Section I. - Convertible Bank-Notes.

We have now ascertained the nature and principles of a metallic currency; we proceed to paper currency, and we shall find the same general principles to prevail here also, subject only to such modifications of detail as are created by the difference between paper and metal. Coin and bank-notes perform generally the same work. They transfer property, and thus exchange commodities. Both were invented to effect the same purpose. What we have gained in the study of metallic currency must be firmly adhered to, or mischievous untruth will be the result.

But it is necessary to explain the word currency. In America the expression is frequently used to denote instruments of exchange other than money-all those, namely, that consist of paper; but this is a practice much to be deprecated. There is too much confusion already in currency to excuse the increase of it by affixing new senses to old words. This mode of speaking is further open to the objection that it classes under one term things very dissimilar; for a cheque and a banknote are very different matters. A cheque is not currency, does not run. The word currency is needed as a generic term to comprise two varieties of similar tools which are current and circulate, and are universally called money. Both stay out in the hands of the public. A cheque, on the contrary, travels straightway to the bank which has to pay it. A bill is slightly more current; it may pass, as a tool of exchange, through a few hands by the help of endorsements, but it has a fixed day for being paid and annihilated. There is one distinction more between these machines for payment and the bank-note. They are personal, so to speak. Every man who takes them knows that he is bound, for his own safety, to weigh their signatures. There is a distinct act of reflection in giving goods for cheques or bills. Hence, in popular language, they are not money, things which everybody takes as a matter of course. The bank-note, on the contrary, is almost impersonal. It is, in a manner, semi-anonymous; when a bank is once thoroughly established, its notes travel unchallenged all over the town.

But is the bank-note, for all that, money? It is called money; so are bills, occasionally. Cheques earn the title still more frequently. A shopkeeper, when he carries bills, cheques, and cash, to the bank, calls them all money. Even Mr Bagehot, in his "Lombard Street," written expressly to explain the Money Market as being" as concrete and real as anything else, capable of being described in as plain words, so that it is the writer's fault if what he says is not clear," gives six different meanings to the word money. What, after this in a writer of ability and reputation, must be the state of mind of ordinary mortals upon apparently so well known a thing as money? And this marvellous looseness of expression runs the same course in private as in commercial life. A rich man is said to have so much money in cash or in railway stock. The objects comprehended under this multiple word by popular language are as countless as the sand on the sea-shore. Coin, metallic coin, alone is true money) and nothing else is, unless it be a commodity, as an ox, or a cow, or a piece of salt. There is a very decisive reason for this assertion. Every kind of paper styled money carries on its face an order or promise to pay money); and without that order or promise it would be a worthless piece of paper and nothing more. An order or promise to give a thing is not the thing itself; the thing is absent. This settles the matter absolutely: paper is not money) It is idle to reply that the distinction is unimportant - that the bank-note does the same work as money, and that practically there is no harm in calling it money. I answer that the harm is immense for the understanding of currency. The vital fact is obscured that the man who takes a gold coin for his goods receives an actual piece of property, a metal, as valuable as the thing he sells. He acquires not a particle of substance with a cheque or a bank-note. If the cheque is dishonoured or the bank breaks, he finds a nothing in his hand against the wealth that he gave away. If cheques and bank-notes are true money, then so are spoken words, for they can purchase property, and bind the buyer at law just as strongly as a cheque. To tell a bookseller to put five pounds' worth of books to his account commits the buyer to payment as completely as a cheque. Coin is the substance, the reality covenanted to be given for goods bought; consequently coin alone is payment. The coin at last may never be touched, because it may be put down in an account against which set-offs appear on the debtor and creditor sides; coin then is not asked for, because its equivalent in property has been received. Everything else - spoken words, shop-accounts, bank-notes, cheques, warrants - are nothing but title-deeds, evidence good at law to compel the stipulated payments in coin, if not voluntarily given. Without a court of law in the background, they are only acknowledgments resting on honour, and may at any moment prove to be empty writing. Coin pays, no form of paper does till what is written upon it is fulfilled. A bank-note is not property placed in a man's hands; every seller may decline to take it. If the bank fails, the holder will never be paid at all.

The truth that bank-notes are not money received a remarkable confirmation from an elaborate judgment delivered in the Supreme Court of the United States. The question which presented itself for final decision was whether debts which had been contracted previously to the Act of Congress, which made the inconvertible bank-notes called greenbacks legal tender, were discharged by the tender of these notes. Nothing could be sounder or more admirable than the doctrine laid down by Chief Justice Chase. He ruled that such debts were contracts to deliver money, and that bank notes were not money, and could not be forced upon a creditor as a satisfaction of his claim. The distinction that coin alone, the metallic dollar, was money, was most sharply and accurately drawn, and the right of the creditor to the covenanted payment as clearly established. A bank-note was pronounced not to be payment; it did not fulfil the contract entered into to deliver money. The case was wholly different with debts contracted subsequently to the enactment of the law which declared greenbacks legal tender. The creditor had been distinctly warned beforehand that the word dollar would be understood by the law to mean that particular piece of paper which contained an acknowledgement of debt due by the Government of the United States. He knew when he gave credit on an undertaking to be repaid in dollars that he would receive, not money, but the transfer of a debt expressed on paper which was due by the Government. He did not stipulate for money, and consequently money he was not entitled to and would not receive. He would get dollars, as interpreted by the law of legal tender, not the metallic dollars which are money, but a promise made by the Government to pay such dollars, without any stipulation as to the time when they would be given. It was for him to consider when he gave away his goods, what the promise of a dollar or the piece of paper might be worth in the stores.