All forms of paper money are characterized by the possession of the credit feature briefly explained in the first chapter. Each and every one represents and in some way expresses the obligation of some person, corporation, or government to pay the sum indicated on its face. The intrinsic value of these notes is, of course, practically nothing. Why, then, do they circulate side by side with silver and gold coins without displacing them or being displaced by them ? Attempts to answer this question have probably given rise to more controversy than any other subject in the range of monetary science, and it is not best in this chapter to enter into a discussion of the various pertinent questions; but it is desirable to call attention at this time to the fact that the principles which we have discussed in the preceding section may be applied here. For example, if the paper money is made redeemable on demand at its face value in standard coins, it will readily circulate without danger of depreciation. If the quantity issued does not exceed the demand for it for currency purposes, and its legal-tender quality be limited, there will be no danger of its substitution for coin in large quantities or of the disappearance of coin from circulation. Without entering in any way into the discussion of controverted questions, therefore, we may understand at least one method of maintaining in concurrent circulation metallic and paper currency. The application of these principles to the various forms of paper currency issued by governments and banks, and the danger of their violation in this case as well as in that of silver and gold coins, will be made clear in the appropriate place.

* The reasons for making these exceptions and the unfortunate experiences which have followed them will be treated in the chapters on Bimetallism.


On Gresham's law see Jevons, ch. viii; Nicholson's Money and Monetary Problems, ch. iv, and Political Economy, v. II, ch. xiii.

On subsidiary currency see, for a discussion of the principles involved, Nicholson, ch. iv; Mill, bk. III, ch. x; Nasse, ch. vii; and Report of the Monetary Commission of the Indianapolis Convention, §§ 42 to 45.

For the regulations of the various States see Norman's Complete Guide to the World's Twenty-nine Metal Monetary Systems, Watson's History of American Coinage, ch. xxi, and Lejeune's Monnaies, Poids et Mesures des Principaux Pays du Monde,