Although the State may not promise to pay a dollar, yet, wherever such paper money carries any purchasing power with it (which has very seldom happened, and then only for short periods), it will be found that there is a vague popular understanding that the State intends, at some time or other, to redeem the notes with value in coin to some amount. In the early cases of irredeemable money in our colonies, the income of taxes, or similar resources, were promised as a means of redemption. To some—although a slight—extent, the idea of value was associated with such paper. The actual quantity issued did not measure the depreciation. The paper did depreciate with increased issues. But only in so far as the increased issues proved to the community that there was less and less possibility of ever receiving value for them did they depreciate. In other words, we come to the familiar experience, known to many, of a paper money depending for its value on the opinions of men in the country. This was partially true, even of our own greenbacks, which were not _fiat_ money, but promises to pay (although not then redeemable), as may be seen by the movement of the line in Chart XII (p. 359), which represents the fluctuations of our paper money during the civil war. The upward movement of the line, which indicates the premium on gold during our late war, of course represents correspondingly the depreciation of the paper. Every victory or defeat of the Union arms raised or lowered the premium on gold; it was the register of the opinion of the people as to the value to be associated with the paper. The second and third resorts to issues of greenbacks were regarded as confessions of financial distress; it was this which produced the effect on their value. It was not only the quantity but also that which caused the issue of the quantity. It is, of course, clear that the value of a paper money like the greenbacks, which were the promises to pay of a rich country, would bear a definite relation to the actual quantity issued; and this is to be seen by the generally higher level of the line on the chart, showing a steadily diminishing purchasing power as the issues increased. But the thing which weighed largely in people’s minds was the possibility of ultimate redemption; and the premium on gold was practically a register of the “betting” on this possibility. In 1878, when Secretary Sherman’s reserve was seen to be increasing to an effective amount, and when it became evident that he would have the means (i.e., the value represented by all the paper that was likely to be presented) to resume on the day set, January 1, 1879, the premium gradually faded away. The general shifting of the level to a lower stage in this later period was not due to any decrease in the quantity outstanding,