If the European countries which now have a paper currency are to resume specie payments, it is evident they must resume in gold, because gold is practically the standard of Europe, and resumption in silver would be no resumption at all. The resumption of specie payments by any of these countries would only be practicable in the two ways heretofore adopted; that is, by the placing of gold loans in the shape of interest-bearing bonds, or by selling their stock of silver coins for gold. It seems reasonable to suppose that the latter method would be resorted to, as far as practicable, especially if this country should furnish a convenient opportunity to supply the gold necessary for resumption purposes in the purchase of their silver coins at the rate of $1.2929 a fine ounce. That the slight loss of three per cent would be any serious consideration in the carrying out of these monetary reforms, I do not for a moment believe; it is disproved by the action of European countries which have in recent years adopted the gold standard.

In the fifth place, a very erroneous idea prevails as to the actual loss which would result from the melting down and sale of foreign silver under free coinage in this country. Silver coins in Europe are maintained in domestic circulation at par with gold, by limitation of their coinage, by the credit of the government, as well as by the interchangeability of the one coin with the other; as a matter of fact, they possess no actual value to the government which issued them over and above the value of the pure silver contained in them. The difference between this value and their face value is simply a credit value, as it is in the silver dollar of the United States. The stock of silver coins in France and the states of the Latin Union is in excess of the requirements of domestic trade. The coins are not kindly received by the people, are rejected in foreign commerce, and, as a result, pile up in the vaults of the banks. As a matter of fact, they are used by the banks of Europe largely as a basis for the issue of paper money; and as the amount of paper money which the banks. could issue upon the gold value of their silver coins at our coining rate would be very much greater than the value of the paper money which they could safely issue upon these silver coins now, instead of their sale involving a loss, it would be an absolute gain to the banks. Mr. S. Dana Horton presents this matter very forcibly when he says:

"Taking the case of the Bank of France, this supposition implies that she would receive one hundred and ninety million dollars of gold instead of one hun

dred and ninety million dollars' worth of silver, coined at a face value of two hundred and fifty millions. This coin is in use as a deposit for bank-notes. How large an issue could be based on gold, which is the chief or standard metal, the only international money of the western hemisphere? Evidently, if the government so wished, the convenience or advantage of maintaining the existing figures of monetary stock could be attained with gold as well as silver, and thus indemnity for any apparent loss be easily given to the bank. The actual value of the gold would serve as security for not less an amount than the nominal value of the silver. Where, then, is the loss? It does not exist." 1

If the effort of the United States is to increase the use of silver for money purposes, not here alone, but everywhere, that effort would be defeated by a free-coinage law here, because, while it would undoubtedly increase the use of silver in this country, it would reduce it elsewhere. It would do more than that, for, by enabling foreign governments to melt down their silver coins and sell them for our gold at our coining rate, it would destroy the interest of such countries in the restoration of silver as a money metal. While it would temporarily raise the price of silver, the ultimate effect would be to raise the price of gold the world over, by enabling countries now having the double standard, or the silver standard, to adopt the gold standard, thus creating an increased demand for gold and causing it to appreciate in value, aggravating, in fact, the very evil complained of— the dearness of gold. At the same time it would necessarily lower the price of silver because it would enable Europe (not to speak of South America and other countries) to throw vast quantities of it on the American market.

If our mints should be opened to the free coinage of silver, under existing conditions, the stocks of silver would move to this country solely because they could be converted, at the highest market price, into our legal-tender money, which could in turn be converted into gold at par; but the moment our currency reached a silver basis, when our legal-tender paper money could only be exchanged for silver dollars, the profit to the foreign silver owner for the interchange of his silver for our gold would cease, and silver would be imported then only as an exchange matter, just as gold is now.

If we should exchange our stock of gold for a stock of silver, which would most surely and swiftly take place were it not rendered impossible by the withdrawal of gold from the treasury and from circulation, what would be our gain? Under free silver coinage here, one of two things will most certainly occur: either our gold will go to a

"Silver in Europe," by S. Dana Horton, p. 230.

premium and be withdrawn from circulation, or it will go abroad to pay for the silver which will be shipped here for sale. In either event we shall reach a silver basis.

As an earnest worker for the restoration of silver to its former rank and use as a money metal of full debt-paying power, believing that such restoration is fraught with incalculable benefits to mankind, and not yet without hope that the embarrassments arising from the attempt to use one metal alone as the measure of all values and the medium of exchanges may become so intolerable that commercial nations will find it for their advantage to join the United States in the restoration of silver, I should deplore the enactment by Congress of free silver coinage, which, as I have shown, is a measure not favored by any bi-metallist of repute and will only add to our financial embarrassments and relieve Europe of its embarrassments.

EDWARD OWEN LEECH.

FREE COINAGE AND AN ELASTIC CURRENCY.

IN discussing the question of "The Restoration of Silver" in the FORUM for November, 1886, I used the following language (page 249):

"But the true solution of the gold and silver question is to give free and unlimited coinage to both at our mints, and to issue coin-notes on the deposit of gold and silver coin or bullion, these notes to be redeemed on demand in standard gold or silver coin, at the option of the government. These notes would go into general circulation, would do away with all distinction between gold and silver, and would stand at par with either metal the world over. They should be made a legal tender, just as gold and silver certificates are to-day. Nor can it validly be objected that by this coinage system we should gain more of the two metals than is necessary so to maintain prices as to promote a general revival of business. Indeed, the difficulty would be to secure the amount of the metals needed to supply the great demand for money. A system of paper money based upon coin, dollar for dollar, cannot be inflated; it is absolutely safe, and would inspire confidence in its stability. This should be the first step taken by Congress, in whatever readjustment of the currency question may be attempted. There is no doubt but that the silver question must be finally considered whenever Congress undertakes to devise a system of currency to take the place of the national bank issue. We cannot afford to wait the action of other governments, but must mark out a financial road of our own."

The views then held I still entertain. I shall assume, for the purposes of this article, that it is generally admitted that all our credit money should be tied to coin in such a manner as to insure the con vertibility of the note; in other words, that paper issues should not be inflated beyond the power of the issues at all times to keep the paper at par with coin. I shall also assume it to be generally admitted that to do this it is not absolutely necessary that a coin reserve equal to the note issue be at all times on hand. Yet, so far as Congress is concerned, and the money issued by the Federal Government is contemplated in my proposition, a dollar of coin or bullion is required for every note issued, the only exception being the $346,000,000 in greenbacks having only $100,000,000 in coin reserve. So far as Congress is concerned, legislation shall be such as the Constitution clearly contemplates-that is, the free coinage of both metals at a value interchangeably established by law. What then? Shall this be the only plan of supplying the people with a circulating medium? The answer

must be, at least all past experience shows, that the metals alone never have been and in all probability never will be sufficient to supply the demands of our people with a sufficient volume of money. Does this fact necessarily mean that we must abandon metallic money and resort to a material the supply of which is of greater abundance or without limit? Not necessarily so. Yet when we go beyond the limit of coin, or paper represented by coin, dollar for dollar, we enter the realm of good faith, the domain of credit and confidence. We are in the latter condition to-day. We always have been, and probably always will be, to a greater or less extent dependent on good faith and confidence for the stability of our financial system. The advocates of purely fiat money, to be made of a material that has no limit fixed by nature for its supply, and that might have none fixed by law for its volume, rely wholly upon credit, confidence, and good faith for the value and stability of the money issued. If I am to choose between the two, that is, whether my confidence is to be placed in the good faith and solvency of individuals and corporations or in my government, state or federal, I shall unhesitatingly choose my government. So long as we must rely on credit money we ought to have the state guaranty. It is claimed for gold and silver that the supply is naturally so limited that the annual output adds but a very small per cent to the stocks on hand; that it is, therefore, impossible to inflate the volume beyond the pressing monetary demand of increasing wealth and population; that the annual output has by law or common consent, or both, a constant and increasing demand everywhere for monetary uses, and that the supply and the demand are governed by the laws of nature and the laws of commerce.

The only way this automatic or elastic volume of money can be manipulated by governments is to demonetize one or both of the metals, or arbitrarily to change the constituent units. When the legislator, for the purpose of contracting the volume of money and thus enhancing the value of credits, demonetizes one of the metals, he is in no better, in fact he is in worse, business than the legislator who does away entirely with metallic money and issues paper legal tenders to swell the volume of money, and thereby depreciates the value of credits. Assuming again, that we restore our bimetallic system, the unlimited use of both the metals, constituting as they do the money of the world, and that Congress stops these, or at least goes no further than demanded by convenience, that is, authorizes coin-notes to be issued on the deposit of coin or bullion,