To give acceptability to inconvertible paper, the government usually makes special provisions. One is to declare it legal tender in payment of private and public dues. Unless the people unite to boycott the use of inconvertible money, the government's legal sanction can force its receipt at par for debts, with the result that its acceptability for other purposes will follow. Of course, the existence of inconvertible money does not prevent a creditor from contracting in terms of gold, nor does it prevent his asking a higher sum in payment, if the contract be drawn in terms of general money. Its depreciation may, therefore, persist despite legal - tender laws.
The extent to which the paper declared is legal tender may, however, be limited to the payment of taxes and debts to the government. If issued in anticipation of taxes soon to be levied and in amounts equal to those taxes, it will likely keep at par, for the people accepting it will really be paying their taxes in advance, and when the taxes come due they will not care whether they pay in standard or in inconvertible money. Such issues will not be excessive; the tax levy will act as governor of the issue, and loss of faith in the issue is, therefore, unlikely. If, however, issues exceed taxes, laid or to be laid, the volume of circulation will be inflated by the excess.
The above methods of promoting acceptability and maintaining parity are unavailing if the issues become excessive. The volume issued may be so large as to discredit the government's ability or intention to redeem, and far exceed its capacity to absorb by way of taxes. Depreciation then becomes inevitable. After the public has become used to convertible paper a certain volume that is inconvertible will by force of habit circulate without question. If the issue thereafter is limited to the growing needs of business at the existing price level, there will be no depreciation; greater issues, however, will result in depreciated values in terms of gold inversely proportional to the volume. The most effectual method of maintaining the value of inconvertible money is, therefore, to limit its issue. There is no way of determining in advance the amount which a country may issue and keep at par; the risk is psychological, varying with the people, time, and conditions. In times of peace, normal order, and ready collection of taxes, a much larger sum of credit can be supported than in times of panic, war, or falling tax receipts.