The Indiana State sentinel. [volume] (Indianapolis) 1868-1895, 1874-07-21
The labor of getting a gold


dollar out of the mine is much beyond what
1t costs to make a hundred dollar green back.
In just so far as paper currency takes the
place of gold, it may be regarded as clear
gain to the comm unity, for the gold. super
coded in its function of transacting ex-
changes. will be turned to other account. The
tendency is for the cheaper and more con-
venient currency to drive out the more
costly one. 1t will remain as good as gold
so long as there is absolute confidence in the
issuer and wise prudence in the amount
issued. This idea of credit is so bound mn
with it that Herbert Spencer goes so far as
to say that in community of rogues moth
ing but gold would circulate; in a COM
munity of honest men, nothing but paper:
and in community of honest men aud
rogues mingling in their transactions.
mixed currency of paper and gold.
The ordinary form of mixed currency is
free banking with the notes of issue redeem
able in gold. The check upon an over-issue
and the test of credit are both provided for
in the convertibility of the paper into gold.
Such currency is open to receive and lend
assistance through the money market OF the
world. 1t has also the req aisite adaptability
for performing the exchanges of the com
munity as banks contract and initiate accord
ing to business necessities. Its great adj
vantage lies in its cheaDness, as no more
than about one-third of the paper circula-
ton is generally represented by a reserve of
specie. Its drawbacks are its liability to
counterfeiting and the limited confidence
which the public puts in private individuals.
An exclusively paper currency is brought
about as the immediate consequence of sus-
pending specie payment on bank bills and
making notes legal tender for debt. The
latter step is generally the result of severe
national crisis, and it is a significant fact
that paper currency must be controlled
and restricted by government whose statutes
assume the authority of the laws of trade
and regulate all financial concerns. Legal
tender notes, and all those guaranteed by
government have this advantage, that the
national faith is pledged to their redemption.
They are therefore good throughout the ma
ton until an over-i tissue depreciates them.
The natural distrust and jealousy between
different nations prevent the paper money
of one government from ever becoming cur
rent through the world. Consequently the
currency OF a nation where gold has ceased
to be circulating medium is isolated. III it
grows too weak 70 perform the exchanges it
can get NO outside help. If there be a su-
perabundance, it cannot be exported. The
ebb and flow of trade in the market of the
world cannot effect it. Moreover in
addition to this lack of sympathy with the
financial pulse of other nations, there is
lack of adaptability about paper money.
There is certain amount of value required
to conduct the business of a community.
although no human wisdom can fix the
limit accurately in any locality. The pc
culiarity of gold is that, as it represents
certain amount of labor a fixed sum of it
will conduct exchanges equally well when
production is doubled and when it is dimin-
ished by one half. In times of plentiful har-
vest dollar in gold might be equal to
two bushels of wheat and when the
same labor produced but half q bushel, the
purchasing power of the gold would be less
ened by one-half. But as this labor test
does not apply to paper money. its purchas-
ing power does not increase in eras of pros
perity or increased production. As q conse-
quence, there is a necessity for an imitation
of the currency. Thus, suppose a country
whose currency has bit exactly that happy
amount required to conduct its business
In a season of sudden demand there is an
addition of one-third made to it. When
the pressure passes away there remains
a circulation beyond the ordinary necessi-
ties of society. The result must be dete-
rioration in the quality of the currency pro-
portiouste to the advance in the quantity.
In other words, the purchasing power of
dollar sinks to two-thirds and the next
new demand necessitates a new issue, to be
followed by a new deterioration. 1t will be
seen that after q succession of over-issues
the amount of currency will grow so large
that it cannot possibly be redeemed
and so deprecated that the national
faith ceases to be a guarantee. The
result is the utter ruin of the
currency, the breaking down of all indus
tries and the bankruptcy ofthe government.
Theoretically, the economists have demon
strated. over and over again, that initiation
must end in reputation. To men careless
of what theorists say, the teachings of his
tory ought to afford warning. France has
gone through national bankruptcy more
than once. She lived through the gigantic
struggles OF the great revolution on the issue
of her assignats. but nothing could
prevent their final debssement. This
country inflated its continental
currency until it become good for
nothing but paperiDg barber shops, although
the contest which was carried on by means
of it proved successful. Austria began her
paper policyin 1862 and is staggering slowly
along to Reputation under a mass of cur
rency trifie less than our own. She has
resorted on more than one occasion to a
trick which is inevitable in the history of
cd i.,or