Returning to the reasons for an invariable money value, they are best appreciated by considering the effects of one that is variable. While the statement of Mill, previously quoted, "that the money prices of all things should rise or fall, provided all rise or fall equally, is in itself and apart from existing contracts, of no consequence," is true, yet is it true only under the condition specified, that all shall rise or fall equally, and this condition in the case of a fluctuating money value never obtains. Aside from the exception which Mill makes of fixed money contracts, which can never adjust themselves at all to a changed money value,—and the exception is of enormous volume and importance,—the prices of many commodities are not adjustable quickly or readily to a change in money value, especially when such change is an increase. There is a persistency or inertia about prices that in many instances resists a reduction. Wages can never be reduced without friction and often strikes. The fact that commodities have fallen and that the lower wages will buy as much, or more, than the higher ones formerly did, is slow of appreciation; hence the employer caught between the difficulty of reducing his employés' wages and the falling prices of his products, is injured by an increased money value. When the change, on the other hand, is a decrease of money value, the employer will not as a rule advance wages until compelled to do so, and the labourer suffers meanwhile from the rising prices of commodities.
When prices fall, the producers of a commodity are not apt to recognize that it is a general fall, a change in money value; but accustomed to regard money as invariable in value, as it should be, and, failing to see anything in the conditions affecting their own particular product that should lower the price, they delay or refuse to sell, hoping for higher prices; and all, or a large number, doing this, makes business dull.
The great injury and evil of changing money value comes, however, through fixed money contracts. The enormous amount of bonded indebtedness, railroad, municipal, county, state, and national, makes the slightest change of money value of vast importance, and added to these is the aggregate volume of commercial and private debts.
In short, a change of money value either way is a robbery, and none the less reprehensible because it is legal and insidious. Indeed, it is perhaps more damaging in its secondary effects because of its insidiousness. An open danger may be guarded against, but the hidden danger, known to exist, but which cannot be located or prevented, only excites fear and distrust, and checks all movement. Nor is the damage, in its secondary effects, confined to those involved in fixed money contracts. Piracy on the seas or robbery on a highway, when common, injure not alone those who are robbed. The fear and distrust engendered by such occurrences damage and delay all commerce; and the cost of protection against these menaces, or of avoiding them by taking more circuitous routes, are a burden on the whole people. So the robbery by a fluctuating money value affects, indirectly, the whole community, while the indirect effects are far worse. In the case of a decreasing money value the robbery does not bring such disastrous consequences in its train as where the change is an increase, owing to the different conditions of the people robbed.
A slight decrease of money value generally brings about a stimulation of trade and industry, the rising prices of commodities acting as a spur to greater production and new enterprises.
Mr. F. A. Walker, indeed, considers that for this reason, and in spite of the recognized injustice to some classes, that such a condition when slight and brought about by natural causes, is a benefit on the whole. It can hardly be admitted that robbery of one large class in a community is defensible, even if it does result in a gain to another class greater than the loss to the first. It is indisputable, however, that the opposite case, where money is increasing in value, brings such disasters in its train that it would be better, if an invariable value for money could not be attained, that the variation should be a decrease rather than an increase. In the latter case not only is the robbery equally great, but falling upon the most active, industrious, and enterprising class of the community,—for it is this class as a rule that are borrowers,—it not only imperils all they possess, but discourages, when long continued, all forms of industry and enterprise. In this way it throws thousands of men out of employment and brings suffering and hardship to thousands more. No other one cause, perhaps, is more responsible for "panics" and "hard times," with their attendant evils—tramps, pauperism, and crime. Its evils have been painted by many writers, and it is scarcely possible to exaggerate them. Of all ills, war and pestilence alone seem to fill the cup of human suffering more nearly full than the depression and stagnation of industry which is brought about by constantly declining prices.
In view of these facts, the necessity for a money that shall vary in its amount in accordance with the demands of business is evident. Not only must it respond to the long-continued, slow, and almost imperceptible increase of demand due to growing trade and population, but it should also respond, quickly and surely, to those sudden demands, known as panics, when credit fails for any reason to do its usual work. This need is recognized by bankers in their demand for a flexible or elastic currency.
Quotations are hardly necessary in support of the foregoing statements, but a few may be given. David Ricardo, in "Proposals for an Economic and Secure Currency," observes that:—
"All writers on the subject of money have agreed that uniformity in the value of the circulating medium is an object greatly to be desired."
"A currency may be considered as perfect of which the standard is invariable, which always conforms to that standard, and in the use of which the utmost economy is practised."