8 



IV. G. Langzvorthy Taylor 



Heavy losses 

 both to govern- 

 ment and to 

 citizens result- 

 ing from paper 

 money issues. 



§7. Another objection to government money is that, while 

 there is a gain in non-payment of interest, the usual depreciation 

 of it puts upon the shoulders of the government, when the day 

 of reckoning arrives, a burden far out of proportion to the values 

 received. For instance, it is estimated that the United States 

 has paid much more than the Civil War should have cost on 

 account solely of the depreciation of the paper money issued. 

 Private parties lose either the depreciation of money on hand, or 

 the high interest they are compelled to pay, in order to make 

 up to the creditor, who expects to be paid in such money, for 

 the depreciation of his principal. Creditors lose in so far as they 

 have not foreseen the extent of depreciation. Merchants lose 

 because they cannot induce customers to repay the higher money 

 costs. Curiously, when paper money begins to depreciate, the 

 argument is always made that more should be issued, in order to 

 lower the rate of interest. Doubtless before the depreciation 

 becomes very pronounced, a small additional issue of money will 

 have a temporary effect to moderate the rate in the locality where 

 it is conceded; but, when the depreciation is rapid and has gone 

 very far, probably no effects of this sort would be noticed 

 Finally, an issue of government paper money is a confession of 

 bankruptcy on the part of the government ; it probably tends to 

 lower national credit more rapidly than the issue of obligations 

 in any other form. It is astonishing what a vast quantity of 

 government bonds can be absorbed, if only some time be given 

 in which to market them, whereas the field for paper money is 

 strictly limited. 



§ 8. Government regulation of private credit now claims atten- 

 tion and more specifically that of the most prominent credit in- 

 stitutions, namely, banks. The following is a short account of 

 the development of credit theory as applied to bank control ; of 

 the growing appreciation of it by officials and by bankers; and, 

 in general, of the attempts to bring bank regulation into con- 

 formity with the real needs of banking. It will be perceived that 

 this question, like many another, presupposes a knowledge of the 

 facts before it can proceed to intelligent discussion, and that,. 



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