The Daily state journal. [volume] (Alexandria, Va.) 1868-1874, 1874-02-20

country. He denied that its volume effect
ed prices and he denied that the amount
of paper currency in circulation had had
any influence in England upon the export
or price of specie. He said:
"1he comparatively moderate dram Of
bullion is from known cause, want of
food, and not from any over-issue of bank
paper; and above all, we should recolect
how greatly we aggravate our difficulties
by so cramping our circulation or to dis.
turb those ordinary sources Of our indus
try by which alone this supposed adverse
balance with our foreign customers can be
set right. = Should we
be affected with second year of famine,
the gold must go out for food, whatever
may be the consequences but nothing
more absurd could be proposed than to
obstruct all trade by Withdrawing the
means by which to circulate it. as mode
of meeting those difficulties which the ac-
tive condition of that trade can alone en-
able US to support"
WHAT CONTRACTION HAS DONE HERE.
The blind and logged application of the
the policy of contraction has advanced the
rate of interest everywhere to a figure
which no profit can pay; it has deprived
the most solvent houses of the means of
meeting their legitimate engagements; it
has caused a universal reduction of prices,
and thus baffled the calculations of the
most prudent men; it has reduced wealthy
merchants to the condition of paupers; it
has deprived manufacturers of the means
of executing their orders, throwing thou
| sands of industrious people out of employ
haC Torcad y>aa,,la n call 10
amounts of produce and merchandise at
less than prime cost, entailing grevous
national loss; it has stopped the progress
of many useful public works, and destroyed
confidence and credit among the classes
where they are essential to enterprise and
success. The ruinous workings of this
MIscHIEvoUs POLICY OF CoNTRAC-
| TION,
and its disastrous failure in this country
have been so thoroughly depicted by thu
Hon. William d. Kelley, of Philadelphia, il
recent publications, that nothing more is LET
to be said on this subject. Reason teaches
that
CONTRACTING THE PAPER CIRCULA
TIoN DON'T CHEAPEN GOLD.
Contracting the amount of paper money
contracts and makes dearer all money, in
GLIDING gold, SO far as gold continues t
be money. Where there are two kinds Q
money, not made equivalent by law, tn
value of each kind depends upon the specia
causes affecting itself, and does not Deepen
upon the single circumstance of the guam
tity of the other kind in circulation. Durin
q suspension of specie payments, paper an
gold are released from mutual dependenc
in their respective values, and each rise
or falls by virtue of separate causes espt
J cially affecting ITSELF Gold ceases then
be part Of the home currency, and b.
: comes q mere commodity of commerc,
Its value then comes to depend, in gre,
part, upon the causes which increase {
lessen the demand for it for expectation
| and these causes have very little Necessary
connection with the home value of papt
currency.
I On the other hand, as paper money cal
/ not be used abroad, its value depends upC
\ causes operating at home, which are di
: tinct from those affecting the value of gol
It is only indirectly that the causes whit
affect the value of home-staying pap
money also affect that of exportable gol
Redundancy in the currency does, indet
: tend to produce over-trading, therel
9 creating foreign balance against the cou
S try, increasing the demand for gold for e
e portation, and enhancing its value. b
;. such an effect is indirec,, and does n
e change the fact, that the values Of gold al
. currency, in periods of suspension, a
;, affected by separate causes, and cam
S be forced into equivalence by any arbitral
: process applied to one of them alone.
: MERE INITIATION DOES NOT INCREAs
PRICES.
n The premium on gold, during s.,
# peasion, has been proved by Thom
Tooke, in his History OF Prices, and |
others, not to depend upon the amount
paper currency in circulation pyOvide
that the currency shall have been issued
l. amount and manner based upon the bus
Of ness transactions of the community. Whe
le ever the receivers of it, in receiving
Al contract the obligation to return it in d.
II time with interest to the issuers, then Il
st quantity Of paper issued adjusts itself
IS the actual wants of the community. The
d there is no vicious initiation OF the curren
{, as such, and its value is not affected b
d nor does it affect, the value of gold. Tn,
1t the demand for it equals the supply, al
: | prevents the eVll OF lnf1atl0n.
: Mr.. Tooke, after an elaborate examin
n ton Of the prices Of leading articles of Il
/ English market, for the period from II
}, to 1887, concludes that changes in the
le were to be wholly accounted for by Ct
re cumstances affecting supply and consum
re ton, and not by the condition of either {
paper or the general circulation. !
l. further concludes that whatever variatio
occurred in the circulation during t
If period referred to, were the consequence
- rather than the cause, of changes
!. prices. He said, in 1882, under oath, b
,r fore committee of Parliament:
q SIN point of fact and historically, as I
N as my researches have gone, in every sing
:. instance Of rise and fall of prices, the ri
r. or fall has preceded, and could not, thel
% fore. have been the effect of an enlarg
70 ment of the bank circulation"
n 1t has been the experience in Englan
i that the highest initiation in the prices
q the leading articles of trade has occurr
n when the currency was undergoing co
y traction. And during the wild specul
= ton in railroad shares, which,
September, 1915, reached the enc
n nous aggregate Of twenty-five hundr,
i millions of dollars, the circulation of
= the British and Irish banks was not great
!. than it had been in 1910, and was then u
> dergoing decided contraction, [Lond'
:. Quarterly Review slst vol. PIP 253. 49,