Its ulterior consequences are, a still stronger shock to commercial credit, the extensive ruin of individuals, and an excessive contraction of the currency, yet more injurious than its excessive expansion.
These evils arise from buyers and sellers bearing an unequal relation to the quantity of money in the market.
If all sold as much as they bought, and no more, and if the prices of all commodities rose and fell in exact proportion, all exchangers would be affected alike by the increase or diminution of the supply of money. But this is an impossible case; and therefore any action on the currency involves injury to some, while it affords advantage to others.
A sudden or excessive contraction of the currency produces some effects exactly the reverse of the effects of a sudden or excessive expansion. It lowers prices, and vitiates contracts, to the loss of the opposite contracting party.
But the infliction of reverse evils does not compensate for the former infliction. A second action on the currency, though unavoidably following the first, is not a reparation, but a new misfortune.
Because, the parties who are now enriched are seldom the same that were impoverished by a former change; and vice versâ: while all suffer from the injury to commercial credit which follows upon every arbitrary change.
All the evils which have arisen from acting arbitrarily upon the currency, prove that no such arbitrary action can repair past injuries, while it must inevitably produce further mischief.
They do not prove that liability to fluctuation is an inherent quality of paper money, and that a metallic currency is therefore the best circulating medium.
They do prove that commercial prosperity depends on the natural laws of demand and supply being allowed to work freely in relation to the circulating medium.
The means of securing their full operation remain to be decided upon and tried.