The value of money in any country is determined by the amount existing.
Its [money's] power of acquisition depends not on its substance, but on its quantity. [Paulus, author of the Pandects, sixth century.]
Professor De Colange, in the American Cyclopedia of Commerce, article on "Money," says:
The rate at which money exchanges for other things is determined by its quantity. * * *
Supposing the amount of trade and mode of circulation to remain stationary, if the quantity of money be increased, its value will fall, and the price of other commodities will proportionally rise, as the latter will then exchange against a greater amount of money; if, on the other hand, the quantity of money be reduced, its value will be raised, and prices in a corresponding degree diminished, as commodities will then have to be exchanged for a less amount of money. * * *
In whatever degree, therefore, the quantity of money is increased or diminished, other things remaining the same, in that same proportion the value of the whole and of every part is reciprocally diminished or increased.
A curtailment of the volume of money in a country will, ceteris paribus, increase the value of the money of that country. All the authorities agree that this law applies to all forms of money, whatever the material; so that it applies to paper money with precisely the same force that it applies to metallic money.
Mr. Stanley Jevons, in his work on "Money and the Mechanism of Exchange," says:
There is plenty of evidence to prove that an inconvertible paper money, if carefully limited in quantity, can retain its full value. Such was the case with the Bank of England notes for several years after the suspension of specie payments in 1797, and such is the case with the present notes of the Bank of France.
Mr. Gallatin said: