THE MATERIAL EXISTENCE OP MONEY.
Economists tell us that the precious metals seem to be specially designed by nature as the material out of which to coin money. Thus Prof. Jevons says, "some of the metals seem to be marked out by nature as most fit of all substances for employment as money. Accordingly, we find that gold, silver, copper, lead and iron have been more or less extensively in circulation in all historical ages. In almost all respects gold is perfectly suited for coining." (“The Mechanism of Exchange,” Jevons) Nevertheless, he confesses that when used in a pure state they are too soft and rapidly wear away. "When quite pure, indeed, gold is as soft as tin." Hence alloys are formed, and these so-called "precious" metals, specially designed by nature for man's use as a medium of exchange, need adulterating to render them at all serviceable. In other words, nature seems to have made a bad job in her attempt to furnish mankind with a satisfactory medium of exchange, -else the “gold bugs,” Rothbard, the Austrians and the rest are idiots, fiends and liars, which we would prefer to accept as the truth! and man has had to bring his art to her assistance. But the combined forces of art and nature have failed to make a perfect metallic medium, for this alloy is not proof against the gradual disintegration and death of the coin. From the time a coin starts upon its journey its dissolution commences, and if it were not renewed from time to time it would ultimately disappear. If there be any purpose or design in nature regarding the precious metals, it would seem to point to their final destruction, in common with man. In other words, gold (and silver) from the hills, into the streams and into the oceans sooner or later gets back from whence it came.
Gold and silver are, therefore, no more ordained by nature to serve as money than a man's body is ordained to perpetual life. "Every year,” says the governor of the Bank of England, "a fresh class of sovereigns become too light. The class which one year passes with full weight, loses enough by wear and tear to draw the scales, next year, against it. During their currency, coins wear away, some more and others less. Name and substance, nominal weight and real weight, begin their process of separation. Coins of the same denomination become different in value because they are different in weight. The weight of gold, fixed upon as the standard of prices, deviates from the weight which serves as the circulating medium, and the latter thereby ceases any longer to be a real equivalent of the commodities whose prices it realizes. The history of coinage during the middle ages, and down into the 18th century, records the ever renewed confusion arising from this cause." (ibid, Jevons) So there, you have just read the truth of the matter from an insider's perspective. If you still think that nothing but gold and silver coins are real money, then you are either an idiot, someone who is just ignorant and needs an education, or an idealist; someone bent on FORCING water to run uphill. Either way, you happen to be WRONG and anyone publicising this same nonsense as an answer to current circumstances is certainly a fiend, not your friend. This blog's proposed Value Unit is designed to forever defeat both specie based money and “public” money and it does so by fusing the two and then abandoning them both.
The natural tendency of circulation to convert coins into the mere semblance of what they profess to be, and of the weight of metal they are officially supposed to contain, is recognized by modern legislation, which fixes the loss of weight sufficient to demonetize a gold coin, or to make it no longer legal tender. "It is the theory of the present English law," says Professor Jevons, "that every person weighs a sovereign tendered to him, and assures himself, before accepting it, that it does not weigh less than 122 & 5/10 grains. In former days, it was not uncommon for people to carry pocket scales for weighing guineas, and such scales may be seen in the old curiosity shops. But we know the practice has been entirely given up, and that even the largest receivers of coin, such as the banks and railway companies, and even the tax offices, post office, etc., do not pay the least regard to the law. Only the bank of England, its branches, and a few government offices, weigh gold coin in England. The result is that a large part of the gold coinage is now below the least current weight, and all persons of experience avoid paying old sovereigns into the Bank of England. Only ignorant and unlucky persons or else large banks and companies, which cannot otherwise get rid of light coin, suffer loss. The quantity of light gold coin withdrawn by the Bank, did not many years exceed half a million a year; during the last few it has varied from; £700,000 to ;£9SO,000. As the average amount of gold coined annually is four or five millions, and the coins melted or exported are for the most part new and of full weight, it follows necessarily that the currency is
becoming more and more deficient in weight." What think you in all your “gold-bugged” notions of “honest money” or “hard money” now? It was always our intention to slay both of dragons of money at once with our Value Unit proposal. Those dragons were 1) specie based money and 2) government or supra-national government issued money. They are both killed by fusing them into a means of exchanging them both for our own truly sound money, which I shall remind those foolish or idiotic enough still not to get it, that our proposed money is not a commodity or based on one.
Jevons also says: "In 1869 I ascertained, by a careful and extensive inquiry, that 31 1/2% of the sovereigns, and nearly one-half of the l10 Shilling pieces were then below the legal limit." (“Money the Mechanism of Exchange”)
Was there ever a more complete exposure of the failure of a thing to perform its functions, than gold is here shown to be? And yet the writer thinks he sees, in the supply of gold, an all-wise provision of nature for supplying man with a medium of exchange! This substance specially prepared by nature, and assisted by the art of man, bolstered by legislative enactments, supported by authority of the State, fails to carry out what it is decreed to do, and the disaster and loss caused by its failure is allowed to fall upon the "ignorant and unlucky." -to whom the “gold bugs,” “Austrians,” various so called “libertarians” and others prattle forth with promises to “preserve their wealth,” when they have an imprecise and useless definition of wealth to begin with!!! Well does John Stuart Mill write: "But though governments or nations can in some measure determine what institutions shall be established, they cannot arbitrarily determine how these institutions shall work." Apart, therefore, from the fluctuations in value of the metals themselves, gold and silver are physically unfitted to be used as money. We will add here that some of the loss in weight of these older gold coins was due to various “whizzing” practices whereby fragments of gold could be confiscated and recast as gold medallions or for jewellery, all the practices of dishonest goldsmiths, who were very often the same people who begin the equally dishonest fractional reserve banking on which all the money most people use today is based upon.
Macleod says: “But when we consider the purposes for which money is required, it is easily seen that no substance possesses so many advantages as a metal. The use of money being to preserve a record of services due its possessor for any future time, it is clear that money should not alter by time. All civilized nations, therefore, have adopted a metal as money; and of metals, gold, silver and copper have been chiefly preferred." (“Theory of Credit," Macleod) See what he's doing? You can't have it both ways, but people have and do all the time, which is why they can never expect their “idealisms” to work. Gold and silver are not what Rothbard and anyone else may say or think they are; they are chiefly commodities, they are not real money. Basing a money on any commodity turns that into a commodity subject to the whims and games of speculators. Riegel and Kitson and this blog have the only realistic solution; all figures relating to money are based on a transaction concerning precious metals and “public” money on a specific date, and all future instances of the exchange from these into our money are made with reference to that specific date. If the chief use of money is to preserve the record of services due to its possessor, nothing would appear so serviceable for this purpose as good parchment paper. Quite so! When properly engraved, the record would be, practically speaking, imperishable. One fact alone should, however, suffice to convince us of the unsuitability of using gold and silver for money, viz., their extreme cost.
Prof. Jevons has computed the cost to England involved by the use of gold, silver and bronze money. He says: "The cost of the currency is made up of four principal items: the loss of interest upon the capital invested in the money, the loss by the abrasion of the gold coin, the expenses of the mint, and lastly, the casual loss of coins. The last item is of wholly unknown amount." He estimates these items as follows:
Three and one-half per cent. on gold coin in circulation, bullion in Bank of England, silver and bronze coin, total - £131,125,000
\Loss of interest ... ... £4,262,000
Wear of coin ... ... £48,000
Mint estab. ... ... £42,000
Total ... ... ... £4,352,000
or, speaking in round numbers, about twenty-one million 1895 dollars annually. This, however, is only one part of the loss. If gold and silver were relegated to the arts, where they properly belong, the demand for them would immediately decline, and a vast amount of labour now employed uselessly, would be released to follow more productive channels. I have, however, shown in discussing the Gresham Law, that the cheapest substance (providing it is suitable and will perform satisfactorily the work) is the best substance for money uses, as for everything else. Riegel agreed, and so do we! It actually proves Gresham's Law: paper or swipe card representations of money; the cheaper money, DOES ALWAYS drive the more expensive money out of circulation! This is more proof that all the “sound money” or “hard money” advocates' “idealisms” are just more attempts to get water to run uphill; they are BOGUS!
In fact, the great fundamental law governing commerce and industry is, that the cheap drives out and supersedes the expensive. It is the same law as that by which men seek to satisfy their desires with the least expenditure of energy.
In the arts, we do not use silver when copper will answer our purpose as well, nor brass when iron is as serviceable. A sewing-machine, constructed of nickel and bronze, would not be any more useful than one of cast iron and steel; and this steel pen with which I write is quite as useful as one of gold. Now experience in this country has demonstrated that paper is the most serviceable of all substances for money purposes. It combines all the so-called advantages of a metal currency, and has none of its disadvantages. It is cheap, useful, durable, easily engraved, made cognizable and portable, can represent any denomination of value, is not subjected to loss by abrasion, is not subjected to commodity fluctuations, is readily and inexpensively replaced when lost, and finally is not liable to resolve itself into a commodity and leave the country when it is most needed, or at any other time. Of course by electronic means, money can and does leave the country or resolve itself into a commodity, but those factors are entirely due to WHO ISSUES IT rather than of what it is composed. What follows is CRUCIAL HISTORY concerning the Chinese invention of paper money and what happened. Notice that a commodity basis was used, and then fractional reserve practices were allowed, both of which led to disaster. Many FOOLS and IDIOTS out there continually prattle forth more ignorant bunk attempting to persuade good, honest, hard working, law abiding people that this history proves the fault to be in fiat creation of money apart from specie or some other commodities. Their arguments are BOGUS and their logic faulty because they insist on basing their ideas on money issued by THE WRONG PEOPLE. Riegel had this one right. Let's see if Kitson arrived at the same answer.
Of all the various substances used for money, none is so desirable or useful as paper. Its advantages are so great, that were it not for law-makers, it would soon be the only substance used. Paper money is not a recent discovery. Like many other things, we are indebted to the Chinese for this most useful invention. "In the beginning of the reign of Hiantsong, of the dynasty of Thang, about the year 807 AD, there was a great scarcity in the country," writes Macleod.
The emperor ordered all the merchants and rich persons to bring all their money into the public treasury, and in exchange gave them notes, called “fey-thsian,” or 'flying money.' In three years, however, this money was suppressed in the capital and was only current in the provinces.
In 960 AD, Thai-tsu, the founder of the Soung dynasty, renewed this practice. Merchants were allowed to deposit their cash in the public treasuries, and received in return notes, "pianth-sian" or current money. The convenience of this was so great that the custom quickly spread, and in 997 AD, there was paper in circulation to the amount of 1,700,000 ounces of silver, and in the year 1021 AD, it had increased to 2,830,000 ounces. At this period a company of sixteen of the richest merchants were permitted to issue notes, payable in three years. But at the end of that term the company was bankrupt, which gave rise to much public distress and litigation. The emperor abolished the notes of the company and forbade any more joint stock banks to be formed. Henceforth the power of issuing notes was kept in the hands of the government. These notes were also called kiao-tsu and were of the value of an ounce of silver.
In 1032 there were kiao-tsu to the value of 1,256,340 in circulation. Subsequently banks of this nature were set up in each province, and the notes issued by one provincial bank had no currency in any other. These were the first bank notes on record, that is to say, notes issued in exchange for money, or convertible into money, and not paper money created without any previous deposit of specie. Besides these bank-notes, the Chinese manufactured paper money to a vast extent." (Ibid, Macleod)
The vast importance paper money has been to the world, it would be impossible to over-estimate. As Macleod says: "Paper money has had incomparably more influence in the world than all the gold and silver. Credit and paper now form the great circulating medium or currency of the world, and amounts to at least fifty times the quantity of specie in this country." In the United States, in 1895 at least 98 per cent of the entire business and commercial transactions of the country is done upon a credit and paper basis, without the intervention of specie. Experience, therefore, unites with the great law of philosophy known as the "survival of the fittest," in declaring cheap money to be the best money. The nearer it approaches the ideal, the more perfectly will money perform its function. We'll pardon Kitson for his misuse of the word “ideal” as he clearly did not apprehend that “wealth” could not be mere “stuff.” He still gets it: money is the cheapest way of accounting for a split barter transaction and need not be represented any better than by a piece of paper.
"So long as nations continue in a low state of civilization, all the money or credit is made of some material substance. But when they advance in civilization, they make use of credit in another form." (“Social Statics,” Spencer)
So by this time, we see or should see very clearly that gold and silver are really “barbarous relics” and that true “cash” in the form of virtually anonymous accounting for spit barter transactions using paper is the instance of civilisation. This blog's V-Check proposal based on the Value Unit as an international standard, impervious to speculation or watering down through spurious government spending, is the basis for real “sound” money.