Kemmerer's admirable Modern Currency Reforms (Macmillan, 1916), is at hand while the proof sheets are being revised. It is interesting to note that he finds the statistical evidence regarding Indian prices, trade, etc., far too scanty to justify positive conclusions as to the causes governing the course of the rupee. He prefers, rather, to rest the case for the quantity theory on a priori reasoning and statistics for the United States. Loc. cit., pp. 70-71. In the chapter on "Dodo-Bones," I have suggested that India might come nearer than other countries to actualizing the assumptions of the quantity theory. On Kemmerer's showing, however, it appears to be a liability, rather than an asset!
[494] This is a national bank. In the same community, the writer asked the president of a State bank about his gold reserve, and was told that light-weight gold coin could not be used, since the State bank examiner made a practice of weighing the gold of State banks.
[495] Legal tender can add to value of money only when it confers an option on the debtor. In the case discussed, it is the creditor who has the option. But options are not necessarily valuable.
[496] As Davenport has pointed out, money is really moneys—there is a hierarchy. Cf. Economics of Enterprise, pp. 256-259.
[497] The restricted legal tender of small coins, where the coins are limited in amount to the needs of retail trade, is virtually an unrestricted legal tender, in practice, and amounts, in fact, to redemption. The coins are capable of being used where large coins, of standard metal, would otherwise be used, or where checks, redeemable in standard coin, would be used. Legal tender is vastly more effective with reference to a small part of the money system than it would be with the whole of the money supply. The same is true of the privilege of using a particular form of money in paying taxes. Cf. W. C. Mitchell's discussion of the "Demand Notes," History of Greenbacks, passim.
[498] Cf. Mitchell's account, (Ibid., pp. 166-173), of the premium on minor currency, during the Civil War. Pennies were used in rolls of 25 as a substitute for silver quarters, which had left the country under Gresham's Law. The premium was due primarily to the need for small change, rather than to bullion content, though the latter was a factor even for coins made of baser metals, in 1864.
[499] Cf. my article in the Annalist, Feb. 7, 1916, "The Ratio of Foreign to Domestic Trade," and the chapter, supra, on "The Quantity of Money and the Volume of Trade."
[500] Kinley's figures show a much lower percentage of money than this. He is anxious not to overestimate the extent to which checks are used, however, and so gives the figures of 50 to 60% of checks as a safe lower limit.
[501] Cf. Social Value, 183-184.
[502] Cf. Carver's contention that "the demand for money is a demand for value." "Concept of an Economic Quantity," Quart. Jour. of Econ., 1907.