DEVELOPMENT OF THE MONETARY PROBLEM. 27 



as coin or bullion, without qualification or condition, through- 

 oat civilization, but a piece of paper representing the value of 

 that amount of coin or bullion considered simply as paper, 

 whether covered by writing or impressed by an engraved block, 

 is without intrinsic value. That is, for example, twenty-nine 

 grammes, 448"025 grains, of fine gold, whether in bullion or 

 coined into a hundred-franc piece, can readily be exchanged 

 throughout Europe and almost as readily throughout America for 

 an approximately similar amount of commodities ; but a piece of 

 paper known as a National Bank of Belgium one-hundred-franc 

 note can be exchanged for commodities to this value only among 

 peoples who feel confident that it can readily be exchanged 

 again in return for commodities to the value of one hundred 

 francs, and such peoples in great numbers do not exist outside 

 the kingdom of Belgium, because other than the Belgian peo- 

 ple are not generally familiar with the language in which the 

 note is printed, and therefore do not understand the value of 

 the units of value in which the note is expressed, and they are 

 not sufficiently familiar with the Belgian banking system to 

 know that the note is secure — that is, that twenty-nine grammes, 

 448'025 grains, of fine gold, can readily be obtained for it. The 

 extent to which a paper representative of value, which in itself 

 has no intrinsic value as a commodity, will circulate is therefore 

 at present determined by the number of people who believe that 

 it can readily be exchanged for coin or bullion to the value ex- 

 pressed by it. Essential to this belief are confidence in the 

 honesty and ability of the issuer. Therefore, when a people 

 among whom paper representatives of money of a particular issue 

 have been freely circulating begin to lose confidence in their 

 ability to readily exchange them for the coin for which they call, 

 there arises a tendency to exchange commodities and services 

 only for coin. As this tendency increases, as the lack of confi- 

 dence in the paper grows, there is soon reached a time when the 

 exchange of commodities and services is greatly diminished, be- 

 cause there is only sufficient coin in existence to effect a small 

 fraction of the normal value of exchanges. 



But, as measures of value in the last analysis are measures of 

 human effort as determined by its results, it is obvious that, were 

 every paper representative of value so secured that the holder 

 thereof might be certain that at any time he could obtain in 

 exchange for it the result of human effort to the measure of the 

 value called for by it, in a form acceptable to him, such paper 

 representatives of value would obtain free and general circulation 

 among all people believing in their security. The more extended 

 the territory throughout which, and the greater the number of 

 people among whom, such a currency would circulate, the less 



