one.

DISTURBANCE OF THE MONEY OF ACCOUNT BY OPEN AND BY CONCEALED ATTACKS.

But if the change of a money unit under the most favorable circumstances, and for the strongest reasons, is productive of so much inconvenience to all, and risk of imposition upon the unskillful and unwary, what must be the effect where the change is not merely from one unit to another, but a concealed or unseen attack upon the unit itself?-the occurrence of such circumstances, or the enforcement of such regulations as tend to change the value of the unit and produce confusion in regard to it in the minds of those employing it? Instances of this kind of change are but too familiar to readers of the histories of European countries, in the frauds perpetrated by mistaken or unscrupulous rulers-in the successive debasements of the current coins. In England this has been done until the equivalent of the money unit five hundred years ago and that of the present day is as thirty-two to ninety-nine: they coined, originally, including the alloy, £1 1s. 4d. from a pound of silver; since 1816 they coin £3 6s. from that quantity of silver. In France the debasement has proceeded so far as the rate of seventeen to The evils and losses inflicted upon the respective countries in which these abuses were practiced can never be adequately estimated. Measured by the mere inconvenience they imposed, great as that was, no just idea of the mischief could be attained. A more correct estimate may be drawn from the cries of distress which came from all quarters on the occasion of these debasements. Volumes might be filled with the complaints caused by the iniquities of this process of debasement. In France a heavy tax was agreed to be paid on condition the coinage was permitted to remain undisturbed. It is true that in the periods when these debasements were most resorted to as a means of raising money, neither rulers nor subjects fully understood the true nature of the evil, although its results were felt by those whom they affected, so as to leave no doubt about the injury. The functions of a money of account were not known, as they are not sufficiently appreciated even to this time. The whole of the mischief was in those cases imputed to the change of the coinage, because that was the occasion. No debasement, however great or well managed, could much injure those who were knowing enough to detect the fraud, or in a position to discover it. They could readily perceive that the new coin which purported to be a shilling, and which the authorities required to be so called, was in fact worth only ten pence, and they could take their precautions accordingly. But the mass of the people, who could not distinguish the shilling of their money of account from a shilling coin, would continue to count and fix their prices and make their sales in the usual shilling of account, and receive payment in the debased coin. Their eyes would only be opened after the fraud was complete, and after the perpetrators had extracted a large sum from the public, and after merchants and bankers, shrewd enough, and unscrupulous enough to avail themselves of the opportunity, had levied a tenfold larger sum. This process of breaking up or destroying a money of account is one of fraud and misconception, where all parties to a transaction are ignorant of what has been done; they speak in one language, the law, under which they act, speaks in another; they make their prices by one scale, the law exacts payment by another. Where, as would soon be extensively the case, one party comprehended the change and the other did not, a direct advantage could be taken to the extent of the depreciation. Such debasements destroyed the money of account because the base coin was made a legal tender for its

nominal amount of valuation in the money of account. The ignorant and unwary were therefore preyed upon until the extent of their losses finally opened their eyes, and the speculation became no longer available. The prices of all articles would become enhanced to the amount of the debasement, and that being the case, a new money of account would gradually be established, as habit rendered the new unit familiar. It must not be overlooked, that the success of this kind of fraud depended on the fact that the money unit in use, where the fraud was attempted, was so firmly fixed in the minds of the people that they would continue to compute by it after the alteration in the value of the coin. The success of the fraud would come to an end as fast as the new money of account replaced the old one. The law which made the debased coin a tender at its former value would cease to be effective when all prices were fixed by the new scale. It is well known that men of business had such a dread of the confusion, trouble, and loss, ensuing from a debasement, that they stood aghast at the prospect or mere suspicion of such an event.*

EFFECT OF A CHANGE IN THE VALUE OF THE PRECIOUS METALS ON THE MONEY OF ACCOUNT -LAW OF LEGAL TENDER-DEPRECIATION OF PAPER CURRENCY.

There is another way in which a monetary unit may be changed, which it is important to consider, and that is, by a change in the value of the precious metals of which the coins most in use are composed. It is by no means a necessary consequence; but unless the danger is seen, and precautions taken, there is always danger of the money of account being disturbed where the ordinary coins of circulation change their value gradually, and from causes not generally appreciated. This danger is always greater where the name of the money unit is the same with the chief coin-as our chief silver coin and unit are both denominated à dollar. If the silver in a dollar coin should depreciate by degrees imperceptible to the mass of men, the unit would alter by a change following at a long interval from the depreciation. During this time a harvest of profit would accrue to those who were shrewd enough to perceive the alteration, and fortunate enough to be in a position to avail themselves of it. Its operation would of course be very unequal the advantage and disadvantage to some might be equal; many might suffer severely without understanding the reason, and some might be profited without knowing how. The whole mass of transactions occurring within the range of this depreciation, the prices fixed upon all commodities for sale, the contracts of sale, the actual payments in coin, the whole position of debtors and creditors, their books of account, evidences of debt and securities of credit, would be more or less affected. There could be no certainty that the parties to these transactions perfectly understood each other. It might very frequently be a matter of accident or chance on whose side the advantage would fall, but it would be very certain that those who understood the process of depreciation would have power to turn the whole event very greatly to their profit.

We say that the money unit would suffer even where it did not correspond in name with any coin; we mean, of course, where there is a fixed price on the precious metals, and a law of legal tender. Wherever neither of these circumstances exists, as in China, where great fluctuations in the

* See the note at page 35, Snelling on the coins of Great Britain, France, and Ireland.

value of gold and silver occur, there such changes have no effect whatever upon the money account. In China the value of gold and silver can always, in any variation, be expressed in tales, mace, candarines, and cash; and so in England, if the statute making gold a legal tender at £3 17s. 101d. were repealed, the value of gold could be expressed under any possible degree of variation in pounds, shillings, and pence. So, if our law making gold a legal tender were repealed, we should have no difficulty in expressing its value in dollars and cents, at any possible depreciation to which it might descend under the effect of the influx of that metal from California or Australia. But when the law compels men to take gold at a fixed value, and coins are issued in gold which are made a legal tender at one dollar, five, ten, and twenty dollars, the mass of men will be slow to perceive any depreciation of a coin which the law holds at the same value. They can only discover the change by a long process of selling at the old value and being paid in the new, whilst very few will enjoy the equivalent advantage of buying by the old scale and paying by the new.

The unit of valuation may be disturbed and destroyed by the depreciation of a paper currency which enjoys the whole circulation of a country. If such a currency is once established in the confidence of a community, so as to be received in all business transactions at par with the unit, or as equivalent to coins of known value, it may depreciate by such imperceptible degrees, and from such unseen causes as gradually to cause a general rise of prices corresponding to the stage of depreciation. This, of course, destroys that money of account, and gradually substitutes another; but the process is fraught with all the mischiefs and confusion attendant upon a change in the value of gold and silver.

This was that which was alleged to have taken place in England in the period of suspension of payments by the bank between 1809 and 1815, when at one time, as we have already mentioned, gold reached the very high price of £5 4s. And it is still urged by some in that country that no more unjust nor impolitic legislation ever took place than that which restored the unit of account to its original place compared with gold. But the very heated controversy which took place within the period above-mentioned, is one of those in which the calm observer of later days looking through a less prejudiced medium can clearly perceive that there was much truth and error on both sides, and that their differences were of a nature that no element employed in their discussion could enable them properly to reconcile or determine the preponderance. No doubt there was some depreciation of the paper of the Bank of England, but not by any means corresponding to the price of gold, which was in special demand, owing to many special causes, but chiefly to the wars raging on the continent. After the battle of Waterloo, as the affairs of the continent gradually resumed a state of quiet, gold fell by degrees to its average market rates.

If the strenuous efforts which were put forth at the period of this controversy had been in part directed to preserve the money of account intact, rather than to an angry and excited discussion upon the question whether gold had risen or bank-notes had fallen in value, more light would have been shed upon the subject, and more real good accomplished. The publications of this period, and the Parliamentary reports form the most valuable mine

of instruction on the subject of money and credit anywhere extant, but fartoo voluminous to be more than merely referred to in this connection.

The money unit of the American colonies was destroyed and diversified by a process the opposite of the depreciation of the coin. The long continuance of an unfavorable exchange with England with most of the colonies begot a constant and pressing demand for coin as a remittance. The exports of the colonies were insufficient to furnish bills of exchange for adjustment of the large indebtedness to the mother country, created by incessant over-importation. The only possible mode of discharging a large portion of this foreign debt was by the exportation of coin. The demand thus arising continued so long and so urgent that the value of coins began and continued to enhance, through a long series of years; the scarcity became so great that the colonists suffered severely for some medium of exchange, and were driven to various strange expedients, and not unfrequently to a state of barter, in which the commodities to be exchanged were valued in the money of account. That is, all payments were made in the commodities exchanged, whilst all prices were fixed in the money of account. During this period Spanish dollars and fractional coins under this special demand rose in value, and increasing prices continued to be expressed in the usual money of account. The dollar, which at first was worth 4s. 6d., became worth 5s., 5s. 6d., 6s., 6s. 6d., 7s., and 7s. 6d. in Pennsylvania, and in New York it went to 8s. It is true that in some colonies this process was complicated with an excessive issue of paper currency. In such cases it may not be practicable to estimate the respective influences of the unfavorable exchange and consequent demand for coin as an article of export, and that of the overissue of paper currency, but that both causes had their appropriate result is easily seen, and the more especially as they were not always contemporary. In some of the colonies no paper was issued, and in them the unfavorable exchange destroyed not less effectually the money unit, and in some of the colonies the original money unit was changed before the issue of the paper currency. It thould be noted that neither an unfavorable exchange nor an overissue of bank-notes necessarily involve the destruction of the money of account. Where there is a regular place for the transaction of exchange and regular quotations of the rate of exchange made public, there the nature of the demand for coin is at once seen and understood, and the price of coins nearly keeps pace with the price of exchange, both coins and bills of exchange being rated in the terms of the money of account at what they were worth. There was no regular price for exchange, nor were there regular dealers in exchange in the early days of our colonial existence, and the mass of the people did not comprehend the true nature of the demand for coin. Hence, as coins almost disappeared from circulation, and as a high nominal price was continually bid for them, the prices of other commodities fell into a state of confusion, and all harmony of adjustment was gone, for few could tell whether prices referred to an equivalent in coins or an equivalent in other commodities.

So in the case of paper issues; its depreciation does not necessarily imply injury to the money of account, for where there is good paper with which to make comparison, it may be quoted, paid, and received at any rate of discount agreed upon, from 1 to 99 per cent a fact familiar to all men of business in the United States.

THE MONEY OF ACCOUNT NOT A STANDARD BUT A MODE OF EXPRESSING PRICES AND STATING VALUES.

It is clear, then, to those who have regarded the subject with attention, that every community of trading people, having once adopted any unit for the expression of prices, computation of money, and keeping books, as, in the first instance some coin or determinate quantity of gold or silver, invariably forms, by the use of this unit for a long period, in all the infinity of industrial and commercial transactions, an ideal money of account which becomes so clearly defined and fastened on their minds, that it is in fact the medium by which all prices are fixed and expressed, and finally capable of noting variations in the value of the coin from which it took its rise. It is equally clear that, once established, its tendency is to remain steady, and that the minds of the masses cling to it with a tenacity which nothing can disturb or destroy, except causes not understood by the multitude, or operating unknown to them, or legal compulsion long continued. It is further clear that, as it is not in coins that prices are expressed and accounts kept, so it is very important not only that the public should be well master of the prevailing money of account, but that all disturbing causes should be warded off. As the public authorities in remote times availed themselves of this tenacity of the people in clinging to their habitual mode of expressing values, to debase, very often secretly, the coins which were the usual equiv alents used in payment; so now, when commercial rectitude rules so much more firmly and extensively, the public authorities should carefully keep off the operation of such causes as tend to disturb or destroy the common money of account, and thus carry confusion into transactions of countless magnitude. The subject should, at this late day, be sufficiently understood to be the object of wise legislation; if not understood, it should at least be the subject of careful and competent investigation. Events are even now in the horizon which demand such preparation.

This view of the functions of the money of account is not brought forward for, nor recommended as a standard of value; not at all. It is merely stated as a fact in the mental habitudes of trading people; a fact which fully explains some of the most disputed and difficult points in the doctrine money. It is brought forward and explained, that its bearings may not be overlooked, and that the light which it sheds on the subject of money and coinage may not be lost.

It has been long well enough understood what the functions of a money of account are when applied to the keeping books of accounts and entries of debit for sales made and goods delivered. Transactions of this kind occur among us to an extent very many times greater than those in which actual coins are used. The prices of the articles sold are recorded in books of account, the sum total is carried out in them, the notes and bills by which they are finally adjusted, are entered in like manner. Now the figures in these transactions and entries represent sums clearly apprehended by the minds of the parties, although not expressed in the name of any coin in existence. So it is in regard to the language of contracts of buying and selling the parties perfectly understand one another, and accurately measure and express the value of every commodity of trade, although no coins are present and none are in existence corresponding to the denominations of their money of account.

It is more than probable that this function of a money of account which we specify would have been better understood, had not those who most