Money changer

“ When, however, new money, composed of some substance of supposed intrinsic value (as of gold) , is brought into the market, or when new notes are issued which are supposed to be deserving of credit, the desire to obtain money will, under certain circumstances, stimulate industry; an additional quantity of wealth is immediately produced, and if this be in proportion to the new claims advanced, the value of the existing currency is undepreciated. ”

“ Wages and prices, rising together, call perpetually for more money, or at least more tokens and symbols, more paper credit in the form of checks and deposits, with a value that is no longer based on the rock-bottom of redemption into hard coin, but that floats upon the mere atmosphere of expectation. ”

“ The condition of our monetary laws to-day is such that, except by the slow increment of gold production, which must be shared by all the world, we possess no means of meeting either the increasing demand for money that expanding population and commerce bring, or the sudden demand that a failure of credit may bring at any time. ”

“ For in the absence of all law defining what money should be, and regulating exchanges, the adoption of any article to serve as money which represented little or no effort for its production or accumulation would enable the shrewd, the idle, or unscrupulous, easily, and without fear of punishment or restraint, to take from the rest of the community products which represented the expenditure of time and labor, without giving in return any equivalent. ”

“ When the first effects of the great shock were over, when the lies and deceptions in the shape of rotten bank issues and fancy values had disappeared, when the self-acting contraction of currency and credit had done its work, business enterprise began once more to feel firm ground under its feet. Business men had less of that which called itself money, but they were sure that every dollar they did have not only called itself a dollar, but was a dollar and would remain a dollar. ”

“ Therefore, whenever such a thing as a chain of payments and an artificial system of settling them, is developed, money suddenly changes its visionary nebulous shape as a measure of value, turning into hard cash or means of payment, as soon as some shock causes a violent interruption of the flow of payments and disturbs the mechanism of their settlement. ”

“ What specie payments mean, what a gold dollar and notes convertible into gold dollars are, every sensible man understands. The gold dollar is real, tangible, and forms a reliable basis for calculation. But the abandonment of specie payments, the rejection of the gold dollar, mean that the conduct of our financial affairs is to be delivered into the hands of a class of financiers whose theories and schemes move in the realm of imagination, and point, not to stability, but to the uncertainty of change as their real object and inevitable consequence. ”

“ That this second step is really the determinative one; and that a continuing business is but a continuing repetition of these cycles from commodity back to commodity, which does not chiefly consist of money, but in which money is merely a device for facilitating the barter. ”

“ But I do say that the restoration of sound money will revive that confidence which is necessary to set all the industrial forces of the country in motion again to give you remunerative employment; that it will protect you against that insidious robbery with which a currency of fluctuating value strips your earnings and savings of their purchasing power; that it will open to you a fair chance again in the struggle of life by securing to you an honest dollar as wages for honest work. That is what the restoration of sound money will accomplish for ourselves and our children. ”

“ But the expansion of business is checked, the volume of business confidence is reduced, the values of future incomes in enterprises is lowered, production is checked, and prices are reduced, (a) because the value of money rises; and (b) because the values of goods and income-bearers is reduced. The exchange side of production is hampered. Substitutes for gold, through increased activities of bankers and other agents of exchange, are costly. ”

“ I have shown that an additional issue of greenbacks would at once revive all the dangerous influences which that kind of currency has exercised before, and always exercises wherever it exists, that wild enterprise, speculation, and gambling will spring up again, that a new expansion of credit will take place, that the cry for more and more paper money will appear with imperative and almost irresistible force ”

“ This is a fact known to every observing man. A return to the system of irredeemable paper money and a new expansion of that kind of currency would indefinitely postpone specie payments; it would inevitably result in new and violent fluctuations of money values and new uncertainty; it would thereby, with the experience of recent disasters before us, create intense distrust instead of confidence, frighten capital away from business enterprise, and fall like a blight upon reviving business. ”

“ A constant but unperceived rise in the value of the dollar with which those payments must be made, baffles all plans, thwarts all calculation, and destroys all equities between debtor and creditor. If we can not intelligently regulate our money volume so as to maintain unchanging the value of the money unit, if we can not preserve our people from the blighting effects which an increase in the measuring power of the money unit entails upon all industry, to what purpose is our boasted civilization? ”

“ But the people, now fully established in business for themselves, continued, by their system of paying dividends to consumption, to increase the price of labor and its products. When these millions were paid out as wages and entered into circulation they speedily found their [Pg 348] way into the people's banks and were returned to these vaults to pay debts. All this time the price of labor and its products was increasing, and the purchasing power of gold was decreasing, until in time all the debts were paid and the people ceased to exchange their products for money altogether. ”

“ So, however many of these "made dollars" are brought into existence by this trick of finance, only the men who "made" them can know and profit by their existence. The people are no wiser nor can they adjust themselves to the change of conditions brought about by the creation of all this new money ”

“ Under the operation of the present system, by which prices are constantly falling and money is constantly increasing in value, the surplus earnings of the people are flowing in a steady stream into the vaults of money-lending institutions, and into the pockets of creditors. ”

“ So with the money supply. There is a certain demand for money, ever increasing as population grows. How shall we meet it? By producing more money, or by destroying one-half of that which we now have, by eliminating one-half of the base of future supplies of money?
The latter is now the policy of this government, and as a consequence the price of gold has been greatly enhanced, and its purchasing power has increased each year, and will continue to do so.
The advocates of the gold standard call this “honest money.” ”

“ If the volume of money in circulation be made to bear a direct and steady ratio to population and business, prices will be maintained at a steady level, and, what is of supreme importance, money will be kept of unchanging value. With an advancing civilization, in which a large volume of business is conducted on a basis of credit extending over long periods, it is of the uttermost importance that money, which is the measure of all equities, should be kept unchanging in value through time. ”

“ The heavy selling of securities, which closed the bourses of the world, grew out of men's efforts to get money and bank-credit as a "bearer of options" for the old reasons. The old reasons explain in large measure the accumulation of gold by the Banque de France, and by the German Government, referred to above. But to-day, in general, the main purpose of those who use money, or other things, as a "bearer of options" is to make gains, or avoid losses, in industry and trade. ”

“ People who had things to sell—the farmer and the active business man—complained that their profits were being cut down or entirely wiped out; for the prices of their products kept falling while many of the charges they had to meet—interest, rent, etc.—remained fixed. On the other hand, people who had money to lend—the "bloated bondholder" and the "dead hand" (estates, foundations, hospitals, endowed churches and universities, for instance) —were coming to "own the earth." Their money incomes were fixed, but each dollar would buy more and more every year. ”

“ By the mere expansion of paper money the amount of your savings in dollars is not increased one cent. But by the depreciation of the paper money following that expansion, the purchasing power of your savings is decreased to the amount of that depreciation. It is as plain as daylight. And do not your greenbackers and fiat-money doctors tell you that irredeemable paper money must be made plenty, to raise prices and to make business lively? ”

“ Is it possible that when a commodity basis was necessary to start the thing, and when even in the modern world gold bullion, interconvertible with gold coin, remains the ultimate basis of the money-systems of all great commercial peoples, that you could withdraw the commodity support and keep money unchanged in value? ”

“ The complexity of the process by which money saving becomes embodied through a money loan in new productive agents should not blind to its real nature. The money is saved as a means to the exchange of present goods for future income. Money even in our day is occasionally stored away for future use under hearthstones or in old stockings and hollow trees, but this is a primitive and wasteful method, involving the loss of all the additional rents that its exchange and investment would yield. ”

“ The addition of $2,400,000,000 to the currency of the country will unquestionably largely increase all values. It will at the same time encourage—nay, almost compel—capital to seek investment in active industries rather than in dormant funds. For the present it will supply those who can use money to advantage with a sure and convenient method of obtaining it at a cheap rate of interest, while its ultimate tendency must be to eliminate interest on money from the world’s transactions, and bring money to what I conceive to be its true function—a measurer of values only. ”

“ If the farmer or planter could inflate the currency and run up the premium on gold when he sells his crops, and then so manipulate the currency as to raise the value of paper money and depress the premium on gold when he buys his supplies, of course that would be a winning trick. ”

“ No sooner will expansion become the declared policy of the Government than capitalists, money lenders and business men having money due them will be upon their guard. Knowing that the expansion of the currency will subject their out standings to progressive depreciation they will at once seek to anticipate that event. ”

“ We have grown and prospered in spite of an imperfect, repressing, and perilous banking and currency system. We have grown as a vine sometimes forces its way through a crevice in a wall, our very growth inviting disaster and death, our wonderful vitality hastening catastrophe.... Over fifty years of growth under the old banking act has been forced by the generosity of the soil of a new land, by the unconquerable energy and resiliency of a virile and courageous people; yet it has been interrupted by periods of business depression and stagnation ”

“ If, then, you should be paid in silver dollars, or if a larger share of the loans should be paid under the new conditions, you would be a gainer and not a loser by the change. It seems to me that an increase in the volume of money and rising prices are the opportunity for you to realize from your holdings, for without some favorable change you will hardly realize twenty-five per cent. ”

“ The present purpose, therefore, is to inquire into this vital though neglected part of the subject; to call attention to the economic truths that money and credit fluctuate as much, and often more, than commodities; again to point out that continuing trade is, in substance, only its original form of barter; to show that an exchange of a commodity for money constitutes but a single step, the second and most vital step being the replacement of the commodity with the money thus obtained. ”

“ But if coin alone be used as money, and if this coin be sent out of the country, when borrowed, and if what is sent away cannot be replaced at will, the scheme of augmenting money becomes impracticable: it will daily become more scarce, more difficult to procure, and interest must rise higher every day. ”

“ The Sources of Currency Supply.—It is, then, clear that the larger part of the circulating medium of society is not money; that not all of the money that there is is bullion money; and that not even all of the bullion money need be ultimate money—redemption money of the highest rank. The sources of currency in society are various—some of it bullion, with a cost of production limit upon its supply, some of it government paper, substantially free of cost, some of it banking credit with certain peculiar and appropriate costs attending its issue. ”

“ Loan Interest as related to the Increase of Real Capital.—How does a slow and steady appreciation of any metallic currency affect the relations of business classes? Does it rob borrowers and enrich lenders? Does it favor the consumers by giving falling prices, and hurt producers in the same degree? Does it tax enterprise and paralyze the nerves of business? The answer is an emphatic No. Steadiness in the rate of appreciation of money is the salvation of business. Not by one iota can such a slow and steady movement, in itself alone, rob the borrowing class. ”