expense is involved in making such checks acceptable in paying debts, so far from the place where they are issued, whether it take the form of loss in interest while in transit, or a collection charge, or otherwise, should be borne by the party who receives advantage by the payment, usually the drawer of the check, sometimes the drawee. It would not be right to devolve this expense upon the stockholders in the Federal Reserve Bank. One thing that all banks have to struggle against is "checkkiting"; making country checks worth par in business centres will open up a rich field for that form of misadventure. It was the declared purpose of some Congressmen to make all checks worth par everywhere, at the expense of the banks, and thereby make them practically a part of our currency.

The act creates an Advisory Council equal to the number of Federal Reserve Banks, and elected by the boards of directors of such banks; national banks were empowered to establish foreign branches; the emergency currency act was extended for one year and the restriction of the use of such currency to the banks who had bond-secured currency equal to 40 per cent. of their capital, was removed.

CHAPTER XXIV

GENERAL REVIEW

A GENERAL review of the monetary history of the entire period of our national existence shows that each generation had to learn for itself and at its own expense the evils of unsound money. The costly experiences of the preceding generation were generally forgotten, and legislators, following rather than leading the people, failed to correct the evils except after long and disastrous delays. So intolerable were the conditions at times that only the unlimited recuperative powers of our rapidly developing and expanding country prevented the overthrow of that standard of value and honor which is recognized by the world as highest and best.

The problem of furnishing a sound and stable medium for a country of such large area, of such diverse interests composed of 48 sovereign states, developing at an unprecedented rate, presents unusual difficulties, and no precedent is furnished by any other country with kindred conditions and analogous experience. Principles remain the same, however, and the obstacles could have been overcome and all questions properly solved had not political ambitions and party advantage exercised such a controlling influence. With the creation of the Federal Reserve Bank let us hope that we have a credit and currency system which will assure stability as to metallic money, security and flexibility as to paper currency, to the end that prices may not be subject to ruthless disturbances and interest rates be reasonably uniform and equitable throughout the land.

The bimetallic theory, however logical in the days of Hamilton,

when the production of precious metals was but small and the greater part of the civilized world preferred silver to gold, has been demonstrated to be impossible of realization without substantially universal adoption, which has been shown to be quite impossible. As a practical question bimetallism has been abandoned by all great commercial nations. Whether the enormous production of gold shall ultimately impair its desirability as a standard of value, or, what is more likely, cause the development of entirely novel theories of money, with all the vagaries and unsoundness that inevitably accompany original theories, is a question too remote to have any present utility.

Hamilton's writings, his careful study of the subject, with the end always in view of giving his country a just measure of values, show clearly that to-day he would favor a standard resting upon gold alone; nor is it to be doubted that Jefferson would maintain equally sound and conservative views. The statistics presented show that immediately after the adoption of Hamilton's coinage law the production of silver increased largely, disturbing the commercial ratio between gold and silver. According to Hamilton's theory, this should have been followed by a change in the coinage ratio as early as 1810. In 1834, when such action was taken, the intelligent opinion of the day was ignored and an extreme ratio adopted which reversed rather than corrected the disparity by undervaluing silver. Within a decade the great increase in gold production had enhanced the relative value of silver, and all coins, fractional silver as well, were exported. To correct this and retain small coins for current use the law of 1853 was passed, reducing the amount of fine silver in fractional coins.in

The relatively scant product of the white metal for the following twenty years served to demonstrate the wisdom of the law of 1853. Unfortunately the legislators of that day left the silver dollar unit undisturbed, and when silver was again produced in larger quantities (after 1874) the existence of the law of 1837 gave

the advocates of free coinage of silver a precedent and prestige which would not otherwise have existed. The act of 1900 leaves the legal tender power of the dollar of 371.25 grains of pure silver exactly as provided in the acts of 1792 and 1837, except where otherwise expressly provided in the contract.

It is only necessary to recapitulate the silver legislation since the beginning of the agitation for remonetization in 1876, in order to appreciate the bearing of the enormous acquisition of silver by the United States and the possible menace which its possession involves. The silver purchased under the laws of 1878 and 1890 amounted to 459,946,701 fine ounces, costing us $464,210,262, an average per ounce of nearly $1.01, parity being $1.2929; the silver dollars coined amount to $565,194,138.

The entire volume of silver and representative certificates may be utilized for the great and growing retail trade of the country so long as business conditions are prosperous, the labor of the country is employed, and the consuming power continues unabated, and issued in small denominations only they may be so chained to the wheels of industry as to prevent them from being a menace to the Treasury. A safe means of avoiding danger to the gold standard from the large volume of silver in our currency is the maintenance of a good Treasury surplus, into which the redundant silver, for which there may be no use as currency, can be absorbed.

While at first gold certificates were permitted to be issued in excess of the gold deposited (law of 1863), the more recent laws governing their issue, as also in the case of silver certificates, require that the full amount of coin shall be held against them. Both forms of certificates are, therefore, merely warehouse receipts, and, although receivable for all public dues and available for bank reserves, they are not legal tenders. These certificates as compared with coin save in transportation as well as in abrasion, cater to a public preference for paper money and seem

to be fully established as a permanent part of our currency system.

We have seen that the "fathers" without specifically embodying a prohibition to that effect in the Constitution intended to prevent the issue of governmental legal tender paper, and a tacit understanding that no such power existed guided legislators for seventy-three years. In the evolution of government the conception of federal power under the Constitution was broadened, and found enlarged expression in legislative, executive, and judicial action. The perils and necessities of the government during the Civil War broke the barriers of the strict constructionists, and the powers which a sovereign government needed to exercise were held to be warranted by the Constitution except where specifically prohibited. Relying upon the opinions expressed in debate, it is safe to assert that Congress believed the legal tender act of 1862 unconstitutional when they voted that it become law. They were willing to adopt revolutionary means to overcome revolution. The Rubicon once passed, this law furnished a precedent for others to follow. The Supreme Court in its first decision held the law in large part unconstitutional. The second decision reopened the case, and held that Congress had power to issue legal tender notes "for the time being," having reference to the perils of the government in the exigency of war. Upon the third hearing, in 1884, the Court held that giving the legal tender quality to paper was a sovereign power, exercisable in time of peace as well as in time of war, in the discretion of Congress.

The right to issue bank-notes was made use of by the few banks existing prior to the adoption of the Constitution as a common law right. The banks in the several states continued to exercise this right after the adoption of the Constitution, under their state charters, whether specifically authorized or not. It was generally admitted that such rights existed, that the states, although prohibited from issuing bills of credit to be used as