could never occur; merchants demand this certainty in all their dealings, and they are generally able as well as careful to secure it. If the man who is about paying for a cargo by the thousand tons has any doubt as to what constitutes an ounce in the estimation of the person who has weighed the cargo at the port of shipment, he will not make the payment until he has verified the weight by his own scales; but if there is no doubt upon that point, he pays by the weight specified in the bills of lading.

So if the man to whom payment for this cargo is being made in the form of check or draft, has no doubt as to the real value, i. e., the kind of dollars, represented by these paper orders for money, he accepts them as if they were money; but if he has doubts, he requires to be assured upon this point before parting with the bills of lading, which are paper orders for his property. The quantity or weight specified in the bills of lading being fixed, he very reasonably demands equal certitude as to the exact value he is to get in exchange.

It is absolutely necessary to have a unit of value, not only for measuring values, but for expressing their measurement accurately, because unless the several values of different objects can be thus ascertained by a common unit or valuemeasure, and unless they can be expressed in terms common to all, these values cannot be compared with the requisite degree of exactness for the purposes of trade and commerce. Without the means for such comparison industry would be paralyzed.

Contracts to pay or to receive money at a future time would never be entered into if the actual value to be paid or received at that time cannot be relied upon by both parties. The very existence of credit is therefore dependent upon the certainty of the monetary unit. The establishment of a monetary unit or fixed standard of value is, therefore, the highest duty of governments, and the more numerous and diverse the forms of money in use, the more imperative does this duty become. There is, however, another element required to make any particular kind of money really good, namely, invariability in its purchasing power, stability of

value.

We are so accustomed to measure values and to express all variations of value by money, that it requires a little effort to conceive of money itself as varying in value, but such a conception will be by no means difficult if regard is had to the distinction between price and value which has been already pointed out.

When we compare the value of any commodity with that of money, we express the result of the comparison in money value, that is, price. So we say, "This watch is worth $100," "The price is $100." Yet we can conceive of a man who has $100 saying, "The price of this $100 is such and such a watch." The jeweler buys $100 with his watch when the customer buys the watch with $100.

Variations of the relation expressed by price may, of course, be caused by a change in the value of the article, or by a change in the value of the money, or by changes in both values.

This point being made clear, it is evident that good money should not only stand the test of passing current, but it should also be definite in value and possess the further quality of stability of value. The possession of this latter quality is essential to good money, because we measure all other values by money.

Since stability of value is an essential property of good money, the question arises, how is this obtained? And then there is another question behind this, namely, how are the people to distinguish between money that possesses this quality and money that lacks it? Stability of value is assured, when, as has been the case in England for nearly half a century, only one metal is used for money, or when, as has been the case in the United States since January, 1879, all the different kinds of money in use are maintained constantly at a parity of value with the monetary unit.

The practical test of stability in the value of the money in use is general stability in prices. There is no other test, nor can any better be conceived.

IX. THE MONETARY UNIT.

It has been ascertained, by the experience of past generations, that even two kinds of money cannot possibly continue circulating side by side when once they are recognized as differing in purchasing power, i. e., in money force, because the moment any inequality of value among the ingredients of a mixed currency is discovered or even suspected to exist, that moment everybody hoards the more valuable and hurries to pass off the less valuable of those ingredients; so that in a short time the former are sifted out from the circulation and disappear, while only the least valuable ingredient of all remains accessible to the people; thus debasing the money of the community and correspondingly affecting all measurements of values, i. e., raising the prices of everything.

This natural law was first pointed out by Sir Thomas Gresham, three hundred years ago, and by reference to history it is found to have asserted itself, both before his time and since, whenever and wherever two or more kinds of money, circulating together, have been perceived, or even suspected, to have lost, or to be likely to lose, their equipoise in value. So universal and inevitable is the operation of this law that people of all lands and all tongues have defied edicts, statutes, and even military force; they have put aside old prejudices and disregarded usage, tradition, patriotism, public spirit, even what appears to be their own immediate welfare and prosperity, in the irresistible impulse to pursue a course of individual conduct which when practised by all inevitably results in restricting the money circulating in the community to the least valuable and least desirable of its ele

ments.

In such cases, of course, the sifting and hoarding is done chiefly by those who are the first to perceive the tendency toward divergence in value, and as these are generally bankers and other dealers in money, they reap whatever benefit can possibly be got out of the sifting and the hoarding, while the refuse of the circulation is put off upon laborers, artisans, farmers and other plain folk. As every mixed currency is in danger, more or less, of having the equilibrium of value among its ingredients disturbed, at some time or other. by causes beyond the control of the government and people, and of thus suffering dissolution. such currencies have been, by many writers and statesmen, altogether condemned as mischievous to the people, and the only grounds upon which they have been justified are these four First, the convenience to the people of having several kinds of money from which to select whichever best suits each occasion; secondly, economy in the use of one or both of the precious metals; thirdly, raising the volume of the circulation above what could be maintained by using only one of these metals; fourthly, the various considerations, whatever they may be, that support the doctrines of the bimetallists.

All who, for any reason, favor our present mixed currency, must, by logical necessity, assent to the proposition that the good of the people requires that the elements composing it be perserved in harmony of value, since, because of Gresham's law, that is the sole condition upon which the integrity of the currency can be secured and the volume of the circulation maintained.

This desired object can be practically accomplished only by the establishment and maintenance of a monetary unit, or a unit of value, corresponding with the denominational unit of the money system of the community.

A monetary unit is a definite weight of a particular metal of a certain fineness, established by law, to be the actual substantive value designated by the term which is the denominational unit of the money system of the country. The denominational unit of our money system is the term dollar; the monetary unit or unit of value, is 25.8 grains of gold, nine-tenths fine. It may be interesting to trace the history of this matter in the laws of the United States.

The money circulating in the colonies consisted of British, French and Spanish coins, chiefly the latter, and also of paper bills of credit emitted by the different colonial governments. In all history there is nothing so instructive, in respect to money, as the account of the various currencies that from time to time vexed the souls of the people and thwarted all industrial efforts in these enterprising and resolute_communities.* Experience, therefore, impressed the fathers of the American Union with the importance of a new departure in financial management, and hence we find that the Articles of Confederation, which stand at the threshold of our national existence, vested in Congress "the sole and exclusive right and power of regulating the alloy and value of coin struck by their own authority or by that of the respective States."

A further and more effective step in the same direction was afterward made by providing in the Constitution that the Congress shall have power to coin money, regulate the value thereof, and of foreign coins," and that "no State shall coin money, emit bills of credit, or make anything but gold and silver coin a tender in payment of debts."

"

In pursuance of these wise provisions of the Constitution, Congress, by the Act of April 2d, 1792, established the dollar as the unit of the money of account for the whole United States, and from that day to this all our conceptions of the value of things, all our computations and contracts, have been expressed in dollars. From 1792 to 1862 legal provision was made from time to time for preserving uniformity in the conventional value of whatever different kinds of money enjoyed the recognition of the Federal Government.

After 1862 monetary affairs became greatly disordered by the war, coin disap

*See Money, p. 301 et seq. F. A. Walker, New York, 1878. Money: Its Laws and History, p. 429 et seq. H. V. Poore, New York, 1877. Sumner's American Currency.

peared from general circulation, while United States Treasury notes on one side, and Confederate States Treasury notes on the other, became, under the operation of Gresham's law, the only kind of money available to the people at large, notwithstanding that, according to the best estimate, the gold coin in the country was never less than $200,000,000. When the war ended, in 1865, the Confederate currency was worthless, and the greenbacks were so depreciated that $100 in that currency would buy only about $70 in gold coin of the United States. The National Bank notes, being redeemable in greenbacks, conformed in conventional value to that depreciated currency.

The Resumption Act, and the measures taken in pursuance of it, restored to the people substantially the money intended to be guaranteed to them by the Constitution, and the last of the series of acts fixing the value of this money, based it on a monetary unit, viz., 25.8 grains of gold, nine-tenths fine. This has remained until to-day the monetary unit of the United States, and by this all values have been measured and computed since January 1, 1879.

The importance to the people of selecting and adhering to a certain weight and fineness of one metal as the monetary unit, arises wholly out of the fact that their money is manifold in form, substance and intrinsic value. Our four kinds of money, differ in intrinsic value, and therefore they can be maintained at uniform conventional and legal value only by investing one of the two metallic coinages (gold and silver) with the character of a basis or standard of value, and by force of law conferring upon the other elements of the currency, values representative of the actual value intrinsically present in that selected to be the standard.

The Government is by no means free to select either of the two coinages as the standard, but must select that of greater intrinsic value, or else, under Gresham's law, those coins will disappear from circulation. If instead of 25.8 grains of gold 4121⁄2 grains of silver had been made the monetary unit in 1873, we should now have no gold coin at all in circulation.

The monetary unit once established becomes the standard for measuring all values expressed in money, and thus it enters into all business and financial transactions, arrangements, and contracts; hence it should be always preserved at substantially the same level of value.

The progress toward simplification and method, which begun when coins were substituted for scales and weights in the measurement of copper, silver and gold, has been continued constantly in the direction of improving the coins, perfecting their accuracy, and fortifying their permanency in respect to value, and its logical conclusion is now reached in the adoption of a monetary unit, by means of which several kinds of money, varying in intrinsic value, are co-ordinated as to legal value, and their solidarity in the currency is established and preserved.

The duty of the government, therefore, in respect to this matter, is to establish a monetary unit, and to provide against its being changed except by such universal consent as is requisite to effect a constitutional amendment.

Imagine an ordinary workshop where the foot-rules are not on the same scale; where the unit of linear measure-the inch-is not definite nor fixed, so that the inches and the feet marked on one man's rule do not correspond with the inches and the feet marked on the rule of another man engaged on a different part of the same work. Would there not be inextricable confusion and wrangling among the men, attended with spoiling of material and consequent loss and vexation to the proprietor? Would there not be necessarily a spontaneous halt in the work, and a simultaneous demand that some one of the various inches be selected as a standard, and that all rules that differed from the standard be banished, and even destroyed utterly?

Now money, as a measure of value, sustains toward the specialized and differentiated industries of this country, relations precisely like those which foot-rules sustain to the specialized and differentiated employments into which the work of a great machine-shop is distributed. An industrial people, subjected by their government to the use of an uncertain currency, are just as badly treated as would be the hands in a machine-shop who should be furnished with defective and inaccurate foot-rules, and then held accountable for material spoiled and time lost by misfits.

One step further: while the United States may be regarded as a great workshop, yet it is only a branch of the still greater workshop of the world at large.

The value-rule in use among us should, therefore, bear a definite, known, and unchangeable relation to the value-rules in use among the people with whom we trade. While it would be more convenient to have but one monetary unit for all the world, it is not necessary to do so. Different nations may still retain those they are accustomed to, but it is absolutely essential that each of these should be

immutable in real value, and that they should all be alike in material, for identity of metal can alone insure identity of intrinsic value in equal weights.

X-LEGAL TENDER.

The term "legal tender" is a technical expression signifying that which the law prescribes to be paid or tendered in order to discharge a debt, satisfy a judgment, fulfil a money contract, or pay taxes.

The very object, therefore, of a legal tender law must necessarily be to establish a fixed and immutable measure, or standard, by which the value repaid or returned may be compared with and made equal to the value acknowledged to have been received, and in other cases by which the value paid in satisfaction of a debt, or a judgment may be compared and equalized with the value agreed or adjudged to be payable therefor.

This being the nature and the object of all legal tender laws, reason itself requires that when such a law gives legal tender force to several kinds of money, these kinds of money must be always preserved at equal value, for if they are not so preserved the nature of the legal tender law is violated and its essential objeet is defeated. This is not only a requirement of reason, but it is also demanded by that spirit of justice which is the soul of law and should be the animating principle of all legislation.

Legal tender laws control the execution of contracts, and every contract embraces two or more persons, sustaining to each other complementary relations. The essence of these reciprocal relations is equality; equality of the value reteived at the date of the note or bond, with the value agreed to be returned at its maturity.

The whole theory of a money penalty for default of specific performance rests upon the doctrine here set forth, and this doctrine also underlies all taxation, for without fixed value in the medium of payment the taxing power can neither provide adequately for the public needs nor gauge the burden laid on the tax-payers. Not money but money's worth, not the dollar but the dollar's worth, is the motor of industry, the propelling force behind human enterprise and endeavor. This truth is the key to the obligations of governments in respect to legal tender money; they are bound to preserve its value, its true worth. The name of the coin, the denomination of the note, is absolutely naught; the value is the essence of the matter; equality of value, not identity of substance, between the thing borrowed and the thing returned; equality of value, not specific identity, between the thing promised and the thing performed, will alone content the avidity of justice for what is right.

XI. THE MATERIAL AND FORM OF MONEY.

Since the government is charged with the duty of determining what the people's money shall be, it is well to inquire what principles should govern the coinage of metals and the creation of paper currency.

Before proceeding to these inquiries, however, it is necessary to point out the difference between these two kinds of money Coins possess intrinsic value; that is, the substance of which they are made is valuable in itself. Whether coined or not, gold, silver, and copper are valuable as metals, and their value is nearly the same all the world over. Paper money has practically no intrinsic value; its money-force depends upon law, or upon the financial credit of the government, or the credit of a bank; sometimes certificates, representing coins of gold or silver deposited in the Treasury, and redeemable in such coins, are used as money. Paper money generally expresses an obligation or a promise; it usually implies a contract or a trust, and its value, derived wholly from these, depends for its continuance upon the public confidence that the promise or obligation will be fulfilled, the trust or contract executed. Beyond the limits within which this confidence suffices to give it currency, paper money, whether in the form of Bank of England notes, greenbacks, National Bank notes, or coin certificates, loses its money function; it has no force to pay wages, or to pass from hand to hand in the ordinary course of daily traffic.

There is another very important difference between coins and paper money. The value of coins, being in their substance, is not affected by or dependent on what is stamped or imprinted upon them.

Coined metal is beyond the reach of political strife; it is free from danger by reason of disaster, panic, or war. Earthquakes, revolutions, the rise and fall of empires, have been powerless to impair by a fraction the value inhering in the coins sewed in the garments of trembling towns-people or hidden in the huts of a terrified peasantry.

Paper currency, on the other hand, is created by statute; every note has value conferred upon it solely by the stroke of the pen recording an official signature. A greenback or bank-note of $1,000 contains no more paper and ink than one for only $5; it costs no more to produce the one than the other. The money life of such currency depends wholly upon the continuous sustaining force of the law; interrupt this, and it droops depreciated; cut off this support by repealing the law or disabling the government, and the currency dies, as the lights go out when the gas is turned off. Every note that draws vitality from the law perishes with the repeal of the law, or with the downfall or bankruptcy of the government, even though it be locked in a hidden recess a thousand miles away from the seat of legislation or the theatre of revolution.

A depreciated currency, whether metallic or paper, is the sum of all monetary evils; it is worse in its effects than war or pestilence; it seeks out and ruins the most secure and the most secluded; it brings widows and orphans to penury; it corrupts the virtuous, disheartens the industrious, destroys the helpless; it breeds rapacity, pampers vice, and sets up gambling as a substitute for profitable toil.

It may be asked, How may a government secure its people against the danger of the currency becoming depreciated? The answer is: A government should never make anything lawful money but coins of metal, and paper convertible into such coins on demand of the holder.

There is no reason, however, from a financial point of view, though there may be political reasons against it, why the United States government, after establishing, under constitutional sanction, an unchangeable monetary unit, should not provide in its laws for a system of banks of issue, which may supply to the currency an element adjustable in volume, under natural laws, to the varying needs of industry.

Metallic money is certainly as old as the time of Abraham. Then it passed by weight. More than a thousand years after that coins were invented-at first these were made of brass, then of iron and copper; long afterwards silver coins were struck; gold was the last to be coined.

At each stage in the progression from the less valuable to the more valuable metals, the material of money seems to have borne a relation to the value of labor.

In primitive times money had no general sphere of circulation. Nearly all labor was performed by slaves or dependents, hence there were no wages to be paid, personal service was requited not by money but by protection, shelter and maintenance, few industries were pursued for gain and trade consisted largely of barter.

Now industry has become almost universal and is infinitely varied, each worker is master of his own earnings, so that money is indispensable to the daily life of hundreds of millions of men, women and children, and the material of money has increased in value with the rising value of the labor it measures and the increasing volume of the transactions it liquidates.

It is in this way that the world has outgrown brass, iron and copper, successively used as money; these metals are now all too low in value, in proportion to their weight and bulk, to serve the needs of industry among the more advanced nations, although copper coins are still found in circulation among peoples less advanced. Gold and silver are the metals now chiefly used as money in Europe and America. Mankind has become satisfied by experiment that silver and gold are the best metals to be used as money at the present time, and when, if ever, they become satisfied that either of them can be advantageously dispensed with for such use, that metal will cease to be used for money, and no amount of sentiment, no force of declamation, can prevent its disuse.

It is only in modern times that paper money has come into use. A sketch of its history will be found in Chapter XII; but it may be well at this point to sug gest some views as to paper money generally. All paper currency, whether issued by the government or by a bank, consists of due bills only; these due bills may be simply the government outlay, or they may represent taxes to be collected, or gold or silver coins deposited in the Treasury; or they may represent value in some other form received by the government or by the banks. History teaches that it is never entirely safe for any people to entrust the keeping of all their gold and silver to treasuries and banks, while they have nothing to show for it but a paper receipt; and it is always exceedingly unsafe for the people, especially farmers, artisans, and laboring men, who are not in the way of keeping up with financial changes, to become wholly dependent upon a currency that has neither gold nor silver behind it, but which consists wholly of paper representing future taxation, or which is based solely upon the credit of a government, or of a corporation under governmental control."

If the government supplies the money it ought to take care that all of it is equally good, and equally good at all times; but this cannot be depended upon