New-York tribune., 1876-01-05

tentions The quantity that will stay out at any gwen
time depends mainly the expectancy OF indl-
viduals the future transactions, and. In
lesser degree, the state of prices which vary the
amount used In the transaction. In times
OF rising speculation, the wants OF the com
munity absorb larger quantity. Each uansae-
tOn employs amount enlarged IN proportion TO the
enhanced PRICES transactions become more frequent,
and the detention of the means OF future transactions
increased by greater disposition TO make them and
less to economic interest II is the competition OF
buyers which puts up pnces in period OF speculation
Bank notes have infinitely ess to do with originating
speculation furnishing the means whereby 1t
be sustained than the other parts of the machinery
OF credit Bank notes currency, as they are called,
insignificant portion ~ the OF purchase
payment The transactions effected by check oper-
ating TO transfer bank deposits in the City OF Newfork
amount now in every eight days-and some years ago
in five daystO large sum az all the legal ten
and in the hands OF the people OF the
whole United States The payments effected at the Lon
don house amount in every two days TO as much
as the whole circulating medium OF the United Kingdom
The other instruments OF credit by which business lie car
ried on-such book accounts notes OF hand bills OF
exchange drafts checks on bank dcpo-are thus many
times the volume OF bank notes.
OTHER INSTRUMENTS OF CREDIT PREFERRED
speculative purchases nearly always initiated by
the Of personal credit In such times confidence is
high; credit is freely given and readily accepted The
transactions are generally made on BOOK accounts or
OF hand These are at the command OF the buyers
in unlimited amount, and without delay or inconve
nience. Bank credits called dcposs-lke bank notes
can be obtained only by borrowing For such purposes
bank notes are only used in small transactions and to
comparatively insignificant extent.
The issue OF bank notes. II not limited 10 hxed
amount, is generally restrained by laws which require
deposit Of securities with the Governments and the pro-
cess OF issue is slow and inconyenen that sudden
and large possible Those that are in the
hon Of fLe ic collected
amounts but scattered in small sums among millions
OF holders throughout continent.
On the whole then IL is demOnstrabe that bank notes
or currency when convertible have less agency IN org
mating or facilitating general speculation than any
other portion of the machinery OF credit OF which
they form so ncousiderable part The false theory
that they the mastercause Of prices and fluctuations
OF prices and that governmental regulation oi telf
volume will avert the tremendous vclsstudes IN business
to which commercial countries carrying Oh vast cr'dt
transactions periodically subject WAS the basis OF
the plan adopted in ls44 the recharcr Of the Bank
Of England The theory was then seen by few Of the
best thinkers be destitute Of truth IL has since been
completely refutcd by experience.
A PROLIFIC FALLACY.
In the infancy of the very modern science of political
economy, metaphor accepted as m axiom II was
said that il purchasers should suddenly nud two gold
coins for Que in their pockets they would pay double
price for their commodities The proposition has no
truth in IT, except by assuming condition the result
10 be proved II would not be true Of any one buY'r IL
could not be true Of all collectively unless fa! III TIE
value OF gold had previously happened TIC lucre~cd
quantity could only consequence of AN In
creased demand the value, or ci decline ~ the
cost Of production In modern times, the increase III
wealth and commerce many fold the increase OF p"pu
lation. The medium Of exchange required is vastly
larger than the accumulation of the precious metals ana
an increased extension OF credit machinery has become
necessary. Bank notes, or other circulating cfecIs cost
as much TO all save the issuer equal value in coin
They have 10 be paid for by all who use them II IN
divduas prefer to coin small proportion oi
their ability to hold their savings or reserves IN com
il traders. commercial companies, ana governments III
crease their reserved stocks OF bullion 10 even small
per ccnage OF extension OF their operations the ab
sorpion would ouun the production OF the precious
metals taking account OF the insatabo demand Of
the Asatic nations.
The fact is that price is not mathematical ratio to he
compnted like a locsuthm. The variations "f the mar
kct are estimated by reasoning beings on The best JudH
ment they can form Of the happening aud the effect Of
future events. The laws Of market temporary price
arc different in Az excess of oranges which
perish in few days OF artificial flowers which 80 out
OF fashion, il worthless An excess OF gold which IN
desructibe and easy cheap and safe 10 hold ID qno-
ton OF interest the lowest raeio the period Is likely
20 remain on hand
LAW OF DEPRECIATION OF NCONNLbTIBIL CUR
RENCY.
The de- recitation Of lcgaender treasury notes Is
not to he measured by any arithmctcal formula. The
law which governs IT is the discount for interest until the
probable OF payment and for insurance against risk
as those two elements estimated by the general udg
ment Of invcsors To create demand foF H. by rccciV
ing Government transactions or 10 reduce ts sup
Div below the demands created by law from individuals
for use as legal tenders is for the Government TO make
artificial market, which operates 20 far forth, as prac
teal redemption.
IL consistent with this reasoning 10 admit and assert
that the issue Of cgaltender Treasury notes during the
late civil cXerted great power over prices II acted
Oh the public imagination in respect 10 future values II
excited great dstrust that the Government instead o
having for its Of war expenditure 10 the
vast mass Of national wealth by loans aud taxes.
sorted TO q debasement Of the comparatively insignia
cant fund Of circulating credits with which private bust
ness Is carried on. It excited grave Of doubt how
often and what extent il might 10 so dangerous
expedient; great misgiyng to The time and the
certainty Of ultimate redemption. Under these innu
eHces in the vcssitudes of military operations, the dis
count became large touching at ts extreme point 90 per
cent the par value Of the issues
The human einaOn seldom falls TO exac-crate any
desired dreaded reality TO which it looks forward aud
1t great part in those cycles Of ascending prices
and descending prices which happen in highly cOnlinor
anticipation Of rise In the market value Of
commodities which extends by cOntdgiOn 10 others,
in expectation of general rise Of prices The up
ward movement sometimes continues for several years
The excitement begins with dealers for profit specua
tiOn. The Instruments Of credit FIRST brought into req
sitiOn those which commonly used by these
classes. The small the last reached.
Then bank notes expanded and they generally
tinue to increase for time after the downward turn
Of the speculation.
The reaction wOuld take place hy the exhaustion
OF the speculative impulse. Sometimes IL does happen