Money.[1]
No man by himself produces everything he wants to use, but devotes his
time to the production of some few things, and the surplus that he does
not use, he exchanges for other things made by other men. In rude stages
of society this is done by a direct exchange of one commodity for
another, _e.g._ so much wheat or corn for a gun or plow. This is a very
imperfect and cumbersome method, which cannot be employed in our present
complicated transactions of buying and selling. There thus early
developed the use of money, or the practice of referring the value of
all things to one standard, usually the precious metals: so that,
instead of trading 20 bushels of corn for a plow, where it would be
necessary to go to the great trouble of finding a man who had a plow,
and also wanted your corn, you sell it for so much money, and with this
money you buy a plow. Money is thus but a medium of exchange and a
standard of value.
In the United States, as in most nations, money has always been made by
the Government, and the Government alone, so that one certain fixed
system may prevail. For the sake of convenience, money is made of
various kinds and denominations, and United States money may
conveniently be regarded under the five following divisions: 1. _#Gold
Coin, Gold Bullion, and Gold Certificates.#_--There are six gold coins:
(1) the eagle, $10 piece; (2) the double eagle, $20 piece; (3) the half
eagle, $5; (4) the quarter eagle, $2.50; (5) the $3 piece, and (6) the
$1 piece. The three last are but little used. The gold bullion, or gold
in bars and blocks uncoined, is for all practical purposes as good as
the coin, and in foreign trade is much used, it being more convenient to
handle. Besides the gold coin and bullion there are in circulation gold
certificates. These are paper, the same in general appearance as the
ordinary bank-note, and certify that an equivalent amount of gold has
been deposited with the Treasurer of the United States, and that the
holder of the certificate has the right to obtain the gold for it at any
time. This does not increase the amount of money in circulation, as for
every one issued just so much coin is withdrawn and stowed away in the
Treasury. The certificates are used simply for convenience, and in order
to avoid the necessary wear of the coin if in constant use. These
certificates are of the denomination of $20.
2. #_Silver Dollars and Silver Certificates_#.--There is no silver
bullion circulating as money, for a silver dollar does not contain a
dollar's worth of silver, as the gold dollar does of gold, and the
silver bullion is thus of different value (less value), according to
weight, than the silver dollar. The silver certificates are similar to
the gold certificates, already described, and certify that an equivalent
amount of silver has been deposited in the Treasury.
3. _#Subsidiary and Minor Coins.#_--All coins of a lower denomination
than $1 belong to one or the other of these two classes. There are three
subsidiary coins, the fifty cent, the twenty-five cent, and the ten cent
pieces. The three cent piece is no longer coined. All other coins are
minor coins. The peculiarity of the subsidiary and minor coins is that
they are, as compared with the standard coins (gold and silver dollars),
of a greater value than the value of the metal they contain. The
subsidiary coins are legal-tender to the amount of $10, the minor to
the extent of twenty-five cents. By legal-tender is meant that the
government has ordered that it must be received in payment of all debts
and articles bought. Gold coin and the silver dollars and certificates
are legal-tender to any amount.
4. _#Treasury Notes.#_--Under this head are included that form of money
ordinarily known as "greenbacks," from the color of their backs. They
were originally issued during the civil war, and are promissory notes on
the part of the government, and as such constitute a portion of the debt
of the government. They are paper, which of itself is of no value, and
no coin is deposited in the Treasury which they represent, as in the
case of the gold and silver certificates. They thus cost the government
nothing, and, as they are made legal-tender, and paid out by the
government, they were just so much clear gain to it. At first they were
not redeemable, i.e., exchangeable for coin at the Treasury, but since
1879 they are, and are therefore just as valuable now as any other form
of money, though formerly worth much less than their face value. One
hundred million dollars in gold is kept on deposit in the Treasury for
their redemption.
5. _#Notes of National Banks.#_--This is the one form of money that is
not issued directly by the Federal government, but through the agency of
what is called our "National Banking System," which may be thus
described: A national bank can be organized by any number of men,
provided the capital stock of the bank is at least $100,000. One-third
of the capital must then be invested in government bonds and deposited
in the United States Treasury. The bank may then issue notes to the
extent of 90 per cent, of such deposit. Such notes are thus amply
secured by the deposits with the government. The government guarantees
their payment, and so they circulate as well as the certificates issued
directly by the government. Thus a great deal of the paper money in
circulation is issued by the national banks, which must, on demand, be
redeemed with coin, and, in case of failure of the banks, are paid by
the government, which reimburses itself from the deposits. A bank-note
differs from a Treasury note in two particulars. The Treasury note or
"greenback" is a promise of the government, and is legal-tender in
payment of all private debts; the bank-note is the promise of a private
company, and is not legal-tender. A bank-note is said to be paid when
the bank gives a greenback or coin for it. A greenback is said to be
paid or redeemed when the government gives gold for it.
The following figures, taken from the report of the Secretary of the
Treasury for 1889, give the amounts of the various sorts of money
described in the foregoing, which were then in the Treasury, in the
banks, and in the hands of the people:
Gold coin and gold bullion, $680,063,505
Silver coin and silver bullion, 343,947,093
U.S. Treasury notes, 346,681,000
National Bank-notes, 211,378,963
Subsidiary coins, 76,601,836
It will be noticed that gold and silver certificates are not included,
for, as explained, they merely represent an equal amount of coin or
bullion on deposit.
The total amount of money is thus approximately $1,660,000,000, which,
divided by the total population, gives about $27 per capita. It should
be borne in mind in connection with these figures that other devices,
such as checks, drafts, bills of exchange, and other forms of credit,
are used side by side with money in carrying on trade and serving the
same purposes.
By the Compromise Silver Bill of July 14, 1890, provision was made for a
new kind of paper money. By this act the Secretary of the Treasury was
directed to purchase, from time to time, silver bullion to the amount of
4,500,000 ounces each month, and to issue in payment for such purchases
Treasury notes; these notes so issued to be redeemable on demand in
coin, and to be a legal tender in payment of all debts, public and
private, except where otherwise expressly stipulated.
[Footnote 1: In the preparation of this article, much assistance has
been derived from an article by H.C. Adams contributed to the
_Chautauquan_.]