I
MONEY
MYSTERY
THE
HERITAGE OF OLD-WORLD ERRORS AND
NOW
THE AMERICAN DEPARTURE.
Habituated
as man has been in using political monies he has forgotten that money
had its beginning in private enterprise - where the motive was merely
the facilitating of exchange. It fell into the hands of government
where it came under the motive of tax deception and public
exploitation. It must be rededicated to its primary and natural
purpose and to that end must be mastered.
How
many wars could have been precluded, how much poverty and misery
averted, how much further human progress would have gone had money
never become a political instrument, we can only conjecture. However
that may be, the blame for the detour cannot be laid upon the
politician; since it appears that it was the business men who - when
they found that the goldsmiths and silversmiths were cheating -
petitioned the state to certify to the weight and fineness of coins.
Ironically, they fell into the hands of a greater cheat – because
the state made clipping of coins a major racket and developed
shortchanging into a fine art through repudiation and inflation.
The
stream of political monies from the beginning to the present day runs
deep and dirty, yet to suggest that money can spring from any other
source is to surprise if not even to dismay. So has tradition dulled
mens' senses. No matter how often the state fails to supply a
virtuous money system, men rush back to it in desperation and beg it
to try again. Indeed, until we learn that the money power resides in
us, we must abjectly beg the state to give us an exploitative system
because we cannot return to a moneyless civilization. Yet, no mater
how often and earnestly the state tries to provide a true money
system, it must fail because of an inherent antipathy between the
money issuing power and the taxing power. A money issuer must be a
seller who bids for money, not a taxer who requisitions it in whole
or in part, as politically expedient and without a quid pro quid.
The
early experience of traders with private money was naturally
evolutionary. They were being led step by step, toward an unexplored
path toward a goal they could not envision. They only knew that
simple barter was inconvenient and that the more it was escaped, the
greater was progress and the development of wealth. They were fleeing
from an impediment rather than pursuing an ideal for they were unable
to conceive the money ideal.
Their
first expedient to escape simple barter was to hit upon some common
commodity that would be acceptable to most any trader and which would
not deteriorate in storage. A number of such commodities were used,
but it was natural that ultimately gold and silver would be selected
as the best suited for the purpose. They were the most portable,
because much value was represented by small weight, and they were not
subject to erosion.
What
had thus been accomplished was the adoption of a representative
commodity, designated by weight or measure, to mediate the exchange
of other commodities. Though a mediating commodity is not, and cannot
be, money, it is interesting to note how the spirit of money crept in
at this point, quite unawares. Let us consider the one mediating
commodity, gold. There probably has never been a time in all history
when the value of existing gold was more than one millionth of all
values passing in exchange during one year. Therefore, it could
mediate only an infinitesimal part of all values moving in exchange.
Exchange acquired, as it had to, something additional to meet its
expanding needs. This additional element was the spirit of money that
attached itself under the urge for greater freedom and larger volume
of exchange. Because the spirit of money has never been comprehended,
the fetish of gold or materiality, as exchange media, in some form
remains.
The
spirit or purpose of money is to convert barter from a completed transaction
into two halves - with one trader, (the buyer) receiving full satisfaction
in value and the other (the seller) receiving the assurance of an
equivalent value later from some trader. Thus simple barter, which is
a bilateral transaction wherein both traders receive immediate
satisfaction, gives way to money exchange, which is a unilateral
transaction. A time lag intervenes before the seller receives
satisfaction but he has the great advantage of choosing what he wants
and from whom. To serve the urge for an escape from bilateral barter
to unilateral barter was and is the function of money; and in its
incipiency it operated unseen and unsung. It had to come, and did
come, and is here; but it is still shrouded in superstition.
Trading
continued on a bilateral or whole barter basis, oblivious of the money
concept by traders. But money crept in and fulfilled its function of
expanding exchange. After the practice of using silver and gold as
barter media in terms of weight had become firmly established, the
practice of depositing these metals for safe-keeping was developed.
Thus metal smiths, who received these deposits, issued warehouse
receipts therefor. Then it was found that, instead of taking out and
putting in the metal, the receipts themselves could be transferred.
This was the beginning of paper money, but only to the extent that
the smiths by their cunning developed it.
They
found that a certain percentage of metal remained in their possession
continuously, and that it was safe to issue receipts or promises to
deliver metal against non-existent metal - which receipts circulated
as money. This was the birth of the banking business. Thus some
receipts (those backed by actual gold) were bi-lateral barter
instruments and those not actually backed were uni-lateral barter
instruments or money, though traders were quite unconscious of using
money. The smiths had created money by trickery and thus expanded
exchange to the benefit of everybody.
For
specie payments (i.e. actual delivery of metal) it was found that weighing
and testing was inconvenient, so the smiths developed the practice of
stamping the metal in certain weights and fineness. This was the
birth of coinage and it permitted another trick by which money again
entered exchange unrecognized by traders. The coins were either
falsified by the smiths or "sweated" or "clipped"
by others to contain less value and thus exchange was still further
expanded through the surreptitious introduction of money.
Next
came the bill of exchange invented by merchants to minimize the transportation
of metal and this gave money another opportunity to break the
straitjacket of bilateral barter. Basically, these bills of exchange
were orders for silver or gold in favor of a merchant in another
City, drawn against another merchant in the same city. But they
tended also to circulate and thus permit the issuer to issue beyond
actual power of specie redemption.
These
examples illustrate how exchange was mediated in part by bilateral
instruments (genuine certificates of deposit of actual values) and in
part by unilateral instruments - money (based solely upon common
acceptance without reserve for redemption). True, the latter were
products of cupidity and were executed by dishonest men but since men
were unable to conceive money, there was no other way by which it
could emerge and serve its grand purpose of expanding exchange.
By
illusion and delusion, money had to break down the barriers of a
bilateral exchange system and convert it into unilateral exchange, so
that trade could be expanded. In doing so it followed a natural urge,
because traders did not really want metal; they wanted exchange power
- the power to acquire all commodities; not just one commodity.
It
is interesting to note that the spirit of money, which is the spirit
of facile exchange, brooded over barter exchange when it was trying
to break its bilateral cocoon and emerge as unilateral exchange; and
today the ghost of dead bilateral barter still hovers in the minds of
some men, in that they try to restore the butterfly to its bilateral
shell. They speak sneeringly of "fiat money," not realizing
that money can exist only by the fiat of the issuer and that a money
instrument is money only in so far as it has no intrinsic value.
So,
unable to visualize money as an accounting concept, they cling to the
fetish of gold, ever trying by various devices to stretch it to reach
the heights of soaring money. These devices range from raising the
so-called value of gold to fractionalizing the reserve and finally
resorting to debt pyramids that have the most nebulous relation to
the magical lodestones presumed to be buried underneath it - a
lodestone to which, in actual practice, the man in the street gives
not the slightest thought. While he does not understand money, he
does not misunderstand it as the so-called authorities do.
While
money long since has functioned as a representative of value in all
commodities, the superstition still exists that it represents the
value of but one commodity, gold or silver and at a fixed price. The
absurdity of the standard of value superstition is instantly seen
when one realizes that the so-called "value" of the
standard commodity is an arbitrary price set by the power of the
money unit which is supposed to be supported by that which it
supports. The tail is made to wag the dog. Thus, the commodity chosen
as the "standard" does not back the money unit; the money
unit backs the "standard" commodity. If the money unit were
not a power in and of itself, it of course could not raise the price
of gold or anything else. The thermometer does not control the
weather.
It
is evangelical to denounce those dishonest souls who have led us by illusion
and delusion into the use of money as a valueless accounting device
while we were still clinging to a material concept, but it is not realistic
to do so. Without their cunning (in the absence of money mastery) we
could not have advanced. This is not to say that such practices
should be encouraged; but rather that we should become so intelligent
that they are no longer necessary. They involve a parasitism which
should be dispensed with - but, in the absence of an intelligent
approach to the subject, it is better that we be deluded into
exchange, even though it supports parasites and exploiters, because
exchange is the neck of the bottle in the productive consumptive
cycle, and is therefore the final determinant of human progress.
Exchange must be expanded by fair means or foul; for society cannot
stand still, and can progress only by expanding exchange.
There
was no comprehension of money while it was still a private enterprise
medium, but there is reason to believe that tradesmen would have
found their way before this, because they were at least actuated by
the right motive, namely, the pursuit of a means of facilitating
exchange, which is money's sole purpose. When, however, money
experimentation fell into the realm of politics the motive changed to
suit the purposes of those who used the state for private advantage
and thus, for hundreds of years, money has followed the political
tangent that leads only to frustration. When, by assuming the control
of money, the state intervened in private enterprise, the latter
became and remains the political enterprise system and can never be
truly private and fully serve society until the money power is
recovered from the state and operated as part of the private
enterprise system. But before this can come we must master the money
concept.
FRUITLESS
SEARCH
Ten
years ago, after fruitless search for a money master, we read the
public statement of a well known monetary economist that there were
only "a few persons in the world who understand the meaning of
money." We asked who they were and received the names of 13
Americans and 5 Europeans. Of these international authorities we
succeeded in getting the consent of 6 Americans and 2 Europeans to
enter a symposium to be presented to Congress which was at that time
debating money theories. We submitted the result to the Senate
Committee on Banking and Currency and, on June 9, 1934, wrote a
covering letter to that body from which the following are the
concluding paragraphs:
"The
total of 176 answers to the 22 questions showed such contradictions,
inconsistencies and disagreements that we feel it a patriotic duty to
state that there appears to be no understanding of the subject of
money either among contributing authorities or among others whose
writings we have studied. No clear principles are established;
projected theories are not demonstrable; the basic concept for the
construction of a monetary science seems lacking.
"The
meaning of money is yet to be revealed, its mastery is yet to be
proven, the power of laws to direct or control it is yet to be
demonstrated, the medium to implement it is yet to be developed. The
people should no longer be misled by abracadabra and
psuedo-profundity. There must be a break with the past. New thought
must challenge the prevailing hypothesis."
The
same year there appeared a book by Montgomery Butchard, an English
author, entitled "Money" which the author describes as
"Selected Passages Presenting the Concepts of Money In The
English Tradition, 1640 to 1935." Approximately 200 named and
anonymous authorities are quoted. Reviewing them, the author
concludes with these words :
"What
does this book 'prove'? In any narrow or positive sense it proves, I
hope nothing. But if the passages illustrate anything it is the broad
and negative thesis that in the history of English writings on the
nature and function of money there has been from the earliest times
to the present no observable advance."
With
this conclusion we fully agree. The following year, the same author
turned from the orthodox authorities and examined the so called new
thought on money. His book is titled: "Tomorrows Money By Seven
of Today's Leading Monetary Heretics." They are, Silvio Gesell,
Arthur Kitson, Frederick Soddy, R. McNair Wilson, C. H. Douglas, G.
D. H. Cole and Jeffrey Mark. This is the author's concluding comment:
"The
seven theories agree, by direct assertion or by inference, that
measures of monetary reform will at least initiate the remedying of
our economic and social ills, and that these monetary measures should
include at least:
1.Public
(communal, national) control of money and monetary policy.
2.Public
control, direct or indirect, of prices."
Thus
the so-called heretics still wear the mantel of orthodoxy - because
the two measures stated are cardinal to all money theories heretofore
extant, and both are false. America too has many sincere would-be
money reformers, and some accused of heresy, but all, so far as we
know, accept the false premise that government must issue, control
and manage money and prices. Thus their efforts are innocently
devoted to various schemes to improve upon perversion. Government
should not issue or control money; and it is not the function of
money to control prices. Money is a neutral agent whose sole function
is facilitating exchange, and not influencing prices in any way. Our
English contemporary must look to America for heretics, and, we
believe, will find them only in the Valun school of thought.
Americans
think in the English tradition, which is no better and no worse than
any other, for they are all alike in fundamentals. There has been,
until now, no independent American approach to the problem of money.
By strange coincidence, in the very year that Americans declared
their political independence of England, an Englishman, Adam Smith,
put them under a mental subjection that still holds sway though it is
utterly inconsistent with our Declaration of Independence and our
political principles. The father of Political Economy states its
purposes in "The Wealth of Nations," thus:
"Considered
as a branch of the science of the statesman or legislator, Political
Economy proposes two distinct objects. First, to supply a plentiful
subsistence for the people, or more properly to enable them to
provide such a revenue or subsistance for themselves; secondly, to
supply the state or commonwealth with revenues sufficient for the
public services. It proposes to enrich both the people and the
sovereign."
Here
is written, and by our schools accepted, the bald paternalistic and
autocratic principle which we denounce in all our political
declarations and which must be renounced if man is to attain his true
dignity and freedom. Yet it dominates our practices more and more as
we flounder in our perplexities. We divide only on the degree of
paternalism and government management of our lives that such a
philosophy provides, not on the principle. By this theory the
government and the people are set up as separate entities; with the
government as a sovereign patron of the people. How can the
government (which, under the American political philosophy, is
nothing but a creature and dependent of the constituency) "supply
a plentiful subsistence for the people" or how, except by
leaving them alone and not burdening them with tires, can it: "enable
the people to provide such a revenue or subsistance for themselves"?
How can man be a dependent of the state? Does the citizen tax the
state? Is not the state merely a corporation created by man to render
services at a price and must not that price be paid by the citizen
to the state? And is not the ability to pay such price, for such
service, conditioned upon the citizen's free and untrammeled power to
carry on his production and exchange enterprises? If we fall under
the delusion that economic betterment can be gained by means of a
power inherent in the state, are we not unwittingly on the path to
communism and complete frustration? Is not the doctrine of Karl Marx
but a logical extension of the theory of Adam Smith? How can we
accept one and quarrel with the other? Once we accept the principle
of paternalism, how can we defend the principle of the sovereignty of
man?
From
these false theories that we have borrowed from the old world has
sprung the idea of managing the people by money and we have
accomplished nothing but perversion and gross miscarriage of our
wealth producing capacities, and nullification of the inventive
genius of our scientists that might have carried us much further had
we a money science capable
of distributing what they have shown we are able to produce. It
is the state that must be controlled by the citizen through his money power;
not the reverse. We have tried the impossible experiment of combining
in the state a political democracy with an economic autocracy; the
principles of Jefferson and the principles of Adam Smith. Political
democracy cannot work without economic democracy; and the money power
is the franchise of the latter.
If
America is to vindicate her leadership of political theory she must
also provide leadership of economic theory; and the two must be in
harmony. Such dual leadership means casting traditional economic
theories to the winds, just as was done with traditional political
theories.
POLITICAL
ECONOMY A FICTION
Political
economy is a fiction. Economy can have but one sphere, namely, in the
practice of the individual. Political economy implies that the state
can have a separate existance as a creative force, whereas, it is but
one of the instruments of the individual's economy. All wealth - all
economic planning - can spring only from the individual for his
private guidance; and in him resides both the political and economic
power. The ballot is his instrument of political power; money his
instrument of economic power and the former is futile without the
latter. He is a dupe, who believes that government can be both his
servant and his patron, i.e., that the state can develop an economy
to enrich him. He must govern government as he governs himself; and
he must provide for government as he provides for himself. Any power
existing outside himself is only that which has been delegated by
him, or has escaped from him; for he is the one and only power-house.
He cannot delegate his money power, if he would, because it is
inseparably linked to his buying wherein he must exert his private discretion.
To issue money, one must buy, to buy, one must appraise. Hence,
the money issuing power is undelegatable and unusurpable.
Assertions
such as these can be reconciled with the American political theory
of democracy; the old-world political and economic philosophy of
divine right and descending blessings, cannot thus be reconciled. We
are doomed to failure in our political experiment unless we declare our
monetary control of both the state and our private affairs and this can
be done only by the separation of money and state. Man's natural money
power cannot be vicariously exercised in his behalf; he must either
exert it or suffer the exertion of a money power adverse to his interests.
The only freedom we have retained against the encroachments of the
state is the freedom to struggle against perversity. If we use that
freedom intelligently we will overthrow the political money power and
attain money freedom, the guarantor of complete economic and
political mastery. It is utter folly for us to imagine that we have
freedom when the very life blood of our private enterprise is
controlled by government and our political power thus nullified.
Money,
like everything else, began in private enterprise. It must be an exclusive
instrument of private enterprise untouched by the state which is a
public enterprise outside the sphere of competition, securing its
income not by the necessity of winning patronage but by tax
impositions and therefore not qualified to exert money power. Had the
early businessmen realized this, money would not have become a
political instrument; and untold miseries, revolutions and wars would
have been averted. It is for us now to rescue it; and, to do so, we
must lay hold firmly with our minds on the theory before we put our
hands to the practice. That is the purpose of these studies.
As
we close this chapter on the past, let us bury the fetish of value in money.
The banker sneers at "fiat money;" the layman sneers at
"fountain pen money," thus betraying the universal
ignorance of money.
The
purpose of money is to obviate the transference of value one way in
exchange. It substitutes credit for value, but the credit is social
credit, i.e., it rests upon the common creditability of the trading
community. The money instrument, however, springs from the fiat of
the issuer, a fiat that asserts that the issuer is, under the money
pact, qualified to issue. The actual creation of money instruments
can take place only by fountain pen - using that term to include all
graphic processes. Thus all money that has ever existed or can exist
is fountain-pen-fiat money.
Any
valuable thing, such as metal in coins, is not money - it is
commodity, and to the extent of its value displaces money in the
coin. Money is a memorandum, a credit instrument, a bookkeeping
device to effect split barter and is money only to the extent that it
obviates delivery of value by the transmitter.
Since
all money is fountain-pen-fiat money, the only question we have to
decide is whether its issuance shall continue to be the special
privilege of a few or the right of all. By such decision we determine
the fate of humanity.
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