consider the development of the currency to be limited to the coin or to be in exact proportion to the coin, the situation may be fairly described as ominous. There would be ground for saying, as men of science have recently done,[1] that eventually the gold standard will become untenable, and that silver will force its way into use side by side with gold, if not to the exclusion of gold.
But the situation is modified, if not transformed, by another factor in present and in future industrial history: that development of credit machinery which forms the most striking phenomenon in the monetary history of modern times. In the development of credit as a substitute for money we have something like a natural law, which will put to naught the predictions of those who predict disaster from the failure to make wider use of silver. If, indeed, coin money were the sole or the most important constituent in the medium of exchange in civilized communities, silver or some other metal must certainly be brought in to supplement the scanty growth of the supply of the gold. In fact, however, the actual currency of civilized countries tends to consist less and less of specie, more and more of credit substitutes for specie. Bank notes, government notes, and above all bank checks, actually perform the commercial transactions of civilized countries. Specie is the basis of exchange; it is the measure in terms of which the value of commodities is expressed; but it is only to an insignificant extent the medium by which exchanges are actually conducted. The use of credit is of course most highly developed in countries like the United States and England, which lead the world in general industrial development. It is growing steadily and surely in continental Europe, and, beyond question, will continue to grow. Each individual, each financial institution, each government, is tempted to enlarge the scope of credit operations and to diminish the use of actual coin; and the steady pressure of these motives makes the tendency as sure and unalterable as physical law.
That this tendency brings its dangers can not be denied. An ever-increasing volume of credit is based upon a relatively smaller foundation of specie, and the evils of a sudden impairment of credit become more and more serious. It has been attempted to obviate the dangers by enlarging the basis of specie; and the wider use of silver is advocated as one method of broadening the substructure. But efforts in this direction are likely to have but temporary results. A broader basis of specie is likely, under the influence of the same forces which now lead to an extended use of credit, to bring about in due time an expansion of credit machin-
- ↑ See Die Zukunft des Silbers, by Eduard Suess, Vienna, 1892.
