industrial need of money, imperative of itself, is augmented by the pressure of taxation and by the incessant accretion of interest. So universal are the forces compelling men in all conditions of life to obtain money, that there is a universal demand for it, and he who has it possesses a wide choice as to how he shall spend it, while neither property nor commodities, services nor the creations of intellect, can procure desired objects unless first parted with for money.

IV. NATURAL BASIS OF MONEY.

As civilization has progressed money has become more definite in form and each form more precise and constant in value. Numerous substances have served as money at different times and in different places, which shows that the need of money was felt and that efforts were made to supply that need before the qualities of any particular substance, such as gold or silver, suggested the idea of that substance being made into money.

The idea which thus found expression was begotten of the need of having a medium of exchange, something that would be generally valued alike by everybody, and the first use of money must have been to facilitate barter, because barter was the only method of exchange or trade known, or even practicable, before money came into general use.

Money was probably at the very first used only as a make-weight in bartering and trading; the "boot," as we call it now. It may be imagined that when bartering and "trading" became close, some article of general acceptability was added to the less valuable of the two things under exchange, so as to equalize the values received by the parties to the barter. Naturally the best substance for this would be one in general use and easily divisible without loss of value, and also of rare occurrence as a natural product; hence salt, an article of universal consumption; iron, the material of weapons; copper, the material of armor; silver, the material of household utensils, of personal ornament, and of religious vessels; gold, the material of royal and female adornment, came into use as make-weights or "boot."

It was probably a long time before this primitive stage was passed, but at length men must have perceived that if money could stand for a part of the value of a thing, it could stand for its whole value, and thus money in one or the other of its primitive forms came to be a measure of value.

The activity of traffic, increasing from century to century, afforded more frequent opportunities and more numerous inducements to employ money advantageously until, amid the countless industries and dealings of our day, it moves in a million circuits, of which the axes traverse the plane of society in every direction, and cross each other at a thousand points. During the period of this development, from the point at which money was first thrown in as "boot" to close a "trade," down to the point at which we now find it, it gradually came also to be regarded as a measure of value, and everywhere history shows a progression of some sort as to the substance used for money considered as a measure of value.

In every country, and in every race, there was a similar progression, beginning with rude materials of low intrinsic value, and advancing toward finer materials of higher intrinsic value.

There must, therefore, be a natural law governing this progression; a natural law which tends always to establish as the standard of value the material of highest intrinsic value available at the time. If there is such a natural law, it must be still operative, and to its effect we may attribute the steadfast movement of modern nations toward silver as the general standard of value, when copper ceased to be adequate, and now toward gold, when silver is no longer adequate.

V.-INDUSTRIAL BASIS OF MONEY.

Without money trade could never have expanded beyond the limits of barter; without trade, industry could never have become specialized; that which has been called (clumsily enough) the division of labor, could never have taken place. Industry, therefore, depends upon money as a medium for the exchange of its diverse products, and at the present day, in civilized countries, money is assisted in this office by credit in various forms. The use of money as a medium of exchange of the products of industry brings into play also its functions as a measure of value. Every transaction involves an estimation and a comparison of values.

Value is a relation, and more than that, it is a compound relation. It is the relation between a human desire and the object of that desire on the one hand, and on the other, it is a relation between that object and the desire of its possessor with respect to it.

At every point throughout the industrial world the opposing desires and opinions of buyers and sellers, the conflict of interests and purposes as to the dispo

sition and value of labor, services and commodities, create an incessant contention, out of which, and by means of which, definite results as to value are obtained, and these results are expressed under the designation of price.

Prices are always expressed in money, and values are estimated in money, hence we are accustomed to regard price and value as identical, but they are not so, for price is only the exponent of estimated value.

Since money is ordinarily the only measure of value generally accessible, since trade depends at every turn upon measuring values in order to compare them, and since a comparison of values is essential to the exchange of the products of industry, industry itself, and all who live by industry, have a vital interest in money, regarded as a measure of value. They depend upon it absolutely.

Now, whatever is depended upon as a measure of anything, must itself be constant and unchanging in respect to the quality which it is to measure. A measure of length must not be subject to linear contraction and expansion; a measure of weight must not be subject to changes in its own weight; a measure of time must be chronometrically accurate; a measure of force must never show variable results under identical conditions; hence money, as a measure of value, should itself be free from variation in value.

VI.-LAW AS A BASIS OF MONEY.

In communities where society has not yet reached a degree of development which brings it under settled government and written law, local conditions and ideas bring about, in process of time, a general consensus of the people as to the form and value of the money best suited to their use, and what is thus evolved is afterward maintained by custom; but when government is perfected, these matters are more fully provided for by law.

One of the duties thus devolved upon modern government is that of selecting the material of money, prescribing its forms, and fixing its value, and it is in this way, and under these conditions that law is a basis of our money.

Although it may at first seem superfluous for the law to concern itself with what existed before there were law-governed communities, and what would continue to exist if there were neither parliaments nor congresses, mints nor public treasuries, it is not so. Roads, bridges, and ferries have been constructed and used before there were laws providing for their establishment and maintenance, but civilization requires that in populous communities these should be provided and regulated by the public authority. So it is with money. That which suffices for barbarous nations would not satisfy those that are civilized, and in our day the uses of money are much more important and diversified than they have ever been before.

It is obvious that as respects taxes and debts there must be some medium of payment prescribed by the law that imposes the one and sanctions the other, for since the law undertakes to enforce payment in these cases the law alone can fix what shall constitute such payment. But, one may ask, why should the law presume to say what I must take in payment for my labor, my talents, my property, or my land? Why should I not be free to dispose of these as I like, as is done where only natural law prevails? The answer to this is, that every one is free to do so, but since ordinarily none exercise that freedom because it is more convenient to accept the money the Government provides, there is no stock of any other money in the community.

In a later chapter we shall see that when men do not like the money in use, when they do not trust it, that very opinion inflicts loss upon them by causing the money to depreciate on their hands,

Since, therefore, the people individually, or even by voluntary combination in large numbers, cannot sustain a currency not universally trusted, it is evident that in order to command general confidence the value of the money in use must be vouched for by some authority universally known and respected, and in modern nations the government is such an authority, and it vouches for the money by subjecting its coinage or manufacture to the regulation of law.

The framers of the Constitution vested in Congress "the power to coin money, regulate the value thereof, and of foreign coins, and fix the standard of weights and measures."

Another clause provides that "no State shall coin money, emit bills of credit, or make anything but gold and silver coins a tender in payment of debts."

These two clauses of the Constitution vest in the United States Government exclusive control over the money of the people. Congress has placed a very wide construction upon this grant of power, hence it behooves the people to know what limitations are imposed upon its exercise by the natural laws on which the constitutional grant is founded, and by which, therefore, it should be interpreted.

This inquiry is momentous in practical importance, because unless Congress exercises its powers in conformity with natural laws, there will inevitably arise a state of things contravening those laws, and such a situation invariably leads to disaster.

The whole function of government, with respect to money, is limited, first, to establishing by law what shall constitute the general medium of exchange, measure of value, and legal tender for debt and public dues, and, secondly, to protecting this money from variations in value one way or the other.

Sentiment, prejudices, ignorance, vague and ill-digested theories, experiments and shifting expedients, are pernicious in their effects everywhere and always, but when embodied in monetary laws they work evils hard to detect and harder still to cure; they cast a blight upon industry and sow ruin and demoralization broadcast among the people.

VII.-CONFIDENCE AS A BASIS OF MONEY.

All the teachings of history, all the logic of political economy, all the facts of common experience in respect to money, concur in support of the proposition that public confidence can make anything pass as money, and, conversely, that nothing can so pass unless there is confidence in the future continuity of its efficiency as a medium of purchase and payment.

Mistaken confidence, as long it lasts, is quite as effective for this purpose as confidence sagaciously given, and a mistaken withholding or withdrawal of cor Sdence is just as fatal as that which ensues from right reasoning.

It is the province of the law to determine the material of money, to prescribe its form or forms, and to fix its value; but the law cannot make it circulate unless the money itself enjoys the confidence of the people.

Whether any particular form of money is or is not entitled to command this confidence will depend wholly upon how the government exercises its prerogative of regulating money, for the conditions determining public confidence in respect to money arise out of natural laws, which are superior in force to statutes.

There is historical evidence to show that when these conditions are either not all originally present, or have become varied by events, still public confidence in certain forms of money may be won and preserved by the force of the government's credit. In such cases the credit of the government is substituted for the whole or for a part of that intrinsic value which constitutes the natural basis of money, and the degree of confidence thus imparted to any particular form of money depends, of course, upon the degree of the government's credit.

Now, public trust in the government includes three distinct beliefs.

1st. Belief in the good faith of the government; that is, in its purpose to fulfil all obligations expressed and implied in its engagements.

2d. Belief in the stability of the government; that is, that it will continue to have the power to apply the national resources to the fulfilment of its engagements. Stability, under our form of government, implies a settled purpose among the people to require all public obligations to be fulfilled, however local politics may vary.

3d. Belief in the sufficiency of the material resources of the government for fulfilling its engagements.

These three elements, therefore, constitute the substance of government credit, and when they all exist in the highest degree, that credit is generally sufficient to support a portion at least of the monetary circulation.

There is, however, something else wanting to the complete monetary efficiency of any form of money that depends wholly or partially upon government credit, and that is, its convertibility into other money that derives its value wholly from intrinsic qualities.

These being the principles underlying that public confidence which is essential to money as an effective servant of society, let us test them by the experience of our own people, and apply them to the circumstances of the present time.

The money existing in the United States during the last dozen years has been of various kinds; gold coins, silver coins, gold certificates, silver certificates, currency certificates, greenbacks, and National Bank notes, to which are now added "coin notes," issued under the act of July, 1890. Since January 1, 1879, it has all enjoyed equal confidence, that is to say, it has all circulated indiscriminately; has been equally effective in purchasing; has been of uniform, and therefore of interchangeable, value.

Before 1879, however, this was not the case; gold coin and gold certificates then were more valuable than corresponding denominations of greenbacks and National Bank notes.* The reason why greenbacks and National Bank notes were less There were no silver dollars at tha time and the subsidiary coin being of low intrinsic value and used only for change, is not taken note of here or elsewhere in this treatise.

valuable than gold, before 1879, is because the credit currency did not then stand as high in popular confidence as did gold coins and the gold certificates.

When, however, the government provided for the convertibility of its paper into gold, first, by the Resumption Act, and then by actually getting the gold in hand to effect resumption, the confidence of the people in the greenbacks and National Bank notes rose to the level of their confidence in gold itself. The paper currency came to "par," as the phrase goes.

If we analyze the grounds of this confidence we shall find that it rested on the three distinct beliefs already enumerated, viz.:

1st. Belief in the good faith of the government.

2d. Belief in the stability of the government.

3d. Belief in the means of the government for fulfilling its undertaking to establish and maintain the convertibility of greenbacks into gold.

It will be profitable to follow this instructive episode in our recent monetary experience somewhat in detail.

When the greenbacks, which are the government's due bills, were depreciated, that depreciation was the sign of the government's discredit; the rate of depreciation was the measure of the degree of such discredit.

The Resumption Act, which was passed January 14, 1875, did not raise the greenbacks to par, but the accumulation of $70,000,000 of gold coin in the Treasury brought the gold premium down, and the negotiation of $50,000,000 of bonds for. $50,000,000 of gold coin finally extinguished it. The credit of the government was perfected, not by the law, but by the financial operations that rendered resumption practicable.

Now, undoubtedly, the confidence of the foreign bankers who lent the greater part of this $50,000,000 rested upon their belief in the honesty and intelligence, as well as in the resources of the people of the United States.

It is true that these obligations are but little understood, and that the people of the United States, through their representatives, can break all contracts and invalidate all bonds, while no physical power on earth could coerce the payment of either the principal or interest of the national debt if Congress should refuse, or even should omit to provide for such payment.

The bonds of such a government may seem but slight security for $50,000,000 of gold coin; but the bankers who took our bonds in 1878 knew that the natural laws of finance gave them a grip upon the people of the United States more sure and more durable than could be secured by the combined fleets and armies of Europe. These natural laws compel every commercial people to sustain the national credit at any sacrifice, and under all circumstances, on peril of intolerable loss. The repudiation of those bonds would cost the people of the United States vastly more than they would gain by extinguishing the debt of $50,000,000 in that way; it would cost us not less than six times as much, while the mere attempt to repudiate, even if afterward abandoned, would cost us eventually more than $50,000,000.

Can this be doubted? Consider the effect of discrediting the government of the United States. Let the government lose its credit with the bankers, can it be retained among the people? Surely not. The $100,000,000 of gold now held as a special redemption fund will be drawn out as fast as greenbacks can be handed in through every aperture of the redemption counters of the Treasury, and then there will remain $246,000,000 of greenbacks in the hands of the people, and neither gold to redeem them with nor credit with which to get more golu. These will, of course, immediately depreciate, how much is immaterial to our immediate purpose; let us say, only ten per cent. That will take ten per cent. off the purchasing power of $380,000,000 of silver dollars, $246,000,000 of greenbacks, $150,000,000 of Treasury notes of 1890, about $200,000,000 of National Bank notes [because they are redeemable in greenbacks], making $976,000,000 of currency, on which ten per cent. is $97,600,000. In the last report of the Comptroller of the Currency (December, 1894), deposits of all the State banks and trust companies are estimated at $1,129,000,000; savings bank deposits, $1,778,000,000; individual deposits in National Banks, $1,728,000,000; private bankers' deposits, $66,000,000. Total debt of the banks, etc., to the people, payable in lawful money, $4,701,000,000. These deposits would, of course, follow the value of the lawful money in which they are payable. On the $4,701,000,000 of deposits above shown, the loss would be $470,100,000; and the loss on currency, as above, would be $97,600,000; aggregate loss on above items resulting from ten per cent. depreciation of greenbacks, $567,700,000. Here, then, is the sword held over us. Here is the power that compels us to preserve the credit of our government.

Our circulation now includes: Greenbacks about $316,000,000; National Bank notes, $200,000,000; silver dollars and silver and coin certificates outstanding, say $495,000,000; making the total of paper and silver held up to a parity of value with gold by the credit of the government, $1,041,000,000.

The entire value of the greenbacks and National Bank notes depends upon credit, while the silver dollars and silver certificates derive more than a fourth of their value from credit. Impair that credit, and for every one per cent. of currency depreciation resulting from its impairment, you will inflict upon the people who are holding the currency, a loss of $10,410,000; and upon depositors in banks, etc., $47,010,000; here is a loss, for every one per cent. depreciation of $57,420,000. If the currency drops to the intrinsic value of 412% grains of silver to the dollar, now less than 50 cents, that will be a loss of over fifty per cent., or more than $2,870,000,000, which is more than four times the entire volume of the national bonded debt still unpaid

Who can doubt that this result will follow upon any act of our government which lets go the gold standard? It cannot be denied that we must have a solid metallic basis of value somewhere for our currency. What is it to be? According to existing laws it must be coins containing either 25.8 grains of gold, or else 412.5 grains of silver 900 fine. There is no standard but these two by which to measure ten dollars in this country, and as these two standards differ in real value, the time will come when we must cleave to the one and forsake the other.

Admit, for the sake of argument merely, that the government can elect to make the silver dollar the standard; dare we encounter the consequences? At present, the standard is gold-gold by force of the statute of February 12, 1873, establishing the dollar of 25.8 grains of gold, nine-tenths fine, as the monetary unit; gold by contract under the Resumption Act of 1875; gold according to the real worth of the $4,700,000,000 of good money lent by the people to the banks, in the form of deposits, and now owed by the banks to the people in gold; gold by the common understanding and business dealings of the people during the last twenty years. State, municipal, railroad and other corporation bonds, private bonds, notes and contracts, salaries, wages, rents and taxes, are all on a gold basis, placed there in consequence of the popular faith in these solemn enactments by Congress, sanctioned by public acquiescence.

Let Congress say, now, that the standard is the silver dollar, and straightway a loss of $2,350,000,000 will fall upon those among the people of the United States who have no gold, no foreign exchange, no government bonds, no bank stock.

The people, the masses, who have deposits in the various banks, and who hold the money provided by the government, will have to bear the entire loss. What boots it that a large part of this fearful loss will be offset by gains to those [banks and bankers] who now owe this money, and who have been wise enough or fortunate enough to invest it abroad, or to hold it here in gold, or in securities convertible into gold?

In the case supposed the poor will all be made poorer, the great bulk of the people who are in moderate circumstances will bear the chief loss, while some few among the rich may possibly be made richer. If these things are clearly appre hender, either in Congress or among the people, will any voice be raised to disturb the public confidence now enjoyed by our money? No patriot, no statesman could wish to disturb it; no demagogue or fanatic would dare to do so.

VIII.-DEFINITENESS AND STABILITY OF VALUE THE ESSENTIAL QUALITIES

OF MONEY.

What quality must money possess in order to conform to natural law, to serve the needs of industry, to command the confidence by which alone it can fulfil its functions as a medium of exchange and a measure of value, and hence to merit the sanction of civil law?

The answer is, the qualities essentially requisite for money are, definiteness and stability of value.

In the payment of wages, and in all small transactions, the current money of the time and place is used to measure values, just as in the retail trade the yardstick is used to measure cloth, pound weights to measure sugar, or pint cups to measure molasses. But beyond the retail trade goods are passed from hand to hand among wholesale dealers by the package or bale, the barrel or hogshead, and are paid for by checks or drafts.*

Now the packages, bales, barrels, hogsheads, and cargoes are aggregations of quantity and weight, based upon primary and fixed units of weight and measurement; in like manner amounts of dollars or pounds sterling, specified in checks, drafts, and bills of exchange, are aggregations of money based upon a primary and fixed unit of value.

Without a perfect understanding and agreement between buyer and seller as to the actual weight of an ounce, and the actual value of a dollar, these transactions * Bonds and stocks are paid for in the same way.