early issues of which were made payable six months after the ratification of a treaty of peace with the United States, and further issues were to be payable two years after such treaty.

All such documents may be considered as bills of very long date and of very uncertain value. The public spirit of a people in time of war often enables them to be put afloat, and the need of currency keeps them in circulation for a time, but their value undergoes violent variations, and there are few instances in which such bills have been eventually paid.

14. Inconvertible Paper Money.

Finally we come to the undisguised paper money issued by government and ordered to be received as legal tender. Such inconvertible paper notes have in all instances been put in circulation as convertible ones, or in the place of such, and they are always expressed in terms of money. The French mandats of 100 francs, for instance, bear the ambiguous phrase "Bon pour cent francs." The wretched scraps of paper which circulate in Buenos Ayres, are marked "Un Peso, Moneda Corriente," reminding one of the time when the peso was a heavy standard coin. After the promise of payment in coin is found to be illusory the notes still circulate, partly from habit, partly because the people must have some currency, and have no coin to use for the purpose, or if they have, carefully hoard it for profit or future use. There is plenty of evidence to prove that an inconvertible paper money, if

carefully limited in quantity, can retain its full value. Such was the case with the Bank of England notes for several years after the suspension of specie payments in 1797, and such is the case with the present notes of the Bank of France.

The principal objections to an inconvertible paper currency are two in number.

1. The great temptations which it offers to over issue and consequent depreciation.

2. The impossibility of varying its amount in accordance with the requirements of trade.

Over Issue of Paper Money.

It is hardly requisite to tell again the well-worn tale of the over issue of paper money which has almost always followed the removal of the legal necessity of convertibility. Hardly any civilized nation exists, excepting some of the newer British colonies, which has not suffered from the scourge of paper money at one time or other. Russia has had a depreciated paper currency for more than a hundred years, and the history of it may be read in M. Wolowski's work on the finances of Russia. Repeated limits were placed to its issue by imperial edict, but the next war always led to further issues. Italy, Austria, and the United States, countries where. the highest economical intelligence might be expected. to guide the governments, endure the evils of an inconvertible paper currency. Time after time in the earlier history of the New England and some of the other states

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now forming parts of the American Union, paper money had been issued and had wrought ruin. Full particulars will be found in Professor Sumner's new and interesting 'History of American Currency." Some of the greatest statesmen pointed to these results; and Webster's opinion should never be forgotten. Of paper money he says, "We have suffered more from this cause than from every other cause or calamity. It has killed more men, pervaded and corrupted the choicest interests of our country more, and done more injustice than even the arms and artifices of our enemy."

The issue of an inconvertible money, as Professor Sumner remarks, has often been recommended as a convenient means of making a forced loan from the people, when the finances of the government are in a desperate condition. It is true that money may be thus easily abstracted from the people, and the government debts are effectually lessened. At the same time, however, every private debtor is enabled to take a forced contribution from his creditor. A government should, indeed, be in a desperate position, which ventures thus to break all social contracts and relations which it was created to preserve.

Want of Elasticity of Paper Money.

A further objection to a paper money inconvertible into coin, is that it cannot be varied in quantity by the natural action of trade. No one can export it or import it like coin, and no one but the government or banks

authorized by government can issue or cancel it. Hence, if trade becomes brisk, nothing but a decree of the government can supply the requisite increase of circulating medium, and if this be put afloat and trade relapse into dullness, the currency becomes redundant, and falls in value. Now, even the best-informed government department cannot be trusted to judge wisely and impartially when more money is wanted. Currency must be supplied, like all other commodities, according to the free action of the laws of supply and demand.

Some persons have argued that it is well to have a paper money to form a home currency, which cannot be drained away, and will be free from the disturbing influences of foreign trade. But we cannot disconnect home and foreign trade, except by doing away with the latter altogether. If two nations are to trade, the precious metals must form the international medium of exchange by which a balance of indebtedness is paid. Hence each merchant in ordering, consigning, or selling goods must pay regard not to the paper price of such goods, but to the gold or silver price with which he really pays for them. Gold and silver, in short, continue to be the real measure of value, and the variable paper currency is only an additional term of comparison which adds confusion.

CHAPTER XIX.

CREDIT DOCUMENTS.

MUCH mystery has been created on the subject of money by those who assert vaguely that credit can replace coins, and that we have only to print sufficient bills and other promissory documents in order to have an abundant circulating medium. Credit has been said to multiply property and to perform all kinds of prodigies. When we analyze its nature, however, credit is found to be nothing but the deferring of a payment. I take credit when I induce my creditor to consent to my paying a month hence what might be demanded to-day; and I give credit when I allow my debtor in the same manner to put off the liquidation of his debt. Thus credit involves, as Locke very accurately said, "the expectation of money within some limited time." The debts, indeed, may consist of a definite quantity of any commodity. I may have to pay corn, pig iron, palm oil, cotton, or any other staple article, but, generally speaking, debts are debts of legal tender money.