176. One of the most obvious differences between a metallic
and a paper circulation is, that the coin can never, by any panic
or national danger, be reduced below the value of bullion in
other civilized countries; whilst a paper currency may, from the
action of such causes, totally lose its value. Both metallic and
paper money, it is true, may be depreciated, but with very
different effects.
1. Depreciation of coin. The state may issue coin of the same
nominal value, but containing only half the original quantity of
gold, mixed with some cheap alloy; but every piece so issued
bears about with it internal evidence of the amount of the
depreciation: it is not necessary that every successive
proprietor should analyse the new coin; but a few having done so,
its intrinsic worth becomes publicly known. Of course the coin
previously in circulation is now more valuable as bullion, and
quickly disappears. All future purchases adjust themselves to the
new standard, and prices are quickly doubled; but all past
contracts also are vitiated, and all persons to whom money is
owing, if compelled to receive payment in the new coin, are
robbed of one-half of their debt, which is confiscated for the
benefit of the debtor.
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