US dollar

“ What good does it do us to be assured that our dollar weighs just as much as ever? Does this fact help us in the least to bear the high cost of living? What we really want to know is whether the dollar buys as much as ever. We want a dollar which will always buy the same aggregate quantity of bread, butter, beef, bacon, beans, sugar, clothing, fuel, and the other essential things for which we spend it. ”

“ At certain times there are greater and less demands for money, which, under our present practices, make a dollar, to-day, worth four per cent. per annum interest, and to-morrow increase it to ten per cent. It must be remembered that we are now speaking of an irredeemable currency, the representative of the wealth of the nation: that the government representing the nation has uttered it, in behalf of the people, upon the soundest and, in reality, the only sure basis of value any money can have—the productive power and capacity of the nation. ”

“ The real culprit being the dollar, the real remedy is to fix the purchasing power of the dollar. Our dollar is now simply a fixed weight of gold—a unit of weight, masquerading as a unit of value. A twentieth of an ounce of gold [1] is no more truly a unit of value or general purchasing power than is a pound of sugar or a dozen eggs. It is almost as absurd to define a unit of value, or general purchasing power, in terms of weight, as to define a unit of length in terms of weight, to define a yardstick as, let us say, any stick which weighs an ounce. ”

“ They seek the causes wholly in the goods, the prices of which have changed, and not at all in the gold dollar, in terms of which those prices are expressed.
Which of these—goods in general, or the dollar in particular—is the more likely to vary? Is it credible that commodities should rise and fall so concertedly without some simple common cause? Is it not more probable that the dollar, which, as such a common cause, affects all the commodities it buys, should fall in value than that hundreds of individual changes in the values of other commodities should all happen to occur in concert? ”

“ I believe that I speak that which is the common thought of us all when I say that every dollar, whether paper or coin, issued or stamped by the general Government should always and everywhere be as good as any other dollar. I am sure that we would all shun that condition of things into which many peoples of the past have drifted, and of which we have had in one of the great South American countries a recent example—the distressed and hopeless condition into which all business enterprise falls, when a nation issues an irredeemable or depreciated money. ”

“ Two commodities like gold and silver make a better standard than one and many make a better standard than two. The dollar standard should be worth a specified bill of goods such as one board foot of lumber, fifteen pounds of coal, half a pound of sugar, half an ounce of butter, a quarter of an ounce of leather, a quarter of a pound of steel, etc. Such an aggregate of goods, selected on the basis of their relative importance in trade, may be called a goods-dollar or a market-basket dollar. ”

“ So with the price level, while the strong-arm method is not only costly and vexatious but futile, the simple regulation of our instrument for measuring prices, the dollar, will accomplish the same result not only without cost and effort but, what is more to the point, with success. ”

“ The cautious and conservative reader will ask: if the evils of our present dollar are so great and the remedy so simple, why did not our civilization improve its monetary units years ago, as it improved all other units? ”

“ Just as we then learned that the sun and moon and stars do not really rise and set—though they move somewhat—but that what so appears is really the revolution of the earth on its axis, so we are now learning that commodities as a whole do not really rise and fall much but that what so appears is really the gyrations of the dollar. ”

“ Under such conditions all parts of the circulating medium tend to expand or contract in unison and a change in weight of the basic gold dollar carries with it a control of the whole mechanism of exchange, cash, and credit. ”

“ By the latter the currency is enlarged at the expense of the people,—being at once a tax and a derangement of values. You pamper the morbid appetite for paper money, and play the discarded part of John Law. You blow up a bladder, without thinking that it is nothing but a bladder, ready to burst. As the volume of currency is increased, the purchasing power of each dollar is reduced in proportion. As you add to the currency, you take from the dollar. You do little more than mark your goods at [Pg 293] higher prices, and imagine that they have increased in value. ”

“ I do not perceive why it is the English, who themselves so dearly love the dollar after it is translated into terms of pounds, shillings and pence, should insist on regarding us as a nation of dollar-grabbers, when they only see us in the act of freely dispensing the aforesaid dollar. ”

“ Instead of great price convulsions, such as we find throughout history, the index number would run close to par, say, 101, 1001⁄2, 101, 100, 102, 1011⁄2, 100, 98, 99, 99, 991⁄2, 100, etc., seldom getting off the line more than one or two per cent.
The process of correcting the dollar has just been likened to steering an automobile. ”

“ Any noticeable change in the price level is practically sure to produce a crop of complaints and of proposals to remedy the disturbance. At first these popular complaints and proposals ignore money, for the reason that, as explained in Chapter II, the popular mind is full of fallacies about money. To look to the dollar as a cause of great price movements in food, steel, and cotton, is literally the last thing to occur to the ordinary man. When those more versed in monetary theory suggest that the dollar may have any such rôle to play, the idea is at first greeted with derision. ”

“ Even if our shifting dollar were guiltless of most of the offenses charged, even if the high cost of living had no relation to the dollar, there would still be excellent reasons for standardizing it—on the same general principle on which we have standardized all other units. ”

“ Thus, the Bureau of the Mint, which would regulate the weight of the dollar, would do so merely by buying and selling gold at specific prices fixed for it by the Computing Bureau ; and it would have to buy or sell at the pleasure of the public. It would have no more choice than does a broker who is ordered to buy or sell at specified prices. ”

“ If now the wants of trade are considered to require still more currency, under what circumstances will they be considered to require less? It is easy to show that as you go on increasing the currency the demand will not be satisfied, but it will be still more excited.
One thing is universally admitted: If the volume of our irredeemable paper money is increased, it will further depreciate. The paper dollar, which is worth 85 cents in gold now, will be worth 80, or 70, or 60, or 50 cents, then, and what you can buy for one dollar in paper now will cost $1.25, or $1.30, or $1.40, or $1.50 then. ”

“ It will be clear to any one who follows the reasoning and explanations in this book, [3] that the only money theory assumed is that common to all theories, and accepted universally; namely, that a large quantity of gold will buy more goods than a small quantity—a pound, than an ounce, for instance—and that an increase of the gold in a dollar will, somehow, increase the dollar's purchasing power. ”

“ Thus by the universal competition to get it the value of the dollar is made to depend upon the number of dollars that are out. This is a principle that lies at the very foundation of the science of money. The law, stated broadly, is that the value of each unit of money in any country at any given time depends on the whole number of units in circulation in that country. The larger the number of units out, population remaining the same, the less must be the value of each unit; the smaller the number of units out, population remaining the same, the greater the value of each. ”

“ It is very hard to control any individual price in the face of the economic forces of supply and demand, but it is very easy to control the general scale of prices; for the general scale of prices depends, among other things, on the weight of the gold dollar and the weight of the gold dollar is whatever we choose to make it. ”

“ This the proposed currency will be by right of use,—a right inherent in a national currency, and respected as long as the government respects itself, that is, as long as the people govern wisely.
A dollar, value-currency, will always buy a dollar's worth of gold, but it may not always buy the quantity of gold contained in the gold dollar. ”

“ And so, as long as the index number persists in staying even a little above par, the dollar will continue to be loaded at each adjustment period, until, if necessary, it weighs an ounce—or a ton, for that matter. ”

“ So far we have treated only of Coin-Money in its two forms, substantive and subsidiary. The latter may now be dismissed as of little consequence in itself, and as already elucidated fully: the latter is the only Money that stands in its own right as a commodity, and the only Money that can give birth to the Denominations of Value, such as sovereigns, dollars, marks, and francs. What is a Dollar? A dollar is 254⁄5 grains of a metal compound coined, of which nine parts are pure gold and one part a hardening alloy. ”

“ Just as he who would picture the astronomical movements as they really are must conceive a mental image not of a sun and stars concertedly rising and setting around a fixed earth, but of a sun and stars, substantially fixed, shining on a whirling globe, so he who would picture economic movements as they really are must likewise conceive not of the concerted dancing of numberless commodities relatively to a fixed dollar, but of the dance of the dollar relatively to a nearly fixed mass of commodities. ”

“ That the Bridgeport Chamber of Commerce, recognizing the many evils that flow from the ever-changing value of the dollar, hereby calls upon Congress to enact such legislation, if it be feasible, as shall tend to make the dollar stable at all times in its purchasing power ; and to that end it respectfully recommends the adoption, in substantial form, of the plan put forward by Professor Irving Fisher for stabilizing the dollar by adding weight thereto or subtracting therefrom in accordance with the fluctuations of prices as represented by the index numbers. ”

“ And this composite goods-dollar is not altogether a joke. I am going to suggest its adoption—indirectly, at least!
4. The Gold Standard Not to Be Abandoned
Some literal-minded reader is now eager to point out how inconvenient, not to say grotesque, such a market-basket dollar would be if it were in circulation or were used for export or import! With its 15 lb. of coal, it is far too heavy to carry; with its wood and hay, it is far too bulky; its half egg would spoil; while to divide a pair of shoes into two hundred parts would annihilate their value. ”

“ Wall Street had been doing business with pieces of paper; and now someone asked for a dollar, and it was discovered that the dollar had been mislaid. ”

“ You and I know that the dollar is what is running things in this country to-day, and if you come along with an ideal proposition—a proposition that carries with it a change in our laws or a proposition to have some new laws passed—you might as well say good-by to it, because the fellow whose hundred millions you want to take away is going to say: 'How many dollars does it need to turn that upside down?' and he is going to supply the dollars. ”

“ With our present unstable dollar, the just intent of such agreements is constantly being balked by a change in prices. Gradually such corrections of the dollar will break down the popular superstition that "a dollar is a dollar"; for every time we correct the dollar we convict it of needing correction. Ultimately the correction will surely be applied not, as at present, as a patch on the dollar from the outside, but by incorporating it in the dollar itself. ”

“ On the contrary, as one opponent of the quantity theory has pointed out, the plan should seem even simpler to those who do not accept the quantity theory but believe that a direct relationship exists between the purchasing power of the dollar and the bullion from which it is made, than to believers in the quantity theory. ”

“ However great may be the disturbing effect of some other cause on the scale of prices, that effect can always be neutralized by a suitable change in the weight of the gold dollar, provided, of course, that all other dollars are kept redeemable in gold dollars. ”

“ But with our variable yardstick of commerce, observance of the constitutional provision, at best, conforms only to the letter, not the spirit, because the letter of the contract, through the law, fixes the obligation in gold by weight, whereas the contracting parties are not properly concerned with what a gold dollar weighs; usually, in fact, they do not even know that a dollar is a weight-unit. The meeting of their minds is essentially on the basis of what a dollar is worth—that is, of what it will do for them in commerce ”

“ But few except speculators even try to foresee price movements. The chief evil of an unstable dollar is its uncertainty.
10. Trade Cycles. When prices rise, great profits lead to overextension of business and credits and sometimes to a crisis, after which contraction leads to a fall of prices and depression of trade. The unstable dollar is a fundamental element in these cycles. ”

“ With much more rea­son Americans might have suspected that in Amer­ica Englishmen found everywhere a silent influence, which they found nowhere in Europe, and which had nothing to do with avarice or with the dollar, but, on the contrary, seemed likely at any moment to sacri­fice the dollar in a cause and for an object so illusory that most Englishmen could not endure to hear it discussed. ”