Iowa County democrat. [volume] (Mineral Point, Wis.) 1877-1938, 1903-09-03
"pRINCIpLES OF MONEY"

The above IL the title OF book re-
Gently printed, Prof, Laughlln Of Chi
cago Is the author. The Chicago Tri-
bune a short time ago printed re-
view 81 the book The review was
written by Albert Watkins. 1t Is able
and also very timely In view OF the
discussion now being carried on In re.
gard to asset currency. We quote the
following:
A thorough discussion Of credit "
OF "deposit currency" Of " the true
theory OF prices" and OF " prices and
the movement Of specie" has II direct
bearing on the quantity theory. IL is
shown that "modern credit Is II means
OF coming property into means OF pay
mcnt thereby enabling that property
10 be exchanged against other prop
erty without the intervention Of money
as u medium OF exchange. The phe-
nominal Development OF credit only
emphasizes the truth that the stability |
OF the standard In which prices are
expressed Is beyond all things mo /
essential" Forms OF credit are the
machinery by which large part OF
EtHtlhl WGhlNll ~ EooAbi ~ h'hiVioh
10 gold and silver, Is converted into
general purchasing power" i
The perfect elasticity OF the the dopos
1t currency Is It's most valuable, rs it |
il Mt the same time It's least appreci- |
ated, characteristic. A medium Of eX-
change based on commercial assets
and therefore perfectly elastic IL here
with us active, efficient, performing u |
tnnau NJ nVahu ant pT all nrnppr.
tions to the work Of bank notes or to
any other form Of money. Given an
unquestioncd stability of the standard
goods will more and more easily be
transferred by means Of off sets against
each other without suspicious de-
mand for the standard metal The
greater the stability Of the standard
the less II will be used as II medium of
exchange
Here Is an important point bearing
upon the quantity theory: 1--WE have
already emphasized the fact that the
supcrstructure of deposit currency Is
based on goods and not on money;
that each credit transaction originated
more or less remotely In n transfer Of
goods that instead OF credit resting
like an Inverted pyramid upon mar
row sum OF money, each form OF nor
nal credit rests on n corresponding
value Of salablc goods; and that the
forms OF credit could come into exist
cnce only because OF II basic operation
In goods
The quantity theory Is that general
prices are determined by u comparison
between the quantity of money In cir
culation and the amount OF transac-
tion In goods. But the essence OF the
quantity theory Ia unquostionably that
price making can go on only through |
an actual exchange through money
against goods; and the level OF prices
IL fixed by comparison between the
amount OF exchanging to be effected |
(taking into account tho number Of
times the commodity changes hands
and the quantity Of money, however
defined In circulation - taking into
the account the rapidity Of circula- |
tion. Tho quantity theory can be
operative only under IL monopoly |
OF the coinage or Of the issues of
money by the central authority |
and "in the case of metals NO free |
coinage can be allowed, otherwise the |
coins would have the value OF bullion
from which they are made, unaffected |
by the extra quantity OF money issued |
Again, the theory holds true "only In |
that state OF things In which money Is
the only instrument OF exchange, and
Is actually passed from hand to hand
Exchange 10y barter or by those re-
fined methods devised by banks can
have no influence on prices Credit is
supposed TO be noneXlstont, y
The mere statement of these obvious
conditions and limitations illustrates
the tallacy Of the notion so commonly
entertained that prices increase Ms
money Ia circulation increases. 1.-THE
central error OF the quantity theory
lies IN the assumed premise that prices
are fixed by comparison between the
goods to be exchanged aud by the
media by which theworl isto be done:
whereas price is an exchange rela
tion between goods aud the standard
money commodity, whether that mon
ely commodity be used MS " medium of
exchange or not; aud "thc prices OF
goods are, OF course, the quantities of
the standard metal for which they eN-
change
Therefore II the increased quantity
OF "money" Is OF inconyertihle paper
1t will lower prices not by virtue of its
increase Of the total circulation, but
by substituting its own degraded stand
ard in place of the metal standard. If
the Hypothetical increase he OF con-
vertible paper its amount will I've self
regulating and will be returned for re-
demption MS soon rs 1t appears by its
excess TO depreciate in It's purchasing
power, The author contends that facts
as we'll as sound principle, in the light
Of the present development OF credit
currency aud economic knowledge,
contravene the quantity theory, TAX
ing the available data ut hand for the
United States one would have no hest
tation in saying that in no single case