We are still more forcibly reminded of paper money by the Carthaginian leather money, where any object whatever of the size of a coin was shut up in a leather envelope with the state seal, and then circulated as if it were the coin it purported to be. Mieris, Beschryving der Munstn, 1726, explains the saga of Dido's ox-skin by means of this leather money. Certain it is, however, that the surprise with which the sophistical dialogue, Eryxias, mentions the matter, is a proof how foreign it was to the Greeks. Concerning the Roman plated denarii which were stamped with the silver coins, but which were also accepted by the state treasury, see Mommsen, R. G., I, 405.

907 In the middle ages, leather money was issued as a promise of future payment: by the doge of Venice in the wars of 1122 and 1126 (Montanari, Della Moneta, 34); by King John, of England, during the struggle of the barons (Camden); Emp. Frederick II. at the siege of Faventia (Malespini, Hist. Fior., 130, Villani, Hist. Fior., VI, 21); by Louis IX. during his captivity (v. Raumer Hohenstaufen, V, 461), John of France, 1360 (Anderson, Origin of Commerce). On the Frankfurt lead marks which were afterwards redeemed by the Rechnerei: Kirchner, I, 541. Lavallette's copper tokens during the siege of Malta had the inscription: non aes sed fides. The paper money which was issued during the siege of Leyden, the inhabitants afterwards would rather preserve than have redeemed, ad perpetuam liberationis divinae memoriam. (Bornitii, De Nummis, 1605, I, 15. Distress coins, melacs, during the siege of Landau and of the Hungarian Ragoczy, Marpurger, Beschreibung der Banquen, 213. Krones, Zur Geschichte Ungarns im Zeitalter R's, 1870.)

908 The Chinese have had various kinds of paper-money in their country since the 7th century after Christ. Sometimes they called them "flying coins, convenient coins," and sometimes coupons, bons, conventions (Klaproth, Memoires relatives a l'Asie, I, 375 ff.), against which the caravans, as soon as they had passed the limits were obliged to exchange their silver (Pegolotti, Pratica della Mercatura in Della decima etc., III, 3). These had compulsory circulation in China. The great Mongolian khans here became acquainted with paper-money. (M. Polo, II, 21.) Thus, especially in Persia, where refusal to accept such money and the imitation of it was punished with death (1340). Compare Ferishta, ed. Briggs, I, 414 ff. d'Ohsson, Hist. des Mongols, IV, 101 ff.; II, 487. Even here there occurred cases of state bankruptcy and finally withdrawals of the depreciated paper. (Klaproth, loc. cit.) In Japan, according to Oliphant, Narrative of L. Elgin's Mission to China and Sapan (1859), all foreign coins were required to be exchanged against paper-money at the offices of the state bankers.

909 Adam Smith mentions North American paper money of the amount of 1 shilling, and Yorkshire bank notes of the amount of 1-1/2 shillings. Sweden had, until 1828, notes of 28 pfennigs.

910 Hence in Sweden, with its copper standard of long duration, the system of banks of issue was developed very early. The transport-notes (Transportzettel) (to be found in that country as far back as 1661) of the Stockholm bank are considered the oldest bank notes. Compare, however, Palgrave, in the Statist. Journal, 1873. When, in 1768, Catherine II. introduced paper money into Russia, the people gladly paid 1/4 per cent. exchange to the state treasury for it. (Brueckner, in Hildebrand's Jahrbuecher, 1863, 49.) According to Cancrin, Oconomie der menschl. Gesellschaft, 116, private individuals in from four to five months exchanged 40 millions of silver roubles for paper. And thus, in 1780, Berlin bank notes stood a few per cent. above par, and the notes of the S. Carlos-Bank, in 1788, from 1 to 1-1/2 per cent. (Rau, Archiv., II, 161.)

911 When at times in which paper money is looked upon with diffidence, peasants and others bury their metallic money, this advantage of course is lost. On the other hand, the exportation of precious metal money, caused by the emission of paper money, must not be considered a necessary evil, but rather as the condition precedent which in most cases makes the above advantages of the paper money possible for the first time. Compare Ad. Wagner, Die russische Papierwaehrung (1868), 22, 24, 33. Ricardo, Proposals for an economical and sure Currency, 1816, estimated that England, after the abolition of the bank restriction, needed twenty million pounds sterling. The interest on this amount of capital inclusive of wear and tear etc., should be estimated at at least ten percent.; that is for the whole kingdom at at least from two and one-half to three millions a year. On this Ricardo founded his proposal to base the bank notes on gold bars. In its time, the essay: Guineas an unnecessary and expensive Incumbrance on Commerce, or the Impolity of repealing the Bank-Restriction Bill considered (London, 1802), met with great approval.

912 Adam Smith calls attention to the analogous case in which a manufacturer replaces a costly machine by a cheap one, sells the former and employs the difference between the old one and the new in enlarging his business. (W. of N., II, ch. 2.) When, indeed, all nations have introduced the use of paper money, the greater portion of the advantages which the one nation was able to obtain by its means cease, and the only ultimate result is a depreciation of the value of money and of the precious metals. Formerly the advantage reaped by the single nation that emitted paper money was greater than its share in the depreciation. (Wolowski, Enquete de 1865, 108.)

913 When E. Seyd calls bank notes more costly than metallic money, because the former in England require an outlay for administration of 1-1/2 per cent. per annum, while the wear and tear of metallic money amounts to 1 per cent. only in 20 years (Statist. Journal, 1872, 511), he overlooks the loss in interest and the costs of coinage in the latter case.

914 Related to this is the fact that in France, during the assignat-crisis, the large bills of 10,000 francs were harder to get rid of than the small ones. (A. Schmidt's Pariser Zustaende, III, 22.)

915 The numbering of paper money. A state which should neglect this would not only reserve to itself the possibility of an unlimited increase, but would surrender all control of its officials charged with the emission of the paper money. Law, Trade and Money, 162, advises that a large money reward should be paid to any one who should show the existence of a higher number than allowed by law, or of a duplicate number. And indeed, as comptroller-in-chief, he caused the prevot des marchands to be removed, because charged with the duty of burning the paper withdrawn from circulation, he (the prevot) noticed that the same number reappeared several times.

916 If a traveler wished to pay his inn-keeper in the note of a bank entirely unknown in the place, the latter would certainly refuse it. If, on the other hand, the traveler were to offer him a silver coin, the stamp and inscription of which were not familiar, still it would be taken at the value of the metal it contained, after deduction made of the costs of testing it, re-coining it, and compensation for the trouble caused. Ignored by Berkeley, who, indeed, considered metallic money nothing but "counters" or tickets (Querist, No. 23, 26, 441, 475), and who ascribes important advantages to paper money,—which by "stamp" and "signature" is made as costly as gold (440)—over metallic money (226).

917 Any person who has witnessed a tax-execution, or sale of property for the non-payment of taxes (Stuerexecution) will admit that a tax receipt is at least as real goods as an umbrella or a glass window that protects one from the storm. Michaelis considers the amount of running payments to the state for duties, taxes etc., as the only right basis for full-value paper money. (Berliner Vierteljahrsschrift, 1863, III.) Better yet when Hoefken advises that only as much paper money should be issued as amounted to the average balance (Bestand) in the national treasury. The tax-basis is defended with great warmth by L. Stein. Louis XIV., in 1704 issued paper money bearing 7 per cent. interest, the acceptance of which by all the royal officers of the treasury was prohibited! (Dutot, Reflexions, 863, Daire.) Law, Trade and Money (1705) ascribes to parcels of land the greatest constancy of value, because they cannot be replaced, because they can be neither increased nor decreased, and because they help to produce all other goods (p. 170). While silver cannot but depreciate, they have a prospect but to rise (188). Hence Law recommended notes based on parcels of land as the best money. (163, 191, 195.) Similarly, Benjamin Franklin, Modest Inquiry into the Nature and Necessity of a Paper Currency: and the Paper Money of Pennsylvania, New York and New Jersey was actually based on parcels of land, and was to be extinguished by the enfeoffed owners, and the interest paid by them. (Ebeling, Gesch. und Erdbeschreib, von N. Amerika, III, 621, IV, 649.)

918 F. Renonard de Ste Croix, Voyage aux Indes orientales (1810), I, 32, describes a species of paper money based on parcels of land which had lost 40 per cent. of its nominal value, although the holders of them were invested with the fief at only one-half their value. The French mandats territoriaux of 1796, declined in five months to 5 per cent. of their nominal value, although they contained the provision that the holders might, without public sale (Auction), have a certain amount of the national estates allotted to them in exchange for the mandats. The assignats were still more defective after their redemption (at the Caisse de l'extraordinaire), which was at first intended, and their drawing of interest were not fulfilled. Leaving the tax-basis out of consideration, the notes might, at the sale of the national estates, be brought in as means of payment: a thing which would not have been inoperative, provided the amount of the paper money had been strictly limited to the price of the pieces of land estimated in money. On the 1st of April, 1790, 400,000,000 francs in assignats were issued, and in September, 800,000,000 more, both together about equal to the secularized property of the church. (Ad. Schmidt, Pariser Zustaende, II, 97.) But as afterwards all proportion between these two magnitudes ceased, or rather as up to January 1, 1793, 3,626,000,000 assignats were issued; up to September, 1794, over 8,800,000,000; up to September, 1795, 19,700,000,000; and finally up to September, 1796, 45,578,000,000 francs, of which perhaps 6,500,000 were either burned or demonetized, the price of the national estates on lands must naturally have risen as vastly as the assignats declined.

919 The paper money issued by Colbert's successor, Chamillard, soon lost on account of its too great amount, 25 per cent. of its value, spite of the fact that it bore interest, and that 1/4 of all payments to private persons had to be made in it. (Forbonnais, Recherches et Considerations, II, 182.) When the people of the United States, in 1775, issued paper money, it did not decline in value up to the end of 1776, so long as the amount did not exceed $20,000,000, as it was considered a matter of honor to take it at par. Afterwards, when the amount issued continued to increase, not even the law that a refusal to accept it, or insisting on taking it below par, should be punished with the loss of the commodity, and that the guilty party should be declared a national enemy, could keep it from declining in value; so that in May, 1871, a dollar in specie was worth $200.5 in paper. Compare Franklin, Works, ed. Sparks, II, 421, VIII, 328, 505.

France, during the Reign of Terror, on the 2d day of April 1793, threatened the claiming of a discount in the taking of assignats with six years' confinement in chains, and on the 1st day of August, on Couthon's motion, with twenty years' confinement. In addition to this, maximum prices for the principal necessities of life were fixed and the exceeding of them was punished by severe penalties; and in France, and still more in the neighboring conquered countries, there were many persons who preferred to take assignats instead of payment rather than permit themselves to be robbed by requisitions. And yet on the 4th of June, 1796, one franc in specie exchanged for 800 francs assignats. Compare Buesch, Geldumlauf, III ( 58 ff., d'Ivernois, Etat. des Finances Francaise, 1796).

920 The Prussian treasury notes of 1806, by virtue of a decree published in 1807, were to be taken by all at a rate of exchange to be officially published from time to time. Between December 1, 1807, and February 28, 1809, the highest "normal course of exchange" was 71, and the lowest 27 per cent. In January, 1815, a refusal to take them at par, except in certain cases, was threatened with from 500 to 1,000 thalers of a money-fine or from 6 to 12 months' imprisonment. But indeed, in December, 1812, of 8,000,000 thalers, there were only 731,625 still circulating. Compare 7 of the decree of the 19th of January, 1813. In April, 1815, it was ordered that the half of all taxes should be paid in such notes, or that if not, 8-1/2 per cent, should be added as a penalty. This penalty, reduced in 1827 to 1 silver groschen, was not formally abolished even in 1870, although it had long fallen into disuetude. There was a run of the owners of the notes in 1830, for redemption, and again in 1841 and 1848; in 1848 to the extent of at most 40,000 thalers in one day, and altogether not over 100,000 thalers. (Bergius, in the Tuebinger Zeitschr., 1870, 226 ff.) About 1846, it was estimated that scarcely 1/250 a year of Prussian paper money was presented for redemption, while ⅓ of the state receipts came in in the shape of paper money. (Rau, Archiv., V, 125, 207.) The Saxon treasury notes never lost over 2 per cent., although the state treasury redeemed them up to 1804 only at an agio of 9 pfennigs per thaler, and afterwards of 1 pfennig.

921 Those entitled to make money claims are either compelled to accept the paper money at its nominal value or only at its current value for the time being. In the latter instance, the unjust compulsion is much smaller, but at the same time the whole expedient is much less productive to the state; and hence the former is the more usual. It was provided in Austria on the 22d of May and the 2d of June, 1848, that the former should be the rule, and that the latter should govern in cases in which gold or foreign silver had been stipulated for. (Hoefken, Oesterreichs Finanzprobleme, p. 53.) On the 7th of February, 1856, it was permitted to contract by express promise for loans in the metallic currency of the country, both for the interest and the repayment of the principal. Hence a species of parallel-currency. If it be made entirely impossible for private individuals to protect themselves against the compulsory circulation of paper money, the more prudent are forced to send their capital into foreign countries, which operates very disadvantageously to poor countries especially. (Wagner, Tuebing. Zeitschr., 1863, 441.)

922 Thus, for instance, the Frederick coins, and for a time the French assignats were helped by the popular enthusiasm, while Gustavus III., of Sweden, could give little value to his paper. (v. Struensee, Abh., III, 577.) In France, in 1796, 2,400,000,000 mandats were issued instead of all the outstanding assignats; that is, as many as there were assignats at the close of the year 1792. And yet the latter were then only 25 per cent. below par; the former, before one month had elapsed, 80, and in nine months, almost 98 per cent. below par. (St Chamans, Nouvelle Essai sur la Richesse des Nations, p. 150. A. Schmidt, Parisier Zustaende, III, 121 ff.) In Austria, in 1811, the volume of paper money was contracted, but in a manner so violent and destructive of credit that its rate of exchange did not rise in consequence. (Tub. Zeitschr., 1763, 1874.) After 1848, also, the rate of exchange of Austrian paper money was much more perceptibly influenced by the variations in the political state of affairs than by the changes in its volume. (Tub. Zeitschr., 1856, 129.) In the summer and winter of 1866, about 650,000,000 paper rubles circulated, with scarcely any increase or decrease; and yet the ratio of exchange was, during a part of the summer, 66, and in winter, 84 per cent. of the silver value of the ruble. (Wagner, Russ. Papierwaehrung, 74.) Instances in which the increase in the price of commodities began to be more general only after the volume of paper money had decreased; in Austria, in 1851 and 1866; in Russia, in 1857 (loc. cit).

923 Then precious metal money becomes a commodity of which great stores may be collected in the country itself, at the banks, but chiefly for foreign trade. It is said that Austrian business men in 1860 and the following years invested "hoards" to the amount of several hundred million florins in exchange on metallic-currency countries. (Tueb. Zeitschr., 422.) Good paper money will never drive out the whole supply of cash money out of a country, because a good portion must always be kept for purposes of redemption; depreciated paper money operates much farther in this direction. Even the exportation of small change may become a profitable speculation as soon as the amount of depreciation of paper money exceeds the seigniorage. Then usually small change of a worse kind is stamped, as, for instance, in Austria, copper instead of silver; and in 1860, 12 millions florins of paper small change. Here the exportation of the better money is not a consequence, but the motive to the manufacturing of the worse.

924 During the assignat-period it could happen that a land owner, after the term for which he had farmed out his land, might be compelled to surrender it to the farmers, for the reason that the taxes, requisitions, etc., paid by the farmers, amounted to more than the farm rent. In the case of the former, the calculation was based on the recent depreciated value of the assignats; in the case of the latter, on the higher value the assignats had at the moment that the contract was concluded. (Buesch, Geldumlauf, III, 62.) A writer in the Revue des deux Mondes, April 15, 1865, thinks that one reason why the American civil war was so popular in the northwest was because the paper money issued during the rebellion made it easy for that part of the country to pay off the mortgage-debts which had burthened it since 1848. Even of the two law catastrophes, Duclos, in his memoirs, remarks that they produced a great admixture of those who had been formerly separated by differences of class and wiped out the previous ideas of decorum, fitness, etc.

925 During the time that the clipping of the coin was practiced, it is scarcely possible to show that money was debased below 11 per cent. of what its value should have been. See, on the other hand, 3. In Austria, in 1810, a person had to give 1,200 florins in paper money for 100 florins in silver. (Tueb. Zeitschr., 1861, 593.) In North America, in 1781, it took $280 in paper to purchase $1 in silver. (Ebeling, Gesch. und Erdbeschreib., von N.A., 1856, III, 580; IV, 440; V, 437.) During the American civil war, the paper money of the Southern States declined to 1/2 (December, 1863) and even to 1/35 (October, 1864) of its nominal value. Compare Hock, Finanzen der V. Staaten, 514 ff. Observed even by Storch, Handbuch, Rau's translation, III, 141 ff. (See, on the other hand, C. King, Thoughts, p. 113.) In Paris in July, 1795, the greater number of commodities estimated in assignats were worth as much as if the rate of exchange of the latter was 6-14 per cent. of their nominal value, while it actually amounted to only 3-1/2 per cent.

926 Where an agio of exchange of metallic money as compared with paper is prohibited, the decline of the latter will manifest itself not only in foreign rates of exchange, but also in the price of bars of the precious metals.

927 The changes of the agio or premium depend mainly on the supply and demand of the precious metals, that is, on the extent and intensity of the business transactions which have to be made in these metals themselves. (Wagner, Russ. Papierw., 87.) Hence, for short periods of time, it may be said in a paper currency country, that business transactions based on cash money have a great element of variation in them. (Wagner in Bluntschli's Staats-woerterbuch, III, 971.) The purchase and lease-hold prices of fixed capital, of houses, for instance, rise much less because most people look upon the distress as transitory, and of short duration. (A. Walker, Sc. of W., 133.) In Austria in 1859, the rise of the agio of exchange of silver from par to 40 per cent., and its subsequent fall within 7 months to 20 per cent., left the price of coin almost entirely unaffected. (A. Wagner, Goett. Anz., 1860, 114.) That country people in general suffer more from a bad paper currency than the towns people and inhabitants of cities, see Bonamy Price, Currency and Banking, 175, seq. In the northern states of the American union, in 1864, 12 home kinds of commodities had risen 148 per cent., 7 foreign kinds of commodities, 164 per cent., and 7 which could be obtained only from the southern states, 353 per cent. (v. Hock, 186 seq.) As too great issues of paper money are so frequently made on account of war, it is comparatively easy to understand why it is that articles for which war creates a demand should rise in price very soon and very high; while the very opposite happens in times of taxation-distress, in the case of a great many articles of luxury, which can readily be dispensed with. Buesch remarks (Werke, VII, 91), that retail dealers frequently raise their prices in order not to be obliged to pay out so many small coins as change for the paper dollar.

928 Compare Hufeland, N. Grundlegung, II, 241. Self-seeking undertakers (Unternehmer = men of enterprise) have, on this account, both in Austria and Russia (Wagner, Russ. P.W., 105), but more so in North America (v. Hock, 556 ff.), opposed measures intended to restore values (Valuta), on the ground that they were anti-national. Even Sperausky experienced this in 1809, when he published very correct ideas on paper money, while in the "fairy" times of Catherine II., no one even thought that state paper money is a state debt. (Bernhardi, Russ. Geschichte, II, 2, 636.) One of the principal representatives of this course is H. C. Carey, Our Resources (1866), and in the New York Herald, 1865. On the other hand, Faucher rightly calls the more active exportation of countries, with a bad paper currency, an exportation of barbarous nations, the commerce of misery, to which any price paid in metal or in any higher-standing product of civilization is acceptable. (Vierteljahrsschrift, 1868, IV, 167.) The nation in the aggregate loses in international trade for the simple reason that its foreign creditors will accept its paper money at most at its current rate of exchange against specie, while foreign debtors force it upon the nation at its nominal value.

929 The different provinces also of a large empire may have very different degrees of depreciation of the same paper money. Thus, in the interior of Russia its rate of exchange against specie had for a long time not declined beyond 50 per cent. of its nominal value; while the foreign rate of exchange supposed a decline to 33-⅓ per cent. (Cancrin, Weltreichthum, 68.)

930 An enhancement of duties, taxes (Abgaben) etc., will seldom be able to progress in the same measure as the paper money sinks; in any case, a law would be necessary to effect this, which, however, comes always later than the decline. (Sismondi, Du Papier Monnaie, 27.)

931 Wagner, Russische Papierwaehrung, 142, estimates that the Crimean war depreciated the average current rate of exchange of Russian paper money by 11.1 per cent., the Italian war of 1859 by 14.5 per cent., the German war of 1866 by 19.4 per cent., spite of the fact that Russia did not participate directly in the last two wars.

932 The more than forty-five milliards French assignats, estimated at their rates current, really produced to the state only about six milliards. (Gentz, Histor. Journ., 1800, II, 317, after Lecoulteux.)

933 Very well explained by H. Thornton, Paper Credit of Great Britain, ch. 10. As to how, in Austria, the paper-money crisis contributed to bring the rigid national resources into a molten state, and to shake off the national inertia by the feeling of insecurity, see Buquoy, Theorie d. Wirthschaft, 1816, 347 ff. Schaeffle, System, 3 aufl., 254 seq., thinks that if Austria should first adjust its values, and then, in case of another war, have recourse to a second depreciation, the disastrous disturbances of its national economy consequent herein would be produced twice instead of once, and not without reason.

934 The Prussian treasury-bills stood, in June, 1809, at 36 per cent. of their nominal value; June, 1810, 84-1/2 per cent.; January, 1812, 13-1/2; December, 1812, 44-1/2; June, 1813, 26-1/2; July, 1813, 24-1/2; December 31, 1813, 49-1/2; January, 1815, 88; January 5, 1816, 99 per cent. Austrian paper money expressed in terms of metallic money, amounted, on an average, between 1849 and 1855, to 292,000,000 florins: but at certain moments, it fluctuated from 231,000,000 to 337,000,000. (Tuebing. Zeitschr., 1856, 124.) The agio of silver fluctuated during the Bancozettel (bank-billets, a species of Austrian paper money) period from one day to another on Change 40 and even 100 per cent.: thus, on the news of Napoleon's entry into Paris, between the 25th of March and the 4th of April, from 330 to 440; on the receipt of the news of the result of the battle of Waterloo, in three days, from 458 to 412; after Napoleon's abdication, from 412 to 320. (Gentz, Werke, V, 62.) Huskisson rightly calls a depreciated paper currency a much worse thing than clipped coin: the clipping of the coin is, so to speak, one great blow after which people can again calculate with certainty; but bad paper money is one continual fluctuation.

935 "The only difference here is that it is not left to individuals to say whether they will join in the game or not." (Helferich.)

936 During the later assignat-period every house was full of commodities, every pocket of samples; every "exquisite" and every lady was a merchant, because no one had any further confidence in the money. People had retrograded to the barbarous condition of trade by barter. (Goncourt, Histoire de la Societe francaise pendant le Directoire, 1854.) The French constitution of 1795 fixed the salaries of members of the Directory at the value of 50,000 myriogrammes of wheat (art. 173, 68). In Delaware, while the depreciation of paper money lasted, farm rent was usually required to be paid in produce. (Ebeling, V, 37.)

937 "Of all contrivances for cheating mankind, none has been more effectual than that which deludes them with paper money." (D. Webster.) The American Secretary of the Treasury, McCulloch, says, in the report of December 7, 1868, of the legal tender notes: "there can be no doubt that these acts have tended to blunt and deaden the public conscience, and they are chargeable in no small degree with the demoralization which so generally prevails." Niebuhr attributes the decline of old Spanish honesty which was formerly so much relied on in all great money centers, principally to the vales. (Nichtphilol. Nachlass, 489.)

938 This calls to our mind the impersonal mass-crimes to which our own times so frightfully incline, when many a man who would recoil in horror from an ordinary act of pocket-picking or from manslaughter with intent to commit larceny, robs thousands in cold blood by means of a swindling enterprise, or, for the sake of a fraudulent insurance, destroys the lives of a whole ship's crew.

939 Saxon loans of two million thalers treasury notes (Kassenbillets), August, 1813, which were then to bear interest in silver and to be paid in silver. The purchase of the precious metals, or loans made by the state in foreign countries, with the intention of redeeming paper money, effect the same end at a much greater cost. (Peschel, D. Vierteljahrsschrift, 1858, III, 254.) If the currency consists of bank notes endowed by the state with compulsory circulation and an irredeemable character, such a metallic loan made in order to reimburse the bank for a loan to the state in depreciated notes is a gift made to the bank without reason; and the metallic money brought into the country flows back into foreign parts when the bank restriction is removed, because it, together with the appreciated notes, creates a too abundant circulation.

940 Although in England the suspension of the redemption of notes had lasted from 1797 to 1819, depreciation of notes during the greater part of this time either did not occur at all (Summer of 1797 to 1799, 1802 ff.) or was very small; and even during the last five war years, it did not amount to much over 30 per cent. About 1817, the notes of themselves again rose to par, and had lost but little during the following years, in consequence of the great loans of the continental powers in the English market. Under such circumstances, the repeated promise of the state to make the notes redeemable at their full nominal value was certainly a cogent reason for the Peel's Act of 1819. In favor hereof are especially Tooke, Hist. of Prices, II, p. 60 ff., and J. S. Mill, Principles, III, ch. 13. Opposed to it, the so-called Birmingham-Atwood school and also Lord Ashburton, in his statement before the Agricultural Committee, 1836. But according to Rob. Muschet, Tables, exhibiting the Gain and Loss to the Bondholders arising from the Fluctuations in the Value of the Currency (1826), the state creditors, on the whole, lost more by the depreciation of the notes than they gained by their subsequent rise. Ad. Wagner also is decidedly in favor of the course A.

941 This has occurred not unfrequently in the case of the paper money of subdued revolt: thus, for instance, the Hungarian of 1849; in the case of the Southern Confederacy. But the assignats, too, came to this end, although, according to Buesch (Werke IX, 526), the intentions of the country at first were good; and in Austria, in 1810, many prophecies looking in this direction were made. (Per contra Rehberg, Saemmtl. Schriften. IV, 334.) Not very differently did it fare with the Swedish coin-tokens (Muenzzeichen) of Charles XII, which were altered 7 times between 1715 and 1718; and where besides, the tokens called in in a much too short space of time were transformed into small change coins 1/32 their value hitherto. (Brueckner in Hildebrand's Jahrb. 1864, I, 161, ff.)

942 Thus it was, for instance, in Austria, in 1811 and 1820, at 1/5 and 2/5 of the nominal value, in 1799 in the United States, in 1813 in Denmark with the currency notes (Courantzettel), in 1816 in Norway with the royal bank dollar notes, in Sweden in 1814 with the bank notes (Bancozetteln) at 37-1/2 per cent., in 1839 in Russia with the bankassignationen, at 2/7 of their nominal value. Of theoretical writers this course is recommended among others by Jacob, Staatsfinanzwissenschaft, 980 ff.; Nebenius, OEff. Credit, 2 Aufl., ff.; Deutsche Vierteljahrsschrift, 1841, I, 65; Rau, Lehrbuch, III, 528; Helferich, Tueb. Ztschr., 1856, 435 ff. According to v. Rotteck, Lehrbuch, IV 402, it may be assumed that paper money is spread among the people of a country in proportion to their resources: which is also the hypothesis on which all direct taxation is based. Hence the gradual depreciation of paper money operates like the imposition of a tax and the reduction of value (Deralvirung) is, so to speak, only the release of the same. Besides Gentz (Werke by Schlezier, IV, 58) shows from the example of Austria in 1811, that in the case of the taking up of a depreciated paper currency it makes a better impression to give 100 florins in specie for 1,000 florins in paper, than 200 florins in a new kind of paper. The holders of the old paper money have now lost confidence in all paper currency. Of similar import is the immediate abolition of the compulsory circulation of paper money at its nominal value (Prince Smith in Faucher's Vierteljahrsschrift, VII, 126 ff.), and the introduction of compulsory circulation in accordance with the day's quotations of the actual value of the paper as compared with specie. (Strache, Die Valuta in OEsterreich, 1861; per contra, Ad. Wagner, Tueb. Zeitschr., 1861, 606 ff.)

943 Such measures as were adopted in Austria, in 1811, where a "redemption and extinction deputation," independent of the government was established and sworn to prevent a further increase of paper money, are not sufficient of themselves alone.

944 The Code Civil (art. 1895) makes the nominal value entirely conclusive; so, also, the Prussian Landrecht (I, 790): which is to proclaim the omnipotence and infallibility of the state power in the most ingenuous or else in the most brutal manner. The power given by Puchta to metallic value (Pandecten, VII, aufl., 38) is applicable neither to paper money nor to small coin; and it ignores entirely that stamped coins and currency money are something different from mere metallic commodities and even from metallic bars. The Austrian civil law (buergerliche Gesetzbuch) decides in favor of the current value (986 seq.): a view which most modern jurists since Savigny (Obligationenrecht, I, 404; earlier yet, Hufeland, Ueber die rechtliche Natur des Geldschulden, 180) entertain. But they even fail to recognize that the depreciation, for instance, of paper money as compared with specie and general decrease of purchasing power are identical only in the case of such paper money or reduced coins which have no compulsory circulation. (A. Wagner, Tueb. Ztschr., 1863, 478 ff.)

945 Let us suppose that at the moment the state could perform its duty to its servants only to the extent of one half. If it should frankly admit this, pay one-half in good money and remain in debt for the other half, it might subsequently, in better times, make good to them or to their heirs what it had now refused; and thus private credit, from the disturbance of which the state can only suffer, suffer no diminution. Both are quite different when the state disguises its insolvency under the mask of apparent full payment in paper money which has lost 50 per cent. of its nominal value. In opposition to the myth that the assignats saved France, see Levasseur, in the Acad. des Sc. m. et. p.

946 It not unfrequently happens that a nation's paper money has been directly or indirectly affected by an unfriendly state. Thus for instance, England, in 1794, tolerated an assignat manufactory at Lambeth, while Frenchmen imitated English bank notes. (Archenholz, Aenalen XI, 429.) Napoleon in 1812 issued forged Russian bank notes. (Cancrin, OEconomie der menschl. Gesellschaft, 136. Niebuhr, Gesch. der Revolution, II, 314.) When Maria Theresa first wished to introduce paper money, Bolza, her minister of finance, in his urgent appeal to her to desist from adopting such a measure, foretold the subsequent bankruptcy etc. (Mailath, Oesterr. Gesch., V., 83.) Adam Smith compares gold and silver circulation to a highway which, indeed, produces nothing directly. Paper money is an advance similar to that which would be produced by the construction of a machine adapted to the carriage of persons and goods through the air, and which permit the highways hitherto used to be turned into meadows, arable land etc. Ad. Smith very strongly emphasizes the insecurity of these "Daedalian wings" as compared with the "solid ground of gold and silver," especially in the transitory misfortune produced by war. (W. of N., II, p. 78, Bas.) David Hume says of all paper media of exchange, that they share all the harmfulness of an increase of specie money, enhancement of the price of commodities, aggravation of the obstacles to exportation; but that they do not share in the useful properties of specie money. (Discourses, On Money and on the Balance of Trade.) The younger Mirabeau kept Necker from pursuing his plan to issue paper money with the words: du papier monnaie c'est la peste circulante! Inconsistent as Napoleon was in his bank policy (compare Horn, Bankfreiheit, 304), he always rejected paper money. As in 1805 he wrote to the minister of justice: je ne veut pas de papier monnaie: so, in opposition to the minister of the interior, he in 1810 compared it to the plague: le plus grandfleau des nations. (Acad. des Sciences m. et p., 1864, II, 212.) Sismondi, too, compares paper money to the paper cannons of the Chinese, which render a cheap service until the hour of danger comes. (N. Principles, II, 107.) Of the banks he says: les avantages aussi-legers les dangers aussi graves. (Eludes, II. 421). Cancrin, OEkonomie der menschl. Gesellschaft, 1845, 152 ff., says he thinks that possibly it might have been well never to have established banks, but that yet the craving for the new is preponderately good, it brings inventions and improvements with it. Even Tooke considers the insecurity of paper money a disadvantage which more than counterbalances its cheapness. (Considerations on the State of the Currency, 1829, 85.) On the doubts of Jefferson and Gallatin, see Wolowski, Enquete, 170, seq. Webster called paper money "the most effectual of inventions to fertilize the rich man's field by the sweat of the poor man's brow." Tout papier monnaie par lui meme est un mensonage. (M. Chevalier, Cours, III, 428.) M. Niebuhr calls banks a poison which should be used with moderation. (Bankrevolution und Bankreform, 1846, 37.) Compare the writers named in 2.

947 Avec la liberte un peuple n'a jamais de mauvaises monnaies (F. Lenormant): entirely so, provided liberte be translated "true and insured freedom."

948 Law's giddy projects under the regents of Orleans and the assignats of the first republic; Austria, Russia and the United States; the Danish absolute monarchy, and Sweden, both under Charles XII., and its oligarchical times. The history of Rhode Island paper money is peculiarly scandalous. All debts had to be paid within two years, or to be held invalid, and juries were dispensed with in such cases. (Ebeling, Gesch. und Erdbeschreib. von N. America, II, 173 ff.)

949 Ad. Mueller compares "cosmopolitan" metallic money to a universal language: paper money ties one to the country, as people do not like to travel in foreign parts when they understand only their native language. As paper money compels subjects to take an interest in the state, a state like Austria would act very foolishly if it should begin its reorganization by enhancing its depreciated values (Valuta). (Elemente der Staatskunst, 180, III, 171; II, 339 ff.) Even in 1830, he found fault with the Austrian loan for the payment of the paper money. (Briefwechsel mit Gentz, 321 seq.) He lauded paper money because he claimed it led a country back to the barter And service-economy of the middle ages. (Verm. Schriften, I, 59 ff.) Similarly, Gentz, in his later writings. Compare Roscher, Gesch., der N. OEk., in Deutschland, II, 762.

950 Who, for instance, would lay by a paper dollar in the savings bank for his godchild? In this respect, too, oriental countries have preserved much of the medieval. Concerning the aversion of the Egyptians of our day for all paper money, see Stephan, AEgypten, 250 seq. This is all the more surprising since during several months after the harvest, there are from 4,000,000 to 8,000,000 piasters in specie sent every day from Alexandria by post to private individuals in the provinces. In addition to this there is the immense difference in the French, English and Austrian coins circulating in the country, and which have very different rates in the different provinces. It is still worse in Arabia. (v. Maltzan, Reise, I, 27.)

951 Compare v. Schlozer, Anfangsgruende, I, 140 ff. M. Niebuhr (Rau's Archiv. N.F. II, 125) finds paper money best adapted to countries without any exchange-trade, but which at the same time require a species of money easily computed and easy of transportation (Russia); countries whose national economy has an extraordinarily rapid growth (the United States); and in unusually solid countries (Scotland).

952 List, Nat. System der politischen OEk., I, 394. A private individual of small means who should go on his travels without money would be subject to all sorts of annoyances; a king or a Rothschild, just as soon as he was recognized as such, would find credit everywhere. Thus, English businessmen have outstanding claims in all parts of the world, which might without any great difficulty be called in in the precious metals. The more the division of labor is developed, the better may the condition of a nation's whole economy be seen reflected in the course of its banking system and its exportation and importation.

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