The New Orleans bulletin. [volume] (New Orleans [La.]) 1874-1876, 1875-12-19
A LESSON IN FINANCE.

mark of interest on the part OF our CORE
spondent; but we may be permitted to sug-
pest that his instructions would be enhanced
in value il he had understood the sentence OF
our article which he subjects to criticism
That sentence, as correctly quoted by " D.,
is as follows: "What causes the depreciation
of paper is not SO much redundant currency
as its inconvertible character and the uncer-
tainty that it will ever be redeemed; IN re-
gard to which our correspondent kindly points
out that we 'have precisely and completely |
reversed the truth" He is also good !
enough to intimate that we have been led into
this grievous error by the influence OF some
supposed "organ" of certain anonymous
Wall street magnates, "whose arrogant claim
of exclusive knowledge on the subject, has
stifed our intelligence. II it would not be
too presumptuous on our part to dissent from
our correspondent, we would assure him that
we have had no communication with any real
or supposed Wall street magnate, or their
organs aud that the only "claim to exclusive
knowledge On the subject" that has come
under our notice, is set up by our correspond
ent himself.
And now let us see in what manner we have
directly and completely reversed the truth IN
the sentence quoted by B." This IS our
proposition: That paper (meaning the actual
greenback currency of the United S:ates) is
deprecated not so much on account OF re-
dundancy as on account of its inconvertl-
bility and the uncertainty that it will ever be
redeemed. Is this true, or is it partly true'
or is it the exact reverse of the truth, as our
correspondent declares? In the first place it
must be promised that the word depreciation,
as applied to circulating medium, has two
meanings In one sense it is used to indicate
the diminished value of money compared
with the articles which money purchases, as
indicated by the general rise OF prices during
periods of speculation; and in the other
sense it is used to designate the difference in
value between two kinds OF currency, say
paper and gold. The latter is the sense in
which the word is generally and popularity
employed, and in which it is used in the pres
ent discussion. Now, we assert the funda-
mental proposition that, in this sense, depre-
citation is due, primarily, to inconvertibillty,
we may say, exclusively to inconvertibility.
To make this proposition plain, it is only
necessary to put it in another form, VIZ: fall
paper were convertible into coin, there could be
no depreciation with respect to coin. Even the
!, traditional school-boy could tell that things
which are equal to the same things are equa
to one another, and that things which arr
| iv
And what is this as applied to currency bu
an EXPIRE, sion of the fact that the inequalit.
8 of depreciation depends upon the absence o
convertibilitv. A thousand million, or TIVE
:, thousand million of paper, would OF cours
stand at par with gold if it were convertible
into gold It's depreciation begins the mo
ment that it is made inconvertiole, and tn
extent of the depreciation is then, of course
: measured by the volume of the currency
within certain limits. A sufficient reduction
of the paper currency could be made t.
I. bring it to par with gold, provides
there is confidence in the abilit
and the intention of the Governmen
to redeem it in some form or another. Gu
correspondent does not seem to see that thl
4 is at all necessary. Nevertheless, wlthou
it, even government paper would be worth
g. less. Mr.. Mill says:
y. "But. also such system Of currency woul
have no advantages sufficient to recommend 1t
adoption. An inconvertlble currency, regulate
by the price of bullion, would conform exactly,
all its variations. to a convertible one, ana W
only advantage gained would be that or exeml
s. ton from the necessity of keeping any reserve
the precious metals, which Is not very lmpo
tant consideration, especially as government
80 long as its good faith is not suspected, neet
not keep 80 large q reserve as private issuers
=, OF course, if the paper were supposed
be perpetually inconvertible, the expire
sion, good faith Of the government, would
meaningless. Good faith means the dispos
ton to pay; but if there were no necessity
paw in any form whatever, there could be I
necessity for good faith. In truth, no COVER
., ment paper ever maintained itself except u
nod der the condition of practical convertibilit
Lle in part at least, through the operation
some plan equivalent to redemption. 1t
true that greenbacks are nominally inco
vertible-yet in fact they are partly redeem
es, once year by their payment into t
Treasury as taxes. The practically !
1 convertible currency Is that exec
= which remains over after the payne
'o' of dues exacted by the government III
~ amount is capable of depreciating the who
and it works the depreciation precisely
cause it is inconver,ible. Ii the governme
were to decline to receive greenbacks In Pr
etc ment of debts due to itself, this would be
~ pudiation, and the paper would lose eve
. element of value, whether its quantity W
it's great or small. If it receives them, as it d.
now precisely to that extent it redeems the
1t is strange that our correspondent oV
looked the enunciation of this obvious pr
ciple in the quotation made by him fr
Calhoun's works "a paper issued by G
ernment with the simple promise to rece