out the community, in full discharge of debts and full payment for commodities, being accepted equally without reference to the character or credit of the person who offers it, and without the intention of the person who receives it to consume it, or enjoy it, or apply it to any other use than in turn to tender it to others in discharge of debts or payment for commodities."

The writer illustrates his definition by showing how tobacco came to be used as money in Virginia.

Tobacco was raised plentifully throughout the state. It was brought to the main stores and there exchanged for various commodities. A comparison was made between a certain weight of tobacco and those commodities, and an exchange effected. This was merely barter. But when the people of Virginia found that tobacco had a certain fixed value with reference to commodities, they began to use it in exchange for all sorts of things. It was used to pay the lawyer and the physician and the services of hired laborers, and this fact, that it was universally used as a medium of exchange for all things, constituted it money.

And so for other objects; the moment they become a medium of exchange, no matter what their use or purpose may be, they become money. Glass beads among the Arabians, wampum among the Indians of New England in the seventeenth century, shells and feathers among the islanders of the Indian Ocean, served these several peoples merely for personal adornment, and yet they were money.

"Money," then, as Walker says, "is always a medium of exchange; an intermediary thing; a means, not an end." (Money, Trade, and Industry, p. 7.)

Money is legal tender when the laws of the state declare it to be a full acquittal when offered in payment of a debt. A creditor must accept legal tender money when offered in payment by the debtor. Money is not legal tender when the state does not by law declare it capable of canceling debts.

Money may be legal tender to an unlimited amount, as are

gold and silver with us; or to a limited amount, as is our subsidiary coin.

Money is at par, at premium, at discount, with reference to some other money, when it equals in value some other money with which it is compared, or is worth more or less than that

other money.

"Lawful money" in the United States includes gold coin, silver dollars, United States notes, and Treasury notes.

Money is foreign or domestic, when reference is made to different countries.

II. KINDS OF MONEY

Money, with reference to the basis on which it circulates, may be divided into (1) coin or value money or metal money; (2) paper or credit money; (3) money of account.

Coin or Value Money. Coin or value money is money possessed of real value. It may be standard, or subsidiary, or minor coin.

The standard coin of any country is "that in which its statutes make all public and private obligations and dues receivable and payable, to any amount." (Denslow, Principles of Economic Philosophy, p. 336.) In the United States, the gold coins are standard coins.

Subsidiary coin embraces the divisions of the standard coin, generally silver, below the unit of measure.

Minor coins are the smallest fractions of the unit of measure, usually of a metal other than gold or silver.

The silver dollar and the subsidiary and minor coins in the United States are at present Token money, i.e. each piece has less intrinsic value than it has face value.

The United States gold and silver certificates really belong to the class of value money, since each certificate represents a sum of gold or silver actually deposited in the United States Treasury.

Paper or Credit Money. - Paper or credit money is a promise to pay. It represents a value which depends on the credit of the issuer of the paper. Paper money is Redeemable or Con

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vertible, if it is exchangeable for coin or "lawful money," as is at present all our paper money; or it is Irredeemable or Inconvertible, if not exchangeable for coin or "lawful money." This latter kind of money is also called "fiat" money or paper money" in the strict sense of the term. Examples of this money are the "greenbacks " and the Confederate notes issued during the Civil War. The "greenbacks," however, became convertible in 1879.

Convertible money may become inconvertible through the refusal or the inability of governments to provide actual coin for its redemption. "No paper money is convertible, the full, immediate and unconditional redemption of which is not, at all times, within the choice of the holder." (Walker, Political Economy, p. 153. Cf. Gide, Principles of Political Economy, p. 260 et seq.)

If the government would so determine, and all the people would grant consent, it would be possible to put into circulation this conventional paper money. It would serve all the purposes of money.

(1) Defects of Paper Money. There are, however, three features in which paper money is deficient as compared with metallic money.

1. The value of paper money is precarious. It depends on the will of the legislator and can be destroyed by the power which created it. It has no intrinsic value. Metallic money has its own inherent value arising from its natural qualities independent of the stamp of the government.

2. The value of paper money is restricted to the country which issues it. It will not be received as money in foreign countries. Standard money will pass anywhere on its weight.

3. The value of paper money is changeable, as the amount and consequent value of such money depends on the will of the government. Even though the government tries to limit the amount strictly to the requirements of trade, trade itself will vary from period to period, being now brisk, now dull, and the amount of paper money will be greater or less than the actual

requirements. The value of metallic money depends on natural causes, on the output of the mines. Its amount ordinarily cannot depend on the will of man. In trade depressions following on greater activity, there may be a surplus of metallic money, but it can find outlets in foreign countries, whither the excess will naturally flow.

These disadvantages of paper money as compared with metallic money would disappear if all the governments of the world would consent (1) to make legal tender a paper money which would be acceptable in all countries; and (2) to limit the issue in each country to the amount required by trade, this amount not to be augmented arbitrarily, but in a measure predetermined for each nation.

(2) Effect of Paper Money on National Wealth. The issue of paper money would not add directly to the wealth of a nation. It would do so, however, indirectly. It would set free the immense sum of metallic money now in use, and allow it to be employed as capital in various industrial pursuits.

Thus, the United States has a billion and a half dollars in metallic money. Other nations have like sums. Were these sums of coin used as capital in the promotion of production or in investments in foreign securities, great revenues would accrue to the countries so using them.

Again, paper money would indirectly increase the wealth of a nation by setting free the labor of various kinds now employed in the production of metallic money. This labor could be employed in other industries which would add to the wealth of the nation.

Besides all this, the issue of paper money would be a very easy and inexpensive way for a government to pay its debts. If it borrows money, it will have to pay interest. If it issues bonds, it burdens future generations with a heavy tax. Whereas, if it issues paper money, the sole expense is the cost of manufacture. In the Franco-Prussian war, France issued notes to the amount of $300,000,000, and our own country ordered several large issues of paper money during the Civil War.

In spite of its possible advantages, there are many economists who declare that paper money is the greatest plague that could ever befall a nation. This is due not so much to paper money in itself, as to the imprudence of governments in issuing a greater amount than is needed for circulation. We have had examples in our own history of the evils resulting from over-issue of paper. Another instance may be found in the time of the French Revolution, when the government issued "assignats" to the enormous amount of forty-five billion francs. This was twenty times the amount of coin then in the country. The inevitable result followed, and the assignats depreciated in value. In 1796, the hundred franc ($20) assignat was worth seven cents, and it required 4000 francs ($800) to buy a pair of shoes.

(3) Signs of Over-issue of Paper Money. - Now there are certain signs which indicate that the amount of paper money in circulation is greater than is required by the state of trade. These are:

I. A premium on gold. When the amount of paper money is too great, its value will begin to depreciate. This fall in value will manifest itself in relation to metallic money. Gold will be sought for to pay foreign bills, and, to secure it, a premium will be paid for it. During the Civil War and for many years afterwards, gold stood at a premium in the United States.

2. A rise in the rate of exchange. Bills of exchange are always payable in gold, the international money, and will be affected as is gold itself by a depreciation in the paper money. The rate of exchange will rise.

3. The disappearance of metallic money. This will be brought about by the working out of the principle enunciated in Gresham's law (p. 128).

4. A rise in prices. When the paper money has depreciated considerably, prices will rise. This is in accordance with a principle affecting prices explained in subsequent pages. Sometimes there are quoted two different sets of prices for all commodities, one payable in metallic, and the other in paper money. When these signs begin to manifest themselves, it is the duty