Coinage. When the metals first came to be used as a medium of exchange, they passed from hand to hand in their rough state, as " dust," or in nuggets, and the testing of amount and fineness was left to the parties to the exchange. In course of time, private individuals of note occasionally stamped or otherwise certified to the weight or fineness or both, a custom which still obtains in some parts of the world. Gradually, governments took over the work of providing an authorized currency, and systems of regular coinage were developed. In attempting to improve coins, governments have sought first of all to prevent counterfeiting by making the coins of regular and uniform sizes, and by various devices, such as elaborate designs upon the face, milled edges, etc. In all this, governments, though they do not give the original value to the money, do increase the value, by the superior exchangeability which their certification confers upon it.

When the government at its mint coins for private persons any metal that they may bring to it, the coinage is said to be on private account or free coinage. The expression " free coinage," therefore, does not have reference to the cost of coining. If the government coins for private persons without charge, coinage is not only free but also gratuitous. Any charge by the mint for coinage is called mintage. If the charge is just sufficient to reimburse the government for the expense of the work, it is called by the French name brassage; anything in excess of such a charge is then called seigniorage. When the government buys the metal in the market at the market price and coins it, the coinage is said to be on government account. If the face value of the money thus coined exceeds the market value of the metal by more than the expense of coinage, the difference constitutes another form of seigniorage. Most industrial nations to-day coin gold on private account and silver on public or government account ; in other words, under such governments there is free coinage of gold, but not of silver.

Governments and Money. From the fact that governments regulate the coinage of money has grown up in the minds of many people the erroneous idea that governments make money. As we have seen, all the functions that make money what it is can be fulfilled and have been fulfilled without the participation of government at all. Governments, therefore, do not make money. But by careful coinage to prevent counterfeiting, by stringent laws against counterfeiting, and by conferring a legal tender power upon the medium of exchange, governments have done much and can do much to increase the currency or exchangeability of money, and hence may give to a certain volume of money a greatly increased value. Gold and silver would have a considerable value to-day for use in the arts and for ornament, even if they were not used as money at all. They would have a very high value as commodities and as money, even if the government should leave the work of coinage and the work of debt enforcement to private honor. But it cannot be doubted that gold and silver to-day have a higher value than they would have in either of the two cases just assumed.

Prices and the Value of Money. It is clear, from what has been said concerning money as a measure of value, that a change in the value of the money unit means a change in the general prices of other commodities. To say that a dollar has become cheaper is the same as saying that prices have risen ; i.e., it takes more dollars to buy the same commodity. Again, any cause that lowers prices thereby raises the value of money. In brief, prices and the value of money vary inversely.

Prices and the Quantity of Money.When prices are high, it is evident that a larger volume of the medium of exchange is needed, the rapidity of circulation remaining the same, than when prices are low. When coats are $10 apiece, it takes a greater quantity of the medium of exchange to buy them than when they are only $5 apiece. This is a fact about which there is no dispute. But it is a distinct and difficult question whether an increased supply of money can itself make prices high, or whether it is the high prices that call forth the increased supply of money.

The Value of Money. One of the most difficult and most disputed problems in regard to money is this of the determination of its value. One answer to the problem, known as the " quantity theory," has been generally accepted for over a century; but within the last few years this theory has been vigorously combated and does not now receive the general assent to its validity that was formerly granted it.

The Quantity Theory. It is not easy to state the theory briefly and at the same time accurately, but in a general way it runs as follows: The value of money, and therefore general prices, will vary according to the proportion between the demand for money and the supply of it. By the demand for money is meant the number of exchanges to be effected by the use of money. When trade is very brisk, a great many commodities will be produced and exchanged, and to effect the exchanges society will need a great deal of money; in other words, the demand for money will be great. By the supply of money is meant the quantity of money taken in connection with the rapidity of its circulation. Thus, if money circulates more rapidly on the average in one country than in another, a given quantity of money in the first country will result in a greater supply of money than in the second. Now, according to the theory, if the supply of money remains the same during any period of time, while the demand for money increases on account of the increased volume of business, a given quantity of money will exchange for a greater quantity of other goods than before. In other words, the value of money will have risen, and, what is the same thing, the value of commodities, measured in terms of money, will have fallen. Conversely, if the general state of business during any period of time remains the same, while the supply of money increases either through an increase in quantity or through an increase in the rapidity of circulation, the value of money will fall and general prices will rise. To go a step farther, we may say that if the demand for money at any time increases faster than the supply, the result will be a rise in the value of money and a corresponding fall in general prices; while if the supply of money increases faster than the demand, there will be a fall in the value of money and a corresponding rise in general prices.