% 1895 Jan. . 79% 
 
 The fall of prices is partly the cause of panic, partly the 
 effect of it the first fall leading to a further fall in the ab- 
 sence of elastic currency. The above figures do not fully ex- 
 press the facts. For example, the 105 expresses the average 
 price for the whole year 1857 including several months of 
 panic prices; it is likely that 108 or 110 would more truly 
 represent the real level before the crisis. 
 
 The worst injustice and dangers of rising prices are far 
 exceeded by the evils of falling prices or appreciating money. 
 A falling market is a calamity almost as .much to be deplored 
 as civil war. It ruins merchants, manufacturers and farmers, 
 throws men out of employment, and leads in a double way to 
 failure, depression and panic, A very slight fall between the 
 
58 PAPER MONEY VINDICATED BY HISTORY. 
 
 time a merchant or manufacturer buys his goods or materials 
 and the time he sells, may turn his expected profit into a loss. 
 He borrows money to tide him over, hoping next year to re- 
 cover; but prices fall further the following year, and instead 
 of relief he finds the loan an ever-increasing weight about his 
 neck. Year after year he struggles to regain what he has 
 lost, but prices continue to fall and his difficulties to increase, 
 until at last he fails. His creditors, some of them wrestling 
 like himself with falling prices, are further embarrassed by 
 his bankruptcy, and their names are soon upon the list 
 of wrecks. Failures and the natural impairment of industry 
 due to the discouragements of a falling market throw many 
 out of work. Having no employment they cannot buy as they 
 used to, and a shrinking demand is added to the dangers and 
 perplexities of commerce, causing a further fall of prices and 
 new ruin; and so the inter-acting causes continue their sad 
 work till stoppage and destruction reach such vast dimensions 
 that we call them panic. 
 
 Falling prices are unjust to debtors; their debts remain the 
 same, but their means of payment shrink. The note calls for 
 as many dollars as ever, but the number of bushels of wheat 
 or bales of cotton that must be sold to get those dollars is 
 double what it was when the money was borrowed and the 
 note was written. 
 
 Here is a table that tells the story of the farmers' falls 
 the Niagara of agriculture: it is taken from "The Key Note," 
 by Albert Griffin, p. 197: 
 
 VALUE OF AN ACEE'S PEODUCT. 
 
 1866-70 1871-5 1876-80 1881-85 1886-90 1893. 
 
 Corn 12.84 11.30 9.62 10.25 8.81 * 8.35 
 
 Wheat 13.16 11.90 12.00 30.20 9.07 0.00 
 
 Oats 10. 2 9.81 8.58 9.17 7.50 5.75 
 
 Hay 13.28 14.38 11.57 11.15 10.19 10.00 
 
 Cotton 28.01 28.55 17.65 15.63 13.84 10.65 
 
 Total 78.21 75.94 59.42 56.40 49.44 40.75 
 
 Average ... 15.64 15.19 11.88 11.28 9.89 8.15 
 
 Such is the history of our thirty years' war upon the pro- 
 ducts of the soil. As the value of an acre's yield diminishes, 
 the value of the acre itself decreases also. Many a man who 
 
PAPER MONEY VINDICATED BY HISTORY. 59 
 
 put his savings into farm land years ago, giving a mortgage 
 for the balance of the purchase price, finds to-day that the 
 mortgage has swallowed up the farm. Suppose he had 
 saved five thousand dollars, borrowed five thousand more, 
 and bought a ten thousand dollar farm in Kansas, giving a 
 mortgage for the money he had borrowed. To-day the farm 
 is not worth the face of the mortgage; falling prices have de- 
 voured his five thousand dollars and left only the debt. At 
 the start the farmer and the mortgagee had equal interests 
 in the farm; now the mortgagee's interest covers the whole 
 farm, and the farmer has nothing. This is a fair example of 
 one of the disastrous processes that have been going on all 
 over the country, and especially in the "West and South, and 
 no one can wonder that our people should become desperately 
 hostile to a monetary system that causes or permits such evils. 
 The entire product of our farms in 1895 was worth less 
 by 6 per cent, than in 1873, altho the increase in the num- 
 ber of hands ivas about 50 per cent., in the number of acres 
 also about one-half, and the product in tons and bushels had 
 grown about 100 per cent. 
 
 One of the most striking illustrations of the 
 effects of falling prices in the last thirty years is the fact that, 
 after having paid over four billions and a half in interest and 
 principal on the National debt, the people have still to pay 
 more in terms of commodities to settle the remainder of the 
 debt than would have sufficed to cancel the entire debt at its 
 maximum figure just after the rebellion. Upon an average 
 of 25 leading commodities, including land and labor, the debt 
 is bigger now than in 1866, in spite of the hundreds of mill- 
 ions that have been paid on the principal since that date. Presi- 
 dent Andrews says: "Our National debt 011 September 1, 
 1865, was about 2J billions. It could then have been paid off 
 with 18 million bales of cotton? When it had been reduced 
 to a billion and a quarter, 30 million bales would have been 
 required to pay it" ("An Honest Dollar," p. 13.) Careful 
 estimates by the eminent historian, John Clark Ridpath, will 
 be found in the Arena for January, 1896, p. 271. The re- 
 sults briefly stated are as follows : 
 
60 TAPEK MONEY VINDICATED BY HISTORY. 
 
 AVERAGE PRICES. 
 
 MARCH, 1866. CLOSE OF 1895. 
 
 Wheat, per bushel $1.90 $0.58 
 
 Flour, per barrel 10.75 3.50 
 
 Cotton, per Ib 48 .085 
 
 Mess pork, per barrel 28.37 8.20 
 
 Sugar, per Ib. 11125 .05 
 
 Wool, per Ib 53 .215 
 
 Beef, per cwt 15.25 9.50 
 
 Bar iron, per Ib 0675 .0267 
 
 Superior farm lands, Ohio and Miss- 
 issippi valley, per acre 75.00 35.00 
 
 The National debt, March, 1866, was $2,827,868,959 
 
 The National Debt at the close of 1895 was . . 1,126,379,106 
 
 It will cost more to pay the little debt now than the big 
 one then: 
 
 More of wheat by about 43% 
 
 More of flour by about 38% 
 
 More of cotton by about 140% 
 
 More of pork by about 50% 
 
 More of wool by about 8% 
 
 More of bar iron by about 10% 
 
 It will cost a little less in sugar (2J per cent.), beef (30 per 
 cent.) and land (6 per cent.) to pay off the remnant of the 
 debt; but to pay a billion now will take about double the 
 sugar, beef, and land that was required to pay a billion of 
 the debt in 1866, and upon the average of the nine great 
 staples above mentioned it requires a great deal more of them 
 to pay a billion now than it did to pay three billions at the 
 close of the war. 
 
 On the average of all commodities a dollar now (1897) will 
 buy nearly 100 per cent, more than in 1873, and over 100 
 per cent, more than in 1866. These changes have benefited 
 labor in some respects a day's wages, as a rule, will buy more 
 than in 1873 or 1866; but the disastrous effects of falling 
 prices upon productive activity and the distribution of wealth 
 have more than counterbalanced the advantages of the change. 
 The appreciation of money is of little avail to the workman 
 out of employment, or the merchant whose business has shriv- 
 elled into insignificance, or the farmer whose mortgage ap- 
 

 PAPER MONEY VINDICATED BY HISTORY. 61 
 
 
 predates as fast as the dollar. The increased power of the 
 dollar is of no use to the man who can't get the dollar; a 
 positive detriment to him when it is that very increase of 
 power that crippled his business or threw him out of work, 
 and a terrible disaster to the man whose debt grows bigger 
 with the growth of the dollar, while the crops or other prop- 
 erty with which he expects to pay the debt depreciate and 
 disappear. 
 
 The United States Monetary Commission, Vol. I., p. 50, 
 says that "falling prices, misery and destitution are insepar- 
 able companions/ 5 and our great economist, Francis A. 
 Walker, says: "Mr. Balfour was fully justified in saying that 
 a slow appreciation of the standard of value is probably the 
 most deadening and benumbing influence which can trouble 
 the springs of enterprise in a nation. 8 6 
 
 The tables prepared by R. A. Southworth, Secretary of the 
 National Farmers' Alliance, show in another way how fierce 
 has been the fall of prices and how strong has been the ten- 
 dency to pour the product of the country into the laps of the 
 official and directing classes. I have taken Cleveland, 1896, 
 instead of Harrison, 1892. 
 
 Lincoln's salary, 1866, $25,000, equal to 10,310 bushels of wheat, 
 Cleveland's salary, 1896, $50,000, equal to 86,000 bushels of wheat. 
 
 PAID TO 1866. I 1894. 
 
 Congressman . . $3,0001,240 bu. wheat. $5,000=15,000 bu. wheat. 
 
 Governor $3,000=1,240 bu. wheat. $5,000=5,000 bu. wheat. 
 
 Legislator $4 a day=l 2-3 bu. wheat. $7 a day = 21 bu. wheat. 
 
 Lawyer $5 a day = 2 bu. wheat. $10 a day=30 bu. wheat. 
 
 Mr. Southworth has taken the average prices given by the 
 American Almanac, but even if the very conservative aver- 
 ages of Prof. Bidpath are taken for the calculation, the results 
 still show that while the farmer has continually greater diffi- 
 culty in obtaining the means of livelihood, the "upper classes," 
 as they are called, obtain 6 to 8 times as much wealth in re- 
 turn for their services as they did in Lincoln's time. 
 
 ( 88 ) American Economic Association, Economic Studies, Vol. I., No. 1, 
 April, 1896, p. 44. 
 
PAPER MONEY VINDICATED BY HISTORY. 
 
 The contrast is not by any means confined to wheat. Some 
 of Mr. South worth's other figures are as follows: 
 
 LINCOLN'S YEARLY SALARY 
 1864 TO 1868 WOULD BUY 
 
 AT AVERAGE NEW YORK HARRISON'S SALARY 
 
 PRICES. 1892 WOULD BUY. 
 
 Cotton 
 
 j-Uj*w~rc? k>LloXXdo* 
 
 132 275 Ibs 
 
 auvjuuu uusiieis. 
 fi^'i 00ft lh 
 
 Wool 
 
 48 356 Ibs 
 
 166 666 Ibs 
 
 Rice 
 
 110 tons 
 
 060 tnn<3 
 
 Butter . 
 
 68 870 Ibs 
 
 0*0 000 lh 
 
 Sugar, raw 
 Mess pork 
 
 193,708 Ibs. 
 959 barrels 
 
 1,111,111 Ibs. 
 
 *i 263 "harrpls 
 
 Mess beef . 
 
 1.042 barrels. 
 
 fi OfiO VinT-T-fls 
 
 Mr. Southworth remarks that in the early period, from 
 1864 to 1868, when the people were comparatively free from 
 private debt, $100 for payment of interest or principal could 
 be obtained with 40 bushels of wheat; while now, when the 
 people are weighted with debt, it takes 2 or 3 hundred bushels 
 to get the same number of dollars that used to be bought with 
 40 bushels. These tremendous injustices are caused or per- 
 mitted by our system of metallic money. 
 
 It is said that falling prices are caused by cheapened pro- 
 duction, and this is partly true. Part of the fall in the last 
 thirty years has been due to the appreciation of gold, and 
 another part has been due to cheapened production and inten- 
 sified competition under a money that failed to counteract 
 the downward tendency of prices. The system is as much to 
 blame in one case as in the other. It makes no difference 
 whether gold moves away from commodities or commodities 
 move away from gold; whether gold has appreciated or com- 
 modities depreciated, or both; the result has been a falling 
 market with all the disastrous consequences which a proper 
 system would prevent. There is abundant evidence in the 
 table given above that gold and silver have vibrated through 
 enormous arcs, becoming less valuable with each new mining 
 discovery and growing more valuable as the sources of supply 
 failed to keep pace with the growth of business requirements. 
 The movement of production will not account for the facts. 
 
PAPER MONEY VINDICATED BY HISTOKV. 63 
 
 The centuries following the discovery of America witnessed 
 a vast industrial advance and cheapening of production, yet 
 prices did not fall; they rose because the movement of money 
 was more than sufficient to counteract the cheapening effects 
 of organization and invention. Again, from 1850 to 1866 art 
 and invention and business grew marvellously; the railroad, 
 the steamboat, the telegraph and thousands of labor-saving de- 
 vices worked their wonders on America, yet prices rose. It 
 is not disputed that the movement of gold produced the great 
 fall of prices in the later years of the Koman Empire, and 
 there can be no rational question, I think, that it has shifted 
 its position to higher values since the demonetization of silver 
 in 1873. 
 
 But this is entirely immaterial to the question of monetary 
 responsibility for falling prices. Falling prices are disastrous, 
 whether they result from the movement of business and in- 
 vention while the gold stands still, or from the movement of 
 gold while business stands still, or from the combined effect 
 of the two movements in opposite directions. If a merchant 
 buys at 50 and the price falls to 40, he is ruined just the 
 same whether the fall is due to cheapened production or to 
 a relative scarcity of gold. And if such cases are numerous, 
 as they will be, where the average price level of commodities 
 is sinking, widespread embarrassment will ensue. In a com- 
 petitive society, falling prices and disaster are inseparable 
 companions regardless of the cause of the falling prices. It 
 is the business of a monetary system to adjust itself to chang- 
 ing conditions, so as to maintain a uniform level of prices in 
 reference to the great staple commodities on which our in- 
 dustries are based, in order that injustice to both debtors and 
 creditors may be avoided, and security given to the whole in- 
 dustrial system so far as possible. 
 
 History shows that this has been done and can be done by 
 means of a regulated paper money, and it is equally emphatic 
 that it has never been done and probably never can be done 
 with a system based on gold or silver or both. The vicissi- 
 tudes of mining, the movements of production, the contin- 
 gencies of foreign markets and the conspiracies of speculators 
 
64: PAPER MONEY VINDICATED BY HISTORY. 
 
 make a uniform level of metal prices a practical impossibility. 
 Even if the Government should become the owner of the 
 mines of gold and silver and carefully regulate their coinage 
 and issue (the only way in which it appears to be possible to 
 make any approach to a fair and rational metallic system) 
 even then it would be difficult if not impossible to counteract 
 the effect of changing prices in other countries using the same 
 metals. Our stock of gold and silver would be subject to ex- 
 haustive emmigration, and at the best the system would not 
 outlast the life of the mines. 
 
 A METAL BASE IS A CAUSE OF INDUSTRIAL CRISES. 
 
 The variations of money due to natural or artificial causes 
 constitute a prolific source of panic, originating or permitting 
 and intensifying every industrial crisis. 
 
 Wendell Phillips said: "The great lie called ' specie basis' 
 has destroyed the commercial prosperity of the United States 
 once every six years since the nation started/' 87 
 
 Looking over the history of England and America we find 
 that panics of. the first magnitude occurred in England in 
 1763, 1783, 1793, 1797, 1816, 1825, 1837-8, 1847, 1857, 
 1866, 1875 and 1890-3, and in the United States in 1819, 
 1825, 1837, 1839, 1847, 1857, 1873 and 1893 (with a plenti- 
 ful supply of lesser disasters in intermediate years), and every 
 one of them was either directly caused by the movement of 
 money, oo* grew to ruinous dimensions because the money 
 volume failed to expand at the proper time to relieve the finan- 
 cial pressure, metallic money being far more apt to shrink 
 away and hide itself in time of danger than to come to the 
 rescue of commerce when credit money is shaken. 
 
 A few great failures from rash speculation, a contraction 
 
 ( 8T ) See North Amer. Rev., Sept., 1885, p. 205. Phillips called specie basis 
 a lie, because coin is not really the basis of our mouey, but only a regulator, 
 or rather a misregulator of it. The true basis of money, that which makes 
 it pass as money is not the specie reserve but the legal tender quality of 
 the currency. The vital fact is not specie redemption but utility redemption. 
 Men do not take greenbacks because they are convertible into gold, but 
 because they are convertible into food and clothes, shelter and service, and 
 will pay debts and taxes. As a matter of fact they are not convertible into 
 gold except to a very limited degree. Complete redemption is impossible. 
 The holder of bills and silver token monies could not get gold for them 
 since there is not half enoxigh gold in the United States to make the re- 
 demption. Even partial redemption is apt to fail. "The gold dollar is never 
 behind the dollar-bill except when no one wants it." 
 
PAPER MONEY VINDICATED BY HISTORY. 65 
 
 of the currency, an adverse balance of trade, a foreign panic, 
 large sales of American securities held abroad, purchase of 
 gold by foreign governments or banks, any drain of gold to 
 foreign countries, a corner on gold in New York, or a rapid 
 withdrawal of loans by concerted action of powerful bankers 
 and capitalists, destroys confidence, produces financial strin- 
 gency, and brings the mercantile classes face to face with 
 ruin. We have seen that France, at such a time, averted 
 panic by expanding the volume of her independent paper 
 money. And that is the simple common sense cure for a crisis, 
 or rather the common sense means of preventing a crisis, for 
 it will not come if the remedy is promptly used. When one 
 part of the money force is disabled, the other part should be 
 increased sufficiently to do the work of the injured part. 
 When credit money or non-legal-tender money fails, and 
 prices begin to fall, legal tender money should expand to 
 take its place. People fear to do business with checks and 
 private notes in panic times for the individuals behind the 
 paper may prove unable to make it good, and the power of 
 individual paper to pay debts and make exchanges diminishes 
 in proportion to the loss of confidence. The failure of credit 
 and the necessities of merchants and manufacturers who must 
 meet maturing liabilities, causes them to offer their goods at 
 lower rates to raise the needed money. The fall of prices dis- 
 courages industry and deepens the difficulty. Men are afraid 
 to do business on a falling market. But men are not afraid 
 to do business with cash on a steady market or a rising mar- 
 ket. Full legal-tender money backed by Federal law and not 
 issued beyond the needs of trade retains the confidence of 
 men in spite of panic, because the nation is behind it to make 
 it good in service and see that it pays its face in debt, where- 
 fore it does not lose its power of settlement and transfer in 
 periods of disturbance as individual paper does; and if in 
 threatening seasons legal-tender currency were issued in suffi- 
 cient volume to take the place of the vanished credit, and 
 counteract the tendency to falling prices, no panic would ever 
 materialize. For over six hundred years Venice had no com- 
 mercial panic. Her independent National money, under a 
 wise public management, was always adjusted so well to the 
 
00 PAPER MONEY VIKDICATED BY HISTORY. 
 
 needs of trade that a crisis was impossible* We have had eight 
 tremendous panics in less than eighty years. 
 
 The adjustment we have spoken of would be easily possible 
 with Postal Savings Banks and Independent National Cur- 
 rency under public control. But with the metallic system 
 the legal-tender money shrinks when credit shrinks, instead 
 of expanding to fill its place. No sooner does panic show its 
 head than people begin to run upon the banks, compelling the 
 latter to draw in their loans and not infrequently to close their 
 doors, thus intensifying the pressure instead of relieving it. 
 People would not withdraw their money en masse from Pos- 
 tal Banks in times of disturbance, because the money would 
 be safer in the Government Banks than anywhere else, at 
 such times as well as at any other times; and even if they 
 should run upon these banks with all their might, and draw 
 out every dollar of their deposits, not a bank would close its 
 doors. 
 
 There would be failures still, so long as the competitive 
 system may last, for men will speculate and some of their ven- 
 tures will not succeed, but panic there need not be if reason- 
 able care were taken to prevent the pestilence of failure from 
 spreading over the whole community and involving the sound 
 and valid members of the industrial system as well as the 
 reckless speculators. Some men undertake too much, espe- 
 cially when times are prosperous and prices going up. When 
 it becomes evident that their enterprises will not succeed, 
 they have to sell out or be sold out to pay their debts. This 
 gives a fall to prices, embarrasses many who had business 
 relations .with the bankrupts, and leads capitalists to distrust 
 the future. Loans are called in, money is hard to get, mer- 
 chants hard pressed to pay their debts raise money by offer- 
 ing their goods at lowered prices. Many a man whose assets 
 are far greater than his debts, is nevertheless ruined because 
 he cannot collect what is due him in time to meet his own 
 obligations. The falling market paralyzes industry. The 
 merchant feeling the pressure and fearing worse to come, is 
 determined not to be caught with a large stock on his hands, 
 so he orders little or nothing from his manufacturer and dis- 
 
PAPER MONEY VINDICATED liY HISTolIY. 07 
 
 charges all the employees he can possibly spare. The manu- 
 facturer with shrunken orders diminishes his force and runs 
 on half or three-quarters time', or may be closes his mill en- 
 tirely. Labor out of employment cannot buy, the market 
 shrinks still more, additional discharges and new shrinkages 
 follow, and so hard times go on intensifying themselves in a 
 grievous circle, like the bitter words of angry brothers. The 
 quarrel could be avoided by a gentle word at the first rebuff, 
 and the panic would never exist if the first shock were met 
 by easy loans from the Government to the embarrassed mer- 
 chants and business men of solid worth, in order to tide them 
 over the trouble, as Pitt did long ago in England, and as our 
 own Government did in 1881. 88 
 
 A panic may come with the turn of the tide from rising 
 to falling prices, or with the accumulated effects of a long 
 term of falling prices. The bursting of a bubble of specu- 
 lation, a change in the foreign market, 89 a falling off in the 
 production of the mines, a comer in gold, a deliberate plan 
 to draw in large loans, the demonetization of one of the money 
 metals any of these, may produce a falling market and in- 
 dustrial panic. But of all the causes of panic none deserves 
 more note than the contraction of the currency. 
 
 ( 88 ) See pp. 72-8. Some slight relief was also afforded in 1878 by an expan- 
 sion of $5,000,000 issued from the Treasury, but the issue was too small to put 
 the industries of the country on their feet. (Prof. Suinner's Hist, of Currency, 
 pp. 218-9.) The British "Bullion Committee" of 1810, the doctrines of whose 
 report Prof. Stunner says (p. 248) are no longer disputable, being matters of ex- 
 perience and demonstration, recorded among the said doctrines an emphatic 
 statement that in presence of a panic it is the duty of the Bank of England to 
 discount freely for all solvent parties. In 1825 the Bank, at the request of the 
 Government, lent money even oil goods. In 1857 its loans on private securities 
 went up 55 millions in a few months. In the crisis of I860 it hart only 29 millions 
 cash but loaned 65 millions in the first few days of the panic, the Government 
 assisting. In 1890 the Bank again came to the aid of embarrassed commerce 
 (Hon. Henry Winn, American Maga/ine of Civics, Dec. 18!>r>, p. r>8H.) It is well to 
 use the Treasury presses to fight the hoarders and panic makers, but it would be 
 better to stop the fluctuations of price that lead to panic than to await the explo- 
 sionbetter prevent the conflagration than merely to fight it when it comes. 
 Our banks are more apt to assist the flames than to allay them, and the ( i<>\ em- 
 inent seldom comes to the rescue. In the panic of 1898 the National banks, 
 instead of relieving the money famine, actually contracted their loans 140 millions 
 in the worst of the crisis, and in the whole of the critical period from May 4 to 
 Oct. 3 they contracted their loans 819 millions, altho their cash resources had 
 increased meantime by 26 millions. (Winn, pp. 576,587.) 
 
 ( 89 ) The falling of prices in England brought upon us a falling market and 
 the panic of 1825, which, t ho not so severe in the United States as in England, 
 was nevertheless a well developed panic here. (Simmer's Hist. Currency, p. 85.) 
 In 1886 the failure of some British banks precipitated the crisis of 1887 on both 
 sides of the water. (Sumner, p. 188.) The panic of 1898 was partly due to dis- 
 turbances in the London money market. (See Quarterly .Journal of Economics 
 Jan. 1894: "Panic in United States in 1898," by A. C. Stevens.) But there were 
 other facts in the case with us. (See below.) 
 
 6 
 
68 PAPER MONEY VINDICATED BY HISTORY. 
 
 Some years ago an eminent economist went over the hist- 
 ory of industrial crises and found that a contraction of the 
 currency was an antecedent factor in every panic that had 
 occurred up to his time (Asa "Walker's Political Economy) 
 not always the initial cause, not always the principal cause, 
 but always present as at least a part cause of the crisis. Dur- 
 ing the rebellion the currency expanded, prices rose and pros- 
 perity was great. Contraction began with the National Bank- 
 ing Act of 1863, which provided for retiring greenbacks and 
 issuing National bank notes $90,000 in bank notes for every 
 $100,000 of currency cremated a contraction of 10 per cent, 
 on the whole volume of currency used in supplying a basis 
 for the National banks, tho population and business were 
 growing all the time. But this was only the prelude. 
 The curtain rose on the real contraction act April 12, 1866, 
 when it was enacted that the Secretary of the Treasury should 
 be authorized to sell 5.20 bonds and with the proceeds re- 
 tire United States currency. In 1865 the circulation is esti- 
 mated to have been between 1J and 2 billions, while the 
 funded debt was $1,109,568,191. From September, 1865, 
 to September, 1867, the Secretary of the Treasury reported 
 the reduction in the curency as $797,725,000. By June 30, 
 1869, the money in circulation had fallen below f of a billion 
 and the National bonded debt had grown to be $2,166,568- 
 920. 90 Prices fell from 216 in 1865 to 153 in 1869 and 137 
 in 1873. The folowing table shows the results: 
 
 TABLE XII. 
 
 YEAR. NO. OF FAILURES. LIABILITIES. 
 
 1865 530 $17,625,000 
 
 1866 1,505 53,782,000 
 
 1867 2,386 86,218,000 
 
 1868 2,608 63,774,000 
 
 1869 2,799 75,054,000 
 
 1870 3,551 88,242,000 
 
 1871 2,915 85,250,000 
 
 1872 4,069 121,058,000 
 
 1873 5,183 228,499,000 
 
 ( 90 ) See Comptroller's Report 1889, p. 35. Sec. Treas. Rep. Mess. & Docs. 
 1867-8. pp. 27-29. Rep. of J. T. Power, May 10, 1878. United States Treasury 
 Circular No. 123, July 1, 1896. Care must be taken in dealing with the state- 
 ments of the circular and those of recent United States abstracts, since the 
 currency figures given for some of the earlier years differ materially from 
 the figures given for the same years in earlier United States Abstracts and 
 statements of the Treasury Department made at the time. 
 
PAPER MONEY VINDICATED BY HISTORY. 69 
 
 The embarrassment of business was so severe that by 1873 
 the accumulated effects produced a terrible panic from which 
 the country has not even yet entirely recovered'. It is said 
 that in 1865 labor was well "employed, but by 1873 about 
 500,000 men were idle; a year or so later an army of (ramps 
 began to travel, and three years later there were mere than 
 a million of them on our highways, and another million of 
 idle workmen in o>ur homes. 
 
 Some of our foremost financiers, including John Sherman, 
 vividly predicted the ruin that would follow the contraction 
 of the currency incident to the scheme for resuming specie 
 payments. The United States Monetary Commission of 1876 
 thoroly investigated the panic of 1873, and concluded that it 
 was caused by the contraction of the currency and consequent 
 fall of prices. The Commission, says: 
 
 "However great the natural resources of the country, how- 
 ever genial its climate, fertile its soil, ingenious and enter- 
 prising its inhabitants, or free its institutions, if the volume 
 of money is shrinking and prices are falling, its merchants 
 will be overwhelmed with bankruptcy, its industries will be 
 paralyzed and destitution and distress will prevail." 
 
 General Ewing, in a strong speech in Congress eighteen 
 years ago, estimated that the depreciation of values due to con- 
 traction amounted to one-third of the whole, and that the 
 resumption law constituted a practical confiscation of $3,500,- 
 000,000 of property. 
 
 The loss to the laboring classes was $3,000,000 a day, or 
 more than $900,000,000 a year. 
 
 In recent years, altho the currency has not contracted ab- 
 solutely, but on the contrary has increased in volume, yet 
 it has not increased sufficiently to keep pace with business and 
 changing conditions of production, so that prices have con- 
 tinued to fall, and the industrial thermometer, tho showing 
 slight yearly movements up and down, has on the whole per- 
 sisted in a downward course. 
 
 During the early years of the Napoleonic Wars (1793-1797) 
 England was in a most alarming condition. Her money had 
 fled (as our money did at the breaking out of the rebellion, 
 
70 PAPER MONEY VINDICATED BY HISTORY. 
 
 as metallic money always does in time of calamity), a finan- 
 cial stringency crippled her business, a panic swept over her 
 commerce and ended in a run on the bank and mutiny in the 
 fleet The Government was induced to give relief by loans 
 to the business classes, and was at last, in 1797, compelled 
 to suspend specie payments, and rely entirely on a paper cur- 
 rency. Immediately the business of the nation revived) and 
 for eighteen years England enjoyed unparalleled prosperity 
 in spite of the heavy drain of the war. And she might have 
 retained her industrial glory forever had she retained the 
 policy of supplying the people with an abundant currency and 
 raising revenue by a heavy income tax and continued the 
 public employment and direction of all the surplus labor in 
 the country, not in army and navy as during the war, but in 
 the construction of roads, parks, buildings and all manner of 
 public improvements. But in 1816 she demonetized silver 
 for amounts beyond $10, provided for the resumption of 
 specie payments by a, bill passed in 1819, and in preparation 
 therefor began to fund the paper currency into public bonds. 
 Prices immediately began to fall. Profits and wages declined. 
 Kiot and ruin followed. The farmers petitioned for loans 
 from the Government at low interest, but without avail. 
 Crops were good and prices low, yet the working people 
 could not buy bread. The net results of the contraction and 
 accompanying fall of prices were wreckage, poverty, decades 
 of misery, enormous growth of the fortunes of the wealthy, 
 and ruin of all others. 
 
 Speaking of the post-contraction period in England, 1819 
 to 1845, the historian Alison says: "There never was a period 
 in which a greater amount of financial embarrassment has 
 been experienced by the Government or more widespread and 
 acute suffering endured by the people* "Wages were in many 
 trades low, employment difficult, suffering general, and yet 
 the period was one of great increase in material resources. 
 It may safely be affirmed that the anxiety and distress which 
 were felt during this brilliant period of natural growth have 
 never been surpassed. The distress among the mercantile 
 classes for years after the dreadful crisis of 1825, of the agri- 
 
PAPER MONEY VINDICATED BY HISTORY. < 1 
 
 cultural interests during the low prices of 1832-35, and of 
 the whole community from 1837 to 1842, was extreme. The 
 extraordinary fact has now been revealed by statistical re- 
 searches that in an age of unbounded wealth and general and 
 long continued peace, a seventh part of the whole inhabitants 
 of the British Isles are in a state of destitution, while 70,000 
 persons have among them an income of 200 million pounds 
 or $14,000 each per year. Frightful strikes occurred. Crime 
 made unexampled progress, serious detected offenses having 
 multiplied seven-fold while population increased but 70 per 
 cent. ; with rapid growth of wealth and great effort at instruc- 
 tion, crime has augmented ten times as fast as the numbers of 
 the people. The co-existence of so much suffering in one 
 part of the people with so much prosperity in another is un- 
 paralleled. Capital exists to profusion, labor adequate to any 
 expansion of industry is at hand, yet millions are pining for 
 employment." Mr. Alison examines the various theories ad- 
 vanced to account for the above situation (so like the story of 
 our own country since the beginning of contraction here), 
 and finally concludes, as we have already seen when speaking 
 of England, that "the contraction of the currency which was 
 made to accompany the resumption of cash payments has 
 been the chief cause of all these effects." 
 
 Contraction and falling prices oppress the poor, ruin the 
 middle classes, and increase the power and affluence of many 
 of the wealthy. 91 Those who control large amounts of money 
 are able to take advantage of the distress of others to accu- 
 mulate vast property for themselves; the power of the dollar 
 and its possessors is increased; the congestion of wealth in 
 the hands of a few materially favored; and the industrial in- 
 terests of the nation in every way disastrously affected. Con- 
 traction and its sister, failure of due expansion, are among 
 the most powerful, insidious, and to the masses of the people, 
 unrecognizable causes of evil that exist in this world of mis- 
 chief. 
 
 ( 91 ) Writing of the United States in 1820, when panic prices had brought 
 wheat to 20 cents a bushel and flour to $1 a barrel, Prof. Suiuner says: 
 "Monev was plentiful in the hands of those who had no debts to pay, 
 where 'of course it must settle whenever the social umchiney comes to a 
 stand still. (Hist. Currency, p. 82.) 
 
72 PAPER MONEY VINDICATED BY HISTORY. 
 
 Even the wealthy as a rule misunderstand the effect of fall- 
 ing prices. They see the more obvious effect of increasing 
 the value of their loans, and fixed returns, but they do not 
 appreciate the remote effects. If they realized the fact that 
 the discouragement of industry and the diminution of the 
 total product more than balances the increased proportion 
 of product that goes to the creditor, they would know that 
 falling prices are really a detriment to the moneyed classes 
 as well as to the rest of the community. The lender gets a 
 larger share of the product than under steady or rising prices, 
 but the total product is so much diminished that his share is 
 less in actual amount than it would be if prices were steady. 
 If this were understood and the insecurity of investment in- 
 cident to falling prices were given due weight, there would be 
 none to favor or be content with a falling market, except the 
 gamblers and wreckers, who profit by the misfortunes of 
 others rather than by the development of commerce and the 
 growth of industry. 
 
 It must be remembered that aside from natural causes and 
 the movement of gold to foreign parts, serious contraction 
 of the currency may occur not merely thru legislative action, 
 but thru individual action; not merely by withdrawal of 
 greenbacks or demonetization of a money metal, but thru 
 the recall of loans and the hoarding of money that generally 
 follow any disturbance of credit or appearance of danger; 
 and worst of all perhaps, thru deliberate conspiracy to wreck 
 the market by cornering gold or calling in loans, or contract- 
 ing the circulation in order that the conspirators may secure 
 desired legislation or possess themselves of railroads, factories, 
 mines, lands and other properties at prices that represent but 
 a fraction of their cost. 
 
 In 1881 there occurred a sudden and simultaneous action 
 on the part of a number of National Banks in withdrawing 
 about 18 millions of gold and U. S. currency from circula- 
 tion to deposit with the Government in order to redeem their 
 bank notes. Interest on call loans went up to 1^ per cent, a 
 day, 371 per cent, a year. lSTew York was on the verge of 
 panic and probably would have gone over the edge if it had 
 
PAPER MONEY VINDICATED BY HISTORY. 73 
 
 not been for an order from the Secretary of the Treasury for 
 the redemption of $25,000,000 of bonds on presentation. 
 This concerted disturbance was created apparently for the 
 purpose of killing a bill then pending in Congress that was 
 obnoxious to the National Banks. It was killed. The fol- 
 lowing autumn Secretary of Treasury Windom recommended 
 Congress to prohibit National Banks from withdrawing their 
 circulation without notice, and President Arthur concurred 
 in the recommendation; but no such restriction has been en- 
 acted. 92 
 
 There is evidence tending to show that the panic of 1893 
 was not entirely a natural phenomenon. The moneyed in- 
 terests desired the unconditional repeal of the silver purchase 
 law. It was openly said that "The quickest if not the only 
 way to repeal the silver purchase law is to precipitate a panic 
 upon the country, as nothing short of that will convince the 
 silver men of their error and arouse public opinion to a point 
 which will compel the next Congress to repeal the Sherman 
 law whether it wants to or not." 93 The panic came and the 
 silver law was repealed. 
 
 In 1896 it was commonly understood and accepted on all 
 sides that if Bryan were elected there would be a panic. If 
 the moneyed classes cannot have the President they want, 
 and the kind of money they want, then there will be an earth- 
 quake. 
 
 Once get a system of Postal Savings Banks and a National 
 currency into full operation and no class in the country could 
 cause a panic; but under the present system a very few men 
 can wreck the industries of the nation. 
 
 Is a monetary system with such a history, and saturated 
 with such disasters and iniquities, worthy the acceptance or 
 retention of a civilized people? 
 
 Even the banks, tho strongly attached to the metallic sys- 
 
 ( 9J ) See Appleton's Annual for 1881, pp. 129, 779; and "The Money 
 Question," by G. H. Shibley, pp. 410, 676. If there were a law requiring the 
 Government in case of stringency to loan money on United States bonds or 
 other good securities at a reasonable Interest, It would go far to prevent a 
 corner, collapse or temporary contraction from developing into a panic. In 
 Germany, money Is loaned by the Government in this way, but only to 
 banks. The system has been adopted in Austria-Hungary and Japan. 
 
 () See "Banker's Magazine," New York, May, 1893, p. 806. 
 
<4 PAPER MONEY VINDICATED BY HISTORY. 
 
 tern, abandon it in panic time. Prof. Sumner says: "The 
 banks suspend, escape the results of a folly in which they had 
 full share, and then loan their notes at exorbitant rates to 
 the merchants who are still out in the financial storm. This 
 has been the process here in every crisis and probably will 
 be as long as the people stand it without complaint." 94 
 
 COIN IS A COWARD. 
 
 Metallic money is very timid. It. goes into hiding upon the 
 approach of danger. When the country needs it most it re- 
 tires into seclusion or journeys to foreign shores. In battle 
 it deserts the flag, while independent paper goes to the front 
 unmindful of the roar of cannon, ready to do its duty bravely 
 in the face of the enemy. 95 
 
 was not gold, but paper, when she fought the great Napoleon. 
 And paper carried the Allies thru to a finish at Waterloo and 
 conquered the greatest soldier of modern times. Coin van- 
 ished at the bugle call, and paper came to the front for ser- 
 vice. Napoleon fought with gold because he was able to 
 keep his coffers full by taking the treasures of nations he 
 subdued. Nothing but martial law could make it do its duty, 
 and even then it failed against the English paper. 
 
 THE PATRIOT PAPER OF THE CONTINENTAL CONGRESS 
 
 burdened as it was by overissue, and brought to ill repute by 
 
 ( M ) Hist. Currency, p. 137. When the specie basis brings a crash, the 
 banks suspend specie payments and let paper money do the work of recupera- 
 
 (95) \\rhen the French Revolution broke out metallic money disappeared 
 and the assignats, tho terribly watered by overissues and grievously cor- 
 rupted with heavy injection of P>ritish counterfeits, carried the Republic 
 thru the Storm to years of Comparative safety when coin was ready to come 
 out of doors and go to work again. The depreciation of paper caused very 
 great hardships, ruining creditors and those who lived without labor or 
 settled income, but it helped to diffuse the wealth of the nation and dis- 
 tribute among a multitude of active producers a large amount of property 
 that had formerly been held by a few individuals. 
 
 In China more than a hundred years before the Christian era, the Emperor 
 raised funds for war in a way that showed a keen appreciation of the value 
 of the legal-tender-limited-volume principle. An independent currency made 
 of the skins of white deer was used as money. The Emperor collected into 
 a park all the white deer to be found and prohibited his subjects from 
 possessing any animals of this monetary variety. Having obtained a 
 monopoly of the material, the Government issued pieces of white deer skin 
 leather as money at a high rate, (.tevons Money & M. of Exc., p. 197.) 
 
PAPER MONEY VINDICATED BY HISTORY. 75 
 
 spurious rivals tresspassing incognito in its domains, never- 
 theless enabled the Colonies to carry the battle^ thru imd free 
 themselves from the English yoke. Coin vanished with the 
 musketry of Lexington, and the commerce and military opera- 
 tions of the Revolutionary period had to be carried on with 
 paper: The British commanders recognized the fadt ihat !he 
 Continental paper constituted the sinews of war, and did their 
 best to destroy it; but tho it was mortally wounded on the 
 field of battle, it lived long enough to win the victory for 
 America. 
 
 THE GREENBACKS OF THE SIXTIES 
 
 saved the Union. Gold and silver disappeared quite early 
 in the conflict. In 1861 the banks of Boston, Philadelphia 
 and 3STew York agreed to loan the Grovernment $150,000,000 
 in specie>, but were unable to carry out the agreement, and 
 the last $50,000,000 of the loan was paid by tho banks to 
 the Government in demand notes of the United States which 
 the banks had at first refused to reciye as money. 90 
 
 Instead of borrowing coin from the banks, we think, as we 
 have already intimated, that the Government ought to have 
 abandoned the recreant metals, issued full legal tender green- 
 backs, opened Postal Savings Banks, so that the circle of 
 issue and deposit would have brought the funds round again 
 to public use and not into the vaults of Wall Street, and when 
 the volume of the currency showed signs of more rapid growth 
 than might be deemed wise, the Government should have 
 
 ( 96 ) Speeches of Thaddeus Stevens in the House, Feb. 5th and 20th, 1802. 
 (Cong. Record, Part 1, 1801-2, pp. 079,200.) It has been said that " if the banks had 
 been permitted to exercise their own methods, they could have Continued their 
 advances in sums of 50 millions for an indefinite period." (Geo. S. Toe, Pres. 
 Amer. Ex. Hk. N. Y., in Bankers IVlaga/ine, Jan., 1S70, p. 540.) Before the first pay- 
 ment the associated banks in New York had $49,7.'W,JMK) In coin, and after ?0,(]()IUXX) 
 of the loan had been paid they had $42,81 8,010 of coin, a reduction of only f7,4ir>;{N); 
 that is, if the banks could have made loans to the Government in moderate in- 
 stallments with an interval between each two installments sufficient to let the 
 coin get into circulation and come found to the banks again in payment and 
 deposit, why the banks could have kept right on loaning specie to the Govern- 
 ment. What a beautiful plan! The banks bad loaned nearly twice as much 
 specie as they possessed and had the Government 3 * bonds for about eleven times 
 as much coin as they had lost, and if they had only been allowed to keep on with- 
 out interference from greenbacks, they might have been able to pile up billions of 
 Government bonds in their vaults. The greenbacks stopped the scheme for a few 
 years, but a very good substitute was carried into effect when bonds were issued 
 to call in the greenbacks and burn them up preparatory to the resumption of 
 specie payments. 
 
76 PAPER MONEY VINDICATED BY HISTORY. 
 
 called upon opulent citizens to give their money to their coun- 
 try as freely as it called upon the poor to give their lives for 
 the Union. 
 
 At the close of the war when the greenbacks had the field, 
 the Government should not have contracted the currency 
 50 or 60 per cent, in order to return to specie payments 
 against the advice and warnings of many of the ablest states- 
 men in the country. It should rather have made the whole 
 body of greenbacks a full legal tender without regard to 
 coin, and expanded instead of contracting the volume of 
 money, as did France at the close of the Prusssian war, so as 
 to meet the larger demands upon it incident to a reunited 
 North and South, the entire commerce of both sections being 
 thereafter dependent on the currency that had previously had 
 to do service for one section only; and last but not least, the 
 nation should have had a care that its million defenders found 
 employment when they came from the ranks, and provided 
 employment on the public works for those whose labor was 
 not absorbed by private industry. If these plain principles 
 of justice and common sense had been heeded, if statesman- 
 ship instead of capital had ruled our councils, the prosperity 
 of the period of the war would have been redoubled in time 
 of peace. As it was, the burden of battle was no sooner lifted 
 from our industries than the burden of falling prices was 
 fastened upon them; the industries that had prospered and 
 grown strong under the load of civil war, languished and 
 grew feeble under the load of appreciating gold. 
 
 In closing these remarks upon the unreliability of metallic 
 money under fire or in any stress of danger, I cannot do better 
 than quote the words of Senator Ingalls in his noble speech 
 in the United States Senate, February 15, 1878: 
 
 "No people in a great emergency ever found a faithful ally 
 in gold. It is the most cowardly and treacherous of all metals. 
 It makes no treaty it does not break. It has no friend it does 
 not sooner or later betray. Armies and navies are not main- 
 tained by gold. In times of panic and calamity, shipwreck 
 and disaster, it becomes the agent and minister of ruin. No 
 nation ever fought a great war by the aid of gold. On the 
 
PAPER MONEY VINDICATED BY HISTOEY. 77 
 
 contrary, in the crisis of the greatest peril it becomes an 
 enemy more potent than the foe in the field; but when the 
 battle is won and peace has been secured, gold reappears and 
 claims the fruits of victory. In our own Civil War it is doubt- 
 ful if the gold of New York and London did not work us 
 greater injury than the powder and lead and iron of the 
 South. It was the most invincible enemy of the public credit. 
 Gold paid no soldier or sailor. It refused the National obli- 
 gations. It was worth most when our fortunes were the 
 lowest. Every defeat gave it increased value. It was in 
 open alliance with our enemies the world over, and all its 
 energies were evoked for our destruction. But as usual, when 
 danger had been averted and the victory secured, gold swag- 
 gers to the front and asserts its supremacy." 
 
 CONCLUSIONS. 
 
 Upon the facts revealed by monetary history we come to 
 the following conclusions: 
 
 (1) Metallic money is not to be relied upon in war. It 
 caresses the conqueror, but deserts the oppressed. It cares 
 nothing for justice, liberty or country. The money of pat- 
 riotism is independent paper. 
 
 (2) Metallic money, by its fluctuations, is a cause of indus- 
 trial disturbance and panic, and by retiring instead of ex- 
 panding in time of stringency, it adds to and intensifies the 
 disturbances produced by other causes. 
 
 (3) The history of metallic money is characterized by long 
 periods of falling prices more disastrous than war or pesti- 
 lence. 
 
 (4) A nation with a metallic system is peculiarly open to 
 industrial and political disturbance arising from monetary 
 changes in other countries, whereas an inconvertible paper 
 currency remains serenely unaffected by the vicissitudes of 
 foreign moneys. 
 
 (5) Metallic money is the friend of gamblers and specu- 
 lators, affording them innumerable opportunities for plunder 
 in its periodic, annual, monthly and sometimes daily varia- 
 tions, offering them thru combinations among themselves the 
 
78 PAPER MONEY VINDICATED BY HISTORY. 
 
 inestimable privilege of controlling prices, and placing at 
 their mercy even the Government, the public credit and the 
 National debt. 
 
 (6) The volume and value of metallic money in circulation 
 is governed by chance and private manipulation; the contin- 
 gencies of mining, the movements of international trade, the 
 changes of opinion and political action across the sea, the nar- 
 rowing or expanding policies of combinations of capitalists 
 in New York, London and other money centres. 
 
 (7) Steady prices -are unknown to our metallic system. 
 Prices are always rising or falling, and continual injustice is 
 being accomplished thereby. Creditors cheated by rising 
 prices, debtors cheated by falling prices, the normal relations 
 and efforts of industry disturbed in both cases. And altho 
 the stimulating effects of a moderate rise of prices may some- 
 times justify the accompanying injustice, especially after a 
 period of falling prices, when a rise is necessary to bring in- 
 dustry back to its normal level, yet when once the normal 
 level is attained and idle labor is absorbed at reasonable wages, 
 there is reason to think that steady prices should become the 
 rule. Whatever may be thought of slowly expanding prices 
 when not required to overcome the effects of depression, it is 
 clear that no possible justification exists for falling prices, 
 which mean only ruin and despair to the producing classes 
 and unjust advantage and aggrandizement to the owners of 
 money. A wise financial system would subject the movement 
 of money to scientific control in the public interest, aim to 
 avoid all needless injustice bet wen class and class, all panic 
 and depression, or undue stimulation of industry. In other 
 words, it would keep prices steady except, perhaps, where a 
 serious emergency or calamity called for the aid of a rise, 
 which if ever deemed justifiable as a deliberate measure after 
 considering all less objectionable means of industrial stimu- 
 lation and adjustment, should at least be very carefully ad- 
 ministered and discontinued as soon as possible. 
 
 (8) History shows that independent paper if well managed 
 yields steady prices, freedom from industrial disturbance, im- 
 munity from gambling with the money volume, security from 
 
PAPER MONEY VINDICATED BY HISTORY. 
 
 79 
 
 the vicissitudes of mining and the change of foreign markets 
 and policies, and entire protection against the disastrous do- 
 minion of chance and private manipulation. Even when not 
 well managed, paper money produces no panics, does not de- 
 sert its country and prove false to its creator in time of danger, 
 and mainly places such injustice as it brings upon the shoul- 
 ders of the rich, the idle rich, and not upon the laboring 
 poor, and the active managers of industry. On the contrary, 
 steady prices appear to be impossible under metallic money. 
 Fluctuation is inherent in it and no nation can control it. And 
 it is very apt to build the fortunes of the idle rich, pouring 
 into their laps unnumbered millions of unearned increment 
 at the expense of the active and owing classes. 
 
 Independent paper prop- 
 erly managed does not fluc- 
 tuate. 
 
 When not properly man- 
 aged its fluctuations favor 
 the debtor and producing 
 classes, diminish the relative 
 power of the idle rich, bring 
 the classes nearer together 
 and help to diffuse the 
 wealth of the world. 
 
 Metallic money has fluc- 
 tuation in its heart it is in- 
 herent in it. 
 
 And its changes in our 
 generation oppress the poor 
 and favor the rich, burden 
 the active debtor and bestow 
 a gift on the idle lender, 
 discourage production and 
 encourage gambling, widen 
 the breach between the 
 classes, and give to the few 
 the wealth created by the 
 
 many. 
 
 Which is just money? 
 Which is rational money? 
 
 Which is the people's money? 
 
CHAPTER II. 
 
 THE BEST MONEY. 
 
 Turning from the history of the subject to its philosophy, 
 we have to consider: 
 
 First. The purposes or functions of money. 
 
 Second. The attributes, essential or convenient, which 
 more or less perfectly fit a material or commodity for service 
 as money. 
 
 Third. "What sort of money combines these attributes in 
 the highest degree of perfection, and is, therefore, best fitted 
 to fulfil the functions of money. 
 
 PURPOSES OF MONEY. 
 
 The functions of money in civilized society appear to be 
 five, since money acts as: 
 
 1. A medium of exchange. 
 
 2. A measure of value. 
 
 3. A means of storing or transmitting value or power of 
 purchase. 
 
 4. A standard of deferred payments. 
 
 5. A regulator of production and distribution. 
 
 Barter is too complex, cumbrous, and difficult to answer 
 for the exchanges of a highly developed community. Some ar- 
 ticle is, therefore, selected, first by custom and afterward by 
 law, to act as a medium in terms of which all exchanges may 
 be made. This device lubricates the action of exchanges, 
 avoids the transfer of bulky articles, permits the indefinite 
 division of wealth and value, and renders easy a volume and 
 variety of commerce that would otherwise be impossible. 
 
 MEASURING VALUES. 
 
 A necessary consequence of its action as a medium of ex- 
 change is the power of money in the measurement of value. 1 
 
 O Jevons "Money" &c., pp. 5, 13; Mill. Polit. Econ. iii, ch. 7, sec. 1 and 
 oh. 15; Rogers Pol. Econ. p. 22; Marshall Prin. Econ. sec. 5; Prof. Bowen 
 Pol. Econ, 293; Walker, "Money." pp. 4-9, 64, 280-9. The latter doubts the 
 
THE BEST MONEY. 81 
 
 Value is a ratio. If cotton is selling at 10 cents a pound, corn 
 at 50 cents a bushel, and wheat at $1, the value of a bushel 
 of wheat in terms of corn is two bushels at that time and 
 place, and the value of a bushel of corn in terms of cotton 
 is 5 Ibs., etc. Little or no idea of the real exchange value of 
 a commodity can be obtained by comparing it with one or two 
 other things. 2 The value of a commodity is its general pur- 
 
 validity of ascribing to money the function of measuring values, claiming that 
 it acts as a common denominator of values, but not as a measure of them. 
 It is true that our money does not measure values by final test of a 
 constant something inherent in itself as in the case of a quart measure or a 
 pound weight. We measure with it as we would with a quart that swelled 
 and shrank and had to be compared with a standard back of it in order to 
 know the meaning of its results. It would not be wise to use such a method 
 of measurement unless it were easier to compare a commodity with the real 
 standard by comparing it with the variable measure (money) and then 
 comparing this with the standard behind it, than it would be to compare the 
 commodity with the real standard directly without the intervention of 
 money. Money serves as an intermediator between the commodity to be 
 valued and other commodities in general. Its power of representing those 
 commodities (its relation at the given time and place to the real standard) 
 being known thru prices) it becomes a means of measuring the said com- 
 modity against commodities in general, with less trouble than would be 
 required by the complex processes and statements incident to the direct 
 measurement of a commodity against others by way of barter. 
 
 "In a state of barter the price-current list would be a most complicated 
 document, for each commodity would have to be quoted in terms of every 
 other commodity, or else complicated rule-of-three-sums would become 
 necessary. Between one hundred articles there must exist no less than 4950 
 possible ratios of exchange, and all these ratios must be carefully adjusted 
 so as to be consistent with each other, else the acute trader will be able 
 to profit by buying from some and selling to others." (Jevons "Money" 
 &e., p. 5.) 
 
 All such trouble is avoided if some one thing is chosen and its ratio of 
 exchange with each other commodity is quoted. 
 
 The real nature of the process being understood, the statement that 
 money is used to measure values seems to be a convenient and unobjection- 
 able form of stating one of the functions of the circulating medium. 
 
 Speaking of money as a measure and recalling the fact that the value 
 of money varies with its volume, Dr. C. F. Taylor calls attention to the 
 fact that: "This does not apply to yardsticks and bushels. The length of 
 a yardstick does not depend in any way upon the number of yardsticks in 
 existence; and the size of a bushel measure does not in any way depend on 
 the number of such measures in a country." (Medical World, Aug., 1897, 
 pp. 347-8. Unless the facts are fully understood, analogies between the 
 money measure and other measures are likely to be misleading until a 
 system of finance is adopted that shall keep the dollar in harmony with 
 the real standard of exchangeable values. 
 
 (-) The fact that a bushel of wheat commands two bushels of corn 
 affords very little information as to the value of either. The ratios of 
 both to other commodities may be high or low or medium, i. e. both wheat 
 and corn may be dear or cheap or of medium price compared to other com- 
 modities. 
 
 So with the relation of any commodity to money; the price of a com- 
 modity or service tells us practically nothing of its value till we know the 
 prices of other commodities and in the fullest sense we do not know its 
 value till we ascertain the prices of all other commodities and services, and 
 so understand its relative position to the entire body of purchaseable 
 things, its power of command over the whole range of products. If T 
 were told that at a certain period wheat sold for $10 a bushel I would not 
 know its value; but if I were also told that during the said period a hat 
 cost $30, a pair of boots .$40, a pound of beef $2, &c., I should begin to get 
 a glimmering of the value of the wheat. When I read that in the latter days 
 of Rome one two-hundredth of an ounce of gold (about 10 cts. worth now) 
 would buy a bushel of wheat, I get no idea of its real value; the general 
 exchange power of gold may have been (was) so great that (notwithstanding 
 the said low price) a man could get more in exchange for a bushel of 
 wheat in Rome than in the United States to-day or at the close of the 
 Revolution, when it took a pocket full of money to buy a loaf of bread. 
 
82 PHILOSOPHY OF MONEY. 
 
 chasing power, and its relation with other commodities as a 
 whole must be understood in order to get a knowledge of its 
 purchasing power or command over commodities in general. 
 This, money enables us to do with the greatest ease and dm- 
 plicity. Having the price of a bushel of corn and the prices 
 of other commodities, we can ascertain its ratio to any one 
 commodity or any combination of commodities, and so meas- 
 ure its purchasing power or exchange value in terms of one 
 commodity or all. Money serves to express and compare the 
 ratios that constitute value, measuring one commodity against 
 another or one against all others 1 or any combination of others. 
 The selling price of wheat being ascertained to be $1 a, bushel, 
 the farmer measures by that fact the value of the 1,000 
 bushels he possesses, and puts it down as $1,000, which means 
 as to real values that 1,000 bushels of wheat are equivalent 
 to the quantities of other commodities which can bo bought 
 for $1,000' a quantity dependent on the prices of those other 
 commodities. 
 
 STORING THE POWER OF PURCHASE. 
 
 A further result of the use of money in exchanges is that it 
 may become a means of storing value or power of purchase. 3 
 If I do a piece of work for $50 or sell goods to that amount, 
 receiving five ten dollar bills, and do not care to buy anything 
 with the money now, preferring to keep my power of pur- 
 chase for some future need, or take it to a distant place, I 
 can accomplish my purpose by simply keeping the money. 
 In such case the bills in my pocket become a store of pur- 
 chasing power or exchange value always ready to my purpose. 
 If I wish to transmit say $50 of value or power to a distant 
 friend, I can do so by sending the bills. 
 
 STANDARD OF PAYMENT. 
 
 Money performs another function of great importance in 
 connection with borrowing and lending, and the settlement of 
 debts of various origin. When A borrows from B and ,'s 
 to pay B at some future date, the money used becomes a etan- 
 
 ( 3 ) Jevons " Money, &c.," p. 15. Compare Walker," Money," p. 12. 
 

 THE BEST MONEY. 83 
 
 dard of deferred payment 4 a means of measuring back to 
 the lender at a future time an equivalent for what he lent. 
 The same is true if A buys goods of B at a specified price and 
 pays for them at a later date. Any debt, whatever its origin, 
 that is to be paid after an interval, brings into play the same 
 principle. 
 
 A REGULATOR OF PRODUCTION AND DISTRIBUTION. 
 
 None of the powers of money arising from its use as a 
 medium of exchange are of more importance than its power 
 to regulate enterprise, and modify the distribution of wealth. 
 The movement of the money volume in reference to the busi- 
 ness to be done with money, or its failure to move, causing 
 or permitting a rise or fall of prices, will change the relative 
 proportions of product that go to laborer, landlord, capitalist 
 and entrepreneur, stimulate or depress industrial motive, 5 in- 
 crease or diminish tiie weight of every debt, and exert upon the 
 industrial system an influence so profound that panic or pros- 
 perity may wait upon its whim. 
 
 Wages, rent, interest and profits represent the classes among 
 which the yearly product is divided: Wages to the workers, 
 rent to the landlords, interest to the capitalists, profits to the 
 entrepreneur or manager and director of industry who borrows 
 capital, employs labor, and takes the responsibility of enter- 
 prise for the sake of profit. The money value of wages, rent 
 and interest has a considerable stability or inertia due partly 
 to the effect of time contracts, and partly to the fact that a 
 change in the purchasing power of money is not readily seen, 
 and appreciated. The result is that every change in general 
 prices seriously alters the distribution of product. A rise in 
 prices increase the share of the entrepreneur and decreases the 
 shares of laborer, landlord and capitalist. Wages, rent and 
 interest do not go up at once upon the rise of goods, but 
 follow after an interval if at all. To bring out the case, sup- 
 
 (*) Walker, "Money," p. 10. Jevons, "Money, &c," p. 14. 
 
 ( 5 ) See the discussion by Prof. J. Allen Smith, Annals of Amer. Acad. of 
 Polit. & Social Science, Vol. VII, No. 2, pp. 3-6. And Gen'l Francis A. 
 Walker's "Money in its Relation to Trade and Industry." Most economists, 
 when speaking of the functions of money, say little or nothing of i 
 as a regulator of industry and distributor of wealth, but Professor Smith 
 and Pres. Walker give proper emphasis to this most vital function. 
 
 7 
 
84 RATIONAL MONEY. 
 
 pose that prices are doubled. The entrepreneur has for a 
 time the same interest, rent and wages to pay as before, but 
 receives twice as many dollars for his goods; his profits are 
 consequently very much increased; he is eager to push his 
 business, borrows more capital, employs more labor, embarks 
 in new enterprises, and business is very lively; too much so 
 sometimes for safety to men of insufficient caution. The 
 worker on a fixed salary renders services which bring his 
 employer twice as many dollars as before the rise, but he 
 only gets the same wage, until it slowly dawns upon him that 
 the prices of what he has to buy are higher than they used 
 to be and that business is good with his employer; then he 
 asks for more pay. The employer gives him a small increase, 
 often a mere fraction of the rise in goods, and the worker is 
 satisfied as a rule because he is used to thinking of the dollar 
 as something absolute, and since he is getting .more dollars, 
 he must be better off. He sees the rise of wages and does not 
 clearly comprehend the general rise of prices and its precise 
 quantitative bearing upon his interests. 
 
 A fall in prices has exactly the contrary effect. The entre- 
 preneur cannot scale down the debt he owes, or the rent or sal- 
 aries he has agreed to pay; his liabilities remain the same, 
 while his income shrinks and his profits are cut down or may 
 be turned into a loss. He is discouraged, has no motive to 
 undertake the risks of business in face of a falling market, and 
 as he constitutes the active force in industry, the man who 
 takes the initiative in production, the result is that industry 
 languishes. It makes no difference what may be the cause 
 of falling prices, the result will be the same. If prices fall 
 because of invention and improvements in production, the 
 effect is the same as when they fall because of increasing 
 scarcity of gold. If the entrepreneur, merchant or manufac- 
 turer has to sell for less than enough to pay the fixed charges 
 resting upon him the rent, interest and wages he has agreed 
 to pay, and the price of materials and goods he bought on 
 time he is ruined just the same, whatever the cause of the 
 fall in the market. 6 
 
 ( 8 ) Inventions and improvements in production while they are of the 
 highest advantage to society when their benefits are Justly distributed, may 
 
THE BEST MONEY. 
 
 Falling prices injure labor also, unless employed on time 
 contract or at a fixed salary. It is true that falling prices in- 
 crease the purchasing power of the wages received by ordin- 
 ary labor, but it does not follow that labor is better off. The 
 total amount of wages must be considered as well as the rate. 7 
 
 A falling market reduces production, throws labor out of 
 employment, compels factories to close or run on short time, 
 and the amount of wages received per worker in the course of 
 a year is often so much less as to rnoro than balance the 
 effect of the added purchasing power in the few dollars that 
 are obtained. Better have 500 normal dollars than 100 dol- 
 lars of double the normal value. 
 
 It appears then that money thru its action upon prices has 
 a vital regulative influence on the whole industrial system. 
 This power of money to control and direct industrial forces 
 
 
 for a time cause serious disturbance and large injustice to laborers and 
 active business men thru the imperfect distribution of the burdens attend- 
 ing the destruction of capital and the displacenmt of labor that accompany 
 their introduction. Workers are thrown out of employment, and reduction 
 in the value of existing capital occasioned by the invention or improvement 
 falls entirely upon the entrepreneur. Industrial capital is owned by two 
 classes, interest receivers and profit receivers. The latter have the manage- 
 ment. The property of the interest receiving class exists in the form of a 
 mortgage or fixed money claim upon the capital and product of economic 
 society. Their principal and interest constitute a first claim on the capital 
 and earnings of industry. Dividends and profits come afterward. The 
 entrepreneur must, therefore, sustain the loss of capital occasioned by im- 
 provements. His debt to the interest receiver is as large as ever, and the 
 machinery he bought with the borrowed money is worth less than before by 
 the whole effect of the improvement. It is one of the great injustices of the 
 present system that the active capitalist, the initiator and manager of in- 
 dustry has to bear the whole burden of depreciation caused by improve- 
 ments, while the passive capitalist escapes. If either class of capitalists is 
 to receive a special benefit at the expense of the other, equity would demand 
 that favor should fall on the active and not on the passive capitalist. 
 Those who take no active part in industry should not fare better than the 
 captains of production. Progress should not punish the progressive in pre- 
 ference to the non-progressive. (See the admirable discussion by Prof. J. 
 Allen Smith, Annals A. A. P. & S. S., Mar. '96, of which this note is a 
 condensation.) 
 
 ( 7 ) The facts in relation to the movement of wages as prices change are 
 of the utmost interest and importance. We must carefully distinguish be- 
 tween wage rates and aggregate wages. According to the Aldrich Report, 
 money wages rose in the ratio of 100 to 148 per cent., from 1860 to 1SG5. 
 while general prices rose in the ratio of 100 to 232. From 1873 to 1879, 
 money wage rates fell in the ratio of 166 to 134, while general prices declined 
 in the ratio of 129 to 95. The accuracy of these figures is not, however, 
 satisfactory. They are suggestive, but not absolutely reliable. Dr. Chas. B. 
 Spahr, economic editor of The Outlook, has written an article on "The Gold 
 Standard and the Wage Earner," which is to appear in the National 
 Review, London, and which contains the results of some very valuable re- 
 searches on this subject. The author nnds that average wages have con- 
 siderable inertia, but that aggregate wages move very quickly. From 1873 
 to 1879 the reduction in average daily wages had been 14 per cent., the 
 reduction in the number employed 17 per cent., prices had fallen 17 per 
 cent, and aggregate wages had fallen 29 per cent. From 1879 to 1883 prices 
 rose aboue 10 per cent., the average daily wage rose about 13 per cent., while 
 aggregate wages rose 58 per cent. From 1893 to 1895, by the Mass. Labor 
 Reports, aggregate products fell 17 per cent, and aggregate wages 16 per 
 cent., while average wages fell about 7 per cent. By the Pennsylvania 
 Labor Reports, aggregate products and wages fell off about 33 per cent., 
 while average wages and prices declined only about 13 per cent. 
 
86 PHILOSOPHY OF MONEY. 
 
 arid determine the distribution of wealth is of the utmost 
 moment economically, politically and socially, and must be 
 moet carefully considered in constructing a scientific system 
 of finance. 
 
 ATTRIBUTES OF MONEY. 
 
 Coming now to consider the attributes necessary or desir- 
 able in the performance of the above functions, we find that 
 the following qualities will be either essential or advantageous 
 to whatever may be chosen to act as money. 
 
 1. General receivability or acceptabilty willingness of 
 people to receive in exchange for commodities and services 
 and in payment of debt, etc. 
 
 2. Limitation of volume. , j ; 
 
 3. Steadiness of value. 
 
 4. Portability. 
 
 5. Ease of keeping. 
 
 6. Ease of concealment. 
 
 7. Difficulty of counterfeiting. 
 
 8. Durability. 
 
 9. Divisibility. 
 
 10. Elasticity. 
 
 11. Uniformity. 
 
 12. Cheapness. 
 
 Concerning most of these qualities a word will be sufficient. 
 Durability and elasticity are needful for steadiness of value, 
 and may be referred to that head. Large susceptibility to 
 division is convenient but not always essential the cattle 
 used as money in many countries did not possess it. In a 
 state of advanced commerce however a considerable divisi- 
 bility becomes quite necessary. The same thing may be said 
 as to uniformity one cow was not always the equivalent of 
 another unit of bovine currency. There was one uniformity 
 about it tho. The taxpayers of Massachusetts, when cows 
 were legal tender, quite uniformly paid their taxes in the 
 smallest and leanest kine. Portability is good but not essen- 
 tial; living money had little of it; grain has been found very 
 bulky, and gold and silver very heavy when large payments 
 have to be made. Ease and safety in keeping are good, but 
 
THE BEST MONEY. 8Y 
 
 not necessary cattle cannot be put in your inside pocket, and 
 you could not keep that sort of money very well in a Boston 
 flat. Difficulty of counterfeiting is an excellent thing in 
 money, but not essential. The Continental money and the 
 French assignats were very faulty in this respect, but never- 
 theless they did undoubted duty as money. Cows are perhaps 
 superior in this respect to either gold or silver coin or paper 
 money. Cheapness is good, other things equal; i. e., if a 
 money that costs very little labor can be made as efficient as 
 a money that costs much labor, the first should have the pre- 
 ference. Cheapness, however, is not esesntial. The same is 
 true of steadiness of value it is admirable, but not essential. 
 Gold, silver, paper, cattle, furs, every money that has ever 
 been used has been subject to more or less variation in value. 
 
 INTRINSIC VALUE. 
 
 There is a common notion that money must have or ought 
 to have what is called "intrinsic value." The idea is that 
 paper is not real money but only "representative" money, rep- 
 resentative of gold or silve^ or some "real" money made out 
 of some material having an inherent value of its own, which 
 sustains its purchasing power independently of any legal- 
 tender quality. "Representative" money is supposed to be 
 defective unless it can be exchanged upon demand for a stated 
 weight of gold or silver or other money possessing inherent or 
 intrinsic value. It is thought by some that it is only by such 
 convertibility that paper money can retain its value, and it 
 is further said that nothing destitute of intrinsic value can be 
 real money, because nothing without value of its own can 
 measure the values of other things. We have to use length to 
 measure length, capacity to measure capacity, and value to 
 measure value, Whatever we measure must be measured by 
 a unit of the same nature as itself. (See Prof, Bowen's Pol. 
 Econ., p. 293.) 
 
 Let us examine the last point first: (1) It is not quite true 
 that whatever we measure must be measured by units of its 
 own nature. For example, with a thermometer we measure 
 heat by units of length. 
 
88 
 
 RATIONAL MONEY. 
 
 (2) As we have seen when speaking of the second function 
 of money, values are not measured by anything inherent in 
 the thing used as money, but by comparison of the relations 
 between money and the commodity to be measured with the 
 relation betwen money and commodities in general. Strictly 
 speaking, money does not measure the value of commodities, 
 but only enables us to measure it by means of a double com- 
 parison, giving us the exchange power of the commodity in 
 terms of commodities in general, which exchange power consti- 
 tutes the value of the commodity. 
 
 (3) To say that we must have value to measure value does 
 not prove that we must have "intrinsic" value in order to per- 
 form the measurement. It is not utilities that are measured 
 by money, but exchange values. We don't measure intrinsic 
 values with money, nor measure by intrinsic values. We can't 
 measure exchange values by intrinsic values unless by intrin- 
 sic values we mean exchange values; and exchange value 
 arising from the use of an article as money will do as well 
 for purposes of measurement as exchange value arising from 
 its use in the arts or in any other relation to human need. A bit 
 of stamped paper used as a medium of exchange fulfills as 
 valuable a purpose, is just as useful, as a bit of iron fashioned 
 into a spade, or a bit of silver stamped into the shape of a 
 spoon, or a bit of gold made into a breastpin. A piece of 
 paper that will exchange for commodities, services, taxes, etc., 
 has exchange value as truly as corn, cotton, cattle, silver or 
 gold. 
 
 (4) To give a paper dollar exchangeable value it is not ne- 
 cessary to make it convertible into gold or silver, but only, by 
 law or usage, to make it generally receivable in payment of 
 debts, taxes, etc. Dr. C. F. Taylor, of Philadelphia (whose 
 admirable "Monthly Talks" in The Medical World contain 
 some of the best and clearest statements of great questions that 
 are to be found in our literature), has many times exposed 
 the fallacy of the "intrinsic value" hypothesis, and shows that 
 rcceivability is much more important than convertibilty. On 
 p. 525 of The Medical World for December, 1897, is printed 
 a letter from Secretary of the Treasury, L. J. Gage, to Dr. 
 Taylor, in which the Secretary says: 
 
THE BEST MONEY. 89 
 
 "While the Government does not specifically redeem either 
 silver dollars or silver certificates in gold, it receive* them the 
 same as gold (i. e., at face value) in payment of all debts due 
 to the United States. This amounts to a practical daily re- 
 demption of such dollars and certificates in large amounts." 
 
 (5) Examine one of our silver certificates, of which there 
 are several hundreds of millions in circulation. You will 
 find that it is not redeemable in gold, but only in silver worth 
 at this time less than half the face value of the certificate 
 less than fifty cents on the dollar; yet the certificate passes 
 at its full face value because everybody knows it has receivabil- 
 ity because it is redeemable in services, and commodities and 
 settlement of debt. 
 
 (6) The case is the same with the silver dollars themselves:; 
 it is not their intrinsic value that makes them pass at par, for 
 their intrinsic value is less than half the par. It is the fact 
 that they are receivable for the same things that gold dollars 
 are receivable for the fact that they will do the money 
 work, the exchange service that gold will do. It is that fact 
 that keeps their value level with gold, and would keep it so 
 even if the silver in them were not worth one cent to the 
 hundred. 
 
 (7) Even in the case of gold, the intrinsic value of the 
 material, the value it would have as a commodity for use in; 
 the arts, the value it has independently of what comes to it 
 by reason of its use for monetary purposes, is comparatively 
 small, and is not the value that is used in money measure- 
 ments. 
 
 Silver fell in value from 70 to 50 cents in a few days when 
 the Indian mints were closed to it, and its demonetization in 
 Germany, France., the United States and other countries has 
 reduced the value of 371 J grains (the weight of silver in a 
 dollar) from its former level of 100 cents to its present level 
 of 35 cents. If all the countries that still use silver for money 
 were to demonetize it, there is no doubt that its value would 
 sink much lower yet, and it is safe to say that at least two- 
 thirds of the value silver possessed in 1873 was derived from 
 its use; as money; its mere commodity value, its intrinsic value, 
 
PHILOSOPHY OF MONEY. 
 
 was less than one-third of its exchange value when it was a 
 full legal-tender money and the mints were open to its coin- 
 age. 
 
 If silver had been made the sole money metal, and if gold 
 had been demonetized by the leading nations in 1873 and fol- 
 lowing years, there can be no doubt that the value of gold 
 would have fallen very greatly for the same reason that silver 
 has fallen, viz., the diminution of demand without a corre- 
 sponding diminution of supply. The main demand, or the 
 main element in the demand, for both gold and silver in 1873, 
 was the monetary demand the demand for them to be used 
 as media of exchange in the growing commerce of the nations. 
 If this main element in demand were removed without con- 
 temporaneous and equal failing of the mines, the value must 
 fall by the inevitable working of the law of demand and sup- 
 ply. Under given conditions of mining output, etc., the ex- 
 change value of a metal used as money will have a tremendous 
 fall if it ceases to be used as money. 
 
 The exchange value of gold, thru which it measures values 
 and performs the functions of money, is, therefore, not in- 
 herent or intrinsic at all, but is a consequence of its use as 
 money, its receivability in exchanges and settlements, together 
 with the limitation of its volume by natural or artificial 
 causes. Anything that by law or custom has equivalent re- 
 ceivability, and whose volume is similarly limited by nature 
 or by man, will have the same value for monetary purposes. 
 Men do not, as a rule, take gold in commerce because of any 
 use they have for the gold as such, but simply because they 
 know they can pay their debts and taxes with it, and obtain 
 for it food, clothes, shelter, pictures, books, transportation, 
 education, labor any commodity or service in the market. 
 Anything else that will do these things will be taken by mer- 
 chants, manufacturers, laborers, etc., just as eagerly as gold 
 (perhaps more eagerly if more convenient to carry, keep and 
 send), and anything will do these things if it is portable, 
 durable and hard to counterfeit, limited in volume and made 
 a full legal tender for all debts and dues public and private. 
 Even counterfeit dollars, metal or paper, circulate as well as 
 
THE BEST MONEY. 91 
 
 gold dollars so long as people do not know they are counter- 
 feits; so long as the people think they have a right to circulate, 
 and therefore possess the quality of general receivability, 
 they will buy as much as gold. A genuine dollar that has 
 the right to circulate possesses permanently the quality that a 
 counterfeit possesses while it is masquerading as genuine 
 money, and the people are ignorant of its lawless character. 
 
 (8) History and experience in our own time abundantly con- 
 firm the statements just made. In the first chapter we have 
 seen that the financial history of England, France, Austria, the 
 United States, Venice and Brazil shows many instances of the 
 maintenance of the value of money without metallic redemp- 
 tion or basis, the independent paper or bank currency being 
 kept at par or even above par with gold, not by promising 
 to pay gold for it, not by promising to pay anything for it, 
 but by promising that it should be received, and by limiting 
 its volume the two elements which must exist in the case 
 not only of paper but of gold, or silver, or anything else that 
 is to serve as money. 
 
 In 1873 the Netherlands rejected silver at their mints, and 
 also refused for two years to coin gold. During that time 
 their exchanges increased till the money volume became so 
 limited relative to the demand that the whole coinage went 
 to a premium above bullion; the coins would buy much more 
 metal than they contained. "The gold necessary to make 
 9| florins would buy silver enough to make 11 silver florins, 
 yet 11 silver coined florins would buy gold bullion enough to 
 make about 12 gold florins." That is, a silver coined florin 
 would buy about 9 per cent, more gold than was in a gold 
 florin, and would buy as much silver as was contained in 
 1.4 silver florins. (Hon. Henry Winn, Faneuil Hall Address, 
 October 7, 1891, p. 10, and Amer. Mag. of Civics, December, 
 1895, p. 580.) Our own silver dollar will at present buy 
 silver bullion enough to make nearly three silver dollars. The 
 nickel with which we pay street railway fares will buy enough 
 of the metal on which the coin is stamped, enough "nickel," 
 to make 6 or 8 nickels the metal in the coin is worth less 
 than a cent, yet the coin passes for 5 cents gold value, and 
 neither it nor the silver dollar is redeemable in gold. 
 
92 PHILOSOPHY OF MONEY. 
 
 The city of St. Joseph, Mo., in recent years has used an 
 independent paper currency for local purposes which was re- 
 ceivable for taxes, and being limited in volume kept its value 
 perfectly. Many of our counties have done and are doing 
 the same thing. 
 
 Persons who have not studied the subject or thought much 
 of it, on hearing about independent paper, are apt to declare 
 that, history or no history, it is perfectly clear to them that 
 the Government cannot create value, and that paper without 
 gold or silver behind it must be worthless. They fail to recog- 
 nize that the paper has the whole field of service and com- 
 modities behind it, and that they are making a pun on the 
 word value. Suppose the Government -cannot, by stamping 
 paper, give it the intrinsic value possessed by gold; it can 
 give the same exchange value, and it is the exchange value 
 that makes gold money. 
 
 The Government can give even intrinsic value of a cer- 
 tain kind to practically worthless paper by stamping it and 
 limiting the number of pieces; men will pay far more than the 
 legal-tender value of such pieces in order to possess them as 
 curiosities or art treasures. For example, rare postage stamps, 
 Columbia coins, old currency, etc. 
 
 It is clearly absurd to say that the Government cannot give 
 value to paper. An individual can do it, why not a nation? 
 A deed has value, and a note, and a bit of manuscript. Tenny- 
 son could make a sheet of paper worth $1,000 by writing a 
 few verses upon it. A postage stamp has value, and is just 
 as good as gold or silver all over this country, ' altho it is "ir- 
 redeemable" in coin redeemable in service only. Anything 
 that is useful has value. The difference between gold money 
 and paper money is not that gold has value and paper has 
 none, but that the gold money has a value aside from its 
 character as money. It has another utility and therefore an- 
 other source of value, while paper in general has only value 
 as money, because it has only that one utility (or rather its 
 other utilities are insignificant in comparison with its money 
 utility bulk for bulk). .But in that utility it is as useful as 
 gold, and therefore has the same value for money as gold, and 
 frequently more. 
 
THE BEST MONEY. 93 
 
 It will not do to point to the French assignats, the Conti- 
 nental money, and the Confederate script, and conclude that 
 paper money will not keep its value. They lost value because 
 of the relaxation of limitation on their volume; and exper- 
 ienced extinction by the failure of their legal-tender quality 
 thru withdrawal, or the downfall of the Governments that 
 established them. No number of failures where the essential 
 conditions of money, legal tender and limitation, were not ful- 
 filled, can go any distance at all toward proving that intrinsic 
 value is necessary, especially in the light, not merely of one, 
 but of many cases where independent, inconvertible, non-in- 
 trinsic money has kept its value by the fulfillment of the said 
 conditions. 
 
 Nearly all economists, and all the great economists agree 
 in affirming that intrinsic value is not requisite to money. 
 John Stuart Mill says (Polit. Econ., Book iii, chap. 13, 1): 
 
 "After experience had shown that pieces of paper, of no 
 intrinsic value, by merely bearing upon them the written 
 profession of being equivalent to a certain number of francs, 
 dollars or pounds, could be made to circulate as such, and to 
 produce all the benefit to the issuers which could have been 
 produced by the coins they purported to represent; govern- 
 ments determined to try whether they could not make a piece 
 of paper issued by them pass for a pound, by merely calling 
 it a pound, and consenting to receive it in payment of the 
 taxes. And such is the influence of almost all established 
 governments, that they have generally succeeded in attaining 
 this object: I believe I might say they have always succeeded 
 for a time, and the power has only been lost to them after 
 they had compromised it by the most flagrant abuse." 
 
 Eicardo and our own Francis Walker, two of the greatest 
 economists that have ever lived, give special emphasis to the 
 case of coins which have lost much of their intrinsic value 
 by abrasion or clipping or sweating, or by the original ab- 
 straction of a certain portion of the metal at the mint, to cover 
 expenses of coinage or for the profit of the Sovereign, and 
 both Bicardo and Walker affirm that "in no case will depre- 
 ciation (of money value) result unless the coin be supplied 
 
PHILOSOPHY OF HONEY. 
 
 (Walker, Money, p. 196; Ricardo, Polit. Econ. 
 Discussion of Seigniorage, and Reply to Bosanquet, pp. 95-6.) 
 Ricardo says: "However debased a coinage may become, it 
 will preserve its mint value; that is to say, it will pass in cir- 
 culation for the intrinsic value of the bullion which it ought 
 to contain, provided it be not in too great abundance." 
 
 Many times Sovereigns have debased the coin of the realm 
 for their private gain, abstracting a part of the gold or silver, 
 and the coin has circulated just the same as before. King 
 John of France was especially noted for this. But the idea 
 has not been confined to crowned heads. The merchants of 
 New York stated to Lord Cornbury that 
 
 "The people of Boston publicly and avowedly have prac- 
 ticed to clip and file all the small current money along the 
 continent, to 25 per cent, loss, which practice and the unlawful 
 profit coming thereby, did encourage enough to make it their 
 business to carry it thither and return it again to us and our 
 neighbors, where it passed for the same value as formerly." 
 (Documentary History of New York.) 
 
 In his "Report on the Mint," Alexander Hamilton speaks 
 of "the new dollar" as being 5 per cent, less valuable intrin- 
 sically than the old dollar, and yet circulating together with 
 the old at a par. Our present silver dollar presents a seign- 
 iorage of 65 per cent. Gresham's law that inferior money 
 will drive out and replace the superior only applies where 
 there is an excess of money above the needs of the community. 
 If sufficiently limited in quantity, both will circulate at or 
 even -above par in bullion. (See Walker, Money, p, 194; Ri- 
 cardo's reply to Bosanquet, p. 95; Case of the Netherlands 
 above, etc.) 
 
 General Walker says (Money, p. 277): 
 
 "Several expressions of Mr. Ricardo have already been 
 quoted to the effect that a bank-note may be regarded as a 
 coin upon which the seigniorage is enormous, extending to 
 its whole nominal amount. While some exception might 
 possibly be taken to this statement regarding a bank note (on 
 account of the bank reserves which may be regarded as en* 
 tering into the cost of maintaining the notes), there can be 
 
THE BEST MONEY. 95 
 
 none to its application to independent govermnment paper. 
 We said that, by Mr. Ricardo's reasoning, a seigniorage of 
 10 per cent., or even of 50 per cent., on coin would not alter 
 the purchasing power of each piece, provided only the pieces 
 were not supplied in excess of the amount of money of full 
 value which would circulate as the community's distributive 
 share of the world's stock of money. 
 
 "No more, if we suppose the seigniorage to be carried out 
 to 100 per cent., and instead of debased coin, pieces of paper 
 to be issued, costing so little in their production that, for 
 purposes of economical reasoning, we may say they cost 
 nothing, would the purchasing power of each piece be dimin- 
 ished provided the pieces were not issued in excess. Upon this 
 point there is substantial unity among economists." 
 
 Pages 288 et seq. by a careful analysis of the facts and prin- 
 ciples of exchange Walker shows that intrinsic value is not 
 necessary to money. On page 297 he quotes Wilson as say- 
 ing that "TKe gold is no more essential to the guinea than 
 the brass or ivory of the ruler is to its inches" 
 
 In his Political Economy, 213, General Walker (tho 
 favoring bimetallism and not independent paper) says : 
 
 "It is undoubtedly true, as Prof. Bonamy Price asserts, 
 that 'experience has proved that it (paper money) need not 
 of necessity suffer any depreciation of value.' " (Principles of 
 Currency, Price, p. 156.) 
 
 General Walker continues: "On a point so vital it may be 
 well to add authority to reason, especially as current American 
 literature misrepresents the real purport of economic opinion 
 on this subject." 
 
 "Mr. Thomas Tooke, the most eminent economic statistician 
 of the world, explicitly and repeatedly states that depreciation 
 is not a necessary consequence of inconvertibilty. 
 
 "Mr. James Wilson, founder of the London Economist , and 
 a statesman and financier of wide experience, declares that 
 if the amount of inconvertible paper be properly regulated, 
 ' there is no reason whatever why such notes should suffer de- 
 preciation.' " (Capital, Currency and Banking, p. 42.) 
 
 M. Courcelle-Seneuil, an eminent French writer on finance, 
 
96 NATIONAL MONEY. 
 
 speaking of inconvertible paper says: ."The value of such 
 money, resulting solely from its use, is limited by that use. 
 If the issues are moderate, paper money will be able to have 
 the same value as metallic money." (Operations de Banque, 
 p. 370.) 
 
 I have made use of three names of the first rank in the 
 economics of finance. Let me now quote once more from 
 "the most illustrious writer known to monetary science." 
 
 "The whole charge for paper money," says Mr. Bicardo, 
 in his Political Economy, "may be considered as seigniorage. 
 Tho it has no intrinsic value, yet by limiting its quantity 
 its value in exchange is as great as an equal denomination 
 of coin, or of bullion in that coin. It is not necessary that 
 paper money should be payable in specie to secure its value; 
 it is only necessary that its quantity should be regulated." 
 
 Wm. G. Sumner, Yale Professor of Political and Social 
 Science, in his "History of American Currency," p. 249, 
 quotes the report of the English Bullion Committee to the 
 effect that "The value of an inconvertible currency depends 
 on its amount relatively to the needs of the country for a cir- 
 culating medium." 
 
 And Professor Sumner declares that "The doctrines of the 
 Bullion Report have been tested by experience of their oppo- 
 sites and of themselves, and they are no longer disputable. 
 They are not matters of opinion or theory, but of demon- 
 stration. They are ratified and established as the basis of 
 finance." 
 
 THE ONLY ESSENTIAL ATTRIBUTES 
 
 are general receivability, 8 and limitation of volume either by 
 nature or man. Indeed, since general receivability in ex- 
 change cannot exist in respect to any article in the absence of 
 limitation upon the quantity of it in circulation, we may con- 
 
 ( 9 ) "It is the disposition or the Indisposition of the great majority of 
 the community to receive it in payment which settles the question whether 
 a particular commodity shall become money or not. The willingness of the 
 mass of the people to receive one article rather than others in payment for 
 whatever they have to sell, furnishes the prime, the one essential condition 
 of a true money." (Walker, Money, pp. 24-5.) In primitive societies the 
 willingness generally arises by the slow growth of usage. In civilized 
 societies the willingness arises by definite act of the Government, establish- 
 ing the legal tender and maintaining it by enforcement in the courts, and 
 by reception for public dues. 
 
THE BEST MONEY. 97 
 
 sider receivability the sole essential test. An article may be 
 limited without being generally receivable in exchange, but 
 it cannot be generally receivable in exchange unless it is 
 limited. If it comes to be generally receivable and should 
 afterwards become absolutely unlimited it will cease to be 
 receivable. If alchemy should be so wonderfully successful 
 that mountains of dirt could be turned into gold by a wave 
 of the hand, people would not use gold as a medium of ex- 
 change any more than they would use mud now. They might 
 use stamped gold, however, because the quantity of that could 
 easily be limited. Receivability in exchange implies limita- 
 tion, so that receivability covers both essentials and may be 
 taken as the index of both. 
 
 Anything that the people are willing to take in exchange 
 for commodities and services and in payment of debts, so that 
 the taker knows he can in his turn use the same thing to pay 
 his debts and to purchase commodities and services from 
 others, will answer for money. It may be very poor money; 
 it may not possess the other attributes needful for efficient 
 performance of the various functions of money; but it can 
 act as a medium of exchange and. roughly perform all four 
 resulting functions. In other words, it can be money, if by 
 custom or law the mass of the people are willing to receive 
 it in payment. We have found communities using corn, 
 leather, cattle, bullets, notched sticks, iron, copper, gold, sil- 
 ver, paper, bank accounts, and they would use any reasonably 
 convenient thing upon which the Government put the stamp 
 of legal tender, receiving it for duties and taxes, and enforc- 
 ing it in the courts as a valid payment of debt for its face 
 value. 
 
 STEADINESS OF VALUE. 
 
 Next in importance to the essential quality of legal tender 
 or general receivability, is the attribute of stable value. In- 
 deed this attribute, tho not essential to the existence of money, 
 is absolutely essential to just and equitable money. By steady 
 money I mean money of constant purchasing power; money 
 that will buy the same average quantity of commodities and 
 services this year that it did last year; money that gives its 
 
98 PHILOSOPHY OF MONEY. 
 
 possessor the same command over the world of exchange at 
 all times. 9 If a dollar gives its owner more power of pur- 
 chase than formerly, or less power, it has changed its value. 
 The holder can get more or less for it than before, and it be- 
 comes a false standard of payment, and a dangerous regu- 
 lator of industry and wealth distribution. If prices rise, the 
 dollar has less purchasing power than before; if prices fall, 
 the dollar has more purchasing power than before. In order 
 that the purchasing power of the dollar may remain the same, 
 the general level of average prices must neither rise nor fall. 
 A steady currency is one that maintains general prices at a 
 constant level. A money that does not accomplish this is dan- 
 
 () It is sometimes said that money should be constant with labor that 
 a dollar should always buy the same quantity of labor. A bill has even been 
 proposed providing for the issue of labor dollars by the Government at the 
 rate of $2.50 per day of 8 hours unskilled labor, the Government to redeem 
 the money on demand in unskilled labor at the same rates. (Labor as 
 Money, by John O. Yeiser.) It has been suggested that labor is intrinsically 
 the most proper measure of value, on the ground that one day's ordinary 
 exertion of one man may be looked upon as always to him the same amount 
 of effort or sacrifice. (See Adam Smith's Wealth of Nations, Bk. 1, Chapter 
 XI; John Stuart Mill's Polit. Econ., Bk. Hi., Chapter XV., Sec. 2; Ricardo's 
 Works, iii.; D. A. Wells "Recent Economic Changes," p. 225.) While labor 
 for labor, and even day for day is a very admirable principle of distribution 
 which in a co-operative brotherhood might be incorporated in the money 
 system see Our Country's Need, Parsons, p. 12 et seq.), yet it by no means 
 follows that it could properly become the monetary basis to-day. (Ibid., and 
 J. Allen Smith's remarks in "Annals, etc.," supra, pp. 10-12.) In the first 
 place, labor day for day does not truly represent exchange values nor real 
 values. The product of a day's work by a savage in the wilds of Africa, or 
 the product of a lazy Italian in a street sweeping gang in one of our cities 
 is not the equivalent for the product of a day's work by a fine mechanic or 
 an efficient farmer, a wise statesman, a successful inventor or an eminent 
 physician. Moreover, the value even of unskilled labor in the same country is 
 continually changing. A new invention may double the product of a day of 
 unskilled labor. It is absurd to say that the double product is worth no 
 more than the former product. The truth is that the day's labor is twice as 
 valuable as before, and a dollar regulated by the labor unit, maintaining a 
 constant relation with the day's work, would double in value under such cir- 
 cumstances. So long as the competitive system continues, and values rest 
 upon demand and supply, a labor unit can hardly represent them truly. To 
 regulate money by a labor unit under competition would be about as unjust 
 as the present method of nonregulation. The crelditor who lent $1,000 or 
 1,000 days work for two years or ten years might at the end of that time 
 receive 1,000 days work of vastly increased efficiency days whose product 
 might be double the product of the days he lent. In other words, the whole 
 benefit of inventions and improvements would go to the creditor class, 
 whereas it is much more equitable to give the benefit of improvements to the 
 burdened debtor class, as would happen were the dollar kept steady with 
 commodities. If debtors have to pay back an equivalent in commodities, 
 then every improvement in production makes it easier for them to pay 
 their debts, and does this without the slightest injustice to the creditors 
 who receive the same number of dollars of the same purchasing power as 
 those they lent; i. e., they receive back the same command over the world 
 that they gave, whereas if the dollar Is regulated by the labor day, each 
 dollar repaid may buy two or three times as much wealth as the dollar lent. 
 The labor dollar means the fall of prices, and this, under competition, 
 means panic and depression. If the dollar is kept steady with the labor day, 
 then the progress of invention would produce a series of Industrial crises. 
 When a day's work created twice as much product as formerly, the labor 
 dollar would buy twice as much; that is, prices would have fallen to one half. 
 Every increase in the productivity of labor would reduce prices in proportion 
 and the worst variety of money fluctuation would become a perpetuity. 
 
THE BEST MONEY, 99 
 
 gerous and unjust. Rising prices cheat the creditor classes, 
 and award to labor less than its share of the total product. 
 Falling prices cheat debtors, displace labor and crush indus- 
 try into the dust. Fluctuating prices produce periodical 
 panics. The only way to give the creditor just what he lent, 
 no more, no less, and the only way to be secure against panic 
 and depression under a competitive system of industry, is to 
 keep prices level. And the only safe or honest dollar is the 
 dollar that will do this; the dollar that has a constant and 
 unchanging purchasing power; that will buy the same average 
 amount of commodities at one time as another. 10 
 
 ( 10 ) Ricardo says: "All writers on the subject of money have agreed that 
 uniformity in the value of the circulating medium is an object greatly to be 
 desired. A currency may be considered as perfect, of which the standard 
 is invariable, which always conforms to that standard, and in the use of 
 which the utmost economy is practised. * * During the late discussions on 
 the bullion question, it was most justly contended, that a currency to be 
 perfect should be absolutely invariable in value." (Proposals for an econ- 
 omic and secure currency, Sections 1 and 2.) 
 
 Locke says that money "as the measure of commerce ought to be kept 
 as steady and invariable as may be." (Address of the Master of the English 
 Mint in 1816.) 
 
 Jevons holds: "It is evidently desirable that the currency should not be 
 subject to fluctuations of value. The ratios in which money exchanges for 
 other commodities should be maintained as nearly as possible invariable on 
 the average." (Money and the Mechanism of Exchange, p. 38.) 
 
 Fonda observes that "invariable value is the great requirement for both 
 the functions: 'a measure of value' and 'a standard of deferred payments.' " 
 (Honest Money, p. 28.) 
 
 Professor Sherwood remarks: "The ideal that we want so far as price 
 adjustment is concerned, is to keep prices stable, so that a contract which is 
 payable in one year from now can be paid With just the amount of com- 
 modities which will then represent the value stated in the contract of to-day. 
 * * * "That is what we want, a stability of prices that persists from one 
 year to another and from one generation to another, * * a currency which 
 shall expand with the expansion of trade and commerce and development 
 generally; a currency which shall not be lagging behind the commerce and; 
 development of the country and hindering that development, and a cur- 
 rency which shall not, by being too rapidly increased, lead to excessive specu- 
 lation and to loss." (History and Theory of Money, p. 225.) 
 
 J. L. Laughlin, head professor of political economy in the University of 
 Chicago, says: "The highest justice is rendered by the state when it exacts 
 from the debtor at the end of a contract the same purchasing power which 
 the creditor gave him at the beginning of the contract, no less, no more." 
 
 "The value of money does not remain the same for any length of time; 
 and the precious metals cannot serve as a proper measure of value during a 
 long term of years. * * One way suggested to get a standard of payment 
 for long contracts is by a device known as the multiple standard. A long 
 contract, like a government or railway bond, ought not to be settled by 
 paying back the amount of gold or silver borrowed, but by giving the lender 
 a sum which would at the time of payment, purchase the amount of com- 
 modities for which the money loaned could have been exchanged at the 
 time that it passed from the lender to the borrower." (History of Bi- 
 Metallism in the U. S., pp. 70 to 76.) 
 
 R. B. Chapman, for many years financial secretary to the government of 
 India, remarked to the British Gold and Silver Commission, January 27, 1888: 
 "To my apprehension, a steady standard of value is absolutely necessary for 
 the purposes of commerce; and if stability of standard is lost, commerce is 
 paralyzed." 
 
 President E. B. Andrews says on p. 135 of his "Institutes of Economics": 
 'It money) is a more perfect measure the more steady and invariable it Is 
 as to its own value. It inevitably shrinks in value so soon and about in pro- 
 portion as it Is multiplied beyond the requirements of exchange." 
 
100 RATIONAL MONEY. 
 
 MOVEMENT OF THE MONEY VOLUME. 
 
 The value of money, that is, the general level of prices, can 
 be controlled by controlling the volume of the currency. 
 Prices can be made to rise by increasing the volume of money 
 in circulation, and prices can be made to fall by decreasing 
 that volume. 11 Contrariwise, a fall of prices otherwise caused 
 
 ( n ) Some writers appear to think that the volume of money has no re- 
 lation to prices. They say that the volume of money may increase very much 
 without affecting prices, while on the other hand prices may rise or fall 
 thru the movement of credit without any change in the volume of legal 
 tender money, and from these facts they conclude that the money volume 
 has no controlling influence on prices. But this conclusion is not justified 
 by the premises. A given movement of the money volume may not ALWAYS 
 cause prices to move any more than gravitation will always cause a body 
 to fall, or than an electric current will always cause a trolley car to move. 
 It depends upon the circumstances of the case HOW MUCH CURRENT will be 
 required before the car will move, and HOW MUCH CHANGE in the money 
 volume must be made in order to cause a movement of prices. If population 
 and business are growing as fast as the money volume, or if people accustom 
 themselves to using more money in doing the same business, paying cash 
 more frequently and relying on credit less, there may be a large accession 
 to the money volume without a rise of prices. 
 
 The fact that a shrinkage of credit may cause a fall of prices without any 
 change having taken place in the volume of legal tender money shows that 
 there are other causes of fluctuating prices besides a movement of the legal 
 tender money volume, but does not prove that such movement is not also 
 a cause of price change; indeed it proves the opposite, for a shrinkage of 
 credit is equivalent to a contraction of the currency it is a shrinkage of that 
 which in a certain field iias acted in the place of legal tender money, and its 
 failure enlarges the business to be done with legal tender money, which, if 
 the volume of the latter remains the same, amounts to a contraction rela- 
 tively to the work it has to do. As a matter of fact the volume of legal 
 tender in circulation is apt to shrink along with credit, thru the hoarding of 
 money in time of danger. 
 
 We know from history that the movement of money does cause a corres- 
 ponding movement of prices. The influx of the precious metals following the 
 discovery of Mexico and Peru increased the volume of money in Europe 
 500#, and prices rose to a degree estimated at 200 to 400 per cent, notwith- 
 standing the growth of population, and expansion of the business to be done 
 with money. (See Economic Studies, Vol. I, No. 1, Amer. Econ. Assoc. ; and 
 Mulhall's Hist, of Prices, tables in the back of the book.) So in the middle 
 of this century the discovery of gold in California and Australia increased 
 the money volume and lifted prices very materially. On the other hand 
 the contracton of the currency in England after the Napoleonic wars, and 
 in this country after the Rebellion, produced a serious fall of prices, as we 
 have seen. 
 
 It is sometimes said that credit will expand to take the place of money, 
 so that a decrease of the currency does not necessarily affect prices. This 
 may be so in some cases, but as a rule it is, as President Walker remarks, 
 "a question whether the operations of credit are not less active, rather than 
 more active, when contraction of the currency is going on than when the 
 currency is undergoing a moderately progressive increase." (Economic 
 Studies, Vol. i., No. 1, pages 44-5.) Contraction depresses business, and men 
 are less willing to give credit, more insistent on cash, when trade is bad and 
 danger is ahead, than when business is brisk and the sea is smooth. Walker, 
 Price and other leading economists declare that the credit system may 
 modify but does not destroy the relation between currency volume and price, 
 there being a large field of exchange in which cash is required. 
 
 There is no precise quantitative relation between money movement and 
 price movement because of the interference of other forces; neither is every 
 price movement due to money movement. The truth is simply that a SUFFI- 
 CIENT movement of the money volume will cause a movement of prices, and 
 that when a price change is produced by another cause a SUFFICIENT counter 
 movement of the money volume will cancel the change. A sufficient upward 
 movement would be one large enough to overcome opposing resistances, like 
 shrinkage of credits, etc., and saturate business with cash up to the point 
 people care to use it, and introduce an excess of currency beyond this point 
 of saturation. That excess would move prices. A sufficient downward move- 
 ment would be one not met by increase of credit or other substitute, and 
 not accompanied by a corresponding shrinkage of business. 
 

 THE BEST MONEY. 101 
 
 may be checked and expunged by an increase in circulation, 
 and a rise of prices can be overcome by contraction of the cur- 
 rency. With sufficient foresight a threatened rise or fall of 
 prices could be prevented by a movement of the money vol- 
 ume contemporaneous with the action of the cause threaten- 
 ing to produce the rise or fall. 
 
 Under a strong and stable government able to enforce its 
 legal-tender laws, the most important monetary fact is the 
 movement of the volume of the currency; control of this 
 movement means control of prices, and the control of prices 
 means the power to increase or diminish the weight of public 
 
 Attention is sometimes directed to per capita circulation as a matter of 
 Importance. But wit bin wide limits it is a matter of no consequence. 
 Nations have adjusted themselves successfully to $3 or $4 per capita and to 
 $35 or $40. But the MOVEMENT from one per capita to another, especially if 
 it be from a large per capita to a small one, while the business to be done 
 with money is all the time increasing, may be a matter of the most vital 
 moment. 
 
 The conclusion that the money volume has a determining Influence upon 
 prices is simply one application of the law of supply and demand, and Is 
 affirmed by all the leading economists. 
 
 Professor Alfred Marshall, the highest living English authority In political 
 economy, says: "I accept the common doctrine that prices generally rise, 
 other things being equal, in proportion to the volume of money. * * I 
 include paper money." (Testimony before the Herschell Commission, No. 
 9629-32.) 
 
 Pres. F. A. Walker, the highest authority on this side of the water upon 
 the question of nuance, writes (Sec. 218, Polit. Econ.): "Mr. Ricardo has 
 rightly said that, by limiting the supply, any degree of value can be given 
 to the money of a country* be it of gold and silver, or of paper;" giving us 
 in a single sentence his own conclusion and that of KIcardo, whom he calls 
 "the most illustrious writer known to monetary science." 
 
 Pres. Walker wrote very strongly on this subject in his "Relation of 
 Changes in t.he Volume of the Currency to Prosperity." (Economic Studies, 
 Vol. I., No. 1, April, 1896, Amer. Econom. Assoc.) 
 
 Professor Sumner (Hist. Amer. Currency, p. 221) speaking of irredeem- 
 able paper, says: "The whole story which precedes, goes to show that the 
 value of a paper currency depends on its amount. At the time of issue, or 
 during a war in which the issuer is engaged, it depends in some degree on 
 his credit; but when it settles down in peace as the normal medium of 
 exchange, its value conies to depend purely on Its amount. This amount of 
 course is relative to the requirements of the country for the purpose of 
 performing its exchanges." 
 
 David Hume says in his Essay on Money: "It is the proportion between 
 the circulating money and the commodities in the market that determines 
 prices." 
 
 John Stuart Mill says (Polit. Econ. iii., 8, Sees. 2, 3,; and Hi., 13, Sec. 1.): 
 "The value or purchasing power of money depends in the first instance on 
 demand and supply. * * In point of fact, money is bought and sold like 
 other things, whenever other things are bought and sold for money. 
 Whoever sells corn, or tallow, or cotton buys money. Whoever buys 
 bread, or wine or clothes, sells money to the dealer in those articles. * * If 
 there were less money in circulation in the community, and the same 
 amount of goods to be sold, less money would be given for them, and they 
 would be sold at lower prices. * * That an increase of the quantity of 
 money raises prices, and a diminution lowers them, is the most elementary 
 proposition in the theory of currency. * * The Immediate agency in de- 
 termining the value of money is its quantity. If the quantity, instead of 
 depending on the ordinary motives of profit and loss, could be arbitrarily 
 fixed by authority, the value would depend on the fiat of that authority. The 
 quantity of a paper eunvney not convertible into the metals at the option of 
 the holder can be arbitrarily fixed, especially if the issuer is the soverign 
 power of the state. Wherefore the value of such a currency is entirely 
 within the control of the government. 
 
 (See the closing paragraphs of the preceeding section on "Intrinsic 
 Value.") 
 
102 PHILOSOPHY OF MONEY. 
 
 and private debts, to govern the distribution of wealth, to 
 command prosperity or panic. A matter of such moment 
 should not be left to chance or private manipulation. A 
 money of elastic volume, carefully regulated in the public in- 
 terest, is essential to prevent oppression and gambling, to 
 maintain a constant average of general prices, keep the value 
 of money steady, and make the dollar a perfect medium of 
 exchange, a reliable measure and means of storing value, an 
 honest standard of deferred payments doing injustice neither 
 to debtor or creditor, and a safe regulator of industry and dis- 
 tributor of wealth. 
 
 WHAT MONEY SHOULD BE ADOPTED? 
 
 There are few if any more important questions before the 
 American people to-day. The Gold Standard, the Bimetallic 
 Standard and the Multiple Standard are the systems chiefly 
 spoken of, and the only ones that have sufficient support in 
 reason to make it worth while to consider them. 12 The gold 
 standard makes the dollar conform to the value of a given 
 weight of gold. The bimetallic standard subjects the dollar 
 to the controlling influence of gold and silver, giving it some- 
 times the value of one metal, and sometimes of the other, such 
 value being always limited however by the monetary poten- 
 tiality of the other metal, and amounting, if long periods are 
 considered, to the average value of the two metals. The mul- 
 tiple standard requires the dollar to conform itself to the 
 average value of commodities in general, so that its purchasing 
 power may remain constant. The average value of commo- 
 dities, and the increase or diminution of the money volume 
 necessary to cancel or prevent a rise or fall of the average 
 level of prices, are determined by methods that will be de- 
 scribed in the next chapter. 
 
 It is clear from the discussion preceding this section that 
 steadiness of value in the monetary unit is of the very highest 
 importance to justice and prosperity, and necessary to the due 
 performance of the functions of money. And it is equally 
 clear that steadiness of value cannot be attained with either 
 
 (") See above for discussion of the labor standard. 
 
THE BEST MONEY. 
 
 the gold or the bimetallic standard. Even if the Government 
 owned all the mines in the country, it could not stop Wall 
 Street from cornering gold, or prevent scheming syndicates 
 from draining the treasury, or shut out the perturbing in- 
 fluence of foreign markets, mines and financial politics, In 
 general, bimetallism is superior to monometallism. Two 
 metals are better than one, less easily cornered, less affected 
 by the accidents of production, less liable to sudden and wide 
 fluctuations from any cause, but the difference is slight as is 
 clearly shown by the facts platted in diagram below. As a 
 general rule it is evidently better to base the money unit on 
 two commodities than on one, as the average of two commo- 
 dities will be likely to represent all commodities or general 
 purchasing power more nearly i/han either one of the two. 13 
 
 However much of an improvement two commodities may 
 be over one as a basis for the money unit, it is manifest that 
 two are not so good as 100 or 200 or 500. "We cannot rely upon 
 two to represent all so fully as we can rely upon 100 or 200 
 or 500, or upon the all itself. 
 
 So long as no attempt is made at a wise public control of the 
 movement of the money volume in the interest of justice 
 and industrial well-being, so long as Congress neglects the 
 duty of regulating money imposed upon it by the Constitu- 
 tion, so long as the volume and value of money is left to 
 nature and conspiracy and foreign emergencies, so long will 
 gold and silver be rightly used instead of independent paper; 
 the rude regulation of Nature's restrictions on production, 
 with all the perturbations of competition, conspiracy, etc., is 
 better than no regulation; but so soon as the necessity of 
 replacing chance and private manipulation with intelligent 
 regulation on scientific principles for the public benefit 
 comes to be understood, 14 just that soon does it become clear 
 
 ( 13 ) This likelihood is by no means a certainty. Silver, for example, might 
 keep prices nearer level than gold, or gold and silver together; the white 
 metal's variations from the general average of all commodities being less 
 than those of gold; and the average of the flustuations of gold and silver, 
 tho nearer the true level than gold alone, is not so near as silver. It is very 
 doubtful, however, if this would continue to be true if the monetary demand 
 were thrown upon silver. The case would be clearer with cotton and leather, 
 leather varying much less from the average commodity level than cotton. 
 (See diagrams below.) 
 
 ( 14 ) This is the vital point in the monetary problem of the day. There 
 must be intelligent control of money in the public interest in order to stop 
 panics, do justice between debtor and creditor, and regulate the distribution 
 
104: RATIONAL MONEY. 
 
 that gold and silver must be abandoned as monetary bases, 
 and reliance placed on independent paper carefully regulated 
 in volume so that its value may remain constant, represent- 
 ing from month to month and year to year the same average 
 amount of commodities in general, retaining the same power 
 of purchase in peace or war, in good mining or bad, and rid- 
 ding the nation of the pestilence of falling prices. Such regu- 
 lation is hardly possible with a money based on gold and silver, 
 because the sources of supply and causes of variation would be 
 in large part beyond the control of the Government. No one 
 people could hope to stem the tide of the world. If gold and 
 silver appreciated abroad for a considerable time and to a con- 
 siderable degree, we would simply lose all our gold and silver 
 if we tried to keep our prices steady with coin and con- 
 vertible paper, 15 and be compelled at last to rely upon inde- 
 pendent paper. Even if due regulation of metallic money, 
 or currency based on metallic money, were a possibility, it 
 would still be undesirable not merely because of the added 
 difficulties it would involve, but because of the needless ex- 
 pense of using costly materials for a service that can be per- 
 formed as well or better with cheap materials. In other 
 words, money should be intelligently regulated anyway, and 
 if it is intelligently regulated, independent paper is preferable 
 to monometallism or bimetallism, because it is cheaper and 
 less open, to disturbing influences beyond the control of the 
 Government. 
 
 We have said that bimetallism is but little better than 
 monometallism. In detailed proof of this we present the fol- 
 lowing diagram from Professor Alfred Marshall, bringing the 
 lines to date and adding the Professor's comments. 
 
 of wealth. Men favor metallic money because they think in terms of present 
 methods. Gold is better than limitless issues of paper; little regulation is 
 better than none, bad regulation is better than no regulation, but good and 
 sufficient regulation is better than either. It will not do to say that money 
 cannot be wisely regulated in the interests of the people. It has been done 
 (See Chap. I) and can be done with great perfection and certainty by methods 
 developed by modern economics. (See next chapter.) 
 
 ( 1B ) Convertible paper is open to even more variations than metallic 
 money itself. It may at any time through industrial disturbance or other 
 cause be called upon to toe the mark with gold, and follow wherever it 
 goes, and it may between whiles enjoy little excursions of its own away 
 from the value a metallic currency would have; a phenomenon arising from 
 the friction or inertia usually attending convertibilitv which permits an 
 "over-issue" of the "convertible" notes. (See Walker "Money," pp. 479- 
 484. Prof. Sumner Hist Amer. Currency p. 186.) 
 
THE B3ST MONEY. 
 
 105 
 
 FROM PROF iiARSMAii CONTEI-IP REV MAR 1387, PAGE 361 
 
 THE SOLID LINE HEPRESENT5 THE MOVEMENT OF GOLD PRICES. THE. DOTTED LINE, 
 THE MOVEMENT OF BIMETALLIC PRICES 
 
 I8EO 1830 
 
 i860 
 
 1670 
 
 "The dark curve shows tlie variations of the index number 
 which represents the average prices of the leading wholesale 
 commodities during the last hundred years, estimated in gold 
 alune; while the dotted curve shows the same index number 
 estimated in terms of the two metals, gold and silver in equal 
 shares. On comparing these, 'we find that the fluctuations 
 shown by the second curve are not very much less than those 
 shown by the first; and, what is of even more significance, that 
 the fluctuations in the index number during the period when 
 the gold value of silver was nearly stationary are greater than 
 they have been since 1873, when its value has been much dis- 
 turbed." 16 
 
 "There is no security that the yield of the silver mines will 
 be great when that of the gold mines is small; history shows 
 that the probability is the other way, in the ratio of 3 to 2. 
 The production of gold has been changing in the opposite di- 
 rection to that of silver during about 160 out of the last 400 
 years; during the remaining 240, the two productions have 
 been either increasing together or diminishing together." 17 
 
 The truth is that gold and silver belong to the same class, 
 and are much more likely to vibrate together than two com- 
 modities of a more different nature. If we are to confine our- 
 
 ( 16 ) Prof. Marshall, Contemporary Review, Vol. 51, Mar., 1887, p. 
 (") Ibid, p. 359. 
 
106 
 
 PHILOSOPHY OF MONEY. 
 
 selves to two commodities it would be better to choose so that 
 both would not belong to the class that is subject to the law 
 of diminishing return nor very similar in other respects, so 
 that their fluctuations might offset each other. 
 
 The following diagram from MulhalFs History of Prices 
 shows the movement of money from 1841 to 188 4. The solid 
 line represents English prices and the dotted line World 
 prices. 
 
 PRICE LEVELS OF THE WORLD AND OFCREAT BRITAIN. 
 
 WORLD G.B. 
 
 I84h50 51-3 51-657-8 60* 6V3 6W 6971 TM 75-7 78-80 M-Z 83'1 
 I56 - - I56 
 
 -15+ 
 
 ISO _ 
 
 _ ISO 
 
 _I40 
 
 _I30 
 
 _I20 
 
 90 _ 
 
 _90 
 
 The rise and fall of prices since 1846 is shown in the fol- 
 lowing tables. Dr. Sauerbeck and Dr. Soetbeer (two of the 
 most eminent statisticians in Europe), The London "Econo- 
 mist," the Report of the Finance Committee of the United 
 States Senate, 52d Congress, on "Wholesale Prices, Wages 
 and Transportation," commonly known as the "Aldrich Re- 
 port," and "The American," edited by the distinguished eco- 
 nomic writer, Wharton Barker, are the authorities. Pal- 
 grave's table is a recast of a portion of the Economist figures, 
 
THE P.KST MONfcY. 107 
 
 each commodity being "weighted," i. e., entered in the esti- 
 mate of average prices according to its importance relatively 
 to the other commodities, instead of entering each commodity 
 as the equal of every other, as is the case in most of the tables, 
 the average being obtained by taking the sum of the prices of 
 all the commodities without weighting, and dividing by the 
 number of commodities. 
 
 The Economist list is not considered wholly satisfactory be- 
 cause the number of commodities is small (22), and 4 of them 
 are either raw cotton or cotton manufactures, which rose 300 
 or 400 per cent, during the war. It is all right to include 
 erratic elements in due proportion the same proportion that 
 occurs in the total of commercial products but 4 skyrockets 
 in 22 products is too high a ratio. 
 
 The Aldrich Report bears many marks of careless work 18 
 (perhaps by the clerks employed to handle the enormous body 
 of data obtained by the committee), and for the "weighted'* 
 column only the relative importance of the various groups 
 of articles is used, so that altho the number of commodities is 
 large (223), the results are not considered by economists to 
 be as reliable as the averages of Sauerbeck and Soetbeer. The 
 first two columns of the Aldrich table give the actual prices, 
 paper prices during the war and until 1879, then gold prices. 
 The last two columns show gold prices all the way thru, the 
 paper prices of 1862 to 1879 being reduced to terms of gold 
 at the premium then existing. The prices thus obtained do 
 not exactly represent the course that a continuous gold stand- 
 ard would have taken because speculation in gold widened the 
 distance between it and paper, lifting the yellow plaything, 
 and putting gold prices during and after the war below the 
 normal gold level as indicated by the movement of price 
 levels in other countries during this period. In the first and 
 third columns of the Aldrich table we have the relative prices 
 
 ( 18 ) One of the most striking illustrations of the imperfect methods em- 
 ployed in the Aldrich Report is the fact that in obtaining average wages, 
 the wages of a few foremen were added together and divided by the number 
 of foremen (4, for example) to get the average pay of a foreman ($5 a day, 
 for example). Then the wages of perhaps 100 workmen were added and 
 divided by the number of workmen, giving perhaps $1.00 for the average. 
 Finally, the foremen's average ($5) and the workmen's average ($1) were 
 added together and the sum ($6) divided by 2, giving $3 (in this example) 
 for the average wages on the whole of the data concerned, whereas the 
 true average would be $1.15, 
 
JOS 
 
 3SATIOINAL MONEY. 
 
 calculated as a simple average of all the commodities. In the 
 second and fourth columns, the relative price resulting from 
 giving each commodity its due weight according to its consump- 
 tion. Rent, insurance, charity, etc., had to be omitted. The 
 shorter lists used in calculating the tables include such com- 
 modities as coffee, sugar, tea, wheat, corn, oats, cotton, wool, 
 silk, flax, indigo, timber, tallow, leather, copper, iron, lead, 
 tin, etc. The long list of the Aldrich report contains 8 groups 
 of commodities: food, 19 cloths and clothing, fuel and lighting, 
 metals and implements, lumber and building materials, drugs 
 and chemicals, house furnishing goods, and miscellaneous arti- 
 cles. A number of items are considered under each group. The 
 committee ascertained from statistics of 2,561 normal families 
 that the expenditure for food is 41 per cent, of the total expen- 
 diture, clothing 15 per cent., rent 15 per cent., fuel 5 per cent., 
 light 1 per cent., house furnishing 2.5 per cent., insurance 1.5 
 per cent., taxes 1.15 per cent., tobacco 1 per cent., intoxicants 
 1.68 per cent, amusements. 9 2 of 1 per cent., religion. 9 2 of 1 
 1.68 per cent, other amusements .92 of 1 per cent, religion 
 .92 of 1 per cent., charity ^ of 1 per cent, books and news- 
 papers 1 per cent., illness and death 3.35 per cent., other pur- 
 poses 15 per cent. Not being able to measure the changes of 
 rent, insurance, etc., the committee confined its table of prices 
 and averages to the 8 groups above named which represent 
 68.6 per cent of the total expenditure of the average family. 
 In using the tables it must be remembered that each statis- 
 tician arbitrarily places the location of the 100 level; he may 
 take any year as the standard and call its index number 100. 
 The index numbers of the other years will then differ from 
 100 in the same ratio that their prices differ from prices of 
 the standard year. 
 
 The Sauerbeck list has been extended from 1895 to 1897 
 by applying the percentages of fall shown by the American 
 table, which has been used in extending the Economist list 
 from 1891 as given in the Aldrich Report 
 
 (") To show the character of the groups wo give the main elements of the 
 first group: beans, bread (10 varieties, including Boston crackers, oyster 
 "rackfrs, shipbread, etc.), butter, cheese, coffee (Kio) eggs, cod salt, mack- 
 erel, (3 nos), rve, flour, dried apples, raisins, lard, yellow co % e r a J', b * c l o ,E' 
 beef (joints ribs (salt), ham (sugar cured), lamb, mutton pork, fresh milk, 
 molasses (New Orleans prime), rice (California prime), salt (5 sorts), nutmega, 
 pepper, corn starch, 
 
THE BEST MONET. 
 
 109 
 
 TABLE XIII. 
 
 SAUEKBECK. 
 
 1867-1877=100. 
 
 Simple Average. 
 
 English prices. 
 
 45 commodities. 
 
 1846 
 
 89 
 
 1847 
 
 95 
 
 1848 
 
 .... 78 
 
 1849 
 
 74 
 
 1850 
 
 77 
 
 1851 
 
 .... 75 
 
 1852 
 
 .... 78 
 
 1853 
 
 .... 95 
 
 1854 
 
 102 
 
 1855 
 
 101 
 
 1856 
 
 101 
 
 1857 
 
 105 
 
 1858 
 
 91 
 
 1859 
 
 .... 94 
 
 1860 
 
 99 
 
 1861 
 
 .... 98 
 
 1862 
 
 101 
 
 1863 
 
 103 
 
 1864 
 
 105 
 
 1865 
 
 101 
 
 1866 
 
 102 
 
 1867 
 
 100 
 
 1868 
 
 99 
 
 1869 
 
 .... 98 
 
 1870 
 
 96 
 
 1871 
 
 .... 100 
 
 1872 
 
 .... 109 
 
 1873 
 
 111 
 
 1874 
 
 102 
 
 1875 
 
 96 
 
 1876 
 
 95 
 
 1877 
 
 94 
 
 1878 
 
 .... 87 
 
 1879 
 
 83 
 
 1880 
 
 88 
 
 1881 
 
 85 
 
 1882 
 
 84 
 
 1883 
 
 82 
 
 1884 
 
 76 
 
 1885 
 
 72 
 
 1886 
 
 69 
 
 1887 
 
 68 
 
 1888 
 
 .... 70 
 
 1889 
 
 .... 72 
 
 1890 
 
 72 
 
 1891 
 
 72 
 
 1892 
 
 68 
 
 1893 
 
 68 
 
 1894 
 
 63 
 
 1895 
 
 62 
 
 1896 
 
 60 
 
 1897 
 
 .... 9 
 
 SOETBEER. 
 
 1847-1850=100. 
 Simple Average. 
 Hamburg prices 
 100 commodities, and 
 Eng. export prices 
 14 commodities. 
 
 ECONOMIST LIST. 
 
 1845-1850=100. 
 Simple Average. 
 
 English prices. 
 22 commodities. 
 
 1847.... 
 
 1 
 
 
 1 
 
 to 
 
 }- 100 
 
 1850 
 
 
 1851 
 
 100.21 
 
 1852.... 
 
 101.69 
 
 1853 
 
 113.69 
 
 1854 
 
 121.25 
 
 1855 
 
 124.23 
 
 1856 
 
 123.27 
 
 1857 
 
 130.11 
 
 1858 
 
 113.52 
 
 1859.... 
 
 116.34 
 
 I860.... 
 
 120.98 
 
 1861.... 
 
 118.10 
 
 1862 
 
 122.65 
 
 1863 
 
 125.49 
 
 1864 
 
 129.28 
 
 1865 
 
 122.63 
 
 1866 
 
 125.85 
 
 1867 
 
 124.44 
 
 1868.... 
 
 121.99 
 
 1869.... 
 
 123.38 
 
 1870.... 
 
 122.87 
 
 1871 
 
 127.03 
 
 1872.... 
 
 135.62 
 
 1873.... 
 
 138.38 
 
 1874.... 
 
 136.20 
 
 1875 
 
 129.85 
 
 1876 
 
 128.33 
 
 1877 
 
 127.70 
 
 1878 
 
 120.60 
 
 1879 
 
 117.10 
 
 1880 
 
 121.89 
 
 1881 
 
 121.07 
 
 1882 
 
 122.14 
 
 1883 
 
 122.24 
 
 1884.... 
 
 114.25 
 
 1885.... 
 
 108.72 
 
 1886.... 
 
 103.99 
 
 1887.... 
 
 102.02 
 
 1888.... 
 
 102.04 
 
 1889.... 
 
 106.13 
 
 1890.... 
 
 108.13 
 
 1891.... 
 
 109.19 
 
 1845.. 
 
 to 
 
 100 
 
 1850.. J 
 
 
 1851.... 
 
 104 
 
 1852.... 
 
 93 
 
 1853 
 
 108 
 
 1854 
 
 122 
 
 1855 
 
 118 
 
 1856 
 
 123 
 
 1857 
 
 132 
 
 1858 
 
 119 
 
 1859 
 
 115 
 
 I860.... 
 
 121 
 
 1861.... 
 
 124 
 
 1862 
 
 131 
 
 1863 
 
 159 
 
 1864 
 
 172 
 
 1865 
 
 163 
 
 1866 
 
 162 
 
 1867 
 
 137 
 
 1868.... 
 
 122 
 
 1869.... 
 
 121 
 
 1870.... 
 
 122 
 
 1871.... 
 
 118 
 
 1872.... 
 
 129 
 
 1873 
 
 134 
 
 1874 
 
 131 
 
 1875 
 
 126 
 
 1876 
 
 123 
 
 1877 
 
 123 
 
 1878.... 
 
 115 
 
 1879.... 
 
 101 
 
 1880.... 
 
 115 
 
 1881.... 
 
 108 
 
 1882.... 
 
 111 
 
 1883.... 
 
 106 
 
 1884.... 
 
 101 
 
 1885.... 
 
 90 
 
 1886 
 
 92 
 
 1887.... 
 
 94 
 
 1888.... 
 
 101 
 
 1889.... 
 
 99 
 
 1890.... 
 
 102 
 
 1891.... 
 
 102 
 
 1892 
 
 97 
 
 1893 
 
 96 
 
 1894 
 
 89 
 
 1895 
 
 89 
 
 1896 
 
 89 
 
 1897 
 
 86 
 
1 10 
 
 PHILOSOPHY OF MONEY. 
 
 TABLE XIV. 
 
 PALGRAVE. 
 1865-69=100. 
 
 Economist prices. 
 22 commodities. 
 
 Simple 
 
 Weighted 
 
 average 
 
 . average. 
 
 1865 110.6 
 
 107.5 
 
 1866 lil.3 
 
 110.6 
 
 1867 98.0 
 
 99.0 
 
 1868 90.1 
 
 93.5 
 
 1869 90. 
 
 89.2 
 
 Average 100. 
 
 100. 
 
 1870.... 91. 
 
 90. 
 
 1871.... 90. 
 
 93. 
 
 1872.... 97. 
 
 100. 
 
 1873.... 102. 
 
 104. 
 
 1874.... 100. 
 
 108. 
 
 1875.... 95. 
 
 97. 
 
 1876.... 93. 
 
 99. 
 
 1877.... 94. 
 
 100. 
 
 1878.... 87. 
 
 95. 
 
 1879.... 76. 
 
 82. 
 
 1880.... 87.- 
 
 89. 
 
 1881.... 81. 
 
 93. 
 
 1882.... 83. 
 
 87. 
 
 1883.... 80. 
 
 88. 
 
 1884.... 75. 
 
 80. 
 
 1885.... 70. 
 
 76. 
 
 THE AMERICAN, OCT. 16, 1897. 
 
 Jan. 1, 1891=100. 
 
 Simple average, 
 
 100 commodities. 
 
 1891 
 
 1892 
 
 1893 
 
 1894 
 
 1895 
 
 1896 
 
 1897 
 
 Jan. 1 .... 
 
 100. 
 
 Apr. 1.... 
 
 101.96 
 
 July 1.... 
 
 98.28 
 
 Oct. 1.... 
 
 94.71 
 
 Jan. 1 
 
 93.12 
 
 Apr. 1 
 
 92.87 
 
 July 1.... 
 
 92.85 
 
 Oct. 1.... 
 
 93.60 
 
 Jan. 1. ... 
 
 98.42 
 
 Apr. 1 
 
 99.75 
 
 July 1 
 
 93.39 
 
 Oct. 1 
 
 91.43 
 
 Jan. 1. ... 
 
 87.59 
 
 Apr. 1 
 
 84.70 
 
 Julyl.... 
 
 84.40 
 
 Oct. 1 
 
 82.81 
 
 Jan. 1 
 
 79.74 
 
 Apr. 1.... 
 
 82.59 
 
 July 1 
 
 86.05 
 
 Oct. 1.... 
 
 84.88 
 
 Jan. 1 
 
 85.29 
 
 Apr. 1.... 
 
 81.29 
 
 July 1.... 
 
 78.81 
 
 Oct. 1.... 
 
 78.34 
 
 Jan. 1. . . . 
 
 79.95 
 
 Apr. 1 
 
 79.38 
 
 July 1.... 
 
 76.33 
 
 Oct. 1 
 
 82.88 
 
 98.74 
 
 95.6 
 
 95.77 
 
 84.87 
 
 83.31 
 
 j. 80.93 
 j 
 
 79.63 
 
THE BEST MONEY. 
 
 Ill 
 
 TABLE XV. 
 
 THE ALDRICH REPORT. 
 
 1860=100. 
 
 U. S. Prices, 223 Articles. 
 
 Actual Prices. Gold Prices. 
 
 Simple Weighted Simple Weighted 
 
 Year. average. average. average. average. 
 
 1840 116.8 97.7 116.8 97.7 
 
 1841 115.8 98.1 115.8 98.1 
 
 1842 107.8 90.1 107.8 90.1 
 
 1843 101.5 84.3 101.5 84.3 
 
 1844 101.9 85.0 101.9 85.0 
 
 1845 102.8 88.2 102.8 88.2 
 
 1846 106.4 95.2 106.4 95.2 
 
 1847 106.5 95.2 106.5 95.2 
 
 1848 101.4 88.3 101.4 88.3 
 
 1849 98.7 83.5 98.7 83.5 
 
 1850 102.3 89.2 102.3 89.2 
 
 1851 105.9 98.6 105.9 98.6 
 
 1852 102.7 97.9 102.7 97.9 
 
 1853 109.1 105.0 109.1 105.0 
 
 1854 112.9 105.0 112.9 105.0 
 
 1855 113.1 109.2 113.1 109.2 
 
 1856 113.2 112.3 113.2 112.3 
 
 1857 112.5 114.0 112.5 114.0 
 
 1858 101.8 113.2 101.8 113.2 
 
 1859 100.2 102.9 100.2 102.9 
 
 1860 100.0 100.0 100.0 100.0 
 
 1861 100.6 94.1 100.6 94.1 
 
 1862 117.8 104.1 114.9 101.6 
 
 1863 148.6 132.2 102.4 91.1 
 
 1864 190.5 172.1 122.5 110.7 
 
 1865 216.8 232.2 100.3 107.4 
 
 1866 191.0 187.7 136.3 134.0 
 
 1867 172.2 165.8 127.9 123.2 
 
 1868 160.5 173.9 115.9 125.6 
 
 1869 153.5 152.3 113.2 112.3 
 
 1870 142.3 144.4 117.3 119.0 
 
 1871 136.0 136.1 122.9 122.9 
 
 1872 138.8 132.4 127.2 121.4 
 
 1873 137.5 129.0 122.0 114.5 
 
 1874 133.0 129.9 119.4 116.6 
 
 1875 127.6 128.9 113.4 114.6 
 
 1876 118.2 122.6 104.8 108.7 
 
 1877 110.9 113.6 104.4 107.0 
 
 1878 101.3 104.6 99.9 103.2 
 
 1879 96.6 95.0 96.6 95.0 
 
 1880 106.9 104.9 106.9 104.9 
 
 1881 105.7 108.4 105.7 108.4 
 
 1882 108.5 109.1 108.5 109.1 
 
 1883 106.0 106.6 106.0 106.6 
 
 1884 99.4 . 102.6 99.4 102.6 
 
 1885 93.0 93.3 93.0 93.3_ 
 
 1886 91.9 93.4 91.9 93.4~ 
 
 1887 92.6 94.5 92.6 94.5 
 
 1888 94.2 96.2 94.2 96.2 
 
 1889 94.2 98.5 94.2 98.5 
 
 1S90 92.3 93.7 92.3 93.7 
 
 1891 92.2 94.4 92.2 94.4 
 
112 
 
 RATIONAL MONEY. 
 
 The ups and downs of prices shown in these tables and es- 
 pecially the long descents are sufficiently startling, but they 
 soften the real facts because they show only the averages 
 for each year, and do not exhibit the maximum or minimum 
 price attained during the year. Here is a very suggestive 
 table from p. 336 of the Aldrich Report. 
 
 TABLE XVI. 
 
 FLUCTUATION OF PRICES. 
 1860-1869. 
 
 Maximum. Minimum. 
 
 Year. Price. Year. Price. 
 
 United States 1864 172.9 1861 98.2 
 
 England 1864 144.8 1868 99.3 
 
 Hamburg 1864 137.8 1861 99.3 
 
 France 1864 128.6 1868 94.5 
 
 1870-1879. 
 
 Maximum. 
 Year. Price. 
 
 United States 1872 126.5 
 
 England 1873 114.6 
 
 Hamburg 1872 116.9 
 
 France 1872 104.6 
 
 1880-1891. 
 
 Maximum. Minimum. 
 
 Year. Price. Year. Price. 
 
 United States 1880 100.5 1886 80.4 
 
 England 1880 92.2 1886 73.3 
 
 Hamburg 1880 91.1 1886 74.8 
 
 France 1880 79.2 1886 69.3 
 
 1860-1891. 
 
 Maximum. 
 Year. Price. 
 
 United States 1864 172.9 
 
 England 1864 144.8 
 
 Hamburg 1864 137.8 
 
 France 1864 128.6 1886 69.3 
 
 Minimum. 
 Year. Price. 
 
 86.7 
 80.7 
 92.5 
 76.4 
 
 1879 
 
 1879 
 
 1878 
 1879 
 
 Minimum. 
 Year. Price. 
 80.4 
 73.3 
 
 74.8 
 
 1886 
 1886 
 1886 
 1886 
 
 What would we think of a measure that would be 172 
 inches long in 1864 and then shrink to 80 inches in 1886, 
 and to 60 inches in 1897? If we took the maximum and min- 
 imum actual prices instead of gold prices, the contrast would 
 be greater still, a contrast of 280 to 60 in round numbers. 
 
THE BEST MONEY. 113 
 
 What would we think of a yard stick that would expand to 
 more than four times its former length, so that a piece of 
 cloth that measured a yard by its test a generation ago would 
 measure less than a quarter of a yard to-day only 8 inches 
 at the lowest point this year? No doubt some creditors are 
 willing to receive 4 yards for every one they lent, but what 
 is the effect on the debtor? 
 
 So far as we have dealt with fluctuations of price. Gold 
 lias been deemed the standard and the variations in the price 
 of a given quantity of commodities has been recorded. Now 
 lot us take commodities as the standard and record the varia- 
 tions of gold from the commodity base. That this is the true 
 method is clear upon plain common sense, upon scientific prin- 
 ciple and upon authority. 
 
 The object of commerce is not to get gold. In 999 out of 
 i\ thousand sales the vendor does not want gold or silver. The 
 dollar is not sought by him for the sake of the 23.22 grains 
 of gold in it. Most of the dollars he gets contain no grains of 
 gold at all, but are made of paper. He does not think of 
 asking for gold, and would deem it a burden if he were re- 
 quired to take large payments in gold. His object is to ex- 
 change his commodities for other commodities, and he takes 
 money because it is a convenient means of making that ex- 
 change. The purpose of money is not to convey a certain 
 weight of gold, 23 grains to the dollar or any other number 
 of grains to the dollar, but to transfer a purchasing power 
 equal to that of the goods which are being paid for, or the 
 loan that is being liquidated. The receiver of the dollar takes 
 it because it will buy the means of life and happiness com- 
 modities in the broad sense. The dollar is taken as the rep- 
 resentative of the means of living, the representative of com- 
 modities; and in order that it may be a true representative 
 it must be based on commodities and kept in harmony with 
 them. 
 
 The real standard of values is command of the means of life, 
 and not a grain of gold which may at one time have twice the 
 command over the means of life that it possesses at another 
 time. 
 
114 flILOSOPHY OF 
 
 The purpose of money being the transfer of equivalences 
 in purchasing power equivalences of command over commo- 
 dities in general equivalences in exchangeable value, it is 
 clear that the base or standard should be something that is 
 constant in exchangeable value; and the only thing that is 
 thus constant is a composite of all commodities. No one com- 
 modity, nor two, nor three commodities can be relied on to 
 be constant in exchange value, or have the same command 
 over life and the world; but the average of all commodities 
 (in the broad sense) will do this. The sum of the internal ex- 
 change values of any list of commodities is a constant quan- 
 tity. Take leather, corn and iron, for example, and suppose 
 that last month 100 units of leather exchanged for 100 units 
 of corn, or 100 units of iron, we may represent the exchangee 
 thus: 
 
 100 iron (spades e. g.) would buy. ....... { and j 
 
 100 leather (shoes perhaps) would buy.. { 
 
 100 corn would buy . , 5 leather. 
 
 and 50 iron. 
 
 Sum of exchange values ................. 300 
 
 Now suppose the iron loses 20 per cent, of ,its exchange 
 value by reason of cheaper production perhaps. Then corn 
 and leather will gain in exchange power exactly as much as 
 iron loses. Iron will buy less corn and leather, but corn and 
 leather will buy more iron than before. This command over 
 iron increases in the same ratio that iron's command over them 
 diminishes, and the sum of the internal exchange values re- 
 mains the same as before, the table taking this form: 
 
 100 iron will buy ...... _ ; 
 
 \ and 40 leather. 
 
 100 leather will buy ................... { . 6 
 
 I and 50 iron. 
 
 100 corn will buy . { n G0 } eather - 
 
 I and 50 iron. 
 
 Total of exchange values 300 
 
 Iron having lost one-fifth of its power can only buy 40 
 corn and 40 leather, which leaves 60 corn for leather to buy 
 
THE BEST MONEY. 315 
 
 and 60 leather for corn to buy. As the relations between 
 corn and leather have not changed, it takes 60 leather to buy 
 60 corn, and leather has 40 left which buys 50 iron. In the 
 same way corn buys 60 leather and 50 iron, and the sum of 
 the internal exchange values of the group is 300 as at first. 
 The external exchange values, the exchange relation between 
 this group and other commodities may not remain constant, 
 but if all commodities (in the broad sense including services 
 and all purchaseable things) are included in the list, all ex- 
 change values then become internal. Wherefore a list in- 
 cluding all commodities is the constant in exchange which 
 science seeks. A composite including a large number of com- 
 modities carefully selected so as to fairly represent all classes 
 of purchaseable things is much nearer the real base and in- 
 finitely more to be relied upon than any one or two com- 
 modities. A composite commodity standard is the true base 
 from which to measure the variations of gold and every other 
 commodity. 
 
 To common sense and reason we may add authority to the 
 point that commodities are constant. John Stuart Mill says: 
 "There is such a thing as a general rise of prices. All com- 
 modities may rise in their money price. But there cannot be 
 a general rise of values. It is a contradiction in terms. A 
 can only rise in value by exchanging for a greater quantity 
 of B and O; in which case these must exchange for a, smaller 
 quantity of A. All things cannot rise relatively to one an- 
 other. If one-half of the commodities in the market rise in 
 exchange value, the very terms imply a fall of the other half; 
 and reciprocally, the fall implies a rise. Things which are 
 exchanged for one another can no more all fall, or all rise, 
 than a dozen runners can each outrun all the rest, or a hun- 
 dred trees all overtop one another." 
 
 Robert Giffen, the great English statistician, speaking of 
 the commodity lists of Sauerbeck, Soetbeer, The Economist, 
 etc., says that even shorter lists carefully selected would 
 answer, and declares that "Viewing a long period dynamically 
 it is beyond all question that the commodities are compara- 
 
 9 
 
116 
 
 RATIONAL MONEY. 
 
 DIAGRAM Vf. 
 VARIATIONS IN THE VALUE OF GOLD AND SILVER 
 
 THE RELATIVE AMOUNTS OF COMMODITIES NECESSARY TO BUY 100 GRAINS Of SOLD IN DIFFERENT YEARS. 
 PLATTED FROM THE DATA OF SAUERBECK AND THE AMERI&AM. THE DOTTED LINE REPRESENTS SILVER. 
 
 
 D I '.GRAM Vll. 
 
 VALUE OF WKFAT. I.MTERMS OF COMIOOITKS 
 
 THE AMOUNT OF COMMODITIES NECESSAKY TO BUY 100 UNITS OF WHEAT. 
 IN 1573 & I&77 !00 UNITS -Or WHEAT WERE EQUIVALENT TO 100 UNITS of 
 
 COMMODITIES BYTME AuDRICM WEIGHTED 5TANDA-.RD. 
 
 /ALXIE OF WHEAT IN TERMS OF COMMODITIES 
 ENGLISH DATA 
 
THE BEST MONttY. 
 
 117 
 
 DIAGRAM ix 
 VALUE OF IRON INTERMS. OF coMMoorrrES ' 
 
 RELATIVE NUMBER OF UNITS OFGOMMODITieS NECES5ARY TO BUY IOOUNIT50F IRON 
 IN DIFFERENT YEARS BY SAUERBECK'S DATA 
 
 RELATIVE NUMBER CH UNITS 
 
 DIAGRAM x 
 VALUE OF BEEF IN TERMS OF COMMODITIES 
 
 OF COMMODITIES. NECESSARY TO BUY 100 UNITS OF.8ECF m DIFFERENT YEARS BY SAUERBECK'S DATA 
 
 DIAGRAM xi. 
 
 VALUE OF LEATHER INTERMS OFCOMMODITIES 
 
 RELATIVE AMOUNTS OF COMMODITIES IN GENERAL NECESSARY TO BUY 100 UNITS OF LEATHER 
 IN DIFFERENT YEARS. SAUERBECK'S DATA.. 
 
 
118 
 
 PHILOSOPHY OF MONEY. 
 
 tively steady, and only money changes." 20 That is, even a 
 small group of commodities well selected will keep quite 
 close to the real standard, the all-commodities base, very much 
 closer than the money of the present day. 
 
 The accompanying diagrams take commodities as a base and 
 record the variations of gold. 21 The usual method is to regis- 
 ter prices, i. e., the amount of money necessary to buy a given 
 quantity of commodities. Here we reverse the process and rep- 
 resent the relative amounts of commodities necessary to buy 
 100 grains of gold. That is, we take a fixed quantity of gold 
 
 DIAGRAM XII. 
 
 VALUE or COTTON IN TERMJ of COMMODITIES 
 RELATIVE AMOUNT OF COMMODITIES NECESSARY TO BUY 100 UNITS OF COTTON IN DIFFERENT YEARS. 
 
 VERTICAL 
 
 SCALE HALF 
 
 and mark the variations of its value in commodities. ~No 
 one who will glance at the diagrams can entertain the idea 
 that gold or silver or any one of the commodities dealt with 
 could possibly be a fair representative of the commodity base, 
 or a just and proper basis for money intended to transfer 
 equivalences in commodities, or command over the means of 
 life and happiness. Neither gold or silver money, nor any 
 money convertible into gold or silver at fixed weights so as 
 
 ( 20 ) Growth of capital, p. 61. 
 
 (21) w e have had the diagrams made from the data of Sauerbeck, the 
 Aldrich Committee and The American. In some cases the maker used the 
 Aldrich translation of Sauerbeck to the 1860 base together with Sauerbeck's 
 general price levels as given in the Journal of the Royal Statistical 
 Society. 
 
THE BEST MONEY. 119 
 
 to be dependent upon them or tied to their values, could be 
 relied on to have a constant purchasing power, or truly repre- 
 sent the all-commodity base. The only rational money is an 
 independent 22 currency based on a composite commodity 
 standard. 
 
 An independent money regulated by a composite com- 
 modity standard would not only be vastly superior to our 
 present money in steadiness of value; it would be superior also 
 in respect to every other attribute and function of money. 
 
 In general receivability our paper ranks higher than gold. 
 Mr. Eltweed Pomeroy, President of the National Direct Leg- 
 islation League, writing in the Arena for September, 1897, 
 says on p. 321: "To-day the civilized world has settled on 
 paper as the best form of money. During the money famine 
 of 1894 in New York City, gold coin commanded a premium 
 of 1 per cent, over bullion, silver coin of 2 per cent., and 
 paper of 4 per cent., showing that paper was preferred to 
 metallic money.' 7 And silver certificates with no "intrinsic" 
 equivalent back of them were as eagerly sought and at as 
 high a premium as gold notes or any other paper. It was 
 money, not gold, the merchants wanted, and paper was the 
 most convenient form of it. Even the banks abandon metal 
 in time of panic, and the Government abandons it in time of 
 war. If we have to resort to paper whenever the financial 
 situation is difficult, why not keep it all the time? If it will 
 answer for the most complex and dangerous periods, surely it 
 will do so for the easy times, and will save all the jolts and 
 derangements that so often accompany the transition from one 
 sort of money to the other. 
 
 It is decidedly expensive to use gold for a service that 
 paper can perform. It is unwise to dig silver and gold out 
 of the ground at enormous cost in order that the precious 
 
 P) It might be redeemable in gold or silver or both AT THE CURRENT 
 MARKET PRICES of those metals without being DEPENDENT. The essential 
 matter is that the value of the currency should not be dependent on the 
 value of the metals in such a way as to be in danger of following them in 
 their wobbles, instead of remaining constant with the commodity base. Con- 
 vertibility by weight, so that a dollar means so meny grains of gold, no 
 matter what the purchasing power of these grains may be, is necessarily 
 destructive of steadiness in the dollar; but convertiDility into gold at the 
 amount a commodity based dollar would buy at the time is not a dependence, 
 but only a convertibility of the kind that exists in respect to any other com- 
 modity in the market. Such a provision however would be of doubtful 
 wisdom. 
 
120 RATIONAL MONEY. 
 
 product may be used for a purpose that can be answered as 
 well or better by a product that is almost costless. Paper at 
 less than 1 cent an ounce will do the work of money better 
 than gold worth more than $20 an ounce. Is it not folly 
 to coin the gold and bury it in vaults, or scatter it over the 
 world in the fine dust that wears from its surface as it passes 
 from hand to hand and counter to counter? Better reserve 
 the gold for purposes paper cannot serve beautiful watch- 
 cases, fine table service, etc., where it will last practically for- 
 ever. 
 
 Dr. C. F. Taylor throws a strong light on this point when 
 he says that the present idea of money "is like writing a deed 
 to a house on a plate of gold of equal value with the house. 
 It is an enormous waste. Money is a title to wealth; and 
 money made of gold and silver is just like titles to property 
 written on gold and silver/ 723 
 
 In elasticity an independent regulated paper would be in- 
 comparably superior to money on a metallic base. The metal 
 base is subject to nature's limitations, and restrains in greater 
 or less degree the flexibility of the whole currency based upon 
 it, while an independent paper possesses any degree of flexi- 
 bility that .may be required. As the value of money depends 
 upon its volume, this quality of elasticity is of the first im- 
 portance. A money whose volume is subject to other control 
 than that of the agents of the sovereign people cannot be 
 expected to respond to the needs of the people, and expand 
 or contract as occasion may require to keep the dollar steady. 
 In 1894 European banks of issue increased their hoardings 
 of gold by 176 millions, an amount that exceeded the whole 
 worlds supply for 3 years, after deducting enough for the 
 arts. 24 That one fact speaks volumes. With independent 
 paper they might hoard all they pleased and its place could be 
 easily supplied. There could be no corners, no Black Fridays, 
 no endless chains of Treasury withdrawals and bond issues. 
 
 In portability gold can make no pretence of rivalry with 
 paper. To carry $100,000 in gold a merchant would require 
 
 ( 23 ) Medical World, August, '97, p. 349. 
 
 ( 24 ) Hon. Henry Winn, Amer. Mag. of Civics, December, '95, p. 578. 
 
THE BEST MONEY. 121 
 
 a team; but in paper he can carry it in his pocket without 
 trouble. 
 
 In regard to counterfeiting, Del Mar says: "The silk 
 threaded distinctive fibre paper, the water marks, the printing 
 in colors, the highly artistic vignettes, the geometrical lathe 
 work, the numbers, the signatures and other mechanical safe- 
 guards of the modern paper note render it far more difficult 
 to imitate than coin." 
 
 In respect to the regulation of industry and the diffusion of 
 wealth no money based on one or two commodities can be 
 trustworthy, because such money cannot avoid rising and fall- 
 ing in value. The disasters of rising and falling prices are 
 inevitable with a metallic money or a metallic base. It will 
 not do to charge these disasters to the abuse of the credit sys- 
 tem. It is true that expanding credit has often much to do 
 with the rise of prices, and shrinking credit with their fall. 
 But it is the business of a rational money to correct and steady 
 credit absent itself when credit is over-brisk, and be present 
 in force when credit retires from active business. This, gold 
 fails to do. It is brisk when credit is brisk and absent when 
 credit is absent just the opposite of what it ought to do. 
 Moreover "The abnormal expansion of credit is itself an effect 
 which must be ascribed to the gold standard." 25 Gold causes 
 or permits prices to go up. If it becomes more plentiful in 
 relation to business it may cause a rise of prices. If it re- 
 mains stationary in quantity while expanding credit or 
 diminishing business produce a rise of prices, then it permits 
 the rise. It is the business of a. true money not to vary in 
 value it should keep itself at a constant level, and to do this 
 it must keep average prices at a constant level. It must not 
 merely refrain from causing a rise or fall it must not permit 
 a rise or fall. If credit unduly expands gold should contract 
 sufficiently to balance the excess, prevent a rise and keep 
 prices level. If credit shrinks unduly, gold should expand 
 enough to prevent a fall of prices. But gold does not act 
 that way. It frequently causes a change of the price level, 
 
 ( 25 ) Prof. J. Allen Smith, Annals Ainer. Acad. P. & S. Sc., March, '96, p. 
 19. (See also p. 17.) 
 
122 PHILOSOPHY OF MONEY. 
 
 and rarely or never prevents one. It adds its own weight to 
 increase the vibrations of credit instead of balancing them. 
 A movement of gold, or business, or credit makes prices fall. 
 Does gold expand to restore the balance? E"o! It goes into 
 hiding, still further diminishing the money volume, causing a 
 further fall of prices, which results in another shrinkage of 
 credit, more hoarding of gold, a new fall of prices, and so on. 
 Every round of the disaster is emphasized and intensified by 
 gold instead of being checked by it. On the other hand, if 
 a movement of gold or business or credit causes a rise of prices, 
 a rapid expansion of credit is apt to result. Men are willing 
 to trust on a rising market, for times appear to be prosperous 
 and profits are large. The expansion of credit still further 
 lifts the value of goods and lowers the value of gold. The 
 higher the prices of goods, the more gold a certain quantity 
 of goods will bring; the less the value of gold. The more 
 dollars you have to give for a sack of flour, the fewer the 
 pounds of flour a dollar will buy. So that rising prices mean 
 depreciating gold. Does gold do anything to prevent its de- 
 preciation when credit expands unduly? ~No. It is apt to 
 intensify its humiliation. It comes out of its hiding places, 
 for hoarding does not pay on a rising market. The volume of 
 money is thus still further increased. Prices rise higher, 
 credit expansion is again stimulated, which produces a new 
 rise of prices and fall of gold, and so on in a seamless circle 
 of rising prices, expanding credit, falling gold, till a crash 
 comes, or the expansion is checked by prudence, or lack of 
 materials, or foreign conditions, and for it all gold is the 
 responsible party because it is the business of a true money to 
 prevent rising prices, which at each step provoke a new infla- 
 tion of credit. The fact that gold is subject to such variations, 
 no matter what the cause may be, shows that it is not a good 
 standard. 
 
 If in contemplation of all the great advantages of inde- 
 pendent paper based on a composite commodity standard, you 
 ask why it is that gold is still the foundation of our finances, 
 the answer is two-fold: (1) The gold standard is very val- 
 uable to creditors and bankers, and to the men who devote 
 
THE BEST MONEY. 
 
 123 
 
 themselves to the cornering of money and the capture of 
 millions by watching or controlling the movement of gold 
 values. In one of the flurries a shrewd New Yorker made 
 two millions at a single deal on gold the Government had 
 contracted to him at a fixed price; and recently a New York 
 syndicate multiplied, this figure by four on a bond contract 
 with the Treasury. The people thus interested in gold and its 
 fluctuations have a great deal of power at Washington. (2) 
 A really complete and scientific plan for a regulated paper 
 based on commodities is of very recent date, and as yet few 
 people have become acquainted with the merits of the system. 
 In the following chapter we will try to explain the details 
 of such a plan. 
 
CHAPTER III. 
 
 THE MULTIPLE STANDARD. 
 
 From what precedes it appears : First. That a steady money, 
 a dollar of constant purchasing power, is a matter of the high- 
 est importance to justice, prosperity, development, civilization. 
 Second. That metallic money is not steady, and any plan to 
 make it steady would be very difficult if not impossible to 
 execute. Third. That the value of independent National 
 paper can be regulated without difficulty, its volume being 
 under the control of the issuing government, wherefore by 
 intelligent regulation in the interests of the public, it can 
 easily be kept at a uniform level so that it will always repre- 
 sent substantially the same amount of commodities in general. 
 
 The problem is to replace the single standard, and the 
 double standard by the multiple standard to base the dollar 
 not on one commodity, nor on two, but so far as possible on 
 the whole mass of commodities, using the word in its widest 
 sense to include goods, services, privileges and all manner of 
 purchasable things. 1 The ideal basis of value is the whole 
 
 (*) The Multiple Standard appears to have been first proposed by Joseph 
 Lowe, in 1822, in his "Present State of England;" which contains a very 
 able treatise on the variation of prices, state of the currency, etc. His idea 
 was to use the standard in long time contracts. He proposed that persons 
 should be appointed to collect information concerning the prices of staple 
 articles. Having regard to the comparative quantities of commodities con- 
 sumed in a household, he would frame a table of reference, showing in what 
 degree a money contract must be varied so to make the purchasing power 
 uniform. Jevons, in his "Money and the Mechanism of Exchange," after 
 outlining Lowe's plan substantially as above, mentions Mr. G. Poulett Scrope 
 as having independently proposed a similar scheme 11 years later, in his 
 "Inquiry into the Nature of a Just Standard of Value," his "Principles of 
 Political Economy," p. 406, and "Political Economy for Plain People," p. 
 308. The plan was taken up by Mr. G. R. Porter in 1838, in "The Progress 
 of the Nation." The Multiple Standard has also been advocated by Count 
 Soden and Prof. Roscher, of Germany, Prof. Walras, of Lausanne, Prof. 
 Jevons Pres. F. A. Walker, Prof. Simon Newcomb, Prof. Alfred Marshall, 
 President E. B. Andrews, Pres. Thos. E. Will, Hon. Henry Winn, Prof. 
 Prank Parsons, A. I. Fonda, Prof. J. Allen Smith, Dr. C. F. Taylor and 
 Eltweed Pomeroy. 
 
 The earlier writers confined themselves to suggesting the use of the 
 multiple standard as the basis of payment in long time contracts. The idea 
 of controlling the movement of the money volume so as to keep the dollar in 
 harmony with the commodity standard does not appear to have occurred 
 even to Prof. Jevons or Pres. Walker. Profs. Walras, Newcomb, Will, 
 Andrews and the last six writers named above have advocated, not merely 
 the use of a commodity base as a standard for deferred payments, but the 
 
THE MULTIPLE STANDARD. 125 
 
 iass of commodities. The best practicable basis is the largest 
 number of commodities that can be handled with definiteness 
 and accuracy. The nearest to all commodities is a large num- 
 ber of commodities. 
 
 In order to substitute intelligent public control for chance 
 and private scheming, it is only necessary: 
 
 incorporation of the multiple standard in the monetary system and the 
 regulation of money in conformity to that standard. Prof. Newcomb's 
 article in the North American Review for September, 1879, was a very 
 valuable contribution to the subject. He wished, however, to continue the 
 use of gold and silver, making the currency redeemable not in a fixed weight 
 of metal, but in such quantity as should at the time possess a purchasing 
 power equal to the unit value of the multiple standard. 
 
 Pres. Andrews, in the first edition of "An Honest Dollar," 1889, followed 
 Prof. Walras in advocating the regulation of the currency by the issue or 
 withdrawal of token silver coins, or silver certificates. Gold was to continue 
 to be the money base, paper dollars being redeemable in a fixed weight of 
 metal, but the value of gold to be kept in harmony with a multiple com- 
 modity standard by increasing or diminishing the volume of the currency, 
 thru the use of call bonds. Prof. Marshall, in the Contemporary Review for 
 March, 1887, suggests the plan of using an inconvertible paper money kept 
 in harmony with the multiple standard by the Government's buying consols 
 (bonds) to enlarge the circulation when falling prices show that the money 
 volume is too small, and selling consols when the circulation needs to be 
 contracted. He also suggests a plan for applying the multiple standard to 
 the regulation of a convertible currency. The paper sovereign to be based on 
 the commodity unit, but redeemable in half a standard unit's worth of gold 
 bullion plus half a unit's woi'th of silver bullion at the market value of those 
 metals at the time. So far as I know, Professor Marshall was the first to 
 suggest the use of an inconvertible currency in connection with the multiple 
 standard. On this side of the water, I believe, the Hon. Henry Winn was 
 the first to conceive the idea of an independent national paper based on the 
 multiple standard. He worked it out without knowing of Marshall's sug- 
 
 festion, and outlined it in a speech in Fanueil Hall in 1891, when he was 
 'copies' Party candidate for Governor of Massachusetts. In December, 
 1895, he published in the American Magazine of Civics one of the most 
 valuable discussions of the Multiple Standard that we possess. In a series 
 of lectures given in Boston in 1894, Thos. E. Will, now President of Kansas 
 State Agricultural College, advocated a government paper money regulated 
 by a- multiple standard. Speaking of the assertion that government papL>r 
 money would not be safe that it would be "dangerous for the government 
 to issue promises to pay and call them money." Professor Will said with 
 fine irony: "Instead of this the banks should issue their promises to pay and 
 call them money. Bank promises would be perfectly sound and trustworthy 
 for the reason that they would rest on government bonds. What is a govern- 
 ment bond? Answer: A government promise to pay. Hence a government 
 promise when called a greenback is utterly untrustworthy, but, a bank 
 promise when based on a government promise called a bond is perfectly 
 secure." In "Our Country's Need," (1894), Sec. 21, I advocated substanti- 
 ally the same plan that is elaborated in the present volume. In 1895, Mr. 
 A. I. Fonda, in "Honest Money," strongly urged the claims of inconvert- 
 ible multiple standard money, arguing pp. 157-8, that "Since the value of the 
 circulating medium the money depends on supply and demand, the supply 
 should be so controlled that the value of the money would always correspond 
 with that of the standard adopted; and since paper money is the cheapest, 
 the most convenient, and the only money entirely free from outside influences 
 affecting its volume and value, our currency should be a paper money." 
 
 The most profound discussion of the subject that has yet appeared is con- 
 tained in the article of Prof. J. Allen Smith in the "Annals of the American 
 Academy of Political and Social Science," March, 1896. The Professor proves 
 the case for an independent National paper money regulated in volume by 
 the government, so that its value shall remain substantially constant with 
 a carefully selected multiple standard. Dr. C. F. Taylor, during the last 
 two years, has urged the same idea in his pungent "Monthly Talks" in the 
 Medical World, and in The Arena, September, 1897, Mr. Eltweed Pomeroy, 
 President of the National Direct Legislation League, published a spirited 
 popular argument for the same plan. The unanimity with which thoughtful 
 men adopt the independent multiple standard paper system as soon as it 
 is thoroly understood by them is a powerful evidence of the wisdom of the 
 plan. (See further, Chapter IV.) 
 
126 THE MULTIPLE STANDARD. 
 
 First. To replace our bank bills and convertible notes with 
 independent paper money issued by the National Govern- 
 ment as full legal tender for all debts and dues, public and 
 private, with no promise to pay gold or silver, no promise to 
 pay anything, but only a promise to receive it at its face for 
 taxes, duties and all public dues, and to see that it is received 
 at par in settlement of private debts, which -promises being 
 enforced by public opinion and the courts confer upon the 
 paper the fundamental attribute of general receivability or 
 legal-tender quality. 
 
 Second. A commission of eminent men should be appointed 
 who would watch the course of prices in the chief markets of 
 the country, tabulate the results and publish them monthly, 
 weekly, or at whatever interval might be specified by law. 
 They would report to the Secretary of the Treasury any move- 
 ment in the level of general prices, together with their estimate 
 of the amount of increase or decrease in the volume of the 
 currency necessary to steady prices. and bring them again 
 to a normal level. 
 
 Third. The requisite expansion or contraction of money 
 volume could be effected in several ways. The best methods 
 that have been suggested are the use of call bonds, the buying 
 and selling of securities, the establishment of a sliding scale 
 of interest on government loans, and the inter-adjustment of 
 taxation and public expenditure. 
 
 If more money is paid out by the Government in its or- 
 dinary expenses or for special public improvements than is 
 taken in by taxation, the volume of the currency is increased 
 and prices raised, or a fall cancelled; while on the other hand 
 if the taxes are made larger than the expenditures, the volume 
 of money is decreased and prices lowered, or a rise counter- 
 acted. 
 
 A method requiring less time to produce is effects, and 
 therefore affording greater elasticity to the monetary system 
 would be the issue of one or two hundred millions of call 
 bonds payable at the pleasure of the Government, interest to 
 cease on call. The currency could be contracted by selling 
 such bonds, and expanded by calling, them in, wherefore the 
 
good 
 way 
 
 THE MULTIPLE STANDARD. 127 
 
 Government, by issuing and recalling bonds, would be able 
 to control the money-volume.* 
 
 Another plan would be for the Government to add to the 
 currency volume by going into the market and buying up 
 
 y securities : National, State, and municipal bonds, rail- 
 and telegraph securities, real estate, etc., or other prop- 
 erty obtainable with the highest advantage and safety, such 
 property to bet sold when the currency needed contraction. 
 This would act with great rapidity and would have the further 
 advantage that, the Government would buy on a falling mar- 
 ket and sell on a rising market, yielding incidentally a revenue 
 that might be sufficient to cover all the expenses of collecting 
 the data, etc., and leave a margin of profit besides. 
 
 A fourth method would be for the Government to loan 
 money on good security, U. S. bonds, State and municipal 
 bonds, laud, buildings, deposits of gold and silver, perhaps 
 even first class paper and personal property in case of special 
 need. If such loans were made at an interest varying with 
 the movement of prices, the volume of the currency would 
 probably receive all needed regulation automatically. The 
 law would fix a sliding scale of interest to be paid to the Gov- 
 ernment on such loans, arranging said scale so that the rate of 
 interest should rise, perhaps in geometric ratio, as prices rose 
 above the normal level, and fall in corresponding ratio as 
 prices fell.f The result would be that money would be plen- 
 tifully borrowed on a falling market when money is scarce, 
 and the new influx would lift prices again, while on a rising 
 market interest would pile up at too rapid a rate for debtors, 
 and loans would be paid back to the Government, thereby con- 
 tracting the currency and checking or cancelling the rise of 
 prices. 
 
 Thus by taxation and expenditure, lending and borrowing, 
 
 *If the bonds were made payable on demand it is probable that they 
 could be made to act automatically to prevent any serious fluctuation. (See 
 
 Money, p. 166 (McMillan & Co., 1895). Fonda would 
 use existing banks as distributing agencies for the Government loans, guard- 
 ins against monopoly by providing that the loans should be open to all on 
 equal terms and making the list of acceptable securities as wide as possible 
 consistent with safety. It is perfectly practicable to use existing banks, bi 
 it would be much better to establish a system of Postal Banks and us< 
 them as agencies in all the monetary transactions of the Government. (See 
 infra 178.) 
 
128 THE MULTIPLE STANDARD. 
 
 buying and selling, the Government could regulate the vol- 
 ume and consequently the value of money. All the methods 
 mentioned have their advantages, and might be used in com- 
 bination. The law should make it the positive duty of the 
 Secretary of the Treasury to maintain as nearly as possible a 
 uniform level of prices. 
 
 To aid him in doing this, he would obtain information in 
 regard to the acreage of various crops, condition of the crops 
 from time to time in all parts of the country, the out-put of 
 various kinds of mines, the building and operation of various 
 kinds of factories, etc., and publish such information at fre- 
 quent intervals. He would also consider the probable foreign 
 demand for various products, '.he actual movements of prices, 
 as recorded by the Commission, etc., etc. 
 
 In obtaining the periodic record of average prices the Com- 
 mission should take as wide a range of purchaseable things 
 as possible. It might not be possible at first to include such 
 items as rent, insurance, taxes, education, medical attendance, 
 legal advice, domestic service, transportation, etc., but it 
 seems clear that an effort should be made to do so as soon as 
 a body of data sufficient to give a definite character to these 
 items can be collected. Rent, insurance, taxes, labor, etc., are 
 things that almost everyone has to buy, and if they are not 
 included in the estimate a change in them may seriously alter 
 the ordinary purchasing power of the dollar. By ascertaining 
 every year or every few years the total rents paid, and the 
 total acres and total rooms rented, a rough indication of the 
 general movements of rents could be obtained, and in the inter- 
 vals the item of rent could be deemed a constant quantity, or 
 modified in accordance with the observed relation between its 
 movement and that of the growth of population and other 
 varying conditions. In case of insurance and taxes it is easy 
 to obtain a reasonably reliable average. The last census shows 
 that $100 of property insurance costs about $1 in the United 
 States. Similar methods may be employed in dealing with 
 the average cost of labor and services of various sorts. 
 
 Until such items as those discussed in the last paragraph 
 become more definite and generally understood than at 
 

 THE MULTIPLE STANDARD. 129 
 
 present, and the multiple system is fully established in the 
 public confidence and comprehension., it would be best to 
 use only commodities capable of easy and accurate definition 
 as to quantity and quality. It would be better to sacrifice 
 completeness, at first, for the sake of perfect clearness and 
 defiiteness, and eliminate every item the correctness of 
 which could not be easily tested by the people. One or two 
 hundred representative commodities could be selected from 
 the price lists published by the trade journals, and a careful 
 record kept of their prices at New York, Chicago, Philadel- 
 phia, Boston, New Orleans, San Francisco, etc., and the aver- 
 age price of each commodity for each week placed in the 
 table of standard prices. The sum of these averages divided 
 by the number of commodities would give the price level for 
 the week on the plan of simple averages. It would be better 
 in many respects however to give each commodity a "weight" 
 or importance in the calculation in proportion to its import- 
 ance in the expenditure of the average family. 2 
 
 It is obvious that to allow a change in the price of indigo, 
 silk, wine, or nutmegs to affect the composite standard and the 
 
 ( 2 ) While it is true that a large number of commodities weighted according 
 to their relative importance is the ideal requirement, it is also true that a 
 very substantial degree of accuracy may be obtained without weighting and 
 without anything like an exhaustive list of commodities. In other words, the 
 prices of all commodities vary substantially in the same way as the prices of 
 any considerable number of commodities representing the various groups. 
 And the result of a simple average is but slightly different from the result of 
 a weighted average. Mr. Sauerbeck says: "I have checked my figures to 
 some extent by calculating also according to quantities (consumed) and found 
 that the change in prices was, if anything, more important than is actually 
 shown by my ordinary index numbers; but that it did not differ materially." 
 (Testimony before English Gold and Silver Commission, December 8, 1886, 
 Sec. 905.) Palgrave's table given in the preceeding chapter shows the same 
 thing. The Aldrich weighted figures vary more from the simple average, but 
 there is reason to doubt the scientific validity of the methods, and even the 
 accuracy of that report. 
 
 The fact that the average prices of all commodities vary in about the 
 same way as the average prices of a considerable number judiciously selected 
 is shown by the substantial agreement in the results of taking different 
 sets of commodities. The fall of prices from 1875 to 1885, 
 As judged by the 22 commodities of the Econo- 
 mists Table was 24y 2 per cent. 
 
 . As judged by the 45 commodities of Sauerbeck's 
 
 table 24y 2 per cent. 
 
 As judged by the 114 articles of Soetbeer's Table 19.6 per cent. 
 As judged by the 22 articles of Palgrave's Table. . 22. per cent. 
 As judged by the 223 articles of the Aldrich 
 
 Tables 25. per cent. 
 
 Divide the total by the number of groups 5)115.6 
 
 The fall as judged by average of all the groups.. 23.1 per cent. 
 
 The very slight difference between the results of different sets of com- 
 modities estimated by different men and on prices obtained in different 
 markets, is a fact worthy of most careful consideration, as is also the 
 equally interesting fact that the average of all the tables, 23.1 per cent, is 
 much more closely represented by either of them than by gold, which is 23 
 points away; while even the Hamburg group is only 3% points off. 
 
130 
 
 THE MULTIPLE STANDARD. 
 
 value of the dollar equally with a change in the price of beef, 
 butter, leather, wheat, corn, cotton, etc., is to depart from the 
 purpose of keeping the dollar constant in its power of making 
 the purchases usually made with it, so that it will mean al- 
 ways the same thing to the average user of it the same in- 
 strument with the same ability to do what he wants to do 
 with it the same command over what he wishes to obtain. 
 
 The average family spends at least 100 times more for 
 wheat than for indigo, so that indigo should have only one- 
 hundredth part as much weight or influence as wheat in 
 making up the standard. 
 
 The following table shows the opinions of various writers 
 as to the weight that should be given to different articles : 
 
 TABLE XVII. 
 
 Total 1000 1000 1000 
 
 * Butter includes also cheese and milk. 
 
 
 u 
 
 bo 
 
 T3 
 
 s 
 
 Ofl 
 
 ^ 
 
 9 
 
 > 
 
 
 1-3 
 
 w 
 
 3 
 
 m 
 
 02 
 
 |3j 
 
 <! 
 
 Butter* 
 
 35 
 
 75 
 
 75 
 
 30 
 
 45 
 
 80 
 
 57 
 
 Sugar 
 
 35 
 
 25 
 
 25 
 
 55 
 
 45 
 
 15 
 
 33 
 
 Wine 
 
 35 
 
 25 
 
 25 
 
 
 70 
 
 45 
 
 40 
 
 Wool 
 
 35 
 
 25 
 
 25 
 
 75 
 
 20 
 
 20 
 
 33 
 
 Silk 
 
 35 
 
 25 
 
 25 
 
 10 
 
 20 
 
 15 
 
 22 
 
 Tea & coffee. 
 
 35 
 
 25 
 
 25 
 
 20 
 
 20 
 
 15 
 
 23 
 
 Wheat 
 
 35 
 
 65 
 
 50 
 
 110 
 
 45 
 
 100 
 
 67 
 
 Barley 
 
 35 
 
 65 
 
 50 
 
 55 
 
 45 
 
 35 
 
 47 
 
 Oats 
 
 35 
 
 65 
 
 50 
 
 60 
 
 20 
 
 50 
 
 47 
 
 Metals 
 
 70 
 
 50 
 
 50 
 
 15 
 
 40 
 
 80 
 
 51 
 
 Coal 
 
 
 
 100 
 
 . . 
 
 . . 
 
 40 
 
 70 
 
 Indigo 
 
 35 
 
 1 
 
 10 
 
 5 
 
 20 
 
 1 
 
 12 
 
 Flax 
 
 35 
 
 3 
 
 30 
 
 10 
 
 20 
 
 5 
 
 17 
 
 Palm Oil 
 
 35 
 
 1 
 
 10 
 
 
 20 
 
 1 
 
 13 
 
 Timber 
 
 70 
 
 30 
 
 30 
 
 20 
 
 70 
 
 60 
 
 47 
 
 Leather 
 
 70 
 
 25 
 
 25 
 
 20 
 
 70 
 
 40 
 
 62 
 
 Meat 
 
 110 
 
 100 
 
 100 
 
 155 
 
 90 
 
 120 
 
 113 
 
 Cotton 
 
 110 
 
 30 
 
 25 
 
 100 
 
 20 
 
 20 
 
 51 
 
 Sundries . . . . 
 
 150 
 
 365 
 
 370 
 
 260 
 
 320 
 
 258 
 
 195 
 
 1000 1000 1000 1000 
 
 The earlier writers appear to have drawn broad lines without 
 detailed investigations of relative consumption. Mulhall ob- 
 serves that four writers took no account of coal. There seems 
 to have been no good reason for inserting indigo and palm- 
 oil, which are items of trifling value, while fish, lard, rice, 
 potatoes, and other important articles are omitted. Another 
 
THE MULTIPLE STANDARD. 
 
 131 
 
 feature that seems inexplicable is, that four of the above 
 writers give barley the same relative importance as wheat, 
 whereas the latter, according to statistics of consumption, 
 should have three times the weight of the former. A similar 
 remark applies to oats, which should stand for only half the 
 value of wheat. 
 
 The Aldrich Committee made a strong effort to arrive at 
 accurate conclusions respecting the relative consumption of 
 various commodities by the average family. Table XVIII. 
 from p. 61, of Vol. 1 , of the said Report gives the average 
 consumption of 2,561 "normal" families, and Table XIX, 
 from pp. 62-3, shows the average consumption of various ar- 
 ticles by 232 families. 
 
 TABLE XVIII. 
 Proportions of 10,000. 
 
 Rent 1,506 
 
 Food 4,103 
 
 Fuel 500 
 
 Clothing . 1,531 
 
 Light 90 
 
 All other purposes 2,270 
 
 Total 10,000 
 
 TABLE XIX. 
 
 GROUP FOOD. 
 
 Per family. Proportion of 
 10,000 
 
 Beef $40.95 1,561 
 
 Hog products 17.20 655 
 
 Meat (kinds not specified) 16.10 614 
 
 Poultry 2.78 106 
 
 Fish 2.97 113 
 
 Eggs 8.28 316 
 
 Milk 15.02 572 
 
 Butter 29.04 1,107 
 
 Cheese 1.73 66 
 
 Tea 4.51 172 
 
 Coffee 13.97 532 
 
 Sugar 16.69 636 
 
 Molasses 1.44 55 
 
 Lard 5=27 201 
 
 Flour and meal 28.62 1,022 
 
 Bread 11.42 436 
 
 Rice .62 24 
 
 Fruit 8.80 332 
 
 Potatoes 11.92 454 
 
 Vegetables (kinds not specified) . . 12.55 479 
 
 Vinegar, pickles, condiments .... 1.86 71 
 
 Food (not specified) 12.47 476 
 
 Total 262.42 10,000 
 
 10 
 
132 
 
 THE MULTIPLE STAUTDAKD. 
 
 TABLE XIX Continued. 
 
 CLOTHING. 
 
 Per family. Proportion f 
 
 Husband: 10 > 000 
 
 Coats, vests, trousers, overcoats.. $14.11 1,407 
 
 Boots and shoes 4.71 470 
 
 Hats 1.73 173 
 
 Underclothes 2.75 274 
 
 Shirts 1.49 149 
 
 Miscellaneous 9.01 898 
 
 33.80 3,371 
 
 Wife: 
 
 Dresses, cloaks and shawls 8.26 824 
 
 Boots and shoes 3.56 354 
 
 Underclothes 2.55 254 
 
 Miscellaneous 8.39 836 
 
 22.76 2.268 
 
 Children: 
 
 Coats, etc. .., 6.10 608 
 
 Dresses, etc. 6.59 657 
 
 Boots and shoes 7.76 774 
 
 Hats 2.78 277 
 
 Underclothes 2.96 295 
 
 Shirts .31 31 
 
 Miscellaneous 17.25 1,719 
 
 4b.,'5 4,361 
 
 Grand total 100.31 10,000 
 
 MISCELLANEOUS EXPENSES. 
 
 Per family. Proportion of 
 2,270 
 
 Taxes $8.34 115. 
 
 Insurance 10.98 151. 
 
 Organizations 4.82 66. 
 
 Religion 6.71 92. 
 
 Charity 1.77 24. 
 
 Furniture and utensils 18.36 253. 
 
 Books and newspapers 7.27 100. 
 
 Amusements 6.68 92. 
 
 Intoxicants 12.14 168. 
 
 Tobacco 7.71 107. 
 
 Illness and death 24.36 335 
 
 Other purposes 55.64 767. 
 
 164.78 
 
 2,270 
 
 It would be a simple matter to request families and indi- 
 viduals to send in sworn statements of the relative amounts 
 annually spent by them for different purposes. And these 
 data, together with the figures of total product, plus imports 
 
THE MULTIPLE STANDARD. 133 
 
 and minus exports, and the records of wholesale and retail 
 rates would, in the course of a few years, afford a very ac- 
 curate idea of the relative expenditure for various commodi- 
 ties both at wholesale and retail. It will not be best to rely 
 on wholesale prices alone. Retail prices are steadier than 
 wholesale, and it is retail rates that the average buyer has to 
 pay. Retail prices largely govern the household expenditure 
 of the average family, and should have due weight in the 
 standard, as well as the wholesale rates involved in the ex- 
 penditures of merchants and business men. 
 
 Our standard then is to be made up (1) of the largest prac- 
 ticable number of commodities (using the word in its broad 
 sense), (2) weighted according to importance in ordinary con- 
 sumption. We are to prefer (3) commodities largely bought 
 and sold. (4) Commodities that are independent of each 
 other.. (5) Commodities capable of accurate definition as to 
 quantity and quality. (6) Commodities regularly quoted in 
 the public prints. (7) Our commodities should be taken 
 partly from the class that is Subject to the law of diminishing 
 return and partly from the class not subject to this law, the 
 choice being made so as to fairly represent each class in the pro- 
 portion it bears to total consumption. (8) Commodities whose 
 prices vary much must be taken as well as those that vary little, 
 for men and women have to use their dollars to buy both, and 
 dollars are not steady in their purchasing power unless they 
 are steady in reference to the average of all the purchasing 
 to be done with them. Moreover a commodity whose price 
 varies greatly may be nearer steady with average commodity 
 values than a commodity whose price varies little. Slight var- 
 iation of price (on the gold basis, as at present) means that 
 the commodity moves with gold, and that means that the com- 
 modity does vary greatly from the general commodity base. 
 The moon does not vary in distance from the earth so much 
 as Venus, but it varies in its distance from the sun much 
 more widely than Venus. (9) Prices must be registered in 
 all the principal markets of the country. And (10) the aver- 
 ages for the chosen commodities must be tabulated and pub- 
 lished periodically. 
 
134 
 
 THE MULTIPLE STANDARD. 
 
 Let us now select a dozen commodities and illustrate the 
 working of the multiple standard. Suppose that, on the aver- 
 age of ordinary expenditures for every $100 spent for beef, 
 pork, mutton and other meats, $75 are spent for butter, 
 cheese, milk and cream, $20 for sugar, $20 for tea and coffee, 
 $50 for wheat, $25 for oats, $20 for fruit, $60 for coal, $30 
 for leather, $20 for cotton, $30 for wool, $50 for iron, steel, 
 lead, copper, tin, silver, gold, etc., and $50 for wooden uten- 
 sils, furniture, etc. In the first column we write the names 
 of the commodities or groups of commodities selected for the 
 standard; in the second column we place the numbers just 
 mentioned representing the relative importance of the said 
 commodities in average consumption; in the third we write 
 the prices of the commodities per unit of volume or weight; 
 and in the fourth column we write the weights or volumes 
 that would be required at the said prices to equal the amounts 
 in the second column. For example, if the market price of 
 meat averages $10 per hundred weight it would require 10 
 hundred weight to amount to the $100 spent for meat, where- 
 fore 10 cwt. is the item in the fourth column opposite meat. 
 In the same way, if $50 represents the relative amount spent 
 for wheat, and wheat is $1 a bushel, the quantity of wheat 
 bought will be 50 bushels. 
 
 TABLE XX. 
 
 MULTIPLE STANDARD. 
 123 4 
 
 Meat $100 $10. per cwt. 
 
 Butter, milk, ete. . 75 15. per cwt. 
 
 Sugar 20 4. per cwt. 
 
 Coffee and tea 20 20. per cwt. 
 
 Wheat 50 1. per bush. 
 
 Oats 25 1.5 per cwt. 
 
 Coal 60 3. per ton. 
 
 Leather 30 20. per cwt. 
 
 Cotton 20 10. per cwt. 
 
 Wool 40 40. per cwt. 
 
 Metals 50 2.5 per cwt. 
 
 Wood 50 25. per cwt. 
 
 $540 
 
 The quantities in the fourth column with their total value 
 $540 constitute the composite or multiple standard. 4 
 
 10 cwt. meat. 
 5 cwt. dairy products. 
 5 cwt. sugar. 
 
 1 cwt. coffee & tea. 
 50 bushels wheat. 
 
 17 cwt. oats. 
 20 tons coal. 
 iy a cwt. leather. 
 
 2 cwt. cotton. 
 
 1 cwt. wool. 
 20 cwt. metals. 
 
 2 cwt. wood. 
 
 (*) Different units of weight and measure are used to show that no uni- 
 formity in this respect is requisite. Some of the items in this table are 
 
THE MULTIPLE STANDARD. 135 
 
 These quantities are made the standard just as the law now 
 makes 23.22 grains of gold the standard for a dollar. In the 
 real work of the Commission the prices of the third column, 
 instead of being the current rates at the time of putting the 
 system into effect, might be the averages for 5 or 10 years so 
 as to bring the dollar to a level representing its past average 
 for the time during which existing debts and obligations were 
 contracted. 5 
 
 The Multiple Standard being made and published as above 
 suggested, let us now make up our first report on the condition 
 of prices and the currency. We place in column A the quan- 
 tities from column 4, Table XX, which compose the standard. 
 In column B we write the average prices obtained from the 
 market records of New York, Chicago, etc., during the past 
 month. In column C appear amounts obtained by multiply- 
 ing the quantities of column A by the prices of column B. 
 
 TABLE XXI 
 
 A B C 
 
 Meat, 10 cwt $9 per cwt. $90 
 
 Dairy, 5 cwt 14 per cwt. 70 
 
 Sugar, 5 cwt 4 per cwt. 20 
 
 Coffee and tea, 1 cwt 20 per cwt. 20 
 
 Wheat, 50 bush 0% per bush. 37.5 
 
 Oats, 17 cwt 1 per cwt. 17 
 
 Coal, 20 tons 4 per ton. 80 
 
 Leather, 1% cwt 22 per cwt. 33 
 
 Cotton, 2 cwt 10 per cwt. 20 
 
 Wool, 1 cwt 38 per cwt. 38 
 
 Metals, 20 cwt -2 per cwt. 40 
 
 Wood, 2 cwt 26 per cwt. 52 
 
 $517.5 
 
 definite nncl simple, but others are complex. The item "metals," for 
 example, is made up of iron, steel, lead, tin, copper, zinc, gold, silver, etc. 
 If tin be taken as the unit of consumption, zinc will be about 5, lead and 
 copper each 20, iron 600, silver 1-10, and gold 1-100, so that altho gold costs 
 thirty thousand times as much as iron, yet as there is 60,000 times as much 
 Iron used as gold, the effect of iron upon the metal average is double that of 
 gold. Meat, dairy products and other items are also composite. For the sake 
 of easy checking by the public it would be best to require the Commission 
 to state each separate item, pig iron, gold, silver, lead, beef, pork, mutton, 
 granulated sugar, etc., clearly defining the precise grade of quality of every 
 item. We have bunched some items in order to save space and avoid too 
 much detail. 
 
 ( 5 ) It would be best also to consider retail prices and the distribution of 
 final expenditure as well as wholesale prices and relative wholesale expendi- 
 ture or proportional amounts of total product, or else transportation and the 
 cost of distributing products should be entered as specific items with their 
 due weight. The price and relative importance of commodities at retail 
 could be entered in the table along with the price and relative importance of 
 the same commodities at wholesale, the retail and wholesale items being 
 weighted so as to have the same relation to each other that exists in the 
 retail and wholesale trade. It has been customary to rely on wholesale 
 prices alone; but this does not seem wise or just. 
 
136 THE MULTIPLE STANDARD. 
 
 A comparison of the footing of column C with the total 
 value in the original or standard table (XX) shows that the 
 price level of the standard commodities has fallen from $540 
 to $517.5 $22.5 or 4.46 per cent, below the normal level. 
 Interest would therefore fall a notch or two at the Postal 
 Savings Banks, or the Government would buy securities, or 
 call in and pay off some bonds; or if interest were left to pri- 
 vate adjustment, it would go up and Goverment bonds would 
 begin to come in of themselves. Any one of these moves 
 would increase the volume of money and tend to bring prices 
 up to the normal level again. Precisely how much increase 
 of volume would be necessary to effect a given alteration in 
 the price level under given conditions could only be ascer- 
 tained by experience. 
 
 At the end of the second month we would make out another 
 table, and if the price level were still below the normal level 
 we would further increase the money volume. If prices had 
 gone above the normal we would decrease it. And so month 
 after month we would check the rise or fall of prices and keep 
 the dollar very close to the line, now a little above, now a 
 little below, but never soaring into the clouds or falling thru 
 long years of ruin and despair. 
 
 Every year or so the weighting of the standard commodities 
 should be tested, and if it is found that their relative im- 
 portance has changed, the weighting should be corrected. 
 
 It is entirely possible to adjust our standard table so that 
 the normal sum of values shall be an even number like 
 $100,000 or $100 or $1. For example, take Prof. Smith's 
 table of total annual product of corn, wheat, cotton, oats, 
 silver and gold and the wholesale value of each. 
 
 TABLE XXII. 
 
 P Q R 
 
 Commodity Quantity. Wholesale Wholesale. 
 
 Price. Value. 
 
 Corn 1,600,000,000 bush. $0.50 per bush. $800,000,000 
 
 Wheat 500,000,000 bush. 1.00 per bush. 500,000.000 
 
 Cotton 3,500,000,000 Ibs. .10 per Ib. 350,000,000 
 
 Oats 625,000,000 bush. .40 per bush. 250.000,000 
 
 Silver 70,000,000 oz. 1.00 per oz. 70,000,000 
 
 Gold 1,450,676 oz. 20.68 per oz. 30,000,000 
 
 Total . $2,000,000,000 
 
THE MULTIPLE STANDARD. 137 
 
 Now suppose we wish to make a composite standard that 
 will have a value of $100. The value of corn in column S 
 is eight-twentieths or two-fifths of the total value of all the 
 products represented. Corn would, therefore, occupy two- 
 fifths of the standard, or $40 (two-fifths of -$100 the total 
 value to be covered by the standard). Wheat is five-twen- 
 tieths or one-fourth of the total in column S, wherefore giving 
 wheat the same relative importance in the standard that it 
 has in the table of annual production and consumption, it 
 would appropriate one-fourth or $25 of the $100 chosen for 
 the standard total. Treating the other commodities in the 
 same way, and dividing the value of each that enters into the 
 standard by the price of each per bushel, pound or ounce, we 
 get the quantity of each that enters into the standard. 
 
 TABLE XXIII. 
 U V W X 
 
 Value of it Quantity that 
 
 Commodity that enters Price. enters the 
 tne standard. standard. 
 
 Corn $40 $0.50 per bush. 80 bush. corn. 
 
 Wheat 25 1 00 per bush. 25 bush, wheat. 
 
 Cotton 17.5 .10 a Ib. 175 Ibs cotton. 
 
 Oats 12.5 .40 per bush. 31% bush. oats. 
 
 Silver 3.5 1.00 per oz. 3y 2 oz. silver. 
 
 Gold 1.5 20.68 per oz. 34 1-3 grs. gold. 
 
 Total $100 
 
 At the end of each month or tabular period we take the 
 standard quantities in column X, multiply by the new average 
 price per bushel, pound or ounce, which emerges from the 
 records of the month, and add the products to find how much, if 
 any, the average level of prices has varied from the $1 00 nor- 
 mal value of the standard. These processes carried out, not 
 merely with half a dozen or a dozen commodities, but with one 
 or two hundred well chosen items, would afford a rational 
 basis for a scientific money system. 
 
 MASSACHUSETTS MULTIPLE MONEY. 
 
 It is interesting to know that Massachusetts, more than a 
 century ago adopted a multiple standard as the basis of notes 
 
138 THE MULTIPLE STANDARD. 
 
 issued to settle balances due to the State's quota of the Con- 
 tinental Army. The law regulated the value of the notes by 
 the value of a composite standard composed of fixed quanti- 
 ties of corn, beef, wool and sole leather. The standard 
 adopted was 5 bushels of corn, plus 68 4-7 pounds of beef, 
 plus 10 pounds of sheep's wool, plus 16 pounds of sole leather, 
 equals 130. 
 
 On the following page is a fac- simile of one of the notes 
 issued in 1T80. 6 
 
 OBJECTIONS. 
 
 The chief objections likely to be raised against the Multiple 
 Standard are political, international, or selfish. To the claim 
 that it is dangerous to entrust the Government with the power 
 of regulating the currency, we reply : 
 
 First: That the power is already entrusted to the Govern 
 men ; and not only that, but the decisions of the Supreme Court 
 make it clear that the trust is a mandatory one. The Federal 
 Constiution makes it the duty of the National Government to 
 regulate the currency, and a trustee does not fulfil his duty 
 unless he uses the best available means to carry out his trust. 
 "Not only does the Government possess the power of issuing 
 and regulating money, but it has exercised the power to great 
 advantage, even tho the plan adopted was far from perfect. 
 The war paper was a marked success. Only when we began to 
 retire it in order to go back to gold did disaster overtake us. 
 
 Second. The automatic action of the system will of itself 
 keep the variations of prices within narrow limits. Even if no 
 onicial were empowered to increase or diminish the currency, 
 the new standard would be a great gain. 
 
 Third. The publicity, definiteness and importance of the 
 standard and its operation would constitute a strong protection 
 against fraud. As Hon. Henry "Winn says: "The commis- 
 sion would hang out a barometer of monetary value whereby 
 all men could see, not only what the government ought to do, 
 but what it was actually doing, and whether it was acting 
 
 (8) rpjj e note it se if i s the property of Hon. Henry Winn, and was by his 
 courtesy reproduced in The Arena for September, 1897, in illustration of a 
 paragraph in Mr. Eltweed Porneroy's article in that number of the magazine. 
 
THE MULTIPLE STANDARD. 
 
 139 
 
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140 
 
 THE MULTIPLE STAITOAKD. 
 
 honestly. There could be no fraud in that barometer, for 
 every trade paper gives the prices, and any man could detect 
 an error in the printed data of the commission, and discover 
 the true index number. That a people accustomed to a price 
 barometer, and knowing that it ought and could be kept close 
 to 100, would permit their money, as ours has, to grow so bad 
 that it would stand at 170, or 200, is almost unthinkable." 
 
 Fourth. It could be enacted that debts should be payable at 
 standard values, no matter whether the money was at, or 
 above, or below the standard. This would remove the prin- 
 cipal motive that executive officers and others in power might 
 have to fail in their duty of keeping the dollar level. Such a 
 provision would also make it very greatly to the interest of 
 both debtors and creditors that the dollar should be kept 
 normal, since neither could gain by an abnormal dollar, and 
 the settlements would be much simplified by keeping the dol- 
 lar steady. These great classes would therefore bring a_strong 
 pressure to bear in favor of a level dollar. A similar pressure 
 would come from those who receive and pay salaries. If the 
 dollar went below the line, the former would be injured; if 
 above, the latter would be damaged. The said provision 
 would further have the effect of bringing the standard into 
 court, and subjecting it and its management to the most in- 
 tense scrutiny. The provision, however, might detract some- 
 what from the smoothness and facility of commerce, and 
 would, we think, be quite unnecessary in view of the fact that 
 the automatic features of the plan would at the most, leave but 
 a very narrow margin to official action. 
 
 Fifth. iNo monetary control would be exercised by the 
 Government that is not far more dangerous where it is to-day. 
 No public control of money can be so dangerous as private 
 control. The agents of the people acting under definite pro- 
 visions of law, and under the public eye, will surely do better 
 than chance and Wall Street. 
 
 Another objection that may be made is that the multiple 
 standard (especially if linked with a system of Postal Savings 
 Banks as it ought to be) will interfere with the profits of 
 private banking. This objection is likely to be far the most 
 
THE MULTIPLE STANDARD. 
 
 1.4L 
 
 difficult to overcome. In fact it is the only one that has any 
 real vitality or resisting power. And the answer that private 
 interests must yield to public is not apt to be satisfactory to 
 the men whose private interests are affected. These men have 
 a powerful grip on affairs of state, and their opposition is no 
 child's play. All private profits on the circulation of bank 
 notes will cease, and the Postal Banks will be so much safer 
 than private banks that they may absorb a large proportion of 
 deposits. This fact, together with loans at low interest, and 
 the facilities and safety of transmitting money thru an institu- 
 tion with an office in every town and having the entire wealth 
 and power of the nation back of it, would be likely to con- 
 siderably diminish the business of private banks, and might, 
 in the course of a few years, make private banking quite un- 
 profitable. The Multiple system could be adopted without 
 Postal Banks and would then very slightly affect the legiti- 
 mate business of private banks. This might be a good way 
 at first, but to bring the plan to its full perfection Postal Banks 
 must be ultimately established, and it is not improbable that 
 we may in fact get the Postal Banks before we achieve the 
 Multiple Standard; and if so, their establishment will greatly 
 facilitate the introduction of the Multiple Standard. Beyond 
 question there is force in the objection that a good money sys- 
 tem would be dangerous to the banks. But the all sufficient 
 answer is that individual profit must yield to the public good. 7 
 If the matter be examined on a plane above mere dollars and 
 cents, the Multiple Standard will benefit even the bankers; for 
 as men and citizens their interests are identical with the wel- 
 fare of their country. 
 
 The objection chiefly relied on in the public utterances of 
 those who oppose an independent money, is that the discon- 
 tinuance of a metallic standard would disturb our interna- 
 tional relations, and injure our foreign commerce, it being 
 affirmed that to carry on foreign trade to good advantage re- 
 quires a money that will pass in Europe. As a matter of fact, 
 however, foreign payments are not made in money, 8 and if 
 
 O Justice Strong delivering the opinion of the U. S. Supreme Court in 
 the famous Legal Tender Cases, said "A new tariff, an embargo, a draft, or 
 a war may inevitably bring upon individuals great losses; may, indeed, 
 
142 THE MULTIPLE STANDARD. 
 
 they were, it is probable that our independent paper would be 
 taken in Europe at its face value, less brokerage and transpor- 
 tation, just as readily as our metallic money. Practically the 
 whole of our foreign commerce is carried on by means of bills 
 of exchange. Balances are settled with commodities; when 
 gold is used it is used as a commodity, not as money ; as bullion, 
 not as coin. It could be used in the same way, no matter what 
 sort of a home-currency we had. If it could not be had in this 
 country, a cargo of wheat, beef, cotton, or other commodity 
 could be sent over the sea, sold in Europe for coin or bullion 
 or bills, and the debt settled with that. Such shipments of 
 commodities are the fundamental facts in international com- 
 merce. It is upon such facts that bills of exchange are based. 
 Foreign exchanges would go on all right without an ounce of 
 gold. We were on a paper base for 17 years during and after 
 the war, and our merchants did not mention any inconven- 
 ience resulting therefrom in their trade with other nations. 
 Russia is on a paper basis now, but her commerce is not dis- 
 turbed by that fact. Silver countries trade with gold 
 
 render valuable property almost worthless. They may destroy the worth of 
 contracts. But whoever supposed that because of this, a tariff could not be 
 changed, or an embargo enacted, or a war declared." (12 Wallace at 551.) 
 The Justice also instanced the damage that may be done to creditors by 
 passing a bankrupt act (p. 549). We might mention the grant of a franchise 
 that partly or wholly destroys the value of a former grant or business. When 
 a bridge or railway franchise is not expressly made exclusive, a new bridge 
 or railway may be built or authorized by the state, tho the value of the 
 former franchise is thereby completely destroyed. (Charles River Bridge v. 
 Warren Bridge, 7 Pick., 344; 11 Peters, 420, 536, 546, 549; Turnpike Co. v. 
 State, 3 Wallace, 210.) 
 
 ( 8 ) Mr. Fonda says in "Honest Money:" "International trade is an ex- 
 change of commodities; not, to be sure, a direct barter, but an indirect one. 
 * * It would make no difference in the foreign trade of any country if it 
 did not possess an ounce of gold or of silver, or whether its money was based 
 on gold or was inconvertible paper." Walter Bagehot, in "A Universal 
 Money," says that the rates of exchange are not determined by the nature 
 of the currency, but by the relative AMOUNTS of the settlements to be made 
 in each direction between the two countries. "If France and America had 
 the same currencies as England, it would still happen, as now, that bills on 
 Paris or New York would be at a discount or a premium. The amount of 
 money wishing to go eastward across the Atlantic, and the amount wishing 
 to go westward, would then, as now, settle how much was to be paid in 
 London for bills on New York, and how much was to be paid in New York for 
 bills on London." In the Medical World for October, '97, Dr. C. F. Taylor 
 says: "With paper money on a multiple standard our foreign exchanges 
 would be conducted just as they are now. * * The value of each com- 
 modity would be calculated on the basis of its real value, first in the medium 
 of its own country, and then translated into the other according to the ex- 
 change value, which is governed by laws of comparative values, and is never 
 difficult to discover. Bills of exchange are emitted by dealers in foreign 
 exchange, on the basis of the comparative value of the two mediums, each 
 in its own country. Our money, of whatever kind, is worth in a foreign 
 country just what it is worth here, less brokerage and transportation." 
 
 In his "Recent Economic Changes," Mr. David A. Wells cites the testi- 
 mony of members and directors of English Chambers of Commerce to the 
 effect that there is no difficulty in negotiating exchange or conducting foreign 
 trade between silver countries and gold countries. 
 
THE MULTIPLE STANDARD. 143 
 
 countries without any difficulty. The rates of exchange vary 
 somewhat from time to time, but so they do between New 
 York and London, which have the same standard, and between 
 Great Britain and Australia, which not only have the same 
 standard, but the same money unit. 
 
 Even if it were true that independent money would be 
 detrimental to foreign commerce, the objection would have 
 but little weight as against the advantage of such money to 
 domestic commerce, since the latter forms 96 per cent, of our 
 total business against only 4 per cent, foreign trade. 
 
 The truth is that an independent money, instead of being a 
 disadvantage in respect to our foreign relations, would be of 
 the greatest service in shutting out foreign panics, and freeing 
 us from the disturbing influence of changes in foreign markets, 
 mines and Governments. The disastrous crises of 1825 and 
 1837 came to us from over the sea. It was the fall of prices 
 and failure of banks in Great Britain that deranged our 
 finances. We were on a metallic base. The appreciation of 
 the metallic standard there caused an appreciation of it here, 
 and money became harder to get, instead of taking the place of 
 retiring credit. But in 1866 a very severe panic occurred in 
 England without affecting our industries to any perceptible 
 degree, because we were on an independent paper basis, and a 
 change in English prices and the value of the English standard 
 did not disturb the value of our currency at all. Hon. Henry 
 Winn, in a magazine article soon to appear, has a fine passage 
 on this point, which he has kindly allowed me to quote. "To- 
 day every foreign panic or corner in gold, every state buying 
 to hoard, draws away gold from our money volume and de- 
 ranges by fluctuation in price our domestic exchanges. We 
 remember how prices tumbled and we were thrown into panic 
 conditions thru sympathy with London when the Barings 
 failed in 1890. But in 1866 when we were on an indepen- 
 dent paper standard, a panic fell on London so much more 
 severe that the bank act was suspended for the Bank of Eng- 
 land. It sent up the price of gold here of course, but it caused 
 hardly a ripple in our domestic trade. Martin, in his 'His- 
 tory of the Boston Stock Market/ boasts that in June, 1866 
 
144 THE MULTIPLE STAITOARD. 
 
 money stood at 5 to 6 per cent., actually 1 per cent, cheaper 
 than the month before, and was 'abundant while the bank rate 
 in London was 10 per cent. 9 and a panic in the market.' The 
 lowest quotations for railroad stock were far higher than the 
 year before, and the dividends of Massachusetts factories 
 showed wonderful prosperity." 
 
 In the very matter, therefore, mainly relied on for the sup- 
 port of the gold standard, we find that independent paper is 
 superior. It would be an excellent thing to have an interna- 
 tional money, if the various nations involved would adopt the 
 multiple standard; but until that time arrives there will be an 
 immense advantage in having a separate standard a standard 
 that will keep on the even tenor of its way regardless of 
 foreign crises and contingencies. We must never forget that 
 the fundamental fact, the prime requisite, the crucial test of 
 good money is steadiness of value. As Professor Smith re- 
 marks, "No argument for international money is sound which 
 fails to recognize that the first requisite of a good monetary 
 system is steadiness of value." 
 
 ADVANTAGES. 
 
 The Multiple Standard will be just. 
 
 It will not defraud labor. 
 
 It will not defraud debtors. 
 
 It will not defraud creditors. 
 
 It will stop the waste of digging gold for a use that paper 
 can serve at almost no cost. 
 
 It will free $1,200,000,000 of the people's capital that is 
 now locked up in metallic money. This gold and silver could 
 be used in productive industry, or sent away to buy American 
 securities held abroad, and pay American debts in foreign 
 countries, relieving us of a considerable burden of interest, in- 
 creasing the volume of money and raising prices across the 
 water, whereby a better market would be made for our pro- 
 ducts, and a bit of the prosperity that comes with the impetus 
 of rising prices would be introduced into Europe. 
 
 ( 9 ) The ordinary rate of the Bank of England is 2 or 3 per cent. 
 
THE MULTIPLE STANDARD. 145 
 
 It would check gambling and speculation. No more rock- 
 ing of our finances by the cornering of gold. No more long, 
 steep slopes of rising prices, nor financial precipices, with their 
 catastrophes to honest industry and engorgements of parasites, 
 and beasts of prey. 
 
 It would not build a new bonded debt thru an endless chain 
 of withdrawing gold from the Treasury with Greenbacks, pay- 
 ing it in again for bonds, and again withdrawing it till the 
 Government has to issue more bonds to get it back, and so on. 
 
 It would not subject the Government to the ignominy of 
 hiring a foreign syndicate to maintain the treasury reserve, 
 and "preserve the faith of the nation." 
 
 It would not make the war debt heavier after more than 
 two-thirds of it had been paid than it was at the close of the 
 struggle. 
 
 It would ease the burdens of debt without injustice to the 
 creditor, by enabling the debtor to avail himself of inventions 
 and improvements in production instead of bestowing the 
 whole advantages of social progress upon the creditor, as gold 
 with its falling prices does now. To give the benefit of im- 
 proved production to the active instead of the passive classes 
 is not unjust, but very distinctly just. 
 
 It would recognize the vast importance of the movement of 
 the money volume, by means of which average prices may be 
 made to rise or fall, or remain stationary, and it would subject 
 this movement to intelligent control in the public interest in- 
 stead of leaving it to chance and private manipulation. 
 
 It would provide a practically invariable standard of value, 
 and a medium of exchange whose variations of value would be 
 slight. The trifling departures of the dollar one way or the 
 other from the standard in the intervals between the tabular 
 reports would be like the swelling and shrinking of a steel 
 ruler under changing temperatures, and could not accumulate 
 or go far enough to materially affect the truth of its measure- 
 ments in exchange, the settlement of debt, etc. 
 
 It would afford a money in accord with common sense and 
 scientific principles a currency capable of performing all the 
 functions of money with reasonable perfection. 
 
J46 THE MULTIPLE STANDARD. 
 
 It would favor prevision, arid so increase, the steadiness of 
 business. The movement of prices in the fall caused by the 
 annual movement of the crops and the settlement of the year's 
 accounts could be anticipated and prevented by an increase of 
 the currency volume in September or October, on the same 
 principle that a wise manufacturer prevents overpressure on 
 his engines and workmen by using more machines and em- 
 ploying a larger force when ho has more work to do. 
 
 It would prevent panics. There would still be individual 
 failures and possibly local flurries, but no panics. A panic is 
 the product of fear. Something makes men suspect credit, and 
 it shrinks. Cash instead of becoming more plenty than usual 
 to fill the place of the departed, takes flight itself. It be- 
 comes difficult to get money even at ruinous interest. To pay 
 their debts merchants slaughter prices, and widespread ruin 
 follows the fall. "We all know the story. It is lack of elastic 
 money that turns the failure of a few speculators into a 
 national disaster. Under the Multiple Standard the Govern- 
 ment will stand ready at all times to furnish any amount of 
 money necessary to prevent the fall of prices. There will be 
 no money famine, no big interest, no need for men really 
 sound to sell at a loss. The very knowledge that the Nation 
 will issue funds and lend money at a reasonable interest in 
 any needful quantity will prevent the fear and distrust of 
 the future, which, makes men " rush into the market and out- 
 vie each other in selling goods at a loss." 
 
 It will benefit all classes of the community except the 
 wreckers and parasites. 
 
 It will carry out the constitution, destroy a dangerous special 
 privilege, and return to the sovereign people as a real posses- 
 sion, one of the most important of sovereign powers, the power 
 of issuing and regulating the money of the country. 
 
 It will be as good in war as in peace. The multiple dollar 
 would not go to foreign parts in time of danger, but it would 
 stay at home, equip our armies, and go with the cannon to the 
 front of the fight. 
 
 It would free our financial system from the baneful in- 
 fluence of foreign disturbances. Not only would we be safe 
 
TEE MULTIPLE STAND A&D. 
 
 from foreign panics and the vicissitudes of foreign mines and 
 markets, but the ups and downs of foreign legislation would 
 affect us but slightly as compared with the present. 
 
 It would operate as a beneficient influence in the regulation 
 of industry and the distribution of wealth. Neither land- 
 lord nor tenant, laborer nor employer, capitalist nor entre- 
 preneur would be deceived or defrauded by it. It would 
 beget neither feverish excitement nor despair, but the calm 
 serenity that comes with certainty of prevision. The man of 
 enterprise could invest his money, employ his workmen, and 
 make his contracts with assurance that his calculations would 
 not be brought to nought and his enterprise be wrecked by an 
 unforseen change in the value of money. 
 
 It would greatly increase the wealth of our people, not 
 merely by saving the waste of digging gold for monetary use 
 and part of the waste of speculate in, but by putting a stop to 
 the disastrous panics and depressions that now cripple our 
 productive industries. 
 
 Finally the Multiple Standard would have a beneficient in- 
 fluence morally and socially. Its tendency would be to turn 
 men from feverish speculation, and to relieve in some degree 
 the pressure of financial anxiety for the future. It would 
 tend to remove one of the great antagonisms of interest in 
 society. Social cohesion would be promoted, and a frame of 
 mind developed more favorable to thought, to art, to quiet 
 home life, to development of man and society on planes above 
 the level of dollars and cents. It would cancel some of the 
 causes that are producing undue accumulation of wealth and 
 power in the hands of a moneyed aristocracy, would tend to- 
 ward democracy and the diffusion of wealth. It would dispose 
 of one of the great questions that are absorbing the attention of 
 the people, and so make room for discussion of other weighty 
 problems awaiting decision. In every way it would tend to- 
 ward justice, harmony, equality and progress. 
 
 11 
 
CHAPTEK IV. 
 
 THE AUTHORITIES. 
 
 Distinguished leaders of thought, eminent economists, illustrious 
 statesmen, renowned jurists and famous financiers have affirmed 
 the principles on which this book is based. The need of a better 
 monetary system rests upon two propositions. 
 
 1. Tne great importance of steady money the moral and 
 economic need of a dollar of unchanging power of purchase. 
 
 2. The unsteadiness of gold and silver. 
 
 These two facts are affirmed or admitted by all the leading 
 authorities. 
 The claims of the Multiple Standard rest upon three propositions. 
 
 1. The importance of steadiness. 
 
 2. The unsteadiness of a metallic standard. 
 
 3. The steadiness of a composite commodity standard. 
 
 This third proposition is also admitted or affirmed by all authori- 
 ties to whom the thought of a composite standard has presented 
 itself. 
 
 The establishment of a money that shall remain constant in its 
 purchasing power requires the co-ordination of the dollar and the 
 multiple standard the incorporation of the said standard in the 
 monetary system as the basis of the circulating medium, and in- 
 volves four propositions. 
 
 1. The importance of steadiness. 
 
 2. The unsteadiness of the precious metals. 
 
 3. The steadiness of the multiple commodity standard. 
 
 4. The practicability of keeping the dollar in harmony with the 
 multiple commodity standard by careful regulation of the money 
 volume. 
 
 The fourth proposition, like the third, is affirmed or admitted by 
 all authorities conversant with any of the methods of regulation 
 proposed in the last chapter. The earlier writers dealing with the 
 money question before the fourth proposition had been worked out, 
 do not take the final step, and some of the later writers, tho 
 recognizing the fourth proposition, think the time has not yet 
 come to apply it, because they deem the Government as yet unfit 
 to be trusted with such work. This plea was answered in the 
 third chapter, but even if there were no answer to it, even if there 
 were no way of checking the work so that it would be safe in the 
 hands of Government officials to-day, still the plea would have no 
 force as against the multiple money system as such, but only 
 against its immediate adoption. It would only afford an additional 
 reason to put forth every effort for the purification of Government 
 so that it may be fit to administer a rational system of finance. 
 
 Many of the authorities who have most fully discussed the 
 Multiple Standard, have been quoted in the third chapter. We will 
 confine our attention now to the views of some of the 
 most widely known thinkers who have not been dealt with suffi- 
 ciently in previous chapters. 
 
 PRESIDENT WALKER. 
 
 The late General Francis A. Walker, President of the Massachu- 
 setts Institute of Technology and former Chief of the Census, was 
 the leading American economist, and our foremost writer on mone- 
 
AUTHORITIES. 
 
 U9 
 
 tary science. His text-books are used in Oxford on an equality with 
 the writings of Professor Alfred Marshall. 
 
 President Walker says: "It is evident that to enable an article to 
 perform the function of a standard for deferred payments, a certain 
 steadiness in value is essential." ("Money," p. 36.) "The object of a 
 standard for deferred payments being 1 to secure the payment, at the 
 maturity of obligations, of substantially the same purchasing 
 power that was in contemplation of the parties at the formation of 
 the contract, it is conceivable that a paper money might be so 
 regulated as to preserve a more uniform value, from generation to 
 generation, than the precious metals have maintained during any 
 considerable period of the world's history. We have seen that 
 that is the weak point of the precious metals in their use as 
 money." (Ibid., p. 377.) 
 
 "The production of the precious metals is of the most spasmodic 
 character. At times, a flood of gold, or of silver, or of both, has 
 poured from newly-opened mines, as after the discovery of the 
 mines of Potosi in 1545, and of the mines of California almost 
 coincidently with those of Australia, in 1849-51; at times, on the 
 other hand, mining industry has almost wholly ceased, either from 
 the exhaustion of known deposits, or as the result of war or 
 civil disturbance. Such a cessation of mining industry followed 
 the invasion of the Eoman Empire by the Teutonic tribes. The 
 series of revolutions and insurrections in the Spanish States, be- 
 ginning in 1809, destroyed the mining machinery, scattered the 
 mining populations, and closed the mines of regions which had pre- 
 viously been among the most prolific sources of the world's supply 
 of metallic money." (Pol. EC., p. 141.) 
 
 President Walker then speaks of the comparative steadiness of 
 agricultural products, showing' that there is much reason to regard 
 "Bread-corn as, in truth what Francis Homer pronounced it to 
 be, 'the real and paramount standard of all values.' " A remark 
 which must be taken with some qualifications, but which is very 
 forcible and covers an important truth. President Walker con- 
 tinues: "The superior stability of value of the cereals, thru long 
 periods of time, has led to the suggestion that, in the case of con- 
 tracts extending over considerable terms of years, grain should 
 be adopted as the standard for determining the obligations of the 
 debtor, the rights of the creditor." (Pol. EC., p. 142.) 
 
 Locke favored this idea in his paper on "The Value of Money," 
 and the principle has been put to practical use in the corn-rents 
 so long in use in England, and which have proved so much more 
 stable in value than money. "W T e are forced to admit," says Prof. 
 Jevons, "that the statesmen of Queen Elizabeth were far-seeing 
 when they passed the act which obliged the colleges of Oxford, 
 Cambridge and Eton to lease their lands for corn-rents. The result 
 has been to make those colleges far richer than they would other- 
 wise have been, the rents and endowments expressed in money 
 having sunk to a fraction of their ancient value." ("Money," p. 
 159.) 
 
 After speaking of these corn-rents, President Walker remarks 
 that a proposition has been made by Jevons and others to establish 
 a multiple or tabular standard by joining a great number of arti- 
 cles together so that their individual value variations may offset 
 each other, whereby the undeserved losses resulting to debtors and 
 creditors from changes in the precious metals may be avoided. 
 ("Political Economy," 191.) 
 
 Discussing the proposed Multiple Standard, General Walker 
 affirms that, "Certainly, as Prof. Jevons says, such a standard 
 would add a wholly new degree of stability to social relations, se- 
 curing the fixed income of individuals and public institutions from 
 
150 AUTHORITIES. 
 
 the depreciation which they have often suffered." ("Money," 
 p. 161.) 
 
 "Certainly the need of such a standard of deferred payments is 
 most imperative in the case of those who are not in the way of 
 repairing any losses they may suffer thru fluctuations in the value 
 of money, upon whom the full effects of depreciation fall directly 
 and remain without relief." (Pol. EC., p. 374.) 
 
 "The effect of the introduction of the tabular standard would 
 be to decide how much money at that date constituted the equivalent 
 in the power to purchase the necessaries, comforts and luxuries of 
 life, of the money which would have been paid had the sale been 
 for cash. In short, it is a means of giving and taking credit with- 
 out receiving an unearned advantage or suffering an undeserved 
 injury thru fluctuations in the value of money." (Pol. EC., p. 373.) 
 
 President Walker, while thus pronouncing in favor of the Multiple 
 Standard as a basis for deferred payments, does not. appear to 
 have considered the question of regulating the volume of money 
 so as to keep the dollar in harmony with the said standard. This 
 final element not entering his thought, he was a bi-metallist, 
 advocating the use of the Multiple Standard in deferred payments. 
 
 PEESIDENT ANDREWS. 
 
 E. Benjamin Andrews, the honored President of Brown Univer- 
 sity, is one of the best known economists on this side of the water. 
 In his Institutes of Economics, section 87, he says: "The best 
 monetary systems yet used are very imperfect, permitting the 
 most unhappy fluctuations in the purchase-power of their units, 
 discouraging enterprise and robbing now debtors, now creditors! 
 Bi-metalism would relieve, yet only temporarily. The time must 
 come when Governments will be authorized (i) to watch, thru 
 competent commissions, for each rise or fall in the value of money 
 (fall or rise of general prices), and (ii) to correct the same by 
 expanding or contracting the circulation." 
 
 In his "Honest Dollar," 1889, pp. 8-39, President Andrews says: 
 "Money, besides furnishing our system of value-denominations, 
 measures value, serves as a reservoir of value, and as a standard 
 for deferred payments. To fulfill ideally any one of the last-named 
 offices it must preserve its general purchasing power unchanged. 
 Increase in the value of money robs debtors. * * * Decrease in the 
 value of money robs creditors. * * * It is very of ten taken for grant- 
 ed that the gold dollar must be an honest dollar, and one may hear 
 this alleged in the same breath with the admission made by all, 
 that money is good in proportion to its stability of value. The 
 two positions are of course contradictory, except upon the pre- 
 tense, which no well-informed person will offer, that gold never 
 appreciates or depreciates. * * * Gold is produced under the law 
 of diminishing return, and hence must in the long future grow more 
 and more scarce, its cost of production greater and greater, while 
 most of the commodities trafficked in by means of money are not 
 under this law, are to grow cheaper and cheaper forever, and 
 almost none are so completely in the clutch of the law as gold is. 
 
 * * * The fall of prices since 1873 has been a terrible calamity, 
 but it has occurred in spite of us, and here we are. The evil, as a 
 whole, a general rise of prices would not correct, but only repeat. 
 We have struck a new base line of prices; let us plant ourselves 
 upon it, and see to it that we are not forced to change again, 
 whether up or down. 
 
 "If the rehabilitation of silver as full legal tender would fully 
 and finally keep change of prices from recurring, I would advocate 
 it in spite of its immediate injustice. But it certainly would not. 
 
AUTHORITIES. 151 
 
 The relief would be partial and temporary. We should never be 
 certain that maximum and minimum total production of metal 
 would synchronize respectively with maximum and minimum need, 
 while we should be certain that in the long* run production must 
 fall behind need. * * * 
 
 "So Mr. Giffen concedes, Contemp. Rev., vol. xlvii, pp. 800 seq. Cf. 
 Robertson, Westm. Rev., Oct. 1880. Cf. also Contemp. Rev., vol. 51, 
 p. 359, note. More instructive than all these are the critical views 
 of America's chief geologists and metallurgists, set forth in Consu- 
 lar Report No. 87, December, 1887. They nearly all agree with the 
 well-known conclusions of Suess, in his Zukunft des Ooldes. N. S. 
 Shaler thinks that the output of both gold and silver must hence- 
 forth gradually decrease, and that 'gold is more likely to become 
 an article of increased cost within the coming half century than 
 any other metal,' tho we are 'liable to many sudden increments in 
 the production thereof.' J. D. Hague is of opinion that while gold 
 may slightly increase in yearly supply, silver can hardly fail to 
 go the other way. R. H. Richards concludes almost exactly with 
 Shaler. J. S. Newberry utters, as the result of his long experience, 
 the conviction that our production of both gold and silver has 
 passed its maximum, and that in future we cannot expect a yield 
 of more than perhaps one-half the greatest annual product of gold. 
 Not only America's but 'the world's stock of gold will gradually 
 decline from the diminished supply, the increased consumption in 
 the arts, the abrasion of coin, etc.' The outlook, he thinks, is much 
 the same for silver. 
 
 "R. H. Inglis Palgrave, in his memorandum printed as Appendix 
 B. to the final Report of the (1886) British Commission on the De- 
 pression of Trade and Industry, says that even now, in spite of its 
 wide demonitization, the employment of silver for coinage purposes 
 appears to exceed the net production." 
 
 After discussing at length the history of gold fluctuations, Presi- 
 dent Andrews says: "Is this plague necessary? Must it be per- 
 petual? Is the commercial world, the entire money-using world, 
 to be forever tormented with this accursed up and down in the 
 purchasing power of money * * * * 
 
 "Are we to despair of stability in general prices? I believe not. 
 I am impressed with the practicability of preserving prices per- 
 manently at whatever level they have at any time assumed, by 
 swelling or contracting the volume of money in circulation, on 
 some such plan as has been outlined by Professor Walras, of Lau- 
 sanne. The method would involve (1) the critical, official ascertain- 
 ment of the course of prices; (2) the use of some form of subsidiary 
 full legal tender money; and (3) the injection of a portion of this 
 into circulation or the withdrawal of a portion therefrom, accord- 
 ing as prices had fallen or risen. * * * * 
 
 "The universally conceded equity of a composite value-standard 
 would in this way be incorporated in the monetary system itself, 
 and would spread to all the exchange transactions of the nation. 
 The very knowledge of an existing purpose thus to regulate would 
 do much to regulate. 
 
 "Walras's project differs from this as follows: He would work 
 a priori. He judges that the volume of commerce, the volume of 
 money, and the relation between the two can all be so closely 
 figured out and followed that threatened changes in general prices' 
 may be forecast and prevented. I would be less presumptuous, and 
 apply the needed corrective in an a posteriori way." 
 
 President Andrews advises the use of call bonds as the best 
 means of regulating the volume and value of money. His prefer- 
 ence would be, not to discard the precious metals, but to buy silver 
 and coin it and issue silver certificates, adding to or subtracting 
 
AUTHORITIES. 
 
 from their volume in circulation by calling in or selling the bonds. 
 His reason for continuing the use of metal as a backing for the 
 currency is the additional security thereby obtained. But the 
 danger is, that convertibility into gold or silver at fixed weights 
 would subject the currency to disturbing influences that would 
 make it impossible to keep the dollar steady, and the silver backing, 
 moreover, appears to be an entirely useless expense. (See Chaps. 
 2 and 3.) President Andrews admits that if we are to continue the 
 use of gold and seek to steady its value by means of the Multiple 
 Standard and regulation of the money volume, an international 
 agreement would be necessary. 
 
 PEOFESSOK MARSHALL. 
 
 Prof. Alfred Marshall, of Cambridge University, England, is the 
 leading English writer on Political Economy since Mill. In an 
 article in the Contemporary Review for March, 1887, he says: 
 "The precious metals cannot afford a good standard of value." He 
 then says in substance that bi-metallism would tend toward greater 
 steadiness than monometallism, but would not go very far, for at 
 best it would substitute the mean between two fluctuating supplies 
 in place of one fluctuating supply. He believes, however, that bi- 
 metallism is the next step in the direction of a steadier money. 
 After speaking of Ricardo's plan for using a paper currency, based 
 not on coin, but on stamped gold bars weighing 20 ounces each, he 
 outlines a bi-metallic scheme consisting of paper money redeemable 
 in gold and silver, 56y 2 grains of gold plus 1130 grains of silver 
 to the pound. The holder of a pound note could not demand full 
 payment in gold nor full payment in silver, but must take part of 
 each in a fixed ratio. One of his reasons for advocating this plan, 
 Professor Marshall says, is the fact that "It is a movement in the 
 direction in which we want to go, of a tabular standard for deferred 
 payments." 
 
 In the same article Professor Marshall discusses the regulation of 
 the money volume in order to keep the dollar in harmony with the 
 "unit" value of a multiple standard. He does not appear to think 
 that the time has come for a practical realization of such regula- 
 tion, but his remarks are important and suggestive, especially 
 when viewed in the light of the words above quoted from him. lie 
 says: 
 
 "Mr. Walras has proposed to steady the value of gold by issuing 
 or withdrawing token silver coins according as gold rose or fell 
 in value. His scheme is able and ingenious. But as he admits, it 
 would, like any other scheme for regulating the value of gold and 
 silver, require an international agreement. And I do not see how 
 this could be managed, because, to say nothing of minor difficulties, 
 there cannot be a common unit of purchasing power for all coun- 
 tries. Every plan for regulating the supply of the currency, so 
 that its value shall be constant, must, I think, be national and not 
 international. 
 
 "I will indicate briefly two such plans, tho I do not advocate 
 either of them. On the first plan the currency would be incon- 
 vertible. An automatic Government Department would buy consols 
 for currency whenever 1 was worth more than a unit, and 
 would sell consols for currency whenever it was worth less. Those 
 who had to pay balances to foreign countries would buy gold or 
 silver in the open market; they would be certain of getting in 
 exchange for this money gold and silver that had a fixed pur- 
 chasing power in England. The researches of Mr. Palgrave and Dr. 
 Soetbeer show that a unit of fixed purchasing power in England 
 would give a more nearly uniform purchasing power in any other 
 
AUTHORITIES. 
 
 153 
 
 civilized country than would an ounce of gold or an ounce of 
 silver. On the whole, this currency would, I believe, give more 
 stability to our foreign trade than our present one. 
 
 "The other plan is, that of a convertible currency, each one 
 pound note giving the right to demand at a Government office as 
 much gold as at that time had the value of half a unit, together 
 with as much silver as had the value of half a unit. The necessary 
 provisions for keeping a proper reserve of gold and silver would be 
 a little intricate, but would involve no great practical difficulty. 
 Under either of these plans, contracts for deferred payments might 
 be made fairly well in terms of the currency." 
 
 PROFESSOR JEVONS. 
 
 W. Stanley Jevons, Professor of Political Economy in Owen's 
 College, Manchester, Eng., has a worldwide reputation as one of the 
 foremost writers on monetary science. His writings are used as 
 text-books in universities and colleges all over the English-speaking 
 world. 
 
 In his "Money and the Mechanism of Exchange," written in 
 1874-5, he says: 
 
 "It is evidently desirable that the currency should not be subject 
 to fluctuations of value. The ratios in which money exchanges 
 for other commodities should be maintained as nearly as possible 
 invariable on the average." (P. 38.) 
 
 Speaking of the plans of Lowe, Scrope, and others, for a tab- 
 ular or multiple standard of value to be used as the basis of settle- 
 ment in long contracts, Jevons says: 
 
 "Such schemes for a tabular or average standard of value appear 
 to be perfectly sound and highly valuable in a theoretical point 
 of view, and the practical difficulties are not of a serious character. 
 To carry Lowe's and Scrope's plans into effect, a permanent Gov- 
 ernment commission would have to be created, and endowed with 
 a kind of judicial power. The officers of the department would 
 collect the current prices of commodities in all the principal mar- 
 kets of the kingdom, and, by a well-defined system of calculations, 
 would compute from these data the average variations in the pur- 
 chasing power of gold. The decisions of this commission would 
 be published monthly, and payments would be adjusted in accord- 
 ance with them. Thus, suppose that a debt of one hundred pounds 
 was incurred upon the 1st of July, 1875, and was to be paid back 
 on 1st of July, 1878; if the commission had decided in June, 1878, 
 that the value of gold had fallen in the ratio of 106 to 100 in the 
 intervening years, then the creditor would claim an increase of 6 
 per cent, in the nominal amount of the debt. 
 
 "At first the use of this National tabular standard might be per- 
 missive so that it could be enforced only where the parties to tne 
 contract had inserted a clause to that effect in their contract. 
 After the practicability and utility of the plan had become suffi- 
 ciently demonstrated, it might be made compulsory, in the sense 
 that every money debt of, say more than three months' standing, 
 would be varied according to the tabular standard, in the absence 
 of an express provision to the contrary. (Pp. 330-1.) 
 
 "The space at my disposal will not allow me to describe ade- 
 quately the advantages which would arise from the establishment 
 of a National tabular standard of value. Such a standard would add 
 a wholly new degree of stability to social relations, securing the 
 fixed incomes of individuals and public instiutions from the depre- 
 ciation which they have so often suffered. Speculation, too, based 
 upon the frequent oscillations of prices, which take place in the 
 present state of commerce, would be to a certain extent discour- 
 
154 AUTHORITIES. 
 
 aged. The calculations of merchants would be less frequently 
 frustrated by causes beyond their own control, and many bank- 
 ruptcies would be prevented. Periodical collapses of credit would 
 no doubt recur from time to time, but the intensity of the crises 
 would be mitigated, because as prices fell the liabilities of debtors 
 would decrease approximately in the same ratio." (Pp. 332-3.) 
 
 PROFESSOR SIMON NEWCOMB. 
 
 The writings of this distinguished educator having received no 
 attention in previous chapters beyond a bare mention, we may 
 briefly summarize here his valuable article in the North American 
 Review for September, 1879. The Professor says that notwithstand- 
 ing the wonderful progress of civilization, we have not improved 
 on the money of Abraham. This is partly because the fluctuations 
 of money escape our notice. Our whole education leads us to look 
 on the dollar as absolutely invariable. It is like the earth. We 
 do not see it move. The sun and stars appear to move round the 
 world, and commodities appear to move while gold stands still, 
 whereas in both cases the actual fact is the reverse of appear- 
 ances. "The dollar of to-day is worth twice as much as was that 
 of 15 years ago." And we have every reason to anticipate the 
 slow advance of a gold famine. If new sources of supply are dis- 
 covered, it will only delay a little the inevitable famine (unless 
 the chemists learn to make gold and then the standard will become 
 worthless for the opposite reason.) The Professor says that the 
 Multiple Standard has not received the attention it deserves and 
 continues thus: (Pp. 231-5.) 
 
 "An invariable standard is better than either a depreciating or 
 an appreciating one. * * * That a standard of value with the 
 use of which no such thing as general fluctuations in price should 
 be possible, is one of the greatest social desiderata of our day, no 
 one will deny. 
 
 "What we want is a dollar of uniform value, as measured by the 
 average of commodities." 
 
 "The legal-tender doljar shall be defined as a quantity of some- 
 thing, no matter what, sufficient to purchase in the public markets, 
 at average wholesale prices, a definite collection of commodities." 
 
 "The first and most obvious method of attaining the object is 
 to issue a paper currency which shall be redeemable, not in gold 
 dollars of fixed weight, but in such quantities of gold and silver 
 bullion as shall suffice to make the required purchases." 
 
 RICARDO. 
 
 President Walker, and other great economists, regard Eicardo 
 as the most illustrious of all writers upon finance. In his "Pro- 
 posals for an Economic and Secure Currency," 1816, Ricardo says, 
 Sees. 1 and 2: 
 
 "All writers on the subject of money have agreed that uniformity 
 in the value of the circulating medium is an object greatly to be 
 desired. Every improvement, therefore, which can promote an 
 approximation to that object, by diminishing the causes of varia- 
 tion, should be adopted. * * * A currency may be considered 
 as perfect, of which the standard is invariable, which always con- 
 forms to that standard, and in the use of which the utmost 
 economy is practiced. * * * During the late discussions on 
 the bullion question it was most justly contended that a currency 
 to be perfect, should be absolutely invariable in value. 
 
 "No plan can possibly be devised which will maintain money 
 at an absolutely uniform value, because it will always be subject 
 
AUTHORITIES. 
 
 155 
 
 DO those variations to which the commodity itself is subject, which 
 has been fixed upon as a standard. While the precious metals con- 
 tinue to be the standard of our currency, money must necesssarily 
 undergo the same variations in value as those metals." 
 
 Ricardo did not deem it impossible to attain a steady money 
 because of any failure to recognize the principles on which the 
 value of paper money depend. In his Political Economy, 125, he 
 says: 
 
 "It is on this principle that paper money circulates: the whole 
 charge for paper money may be considered as seigniorage. Tho 
 it has no intrinsic value, yet, by limiting its quantity, its value in 
 exchange is as great as an equal denomination of coin, or of 
 bullion in that coin." 
 
 Ricardo further says: "A regulated paper currency is so great 
 an improvement in commerce that I should greatly regret if preju- 
 dice should induce us to return to a system of less utility. The 
 introduction of the precious metals for the purposes of money 
 may with truth be considered as one of the most important steps 
 towards the improvement of commerce and the arts of civilized 
 life. But it is no less true that, with the advancement of knowl- 
 edge and finance, we discover that it would be another improve- 
 ment to banish them again from the employment to which, during 
 the less enlightened period, they had been so advantageously ap- 
 plied." ("Works" by McCulloch, p. 404.) 
 
 Again he says: "It is not necessary that paper money should be 
 payable in specie to secure its value; but only that its quantity 
 should be regulated according to the value of the metal which is 
 declared to be the standard." (Ricardo's "Plan for the Extinction 
 of Bank Notes.") 
 
 Tho fully recognizing the imperfections of the precious metals, 
 Ricardo proposed to use gold as the standard of value for want 
 of a better. The use of a composite commodity standard did not 
 occur to him. If he had thought of that, his principles would in- 
 evitably have led him to a system substantially like the one pro- 
 posed in this book, for that standard supplies the one additional 
 element he said was necessary to make a perfect money. 
 
 PETER COOPER. 
 
 This great New York financier believed in honest money and 
 urged his countrymen, after the war, not to abandon the paper 
 basis, but to use an independent National currency and regulate its 
 volume. Peter Cooper, Horace Greely and Henry Carey Baird ad- 
 vocated a paper money issued by the Government and convertible 
 into United States bonds bearing low interest. The mutual con- 
 vertibility would prevent any great excess or dearth of money. 
 
 Cooper said in substance (Letter on the Currency, N. Y., Phila. 
 Library, 20527, O. 11, Pamphlet): "Experience has shown that 
 individuals or corporations cannot be trusted with the power of 
 issuing money. Governments are the safest depositories of the 
 power. Value has hitherto been measured by its exchangeableness 
 with gold, but this is subjecting paper to the laws of barter. It 
 presumes that Governments can control what is uncontrollable, 
 namely, the amount of gold that may, at any time, be in a coun- 
 try. 
 
 "To fix upon an arbitrary and fluctuating standard, such as the 
 worth or exchangeable value of a gold dollar, is as uncertain as 
 to take any other permanent product of human labor, such as a 
 bushel of wheat or a pound of cotton. But how shall Government 
 give an exchangeable value to a paper currency? Can it do so by 
 a standard which is beyond its control, and which naturally fluc- 
 tuates ? 
 
156 AUTHORITIES. 
 
 "This is the unsound state which possesses the minds of our 
 people and of our politicians. 
 
 "We must come out of this unreasonable condition, or we shall 
 be subject, for all time, to these periodic disturbances of our money 
 and currency which bring such widespread ruin and distress on 
 our commercial industries, and work, on the part of the Govern- 
 ment, positive and cruel injustice. The remedy seems to me to 
 be very plain. First. We must put this whole power of coining- 
 money or issuing currency, as Thomas Jefferson says, where, by 
 the Constitution, it properly belongs', entirely in the hands of our 
 Government. We must trust our Government with this whole 
 function of providing the standards and measures of exchange as 
 we trust it with the weights and measures of all trade. The more 
 stake the people have in the wisdom and honesty of the administra- 
 tion of the Government, the more watchful and firm they will be 
 in its control." 
 
 "Secondly. We must require the Government to make this cur- 
 rency at all times, and at the option of the individual, convertible. 
 Butthe currency must be convertible into something over which the 
 Government has entire control, and to which it can give a definite 
 as well as a permanent value. This is its own interest-bearing 
 bonds." 
 
 If money were scarce, interest would rise and bonds would come 
 in for translation into currency. If money were plenty, interest 
 would fall and it would be profitable to invest in bonds again, thus 
 diminishing the volume of the currency. If the Government may 
 "call" the bonds in, they become a still more plastic means of regu- 
 ation. (See Chap. III.) 
 
 THE UNITED STATES SUPREME COUET. 
 
 In the Legal Tender Cases, the United States Supreme Court 
 made some very significant remarks concerning intrinsic value, 
 monetary standards, the advantages of paper money, the necessity 
 of sustaining the debtor interest and not allowing it to be crushed 
 under the weight of appreciating money, etc. The Court said: 
 "Whatever power there is over the curency is vested in Congress. 
 If the power to declare what is money is not in Congress, it is 
 annihilated. (12 Wallace, 545). 
 
 "No one ever doubted that a debt of one thousand dollars, con- 
 tracted before 1834, could be paid by one hundred eagles coined 
 after that year, tho they contained no more gold than ninety- 
 four eagles such as were coined when the contract was made, and 
 this, not because of the intrinsic value of the coin, but because of its 
 LEGAL VALUE. The eagles coined after 1834 w r ere not money until 
 they were authorized by law, and had they been coined before, 
 without a law fixing their legal value, they could have no more 
 paid a debt than uncoined bullion, or cotton, or wheat. (12 Wal- 
 lace, 548-9). 
 
 "The coinage acts fix its unit as a dollar; but the gold or silver 
 thing we call a dollar is, in no sense, a standard of a dollar. It 
 is a representative of it. (12 Wallace, 553). 
 
 "The debtor interest of the country represents its bone and 
 sinew and must be encouraged to pursue its avocations." (12 Wal- 
 lace, 564). 
 
 The opinion of the Court in respect to the advantages of paper 
 money, has been quoted in the first chapter and need not be here 
 repeated. 
 
 In the same cases (12 Wallace, 557, 568), the Court used the fol- 
 lowing language in respect to the value of paper money: 
 
 "Dr. Franklin, in a letter to a friend, dated from Paris, in April, 
 
AUTHORITIES. 
 
 1779, after deploring- the depreciation which the Continental cur- 
 rency had undergone, said: 'The only consolation under this evil 
 is, that the public debt is proportionately diminished by the de- 
 preciation; and this, by a kind of imperceptible tax, every one hav- 
 ing- paid a part of it in the fall of value that took place between 
 the receiving and paying such sums as passed thru his hands.' He 
 adds: 'This effect of paper currency is not understood this side 
 of the water. Arid indeed the whole is a mystery even to the poli- 
 ticians, and how we have been able to continue a war for four 
 years without money, and how we could pay with paper that had 
 no previously fixed fund appropriated specially to redeem it. This 
 currency, as we manage it, is a wonderful machine. It performs 
 its office when we issue it; it pays and clothes troops, and provides 
 victuals and ammunition.' (Franklin's Works, Vol. 8, p. 329). In 
 a subsequent letter of 9th October, 1780, he says: 'They (the Con- 
 gress) issued an immense quantity of paper bills, to pay, clothe, 
 arm and feed their troops and fit out ships; and with this paper, 
 without taxes for the first three years, they fought and battled 
 one of the most powerful nations of Europe.' (Franklin's Works, 
 Vol 8, p. 507). 
 
 "It is well known that for over twenty years, from 1797 to 1820, 
 the most stringent paper money system that ever existed prevailed 
 in England, and lay at the foundation of all her elasticity and 
 endurance. 
 
 "It is unnecessary to refer to other examples. France is a not- 
 able one. Her assignats issued at the commencement and during the 
 Revolution, performed the same office as our Continental bills; and 
 enabled the nation to gather up its latent strength and call out 
 its energies. Almost every nation of Europe, at one time or an- 
 other, has found it necessary or expedient to resort to the same 
 method of carrying on its operations or defending itself against 
 aggression." 
 
 WILLIAM JENNINGS BRYAN. 
 
 In his California speeches, as reported in the Denver "New Road," 
 of July, 1897, Mr. Bryan admitted that neither gold nor silver rep- 
 resents an honest dollar. "An honest dollar," said he, "is a dol- 
 lar that will always buy the same amount of products; and if 
 such a dollar could be constructed, a man would not be called upon 
 in ten years to pay back a debt in dollars worth four times the 
 dollar he borrowed; neither would he be enabled to pay off a debt 
 with dollars four times as cheap as the dollar he borrowed." The 
 report continues: "Mr. Bryan advocates a paper dollar based upon 
 ten leading products of the nation, and when he does so he recom- 
 mends the most scientific money the world ever saw. Given a 
 dollar based upon oats, corn, wheat, rye, petroleum, pork, cotton, 
 sugar, tobacco and coal, the value of which would be controlled by 
 the average of these commodities, would give us 'an honest dol- 
 lar.' " 
 
 WENDELL PHILLIPS. 
 
 The great anti-slavery orator, one of the greatest orators and 
 one of the truest friends of the people that has ever lived, regarded 
 the emancipation of the country from the despotism of an unjust 
 (Minvnrv as tlie vital issue after slavery was abolished. In 1878, he 
 said: '("Who shall Rule Us, Money or the People," by Wendell 
 Phillips. Boston, 1878. Rand, Avery & Co.) "I shall vote for Gen- 
 eral Butler because he represents the determination of the people 
 to take the currency out of the control of money-kings. * * * 
 When slavery was abolished when it was settled that the capitalist 
 
158 AUTHORITIES. 
 
 should no longer own the laborer all labor, black and white. 
 North and South, was lifted to the level of wages. Of course every 
 wage-laborer desired a fair division of the joint product of labor 
 and capita). Horace Mann said (substantially): 'Yankee ingenuity 
 has increased production tenfold, but we have made hardly one 
 step forward toward a fair division of that product.' 
 
 "In our effort to secure a fairer division, we soon saw that the 
 dollar in which labor was paid was one of the most important, if 
 not the most important, element in the solution of this problem. 
 In other words, we saw it was currency which, rightly arranged, 
 opened a nation's well-springs, found work for willing hands, and 
 filled them with a great return, while honest capital, daily larger 
 and more secure, ministered to a glad prosperity; or it was cur- 
 rency, wickedly and selfishly juggled, that made merchants bank- 
 rupt, and starved labor into discontent and slavery, while capital 
 added house to house, and field to field, and gathered into its 
 miserly hands all the wealth left in a ruined land. 
 
 "The first question, therefore, in an industrial nation, is, where 
 ought the control of the currency to rest? In whose hands can 
 this almost omnipotent power be trusted? Every writer on poli- 
 tical economy, from Aristotle to Adam Smith, from Ricardo to 
 Calhoun, allows that a change in the currency alters the price of 
 every ounce and yard of merchandise and every foot of land. Whom 
 can we trust with this despotism? 
 
 "At present the banks and the money-kings wield this power. 
 They own the yardstick, and can make it shorter or longer as 
 they please, and when they will. They own the pound-weight and 
 can make it heavier or lighter as they choose. 
 
 "This explains the riddle, so mysterious to common men, why 
 those who trade in money always grow rich, even while those who 
 trade in other things go into bankruptcy. 
 
 "This is the issue of to-day. Who shall make the yardstick? 
 
 "Mr. Schurz, my friend Mr. Elaine, Mr. Secretary Sherman, fancy 
 we are discussing what the money shall be made of; whether paper 
 or metal. Not yet, gentlemen. The question is not what the 
 money shall be made of: the question to-day is, Who shall make 
 the Money; Banks, or the Government? Money-Kings or the people? 
 As Ewing said, last August, 'The practical money question in the 
 United States is not whether the currency shall be coin or paper, 
 but who shall issue the paper money, and how shall its volume be 
 determined?' By and by, after we have settled this first point, we 
 will discuss that second one. To-day we are fighting to secure 
 what Jefferson, in 1813, advised that 'the circulation be restored 
 to the nation to whom it belongs.' 
 
 "This is the reason why the banks and money-kings hate this 
 movement so bitterly, and pour out their money like water to kill 
 it. They feel and know it is a hand-to-hand fight between them- 
 selves and the people one of the last battles between aristocrocy 
 and democracy. The most cunning weapon they use is that of 
 confusing the question, in order to hide the real issue, which is 
 simply: Shall the Nation make its own currency, or put itself under 
 the guardianship of capital sheep in the keeping of wolves?" 
 
 In another address (Wendell Phillips on the Currency, a pamph- 
 let in the Boston Public Library), Phillips said: "England and 
 France the two nations to which gold naturally and almost, in- 
 evitably runs, since they are credit States have been obliged 
 to resort to paper currency upon every emergency. The specie 
 bank of England, since she was remodeled in 1844, has thrice been 
 obliged to beg the Government to save her from suspension. If 
 England, the richest nation in the world, the reservoir and refuge 
 of coin, cannot without subterfuge, support one specie paying 
 bank in London, the world's business centre, how can we expect 
 
AUTHORITIES. 159 
 
 to hoard gold enough to form a real basis for two thousand banks 
 scattered over the continent? 
 
 "Gold is no trustworthy standard of value. During the rebellion 
 gold measured by the prices of twenty of our great staples 
 varied more than any of them did, except cotton, the cause of the 
 war. 
 
 "Now while gold has thus varied during the last ninety years, 
 there is in England one commodity which never changes: that is 
 consols and shares in the Bank of England; which practically are 
 public funds, since they are in effect guaranteed by the nation. 
 From 1789 to 1875, both inclusive, the average price of a consol was 
 81. If, as Jevons says, from 1809 to 1849 gold more than doubled 
 in value, the consol never changed; its average price those forty-one 
 years was just what it was before and after, that is, 81. If, as 
 Jevons and Fawcett say, since 1809, gold has fallen one-quarter, 
 consols have not fallen. So of the bank shares; the interest on 
 their selling price from 1789 to 1872 was the slightest trifle above 
 four per cent. During the forty-one years (1809-1849) that Jevons 
 says gold rose to double, the interest was just the slightest trifle 
 below four per cent (4.04 in one case, 3.94 in the other.) During 
 these last twenty-five years, when gold has fallen one-quarter, the 
 interest on a bank share is 3.67 per cent. 
 
 "Now, let men explain the unchanging values of these stocks as 
 they please, their unchanging value remains a fact. Eemember 
 what these last 84 years have done and seen the French Revolu- 
 tion and Napoleon Wars, Waterloo, paper money, riots, famines, 
 California, the Crimean War, the Franco-Prussian War, steam, the 
 use of cotton, extension of the ballot, the telegraph, and our re- 
 bellion. Still, thru all, the ebb tide and the flood, the sunshine 
 and the tempest, the funds of England have steadied with un- 
 changing keel. What explains it? Their basis is a government 
 bond, at a low rate of interest, but sure as 'death and taxes.' 
 
 "Taking note of this, we propose to found our National currency 
 on a Government bond, bearing a low rate of interest. Why should 
 not our bond be as unvarying as that of England? She is encom- 
 passed by troubles and dangers, half a dozen warlike rivals, and 
 constant risk of international complications. We have a clear 
 sky, and the ocean for a wall of defence. Why should not our 
 bond be better than hers? * * * 
 
 "The moment you leave a simple barter, that moment the power 
 to inflate begins. This power must always reside in civilized 
 States which have ceased to use barter. The only real question is, 
 where shall it be trusted? Under our present system it rests in 
 the hands of the bank directors. Ricardo and all other writers 
 allow that those who increase and diminish, at their pleasure, the 
 currency (not note currency merely, but discounts, checks, credits, 
 notes and coin) have the power to change prices at their will. To- 
 day, our bank directors have this power. The New York City 
 banks increased this currency $2,957,200 in one month, September, 
 1874, and decreased it $5,000,000 in one week of March, 1875. They 
 thus changed the value of every commodity in that city. '10 in- 
 flate in the same proportion, Congress must pour out and Keep* out 
 $50,000,000 a week. * * * 
 
 "They (the people) will keep it in the form of bonds, or draw 
 it forth in greenbacks, as the hour dictates. They will decide, 
 under this elastic system, how much currency is needed by a na- 
 tion, not rich, but widely scattered and marvellously busy; one 
 whose harvests can feed the world, and her mines supply it with 
 metal and coal; while rivers and mountains and thousands of 
 miles divide prairie and seaport, plantation and spindle, mine and 
 forge. Indeed, this movement is a revolt against a system of 
 finance which rests the power of inflation in the hands of a few 
 
160 AUTHORITIES. 
 
 hundred bank directors, and lets them play with values at their 
 pleasure. This movement is in its essence the assertion that when 
 our fathers settled it that the people were competent to govern 
 themselves, they meant to include among the points as to which 
 they were competent, the question of finance, as well as marriage, 
 crimes, real estate, wills, and other matters of government. This 
 movement is a revolt against the notion that in ordinary matters 
 the people can govern themselves, but on questions of finance they 
 must be kept under perpetual guardianship, and be the wards of 
 rich men." 
 
 BENJAMIN FRANKLIN. 
 
 In Chapter I., we have already seen that the great philosopher 
 and patriot of Revolutionary days was a strong believer in paper 
 money of limited volume. We will not requote, but merely add 
 one further brief citation. 
 
 "Paper money," says Franklin, "well founded, has great advan- 
 tages over gold and silver, being more lig'ht and convenient for 
 handling large sums, and not likely to have its volume reduced 
 by demands for exportation. No method has hitherto been formed 
 to establish a medium of trade equal in all its advantages to bills 
 of credit made a general legal tender." ("Works," Vol. IV., p. 2. 
 The passage is frequently quoted. Wendell Phillips, Peter Cooper, 
 the United States Supreme Court and many other authorities cite 
 Franklin's views on the money question with hearty approval.) 
 
 THOMAS JEFFERSON. 
 
 The father of Democracy clearly saw that the money system of 
 the country should belong to the sovereign people and not to the 
 sovereign banks. 
 
 "Bank paper must be suppressed, and the circulating medium 
 must be restored to the nation to whom it belongs. It is the only 
 fund on which they can rely for loans; it is the only resource 
 which can never fail them, and it is an abundant one for every 
 necessary purpose. Treasury bills, bottomed on taxes, bearing or 
 not bearing interest, as may be found necessary, thrown into cir- 
 culation will take the place of so much g-old or silver, which last, 
 when crowded, will find an efflux into other countries, and thus 
 keep the quantum of medium at its salutary level. 
 
 "No method has hitherto been formed to establish a medium of 
 trade equal in all its advantages to bills of credit made a general 
 legal tender." (Jefferson's Works, Vol. VI., p. 199). 
 
 Jefferson saw that money should be public, independent, regu- 
 lated. In 1776 he wrote the Declaration of Independence for 
 American manhood, proclaiming the truth that American citizens 
 ought to be free from the rule of European monarchs. And if he 
 were living to-day, he would write a Declaration of Independence 
 for the American dollar, proclaiming the truth that American 
 money should be freed from the despotic rule of the square mile 
 of Xondon, which controls the financial policy of the world. Indeed, 
 the new Declaration is necessary for the fulfillment of the first, 
 for American citizens cannot be free from European rule so long 
 as American dollars are subject to foreign control. 
 
 ABRAHAM LINCOLN. 
 
 In a letter to Col. Edmund Taylor, December, 1864, President 
 Lincoln said: "Chase thought it a hazardous thing, but we finally 
 accomplished it, and gave to the people of this Republic the greatest 
 blessing they ever had their own paper to pay their own debts." 
 
APPENDIX A. 
 
 PENNSYLVANIA CURRENCY. 
 
 (See reference, page 14.) 
 
 In 1697 silver was plentiful in Pennsylvania, but by 1719 pay- 
 ments for imports and payments to the foreign proprietors had 
 stripped the colony of its coin, 1 and the people had to carry on 
 the principal part of their commerce by barter. In 1723 the As- 
 sembly ordered the issue of 15,000 in paper money, 11,000 to 
 be loaned to the people on real estate security, the balance to be 
 issued against taxes. The loans were to be at 5 per cent, interest, 
 to run 8 years, and be secured by land of twice the value of the 
 loan or houses of three times that value. One-eighth of the loan 
 was to be repaid each year, together with the interest. It was 
 enacted that no one should borrow more than 100, it being de- 
 sirable to guard against a control of the loan by the wealthy. It 
 was also provided that the bills should be a full legal tender, and 
 that refusal to receive them should cancel the debt. The bills 
 would pay debts and taxes, but were not redeemable in gold or 
 silver. 
 
 It was found that 15,000 was not sufficient for the needs of 
 business, and further issues were made from time to time, partly 
 on real estate and partly on tax redemption. The term of the 
 loans was extended in subsequent issues so that it became 16 
 years instead of 8, which made the annual payment due from the 
 borrower less than 12 per cent., including interest and the instal- 
 ment of the principal. By 1764 there was about 500,000 of this 
 "irredeemable" paper money in circulation, about 400,000 of it 
 having been issued against taxes and the rest against realty. 
 
 This Pennsylvania money kept its value and did the work of the 
 colony to the entire satisfaction of the people. Franklin said: 2 
 "The utility of this currency became by time and experience so 
 evident that the principles on which it was founded were never 
 afterwards much disputed. * * * In New York and Pennsylvania 
 it has continued now nearly forty years without variation upon 
 new emissions." 
 
 Some of the colonies, however, in the South and in New England, 
 had, by over-issue, seriously depreciated their currency, and a 
 movement took shape in England to restrain the emission of paper 
 in America as legal tender. In February, 1764, the Board of Trade 
 in England reported in favor of such a restraining law for the fol- 
 lowing reasons: 
 
 1. Such paper-credits carry the gold and silver out of the province 
 and ruin the country. 
 
 2. Merchants trading in America have lost by this money. 
 
 3. Restriction upon it has had a good effect in New England. 
 
 4. That every medium of trade should have an intrinsic value 
 which paper has not. 
 
 5. That debtors in the asemblies make paper money with frau- 
 dulent intent. 
 
 6. That the bills have never kept their nominal value in circula- 
 tion, but have constantly depreciated to a certain degree whenever 
 the quantity has been increased. 
 
 (*) Phillips, pp. 11, 12, 19, see also below citation from Franklin's works. 
 ( 7 ) See Franklin's Autobiography and Jared Sparks ed. of Franklin's 
 Works, Vol. 11., pp. 254 and 351. 
 
162 APPENDIX A. 
 
 Benjamin Franklin, then in England, replied to these objections 
 as follows: 
 
 "1. The truth is that the balance of trade with Britain being 
 greatly against the colonies, gold and silver is drawn out to pay 
 that balance, and then the necessity for some medium of trade 
 has induced the making of paper money, which could not be car- 
 ried away. Thus,if the carrying out of the gold and silver ruins 
 a country, every colony was ruined before it made paper money. 
 But far from being ruined, the colonies have been and are in a 
 nourishing condition. 1 
 
 "Pennsylvania, before it made any paper money, was totally 
 stripped of its gold and silver, tho they had from time to time, 
 like the neighboring colonies, agreed to take gold and silver coins 
 at higher nominal values, in hope of drawing money into and re- 
 taining it for the internal use of the province. During that 
 weak practice, silver got up by degrees to 8s. 9d. per ounce * * * 
 long before paper money was made. * * * The difficulties for 
 want of cash were accordingly very great, the chief part of the 
 trade being carried on by the extremely inconvenient method of 
 barter, when in 1723, paper money was first made there (in Penn- 
 sylvania), which gave new life to business, promoted greatly the 
 settlement of the new lands (by lending small sums to beginners, 
 on easy interest to be paid by instalments) whereby the province 
 has so greatly increased in inhabitants that the export from thence 
 thither (to England) is now more than tenfold what it then was. a 
 "2. Merchants may have suffered loss by paper money in particu- 
 lar instances, as in New England and Virginia, when great sums 
 were issued to pay the colony troops, or in South Carolina when she 
 was thought in danger of being destroyed by the Indians and 
 Spaniards, tho since that danger blew over their currency became 
 fixed and has remained so to this day. But the merchants trading 
 to the middle colonies (New York, New Jersey and Pennsylvania) 
 have never suffered by any use of exchange. 3 
 
 "3. The restraining of paper issues in New England has embar- 
 rassed the provinces for want of money to such extent that trade 
 was under great discouragement. 4 
 
 "4. Intrinsic value is not necessary. Bank bills and bankers notes 
 are daily used here (in England) as a medium of trade, and in 
 large dealings perhaps the greater part is transacted by their 
 means; and yet they have no intrinsic value. 
 
 "Their being payable in cash on sight is indeed a circumstance 
 that cannot attend the colony .bills, their cash being drawn away 
 by the balance of trade. But the legal tender, being substituted 
 in its place, is rather a greater advantage to the possessor, since 
 he need not go to a particular bank to get his money, finding 
 (wherever he has occasion to pay out money in the province) a 
 person that is obliged to take the bills. 
 
 "So that, even out of the province, the knowledge that every 
 man within that province is obliged to take its money gives the 
 bills a credit among its neighbors, nearly equal to what they have 
 at home. 
 
 "At this very time even the silver money in England is obliged 
 to be legal tender for part of its value, that part which is the differ- 
 ence between its real weight and its denomination. Great part of 
 the shillings and sixpences now current are by wearing become 
 5, 10, 20 and some of the sixpences even 50 per cent, too light. For 
 the difference between the real and the nominal you have no in- 
 trinsic value; you have not so much as paper; you have nothing. 
 
 0) Franklin's works edited by Jared Sparks, Vol. II., p. 342. 
 ( 2 > Ibid., pp. 343-4. 
 
 ( 3 ) Ibid., pp. 344-5. 
 
 ( 4 ) In substance, p. 346. 
 
PENNSYLVANIA CURRENCY. 163 
 
 It is the legal tender, with the knowledge that it can easily be 
 repassed for the same value, that makes .'5 pennyworth of silver 
 pass for sixpence.* 
 
 "On the whole, no method has hitherto been formed to establish 
 a medium of trade in lieu of money, equal in all its advantages, 
 to bills of credit, funded on sufficient taxes for discharging it, or 
 on land security of double the value for repaying it at the end of 
 the term, and in the meantime made a general legal tender. The 
 experience of now near half a century in the middle colonies has 
 convinced them of it among themselves, by the great increase of 
 their settlements, numbers, buildings, improvements, agriculture, 
 shipping and commerce, and the same experience has satisfied the 
 British merchants who trade thither, that it has been greatly use- 
 ful to them, and not in a single instance prejudicial. 1 
 
 "5. To deprive all the colonies of the convenience of paper money 
 because it has been charged on some of them that they made it 
 an instrument of fraud, is as if all the India banks and other 
 stock and trading companies were to be abolished because there 
 have been Mississippi and South Sea schemes and bubbles. 2 
 
 "6. The paper money of the middle colonies has kept its value. 
 In New York and Pennsylvania it has continued now nearly forty 
 years without variation upon new emissions, tho in Pennsyl- 
 vania the paper currency has at times increased from 15,000 to 
 600,000, or near it. 3 Nor has any alteration been occasioned by 
 the paper money in the price of the necessaries of life, when com- 
 pared with silver. They have been for the greater part of the time 
 no higher than before it was emitted, varying only by plenty and 
 scarcity, according to the seasons, of by less or greater foreign 
 demand. 
 
 "It is nothing to the purpose to object the wretched fall of 
 the bills in New England and South Carolina, unless it might be 
 made evident that their currency was emitted with the same pru- 
 dence and on such good security as ours is, and it certainly was 
 not. 4 
 
 (*) Ibid., pp. 347-8. 
 (M Ibid., p. 354. 
 ( 2 Ibid., p. 350. 
 ( 3 Ibid., p. 351. 
 
 ( 4 Ibid., p. 276. The reasons for the depreciation of colonial paper in 
 Mass., R. I. and other New England colonies are very apparent. For 
 example, in 1714 Mass, authorized an issue of 50,000 in bills to be put in 
 the hands of five trustees and let out at 5 per cent, in safe mortgages on 
 real estate, to be paid back in five annual instalments. This was like the 
 Penna. plan except that the term was too short a 25 per cent, payment per 
 year WP.F too great a burden and the debts were not paid back as agreed 
 on the contrary a clamour was raised for further issues, and paper was 
 multiplied lavishly. Such is the account given by Bancroft in his History of 
 the United States, Vol. II., pp. 262-3, and by Mr. Macfarlane in the article 
 already referred to in the first chapter of this book. 
 
 For 1749, just before the close of the era of colonial paper in New Eng- 
 land, Prof. Sumner states the paper of Mass, at 2,466,712, R. I. 550,000, and 
 N. H. 450,000. While Phillips' data place the currency of Penna. at 85,000 
 in 1749 and that of N. J. at 76,000. Taking the population for 1749 from 
 Mulhall's Dictionary of Statistic?), we have the following contrasts: 
 
 Colony. Population 1749. Currency 1749. Per head. 
 
 Mass 220,000 2,466,712 $60 
 
 R. 1 35,000 550,000 77 
 
 N. II 30,000 450,000 75 
 
 Penna 210,000 85,000 2 
 
 N. J 60,000 76,000 6 
 
 New Jersey and Penna., whose bills were mutually honored over the 
 boundary, had together a circulation of about $3 per head. Penna. started in 
 1723 with an issue of less than $1 pei head and rose in 1749 to an average of 
 $2 per head, while R. I. started in 1710 with an issue of $2.50 a head and 
 rose by 1749 to an average of $77 per inhabitant. Even in 1775 the Pennsyl- 
 vania paper outstanding was only $11 per capita. 
 
 It is no wonder that Pennsylvania paper kept its value, while the bills 
 of New England sank to less than one tenth of their original purchasing 
 
 12 
 
164 APPENDIX A. 
 
 Adam Smith's "Wealth of Nations" appeared in 1776; on p. 262 
 of that great work, the author says: 
 
 "Pennsylvania was more moderate in the emission of paper 
 money than the other colonies. Its paper currency accordingly 
 is said never to have sunk below the value of the gold and silver 
 which was current in the colony before the first emission of its 
 paper money." 
 
 In the Annals of the American Academy of Political and Social 
 Science, Vol. VIII., No. 1, July, 1896, Mr. C. W. Macfarlane tabulates 
 at great length the prices current in Pennsylvania from 1723 to 1773 
 from contemporaneous newspaper data and old account books pre- 
 served by the Pennsylvania Historical Society. He finds (pp. 67- 
 70) that up to the middle of the century (1749 according to his 
 tables) there was no advance in prices either in the domestic or 
 the export trade, but after that date there was a sharp and per- 
 manent advance in the prices of commodities that figured largely 
 in the colony's exports, while those that were produced largely for 
 home consumption or were imported into the province show no 
 material advance in price, which shows clearly that the changes 
 of price which did occur were not due to any depreciation of 
 the currency (which would have affected home products and im- 
 ports as well as exports), but were occasioned by a rising foreign 
 market. 
 
 After citing Franklin 1 and Hume 2 to show the high degree of 
 prosperity that existed in Pennsylvania during the period under 
 consideration, the author concludes that the "irredeemable" paper 
 money of Pennsylvania maintained its value thruout the fifty 
 years of its existence. 
 
 "Our study of prices, together with the fact of this marvelous 
 prosperity, seem to sustain Franklin's claim that this currency 
 suffered no material depreciation for half a century. 3 
 
 "The Pennsylvania ciTrrency maintained its value, because the 
 amount issued was not in excess of their need 4 for a medium of 
 
 power. Neither is it to be wondered at that Parliament in 1751 restrained 
 the Northern colonies from issuing legal tender bills and prohibited them 
 from issuing any bills of credit of any sort except: 
 
 1. To cover expenses of the current year, the paper not to run over two 
 years, or, 
 
 '2. To provide for extraordinary emergencies (as in case of invasion) a 
 fund to be established to sink such bills within five years. 
 
 Massachusetts led the way to a specie basis, which was restored in New 
 England about the middle of the century and remained until the Revolution. 
 
 C 1 ) "Abundance reigned in Pennsylvania and there was peace in all her 
 borders. A more happy and prosperous population could not perhaps be 
 found on the globe. In every home there was comfort. The people generally 
 were highly moral and knowledge was extensively diffused." Franklin. 
 
 ( 2 ) "In Pennsylvania the land itself is coined. A planter immediately 
 after purchasing land, can go to a public office and receive notes to the 
 amount of half his land, which notes he employs in all payments. No more 
 than a certain sum is issued to one planter, and he must pay back each year 
 into the public treasury one-tenth of the notes. When they are all paid back 
 he can repeat the operation. This caused a prosperity that Burke said was 
 unparallelled." David Hume, historian of England, in a letter to Abbe 
 Morellet. 
 
 ( 3 ) Macfarlane, p. 71. 
 
 ( 4 ) Hon. John Davis says (February Arena, '94): "The paper money of 
 Pennsylvania succeeded as long as it possessed the quality of legal tender. 
 It failed when the British government forbade it having that quality. Coin 
 money, being an exportable article, was always a fugitive in those colonial 
 days. It was usually a failure when needed. It could not be relied upon as 
 a circulating medium, nor could it even be trusted as a basis for paper. The 
 Pennsylvania paper rested entirely on the quality of legal tender (backed by 
 limited issue), and it remained good and sound money until that quality was 
 withdrawn by the British government on purpose to destroy it, and thus to 
 render the colony dependent for money on the usurers of England. The 
 money did not depend on the land for its value as some suppose. The lauds 
 were merely security for the loans.'' 
 
PENNSYLVANIA CURRENCY. 165 
 
 exchange, and had ample provision made for the redemption of 
 the larger part of it by taxation." 1 
 
 Gold and silver were among the articles which rose in value 
 above the prices of 1723. The Journals of the Pennsylvania As- 
 sembly, and Phillips, p. 19, give the following figures: 
 
 GOLD PER OZ. SILVER PER OZ. 
 
 1700 to 1709 7 9s. 2d. 
 
 1709 to 1720 5, 10s. 6s. 10y 2 d. 
 
 1720 to 1723 5, 10s. 7s. 5d. 
 
 1723 to 1726 6, 6s. Gd. 8s. 3d. 
 
 1726 to 1730 6, 3s. 9d. 8s. Id. 
 
 1730 to 1738 6, 9s. 3d. 8s. 9d. 
 
 These data show a rise in the value of the precious metals of 
 about 20 per cent, between 1723 and 1738, while commodity prices 
 in currency remained at the level of the silver and paper prices 
 of 1723. The exchange on London during the period under discus- 
 sion is stated by Walker, Sumner and other authorities as 160 to 
 180. This was due to a rise in bullion as compared either with 
 commodities in general or the home currency, and to the difficulty 
 of transporting the bullion, or of obtaining bills on London. The 
 rise of bullion was caused by the scarcity of it in the colonies and 
 the necessity of obtaining it or exchange, which was also scarce, 
 in order to pay rents, etc., in England. 
 
 In Massachusetts, where by over-issue the paper money greatly 
 depreciated in reference to commodities, this depreciation together 
 with the rise in bullion, produced an exchange of 500 in 1737 and 
 1100 in 1749. 2 That the rise of exchange to 160 or 180 in the middle 
 colonies, New York, New Jersey and Pennsylvania, was not due 
 to a depreciation of the paper was clearly shown by Franklin in his 
 famous reductio ad absurdum. 
 
 "If the rising of the value of any particular commodity wanted 
 for exportation is to be considered as a depreciation of whatever 
 remains in the country, then the rising of silver above paper to 
 that height which its capability (and need) of exportation only 
 gave it, may be called a depreciation of the paper. Even here (in 
 England where he was writing) as bullion has been wanted or 
 not wanted, for exportation, its price has varied from 5s. 2d. to 
 5s. 8d. per oz. This is near 10 per cent. But was it ever said or 
 thoughtonsuchan occasion that all the bank bills and all the coined 
 silver and all the gold in the kingdom were depreciated 10 per 
 cent.? Coined silver is now wanted here for change, and 1 per 
 cent, is given for it by some bankers. Are gold and bank notes 
 therefore depreciated?" 3 
 
 The great philosopher then states that silver had risen because 
 of the demand for it for exportation, and that exchange on Lon- 
 don was at a still further premium, rising above bullion, since 
 it saved the expense and risk of transporting gold or silver. In 
 part his statement is as follows: 
 
 "It has, indeed, been usual with the adversaries of a paper cur- 
 rency to call every rise of exchange with London a depreciation 
 of the paper; but this notion appears to be by no means just, 
 for if the paper purchases everything but bills of exchange at the 
 
 Four-fifths of the currency did not rest upon land at all, but was 
 Issued against taxes In moderate volume and kept its value because it was 
 a full legal tender, receivable for all dues public and private and was not 
 issued in excessive quantities, but kept pace in its increase with the growing 
 needs of business. 
 
 0) Macfarlane, pp. 73-4. 
 
 ( 2 ) Walker on "Money," p. 321. 
 
 ( 8 ) Franklin's Works, Vol. II., p. 350. 
 
166 APPENDIX A. 
 
 former rate, and these bills are not above one-tenth of what is 
 employed in purchases, then it may be more properly and truly 
 said that the exchange has risen, than that the paper has depre- 
 ciated. And as proof of this, it is a certain fact that whenever in 
 those colonies (New York, New Jersey and Pennsylvania) bills of 
 exchange have been dearer, the purchaser has been constantly 
 obliged to give more in silver, as well as in paper, for them, the 
 silver having gone hand in hand with the paper at the rate above 
 mentioned. 1 
 
 A diagram frequently serves to place in a very clear light the 
 relations between two movements. Let us compare in this way 
 the movements of money and prices. The Pennsylvania issues and 
 circulation were as follows: 2 
 
 DATE. ISSUES. CIRCULATION. 
 
 1723 15,000 15,000 
 
 1729 30,000 45,000 
 
 1739 35,000 80,000 
 
 1746 5,000 85,000 
 
 1749 85,000 
 
 1756 30,000 115,000 
 
 1757-9 300,855 415,855 
 
 1760-9 5,000 420,000 
 
 1771 15,000 435,000 
 
 1772 25,000 460,000 
 
 1773 11,000 471,000 
 
 1774 150,000 621,000 
 
 1775 158,000 779,000 
 
 As to the movement of prices, Mr. Macfarlane finds a "sharp and 
 seemingly permanent rise" about 1749 in the prices of leading ex- 
 ports. Speaking of prices before 1723 and after 1749, he says: 
 
 "While those commodities that were produced largely for home 
 consumption or were imported into the province show no material 
 advance in price, those that fig'ured largely in their exports had 
 advanced 100 per cent." 3 
 
 "Looking at the details of his data we find that some imports, 
 as wine, increased in price, and that while the average prices of 
 staple exports remained high after 1749, yet the price of any single 
 article of export vibrated up and down, sometimes falling to the 
 level of 1747 and 1748 or lower, but speaking generally Mr. Mac- 
 farlane's statements are borne out by his tabulated data. Putting 
 these two sets of fact?: together we have the following results: 
 
 0) Ibid., p. 351. 
 
 ( 2 ) Tabulated from Phillips Hist, and Penna. Laws and Records. The 
 issues, or parts of issues used to replace former issues are omitted, as they 
 did not affect the volume in circulation. In 1739 a committee of the As- 
 sembly reported the circulation as 80,000, and in 1745 this circulation was 
 continued for 16 years. In 1753 a struggle began between the people and the 
 English government in respect to further issues. Up to this time the issues 
 had been on interest and payable in instalments, but subsequent issues were 
 against taxes simply. From 1760 to 1769 inclusive 205,000 were issued and 
 200,000 withdrawn. The 150,000 issue was voted in 1773, dated October 
 and issued mostly in 1774. 
 
 ( 3 ) Annals, etc.. supra, p. 70. 
 
t^NNSYLVANIA CURRENCY. 
 
 1749 
 
 ief 
 
 1775 
 
 GENERAL 
 PRICE 
 
 LINE OF 
 EXPORTS 
 
 1723 
 
 GENERAL 
 
 JNt OF 
 
 CURRENEY 
 
 VOLUME l5Miuio45 
 
 1723 
 
 80 
 1739 
 
 85 85 115 415 
 
 1746 1749 1756 1759 
 
 460471 773 
 1772 1773 1775 
 
 PENN. CURRENCY 
 PER CAPITA^ 
 
 1 
 
 -/ 
 
 i 
 
 1723 
 
 2 
 1749 
 
 1 1 1 1 
 2.1 7 6 II 
 1756 1760 1772 177 
 
 Dec 
 
 It is clear that the rise of prices in 1749 could not have been 
 caused by an increase of currency in 1756 to 1759. At the time of 
 the rise and for seven years after the currency was practically 
 at a level, and when we come to the period of paper increase, 1756 
 to 1759, we find prices gliding smoothly along, showing some little 
 ripples from ;year to year and from month to month, but on the 
 whole quite level thruout the period under consideration. Tak- 
 ing an average of all the staples in Mr. Macfarlane's tables, 1 includ- 
 ing exports and taking the prices of 1749 as a standard we have 
 the following: 
 
 GENERAL PRICE LEVELS. 
 1749 100 
 
 1758 98 
 
 1759 106 
 
 1760 : 101 
 
 1773 112 
 
 1775 . 106 
 
 (*) If, instead of summing the prices and dividing by the number of 
 commodities, we find the quantity of each article that could be bought for $1 
 in 1741) and then ascertain the prices of the said quantities In subsequent 
 years and sum the results, we shall discover that, by this method, the price 
 level of 1775 was precisely the same as that of 1749, using the commodities 
 listed by Macfarlane, p. 70, Annals, supra, so far as data are available. 
 
168 APPENDIX A. 
 
 It might be supposed that the increase of money had something 
 to do with the rise from 1758 to 1759, but if so, the paper lost its 
 effect in 1760, when the volume reached its height. Moreover, it is 
 difficult to account, by means of the currency, for the drop be- 
 tween 1773 and 1775 in face of a great increase in the volume of 
 circulation. 
 
 These averages vary much less from year to year than the prices 
 of any one commodity in different years or even in different 
 months of the same year; and if we had data for a hundred repre- 
 sentative articles in place of the fifteen staples of Mr. Macfar- 
 lane's tables, we should probably find the average of prices prac- 
 tically identical every year from 1749 to 1775. 
 
 Whether the replacement of other forms of exchange and the 
 rapid increase of business absorbed the issues of 1756-9, or the 
 notes of Pennsylvania circulated more freely in other colonies than 
 the bills of other colonies circulated in Pennsylvania, I do not 
 know; but it seems reasonably certain that the notes of Pennsyl- 
 vania did not depreciate from 1723 to 1775. 
 
 Phillips, speaking of the period from 1723 to 1738, says (p. 19) : 
 
 "During an this time the notes, having ample provision made for 
 their ultimate extinction, circulated freely at their value, super- 
 seding the bills of other colonies, which had until then consti- 
 tuted the chief part of the currency." 
 
 After summing up a longer time and looking back on the whole 
 period before the Revolution, Phillips says (p. 30) : 
 
 "The early notes of the colony seem to have kept their credit 
 well, and had not the revolution intervened they would all have 
 been redeemed at par," as ample provision was made by taxation, 
 etc., for their extinction. But the battle of Lexington roused the 
 colony, and the over-issues of the war together with British coun- 
 terfeits, completed the work of destruction begun by Act of Parlia- 
 ment. 
 
 Franklin's wisdom and the success of paper money in Pennsyl- 
 vania, ATew York and other colonies did not stop the English move- 
 ment to deprive the colonies of the power of issuing paper, and in 
 1764 and 1773 Parliament passed acts restraining the issue of oills, 
 and destroying the legal tender of the paper currency. The results 
 were disastrous. 
 
 Peter Cooper, the great New York financier, was a deep student 
 of the philosophy of money. His letters on the currency in pamph- 
 let and newspaper form attracted wide attention. 
 
 In reference to the subject now before us, we note the following 
 striking words from his pen: 
 
 "When Franklin was brought before the Parliament of Great 
 Britain and questioned as to the cause of the wonderful prosperity 
 growing up in the colonies, he plainly stated that the cause was 
 the convenience they found in exchanging their various forms of 
 labor one with another by paper money, which had been adopted; 
 that this paper money was not only used in the payment of taxes, 
 but in addition it had been declared legal tender. f It rose two and 
 three per cent, above the par of gold and silver, as everybody preferred 
 its use. One of its advantages was its security against theft, as it 
 could be easily carried and hidden on account of its having no bulk, 
 as all kinds of specie must necessarily have. After Franklin ex- 
 plained this to the British Government as the real cause of pros- 
 perity they immediately passed laws forbidding the payment of 
 taxes in that money. This produced such g-reat inconvenience and 
 misery to the people that it was the principal cause of the Revolu- 
 tion. A far greater reason for a general uprising than the tea 
 and stamp act was the taking away of the paper money." 
 
 President Walker says that much of the force of the Revolu- 
 tionary movement is attributed to "the chafing of the colonists 
 
PENNSYLVANIA CURRENCY. 169 
 
 imder the restriction and final prohibition of paper money by the 
 Crown." 1 
 
 Rev. John Twells, of London, an able English writer, says of 
 the colonial paper: 
 
 "This was the monetary system under which the American col- 
 onists prospered to such an extent that Burke said of them: 
 'Nothing in the history of the world is like their progress.' It was a 
 wise and beneficial system and its effects were most conducive to 
 the happiness of the people. Half the value of his land was ad- 
 vanced to the head of the family in notes which circulated as 
 money. With these notes he could hire labor and purchase imple- 
 ments of husbandry and cattle; and thus, where without these 
 notes, one acre could be cleared and stocked in a year, ten 
 would, by the assistance of the paper money advanced, be re- 
 claimed from the forest and rendered productive. In an evil hour 
 the British Government took away from America its 'representa- 
 tive money,' commanded that no more paper bills of credit should 
 be issued, that they should cease to be legal tender; and collected 
 the taxes in hard silver. This was in 1773. Now mark the con- 
 sequences. This contraction of the circulating medium paralyzed 
 all the industrial energies of the people. Ruin seized upon these 
 once flourishing colonies; the most severe distress was brought 
 home to every interest and every family; discontent was urged 
 on to desperation, till, at last 'human nature' as Dr. Johnston 
 phrases it, arose and asserted its rights." In 1775 the Congress 
 first met in Philadelphia. In 1776 America became an independent 
 State. 8 
 
 0) Money, p. 310. See also Professor Wm. G. Sumner's Hist. Amer. 
 Currency, p. 30. 
 
 ( 2 ) Cited by Hon. John Davis, February Arena, 1894, p. 364. 
 
APPENDIX B. 
 
 ENGLAND. 
 
 (See reference, page 20.) 
 
 In 1793 England went to war with France. Coin began to be 
 hoarded and to go abroad. A financial stringency followed, and 
 business was seriously affected. The Bank of England, unable 
 to collect its loans, and fearing the drain of specie with so large 
 a mass of its bills outstanding, began to contract its circulation. 
 This embarrassed the country banks and they began also to con- 
 tract. In 1796 a rumor of French invasion caused a run upon the 
 country banks, and in consequence they made heavy demands on 
 the Bank of England. The specie reserve was reduced to 1,000,000, 
 when the bank was forbidden by order of Council to make further 
 payments in specie, and in 1797 Parliament passed an act suspend- 
 ing" specie payments. From that time on England carried on the 
 war with Napoleon with inconvertible paper money, and during 
 the first ten years at least, the issues being managed with pru- 
 dence and firmness, so that the volume of money did not exceed 
 the needs of business, the bills retained their value, and prices as 
 a whole, after rising out of the depression caused by the flight 
 of coin and the panic contraction of the circulation, remained 
 substantially on a level with those that had obtained before the 
 suspension of specie payments. 1 
 
 In later years the bills were issued more heavily, and in 1809 the 
 mint and the market price of bullion began rapidly to diverge. 
 This may or may not have indicated a depreciation of the paper; 
 it may have been a mere rise of gold. The true test of deprecia- 
 tion in time of war is the general rise of home products above 
 their usual price level. There is reason to believe that these prices 
 did rise decidedly in later years 2 but it is matter of common knowl- 
 edge that for ten years or more after the suspension, while the 
 bills were not issued in excess, England's independent "irredeem- 
 able" paper money did not depreciate, but retained substantially 
 the same value that gold of equal stamp possessed before the war. 8 
 
 At the opening of the war with France, the circulation of Great, 
 Britain, according to the estimate of the Lord's Committee of 1819, 
 was as follows: 
 
 Coin 25,000,000 
 
 Bank of England Notes 10,500,000 
 
 Country Bank Notes 7,000,000 
 
 Total 42,500,000 
 
 As we have said there was in the first three years a contrac- 
 tion of the note circulation, which together with the retirement 
 of large amounts of coin caused marked financial stringency and 
 commercial distress. The Government gave relief by lending money 
 to merchants and others. 4 On the suspension of specie payments 
 
 O Tooke's Hist, of Prices, showing that while war produced some fluctu- 
 ations and carried the prices of certain articles to an extravagant height, 
 yet exchanges were on the whole as favorable during the first 10 or 12 years 
 of the suspension as they had been on an average of 96 years, or of any 
 10 consecutive years preceeding 1797. See also Walker on "Money," p. 351. 
 
 ( 2 ) According to Jevons' tables the price level of 1809 was 20 per cent, 
 above the level of 1799. 
 
 ( 3 ) Professor Dunbar in Quarterly Journal of Economics, Vol. 6, p. 333. 
 
 ( 4 ) Pitt's government offered to lend on excellent terms. Over ten 
 million dollars was loaned on personal security, and $936,000 on goods the 
 whole was faithfully repaid, much of it before maturity. (See Doubleday's 
 "Financial Hist, of England., p. 137). 
 
ENGLISH CURRENCY. 
 
 171 
 
 and issue of notes for Government expenses, the paper circulation 
 of the Bank of England grew as follows: 1 
 
 February, 1797 9,674,780 
 
 February, 1800 16,844,470 
 
 February, 1805 17,871,170 
 
 February, 1810 21,019,600 
 
 February, 1815 27,261,650 
 
 That is, the notes of the Bank of England were tripled in 18 
 years. Considering the disappearance of coin and the increase of 
 country bank bills, it seems probable that the total circulation 
 was not much increased till after 1805, but by 1815 it may have 
 been 80 to 100 per cent, greater than in 1797 2 a per capita change 
 from $14 per head in 1797 to about $21 per head in 1815. 
 
 The war ended in 1815. The average paper price of gold, which 
 in 1814 stood at 5, 4s. per oz., fell to 4, 13s. 6d., where it re- 
 mained through 1816, 3, 17s. ~LQy 2 d. being the mint value. In 
 1817 the premium fell until, as Mr. Tooke says, there was "a spon- 
 taneous readjustment of the value between gold and paper to a 
 perfect equality." This restoration of the value of the bank note 
 coincided with an enlargement of the bank issues as compared 
 with any previous period. 3 The "spontaneous readjustment" was 
 due in this case to contraction of the currency, as we shall see in 
 a moment. 
 
 Lord Liverpool became Prime Minister in 1812 and remained at 
 the head of the Government until 1827. He was a firm believer 
 in metallic money from hereditary attachment to the doctrines of 
 his father, who (see his "Essay on Coins") was not only a metallist, 
 but a believer in the gold standard for the reason that the richest 
 country in the world should use the most costly metal. 4 Lord 
 Liverpool's influence was one of the causes of the adoption of the 
 contraction policy. It is said that another powerful cause of the 
 change of policy was the great accumulation of capital in interest- 
 bearing debts. 5 The wealthy holders favored a policy that would 
 increase the value of these bonds and of all loans and mortgages, 
 as well. 6 
 
 The first contraction was by arrangement between the Govern- 
 ment and the Bank in 1815 and 1816. The Bank of England and 
 its country subordinates reduced their circulation the country 
 banks by nearly one-half in 1816 and 1817. 7 "Gold fell almost to 
 the mint price (i. e. almost to par). Wheat fell 64s. a quarter, and 
 
 (!) Doubleday, pp. 232-7. 
 
 ( 2 ) Financial Hist. Eng., pp. 234-7. The country banks were estimated at 
 200 in 1797, 702 in 1809, and 940 in 1814. High banking authority estimated 
 the country bank notes in 1815 at 40 to 50 million pounds. The committee on 
 the currency in 1819 at 30 million sterling. Mr. Sedgwick and Robert Mushet 
 lower even this estimate somewhat. 
 
 ( 3 ) Tooke's Hist. Prices, ii., 52, 60-1. At this time the Bank of England 
 offered to redeem their 1 and 2 notes, and as these notes were chiefly in the 
 hands of the poorer classes, no inconvenience resulted, not more than 
 1,000,000 being paid out. In October the bank announced that it would 
 pay gold for all its notes issued before 1817, but the demand for gold was so 
 great that the banks had to recede from this position. (Walker on "Money," 
 p. 355 et seq.) 
 
 (*) If it did it would not use gold; platinum and several other metals are 
 more costly than gold. 
 
 ( 5 ) Brooks Adams, Fortnightly Review, August, 1894. 
 
 ( 6 ) The public debt, which was 1,200 million dollars in 1793 amounted to 
 4,200 millions in 1817. Pitt paid the interest in notes, believing that money 
 which was good enough for the people was good enough for the bondholders. 
 Not only had the debt increased enormously, but a large number of offices 
 had been created, and these officials like the owners of bonds and mortgages 
 were very favorable to specie payments and the "preservation of the public 
 honor." 
 
 ( 7 ) "Resumption in Great Britain," by J. W. Schuckers, 1877. 
 
172 APPENDIX B. 
 
 such a scene both of agricultural and commercial distress ensued as 
 this unhappy country had at that time never before witnessed." 
 In 1817 the Government relented for a time, and permitted an ex- 
 pansion amounting to 15 millions of dollars, which did much to 
 restore confidence and prosperity. At the close of 1817, however, 
 and thruout 1818 a crisis occurred which Mr. Tooke attributes 
 to the contractional disturbance caused by large loans negotiated 
 in England for the French and Russian Governments. 
 
 The second attempt by the Government to adopt the policy of 
 contraction occurred in 1819 and was successful; i. e., the policy 
 was adopted. "Peel's Bill," as it is called, providing for the re- 
 sumption of specie payments at a specified date three years distant, 
 was introduced into the Commons on May 24th and passed June 
 23d amid a pandemonium of excitement. 1 
 
 The Directors of the Bank of England, true to the interests oi 
 their country, opposed the measure, declaring that the rapid con- 
 traction they would be compelled in self defense to make in order 
 to resume at the required time would ruin the industrial interests 
 of the nation. Eminent bankers and merchants of London and 
 other cities also opposed the bill. Lord Liverpool admitted in his 
 speech upon the bill that "the commercial world would always be 
 against the return to specie payments." He also said that "there 
 could be no doubt of the advantages which the paper system had 
 produced during the war." It had enabled the country to make 
 efforts to which its means could not otherwise have been equal, 
 and he readily admitted that in peace also the system afforded 
 facilities to commerce which it would not otherwise enjoy. But 
 paper money had no intrinsic value; it did not accord with his 
 father's theories, and it was not as good for the bondholders as 
 gold and silver "would be, and so the law was passed in 1819. 
 
 The contraction of the currency was pushed with vigor, 2 prices 
 began to fall, merchants and manufacturers failed by the score, a 
 terrific panic ensued in 1825, and for a whole generation the busi- 
 ness of Great Britain was depressed by the evil consequences of 
 the fall of prices that resulted from the contraction policy of 
 1818-9. 
 
 In 1829 prices were about one-half what they were in 1809, and 
 in 1849 they were 60 per cent, below the level of 1809. 3 "With the 
 first measures for resumption." says Robert Mushet, "the pros- 
 perity of the country seemed to vanish." 
 
 In 1839 Lord Brougham said that he had always regretted having 
 supported Peel's Bill for resumption. Jean Baptiste Say, the great 
 French economist, closes an extensive review of the resumption 
 period in England by declaring that "the privileged classes, the 
 public functionaries, the pensioners of the State, and the fund- 
 holders, profited by the enhancement in the value of money," con- 
 sequent upon the resumption act, "but that it laid a burden upon 
 the masses of the people and upon industry which so rich and in- 
 dustrious a nation could alone support." 
 
 We know that Mr. Tooke endeavors to persuade us that Peel's 
 Bill and the consequent contraction did not produce the disasters 
 of the following years; but Mr. Tooke was one of the projectors 
 
 () Ibid., quoting Sir James Graham. 
 ( x ) Corbett's Parliamentary History. 
 
 ( 2 ) The bank reduced its private discounts from 32 millions of dollars in 
 August, 1819, to 13% millions in August, 1821, and its paper circulation from 
 131 millions in August, 1818, to 88 millions in August, 1822, a reduction of 
 33 per cent., accompanying which there was a contraction of country bank 
 circulation between January, 1819, and December, 1822, of more than 80 
 per cent. (Resumption in Great Britain, 1819-22; by J. W. Schuckers.) 
 
 ( 3 ) Jevons' Price-levels. See also Mulhall's Dictionary of Statistics, title 
 "Prices." 
 

 ENGLISH 
 
 and promoters of the bill, and his testimony on this point is of 
 little weight against the limitless mass of evidence to the contrary, 
 backed by the whole force of economic principles as expounded 
 by all the leading writers, and by the analogies of every period 
 of serious contraction of which we have any record since the world 
 began. 
 
 If instead of adopting the policy of contraction, England had 
 done as France did in 1870 and following years, and expanded the 
 currency with easy loans on the slightest symptoms of business 
 depression, the disasters of the period of falling prices might have 
 been avoided. The condition of affairs in England under an ex- 
 panding currency during the Napoleonic wars, and under contrac- 
 tion in the following decades, is so strikingly parallel to the state 
 of things in this country during the war expansion of 1860 to 1865> 
 and the epoch of contraction following it, and the story is told with 
 so much power by Sir Archibald Alison, the great historian of 
 Europe and of England, that we quote a few passages from his 
 "England in 1815 and 1845." Speaking of the period from the 
 suspension of specie payments to the beginning of contraction, he 
 says: 
 
 "The next eighteen years of the war, from 1797 to 1815, were, as 
 all the world knows, the most glorious, and taken as a whole, the 
 most prosperous which Great Britain had ever known. Ushered 
 in by a combination of circumstances the most calamitous, both 
 with reference to external security and internal industry, it ter- 
 minated in a blaze of glory and a flood of prosperity which have 
 never since the beginning of the world descended upon any nation. 
 
 * * Agriculture, commerce, and manufacture had increased in un- 
 paralleled ratio; the landed proprietors were in affluence; wealth to an 
 unheard-of extent had been created among the farmers. * * * In the 
 years 1813 and 1814, being the twentieth and twenty-first of the 
 war, Great Britain had above a million men in arms in Europe and 
 Asia, and remitted 11,000,000 yearly in subsidies to continental 
 powers. Yet was this prodigious and unheard-of expenditure so 
 far from exhausting either the capital or resources of the country 
 that the loan of 1814 was obtained at a lower rate than that paid 
 at the commencement of the war." 
 
 Contrast this with what Mr. Alison says of the post-contraction 
 period from 1819 to 1845, the year in which he wrote: 
 
 "Considered in one point of view, there never was a nation which 
 in an equal space of time had made so extraordinary a progress; 
 its population had advanced from 20 millions in 1819 to 28 millions 
 in 1844; its imports from 30 million pounds to 70 millions; its 
 exports from 44 million pounds to 130 millions; its shipping from 
 2,350,000 tons to 3,900,000. There never, perhaps, was such a growth 
 in these great limbs of industry in so short a period in any other 
 State. * * * 
 
 "Considered in another view, there never was a period in which 
 a greater amount of financial embarrassment has been experienced 
 by the Government, or more widespread and acute suffering en- 
 dured by the people. * * * The government was brought to 
 such a pass that it was extricated from absolute insolvency only 
 by the re-imposition, during European peace, of the war income tax. 
 
 * * The nation during the late years of the war prospered 
 and experienced general well-being under an annual taxation of 
 72,000,000 drawn from 18 million souls; in the latter years of 
 peace it has, with the utmost difficulty, drawn 50,000,000 from 
 a population of 27 millions. Wages in the former period were hign, 
 employment abundant, the working classes prosperous, with an 
 export of 45 to 50 million pounds annually; in the latter, wages 
 were in many trades low, employment difficult, suffering general, 
 with an annual export of 120 to 130 million pounds. 
 
174 APPEND!* ii. 
 
 "But extraordinary and apparently inexplicable as these facts 
 may seem, they are yet exceeded in marvel by the details of our 
 social and economical state during this period of unparalleled in- 
 crease in our material resources. It may safely be affirmed that 
 the anxiety and distress which were felt during that brilliant 
 period of National growth have never been surpassed, at least in 
 a State possessing the external mark of prosperity. It is well 
 known to what straits the Bank of England has been reduced on 
 two different occasions in that period. In December, 1825, we 
 were, as Mr. Huskisson said, 'within twenty-four hours of barter.' 
 
 * * * 
 
 "The distress among the mercantile classes for years after the 
 dreadful crisis of December, 1825, of the agricultural interests 
 during the low prices from 1825-1832, and of the whole community 
 from 1837 to 1842, was extreme. Wages sank (during these disas- 
 trous periods in the manufacturing districts so low that the;y 
 barely sufficed with the great bulk of workers, especially femaleb, 
 for the support of existence. * * * 
 
 "While population was advancing with unparalleled strides in 
 the manufacturing districts, pauperism even more than kept pace 
 with it all, and the extraordinary fact has now been revealed by 
 statistical researches that, in an age of unbounded wealth and gen- 
 eral and long-continued peace, a seventh part of the whole inhabi- 
 tants of the British Islands are in a state of destitution, or pain- 
 fully supported by legal relief. * * * While 70 thousand persons 
 have among them an annual income of 200 million pounds, or 
 $14,000 each * * * frightful strikes among workmen, attended 
 with boundless distress among, and hideous democratic tyranny 
 over them invariably succeeded those periods of suffering, as pesti- 
 lence stalks in the rear of famine; and popular insurrection has 
 become so common that it is a rare thing to see two years pass 
 over without martial law being of necessity practically enforced 
 in some part of the empire. * * * And as if to bring this chaos 
 of contradictions to a perfect climax, at the very time when un- 
 heard of exertions have been made for the education of the people 
 in every part of the empire, and the newly aroused fervor of re- 
 ligion in all denominations of Christians has drawn forth un- 
 paralleled efforts for the diffusion of the gospel among the working 
 classes, crime has made unexampled progress in every part of the 
 empire; and the scandal has been exhibited of serious and detected 
 offenses having multiplied sevenfold in a realm which, in the same 
 period has not added more than 70 per cent, to its. population;' in 
 other words, during a period of unparalleled growth of wealth 
 and effort at instruction, crime has augmented ten times as fast 
 as the numbers of the people. * * * What we do say is un- 
 paralleled is the co-existence of so much suffering in one portion 
 of the people, with so much prosperity in another. * * * There 
 is food enough in the land and to spare, the surplus of it produced 
 by our cultivators is daily and rapidly on the increase. * * 
 Nor are our resources in any way approaching the natural limits. 
 
 * * * Capital exists and to profusion, amply sufficient to give 
 full and profitable employment to the whole community. Labor 
 adequate to any possible expansion of industry is at nand. Above 
 two millions of destitute persons are pining for employment in 
 Ireland alone. Our colonies are increasing with unheard of rap- 
 idity. * * Yet with all this, great and wide-spread distress 
 generally exists among the working poor, and whole classes of 
 society in the more affluent ranks are gradually slipping down to 
 a state of insolvency. * * * 
 
 (The cause) A. "In investigating the cause of this extraordinary 
 state of things, one fact of leading importance must at the very 
 first glance strike the observer. It is that the opulence wliicli lias 
 
ENGLISH CURRENCY. 175 
 
 flown into the nation has been very far indeed from being evenly dis- 
 tributed; and that, generally speaking 1 , the landed interests have 
 been as much impoverished during that time as the commercial 
 have been enriched. * * * The embarrassments of the landed 
 proprietors are, with the exception of a few magnates, notorious 
 and universal. This is decidedly proved by the prodigious extent 
 to which commercial wealth is everywhere buying up the estates 
 of the old gentry, and rooting them and their families out of the 
 land. And what is very remarkable, this state of things is just the 
 reverse of what it was during the war. Agricultural industry was 
 then not only amply but splendidly remunerated; the farmers 
 rapidly made fortunes, and laid the foundation of the whole sub- 
 sequent agricultural progress of Great Britain; and the purchase 
 of land with borrowed money was nearly as certain a mode of 
 making a fortune as it has since become of losing one." 
 
 B. "The next remarkable feature in the social state of Great Britain 
 for the last quarter of a century has been that capital has daily 
 acquired a greater advantage over industry, or rather, large capital 
 over small. * * * The colossal fortunes made by manufacturers 
 and great capitalists, contrasted with the innumerable bankrupt- 
 cies of lesser adventurers in the same perilous path, is a proof. 
 
 The common complaint that the money power has become 
 all-powerful, that its sway is paramount in the legislature, and 
 that it is able to set all other interests in the community at defi- 
 ance, is another proof. And a most decisive proof of the universal 
 sense of the overwhelming, and often despotic influence of capital, 
 has been afforded within this period by the astonishing multipli- 
 cation of joint stock companies. * * * Falling as they generally 
 do under the entire guidance of one or two active and skilfull di- 
 rectors, they have in effect enormously augmented the influence, 
 already preponderating, of accumulated capital; they often commit 
 practically with impunity unbounded inroads on private property. 
 The obligation of giving compensation for property injured or 
 taken is often rendered almost illusory, from the results of trials 
 to ascertain its value. Defying competition, such companies art 
 often deaf to the cries of justice. Industrial, as the French say, 
 has come in place of territorial feudality; and probably men have 
 already discovered in many parts of the country, that a joint stock 
 railway company, with its patriotic professions, accumulated capital, 
 legislatorial attorneys, skilled engineers, scientific witnesses, railway 
 stockholding jurymen and judges, and legions of Irish laborers, is a 
 more formidable neighbor than erer iras feudal baron with his mailed 
 men-at-arms, stout archers and strong castles." 
 
 C. "The third feature is the uprecedented growth of the city. 
 Generally speaking, the city population has immensely increased, 
 and the rural by no means in the same proportion. In some 
 counties the latter appears from the late census to have actually 
 declined. * * * Nor has the increase of opulence in cities been 
 less remarkable than the augmentation in the number of their 
 inhabitants. The daily display of wealth in the metropolis excites 
 the astonishment of every beholder. * * * But there are by 
 no means the same symptoms of growing prosperity in the rural 
 districts. * * * The farmers are contented if they can live; to 
 make fortunes has become so rare among them that it is scarce 
 ever thought of. * * * Wealth is not accumulating in the hands 
 of the cultivators of the soil. * * * The affluence of the towns 
 is derived from manufacturing and commerce, from professional 
 gains, or from capital rendered a burden on land in former times." 
 
 D. "The 1-xst feature, and it is a most distressing one, is the 
 extraordinary inequality in the condition of the working classes them- 
 selves. * *' * Wages differ in a remarkable and most distressing 
 
1T6 APPENDIX B. 
 
 degree. * * * It is the condition of the poor of the lowest grade which 
 is the most extraordinary feature of the last 20 years, and which 
 has now assumed such a magnitude as to havt become in every 
 point of view a national concern. * * * In every great town 
 in the empire there is a mass, about the twelfth or fifteenth of 
 its number,who are generally in a state of almost total penury. In 
 periods of commercial distress this destitute class rises to double, 
 sometimes triple its average amount. It is from this frightful 
 tribulation of poverty, intemperance, vice and destitution, that 
 two-thirds of the physical contagion which ravages, and four-fifths 
 of the convicted crime which burdens society, takes its rise. * 
 This desolate community consists of widows with large families, 
 destitute old men, young thieves, abandoned drunkards, licentious 
 prostitutes, shameless publicans, audacious receivers of stolen 
 goods, and once virtuous families, brought into such hideous so- 
 ciety by being thrown out of employment. And all this exists un- 
 noticed, unrelieved, within a few hundred yards of the most 
 unbounded opulence, amidst luxury unheard of, prosperity unex- 
 ampled, and in a community making more rapid progress in ma- 
 terial resources than any that ever appeared upon the earth." 
 
 E. It was said that this distress of the industrious classes was 
 owing to the transition from the vast National expenditures of 
 war times to the limited expenditures of peace. But Mr. Alison 
 replied that it was "rather too late to speak of that as the cause 
 when they were already in the thirtieth year of unbroken Euro- 
 pean peace." Then it was affirmed that protection was the cause 
 of the aforesaid evils, and the tariff duties were repealed, but the 
 condition of the English laborer continued to be most pitiable. 
 
 Having disposed of these false theories, Mr. Alison asks, "What 
 was the real cause?" "The answer is: It was the contraction of 
 the currency which was unnecessarily made to accompany the resump- 
 tion of cash payments by the Mil of 1819, which has been the chief 
 cause of all these effects." 
 
 " When the commercial transactions of a nation increase, the 
 circulating medium should increase also. This is as necessary a 
 step as that when a people increases, their subsistence should be 
 augmented in a similar proportion. If twenty millions of men 
 on an average of years and transactions require 40 millions of cir- 
 culating medium to conduct their transactions, then if these men 
 swell to 30 millions, they will require, other things being equal, 
 60 millions of money for their transactions. If a supply propor- 
 tioned to the increase of men and the wants of their commercial 
 intercourse is not afforded, the circulating medium will become 
 scarce, it will rise in price from the scarcity and become accessible 
 only to the more rich and affluent classes. The industrious poor, 
 or those engaged in business with small capital, will be the first 
 to suffer; they will find it impossible to get currency to carry on 
 their business and will fail in consequence. To retain the circu- 
 lating medium of a country at a stationary or declining amount, 
 when the numbers are rapidly increasing and their transactions 
 are daily augmenting in number and importance, is the same thing 
 as to affix a limit to the issuing of rations to an army at a time 
 when the number of soldiers it contained was constantly augment- 
 ing. The inevitable result would be that numbers would be 
 famished." 
 
 Could there be a more vivid and lifelike picture of events in the 
 United States since 1865 than this pen picture of Great Britain 
 in 1845 by the great, clear-sighted, true-hearted historian of Eng- 
 land? And not merely the post-bellum periods are of identical 
 character in the two countries, but the prior period in each is 
 also the same. Coin money fled when the war broke out. Paper 
 
ENGLISH CUBBENCY. 177 
 
 was issued. Specie payments were suspended December 28, 1861. 
 The currency began to expand, prices rose, business was active. 
 The war and expansion combined to employ all labor. Either cause 
 would have been likely to produce that effect, but together they 
 were sure to produce it. Manufactures, commerce, agriculture and 
 labor nourished. Wages were high; capital well paid. Wealth in- 
 creased at a marvelous rate in spite of the tremendous drain of 
 the war. At the close of the war the people were nearly free 
 from debt (except the National "debt, and even that was far less 
 that it was made in the process of contracting the currency) ; there 
 were about two billions of money in circulation among 25 millions 
 of people, trade was carried on for cash more largely than ever 
 before; prosperity was intense and universal. 
 
 In 186<) the policy of contraction was inaugurated, and the cre- 
 mation furnaces began to blaze. The National bonded debt was 
 built up. In 1869 it was enacted that the bonds bought with de- 
 preciated greenbacks should be paid in coin. In 1873 silver was 
 demonetized. In 1875 it was decreed that specie payments should 
 be resumed January 1, 1879. The result was that in 10 years from 
 the time contraction began, the currency had diminished one 
 billion dollars, while the people using it had nearly doubled (25 
 millions of the North in 1865, 45 millions of the whole country in 
 1876), while their business had more than trebled. And the process 
 of contraction has continued till now, for altho the absolute volume 
 of money has been increased somewhat in the last few years, it 
 has not increased as fast as population and business. Prices have 
 gone down. Wages have fallen and are distressingly unequal in 
 different places and employments. Small merchants have been 
 ruined. Strikes and panics have devastated the country. Agri- 
 culture has come to be a struggle for subsistence. The farmers 
 have petitioned for Government loans on land and agricultural 
 produce, and have been told that the tariff question was the only 
 issue in politics. Cities have grown abnormally, while rural dis- 
 tricts have in some cases declined in population. Wealth has in- 
 creased enormously. So have poverty and crime. The magnificence 
 of the millionaire, and the squalor of the tramp, have both become 
 too common to excite a moment's notice. Capital has acquired a 
 tremendous power over labor, and large capital over small. Cor- 
 porations and their abuses overflow the years. The condition of 
 the poor of the lowest grade in the slums of our cities is frightful, 
 and has become a matter of National concern. How exact and 
 minute the parallel! 
 
 The grand fact is that in England and in the United States 
 during the period of expansion, wealth was rapidly created, and 
 was well distributed, whereby prosperity and happiness ensued. But 
 during the subsequent period of contraction, tho wealth was still 
 more rapidly created it was not well distributed, and misery was 
 the result. Contraction of the currency means false distribution, con- 
 gestion of wealth, and that means tyranny, slavery, misery. 
 
 If England and the United States would re-establish the splen- 
 dors of the war time, they must increase the currency as fast as 
 business increases, and they should also take possession of the mon- 
 opolies that have grown so fast in later years, cut down the over- 
 rapid growth of great fortunes by a graded income tax and a heavy 
 inheritance fee, and make adequate preparations to employ in the 
 construction of public improvements all workmen who at any time 
 would otherwise be idle. Thus we should restore the great forces 
 that produced a diffused prosperity in the periods of war. If these 
 simple things were done, the embarrassments of our business would 
 cease, and public works could be accomplished involving perhaps 
 as vast a labor as that expended in war, not merely without im- 
 poverishing the country, but to its unexampled enrichment. 
 
NOTE ON THE REGULATION OF THE MONEY VOLUME. 
 
 The efficiency of government control over the money volume thru 
 the purchase and sale of properties (p. 127) is perfectly clear, as 
 is also* the efficiency of the "call-bond" plan (p. 126), the govern- 
 mental power to issue and recall bonds at its pleasure is the power 
 to regulate at will the volume of money. All that is necessary 
 is to provide for reasonable adjustment of interest and fair dis- 
 tribution of bonds, or purchases and sales, so as to ensure the 
 application of the remedy at the points of special need. 
 
 One of the automatic methods spoken of oil p. 127, the plan of 
 government loans, is also sufficiently clear in its operation to make 
 detailed discussion unnecessary, but the other automatic method 
 operating thru government bonds payable on demand, needs some 
 elucidation. The main likelihood of confusion arises from failing 
 to note that to make the regulation completely automatic, the in- 
 terest payable on the bonds must vary with the rise and fall of 
 prices. 
 
 Suppose a large volume of demand bonds had been issued. If a 
 scarcity of money occurs thru a shrinkage of credit or otherwise, 
 interest on business loans would go up, and persons feeling the 
 need of funds would soon find it more profitable to get money 
 for the bonds they might possess, than to keep them for the low 
 interest paid by the Government. So far automatic action would 
 go even tho the interest on the demand bonds were fixed and 
 constant. But to secure automatic return whether the bonds were 
 in possession of embarrassed or unembarrassed persons in times 
 of falling prices when men with funds are frequently willing to 
 take or keep safe investments at very low interest, and to secure 
 the taking of bonds in case of rising prices when interest on 
 ordinary business loans sometimes rises and sometimes falls, it 
 would be necessary to make the interest payable on the bonds 
 a variable one, rising rapidly as the price level ascends, and fall- 
 ing fast as the price line descends. 
 
 If it were universally true that interest falls with a rising price 
 level, and rises with a falling price level, a good volume of demand 
 bonds at a moderate fixed interest would secure complete auto- 
 matic regulation of the money volume. If prices rose and busi- 
 ness interest went down, it would soon become profitable to buy 
 bonds, thus diminishing the circulation by the amount of money 
 paid the Government for the bonds, and so checking the rise of 
 prices. On the other hand if prices fell and market interest went 
 up it would soon become unprofitable to keep the bonds on the 
 comparatively low interest paid by the Government so that bonds 
 would be returned and the currency increased by the money re- 
 ceived from the Government for them, so checking the fall of prices. 
 
 The rise and fall of interest in opposition to the rise and fall 
 of the price line is however only a part truth. In times of rising 
 prices, the abundance of money, lessened risk in lending, and com- 
 paratively small number who have severe need of borrowing, tend 
 to lower interest, but the high profits often made on a rising 
 market tend to lead men to borrow even at high interest to extend 
 their business and enlarge their profits, and the demand for and ab- 
 sorption of capital in promising enterprises also tends to lift in- 
 terest by reducing the loan fund. The result is that in times 
 of rising prices interest sometimes falls and sometimes rises. In 
 times of revulsion and falling prices "interest always rises inor- 
 dinately, because while there is a most pressing need on the part 
 of many persons to borrow, there is a general disinclination to 
 
NOTE ON THE REGULATION OF THE MONEY VOLUME. 179 
 
 lend." (Mill's Polit. Econ.; Bk. Ill, CXXIII, 3, see also 4.) The 
 disinclination to lend or invest however does not extend to loans 
 on Government bonds. The risks of production are great and 
 owners of money are unwilling- to loan and interest on business 
 loans rises, but these same money owners are anxious at such 
 times to put their money into Government bonds or other safe 
 investment even at very low interest; and the more depressed busi- 
 ness is, the less chance there is for capital in productive industry, 
 the more the money owners call for bonds. (The American, vol. 
 29, p. 249.) Interest on loans to producers or on any ordinary 
 business loans tends to rise in time of distress and falling 1 prices, 
 but the interest demanded on safe investments such as govern- 
 ment bonds tends to fall at such times. Men seek to withdraw 
 their money from the risks of production, and a large amount 
 of money accumulates in financial centers eager to invest at low 
 rates in anything- safe. 
 
 So far, therefore, as demand bonds on constant interest might 
 be held by unembarrassed persons or those having funds seeking 
 safe investment, there would be no automatic return or moneti- 
 zation of the bonds in times of distress, but on the contrary 
 there would be a demand for more bonds. On the other hand 
 so far as the bonds were held by embarrassed parties or men in 
 need of money, they would be turned into money either by demand 
 on the Government or sale to aforesaid capitalists who had with- 
 drawn or withheld their funds from ordinary investment and cir- 
 culation, and in either case the result would be an increase in 
 the available circulation, and a corresponding 1 relief from financial 
 pressure and stringency. 
 
 It is evident from this that in order to make the automatic 
 action of demand bonds certain and sufficient under all circum- 
 stances the rate of interest payable on the bonds must be made 
 a variable quantity. The law must provide (1) that as prices rise the 
 rate of interest that will be paid by the Government on the bonds 
 shall grow rapidly larger so as to create a demand for the bonds 
 that will at once bleed the plethoric currency and restore a whole- 
 some circulation, and (2) that as prices fall the rate of interest 
 that will be paid by the Government on the bonds shall go down 
 a steep incline so that it shall fall below the rate at which money 
 is willingly lent on such security, whereby the bonds will flow 
 toward the Government and the tide of money flowing- out in 
 return for them shall lift the price line ag-ain to its normal level. 
 
 It must not be forgotten that, if the reasoning of this book 
 is valid, after the Multiple Standard System is once in operation 
 times of serious depression and withdrawal of money from ordi- 
 nary investment will no long-er occur, and the hoarding of money 
 unwilling to venture on productive circulation will become a thing 
 of the past, and a factor that need not be reckoned with in the 
 problem under discussion. 
 
 It must be noted further that provision should be made to avoid 
 the massing of the bonds in the hands of moneyed syndicates 
 whereby the issue and return of the bonds mig-ht be prevented 
 from having its due effect on the general circulation. This could 
 be guarded against by limiting the amount of bonds to be held 
 by one individual or company, and by provisions securing- the 
 fair distribution of the securities in different sections of the 
 country and among the various states and cities and counties. 
 
 The third and fourth methods of reg-ulating the money volume 
 (p. 127) are not subject to the difficulties above considered. They 
 are proof against interference from the variations of market in- 
 terest, (the interest being adjusted by law in the 4th plan, and 
 the properties dealt with by the 3d plan, including some that fall 
 
180 NOTE ON THE REGULATION OF THE MONEY VOLUME, 
 
 with a falling price level and some that may rise with a falling 
 price level, and vice versa), and adequate distribution or appli- 
 cation of the remedy in any required amount at the precise points 
 where the cure is needed, is easy and natural, with the fourth 
 plan in fact the distribution will be automatic since the demand 
 for Government loans will arise at the points where money is 
 stringent and funds are needed, and loans will be returned where 
 rising prices lift the Government interest to an uncomfortable 
 height. The loans could be made thru existing banks and monetary 
 agencies, but might be much more advantageously made thru 
 postal banks.* . 
 
 There is then one automatic plan of regulation the entire effi- 
 ciency of which is as clear as anything can be made by reasoning 
 in the absence of actual experiment, and another which could 
 probably be made completely efficient by careful provisions as to 
 interest and distribution. And entirely aside from automatic 
 regulation of any kind the Government has at least two methods 
 of regulation, the ' 'call-bond" plan (p. 126) and the purchase and 
 sale of properties (p. 127), which are easily capable of being 
 operated with complete efficiency. 
 
 *Postal banks are not necessary to the success of the Multiple Standard 
 System, but they would add greatly to the ease, economy and certainty of 
 the Government's transactions, not only with reference to the regulation of 
 the money volume, but in reference to various other monetary affairs, and 
 would afford the people an absolutely safe deposit for their savings, a cheap 
 financial agency for the collection of claims, &c., an extra guard against bank 
 monopoly and a powerful aid for the accumulation of funds for purchase 
 and nationalization of railways, telegraphs, etc. A complete system of 
 national finance must include postal banks as well as National Multiple Stand- 
 ard currency. 
 
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