Consequently the token coins are made legal tender for this purpose. On the other hand, a payment of a debt in large amounts of overvalued coins, these being of small denominations and hence heavy and cumbrous in large sums, would be a serious inconvenience. If, therefore, the legal-tender quality conferred on token coins were unlimited, the power might be abused by a captious debtor, who might insist on making some large payments in these coins for the purpose of annoying the creditor. Minor and subsidiary coins have usually been made a legal tender, therefore, only to limited amounts. In 1853 subsidiary silver coins, which hitherto had had full legal-tender power, were made payable for debts only in sums not exceeding five dollars. In 1879 this limit was raised to ten dollars.

A person obliged to make remittances abroad might have been paid here in overvalued token coins, which, not being worth in foreign countries more than the bullion they contained, would be short payment and could not be used abroad. Unless he could exchange token coins for full-valued standard coins which would be equally good abroad as well as at home, he would find business decidedly venturesome. Consequently the necessity for the fourth law becomes at once apparent. Indeed, redemption is a fundamental necessity for a system of token coins. Inasmuch as no government can ever foretell the amount which the community will absorb, it must be ready freely to provide token coins in exchange for standard coins. whenever needed; and to prevent an excess from clogging the tills of merchants it must be equally ready to pay out standard coins in exchange for token coins whenever the latter are sent in to the Treasury. Thus free exchange of token coins for gold and of gold for token coins is the only proper method by which an excess in quantity is automatically prevented. If wanted, they are obtainable; if redundant, they are inevitably withdrawn. Without a method of redemption, direct or indirect, token or debased coins would certainly go to a discount if issued to excess, because, not being received equally with standard coins, a discrimination against them would manifest itself. Not having in themselves a value equal to their face value, they must borrow the deficiency only from the process by which they can be exchanged at par with full-valued coins.

In addition to the removal of excessive issues from the circulation, redemption of token coins performs an important function in the distribution and redistribution of such coins as are needed. Without redemption, nickels, for example, would accumulate in large amounts

on the hands of street-car companies; for it would be inconvenient or impossible for those companies to find people who might want small change, and it would be difficult for them to get rid of large accumulations at full value. But the system of redemption offers the means whereby those who have too much can dispose of their surplus and those who have not enough can get more. The Treasury thus acts as a distributor of the supply of token coins.

Lastly, the community will need only a limited amount of token coins for small change. What this sum will be can be determined only by experience. No one can foretell how many dimes or quarters will be needed in the daily transactions in which money is necessarily used. There must, therefore, be freedom in issuing all that is wanted. Safety is to be found in a prompt redemption of those which the public do not need. In small denominations a very large number of pieces may be required, but the total value may be inconsiderable; for larger denominations of no greater number of pieces the total sum may be quite important. The inconvenience of not having money for large and small change is so great that if the government did not provide it in a form that will circulate (as before 1853 and again in July, 1862) some substitutes are necessarily provided by merchants. The demand for token coins is, therefore, up to a certain limit, strong and steady, and if the issues are within this limit there will be no net redemptions. The coins presented by one individual or class will be withdrawn by others for use in the channels where they are wanted.

80. THE ACT OF 1853 AND THE STANDARD QUESTION' BY AUGUST RODEN

No provision was made in the act of 1853 to secure the circulation of a silver dollar. There was no need of one. In 1849, when it had so rapidly disappeared, its place had been supplied by the coinage of a gold dollar, and by 1853 over 10,000,000 had been coined, which, together with the great number of $5 and $2.50 gold pieces previously in circulation, provided a plentiful currency for transactions in which coins of this size were needed, while the use of bank notes of $1 and $2 was common. The 371.25 grains of pure silver in the standard silver dollar, being worth more as bullion than as money, it was apparent that this law would take away the full legal-tender quality of all silver in circulation, leaving gold as the sole standard.

I

Adapted from "The Dollar of Our Daddies," Sound Currency, IV (1897), No. 13, pp. 5-14.

No secret was made of this fact, for Congressman C. S. Dunham, of Indiana, who secured the passage of the bill in the House, relied mostly on this feature for success. In speaking against an objectionable feature of the Hunter Senate bill and in reference to the silver coins he said: "This, however, would make them a standard in all small transactions; we would thereby still continue the double standard of gold and silver, a thing which the committee desire to obviate. They desire to have the standard currency of gold only, and that these silver coins shall be entirely subservient to it and that they shall be used rather as tokens than as standard currency. We intend to do what the best writers on political economy have approved; what experience has demonstrated to be best, and what the committee believe to be necessary and proper-to make but one standard and to make all others subservient to it. We mean to make gold the standard coin, and to make these silver coins applicable and convenient, not for large payments, but for small transactions." There are other statements of a similar import. This bill with slight alterations passed ten days later, and the nation for the first time now possessed what Hamilton so earnestly strove to secure for it, and what every Secretary of the Treasury and every Congress had likewise striven for, viz., the concurrent use of both gold and silver as money by the American people. The results of that act were hailed with satisfaction and delight by Congress and the country.

It was here that the battle of the standards in America was fought and decided. The law of 1853 took away the free and unlimited coining privilege of all silver that was expected to serve as money, and to all intent and effect established gold as the only full money of the Nation. It is true that the provisions for the continued coinage of the old silver dollar were not repealed, nor was its actual coinage stopped, or intended to be stopped. When coined, however, it was never from 1853 to 1873 worth less than $1.03 and sometimes as much as $1.07, and, such being the case, there was no danger of its threatening the gold standard by a displacement of the gold currency. It was evident, however, that should silver cheapen in value so that the silver in the silver dollar should be worth less than the gold in the gold dollar (which was not considered impossible, though improbable) the gold standard would be overthrown. Why, then, it will be asked, if it was so clearly the intent to establish the gold standard in 1853, was not this menace of a possible return to silver removed by abolishing the provisions for the apparently useless silver dollar?

Though this may appear perplexir.; to many at the present time, the reason was very well understood in 1853. Though silver dollars ceased to circulate as early as 1849, they did not cease to be coined. In fact, nearly 6,000,000 of them were coined between 1853 and 1873. But they were not intended to be used as money by those who brought the bullion to the mint to have it stamped into dollars. They were used exclusively for commerce with China, Japan, and India, where it was more advantageous to use silver than gold in the purchase of commodities for importation into the United States, because of the relatively high valuation of silver in those countries. The nations of the East, recognizing the stamp of the United States as a guarantee of the weight and fineness of the silver in the dollar, accepted such silver more readily than they would in the form of uncoined bullion. To substantiate this assertion that this anomaly of retaining provisions for the free and unlimited coinage of the silver dollar, while virtually establishing the gold standard, was only to foster and protect American commercial interests in the East, I will quote some of the opinions and recommendations of directors of the Mint and secretaries of the Treasury made previous to 1873, at which time the privilege of unlimited coinage of silver dollars was stopped.

The first quotation I give is from the report of Mint Director Pollock, made in 1861. At this time the excuse for the continued coinage of the silver dollar for commercial purposes was beginning to lose force. Director Pollock said in this report: "The silver dollar was supposed to be needed for our China and East India trade, but our consular advices are to the effect that our silver dollars are taken very reluctantly at the ports, and not at all in the interior, of China. The reasons for its retention having ceased, we should cease to coin the silver dollar or it should be made to conform in weight and value to our lesser silver coins."

From the Report of the Finances for 1864, page 215: "Permit me again to refer to the anomalous character of the silver dollar of the United States and to the observations on this subject in former reports. The whole dollar should be made in weight and fineness the exact multiple of our fractional currency and the gold dollar should be declared the unit of value of our money."

From the Report of the Finances for 1868, page 432: "Our silver dollar is not received by the Chinese except at a discount. This is owing to the fact that while of equal fineness with the Spanish or Mexican dollar it is about 1 per cent less in weight. This

rejection seems to take away the past plea for continuing to coin that piece."

Could better evidence be brought to show that at this time gold was acknowledged as the intended and existing standard, and that our currency was in a highly satisfactory condition? The continued coinage of the silver dollar, though no more to any purpose, was as yet no menace to the existing national currency and of little expense to the Government; so Congress from its usual conservatism or lack of interest in the matter had taken no notice of the repeated recommendations for its abolition.

D. International Bimetallism

81. THE THEORY OF INTERNATIONAL BIMETALLISM During the latter part of the nineteenth century discussion of the double standard centered largely around the question of international as distinguished from national bimetallism. There were many writers, and these the more careful students of the theory of bimetallism, who believed that bimetallism when adopted by a single nation would always break down sooner or later, but that it would prove successful if established uniformly by the leading nations of the world.

The argument was that as long as there are different coinage ratios in different countries, or so long as some important nations have bimetallism and some monometallism, the maintenance of national bimetallism is rendered impossible on account of the flow of specie from one country to another. For instance, if gold were undervalued at the United States mint relatively to silver, it would be shipped abroad to a country where such undervaluation was less, or nonexistent. Such movement abroad would take place whenever even slight variations occurred in the ratios of different countries. But if there were an international agreement there would be no gain in sending the undervalued metal to a foreign country for the reason that its relative valuation would be the same in all markets. Under international bimetallism, therefore, the compensatory action of a double standard would be unimpeded.

82. THE LATIN MONETARY UNION

The nearest approach to a trial of international bimetallism is found in the Latin Monetary Union. The Latin Union resulted from the fall in the value of gold following the discoveries of gold in