Although the Bullionist's preoccupation about the lack of acceptability of inconvertible paper money
out of the country of issue is clearly a concern which belongs to a period far from today, Ricardo's quest for a stable monetary system is still very much alive, both in practice as well as in theory.
Piatt Andrew, a professor of economics at Harvard University, wrote three articles about the 1907 Panic, one of which measured the dollar quantity of clearing house certificates and other substitutes for legal reserves, frequently called "cash." Andrew (1908: 434) called the suspension of cash payments "the most extensive and prolonged breakdown of the country's credit mechanism which has occurred since the establishment of the national banking system." All this currency, he concluded, "was an inconvertible paper money
issued without the sanction of law, an anachronism in our time, yet necessitated by conditions for which our banking laws did not provide.
In Europe and the United States, governments progressively implemented the classical specie regime after periods of Revolutionary, Napoleonic or Civil wars, during which the inconvertible paper money regime had prevailed.
The Congress adopted the Legal Tender Act in February 1862, which legalised the government's ability to issue inconvertible paper money (the greenback) and the legal amount reached US$400 millions in March 1863.
A bank note that is a money certificate is of a higher quality than inconvertible paper money
. (19) This is so, because inconvertible paper money
presents a claim on an indeterminate amount, while a (convertible) money certificate is a claim on a clearly defined sum.
They are a precursor of the inconvertible paper money that was introduced in the region more than a decade after the 1810 Revolution.
The perceived insufficiency of means of payment prevailing in the region was then replaced by excessive printing of inconvertible paper money. A regime of high inflation followed, which lasted for many decades.
"Inconvertible Paper Money, Inflation, and Economic Performance in Early Nineteenth Century Argentina." Journal of Latin American Studies 32: 333-59.
Thus, in general equilibrium, inconvertible paper money
will change hands in trade at par, a circumstance which may lead the public to believe (erroneously) that money itself is the ultimate standard of economic value.
We have now experienced the defects of one century of American central banking--and the predatory consequences of almost one-half century of American inconvertible paper money
Inconvertible paper money
, via its impact on total spending, determines domestic prices.