What is the precise change, then, in the valuable chosen as Money when it becomes money? This: it was a valuable before, else it could not by any possibility serve the present purpose, but now it has become a standard valuable, with which other valuable things may be compared in the single point of their value. Valuables are now commensurable. That is all. But that is a great deal. As we have already learned to the nail, Valuables are all Services; and now some one Service has been selected from the rest, capable in its very nature of measuring all the rest, and so capable of becoming immensely useful to mankind.

What, accordingly, is the bottom characteristic of Money? And where shall we find the terms for an immutable definition of it? The core of Money is this quality of being a Measure of Services, taken on in addition to the usual and universal qualities constituting anything a Valuable. This additional quality arises under the choices and action of men, just as the ordinary qualities constituting anything a valuable arise under the choices and action of men. But it is an additional quality, distinctly conferred, and vastly important. The valuable chosen as Money was a Service to start with, was constantly rendered as such then and there, and was consequently fitted by qualities already possessed to assume a further and a unique quality, namely, the capacity to measure and express relatively to itself all other valuable Services whatever.

As each and every Valuable is the outcome of a comparison instituted by two persons as between two things, as is thoroughly unfolded in the first Chapter, it is not at all strange, rather it is natural and inevitable, that there should arise in connection with Valuables as a whole class some such further comparative measure, as Money is now shown to be; because, without some such common measure of Services in general, itself a Service of the same kind, it would be inconvenient, not to say impossible, to carry on any considerable traffic anywhere. For instance: a baker has only loaves of bread, and wishes to buy a hat, a horse, a house. How many loaves shall he give for each? Unless there be some common Service, in the terms of which these differing Valuables can be expressed, and by means of which they can be brought into commercial relations with each other, it would be an awkward piece of business to effect even the three exchanges; and every time the baker wished to buy another article, there must be a rude and slow calculation from independent data, in order to decide upon the terms of the exchange. Let now some Common Service be introduced, in the terms of which each of these values can express itself independently, and the difficulty disappears in an instant. "My loaves are worth ten cents each," says the baker. "My hat is worth ten dollars," says the hatter. Their saying so does not indeed make it so; that matter is a preliminary; but each has come to that approximate conclusion by a relatively easy comparison of two Services, his own and another common one; and if the loaves will duly bring ten cents and the hat ten dollars, the terms of their own exchange are one hundred for one, and there is no need of parleying. So of the rest; so of everything that is ever bought and sold. Money becomes by common consent a Measure of them; because it measures them, it makes the interchange of them a very facile matter; because it measures them, it easily becomes a medium between them; and, accordingly, because the money rendered is itself a Service, it is a natural and universal measure of all other Services.

Money is a current and legal measure of services. With this final definition of "Money" the writer is more than willing to take all the risks. It was new when propounded many years ago in one of the editions of his earlier book. All subsequent testings of it in form and substance have but confirmed the original confidence in it. The word "legal" in this definition is not always to be pressed to its utmost signification, but denotes anything sanctioned by law or usage equivalent to law. The other words are to be taken in their full and technical meaning. It is believed that, while this definition is short and simple, it just covers the whole ground and no more. It is not enough that a certain valuable be "legal" as Money; it must also be "current" in order to be a true money. In the United States between 1862 and 1879, to take an example, gold coins, though legal tender all the time for all debts public and private, were not "current" in the full sense of that term, and hence were not the Money of the country. Till the last-mentioned date, the gold dollar of 25 ⁴⁄₅ grains standard fine was required by law to pay customs-taxes with and the interest on the public debt, and was used to a small extent in a few branches of private business, and was not otherwise in the hands of the people. These dollars, accordingly, were not strictly money, but bore a premium over the "current" money of the country. To be Money, then, a Valuable must be recognized as money by law or custom as strong as law, and also circulate among all classes of the people as a medium in their exchanges.

But we are bound to observe that Money becomes a medium in men's exchanges, because it first became a measure in their Services. Some economists think that these two functions are separate, and are of equal rank; but it is easy to see that one only is original, and that the other is derived from that. Even Aristotle perceived that Money is a Measure, inasmuch as he defined property "anything that can be measured by money." We may be pretty sure, in opposition to Professor Jevons, in his Money and the Mechanism of Exchange at page 13, who thinks there are four characteristics of Money, that Money as such has but one primary characteristic difference from other forms of Value, namely, this measure-quality, this standard-quality, this publicly recognized function as a common measure to which all other valuables are constantly referred. This additional attribute put upon a money-valuable by law or custom is not what makes it valuable, since an ounce of uncoined gold standard fine is worth within a very small fraction as much as an ounce of gold coins, but it makes the money a far more convenient instrument to purchase with, inasmuch as money, having now the attribute of making all other valuables easily commensurable with itself, becomes at once something which everybody is ready to receive, because everybody knows in general what its power will be to purchase all other things. In other words, Money becomes a medium in exchanges just because it has already become a measure of Services in general; and there are not consequently two prime functions of Money, still less four, but only one. This view seems to simplify the whole subject of Money very much; and we may be sure that it will be found to be scientifically correct, and that we shall find many means of testing its accuracy as we go on.

To maintain, as we do, that "Money is a measure of Services," is much better than to say, in connection with many economists, that "Money is a Measure of Value." That phrase is objectionable because Value is always relative to two Services exchanged for each other; and to say that money is a measure of that relation is neither so simple nor so ultimate as to say that it is a measure of each of the Services entering into that relation. The Services may be conceived of and spoken of separate from the Value into which they merge, although they come into existence solely for the sake of that resultant Value, and it is more exact and final to propound that Money, itself a Service, is a measure of all other Services considered as constituent elements of the Values into which they fall. We are not without strong hopes, accordingly, that competent economists will concede, that here is a radical improvement in the nomenclature of our Science.

In the place of our expression and definition, and the foregoing explanation consequent upon its use, President Walker in his Money, pages 280 et seq., prefers the mathematical and excellent phrase, "the common denominator in exchange"; Professor Bonamy Price, in his Practical Political Economy, page 363, shows his fondness for the formula (and it is a good one), "the tool of exchange"; and Henry Dunning Macleod, in his Elements of Banking, page 17, insists with much less reason, that "Money is the representative of Debt." He says: "The quantity of money in any country represents the amount of Debt which there would be if there was no money; and consequently when there is no debt there can be no money." The unfortunate use by some countries of a paper money, which is indeed a form of debt, gives some plausibility to the notion that Money is a representative of Debt; and perhaps the fact that Money is often used to pay debts previously contracted, and that debts are almost always contracted in the terms of Money, may give some additional plausibility to this view; but as Macleod himself goes on to say that "no substance possesses so many advantages as a metal for money," and that "all civilized nations therefore have agreed to adopt a metal as money, and of metals, gold, silver, and copper have been chiefly used," we do not see how he can logically hold that a gold dollar, or a gold sovereign, whose value is as substantive and independent as that of any Valuable in the world can be, becomes through coinage and circulation "a representative of Debt." Instead of saying as he does, "where there is no debt there can be no money," it may be confidently asserted on the other hand, where all transactions are settled at once in solid money there can be no debt.

7. Having thus looked into the nature of Money, and seen what is its one essential characteristic, and its one obvious and universal function as the result of that, it will help us now in our further discussion, to examine some of the material commodities that have served as Money at different times and places.

Cattle appear to have been the earliest money of which there remains any record. Homer, near the middle of the sixth book of the Iliad, indicates in the following lines that oxen were an incipient money in the Heroic age:—

We cannot certainly infer, when it is said in Genesis that "Abraham departed out of Egypt very rich in cattle and silver and gold," that any of these were anything more than articles of valuable merchandise; but on the other hand it is certain from the Latin name of Money, Pecunia, which is derived from the root pecus, which means "cattle," that Cattle were the Money of the early Romans; and Pliny writes expressly that King Servius Tullius stamped the first bronze money of Rome with the image of cattle, undoubtedly indicating by that some equivalence in current value between the two. At any rate cattle have been used as Money among pastoral peoples very widely in place and in time, and are still so used in various parts of Africa.

In the region of the Euphrates and Tigris the precious metals became money in very remote antiquity; for the art of coining, and all other arts, came thence westward to the Greek cities of Asia Minor, and to Greece itself, and we learn that Pheidon, King of Argos, coined silver money on a scale derived from the East in 869 B.C.; and a better proof still is the fact that burnt clay tablets are found in the Royal Library at Nineveh, discovered by Layard, which are really credit-money, notes issued by the Government, and made redeemable in gold and silver money on presentation at the king's treasury. Tablets of this character are extant bearing date as early as 625 B.C. But the gold and silver money must have been circulating a long time in their own right as valuables, before such a credit-money, such a promise-money, as those tablets are, could have originated in connection with them. Abraham, who himself migrated from "Ur of the Chaldees" about 2000 years B.C., not long after reaching the Mediterranean, "weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant." This is expressly said to be "money" and "current money." Perhaps it was coined money. At any rate, it was cut and piece money. It was indeed weighed out, and not counted out. This is still the more accurate and speedy manner, when the facilities for the weighing are present. The Bank of England at this day weighs, and not counts, the coins received and paid out. The Romans first coined silver money in 269 B.C., and gold money in 207 B.C., and gold coins were stamped in Greece about the time of Alexander the Great, say 333 B.C.

Other metals than those called precious were also early used as money. Long before Pheidon's silver coinage in Greece, copper skewers were used as money in that country, of which six made up a drachm, which was afterwards both a coin and a unit of weight, the coin being worth about 17 cents of our money, and the weight being about 66 grains avoirdupois. The word drachm is derived from δρἀγμα, a handful; and the sixth part of it, called an obol, from the Greek word meaning a spit, became also both a coin and a weight, all which makes it evident that these were used in connection with roasting meat, and that one skewer or obol was originally a unit both of value and of weight. In Adam Smith's day, in certain districts in Scotland, nails were still used as small money, which is a forcible reminder of these old Greek skewers. Iron became money in Sparta; money of lead was known to the ancients, and is still current in the Burman empire; the earliest Roman coins were of copper, which were cast rather than stamped, for no die would have sufficed for pieces so large and heavy, and the denarius was the unit divided into ten asses, the denarius being nearly the equivalent of the Greek drachma whether of copper or silver, because the Romans reckoned from the first the ratio of copper to silver as 250:1; bronze is a mixture of copper and tin, and brass of copper and zinc, and copper coins with both these admixtures—used for the purpose of hardening the copper, it being a general law of metals that a mixture of two is harder than either—have been very common in ancient and modern times; Sicilian, Roman, and old British coins of tin alone are known to have been struck; and Herodotus makes the statement that the Lydians of Asia Minor were the first to make a coinage of electrum, which, as some claim, was a mixture of gold and silver, and of which ancient specimens are still existing.

Cowry shells are still used in the East Indies, and also in Africa in the place of small coins, and have sometimes been imported into England from India to be exported in trade to the coast of Africa, being reckoned in Bengal at about 3200 to a silver rupee, which is about 46 of our cents. The New England Indians also used beads or shells of periwinkles (white) and of clams (black), of which 360 made up a belt of wampum, as they called it, the black being counted worth twice as much as the white; and the English colonists accepted the wampum in their exchanges with the Indians, regarding a string of white as equal to five shillings, and a string of black to ten shillings, and afterwards made it legal tender among themselves for small sums, and even counterfeited it. Cakes of tea have passed as money in India, and elsewhere; and it is said, that at the great annual fair at Novgorod, in Russia, the price of tea has first to be determined before the prices of other things can be settled upon, since that is a kind of standard of Values in that great mart. Salt has been current money in Abyssinia; cod-fish in Ireland and Newfoundland; and beaver-skins in New Netherlands, New England, and the western parts of America.

We do not here try at all to give a full list of the things that are known to have been used in the early states of society as money; and there would be no ground for surprise in any list, however large and varied, when we remember how great is the need of some such form of value generalized in order that exchanges may grow to any considerable size and vigor. Two points only need now to be noted, (1) that the tendency everywhere has been sooner or later to come to the metals as the best form of money, and among the metals to reach gold and silver as the only ultimately satisfactory materials for Money; and (2) that no instance has ever been found in the whole stretch of inquiry over all the earth, of anything becoming a Money that had not been previously a Valuable. We might be perfectly sure of this beforehand, without any search at all among the moneys of primitive times and states of civilization, because, from the very nature of the case nothing could ever serve the purpose of Money except what was already a valuable to make the comparison with,—nothing could ever possibly serve as a measure of services except a service. It has several times been claimed, that actual exceptions to this law have been historically discovered, but when the alleged exceptions have been closely scrutinized they have been found to be apparent only. To take two or three of the most plausible examples: the Carthaginians had a kind of leather money, which originally enclosed bits of the precious metals, and circulated in virtue of them, though they afterwards came to circulate as bits of leather only, as counters and pledges, in a way that will be explained later. According to the Venetian traveller, Polo, China had in the thirteenth century a money made of the bark of the mulberry tree, cut into round pieces and stamped with the name of the sovereign, which money it was death to counterfeit or to refuse to take in any part of the empire. If we had the whole history of this money, it would surely ally itself either with the other commodity-moneys now being treated, or with the modern credit-moneys made legal tender to be treated hereafter. It is just as certain as anything can be, that these circles of stamped bark did not start out as money in their own right. The French writer, Montesquieu, asserted that there was in use in the last century among the people of the coast of Africa, what he called "an ideal money," "a sign of value without money," the unit of which was called a macoute, which was subdivided in ideal tenths, called pieces. This statement was startling, as implying a denomination without the thing denominated, as implying a standard of value which had no basis in a valuable thing. It was afterwards discovered, however, that this money of account had its origin, just as we should suppose it must have had, in an actual macoute, a piece of stuff, a fabric, which they had used first as a commodity-money, and afterwards its name as a money of account. A valuable thing may become money, and then its name may become a denomination of value, and still later a bit of leather or a bit of paper may be called by the same name, and in a certain sense take the place of the same thing. All this will be as clear as day pretty soon.

8. Contrary to what has often been affirmed by Economists, the real measure of Services is the service itself, the thing-dollar and not the denomination-dollar. The denominations are used in bargainings and calculations as representatives of the money itself, and thus indeed in a secondary sense serve as measures; but the subtle connection between the thing and its name, between money and its denominations, and the differences between the two, need to be clearly unfolded, because most of the current fallacies about money take their rise just at this point. An illustration will best serve us here. The original measure of Services in France and England and Scotland was the pound weight of silver. No coin of that weight was ever struck; but the pound of silver was cut into 240 coins called pence. Twelve of these pence were called a solidus or shilling. Thus, as applied to silver, the symbols lb. and £ denoted equivalent weights, the former of uncoined metal, the latter of metal coined. But in course of time, more "pence" than 240, and at last in Elizabeth's reign 744 "pence were coined out of a lb. of silver." Yet all the while 240 of these pence were called a £. £ and lb., both a contraction of the Latin libra, were no longer equivalent. The lb. of weight continued stable; the £ of money had dwindled to less than one-third. Yet the name pound continued to attach to 240 pence, although the pence embodied a less and less quantity of silver. Each actual penny had less silver in it, and though it was still called a penny as before, the denomination, though spelled and sounded as before, represented less silver, and therefore less value, than before. The denominations, then, always follow the fortunes of the coins, whose names they are, to the frequent loss and shame of the unthinking, who suppose the same name must represent the same thing. Unfortunately it does not.

Take another illustration. In 1834 the gold eagle of the United States was reduced in weight from 270 to 258 grains troy, and the alloy increased from one part in 12 to one part in 10. These changes took out more than 6 parts of gold from every 100 parts in all the gold coins of the country. Yet all these coins bore the same names as before. The things denominated changed, but the denominations changed not. Other things remaining equal, the coins lost six per centum of their purchasing-power, or in other words, general prices rose in that proportion; the measure became so much smaller; and the names, eagle, dollar, outwardly unchanged, varied simultaneously and equally with the change in the coins.

Also, coins are liable to change in their function as a measure of general Services from unavoidable changes in the general purchasing-power of the precious metals themselves. If for any reason an ounce of gold will buy less of general Services than formerly, of course the coins cut from that gold will buy less than formerly; and this change in the measure is followed instantly and inevitably by a corresponding change in the meaning, though not in the spelling, of the denomination. Not so with all other tables of denominations. These have a basis independent of the things which they help to measure. The French metre, for example, is not variable by the lengths or breadths or heights of the things it measures, but is an invariable unit of length the world over; so is one of Troughton's inches; but this feature does not hold at all of the denominations of Money; because sovereigns, dollars, marks, francs, are denominations of Value, which is itself a variable relation. Such denominations, consequently, are not an independent standard to which values themselves can be referred, as lengths are referred to metres and inches, but vary with the varying purchasing-power of the coins themselves. The "dollar," as a denomination, means more or less, just according as the "Dollar," as a coin, buys, that is, measures, more or less.

Still, essential as is the point now made to any just understanding of the subject of Money, it is vastly important for all the interests of Exchange that the accepted measure of Services be as little liable to fluctuations as possible, especially in all cases in which lapse of time is involved before the exchange is fully consummated. An inflexible standard there cannot be from the very nature of the measuring, but also from the very nature of all measuring, the money-standard should be and should be kept as nearly inflexible as it possibly can be. For the same reason in kind, only multiplied a thousand-fold in force, that the bushel-measure should be of the same capacity in sowing-time and in harvest-time, to sell and buy by, always a bushel, no more and no less; and the yard-stick an inflexible measure of length, always 36 of Troughton's inches, no more and no less; so, as far as it is possible in the nature of Values, ought the current measure of Services, and hence its denominations, to represent, year in and year out, a uniform degree of purchasing-power.

9. This brings us logically to the historical fact, that, no matter what measure of services any people may have adopted in their primitive times, there has always been a steady force at work tending to displace these in favor of gold and silver. This has become the universal result the world over among all advanced peoples. Governor Bradford in his History of Plymouth Colony gives a quaint account of the origin of money among the Pilgrims, and in connection with that of the fee-simple in lands: "The Pilgrims began now highly to prize corn as more precious than silver, and those that had some to spare began to trade one with another for small things, by the quart bottle and peck; for money they had none, and if any had, corn was preferred before it. That they might, therefore, increase their tillage to better advantage, they made suit to the governor to have some portion of land given them for continuance and not by yearly lot, for by that means that which the more industrious had brought into good culture (by such pains) one year came to leave it the next and often another might enjoy it; so as the dressing of their lands were the more sleighted over and to less profit; which, being well considered, their request was granted."

The neighboring Colony of Massachusetts, settled about ten years later, used Bullets for small change, reckoning them at a farthing apiece, and made them legal tender for debts of less than one shilling; for larger exchanges Wampum and Beaver-skins were long used; but the steady force just spoken of induced Massachusetts in 1652 to supplant these with a silver coinage of her own, called the Pine-tree shillings and sixpences and threepences and twopences. This mint existed (sometimes idle) for over 30 years, but all the pieces coined bore the dates of 1652 or 1662. In 1691, the two Colonies were forced into one government through a new charter granted by William and Mary; and after lengthened trials of inferior moneys, not needful to be described now, Massachusetts determined in 1749 to have no other than silver money circulate in the Colony, and became thereafter till the Revolution the so-called "Silver Colony," and business rapidly and steadily revived and enlarged in consequence of the change, and in contrast with the rest of New England.

Gold and silver, thus ever urging their way in to take the place of tentative and transient standards, and ever coming back again to stay if displaced for a time by cheaper and changeable moneys, have never been anywhere of equal value, weight for weight. An ounce of gold has always been more valuable than an ounce of silver. Probably in the Euphrates country where coinage began, and certainly in Asia Minor deriving thence its weights and measures, gold was strictly the standard with silver as subsidiary to that; in Greece, when Philip's victories established a double standard there, gold was reckoned relatively to silver as 1:12½; in the Roman world, where silver had been the standard after 217 B.C., Augustus Cæsar legalized gold as a co-standard in the ratio of 1:12; in 1717 a double standard was established in Great Britain, gold being rated in the coinage as 1:15¹⁄₅ of silver, but in 1816 by a law still in force, gold was made the sole standard for the United Kingdom, the legal use of silver being limited to 40s. in any one payment; in France the legal relation of gold to silver was fixed in 1803 as 1:15½, and so continued till 1876; in the United States the ratio first established, in accordance with the recommendation of Alexander Hamilton as Secretary of the Treasury, was 1:15, but in 1834 this was changed to the relation of 1:15.98, and so it remains to this day; in 1871, the new German Empire adopted the sole gold standard, and limited silver to the amount of 20 marks in any one forced payment, still allowing the old silver thaler to circulate at the rate of three marks to a thaler; and since 1875, the Scandinavian Union permits gold alone to be coined for private persons, and limits the debt-paying power of silver to 20 crowns. A crown is 26.78, and a mark 23.82, of our standard cents.

Moreover, the relative value of gold in silver never continues the same for any great length of time, even after the law has sought to ascertain and fix it. Indeed, any law fixing the ratio between the two has very little, if any, effect towards maintaining the ratio. Demand and Supply determine the value of the precious metals each in each at any one time as absolutely as they decree the value of Hindoo rice in silver. France managed to maintain her legal ratio at 1:15½ for 73 years, because all the conditions were on the whole favorable; but when the Germans threw a portion of their silver on the world's market in hopes to reach the single gold standard, and the mines of Nevada poured forth on the same market their millions of silver, the ratio could no longer stand, the right of private individuals to have silver coined for them was taken away in behalf of the government, and only the five-franc silver pieces continued to be legal-tender to all amounts, the other silver coins becoming then (1876) only legal to pay debts to the amount of fifty francs. A franc is 19.29 of our standard cents.

And this brings us to notice what are called subsidiary coins. France, England, Germany, and the United States have debased their smaller silver coins in weight, so that the nominal value of these coins is from 7 to 15% above their bullion value. For example, two halves, four quarters, ten dimes, of our silver since 1875 weigh 385.8 grains, which is also the exact weight of the French five-franc piece, while our standard silver dollar weighs 412½ grains, both ⁹⁄₁₀ fine, so that our "subsidiary" silver is debased in weight 6.48%. There are three advantages in thus treating the smaller silver: (1) there is so much clear profit to the Government minting them, thus lessening taxation; (2) a security to the peoples that they shall not lose their convenient small change by export to neighboring countries; and (3) this scheme allows a very considerable rise in the market value of silver without tending to throw the subsidiaries out of circulation. As these are never legal-tender except to very small amounts in domestic trade, there are no serious objections to their use in limited quantities. The English can pay debts in their silver to the amount of £2, and we in ours to the extent of $5. Coins of copper and of other inferior metals are also subsidiary in principle and motive. Our 5-cent and 3-cent nickel pieces are 75 parts copper and 25 parts nickel, and the 1-cent piece is 95 parts copper and 5 parts tin-zinc; and debts of 4 cents can be paid in 1-cent pieces, of 60 cents in 3-cent pieces, and of 100 cents in 5-cent pieces.

10. The steady experience of civilized men for two milleniums and a half seems to demonstrate, that gold and silver constitute the best Money; and we must now investigate the reasons, one by one, why they are the best money. The reasons appear to be three. Of these the first is by much the most important.

(1) The first and main reason why gold and silver make the best money is to be found in their comparatively steady general Value. Since Money is a Measure of all other valuables, its success as a measure must depend on its own steadiness of value, and gold and silver meet this test better than anything else. Money is a valuable, and not in any sense a representative of value; except as to the subsidiaries, a coin does not owe its value at all to the stamp impressed upon it or to the law authorizing it, since the metal in it is worth as much out of the coinage as in it; coin-values arise under the same conditions as all other values, and are variable by any change in any one of the four elements which alone can vary the value of anything; and it would seem that nothing more is needed in order to remove the last vestiges of the dark cloud which has so long overhung this subject of Money, than to familiarize ourselves first of all, as we have already done, with the true doctrine of Value in general, and then to hold fast the truth exemplified on every hand, that the value of Money is just like every other value. Let us examine then, first, why the value of gold and silver is so steady.

(a) On account of the comparatively steady Demand for these metals. Gold and silver are wanted for two general purposes: first, to be used as money, and second, to be used in the arts; and the usual estimate is, that about ²⁄₅ of the aggregate quantity in the world is in the form of money, and the other ³⁄₅ in the form of plate and utensils and ornaments. Now, so far as the element of Desire controls Value, the purpose for which any article is desired is a matter of indifference. The aggregate desire for it for all purposes, accompanied with the offer of something with which to buy it, constitutes the Demand; and the more universal the desire, no matter for what use, the steadier the Demand and so far forth the steadier the Value. It is a point still too little noticed, that the combined demand for the precious metals for all uses is what helps determine their general value, and not the demand for them as coin alone; just as the value of barley is regulated partly by the demand for it for food, and partly by the demand for it for malting purposes. Hence an ounce of bullion of the standard fineness destined for the smelting-pot of the artisan is worth within a very trifle as much as an ounce of coined money.

For example, by the law of the Bank of England an ounce of standard gold (¹¹⁄₁₂ fine) is coined into £3 17s. 10½d., and the Bank is obliged to buy all bullion and foreign coins of the standard fineness offered to it at £3 17s. 9d. per ounce,—a difference of only three half-pennies. Now, gold and silver are so indispensable in the form of money, so beautiful in the form of ornaments, so well adapted to serve the purposes of luxury and love of distinction, and so really useful in the arts, that the Demand for them is constant and well-nigh universal; and should there be in the progress of civilization a lessened demand for them for purposes of personal ornamentation and luxury, and a less quantity be required for coins on account of the multiplied use of cheques and other credit-forms, as seems likely in both cases, a greater quantity will doubtless be required for all the other uses old and new, and so, as the Demand in the past has been steady, and probably steadily increasing, there is every reason to expect the same course of things for the time to come. Moreover, it contributes to the steadiness in value of the gold and silver coin, that there is at hand at all times, in the form of plate, a reservoir from which a chance chasm in the coin may be replenished, or an extra demand for it answered.

(b) On account of their tolerably uniform Cost of Production. Not Desires only but Efforts as well determine Value. Supply is the correlative of Demand; and when to a steady demand there answers a steady supply realized under conditions of pretty uniform difficulty, there will be as a matter of course a pretty steady Value. Nature herself, that is to say, God himself, has indicated in a manner not to be mistaken the intention, that these precious metals should be the Money of the nations. They are scattered all over the earth, and so scattered that the cost of their production has been on the whole pretty steady ever since civilization and commerce began in earnest. God is a God of order throughout all His works. Corresponding to the nature and necessities of men is the whole structure of the outward world. Science builds only on these predetermined lines of Order. Induction is only possible where original Resemblances run through great departments of phenomena. To be enabled to buy and sell to any considerable extent in order to meet their subjective wants, men must have an objective measure of mutual Services, and this measure must be a valuable steady in its purchasing-power: very well; such a possible measure was all provided for beforehand, when the foundations of the earth were laid.

The precious metals have always been obtained in one or other of two ways: by surface diggings and washings, and by rock-mining. Both were employed in the very beginnings of Civilization. There is a description in the book of Job (chapter xxviii) of the way in which the ancient mines were wrought, and of the worth of the ores:

These methods and difficulties in rock-mining, thus poetically and beautifully delineated, have been substantially the same from that early day to the present time; and, consequently, there have been but two or three striking changes in the general value of gold and silver in the commercial world during the last 500 years, at least changes owing to easier and larger Supply. The discovery of the mines of Potosi in 1545, and the large influx of silver into Europe from those and other American sources, together with the irrational stimulus thereby given to the working of European mines under the false impression not even yet wholly dissipated that Value can be clutched bodily in mining, so increased the stock of silver, that its value as measured in grain or other commodities declined in Europe in 70 years after 1570 to about 25% of its previous purchasing-power. Adam Smith expresses the opinion in his Wealth of Nations, that silver did not perceptibly fall before 1570, nor continue to fall further after 1640. The discovery of gold deposits on the Pacific coast of the United States in 1848, and a similar discovery in Australia in 1851, enlarged the annual supply of gold for the world from $40,000,000 in 1848 (Chevalier), to an average of $136,000,000 for the five years ending in 1859 (Jevons); and the latter writer estimated the fall of gold in general commodities from 1845 to 1862 at about 15%. But with exceptions like these, and similar ones are perhaps not likely to recur, the precious metals have always maintained and seem likely to maintain in the future a considerable uniformity of Value, as estimated by their power to purchase other valuables, so far forth as Cost of Production goes to determine their value. Even the great changes just noted in the cost of the metals issued only gradually in a rise of Prices, which many were able to foresee and thus to provide for, but by which many more were caught and brought into distress and even pauperism. The two classes that suffer the most under a fall in the Value of Money are the wages-receivers and the holders of long annuities and other similar obligations.

(c) On account of their Quantity. The amount of gold and silver in circulation in the commercial world, to say nothing of the quantity so easily brought into circulation from the reservoir of plate, is so vast, that it receives the annual contributions from the mines much as the ocean receives the waters of the rivers, without sensible increase of its volume, and parts with the annual loss by detrition and shipwreck, as the sea yields its waters to evaporation, without sensible diminution of volume. The yearly supply and the yearly waste are small in comparison with the accumulations of ages; and, therefore, the relation of the whole mass to the uses of the world, and the purchasing-power of any given portion, remain comparatively steady. It is probable, that production at the mines might cease altogether for a considerable interval without very sensibly enhancing throughout the commercial world the value of gold, as it is certain, from experience, that a production very largely augmented only very gradually and after a considerable interval of time diminishes its value. The mass of the precious metals has been aptly compared with the heavy balance-wheel in mechanics, which preserves an equable and working condition of the machinery under any sudden increase of the power, and even when the power is for a moment withdrawn.

Just at this point a caution is needful. Because it is affirmed that the great amount of the precious metals is a ground of their firm value, it must not be supposed that we are going beyond our general doctrine, and introducing another element, namely, Quantity, besides the four elements, which, as we have so often alleged, can alone vary the value of any Service. Quantity, in itself, is not an element capable of varying the value of anything, but taken in connection with durability, it is an element of what might, perhaps, be called with propriety the Inertia of Value, and tends to keep the purchasing-power of gold and silver where it is. Value and Steadiness of Value are two distinct ideas. The present value of an ounce of gold is decided by four things alone, two Desires and two Efforts; but other elements besides these may help determine that that ounce of gold shall have ten years from now a purchasing-power approximately the same as now. It will depend of course in the last analysis upon the relation of the then Demand to the then Supply; yet the vast quantity of the precious metals in existence, combined with their durability, prevents those fluctuations in the Supply which are so destructive to a steady value. It is not with them as with the fruits and the cereals, whose value varies perpetually with the seasons, and which are so perishable that they must be sold quick or never. Gold and silver are almost indestructible, and the existing mass is not liable to be lessened except by wear and accident, and in so far as the annual production from the mines exceeds the yearly waste there is a natural provision made for the natural increase of Demand to supply the wants of the world for money and for the arts without much disturbing the relation of the Demand and the Supply; and so Quantity in connection with durability helps preserve to them a tolerably steady value from generation to generation.

(d) On account of their Fluency. Gold and silver are in demand the world over. Having great value in comparatively small bulk, they are easily transported from Continent to Continent; and whenever from any cause they become relatively in excess in any country, and so lose there a portion of their previous purchasing-power, there is an immediate motive in profits to export them to other countries, in which their power in exchange is greater, and thus the equilibrium tends to restore itself. The proposition is, The value of gold and silver is kept pretty steady throughout the commercial world by the facility with which they are carried from points where they are relatively in excess to points where they are relatively in deficiency. In any country or place where the precious metals are temporarily in excess, the prices of general commodities as measured in them will rise of necessity, because the unit of measure is smaller than it was; and for the same general reason, the country temporarily lacking in these will experience in consequence a fall of general prices. There is, therefore, a private gain in carrying these metals to those countries in which their power of purchase is the greatest owing to the lack of them, because more commodities can be obtained in exchange for them than at home; and private motives here coincide, as indeed they generally do, with public welfare, since what the traders do in carrying gold and silver abroad with an eye to their own interest only, helps maintain at home and abroad the steady value of these commodities.

This law of the distribution of the precious metals by Commerce, and the equilibrium of their general value resulting therefrom, is as natural and beautiful as the law which preserves the level of the ocean, or that which balances the bodies of the planetary system. This has come at length to be recognized by the nations, and the laws which used to forbid by heavy penalties the exportation of gold and silver are all swept away, and these metals are now free to go and do actually go wherever they can obtain the most in exchange. It is absurd to suppose that their owners would carry them out of a country unless they were worth more abroad than at home; and, therefore, the prejudice which still exists in this country (the relics of itself) is a senseless prejudice. The gold is not given away, it is sold, and sold for more than it will buy at home; otherwise nothing in the world could start on its foreign travels. There is the same kind of gain in this as in all other exchanges of commodities, with this great incidental advantage in addition, that its general value is by this means kept pretty uniform throughout the commercial world.

Unluckily for the darker and middle Ages, so far as they took their cue and thought from the Romans, the latter, in the teeth of the sound view of Aristotle, looked upon Money as something quite different from other forms of salable things, looked upon it in short as an end in itself, as something to be gained and not readily to be parted with. If this were the right view of Money, as it is not, then the policy to spring from it might well be,—Get all the money possible into the country, and let as little as possible out! Just this came to be the policy of the Romans. In one of his Orations, Cicero says, "The Senate solemnly decreed both many times previously, and again when I was consul, that gold and silver ought not to be exported." The other and the true opinion, that money is bought and sold like any other valuable, and that its sole peculiar function is as a means to further sales, was indeed held and argued at Rome, as we learn incidentally from a passage in the Institutes of Justinian; but the false though plausible opinion, that money is ultimate, and not mediate, is said in the same passage "to have prevailed"; and accordingly this superficial view of money, and that it "ought not to be exported," constitute what may be called the Bullion Theory, and it is the first general theory of Sales ever promulgated. The Romans brought it forth, and other nations took it from them. It could never stand in the light of Reason, and still less amid the exigencies of practical Commerce.

It is an illustration of the continuity of human thinking as well in wrong as in right directions, that the second main theory of Sales, which has long been styled the Mercantile Theory, is a prolongation and expansion of the first. That gave an undue weight to gold and silver over other goods in trade, and forbade their export: this did the same thing too, but also tried to swell the exports of other goods beyond the worth of current imports, so as to get back a balance in gold and silver: both alike interfered with the international fluency of the precious metals, to the constant detriment of all parties to the restrictions. The common principles of both Theories may be thus expressed: Gold and silver are the things to get; they are worth more than what they will buy; therefore let us get all of these in that we can, and let as little of them out as we can; and let us work all our trade so, that others shall have to give us a balance back in gold and silver. These false postulates and inferences wrought centuries of woe in the world of commerce, because all the leading nations became devotees simultaneously to this scheme of each shrewdly plundering the rest. The germs of this Mercantile Theory appear first in France, when Phillippe le Bel, in ordinances of 1303 and 1304, put his hand in as king to mend the movement of trade, to forbid the export of gold and silver, to fix the price of wheat and to forbid its export, and to lessen imports by prohibitions of them. "Considering that our enemies might profit by our provisions, and that it is important to leave them their merchandise, we have ordered that the former should not be exported nor the latter imported." The famous Colbert, who laid down many financial maxims that are good, thought nevertheless, that he could so manage the foreign trade of France that she should get the better of her neighbors, and embodied his plan in the tariff of 1664. We will let him state his plan in his own words: "To reduce export duties on provisions and manufactures of the Kingdom; to diminish import duties on everything which is of use in manufactures; and to repel the products of foreign manufactures by raising the duties." The principle of the Mercantile Theory was never better or briefer expressed than by Ustariz, a Spaniard, in 1740: "It is necessary rigorously to employ all the means that can lead us to sell to foreigners more of our productions than they will sell us of theirs, as that is the whole secret and the sole advantage of trade." Too many nations knew the "whole secret" at the same time, and accordingly the "sole advantage" to any became exceedingly small. England was as deep in the sloughs and wars and losses of this false system as any of the rest.

It may be laid down as an axiom, that no country will ever export for the sake of buying other things those things which are more needful for its own welfare at home. So long as human nature continues what it is, what it always was, what it always will be, no persons in any nation will ever export gold and silver except to buy therewith other valuables then and there more important to them and consequently to their country. There need not be the slightest fear that any nation which cultivates its own commercial advantages under freedom will ever lack for a day a sufficient quantum of the precious metals; because under freedom these metals will always go, and go in just the right proportions, to and from those countries which produce and offer in exchange those desirable Services which other countries want. The greater the enterprise and skill, the keener the development of all peculiar and presently available resources, the more honorable and free the commercial system, so much the surer is any nation whether it be a gold-bearing country or not, of securing all the gold and silver which it needs. This is so, because there will be a good market to buy in, an abundance of good and cheap goods will be there, and they who have gold will resort thither to buy. But such a free and enterprising nation will also want to buy other things besides gold and silver, and other things than those itself can make or grow to advantage, and when enough of the precious metals is secured for money and the arts, the residue will be exported, perhaps to the very countries from which it originally came, in payment for some products which those countries have an advantage in producing.

The United States, for example, is a gold- and silver-bearing country, and exported in the years 1850-60, both inclusive, $502,789,759 in coin and bullion, according to the official Report on the Finances, 1863; and during the same period imported from other countries $81,270,571 in coin and bullion. Where was the famous and fallacious "balance of trade" in that case? The United Kingdom, on the other hand, is not a gold- and silver-producing country at all, but it is the central market of the world for the precious metals all the same, its imports and exports of them are immense in all directions, because it is an enterprising country within the lines of Nature in agriculture and manufactures and commerce, and is not afraid to allow its people to buy and sell freely with all the world. Where lies in the technical sense the "balance of trade" between Great Britain and the rest of the world? Who can tell? All that is known, and all that is worth knowing, is, that all that trade is immensely profitable to all the parties to it wherever situated.

Now, there is always a double advantage in these free movements of coin and bullion in exportation and importation. In the first place, more and better commodities are secured to the countries exporting, whether they be gold-bearing or not, than the gold could have bought in those countries, otherwise it would not have been carried abroad, that being the sole motive that stirs it from its present haunts; and in the second place, the benefit to the countries importing is the market for their own commodities created by the gold brought in, for we must never forget that a market for products is products in market, is a benefit also in naturally and easily filling up a chance deficiency in the quantum of coin there, and incidentally too a benefit to the world as tending to keep in equilibrio the purchasing-power of the metals everywhere. This last is especially seen when new and pregnant sources of supply are opened in any country. For example, in the United States about the middle of the century the stock of gold was more than doubled in ten years' time; unless by much the larger part of this had been carried abroad in commerce, it would have inevitably depreciated the whole mass and disturbed the prices of everything; but by causing the new gold to impinge on the whole world's stock, the shock of the new production on the measure of Services, though perceptible, was reduced and deadened. The world's mass of the precious metals is comparatively torpid beneath the action of an accretion which would break down by its weight the metals of a single nation. Therefore, in conclusion on this topic, the Fluency of gold and silver, by which they pass easily in commerce to those places where their present value in exchange is greatest, or to such countries as India and China which have shown for centuries a wonderful power to absorb the metals of the West, and return as easily when the conditions are reversed, or when a larger use of paper-credits releases some portion of the coin, tends powerfully to make their general value uniform throughout the world, and consequently to make them the best medium of Exchange and the best measure of Services.

(e) On account of this Circumstance, that every general rise or fall in the value of gold and silver tends quickly to check itself. This principle, indeed, is applicable more or less to the value of all commodities, but owing to their quantity and durability and fluency pre-eminently applicable to the value of the precious metals. The check is double in either direction. First, let us suppose that the purchasing-power of an ounce of gold or silver be rising: then, production will be stimulated at all the mines, and the more stimulated as the rise is more; and this new and enlarged Supply will tend to check a farther rise, and unless the permanent Demand has been in the meantime intensified, to bring back the value to the old point; moreover, when there is a rise in the value of the coin, a less quantity is required to do the same amount of business; and the demand for gold which causes the rise tends to be checked by the rise itself, because a lessened quantity is needed for money-use in consequence of the rise. If the exchanges mediated by money have become permanently greater than before, then of course the Demand will continue greater than before, and the rise in value may be maintained.

And just so, mutatis mutandis, of a fall in the purchasing-power of the coin. The production of the metals is thereby slackened at the mines, and the lessened Supply tends naturally to enhance the value; and if the same amount of business is to be done as before, there is a stronger demand for money while the fall continues, and this new Demand helps also to bring back the old value. All this is in the interest of a steady value.

(f) On account, lastly, of this Circumstance, that a stronger Demand for Money is met in either one of two ways, by increasing the stock of coin, or by an increased rapidity of circulation of that on hand. It is exceedingly fortunate that a brisker demand for money, especially if it be but temporary, does not necessarily enlarge the Supply or alter the value, but only hurries round the existing money. Oscillations in the Demand are responded to by a slower or a more rapid circulation. This tends admirably to keep the value of the existing-stock of money steady within certain limits. Ignorance of this principle, or indifference to it, has caused mighty mischiefs in the United States. In General Grant's administration, for instance, the cry that a larger volume of money was needed "to move the crops" was disastrous in its results. The truth is, that the volume of Money in the United States was then, and has been ever since, by much too great, considering its character, as we shall see by and by. The multiplying and fructifying nature of Rapidity of Circulation has never been understood by our national financiers. When, however, enterprises are multiplying and Exchanges are being permanently increased in number and variety, then there must be a larger volume of money, and this larger amount is secured in the ways already indicated, with perhaps slight disturbances of value, but the temporary ebbs and flows of business should have no effect at all on the mass of money, but only on its movement, and its value consequently would scarcely be disturbed.

These Six grounds appear to be satisfactory and sufficient to account for the superior steadiness of the value of gold and silver, so far as their value is determined by considerations relating to these metals themselves. We now proceed to the two reasons additional to this why gold and silver constitute the best Money.

(2) The second general reason why gold and silver make the best money is found in the fact that Governments have little to say or do about the Value and Quantity and Mode of Circulation of such Money. In respect to Credit-Moneys, like our own Greenbacks and national Bank-Bills, the Government has everything to say. When we remember how governments are constituted, that they are only a transient Committee of the citizens for special purposes; of what sort of persons they commonly consist; the variety of subjects they are obliged to consider during short periods of office; the absence for the most part of expert knowledge among them; the enormous blunders they have made in the past in all financial measures; and that those who know the most about their action in the past and present in such matters have the least confidence in their ability to act wisely; the better we shall see the strength of the grounds of this second reason. In all essential respects money of gold and silver regulates itself. These metals came to be money and continue to be money in the main sense independent of the enactments of any Government. The people chose them: they choose them still. As we have seen, coins do not owe their value to the stamp of the Government, since the metal in them is worth within a trifle as much before coinage as after. Coinage publicly attests the quantity and quality of the metal in the coin, and that is all. Of the value of their coins governments say nothing. They can say nothing. That depends on men's judgments, and not on edicts at all. No law of the United States can add directly an appreciable fraction to the value of a gold dollar. The law makes it consist of 25⁴⁄₅ grains troy of gold ⁹⁄₁₀ fine, the mint so stamps and attests it, and thereafter it takes its own chance as to value.

Some Governments charge a little something for coining for their People, and some do not. What is charged is called seignorage. England coins gold for all comers at a seignorage of .032%, which is practically a free coinage. France charges for gold .216%; and by the law of 1874, the United States charge nothing for coining gold. It is left to the People to say how much money they will have coined; and, having received it back from the mint, they may do just what they please with it; they may hoard it, they may melt it, they may sell it at home in purchase, and they may export it in foreign trade, at will. Now, it is a great gain, an immense relief, to have a Money with which the Government has nothing to do except to mint it; a money that asks no favors, needs no puffing, never deceives anybody, knows how to take care of itself, is always respectable and everywhere respected.

(3) The last general reason why gold and silver make the best Money is to be found in their physical peculiarities, in accordance with which they are (a) uniform in quality, (b) conveniently portable, (c) divisible without loss, (d) easily impressible, and (e) always beautiful.

Pure gold and pure silver, no matter where they are mined, are exactly of the same quality all over the earth. Not so with iron and coal and copper. Gold is gold, and silver is silver. The gold mined to-day in California differs in no essential respect from the gold used by Solomon in the construction of the Temple, and the silver out of the Nevada mines is the same thing as the silver paid by Abraham for the cave of Machpelah. Nature with her wise finger has thus stamped them for the universal money; and a universal coinage, that is, coins of the same degree of fineness, and brought into easy numerical relations with each other in respect to weight, and current everywhere by virtue of universal confidence in them, though bearing the symbols preferred by the nation that mints them, is one of the dreams and hopes of economists, that will be realized in some