8 IV. G. Langivorthy Taylor 



argument is always made that more money should be issued, in 

 order to lower the rate of interest. Doubtless, before deprecia- 

 tion is very pronounced, a small additional issue of money will 

 have a temporary effect to lower the rate of interest in the local- 

 ity where it is issued ; 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 the government credit more rapidly than the issue of gov- 

 ernment 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 issue and market them, whereas the 

 field for government issues of paper money is strictly limited. 



Passing now over to the question of government regulation of 

 private credit, we shall confine ourselves chiefly to government 

 regulation of the most . prominent credit institutions, namely, 

 banks. The following is a short account of the development of 

 the credit theory as applied to banks, of the growing appreciation 

 of it by governments and by bankers, and, in general, of the at- 

 tempts to bring bank regulation into conformity with the real 

 needs of banking. It will be seen that this question, like any 

 other, presupposes a knowledge of the facts before it can proceed 

 to intelligent discussion, and that, when the facts are once 

 known, the hardest parts of the discussion have already been 

 accomplished. 



Here we may pause to remark that what is known as theory, 

 and often condemned as such, is really nothing but an attempt to 

 ■get at the facts. To a person that has not made this attempt it 

 appears to be unnecessary, because the facts are supposed to be 

 self-evident or to depend simply upon observation. On the con- 

 trary, facts are not self-evident, and they depend upon an obser- 

 vation which, to p say the least, can not be made with the outer eye. 

 The facts once agreed upon, the measures of government to be 

 taken will depend upon abuses that have been experienced, but 

 also upon the popular conception of what the facts are. The 

 measures taken by government upon the facts connected with a 

 particular form of social service, such as banking, are never the 



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