paper is sufficiently acceptable for the purpose, the difference need not concern us.

Aside from that general acceptability, which is the very essence of money,—without which no commodity could be considered money, and which, therefore, all money may be considered as having,—the great requirements of money are invariable value, added to convenience of form, size, weight, and value.

This latter requirement pertains to the function of a medium of exchange, and the degree in which it is possessed by the different money materials or kinds of money, depends wholly on the values to be transferred by its use. For small amounts, silver is preferable to either gold or paper; as the amount increases, gold becomes preferable to silver; and for all amounts above fractional currency, paper money is unquestionably more convenient in every way than either gold or silver, and the advantage increases with the amount.

Invariable value is the great requirement for both the functions,—"a measure of value" and "a standard of deferred payments." Indeed these two functions may practically be considered one; the only difference between them being centred in the element of time, and that is more or less involved in every exchange requiring the use of money, since some interval must elapse between the sale of one commodity and the purchase of another with the money received,—which constitutes the whole exchange transaction,—and during such interval the money should maintain a constant value. When the interval over which the transaction is spread is a large one, as in the case of notes and bonds, any variability is more noticeable than when the change is distributed among many holders of money.

Before considering further the great necessity for invariable money value, it will be best to consider the laws and forces which determine and control the value of money.

Money Value.

That money is a commodity, and that its value varies like that of every commodity in accordance with the law of supply and demand, are incontestable.

The fluctuations in the value of money can be detected, it is clear, in the same way that changes in the value of any commodity can be detected, by comparison with all other commodities,—by its average purchasing power, in short.

The value of a commodity, when measured by money and expressed in terms of the unit of money, is called its price. If the prices of all commodities, or the average of all, rise or fall, it is conclusive evidence that the value of money has changed, for its purchasing power is less in the one case and greater in the other. Indeed the statement that general prices have fallen is equivalent to saying that the value of money has increased, and vice versa. Therefore, if the value of money remains stable, average prices must remain constant.

The following quotations will show that these views are correct, and that they are generally accepted by authorities on finance and political economy, though very commonly overlooked and neglected in discussions on the subject.

John Stuart Mill, in his "Principles of Political Economy," says:—

"There is such a thing as a general rise of prices. All commodities may rise in their money price. But there cannot be a general rise of values. It is a contradiction in terms." "That the money prices of all things should rise or fall, provided all rise or fall equally, is in itself, and apart from existing contracts, of no consequence. It affects nobody's wages, profits, or rent. Every one gets more money in the one case and less in the other; but of all that is to be bought with money they get neither more nor less than before. It makes no other difference than that of using more or fewer counters to reckon by. The only thing which in this case is really altered in value is money; and the only persons who either gain or lose are the holders of money, or those who have to receive or pay fixed sums of it.... There is a disturbance, in short, of fixed money contracts, and this is an evil whether it takes place in the debtor's favour or in the creditor's.... Let it therefore be remembered (and occasions will often rise for calling it to mind) that a general rise or a general fall of values is a contradiction; and that a general rise of prices is merely tantamount to an alteration in the value of money, and is a matter of complete indifference save in so far as it affects existing contracts for receiving and paying fixed pecuniary amounts."

"The value of a thing is what it will exchange for: the value of money is what money will exchange for; the purchasing power of money. If prices are low, money will buy much of other things, and is of high value; if prices are high, it will buy little of other things, and is of low value. The value of money is inversely as general prices: falling as they rise and rising as they fall."

"The value of money, other things being the same, varies inversely as its quantity; every increase of quantity lowering the value, and every diminution raising it in a ratio exactly equivalent."

"That an increase of the quantity of money raises prices, and a diminution lowers them, is the most elementary proposition in the theory of currency."

The expression, "other things being the same," in one of these quotations, evidently means "demand remaining the same," and the terms increase and decrease of money unquestionably refer to the increase and decrease relative to demand, since the writer further says:—

"If there be at any time an increase in the number of money transactions, a thing continually liable to happen from differences in the activity of speculation, and even in the time of year (since certain kinds of business are transacted only at particular seasons); an increase of the currency which is only proportional to this increase of transactions, and is of no longer duration, has no tendency to raise prices."

Per contra, therefore, unless the currency be increased to meet such increased demand, there will be a tendency to decreased prices and consequent change in the value of money.

Stronger statements than these of Mill's, or by an abler authority, could not be asked for.

Prof. R. T. Ely, in his "Political Economy," remarks, p. 179:—

"Values are merely relative, and consequently there can be no such thing as a general rise or fall of values."

"Value expressed in money is called price. There can be such a thing as a general fall or a general rise of prices. A general fall in prices means an increase in the value of money, and a general rise of prices means a fall in the value of money."

David Ricardo observes that:—

"The value of money, then, does not wholly depend upon its absolute quantity, but on its quantity relatively to the payments it has to accomplish."

The last edition of the "Encyclopædia Britannica" says, as a conclusion in discussing the value of money, and referring evidently to coin alone:—

"The most correct way to regard the question of money value is that which looks on supply and demand, as interpreted above, as the regulator of its value for a limited time, while regarding cost of production as a force exercising an influence of uncertain amount on its fluctuations during long periods."

This view is in exact accordance with the conclusions previously stated in regard to the values of all