Green-Mountain freeman. [volume] (Montpelier, Vt.) 1844-1884, 1878-10-30
Contraction and Expansion.

pectlVe OF CODIfaCtlOli CiuSOaH - a. -
in another column. to suggest that 1t con-
Pounds the theories and arguments oil both
contractors and "expanders." ms
is. no doubt, to some extent true. But
when Secretary McCulloch favored con-
traction as a means Of increasing the Wall
nc of the currency, resumption was not
possible, and contraction seemed the only
resort. Resumption accomplisheS Inc
same thing; and actual specie payment
would keep the legal tenders at par no
matter how great the volume. SO would
their redemption in a bond worth par In
coin. An expansion that would not put
in peril such redemption would not re-
duce the coin value Of the currency. But
even then, expansion and contraction
might affect prices, as speculation is pos
sible, though less likely to occur, when
money is good as we'll as when it is poor
The war prices were only partly due to
expansion; the fall in prices since is very
little owing to contraction. The old state
bank circulation, nominally as good as
gold, had something to do with the inflated
prices that preceded the crash in 1857; yet
the bank circulation was larger in 1897
than ever before. When the panic of 1879
occurred greenbacks were only about
eleven per cent below gold in value, and
for two years previously the depreciation
had been even less, and their purchasing
power was greater, and the volume. there
fore. with reference to the business of TIL
country, was larger than during the war
Such facts show that no invariable rule Il:
to the effect of expansion or contraction
can be laid down; yet it is undoubtedl,
true that expansion, even, of currenc.
that is AS good as gold, initiates prices
This initiation is not, however, the resul
of the causes that raise prices when cur
rency is deprecated in value. Poor mon
ey increases prices, -speculation may d
it-but the increase in the one case is du
to greater activity in business, and in tn
other to the worthessness of what is use
as money. Contraction may be remed
in both cases, but for different reasons; i
the one it makes the money more walt
able, in the other it lessons the tendenc
, to speculation, contracts credits, and TIT
Il brings prices back to Il normal standard.
4 1t is not easy to determine how niue
currency is enough for safe and steac
g transaction of business, even when tn
= currency is equal to gold in value. II
country could undoubtedly get along wi
less than the present volume, and yet ha
l. enough for all the wants Of legitima
IL trade Logically any paper that is CALI
eS money should have for basis an equ
IS amount of what is the real money of t
" country, If that is coin, there should
&c no more paper money than there is &C
ON deposit somewhere to redeem it wit
es The paper dollar, rs money, should
id only be promise to pay com DOLL
nv but should actually have II coin dollar
IN hind it. For the theory of paper mon
m is that it represents real money, and
90 resorted TO only for convenience, as c.
is not so easy to handle. But if pal
, represents coin, then there should be G.
u" actually behind it, as it cannot repres
% what is not actually in existence. And
-, is by no means certain that such pa
money would not be equal to all the lei
" innate wants of the people. The d;
y, exchanges in the New York clear
house amount to from sixty millions t
hundred millions of dollars, but the aN
ork age use of money is less than five per {
ers of this amount. The rest Is done
IRE checks and drafts. Probably ten mill
INTO of money would be enough for the b
OBJ ness of that house for II year, or to
sed the balances on q business of TIVE
n9s thousand millions of dollars. From
hly it will be seen that even paper money
ady form but Il small office in the eXchal
!, is of trade, and that the volume acIu
int needed is probably much less than
Will amount which a more or less specula
sla demand calls for 1t is safe to say tn
paper money that really represented
the dollar for dollar, would not reach sue
tile. expansion as would be likely to I'm
,vict stimulate credits OF enhance prices;
else. any paper money in excess of that W.
ison no doubt, have some tendency in thai
,lum rection. t... ...,.
h of IT. II. H." is undoubtedly corre'
have drawing his Inference that it is sc
more dence" that gives value to paper m
On almost irrespective Of volume; it is
q pa. when the volume is so great as 10 s
, adj that confidence, or the responsible
Yer fails to redeem, that its value dec
ylum But this, as already shown, is not tn
test by which to regulate the volun
paper money, although it is ininltel
ter than no test. There may be in
prices, stimulated credits, and SIP
well ton. ending in panics and revulsons
ghout result to some extent of too much
money that is nominally rs good as
ed at and therefore it does not follow that
told good thing to have all the paper II
com (even when the people have entire
icially dence in it,) that anybody wants.
! mar not better, after all, to fall back on
g. anu pies, and have no more paper none
'' ~ there is real money, and let basine
vices take care of the restP
c. w
posing -.
g any Horatio Seymour. who doesn't Ii
, ron. Tilden, is said to have made this /
ed not about his canvass: 1t took gre
person of ingenuity in Mr.. Tilden to lo
of the presidency" .a
of the .u ha h,,.o. - b,s hr,uaht
to sell N ~ tno 100 ,hn ,, ,rndnn 7hS