Currency depreciation

“ But, if there is no gold or silver to be superseded—if the notes are added to the currency, instead of being substituted for the metallic part of it—all holders of currency lose, by the depreciation of its value, the exact equivalent of what the issuer gains. A tax is virtually levied on them for his benefit. ”

“ If we consent to give coin in exchange for goods, it must be from choice, not necessity. We should not import more goods than we export, unless we had a redundancy of currency, which it therefore suits us to make a part of our exports. The exportation of the coin is caused by its cheapness, and is not the effect, but the cause of an unfavourable balance: we should not export it, if we did not send it to a better market, or if we had any commodity which we could export more profitably. It is a salutary remedy for a redundant currency ”

“ It thus appears, that a depreciation of the currency does not affect the foreign trade of the country: this is carried on precisely as if the currency maintained its value. But though the trade is not affected, the exchanges are. When the imports and exports are in equilibrium, the exchange, in a metallic currency, would be at par; a bill on France for the equivalent of five sovereigns, would be worth five sovereigns. But five sovereigns, or the quantity of gold contained in them, having come to be worth in England 6l., it follows that a bill on France for 5l. ”

“ A depreciation of money is not an accumulation of national wealth, and therefore a nation may both abound in currency, and also become poor and wretched. This is, invariably, effected by the system for increasing currency, combined with regulations by which its occupation of exchanging property is contracted, and that of transferring it, is extended. The supreme law of commerce governs currencies both local and universal. ”

“ The exportation of metallic money when an over-issue of inconvertible paper takes place is another case of the theorem. By means of this principle we can easily explain the tendency of currency to depreciation, for when once, either by wear or by the issue of inferior coins, a currency has become debased, no reformation is possible unless the debased coins are removed from circulation, as otherwise they will be preferred for payments by dealers, and will not be melted down or exported. All demands for foreign trade will be met from the best part of the coinage. ”

“ When a standard of value is a convertible paper money the provisions as to reserve act as a check on its expansion. But when a standard of value consists of a money the value of which is greater than its cost and is inconvertible, the currency must be said to be fraught with the fatal facility of indefinite expansion, which is another name for depreciation or rise of prices. ”

“ That such a depreciation is possible cannot be denied even by those who maintain that rupees are issued only in response to trade demand, otherwise why should they be so very anxious for an increase of the gold reserves of the country. But the danger to the rupee currency does not merely arise from the possibility of indiscretion on the part of the Government. ”

“ The simple truth was, that it was much more likely to increase in time of peace and trade activity than in time of war. The point to notice was not at all how much the écu did depreciate, but the relativity of such its depreciation with that of the standard currency of other countries, and the monetary disorder which the inequality of ratio and of rate of depreciation induced. ”

“ The diversity of industry and increase of production that follow an increase of currency by paper, and the effect which that diversity and production have upon the prices of commodities, utterly destroy the argument that the rise in prices results from any depreciation in the value of coin below its true and natural value as a metal. ”

“ To prevent a recurrence of the loss, which the original responsible issuers of currency had sustained by its depreciation in the market, they affixed to it themselves a specific depreciation, promising in the body of their notes to pay them on demand in government money at a discount, in the first of these instances, of twenty-five per cent., and in the last of fifty per cent. But it must be evident that a currency of this nature, payable on demand, became of equal value with the sterling money of the government, to those who took it at the stipulated depreciation ”

“ The operations of currency in exchanging and transferring property are so interwoven, that it is easy to delude the people into an opinion, that the former and not the latter design is at the bottom of its legal augmentation; and debtors are bribed by a hope of depreciation, to mortgage the remnant of their property, with themselves and their posterity, to the property-transferring policy. When currency is increased, as in the case of banking, for the primary object of transferring property, a temporary depreciation ensues, which robs once by this means, and again by appreciation. ”

“ Page 244: “The probability of the notes being redeemed at some future day, more or less remote, is not the cause even of the depreciation in the value of paper money, ... but solely on the relative amount of the currency compared with the needs of business. How great are these needs? Commerce needs money or currency enough to enable it to perform its peculiar function; that is, to make the prices of commodities in the home market equal or as nearly equal as possible to the prices of the same commodities in foreign markets.” ”

“ No proposition is better established than that the value of money, whether [Pg 276] it consists of specie or paper, is depreciated in exact proportion to the increase of its quantity, in any given state of the demand for it. If, for example, the banks, in 1816, doubled the quantity of the circulating medium by their excessive issues, they produced a general degradation of the entire mass of the currency, including gold and silver, proportioned to the redundancy of the issues, and wholly independent of the relative depreciation of bank paper at different places as compared with specie. ”

“ The excessive and unnecessary emission of the promissory notes of the Government has produced the depreciation of and destroyed the currency of the country. An amount not exceeding five hundred thousand dollars will answer all the conveniences of Government, and, in my opinion, remain in value equal to gold and silver. Experience has instructed us in the ruinous policy of issuing a greater amount of governmental liabilities than were necessary for the purposes of trade and commerce. The rock on which we have been wrecked must, in future, be avoided. ”

“ So long, therefore, as the currency is increased by the issue of national-bank notes, and not of greenbacks, there can be no depreciation, and consequently, no inflation—for inflation, as the term is used nowadays, signifies an increase in the volume of the currency that causes depreciation, or, as its friends put it, “makes money cheaper.” ”

“ The particular kind of variation to which a currency is rendered more liable by having two legal standards, is a fall of value, or what is commonly called a depreciation; since practically that one of the two metals will always be the standard, of which the real has fallen below the rated value. If the tendency of the metals be to rise in value, all payments will be made in the one which has risen least ”

“ The depreciation of our currency really casts a gloom on our prospects, but my sentiments on this subject are rather peculiar. I think, bad as it is, it will continue to draw out the resources of the country a good while longer, and especially if the enemy make such detachments, of which there is hardly a doubt, as will oblige them to act on the defensive. This will make our public expenditures infinitely less—and will allow the States leisure to attend to the arrangements of their finances, as well as the country tranquillity to cultivate its resources. ”

“ They think thus to increase the means of paying the debts which are being incurred; but the only effect is, still further to increase the evil; for importation, instead of being checked, is fostered by such a plan. When, during a period of apprehension caused by a large efflux of gold from England to America, views were expressed in Manchester and Liverpool, that a much larger issue of bank-notes ought to be permitted, this opinion tended manifestly to a depreciation of our currency. ”

“ When, therefore, the real exchange is at par, there will be a nominal exchange against the country, of as much per cent as the amount of the depreciation. If the currency is depreciated 10, 15, or 20 per cent, then in whatever way the real exchange, arising from the variations of international debts and credits, may vary, the quoted exchange will always differ 10, 15, or 20 per cent from it. ”

“ But the effect of either between individuals is moderate and shortlived, because the demand of currency to be employed in exchanges will regulate its value; and in making such exchanges it will be computed by its representative relation to property. An increase of currency, for the purpose of transferring property, contains no such internal remedy against the evils of excess. Governments and exclusive privileges increase their exactions at least comparatively, and usually take care that their compensations shall exceed a temporary depreciation. ”

“ The inevitable consequence of a depreciated currency must be a rise of prices, usually greater than the actual percentage of depreciation. To meet this situation there came a device possible in no other commercial country. ”

“ The continued depreciation of currency in the affected countries, is one of the causes of the many grievances. No remedy has yet been discovered for it, but it must be apparent to everybody, that the most precious treasure possessed by man, is not GOLD, but "WORK"! ”

“ I say that it is one of the very first duties of the Government to the people; for, of all the ways of doing the laboring masses out of their earnings, and cheating them, a depreciated currency is positively the worst. Make your currency redeemable in gold, and so safe that no toiler can lose by holding it any length of time. ”

“ It is only thus that a general rise of prices can be a source of benefit to producers and dealers; by diminishing the pressure of their fixed burthens. And this might be accounted an advantage, if integrity and good faith were of no importance to the world, and to industry and commerce in particular. Not many, however, have been found to say that the currency ought to be depreciated on the simple ground of its being desirable to rob the national creditor and private creditors of a part of what is in their bond. ”

“ When, however, new money, composed of some substance of supposed intrinsic value (as of gold) , is brought into the market, or when new notes are issued which are supposed to be deserving of credit, the desire to obtain the money will, under certain circumstances, stimulate industry: an additional quantity of wealth is immediately produced, and if this be in proportion to the new claims advanced, the value of the existing currency is undepreciated. ”

“ Like these individuals, types of the class, they depreciate. The general aspect is, the occasional reduction of the quantity of coin in circulation. The merchant, believing it to be more immediately profitable, exports the coin,—that is, finding the currency to consist of an article of merchandise that suits his immediate purpose, he treats it accordingly,—though by so doing he causes a rise of prices where he buys and a fall where he sells, and to that extent nullifies his own business-intentions, and deranges those of others. ”

“ If the currency is redundant, prices rise, exports are diminished; and the reverse follows with a contracted circulation. But banks inflate or restrict the currency at their pleasure, and thus control prices, commerce, exports, imports, and revenue. But they also destroy or depreciate the money of the Government, and deprive it of a vital power. Thus, the nation issues treasury notes, and makes them a legal tender: the banks immediately make such notes the basis of bank issues, in the ratio of three to one, and the whole currency necessarily becomes redundant and depreciated ”

“ For the purpose of external or foreign trade, a debasement of currency is fatuous and pernicious. The coins are estimated at their content of pure metal, and the international exchange is so rated. The consequence is an apparent rise of foreign prices proportioned to the extent of the debasement. ”

“ The fact that those countries whose fiduciary issues have sunk to an apparently ruinous level are on that very account able to export their merchandise with profit, taking payments in comparatively valuable currencies and paying their way at home in depreciated paper, is illuminated by the lesson of the territories with currency maintained at a high exchange rate by gold backing, which are unable to find buyers of their products because no outsider can afford to pay the exaggerated rates of exchange. ”

“ Every change in the weight of the gold dollar would be definitely measurable, and would have to be justified to the public. A reduction in weight not fully explained by a fall in prices would be a clear confession of depreciation. ”

“ There is not indeed the self-acting check which convertibility brings with it. But there is a clear and unequivocal indication by which to judge whether the currency is depreciated, and to what extent. That indication is, the price of the precious metals. When holders of paper cannot demand coin to be converted into bullion, and when there is none left in circulation, bullion rises and falls in price like other things; and if it is above the Mint price, if an ounce of gold, which would be coined into the equivalent of 3l. ”