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held by the banks at the great commercial centers, are now watched, as indicating the dearth or plethora of money. Bank interest rises and falls with the diminution and increase of

the reserves. These fluctuations are usually temporary, depending on the movements of business; but there are cases in which the whole volume of the money of the country rises, for a protracted period, above the general need, or falls below the demand. In such cases, a readjustment of general prices and values will occur, and so the excess or deficiency will disappear.

258. Effects of too much money.-A general and protracted redundancy of money tends:

1. To stimulate business. Increasing the prices of commodities and of labor, and raising the apparent value of property, it produces a spirit of speculation, and thousands rush into, or enlarge, their business. The increasing prices are mistaken for an increasing demand, and men count upon a career of prosperity. In the end, if continued, the effect would be simply the employment of more money to do the same amount of business. Each man would get more and give more in

trade.

2. It places the country at a disadvantage in relation to other countries; for the high cost of its commodities would discourage or forbid their export, and the redundancy of money, even if it is in gold, can not be exported except at a loss, since it must go as bullion and not as coin.

259. Too little money.-A protracted deficiency of money tends:

1. To hinder exchanges and diminish, to some extent, the circulation of goods.

ness.

2. To increase the rate of interest and to discourage busiThe fall of prices and of wages are commonly taken as evidences of general prostration and poverty, and men hesitate to go into business or to increase their risks. final result must be to fix all prices on a lower scale.

The

Men

get less and give less money in trade, and business accommodates itself to the new values of money.

3. The country gains in its relations to foreign countries where a similar result has not been reached. Its exports are at a larger profit, and gold, if not goods, may be imported at an advantage.

Another and serious effect of a deficiency of money, is the hardship imposed upon the debtor class. This class is always a large one, and especially in times of financial prosperity, when public confidence enlarges the amount of private credit. As a deficiency of money raises its relative value, the debtor finds his debt increased, while the property for which he incurred the debt shrinks in price. The opposite line of effects follows a redundancy of money, which entails a hardship upon the creditor class. During the war, mortgages upon western farms, to an immense amount, were paid off with paper money worth no more than one third to one half the money loaned. On the other hand, debts contracted and mortgages given during the later years of the war, or in the years which immediately followed the peace, while the great volume of paper money was still afloat, had to be paid at a later date in money worth two or three times that which was borrowed.

P. E.-23.

CHAPTER XXIII.

MONEY-CONTINUED.

260. Kinds of money.-Metallic.-Modern money is of two chief classes: 1. Metallic money, called specie; 2. Paper money, sometimes called credit money. Each of these classes has several varieties.

All the civilized peoples now concur in the choice of the two precious metals, gold and silver, as the fittest materials for money. Inferior coins and tokens are made of copper, nickel, and alloys.

Gold and silver, which have been in use as money from very early times, are peculiarly suited to be the money of the world: 1. They are beautiful and easily distinguished in color. 2. They are sufficiently hard and durable to receive and retain the impress of the mint in coinage. 3. They are so valuable that small and portable quantities contain the requisite amount of value. 4. They are nearly sufficient in amount to supply the money needs of the world. 5. They have an independent value for other important uses in the arts to sustain and regulate their use as money. 6. They are susceptible of being divided into equal parts sufficiently minute to measure nearly all the current values of the market. 7. They are so nearly indestructible that they may be hoarded without danger of loss. 8. Though liable to fluctuations of value, from the rates of production, they fluctuate so little and so slowly that, within periods of considerable length, they may be considered as fixed in value. 9. It is another advantage

possessed by these metals, that they are so related to each other in value, that the one furnishes convenient coins of small value, and the other, coins of large value. Few of these advantages are found in other metals; and no other metal possesses them all. Platinum has been proposed and coined by Russia, but the supply is not sufficient for a general use; and if new discoveries should overcome this objection, it has such a limited use in the arts that its value could not be kept at a high figure when greatly increased in amount.

With the addition of copper and nickel for the coins of small value, the metallic money system may be regarded as complete. So far as a specie currency is concerned, these four metals leave little to be desired.

The history of the precious metals, and of their use as money,―of their fluctuations of value, and of their relative changes, is full of interest and instruction, and recent investigations afford abundant material for such history; but it would unnecessarily swell our volume. The articles on gold, silver, money, mint, coin, and coinage, in the cyclopædias, or any of the numerous books upon money which have recently appeared, will give the student or reader a fuller statement than would be possible here.

261. Problems of coinage.-The question of the standard of coinage has assumed, of late, a new interest and importance. The demonetization of silver by the German Empire, the remonetization of this metal in the United States, the vast discoveries of silver and gold in Western America, Australia, and Russia, and, finally, the two unsuccessful international conferences, held in 1878 and 1881, to secure the adoption of a common standard by the leading commercial countries of the world, all these have given to the subject an interest which is scarcely exceeded, at the present time, by any other in the range of Political Economy.

The practical problems of coinage are the following:

1. The choice of the metal or metals for the legal money,

money to be coined by the government and made legal tender, for the payment of all debts.

2. The determination of the money unit; as the dollar, the franc, or the pound sterling; and also the multiples and fractions of this money unit to be represented by different coins.

3. The fixing of the amount of pure metal and alloy which shall make the unit coin and the other pieces.

4. The choice of the form, design, and inscriptions for each piece.

5. Whenever two or more metals are to be used as money, the determination and establishment of the ratio of value between them.

262. Single and double standard.-The chief question now in debate between states and among statesmen is whether gold or silver, or both, shall be made legal tender. Countries using both gold and silver as legal currency are said to have a double standard. Those using only a single metal, either silver or gold, for their legal currency, have a single standard. The single silver standard prevails in Australia, in India, China, and other countries in Asia. The gold standard is in use in Great Britain, Germany, the Scandinavian Kingdoms, and Portugal. The double standard, gold and silver, prevails in the states of the so-called Latin union, including France, Belgium, Italy, and Switzerland. It is also in use in the United States, in Spain, Greece, Netherlands, Mexico, Japan, and Russia. The countries having the gold standard still use silver for subsidiary coins,—or bilion, as the French call all coins which are employed to make change, but are not a legal tender, except for very small amounts.

In 1873, the United States demonetized silver, taking away from silver coins their legal tender quality. Not long afterwards the agitation began for its remonetization, and after a long and somewhat heated controversy, in Congress and by the press of the country, silver was again made legal tender, and its extensive coinage was commanded by law. Since this

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