Treasury-notes (greenbacks) outstanding

National-bank notes outstanding

Gold in the treasury

Silver in the treasury

Coin in the banks

Estimate of coin held by the people

Total

SECTION III. — PAPER MONEY.

Real Money is made of the precious metals, and is capable of representing all kinds of values, because it has value in itself. But on account of its bulk, its weight, and its costliness, some more convenient instrument is desirable for many operations of exchange. The ancient commercial nations felt this need, and took various measures to meet it. The Carthaginians adopted a symbolic money, made of any object of the size of a coin, enclosed in a leather envelope, and stamped with the seal of the state. The Doge of Venice, and other sovereigns of the middle ages, issued leather money as a promise of future payment. The Chinese, as far back as the seventh century A. D., had various kinds of paper money which they called “ 'flying coins." The necessity is acknowledged to-day, and all commercial nations are using some kind of paper money.

Roscher notes well a distinction to be made between paper money and money paper. The latter term embraces drafts, bills of exchange, certificates of stock, bonds of cities, states, &c., and like forms on paper, which are definite calls for money, titles of ownership, evidences of debt. These are bought

and sold, and so, in a sense, circulate; but, like substantial goods, they require money to circulate them. Paper money, on the other hand, is intended for circulation, in the place of money. It must be itself ever afloat, as a means of floating every thing else. It is made up of promises to pay money, but to no definite person, in no definite place, at no definite time; good for the functions of money in purchases and sales, just so far and just so long as men believe the promise.

Several kinds of paper money may be specified.

1. There is what Mr. Walker terms mercantile currency. This signifies promises of banks to pay certain amounts of money on demand; the bank holding the full amount of coined money or bullion in reserve to fulfil the promise of every bill issued. Such were the notes of the Bank of Amsterdam as first issued; such are, and have been for more than two hundred and fifty years, the notes of the Bank of Hamburg. Such are the gold-certificates of the United-States Treasury. These involve only truthfulness and integrity on the part of the bankers or officers of the government to insure entire credit. Such notes combine the convenience of paper with the security of specie. Its basis is solid and immovable. It is paper money resting on real money.

2. There is our national-bank currency, which consists of bank-notes secured by a reserve of government-bonds instead of specie; the government holding the securities, guaranteeing the fulfilment of the promises, and requiring the banks to hold specie in readiness, sufficient to make payments

when called for. Here the strength of the security is measured by the credit of the nation. It is paper money resting on money paper.

3. Mixed currency. This is composed of written promises to pay specie on demand, issued by banks in excess of the actual amount of specie held for their redemption. It is called mixed because its basis is partly coined money, and partly credit in the notes of their customers discounted by the banks. The notes of the Bank of England and of the Bank of France are of this character; and such were the notes of the old State banks and of the United-States Bank in our of the security in this case depends on the proportion of specie to credit. When so-called "wildcat "banks were started, with no capital except the notes of stockholders, and no specie, there was nothing but credit to sustain the circulation, and banks and circulation soon collapsed together.

country. The strength

4. Credit currency. This consists of engraved notes, bearing promises of a government to pay specified sums of money. The Continental money of Revolutionary times, and the present UnitedStates treasury-notes, are examples of this kind of paper-money. On the face of the greenback we read, "The United States will pay the bearer ten dollars." On its back we read, "This note is a legal tender at its par value for all debts, public and private, except duties on imports, and interest on the public debt." This engraved slip of paper is, then, only an evidence of debt. The legal tender clause on its back forces men to take it in payment

of goods. But as it passes from hand to hand it simply transfers debts: it cannot pay them. You owe your butcher ten dollars, and give him a greenback in payment. You are released thereby, but the government is now the debtor in your place. It is not itself, as a gold eagle would be, a quid pro quo for the butcher's meat: yet it will serve as a medium of exchange, while men have faith in the government. But let the suspicion arise that the government can not or will not fulfil its promise, and the purchasing power of these paper slips at once declines, and quickly comes to nought, as did the Continental money and the paper money of the Confederate States.

Such

5. Paper money secured by real estate. were the assignats of France. In the Revolution of 1789, large estates of the Church, and of wealthy nobles who had fled from the country, were confiscated, and made the basis of paper money, made up of promises of the government for a certain number of francs, each note being at the same time a certificate of title to a certain amount of land of the same value. But the troublous times caused the value of lands to depreciate; and, when the amount of assignats issued rose to more than forty-five billion francs, the promise and the assigned landtitle became worthless.

From this view of what paper money is, the following statements are evidently true. They are also confirmed by actual experience.

1. It is a very convenient instrument of exchange.

2. As respects its material it is economical; so far as it can safely be used in place of real money, it sets free, for other uses, the more costly gold and silver.

3. It has in it always the element of credit. Even a gold-certificate is nothing to me except as I credit the statement that the treasurer holds the gold ready to pay it. The managers of the Bank of Amsterdam betrayed their trust; and, as soon as the fact was known that the gold was gone from its vaults, its notes were good for nothing.

4. While paper money may be a convenient medium of exchange, it can never serve as a standard of value. Its promise must be expressed in terms of real money, dollars; and a dollar means a specified number of grains of silver, a defined, substantial value. The paper note must carry with it the vision and the hope of a silver dollar, at some time to be realized, or it can have no purchasing power. If our government should say, by word or act, that the actual redemption of its greenback promise is not to be expected, its treasury-notes would drop to the ground like autumn leaves, utterly worthless. 5. Paper money can ordinarily circulate only in the country where it is issued.

6. Paper money is itself liable to fluctuate in value. It will be always compared with gold; and if, by increased issues, it is out of proportion to the standard, gold will be at a premium, which means always that paper is depreciated.

7. By the expansion and contraction of its issues, paper money tends to keep the prices of all commodities fluctuating.