ON THE ISSUANCE OF MONEY.
"So constantly have currency and government been associated," says Herbert Spencer," so universal has been the control exercised by 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 were it 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 so much surprise." Be it a surprise or not, we do deny this as both needful or virtuous. In fact it would be better for states and peoples if they did not.
"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." (Ibid, Spencer) He's stating here another inalienable right that belongs within the rest of the original Bill of Rights or a revised Magna Carta or to be included among the Rights of Man.
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. This was Riegel's precise contention.
In the chapter on Credit, I showed first that the large proportion of the business of all commercial nations was done upon a credit basis; and second, that circulating credits constituted money in the strict scientific sense, and that whilst a large amount of personal credit was stationary, still a considerable proportion did circulate, and so performed all the functions of money. It therefore follows, that in spite of legislative acts, and in spite of the assertions of certain writers, that “law, and law alone, creates money," ("Labour and Capital," Kellogg) the greatest volume of money is now created by the people themselves, without the aid or knowledge of governments. In fact, were it not for the power that individuals have of creating credit, the volume of the world's commercial transactions would be reduced to a mere fraction of what it now is. Whilst, therefore, as a matter of fact, the commercial world does create the greater portion of the world's currency, in the form of bills of exchange, drafts credit notes, etc., the effect of the legal tender act and governmental interference, is to force people to build credit upon an unstable, insecure basis. The entire volume of commercial currency is built upon that of the government, so far as domestic exchanges are concerned, and is liable at any time to be overturned by the manipulations of those in control of the government currency. The abolition of the specie basis would not abolish the evils of our pernicious monetary system so long as the law makes a certain monopolized or restricted instrument a legal tender for the payment of debts.. Etc. and one begins to wonder whether Kitson wasn't one of Riegel's inspirations. All Riegel intended was that his Value Unit, was to be a more stable form of money not susceptible to speculation, since not itself a commodity, would become more widely known and hence used in parallel with other money until, to borrow Gresham's Law, it drove out the less good money or until the inevitable crash brought on either by usurers or speculators or both working in concert. Notice to “gold bugs” that to Kitson, Riegel and to us, a “gold backing” makes no difference. It is and was always a red herring to ensnare the gullible and it has and will always do a good job of doing so, which is why our proposal uses gold (and silver) as it does.
The idea that governments must necessarily control the currency, arises partly from a misconception of their powers and functions, and partly from the erroneous but prevalent idea that governments are more trustworthy than their subjects. History at all times easily proves this NOT to be the case, yet perhaps one of the most ancient superstitions persists.
The function of paternalism ascribed to governments, which nationalism and socialism seek to carry to its logical issue, is that which the advocates of governmental currency invoke in support of their contention. Such an attribute is, however, utterly at variance with the ideas of individual freedom and the natural growth of society. It isn't scientific, it is part of all that which seeks to make water run uphill; it is against natural law. Nationalism and socialism would enforce an artificial, hot-house form of development, in place of allowing a natural growth by the removal of artificial restrictions. Experience shows that the morals of governments are never superior to the morality of the majority of their subjects. Nay, they are often far inferior. The crimes committed by rulers, legislators and governments far exceed in number, cruelty and extent, those committed by individuals. How anyone who is familiar with the history of the coinage and currency of Europe, or acquainted with the financial history of the United States during the past fifty years, can imagine that the control of currency is safer in the hands of the governments of those countries than in the hands of the people, is astounding. Yet this cultish superstition prevails, until it doesn't. Kitson here singles out both nationalism and socialism as no better than any previous bases for states. It is one thing to react emotionally to these clear attacks on their premises, but the fact remains that anyone from anywhere using basic common sense will vote against a local regime with their feet if they perceive a better opportunity for advancement elsewhere. Such aspirations are extensions of natural law – water will always seek its own level by moving downhill.
The pages of history teem with the record of financial crimes and conspiracies of rulers and legislators against the people, who have at all times been the subjects of plunder. "In every country in the world, I believe," says Adam Smith, "the average injustice of princes and foreign states, abusing the confidence of their subjects, have by degrees diminished the real quantity of metal which had been originally contained in their coins.” "The Roman coin, in the latter ages of the republic, was reduced to the twenty-fourth part of their original value, and instead of weighing a pound, came to weigh only half an ounce. The English pound and penny contain about a third only, the Scotch pound and penny about a thirty-sixth, and the French pound and penny about a fifty-sixth part of their original values. By means of those operations, the princes and sovereign states which performed them were enabled, in appearance, to pay their debts and fulfil their engagements with a smaller quantity of silver than would otherwise have been required. It was indeed in appearance only, for their creditors were really defrauded of a part of what was due them. All other debtors in the state were allowed the same privilege, and might pay with the same nominal sum of the new and debased coin whatever they had borrowed in the old." (Ibid, Smith) A specie basis would have everyone use scales in their shops since everyone would be whizzing their coins down and stealing purchasing power, starting with the states, who produce nothing anyone would really ever want to buy.
Speaking of the debasement of English coinage, Macleod says: "The pound weight (silver) was divided into 240 coins, called pence or denarii, twelve of these pence were called a shilling or solidus, and, therefore, twenty shillings or solidi actually weighed a pound of silver bullion. … The sovereigns of these various countries were frequently in want of money to pursue their various extravagances. As they could not increase the quantity of the metal, they adopted the fraudulent plan of surreptitiously cutting the pound weight of bullion into a greater number of pieces, but they still called them by the same name. They still do this, except they are called dollars, euros, pounds, yen, etc. They don't need metal to do it and having metal would not make it any less easy for them to cheat the public of purchasing power, so “gold bugs” are again rebuked for their idiocy on this subject. As they could not increase the quantity of the metal, they at various periods falsified the certificate, while they called the coins by the same name. Thus the quantity of bullion in each penny was diminished. . . Edward the First began this bad practice in 1300, and coined 243 pennies out of the pound weight of metal; in 1344 Edward Third coined 266 pennies out of one pound; in 1412 Henry coined the pound into 360 pennies, and so it crept up until Elizabeth in 1601 coined the pound weight into 744 pennies. Instead of 240 pence, 20 shillings 1 pound, £1, we have 744 pence, 62 shillings, 1 pound, £3 2s." Thus the process was well under way in centuries past, in fact even with a so called precious metals standard, price inflation in Europe was still 100% during the 16th century alone, much of that due to the importation of gold from the Americas during that period.
In Scotland this depreciation of the coinage was carried to a much greater extent, whilst in France and Italy the depreciation proceeded twice as far as in Scotland. The abuse of the money monopoly has not been confined to kings or monarchical forms of government. We have many instances in the history of the United States, before and since the war -Lincoln's War: the Civil War-, where the governments of both the states and the nation dealt fraudulently and falsely with the currency and the people. Under the protection of special laws, banks were chartered with authority to issue currency, and after certain years of more or less successful operation, were taxed out of existence by the very powers that gave them their rights; such as the free banks of Ohio, which were organized under the act of 1851, and were gradually driven out of existence by excessive taxation. (“Money and its Laws,” H. V. Poor) There are some out there that actually believe that if a government does something which for any of its people to do would be a crime, it is not a crime. Such people believe in “special privileges” in “national security,” etc. even though a crime is still a crime no matter who or which organization commits it.
Instance also numerous state banks throughout the country, which under the10% Federal tax were likewise driven out of existence. The repudiation laws of Mississippi and Virginia evidence the rascals of which republican forms of government are capable of perpetrating, in common with princes and sovereigns. In what is known as the "exception clause," currency, issued during the war, we have an example of a government forcing upon its citizens money which it had itself dishonoured; whilst in the history of the republican legislation that brought about the demonetization of silver, and the contraction of the currency since the war, we have a record of as grave conspiracies against the welfare and happiness of the American people, as that of the Stuarts against the people of England, to whose crimes the Bank of England owes its origin. Indeed!
All that is urged against the expediency of allowing individuals and private institutions to issue money, may be urged with equal force against governments. History fails to prove governments to be any the less liable to dishonesty than individuals. Apart from the untrustworthiness of rulers, a still stronger reason for not permitting them to monopolize the issuance of money is, that the peculiar nature of money necessitates that it be entirely free from monopoly and monopolistic influences. A constricted currency means restricted commerce, restricted commerce means restricted production, and restricted production means poverty, misery, disease and death. Yes, but isn't he forgetting about ecology? Isn't he forgetting that production isn't the issue? Doesn't he accept the preservation of some “balance of nature” as an important state matter? Doesn't he accept man made global warming? Isn't he forgetting that the purpose of modern political economy is to the question whether there are always too many people? Isn't the present moral climate about making people feel guilty for their very existence? Especially if they are poor? People have such short memories and do not know that these ideas have been afloat for hundreds of years among the elites who have always had but one thing in mind; to stay in power.
The mere existence of a single body with power to control the mechanism of exchange, is in itself a menace to commerce. To control the mechanism of exchange is to control the entire business, trade and industry of a country; and it is impossible that the people can feel as safe and secure in their commercial dealings, knowing that one man or small body of men have the power to precipitate a panic by the mere exercise of their authority, as where this power does not exist. A nation whose currency is controlled by its legislators, is like a town built in the vicinity of a volcano. Its inhabitants never know at what period they may be enveloped in ruin.
An unanswerable objection to the governmental control of money is however found, when considering the function of money as a common denominator of values. When treating this subject in the chapters on Price and Credit, I showed the necessity of having money free from fluctuation, and basing it upon an invariable unit of purchasing power. The evils of a specie basis were demonstrated by showing the way in which the common denominator of values was subjected to the manipulators of specie. Stupid, yes STUPID, “gold bugs” never get this. They assume that a chunk of metal in their hands is any different from a piece of paper that came out of some government printing office, even though both are commodities whose day to day purchasing power is dictated by speculators in far away cities. All commodity money is essentially of the same character; it is touted to be of limited supply, that's supposed to make it more valuable, then it is sold as an “investment” which gives people the illusion that they will be retaining its exchange value for things they really need like food, water, clothing, shelter, etc. The suit of clothes for an ounce of gold illustration is continually trotted out, but is that even reasonable since we have no way of really knowing for sure what an ounce of gold might have procured in ancient times. And bitcoin, an internet commodity created especially for speculators, is just another of the same species. And NONE OF IT is or ever will be YOUR money!
Now the same evils are also liable to occur with any currency, no matter what may be its basis, if it is controlled by the government. Such a currency would still be subjected to the manipulations of speculators and politicians, as at present. His words, written about 120 years ago! Observance of the laissez-faire doctrine should be, therefore, as obligatory on the part of rulers regarding currency as regarding trade. The reason this is unlikely is that the idea of ruling someone else goes along with governments and money has always been a tool, an invention that they cannot do without, because they are essentially unproductive parasitical members of society and would starve without it. Natural law makes it clear that we want nothing from government, so therefore they FORCE it on the rest of us. We asked for it, we got it: that's government.
The issuance of money should depend altogether upon business necessities, and should spring spontaneously there from. No individual and no body of individuals can pre-determine the amount of currency which a commercial people require for any given length of time. To determine this would be to determine how many dealings will be transacted. Left, free to act, in the absence of any legal restraint, every community would arrange its monetary system in a manner satisfactory to itself and to the nation generally. That a general system throughout the country would speedily become established, one cannot doubt, who has witnessed the growth and combination of industrial organizations during the past few years. Witness, for instance, the unification and centralization of the telegraph systems, the express and transportation companies, railroad and steamship companies, bank clearing houses, etc. In fact, it is not too much to say, that if the governments throughout the world would repeal all laws regarding the issuance and tender of money, before very many years had elapsed we should witness the introduction of a universal currency; money that would circulate wherever a medium of exchange was needed. Riegel came to precisely this conclusion. Of particular note, AGAIN, is the question of how much money to allow. ANYONE who asks this FOR ANY REASON WHATSOEVER is still hooked on money as a commodity and whether he would or not, there are plenty who do and would wish to speculate concerning the purchasing power of any piece of this money or the whole amount of it, just as has occurred with bitcoin. As we said and shall state AGAIN, all Value Units will trade for exactly the same in THEIR purchasing power whether they are in the hundreds, tens of thousands, millions or billions of units, NOW, TOMORROW, NEXT WEEK, NEXT MONTH, FOREVER! We fully intend if we can, to BREAK humanity of the “money as commodity” addiction once and for all. Once this is done, none will ever want to return to the present bad days. They will rightly regard all other money as commodity schemes, as deliberate attempts to steal from them.
The difference between a monetary system established by law, and one without governmental authority, is that in the former case commerce is compelled to adjust itself to suit the system, whilst in the latter the system is devised to assist commerce. Monetary systems should be the natural outgrowth of trade. The manner in which credit is brought into existence, and made to perform the money functions, is an illustration of how money, in a community free from governmental interference, would be created. In fact, we may say that under free conditions, money and credit would become synonymous.
Instead, however, of building upon a contracted and insecure basis, credit would become socialized, and would have the united and voluntary support of the entire community. Self-interest would compel men to join together in a system of mutual co-operation, so that the interest of each should be the interest of all. Credit would be based upon the productive capacity of the whole of society. Instead of a single commodity basis - a specie basis - credit would be built upon the broad basis of the entire wealth of the community, and would be redeemable in all commodities. The only thing holding such a system back is that certain “special” people “earn,” syphon, their livelihood from scamming, cheating and stealing from the general public. Since they currently own the media, run the education and government to suit themselves, better things cannot be expected of them. Indeed, a recent comment by an alternative newsman suggested that much of their ideas were “Victorian,” and that pretty much suggests Malthus and Darwin with a tinge of Marx and Freud. That's a particularly lethal brain salad sandwich!
Consider for a moment the effects of a governmental monopolized currency. Circulating, as it invariably does, through the channel of specially favoured institutions, the industrial part of society is compelled to make terms with those controlling financial institutions. The law of self-interest inevitably leads one class to regard the other as its natural prey. To the money dealer, the industrial world is presented as his harvest field. To the tradesman, the banker appears as a necessary evil. Society is thus divided against itself, and class wars on class. A condition which, under free institutions would be one of co-operation, becomes a condition of warfare. The misfortunes of one part of society furnish the fortunes of another. The ill-winds of adversity to the masses, blow good to the classes.
Monetary panics are harvest times for money merchants. Such are the inevitable results of a monopolized currency. That this must be so, few will dispute. This condition is irrational, inequitable, and productive of the vast amount of misery with which society is always afflicted. Under free conditions, society would be banded together to co-operate with nature in the production of commodities. Instead of promoting industrial warfare, society should united fight against what McCuIIough terms "the parsimony of nature." It would be done pretty naturally too, based on each locality's view of the relative skills of its members.
Nations have long recognized the harm that the monopolization of commodities engenders, and have sought to prevent such evils by the enactment of laws prohibiting the formation of trusts and combines. Attempts to monopolize wheat, copper, sugar and various other commodities, have been dealt with by writers and politicians as conspiracies against society. But the monopolization of money, the medium of exchange, is strangely regarded as essential to the welfare of society; and yet money monopoly is a monopoly not merely of money but of all commodities, "You take my house when you do take the prop that doth sustain my house. You take my life when you do take the means whereby I live."
One fact must not be overlooked in this discussion. No monetary system can possibly be devised to work efficiently, in a society where its members are uniformly dishonest. This impossible feat legislators have been vainly attempting from time to time. They have accepted the doctrine of universal depravity and striven to devise a system suitable to their creed. Such a system, instead of making a necessity of honest dealings, achieves the very opposite result. By making the conditions for procuring the means of livelihood more difficult, men are compelled to resort to practices which, under more favourable conditions, they would never think of doing.
To put it plainly, dishonesty becomes the natural result of an inherently dishonest monetary system. Therefore if and when an honest monetary system is devised, and we believe this blog's proposal to be one, then it would be considered an act of irrational mental illness to act in an overtly dishonest manner in dealing with it. Riegel's basic premise is that if the poorest of the poor were allowed to create, have and use their own money, under the auspices of the communities in which they lived, that since it would become impossible ever to go broke, that far less crime would result and in fact more productive and rational applications of everyday labour would result. All one really needs to know is who doesn't want such a system and move away from them, socially, financially, politically, etc.
“Law,” says Thoreau, "never made men a whit more just, but by means of their respect for it, even the well-disposed are daily made the agents of injustice." We note further that Bastiat said that law is FORCE. Natural law is itself FORCE and is inexorable. Therefore the best system devised by man must be in accordance with natural law or it will ultimately fail. Unfortunately most people have been so poorly educated that they commonly mistake their own prejudices and bigotries for natural law. That's why so much re-educational material is included on this blog.
Whilst no legislative system can make people honest, it can and does lead many to act dishonestly. Take for example the laws for the protection of industries. The number of crimes which the protective laws of nations are directly responsible for, are legion. The so-called crime of smuggling, which per se violates no rational or religious code of ethics, is a pure creation of these laws; whilst perjury is committed to an enormous extent by travellers, in order to evade the payment of what the majority of people instinctively feel to be an injustice. A United States Custom House officer recently remarked that he did not believe five per cent of the travelling public hesitated to swear falsely in a matter of declaring dutiable goods. (“But abominable as a lie is, perjury is still more abominable, for it adds sacrilege to mendacity, blasphemy to falsehood. Perjury is the abyss, the very nadir of moral crime." - Sermon by Rev. Dr. Boardman.) [What must be said of a system that compels people to choose between committing perjury or submitting to robbery ? — Author. ] Not that too many people care anymore, but honestly, most people these days expect politicians, celebrities and the rich to lie to get out of their troubles and never have to spend an hour locked up in a cage with the rest of the common run of prisoners. Such conduct is expected. But this hardly results in a better society or civilization. Most are best advised never to know such people and hence the calibre of those seeking “public office” has dropped precipitously. Dishonestly breeds callousness and eventually results in barbarism. But after all, isn't this just what some who imagine that they know better or are better actually want? Again, why even know such people?
Again, by stimulating the greed and rapacity of manufacturers, in whose interests protective laws are passed, bribery and corruption are fostered. Legislators thus become corrupt and venal, and eventually the whole of society tainted and rotten. Ample evidence of this is given in the immense sums openly contributed by manufacturers and bankers for the election of their representatives to political offices. All such legislative acts must necessarily have a demoralizing effect upon nations, and if continued will inevitably sink them to a depth of depravity from which nothing short of a revolution can raise them. And that revolution will plunge them into an even darker abyss, because ALL revolutions are paid for and again look who finances them. They have their agendas, which always run counter to the “useful idiots” whose lives may seem “romantic” but are ruined nonetheless.
Under a system where it becomes apparent that dishonesty endangers the peace and happiness of society, all would awaken to the necessity of regarding the slightest suspicion of dishonesty as a crime against himself. We should then cease to wink at moral crookedness, or regard it as an evidence of “smartness." In short, nothing tends more to check rascals than a healthy moral public sentiment. We'll just call it people dealing plainly and honestly with one another and yes we can see how the trend toward dishonesty in public service corrodes all of society.
In dealing with the moral aspect of the money question, Herbert Spencer says: "The monetary arrangements of any community are ultimately dependent, like most of its arrangements, on the morality of its members. Among a people altogether dishonest, every mercantile transaction must be effected in coin or goods raw barter; for promises to pay cannot circulate at all, where, by hypothesis, there is no probability that they will be redeemed. Conversely, among perfectly honest people, paper alone will form the circulating medium; seeing that no one of such will give promises to pay more than his assets will cover, there can exist no hesitation to receive promises to pay in all cases, and metallic money will be needless. Manifestly, therefore, during an intermediate state in which men are neither altogether honest nor altogether dishonest, a mixed currency will exist; and the ratio of paper to coin will vary with the degree of trust individuals can place in one another. There seems no evading this conclusion. The greater the prevalence of fraud, the greater will be the number of transactions in which the seller will part with his goods, only for an equivalent of intrinsic value; that is, the greater will be the number of transactions in which coin is required, and the more will the metallic currency preponderate. On the other hand, the more men find each other trustworthy, the more frequently will they take payment in notes, bills of exchange, cheques; the fewer will be the cases in which gold and silver are called for, and the smaller will be the quantity of gold and silver in circulation. We notice here another aspect affecting everything having to do with money; whether the transactions affected by money will be concluded using it, not in money itself, but in actual goods and services themselves, the goals of completed transactions, which we repeat must all be essentially by barter.
"Thus, self-regulating as is a currency when let alone, laws cannot improve its arrangements, although they may and continually do, derange them. That the State should compel everyone who has given promises to pay — be he merchant, private banker, or share-holder in a joint stock bank — duly to discharge the responsibilities he has incurred, is very true. To do this, however, is merely to maintain men's rights, to administer justice; and therefore comes within the State's normal function. Just how far from most people's minds is this pronouncement these days? But to do more than this — to restrict issues interesting, or forbid notes below a certain denomination as is common with most monetary regulations regrading alternative money — is no less injurious than inequitable. For limiting the paper in circulation to an amount smaller than it would otherwise reach, inevitably necessitates a corresponding increase in coin; and as coin is locked-up capital, on which the nation gets no interest, a needless increase of it is equivalent to an additional tax, equal to the additional interest lost." (It is unfortunate that Mr. Spencer has not given the same amount of study to and brought the same comprehensiveness of thought and keeness of perception to bear upon the money question, as he has upon almost every other branch of knowledge about which he has written. Perceiving as he does the immorality and injustice of governmental control of currency, he does not see that interest is the fruit of this unjust monopoly. I shall deal with this fully in the next chapter. This quotation is inserted merely for the ethical light which it throws upon this part of our subject. From the standpoint of monetary science, Mr. Spencer is altogether at sea.)
Yes, and it's clear that whether issues of morality or honesty figured into any of it before, with the advent of swipe cards, they figure in it not at all, as all most people care about, is whether or not their cards work and their transactions will go through. Again, most people are totally unaware that their transactions are not completed until the money they earned from some business become transformed into groceries, energy or some other useful good or service. To most people, money is only a means to an end despite the social forces always attempting - for the money interest - the usurpation of greater attention and concentration.
"Moreover, even under such restriction, men must depend mainly on one another's good faith and enlightened self-interest; seeing that by requiring the banker to keep sufficient specie in his coffers to cash all the notes he has issued, can complete security be given to the holders of them; and to require as much, is to destroy the motive for issuing notes. … It should be remembered, too, that even now the greater part of our paper currency is wholly unguaranteed. Over the bills of exchange in circulation, which represent liabilities three times as great as are represented by notes, no control is exercised. For the honouring of these there exists no special security, and the multiplication of them is without any limit, save that natural one above mentioned — the credit men find it safe to give one another. Lastly, we have experience completely to the point. While in England banking has been perpetually controlled, now by privileging the Bank of England, now by limiting banking partnerships, now by prohibiting anks to issue within a specified circle, and now by restricting the amounts issued, while we have never rested for many years together without some ew laws, some new regulations, dictated by the fancy and theory fashionable at particular periods, and while by constant interference we have prevented public opinion, and the experience of bankers themselves, adapting and moulding their business to the best and safest course - and that's saying quite a lot right there-, — there has existed in Scotland, for nearly two centuries, a wholly uncontrolled system — a complete free-trade currency. And what have been the comparative results? Scotland has had the advantage, both in security and economy. The gain in security is roved by the fact that the proportion of bank failures in Scotland has been far less than in England. Though by law there has never been any restriction against anyone issuing notes in Scotland, yet in practice it has ever been impossible for any unsound or unsafe paper to obtain currency. And thus the natural guarantee in the one case has been more efficient than the legislative one in the other. The gain in economy is proved by the fact that Scotland has carried on its business with a circulation of £50 million to £6o million; or, allowing for difference of population, England has required a currency three times greater than Scotland."
A question of grave importance is that concerning the redemption of money. Money, as we have previously seen; represents debt, and debts must sooner or later be paid. If the specie basis be abolished, how shall money be redeemed? This brings in that age old question, if not with silver or gold, upon what would one “back” one's paper money? Riegel said that all money is backed only by what it buys, but that doesn't settle it for most people, as they simply cannot give up their reliance on considering any and all money as just another commodity. The connection with purchasing power and quantity are relatively fixed in most people's minds.
I have already stated that money should be redeemable, not in one, but in all commodities. This is identical with Riegel's conception, that all money is “backed” ONLY by what it buys and is so “backed” each and every time it changes hands in exchange for a good or service. Since money is the evidence of debt -Riegel would have said that it is evidence of incomplete transactions, the nature and functions of the one must be those of the other. Debts are obligations to pay goods or services. Now debts arise out of every conceivable transaction, involving every kind of commodity. When, however, payment is agreed to be made in money, it is with the view of enabling the creditor to acquire any commodity he may desire, instead of some one particular commodity; hence though payment is stipulated to be made in specie, it Is still with a view, proximate or ultimate, of acquiring whatever commodities the purchaser may desire. Someone buying something using a gold or silver coin didn't acquire those coins to have as coins, but to spend them as money. They are not intrinsically desired for themselves, usually, unless the person has some other concept, such as that his “stuff” in and of itself might be wealth or further his “peace of mind” or self esteem. Think again of the points Spencer was making above concerning honesty and then reflect that all real sanity in this world must be honest and one is left with the advisory that any monetary system, a machine for settling split barter transactions and financing larger purchases, must require what everyone recognizes as sanity and honesty in order to operate at all. Obviously, there are cross currents, usually attributable to excesses of one sort or another, that cause people to behave in some dishonest or insane manner. People with too much of something for their own good seem inevitably prone to these conditions. Those with little or nothing are less likely to act out of any other concern than their desperate need.
Considered, therefore, from its functional standpoint, money means payment in all commodities. In other words, it represents general purchasing power, and its final redemption is in all commodities, even though its road to redemption be through the narrow, golden gate of pecie. And even then, it remains a commodity used to acquire other commodities.
The desire to exchange commodities for gold is invariably owing to the fact that gold itself can be exchanged for any desirable commodity. The ifference between money redeemable in specie and money redeemable in all commodities is, that the latter saves one step in the process, and is far more economical. It achieves its results per saltum. In the case of specie, the money is first redeemable in specie, and the specie redeemable in other commodities. The final results, so far as the objects sought after are concerned, are identically the same in both cases. The use of specie is, therefore, wholly unnecessary. We totally agree. As far as we're concerned, aside from their uses in the arts and sciences, precious metals as money is a superstition, but a very powerful one. That's why we have included them as a basis for our proposal; we want to eliminate as much of them from circulation and consideration as money as possible, limiting their use to exchange between our money and all “public” money, until their money ceases to have any value.
What then, is necessary in order to constitute a safe monetary system? Merely the assurance that the holder of money may, whenever he sees fit, cquire whatever commodity he desires, to the extent of the purchasing power of his money. This is all that any system can do, and it is all that the specie system professes to do. Very well put. It is all our proposal seeks to do. Our money does not profess to be another artificially scarce resource like bitcoin, suitable for “buy and hold” investment schemes. It promises never to lose more purchasing power per unit than it had at inception, but the only way its purchasing power can be referenced is by comparing one to a dollar (or some other widely used “public” money) or an ounce of gold or silver. Prices in Value Units (Valuns) may be nearly invariant, but there probably will be some differences based on supply and demand. What kinds of things might sell for a range of $2.80 plus or minus 10% over the next year? That's how anyone would determine what a Valun would buy in open trade within an operating Valun Exchange Network or VEN.
Now, since debts are contracted in all commodities, payments of debts are likewise made in all commodities. It therefore follows that all commodities hould be ale to be monetized. Yes, I corrected his use of words here: to monetize is simply a verb for converting into or expressing in the form of currency or to adapt (a society) to the use of money. When one walks into a store and sees prices on things, that is evidence of commodities being monetized. Another aspect of the same thing is when something is literally converted into some form of money, as when a bunch of debt of some kind (home mortgages or government debt) is turned into pieces of money and distributed to the public for circulation. When that happens, one may bring about a Weimar meltdown. Another kind of monetizing is when some form of debt is turned into other forms of debt that aren't usually circulated as money, such as stock shares. When that happens it's called hypothecation. The result on the underlying economy may not be a Weimar Meltdown, but where it makes it more difficult to price the underlying commodities, it can and usually does cause many problems.
There is no equitable reason why the owner of gold and silver should be afforded this privilege the basis for any other money issue any more than the owners of copper, iron, coal, wheat, oil, or any other commodity. Of course, we agree in theory, but we acknowledge the superstition as very powerful in practise. It may be urged, however, that since bankers will loan money on good security, irrespective of the kind of commodity, that commodities are now able to be monetized. Again correcting his use of this word; not only has this always been true, but even Louis McFadden told us of instances where money was loaned (therefore issued) based on the potential or future value of commodities not yet in existence. This kind of business we regard as so inherently risky that we would never want to subject the common everyday account holder to such schemes, which is why our proposal forever separates the transaction clearing (exchange) function from the finance functions within our proposed monetary institutions. Whilst this is in a sense true, the present estricted supply of money gives bankers a choice of the goods they are willing to monetize. It enables them, further, to exact an unreasonable amount of security, as well as to put a tax upon the loan. And finally, the cost of this transformation of commodities into money is so exorbitant, that few resort to the practice short of compulsion. This, however, is not the monetization of commodities in the same sense that gold and silver are. That's correct, which is why our proposal is as it is.
A further objection that will be urged is, that if money is issued on all goods alike, the money will become too "cheap," and its value will depreciate. This argument, which is plausible among the specie basis advocates, is an evidence of their failure to comprehend the true nature and functions of money. It is evidence that they cannot grasp a money other than as just another commodity. Our proposal is that each and every last unit of our money has the same purchasing power as it had at the money's inception. Under our proposal, we cannot say that each and every unit will always trade for the same in some other money, as today (12 January, 2015) it takes $640 more gold per thousand Valuns to trade for that same purchasing power, as it would have at Valun inception (2 November, 2011). But at no time will each unit's value fall below $2.16 in trade. For instance, in an article entitled "Financial History of the War," George S. Coe, president of the American Exchange Bank, New York, says:
"As the war progressed and the country became poorer, the currency increased, giving new instruments and facilities to expend, just in proportion as the means of payment were consumed. With a compulsory currency thus made the measure of prices, and daily deteriorating yet still increasing, is it strange that all other property was eagerly sought for in preference to this, and that prodigal expenditure became the law of the land?" First of all, during any wartime is by its nature a time when all commodities are placed under extreme economic conditions and where the usual sanity and honesty may be less than normal. But Kitson says;
Was there ever a more palpable failure to comprehend the true function of money? The writer actually condemns a currency because it facilitated exchange too well! Yes, indeed! As well might an engineer condemn a lubricant, on the ground that it reduced the friction of his engine too much! Further, the desire to possess commodities instead of money, is the natural desire of healthy and sound commerce. It is, in fact, the very end and aim. of all industry. Unless you strive to have so much money, which in every instance is simply the claims to settle unfinished transactions, that you mistake your riches for an actual life, or that you think of mere “stuff” as actual wealth.
In the chapter on Money Supply and Demand, I showed that money could scientifically fulfil its functions only when the supply was in excess of the demand, so that it should, per se, be of no value. In other words, the solution of the money question is arrived at through the medium of what is termed cheap money. To many, the statement that money should be of no value, will appear paradoxical. I have already given an illustration of this ssertion in a previous chapter, by instancing railway and theatre tickets as analogous to money. Let me give a further illustration. Paper currency, redeemable in specie, may be regarded from two standpoints. First, as money. Owing to the demand for money as the medium of exchange, and its limited supply, men will pay interest for its use, irrespective of the bullion which it represents. In this sense it is, per se, of value. Second, as the representative of so much bullion. It is the bullion that is of value and not the paper. The paper is merely the representative of value; for, to say that the paper is, per se, of value, is to say that a thing can be twice its own value. As the representative of commodities, then, paper currency is of value, and of value only so long as it carries with it the right to that which it represents. We have, therefore, in a paper currency issued upon and redeemable in specie, that which, passing as a single material thing, is in reality dual, possessing body and soul; having two distinct prices, one for its body, another for its soul. It has its money-price and its commodity bullion-price. Most people understand this and assume that it proves that all we need do is return to this system, which only satisfied a fraction of any ongoing commerce at any time during its use.
Now, it is in the first sense, I contend, that currency should be of no value. It is entirely owing to a restricted supply that an inconvertible paper currency can be made artificially valuable. (This is the fallacy of greenbackism. It takes the worst and most dangerous feature of a restricted currency as a foundation upon which to build commerce, and places it in the control of what — in this country — experience has shown to be — an ignorant, depraved, dishonest class of men — the politicians.) Indeed, which is why we must consider Riegel's ideas to interest these types in his money as an idealism. What he hoped to accomplish was the association of the legitimacy of his money with these officers or their offices, which as we have always been keenly aware, falls far short of expectations and is actually irrelevant, since it is our intention that our money be ours and not theirs.
Money should necessarily represent commodities, since it represents debts r credits; but as the mere medium of exchange, as a means for facilitating commerce, it should be wholly unrestricted, and consequently of no value. he inevitable result of allowing all commodities to be monetized, would be to make money free. As the representative of certain commodities, it ould of course be redeemable in commodities, and would circulate freely. Under such a system, no one with commodities could be prevented from obtaining money. Interest would, therefore, die a natural death, for no one would pay for that which was within the reach of all. The result is eyond dispute. Money upon a scientific basis means the abolition of interest. To that consummation science unerringly points, I shall defer the reatment of the interest or usury question to another chapter. The question as to the issuance of money may, therefore, be briefly summed up as follows:
The nature and functions of money necessitate that its creation and redemption be governed solely by the phenomena out of which the need of t arises, viz., exchange. And since exchanges arise out of the wants and caprices of mankind, the number and extent of such exchanges which ill take place during any future period, are beyond the power of human intelligence to estimate; likewise the amount of money necessary for facilitating such exchanges. All of this is underlined in the original. The fundamental condition essential to the growth of trade, and the production of wealth in a nation, is freedom. This was italicized in the original. And in order that trade may be unhampered, the means for effecting exchange must be unhampered. The medium of exchange must necessarily, therefore, be free from the control of both governments and individuals. This was underlined in the original. Since governments cannot determine the commercial needs of the subjects whom they govern, their interference with commerce, or the medium of commerce, cannot fail to create trouble and work injustice. Governmental control of the issuance of currency, means a restricted currency. A restricted currency is the parent of interest, a menace to commerce, a brake upon the wheels of industry, a hindrance to the production of wealth, the instrument of oppression, the source of misery, disease and death. Governments cannot exercise the function of controlling the currency without violating the one function by which their right to existence is generally recognized, viz. the administration of justice. The issuance of money must be free, in order that industry and commerce may be free; and commerce must be free in order that the people may be free. Freedom to life necessitates freedom to maintain life, and this involves freedom of exchange. Bravo! Standing ovation! Arthur Kitson is clearly on the same footing as E. C. Riegel. Now, all this blog has intended from its inception was to work out the details of the implementation. Contrary to what the vast majority of people might think, Shakespeare's too often quoted remark, “first we kill all the lawyers” is NOT the best course of action that such a far reaching proposal as formation of a new monetary system entails. Indeed, it is precisely the best and brightest lawyers we can attract who must serve as the instigators of such a system. Why? Because lawfulness in the interests of preserving justice is SANITY itself! With apologies for the many truly selfish and unscrupulous types who have taken up the practise of law for their own wealth enhancement or to become the paid watchdogs of many very frankly evil special interests, it is precisely lawyers as a class of people who would have the most bearing on the sound basis for such a system as this blog proposes. But Kitson is on a roll -
Denial of free money is, therefore, a denial of freedom to life. This is Riegel echoed from sixty years before his writing. St. Gregory of Nyssa, the immortal thinker of the fourth century that barbarous century, wrote these lines:
"He who would give the name of robbery or parricide to the iniquitous invention of interest would not be very far from the truth. Do you hear that and understand it, all who parrot the glib statements of the so called “Austrians” or those who call themselves “Libertarians?” ANY championing of usury is ROBBERY or THE KILLING OF A PARENT OR OTHER NEAR RELATIVE. Yeah, it's that serious. What, indeed, does it signify if you have made yourselves masters of the wealth of another by scaling walls r by killing passers-by, or if you have acquired what belongs to you by the merciless method of the loan?''
If any one had prophesied to St. Gregory as follows:
"A day will come when what thou treatest as robbery and assassination will become the law of the world, and when an Attorney General will indict in an assize court the writers who share thy opinion. The whole of society will be founded upon usury. They will build a temple which they will call a stock exchange. This temple will fill the place of thy cathedrals, even as thy cathedrals have filled the place of the temple of Venus or Jupiter. The priests serving in this new temple will be called bankers, stock-brokers and financiers. They will swindle others out of all the gold that will insure to them omnipotence. They will buy everything that is buyable, and some of the things that are not. And vain revolts against their frightful empire will serve only to make more manifest its terrible solidity!"
If any one had prophesied that to St. Gregory, St Gregory, who believed in God, would have joined his hands and cried: "Lord, deliver us from such a moral malady!"
The malady has run its course. (M. de St. Auban's defence of Jean Grave)
Indeed it has. The result is that under which we all live, some call it Mystery Babylon, because it is a return of something very old, the rule of the world through financial empire. Our insistent cry has been, “come out of her, my people, lest you be implicated in her crimes!”