Cyclopædia of Political Science, Political Economy, and the Political History of the United States

Edited by: Lalor, John J.
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New York: Maynard, Merrill, and Co.
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Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
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BILLION. Economists call by this name the instruments of exchange of a metallic nature which take the place of money, for two special uses: for small change and small payments which could not be made with gold or silver coins, because these coins are not small enough. The word billion is applied to pieces formed of a base alloy of silver, as well as to those made of copper. Although pieces of billion are always given in the form of pieces of money, care must be take not to confound billion with money. There is this radical difference between them, that the piece of money is reckoned in exchange as equivalent in value to the objects for which it is bartered. It is otherwise in the case of billion. When a Frenchman pays five francs for an article, the article has a value equal to that of 25 grammes of silver nine-tenths fine, contained in the five-franc piece. If he pays 20 centimes in copper for a kilogram of bread, the metal which he gives is far from equaling the value of the bread which he receives. The proof of this is, that it is not worth the twenty-hundredths, that is to say, one-fifth part of the quantity of silver in a one-franc piece; the respective value of the two metals, silver and copper, in an uncoined state, shows this clearly. The difference between the real value and the nominal value of the copper coins varies in different countries. It is generally between one-half and two-thirds. A grain of copper passes as if it was worth two or three. With base alloyages of silver, there is always a smaller departure from equality. There have been cases in which this departure was almost nothing. In England, where silver coin is considered billion, the nominal value of these coins differs from their real value only by one-tenth.


—The difference between the nominal and the real value of copper coins is based upon this reason, that it would be too great an inconvenience for the public to carry even a very small number of them, if they contained an amount of metal equivalent to their nominal value. Besides, copper is a metal whose value is very variable, as compared with that of silver. The tables of prices current prove this; within a space of a few years it is not unusual to find variations of one-fourth, one-third and one-half. In order, therefore, to give to copper coins, as compared with silver, a value free from great variations, they would have to be frequently recoined.


—But when the law rigorously limits billion to the two uses indicated above, to the making of change, and to all minor transactions. Such as those of the daily purchase of bread, meat and coal for a poor family, this sort of faiblage of copper coins has no inconvenience. The restriction of billion to those uses also reduces the amount necessary even in very large states to quite a moderate sum. In France this sum is reckoned (1853) at from 40,000,000 to 45,000,000 francs, as against 2,500,000,000 of money; this is not 2 per cent. In Russia, at one time, the issue of billon had been exaggerated to the utmost. From 1762 to 1811 it amounted to 90,000,000 rubles against 137,000,000 rubles in gold and silver: 65 per cent. In England, if we consider silver billon alone, it forms quite a considerable proportion. The coinage from Jan. 1, 1816, to Jan. 1, 1848, amounted to £13,390,000 of silver against £92,029,000 of gold, or nearly 1 to 7, but the legitimate circulation of silver coins is necessarily much more extended than that of copper coins.


—It has happened more than once that governments have wished unreasonably to increase the uses of billion, by decreeing that it should constitute a certain proportion, one-twentieth or one-fortieth part, for instance, of payments of every kind. This was actually debasing the money of the country exactly in this proportion, leaving out of consideration the real value of the billion. If it be decreed that merchants must accept in payment one-fortieth part billion, and this billon contains only one-fourth of its nominal value, the debasement is three-fourths of one-fortieth, or nearly 2 per cent. All prices rise in this proportion, and this without almost any noticeable effect at home; but accounts with foreign nations give warning of the evil, for the course of exchange becomes unfavorable in the same proportion.


—The poverty of the treasury is the motive which determines governments to tolerate or expressly authorize these abuses. Thus the French directory, when extremely hard pressed undertook to coin a quantity of copper décimes (nearly 20,000,000), and the right which it gave to private persons to use them in making payments enabled it to put them into circulation after having coined them. Mexico was flooded in like manner in 1835, with small pieces of a similar origin called quartillas.


—This mischievous practice is met with several times in French history. It is met with under the old régime in the times immediately preceding the revolution. Necker, who had been a banker, and in this quality had recognized the inconvenience of the practice, although tolerably familiar with the principles of public economy, did away with it. The directory, with monstrous effrontery, restored it in 1796 by a simple resolution. Beginning with this year, in all commercial payments one-fortieth part was paid in copper coin. This abuse, once established in principle, led to many other vicious practices. So-called banks were established, which issued notes payable in copper coins. Under pretext of correcting the most palpable inconveniences of the abuse, this served to sanction it, and to give it consistency; this was giving private individuals an interest in it, who would violently defend it when attacked. The bank of France itself, under the directorship of Cretet, paid the proportion allowed its own notes in copper coin. Mollien gives some curious details on this subject in his Mémoires d'un ministre du Trésor, vol. 3, pp. 165, 469. Finally, in 1810, this enlightened minister obtained of the emperor Napoleon a decree which forbade the use of copper coins in commercial payments, except in making change, to an amount not exceeding five francs. The receivers of the public revenues had, up to the time of the issuing of this decree, taken an excessive proportion of sous; so that nine-tenths of the receipts from the mail service consisted of sous, and in a total budget of 850,000,000 francs, some 40 millions in sous were annually paid into the treasury. All the receivers of the revenue were ordered, by this decree, to be very severe on this point in future. Those who were likely to receive considerable quantities of these sous were paid a supplementary salary to induce them to reduce to an insignificant proportion the quantity of copper they took in. Nothing more was needed to destroy a custom which savored of the grossness and ignorance of barbarous times.


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