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THE NEW PHILOSOPHY
OF MONEY
A PRACTICAL TREATISE ON THE NATURE
AND OFFICE OF MONEY
AND THE CORRECT METHOD OF ITS SUPPLY
BY
ALFRED B. WESTRUP
Author of '■'■The Finmicial Problem''^ and '^^ Citizens' Money
ALFRED B. WESTRUP.
'^ MINNEAPOLIS
470 SYfiDfcAltBaJfiaiD^ PUBLISHER
IS95
COPYRIGHT, 1895
BY
F. E. LEONARD
iJ ... V\G-
CONTENTS.
Preface, ......... 7
Introduction, ...... . . 9
A Synopsis of the Philosophy of Money herein presented.
General Effect of the Artificial Limit to the Volume of
Money, ...... . . ig
The effect, in case facilities are provided for an abundant supply
of money contrasted with that resulting from the existing artifi-
cial limit The present money a makeshift, not the result of
provision for a medium of exchange The business people,
and not money-lenders should make provision for a medium of
exchange, pure and simple Interest in such a medium is uni-
versal.
Exchange, ........ 24
The indispensability of money Who should provide it An
all cash system; hence book credits abolished and bad debts
avoided The Mutual Credit System irresistable Will defeat
all opposition.
Not Enough !Money, ...... 28
Money being artificial, its supply can be increased It results
in a credit system that is destitute of principle A matter of
guesswork Its supply by banks a matter of favoritism and
uncertainty, engendering false pretense and defeating honesty
The relation of volume of money to prosperity, justice and
morality The supply of money Postponing pay-day
The transferability of secured and unsecured credit The sub-
stitution of the former for the latter.
Too Much Money, .32
The most perfect elasticity under the Mutual Credit System
Neither too much nor too little Inllation The gold re-
demption superstition The abandonment of all commodity
money a necessity Establishment of a credit monev system
indispensable to progress.
Cheap !Money, . ..... '35
A review and criticism of articles published in the "Century
Magazine."
The "Per Capita" Delusion, . . . . 39
The Treasury Report on circulation unreliable Twentv-five
dollars per capita, but only one dollar in circulation for every
389182
4 CONTENTS
sixty-six dollars of wealth Interest of borrowers and the com-
munity not served by the per capita theory The number of
times in a year that all money must pass into the hands of capi-
talists and government officials, besides performing the ordinary
functions of a medium of exchange. Are they knaves or fools?
Credit, ......... 43
Importance of correct definitions and their mutual acceptance
Several new definitions Secured and unsecured credit
Advantages of the former Credit money and commodity
money Exchanges with the latter are barter Paper money
(secured credit) better than book credits (unsecured credit)
The prevalence of the latter the result of sheer ignorance
Quotation from "Mutual Banking."
Cost, ...... ... 49
Ruskin's definition of cost ^Josiah Warren, cost and true civil-
ization Cost defined Capitalism and the Mutual Credit
System Cost should be the limit of price.
Value, ......... 50
Market or exchangeable value defined Exchangeable value ex-
pressed by means of a conventional monetary unit, an abstrac-
tion Utility value defined Utility value without exchange-
able value Monopoly and value.
Competition, ........ 53
A criticism of the "Twentieth Century's" definition The pres-
ent economic system not "the competitive system" Legal
tender a means of enslaving the people Control of money
the basis of monopoly Defeats competition Quotation
from "Instead of a Book" The "Twentieth Century's blunder
Foot-note from "Special Legislation the Bane of Agricul-
ture."
Usury — Interest, ...... "57
The Bible doctrine of usury Its inequity susceptible of math-
ematical demonstration The ethics of interest The obtain-
ing of something for nothing "Great financiers" and political
economists silent on this point Quotation from "The Finan-
cial Problem" Mr Bennett's great article on the subject A
startling calculation.
"We Must Have Government," .... 64
An unphilosophical proposition Man's ignorance, hypocrisy
and audacity The consequent penalties Humiliating-——
The beginning of wisdom A thesis of Democracy Philis-
tines and foot-pads Commentaries for paternalists and moral-
ists We must have government, a superstition What does
history prove.' Ignorance the cause The Anarchistic phi-
losophy Opposed to the methods of force Definitions of
anarchy Burke's dictum Anarchists versus the abettors
of the methods of force Inexcusable perversion of fact
CONTEXTS 5
The inviolability of person and property The abolition of
government, a bugaboo The thesis — the abolition of the State
Anarchism and the bomb tlirower The money power
must release its grip Government must cease to control or
regulate the issue of money Government control only a relic
of the previous royal system Tom Moore's opinion of gov-
ernment Quotation from his poem on corruption The
Galveston IVcws on paternalism Lewis II. Blair on liberty and
competition in monetary affairs American independence an
Anarchistic movement "Preserve our institutions" the real
purpose of government The Wcstiiitnster' Rcviev^^s history of
money panics in England Their origin traced to the monop-
oly of the Bank of England.
Monopoly, . . . . . . . , 91
Monopoly defined Prevailing erroneous notions Free
money an effectual remedy for all monopoly and corruption.
"Measure of Value," ...... 94
Wanted — a champion who can successfully defend the dogma
The absurdity shown up Not a mathematical quantity
Redemption by the "standard" method and by the Mutual Credit
plan contrasted Gold and its rival The first time in history
The alTirmative position examined The storekeeper's money
Redemption by the two methods still further considered The
function of money and that of the denoininator or monetary
unit separate and distinct Controversy between the editor of
the Galveston Ne-ws, the editor of Liberty, Mr. Wm. B. Du Bois
and the author.
Controversy with ISIr. Edward Atkinson, . . 121
The Mutual Credit System, . . . . . 13S
Illustrated by reference to mutual insurance A danger that
involves all An unavoidable necessity Protection that is
not available in the case of paper money IMoncy different
from, yet more importaiit than any other instrument Xo con-
flict of interest, hence the adaptability of the mutual plan in the
supply of money Why Greenbackers and Socialists advocate
government control of money The error pointed out The
Mutual Credit System the only practical way of carrying out
the will of the people Government methods those of brutes
and savages The best system of money will not be established
by government, but in spite of it The Mutual Credit Sys-
tem not devised under the supposition that all men are honest,
but because they are not A method that is not practicable
Jumping to conclusions What diminishes burdens and adds to
comfort A provision against lack of wisdom and honesty and
other difficulties Uniformity provided for Why the mutual
plan is preferred in life insurance For like reasons it should
be used in the supply of money Government control of
money a menace to what little liberty w-e enjoy A plea for the
new system The adoption of honesty as the best policy
6 CONTENTS
The borrowing of money under the new system will not be bor-
rowing capital as under the present sjstem; hence the ground
for the justification of interest disappears Cost of issuing pa-
per money Ex-Comptroller Hepburn's testimony on the sub-
ject The General Clearing-House feature.
Conclusion, ........ 147
Inadequacy of the present medium of exchange The most
conspicuous fact in the study of economics The alternative
presented by the "great financiers"—- — They have no solution to
the money question Criticism of the Westminsfer Review
articles Tv.o money panics are brought to an end in England
by the issue of Exchequer Bills The superiority of the Mutual
Credit System The subtreasury scheme Inconsistency in
the statement by the \Vestmi71ster Review What free trade in
banking would inevitably lead to Prof. Francis A. Walker
on bimetallism His position criticised Correspondence
with Prof. Wm. W. Folwell Prof. Folwell criticised Pop-
ular fallacies considered Coin not acceptable as money in the
settlement of foreign balances The origin of "wildcat" banks
How they could have been extinguished without govern-
ment control Loss to depositors in national banks probably
greater than loss from "wildcat" banks A plea for liberty
The land question subordinate to the money question
Mr, J. K. Ingalls criticised The exchangeability and pur-
chasing power of money The need of the hour Personal
effort, energy and thrift unavailing Nothing goes but the
accumulation of wealth.
Appendix, . . . . . . . . 184
Articles of incorporation and by-laws of a Mutual Credit Associ-
ation Explanations regarding the organization of Mutual
Credit Associations and the General Clearing-House Association.
Note — The figures in parenthesis throughout this work are for
the purpose of calling attention to the paragraph of that number.
PREFACE.
This work is an investigation as to the nature and office
of money; what constitutes the most satisfactory money, and
the best method of providing for its supply. It is necessar-
ily, therefore, an exposition of the errors and fallacies that
are accountable for the prevailing unsound notions and the
apparently inextricable confusion that characterize the sub-
ject, and are responsible for the existing absurd money
systems.
The title, The New Philosophy of Money, might, per-
haps, better have been formulated, The Philosophy of Money.
Putting it in this positive form affirms that which it claims
to be — the correct and only sound theory of money. A
philosophy may be knowledge imperfectly understood, and
contain errors, but the philosophy of a subject should be
knowledge which has been demonstrated. It should be
complete, and so formulated that all error is excluded. The
New Philosophy of Money has been adopted as the title, for,
while it is an old subject, the philosophy here presented is
not only correct, but it is new.
The reader will find herein treated all the facts and the-
ories that have a bearing on the subject, including that diplo-
matic phase of it called "finance."
Heretofore, the end that should have been sought — a
faultless medium of exchange — has been lost sight of; and
every writer who has presented a new theory of money, not
to mention the old one, has become entangled with the dog-
mas, State supervision, "measure of value," "standard of
value," and legal tender; or lost his bearings and ship-
8 PREFACE
wrecked among the breakers — fiat money, wildcat money,
monometallism, bimetallism, and the like.
Production and exchange being the two great burdens
that the constitution of things imposes on us, exchange being
fully as important as production (because if exchange stops,
production must stop also), and a medium of exchange,
c«//6'c/ ?/zc»;^e)/, being indispensable to the accomplishment of
exchange, what money will the most effectually and econom-
ically fulfil its oflice, and how to provide it, is a question of
the very first magnitude, if it does not transcend all others.
If the invention of an instrument used in the production of
only one article of the thousands that contribute to comfort
is of value to mankind, how much more so is that instrument
which enables us to exchange all those products, and with-
out which we could not enjoy them because we could not
possess them? On this question of the best medium of ex-
change there is absolutely no conflict of interest. If it is
reliable and there is enough of it, all are benefited; no one
can be hurt by it. If it is unreliable, all are involved in the
risk, and all interests are damaged.
This is the ground on which The New Philosophy of
Money appeals to the reader in behalf of the Mutual Credit
System. The writer makes no pretensions to originality or
special merit. Whatever new idea, term, or definition may
be presented here for the first time, he will, no doubt, in due
time get credit for. The allusion to its being new has refer-
ence to the manner of presenting it; and that, in the popular
sense, it is new.
With grateful remembrance, the author acknowledges
his indebtedness to the writings of Col. Wm. B. Greene,
E. H. Hey wood, Josiah Warren, and others.
The Author.
INTRODUCTION.
1 "The money question" is a title applied to that subject
which is a philosophical inquiry into the nature and office of
money, and necessarily includes an investigation as to how it
originates, what are the methods employed in making it and
furnishing the supply ; and, finally, the maturing of a plan
that shall correct any defects that may be discovered in those
methods.
2 The terms "money" and "medium of exchange" are
applied to that instrument which is used to facilitate the
exchange of objects of value, and which is not the direct
exchange of objects without the intervention of money; this
latter kind of exchange being known by the term "barter"
(8i,88).
3 It does not matter what this instrument or medium of
exchange is composed of. It is not the quality of the instru-
ment that entitles it to be called money, but whether it per-
forms, in a general way, the office or function of money.
There has been a very great variety of money, and
there are many kinds of money now in use throughout the,
world, and some of it is very poor money; but to say that
only a certain kind is money, and that all others are only
substitutes for money, is a play upon words and does not
conduce to a more intelligent understanding of the question.
4 There must be a general term by which we can desig-
nate the various instruments that perform the function of
money. "Money" has always been and is used in this sense.
Among other definitions given in the Century Dictionary
we find: "Any circulating medium of exchange."
lO THE NEW PHILOSOPHY OF MONEY
5 There are instruments that perform in a limited way
the function of money, but which are not called money.
For instance: a check on a bank, a promissory note, a bill of
exchange or draft, fulfil the office of money in at least one
instance, but they do not circulate generally, and it is for
this reason that the term money is not applied to them.
6 As to w^hat is good, and what bad money, depends
upon whether it circulates generally without liability of
incurring loss to anyone; but this is only one of the impor-
tant items. In the supply of money, we have to deal with
quantity (volume) as well as quality. The supply must
not only consist of good money, but there must be enough of
it (46); and this is the item that all other theories of money
have failed to resolve — what constitutes enough — notwith-
standing it can be as satisfactorily answered as the ques-
tions, how many square inches in a given area, or how long
it would take for a calf to become a year old. It is not that
the problem is so difficult to solve, but that the investigation
has not been pursued fearlessly and w^ith a determination to
arrive at the truth. It is very evident that there must be
some natural limit to the volume of money (14), just as there
is a natural limit to all material things, and when we have
determined correctly what that natural limit is, we shall be
very much nearer the solution as to how much is enough (35).
7 We have already learned that the office or function of
money is to facilitate the exchange of products; but to pur-
sue our investigation, to determine what is the natural limit
to the volume, we must also know the nature of money.
8 The nature of money depends upon the product or
commodity of which it is made. To illustrate: The mar-
ket value of the commodity of which coin is made consti-
tutes a large percentage of the face value of the coin, while
the market value of the commodity that bank-notes, or bills,
or treasury notes are made of, is but an infinitesimal fraction
of their face value. The nature of coin money, then, is dif-
ferent from that of paper money; and we may designate
INTRODUCTIOX I I
coin as commodit}' money, and paper money as credit money;
for pajDer money is really a form of credit (9). Now, the
natnral limit to the volume of commodity money is very easy
to determine. The limit is arbitrary. The metal of which
it is made is found only in limited quantities, and there is no
way of adding to it. But it is not so with the material of
which paper money is made. It is practically without limit.
The supply of the volume, therefore, however large it may
be desirable to have it, will not be hampered by scarcity of
the material to make it of.
9 If it is not limited like commodity money, and if our
definition relative to its nature is correct, then it is as such
that we must deal with it. We must determine its limit as a
form of credit; but as there is more than one form of credit,
we must state wherein they differ. There are two forms
of credit (84-85); one is secured and the other unsecured
{S6). Book accounts or time credits are generally unse-
cured credits. A simple promissory note is unsecured credit,
while a mortgage note is secured credit. Paper money is,
or should be, secured credit. It is the credit of the party
who issued it. For instance: "treasury notes" are the credit
of the United States government. Gold certificates are the
credit of the party who deposited the gold they are issued
on; the same with silver certificates. Bank-notes are the
credit of tlie bunk that issued them, although they are not
always secured.
10 We have now arrived at something definite as to the
nature of money. The definitions given, namely: that coin
money is commodity money and that paper money is secured
credit, are strictly true of the best of each kind, and that is
the only kind we can consider.
1 1 The task now before us is to find the natural limit to
that form of secured credit called paper money. The ques-
tion arises whether that which determines the natural limit
in one form of secured credit determines the natural limit in
12 THK NEW PHILOSOPHY OF MONEY
all forms. I have explained what is secured credit, but it
will be well to formulate a precise definition.
12 Secured credit is debt incurred with ample provision
made to insure payment (79-91).
13 Secured credit, then, originates in the voluntary acts
of two or more parties. There must be at least one (there
may be more) who incurs the debt, and one or more to
whom the debt is incurred. The other essentials are: The
material upon which the promise is recorded (paper) and
the security; and since, as we have seen, there is practically
no limit to the material (paper), the natural limit to secured
credit would seem to be determined by the security, because
it is the only thing that can limit it. What difference, then,
does it make, whether it is a secured note, paper money, or
any other form? It is the security that determines the nat-
ural limit to any form of secured credit. Where there is no
security there can be no secured credit; where there is secur-
ity, there can be.
14 We have now determined the natural limit to the
volume of money. The natural limit to the volume of coin
money is the quantity of the metal of which it is made.
Vou can make as much gold coin as you can get gold bullion
to make it of. You cannot make any more. The natural
limit to the volume of paper money is security; the material
of which it is made being unlimited, you can make as much
paper money as you have security to convert the paper
promises to pay into secured credit, so that no one will run
any risk in taking them in exchange for commodities.
15 Remember, this is the 7ia^u?'al limit; and it is perti-
nent to inquire now, what relation it bears to the question:
"how much is enough?" It is evident that there can be no
more; but why should there be any less? Our definition for
secured credit is, "debt incurred with ample provision made
to insure payment," and we have defined paper money to be
a form of secured credit. It is not denied that an individual
has the right to incur debt, but he must not incur it in this
INTKODUCTIOX I3
form without complyin<j with certain restrictions.* Here
we have an artiHcial limit; and our next inquiry must be to
ascertain what is the object of this artificial limit.
16 I have already explained that the term "money" is
applied to that instrument which is in general use for the
purpose of facilitating the exchange of products, but this is
not sufficiently definite. Its use in the cancellation of indebt-
edness and in payment for services, while it should not l)e
omitted, is, in reality, but a part of exchange. It should be
stated, also, that the use of money obviates the necessity for
barter, and so expedites exchange, which would otherwise
be hampered and even impossible. But do these statements
include all the uses that money is put to and all the purposes
it subserves.'' There can be no denying that to a money-
lender, at least that portion of his money which he lends,
serves him a purpose not included in those I have named.
He does not use it himself for the purpose of exchange, but
loans it to another who needs it for that purpose. The pur-
pose of the money-lender is to derive an income from it.
Here our field of inquiry widens. We are confronted with
conflicting interests. We find that money is used for
another and quite different purpose than that of facilitating
exchange; and that the interest of the party using it for the
one purpose is hostile to the interest of the party using it for
the other purpose. For is it not to the interest of the
money-lender, as such, that there be a scarcity of money and
that the rate of interest be high? And is it not to the
interest of borrowers that there be plenty of money and that
interest be low ? How could interest be low with a scarcity
of money? Or how could interest be high with plenty of
money? The scarcer money is, the greater the opportunity
of the possessor to lend it; and the greater the demand for
it, the higher the rate of interest.
*The restrictions here referred to are those which interfere with
the free issue of paper money, such as the 10 per cent tax imposed
by congress and the requirements in the different States.
14 THE NEW PHILOSOPHY OF MONEY
17 To be sure that these interests are distinct and
opposed to each other, let us pursue our investigation still
further.
18 It is claimed that in this country all should have equal
rights; and this ought to be especially true with regard to
the supply of the medium of exchange. The means of
obtaining it that are open to one should be open to all. Let
us see if it is so.
19 The source of supply of money in this country is the
United States government. It will coin gold for all on
equal terms, or give gold certificates in exchange for gold
bullion. But this is the only commodity it will now coin
into money or upon which it will issue certificates.
20 Other paper money may be obtained by organizing
national banks and depositing United States bonds in the
United States treasury; but you must organize a bank.
Such paper money cannot be procured by an individual bor-
rower.
21 Here we have discrimination in favor of one com-
modity, and in favor of bankers and against those who are
not. What becomes of this boast about equal rights?
Money is loaned every day on every conceivable kind of
securit}^, from a piece of ordinary kitchen furniture to a
private mansion or a block of buildings; a manufacturing
plant, or an entire railroad; but all such money must go
throuofh the hands of monev-lenders. Not one of these bor-
rowers can get money from first source.
22 Now, the special claim that The New Philosophy
of Money makes is, that paper money being secured credit,
whoever can furnish the security is entitled to that form of
credit; that equality of rights demands it, and that to deny it
is to deny the right of private property.
23 But this is not all. It unqualifiedly affirms that it is
of the very greatest importance; that it is to the very best
interest of all concerned, including the money-lenders them-
INTRODUCTION 1 5
selves, that this right be recognized at once, and that the
phui that will make its realization possible be adopted.
24 But, before we proceed further into this labyrinth of
inconsistencies and incoherencies called political economy, let
us clear up as we go, and make sure our own position.
25 The questions still pending, of those brought to the
notice of the reader, are: "What is the object of this artifi.
cial limit to paper money?" and, still farther back, is that all-
important one, "how much is enough?"
26 I have pointed out that the means employed to bring
about this artificial limit are legislative enactments by con-
gress and State legislatures, that restrict the issue of paper
money and furnish it to bankers only.
27 I have shown, also, that the rate of interest, like the
price of commodities, is affected by supply and demand; that
a scarcity of money makes interest high, just as a scarcity of
any article that there is a demand for will cause the ^Drice of
that article to be high.
28 It follows, therefore, that the only object of limiting
paper money to less than the natural limit, is to keep up the
rate of interest; and it follows also, that since it benefits
money-lenders only (68), it must be their work. Borrowers
would hardly spend their time in efforts to secure the pas-
sage of laws in opposition to their own interests.
29 We will now devote our attention to the other ques-
tion that remains unanswered. The reader should bear in
mind what has been said about the source of the supply of
money, and how the borrower is cut off from that source and
is compelled to patronize the money-lender; and also that we
have defined paper money to be a form of credit.
30 Now, if a borrower borrows paper money of a
money-lender, he obtains credit (9). Whose credit is it that
he obtains? It must be the credit of the money-lender. It
certainly cannot be his own credit. To be his own credit,
the money would have to be issued to him direct on his own
security, just as gold certificates are issued on gold. What
l6 THE NEW PHILOSOPHY OF MONEY
he has borrowed must be either gold certificates, silver certi-
ficates, treasury notes or national bank notes. They are not
his credit. They were issued by the government, not to
him, but to a money-lender, and he borrowed them of the
same or some other money-lender. But why should he use
the money-lender's credit.'' We must regard his security as
good. The money-lender would not lend his money on it if
it were not. If it is good enough to insure the return of
paper money that is redeemable in gold, it must be equiva-
lent to gold ; if it is good enough to secure such money it
must be as good as gold. If it is as good as gold, why not
issue certificates on it just as well as on gold? Again I ask:
Why should he use the money-lender's credit when his
security is as good as gold? Is he not deprived of his right
to the use of his property for purposes of credit? If he can-
not use his property in this way without the consent of the
money-lender, then he is not the absolute owner of that
property. Is it not a denial of the right of private prop-
erty?
31 Suppose a farmer, who owns a farm which is unen-
cumbered with debt, rents his farm and moves with his fam-
ily into town. He has, besides his farm, considerable grain
in warehouse. He needs some household furniture, and
proceeds to investigate as to its cost. The furniture dealer
foots up the cost and it amounts to $500. The farmer asks
him how much he will discount it if he pays him C. O. D.
The dealer informs him that he will deduct 6 per cent if he
pays cash down on receipt of goods. The farmer has no
money, but he has good security. He has $2,000 worth of
grain, and he proceeds to inquire what it will cost him
to bo-rrow the $500. He learns that a money-lender will
accommodate him at the rate of 6 per cent interest, holding
all his grain as security. Surely no one will claim that this
is not a fair illustration of present methods.
33 It makes no difference whether the $500 are bor-
rowed or whether the g-oods are boug-ht on the usual two or
INTRODUCTION
17
':hree months time. In either case, there is 6 per cent inter-
est to be paid in excess of the cash price. It is interest on
the money borrowed, or it is interest on the deferred payment
for the goods.
33 It is a correct business rule that where you pay out
money, it must be for vakie received; but what does this
fanner get in exchange for this $30? He is wilHng to relieve
the furniture dealer of all risk, by paying him cash on receipt
of goods, but it does not save him from the loss of this $30.
The individual who enables him to pay cash, and who
charges him the $30 (who, by the way, is quite moderate;
there are usually additional charges, commission, etc., which
bring up interest to about 8 or 10 per cent), furnishes him
with what? Some printed pieces of paper, the actual cost of
which does not exceed one- half of one per cent. He as-
sumes no risk, for the security is ample (95). The charge,
therefore, covers notliing but the printed pieces of paper; for
that is all the farmer gets.
34 Now let us come back to the question as we left it
before we introduced the illustration. The proposition was
advanced that whatever collateral is good enough to secure
paper money that is redeemable in gold, must necessarily be
as good as the gold it is redeemable in; and the question was
put: "If it is as good as gold, why not issue certificates on
it just as well as on gold?" There is no reason why this
should not be done. It would be opening to all the means
of obtaining credit in the form of paper money, that are now
open only to a few (iS, 19, 20, 21). It would be the con-
ceding of a right that is now denied — the right to that credit
without the intervention of money-lenders — the right which
The New Philosophy of Aloney teaches inheres in the right
of private property; and that the individual has as much
right to that form of credit called paper money as he has to
make a mortgage note. Ilis right to make a promissory note
and secure it by mortgage is not questioned. His right to
iS THE NEW PHILOSOPHY OF MONEY
credit in the form of paper money cannot be successfully dis-
puted. It would be assailing the right of property.
35 We have now the solution to the question, "how
much is enough?" It is easy. The reader must already
have foreseen it. When the artificial limit has been removed
and all who have security can obtain the representative
paper money credit he is entitled to, and from its source —
direct from the printing press — instead of from the money-
lender, the demand will be supplied; and when that is sup-
plied, there is enough; but so long as that is not supplied,
how can there be enouijh?
THE GENERAL EFFECT OF THE ARTIFICIAL
LIMIT TO THE VOLUME OF MONEY,
36 Let us consider for a moment what would be the
result if a system of money such as is proposed in The New
Philosophy of Money, were in actual operation (129),*
Would not all who could furnish security take advantage of
the low rate of interest, and borrow all they could? Espec-
ially as the certainty that the rate would not be higher in the
future, and become a cormorant and swallow them uj) at no
distant day, as it does now, would be too apparent to leave
any doubt.
37 And what would be the consequence resulting from
the people borrowing so much money? When an individual
borrows money it is with the object of going into some new
enterprise, extending one already established, or paying off
some debt. In cither case, he is adding to the general
increase of trade. What is true in one instance must be true
in all; therefore, the greater the amount of money borrowed,
the greater the increase in trade.f
38 Now, if this is the general effect that results when
there is ;?c artificial limit (15), the exact opposite must be
the result when there is an artificial limit. The general
effect, therefore, of the artificial limit to the volume of
money is paralysis and stagnation to trade; and the more
restriction, the more stagnation.
*See Appendix for plan.
fThe reader must bear in mind that under the system herein pro-
posed, all money borrowed will be new monev, and therefore an addi-
tion to tlie volume in circulation ; whereas, under the existing system,
the borrowinij of money adds notliing to the volume; being merely
tiie transfer of that much from one party to another.
20 THE NEW PHILOSOPHY OF MONEY
39 Just as a man without tools is helpless and remains
idle, so production and exchange must stop when the tool,
money, is absent. And in proportion to its abundance, and
the ease with which it can be obtained, will be the activity
or inactivity of trade; just as a scarcity or plentiful supply of
tools will retard or accelerate the work of the mechanic.
40 Who can tell the marvelous development we might
have attained, if there had never oeen an artificial limit to
the volume of money? So far, a medium of exchange pure
and simple, has never been provided. The money power,
or the combined interests of money-lenders, has ever suc-
ceeded in inducing the people to use the makeshift that suits
its purpose. The medium that will best perform the func-
tion of exchange, must, of necessity, be provided by the
borrowers themselves; for their interest being the direct
opposite of that of the money-lenders (16), as such, it is not
natural to expect that the latter will initiate a movement in
opposition to what they regard as their interest. The ques-
tion may well arise in the mind of the reader, especially if he
(or she) be somewhat of a thinker, — "is this a natural state
of society? Are those normal institutions which engender
antagonisms, and tend to form classes with opposing inter-
ests?" Since the aim and end of life is common to all — the
attainment of happiness — and since whatever facilitates and
simplifies production and exchange tends to reduce burdens,
and, therefore, to the attainment of happiness, the real inter-
est of all is identical. Progress involves change; therefore,
our institutions must change or they are not progressive.
As all are interested in progress because all are interested in
happiness, and as we cannot attain happiness unless we
change — progress from our present unhappy condition — the
real interest of one class is not opposed to that of any other;
and if there is apparent conflict of interest, it is because some
institutions which have outlived their usefulness, or have not
yielded to the iconoclastic hand of evolution, still stand as
barriers to progress and block the road to happiness. It is.
GENERAL EFFECT OF THE AUTIFICIAI. LIMIT 21
their interest as money-lenders that prompts them to encour-
age and perpetuate an institution which hmits the supply of
money and keeps up a high rate of interest; while it is to
their interest as members of a common humanity, that that
institution should give place to a more progressive and useful
one. Which, then, of these two interests is paramount — the
attainment of happiness on the part of a class, or the attain-
ment of happiness on the part of mankind as a whole?
41 There can be no such thing as the attainment of hap-
piness on the part of a class, as distinct from the whole, un-
less it be at the sacrifice of the rest; and the question here
arises: Could such a condition be considered a state of hap-
piness? Can an individual be happy surrounded by people
living in poverty, with the necessary accompanying evils,
such as disease and crime; his health and that of his family
and friends in danger from unhygienic conditions breeding
contagious diseases, to say nothing of the insecurity from
invasion of person and property? Can such an individual
be happy? If he congratulates himself upon his happiness,
it is because he is ignorant of another kind of a vastly super-
ior quality, and it is because he does not realize what are his
true interests, that his constant aim is to get rid of the
burdens of life by shifting them onto others. Having suc-
ceeded, he is happy; but he has only postponed the evil. A
day of reckoning must come. These others also desire to
get rid of the burdens. They are of the same flesh and
blood; and the greater the burdens, the greater the danger;
both from the unli)'gienic conditions and from discontent.
His real interests consist, not in shifting the burdens, thus
increasing those that others have to bear, but in the discovery
of the means of getting rid of them altogether. If this is
true, how is it that he does not act with that end in view?
42 The fact is that society as it is today is the outgrowth
of ignorance. Its institutions arc such as class interests have
reared for their own benefit. The real interests of mankind
have been lost sight of. We have an arbitrary money sys-
22 THE NEW PHILOSOPHY OF ^lONEY
tern which limits credit, and makes it possible for a few to
control it. This control is a power that few comprehend.
The scarcity of money in consequence of the artificial limit,
makes high rates of interest. As all surplus funds are
invested from year to year — the interest on investments one
year is reinvested the next — and as all capital successfully
engaged in business receives interest, which is again rein-
vested, it is not difficult to see that a very large amount is
compounded every year, the marvelous rapidity of increase
of which (130) accounts for our millionaires, and, necessar-
ily, also, for our paupers. It is evident, therefore, that the
artificial limit and an arbitrary money system were not
devised for the benefit of mankind, but in the interest of a
few. These millionaires and the pauperization of the masses
would never have occurred if there had been no artificial
limit to the volume of money. There would be no arbitrary
money system and therefore no limit to credit, except the
natural one, if there had been no artificial limit to the volume
of money. Usury, or interest, will come to an end when the
artificial limit to the volume of money shall cease to exist.
The possibility of getting a living without labor, and, there-
fore at the expense of others, is the most vitiating factor in
our civilization; for, as long as it is possible, however remote
the probability, however few the number who attain the
coveted goal, it will be the one thing that will absorb atten-
tion; the one aim of life to which all energies will be bent;
and of course, those questions which are of interest to man-
kind at large are subordinated to this all-consuming strug-
gle, this all-absorbing theme; the accumulation of wealth m
order to live on the interest it brings. Take away the arti-
ficial limit to the volume of money, and the institutions
that this class have reared in their interest will be left with-
out a foundation — the civilization that is based upon usury
will come to an end.
43 It is vitiating, because, as Proudhon says, "property
GENERAL EFFECT OF THE AKTIFICIAI. EIMIT 23
is robbery."* It cannot exist on its just basis, which is
hibor; therefore, in its true sense, "property is impossible"
(123), for usury not only absorbs all property, but there is
ever a balance which can never be paid, as Mr. J. W.
Bennett has so clearly shown in his powerful article, "The
Cause of Financial Panics," in the March "Arena," 1S94
(i 18-126).
44 The class that would perpetuate our money system,
once called "specie basis," but which is being narrowed
down to a "gold basis," by the exclusion of silver; the class
that has rearedour institutions, — the State, with its manifold
devices for plunder — its army and its navy to enforce them,
its armories, its bastiles and its gatling guns to strike terrcr
into the minds of its opponents, and its courts to solemnize
its acts and justify its course; the class that elect themselves
to office to legislate and to preside; what does this class
know about the real interests of mankind? They not only
do not study the subject, but they override with their money
and their vulgarity, any who, being especially adapted,
should dare to show up the evils which result from the
course they are pursuing.
45 The rest of the people are too busy struggling under
the burdens this class has shifted onto them, to be able to
give special attention to the grave questions that affect man-
kind as a whole; thus, as already stated, the real interests of
mankind have been lost sight of; and each individual, bent
on the insane effort to accomplish the impossible, is only
adding to the momentum which must finally rupture the
bubble we call civilization. Such is the general effect of the
artificial limit to the volume of money!
♦ •'What is Property?" by P.J. Proudhon.
EXCHANGE.
46 As elsewhere stated in this book, exchange is as
necessary as production; for no one produces everything he
needs, and is therefore dependent on others, with whom he
must exchange his services, or part or all of his products, for
such things as he needs and does not produce. Now, for
obvious reasons, we cannot exchange our services or our sur-
plus products direct with those who have for exchange such
things as we need. Except in rare instances they do not want
what we have to exchange, and when we find one who does,
it is almost invariably the case that he has not the articles we
need. It follows, therefore, that we have to exchange indi-
rectly instead of directly, and hence the necessity for a med-
ium of exchange — a universal order for goods — that, deliver-
ing your product or services, you get an order for an equal
amount of products, good anywhere where they are offered
for sale. Such is a medium of exchange called money (4,
10) ; and it is those who incur the risk when they part with
their services or property who should decide on what condi-
tions it shall be furnished; because, as elsewhere explained,
it is a worthless thing in itself (301), of no market value,
and only possessing a purchasing power equal to its face
value when honestly issued. And the inore one examines
into the merits of the case, the more he is convinced that this
view is the correct one; but instead of this being the case,
we find that it is a class that has little or no direct interest in
exchange of products, that decides not only on what condi-
tions it shall be furnished, but they also determine how much
shall be furnished, and do all in their power to prevent those
interested from supplying themselves. Think of a class of
individuals who have no direct interest in transportation, hav-
EXCHANGE 25
ing the exclusive control over the supply of locomotives, and
deciding that so many per 100,000 of the population is amply
sufficient to do the hauling. "^Vhat nonsense!" the reader
will exclaim. But is it not equally as ahsurd to allow a class
to control the means of exchange as it would be to allow a
set of men to control the means of transportation? The
power over the destinies of men is more effectual through
the control of money than of anything else, and that is pre-
cisely why the ruling class use this means. This control
must be brought to an end; for there is not the slightest
excuse for it, and there is every reason why those engaged
in production and exchange should assume it themselves.
47 To make this matter still clearer it is not necessary to
present proof, for all who have had any experience in busi-
ness know, to their sorrow, that among the number who
obtain goods on credit, there are some who fail to pay. In
this kind of credit (unsecured credit)(9), then, there is a cer-
tain loss from bad debts. There is also the inconvenience of
having to part with the goods without receiving the money
for them imtil some time in the future. Now, the Mutual
Credit System proposes to put an end to these two evils by
doing away entirely with unsecured credit, substituting se-
cured credit (paper money)(i2). Instead of an individual
obtaining credit in products of those who sell, he obtains
certificates of credit of the Mutual Credit Association, for
which he furnishes ample security; thus only those who
have security can obtain credit in the form of certificates of
credit (60). That puts an end to bad debts — one of the two
evils just mentioned.
48 By the use of these certificates, which constitute the
best money that can be devised, all business transactions can
be conducted on a cash basis; thus putting an end to the
other evil — the inconvenience resulting from the delay in
collecting for the goods sold. Independent of other benefits
that would follow, we have, then, in the Mutual Credit
System, the nieins of inaugurating universal cash joayments;
26 THE NEW PHILOSOPHY OF MONEY
the cash — certificates of credit — being amply secured.
What better argument can be presented in favor of the new
system than the proposition to gradually convert all book
accounts into ready cash?
49 In granting credit as it is now done, business men
rely mainly on the reports of firms who make a specialty of
inquiring into the business standing of individuals; so that
whether or not one can obtain the credit he asks, depends
very largely upon these reports. If he is given the credit, it
means that he obtains goods without paying for them imme-
diately, and that those who give the credit are minus the
amount of the credit until the goods are paid for. Under
this absurd system, it is not the party who gets the benefit of
the credit, but the party who confers the benefit who takes
all the risk. The New Philosophy of Money teaches that
the party who desires credit, instead of asking others to take
the risk involved in giving him credit, he should assume that
risk himself, and proposes the Mutual Credit System as the
means of attaining that end.
50 It so happens that it is inherent in the very nature of
economics, that that which is the most advantageous to the
community as a whole, at the same time invariably presents
an irresistable attraction. Man is still moved by his cupidity.
It is to this propensity, mainly, that we are indebted for the
advantages we now enjoy, and it is upon it that we must
depend for those that are yet to come. The Mutual Credit
System of money is not lacking in its irresistable attraction
— its vital force, that which will outweigh all obstacles and
defeat all opposition — its appeal to man's cupidity. The
borrower, like the purchaser, is interested in himself. He
will not long pay high rates of interest when he knows how
to supply himself at low rates; just the same as a purchaser
will not pay one merchant a higher price for goods than he
can buy them for elsewhere.
51 We have seen, then, that the reasons why business
men and not money-lenders should provide the medium of
EXCHANGE 27
exchange, and have entire control of it, are overwhehning;
and we have seen that the inducement is altogether too great
for this class to resist the temptation. When they take a
hand in investigating and realize that they can save from 5
to 10 per cent on the money they borrow, it can be safely
stated that they will do it.
NOT ENOUGH MONEY.
52 We apply the term "scarce" to things that are nat-
ural products or those produced by nature, and also to
artificial products or such things as are produced by labor or
devised by the ingenuity of man; but we do not reason the
same with reference to the scarcity of the one as of the
other. When we say that diamonds are scarce, we state a
fact about which there is no use in reasoning any further,
as we could not possibly increase the quantity. Not
so with regard to the artificial products. If there is a
scarcity relative to the demand for any of these artificial
products, ingenuity at once sets to work to devise means of
increasing the supply. This is true of every artificial thing
except money, although money is essentially artificial. Why
this exception.'' We hear it stated, and we know from
experience that It is true, that money is scarce. If it were
any other article than money there would be no end to the
efforts made to increase the supply. If money is of artificial
origin, why can we not increase its supply just as we do any
other artificial thing? Naturally, or in reality, money is not
an exception; and the effect of supply and demand would be
as effectual in regulating the quality and quantity of money
as it has been in producing sound and cheap insurance, ease
and comfort in travel, the printing press, or any and all the
advantages of applied science and art. If by a certain pro-
cedure a printed bill can be converted into a "dollar," made
to circulate as money, cancel indebtedness and be acceptable
in exchange for commodities, why cannot this method be
extended until we satisfy all demands for money, and make it
possible to do all business on a cash basis, instead of the
enforced unsecured credit system of today? Why must a
NOT EXOL'GII MONEY
39
♦'civilized" community be startled every few weeks by a
gigantic, unexpected and unnecessary failure, and every
day by numerous smaller ones? "Why must the individual's
business success be a game of chance in which he may slave
during the vigorous part of his life and be left penniless in
his old age? Why is our system of credit so destitute of
scientific method? It is pure guesswork, and is doubly
damnable in that it offers a premium to rascality and defeats
honesty. Is not the question of granting credit, either at a
bank, financially, or by a merchant, commercially, a matter
of guesswork? How can one know that the individual
seeking credit will be able to meet his obligations?
53 In financial circles, where there is less competition
and monopoly is more concentrated, an endorser is demanded;
but who is the endorser? He may be a friend of the bor-
rower who knows little of hov/ his balance sheet would fig-
ure, but considers him an honest man, and yet he may be
deceived. He may be a patron of the bank whom it consid-
ers good, and who, on account of his extensive transactions
and his prominence in society, it is reluctant to refuse. Here
we have favoritism and uncertainty. Or, again, both
endorser and endorsee may be engaged in "kiting" to save
themselves from the effects of previous schemes of which
they had, perhaps, been victims. The scarcity of money
and the consequent monopoly of credit produce these results,
and induce otherwise honest and fair-minded citizens to resort
to deceit and false pretense to "bridge over" and save them-
selves and dependent ones from poverty, which the system
and not themselves individually, is responsible for. "What
should we think of a system that offers greater inducements
to play false than to be truthful and honest?
54 If the present system is so defective, so inconsistent
with the spirit of progress and so conducive to immorality
and injustice in its effects, are these not sufficient reasons
why we should investigate any new system which claims it
will afford relief?
30 THE NEW PHILOSOPHY OF MONEY
55 The supply of a sufficient volume of perfectly reliable
medium of exchange to enable all commercial transactions to
be cash — secured credit instead of unsecured credit — is not
only essential to prosperity, justice and morality, but is as
simple and easy of accomplishment as to establish and con-
duct building and loan associations or insurance companies.
It is, in fact, so irrational to have a scarcity of money, that it
will be hard to make the next generation believe such vv^as
the case (77).
56 If it is not scarcity of money (secured credit) that
compels a resort to book or time credits (unsecured credit),
what is it that does? If accounts are finally to be settled
by the payment of money — the transfer of secured credit
— why defer it thirty, sixty, ninety days, or six months?
If there is not enough money to cancel indebtedness, how
can postponement of settlement make it any more possible
of accomplishment? If a dollar will not pay a debt of two
dollars, much less ten or twenty, now, will it in thirty, sixty,
ninety days, or six months, or ever? (75-77).
57 Debt in the form of unsecured credit, book accounts,
promises to pay, etc., is not transferable in exchange for
commodities as secured credit in the form of paper money is.
Why, then, do we go on contracting obligations in the form
we know to a certainty we cannot meet, when we could just as
well contract them in a form we know with equal certainty
we could meet? It is true that not all unsecured credits
could be converted into secured credits; not all who have an
account current with one or more merchants could put up
security to borrow certificates of credit of the Mutual Credit
Association; but it is equally true that if those who could
put up security were offered the opportunity to do so, and
get certificates of credit at i per cent per annum, with which
they could buy at cash prices, there M'ould soon be enough
in circulation to enable all transactions to be conducted on a
cash basis.* It is not necessary that everybody should bor-
*See foot note, page 19.
NOT KNOUGH MONEY
31
row money in order that there be plenty in circulation.
Those who have wealth will always use it to the best
advantage to themselves that they know of. If, under a
correct system of money, interest is abolished, and, as a nec-
essary result, dividends also, as they are but a form of inter-
est, capitalists will still be anxious to employ their wealth, if
only for the purpose of preserving it; as wealth not in use
decays more rapidly than when in use, and the enterprise
that uses tl:e wealth as capital will naturally have to sustain
the loss from wear and tear and decay. The capitalist will
therefore seek every opportunity for investment, availing
himself of the advantage which the Mutual Credit Associa-
tion affords of credit in that most desirable form — paper
money.*
5S Thus it can be readily seen that the incentive to bor-
row money when the rate is only i per cent per annum, or
less, in order to get the benefit of cash prices, will be very
great, and all will avail themselves of the opportunity vv^ho
can. Hence there will always be all the money in circula-
tion necessary to do an entirely cash business.
*Credit, the great lever in human progress, will then be worked
at long range and "for all it is worth." It will not work disastrously
as it does now, because it will be secured instead of unsecured credit.
It will be live credit, in the available form of a medium of exchange,
instead of dead credit in the unavailable form of book accounts.
"TOO MUCH MONEY."
59 Where the system of money is such that the supply is
furnished direct from the printing press to borrowers who
can put up security, as The New Philosophy of Money
teaches is the proper way, there cannot be too much or too
little money (35).
60 It is for the individual who can put up security to
decide whether he needs money or not — no one else can
decide it for him — and it is the business of the institutions
that supply it, to furnish him, on application, the sum he is
entitled to in proportion to the security he is prepared to
pledg-e (47). What applies to one individual applies to all.
61 If, then, all borrowers who can comply with the rules
as to security, are accommodated with money; if the rules
do not discriminate in favor of certain securities and against
others, as is the case now ( 19-21 ) ; if everything that has a
market value can be used as a basis for credit In the form of
paper money, hov,'' could there be too little money.?
62 The same reasoning applies to the opposite — too much.
If only such as could comply with the rules are furnished
money, how could there be too much.''
63 It is truly difficult in some instances to show up an
absurdity. In this case, the difficulty consists in the fact that
the parties who talk about too much money, have really
nothing definite in their minds when they make the state-
ment. Unless you know what an opponent means, how can
you discuss it? And if he does not know himself, how can
anyone else? The only way to do is to take the statement
for what it is worth. "Too much money !" The bare state-
ment is as meaningless as blows struck with a cane on the
sidewalk. If it is stated of a depreciated paper money, then
TOO MUCH MONEY 33
there must be a supplemental statement, expressing in pro-
portion to what is there too much money. It is not the vol-
ume of money in itself that affects its purchasing power, but
the proportion of volume to security. Whatever holds good
with regard to one paper dollar, applies with equal force to
any number of paper dollars. To illustrate: The amount
of security that will sustain one paper dollar in circulation at
its face value, multiplied any number of times will sustain
that number of paper dollars in circulation at their face value.
If additional paper money is issued without additional secur-
ity, the purchasing power of that paper money will be
reduced in proportion; but if an additional amount is issued,
with additional security in the same proportion, the addition
to the volume of paper money will not affect its purchasing
power, provided the security is ready at any time, or at any
definite stated time not too remote, to redeem it; and pro-
vided the facts are well known and there are no parties who
are deceiving the public in regard to them.
64 The trouble with those who honestly maintain the
opinion that the Mutual Credit System would result in too
much money, is that they apply to this system the reason-
ing that applies to the specie basis system. In that sys-
tem specie is the basis of the issue, that is, paper money is
issued in place of coin; and it follows that the more pa-
per money issued in proportion to the coin it is issued on,
the less basis, and the less the chances of getting the coin
when it is demanded. One dollar in coin cannot redeem
more than one dollar in paper, and when there are two
dollars in paper to one in coin, it is inflation. The more
paper money issued in excess of the security it is issued on,
the more inflation and the less its purchasing power, is
perfectly correct; but the theory has prevailed so long and
is so universal, that paper money must be redeemable in
coin, and as coin is an exceedingly scarce commodity, the
idea of plenty of paper money has become associated with
that which is impossible. Such reasoning, however, is with-
3
34 THE NEW PHILOSOPHY OF MONEY
out foundation, and results from the failure to correctly under-
stand the Mutual Credit System. In the specie basis system,
as we have seen, there is no escape from either one of two
evils; a volume of money limited to the quantity of coin or
inflation; but under the Mutual Credit System there can
be plenty of money without inflation.
65 The argument that "when gold is used as money
there is no doubt about its value (200), as there is about
paper money," applies to gold only, not to paper money
issued on gold; but as we cannot dispense with paper
money and confine ourselves to the use of gold only,
the argument is of no weight, and the question at issue nar-
rows itself down to this: Since paper money is not wealth,
but a representative of wealth; since it is not value, but
credit; and since we cannot use wealth, but must use the
representative; since we cannot use value in exchange, but
must resort to credit; how can we devise a system that will
supply credit in the form of paper money, which will con-
tain the least possible element of uncertainty? And it is in
answer to this question that the Mutual Credit System
appeals to our judgment (6).
CHEAP MONEY.
66 Under this title, the Century Company, of New
York, published, in 1S92, a pamphlet, a reprint from the
*'Century Magazine," giving an account of "cheap money
experiments in past and present times." Chapter I, entitled
"The People and Finance," says: *'There are a few ele-
mentary principles in economic science, the mastery of which
by the great body of the American people would be of incal-
culable value to us as a nation. One of these is that no gov-
ernment can create money out of anything which it may
choose to call money. Another is that all classes of the peo-
ple, rich and poor, laborer and employer, are far better off
with a sound and stable currency than they are with any of
the varieties of 'cheap money'."
67 The great difficulty that besets an effort to get a
clear comprehension of economic questions is the misunder-
standing in the use of terms. The question arises, what, in
reality, constitutes a sound and stable currency, and what
cheap money? What does the writer of the statement just
quoted mean by these terms, and what do these terms sig-
nify in the minds of those who claim that money can be
cheap and that there can be plenty of it? There is evidence
all through the pamphlet that by "a sound and stable cur-
rency" is meant gold, or paper money that is convertible into
gold at its face value. It is also quite apparent that by the
term "chenp money" is meant money that is not sound and
stable; and by quoting the term it is intended to attribute to
money reformers (those who claim that money can be plenty
and cheap) a desire to have or put into circulation money
that is not sound and stable. Now, is it reasonable to sup-
pose that there are people who deliberately prefer a depreci-
36 THE NEW PHILOSOPHY OF MONEY
ated paper money, or one that is liable to depreciate, to one
that is not liable to depreciation? The system advocated by
any particular set of money reformers may be a fallacy, and
result, if put in operation, in a depreciated paper money; but
to imply that such is the end they desire to attain; to attrib-
ute to them the deliberate intention of trying to establish a
system of money that is not sound and stable, is a perversion
of fact, and the one v^ho states it is an unfair disputant.
Why have we not as much right to accuse him of deliber-
ately defending a system that was devised and established in
the interest of money-lenders and to the great detriment of
everybody else? It is not true that money reformers prefer
to have depreciated money, nor is that the end they are striv-
ing for. It is not true that we cannot have such an abund-
ance of money that no one will say "money is scarce," as
they do now, without it becoming depreciated. When a
money reformer speaks of the need for cheap money, he
does not mean what this writer does when he speaks of
"cheap money." The former means a low rate of interest,
which is the price we pay for money ; using the term cheap in
the same sense that we do when we say, "potatoes are very
cheap this year," or "strawberries are cheap at this season of
the year." The quality is not referred to at all. But this
writer does not refer to the rate of interest when he says
cheap money. He means a depreciated pajDcr money, and he
cites many of the most wild and delusive schemes that have
come and gone, to prove that cheap money is a delusion.
The following from the last chapter emphatically declares it
to be such: *' We began with a plain exposition of the im-
perative need on the part of the people of this country of a
clear conviction that no money except the best was worth
the having, and that 'cheap money' in any and all forms is a
delusion from which all people should pray to be delivered."
Applying to the term cheap money the definition which he
does, namely: depreciated money or money which must
inevitably depreciate, everybody must necessarily agree with
CHEAP MONEV 37
him; but applying- the meaning which money reformers have
in mind when they use the term, namely: money, the interest
or price of which is low, who will agree with him? Only
money-lenders, large capitalists and those who are too igno-
rant to know any bettci". It is an unfair, not to say dishon-
est perversion of fact. Continuing, this "Cheap JSIoney Ret-
rospect" says: "From this we passed to a historical survey
of the more notable of the many experiments which have
been made in various countries and times to improve the
condition of states and nations by making money cheap and
plentiful."
68 It is not difficult to detect the animus that prompted
this effort in the interest of money-lenders, but if evidence is
needed, we have not far to go for it. On the 45th page of
this pamphlet, the writer says in reference to the failure to
establish the English Land Bank in 1696: "The capitalists
would not put their money into it because its avowed object
was to injure them by lowering the rate of interest and les-
sening the demand for existing money" (19-21).
69 Here we have an admission that capitalists are opposed
to and exert their influence to prevent an increase in the vol-
ume of money, because a scarcity of money keeps up the rate
of interest; and that the failure to establish this bank was
due to their opposition.
70 This admission gives away his case, for he points out
no natural obstacle in the way of plenty of money and low
rates of interest, but presents numerous unwise and imprac-
ticable schemes that have failed, to prove the impossibility of
its attainment, while he inadvertantly admits that it is really
the opposition of the money power that has prevented it.
How empirical is this attempt at instruction can be appreci-
ated when it is realized that the money power rules in conse-
quence of the ignorance and superstition of the masses; when
it is fully comprehended, as set forth in The New Philoso-
phy of Money, that the money borrower with good security
is not dependent upon the money-lender, except as the law,
3B9183
38 THE NEW PHILOSOPHY OF MONEY
made at the dictation and in the interest of the money-lender,
is supposed to make him so. But not even does the law, nor
can it make him dependent, and the realization of cheap
money and plenty of it, is only a question of enlightenment
and freedom from superstition.
71 There are a few elementary principles in economic
science, the mastei"y of which by the "great financiers," pro-
fessors and those who presume to instruct the people through
the magazines and the press generally, would be of incalcul-
able value to us all, individually and collectively. One of
these is that this government has not and never had any
authority to imj^ose a tax on the issue of paper money unless
it is imposed on all issues alike; it has no constitutional right
to discriminate in favor of any jjarticular issue. Another is
that the Mutual Credit System will furnish plenty of cheap
money that the money power will not be able to depreciate.
They are playing fast and loose with the most serious and
vital question we are confronted with ; saying to the people
who know little or nothing of the subject: "abandon all hope
of plenty of money or low rates of interest"; and in order to
induce them to believe it and resign themselves to the hard-
ships the present money system imposes, they are treated to
a rehash of all the stupid schemes that speculators, money-
sharks and political tyrants have been able to foist upon
the people, as though these contained the least particle of
evidence that cheap money and plenty of it is not a possi-
bility.
THE "PER CAPITA" DELUSION.
72 According to the United States Treasury Report for
the month of IMarch, 1S94, the volume of money in circula-
tion was $24.85 per capita. The method pursued in order to
obtain this data, is as follows: From the total amount of coin
money minted, and paper money printed and issued is
deducted, as near as can be ascertained, the amount lost or
destroyed; the coin money consumed in the arts and manu-
factures, and the difference between the amount imported
and exported, and also the amount of paper money with-
drawn from circulation is taken into account. From the
amount thus arrived at, called the "greneral stock," is de-
ducted the amount in the treasury. The balance is said to
be in circulation.
73 The phrase "in circulation'' is misleading. It conveys
the idea that the amount to which it refers is actually circu-
lating — being exchanged for commodities and services —
whereas a proportion of it (no one can tell how much), is
hoarded; there is constantly a large amount lying idle in safe
deposit vaults and in banks; the amount destroyed and the
excess exported compared with the amount returned cannot
be even approximately estimated, and not all the jewelers
and manufacturers who employ the "precious" metals report
the amount of coin they consume; so that this data is largely
guesswork. But suppose it were accurate and reliable. Let
it be admitted that there is twice, or even four times that
much money "in circulation." What of it? Of what advant-
age is it to borrowers who have security that is acceptable to
money-lenders, but who cannot afford to pay the rate of
interest they charge, to know that these money-lenders have
4© THE NEW PHILOSOPHY OF MONEY
plenty of money to loan? Of what good is it to the people
whose security is rejected by the money-lenders, to know
that they have plenty of money to loan? The financial jour-
nals and the press of the country generally, mock at the dis-
tress of the people when they say "there is plenty of money
in the country." It is as reasonable as it would be to tell
people who are suffering from a scarcity of ice in midsum-
mer, that there is plenty of ice at the north pole; or to the
traveler in the desert of Sahara who is perishing with thirst,
that there is plenty of cool water a thousand feet beneath
him. Of what use is it that "there is plenty of money
in the country," if those who need it cannot get it? For
whom is there "plenty of money ?" For the money-lend-
ers? There is always too much for them.
74 If money is a tool, why reason in regard to it differ-
ently from the way we reason with regard to any other tool?
How strange it would appear to our judgment if the claim
were put forward that there are too many vessels to drink
out of; that the number should be limited to so many per
capita, whereas there are many times that number; that the
quantity manufactured should be restricted so that there
never could be more than so many for each individual of the
entire population at any given time. "How stupid!" most
people will exclaim. "It would be very inconvenient to try
to get along with a tenth or a twentieth of the number of
cups, glasses, mugs, etc., and the inconvenience would be a
far greater evil than the cost of these articles; besides if only
a few could make such things, or if there were only so
many made prices would go up, the rich would buy all they
wanted and the poor could not get any!" But to limit the
volume of money (19-21) to so many dollars per capita,
which most peoj^le are reconciled to, is equally as stupid.
Suppose all the money in the whole country were offered to
borrowers who had good security, at one per cent per annum.
How long would it take to exhaust the whole pile? And
what would the rest of the borrowers do who came after all
THE PER CAPITA DELUSION 4I
the money had been loaned ont? If there is enough security
in the country free from incumbrance, the money would all
be borrowed in loss than a week. If this is correct, then the
rate of interest determines very largely the amount of money
that will circulate. If interest is very high, large amounts
of money will lie idle in the banks.* If interest is low
enough, all the money will be borrowed that can be fur-
nished (35, 60) until all labor is employed and all enterpris-
ing individuals are fully engaged, and therefore (if that time
should ever come) no additional money will be needed.
75 What, then, has the number of individuals in a country
to do with the volume of money? It is claimed now that
there is plenty of money. According to Mr. Bennett's esti-
mate (11S-126) the wealth in the United States amounts to
$72,000,000,000; and according to the United States Treas-
urer's Report for April, 1894, the total amount of paper
money representing that wealth was $1,081,499,370, or a
proportion of about one dollar credit in the form of paper
money for every sixty-six dollars worth of wealth. Is it any
wonder these manipulators of the currency would rather
give the volume of money per capita — $24.85 per head —
than $1.00 per every $66.00 of the wealth. Mr. Bennett
also shows (121) that the interest charge on the active capi-
tal of the country is $3,300,000,000. It follows, therefore,
that if all this interest were paid in paper money, all there is
in the country, which is not one-third the amount of this
interest charge, would have to pass into the hands of the
capitalists three times during the year and then there would
still be a trifle over $50,000,000 unpaid.
76 Overwhelmingly crushing as this evidence is of the
imbecility or knavery (which?) of those who control the
currency, and of the utter stupidity of the per capita idea of
*To those who control money, the incentive to keep up the rate of
interest is that if there is great demand they get high rates on all
they have to loan. If they only loan half what thev have at 10 per
cent it is equal to 5 per cent on the whole; whereas if thev loan two-
thirds at 6 per cent it would be only 4 per cent on the whole.
A2 THE NEW PHILOSOPHY OF MONEY
the volume of money needed, their confusion can be still
worse confounded by additional evidence. Mr. Bennett
says (122): "At the very lowest estimate, $897,000,000
must be charged yearly to government in the United States,
not including the payment of the principal of the public debt.
This representing money spent outside of regular business .
. . Is it any wonder that we have financial panics when
the volume of money is so contracted, compared with the
enormous duty it has to perform ?"
77 So, not only does all this m.oney have to pass three
times during the year into the possession of the capitalists
in paj'ment for the use of their capital, but more than four-
fifths of it must also pass, during the same period, into the
hands of government officials to satisfy all the various de-
mands it makes upon us. And all this in addition to its func-
tion in the exchange of commodities, which is beyond power
to estimate. Of course the answer to this argument to show
the necessity for more money, which the conservatives and
the superficial will make, will be the statement that checks,
drafts or bills of exchange, etc., are so extensively used that
about nine-tenths of all exchanges are settled by means of
them and only about one-tenth by the use of money. But
since, to get a draft or use a check one must first have the
money, their use does not affect the argument in the least,
and the fact remains that the demands for money cannot
possibly be met with the volume of money available; and
while there is no way of determining how much money is
really necessary to perform conveniently such an enormous
aggregate of payments, it is probable that twenty times what
we now have will be in constant circulation under the Mutual
Credit System.
CREDIT.
7S "If there exists an agency of unquestioned power, it
surely is that of credit. Who does not admire its wonderful
potency? "Who does not recognize the mighty share which
is due to it in the economic development of the present
age ?"* — Cyclopcedia of Political Science.
79 In discussing a vast and complicated question, such as
economics, it is indispensable that the matter of terminology
should be well understood and mutually agreed upon by all
parties to the discussion. The definitions for the term credit
the writer has thus far met with, seem inadequate, and he
has ventured to formulate such as will more clearly define it
as applied in The New Philosophy of Money, and hopes
there will be no cause for rejecting them.
So The term credit designates all transactions that are
not barter, or settlement on the spot by the exchange of
equivalents in value, or that which is accepted as such.
81 Coin money being value and accepted as such in
exchange for commodities, transactions with coin money are
not credit transactions, but must be defined as barter.
82 Credit is divided into two kinds or forms. One is
secured credit, the other is unsecured credit (9).
83 Paper money is a form of credit, and should be
secured credit.
84 An appropriate definition for secured credit would
see.n to be: debt incurred with ample provision made to
insure payment.
85 A promissory note secured by a pledge of collateral,
such as a mortgage note, etc., is secured credit.
*I{ the above can be said of credit generally, it can much more
emphaticallv be said of that form of credit furnished by the Mutual
Credit System — secured credit (S3).
44 THE NEW PHILOSOPHY OF MONEY
S6 A simple unsecured promissory note is unsecured
credit. Book accounts are generally unsecured credits. It
might be argued that coin is accepted as money and not as
value; that, with the exception of a few manufacturers who
melt it up to consume it, people do not use it otherwise than
they do paper money. Very true ; 6ui it is taken because it
has value. It would not be taken if it had none. If the
government were to reduce the gold and silver in its coins to
one-half what they contain now, their purchasing power
would decline one-half, — while credit money is taken because
it is believed that it is ultimately to be taken up out of circu-
lation by giving for it what its face calls for in mai-ket value.
The distinguishing feature between the two kinds of money
— credit money and commodity money — is the fact that the
former is what the adjective credit signifies, — an obligation
to pay which some one has contracted to meet, and has
pledged enough value to guarantee those who take it, that it
will be met and paid at maturity. This is what they rely
on, and not, as in the case of coin money, on the market
value of the material of which it is made.
87 This latter money, on the other hand, is not credit.
There is no obligation or agreement whatever, on the part
of anyone. It is recognized by what it states on its face, as
to what it is, and it is accepted as such. There is no promise
on the part of anyone, as in the case of credit money, that it
will be taken in exchange for anything else at any specified
time.
88 It would appear that enough has beer said to demon-
strate that paper money is credit money, and that, therefore,
the exchange of commodities for paper money is a credit
transaction; and that coin money being wealth — market
value — there being nothing in the nature of credit about it,
and that those who take it rely entirely upon the market
value it contains that they will be able to exchange it at its
face value for other commodities, and that if it fails they
have no recourse but to suffer the loss, it must be defined as
CKKLMT 45
commodity moneys and th;it tlic exchange of commodity
money for commodities is in the nature of, and must there-
fore be defined as barter (65).
S9 It will hardly be necessary to present argument to
show that there are two forms of credit — secured and unse-
cured — or that it is correct and desirable as well as convenient
to thus classify them (9).
90 Probably no one will object to the statement that
credit in the form of paper money should be secured credit;
or to the classification made with reference to secured and
unsecured credit. Certainly unsecured notes and book
accounts as they are generally conducted, or when no pro-
vision is made to insure payment, are unsecured credit.
91 As to the definition for secured credit — debt incurred
with ample provision made to insure payment — the writer
would be glad to have anyone suggest a better,
92 We now come to a point in the discussion of this
question of credit where the enormous advantages of the
Jklutual Credit System can be still further indisputably
demonstrated.
93 It will be granted, of course, that secured credit is bet-
ter than unsecured credit; that paj^er money that circulates
at its face value in payment of debt and in exchange for com-
modities is better than book accounts or promissory notes.
It is more useful and therefore more desirable. This propo-
sition, it would seem, is too apparent to require argument.
Since the actual cost of paper money is insignificant, much
less than bookkeeping the same amounts, why is it that
credit does not take that form? Why is it that credit almost
universally takes the unsecured form, although it is the least
desirable, the most inconvenient and the most costly .'' It is
not easy to explain many of the strange phenomena con-
nected with man and his methods, but it is not difficult to
realize that when he follows the most inconvenient of the
various ways open to him, it must be because he is ignorant.
94 We do not see people walking up six or ten flights of
46 THE NEW PHILOSOPHY OF MONEV
stairs in preference to taking the elevator, or go long dis-
tances to talk with some one when they could just as well
"hello" to him by means of the telephone. They are not in
the habit of hiring wagons in preference to traveling on rail-
roads, nor do they go walking (intentionally) where the mud
or snow is deepest. Why, then, do they not follow this pro-
pensity to save labor and avoid inconveniences in the matter
of exchange as well as getting up-stairs, talking to one
another at a distance, or a thousand other things that are done
in the most convenient and least laborious way that is known?
There can be only one answer to this question. It is the
logic, as well as the fact that they are ignorant. The means
are at their command at any time to put an end to unsecured
credit by establishing Mutual Credit Associations to furnish
certificates of credit, — paper money secured. This sectwed
credit being cheajoer, vastly more convenient and far safer,
would gradually take the place of book credit, promissory
notes and other forms of unsecured credit. If it has not been
done, it is because of the general prevailing ignorance on
this subject.
95 In "Mutual Banking," page 50, I find the following:
"AH the questions connected with credit, the usury laws,
etc., may be forever set at rest by the establishment of
Mutual Banks. Whoever goes to the Mutual Bank and
offers real property in pledge, may always obtain money:
for the Mutual Bank can issue money to any extent; and that
money will always be good, since it is all of it based on actual
property that may be sold under the hammer. The interest
will always be at a less rate than one per cent per annum,
since it covers, not the insurance of the money loaned, there
being no such insurance required, as the risk is 0; since it
covers, not the damage which is done the bank by keeping
it out of its money, as that damage is also 0, the bank having
always an unlimited supply remaining on hand, so long as it
has a printing press and paper; since it covers, plainly and
simply, the mere expenses of the institution, — clerk hire,
rent, printing, paper, etc. And it is fair that such expenses
should be paid under the form of a rate of interest; for thus
each one contributes to bear the expenses of the bank, and in
CREDIT 47
the precise proportion of the benefits he individually experi-
ences from it. Thus, the interest, properly so called, is 0:
and we venture to predict that the Mutual Bank will one day
give all the real credit that will be given; for since this bank
will give such at per cent interest per annum, it will be
ditlicult for other institutions to compete with it for any
length of time. The day is coming when everything that is
bought will be paid for on the spot, and in mutual money;
when all payments will be made, all wages settled on the
spot. The Mutual Bank will never, of course, give personal
credit; for it can issue bills only on wealth. It cannot enter
into partnership with anybody ; for, if it issues bills where
there is no real guaranty furnished for their repayment, it
vitiates the currency and renders itself unstable. Personal
credit will one day be given by individuals, only; that is,
capitalists will one day enter into partnership with enter-
prising and capable men who are without capital, and the
profits will be divided between the parties according as their
contract of partnership may run. Whoever, in the times of
the Mutual Bank, has property, will have money, also; and
the laborer who has no property will find it very easy to get
it; for every capitalist will seek to secure him as a partner.
All services will then be paid for in ready money and the
demand for labor will be increased three, four and five fold.
95a "As for credit of the kind that is idolized by the pres-
ent generation, credit which organizes society on feudal prin-
ciples, confused credit, the Mutual Bank will obliterate it
from the face of the earth. Money furnished under the
existing system, to individuals and corporations is principally
applied to speculative purposes, advantageous, perhaps, to
those individuals and corporations, if the speculations answer;
but generally disadvantageous to the community, whether
they answer or whether they fail. If they answer, they
generally end in a monopoly of trade, great or small, and in
consequent high prices; if they fail, the loss falls on the com-
munity. Under the existing system there is little safety for
the merchant. The utmost degree of caution practicable in
business has never yet enabled a company or individual to
proceed for any long time without incurring bad debts.
95(5 "The existing organization of credit is the daughter
of hard money, begotten upon it incestuouslv by that insuffi-
ciency of circulating medium which results from laws mak-
ing specie the sole legal tender. The immediate conse-
48 THE NEW PHILOSOPHY OF MONEY
quences of confused credit are want of confidence, loss of
time, commercial frauds, fruitless and repeated applications
for payment, complicated with irregular and ruinous expenses.
The ultimate consequences are bad debts, expensive accom-
modation loans, law suits, insolvency, bankruptcy, separation
of classes, hostility, hunger, extravagance, distress, riots, civil
war, and, finally, revolution. The natural consequences of
mutual banking are, first of all, the creation of order and the
definitive establishment of due organization in the social
body; and ultimately the cure of all the evils which flow
from the present incoherence and disruption in the relations
of production and commerce."
COST.
96 Ruskiu says: "Value is the life-giving power of
anything; cost, the quantity of lahoi" required to produce
it; price, the quantity of labor which its possessor will take
in exchange for it."
97 Josiah Warren, in his "True Civilization'" (a work
which, unfortunately, is out of print), laid down the princi-
ple that cost should be the limit of -price. He did not mean
that there should be a law prohibiting people from charging
more than cost, but that long experience as a merchant and
profound study on the sul)jcct had brought him to the con-
clusion that that statement embodied a principle that perfect
freedom in production and exchange would demonstrate to
be correct, because it would be the residt that we should attain
when all legislative interference ceased. Ruskinsavs: "Cost
is the quantity of labor required to produce anything." These
writers agree, and their view of it is in harmony with The
New Philosophy of Money. The Mutual Credit S\stem
furnishes certificates of credit at cost (95). Cost, of course,
includes every item of expense; from the material, which is
concrete labor, to the finished product delivered to the con-
sumer. Cost, therefore, should be the quantity of labor
required to produce, or an equivalent of the amount required
to compensate all labor expended in production. This should
be the limit of price, because if price exceeds this limit, it
must include a bonus to some one. But who is entitled to
something for which he does not render an equivalent ? Un-
der the Mutual Credit system, alone, can mutualism or
co-operation be successful. Without it, capitalists can check-
mate any effort in that direction that they choose; but the
^Mutual Credit System can be inaugurated without their aid
and in spite of thicir opposition. When co-operation becomes
general, cost will be the limit of price.
4
/
VALUE.
98 What nobody wants has no value. Per contra: that
, which people want, providing it costs labor to produce it, has
\ value; the proportion in a given object depending upon the
number of people ^vho want it, and the ease or difficulty with
which it can be obtained. This is market or exchangable
value. The value of an object, and, therefore, the relative
value of all objects, is expressed b}- means of the abstraction
which in this country is called "dollar"; more or less value
being expressed by one or any multiple or fraction thereof.
Thus we say $1.01, — one dollar and one cent — or one dollar
and the one-hundredth part of one dollar; the t^vo last fig-
in-es running from i to 99 and expressing that many hun-
dredths of a dollar. This conventional teim, whatever it may
be in any country, is always also the monetary unit, and what
should be but seldom is, secured credit, in the form of paper
money, or value (wealth) in the form of commodity money
(coin) is divided up to correspond with the value expressed
by this conventional term, thus facilitating its transfer in
exchange for commodities in amounts corresponding with
the exact value of the commodities to be exchanged, or the
exact amount of debt to be paid.
99 There is another kind of value, by which is meant
utility. The portrait of a relative or dear friend has a utility
for those whose friend he or she was; its possession affords
pleasure. It may or may not have a market value. The air
has no market value, but it has a utilit}^ value — Ave could not
live without it. If a method could be discovered by which
it could be bottled up or pumped into tanks, no doubt Con-
gress would grant special privileges to a few to deprive the
rest of it, like it has done with the land, and sell it to them at
VALUE
5^
a high price. It would then have a market value. That
which adds to our comfort, affords etijoyment, in short, what-
ever satisfies want, has utility value. But not all things
which have utility value have market or exchangable value.
Tslarket value represents labor, or monopoly and labor. If
there were no monopoly, nothing would be exchangable but
labor, either in the form of service or in that concrete form
we call commodities.
COMPETITION.
lOO "Competition," says the "Twentieth Century,"* "is
but a civilized mode of warfare." The "Century Dictionary"
defines it as: "i. The act of seeking or endeavoring to gain
what another is endeavoring to gain at the same time; com-
mon contest or striving for the same object; rivahy; as the
conipctitio?z of two candidates for an office. 2. A trial of
skill proposed as a test of superiority or comparative fitness."
The "Twentieth Century" continues:
loi "It is not less cruel than the former method of shoot-
ing or slashing one's opponent. Success in either case means
the ruin and often the death of the weaker party. The
more humane, the one who shrinks from needless slaughter,
often pays for his humanity with crushing defeat. If we are
to continue the competitive system we must be merciless and
cold blooded in our competition as on our battlefields. If we
shrink from the necessary consequences of such policy let us
.strive for the Co-operative Commonwealth. It is the only
alternative. Commercial warfare counts more victims yearly
than the clash of armies. The roll of suicides, murders,
thefts, defalcations, embezzlements, forgeries, bankruptcies
and starvations chargeable to the competitive system in 1S93
is a greater aggregate of disasters than is recorded of any
war of conquest."
102 The "Twentieth Century" is mistaken. In the first
place, the present system of production and exchange cannot
correctly be called the competitive system. A competitive
system is one in which everything is subject to competition,
while the present system is dominated by monopoly, which
is the opposite of competition. The evils of which the
"Twentieth Century" complains are the result of the ahsc}icc
of competition. The money power, availing itself of the
ignorance of the people, secures legislation which excludes
competition in supplying that form of credit called paper
*April 12, 1894,
CO.MI'KTITIOX
53
money. By thus limiting credit (15) nnd by securing fran-
chises through the power money lias acquired in consequence
of its having been made artificially scarce (359), the large
capitalists defeat the competition they would otherwise be
subject to, while the wage-earner remains ever exposed to it.
103 The abolition of interest, an abundant suji^^ly of
money and the gradual reduction of dividends, will cause a
constant rise in wages (compensation for personal services),
luitil finally wages absorb all the net increase in wealth (97).
Capitalists will then be sure of a return of the full amount
invested, instead of about ninety-seven per cent losing part
or all they invest, and only about three per cent realizing
large fortunes — the inevitable result of comj^ound interest
(126, 130). This certainty about the result of investments
of capital will be the effect of the abolition of speculation.
Competition, which the JMutual Credit System will force
monopoly, of whatever nature, to encounter, by the increase
in the volume of capital that ^vill result, will j^ut an end to
all speculation; for all the wealth in the country will be
actively employed as capital in productive enterprise as long
as there are idle men and women who want emplovment.
As production under such conditions will be much more
rapid than ever before, it will not be long till there will
result a surplus of capital, or wealth available as capital, in
excess of the demand. Hence, competition among the capi-
talists tJo get employees. This will be the direct cause of the
rise in wages already mentioned, to the great relief of wage-
earners. How puerile, then, is this tirade on the part of
Socialists and Nationalists against competition!
104 Col. Greene, in his pamphlet, "Mutual Banking,"
says: "As soon as gold and silver are adopted as the legal
tender, they are invested with an altogether new utilitv. By
means of this new utility whoever monopolizes the gold and
silver of any country — and the currency is more easily
monopolized than any other commodity — obtains control,
henceforth over the business of that countrv; for no man can
pay his debts without the permission of the party who
54 THE NEW PHILOSOPHY OK MONEY
monopolizes the article of legal tender. Thus, since the
courts recognize nothing as money in the payment of debts
except the article of legal tender, this party is enabled to levy
a tax on all transactions except such as take place without
the intervention of credit. [Without the intervention of
money, Col. Greene should have said, and it is probable that
the word "credit" is merely a typographical error. — Author.]
105 "By adopting the precious metals as the legal tender
in the payment of debts, society confers a new value upon
them, which new value is not inherent in the metals them,
selves. This new value becomes a marketable commodity.
This ought not to be. . . . This new social
value is inestimable; it is incommensurable with any other
known value whatever. This money, instead of retaining
its proper relative position, becomes a superior species of
commodity — superior, not in degree, but in kind. Thus
money becomes the absolute king and the demigod of com-
modities. Hence follow great social and political evils.
. . . Society established gold and silver as a circulating
medium, in order that exchanges of commodities might be
facilitated; but society made a mistake in so doing; for, by
this very act, it gave to a certain class of men the power of
saying what exchanges sJiall^ and what exchanges sJiall not
be facilitated.''''
106 It would seem unnecessary to add to this statement.
Whoever has watched the course of events, especially of late,
must know that it is true. How well he understood the
subject can be readily perceived ; yet he wrote it about forty
years ago. The control of money gives the same power
over production and exchange of all commodities, that the
control of the tools by which any single commodity is made
gives over the manufacture of that particular article. The
control of money, then, excludes competition to a very great
extent, while it makes interest artificially high by making
money artificially scarce. Labor, on the other hand, has no
means of avoiding competition. Me« and women must work
or starve, and as new inventions, new discoveries and new
processes facilitate j^roduction with less labor, the demand for
labor grows less, while competition among wage-earners
grows greater; for those thrown out of work which is no
COMPETITION
DD
longer needed must enter other already overcrowded indus-
tries, and thus wages are reduced. Now, anyone can see
that if the wage-earners had gradually acquired ownership
of the means of production — these new inventions, new dis-
coveries and new processes — the advantages derived from
them would be enjoyed by the wage-earners themselves.
Instead of reducing wages and the number of workers
^vanted, it would have increased wages and reduced the hours
of toil. And since labor produces all wealth, these labor-
saving utilities should belong to those who produced them.
Whatever, then, has prevented this, is the cause of the evils
comjDlained of, and not competition; for we have seen that
on the part of the capitalists, so far as the supply of money
(which is secured credit)(S3-S4) is concerned, competition
is most effectually avoided. Had the cajoitalists been subject
to as severe competition as wage-earners have, then the sys-
tem could be called the comjDetitive svstcm; but in that case,
the evils herein enumerated, and of which we all realize their
enormity, would have entirely disappeared, because the cap-
italist, as a non-producer and an absorber of wealth, would
have disappeared.
107 In Mr. Tucker's "Instead of a Book," page 405, is
the following interesting paragraph on this subject: "The
supposition that competition means war rests upon old notions
and false phrases that have been long current, but are rapidly
passing into the limbo of exploded fallacies. Competition
means war only when it is in some way restricted, either in
scope or intensity, — that is, when it is not perfectly free com-
petition; for then its benefits are won by one class at the
expense of another, instead of by all at the expense of na-
ture's forces. When universal and unrestricted, competition
means the most perfect peace and the truest co-operation; for
then it becomes merely a test of forces resulting in their
most advantageous utilization. As soon as the demand for
labor begins to exceed the supply, making it an easy matter
for evervone to get work at wages equal to his product, it is
for the interest of all (including his immediate competitors)
that the best man should win; which is another way of say-
^6 THE Nf:W PlIILOSOPHV OF MONEY
ing that, where freedom prevails, competition and co-opera-
tion are identical."
loS The Mutual Credit System will destroy the specu-
lative part of interest, reducing it to cost of j^roviding the
paper money. With the cessation of interest will disap-
pear dividends and rent; profit being also reduced to wages
for superintendence. This will bring us to the competitive
system. We are not there yet, and it would be well for the
"Twentieth Century" to revise its philosophy and aid in its
realization, instead of retarding it by leading the weak
minded and superficial into the wilderness of unsound ideas;*
for, in the second place, neither the Co-operative Common-
wealth nor any other organized body of producers can possi-
bly get along without competition. Is there to be no "trial
of skill as a test of superiority?" Will there be no "compet-
itors for office?" Will there never be "two or more seeking
or endeavoring or striving for the same object?" Will the
"Twentieth Century" undertake to maintain that these evils
would have existed just the same had there been no monop-
oly of that form of credit called paper money ? or that they
will exist in spite of the establishment of the INlutual Credit
System, the abolition of interest and an abundant supply of
monev ?
*''Special legislation is a covetous pretense that usually steals
heaven's livery the better to serve the devil. Its pretenses and de-
vices are many, but its favorite cloak is patriotism, because garbed
therein and posing as "country'" it can defy exposure, few being
bold enough to assail anything so sacred as country. The strong
hold of special legislation on the people, and their blindness to its
ruinous effects, is because special legislation identifies itself with
country, and makes opposition thereto opposition to country. In
spite, however, of patriotic pretenses, the soul of special legislation is
Greed, that base, heartless, never-satisfied passion that seeks its
gratification regardless or in violation of other's rights or sufferings.
Special legislation never seeks its advantage in merit or honest cpih-
fefition^ but instead, lavs hold of law and makes law its servant to
impose burdens and compel obedience." — '■'■Special Legtshition the
Bane of Agriculture^' by Le-wis H. Blatr
USURY— INTEREST.
109 The Bible doctrine of interest or usur}' is very pro-
nounced. In the eighteenth chapter of Ezekiel it says: "The
soul that simeth, it shall die." And then it goes on to say
who are those who shall escape this penalty. "He that hath
not given forth upon usury, neither hath taken an}' increase.
. . . He is just, he shall surely live, saith the Lord God."
This is a terrible anathema, and it is aimed, not at the body,
for all bodies die, but it expressly says the soul shall die.
This evidently means annihilation.
1 10 Other quotations might be made equally as denunci-
atory of the practice,* but this one condemns the modern
church and all who receive increase, whether in the form of
interest, rent or profit, which exceeds compensation for ser-
vice, who take the Bible as their guide in morals. But I
merely call attention to the fact to show the inconsistency of
people who believe in the divinity of the Bible, yet utterly
disregard its teachings and defy its threats. It does not con-
cern us in our investigation. We are interested in its philos-
ophy. How does the question present itself on its merits.^
1 1 1 History proves that the human conscience in all ages
of the world has condemned usury; and if there were any
merit in altruistic idealism, it would have shown itself capa-
ble of realization on this, the most vital of all social questions.
The inequity of interest is not a matter of belief. It is sus-
ceptible of mathematical demonstration (118-126). Some
very interesting calculations have been made at different
times showing its incompatibility with the natural order of
things (130). It is not only unjust, but its perpetuity is an
*Neh. 5; Deut 23: 19; Ps. 15:5; Exodus 22:25; Eze. i8:S, 13; 22: 12;
Lev. 25:35-37-
58 THE NEW PHILOSOPHY OF MONEY
utter impossibility. An ordinary fortune at compound inter-
est would, in a few generations, exceed the wealth of the
largest city; and in a few more, the wealth of the whole
world.
113 The prevalence of interest in excess of cost and risk,
must be harmful or harmless in its effects upon the social
bodv. It must be just or unjust to the individuals who have
to pay it; and these are the items we have to consider in
order to settle the question on its merits.
11^ In a previous pamphlet, "The Financial Problem,"
the reader will find a comparison made between the rate of
interest and the increase of wealth; showing that the average
rate of interest is from two to three times the actual rate at
which wealth increases. Attention was called not only to
this disparity between actual and legal increase, but it was
shown that the speed at which we were apj^roaching the
inevitable collapse was being greatly accelerated by the fact
that interest was collected on fictitious values as well as on
that which is the result of labor.
114 The reader should not fail to note the frightful havoc
that is played with common sense, and the uttei disregard for
the natural order and constitution of thing, when land values
and the fictitious value added to stocks and bonds, and which
is designated by the appropriate term "water," are not only
sold, thus getting something for nothing, but are made a
basis for interest. An individual buys a lot for $500, and
builds a house on it which costs him $1,000. He claims that
"the property" is now worth $3,000, and fixes the rent
accordingly. Admitting that his time spent In choosing the
plans and watching the building of the house Is worth
$500, we have $2,000 as the total cost. If he now sells out
for $3,000, what does the extra $1,000 represent? Nothing!
It is fictitious value. If, instead of selling for all cash, he
gets $2,000 cash and takes a mortgage for $1,000 on which
he receives Interest, it is interest on fictitious value. The
issue of bonds or stock by corporations without adding an
USURY — IN'TEKEST 59
equivalent in real value to the propcity, is fictitious value, and
if dividends are paid on it, it is interest on fictitious value.
115 Now, if interest on actual values is only a slick way
of robbing people; if it is contrary to and incompatible with
the natural order of things (121-122); how much more so is
interest on fictitious values? If interest limited to actual val-
ues will gain faster than those values can be produced by
labor, and it cannot be successfully disputed, how much more
rapidly will its periodical ruin and desolation overtake us if
to the actual values are added enormous sums of fictitious
values which are to draw interest also?
116 The lack of good sense that is displayed by the jdco-
ple generally in dealing with these questions is something
marvelous; but their acquiescense in the prevailing theory of
interest, as well as their silence on the impossibility of its
continuance on the part of the professors of the "science" of
political economy, and the popular and so-called "great finan-
ciers," is beyond comprehension, and can only be accounted
for on the ground of ignorance on the subject. It was
pointed out in "The Financial Problem" that millionaires,
failures and poverty are the natural outcome of interest tak-
ing, concluding with the following paragraph:
1 17 "Let me still further reinforce this idea by stating it
in another way. The present social system may be said to
be strangling itself to death. The annual interest charge
exceeding the net annual increase in labor products; or, in
other words, labor produced more wealth during the year
than is actually consumed and there remains a surplus, but
this surplus is not sutHcient to meet the amount of interest
demanded by the capitalists for the use of their capital ; hence,
as I have already stated, failures are inseparable from the
system."
iiS And now comes Mr. J. W. Bennett, of St. Louis,
who, in the March, 1S94, number of the "Arena," in the
most powerful article ever published in a magazine on that
subject, demonstrates in a conclusive and unanswerable man-
ner the truth of the above statement, showing the real mon-
6o THE NEW PHILOSOPHY OF MONEY
etary condition, not only of this country, but of the entire
civilized world. Mr. Bennett gives an estimate of the total
wealth in the United States, its distribution and the j^ropor-
tion that bears interest. He says:
119 "An odd projDosition, but one capable of mathemati-
cal demonstration, is that the very foundation principles of
our industrial system lead us to recognize obligations which
we can never pay. A simple, specific statement of what
they are, compels us to admit that they are too large to meet.
The present wealth of the United States may be placed in
round numbers at $73,000,000,000. That fully So per cent
of this sum pays interest nvdy be verified by any person who
cares to give the subject thought. If any of the money
invested in business bears interest, all money invested in bus-
iness must likewise bear interest, otherwise nobody would
assume business risks. But we may arrive at the same con-
clusion by a process quite different.
120 "Something like So per cent of the wealth of the
country is in the hands of about 350,000 persons, or about
one two-hundred-fortieth of the population. This excludes
the wealth of well-to-do farmers and merchants; and it goes
without saying that nine-tenths of this wealth held by the
immensely rich is interest-bearing. Nearly all of it is lent,
or, if not lent out it is invested in some business where inter-
est on the money invested is added to the return or profits of
the undertakers.
121 "The wealth in the hands of farmers and merchants
is paying interest on all that is not used for the personal
wants of themselves and their families; and even many of
the homesteads of the country are paying interest. At least
one-half of such wealth is interest-bearing. An examination
of the mortgage lists of the several states will more than bear
out this estimate. We are, then, paying fixed charges, as the
railroads put it, on about $55,000,000,000 of the country's
wealth. The net rate will average 5 per cent; and taking
into consideration commissions and other charges, 6 per cent
is a low estimate of the gross rate. The interest on $55,000,-
000,000 at 6 per cent is $3,300,000,000 per year. To get the
average interest charges for the last decade, we must take
the average of interest-paying capital, which is about $50,-
000,000,000. We have, then, an average A-early interest of
$3,000,000,000, a sum which more than absorbs the entire
USURY INEUKST 6l
yearly increase of wealth in the United States. During the
last decade, tlie wealth of this country has increased about
$22,000,000,000. During- the same period the interest
charges were $30,000,000,000. Adding but the single item
of interest on personal business obligations to the standing
debt of the people, the assets of the country's citizens will,
in the short period of ten years fall $8,000,000,000 below
their liabilities
132 "But interest and rent charges are not the only lia-
bilities of the business of the country. The government
must be supported ; the national debt and the interest thereon
must be met; debts, state, municipal and school must be pro-
vided for; local govermnent must be maintained. The inter-
est on the public debt of the United States amounts to $40,-
410,000 annually. The interest on municipal, county and
township debts in the United States is $56,750,000 per year.
The expenses of the United States, exclusive of interest and
the paying off of the standing indebtedness, are now about
$350,000,000 }earlv, and the cost of state, county and munic-
ipal government is $450,000,000 per year. At the very low-
est estimate, $897,000,000 must be charged yearly to govern-
ment in the United States, not includmg the payment of the
principal of the public debt. Tliis, representmg money spent
outside of regular business, amounts to $8,970,000,000 in a
decade. Addmg it to the former sum, the excess of interest
on private obligations over the increase of wealth, we have
$16,970,000,000 as the sum which the assets of the citizens
of the United States fall behind their mdebtedness every ten
years. In view of such figures as tliese, it is not difficult to
see Avhy we have periods of business depression every ten
years and terrible financial panics every twenty years.
123 '^The tendency under such conditions is to have all
the wealth which is not used to feed and shelter and clothe
the race pass into the hands of the money-lender. There is
a comparatively trifling exception to the rule. About five
per cent of all who start in business leave it with more than
they began with, and but a portion of their gains can be
charged to interest. The more stable and the largest houses
of business, however, realize large returns from interest
taking.
124 "What wonder is it, then, that the business of the
countrv has to go periodically into the hands of a receiver, in
order to strai<rhten out its accounts and begin anew ? This
62 THE NEW PiriLOSOPHV OF MONEY
is the only way in which the great bulk of business men can
get a new start. Creditors are obliged to take part of their
claims, as there is not enough to pay the whole. Debts are
canceled and a new start is made. The wealth is lent out
again; interest is paid again until the burden gets too large
and another crash comes. At each crash some of the men
who were creditors at the last accounting are found among
the debtor class, and thus property is prevented from mass-
ing in a decade or two in the hands of a permanent creditor
caste. Yet the circle is forever growing narrower.
1 35 "After keeping up the capital stock of the world, and
feeding, sheltering and clothing the race, there is not enough
left to satisfy the demands of the money-lender. If one
agrees to return every ten, twelve, or even twenty years, an
amount equal to that which he has borrowed, in interest, he
is undertaking an impossibility. Nature has no such pro-
ductive power. If it cannot be done in this country of virgin
resources and unparalleled conditions for the production of
wealth, it can be done nowhere. We are, then, confronted
by a foundation principle of our financial system which
necessarily results in business panic. It is necessary that this
principle of our system be critically examined if we would
find where our trouble lies
126 "If interest taking is right, compound interest taking
is right. The principle of compound interest is that a dollar,
without any exertion on the owner's part, will grow into two
dollars in a given number of years, four dollars in less than
twice that time, eight dollars in less than three times the
original period, and will keep on increasing in more than
geometrical ratio, until that one dollar with its interest would,
after a time, represent all of the wealth on earth (130). The
rate makes no difference as to the principle of the thing.
Money at compound interest will just as truly increase indefi-
nitelv at 5 as at 25 per cent, though more slowly, to be
sure."
137 But Mr. Bennett's article is replete with fact and
sound logic, annihilating the sophistry of the political econo-
mists and "great financiers" at every turn.
128 There are two points, however, where Mr. Bennett
differs with The New Philosophy of Money. On page 518
he says: "Interest taking is the foundation of speculative
USUUV INTEREST 63
business." * The fact is that interest and speculation are
both made possible by the establishment of a false money sys-
tem, the object of which is to make money scarce by restrict-
ing it within an artiHcial limit instead of allowing it its nat-
inal limit, as the IMiitual Credit System jDrojDOses — the issue
of secured credit in the form of certificates of credit (pajoer
money), not on some special commodity of value, but on any
and all commodities of value.
129 Such a volume of money as would result with this
system would destroy sj)eculation, because everyone would
have an equal opportunity; while the mutual feature of the
system would destroy interest (36-39). Interest, therefore,
is not the origin of speculation, but both interest and specu-
lation are the result of a monopoly of money.
130 In the following startling proposition, interest is
calculated at the rate of 6 per cent: "Supjoose one cent had
been put at interest at the commencement of the Christian
era, what would it have amounted to at simple, and what at
compound interest, at the end of the vear 1S27''
Answer :
Simple, $i,iS6.20
Compound,
$172,616,474,047,552,529,470J60,914,974J11,959,976,620,354..56
nearly — a sum greater than could be contained in six millions
of globes, each equal to our earth in magnitude and all of
solid gold." — Roswell C. SmitJi's Arifh?netic^ 1^37-
*The other point referred to will be found in paragraphs 315, 31S.
"WE MUST HAVE GOVERNMENT."
131 Such a statement never came fi^om a philosophical
reasoner. It is manifestly ahsurd to say "we must have" of
anything except those things that are indispesable to life,
such as air, w^ater, food, etc. Man's mode of life, his institu-
tions, the means of satisfying his wants, and even the wants
themselves, are ever changing. Those who have experi-
mented in hygienic living know how superfluous nre some of
the "wants" it was their custom religiously to satisfy; and
those who have become evolutionists realize how far man is
from knowing what he really does want (need). Poor little
pigmy! But a speck in the iniiverse, tossed about on the
great ocean of life; the sport of forces he does not compre-
hend; the victim of his own ignorance; this manikin, who
boasts of a history, the philosophy of which he has yet to
decipher; whose efforts at justice are a mockery; whose
dominant propensity is free booty, and whose basis of ethics
is, "heads, I win; tails, you lose"; this embodiment of hypoc-
risy and fraud; this Philistine, is presumptuous enough not
only to have an opinion regarding morals, how we shall
exchange commodities, which commodities are good for us
and which are not; but this ignoramus has the audacity to
incorporate his opinions into statutes and enforce them upon
his unwilling fellow-beings. How does he know that he is
right? There is no moi'e certain indication of ignorance than
the constant and persistent effort to enforce an opinion. To
doubt is the very beginning of wisdom. If such people
would only doubt as to the wisdom of the course they pur-
sue, it would be an indication that they realize that possibly
they might be wrong; but this is foreign to their nature.
Thei.r anxiety does not run in that direction. Their egotism
WE MUST ]IA\'K (;0\'KUNMENT 65
is ever rapaciously hankering for the exercise of authority.
A little doubt as to the right to make the laws that have since
been repealed, might have saved the cost of making and
rcpeahng them, the humiliation and ridicule they subjected
us to, and the misery and injustice their enforcement entailed.
These are the penalties, the burdens, that ignorance imposes
on us. We remonstrate, and the only answer we can evoke
is: "We must have government." A thesis of democracy
is: "That government is best which governs least." This
is proved to be true by the fact that the more government,
the worse we are off. Laws multiply, and so does crime.
133 It may be hard for some people to realize that a very
large part of mankind are Philistines, a soi't of legal or con-
ventional foot-pads, of whom we must be ever w^atchful in
order that we may not be victimized in some way that we
least expect. But what else do the records of the courts, if
not our own immediate experience, teach us? Not only are
we forever witnessing those acts that come under the cate-
gory of crimes, but we are daily surprised by little acts of
vantage which tell too plainly the motive. Such wide-spread
cupidity! Cupidity that is alert on all occasions, and in
every sphere of life; that stoops to all devices; that knows
no bounds and will take any chances; is a sad commentary
on the claims of paternalists and altruistic moralists.
133 One would naturally conclude that such results would
induce inquiry into other methods of dealing with evils for
which government is suj^posed to be a remedv, but of which
it is an aggravation, and that those who suffer the most from
these evils would be only too glad to examine any method
that promised relief ; but in spite of the admitted theory —
that government is best which governs least, — the records of
the past, and our own immediate experience, the superstition
"we must have government" still dominates the minds of the
masses, and appeals to reason are disregarded. In vain it is
asked: Where is the history of the government that has
ceased to be that was not tyrannical.^ Where is the govern-
5
66 THE NEW PHILOSOPHY OF MONEY
ment that has endured that is not despotic?* "What is over-
taking us here at the present time? Precisely what has over-
taken all nations — centralization of power, always accompan-
ied with increase of corruption, demoralization and revolution.
All this must have some rational explanation. It is an axiom,
I think nowhere disputed, that there is no effect without
adequate cause. To what cause, then, shall we ascribe these
results? No sooner does an individual undertake an earnest
study of these questions than he becomes a deserter; and
while he may not go forth and proclaim his change of front,
he ceases to co-operate, as formerly, with the enemies of lib-
erty. "What has taken place? Whence the change he has
undergone? He has become enlightened. He has informed
himself; whereas before he was ignorant. Is it not true,
also, that those who are the most zealous in maintaining the
present order of things and the most persistent opponents of
a change, have never made a conscientious study of the sub-
ject? They have merely taken it for granted that "we must
have government," and, therefore, what the government
ordains must be right.
134 Now, is it not natural to suppose that the same
result would follow in at least a large majority of cases, that,
as stated, has occurred in all those who have made a consci-
entious study of this subject ? And would not such results
work a complete change in our social institutions? Have we
not, then, an answer to the question: "To what cause shall
we ascribe these results?" What else but prevailing igno-
rance? Additional evidence of ignorance is manifested in the
fear entertained by those who have never made a study of
the Anarchistic philosophyf as expounded by P. J. Proud-
*Those who have not, and care to look up the question, are re-
ferred to "A Vindication of Natural Society," by Edmund Burke;
"History of Civilization in England," by Thos. Henry Buckle; "Intel-
lectual Development of Europe," by John W. Draper; '-Social Stat-
ics," by Herbert Spencer.
•j-" Anarchy — Want of government in a state, — an anarchy, a com-
monwealth without a head or government." — Skeaf's Etymological
Dictionary of ilie English Language.
WE MUST HAVE (JOVERNMEXT 67
hon* and others,-}* that it means the jorevention of anything
Hke order or system ; that since "government is to preserve
order," the abolition of government must mean the inaugura-
tion of disorder. All this misunderstanding shows that Ihey
are ignorant of the fact that government, instead of being
the preserver of order is the promoter of disorder. This has
been demonstrated unanswerably l:)y these authors. Far
from ojoposing system and order, Anarchism teaches the only
true way to have a permanently peaceful system of society;
that the State is an invader of personal right, and that order
can only be preserved by maintaining personal right — liberty.
As Spencer has so clearly pointed out, the State — govern-
ment — originated in brute force; and as Burke so eloquently
shows, has perpetuated itself by the same means. He says:
"In vain you tell me that artificial government is good, but
* "May not anarchy, •which is a
very great evil become a very great good? Such is the question
raised by a celebrated writer, M . Proudhon, and he did not hesitate to
answer it in the atlirmative. If we understand him aright, the anar-
chy of M. Proudhon is nothing but self government carried to its
extreme limits, and the hist step in the progress of human reason.
According to him, men will at last acknowledge that, instead of dis-
puting and fighting over questions of which, in the majority of
cases, they know nothing, and instead of seeking to ensLi\e each
other, they would do better to accept the law of labor frankly and
join hands to triumj^h over the numerous obstacles which nature
opposes to their well-being. In this new order of things, nations
would be nothing more than groups of producers bound together by
close ties of common interest. Politics, as hitherto understood,
would have no further raison d'etre, and anarchy, that is to sav, the
disappearance of all political authority, would be the result of this
transformation of human society in which all questions to be solved
Avould have a purely economic character. Long ago J. B. Say ad-
vanced the opinion that the functions of the State should be reduced
to the performance of police duties. If so reduced, there would be
but one step needed to reach the an-archy of M. Proudhon, — suppres-
sion of the police power." — /,. Ponbert, in Cyclopedia of PoLituMt Hci-
ence, edited by 'John J. Lalor, iS8j.
f'-What is Property" and "The Philosophy of Misery," by P. J.
Proudhon; "True Civilization," by Josiah Warren; "Science of Soci-
ety," by Stephen Pearl Andrews; "Yours or Mine" and "Hard Cash,"
by E. \\. Hey wood; "Instead of a Book," by Benj. R. Tucker, and
his fortnightly paper, "Liberty"; and "The Anarchists," by John
Henry Mackay.
68 THE NEW PJIILOSOPHY OF MONEY
that I fall out only with the abuse. The thing; i/ze thing
itself is the abuse!"
1 35 To sa}^ that these authors who have made the most
critical analysis of all the factors that figure in our social rela-
tions; these men of keen intellect, who have shown up the
errors and fallacies of the abettors of the methods of force,
demonstrating that the recognition of the right of the indi-
vidual to his person and property is the fundamental principle
upon which a rational system of society must rest; these
philosophers whose works have been ignored and excluded
from the libraries in the vain hope of patching up and per-
petuating that relic of the barbarous past, that despoiler of
all that is good and noble in the race ; that institution that is
barren of any good whatever; the parent of all evil, the sum
of all villainies — the State, — to say that these men want dis-
order; that they have no regard for private property and that
what they aim at is a chaotic condition in which there will be
no security to person or property, is the most inexcusable per-
version of fact. From the right of the individual to his (or
her) person and property, they argue the denial of the right
of government to impose taxes, because it is the antithesis of
the right to private property. Either the individual has a
right to his property or he has not. If he has a right to his
property, then, no one, not even government, can take it
without his consent. It cannot take all of it, nor even a frac-
tion of it; for a fraction of it is as much his as the whole of
it is, and to take a fraction of it without his consent is as
much a violation of the principle of right as to take the
whole. This principle is so well recognized even in law, that
anyone caught appropriating the property of another, how-
ever insignificant its value, is dealt with as having violated
the right of private property.
136 Only government, within certain limits, can take
property without the consent of the owner, with impunity.
When it exceeds the limit, the people resist, even by the use
of fiorce if necessary. This in itself constitutes a denial of
WE MUST HAVE GOVERNMENT 69
the "right" of government, and shows that the people con-
sent to he robhed up to a certain extent, because they do not
know what else to do. Here again is more evidence of pop-
ular ignorance. Upon this same principle of right, — the
right of the individual to his person— is based the denial of
the "right" of government to call upon the individual to bear
arms against his consent. If the individual has the right to
his person, he has the right at any and all times and under all
circumstances, to decide whether he \\ ill bear arms or not.
For if he has not the right to refuse to bear arms, then he
has not the right exclusively and absolutely to his person.
137 Having determined that these two constitute the
fundamental principles in social science, these philosophers
affirm with unfaltering assurance that the most desirable and
satisfactory state of society can be attained only through their
recognition and absolute inviolability; that such must neces-
sarily be the result, and they proceed to demonstrate that it
would be the result.
138 Instead, therefore, of those who advocate the aboli-
tion of the State desiring a state of disorder, they prove that
it is the only possible way of attaining an orderly state of
society, and that the existence of the State is the main hin-
drance to its realization. That the statement, "v/e must have
government" should be changed to: we must abolish
GOVERNMENT.
139 But to the average man or woman, "we must abolish
government" is a scarecrow, a bugaboo of more hideous
proportions, if possible, than that sublime myth, the prince of
devils. What are they scared at? In the first place, there is
no hope that government will be abolished so long as people
are ignorant of the fact that it is the cause, the originator of
all their woes. It is perpetuated through ignorance; audit
fosters ignorance, just as the church does, in order that it
may perpetuate itself. The abolition of government, of the
State, is an impossibility, except as it outgrows its "useful-
ness"; except as other institutions come forward and do the
yO THE NEW PHILOSOPHY OF MONEY
work that it makes a pretense of doing, and the people real-
ize it. The abolition of government, therefore, should not
be feared as an evil. Even those who, from lack of infor-
mation on the subject regard the existence of the State as
necessary, will consent to its abolition when there shall be no
further use for it. Will anyone insist on having policemen
patroling the streets long after arrests shall have ceased and
invasions of persons and property shall be a thing of the
past? If that time never comes, then the policeman will not
be abolished and there is nothing to fear.
140 The thesis of the abolition of the State is this: See-
ing that government is an evil, a mistake, that it does not do
what it promises to do; that it is an aggravation of the dis-
orders for which it is supposed to be a remedy; that it does
not and cannot promote order and justice, but is itself a most
effectual hindrance to their establishment; let us institute such
other means as will in reality bring about justice and order in
society; that, since government never did, does not, and, in
the nature of things, cannot, let us organize and put into
operation that which can and will accomplish the ends we
desire. Such is the philosojDhy that is designated Anar-
chism ; the best definition of which is, perhaps, the absolute
inviolability of person and property.
141 It may be well here to p^int out the difference
between the Anarchist and the bomb thrower. No worse
than government itself, which uses dynamite and gatling
guns, he is a deluded victim ; nevertheless, a product of the
very society that condemns him, and being stronger than he,
survives while he perishes. Pliilosophical Anarchism con-
demns the method — force.* It is contrary to the definition,
*The Standard Dictionary's definition of Anarchism is : "The prin-
ciples, practices, or characteristic spirit of Anarchists; the theory
that all forms of government are wrong and unnecessary." The Cen-
tury Dictionary says: "Anaixhy — Specifically — 2. A social theory
which regards the union of order and the absence of all direct gov-
ernment of man by man as the political ideal; absolute individual
liberty."
WE MUST HA\I-: t;0\-I-:KNME.\T J I
"the absolute inviolability of person and property," and impo-
litic: it can accomplish no good unless it is to give the
unphilosophical wa'iters of the press something to say and
startle lazy plutocrats out of their dream of security, w^hile
conditions are as diabolical as they well can be.
142 But, it is asked, what do you propose to substitute?
The idea is well nigh universal with the philosophical reform-
ers that the first step towards a new and peaceful order of
society is necessarily a release from the grip of the money
power. This can be accomplished by taking the control of
money entirely out of the hands of government.* The idea
*"The right of the individual to do as he pleases with his own is
an axiom with us. Trespass alone limits this right, and provided one
does not trespass, one may, by competition or otherwise, ruin one's
neighbor. But notwithstanding our axiom, and notwithstanding we
place little restriction upon this right, there is one thing individual
may not, wiisi tiut, do. One may fieely fashion one's gold and silver
into ring, watch, spoon, etc., and pass or sell at alleged weight and
fineness, but one may not, tnust not, without crime, fashion into coin
and pass or sell at alleged weight or fineness; and one mav also
freely issue and sell time promises to pay, but one may not, must 7wt,
without crime, issue and circulate demand promises to pav.
"Slightest thought should show the injustice and absurdity, and
therefore injury of such prohibition; but as some cannot think, and
many will not think, these perceive neither the injury, injustice nor
absurdity ; and as the few who do think qualify their perceptions with
so many imaginary and impossible fears, they might as well not
think. Hence, all unite in preventing individual doing as he pleases
with his own, respecting coining money and issuing circulating
promises to pay. All fear to permit right and leave consequences to
righteous Nature, lest Naturestultify herself and bring evil out of good.
"To prevent right is to commit wrong. Now, what is government
that it can righteously prevent one doing as one pleases with one's
bullion and putting one's property into such shapes as one pleases.^*
Government is not, as generally supposed, a mysterious, omnipotent
creature, whose simple fiat makes right and wrong, but is merely an
aggregate or collective individual. Aggregation of individuals into
government does not itnpart to the aggregate a different nature from
its component units, nor rights different in kind, however in degree,
frotn said units — no more than aggregation of seeds of wheat until
they fill an elevator changes the nature of the grain. Government
differs from the individual only as the grains from the mass — that is
in degree, not in nature. Now, as righteous individual cannot arbi-
trarily prevent individual doing as he pleases with his own, so nei-
ther can the aggregate individual, or government, righteously pre-
vent its individual units." — '■'■Ris^ht of Individual to Coin Money and
Issue IVotcs," by Lewis H. Blair.
y3 THE NEW PHILOSOPHY OF MONEY
of the necessity for government supervision and regulation of
money, as tlie "Galveston News" puts it, "was borrowed
from the previous royal system." Royalty, wherever it has
existed, has availed itself of the opportunity which ignorance
on this subject afforded, and arrogated to itself the right to
provide and regulate the supply of money. But invasion of
personal liberty in many other instances has been regarded as
unwarranted interference; and in the establishment of govern-
ment in this countr}', and since, much discussion has taken
place as to the proper sphere of government. Why has this
phase of the question escaped the careful examination it
deserves? Why is it that the popular writers and the press
generally take it for granted that it is a proper function of
government to dictate what shall be used as a medium of
exchange? It implies a belief not only in the wisdom, but in
the honesty of lawmakers that is at variance with all
experience.*
143 The history of the world is a history of corruption.
Listen to Tom Moore: "All the governments that I see or
know are a conspiracy of the rich, who, on pretense of manag-
ing the public only pursue their private ends, devise ways
and means to preserve all that they have so ill acquired; then
to engage the poor to toil for them at as low rates as possible
and oppress them as much as they please." — Tom Moore's
Utopia.
"Like loaded dice by ministers are thrown,
And each new set of sharpers cog their own;
Hence the rich oil that from the Treasury steals,
Drips smooth o'er all the Constitution's wheels,
Giving the old machine such pliant play
That Courts and Commons jog one joltless way,
While Wisdom trembles for the crazy car,
So gilt, so rotton, carrying fools so far;
*The reader is recommended to read "Seven Financial Conspira-
cies," by Mrs. S. E. V. Emery.
AVE MUST 1IA\E GO\'ER.MKNT 73
And the duped people, hourly doomed to pay
The sums that hrihe their liberties away, —
Like the young eagle, who has lent his plume
To fledge the shaft by which he meets his doom, —
See their own feathers plucked to wing the dart
Which rank corruption destines for their heart."
— From Tom Moore's Poem on Corruption.
THE ALLIANCE AXD PROIIIHITOR Y FIXAXCIAL LAW.
\I-'ruiii (he Gah'esion A'ezvs^
144 The Alliance is an offspring of certain oppressive
conditions, and the Alliance will sooner appreciate the truth
of what the Ne-ws has been saying regarding repressive, pro-
hibitory paternalism than will certain benevolent gentlemen
in the old parties, who are paternal in their solicitude to pre-
vent the people from hurting themselves in and by economic
liberty. It is not likely that the Alliance would ever have
gone to the government for issues of currency if the govern-
ment had left banking business as free as the boot-making
and grocery business. The people either know how much
credit and currency they need or they are not competent to
manage their own business affairs. Prohibitory paternalism
envelops everything in such a cloud that gentlemen like
Senator Reagan are astonished to hear that which they never
suspected — that they are paternalists, as proved by the test of
what they desire to forbid. At least if they are willing to
have bankers, and farmers and other producers come together
and arrange for the issue of all the secured currency which
property owners desire to have manufactured and to pay for
in a free market, they give no sign, but often intimate that
the property owner will be ruined if the law allows him to
pledge his property different from now. How bitter a satire
to the Alliance farmer this is! He is free to borrow monop-
oly moncv on all but his homestead, and pay lo per cent.
The interest may eat him up. He learns that a different cur-
rencv, merely representative of wealth, can be made and
secured, and of course its cost is nothing like the interest
which currency commands as now known — a mere addendum
to monopoly money. The borrower being an owner of
wealth, currency to render that wealth fluid, mobile, is what
74 THE NEW PHILOSOPHY OP' MONEY
he needs, and the proper price to pay is what it costs (97).
No better taught, he looks to government (305). He is met
even by Democrats in the spirit of a sincere, ignorant,
repressive paternalism, with something like this: "Dear
boys, you would pledge your property and overdo the thing;
make mistakes, and your property would pass into other
hands." As much caution and advice as gentlemen in polit-
ical life like, but the Alliance is right as to all but the gover-
ment being the warehouser and banker, and it is coming to
this, that the Democratic party must show whether it is in
favor of liberty in finance. The owners of values would
have long ago combined to supply themselves with currency
which need not cost more than 1 per cent and be perfectly
good, but prohibitory law stands in the way. The Alliance
has come to demand through government what government
has wrongfully forbidden to come into being naturally.
Wherever government strikes down trade the demand will
come that government itself do the thing needed if it will not
let private parties do it. The News has used Senator Rea-
gan as an illustration, but its criticism applies to the majority
of other statesmen who consider themselves opposed to
paternalism. It tells them candidly that they cannot grapple
with the Alliance until they come to a platform of economic
liberty on the currency question as in all else. It is a neces-
sary alternative. The people will have currency, and will
not pay for it a rental entirely disproportioned to its cost of
manufacture and control, when they furnish the wealth as
security. There is nothing else essentially in the question,
delicate and difficult as it may be, than security and manage-
ment. What the Democrats should be about as to the money
question, is to take reason of the Alliance and give it an anti-
paternal form and issue. Not that the Alliance might at
once accept free banking. Paternalism has brooded and
reigned too long to abdicate at once from the minds of men.
But this is the alternative, and the only alternative (145-147).
144a The foregoing is an editorial, and the Galveston
Nezvs is the ablest and most influential daily paper in the
state of Texas. It has for some 3'ears past been an advocate
and an able defender of freedom in the supply of money
145 Mr. Lewis H. Blair, in his very able essay, "Standard
of Value," says: "We are so accustomed to the regulative.
WE MUST HAVE GOVERNMENT
75
but especially restrictive, IkiucI of government in things mon-
etary, we can scarcely conceive of any monetary system based
on liberty and competition. Many objections, therefore, will
immediately and s]5ontaneously arise to the proposition that
government must absolutel}' dissociate itself from coinage and
currency. The chief and most formidable will be that it is
the duty of government to protect the citizens against bad
money. We shall examine only this objection, because if
this is found baseless all other objections fall with it.
146 "It is denied that it is the duty of the government to
protect the citizen against bad money. The duty of the
government is simply to protect hmi in his life, lil)ertv and
pursuit of happiness. In all other respects — in his food, rai-
ment, shelter, business, religion, etc. — he is, or should be, left
to look out for himself, and when so left he protects himself
better than government can, and so it should and would be
with money.
147 "A universal currency is a great desideratum, but
such currency can never be until monetary matters are
entirely dissociated from government and left to the free play
of conflicting interests. When thus dissociated and left to
intelligent self-interest, not a generation will probably pass
before the^great financial interests of civilization will have
agreed upon a universal coinage, varying only in appearance
and nomenclature, co-extensive with commerce. A universal
currency resting upon consent and not arbitrary statute would
only be an extension of the clearing-house systems of Lon-
don, New York, and other great financial centers. These
have arisen naturally and do their work perfectly, and in like
manner a universal currency would as naturally arise and do
its work perfectly, if government would restrain its regu-
lative hand."
148 It should be borne in mind that the abolition of gov-
ernment is only an extension of that degree of liberty attained
in the consummation of American independence. If we
rejoice at the progress thus far made towards human liberty,
why should we deprecate still further progress? To advo-
cate the abolition of government is simply to favor such
measures as will bring about conditions under which no gov-
ernment will be necessary. Herbert Spencer says: "It is
a mistake to assume that government must necessarily last
76 THE NEW PHILOSOPHY OF MONEY
forever. The institution marks a certain stage of civilization
— is natural to a particular phase of human development. It
is not essential but incidental."* Those vv^ho oppose the aboli-
tion of government are, logically, in favor of a continuance of
crime and policemen to arrest the criminals. The choice is
between prosperity and the inviolability of person and prop-
erty, or poverty and the policeman's club; and our opponents
virtually say, "we want poverty and the policeman's club."
149 The story of him whom the Christians worship can
all be told in these few words: In a certain nation there
appeared before the public a peaceful and inoffensive citizen,
who said: "I can show you how you can all become happy."
And straightway a few of the prominent and wealthy men
said among themselves: "This man wants to overthrow our
institutions that we have reared; let us hang him." And
they went and hung him. So it appears to be now — not a
question of whether we would be happier by any proposed
change, but, is it likely to affect our institutions. To perpet-
uate these is the real purpose of government, while progress
is constantly demanding their abolition as things we have
outgrown. As evidence of the persistence with which it
inflicts them upon the people, let the following from the
Westminster Review testify. And let the reader bear in
mind while perusing this history of money panics in England,
that the sublime folly that caused them (the monopoly of the
Bank of England), was the culmination of discussions in
which participated the "wisest" and most famous men of the
time. Mr. A. J. Warner, in his statement before the Com-
mittee on Banking and Currency, December 14, 1S94, said;
"Probably no question in which the public is concerned ever
underwent so thorough a discussion as this question of the
regulation of currency, not only in this country, but particu-
larly in Great Britain from iSio down to 1857. Every phase
of the question was discussed over and over again. Parlia-
* "Social Statics," page 24. Edition of 1S90.
WE MUST HAVE (;OVEKNMKXT
77
mentary commission after commission was establislied to con-
sider every ^proposition presented. First came the celebrated
bullion report of iSio, then the report of the secret commis-
sion of 1819, then the commission of 1S26, that of 1S40, and
finally of 1S57, in which was summed up, in my judgment,
the wisdom of the entire discussion, and to the discussion which
then took place, so far as I know, nothing really has been
added since that time. I believe that the general conclusions
then reached have been accepted by all writers of distinction
from that day down to this." The following articles are a
history of the effects produced by the institution approved by
these "writers of distinction" and instituted by the government.
STATE TAMPERING WITH MONEY AND BANKS.
\^]Vcstminster Revte-v, yan., iSjS.']
150 When, in 1793, there came a general crash, nxainly
due to an unsafe banking system which had grown up in the
provinces t'fz conseq^ience of the Bank of England monopoly —
when the pressure, extending to London, had become so great
as to alarm the bank directors and cause them suddenly to
restrict their issues, thereby producing a frightful multiplica-
tion of bankruptcies, the government (to mitigate an evil
indirectly produced by legislation) determined to issue
Exchequer Bills to such as could give adequate security.
That is, they allowed hard-pressed citizens to mortgage their
fixed capital for an equivalent of State promises to pay with
which to liquidate demands on them. The effect was magi-
cal In 1825 again, when the bank of Eng-
land, after having intensified a panic by extreme restriction
of its issues, suddenly changed its policy and in four davs
advanced 5,000,000/ notes on all sorts of securities, the panic
at once ceased (page 214). And now mark two important
truths; one of them, indeed, already indicated in the forego-
ing paragraph. Observe, in the first place, that this expan-
sion of paper circulation which naturally takes place in times
of impoverishment or commercial difficulty, is highly salutarv.
This issuing of securities for future payment when there does
not exist the wherewith for immediate payment is a means of
78 THE NEW PHILOSOPHY OF MONEY
mitigating national disasters that would else be far more severe-
In a few words, the process amounts to a postponement of
trading engagements that cannot at once be met. And the
alternative questions to be asked respecting it are, — shall the
merchants, manufacturers, shop-keepers, etc., who, by unwise
investments, or war, or famine, or great lossess abroad, have
been in part deprived of the means of meeting the claims
upon them, be allowed to mortgage their fixed capital to a
bank in return for promises to pay of equivalent value? or
by being debarred from so issuing memoranda of claims on
their fixed capital, shall they be made bankrupt? On the
other hand, if, as they must also be, they are forthwith made
bankrupt, carrying with them others, and these, again, others,
there follows in the first place, a most disastrous loss to all
creditors; property to an immense amount being peremptor-
ily sold at a time when there are comparatively few able to
buy, must go at a great sacrifice
FREE TRADE IN BANKING.
[IVeshninsfer /Review, ycin., iSS8.'\
151 It has become proverbial that men usually attribute
the sufferings they endure to any cause but the right one.
This tendency was never more strikingly realized than in the
present disposition to attribute the commercial depression of
recent times to free trade — to over-production and to foreign
competition — and this, regardless of the fact that foreign
nations are suffering equally with ourselves. Those who
reason thus little dream that, except to a very limited extent,
free trade has never been tried, and that therefore it cannot
have proved a failure. While the oppressive and costly sys-
tem of indirect taxation and the disastrous monopoly of money
remain, it is perfectly idle to talk of free trade having been
tried in this* or any other country. The principle is right —
perfect freedom of exchange between nations and individuals
— and what is needed is simply to carry it out.
152 It is the monopoly of the banking system to which
we propose to call attention in the present paper. Our object
will be to show that the English bank and currency laws,
* The Westtninster Revie-w is an English magazine.
WE ML'ST HAVi: GOVERNMEXT
79
and especially the Bank Act of 1S44, have been most disas-
trous in their influence on industry and commerce, and that
they are, at the present moment a most influential cause of the
long-continued and wide-spread depression which all lament.
153 This subject was exhaustively treated in the January
number of this Review for 1S58; and many clear thinkers
had at that time denounced the existing system, but the effort
failed to arouse public attention sufliciently to ensure a rem-
edy; and subsequent events have formidably aggravated the
evil, rendering it imperative now to reiterate the expose of
this gigantic wrong, with a view to its speedv removal.
154 It is impossible to over-estimate the importance of
an abundance and reo^ular supply of money. It is abso-
lutely essential to that freedom of exchange on which
healthy comm^erce and natiofzal ^vell-beifig depend. [Italics
mine.] But our bank laws have rendered these conditions
impossible by arbitrary and wholly unjustifiable interference
with the conditions of supply and demand which affect monev
precisely as they affect every other commodity
Not only has the supply been needlessly restricted, but that
restriction has been so capricious, so frequent, so sudden and
so extreme, that panic and commercial disaster have followed
to an incalculable extent.
155 The Bank of England was established in 1694, and
on free trade principles. It was a joint-stock company, and
it commenced its operations with a loan to the government,
then very much pressed for money to carry on a war with
France. Patterson, its intelligent founder, had no idea what-
ever of its having any monopoly or special privilege, but he
soon ceased to be one of its directors, and in 170S, only four-
teen years after its establishment, the government, in return
for another loan, passed a law that no other joint-stock bank
should remain in England. The result was the establishment
of a large number of small banks which, unable to stand
against the intensely selfish manipulations of the government
protege^ perished in numbers in every commercial crisis and
rendered a safe system of banking impossible.
156 It was not until 1826 tiiat the government partly
reversed this mischievous policy and permitted the establish,
ment of joint-stock banks in England. Even now they are
not allowed to issue any notes, though their subscribed cap-
ital and reserve fund, taken together, are many times greater
than those of the Bank of England.
8o THE NEW PHILOSOPHY OF MONEY
157 The worst evils of the monopoly of the Bank of
England were not felt till the present century. Towards
the close off the last century, the wars in which we were
engaged drained the national resources, and exhausted the
ingenuity of Mr. Pitt in the endeavor to raise the "sinews of
war." The transition was frequent from increased imposts
on commodities to income tax, and from that to enormous
loans to be paid in some indefinite future, under the burden
of which we now groan. But all would not avail, not even
with the iniquitous redemption of the land tax — that last
attempt to free land from all responsibility and to throw the
whole burden of taxation on the people. But even this would
not serve and in 1793 specie payment was suspended and the
currency was entirely carried on by paper money until specie
payment was resumed in 1819. The conclusion of the war
naturally caused great changes in commercial affairs. Corn
had been grown at home during its continuance, prices had
been high and rents'had risen. But when foreign corn was
admitted, prices fell and rents could not be maintained. To
keep up rents without ruin to farmers the corn laws were
imposed in 1S16 and the burden of taxation was still further
thrown upon the people.
158 But to aggravate the evil a stupendous change was
made the same year in the currency laws, fraught with untold
mischief — the demonetization of silver. Up to that time sil-
ver and gold had been alike legal tender and together they
had been far from sufficient for the requirements of the
nation. Gold had been 1105^. per ounce, its nominal price
being 77^. lod. Panic and ruin had prevailed in the three
previous years, 1814-15-16; ninety provincial banks having
become bankrupt and as many more having been dissolved;
and yet our infatuated rulers must needs increase the evil
infinitely more by decreeing in 1S16 that silver should no
longer be a legal tender beyond the amount of 405.
159 The infatuation of this step it is impossible to appre-
ciate or account for. Continual scarcity of money had pro-
duced the same disastrous results. There was a panic from
this cause in 1793 and it could only be relieved by the issue
of ^£"5,000,000 in Exchequer bills and in 181 1 a similar crisis
occurred which was relieved by the same ineans.
160 In 18 19, with gold the only legal tender and the sup-
ply of money thus artificially limited, the government re-
turned to cash payments and at the same time materially
WE MUST HAVE GOVERNMENT Si
restricted the paper currency. To intensify this evil, they
lent ^"30,000,000 of gold to the French government, and,
still worse, the supply of gold from the American mines had
materially fallen off. The consequence was a depression of
trade and general distress and ruin terrible to contemplate.
The attempted remedy was monstrous. Instead of an
increased paper issue, this was still further contracted and
discounts were restricted, in order to bring gold from abroad.
Though the directors of the Bank of England told the gov-
ernment that the act would ruin tlie great body of the peo-
ple, it was passed. Up to 1S19 the supply of precious metals
had sunk to one-half, at the same time that the trade of the
country had immensely increased. These measures were
followed in 1826 by one of the most disastrous panics the
world has ever witnessed. Alison in his great history dwells
emphatically upon the ruinous results of the diminished sup-
ply of the precious metals from the American mines com-
bined with the contraction of the currency in our own
country. As in the present crisis, the effect of this mis-
chievous policy was attributed to a wrong cause, and
demands were made for protection against importation from
foreign lands. The panic of 1S26 was caused entirely by
the capricious action of the bank authorities. For some
years they increased their circulation of paper money, and
then, finding their stock of gold nearly exhausted, they sud-
denly diminished the note circulation to the extent of ^£"3,-
500,000. A general distrust took the place of undue confi-
dence which had pervaded the country; the notes of the
countrv banks were returned upon them to such a degree
that a great number failed and a "run" upon many London
bankers ensued, followed by the stoppage of several. Com-
mercial distress of the most friglitful description followed,
and such was the loss of confidence that the wealthiest mer-
chants were driven to make heavy sacrifices of property, in
order to make provision for their immediate engagements.
To use the memorable expression of ^Mr. Huskison, ''the
country was within twenty-four hours of barter." The rem-
edy was found in again iticreasing the paper currency. The
bank had caused the panic by limiting the circulation to save
itself. It increased the paper circulation again and the panic
ceased. Between November 3rd and December 29tb, the
amount of mercantile bills muler discount increased from
£4,000,000 to ^15,000,000; the number of bills discounted
82 THE NEW PHILOSOPHY OF MONEY
in one particular day being 4,200. The effort thus made
was assisted by one circumstance, purely accidental. A box
containing £1 notes which had been overlooked when the
bank called in all its notes under £5, was discovered just in
time, and, in the opinion of Mr. Harmon, one of the direct-
ors, the timely issue of these notes "worked wonders; it
saved the credit of the country." Between December 3rd
and 31st the bank-notes in circulation were increased from
c£ 1 7,000,000 to £35,000,000. This great increase was neces-
sary to replace the notes of the country bankers that had
suddenly been withdrawn from circulation, and to counteract
the tendency to hoarding always indulged in by timid per-
sons in periods of embarassment. Foreign exchanges again
turned in our favor and the gold forced abroad by previous
mismanagement came back.
161 The next foolish step taken by the government was
in 1829 when all notes for less than £^ were made illegal in
England. It was proposed to apply this law to Scotland,
but the sagacity of Sir Walter Scott saved Scotland from the
calamity, and she enjoys the circulation of her ,£1 notes to
this day.
162 From this time a panic seems to have occurred about
once in ten years, and partial ones more frequently, alvva^'S
traceable to scarcity of money arising from the peculiar lia-
bility of gold to be withdrawn to other countries. In 1837
one of these crises occurred after three or four years of com-
parative prosjDerity, occasioned by the despotic action of
President Jackson in the United States forbidding bank-
notes to be recognized as legal tender, and requiring all pay-
ments to the government to be made in gold and silver.
Trade was checked in the States, interest rose to 24 j^er cent
and a large drain of gold from England followed. The
Bank of England raised the discount to 6 per cent and bor-
rowed £2,000,000 from Parisian bankers. English trade
suffered severely.
163 It is strange, beyond conception, that the disasters
resulting from the note circulation and rate of discount
being dej^endent upon the amount of gold in the bank, did
not lead to some effectual remedy. On the contrary, the
infatuation was so complete, that from this time, the bank
stereotyped In the act of 1844 this ruinous system, leaving
the trade of England at the mercy of every foreign power,
and producing one disastrous crisis after another.
WE MUST HAVE GO\'ERNMENT 83
164 From 1S40 to 1S43 an inllux of Russian gold gave
some relief to commerce. This gold, the product of Russian
mines, had hitherto been allowed to lie in the bank coffers of
Russia. It was now employed in the purchase of govern-
ment stocks in the west of Europe and especially in the
British funds. In 1S43 the bullion in the Bank of Ep'^^Iand
was A* 1 6,000,000 — four times the average since 1831. The
Bank Act of 1844, bowever, neutralized the advantages that
should have arisen from the influx of Russian gold; it
allowed no increased issue of notes except those of the Bank
of England; it limited the issue of that bank, causing the
amount to be determined by the amount of gold in its cellars,
and did not allow even the Bank of Scotland to issue any
unless it retained in its coffers an equal amount of gold.*
165 Sir Robert Peel well knew the far-reaching effect of
any alteration in the currency laws, but he was totally blind
to the real nature of the act which he introduced. Instead
of being alive to the disastrous effects of the act of 18 19, he
described that of 1844 as merely the complement of it, and
he perpetuated its worst features in an aggravated form. Its
two great evils arc: i, the extreme liability to disturbance
from the regulations with regard to gold; 2, the capricious
and arbitrary limitations of the paper currency.
166 The principal provisions of the Bank Charter are
briefly these :t i. That after 1844 no new bank should be
permitted to issue bank-notes and that no bank whatever
should issue a note in London or within sixty-five miles of
London, except, of course, the Bank of England.
167 2. The banks enjo\'ing the right of issue previous
to 1844 should be forbidden to extend it, whatever may be
the future expansion of their business.
168 3. That a fixed amount of .£14,000,000 in notes
might in future be issued by the Bank of England against a
like amount lent to the government by the bank. All fur.
ther issues to be covered by bullion, of which not exceeding
one-fourth may be silver. This last provision is utterly use-
less, since millions of silver may not pay one JC5 note.
169 4. In case of private banks ceasing to issue notes,
the Queen in Council may authorize the bank to increase its
note issues by two-thirds of the amount so withdrawn.
* Paterson's "New Golden Age."
■(■"Financial Reformer Almanac," 1S85.
84 THE XEW PHILOSOPHY OF MONEY
170 In ^855 this power was exercised and further note
issues of £475,000 against stock were sanctioned, such being
two-thirds of their discontinued private issues.
171 A somewhat similar arrangement followed with
regard to the Bank of Ireland and special provisions were
permitted for Scotland. But in both countries the amount
of circulation was closely restricted. No new banks of issue
were permitted and in consequence no new bank has been
established in this country, so far as we know.
172 The following are some of the effects of this Bank
Act: The number of banks enjoying the petty right of a fixed
issue has steadily decreased from £9,750,000, forty-four
years ago, to £3,250,000 in 1SS3. On the other hand, the
Bank of England, whose whole note issue was £15,750,000
in 1840 (that is, six millions above theirs), was £25,000,000
in 18S3, or twenty-three and three-fourths millions above
theirs. The total inadequacy of this note issue to the
requirements of the country is proved by a recent statement
from the Eco7iomist to the effect that the note circulation in
England in 1844 was over 205. per head of the population
and is now under \os. per head. The imports and exports
of Britain per head in 1S54 were £9 145'. and in 1SS6 £20
45-. The currency is thus reduced to one-sixth as compared
to the work to be done.
173 The only proof required of the utter rottenness of
the Bank Act of 1844 ^^ found in the fact that on three
occasions, — namely, in 1847, 1857 and 1866 — its operation
has been suspended by government, not to relieve commer-
cial distress, ^z^/ to save the bank fro7ri stopping payment.
Immediate relief and cessation of panic have in every case
followed its suspension; proving beyond question that the
crisis was artificial and unnecessary, — created, in fact, by the
law itself.
174 The panic in 1S47 began by failures in the corn
trade. Wheat fell from \20s. to 60s. the quarter. Then
several banks failed: the general complaint was want of
money. The bank rate was raised from 3 to 7/^ per cent
and panic followed. The pressure continued, with ruin on
every hand until the government authorized the bank to
issue more notes than the law allowed. The effect was
immediate. Confidence was restored. Hoarded notes were
brought out and discounts were everywhere readily obtained.
£7,500,000 of bullion had left the bank and notes had conse-
AVE MUST HAVE GOVERNMENT 85
quently been diminished to that extent. The bank advanced
^4,000,000 in one day in sums of from .£300,000 to £50,000
to different banks and London houses. The panic ceased,
but the number of tradespeople irretrievably ruined and the
wide-spread misery will never be told.
175 The crisis of 1857 began with extensive failures in
America from over speculation in railways, land, etc., result-
ing in failures in England. The drain of gold was such that
on the 12th November, with discount at 10 per cent, the total
reserve in the bank was only £384,1.^4 and at its branches
jC 196,607 more. The bankers' claims alone against it were
^£■5,458,000. It is clear, therefore, that but for the suspen-
sion of the act the bank must have stopped. Thousands by
this time had been ruined. An order in council again
authorized an extensive issue of bank-notes and the panic
ceased. JC6, 776,000 were issued beyond the limit fixed by
the act. No further proof is required of the utter rottenness
of the act than the fact that it required to be suspended and
its mode of operation entirely reversed, within three years
after its enactment and twice more within twenty years. It
was after this terrible crisis that Mr. Gladstone said: "The
act cannot stand as it is. I cannot consent that the law shall
be suspended at intervals to meet these constantly recurring
crises. The act was damaged in 1847. It was shattered in
1857."
176 y\nd yet thirty years have elapsed and this ruinous
act is in operation still and it is steadily precipitating the
nation into commercial ruin and social and political confu-
sion. Prices are steadily going down, investments are
becoming unprofitable, all fixed charges, including rents, sal-
aries, mortgages, wages and taxes are becoming more bur-
densome every day. Trade is being carried on at a loss; and
all this that the monopolist bank may enrich its proprietors
by the ruin of the nation,* Wages are coming down, but
too slowly to save employers from ruin. The trades unions
are most unwilling to submit to any reduction, though their
■members benefit by the low prices that prevail. The pur-
chasing power of what they earn is two or three times what
it was a few 3'ears ago, yet they will go on strike rather than
submit to a ten per cent reduction.
* Precisely the same effect that monopoly of money has produced
in this country.
86 THE NEW PHILOSOPHY OF MONEY
177 That such would be the effect of the Bank Act of
1844 was clearly seen by some of its most ardent supporters.
Lord Ashburton, one of its prime champions, said: "Our
monetary laws put it in the power of a few shrewd capital-
ists so to contract the supply of gold as to embarrass the
bank and nearly ruin the nation." Lord Overstone, another
advocate of the system, said: "Against the actual exhaus-
tion of its treasures through forei'gn exchange, the bank has
the power of protecting itself. But to do this she must pro-
duce a pressure upon the money market ruinous for its sud-
denness and severity. She must save herself by the ruin of
all around her."
178 The result has proved, as we have shown, the base-
lessness of the first part of this latter declaration ; for without
its illegal suspension on three several occasions, the bank
would have become insolvent. The latter statem.ent as to the
ruin of all around her is too true, as thousands have proved
to their cost.
179 The third illegal suspension of the act was in 1S66.
On this occasion, over-trading and fictitious credit helped to
bring on the crisis, but many perfectly solvent firms wei'e
involved in the ruin, because in the panic they could not
meet the unprecedented demand put upon them. The Bank
of England could do nothing to help them though it had
plenty to do it with; it could not, as the law stood, convert
its assets into currency (bank-notes). When, by an order in
council allowed to do it, the panic ceased. No less than
■£4,000,000 were allowed in one day — altogether, X5,ooo,ooo.
180 Before the passing of the Bank Act of 1844, the
bank rate rarely varied more than one or two per cent. The
following figures, including the period of the last illegal sus-
pensions, will give some idea of the suddenness, extent and
caprice of its fluctuations since 1S44.
BANK RATE OF DISCOUNT.
Years Per cent Per cent No. of changes each year
1862 2 Aug. and Sept. 5
1864 314 in ]\Lay "]% Sept. 6
1865 6 March 9 Sept. 9
1866 10 June, July 33/^ Dec. lO
1867 31^ J''^"- 2 Aug. to end 3
181 Beginning at 2 per cent in 1862, the rate gradually,
though irregularly rises till it obtains its maximum of 10 per
\VK MUSr HAVE GOVEKN.M ENT Sj
cent in June, 1866, the very time of the crisis; from which
time it falls rapidly until, in a little more than a year, it is at
its minimum of 2 ])er cent again. Observe, too, the number
of changes, from live to ten in a single year. No wonder
that trade is depressed and that commercial panics are fre-
quent w^ith such manipulations of the monopolist bank!
182 The following extract from the Financial Reformer
of Januar}', 1SS6, is a fresh illustration of this gigantic evil.
"The bank rate was doubled again, within a little more than
a month — namely, from 2 to 4 per cent, and this not, as far
as appears, from any revival of business, and consequently
increased healthy demand for ciedit, but only, as usual, from
some light export of gold; so that for a cause really in no
way arising from or indirectly concerning the general trade
of the country, traders are, as we have several times pointed
out, taxed without their consent, at the rate of £100,000,000
a year — which is, nevertheless, taken quite as a matter of
course — newspapers and Chambers of Commerce uttering
never a word of complaint, notwithstanding general stagna-
tion and failure of profit. If Parliament were to impose by
law an extra tax of one-tenth the amount, it would make an
outcry throughout the three kingdoms. But the Bank Act
may do what mischief it will. People do not, and appar-
ently will not take the trouble to understand its operations
and so they continue to suffer. It is beyond question that
the bank monopoly and the act of 1844 are a principal cause
of depression in business; and equally certain, in our opinion,
that nothing like permanent or steady prosperity can exist
while they continue. All our forty years of experience of
them proves this most abundantly; but for some inscrutable
reason, John Bull prefers to go on suffering, instead of 'put-
ting himself to school' on this question and learning to un-
derstand what is no such really difficult matter, after all."
183 These well-marked crises which occur once in ten
years or oftener are not the only evil of our hidebound cur-
rency. They may be regarded as the acute form of the dis-
ease. But there is a chronic malady not less formidable nor
less threatening to the permanent welfare of the nation.
The supply of gold and silver has long been inadequate to
the requirements of commerce. Even with all the forms of
paper cm-rency still the gold produced has been insufficient
for the growing wants of the world. We have seen how the
flow of gold from Russia in 1S40-43 was neutralized by the
SS THE NEW PHILOSOPHY OF :M0NEY
Bank Act of 1S44. The depression of prices continued with-
out abatement until the discovery of the gold fields of Cali-
fornia in 1S48 and of Australia in 1851, poured into Europe
an unprecedented supply of gold, at once relieving the pre-
vailing distress and inaugurating a quarter of a century of
prosperity to which the world's history presents no parallel.
Up to this point, even the repeal of the corn laws had done
nothing to improve trade. Food had been placed within the
reach of starving thousands, but the first effect on agriculture
was injurious rather than beneficial and prices of all kinds
remained ruinously low.
184 From 1846 to 1851 the times were at their worst.
Farmers and manufacturers suffered alike, while low wages
and lack of employment fell heavily on the working classes.
But when the gold began to pour into Europe from Califor-
nia and Australia, it immediately gave relief to trade at home
and it gave a powerful impulse to industry, giving employ-
ment to shipping and every other department of trade. Ten
millions sterling w^ere made annually at the diggings in Aus-
tralia and the farmers worked the land, so that the gold col-
onies steadily increased in wealth. An immense trade sprang
up which greatly benefited this and other countries, giving
lucrative employment to thousands. From this time wages
rose and prices of all commodities advanced steadily and an
era of prosperity set in such as the world had never wit-
nessed before. Alison, the historian, in view of these facts,
called the gold discovery "a currency extension act of nature."
185 At one time it was apprehended that the supply of
gold would be too great, and that an injurious reaction would
follow. M. Chevalier, a distinguished French economist,
wrote a book warning the world of this apprehended event.
But the apprehension was groundless. Two events con-
curred to prevent the catastrophe. The one was the falling
off of the gold supply to a much smaller annual production
than at first; the other was the absorption of silver in the
Indian and Chinese trade; the new gold taking the place of
the silver sent to the east. France alone absorbed j£ioo,ooo,
000 worth of gold in this way. To these may be added the
fact of Germany having adopted a gold standard in 1S73
and having been followed in that course by several of the
European nations, thus still further enhancing the price of
gold. At the same time, since the discovery of silver in
Nevada, the supply of silver was naturally increased till now
WE MUST HAVE GO\'ERNMEXT 89
the difference in value between the two is no less than 14 per
cent. Several other European States have since followed
the example of Germany in repudiating a silver currency, —
all tending to aggravate the evil and rendering possible the
most disastrous disturbance of commercial relations through-
out the world.
1S6 This discrepancy affects most injuriously all our com-
mercial relations with India. The normal value of silver is
6od. per ounce. It is now only worth 49^?. or about four-
fifths of its proper value. India has yearly to remit to
England .£15,000,000 which must here be paid in gold, so that
more silver has to be remitted to make up for its deprecia-
tion. But the purchasing power in India remains and there-
fore, by the aid of Council drafts corn is purchased in India
and sent over to this country instead of coin. From the same
cause, the purchase of goods in England is discouraged,
because Indian silver buys less than gold and less of those
articles which have to be paid for in gold. So the tendency
is to encourage exports from India but to discourage imports.
With every fall in the price of silver wheat exports from
India increase; with every rise in silver, they are checked;
so that the English farmer is actually paying a bonus on
Indian wheat at the rate of 55. ^d. a quarter. For the same
reason, English manufactures are checked. Indian silver will
buy just so much less of English goods as the difference
in value between gold and silver — a monstrous injustice alike
to British manufacturers and to farmers, and to our Indian
fellow-subjects.*
1 87 The gross injustice and oppression of the repudiation
of silver as a legal tender is further illustrated by its effect
on the national debt. In the year 1816 that debt amounted
to ,£850,000,000 sterling. But the demonetization of silver
converted it into a debt of 850,000,000 gold sovereigns. The
effect of that change, now that gold is 14 per cent more val-
uable than it was in 18 16, is to increase the debt by jCioo,-
000,000 and the interest which the tax-paver has to pay
every year by more than £^2,000,000. With every rise in
the price of gold, this burden will press more heavily.
188 The currency question is very generally avoided,
imder the impression that it is so very complicated that none
but accomplished experts can have an opinion of it. But,
* Moreton Frewer.
go THE NEW PIIII.OSOPIIV OF MONEY
like every great question, though many of its details are
complicated and embarrassing, there is away af looking at it
which will enable every person of average capacity and
knowledge to form a practical conclusion on the subject. In
the foregoing pages stupendous evils have been exhibited
and traced to their true cause — the arbitrary interference of
the government with the law of supply and demand, in rela-
tion to bank-notes and to gold and silver. We simply
require free trade in money, instead of the monopoly and the
privileged manipulations of the monopolist Bank of England.
The reform needed comprises palpably two particulars:
189 I. Free trade principles must be applied to bank-
notes. Every bank must be at liberty to issue them accord-
ing to its means and requirements as men in other business
are left to decide for themselves the amount of credit they
shall seek to obtain — the sole condition required by the gov-
ernment being that they shall pay in coin on demand the
value of every note (323, 326, 330). The disasters of the
past, which have thrown discredit on this principle, have
been caused by the government releasing bankers from this
responsibility and authorizing an inconvertible paper cur-
rency. If left to the natural operation of supply and demand
the issue of bank-notes will be healthy and dishonest specu-
lators will speedily meet their deserts.
190 2. The fatal step taken in the demonetization of
silver must be retraced. Silver must again be admitted as a
legal tender (341) to an unlimited extent, as it was before
the fatal departure of tSi6, confirmed and aggravated as it
has been in its ruinous influence by the Banking Act of 1844.
191 Till these changes have been effected and fairly tried,
let no one exclaim against free trade as the cause of commer-
cial depression. Let the banking system be rendered com-
mensurate with the wants of the nation and placed in har-
mony with the teachings of common sense and experience,
and then will dawn upon our country such an era of steady
commercial prosperity as has never hitherto been realized
except in the dreams of Utopia.
MONOPOLY.
193 If two individuals living near each other, one of
them having a well, and no other water is accessible — if the
owner of the well should exact service from the other in
exchange for the water which he allows him to take from
the well, it is in no sense monopoly. But if an artificial
restriction in the shape of a statute or municipal act should
prohibit the man who has no well from digging one or
catching rain water, then there would be monopoly. There
would not be equal opportunity. Not being allowed to sup-
ply himself, he is dependent upon the other in consequence
of this artificial restriction. If there are no restrictions, the
one who has no well could dig one at his leisure and thus
free himself from the exactions of his neighbor.
193 It is necessary to distinguish between natural disad-
vantages and artificial restrictions. Whatever natural disad-
vantages or obstacles Nature has put in the way of our com-
fort, are burdens we must avoid, overcome or endure. They
are not designed or put in the way of some for the benefit of
others, and we are all liable to stumble onto more than an
equal share of them. In this we have to take our chances.
Artificial restrictions are quite different. They are the work
of man; are especially designed for the benefit of some, and
cannot, in the very nature of things, be otherwise than disad-
vantageous to others; yet, while it is an accepted theory that
no one has a right to benefit himself at the expense of
another without that other's consent, such is the nature of
our money system that a comparative few absorb the surplus
earnings of all the rest without their consent; and it is done
by means of artificial restrictions which limit the volume of
monev and consequently the volume of capital, thus iiicreas-
93 THE NEW PHILOSOPHY OF MONEY
ing profits to capital and intei'est on money, and diminishing
compensation to labor in the same proportion; for, as you
cannot take something from nothing, so, whatever the capi-
talist or money-lender acquires as compensation for the use
of capital or money, is taicen from labor without adequate
return.
194 Monopoly of the medium of exchange is the most
cruel of all monopolies, because it is the basis of all monop-
oly.* There is no monopoly known to modern society that
would not succumb to the effects of free money. " Take, for
instance, that which results from the tax on imports. Free
mone}', or the absence of all legislative interference with the
supply of money, would result in a supply of capital equal to
any demand there might be for it. It would be supplied
wherever needed, and in constantly increasing quantity and
ever dmiinishing rates of interest until cost was reached.
Since money could be obtained under the Mutual Credit Sys-
tem on good security, at one-half of one per cent per annum,
compensation to the capitalist for the use of his capital would
not long exceed that rate, or, as just stated, cost.
195 Such a revolution in affairs would utterly destroy the
conditions that demanded the tariff. Free trade in money so
*"The world's prices are fixed in the market of Liverpool by ref-
erence to gold. This is particularly in the interest of gold-owners,
bondholders, and money-lenders of England, for they control her
laborers, and by her industrial powers the world. Their strong arm
is the Bank of England. The Manchester Chamber of Commerce in
their report of 1S59, refers to it in the following language: 'That its
directors, twenty-six in number, can, in secret session, without the
consent of their constituents, decide the value of all property, is one
of the greatest crimes against civilization.' 'How do you maintain
your supply of gold.?' was asked by a parliamentary committee in
1847. 'By contracting our circulating notes, causing a decline of
prices and conseqviently an influx of gold,' Avas the answer. Again
they remarked: 'There is no means of supplying the bank with gold
except by diminishing the bank-notes, which immediately contracts
the currency and lowers prices by increasing the value of money.' .
. . . . The banking association controls all credit, and by this
means the revenues of all semi-public industries and the great nat-
ional resources. Capitalism dominates production and the producers
have not yet learned to organize for their own defense." — Pred Lift-
comb in "iVetf Occasiotis,^^ Jan., 18^4.
MoxoroLV 03
far transcends free trade in merchandise, that, having anni-
hihited profit to capital, the continuance of the tariff would
be a matter of indifference to the element that now lobbies
for its continuance. "What, then, would prevent its repeal?
196 So it would be with all monopolies. The competi-
tion that a surplus of capital would put in motion would
checkmate and dcstro}- them. The exclusion of competition
is as essential to monopoly as the exclusion of air is to a
vacuum. The admission of free competition is as destricct-
ive to monopoly as ihe free admissio7i of air is to a vacuum.
It is to monopoly that we are indebted for the corruption
that has insinuated itself into and permeates the social fabric
from entl to end and from its center to its edges. Corrup-
tion that stultifies the intellect; that warj^s the judgment;
that stimulates and rewards crime; that freezes the fraternal
feeling; that starves love and nourishes prostitution; that has
no prizes for intellect .unless it can be McKinleyized or
Clevelandized to serve party purposes or society fads. Its
rewards and its punishments are alike its weapons of defense
and its hopes of j^erpetuity. Under the Mutual Credit Sys-
tem, the tables will be turned. Corruption, no longer sus-
tained by ill-gotten wealth, must disappear; and under the
influence of the progress that a real civilization and perpet-
ual prosperity will inaugurate, will come "the new time" of
which the editor of the Arena so eloquently speaks, "while
amazed histoiy, gazing long before she writes, at last shall
pen the story of the first civilization of earth great and wise
enough to be just."
"MEASURE OF VALUE."
197 Both "measure of value" and "standard of value" are
terms that need a champion to save them from being blotted
from the vocabulary.
198 Measure of value! Why not a measure of feeling,
of pain? Really, this theme needs synthesizing!
199 The oscillations of a pendulum under the same con-
ditions as to height from the level of the sea, temperature,
length of pendulum, stillness of the air, etc., will travel the
same distance between strokes in any part of the earth. By
this means we obtain a fixed, definite length through an
imvarying natural law. A unit of length is thus a possibil-
ity, but a unit of value is an impossibility. Value, like pain
or pleasure, is not a mathematical quantity. It has no exist-
ence except as a relation between two or more objects; a
relation which is purely metaphysical and therefore cannot
be measured. We can only express more or less of it by
means of a conventional monetary unit,* not by a unit of
* "Money of account performs the same office, with regard to the
value of things, that degrees, mmiites, seconds, etc., do with regard
to angles, or as scales do to geographical maps, or to plans of any
kind. In all these inventions there is some denominative taken for
the unit. . . . Just so, the unit in money can have no invariable
determinate proportion to any part of value; that is to say, it cannot
be fixed in perpetuity to any particular quantity of gold and silver, or
any other commodity. The value of commodities depending upon
circumstances relative to themselves, their value ought to be consid-
ered as changing with respect to one another only; consequently,
anything which troubles or perplexes the ascertaining these changes
of proportion by means of a general determinate and invariable scale,
must be hurtful to trade; and this is the infallible consequence of
every rise in the price of money or coin. Money, as has been said,
is an ideal scale of equal parts. If it be demanded what ought to be
the standard value of one part, I answer by putting another question:
What is the standard length of a degree, a minute, or a second.'
None: and there is no necessity for any other than what, by conven-
tion, mankind think fit to give." — Sir % Sie-vart.
MEASUUli OF A'AIA'E
95
itself as we express length by a unit of length, or weight by
a unit of weight. As we cannot reach it by mathematics,
we cannot make a unit to measure it with. It is clear, tiicn,
that we do not measure value at all. One does not say to a
builder, "will you measure the cost of such a building for
me?" No; wcsay: ""Will }'ou estimate the cost of such a
building?" Does he measure the value of the building when
he tells you how many dollars it will cost? No. lie ex-
presses the value in terms of money. Does your grocer or
your tailor or your dry goods merchant measure values when
he tells you the price of goods? How absurd! As well
might we talk of measuring the number of bricks that enter
into the construction of a building, or of calculating the color
of a spectral ray. Value is not determined by measuring it,
but by demand and supply. Whatever monopoly exists, of
course affects the supply, and consecjuently the market value;
but demand and supply, with or without monopoly, deter-
mines value; and the only proper function of money is to
facilitate the distribution of things that have value, by
exchanging them for it; the one who gets the money ex.
changing it again for something else. Now, it must be evi-
dent to anyone who will closely examine these operations,
that in order that the certificates of credit (174) may j^ass, be
accepted at their face value for the things of value, it is only
necessary that they be secured credit (9, 10, 12). It is not
necessary that provision be made for their redemption in a
stated definite quantity of some special commodity, but that
they be redeemed in anything for not less than their face
value, and at the market or prevailing value or price. And
this is one of the great advantages that the Mutual Credit
System has over all others; its money is redeemable in all
commodities at their market value instead of a single com-
modit)- in definite quantity, as is the case with "standard"
money. The purchasing power of "standard" money is
affected by the rise or fall in the market value of the "stand-
ard" commodity (200, 242); hence this purchasing power
96 THE NEW PHILOSOPHY OF MOXEY
must vary. Prices or market values are affected, therefore,
not only by the effect of the demand and supply of the com-
modities themselves, hut also by the variations in the purchas-
ing power of the money. In other words, the fluctuations
in values are complex, but they will be reduced to simple
fluctuations by the adoption of mutual credit money in place
of "standard" money; for the exchangeable value* of the
former can have no effect whatever on the market value of
any commodity. It is not a commodity, nor is it affected by
any commodity. It is simply secured or certified credit used
as a means of exchanging commodities.
200 The following will, perhaps, more clearly impress
this point upon the mind of the reader. We will suppose
that the Mutual Credit System has been put in operation and
that both kinds of money are now in circulation. The
"standard" money is redeemable in coin; the mutual credit
money is redeemable as provided in the plan-j- and is accepted
at its face value in exchange for commodities, prices being
the same as for coin money. We will now suppose that the
Mutual Credit System comes rapidly into public favor and
its money is being issued in a large nvmnber of cities. The
demand for the "^^I'^cious" metals to serve as a basis for
money under such circumstances will very materially dimin-
ish. What will be the effect on the market value of those
metals? They will also very naturally depreciate. What
effect will such depreciation have upon the purchasing power
of the coin made of those metals? Their purchasing power
will inevitably follow the decline in the market value of the
metals (242). What effect will this decline in the market
value of the "precious" metals have on the exchangeable
value of the money of the Mutual Credit Association? None
whatever. Prices, then, for such money will remain the
* I deprecate the use of the term "purchasing power" when applied
to money that circulates on its merits. It has acquired a meaning in
connection with legal tender money and authority that disqualifies it
for expressing the exchangeability of certificates of credit (359).
■j" See prospectus.
MEASURE or VALUE 97
same; while for the first time, perhaps, in history, we shall
see gold prices quoted higher than prices for its old rival, —
paper money not based on gold (65), to say nothing of sil-
ver. Of course, the "standard" paper money will go down
along with the coin. This is the inevitable result.
201 Now, let us examine the position of my opponents
on this question of a measure or standard of value.*
202 The terms, "measure of value" and "standard of
value," are used in the same sense by those who maintain
their existence or necessity; they are interchangeable, so that
either term may be used.
203 The supporters of the idea of a "standard of value"
maintain that paper money, unless it is redeemable in a defi-
nite quantity of some special commodity, would have no
definite exchangeable value; that this quantity in which the
paper dollar must be redeemable, is thus constituted the
"measure" and "standard" of value.-j- This is precisely the
* "Although standard and value, or definite invariable fact and in-
definite variable state of mind, are as opposite as the poles, yet
because we can unite the words, standard and value, into the glib
phrase, "standard of value," we imagine when we have done so that
fact and sentiment have thereby become welded into a reality, defi-
nite and comprehensive enough to test or measure all other "things,
or that we really have a "standard of value." But blinded by cus-
tom, misled by authority, and confounding exchangeability with
standard of value, we cannot see that though we have a name we
have not a fact, and that standard of value is an impossibility, a will-
o'-the-wisp luring to ruin. Exchangeability, however great, can
never be transmuted into a standard of value any more than an opin-
ion into a fact." — Standard of Value, by Lezvis H. Blair.
f"The argument showing impossibility of a standard of value has
so far been mainly theory. The fact of the impossibility is shown
by the violent antagonism of silverites and goldites, each school tak-
ing the same data, and one school proving that silver has remained
stationary and gold has advanced, and the other school proving that
gold has remained stationary and silver has declined, and agreement
is impossible because the contention is not about something having
fixed, uniform and demonstrable qualities, but about a sentiment, an
opinion, a state of mind varying with time, place, individual and cir-
cumstances. Better attempt a standard of beauty or of taste or of
religion, than a permanent standard of value. If we permitted our-
selves to think, we would soon perceive that we are attempting sun-
beams from cucumbers, and that our search was more hopeless than
the quest of the Holy Grail, and quite as hopeless as the search fo^
7
9S THF NEW PHILOSOPHY OF MONEY
position of the gold standardites, and there is no possible
escape from the same evils that result under their system of
money if we are only to change the "standard." But for-
tunately we shall be able to escape these evils, as there is no
necessity for this method of redemption being employed.
ISIost people are familiar with the storekeeper's money,
"good for one dollar at my store"; "good for fifty cents at
my store"; "good for twenty-five cents at my store." This
money (3-4) was not redeemable in a definite quantity of
any special commodity. It is true this money circulated only
in the immediate neighborhood of the issuer, but that was
because it was unsecured credit (9). The paper money pro-
posed by The New Philosophy of Money will be secured
credit, and it must be admitted the one bears no comparison
to the other on that score. The point of similarity is that
neither promise a definite quantity of any commodity in
exchange, but so many monetary units or fractions thereof of
any commodity, in the one case, that the storekeeper had for
sale, and in the other, that any of the borrowers of the
Mutual Credit Associations have for sale. Who ever heard
of anyone refusing to take a storekeeper's promise to pay in
goods, on the ground that it did not state a definite quantity
of any particular commodity that it would be redeemed in?
The only objection ever raised against such paper money
was its unreliability. It was unsecured credit. The mutual
plan remedies this difficulty by the issue of secured credit in
the form of paper money, to circulate in its place. The
storekeeper's promise to pay, or anybody's promise to pay,
together with the security required, is deposited for safe
keeping until it matures. If he fails to pay his note, the
security is sold. In either case, an equal amount of the same
the Fountain of Youth. But because we follow in the beaten track,
we still pursue with heat and passion not only one impossibility,
namely, a single standard, but a twofold impossibility, namely, a
double standard of value — a comedy with the world for a stage, with
statesmen for actors, and the fun at the expense of the people." —
Siandard of l''tilue, by Levjts II. Blair.
MEASURE OF VALUE 99
paper money must come into the possession of the association
that furnished it, by which act it is redeemed and retired
from circulation. This method of redemption is not only as
effectual as redemption by the "standard," but it is practically
applicable to every dollar, while the other is not; and it is
this absolute and unavoidable redemption; redemption from
which there can be no possible escape, that will make its
acceptance much more desirable than the other.
204 But let us still further consider the difference between
redemption by the "standard of value" plan and by the
Mutual Credit plan.
205 In order to redeem under the "standard" plan, it is
necessary to have a sufficient amount (?) of the one thing
that is said to constitute the "standard." Under the Mutual
Credit plan a sufficient amount of anything that has market
value will answer the purpose.
206 Under the former plan it is necessary to acquire and
store a vast amount of one particular commodity. Either the
amount must be equal to the total volume of paper money,
in which case the volume of money must be limited to the
quantity of that commodity that is obtainable, or the risk
must be incurred that the demand for it to redeem with will
be greater than the quantity on hand. Under the latter plan
there is no need of acquiring and storing anything. Each
individual takes care to pay his note when it becomes due.
If he has the money it is because, after paying it out, he has
taken it back again in exchange for something which he
sold. This act of taking back the money which he borrowed
of the Mutual Credit Association, and which he had pre-
viously paid out, is the act of redemption (244). To get it
he had to give market value for it. If he has not the money,
then he must get it by giving market value for it, for he must
pay his note; and in paying his note the money goes back
again to the association.
207 Now, what T want to impress upon the mind of the
reader is the fact that, since this borrower of the Mutual
lOO THE NEW PHILOSOPHY OF MONEY
Credit Association redeems at its face value the paper money
it furnished him, it is no less effectual redemption because
done with some other than the special "standard" commodit3\
He must give full market value for it. If, then, all the
paper money issued by the association must be redeemed
everv twelve months in the same way, why is it not a vastly
superior method of redemption to that of the gold or any
other "standard" method?
208 Is the fact that within twelve months a paper dollar
that is in circulation is to be retired — withdrawn from circu-
lation — by some party who, instead of issuing it — paying it
out again, returns it to the association in payment of his note
that has become due — is this fact sufficient to make it accept-
able money? Can there be any possible risk in taking it?
209 As between the two, which money is the safest —
that which has one chance in several in being redeemed, or
that in which provision is made for the redemption of every
bill within twelve months of its issue? In the one case, the
paper money is never redeemed except when an individual
takes a notion to demand the "standard" for it. In the other,
it is all redeemed every twelve months without anyone both-
ering himself to go and demand something for which he has
no use.
210 Finally, let us come to the real issue in this question
of a "measure of value." The misapprehension and con-
fusion that befogs the minds of those who insist on the "stand-
ard of value" idea, is the result of not viewing money and the
denominator, "dollar," separate and distinct from each other.*
* "/« other ivot'ds, the coin zvhich represents the franc, the dollar, the
found, is an entirely different thing f -am the franc itself, or the found or
the dollar. In the discussion of the financial question one of the
greatest stumbling blocks in the way of a clear understanding of the
matter is the fact that the coin which represents the dollar and which
in common phrase is called a 'dollar' is confounded with the dollar
itself. . . . One of the most apt illustrations of this idea is that
given by John Stuart Mill when he tells about the African tribes
who calculate (express) the value of things by the term 'macute.'
Thev sav such a thing is worth a 'macute,' another is worth five
'inacutes,' and another ten, and so on, and yet there is no such real
MEASURE OF VALUE lOI
Each has its independent function. The one is to aid and
facilitate the distribution of wealth; the other is a means by
which we can express more or less value.*
211 We ask the price of a commodity and w^e get the
answer in dollars and cents — monetary units and subdivisions
— before money enters into the transaction. It is after the
price has been agreed upon that the money comes into play.
There are two distinct operations — the transmission from the
seller to the buyer of the idea of the value of the object, by
the former expressing its price in the conventional monetary
unit and its subdivisions — dollars and cents. This is one
operation; the other is the act of exchange, the buyer hands
to the seller paper money equal to the price of the article, in
exchange for it. The dollar with which we express more or
less value is a conventional term, an abstraction.t The pa-
per dollar we use as a medium of exchange is secured credit
( i6i ). In the two operations mentioned, the latter does not
figure in the first, nor the former in the second. When one
only inquires the price of an article, but does not buy, it is
not the paper dollar that is used to convey the answer, but the
term — the abstraction we call "dollar." Secured credit is
divided up into certificates of credit of all denominations and
called "one dollar," "rwo dollars," "five dollars," and so on,
to correspond with the denominator or abstract dollar, thus
facilitating settlement of transactions by the transfer of this
thing as a 'macute,' and probably never was such a thing in exist-
ence." — Ten Men of Money Island.
*"Money and the yardstick have nothing in common. The yardstick
is an exact, unvarying measure of length. Money is an uncertain, var-
iable measure of varying values. The yardstick is not bartered for
commodities. . . . The yardstick is a unit of length. The dollar as
a "unit of value" is preposterous. Our Hamilton-Jefferson statute,
founding the mint, provided a dollar as our "unit of account." — Wm.
P. Sf. yohn, president of the Mercantile Natio7tal Bank of New Tork, in
sfatetnent before Committee on Banking and Currency, December, i8g4.
■f-"The dollar, as simple measure of value, has, like the yard, which
is a measure of length, an ideal existence, only. In Naples, the ducat
is the measure of value; but the Neapolitans have no specific coin of
that denomination." — Wm. B. Greene's ''Mutual Banking,'' j>agc 47.
I03 THE NEW PHILOSOPHY OF MONEY
secured credit instead of the transfer of objects of value (coin)
or paper money based on coin onl}',* It is for the reader to
determine in his own mind whether either of these operations
can be correctly called measuring value. The reader will
no doubt find interesting the following controversy on this
subject between the editor of the Galveston Ne~Jos^ the editor
of Liberty^ Mr. Wm. B. DuBois, and the writer.
HOW MUCH CAN BE LOANED.
YFroni Galvcstott ^Vcti',?.]
212 Mr. Alfred B. Westrup, of Chicago, has begun the
publication of a paper to advocate free banking, two num-
bers of ^vhich have been received. Its name is the Aziditor^
and it is published at 343 Michigan Avenue. Mr. Westrup
appears to have been an attentive reader of the Neivs^ from
which he makes liberal extracts. The Auditor is opposed
to every species of fiatism, but holds that the owners of prop-
erty have a moral right to combine and do a banking business
subject only to such laws as are a protection against fraud
and dishonesty. The editor of the Auditor endorses an arti-
*"But we will notice briefly an argument presented in support of
the proposition that the unit of money value must possess intrinsic
value. The argument is derived from assimilating the constitutional
provision respecting a standard of weights and measures to that con-
ferring the power to coin money and regulate its value. It is said
there can be no uniform standard of weights without weight or a
measure without length or space, and we are asked how anything
can be made a uniform standard of value which has itself no value.
This is a question foreign to the subject before us. The legal tender
acts do not attempt to make a paper standard of value. We do not
rest their validity upon the assertion that their emission is coinage
or any regulation of the value of money, nor do we assert that Con-
gress may make anything which has no value money. What we do
assert is, that Congress has power to enact that the government's
promise to pay money shall be, for the time being, equivalent in
value to the representative of value determined by the coinage act
or to multiples thereof. It is hardly correct to speak of a standard
of value. The Constitution does not speak of it. It contemplates a
standard for that which has gravity or extension, but value is an
ideal thing. The coinage act fixes its unit as a dollar, but the gold
or silver thing we call a dollar is in no sense a standard of a dollar.
It is a representative of it." — Opinion of the Supreme Court, United
States Legal Tender Cases; 12 Wallace, S5^'3-
MEASURE OF VALUE IO3
cle from the uVcrus on a standard of valuation, but still in
some portions of his writings leaves an obscurity hanging
over his position in discussing the "standard of value" and
"unit of value." The point which presents itself for resolu-
tion is not covered by saying that promises of dollars are
accepted on an understanding, Tlie present understanding
as to a dollar is so much gold or silver or paper which is so
limited that it is sure to circulate at par with coin. If issues
of paper were larger the inquiry would be considerable
sharper: "what is a dollar?" for the paper dollar is practi-
cally nothing but what it guarantees. And one can not pay
even loi with loo, wherefore when bank paper is lent at
any interest, however low, the interest should be payable in
something else than that paper. Some paper is always lost.
That should be repaid in something agreed upon. There
come two men to borrow, and if one gets $1,000 on certain
security, by what rule shall his neighbor get $1,200 and
neither more or less on other security? The JVcws has
explained by having an agreed standard for valuation, and it
means no more or less by a standard of value. Whenever
government issues are inflated and uncertain the "understand-
ing" of the word dollar becomes too vague for dependence to
be placed on it, and in mutual banking no note-holder wants
a future borrower to get the issues at a more liberal rate with
regard to property pledged than the earlier borrowers have
got and used them at, for that would mean depreciation.
Such a result is to be prevented by agreeing upon a standard
for valuation, and let not this be confused with means of pay-
ment. The means of payment are the note itself and what
it will bring, but there must be some thing or things uni-
formly referred to in determining how much shall be loaned.
To refer to the bank-notes themselves might lead to limitless
inflation and a very variable relation between the expanding
sum of notes and the comparatively fixed sum of real things,
which relation would in a while cause two or more notes to
go in exchange where one had gone befoi'e, giving those
who hold any money to see that by holding it they had lost
purchasing power. The Auditor should not fear to adhere
to a material standard, simple or complex, for uniform valu-
ations and still insist upon utmost extension of the represent-
ative medium or media.
213 There seems to have been an unaccountable tendency
to overlook the fact that in the system I advocate, provision
I04 THE NEW PHILOSOPHY OF MONEY
is made for the redemption of every dollar of money issued,
at its face value, in commodities at their market value; and
that this fact v\' ill insure its circulation, because it establishes
its exchangeable value. In answer to the foregoing article,
I called the attention of the News to the following extract
from "The Financial Problem," which I reproduced in the
A.udito7'.
214 "Let us suppose a community where there is only
one bank, and that each individual in that community secures
an account current by depositing collateral to a greater or
less extent with the bank. Is it not clear that in such a sys-
tem of payments, no money would be needed, every individ-
ual would pay by check; the accounts being adjusted by off-
setting on the books of the bank; the monetary unit we call
"dollar" answering the purpose of a conventional denomi-
nator or denominant. We will also suppose that this bank is
conducted on the mutual plan, and therefore charges are
made to cover cost only. Gold and silver bullion, like any
suitable commodity, could be used as collateral, but no coin
would be necessary and none would be used. It would there-
fore seem to be sufficiently clear that a unit to act as a meas-
ure or standard of value is but a fiction, a fetish. It is
admitted that the proposed bank, for various reasons, would
be an impracticable method of effecting exchanges, but the
absence of a coin-unit-measure-standard would not be one of
them. Not every one can have a bank account. The incon-
venience of paying small amounts by checks as well as the
uncertainty in many instances, as to the acceptability of
checks at the bank are insurmountable difficulties, but one
can hardly contemplate the foregoing and at the same time
conceive how the advocates of a coin basis to paper money
would defend their theory of its necessity. It is not difficult
to comprehend the nature of the error here fallen into.
215 "A monetary unit (a conventional denominator or
denominant) to facilitate the expressing of amounts in the
realm of value, is, apparently, so similar in its function to
that of the units employed in physics, such as the inch, the
pound, etc., especially as certain coin is made legal tender,
that the notion has become well nigh universal that this
monetary unit must be a definite quantity of some commod-
itv just as the inch is a definite anJ. unvarying length, or the
MEASURE OF VALUE I05
pound is a definite nntl unvarying weight; but this notion is
utterly devoid of reason.*
216 "As there is nothing definite or permanent in vahie
a unit of vakie is a physical impossibility.
217 "The monetary unit is as near a unit or measure of
value as the "x" in an algebraic equation is a known quan-
tity. You can ascertain the exchangeable value of a gold
dollar in any commodity by inquiring the price of that com-
modity; so also you can find the quantity "x" by ciphering
out the equation.
218 "The value of the gold dollar varies with every
change in market price, just as the quantity "x" differs with
every change in the equation.
219 "The gold dollar is a certain quantity of gold. It is
not the gold, however, but the value of the gold that is sup-
posed to do the measuring, and it is the value of the gold that
is the uncertain quantity.
220 "How can an uncertain quantity he a unit of meas-
u-re? And if it is not a measure, what is the object of a coin
basis? If it is answered that it is not a measure but a "stand-
ard" of value, if by "standard" is meant denominant, then
the use of the term "standard" is equivocal, and therefore
sophistical or dishonest. If it is claimed that it is more than
a denominant, there is no escaping the dilemma that con-
fronts the paragram "measure."
221 "When paper money is issued as proposed by the
Mutual Bank Propaganda, with ample security but not legal
tender nor redeemable in any special commodity, the mone-
tary unit dollar will simply be a denominant. Its purchasing
power will not be affected by a rise or fall in the price of any
commodity any more than an order for a pound of butter
commands more than a pound at one time and less at another.
The mutual bank paper dollar will buy more butter at one
time than another, but this will take place in consequence of
tlie operation of supply and demand in regard to butter onlv ;
and so with regard to all other commodities; the mutual
bank paper money will have no more effect on the price of
commodities than the order for the butter will affect the price
of butter (35S-359), whereas when the monetary unit is a
legal tender commodity dollar, variations in the price of any
commodity are affected, not only by supply and demand in
* See foot-note page 94.
To6 THE NEW PHILOSOPHY OF :M0XEY
that particular commodity, but also "supply and demand" in
the arbitrarily limited legal-tender-commodity-dollar, -which
limit enables a class to own and control it, the scarcity or
abundance of which (dependent upon combinations among
this class) must affect the price of all other commodities.
Under any system, therefore, which recognizes any special
commodity as a legal tender basis for its paper money, es-
pecially as that commodity must necessarily be one that is
limited by nature, fluctuations in prices become complicated by
complex causes, resulting from the limitations to credit
through this control of money. No such effect can occur
under the Mutual Credit System, the volume of money
being unlimited except by the quantity of collateral offered,
and the rate of interest beinsr the same to all borrowers."
THE STANDARD OP' VALUE.
To the Editor oj the Auditor:
222 I have given considerable thought to the money
question, and here are my conclusions in regard to the "dol-
lar" and the much discussed "standard of value." The dollar
is, or should be under a just and scientific monetary system,
merely an abstract idea. No one commodity can be made
an absolute unchanging standard by which to effect ex-
changes of other commodities, for the reason that, owing to
fluctuations in supply and demand, there is no one commod-
ity of which a given quantity and quality will always
exchange for the same quantity and quality of any other com-
modity.
223 The scientific basis for money is labor, and its only
honest use consists in exchanging the products or results of
labor. Labor, therefore, is the nearest approach to a "stand-
ard," but it is not a fixed one, for the reason that even labor
varies in supply and demand, in application and in results.
224 It is not necessary to have a fixed or even an approx-
imate standard of value; it is only necessary to have a unit.
In our country the dollar is that unit. But for the sake of ex-
ample let us use the algebraic symbol x, and see how it works
itself out in the regulation of prices. Let us bear in mind, in
the first place, that the real cost of a thing is the labor it takes
to produce that thing. Then, we will assume that the aver-
MEASURE OF VAI.UE
107
age daily wages of labor is 2\, and that it costs on the aver-
age to produce to the consumer:
Days Labor
I bushel of wheat, - - - - i^^
I barrel potatoes, - - . - i
I barrel flour, - - - - - 2
I pair boots, ----- 3
I suit of clothes, - - - - 10
I horse, ----- 50
I piano, - - - - - 100
I locomotive, .... 1,000
The prices of these various articles will then be as follows:
I bushel of wheat, - - - - ix
I barrel potatoes, - - - 2x
I barrel flour, - - - - 4^
I pair boots, - - - - 6x
I suit of clothes, . . . . 20X
I horse, . . . . . loox
I piano, ..... 200X
I locomotive, .... 2,ooox
And these prices will vary according as the average daily
wages of labor varies and according to supply and demand.
It seems to me that this is the root of the whole matter and
all there is to the "standard of value."
Wm. B. DuBois.
Bayonne, N. J., August 14, 1S91.
A STANDARD OF VALUE A NECESSITY.
[Liier^y, June jj, /Sg/.]
225 Readers of Liberty will remember an article in num-
ber 1S4 on "The Functions of Money," reprinted from the
Galveston News. In a letter to the News I commented
upon this article as follows: "I entirely sympathize with
your disposal of the Evening Posfs attempt to belittle the
function of money as a medium of exchange; but do you go
far enough v>hen you content yourself with saying that a
standard of value is highly desirable? Is it not absolutely
necessary? Is money possible without it? If no standard is
definitely adopted, and then if paper money is issued, does
not the first commodity that the first note is exchanged for
loS THE NEW PHILOSOPHY OF MONEY
immediately become a standard of value? Is not the second
holder of the note governed in making his next purchase by
what he parted with in his previous sale? Of course it is a
very poor standard that is thus arrived at, and one that must
come in conflict with other standards adopted in the same
indefinite way by other exchanges occurring independently
but almost simultaneously with the first one above supposed.
But so do gold and silver come in conflict now. Doesn't it
all show that the idea of a standard is inseparable from
money? Moreover, there is no danger in a standard. The
whole trouble disappears with the abolition of the basis
privilege."
2:26 The Nexvs printed tny letter and made the following
rejoinder: "It will occur that in emphasizing one argument
there is such need of passing others by with seeming uncon-
cern that to some minds other truths seem slighted, — truths
which also need emphasizing perhaps in an equal, or it may
be, for useful practical reasons, in a superior degree. The
JVezus aims at illustrating one thing at a time, but it is both
receptive and grateful to those correspondents who intelli-
gently extend its work and indicate useful subjects for dis-
cussion, giving their best thought thereon. A Boston reader,
speaking of the standard of value, states an undeniable truth
to the effect that without a thing or things of value to which
paper money can be referred and which can ultimately be
got for it, such money would be untrustworthy or worthless.
The News in a past article was discussing primary com-
merce and the transition to indirect exchange. No agreed
standard for valuation is needed while mere barter is the rule;
but it is indispensable as soon as circulating notes are issued.
227 "The vice of the greenback theory is that the notes
do not call for anything in particular, and so, if their volume
be doubled, their purchasing power must apparently decline
one-half. A note properly based on gold, silver, wheat, cot-
ton, or other commodity has a tangible security behind it.
The one thing may be better than the other, but the princi-
ple is there in all. It is, however, a notable truth that the
standard of valuation can be nothing better than an empirical
one. Like mathematical quantities, value has no independ-
ent existence, but, unlike mathematical quantities, value has
not even existence as a quality of one object. It cannot be
compared to a measure of length, which possesses the quality
of extension in itself. Gold is assumed to vary little in rela-
MEASUKE OK VAl.VE
109
tion to other things, and they to vary much in relation to
gold Nobody can know how much gold does vary in the
relation. The notable steadiness is in the amount of labor
which will produce a given quantity and the length of time
which it will last. The basis of the assumed steadiness of
gold is thus found. But if the standard for vise in making
valuations be confessedly empirical and value an elusive
quality not of things separately, but of things in relation,
there is a countervailing difference between a standard of
length and a standard of value, which results in disposing of
the objection that the standard is empirical. Why would it
be a serious objection to a yardstick if it were longer or
shorter from day to day? Because thus the customer would
get more or less cloth than was intended. But why is that?
Because the function of the yardstick is to measure for deliv-
ery as great a length of cloth as its own length. But now
let us visit a bank or insurance office. We want a loan of
circulating notes or a policy of insurance. The property
offered as security is valued. Assume that gold is taken as
the standard, and that the loan or the policy is for $600 on
a valuation of $1,000. It is no matter in these cases if the
standard varies, provided it does not vary to exceed the mar-
gin between the valuation and the obligation. The projoerty
pledged is merely security for the loan, or, in the case of
insurance, the premium paid is a per cent of the amount
insured. The margin between the valuation and the loan is
established to make the loan abundantly safe. The policy is
safely written through the same expedient. The empirical
standard of value has a needful compensation about it which
the yardstick or other measure neither has nor needs, —
namely, the valuing goods does not deliver them. It is pro-
visional. In case of default in paying back the loan, the
goods are sold and the same money borrowed is paid back,
but the residue goes to the borrower. It is therefore an effi-
cient compensation for the lack of an invariable standard of
value that the actual standard in any case is simply used as a
means of estimating limits within which loans are safe. All
danger is avoided by giving the borrower the familiar right
in case of foreclosure. It is sometimes a fine thing to dis-
cover distinctions, but it is frequently a finer thing to discover
whether or not the distinctions affect the question,"
228 While not hesitating for a moment to accept the
JVews'' explanation that, when hinting that a standard of
no THE NEW PHILOSOPHY OF MONEY
value is not indispensable, it was speaking of barter only, I
may point out nevertheless that there was a slip of the pen,
and that the words actually used conveyed the idea that
something more than barter was in view. Let me quote
from the original article:
229 "It is manifest that a medium of exchange is abso-
lutely necessary to all trade beyond barter. A standard of
value is highly desirable, but perhaps this is as much as can
be safely asserted on that question."
230 It seems to me a fair interpretation of this language
to claim the meaning that in trade beyond barter it is not
sure that a standard of value is absolutely necessary. And
this interpretation receives additional justification when it is
remembered that the words were used in answer to the
EveniJig Posfs contention that, in comparing the two func-
tions of money, its office of medium of exchange must be
held inferior to its office of measuring values.
231 However, the News now makes it sufficiently clear
that a standard of value is absolutely essential to money,
thereby taking common ground with me against the position
of comrade Westrup. Still I caimot quite agree to all that
it says in comment upon the Westrup view.
232 First, 1 question its admission that a measure of value
differs from a measure of length in that the former is empir-
ical. True, value is a relation; but then, what is extension?
Is not that a relation also, — the relation of an object to space?
If so, then the yardstick does not possess the quaHty of exten-
sion in itself, being as dependent for it upon space as gold is
dependent for its value upon other commodities. But this is
metaphysical and may lead us far; therefore I do not insist,
and pass on to a more important consideration.
233 Second, I question whether the News' "countervail-
ing difference between a standard of length and a standard of
value" establishes all that it claims. In the supposed case of
a bank loan secured by mortgage, the margin between the
valuation and the obligation practically secures the note-
holder against loss from a decline in the value of the security,
but it does not secure him against loss from a decline in the
value of the standard, or make it impossible for him to profit
by a rise in the value of the standard. Suppose that a
farmer, having a farm worth $5,000 in gold, mortgages it to
a bank as security for a loan of $2,500 in notes newly issued
by the bank against this farm. With these notes he pur-
MEASURE OF VALUE III
chases implements from a manufacturer. When the mort-
gage expires a year later, the borrower fails to lift it. Mean-
while gold has declined in value. The farm is sold under the
hammer, and brings, instead of $5,000 in gold, $6,000 in
gold. Of this sum, $2,500 is used to meet the notes held by
the manufacturer who took them a year before in payment for
the implements sold to tlie farmer. Now, can the manu-
facturer buy back his implements with $2,500 in gold?
Alanifestly not, for by the hypothesis gold has gone down.
Why, then, is not this manufacturer a sufferer from the vari-
tion in the standard of value, precisely as the man who buys
cloth with a short yardstick and sells it with a long one is a
sufferer from the variation in the standard of length? The
claim that a standard of value varies, and inflicts damage by
its variations, is perfectly sound; but the same is true, not
only of the standard of value, but of every valuable commod-
ity as well. Even if there were no standard of value and
therefore no money, still nothing could prevent a partial fail-
ure of the wheat crop from enhancing the value of every
bushel of wheat. Such evils, so far as they arise from nat-
ural causes, are in the nature of inevitable disasters and must
be borne. But they are of no force whatever as an argu-
ment against the adoption of a standard of value. If every
yardstick in existence, instead of constantly remaining thirty-
six inches long, were to vary from day to day within the
limits of thirty-five and thirty-seven inches, we should still be
better off than with no yardstick at all. But it would be no
more foolish to abolish the yardstick because of such a defect
than it would be to abolish the standard of value, and there-
fore money, simply because no commodity can be found for
a standard which is not subject to the law of supply and
demand.
A NECESSITY OR A DELUSION, WHICH?
[Liieriy, June 2j, fSg/.]
To tlic Editor of Liberty :
234 It is not only a delusion, but a misuse of language, to
talk of a "standard of value." Give us a standard of pain or
pleasure, and vou mav convince us that there can be a
"standard of value." I am well aware of the difficulty of
112 THE NEW PHILOSOPHY OF MONEY
discussing this question, even with so precise an editor as
Mr. Tucker; but since he has called in question the views
presented in my pamphlet (The Financial Problem), I feel
called upon to lay before the readers of Liberty some addi-
tional arguments to show the correctness of what Mr. Tucker
has honored me by calling "the Westrup view."
235 Let us consider for a moment the practical workings
of a mutual bank, as near as we can foretell them. The
incentive to organize a mutual bank is the opportunity of
borrowing money at a very low rate of interest and no addi-
tional expense. This desideratum is not confined to a few
individuals, but is well nigh universal. It follows, therefore,
that the starting of a bank will draw to it a large number of
people, embracing producers and dealers in almost, perhaps
all, commodities. One of the conditions in obtaining the
notes (paper money) of the mutual bank is that they will be
taken in lieu of current money without variation in the price
of the commodities, by those who borrow them. This con-
dition is just, and will be readily acquiesced in without a
murmur. At the very outset of the mutual bank, then, we
have at least dealers in most of the ordinary commodities who
will accept this money. This certainty of its redemption in
commodities at their market price in current money guaran-
tees its circulation.
236 Strictly speaking, the mutual bank does not issue the
money; it simply furnishes it and is the custodian of the col-
lateral pledged to insure its return. It is the borrowers who
both issue and redeem.
237 The transaction between the bank and the borrower
is of no interest to the public previous to the issue of an}' of
the money by the borrower. Neither is it concerned with
the transaction between the borrower and the bank after the
former has redeemed all the money he borrowed.
23S Discussing theories is far less important than efforts
to put in practice such momentous reforms as the application
of the mutual feature to the supply of the medium of ex-
change. If comrade Tucker really desires the establishment
of mutual banks, it seems to me he would naturally discuss
the practicability of such institutions. Let him point out
wherein the above forecast is unsound. Let him show the
necessity for a "standard of value" and suggest how to intro-
duce one; perhaps I may become converted. I shall most
surely acknowledge my error if I am convinced, but I have
MEASURE OF VALUE II3
no time oi- inclination to discuss any abstract theory about a
"standard of value." The one question that seems to me of
importance is the practicability of the mutual bank. If it is
not practicable, why is it not so? If it is, why waste time
and space in discussing whether the first or the second or any
other commodity exchanged becomes the "measure" or
"standard" of value; especiall}' as "the whole trouble disap-
pears with the abolition of the basis privilege "
Alfred B. Westrup.
239 Mr. Westrup's article sustains in the clearest manner
my contention that money is impossible without a standard
of value. Starting out to show that such a standard is a
delusion, he does not succeed in writing four sentences
descriptive of his proposed bank before he adopts that "delu-
sion." He tells us that "one of the conditions in obtaining
the notes (paper money) of the mutual bank is that they will
be taken in lieu of cicrrcni moneys What does this mean?
Why, simply that the patrons of the bank agree to take its
notes as the equivalent of gold coin of the same face value.
In other words, they agree to adopt gold as a standard of
value. They will part with as much property in return for
the notes as they w^ould part with in return for gold. And
if there were no such standard, the notes would not pass at
all, because nobody would have any idea of the amount of
property that he ought to exchange for them. The fiaivete
with which Mr. Westrup gives away his case shows tri-
umphantly the puerility of his raillery at the idea of a stand-
ard of value.
340 Indeed, comrade Westrup, I ask nothing better than
to discuss the practicability of mutual banks. AH the work
that I have been doing for libert}' these nineteen years has
been directed steadily to the establishment of the conditions
that alone will make them practicable. I have no occasion
to show the necessity for a standard of value. Such neces-
sity is already recognized by the people whom we are tr3'ing
to convince of the truth of mutual banking. It is for you,
w'"-© deny this necessity, to give your reasons. And in the
very moment in which you undertake to tell us why you deny
it, you admit it without knowing it. It would never have
occurred to me to discuss the abstract theory of a standard of
value. I regard it as too well settled. But when you, one
of the most conspicuous and faithful apostles of mutual bank-
TI4 THE NEW PHILOSOPHY OF MONEY
ing, begin to bring the theory into discredit and ridicule by
basing your arguments in its favor on a childish attack
against one of the simplest of financial truths, I am as much
bound to repudiate your heresy as an engineer would be to
disavow the calculations of a man who should begin an
attempt to solve a difficult problem in engineering by deny-
ing the multiplication table.
241 I fully recognize Mr. Westrup's faithful work for
freedom in finance and the ability with which he often
defends it. In fact, it is my appreciation of him that has
prevented me from criticising his error earlier. I did not
wish to throw any obstacle in the path or in any way
dampen the enthusiasm of this ardent propagandist. But
when I see that admirable paper, Egoism^ of San Francisco,
putting forward those writings of Mr. Westrup which con-
tain the objectionable heresy ; and when I see that other
admirable paper, The Herald of Anarchy^ of London, led
by his or similar ideas to advocate the issue of paper bearmg
on its face the natural prices of all commodities (!); and
when I see individualists holding Anarchism responsible for
these absurdities and on the strength of them making effect-
ive attacks upon a financial theory which, when properly
defended, is invulnerable, — it seems high time to declare that
the free and mutual banking advocated by Proudhon, Greene,
and Spooner never contemplated for a moment the desirabil-
ity or the possibility of dispensing with a standard of value.
If others think that a standard of value is a delusion, let
them say so by all means; but let them not say so in the
name of the financial theories and projects which the original
advocates of mutual banking gave to the world.
242 I have endeavored all through this lengthy conten-
tion for what is sound and logical in regard to the exchange-
ability of paper money, to be fair in presenting the position
of those who differ from me on this question; and that the
reader may be able to judge impartially as to the correct view,
I have reproduced entire articles, instead of extracts. Mr.
Tucker replies to my statement (203) namely, that mutual
money will circulate freely because borrowers bind themselves
to take it in exchange for commodities, ine same as they do
MEASURE OF VALUE II5
current monev, "that the patrons of the bank agree to take
its notes as the ec^uivalent of gold coin of the same face vahie.
In other words, they agree to adopt gold as a standard of
value." But how does he reconcile his theory with the fact
admitted in his controversy with ]Mr, Fisher? ("Instead of
a Book," page 233.) "The value of gold would be reduced
by mutual banking, because it would thereby be stripped of
that exclusive monetary utility conferred upon it by the State
(199-200). The percentage of this reduction, no one can
tell in advance." And how does he reconcile the above with
the following which he quotes from Col. Greene? "IMuT-
UAI. MONEY IS ^rEASURED I5Y SPECIE, BUT IS IN NO WAY
ASSIMILATED TO If; AND THEREFORE, ITS ISSUE CAN
HAVE NO EFFECT WHATEVER TO CAUSE A RISE OR FALL
IN THE PRICE OF THE PRECIOUS METALS." He UOt Only
quotes it approvingly, but says: "This is one of the most
important truths in finance" (Ibid, 232). Here we have
two statements which are as opposed to each other as are the
pages on which they are printed. "The value of gold would
be reduced by mutual banking its issue (mutual
money) can have no effect whatever to cause a rise or fall in
the price of the precious metals." Of course Mr. Tucker is
right in the first statement, and both he and Col, Greene are
therefore necessarily wrong in the second statement. "Mut-
ual money is measured by specie!" If this is true, then
mutual money must follow the decline in the value of gold
which will follow its issue. The issue of mutual money
then, W'ill cause a rise in prices, because it will cause a depre-
ciatior of the value of gold. Mutual money being "meas-
ured by specie" will go down with the gold, and conse-
quently will also be reduced in exchangeable value, which is
the same thing as a rise in other values. To what confusion
of thought does the infatuation over an idea lead! If mutual
money is to be measured by specie, we are indeed in a bad
fix, and all the evils predicted by our opponents will surely
come to pass if the Mutual Credit System is established.
Il6 THE NEW PHILOSOPHY OF MONEY
243 But there is no danger that the evils will occur.
Mutual money will not be "measured by specie," nor will
any one part with it for less than its face value. There will
be a reason for depreciation in gold. It will be "deprived of
that exclusive monetary utility conferred upon it by the
State" — the making it legal tender: but there will be no rea-
son for depreciation in mutual money, because the demand
for it to pay notes of borrowers which have become due at
the Mutual Credit Association will always be in exact ratio
to the volume in circulation. In other words, the demand
for the certificates of credit, in order to retire them from cir-
culation by payment of notes to the Mutual Credit Associa-
tion will be as constant as their issue; hence, this money will
be more acceptable, as currency, than anything that can
compete with it. For this reason, it will not depreciate or
follow the downward course of gold. Gold will go out of
use as money and mutual money will take its place.
244 Mr. Tucker fails to comprehend the true nature of
exchange or of value, when he says: "Mr. Westrups article
sustains in the clearest manner my contention that money is
impossible without a standard of value. Startmg out to
show that such a standard is a delusion, he does not succeed
in writing four sentences descriptive of his proposed bank,
before he adopts that 'delusion'." I did not start out to show
that "such a standard" is a delusion, but that "standard of
value" is not a concept but a delusion, Mr. Tucker's con-
tention is "that money is impossible without a standard of
value." I claim, and have never given cause for any one to
think I meant otherwise, that j^^ipei" money is impossible (so
long as all are not perfectly honest) unless its redemption is
satisfactorily provided for. Mr. Tucker says that the only
satisfactory provision is a definite quantity of some special
commodity obtainable on demand in exchange for the j^aper
money, and that this quantity is the "standard of value."
This is the position of the professors and the "great finan-
ciers," and as I have previously stated, there is no escaping
MEASURE OK VALUE II7
the evils rcsulling from cornering the "standarti" and then
demanding it in redemption of the paper money, which can
be done by a chiss interested in depreciating tlie paper
money purely for speculative purposes, no matter what com-
modity be selected as the "standard." And I claim that a
quantity of any commodity cannot be a. standard of value,
because the value of that quantity is not fixed but is ever
subject to change; that to call that which is changeable, a
standard, is to talk nonsense; that the redemption provided
by the Mutual Credit system, which is to the effect that each
certificate shall be retired from circulation by rendering to
the holder its face value in commodities at their market value
or price, is an absolute guaranty of their entire acceptability
in exchange for commodities, not affecting change in values
as "standard" money does, but their abundance and low rate
of interest v/ill promote enterprise and facilitate exchanges
on a cash basis. While Col. Greene refers to "standard of
value" as though there was such a thing, he made no provis-
ion for it in his plan for mutual banks.* I appreciate Col.
Greene's writings and acknowledge my indebtedness to him;
*The Mutual Credit System (see plan) is proposed as an improve-
ment on Col. Greene's Mutual 13ank, which was as follows:
1 . The inhabitants, or any portion of the inhabitants, of any town
or city in the Commonwealth, may organize themselves into a
Mutual Banking Company.
2. Any person may become a member of the Mutual Banking
Company of any particular town, by pledging real estate situated
in that town, or in its immediate neighborhood, to the Mutual Bank
of that town.
3. The Mutual Bank of any town ma>' issue paper money to circu-
late as currency among persons willing to employ it as such.
4. Every member of a Mutual Banking Company shall bind him-
self, and be bound in due legal form, on admission, to receive in pay-
ment of debts, at par, and from all persons, the bills issued, and to be
issued, by the particular Mutual Bank to which he may belong; but
no member shall be obliged to receive, or have in possession, bills of
said Mutual Bank to an amount exceeding the whole value of the
property pledged by him.
5. Any member may borrow the paper money of the bank to
which he belongs, on his own note running to maturity (without
indorsement), to an amount not to exceed one-half of the value of
the property pledged by him.
6. The rate of interest at which said monev shall be loaned by the
Il8 THE NEW PHILOSOPHY OF MONEY
but to call his pamphlet the "standard work" on the subject
sounds a little too orthodox to come from an Anarchist, espe-
cially when it contains the glaring error I have pointed out
(242), and which Mr. Tucker reproduced as "one of the
most important truths in finance."
245 Another error of Mr. Tucker's is that of naming
Spooner (241) as an advocate of free and mutual banking.
Mr. Spooner never advocated mutual banking, at all. His
scheme is a joint-stock affair, involving interest to those who
do not "get in on the ground floor," and, of course, dividends
to those who do. This is neither free nor mutual banking
and is on a par with Mr. Hugo Bilgram's proposition in his
recent book, "A Study of the Money Question," which advo-
cates free banking, but nevertheless presents a plan for a sys-
tem of money to be run by the government and in which
poor borrowers who cannot muster up enough security to
borrow $1,000 are to be ignored and left to the mercy of
money sharks. When I invited Mr. Tucker to "show the
necessity for a standard of value" and suggest how to intro-
duce one, he declined, saying, "I have no occasion to show
the necessity for a standard of value. Such necessity is
already recognized by the people whom w^e are trying to
convince of the truth of mutual banking." This would seem
to imply that since the people believe in it, and Col. Greene
bank shall be determined bj, and shall, if possible, just meet and
cover the bare expenses of the institution.
7. No money shall be loaned by the bank to persons who do not
become members of the company by pledging real estate to the bank.
8. Any member, by paying his debts to the Mutual Bank to
■which he belongs, may have his property released from pledge, and
be hii iself released from all obligations to said Mutual Bank, and to
holders of the Mutual Bank money, as such.
9. No Mutual Bank shall receive other than Mutual Bank paper
money in payment of debts due it, except at a discount of one-half of
one per cent.
10. The Mutual Banks of the several counties in the Common-
wealth shall be authorized to enter into such arrangements with each
other as shall enable them to receive each other's bills in payments
of debts; so that, for example, a Fitchburg man may pay his debts to
the Barre Bank in Oxford money, or in such o^her Worcester county
money as may suit his convenience.
MEASURE OF VALUE II9
believed in it, it is not necessar}' to detcnninc wlietlicr it is an
error or not. But since Col. Greene made no provision for
a "standard," and since his mutual money would not have
been "measured by specie," as he affirmed, because ''the value
of gold would be reduced by mutual banking," etc., there
would have been no "standard of value" in his system any
more than there is in the one I propose, which differs from
his only in some features I have added. If Mr. Tucker sees
the necessity for a "standard of value" in connection with
mutual banking, he can make fame for himself if he will
invent a method of applying it to that system. I challenge
him to do it; and I further predict that when he applies his
own mind to the consideration of the question instead of
depending upon Col. Greene or "standard works on the sub-
ject," he will admit my position to be the correct one. I am
sorry for his unreasonable opposition, because it has materi-
ally retarded the movement. As an illustration of this, let
the reader turn to Mr. Tucker's letter to the Neivs (225)
and the 7V<:tCJ-' rejoinder (326-227); then the comments of
Mr. Tucker (22S, 233). "A standard of value is highly
desirable, but perhaps this is as much as can be safely asserted
on that question." Unlike Mr. Tucker, the Ne-jcs is receptive
to the correct view, and he was altogether too hasty in
assuming that the Ne-Jcs took "common ground with me
(him) against the position of comrade Westrup." It says:
"A note properly based on gold, silver, wheat, cotton, or
other commodity, has a tangible security behind it." The
"standard for valuation" which it says is indispensable as
soon as circulating notes are issued" does not necessarily
mean a standard of value, but the denominator "dollar."
246 Under the Mutual Credit System, value is expressed
and secured credit is divided by this denominator, facilitating
the exchange of equivalents of one for the other. This
secured credit being based on gold, silver, wheat, cotton, or
other commodities, and therefore having a "tangible security
behind it," cannot depreciate, and it is for this reason and
I20 THE NEW PHILOSOPHY OF MONEY
because borrowei's bind themselves to take the certificates
into which it is divided and issued, at their face vakie in pay-
ment of debt and in exchange for commodities and services
without discriminating in prices, as long as they are members
of the Mutual Credit Association. I have felt warranted in
extending this chapter to so great a length because of the
importance of the subject. It is the question about which it
is j^robable the hardest fighting will be done when free
money becomes a national issue. It is a theme on which
financiers and politicians can talk glibly, and about which
they will incur the least danger of being understood.
CONTROVERSY BETWEEN ALFRED 15. WES
TRUP AND EDWARD ATKINSON IN RE-
GARD TO THE MUTUAL CREDIT
ASSOCIATION.
The following correspondence explains itself.
MixxEAPOLis, Minx., JMarch iS, 1S94.
Edward Atkixsox, Esq.,
Boston, Mass.
Dear Sir:
As I desire to publish in permanent form my criticism
of your North Avierican Reviezv article, "How Distrust
Stops Trade," your reply and my rejoinder, I wish to give
you an opportunity to correct or add thereto whatever you
may wish to supplement. I insist on fair piny. I am
ahvays willing to grant it.
Very respectfully,
Alfred B. Westrup.
Boston, March 23, 1S94.
Alfred B. Westrup, Esq.,
Minneapolis, IMinn.
Dear Sir:
Your letter of the iSth has been received in the absence
of Mr. Atkinson. He is out of town and will probably be
absent about ten days.
Yours respectfully,
G. Hamiltox.
Up to this date (December, 1894), I have heard noth-
ing further from Mr. Atkinson, so our statements reappear
as they were originally published.
122 THE NEW PHILOSOPHY OF MONEY
THE NEGLECTED ELEMENTS IN THE MONEY QUESTION.
A faper read by Alfred B. Westrup at a meeting of Minneapolis
business men and published in the Minneapolis Times.
247 The Duke of Argyll, in his recent work, "The
Unseen Foundations of Society," struck the key-note in the
discordant and unreconcilable "dismal science" called political
economy, when he showed that there are elements which the
professors are not familiar with and which, therefore, they
have neglected to consider. But the Duke of Argyll has
allowed some elements to escape his notice, also, and is, there-
fore, amenable to the same charge he makes against the
political economists. He is an advanced thinker in some
respects, yet, in common with all the popular writers, his
conservatism has defeated his reaching bottom, if such was
his purpose.
248 The preconceived notion! How many men or
women can rise above it and welcome the truth; discriminate
between conflicting theories, much less penetrate into the
unknown; that no elements may be neglected, no facts over-
looked?
249 It is my purpose in this paper to call the attention of
Mr. Edward Atkinson to his shortcomings in this respect;
and if I can score a point against him it will be equally
effective against Argyll and the other writers. In his
article, "How Distrust Stops Trade," in the July, 1S93,
number of the North American Jiczw'czc, he has very forci-
bly shown the evil effects of bad money, but if his philosophy
had included the neglected elements I shall presently bring
to his notice, he would have written a very different article.
Mr. Atkinson's argument centers upon credit and good
money. He says:
250 a. "The credit which each man can extend to his
nei"-hbor depends not only upon the quality of the man, but
also upon the quality of the money which is to be paid and
WESTRUP- ATKINSON CONTUO VEKSY I 23
whicli is to lie rcceiveil. When a doubt exists about the
quahty of the money, trade stops."
251 b. "Credit cannot be given even to those Avho are
entitled to it when the credit of the money itself is doubtful.
That is what affects trade now. The quality of the money
which is lawful in the United States is doubted. Why?
Money that is doubted is bad money. It is not fit to be used."
253 c. "The only definition of good money is that it con-
sists of coin which is worth as much after it is melted into
bullion as it purported to be worth in the coin."
253 I will now point out the neglected elements, the fail-
ure to recognize, and therefore non-participation of which, in
the effort to solve the money question, has led to the errors
and almost inextricable confusion which characterizes ortho-
dox political economy.
254 The neglected elements are: First, the necessity for
a system of secured credit; second, the possibilities of paper
money in the extension of credit; third, the right of the
individual.
255 !Mr. Atkinson's statements in a and b are lamenta-
tions that leave an aching void. "The credit which each
man can extend to his neighbor depends not only upon the
quality of the man." Then it docs depend upon the quality
of the man (this is personal credit); and it is stated as one of
the difficulties we have to contend with. Now, what are we
to think of the pilots who, when they run up against a snag,
climb over it instead of clearing the channel that navigation
may be free from all obstructions? "Credit cannot be given
to those who are entitled to it." To deny a man that which
he is entitled to is an injustice — an outrage! (23, 30) Yet
here are these pilots, leaders, teachers, whom the people rely
on as guides, acknowledging a glaring wrong of stupendous
magnitude, for which they offer no remedy, for if his "only
definition of good money" were admitted as correct and car-
ried into effect, it could not afford relief from that wliich, in
the absence of secured credit is unavoidable — a resort to imse-
124 ^^^ NEW PHILOSOPHY OF MONEY
cured credit (93). It is the inadequacy of our money sys-
tems that prevent us from transacting all business on a cash
basis (58), It is imjoerative to adopt a system that will
admit of such a possibility — a sj'stem of secured credit that
Mr. Atkinson fails to see the necessity for (48, 95).
256 Credit is divided into two kinds — personal or unse-
cured, and real or secured. To illustrate: When goods are
sold the payment of which is deferred until some future time,
and no security is pledged to make good the payment in case
of default, it is unsecured credit.
257 When goods are sold for cash, or the payment of
which is immediate and in paper money (when payment is
made in coin it is barter)(8i-88), or when the payment is
guaranteed by a pledge of security, it is secured credit (79-
91). The former (personal or unsecured credit) has no place
in a treatise on economics (95(3:). It is a personal matter with
which the economist has nothing to do. The business of the
economist is to devise a system of secured credit that would
be satisfactory, in order that we may not be compelled to
resort to unsecured credit in the exchange of commodities or
service as is unavoidable under the present money system.
It will be conceded on all sides that cash or secured credit is
preferable to unsecured credit, and it will not be disputed that
under the present money system it would be impossible to do
all business on a cash basis, time being given to receive and
examine goods only. For any one or many to voluntarily
give personal credit to some is quite natural, but that no sys-
tem of secured credit has been put into practical operation, or
has ever been suggested by the professors, is the worst
blunder that has ever been committed; and, as I have said,
sliows plainly that Mr. Atkinson fails to perceive the neces-
sity for a system of secured credit.
258 Second: Up to the present time, the moneyed inter-
ests have been so managed that the enormous advantage of
p:ipcr money, instead of having been utilized in extending
credit in the interest of the borrower, has been used as a
^VES^R UP- ATKINSON (.OX TROVE RSY
125
means of speculation in the hands of the lender. If Mr.
Atkinson had not overlooked the fact that the use of paper
money admits of a system whereby credit can be issued in
that form on any commodity that can be safely warehoused,
as well as on immovable property, he would not have dragged
the character of the individual into the discussion. Given
adequate security, the quality of the applicant for credit
should have no more to do with his obtaining it, than his
religious belief or his jDolitical creed.
259 Mr. Atkinson's "only definition of good money" is
the stock argument in favor of coin money — the dogmatic
assertion that only coin it money. But this position was sur-
rendered the moment tliey issued paper in excess of coin on
deposit. It was repudiated when issued on United States
bonds, and again in the issue of clearing-house certificates.
260 Whejt a specie fayijig bank issues an excess of
paper over coin^ the excess is the unsecured credit of the
banker. Now, I want to know if the borrower who bor-
rows this unsecured credit of the banker, and puts up good
security, why those who take the paper money he has bor-
rowed of the banker would not be better j^i'otected against
loss if the security was pledged to secure them, instead of
being turned over to the banker to secure him? Again: If
clearing-houses, which are associations of bankers, can issue
money called "clearing-house certificates," thus inflating the
currency and enabling them to loan more money at a rate of
interest that leaves them a profit, why cannot the borrowers
who put up good security organize an association and issue
paper money also? The paper money would be utilized in
the interest of the borrower, and as already stated, a system
of secured credit would be established.*
261 Third: It is a universal practice with political econ-
omists, and Mr. Atkinson is no exception, to ignore the right
of the individual. They aflirm a method to be correct and
* See Prospectus.
126 THE NEW PHILOSOPHY OF MONEY
call upon the individual to submit to the inconveniences or
burdens it imposes, attributing them to the perversity of
human nature, instead of pursuing investigation to discover
the real cause. Thus, when Mr, Atkinson says, "credit can-
not be given even to those w^ho are entitled to it," he con-
cedes that they are subject to conditions which others control,
the remedy for which is that such control shall cease, or in
other words, the institution of a system that others cannot
control; that under any and all circumstances, those who are
entitled to credit will be able to get it without let or hin-
drance. This reasoning recognizes the right of the individ-
ual and affords him the opportunity to help himself.
262 But Mr. Atkinson contemplates nothing of the kind.
I will grant, for the sake of argument, that the bullion value
of everv coin in the United States is equal to its face value.
How is the individual who wants credit and has ample secur-
ity, to obtain it? This seems too deep for Mr. Atkinson. He
has nothing to offer. Such individuals are turned over to the
tender mercies of the money-lenders, or to those who have
the goods he needs. "The money which is lawful being no
longer doubted, he will be able to get all the credit which he
is entitled to." Let us see if this is true.
263 Paper money is a form of credit. It is the most
desirable form of credit when it is secured credit. The
source of paper money in this country is the United States
government. It is issued to those only who have gold, silver
and United States bonds (17-21). The individual who has
security other than gold, silver or United States bonds, is
denied the right to this form of credit, because paper money
is not issued to him on his security, and he is therefore
dependent upon those to whom it has been issued.
264 Credit, then, in this form, is not only limited by a
political institution, but it is furnished without interest to
exceedingly few individuals, and they loan it out to all the
rest of the inhabitants who must borrow, at such high rates as
this monopoly can enforce. This constitutes a denial of the
WESTRUP- ATKINSON CONTROVERSY
127
right of private property (30). If one cannot use Iiis prop-
erly for purposes of credit without he obtains the consent of
another, to that extent that other controls his property. He
cannot get credit except as he obtains the consent of another
and pays a bonus— -interest in excess of cost (95).
265 This latter represents nothing but the monopoly price
of credit (^^^d). This statement constitutes a refutation of
]Mr. Atkinson's position. It is not true that under the pre-
vailing systems of money the Mic'ividual can obtain the credit
he is entitled to (105). Nor can he under any system save
the one I propose — the establishment of Mutual Credit Asso-
ciations to print and furnish certificates of credit of all denom-
inations to such individuals as can put up good security, such
borrow^ers to bind themselves in legal form to accept the said
certificates in payment of debt at their face value, and also in
exchange for commodities or services without discriminating
in prices.
266 Life insurance, and Mr. Atkinson knows that fire
insurance, also, has been successful on the mutual plan; why
not banking.''
267 The cost of issuing this money and taking care of
the security would not exceed one joer cent per annum (316).
It would necessarily result in all credit taking that form as
rapidly as possible, as any business man can see that it will be
a great saving to borrow money at that rate and pav cash
rather than buy on time credit.
26S AVhat I propose is the establishment of a commercial
system of money instead of the existing political system.
AVe have outgrown the old system and we must prepare for
the new. Evolution is as Imj^erative in monetary affairs as it
is in all others.
269 September 4th, the dav my criticism of Mr. Atkin-
son's article appeared in the T'l'mcs, I called on Mr. John
Blanchard, the editor, and had quite a long talk with him.
128 THE NEW PHILOSOPHY OF MONEY
He told me he would write to Mr. Atkinson asking him to
reply to my criticism and would enclose a copy of the same.
The following communication shows that he did so.
THE MUTUAL CREDIT SCHEME,
\liIinneafolix Times, Sept. 12, iSgj.'\
To tlic Editor of the Times :
270 I have your letter of the 4th, and in response to your
request that will write a rejoinder to A. B. Westrup's
review of a certain article of my own, I beg to say that Mr.
Westrup's statement of his scheme for paper money is so
incomplete as to make it impossible to subject it to scientific
criticism. Before any discussion can be had upon this old and
familiar conception of a Mutual Credit Association furnishing
certificates of credit, it is necessary for Mr. Westrup to define
the standard of redemption by which the valuation or mental
estimate of the worth of these certificates is to be established.
271 Again, if I comprehend Mr. Westrup, he would
give credit money an absolute quality, to the end that its
acceptance by a vendor would require no consent on his part.
His argument implies that a man who desires to buy com-
modities or services is entitled to something that he can use
as a medium of exchange, which he may use without the con-
sent of the other party in each transaction and without regard
to his own personal character, standing or property. What
is the standard of redemption of that type of credit?
272 Mr. Westrup proposes to establish a Mutual Credit
Association "to print and furnish certificates of credit of all
denominations to such individuals as can put up good secur-
ity, such borrowers to bind themselves in legal form to
accept such certificates in payment of debts at their face value
and also in exchange of commodities and services, without
discriminating in prices." If Mr. Westrup proposes to make
such an organization, why does he not proceed to do so? He
is as free to move in the matter as others are free to refuse.
It is a very old and familiar conception. There is no objec-
tion to it ^Drovided any number of people can be persuaded to
go into it. Why do not ]SIr. Westrup and his coadjutors, if
any, undertake this method of making exchanges? There is
nothing to hinder.
WESTRUP-ATKINSON CONTROVERSY 1 29
273 Now, unless Mr. Westrup can state what the stand-
ard of redemption in his proposed system is to be, then I
think he must either be held to be incapable of dealing with
the subject, or else business men of long experience, econo-
mists and others who have studied the monetary question are
incapable of comprehending what Mr. Westrup means. In
either event, it would be a waste of time for men of experi-
ence in business, or men who have made a long study of
monetary science to enter into any discussion of this old and
familiar fallacy. The fault with it is, that without an act of
legal tendei behind them such certificates will not pass; with
an act of legal tender forcing them into use, they would be a
fraud.
Yours very truly,
Edward Atkinson.
The following is my rejDly to Mr. Atkinson's rejoinder.
THE MUTUAL CREDIT SCHEME.
[^Minneapolis Times, Sept. ij, ^Sgj^
To the Editor oj the Times :
274 In your issue of today you print a communication
from Edward Atkinson, purporting to be a rejoinder to my
criticism of his North Avicrican Review article. Reading
carefully the communication, I find no reference whatever to
my criticisms. His "rejoinder" is devoted entirely to the
IMutual Credit Association scheme, of which he says liis
knowledge is "so incomplete as to make it impossible to sub-
ject it to scientific criticism."
275 I criticise him for neglecting certain elements relating
to the subject he is constantly writing about, and, instead of
answering my criticisms, he evades the issue by writing a
third of a column in opposition to a scheme he admits he does
not understand.
276 Omitting my arguments to sustain my position, be-
cause they would take up too much space, I will merely
quote the charge I brought against Mr. Atkinson in the
review alluded to.
277 "It is my purpose in this paper to call the attention
of Edward Atkinson to his shortcomings in this respect; and
9
130 THE NEW PHILOSOPHY OF MONEY
if T can score a point against him, it will be equally effective
against Argyll and the other writers. In his article, "Plow
Distrust Stops Trade," in the July, 1S93, number of the
North American Review^ he has very forcibly shown the
evil effects of bad money, but if his philosophy had included
the neglected elements I shall presently bring to his notice,
he would have written a very different article
278 "I will now point out the neglected elements, the
failure to recognize, and therefore non-participation of which,
in the effort to solve the money question, has led to the errors
and almost inextricable confusion which characterizes ortho-
dox political economy.
279 "The neglected elements are: First, the necessity
for a system of secured credit; second, the possibilities of
paper money in the extension of credit; third, the right of
the individual."
280 In answer to a letter from the editor of the Times
enclosing my entire article asking him to respond to it, Mr.
Atkinson writes: *'I have your letter of the 4th, and in
response to your request that I will write a rejoinder to A.
B. Westrup's review of a certain article of my own, I beg to
say that Mr. Westrup's statement of his scheme for paper
money is so incomplete as to make it impossible to subject it
to scientific criticism."
281 There is not a word in all the rest of his communi-
cation about my accusation that he has overlooked elements
relating to the money question, and anyone familiar with
correct methods of conducting a discussion will readily see
that he has evaded the point at issue.
282 I affirm that Mr. Atkinson's philosophy ignores the
rights of the individual who has security, to credit, and there-
fore he is ignorant of the necessity for a secured credit sys-
tem, which the extension of credit by means of the invention
of paper money, makes possible. Does Air. Atkinson prove
that this statement is not true by trying to show that the
Mutual Credit Association plan is impracticable? It is beg-
ging the cpiestion; and I insist that he meet the issue fairly
and apply his "scientific criticism" to aid the establishment of
a system that recognizes and embodies these neglected ele-
ments.
283 Now, a few words about Mr. Atkinson's attempt to
criticise the Mutual Credit Association plan. He says:
"Mr. Westrup's statement of his scheme for paper money is
WESTRUP-ATKIXSONT CONTROVERSY I31
SO incomplete as to make it impossible to subject it to scien-
tific criticism"; and yet in his very next statement he says:
*'Before any discussion can be had on this old and familiar
conception of a Mutual Credit Association furnishing certifi-
cates of credit, it is necessary for Mr. Westrup to define the
standard of redemption by which the valuation or mental
estimate of the worth of these certificates is to be established."
2S4 The public should know that Mr. Atkinson's famili-
arity with the mutual credit idea was derived from the author
of "Mutual Banking," Col. Wm. B. Greene, with whom he
debated on the subject on a public platform many years ago,
and that if his knowledge of my "scheme" is incomplete, it
is his fault, as in 1S91 I mailed him copies of my two pamph-
lets and a cojDy of each number of my paper, the Auditor^ as
long as I published it. I also sent him duplicate copies of a
series of questions with a request that he answer them, but
which answers I never received.
285 It would seem as though the following quotation
which he makes from my review of his article is a satisfac-
tory answer to his query about a "standard of redemption."
256 "Mr. Westrup proposes to establish a Mutual Credit
Association 'to print and furnish certificates of credit of all
denominations to such individuals as can put up good security,
such borrowers to bind themselves in legal form to accept
such certificates in payment of debts at their face value and
also in exchange for commodities and services without dis-
criminating in prices'."
257 It is very hard for these political economists to realize
that there is no standard in value, that the monetary unit,
*'dollar," being conventionally agreed upon, is all that is pos-
sible to form a "mental estimate," not of their worth, but by
which we can convey from one mind to another the market
value of commodities.
258 It is clear that Mr. Atkinson has not yet grasped the
idea of the Mutual Credit Association plan for paper money.
The certificates are redeemed every time a member of the
association accepts them in payment of debt or in exchange
for commodities, and they are issued whenever a member
pays debts or buys commodities with them. If a member
pays out some of this money and fails to take it back
exchange or in payment, the association places his security —
which he had to pledge to get the money — on the market,
and redeems the money itself by accepting it in payment.
It is tben destroyed. Alfred B. Westrup.
132 THE NEW PHILOSOPHY OF MONEY
2S9 It was not possible within the limits of a newspaper
article to point out all the imreasonableness contained in Mr.
Atkinson's rejoinder, and it is necessary to review it a little
more at length. In the second paragraph Mr. Atkinson
says: "If I comprehend Mr. Westrup he would give credit
money an absolute quality, to the end that its acceptance by
a vendor would requu"e no consent on his part. His argu-
ment implies that a man who desires to buy commodities or
services is entitled to something that he can use as a medium
of exchange, which he may use without the consent of the
other party in each transaction, and without regard to his
own personal character, standing, or property." In the very
next paragraph 'he quotes from the proposed plan of the
Mutual Credit Association what proves that the foregoing is.
not true. He says: "Mr. Westrup proposes to establish a
Mutual Credit Association 'to print and furnish certificates of
credit of all denominations to such individuals as can put up
good security, such borrowers to bind themselves in legal
form to accept such certificates in payment of debt, at their
face value, and also in exchange of commodities and services
without discriminating in prices." Any one who thinks must
know that the paper money of an association cannot be made
legal tender. Indeed, The New Philosophy of Money is
utterly opposed to legal tender money. How, then, can the
certificates of credit of the IMutual Credit Association be used
to buy or pay debt "without the consent of the other party in
each transaction.?" And if it is to be furnished only to "such
individuals as can put up good security," why does he say,
"and without regard to his own personal character, standing,
or property?" The latter part of this statement is not true.
The borrower mtist put up property that is good security
before he can get the certificates. What, then, has his per-
sonal character or standing to do with it.'' Continuing,
within three lines of what has just been quoted, he says:
"There is no objection to it provided any number of people
can be persuaded to go into it." He first concludes that the
WESTRUP- ATKINSON CONTROVERSY I 33
Mutual Credit Association is a scheme to furnish "money"
to anyone who needs it rci^ardless of his "personal character,
standing, or property," and which he may use "without the
consent of the other party in each transaction," and yet he
says, "there is no ohjection to it j^rovided any number of
people can be persuaded to go into it," "What a travesty
on common sense is this! But then, tliis is not "scientific
criticism," the reader must remember: Mr. Atkinson can
perhaps label it for him.
290 The "standard of redemption," which Mr. Atkinson
lavs so much stress upon, as the reader will readily under-
stand, has reference to the definite quantity of some special
commodity redemption fake, of which so much has already
been said; so I will pass that by. I must, however, once
more call attention to Mr. Atkinson's evasion of my criti-
cism. I charge him with neglecting certain essential ele-
ments relating to this subject, and the charge is equally
applicable to all the political economists. These elements
are: the imperative necessity for a system of secured credit
to take the place of the present unsecured credit system;
the possibilities of paper money in the extension of credit;
or, in other words, the application of the invention of paper
money to the needs, and in the interest of borrowers instead
of in the interest of money-lenders; and lastly the recog-
nition of the right of the individual to use his property for
purposes of credit. The present system of money is the
result of efforts on the part of money-lenders and politicians
to have what suited their purpose. It is the mother of inters
est. It enables greed to accumulate wealth it did not earn;
and it perpetuates poverty and ignorance, which enables the
politicians the more effectually to gratify their ambition to
rule. The political economist, instead of calling attention to
the neglected elements, and insisting on their recognition as
principles which must not be ignored in providing a medium
of exchange, have ever been lavish in apoligies, and energetic
in defense of the existing system; Mr. Atkinson being one of
134 ^^^ NEW PHILOSOPHY OF MONEY
the most persistent. But while lack of familiarity with the
money question admits of many ambiguous statements passing
for profound wisdom, it surely is not beyond the power of
any one who can read ordinary English intelligently to per-
ceive the glaring absurdity in the following, which is the way
Mr. Atkinson commences his letter: "I have your letter of
the 4th, and in response to your request that I will write a
rejoinder to A. B, Westrup's review of a certain article of my
own, I beg to say that Mr. "Westrup's statement of his scheme
for paper money is so incomplete as to make it impossible to
subject it to scientific criticism." The eternal fitness of things,
which is here so utterly disregarded, can be more readily
understood by the following illustration: A certain individ-
ual of great fame as an astronomer writes an essay on the
philosophy of the spectral ray. Another individual who is
only an inventor of a spectroscope criticizes the eminent
astronomer, affirming that he has neglected to consider cer-
tain elementary facts; whereupon the eminent astronomer
vv^rites a "rejoinder" stating that while he has never seen the
inventor's spectroscope, and only had a vague idea of what it
consisted, he nevertheless affirmed that it was only a delusion
and would not do the work it was claimed it would. The
eminent astronomer, not being able to meet the arguments of
his critic, contented himself by calling in question the practi-
cabihty of his critic's invention; as though (admitting its
defects) it could possibly have any bearing on the correctness
of h:s own position. So Mr. Atkinson, failing in ability to
defend himself against the charges I make, comes back at me
with, neither ivill your schetfte work. If it were admitted,
for the sake of argument, that the mutual credit idea is only
a "familiar fallacy," would it prove that in his philosophy of
money, he has not failed to take into consideration certain
factors which I call neglected elements? In his answer to
the editor of the Times^ he says: "I have your letter of the
4th, and in response to your request that I will write a
rejoinder to A, B. Westrup's review of a certain article of my
WESTRUP-ATKIXSON CONTROVERSY I35
own, . . ." He is requested to answer my criticisms of
a certain article of his. Does he do it? No; he never refers
to them at all, but goes off on another subject which was not
mentioned in the article criticized. It is just such loose rea-
soning as this that characterizes most of the writings of these
famous political economists.
291 The following article will no doubt prove an inter-
esting' contribution to this controversy.
EDWARD ATKINSON S EVOLUTION.
292 The great central principle of Anarchistic economics
— namely, the dethronement of gold and silver from their
position of command over all other wealth by the destruction
of their monopoly currency privilege — is rapidly forging to
the front. The Farmers' Alliance subtreasury scheme, un-
scientific and clumsy as it is, is a glance in this direction.
The importance of Senator Stanford's land bill, more scien-
tific and workable, but incomplete, and vicious because gov-
ernmental, has already been emphasized in these columns.
But most notable of all is the recent evolution in the finan-
cial attitude of Edward Atkinson, the most orthodox and
cock-sure of American economists, who now swells with his
voice the growing demand for a direct representation of all
wealth in the currency.
293 In a series of articles in Bradstreet''s and in an ad-
dress before the Boston Boot and Shoe Club, this old-time
foe of all paper money not based on specie; this man who,
fifteen or twenty years ago, stood up in the town hall of
Brookline in a set debate with Col. Wm. B. Greene to com-
bat the central principle of mutual banking; this , who
has never lost an opportunity of insulting Anarchism and
Anarchists, — now comes forward to save the country with an
elaborate financial scheme which he offers as original with
himself, but which has really been Anarchistic thunder these
many years, was first put forward in essence by Proudhon,
the father of Anarchism, and was championed by Atkinson's
old antagonist. Col, Wm. V>. Greene, to the end of his life.
Of course, all the papers are talking about it, and, on the
136 TJIE XEAV PHILOSOPHV OF MOXEV
principle that "everything goes" that comes from the great
Atkinson, most of them give it a warm welcome, though
precious few of them understand what it means. Those
which probably do understand, like the New York Evening
Post, content themselves for the present with a mild protest,
reserving their heavier fire to be used in case the plan should
seem likely to gain acceptance.
294 The proposal is briefly this: that the national banks
of the country shall be divided into several districts, each dis-
trict having a certain city as a banking center; that any bank
may deposit with the clearing-house securities satisfactory to
the clearing-house committe, and receive from the clearing-
house certificates in the form of bank-notes of small denomi-
nations, to the extent of seventy-five per cent of the value of
the securities; that these notes shall bear the bank's promise
to pay on the back, and shall be redeemable on demand at
the bank in legal tender money, and, in case of failure on the
bank's part to so redeem them, they shall be redeemable at
the clearing-house; and that this new circulating medium
shall be exempt from the ten per cent tax imposed upon
State bank circulation.
295 Of course a scheme like this would not work the eco-
nomic revolution which Anarchism expects from free bank-
ing. It does not destroy the monopoly of the right to bank;
it retains the control of the currency in the hands of a cabal;
it undertakes the redemption of the currency in legal tender
money, regardless of the fact that, if any large proportion of
the country's wealth should become directly represented in
the currency, there would not be sufficient legal tender money
to redeem it. It is dangerous in its feature of centralizing
responsibility instead of localizing it, and it is defective in less
important respects. I call attention to it and welcome it,
because here for the first time Proudhon's doctrine of the
republicanization of specie is soberly championed by a recog-
nized economist. This fact alone makes it an important
sisrn of the times
296 The foregoing indicate.-> that Mr. Atkinson's quarrel
with the Mutual Credit System is because it cannot be tacked
onto the prevailing system of money and be made to serve
the interests of the money-lenders. By his plan they could
WESTRUP-ATKINSOX CONTROVERSY 137
still control and manipulate the volume of money to suit their
jjurpose, while under the Mutual Credit System they will no
longer be able to exercise that power, which, as Heywood
says, "overshadows president, courts and pulpit, and is master
of majorities and armies."
297 That this is the secret of Mr. Atkinson's opposition
can readily be perceived. If it is "an old familiar fallacy,"
why did he not point out in what tlie fallacy consisted?
"Would he not have done so if he could.'' Not even when
offered an opportunity to answer my reply to his rejoinder
has he a word to say. It now remains for the public to call
uj^on these great teachers of finance to show wherein the
^Mutual Credit System is wrong in principle or impracticable,
or confess like men that they are unable to do so.
THE MUTUAL CREDIT SYSTEM.
29S Of the instruments that man has devised, money is
one of the most universal of all, and its use exceeds that of
any other.
299 Money and its supply bear a relation to the individ-
ual different from that of anything else. Mutual insurance,
fire or life, comes, perhaps, the nearest to it. A mutual
insurance company issues policies of insurance, and all to
whom it issues are members, and they divide the expenses
and losses upon an equitable basis, and share the advantages
of protection. A mutual bank or credit association adopts
the same idea of co-operation and furnishes paper money to
borrowers, treating them as members, dividing the cost, and
losses if there are any, and sharing the advantage of low rates
of interest and plenty of money.
300 But insurance policies and paper money are totally
different. The one is filed away for safe keeping and re-
mains in its hiding place, while the other is constantly passing
from hand to hand. A policy of insurance is a contract, a
record of an agreement It is not in the nature of a credit,
but it may become credit. It is such whenever it becomes a
claim which the insurance company must meet. But until
that happens it is only a promise, and one that may never
mature.
301 Paper money, on the contrary, is in the nature of a
credit. It is a form of credit (79-91). Not all of us are
affected, except remotely, by the soundness or unsoundness
of insurance. "VVe are not all involved in the loss when an
insurance company fails, but we are all affected by the char-
acter of our money. We are all involved in the risk when
there is danger that our paper money will depreciate. Paper
THE MUTUAL CREDIT SYSTEM
139
money being credit and having no intrinsic value, is worth-
less wlien it ceases to pass in exchange for goods. This
being the case, when we part with that which has value, to
be sure against loss, we must know that the money we take
in exchange for it will command for us the equivalent of
what we parted with. When we purchase anything we are
generally able to judge of its value by its appearance. Then,
again, we have some value in the material, and, except in
rare instances, the purchase is not a total loss. We may pro-
tect ourselves by the condition that if not satisfactory, the
goods may be returned, or they may be paid for after having
been examined and found as represented. We cannot protect
ourselves against bad money in the same way. We could
not pay out money with the understanding that if it depreci-
ated we would take it back and give an equivalent for it. It
must be known to be good when taken and the transaction
must end with the acceptance of it.
303 Money is different, therefore, from all other things
we use. We take it in exchange for everything, and for the
sole purpose of exchanging it again for everything. We do
not do thus with anything else. The things we take in
exchange for money are for consumption. Money is, then,
the one universal thing which we exchange for everything
and which we exchange everything for.
303 For these reasons and for others given elsewhere (46-
51) it is the most important as well as one of the most uni-
versal instruments that we use. There is more at stake on
this one question of money; it more deeply affects human
welfare than any other. Policies of insurance, title deeds to
property, promissory notes of individuals, shares of stock in
corporations, like good or bad articles of merchandise, affect
only a few individuals. Poor bread or bad water in any city
does not affect (except remotely) the people who do not live
there. We do not get our bread and our water from one par-
ticular source. But with money it is quite different. It must
necessarily come from one central institution, because it must
T40
THE NEW PHILOSOPHY OF MONEY
be uniform and unquestionably reliable so that we can take it
from any one who offers it, without danger of loss.
304 We are, therefore, all interested in its being reliable,
and to the extent that it can be made safe, we all want plenty
of it. On these two points there is no conflict of interest. It
is absolutely universal, and, therefore, if there is any one
enterprise that above all others should be conducted on the
co-operative or mutual plan, it is the supply of money.
305 The Greenbacker, and the governmentalist and So-
cialists generally, advocate government control and issue of
money, because that is the way co-operation develops itself
in their mind (143, 144)- The New Philosophy of Money
teaches that co-operation can be carried on without govern-
ment, and that there is no hope that government will initiate
it. That the Mutual Credit System alone can put an end to
interests that conflict with the general good; that they are an
ever jDresent element, a concomitant and inseparable part of
government; the very object for which it exists; the sole
purpose for which it was called into being and for which it
is perpetuated (134, 143)- That the Mutual Credit System
will reduce interest to cost (95, 97, 316), and will unite in
one association all women and men of business or enterprise
of whatever nature, and will therefore transcend in its mag-
nitude and importance government itself; besides, being on
a business instead of a political basis, it will necessarily be
conducted more economically and more honestly.*
*"As a comparison of the cheapness with which the government
"postal monopoly," as Bro. Cunningham calls it, serves the dear peo-
ple, we invite attention to its money order service, as compared with
the charges and accommodations given by the express. An express
money order, which costs the same as a postal money order, is good
at any express office in the United States, with which the company
connects, merely requiring to be properly endorsed by the payee.
Thus it can be used several times in transmitting small sums, while
the postal order is only good on the office it is drawn for. The con-
sequence is that most business people patronize the express in pref-
erence to the United States postal service. There are many ways in
which the regulations of the government service is such as to throw
most of the business to the express companies. The United States
postal service is, as most people are aware, much inferior to that of
THE MUTUAL CREDIT SYSTEM I4I
306 It will be the carrying out the will of the people
instead of that of the money joower, by the only means that
is practicable; for government is not only the most difficult
means to employ; it is not only the hardest thing to capture
in the interest of the people, but it can be recaptured by the
money power. It is perpetuating a warfare with victory
ever on the side of the unscrupulous; a resort to methods that
are essentially reprehensible because they rest on force and
not on consent.
307 The use of force to establish justifies its use to over-
throw, and human ivclfare is too precious to depend for its
realization and perpetuity on the methods of brutes and sav-
ages. The best system of money, when fully comprehended,
will be established, not by government, b^^t in spite of it.
That tool of the money power will be used, as it ever has,
not to promote the well-being of the people, but in the inter-
est of a class.
308 The object of money being to facilitate, to expedite,
and make it easy to exchange the products of labor, it follows
that the best system of money is that one which wdll supply
the money that wdl the most effectually accomplish this end.
Now, if we were all wise as well as strictly honest, and no
one would issue a promise to pay in excess of his ability to
meet it, as it would be a great advantage to anyone to issue his
promise to pay and obtain what he wanted by that means; and
as it would also be as great an advantage to the party selling
the goods, to take the promise to pay and use it as cash instead
of keeping an account, which involves very much more labor
and which he could not use as cash, there would be a suffi-
cient volume of these promises to pay circulating as money,
to render book credits unnecessary. Everything bought
could be paid for, cash on delivery, which, to all except
the private (express) service. The express company delivers its
packages to the person addressed, in the country towns as well as
the cities. Why cannot the government afford to do the same thing
for the same price.'" — Farm Vi'ezi'.
143
THE NEW PHILOSOPHY OF MONEY
money-lenders, is a result most earnestly to be wished for.
309 It is conceded that such a system is not possible — it is
not practicable — but if it would be a good system if it were
practicable, what is there about it that renders it impractic-
able? It certainly will not be denied that the use of money
instead of book accounts is a desirable feature. It is, how-
ever, not practicable by this method. We lack the wisdom
and the honesty to issue our promises to pay within the limits
of our ability to pay. But most people jump to the conclu-
sion that there is no remedy for ignorance and dishonesty
except to wait until people become wise and honest, and
therefore it is a waste of time to look any further in this
direction.
310 This is a mistake. As well might we argue that we
could not do without book accounts until memory was perfect
and nothing was ever forgotten; or that the difficulty of not
seeing well in a poor light could only be overcome by our
vision becoming powerful enough to penetrate the darkness.
311 It is the overcoming of difficulties and avoiding of
evils which exist in the very constitution of things, that
diminish our burdens and adds to our comfort. Why, then,
does it not appeal to the judgment of every individual, that
whoever is able and willing to assure the fulfillment of his
promise to pay by pledging a sufficient amount of security, is
involving no one in any risk ? The lack of wisdom and hon-
esty to issue within limits of ability to pay, is met by a pro-
vision that limits, and the public is relieved from risk.
312 We keep accounts because memory is defective.
Thus we overcome a natural difficulty ; but how much better
would it be to substitute money for book accounts and relieve
ourselves from the labor they entail and the inconvenience of
being without the goods and the money. An argument
against an individual issue of paper promises to pay, even if
all were honest or if they protected holders of these promises
by pledging security, is that when wanted for payment, many
of them would be so far from home that they would not be
iHE MUTUAL CREDIT SYSTEM I43
available. True enough, but this argument is not effective
against the mutual system, as these individual notes do not
circulate at all. Surely the intellect that has invented the
differential calculus; that can foretell eclipses; that has devised
bookkeeping; that can manage a clearing-house, can relieve
us from such provincialism, invent a substitute to take the
place of these notes in the performance of the function of
money, while the notes themselves remain at home in a place
of safety to be delivered up at their maturity for the substi-
tutes that w^ere given in exchange for them. This feature
resolves another difficulty that might be argued by an oppo-
nent; that is, the great variety of notes, and, therefore,
increased opportunities for counterfeiters. The substitutes
can be uniform to any extent that is desirable, and, in fact,
provided at a single institution for the w^hole country.
313 It is claimed that life insurance should be conducted
on the co-operative or mutual plan; that the business of life
insurance, which is to provide for those dependent loved ones
when we pass to the beyond, is of too serious a character to
admit of its being conducted on the ordinary methods of spec-
ulative business, and, for that reason, we especially assign to
it the mutual plan, on the ground that it is safer and we run
less risk. But. our interest in a safe and reliable money is
immeasurably greater than our interest in life insurance. Not
all need to carry insurance, but everyone must use more or
less money. If the argument that the mutual plan is best
and safest for insurance, is sound, why is it not equally so
with regard to money? If voluntary associations cannot be
trusted to issue paper promises to pay in the form of money,
how can they be trusted to issue paper promises to pay in the
form of policies.'' If voluntary associations can be trusted to
issue policies of insurance, they can also be entrusted with the
issue of paper money. What folly to affirm that men cannot
be trusted as business men, but as politicians they can! Does
a bond given to government insure more faithful perform-
ance of duty than one given to a business corporation? So
144 THE NEW PHILOSOPHY OF MONEY
far such has not been the case, of which the records of con-
gress and the history of the government for the last thirty
years afford ample proof.
314 But there is a danger in government control of money
of which the people are little aware. While ample resources
can be used to advantage in case of foreign invasion, which
generally serves the pretext for their accumulation in the
hands of government, they are ever a menace to the cause of
justice. The hundreds of millions in coin piled up in the
treasury are equally available against the people as they are
against their enemies.* Had the Mutual Credit System pre-
vailed, the government would have no such resources ^vith
which to attempt to enforce the unjust pretensions of the
privileged class as seems likely it will. Foreign invasion is
very remote, but in any event, money in the hands of people
who wish to defend themselves, is just as available as it would
be in the hands of the government.
315 Besides these, there are yet other considerations
which we must not overlook. A permanent low and unvar-
ying rate of interest, and a never-failing supply of money are
indispensable to progress and prosperity. These being as-
sured, enterprise can be planned much farther ahead than
when the rate of interest and the supply of money is uncer-
tain. The sjDCCulative nature of "business" will give place to
an effort to excel in perfection and purity of product, the
demand for such increasing as the people become prosperous.
The shoddy and the adulterated will no longer satisfy, and
honesty will, at last, be the best policy. The plan of the
Mutual Credit System is the only one by which credit money
can be substituted for commodity money and supply an un-
limited volume at an unvarying rate that will not exceed cost
(95' 97' 3^^)' ^^ entirely changes the nature of the transac-
* "Army officers are putting themselves to much trouble in devis-
ing means for defending Washington against a hostile fleet. If they
will direct their efforts toward the discovery of some way of protect-
ing the rest of the country against Washington they may accomplish
something useful, a rare exploit for an army officer." — Chicago Times.
THE MUTUAL CREDIT SYSTEM I45
tion called borrowing money. Under the present system, the
borrowing of money is regarded as borrowing capital, because
of the coin basis; the borrower, although he may borrow
paper money, being entitled to coin, which is wealth, while
the paper is but the representative of wealth. This fact is
put forward as the ground for the justification of interest;
that, inasmuch as the borrower uses the capital (wealth) of
another, he should pay for its use, since it enables him to gain
more than he otherwise would. Even Mr. Bennett, who, as
the reader has seen, is one of the most uncompromising foes
of interest, says: "What is really lent is the wealth which
the dollar stands for, and the dollar is used but as a measure
of value" (monetary unit).* Under the Mutual Credit Sys-
tem, as just stated, the nature of the transaction is entirely
changed ; certificates of credit being furnished direct to the
borrower on his security without the intervention of banker
or money-lender. He is by this method relieved from the
necessity of using the capital of another, availing himself of
his own credit issued to him in the form of certificates (144).
316 The expense of issuing these certificates and taking
care of the security, is all the borrower is called upon to pay.
As evidence that this expense would be quite insignificant,
let me quote Mr. A. B. Hepburn, ex-comptroller of the cur-
rency. He says in the North American Review for March,
1893, speaking of "the total cost to the government from all
sources of the national bank system," that "an annual tax of
two-fifths of one per cent upon the circulation would have
defrayed all cost and redeemed all notes of all failed banks."
Not only is this two-fifths of one per cent per annum suffi-
cient to cover all expense of supervising these banks and fur-
nish them with their paper money, but it would also have
been enough to have redeemed all the notes of all the banks
that failed. By adding to this the item of cost of conducting
business, which, according to the commissioners of savings
* The attention of Mr. Bennett and of critics are especially called
to paragraph 33.
146 THE NEW PiriLOSOPIIY OF MONEY
banks of Massachusetts, averages in that State three-tenths of
one per cent per annum, we have seven-tenths of one per
cent as the total cost of furnishing paper money, taking care
of the security and guaranteeing against loss. This data is
the most reliable upon which to forecast the rate the Mutual
Credit Associations will have to charge to cover their
expenses.
317 According to the plan (see prospectus) it is proposed
that the General Clearing-House Association shall supervise
all the local or Mutual Credit Associations, print and furnish
all the certificates of credit, guarantee holders of these certifi-
cates against their depreciating, and insure all property
pledged as security, against loss'by fire or otherwise, I think
that experience will prove that \\ith the exception of the
insurance of the property pledged, all the other items of
expense can be covered with one-half of one per cent, for
failures among the local associations, if there are any, will be
insignificant compared with the failures of national banks.
An average rate of insurance for the whole country, on ordi-
nary risks, all in one association, with no extra labor for col-
lecting than that involved in loaning the certificates of credit,
as it will be included and collected with the charge made for
the loan, would probably not exceed another one-half of one
per cent, except for extra hazardous risks, in which case an
additional charge can be made. The borrowing of money
under the Mutual Credit System, then, with the very best
guarantee against loss, either by depreciation of the certifi-
cates of credit or by destruction of the property by fire or
otherwise would not exceed one per cent per annum.
318 This exposition of the theory upon which interest is
supposed to be justifiable, conclusively proves it to be erron-
eous; and Mr. Bennett's statement, that "what is really lent is
the wealth the dollar stands for," is not necessarily true, but
only so under the present system of money.
CONCLUSION.
319 The readers who have followed closely the philoso-
phy presented in this work, and have carefully weighed the
arguments, can scarcely have failed to realize the inadequacy
of the present method of exchange, with its lack of provision
for a circulating medium; and many of them, if not all, will,
no doubt, agree that the failure to provide this most import-
ant of all instruments is the most conspicuous fact in the study
of economics; for it cannot be claimed that the mediums we
have had up to the present time, have been anything but
makeshifts, the parallel of which, for inconvenience and inad-
equacy for the function assigned it, would not have been tol-
erated in any mechanical enterjDrise since the age of invention
has dawned. And that which will amaze people the most
when we provide a rational system of exchange will be the
enormity of the suffering mankind has endured because of
the absence of so simple a device. We have national hyster-
ics whenever manufacturers of any particular article of neces-
sity form a trust to control the price of that article, and some
of these trusts have caused nearly as much public discussion
as a presidential campaign. But what are any or all of these
monopolies compared with the monopoly of money.? The
exclusive control of one or a dozen articles is of small conse-
quence compared with the control of the medium of ex-
change; yet people generally not only do not complain of the
control of money, but actually think it is necessary.
320 But the failure to form correct conceptions with
regard to money and how it should be supplied is not con-
fined to the masses. "Great financiers," professors, and even
money reformers by scores, fall into errors that would hardly
seem possible to those making a special study of the subject.
148 THE XEW PHILOSOPHY OF MOXEY
I have endeavored to discover and point out those errors. It
is encumbent upon some one to point out those I may have
made, and I am prepared to consider any criticisms. One
thing is certain; the sokition of the money question, popu-
larly speaking, has not yet been reached. The ultimatum
presented by those who have acquired the greatest degree of
popularity, who have attained the most fame as writers on
banking and tlie money question generally, is the alternative
of performing our exchanges through the medium of coin
money, or paper money tliat is "redeemable in coin on de-
mand," bartering (2, Si) one commodity for another, and
continuing the unbusinesslike credit system I have designated
as unsecured credit. As a representative statement present-
ing this view, I call the reader's attention to the concluding
lines of the Westminster Review editorial, "Free Trade in
Banking." "Free trade principles must be applied to bank-
notes. Every bank must be at liberty to issue them accord-
ing to its means and requirements, as men in other business
are left to decide for themselves the amount of credit they
shall seek to obtain; the sole condition 7'egtcired by the gov-
ernment being that they shall fay in coin^ on demand^ the
value of every note''' (323). [Italics mine.] And also the fol-
lowing from the Westminster Reviciv's article, "State
Tampering with Money and Banks," January, 1S5S:
321 "Among unmitigated rogues, mutual trust is impossi-
ble. Among people of absolute integrity, mutual trust would
be unlimited. These are truisms. Given, a nation made up
entirely of liars and thieves, and all trade between its mem-
bers must be carried on either by barter or by a currency of
intrinsic value; nothing in the shape of promises to pay can
pass in place of actual payments; for, by the hypothesis, such
promises being never fulfilled, will not be taken. On the
other hand, given a nation of perfectly honest men — men as
careful of the rights of others as of their own, and nearly all
trade between its members may be carried on by memoranda
of debts and claims, eventually written off against each other
in books of bankers, seeing that, as by the hypothesis, no
man will ever issue more memoranda of debts than his goods
CONXLUSION
149
and his claims will liquidate, his paper will pass current for
whatever it represents, coin will be needed only to furnish a
measure of value and for those small transactions for which it
is physically the most convenient. These we take to be self-
evident truths. From these follows the obvious corrollary,
that, in a nation neither wholly honest nor wholly dishonest,
there may and eventually w^ill be established a mixed cur-
rency partly of intrinsic value and partly of credit value.
The ratio between the quantities of these two kinds of cur-
rency will be determined by a combination of several causes.
322 Supposing that there is no legislative meddling, which
may, of course, disturb the natural balance, it is clear from
what has already been said, that, fundamentally, the propor-
tion of coin to paper will depend upon the average conscien-
tiousness of the people. Daily experience must ever be
teaching each citizen which other citizens he can put confi-
dence in, and which not. Daily experience must also ever be
teaching him how far this confidence may be carried. And
thus, from personal experiment, and from current opinion
which results from the experiments of others, every one must
learn, more or less truly, what credit may safely be given" (329).
323 The first of these two statements imposes a condition
to free trade, which is illogical. Free trade means the aboli-
tion of all restrictions or conditions on the part of govern-
ment. This is conclusive, but I shall refer to it again (326,
330)-
324 The next statement sustains the charge just made
that the professors and popular writers know of no means of
exchange except coin, paper money "redeemable in coin," or
"memoranda of debts and claims eventually written off
against each other in books of bankers."
325 How strange that the idea did not suggest itself to
the writer of the above quotation, or some one of the many
voluminous writers known to the public, that if the payment
of these memoranda of debts and claims at maturity were
guaranteed by a deposit of ample security, they would be
fully equal if not superior, as a circulating medium, to paper
money which is not thus guaranteed, but only promised to
be redeemed in coin on demand.
150 THE NEW PHILOSOPHY OF MONEY
326 It is perfectly evident that the Westminster Review
knows of no means of exchange except these two: "a cur-
rency of intrinsic value" — commodity money — or "memo-
randa of debts and claims" — unsecured credit.* Here its
resources are exhausted; its ingenuity is at an end, and, as if
to prove this, it states the corrolary that naturally follows,
namely, that in a community of honest and dishonest people
there will be a mixed currency, partlj^ of intrinsic value and
partly of credit value, the ratio between these two depending
upon the degree of honesty that prevails. Or, that if all
were perfectly honest, "coin (intrinsic money) will be needed
only to furnish a measure of value," etc. Now, since the
Mutual Credit System will furnish certificates of credit (se-
cured credit in the form of paper money) which are much
more convenient, at less cost than "memoranda of debts and
claims that have to be written off against each other in books
of bankers," or any other form of unsecured credit; and infi-
nitely more so than money of "intrinsic value," and since
communities are actually miade up of the honest and the dis-
honest, why did not the WesttJiinstei' Review advocate the
Mutual Credit System instead of paper money redeemable in
coin? I have shown that the "measure of value" is only a
fetish (161), and even Prof. Walker refers to it as the "so-
called measure of value," so that the pretext that we need
gold as money in order to have a measure of value is invalid.
The fact is, it speaks to the best of its knowledge. Like all
the rest of us, it is still ignorant. But what I blame it for is,
that while it expresses as incomprehensible the ignorance and
blunders of those who originated and still perpetuate the
existing system, it fails to realize that "free trade in banking"
* Paper money in excess of coin actually on deposit for its redemp-
tion, is unsecured credit, and may be classed under the head of mem-
oranda of debts and claims. Paper money for which coin to the full
amount is actually held to redeem it with, ma}^ in this case, be
classed as "currency of intrinsic value," since it is not an addition
thereto, but circulates exclusively in place of such currency. Hence
the above statement is, strictly speaking, correct (9).
CONCLUSION 151
with the condition that all paper money shall be redeemable
on demand, in coin, is not free trach in bankifig- ; that it
would perpetuate the reign of the "gold bugs," — the money
power would rule just the same as it does now; that gold and
silver being limited by nature, can be controlled and cornered,
and that those who 7ni/st have it would still be at the mercy
of those who have it/ that while it realizes and so skilfully
points out the evils we endure and the cause that produced
them, it fails to provide a remedy; and when a remedy is
offered it fails to accept it or point out wherein it is defective.
In 1SS9, before I published "Citizens' Money," seeing that it
advocated less restriction in the supply of money and attrib-
uted depression in trade to the lack of freedom in exchange,
I mailed to the editor of that journal a type-written copy.
About a year after, it was returned to me with a polite note
stating that he could not use it. What can the Westminster
Review say now about those whom it accuses of what itself
is guilty — its infatuation about the need of a coin basis, while
its own statements prove the absurdity of its position?
Speaking of the demonetization of silver in England, it says:
"The infatuation of this step it is impossible to appreciate or
account for. Continually the scarcity of money had pro-
duced the same disastrous results. There was a panic from
this cause in 1793 and it could only be relieved by the issue of
£5,000,000 in Exchequer Bills; and in 181 1 a similar crisis
occurred which was relieved by the same means." A money
panic is relieved and comes to an end by the British treasury
issuing bills to private parties on liens on their fixed property.
Does it not follow that if merchants, manufacturers and other
business men form an association whose sole object shall be
to furnish a medium of exchange by the issue of bills, not
only on fixed property (except vacant land) but also on ware-
house receipts, and which bills all the members of the associ-
ation bind themselves to take in payment of debt at their face
value, and in exchange for commodities without discrimina-
tion in prices, that such a system would put an end to a
152 THE NEW PHILOSOPHY OF MOXEY
money panic equally as well, and that if all money was there-
after furnished by this means, no subsequent panic could pos-
sibly occur?
337 There is no foundation whatever for the notion that
paper money issued by government is more reliable than by
the plan I propose. The Populists will probably make use
of this item about the relief afforded by the Exchequer issu-
ing paper money to private parties (if they have not already
done so), but to do it for temporary relief, and to make a
permanent thing of it, are quite different. In the case of
temporary issue, the speculators have not time to get in their
work; besides the amount furnished was a bagatelle com-
pared with the whole amount that would be issued under the
subtreasury proposition. Then, again, the Exchequer Bills
%vere issued at headquarters only, whereas the subtreasury
scheme contemplates the issue of government paper money
in every city, thus multiplying the opportunities for corrup-
tion as the number of cities in the United States are to one.
Will it be pretended that a comparatively few individuals,
and these politicians, calling themselves the govei-nment^
assuming control of the issue of money, themselves to deter-
mine on what, and to attempt to force it into circulation by
making it legal tender, would be a more satisfactory method
and afford greater responsibility than an organization estab-
lished upon a commercial basis, with its local associations in
every city and a general clearing-house for all of them; its
money not legal tender, but circulating on its merits, the
whole membership having bound themselves to accept it?
328 "What has got into people in the United States within
the last few years, that in proportion as the government be-
comes corrupt, disregards their rights and proves that its
control of money is incompatible with progress or prosperity
— they insist upon its offices, its intermeddling? But more
of this hereafter.
329 Referring again to the Westiiiinster Review : The
incongruity of the disjointed, unsecured credit system of today
CONCLUSION
153
could not be better Illustrated than it has been by this journal.
"Daily experience must ever be teaching each citizen which
other citizens he can put confidence in, and which not.
Daily experience must also ever be teaching him how far
this confidence may be carried. And thus, from personal
experiment and from current opinion which results from the
experiments of others, every one must learn, more or less
truly, what credit may safely be given." Alas for human
happiness! Where we looked for wisdom, we found foolish-
ness, where we expected honey, we were given wormwood
and gall. Why must we be forever learning, forever exper-
imenting to reach the unattainable? The teaching we get
from daily experience is, that confidence cannot with safety
be given under the corrupting system the money power has
fastened upon us. Every one has learned more or less sor-
rowfully that the only credit that can with safety be given is
secured credit (83); and why should we have any other?
The peurility of this reasoning is simply amazing. We are
offered the consolation that during a lifetime we may find
some by whom our confidence was not betrayed or who were
successful and could afford to be honest; but how about the
dishonest, the wrecks, the victims of monopoly, of sharpers,
and those who are thrown out of employment, from whom
this proposition offers no deliverance?
330 All these evils are the effects of the prevailing unse-
cured credit system, which, in turn, is the result of the mo-
nopoly of money. Instead of removing the monopoly by
dissociating government from supplying or regulating money
and substituting for the present system a rational system of
secured credit, it is proposed to extend unsecured credit by the
unrestricted issue of paper money purporting to be redeema-
ble in coin on demand; the government to see that this con-
dition is complied with. On the first page of its article,
"Free Trade in Banking, it defines free trade: "The prin-
ciple is right — perfect freedom of exchange between nations
and individuals." And in the face of this definition it pro-
154 '^^^ NEW PHILOSOPHY OF MONEY
poses the issue of paper money, government to see that those
who issue it redeem it in coin whenever it is demanded.
This restriction limits freedom, and is therefore not "perfect
freedom." But the Review has got into a dilemma on an-
other point also, from which it will be equally hard to extri-
cate itself. It is evident that we could not have any more
paper than there is coin under the method proposed, without
the issuers taking the chances of being called upon to furnish
something they do not possess. The following is its own
language: "The supjDly of gold and silver has long been
inadequate to the requirements of commerce. Even with all
the forms of paper currency, still the gold produced has been
insufficient for the growing wants of the world," We are
told that there is not enough gold and silver to supply a suf-
ficient volume of money, and that the way to have the defi-
ciency supplied is to leave each banker to determine for him-
self to what extent he is willing to take the chances of being
caught with less coin than he has agreed to pay on demand.
That they must resort to this overissue to avoid a scarcity of
money, needs no proof. That they would all take chances
no one will for a moment doubt. For an individual or sev-
eral of them to be able to loan their unsecured credit to
responsible parties on good security, and get good pay for
doing so, is too much of a temptation to be resisted. If this
paper is taken by everybody and no one demands coin, or not
enough to require interference on the part of government,
business will go on with a rush for a time, but the inevitable
result would be an enormous inflation of paper money.
The indiffei'ence on the part of the people to demand
coin would encourage an ever-increasing overissue, as the
drawing of interest on one's promise to pay is so allur-
ing; so that a final crash would be certain and unavoid-
able. There would be a run on most of the banks and
the great majority of them would go under. If, on the
other hand, the people were constantly to demand coin,
very little increase in the volume of money would take place
CONCLUSION 155
and we should continue to suffer from a dearth of money.
331 Reduced to its last analysis, then, the West?}iinstcr
Review^ s proposition affords us the alternatives: paralysis of
business from lack of money, continued poverty, crime and
revolution; or inflation, wildcat banking, wild speculation,
a general crash, blasted hopes, pandemonium, poverty, crime,
and, finally, also revolution. But if bankers may issue j^aper
money redeemable in coin, why may not merchants, manu-
facturers and others, issue paper money redeemable in other
products? The bills issued by bankers are the banker's
credit, and they are unsecured credit. If bankers may use
their credit wherever they can, why may not everyone else
do the same? Why do not people see that if this right were
recognized and government ceased entirely from meddling in
the matter, the very importance of the question would call
forth the best talent to devise a system that would be satis-
factory. If the Mutual Credit System can be improved upon,
no one could prevent it and all would be benefited by the
improvement. Free trade in banking means that every one
has the right to issue his own money and pass it out into cir-
culation as best he can. If this right (and it is but one's
right to his credit) were suddenly demanded by the majority,
and all restrictions were wiped off the statute books, and peo-
ple commenced offering their paper money, the boards of
trade m every city would at once call meetings to devise
means for providing a reliable and uniform medium of ex-
change. All business men and women would be aroused to a
profound and exhaustive discussion of the money question.
All sides would then get a fair hearing; the best system
would naturally come to the surface, and the fittest would
survive. If we did not get a perfect system at first improve-
ments would be added, because, as stated elsewhere (301-304)
it is the one thing in which all producers and exchangers of
products are mutually interested ; there is no conflict of inter-
est whatever; the only interest antagonized would be the
money-lenders'. The establishment of the best system is as
1 56 THE NEW PHILOSOPHY OF MONEY
certain, therefore, as the continuance of the human race.*
332 But there is another point we must not overlook in
the issue of bills by bankers as proposed by the Westminster
Review. These bankers would either hold coin to the
amount of bills issued or they would not. If they did, how
would we avoid scarcity of money? But, as, of course, they
would not, it follows that the bills they issue are their unse-
cured credit. How inconceivably stupid! All those who
have good security, instead of forming into a solid financial
institution to issue bills against the security they actually pos-
sess, by a method that would be safe and satisfactory to every-
body, and which could not possibly be manipulated or entail
loss upon any one, are coerced into helping the banker draw
interest on what he does not possess. In other w^ords, instead
of each using his own individual secured credit at one per
cent or less, he has to pay from 6 to 100 per cent for the
unsecured credit of some one else. Thus the banker lives on
the interest on what he owes, and the public takes the chances
of his paying his debts. We may laugh at the absurdity, but
it is precisely what we have been doing since the invention of
paper money. The money-lenders have deluded the people
into believing in the "standard of value" fake, and have thus
controlled the enormous advantage of paper money in their
own interest; whereas, if paper money had been used in the
interest of the borrower since the date of its invention, we
should not now be mourning poverty, corruption, vice and
crime. The policeman's club would be a museum curiosity,
and the gatling gun never would have been invented. There
never would have been any call for it. There are other crit-
icisms that might be fairly made of the Westminster Re-
view'' s article; but the one purpose for which it was repro-
* At the recent annual meeting of the American Association for
the Advancement of Science, vice-president Farquhar, in his address
in the section of economic science and statistics, upon a State mone-
tary unit, favored the abandonment of attempts to establish a legal
tender by legislation, and the leaving of the question to settle itself.
— Pojiular Science Mo7ithly, October, iSgj.
CONCLUSION 157
duced, namely, to show in an authentic manner a history of
money panics, and the effects of money monopoly — the acts
of government — in England, has been accomplished. My
criticisms are made with a view of pointing out the errors of
the old and proving the correctness of the new philosophy of
money.
333 As a specimen of tlie same kind of reasoning and of
the absence of a real appreciation of what is needed, I will
now present a statement from another source — an extract
from a recent pamphlet, entitled "Bimetallism," by Prof.
Francis A. Walker, author of "Money," "Political Econ-
omy," and several other works; superintendent of the
United States Census of 18S0, and president of the Massa-
chusetts Institute of Technology. "My subject is Bimet-
allism. It is not to be disguised that there is, on the part of
many public-spirited citizens here at the east, a certain indis-
position to consider this subject at the present time, a shrink-
ing from the questions it involves. The reasons for this are
not far to seek. In the first place, many, in opposing the
free coinage of silver and working for the repeal of the pur-
chase clauses of the Sherman Act, have thrown themselves
naturally, though by no means logically, into an attitude of
antagonism towards silver, which is not in conformity with
the traditions of the American people, and which they would
not have taken but for the severe struggle of the last three
years, and especially of the past summer. In the second
place, people are tired and worn out with the still recent
contest over free coinage and the purchase of silver bullion,
^and want a rest from the subject. This mental attitude,
again, is natural enough, but it is, nevertheless wrong. JVo
question is ever settled u?itil it is settled right. The re-
peal of the purchase clauses of the Sherman Act settled
nothing. It but opened the way for a proper treatment of
the financial problem. That problem must be grafplcd
ivith until it is solved. There is neither statesmanship nor
158 THE NEW PHILOSOPHY OF MONEY
good citizenship in seeking to evade or procrastinate the issue
it jDresents.
334 "Another cause which helps to produce a certain in-
disposition to consider the silver question is found in the
apprehension of many persons well inclined towards bimet-
allism, that to raise this issue will excite our fellow-citizens
at the south and west and increase their urgency for free
coinage. This view is held in good faith, but I must regard
it as wholly mistaken. Our southern and western friends
have got hold of a half truth, or rather a half truth has got
hold of them, and has produced among them something very
like a fanaticism dangerous to the republic. The half of the
truth regarding money which actuates the south and west is
that a diminishing money supply constitutes a great evil.
The way in which the gold monometallists seek to meet this
is by opposing to it a half truth of their own, namely, that
an inflated, depreciated and rapidly fluctuating money is a
fruitful source of social and industrial mischief. But a half
truth which excites to fanaticism has never yet been success-
fully opposed by another half truth appealing to conserva-
tism. The only way to meet the dangerous demands from
the west and south, is by telling- ajtd tirging the zvhole
trtith^ which in this matter is found in bimetallism — bimet-
allism on a broad, international basis, which would both
secure the desired stability of the so-called standard of value
and prevent the incontestable evils of a diminishing money
supply." [The italics are mine.]
335 Mr. Walker's remedy for the scarcity of money is
international bimetallism. That is to say, he believes in co-
operating with other nations with a view of bringing silver
coin Into more general use, so as to have more money with-
out depreciation. Of course the Inevitable corrolary follows,
even if it were for a moment conceded to be a remedy, that
If other nations will not co-operate, we have no alter-
native but to go on with the limited volume of money
that periodically paralyzes production and exchange.
CONCLUSION 159
To what a pass have we come! It is not Nature that
has placed obstacles in the way of continued production and
exchange, but man's cupidity on the one hand and his igno-
rance on the other. Nature is always ready to serve us if
we only adopt her methods. But in matters of exchange we
proceed in open violation of her teachings, as we learn from
the records of the past and from observation. We make an
arbitrary, artificial regulation that is impossible to be com-
plied with. The use of gold and silver as media of exchange
is not a condition imposed by Nature. It is a superstition
that dominates men, that such media is necessary. They de-
clare that these metals must be the basis of exchange, and
persist in perpetuating the absurdity, although every money
panic is traced to this as the cause. There is not enough;
and if a sufficient amount were found to give us plenty of
money at present weight and value of coin, it would not
afford us relief, because Nature's methods — supply and de-
mand—cannot be set aside, and the purchasing power of the
coin would diminish precisely in proportion to the increase
in the supply. This cannot be denied either by the mono-
metallists or the bimetallists, for it is one of their cardinal
doctrines that "increase in the volume of money reduces its
purchasing power." They nevertheless persist, and until
we emancipate ourselves from their control of money we
must endure the penalty. In the whole domain of human
activities, inventive genius is prompt with needed innova-
tions, but conservatism stands guard on the highways of
exchange, lest iconoclastic reform should demolish its golden
calf.
Bo7ii(m magis careiido quam frtiejtdo^ cernitur .
336 Man never is^ but always to be blessed. If the
rocks would only cease to yield the "precious" metals, this
might be changed. We should then have neither monomet-
allists nor bimetallists, and rational views on the subjects of
money and value might be confidently looked for, even
among the professors and "great financiers." As the "stand-
l6o THE NEW PHILOSOPHY OF MONEY
ard of value" we are said to have could not then exist, they
might "catch on" to the fact that the monetary unit, and not
a measure or standard, is the means by which we compre-
hend and express relative value; that when we are told the
value of this object is five dollars, and of that, three dollars,
and of another, two dollars, we have no difficulty in forming
a clear conception of what it is intended to convey, of the
relative value of these different articles. And, of course, the
same is true of the fractions of the monetary unit — cents — as
of the unit itself. Value being only a relation, if all parties
express value by means of the same term as the monetary
unit, there cannot possibly be any misunderstanding. This
term — the monetary unit — is but an abstraction. Value be-
ing established by supply and demand, we can, by the use of
this unit, from its smallest fraction to any multiple of the
unit itself, express value to any amount. And I most em-
phatically declare, without fear of successful refutation, that
it never has been anything else but an abstraction since the
invention of paper money, just the same as it undoubtedly is
In bookkeeping "money of account," so-called. That mono-
metallism and bimetallism, instead of helping to convey a
definite idea of value by establishing a "measure" or "stand-
ard" of value, are but a disturbing element in value in ex-
change.* That previous to the invention of paper money,
all exchanges were in the nature of barter. The people
exchanged commodities for commodity money, which is an
exchange of values, and is therefore barter (Si, ^S). We
use the term, dollar, because it is more convenient than it
would be to express value in the smallest fraction; in which
case we should need no term, but simply say one, or any
multiple of one. Thus one hundred would be what we now
mean when we say one dollar; 500, five dollars; 5,000, fifty
dollars; 5,678, fifty-six dollars and seventy-eight cents and so
on. The prevailing method of conveying from one mind to
* See foot-note, page 94.
CONCLUSION
i6i
another the vahie of objects being satisfactory, we effect ex-
changes of values by one of two methods, barter or credit.
Barter is the exchange of one object of value for another
object of value. To exchange for coin, therefore, is a spe-
cies of barter. To exchange for paper money is a credit
transaction, because paper money is a form of credit. It is
distinguished from ordinary credit which is not a settlement
on the spot, by designating it secured credit (82, 84). If we
express the value of all objects and divide up secured credit
and issue it in the form of paper money, using the same de-
nominator or monetary unit in both cases, any given amount
of either must be equivalent to the same amount of the other;
and if this secured credit is redeemed at its face value in any
commodity at its market value, it can be transferred from
one to another with perfect safety. We only need, then, to
provide for its redemption to make its use perfectly safe.
We have no need, therefore, of a coin made of a definite
quantity of some special metal to inform us how much is a
dollar's worth, for we can ascertain that fact by consulting a
price list; the market value of a commodity will always give
us the exact amount that can be had for a dollar. The
amount of gold a paper dollar (that is, secured credit) will
buy, is a dollar's worth of gold, and so with all other articles
or commodities. The essential item, with the exception of
precautions against counterfeiting, is the provision, when the
secured credit is granted, that its redemption at its face value
and at the time agreed upon, be imperative and unavoidable.
Under such a system there can be no disturbing element in
value, such as gold is and always has been.
337 The advantage that the Mutual Credit System pos-
sesses in the matter of redemption of secured credit is that
parties can redeem the amount of secured credit that has be-
come due, by exchanging anything they can for it, instead of
being compelled to furnish a definite quantity of some special
commodity, as is the case when paper money is issued on
gold and the gold is demanded. What constitutes a dollar's
1 62 THE NEW PHILOSOPHY OF MONET
worth, then, in any commodity, is the amount of that com-
modity that is offered in exchange for a dollar of secured
credit. What constitutes a "dollar" of secured credit is the
certificate of credit of that denomination that is issued by
the Mutual Credit Association, and which, therefore, the
party who obtained it from that association has pledged
himself to redeem with one dollar's worth of market value,
and has guaranteed that he will fulfil that pledge by deposit-
ing a sufiicient amount of security. So with all certificates
of credit, of whatever denomination.
33S But to return again to the subject of Prof. Walker's
pamphlet, w^e must confess that he says some good things.
For instance: "No question is ever settled until it is settled
right." . . "That [financial] problem must be grappled
with until it is solved. There is neither statesmanship nor
good citizenship in seeking to evade or procrastinate the issue
it presents." These statements express the right sentiment,
and it is to be hoped that he will neither evade nor procrasti-
nate the issue herein brought to his notice. Why the fact
that a diminishing money supply constitutes a great evil, and
that an inflated, depreciated and rapidly fluctuating money is
a fruitful source of social and industrial mischief, should be
called "half truths," is not clear. They are each of them
whole truths of the most vital importance. But does Prof.
Walker comprehend the real issue this financial problem pre-
sents? It would seem that "public-spirited citizens at the
east," as elsewhere, who "shrink from the question it in-
volves," have a keener insight into the "issue it involves" than
has Prof. Walker; and that he attributes their indisposition to
a wrong cause. The real issue. Prof. Walker, is the wresting
from government its usurped power of the control and reg-
ulation of the supply of money. The speculating capitalist
sees this sooner than the professors do. To them (the capi-
talists) this is the "fanaticism that is dangerous to the repub-
lic," — the republic that has built them up and crushed the
toiler. But a republic is only an institution. Why does
CONCLUSION 163
Prof. Walker manifest so much concern about an institution?
Are institutions more sacred, — are they still, at this late day
paramount to the liberty and prosperity of the people?
Take away the people's credit, give it into the hands of a
few to be farmed out at their discretion, and your republic,
or whatever vou call your political organization, is doomed.
And it is right that it should be. Man and his well-being is
the subject to consider, — not institutions. They are ever
changing and necessarily must change as man progresses.
He must change his institutions to suit his wants, or cease to
progress in order to remain in conformity with his institu-
tions. Which shall it be?
339 Discussing the effect of law upon value, Prof.
Walker says: "As regards bimetallism, then, the question
simply is: Can government set in motion any economic
force which will affect the relative values of gold and silver?
I answer, yes, incontestably; and that force is one of enor-
mous scope and reach. By declaring the two metals indiff-
erently legal tender in the payment of debts, at a certain
ratio, it can at once and powerfully influence the demand for
one and the other of the two metals. This was exactly what
France did by the law of 1S03, which established the bime-
tallic system. By that law France declared that an ounce of
gold, in coined money, should have precisely the same power
to pay debts as that possessed by fifteen and one-half ounces
of silver, in coined money. The operation of this principle
was simple, instantaneous, automatic and of overwhelming
force." Evidently Prof. Walker is not an evolutionist, or he
would not trammel progress with government supervision
and dictation. If there never had been government control
of money, there would never have been a money panic.
The inventive ingenuity of man would never have tolerated
a scarcity of money if superstition that government must
control money had not dominated him. Scarcity of money
is the effect of law. Men have more respect for law than
for their rights. Otherwise they would not tolerate laws
164 THE NEW PHILOSOPHY OF MONEY
that interfere with their rights. The class that own all the
gold and silver coin, the money-lenders — and who are always
the ruling class — procure the enactment of laws compelling
the use of coin as money, the legal tender clause being their
trump card. They make us use their coin, and the tribute
they levy on us for its use is more than the net increase of
wealth (121). Of course they do not take more than the net
increase. It would be difficult for them to get more than
there is, but they demand all that, and their watch-dog, that
the people have elected to govern, see that they get it. Gold
monometallism means that those who own the gold coin
want a monopoly of this lucrative business. Bimetallism
means that those interested in silver want a share of the
spoils. The people will have to repudiate both or abandon
all hope of liberty. Prof. Walker is wrong. Government
can set in motion a force, but it is not an economic force; it
is the effect of arbitrary interference with economic force.
All interference with natural and free exchange will affect
relative values, but by what right government may thus
interfere with demand and supply he does not say. That
governments can call into play, in monetary affairs, a force
of "enormous scope and reach," let the following extract
from the Westminster Review testify.
340 "Lord Ashburton, one of its [the Bank of England]
prime champions, said: 'Our monetary laws put it in the
power of a few shrewd capitalists so to contract the supply
of gold as to embarrass the bank and nearly ruin the nation.'
[They have done the same in this country and have com-
pletely ruined the "nation." — Author.] Lord Overstone,
another advocate of the system, said: 'Against the actual
exhaustion of its treasures, through foreign exchange, the
bank has the power of protecting itself. But to do this, she
must produce a pressure upon the money market, ruinous for
its suddenness and severity. She must save herself by the
ruin of all around her'." Without extending our inquiry
further, it has been clearly demonstrated that the two nations
CONCLUSION 165
which boast of being the foremost in civilization, — the
United States and Great Britain — both, by the monopoliza-
tion of the medium of exchange have instituted and perpetu-
ated poverty, and, consequently, all its concomitant evils, —
misery, immorality and crime. The amount of mental and
physical torture thus inflicted by government, we shall never
know. Instead, therefore, of government meriting our ad-
miration and respect, as the votaries of authority and force
claim it should, after a thorough examination of the subject
it calls forth a most profound, solemn and spontaneous exe-
cration.
341 Does the reader want more evidence? He shall have
it, and from this same Francis Amasa Walker. "Look at
the financial and industrial history of the past few years!
Everywhere the stockholder is giving way to the bondholder;
everywhere we hear of receiverships; everywhere the mort-
gagee is coming into possession; everywhere the weight of
the dead hand is felt continually increasing." That Gen.
Francis Amasa Walker is innocent of any knowledge of the
crime and usurpation of government in controlling and lim-
iting the supply of money is proved by another statement
he makes: "There will be panics, crises and hard times
under any system." Now, bear in mind that this statement
comes from a man on whom the degree of A. M. was con-
ferred by Amherst College, in 1S63, and by Yale College in
1873. L^ter, these same institutions honored him "with the
Ph. D. and L. L. D.; Harvard in 1SS3, Columbia in 18S7,
and St. Andrew's, Scotland, in 18S8. He was United States
Commissioner to the International Monetary Conference in
Paris, in 1878, and was elected the same year to the National
Academy of Sciences. Is president of the American Statis-
tical Society and of the American Economic Association, and
also an honorary fellow of the Royal Statistical Society of
London. I m.ean no disrespect to this "honorary fellow";
on the contrary, I wish to show that he is no worse than
other college-bred men whose early training is a process of
l66 THE NEW PHILOSOPHY OF MONEY
literary cramming instead of developing individuality and
independence of thought, by which means evolution of right
and the triumph of justice would come in their natural order.
But, instead, error holds the fort against fact, dogma wields
a club, reason is prostrate and brutal conflict seems inevitable.
France did not solve the economic question by the establish-
ment of the bimetallic system in 1S03, and which lasted
about seventy years; it having been abandoned in 1S74.
Neither does Mr. Walker expect it would if reestablished,
for he says: "There will be panics and hard times under
any system." What, then, have we to hope for from the
bimetallic system ? Mr. Bennett has demonstrated that inter-
est is impossible. I have shown that it can be abolished.
Mr. Walker ignores the issue. In 18S8 I mailed him a type-
written copy of my essay, "Citizens' Money." Later, I
received a note from him, stating that our views on the issue
of paper money were so far apart that it was useless to dis-
cuss it. Mr. Walker mourns over the financial and indus-
trial history of the past few years, and offers only a palliative
that is impracticable and announces a remedy impossible.
Yet the system herein proposed, the very one he would not
condescend to discuss, is a practicable and effectual remedy
for all currency evils, as time will prove.
343 Another professor whom I am called upon to criti-
cize is William Yi. Folwell, of the University of Minnesota,
who also refused to discuss the merits of the Mutual Credit
System. This gentleman has quite a reputation in the north-
west as a political economist; was at one time president of
the University. I called on him soon after I commenced
my projDaganda work in this vicinity, had a pleasant talk
with him and presented him with copies of my two pamph-
lets, with the understanding that he would give me a written
expression of his opinion in regard to the new money system
they proposed. About six months passed, during which
time I did not hear from him. I then called on him, and
also once since then, but I could get nothing definite or satis-
CONCLUSION 167
factory from him; his excuse being that he had been too
busy with his duties, but he promised each time to give the
matter his attention as soon as circumstances would permit.
About the ist of March, 1894, I wrote him a note inviting
him to address the Financial Club on the subject of the
Mutual Credit System. The following is his reply:
Minneapolis, Minn., March S, 1S94.
My Dear Sir:
Your favor has remained unanswered because I have
been busied with my college examinations and was out of
town over Sunday.
I am obliged to decline your polite invitation to address
the Financial Club on the subject named, because I cannot
now take time from my duties to make the necessary invest-
igation.
I must confess that I am strongly prejudiced in favor of
hard money, chiefly because it accomplishes instant liquida-
tion and saves account keeping. For this reason, alone, I
am of opinion that for an indefinite time, civilized men will
use it as an instrument of exchange.
Very truly yours,
William W. Folwell.
343 By "hard money," of course the professor means
coin. He confesses he is "strongly prejudiced in favor of
hard money, chiefly because it accomplishes instant liquida-
tion and saves account keeping." Now, the facts are, that
while it is true that hard money accomplishes instant liquid-
ation in the individual cases in which it is used, it is also true
that all business transactions cannot be thus liquidated with
hard money, because there is not enough of it for that pur-
pose, and, in the very nature of things, there never can be
(335); and it is for this reason that the Mutual Credit Sys-
tem was devised and is offered as a substitute, because it will
facilitate the accomplishment of instant liquidation in all bus-
hiess transactions. It is not true, therefore, that, as a sys-
tem, hard money accomplishes instant liquidation and saves
account keeping; for it is the hard money system that com-
l6S THE NEW PHILOSOPHY OF MONEY
pels a resort to account keeping- and other forms of unse-
cured credit, and from which there is no relief except by the
adoption of the Mutual Credit System.
344 In the light of these facts, which have been amply
sustained in this volume, what is the position of Prof. Fol-
well? His position is that of one who is ignorant and preju-
diced on the subject; the subject being the very one for
which he holds a professorship and about which he presumes
to instruct the youths who attend the University. He is
called upon and it is pointed out to him that he is teaching
that which is not true, and is furnished with printed matter
that claims to prove this position. He is respectfully invited
to express his opinion and is afforded an opportunity to lec-
ture on the subject but declines to do so. He is next included
in a general challenge to meet the writer in a public debate;
but there is no response. Evidently, the question whether
he is teaching correct ideas or not, is of little consequence to
him. If it is error, it is at least respectable and venerable,
and he has plenty of company, since the professors in all the
colleges are teaching the same error.
345 Let me now call the reader's attention to a few pop-
ular fallacies we have not heretofore considered. One of
these fallacies is the popular notion that as gold and also sil-
ver coin is shipped abroad to settle balances due other na-
tions, that we actually settle such balances with money just
as banks settle balances through the clearing-houses with
money. This notion is erroneous. The coin shipped is
accepted, not as money, but as commodity.* It is so much
gold or so much silver. The stamp which government im-
presses upon the coin is useful in that it is acceptable proof
of the degree of fineness or purity of the metal it is composed
* Wm. P. St. John, president of the Mercantile Nat. Bank of New
York, in his testimony before the Committe on Currency and Bank-
ing, Said: "Money is all domestic. Our $iogold piece is accounted
21^8 grains of nine-tenths fine gold when bejond the jurisdiction of
the United States." [When of full weight, Mr. St. John should have
added.]
CONCLUSION 169
of, but it does not affect its value; that is determined by
what gold or silver is worth on the market as bullion. We
do not, therefore, pay foreign balances with money at its
face value. We may ship money, but we must send enough
to make up the difference between the face value and the
bullion value of the coin, as the latter is what counts.-}" If
the clearing-house in New York, through which most for-
eign balances are paid, has coin of the particular nation to
which a balance is due, it can ship that coin, and that, of
course, is accepted at its face value because it is the money of
that nation. The same is true when a foreign clearing-
house has a balance to pay the clearing-house in New York
and has coin of this nation. It is, of course, accepted at its
face value. Coin, therefore, when it leaves the country that
coined it, goes as commodity, but when it returns, it returns
as money.
346 It will be seen, then, that coin is not essential to pay
foreign balances, and that the establishment of the Mutual
Credit System will not in the least interfere with such settle-
ments. Foreign debt being always paid in commodities,
what commodity depends on which it is the most profitable
to ship. When the Mutual Credit System has effectually
put an end to manipulations of the money market by specu-
lators, these balances will adjust themselves, mostly, perhaps
entirely, by exchange of products for consumption, instead of
constantly carting gold or silver back and forth between na-
tions, merely for the purpose of settling balances due. Bull-
ion, and also coin, is sometimes shipped out one week and
returned the next. Interest on a few millions, even for a
few days, is considerable of an item, and it is to avoid pay-
ment of interest that this bullion is hurried forward to meet
obligations when they become due; but when the Mutual
■f With this exception, however, that a balance due a nation creates
a demand for its coin, because it can be used as money to pay that
balance, provided it is full weight, and therefore enhances its value
above that of bullion.
l>JO THE NEW PHILOSOPHY OF MONEY
Credit System shall have annihilated that hydra-headed mon-
ster begotten of stupidity and law, there will be greater lati-
tude in the settlement of balances, admitting of their liquida-
tion by the shipment of other commodities, the freight and
insurance on which will not be a useless expense.
347 Another popular fallacy is the prevailing notion that
the existence of the wildcat banks of ante bellum times was
due to lack of government control of banking; and the fact
that they disappeared after the federal government assumed
control is pointed to as proof that the notion is correct. Not
long ago a southern daily paper, discussing the subject, made
the following statement:
348 "The wildcat bank is an institution which springs up
in the absence of good currency, and under such conditions,
if the wildcat did not come, there would be an equivalent in
unsecured book credits. Liberty to organize for the issue of
sound currency is the extinguisher to be placed upon all
schemes for issuing wildcat paper."
349 This is the correct idea. If the people had thor-
oughly understood the money question, they would have
organized to supply themselves with a medium of exchange
that was reliable, and refused to take that which was doubt-
ful, for no one was compelled to take the "money" of the
wildcat banks. Such a course would have effectually exter-
minated them. But money was scarce then as it is now, and
the ignorance of the people afforded an opportunity for un-
principled speculators to float their worthless bills. If there
had been plenty of money as easily obtainable as it will be
under the Mutual Credit System, it would have been impossi-
ble for "wildcat" or "red-dog" "money" to have got into
circulation.
350 But other speculators, just as unprincipled, devised a
scheme to get rid of the wildcat by forning a money trust,
with government to enforce its demands. Thus the central-
ization of the money power under the protection of the gen-
eral government was consummated. Then the promoters of
CONCLUSION 171
this scheme went about boasting that they had rid the
country of wildcats, and established the "best money system
the world has ever seen." It was not to increase the volume
of money that they did this, but to cut off the competition
that such banks made the "regular" bankers. It would be
interesting to know whetiier the people have not lost more
by the failures of national banks than they ever did by the
wildcats. For the four years preceding 1S90, the loss to
depositors by failures of national banks exceeded a million
dollars a year. Recent inquiry at the comptroller's depart-
ment failed to ascertain what the loss has been since then.*
351 Necessity, not government, is the mother of inven-
tion. Ingenuity is the originator of remedies or means of
overcoming difficulties. The quickest and surest way, then,
to have evils removed, is to encourage ingenuity to invent
means of overcoming them. This is the course that should
be pursued instead of allowing government to interfere. It
involves no compulsory contributions for experiment. Those
who wish to experiment, do so at their own expense. Gov-
ernment being in reality but the watch-dog and tool of the
class that has succeeded in getting control, instead of invent-
* Mr. Geo. A. Butler, president of the National Tradesmen's Bank
of New Haven, Connecticut, testified before the Congressional Com-
mittee on Banking and Currency, December 12, 1894, as follows:
As to the guarantee fund, I made some figures embracing twenty-
nine yeais of the national banking system. Take all the national
banks that have failed within that twenty-nine years and if you had
not only made the notes payable out of this guarantee fund, but the
deposits also, that fund would have paid every dollar lost by depos-
itors as well as every dollar of notes, and there would have been
more than two and a half times the amount left in the treasury. In
other words, in the twenty-nine years the banks have paid in to the
government seventy-nine millions as a tax on their circulation, and
if that had been applied to paying the depositors in failed banks as
well as the notes of failed banks, it would have paid every dollar of it
and still left fifty-two millions in the treasury."
Since this tax was collected to cover expenses of supervision and
thus protect (?) ///^ /po/Ze against wildcat banking, and since it did
not make good the losses to depositors of failed national banks, but
held onto the plunder, — the excess over cost of "supervision" — the
government must be regarded as fartkeps criminis with those who
robbed the depositors.
172 THE NEW PHILOSOPHY OF MONEY
ing a remedy for an evil, it devises a scheme in the interest of
that class, labels it a "remedy" and foists it upon the people,
w^ho, supposing government to be the paternalistic institution
they have been led to believe, neglect to analyze its true char-
acter. After time has proved the "remedy" does not give
the results anticipated, they conclude it is because the wrong
men are in office and that others must be put in their place;
but the change, instead of affording relief only intensifies the
evils. A new combination of speculators and politicians is
formed. "Now we have the pop-sure thing!" It looks
plausible on its face, because of the peculiarly illogical way
people have of reasoning,— the result of a false education
which suppresses manhood and independence and cultivates
obedience and respect for authority, instead of for that which
is right. In the meantime, the inventor, the genius who
could afford relief by organizing associations to put in opera-
tion practical remedies, is handicapped by the restrictions the
class in control have instituted in the name of "law and or-
der," "good government" and the like, when, in reality, it is
done to prevent the people from freeing themselves from the
slavery they are in.
352 If the people possessed sufficient manhood and inde-
pendence, the functions of government would constantly be
reduced, and the evils we are contending with would be
overcome in the same proportion. Freedom to devise ways
and means to improve our condition is what we need, and it
can only come in proportion as politicians cease to rule.
353 Among the fallacies, or at least mistaken notions of
reform, is that of regarding the land question as paramount
to the money question. This view is not confined to the
Single Taxers. It is held also by others who are not, but
who would abolish all titles to land except for actual use.
Prominent among the latter is Mr. J, K. Ingalls, who has
written very ably on free land. Of so little importance does
this writer regard the money question, that in his pamphlet.
CONCLUSION 173
"Work and Wealth," treating of industrial emancipation, the
following is all he has to say about it;
354 "I may, in this connection, refer to the instrumental-
ity of money or currency, servicahle in moving crops and the
work of distributing generally. Its importance, however, is
mainly due to the want of mutualism in our distributive sys-
tem and of equity in our methods of exchange.
355 "A charge for the time use of this instrument, in
defiance of all the moralists from Moses and Cato to Ruskin
and Palmer, has been enforced by our laws, because labor
was at the mercy of the few who hold the soil, and because
operations could be made to pay dividends out of the wealth
purchased by the labor of the poor and simple."
356 The Mutual Credit System is the very essence of
mutualism in distribution, and its realization is the only pos-
sible way of introducing equity into our methods of exchange.
It is not the importance of money, therefore, that is "mainly
due to the want of mutualism in our distributive system," but
the unnatural, artificial power that money now possesses (359),
for the certificates of credit or money of the Mutual Credit
Associations, will be the most important factor in our distrib-
utive system. If Mr. Ingalls knows of a plan by which
mutualism and equity can be introduced into our methods of
exchange, and in which money will become an unimportant
factor, he should give it to the public. It is true, as he says,
interest "has been enforced by our laws"; but when he says,
''because labor was at the mercy of those who hold the soil,"
he has ventured into deep water without knowing how to
swim. Did the fact that labor was at the mercy of those
who hold the soil enable the money-lenders to enforce inter-
est by lav^? Suppose the land question settled, and anyone
can occupy or utilize vacant land without having to buy or
pay rent, would they not enforce interest by law just the
same as they do now if the money system remains unchanged?
Will free land abolish interest on capital invested otherwise
than in land? Will it put an end to interest on national,
county, state and municipal debts? Will the money-lender
1 74 THE NEW PHILOSOPHY OF MONEY
loan his money at a less rate of interest because monopoly of
land has come to an end? Mr. Ingalls and those of his
school seem to think that when the abolition of land monop-
oly is attained, very little money will be needed; it will be-
come a drug in the market and thus interest will disappear.
This reasoning is utterly absurd. What will induce people
to abandon the use of money? Nothing but a system of
exchange that will dispense with the use of money. But
such a system would have to be superior in every way and
more economical than any that has been or could be devised
that used money; and until land reformers and Single Tax-
ers, who belittle the importance of money, can show us such
a system, it would be an advantage to the cause they are in-
terested in if they would reconsider their philosophy on the
subject. They should give good reasons for their position or
abandon it.
357 The money question and the land question are sepa-
rate and distinct questions. Either can be settled without the
other, although the settlement of one would greatly facilitate
the settlement of the other, because the struggle to get rid of
the one would naturally open the eyes and the understanding
of the people to the evils of, and the proper remedy for, the
other. If the solution and settlement of either will contrib-
ute to the solution and settlement of the other, the question
to consider first, is, which of the two is the easiest of accom-
plishment? To this, most, if not all philosophical Anarchists
will answer, — "the money question," and these are their rea-
sons: The settlement of the land question requires legisla-
tion, or revolution dispossessing the landlords by force. The
former is out of the question at present. Civil war is immi-
nent, and may happen in the near future; but it is very
undesirable and should be avoided if possible. On the other
hand, the settlement of the money question, as "The New
Philosophy of Money" has demonstrated, is a question of
organizing a few associations upon an equitable and practic-
able basis. The extension of these associations to every city
CONCLUSION 175
in the United States (and, in fact, to all the cities of the
world), which we predict will be very rapid, will settle the
money question without legislation or civil war. We claim,
therefore, that the money question is the easiest to settle, and
if the forces of all whose ultimate aim is the same, namely,
justice and hence the abolition of poverty, were to unite on
this one reform, — the establishment of a rational money sys-
tem — we could utterly destroy the money power in less than
a year. Since it is this money power — this monopoly of
money, — that has corrupted legislation, and always will as
long as it lasts, it is indispensable to destroy it first, that it
may not checkmate, as it ahvays has and always will, any
measure that tends to weaken its influence. Its utter de-
stfuction, therefore, cost what it may, is the only hope for
humaiiity. It is needless to go any further into details to
prove the paramount importance of money reform over
land reform. The influence of the money power will not be
denied. If for no other reason than the removal of this
potential opponent of land reform, money reform and prog-
ress generally, all reformers should unite in common cause
against the common enemy.
358 I cannot refrain from again calling attention, before
closing this chapter, to what impresses me more and more as
being the correct view in regard to the exchangeability of
paper money under a true and equitable system of exchange.
It is that secured credit in the form of certificates of credit,
furnished in accordance with the Mutual Credit System, not
being a commodity nor redeemable in a definite quantity of
any commodity, is not affected by change in the value of any
commodity, nor even by supply and demand as commodities
are. Unlike what takes place under the "standard" money
system, changes in market values or prices will not be influ-
enced by any "money market." The medium of exchange
will have no more effect on values than a pencil with which
one works out a sum in arithmetic affects the result; it
simply enables one to do the sum. In like manner the cer-
176 THE NEW PHILOSOPHY OF MONEY
tificates of credit facilitate transactions, but do not affect
them. Pencils do not affect business transactions any more
than the color of one's hat or necktie; neither will the certi-
ficates of credit of the Mutual Credit System. There never
can be a scarcity of secured credit any more than a scarcity
of pencils. An individual may be minus a pencil, but that is
not a scarcity of pencils. There would be a scarcity of pen-
cils if the individual had money to exchange for one but
could find no one who had any to exchange. So likewise,
secured credit would be scarce if an individual having secur-
ity could not get the certificates of credit; but as long as the
Mutual Credit Associations furnish them to all who can put
up security, he can get them and there is no scarcity of
secured credit. If the foregoing is correct reasoning, then
the certificates of credit will have no power whatever to in-
fluence values any more than a pencil or the color of one's
necktie or hat has now.
359 Today money has a power, not that of facilitating
exchanges, but another superadded thereto (105) and which
comes from restriction, the legal tender enactment and the
fact that it is a commodity and therefore affected by supply
and demand. The term "purchasing power" expresses now,
not the exchangeability of money merely, but it includes this
vestige of authority. As commerce is conducted now, to
buy and sell is to be engaged in a scheme to plunder. Labor
sells itself and money buys it. Politicians sell themselves,
and toilers sell their votes. The tender and loving touch of
woman (or what otherwise would be the magnetic and lov-
ing touch of woman) is bought and sold. All this unholy
commerce will cease under the new system. The medium
of exchange — secured credit in the form of certificates — will
have no "purchasing power"; and we shall not "buy" and
"sell," but exchange^ the certificates of credit being the med-
ium to facilitate the transfer, as the pencil is in doing the
sum. The terms buy and sell, expressing as they do trans-
actions which are so often of a questionable character,
CONCLUSION 177
involving the surrender, not only of right, but of manhood
and womanhood, can hardly be terms appropriate to convey
an idea of exchange as it will be under the new system.
And the term "purchasing power." What does itsignif}'?
It is a synonym of "Almighty Dollar"; fit contemporaries of
this age of slavery and authority. In connection with the
medium of exchange provided by the Mutual Credit System,
the term will be inapplicable. We may continue to use the
terms buy and sell, but their significance will be changed.
360 In view of existing monetary and industrial condi-
tions, and what has been presented in this volume, what is
the need of the hour? There are those who think, or at
least afiirm that they believe, that the present inexpressably
bad industrial and commercial conditions will gradually
change and we shall again see what is called "good times";
but they do not take^ into consideration the process that is
going on during these alternate changes, — the centralization
of wealth in the hands of a few, and the pauperization of the
masses. They fail to see that the production of wealth can-
not keep pace with its absorption through compound interest
( 1 17-126). It is folly to talk about personal effort, energy
and thrift. Everyone knows who cares to, that these quali-
ties avail nothing of themselves. To succeed in surrounding
one's self with comforts it is necessary to be an exploiter of
men and women; to be oblivious to their sufferings; to dis-
regard all appeals to manhood and crush out that sublime
characteristic of the most noble of our race ; to stultify one's
self — turn a deaf ear to the higher criticism — and follow
only that debased and sordid ambition, — the accumulation of
a greater pile of wealth than others have been able to con-
centrate. So that to be a success, one must cultivate the
opposite of all moral teachings. And it is easily to be seen
that it is to the sufferings that many have endured rather
than become such, that we owe what little advancement and
refinement we enjoy, else the strife over mine and thine
12
I7*J THE NEW PHILOSOPHY OF MONEY
would have become so fierce, that our civilization would be a
still worse cannibalism than it is.
361 And to what end shall we endure all this discomfort
and witness this misery? There is no rational desire that
may not be fulfilled, nor luxury that may not be enjoyed by
any one who is industrious under a rational system of society,
the initiation of which must be preceded by a rational system
of exchange. To this end, then, I proclaim the great need
of the hour to be a perfect money system. We are losmg
time, and unless we establish such a system our children will
execrate our memory — the next generation will brand us as
liars and idiots; liars because we did not practice what we
preached, and idiots because we deliberately defeated pros-
perity, and burdened it with debt.
362 Let us then briefly review The New Philosophy of
Money. In what does it differ from the macaronic paral-
ogism called "finance," or the present money muddle?
363 The former is the recognition and synthetic arrange-
ment of all the factors that enter into the subject of the sup-
ply of money. By the proper consideration of these, princi-
ples have been discovered, and a true philosophy has been
formulated.
364 The latter is the result of an unintelligent effort to
attain certain ends. Principles have been disregarded, and
false premises have led to erroneous conclusions.
365 In the one, the end Bought is progress, — greater
facilities in order to have better results with an expenditure
of less labor. In the other, it is a reckless perpetuation of a
system, regardless of consequences.
366 The Mutual Credit System is a plan to supply the
paper medium of exchange, and has been formulated in
accordance with the New Philosophy of Money. All the
elements or factors pertaining thereto are recognized and
duly considered. No rights are invaded, none are ignored.
367 The invention of paper money made possible the
abolition of book credits by substituting it; thus making all
COXCLUSION 179
exchanges cash transactions. But such a revolution was not
in the interest of money-lenders, as such; and although bor-
rowers and business people interested in the change, consti-
tute an overwhelming majority, they have never been wise
enough to inaugurate it.
36S Coin, a definite quantity of commodity, being the
circulating medium previous to the invention of paper money,
suggested the idea of a measure of value, which gained
almost universal acceptance, and has served as a pretext for
limiting, through legislation, the volume of paper money
proportional to the amount of the coin; thus money-lenders
have reaped the advantages of this great invention for them-
selves alone;* the rights of borrowers and the interests of
the public have been disregarded, and we have realized but
a fragment of the progress we should have made had the
volume of paper money been commensurate with the need
for a medium of exchange.
369 Thus we see that the present system is not based on
principles; that the elements or factors that pertain to the
subject have never been recognized nor considered; and that,
therefore, the prevailing theory of money is not a true phi-
losophy, but is based on popular fallacy and maintained in
the interest of a class.
370 The great mistake that has side tracked thought on
this subject has been the notion that money-lenders are an
essential factor; that we could not do without them, and that,
in order to keep them within bounds of safety, we must have
government control. The founder of this new philosophy,
keeping right along on the main track, discovered the error
*The paper money of the present system is capital (3o-34)- That
of the Mutual Credit System is credit (32, 30-34). In the former
it is the credit of the money-lender (3o) when it is his uncovered
notes or bank bills in excess of its specie, it is true, but it always be-
comes capital to the borrower and the public generally. Under the
latter, as just stated, it will be credit to the borrower and the public
generally (80), because issued to the borrower direct from the print-
ing press, and therefore neither the capital nor the credit of anyone
else.
tSo THE NEW PHILOSOPHY OF MONEY
(95*95'^'95'^)' ^^^ pointed out that co-opevation, or the appH-
cation of the mutual feature in the supply of money, abol-
ishes both.
371 With regard to the volume of money under the one
and the other systems, it does not take a very great effort of
the intellect to realize that if all money loaned was new bills
which came to the borrower direct from the printing press,
notwithstanding that all of them, in their turn, would be re-
turned to the institutions that furnished them, as the time for
which they were loaned expired, the amount in circulation
would largely exceed the demands of the most radical per
capita Populist. Vet such will be the case under the Mutual
Credit System. I will anticipate the exclamation on the
part of the "great" financiers, political economists and money-
lenders, who will pronounce this "too much money." It will
be nothing of the kind, as I shall proceed to demonstrate.
"Like causes produce like effects," but different causes gen-
erally produce different effects. The cause that produces
depreciation of the paper money of the specie basis or the
present system will be entirely absent under the Mutual
Credit System ; for that cause is the superabundance of paper
issued relative to the basis on which it rests, or overissue, and
hence impossibility of redemption; and no such condition
can result under the Mutual Credit System, for the base is
always much larger than the issue, whatever the issue may
be, while the redemption of its paper money is effected in
the ordinary transactions of trade. The individual who has
issued some certificates of credit furnished him by the Mut-
ual Credit Association, is notified by the association a few
days ahead, that the note which he gave in exchange for the
certificates will be due on a certain day. If he does not care
to renew his note, or the security is such that the association
will not extend the time for payment, he takes certificates
which he has on hand or obtains by disposing of something
he has for sale, proceeds to the ofiice of the association and
pays his note. The act of taking the certificates in exchange
COXCLUSIOX Ibl
for whatever he sold, is the act of redemption. The return
of them to the association, is the act of retiring them from
circulation. The borrower must redeem a sum of money
of the Mutual Credit Association equal to the amount it fur-
nished him, and retired it from circulation. He must do it
voluntarily, or the association will do it by disposing of his
property.
372 The reader will see, then, that the Mutual Credit
System provides a volume of money limited only by the
security — any product of labor that has a market value.
That it provides a most practicable and unfailing method of
redemption of the money, and for its retirement from circu-
lation.
373 The present system provides a volume of paper
money equal to the quantity of gold there may be, or as
much more as money-lenders and politicians are willing to
take chances of being caught unable to redeem in gold. In
order then, to have good money, it will necessarily have to
be very scarce, and if we have plenty it will necessarily be
very poor.*
374 The volume of certificates of credit in circulation
will be very large compared with that of any coin basis sys-
tem at any time. The low rate of interest at which it can
be had, as I have shown (316,317), will induce people to use
it and abandon all forms of unsecured credit. It will cost
much less and be much more convenient and satisfactory, to
have the ledger accounts balanced and the balances in this
paper money in the safe or on deposit, than to carry them on
the ledger as we do now (93-94, 308-309, 312).
375 A "great abundance" of paper money of the kind
that is "redeemable in specie," causes fear of depreciation,
manifesting itself in a preference for things of value. In-
* How strange is political economy! This delectable "science"
purports to deal with, and present the correct philosophy of produc-
tion and exchange ; yet its theory of money is, that if we had enough
of it, there would be too much!
l82 THE NEW PHILOSOPHY OF MONEY
creasing demand causes a rise in prices, which, in the case of
specie, one of the things of vakie, takes the form of a pre-
mium, for those who have the things of value are actuated by
the same lack of confidence. A "great abundance" of money,
then, under such a system, means that one must pay that
much more for the goods he buys, if it does not ultimately
result in total loss.
376 We may now sum up the advantages of the Mutual
Credit System as follows: That its paper money, which is
secured credit, will take the place of zinsectired credit, and
instead of book accounts, all transactions will be cash, be-
cause credit in that form (paper money issued on good secur-
ity) costs but a fraction of what it costs in any other form,
while its advantages are incomparably greater.
377 That it will be uniform throughout the whole
country, because all the associations that issue it will be un-
der the supervision of one general clearing-house, and hence:
378 That it cannot depreciate in exchangeable value.
379 That it will put an end to money panics, as it can
never be scarce, because it will be issued on any product of
labor that has a market value. That it will inaugurate a
true civilization, with prosperity exceeding anything ever
witnessed, and will, therefore, abolish poverty.
3S0 That it will exterminate, not only usury, but also
interest in excess of cost.
381 That under this system monopoly can have no
existence.
382 Its inauguration, then, is the one step that is needed
to free us from the grasp of the usurer, the corruption of
politics, the tyranny of superstition and creeds, the degrada-
tion of womanhood and manhood, and from all the manifold
evils that result from poverty. In a word: It opens up to
view the true destiny of man, foreshadowing the realization
of what have been but dreams.
i83
NOTE.
At the close of my labors on the manuscript of this work,
I received from its author, Mr. Arthur Kitson, a copy of
"A Scientific Solution of the Money Question. I am sorry
it did not appear earlier as I should have been glad of an
opportunity to quote from it. I wish, however, to express
the great pleasure and profit I have derived from reading it.
I consider it by far the ablest and most comprehensive trea-
tise on the money question that I know of. Mr. Kitson is a
deep thinker and a forcible writer, demonstrating his com-
plete mastery of the subject and his familiarity with its liter-
ature.
Like myself, Mr. Kitson exposes "the great commercial
fiction of the nineteenth century," — the "measure of value,"
and champions the entire dissociation of government from
the regulation or supply of money. With such a co-worker
in the cause of liberty, one necessarily feels reassured, and a
renewed hope of a speedy triumph.
APPENDIX.
It is proposed immediately to continue the work of in-
augurating tlie Mutual Credit System suspended during the
preparation of this volume, which was deemed indispensable,
in order that the methods as well as the purpose of the sys-
tem should be correctly and perfectly understood. Now
that this is complete and given to the public, the work of
procuring and enrolling membership will go on uninterrupt-
edly until there are a sufficient number to organize the first
association; the plan for w^hich is as follows:
We, the undersigned, for the purpose of forming a Mutual
Credit Association, under and by virtue of the provisions of title two
(2) of chapter thirty-four (34) of the "General Statutes, 1S7S," of the
State of Minnesota, in such case made and provided, and the laws
amendatory thereof and supplementary thereto, do hereby associate
ourselves together and adopt the following articles of incorporation:
Article I.
The name of this corporation shall be the Minneapolis Mutual
Credit Association. The special and only business of this corpora-
tion shall be to furnish certificates of credit as provided in the articles
of incorporation and by-laws. The principal place of business of this
corporation shall be located in Minneapolis, Minnesota.
Art. II.
The amount of the capital stock of this corporation shall be fifty
thousand dollars ($50,000), divided into five thousand shares of the
par value of ten dollars each. The said stock, after the issue of the
first five hundred shares, shall be sold, issued and paid in at such
times as the board of directors may from time to time determine.
The stock shall bear no interest nor be entitled to dividends.
Art. III.
This corporation shall commence on the day of
189 — , and shall continue for a period of thirty years.
Art. IV.
The highest amount of indebtedness that this corporation may
contract shall be dollars.
Art. V.
The management of the affairs of this corporation shall be vested
in a board of seven directors, a board of three appraisers, a manager,
APPENDIX 185
a cashier, a secretary, and a counsel at law. The manager, cashier,
secretary and counsel shall be appointed by the board of directors,
who shall require each to give bonds in sufficient amount to guaran-
tee the faithful performance of their duties.
Art. VI.
As soon as five hundred shares of the capital stock shall have
been subscribed for, or as soon thereafter as possible, the subscribers
shall hold a meeting and elect the boards of directors and appraisers.
Each subscriber shall be entitled to one vote for each share of stock,
and as soon as this corporation enters upon its business of furnishing
certificates, each borrower of such certificates thereby becomes a
member whether a stockholder or not, and is entitled to one vote,
and one additional vote for each $i,ooo borrowed in excess of the
first $1,000.
Art. VII.
As soon as the association is prepared to furnish certificates of
credit, the stockholders shall be served first and in the order they
appear on the subscription list. After all stockholders who wish to
borrow, are served, anyone may obtain certificates of credit in
accordance with these articles and the by-laws.
BY-LAWS OF THE MINNEAPOLIS MUTUAL CREDIT ASSOCIATION.
1 In conformity with the articles of incorporation, as soon as
five hundred shares of the capital stock shall have been subscribed
for, or as soon thereafter as possible, the stockholders shall hold a
meeting and elect a board of seven directors and a board of three
appraisers.
2 The board of directors shall appoint a manager, a cashier and
a secretary, and shall require each to give bonds to the board's satis-
faction, as a guarantee for the faithful performance of their duties.
3 The manager, cashier and secretary shall hold office until
they resign, or are removed by the board of directors. They shall
be subject to, and not members of the board, nor participate in its
meetings, except when called upon to do so; and the same rule shall
govern the appraisers.
4 The manager shall manage the affairs of the association, sub-
ject to the instructions of the board of directors; the cashier shall
perform the usual duties, and the secretary shall have charge of all
the documents, see that all mortgages are duly recorded before certi-
ficates are furnished by the association, and keep an account of the
blank certificates received from the General Clearing-House Associ-
ation, the disposition of the same, the cancellation of all certificates
returned to the association and the transmission of all such canceled
certificates to the General Clearing-House Association.
5 The board of directors shall instruct and authorize the cashier
to collect an assessment upon the stock, and proceed to carry out the
instructions set forth in the articles of incorporation and these by-
laws ; but no stockholder shall be assessed more than the par value
of his stock.
6 Each subscriber to the stock shall pay fifty cents at the time
he subscribes, and shall be given a receipt for the same, signed by
l86 THE NEW PHILOSOPHY OF MONEY
Alfred B. Westrup, who shall be temporary secretary; the said fifty
cents to pay temporary expenses, and the same shall be considered
an advance payment on the stock subscribed for.
7 The boards of directors and appraisers shall employ secretar-
ies of their own. The board of directors shall fix the salaries of the
ofiicers and employees, and shall employ a legal advisor, who shall
be general counsel for the association, and shall pass upon the legal-
ity of all securities taken by the association.
8 The board of directors shall apply to the General Clearing-
House Association as soon as it is organized, for certificates of credit
of all denominations, and shall always furnish new certificates for
torn or soiled ones, when requested, free of charge.
9 The board of appraisers shall first pass upon all securities be-
fore certificates are loaned by the association.
10 Any person may become a member of the association and
borrow its certificates by pledging unincumbered, improved real es-
tate, never vacant lands, situated within the corporate limits of Min-
neapolis, or in the immediate neighborhood thereof; or commodities
not immediately perishable, and delivered to the keeping of the asso-
ciation. All borrowers shall give a note for the amount furnished in
certificates, but no note shall extend beyond one year, and notes se-
cured by the more perishable commodities shall be limited in the
time they are to run in proportion to the perishability of such secur-
ity. No certificates shall be loaned by the association upon any
other conditions.
11 Every member of the association shall bind himself in due
legal form to receive the certificates of credit issued by any of the
associations that are members of the General Clearing-House Asso-
ciation, of which this association is a member, in payment of debt
and in exchange for commodities and services, and from all persons,
at their face value and without discriminating in prices.
12 Notes falling due may be renewed by the association, sub-
ject to the modification which a new valuation may require, so that
there is always ample security.
13 The charge which the association shall make for the loans,
and for the insurance, shall be determined by, and if possible, not
exceed the cost of the same. In case there is a surplus over expense
and insurance, the same shall be paid back to the borrowers in
equitable proportion; but, in order to provide for the retirement of
the capital stock of the association, an extra one per cent per annum
shall be charged all borrowers who are not stockholders, which as-
sessment shall constitute a sinking fund with which the board of
directors shall, from time to time, take up the capital stock and can-
cel the same until it is all retired; at which time this assessment
shall cease.
14 Any member may, at any time, have his property released
from the pledge, and be himself released from all obligations to the
association, by paying his note or notes to the said association. A
stockholder who is not a borrower, may, at any time, be released
from all obligations to the association by notifying the manager in
writing, but thereby forfeits all right to any voice in the manage-
ment of the association.
15 The association shall receive none other than its own certi-
APPENI>IX 1S7
ficates or those furnished by associations that are members of the
General Clcaring-House Association hereinafter mentioned. The
association shall render each day a statement of its loans the day
previous, describing the property pledged, giving the owner's name
and its location, with the appraiser's valuation and the amount loaned
on it; and also a statement of the notes paid and mortgages canceled
during the same period, which statement shall be signed by the man-
ager, cashier and secretary. A copy of each statement shall be fur-
nished to anyone on application.
16 This association shall do all in its power to encourage the
organization of similar associations in other cities, and as soon as five
associations have been organized they shall proceed to organize the
General Clearing-Iiouse Association, whose object shall be to provide
the blank certificates of credit for the local associations, to supervise
and correct any defects in the method of conducting the business,
and examine the condition and management of such associations as
shall adopt its prescribed rules and apply for membership prior to
their being admitted, to the end that there may be uniformity in the
exchangeability of such certificates throughout the whole country.
17 The General Clearing-House Association shall assume all
loss from fire or otherwise to the property pledged, and also to the
holders of certificates from depreciation in case of mismanagement
or fraud on the part of any local association.
18 To meet the expenses of the General Clearing-House Asso-
ciation, and also to provide for the payment of the losses above
mentioned, each local association shall contribute a percentage of
the rate charged the borrower.
19 Until such time as the General Clearing-House Association
shall be prepared to carry the insurance of property pledged, each
association shall place its insurance in such companies as the board
of directors may designate.
20 At the first meeting, the members shall determine how often
and when the regular meetings of the association shall be held, make
provision for calling special meetings, and how many shall consti-
tute a quorum.
21 Each meeting shall elect a chairman and secretary, and a
competent stenographer shall be employed to report the complete
minutes of each meeting.
22 These by-laws may be amended at any regular meetmg of
the members.
EXPLANATION.
The object in forming a stock company first is to pro-
vide tlie funds necessary to defray the expenses of inaugu-
rating the movement. It is readily understood that no
enterprise can be commenced without money, and this is the
means taken to provide it. It is proposed first to procure
five hundred subscribers to the capital stock, and then call a
meeting of the subscribers to elect the directors and other
officers, incorporate, issue the first five hundred shares of the
iSS THE NEW PHILOSOPHY OF MONEY
capital stock and assess the same only as funds are needed.
Instead of immediately issuing certificates of credit, it is
proposed to extend the work until we have organized an
association in at least five or six cities. This delay is not
altogether undesirable. It will afford ample time for all the
members to become thoroughly acquainted with the methods
and advantages of this new system, and to study and mature
the plan that shall finally be adopted; for which purpose
regular meetings will be held. Each of these associations
will bear its share of the expenses of carrying on the propa-
ganda work and establishing the General Clearing-House
Association. If we meet with obstacles in the way of our
incorporating, we propose to keep on organizing associations
until we have numbers and influence enough to remove
those obstacles, whatever they may be, unless it shall be
decided to proceed without incorporating, which can only be
determined by a concensus of opinion. As soon as this point
is settled either by having become incorporated or by decid-
ing to proceed without incorporating, and the General
Clearing-House Association having been duly organized and
domiciled, it shall proceed to provide the certificates of credit
and furnish them to the local associations in such denomina-
tions as they may ask for.
The General Clearing-House Association shall keep an
account with each association of the blank certificates fur-
nished it and of the mutilated and canceled ones returned.
The mutilated ones being those that are presented at the
oflice of any association as unfit for circulation, and for which
new certificates are given in exchange; the canceled ones
being such as are returned to the associations in payment of
notes that have matured.
By organizing a number of associations and the General
Clearing-House Association before any certificates are issued,
we overcome the great obstacle which seems to present itself
to the minds of the people as insurmountable, and which is,
that a paper money will not circulate unless it is made legal
tender by authority.* The New Philosophy of Money
* What is the meaning of the term "legal tender," as applied to
money? "The Century Dictionary" defines it as "currency which
can be lawfully used in paying a debt." A briefer and common defini-
tion is "compulsory circulation," and this is the term applied to such
money habitually in most South American countries, curso Jorzado.
APPENDIX 1S9
teaches that the paper medium of exchange should be good
enough to be readily accepted on its merits, in which case
the making of it legal tender is entirely unnecessary. By
organizing five or six associations and the clearing-house,
practically making them one association, before any certifi-
cates are issued, they are, when issued, acceptable by any
member of any of these associations, or any that may there-
after orjranize and become members of the General Clearing:-
House Association. Now, it will hardly be denied that pa-
per money that is acceptable by a large number of business
and professional men and women in live or six cities, will
also be gladly taken by any one else in those cities (except,
perhaps, money-lenders), because they, also, can pay it out
to those who are members of the association. It follows,
also, that the enormous advantages of this system, when
understood, will be the incentive to organize associations in
every cit3% Its benefits are not confined to any locality, but
are universal; if it is a good system anywhere it is good
everywhere, and therefore will rapidly extend itself to all
cities.
The idea of borrowing money at one or two per cent
per annum is too much of a good thing to allow it to go beg-
ging. When it is known all over the country that the plan
is matured and it is actually contemplated to carry it into
effect, it will create more discussion than any other subject;
and when it is put into practice it will create greater excite-
ment than anything that ever happened.
There will be no need for expensive machinery to
engrave plates to print the certificates from. The half-tone
process will produce finer prints and facilitate greater safe-
Edward Atkinson, in a recent very interesting pamphlet, cites legal
tender among some examples of words of which the ineaning has
been perverted to the vitiation of public thought, and says legal
tender should be defined as "an act by which bad monej'^ rnay be
forced into use so as to drive good money out of circulation." He
has made a search through history for legal-tender acts, and con-
cludes from his discoveries "that no decree and no statute of legal
tender ever originated anywhere except for the purpose of forcing a
debased coin into circulation, or for the purpose of collecting a forced
loan by making paper substitutes for coin a legal tender for debts." .
. . • Good money needs no act of legal tender to make it circu-
late. Mr. Atkinson makes an unanswerable argument on this point
by citing the fact that the great international commerce of the world
has been carried on from its beginning to the present time without
international acts of legal tender. — The Century, August.
190 THE NEW PHILOSOPHY OF MONEY
guards against counterfeiting than steel engravings possibly
can.
It is asserted now without any fear that it will prove
untrue, that from the start these certificates of credit will be
accepted as good money anywhere. But there will be no
need of sending this money off to a distance. In the first
place it will not come into circulation all of a sudden, the
present money disappearing as suddenly. No one will be
likely to have all his customers bringing him nothing but
certificates of credit, and for some time there will be a mixed
currency of both the present money and the new, affording
an opportunity to use the former where it may be doubtful
about the acceptability of the latter. In the second place, as
the certificates will be accepted by a large number of busi-
ness people on the same terms as the present money, it will
naturally be an easy matter to exchange the one for the
other in those fev/ cases where the individual must have the
kmd he does not happen to possess; and as the system ex-
tends the need of making such exchanges will become less
frequent.
I am sometimes asked: "But will not the government
stop you from issuing these certificates of credit?" No doubt
it will try to, because it is the tool of the money power. But
what of it? Shall we abandon liberty because a lot of offi-
cials take it into their heads to deprive us of it? If this sys-
tem has the merits we claim for it, and if the majority can
rule in this country when they decide to, it is only a question
of convincing the majority of its merits to be free from gov-
ernment interference. In the meantime, the more govern-
ment interference the more it will advertise the system and
the sooner we shall get the majority on our side. Finally, if
this is the only road to prosperity and happiness (and that is
what we claim), we must either travel this road or give up
hope and resign ourselves to the slavery we now have to
endure.
It may at first appear strange to some that the stock is
to bear no interest nor be entitled to dividends; but upon
mature consideration they will see that this is a mutual asso-
ciation, and to pay interest or dividends to members of a
mutual association, where the business is transacted only with
members, is like taking money out of one pocket and putting
it in another pocket. The object of the association is to pro-
vide that instrument of exchansre which we must all use
APPENDIX
191
more or less, and the supply of which, in accordance with
equitable principles, is indispensable to prosperity; and those
who desire prosperity are asked to loan a few dollars to meet
the expenses of starting the association; the same to be re-
turned to them out of a sinking fund to be created for that pur-
pose; so that the cost of starting will be equitably distributed.
Those who do not loan any money to the association by
taking some of its stock, will have to pay a trifle higher rate
of interest when they borrow. This extra charge will be
set apart as the sinking fund with which the capital stock
will be taken up and canceled. The association will then be
purely mutual, reducing its charges to actual cost.
It is to the interest of all to facilitate the initiation of
this method of supplying the medium of exchange, because
it will inaugurate perpetual prosperity, and annihilate all
monopoly and political knavery.
Great care has been exercised in the preparation of the
foregoing plan, but it is not proposed as one that will require
no modification when finally adopted ; some slight changes
may be found necessary in order to meet the requirements of
the law, or those of an unincorporated association if such is
decided upon, but which will not affect the results.
The writer, who has been an advocate of this system for
twenty years, has devoted the last five to efforts for its reali-
zation, and is more hopeful than ever of its speedy accom-
plishment, because of the prospect that there will soon be a
very thorough investigation into its merits by a large number
of thinking people.
Money reform has become absolutely indispensable to
save us from continued hard times or civil war, and this is
the only system that will stand the test of scientific investi-
gation.
It is very important that all who become interested in
this movement should communicate at once with the secre-
tary, and they are earnestly solicited to do so. Any criti-
cisms or suggestions will be gratefully received, duly con-
sidered and promptly answered.
It will be necessary to publish a weekly paper to
represent and defend the movement as soon as the first asso-
ciation is organized. This will greatly increase the oppor-
tunity for informing the people as to the object and methods
of the system, which, intentionally or not, will no doubt be
misrepresented.
192 THE NEW PHILOSOPHY OF MONEY
Let the reader bear in mind that the establishment of
this system means nothing less than a complete emancipation
from tyranny, the inauguration of prosperity, the abolition
of poverty. Not that this alone will do it, of course, but
this is necessarily the first step, and will make others possible
which would otherwise be impossible; even the land ques-
tion (it can be demonstrated in an unanswerable manner)
cannot be settled until the money question is settled. The
money power and interest must be destroyed, and the Mutual
Credit System is the only weapon that can do it.
It will be a great help to the cause, and facilitate propa-
ganda work for each one in any town or city who is in favor
of this money reform, to know who else in that locality is in
sympathy with it. I therefore propose that each one send
their name and address to me. By so doing they can be put
in communication with each other. A representative of this
movement is needed in every city and town in the country to
organize a Mutual Credit Association. It will afford a
greater opportunity for advancement than anything that
anyone can engage in, and certainly none ought to be better
paid, seeing that it is the most important to the human race
of anything ever contemplated. Any good business man or
woman can, by communicating with me, obtain all the infor-
mation they need to commence to form an association, get-
ting large remuneration as the work proceeds.
Let some one in each town and city start in at once to
organize an association and get the subscribers to the capital
stock; the more associations that are organizing the easier
and more rapid will be the work. As soon as the General
Clearing-House Association is organized and furnishing the
certificates of credit, the organization of a local association
will be a work of a few days. So that after it is in opera-
tion it will rapidly extend itself to every town and city, not
only of this country, but of the civilized world. A move-
ment similar to this one has already been started in London,
England, called "The Free Currency Propaganda." Some
of the leaders are able writers; their literature is in harmony
with The New Philosophy of Money, and their work bids
fair to outstrip us in results.
There are plenty of shrewd capitalists who, when they
see that this system is being pushed, that it is not only to the
best interest of all to establish it, but that it is inevitable, will
themselves come to the front and help inaugurate it.
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