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MONEY, i. Definition and Functions. The difficult question as to the best definition of money has been complicated by the efforts of writers so to define the term as to give support to their particular theories. It is hard to frame a precise account which will hold good of the many objects that have served for monetary use. From denoting coined metal, money has come to include anything that performs the money work: though there has been considerable hesitation in extending the term to those forms of credit that are in modern societies the chief instrument of exchange. It is therefore best to avoid a formal definition; and, instead, to bring out the character of money by describing the functions that it performs in the social system. The most important is, clearly, that of facilitating exchange. It is not necessary to dwell on the great importance of this office. The slightest consideration of industrial organization shows that it is based on the division of employments; but the earliest economic writers saw plainly that division of employments was only possible through the agency of a medium of exchange. They recognized that the result of increasing specialization of labour was to establish a state of things in which each individual produced little or nothing for the direct satisfaction of his own wants, and had therefore to live by exchanging his product for the products of others. They saw, further, that this only became feasible by the existence of an article that all would be willing to accept for their special products; as otherwise the difficulty of bringing together persons with reciprocal wants would prove an insurmountable obstacle to that development of exchange, which alone made division of labour possible. A second function hardly inferior in importance to the one just mentioned is that of affording a ready means for estimating the comparative values of different commodities. Without some common object as a standard of comparison this would be practically impossible. " If a tailor had only coats and wanted to buy bread or a horse, it would be very troublesome to ascertain how much bread he ought to obtain for a coat or how many coats he should give for a horse "; and as the number of commodities concerned increased the problem would become harder, " for each commodity would have to be quoted in terms of every other commodity." There is, indeed, a good deal to be said for the view that the conception of general exchange value could never have been formed without the previous existence of money; it has certainly support from the evidence of competent observers respecting the methods of exchange followed by savage communities. The selection of some particular article as the criterion makes the comparison of values easy. " The chosen commodity becomes a common denominator, or common measure of value in terms of which we estimate the value of all other goods," and in this way money, which in its primary function renders exchange possible by acting as an intermediate term in each transfer, also makes exchanges easier by making them definite. Still another function of money comes into being with the progress of society. One of the most distinctive features of advancing civilization is the increasing tendency of people to trust each other. There is thus a continuous increase in relations arising from contract, as can be seen by examining the development of any legal system. Now, a contract implies something to be done in the future, and for estimating the value of that future act a standard is required; and here money which has already acted as a medium of exchange and as a measure of value at a given time, performs a third function, by affording an approximate means of estimating the present value of the future act; in this respect it may be regarded as a standard of value, or as some prefer to say, of deferred payments. Nor does this exhaust the list of services that money renders. In the earlier stages of economic life it acts as a store of value; for in no other way could a large body of wealth be concentrated. Though this is no longer needed by individuals, even at the present day the great banks find that their reserves must take the form of a monetary store. Again, money in its various forms has been the great agency for transmitting values from place to place. Its international function in this respect still continues. The balance of debt between countries is ultimately settled by the passage of bullion from the debtor to the creditor nation. But, though money has these powers, it is nevertheless correct to say that its essential functions are three in number, i.e. it supplies: (i) the common medium by which exchanges are made possible; (2) the common measure by which the comparative values of those exchanges are estimated; (3) the standard by which future obligations are determined.

2. The Value of Money, its Determining Causes. The Quantity of Money required by a Country. The value of money is in principle only a special case of the general problem of value; but owing to its peculiar position the medium of exchange has in this respect become surrounded by difficulties that need to be removed. The very phrase " value of money " is employed in two senses, which on the surface seem to have no connexion with each other, and are the cause of much confusion to those who have not looked into the matter. In mercantile phraseology the value of money means the interest charged for the use of loanable capital. When the market rate of interest is high, money is said to be dear; when it is low, money is regarded as cheap. Without entering into the reasons for this use of the term, it is sufficient to state the other and for our present purpose more correct meaning of the phrase. As the value of a thing is what it will exchange for; so " the value of money is what money will exchange for, or its purchasing power. If prices are low, money will buy much of other things, and is of high value; if prices are high, it will buy little of other things, and is of low value. The value of money is inversely as general prices, falling as they rise and rising as they fall." Now the proximate condition under which value is determined is admittedly the establishment of an equation between demand and supply. In the case of money, however, some explanation as to the nature of both these elements in the problem becomes necessary. In what forms is the supply of, and the demand for, money exhibited ? The supply of a commodity is the quantity of it which is offered for sale. But in what shape does the sale of money take place ? Plainly, by being offered for goods. The supply of money is the quantity of it which people are wanting to lay out, i.e. all the money in circulation at the time. Demand, in like manner, means the quantity of a commodity desired, or, according to another mode of expression, the amount of purchasing power offered for it. Taking the latter as the more convenient for the case of money, we can say that the demand for it consists in all goods offered for sale. The position of money as the medium of exchange introduces a further novel feature; for the market in its case is world- wide and the demand is unceasing; money is consequently in a constant state of supply and demand. It thus appears that the factors determining the value of money at a given time are: (i) the amount of money in circulation, and (2) the amount of goods on sale. Closer examination reveals other influencing conditions. The mere quantity of money is not the only element on the supply side. The varying circulation of the monetary units must be taken into account. Some coins do not make a single purchase in a year, while others change hands in transactions hundreds of times. By averaging, we may estimate the effect of the rapidity with which money does its work, or, to employ a technical term, the " efficiency of money." Similarly, the amount of sales rather than the quantity of commodities is the determining element on the demand side. Thus, if the influence of credit be omitted, it is true to say that the value of money varies inversely as its quantity multiplied by its efficiency, the amount of transactions being assumed to be constant. Some additional explanation is required before this formula can be accepted as an expression of the whole truth on the subject. It must be noticed that it is not commodities only that are exchanged for money. Services of all kinds constitute a large portion of the demand for the circulating medium, while the payment of interest on the many kinds of obligations makes a further call on it. The potent influence of credit must also be recognized. The latter force is indeed the chief agency to be considered in dealing with the variations of prices; though so far as it is based on deposits of metallic money it may be regarded as a form of increased monetary efficiency, and therefore as coming within the formula given above. In its wider aspect, credit acts as a substitute for ordinary money, and may be interpreted as equivalent to a system of perfected barter, or, better, as a new currency development. An interesting but paradoxical conclusion should be noticed: it is that increased trade and expanding business are causes which operate not to raise, but to lower prices; for by enlarging the work that money has to do they raise its value, i.e provided that other things remain the same. Another more obvious deduction is that a large addition to the stock of money does not necessarily raise prices, since money is only effective when brought into circulation.

The chief topic of dispute in respect to the theory of moneyvalue has been concerned with the question as to the ultimate regulating influence. The value of freely produced commodities is according to economic theory determined by " cost of production," or, where the article is produced at different costs, by the cost of production under the most unfavourable circumstances. As demand varies with price, it follows that an adjustment of value takes place through the interaction of cost and demand, the latter indicating the influence of the utility of the commodity on the quantity required. In applying the theory to the special case of money, the first consideration is the fact that gold and silver, the principal money materials, are the products of mines, and are produced at different costs, so that their values depend on the portions raised at greatest cost. We thus obtain the proposition that has figured in so many textbooks; viz. that " the value of money depends on its cost of production." The theory of normal value, however, involves certain assumptions, which are significant in this connexion. Competition is conceived as absolutely free; it is assumed that there are accurate data for computing costs, and that the determination of value by cost is effective only " in the long run." It is recognized, also, that cost operates on value through its power in regulating supply. " The latent influence," says Mill, "by which the value of things are made to conform in the long run to the cost of production is the variation that would otherwise take place in the supply of the commodity." From such considerations it follows that the influence of cost on the value of money is not so predominant as a rigid interpretation of the theory of value seems to suggest.

In earlier times it has been a common proceeding on the part of governments to restrict or stimulate both mining for the precious metals and the business of coining. At all times the working of gold and silver mines has been rather a hazardous speculation than a legitimate business. " When any person undertakes to work a new mine in Peru," says Adam Smith, " he is universally looked upon as a man destined to bankruptcy and ruin, and is upon that account shunned and avoided by everybody. Mining, it seems, is considered there in the same light as here, as a lottery in which the prizes do not compensate the blanks." The modern capitalistic organization of gold mining has not done much to alter this condition. As regards the adjustment of supply to meet an altered cost of production the difficulties are, if possible, greater. The actual supply of money is so large, when compared with the annual production of the precious metals, that a change in output can operate but slowly on its value. The total stoppage of fresh supplies from the mines would not be sensibly felt for some years; and though increased production is more rapid in its operation, it takes some time to produce a decided effect. Hence the conclusion is reached that " the effects of all changes in the conditions of production of the precious metals are at first, and continue to be for many years, questions of quantity only, with little reference to cost of production." This is the position which is usually known as that of the " quantity " theory; though very different degrees of doctrine are comprised under .the general title. With due qualification and comment it may be taken as the prevalent theory. At all events it is beyond dispute that the cost of production is not for short periods the controlling force which governs the value of money; while even for long periods its influence is very hard to ascertain, in consequence of the speculative nature of the industries of gold and silver mining. Another peculiar feature of the problem of money value arises from the fact that it is only through an actual change in the supply of money that its value can be altered. With other commodities the knowledge that they can be produced at lower cost will bring about a reduction in their value. In the case of money, this does not hold. There must be an adjustment of the amount, or of the efficiency, of the money stock, since, as explained above, it is in a constant state of supply and demand. Its value is established in the very process of carrying on exchanges, and that process is influenced by the available supply. In regard to another form of money the effect of the amount in existence is still more decisive. This is paper money, not immediately redeemable in coin. In this case the idea of cost is manifestly inapplicable; the quantity in circulation is evidently, as proved by abundant experience, the ruling influence on value. In fact, the " quantity " theory receives its simplest illustration in the case of inconvertible paper. The truth that the theory is but an instance of the action of supply and demand is equally shown by this prominent class of instances. Where metallic coinage is artifically limited the same principle holds good. The value of such currencies plainly depends on the conditions of supply and demand.

The immense growth of credit and its embodiment in instruments that can be used as substitutes for money has led to the promulgation of a view respecting the value of money which may be called the " credit " theory. According to the upholders of this doctrine, the actual amount of metallic money has but a trifling effect on the range of prices, and therefore on the value of money. What is really important is the volume of credit instruments in circulation. It is on their amount that price movements depend. gold has become only the small change of the wholesale markets, and its quantity is comparatively unimportant as a determinant of prices. The theory has some connexion with the view of " money " as consisting in the loanable capital of the market, taking shape in the cheques that transfer liabilities. Thus the rate of interest comes to form a factor in the creation of " money," and the mercantile use of the phrase " value of money " receives a justification. Like the pure " cost " theory of money value, the " credit " theory gives too one-sided a view of the facts. In particular, it fails to recognize the ultimate dependence of all kinds of credit on the stock of money in the full sense, i.e. on metallic legal-tender money. The truths adumbrated in the theory are better expressed in the statement of the quantity theory in its developed form, as set forth above. It is necessary to take into account the varying quantities of the precious metals, the modes of use in respect to them; the influence of cost of production, and the way in which credit expedients replace standard money. A complete theory must include all these elements, while not unduly emphasizing any one of them.

At the beginning of statistical inquiry much attention was given to the question : What quantity of money does a country require for the proper working of its industrial system? Petty and Locke were ready to give definite answers; but modern inquirers decline making any quantitative statement, and content themselves with indicating the conditions to be considered. Amongst these are: Population, amount of transactions, the efficiency of money, the development of credit, and the height to which banking organization has attained. Other elements in the problem are the disposition towards hoarding, and the employment of some form of barter in transactions. The contrast between India and the United States in monetary and industrial habits supplies an effective series of illustrations on this matter. The conclusion is obvious that economic progress is accompanied by a more sparing use of money. The most important aspect of the question in modern times is in relation to the division of money between countries. Regarded from this point of view, the quantity of money that a country needs is that which will keep its prices in due level with those of the countries with which it has commercial relations. For, this is the condition of equilibrium; there would otherwise be an excess of either exports or imports, involving a transfer of money to adjust the balance. It may be added that the organization works automatically, since fluctuations in the stock of money are corrected by the action of trade. The best estimates place the gold circulation of the United Kingdom at somewhat under 100,000,000, the token currency at about 15,000,000, and the note circulation as nearly 43,000,000. The French use of metallic money is much larger; probably over 200,000,000, and the note circulation is also over 200,000,000.

3. Early Forms of Currency. Up to the present we have considered money as being fully established and properly adapted to fulfil its various functions. We have now to trace the steps by which a suitable system of currency was evolved from a state of barter. It is important for a right understanding of the question to grasp the fact that exchanges took place originally between groups, and not between individuals. The slow growth of exchanges is thus explained, as each group produced most of the articles necessary for itself, and such acts of barter as took place were rather reciprocal presents than mercantile exchanges. Such is actually the case among modern savages. " It is instructive to see trade in its lowest form among such tribes as the Australians. The tough greenstone valuable for making hatchets is carried hundreds of miles by natives, who receive from other tribes in return the prized products of their districts, such as red ochre to paint their bodies with; they have even got so far as to let peaceful traders pass unharmed through tribes at war, so that trains of youths might be met, each lad with a slab of sandstone on his head to be carried to his distant home and shaped into a seed-crusher. When strangers visit a tribe they are received at a friendly gathering or. corrobboree, and presents are given on both sides. No doubt there is a general sense that the gifts are to be fair exchanges, and if either side is not satisfied there will be grumbling and quarrelling; but in this roughest kind of barter we do not yet find that clear notion of a unit of value which is the great step in trading." This vivid description of E. B. Tylor's enables us to realize the way in which money came into existence. When any commodity becomes an object of desire, not merely from its use to the persons desiring it, but from their wanting it as being readily exchangeable for other things, then that article may be regarded as rudimentary money. Thus the greenstone and ochre are on their way to being promoted to the position of currency, and the idea of a " unit of value " is all that is needed to complete the invention. " This higher stage is found among the Indians of British Columbia, whose strings of haiqua-shells worn as ornamental borders to their dresses serve them also as currency to trade with a string of ordinary quality being reckoned as worth one beaver's skin." Such shells are in reality money, inasmuch as they discharge its functions.

On a review of existing savage tribes and ancient races of more or less civilization we are surprised at the great variety of objects which have been used to supply the need of a circulating medium. Skins, for instance, seem to be one of the earliest forms of money. They have been found among the Indians of Alaska performing this service, while accounts of leather money seem to show that their use was formerly more general. As the hunting stage gives place to the pastoral, and animals become domesticated, the anima! itself, instead of its skin, becomes the principal form of currency. There is a great mass of evidence to show that, in the most distant regions and at very different times, cattle formed a currency for pastoral and early agricultural nations. Alike among existing barbarous tribes, and in the survivals discovered among classical nations, sheep and oxen both appear as units of value. Thus we find that at Rome, and through the Italian tribes generally, " oxen and sheep formed the oldest medium of exchange, ten sheep being reckoned equivalent to one ox. The recognition of these objects as universal legal representatives of value, or, in other words, as money, may be traced back to the epoch of a purely pastoral economy." The Icelandic law bears witness to a similar state of things; while the various fines in the different Teutonic codes are estimated in cattle. The Latin word pecunia (pecus) is an evidence of the earliest Roman money being composed of cattle. The English fee and the famous term feudal, according to its most probable etymology, are derived from the same root. In a well-known passage of the Iliad (vi. 235-6) the value of two different sets of armour is estimated in terms of oxen. The Irish law tracts bear evidence as to the use of cattle as one of the measures of value in early Irish civilization. Similarly, oxen from the principal wealth and the circulating medium among the Zulus and Kaffirs. On the testimony of an eye-witness we are assured that, " as cattle constitute the sole wealth of the people, so they are their only medium of such transactions as involve exchange, payment or reward." So also we find that cattle-rents are paid by the pastoral Indian tribes to the United States government. From the prominence of slavery in early societies it is reasonable to suppose that slaves would be adopted as a medium of exchange, and one of the measures of value in the Irish law tracts, cumhal, is said to have originally meant a female slave. They are at present applied to this purpose in Central Africa, and also in New Guinea. On passing to the agricultural stage a greater number of objects are found capable of being applied to currency purposes. Among these are corn used even at present in Norway maize, olive oil, coco-nuts and tea. The most remarkable instance of an agricultural product being used as currency is to be found in the case of tobacco, which was adopted as legal tender by the English colonists in North America. Another class of articles used for money consists of ornaments, which among all uncivilized tribes serve this purpose. The haiqua-shells mentioned before are an instance, cowries in India, whales' teeth among the Fijians, red feathers among some South Sea Island tribes, and finally, any attractive kinds of stone which can be easily worked. Mineral products, so far as they do not come under the preceding head, furnish another class. Thus salt was used in Abyssinia and Mexico; while the metals a phenomenon which will require a more careful examination have succeeded in finally driving all their inferior competitors out of the field, and have become the sole substances for money.

4. The Metals as Money. Reasons for their Adoption. Superiority of Silver and gold. The employment of metals as money material can be traced far back in the history of civilization; but as it is impossible to determine the exact order of their appearance in this capacity, it will be convenient to take them in the order of their value, beginning with the lowest. Iron to judge from the statement of Aristotle was widely used as currency. One remarkable instance is the Spartan money, which was clearly a survival of a form that had died out among the other Greek states; though it has often been attributed to ascetic policy. In conjunction with copper, iron formed one of the constituents of early Chinese currency, and at a later time was used as a subsidiary coinage in Japan. Iron spikes are used as money in Central Africa, while Adam Smith notes the employment of nails for the same purpose in Scotland. Lead has served as money, e.g. in Burma. The use of copper as money has been more extensive than is the case in respect to the metals just mentioned. It, as stated, was used in China along with iron an early instance of bimetallism and it figured in the first Hebrew coins. It was the sole Roman coinage down to 269 B.C. and it has lingered on to a comparatively recent date in the backward European currencies. It even survives as a part of the token coinage of the present. Tin has not been a favourite material for money: the richness of the Cornish mines accounts for its use by some British kings. Silver holds a more prominent place than any of the preceding metals. Down to the close of the 18th century it was the chief form of money, and often looked on as forming the necessary standard substance. It was the principal Greek money material, and was introduced at Rome in 269 B.C. The currencies of medieval Europe had silver as their leading constituent; while down almost to the present day Eastern countries seemed to prefer silver to gold.

The pre-eminence of gold as money is now beyond dispute; there, is, however, some difficulty in discovering its earliest employment. It is, perhaps, to be found in " the pictures of the ancient Egyptians weighing in scales heaps of rings of gold and silver. " According to W. Ridgeway's ingenious theory gold comes into use as a currency in due equation to the older cattleunit, the ox. It was certainly employed by the great Eastern monarchs; its further development will be considered later on. Metals of modern discovery such as nickel and platinum are only used by the fancy of a few governments, though the former makes a good token coinage.

The preceding examination of the varied materials of currency, metallic and non-metallic, suggests some conclusions respecting the course of monetary evolution, viz.: (i) that the metals tend to supersede all other forms of money among progressive communities; and (2) that the more valuable metals displace the less valuable ones. The explanation of these movements is found in the qualities that are specially desirable in the articles used for money. There has been a long process of selection and elimination in the course of monetary history.

First, it is plain that nothing can serve as money which has not the attributes of wealth; i.e. unless it is useful, transferable and limited in supply. As these conditions are essential to the existence of value, the instrument for measuring and transferring values must possess them. A second requisite of great effect is the amount of value in proportion to weight or mass. High value in small bulk gives the quality of portability, want of which has been a fatal obstacle to the continued use of many early forms of money. Skins, corn and tobacco were defective in this quality, and so were iron and copper. Sheep and oxen, though technically described as " self-moving," are expensive to transport from place to place. That the material of money shall be the same throughout, so that one unit shall be equal in value to another, is a further desideratum, which is as decidedly lacking in cattle-currency as it is prominent in the metals. It is, further, desirable that the substance used as money shall be capable of being divided without loss of value, and, if needed, of being reunited. Most of the articles used in primitive societies such as eggs, skins and cattle fail in this quality. Money should also be durable, a requirement which leads to the exclusion of all animal and most vegetable substances from the class of suitable currency materials. To be easily recognized is another very desirable quality in money, and moreover to be recognized as of a given value. Articles otherwise well fitted for money-use, e.g. precious stones, suffer through the difficulty of estimating their value. Finally, it results from the function of money as a standard of value that it should alter in its own value as little as possible. Complete fixity of value is from the nature of things unattainable; but the nearest approximation that can be secured is desirable. In early societies this quality is not of great importance; for future obligations are few and inconsiderable. With the growth of industry and commerce and the expansion of the system of contracts, covering a distant future, the evil effects of a shifting standard of value attract attention, and lead to the suggestion of ingenious devices to correct fluctuations. These belong to the later history of money and currency movements. It is enough for the ordinary purposes of money that it shall not alter within short periods, which is a characteristic of the more valuable metals, and particularly of silver and gold, while in contrast such an article as corn changes considerably in value from year to year.

From the foregoing examination of the requisites desirable in the material of money it is easy to deduce the empirical laws which the history of money discloses, since metals, as compared with non-metallic substances, evidently possess those requisites in a great degree. They are all durable, homogeneous, divisible and recognizable, and in virtue of these superior advantages they are the only substances now used for money by advanced nations. Nor is the case different when the decision has to be made between the different metals. Iron has been rejected because of its low value and its liability to rust, lead from its extreme softness, and tin from its tendency to break. All these metals, as well as copper, are unsuitable from their low value, which hinders their speedy transmission so as to adjust inequalities of local prices.

The elimination of the cheaper metals leaves silver and gold as the only suitable materials for forming the principal currency. Of late years there has beep a very decided movement towards the adoption of the latter as the sole monetary standard, silver being regarded as suitable only for a subsidiary coinage. The special features of gold and silver which render them the most suitable materials for currency may here be noted. " The value of these metals changes only by slow degrees; they are readily divisible into any number of parts which may be reunited by means of fusion without loss; they do not deteriorate by being kept; their firm and compact texture makes them difficult to wear; their cost of production, especially of gold, is so considerable that they possess great value in small bulk, and can of course be transported with comparative facility; and their identity is perfect." The possession by both these metals of all the qualities needed in money is more briefly but forcibly put by Cantillon when he says that " gold and silver alone are of small volume, of equal goodness, easy of transport, divisible without loss, easily guarded, beautiful and brilliant and durable almost to eternity." This view has even been pushed to an extreme form in the proposition of Turgot, that they became universal money by the nature and force of things, independently of all convention and law, from which the deduction has been drawn that to proscribe silver by law from being used as money is a violation of the nature of things.

5. The Introduction and Development of Coinage. The State and Money. The earliest metallic currencies passeu by weight; they were, in fact, commodities, though used in a special way. The Hebrew records, as well as the Greek writers, bear witness to the prevalence of this primitive system. Thus, Aristotle, after explaining the circumstances that led to the invention of money, points out how it was at first denned simply by size and weight, although finally men went further and set a stamp on every coin to relieve them from the trouble of weighing it." (Pol. i. 9, 8.)

Coinage systems have had a long period of growth, in which two distinct stages can be noted. In the first only the quality or fineness of the metal is denoted by the stamp, no attempt being made to fix the weight. The stamp, so to speak, acts as a kind of hallmark. The cubes of gold employed by the Chinese may have been the earliest coins. Modern authorities accept the view of Herodotus that gold and silver coins were first used by the Lydians ; the same author mentions that the first Gr,eek coinage was at Aegina by Pheidon of Argos. In order to complete the invention it became necessary to certify the weight of metal in the coin as well as its fineness. A further result was the establishment of a regular shape for the purpose of preventing any tampering with the coin after its manufacture. Though various experiments in form were made, by the production of hexagonal and octagonal coins, the universally accepted shape came to be that of a flat circle, each side of which is stamped, as also in many cases the edge. The great number of the Greek city states afforded ample opportunities for experiment and competition, and rapid progress in the direction of securing good currencies was made. The improvement in the Greek coinages may be regarded as the consequence, and in some degree a cause, of their growing commerce. From Greece the art of coining was introduced into Italy by the Hellenic settlers and traders, and became one of the essential features of a civilized society. Progress, however, did not stop with the establishment of the institution of coined money. A number of practical questions had to be decided respecting the best way of overcoming the difficulties that certain technical problems presented. In spite of early experience, it has at times been suggested that the circular form might be replaced by some other, e.g. the square or oblong. Practice has confirmed the wisdom of the old-established shape. Another question was in respect to the limits of size that were most suitable for coins. Here the lower limit is prescribed by the convenience of the users. Coins that are easily lost, or picked up with trouble, such as the British threepenny piece and the American gold dollar, ought not to be issued. The determination of the upper limit presents greater difficulties. Very large pieces are hard to coin, and they give facilities for improper treatment by drilling holes 'and filling them up with cheaper metal, or even for the entire removal of the interior, the faces being preserved. The attractive appearance of large gold coins is no compensation for this danger. The English sovereign and, in silver, the half-crown seem to come near the upper limit of safe issue. The comparative wear of coins of different sizes must be considered. A long series of experiments, supported by ordinary experience, goes to show that the smaller coins wear more rapidly. The English mint in 1833 estimated the loss per cent, per annum at 2s. 6d. on half-crowns, 45. on shillings, and 7s. 6d. on sixpences. There are accordingly reasons for adopting a medium size in preference to large or small coins. The actual coins issued have, of course, to be adapted to the requirements of the particular community. Even prejudices must be taken into due account. The designs employed in connexion with coinage have proved a fruitful field for the student of Numismatics (g.f.). From the monetary standpoint the aim of the design is to prevent either counterfeiting or the abstraction of any portion of the metal. For the former purpose careful execution in designing and the use of powerful machinery are the really effective safeguards. The latter is best obviated by protecting the edges by the process of milling, to which a raised inscription has sometimes been added. Great advances have been made in the organization of the modern Mint (q.v.) by the use of new appliances and scientific methods. The question of the proper alloy in coins has received a great deal of attention. As gold and silver are both by nature soft, some other metal, such as copper or tin, has to be added, in order to secure the necessary hardness. The English gold coins have an alloy of one-twelfth; the silver coins one of three-fortieths. Far more general is the alloy of one-tenth, which is probably due to the sentiment in favour of a decimal system; but at any rate is simple for calculations. There does not appear to be any strong technical reason for preferring either of these alloys to the other. The French mint authorities are in favour of their one-tenth ; while the English ones adhere to the alloy of one-twelfth. There is agreement only on the point that a very small amount of alloy, e.g. that of one in seventy-two, as used in the Austrian ducat, does not give the requisite hardness.

A question of far more importance, both politically and economically, is that of the issue of money, and the power of the state in regard to it. In the ruder societies, where money was not sharply distinguished from commodities, no difficulty presented itself. Skins, shells or cattle were money so to speak by the force of things; and the same condition persisted as long_as crude metals were employed. But with the introduction of coinage the idea of a regulating authority came into being. The necessity of enforcing contracts and the parallel system of penalties made it incumbent on the ruler and judges to provide due standards of payment. The combined effect of these influences was reinforced by the establishment of the rudimentary forms of state revenue, which made it a matter of interest to the ruler to provide a good medium of payment. Accordingly, with the origin of the organized state, we find the coinage as a special prerogative of the king, though private persons often exercised the privilege of coining. The very large number of the autonomous cities of Greece, which possessed the right of issuing money, was the cause of the competition between different currencies, each having legal tender power only within its own city. In its practical outcome this " free coinage system proved beneficial, for it compelled the maintenance of the true standard in order to gain wider circulation. With the establishment of larger states the control over the issue of money grew more stringent. In the later Roman Empire the right of coining was reserved to the emperor exclusively. After the fall of the empire the traditions of prerogative passed on to the medieval kings, a right carefully guarded by the English sovereigns. In France and Germany the principal nobles claimed this seignorial right, but in the modern state the regulation money has been definitely vested in the supreme authority, i.e. the sovereign.

One reason for the close connexion of money with the state is the fact that there is one attribute of currency which comes within the area of work specially allotted to the public authority. Money ought to have the power finally to close a transaction, i.e. to say it should be " legal tender." This " liberating power," as the French call it, might be regarded as one of the money functions. Those who- look on money as a purely legal institution naturally take this view; it seems, however, better to take the economic conditions as the really fundamental ones. It is only on account of their economic effects that legal regulations require consideration. These effects are, indeed, very far-reaching. By prescribing the standard and amount of penalties, by their power of selecting the substances to be used as money, and by their frequent interferences with existing currencies, the governments of the world have guided as well as very often disturbed the normal course of development. What Aristotle regarded as the " unnatural " character of money is mainly attributable to state intervention. But it is important to remember that the Sphere of governmental action in respect to money is limited. A currency system is never an arbitrary creation ; it must grow slowly put of the habits and customs of the community, and must subserve its economic needs. No sudden change at the caprice of the state is likely to continue. Further, it is clear that no government can determine the results of its interference; these will depend on the existing conditions and will conform to economic law. Monetary history is rich in examples of the failure of legal enactment to direct the course of events, and of the disasters that have followed on the ill-advised measures of public authority.

One result of the close connexion of the state with the business of coining has been the establishment of regulations in reference to the expense^ of the process. As coins are manufactured articles it seems evident that a charge sufficient to cover the cost may rightly be imposed. Such a charge is described by the term Seigniorage (q.v.). It has in many cases been so fixed as to bring in a large profit to the government; but then it amounts to a depreciation of the currency; for the levy of a charge on coining is the same as the substraction of so much metal from the coins issued. English policy is peculiar in its adoption of gratuitous coinage of gold, an anomaly due in its origin to the prejudices of the mercantile doctrines, but defended on the ground of the convenience to trade from the equivalence of gold bullion and coin. The heavy seigniorage on the silver coins at present over 60% is a source of considerable profit; in some years exceeding 800,000. All other countries levy moderate charges on their gold coinages, and make profit on their silver issues, though in different ways. As it has become the duty of the state to maintain the currency in a sound condition, it has to deal with the question of its expense. This is composed of several elements, viz. (i) the cost of manufacture, just mentioned; (2) the loss through the wear which money undergoes in the work of circulating; and (3) the interest on the capital sunk in the monetary stock. A country with a metallic circulation of 100,000,000 incurs a loss of the interest which that amount of capital would produce by investment, i.e. at 4% 4,000,000. The expense is amply justified by the services that a good currency renders; but, at the same time, it proves the desirability of any economies that do not detract from efficiency. The great economizing agency is, the use of representative money and the various forms of credit, in which so much of the latest advances consist.

6. Representative Money; its Introduction and Development. The Mode in which Credit is used as Money. Economy in the employment of the precious metals is naturally suggested by ordinary experience; but the way in which states have profited by the expedient of depreciation affords a special inducement to follow what is practically the same course, and issue paper documents in place of the more costly metallic medium. In theory, as Ricardo explained, a paper currency is one in which the whole value has been appropriated as seigniorage. The cost of keeping a stock of valuable money is obviated, and the new instrument of exchange is supported by state authority. Here the action of economic conditions is instructively illustrated; for though a government can set up a paper currency, it is not within its power to prescribe its value. The quantity theory ( 2) is confirmed by the inevitable decline in value when issue passes a definite point. The only effective mode of preventing depreciation is by limiting the amount of paper money to that of the metallic money previously in circulation. The easiest way to accomplish this is to leave the use of the paper currency optional by making it convertible into coin at the will of the holder. The amount of the circulation is thus automatically fixed by the action of the community. An evident disadvantage is the necessity of keeping an adequate reserve of coin to meet actual and prospective demands. For ideal security the whole amount of paper issue should be covered by an equal value of metal. In practice the reserve may be much smaller; but so far as it is required, it means a deduction from the gain of issue. The temptation to reduce the reserve to an inadequate amount and then to escape the difficulty by resorting to the expedient of refusing to pay coin for notes, i.e. making the notes inconvertible, has proved too strong for nearly all governments at times of pressure. The history of state dealings with paper money may broadly be described as a history of inconvertibility. Hard-bought experience has only now forced on the notice of governments the loss that follows from a disturbance of the standard used in ordinary payments. They are evident to all careful observers, and may be concisely summarized as consisting in: (i) the injustice to creditors through being paid in a much lower standard than that in which they lent; (2) the disturbance to trade, both domestic and foreign, by the fluctuations in the value of money; (3) the pressure on the working classes from the slower rise of money wages, in contrast with the quicker movement of the prices of commodities, resulting in a fall of real wages; and (4) the check to dealings in relation with the international money market, due to the risk of exchange fluctuations. The only gains are the temporary stimulus to certain branches of trade, and the advantage to the state by contracting a forced loan without paying interest.

The origination of paper money by state direction is the easiest to consider and explain. It does not follow that it is the most important or the earliest kind of representative currency. As W. Bagehot has pointed out, the real origin of economic institutions is often very different from the apparent one. In truth, representative money seems to have grown up out of the elementary contrivances of early credit. A claim could be expressed and transferred by a document, which might be used for facilitating exchanges. The rigid formalism of early law hindered the extensive use of this convenient machinery. It was not till the institution of banking that the coining of credit was made easy. Thus the bank-note comes into use, resting, not on the fiat of the state, but on the repute of the issuer. At this stage the history of the two distinct forms of representative money becomes mixed, owing to the control exercised over banks by government and to the fact that banking companies were in many cases the agents by which what was virtually state money was issued. There is, however, the fundamental difference that bank money finds its way into use through the ordinary system of granting credit; while government money is used in the purchase of commodities and the hire of services. The former, therefore, returns in a short time; the latter remains in circulation and displaces metallic currency. In the long controversy over the Bank Charter Act 1844 this distinction was brought into prominence. Since that date the extraordinary development of deposit banking in both Great Britain and the United States has furnished these countries with by far the most flexible form of currency yet known in the cheques that transfer claims on the capital held by the banking institutions. The confusion so often shown regarding the relation of credit to money is connected with this latest progress. When it is remembered that in its origin money is only an instrument to facilitate exchange we might even say to render it possible it follows that from its earliest to its latest form the ruling influence is the need of society for the best mechanism of exchange.

7. Production and Consumption of the Precious Metals in their Economic Aspects. In considering various monetary questions it is essential to have some acquaintance with the economic aspects of the production of gold and silver. The first point to which attention may be directed is the field over which production .extends. At one time or other these two metals have been found in every continent. Asia Minor in early times possessed its goldfields, or rather auriferous sands. Ceylon also undoubtedly contained gold-mines. China and India both produced silver to a considerable extent. Egyptian remains show that gold was commonly known in that country, probably procured from Nubia and Abyssinia. On the opposite side of Africa, too, the name of gold Coast shows that that metal was thence exported. The mines of Laurium in Attica were a source of supply to the Athenians, and were worked as a state monopoly. At an earlier date the Babylonian and Assyrian empires had each accumulated large stores of gold. The Phoenician importations of gold from the Red Sea coasts (Ophir) are known from Scripture. The Persian kings from the time of Darius levied tribute on all their provinces in gold from India, in silver from the remaining districts, the larger part of which was stored up in the royal treasuries. This tendency of despotic rulers to accumulate treasure had all through ancient history important effects on the economic structure of society. At present it is quite natural to assume that the materials of money are distributed by means of international trade, and tend to keep at an equal level all the world over an assumption which is in general well grounded, though an important exception exists. Ancient history presents a widely different set of forces in operation. gold and silver were produced by slaves under the pressure of fear, and were drawn towards the ruling parts of the great empires; in a word, war, not commerce, was the distributing agency. From this condition of affairs it is easy to see that, whatever may be the reasons for assigning to cost of production a potent influence over the value of money in modern times (and grounds have been already advanced for the belief that its influence has been exaggerated), no such reasons then existed. The production of the precious metals was carried on in similar manner to the great buildings and other works of those periods, on non-economic grounds, and therefore produced quite different effects. The whole history of the Persian monarchy to its overthrow by Alexander (330 B.C.) shows that the hoarded mass of the precious metals continued constantly to increase. On the capture of Persepolis by the Grecian army an enormous treasure was found there, some estimates placing it as high as 1 20,000 talents of gold and silver (27,600,000). All the temples, too, were receptacles for the precious metals, so that the stock accumulated at about 300 B.C. must have been very great. The only causes which tended to diminish the store were the losses arising from wars, when the various treasuries were liable to be plundered and their contents dispersed. There was therefore a more unequal distribution of the material of money than at present. The growth of the Roman dominion led to important results, since under their rule the Spanish mines were developed and became a leading source of supply. The great masses of treasure set towards Rome, so that it became the monetary centre of the world. The overthrow of the republican government and the peace which followed also affected the conditions of production. The inefficiency of the Roman administration made it advantageous to let out the mines to farmers, who worked them in a wasteful and improvident manner, while the supply of slaves was reduced, thus depriving the lessees of their principal agency for cariying on production. The result was a continuous decline in the store of money. W. Jacob has made an attempt to estimate the amount at the death of Augustus (A.D. 14), and arrives at the conclusion that it was 358,000,000. (Precious Metals, i. 225.) Without placing much value on this necessarily conjectural estimate, it is safe to assume that this period marked the highest point of accumulation.

The succeeding centuries exhibit a steady decline, though it is of course impossible to attach any value to even the most carefully guarded numerical estimates. The phenomenon which has since so often attracted notice the drain of the precious metals to the East began at this time, and was a subject of complaint by the Roman writers, while the stock of gold and silver being thrown into general circulation suffered from abrasion, and was more likely to be lost than when stored up in the royal treasure-houses and temples. These causes tended to depress the scale of prices, while the barbarian invasions produced a strong effect on the supply by drawing off the mining population and damaging the various erections used for working the mines. The conjectural estimate is that about A.D. 800 the total supply had been reduced to 33,000,000 (or about oneeleventh of what it had been at the death of Augustus). A new period in the history of gold and silver production may be fixed at this date. The Moors, now firmly established in Spain, began to reopen the mines in that country which had been allowed to fall into disuse. Other European mines also were opened, notably those of Saxony and the Harz Mountains, as well as the Austrian mines the chief medieval sources of supply. The international system of currency, based on the pound of silver as a unit, which was introduced by Charlemagne, must have tended to economize the wear of the metals. We may therefore conclude that from this date (A.D. 800) the supply was sufficient to counteract the loss by wear and exportation, and accordingly regard the metallic supply as fixed in amount until the next change in the conditions of production, which was the result of the discovery of America. Though 1492 is the date of the first landing, yet for some time no important additions were made to the supply of money. The conquest of Mexico (1519) gave opportunities of working the silver-mines of that country, while the first mines of Chile and Peru were almost simultaneously discovered, and in 1545 those of Potosi were laid open. From this latter date we may regard the American supply as an influential factor in causing a continuous increase in the stock of money. The annual addition to the store of money has been estimated as 2,100,000 for the period from 1545 to 1600. At this date the Brazilian supply began. The course of distribution of these fresh masses of the precious metals deserves some notice. The flow of the new supplies was first towards Spain and Portugal, whence they passed to the larger commercial centres of the other European countries, the effect being that prices were raised in and about the chief towns, while the value of money in the country districts remained unaltered. The additions to the supply of both gold and silver during the two centuries 1600-1800 continued to be very considerable; but, if Adam Smith's view be correct, the full effect on prices was produced by 1640, and the increased amount of money was from that time counterbalanced by the wider extension of trade. At the commencement of the 19th century the annual production of gold had been estimated as being from 2,500,000 to 3,000,000. The year 1809 seems to mark an epoch in the production of these metals, since the outbreak of the revolts of the various Spanish dependencies in South America tended to check the usual supply from those countries, and a marked increase in the value of money was the consequence. During the period 1809- 1849 the value of gold and silver rose to about two and a half times its former level, notwithstanding fresh discoveries in Asiatic Russia, which became considerable from 1823. The annual yield in 1849 was estimated at 8,000,000. The next important date for our present purpose is the year 1848, when the Californian mines were opened, while in 1851 the Australian discoveries took place. By these events an enormous mass of gold was added to the world's supply. The most careful estimates fix the addition during the years 1851-1871 atsoo,ooo,ooo, or an amount nearly equal to the former stock in existence. The problems raised by this phenomenon have received careful study. The main features of interest may be briefly summed up. (i) The additional supply was almost entirely of gold, thus tending to produce a distinction between the two principal monetary metals and an alteration in the currency of bimetallic countries. Under this influence France, from being a silverusing, became a gold-using country. (2) The contemporaneous development of the continental railway systems, and the partial adoption of free trade, with the consequent facilities for freer circulation of commodities, led to the course of distribution being different from that of the 16th century. The more backward districts were the principal gainers, and a more general equalization of prices combined with a slight elevation in value was the outcome. (3) The increased supply of gold rendered a general currency reform possible, and made the use of a gold monometallic standard appear feasible. The movements for currency reform, as will be seen, all arose after these discoveries. (4) The change in the value of money, which may for the period 1840-1869 be fixed at 20 %, enabled a general increase of wages to be carried out, thus improving the condition of the classes living on manual labour. It may be added that the difficulty of tracing the effects of this great addition to the money stock is a most striking proof of the complexity of modern economic development. (5) The last point to be noticed is the very small influence exercised on the value of silver by the new gold. The gold price of silver in London rose only from 59|d. per oz. to 62d. per oz. i.e. between 4 and 5%. Hardly had the gold discoveries of 1848-1851 ceased to produce a decided effect when new silver mines of unusual fertility came into working. During the period immediately succeeding the gold discoveries the production of silver remained at an annual amount of from 8,000,000 to 9,000,000. This amount suddenly, about 1870, increased to 15,000,000, and remained at that amount for the next five years. More than half of the supply came from new mines opened in Nevada. This increased supply was accompanied by a marked depreciation in the gold price of silver, though the prices of commodities in countries having a silver standard did not rise. The disturbances resulting from the combined effect of the new silver and the diminution in the annual output of gold which began about 1870 and continued for nearly twenty years were the cause of much controversy and led to the propounding of novel monetary theories. Bimetallism came into prominence; and the modes of relieving trade depression caused by the fall in prices were keenly discussed. Before any monetary adjustment took place the situation again changed in consequence of a renewal of the Australian gold production, soon followed by the great gold discoveries in South Africa. The annual output of gold, which had fallen below 20,000,000, in 1884 rose rapidly to 60,000,000, and in 1908 reached the prodigious figure of over 80,000,000, with the prospect of still larger yields in the near future. By this change the difficulties that had led to the agitations for " free silver " in the United States, and for " international bimetallism " in Europe and in India were removed, showing the close connexion between the production of the precious metals and the economic, especially the monetary, policy of all periods.

The modes of consumption of the precious metals under which their use is included are of equal importance with those of their production. Classed roughly, they come under three heads, viz. (i) their use as merchandise, (2) their use as money, (3) the "drain" to the East. With regard to the first, though precise data are not available, it may be said with some confidence that the demand for personal use tends, after society has made some progress, to decline in strength. The desire for adornment is not a keen one with most civilized persons; and, so far as it exists, is gratified in other ways than by using silver or gold. For purposes of manufacture their use is large and increasing. The second head is that with which we are principally concerned. It is evidently connected with the need for metallic currency; and this again depends on the level of prices and the monetary organization, including in the latter the banking system. Currency requirements still form the largest part of the demand for the precious metals. Under the third head a remarkable exception to the tendency towards the equal diffusion of the precious metals is presented. For nearly two thousand years the movement of silver from west to east has been noticed. Humboldt has made the ingenious remark that the course of these metals is in the opposite direction to that of civilization, and history supports his view. During the middle ages the chief Eastern products used in Europe were luxuries, such as silk and spices, and silver was sent from Europe to pay for them. Eastern trade increased, owing to the discovery of the passage round the Cape of Good Hope, and the flow of silver became greater. Special circumstances have from time to time influenced the movement. Thus, the new supplies of gold in the middle of the last century caused by their action m on the bi-metallic currencies of Europe an acceleration in the flow, the amount exported between 1851-1862 reaching 110,000,000. To this drain of silver a more recent one of gold has been added. India takes year by year a considerable amount of gold bars, which may in the future have a monetary use, but up to the present appear to be hoarded or used for ornament. With the complete reconstruction of Eastern currencies that now seems probable there may come a decided change in the character of the demand. Another influencing condition is also undergoing change ; the tendency to fix prices on a customary basis is bound to yield to the pressure of competition. The inevitable result will be to make the price level alter with each influx of money, and thus to limit the demand for bullion through the action of the exchanges.

One of the technical features of the production of the precious metals should be noted, in consequence of its economic effect. gold has more frequently been found near the surface; silver is usually obtained by deep mining. It follows that the amount of the former metal produced depends more on accidental circumstances, in contrast to that of silver, which is affected by the standard of mining skill. The mines of Nevada were exceptional in their possessing both metals and in nearly equal value. The gold-mines of South Africa have come to be worked at deep levels and therefore are technically in the same class as silver ones. In fact, there is a pronounced tendency all the world over towards the system of capitalistic working.

8. Review of the History of Some Important Currencies. Monetary theory requires to be elucidated by the constant reference to history; just as in turn the history of currency has to be interpreted by the aid of general principles. Each country has its peculiar problems, which call for special treatment ; though at the same time there is no way of avoiding the operation of those economic conditions and forces that are to be found in all countries. The first decisive fact that emerges from the vast material presented by the history of money is the tendency at most periods towards deterioration. In the time of purely metallic currency debasement is the most serious danger; when representative money has come into being extravagant issues of paper are chosen as the readiest way of evading the limits of a sound currency. It is perhaps too extreme to say that monetary history is altogether made up of accounts of debasements and over-issues. The truth is better expressed in the proposition that there has been a constant struggle between the influences that make for deterioration and those that give support to the maintenance of a good currency condition. There is also the cheering circumstance that in spite of much popular ignorance there has on the whole been a steady improvement in the treatment of monetary systems. Expert knowledge has more effect in the later than in the earlier periods. The crude expedients of the Tudors would not be tolerated in modern England. There is much fuller recognition of the danger of over-issue in paper money; and this is accompanied by greater care in the treatment of credit institutions in their relation to the modern media of circulation. It is also noteworthy that mere popular agitation has lost a great deal of its power, as shown in the failure of both the " soft money " and the " free silver " movements in the United States. On the other hand the tendency to accept scientific methods is illustrated in the treatment of the Indian currency question.

Greek Currencies. As already noticed the political conditions of Greek life supplied a varied field for monetary experiments. Unfortunately the details are very incompletely known, and the subject of Hellenic money has not been sufficiently studied from the economic side. Certain broad facts are prominent. The Athenian use of silver as the standard substance, coupled with the later employment of gold to serve for an extra or commercial currency, is a characteristic feature. The alteration of the standard by Solon appears in the light of an exceptional revolutionary expedient. It amounted to the creation of a new standard unit the Attic which was imitated by other states, e.g. Corinth. Only one doubtful instance of debasement can be found in the subsequent history of Athens. This honesty in respect to the monetary standard seems on the whole to have prevailed in the Greek states. Some despots, as Dionysius, issued adulterated coins, but these were isolated cases. The use of gold and silver in an amalgam, known as electrum, was an admissible device ; it, however, had the evil effect of suggesting the use of poorer alloys.

Roman Money. The history cf money in Rome is rather different. Beginning with copper, the currency was changed into a double standard one by the introduction of silver (269 B.C.). gold came in for commercial use with the extension of the Roman dominions, and copper was reduced to a token coinage. In the stress of the Punic Wars debasement was one of the financial devices of the magistrates. The conquest of the Greek territories brought about the regulation of their currencies. Silver was prescribed as the money substance. The establishment of the empire led to the definite concentration of the right of coining in the sovereign; though concessions were made in various localities, where the smaller coinages were allowed to continue. But the principal interest of the money of the Roman Empire is due to the remarkable way in which it illustrates the tendency of despotic and bureaucratic rule to lower the condition of good administration. A long course of debasement is the characteristic aspect of the currency system. " Under the empire," we are told, " the history of the silver coinage is one of melancholy debasement. The most extensive frauds in connexion with money were perpetrated by the Romans." The gold aureus, which in the time of Augustus was one forty-fifth of a pound, was under Constantine only one seventy-second of a pound. The alloy in the silver coins gradually rose to three-fourths of the weight. Plated coins came into extensive use. The practice of debasement was in accordance with the theories of the jurists, who seem to have regarded money as simply the creature of the state, i.e. the personal ruler.

Medieval Money. After the overthrow of the Western Empire, though the invaders were in the condition of what has been called " natural economy," the state in which money has not come into being, they soon were disposed to carry on the Roman tradition, and their rulers adopted some form of silver currency. With the temporary revival of the empire under Charlemagne there comes the effort to found a general standard money on the basis of the silver pound. From this new starting-point it is possible to trace the course of some of the leading currency systems of Europe. For purposes of illustration it will be sufficient to sketch the movements in England and France, which are typical of the general course of monetary development. The systems of these countries are moreover remarkable (i) in the contrasts that they present to each other, and (2) in the widespread influence that they have exercised on the monetary arrangements of other nations.

English Monetary History. The English currency begins with the pound of silver (troy weight) as the standard unit, subdivided into 20 shillings, each containing 12 pennies. The only coin at first in use was the silver penny This system, in force before the Conquest, is the direct descendant of the Carlovingian system, and it continued without change until about 1276, when a slight depreciation was introduced by coining the pound into 243 pennies, instead of the original 240. This was the first of a series of changes, generally in the direction of lowering the weight of the coin. Two periods are remarkable for the operation of this tendency, viz. (l) the reign of Edward I., when the silver was debased by 20% in the period 1344-1351 ; and (2) the close of the reign of Henry VIII. and that of Edward VI., 1543-1552. In this short space of ten years the expedient of degrading the quality of the coinage by bringing the alloy up to three-fourths of the mass was practised for the only time in English history. The substitution of the pound troy for the Tower pound in 1527 was accompanied by a lowering in weight which far exceeded the gain from the higher weight of the new pound (5760 instead of 5400 grains). The reformation of the silver coinage under Elizabeth (1560), and its definite settlement in 1601 on the basis of coining 62 shillings from the pound troy also deserve mention. Turning to the gold currency, we find some gold pennies issued in 1257, probably in imitation of the issue of the Italian cities, which were due to the opening of eastern trade and the example of the Greek Empire, which had always retained its gold currency. The regular series of English gold coins begins in 1343, when Edward III. ordered the coinage of florins the title is significant at 50 to the Tower pound. The " noble " soon followed. The " sovereign " was first issued in 1489. But gold was treated as a commercial money, to be used as subsidiary to the standard silver. Its value was therefore varied from time to time to meet the difficulty that local bimetallism is certain to cause, in consequence of the undervaluing of one or other metal. During the 17th century the most noticeable monetary events are: the proposals for depreciation, of which the most remarkable was that of W. Lowndes (1652-1724), for lowering the standard by some 25%; the introduction of the guinea as the leading gold coin, and the frequent readjustment of the values of the two metals by proclamation. The great recoinage of 1696, carried out on the principles advocated by Locke, reformed the silver currency. In the 18th century the establishment of the guinea at 2is. by Newton's advice made the adoption of gold as the standard inevitable, since it was overvalued in an appreciable degree. The position of gold as the practical standard is clearly recognized by Adam Smith (1776) and is regarded as settled by Ricardo (1809). The full legal establishment of the present metallic currency took place in 1816, when the guinea made way for the present pound or " sovereign," and silver was formally reduced to the level of a token coinage, being slightly lowered by the coinage of the pound of silver into 66 shillings. Thus, by a course of development extending over 700 years, the English currency has been transformed from a crude silver standard system into one resting on gold, but employing both silver and representative money for the greater part of the actual work.

French Money: its Development. Though the monetary system of Charlemagne soon disappeared in Germany and Italy, it con- tinued in the part of his empire that became France. The extreme confusion of the time of his successors enabled the feudal lords to claim the right of coinage. No less than 150 seigneurs are said to have exercised this power at the accession of the first Capet. With the growth of the royal authority the freedom of private coining was restricted, in order to reserve to the Crown the profitable right of seigniorage. Unfortunately the legitimate profit from this source was not sufficient to satisfy the wants of the royal treasury. Therefore French monetary history is marked by a long series of debasements, extending from the time of Philip I. to that of Louis XV. (1060-1774). In sharp contrast to English policy the tampering with the currency was persistent, so that Louis IX. was looked on as quite exceptional. " In later days his management of the royal mint was always appealed to as the equitable standard for the observance of his successors." Yet in his time the livre had been debased to less -than one-fourth of its primitive level. The Hundred Years' War presented the occasion for still further degradation. At the accession of Louis XI. (1461) the livre had been brought down to one-fifteenth of its original value. The 16th century is equally an age of depreciation, no less than nineteen occurring between 1497 and 1602. Again, in contrast to the English system, the absolute monarchy continued the process of debasing the standard under Louis XIV., and the livre was only one-half what it had been under Henri IV. At the Revolution the decline had proceeded so far that the livre had been reduced to one seventy-eighth of its primitive value. The new spirit of reform produced an entire change. The franc was substituted for the livre at the equation: 80 francs, 81 livres. In fact, until the establishment of constitutional government the French people had to depend on popular violence to procure any temporary reform in their currency. Since the Revolution the course of development has been essentially orderly and regular. All through the time of the ancien regime silver was the principal money and the standard, as the use of the word " argent " as a synonym for money shows. Just as England got a gold currency by overvaluing gold, so did France get a silver one by overvaluing silver. Indeed, it may be said that the different ratios chosen by the two countries necessarily caused a reciprocal drain, affording a good example of the action of local bimetallic systems with different ratios between the two metals. A further result from the comparison of the systems of England and France is the greater maturity of the former. England gained an honest currency before France ; she led the way in the adoption of the gold standard, while in her treatment of representative money she has held as decided a priority. The difference in economic conditions in the nations in part explains the contrast. There is no doubt that in both cases a high degree of development has been reached. Finally, it should be remarked, that as England has worked out in practice the system of " composite legal tender," so has France, with its monetary allies, been the first to show effectively the operation of the " limping standard " (etalon boiteux). Each nation has thus supplied a type, which recent monetary changes give evidence of having been used as the pattern for other less advanced countries.

9. Some General Questions respecting the Constitution of Money. The consideration of the history of currency systems naturally suggests the general problems that the more advanced countries have had to encounter. Of these, some may be described as formal, i.e. they relate to the arrangement and the definition of coinage and standards. Others are in essence issues of principle involving the most complicated theoretical doctrines, on which there is even yet sharp differences of opinion between competent students of economics. In some instances an intermediate class may be found, e.g. the question of subdivision of the coins does raise some difficult matters of application; though it clearly belongs of right to the group of formal questions. But the distinction is a valid one. Whether a country should adopt the " gold standard " or prefer a " bimetallic " standard is obviously very different from the elementary points about units and the different classes of coins. We will therefore begin by noticing some of the characteristics that are found in all modern currencies and some of which are implied in the idea of money. Thus it is true that every currency system must be based on a standard unit of value which consists of a " fixed quantity of some concrete substance defined by reference to the units of weight or space." The English unit, for example, is the pound, which consists of a definite quantity of gold (123-27447 grs. standard fineness) while the French unit is the franc (composed of 5 grammes of silver nine-tenths fine). It is not necessary, though it is usually the case, that there shall be a coin corresponding to the standard unit, all that is needed is that the current coins shall be multiples or submultiples of the unit, or at the least easily reducible to it. The Portuguese rei is too small to be coined, and the pound of silver that formed the unit of the early English and French currencies was too large. Quite distinct from both the actual coins and the unit of value is the money of account, though in practice it is usually identical with one of them. In Russia in early times the rouble was an imagi nary money of account not coined, while the copper copeck was the unit of value. Connected with the distinction between the coins and the unit is the highly important one between standard and token money, the former being of full power for discharging debts, and in the case of most systems only o equal value to the metal out of which it is made, while the latter is rated at a nominal value higher than that of its material The silver and copper coinage in England and the smaller coins in the Latin union are only tokens; in the case of English silver coins, the cost value is less than 40% of the nominal one. The French tokens are made of inferior fineness (835 per 1000) to the full tender silver. Two restrictions are applied to token issues: (i) they are only legally available to discharge small debts in England silver is limited to the payment of 403.; (2) they can be coined only by the permission of the state. Thus in England the Bank of England is the state agent for the silver coinage. The limitations are evidently required to prevent the expulsion of standard money, and to avoid the flooding of the circulation with coinage that is not needed for the purpose of the limited exchanges to which it is confined. Intermediate between standard and token currency are those forms of coinage that are free from the first limitation, but restricted by the second. They have this further point of resemblance to tokens in that their nominal value is higher than that of their material the French s-franc pieces and the Indian rupees are prominent examples. Similarly, the analogy between representative money and token money is deserving of attention, and suggests the desirability of the latter being regarded as in some respects a fiduciary issue, for which the issuing authority incurs responsibility.

A class of considerations already referred to ( 5) requires explicit notice here, viz. the influence of popular sentiment on the character and forms of a country's currency. The fact that money has to circulate amongst all classes of society makes it indispensable that it should be suited to the wants and even the prejudices of the users. Many curious instances of preferences for particular coins or special forms of paper money can be given. The Austrian Maria Theresa dollar of 1780 is a favourite on the African coasts and has been frequently reissued for use there. Reasons of convenience and of security combine with sentiment; as in the determined rejection of the U.S. " greenbacks " by the inhabitants of California during the inconvertibility of that currency. Recognition of the desires and tastes of the community is almost essential in carrying out any monetary reform. It is only by building on the habits and customs that have become established that improvements in the monetary system can be effectively completed. Not only is this careful observance of the disposition of the mass of society expedient ; there is still greater need for taking account of the methods and interests of those sections of the business world that deal specially with money. A currency change that was bitterly opposed by the banking interest would certainly be difficult to introduce in either England or the United States; traders have great influence as to the forms of money that they will accept and facilitate the use of. In another aspect the study of the interest of dealers in the arrangement of the monetary system presents itself. One of the features that caused much surprise in the infancy of economic study was the disappearance of good coins from the circulation, while inferior ones remained in use indefinitely. To the first observers there seemed to be something perverse in the preference apparently shown towards debased or worn coins. In business transactions inferior articles are taken only at a lower price. The explanation is easily understood, when furnished; it consists in stating the difference between a commodity which is sought for its use, and money which is taken as merely a medium of exchange. Provided that coin is not too bad for further circulation it will be accepted without difficulty. Still less will there be any trouble if the difference is only in the relative value of two metals, such as silver and gold. The great majority of any population will give and take money without particularly observing it. It is enough if the coin conforms to the usual type. There exists, however, in all mercantile communities a class of dealers in money, who make a profit by selecting the best coins for exportation, or if two metals are in concurrent use, the coins of that metal which is undervalued in the proportion fixed. In the case of inconvertible paper issues the withdrawal is also for the purpose of hoarding to secure the profit expected when there is a high premium on bullion. The action of self-interest under these conditions produces an effect which has been briefly formulated in the statement " that bad money tends to drive out good money." The proposition has been styled Gresham s Law " (q.v.). Abundant illustrations of its working are available. The establishment of the English told currency and the French silver one in the 18th century, already mentioned ( 8), is an effective one. Quite as good is the transition ot prance from the silver to the gold currency form after the great gold discoveries of the middle of the 19th century. In truth it may be said that most of the monetary transitions have been due the operation of the force indicated in Gresham's Law. The importance of the law lies in the warning that it gives against the attempt to reform a degraded currency by the issue of better money. Such operations of the mint are," in Adam Smith's judgment, somewhat like the web of Penelope." The caution holds equally in respect to the reform of a depreciated paper currency or to an effort to force an undervalued metal into circulation, i he success of so many monetary reforms in the last forty years has been in great measure due to the better appreciation of the working of the principle. Its aid can also be obtained by setting currencies rest altogether on the maintenance of an overvalued coinage, along with one of higher value by the limitation of the quantity of the former to the amount that can be employed without expelling the remaining part of the circulating medium from monetary use.

Another part of the structure of any currency is the scale on which its accounts, and by consequence the degrees of its coins, are arranged. The pound, the shilling, and the pennyin the older t-nghsh system represented so many grades in the subdivision of value. All other currencies have the same need for divisions. the simplest scale would be what is called the " binary "; in which each coin is the half of the next higher, and double the one immediately below it. Most actual systems have series of coins on the binary scale. The penny the halfpenny, the farthing; the 45. piece, the florin, the shilling, the sixpence, the threepenny; at a higher level the sovereign, the half-sovereign, the crown, the halfcrown, are English examples. The Latin and Scandinavian unions, as also Germany and the United States, have several binary coinage series. But no country adopts a purely binary scale. England in part retains the old " duodecimal " division in the relation of the shilling and the penny Nearly all civilized nations have come to accept the system of Decimal Coinage (q.v.), though in their actual currencies they admit certain divergences from the strict decimal system. The convenience of having the monetary scale of accounts in accordance with the arithmetical scale will probably secure the ultimate victory of the decimal system everywhere, in spite of the objections to it on the ground of its having only two factors 2 and 5 as against the larger number of the duodecimal scale (2, 3, 4 and 6). The immense trouble involved in altering accounts and the difficulty of overcoming the hostility to change felt by the ordinary members of the community are the obstacles that prevent the adoption of the decimal system in England.

Connected with the composition of a currency and the scale on which it is based is the question of its relation to other currencies. From a very early time the conception of a money that should not be confined by a political limit appears to have existed. In [act until the state took over the control of money its more important iorms had a wide diffusion. The talent, equated to the ox, is a prominent instance. Even when the city-state provided its particular coinage we can still perceive the circulation of the better coinages outside their legal area. The effect on the Greek currencies las been noted above (8). Under the Roman hegemony and the empire that arose out of it there was the equivalent of an interlational currency in the wide circulation of the coinages adopted 'rom the conquered states. Such coins as the drachma and the denarius were of general use in the then civilized world. In later times the Carolingian silver currency for a short period supplied an international medium, which vanished in the confusion of the niddle ages. Owing to the rise of national governments money jecame a national distinction peculiar to each state. It is only in the last sixty years that the idea of international money has been revived in a practical form. Unfortunately the revival was speedily checked by the reaction in favour of nationalism that followed he Franco-German War (1870-71) and by the controversies as to he proper standard. (See BIMETALLISM and MONETARY CON- FERENCES for further discussion of this topic.)

10. Typical Currency Systems: their Evolution and Governing Principles. At first sight it appears that the systems of currency are almost infinite in their variety. They have grown up in different nations under the influence of local conditions and reflect he customs of the particular society. But, underlying these uperficial differences, there are certain general principles that jermit of a grouping into a small number of clearly marked types. The classification, though resting on logical grounds, is very argely in conformity with the course of historical development.

Better forms have come into being as social progress has become more pronounced; and further improvement may be expected in the future. The condition of things when money is coming into being is characterized by the weighing or measuring of the substances used for aiding the course of exchanges. It has therefore been called the system of " currency by weight." In strictness, it is better regarded as the stage before the introduction of real money; and thus outside the field cf currency systems proper. The simplest system of currency seems to be that in which the state coins ingots of different metals and allows them to circulate without assigning any ratio for their respective values. Such an inconvenient form is not likely to be of long continuance; but it has sometimes arisen at a later time through the introduction of foreign coinages. Holland at the end of the 16th century, Turkey down to the present day may be given as countries approaching this state. The title of " currency by tale " is Jevons's apt denomination for such a currency system. The next form in logical order is that in which a single metal is definitely appointed as the sole standard money. In early ages this is the most natural arrangement, and it has, therefore, been widely adopted. Silver has been the metal generally used in this way; as the instances previously given (8) prove. The title of " single legal tender " system is the obvious one ior this form. With the growth of transactions a difficulty soon presents itself. If the chosen metal is not of high value it is cumbrous for making large payments; if on the other hand its value is high, it is unsuitable for use in small transactions. Hence there almost inevitably follows the use of other metals, which are better suited for certain particular uses. Thus silver is at once too heavy and too light. To pay 1000 in silver at its present value would take 800 Ib troy, while a silver pennywould be under the convenient limit of size. Partly for these reasons, but also to a large extent through the persistence of currency by tale, we find that along with the standard money other kinds are brought into or retained in use. Copper long survives beside silver; and gold is employed for the more important commercial transactions. Public convenience leads to the valuation of these subsidiary forms of money, and in this easy manner another currency system that of " multiple legal tender "comes into being. Though, theoretically, several substances might be valued for use as money, in practice some kind of bimetallism is used, and generally gold and silver are the constituents of the system. Thus for over three centuries England had a currency in which the values of gold and silver were fixed from time to time by royal proclamation. France and the United States, as well as many other countries, have had long experience of national bimetallism. The great problem in such a form of currency has always been that of keeping the two metals in effective circulation. As the values of the precious metals fluctuate, the principle of Gresham's Law is exemplified by the expulsion of the undervalued one. Each change in the conditions of production or in the ratios fixed by other countries tends to disturb the balance and is harassing to trade. Local or national bimetallism comes to be unsustainable, and is replaced by other currency types. The most remarkable is that known as the " composite legal tender " system. Its object is to combine any advantages of multiple legal tender with the maintenance of the single standard principle. One metal is selected as the standard and is legal tender to any amount; other metals are utilized for the purpose of token currency. Thus in the system of the United Kingdom gold is the only standard coinage : but silver and copper are employed for the lower coins and for smaller payments. The establishment of this ingenious arrangement is rather the outcome of the circumstances that governed the English monetary situation in the 18th century than any refined considerations of theory; but its justification on grounds of principle is furnished in Lord Liverpool's Coins of the Realm (1805). The extent to which the system has been copied by other nations and the stability of the English currency are strong confirmations of its merits as a solution of currency difficulties. Though the composite legal tender system has been a decided success, it does not follow that it supplies the only mode of dealing with the troubles that attend on the use of the local double standard. Other methods have been evolved from the monetary experiences of France and India, which take distinct forms according to the special features of the case. There is the currency system known as the " limping standard," the essence of which is the concurrent use of two metals, one being overvalued and coined only by state authority. The quantity of this favoured metal is necessarily limited in amount, to avoid depreciation or the ejection of the other metal from the circulation. It, however, has the position of money in the fullest sense, in that it is legal tender for any amount. The S-franc pieces issued by the Latin union are the best known specimen of such coinage. In this case also the origin of the system was not theoretical, it was the result of the fall in the value of silver and the fear entertained by the French government that gold would be displaced by the cheaper metal. The temporary expedient of limiting the coinage of standard silver has developed into the maintenance during more than thirtyfive years of the limping standard, which derives its name from the shortness of one limb of the currency body. Equally suggestive for monetary theory is another phase or system, usually described as the " gold-exchange standard " system, in which the ordinary currency is of a rnetal coined only by the state, and so limited as to keep it in a prescribed value ratio to another metal (gold) which does not circulate, but acts as the standard of value. This variation on the limping standard has been produced by the effort of the Indian government to meet the embarrassment caused by the continuous fall in the gold value of silver. Under the pressure of failing revenue and of persons suffering from the rupee depreciation in gold, the limitation on silver coinage was first enacted (1893); to be followed some years later (1899) by the establishment of gold as the standard, with a definite parity assigned for the state silver issues. The success of the Indian experiment for such it avowedly was has led to its imitation by the American administration in the Philippine Islands and by Mexico. It may be looked on as the natural product of the condition in which the single legal tender system is proving unfit, while the material for the composite legal tender system is wanting. The employment and theoretic explanation of these methods of currency adjustment mark the greatest advance made in monetary science and practice in recent years. Whether the limping, or the gold-exchange standards will be permanent forms is difficult to determine; but they are beyond doubt of much importance in meeting the risks of a period of transition. In any case they are entitled to recognition as distinct forms of currency organization, resting on a scientific basis.

The types presented by purely metallic currencies can be considered by themselves for the purpose of theoretical exposition. In actual working they are now affected by the existence of representative money. The state issues paper money which may be either convertible or inconvertible, or if it refrains from so doing, the banks take up the task and supply a medium of exchange in the form of notes, or by a later development through providing for the use of cheques by their customers. An inconvertible paper currency has some pronounced affinities with overvalued metal; a duly regulated issue of this kind is quite on the lines of the gold-exchange system, and the difficulties of the two forms are very similar. But, just as the cruder systems of metallic money have gradually given way to the higher ones, so it may be said that the grosser forms of mismanagement in representative money are being removed, notwithstanding the recurrence of such monetary crises as that of 1907 in the United States. The great instance of government paper money is the United States notes, known, as " greenbacks," which are fixed at the amount of $346,681,016. The most prominent case of bank issue of notes is that of the Bank of France, with somewhat over 200,000,000 in circulation. Examples of the cheque currency are more difficult to state in quantitative shape; as the constituent parts are continually being created and cancelled, but the clearing-house returns give some idea of its extent in England. The figure for 1909 was 1zz 3,525,446,000. It seems highly probable that the next stage in improvement will be the extension of currency based on . credit, after the Anglo-American pattern, to the other commercial countries of the world. But this movement can only be slow, it will not affect Eastern countries. For a long time they will remain in the metallic currency stage, with the moderate use of a guaranteed note circulation.

There are several plans which have been advocated as superior to any of the systems actually in use. Most of these schemes are undeserving of notice; a few, however, claim attention on the ground of theoretical or practical importance. The most conspicuous is that known as " international bimetallism," which was designed to obviate the evils said to result from the demonetization of silver and the overflow of the established ratio between the precious metals. Its central idea was the creation of a monetary league, composed, if not of all, at least of the leading states (the larger the number the better), the members being bound to coin any amount of gold and silver at an agreed ratio. By such an agreement an adequate field for the use of both metals would be provided, and fluctuations in the relative value of silver and gold would be completely prevented. The expulsion of the cheaper metal would be impossible, owing to the absence of any place to which it could be driven. Variations in the production of the precious metals would act en both metals, not on one. Another plan for meeting the same set of difficulties is the composition of the monetary standard by taking assigned amounts of both metals in combination as the unit say i oz. of gold with 10 oz. of silver. The title " symmetallism " has been given to this ingenious mode of trying to obtain a more stable standard than that afforded by the employment of a single metal. Amongst the many devices that the use of paper money has suggested the most noticeable are those that aim at the replacement of metallic money by some other basis. The socialist conception of a " labour note " may be paralleled by the idea of " commodity notes," resting on a development of the clearing system. Viewed from the practical standpoint it may be said that the double standard in any form is condemned by the course of events; it has been defeated by the gold standard. In respect to the other proposed methods there is the almost insurmountable difficulty of making them in any way sufficiently popular to overcome the resistance that they must necessarily encounter. This criticism holds good, quite apart from the objections of principle to which they are all open, in very different degree it is true. The influence of custom in relation to money can never be set aside. For this reason it is certain that very gradual change is the only possible kind of monetary reform that can hope for success. It is essential to preserve as far as possible the old surroundings and avoid the intrusion of novel devices. The adoption of what Sir R. Giffen has styled " fancy monetary standards " is reserved for a distant future.

In the course of the development of monetary systems important theoretical problems have presented themselves. For the middle ages the great question was the best mode of securing an honest metallic currency. At the beginning of the modern national states the problem of keeping a parity between silver and gold was the most serious issue which each state attempted to solve independently. With the rise of credit there followed debate on the proper management of paper money in its various forms, which has not yet been completely closed. But the tendency in the last fifty years has been to concentrate attention on the meaning and due constitution of the monetary standard. In particular, the difficulties that result from an alteration in general prices, and the inconvenience to foreign trade from different currency standards have been exhaustively considered. It is therefore desirable to present in a concise form what xvm. 13.

appears to be the outcome of these discussions. The first established conclusion is the impossibility of obtaining an absolute and invariable standard. The best that can be hoped is a near approximation by balancing the elements of fluctuation. The construction of the most suitable monetary system is a work of practical adjustment. The influence of the actual conditions, which has been already emphasized, helps to indicate the limits of profitable inquiry. In respect to the metallic basis the choice is between the single standard gold or silver, and some combination of these. The single standard of silver can be set aside, though it has had influential supporters. On the other hand the only combinations that need be considered are those indicated above by the titles " bimetallism " and " symmetallism."

The theory of the gold standard rests on the principle that one metal is a better criterion for measuring values than two, since the fluctuations that occur by the substitution of one metal for the other are certain to be disturbing. There is the further difficulty that no ratio can be permanently fixed between two metals, as their values must vary with the alterations in production. The inherent simplicity, and, so to speak, " naturalness," of the single standard is best realized by embodying it in gold, which is universally desired, of high cost and yet found in sufficient amount to discharge the money work of the standard. The verdict of history is appealed to as confirming the theoretic presumption, for gold has been gaining ground from century to century. The struggles to reverse this process have only made it more pronounced (see MONETARY CON- FERENCES). Most of the objections to the gold standard rest on ideas which are the support of other economic fallacies. The attempts to supersede it involve the rejection of the rule of economic law. The foundation of the doctrine of " bimetallism " is the theory that the value of money is determined, not simply by cost of production, nor by unregulated supply and demand, but by the action of regulated demand, in conjunction with the actual conditions of production. States are the demanders of metal for monetary use, and by adjusting that demand they can powerfully influence the course of production, especially as the cost at which either gold or silver is obtained varies with the productiveness of the poorest mine in working. Thus by directing consumption, states are controlling production, and therefore within limits fixing the relative value of the two metals. This power has been shown in the stability of the ratio during the continuance of the French doublestandard (1803-1873). The possibility of maintaining a given ratio being thus established, the argument proceeds to show the advantages of the system, (i.) It secures the concurrent use of the precious metals and avoids throwing all the money work on gold, (ii.) Greater stability in value may be expected, since the fluctuations of either metal will be compensated by those of the other. At the worst the variation can only be as great, (iii.) The larger stock of money tends to keep up prices to the benefit of trade; for falling prices hamper production, (iv.) The fixed ratio provides a stable par of exchange between silver-using and gold-using countries; though universal bimetallism would remove this dis- tinction, (v.) The establishment of a world-currency would be facilitated by allowing both metals a well-defined relation. -This enumeration of the heads of the " bimetallic " case shows that its working depends on the area of its operation. It must be " international " and the states composing the union must be " great powers " in the monetary sense. Otherwise, their action would be comparatively ineffective. The crucial difficulty has been the determination of the common ratio. The risk of failure in carrying out the policy has proved a deterrent to such great powers as England and Germany, who are in possession of the gold standard. On the theoretic side the chief weakness of bimetallism has been its failure to supply any clear account of the limits within which states can regulate the ratio of gold to silver. If the ratio 15-5:1 can be set up why should not the ratio 100:1, or that of equality ? Its practical failure has resulted partly from political conditions, partly from the removal of most of the difficulties which it was intended to meet by the subsequent economic development. The proposal for a joint standard formed by using a unit in which the two metals are combined has the advantage of escaping the risk of failure to maintain the ratio, for it makes the employment of both silver and gold essential. Its influence in causing stability is also likely to be greater ; but it is open to the danger that a shortage of one metal would not be compensated by the abundance of the other. The further advantage that it does not need international agreement (for each country could settle its own combination) is counterbalanced by the strangeness of the plan and by its necessitating the use of representative money. The suggestion of "goloid" coins on the model of the Greek electrum would hardly be acceptable.

The Present Money Systems of the World: Changes of the last Half Century. The facts as to the money of the leading countries of the world are given in Tables II. and III. It is, however, necessary to explain the way in which this position has been reached by the reforms of the last fifty years. Since 1860 the alterations in standards and in coin denominations have been of a very extensive nature. England is one of thefew countries that has not found change desirable. France has reorganized her token coins (1864), entered into the Latin union (1865) and adopted the limping standard in 1874. Germany has completely transformed the monetary system hitherto existing in the German States (1873). The Scandinavian union has been set up (1875). Holland has changed her system more than once. Still later, Austria-Hungary (1892) and Russia (1897) have come over from the silver standard with the practical use of inconvertible paper to new currencies on the gold basis. In America the United States, after a series of monetary experiences, has made the gold dollar its standard unit, though the silver complication still exists. Mexico has succeeded in establishing a gold-exchange standard at such a ratio as to induce the import of gold. India has had its rupee currency put into relation to the English gold unit, and has been followed by the Straits Settlements. Japan first abandoned its ancient currency (1871). It then adopted a double standard system which became in practice a silver one and later passed into inconvertible paper. Finally, it has (1897) established a composite legal tender system on the gold basis. The Dutch Indies have the gold-exchange standard on the same plan as India. Remarks.-In addition to the tabular statements, the following points respecting the currencies of less advanced countries may be indicated. Though there is a tendency to establish the money of the mother-country in colonies, some of the British possessions, acquired by conquest, have kept their former currency. There has been a widespread movement in the backward countries of the world towards reforming their money; chiefly by setting up some line of connexion with the gold standard. In South and Central America the dollar has been retained as the unit; but the movement for co-ordination with the French system has ceased. The English standard has been preferred as a model by Chile and Peru. In Asia the currency of the Philippines has been reorganized under American control. China is considering monetary reform, and Siam has made progress in the direction of the gold-exchange standard. Prcbably the most defective currencies are now those of Turkey and her tributary states. Bibliography.-The literature on the subject of money has been well described as "almost measureless." The list of writers who have contributed to it begins with Aristotle, and includes such famous names as Copernicus, Locke and Newton. A full enumeration would fill a volume of no slight size. All that can be done here is to give a short classified list of the most serviceable books.

I. Economic text-books: English and American-J. S. Mill, Principles of Political Economy (London, 1848; new ed. by Ashley, 1909); Sidgwick, Principles of Political Economy (London, 1883; 3rd ed., 1901); J. S. Nicholson, Principles of Political Economy (3 vols., London, 1893-1901); F. A. Walker, Political Economy (New York, 1883; 2nd ed., 1887, often reprinted); A. T. Hadley. Economics (New York, 1896); E. R. A. Seligman, Principles of Economics (New York, 1905); H. R. Seager, Introduction to Economics (New York, 1904; 3rd ed., 1908). French: M. Chevalier, Cours d'economie politique (vol. iii. " La Monnaie," Paris, 1850); P. LeroyBeaulieu, Traiti d'economie politique (4 vols., Paris, 1896); C. Gide, Cours d'economie politique (Paris, 1909). German: H. Mangoldt, Grundriss der Volksmrtschaftslehre (2nd ed., Stuttgart. 1871); G. Schonberg, Handbuch der politischen Oeconomie (Tubingen, 1882; 4th ed., 1904); G. Schmoller, Grundriss der allgemeinen Volksmrtschaftslehre (Leipzig, 1900-1904). The Dutch work by N. G. Pierson has been translated into English with the title Principles of Economics (London, 1902). II. Special treatises on "Money": W. S. Jevons, Money and the Mechanism of Exchange (London, 1875); F. A. Walker, Money (New York, 1878); J. S. Nicholson, Money and Monetary Problems (London, 1888; 6th ed., 1902); C. A. Conant, The Principles of Money and Banking (2 vols., New York, 1905); A. Arnaune, La Monnaie, le credit et le change (Paris, 1894; 2nd ed., 1902); A. de Foville, La Monnaie (Paris, 1907); C. Knies, Geld una Kredii (Berlin, 18731879); G. F. Knapp, Staatliche Theorie des Geldes (Leipzig, 1905). III. Works on special questions: See Bimetallism; Banking; and Monetary Conferences for writings on the problems of the standard and depreciation. For the history of money-F. Lenormant, La Monnaie dans I'antiquiU (Paris, 1876); W. A. Shaw, History of Currency, 1252-1894 (London, 1895). For the history of the English currency, besides the works on the numismatic side-Lord Liverpool, Coins of the Realm (1805; reprinted 1880). For America-W. G. Sumner, History of American Currency (New York, 1874). On the production and consumption of money materials, W. Jacob, Production and Consumption of the Precious Metals (2 vols., London, 1831); and A. Del Mar, History of the Precious Metals (London, 1880). Technical details in Tate's Cambist (many editions). (C. F. B.)

[1] Present system introduced in 1894, in place of the system adopted in 1870. The Maria Theresa dollar is only used as a commercial money in Levantine trade.

[2] The system of the Scandinavian union came into force on the 1st of January 1875. It is based on gold monometallism.

[3] The coinage system of France came into force on the 6th of May 1799. It was extended to the countries forming the Latin union in_ 1865; it has been adopted by Greece, Rumania, Servia and Spain. It is the most widely extended system in Europe. The Austrian 8 and 4 gulden pieces were equivalent to the 20 and 10 franc pieces. In 1879 it was estimated that the system was used by populations amounting to 148,000,000. In its origin a double standard (with ratio of 15-5:1) it has become a limping standard by the limitation of the silver coinage. The unit is the same value all through the union, but receives different names in lifferent countries. The titles are: in France, Belgium and Switzerland, franc and centime; in Italy, lira and eentesimo; in Greece, drachme and lepta; in Rumania, leu and ban; in Servia, dinar and para; in Spain, peseta and eentesimo.

[4] The German coinage law came into force on the 1st of January 1875. It was modelled on the English system, but it is only in the last few years that the old silver has been completely withdrawn.

[5] The Dutch standard has been changed more than once. In 1847 a silver standard was introduced, and retained till 1872, the unit being the silver guilder. In 1875 the free coinage of gold was decreed; silver coinage having been restricted since 1872. Thus the limping standard is in force.

[6] The nominal standard of Portugal is gold. The English sovereign is legal tender at 4500 reis.

[7] The Russian currency until 1897 was nominally a silver standard one; but really was inconvertible. The currency was improved in 1885; and in 1897 the gold standard was adopted, provision being made for the withdrawal of the paper money. Finland, which had a currency on the French model, is now being compelled to accept the Russian currency.

[8] The Spanish coinage was assimilated to that of the Latin union in 1871. Spain, differing from the other countries of the group, coins a 25 peseta piece.

The Medjidie coinage was introduced in 1844. English sovereigns circulate at 125 piastres; 20 franc pieces at 100 piastres.

[more notes on tables - ]

1 Until 1906 there was no mint in Canada. English and American coins circulate. The standard is gold (1=4-866 dollars). There were formerly different methods of counting, viz. English sterling, Halifax currency and Canadian sterling; the respective ratios being 100: 120: 108.

2 The Mexican currency has been entirely altered in its standard by the legislation of 1905. The gold-exchange system has been brought, into force. The old-established dollar, which is called piastre, is reduced so as to represent a ratio of about 33-1.

3 The dollar-was introduced in 1787 as the unit. In 1792 the ratio of gold to silver was fixed at i to 15. This valuation underrated gold, consequently silver became the standard. In 1834 the ratio was altered to I to 16, and it was again changed in 1837. In these changes gold was overrated, and silver was driven out of circulation. This led, in 1853, to the reduction of the metal in the silver coins, which therefore became a token-currency. The suspension of cash payments took place in 1 86 1. In 1873 silver was demonetized, and gold became the standard. In 1878 the " Bland Bill " was passed, making the silver dollar a legal tender, but confining its coinage to the executive, and fixing the amount at from two to four million dollars per month The difficulties that resulted from this measure led to the Sherman Act of 1890, providing for the coinage of silver to the annual amount of 54,000,000 oz. Owing to the critical situation created by these efforts to aid silver, the repeal of the Sherman Act was carried in 1893. Since then the chief problem has been to maintain an effective gold reserve.

4 The Argentine currency is, in practice, one of inconvertible paper. The gold coins were altered in 1881. The old South American onza weighed 27 grammes, was 875 fine and worth 3. 4s. 6d.

E The Brazilian currency is greatly depreciated. It is derived from the Portuguese.

6 The Chilean coinage was reformed in 1895, when the gold standard was adopted, and the system brought into relation to the English one. Two Chilean Condors (20 peso pieces) being equal to 3.

7 In 1904 Colombia adopted the gold standard by taking the equivalent of the U.S. dollar as the unit; but the inconvertible paper is the main currency; and the old coins pass as commercial money.

'Alter attempting a parity with the Latin union, and passing through a period of inconvertible paper, Peru has adopted the English gold standard and coinage, but keeps her own silver denominations.

9 The silver standard was prescribed in India in 1835, with the use of the gold mohurs. The latter was demonetized in 1853. In consequence of the fall in the gold value of silver, the Indian mints were closed to the coinage 6f silver, otherwise than by the government, in 1893. The amount of currency was so limited as to bring the rupee to the value of is. 4d. On the realization of this position, English sovereigns were made legal tender at the ratio of 15 rupees = i sovereign. India has, by these measures joined the class, now becoming numerous, of gold-exchange standard countries.

10 The old Japanese currency consisted of gold cobangs and silver itzibus, with a ratio of 4 to I. This antique system was replaced in 1871 by a double-standard one on the French plan, the ratio being 16-17: II. The system passed first into one of silver monometallism; and then became one of inconvertible paper. The great reform of 1897, aided by the Chinese War indemnity, placed the currency on the gold basis.

few countries that has not found change desirable. France has reorganized her token coins (1864), entered into the Latin union (1865) and adopted the limping standard in 1874. Germany has completely transformed the monetary system hitherto existing in the German States (1873). The Scandinavian union has been set up (1875). Holland has changed her system more than once. Still later, Austria-Hungary (1892) and Russia (1897) have come over from the silver standard with the practical use of inconvertible paper to new currencies on the gold basis. In America the United States, after a series of monetary experiences, has made the gold dollar its standard unit, though the silver complication still exists. Mexico has succeeded in establishing a gold-exchange standard at such a ratio as to induce the import of gold. India has had its rupee currency put into relation to the English gold unit, and has been followed by the Straits Settlements. Japan first abandoned its ancient currency (1871). It then adopted a double standard system which became in practice a silver one and later passed into inconvertible paper. Finally, it has (1897) established a composite legal tender system on the gold basis. The Dutch Indies have the gold-exchange standard on the same plan as India.

Remarks. In addition to the tabular statements, the following points respecting the currencies of !ess advanced countries may be indicated. Though there is a tendency to establish the money of the mother-country in colonies, some of the British possessions, acquired by conquest, have kept their former currency. There has been a widespread movement in the backward countries of the world towards reforming their money; chiefly by setting up some line of connexion with the gold standard. In South and Central America the dollar has been retained as the unit; but the movement for co-ordination with the French system has ceased. The English standard has been preferred as a model by Chile and Peru. In Asia the currency of the Philippines has been reorganized under American control. China is considering monetary reform, and Siam has made progress in the direction of the gold-exchange standard. Probably the most defective currencies are now those of Turkey and her tributary states.

BIBLIOGRAPHY. The literature on the subject of money has been well described as " almost measureless." The list of writers who have contributed to it begins with Aristotle, and includes such famous names as Copernicus, Locke and Newton. A full enumeration would fill a volume of no slight size. All that can be done here is to give a short classified list of the most serviceable books.

I. Economic text-books: English and American J. S. Mill, Principles of Political Economy (London, 1848; new ed. by Ashley, 1909); Sidgwick, Principles of Political Economy (London, 1883; 3rd ed., 1901); J. S. Nicholson, Principles of Political Economy (3 vols., London, 1893-1901); F. A. Walker, Political Economy (New York, 1883; 2nd ed., 1887, often reprinted); A. T. Hadley. Economics (New York, 1896) ; E. R. A. Seligman, Principles of Economics (New York, 1905); H. R. Seager, Introduction to Economics (New York, 1904; 3rd ed., 1908). French: M. Chevalier, Cours d'economie politique (vol. iii. " La Monnaie," Paris, 1850); P. LeroyBeaulieu, Trails d'economie politique (4 vols., Paris, 1896); C. Gide, Cours d'economie politique (Paris, 1909). German: H. Mangoldt, Grundriss der Volksmrtschaflslehre (2nd ed., Stuttgart, 1871); G. Schonberg, Handbuch der politischen Oeconomie (Tubingen, 1882; 4th ed., 1904); G. Schmoller, Grundriss der attgemeinen Volkswirtschaftslehre (Leipzig, 1900-1904). The Dutch work by N. G. Pierson has been translated into English with the title Principles of Economics (London, 1902).

II. Special treatises on " Money": W. S. Jevons, Money and the Mechanism of Exchange (London, 1875); F. A. Walker, Money (New York, 1878); J. S. Nicholson, Money and Monetary Problems (London, 1888 ; 6th ed., 1902) ; C. A. Conant, The Principles of Money and Banking (2 vols., New York, 1905) ; A. Arnaune, La Monnaie, le credit et le change (Paris, 1894; 2nd ed., 1902); A. de Foville, La Monnaie (Paris, 1907); C. Knies, Geld und Kred.it (Berlin, 1873- 1879); G. F. Knapp, Staatliche Theorie des Geldes (Leipzig, 1905).

III. Works on special questions : See BIMETALLISM; BANKING; and MONETARY CONFERENCES for writings on the problems of the stand- currency, besides the works on the numismatic side Lord Liverpool, Coins of the Realm (1805; reprinted 1880). For America W. G. Sumner, History of American Currency (New York, 1874). On the production and consumption of money materials, W. Jacob, Production and Consumption of the Precious Metals (2 vols., London, 1831); and A. Del Mar, History of the Precious Metals (London, 1880). Technical details in Tate's Cambist (many editions). (C. F. B.)

Note - this article incorporates content from Encyclopaedia Britannica, Eleventh Edition, (1910-1911)

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