ABSTRACT
§ 1. A special form of enterprise, which can be made to yield a large income to a public authority, is the use of the printing press to manufacture legal tender paper money. The printing press may be used for this purpose either directly or indirectly; directly when a public authority pays its creditors with new paper money specially printed for the purpose; indirectly when a public authority pays its creditors out of loans to itself from the central bank and issues new paper money to the bank, in exchange for a deposit of securities, in order, as it is sometimes put, “ to support the additional credit thus created,” or in other words, in order to save the bank from having to face the alternatives of raising its rates of interest to inconvenient heights or seeing its reserves dangerously depleted. For, if the bank were not thus protected, it would be unwilling to furnish the public authority with loans on the scale required. The indirect method was employed in this country between 1914 and 1921, and both methods have been freely employed, during and since the war, on the continent of Europe. There is no essential difference between the economic effects of the two methods, except that the indirect method, besides mystifying simple minds, involves the publicauthority in the additional expense of paying interest on its loans from the bank.
