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money of credit takes the place of money of gold. Yet money of credit is accepted chiefly because of its convenience, with the understanding that its redemption is properly secured, and its issue properly regulated. Accordingly, to fulfil just expectations in these respects is the earnest endeavor of every Government that authorizes the use of such money. For the accomplishment of these objects, however, the only rule that has the appearance of availability is, to restrict the issue so that the credit dollar will be valued equally with the gold dollar. To make the absurdity of this rule evident, it is sufficient to point to the difference between promise and payment. Of course, every method heretofore tried to make the rule effectual, has failed. That the credit dollar is ever at par is simply because payment is not demanded, and it is not demanded partly because money of credit is more convenient than that of gold, and partly because it serves to increase the rate of the dollar per capita, and thus the nominal value of wealth. The irregularities of the issues of money of credit, notwithstanding the rule, are well exhibited in the report of the Honorable Secretary of the Treasury, by which it appears that on or about the first of January of each of the several years from 1834 to 1863 inclusive, Bank issues were, per capita of population, $6.59, 6.99, 9.21, 9.52, 7.20, 8.15, 6.26, 6.09, 4.26, 3.13, 3.90, 4.51, 5.16, 5.00, 5.90, 5.05, 5.66, 5.48, ———, 5.19, 7.97, 6.91, 7.02, 4.49, 5.26, 6.36, 5.58, 6.21, 5.49 and 6.98.
With this rule, banks are tempted to increase their issues and extend their loans until both they and their customers have more credit than they can redeem in proper time. It is then that the foreign trade, finding the surplus produce not sufficient, take for export a product that is appropriated to an important home use—take money of gold—that upon which money of credit is immediately based, and the money of the country being thus debased, the result is suspension and general failure.
Evidently the increase of money of credit is not to meet increased demand, but to increase trade independently of demand; and its decrease is not to meet decreased demand, but because trade, having been increased beyond the demand, under the stimulus of credit, must be returned to its proper support or perish. The rate of the currency is not an element of political economy.
