MONEY 



3887 



MONEY 



financial scheme may burst and cause panic. 

 Thus, the paper money issued during the Revo- 

 lution of the American colonies fell in value 



CONTINENTAL CURRENCY 

 Form of the paper money of Revolutionary times. 



till in 1782 five dollars of it was worth only 

 one cent in silver. 



There are two kinds of paper money. The 

 first comprises silver and gold certificates, which 



are merely receipts for actual metal in the 

 possession of the government, and are issued 

 because convenient to carry. Any person may 

 take these silver and gold certificates to the 

 national Treasury and get metal money for 

 them. Because of this easy and sure exchange 

 people have full confidence in them. . But most 

 paper currency is only partly, if at all, secured 

 by reserves of gold or silver. So long as the 

 people think the reserve is large enough to pay 

 any of them who may want to change their 

 paper for metal, the paper money retains its 

 face value, but if the reserve dwindles or dis- 

 appears, or people lose confidence in the gov- 

 ernment the value of paper money %uffers. 

 Sometimes, in order to prevent the exhaustion 

 cf their reserves, countries are obliged to sus- 

 pend specie payment. This happened in the 

 United States after the War of Secession, as 

 told in the article SPECIE PAYMENTS, RESUMP- 

 TION OP. 



Currency 



The money which circulates in a country is 

 commonly called its currency. The currency of 

 the United States and Canada includes, besides 

 the token coins in the table above, gold coins 

 and paper money. In both countries the gold 

 coins contain 25.8 grains of metal .900 fine for 

 each dollar, and the authorized coins are $20, 

 $10, $5 and $2.50. In the United States they 

 are called double-eagles, eagles, half-eagles, and 

 quarter-eagles. Gold dollars were coined prior 

 to 1890. The paper money of the two countries 

 is as follows: 



United States Secured By 

 Gold Certificates, 



$10, up Equal amount of gold. 



Silver Certificates, 



$1, $2 Equal amount of silver dollars. 



United States 



Notes, $5, up .. Gold reserve. 

 National Bank 



Notes, $5, up. . .National bonds. 

 Federal Reserve 



Notes Gold and commercial paper. 



Canada, 

 Dominion Notes, 



25 to $5 Gold and bonds. 



Bank Notes, $5, 



up All bank 



Since the purchasing power of a dollar de- 

 pends upon the relation of the supply of cur- 

 rency to the demand for it, it is necessary, in 

 order to prevent violent changes in the value of 

 money, to establish a currency whose supply 

 will increase and decrease with the demand 



that is, be elastic. In prosperous times, when 

 credit is extended to nearly everyone and checks 

 serve in most business transactions and money 

 circulates rapidly, not so much currency is 

 needed. But when it is feared that there may 

 be a business crisis, when merchants refuse 

 credit to their customers, and people withdraw 

 money from the banks and are afraid to part 

 with what they have, then new currency must 

 be issued. It is to gain elasticity that the Fed- 

 eral Reserve Banks and the banks of Canada 

 are permitted to issue notes partly secured by 

 the promissory notes of bank customers. 



The standard moneys of the important coun- 

 tries are given in the following table, with 

 values in United States and Canadian money. 

 The standard is gold in every case, unless an- 

 other metal is mentioned: 



COUNTRIES WITH UNITED STATES AND CANADIAN 

 STANDARD 



COUNTRIES WITH BRITISH STANDARD 



