lars, and exchanging other kinds of money for them. The significant thing is that all other kinds of money are exchangeable, directly or indirectly, for gold coin.

The Monetary Standard. In the case of gold coin, there is a further kind of exchangeability - the unlimited and free convertibility of gold coin and gold bullion. So long as any one can secure gold coin from the mints in any amount for the same weight of gold bullion of standard fineness, and so long as gold coin can be freely melted down into gold bullion, it is impossible that there should be any appreciable difference between the value of a gold coin and the value of its metallic content. We have, then, not only the interchangeability of all parts of the circulating medium, but also the positive physical identity of one part of it and the material of which this part is made.

Gold coins, because their value as bullion is equal to their value as coins, constitute standard money. The gold dollar weighing 25.8 grains, and containing 23.22 grains of fine gold is by law the monetary unit, that is, the dollars in terms of which prices are stated are gold dollars or are maintained at a parity with gold dollars. The coinage of the gold dollar was discontinued in 1890, but the gold coins that are minted contain precisely this . amount of gold per dollar. Gold, whether in coin or bullion, constitutes the monetary standard, for the value of any dollar must be equal to the value of the gold in a gold dollar. The recording of prices in terms of dollars through the exchange of goods and services for money of different sorts, the maintenance of the parity of dollars in all varieties of money through their exchangeability, and the automatic equating of the value of the dollar to the value of 25.8 grains of gold bullion; - these are the fundamental facts of our monetary system.

Seigniorage. - Sovereigns have in the past very often viewed the monopoly of coinage as an opportunity for personal profit. By calling in the stock of metallic money in the country for recoinage, they have frequently reduced the weights of coins without changing their names, thus increasing the number of coins, so that a handsome profit was netted for the royal treasury. Debasement of the currency was a favorite financial expedient

of Henry VIII, of England, and of Philip the Fair and Louis XIV, of France.

Somewhat less reprehensible in theory, although amounting to about the same thing in its effects, was the common practice of making a charge for the coinage of standard money, called seigniorage. This practice was based on the idea that it was possible to maintain a difference between the value of a coin and the value of the bullion put into it. A great deal has been written about the possibility of seigniorage, for the subject is one that involves considerations that are fundamental in monetary theory. It has been often said, for example, that it is the "government stamp," rather than the metallic content, that gives value to a coin. Leaving aside the matter of limited or subsidiary coinage (which will be considered presently), we may dispose of this statement by saying that if it means that the use of certain metals as money creates a demand for them that would not otherwise exist and thus increases their value, it is a truism; but if it means that in coinage we can add an arbitrary and intangible element of value to the value of the metallic content of standard coins, the statement is a misleading doctrine that has been disproved by the monetary experience of almost every country.

There is, however, a stronger statement of the theory of seigniorage. If the only way in which I can convert bullion into a medium of exchange is by being content with 750 ounces of money for every 1000 ounces of bullion I take to the mint, will not the coins have a value one third greater than that of the metal they contain? May not their "metallic content" be said to be, in a figurative sense, one third more than their weight because they cost me that much more in bullion? If their bullion value sinks below this point, bullion will not be brought to the mint, as it will be worth more than the coins one can get for it; just as when the value of the coins rises above this point. the supply of bullion would be stimulated so that as a result the value of the coins would tend to maintain this fixed relation.

1 Under Philip the Fair, the seigniorage charge went as high as 50 per cent Charges of from 2 to 15 per cent were more common.

to the value of bullion. As a matter of fact, it is probable that in a completely isolated community a strong and stable government could, through wise and careful regulations, maintain a constant rate of profit on the coinage, without endangering the stability of the monetary system.

The fundamental difficulty with seigniorage, however, was found in practice to be that in foreign trade coins passed current only as bullion, so that when seigniorage was charged, the prices of imported goods, expressed in money, were necessarily higher than their prices expressed in bullion, by an amount equal to the seigniorage. It was impossible that one ratio of exchange could long be maintained between coined money and bullion in domestic trade and another ratio of exchange in foreign trade. The interdependence of the prices of all kinds of goods prevented that. Money prices, in general always rose; that is, the value of the coins sank to the level of the value of the bullion they contained. Under these conditions no one would voluntarily undergo the loss inseparable from taking bullion to the mint for coinage, and with the cessation of coinage the profits from coinage stopped. Every possible expedient, short of the absolute prohibition of foreign trade, was tried by sovereigns in their efforts to retain their profits.1 But market forces were found to be stronger than royal regulations, which at best only served to retard somewhat the depression in the value of the official coinage. About the only effective way of getting profits from the coinage was for the sovereign to admit that the coins in circulation possessed only their bullion value, and then to call in the currency for recoinage into smaller pieces, in the manner that has already been mentioned, thus starting afresh with a new

1 The use of any other circulating medium than the official one was prohibited; no one was allowed to sell imported gold or silver, whether in bullion or coin, save to the royal mint; if there were mines within the country, they were sometimes prohibited from disposing of their products except to the royal mint; goldsmiths were forbidden to melt down coin or to purchase more bullion than they needed, and this they were forbidden to buy at less than the mint price; restrictions were placed on the export of bullion; these and other similar methods were tried, but all to no avail. Cf. W. Lexis, article "Münzwesen," in Handwörterbuch der Staatswissen schaften.

seigniorage charge. The result was invariably a repetition of the process of a more or less rapid depreciation in the purchasing power of the coins, leading often to further debasements of the currency.

Modern nations have abandoned the attempt to secure profits from their monopoly of the coinage. Since 1666 England has made no charge whatever for coining bullion into standard money. Most of the countries of continental Europe make a charge just sufficient to cover the expense of coinage. This charge is sometimes called seigniorage, but it is usually, and more properly, called brassage. The United States made no coinage charge until 1853, when a charge of one half of I per cent was made for coining standard money. This was reduced in 1873 and was abandoned entirely in 1875. At present the United States exchanges gold coins, weight for weight, for bullion of standard fineness (nine tenths gold, one tenth copper) brought to the mint in lots of one hundred dollars or more in value. For crude bullion, or bullion not of standard fineness, gold coins are exchanged containing as much fine gold as is contained in the bullion, less a trifling charge for assaying, refining, and for the alloy.2

Instead of viewing coinage as a profitable prerogative of the government, we have come to view it as a government duty, to be performed at government expense. The question of seigniorage versus gratuitous coinage is no longer a live issue. But the student who has grasped the significance of the lesson contained in

1 In practice most of the gold bullion coined in England is supplied to the mint by the Bank of England, which is required by law to purchase it at the minimum price of £3 175. 9d. per ounce. An ounce of bullion makes £3 175. 10d. in gold coin, the difference going to compensate the bank for the delay involved in getting the bullion coined at the mint. In the United States the waiting devolves upon the government, for gold coins, or, at the option of the depositor, checks upon United States subtreasuries or upon depository banks are paid to depositors as soon as their bullion can be weighed and assayed.

* The coinage mints are at Philadelphia, San Francisco, and Denver. In addition there are bullion-purchasing mints (not now operated as coinage mints) at New Orleans and Carson City, and assay offices at New York, Boise, Helena, St. Louis, Deadwood, Salt Lake City, and Seattle, which receive bullion on the same terms as the mints, plus an additional charge of one eighth of 1 per cent.

the history of seigniorage has taken an important step toward the understanding of monetary theory. The coinage of standard money is now in law, and always has been in fact, a device for dividing the standard money metal into convenient units of certified weight and fineness.

Limited Coinage. Gold is the only metal which is made into coins by the United States government for any one who deposits bullion at the mints or assay offices. All other coins are made from metal purchased from time to time for that purpose as Congress may direct. In none of these coins is the bullion worth as much as the coin. In 1878, when the United States began the limited coinage of silver dollars, the value of the 371 grains of pure silver in a silver dollar was about 89 cents. The value of silver declined steadily until 1902, when 371 grains of silver were worth only 41 cents. Since that time there has been a slight upward movement, but nevertheless in 1915 the bullion value of a silver dollar was only about one half its value as a coin. The bullion value of the smaller silver coins is still less, for they contain but 347.22 grains of silver to the dollar, while the bullion. value of our nickel and bronze coins is yet smaller, relatively.

Such coins are sometimes called "token coins," the implication being that the fact that they pass from hand to hand at their full nominal value is merely a matter of habit or usage, supported by general acquiescence. More accurately, however, they are credit coins, because the excess of their coin value over their bullion value depends ultimately, as we have seen, upon the good faith and credit of the government, evidenced by their redeemability in gold. If, for example, a catastrophe should overthrow the present federal government, and if the new government should refuse to recognize the obligations of the old, nothing could prevent these coins from sinking to their bullion value.

A very considerable profit accrues to the government from this limited coinage. The difference between the amount paid for silver bullion from 1878 to 1907, and the value of the coins made from it, amounted to $143,000,000. In the accounts of the federal treasury this profit is called seigniorage, but it should be carefully distinguished from real seigniorage, -a charge ex