recognized in the eighteenth century, and was quite lost sight of in the greenback controversy after the American Civil War, when the inflationist party were acting on the assumption that paper money had intrinsic value in itself, and that the Government by an issue of paper notes was actually creating a form of wealth. (2) That paper money is bound to depreciate if it is issued in larger quantities than are required for currency purposes, and that a depreciated paper currency will drive good money-whether coin or paper-out of circulation as surely as it would be driven out by a debased metallic currency. Before this was realized the danger of over-issues was very great, because the paper currency could be so rapidly and easily increased, and a fresh issue often gave temporary relief, though at the cost of greater difficulties later. Both the English Government in the Napoleonic wars and the American Government in the War of Independence and the Civil War had recourse to excessive issues of paper money to tide them over times of pressing difficulty, and in both countries private banking institutions gained temporary profits for themselves by the same means, but in every case the nation as a whole suffered.

By the middle of the nineteenth century the dangers of over-issue were so clearly recognized in England that by Peel's Bank Charter Act an attempt was made to give the Government the monopoly of the issue of paper money in order that regulation might be more effectual; but, though the monopoly has been maintained as far as banknotes are concerned, the use of other forms of paper money has in practice frustrated the purpose of the Act. Yet there is no danger to be feared on this score, for paper money at the present time in England is all practically convertible, and thus, as far as quantity is concerned, it can be trusted to regulate itself; cheques, for instance, are cancelled as soon as they are paid into a bank, and bills of exchange are cancelled as soon as they mature.

On the other hand, the inconvertible notes issued between the years 1797 and 1819 never went out of circulation, though fresh issues could constantly be added to them, and in the case of the country bank-notes, at the end of the eighteenth century, the uncertainty of the solvency of the banks issuing them, and consequently of the value of the notes themselves, had much the same effect as if they had been inconvertible. In the United States a certain quantity of greenbacks are still inconvertible; but, as the amount is strictly limited and the people have full confidence in the solvency of the Government, this causes no difficulty. It was probably the fear of overissue that led to the prohibition of bank-notes for sums smaller than £5 in England. If it is safe to judge from the popularity of £1 and £2 notes in Scotland, and from the very general use of notes for small sums in the United States and in European countries as well, their disuse in England may be held to be due to Government action rather than to any popular prejudice against them, and for the purpose of sending small sums by post it has been found necessary to get a substitute in the form of postal and money orders.

In England there is much less direct Government control over the paper currency than in America. In England the powers of the Bank have been defined clearly by legislation, but there is practically no administrative interference; the Bank of England, acting as the Bank of the Government, enjoys Government support, and alterations in the rate of discount, which are the work of the Bank Directors and not of the Government, are practically the only means taken to regulate the supply of gold. In the United States the Government takes charge of the greater part of the revenue by the Sub-Treasury system, which has the effect of continually withdrawing money from circulation. It issues various forms of paper money itself-greenbacks and gold and

silver certificates—in addition to the notes issued by the banks, and the bank-note issues are hampered by the necessity for securing note issues on Government bonds. "In no other civilized country," remarks an American writer, "is there such an absurd Governmental interference with the currency supply, affecting values, promoting speculation, retarding business, and disturbing the welfare of the people" (Hepburn).

There is a wide difference between the financial problems of mediæval times and those of the present day. In former times the main difficulty was to keep an adequate supply of the precious metals in the country and to check the nefarious schemes of money-dealers who could make a private profit by exporting them. The main problem is now to get a true rate of exchange between countries using widely different currencies, and the supply of specie is secured by regulating the rates of interest and discount. Trade in medieval times was based almost entirely on a metallic currency, and paper money and credit were used only to a limited extent, The nineteenth century was marked by an extension of the system of credit, and the organization of this credit system is so sensitive that any disturbance in one centre is felt throughout the whole of the monetary world. Finance has, in fact, become an international rather than a national question, and the monetary history of any one country tends to become merged more and more in the monetary history of the whole of the civilized world.

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GLOSSARY

Alloy.-Base metal mixed with the precious metals in coins. Assay. To test by chemical process the composition of a coin in order to determine the relative proportion borne by the alloy to the pure metal.

Barter.-Trade by exchange of commodities without the employment of any form of money as a medium of exchange.

Base Metal.-Metal of less value than the precious metals.

Bill of Exchange.—“ An open letter of request from one man to another desiring him to pay to a third party a specified sum and put it to the account of the first" (Chambers).

Bimetallism.—The use of two metals on equal terms as legal tender

currency.

Brassage. A charge made by the Mint to defray the expense of coinage.

Bullion.-Gold and silver, in bars or in the mass, but not converted into coin or manufactured.

Carat.-A measure of weight-about 3 grains, divided into four carat grains-used for diamonds and precious stones. In stating the fineness of gold, the number of carats always expresses some fraction of 24; thus gold 22 carats fine means a mixture of gold and alloy, composed of 22 parts of pure metal to 2 of alloy. Cheque.-An order for the payment of a specified sum, drawn on a bank and payable on demand from the deposit lodged at the bank by the drawer of the cheque.

Coin.-A piece of metal stamped with an officially authorized device which gives it a certain legal current value as money.

Content. The quantity of metal contained in a coin.

Credit. "A -“Any note, bill, or other document, on the security of which

a person can obtain funds" (Chambers).

Currency.-Anything that is employed as a medium of exchange, whether an article, coin, or paper money.

Denomination. Any particular class of coins or notes, such as shillings, notes for $5, etc.

Depreciation.—A lowering of the actual value of money-whether coin or paper money-below its nominal value.

Die. An engraved stamp used for impressing a design on a coin. Discount.-"A charge made at a certain rate per cent. for the interest of money advanced on a bill or other document due at some future time" (Chambers).

Fineness. The proportion of pure metal to alloy in coins.

Foreign Exchange.-The rate at which the money of one country may be exchanged for the money of another.

Legal Tender. Any form of authorized money which a creditor can be forced to accept in satisfaction of a debt.

Measure of Value.-Currency or money of account, representing a certain definite value, in terms of which the value of commodities can be expressed.

Medium of Exchange.—An article, coin, or note, universally acceptable, because recognized as possessing a certain definite value in exchange. Everything used as a medium of exchange must be also a measure of value.

Mint.-A place where money is struck and issued.

Money. Anything used as a medium of exchange and measure of value, including currency, money of account, and credit instruments.

Money of Account.—A term used to express a certain quantity of metal, and used as a measure of value, but not represented by any coin in actual use.

Moneyer.-A person officially authorized to coin money.

Nominal Value.—The rate at which a coin is declared to be current by the authority which issues it.

Par of Exchange." The established value of the coin or standard of value of one country expressed in the coin or standard of value of another" (Chambers).

Payment in Kind.-Payment in commodities instead of in money. Payment by Tale.-Payment by reckoning coins at their nominal value, instead of at their intrinsic value as bullion.

Rate. To estimate the value of one coin or metal in terms of another coin or metal.

Ratio. The relative value of two metals. Thus when the ratio of silver to gold is 15: 1, gold is fifteen times more valuable than silver-or, in other words, a certain quantity of gold will purchase fifteen times that amount of silver.

Seignorage. A charge made by the sovereign on the issue of coin over and above the expenses of coinage and the value of the metal.

Standard of Value.-The officially authorized unit of value-generally a coin-by which the values of other coins and commodities can be measured.