Financial Legislation and its Limitations. 3 



voice in protest.^ It was claimed that the credit of the govern- 

 ment in the form of paper money was no better than in that of 

 bonds, while the former, by virtue of its legal tender quality, 

 caused the circulation and prices to fluctuate with violence and 

 brought an unnecessary uncertainty into business. This indeed 

 is the strongest indictment. It is worthy of note, however, that 

 governments accustomed to the employment of experts in their 

 treasury departments have been able to restore or preserve a good 

 medium of exchange even when the credit of the country was 

 heavily strained. For instance, the Russian and Austrian govern- 

 ments, without any notable reduction of the public debt, have in 

 recent years restored their money system to a fairly sound 

 condition. 



Nevertheless, at the moment of catastrophe, when means of 

 somehow coming to a temporary understanding with a vast body 

 of creditors that have suddenly sprung up, as if from the 

 dragon's teeth sown by Cadmus, seems to be imperatively de- 

 manded, it has been found impossible to avoid a temporary issue 

 of paper money. This was true of the French government at 

 the time of the Franco-Prussian War. It is to be remarked, 

 however, that the French paper money was issued, not directly 

 by the treasury, but as notes of the official state bank. It is 

 simpler, under such circumstances, to give visible receipts for the 

 services performed by contractors and soldiers than it would be to 

 keep a book account of such endless debts. It is incumbent upon 

 the fiscus to fund the receipts or warrants as quickly as possible, 

 in order that the evil effect of their use as circulating medium 

 may be speedily terminated. Accordingly, the French finance 

 minister began payments to the Bank as early as the year 1874, 

 in order to enable the latter to contract its issues ; and resumption 

 of specie payments was effected early^ — January i, 1878, wiiereas 

 the United States did not resume until a year later payment of 

 debts that had been put into form of paper money ten years 

 before the Franco-Prussian War. 



^A Critical Examination of our Financial Policy during the Southern 

 Rebellion. New York, 1865. 

 ' Dunbar, History of Banking, p. 143. 



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