11. Mr. A takes to the United States mint 20,000 ounces of gold .950 fine. The impurities are removed and the gold is standardized and coined. How much will A receive from the mint ?

12. If in the preceding problem the .050 is copper, how many standard dollars would A receive?

13. Mr. B takes 10,000 ounces of British gold coins, which are eleventwelfths fine, to the United States mint. How many American dollars would he receive?

14. What is meant by the "tolerance of the mint"? Why is this permitted?

15. What is the purpose of the "trial of the pyx"? of the Assay Commission?

16. What is meant by "minimum circulating weight"?

17. Who should suffer the loss when a coin is found to be legally uncurrent on account of abrasion? Why?

18. What sort of coins in the United States is most likely to be counterfeited?

19. What devices and methods are used to prevent counterfeiting ? 20. What bearing have the following upon the possible variations in value of coined and uncoined gold: (a) tolerance of the mint; (b) minimum currency; (c) brassage; (d) gratuitous coinage; (e) free coinage?

21. Do you think that Macaulay overemphasizes the social evils of a bad currency?

II. BIMETALLISM

22. How do you account for the fact that bimetallism was everywhere an accepted principle in the sixteenth and seventeenth centuries?

I

23. If the coinage or mint ratio is 16 to 1 and the market ratio 15.5 to 1, show what would happen under the operation of Gresham's law.

24. Between 1792 and 1834 the mint ratio in the United States was 15 to 1. Consult the table of commercial ratios of gold and silver and indicate what must have occurred.

25. In 1834 the mint ratio was changed to 16 to 1. What must have occurred then, in view of the market ratio?

26. Suppose the "crime of '73" had been committed in, say, 1860:

when would it have been discovered? Suppose the Currency Act of 1873 had been passed a year later: could the silver dollar then have been omitted, without controversy, from the list of coins that could be minted?

27. Three causes may be assigned for the growth of an agitation for monometallism: (a) the decline of mercantilism; (b) the improvement of coinage technique and the consequent revelation of the evils of bimetallism in connection with international operations; (c) the increase in the quantity of precious metals and hence in the supply of currency. Which do you think has been most important? (Consult the tables on pp. 82 and 83 in connection with the principal dates of the bimetallic controversy.) 28. Study the table showing the commercial ratios of gold and silver and see if you can find a reason for the demonetization of silver rather than gold. Do you attribute it to the inherent inferiority of silver?

29. "Gold has been proved to be the most satisfactory metal for monetary uses." Does this apply to its use as a medium of exchange, as a pecuniary unit of calculation, or as a standard for deferred payments?

30. Do the statistics of production of gold show, as a matter of fact, that gold is more likely to prove of stable value than silver?

31. If the annual gold production had declined after 1896, rather than increased, might our subsequent monetary history have been different? If so, how?

32. How do you account for the great rise in the value of silver since 1914?

33. The standard silver dollar contains 371.25 grains of pure silver. The mint price is $1.29 per ounce. Look up the latest quotation of the price of silver bullion in the financial pages of the daily press or in the financial journals and compute the present bullion value of a silver dollar.

34. What would happen to our monetary system if silver bullion should become worth $1.30 an ounce? $1.40 an ounce ?

35. Would a restoration of bimetallism necessarily increase the total quantity of specie in the world?

III.

THE REGULATION OF FRACTIONAL SILVER CURRENCY

36. After 1850 fractional silver coins disappeared from circulation. Why did they not disappear earlier? (Consult tables on pp. 82, and 83.)

37. An act of 1853 reduced the weight of fractional silver coins by about 7 per cent. What would be the result of such a reduction? (Consult the table of commercial ratios.)

38. When fractional silver coins were thus reduced in weight, what steps would have to be taken to prevent them from driving gold out of circulation?

39. Is there any good reason at the present time for making fractional silver pieces of less proportional weight than the silver dollar? At what price per ounce for silver bullion would it pay to melt up fractional silver coins?

40. How is the parity of the fractional silver pieces maintained? 41. What is meant by legal tender? Is it necessary that money be legal tender in order to pass current ?

42. X owes Y ten dollars, and the debt is due. They are riding

together on a railroad train. Seeing a bandit entering the car, X says to Y, "Here is the ten dollars I owe you." What would you say if you were Y?

43. Would contracts like the following be binding in the United States: (a) "I promise to pay for value received, one thousand dollars in lawful money, except in silver"? (b) "I promise to pay for value received, one thousand dollars in lawful money, except in gold"? (c) "I promise to pay for value received, one thousand silver dollars"? (d) "I promise to pay for value received two thousand fifty-cent pieces"? (e) "I promise to pay for value received, one thousand bushels of wheat?" 44. Why limit the legal tender power of the silver dollar? Why give any legal tender power to fractional silver coins?

REFERENCES FOR FURTHER READING

Holdsworth, John Thom: Money and Banking, chap. iii. Jevons, W. S.: Money and the Mechanism of Exchange, chaps. v, vi, and vii.

Laughlin, J. Laurence: Principles of Money, chaps. xi and xii.

Moulton, Harold G.: Principles of Money and Banking, chaps. ii, iv, and vi.

Phillips, Chester A.: Readings in Money and Banking, chaps. vi and vii.

Scott, William A.: Money and Banking, chap. ii.

White, Horace: Money and Banking, Book I, chaps. ii-vi.

CHAPTER VII

THE REGULATION OF GOVERNMENT PAPER CURRENCY

Paper money is of so many different kinds, and the principles of regulation involved are so numerous and diverse that a clean-cut treatment of the subject is difficult. A broad distinction may be made, however, between government and bank paper money. The former is issued by the state for the purpose of meeting current obligations when the Treasury is empty, or to provide an inexpensive and convenient medium of exchange by substituting in the channels of circulation paper bills for metallic money; the latter is issued by privately managed institutions which are seeking private profit from the making of loans. The principles of regulation underlying these two forms of paper currency are fundamentally different, and they cannot be satisfactorily treated together. Since the regulation of bank paper is tied up with the whole theory of credit and banking, treatment of it is reserved for subsequent discussion.'

Government paper is of three main types: (1) mere representative paper; (2) convertible fiduciary paper; and (3) inconvertible or fiat currency. Representative money is backed dollar for dollar by specie, and the paper certificates which circulate are merely claim checks to an equivalent in coin. Such paper gives rise to no problems of regulation. Convertible fiduciary paper is exchangeable for specie, but is not covered by a coin reserve of 100 per cent. Unlike representative paper, it involves an element of trust or credit and affords a means of expanding the quantity of money beyond what is possible with the use of specie alone. Numerous devices have been developed, as we shall see, by means of which redeemability may

1 See chapters on commercial banking below.