MICHIGAN ACADEMY OF SCIENCE. 45 



tion between the objects of trade and the medium of exchange ; these two will 

 always balance. Therefore if the medium of exchange increases while the 

 objects of trade continue the same, the money must depreciate ; if the medium 

 of exchange increases while the objects of trade decrease, the proportion will 

 alter still faster, and the depreciation will increase in a double proportion, 

 which I take to be the present case." 



In his discussion he gives full recognition to the importance of velocity of 

 circulation. We have then all the elements of the equation of exchange 

 except the mathematical form and credit instruments, and these were a negli- 

 gible quantity for his day. 



It will be seen also, I think, that his propositions assume the quantity 

 theory of the value of money. For example, he says, if a country needs 

 $10,000,000 to carry on its trade and it is suddenly increased to twenty million, 

 the increased amount will have the same value as the lesser amount, that is 

 the value of the dollar is one half or varies in inverse proportion to its amount. 

 Figuring up the amount of money needed by the country in 1779 he found it 

 to be nine millions dollars ; figuring up the real value of the currency, he 

 found it to be only three million and he adds that this was due to the lack of 

 faith in the government. Whether or not he was aware of any inconsistency, 

 he does not give the slightest indication ; and, in any case, I feel sure he would 

 not have cared. He was not interested in a theory of money or a theory of 

 anything else, except insofar as it would assist him in gaining popular sup- 

 port for financial reforms. For this purpose simplicity was of much greater 

 value than scientific accuracy. 



In .spite of these warnings the emissions of paper continued. By 1780 the 

 emissions of paper money totaled over 241 million dollars, and finally in 1781 

 by a trick of the Pennsylvania Government it ceased to circulate entirely. 

 For this depreciation, Webster had one remedy which he preached on all occa- 

 sions, in season and out, that was taxation which he thought practical. This 

 will be discussed later but first we will consider two other remedies which 

 were very thoroughly tried, namely price regulation and loans. 



Because the burden of loans through the issue of paper money or of loan 

 certificates was borne at the time by depreciation, and in an extremely unjust 

 fashion ; because of the danger, as he saw it, of financial dependence on a 

 foreign power ; because exchange and insurance rates were each 50 per cent ; 

 and because as, he clearly pointed out, the strength of the country lay in its 

 resources and man power which were amply suflicient and had scarcely been 

 tapped ; because of these things, Webster opposed all loans, except for the 

 small amount of equipment which must be bought abroad. I shall not carry 

 the matter farther except to read one short quotation, which I think will be of 

 interest in view of recent discussions of war finance. If I should put it side 



