say that after the banks, how many soever they may be, find that they have more than they need to keep the amount of paper thus found to be necessary afloat, they will sell it, and when they sell it, it will go into the melter's pot, to be converted into jewelry and other articles of merchandise. To keep it is only to lose the use of it. It would be like the merchant's keeping in use more capital than his business needs.

If, on the other hand, the banks find that they have not enough to "float" the amount of circulation needed, more will be coined to supply this demand. But no more will be coined than is needed; it would be simply a waste of capital, using more than is needed for the maximum rate of profit on the business in which it is employed.

Hold bankers to the necessity of specie payments on demand, and allow them to issue paper at will, and they will soon determine how much currency is needed, and how much coin is required to serve as a basis for that currency. But the will and choice of man cannot much affect it. Legislation cannot set bounds to it. And no publicist, doctrinaire, or mere speculator, can determine it on theoretical grounds.

238. Governments cannot control the amount.

Even government itself cannot force upon a peo

ple much more of a circulating medium than it needs. When the late war broke out we had about two hundred and fifteen millions of dollars in paper in circulation. With the breaking out of the war came an increase of the paper, and a suspension of specie payments; the war closed with about seven hundred millions of paper, or about three times as much as we had at the beginning of the war. But the war itself was a great "business," and made occasion for an immense increase in the circulating medium. At its close so much money was not needed, and rather than lie idle it gave a stimulus to other enterprises and kinds of business, until the business was overdone, or at least much was undertaken which the wants and conditions of the country did not require and would not justify. Hence failures and distrust. And now the paper is hoarded up, and in a sense it is scarce. Business men dare not expand, and capitalists will not lend. They had rather keep their money without interest than risk the loss of the principal by insecure invest

ments.

The present condition of our country is both an illustration and a proof of this. The amount of paper actually in circulation-that is, out of the banks doing service as a circulating medium—on the 31st of December, 1874, was $332,043,937. Gold was at that time, as usual, about $1.15. Reducing

the paper to par, or eighty-seven per cent., and making the reduction, this amount was about equal to $290,500,000 of paper at par value, or about $75,000,000 more than just before the war. And this, notwithstanding the amount actually printed and executed, and technically in circulation was, including fractional currency, over $750,000,000.

And, if we bear in mind the fact that nearly all prices are higher than before the war-the average being, evidently, more than the premium on gold ---I think we shall see that the amount of paper money that the country really needs, nay, the amount that even government itself can keep out at the utmost, is only about the same as there was before the war of 1860.

239.

How gold and silver affect the amount.

Gold and silver affect the amount of currencyso long as it is kept at par-only as other commodities having exchangeable value, affect it. The amount of property in any community, and the amount of exchanges are two important elements in determining the amount of currency, and gold and silver as property, exert their appropriate influ

ence.

240. Why no more is coined.

But the amount of gold and silver that will be coined, will have no constant relation to the amount that there is in the market-the demand for them for other purposes, and their intrinsic value for those purposes is so great, that no increase of their quantity which the nature of the case allows us to expect, can greatly diminish their price, whatever may become their exchangeable value.

Hence no more of them will ever be coined than are needed to enable banks "to float," as the expression is, the amount of paper that the business wants of the community demand, whatever may be the increase in the quantity that the various processes of mining may bring into the markets of the world.

If, however, there should be a sudden demand for currency, or the breaking out of a war, there will of a necessity be a demand for more currency than this amount of coin can carry at par: this will occasion the issue of more paper, and the suspension, for a time at least, of specie payments. Or, if for any other reasons, banks are relieved from the necessity of redeeming their paper at par on demand, they will of course increase their loans and discounts, and most likely their circulation also. And if compelled, and whenever they are compelled to return to specie

payments, they will reduce their circulation, but they cannot materially increase the amount of specie in the world by diverting more of the precious metals from other uses, and converting them into coin.

When paper is below par, except in the emergencies I have spoken of, it is not because there is not so much specie as is needed, but it is rather because there is more paper than there ought to be.

241. Effect of inconvertible paper.

But what difference does it make? Why is it not as well that paper should be below par, as to have gold at par and paper redeemable?

Gold and silver are, and ever will be, the acknowledged standard of value the world over. It may make no difference in the mere local exchange of known products, for prices will adapt themselves to circumstances. But the moment we enter into the commerce of the world we feel the difference. When paper is cheap and at a discount, as with us, everything else bears an inflated nominal value; prices are fluctuating and uncertain; successful speculators make large and rapid fortunes, and everybody else suffers in consequence.