ABSTRACT
The safety of every type of property, in a country with a national bank of issue, demands that the ever so smooth transition from bank notes to paper money, and the sophisms that are used to justify this change, be subjected to the most severe examination. When the pound sterling is quoted at only twenty-four or twenty-three francs in Paris, this is because the English guineas, made superfluous by bank notes, are cheap in London, and sell for less there than they would sell in Paris. Historically, paper money was offered at a discount on the exchanges against gold, rather than the other way around, as is evidenced by Ricardo’s pamphlet on the depreciation of bank notes. The assumption that bank notes will displace a determinate quantity of specie can only be accepted if output will not increase proportionately to increases in the money supply, triggering price rises and hoarding of specie, that is, an instance of Gresham’s law.
