WHY SILVER CEASES TO BE MONEY. 583 



consider the development of the currency to be limited to the 

 coin or to be in exact proportion to the coin, the situation may 

 be fairly described as ominous. There would be ground for say- 

 ing, as men of science have recently done,* that eventually the 

 gold standard will become untenable, and that silver will force 

 its way into use side by side with gold, if not to the exclusion of 

 gold. 



But the situation is modified, if not transformed, by another 

 factor in present and in future industrial history : that develop- 

 ment of credit machinery which forms the most striking phenom- 

 enon in the monetary history of modern times. In the develop- 

 ment of credit as a substitute for money we have something like 

 a natural law, which will put to naught the predictions of those 

 who predict disaster from the failure to make wider use of silver. 

 If, indeed, coin money were the sole or the most important constit- 

 uent in the medium of exchange in civilized communities, silver 

 or some other metal must certainly be brought in to supplement 

 the scanty growth of the supply of the gold. In fact, however, the 

 actual currency of civilized countries tends to consist less and less 

 of specie, more and more of credit substitutes for specie. Bank 

 notes, government notes, and above all bank checks, actually per- 

 form the commercial transactions of civilized countries. Specie 

 is the basis of exchange ; it is the measure in terms of which the 

 value of commodities is expressed ; but it is only to an insignifi- 

 cant extent the medium by which exchanges are actually con- 

 ducted. The use of credit is of course most highly developed in 

 countries like the United States and England, which lead the 

 world in general industrial development. It is growing steadily 

 and surely in continental Europe, and, beyond question, will con- 

 tinue to grow. Each individual, each financial institution, each 

 government, is tempted to enlarge the scope of credit operations 

 and to diminish the use of actual coin ; and the steady pressure 

 of these motives makes the tendency as sure and unalterable as 

 physical law. 



That this tendency brings its dangers can not be denied. An 

 ever-increasing volume of credit is based upon a relatively smaller 

 foundation of specie, and the evils of a sudden impairment of 

 credit become more and more serious. It has been attempted to 

 obviate the dangers by enlarging the basis of specie ; and the 

 wider use of silver is advocated as one method of broadening the 

 substructure. But efforts in this direction are likely to have but 

 temporary results. A broader basis of specie is likely, under the 

 influence of the same forces which now lead to an extended use of 

 credit, to bring about in due time an expansion of credit machin- 



* See Die Zukunft des Silbers, by Eduard Suess, Vienna, 1892. 



