6 W . G. Langworthy Taylor 



credit is taken up when the goods are sold and new government 

 credit is substituted. The substitution of payment by means of 

 taxation for payment by means of sale and liquidation with fur- 

 ther organic credit is like the mixing of oil and water. The 

 movement of government credit does not correspond with the 

 movement in private credit and is a decidedly disturbing factor. 



For instance, preceding a crisis, it is highly desirable for specie 

 to be exported from a country, in order that bankers and other 

 debtors may be stimulated to exert a pressure upon those who, in 

 turn, owe them, and thus, throughout the whole credit structure, 

 responsibility be encouraged and bad business be weeded out. 

 The crisis should thus be averted by its early precipitation. Sim- 

 ilia similibus curantur! In a country, however, even with such 

 a small proportion of government money as has the United States, 

 it has been found that this money has left the reserves of the 

 banks and floated to the seaboard in attempts to cross the ocean, 

 but, like the potato bug, has been unable to do so. There, heaped 

 up in the vaults of banks in the great seaports, it has encouraged 

 speculation at a moment when that should have been discouraged. 

 The bears in Wall street readily seize a period of depression com- 

 bined with easy money to hasten on a catastrophe which other- 

 wise might have passed over with a moderate and reasonable 

 period of liquidation. 1 The disadvantage from government that 

 flows from its depreciation and the consequent ruin of creditors 

 has been so often exemplified in history and has been dwelt upon 

 so much that we hardly need to discuss it further. 



Probably one thing that induces the public to vote for govern- 

 ment paper money is the idea that government credit is better 

 than private credit. Undoubtedly, in time of peace, government 

 credit is better than that of most corporations, but it certainly is 

 not better than that of the whole business community, whose 

 credit, as we have seen, is generalized in the circulating medium, 

 so that each portion of the latter depends upon the solvency of 

 the whole. 



Another popular fallacy, which has supported the policy of gov- 



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

 Quarterly, vol. 11, March, 1898. 



226 



