Mr. Buchanan evidently thinks that the whole currency must, necessarily, be brought down to the level of the value of the debased pieces; but surely by a diminution of the quantity of the currency, the whole that remains can be elevated to the value of the best pieces.
Dr. Smith appears to have forgotten his own principle, in his argument on colony currency. Instead of ascribing the depreciation of that paper to its too great abundance, he asks whether, allowing the colony security to be perfectly good, a hundred pounds, payable fifteen years hence, would be equally valuable with a hundred pounds to be paid immediately? I answer yes, if it be not too abundant.
Experience however shews, that neither a state nor a bank ever have had the unrestricted power of issuing paper money, without abusing that power: in all states, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose, as that of subjecting the issuers of paper money to the obligation of paying their notes, either in gold coin or bullion.
A currency is in its most perfect state when it consists wholly of paper money, but of paper money of an equal value with the gold which it professes to represent. The use of paper instead of gold substitutes the cheapest in place of the most expensive medium, and enables the country, without loss to any individual, to exchange all the gold which it before used for this purpose, for raw materials, utensils, and food, by the use of which both its wealth and its enjoyments are increased.
In a national point of view it is of no importance whether the issuers of this well regulated paper money, be the government or a bank, it will on the whole be equally productive of riches, whether it be issued by one or by the other; but it is not so with respect to the interest of individuals. In