1

A National Currency, A Paper Read by William F. Bailey, Before the Galesburg Branch of the American Economic Association, at Galesburg, Illinois.

MONEY

While every one has a general knowledge of the meaning of the word money, many able writers declare that no word is more difficult to accurately define. Webster says "money originally meant coined metal used as money, but has since come to be applied to notes, bills of exchange, or any token that may be redeemed at a bank." The American Encyclopedia says money is "the currency of the realm or country. The standard of payment, whether of coins, circulating notes, or any other commodity. Anything which freely circulates from hand to hand, as a common, acceptable medium of exchange, is, in such country, money, even though it cease to be such, or to possess any value in passing into another country." In a word an article is determined to be money by reason of the performance by it of certain functions without regard to its form or substance. Aristotle says of money "that it exists not by nature but by law." For the purposes of this discussion let us define money as the legal tender currency of a country, being careful to bear in mind the distinction between money as such, and other forms of currency that may by law or common consent perform some of the functions of money. We define money as the legal tender currency of a country because it is the only form of currency which is a lawful tender for debts contracted by the citizens of such country in the absence of any specification as to the kind of currency to be paid. The law recognizes the legal tender only, notwithstanding what is legal tender in one country, may be only a commodity in another, and is recognized as currency only at such value as the law or custom of another country may place upon it. All legal tenders are current, but all currency is not legal tender. The chief value of a currency is its debt paying power. It is by regarding money as a mere medium of exchange that so much injudicious financial legislation has been inflicted. Currency may purchase commodities, but it requires money to pay debts.

Value.

Value is another word used in connection with this subject which it is necessary to understand correctly. Value is a mental conception and changes with conditions. What makes anything valuable is its use, whether it possesses what is called intrinsic value or not. In a financial sense the unit of money expresses our mental conception of value. If a bushel of wheat were designated as a standard of value, we might be taught to say that a yard of cloth is worth one, two, three or more bushels of wheat, according to the quality of the cloth, as well as to say that the same cloth is worth one or more dollars. Our conceptions of valued become clouded when we consider money as of intrinsic value. Articles useful to mankind possess quality or utility, but value resides in the mind. Value is the mental estimation or appreciation which is placed upon useful or desirable objects. Value may differ in degree but not in kind. Our estimate of money as a value in exchange, which value exists only by reason of the functions conferred upon it by government, and is therefore extrinsic, is of the same kind as the estimation we place upon articles possessing intrinsic qualities by reason of their use.

Money, properly speaking, has two perfectly distinct functions to perform. It must be capable of use both as a standard of value and as a medium of exchange. To perform the latter function almost any substance sanctioned by common consent, would serve the purpose. It must be obvious, however that serving as a standard of value is the higher function of money. The unit of money is, to all commodities and debts, a standard by which to express our conception of their value or the extent of obligations. This standard should be fixed and unchangeable, because the very life of trade, the maintenance of a system of credit, the due performance of contracts, the legitimate results of all enterprises depend upon the relative future value of money and commodities outside natural causes. In speaking of a standard of value all must be aware of the difficulty of finding any commodity the value of which is unchangeable. The cost of

2

production, supply and demand necessitate fluctuations in market prices. As before said, value is a mental conception and changes with conditions. To establish a standard of measure or unit of value legislation is necessary. Some commodity most appropriate for the purpose, more stable in price than others should be selected and established by law as the standard by which to measure the value of all other commodities. Legislation can do this; but neither legislation nor any other power outside the common consent of the human race can select any two commodities and consistently declare that a given quantity of the one shall always equal a given quantity of the other, or that both shall be used as one standard of measure or value. Legislation cannot alter facts. It is not necessary that the given quantity of the commodity selected for use as a standard should be in our hand or before our eyes to enable us to use it as a measure of value. We compute the number of gallons in a reservoir from our knowledge of the number of cubic inches in the measure of one gallon. In the same manner we express our mental conception of the value of an article in multiples or fractional parts of the standard of measure or value. The fact that gold and silver have been and are used as money, and that prices of commodities have been controlled by their combined volume, and that on the basis of such volume, contracts and debts of vast proportions have been incurred, it would be manifestly unjust and inexpedient to drop either one or the other from our monetary system. They have been used concurrently as money from time immemorial, although the greater portion of the world has adopted either one or the other as a standard. During the last century gold and sliver have sustained a ratio varying from 13.33 to 22, according to the increase or decrease in production. In the address of Mr. C. L. Frank, and Mr. E. C. Bohm before the national bankers' convention in 1885 the following classification of forty-five peoples is made:

GOLD STANDARD.	SILVER.	DOUBLE.
Great Britain	Russia (nominally suspended)	France
German Empire	Austria (nominally suspended)	Belgium
Denmark	Peru (nominally suspended)	Switzerland
Sweden	Mexico	Italy
Norway	Central America	Greece
Portugal (nominally suspended)	Ecuador	Roumania
Turkey (nominally suspended)	China	Holland
Canada (and legal tender paper)	British India	Spain
Brazil (nominally suspended)	Burmah	United States
Argentine Republic	Siam	U. S. of Columbia
Cape of Good Hope Persia (uses gold and silver)	Dutch Colony	Venezuela
	Egypt	Chili
	Tunis	Uruguay
	Tripoli	Paraguay
		Bolivia
		Cuba
		Japan
		Algiers
Pop. — 138,600,000	Pop. — 772,000,000	Pop. — 185,000,000

The monetary laws of the United States show that congress under the articles of confederation in 1785 adopted the silver dollar as the unit of money. In 1792 the law establishing a mint enacted that "the money of the United States shall be expressed in units or dollars to be of the value of a Spanish milled dollar as the same is now current," and contain 371 1/2 grains pure silver. The same act fixed the weight of a gold dollar at 24.75 grains gold which made a ratio of 15 to 1. In 1834 the weight of the gold dollar was reduced to 23.2 grains making the ratio 16.045. In 1837 alloy was added to both gold and silver making them 9-10 fine, and two grains added to the gold dollar; making the ratio 15.988. During all this time, and indeed to the present time no change has ever been made In the number of grains of pure silver contained in the silver dollar. Thus we see that gold and silver have been used as money in the United States since its first settlement. The constitution recognizes them as money by the provision that "no state shall make anything but gold and silver coin a legal tender, in payment of debt." We gather therefore that by virtue of a general authority over the subject of money; Congress alone has power to make a legal-tender, and is not confined to gold or silver as are the several states.

It is necessary for us also to remember that since that United States cannot legislate a currency that shall be a legal-tender outside of its jurisdiction, and has failed in attempting to secure the recognition of other leading nations to a fixed and definite ratio between gold and silver in the several monetary conferences held at different times, we are limited in the consideration of this subject to some form of currency that will be national and yet commend itself to the commercial world as sound, just and equitable. In short, broadly speaking, the question of money is International rather than national.

A short review of some attempts at monetary legislation will convince us that we have not yet arrived at the best conclusions. The gold dollar containing 24 75-100 gr. of gold 9-10 fine is a full legal-tender. The silver dollar containing 412 1/2 gr. silver 9-10 fine is a legal tender. The gold and silver certificates representing coined metal are not legal tenders. The national bank notes based upon the bonded indebtedness of the country are not legal-tenders. The greenback, representing the non-interest bearing debt, is a legal tender for common debt, though not aspiring to the dignity of a legal tender for duties upon imports or interest on the public debt. A currency created with exceptions and repudiated by its creator because of its exceptions. The later forms of treasury notes are legal tenders in the absence of other specifications. By common consent under existing circumstances these various kinds of money are interchangeable for the purposes of barter and for the liquidation of common debt.

Since 1837 custom has sanctioned the use of an optional standard. That is, while nominally double standard, yet the more valuable has always been recognized in the financial world as the standard of measure. After the great discoveries of gold from 1846 to 1854 silver was the most valuable as measured by the established ratio between the two metals, that is the market value of the silver in a dollar was worth $1.03 in gold. Silver then being the more valuable money, was the recognized standard in financial circles. After the great discoveries of silver later on, the price declined until the market value of metal in a silver dollar today is only reckoned at about .74 measured by the gold dollar. As a consequence since 1873 the gold dollar has

3

been the recognized standard of measure. The attempt to control by law a ratio between the two commodities so as to use both as one standard of value, and to float a currency of which a part is legal tender and the balance a substitute for purposes of barter has been productive, as experience has taught, of absurdities as well as injustice and wrong. Within the memory of most of us we have had a practical suspension of specie payments, a time when gold and silver substantially disappeared from circulation. We have seen our paper money, with exceptions, shrink to forty cents on the dollar. France, gaining wisdom from our folly, subsequently sustained a paper circulation of $700,000,000 within one half of one per cent of par, because their paper money was made a full, legal tender for customs as well as all other public and private debt. We have been the standard silver dollar containing 412 1/2 gr. at par by exercise of government flat, while the trade dollar, which was a limited legal tender for three years, containing 420 grains of equally good metal, was for a long time received at .90 and is now valued as old silver. Even the bonded debt of the government in the shape of 7-30 bonds has been called into requision to perform the function of money In paying soldiers as a war necessity. It is very truly said that wherever the American dollar is found it is the peer of the money of other nations. But there occur panics, wars and other extraordinary occasions in the history of nations, and there are other factors under our present system which may seriously affect the financial and commercial interests of our country even under normal conditions.

The establishment of national banks as a system of banking is undoubtedly a great improvement on all previous experiments, though it must be apparent to those who have read and thought upon the subject that it should be the function of government alone to issue money. The old state bank system was notoriously wrong because no security was accorded the holder of the notes issued by them. This defect has been remedied in the national bank note, and is the redeeming feature of the system. But any system of finance which relegates to corporations or individuals the power to expand or contract at will the currency of the country is wrong in theory and fact.

Experience has taught us that the legal tender of a country is the valuable part of its currency. The amount of gold coin in the United States is estimated to be about $600,000,000, although it forms but a small part of the circulating medium. The reserve of the United States treasury is gold; the reserve of every national bank is gold. Let an emergency arise and instantly gold is at a premium, disappears entirely from circulation, and debt-paying currency has to be bought at a price. Supply and demand are of little account as competitors with money in influencing prices of commodities when the currency can be expanded or contracted by combinations, or when the debt-paying portion can be controlled for speculation by the same power. Were the currency of the country all legal tender and issued by the general government such a condition of things would be impossible. There would be no hoarding of one kind of money with which to redeem another kind. As an indication of the estimation in which legal lender money is held by those who make a business of dealing in money the report relating to the distribution of the currency of the United states is valuable. Of the gold coin in the United States Nov. 1, 1885, the United States treasury held $142,000,000. The national banks held $162,000,000; state banks $31,000,000; making a total of $335,000,000, against $251,000,000 in the hands of the people. Of silver the United States treasury held, including fractional currency, certificates and dollars, $90,000,000. The national banks $9,000,000; a total of $199,000,000 against $108,000,000 in the hands of the people. Of the paper currency the United States treasury held $27,500,000; the national banks, $111,500,000; the state and saving banks $53,000,000; a total of $192,000,000 against $470,000,000 in the hands of the people. Of the legal tender money the treasury and national banks held over three-fifths and the people less than two-fifths, while of the non-legal testers the people hold over seven-tenths and the treasury and banks less than three-tenths. The natural thought, in view of such a showing, would be that not only should the government issue all the money of the country, but that every dollar issued should be a full legal tender for all debts public and private, without exception, within the jurisdiction of the United States. In the forty five countries before enumerated, which include, all worth enumerating, and representing a population of 1,100,000,000, there is estimated to be of gold $2,917,000,000; silver, $2,130,000,000; paper currency, $1,835,000,000; bank note circulation, $1,653,000,000; total, $8,537,000,000, or about $8 per capita. It will be seen from this estimate that there is not enough of either or both kinds of precious metal to do; the business of the world without resorting to a paper currency. Of gold there is not enough, not to speak of the difficulty at tending the carrying on of small business and performing the functions of money in ordinary traffic. Of silver it is objected that it is entirely too bulky to carry on the large commercial transactions, not to speak of the loss by wear and tear of both metals. Of both gold and silver coin it may be safely said that they are too uncertain in quantity and value in exchange for the money of the future. At the time of the Christian era the ratio between gold and silver stood about l to 9. It has since more than doubled, the ratio being now about l to 22 based on market values. Since 1800 the production of gold and silver has raised from an average of 42 to 1 to about 70 to 1. In the year 1300 one pound of silver coined 1 pound sterling. In 1550 one pound of silver coined Ł2 3s 12d, and now coins Ł3 7s 6d. What shall we say of intrinsic value in the light of those facts. Ruskin said he "had no patience to discuss the question of money with any one who has not advanced far enough in economic studies to discard it." The extrinsic value of silver conferred upon it by law has increased the value in exchange of one pound of silver more than three fold and that of gold nearly six fold. It is probably safe to say that the intrinsic quality is the same. But can we say that they are fitted to form a staple, unchangeable standard of value with our increase of population and diminution in supply?

Another important factor in the consideration of a currency is the amount necessary to do the legitimate business of the country. If the world were taking a fresh start in business it would not matter very materially so far as the relation of money and value of commodities was concerned whether we had $5 or $50 per capita. As the currency stands in close relation to the general range of values, we would have a proportionately higher or lower general level of prices. Experience, teaches, however, that a full circulation and fair prices offer more opportunities to the thrifty to accumulate than a scanty circulation and low rate of wages. It is at least a remarkable coincidence in the history of the human race that the volume of money in circulation has served to indicate the civilization,

4

prosperity and happiness of mankind. With a circulation of nearly $2,000,000,000 and a per capita circulation amounting to $30 for the world, Greek and Roman culture, power and glory were possible. Literature, science, art, national power flourished to a degree never approached before or since. The period known as the Dark Ages may be as difficult to accurately define as the full of the Roman empire, but both were coincident with a shrinking volume of money which gradually declined to $4 per capita — an ace of moral degradation, vice, superstition, serfdom and poverty. From the fourteenth to the nineteenth centuries the volume increased. The first half of the present century it declined, since 1850 it has largely and rapidly increased. It is also worthy of notice that the period that marked the arousing of the world, as it were, from its lethargy was coincident with the invention of bills of exchange and paper substitutes for money, which served to increase the efficiency of the meager stock of metal then in current use. With the increase of precious metals used as money, since 1846, together with the increasing use of paper substitutes, has come an advance in invention, a love of art, a diffusion of the means of intellectual culture, and an era of progress in civilization and refinement not witnessed in any previous half century in the world's history. One of the most important considerations in any financial system is the maintenance of a fixed ratio between the sum total of units of money in circulation and the sum total of production, and this is nearest and most correctly obtained by a per capita amount. The importance of maintaining this ratio is simply illustrated. Given 1,000 persons to represent the population of a country with a currency equal to $20 per capita. This $20,000 circulates and easily performs the business of these one thousand people. It bears a fixed relation to the sum total of production. In one year assume that one hundred other persons are added to this population without any increase of currency. These one hundred people become competitors in the race for their share of the currency. New demands in the shape of food, clothing, homes, etc., for these one hundred persons are to be met. Is it not manifest that $20,000 has to perform 10 per cent more work than before? Is not each unit of value just 10 per cent more precious than before? Is not the value of each dollar just 10 percent more by reason of its scarcity. Its relation to the sum total of production is broken. The purchasing power of each dollar is increased 10 per cent. The only way to increase the purchasing power of a given amount of currency is to diminish the value of productions. It is as if there were just $100 a day to pay 100 men for their day's work. If the number of men were increased by 10 and the sum total of wages remained the same, each man's work would bring only a trifle over 90c instead of $1. This 90c, or one day's work, might buy as much of the necessaries of life as the dollar formerly did, but it would only nay debts at the rate of 90c on the dollar. For these reasons, and for many more pertinent ones which might be cited in connection with our financial legislation from 1860 to 1875, we are forced to the conclusion that a monetary system regulated as to the number of units in circulation on a per capita basis, all of such currency being full legal tender, will nearest approach a correct system and avoid the possibility of defrauding either the debtor or creditor by enforcing payments in cheap or dear currency.

Money is the motive power of civilization. A paper currency is the outgrowth of civilization. Nearly all the large commercial transactions of civilized nations are carried on by means of cheeks, drafts, bills of exchange, etc. It is stated that on the 17th day of September, 1881, the receipts of the banks of the United states were $295,000,000. Of this amount only 1.38 per cent was in gold, 0.17 per cent silver and 4.38 paper money, while 94.09 was in checks, drafts, etc. In New York city 98.86 per cent of the payments made were in checks, drafts, etc. In what may be styled country places outside reserve cities 81.74 per cent of similar substitutes for money was used. This actual test goes to prove that coined money is not required for currency except for purposes of small change. It must, however, be remembered that the value of such commercial conveniences, not of themselves legal tenders, depends upon their convertibility into legal tenders, It is not claimed that the check itself has any value. The value is in what it calls for, and under normal conditions when confidence exists as to the solvency of the corporations, banks and individuals issuing such checks, these conveniences add so much to the current funds of the country, the balances only being paid from bank to bank. But in times of wars, panics and other disturbances, and when values are seriously disturbed from any extraordinary causes, the volume of such substitutes shrinks and legal tender money is in demand. The large amount of the business of the country being thus carried on by means of paper substitutes furnishes another valid reason why the volume of legal tender money should be fixed on a per capita basis, and that the sum total should be equal to the combined volume of the various sorts of currency now in use in the United States, in order to leave undisturbed the future value of the debt-paying currency upon which all contracts and obligations now and to be incurred are to be met.

The purpose of this paper is to present for consideration a system of finance hitherto untried in its entirety, and therefore partially theoretical, based upon what is believed to be constitutional grounds, and which it is hoped will bridge over the irregularities and absurdities under which we nave labored, and to a large extent avert the periodical panics that have afflicted our people. We now have the best currency the nation has ever had, but if there is anything better, or any improvements that can be made in our financial system, let us have the best that the consensus of intelligent thought and study, actuated by patriotic motives, can give us.

The history of the two metals, gold and silver, used as currency shows this: That at times silver has been the standard by which to measure gold, also that gold has been at other times, the standard by which to measure the value of silver. At all times the actual value of coin is its market value as a commodity. Both the gold and silver dollar have at times contained less than a dollar's worth of metal, when measured by each other. The inequalities thus existing have been bridged over by the flat of the government. Uncoined the two metals represented different values as commodities. Broadly speaking, coined, the dollar of less market value as a commodity has been made to represent a fictitious value. The flat of government ends with its jurisdiction, for the coin of a foreign country is subject to a value regulated by the law or custom of the nation where it may be, which value is usually at or below its market value as a commodity. If the people of any nation are using two different standards of value at the same time subject to fluctuations in prices as a commodity, it follows that when an emergency arises, as, for instance, the demand for

5

gold during the civil war, values of all kinds of commodities and property are unsettled, for where either standard is at a premium in the market they are no longer interchangeable at par, and as the standard of greater market value always measures the less, importers and dealers in the products of other countries can no longer receive a dollar whose market value is less than the representative value except at a discount. The coin containing the greatest market value disappears from circulation, followed, if the emergency continue, by the one of lesser value, and the nation is eventually left with a cheap paper money, at a depreciated value, as a circulating medium.

Now, given a single standard of measure, it is absolutely immaterial for purposes of illustration whether it be gold or silver, but it must be something that commends itself to the best judgment of the people. Whether it be a given number of grains of silver or of gold, the argument remains the same. Assume, then that 412 1/2 gr. of silver 9- 0 fine or 24.75 gr. of gold 9-10 fine, whichever suits the fancy of the reader, be the authorized unit of value. Is it not apparent that a dollar that represents a dollars worth of all other metals or commodities at their market price, and always pays a dollar's worth of debts would be the most desirable unit of value possible?

We should have a standard of value in the unit, and the worth of that unit in the commodity. The standard should measure the commodity and not the commodity measure the standard. Starting from this basis a system of finance which will work exact justice to all, and at the same time perform all the functions of money is a paper money issued by government based on both gold and silver bullion, which money may be convertible into gold or silver bullion at the option of the holder at the world's market price on the day of presentation. This money should not be a promise to pay, but should be receivable at its face value for all debts public and private without reserve, and the only legal tender for debt within the jurisdiction of the United States. This money should be regulated in volume at the same amount per capita as the present combined volume of currency authorized by law in this country, and should be increased monthly by the government purchasing an amount of gold and silver bullion equal in value to the same rate per capita on the increase in population based on census returns and issuing paper money for the same amount, so that every dollar of such paper money would be secured by a dollar's worth of gold or silver bullion in the treasury of the United States, or such depositories as the government might designate, and that the number of units of money in circulation should also bear a fixed ratio to the population. Such money should not be a promise to pay, but ought to read somewhat as follows: This note is a full legal tender for all debts public and private without reserve in all parts of the United States, and is interchangeable at its face value for gold or silver bullion at the option of the holder at the market price on the day of presentation at any government depository. The government should cease coining both gold and silver, except for fractional currency, and as fast as the present coined money of the denomination of $1 or multiples thereof comes into the treasury it should be melted into bullion and marked by weight in ounces or multiples thereof, to be used as a basis of value for the paper currency and for the purpose of adjusting, if necessary, foreign balances and supplying incidental demand for either metal. Neither gold nor silver should be coined or recognized as legal tender. To those who maintain gold and silver to be money of themselves this may be a stumbling block, but if every paper dollar represents a standard dollar's worth of either kind of metal to be delivered on demand, such dollars are equal in value to the metal with the additional value conferred by law in making them alone legal tender. In this we have a system of uniform currency issued by government, the only legal lender, each dollar representing a dollar's worth of gold or silver bullion obtainable, if wanted, at any or all times at the market value. A currency keeping pace in volume with the increase in population, and therefore unchangeable in the value of each unit, maintaining as nearly as possible a perfect ratio between the sum total of units and the sum total of productions or commodities in which is included services or labor. A currency so regulated could not fall to be an effectual barrier against the periodical recurrence of financial panics.

In support of this theory history tells us that the notes of the bank of Venice winch were not subject to redemption in other forms of money, performed all the functions of money for over 500 years, and were at a premium over coin "because they were the standard of payment furnished by the state and used for all transactions." This bank money was that which established the unit of account in which the value of all coin was expressed.

Even so late as 1847, the time of the crisis in London, it was found impossible to raise any money whatever on the sum of Ł60,000 of silver because silver was not a legal tender above forty shillings. Again in 1864 during a similar crisis in Calcutta not a single rupee could be raised on Ł20,000 of gold because gold was not a legal tender.

Prof. Simon Newcomb, in an article in the North American Review, September, 1879, entitled "The standard of Value," after showing the impossibility of finding any metal or commodity which will answer for a correct standard of value, says: "Clearly such a dollar (a gold dollar of 24.75 gr.) can never afford the standard we require. But it is really clear if we could from time to time increase or diminish the amount of metal in a dollar, so that it would always fill the required conditions, we should have all that we want 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 a fixed weight, but in such quantities of gold and silver bullion as shall suffice to make the required purchases." If Prof. Newcomb had had in his mind the idea of preserving the value of the dollar in circulation by preserving a fixed ratio between the number of units and the requirements of these units instead of trying to preserve the value of the dollar by continually clipping off pieces of the coin, he would have come very near solving the problem. Such a system of currency as is here outlined would possess many advantages over our present system and would be free from many of its defects.

First — The representative value of every dollar would be the same under all circumstances, for it would always be convertible into a dollar's worth of bullion. Assuming a 500 grain silver dollar to be the standard, gold as a commodity might advance or decline, the holder of the paper dollar could always purchase a dollar's worth. The purchasing power and the debt paying power of the dollar would remain intact. Gold gambling for the purpose of making money dear or cheap and thus unsettling values of all commodities would be stopped. McCulloch says:

6

"If there were perfect security that the power of issuing paper money would not be abused, that is, if there were perfect security for its being issued in such quantities as to preserve its value relatively to the mass of circulating commodities nearly equal, the precious metals might be entirely dispensed with."

McLeod, in his theory and practice of banking, says: "The simplest and most perfect form of currency is that which represents nothing but transferrable debt, and of which the material is of no intrinsic value, such as paper. It is only when states have reached a high degree of civilization that they adopt the perfect form; before they attain that the material of it entirely consists of something which has an intrinsic value, such as gold and silver."

Second — Such a system or currency would dispense with the present ruinous necessity of holding the legal tender part of the currency in order to redeem the non-legal tender. All the money of the country in units or multiples of the unit would be full legal tender of itself, requiring no redemption within the jurisdiction of the United States, and simply secured by the best so-called intrinsic value that nature produces, recognized by civilization as the highest rated security.

Third — it would effectually settle the question as to what kind of money should be used to liquidate the obligations of the future. The clauses "current funds" or "gold" could safely be omitted as part of the terms of a contract.

Fourth — It would furnish the highest market value for both gold and silver. The United States is increasing both in population and wealth more rapidly by several per cent than European or Asiatic nations. Consequently it would be the largest and most reliable purchaser of bullion, and the world's market price would be made here. The ratio between the two metals would be subject only to the same variations if used as a basis for legal tender that they would if used for legal tenders themselves, the demand being the same.

Fifth — It would answer the purposes of trade with foreign nations infinitely better than our present currency. Any or every national bank could be made a government depository, where any one desiring to send money or to pay debts in any part of the world could deposit the government paper money and receive in exchange a national draft on any money center in me world where the government had established a system of exchange, such draft payable in gold or silver at the option of the holder at market price on the day of presentation; or, if payable in the United States, convertible again into legal tender paper money. Such a draft, like the money itself, would call for its face value's worth of either metal at any time, in any country, whether a gold or silver or double standard country. Except for the fact that such draft could be made payable to any individual who would require identification before converting the draft into money, exactly as under our present system, and could be sent to any given destination with less risk than the money it. represents; even the draft would not be needed under this system, for every dollar would be a legal tender at home and a certificate of deposit for either metal abroad. As is well known, the bullion itself would rarely play any part in these transactions, for between countries the balances only are paid. So that unless some policy at variance with our commercial and industrial interests were adopted by the general government, the tendency of such balances would be to increase rather than diminish the bullion in the treasury.

Sixth — Such a system of currency would correct what many regard as two gross errors in our present system. One of these errors is the theory that the money of the country should be based upon the national debt, which requires a perpetual debt for the continuance of the system. The other is the error of relegating to banking institutions, who are virtually a combination of private individuals working for their own profit, the privilege of increasing or decreasing the volume of money, and consequently its value, at the dictation of their own interests. As we have before explained the value of each unit of money depends upon the number of units in circulation, and not upon the value of the material which bears the stamp of money. Therefore any contraction of the volume increases the purchasing power of the unit, and artificially decreases the value of products.

Seventh — It would save enough in the loss by abrasion of the precious metals used constantly as money to pay all the expense of maintaining such a system. The masses of the people do not want to handle coined gold. Nearly all the gold taken in over the counters of business houses finds its way back to the banks in the deposits. If passed out to a customer in change it is handed back with a request for paper money in its place.

Eighth — Assuming the theory here presented to be practical it would form the most perfect basis possible for the redemption of all substitutes for money in the shape of notes, drafts, checks, etc, whether these substitutes were of the nature of long or short time obligations.

While it may be admitted that over three-fourths of the business of the country each day is done by means of checks, drafts, etc., yet each one must be redeemed in current funds or they would soon cease to be recognized as of any value.

Ninth — The basis of paper circulation would constantly increase in value. I am not aware that there is any reliable data from which to estimate the loss of currency by fire or other causes from year to year, but whatever that loss might be it is quite certain that the basis would remain even if what represented it were destroyed and would increase the security of the circulation, and in time the value or precious metal in the bands of the government would exceed the par value of the notes representing it, not alone from this source, but from the constantly increasing value of gold itself.

Whatever may be the nature or kind of the currency of the future, let us hope that coming legislation on this subject will not be of the juggling kind which forces the government into the financial arena as a speculator in either metal. A policy which may be indorsed in times of national peril out of purely patriotic motives should be supplanted by a policy which is patriotic in itself, looking beyond the interest, of the selfish advocates of either metal, to the best interests of the industrial and commercial world. The signs of distrust and unrest will vanish only when all the money of the country represents its face value without the aid of government fiat. Unpleasant it may be for silver men to contemplate, but every note should represent a dollar's worth of silver for every dollar named on its face. There is no such thing as a 70c dollar or 80c dollar or 90c dollar. A dollar is the unit, and the cent is the one-hundredth part of the dollar. The dollar measures the value of a cent as currency; the cent does not measure the dollar. A dollar's worth of silver is as valuable as a dollar's worth of gold, and it is along this line of

7

action that the market value of silver may be increased. To lower the standard or unit of value below the present standard of highest value, the gold dollar, would be manifestly unjust to holders of future obligations and tend to degrade our currency in our own estimation as well as the estimation of the civilized world. Since 1873 the gold dollar has been the unit, and all transactions now in vogue, including prices of commodities and wages, are based upon that unit. Any reduction in the value of the unit means an unsettling of all present, values proportionate to the reduction, as the existing ratio between the sum total of commodities and the sum total of units would be destroyed. On the other hand, to raise the value of the unit would be equally disastrous and simply reverse the hardship, shifting it, from the creditor to the debtor class. It is folly to consider for a moment the theory of some that "all movable products of labor and labor itself," or, that "land and things belonging with land" can ever constitute a foundation for a currency. The one is non-circulatable wealth and the other is immovable. The representative money of a civilized nation cannot be safely based upon any kind of wealth which will not be currently accepted as money, or the metal of which money may be made, by other civilized nations.

The leading futures of the system of currency here proposed may be summed up as follows:

First — It is based upon the safest and most acceptable foundation for a currency possible — gold and silver bullion at their market value as commodities.

Second — It would be the only money in circulation, except fractional currency for change. Every note would be a full legal tender within the United States and a certificate of deposit abroad.

Third — The policy of purchasing a large amount of gold and silver bullion monthly would eventually make the United States the largest holder of million in the world.

Fourth — The sum total of units of money in circulation would more nearly than any other system in vogue approximate a fixed ratio to the sum total of production, including labor, insuring stability in prices and values.