This kind of currency has usually, and perhaps always, been issued in times of fiscal exigency. When governments have found it difficult or impossible to raise funds, either by taxation or by loans of the ordinary sort, they have commonly resorted to the expedient of forcing a loan by issuing these notes. Two of the most noted examples of this method of procedure are furnished respectively by the history of France during the Revolution, and by our own country during the Civil War.

A. French assignats and American legal-tender notes as illustrations. - In 1789 the French government was on the verge of bankruptcy. Its annual expenditures greatly exceeded its receipts; it had a large floating debt; and its bonds were practically unsalable at any price. Some means of meeting expenses had to be devised, and the National Assembly created the so-called assignats. They were non-interest-bearing, legal-tender notes, for the security of which the confiscated lands of the clergy were pledged. They were paid out by the government for all sorts of purposes, and, when one issue was exhausted, another was authorized, the confiscated estates of the nobles who had emigrated and other national property being successively mortgaged as security. In the beginning they were readily accepted by the people and no change in prices was observable which could be attributed to their influence. As the quantity increased, however, in much greater proportion than the currency needs of the country demanded, the excess could only be used as a means of investment, and for this purpose they were never regarded as "gilt-edged" on account of the instability of the government and the uncertain issue of the war. Accordingly they very soon began to depreciate, and, once on the downward path, fell with remarkable rapidity, and finally became absolutely worthless.

In 1862 the Secretary of the Treasury of the United States by authority of Congress adopted this same expedient in order to meet the extraordinary expenditures occasioned by the war. Many writers on finance have doubted the necessity for this extreme measure at the time it was adopted, and it is certain that our finances were not then in so serious and deplorable a state as were those of France in 1789. Whatever may be the truth about this matter, however, the notes were issued. They were made legal-tender by an act of Congress, and several hundreds of millions of dollars of them were forced into circulation. Like the French assignats, they soon began to depreciate and finally fell to less than one-half their face value.

B. Depreciation a characteristic of this form of currency. - The depreciation in value which is the most striking phenomenon exhibited in the two instances we have cited is characteristic of every issue of these notes which has been sufficient in quantity to saturate the currency. Indeed, no government has been able to maintain such notes at par for any considerable length of time. We may, therefore, properly regard depreciation as a characteristic feature of this form of currency, and consider its merits and defects in the light of this fact. It is worth while at the outset, however, to seek for an explanation of this peculiar phenomenon.

As we have already stated, these notes are promises of the government to pay at some indefinite date in the future, and they are usually issued at times when the treasury is financially embarrassed. Uncertainty regarding their payment is, therefore, unavoidable. Under the best of circumstances the time of payment is uncertain, and ordinarily there is also uncertainty regarding the ability of the government to pay, and sometimes regarding her willingness and regarding the kind of coin which will be employed in the payment. In the cases of France and the United States in 1789 and 1862 great wars were in progress the outcome of which could not be foreseen. In France it was well known that the obligations of the General Assembly might be repudiated if the monarchy was restored, and, when later on it was observed that the governments which succeeded each other with great rapidity were by no means disposed to be bound by the acts of their predecessors, the possibility that the notes might not be paid, even if the revolution were successful, must have suggested itself to all thinking people. In the United States from 1862 to 1865 the issue of the war was doubtful, and the victory of the States which had seceded involved the division of the Union and possibly its complete destruction. At that time no man could have predicted the attitude which the possible government or governments of the future would assume towards the notes then being issued by both parties and forced into circulation as money. The fact that the successful combatant compelled her conquered foe to repudiate the notes she had issued shows that there were good grounds for the uncertainty of which we are speaking. In the decade which succeeded the close of the war a lively and frequently bitter contest was waged in Congress, first over the question whether the notes should not be retained as a permanent part of the circulation of the country and never redeemed in any kind of coin, and afterwards over the question whether their redemption should be made in the silver or the gold coins of the country, the former having an intrinsic value very much lower than the latter. No principle in financial science is better established than that any kind of uncertainty regarding a negotiable credit instrument affects its market value. The truth of this principle and the mode of its operation are illustrated every day upon our stock exchanges. An unfavourable report regarding the actual or prospective earnings of a railway lowers the price of its stock and bonds, and those securities most likely to be seriously affected by the earnings of the road show the greatest fluctuations. Speculators base most of their operations upon this principle. The element of time has a well-recognized value upon the markets for securities, so that government or corporation bonds, alike in every particular except the date of payment, sell at different prices, and if any of the terms of a bond or stock certificate lack definite-ness or give ground for any kind of uncertainty, the fact will be reflected in a diminution of the price which investors are willing to give for it. This being the case, how could an inconvertible government note, of which the date of payment is entirely uncertain, and which may and 'probably does possess two or three other elements of uncertainty, be expected to circulate at par?