Watertown republican. [volume] (Watertown, Wis.) 1860-1906, 1896-08-26
Convertible Paner Money.

Having settled upon the principles
which underlie the issue an6 use of
metallic money, we are prepared to
investigate the nature and laws of the
paper substitutes for it which have
come to be so widely used in modern
times in connection with the develop
ment of the colossal system of COM
mercial credit.
Paper money may properly be
called credit money. Although it
may SERVE the same purpose as coin
in effecting exchanges, it differs
greatly from metallic money in that
it is not a commodity. If any one
takes metallic money he takes coin
which has value, and which has value
for the same reasons which give value
to commodities not money. If any
one takes paper money he takes not
commodity but a promise or a
certificate which he expects to ex-
change at will for commodities. In
trinsically it is worth nothing, or at
least it's value is so slight that we may
disregard it. Of Itself it cannot
satisfy one single human want or de-
sire. But if there is confidence that it
will be ultimately redeemed in coin,
or if there is general conventional
agreement to receive it in exchange
for goods, it may circulate freely and
it is then a medium of exchange.
Let us first distinguish between
paper money and paper substitutes for
money which are not money, for ex-
ample. checks, drafts, money orders,
due bills, bills of exchange, etc.
These latter instruments certainly
perform at least one of the functions
of money, and the question has arisen,
ought they not to be considered money,
and if not where shall we draw the di-
viding line between them and money.
| If we reflect that certain of these
| instruments of credit we receive in
final payment of an obligation, and
| certain others we receive only as con-
ditional payment, we shall be able to
make very clear distinction by re-
garding as money only those instru-
ments which are accepted as final
! payment. To illustrate: If any one
takes a bank bill in exchange for
goods, unless the bill is counterfeit
or the bank already broken, the
| acceptance of it ends the transaction
between himself and the buyer. The
receiver assumes that the bank is
solvent and that the bill will con-
tinue current. On the other hand
if one receives a check in exchange
for goods he customarily requires an
endorsement of it, and, if the check
be refused at the bank, he returns ii
to the endOrser, who must then re-
imburse him. When the check was
given it was not final money, but only
conditional payment, and hence not
money. The bank bill was final pay
ment, and is money.
There are two kinds of paper money,
convertible and inconvertible. Con-
vertible paper money is reoeemable
in coin by the issuer on demand. In.
convertible papermoney is not thus re.
deemable. In considering this subject
we should carefully discriminate con.
vertibility from redeemability. A bill
may be made redeemable ultimately
but not redeemable on demand. It is
then not convertible. The provisions
necessary to secure redeemability and
cOnvertibility are not the same. Il
the issuer of paper money has assets,
applicable to it's redemption, equal in
market value to the amount of out
standing issues, the money may be
redeemable. But, in order that this
! money be convertible the issuer must