CURRENCY

(MONEY), that which is current or in circulation, as a medium of trade. The word is generally applied to coins and what is termed paper money, comprising bills i ued by authority, and to bank-notes or notes j ued by government. In the science of political economy it more properly connotes money in the sense of coin, bills of exchange, notes, or other paper substitutes, being no more than a means of economizing the amount of coin or bullion in any country. Money in this more restricted sense may be defined as the means by which two persons who do not deal together mutually as producers and consumers are enabled to enter into transactions. It is therefore only a means to an end, but is e ential to the subdivision of labor and services and the very organization of a civilized society. Some common measure of value must nece arily be adopted as an e ential part of the machinery of trade, or, in the language of economists, for the purpose of facilitating exchanges. Various substances have been used in different countries to serve as money, (e.g.), the Chinese formerly used cubes of tea and ancient cla ic nations used cattle. But as the precious metals, gold and silver, and in a le er degree copper, have been for long the universal substances selected for the purpose by reason of the po e ion of their qualities of intrinsic value, durability, susceptibility to division, and portability, it is unnece ary to consider any other kinds. Besides acting as a medium of exchange, money performs the no le e ential functions of serving as the measure of the value of all other substances and as a means for effecting credit. In the vast majority ~ of transactions no money, in the strict sense, is used to liquidate debts on either side. But the same result is obtained by negotiation of bills of exchange and notes through the intermediation of banks. These paper instruments are therefore a substitute for money. In most modern countries that form of promi ory note known as a bank-note is part of the ordinary C. Notes are made legal tender provided they are i ued by the state or by a state bank. When once in circulation such notes discharge debts as completely as current coin, in spite of fluctuations in value; an illustration of such ©. is afforded by the American ‘green-backs,’ which have in the past fluctuated in value by as much as 80 per cent., or more. Promi ory notes i ued by bankers may of course be refused as payment of a debt, and can only be circulated with the entire concurrence of those who receive them. Where notes are not convertible into money on demand, they are what is called ‘inconvertible C.’ The danger of inconvertible paper C. is that there is no real limit to the i ue, with the result that there may be a poor prospect of redeeming the notes, and such huge sums may therefore by their means be added to the C. as to exercise a prejudicial influence on the financial resources of a@ country and ultimately to injure the credit of a government. Advocates of a double standard insist upon the relative value of gold and silver being fixed by international agreement; but the fallacies underlying this proposal, which is commonly known as bi-metallism, may be refuted by consideration of the effect of the cost of production of the precious metals. See BIMETALLISM. The problem of stabilizing the currency in the countries of Continental Europe was one of the most serious obstacles in the way of reconstruction in the year following the World War. In Ru ia, Austria, and, to a large extent, in Germany, gold and silver currency disappeared from 1918 to 1923. Unitep States CurreNcy.— Prior to the i ue of coins by the government, sacks of flour, gold dust, tobacco, and wampum skins were used for money. This C. proving cumbrous, a private coinage was introduced which, although not legal tender, readily pa ed from hand to hand. Nearly all the states prior to the Federal Constitution increased the limited coinage i uing from Maryland and other of the more advanced states by the i ue of paper money. An attempt to provide a sound and uniform C. was made by the establishment of a U.S. Bank in 1791, which was given up in 1811, and of a second in 1816, which was closed in. 1832 owing to President Jackson’s opposition. The bi-metallic standard (the ‘dollar,’ without decision as to whether it was to be of gold or silver, having been made the unit) caused speculation in gold and silver coin, and in 1834 ' the ratio of coinage was changed from 15.1 to 16.1. Between 1837 and 1844 several state banks collapsed and Federal credit was so impaired that payment for land was ordered to be made in specie. Some of the states repudiated their public debts. Radical experiments ensued. An independent U.S. Treasury was established in 1846, and also a subTreasury. Treasury notes were made receivable for public debts, and selected cities were named as centers of deposit for government funds. In 1861 a panic occurred, specie payments being suspended, and in 1862 Secretary Chase i ued legal-tender notes, founded on specie support (greenbacks), though Owing to the rise of prices and depreciation of notes, specie payment of notes was later suspended. In 1863 the National Bank system was established, a national C. was provided for, secured by U.S. bonds, the banks being allowed to i ue C. up to 90 per cent. of government bonds deposited. In 1869 occurred: the worst panic in the history of U.S.A., President Grant declaring government bonds should be redeemed in gold, not C. In 1870-71 Refunding Acts provided that the bonds be paid in ‘coin’ and exempt from tax. In 1873, after serious results of speculation in gold, the gold standard was tentatively a erted, but between 1876 and 1890 the Bland Bill, providing for the free coinage of silver dollars, loosed a flood of over 300 millions of silver dollars on the country which banks refused to accept, as they also did the silver dollar certificates i ued in 1886. To relieve the pre ure of silver the Secretary of the Treasury was empowered to purchase them and store them, i uing Treasury notes against them. In 1893, the fall in the value of silver was accélerated by the establishment of the gold standard in India, and after a period of depre ion a@ serious political agitation led by W. J. Bryan arose for the re-establishment of a bi-metallic standard. In 1900 the Currency Act was pa ed, definitely making gold the standard, and creating more favorable conditions for national banks. The 1907 panic was followed in 1908 by the Aldrich Currency Bill, allowing banks to i ue ©. on security of other than government bonds. The Owen-Gla Bill in 1913 (the Federal Reserve Act) established Federal Reserve Banks in twelve cities to afford means of rediscounting commercial paper and establishing a more effective supervision of banking. By this law the government is empowered to i ue notes to the value of three times the value of the ‘lawful money’ held by these banks—on a 5 per cent. gold reserve. See Banks, UniTep STATES AMERICAN. national a emblies for establishing uniform media of exchange. First met in Paris, 1867, at time of Exhibition.