W. G. Langzvorthy Taylor 



Government 

 paper money 

 discourages 

 liquidation 

 and encour- 

 ages specula- 

 tion. 



laboring men. However beneficent such charitable activities 

 may be, it is not perhaps for the good of commerce that attempts 

 should be made to expand the circulation at a moment when the 

 healthy action of the organism of business requires contraction. 

 Moreover, the product which the government elaborates is not 

 sold in the market for goods ; it is apparently given away. Pay- 

 ment comes in the form of taxation. Ordinary business credit 

 is taken up when merchandise is sold and inelastic bureaucratic 

 credit is substituted. If the nation seems to pay for these good 

 things with paper money, that must be redeemed some time or 

 other by means of taxation. The substitution of a system of 

 payment by means of taxation for one of payment by means of 

 sale and liquidation with organic credit is like the mixing of oil 

 and water. The movement of olhcial credit does not correspond 

 with that of private, and is a decidedly disturbing factor. 



§ 5. For instance, during the inflation of private credit preced- 

 ing a crisis, it is highly desirable for specie to be exported, in 

 order that bankers and other debtors may be stimulated to exert 

 a pressure upon those who, in turn, owe them, and thus, through- 

 out the whole credit structure, responsibility be encouraged and 

 bad business be weeded out. The crisis should thus be averted 

 by its early precipitation. Similia similibus curantur. In a 

 country, however, with even such a small proportion of fixed 

 issue as has the United States, it has been found that this has 

 left the reserves of the banks and wandered to the seaboard, in 

 attempts to cross the ocean, but, like migrating insects and 

 rodents, has been stopped at the shore. There, caged in the tills 

 of banks in the great seaport, it has encouraged speculation at a 

 moment when that should have been discouraged. The bears in 

 Wall Street readily seize a period of depression combined with 

 easy money to hasten a catastrophe which otherwise might have 

 passed over with a moderate and reasonable period of liquida- 

 tion.® The disadvantage of government money that flows from 

 its depreciation and the consequent ruin of creditors have been 



° F. M. Taylor, "Do We Want an Elastic Currency?" Political Science 

 Quarterly (vol. 11), March, 1896. 



120 



