SYMBOLIC MONEY. BANKS OF ISSUE.

Metallic money being the equivalent, in value, of articles sought in exchange, so far as it can be dispensed with a corresponding amount of capital is discharged from use. It is to-day almost wholly so discharged by means of what may be termed "symbolic money," consisting of bankers' bills drawn against merchandise moving between different countries and widely separated sections of the same country, such bills entitling their holder to that which they represent; of merchants' bills drawn against merchandise moving from producer to consumer in the same country, and of the notes and credits of banks and bankers issued in the discount of the same. An importer of merchandise into the United States, for example, remits in the payment thereof a banker's bill drawn ordinarily upon his correspondent in London, the Clearing House of the world. To provide the means for its payment the banker purchases bills drawn against exports of merchandise equal in value to his own.. So far as that exported equals in value that imported no metallic money interposes in the foreign commerce of a country, imports and exports offsetting one another. If the imports exceed the exports in value, both alike being the ordinary subjects of consumption, the banker himself becomes an exporter of merchandise in the form of coin, of the universal equivalent, now gold, equal in value to such excess, all commerce between solvent nations and communities being reciprocal in amount or value. If the exports exceed the imports in value, the excess comes back in merchandise in the form of the universal equivalent, which, in international commerce, interposes as a rule only in discharge of balances, the transfers of merchandise being almost wholly effected by symbols. These are always payable, whether so expressed or not, in metallic money, in case the holder prefers this to the merchandise they represent, and as a guarantee that such merchandise has a value in gold equal to its nominal amount.

In the exchanges of merchandise between widely separated parts or sections of the same country, as in the exchanges between different nations, metallic money ordinarily interposes only in the payment of balances. The merchandise, for example, moving from Chicago to New York is accompanied by a bill or bills representing its value, the proceeds of which are to serve for the payment of

merchandise of equal value moving from New York to Chicago. Remittances on either side are made by bills of bankers who, to provide the means for their payment, purchase, as in the foreign trade of the country, merchants' bills equal in amount to their own. If the amount, in value, of merchandise moving from one city equals that moving to it from the other, the proceeds on either side serve for the payment of the bills drawn, no metallic money interposing. Bills representing merchandise moving in gross are ordinarily drawn on such time as experience has shown to be required for the distribution to consumers of that which they represent. As they serve for the transfer of the title of their constituent, they perform, as instruments of exchange, all the functions of metallic money.

The instruments for the distribution of merchandise represented by bills from merchants to consumers are the notes, and credits in the form of deposits to be drawn by cheques, of banks and bankers, issued in the discount of such bills. The two differ only in the manner in which the proceeds of discounts are taken. They are accepted by the holders of merchandise, the makers of the bills discounted, as they will pay their bills at bank equally with coin. As they are convertible into merchandise they are accepted as money by those who have occasion to purchase the same, the use of metallic money, as such, being to reach some other article of merchandise. They are consequently paid out by producers, in whose favor the bills given were discounted, in the purchase of labor and material to be used in new creations of merchandise to take the place, as fast as it is consumed, of that upon the market. By their use by consumers, in the purchase of merchandise, they fall into the hands of the makers of the bills discounted and are returned to

the issuers in the payment of the same. As the process of discount at bank consists of a mutual exchange of obligations, so the process of payment consists of the mutual cancellation of the same, but not until they have been instrumental in the distribution of merchandise represented thereby equal in value to their nominal amount. Such illustrations cannot be too often repeated, as they serve to show why metallic money is no longer used, and that it is impossible it ever should be used in considerable amounts except in the discharge of balances, unless indeed a return be made to barbarism in which all methods by which the operations of society are now carried on are forgotten. They also serve to show what an elastic currency is

If

one that measures the means of the people to consume. merchandise be plenty, its symbol, money, will be plenty. If scarce, money will be scarce, the remedy being an increase of merchandise, always to have its symbol, the possession of which entitles the holder to that which it represents.

In the sale of merchandise, the holders of the same, the makers of the bills discounted, receive alike the notes and credits of all banks of good standing, as these will be received at all equally with their own in the payment of their bills. A bank, in fact, prefers to receive in payment of its bills the notes and credits of other banks rather than its own, as, in ratio to the amount so received, specie can be demanded, its own issues remaining in circulation.

The exchanges taking place in the United States afford a striking illustration, the best probably that could be produced, of the degree of the substitution of symbolic for metallic money-capital- and of the advantages resulting therefrom. In 1892 the railroads of the country moved, say, 750,000,000 tons of merchandise, the value of which, at $20 the ton, equalled $15,000,000,000. A portion of this, say one-half, was duplicated, but the value of the net tonnage equalled fully $40 the ton. The value of the tonnage of the Erie Canal, of which a careful record is kept, little or no portion of which is duplicated, and which consists of freight having the lowest relative value, averages $30 the ton. If it be assumed that the waterborne tonnage of the country and that over ordinary highways equals one-quarter the whole, the aggregate for the year equalled 1,000,000,000 tons, having a value of $20,000,000,000. For the transfer of the title of such tonnage two sets of instruments, as has been shown, were used: one of bills for its movement, in gross, from the producer to the merchant; and one of notes and credits issued in the discount of such bills for its distribution, piece by piece, from merchant to consumer. The amount of symbolic money, merchants' bills for distribution in gross, and the notes and credits issued by banks and bankers for distribution, piece by piece, employed in the movement of merchandise from producers to consumers for the year, in the United States, and performing so far all the functions of metallic money, equalled $40,000,000,000, no metallic money directly interposing except in the form of subsidiary coins.

The provision of symbolic money by banks and bankers in the United States, September 30, 1892, according to the Comptroller

of the Currency, equalled $3,100,943,227, as follows: Deposits with National banks, $1,775,251,128; with State banks, $648,513,809; with Trust companies, $411,654,996; with private banks and bankers, $93,091,148; notes of National banks, October 31, 1892, $172,432,146. The whole arose out of the discount of bills to the amount of $3,217,738,732, as follows: Discounts by National banks, $2,153,498,826; by State banks, $654,654,490; by Loan and Trust companies, $330,174,726; by private bankers, $79,310,684. If it be assumed that the bills discounted were drawn for periods averaging fifty days, the total amount under discount for the year was very nearly $20,000,000,000, a sum equalling very nearly the value of the merchandise moving, in gross, during the year, from producer to consumer. Interest, at the rate of 4 per cent., upon a sum of metallic money equal to the provision of the symbolic money, the notes and credits of banks and bankers, would amount to $124,000,000 annually. The saving effected in the matter of interest, whatever it may be, is by no means the chief advantage resulting from the substitution of symbolic for metallic money. Were metallic money to interpose in all transactions, the expense, inconvenience, and risk attending its care and movement would be so great as to reduce transactions in all commercial countries to one-tenth their present volume. Symbolic money is so much more convenient in use that no one, not even the warmest advocate of silver money in the United States, would, if he could get the former, touch a dollar of the latter, or of gold even, if there were piles of it as high as Pike's Peak at every station on every line of railroad between the mining districts of the continent and the Atlantic coast. He would greatly prefer to have his money in the form of bits of paper which he could carry securely on his person, no matter the amount or value, these being convertible into metallic money at his pleasure, or into any other form of merchandise, to be held and cared for by others without cost or annoyance to himself till he had occasion for their use. Metallic has given place to symbolic money for the same reason that cowries or wampum gave place to copper, copper to silver, and silver to gold, as instruments of exchange. It is hardly too much to say that should a merchant in New York accompany an order for 10,000 barrels of flour upon a manufacturer in Minneapolis with gold, an inquest de lunatico inquirendo would soon be held to determine his sanity.

The difference between the notes of a bank and credits granted by it to take the form of deposits is one of form only. The notes, which are promises to pay to the holder an equal amount of coin, are what may be termed subsidiary paper money-pocket money, for transactions inconsiderable in amount; or where it is not known that the person offering cheques is entitled to draw them; or where a person having occasion to make payments has not his cheque-book by him. The tendency everywhere in commercial countries is to cheques in preference to notes, from the greater safety and convenience of their use; cheques, in addition to their use as money, serving as valuable records of the transactions to which they relate. The proportion in amount, or value, of cheques to notes in the United States, were the issue of each alike free, is of course à matter of conjecture; but it is probable that the use of the former as money would be tenfold greater than that of the latter, the proportion of cheques constantly increasing from the establishment of banks in every considerable place of trade, with which every one in affairs opens accounts for the safe keeping, as well as the convenient use, of his money. As it is, while the deposits in the national banks equalled $1,775,251,128, the notes of the same in circulation October 31, 1892, equalled only $143,423,298. time, however, the notes of the United States-greenbacks, equalled $346,681,016; silver certificates and notes circulating as money, $487,744,654; the two equalling $834,425,670. Should the United States ever return to a normal and healthy monetary system, its notes, except such as might be used as instruments, never legal tender, for the collection of the revenues, evidences of debt, not of capital, would be wholly retired.

At the same

So great has been the progress in the instrument, symbolic money, by which the exchanges of all commercial countries are now carried on, that metallic money, except in the form of subsidiary coins, is almost wholly discharged from use. When it interposes, and then only in inconsiderable amounts, it is in the discharge of balances arising between nations and widely separated districts of the same country, and between banks and bankers, issuers of symbolic money, for distribution from hand to hand. Its chief use is in the discharge of balances arising between the latter. If all bills discounted represented merchandise certain to be taken for consumption within. the period in which they were to mature, and if all had the same time to run, balances arising between issuers of symbolic, or bank