The notes, therefore, formed an inconvertible paper currency.
The first of these mistakes was a measure making (January 1885) the currency inconvertible for a period of two years.
The president was advised that the only way of averting the financial ruin of the banking institutions of the republic was to suspend the conversion law and lend from the national treasury inconvertible notes to the banks.
At the opening of 1901 the country was chiefly interested in the forthcoming presidential election, for which the candidates were Don Pedro Montt (Conservative and Clerical) currency once more on an inconvertible paper money P P Y basis until 1902.
On the 31st of August of the same year a series of proposals upon the currency question was submitted to congress by the president, whose real object was to counteract the too rapid appreciation of the inconvertible paper money.
The great struggle compelled every resource to be strained to the utmost: the issue of long-time bonds, continual borrowing in very large amounts on short-time inconvertible paper money, an elaborate and all-pervading system of internal taxes, and, finally, heavy import duties.
The country was still labouring under the curse of an inconvertible currency originatingwith the Legal Tender Act res - paperY g dncy.
Instead of facing the difficulties, the president preferred to put off the day of reckoning by flooding the country with inconvertible notes, with the result that the financial crisis became more and more aggravated.
Great opposition was raised by the representatives of the debtor class in congress to the suppression of the inconvertible paper money, but in the end President Montt carried the day, and on the 11th of February 1895 a measure finally became law establishing a gold currency as the only legal tender in Chile.
Political troubles in 1884-1885 led to a suspension of cash payments in 1885, and in 1886 Congress made the notes inconvertible and of forced circulation.