New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1874-07-25
TIE PURCHASING POWER or GOLD
AND PAPER.
July %, 1874.

IssUEs-AUsTRIA's EXPERIENCE.
TO the Edttor Of the Tribune.
SIR: Gold, the universal medium of eX-
change has attained its position aud kept 1t for many
centuries because OF an exceptional combination or
good qualities. VIZ. beauty, durability. nvariablity,
diysbity feasibility, malleabiity and by the necessity
Of great labor in its production. The first thing to con-
slider is the natural laws that determine the purchasing
power of thisimetal. Suppose community, consisting
one-tenth OF gold miners and the balance OF farmers
stock-rasers, manufacturers and other producers.
Every member will desire to exchange part
Of his production for something else, but he
will have use for only limited quantity OF any article
with the exception OF :" the dust" He may have more
wheat or cattle more manufactures than he can
use or can sell without great loss, but he will not DO
troubled with too much gold For all this, the gold
| miner Will only get as much payment as tue other
producers. II In year gold mining be very pront-
able, other workers will into that field, leaving
profit in their for the workers left in it, such a
process must continue until all laborcrs paid in due
proportion. Therefore, the purchasing power of gold
depends upon the relative cost of its production; and
gold being easily transported this rule holds good in all
| parts OF the world. Gold Is used as money ana IL
universally desired in unlimited quantity but its value
a. nevertheless fixed by the laws governing the values
OF other productions II you buy hat for gold dollar
you sell dollar just truly as you purchase the hat
You give the result of much labor for the result OF
80 much other labor Now, II you wish to sell your hat
| for a gold dollar, you may lose days time in
finding the man who will pay the price, Here then we
have the difference between gold and other productions
of an equal amount Of labor; the difference between
money and merchandise. Both must represent some
labor but money must be universally desired II follows
from this reasoning the amount OF gold in the world
is always much but never more han Is needed Inc
price OF article being IT, value in gold and the value
OF each being determined by the cost OF IT'S production
the price il merely statement OF relative cost To say
that there enough gold in the wO rid is to say that
prices are low to that there IS too much gold
say that prices are too high Elch assertion must
be absurd since we have no rul, by which 70 hnd our
ideal prices The scarcity OF gold In any country may
be charged to the stupidity ot It's people OF us Law"
| makers.
How now shall we explain the purchasing power Of
paper money! II il not the result OF labor and has no
intrinsic value, but taken in exchange for articles
that are intrinsically valuable We shall lind To be
pronssoy kind OF money aud to be good TO the extent
Of the belief IN the promise 10 redeem in gold Ii the
belief is perfect and well-fOuDded definite amount OF
paper money an improvement upon the exclusive use
OF gold, the weight OF which Is OurdehsOme' Con-
makes possible the issue OF paper money put
the is found in the benefit to the issiers II
man Keep on hand 500 IN goid, ana issue MS t ae-
mand note for the SUN, he Will derive no proht;
but If he keep 500 gold and issue three demand notes
each for SUN, he must get the interest upon 500
for his trouble Under system OF flee banking
in ordinary times t Is supposed that bank may safely
its notes for 100000, provided 1t retain III vaults
100000 gold and possess real value 70 cover the pal
auce OF figures liable to great vara-
ton and the proportion mast depend upon the sagacity
OF the bank directors the sort OF securities held the
state OF trade the kind OF business done by the banks
customers; for in general demand for specie all
these considerations will BE- prominent. Tne reader
portion between "a banks specie and ts circulation.
There is limit to the amount OF paper which any gov,
and the public. Within this limit we may
ccasider paper money q blessing; but beyond
Instances oyersteppng the safe bounds. As the
chasing power of gold depends upon the cost OF produc
by transfer OF aborers to or from other fields
purchasing power OF paper money depends upon the
for prices may advance and must advance enough to-
absorb amount. snpposing the chance OF redemp'
nripaa tnus AL anp tn
any amount OF paper money also. A surplus or gold
OF paper money, surplus OF that which everybody
wants cannot be conceived BY doubling the amount OF
paper money you cannot guard against periods OF
scarcity and financial distress However, the issuing
the average human nature OF rulers or bank
eraIIy been supplemented by popular camor
As the paper has been increased the advancing
persons any community thinking this anything but
real prosperity. Government paper and bank paper
have often been issued to reputation short time
has generally suiiced 10 wind up any bank that e1-
ceeded the proper bounds for bank must redeem IT'S
promises 80 under. But creditors have no remedy
TO apply to Government that may pass legaltender
act Indeed, custom alone IL sufficiently powerful to
rence England. During the period from 1877 to 1871.
Bank of England paper paid debts although thls paper
by the courts n 1901 that the precious metals were the
only legal tender.
In proportion to the pleasure Of increasing paper
issues has been found the pain of reducing them The
latter is 50 disagreeable that no people mas yet at
tempted IL voluntarily. The first step has always
brought on enough symptoms OF panic 10 frlghen the
bOldoet nancer Perhaps the most Instructive lesson
OF the OF expansion and the difficulty OF conrac-
ton afforded by Austria Since 1902 that country has
been cursed by rredeemable paper. The proper limit
paper passed there seems to have been no power
TO return. Each new issue was called temporary
relieve some pressing distress The expenses
aud Government promises were more popu-
lar than taxes. OF course every issue
so each time that the Government bought
IL had pay much for material than 1t paid be-
fore Each ISSUE OF paper therefore, made necessary
greater succeeding issue. we may wonder how much
In 1895 the Austrian note issue was 449O0OOO
guden, about ten times great In 1896, prices
having high that the sums required for army
supplies were enormous. Every possible law To Keep
tried, but to no purpose Ia 1910 the notes mad
fallen O95 for loo metal. The crisis reached in
1911, when the Government ordered that the notes
should be exchanged Tor Vlennese legal tenders
at one-hfth OF tho nominal value or the
old notes, OF which there over 1,OoO.OOOOOo
guden in circulation IL was promised thht u2OOOOJO
should be- the extent OF the new ISSUE or just enough to
redeem the old, the new beng called redemption
issue" The old issue fell in value 10 $780, and the new
tn 1888 for silver. In the midst Of necessities
the only seemed 10 DO To make another issue,
SO the solemn promise OF the Emperor broken under
tho guise OF anticipation notes." with the expana-
ton that these merely exchange bills for antic
pang the revenue These were secretly Increased to
63s,OOOOoo. In 1916 the Austrian National Bank
was founded, and attempt was made TO
these anticipation notes" reduced TO 99GOOO0)
aud Ia 1910 lOOO0O0D. The policy OF repression OF
IN Italy In 1883 aud with Prussia In 1866 caused new
emissions OF paper. This record OF naucial blunders
ends with the panic at Vienna last Summer, now fresh
Ia the public mind.
Is it not evident that promises made regarding re-
dompon OF paper likely To be broken that Ia the
excessive issue a force Ia loosed that cannot be con
trolled History affords instance OF nation paying
gold for its overissued promises. Who. then,
That the United states viii DC the nrst Oh the roll Of
honOri RADIK.
XeW-i Gs, July u, Isl.