Developments in currency and banking at the Cape between 1782 and 1825, with an account of contemporary controversies
The investigation that forms the substance of this thesis has been conducted on historical lines. An intensive study of the Currency and Banking developments in the old Cape Colony between the years 1782 and about 1825, reveals the typical currency development from a money economy to a credit economy. Prior to the beginning of the nineteenth century, there were no commercial banks with the result that there was no credit structure built up on a metallic reserve whereby the amount available for trade could have been multiplied several times. This study of the origin and development of the inconvertible paper rixdollar will enable us to form a correct judgement of the various methods adopted to supply the public exigencies, and the effects of such tampering, in destroying the credit as well as the value of the currency. It will be seen that inconvertible notes can be issued without any limit and when the issuers have a free hand, their value depends solely on the moderation of the issue. The inflation of an inconvertible paper currency may be either automatic or deliberate. The authorities may issue increased currency to meet what they believe to be trade demands, but, in fact, they may issue more than enough and the result will be unconscious inflation. The authorities will argue that more currency is needed because prices are rising, while their opponents will contend that prices are rising because too much currency is being issued. Further, this investigation will reveal the dangers of Government Banking and Government interference in the sphere of currency; the ease with which paper is issued and the difficulty of stopping the issue of notes. Inconvertible notes may be limited to an amount which can circulate without any depreciation, but in that case there can be no more of them than there would have been if they had been convertible, and no object is served by their being inconvertible. Generally, it may be said that the immediate cause of resort to inconvertible paper has almost always been the pressure of public finance. Funds must be raised in some way, and an additional issue of inconvertible notes affords the easiest, though not the best, method of raising them. Such issues lead eventually to uncertainty, discredit and depreciation, which harm the nation's credit and disorganise trade.
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