$25,000,000. The reason is obvious. The greenbacks were needed for the purposes of trade, and could accumulate value more rapidly in the production and distribution of wealth. than a six per cent. gold interest bond; and it was not until the channels of circulation were amply supplied with a medium of exchange that the 5-20 bonds could be sold.

ernment.

We have already suggested that a redundancy of money (legal tender public notes) could be remedied by increased taxation; but it may happen, as was the case during the war, that taxation cannot be resorted to, to the extent of the wants of the government, or the necessities of the occasion, without producing distress and defeating the ends of the govIt then becomes necessary to employ the credit of the government in another form in the shape of an interest bearing bond. This bond or evidence of indebtedness represents property or products, payable in the form of money in the future; while the public note represents property in the process of exchange between the tax payer and the creditor of the government, and is virtually payable in the present.

When money (legal tender public notes) becomes redundant, it is manifest that there are more notes in circulation than there is property or products moving in the channels of trade to be exchanged through their instrumentality, and consequently more than the exchanges growing out of the transactions of the government will justify. Taxation must be increased to increase the transactions between tax payer and creditor; or, if that is inexpedient or unnecessary, the form in which the government credit is issued must be changed, that is, the public note, not bearing interest, issued in excess of the wants of trade, must be converted into a bond bearing interest; or in other words, as the government note is no longer payable in the present, it must be made

payable in the future, and justice requires that it should bear interest (accumulate value), just as the public note, when not redundant, was capable of accumulating value, and this, as is obvious, can only be done in the form of a bond.

A bond, inter-convertible with the public note of the government, is capable of performing a two-fold service; it will prevent a redundancy of public notes, and it will regulate the rate of interest which money will command. When public notes become redundant and are unable to accumulate value, the excess would naturally seek investment in an interest bearing bond; and when money (public notes) is able to accumulate value more rapidly in production and trade, and interest rises, the interest bearing bonds of the government would again be converted into money, and thus the equilibrium would be restored.

Money thus instituted could not do otherwise than conform, in value, to the money of account of the nation, and, in amount, to the wants of trade. It would then always circulate on a par with money of account-a dollar note would mean a dollar, neither more nor less, and would always command a dollar's worth of property; interest would not vary a fraction for any length of time; and money would prove, what it is designed to be, an unvarying standard of measure and payment. Under such a system of money the exchanges of the nation could be effected economically and equitably, and capital and labor would each secure a due share of the products of industry; and commercial crashes and money panics could not possibly

occur.

The amount of interest which an inter-convertible bond should bear is a matter of detail which can be settled fully only by experience. Interest on money, as has been suggested, should be in proportion to the profits of industry,

otherwise capital will be enabled to reap more than its due share of the profits of labor. The average rate of increase of wealth in the nation is estimated at about 3 per cent, Capital is entitled to a proportionate share of this increase, and hence the rate of interest of money should not exceed greatly, if at all, the average increase of wealth. For the sake of convenience in computing interest it is suggested that a bond bearing interest at the rate of one per cent. a day on $100, or 3.65 per cent. per annum, should be issued. This, as well as other details, can only be settled by experience. The important point is the institution of a monetary system based on sound principles, and its details can be safely left to the government, if its affairs are placed in the hands of capable and trustworthy men, in sympathy with the wants and interests of the nation.

It is urged by many who are favorable to the use of the public credit, in the shape of public notes, that a bond is not an essential part of the legal tender paper money system; that it would be absorbed by capital, and in the end would constitute a burden upon the nation. This is borrowing trouble. The public notes of the government would not be funded in an interest bearing bond as long as they could accumulate more value in production and trade; and, when funded, they would return to the channels of trade as soon as their services were required.

The inter-convertible bond plan is greatly derided by the bullionists and their tools, who do not fail to misrepresent the principles upon which it is based in every way possible. The public note is treated by them as simply a promise to pay money, and upon this hypothesis it is not difficult to prove that it is a very worthless piece of paper. The public note, as has been sufficiently explained, is a representative, not of money but of property, and as the great object of

trade is to exchange property and not money, it is far more important that the public note should represent property than money (gold coins). The amount of property in the country is estimated at $40,000,000,000; the amount of gold at $100,000,000. It is to exchange this $40,000,000,000 of property that money is required and not the $100,000,000; and to base the public credit on $100,000,000 of gold, when it should be based on $40,000,000,000 of property, is in utter violation of the plainest principles of the credit system, to which all paper devices for the exchange of property, whether public or private, belong.

Again it is asserted that the inter-convertible note and bond is simply paying one paper debt with another. If the public note was simply a promise to pay money this would be true, but the public note, properly understood, is not a promise to pay money, but is a representative of property to the amount inscribed on its face, which the government is entitled to demand and receive forthwith from the people, and in this sense was described by Calhoun as a "promise to receive," and not a "promise to pay.'

HOW THE PUBLIC NOTE IS TO BE PUT INTO CIRCULATION.

How the paper money of the government is to be put into circulation is a matter worthy of consideration, especially as friends of the system, with the best intentions in the world, have frequently allowed themselves to be led into error by failing to carry the principles of the system to their logical results. As the public note represents property and products which the government is entitled to demand and receive forthwith, in the way of taxation, to the amount inscribed on its face, and is virtually based on such property or products in the process of transfer from the tax payer to the creditor, just as other devices of the credit system

"See page 60.

are based on commodities moving in the channels of trade, it is clear that it (the public note) should only be issued by the government for property or services. If the government should issue public notes without reference to the ability of the nation to respond in property and products in the way of taxation, as for example, to pay off the public debt in paper money, when a corresponding amount of property and products could not be transferred at the same time to the creditors of the government, would, as is manifest, be a gross infraction of the principles upon which the legal tender paper money system is founded. The creditors of the gov ernment are paid in property or products, and the public note must not only represent such property, but must be able to command it, which can be done only to the extent to which the people are able to respond in the way of taxation. Hence it is idle to talk about liquidating the public debt with paper money, or any other kind of money, any more rapidly than the people are enabled to produce wealth (property and products), which can be applied to that purpose.

It has already been explained that the amount of money which the government can issue is limited, not by the amount of the transactions of the government for any specified time, but by the transactions of the entire nation, which are constantly varying in amount. But when the channels of circulation are supplied with a medium of exchange no more public notes can be used; it is essential, therefore, that their emission by the government should go hand in hand with taxation.

THE NATIONAL DEBT.

Debt, whether individual or national, is inconsistent with true independence, and the payment of the national debt at