Money 1

government, paper, value, coins, gold, standard and silver

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In the United States the earlier standard was by law bimetallic; but in 1873 Congress suspended the free coinage of silver dollars, thereby making the gold dollar the sole standard of value. The Latin Union, a league of France, Belgium, Italy, Switzerland and Greece, was organized for the purpose of maintain ing bimetalism. India, long on. a silver basis, went to the gold basis in 1893, Japan in 1895 and other countries since that date. The whole commercial world has come to recognize the fact that it is an im possibility to hold a ratio against the results of eco nomic forces working in the market.

The purpose of bimetalism—to establish two stand ards—is faced with the stubborn fact that there is but one standard of money possible at one time. The government cannot fix values by legislative act, nor have the attempts to maintain two standards by in ternational agreements been sufficiently successful to demonstrate the desirability of such action. Despite these principles of monometalism, the advocates of government-control by agreement have been sanguine that it was possible by controlling the money demand to keep the ratio prevailing in the market uniform with the mint standard.

13. Token, the bullion value of the coins is not equal to the nominal value they are called tokens or token coins. Such coins circulate because there is a big demand for them in order to meet the ordinary trade requirements. This offsets the fact that their value is less than the amount for which they circulate. The government does not permit free coin age, nor does it make such money an unlimited legal tender. In fact the silver coins, except the dollar, are a legal tender to $10 only and the copper and nickel coins to twenty-five cents.

On the other hand, the government redeems its token coins in the standard money. Consequently a street car company or a nickel picture show that receives a great deal of change can take its money to the bank for deposit, with the full knowledge that the bank will accept the deposit since the small coins can be re deemed at the government treasury.

14. Paper money has been the cause of manY financial heresies, but there is nothing mysterious about it. The wear and tear upon gold coin suggested the use of a representative money that would circulate while the gold rested in the vaults of the government. To that end a kind of warehouse

receipt has been issued by the United States govern ment, which declares that there has been deposited a given sum in gold which would be paid upon presen tation of the certificates. Of a similar nature are the silver certificates representing silver dollars on deposit in the treasury and the rapidly disappearing treasury notes of 1890 indicating that the government held silver bullion.

The real interest in paper money centers in fiat money whose value rests wholly upon the fact that the government declares it to be money of a certain de nomination. Why, it has been asked, could not the government issue a paper money based upon its own authority and required to be taken in payment of debts and obligations, public and private? Is there, in es sence, much difference between the problem involved in an attempt to maintain a bimetallic system and that of maintaining a paper money at par value? There is this difference, that in the case of the bimetallic system there is an economic value in the metals, while the paper money is an implied promise to pay money whose final value depends upon the redemption of the paper in metallic money. During the Civil War the LTnited States issued large sums of paper money popularly known as greenbacks. Until 1879 these circulated below par ; but the treasury then accumu lated a large sum in gold, offering to redeem all notes with it. Since that date the notes have been limited in amount, and redemption of them has been a possi bility at all times.

There is a third class of paper money that can be designated as credit money. Such money is a prom ise to pay coin and is issued by governments and banks. Usually the law requires the banks to main tain a reserve equal to a given percentage of the issue. In the final analysis such money depends upon the keeping of the promise to pay. Some of the bank money issued in the United States before the Civil War was of this character. It has a more recent illus tration in the Federal Reserve notes.

15. Credit and standard money.—While the term credit money is in its narrower sense applicable to cdtain forms of paper money, more especially to bank notes issued under government authority, it will be seen that many kinds of money, apart from the stand ard, partake of the credit character.

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