Civilization, or culture, is fundamentally commercial and only superficially political. Politics has been superimposed, and man has become politically disposed, because he has fallaciously believed that, as a money sponsor and issuer, the state is necessary to the commercial intercourse upon which his life depends. When he learns that he can have a monetary system without political authority and unconfined by political boundaries, he will cast off his political shackles and develop, through commerce, a civilization far higher than any attainable or dreamed under political dictates.
The Money Pact
IF MONEY is but an accounting instrument between buyers and sellers, and has no intrinsic value, why has there ever been a scarcity of it? The answer is that the producer of wealth has not been also the producer of money. He has made the mistake of leaving that to government monopoly.
If you wish to trade one thing for another thing, even Steven, you need only the consent of the other party, do you not? This shows that trading is essentially a private affair. Now if you wish to acquire something from another and give a receipt therefore, it is still solely up to you both, is it not? A receipt, of course, is not money, but we are getting warm. Keep thinking about yourself and the other fellow and don't bother about any outside power.
Suppose the other fellow says, "I'll accept your receipt if I can give it to someone else in exchange for something I need." What would you do? Take your time. It took our ancestors several centuries to figure that one out.
Our ancestors hit upon the scheme of depositing gold and silver and other valuable things with goldsmiths and silversmiths, who in their turn gave the depositors warehouse receipts, which they could sign over to someone else, who could assign it to another, and so on. Later they got to making the receipts out to bearer, and that obviated the need for signatures. Thus the receipts circulated without coming back to the warehouse. Most holders were not interested in the metal in the warehouse, but everyone wanted a medium of exchange. This was the birth of currency money.
Now the warehouseman had some inside dope. Said he to himself, "Since most of the receipts never come back, why can't I issue some without deposits?" He tried it, and, by golly, it worked. That was the beginning of "phony" money. The tradesmen were giving actual values in exchange for the receipts, and this kept them sound. But the warehouseman put them out with nothing back of them, and, thus, invented inflation.
That initial dishonesty was but the first of an unbroken chain of perfidies that have been perpetrated down to the present day in the record of money, both while money was a private affair and after it became a political monopoly. But this history of deception demonstrates that anything that people believe is money serves as money as long as it is believed. Thus were men intrigued out of barter into money exchange by illusions, and even today a monetary system need not be sound to cause it to be used.
After these side remarks, we come back to the unanswered question—what would you do if the other fellow wanted a receipt that he could pass along? Of course we want an honest solution this time, not a tricky one. You must write your receipt so that it will be acceptable to a third party whom you don't know and who wants to pass it to another, and so on. Obviously, you cannot write the receipt in terms of things, because the other fellows might not want those things. What's that? You say you'll have to talk it over with the other fellows? That's just what the valun plan proposes. The valun proposal is merely a plan for a convention wherein a sizable number of traders get together and agree among themselves how to write receipts for goods and services to be exchanged among them and then set up the machinery for bookkeeping and clearing those receipts. It merely means carrying out private agreements and understandings without bothering about politics or any power outside the traders themselves.
If, now, you are disposed to get together with other persons to build a personal enterprise monetary system, you may have concluded already that the basis of a true monetary issue is not a promise to pay, but a promise to accept. The purpose of money is to permit buying. therefore it can spring only from a buyer and, to be consummated, must be accepted by a seller. Obviously, there must be some agreement involved. The only pledge the buyer can make, and therefore the only one a monetary transaction can imply, is that the buyer will accept the money in exchange for his goods or services at the best price he is able to get when, as a seller, it is tendered to him. No price for such goods and services can be agreed upon, since the buyer does not know the condition of the market for his goods when he shall be called upon to sell, nor does he know who the buyer may be. The buyer merely pledges, when he issues money, that he will in turn accept it in exchange for his goods or services at the best price he can get when it is tendered to him. This common pact among all traders in a monetary system is the only pact underlying money. Nothing further is needed and nothing can be added.
Ignorance of Money
WRITING to Thomas Jefferson in 1787, John Adams said, "All the perplexities, confusion and distress in America arise from downright ignorance of the nature of coin, credit and circulation." Downright ignorance is the proper term, and it still abides with us. It applies to our academies, our counting houses, our legislatures, and the man in the street. We do not know what money is, what its virtues or vices spring from, what are the natural laws governing it, nor its influence in determining the trend of a people toward democracy or dictatorship.
Two forces are now pressing for its solution. One is the increasing specialization of labor, which requires man to make more exchanges in ratio as he reduces his self sufficiency. In other words, the more man reduces his part in the production of the whole product, the more exchanges are necessary and hence the greater use of money. The other force making the solution of the money problem imperative is the growth of dictatorship and the contraction of democracy in ratio as governments exert the money issuing power.
Herbert Spencer, writing in Social Statics, said:
“That laws interfering with currency cannot be enacted without the reversal of state duty, is obvious; for either to forbid the issue, or enforce the receipt of certain notes or coin in return for other things, is to infringe the right of exchange—is to prevent men making exchanges which they otherwise would have made, or is to oblige them to make exchanges which otherwise they would not have made.”
“So constantly have currency and government been associated, so universal has been the control exercised by the law givers over monetary systems, so completely have men come to regard this control as a matter of course, that scarcely anyone seems to inquire what would result if it were abolished. Perhaps in no case is the necessity of state superintendence so generally assumed, and in no case will the denial of that necessity cause such surprise.”
In Spencer's day, the specialization of labor and the need of free monetary exchanges had not been so highly developed as in our day. His challenge to government money power therefore passed unnoticed. But we must heed it now. Let us dare to question the propriety of government money power—and let us speculate on "what would result if it were abolished.”
Another Englishman, Arthur Kitson, writing in 1894 in A Scientific Solution of the Money Question, said:
“To the average man, a currency that has not the authority or stamp of government is inconceivable; and yet there is no good reason why communities should not create and control their own currency without the aid or intervention of governments, just as they incur debts or liabilities without such aid or intervention.”
Is it true that, in the language of Spencer, “to forbid the issue, or enforce the receipt of certain notes or coin is to infringe the right of exchange?” And is it further true that, in the words of Kitson, “there is no good reason why communities should not create and control their own currency?”
Freedom of exchange is now so imperative, and centralization of political power so threatening, that it behooves us to inquire whether our economic and political ills and the threat to peace are not due to misplacement of money power in the state—and whether and how that power might better be exercised by the people for progress, prosperity and peace.
The Right-Wing Socialists
THERE ARE three classes of socialists: the left-wing, or Marxist, group, who believe that the government should own and control everything; the middle-of-the-road socialists, who believe the government should own and operate public utilities; and the right-wing socialists, who believe that the government should control only the monetary system.
The right-wing socialists are by far the most dangerous, because they are not known as socialists and call themselves capitalists, individualists, private enterprisers, etc. They even believe themselves to be anti-socialist and profess full faith in private enterprise. They are not only numerically the largest group of socialists but are also individually the most influential. Among them are the leading industrialists and mercantilists and bankers and statesmen.
The right wing socialists believe that with production and distribution facilities in the ownership and operation of private interests, and with monetary facilities in the hands of government, we can have free enterprise. They might as well believe that if a man owns an automobile, he need not worry about who or what controls the gas.
Private enterprise means the right among men to come to voluntary agreement on the exchange of their goods and services. These agreements, some written, some oral, some implicit, some explicit, run into the millions, and upon their fidelity rests the entire social structure. In a money economy, all these contracts are expressed in terms of the monetary unit, which is itself based upon a contract—the basic contract which is the foundation of the entire pyramid of contracts.
What is the money contract that makes possible or impossible the faithful performance of every other contract? Ask any businessman, banker, lawyer, economist or statesman, and you will find that his idea is not only vague, but that it involves legislation. In other words, he believes that money is a political product.
In contrast with this universal belief, the truth is that the state is incompetent to legislate money and powerless to issue it. The substance of money is supplied entirely by private enterprise. The state's intervention in money is at best an impediment to private enterprise, and with the assertion of the issue power, it becomes the active agent of socialization. Thus those who believe in or accept political money power—and their number is legion—are the most dangerous, though innocent, socialists.
While the great mass of people have no ideology, those who think on the issue between private enterprise and socialism are virtually all socialists of the three classes named. This is a startling fact that we must recognize before the final battle lines are formed. The would-be friends of private enterprise must be made real friends, instead of innocent fellow travelers with those who would destroy our liberties.
Private enterprise, to survive, must control its three facilities, namely, the means of exchange, the means of production, and the means of distribution. To control the means of exchange, we must have separation of money and state.