Cyclopædia of Political Science, Political Economy, and the Political History of the United States
COMPULSORY CIRCULATION, the obligation imposed upon citizens to accept, as the equivalent of coin money, the paper uttered by the state or by the banks. As applied to banks compulsory circulation means that the banks are not obliged to redeem their notes, or exchange them for specie at sight.
—Compulsory circulation may be, at certain times, a measure of public safety for a country; but it is a very dangerous one, and should be abandoned as speedily as possible.
—Compulsory circulation, being almost always the result of an extraordinary issue of irredeemable notes, leads to a depreciation of the paper, which no legislation can prevent. The commercial public avoid the difficulty with the greatest ease: they raise the price of goods in proportion to the depreciation of the paper. There is but one way to restore to the notes their former value, and that is, to diminish their number by specie resumption or by consolidation.
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