The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1892-08-17

trusting to It's fiat to keep them
on n par with gold. The Govern
ment has a monopoly in the manu-
faoture of silver dollars. No one
can get silver dollar except by
paying for it gold dollar or its
equivalent. Now, at any pnrticu-
lar time, a certain number of dol
lar pieces are required in order
that business may be carried on
most conveniently. The banks see
to it that this demand is met by
purchasing the proper supply from
the Government. The silver dollar
has n market value as n tool of ex-
change, just the same as any other
tool has n market value, and when
the tool is patented or when for
any other reason it is the subject
of monopoly, its market value is
not at all dependent upon the
value of the material of which it is
composed, Those who need the
tool will purchase only what they
find it of advantage to purchase at
the price asked. The silver ques-
ton now so much discussed in the
United States is only a question of
whether the quantity Of silver coin
in circulation shall be determined
by supply and demand, as at pres
ent lin which case the coin will
continue on a par with gold), or
whether the quantity shall be un-
limited lin which case the coin
will depreciate to its bullion
value). The above reasoning APP
plies equally well to paper cur
rency. So long as the supply
is limited, it will be on a
par with gold. When the
supply exceeds the demand, the
paper may depreciate until it's
value as currency may be no
greater than its value as waste
paper, IS was the case with the
Continental paper currency. There
is no objection to limited amount
of paper currency. 1t is convent
ent to carry and, being inexpensive,
it saves interest on the capital
which would otherwise be invested
in metallic currency. The danger
lies in issuing too much. Accord
ing to Gresham's law, the cheaper
money always drives out the
dearer. At any one time certain
amount Of currency is needed to
carry on the business of a country.
Suppose this is gold. Now, if
paper is issued gold will be driven
out to the extent of the paper is
sued. The paper will be on par
with gold until the gold is all re-
placed with paper. After this point
is reached every increase of paper
will be followed by depreciation
in the value of the whole. AS a
rule, the only way to keep paper in
circulation and on a par with gol9
is to keep it redeemahl1 IN gold.
Otherwise tho VII DE little or no
dA,~ Tor it. In order to do this
1t is necessary to keep large
amount of gold on hand with which
to meet any calls that may be made.
Greenbacks are sometimes cited as
an example of fiat money. But for
years after their issue, the fiat of
the Government was powerless to |
maintain their value on a par with
gold Now their quantity is limit
ed to 346,000,000 in round num- |
bers, and they are redeemable in
gold. $10o,OOo,OOO in gold is kept
on hand to meet any calls that
may be made. If Horner's bill
should become law, paper might
be issued to the extent of, say half
The value of all the real estate in
The Kingdom. The country would
be swamped with the almost
worthless currency, all gold would
De driven away, foreign exchange
would be unobtainable, and inter
lal business would be worse than
leranged.