the monetary needs of so vast a nation as the United States. It is doubtful that even the vast increase, both present and prospective, in the production of gold will yield a supply, the proportion of which coming to the United States would be sufficient for its monetary needs under such a requirement. To the evils of a paper currency issued against silver, reference will be made hereinafter.
If paper currency apparently based upon gold be issued to a value greatly in excess of that of the gold held for its redemption, the excess of the currency above the gold, in the absence of other guarantee of its security, is speculative and unstable. If a guarantee of its security other than gold or other metal in coin or bullion be given, a new factor enters into the monetary sphere.
The United States bonds are promises to pay, based upon the ability of the Government of the United States to obtain the result of human effort to the extent of their value by the power of taxation; and as a United States national bank is required to deposit numbers of these bonds as a basis for the bank notes issued by it, the security for these notes is really the Government's power of taxation, or ultimately the result of human effort elicited by the use of that power. A considerable portion of the security for the notes of the Bank of England consists of indebtedness of the nation to the bank; and the Dominion notes of Canada are largely based upon the Government's indebtedness. A new factor succeeding and supplementing gold as the basis for monetary issue is therefore the assurance of the result of human effort to the extent necessary to maintain the expressed value of the currency.
To perceive that a pa-per representative of value so secured will perform every function of a coin of equal value needs only an instant's reflection. A five-dollar national bank note, for example, one of hundreds of such notes, drawn from a bank by the paymaster of a woolen mill, may be paid to one of the operatives as the measure and reward in part of the expenditure of his effort in guiding the loom. It may be paid by him to his grocer, thereby measuring and rewarding in part the efforts of men expended in producing and bringing to him potatoes, flour, coffee, sugar, bacon. It may be paid by the grocer to his landlord, and so measure and reward him in part for effort expended under his direction in erecting and finishing the building containing the grocery. It may be paid by the landlord to a servant, as the measure and reward of effort expended in keeping his house clean and preparing food for his family. It may be given by her to a shoe dealer, measuring and rewarding in part the efforts of men expended in killing cattle, tanning hides, working them into shoes, and bringing the shoes to the store whence she obtained them.