A house in New York, worth twenty thousand dollars in 1859, was not worth fifty thousand dollars in 1864; but twenty thousand dollars' worth of flour, at prices of 1859, would have brought fifty thousand dollars in 1864. Why is this? Because everybody believes that prices have not permanently advanced, but will before many years, perhaps before many months, decline. Therefore permanent investments will not be made at prices corresponding to those of ordinary merchandise. This difference between real estate and consumable commodities, as influenced by the expansions and contractions of the currency, should be borne in mind, as it will explain phenomena that will be presented in our further inquiries.

EFFECT ON CONTRACTS.

A credit currency, it may be safely assumed, is always redundant; and, as such, its effect on contracts is twofold. Obligations to pay money made with a specie standard, and paid with credit currency, will impose a loss of value on the creditor equal to the depreciation of the currency. Great injustice and suffering resulted from this cause during the progress of the American wars of the Revolution and of the Rebellion.

On the other hand, contracts made to pay money during the existence of a credit currency, but which mature and are discharged under a value currency, will subject the debtor to the loss of all the difference in the value of the two currencies. Great injustice and suffering resulted from this source, on the recognition of American independence, in the last century, among the first of which may be reckoned the Shay's Rebellion of Massachusetts. At what time, and with what results, the return to specie payments at the present period will next be made, it is yet impossible to predict.

Historically, it is found to be true, that a credit currency has never yet been kept within the natural limit of the

value currency of the country in which it was established. The "continental money" of the American Revolution; the assignats of the French Revolution; the bank money of England during the Napoleonic wars; and, lastly, the greenbacks, or treasury notes, issued during the late Rebellion, and the present paper currency of Russia, are illustrations in point.

The French assignats were issued in such excess that their utter repudiation by the government became a necessity. So of the "mandates" which followed them. The "continental money" became entirely worthless. The notes of the British Bank, which depreciated during the great struggle with France, were finally restored to par at the cost of immense suffering and loss to the commercial and business classes.

The paper issues of the American government will, doubtless, be paid; but it will be at an incalculable amount of bankruptcy and ruin to those who are greatly indebted.

The treasury notes, now acting as currency, will be redeemed ultimately; that is, be taken in for taxes and other dues to government, and thus annihilated. They could not be paid in coin, but are sufficiently certain to be cancelled in the way just indicated.

A credit currency never has been regulated in such a manner as to keep it on a par with specie, and probably never will be. The necessities of government are so pressing that the temptation to increase the amount becomes too great for resistance. As prices rise in consequence, the currency becomes of less and less value, that is, has a decreasing power in exchange, so that the inducement to issue becomes continually stronger as the volume expands. Unless this course can be arrested, final bankruptcy is

sure.

But the issue of a legal-tender credit currency is, under any circumstances, a great wrong, and can never be justified except in the most extreme cases of national peril;

and, even in those instances where it has been defended as an indispensable measure, events have generally proved it to have been a mistaken and short-sighted policy.

CREDIT CURRENCY A FORCED LOAN.

When a government issues its notes as currency, and makes them a legal tender, or authorizes other parties to do so, it creates a forced loan.

All creditors are compelled to receive these notes for whatever may be due to them, which is equivalent to making a loan to the government to the amount so received; and those who sell their property are obliged to take these promises, since there is no other currency in use, so that the whole amount thus put into circulation becomes a compulsory loan to the government.

CREDIT CURRENCY A DIRECT TAX.

As soon as legal-tender credit notes begin to depreciate in value, or, in other words, as soon as commodities rise in consequence, each person who receives them pays a tax equal to their depreciation while in his possession. For example, if he receives a ten-dollar note, which will bring him but eight dollars' worth of merchandise at the gold price, he has contributed two dollars to the government. So, of course, with all who receive notes in payment for debts contracted prior to the issue of such currency. When, as in the case of the "continental money," these notes become utterly worthless, those through whose hands they have passed have contributed, at least nominally, the whole amount. We say nominally; for the contribution thus forced from the people is not in fact to the full amount in actual value.

For illustration, the government issues one hundred millions of its notes at first; and for this, as prices have not been raised, it receives an equal amount in value. It issues a second hundred millions; but prices have advanced in

consequence of the first issue, we will suppose, fifty per cent, so that the government gets but $66,666,666 in value. third issue is made of one hundred millions; but prices have gone up one hundred per cent, and the government gets but fifty millions in value. Another issue of one hundred millions carries prices up to one hundred and fifty per cent, and only forty millions is realized in value. This is not intended as a statement of the precise fact, but to exhibit the natural operation of such issues. That it is not exaggerated, appears from what is well known, that the United States government sold many millions of its bonds for that which was equivalent to but forty per cent in gold. The result is shown in the following recapitulation:

First $100,000,000, issued at par value,

Second $100,000,000, issued at 33 per cent dis

$100,000,000

count..

66,666,666

Third $100,000,000, issued at 50 per cent discount

50,000,000

Fourth $100,000,000, issued at 60 per cent dis

The people must finally pay in taxes $143,333,334 more than the government received in value, if the debt is paid; but, if it should be repudiated, the loss of actual value to the people would be but $256,666,666, the balance being merely the enhanced prices they have received for commodities furnished. But, unfortunately, those who received the extra prices and those who will pay the taxes may not be the same identical persons.

The foregoing illustration shows the operation or general result upon the community of a credit currency as a direct tax: but the effects upon different individuals are diversified in every possible manner; one man losing, another gaining by it, according to the position in which the parties are

found at the time they were compelled to accept such a currency instead of money. The laws of value having been violated, universal chaos in all monetary affairs is the inevitable consequence.

The final result of the issue of an inconvertible currency, then, is, that, if it is never redeemed, the taxation it imposes is most unequally and unjustly distributed; if it is finally paid, then the taxation is not only unfairly distributed, but the amount vastly increased, since the expenditures of the government have been largely enhanced by it. It does not admit of question that a large part of the debt of the United States represents expenditures made solely to meet the excessive prices caused by a credit currency, especially in the years 1863-5, when the premium on gold averaged nearly seventy per cent, and for a considerable period, when the heaviest expenditures were made, as high as one hundred and fifty. Of course, the taxation of the country will be correspondingly increased for the payment of this

excess.

CHAPTER IV.

III. MIXED CURRENCY.

MIXED currency is a modern invention, as yet known only to a small part of the human race, and but partially understood even in those countries into which it has been introduced.

The Bank of England, the parent of all mixed-currency institutions throughout the world, was established in 1694; but its operations were so limited, and its influence so partially felt, during the first century of its existence, that the character of the currency it issued was hardly appreciated. This bank made a grand suspension in 1796, and continued in that state for over twenty-three years. This was the