The Better forms have come into being as social progress has | mode of dealing with the troubles that attend on the use of the become more pronounced; and further improvement may be expected in the future. The condition of things when money is coming into being is characterized by the weighing or measuring of the substances used for aiding the course of exchanges. It has therefore been called the system of "currency by weight." In strictness, it is better regarded as the stage before the introduction of real money; and thus outside the field of currency systems proper. The simplest system of currency seems to be that in which the state,coins ingots of different metals and allows them to circulate without assigning any ratio for their respective values. Such an inconvenient form is not likely to be of long continuance; but it has sometimes arisen at a later time through the introduction of foreign coinages. Holland at the end of the 16th century, Turkey down to the present day may be given as countries approaching this state. The title of "currency by tale" is Jevons's apt denomination for such a currency system. The next form in logical order is that in which a single metal is definitely appointed as the sole standard money. In early ages this is the most natural arrangement, and it has, therefore, been widely adopted. Silver has been the metal generally used in this way; as the instances previously given (§ 8) prove. The title of "single legal tender " system is the obvious one for this form. With the growth of transactions a difficulty soon presents itself. If the chosen metal is not of high value it is cumbrous for making large payments; if on the other hand its value is high, it is unsuitable for use in small transactions. Hence there almost inevitably follows the use of other metals, which are better suited for certain particular uses. Thus silver is at once too heavy and too light. To pay £1000 in silver at its present value would take 800 lb troy, while a silver penny would be under the convenient limit of size. Partly for these reasons, but also to a large extent through the persistence of currency by tale, we find that along with the standard money other kinds are brought into or retained in use. Copper long survives beside silver; and gold is employed for the more important commercial transactions. Public convenience leads to the valuation of these subsidiary forms of money, and in this easy manner another currency system-that of "multiple legal tender "-comes into being. Though, theoretically, several substances might be valued for use as money, in practice some kind of bimetallism is used, and generally gold and silver are the constituents of the system. Thus for over three centuries England had a currency in which the values of gold and silver were fixed from time to time by royal proclamation. France and the United States, as well as many other countries, have had long experience of national bimetallism. The great problem in such a form of currency has always been that of keeping the The types presented by purely metallic currencies can be two metals in effective circulation. As the values of the precious considered by themselves for the purpose of theoretical exposimetals fluctuate, the principle of Gresham's Law is exemplified tion. In actual working they are now affected by the existence by the expulsion of the undervalued one. Each change in the of representative money. The state issues paper money which conditions of production or in the ratios fixed by other countries may be either convertible or inconvertible, or if it refrains from tends to disturb the balance and is harassing to trade. Local or so doing, the banks take up the task and supply a medium of national bimetallism comes to be unsustainable, and is replaced exchange in the form of notes, or by a later development through by other currency types. The most remarkable is that known providing for the use of cheques by their customers. as the "composite legal tender " system. Its object is to inconvertible paper currency has some pronounced affinities combine any advantages of multiple legal tender with the main-with overvalued metal; a duly regulated issue of this kind is tenance of the single standard principle. One metal is selected quite on the lines of the gold-exchange system, and the diffias the standard and is legal tender to any amount; other metals culties of the two forms are very similar. But, just as the cruder are utilized for the purpose of token currency. Thus in the systems of metallic money have gradually given way to the system of the United Kingdom gold is the only standard coinage; higher ones, so it may be said that the grosser forms of mismanbut silver and copper are employed for the lower coins and for agement in representative money are being removed, notwithsmaller payments. The establishment of this ingenious arrange-standing the recurrence of such monetary crises as that of 1907 ment is rather the outcome of the circumstances that governed the English monetary situation in the 18th century than any refined considerations of theory; but its justification on grounds of principle is furnished in Lord Liverpool's Coins of the Realm (1805). The extent to which the system has been copied by other nations and the stability of the English currency are strong confirmations of its merits as a solution of currency difficulties. Though the composite legal tender system has been a decided success, it does not follow that it supplies the only local double standard. Other methods have been evolved from the monetary experiences of France and India, which take distinct forms according to the special features of the case. There is the currency system known as the "limping standard," the essence of which is the concurrent use of two metals, one | being overvalued and coined only by state authority. The quantity of this favoured metal is necessarily limited in amount, to avoid depreciation or the ejection of the other metal from the circulation. It, however, has the position of money in the fullest sense, in that it is legal tender for any amount. The 5-franc pieces issued by the Latin union are the best known specimen of such coinage. In this case also the origin of the system was not theoretical, it was the result of the fall in the value of silver and the fear entertained by the French government that gold would be displaced by the cheaper metal. temporary expedient of limiting the coinage of standard silver has developed into the maintenance during more than thirtyfive years of the limping standard, which derives its name from the shortness of one limb of the currency body. Equally suggestive for monetary theory is another phase or system, usually described as the " gold-exchange standard " system, in which the ordinary currency is of a metal coined only by the state, and so limited as to keep it in a prescribed value ratio to another metal (gold) which does not circulate, but acts as the standard of value. This variation on the limping standard has been produced by the effort of the Indian government to meet the embarrassment caused by the continuous fall in the gold value of silver. Under the pressure of failing revenue and of persons suffering from the rupee depreciation in gold, the limitation on silver coinage was first enacted (1893); to be followed some years later (1899) by the establishment of gold as the standard, with a definite parity assigned for the state silver issues. The success of the Indian experiment-for such it avowedly was-has led to its imitation by the American administration in the Philippine Islands and by Mexico. It may be looked on as the natural product of the condition in which the single legal tender system is proving unfit, while the material for the composite legal tender system is wanting. The employment and theoretic explanation of these methods of currency adjustment mark the greatest advance made in monetary science and practice in recent years. Whether the limping, or the gold-exchange standards will be permanent forms is difficult to determine; but they are beyond doubt of much importance in meeting the risks of a period of transition. In any case they are entitled to recognition as distinct forms of currency organization, resting on a scientific basis. An in the United States. The great instance of government paper money is the United States notes, known, as "greenbacks," which are fixed at the amount of $346,681,016. The most prominent case of bank issue of notes is that of the Bank of France, with somewhat over £200,000,000 in circulation. Examples of the cheque currency are more difficult to state in quantitative shape; as the constituent parts are continually being created and cancelled, but the clearing-house returns give some idea of its extent in England. The figure for 1909 was £13,525,446,000. It seems highly probable that the next stage in improvement will be the extension of currency based on credit, after the Anglo-American pattern, to the other commercial countries of the world. But this movement can only be slow, it will not affect Eastern countries. For a long time they will remain in the metallic currency stage, with the moderate use of a guaranteed note circulation. appears to be the outcome of these discussions. The first established conclusion is the impossibility of obtaining an absolute and invariable standard. The best that can be hoped is a near approximation by balancing the elements of fluctuation. The construction of the most suitable monetary system is a work of practical adjustment. The influence of the actual conditions, which has been already emphasized, helps to indicate the limits of profitable inquiry. In respect to the metallic basis the choice is between the single standard-gold or silver, and some combination of these. The single standard of silver can be set aside, though it has had influential supporters. On the other hand the only combinations that need be considered are those indicated above by the titles" bimetallism" and "symmetallism." The theory of the gold standard rests on the principle that one metal is a better criterion for measuring values than two, since the fluctuations that occur by the substitution of one metal for the other are certain to be disturbing. There is the further difficulty that no ratio can be permanently fixed between two metals, as their values must vary with the alterations in production. The inherent simplicity, and, so to speak," naturalness," of the single standard is best realized by embodying it in gold, which is universally desired, of high cost and yet found in sufficient amount to discharge the money work of the standard. The verdict of history is appealed to as confirming the theoretic presumption, for gold has been gaining ground from century to century. The struggles to reverse this process have only made it more pronounced (see MONETARY CONFERENCES). Most of the objections to the gold standard rest on ideas which are the support of other economic fallacies. The attempts to supersede it involve the rejection of the rule of economic law. The foundation of the doctrine of "bimetallism" is the theory that the value of money is determined, not simply by cost of production, nor by unregulated supply and demand, but by the action of production. States are the demanders of metal for monetary of regulated demand, in conjunction with the actual conditions use, and by adjusting that demand they can powerfully influence the course of production, especially as the cost at which either TABLE 1.-Estimated Production of Gold and Silver, 1493-1900. There are several plans which have been advocated as superior to any of the systems actually in use. Most of these schemes are undeserving of notice; a few, however, claim attention on the ground of theoretical or practical importance. The most conspicuous is that known as "international bimetallism," which was designed to obviate the evils said to result from the demonetization of silver and the overflow of the established ratio between the precious metals. Its central idea was the creation of a monetary league, composed, if not of all, at least of the leading states (the larger the number the better), the members being bound to coin any amount of gold and silver at an agreed ratio. By such an agreement an adequate field for the use of both metals would be provided, and fluctuations in the relative value of silver and gold would be completely prevented. The expulsion of the cheaper metal would be impossible, owing to the absence of any place to which it could be driven. Variations in the production of the precious metals would act on both metals, not on one. Another plan for meeting the same set of difficulties is the composition of the monetary standard by taking assigned amounts of both metals in combination as the unit-say I oz. of gold with 10 oz. of silver. The title "symmetallism" has been given to this ingenious mode of trying to obtain a more stable standard than that afforded by the employment of a single metal. Amongst the many devices that the use of paper money has suggested the most noticeable are those that aim at the replacement of metallic money by some other basis. The socialist conception of a "labour note " may be paralleled by the idea of commodity notes," resting on a development of the clearing system. Viewed from the practical standpoint it may be said that the double standard in any form is condemned by the course of events; it has been defeated by the gold standard. In respect to the other proposed methods there is the almost insurmountable difficulty of making them in any way sufficiently popular to overcome the resistance that they must necessarily encounter. This criticism holds good, quite apart from the objections of principle to which they are all open, in very different degree it is true. The influence of custom in relation to money can never be set aside. For this reason it is certain that very gradual change is the only possible kind of monetary reform that can hope for success. It is essential to preserve as far as possible the old surroundings and avoid the intrusion of novel devices. The adoption of what Sir R. Giffen has styled "fancy monetary standards" is reserved for a distant future. In the course of the development of monetary systems important theoretical problems have presented themselves. For the middle ages the great question was the best mode of securing an honest metallic currency. At the beginning of the modern national states the problem of keeping a parity between silver and gold was the most serious issue which each state attempted to solve independently. With the rise of credit there followed debate on the proper management of paper money in its various forms, which has not yet been completely closed. But the tendency in the last fifty years has been to concentrate attention on the meaning and due constitution of the monetary standard. In particular, the difficulties that result from an alteration in general prices, and the inconvenience to foreign trade from different currency standards have been exhaustively considered. It is therefore desirable to present in a concise form what Period. 1493-1520 28 162,400 1,316,000 560 292 11.3 2,165,000 592 481 II.2 273,000 10,976,000 940 2,439 11.5 147,600 20 170,400 20 166,000 175,400 20 gold or silver is obtained varies with the productiveness of the | tinction. (v.) The establishment of a world-currency would be poorest mine in working. Thus by directing consumption, states are facilitated by allowing both metals a well-defined relation. This controlling production, and therefore-within limits-fixing the enumeration of the heads of the "bimetallic" case shows that its relative value of the two metals. This power has been shown in the working depends on the area of its operation. It must be "interstability of the ratio during the continuance of the French double- national" and the states composing the union must be " great standard (1803-1873). The possibility of maintaining a given powers in the monetary sense. Otherwise, their action would ratio being thus established, the argument proceeds to show the be comparatively ineffective. The crucial difficulty has been the advantages of the system. (i.) It secures the concurrent use of the determination of the common ratio. The risk of failure in carrying precious metals and avoids throwing all the money work on gold. out the policy has proved a deterrent to such great powers as England (ii.) Greater stability in value may be expected, since the fluctua- and Germany, who are in possession of the gold standard. On the tions of either metal will be compensated by those of the other. theoretic side the chief weakness of bimetallism has been its failure At the worst the variation can only be as great. (iii.) The larger to supply any clear account of the limits within which states can stock of money tends to keep up prices to the benefit of trade: regulate the ratio of gold to silver. If the ratio 15.5:1 can be set for falling prices hamper production. (iv.) The fixed ratio provides up why should not the ratio 100:1, or that of equality? Its a stable par of exchange between silver-using and gold-using practical failure has resulted partly from political conditions, countries; though universal bimetallism would remove this dis- partly from the removal of most of the difficulties which it was TABLE II.-The Coinage Systems of Continental Europe, exhibiting the gold and silver coins, their weight, fineness, remedy and approximate value in English and United States money. Present system introduced in 1894, in place of the system | 1875. It was modelled on the English system, but it is only in the adopted in 1870. The Maria Theresa dollar is only used as a commercial money in Levantine trade. The system of the Scandinavian union came into force on the 1st of January 1875. It is based on gold monometallism. The coinage system of France came into force on the 6th of May 1799. It was extended to the countries forming the Latin union in 1865; it has been adopted by Greece, Rumania, Servia and Spain. It is the most widely extended system in Europe. The Austrian 8 and 4 gulden pieces were equivalent to the 20 and 10 franc pieces. In 1879 it was estimated that the system was used by populations amounting to 148,000,000. In its origin a double standard (with ratio of 15:5:1) it has become a limping standard by the limitation of the silver coinage. The unit is the same value all through the union, but receives different names in different countries. The titles are: in France, Belgium and Switzerland, franc and centime; in Italy, lira and centesimo; in Greece, drachme and lepta; in Rumania, leu and ban; in Servia, dinar and para; in Spain, peseta and centesimo. The German coinage law came into force on the 1st of January ❘ last few years that the old silver has been completely withdrawn. The Dutch standard has been changed more than once. In 1847 a silver standard was introduced, and retained till 1872, the unit being the silver guilder. In 1875 the free coinage of gold was decreed; silver coinage having been restricted since 1872. Thus the limping standard is in force. The nominal standard of Portugal is gold. The English sovereign is legal tender at 4500 reis. The Russian currency until 1897 was nominally a silver standard one; but really was inconvertible. The currency was improved in 1885; and in 1897 the gold standard was adopted, provision being made for the withdrawal of the paper money. Finland, which had a currency on the French model, is now being compelled to accept the Russian currency. The Spanish coinage was assimilated to that of the Latin union in 1871. Spain, differing from the other countries of the group, coins a 25 peseta piece. The Medjidie coinage was introduced in 1844. English sove reigns circulate at 125 piastres; 20 franc pieces at 100 piastres. Coins. intended to meet by the subsequent economic development. The proposal for a joint standard formed by using a unit in which the two metals are combined has the advantage of escaping the risk of failure to maintain the ratio, for it makes the employment of both silver and gold essential. Its influence in causing stability is also likely to be greater; but it is open to the danger that a shortage of one metal would not be compensated by the abundance of the other. The further advantage that it does not need international agreement (for each country could settle its own combination) is counterbalanced by the strangeness of the plan and by its necessitating the use of representative money. The suggestion of 'goloid "coins on the model of the Greck electrum would hardly be acceptable. 11. The Present Money Systems of the World: Changes of the last Half Century.-The facts as to the money of the leading countries of the world are given in Tables II. and III. It is, however, necessary to explain the way in which this position has been reached by the reforms of the last fifty years. Since 1860 the alterations in standards and in coin denominations have been of a very extensive nature. England is one of the Until 1906 there was no mint in Canada. English and American coins circulate. The standard is gold (£1=4-866 dollars). There were formerly different methods of counting, viz. English sterling, Halifax currency and Canadian sterling; the respective ratios being 100: 120: 108. The Mexican currency has been entirely altered in its standard by the legislation of 1905. The gold-exchange system has been brought into force. The old-established dollar, which is called piastre, is reduced so as to represent a ratio of about 33.1. The dollar was introduced in 1787 as the unit. In 1792 the ratio of gold to silver was fixed at 1 to 15. This valuation underrated gold, consequently silver became the standard. In 1834 the ratio was altered to 1 to 16, and it was again changed in 1837, In these changes gold was overrated, and silver was driven out of circulation. This led, in 1853. to the reduction of the metal in the silver coins, which therefore became a token-currency. The suspension of cash payments took place in 1861. In 1873 silver was demonetized, and gold became the standard. In 1878 the "Bland Bill" was passed, making the silver dollar a legal tender, but confining its coinage to the executive, and fixing the amount at from two to four million dollars per month. The difficulties that resulted from this measure led to the Sherman Act of 1890, providing for the coinage of silver to the annual amount of 54,000,000 oz Owing to the critical situation created by these efforts to aid silver. the repeal of the Sherman Act was carried in 1893. Since then the chief problem has been to maintain an effective gold reserve. The Argentine currency is, in practice, one of inconvertible paper. The gold coins were altered in 1881. The old South American onza weighed 27 grammes, was 875 fine and worth £3, 4s. 6d. The Brazilian currency is greatly depreciated. It is derived from the Portuguese. The Chilean coinage was reformed in 1895, when the gold standard was adopted, and the system brought into relation to the English one. Two Chilean Condors (20 peso pieces) being equal to 1904 Colombia adopted the gold standard by taking the equivalent of the U.S. dollar as the unit; but the inconvertible paper is the main currency; and the old coins pass as commercial money. After attempting a parity with the Latin union, and passing through a period of inconvertible paper, Peru has adopted the English gold standard and coinage, but keeps her own silver denominations. The silver standard was prescribed in India in 1835, with the use of the gold mohurs. The latter was demonetized in 1853. In consequence of the fall in the gold value of silver, the Indian mints were closed to the coinage of silver, otherwise than by the government, in 1893. The amount of currency was so limited as to bring the rupee to the value of 1s. 4d. On the realization of this position, English sovereigns were made legal tender at the ratio of 15 rupees 1 sovereign. India has, by these measures joined the class, now becoming numerous, of gold-exchange standard countries. 10 The old Japanese currency consisted of gold cobangs and silver itzibus, with a ratio of 4 to 1. This antique system was replaced in 1871 by a double-standard one on the French plan, the ratio being 16-17:11. The system passed first into one of silver monometallism; and then became one of inconvertible paper. The great reform of 1897, aided by the Chinese War indemnity, placed the currency on the gold basis. few countries that has not found change desirable. France has | tyranny and abuse are likely to appear, all countries have at reorganized her token coins (1864), entered into the Latin | different times endeavoured to regulate. In England the lessons union (1865) and adopted the limping standard in 1874. Ger- of experience have shown that the abuses of this business are many has completely transformed the monetary system hitherto best regulated by a system of registration coupled with relief existing in the German States (1873). The Scandinavian union to debtors against harsh and unconscionable bargains. Other has been set up (1875). Holland has changed her system more countries however still appear to cling to the belief that it is than once. Still later, Austria-Hungary (1892) and Russia wisest to fix a maximum rate of legal interest. Thus in Germany (1897) have come over from the silver standard with the practical the commercial code fixes the legal rate of interest on commercial use of inconvertible paper to new currencies on the gold basis. transactions at 5%. Moreover in that country traders can In America the United States, after a series of monetary expe- demand interest on commercial debts from the day on which riences, has made the gold dollar its standard unit, though the debts fall due. In France, again, the Code fixes the rate the silver complication still exists. Mexico has succeeded in of interest on ordinary loans at 5%, and on commercial transestablishing a gold-exchange standard at such a ratio as to induce actions at 6%. In the United States of America the law the import of gold. British India has had its rupee currency relating to the lending of money on usury varies in the different put into relation to the English gold unit, and has been followed states. All the states have what is called a "legal rate" of by the Straits Settlements. Japan first abandoned its ancient interest; and when no rate of interest is specified in the contract currency (1871). It then adopted a double standard system between the parties, there is a presumption that the borrower which became in practice a silver one and later passed into has agreed to pay the legal rate. This legal rate varies from inconvertible paper. Finally, it has (1897) established a composite 5% in Louisiana to 8% in Wyoming; in the Eastern states legal tender system on the gold basis. The Dutch Indies have it is generally 6%. Some of the states have usury laws giving the gold-exchange standard on the same plan as British India. relief to borrowers in cases where circumstances have compelled Remarks. In addition to the tabular statements, the following them to agree to extortionate rates; but other states have no such points respecting the currencies of less advanced countries may be indicated. Though there is a tendency to establish the money of laws, except that a contract in writing is invariably required in all cases where the "legal rate" is exceeded. the mother-country in colonies, some of the British possessions, acquired by conquest, have kept their former currency. There has been a widespread movement in the backward countries of the world towards reforming their money; chiefly by setting up some line of connexion with the gold standard. In South and Central America the dollar has been retained as the unit; but the movement for co-ordination with the French system has ceased. The English standard has been preferred as a model by Chile and Peru. In Asia the currency of the Philippines has been reorganized under American control. China is considering monetary reform, and Siam has made progress in the direction of the gold-exchange standard. Probably the most defective currencies are now those of Turkey and her tributary states. BIBLIOGRAPHY.-The literature on the subject of money has been well described as "almost measureless." The list of writers who have contributed to it begins with Aristotle, and includes such II. Special treatises on "Money": W. S. Jevons. Money and editions). (C. F. B.) MONEY-LENDING, the lending of money on usury (q.v.). The business of the professional money-lender is one which, as Practically every form of investment in which a man is capable of indulging involves the lending and borrowing of money, the interest exacted being the profit which the lender receives for the use of his capital. The existence of the professional lender, as apart from the ordinary facilities for borrowing money on good security, is obviously due to the fact that it is not every borrower who is in a position to give good security for a loan. Where the security is bad the market is narrowed; the individuals who are prepared to lend the money on merely personal security require a high rate of interest. The first people to practise the profession of money-lending in England regularly were the Jews, and the business has remained largely in their hands, though they are in the habit of trading under assumed names. The Norman and Angevin kings were fully alive to the advantages which accrued to the people through borrowing at usury from the Jews, but they were also alive to the advantages which they themselves were able to reap by extorting from the Jews the wealth which the latter had acquired from the people. The Jews were regarded as the king's serfs, and squeezing them was but a popular form of taxing the people. Indeed in the reign of Henry II. the Scaccarium Judaeorum was established as a separate branch of the exchequer and used for the purpose of filling the royal coffers. The English people on the other hand were not so prone to foster the money-lending business. Sections 10 and 11 of Magna Carta provided that when a person died owing money to a Jew no interest should accrue during the minority of the heir, and further that the widow should be entitled to her dower, and any children who were minors should be provided with necessaries before the repayment of the loan. Then followed a large number of statutes known generally as the Usury Laws (see also USURY). The first of these was passed in 1235 (20 Hen. III. c. 5). The acts were directed to restrain the lending of money at usurious rates. The earlier ones in some cases prohibited the lending of money on usury at all, as in a statute of Jewry of the reign of Edward I.; but the later statutes were chiefly confined to limiting the rate of interest. Thus 21 Jac. I. c. 17 declared void all contracts where the interest was more than 8%. In 1818 a select committee of the House of Commons was appointed to consider the Usury Laws and in 1841 a similar committee of the House of Lords was appointed. As a result an act was passed in 1854 (17 & 18 Vict. c. 90) whereby all the existing laws against usury were repealed. The question whether any interest is payable or not, and also the amount of such interest, depends on whether the parties to the transaction have expressly or impliedly agreed to the payment of interest by the borrower, for apart from such agreement no interest can lawfully be demanded on a loan. |