of the government to curtail the amount of paper money in circulation, if it would prevent the evils of inflation and restore the financial world to its normal state. This it can do by canceling the paper notes as they are returned to the government treasury. In April, 1866, Congress passed a law for retiring and canceling paper notes at the rate of $4,000,000 a month. In less than two years, $44,000,000 of the notes had been retired. (Cf. Gide, Principles of Political Economy, p. 280.)

Money of Account. — This expression is used to indicate the kind of money unit current in a country. Thus, in England, the pound is the money of account; in France, the franc; in Germany, the mark; in the United States, the dollar.

Kinds of Money in the United States. The various kinds of money used in the United States are the following:

(1) Gold Coins: $20.00 piece Double eagle.

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The last three are but little used. The coinage of the $1 gold piece was discontinued by act of Congress, Sept. 26, 1890. Gold coins must weigh 25.8 standard grains to the dollar (23.22 fine grains), and be nine tenths fine, i.e. nine tenths must be pure gold and one tenth alloy. They are legal tender to an unlimited amount.

(2) Gold Bullion. · Gold in blocks or bars uncoined. These are as good as coin and are much used in foreign trade, when gold is shipped by weight.

(3) Gold Certificates. These are paper and certify that an amount of gold equal to the face value of the certificate is deposited in the United States Treasury. They can be exchanged for gold on demand. Their denominations are $10 and over.

(4) Silver Dollars. The face value of the silver dollar is greater than the value of an equal weight of silver bullion, i.e.

POL. ECON. 8

it is token money. The silver dollar must contain 412.5 standard grains, and be nine tenths fine, i.e. it must have 371.25 grains of pure silver. The coinage of the silver dollar ceased in 1905. It is legal tender to any amount, except when otherwise stipulated in the contract.

(5) Silver Certificates. — These are paper bills for $100, $50, $20, $10, $5, $2, and $1. For each silver certificate, an equal amount of silver is deposited in the United States Treasury.

Gold and silver certificates are not legal tender. They are, however, receivable for all public dues.

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(6) Subsidiary Coins. These are silver, 50 cents, 25 cents, Io cents. There formerly existed a three-cent piece, but it is no longer coined. The subsidiary coins are legal tender to the amount of $10. They contain 385.8 grains to the dollar, nine

tenths fine.

(7) Minor Coins. These are the nickel 5-cent piece and the copper 1-cent piece. The 5-cent piece contains 77.16 grains, 75 per cent copper and 25 per cent nickel. The 1-cent piece contains 48 grains, 95 per cent copper and 5 per cent tin and zinc. The minor coins are legal tender to the amount of 25 cents.

(8) United States Notes. These are called "Legal tender notes" and "Greenbacks." They were originally issued during the Civil War, and are promissory notes of the government. They are paper and are not backed by gold or silver deposited in the treasury as are the certificates. Since 1879 they have been redeemable, i.e. the government will exchange coin for them. One hundred and fifty million dollars is kept on deposit in the Treasury for their redemption. When at first issued they were legal tender for all debts, public and private, except customs duties and interest on the public debt. Since 1879 they have been receivable for duties. Their total amount is limited to $346,681,016. When redeemed they are issued again.

(9) National Bank Notes. These are paper notes of various denominations issued by the National Banks. A National Bank must have a capital stock of at least $25,000 (in places where the population is less than 3000; cf. Currency Law of March 14,

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1900). One third of the capital must be invested in government bonds and deposited in the United States Treasury. Until the passage of the law of 1900, the bank could then issue notes to the extent of 90 per cent of its deposit. The new law allows the issue of notes to the par value of the bank's deposit. These notes circulate as money. As legal tender, they are limited. As the act of June 3, 1864, Sec. 23, says: they are received at par in all parts of the United States in payment of taxes, excises, public lands, and all other dues to the United States, except for duties on imports, and also for all salaries and other debts and demands owing by the United States to individuals, corporations, and associations, within the United States, except interest on the public debt and in redemption of the national currency." They must be redeemed in coin on demand. Should the bank fail, the government will redeem its notes, reimbursing itself out of the capital stock on deposit in the United States Treasury.

(10) Treasury Notes of 1890. By the Compromise Silver bill of July 14, 1890, provision was made for the issuance of treasury notes in payment for the purchase by the Secretary of the Treasury, from time to time, of silver to the amount of 4,500,000 ounces each month. These notes are redeemable in coin on demand and are legal tender for all debts, public and private, except when otherwise expressly stipulated in the contract. They are receivable for customs, taxes, and all public dues. Most of them have been redeemed.

In July, 1912, the amount of money in circulation in the United States was $34.34 per capita.

III. FUNCTIONS OF MONEY

The functions of money are the following: a medium of exchange, a measure of value, and a standard of deferred payments.

Medium of Exchange. The primary function of money is to serve as a medium of exchange in all kinds of commercial

transactions. In ancient times, exchange was carried on by barter. Articles were interchanged for each other without any intermediary. This method was most cumbersome and would be impossible in the present state of trade. Money became the medium. A farmer who gathers in a yield of grain from his land, and who wishes to procure clothing for himself and family, transforms his grain into money by selling it in the market. The money acquired is given to a tailor, who in return gives the farmer the raiment needed. The money has served as a medium between farm produce and clothing.

Measure of Value. The second function of money is to serve as a measure of value for all things. All things have a certain value which may be estimated in terms of money, a money value or price. We say that a farm is worth $2000. The dollar is the measure of the value of the farm. In like manner, the foot rule or the yardstick is the measure of length, the quart the measure of liquid contents.

A farmer might estimate the value of a farm in bushels of wheat, a cloth manufacturer in yards of cloth. But money is the universally accepted measure of value of the farm and of all things of which the value is estimated. A man's wealth is estimated in terms of money. A nation's wealth is estimated in the same way. And thus there is secured a common measure that may serve for comparison between the wealth of different men and of different nations.

Were there no such common measure, much inconvenience and uncertainty would result from an attempt to compare two widely different substances. Since, however, we can estimate the values of all commodities in terms of money and have thus a common measure for all, it becomes easy to determine the quantity of one commodity equivalent to and exchangeable for another commodity. Instead of endeavoring to estimate how many yards of cloth could exchange for a ton of hay, or how many bushels of wheat could exchange for a coat, the value of each of these articles is translated into money, and at once their relative worth is known.

The third function is to

Standard of Deferred Payments. serve as a standard by which to judge of the sum to be paid at the close of a long-time contract. Business transactions involving credit are concluded generally within a relatively short time, but there are many such credit transactions which cover a long period of years. Money serves as the measure of the amount that is to be paid over at the close of the contract.

IV. COINAGE

Definition." Coinage is the act of assaying, subdividing, and stamping a metal intended to be used as money." (White, Money and Banking, p. 29.)

The government does not certify the value of the coin, for that will fluctuate, according to the supply of metal in circulation, but the government stamp does certify as to the weight and fineness of the metal in the coin.

Formerly in our own country coinage was carried on by private individuals, for example, in California, and the known honesty of the individuals attested the fidelity of the coinage. Since, however, private individuals may falsify coins, the governments have by law reserved to themselves the right of coinage. Coinage was begun in the United States in 1793. There are at present four mints in which coinage is carried on. uated in Philadelphia, New Orleans, San Francisco, and Denver.

They are sit

Coinage is said to be free when any possessor of bullion has the right to bring it to the mints and have it coined into money. Coinage of gold is free in the United States. Free coinage of silver existed up to 1873, but ceased in that year; a restricted amount of silver was coined by the government under the Bland-Allison act of 1878 and the Sherman act of 1890, but even this was stopped in 1893. In 1893, England stopped the free coinage of silver in India. In 1873, France limited the coinage of silver.

Seigniorage. Seigniorage is a prerogative assumed by the crown in ancient times by which it deducted for its own profit