Principles of Political Economy: Abridged with Critical, Bibliographical, and Explanatory Notes, and a Sketch of the History of Political Economy — John Stuart Mill — John Shaqi
Principles of Political Economy: Abridged with Critical, Bibliographical, and Explanatory Notes, and a Sketch of the History of Political Economy
John Stuart Mill · en
because the contraction had been stopped in 1868, and that
consequent on the resumption act in May, 1878.
Suppose that, in a country of which the currency is wholly metallic, a
paper currency is suddenly issued, to the amount of half the metallic
circulation; not by a banking establishment, or in the form of loans, but
by the Government, in payment of salaries and purchase of commodities. The
currency being suddenly increased by one half, all prices will rise, and,
among the rest, the prices of all things made of gold and silver. An ounce
of manufactured gold will become more valuable than an ounce of gold coin,
by more than that customary difference which compensates for the value of
the workmanship; and it will be profitable to melt the coin for the
purpose of being manufactured, until as much has been taken from the
currency by the subtraction of gold as had been added to it by the issue
of paper. Then prices will relapse to what they were at first, and there
will be nothing changed, except that a paper currency has been substituted
for half of the metallic currency which existed before. Suppose, now, a
second emission of paper; the same series of effects will be renewed; and
so on, until the whole of the metallic money has disappeared [see Chart
No. XIV, Chap. XV, for the exportation of gold from the United States
after the issue of our paper money in 1862]: that is, if paper be issued
of as low a denomination as the lowest coin; if not, as much will remain
as convenience requires for the smaller payments. The addition made to the
quantity of gold and silver disposable for ornamental purposes will
somewhat reduce, for a time, the value of the article; and as long as this
is the case, even though paper has been issued to the original amount of
the metallic circulation, as much coin will remain in circulation along
with it as will keep the value of the currency down to the reduced value
of the metallic material; but the value having fallen below the cost of
production, a stoppage or diminution of the supply from the mines will
enable the surplus to be carried off by the ordinary agents of
destruction, after which the metals and the currency will recover their
natural value. We are here supposing, as we have supposed throughout, that
the country has mines of its own, and no commercial intercourse with other
countries; for, in a country having foreign trade, the coin which is
rendered superfluous by an issue of paper is carried off by a much
prompter method.