population increased, and our commodities increased also-in other words, as our buyers and sellers increased-money, the medium of exchange between man and man, might increase in due proportion. People sometimes ask me why the law which governs or which ought to govern the Currency, cannot be discovered? It is discovered. "Supply and demand," I say, "is the law of the Currency." As men increase, more food is required, and more clothes are required; and if left to itself, the supply will increase with the demand. So it is with Money. Make Paper Money as safe as you please make it as safe and secure as gold itself; and this we can prove can be done— and then leave the trade in money free. Leave it to the general, the universal law of trade, viz., Supply and Demand (hear, hear).

I say that experience fully justifies the expectations of an improved state of things resulting from an alteration of the Currency Laws. I say that the Paper Money System, which enabled this country to prosper in spite of war, would produce tenfold advantages in a time. of peace (hear). Observe, I do not say that Paper Money would do everything. I do not say, for instance, that it would enable a farmer to prosper without skill, labour, judgment, and a fair amount of capital (hear). I do not say that it would supply the place of science and of knowledge in the direction of a man's energies. I know that under any financial system, vice, improvidence, and ignorance will bear their pernicious fruits. But I do say that it would secure to labour its just reward; that it would afford to every man of integrity, talent, and energy, a fair opportunity of improving his condition; that it would prevent the attempts which are made for raising the condition of the people from being counteracted by the frequent recurrence of those periods of severe distress and privation in which their moral condition inevitably deteriorates (cheers). I say that the Paper Money System which enabled this country to lend to Government 600 millions, would enable the country to pay off the debt, and thus cause a reduction of nearly 30 millions of taxes. I believe that this country might then advance to a greater height of happiness and prosperity than ever-that instead of disunion and ill-will, we might see all classes flourishing, and contributing to each other's prosperity; that the well-being of the poor would furnish the best security for the possessions of the rich; that men would learn to prize the institutions under which they live happily; and that England would become the instrument, in the hand of Providence, of civilizing, elevating, and Christianizing the whole world.

89. RECENT ARGUMENTS FOR PAPER MONEY1

1. I am not stuck on silver and gold as circulating mediums. A piece of paper is my ideal. Geologists have things so fine that they can estimate the quantities of silver and gold in the mountains, and the government should issue silver certificates to an amount equivalent to that estimate. It would be far safer, as it would be easy for a foreign nation to capture the coin in the treasury vaults at Washington; but the mountains they could not remove, even by all the faith they could muster.

2. We (speaking for the Farmers' Alliance) believe in the people making their own money; we believe in the Government, which is simply the agent of the people, issuing their money directly to them without going around Robin Hood's barn to find them.

3. If the people had twice as much currency in their pockets as now, their prosperity would be greatly increased.

4. I am in favor of more currency. We haven't enough currency per capita to do the business of the country. If we cannot increase the currency, I think somebody ought to issue more collateral. There is usually enough money if a man has the collateral.

5. My monetary system eliminates from money both the element of intrinsic value and the power to limit or control the value of things of use. I propose that the Government only shall issue money for the public use. In order to do this, I would have it issue immediately 500,000,000 new treasury notes of the denomination of one dollar each. So much of this amount as was necessary the Government should loan to the people; 10 per cent of each loan to be paid back each year; 9 per cent to be applied to the extinction of the principal, I per cent covering the interest. In that way it would be possible to redeem every mortgaged farm in the land within fifteen years.

6. Banks should not be allowed to issue notes. These should be printed and put out by the Government. The tariff should be reduced till there is a deficit in the treasury, and then greenbacks should be printed and issued to pay all claimants. These should not be redeemable in metal money. Each bill should bear the legend, "One dollar, receivable for all dues and debts." This would make it receivable for all taxes and import duties, and a legal tender. This would keep it perpetually at par.

7. Tens of thousands of our farmers have been unfortunate, and can never get out of debt without special relief. I would enact a law 'Adapted from Century Magazine, XLII (1891), 310-11.

stopping the big interest they have agreed to pay, and substituting a debt at 1 per cent interest. It would be done in thi. way: Suppose I owe you $5,000 and accumulated interest on my farm. This new law would direct you to add the interest to the principal, and go to the treasury of my county and file the mortgage and an abstract of the property, and get a check on the nearest bank for the entire debt. That would satisfy you. Then the county treasurer makes a draft on the United States treasurer for the money, and gets it in crisp new bills. That satisfies him. The United States treasurer accepts the mortgage on the farm-providing it is worth the amount of the mortgage and sends word to me when the 1 per cent interest is due. Is not that simple? It is the first news I have had of the transfer of the debt. That ought to suit everybody.

B. History of Government Paper Money

(1) SOME EARLY EXPERIENCES

90. THE FRENCH ASSIGNATS AND MANDATS1

One of the first and most serious troubles which confronted the republic established by the French Revolution of 1789 was the scarcity of money. This was due to many causes, but chiefly, says Thiers, to the "want of confidence occasioned by the disturbances." The same authority adds the following general truth about circulation, which is applicable to all countries and in all times: "Specie is apparent by the circulation. When confidence prevails, the activity of exchange is extreme; money moves about rapidly, is seen everywhere, and is believed to be more considerable because it is more serviceable; but when political commotions create alarm, capital languishes, specie moves slowly; it is frequently hoarded, and complaints are unjustly made of its absence." To increase the supply of circulating medium it was proposed that the National Assembly issue paper money based on the Church lands which had been confiscated by the Government. These lands were yielding no revenue, but were a heavy burden. The money, to be called assignats, was really a form of titles to the confiscated lands; for it was receivable in payment for them, and was designed, in addition to furnishing revenue to the Government, to bring about a distribution of those lands among the people. The

1 Adapted from Century Magazine, XLIV (1892), 791-93.

debates of the National Assembly upon the proposition showed that John Law's experiment had not been entirely forgotten. There was strong opposition, but it was overcome by the usual arguments in favor of cheap money. "Paper money," said one of the advocates of the assignats, "under a despotism is dangerous; it favors corruption: but in a nation constitutionally governed, which takes care of its own notes, which determines their number and use, that danger no longer exists."

These curious arguments carried the day in the National Assembly, and a first issue of assignats, to the value of 400,000,000 francs, was issued in December, 1789. They bore interest, and were made payable at sight, but no interest was ever paid, and subsequent issues had no interest provision. The first issue represented about one-fifth of the total value of the confiscated lands.

Yet with this solid basis of value upon which to rest, the assignats never circulated at par. A few months after the first issue demands began to be made for a second issue, as is invariably the case in all experiments of this kind. Talleyrand opposed the second issue in a speech of great ability, many of whose passages have passed into economic literature as model statements of fundamental monetary principles. "The assignat," he said, "considered as a title of credit, has a positive and material value; this value of the assignat is precisely the same as that of the land which it represents, but still it must be admitted, above all, that never will any national paper be upon a par with the metals; never will the supplementary sign of the first representative sign of wealth have the exact value of its model; the very title proves want, and want spreads alarm and distrust around it." And again: "You can arrange it so that people shall be forced to take a thousand francs in paper for a thousand francs in specie, but you never can arrange it so that the people shall be obliged to give a thousand francs in specie for a thousand francs in paper." Still again: "Assignat money, however safe, however solid it may be, is an abstraction of paper money; it is consequently but the free or forced sign, not of wealth, but merely of credit." In answer to the arguments of Talleyrand, the most effective, because most "taking," argument, if argument it can be called, was the following by Mirabeau: "It is in vain to compare assignats, secured on the solid basis of these domains, to an ordinary paper currency possessing a forced circulation. They represent real property, the most secure of all possessions, the lard on which we tread."

This resounding phrase of Mirabeau carried the day in the National Assembly, and in September, 1790, a second issue of assignats, to the value of 800,000,000 francs, bearing no interest, was ordered.

The decree for this second issue contained a pledge that in no case should the amount of assignats exceed twelve hundred millions. But the nation was drunk with its own stimulant, and pledges were of no value. In June, 1791, a third issue of 600,000,000 was ordered. This was followed soon afterward by a fourth issue of 300,000,000, and by a new pledge that the total amount should never be allowed to exceed sixteen hundred millions. But this pledge, like two others that had been made before it, was broken as soon as a demand for more issues became irresistible. Fresh issues followed one another in rapid succession in 1792, and at the close of that year an official statement was put forth that a total of thirty-four hundred millions had been issued, of which six hundred millions had been destroyed, leaving twenty-eight hundred millions in circulation.

Specie had disappeared from circulation soon after the second issue, and the value of the assignats began to go steadily and rapidly downward. Business and industry soon felt the effects, and the inevitable collapse followed. Ex-President Andrew D. White, whose tract, Paper Money Inflation in France, is the most admirable and complete statement of this experience which has been published, says of the situation at this stage: "What the bigotry of Louis XIV, and the shiftlessness of Louis XV, could not do in nearly a century, was accomplished by this tampering with the currency in a few months. Everything that tariffs and custom-houses could do was done. Still the great manufactories of Normandy were closed; those of the rest of the kingdom speedily followed, and vast numbers of workmen, in all parts of the country, were thrown out of employment.

"In the spring of 1791 no one knew whether a piece of paper money, representing 100 francs, would, a month later, have a purchasing power of 100 francs, or 90 francs, or 80, or 60. The result was that capitalists declined to embark their means in business. Enterprise received a mortal blow. Demand for labor was still further diminished. The business of France dwindled into a mere living from hand to mouth. This state of things, too, while it bore heavily against the interests of the moneyed classes, was still more ruinous to those in more moderate, and most of all to those in straitened, circumstances. With the masses of the people the purchase of every article of supply became a speculation-a speculation in which the professional specu