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Bankruptcy in
Europe.

matter.

It is to be feared that debtors, in our country, are released too easily from their obligations. "In England, bankruptcy is a more serious The bankrupt not only loses credit; he also, to a great extent, loses caste. In France, the lot of the bankrupt is still more severe; not only does he lose his social position, but the law prevents him from engaging in any other business on his own account till he has redeemed his outstanding obligations." 1

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But even the English laws are far too lenient, according to the opinion of an eminent writer. "It is seldom difficult for a dishonest debtor, by an understanding with one or more of his creditors, or by Language of means of pretended creditors set up for the purpose, to Mr. Mill. abstract a part, perhaps the greatest part, of his assets from the general fund through the forms of the law itself. have been trusted with money or money's worth, and to have lost or spent it, is prima facie evidence of something wrong, and it is not for the creditor to prove, which he can not do in one case out of ten, that there has been criminality, but for the debtor to rebut the presumption by laying open the whole state of his affairs, and showing either that there has been no misconduct, or that the misconduct has been of an excusable kind." 2

The distinction between a legal obligation and a moral one must not be overlooked. The law may discharge the bankrupt from his debts, but there still rests upon him the moral obligation to satisfy the claims of his creditors, so far as it may be in his power. The legal discharge puts him in a position to accumulate again, and thus furnishes him the opportunity to provide the means with which to pay his debts in whole or in part. Some make this right use of the advantage which the law gives them, but many regard the legal discharge from their debts as a release, also, from their moral obligations. Bankruptcy is a test, though a severe one, of a man's real character.

Clause 5.-To coin money, regulate the value thereof and of foreign coin, and fix the standard of weights and measures.

1 Bowen's American Political Economy, page 211.

2 Mill's Political Economy, II. pages 473, 476.

To Congress is here given the power to coin money.

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Else

Money what?

where in the Constitution (Art. I. Sec. 10, Clause 1) the States are forbidden to "coin money,' or "make any thing but gold and silver coin a tender in payment of debts." According to the Constitution, then, money is gold or silver, coined by the general government, and made a tender in payment of debts. Whatever fails to possess these three characteristics is not strictly money. A promise to pay, whether by the government or a bank, though the law may make it legal tender, is not money, but only a promise to pay money. Gold, as bullion,—that is, in any form but that of coin-is not money, though it may have the value of the same weight of gold coin.

Dollar the

Unit.

Under the Articles of Confederation, the power of coining money was possessed by Congress and the States jointly, though Congress had "the sole and exclusive right The Spanish and power of regulating the alloy and value of coin struck by their own authority, or by that of the respective States." The power had not been exercised either by Congress or the States prior to the Constitution. Coin of other countries was used, the Continental Congress regarding the Spanish dollar, or "piece of eight," as the money unit. There was no official action on the subject till 1785, when Congress resolved that the dollar should be the money unit, and that the decimal system should be followed. A year later the dollar was defined by prescribing its weight in grains in each metal. But no coins were issued of either gold or silver.

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The Coinage

Act of 1792.

The first act of Congress under this clause was the coinage act of 1792. This prescribed what coins should be issued of gold, of silver, and of copper, and their respective weights. It provided also for coinage by the establishment of a mint at Philadelphia, where Congress was then in session. This has never been removed, though Washington became the seat of government in 1800. Branch mints have since been established in various places.

Both Gold and
Silver Coins

The coinage act of 1792 made both gold and silver coin legal tender for all sums. In the gold coins, which at first were three, the eagle (ten dollars), the half-eagle, and the quarter-eagle, there were 24 grains (Troy) of Legal Tender. pure gold to the dollar. In the silver coins, which were the dollar, the half-dollar, the quarter, the dime ("disme" in the statute), and the half-dime, there were 371 grains of pure silver to the dollar. The silver coins contained just fifteen times as many grains of pure metal as the gold coins of the same amount, showing that in the judgment of Congress an ounce of gold was worth at that time in the markets of the world fifteen times as much as an ounce of silver. As debts might be paid in either gold or silver at the option of the payer, it was necessary that the two classes of coin should have, so far as possible, the same value.

Congress has power to "regulate the value of money." Were our money restricted to one metal, there would be no occasion for the exercise of this power. With

To "Regulate

the Value" is gold as the only money, for example, Congress would simply determine the number of grains the dollar should contain, but could do nothing to

to Fix the Ratio.

regulate or determine its value, or purchasing power. When, however, two metals are to be used as money, Congress must prescribe their respective weights; and in this sense, but in no other, can it "regulate the value of money. This was all that was done in 1792. The weight of the gold dollar having first been decided on, that of the silver dollar must be made to correspond; that is, the ratio of the commercial values of the two metals must be preserved. To prescribe arbitrarily the relative weights would be monstrous; for, as Jefferson says, "the proportion between the values of gold and silver is a mercantile problem altogether."

After a few years gold began to increase in value relatively to silver, so that an ounce of gold was worth more than fifteen ounces of silver. In consequence, the gold coins began to dis

appear from circulation, being melted up or exported. To keep both metals in circulation as money it was necessary either to put less gold into the gold coins or more silver The Relative into the silver ones. The former method, which value of Gold was the only just one, was adopted.

Increases.

If gold had been the single standard, or the standard, the silver should have been made to correspond to it, and so the silver dollar increased in weight. But both metals being by law full legal tender were equal standards; when, therefore, the gold ceased to circulate, the silver became practically the single standard, and all contracts were made with reference to that. To have made a heavier silver dollar would have been unjust to all who had money to pay. To make a lighter gold dollar was strictly just to all.

This change was brought about in 1834. The gold coins. were reduced from 24 grains of pure gold to the dollar to 23 grains. As the number of grains of pure silver in the silver dollar remained 371 as before, the ratio between the two metals was changed from 15 to 1 to that of 16 to 1.

Gold Coins
Reduced in

1834.

Increases.

But presently the equilibrium was again disturbed, silver having become worth more than the one sixteenth part of gold. This was owing, in part at least, to the large The Relative amount of gold from the Australian and Cali- Value of Silver fornian mines. If both gold and silver are to be retained as full legal tender, the silver coins must be reduced in weight as those of gold were in 1834. There was another method, however, -to make gold alone the legal standard, and have the silver coins subsidiary. This method was preferred by the government; and in 1851 the Secretary of the Treasury recommended that the silver coins be reduced in weight, and be made legal tender for small sums only.

A bill was accordingly prepared which became a law February 21st, 1853, providing that two half-dollars, four quarters, etc., should contain 345.6 grains of pure silver instead of 3714;

A. C.-9.

lars.

Silver Coin

and that these coins should be a legal tender for only five dolThe silver dollar was not mentioned in the act, and so remained as a nominal coin, but it formed from Made Subsid- that time no part of the circulating money of the iary in 1853. country. In this great monetary change the United States followed the example of England, where gold was adopted as the only standard in 1816, silver being made a legal tender for only forty shillings.

Silver was thus practically demonetized in 1853, and from that time was used only as change, or token money.

The Act of 1873.

The Silver
Dollar Re-

In 1873 a general coinage act was passed, which prohibited the coining of any coins not mentioned in the act. As the silver dollar was not named in the list, this legislation completed the demonetization of silver. The act also declared that the gold dollar should "be the unit of value." From 1792 to about 1875 the ratio of the metallic values of gold and silver had ranged between fifteen and sixteen to one. Silver then began to decline in value, so that in July, 1876, the silver in the old dollar of 3711 grains pure was worth only 794 cents. There were also great fluctuations in its value, the variation amounting to twenty-five per cent within a period of five months. About this time the question of recoining the silver dollar, and making it again full legal tender, began to be agitated, and by the act of February 28th, 1878, this was done. The bill, which declared that a silver piece then worth 93 cents should pass for a dollar-was vetoed by President Hayes, but was subsequently passed by the requisite majority in each House.1

coined in 1878.

The change in silver in 1853, as appears from the report of the Secretary of the Treasury and from the discussions in Congress, was for the

It was asserted that the decline in the commercial value of silver was owing largely to the omission of the dollar from the silver coins in 1873; and it was predicted that its restoration would soon bring back the value of silver to an equality with gold. The prediction has not been fulfilled. On the contrary, the silver dollar worth about 93 cents in 1873 has since fallen below 75.

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