A Treatise on Currency & Banking by Condy Raguet

Author:Condy Raguet [Condy Raguet]
Language: eng
Format: epub
ISBN: 978-1-61016-128-2
Publisher: Augustus M. Kelley Publishers
Published: 1966-11-06T16:00:00+00:00

CHAPTER VI.

OF THE DIFFERENT KINDS OF DEPRECIATION TO WHICH AN INCONVERTIBLE PAPER CURRENCY IS LIABLE.

So long as bank notes are convertible into coin on demand, they are liable to depreciation, or a fall in value, in common with the gold and silver for which they are interchangeable, from all the causes which we have shown capable of producing that effect upon a currency purely metallic. But in addition to this, they are susceptible themselves of depreciation from excessive issues, and in such event involve the metallic portion of the currency in the same depreciation. This sort of depreciation arising from excessive issues, produces the same effect upon a mixed currency, as the excessive importation of bullion would upon a metallic currency. There is, however, this difference between them. The one can always be removed sooner or later by the exportation of the superabundant metal, whilst the other cannot always be removed by a contraction of bank loans, as the several examples of a general suspension of specie payments in the United States have sufficiently established.

When bank notes cease to be convertible into coin, by a general suspension of specie payments, the currency may, for a long period together, remain without any depreciation, except that which is the result of the excessive issues which occasioned the suspension. During the long suspension of payment by the Bank of England from 1797 to 1821, no part of the depreciation appears to have resulted from any want of confidence in the ultimate ability of the bank to pay its notes, for had such want of confidence been displayed, it would probably have shown itself immediately after the stoppage. Such, however, was not the fact. The bank, by restricting its issues, for some time after that event, to an amount very little exceeding their accustomed extent, kept up the value of its paper, so nearly to par, that the market price of gold for two years after the suspension, payable in bank notes, did not exceed the mint price, which could not have happened, if any discredit had accompanied the depreciation.*

The same may be said of the two general suspensions of specie payment which took place in the United States in 1814 and 1837. With the exception of a comparatively few banks, the unsoundness, or imprudent conduct of which was too apparent to be concealed, no want of confidence as to ultimate solvency appears to have entered into the estimate of the depreciation. The amount of excessive issues in each place, appears to have determined the depreciation of the currency of that place, and we have seen that just in proportion to the absorption of the excess, the depreciation disappeared.

There is, however, a reason why bank notes are not necessarily involved under a general suspension of specie payments, in a depreciation arising from discredit. The public is always indebted to the banks to an amount far greater than the banks are indebted to the public, and as a bank note will be received by the

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.