t control over the issue
of paper money, sought to gather into the public treasury all the
specie, and to give paper (either governmental notes or bank
notes) practically a forced circulation, making it almost the sole
circulating medium. The values of the paper moneys have fallen in all
the countries, especially in Germany and Russia. In such cases the
money partakes somewhat of the characters both of bank notes and of
political money. Resorted to in desperate extremities, political
money has usually proved to be a costly experiment. A result usually
unintended is the derangement of business and of the existing
distribution of incomes. The rapid and unpredictable changes in prices
gives opportunity for speculative profits, but injure legitimate
business. This incidental effect on debts and industry offers the main
motive to some citizens for advocating the issue of paper money. It
is peculiarly liable to be the subject of political intrigue and of
popular misunderstanding. It is this danger, more than anything else,
which makes political money in general a poor kind of money.

Sec. 11. #Theories of political money.# There are two extreme views
regarding the nature of paper money, and a third which endeavors
to find the truth between these two. First is that of the
cost-of-production theorists, who declare that government is powerless
to influence value, or to impart value to paper by law. They deny that
there is any other basis for the value of money than the cost of the
material that is in it. Money made of paper, on a printing press, has
a cost almost negligibly small, and, therefore, they say it can have
no value. The facts that it does circulate and that it is treated as
if it had value are explained by the cost-of-production theorists as
follows: while the paper note is a mere promise to pay, with no value
in itself, it is accepted because of the hope of its redemption, just
as any private note. Depreciation, according to this view, is due
to loss of confidence; the rise toward par measures the hope of
repayment.

Taking a very different view, the extreme fiat-theorists assert that
the government has unlimited power to maintain the value of paper
money by conferring upon it the legal-tender quality. The meaning of
_fiat_ is "let there be," and the fiat-money advocates believe that
the government has but to say, "Let there be money," to impart value
to a piece of paper. The typical fiat-money advocates in the Uni