This passage shows how the word, "wealth," tangles men up inextricably, who, by discarding it utterly, might have become clear thinkers and useful expositors. It also shows, that Professor Price never analyzed Valuables into their three kinds, never thoroughly mastered in a preliminary way the Idea that underlies Economics, never precisely understood what Money is, and certainly never found out the radical nature of Credit. Nevertheless, the passage just quoted really concedes the whole matter in the present dispute,—"the right to acquire that property, even before possession is obtained, is itself a property,"—that is all that we claim, namely, that rights are property, and that new rights (which are property) are created by Credit, and that some of these new property-rights thus created may become and do become a new Capital. These new rights, however, this new and acknowledged "property," are not "titles" to any specific valuables whatever, as Price supposed; "a title-deed or a mortgage" is a totally different thing from a Credit, since the one always describes and gives a qualified title to some specific and tangible thing, while a credit-right is always a claim against a person; the Roman law drew this distinction perfectly, a credit-right was a jus in personam, while a title-right was a jus in re; the common Latin language as spoken and written marked the difference by separate words, a credit-right or true debt was a Mutuum, while a title-right or thing loaned was a Commodatum; and the Law of our present national banks explicitly recognizes this universal and fundamental distinction, by requiring the banks to loan money on personal security only, that is to say, no tangible things whatever, not even real estate, are allowed to be taken as original security for any loan. Banks deal only in true debts,—mutua,—and when they keep custody of concrete valuables—commodata—for their customers, it is as trustees or bailees and not at all as debtors.

Our late Oxford friend was far too well informed in general to contend, that a cheque, for example, is "the right to acquire possession" of any specific property anywhere; the drawer has indeed deposited money with the banker on whom the cheque is drawn, but that money became the banker's money the moment it was deposited and no longer his own; the cheque, accordingly, is a general claim on the banker, and not at all on any special fund in the banker's hands; it follows, therefore, that the excess of the banker's average deposits over his average reserves to secure them, is a new creation of Credit, a new resource of Production, a new Purchasing-power now available to the banker not previously and practically available to anybody, a new Valuable which he proposes to use and does use for the sake of profits accruing, consequently a new Capital.

Now let us listen to the objections to this view by a practical banker, J. H. Walker, of Worcester, Mass., in a little book of his on Banking published in 1882: "A man always borrows something of intrinsic value. What he borrows is not a piece of paper, whatever may be on it, but a farm, a house, a factory, or a part of them; a store, a mine, or goods. No man can borrow or lend anything else. The borrower gets from the lender what puts him in possession of the things he seeks, and it must be some one of these things. So of all money (except coin). It has no value in itself. It adds nothing to the capital of the world. It purports to be and is only a title to property, a convenient device for transferring the ownership of property."

This author is led astray by the worse than useless adjective "intrinsic," having never yet learned that there is only one kind of value in the world of Economics, namely, purchasing-power; he sees men as trees walking through the haze cast over paper-money by John Law in the last century, as if paper-money must be "based" on something tangible and specific; he makes a narrow and false assumption that the only objects ever bought or borrowed are corporeal "things," denying that the debts in which alone he deals as a banker are realities as much as any "thing" can be; and it all comes in his case, as in the case of hundreds of others, from a totally inadequate analysis of Valuables into their three separate and virtually independent kinds, namely, Commodities and Services and Promises. Mr. Walker, although he writes a book on purpose to do this, can not explain at all under his view the Deposits and Discounts of his own bank, and would be as dumb as an oyster when confronted with the "Cash Credits" of Scotland.

(5) The fifth advantage of the use of Credit, and the last one to be mentioned in this connection, is, that it dispenses with the use and wear of large amounts of expensive Money. It is perfectly certain that Credit answers many of the purposes of Money. Suppose A has bought of B $100 worth of goods, and B has bought of A $125 worth of goods. Three ways are open to close up these transactions. A may pay B and B may pay A in money. This would take $225. A may pay B in money, and B may send that back with $25 more. This would take $125. Or A and B may mutually balance their credit-books, and B pay the difference in account. This would take but $25. It is clear then, that, as one or other of these general methods prevails in practice, the quantity of expensive money required to do the business of a country is very different. Just so in international trade. Foreign bills of exchange lessen enormously the quantity of metallic money that would otherwise have to be transported.

It is not strange that some thinkers and writers, seeing these unquestionable benefits of Credit even within the peculiar sphere of Money itself, have come, like Herbert Spencer and many more, to think and teach that Credit might answer all the purposes of money. Credit does take the place of money in part. Can it take the place of money entirely? Let us see. We have defined Credit as a right to demand something of somebody, and Debt as an obligation to render something to somebody; the denominations of Money are certainly needful in order to measure this right or obligation; and how can the denominations of money be established or maintained at all separate from the use of some money itself as a circulating medium? Moreover, great as is the undoubted power of Credit, vast as are these five advantages from its current use, still, each particular piece or form of Credit waits for something beyond itself; it waits for its own extinction in future time; which can only come about in one of three ways, (a) by set-off against another debt with or without a balance, (b) by renewal which creates a new debt and extinguishes the old, (c) by its payment in money; and now how can these extinctions come about without the current use of some money, at least to settle the balances at the clearing-house?

Furthermore, there have always been heretofore in all commercial countries longer or shorter periods, called "crises" or "panics," during which there was a popular reluctance to accept in exchange the ordinary instruments of Credit. Money, and much of it, was then found to be indispensable. Indeed the very advantages of Credit itself, which have now been explained at length, are dependent on this, that there be alongside of it to sustain and limit it, a current and legal measure of Services in metallic form, in whose denominations Values may be reckoned, in whose coins the balances of Credit may be struck, and whose presence secured everywhere by natural laws alone may enable fulfilment to join hand in hand with promise. If ever Credit should try to usurp the whole domain of Money, a tolerable standard of Value or measure of Services would be no longer possible, Credit itself would lose its foothold, and the vast balloon of Promise, sailing for awhile through the blue, the joy of projectors and the wonder of credulous spectators, would of a sudden descend to the earth collapsed and ruined.

4. There are too some disadvantages inhering in Credit. This admitted fact makes no valid argument against the use and extension of it; because there are disadvantages connected with all human devices whatever,—with all means contrived to reach earthly ends—and even a child may discover many of these; some objections lie against everything, and against everybody, and the practical question always is, Which preponderates, the good or the evil? In respect to Credit there can be no doubt, that the good outweighs the evil many fold; still, in accordance with the purpose in this book of both writer and readers to look on both sides of each significant point in Economics, we will now give attention to the chief disadvantages inhering in the nature of Credit.

(1) In the first place, when credit is much given by dealers to ordinary retail buyers, the reverse results take place from those but just now characterized as happening under bank credits, namely, capital passes out from the hands of productive operators into hands less able and less willing to use it in further production. Indeed, in most such cases it ceases to be capital, and is expended in immediate gratification. It is much easier for the average man of fair character within the present customs of Society to "get trusted" than to pay "as he goes." Such a man is even called "easy-going." He almost always over-estimates his resources for the future, and under-estimates his obligations at the present. It is always a disadvantage in the long outlook for both parties when such men easily and largely "get trusted." Let us take a sample case: when an industrious artisan or efficient merchant has given credit for six months or a year to dilatory customers, it is so much withdrawn for so long a time from his active capital; and in order to make up his consequent loss of profit to the average and expected rate, there must be an addition to the prices of his wares sold to other parties; and, besides, some bad debts belong to such a system, and there must be additional prices somewhere to compensate for this; and thus the customers who pay promptly bear a part of the burden of the delinquents, who at least do not wholly escape, inasmuch as they ultimately (if they pay at all) pay a price enhanced by their own delay. Thus, if the current and expected profit on his capital be 12%, and the artisan or merchant sells and gets returns four times a year on the average, something less than 3% profit may be charged to each article on the average; while if he only gets returns at the end of the year, at best 12% must be put on everything at the average, and in reality considerably more, because of the bad debts that stick like a burr to that way of doing business. Hence the excellent maxim, "Quick sales and small profits."

(2) There is a greater inherent uncertainty in values connected with credits than in those connected with commodities, or than with those connected with personal services. We have already seen repeatedly that Value has its sphere of operations in the Past, in the Present, and in the Future. There is some uncertainty connected with what has been done in reference to value, since the market may prove to have been miscalculated, and the commodities to have become unsuitable; there is perhaps more uncertainty connected with what is now being done in reference to value, because the services bargained and being paid for may prove to be less steady and skilful than was supposed; but in the very nature of the case there is still greater uncertainty connected with what is to be done in relation to its value, because in the first two cases some at least of the conditions are already fixed, while in the last one all of them are at least open to hazard. There is sufficient certainty in all three of the grand divisions of Time to justify, and probably to reward, operations in each in reference to value under the peculiar limitations and conditions of each, but credits are naturally more sensitive in the law of their value than either commodities or services.

(3) Largely in consequence of what has just been expressed under the last head, credit-exchanges are more likely than commodities-exchanges or than services-exchanges to become unduly multiplied and consequently to fail of ultimate realization. The majority of men are sanguine in relation to the future. Unless they are in actual contact with their limitations, they are apt to belittle the rigidity and inevitableness of such limitations. As the outcome of this, promises are apt to overpass the powers of fulfilment. No more bales of cotton of any one year's crop can be actually delivered to buyers, than have been actually grown and marketed; the services of no more men in any capacity can be contracted for and rendered, than there are men able and willing to work; here are impassable limits; but the field of the future is buoyant with possibilities; and hence credits, whose sphere is the future, though legitimate and potent under the proper conditions, lie in a field whose limits are invisible, and within which Hope is ever a tempter to overdoing.

Is speculation proper? Certainly; if by the word "speculation" is meant the buying of anything with an expectation based on rational probabilities of being able to sell it again under different conditions at a higher price. Speculation in this sense is both proper and beneficial to the immediate parties to it, and to the general public as well, because the values of things thus bought and sold neither fall so low nor rise so high as they otherwise would do, which is a public gain. Speculators as a rule buy on a falling market, which tends to lift it, and sell on a rising market, which tends to lower it. It is better for all concerned, that the necessaries and conveniencies of life should bear as steady a market as is possible in the nature of things, summer and winter, year in and year out; and the ports of every nation should be open with the slightest possible hindrance in the way of tax to the corresponding necessaries and conveniencies from abroad, whenever combinations and "corners" attempt to lift their prices beyond the level determined by a natural and free Supply in contact with the current Demand.

Credits occupy the field of Probabilities; that is to say, probabilities seeming to be such to men of sharp insight and cultivated forecast. When such men on such grounds buy and sell "futures" in cotton or corn; when they buy and sell stocks either "short" or "long"; when they seem to themselves to perceive a sound reason for lurching over from the "bulls" to the "bears," or vice versa; and when they really think that what they are wont to deal in has touched bottom in price, and they buy now in view of a rise, Economics has nothing to say in blame of any or all of these operations, for they are the same in substance and motive as all other buying and selling; but nevertheless, it has this to say, that all these operations in credit-futures lie adjoining to and in dangerous proximity with another field, for operations within which it has nothing but blame to utter. Gambling occupies the field of Chance. There is a great difference between chances and probabilities. Political Economy has no trouble in drawing a fast and hard line between them.

But practically the operators in credit-futures experience an immense difficulty in keeping within this line of rational probabilities. The coolest heads are apt to become heated, and to lose sight of distinctions, in the close air of the Stock Exchange and the offices circumjacent. Some operators openly confess they know nothing which way the index of reason points, by buying "straddles," as they are significantly called. A friend and old-time pupil, who has for years been accustomed to these excitements in New York, said recently to the writer,—"The Stock Exchange is a great gambling hell, and that's all there is of it!" In buying and selling of all kinds, both sides gain: in gambling of all kinds, what one side gains the other side loses: therefore, under a sound money, healthful public opinion, and good law, gambling never can become formidable. In every lottery scheme, no matter how honestly managed, the sum of the prices of the tickets is greater than the sum of the prizes offered, otherwise nothing would be left for the profits of the managers; therefore, he would be a very foolish man, who should buy all the tickets of a given lottery with the certainty of drawing all the prizes; and he is a still more foolish man, who should take his chance of drawing all the prizes by buying two or ten tickets.

(4) Another and a principal Disadvantage of Credit is seen in its usual action on prices through increased Demand, and its consequent tendency to bring about Commercial Crises. Any man's whole purchasing-power is made up of three items: first, the property in his possession; secondly, the values that are owed to him; and thirdly, his credit. He can buy services of the three kinds with these three valuables; and the sum of his power to buy is exactly measured by the aggregate of these three valuables under his control. But while the first two, his property and debts due, are limited and ascertainable, the third (his credit) is indefinite and undeterminable beforehand. Being based upon confidence, which is itself sensitive and variable, a man's credit at one time may be vastly greater than at another, compared with his other two means of purchase; and if he have the reputation of doing a safe and regular business, and is favored by circumstances, he will find himself able sometimes to buy on credit to an extent out of all expected proportion to his other capital. When, therefore, credit is offered and received for commodities, it has the same influence upon their prices as when money is offered and received for them. It follows, consequently, that there is likely to be a general rise of prices whenever there is an extension of credit for the purpose of purchasing; indeed, when money only is used to buy with, there can not be a general rise of prices, because while more money may be spent on some things, and they rise in price, there would be less money for other things, and they would rather fall in price; but when credit is used freely in addition, and increased purchases go on in all departments at once, there is apt to be a rise of prices as to all commodities and a universal spirit of speculation.

At such times, and while prices are still rising, men seem to be making great gains; everybody wishes to extend his operations by means of all his money and all his credit; and forms of indebtedness are multiplied on every hand. By and by it begins to be perceived in certain quarters that the matter has been overdone; speculative purchases cease; banks become particular whose paper they discount; men find it difficult to sell their debts due in order to provide for their debts owed; they fall back on the sale of their commodities, but when holders are anxious to sell, prices always fall; a panic now sets in, more irrational, if possible, than the previous overconfidence; their inflated credits and commodities collapse in the hands of their holders; sales at great sacrifices are inadequate to meet the mass of maturing debts contracted when confidence was high; men fail, and must fail; the banks cannot help them, or think they cannot; and so wide-spread commercial disaster comes in.

Such commercial crises swept over the United States in 1837, 1857, and 1873; and will doubtless recur in the time to come. They always arise from disordered credits, and though not necessarily connected with credit-money, are much more likely to come in connection with that. The more strong and conservative the Banks maintain their ordinary condition, the more powerfully can they operate to prevent or abate a panic. They ought always to be on the shore and never in the stream. From the very nature of banks and of the motives that create and operate them, they are apt to sell for a profit in ordinary times about all of the credit they safely can; unless, then, they foresee a stringency some time ahead, and curtail their loans, and otherwise keep their position strong in reserves and deposits, they will be powerless to help even their most deserving customers when the panic sets in; even then by a special association with other banks in the same city for reciprocal support during a crisis, as was happily brought about in New York some years ago, something may be done for their common constituency and good customers to help them out of trouble by discounts continued to them; especially as it is not money so much that is needed to allay a panic, nor even credit actually given, as it is a general knowledge that abundant credit can and will be given either by some pre-eminent bank, like the Bank of England in London, or by an association of banks for that special purpose, like the agreement just referred to as entered into temporarily by the banks of New York city. As a panic becomes imminent anywhere, some Bank or banks there ought to be in a position to extend their discounts freely, at a high rate of interest indeed, so as to discriminate between customers urgent for and deserving of discounts, and another class whose need of accommodation is not so sore, and a third class who are sure to fail if the Panic stalks forward.

A permission given of the Government to the Bank of England to overpass under these circumstances the Discount-limits laid down by the Bank Act of 1844, has on three several occasions acted like a charm to still the ragings of a commercial storm. On each of these occasions, 1847, 1857, and 1866, the Bank was forbidden by the Privy Council to discount for less than 10%.

As the inclined plane of rising prices is slowly ascended before a Crisis, so the fall of general prices afterwards seems to be rather gradual also till the lowest point of them is reached, from which another ascent is apt to commence. The following table taken from the New York Public of the first week of November, 1881, is instructive on both these points. Taking the prices in 1860 of 43 articles of prime necessity, which constituted then and afterwards about ¾ of the commerce of the country, as the normal standard or 100, the table gives the comparative gold prices of the same for four years previous to 1873 and for seven years subsequent, as follows:—

(5) A penultimate Disadvantage of Credit may be noted in the facility which it offers for contracting great national Debts. There are certain aspects, under which a Nation may be properly regarded as a moral person, and as such person may pledge the public faith for the present and the future, becoming a debtor to its own people or to foreigners, and thus a public debt may be made a sort of mortgage on the national property and income. Now, it cannot be fairly denied, that incidental advantages may spring up in connection with such a national debt: for example, the bonds, which are its evidences, may open up to the people a convenient form of investment for presently inactive capital, and for trust funds of all kinds; there can be little doubt that certain classes of persons holding these national obligations are won thereby to a stronger patriotism and become better friends to stability in government, although this consideration applies mainly to new governments and to those temporarily endangered; both England and the United States now make a portion of their public debt the basis of a national system of Banking, but it is perhaps questionable whether this can be justly put among the incidental benefits of the Debts; and again "a moderate debt adds to the credit of a Nation, and its ability to raise money in an emergency, for bankers and capitalists are more ready to take such securities as they are in the habit of dealing in" (Sidney Homer).

On the other hand, the burdens of a National Debt are very apparent: for example, the annual interest charge to the Union at the close of our late civil war was $150,000,000, which gradually declined by the lowering of the interest-rate and by the paying off of principal to $61,368,912 for the fiscal year ending June 30, 1881; between March, 1869, and August, 1873, the United States paid $378,015,065 on the principal of its public debt; the collection of the Internal Revenue alone of the national government cost for the fiscal year 1867, $7,712,089; and in each of the two years, 1870 and 1881, a little over $101,500,000 was paid out to reduce the principal of the Debt. All those vast sums came out of the industry and income of individuals; and taxation to any degree as all this implies is a mighty disturbance to industry, and gives rise to an army of officials who eat out a considerable percentage of all they collect. Moreover, the various expedients of taxation, which are always practically unequal in their operation, are apt to give rise to irritation and political agitation, and even sometimes to threats of repudiation, especially when the occasion has gone by under which the debt was contracted, and another generation is called upon to pay off a debt it had no agency in creating.

Here the vexed question arises, how far has one generation the right to throw upon succeeding ones the burdens of a National Debt? The true answer to this question is, it has a very limited right indeed. The opposite doctrine implies tacitly when not openly, that the succeeding generations will have no occasion for extraordinary expenses of their own, and, therefore, may rightfully be made to contribute to the extraordinary expenditures of this generation. But it is pure assumption to take for granted, that the next generations will not have, of some kind or other, as much occasion for an extraordinary effort in the way of defence or of improvement as the present generation has had. It is a common but harmful illusion to estimate what has now to be done as of much more importance than what will have to be done. Therefore, to throw the present burden forward on another generation of men, who are likely to have to make their own special exertion, just as great and just as imperatively called for, is a procedure unwarranted by past experience. The view that has long prevailed in practice, that a great War-debt, for example, might be easily and justly cast upon posterity, has again and again given rise to needless and expensive wars; those have been called upon to pay the piper, who perceived the utter inutility of the expenditure; and thus bitterness has been added to burden.

Besides, the men to fight the battles, and the capital by which to feed, clothe, and furnish them the munitions of war, must come from that generation; and there is always great injustice in the manipulations of a great debt ostensibly incurred to obtain this capital, and the debt itself is usually in large part rather a memorial of the war than of the means by which its expenses were actually defrayed.

The generation of American citizens not yet wholly passed off the stage was called on in the Providence of God to suppress a Civil War of enormous proportions, and to eradicate a social institution that was thoroughly bad; the expense of doing this was many fold enhanced by timorous counsels in the field, by class legislation in Congress, and by wretched financiering in the Cabinet; but the Debt, vast as it was, and needlessly incurred as a large portion of it was, has already in good part been paid off and must be entirely paid off by the generation that incurred it. That this great task may be thus completed, will require (1) an economical administration of the national Government; (2) an avoidance of intervention in the affairs of our Neighbors, and of entangling alliances with Foreigners; (3) a free Commercial System, under which the taxes shall be adjusted only towards the most productive revenue; and (4) a constant and onerous home Taxation.

(6) The final Disadvantage of Credit is this, that it is apt to confuse the minds of men as to its own nature, from its apparent resemblance to something else, which is at bottom wholly unlike it. The people of the United States have suffered greatly from this confusion, and are likely to suffer from it still more in the time to come, both in their property and progress at home and in their good name abroad; and it becomes all good citizens, and especially all those called upon to pronounce on the Law of the Land, to know thoroughly the radical difference between a Credit and a Quittance, and so to escape the contagious confusion that has entered and stirred up the popular, and even the judicial, mind of this country. All through the present chapter has been insisted on and illustrated the point, perhaps to the weariness of the reader, that Credit is always essentially the Promise of one person to another, and that whatever is thus Promised is necessarily and fundamentally different from the Promise itself. To confound those two things as if they were or could be made one and the same thing, is in thought illogical and in practice execrable.

And yet it must be allowed, that there is somewhat in the nature of Credit, that makes this confusion plausible, or else it never would prevail; and also that there is something more still to make it plausible in the nature of Money, which last point can only be cleared up in the next following chapter under that title.

Mr. E. G. Spaulding of Buffalo, in his copious and excellent History of the Legal Tender Act, "all of which he saw and part of which he was," as the chairman of the subcommittee of the Ways and Means at the time the Act was passed, demonstrates the extreme reluctance of everybody concerned to give a forced circulation, that is, a compulsory legal-tender quality, to the first batch of Treasury Notes to the amount of $150,000,000 in February, 1862. We have already noted in another place in this chapter, that two successive batches of similar Notes, each to the same amount as the first, were issued within less than a year. These Notes then and since called Greenbacks, bore at the time four essential features: first, they were both in terms and in reality national Promises to pay to the bearer gold dollars of the then and present standard of weight and fineness, because there is no other possible meaning to the words "The United States will pay to the Bearer Five Dollars"; second, in addition to their being a forced loan from the people to the amount of notes authorized, they were given a forced circulation as money by means of the clause, "and shall also be lawful money and a legal tender in payment of all debts public and private within the United States except duties on imports and interest on the national bonds," which clause still recognizes gold dollars as the only universal and standard money; third, the notes were made fundable in sums of fifty dollars, "or some multiple of fifty dollars," in six-per-centum gold bearing bonds of the United States, then called 5-20's, again in this clause recognizing the radical difference between the legal-tender paper promises as money and the gold dollars promised in them, in which gold money the interest and principal of the bonded debt must still be paid; and fourth, these notes were publicly known and acknowledged by the Issuer and the receivers to be presently irredeemable, since the Government did not have, and did not pretend to have, any coin with which to redeem them, and everybody knew that they were made a legal-tender because they were irredeemable.

These prompt recognitions of the impassable gulf between a Promise and what is Promised, were confirmed by all that happened afterwards. The notes, notwithstanding they were legal tender and all bonds of the United States could at first be bought with them at par, almost immediately began to droop as compared with gold. The daily quotations showed a pretty steady decline for two years. On Jan. 15, '64, gold in greenbacks was 100:155; April 15, 100:178; June 15, 100:197; June 29, 100:250, that is, 40 cents to the dollar; and July 11, 100:285, or 35 cents to the dollar in gold, their lowest point. From this depth they slowly rose with many fluctuations back and forth from many causes for 14 years. Jan. 1, 1879, they became redeemable in gold, and have so continued till the present time.

When the Civil War was all over, and these startling vicissitudes of the paper money were measurably forgotten; though no prominent man, when they were passed, thought the Legal-Tender Acts constitutional; the paper money began to be popular; the distinction between a promise and its fulfilment began to fade out of the minds of the people; there had always been bank bills circulating as money in the country; these had been called "dollars" equally with the coin; and in December, 1869, a test case, Hepburn versus Griswold, was decided by the Supreme Court on the question, whether Congress had the constitutional authority to make anything but gold and silver lawful money in satisfaction of contracts entered into before the first legal-tender Act was passed. The question, Can Congress make such notes a legal tender for contracts made after the passage of the Act? was not involved in this case; but it was very clear from the Opinion of the court delivered by Chief Justice Chase, that the majority of the justices regarded the Act as being unconstitutional in its application to contracts made after as well as before the Act was passed. Upon the special question before the Court, the justices were divided in opinion; five, including the Chief Justice, agreed that the Act was invalid so far as it made the notes a legal tender on contracts executed prior to its enactment; and the three other judges were of the opinion that it was valid. Of course, the Decision of the Court was rendered by a majority of two, that the Act was unconstitutional. Chase, Nelson, Grier, Clifford, and Field constituted the majority; Miller, Swayne, and Davis, the minority.

Salmon P. Chase was one of the greatest men of the great period of the Civil War. He was Secretary of the Treasury at the time the greenbacks were issued, and they were issued at his instance and advice, but he was opposed to the clause that made the notes a legal tender. He never expressed the opinion that the Legal-Tender Acts were constitutional, nor did he expect that the notes, of which these authorized the issue, would ever become a permanent national money. This is evident from the fact that the notes were made fundable at his instance, not so much with the view of keeping up the value of the notes by giving them a present market in bonds, as with the view that they would help the sale of the bonds and would be absorbed by them as soon as the price of the bonds was above par in greenbacks. Afterwards Mr. Chase thought that this fundability of the notes into bonds would so far take up the notes as to stand in the way of the negotiation of further necessary loans to the Government, and at his instance this provision of the law was repealed. Consequently, there was nothing inconsistent between his position as Secretary and his later position as Chief Justice. He was undoubtedly right in both of these positions. The making the greenbacks legal tender did not probably add one particle to their purchasing-power, but rather the reverse, because that feature implied a doubt on the part of Congress itself as to the validity and currency of such national promises-to-pay. That he was also right in his judicial opinion and decision, however subsequently overruled in his own Court, may be safely left to the inevitable future appeal to common sense and to the common principles of constitutional interpretation.

This judgment in Hepburn versus Griswold was favorably received by the country at large, as being just in the line of the great decisions of Chief Justice Marshall, and as being exactly in accordance with Amendment X of the Constitution, namely, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." The State of Massachusetts particularly, which has always maintained and still maintains a strong doctrine of State Rights as over against, though in harmony with, the Rights of the United States under the Constitution, applauded this judgment as sound in law and politics, and as righteous altogether. But the then administration of General Grant, inexperienced alike in law and politics, and linked in entangling alliances with the great corporations of the country, received the Decision with marked dissatisfaction; and it was especially offensive to the huge railroad companies, whose bonds had been executed prior to Feb. 25, 1862, inasmuch as it made the principal and interest of these bonds payable in coin, which they had hoped to pay off in the depreciated greenbacks, made legal tender for all debts.

The Administration lost no time in trying to bring about by fair means or foul, a reversal of this unwelcome decision. E. R. Hoar of Massachusetts, at that time attorney-general in Grant's Cabinet, was the principal agent in accomplishing this end by means so discreditable that he lost in consequence his popularity in Massachusetts and all chance of further political preferment. The means chosen and put into effect was the appointment by the President of two new judges, Strong and Bradley, the first to take the place of Grier, resigned, and the second appointed under a law increasing the number of judges to nine, whose opinions on the point at issue were known beforehand, and who were selected to serve on that very account. "It was no secret, indeed it was a matter of public notoriety, that these justices were appointed in order that the decision of 1869 might be reversed. Their opinions in regard to the constitutionality of the Legal-Tender Acts had been clearly and publicly expressed. It was therefore pretty well known what the decision would be when the question was again presented." (Hugh McCulloch.)

The second Legal-Tender case, accordingly, that of Knox versus Lee, decided in December, 1870, reversed the judgment of a year before, no new points therefor being raised either by the new judges or by counsel in the new trial, the Chief Justice and his three former associates still adhering to their original opinions. It was then five judges to four, the special question being, Is it constitutional to make promises-to-pay a legal tender on contracts executed before the promises were issued? The judicial answer was in this case, Yes; provided Congress regarded such action as a necessary means of preserving the Government in time of War, or any other period of extraordinary emergency. That is to say, bona fide creditors were constitutionally bound to receive depreciated notes as legal tender in satisfaction of contracts entered into when no notes were in existence; to receive on contracts specifically calling for "dollars" the depreciated notes of the Government merely promising to pay "dollars," but on which the "dollars" could not be obtained! What is that, but the monstrous incongruity that a promise is the same thing legally as its fulfilment? What is that but judicial blindness as to the nature of Credit? What is it but the old confusion between names and things? What is it, finally, but the dazed and hazy vision, pardonable perhaps in the popular mind but half-opened to radical distinctions, but unpardonable in learned men professing to lay down the law in a civilized country?

It is scarcely needful to add, that the Supreme Court of the United States suffered in the judgment of good citizens by that transaction; that the best legal and financial opinion of the country yielded little respect to a decision thus secured; and that intelligent people do not believe that constitutional law can sanction what contravenes at once common sense and common morality.

Judge Field (and his memory the country will not willingly let die), one of the majority in the first decision, and writing the opinion of the dissenting minority in the second, used this strong but just language, "It follows, then, logically, from the doctrine advanced by the majority of the Court as to the power of Congress over the subject of legal tender, that Congress may borrow gold coin upon a pledge to repay gold at the maturity of its obligations, and yet in direct disregard of its pledge, in open violation of faith, may compel the lender to take, in place of the gold stipulated, its own promises; and that legislation of this character would not be in violation of the Constitution, but in harmony with its letter and spirit. What is this but declaring that repudiation by the Government of the United States of its solemn obligations would be Constitutional?"

CHAPTER V.
MONEY.

In the first place, Money is the only Valuable that may belong to two out of the three possible categories into which Valuables may be scientifically thrown. All Valuables are either Commodities, or Services, or Credits. These categories never change places. Once a Commodity always a commodity, so long as value can be predicate of it; a personal Service can never take on any other valuable form; and a Credit is ever a credit, and nothing else, until it is annihilated by Fulfilment. Now Money is the only Valuable that ever appears in two of these forms. The same Dollar indeed cannot be both a Commodity and a Credit; but some Dollars are a Commodity cut out from gold and silver, and some other Dollars (so-called) are a Credit issued by Government or parties responsible to government; while Money as a general term properly enough covers both kinds of Dollars, the Commodity-Dollar and the Credit-Dollar. In other words, Money is of two kinds, and only two kinds, either a Piece of valuable metal stamped as to weight and fineness by the image and inscription of Cæsar,—a Commodity; or a Promise to pay to somebody some of these pieces,—a Credit. This unique peculiarity of Money, by which, always a Valuable, it may appear and does appear in two out of three possible predicaments of Valuables, makes a little difficulty at the outset of its discussion, and requires continued care in formulating its scientific propositions.

In the second place, a more considerable difficulty, and yet a slight one still, is found in the fact that the choices and the legislations of men have more to do in shaping the propositions of Money than in most other economical propositions. It is true, that Nature and men coöperate in the determination of every case of Value whatsoever; while there is a difference in the cases, though perhaps not a distinction, in respect to the fixedness and universality of the natural laws involved, in contrariety to the purely human impulses concerned. The Providential elements in Economics, both the social and the physical, are of course relatively fixed and unchangeable, otherwise Science could not grapple with and classify them; and so also are those principles of Human Nature related to exchanges, which may be said to be universal in their character,—such as, for example, the preference to receive a larger rather than a less return-service, and to render a smaller rather than a larger effort; and at the same time there are other principles of human nature related to exchanges much more variable in their character than these, such, for instance, as the nation's choice of the kind of Money it will use, or the kind of Taxation it will impose. It certainly follows from this, that some Economical laws must be more general than others, owing to a less variation in the human impulses concerned in them: it follows, for example, that the law of landed rents, or the law of the approach of the price of raw materials to that of the finished products, is more universal in its terms of generalization than most of the propositions of Money and Taxation can be.

It seems like a paradox, that those parts of Economics in which the human elements of variable choice may predominate over the relatively fixed laws of nature and of mind, should be just the parts hardest for men to catch clearly and hold firmly; because, we naturally think, that difficulty and mystery are rather to be found in those departments in which an Infinite Mind has been at work upon an infinite plan, and that there is no such profundity in the works of men; but after all, even those natural laws like Gravitation, which are clear and universal as laws, if they be such as the devices of men have to do with, such as may be modified and in a certain sense controlled by human actions, become from that very circumstance liable to some difficulty and perhaps to some mystery. Now all the truths of Money, and as we shall see in the final chapter all the truths of Taxation also, belong to this class of less general generalizations; still, it is scarcely less than foolish to say, that Money is such an elusive and ideal agent that nobody can understand it. That is the language of indolence and lack of penetration. Money is wholly a matter of man's device, though it comes into constant contact with something greater and more fixed than itself; it was invented, just as any other instrument is invented, to accomplish a certain economical purpose; and it would be strange indeed if men by taking pains could not perfectly comprehend what men themselves have wholly devised. We hope, accordingly, in the following paragraphs to clear up completely to all intelligent readers the whole doctrine of Money. The key to unlock all the superficial difficulties (and there are no others) is this: Money is always a Valuable before it becomes money, and continues a valuable independently of the fact that it is money; and, it is always one or other of two kinds, either itself a Commodity or a Promise to pay a commodity. In this chapter, we will not begin with definitions and justify them afterwards, but will come up to them step by step, and, as it were, justify them beforehand.

1. Economical Exchanges may begin, be profitable to both parties, and go forward to a certain extent, without the use of any money at all. As a matter of fact and probably for a long time, while the Civilizations were gathering their inchoate forces for a further progress, men exchanged one Service directly for another without the intervention of any medium. This form of trade is called Barter. King Hiram of Tyre furnished to King Solomon of Judea a certain quantity of cedars from Mt. Lebanon for the building of the new Temple at Jerusalem, and Solomon in return furnished to the Tyrians a certain quantity of wheat and oil, Judea being a fertile agricultural country with no forests, and Tyre a wooded country with no farms. This may well serve us as an instance of Barter, although Money had been in current use in those regions a thousand years before, as is seen in the purchase by Abraham of the cave and field of Machpelah, for which he weighed out "four hundred shekels of silver, current money with the merchants."

It is obvious, however, that while Barter is a good deal better than no exchanges at all, there are inherent and immense difficulties in that form of trade.

(a) Under Barter trade is extremely limited in its personnel. Only those parties can engage in it, each of whom is in position to render to the other just such a Service as the other is in direct and immediate need of, and each of whom also wants another Service in kind and quantity exactly what the second man has to render. It is not enough under these conditions, that a man should have some Service to sell, but he must also find some other man, who not only wants that specific service but who also has some service to render in return just such as the first man wants. If A has wheat which he wishes to exchange for a coat, he must first find a party desiring wheat and also having a coat to sell, and moreover who wants just as much wheat as will pay for a coat, no more and no less; if he wants more, he may have nothing to render for the excess which A is willing to accept; if less, A may have nothing besides wheat with which to help pay for the coat. Even in the simpler states of Society the inconveniences of thus hunting up a specific market for each specific service are very great, and in more advanced states of civilization would become intolerable, if it were possible (as it is not) for Society to become advanced under such conditions.

(b) Barter presents insuperable obstacles to trade in point of place. While men still exchanged in kind, as it is called, and knew no other mode, the purchasing-power of any Service was necessarily confined to that locality, and would not be parted with except in view of a return service actually there present in the same place. There could be no commercial contact without a local contact. The ultimate parties to every exchange must come together face to face. There could be no middle-men or distributors. The market was circumscribed to the hamlet.

(c) Buying and selling under the scheme of Barter is also wretchedly limited in point of time. The fruit-dealer, for example, must dispose of his product quickly, or it perishes on his hands. So of many other commodities. If they are to be sold at all, they must be sold quick. The ultimate buyer must be on hand in time. As the result of these three concomitants of Barter, ten thousand things that are now bought and sold to profit never came to a market or thought of a market, exchanges were so limited in time and place and variety, human associations were so hampered, and the development of all peculiar talents so impeded, that one of the initial steps in the progress of all Civilization has been to hit upon some expedient to lessen these intrinsic difficulties, and so to facilitate Exchanges.

2. The Invention of Money was nothing in the world but the tentative selection by certain people in a certain locality of some Commodity then and there valuable, that is, capable of buying some things then and there, and gradually giving to that commodity by general consent the capacity of buying all things then and there salable. The commodity thus slowly becoming money, whatever it was, had and must have had a limited purchasing-power to start with, because no instance to the contrary has ever been shown, and still more because that peculiar comparison between two things that lies at the bottom in each single case of Value is exactly the same kind of comparison that holds between money and the many things which money purchases; given a valuable in common use as a starting-point, and the transition is easy and natural to a generalized valuable, that is, to a recognized money; the relation of mutual purchase between the commodity and some other things was a common fact to begin with, the making it money was merely the common consent that thereafter it should have a general purchasing-power within the circuit; so that as a simple result, whenever anybody had anything to exchange, he might first exchange it for this selected product, which was valuable before but is now generally valuable, and then with this money-product in hand he could buy whatever he might want at any time or place within the circuit.

It is impossible from the very nature of Value, impossible from that comparison of two distinct Services, that precedes every Exchange, as well under Money as under Barter, that anything except a valuable anterior to and independent of its becoming money, could ever have become money at all. Money makes no alteration in any law of Value, but only substitutes for convenience' sake in every transaction in which it plays a part, a general for a specific purchasing-power; a book, for example, has a specific purchasing-power, since there is somebody who wants it, and is willing to give a sum of money for it; and the owner of the book by the sale of it parts with a product which has only the power to purchase something from a few persons, and receives a product in return which has the power to purchase something from all persons; it is not true to say that the money is worth more than the book, because they are just worth each other, as is demonstrated by the sale; but it is true to say that the seller of the book has substituted in the place of a limited purchasing-power, of which he was proprietor, a general purchasing-power, of which he has now become proprietor; that is, that the command of the money, which has no larger value than the book had, does carry along with it a superior command over purchasable articles generally. In one word, Value in the form of money is in a more available shape for general buying and selling than value in any other form. This is the exact and ultimate expression for all the truth there is in the common vague remark, namely, that Money is something different from all other Valuables; it is different from them in just one respect, namely, while they have the power of buying some things from some persons, it has the power derived from the consensus of Society to buy all sorts of things from all sorts of persons.

This simple change or substitution, which seems in itself so little and easy and natural, has changed in its ever-enlarging results the face of the world! It makes the valuable now selected to be money seem to the minds of men to be a very different thing from what it was before, although the change in itself is slight indeed. It removes most of the inconveniences of Barter as by a stroke of the hand. So soon as a commodity selected to become money by one people comes to be acceptable as such to all other peoples, as is the case with gold, the advantages of its use are vastly multiplied to all. Experience has shown many times over, and reflection will explain to any one, how that there is no other machine that has economized labor like money; no other instrument that plays so deep and broad a part in Production; no invention whatever, unless it be the invention of letters, which has contributed more to the civilization of mankind. Money makes vast distances relatively indifferent; for it is sufficient to constitute a market for any valuable that it is practically wanted anywhere on the round globe, the middle-man paying the seller for it in money transports it thither, and receives back his investment with a profit from the ultimate buyer. So, also, money generalizes any purchasing-power in point of time. The dealer, exchanging his perishable products for money, may keep its power of purchase locked in this form as long as he lists, putting an interval at his own pleasure between selling and buying, and with this generalized power in his pocket he may buy when he will and what he will and where he will. Money, too, makes any purchasing-power portable, divisible, and loanable. A man may carry the value of his farm in his purse, and may divide it up for a thousand different purchases, and especially is able to loan it in this form in order to receive it back again with interest at a future day.

3. It is important to notice in the next place, that, whatever made the commodity selected as money originally desirable and valuable, it has now become desirable and valuable for other and wider reasons. The tobacco of Virginia, for example, in the early days of that Colony, became valuable at first on account of the demand for it as a narcotic both there and in England; but as soon as it was made a legal money in the Colony by the general consent already described, its value depended in part upon another set of causes. Of course Demand and Supply still controlled its value just as before, only certain parties who had not desired it before as a mere commodity thereafter desired it as a current money. Its convenience and necessity as money widened the circle of those parties willing to receive it and glad to render a return for it. It is true, that many now received it only because they could pay it out again to buy something else with; but that made no difference so far as Value is concerned; it was valuable before under a certain limited demand, and continued valuable under an additional and broader demand; we cannot certainly say, that it became more valuable under this new and wider demand, because we do not know how the then combined demand affected the Supply. We may probably say, that the value became steadier if not larger, under the double demand than under the previous single one; and the vital point to mark and remember is, that the value of money, previously valuable as a commodity only, is still maintained under the law of Demand and Supply, just as all other values are, the only peculiarity being this, namely, as a generalized valuable and consequently a potent social agent money is in demand by everybody who has anything else to sell.

It follows from this in necessary sequence, that Money as such, whatever may have been the ground of its original value as a commodity, is always received as money in order to be parted with. It is not bought for its own sake to be used and enjoyed, as most other things are, but is only bought to be sold again. Men will sell everything to buy it, with the sole intent to sell it again to buy something else; and the odd thing about it is, that everybody buys it to sell again, not at all as the speculator buys grain to sell it again at a higher price by the bushel or centner, but, the money remaining constant in their minds, they sell for it something they care less about in order to buy with it something they care more about. Money, therefore, becomes a medium in men's exchanges. The word "medium" in this proposition is to be taken in its etymological and strict sense, as something that comes between two extremes and serves also to relate them to each other. This is not the ultimate characteristic of Money, as we shall see, nor can a final definition be founded here, but it is a good step towards ultimates to see that money is exchanged for other things as a means and not as an end, that it is a great help in exchanging all other valuables but is never exchanged for itself in an ultimate transaction.

Small boys, indeed, sometimes swop cents; but men, the miser excepted, who is under a deplorable fallacy of the senses, use and estimate money mainly as the medium that facilitates the real exchanges of Society. What is actually and ultimately exchanged is the wheat, the cloth, the lumber, the furniture, the commercial service of every kind, and Money is but the instrument making those exchanges easy, which might perhaps go on in part without it, though with difficulty and loss. In short, money is somewhat like a railroad ticket. Transportation to a given place is what is really bought when one pays for a railroad ticket. The proof of the purchase is the bit of paper exhibited. That comes in as a medium between the traveller and the railroad company; and while it facilitates the real exchange, it also partly disguises it. This comparison holds good in the main feature, but in two respects the resemblance fails: Money is not a specific ticket for a single purpose, as the pasteboard is, but is a general ticket (so far as it goes), for all purposes of purchase; and secondly, Money really stands as a value in its own right (so far as any single thing can so stand) at the same time it is serving as a medium, while the railroad ticket does not. Still, we are all desirous to get money, not for the sake of the money itself, but for the sake of those things which the money will buy. We part with money freely and constantly for those things which we care more about. What we exactly care for is what our money will buy, is the conscious command over all services and commodities which the possession of money insures to us. If we could give our own commodity or service or claim, whatever it may be, and receive directly in return the claim or commodity or service which we want, whatever that might be, there would be no need of money at all; but this is always inconvenient, and generally impossible; and, therefore, we introduce a middle term, and money is found to be a good mean to help exchange the two extremes.

4. We are now getting on towards a just conception and a true definition of Money, though two or three more points must still be noted as preparatory to that consummation. As a result of the fact already reached, that money serves as a medium in men's exchanges, it follows of course that the power of money as such a medium is multiplied by what has been called rapidity of circulation, that is, a brisker use of the volume already in circulation will reach the same end as the increase of its volume. As in mechanics, so in money, the whole power is the product of mass and velocity. Money also is like any other tool, the more constant its use the more profitable its agency. The quick movement of a small mass, accordingly, is better than the torpid movement of a large mass, both in what it saves of expense, and in what it presupposes of the general conditions of exchange. The value of the money-volume of any country is a small fraction of the aggregate value of those products which the money helps directly to exchange; and a very small fraction indeed of the aggregate value of all the products which it helps indirectly to exchange through Credit by means of its denominations. We shall see better a little farther on, that Money works not only as a medium direct, itself exchanged against other Services, but also as furnishing those denominations of Value, like the dollar, which are always used in bargaining; and also used in all cases of Credit, in which settlement is not made by money but by offsetting one piece of indebtedness against another, and these denominations can arise only from the use of money as a direct medium. Therefore, we may say that the hub and the spokes and the rim of the wheel of exchange consist of personal services and commercial credits and all material commodities except money, while, to borrow the famous comparison of Hume, "Money is but the grease which makes the wheel turn easier." It would be a vast mistake to suppose, as some of the ancients did, that the grease is really the wheel.

While Money thus facilitates the revolution of the wheel of Exchange, it follows too from its nature as a medium, that the dimensions of the wheel as a whole are vastly greater than they would have been but for the Money. Money indeed helped to exchange the products that already existed and were coming into existence at its first invention, but by far the largest part of products since have come into existence largely through the agency of Money. We get quite too low a view of the functions of this potent agent, if we think of it merely as an aid in circulating products, that would have existed whether or no; some products would certainly have existed whether or no, and money would surely be of great use and convenience in helping bring these to the ultimate consumers; but this is a partial and wholly inadequate view of the function of Money as a medium of exchange. The fact that such a medium is in universal circulation, and that the present holders of it are ready to exchange it against any sort of Services adapted to gratify their desires, exercises a kind of creative power, and brings a thousand products to the market which would otherwise never have come into existence. Since money will buy anything, men are on the alert to bring forward something which will buy money; and since Money is divisible into small pieces, an incredible number and variety of small services are brought forward to be exchanged against these pieces, for example, into railroad cars and fares of all sorts, which services we have no reason to suppose would ever be brought forward at all were it not for the strong attraction of the money.

5. From this last point of view we may gain another closely connected with it, namely, that Money must be a very important part of the Capital of the world. We have already thoroughly learned that Capital is any product outside of man himself from whose use springs a pecuniary increase. Now any one may see that the monetary medium of any country is the most active and the most essential and the most profitable of all those instruments reserved in aid of further production. The axe, the plough, the spindle, the loom, the wheel, the engine, are all instruments, are all Capital, and they each aid respectively some part or parts of the processes of Production; but Money is a form of Capital which stimulates and facilitates all the processes of Production without exception. Just as we have seen that Money is a form of Value generalized, so is it also a form of generalized Capital, that is to say, it is an instrument capable of aiding all processes of Production in every department, while every other capitalized instrument is capable of aiding but few processes in one department. Without Money, for instance, there could be no thorough Division of Labor, because there would be no adequate means of estimating or rewarding each one's share in a complicated process. By means of Money all services small or great contributing towards a common product are neatly measured, and may be paid for by some one, who thereby becomes proprietor of the whole product; or, if the contributors choose, they may wait till the product itself is sold, and then the money received is divisible without loss to each contributor, according to the service rendered. Thus the influence of Money as Capital pervades the whole field of Exchange from centre to circumference, facilitating every transfer and stimulating new transfers.

Now then, if Money be, as it is, a peculiar kind of Capital, since it is a Medium in all Exchanges, the question becomes pertinent, How much of it is wanted? Clearly, only so much as will serve the purposes which such a medium is fitted to subserve; there should be enough fairly to mediate between the Services actually ready to be exchanged then and there, and also enough fairly to call out other Services proper and profitable in the then circumstances of Society, and whose only obstacle to a profitable exchange then and there is a lack of a facilitating medium. All increase of the volume of money beyond this point, which the very nature of Money itself marks out as the boundary, leads to a diminution of Value of every part of it, to a consequent disturbance of all existing monetary contracts, to a universal rise of prices which are illusory and gainless, to unsteadiness and derangement in all legitimate business, and to a spirit of restless enterprise and speculation which seeks to draw off the excess of money in untried and reckless experiments. The only real subjects of Exchange are mutual efforts, mutual services, as these are expressed in Commodities and Services and Credits, and money is the instrument merely that comes in between the real exchanges to facilitate them; and, therefore, it seems to be perfectly conclusive on this point to remark that the quantity of money needed in any country or the whole world is limited by the number of the services ready to be exchanged, to make easy the exchange of which is the good purpose and sole end of Money.

The physical and mental powers of man, which alone can give birth to commercial services, when considered as they must be in this connection as belonging to a given number of men at a given time and place, are strictly limited of course; and although the presence of money then and there is both a stimulus and an aid to all these men to bring forward services of all sorts to the market, there are obvious restrictions both in their powers and in their circumstances; and the quantity of money needed among them is just that quantity which will fairly act as a medium in exchanging the services which they are able and willing to render to each other. All increase in the quantity of money beyond that point would have, and could have, the only effect of increasing the nominal Prices of Services, without making the services themselves any greater in number or better in quality.

It is with Money exactly as it is with any other form of Capital, allowance being made for the fact that Money is a kind of generalized capital. To illustrate, How many ships does a commercial nation need to employ? As many as will fairly take off its exports and bring in its imports. Ships are wanted for one definite purpose; and when enough are secured to answer that purpose, all additions will lessen the Value, that is, the purchasing-power, of ships generally. So of all instruments whatever. Enough is as good as a feast. Enough is better than more. In regard to every form of Capital, and consequently in regard to Money as such, the point of sufficiency is determined by the quantity of work to be done. And as no law of Congress is required to determine how many ships are best to do the transportation for the people of the United States, so no legislation is needed to fix the amount of Money that is best for the same people, or for any people. As the people find out for themselves how many steam-engines they want to do their work of the year, so they find out without any aid from their legislators how much money they want to make their exchanges of the year. The less Law and the more Liberty on all such points the better for all concerned.

Let the reader notice in passing, as a corollary from what has just been shown, that when forms of Credit like bank cheques come into growing use to make payments with and settle balances, they displace to a large extent commodity-moneys, like gold and silver, which would otherwise have to be employed. Speculations, and even scientific discussions, over the needful amounts of gold and silver for money in the United States, have usually overlooked this essential consideration of displacement; and one result of this has doubtless been too large a coinage of the precious metals, to the hazard of their stable value, and especially to the hazard of the permanent maintenance of the gold standard. Men forget in their zeal for Money that it is nothing but a Tool, and that the multiplication of tools beyond the amount of work to be done by means of them always makes the tools a drug; and they are apt to forget also that the cheaper and more convenient substitutes for metallic moneys, namely, forms of Credit, are all the time and more and more taking the place of the older moneys, which, nevertheless, must still be kept at the foundation, though a lessened quantity of them be needful for circulation.

6. We must now carefully sink our analysis one grade deeper, in order to reach the bottom characteristic of Money, and so to formulate an ultimate definition of it.

The only quality common to all valuable things is the fact that they are all salable; and if these various and multitudinous valuables are ever to be made in any way commensurable with each other, it must be by means of one of their number assumed as a standard of comparison with the rest. Comparisons can only turn on points of likeness. The single respect in which all valuables whatsoever resemble each other is their common possession of purchasing-power, be it more or less. Therefore, as a yardstick, itself possessed of length, and because it is possessed of length, if assumed as a standard of comparison with other objects that have length, may be used to measure all such objects whatsoever, and may accurately express in units or fractions of itself the simple length of anything and everything; so, any valuable may be selected as a standard with which to compare all other valuables, and by means of the terms of which to express numerically the reciprocal relations between all valuables whatsoever. This is just what is done whenever any valuable is selected as Money; and this is the exact and single purpose of such selection.