MONEY 



3886 



MONEY 



pretty stones and wampum. A piece of paper 

 money is a printed token. 



The standard metals for the world's money 

 have been chosen for a number of reasons. 

 First, their value is large in proportion to their 

 weight; they can be more easily carried than 

 bags of salt or beaver skins. Secondly, they 

 are not perishable, like tobacco or corn. Then, 

 too, because they are composed of very small 

 grains they can be made into units of exactly 

 equal value and of any size desired. Last of 

 all, their values change but little from year to 

 year, whereas those of most commodities move 

 up and down from season to season. Gold and 

 silver possess these qualities to a greater degree 

 than any of the other metals. Copper, because 

 it is so heavy, is suitable only for the smallest 

 coins. 



Cheap Money and Dear Money. Because we 

 think of everything else as being worth a cer- 

 tain amount of money, it seems strange, at first, 

 to hear that money, too, has price and value. 

 Sometimes the expression price of money refers 

 to charges for borrowing it, and means in reality 

 the price of capital, which is explained in these 

 volumes in the article INTEREST. But money 

 itself has a price; that is, a silver dollar is 

 worth a certain amount in gold or paper money, 

 and a paper dollar has its worth in silver or 

 gold. So, too, the money of one country has 

 a price in another. In addition, money as a 

 whole has changing value, and when we read 

 that the cost of living is increasing what we 

 really learn is that the value of a dollar is going 

 down, for if a dollar will buy less than for- 

 merly it is in a true sense worth less to us. 



Gold and Silver Standards. In 1873 the value 

 of the metal in a silver dollar of United States 

 money was exactly a dollar in gold. Then the 

 price of silver began to decrease, so that at 

 times a silver dollar has been worth only forty 

 cents in gold. Other countries have, of course, 

 had similar experiences, and as a result most 

 of them have adopted a gold standard. That 

 is, gold coins have been the basis of all money 

 figures, and silver circulates as token money. 

 The United States has had the gold standard 

 since 1900; Great Britain made it legal in 

 1816. Few countries now maintain a silver 

 standard. 



A change in the relative values of gold and 

 silver sometimes creates difficult situations for 

 a government. Thus, the rise in the price of 

 silver in the spring of 1916 brought the value 

 of the metal in a silver rupee of India, which 

 ordinarily circulates as a token coin, to nearly 



the legal value of the coin. Had silver risen a 

 very little more, people would have begun to 

 melt the rupees to sell the silver in them, and 

 silver would have been driven out of circula- 

 tion. This would have been a hardship upon 

 all the people, because there are no gold coins 

 of small amount. 



At one time the silver half-dollars and quar- 

 ters of the United States were worth an equal 

 sum in gold, but after the great discoveries of 

 California gold in 1849, these coins were more 

 valuable than gold coins and ceased to circu- 

 late, because people saved their silver and 

 spent their gold, as explained under the head- 

 ing GRESHAM'S LAW. For this reason all coins 

 less than one dollar were made "token" money 

 by putting less metal into them. The amount 

 of metal in the minor coins of the United 

 States and Canada is as follows: 



UNITED STATES 



*Fineness .900 means that only 900 out of every 

 1,000 grains are the metal which gives the coin its 

 value. The balance of the metal in United States 

 silver coins is copper, in the five-cent piece nickel, 

 and in the one-cent piece tin and zinc. 



tThese values are constantly changing. 



Paper Money. Since paper, in itself practi- 

 cally worthless, becomes money only because 

 of government decree, it follows that its real 

 value depends largely on the confidence which 

 people have in the promises of the government. 

 The total amount of it which can be issued is 

 not controlled, as with gold and silver, by the 

 output of mines, but by the quantity which the 

 government determines to print. If too much 

 paper money is issued, the currency of a coun- 

 try is said to be inflated; like a balloon, it has 

 no solid backing, and if expanded too far the 



