The Portland daily press., 1878-07-18
tChicago Tribune I
Money.
Prof. Kent ON the Uses of Ieney-Amount
and Kind Needed.

the subject of money. This may excuse a re-
statement of some of these principles:
l. Money is simply medium of exchange.
Its sole object is to avoid the inconveniences Of
barter-trade When there is money enough in
any community to make barter-trade unneces-
sary the supply is sufficient
2. The amount of money in permanent
circulation in any country, or in the whole
world, is matter of almost no consequence.
A small amount does the work of medium of
exchange just as we'll as large one, because
prices correspond with the amount. If wheat
were 10 cents bushel and other things in the
same proportion, the exchanges could be made
just as well with wheat at 81 bushel and
other prices corresponding; and the amount of
money required would be on the first suppo-
sition but one tenth of that required by the
last.
3. An increase in the amount of money in
circulation does not increase its effectiveness as
a medium of exchange. In the proper sense
money is made no more plenty by an increase
of the quantity. The effect of an increase of
the quantity in circulation, the business re-
naming the same. is to increase prices; and
the new prices as completely absorb all
the money as did the old. 1t is said
that money was scarce in Richmond
when wheat was $40 bushel. Nor does the
increase of the amount of money tend perma-
nently to lower the rates of interest Rather,
il the volume of money in circulation is on
the increase, this will increase the rates of in.
teresr, since it will seem to make business more
profitable. Money is borrowed in order that
the borrower may purchase something-labor
or property-out of which he hopes to make
profit, and the expected profit usually deter
mines the rate paid. Now, all business seems
more profitable when prices are increasing.
And man who buys is sure to be able to sell
at an advance. The rates of interest can only
be lowered by an increase of capital in proper
tion TO the demand. Capital is not money, but
property which can be put to a profitable use
Money represents capital; but an increase of
the amount of money does not increase the
amount OF capital any more than doubling the
members of Congress would double the lumber
of people whom they represent.
4. The increase of the money in circulation
10 proportion to the business does injuriously
affect all those who have money in their pos
session at the time of the increase and all who
have made contracts by which they are to re-
ceive money in the future-that is to say, all
creditors and all who work for wages. An in
crease of money BY increasing prices dimin-
lshes the purchasing power of money, and
hence takes certain amount from all wages
and from creditors. The effect of this upon
any man who sells his labor for fixed period
at fixed money rate is very disastrous He
may not get in real value half of what he has
right to expect. An increasing, and therefore
depreciating. currency, always affects labor
ing man in proportion to his means mere than
any one else, His wages never increase as fast
as the depreciation. He has not time, or per-
hsps knowledge sufficient to look forward to
the probable depreciation of money, and make
his contracts on this basis.
3. The first essential in a currency Is that it
be stable; that it does not rapidly change in
value. Society finds it necessary to make con-
.At L. f,.1G Ma
haps many years after they are made. 1t is of
the greatest consequence that both parties to
all contracts involving the payment of money
at some future time should be able to calculate
with some certainty the probable value of the
money when it is to be paid. A currency
rapidly decreasing or increasing in amount
makes such calculations impossible, and hence
tends to make success in business an affair of
chance rather than of skillfu, calculation.
g. The great objection to irredeemable pa
per money is. that there is no way of properly
limiting the amount issued. AS it costs moth
ing, and at first passes almost like coin there
is great temptation to issue so much as to
produce an immediate depreciation. This
depreciation makes rise in prices, which
seems to make business good. The rise in
prices absorbs the money and makes it as scarce
as before. This leads to a new demand for
more money. 1t must be left to Government
to determine the amount to be issued. The
debtor class and many business men who think
prosperous times are made by a constant in
crease in prices, and so apparent profit, are
likely to constantly demand new issues. The
necessities of the Government may lead to the
same result. 1t seems a pity to burden the
people with taxation when money enough for
the wants of the Government may be had at
the expense OF printing it. The working OF
| these causes is sure to bring about further and
| further issues, and greater and greater depre-
| citation. If an attempt is made to check this
| tendency, to stop further issues, and to dimin-
| 'ish the am0unt in cirnulatiOn fhprA ia tn
| be great cry of hard times, which few Gov
| ernments are strong enough to resist. But
| either policy of contraction must be entered
| upon, with all its evils, or successive issues
| must finally end in the rejection of the paper
| as absolutely worthless.
| Z. The great advantage of a currency of gold
| and silver is, that it is comparatively stable.
| The amount can only ba increased by mining
| at great expense. And the amount to be had
| by miuIng is restricted. Then, as it is the cur
rency of the world, any increase spreads all
| over the world, and SO, but slowly affects
prices. The objections to currency OF coin
generally made are, that there is not enough Of
it to do basiness, and that it is too costly. As
to the first, people often talk as though it re-
| quired as much currency to do business as the
| value of all ths exchanges of the country dur
ing year,-forgetting that one dollar may be
used in thousands of exchanges during any
one year; that often during one day certain
sum will pay many debts, each as large as it.
self. Such people forget also the second prin-
cple that l have stated. viz: that small
amount of money will do the work of exchange
Just as well as large amount.
The cost of a coin currency is not very large.
1t the sum of $3C0,000, 900 of coin is necessary
to keep the currency of the United States re-
deemable in coin, and this seems o sufficient
estimate, tnen the cost of this currency is the
interest of $300000000 and whatever loss
there is from the wear of the coin. L cannot
estimate the last item. but it cannot be large:
| The interest of $500, 600 600 at per cent would
be $12000,0 ,000-30 cents for each person on a
population of 10000, coo, or 81 80 for each FAM
lily of five. This is not great price to pay for
stable currency. Compare with 1t the loss
which any workman may suffer during yeaI
from the most moderate depreciation of the
currency. If laborer is employed for com.
pensation OF $500 year, and the purchasing
power of that sum is diminished 10 per cent.
by an increase of the currency, he will lose $50
thereby. q. A. KENT.