CHAPTER II.

paper has value because it circulates. While with a given exchange value of commodities, the quantity of gold in circulation depends on its own value, the value of paper depends on its own quantity in circulation. While the quantity of gold in circulation rises or falls with the rise or fall of prices of commodities, the prices of commodities seem to rise or fall with the change in the quantity of paper in circulation. While the circulation of commodities can absorb only a definite quantity of gold coin and as a result of that the alternating contraction and expansion of the currency appears as a necessary law, paper money seems to enter circulation in any desired amount. While the state is guilty of debasing gold and silver coin and of disturbing their function of a medium of circulation, if it turns out a coin, only 1-100 of a grain below its nominal weight; it performs a perfectly proper operation by issuing absolutely worthless paper notes which contain nothing of the metal except its mint denomination. While gold coin apparently represents the value of commodities only in so far as that