specified amount of the standard commodity or redeemable in an amount of some other commodity exactly equivalent to this in value. The difficulty connected with the redemption of the various elements of the medium in other commodities than the standard is the fact that the quantity of such commodities receivable in payment for a ten-dollar note or a dollar or fifty-cent coin would vary with the price of the commodities. Suppose, for example, that all elements of the medium were made redeemable in silver, gold being the standard of value. When silver was worth a dollar an ounce it would take ten ounces to pay a tendollar note, and when its price was fifty cents an ounce it would take twenty ounces to redeem the same note. It would always be necessary to determine the price of silver in gold before the payment of the note or the redemption of the coins could be accomplished.*

When all forms of currency are made redeemable in the standard commodity, on the other hand, the quantity payable for a ten-dollar note is unchangeable, since ten dollars means ten times the unit of value called the dollar, and this unit is defined by law to be a certain number of grains of gold. If, then, the standard commodity be put up in coins of convenient sizes and denominations, it constitutes as nearly perfect a material for redemption as it is possible to obtain. It follows that a good standard of value must be a commodity which possesses the qualities needed in the manufacture of coins, such as durability, divisibility, homogeneity, malleability, etc.

* The student must not allow himself to be deceived by indirect systems of redemption. We may make notes redeemable in silver dollars at their face value without reference to their intrinsic value, and no difficulty will be experienced provided the silver dollars are themselves directly or indirectly redeemable in gold. Under such a system the notes are really redeemable in gold, but by an indirect or roundabout process.

C. Capacity to be easily and cheaply hoarded and transported. The extensive use of the standard commodity as material for redemption renders important its capacity to be easily and cheaply hoarded and transported. The commodity used for the payment of notes and the redemption of coins must be frequently transported between different countries and different parts of the same country, and the question of expense of transportation thus becomes an important matter. If the redemption material is bulky and of low value, the expense of transportation will be high; if it is very valuable, that is, possessed of a good deal of value in small bulk, these expenses will be much lower, indeed may be relatively insignificant. In subsequent chapters we shall explain the necessity of paying balances between banks in the same and different countries in the standard commodity, and consequently the need many banks, and sometimes the national treasury, feel for keeping large amounts of this commodity on hand in their vaults. A bulky commodity is much more expensive to store than one of high value. It thus becomes evident that of two commodities otherwise equally well fitted to serve as a standard of value, the more valuable one has the advantage in the particulars just described. Great financial institutions which are obliged to handle large quantities of the standard commodity possess great influence in the determination of what that commodity shall be, and, for the reasons mentioned, among others, are quite certain to favor the more valuable commodity.

5. The history of standards and units of value.-The number and variety of commodities which at various times have served as standards are great. Various kinds of grain, rice, cattle, salt, tobacco, skins of animals, cacao, and various metals, of which the most important are lead, iron, copper, silver, and gold may be mentioned. Of these, gold

has best endured the various tests, and is now the standard in all the great commercial nations. Since commerce has been playing an important rôle in the affairs of nations, silver has been its only competitor. These two metals are better fitted for the work of a standard in all the respects we have mentioned than any of the other commodities. On account of their durability, divisibility, adaptability to the coiner's art, and high value, they are preeminently fitted for service as a medium of exchange, and their great beauty and consequent adaptability to purposes of ornamentation made them objects of universal desire very early in the history of civilization. Custom and law have also long favored them. The victory of gold over silver in comparatively recent times is due chiefly to its superior value and its consequent extended use in international exchanges and in the payment of balances between banks. Legislation has also favored it, but largely for this reason. It is equally as good as silver in all other respects, and much better in this very important one.

Of secondary standards history presents us with numerous examples. During the years 1790-1796 France had such a standard in the depreciated government notes which displaced all other forms of money and which were issued by the Revolutionary governments as a means of meeting the extraordinary expenses of the time. During the years 1793-1821 the notes of the Bank of England, not being redeemable on demand in coin, depreciated and became a secondary standard. So comparatively slight was the depreciation of the notes during the greater part of the period, and so gradual their introduction as a secondary standard, that many people believed them to constitute the primary standard, and a number of theories in support of this contention gained currency. During our Revolutionary and Civil wars depreciated government notes came into general

circulation as money and served as secondary standards. In all of these instances silver or gold continued as the primary standard, and prices were commonly quoted in these metals as well as in the depreciated paper.

The history of units of value is too complicated and in many cases too obscure to warrant any extended account here. The English pound sterling has probably had the longest continuous history of any of the units of value employed by modern nations. It dates back at least to the later Saxon period, and probably still farther. The name pound, however, has been the only really permanent element. For many centuries it consisted of silver, but the amounts which it represented were repeatedly diminished until from a pound's weight it ultimately fell to a few ounces. It was not represented in the form of a coin until modern times. In 1816 it was changed to gold and has remained unaltered to the present day. In France the same system of reckoning as in England, with the French names livre, sou, and denier instead of pound, shilling, and penny, was employed until 1795, when the modern franc was adopted as the unit. As in England, the amounts of metal represented by these names constantly diminished, and they were even less frequently represented in coins. In Germany the same system with the names pfund, schilling, and pfennig was originally employed, but a number of independent and widely different systems were developed in the free cities and independent principalities of the Middle Ages, and it was not until 1873 that the mark, consisting of .398247 of a gramme of gold, became the unit of the whole German Empire. In the United States the dollar has been the name of the unit since colonial times. Up to the establishment of our own coinage system it meant the Spanish milled dollar, but the act of 1792 defined it in terms both of silver and of gold, the ratio between the two being reckoned

as 15 to 1. Its content in pure gold at that time was fixed at 24.75 grains, but in 1834 it was diminished to 23.22 grains, and has remained unchanged since that date.

It is by no means necessary that the unit should be represented in a coin, although it is desirable, as we have shown, that some coins should be made from the standard commodity. For example, though gold is the standard of value in this country and our unit, the dollar, is defined in the statutes as 23.22 grains of pure gold, we do not coin a gold dollar as its representative for the reason that it would be too small for convenient use. Our dollar coin is, therefore, made of silver. The same is true of the present French and German units. While the franc and the mark are both defined as a certain number of grains of gold, the coins designated by these names are, for convenience's sake, made of silver. The English pound sterling, being a very large unit, is represented in a gold coin called the sovereign, which is of convenient weight and size for purposes of general circulation.

6. The importance of stability of value in the standard.The vital part which the standard of value plays in the determination of prices suggests the importance of stability of value in the commodity which is to perform this function. Fluctuations in prices ought, if possible, to correspond exactly with fluctuations in the value of commodities. If we could be perfectly sure that every change in the price of a commodity represents and exactly measures a change in the relation between its demand and supply, producers would be able to determine with a considerable degree of accuracy the results of prospective increases or decreases in the supply of their product, and would thus secure a sound basis for the management of their concerns. Under these circumstances, too, political economists and sociologists would be able accurately to translate price statistics into