Comparison of silver and gold as a medium of exchange- Intelligence and integrity the foundation of credit—The beginning of interest—The development of the banker-His receipt the beginning of paper-money-Essential qualifica- tions of paper-money—The banker's functions—The clear- ing-house-Delegated powers—The defects of government paper-money-Personal supervision necessary to paper- CHAPTER IV. PAPER-MONEY IN COLONIAL TIMES . 80-98 Colonial paper-money not redeemable in coin on demand- Issue of bills of credit-Abortive efforts of the Crown to regulate the value of money-Failure of colonial paper- money due to its defective character-Grounds of opposition to colonial paper-money-Value and not volume the test of the money standard— The Bank of North America-Govern. ment paper-money displaced by bank-notes—The Bank of England America's model in banking-Increase of State banks—Conflicting views held by Hamilton and Jefferson. CHAPTER V. MONETARY SYSTEM OF CANADA AS CONTRASTED WITH THAT OF THE UNITED STATES 99-115 Canada's banking capital and methods-Defects of her The differing functions of money and capital—An illustra- tion of this difference—The supply of capital affects the rate of interest - The normal and the abnormal interest-rate- An illustration of the relation between the volume of capital and the volume of money-Effect of the introduction of foreign capital-Mistaken legislation in reference to silver- MANDATORY MONEY AND FREE MONEY. 130-151 What the framers of the Constitution thought of paper- money-Thomas Paine's opinion of tender-laws-Useless- ness of a legal-tender law-Free-metallism-Bi-metallism impossible-Impossibility of legislating a new money-metal into general use—Indispensable qualifications of a money- THE HOARDING PANIC OF JULY, 1893 Two distinct panics—The first panic the result of the with- drawal of capital from the country—The second panic caused by the hoarding of paper-money-Means of expand- ing the volume of paper currency-The tax upon paper- money-Rate of shrinkage in volume of current money during the hoarding panic-Effect of the repeal of the silver purchase clause of the Sherman Act—Private efforts to supply a medium of exchange-Revival of industry with- out Congressional aid— The chief instrumentality of relief- IT T may be well to explain at the outset what is meant to be conveyed by the phrase "the natural law of money.” While it is true that money is a product of man's labor, and that it derives all its usefulness from the actions of men, it was not planned and brought into existence with an intelligent prevision of its nature and workings. It would be more correct to say that it came into use because it possessed inherent properties which fitted it for certain services, and that men appropriated it when they felt the need of the services. This they did in. dividually, without any concert of action, for money was circulating everywhere in the world before men even thought of making laws for its regulation. a When an individual uses money, he is governed in what he does with it purely by his own interests, and he does not concern himself about what becomes of it after it passes out of his possession; thus it circulates indefinitely, impelled always by the motives and interests of individuals acting independently of each other; yet it is found to move and perform its functions with the regularity of a natural law. The material of which money is composed may be almost any product of man's labor; it becomes money only when it is used as the common medium of exchange. Before the appearance of money in the world, exchanges of commodities were made in a very crude way. If a man had a dog that he wanted to exchange for a sheep, he could not make the exchange until he found some one who had a sheep and wanted a dog. But in the course of time man discovered that, among the commodities produced by him, there was always some one commodity in more general use and demand than others, and this he seized upon as his medium of exchange, -it became his money. Having done this, he was no longer obliged to wait until he found some one who had the particular commodity he wanted, and who also wanted his commodity; he stood ready to accept the commodity in general demand, because |
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