community, and no more; and these notes will remain at par only if there is a recognized system—not of ultimate, but of immediate redemption. No matter what quantity of notes may be put out, if there is no system of immediate redemption, the notes will depreciate. But, if there is an effective system of immediate redemption in operation, then no matter what the amount issued, none of it can depreciate, and only that quantity which is needed by the convenience of the business public will remain outstanding. In this way it may be realized that the element of quantity is incidental to the more dominant factor of redemption.
The connection of the value of the standard money with the paper promises to pay in that standard coin is the one important consideration in determining the value of paper money. Redemption is the only sure means of ascertaining automatically what quantity of paper is needed by the public. Redemption determines both the quantity and the value of the paper.
In the case of irredeemable paper, however, it is often assumed that, in the absence of redemption, the.value of the paper is determined directly by the amount outstanding as compared with the uses to which such money can be put. There is believed to be an imperative demand for money, as a medium of exchange, which must be satisfied in some way; and in default of anything better, irredeemable paper will be required, and a value will be given to it by this imperative demand. Then, only if issued in excess of this demand, will even irredeemable paper depreciate. This is the usual explanation of the fact that irredeemable paper, worthless in itself, bears any value at all.
