THE MONETARY PROBLEM. 205 



the monetary needs of so vast a nation as the United States. It is 

 doubtful that even the vast increase, both present and prospec- 

 tive, in the production of gold will yield a supply, the proportion 

 of which coming to the United States would be sufficient for its 

 monetary needs under such a requirement. To the evils of a 

 paper currency issued against silver, reference will be made 

 hereinafter. 



If paper currency apparently based upon gold be issued to a 

 value greatly in excess of that of the gold held for its redemp- 

 tion, the excess of the currency above the gold, in the absence of 

 other guarantee of its security, is speculative and unstable. If 

 a guarantee of its security other than gold or other metal in 

 coin or bullion be given, a new factor enters into the monetary 

 sphere. 



The United States bonds are promises to pay, based upon the 

 ability of the Government of the United States to obtain the result 

 of human effort to the extent of their value by the power of taxa- 

 tion ; and as a United States national bank is required to deposit 

 numbers of these bonds as a basis for the bank notes issued by it, 

 the security for these notes is really the Government's power of 

 taxation, or ultimately the result of human effort elicited by the 

 use of that power. A considerable portion of the security for the 

 notes of the Bank of England consists of indebtedness of the nation 

 to the bank ; and the Dominion notes of Canada are largely based 

 upon the Government's indebtedness. A new factor succeeding and 

 supplementing gold as the basis for monetary issue is therefore 

 the assurance of the result of human effort to the extent necessary 

 to maintain the expressed value of the currency. 



To perceive that a pa-per representative of value so secured 

 will perform every function of a coin of equal value needs only 

 an instant's reflection. A five-dollar national bank note, for ex- 

 ample, one of hundreds of such notes, drawn from a bank by the 

 paymaster of a woolen mill, may be paid to one of the operatives 

 as the measure and reward in part of the expenditure of his effort 

 in guiding the loom. It may be paid by him to his grocer, there- 

 by measuring and rewarding in part the efforts of men expended 

 in producing and bringing to him potatoes, flour, coffee, sugar, 

 bacon. It may be paid by the grocer to his landlord, and so 

 measure and reward him in part for effort expended under his 

 direction in erecting and finishing the building containing the 

 grocery. It may be paid by the landlord to a servant, as the 

 measure and reward of effort expended in keeping his house clean 

 and preparing food for his family. It may be given by her to a 

 shoe dealer, measuring and rewarding in part the efforts of men 

 expended in killing cattle, tanning hides, working them into shoes, 

 and bringing the shoes to the store whence she obtained them. 



