THE MONETARY PROBLEM. 203 



regular ratio, and notably in the United States there are paper 

 currencies issued from different sources and resting upon differ- 

 ent bases. 



The money in circulation in the United States amounts to be- 

 tween one and a half and one and three-quarter billions of dollars, 

 divided approximately as follows : Nickel and copper coins, twenty 

 millions of dollars ; silver coin, one hundred and twenty millions 

 of dollars ; gold coin, four hundred and eighty millions of dollars ; 

 paper currency, one thousand millions of dollars. 



Statistics gathered by the Comptroller of the Currency show 

 that, of the receipts of national banks, checks form an average of 

 about ninety per cent, only about ten per cent being composed of 

 paper currency and coin. Other statistics, also gathered by the 

 Comptroller of the Currency, show that in retail transactions 

 throughout the United States the medium of exchange is com- 

 posed, on an average, to the extent of about forty per cent of 

 checks and sixty per cent of paper currency and coin. The 

 smaller retail transactions are effected almost entirely by the use 

 of coin; as the transactions become of greater value, the more 

 does paper currency enter into them ; as their value further in- 

 creases, the greater is the use of checks, and transactions of magni- 

 tude between different localities are settled by drafts and bills of 

 exchange. 



This progression in the medium of exchange, corresponding 

 with the progression in value of coexistent transactions, agrees 

 with the progression in the medium of exchange in correspond- 

 ence with the progression in value of transactions, as they have 

 developed throughout history, and makes manifest the fact that 

 the most important monetary factors at present are paper repre- 

 sentatives, of value consisting, first, of bank notes or govern- 

 ment notes circulating generally as currency, issued under gov- 

 ernment regulation, and secured upon widely known bases ; second, 

 of checks, drafts, promissory notes, bills of exchange, and other 

 instruments depending for their security upon the resources of 

 the drawers and indorsers, the extent of which is not generally 

 known. 



As these paper representatives of value form by far the greater 

 portion of the medium of exchange, the most important point of 

 the monetary problem is raised by the question 



How may paper representatives of value be secured, to most 

 satisfactorily meet the requirements of a medium of exchange ? 



Let the conditions incident to the issue and acceptance of a 

 paper representative of value in a simple case be considered. 

 When, a few years ago, a humble laborer, bereft of home, property, 

 and family by the Johnstown flood, applied to the manager of 

 a Pittsburg mill for work, he was provided with some immediate 



