notes of 1890, and United States notes (greenbacks) are exchangeable for gold at their face value upon presentation at the treasury of the United States.

(4) This redemption is made possible by the reserve fund of $150,000,000 in gold which the government keeps in its vaults.

(5) The paper money, when redeemed with gold, is again used by the government in the payment of its debts, and thus again finds its way into circulation.

(6) The volume of money in circulation is increased by the coinage of gold at the mints and by the notes issued by banks, and, in times of great financial stringency, by the banking associations established by the Aldrich Law.

(7) Bank notes are as good as gold because the government bonds, and other approved bonds which secure them are as good as gold.

The Amounts of the Several Kinds of Currency. The following table prepared by the comptroller of the treasury shows the general stock of money in the United States, April 1, 1909:

1. What is a bank note? a government note?

2. For what purposes did Hamilton establish a government bank? Give an account of the first and second banks of the United States.

3. Give an account of State banks prior to the Civil War.

4. In what matters did the State banks fail to meet the financial

needs of the government during the Civil War?

5. Describe the present national bank system.

6. Give an account of the paper money issued during the Civil War. 7. Give an account of the resumption of specie payments.

8. What was done with the greenbacks when they were redeemed? 9. Give an account of the drain on the gold reserve in 1893.

10. Why are the greenbacks not destroyed as fast as they are redeemed? What are the arguments for and against retirement?

11. What was the decision of the Supreme Court in reference to the right of Congress to issue paper money?

12. What are the provisions of the Aldrich Law?

13. What are the essential features of our monetary system?

SUGGESTIVE QUESTIONS AND EXERCISES

A

1. If you had $100 in a bank and owed a man living at a distance $26.87, how would you be likely to pay the debt? Is a bank check currency? Does it take the place of currency? A, B and C meet. owes B $5, B owes C $5, and C owes A $5. A draws a check for $5 and pays B; B pays C with the check; C pays A with the check. After the transaction is finished and each has a receipt A remembers that he had no money in the bank. Can a debt be paid without money? 2. Draw a promissory note. Compare the language of the note with that found on a national bank note. Under what conditions would you accept the promissory note in payment of a debt? How is a bank note secured?

3. Study what is printed on a bank note and answer the following questions: Is it legal tender for all debts? What is the penalty for counterfeiting it? When and where was it issued? Where was it printed?

4. Suppose a bank note which you hold should be destroyed, would the bank gain by reason of the accident?

5. Study what is printed on a United States note and answer the following questions: In what year did Congress authorize it to be issued? Is it a legal tender? What is the punishment for counterfeiting it? It says: "will pay the bearer five dollars': What did these words mean at the time the note was issued? What do they mean now? 6. How much currency per capita is in circulation in the United States? How much per voter?

7. How is the volume of currency increased as more is needed?

Topics for Special Work.-Government Paper Money: 21, 263–269. Greenbacks and Resumption: 22, 359–378. The National Banks and the Panic of 1907: 30, 467-469.

XLIII

FOREIGN COMMERCE

Introductory. Commerce is the exchange of goods, merchandise, or property of any kind. All governments find it necessary to regulate commerce. In the United States power in respect to commerce is divided between the State and the federal government. Foreign commerce, interstate commerce and commerce with Indian tribes (47) are regulated by Congress, while the regulation of commerce carried on wholly within the boundaries of a State is the function of the State government. The subject of the regulation of commerce, therefore, may be treated appropriately under three heads: (1) Foreign Commerce, (2) Interstate Commerce and (3) Intrastate Commerce. In this chapter the first of these topics receives attention.

The Power of Congress over Foreign Commerce. Under the Confederation commerce with foreign nations was in a confused and disordered condition. Each State had its own custom-house and levied such duties on imports as it deemed expedient. There was no uniformity in the customs rates and the commercial warfare between the several ports along the coast was destructive. To remedy these evils the Convention of 1787 placed the regulation of foreign commerce wholly in the hands of the national government. Of course it was asking a great deal of a port like New York to give up its custom-house receipts, yet patriotism in the Convention prevailed, and the States gave up their power to collect customs duties (74).

The power of Congress over foreign commerce is limited in only two particulars: (1) It must deal fairly with all the ports of the country, and not give one port a preference over another (68); and (2) it must not lay any tax or duty on articles exported from any State (67).

The power of government to regulate commerce is construed very broadly and extends not only to the goods exchanged and to the agencies of transportation, but to the movement of persons as well. Congress, therefore, in the exercise of its constitutional power can do much to influence the character of our foreign commerce and to shape its course. Indeed, Congress can prohibit foreign commerce altogether, as was illustrated by the non-importation act of 1806, and by the embargo act of 1807. Under the non-importation act foreign goods could not be brought into the country, and under the embargo act vessels could not leave the harbors of the United States.

Of the many regulations of Congress in respect to foreign commerce the most important refer to the tariff, to shipping, and to immigration.

The Tariff; Free Trade and Protection. As heretofore stated, it has always been the policy of the United States to raise a large part of the national revenue by means of a tariff or duty laid on imported goods (p. 274). On what principle shall the tariff be laid? Shall every imported article be taxed at the same rate, or shall some be taxed at a high rate and others at a low rate? Shall some kinds of goods be allowed to come in free?

From the beginning of our national history to the present time two distinct policies have been advanced in reference to foreign goods: (1) the free-trade policy and (2) the policy of protection. The adherents of the free-trade policy, regarding free commercial intercourse between nations as a good thing in itself, contend that taxes on foreign goods should be levied, not with the view of keeping the goods out of the country, but with the view of raising the neces

sary revenue, and with that view only. The adherents of the protective policy, desiring to protect home producers from competition with foreign goods, would levy the customs, not so much with the view of raising revenue, as with the view of at least discouraging importations.

The essence of the free-trade argument is that, under normal conditions of production and competition, a country will satisfy its needs with the least possible effort. Those things that can be produced with the greatest economy at home will be so produced, and any surplus will be exchanged abroad for what other nations can produce with less of effort. Commerce between two countries, each of which produces according to its natural resources, is always profitable to both countries, the free-traders contend, for each country exchanges that which it wants less for that which it wants more. The argument of the protectionist is that by imposing high import duties upon certain classes of goods and thereby partly or wholly keeping them out of the country you encourage the production of those goods at home, and this encouragement results in new occupations and in a diversified industry at home. The additional producers thus called into being by the protective tariff are also consumers, and they buy at least a part of the country's surplus. Another argument for protection is based upon the difference in the standards of comfort and rates of wages in different countries. If there were no tariff hindrances the lower standard and the lower wage would be given the advantage in competition and workmen would suffer as a result.

Tariff Legislation in the United States. The first act that was passed by Congress relating to foreign commerce (p. 274) imposed moderate duties on the commerce of all nations. Its main object was to raise revenue, although it had mild protective features. The active principle of protection was first seen in a law passed in 1816. After the War of 1812 the English manufacturers rushed into