Page:Popular Science Monthly Volume 49.djvu/36

24 the rapidity of circulation of either gold or silver varies in exact ratio with the variations of trade. The growth of commerce, for example, that began in Europe during the thirteenth century, so far outstripped the increase in the supply of the precious metals that each of the petty states and principalities was in a continual fight with the others for the possession of a sufficient supply of gold and silver whereby the exchange of effort as evidenced by the exchange of commodities between its own subjects could be rewarded. The world's product of gold was nearly four times as great in 1850-'60 as during the preceding decade; it was about twenty-five per cent less in 1880-'90, and during the present decade promises to exceed that of 1880-'90 by one hundred per cent.

And the supply of neither metal increases in the same ratio as the other; therefore, that pursuit after a constant ratio between gold and silver which has continued to this day is vain as the cruise of the Flying Dutchman.

And as it is estimated that at the present time actual coin passes in less than ten per cent of the exchanges, it is significant that a medium of exchange has largely taken the place of coins. This medium consists of paper representatives of value.

And, again, the quantity even of gold necessary to effect any considerable exchange is of such weight that its transportation is a matter of inconvenience, and for any person or association of persons to keep safely on hand all the gold that might be amassed at any one time would necessitate expensive precaution. Obviously these inconveniences are avoided by the deposit of silver or gold coin or bullion in the charge of a person or persons responsible for its safe keeping, and for its transfer from the owner to another as he may direct. Hence banks of deposit and payment by check, the use as money of paper representatives of money. For if B is willing to accept the check of A upon banker C in the belief that he can obtain the money for which it calls upon presentation, why should not D accept the same check from B upon B's assurance that it is good?

If A, buying merchandise from B, says that he will have the money wherewith to pay for it when he has resold the merchandise, or at the end of a particular time, B may be willing to accept his written promise to pay; usually, however, with the stipulation that A surrender an additional sum as compensation to B for waiting for the payment. This sum is interest. And upon B's guarantee that the promise is good, D may be willing to accept the promise from B as payment for other merchandise. Or if B need the money in advance of the time specified in A's promise to pay, he may perhaps deliver the promise to D in return for the money. Or, as would be more likely, he would seek