demand? Or is its fall in value permanent, and likely to go on, so that Silver must be given up by the civilized Nations as money? On the answer to these questions people are divided into Monometallists and Bimetallists.

II. The Monometallists trace the fall to the great increase in the supply. Up to 1870 the annual production of Silver was between $40,000,000 and $45,000,000 worth a year. In 1870 it rose to $75,000,000 a year, being still below the value of the added Gold, and so continued for five years. In these five years, however, great alarm began to be felt, as formerly about Gold, and this alarm was deepened by the exaggerated reports made as to the possible output of our new mines in Nevada.

Germany, which in 1871 exacted a war indemnity of $1,000,000,000 from France, required this to be paid in Gold. The Germans used this Gold to retire the most of their Silver money and put out Gold coin instead. They then tried to sell off their Silver, which amounted to a two years' supply from all the mines, thus farther forcing down the value. This example was then followed by the Scandinavian nations and by Holland, while France and the countries which agreed with her in trying to uphold the credit of Silver, had to close their mints to it.

12. Our own country, which is now the chief producer of Silver, in 1873 changed the unit of value from the Silver to the Gold dollar, and stopped the coinage of the former by law. Since that time two ineffectual attempts have been made to restore the credit of Silver, first by a limited coinage, at the ratio : 16, and then by large purchases of the metal and the issue of certificates on the credit of this silver bullion. But neither of these measures prevented its farther decline, and in 1893 we ceased either to buy or to coin Silver.

13. The result of turning Silver out of the mints of the civilized world has been to create an excessive demand for

Gold, which could not but raise the value of that metal. When we say that Silver is now sold at the ratio 1 : 32, and was sold at 1: 16, twenty-five years ago, this is not the same as saying that Silver is worth but half so much as it was in 1870. It means not only that Silver has been forced down by an artificial reduction of the demand for it, but that Gold has been forced up by an equally artificial increase of the demand for it. And with this forced rise in the value of Gold, there has been an apparent fall in the value of everything else as measured by Gold. Thus wheat in 1896 was much scarcer and more in demand than it was in 1870, but its price in Gold was not half so high. The same was true of cotton and many other commodities. Now if there were no such thing as debt, and if the prices which the growers of wheat and cotton have to pay for what they buy fell as quickly and as much, this would not matter much. But debt is very general among these classes, and they had to give more than twice as much wheat or cotton to pay the interest on a debt, as they would have had to give in 1870 to pay the interest on the same debt.

14. As this is true of individual debtors in relation to their creditors, so it is true equally of Nations which are in debt. Creditor Nations generally take the interest on their foreign investments in food or raw materials. Thus India pays England in jute, indigo and wheat; Egypt pays in cotton; we pay in grain, cotton and meats. Under the operation of the single Gold standard all these countries had to hand over larger and larger quantities of such products to meet obligations to their foreign creditors.

Since 1870 we have paid off more than half of the great debt incurred in the War for the Union. But we could have paid off the whole of it in 1870 by the sale of fewer bales of cotton, or bushels of wheat, or carcasses of pork, or tons of iron, than we would have had to sell to pay off what remained in 1896.

NOTE. The rise in the value of Gold through the demonetization of Silver had the effect of making people search for it in all parts of the world. The discoveries on the Yukon River, at Cripple Creek, in the Transvaal, in Australia and in other places, brought about such an increase in the supply that Gold fell in value in four years (1896-1900) as it had risen in the previous fourteen. This made the question of remonetizing Silver one of less urgency.

15. The Monometallist defends the single Gold standard on two other grounds. The first is that a double standard is impossible, as the supply of one metal is sure to vary from that of the other, and thus to force variation in the ratio of their values. We have seen, however, that in 18401870, with a very great variation in the supply of the two metals, there was a very great steadiness in the ratio of value. For all practical purposes it remained the same. The amount of variation was what mathematicians call a negligible quantity. So between 1687 and 1873, under a general policy of Bimetallism, the variation was but from 1:14.94 to 1: 15.92 at these two dates. The farthest variations in intermediate years was 1: 14.14 in 1760, and 1:16.25 in 1813, both of them due to temporary causes. was only with the demonetization of Silver that the variation became serious.

It

16. It is also argued that since Silver in the markets of the world sells at the ratio 1:32, if we should attempt to coin it at 1:16 we would drive out all our Gold coinage. For whenever a country undervalues one metal by overvaluing the other, the effect always has been to force the export of that which is undervalued. If the law make it less valuable at home, it will be sent to where it is more valuable.

This is true, as experience has shown, and the sudden loss of $400,000,000 in Gold might prove very disastrous. We therefore either must wait until Europe is ready to unite

with us in remonetizing Silver, or we must adopt some course which will compel her to follow our example.

17. By general consent of mankind Gold and Silver are used for coined money, and are well fitted for this use. The supply from America, coming after a prolonged dwindling of the stock in Europe during the Middle Ages, effected untold good, as did the renewed supply from California and elsewhere since 1840. Up to 1873 the ratio of the two values changed so little as to make no difficulty in their use as money. The fall in Silver since 1870 has been due to demonetizing legislation. It is our interest to have Silver remonetized, but we must avoid any step which would lead to the withdrawal and export of our Gold coinage.

CHAPTER VII.

Banking, Paper Money and Credit.

I. THUS far we have been speaking only of money which has intrinsic value, that is, which is made of a quantity of precious metal whose value is equal to that which the coin passes for. No money contains quite so much Gold or Silver as this. To prevent coins from being melted down by those who need Gold or Silver for other purposes, they are made to contain slightly less of either metal than they would purchase. And in the case of token or change money, being coins of less value than a dollar, the difference is very considerable. But coin is money which passes for little more than the worth of the metal it is made of.

2. Besides this we have representative money of several kinds. The simplest form that we often see is the Silver Certificate. As it is not convenient to carry about large quantities of silver dollars, the government stores them in its vaults and issues instead pieces of silk paper, of the size and shape of bank-notes, but differently printed and colored. Each of these is an order on the Treasury for a specified number of silver dollars. In this way the great quantities of silver dollars we read of as stored away in the Treasury vaults at Washington, are really in use as money, and are circulating by their representatives. Whoever has a fivedollar silver certificate, owns five of those dollars, and can get them by giving it up. And as Gold also is inconvenient for use in large sums, besides being liable to lose weight by use, gold certificates for large amounts are issued, and used especially by the bankers.