produces evil as well as good, in most cases it produces good only. And
three of these cases are illustrated by recent American experience.
First, as Mr. Goldwin Smith--no unfavourable judge of anything
American--justly said some years since, the capital error made by the
United States Government was the "Legal Tender Act," as it is called,
by which it made inconvertible paper notes issued by the Treasury the
sole circulating medium of the country. The temptation to do this was
very great, because it gave at once a great war fund when it was
needed, and with no pain to any one. If the notes of a Government
supersede the metallic currency medium of a country to the extent of
$80,000,000, this is equivalent to a recent loan of $80,000,000 to the
Government for all purposes within the country. Whenever the precious
metals are not required, and for domestic purposes in such a case they
are not required, notes will buy what the Government want, and it can
buy to the extent of its issue. But, like all easy expedients out of a
great difficulty, it is accompanied by the greatest evils; if it had
not been so, it would have been the regular device in such cases, and
the difficulty would have been no difficulty at all; there would have
been a known easy way out of it. As is well known, inconvertible paper
issued by Government is sure to be issued in great quantities, as the
American currency soon was; it is sure to be depreciated as against
coin; it is sure to disturb values and to derange markets; it is
certain to defraud the lender; it is certain to give the borrower more
than he ought to have. In the case of America there was a further evil.
Being a new country, she ought in her times of financial want to borrow
of old countries; but the old countries were frightened by the probable
issue of unlimited inconvertible paper, and they would not lend a
shilling. Much more than the mercantile credit of America was thus
lost. The great commercial houses in England are the most natural and
most effectual conveyers of intelligence from other countries to
Europe. If they had been financially interested in giving in a sound
report as to the progress of the war, a sound report we should have
had. But as the Northern States raised no loans in Lombard Street (and
could raise none because of their vicious paper money), Lombard Street
did not care about them, and England was very imperfectly informed of
the progress of the civil struggle, and