2. Depreciation of paper. The depreciation of paper money
follows a different course. If, by any act of the Government
paper is ordained to be a legal tender for debts, and, at the
same time, ceases to be exchangeable for coin, those who have
occasion to purchase of foreigners, who are not compelled to take
the notes, will make some of their payments in gold; and if the
issue of paper, unchecked by the power of demanding the gold it
represents, be continued, the whole of the coin will soon
disappear. But the public, who are obliged to take the notes, are
unable, by any internal evidence, to detect the extent of their
depreciation; it varies with the amount in circulation, and may
go on till the notes shall be worth little more than the paper on
which they are printed. During the whole of this time every
creditor is suffering to an extent which he cannot measure; and
every bargain is rendered uncertain in its advantage, by the
continually changing value of the medium through which it is
conducted. This calamitous course has actually been run in
several countries: in France, it reached nearly its extreme limit
during the existence of assignats.
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