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( Originally Published 1902 )
Francis A. Walker, a distinguished authority, defines money as "that which passes freely from hand to hand throughout the community in final discharge of debts and full payment for commodities, being accepted equally without reference to the character or credit of the person who offers it and without the intention of the person who receives it to consume it or enjoy it or apply it to any other use than in turn to tender it to others in discharge of debts or payment for commodities." Currency is the name given to the legal medium of exchange in every country.
Various articles have passed current as money in various communities at different times. Tobacco was used as money by the early Virginia settlers ; the skins of furbearing animals served the same purpose in some parts of this country at a much later date. For ages gold and silver have been the first choice of all nations as the standards of value. Some one has truly said, "Abraham, 1900 years before Christ, weighed out uncoined silver in payment for land, and 1900 years after Christ gold-dust passed current as money among the 'fortyniners' in California." The standard of monetary value of the civilized rations of the world is a fixed amount of gold or of silver, which, taken together, is called bullion.
Gold and Silver Money.
In the United States the dollar is the unit of value, and is equal to 23.22 grains of pure gold. Therefore, when we say that an article is worth so many dollars we mean it is worth so many times as much as 23.22 grains of pure gold.
The gold coins of the United States actually contain the gold in the proportion of 90o parts gold and 100 parts alloy, and are the only form of money actually worth its face value as a commodity; therefore gold is the only money that will be accepted in a foreign country at par. The gold coins of the United States are the 20-dollar piece or double eagle, the 10-dollar piece or eagle, the 5-dollar piece or half eagle, the 3-dollar piece, the z I z -dollar piece or quarter eagle, and the gold dollar, which has not been coined since 1890 and which is now not much in circulation but considered rare.
An estimate has been made showing there is about $7,000,000,000 in gold in use in the world, and this, if put into one place, would fill a room 64 feet long, 50 feet wide, and 20 feet high. In the banks and treasuries gold coin are piled in bags each containing $5000 and weighing 22 pounds.
The silver dollar weighs 412Y2 grains, of which 37 1 1/4 grains is pure silver and 41.25 grains alloy. This amount of pure silver was at one time equal in value with 23.22 grains of pure gold. Of late years it has been much cheaper, and its relative value to gold is no longer 16 to I, being determined by commercial conditions.
The half dollar, quarter dollar and dime, as well as the 5-cent nickel and the copper cent, contain still smaller proportions of silver, and are intended only for circulation in this country as representatives of the fractional parts of a dollar. They are legal tender for debts not exceeding five dollars in amount.
The standard of value are the gold coins, which stand upon their own merits as actually worth what they represent on their face. All other coins only represent their face value, being accepted throughout the land because they are by law exchangeable for the amounts for which they stand.
There is another medium of exchange not having any value in itself, but representing the credit of the government. It is, in fact, a form of " promise to pay," and for that reason it is often called "fiat money" or "paper money." Paper money is largely in use in this country, and is represented by four different kinds. The first and second are called respectively Gold Certificates and Silver Certificates. These are issued by the Treasury, and represent on their face the number of gold or silver dollars held in the Treasury of the United States payable on demand to bearer. These certificates are popular on account of their convenience, and are always worth par. The third kind is the Treasury note or greenback, which is a promise to pay the bearer on demand (therefore a demand note) without interest. There are now in circulation $300,000,000 of Treasury notes. This was called into existence during the Civil War, and for a time was not worth par in gold. Now it is worth par, as the credit of the government insures their payment.
The fourth class is the National Rank note, issued by banks holding a charter from the United States, and whose circula tion is secured by United State!; bonds deposited with the Treasurer of the United States. The payment of these notes is guaranteed by the United States Government.
Gold certificates are issued in denominations of $20 and upwards.
The Silver certificates in $1, $2, $5 and upwards, to $10,000
The Treasury notes in $1, $2, etc., to $10,000.
The National Bank notes are issued in denominations of $5 and upwards.
Money of the British Empire.
Great Britain in actual circulation has the gold sovereign (value $4.8665) and half-sovereign; the silver crown (value $1.087), halfcrown, shilling (value $0.2I7), six-pence, four-pence, and three-pence. It has a paper currency, which includes the notes of the Bank of England, the smallest denomination of which is five pounds ; the notes of the Scotch and Irish banks, the smallest denomination of which is one pound. Certain joint stock and private banks also issue notes.
CANADA has a currency similar in form to that of the United States. But she has no gold coinage of her own. She uses the gold coinage of the United States and Great Britain, and they are legal tender. The silver coins are similar to those of the United States except that there are no silver dollars and no silver five-cent pieces. There are notes issued under the laws of the Dominion of the denominations of $I, $2, and $4, and are redeemable in gold on demand. The chartered banks issue bank notes in denominations not smaller than $5. Unlike the laws in the United States, no special security in the way of deposit of bonds is required, but the notes, in case of the bank's insolvency, become a preferred claim against all assets of the bank, and include the double liability of the stockholders. The total issue rarely exceeds sixty per cent. of the paid-up capital of the bank, and in no case must it exceed one hundred per cent.
AUSTRALIA, has the same monetary system as that of Great Britain.
BRITISH INDIA has a silver standard unit, which is the rupee, whose value is $0.444. It has gold coin of five, ten, fif teen, and twenty rupees, respectively. The government notes, ranging in value from five to ten thousand rupees, are issued and secured by deposits of gold and silver. The money in circulation in India is said to exceed one billion dollars.
Money in Foreign Lands.
GERMANY has a gold standard, and the mark, whose value is $0.208, is the unit of value. The 5-mark piece is the smallest gold coin. The 5-mark, 2-mark, 1-mark, 1/2-mark, and 1/5-mark pieces are the silver coins. Germany has a paper money which includes the imperial treasury notes, and the bank notes of the Reichsbank, a corporation owned by individual shareholders, but controlled by the government. The issue of notes of less than 100 marks in value is prohibited.
AUSTRIA-HUNGARY has recently established a monetary system making as the unit the gold crown, whose value is $0.203. The 10-crown and 20-crown pieces are in gold, and the crown and a half-crown pieces are in silver. However, there is very little metallic money in circulation. There is a paper currency issued by the AustroHungarian Bank in denominations of 10, 100, and 1,000 florins, and by the treasury in smaller denominations-this money is irredeemable. The value of the florin is two crowns, or about forty cents.
THE LATIN Union, including France, Belgium, Italy, Switzerland, and Greece, has now a single gold standard, of which the franc, whose value is $0.1929, or nearly twenty cents, is the unit of value. The smallest gold coin is a 5-franc piece, equivalent to a dollar; in silver are the franc, the 2-franc, the half-franc, and the 20-centimes. The latter is one-fifth of a franc, or four cents. The coins of one country of the Union are received at par in all the others. France and Belgium have state banks which issue bank notes. In Belgium, individuals and associations are also free to issue bank notes on their own responsibility. Italy has no state bank, but there are in the country six banks which are authorized to issue notes payable on demand. The smallest denomination is 50-lire, in value, about 19 or 20 cents. Switzerland uses the coin of the Latin Union, and also, has a state bank. Its central office is at Berne, and there are branches throughout the country.
IN GREECE there are three banks authorized to issue notes. But gold and silver reserves are so small that for many years gold has been at a premium.
IN SPAIN the silver peseta, equivalent to the franc, or twenty cents in our money, is the monetary unit. The gold and silver coins are the same in Spain as the other countries of the Latin Union. The Bank of Spain is the only bank of issue in the country. It is a private institution, with certain government restrictions. The smallest note of issue has the value of 25-pesetas, in our money equal to nearly five dollars.
IN MEXICO there is a silver standard. The unit is the Mexican dollar, called el peso; and, under the name of piaster, it circulates in several countries in Central and South America, Asia, and Africa. Mexico has also a few gold coins in circulation, the smallest is equivalent to our gold dollar in value.
Banks and Banking.
Banks, both national and private, offer another means of exchange. Any one having money deposited in a bank to his credit may give to a third party an order on the bank for any number of dollars and cents not exceeding the full amount of his credit. These orders on the banks are called Bank Checks They differ from paper money, as their acceptance depends upon the credit of the one who draws (or signs) the check. It is usually made payable " to the order of" some one. The party presenting the check must be known in some way to the bank authorities.
The use of checks adds to the circulating medium, and is a benefit to the community at large. It leaves actual money for minor transactions. They are in far more extensive use than any other form of money order. Checks often pass from hand to hand as money before they reach the bank, and then are seldom cashedusually deposited. Over a hundred million dollars of checks daily in New York alone are not cashed at the paying teller's window, but pass in " exchanges " through the Clearing House, which is an association of the banks of a large city for the purpose of conveniently and quickly transferring checks they hold for collection. This saves an immense amount of time and labor, which would otherwise be spent in handling and counting the money, and also lessens the chances for mistakes.