Civil War, when the paper standard was slowly rising until it reached par in 1879-in the period when prices were fallingthe laborer's condition was improving. As prices fell, his wages had greater purchasing power. A casual study of Chart XII will show that from even before 1870, the line representing the purchasing power of wages steadily rose as prices fell. By 1890, while prices were only 92.3 per cent. of what they had been in 1860, wages were 158.9 per cent. of what they had been in 1860, and these wages bought 172.1 per cent. of what the wages of 1860 obtained. In short, while producers and employers were complaining of the fall of prices (due to a rise in the value of the paper standard), the great body of laborers were being benefited in a corresponding proportion.

THE RETIREMENT OF THE UNITED STATES NOTES.

322. From the brief history of the United States notes which has been given it will be apparent that these notes were issued in time of war under the plea of necessity. The government, feeling itself unable at the time to borrow, through the ordinary channels, the vast sums needed for carrying on the war, resorted to the issue of legal-tender paper as a means of floating a forced loan without interest. Even so, however, the intention was clearly expressed that the debt thus contracted should be paid at an early day. For it was recognized that these obligations were but debts; the United States note was not standard money, it was merely a promise to pay that kind of money. Given power to cancel debts equal to that possessed by the money it promised to pay, the United States note became an instrument for unsettling business and working an immense amount of injustice. This, then, constitutes one reason for the payment of these notes of the United States at the earliest possible date. Such payment would only be fulfilling a promise made years ago. Whatever the sentimental considerations which may gather about the greenback, they are outraged by the proposition to abandon this principle of early payment which underlay its origin.

The dangers and evils of a depreciating standard have been too recently experienced in this country to permit the continuance of our government paper without menace to our business. So long as these notes remain, the knowledge that they have once constituted a depreciated and fluctuating currency will continue to fill the minds of our business men with apprehension, and thus act as a constant drag upon that perfect confidence which the fullest measure of prosperity demands.

323. As against all arguments for the retirement and cancellation of the United States notes, the apologists for such a currency point only to the saving of interest to the government

which they effect. If the government, needing money to meet its expenses, finds that the community will accept its notes without interest, it can by issuing them save the interest which it would otherwise have to pay upon the bonds sold to raise the funds required. As, however, it has to keep on hand some reserve of money in order to maintain the constant redemption of the notes in standard money, the government can in any case save the interest only on the difference between the notes which it has issued and the gold reserve which it keeps for their redemption. But, even after making full allowance for this reserve, the fact remains, it is pointed out, that the government has for years been saving the interest upon some $200,000,000.

This, however, is but one side of the account. On the other side must be mentioned all those items of special cost which must be charged against the greenbacks, and several considerations of public policy which would go far to outweigh any saving of interest which might actually exist. The first of these is the considerable expense involved in printing, counting, registering, handling, and redeeming a paper currency. A large part of this expense is so interwoven with other Treasury operations that it cannot be separately stated. But the actual cost of the special operations chargeable to government paper alone amounts to more than $1,000,000 a year. This, then, is one item which must be set off against the saving of interest.

324. Another fact of supreme importance in weighing the advantages and disadvantages of our government demand obligations, is that this saving of interest-whatever it may beis at the expense of the credit of the government and is overbalanced by occasional heavy sacrifices. This principle is fully recognized in ordinary business life. Many a merchant who might borrow on call at 11⁄2 per cent. interest, actually prefers to borrow on time at 4 or 5 per cent.-notwithstanding the apparent saving of interest in borrowing on call. The reasons for this preference are obvious. In the first place, he realizes that if he makes large demand loans at a low rate of interest, or even at no interest at all, though for a time everything may move smoothly and none of his obligations be presented in such

a way as to embarrass him, nevertheless at the least rumor of threatened insolvency he will be called upon to meet these obligations. In other words, he will be called upon to pay them at the very time when he is least able to do so; and the sacrifice which he will have to make at such a time to raise the necessary sum to pay off his demand loans will more than counterbalance the previous saving of interest. This is one of the reasons why a good business man will never permit a large amount of his demand notes to remain outstanding.

The same considerations apply to the demand obligations of a government. Though it may for a time be able to save considerable amounts of interest by issuing its demand obligations without interest, the special expense and loss involved in having to secure funds at a great sacrifice at the particular time when its credit is no longer good and when its obligations are presented for payment, are likely to more than counterbalance the saving of interest. So long as the credit of the government is high, and there is no question as to its ability and intention to pay all of its obligations in the best money, it is not probable that many will be presented. This is what happened in the United States prior to about 1890. But whenever the notes are presented (except because of redundancy, or to a slight extent as a convenient means of obtaining gold for jewelers' uses, etc.), it will be because, for some reason, the credit of the government is impaired, and the public has lost confidence in its ability or intention to pay these obligations in accordance with the accepted understanding of the terms. At such a time, the same considerations which lead to the presentation for payment of the government's demand obligations will also make heavy sacrifices necessary in order to raise the requisite funds promptly. This is the reason why the bonds sold in 1894-1896 netted the government some $40,000,000 less than the amounts for which the same bonds could have been sold a few years earlier, when public apprehension had not been so much aroused. In 1890 and 1891 United States 4 per cent. bonds of 1907 were selling at from 120 to 125. On the basis of even the lowest of these prices the 5 per cent. bonds of 1904 which were sold in 1894

would have been worth more than 122; the 4 per cent. bonds of 1925 sold in 1895 would have been worth about 132, and those sold in 1896 about 131. Had these bonds been sold gradually in those earlier years when there was no public apprehension, instead of being thrown in large quantities on an over-sensitive market, when the credit of the government was shaken by a rapid presentation of notes for redemption, resulting in a depletion of the gold reserve, they would have bought, on the basis of prices in 1891, over $335,000,000 instead of the $293,400,000 which was actually received. This difference of over $40,000,000 is another sum which must set off against the saving of interest. This, however, is not all. The merchant who borrows on time at 4 or 5 per cent. and arranges his loans in such a way that he knows just when he will have to meet them, in preference to borrowing on call at 11⁄2 per cent., appreciates thoroughly that his credit in the community is thereby strengthened. The loaning public views with suspicion a man with a large amount of demand paper outstanding-not because the amount is more than he could meet with ease if he knew, long enough in advance, when he would have to meet it, but because his insolvency is likely to be precipitated at any time by the presentation of a large amount of this paper at an unexpected moment. The merchant's credit is therefore better, and he is able to borrow on time at uniformly lower rates, if it is understood that his loans are so adjusted as to fall due at times when arrangements can be made to meet them. This analogy applies in large part to the action of governments. For unquestionably the popular apprehension, raised and maintained by the existence. of a large amount of government demand obligations, has had a decided tendency, throughout all the years in which this apprehension has existed, to increase the rate at which the government could borrow.

But aside from the direct loss to the government through the lower prices realized for bonds when sold at the time that shaken confidence leads to the presentation of the notes, our greenback currency has, directly or indirectly, caused untold losses to the business interests of the country. Constantly before