James Harvey
Paper Money
To the American mind, less enslaved to conventional ideas, and more ready to accept bold innovations, we must look for fearless investigation and inquiry less trammelled by stereotyped opinion.
One hopeful sign is, that the great Western States, rapidly developing in population and wealth, are pronouncing more and more emphatically every day for Paper Money, and it is to the Eastern States chiefly that the "Hard Money" men look for support in their efforts to make the nation pay gold interest on a Greenback debt. The sufferings they are undergoing the exact counterpart of ours in 1820 — are opening their eyes, and the controversy is assuming a more determined and inveterate aspect every day. In a previous page Mr. Tierney, Sir James Graham, and Mr. Attwood have been brought forward to bear testimony, and protests as energetic are being pronounced there. They, too, see bankruptcy decimating their manufacturers, distress harassing their middle class, employment denied the working-men, and an additional grievance immigration from Europe stopped. A few only of these protests are now given.
Mr. Samuel Seaville read before the Industrial Congress which met at Rochester, April 11th, 1874, the following statement of the present condition of this once happy federation of prosperous republics. It must indeed be galling to the feelings of an American citizen thus to bring before the eyes of the once despised Europe this humiliating picture:—
" In this land we behold a strong young nation drunken with the new wine of freedom and of external prosperity. Dazzled by sudden growth in wealth, and by wondrous developments in science, it forgets the lessons taught by the fathers, and turns its back upon the ways of rectitude in domestic, social, commercial, and political life. Everywhere is disintegration. Shams and eternal verities totter for the time. Cries of alarm are heard on all sides. Pious usurers rejoice that, at last, it is easy and pleasant 'to do right;' and that their lusty cry for 'Specie Basis' enables them to righteously 'devour widows' houses, and grind the faces of the poor. The inventions of genius, grasped by the shrewd and forceful, turn and devour the people as the demon created by Frankenstein destroyed its creator. Steam (which should have lifted half their burdens from the heavy-laden working classes, doubled their incomes, and reduced their hours of labour one-half) more and more displaces human creatures, and is used to double the tasks of those still allowed to be its co-workers. It gives us a thousand million man-power; yet the 'protected industries' of New England give 'hands' less than $400 a year, in the average, and shriek of coming doom when 'eight hours labour' is mentioned; while every few years a 'great' manufacturer dies 'worth' from five to fifteen millions. Our young men, crazed by the success of men of small capacity all about them, shun honest labour, and press toward city sinecures. Our women, robbed by steam and machinery of their vaunted 'home industries' —spinning, weaving, knitting, making clothes, soap, cheese, brooms, baskets, etc., are following those industries into the cities, to their own destruction. Even their clothes are now largely imported — ready-made by German paupers. Europe pours upon us her paupers and knavish traders, and Asia sends the overflow of her debased millions to drag down our children to their own level. Absenteeism prevails. American capitalists rob our producers and poorer consumers, to spend the plunder upon European middlemen. Our boasted modern amenities are all steeped in fraud. Life insurance, for instance, is, in the average, a monstrous swindle. In one recent year, lapse and surrender annulled 93 per cent, of the terminated policies."
Dorman B. Eaton says: "It is part of the scheme of those practising frauds, that the laws be made so complicated that none but a trained villain can understand them."
The Americans have taken up this question with all their accustomed energy and ability. They are well versed in the various English writers who have investigated and studied the question.
The following is a powerful appeal to the people against the annual drain of gold to pay the foreign fund-holders interest on their bonds, and the consequences resulting:—
" SIR,—Foreign debt, carrying gold interest, is what is crushing the hearts and the hopes and undermining the morals of the labouring people of our country. It is that indebtedness which is filling our almshouses with people skilled in many industries and eager to toil for their living. It is that foreign debt, that annual gold indebtedness for interest on the principal, that is stripping the thrifty and industrious labourer of his earnings hoarded through years in savings banks; that is compelling him to see his humble but mortgaged home pass to the capitalist at a nominal price, because he has not been permitted to earn the little stipend that would enable him to pay his monthly dues to the building association, or his semi-annual instalment to the capitalist. It is that foreign debt which is causing a vast tide of emigration to flow from our shores, and repelling hundreds of thousands of immigrants who hoped and expected to find shelter, freedom, and prosperity under our republican institutions."
Whilst another speaker quotes Sir Thomas More: "So help me God, I can perceive nothing but a certain conspiracy of rich men, procuring their own commodities under the title of commonwealth. They invent and devise all means and craft, first how to keep safely, without fear of losing, what they have unjustly gathered together; and next how to hire and choose the work and labour for as little money as may be."[1]
Even the Eastern States confess to the sad state to which the country is reduced, and to the intense animosities engendered between the "hard" and "soft" money advocates.
The Philadelphia Ledger, by the following extract, makes it plain that the Eastern States are gradually becoming alive to the fact that the Greenback question is at the bottom of it all, and such protests find their way into the newspapers in spite of the vigilant control of the capitalists:—
"The times are pretty hard, the signs of which are unmistakable. The 'Wants' columns of The Ledger are quite full, but these are not all. There are long lists of horses and carriages for sale — 'property of gentlemen going abroad' — which tell tales of sudden vicissitudes and collapse. 'Board at summer prices,' is the delicate way in which landladies announce compulsory reductions. Sales at auction, by marshals, by sheriffs, by mortgagees, by pawnbrokers, of every possible variety of article of luxury, stare at one from the newspaper page. And the announcement of 'reduced prices for clothing,' for 'fuel,' 'flour' and other necessities tells the same story. Painful facts to contemplate, but they have to be faced; and the moral they teach of the need of strict economy ought not to be overlooked. We have not yet done paying the penalty for false prosperity which followed the war, and will continue through the Paper Money period. All kinds of business are very much prostrated. The capitalists are accepting lower rates of interest, and the holders of stock investments are generally becoming satisfied with 6 per cent, interest, and even 5 per cent., if the payment of that smaller rate is fully assured. Hundreds and thousands are out of employment, and all, rich and poor, are gradually coming down to humbler pretensions. The 'penalty' will continue through the Paper Money period. How long will that continue ? For my part, I fear it will be long; and such is the mischievous reaction in these cases, the check to prosperity, on which my contemporary enlarges, will most seriously retard the return to specie payments after which his soul obviously lusts. But for the benefit of my readers, who may not be familiar with American finance, and the intense animosity with which its hostile theories are discussed, I will tell them that a very demonstrative party in the State denounces the high finance, of whose programme this return to a metallic currency is one of the principal pillars. They insist that the salvation of the country is only to be secured by subverting the old-fashioned policy which there is such a struggle to restore and that radically new banking practices and new currency laws will be necessary to avert national bankruptcy. They say it is coming on their country rapidly. I regard this growing controversy without further comment than this : That such extreme divergence of opinions, and such heated contentions, are at least very unlikely to contribute to that common and harmonious effort which is doubtless required to restore prosperity to trade and commerce. This angry controversy is, doubtless, both an effect and a cause. It is an effect of the discontent which restricted trade engenders, and it will prove a powerful obstacle to the restoration of prosperity."
The angry controversy will become more and more embittered, for the monopolists and high financiers will not give up their control over the country till the American people compel them.
To the Americans we are indebted for publishing and making known the late great financial operation of the French nation, who have given us two extreme examples: the one, of the deplorable effects of over-issue in the assignats; and the other, of the wonderful and beneficial results of a paper issue under control and wise management in their late contest with Germany. Our writers on finance are lost in perplexity when they see how France quickly recovered herself, though all her gold was abstracted, and how distress and bankruptcy and diminished trade were concomitant with the Germans' acquisition of this same gold. M. Victor Bonnet, an eminent French political economist, says of the late financial experience of that nation:—
"What has taken place in France since the war in relation to the paper circulation, what is still taking place to-day, is a very curious phenomenon. It apparently reverses the economical and financial principles which the authorities on the subject have hitherto laboured to establish. They have cautioned us against issuing too much Paper Money, having the quality of legal tender; holding that the volume of such paper should be very carefully limited, lest confidence in it should become impaired, and depreciation follow. Now it so happened that, almost at a single step, in the midst of our disasters, we issued more than 1,800 million francs of new notes, and that this legal tender paper has kept itself at par, the only time when it fell below par being upon the payment of the first instalment of the indemnity to Germany."
It would indeed be long before we should have this plain statement of these wonderful results from the Times, from the professors of political economy, or the reviewers in this country; but the Americans are being roused to an intense interest in the inquiry, "for, from the depths of their present miserable state, they look back to the time when Greenbacks in spite of the excessive drain of their civil war not only fed and clothed and equipped armies on their destructive mission, but vivified their prostrate industries, and developed production to a hitherto unprecedented[2] extent and activity, until peace resumed her sway, when it was found to be fully as beneficial an agent for construction as for destruction, for wealth as for waste, and, consequently, for happiness, comfort, and content, as it had hitherto been in the battle-field for the purposes of devastation and havoc.
" The exigencies of war, in addition to their great purpose, the striking the shackles from the limbs of the black race, had for the first time in history produced money 'by the people, of the people, and for the people.' Every working man was busy. Taxes were heavy, but work was plenty. Our national indebtedness was being paid off. Homesteads were cleared from mortgages, and it did seem as if our approaching centennial would show the world a republic fairly completed in fact, as well as in law, free and independent in finance, as in religion and politics. The 'Unproductives,' however, are still animated by their ancient spirit, and being the chief makers of the laws for the protection of labour and ingenuity, the increase of products, and the change and transfer of property, they shape all their devices so cunningly that they, the 'Unproducers,' continue to grow richer than the producers." —J.G. Drew, of Elizabeth, N.J.
These "Unproductives," headed and influenced by the Wall Street speculators, have reduced the country to a debasing dependence on the London gold-market, as thus depicted:—
" The commanding issue of to-day is a struggle of supremacy between producers and combined monopolies; between the creators of wealth and those who do not create, but who, by large combinations and ingenious devices, absorb more and more of the wealth produced, especially that central monopoly, the grand focus of all monopolies, the money power.
" This power is not merely the bankocracy of the United States, which, influential as it may be in commerce, industry, and the halls of legislation, is nevertheless but one subordinate constituent of that universal power, that 'international imperialism' which has its chief centre in London, its co-ordinates in every nation, its branches in every principal city in Christendom, its correspondents wherever property is bought and sold, which controls the money of the world through the control of gold, and so determines the rates of interest and the prices of money, of products, and of labour; which excites industry into full activity by copious loans, and, at pleasure, collapses every interest by calling in gold, or attacking credit; which fattens upon public debt and private misfortune, for it more than doubles the volume of debt and the cost of railways by discounting government and railway bonds, so that in many cases less than fifty per cent, of loans goes to legitimate use; buys private property at panic prices and real estate at foreclosure sales; which dominates cabinets, dictates diplomacy, shapes legislation, nominates executives, inserts its plank in party platforms, interferes in elections, forms coalitions, instructs finance committees, procures boards-of-trade resolutions and memorials, inspires presidential vetoes, manufactures public opinion through the press and public meetings, lobbies in every legislature on the globe, levies double and three-fold tributes upon the labourer, producer, manufacturer, carrier, consumer in all lands, and, withal, is irresponsible.
" A single illustrative fact may be suggestive: August Belmont, American representative of the Rothschilds, was for many years Chairman of the National Executive Committee of the Democratic Party.
"Recent developments have alarmed this omnipresent power, and its varied resources will be freely used to maintain its prerogatives and perpetuate its control of all interests. On the other side are the useful classes of every name, and their first necessity is ORGANIZATION.
* * * * * *" Then we display to the astonished world a country which for its size, its agriculture, its manufacturing and commercial advantages, surpasses any other nation recorded in history, in proof of which, did we not export last year nearly £400,000,000 of bread stuffs and cotton ? Yet our republic presented to the gaze of mankind last fall and winter (1875) the greatest incongruity of any other nation that ever existed, when hundreds of thousands of native-born American mechanics were reduced to the first step towards pauperism when they approached soup houses as mendicants, with blushing countenances and aching hearts, while corn by the ten thousand bushels was consumed in the west for fuel; and, to add to our shame,, thousands of foreign artizans left this boasted country during the September panic, and returned to their respective countries to obtain employment, whereby to preserve their true manhood and dignity.
* * * * * * * *"This is what we see: that while our producers have begged almost on their bended knees for the privilege — the right to labour, and to be paid for the same in national certificates of indebtedness, called Greenbacks, without interest, our infatuated Government has insisted on having its work done by subjects of European monarchies, and to pay for the same in interest-bearing bonds; and that our mechanics are leaving our shores to find that employment which we have banished across the ocean.
" If this has not been practically levying a tariff upon our home productions, or offering a bonus on foreign importations, we have forgotten what little cyphering we ever knew.
" We have, as a nation, substituted idleness for industry, poverty for affluence, beggary for thrift, restlessness for contentment, emigration for immigration, foreign subserviency for domestic independence.
"Under the mighty influence of a national money we evoked the national resources. We followed the example of England in the Napoleonic wars, who with it, and by it, won Waterloo and conquered Napoleon. France, in her late contest with Germany, did act so promptly that it never fell below 1½ per cent, discount. And in our own recent struggle, though too blindly adhering to a superstitious reverence and worship for the spiritualistic and mysterious power of gold, we found ourselves abandoned by it before the heavy work of war fairly began, when the Greenback took up, and with ease, the work abandoned by its weak and cowardly competitors." —J.G. Drew, Political Economy for the People.
This successful attempt of the "Unproductives" to thrust this "money of barbarism" on this once prosperous nation had a precedent in 1832.
General Jackson, in 1832, copying Peel, endeavoured to introduce a metallic currency in America; ruin followed; the bank of Pennsylvania stopped. America had in a few years, as Burke said, made the progress of centuries; that was with Paper Money. The attempt to introduce metallic money perilled their commercial prosperity, and they abandoned it. "If," said General Harrison, the President in 1840, "any single scheme could produce the effect of arresting at once that mutation of condition by which thousands of our fellow-creatures by their industry and enterprise are raised to the possession of wealth, that is one. If there be one measure better calculated than another to produce that state of things so much deprecated by all true republicans, by which the rich are daily adding to their hoards, and the poor sinking into penury, it is an exclusive metallic currency. Or if there is a process by which the character of the country for generosity and nobleness of feeling may be destroyed by the great increase and necessary toleration of usury, it is an exclusive metallic currency."
The excuse for these copious extracts must be the fact, as stated by Professor Bonamy Price (p. 5), "that the defence of an inconvertible paper may be said to have disappeared from English literature."
In fact, the Americans, in their true "go-ahead" character, seem to dive deeper into the slough of error, and get out of it quicker than we do on this side of the Atlantic.
The development of the monied men into a landed aristocracy is rapidly taking place. The Railways alone have allotted to them blocks of land on the lines larger than the area of England. By means of land companies they are becoming possessed of immense tracts of land, which they sell off in lots as settlers increase in numbers, "so that," says Mr. Drew, "if we are not fools we will note the next step taken by England, and be very sure that, as in the past we have adopted her theories in finance, and thus so far repeated her history, if we continue to follow this same leadership, we shall have to wallow through the same terrible experience which has reduced the landowners in England in number from 160,000 to 30,000 in 1861, though the aggregate population in that time, thirty-nine years, must have been more than doubled."
To show how lack of money paralyzes industry, impedes the circulation and exchange of productions, increases bankruptcy, and inflicts incalculable suffering on the debtor and working interest, the following table is given by the same authority. "The mercantile failures in the Northern States, from 1862 to 1870, inclusive, which we copy from Hunt's Magazine and Year-Book for 1870, were:—
We supplement the foregoing table with the following (for the whole nation) of commercial failures for 1870, 1871, 1872, and 1873:—
" The failures of 1873 are about 25 per cent, in excess of 1872; but the aggregate is nearly double, showing that devastation is spreading among the loftier commercial and financial circles." —J.G. Drew.
This tallies with our experience, for the Times informs us, that from 1846 to 1857, 90 banks broke, with liabilities amounting to 47 millions.
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1
For extracts from The Money Question, by W.A. Berkey, Michigan, see Appendix H.
2 Not unprecedented. See Mr. Burke's eloquent description (p. 60) of tho happy, contented, and flourishing condition of these same United States when, as colonies, they enjoyed a paper based on land.
THE Usury Laws were abolished by Sir Robert Peel at the very time he was making money dear by making the sovereign our only money. This let loose the rapacious harpies who prey on the extravagance of youth and on the necessities of the needy tradesman. Instances are continually cropping up in the newspapers, but the most recent and notorious was the case of Sanderson and an Oxford student. Those wholesome restrictions removed, and we have loan societies devastating the middle classes, whilst the pawnbroker preys on the labourer and artificer. The banks fly at higher game, and their enormous dividends, and this whether trade be good or bad (the London and Westminster, for instance, with its 20 per cent.), point out the cancer which is eating into the body politic.
COMPOUND INTEREST. To the workings of that baneful offspring of the system we owe those immense masses of wealth which are left by will, and which are duly chronicled in the newspapers. The Illustrated London News, at stated intervals, gives a list of these, confining itself to those only above a quarter of a million.
These agglomerations are entirely the fruit of compound interest, the operation of which has not attracted the notice of the political economists.
In the Appendix I. is given a list of a hundred men who in the last ten years have died worth £60,000,000 — no one inserted whose legacies are less than a quarter of a million. There are two put down at £3,000,000 each. Let us pick out one with his £3,000,000. The interest on this colossal fortune at 3 per cent, is £90,000. Let us suppose this leviathan of wealth to spend per annum £40,000; here is a sum of £50,000 with which to go into the investment market. Investment ! the great trouble of millionaires, filling them with anxiety, and costing sleepless nights: —coal mines, landed estates, consols, foreign loans, railways, gas, water, and insurance shares: —they must be distracted by variety of choice, whilst begging letters for donations to churches and a hundred charities must lay daily siege to the knockers of their mansions. The very finance must require a staff of clerks and collectors not much less than that of many public bodies.
But to return to his annual saving of £50,000. We must bear in mind that it accrues year by year. Let us take our example at his thirtieth year, and let him reach his seventieth, and what immense accumulation do we see. 40x50,000, if Cocker may be depended upon, will amount to two millions. The working of the extraordinary engine of usury is something wonderful. Suppose one of those millionaires was able to secure 10 per cent., — and some of them by sagacity in choice, say fortunate investments in coal-mines, secure more than this, — and we have these immense accretions doubling themselves in seven years. One thousand pounds would stand thus in the forty years on which limitation our calculation is based:—
Our capitalist begins in his 20th year with 1,000.
In his 27th year the 1,000 becomes 2,000
.... 34th .... 2,000 ..... 4,000
.... 41st .... 4,000 ..... 8,000
.... 48th .... 8,000 .... 16,000
.... 55th ... 16,000 .... 32,000
.... 62nd ... 32,000 .... 64,000
.... 69th ... 64,000 ... 128,000
Impossible, it may be said. Perhaps so; let us cut off one-half, and there remain £64,000, usurious and monstrous progeny of the original £1,000; and yet, as the Usury Laws are abolished, these immense sums are recoverable by law. Can the productive powers of the earth keep pace with such claims ? Are sovereigns coined in quantities sufficient to give them the monetary expression ?
Surely the end of this is not far off.
All this must end in social revolt and popular discontent. Carlyle gives us an ugly picture in his "French Revolution" of the fate of a Dives — one Foulon. Foulon, a few years before the breaking out of the French Revolution, had told the people who had crowded round his bureau in a time of distress that "they might go and eat grass:" fatal words ! as may be seen in the sequel.
" Sansculottism drags him from his hiding place: Sansculottism seizes him. His body is dragged through the streets, his head goes aloft on a pike — 'the mouth filled with grass' — amid sounds of Tophet from a grass-eating people."
If history is experience teaching from example, here is a lesson.
Such are the vast accumulations which a rate of interest calculated at 10 per cent, produces, but 5 per cent, even is more than legitimate trade can bear.
De Foe, in his "Complete English Tradesman," depicts the inevitable ruin of a tradesman resorting to borrowed money even at the moderate rate of 5 per cent., unless he can avoid two contingencies which unfortunately attach to all trade, the giving of credit and the avoidance of losses. He says:—
" In a word, interest of money is a canker-worm upon the tradesman's profits: it consumes him unawares. Not one tradesman in fifty states to himself the true nature of it; it eats through his ready money for it takes nothing for payment but its own kind; it makes no defalcation or abatement for bad debts, or disasters of any kind; whatever loss the tradesman meets with, the USURER must be paid; whoever the tradesman compounds with, HE makes no composition, unless it is at last of all, and he is forced by the ruin of the tradesman to compound for both interest and principal, when perhaps, by the mere interest, he had had his principal two or three times over; and this brings me to another terrible article upon a tradesman, and that is — extortion.
" It is thus fatal to the tradesman to pay but the moderate interest of the money at 5 per cent, which we call lawful interest; what then must it be, when he is encroached upon either by the lender, or, which is as bad, by the procurer or scrivener or banker, under the sly and ruinous articles called procuration, continuation, premium, and the like ? These are when the poor debtor is apparently in need of a loan, and it appears that he is not in a condition to refund the money, and though perhaps he has given good security for the money; so that they are in no danger of losing it, yet these people never want artifices or pretences to hook in new and frequent considerations by way of addition to the ordinary interest."
No one has put the matter in a stronger light than an usury by old writer whose name has not reached us. He says:—
" Whoever borrows at usury condemns himself to poverty. The borrower is not relieved, he is only embarrassed. The usurer's life is both indolent and insatiable; he gathers his harvest when he sows his seed. He awakes richer in the morning than he was over night. Desist, O man, from your dangerous cares, from your precarious calculations: seek no offspring from gold and silver, things naturally barren."
The common phrase so prevalent, that such a man has "made money," shows the common idea that a man can in some mysterious way aid the mint in its particular function of coining, and that by skill in trade, improvements in manufactures, success in speculation, and even by accumulating money at interest, he increases the money of the country. The slightest reflection should dispel the delusion. Wealth may increase in a country, the houses may become villas, the clothing may be more plentiful, the land may be made to produce more, machinery may aid in various processes of manufactures, docks and harbours be excavated, railways intersect every county, but all this does not add to the quantity of money. MONEY has been well defined as a conventional instrument adopted by civilized nations to secure the justice and avoid the disadvantages of barter; CAPITAL, as the accumulated labour of preceding generations, constantly added to by the labours of the living generation. Under the gold theory it is the mint only that can make money.
Take the instance of a man clearing a thousand pounds by a speculation. What he gains, another man loses. Peter is robbed to pay Paul, but there is no addition to the money of the country.
CHAPTER IX.
BUT usury has its defenders, and the most celebrated is Jeremy Bentham, whose "Defence of Usury" is the text-book which is put forward as its most able vindication. It required some courage to stand up for a system which has been condemned in all nations and in all ages, "quod semper, quod ubique, quod ab omnibus."
Let us examine this leading proposition as laid down by Mr. Bentham:--
"What natural fixed price can there be for the use of money more than for any other thing ?" --(P.9, "Defence of Usury.")
Because money is endowed with certain privileges. The coined gold, the sovereign, is legal tender; in it only can you pay debts and taxes. The money denomination withdraws it from the list of commodities, and gives it special functions, commodities in one scale, money in the other; thus we know that if money is cheap, commodities are dear; if money is dear, commodities are cheap.
" Custom, therefore, is the sole basis on which the legislator can build his injunctions, but what basis can be more weak than custom arising from free choice ?" (P.10.)
Free choice ! The freedom is not very perceptible, when the borrower must have it, if he is to pay a debt or a tax, and the lender can take advantage of his need.
" Antecedently to custom growing from convention, there can be no such thing as usury."
Money is a conventional instrument to obviate barter, and the custom, usury, came into existence when convention superseded barter.
" Nor has blind custom any steadiness. Among the Romans, 12 per cent.; in England, in Henry VIII.'s time, 10 per cent., afterwards reduced to 5. In Hindostan, where there is no rate limited by law, the lowest customary rate is 10 or 12." (P. 11.)
So it is confessed that where the law does not interfere the rate may rise to 12. Here it may be asked, Is any labour so profitable that it will bear any such imposition ?
"Now of all these widely different rates, which one is there which is intrinsically better than another ?" (P. 12.)
Yes ! The lowest is the best. All interest is a deduction from the reward of labour. As seen in the case of Turkey, high interest is ruin.
" Much has not been done, I think, by legislators as yet in the way of fixing the price of other commodities." (P. 13.)
This is the grand error which throws Mr. Bentham wrong. MONEY IS NOT A COMMODITY. Take the sovereign: the act of the mint in coining this disc of gold, with the king's head on one side, and the British arms on the other, withdraws it from the list of commodities, as the pound weight is withdrawn from the list of the articles it weighs. This disc of gold is MONEY, in which all commodities are priced; it is legal tender, in which alone the debtor can pay his debts. This disc of gold once monetised, no debtor can pay his debt in kind, his creditor may demand payment in the lawful coin of the realm, and can, under the sanction of law, refuse payment in corn, cloth, fuel, or any other commodity the debtor may deal in.
Such a flagrant error as calling coined gold a commodity leavens the whole sixty pages of this "Defence," the style of which is offensively dogmatic.
Chapter IX. puts the case of horses and money on the same footing, but if horses are not legal tender, and money is, the argument goes for nothing. Horses won't pay debts or taxes: to do that, they must be sold, -- they must pass through the gold mill.
Chapter XVI. defends compound interest without limitation, so that, in Mr. Bentham's eyes, the rate of 30 per cent. -- a rate ruling at Constantinople -- is as proper and legitimate as a rate of 5 per cent.; and this is his illustration:
" I who have money to lend, and Titius who wants to borrow it of me, would be glad, the one to accept, the other to give an interest somewhat higher than my neighbours. Why is the liberty they exercise, that of dealing at a certain rate of interest, to be made a pretence for depriving me and Titius of ours ?"
Well, for Titius let us substitute a money dealer in Turkey. He, under liberty of contract, stipulated for 30 per cent., and as his unfortunate debtor is most likely unable to pay the debt of say £100 the second year, compound interest at 30 per cent, is .... £130. In three years the debtor finds the claim against him doubled, --£200 !
Mr. Bentham defends this last invention of Mammon, devised in one of his wickedest moods, by which a sovereign laid out at the birth of Christ would amount to a mass of gold equal to the bulk of the earth. These "hard calculators" are magicians of a high order, to endow a sovereign with power to multiply itself a hundred-fold ! Let us take the instance of such a financier accumulating £1,000 a year, and this for fifty years. This sum, by simple lying by, would be £50,000. Again, suppose the case of the same sum, £1,000, put out at compound interest at 10 per cent, for the same period -- 50 years, and the £1,000 becomes £120,000 ! But if to this we add year by year a thousand pounds put by at the same rate of interest -- and how many monied men heap up many thousands ? -- the results become fabulous. But this "multiplying figures" is mere vanity and vexation of spirit, for the sovereigns which make it negotiable are not in existence; there is not the money to represent it, nor is labour -- the source of all wealth -- able to meet its demands, which yet are recoverable by law. The simple question that disposes of these nefarious exactions -- the very progeny of usury -- is, "Do corn, wool, cotton; do fuel, furniture, houses, increase in the same ratio ?"
Such are the results of a high rate of interest. One of the great benefits of a low rate is, that the wings of a compound interest are clipped, since it takes twenty-four years for a sum of money to double itself at 3 per cent. Compound interest is the natural result of simple interest, and its injurious working can only be counteracted by keeping the rate low.
The first principles of society are trampled upon by this prostration of industry at the feet of avarice and fraud. Sir Robert Peel made money scarce, and then abolished the Usury Laws. And we see, every day, one man preying upon another, and all mutual advantage lost sight of, in the certain loss, if not utter ruin, of one of the parties. To what purpose is the property of the subject protected by the laws from the robber and the thief, who can only take what is possessed at present, if the arm of the insatiable hoarder, of the despised yet power-wielding miser, may stretch out with impunity to the future, to rob to the furthest verge of life, and to prey upon unborn generations ?
" In society, no transaction is more frequent than loan; none more needful, none that lies so open to avarice, none where extortion can inflict so deep an injury.
" But in loans, when do the parties meet on equal terms ? The one lends from his abundance, the other borrows from his necessity. The very nature of the contract proves that the one holds an advantage over the other.
" It may be asked, must we of necessity borrow from this particular monied man ? Oftentimes we must. Every man must borrow where he is known; for example, he may be known but to one banker: his condition may be such that he cannot or dare not borrow from another.
"But granting him liberty, will the change of creditor better his condition ? Will it make his need the less ? Shift as often as he will, the original difference remains. The one lends from his abundance, the other borrows from his necessity. In short, they grapple, not on equal ground -- the borrower is undermost.
" Again, extortion or usury has characters of its own which mark it as more dangerous than other frauds. In other frauds detection for the most part affords security for the future; but in usury the borrower knows that he is defrauded without daring to complain -- extortion begets extortion, 'and the fraud,' as Dumolin justly says, 'is continued, aggravated, and multiplied, through a succession of years, ending commonly with the ruin of its victim.'
" Closely connected with this is another reason why usury is of such danger to society, proceeding from the nature of interest, which, by its incessant increase and prodigious multiplication, differs from all those things, whether of nature or of art, by which interest is paid. They have their times of rest; not so interest, its progress is incessant. And it is for this reason that compound interest is forbidden in most states." --Hannay's "Defence of the Usury Laws"
Another reason is the one already quoted, assigned by Lord Bacon, that "usury bringeth the treasure of a realm into few hands. For the usurer being at certainties, and others at uncertainties, at the end of the game most of the money will be found in the box. And ever the State flourisheth when wealth is more equally spread."
If such be the nature of avarice and usury, is Mr. Bentham justified in releasing them from the restraints of the Usury Laws -- laws repealed chiefly through his influence, laws which all nations, ancient and modern, have agreed to institute ?
It has been objected against Usury Laws that riches "generally diffused," "liberty of contracts," and the true interest of the borrower and lender afford sufficient protection against usury.
But the general riches of a country can afford none; this history and experience demonstrate. It is, alas ! too plain in this present England, that a nation may be rich beyond all parallel, and money abundant, yet whole classes of society reduced to want and despair, lying wholly at the mercy of their creditors.
All this we see and feel this very day.
" 'Liberty of contracts,' what can this avail ? Nothing; this is proved by the history of law. For, originally, contracts of loan and interest were unlimited until commerce increased; and with it loans, and with loans multiplied abuses, that brought, by hard experience, every people to impose restraints on 'liberty of contracts' between the debtor driven to borrowing (and 'he who goes a borrowing goes a sorrowing') by urgent necessity, and the monied man, who can bide his time, and who knows full well that the fly must ultimately get entangled in his web and yield.
" Does the lender ever inquire whether the borrower is to profit or lose by the loan ? Yet there is no honest trade, the average profits of which are 10 per cent., which can borrow money at rates of 10, 15, or 20 per cent., when De Foe (p. 94) shows that even 5 per cent, must entail ruin on the trader, unless he can avoid three contingencies to sustain no losses, incur no bad debts, and to give no credit."[3] --Hannay's "Defence of the Usury Laws."
Having demonstrated clearly, by the light of history and by reference to daily experience, that usury has been the scourge of all nations, and is, at this day, the crying sin of the times, -- that it is inherent in the very nature of metallic money to bring the demands of the monied-man class into existence, it is evident that there is only one remedy: to abjure the precious metals altogether, and to resort to paper money, based on productive labour, and issued by the State.
John Ruskin has condensed the question in one paragraph; but how many years will elapse before his words of wisdom will be listened to by a people who have given themselves up to a delirium in favour of gold ? He writes :--
" The intricacy of the question has been much increased by the hitherto necessary use of marketable commodities, such as gold, silver, salt, shells, etc., to give intrinsic value or beauty to currency; but the final and best definition of money is, that it is a documentary promise, ratified and guaranteed by the State, to give or find a certain quantity of labour on demand."
Mr. Bentham, being an advocate for gold money, was logically obliged to defend its natural result, usury, but a greater than he had pronounced in favour of representative money -- a money without intrinsic value -- a paper document deriving all its significance from the signature of a treasury or exchequer official, with the proper stamp, and under the authority of an Act of Parliament. And let it be reiterated that this is no new experiment. We have the example of Pitt's one-pound note before us, with the remarkable results as pointed out by Sir John Sinclair (p. 27). The unfortunate wording of that note, "I promise to pay," gave the bullionists a plausible plea for a return to specie payments. This wording must be avoided in future, and as the specimen given at end of the proposed exchequer note declares, it must only be an engagement on the part of Government to receive it as quittance of taxation, and consequently of debts.
Let all credit, however, be given to Mr. Bentham, whose works on jurisprudence and efforts to reform our law procedures entitle him to national gratitude. It is only when he steps out from the walk in which he stands pre-eminent, and defends the giant injustice which is afflicting all nations -- it is only when he comes forward as a vindicator of a class who, in this moral civilized Christian country, levy blackmail on trade and industry, walking among us unpunished and unabashed, dictating to the State -- "a power behind the throne greater than the throne itself" -- bearding and absorbing the old historic families, crushing the labouring portion of the nation to the earth, and holding manufacturer and merchant in thrall; -- it is only as the apologist of such that Mr. Bentham is held up to public animadversion. How differently must we regard that great man, Bishop Berkely, who, 150 years since, laid down principles to guide us to the true philosophy of money in his celebrated Bishop work, "The Querist," a work which our political economists, including professors, have studiously kept out of sight -- a work declared by John Stuart Mill to be remarkable "for the strong hold the author has on the fundamental truths, that the industry of the people is the true source of wealth, and luxurious expenditure a detriment;" and for the distinctness with which he perceived, being therein much in advance of his age, that money is not in itself wealth, but a set of counters for computing and exchanging wealth, and, in his own words, "a ticket entitling to power, and fitted to record and transfer such power."
The Quarterly Review, January 1872, even maintains that Berkely, dwelling on the cause of existing evils, and from regarding special circumstances from an universal point of view, had arrived at something approaching a complete system of economic science forty years before the appearance of Adam Smith's "Wealth of Nations;" and the Times, in a leader chiefly devoted to Ireland, let out inadvertently that "The Querist" contained "more home truths than were ever before or since compiled in so brief a compass," -- which truths expose the folly and injustice of that bullionism of which the Times is the sworn champion.
The following quotations from "The Querist" will show that the Bishop's sympathies were not with the usurers, but that he strongly advocates a Paper Money, which, being an instrument that can expand with population and wealth, will never be so scarce as to allow extortionate demands for its use:--
" Whether money is to be considered as having an intrinsic value, or as being a commodity, a standard, a measure, or a pledge, as is variously suggested by writers ?
" Whether the true idea of money, as such, be not altogether that of a ticket or counter ?
" Whether the terms crown, livre, pounds sterling, etc., are not to be considered as exponents or denominations ? And whether gold, silver, and paper, are not tickets or counters for reckoning, recording, or transferring such denominations ?
"Whether the denominations being retained, although the bullion were gone, things might not nevertheless be rated, bought, and sold -- industry promoted, and a circulation of commerce maintained ?
" What makes a wealthy people ? Whether mines of gold and silver are capable of doing this ? And whether the negroes amid the gold sands of Africa are not poor and destitute ?
" Whether there be any virtue in gold or silver other than as they set people to work and create industry ?
"Whether a view of the ruinous effects of absurd schemes and credit mismanaged, so as to produce gaming and madness, instead of industry, can be any just objection against a national bank, calculated purely to promote industry ?
" Whether a national bank would not at once secure our properties, put an end to usury, facilitate commerce, supply the want of coin, and produce ready payments in all parts of the kingdom ?
"Whether, though the prepossessions in favour of gold and silver have taken deep root, yet the example of our colonies in America (1720) doth not make as plain as daylight that they are not so necessary to the wealth of a nation AS THE VULGAR OF ALL RANKS IMAGINE ?
"Whether our prejudices about gold and silver are not very apt to infect or misguide our judgments and reasonings about the public weal ?
" Whether plenty of all the comforts and necessaries of life be not real wealth ?
" Whether the benefits of a DOMESTIC COMMERCE are sufficiently understood and attended to, and whether the cause thereof be not the narrow and prejudiced way of thinking about gold and silver ? And whether there be any other more easy and unenvied method of increasing the wealth of a people ?
"Whether it be not evident that not gold, but industry, causeth a country to flourish ? Whether the industry of the people is not the first to be considered as that which constitutes wealth, which makes even land and silver to be wealth, neither of which would have any value but as means and motives to industry ?
" Whether in the wastes in America a man might not possess twenty miles square and yet want a dinner or a coat to his back ? "
With remarkable inconsistency Mr. Mill, forgetting the praises he bestowed on Bishop Berkely's leading proposition, that money and wealth are quite distinct in their nature, and that money is only a ticket recording wealth, in a later work denounced Paper Money as "a gigantic fraud," and its adoption as "a wholesale confiscation of private property." But not a word do we hear of confiscating the most sacred of all property, -- that of a man in his own labour; a confiscation effected by gold money, which has doubled indebtedness. And here one is tempted to quote Mr. Ruskin's pithy apothegm, "Whereas it has been known and declared that the poor have no right to the property of the rich, I wish it also to be known that the rich have no right to the property of the poor."
All legislators, from Moses and Solon up to the present time, have endeavoured, by restricting usury within lawful bounds, to rescue the debtor interest -- that is, the great mass of the people from the extortionate claims of the creditor, or monied interest claims which, under the calculations of compound interest, may be said to be illimitable; but it has been attempted to be shown that metallic money and usury are inseparable, and that the only remedy is a documentary instrument issued by the State -- a Paper Money, expanding with population and wealth.
This attempt Mr. Mill declares to be "one which all true friends of the people should disavow, as a roundabout method of cutting down debts to a fraction." Further on he writes, "That men who are not knaves in their private dealings, should understand what the word depreciation means and yet support it, speaks but little for the existing state of morality, and whether to deliberate on such a question is not as if a private person were to deliberate whether he should pick a pocket ? "
"Depreciation and cutting down debts." This must strike the reader as a very one-sided view of the question. What does Mr. Mill say to appreciation and increasing debts ? And what shall we say of those who, by a sudden resort to gold payments, made the pound into thirty shillings, adding by a stroke of the pen one-third to the burthens of all debtors -- those debtors being the men who find us in food, clothing, lodging, and fuel ?
By the Bill of 1817, Sir Robert Peel, backed by Mr. Horner and the Whigs, by political economists like Mr. Ricardo, and philosophers, men of the closet, like Mr. Mill, declared the paper debt to be a debt of 6000 tons of gold, and this at a time when gold was found hardly sufficient to replace what was consumed by the artificer in wear and tear. "Oh," exclaimed Sir Robert Peel, chucking a sovereign in the air (and this in the House of Commons), "this is my pound !" His pound indeed it was, and has inflicted greater wrongs and caused more misery than any other piece of legislation, however wrong-headed. To tie a nation down, whose productive powers, aided as they are by the most wonderful machinery, could double its real wealth every ten years, to a money consisting of the dearest metal known, is a piece of unreason, the consequences of which we see in the social disruption around us.
The orthodox school always assumes that population and production are fixed quantities, instead of being a constantly-increasing factor, requiring more and more circulating medium. "Deprived of this," Bishop Berkely tells us, "the State becomes gouty and inactive." Supplied with this, and, Mr. Hume tells us, "all things assume new life."
Mr. Cobbett was so impressed by the fall of prices incident to the return to cash payments, that he proposed equitable adjustment. In Mr. Mill's eye "this proposal was preferable, seeing it was only knavery, where a depreciated paper was not only knavery but folly; that as great a man as Mr. Attwood declared it to be his creed, that the man who calls two blades of grass into existence where only one grew before, deserves better of his country than the whole tribe of statesmen and warriors. Mr. Attwood has the same exalted opinion of the man who calls two pieces of paper into existence where only one existed before."
Surely Mr. Mill would allow the issue of two warehouse warrants in the place of one, if the goods warehoused were doubled.
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3
Mr. Kobert Hannay, in his "Defence of the Usury Laws," ably exposing Mr. Bentham's "Defence of Usury," makes reference to the Usury Laws of all nations, and shows great research; and his dissection of the Doctrinaires' sophisms is as temperate as it is perfect. "Defence of the Usury Laws, with a proposal to lower the legal rate of interest to 4 per cent." By Robert Hannay. Blackwood, 1823.
IN the list of political economists whose positions are questioned, Mrs. Marcett and Miss Martineau are placed first, because their books are intended for the young, and are text-books on this subject in schools, besides being generally recommended. This gives them undue importance, for opinions once imbibed in early days, and it will be a work of immense difficulty to eradicate them afterwards.
Mrs. Marcett on Usury, as to which she apparently has been sitting at the feet of Mr. Bentham, says: "What we you now call exorbitant and scandalous usury proceeds in a great measure from prejudice, which prevents the interest of money, like all other pecuniary interests, from finding its natural level, and stamps with criminality and the odium of usury any bargain in which money is lent at a higher interest than 5 per cent., however great the risk incurred by the lender. Why should there be a limit to the terms on which money may be borrowed any more than to the borrowing, or rather, I should say, to the hiring of any other commodity ?"
Because money is not a commodity, but the instrument which exchanges all commodities; that money is legal tender for debts and taxes (and in nothing else can they be paid). Mrs. Marcett goes on to tell us, that "salt, tobacco, shells, and a great variety of other articles have been used at different times, and in different countries, as a medium of exchange, but nothing has ever been found to answer this end so well as the precious metals."
Granted, that if money is to be constituted a commodity, the precious metals are to be preferred to all others; but this does not meet the objection of monetary reformers to any and every commodity, because money must be documentary, -- an instrument "which by its stamp and signature acquires a local value, becoming as precious and as scarce as gold, and more fit to circulate large sums." --Berkeley.
Endow gold with the privileges which coining confers upon it, and, like the trump suit in cards, it is invested with the supreme power, its lowest number controlling the highest card of the other suits. A man with gold, like the man with a hand of trumps, is sure to win the game.
The daughter in the dialogue asks: "As gold and silver are the standard of value of all other commodities, all other commodities, I conceive, must be affected by an alteration in the exchangeable value of gold."
"And," replies Mrs. Marcett, "this is the reason why money is not an accurate standard of the value of commodities."
True enough of metallic money, and this the reformers have always maintained.
"Yet," continues the daughter, "what a common observation it is, that plenty of money animates the industry of a country, and encourages commerce; and this seems to have been proved by the miserable and barbarous state of Europe previous to the discovery of the American mines."
Mrs. Marcett answers: "The discovery of America was certainly a very efficient cause in rousing the industry of Europe, but had America possessed no mines, I doubt whether the advantages we have derived from our connection with that country would not have been equally great. We could easily find a substitute for the specie with which she supplies us, but never for the abundance of sugar, coffee, indigo, etc., she pours upon us."
To this it may be replied, that no possible substitute could Europe have found for the specie with which America supplied her, for this reason, that the nations of Europe, with their worship of gold, had universally agreed that the metal they esteemed so precious should be their only money. This conferred a fictitious value, for no substitute would they tolerate, and their state of civilization rendered the only substitute, a Paper Money issued and guaranteed by the State, impossible, so possessed were the minds of all men with this prejudice. So long as the universal belief in the value of gold exists, so long will the nations prize it above all other commodities.
" Gold and silver, though they have greatly excited the ambition and avarice of mankind, have evidently contributed but little to stimulate their industry."
The Australian discoveries did most certainly stimulate the industry not only of this country but of the whole Continent, for the gold was, most of it, coined into sovereigns, adding to our previous stock one hundred millions.
"Were money as liable to variation of value as commodities for which it serves as a medium of exchange, it would be totally unfit for a standard."
This difficulty Sir Kobert Peel attempted to meet by coining five dwts., three grains of gold, into a coin which he called the sovereign, and to which he gave a money denomination -- twenty shillings. This made the sovereign apparently fixed in value, but the alteration was transferred to commodities, which rose and fell in price as gold became plentiful or scarce. But the sovereign, in which all fixed charges were estimated, made them nominally unalterable, but in actual operation, that is, in purchasing power, those fixed charges became unfixed.
That gold does vary in value, or rather in price, is proved by the rise and fall in discount, which is the price of money. A rate of 10 per cent, indicates a short supply; a rate of 2 per cent, indicates plenty.
For money, however, to rise or fall in purchasing power and this is the true test by which to try Sir Robert Peel's legislation -- is as injurious, and as subversive of all calculation in the bargains of every-day life, as would be changes in the weight of the pound avoirdupois, which one day might be twenty ounces and the next only twelve.
Caroline justly asks: "Yet is it not a great hardship on the poor to send goods abroad, which many of them are in want of at home ?"
Mrs. Marcett: "The poor are first supplied with whatever they can afford to purchase, and without the means to purchase you must recollect there can be no effectual demand."
It did not require a book of 200 pages to tell us that without money the poor cannot buy, but to make demand effectual, money is required. If Mrs. Marcett thought this a sufficient answer to her daughter's very pertinent question, it says little for her powers of reasoning. This is indeed the jargon of the political economist. This, too, in a book which is a popular text-book in schools; and thus we see the platitudes of the past deeply instilled into the minds of the rising generation.
Miss Martineau has also been engaged, as well as Mrs. Marcett, in misleading the youthful mind and propagating error.
Miss Martineau wrote a child's book also, in which she inculcates the fallacies of the bullionist school, and the following extract from her "History of England" manifests her leaning:--
"Sir Robert Peel desired to modify the Bank Charter, and introduced his Bill to the House of Commons in 1844. It was the desire of the country at large that changes should be made, for the last few years had wrought deeply on the public mind in regard to currency matters. The fever of joint stock bank speculation had subsided. Opinions of Mr. Samuel Jones Loyd and Mr. Norman, opinions clearly propounded before a Parliamentary Committee in 1846, in favour of a single source of issue of money, had become widely known and intelligently embraced by a large majority of thinking persons; while, on the other hand, an extensive agitation had gone forward in favour of such an expansion of the currency in all times of pressure as might buy off the pressure, and spread ease through the field of commerce. The intricate and abstract subject of currency had become so interesting to the many, that pamphlets advocating every view had appeared in abundance, and not a few, both of the wise and the foolish, went through several editions. It is easy to understand that some of the most unwise were the most popular. When the small traders and artisans were told that trade was always good when Paper Money was abundant; that a new issue of Paper Money had relieved distress as often as it had been tried; and that hardship and misery had always attended a contraction of the currency, it was not surprising that they would read with avidity publications which described the bliss of an abundance of money, and partly consoled them for past misfortunes by appearing to point out the cause of them. Publications more intelligent and more intelligible were read as eagerly as any novel by men of business who were aware that the wisest of us have only too little knowledge and insight on a subject of central interest and importance, a subject on which any man of business would gladly have a clear opinion if he could. On the whole, though the confusion of views was great, and the stragglers were so many as almost to defy calculation, it may be said that there were three parties awaiting the minister's exposition of his views on currency and banking in 1844 -- the advocates of inconvertible currency of a paper circulation, open to all comers when desired;[4] the advocates of a legal declaration that paper money was convertible without other safeguard than legal penalties in case of mischievous transgression; and the advocates of a real security for such convertibility securely in the form of precious metal actually laid by under the same roof, from which its representative bank-note goes forth." --History of England, vol. ii., p. 624.
The cool assumption and the affected condescension to the ignorance of her opponents are amusing, but the strength of prejudice was never more displayed than in the concession "that it was not surprising, when small traders and artisans were told that Paper Money had relieved distress whenever it was tried, and that misery had always attended a contraction of the currency, that they should read with avidity the publications which showed this plainly and logically."
The surprise is that such a concession as this did not open Miss Martineau's eyes, who continues:--
" It is the portion of our currency which is, or may be, concerned in our foreign commerce in a department where our national securities are of no use, and a security must be provided which is of universal value, -- gold."
It is this universal value which utterly unfits gold for an internal money. Our currency must not be "concerned in foreign commerce," for foreign commerce is barter -- manufactured articles in exchange for raw material, -- and even if gold enters into the transaction, it is as a commodity, and not as a money, for our mint coinage is not recognised by the foreigner.
The very first essential of a money is, that it shall have no value in the eyes of other nations, for its prime object is, that it shall remain at home, to fructify trade, facilitate exchanges, furnish the till and the purse, pay wages and housekeeping expenses, and, finally, to give the subject the wherewithal to pay the taxes the State and the Municipality demand of him. With this documentary instrument we might dispense with the sovereign; and the whole coinage might disappear without the slightest inconvenience. France proved this when the Germans abstracted all her gold (p. 83). It was also proved in Mr. Pitt's time, when every guinea was withdrawn from circulation, and nothing but one-pound notes were seen. It must be admitted, however, that the popular feeling, so used to the sight of the precious metals, would receive a severe shock on the introduction of paper; but this was "not an insuperable difficulty in 1797.
Miss Martineau pinned her faith on Mr. Samuel Jones Loyd, the reputed author of the Bill of 1844, and who, as such, evidently understood its workings as well as the "cool calculators," for his fortune is computed at several millions.
He it was who declared that under this convertibility, "the Bank of England could only save herself by the destruction of all around her," and whose celebrated cycle gives a graphic summary of its operation on trade.
" The history of what we are in the habit of calling the state of trade is an instructive lesson. We find it subject to various conditions, which are periodically returning; it revolves apparently in an established circle. Thus we find it in a state of quiescence, next improvement, growing confidence, prosperity, excitement, overtrading, convulsion, pressure, stagnation, distress ending again in quiescence." How these oscillations from prosperity one year to stagnation and distress in the next affect trade is shown by extracts from the newspapers of the day.
Miss Martineau also coincides in opinion with Mr. S.J. Loyd, who is in favour of a "single source of issue." This no one disputes; but the question is, should this single source of issue be entrusted to a private joint stock bank, which has audaciously arrogated to itself the title of Bank of England ? or is it to be a State function, under the control and management of the exchequer ?
Mr. Fawcett, M.P., and Professor of Political Economy in the University of London, published his "Manual of Political Economy," and it is matter for wonder why he should restate all the old dogmas of that school, when what he advances has been already better said; for this I have his own confession: "Mr. Mill's work is at once exhaustive and complete."
In Chapter V. the old error is repeated, an error which vitiates all argument built upon it.
" As a medium of exchange, money should possess an intrinsic value."
If this has not been successfully controverted, this book has been written in vain.
In Chapter VII., "A cursory view may perhaps induce some to believe that the pecuniary loss is inflicted on the home producers of foreign commodities, reduced in price by foreign importation. Such an opinion may be entertained by many, although it indicates a complete ignorance of the principles of international trade." (P. 386.)
Let this be tested by the case of Geneva watches -- "a foreign commodity." The purchasers of watches, comparatively a rich class, are benefited by the cheapness; but will Professor Fawcett assert that the watchmakers of London and Liverpool, comparatively a poor class, are benefited by a free trade in watches, which deprives them of employment, -- an employment that totally unfits them for turning their hands to anything else ?
This holds good regard to German pianos, which can be sold in this country at one-third less than Broadwood can sell them. Certainly a palpable gain to the comparatively rich class who buy pianos; but it will require a stretch of politico-economical logic to prove this a gain to any of Broadwood's men, a comparatively poor class.
The poor matchmakers, too, may be cited as a case in point.
" There can be no right to which a nation has a more defensible or juster claim, than that every individual of the community should be freely permitted to obtain commodities where he can buy them on the cheapest terms, and to sell them where he can realize the highest price." (P. 887.)
Such are the conclusions to which bullionism leads even men of such bold thought as Professor Fawcett. Price ! Money Price !! everything is to be weighed in the gold scales. But are there not things above all price ? The export of coal these political economists view as nationally beneficial, because it brings money into the country; but surely the calculations that one hundred years may see us at the end of our supplies should give them pause. It is vain to urge that coal is inexhaustible. Perhaps physically, yes; but is it commercially ? Even now the extraordinary depths the poor miners have to go appal the imagination. Another question opens upon us. Is there anything that France can give us in exchange as valuable to us as coal ?
The author was struck at Rotterdam to see the quays covered with cattle for exportation to England, and the poor porters of the quay the very pictures of misery and starvation, and yet engaged in taking out of the country food which they could have eaten themselves.
In fact, the political economists devote themselves too exclusively to "WEALTH," as to its modern meaning -- gold and silver.
It is bullionism that leads Professor Fawcett astray in treating of foreign commerce.
" We trust that it is now made evident, that it is not the traders or merchants, but the consumers of imported commodities, who derive the greatest benefit from foreign commerce." (P. 386.)
By the following statement it can be shown that the foreigner is the chief gainer by free trade.
The English farmer, to get a living profit, and to pay his rent (the monopoly price of the land) and taxes, must get ..... 60 shillings.
But the Californian importer can gain his living profit and be enabled to export, as is proved by actual prices for recent arrivals ...... 43
But the competition of free trade compels the English farmer to take the market price ...... 46
The English farmer is a loser of ..... 14
The American is a gainer of the surplus over his living profit of .... 3
The English consumer is a gainer by the cheapness of corn, but the community consists of the farmer and those under him, as well as the consumers. Another consideration is lost sight of by the political economists. It is a question whether, if England was brought up to garden cultivation, foreign corn would be required at -- least for a century.
" But it would not pay."
Certainly not under the gold system; but supply a money based on the prospective labour on this inferior soil now lying waste, and see if we should not approach to something like garden cultivation. That a bad tenure of land is a hindrance is true, but a proper money would obviate this. Perhaps the political economists will give their attention to this subject, and enforce it on the public mind, for, next to money, land is the most vital question.
If a theory is wrong in principle, it is wrong in all its deductions. The importation of foreign guano, when the native guano, thrown into our rivers, might supply our wants, must strike the most casual of observers as a matter for reform. The fine payable to the monied man in the shape of interest on his advances may explain the anomaly, and might not a little protection and encouragement from the State in the way of experiment be advisable, though this proposal must be heresy in the eyes of the disciples of Messrs. Bright and Cobden ?
The Professor is invited to scrutinise the following analysis of profit, and he will see that it is capable of being reduced to its elements -- interest of money, or of capital, as it is wrongly called, and wages.
Take a large engineering establishment. There is the working partner, who brings much experience and skill and practical knowledge, but he brings little money. His share of profit will consist chiefly of wages, and in a lesser degree of interest.
Take a leading shop-keeper in a principal street in London or Liverpool. He receives interest on his money invested on his stock, and he receives wages for his skill in selecting stock, and his daily superintendence and assiduous care. This interest, added to these wages, make up the total of profit.
To go lower in the scale of life. A keeper of a fruit stall in the street has a small capital invested in his apples and pears. His profit is enormous, if we take his capital only into account, but his profit consists chiefly in wages; the care in selecting his fruit and the exposure to the inclemency of the weather must be taken into account.
So, as the chemical analyst brings his sulphuric acid to oxygen and sulphur, must the Professor analyse profit and find that he can eliminate it, and that, disappearing under a distinctive title, it appears again as Interest of Money and Wages, and we have thus the three requisites of production, not as given in Chapter II., "Rent, Profits, and Wages," but as Kent, Interest of Money, and Wages.
This definition of profit would go a good way in clearing the faculties of these unfortunate professors of a science which they have indeed made, owing to their confounding capital and money, a tangled conglomeration of contradiction.
Mr. W.D. Macleod's, of the Temple, is the most recent work, and is entitled "Principles of Economic Philosophy." He has been unable to extricate himself from the groove, and a few extracts will show that he only advances what the old school have been so persistently advocating. He says:
" Small portions of these metals, of definite purity and weight, are manufactured into coins by the State, and a national stamp put on them, to authenticate this purity and weight. In England these coins are called shillings, crowns, .sovereigns, and so on. Their true nature then is easy to be understood. They are simply bits of metal, whose weight and purity are attested by the stamp of the State: they are absolutely nothing more."
Absolutely nothing more ! -- what ! not a money denomination ?
" Why, I ask myself, must a deficiency of gold be regarded as an event more alarming or more disastrous than a short harvest, or a scanty supply of cotton, or scarcity of silk ?"
Because it is legal tender.
" The result I arrive at is simply the demonstration that currency obeys the ordinary laws which belong to all commodities."
Currency or money is not a commodity.
" A nation is not the poorer for possessing little gold, nor the richer for having much: and I earnestly beg you to keep this truth in mind."
If the sovereign is to be the only money, the country is the richer which possesses much gold.
"So says the mercantile theory, and so say the newspapers every day. They hail with delight every arrival of gold from Australia."
And they may well. We may all recollect the fillip given to trade, -- the burst of prosperity which attended the Australian discoveries.
But all this mere reiteration of Professor Fawcett and Mr. Mill is answered, and Mr. Macleod may be summarily dismissed.
Professor Bonamy Price, of Oxford, is the most energetic defender of the gold theory at the present day, and the latest in the field. He opens his work with the appalling announcement, that to commence an investigation of the principles of currency, is to enter a region which may justly be described as chaos. "The very sound of the word currency makes a man turn his back and shut his ears; his immediate instinct is to fly from a subject with which he associates such unendurable jargon." Suppose for the word "currency" we substitute the word "money," and perhaps we may come to some principle that will replace this unendurable jargon by clear and definite ideas.
Let us fix in our minds without a doubt that the sovereign is the only money we have in England, and that all currency consists in "promises to pay sovereigns." This clears away a good deal of fog.
The policy of the Times has been to discourage all attempts to investigate into first principles, and, with Professor Price, to frighten us all "from looking into the question as one beyond the powers of the human intellect;" but these repeated panics have at last compelled attention to this conventional instrument, a machinery invented by the various nations, for the obvious purpose of giving them the justice of barter, without its inconveniences. May not all this jargon have arisen from a vain attempt to make one commodity a money ? May not bullionism be at the root of all this confusion ? May we not be the victims of a prejudice, handed down without question from generation to generation ? May not civilization be clamouring for a circulating medium capable of expanding with the expanding production created by machinery, and increasing control over the powers of nature revealed to us by chemistry ?
Lord Overstone must smile when he sees professors of political economy rush forward with so much disinterested zeal to support the principle on which Sir Robert Peel with his co-operation founded his Bill.
Is not Bishop Berkely a more disinterested authority than Lord Overstone ? and he asks "whether the prejudices in favour of gold and silver are not strong, but whether they are not still prejudices ?" And further, "whether paper doth not by its stamp and signature acquire a local value, and become as precious as gold and silver ?" Mark the word local, that money is only valuable to the nation who issues it, and being meant only for internal trade, is not available for foreign commerce. The Professor, however, is quite right when he questions the fitness of bankers and bill-brokers to dogmatise on this question, or esteem as authorities great practical City men -- men of money. This class is too deeply engaged in the turmoil of daily transactions, too absorbed in details, too busy with sums of money, to study principles of money. They should no more be looked to for guidance than attorneys for enlightenment on the principles of jurisprudence.
The professor continues: "Whatever else may or may not be money, coin is at any rate money, and coin is a definite concrete substance (or, as the vulgar have it, something that rings). The derivation of the word proclaims this fact, it coming from the word Monetor, whose temple was the mint in which Roman coin was made, -- the stamped pieces of metal which constituted the currency of Rome. Thus the word money implies minting. Here we are on solid ground," etc.
Here we are referred for example and instruction to the most barbarous times of a barbarous people, for in the view of true civilization the Romans were barbarians, and this on a question of faith of man in man; but what is this but to tie down with golden fetters the enormous development of production we now see, and to refer us to a time of feebly-developed industry, and to a nation who, under the cursed thirst for gold, attacked and plundered neighbouring nations -- for we find them taking city after city, where their first search was for plunder in the shape of treasure, as in the case of Syracuse and Corinth.
Surely the Professor will not adduce as an example these, the greatest brigands, carrying slaughter and fire over the whole known world, and whose unprincipled encroachments in every direction are yet passed without comment by all historians. Credit must have been as incredible to them as it was to M. Esquirol's savage. To him credit or a paper representative was a mere make-believe. Captain Franklin, in his "Overland Expedition," tells us he could not make the Indians of Lake Winnipeg believe that his slip of paper, a draft on Quebec, was really on presentation so many blankets and fowling-pieces. They, like our bullionists at home, did not believe in "filthy rags." M. Esquirol informs us in his "English at Home," that Deerfoot, the Indian runner, was so strict a disciple of his school that "displaying extreme suspicion in matters of self-interest, he for a long time carried about with him all his heavy fortune in gold and silver, unwilling to exchange it even for bank notes, which he considered valueless paper." There are certain fourteen millions of Peel's own issue that, on Deerfoot's principle, are valueless. Deerfoot and Lord Overstone could have hob-nobbed together to his lordship's toast, "In England, gold is our only money."
Mr. Price resumes:-- "Every arrival from Australia is hailed with delight in England; manifestly, the country is so much the richer, the money market is so much the stronger. But those who talk in this manner totally forget that gold has to be paid for like everything else."
Why is all this delight ? The reason is plain. Because the law says that this gold is our money, and that it is as indispensable as blood to the body. And this is the excuse for what would otherwise be the absurdity of the mercantile theory -- that theory, holding that trade only to be profitable which brings gold and silver into a country encouraged and fostered foreign trade, because there might possibly be balances paid in the precious metals.
" The inland or home trade," says Adam Smith, "the most important of all, the trade in which an equal capital affords the greatest revenue and creates the greatest employment to the people of the country, was considered as subsidiary only to foreign trade. It neither, the advocates of the mercantile system averred, brought money into the country, nor carried any out of it. The country could never, therefore, become richer or poorer by means of it, except so far as its prosperity or decay might indirectly influence the state of foreign trade." This idea still pervades the mercantile mind. What congratulations if a few hundred thousands are added to the stock of gold in the Bank of England, and what dismay if as much is abstracted !
As long, then, as this metal is invested with monetary power, so long will its acquisition be looked upon as a matter of life and death. Mr. Price is landed in strange results in following out this theory:-- "Above all, the construction of railways in 1847 had been carried on to an extent far exceeding the savings of the country." The savings, it is to be presumed, taking the shape of gold saved up and deposited in banks.
Now, why were not the railways carried on ? There were stoppage the rails and the locomotives; there were the bricks, slates, and flags; lime in abundance; there were the engineers and the contractors, all ready and eager to complete the railways; but, above all, there were gangs of industrious, sturdy men, able and willing at good wages to pile up the embankments and to excavate the cuttings; and, finally, there was the food, the lodging, and the clothing for these men. And why should they not be employed in making these useful works, instead of being dismissed into compelled idleness by some occult power that paralyzed their arms, dismissing them to hunger and privation ? This question must be urgently pressed upon Mr. Price. If the food and the lodging and the clothing of this army of useful men were not, by the veto of some mischief-working magician, suddenly in one week annihilated, why should not the work go on ? -- this army, which in one reign covered the country with a net-work of railways.
Mr. Price gives us the reason why they could not be completed: the magician stands revealed. "The railways could not be completed by those who had committed themselves to the shares." Committed themselves to the shares ! This being interpreted, means that "the shareholders could not meet their calls." They could not find the money: they had not the sovereigns. "The resources of the banks were crippled."
At the hazard of being accused of damnable iteration, the reader must please bear in mind that the sovereign is our only money; that bank notes are merely certificates that the bank has in store sovereigns to honour them when presented; that convertibility demands that there be no more notes out than sovereigns in: that bank notes are "promises to pay," and that all bills of exchange, promissory notes, all currency, i.e., paper running current, is promise to pay sovereigns. These calls then could not be met. Why ? Because the gold was not there, and the gold being exported or hoarded, the railways were stopped.
To quote Professor Price further:-- "The resources of the banks were crippled." Those "resources" -- what circumlocution have we here ? -- were sovereigns of the full weight and fineness, and they had none, for the fountain head, the Bank of England, had none. "The shareholders had emptied out their accounts, and borrowed where they could from the banks, instead of bringing in deposits. Shares were unsaleable except at ruinous loss." "Now was the time for the hard calculator to seize his opportunity, to demand 15 to 20 per cent, for the gold which he has prudently reserved," to use the words of the Times.
" But the fact to grasp in all this disorder is, that the shareholders had expended their property in setting labourers to work, who consumed the wealth and made diverse constructions on the ground." What wealth had the labourers consumed ? Why, the bread and potatoes, the beer and the spirits which were there for them to consume; and Mr. Price will surely concede that, even if dismissed from their work (useful or useless is not the question), they must still be fed, and lodged, and clothed.
" Gold, notes, banks, commercial firms are mere machinery; they are not the wealth of a nation." Mr. Price may call gold machinery if it so pleases him, but it is rather important machinery, if in it only we can pay our debts and taxes.
" But it is true, nevertheless, that the effects of a crisis last for a long time, and this is the great truth to remember, because a crisis is only a culminating point of a long destruction of capital which has preceded." Capital has not been destroyed. A panic ravages no fields, destroys no machinery, burns no mills, blocks up no harbours, trenches up no railways. A panic is a mere rush of all creditors for gold, and the gold, gone or hoarded.
" Amidst premiums and unlimited markets for stocks and shares, all appeared to be growing rich together (in America), and spent, that is, consumed, goods profusely." The goods were there: why should they not be consumed ? "If a people choose to eat and drink up all their property in one year." This is simply impossible. People can only eat what food there is, and if it is there, why not consume it ? The political economists confound the individual with the nation. An individual may, by getting into debt and not paying, rob his neighbour; but this is impossible with a nation, for the nation consists of creditor as well as debtor. The simple fact stares us in the face, that if food, lodging (houses), and fuel are there, they should be consumed. Why accumulate ? For happiness and comfort consist in the consumption of such necessaries. Mr. Price is thinking of some miser putting sovereigns by in a strong box; but the present question is about wealth, which our Saxon ancestors properly spelt wellth, or all things conducing to well-being.
" A country cannot be well injured by the mere fact that some banks and mercantile houses have been brought to a stoppage."
This is in direct contradiction to his address to the Chamber of Commerce in Liverpool. In this he told his audience:--
"It makes one shudder to recollect the agonies which convulse trade at these dreadful seasons. The crash of falling houses, the paralysis and distrust which arrest commerce; the danger hanging over eminent banks and distinguished firms; the difficulty or even impossibility of discount; and these calamities and anxieties revolving in recurring cycles," etc. Here he might have added the consigning hundreds and thousands of labourers and artificers to starvation, the very men who in half a century had made 20,000 miles of railway.
The political economists strenuously advocate accumulation of capital (the old confusion of terms ! they mean money), but to what end ? Can a man do more, however great his wealth, than eat, drink, and sleep, cultivate his mind, enjoy the society of his friends ? and does all this require inordinate wealth ? Pope, though only a poet, seems to have arrived at sounder and more truthful convictions than these worthy successors of the philosophers of Laputa:--
" What riches give us, let us now inquire,--
Fire, meat, and clothes. What next ? Clothes, meat, and fire,--
Would you have more ? Would you more than live ?
Alas ! 'Tis all that Rothschild's wealth can give."
Baron Rothschild's name is substituted, for he is a living example how metallic money aids the accumulation of high financiers, and yet even the Baron would find it difficult to eat two dinners or wear two coats; so that with all these elaborate inquiries, we come to the primitive foundation of all wealth food, lodging, clothing, and fuel. The millionaire can make a palace of his lodging; he can ransack the ends of the earth for all delicacies; he can wear the finest of broadcloth (nota bene, he cannot wear two coats or eat two dinners), but it comes after all to food, lodging, and clothing, and the poor "navvie," or agricultural labourer, wants no more; but the Professor upholds a system which deprives him of the common necessaries of life, hurls him to a state of destitution, and, more than all, keeps him idle, stopping his useful work.
Professor Price concludes his "Currency and Banking" with this advice to the people of the United States, warning them of the terrible consequences of paper money, if they should adopt it:--
"A permanently inconvertible currency science pronounces to be utterly destitute of justification. The continuance of such an indefensible practice in one of the most important branches of social administration, would place that great nation on a level below the intellectual standard which it has won in the world. Were it to go on, their descendants would speak of the want of intelligence it would seem to imply, as the wonderful spot on the great reputation they had inherited.
" The one vital condition for the successful carrying out of this operation is, a general and resolute determination of the American people to have a currency worthy of themselves, and to resume specie payment in earnest."
There is a flavour of bigoted self-complacency in this extract, which is manifested also by Miss Martineau and Mr. Bentham, as if the advocates of different views were objects of pity, as labouring under a delusion, and upholding extravagant and irrational theories.
Amongst other writers, Mr. W. Stanley Jevons has written on "Money and the Mechanism of the Exchanges," which, however, is principally a réchauffé from Adam Smith. In his preface he quotes with approbation Mr. Herbert Spencer, who, in his "Study of Sociology," complains that political science is continually discussed by those "who never laboured at the elementary grammar or the simple arithmetic of the subject." It may be doubted whether Mr. Jevons's work is not a new illustration of the truth of the assertion.
Mr. Jevons knows one gentleman "who holds that exchequer bills are the panacea for the evils of humanity." It is absurd to assert that the issue of exchequer bills would cure any but financial evils, and no one could be bold enough to say that this would be a cure for all the evils of humanity; but it is maintained that paper money based on labour could cure much commercial evil, and this is well put by the late lamented Rector Twells[5] in his excellent pamphlet previously quoted: "How can paper money increase the wealth of a nation ?" a copy of which has been forwarded to Mr. Jevons. In this pamphlet he will find Bishop Berkely, Edmund Burke, David Hume, Benjamin Franklin, Sir Walter Scott, and Sir Archibald Alison brought forward as authorities in favour of paper money.
Mr. Jevons heads his eighteenth chapter, "Want of Elasticity in Paper Money," and proceeds:-- "A further objection to a paper money inconvertible into coin is, that it cannot be varied in quantity by the natural action of trade. No one can export or import it like coin, and no one but the Government, or banks authorized by Government, can issue it or cancel it, export or import it." This is to lose sight of a principle, which the bullionist utterly ignores, that it is of the very essence of a money for internal trade that it shall neither be exported nor imported. Mr. Pitt's one-pound note was never exported, for the plain reason that it had no value in the eyes of the foreigner: the sovereign, on the contrary, is often exported, leaving us at home gasping for want of the wherewithal to meet debts and taxes. Moreover, Paper Money can be cancelled.
John Locke thus illustrates the jealousies, the ill-blood and the struggles between debtors and creditors, when the supply of money is suddenly curtailed. "If one-third of the money," says he, "were locked up (or exported, as we see in these days), the people, not perceiving money to be gone, would be jealous one of another, and each would employ his skill and power the best he could to retrieve it again, and bring it back into his pocket in the same plenty as before. But this is but scrambling among ourselves, and helps no more against our wants than the pulling of a short coverlet will, among children that lie together, preserve them all from the cold. Some will starve, unless the father (the Government) provide better, and enlarge the scanty covering (provide more money)."
Another principle to which Mr. Jevons's attention is invited is, that money, quasi-money, never enters into the account of foreign trade, for this simple reason, that the foreigner does not recognise our sovereign as money. With him it is only a disc of gold of a certified fineness and weight, which certificate he accepts, but altogether without acknowledgment of the money denomination. To the foreigner the king's head and the royal arms on the reverse are nothing. Foreign trade is barter, and even if gold enters into a transaction it is as a commodity simply.
" Some persons have argued that it is well to have a paper money to form a home currency, which cannot be drained away, and will be free from the disturbing influence of foreign trade. But we cannot disconnect home and foreign trade, except by doing away with the latter altogether. If two nations are to trade, the precious metals must form the international medium of exchange, by which a balance of indebtedness is paid." (P. 237.)
If foreign trade is barter, it is an exchange, say, as far as this country is concerned, of manufactures for raw material; as in the case of America, manufactures against raw cotton; of Brazil, against sugar and coffee; and what balances there are, are settled in gold and silver, as commodities; and even these balances lie over and are calculated in produce.
" Currency is to the science of economy what the squaring of the circle is to geometry, or perpetual motion to mechanics." (P. 237.)
And this will always be the case as long as the wild and barbarous idea is maintained, that gold is to be the favoured commodity -- the instrument of exchange for all other commodities.
" Gold and silver, in short, continue to be the real measure of value, and the variable paper currency is only an additional term of comparison which adds confusion."
It is labour, and not gold and silver, which is the measure of value. An American merchant gives three or four bales of cotton for one bale of cotton manufactures, because of the additional labour embodied in the latter.
" There are men who spend their time and fortunes in endeavouring to convince a dull world that poverty can be abolished by the issue of printed bits of paper." (Preface.)
It depends upon what authority that paper is issued, and whose signature and stamp may be affixed. The postage stamp is only a bit of gummed paper, but no one regards what the material is as long as its postal power is recognised; a warehouse warrant is only a bit of paper, but its significance and value is derived from the goods warehoused.
" I know one gentleman who holds that exchequer bills are panacea for the evils of humanity."
Not exactly so. The gentleman doubtless did not look upon exchequer bills as a cure for the small-pox; but it is a fact, perhaps not known to Mr. Jevons, that exchequer bills are now currency; they are received in payment of customs, but, unfortunately, the sum is restricted to a hundred pounds, and so of little avail for general circulation. Perhaps we may be favoured with a reason why the nation should not make its own credit negotiable, by breaking these notes into small sums, say of one pound, and, if the proposal may not shock Mr. Jevons's nerves, into ten shilling notes, acting on Bishop Berkely's hint, "Whether the principal use of cash be not passing from hand to hand, to answer common occasions of common people, and whether common occasions of all sorts of people are not small ones ?"
" Another class of persons have long been indignant, that in this age of free trade, the Mint price of gold should still remain arbitrarily fixed by statute." (Preface)
This fixing the price of gold makes it sometimes the cheapest article the foreigner can take, -- consequently, take it he does. Result -- gold diminished, the notes are cancelled, and trade suffers syncope from a deficient supply of blood.
" A member of Parliament lately discovered a new grievance, and made his reputation by agitating against the oppressive restrictions on the coinage of silver at the Mint." (Preface.)
If it be true according to Bishop Berkeley, that the principal use of cash is for the common occasions of all sorts of people, and that the common occasions of all sorts of people are small ones, Colonel Tomline's proposal is reasonable -- more shillings for small shilling transactions.
" No wonder so many people are paupers, when there is a deficiency of shillings and sixpences, and when the amount of the rates and taxes paid in a year exceeds the whole sum of money circulating in the kingdom." (Preface.)
When everything has to be bought with shillings and sixpences, is it not of vital consequence that there shall be a due supply of shillings and sixpences ? Bishop Berkely asks, "Whether business at fairs and markets is not often at a stand, and hindered, even though the seller has his commodities at hand, and the purchaser his gold, yet for want of change ?" And as silver is only legal tender for forty shillings, the plenty of silver coinage, though convenient for the purse, the till, and for wages, would not affect prices. Mr. Jevons has been too much absorbed in literary pursuits, or he would know that the difficulty of getting silver and small change to pay wages on a Saturday night is exceedingly great.
The large supply of silver now so complained of in India, would, if coined into rupees, rescue the poor Ryot from the rapacity of the Schroffs.
Both Mr. Jevons and M. Chevalier, who is brought forward as an authority, fail to give a true, full, and explicit definition of money. M. Chevalier defines pieces of money as "ingots, of which the weight and fineness are certified." This is not full and explicit; he should have added, "and invested with a money denomination." This is the grand function which makes these ingots into money, withdrawing them from the category of commodities. Mr. Jevons's definition is, "Coins are ingots, of which the weight and fineness are certified by the integrity of designs upon the surfaces of the metals." This, too, is imperfect. The sovereign, moreover, is deficient in the primary distinction of a coin, inasmuch as it does not state what its denomination is, namely, a sovereign, or twenty shillings. This is left to be inferred, but surely its distinctive function should be clearly stated on its face.
A valid objection to gold being chosen is its liability to abrasion. Mr. Lowe confessed in his budget speech, that one-third of the sovereigns were light, and yet on the tax-note there is always attached a warning, "No light gold taken," -- a most serious objection, but passed over in silence.
M. Louis Blanc, in his "History of the Revolution," referring to the assignats, assigns as the particular function of money that it releases us from barter (and gold money is barter) and enables us to effect exchanges with a note of credit. As to his objection that it may be issued ruthlessly and to any amount, this is utterly futile, for the State is to issue it, and to receive it in quittance of taxation, and the State would consequently guard against the depreciation arising from over-issue. As to superabundance from the fecundity of the mines, let us suppose the fecundity too great, and some discoverer should at last come on the matrix !
" Non qu'ils se furent illusion sur les avantages particuliers attache's a l'emploi des metaux precieux comme intermediaires des échanges; ils n'ignoraient certes pas qu'un des inconvenients du papier-monnaie, meine lorsqu'il a un gage solide, est de ne pas porter ce gage avec lui partout ou il se presente, et qu'un autre de ses inconvenients, plus serieux encore, est de pouvoir se creer a tres peu de frais, presque a volonté, d'ou résulte de la parte des gouvernements une tendance funeste a le multiplier outre mesure, ce qui entrame son avilissement et bouleverse les transactions."
Not that they illusioned themselves on the particular advantages attached to the use of precious metals as intermediaries in the exchanges; they of course did not ignore the fact that one of the inconvenients of paper money, even when it has a solid pledge (security), is to not carry this security along with it wherever it goes, and that another one of its inconvenients, more serious even, is that it can be created at little cost, almost at will, from which results on the part of governments a disastrous tendency to multiply it beyond measure, which leads to its degradation and upsets transactions.
Another French political economist, Jean Baptiste Say, also bears witness to the peculiar benefit derived from paper, in releasing the precious metals from their use in internal trade, and making them available for foreign exchanges. It is also less expensive.
" Tellement qu'une nation qui fait usage d'un papier-monnaie peut employer toute la valeur des metaux que reclaimeraient ses monnaies, a d'autres usages, et n'en jouit pas moins d'un excellent intermediaire dans toutes ses transactions, sauf peut-etre les plus petites. Les metaux dont elle n'aurait pas besoin pour ses échanges, servent alors, soit comme utensiles, soit plutot comme objets d'exportation, et forment une addition a ses capitaux productifs. C'est un avantage que nous apprecierons avec plus de soin lorsque nous e'tudierons les signes representatifs de la monnaie et ses autres supplémens."
So much that a nation making use of paper money can use all the value of metals that its currencies would claim, for other uses, and still continue to enjoy an excellent intermediary in all its transactions, except maybe the little ones. The metals which it would not need for its exchanges, can then serve, either as utensils, or else as export objects, and form an addition to its productive capital. It is an advantage one will appreciate with more care when we will study the representative signs of money and its other supplements.
The extravagant issue of assignats in the French Revolution has thrown back the paper money question fifty years.
Paper money, like steam, is a powerful agent for mischief unless under proper control, and however long the nations may struggle under their chains, the time must come when the question of a paper money, expanding with wealth and population, and guaranteed against extravagant issue, must be debated in Parliament, and discussed in scientific congresses and mercantile associations.
M. Louis Blanc, after portraying the enormous evils inflicted on France by the assignat, yet is alive to the objections to metallic money:--
" Et puis, l'on sentait bien, au fond que les avantages propres au metal ne le rendent preferable an papier que dans un ordre social imparfait, que dans un regime qui, consacrant le separation des intérets, se pretant a leur antagonisme, fait de la défiance l'inevitable contrepoids de la fraude et met a coté de l'impatience de gagner, la peur de perdre; -- oui, c'est justement parce que la monnaie de métal possede une valeur réelle, parce qu'elle est a la fois marchandise et signe, parce que la faculte de l'etendre ne contre-balance pas celle de la resserrer, c'est justement a cause de tout cela qu'il suffit de l'accaparer pour etre maitre du mouvement des echanges, c'est a dire de la vie, de l'ame, de la respiration de l'industrie." --Histoire de la Revolution, vol. iv., p. 146.
And then, one could feel it, deep down that the inherent advantages of metal rendered it preferable to paper only in a perfect social order, only in a regime which, consecrating the separation of interests, lending to their antagonism, makes of defiance the inevitable counterweight to fraud and puts aside the impatience to win, the fear to lose; yes, it is precisely because metal money possesses a real value, because it is at the same time merchandise and sign, because the faculty to extend it does not counter-balance that of retraining it, it is precisely because of all this that it is only required for one to monopolize it to become the master of the trade movements, that is to say of the life, the soul, the respiration of industry.
" Un ordre social imparfait !" in other words, the resort to the metals indicates a low civilization, and indeed it maybe a question whether we are sufficiently advanced to avail ourselves of an instrument, pre-supposing great honesty in the government of the nation using it.
There is a great tendency in these days, owing to the profits of trade having been so seriously encroached upon, for men to withdraw from productive works, and to devote themselves to investments in foreign funds, and speculations generally. M. Louis Blanc depicts in lively colours the evils of this perverted activity, and on this topic speaks more reasonably than when descanting on the precious metals:--
"Le jeu de l'agiotage n'est pas precisement illicite, mais il est immoral, et c'est avec justice que les hommes le s'y méprisent, qu'ils refusent leur estime aux egoistes qu'en font metier. La raison en est simple: c'est que la nation ne gagne rien au deplacement de fortune que l'agiotage peut occasionner; c'est que l'industrie de l'agioteur ne produit aucun creation réelle; c'est que les capitaux qu'elle emploie son faits pour salarier, pour faire naitre des nouvelles productions, ou fabriques des nouveaux ouvrages: en un mot pour servir la societé et non pour etre prodigues ou risqués, dans des speculations frivoles, ou l'avantage de celui que gagne n'est fondé que sur le malheur de celui qui perd, sans qu'il y ait pour personne aucune autre profit."
Professor Bonamy Price, in a previous page, questions the fitness of bankers and bill brokers to be esteemed authorities, questions their authority to dogmatise, because of their time and attention being absorbed in details, and, because of their being too deeply engaged in the turmoil of daily transactions, -- in fact, too busy with sums of money to look into the philosophy of this great factor in the transactions of poor as well as rich.
Mr. John Dun, a Warrington banker, has published a pamphlet full of most valuable details respecting the position, not only of the Bank of England, but of all the banks in the United Kingdom. But whilst showing in the clearest manner the precarious state in which all banking establishments are placed under the present system, he fails to mark that the leading principle, the key-stone of the Act of 1844, is to maintain the convertibility of the note.
Mr. Dun has not the courage to give his adhesion to Mr. Ruskin's idea, that money must be documentary, and that the question of the future is, "Paper: how and in what quantity is it to be issued ?" Here is the description of the working of what he still upholds, namely, convertibility:--
" It must be confessed that our monetary system is a very peculiar one.
" Our whole scheme of credit and banking may be likened to the familiar peg-top of the schoolboy, which gyrates upon a small metallic point sufficient to support it so long as it spins with rapidity, but inadequate to the task when the rotatory force is relaxed. Credit is the rotatory force of our financial system. So long as this force is unimpaired the system spins merrily on, but when it fails the insufficiency of the small metallic basis becomes only too apparent, and the fabric topples to its fall. Metaphor apart, the case stands thus: bankers hold a certain amount of deposits, which I have estimated at nearly £600,000,000. With part of these they accommodate the customers who discount bills with or take advances from them. Another part -- generally a fourth or a third they hold in Government or other good securities, and in cash at call or short notice with other bankers or bill brokers.
" Such is the development of credit in this country, that it has been roughly calculated that 97 per cent, of the money transactions of the nation are ordinarily effected by cheques, bills, and other expedients."
Such being the case, the wonder is that the mercantile world ever recovers confidence. In fact, it is found that confidence after each panic is slower in reviving and more easily shaken.
" It certainly cannot be good management which brings the leading bank of the kingdom -- the pattern bank as it ought to be periodically to such abject straits that it is only saved from the crowning disgrace of failure by the arbitrary suspension of the law of the land.
" Would not the management of any other joint-stock bank be condemned, if, when a crisis came, it was unable to carry on its business without the assistance of a loan from Government ?"
The Bank of England is here most unjustly blamed, because, under impossible conditions, it breaks down in vain efforts to maintain the convertibility of the note. It is not the bank, but Sir Robert Peel's impracticable theory, that is at the root of all these accusations, recriminations, and captious criticisms.
The Directors are, however, open to the charge of persisting to work this pernicious system without a protest without a remonstrance not a symptom of relenting at the anguish and privations of thousands, and blind to the terrible consequences to the nation. A most damning proof of the opposition of their interests to those of the commercial world is afforded by the fact, that in the year 1866, when the country was convulsed by the Gurney panic, they actually declared a dividend of 11½ per cent., as against their usual rate of 10 per cent. They remind us of Charles Lamb's Chinaman, who could only roast his pig by burning his neighbour's house down.
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"Open to all comers." Is not this an unwarranted misstatement ? This was advocated by none.
5 How can Paper Money Increase the Wealth of a Nation ? by the late Rev. John Twells, Rector of Gamston, and Prebend of Lincoln Cathedral.
