contradiction at all in claiming that money can be made very much more plentiful and yet maintain its value at the same time that he contends that the present value of money is due to its monopoly or scarcity. For to quote Colonel Greene again:
All money is not the same money. There is one money of gold, another of brass, another of leather, and another of paper; and there is a difference in the glory of these different kinds of money. There is one money that is a commodity, having its exchangeable value determined by the law of supply and demand, which money may be called (though somewhat barbarously) merchandise-money; as, for instance, gold, silver, brass, bank-bills, etc.: there is another money, which is not a commodity, whose exchangeable value is altogether independent of the law of supply and demand, and which may be called mutual money. … If ordinary bank-bills represented specie actually existing in the vaults of the bank, no mere issue or withdrawal of them could effect a fall or rise in the value of money: for every issue of a dollar-bill would correspond to the locking-up of a specie dollar in the banks' vaults; and every cancelling of a dollar-bill would correspond to the issue by the banks of a specie dollar. It is by the exercise of banking privileges—that is, by the issue of bills purporting to be, but which are not, convertible—that the banks effect a depreciation in the price of the silver dollar. It is this fiction (by which legal value is assimilated to, and becomes, to all business intents and purposes, actual value) that enables bank-notes to depreciate the silver dollar. Substitute verity in the place of fiction, either by permitting the banks to issue no more paper than they have specie in their vaults, or by effecting an entire divorce between bank-paper and its pretended specie basis, and the power of paper to depreciate specie is at an end. So long as the fiction is kept up, the silver dollar is depreciated, and tends to emigrate for the purpose of travelling in foreign parts; but, the moment the fiction is destroyed, the power of paper over metal ceases. By its intrinsic nature specie is merchandise, having its value determined, as such, by supply and demand; but, on the contrary, paper money is, by its intrinsic nature, not merchandise, but the means whereby merchandise is exchanged, and, as such, ought always to be commensurate in quantity with the amount of merchandise to be exchanged, be that amount great or small. Mutual money is measured by specie, but is in no way assimilated to it; and therefore its issue can have no effect whatever to cause a rise or fall in the price of the precious metals.
This is one of the most important truths in finance, and perfectly accounts for Mr. Westrup's position. When he says that money can be made very much more plentiful and yet maintain its value, he is speaking of mutual money; when he says that the present value of money depends upon monopoly or scarcity, he is speaking of merchandise money.
(7) As sensibly might one say to Mr. Fisher, who is a stanch opponent of government postal service, that "the immediate effect of the total abstention of government from its protection of the public from the roguery of private mail-carriers
