346 THE QUESTIONS OF THE DAY. 



the nation authorizing it, but provided only that no more of it 

 were issued than would equal in nominal value the gold and 

 silver necessary to conduct the business, if that could be had. 

 Such money is called "fiat money," "fiat" being a Latin word 

 meaning, "let it be done," that is, in this case, "let this be 

 money." The people of a new country, like our first colonists, 

 have no means of getting gold and silver — international 

 money — except by the exportation of goods. But exchanges 

 among themselves are all the time going on, domestic 

 exchanges, in fact, at all times greatly exceeding international 

 exchanges in volume, and for these money is needed. In 

 such cases there is no doubt that, as a temporary expedient, 

 fiat money carefully restricted in volume would be much 

 better money than cattle, or tobacco, or rice, whose production 

 would increase, and ought to increase, and so cease to be a 

 good medium of exchange. When such money had served its 

 turn it would be received in payment of taxes and so return 

 to the authority which originally received goods for it. 

 Practically, however, there are difficulties in the way of even 

 this use of fiat money. The infirmity of human nature is 

 such that no government would be able to restrict its issues of 

 fiat money to the amount required to pay for what itself 

 required, which would be very small, because, when issued, it 

 would immediately begin to return in taxes, so that the 

 government would soon receive money enough for its uses in 

 the ordinary way. This would not satisfy the people, who 

 would insist upon the government printing the money and 

 lending it to them. This would very quickly introduce into 

 circulation a much greater amount of money tlian would 

 naturally be present of gold and silver or its representatives, 

 in the course of freely moving national and international 

 exchanges, when it would immediately depreciate, and cease 

 to be a good medium of exchange. And still it is true that 

 pure fiat money, with issues cai'efully restricted to displace 

 only its face value of metallic or representative money, would 

 probably make an entirely satisfactory medium of domestic 

 exchanges. I sny "probably," because the exporimont has 



