3)
RELATIVITY OF VALUES – 1936
If,
as stated, money is the mathematics of value, what is value? Value is
the relativity of desire. It is arrived at in the mind by comparing
one thing with another. Therefore, everything establishes its value
in terms of something else or the same thing at a different time or
place. A standard of value, in the sense of a fixed, commodity value,
is impossible, since nothing is unchangeable in its desirability or
relativity. This is not to say, however, that value has no unit.
Value has a unit, even though it is not determinable. The smallest
value, whatever it may be at any time, is the unit of value, or the
numeral one.
Value
is a common quality that runs through all commodities, but under the
operation of the law of supply and demand, the content of value in
each is constantly subject to change. The total, however, i.e. the
sum of all the values in the universe of values, is changeless. The
total of all values is no greater today, nor will it be greater
tomorrow, than when mental appreciation or evaluation began. Whatever
comes into life merely takes its proportionate part of the whole of
value. Values vary quantitatively as fractions of the unchanging
whole of value.
What
actually takes place in trading is the determination of relatives of
values, and this mental process is the act of moneyizing. It is a
process of fractionizing or multiplying, depending upon whether the
thing evaluated or compared is of greater or lesser desire than is
the criterion of value. It is a mathematical process, and hence the
statement that money is the mathematics of value.
As
the act of moneyizing is psychological, so the act of monetizing is
material, and it should be noted that both arise out of and do not
antecede exchange. Hence trade produces money; money cannot produce
or induce trade. The act of monetizing, i.e. creating the money
manifest, is in essence nothing but an act of recording accountancy.
Now,
taking arbitrary relatives, let us say that the tailor with a pair of
trousers, undertaking to dicker with the wheat farmer, estimates his
commodity to be worth five bushels of wheat, and that the farmer
concurs in this. The tailor's unit of value is trousers, and to him a
bushel of wheat is 1/5 of a unit. The wheat farmer's unit is a bushel
of wheat, and he regards the trousers as five units. From this it may
be seen that whether the unit is large and divisible or small and
multipliable is immaterial; the relativity alone is essential in the
act of moneyizing. The next day, the ratio, under the influence of
supply and demand, might be 4.5 or 5.5 to 1. This constant flux
occurs within the totality of value.
The
totality of value is fixed, but values (fractions) are volatile. They
are uncapturable and uncontrollable, because they are subject to the
mass mind, which has no stability and no governor. They cannot be
shut off from the ceaseless agitation of public opinion. The same sum
of value may abide in a cubic centimeter of matter as in a cubic
yard, and tomorrow the substances of these cubes may hold widely
varying value content. No commodity has a wall that can resist the
ingress or egress of value. It is psychological; the minds of traders
in concurrence govern the value content of all commodities. No
physical measure nor psychological meter or control can be contrived.
Commodities are the reservoirs of value, because value can abide
nowhere else. But no one commodity can ever hold a fixed amount of
value, and only the minds of traders can invest a commodity with
value or divest it thereof. The total of value invests the total of
commodities in constantly changing relativity. The concept of
mathematical relativity of values is the concept of money.
Let
us assume now that some marketers incline to take the sheep as the
most desirable common commodity for a trading base or criterion.
(Among the Romans it was the ox, or pecu, from which word pecuniary
derives.) If we make the sheep 1, and adopt some arbitrary relatives,
we might get under the decimal system the following:
Barrow
of sand .10
Chicken
.10
Horse
5.00
Bushel
of corn .10
Cow
3.00
Sheep
1.00
Bushel
of wheat .20
Harness
2.00
Shoes
.50
Candle
.01
Hog
1.00
Trousers
1.00
Thus
the composite would total 14.01. At the particular time of this
imagined meeting of traders' minds, the sheep, serving as the
comparative criterion, or the numeral 1, represents about 1/14th of
this universe of value. But almost during the time it takes to relate
it, a change has taken place. Men's minds have changed; hence the
relative value of the sheep has changed. Either more of value
inhabits it, or some has escaped from it. But a compensatory
deficiency or surplus abides elsewhere in the total inventory.
Nothing has been lost, nothing has been gained, except to the
individual traders as owners of the commodities whose values have
risen or fallen. In other words, the sum total of value is
unchanging, and hence money, which is the mathematics thereof, is
always co-extensive, never deficient and never excessive. As stated,
the total of value in the example is 14.01. Had the candle been taken
as the unit, the total of value would have been the same, but the
total of the mathematics of value -money- would have been 14.01.
It
is conceivable that the marketers, after gaining the concept of money
as outlined here, might effect their exchanges without the scratch of
a pen or a record of any kind. Their exchange would nevertheless be a
perfect monetary exchange. Had they agreed to utilize some pieces of
paper marked in a peculiar way for identification, and each trader
had held, in advance of the trade, numbers of these pieces in ratio
to the agreed value of their respective commodities, they would have
materialized or monetized their money.
It
is in taking the step from moneyizing to monetizing that every past
effort of man has failed. He has invariably striven to perfect a
standard of value, because he could not comprehend that exchange
operates under the law of relativity, which knows no absolute. His
monetary efforts have always miscarried, because he has tried to use
as the monetary medium some intrinsically valuable commodity or a
paper certification of a fixed measure of value. Since there is no
fixed measure or standard of value identifiable with any commodity,
the effort has been and must continue to be abortive.
Since
value exists in all things, and since value when mathematically
compared is money, it is possible to convey money with gold or cheese
or anything else, to the extent of their intrinsic value. The
purpose, however, of a monetary medium is to isolate value
accountancy from value itself, so that a sum of value may find its
equivalent anywhere and not be related to specific things; all of
which are constantly changing in their value content. That
orientation is the quality wherewith money accomplishes its high
purpose of emancipating trade from barter. Man's ignorance has to
this day kept this spiritual weapon of liberation sheathed in a
scabbard of materiality. The pure monetary medium, when it comes,
will be an instrument intrinsically valueless, evidencing the
transference of a value that is unidentified with any commodity, yet
has a relative requisitionary power upon all.
4)
THE FUTURE OF GOLD - 1944
As
a monetary metal, gold for centuries has been the object of illusion
and superstition. Yet in reality it is but a commodity like any other
metal - nor is it one of the rarest. From the beginnings of time, it
has been carried, like salt, by many streams to the oceans, from
which it could be extracted if the price of gold justified it. Yet
the very word is synonymous with riches.
Why?
In
ancient times gold was used as a medium of exchange, for which its
beauty, durability, malleability and relative scarcity ideally suited
it. Hence its association with early monetary systems, all of which
were on a "hard money" basis. As commerce grew more
expansive and complex, and there arose the necessity of paper money
and other credit instruments, it was believed that such instruments,
to be acceptable in trade, had to be exchangeable for gold upon
demand. Thus arose the correlative belief that a national currency,
to have significance or "value" or "stability,"
had also to be identified with a measure of gold or silver. This
practice was termed putting money on a gold or silver “standard.”
This
posed a problem, however, for there is no stability in the value of
gold any more than there is in any other metal. In order to give the
value of gold the appearance of constancy, therefore, the price of
gold, i.e. the amount of the metal exchangeable for the monetary
unit, had to be stated above its true market value so that it could
not vary. For many centuries, accordingly, one or more governments
have always been willing to bear the expense of maintaining the price
of gold above its true value as determined in free exchange, and thus
gold has been given the appearance of having a constant value. This
has given rise to the superstition that gold is not only stable in
value, but that it is, in fact, a criterion of value.
The
practice of setting a price for gold that is above its free market
value set in motion economic laws, which have actually reduced the
value of gold. When an artificially high price is put upon a
commodity, it causes that commodity to be over produced, and when a
commodity is in excessive supply, its units lose value
commensurately. The association of gold with the monetary unit, an
association intended to benefit the latter, has resulted in a benefit
to gold miners, nothing more. The delusion of "gold
convertibility" has, in effect, subsidized the gold mining
industry for centuries and caused gross overproduction. The actual
value of gold has declined accordingly, but the decline has not been
manifest because some nation has always been willing to keep the
price up on a peg. In short, we know the price of gold, but we can
only guess at its value.
England
maintained the price of gold for 600 years, from the 13th century
until 1931, in which year she had to give it up, unable to afford the
charade any longer. The United States then became the price pegger,
but with a twist. Previously, nations on a gold standard had bought
and sold gold to all comers at the fixed price. President Roosevelt
was induced by his advisors, however, to exclude those within the
United States from trading, and to confine buying and selling
privileges to foreigners. American citizens were required to turn in
their gold coins and certificates. In thus changing the rules,
Roosevelt unwittingly exploded the gold standard fallacy.
Had
the gold standard theory been correct, namely, that backing a
monetary unit with gold convertibility gives it greater stability or
acceptance than units not so backed, we would now have two dollar
price levels, one for the foreigner and another for the American.
This would have had to arise, since the foreigner's dollar is
convertible whereas the American's is not. The fact that there is one
dollar price for both demonstrates that the dollar is a power in and
of itself, quite apart from any gold convertibility.
A
corresponding observation is that as the dollar goes, so goes gold,
and not vice versa, as the gold theorists would have had us believe.
When the purchasing power of the dollar is high, that of gold is
high, and when the power of the dollar declines, that of gold also
declines. The purchasing power of gold, like that of the dollar,
declined by nearly a third between January of 1940 and September of
1943. An ounce of gold, at $35, would have been required on the
latter date to purchase the same amount of other commodities that
could have been purchased for $24.50 three and a half years earlier.
This in itself proves that there is no stability in the value of gold
and that it has no power to uphold the unit that supports it.
In
view of the fact that the purchasing power of gold is declining in
America, why is it that foreigners are not withdrawing it? The reason
is simple: the United States Treasury is the only market in the world
for gold, and its price, despite the cheaper dollar, is still higher
than its free market value. Outside of the United States there is not
now, nor is there likely to be, any nation foolish enough or strong
enough to burden itself by gratuitously paying a subsidy to the gold
mining industry of the world. Nor will the United States pursue this
folly for very much longer.
Circumstances
are now compelling the realization that gold has no magic charm, no
peculiar quality, no fixed value, and no special stability, but it is
a commodity subject to the same laws of supply and demand that
determine the value of any other commodity. Its last artificial
support is the dollar, and when the dollar grows too weak from
inflation to hold the price of gold above its actual value, gold will
be on its own. The dollar will be so reduced in purchasing power that
$35 per ounce will actually be a low price for gold, and its price
will rise above that figure. From that point and beyond, unless the
Government arbitrarily holds it for some reason, gold will move out
of the Treasury and into the arts and industries. No more will flow
into the Treasury, because there will be no profit to the seller at
the old price. Indeed, if the Government continues its present policy
of selling to foreigners at $35 an ounce in the face of continuing
inflation, gold will flow out to other countries, who will buy it
back for a minute fraction of what they sold it to the United States
Treasury for in pre-war days. The gold problem will be solved by
either action or inaction; for, economic laws have away of
compensating for bad statutory laws. In any event, the standard or
base idea will be gone beyond recall in economic thought.
Of
course, there will be some serious repercussions from the collapse of
dollar support for gold. Foreign gold reserves held throughout the
world are dollar reserves, nothing more and nothing less. As the
dollar shrinks, these reserves shrink as well. Therefore, the
inflation of the dollar is undermining gold reserves and the credit
they support all over the world. The nation with the premier unit
that makes the price and market for gold cannot go through inflation
without affecting all nations. That is why our inflation is
international inflation, the first such instance in the world's long
experience with inflation.
The
Federal Reserve Board and the Bank of International Settlements have
estimated monetary gold reserves outside of the Unites States at $7
billion, and the Bank of International Settlements estimates $2.5
billion in unrecorded holdings of exchange funds and government
accounts outside of the United States. The National City Bank
estimates $2 billion of newly mined gold. Thus a total of $11.5
billion is estimated as the world holdings outside of the United
States. If the dollar has lost 30 per cent, therefore (there is no
definite index in view of the black markets), these hoards have
already shrunk to about $8 billion in actual purchasing power. For
the Unites States to make its own hoard maintain its Federal Reserve
Bank reserve illusion, the price will have to be raised to many times
its present artificial price.
Some
indication of the extent to which gold has been excluded from
industrial uses by the pegged price policy can be seen from the
figures for production and industrial consumption in the United
States during the period 1937 to 1941. In the latter year,
consumption was only about 15 per cent of production, and this was
far above average for the period. These figures only reflect United
States production and consumption. When we consider that the United
States produces only about one-eighth of the world's gold, but
undoubtedly uses more for industrial purposes than the rest of the
world combined, we can see how greatly current production exceeds
current industrial demand.
The
picture is all the more startling if we consider the tremendous
accumulation that exists. The best available figures show that
throughout the world, in government treasuries, stabilization funds,
central bank reserves, and private hoards, there are nearly a billion
ounces, all of which must, sooner or later, be dumped on the
industrial market. On the basis of approximately one million ounces
for industrial consumption in the United States in 1941, and assuming
double this amount for world consumption, it would take five hundred
years to consume the existing supply. Of course, this is no criterion
for the probable rate of consumption when price support ends. There
are many known uses for gold for which the price has always been
prohibitive, and changing technology will continue to find new uses.
5)
MANARCHY – 1950
In
giving fundamental consideration to government, it might be
instructive to have an authoritative opinion regarding the modern
state, written while its author was on the outside looking in, and
who when on the inside, magnified the intrusions upon private rights
that he had condemned:
“The
state, with its monstrous terrific machine, gives us a feeling of
suffocation. The state was endurable for the individual as long as it
was content to be a soldier and policeman; today the state is
everything - banker, usurer, gambling den proprietor, ship owner,
procurer, insurance agent, postman, railroader, entrepreneur,
teacher, professor, tobacco merchant and countless other things, in
addition to its former functions of policeman, judge, jailer, and tax
collector. The state, this Moloch of frightful countenance, receives
everything, does everything, knows everything, ruins everything.
Every state function is a misfortune. State art is a misfortune,
state ownership of shipping, state victualizing - the litany could
extend indefinitely. ...If men had but a faint idea of the abyss
toward which they are moving the number of suicides would increase,
for we are approaching complete destruction of personality. The state
is that frightful machine which swallows living men and spews them
out again as dead ciphers. Human life has now no secrets, no
intimacy, neither material affairs nor spiritual; all corners are
smelled into, all movements measured; everyone is locked into his
cell and numbered, just as in prison.” -Benito Mussolini
Il
Duce's candid appraisal has been shared through the centuries by many
who have thought and written on the state. In a more reflective and
perhaps more honest vein, Immanuel Kant wrote,
Man
is an animal which when living among others of its kind, needs a
master. For he surely abuses his freedom in the presence of his
equals, and though as a reasonable being he desires a law, his
beastly selfish nature leads him to exempt himself whenever he can.
Hence he needs a master who will break his individual will and compel
him to obey a generally accepted rule whereby everyone can be free.
Likewise,
Jean Jacques Rousseau:
“The
citizen of the state is…….no longer the judge concerning the
danger to which he may expose himself at the demand of the law, and
when the state says to him, "Thy death is necessary for the
state," he must die, since it is only upon this condition that
he has thus far lived in security, and his life is no longer merely a
gift of nature, but is a conditional grant from the state.”
On
the other hand, Henry David Thoreau denied the state any rightful
authority:
“I
heartily accept the motto-"That government is best which governs
least," and I should like to see it acted up to more rapidly and
systematically. Carried out, it finally amounts to this, which also I
believe: That government is best which governs not at all.”
And
Proudhon:
“Liberty
the mother, not the daughter, of order. ...The personality is for me
the criterion of the social order. The freer, the more independent,
the more enterprising the personality is in society, the better for
society.”
But
Proudhon broke free from the horns of the tyranny/anarchy dilemma. He
glimpsed an alternative.
“So
you want to abolish government,” someone asked Proudhon. “You
want no constitution? Who will maintain law and order in society?
What would you put in place of the state? In place of the police? In
place of the great political powers?”
"Nothing,"
he answered. "Society is eternal motion; it does not have to be
wound up, and it is not necessary to beat time for it. It carries its
own pendulum and its ever wound-up spring within it. An organized
society needs laws as little as legislators. Laws are to society what
cobwebs are to a bee hive; they only serve to catch the bees."
Those
who have pondered the past, present, and future of the state, have
quite generally distinguished between society and the state, but they
have associated government with the latter, hence implying that
society would be anarchic but for government supplied by the state.
The
view advocated here, however, is that society and self-government are
inseparable. One could not exist without the other. They are natural
and spontaneous. Social government operates by unwritten laws which
spring from the common impulse of self advancement by the process of
exchanging with others under the discipline of cooperative
competition. The rivalry to win patronage and gratify men's desires,
which we call competition, is really the broadest and deepest form of
cooperation that social man can develop. But for the intervention of
the state, it would always be tranquil. The state serves solely the
purpose of evading the law of cooperative competition. Its appeal is
always to the cheater, he who desires to escape this natural
discipline.
Failure
of the critics of the state to realize that society and government
are concomitants, puts them in the awkward position of advocating
anarchy to the same degree as they oppose the sway of the state. The
diminution of state power does not mean less government, however, but
its displacement by natural and nonpolitical government. It does not
imply an increase in the sphere of anarchy. Rather, to coin a
much-needed word, it means manarchy - the natural government of man
in society.
Manarchy
means the prevalence of social customs wherein equality among
individuals makes each a lawgiver as well as a law observer, without
professional governors. The natural rule of manarchy has been
submerged by the presumptions of the state, and as state power
recedes, manarchy, the rock upon which society rests, emerges as the
true government.
Since
manarchy is the true government of society, and the intrusion of the
state lessons its sway, the so-called government of the state is seen
as disgovernment, or anti-government. Thus advocacy of the diminution
of state power is the advocacy of the sway of government and the
denunciation of anti-government.
What
is the constitutional or fundamental law of society? It is the law of
competitive cooperation. The beginning of the social order was the
beginning of exchanges. Here independence ended and interdependence
began. Here competitive cooperation entered as man discovered that
his urge for self-advancement was best served by catering to the
wants and wishes of his fellows through voluntary exchanges. But
there arose would-be breakers of the rule of competitive cooperation.
As Franz Oppenheimer has observed in his volume, The State,
“Whenever
the opportunity offers, and man possesses the power, he prefers
political to economic means for preservation of his life. And this is
perhaps true not alone of man, for, according to Maeterlinck's Life
of the Bees, a swarm which once made the experiment of obtaining
honey from a foreign hive, by robbery instead of by tedious building,
is hence-forth spoiled for the "economic means." From
working bees robber bees have developed.”
The
state was invented by those who wished to escape the law of
competitive cooperation-by those who would be robbers through the
exercise of political power. This is the explanation for the genesis
of the state which Oppenheimer sets forth so well. Beginning with
rape and evolving toward seduction, the purpose of the state has ever
been to serve the ends of exploiters. Therefore, liberty will never
be attained as long as the state is permitted to intervene in
economic affairs. The state has ever been the implement of those who
would escape the discipline of voluntary exchanges, and it has
contrived a variety of cheating devices, the greatest and most
deceptive of which is its power to issue counterfeit money. This very
device, however, will prove to be the state's Armageddon.
Always
an instrument for robbery of the many by the few, the state within
the present century has gradually popularized its distribution of the
loot. It is no longer the robber of the many for the benefit of the
few; it now offers to provide for all citizens "from the womb to
the tomb." It poses as the welfare state. No longer does it need
the support of the wealthy; it has found a way to rob the whole
constituency while apparently benefiting the many, and by this
delusive method it has greatly enhanced its prestige.
By
subtly taxing the economy through inflation of the money supply while
ostentatiously distributing its largess, the state has convinced the
citizen that it is a fountain of wealth. But the popularity so
achieved has been attained through the issuance of spurious money.
Hence the state must be undermined as the mounting inflation
discloses the falsity of its pretended power of paternalism.
Out
of the impending collapse of the political monetary system will come
not only a weakening of the power of the state, but a strengthening
of society. For the nonpolitical monetary system which must replace
the defunct political one will lead automatically to the union of
peoples economically.
Once
society has consolidated its power, while the national states remain
divided, the subordination of political power will easily be
accomplished. Thus will society gain the ascendancy and assure
freedom and prosperity under the natural law of competitive
cooperation.
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