circulation thus being all or nearly all of a fiduciary nature.

(3) Regulation and limitation of the amount of money in circulation so
that a fixed parity between it and gold may be maintained (a) by the
limited issue of coins only on governmental account, (b) by the sale,
at a fixed rate, of foreign exchange bills payable abroad in the
standard unit, the money paid for the bills being withheld from
circulation in a special reserve, (c) by the purchase of foreign bills
of exchange at a fixed rate, thus paying out and putting again into
circulation some of the fiduciary money in the special reserve.

These monetary changes furnish numerous illustrations and
demonstrations of the quantity theory of money as applied to the
entire circulating medium of a country.[8]

§9. #Nature of governmental paper money.# The problem of seigniorage
presents itself in its most extreme form when money is made of paper.
Paper money is issued either by a government or by a bank. We will
consider governmental notes here, reserving until Chapter 7 the case
of bank notes.

The issue of paper money in some cases grew out of the practice of
debasing metal. However this may have been, governmental paper money
may be looked upon as money for which a seigniorage of one hundred per
cent is charged. The gain of seigniorage from paper money is greater
and is just as easily secured as that from coinage of metals.
Governmental paper money is called "political money," in contrast
with commodity money. However, all coins that contain an element of
seigniorage, or monopoly value, are to that degree "political money."
The typical paper money is irredeemable; that is, it cannot be turned