Money, Prices, Credit, and Banking.

The people of Chile are suffering from an unsound monetary system, which has for a long time been a disturbing factor in business and has contributed not a little to the establishment of foreign control of the industries of the country. The circumstances make it necessary to offer fellow citizens a treatise on the theory and history of paper money. The first issue of inconvertible money in Chile occurred in 1865, during the war with Spain, and consisted of inconvertible notes of the bank of Chile. The assumption was undertaken after the war, and Chile entered upon a period of bimetallist. By 1878 the failing value of silver had driven gold from circulation. The banking law of Chile which follows the liberal inspiration of whom it was at one time a professor of the University of Chile, fixed the maximum note issue at 150 percent of the paid-up capital of the bank. Taking advantage of the needs of the government in 1878, the bank obtained the privilege of issuing its own notes in payment of public dues; in that same year the law authorized the issue of the note. without convertibility, and provided for forced circulation. This privilege was for one year, but appears to have been continued much longer.