Financial Legislation and its Limitations. 



so often exemplified in history and have been dwelt upon so 

 extensively that they hardly require further discussion. 



Probably one thing that induces the electors to vote for it is 

 the idea that government is better than private credit. Un- 

 doubtedly, in time of peace, the national credit is better than that 

 of most corporations, but it certainly is not better than that of 

 the whole business community, whose enterprise is generalized 

 in the circulating medium, so that each portion of the latter 

 depends upon the solvency of the whole.' 



§ 6. Another popular fallacy which has supported the policy of 

 government paper money is the total misapprehension as to the 

 organic origin of money. This mistake is unavoidable, since the 

 perception of the truth in this matter requires no ordinary ability 

 and education. It is a point, like excessive protection, on which 

 progressive men perforce must resign themselves to wait for the 

 growth of public opinion. It is popularly supposed that money 

 " represents " present goods, and that it acts as a circulating 

 medium for this reason. Hence the whole brood of propositions 

 that have been made and attempted to be enforced, from early 

 times, to " coin all the production of the country into money." It 

 has been looked upon by several party conventions in the United 

 States, as a self-evident proposition, that the m.oney of the 

 country " represented " its produce and that, therefore, the 

 " value " of the produce should be coined in order to circulate it. 

 It was not supposed that a proposition of that sort needed the 

 slightest demonstration. It was not deemed necessary to pause 

 for a moment in order to be more precise about the word " repre- 

 sent." This is a point that even students of political economy 

 have not squarely met. The recent development, however, of 

 the theory of subjective values facilitates the deduction that 

 money does not represent present but does future goods, and con- 

 sequently the inflationist's argument, so far as it is founded on a 

 false quantity theory and neglects the natural, organic genesis of 

 credit in unexecuted contracts, falls to the ground. 



Fallacy that 

 money " repre- 

 sents " goods 

 has been an 

 argument for 

 inorganic 

 inflation. 



Inflationists 

 argue that if 

 X money 

 represents y 

 goods, then 2X 

 money must 

 represent zy 

 goods. But 

 that is only 

 true if some- 

 one is under 

 contract to 

 manufacture 

 the goods. 



''Dearth of "money" a result not a cause of suspension. 

 Spragne, Crises under National Banking System, p. 197. 



121 



Cf. O. M. W. 



