If A gives B a note promising to pay one dollar, and B passes that note to C, and C returns it to A, just so soon as A receives it at its full face value, that note is fully redeemed. The great difficulty, in connection with the redemption of paper money, consists of this,— that the promise to pay implies a promise to pay coin; whereas, by right, it should be considered a promise to pay value equal to gold, or silver, whichever may be taken as the standard of value.
In commerce scarcely anybody wants gold, but everybody wants value equal to gold.
If a gold dollar will buy ten yards of cotton cloth, and a bushel of wheat will buy a gold dollar, can there be any difficulty in exchanging wheat for cotton cloth?
Let us remember that, although an absolute standard of value is impossible, a comparative standard is indispensable. We want something of value by which to compare, count, and exchange all other valuable things.
How much fog, mud, and moonshine has been waded through by the would-be teachers of political economy, just because the above truth has not been clearly seen!
Primitive people, as a rule, believe the false and do the wrong. And even when the true thing has been discovered, they are almost sure to start for it in the wrong direction. This is eminently true in regard to money.
Let me repeat,— everybody wants value. Now, if A, B, and C can exchange their goods on the base of a gold valuation, what is the necessity of the gold itself?
Gold always has a marketable value, which is well known. Now, let business men make their exchanges on the value of gold, and not on the gold itself. Then they can use their own credit as money, and redeem their promises to pay by receiving them, and thus, by mutually acting together, they can be independent of the money-lender. For, be it understood that borrowing money, as a good business transaction, is but an exchange of credits. Will the people ever get over the stupid and barbarous notion that money is something of itself?
Our paper money atthe present time (November, 1881) is at par with gold because the government receives it. If A owes B $1,000 and C holds all the gold, how can A pay his debt? Is A has made the promise to pay the gold itself, he must go to C and hive him a bonus for the gold. That is the nature of usury, or interest. But if A, being solvent, has promised to pay B $1,000 in value equal to gold, the debt can be easily cancelled.
What a monstrous barbarism is the arbitrary limitation of money!
And yet money must be limited, to be good money, until people shall find a way to redeem their notes, other than by swapping them for coin.