It is said that our paper is as good as silver, because we may have silver for it at the bank where it issues. This is not true. One, two, or three persons might have it; but a general application would soon exhaust their vaults, and leave a ruinous proportion of their paper in its intrinsic worthless form.
About this quote
- What does it mean?
- Paper currency is only valuable if backed by sufficient reserves; otherwise, widespread redemption would deplete vaults and render the paper worthless.
- In plain terms
- Paper money is not truly valuable if the bank cannot pay out real silver for it.
- What can you take from it?
- Currency requires sufficient reserves to maintain real value.
Where it applies
Putting it to work
Questions to consider
- What backs the value of money?
- When does trust in currency fail?
Another view
Modern fiat currency operates without direct silver backing.
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