JVo. Division Range W Shelf. Received University of California CM FT < 1816. NEW MONETARY SYSTEM THE ONLY MEANS OF SECURING THE RESPECTIVE RIGHTS OF LABOR AND PROPERTY, PROTECTING THE PUBLIC IBOI FINANCIAL REVULSIONS. BY EDWABD ^ELLOGG. REVISED FROM HIS WORK ON "LABOR AND OTHER CAPITAL,' WITH NUMEROUS ADDITIONS FROM HIS MANUSCRIPTS. EDITED BY HIS DAUGHTER, FIFTH EDITION, TO WHICH IS PREFIXED A BIOGRAPHICAL SKETCH Of THE AUTHOB. PHILADELPHIA: HENRY CAREY BAIRD, INDUSTRIAL PUBLISHER, 406 WALNUT STREET. LONDON: SAMPSON LOW, MARSTON, LOW & SEARLE, CBOVTN BUILDINGS, 188 FLBKT STRXET. Library. KMTEI'.ED according to Act of Congress, in the year 1861. by MARY KELLOGG PUTNAM. In the Clerk's Office of the District Court of the tnited States for the Sou'fo District oi New Yotk. TABLE OF CONTENTS. F PAGE BlOGKAPHICAL SKETCH OF THE AUTHOR xi PREFACE xxv INTRODUCTION ... 17 PAET I. OF 33ISTRIBTJTIO1V. CHAPTER I. Of Value 41 CHAPTER II. MONEY, THE MEDIUM OF DISTRIBUTION. SECTION I. The Nature and Properties of Money 45 SECTION II. The Power of Money to Represent Value 46 SECTION III. The Power of Money to Measure Value 56 iii IV CONTENTS. SECTION IV. The Power of Money to Accumulate Value by Interest, SECTION V. The Power of Money to Exchange Yalue, SECTION VI. The Material of Money, and the Distinctions between Money and the Material of which it is made, 7 1 CHAPTER III. THE RATES OP INTEREST THE GOVERNING POWER OF DISTR. BUTION TO LABOR AND CAPITAL. SECTION I. The Power of Capital to accumulate Property and Labor, according to the Rate of Interest, 79 SECTION II. The Wealth of Cities, and the Means of its Accumu- lation, 97 SECTION m. Interest received by the Citizens of New York on Loans to the Country, 107 SECTION IV. The per centage Actual Increase of the Yalue of the Property of the States of New York and Massa- chusetts, compared with the per centage Legal In- crease on the Property of these States for the same periods,. I'll CONTENTS. V PACK SECTION V. nterest on National and State Debts, 121 SECTION VI. itfo Accumulation of Property by Labor equal to the Accumulation by the Loan of Money at seven per cent. Interest, 126 SECTION VII. Two Per Cent, per annum too high a Rate of Interest, 135 SECTION VOL The Reduction of Interest would be an equal benefit to the Producing Classes, whether Property should Rise or Fall in Price, in consequence of such reduction, . 139 SECTION IX. Effects upon Producers of High and Fluctuating Rates of Interest, 142 SECTION X. The Oppression of Labor by a Monopoly of Land not so great as the Oppression by High Rates of Interest on money, 14f SECTION XL The Rate of Interest determines the Price of Property, and a Rise of Interest increases the Power of Money to command property, 153 SECTION XII. The Rise of the Rate of Interest increases the Liabi- lities of all Debtors, 154 VI . CONTENTS. PAOB SECTION XIII. Rents, whether High or Low, bear the same Relative Value to their Principal; but when the Per Centage Interest on money is Increased, not only is its Rela- tive Proportion to the principal Increased, but each Fractional Part has Increased Yalue, ........... 158 SECTION XIV. To Cheapen Prices by an Unjust Rate of Interest and a Scarcity of Money, is but to Cheapen the Labor of all producers, and Give their Earnings to Capital- ists without an equitable equivalent, ............ 161 SECTION XV. Voluntary Agreement no Test of a just Rate of In- terest, .................................... 164 SECTION XVI. The Law of Interest on Money an Accumulative not a Producing power, .......................... 169 SECTION XVH. Estimate of a just Rate of Interest, .............. 175 SECTION XVIII. Beneficial Results to Laborers and Merchants from the Reduction of the Rate of Interest, ............. 178 SECTION XIX. The Low Prices of Labor in European countries not caused by their Low Rates of Interest, .......... 185 CONTENTS. Vli CHAPTER IT. THE BANKING SYSTEM. SECTION I. PAQH The Nature of Banks, their Institution, and the Prin- ciples by which they are governed, 193 SECTION II. The Amount of Specie owned by the Banks, and the Interest paid by the people on Bank Loans, 203 SECTION HI. Basis of the Bank of England, 215 SECTION IV. The Balancing Power of Bank Notes and Deposits,.. 211 SECTION V. The Management of the Banks, and the Effects of their operation upon the Prosperity of Trade and Productive Industry, 219 SECTION VI. Remarks on the Repeal of the Usury Laws, 249 CHAPTER Y. The Amount of a Currency should be Limited only by the Wants of Business, 254 CHAPTER VI. The Necessity of Credit, , . . . 261 Vlll CONTENTS. PAGE CHAPTER VII. A well regulated Currency Impossible under Present Laws, 263 Recapitulation, 266 PART II. .A. TJRTJK MONETARY SYSTEM. CHAPTER I. The Security of a Paper Currency, 269 CHAPTER II. THE SAFETY FUND. SECTION I. The Formation of the Money, and the Mode of Issue, 273 SECTION n. The Security of the Safety Fund money, 278 SECTION m. The Rate of Interest on the Safety Fund money, 282 SECTION IV. Organization and Management of the Safety Fund, . . 286 SECTION V. The probable Amount of Safety Fund money, 288 CONTENTS. IX PAGB CHAPTER III. The Advantages of the Safety Fund money over Specie, 290 CHAPTER IY. OBJECTIONS TO THE SAFETY FUND CONSIDERED. SECTION I. Objections to a Paper Currency on account of Foreign Trade considered, 295 SECTION II. Sundry Objections the Effects of the Safety Fund on our Banking Institutions, etc., considered, 300 CHAPTER Y. Advantages of the Safety Fund, 307 CONCLUSION, 318 APPENDIX, 325 BIOGRAPHICAL SKETCH OF THE AUTHOR. As an introduction to the fifth edition of my father's work, and in compliance with repeated requests, I shall offer a sketch though it must be an imperfect one of his life ; chiefly for the sake of telling why and how this book was written. Edward Kellogg was born at Norwalk, Conn., on the 18th day of October, 1790. He was the son of a substantial farmer, enjoying the comforts of life ; each child of the numerous family, however, was expected to do its part toward the common support ; and he was early set at work, bringing the cows from the pasture, riding the horse while his older brother ploughed, and doing, when he was ten years old, half a man's work noeing corn. The hired men who harvested for his father, observing the lad's deep set, deep blue eyes, said to each other in their homely phrase that he would make a smart man. Soon after he was of age, he began to buy goods in New York and sell them to country storekeepers in New Jersey, Pennsylvania, Maryland and Virginia, learning a great deal about men and things in the journeys he made for this purpose. In 1817 he married Esther F. Warner, daughter of Lyman Warner, of Northfield, in his native State. Two or three years later he was established in New York as a wholesale dry goods merchant ; soon as senior partner of the firm of Kellogg & Baldwin, and later as chief of the firm of Edward Kellogg & Co. of Pearl street. When he was about thirty years old his mind was deeply wrought upon by questions of theology and morals, and reading the Bible only, he abandoned the so-called orthodox tenets ; when mat- ters of business were not immediately before him, he studied ardently in his own thoughts the relations of man to his Creator and to his feilow-man ; on his way from one engagement to another, he usually pondered the meaning of some text of Scripture. He read very few books, but he talked much with other men, and xii BIOGRAPHICAL SKETCH OF THE AUTHOR. always weighed new thoughts that were thrown out. Singularly fearless and free in mind, he was continually investigating opinions to ascertain whether they were true ; and whenever he had learned anything he was quick to communicate it to others. But he chiefly sought to draw out their minds and induce them to think for themselves. To this end he used to talk much with young per- sons ; and, in the intervals of business, with the young men who were employed in his counting-house. His thirst for knowledge was so great that he seriously contemplated giving up business and devoting himself to study. At the same time he was eminently practical. No facilities then existed for ascertaining quickly the commercial standing of men, and the firm often sold on credit to persons living in remote parts of the South and West. When a new customer appeared the clerks would call Mr. Kellogg to talk with him a few minutes, and then he would say whether to sell or not. One of these young men, who learned business under him and is now the president of a national bank in the city of New York, says of him : " He was the best judge of men that I ever knew ; his judgment of them was almost infallible." A man of stainless char- acter and reputation, he conducted a large business with honor and success. His advice was frequently sought by younger men ; and he was called upon to fill various offices of trust. During those years he did not speak of business matters at home, but he talked much with friends and neighbors about theological doctrines, principles of morality, about- political questions and the man- agement of the banks. As a child I used to sit down near him to listen, being greatly attracted by his animated and earnest discourse. In 1837, the financial panic occurring, he was unable to make collections from his debtors, and, though having assets largely in excess of his liabilities, was obliged to suspend payment, and saw his affairs thrown into what seemed to be almost inextricable con- fusion. But, gifted with indomitable energy and courage, he met misfortune for himself unflinchingly ; maintaining his integrity and reputation, saying afterward, "If I lost everything I had, I was determined not to lose myself." When an old acquaintance, who died a few years ago leaving a princely fortune, came one evening with his wife to drink tea and said, in lugubrious tones, " Mr. Kel- logg, what are we coming to ? " my father instantly replied in his pleasant way, " It is plain what you and I are coming to, Mr. P. : we are coming to our tow trousers again ; " whereupon the ques- BIOGRAPHICAL SKETCH OF THE AUTHOR. Xlll tioner laughed heartily for the first time since the panic, and they spent a cheerful evening. Yet, while he thought carefully and anxiously of his obligations and attended faithfully to all that was to be done, his mind turned with earnest and eager inquiry to the cause of the great calamity in which he saw so many involved. He perceived that it was the result of the existing monetary system, and he began to study out the origin of the evils. He soon became convinced that the money of a country, being a public medium of exchange, ought not to be put under the control of private corporations, but ought to be instituted by the government for the benefit of the whole people, and so managed that usury could not be exacted, and that losses in exchange in sending money from one part of the country to another should not be incurred. His soul was moved with indignation at the extortions of usurers, which came continually under his notice ; and he caused a friend to write a pamphlet setting forth some facts that he furnished. This was printed in 1841 by Harper & Brothers, and was called " Usury and its Effects : A National Bank a Remedy. By Whitehook." His idea then was that a national bank should be created with a capital of fifty millions, with branches in every State, limited in dividends to five or six per cent., and compelled when its surplus profits exceeded five per cent, on the capital to reduce the rate of interest on its loans. He had not yet ascertained the real nature of money nor devised the true remedy. He still worked in his mind at the problem, for he knew he had not solved it. He saw that money ought not to be made of gold and silver, which cannot be had in sufficient quantities to meet any great financial crisis, and which nobody wants when confidence exists ; that it must be a legal representative of value, and thought it ought to be founded on real estate, or on the public credit resting on the national resources ; he saw how to issue it in exchange for mortgages of productive real property but how to redeem it? He tried it in every way he could imagine; he knew there must be some right way of doing it, but what was it ? it was of no use to point out the evil unless he could show a remedy for it. He thought upon it by night and by day, and at last, after looking for it three years, one night in the spring of 1843, as he lay in his bed revolving once more his problem, it dawned upon him like an inspiration, " REDEEM IT WITH A BOND BEARING INTEREST." He turned it to and fro for a moment 2 XIV BIOGRAPHICAL SKETCH OF THE AUTHOR. and exclaimed, in the very words of the old philosopher, " J have found it!" Deeply impressed with the value of his discovery, he began at once to write out his ideas. He had had only a common school education, and, as he used to say, " very little of that." He thought himself " the furthest man in the world from writing a book." He disliked to write letters, and made his clerks write for him if pos- sible. But now, morning and evening in the midst of his family, and in moments snatched from business at his counting-house, he set down upon paper the new and stirring thoughts with which his mind overflowed. He had ever been apt to teach, adapting him- self carefully to the minds of others, and taking the greatest pains to make facts and ideas intelligible to them ; and he wrote simply and vividly. But thinking some revision was desirable, and not having the time nor the practice to do it easily himself, he caused one of the young men in his employment to copy and amend for him. One evening I was then seventeen years old and was always hovering about him he showed me some leaves of the manu- script. In my secret heart I thought the amendments were not well made ; but I only said to my beloved father, " I think I could do that." A little surprised, he rejoined, " Do you ? well, you may try." The next morning he left some pages with me; at night I had a copy ready for him, which he altogether ap- proved ; and from that day I became his " scribe," and presently his devout disciple. He was intensely moved by the wrongs that he saw everywhere weighing on the workers of the world through this gigantic, hidden power of money; he knew he had devised the means to overthrow this power, so he worked on at a white heat. Now his relatives and friends began to remonstrate with him. One man of mark, a lifelong friend whom he greatly valued, said to him : " Mr. Kellogg, this is the most difficult part of political economy ; no one has ever understood it. It has puzzled the wisest heads from the beginning until now, and you cannot solve it : you. will only succeed in bewildering yourself. Besides, your own ^ affairs are in a very perplexing condition and require all your attention ; and it is against your interest to do anything about it." To which he replied : " I have an interest in the human family, and I have discovered something that is for their benefit. I shall write it ; I should if I knew that I could make a million of dollars if I did not ; and that if I did, I should live on a crust of bread and die in a garret." So the writing went on. BIOGRAPHICAL SKETCH OF THE AUTHOR. XV About the last of July, 1843, enough had been written to cover, as he thought, the important points. He cast about to see whom he could interest in it, and how he should get it printed. Having a high opinion of Mr. Horace Greeley's character and benevolent aims, he invited him to come and hear it read. Mr. Greeley, ever prompt to consider any proposition for bettering the condition of mankind, accordingly came twice to Brooklyn whither the author had removed in 1838 and my father assigned to me the pleasant task of reading the manuscript to him. The good man heard it through, and said it ought to be published : he seized upon it and carried it away with him, giving it, with my father's consent, to Burgess & Stringer, 222 Broadway, to be published. It was printed at the author's cost, in newspaper form, of which, so far as I know, only the one copy now in my possession is extant. It was entitled, "Usury: the Evil and the Kemedy;" and contained the following paragraphs, this being the original of what is now attri- buted to many different persons and called the interchangeable bonds and money proposition. I quote as follows : " For the purpose I have before mentioned [to supply the people with a good and sound currency], the United States should establish an institution, which I shall here call a Safety Fund. I give it this name because I think it will be the means of securing to the producers a fair remuneration for their productions. It will save us from the power of any foreign nation over our Internal Improve- ments, or anything else of great importance. It will enable the nation as far as man can have such control to decide its own destiny. Therefore it will be a NATIONAL SAFETY FUND. " In order to explain the nature of this Safety Fund. I will here write out, in full, two bills, one for a circulating medium, the other for a Treasury Note. By reading these the system may be almost entirely understood. Should such an institution be established, the bills might be more brief, as the laws on the subject would be known, and it would be unnecessary to have as much expressed as in the following : (Circulating Medium, or Safety Fund Note.) " The United States promise to pay to A. B., or bearer, at their Safety* Fund, in the City of - , One Hundred Dollars, in a Treasury Note, bearing interest at the rate of two per cent, per an- num, payable half-yearly in gold or silver coin; and until such XVI BIOGRAPHICAL SKETCH OF THE AUTHOR. payment is made this note shall be a legal tender for debts, the same as gold and silver coins are now a tender." (Treasury Note.) " One year from the first day of May next, or any time thereafter, the UNITED STATES promise to pay to A. B., or bearer, in the City of , One Hundred Dollars, in Safety Fund Notes ; and until such payment is made, to pay interest thereon half-yearly on the first days of May and November, at the rate of two per cent, per annum in gold or silver." "It will be perceived that the note intended as a circulating medium is made a tender for all debts, that it is issued by Govern- ment, and payable in Treasury Notes. The Treasury Notes are to bear interest ; hence there can be no money in circulation but what the holder can at any time put on interest where the loan would be entirely safe, and the interest payable half-yearly in specie ; so that money can, at all times, be loaned for a certain income secured by the nation. One year after the first of May ensuing, the holder can convert the loan again into the legal currency of the country, so there never can be a surplus of money which may not be made productive." The newspaper contains no date of publication, but the leading article of the New York Tribune of August 17, 1843, evidently from the pen of Mr. Greeley, had the heading, " Usury : the Evil and the Remedy," and began, "Such is the title of a" powerful essay which has recently been published in this city, in a cheap news- paper form designed for general circulation. The intent of the author is evidently to probe the evil to the bottom, and not to rest in mere grumbling at it, but devise and suggest adequate means for its removal." The main features of the plan are clearly and forci- bly stated in this article, with a recommendation to all who think excessive interest an evil to procure and read the paper. My father then did his utmost to circulate the e\say. He sent it to many editors, the paper itself containing a request that they would copy parts of it for the good of the public. On the 28th of October of the same year, a synopsis of it in four columns was printed in the Tribune ; and, in December of the same year, it was issued, at his cost, as a supplement to the New York Commercial Advertiser. Then he had it put in pamphlet form, with some addi- tions, and stereotyped. It was called "Currency: the Evil and BIOGRAPHICAL SKETCH OF THE AUTHOR. XV11 the Kemedy," by Godek Gardwell, these words containing the let- ters of his name. About this time or a little later, he gave up business as a mer- chant, and, retaining an office in New York, spent his time in the care and improvement of his property. He continued to think and to write on the money question. Sometimes he wrote at length, but oftener a few pages only on any point that was in his mind. When a " good idea " occurred to him he set it down. Sometimes the same in slightly varied form appeared often, especially in regard to the representative value of money. The subject was so important, the need of clear ideas and simple illustrations to combat the old errors so evident, it was all so urgent that he could not say it too emphatically or too much. Then the subject ramified in such a way ; it was so vast, touching upon most of the material interests of men ; it lay at the foundation of public justice and good morals : the new system was capable of effecting a beneficent revolution, and would, too, by and by. All these things and more were seeking expression. His mind worked so deeply that he often went along the street, noticing nobody, seeing only the idea that he was pur- suing and endeavoring to seize. Some time after the essay was published, when he had a mass of papers thus written, various in subject and length, he told me he wanted me to " arrange them in some order," copy, and get the whole ready for the printer. Though dismayed at being called upon to set in order the subject-matter, it did not occur to me to say I could not do it; I must at least try, if my father expected it. After a time I thought I saw the proper sequence of the argu- ment, and sorted and arranged the papers in chapters and sections accordingly. Perhaps a less formal mode might have been better ; but the author himself found no fault with it : he, with his origin- ating mind, "would rather write ten than arrange one;" and he was occupied in searching out ideas and principles. Almost every day there was something new ; a page or two came home on the back of a letter or on a sheet of paper doubled up in his pocket, and must be assigned to the proper place ; sometimes a section re- written because the new was better, or to introduce fitly a fresh idea or illustration ; then a large part of the chapter on the banking system was written. I used to go over it all again and again by myself during the days while he was away at his office, occasionally suggesting the writing of something on this or that point to fill out the course of thought ; and in the evenings and on Sundays he read XV111 BIOGRAPHICAL SKETCH OF THE AUTHOR. it over, or we read it over together ; sometimes spending hours on a single paragraph, to make it clear and simple. Unwearying thought and care were bestowed on the whole ; but the chapter on the nature of money received specially vigilant and repeated revision. For recreation we used to talk together, often into the midnight hours, of the blessings that would flow to mankind from this grand new truth ; and we said, that some day the nature of money would be so well understood, and the system so much a matter of course, that people would wonder it had ever been needful to write such a book, or take such pains to argue the question. When it was nearly finished he invited a friend to hear it read, who suggested further omissions and condensations. Then my father went over it several times more, always making some emendations, and five years from the time he began to write it, it was copied out for the printer ; con- taining then in substance all and in length about one-third of the original matter. The book was p> Wished in the winter of 1848-'49, under the title of " Labor and other Capital : the rights of each secured and the wrongs of both eradicated ; or, an exposition of the cause why few are wealthy and many poor, and the delineation of a system which, without infringing the rights of property, will give to labor its just reward. By Edward Kellogg." Jt was stereotyped and printed at his expense, and he had it for sale at his office, then at 47 Stone street. He hoped he had now written something that would awaken the public attention and direct it to this momentous question ; but his book failed to attract much notice, and his plan was called visionary, impracticable, Utopian. Here and there a man read it who per- ceived its power. One old friend of his, president of a bank in Maryland, said, "Mr. Kellogg, I have read your book, and it is all true, every word of it ; but nobody will buy it, nobody will read it, and it will lie on the shelf: but if you will write one on the other side of the question, it will go like hot cakes." ( A year or two after it was printed, a gentleman, to whom he had lent a copy, said to him, " Mr. Kellogg, your book is true ; it is in advance of the time, and the people of this generation do not appreciate it ; but future genera- tions will raise monuments to your memory." An editor, too, said to him, " Do you know that this book of yours is the most radical one that ever was written?" Yes, he knew it ; nothing was new to him in regard to the deep-reaching nature of his work. He remarked, "This will break down every despotism. As soon as the system is BIOGRAPHICAL SKETCH OF THE AUTHO&. xix adopted in this country and its results are seen, the people of other countries will compel their governments to establish it ; these prin- ciples are of universal application, and will be ultimately adopted by all nations ; then ' a nation shall be born in a day.' " This last was a favorite expression with him ; he often quoted texts of Scrip- ture in connection with his plan. He said, too, " They cannot bring me any question relating to this subject that I cannot answer, when I have had a little time to consider it." At various times he had written papers expressly for certain public men, setting forth the advantages of his project, hoping to gain the ear of some one who might speak of it effectively to the people. He wrote to Henry Clay, and paid him a visit, making a great effort to interest him ; but nobody cared for this newly-dis- covered truth. He spoke often of the oppression of the laboring classes of England, and wrote an article showing how to remedy it, which he sent to the London Economist, but it was not printed. When the book was first published he sent it to Proudhon, and the prominent members of the French Assembly, as well as to other statesmen in foreign countries ; ever hoping somebody might perceive its worth, who would endeavor to put it in practice for the good of the people. He placed it in the hands of editors, members of Con- gress, and Cabinet officers at home. He used to say, " Some men tell me this is a very good theory, but it would not work in practice ; but a theory is of no value unless it can be put in practice ; the practica- bility of a theory and the good results flowing from it are what make any theory valuable." It burdened his soul that he could not make men understand, nor even fairly look at a subject laden with the liberty and well-being of mankind. The few instances I have noted are almost the only ones I can recall of a cordial recognition of his work. He continued to write occasionally when some fresh thought or striking illustration occurred to him ; and he spoke of making a new book ; thinking again that perhaps he could produce something different in expression and illustration, yet the same in principle, which would reach the public ear. But when he considered that the people were not yet alive to the importance of a better monetary system, and that a great deal of thought and labor had been given to the book, he resolved to take it as a basis, and make it more valu- able and interesting by incorporating the new matter with it. Ee- marking to him once in reference to a passage, " Father, that is so simple it does not seem as if there were any need of saying it," he XX BIOGRAPHICAL SKETCH OF THE AUTHOR. replied, " It is perfectly simple ; but people do not know it." And, " What astonishes me is that no one has ever found this out before. I cannot see how the world has gone on so long without any one understanding the real nature of money." " I do not need to hear the history of the monetary laws of nations. If I take the present condition of the people, I can tell pretty nearly what sort of money they have had." "Political economists fill their books with ac- counts of things as they are, but they do not show us any means by which the old evils they depict can be done away." Sometimes he used to call money, because of its present elusive, deceitful, and hidden power, a money-devil, and say that it ought to be chained, so that it could not devour the substance of the producers. He was the most companionable of men : and though his conver- sation naturally turned to matters of government, law, or religion, he liked lighter topics too ; was quick at repartee, could tell a good story, was fond of games, and ever loved a joke. He had a great respect for the common mind ; he loved little children and tenderly drew out their thoughts : he had a lively sympathy for the pleasures and occupations of others, and everybody could do his best in that cheerful and inspiriting presence. He was withal a man of an un- usually beautiful and dignified aspect ; of a manly form, above the middle height, having finely cut features, a pure red and white complexion, dark blue eyes, a firm mouth, and soft gray hair lying in abundance on a noble head. His countenance was expressive of power, refinement and benevolence. When he was conversing on some of his favorite topics, and especially when speaking of the excellent results to flow from just laws, his face sometimes assumed the innocent and joyful expression of a child. The moral effect of his system was always uppermost with him. While he foresaw, perhaps as few others can, the physical benefits to follow upon its establishment, the prospect of peace and good-will among men was the one which most delighted him. " The millennium can never come," he would say, " until this system goes into operation ; but then it can come ! " The foundation of contracts b'eing laid in jus- tice, order and beauty in the state and in society could arise. As I listened day by day to his conversation, I often thought of making a written memorandum of it, but did not. In arguing a question he frequently began at a distance so remote that one did not see the connection ; and as he approached the point, he brought, by means of the train of thought, an unexpectedly great force to bear, carrying conviction to the mind of his hearer. He talked of BIOGRAPHICAL SKETCH OF THE AUTHOR. XXI righteousness, and of justice and mercy, drawing much from the Bible: how often he quoted, "Justice and mercy have met to- gether ; " adding, " There is no justice without mercy ; it is just to be merciful." He said he had thought a very great deal more about religion than he ever had about the currency, and that he could not have written the book if his mind had not been free on religious subjects. He spoke of writing a book on faith, but he never began it. He said, too, that he could write a code of laws ; but he always added, " When my system goes into operation the laws will be very simple ; they will be few and easily understood ; there will be much less litigation." He remarked that if the Jaws were just it would not make much difference which political party administered them. He conceived that party strife would be diminished; that legislative bodies would come together less fre- quently, and he inclined to favor direct taxation for government expenses. He said it was supposed that a country might be so wide, and a nation so numerous as to fall apart Because "of the bulk, but if the laws were just, and a true system of money were instituted, the country might enlarge and the people multiply without dis- advantage. It was during the later years of his life, while his mind was occupied with these subjects, that a committee of gentlemen in- vited him to take the presidency of a bank, urging that if he would consent, such confidence was felt in his management that the stock would be taken immediately ; and the United States Government appointed him to appraise the value of some lands ; but he declined these offices, as he had previously declined a minor political one. I mention these otherwise trivial incidents to show his reputation as a practical man. In the summer of 1857 it became evident that his hitherto vigor- ous health was declining, and a few months later the presence of a painful and fatal disease was disclosed. During the financial pres- sure of the autumn he felt intensely for the general suffering, which, in his then weak condition, seemed almost beyond his endurance ; and said, <: It is not the trouble in my own affairs, but it is the cause of these calamities that wears me out." He wrote an article for the New York Tribune, copied in the appendix of this book. The an- nouncement of his approaching departure he received with the equanimity that distinguished him ; saying, " It is usually our duty to prepare for life, but circumstances change ; there is a debt of nature that we all must pay, and I have considered our duty in re- XX11 BIOGRAPHICAL SKETCH OF THE AUTHOR. lation to it for many years ; and it does not alarm me at all not a bit. I shall still be in the presence of the same Being before whom I have lived ; there will be no change in that." He continued to go to his office as his strength permitted, and to attend to his affairs. At home he caused me to read his book through to him, after the lapse of seven or eight years listening to it with marked satisfaction, and saying that it was much better than he had thought it. When we came to the passage where it is said that those who neither lend nor borrow money, and have not the mental grasp to understand how the rate of interest affects the re- ward of their labor, shall yet benefit by the institution of the new system, he was visibly affected, and said, " If I did not know who wrote that book I should say, that sounds like Christian legisla- tion ! " He changed the title for the present one, made some amendments, dictated a few paragraphs, and from time to time spoke to me of some points which he desired to have enforced ; es- pecially that the rate of interest ought not to exceed the expense of instituting and circulating the money ; but he added that at one per cent, it could not be made oppressive to the producers. He had previously said that no doubt an attempt would be made to lower the rate of interest gradually ; but, in his judgment, it would be much better to bring it at once to the just standard ; then every thing would adjust itself to that, and there would not be a series of readjustments consequent upon lower and lower rates. He said, " If there should be a war in this country, my system would be much more likely to go into operation ; for the government would be com- pelled to issue a large amount of paper money to carry it on." * In those days of physical weakness and suffering, when greatly oppressed by the general lack of appreciation for this truth, it soothed him to have me talk to him with faith and hope of the coming day of recognition for it. I promised him that I would print a new edition of his work, and make additions to it from his manuscripts. He gave me all his manuscripts, though long ago I had often said to him that those were my perquisite, valuing them highly, and he had assented, remarking, "There are some good ideas in those old papers that you have not got out yet." But now he gave them to me definitely, and the copyright, and all the- * Those who proposed and carried the legal tender act can tell what strength they derived from the facts and arguments of the New Monetary System, which was freely circulated among members of Congress and others at Washington. BIOGRAPHICAL SKETCH OF THE AUTHOR. XX111 remaining copies of the essay and the book and I received them as one who takes a sacred trust for the people. He said, " Mary, I love my friends, I love my family ; I take a great interest in their welfare ; but I care more for that book than for any thing else, it is of such vast importance to the world." Soon after this he could no more go out, nor go to his writing- room, and for three weeks his family watched beside his dying-bed. He bore intense suffering with resolution and uncomplaining forti- tude. Once as he lay apparently asleep I heard him say, " That is shortly expressed," and asking what he said, he replied, smiling, "I was dreaming about usury, I guess." Again when I heard some word, he said again, " I was dreaming pleasant dreams all my thoughts are pleasant." To an old and valued orthodox friend, who, knowing he did not hold the usually received religious opin- ions, asked him how he should appear before a just God, he replied, in tones of solemn sweetness and serenity, " In regard to that I feel a perfect peace. You may think strange of it, Judge, but I do." Each day until the very close he gave directions respecting his affairs; in the extremity of death he did not neglect to greet a friend ; and in perfect possession of his faculties up to the instant of his departure, on the 29th day of April, 1858, this great soul went hence. , We who sat beside him day and night, and saw his grand com- posure, could but think of the old philosophers, to whom, in mind, he always seemed to me akin. My spirit went up with him to the company of the saints and reformers of every age. We laid the wasted body in a grave on Chestnut Hill in the Greenwood Cemetery ; but not until a cast of his head had been taken, that the sculptor might reproduce in marble his lineaments, for those who shall some day desire to see his face. I have now told, according to my ability, who and what he was who wrote this book, and how he was moved thereto ; trusting that it may comfort and encourage those who are to endure the stress of the coming struggle ; that they may know more intimately their pure and benign leader, to whom was denied this conflict which he so ardently sought ; that he was not a closet thinker, as some have called him, but up to the close of a long life actively engaged in affairs ; mingling freely with men and partaking of the ordinary cares and joys ; though having endured toil and hardship, not a dis- appointed, but, in the main, a successful man ; known to most of his business acquaintances in no capacity but as one of themselves, yet, XXIV BIOGRAPHICAL SKETCH OF THE AUTHOR. with his deep nature, having, as he himself said, " an inspiration of the truth " on this all-important subject. In closing I must add, that a few days before his death I said something to him, I do not remember what, about writing some recollections of his life, and he answered me, " I don't think much of these biographies. Every child thinks its own father and mother the best in the world. My book will show what my character was." M. K. P. ELIZABETH, N. J., December, 1874. PREFACE. THE laboring classes of all civilized nations have been, and are, as a body, poor. Nearly all wealth is the production of labor ; therefore, laborers would have possessed it, had not something intervened to prevent this natural result. Even in our own country, where the reward of labor is greater than in most others, some cause is operating with continual and growing effect to separate production from the pro- ducer. The wrong is evident, but neither statesmen nor philanthropists have traced it to its true source ; and hence they have not been able to project any plan sufficient for its removal. The design of tne present volume is to show the true cause ; and to illustrate its operation so plainly and variously, that any ordinary mind may easily perceive how it has produced and continued this un- natural oppression of laborers. It will also be shown, with equal clearness, that a simple and effectual rem- edy can be applied to the removal of the evil. A good government must have some system by which it can secure the distribution of property according to the earnings of labor, and at the same time strictly 3 xxv XXVI PREFACE. preserve the rights of property : and no government, whether republican or not, that fails in these particu- lars, can insure the freedom and happiness of the people and become permanent. The plan proposed to secure this distribution is obviously safe and cer- tain ; and it contemplates no agrarian or other similar distribution of property, nor any interference in con- tracts between laborers and capitalists, or in the usual course of business. Fulfilling these requirements, it can hardly fail to recommend itself to all thinking men. Therefore, it is confidently believed that when the plan shall become generally known, it will be quickly put into operation, and thus save the produc- ers of this nation from the oppression, degradation and misery which have befallen the laboring classes of all other countries. A NE MONETARY SYSTEM. INTRODUCTION All civilized nations enact certain fundamental laws. These are governing powers, and subsequent laws are intended to carry them out into practical use. The most important fundamental law in any nation is that which institutes money ; for money governs the distribution of property, and thus affects in a thousand ways the rela- tions of man to man. If wrongly instituted, it cannot be rightly governed by any subsequent laws ; and the wrong distribution of property consequent upon it must corrupt society in all its branches. The evils engendered can never be remedied except by altering the funda- mental law. Changes in the subsequent laws, so long as they are founded on a wrong base, can only result in the exchange of one evil for another. The proposition that wrong premises will produce wrong conclusions is often stated, yet it is seldom fully understood and properly appreciated. We will therefore, by means of one or two simple illustrations, show the governing power of a fundamental principle. A good house cannot be built except upon a good foundation. The mason- work above may be laid of the best material and by the best work- men ; but if the foundation be not sound, and sink at each corner from five to twenty inches, although the 17 18 IN'i^- i-6'tiiiwii. house shouid not fall, yet this movement of the founda. tion will distort the floors, ceilings, roof and. rooms from their proper shape ; and no propping or patching up of floors, ceilings, roof or rooms will ever make the house a good one. It will be directly the opposite, it will be a poor one ; and as the foundation continues to move, will constantly need repairs. A valuable machine cannot be invented except upon true mechanical principles. Let a man invent a machine founded upon a false principle. Every part of it may be well made of the best ma- terial, and when finished it may present a plausible ap- pearance, yet it either will not work at all or it will work imperfectly, and can never be good until it is founded on true mechanical principles. The stability of a house shows the character of its foundation ; the results produced by a machine show the worth or worth- lessness of the principle on which it was invented ; and with equal certainty the centralization of property in a nation shows the character of its monetary laws. If great wrongs prevail while there is a general conformity to laws apparently designed to secure justice, there must be, in spite of appearances, some defective law or institution, which is a sufficient cause of those wrongs. The general evils naturally and inevitably flowing from it are easily seen, like the parts of the building above ground, and like the wheels of the machine that are open to view, while the great radical defect in the ground- work may be so hidden from public sight as to attract comparatively little attention. One of the chief objects for which governments are constituted, is to insure the protection of the rights of property. The security of these rights is essential to the welfare of a people. Their infringement is the cause of nearly all legal procedures. Such crimes as theft, gambling, fraud in business, bribery in courts of law, etc., consist in unjustly obtaining property without ren INTRODUCTION. 19 dering an equivalent. To obtain labor without rendering a fair equivalent, is also a violation of the rights of property. Property is almost entirely the product of labor, for even food of spontaneous growth in the seas or on the land cannot be gathered without labor. Labor has effected every improvement in our country ; it has built our cities ; cleared, fenced, and improved our farms ; constructed our ships, railroads and canals. In short, every comfort of life is the fruit of past or present labor. If any one is in doubt whether labor is the actual pro- ducer of the wealth, let him consider what would be the situation of this or any other civilized nation, if the laborers should cease their toil for the brief term of five years, letting the earth for that period bring forth only her spontaneous productions. Let man neither sow nor reap, let manufacturing cease, commerce be suspended, and what would be the condition of our country at the end of the five years ? Would not a large proportion of the people have sunk into their graves from starvation ; and would not many who were living be almost naked like the barbarians ? If the earth should open her chasms and spew out pure and malleable gold and silver, as plenty as the rocks in the mountains, it would afford no relief. But if she should cast out wheat, corn and vegetables, beef, pork, mutton, poultry, besides gar- ments, houses, furniture and so forth, the people would be supplied with the means of subsistence. In such a case we might do without the labor of man. But if we had all the gold and silver money and all the paper obli- gations that have been made from the creation of the world to the present day, they would not be the least substitute for the productions of labor ; and yet our laws make these legal instruments in the hands of the few to trample in the dust the rights of the laborer, on whom we depend for every morsel of food that we eat, 20 INTRODUCTION. for the clothing we wear, the houses we live in, and in fact for every comfort and luxury of life. A moderate amount of labor readily produces an abun- dant supply of necessaries and comforts for man ; but the present distribution of these products is such, that a large number of those who labor much more than their share in the production, receive a very small proportion of the products, while the larger proportion accumulates in the possession of those who are employed neither in produc- ing nor in distributing them. The greater portion of the human family toil day by day for a scanty subsistence, and are destitute of the time and means for social and in- tellectual culture. The industrious poor, as a class, do not obtain even a competence. Their destitution often in- duces them to trespass against existing laws, to obtain a small proportion of that, which, under just laws, would be abundantly awarded to them as a fair compensation for their labor. All candid men will acknowledge this truth, that the wealth is not distributed in accordance with either the physical or the mental usefulness of those who obtain it. Opposed to the masses who live in toil and poverty, is a small proportion of the human race, sur- rounded by all the appliances of luxury, and living in comparative idleness ; while their abundant means of so- cial and intellectual culture are too often neglected, or ren- dered useless by indolence and self-indulgence. These extremes of wealth and poverty, of luxury and want, of idleness and labor, are great, somewhat in proportion to the antiquity of a nation, or the length, of time that its monetary law, or system, has been in operation. The wealth of this nation, like the wealth of other na- tions, is rapidly accumulating in the hands of a compara- tively few persons in our large cities. Still it is indispu- table that cities are great consumers of wealth, while they are comparatively small producers. The labor of the country furnishes nearly the whole support of the INTRODUCTION. S4J cities. The rewards of labor paid by the cities and the country respectively to each other, to be justly recipro- cal, ought to be in proportion to the services rendered to each other ; but the immensely greater amount of wealth flowing to the cities, and the less to the country, is clearly opposed to this just reciprocity. This will be more ap- parent by supposing the large Atlantic cities to be cut off from all interchanges with the country. In a short time their citizens would be destitute of food, fuel, and clothing, for exchanges of their productions among them- selves would do very little toward supplying their wants ; while the people of the country and the small manufac- turing towns, if they had a just medium by which they could exchange their productions with each other, would have an abundant and vastly more bountiful supply than at present of nearly every necessary and luxury of life. They would save for their own use nearly the whole dif- ference between what they now produce for the large cities, and what these cities produce for the country. But even in these cities, where a great part of the na- tional wealth is owned, a majority of the people toil for a scanty subsistence, and thousands of miserable poor are dependent on public charity. In all probability, four thousand of the most wealthy citizens of the city of New York own a greater amount of real and personal property than the whole remainder of its inhabitants. Their wealth is vested in real estate in the city and country, in bank, railroad, State, and other stocks, loans of money, etc. Allow five persons to form a family, and the four thousand men and their fami- lies would form a population of twenty thousand, or two and a half per cent, on eight hundred thousand; the pres- ent population of the city. Upon this estimate and a little observation and reflection will show that it is not an extravagant one two and a half per cent, of the popu- lation are worth as much as the remaining ninety-seven INTRODUCTION. and a half per cent. Take the disproportion of wealth on a greater amount of population. "We may reason- ably estimate that a hundred and fifty thousand of the wealthiest men in the United States own as much real and personal property as the whole remainder of the nation. Allowing five persons in a family, these hun dred and fifty thousand men, with their families, make a population of seven hundred and fifty thousand, or two and a half per cent, on thirty millions, the present popu- lation of the country. This calculation will make two and a half per cent, of the population own as great an amount of wealth as the remaining ninety-seven and a half per cent. Our government professes to establish laws for the benefit of the whole people ; and such laws, if justly administered, should secure to every individual a fair equivalent for his labor ; yet probably half the wealth of the nation is accumulated in the possession of but about two and a half per cent, of the population, who, to say the most, have not done more labor toward the production of the wealth than the average of the ninety- seven and a half per cent., among whom is distributed the other half of the wealth. Let those who doubt whether two and a half per cent, of the population own half the property of the nation select in their own neighborhood, or in a village contain- ing, say, four thousand inhabitants, the twenty most wealthy men, and see if the twenty are not worth as much as all the rest. Or, if the village contain ten thou- sand inhabitants, take the fifty most wealthy men, and see if they are not worth as much as all the rest. Allow- ing the families of the fifty men to average five persons each, they would amount to two hundred and fifty indi- viduals just two and a half per cent, of the population. If it be found that the fifty men and their families own one-half of the property, then see if they have contri- buted more labor physically, intellectually, or morally. INTRODUCTION. 23 for the general benefit, than the rest of the villagers. We do not now speak of what their wealth may have done in hiring others to make improvements, but of the improvements that the fifty men and their families have effected by their personal labor. If they have not accom- plished as much as all the rest of their townsmen, and yet own half the wealth of the town, some wrong to the majority of the people has been done. Not that these men have not acted in as good faith, or with as upright intentions as other citizens ; or that others would not be equally glad to accumulate wealth in the same manner ; but we ask how it occurs that the comparatively few have so large a proportion ? They have not earned it, for they could not have performed the labor of building half the town, nor of providing half its inhabitants with food and clothing ; nor could they have given half the instruction in the various trades and in the school educa- tion of the villagers. And if they have not done one- half the labor, why is it that they possess one-half the property ? Why is it, too, that we see one industrious man rise from poverty to wealth, apparently because his business is prosperous, and another man, who is equally diligent in an equally useful employment, remaining with a mere subsistence ? These facts are sometimes attributed to the ignorance and extravagance of the laboring classes. But if all our people were learned in Greek and Latin, as well as in other languages and in the sciences, the ground must continue to be tilled, and railroads, houses, and so forth, built by labor. Not all the education, nor all the money in the world, would make these improvements without the physical labor ; and it ought to secure to those who perform it a just and much larger share than it at pre- sent does of all the comforts of life. Many good scholars and industrious and intelligent men are poor, while very indifferent scholars and rather ignorant men have ofter 24 INTRODUCTION. accumulated fortunes. The ignorance ot the laboring classes does not account for their poverty.. NOT does want of economy better account for it. What oppor- tunity has the laborer to be extravagant, when the price of his day's work would hardly pay that day's board and lodging in a comfortable house in our cities ? Do the factory operatives in England, France and Germany live extravagantly, or the seamstresses in London and New York ? They earn three, four or five times more products than they actually consume, and these go into the pos- session of that class of persons who live comfortably or luxuriously without performing much, if any, productive labor, or advancing the moral and intellectual well-being of society. The wealthy men of a nation are not usually those whose genius makes improvements in the mechani- cal arts, or who, by any species of labor, contribute much to actual production. Their attention is generally directed to the accumulation of wealth by indirect means, which do not require labor.* The injustice of the present distribution of products is still more conspicuous, when we consider that present labor is indispensable to human existence. Although all discoveries, inventions, and improvements, made by all previous labor, are transmitted, free of expense, to suc- cessors, yet the property, thus improved and inherited, cannot give support without present labor. The sponta- neous productions of the earth cannot supply one-twen- tieth part of the population with food. Clothing can last but a few years, and buildings, unless /repaired, must decay. Therefore, each generation must in the main provide its own means of subsistence. If a generation enact laws through which one-third of the succeeding * Labor signifies toil, which produces or distributes something .Actually useful ; and this is the sense in which the term is used in this volume. When toil is directed to wrong ends, it does not deserve the name of labor. INTRODUCTION. 25 generation can live in luxury without labor, then the labor of the other two-thirds, besides supplying their own necessities, must also supply the wants of the first third. Although the idle rich man inherits wealth, yet he owes his present support to the labor of others. Others must raise the grain that he consumes, manufac- ture cloth for his use, build his house, etc. If one-third of a generation own all the property, they have the means of supplying their wants by labor upon their own possessions ; but the two-thirds who have no property, have not even the means of preserving their lives, unless the one-third allow them the use of property on which to expend their labor. In addition to this evil of greatly centralized wealth, all civilized nations are every few years visited with great revulsions in trade. Outstanding debts become unsafe, and many debtors bankrupt. There is usually an appa- rent overstock of goods and products, for which there is no ready market ; houses will not sell or rent ; manufac- tured goods lie in the stores and cannot be sold for the cost of making ; and therefore laborers are out of employment, for why should more be produced to decrease still further the ruinous prices at which those already in market must be sold ? At such periods, in our cities, one house is filled with families, one in each room from cellar to garret, and the adjoining house stands empty for want of tenants able to pay the rent. Goods are piled up in stores without sales, while great numbers of the laboring community are ragged and are begging from door to door for old clothes to shield them- selves and their families from the piercing cold, and for the crumbs that fall from the tables of the rich to keep them from starving. When people look about to ascer- tain the cause of these things, seeing houses and stores un tenanted, and great quantities of agricultural products 26 INTEODUCTION. and manufactured goods on hand for which there appears to be no market, they generally come to the conclusion that over-production and over-trading have caused these calamities. If this be really the case, public measures should be taken to avert such disasters, by preventing an excess of labor. Is it not strange that at the times when the amount of surplus production is a subject of national lamentation, the people who produce by their labor the very things which they need for their own use and comfort, are the ones who are often destitute of them ; while a few capitalists who do little or nothing toward the production and distribution, are supplied with all the comforts and luxuries of life at half, or less than half their usual price ? But a surplus of cotton has never remained because no one needed it. In 1844, nearly sixty thousand citizens of New York received the aid of public charity. All these needed additional cotton cloth- ing. At least one-half the population of the whole country would have made a yearly purchase of five dollars' worth of additional cotton clothing, if they could have spared the means from their earnings. In one year ten millions of persons would have consumed $50,000,000 worth of cotton clothing, in addition to the previous quantity. Cotton would then have maintained a good price, and the crops would have been consumed. If, during the years included between 1837 and 1844, the laborers in the city of New York and its vicinity, whose occupation was the building of houses, had been furnished with the work which they would have been willing' to perform, they would have built a house for nearly every poor family in the city. If the unemployed laborers in the districts where the materials for building, bricks, mortar, timber, boards, nails, etc., are usually prepared, had been set at work, the materials might have been furnished, and the buildings erected and paid for by labor. The laborers, INTRODUCTION . 27 too, would have been much happier, for they begged for work without obtaining it, and many were dependent on public charity. It is plain that there can be no real over-production unless a large surplus remains after all the people have been fully supplied with the necessaries and comforts of life. The public cannot over-trade by distributing each year's productions among those who really need them to use. Too high prices cannot be paid for labor, unless the laborers in general actually gain more than their equitable share of the year's productions. Neither can there be an over-stock of laborers so long as thousands are suffering for want of the very articles these laborers would gladly produce, if they could be employed. There cannot be too many houses, when they would be filled with tenants able to pay the rent if work could be obtained. We must look for the real cause of these calamities, not in over-production, but in the power that governs the distribution of the products. But, taking another view of the subject, it may be said that we are a free people, and many suppose we enjoy all the rights that a government can confer. Every one employs himself in labor, trade, speculation, or other- wise, according to his own choice ; sells his labor or products at such prices as he can obtain, and buys the labor and products of others at prices that he agrees to pay. Our government is also deemed beneficent because poor-houses and schools * are provided for the * In the various States, a tax is levied to provide schools for the children of the laboring classes. Under existing laws, this species of charity is, doubtless, very important. But wealth being the pro duct of labor, the laborers should have abundant means to educate their children ; and if a fund be established for the purposes of education, it should be necessary for those only who are unable or unwilling to labor. It is unreasonable for the laws to be such as to compel the producers of wealth to ask alms of non-producers. 4 28 INTRODUCTION. needy. If a farmer or a mechanic should be told that our laws oppressed him, probably he would say, that he worked at what he pleased, and sold either his labor or its products to whom he pleased, and had no law suits, and therefore, the laws did not in the least infringe his rights, and would not those of any other man who was upright in his dealings. The laboring classes make their own bargains with capitalists, and one another; and all are equally protected in. the property which they lawfully acquire. Why then do not laborers get all they are justly entitled to receive? Looking at the matter in this light, it wears an appearance of freedom and equal justice ; yet results prove the existence of some radical wrong lying below this surface view. For \ve all know that wealth is produced by labor, and vhat the people of the country send the best products of their incessant toil to supply the luxuries of the wealthy in cities; and that the laborers in these cities build splendid mansions for the opulent, and poor tene- ments for themselves, most of which are also owned by capitalists, and rented to their occupants. True, all this labor is paid for by capitalists according to their agree- ments with laborers; yet, notwithstanding these volun- tary agreements according to the law of supply and demand, the wealth of the nation continues to accumulate in large fortunes in the hands of a comparatively few non-producers, leaving a very large number of its actual producers in poverty. These are facts that stand out to public view, and cannot be denied. Freedom of contract, choice of location and occupation, and protection of property, are manifestly proper and right, and ought to be enjoyed by every people ; yet we see they fail, and entirely fail, to secure any equitable distribution of property, and any adequate compensation for labor. They fail for the same reason that good materials and workmanship on a bad foundation Ml to make a good INTEODUCTION. house. Their foundation is unsound and variable, perverting their natural good tendencies, and engender- ing defects corresponding with their wrong basis. A bad foundation for a house affects the edifice above, and the few individuals who are interested in its building and use. A machine not founded on true mechanical principles, affects the few who own it, and those interested in its working. But a national standard of value liks money, which forms the foundation of contracts, and regulates the award of property, thus greatly modifying and limiting all minor rights of freedom of contract, location and occupation, and which a whole nation is compelled to use, must, if it be variable and uncertain, affect injuriously the interests of every individual, family and association, as far as the money circulates. The present rates of interest on money enable the owners of property to demand an undue proportion of the products of labor for the use of property, and laborers are compelled to make their agreements with them under these circum- stances. Undoubtedly both parties are governed by their own interests in making their agreements ; but the circumstances under which contracts are made, render them very unjust toward laborers. Suppose one of the contracting parties to be in water, where he must drown unless he receive assistance from the other party who is on the land. Although the drowning man might be well aware that his friend on shore was practising a very grievous extortion, yet, under the circumstances, he would be glad to make any possible agreement, to be rescued. The monetary laws of nations have depressed the producing classes to a similar state of dependence upon capitalists, and they are similarly obliged to make their contracts with them under great disadvantages. A very large proportion of the people are actually wronged out of their property, and the earnings of theil labor, by the operation of the laws, although their con- 30 INTRODUCTION. tracts are voluntarily made, and honestly fulfilled. Neither of the contracting parties may know that either is injured by the laws, although both may be sensible that justice is really not done them. In all ages and nations, philanthropic men have endea- vored to devise some means of securing to labor a better compensation. Labor-saving machines have been in- vented ; associations have been formed for the purpose of producing with less labor, the earnings being equita- bly distributed, according to the work performed. But these benevolent efforts have failed of any general success. The reason is this : no individuals, nor associations of indi- viduals, can withdraw their labor or their products from the influence of the national laws which regulate distribu- tion. The great disparity in the conditions of the rich and poor is the natural result of unjust laws, and, there- fore, this disparity must continue so long as these laws are in force. If, however, a father should so dispose of his property, that all his children, except one, should be compelled to work twelve or fourteen hours a day for a mere subsistence, while one son should receive an im- mense fortune, which would supply him with every luxury without toil, the injustice and injury to both parties would call forth the censure of every right thinking per. son. A government is no more justifiable in legislating so as to produce these results, than a father is justifiable in a similar treatment of his children. Goveniincnts are established to protect the just rights of the governed, as much as a father holds his position to protect the just rights of each child. Present laborers, who produce present products, should receive a very large proportion of them, and capitalists who do not labor, should receive a corre- spondingly small proportion. How shall this change in the reward of labor and capital be effected-? Shall laws be made to determine the prices of various kinds ot INTRODUCTION. 31 labor, and thus prevent the laborer and employer from making contracts upon their own terms ? This would be impracticable, and, if practicable, not desirable. Each man should be at liberty to make his own contracts. There is no need of interference with this liberty, in order to prevent capital from taking too large a proportion of the products of labor. The unfair distribution of wealth is caused by an un- just legal standard of distribution. Distribution is re- gulated and effected by the standard of value, which is money. Money, as will be hereafter shown, exercises astonishing power throughout every department of busi- ness and industrial occupation. When monetary laws shall be made equitable, present labor will naturally re- ceive a just proportion of present products, and capital will likewise receive a just reward for its use. The necessity for the exchange of commodities is gen- erally acknowledged. Few, however, even among think- ing men, are aware how indispensable these exchanges are to the subsistence and comfort of the human family. Men are social beings, and mutually dependent. To appreciate this important truth, we must consider the inability of each man to provide for the numerous wants of his nature ; and the ignorance and discomfort to which each would be exposed, were he not benefited by the labor of others. If every man could build his own house, furnish his own food and clothing, and make all the instruments and utensils that he needs to use : if the materials for all these things were placed upon every acre of land, and every man, woman and child, were endowed with sufficient skill and strength to produce them, there might be no need of an exchange of commodities. But all men are, in many, in most things, dependent on the labor of their fellow men. For example, take vhe farmer, who is acknowledged to be the least depen- 32 INTRODUCTION. dent of men, and see for how many tilings even ho is indebted to the labor of others. He must- have imple- ments for the cultivation, of his farm, a plough, harrow, shovel, hoe, sickle, cradle, scythes, a fan, or fanning-mill, and a cart or wagon. The farmer is dependent on the miner for the iron ore ; on the collier to dig the coal ; on the furnace-worker to smelt the iron ; and on the forger and the smith to make his iron and steel instruments. He is dependent on the wagon-maker for his wagon ; on the machinist for his fanning-mill ; on the carpenter for his house ; on the nail-maker for nails ; on the glass- manufacturer for glass ; on the stone-cutter and the mason for mason- work ; on the brick-maker for bricks ; on the cooper for barrels, tubs, and pails ; on the saw- maker for a saw, and on the rolling-mill to roll out the iron or steel for it ; on the tin-plate- worker for kitchen utensils ; on the moulder and caster of iron for iron pots; on the miner of copper, and on the copper and brass founder for brass and copper kettles ; on the pump- maker for a pump, etc., etc. He is dependent on the needle-maker, the pin-maker, the button-maker, the silk grower, the tanner, the shoe-maker, the hatter, the saddle and harness-maker, the cabinet-maker, and the type- maker, type-setter, and printer. Not one of these artisans, in attending to his particular employment, produces his food and clothing ; and all would be desti- tute of them, unless supplied with them by the labor of others The farmer raises all his food, except salt, tea, colfee, sugar, molasses, spices and the like ; these, and the ships to transport them, must be furnished by others. These wants call into employment ship-carpen- ters, sailors, compass-makers, surveyors, chart-makers, etc. The farmer must raise wool, cotton, hemp, or flax, or else be dependent on others for clothing. If the farmer, who is the least dependent of men, receives from others so many supplies, how is it with the hatter and INTRODUCTION. 33 the shoe-maker ? The former makes an article to cover the head, the latter one to cover the feet ; and all the additional supplies of both must be furnished by the labor of others. Artisans, too, depend upon each other for the different parts of their work ; the cotton manu- facturer must be assisted by others to carry forward his manufacture. Many articles, such as watch-springs, are useless unless they are combined with other parts. It is, then, of paramount importance that no obstacles be thrown in the way of a ready exchange of commodities. A certain quantity of one kind of produce is worth as much as a certain quantity of another kind ; and all civilized nations have adopted some medium by means of which all kinds of produce may be more easily ex- changed than by direct barter. We hear it sometimes asserted that there is no need of a medium of exchange. But the articles of trade could not be divided and distri- buted to supply the numerous wants of a people without a representative of value through which the distribution could be made. For example, a man brings to market five hundred bushels of wheat. The purchaser tenders corn in payment ; and they agree that seven hundred and fifty bushels of corn are worth as much as five hundred bushels of wheat. The seller can use but a small portion of the corn, and finds a purchaser, with whom he exchanges the surplus for hams. He disposes of the hams for hats and shoes. If he endeavor to divide the hats and shoes, and exchange them for the articles that he needs, he may spend two years before he can return to his farm to raise a second crop of wheat. Yet he is fairly dealt with. All those with whom he exchanges, give him, as nearly as possible, an equivalent of actual value for the actual value that they receive ; and all the articles are such as all need. In fact, all trade is simply a barter of one useful thing for another. A person who produces more of an article than he needs 34 INTRODUCTION. for his own use, exchanges his surplus for the surplus articles of others. If the farmer had sold the wheat for money, the money would have been a tender for any other article that he wished to purchase. The value and prices of all products are estimated by money, the legal standard of value. In making out a bill, the articles sold are set down at the prices agreed upon, extended and footed up, and they amount to so much money. How could contracts for various articles be made, and bills of them be made out and summed up, without money ? Should it be said that a pint of Indian corn was equal to four rows of pins, and a pound of cot- ton to twenty needles ; and, if so, must there not be a description of the quality of the pins and needles, as well as of the cotton and corn ? If it should be said that ten pounds of sugar were of equal value with a boy's cap, would it not be necessary to describe the quality of the sugar, as well as the material, workmanship, and size of the cap, in order to make the contract just ? A standard of value is manifestly indispensable to a just and convenient exchange of commodities. Monetary laws are the most important that are enacted ; for, by these laws, money is made the tender for debts and the medium of exchange for products. All indi- viduals are compelled to found their contracts for the necessaries of life upon the standard fixed by law. How- ever good the intentions of the parties, their contracts will partake of the evil of the monetary laws upon which they are founded, and every law that goes to support the fulfilment of the contracts will partake of the same evil. We have laws to prohibit the fulfilment of con- tracts made upon certain acknowledged unjust principles. Contracts made in gambling are void in law. In gam- bling, each player stakes a certain sum, and all agree that the winner shall take the whole. This contract would be perfectly fair or just, if the first or fundamental INTRODUCTION. 35 principle were just. But the principle upon which gambling is founded is, that what one gains, others lose ; for no production is made by gambling, and no equiva- lent is given to losers for their money. The laws make money the foundation for all business contracts. The value of this foundation is unjust and continually vary- ing ; so that parties in fulfilling their contracts are com- pelled to give either more or less tharTa just equivalent for their purchases. The results of all contracts are as vary- ing and unjust as their foundation. The continual fluc- tuations in the value of money make a sort of gambling system of all trade. For an example of the effects of variations in the value of money, suppose the bonds of the government be issued, payable in twenty years, and bearing six per cent, interest. If we had no foreign market for these bonds, and the interest on money in our own country were unalter- ably fixed at six per cent., the bonds would be worth exactly par, and would continue of the same value throughout the twenty years. But if the interest on money should rise to nine per cent., and to obtain a loan at that rate the best security were required, the govern- ment bonds would fall, and would not be good security for more than three-fourths of their par value. If the government issue a bond at par, and, by pressure in the money market, the holder be compelled to sell it at three-fourths of its par value to meet his engagements, the government takes, or allows others to take, one- fourth of his money, for which he no more receives an equivalent than the gambler receives an equivalent when he gambles away one-fourth of his money. The govern- ment reserves the right to coin money and regulate its value, and yet allows its value to change incessantly, and thus, by its own acts, deprives a man of a fourth of his money without rendering to him any equivalent. Under our present monetary laws, when interest is low 36 INTRODUCTION. and money plenty, if a contract be made for the purchase of a farm, of which one-half the purchase money is to be left on mortgage for a term of years, the purchaser runs nearly as great a hazard of losing a large proportion of the money that he pays for the farm, as if he had staked the amount on the turning of dice. For if, at the time the money becomes due, interest should be as high as it was from 1837 to 1840, it is doubtful whether the farm would sell for enough to pay one-half the purchase money remaining on mortgage. The farmer's loss; in this case, would be owing entirely to the change in the value of the dollar, and not to any change in the actual value of the farm ; for the farm would produce as good a crop as if money had continued to bear a uniform interest of six per cent. The laws of the United States are sup- posed to be highly favorable to productive industry ; but the standard which regulates and effects distribution is so made as, in a great degree, to defeat its own object, and to exert a disadvantageous influence upon produc- tion. The effects of high and varying rates of interest upon all classes of producers will be hereafter more fully exhibited. Among political economists, the nature and regulation of money appear to have been subjects of the utmost difficulty. We have no full account of its functions, and no satisfactory answer to the numerous and perplexing questions which arise concerning its value and regulation. The alternate abundance and scarcity of money, and the variations of interest, are supposed to /be irremediable evils. It would seem that gold and silver coins inhe- rently possess a mysterious power, which defies all regu- lation, and renders impossible a comprehensible monetary system. It is doubtless true, that while the nature of a thing is not understood, all attempts to regulate it must prove ineffectual, and legislative bodies have hitherto in- stituted money in a very imperfect way. The money of INTRODUCTION. 37 a nation, instead of being a power by which a, few capi- talists may monopolize the greater part of the earnings of labor, ought to be a power which should distribute fyroducts to producer S, according to their labor expended in the production. The labor-saving machines that have been invented within the last half century, have greatly facilitated pro- duction. Improvements in implements of husbandry have materially lessened agricultural labor ; and most articles manufactured by machinery are made with less than one-fourth of the labor that was formerly required, We should naturally suppose that these improvements would be a great relief and advantage to the laboring classes ; and that they would feel grateful to those who have studied out the laws of nature and invented the machines. Yet both the inventors of machinery, and the operatives, in general, continue to toil on in want, and many of them have neither means nor leisure to educate their children. Increased facility in production seems to increase the number and multiply the wants of those who live in idle luxury, instead of affording the desired relief to actual producers. Fifty years ago, the farmers raised, carded and spun their wool ; they raised flax and spun most of their linen ; and cotton was also mostly carded and spun by each family to supply its own -wants. Now, farmers who raise wool, cotton and flax, sell the raw materials, which often pass through a number of hands before they reach the manufacturer. The manufactured goods again pass through several hands before they reach the consumer. Machinery has collected the people into towns and villages to work in large factories, where they sell their labor, and buy their board and clothing- This greatly augments the necessity for the exchange of goods the more machinery the greater the necessity for exchanges of products yet there has been no new inven- tion in financial affairs, by which the exchange may be more equitably and easily made. True, we have increased 38 INTRODUCTION. the amount of gold and silver coins, and the number of banks, bank-notes, and money-brokers, but this is no more an improvement in the medium of distribution, than an increase in the number of pack-horses on the old muddy roads would be an improvement in conveying products, while it would still take the same muscular power to convey a given weight. A railroad made and a steam-engine substituted for horses and oxen, are great improvements in the mode and means of transportation. Though the quantity to be conveyed may be increased tenfold, railroads and steam-engines will fulfil all re- quirements ; whereas if we depended on an increased number of horses and oxen, want of teams and bad roads would often cause great inconvenience. But no inconve- nience of this kind could equal that experienced by the producers in consequence of the defects of our monetary system. Just monetary laws are of more importance to the laboring classes than all the machinery that has been invented during the last fifty years. And when the needed reformation is made, the producing classes, who will gain the benefit of ah! improvements, will rejoice at every advance in machinery, and the inventors will be hailed as the benefactors of man. Many people seem to be opposed to innovation. They do not. consider that all improvements in the mecha- nical arts, or in laws, are innovations upon former things and former laws. The establishment of our republican government was an innovation upon monarchies. Peo- ple do believe that changes may be macje for the better, for each year they assemble legislative bodies to remodel old laws, and to make new ones. Every modification of a law is an innovation, and every new law is an innova- tion upon former laws. Every moral improvement is an innovation upon the previous evil. Those who talk against innovation are often great innovators. They an? doing, or advocating something to improve the condition if man. INTRODUCTION. 39 The antiquity of laws and customs is not a proof of their excellence. In all ages, and in all nations the pro- ducing classes have been ill paid for their labor. Let us no longer recur to ancient laws and usages to uphold our unjust standard of distribution. Our producing classes are vastly more interested in knowing how the products of their own daily labor are disposed of, than in knowing iow the ancients disposed of theirs. We cannot alter the evils of the past ; we must act for the present and the future. Suppose a legislature enact a law which gives a certain part of their constituents great advantages over ihe remainder. They discover the error, and amend the law so as to operate equally upon all. The alteration is not an infringement of the rights of those who received undue advantages from the former law. It only renders justice to those previously injured. Money is as much the representative of the property of the people, as the legislature are the representatives of their constituents. Its erroneous construction and undue power have made a few rich, and have plunged thousands into poverty. Thej, have sent hundreds to premature graves, starved the widow and the orphan, and given untold Avealth to the miser. They have been the cause of incalculable moral and social evils. It is not to be understood that those who now possess the wealth are worse than others who do not possess it, or that others, if they could have obtained it, would not have appropriated it in the same manner. But on thing is certain, that an enormous and universal wrong exists, which nothing but an entire change of our laws, respecting money, can remedy. Money is the national standard of distribution, there- fore the evils inevitable upon its present institution, are national evils, which can only be removed by the action of the general government. A defective standard will, doubtless, appear to many an inadequate cause for the wide spread wrongs of unjust 40 INTRODUCTION. distribution ; but the fact can be established by the clear est proof, and such will be adduced in the progress of the work. It will also be shown, that a safe and just monetary system can be easily established by the govern- ment, which will so regulate the standard, that the general distribution of products will be in accordance with actual earnings. When the farmers and mechanics, and other producers, and laborers, understand the system which is to be developed, and perceive its adequacy to secure to them a just compensation for their labor, they will as surely cause it to be put in operation, as they would send their products to Philadelphia or Boston, rather than to New York, if in the former markets they could sell them for a third more than in the latter. The correction and due regulation of money will make no change in the present ownership of property. The changes effected by the establishment of a sound mone- tary system will be gentle, immediate, gradual, sure. Only such will ensue as will naturally result from secur- ing to the laborer a fair compensation. Its object will be to protect producers in their rights, and not to re- taliate for past injuries. No agrarian distribution will be necessary, but a just standard, that will at once begin to regulate the distribution of products, so as to reward the labor performed, and which will in process of time distribute property in accordance with individual and general rights and interests. Although the bearings of money upon labor may be deemed a somewhat dry sub- ject, yet, under its present new aspect, it is believed that it will prove deeply interesting to all classes. The patient and continuous attention of the reader is soli- cited to the important facts and principles now to be presented relative to the uses and abuses of money, and to the new plan to be suggested for its institution and regulation. PART I. THE PRINCIPLES OF DISTRIBUTION. CHAPTER I. OP VALUE. VALUE consists in use ; it is that property, or those properties, which render anything useful. A house that could not be occupied would be worthless, unless its materials could be employed for some other purpose. A horse is valued for his useful qualities ; if he becomes disabled, he is worthless, for his use is destroyed. So of everything necessary to the support and comfort of man, it is valuable because it is useful. The same is true of ornaments. They are valuable because they are useful for ornamental purposes. If diamonds were deprived of their beauty, their use, and therefore their value, as ornaments, would cease to exist. A valuable portrait might be rendered worthless by erasing the features. The canvas and the paint, the material of the picture, would remain, but its use would be destroyed. The value of all property is estimated by its useful- ness. For instance, the income that a city lot can be made to produce, determines its value. The interest on 41 42 OF VALUE. the money that its improvement will cost, must be first deducted, together with the taxes, insurance, and repairs necessary to keep the improvement permanently go o d The surplus it will yield after making these deductions, determines the true value of the lot. There are two kinds of value : actual value, and legal value. Actual value belongs to anything that inhe- rently possesses the means of affording food, or which can be employed for clothing, shelter, or some other use- ful purpose, ornamental or otherwise, without being exchanged for any other thing. Legal value belongs to anything which represents actual value, or capital. Its existence depends upon actual value. The worth of things of legal value depends upon their capability to be exchanged for things of actual value. The following illustration shows the distinction be- tween actual and legal value, and the dependence of the latter upon the former. The national debt of England exceeds 800,000,000 sterling, say $4,000,000,000. It bears interest at about an average of three per cent, per annum, amounting to an annual sum of $120,000,000. A hundred and twenty millions of dollars' worth of the products of labor, of actual value, must be sold annually to pay the interest ; to pay the principal would require a large proportion of the wealth of the country. If the paper, the legal value which represents and secures the debt and interest, were collected and burned, it would not diminish the real wealth of the nation. It would merely cause a change in the individual ownership of property. But alter the circumstances, and. suppose a similar amount of actual value to be consumed, houses, manufactories, machinery, fences, grain, etc., to the amount of $4,000,000,000, and nearly every improve- ment would be swept from the British Islands. Destroy merely the three per cent, interest of actual value or OF VALUE. 43 the debt for one year i. e., products to the amount of $1 20,000,000, and a famine would ensue ; for actual value, the products of labor, would be destroyed, instead of a legal representative, as in the case of the conflagration of the paper securing the interest. The power of money, like the power of a bond and mortgage, is legal. A mortgage upon a specific piece of land gives the owner of this paper instrument a right to a certain portion of the value of the land. A mortgage is a specific Hen, by which one individual binds a certain portion of his property to another. A lien on property, in the technical acceptation, is a judgment recorded on the docket of a court, or a mortgage recorded in the county clerk's office. These instruments hold a right over the property of the debtor, in defiance of him, or of any other person who may have the property in posses- sion. Money is a public lien upon all property that is for sale in the nation ; and the bolder of money can, at all times, procure with it the amount of property which it represents, as much as the holder of a mortgage can procure the specified amount of property upon which the mortgage is a lien. Money is, however, a lien superior to all mortgages and judgments ; because, if the specified amount of money be tendered, the owner of the mort- gage, or judgment, is compelled to cancel it. Notes of hand are deemed by all business men to be liens upon the property of their drawers ; otherwise, although a man owned ten thousand dollars' worth ol property, his note for five thousand dollars would be deemed no better secured than if he owned no property. If money were not a lien on property, it would be value- less, and people would cease to part with their property for it. The value of notes of hand, bonds and mortgages, book accounts, and money, depends upon their capabi- lity of being exchanged for property. Their power to 44 OF VALUE. accumulate is given by law, and they accumulate a mere legal representative ; that is, interest in money, which is valuable only because, like the principal, it can be ex- changed for a certain amount of actual value. Hence, the value is in the property, and not in the money or in the obligations. Money, and all obligations, are mere representatives, and depend upon property for their value. CHAPTER II. MONEY-THE MEDIUM OF DISTRIBUTION. SECTION I. THE NATURE AND PROPERTIES OP MONEY. MONEY is the national medium of exchange for pro- perty and products. It must be instituted, and its value must be fixed by the laws of the nation, in order to make it a public tender in payment of debts. No debt can be paid with property or with individual notes, except by consent of the creditor ; but when money is tendered, all creditors are compelled to receive it in full satisfac- tion of debts. The aim of legislation in regulating the value of money is to insure to all individuals, in making exchanges of their property for money, the full value of their products or property. Debts are postponements of the time of payment for the property or products received ; and loans of money, and all rents of property, are mere rents of the use of certain amounts of legal or actual value, which use is to be paid for at the expiration of a specified period. Money is the legal tender, and must be offered and received in payment for all these debts. Certain properties are by law given to some substance, which bears the name and performs the functions of money. The term money, then, signifies a legal, public 45 4:6 THE POWER OF MONEY medium of exchange, which possesses all the qualifications necessary to effect a just exchange of property. In the discussion of the nature of money, it will appear that its properties are, in truth, the creation of law, and entirely different from the properties of the things which it ex changes. Money has four properties or powers, viz. : power to represent vaJ,v,e, power to measure value, power to acci^ mutate value by interest, and power to exchange value. These properties are co-essential to a medium of ex- change : it is impossible that any one of them should exist in such a medium independently of the others. The material of money is a legalized agent, employed to express these powers, and render them available in trade. The powers of money, which alone render it useful, are created by legislation ; therefore, money can possess none but legal value. As all legal value depends upon the actual value which it holds or represents, money must represent actual value that is, the value of property or labor. SECTION II. THE POWER OF MONEY TO REPRESEOT VALUE. Money must be a legal representative of property, for it is impossible to find any light and portable material possessing the requisite inherent value to equal and balance the value of the property and products to be exchanged. The real value is in the property and pro- ducts, and the money is only the legal medium by which this value is represented and by which exchanges of the property and products are made. Every representative is distinct from the thing which it represents; and its presence implies the absence of the thing represented. A representative has power to act for, or in lieu of something else. The power to represent TO REPRESENT VALUE. 47 is always independent of the natural or inherent powers of the representative ; it is superadded and delegated, and cannot alter the original capabilities and qualities of the agent. Delegated authority gives the agent, the person or thing, power over other persons or things, which, with merely his natural capabilities, he cannot possess. Acting for himself alone, his acts are all indi' vidual, and incapable of binding any but himself. For instance, he cannot give a note, bond or deed, which will bind others, or the property of others, unless the power be expressly delegated to him. He may reeeive authority to give a note or bond binding the property of the peo- ple for its payment. This authority does not diminish or alter his capabilities as an individual ; it is superadded to his natural endowments. An ambassador represents our nation at a foreign court. If he be lost at sea, the nation loses but one individual, although he represents and acts for thirty millions. But if the nation should be annihilated, and the ambassador should reach his des- tination in safety, he would cease to be a representative : he would have nothing to represent. He would, how- ever, possess all his powers as an individual he would lose only his delegated authority as a representative. A representative in Congress is chosen by the people, and is empowered to act for or in lieu of them. Still it is not supposable that he possesses as much knowledge and skill as all his constituents. They are farmers, mechanics, manufacturers, and merchants. Of many of the arts with which they are familiar, the member of Congress is ignorant. He is their representative for one specific purpose i. e., to make laws to govern the peo- ple. He has a moral perception of justice corresponding to their perceptions of justice, and this fits him to be their representative in making laws. Money is made solely to facilitate the exchange of products. To be capable of effecting this exchange, it must be endowed 4 THE POWER OF MONET with a legal power to represent actual value / for it pos- sesses no inherent quality which makes it equivalent to products or labor more than the representative in Con- gress possesses all the knowledge and abilities of his con- stituents. It is held for the time being in lieu of property ; we cannot use it as property, and if we wish to use actual property we must obtain it by giving the legal representa- tive, money, in exchange for it. A representative in Congress has the sole authority to act there ; and the people whom he represents can neither control him, nor be heard in lieu of him. They have no authority nor voice in making the laws except through their repre- sentative ; but the laws which he helps to enact have a binding force on his constituents and others. So of money ; when it is made a representative of value it con- trols and determines the value of labor and property, while these have no power to control and regulate the value of the money. The money is the only legal tender for debts ; and all property and labor are as powerless to discharge an obligation as the constituents of a repre- sentative arc to act in Congress after they have delegated their power to their member. The representative of value should no more have power to accumulate pro- perty in the hands of a few than the representative of the people should be allowed to legislate for the benefit of a few of his constituents. Both are mere representatives, endowed with powers for specific purposes ; the former to exchange products, the latter to enact laws. The producing classes elect and support the members of Congress, who are bound to make laws for the equal benefit of the people. The people also furnish the material of money and the property which it represents ; and the representative of value should be such as to con- duce in the highest degree to tbeir welfare. The following is another example of delegated or re- presentative power : A man gives a note for a thousand TO REPRESENT VALUE. 49 dollars. He thus delegates to the paper on which the note is drawn a power that increases its legal value mil- lions of times. Before the drawing of the note, the paper possessed a small amount of actual value, but was not a legal representative of other property; for, as paper only, its worth depended upon its inherent qual- ities. But when the note is drawn, the paper becomes a representative, and has, according to law, a delegated control of a thousand dollars' worth of the property of the drawer. The drawing of the note does not add a fraction to the actual worth of the paper ; its value in holding the property is legal, and superadded to its in- herent qualities ; the same value might be superadded by law to a plate of steel, or of any metal. The note and the property are distinct existences ; but the legal value of the note depends on the actual value of the property. The paper material of a note good for a thousand dollars, is not as valuable as an ounce of flour ; but it has a legal power which makes it capable of being exchanged for two hundred barrels of flour, worth five dollars each. A trifling labor will provide the repre- sentative note, but a great amount of labor is required to produce such a quantity of flour, or actual wealth. All individual notes are, however, payable not in flour, nor in actual products or property, but in money, the legal representative of all commodities and property. According to law, the owner of an estate represents the value of the estate in his own person ; but by a simple power of attorney, he can give to another the entire control of his property during his life-time. The receiver of the power may not be worth a dollar, but the power of attorney may make him the representative and controller of millions of dollars' worth of property. The paper that secures to him the control of the pro- perty has no greater inherent value after the writing of the instrument, than it had before ; it is merely made 60 THE POWER OF MONEY to represent the property and control its use. The actual value which the paper represents, exists in the property, and, without the property, the paper would be worthless. The power of attorney is confined to an individual ; but if a man, instead of making the power to a single person, should make it to bearer, whoever held the paper would have power over the property con- trolled by it. The negotiable power of money is in- separable from it, otherwise it would not be money. The holder of money has power over a certain amount of property for sale, and can appropriate it to himself. Money has a legal power or value as much superior to the natural value of its material, as a paper which secures authority over property has a value superior to blank paper. Money is, then, a legal existence, being constituted a national representative of property ; consequently it is a public lien on all property for sale in the nation, a public medium for the exchange of products, and a tender in payment of debts. If money be made a representative of the earth and its productions, it cannot fail to be permanently valuable, for the earth and its products are necessary to the existence of man ; and anything which legally represents them, and can be exchanged for them, must be valuable to its holders. It is a popular error that the value of money depends upon the material of which it is made. As this miscon- ception of the nature of money is of long standing, we shall endeavor to point out its inconsistency, in connec- tion with each property of money. The value of money perpetually depends upon its power to represent value, and not upon its material, because money never reaches a point at which it can be used as an article of actual value. Suppose twenty-six individuals owe $100 each, payable on the same day : A. owes B., B. owes C., and so on through the alphabet to Z, In the morning, A. TO EEPKESKNT VALUE. 51 borrows from a bank a bank-note for $100 and pays it to B., B. pays it to C., C. to D., and so on, until it passes down to Z., who owes and pays it to the bank from which A. borrowed it. The same bank-bill pays twenty- six debts, and in the evening is in the ownership, and possession of the same bank as in the morning. Suppose that, instead of money, each of the twenty-six persons owes in the same order a loaf of bread, and each must have the loaf to use on the specified day or suffer from hunger. In the morning A. goes to a baker, borrows a loaf and pays it to B., B. pays it to C., 0. to D., and so on through the alphabet to Z., who pays it over to the baker. The money in passing through this routine an- swers every man's purpose, and in meeting the contract fulfils the function for which money is designed, but the bread does not fulfil the purpose for which bread is de- signed, nor can a single loaf short of twenty-six answer the purpose. But one bank-note pays the twenty-six debts, and is ready to fulfil as many contracts more the next day, whereas twenty-six new loaves would be re- quired to meet an equal number of contracts. It may be objected that the comparison is not a fair one, because bread is consumed by use and money is not : take then any other article valuable for its material and .not con- sumed in the use. Twenty-six individuals have land to plough on the same day; can they borrow one plough and ma7~e it answer the purpose of twenty-six ? The r-aiue of lands and of goods, wares and merchan- dise, does not depend upon any act of legislation, upon any power to represent and exchange, but upon their utility for food, clothing, etc. If the gold or silver material of money be used for any other purposes than to represent and exchange property, if it be used for spoons, or ornaments, it at once ceases to be money : it is no longer a legal representative of value, but finds its level as a commodity. But the inherent properties of all articles 6 52 THE POWEK OF MONEY of actual value, are their only valuable properties. How- ever various the employment of articles of actual value, their properties do not change, or become useless. For example, cloth is useful to make a garment, and when made, is a cloth garment. The nature of the cloth does not change; it is only applied to a specific purpose, and the cloth retains its properties of durability, etc. Metal buttons are used upon the garment, and continue to be metal buttons. But silver money converted into a spoon, makes a silver spoon, and not a money spoon. The silver is no longer a legal representative of actual value ; it is no longer money, for it has ceased to have the properties of money, which are creations of law. Neither a spoon nor bullion can legally represent, measure, accumulate nor exchange property ; and the mere metal is, consequently, not a medium of exchange, nor a tender in payment of debts. The sole value of gold and silver coins, when not used for a currency, con- sists in the worth of their materials for spoons, ornaments, etc., which are a very small part of our actual wealth, and not indispensable to human existence. The metals cease to be money, as the power of a representative ceases when the term for which he was elected expires. He may be reelected and receive his former power ; and the gold may be recoined by the government, and thus be endowed with its former power as money. So, if the paper of a bond or note be ground to dust its value ceases ; but it may be remade into paper, and by the requisite writings receive its former value. The laws of nations have established money as the standard of value. These laws are immaterial ; they are principles, and not material substances. The power of money is also immaterial : it is its legal authority, and not its material substance that establishes its value and power. The laws have professedly established the value of money in its material substance, l>ul the groundwork TO RKPBESENT VALUE. 53 being false, they have failed practically to establish money upon this basis ; yet they have so far succeeded as grossly to deceive the public. That the worth of money to exchange property does not reside in its material, but in its legal power to represent value, will appear in the following illustrations : A. hires B. and C. to work for him at ten dollars per week each. At the end of the week he pays B. a ten-dollar gold piece, and C. a ten-dollar bank-note ; taking in both cases a receipt in full for the week's work. B. is now the actual owner of the gold, and C. the actual owner of the paper in the bank-note. C. can buy in the market just as many of the necessaries of life with his paper money as B. can buy with his piece of gold. B. gave no more labor for the gold money than C. gave for the paper money, and can buy no more products with the gold than C. can buy with the paper. If there be any intrinsic value in gold money which does not exist in paper money, B., when he parts with his piece of gold, loses all the difference between the intrinsic value of the gold money and the intrinsic value of the paper money. But all the difference in the intrinsic value of the gold and paper disappears when both are used as money ; hence it is evident that it is the immaterial power, that it is its legal authority over other things, and not the intrinsic value of its sub- stance, that establishes the market value of the money. B. did not work the week because he needed the gold, neither did C. work the week because he needed the paper. They both labored for the same object, which was to procure the necessaries of life ; and they both knew that either kind of money was legally competent to pay for these things. A yard of cloth measured with a gold yard-stick is neither longer nor shorter than if measured with a wooden one ; and property purchased with gold or silver money is neither more nor less valuable than if bought with paper money. A person 54 THE POWER OF MONEY intends to purchase a farm and settle in Ohio. He has a thousand dollars in silver, but, as it is inconvenient to transport the specie, he exchanges it at a bank in Xew York for a thousand one-dollar bank bills. The bills readily purchase the farm. The individual who receives them in payment lends them on interest, and the bor- rower purchases wheat with them. Thus the bills circu- late as money, and can be loaned for as good an income, or will purchase as much grain, as a thousand dollars in silver. They fulfil every purpose for which money is designed as well as the silver would. If the notes should remain permanently in Ohio, and the people should believe the bank secure, the notes would be a much better cur- rency than coins, for they would make purchases as well, they could as well be loaned for an income, and could be much more easily transported. Why could not a thou- sand axes be deposited in Wall street, and a thousand pieces of paper be taken for them, on each corner of which was engraved " one axe," and in the body a written promise to pay one axe on demand, and these paper axes be taken to Ohio, and made to answer every purpose for which axes are designed, in clearing forests, etc., in lieu of the steel axes ? There is as much resemblance between a paper axe and a steel axe as there is between a paper dollar and a silver dollar. If a paper dollar, that repre- sents a silver dollar, is as good for all the purposes for which money is designed as a silver dollar, why is not a paper axe, that represents a steel axe, as good for all the purposes for which axes are designed as the steel axe ? The reason that the paper dollar will answer as well as the silver dollar is, that the silver and the paper dollar are both representatives, the silver dollar equally with the paper dollar. (See Chap. III., The Banking System.) If the value of money be in the worth and weight of i*s material, it cannot be representative ; and if its value be not representative. i* would be as impos- TO REPRESENT VALUE. 55 sible to make paper money fulfil, as it now does, the functions of coins as to make a paper promise to pay a loaf of bread on demand as nutritious as the bread ; or to make paper representatives of ploughs promising to pay real ploughs on demand capable of tilling the ground. If a city bank have $100 in coins and issue $600 in bank- notes, the amount of money is as much increased as if 1600 in specie had been issued. Each dollar of the bank- notes will pay for as much labor and for as many of the necessaries of life as any one dollar in specie ; and so long as these bank-notes continue to circulate and to be on a par with specie, they continue to hold the same power and value in the market that are held by gold and silver money. Hence, if the value of money is inherent, this must prove that it inheres in bank-notes as well as in coins. The fact that it takes many thousand times more labor to mine the gold and silver and coin them into money, than it does to make the paper and engrave the bank-notes, makes no difference in the market value of the money, because the value of the money depends on its immaterial power that is, upon its legal authority, and not at all upon its material substance. The law can and does designate the substance out of which money shall be made, but human laws do not in the least alter the intrinsic value of any substance. We might as well undertake by legislation to make saw-dust as nutritious as bread, as to undertake to make paper money on a par with specie if the value of the specie were dependent on its material substance. It takes as much labor and material to make a one-dollar bank-bill as it does to make a one thousand dollar bill; yet the latter is worth in the market precisely one thousand times more than the former. The reason that the value of bullion is equal to that of coins is, that coins are made at the expense of the nation. The government coins all the gold and silver offered at 56 THE POWER OF MONKY the mint free of charge. It will give, in exchange for them, an equal weight in coins. If the -government would take wool, and make cloth at the public expense, and return to those who furnish wool an equal weight in cloth, the cloth and wool would command the same price, because the expense of manufacturing the cloth would be borne by the government. If a charge were made for manufacturing, the wool would be worth less than the cloth ; and if a premium were charged for coinage, the value of bullion would depreciate below that of coins. It is clear that gold and silver have no special inherent value which makes them naturally money ; for they are not money until made so by conversion into coin. SECTION III. THE POWER OF MOISTSY TO MEASURE VALUE. The power to measure value is another property of money. Measures are definite quantities of length, weight, bulk, and value, by which the amount of length, weight, bulk, and value in any substance is denned and ascertained. Length, weight, bulk, and value, must necessarily be indefinite, unless some limit be fixed upon for a standard to which all other lengths, weights, quantities, and values may be referred, and by which they may be computed. Length may be the circumference of the earth, or the unknown distance to a star, or it may be tho one-thou- sandth part of an inch ; therefore, to convey any definite idea of length, reference must be imde to a fixed standard. Weight, quantity, and value, are equally indefinite ; hence the necessity for some limit or standard^ to which they may be referred^ and by which their amount may be ascertained. TO MEASURE VALUE. 57 The length, weight, quantity, and value of all articles, in business transactions, are settled by certain measures fixed upon by the government. The length of the yard- stick measures and determines a before undefined length of cloth ; the size of the bushel measures and defines the before undefined quantity of grain ; and so of the pound weight, it defines the quantity of cotton or other sub- stances. The cloth does not define the length of the yard-stick, neither does the grain determine the size of the bushel, nor the cotton the pound weight. The value of the dollar measures and determines a before undefined value of land, labor, or products ; the value of land, labor, and products, does not measure and determine the already defined value of the dollar. When the yard- stick measures cloth, it does not determine its own length ; and when money exchanges property, it does not deter- mine its own value. Both the length of the yard-stick, and the value of the money, were previously determined by the laws which instituted them, and gave them power to measure length and value, which are their sole objects and uses as measures. The pound weight, or the standard of weights, deter- mines the amount of the weight of all commodities ; and the dollar, or money, the standard of value, by its own fixed legal value, determines the amount of tho value of all other things. The weight of the pound, the length of the yard, and the value of the dollar, are presumed to be invariably fixed by national laws, and, therefore, every variation from their legal standard is a fraud upon the public. If the yard be variable, the measure of length will commit frauds when it is used ; and if its value be fluctuating, the measure of value will commit frauds whenever it is used to measure the value of labor or property. If measures be strictly just and uniform, they will equitably determine quantities and values, whether of land, labor, or commodities. 53 THE POWER OF MONET It appears that the government considers the dollar of more importance than any other measure, for it reserves the right to coin it, and makes it a criminal offence for individuals to coin or issue money, even if it be equal to the government standard in purity and weight. Indivi- duals are also prohibited from making and issuing paper money as a substitute for gold and silver money, unless especially authorized by law ; and when this privilege is granted, the amount that may circulate and the security that shall be given to secure the public against loss, are also prescribed by law. But any individual may make and use any other measures, or may make and sell them in market, the government having merely a supervision over them as to weight, size and length.* Money measures its own amount or value of actual property as often as it passes from one individual to another, as the yard-stick measures its own length as often as it passes over the cloth ; consequently a given sum of money measures in a given time more or less pro- perty, according to the frequency of its transfer. In one morning, a dollar, passing through several hands, may belaid out for food, buy various articles of clothing, be loaned out with other dollars on bond and mortgage, and then purchase a dozen articles more. Every time it passes, it determines the market value of the thing that it buys. If there were no distinction between measures of value and articles of value, the same principle wonld apply to both; one yard of cloth, rapidly measured, would answer the purpose of two, slowly measured ; a pound of food, rapidly weighed, would answer the purpose of two, slowly * Notwithstanding the care the government has taken to guard the use of money, there is in this nation more litigation, fraud and oppression, growing out of the corrupt use of money, in one week, and often, doubtless, in a single day, than all the evils that occur in a century from the fraudulent use of all other measures. TO MEASURE VALUE. 59 weighed. The value of money cannot consist in the amount or kind of the metal in which its properties are embodied ; for, in its rapid circulation, it can be used neither as a utensil nor as an ornament, and is only useful to exchange property. Eagles and dollars are seldom used for ornamental purposes : and when they are so employed they cease to exchange products. The value of money balances the value of the commo- dity sold, as the weight of the pound balances the weight of the thing weighed ; or the yard, the length of the cloth measured. Measures of quantity remain stationary, their only function being to determine the exact quantities of the commodities transferred from the seller to the pur- chaser. But the measure of value passes into the posses- sion of the seller, who holds it as a representative of value in lieu of his commodity. And it is on this account that the measure of value is frequently confounded with articles of value. Money, like all other measures, is divisible. The yard is divided into feet and inches, that it may determine any required length. The pound weight is divided into half- pounds and ounces ; the bushel into the peck, quart, etc., that they may accurately determine the various weights and quantities of various substances. Money is divided into pounds, shillings, and pence, dollars, half-dollars, dimes, etc., that it may determine the precise amount of the value of all commodities. The government reserves the right to fix the length of the yard, the weight of the pound, the size of the bushel, and the value of the dollar, that they may be fit- ted for public use. Money is the public measure of value ; and the government is bound to make it just and uniform, that it may correctly determine the value of all commo- dHies. Library, 60 THE POWER OF MONET SECTION IV. THE POWER OF MONEY TO ACCUMULATE VALUE BY INTEREST. Money, the representative and measure of value, has also the power to accumulate value by interest. This accu- mulative power is essential to the existence of money, for no one will exchange productive property for money that does not represent production. The law making- gold and silver coins a public tender, imparts to dead masses of metal, as it were, life and energy. It gives them certain powers which, without hegal enactment, they could not possess, and which enable their owner to obtain for their use what other men must earn by their labor. One piece of gold receives a legal capability to earn for its owner, in a given time, another piece of gold as large as itself. Or, in other words, the legal power of money to accumulate by interest compels the bor- rower, in a given period, determined by the rate of in- terest, to mine and coin, or procure, by the sale of his labor or products, another lump of gold as large as the first, and give it, together with the first, to the lender. If the borrower of the gold pay interest half yearly at the rate of seven per cent, per annum, he must double the lump in about ten years. If he pay interest half yearly at the rate of six per cent, per annum, he must double the lump in less than twelve years ; at three per cent., in less than twenty-four years ; and at one per per cent., in about seventy years. In popular phrase, money is said to be a producer of value; but this expression conveys a false idea, for money possesses no power to produce. The earth pro- duces by actual increase by the growth of ' additional quantities of the seed sown. But money possesses no TO ACCUMULATE VALUE BY INTEREST. 61 natural capability to produce its like. It can only accu- mulate things already produced. When a loan of a hun- dred dollars is repaid with interest, the six or seven dollars given as interest have not grown upon the ori- ginal one hundred. Nothing grows upon the mortgage that bears interest. The interest on the money, or on the mortgage, must be paid in money received in ex- change for property, products, or labor. The worth and amount of the interest on the dollar constitute and determine the value of the dollar, and make it equal to a certain amount of actual value or pro- perty, as much as the amount and kind of labor that a man can perform, determine his value as a workman ; or as the quality and quantity of the fruit of a tree deter- mine the value of the tree. In the same manner, and for the same reason, if the interest on the dollar be good, the dollar Avill also be good. The value of the workman and of the tree is natural to them, and consists in their power to produce ; the value of money is artificial, and consists in its arbitrary power to represent actual value and to accumulate by interest. Demand and supply are sometimes said to give value to money ; but it would be as reasonable to assert that demand and supply fix the length of the yard, the weight of the pound, or the size of the bushel, as that demand and supply regulate the value of money. One is a legai instrument to determine value, its own value being fixed by law ; the others are legal instruments to determine length, weight, and quantity, their own length, weight, and size being fixed by law. Money is valuable in proportion to its power to ac- cumulate value by interest. A dollar which can be loaned for twelve per cent, interest, is worth twice as much as one that can be loaned for but six per cent., just as a railroad stock which will annually bring in twelve our cent., is worth twice as much as one that annually 62 THE POWER OF MONEY brings in six per cent. The value of state, bank, rail- road, or any other stock, is estimated by the dividends it will pay during the time it has to run. Any increase or diminution of the power of money to accumulate by interest, increases or diminishes proportiouably its value, and consequently its power over property. Money becomes worthless whenever it ceases to be capable of accumulating an income which can be ex- changed for articles of actual value. Take the following example. Suppose, during the Revolutionary war, A. had lent to B. a thousand dollars in gold or silver coin, at six per cent, interest, for a term of fifty years, and had taken as security a mortgage on B.'s farm, which was worth $10,000. A. had agreed to receive the six per cent, interest from B. in Continental money. This currency soon after proved to be worthless ; and the interest proving worthless, the principal would have been worth- less to A. during the fifty years for which he lent it, al- though the loan was made in gold and silver coin, and, at the expiration of that period, the principal would have been paid him in coin. Now reverse the circumstances, and suppose A. had lent to B. a thousand dollars in Continental money on the same farm for fifty years, and had made the interest payable in gold and silver coin. Although the principal was lent in Continental money, which soon after became worthless, it would have continued as valuable to A. for fifty years, as the interest in coin which he received upon it. The interest continuing valuable,' the mortgage would have been a binding lien upon B.'s farm for the fifty years, and would have taken a part of the yearly produce of the farm for that period. .At the expiration of the fifty years, the principal would have become worthless, for it could not have brought in a further in- come. But in the former case, in which specie was lent and the interest made payable in Continental money, the TO ACCUMULATE VALUE BY INTEREST. 63 interest being worthless, the contract would not have been an encumbrance upon B.'s farm ; for no part of its yearly products would have been required to pay the interest. At the expiration of fifty years, the principal could have been demanded in specie. The value of money as much depends upon its legal power to be loaned for an income, as the value of a farm depends upon its natural power to produce. If the Continental money, or the assignats of France, had been made representatives of property, and capable of being always loaned for a good and uniform income, they would have been as permanently valuable as a mortgage in perpetuity on a farm, which could yearly collect from the farmer a certain quantity of products, as interest, or income. The value of a horse depends upon his ability to perform useful labor for his possessor ; and the value of money depends upon its capability to earn for its owner by being loaned on interest. Take twenty mort- gages for ten years on twenty different farms. Suppose each of these farms to rent for sixty dollars a year, just the interest on each of the mortgages. It would take the whole produce of each farm to pay the interest on each mortgage. The twenty mortgages would take the rent or produce of the twenty farms for ten years. In one month, one thousand dollars could be easily loaned so as to take the entire income of twenty farms for ten years. Consequently, each time the money was lent it would accumulate an income which would be as valuable to its owner as a farm of equal value leased for the same period ; for the income on the money would yearly purchase the whole yearly produce of the farm. The difference between money and the farms is, that the former is a legal representative and measure of value, and the latter are of actual value. The money is as capa- ble of representing and measuring its own amount of value a hundred times in a year, and creating a hundred 64: THE POWER OF MONFY incomes, as the pound weight is of determining its own amount of weight a hundred times. The quantity of cloth measured, and the weight of things weighed, can- not be increased by the number of times that the mea- sure is applied to them. But money being a representa- tive of value, and being endowed by law with the power to accumulate by interest, makes an income whenever it is transferred from one to another as a loan. Anything that exists in perpetuity, is valuable in exact proportion to the income it will yearly bring to its owner. The market value of a house, store, or farm, rises or falls with the rise or fall of its yearly rent ; and the value of the dollar rises or falls with the rise or fall -of its rent or interest. If we admit both the property and the money to be merchandise, this principle cannot be true in one case without being equally true in the other ; therefore, whether we assume money to be of actual, or of legal value, to keep its value uniform, the rate of interest must be kept uniform. Doubling the capability of the dollar to accumulate, doubles the value of the dollar. Its nominal value may, and does remain the same that is, it retains the name of dollar, although it possesses twice its ordinary value, or power over property and labor. The same principle applies to all measures. The length of the yard-stick being doubled, although it might still retain its name, it would measure twice as much cloth as with its present limits. And money, while its denomina- tions remain the same, measures more or less property, according to the rate of interest. We may imagine a measure fluctuating, expanding and contracting between certain points ; as a yard-stick, made of some elastic material, susceptible of being stretched to twice or thrice its ordinary limits, and still called a yard-stick, and used as such. But no one would deem himself acquainted vitli the actual length of anything measured by this TO ACCUMULATE VALUE BY INTEREST. 65 yard-stick, although, if it were the legalized one, it could, and must be used in business.* Measures of quantity are instituted, and their length, bulk, and weight are fixed by law, and not by individuals. The measure of value is instituted and made by law ; and, consequently, it is fraudulently used when the rate of in- terest upon it, which determines its value, is altered by individuals. The fundamental proposition of Jeremy Bentham, in his " Defence of Usury," is as follows : " No man of ripe years, and of sound judgment, acting freely and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargain, in the way of obtaining money, as he thinks fit; nor (what is a necessary consequence) anybody hindered from supplying him, upon any terms he thinks proper to accede to." According to Mr. Bentham's theory, when money is loaned, the rate of interest to be paid must be a matter of agreement between borrower and lender. This makes the rate of interest belong to the system of free-trade, whereas it no more belongs to this system than the length of the yard-stick or the weight of the pound. By in- creasing the rate of interest, both the principal of the money and the interest upon it have an increased power over property, just as the pound increased in weight would call for an additional quantity of products to balance it. The right to fix the value of money is as much reserved by the government as the right to fix the length of the yard or the weight of the pound ; and the regulation of its value is a thousand times more impor- tant to the people.f The value of money is no more fixed * See Appendix, A. f Although the value of money is now professedly fixed by the go- vernment, we can form no correct idea of what its value will be at the end of three or six months. But we should think it ridiculous to ask what would be the length of the yard, or the weight of the pound, 01 <36 THE POWER OF MOEY or regulated by the laws ordering each piece of money to be coined of a certain weight and kind of metal than the length of the yard would be fixed by ordering it to be made of a certain weight and kind of wood, without regard to its length. The value of money depends upon its power to accu- mulate value for its owner, by interest, and not upon the worth of its material ; as the value of a paper instrument, which secures a ground-rent, depends upon the -produc- tiveness of the land on which it is secured, and not upon the inherent qualities of the paper. If the land were per- manently unproductive, the lien could command no pro- ducts, and would be worthless, except so far as the paper on which it was drawn possessed inherent value. Sup- pose the lien to be engraven on a silver plate, instead of on paper, and to be made in perpetuity for $10,000, at six per cent, interest per annum. Let the annual pro- ducts of the land be sufficient to pay for the labor expended upon it, and to pay the ground-rent, and the silver on which the ground-rent was engraven would be the size of the bushel three or six mouths hence ; or to express great anxiety when the crops were coming in and the fall trade commencing whether enough measures could be procured to measure the grain, or scales and weights to weigh it, or yard-sticks to measure the cloth manufactured. We should think farmers, manufacturers and mer- chants crazed, if they should come to New York to ascertain whether enough measures could probably be had to determine the weight and quantity of their products; and under a just and sound monetary system, it would be equally absurd to ask whether enough money could be obtained to buy or exchange the goods, or to make any in- ternal improvement; and it would appear as ridiculous to ask what the rate of interest would be at the eud of three or six months as to ask how many feet it would then take to make a yard. Money pro- perly instituted would be as definite and uniform as the latter measure, and would no more govern the amount of production than the yard- stick does the quantity of cloth manufactured. It could be about as easily procured to facilitate all desirable production, trade and im- provements as yard-sticks to measure any quantity of cloth. TO ACCUMULATE VALUE BY INTEREST. 67 worth ten thousand dollars, whether the plate of silver on which it was drawn were three feet square, and weighed three hundred pounds, or whether it were three inches square, and weighed but three ounces. If the ground-rent on each plate were in perpetuity, and it were necessary to preserve ea^h in its proper form, to keep the title good, although so great a difference existed in the weight, there would be no difference in the value of the two plates, for both would secure the same annual amount of interest. If, however, the ground-rent should fail because of some defect in the title, of course the larger plate of metal would be worth more than the smaller, for it would make more useful and ornamental articles. A ground-rent made in perpetuity for $10,000, secured on good property by paper instruments, would be as valuable to any owner as the larger silver plate. For this and for similar purposes, the paper is as much superior to the silver as, in manufacturing, the power- loom is superior to hand-weaving. The value of these liens on specific pieces of land, does not more depend on the productiveness of the land than the value of money depends upon its power to accumulate an income from the labor or property of borrowers. The value of the papers which secure the National Debt of England would cease if the government should pass a law to pay no more interest upon the debt. A mere legislative enact- ment could annul the value of the papers. Laws, then, give them their worth, and their worth consists in their power to collect a yearly income, which may be exchanged for the products of labor. Money could not answer the purposes of a medium of exchange unless it were necessary to part with it to make it valuable. For this reason it is made to accumulate no interest in the possession of its owner ; for if it would accumulate interest in his hands, it would be legaUy equivalent to a bond and mortgage bearing interest, or 68 THE POWER OF MONEY to productive property, and the owner would not need to part with it to make it productive. SECTION V. THE POWER OP MONEY TO EXCHANGE VALUE. Another power of money is to exchange property. When it is made the public representative of value, and the interest is fixed at a just rate, it is fitted to perform the duty of money, which is the equitable exchange of property. All goods, wares, and merchandise, although they may be exchanged for money a number of times, soon find a place where they are consumed ; but money never reaches a point where it can be used except as a tender in exchange for property. Making a silver dollar an equivalent or tender in payment for a debt contracted by the purchase of a bushel of wheat, does not make the dollar possess the nutritious qualities of the wheat, more than giving a note upon the purchase of a hundred bushels of corn makes the note of as great actual value as the corn. The value of the note depends upon its power to exchange itself for the property of the drawer, and not on the worth of the paper upon which the note is drawn. But the value of the corn depends upon its nutritious qualities, and not upon any power to exchange itself for the property of the person who raised or sold it. The note must be exchanged for property before it can be useful to its owner ; money must also be exchanged for property to become useful. This, then, is the distinction between articles of actual value and the medium of exchange. The former are designed to be actually used or consumed ; the latter is designed to be continually exchanged for articles for actual use and consumption. Hence money is not mer- TO EXCHANGE VALUE. chandise, for if its material be used as a commodity if coins be converted into watch-cases and ornaments, the owner must keep them to make them useful. The object of the institution of money is to facilitate the exchange of commodities ; and this it could never do unless it were possessed of as much legal value as the thing for which it is to be exchanged possesses actual value. If a farmer has five hundred bushels of wheat, with which he wishes to buy sugar, coffee, tea, molasses, clothing and so forth for his family, he will not sell the wheat for five hundred dollars, unless the money will be a legal equivalent for all the articles for which he wishes to exchange his wheat. He does not want the money to keep ; he wants it to exchange for other articles that he needs to use or consume, and he sells his wheat for money because the money is a legal equivalent for every species of property. It would be very difficult for him to divide up the wheat and barter it for various articles in different places ; and the wheat is not a tender. But he can divide up his money in amounts to suit all his purchases, and the money is a legal tender in payment. A man may carry a piece of paper money in his pocket that is a legal equivalent for a valuable farm in any part of the country, when if he had the same amount of actual value, it might be impossible for him to move it ; but he can sell it for money, and the money he can carry in his pocket and buy with it where he pleases. Some writers, instead of considering money as a medium of exchange, call it capital seeking investment. If money be capital, it is already invested ; because the capital would consist in the inherent value of the mate- rial of the money, and not in the thing the money seeks to obtain. But, when money has found one investment, it is as much a seeker for a second and a third investment, as if it had not been invested at all. It is always seeking 70 THE LEGAL POWERS OF MONEY. investment, without being invested.* It is no more real capital than a very poor horse, of which the appearance is such that he will do very well to exchange oft*. But if he should finally fall into the hands of a person who had not the good fortune to exchange him again for something else, the owner would have to depend upon his few useful qualities. And if a currency were formed in the various nations independently of gold and silver, and coins should cease to be a tender in payment of debts, the value of coins would depend upon their inherent qualities, as metals, as much as the value of the horse when he could be no longer exchanged for more than his actual worth, would depend upon the little labor that he could perform, or upon his hide and bones. The price of the gold and of the horse would then depend upon their actual useful- ness, and not upon any capabilities for exchange. Money is, then, a combination of legal powers, ex- pressed upon metal, paper, or some other substance ; its value is the standard or determiner of the value of all other things, and it serves as a public medium of ex- change for land, labor, and all commodities. * We are accustomed to say that money is invested in property, but this is not true. Money is no more invested in property than the yard-stick is invested in the cloth that it measures. When money has passed from one person to another either as a loan or in payment for property, it is ready to be lent again or to be paid for another piece of property. The money is no more used up by passing from one person to another than the yard-stick is used up by measuring a single piece of cloth. We are often told in the money articles of the daily newspapers, that the money of the country has been used up in railroads ; but upon travelling over these roads we see evidences that a great deal of labor has been expended in grading them, furnishing the iron and timber and so forth, but we do not see any money. If the money has been invested in these roads, it has now gone some- where else ; and it is still going to and fro in the earth, and up and jovr n in i :. THE MATERIAL OF MONEY. 71 SECTION VI. THE MATERIAL OF MONEY, AND THE DISTINCTIONS BE TWEEN MONEY AND THE MATERIAL OF WHICH IT IS MADE. The material of money gold, silver, paper, or any other substance is a legalized agent, made to express the four properties, or powers of money, and render them available in business transactions. Common usage has applied the term measure to the material, by means of which, length, weight, etc., are ascertained ; as, for instance, the yard, pound, and bushel, instantly suggest the stick, iron, and wood, the means employed, rather than the abstract length, weight, and size, which are, in reality, the things signified by the terms. It matters not whether the yard-stick and pound weight be of wood, iron, or gold length and w r eight are the only properties necessary to be expressed by them, and possessing the standard limits, their material is a matter of. indifference. Of course, some materiai. is indispensable ; but the only thing that makes one sub- stance preferable to another, is its superior convenience. So of money ; it is a matter of indifference by what material the powers or properties of money are ex- pressed, for the material is merely a substance fixed upon by law. The natural powers of any material do not make it money. Its powers and agency as money are delegated to it by law, in addition to its natural capabilities When gold is used, the powers conferred upon it make it an equivalent for every species of property. If gold had not been selected for the material of money, and a legal power given to it to exchange property, and to r2i THE MATERIAL OF MONEY accumulate interest for its use, a man would have as little occasion for more gold than he needs for utensils and or- naments, as for more clothes than he can wear, or more tools than he can use. It would have been subjected to the same laws of trade as other merchandise, and must have waited a demand for consumption before it could have been sold. It is clear that gold possesses no pe- culiar or inherent excellence to endow it with power to determine the value and control the use of all other things. But when it is made the agent of these legal powers, it becomes necessary to acquire the gold in order to discharge debts ; and the quantity of the metal being limited, its owners are enabled to extort from the necessitous a very high price for its use. If gold were not used as the material of the currency, its abundance would cause* no inflation of business, nor would its scarcity produce distress, because, compared with other metals, its use is very limited. The following statement will show the different effects upon our own people of the use of the precious metals as utensils, and their use as the material of money. All will probably admit that there were, in 1846, twelve thousand families in the city of New York, owning, on an average, $800 worth of gold and silver ware, such as tea, coffee, and dinner services, vases, ornaments, etc. Including jewelry, the amount of the metals probably far exceeded the sum named. But calculating the twelve thousand families to have owned $800 worth each, they owned, in the aggregate, $9,600,000 ; while, according to the Bank Reports, the specie in all the banks in the State of New York on the 1st day of November, 1846, amounted to but $8,048,348. Suppose the twelve thou- sand families owning these silver and gold utensils and ornaments, had in one week collected them together, and shipped them to England. The shipping of these wares would have had no more effect upon the monetary affairs A LKGALIZED AGENT. 73 of the State or nation, nor upon business, than the ship- ping of the same amount in cotton and tobacco. But had the people drained the $8,048,348 of coins from the banks, and shipped them abroad, the banks throughout the State, and throughout the United States, would have been compelled to suspend specie payments, and hun- dreds of thousands of our people would have been bankrupted or thrown out of employment. Yet, by shipping the gold and silver wares, more than one million and a half more of the precious metals would have left the country, than by shipping the coins. The shipment of the smaller amount would have shaken the country to its centre, while the shipment of the larger amount, could not have unfavorably affected busi- ness. And yet our gold and silver utensils and orna- ments are more in use than our coins ; for the coins are mostly in kegs and boxes in the vaults of banks, and if they are moved at all, it is usually from one bank vault to another, without even emptying them from the kegs. If money is merchandise, why would not the shipment of our gold and silver utensils affect the business of the nation, as much as the shipment of our coins ? The same twelve thousand families were doubtless the owners of a much larger amount of the capital stocks of the banks than the $9,600,000 ; and could at any time have sold stock enough to draw all the specie from the banks, and thus have caused a suspen- sion of payments, and distressed producers, even with- out shipping the specie. If the value of money inhere in the precious metals, so that a certain weight naturally possesses a certain amount of power to exchange property, and still is itself a commodity, the value of which is fixed by law, other com- modities made of the same naturally precious metals, watch- cases, spoons, etc., should likewise be subject to the scru- tiny and restriction of government, that the puhUc may not, 74 THE MATERIAL OF MONEY be imposed upon in the receipt of them by any mixture of alloy. If money be a commodity, why do governments pretend to fix a value upon coins, and not upon any other commodity, although it be made of gold or silver ? If a definite value be assigned to one commodity by legal en- actment, a definite value should also be legally assigned to every other commodity, that each may sustain a just relation according to the amount of labor necessary to manufacture or produce it. If money be a commodity, goods sold might as well be made payable in other com- modities, sugar, beef, etc., as in money. Why not as well sell money on time payable in goods, as goods on time payable in money? If money be a commodity, why should the government force the public to convert every other commodity into this one to pay debts ? If the sale and purchase of all other commodities will cause debts to exist, why should one commodity only be competent to pay them ? And why should the value of every other commodity be determined by this one commodity ? If money be a commodity, why does the government reserve the right to coin it, making its private coinage a criminal offence ? Why not let any one make it, and dispose of it in market as of any other commodity ? If money be merchandise, why is it, that it can be at all times exchanged for property and products, in any part of the country, and that all other more necessary commodities are at certain times esteemed almost worthless, compared with it ? It is answered, that it is because it is made by law- a legal tender in payment for debts that it has this superiority over every other commodity. But the very answer proves that it is not a commodity; for a legal tender is a creation by law of certain properties which do not naturally belong to any substance, but which are made to represent all substances, and to control their exchange. Governments have enacted their monetary laws upoi. the A LEGALIZED AGENT. 75 false principle that the gold and silver metals had an intrinsic value, and consequently a power in their material, before they were instituted as money, equal to their legal power and value after being so instituted. It is sometimes said, that commodities are a sort of currency, because they can be and are exchanged for money. But though a bushel of wheat may be exchanged for money, it does not possess any of the legal and distinc- tive properties of money. The wheat does not become money more than a watch would become land by being given in exchange for land. Some argue that the dollar derives its value from the labor required to mine and coin the silver for it. They say that if a day's labor be required to mine the silver for a dollar, and a day's labor be required to raise a bushel of wheat, the silver and the wheat are of equal worth, and that the legal acts of the government cannot alter the value of either. But if the equal amount of labor expended make the dollar and the wheat of equal value, why will the dollar at certain periods buy two or three times more wheat, or more labor, than it will at other periods ? Why does not the value of la- bor and of wheat increase equally with the value of the dollar ? When the products of labor command a high price, labor also commands a high price. A given quantity of wheat or of other products will pay for nearly the same amount of labor every year. But if the price of products be low, the employer cannot pay to labor a high price in money. In seasons of depressed prices, a dollar will purchase double, treble, or quadruple the amount of labor that it ordinarily will, and this difference occurs when no more labor is required to mine and coin the silver.' Let those who maintain the theory, that the labor required to procure money constitutes its value, account, if they can, for these facts, so as to satisfy 8 76 THE MATERIAL OF MONEY laborers and producers, the reward of whose labor, and the price and sale of whose products it so nearly affects. Because money is held in lieu of labor performed, and in lieu of everything valuable, the public have been accustomed to consider money an actual equivalent in value to the commodity or labor it will pay for ; whereas in fact, it is only a legal equivalent or balancing power. Air, water, food, clothing and a vast variety of other things are essential to the existence and comfort of man, and no one thing can be an actual equivalent for them. It is as impossible that ten pounds' weight of gold should possess equal actual value with the four thousand bushels of corn, or four thousand days' labor which the gold will purchase, as that a small quantity of poison, frequently necessary as a medicine to restore man to soundness and health, should be of equal value with the corn or labor. As many elements for the support of man exist in the poison, as in the money. Both are useful in their spheres, the former to remove obstructions to health, the latter to facilitate the exchange of products. Poison is of little value compared with food ; and money is as little valuable compared with property. It would be as reasonable to esteem the comet which appears once in a century, more valuable to us than the sun that daily sheds its fertilizing beams upon the earth, as to esteem the actual value of gold and silver equivalent to that of all the necessaries of life. If the quantity of gold were unlimited, not a thou- sandth part as much of it would be used as of iron. The notion that gold and silver are- endowed by the Creator with some mysterious value and capabilities, which render them of greater importance than the ordinary products of labor, is an erroneous and pernicious one. Legal enactments cannot alter the inherent proper ties of metals. The common opinion that the material of a currency must be something scarce and difficult to procure, that A LEGALIZED AGENT. 77 the limited amount may render it permanently valuable, arises from a misconception of the nature of money, the properties of which are entirely independent of the material. Money consists in the legal powers to repre- sent, measure, accumulate, and exchange property and products. It receives its powers from law. If gold and silver should become as abundant as iron and lead, the only difficulty in maintaining them the materials of a currency, would be the difficulty of protecting them from counterfeit. Could they be protected, it would be as unnecessary to abandon them for a currency on account of their abundance, as to abandon the use of paper in making obligations, because more exists than can be used for that purpose. If the quantity of gold and silver were unlimited, and that part of it which was needed for a currency were made a lien upon and representative of property, there would be nearly as great a difference between the value of the metals so used and bullion, as there now is between a paper obligation that is a lien upon valuable property and a piece of blank paper. For ages gold and silver have been esteemed precious metals, containing a large amount of intrinsic value, al- though their inadequacy to supply natural wants is mani- fest, when we imagine a man, with a bag of coins, on a desert island, and without the power to exchange them for other articles. These metals have intrinsic, or actual value, and this value consists in their utility for utensils and ornaments ; their malleability, ductility and beauty rendering them, for some purposes, superior to all other metals. But it will be confessed, that we could far better dispense with them than with any of the abundant metals, which are in more general and constant use, and the loss of which would seriously impair our com- fort. In early ages, gold and silver were, doubtless, selected for the material of money on account of their scarcity. 78 THE MATERIAL OF MONET. and the amount of labor necessary to procure them ; the same reason that led the American Indians to select the beaver-skin for a standard of value, Iby which the value of all other skins and commodities was estimated. It has been already explained, that gold and silver, when used as money, cease to have any other use. These metals have, however, received the sanction of governments as the material of money. The laws require that coins used as a public tender shall contain a certain weight of the au- thorized metal without which they are illegal, and can- not be enforced as a tender. But the only reason that they are not received is, that they are unsanctioned by law. If coins of base metal were endowed by law with the properties of money that is, were made representatives ' of actual value, capable of accumulating by interest, and a public tender for debts, they would answer every purpose of money, equally well with coins of pure metal. They could represent, measure, accumulate and exchange pro- perty, and these are the sole properties and uses of money. Therefore they would be money, for anything that pos- sesses the properties of money, without division, subtrac- tion, or increase, is money. But if the metal were used for purposes of dentistry, the difference between the pure and the base would at once appear ; for the metal would then be used otherwise than as the material of money, and its utility would not depend iipon its legal powers, but upon its natural capabilities as a metal. The value of money, then, depends upon its powers to represent, measure, accumulate, and exchange value. These powers, given to any convenient material by Con- gressional enactment, will qualify it for a medium of ex- change, and in every particular constitute it money. CHAPTER III. THE RATES OF INTEREST THE GOVERNING POWER OF DISTRIBUTION TO LABOR AND CAPITAL SECTION I. THE POWER OF CAPITAL TO ACCUMULATE PROPERTY AND LABOR ACCORDING TO THE BATE OF INTEREST. IN the introduction, labor was said to be the chief producer of wealth, and the preceding chapter has been devoted to the consideration of the nature and powers of money. The present chapter will exhibit the laws which govern the distribution of the wealth, and will show the practical effects of certain rates of interest upon producers. The Constitution of the United States, Art. I., Sec. VIII. 5, declares, " The Congress shall have power to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." Money is the legal standard of value, by which the value of all articles for sale must be determined. The rate of interest fixes the value of money. Its value is no more fixed by the quantity or the quality of its material, than the size of the bushel is fixed by the quantity and quality of its wood. The rate of interest maintained upon loans of money, determines what proportion of the earnings of labor shall be paid for the use of capital, and what pro- 79 80 THE KATES OF INTEREST GOVERN portion shall be paid to the laborers for their productions. If interest on money be maintained at a high rate, rents on property will also be high. There are but two purposes to which the yearly pro- ducts of labor can be applied. One is the payment of the yearly rent or interest on the capital employed, and the other is the payment of labor. If laborers pay to capital, as use or interest for the year, their whole surplus pro- ducts, the laborers, as a body, work for a mere subsist- ence, and the capital takes their whole surplus earnings. The laborer receives for his year's toil, food, clothing and shelter only, and these perhaps of the poorest kind ; while the capitalist lives in luxury, increases the number of his bonds and mortgages, or with his income buys land or builds houses to let, which will, in succeeding years, take a still greater sum from the laborer. The law of interest, or per centage on money, as much governs the rent or use of all property, and consequently the reward of labor, as the law of gravitation governs the descent of water. If the interest on money be too high, a few owners of capital will inevitably accumulate the wealth or products of the many. With the present accumulative power of interest, there is no more chance of the laboring classes gaining their rights by combining their labor to increase production, than there would be hope of success that by combining their labor they could reverse the course of the rivers, antl make them run to the tops of the moun- tains, and pile up the waters on their summits. The law of gravitation, in the latter case, would~not be more sure to overpower all their labor, and frustrate all their plans, than the present governing power of the interest on money is sure to gather up the increased production and add it to the wealth of capitalists. The fault is in the law which governs the distribution of property ; and combi- nations to increase production would no more effect any general change in the distribution, than combination THE DISTRIBUTION OF WEALTH. 81 against the law of gravitation would effect a change in its general governing powers. The evil is legislative, and the remedy must be legislative. Money loaned on interest or invested in property, is doubled in a certain length of time, determined by the rate of interest. When this rate is too high, it requires the principal to be doubled in so short a time, that the borrower is compelled to give all his surplus products as interest or rent ; whereas, justice requires that he should pay only a moderate per centage for the use of capital, and himself retain the chief surplus of his labor. The following illustrations, calculating property to accumulate or double at certain rates of yearly per cent- age, in the same manner as money, will clearly exhibit the various results to laborers from various rates of inte- rest. A., B., and C. are young men, who have just come of age. C. is heir to $10,000, while A. and B. are mecha- nics, without capital. C. contracts with A. and B. to build a house which shall cost $5,000, on a lot for which he paid $5,000. The house and lot together are worth $10,000. C. leases this property to A. and B., and charges them seven per cent, upon its cost, clear .of insu- rance, taxes and repairs. The interest is payable once a quarter. A rate of interest of seven per cent, per annum, paid quarterly, will accumulate a sum equal to the principal loaned or invested in property in ten years. At this rate, in ten years A. and B. are compelled to buy another lot, build upon it another as good a house, and pay the lot and house to C. for the use of the house they occupy. In twenty years, if A. and B. retain the use of the house and its accruing rents, they must pay C. three houses ; in thirty years they must pay him seven houses ; in forty years, fifteen houses ; in fifty years, thirty-one houses ; in sixty years, sixty-three houses ; and in seventy years, one hundred and twenty-seven houses. In seventy years all these must be built by A. and B., and paid to 82 THE BATES OF INTEREST GOVERN C. as the accumulation on the one that he leased to them. The one hundred and twenty-seven lots which A. and B. earn the money to buy, cost $635,000, and the buildings cost an equal amount, making together, $1,270,000 ; which sum is paid to C. for seventy years' rent of one house and lot worth $10,000. At the expiration of the lease, the original house must be returned to its owner, as well as the rent. If, instead of being invested in the house and lot, the $10,000 were loaned on interest at seven per cent., and the interest were collected and reloaned quarterly, the money would accumulate in a given period precisely the same amount as the pro- perty. Now, suppose interest to be at three per cent, per annum, and A. and B. to build the house, and pay C. three per cent, annually on its cost of $10,000. This is $300, instead of $700 a year ; and, at this rate, the in- terest on money, collected and reloaned quarterly, re- quires nearly twenty-four years to accumulate a sum equal to the principal. Therefore, in twenty-four years A. and B. would give C. another house ; and, in seventy- two years, seven houses, instead of one hundred and twenty-seven, which they are compelled to do at seven per cent, interest. The labor of building the houses is neither increased by a high rate, nor diminished by a low rate of interest. If C. let his house to A. and B. at six per cent., in about twelve years the income or rent will equal the principal ; therefore, at the expiration of that period, A. and B. must pay C. another house, and in twenty-four years, they must pay him three houses. But if C. lease the house to them for twenty-four years at three per cent., A. and B. return him his house, adding one to it as its rent, and retain two houses as their own surplus. With interest at three per cent., in twenty-four years A. and B. would each own a house and lot worth $10,000 ; THE DISTRIBUTION OF WEALTH. 83 while, with the interest on money loaned or invested in property at six per cent, both would still be tenants, al- though they would have performed, in both cases, the same amount of labor. With interest at three per cent., in forty-eight years they would give C. three houses, instead of fifteen, as at six per cent., and they would own twelve as the surplus product of their labor. But at six per cent., C.'s capital would compel A. and B. to con- tinue his tenants, and to build for him sixteen houses more during the next twelve years. Take another example of the accumulation of property at seven per cent, interest. At the age of twenty-one, D. owns a well improved farm of one hundred acres. He leases it to E. at an interest of seven per cent., payable in land, as the interest on money is payable in money. At the close of the year, E. pays D. seven acres of as good quality as the one hundred rented, and with a pro ratd proportion of buildings upon them. D. continues to let the farm to E. requiring him to pay the rent in land half-yearly, as interest on money is paid half-yearly in money; and to pay rent on the land so paid, as the borrower of money pays interest on the interest which he adds half yearly to the principal. In ten years, E. must pay one farm ; in twenty years, three farms ; in thirty years, seven farms ; in forty years, fifteen farms ; in fifty years, thirty-one farms; in sixty years, sixty- three farms ; and in seventy years, one hundred and twenty-seven farms ; all in as good a state of cultiva- tion as the one originally leased. At the age of ninety- one, D. can bequeath to his posterity one hundred and twenty-seven farms, from the mere rent on one. These farms E. must earn by the labor of seventy years, and pay to D. for the use of one farm. If it were possible for him to earn the one hundred and twenty-seven farms to pay to D., and the rate of interest were reduced to one per cent., he need pay to D. only about one farm as 84 THE RATES OF INTEREST GOVERN rent for the seventy years, and could retain one hundred and twenty-six as the surplus of his labor. Again, suppose John and Richard to be poor boys, each ten years old, who expect to be bound out at the proper age to learn the carpenter's trade. But a rich uncle bequeaths to John a house worth ten thousand dollars. It is worth so much, because it will rent for seven hundred dollars a year over and above taxes, in- surance and repairs. John's guardian is a lawyer, and will collect the rent, and loan it out for him at seven per cent, per annum, getting his fees from those who borrow the money. John likes Richard, and learns his trade with him, and earns his living by his labor as Richard does. John instructs his lawyer to purchase another house, whenever the rent of the one accumulates to enough to buy a second equal to the first. If the in- terest be regularly collected and loaned at seven per cent.j and the interest be collected half yearly, it will equal the principal in ten years and one month ; when his lawyer can buy for John a second house, so that when he is twenty years and one month old, he will be the owner of two houses. These two houses, rented for ten years and one month more, will buy for John two houses more ; so that at the age of thirty years and two months, he will own four houses: at forty years and three months, he will own eight houses : at fifty years and four months, sixteen houses ; at sixty years and five months, thirty-two houses; at seventy years and six months, sixty-four houses ; and at eighty years and seven months of age, he will own one hundred and twenty- eight houses, each of which is rented at seven hundred dollars a year ; and all of them together are bringing in a clear yearly income of eighty-nine thousand six hundred dollars. Now what has John, or his uncle, or his guardian, done, that the public should be obliged to give John one hundred and twenty-seven houses for seventy THE DISTRIBUTION OF WEALTH. 85 years' use of one house ? These one hundred and twenty-seven houses are all legally his ; and our laws maintain that John has as equitable a right to them as if he had bought the lots and built the houses by his own labor. Yet, if we allow labor to be worth a dollar a day, it would take the entire earnings of sixty men for over seventy years to pay for the one hundred and twenty- seven houses, which the use of the one house has in seventy years legally acquired for John, without the per- formance of any labor on his part. Let us see how different would be the results in this case if the interest on money, and consequently the rents on property, were at one per cent, per annum, instead of at seven per cent. John's uncle bequeaths to him the house worth ten thousand dollars ; but, instead of renting it at seven per cent, on its value, John can rent it at but one per cent, over and above taxes, insurance and re- pairs, and regularly collects and loans out the rent as in the former case. It would be about seventy years before the rent and the accruing interest on the rent would equal the principal, and buy for John a second house as valuable as the first. With interest legally fixed at one per cent, the use of one house for seventy years would accumulate for John, out of the earnings of others, one additional house of equal value, whereas, at seven per cent, it would accumulate for him one hundred and twenty-seven houses. Whether the government fix the rate of interest at seven or at one percent, the public must provide the same quantity of material and perform precisely the same amount of labor to build the one hun- dred and twenty-seven houses ; but with the interest at seven per cent. John would lawfully own them all, whereas with interest fixed at one per cent, he would lawfully own but one house out of the one hundred and twenty- seven houses, and otherswould lawfully own the remain- ing one hundred and twenty-six houses. To furnish the 86 THE KATKS OF INTEREST GOVERN materials and build these houses, requires not only skill in the mechanical arts, but also the performance of an immense amount of manual labor. But to give the one hundred and twenty-seven houses to John, who is fairly entitled to but one of them for the use of the one he rented, is the legitimate operation of the law fixing the interest at seven per cent. What chance have the pro- ducing classes by any combination of labor to contend successfully against such an accumulating and centraliz- ing power ? They might as well venture into the sea, with the wind blowing a hurricane, and expect by their bodily strength to turn back the waves. The sea would not be more certain to sweep over them, and pursue its on- ward course, than the accumulative power of money at seven per cent, interest yearly to gather up the surplus earnings of labor despite all combinations of labor against it. If the producers ever gain their rights, it will be by legally controlling the power of money, and not by any combinations of labor. If a hundred dollars can be lent at seven per cent, inte- rest, the borrower pays seven parts of the whole for the use for one year. The borrower must invest the money (for it is of no use to keep) in land or other property, and therefore must pay seven parts of the value of the property for the use of one hundred parts for a year. But if money be borrowed at one per cent., of course the borrower pays but one part for the use of one hun- dred parts either of money or property for a year, hence at this rate laborers would receive six ~parts of their net yearly earnings now paid to capital. A man who labors on his own property gains for himself its whole product. The rate per cent, interest determines what proportion others shall pay him for the use of capital, which he does not need for his own use. Suppose seven per cent, to be the fixed rate of interest, and V. to be a farmer, who, at the age of twenty-one, inherits five farms, worth ten thousand THK DISTRIBUTFOX OF WEA.LTH. 87 dollars each. He wishes to cultivate one himself, and to sell or rent the remaining four. A., B., C. and D. are farmers without property, and are obliged to hire their farms. They cannot expect Y. to rent them his for less than the interest on the money for which they would sell. Suppose these men to rent V.'s four farms at seven hun- dred dollars a year each ; and V. to collect his rent yearly, and lend the money to others at seven per cent., and yearly to collect and reloan this interest. The rent and accruing interest upon the rent, in ten years and three months, would enable V. to buy four additional farms, worth ten thousand dollars apiece, which he could rent to four more tenants. In ten years and three months, the rent and interest upon the rent of these eight farms would furnish V. with money to purchase eight farms more of equal value, which he could rent to eight other tenants ; in a third period of the same length, the rent and interest upon the rent of the sixteen farms would buy sixteen additional farms ; in a fourth period, the rent and interest upon the rent of the thirty-two farms, would pur- chase thirty-two more farms ; in a fifth period, the rent and interest upon the rent of the sixty-four farms, would buy sixty-four more ; in a sixth period, the rent and interest upon the rent of the one hundred and twenty- eight farms would buy one hundred and twenty-eight more ; and in a seventh ten years and three months, the rent aud interest upon the rent of the two hundred and fifty-six farms then owned by V., would buy for him two hundred and fifty-six farms more, of equal value with the first farms which he rented to A., B., C. and D. Thus V., in seventy-one years and nine months, would become the owner of five hundred and twelve farms, worth ten thousand dollars each, and bringing in a yearly income of seven hundred dollars apiece. Five hundred and eight of these farms would be added to V.'s wealth by the labor of his tenants, not to mention the improvement 88 THE RATES OF INTEREST GOVERN made on their original value by the labor ; and V. would have had besides, the entire produce of the one farm re- served for his own cultivation. We will now see what would be the result to V. and his tenants from the simple change of the rate of interest from seven to one per cent. Suppose V., as before, to in- herit five farms, each worth ten thousand dollars, one of which he cultivates himself. If he should sell the remain- ing four for ten thousand dollars each, he could lend the money at one per cent., that is for four hundred dollars ; but he rents the farms to A., B., C. and D., at one per cent, on their value, and thus receives the same income. If V. should loan this yearly rent of one hundred dollars on each farm, yearly collecting and reloaning the interest, nearly seventy years would elapse before the rent paid him by A., B., C. and D., and its accruing interest, would buy four more farms of equal value with those rented ; whereas, in about the same period, at seven per cent, the rent and its accruing interest would buy five hun- dred and eight farms. Whether the interest were at one or at seven per cent., Y. would equally receive the products of his labor on the farm that he kept for his own use ; but at seven per cent., he would gain by the labor of his tenants five millions and eighty thousand dollars' worth of land; while at one per cent, he would gain by their labor but forty thousand dollars' worth. The agree- ments between V. and his tenants appear on the surface as fair where they pay the larger as where they pay the lower rent ; because, in each case, they conform to the groundwork or foundation established by law ; but, in the latter instance, V.'s tenants would as much pay to him the full yearly market rent of his farms by paying one hundred dollars apiece, as in the former by pay- ing seven hundred dollars apiece. If one acre of land would produce twenty-five bushels of wheat worth one dollar per bushel, each of V.'s tenants must yearly sow, THE DISTRIBUTION OF WEALTH. 89 gather and sell twenty-eight acres of wheat to pay seven hundred dollars rent. Suppose wheat to continue worth one dollar per bushel, and the rent to be diminished to one per cent. ; with the same industry and economy, each tenant could pay the one hundred dollars rent, and re- tain for himself six hundred bushels of wheat as the sur- plus of his labor. If V.'s tenants, in about seventy years, could earn and pay to him five hundred and eight farms, in the same period, with the interest at one per cent., they could earn for themselves five hundred and four, for the other four farms would pay all theiu rent to V. Having the entire produce of one farm for his own sup- port, the low rent of the other four could do him neither injustice nor injury; while compelling A., B., C. and D. to pay the larger rent would deprive them and others of the just reward of their labor ; and V. would not be really benefited by the hardships imposed upon them. The interest on money at seven per cent, is as oppres- sive as the same rate per cent, rent on land. Suppose V., instead of renting his four farms, should sell them for $10,000 each, and loan the money at the legal rate of seven per cent., collecting and reloaning the interest yearly. In ten years and three months, the principal and interest together would amount to $80,000; in twenty years and six months, to $160,000: in thirty years and nine months, to $320,000 ; in forty-one years, to $640,000; in fifty-one years and three months, to $1,280,000; in sixty-one years and six months, to $2,560,000 ; and in seventy-one years and nine months, to $5,120,000. Mul- tiply $10,000 by five hundred and twelve, the number of farms, and it will give the same sum. If V. should sell the four farms for $40,000, and lend the money on bond and mortgage at seven per cent., requiring, as is usual, double the value in land as security, he would have mort- gages covering $10,240,000 worth of landed estate ; and 00 THE RATES OF INTEREST GOVERN the people occupying this land would be hard at work to pay him the interest; thus rapidly concentrating wealth in his hands, instead of diffusing it to supply their own wants. But with interest at one per cent., $40,000 loaned for seventy years, would accumulate but $40,000 more ; whereas, at seven percent, it would accumulate $5, 080, 000. This difference in interest of $5,040,000 would be added to V.'s wealth from the earnings of others, while V.'s accumulation of money or increase of lands would not add either a dollar to the quantity of money, or an acre to the quantity of land. It would only have monopolized it for V.'s benefit. It would have caused the people to owe V. $5,080,000, and make them $5,040,000 poorer than if interest had been at one per cent. The contracts be- tween V. and his tenants being made in conformity with ihe standard at seven per cent., they must pay him the $5,040,000, or defraud him of what is legally his due ; and if he voluntarily take less than this from them, it is an act of charity. Seven per cent, is not the standard for V. only ; it is a public standard that favors other capital- ists equally in the various branches of business, and imposes upon the producing classes generally obligations similar to those it imposes upon Y.'s tenants.* *We do not question the right of V. to inherit the five farms, and to enjoy all the produce of the one he cultivates : nor do we object to his receiving a just rent for the use of any other farms which he may own ; but the rent of the latter should be only equivalent to a pro- per support of the money by which their value is represented ; and we claim that one, or one and one-tenth per cent, is ample to pay for the necessary material and labor to furnish a representative that shall be and remain perfectly secure and good. ... As labor in all useful departments should be fairly compensated, so also the neces- sary labor to furnish and issue the money of a nation should be justly remunerated ; and the per centage interest on the money should be equivalent to pay for the needful material and labor to furnish and lend it. The interest ought not to exceed the expense of the institution and circulation of the money. (See Sec. XVII. and Part II., Chap. II.) THE DISTRIBUTION OF WEALTH. 91 To give some idea to what extent the power of interest operates, it can only be necessary to say, that all the money lent on bonds and mortgages by indivi- duals, by insurance and trust companies ; all the money lent for United States, State, County, City, Railroad, Canal and other bonds, made to raise money for public improvements, whether these improvements be made by corporations, by the States or by individuals; also all the money lent by banks, brokers and individuals on promissory notes all these loans are operating with a like centralizing power against the producers and in favor of money-lenders. This power also establishes a like rate per cent, rent to be paid for the use of all property, real and personal. The rent of houses and lots in cities, and of farms and houses in the country, must conform to this standard. All the goods, wares and merchan- dise on hand in the nation, and that are in process of being produced and manufactured, are governed in their value by money, and are under tribute to its centralizing power. It is an unavoidable power, because it is insti- tuted, upheld and enforced by the national laws, and is the basis upon which all market values are founded. The following statement shows the effect upon pro- ducers of a rate of interest on capital of six per cent, per annum. The yearly income of our most wealthy citizen from dividends on State, bank, and other stocks, money lent on bonds and mortgages, and rents of property, is said to amount to $2,000,000. Take the farmers of the six New England States, include those of New York and New Jersey, and it is very doubtful whether, after paying necessary expenses, each makes a yearly gain of more than one hundred dollars. According to this calculation it would require the use of twenty thousand farms, and the surplus earnings of twenty thousand farmers and their families, to clear $2,000,000 a year. However difficult it might be to trace the ways and means b> 92 THE RATES OF INTEREST GOVERN which this income is gathered, it takes $2,000,000 worth of the surplus products of labor to pay the legal accumu- lation on the capital. Suppose able-bodied men to earn one dollar per day, for an average of two hundred and seventy-five days in each year i. e., $275. Two millions of dollars would annually hire and pay for the labor of seven thousand two hundred and seventy-six men. Allow the receiver of the income to expend yearly for his own support as much as seventy-three laborers earn, and he will still receive a clear gain of $1,980,000 yearly, the entire earnings of seven thousand two hundred and three men. Calculate the interest on $1,980,000 at six per cent., and the next year it will make an addition to his income of $118,800; which sum would pay for the labor of four hundred and thirty-two men, in addition to the number employed in the preced- ing year. What is the probable surplus that each of these laboring men would yearly retain, after deducting from the $275 their own expenses, and those of their families? Can any laboring community be prosperous, and pay so great an amount of interest on capital ? The legal power of money to accumulate an undue rate of interest, com- pels these laborers to give all their surplus products to one man for the use of capital, while they and their families are deprived of a good subsistence, and are obliged continually to increase that capital, which yearly exercises a greater power over their labor. In order that the power of the ordinary rates of inter- est to concentrate property in the hands of capitalists may be more clearly seen, in the following illustration the con- tracts shall be based upon wheat instead of upon money. Take the yearly income of Mr. A,, say $2,000,000. If his money be loaned, or his property be leased at six per cent, on its Vjaluation, he must be worth thirty-three and a third millions of dollars. Suppose Mr. A., instead, to own thirty-three and a third millions of bushels of wheat, THE DISTRIBUTION OF WEALTH. 93 Let him lend the wheat instead of the money at six per cent., and the interest will be precisely two millions of bushels. The farmers who borrow the wheat, and give their bonds and mortgages upon their farms to secure the payment of the principal and interest, must sow, reap, and thrash out two millions of bushels, transport them to New York, and put them into Mr. A.'s storehouses, to pay the interest for one year. What a pile of wheat is this for one man's use, gained too, without his sowing or harvesting a bushel of it. But suppose the interest to be at one per cent, instead of at six per cent, and Mr. A. to lend these same farmers the thirty-three and a third mil- lions of bushels of wheat at this per centage ; at the end of the year they will have to pay him only three hundred and thirty-three thousand three hundred and thirty- three and a third bushels of wheat, to satisfy the interest. The farmers will then retain one million six hundred and sixty-six thousand six hundred and sixty- six and two-third bushels for their own use, or to sell to others, or to pay toward the principal of the debt. With interest at one per cent, they will as much satisfy Mr. A.'s yearly claims, by paying him the smaller quantity of wheat, as they would at an interest of six per cent, by paying two millions of bushels. If each acre of land produce fifteen bushels, and the farmers cultivate on an average ten acres each, it will take the labor of thirteen thousand three hundred and thirty-three farmers, and the use of one hundred and thirty-three thousand three hun- dred and thirty-three and a third acres of land to pay the yearly interest of six per cent, on the thirty-three and a third millions of bushels of wheat borrowed of Mr. A. But if interest be at one per cent, and the farmers con. tinue to pay Mr. A. the two millions of bushels yearly, in eighteen years and four months they will pay off both the principal and the interest of the debt. Suppose the farmers to pay six per cent, interest, i. e., 94: TUP: RATES OF INTEREST GOVERN two millions of bushels of wheat on the loan for twenty years, they will pay forty % millions of bushels to satisfy the interest, and will still owe the thirty-three and a third millions principal. If Mr. A., as he yearly receives the interest from the farmers, say two millions of bushels of wheat or $2,000,000, should lend it out to mechanics at six per cent, interest, and continue to do this for twenty years, adding yearly to the loan the interest so accrued, it would accumulate, in the twenty years, to $73,571,180. The interest on this interest for a year amounts to $4,414,270, which would yearly be due from the mechanics. If the mechanics, instead of paying the interest in wheat, should pay it in manufactured articles, they would pile up an enormous quantity of goods in Mr. A.'s storehouses for his yearly use. With interest at six per cent., at the end of twenty years, the farmers would owe Mr. A. $33,333,333, or the same number of bushels of wheat, and the mechanics would owe him $73,571,180; together, $106,904,513 ; which would annually require from the farmers and mechanics $6,414,270 worth of their products merely to pay the interest. Now let interest be at one per cent, per annum, and let Mr. A. lend $33,333,333 at this rate, and in twenty years the interest compounded yearly would amount to but $7,339,666, instead of $73,571,180 ; making by this sim- ple alteration of the rate of interest for twenty years, a saving to the farmers and mechanics of $66,231,514. These calculations of the centralizing power of money are not based upon any usuiious rates of interest, but upon six and seven per cent., and the latter rate is estab- lished by the State of New York as just and equitable ; and judgments in the courts of law are rendered and entered upon the records accordingly. These rates of interest are certain to take the wealth from the pro- ducers and give it to the financiers. It will be hereafter shown that the rate of interest may be easily reduced to THE DISTRIBUTION OF WEALTH. 95 one per cent., or to any other per cent, that shall be deemed most conducive to the general welfare ; and if the people think it more just that the interest should cease to accumulate wealth so rapidly in a few hands, they will enact laws to prevent it. If they will stop such accumulation by interest, they will live upon the pro- ducts of their own labor, instead of living upon the charity of capitalists. If in twenty years Mr. A. should bestow on the needy $66,231,514, or the same number of bushels of wheat, it would be an unheard-of liberality. But if the law of interest were such that he could not legally take this amount from the people, they would retain it in their own possession, as the natural product of their labor, instead of being compelled to receive it as a charity. Mr. A. now uses the most of his capital by investing it in State and other stocks, buying business notes at large discounts, lending money on bond and mortgage, buying up mortgages bearing seven per cent, interest be- low their par value, purchasing property under foreclosure, etc. Doubtless his object is to obtain the best possible per centage income for the use of his money or property. All that he gains by these means above six per cent, interest, takes a still greater sum from the earnings of producers. Now suppose from this time forward Mr. A. should determine to pursue a different course, and to lay out his capital in such a manner as to conduce in the highest degree to the welfare of the people around him. To support them in idleness would be a disadvantage ; but to employ them, and pay for their work such a price as would give them a good subsistence, and furnish them with the means of educating their children, and to pro- vide for the aged and needy, would be a Very benevolent disposition of his wealth. To do this he invests all his property in the manufacture of cotton goods. With thirty-three and a third millions of dollars he could carry 90 INTEREST GOVERNS DISTRIBUTION. on an extensive business. He builds his manufactories, and purchases machinery. He contracts with a number of planters to supply him for a certain number of years with a given quantity of cotton. He also contracts with workmen to perform the labor in his mills, and agrees to give to all such prices as will afford them and their families a comfortable subsistence, make suitable pro- vision for the education of their children, and support those who are unable to work and dependent upon them. The cotton will, of course, be always furnished at a uni- form price, and the price of labor will be about the same each year. Mr. A. now fixes the prices of his goods so as to sustain the various people in his employment. Let Mr. A. invest all his means in mills, in stock, and labor, on these terms, while the planters hire their plantations, and the mechanics, manufacturers and laborers employed by Mr. A. hire houses to live in, etc., from others at a rent of seven or eight per cent, per annum, and it will be impossible for him, with all his capital, to sustain himself. In a very few years he will become bankrupt, for he must enable his workmen to pay their rents, and give th^m, besides, a comfortable support. This obliges him to use his own property at a low rate of interest, while, through his workmen, he is compelled to pay a high rate of rent or interest for the use of the property of others. The operation is, virtually, that the owner of thirty-three and a third millions of dollars borrows an equal or large amount at six, seven, or eight per cent, interest, and reloans the borrowed money, together with his o_wn, at an interest of one, or one and a quarter per cent. By so doing, his fortune will soon pass into the hands of other capitalists. The present monetary laws of all nations are opposed to the reward of labor ; and no individual or national At- tempts justly to reward it, except by changing these laws, can secure any permanent success. THE WEALTH OF SECTION II. THE WEALTH OP CITIES, AND THE MEANS OP ITS ACCU- MULATION. The following illustration shows the capability of money, at an interest of six per cent, per annum, to cen- tralize the wealth of nations in large cities. Suppose an uncultivated island, ten miles square, and a few miles distant from the coast of the United States. Ten thousand wealthy citizens of the States intend to build a city upon it. These citizens are worth $150,000 each ; in the aggregate, $1,500,000,0.00. The legal interest on money is fixed at six per cent, per annum. For two years previous to their removal to the island, the people prepare upon it houses for themselves, and suitable accommodations for merchants and mechanics. Each of these families expends $3,000 yearly for its support. Each family being worth $150,000, the interest on which, at six per cent, would be $9,000, each has an income of $6,000 a year, over and above expenses. They expend their surplus income for two years, i. e., $12,000 for each family, in the aggregate $120,000,000, in making improve- ments on the island. They dispose of their property on the main land on credit, securing it by bonds and mortgages, State stocks, or otherwise, so that they insure an interest payable half yearly of six per cent, per annum, on the whole amount of their property. These obliga- tions merely represent the value of the property they leave upon the main land, and must yield an income from the products of the land and labor of the purchasers. The annual interest on $1,500,000,000, amounts to $90,000,000. The paper obligations held by the creditors legally empower them to demand an interest of $90,000,000, in specie. The mere giving of obligations is all that is re- 98 THE WEALTH OF CITIES. quired in the transfer of property. The conversion of their property into bonds and mortgages and other secu- rities, may not have required the use of a million of dol- lars of money. But the payment of both principal and interest must be made in money. The ten thousand families contain, on an average, five persons each, making, in the aggregate, a population of fifty thousand. They employ, on an average, three domestics in each family, increasing the population to eighty thousand. The yearly expenses of each family amount to $3,000; or, for the whole, to $30,000,000. Hatters, tailors, shoemakers, cabinet-makers, mechanics of every sort coUect about them to supply their wants, and receive the sums which they expend in living. More than fifty thousand laborers and artisans are needed to supply their wants. In a few years the centralization of capital collects a city of three or four hundred thousand inhabitants. The ten thousand families expend $30,000, 000 yearly, and draw besides, from the people of the main land, a clear income of $60,000,000 a year, which they can reloan. The debtors cannot send the* $60,000,000 in money, and are therefore obliged to send the products of the soil, manufactured articles, etc., to this city for sale, to procure money to meet their payments of interest. The city soon becomes the market-place of the nation, and engrosses the principal business. The people are astonished at its wealth and prosperity, and congratu- late themselves on having so fine a market for their products. In the course of a century or two, the ten thousand families and their descendants can, if they choose, with- out labor on their part, build a wall around their city as high and as broad as the walls of ancient Babylon. Meanwhile, the people upon the main land are obliged to supply all the wants, the food, clothing, etc., not only of the ten thousand families and their descendants who do THE WEALTH OF CITIES. 99 no work, but also of the laborers employed in the erection of the wall, in the building of houses, ard in all other im- provements. Producers and manufacturers from differ- ent parts of the country carry their goods to the city, and the citizens, after selecting the choicest for their own use, reseU the remainder to laborers, who are only able to purchase the "poorer kinds. If an account were kept of those sold to the country, it would be found that they were minus nearly the whole support of the people of the city. Now what compensation is received by the people of the main land for the supplies which they furnish ? The citizens, indeed, pay money for the supplies, but this money is the interest on capital loaned to the people, without whose labor it would have been useless. In a similar manner, under the present monetary laws of the United States, a few rich men in cities engross the wealth of the country. It is as natural under these laws for the wealth to fall into a few hands as for water to find its level by its own gravitation ; and while our present rates of interest prevail, no combination or suc- cess in production, either by machinery or the muscular power of labor, will ever effect any important change for the better. But when the laboring classes combine to have good national monetary laws in lieu of the present evil ones, their united efforts will effect a change in these laws, and thus accomplish the object they have so long and so anxiously sought after. If the interest in the case supposed were limited to one per cent., the income for each family would be only $1,500, or one-half of what they each year expend.; consequently, they must either labor for the other half, or take a portion of their princi- pal each year for their support. It would, therefore, be impossible for them to build or sustain such a city. The ten thousand most wealthy men in the United States- are probably worth, on an average, at least $300,000 in the aggregate $3,000,000,000. The annual 10 100 THE WEALTH OF CITIES. interest on this sum at six per cent, would be $180,000,000. If these men should sell their property, and invest the proceeds in bonds and mortgages bearing six per cent, interest per annum, and remove from the country, they would impose a tribute on the productive industry of the nation which would impoverish it for ages. It is doubt- ful whether the people would ever be able to pay and satisfy the interest and principal of the debt. They would pay $180,000,000 of their products yearly, without receiving any equivalent. And yet, without the labor of the buyers or borrowers, the property would be use- less ; and if the owners received any benefit from it, they would be obliged to remain and cultivate it themselves. Ought the laws to be such, that ten thousand wealthy men, on leaving their country, could impose such a bur- den upon the millions left behind? If interest were reduced to one per cent., and the ten thousand men should sell their property, leaving the proceeds on in- terest at one per cent., this nation would pay them $30,000,000 interest annually. And this would be quite enough for producers to pay for the mere use of capital. To show conclusively that the present rates of interest are the cause of the accumulation of the wealth in our cities, we will enter at length into a calculation which each can test and examine for himself. No one will dis- pute that in the city of New York there are several hun- dred families whose collective wealth is equal to $250,000 for each family. For our illustration, however, we will take but one hundred families, and supppose each of them to be worth equal to $250,000 in total, $25,000,000. As five or six of our citizens might be pointed out who are, in the aggregate, worth at least double the sum total, this calculation is a moderate one. Suppose these one hundred families to emigrate to some desirable sec- tion of the country, and settle upon two hundred acres of land, so that each family owns two acres. They con- THE WEALTH" OF CITIES. 101 vert all their property into money, or into bonds and mortgages bearing six per cent, interest, the lowest legal rate of interest in any State of the Union. Each family expends yearly for its support $3,000, or the interest at six per cent, on $50,000. This sum would supply each family with the necessaries and luxuries of life without the performance of labor by any of its members. Be- sides the $50,000 of which they expend the income, each family has $200,000 in the aggregate, $20,000,000 loaned at six per cent, interest, the annual income of which would be $1,200,000. The yearly expenditure of $300,000 (the interest on $50,000 for each family) soon collects near them merchants, mechanics, laborers, and others, to supply their wants ; and farmers find here a market for their produce. These families and their posterity live without labor, being determined to incur no hazard of business. They intermarry for five generations, thirty years being the average duration of each. Upon marriage, each couple receives $50,000, the income on which, at six per cent., amounting to $3,000 a year, is appropriated to their sup- port. They also receive their average proportion of the principal. They are forbidden to exact a higher rate of interest than six per cent, per annum r payable half-yearly, and are not at liberty to call in the principal so long as the interest upon it is regularly paid. The families con- sist of five persons each, exclusive of servants, amount- ing, in the aggregate, to five hundred individuals. Sup- pose them to increase twenty-five per cent, every twelve and a half years. Each family at the emigration had $200,000 loaned at six per cent, interest', amounting to $12,000 per annum; and, in the aggregate, on the $20,000,000 owned by all, to $1,200,000 per annum. This interest, collected and reloaned half-yearly, wifl double the principal, $20,000,000, in about eleven and 102 THE WEALTH OF CITIES. three-quarter years ; but, to leave time for the collection and reinvestment of the interest, allow it twelve and a half years to double. The following calculations exhibit the sum which would be owned by the families at the end of five generations of thirty years each, or at the end of one hundred and fifty years. This calculation of the centralization of wealth by interest is no idle theory, but a mathematical demonstration of facts, based upon the lowest rate of interest established by law in any State a much lower rate, too, than the average one at which money is actually loaned. The following table exhibits the accumulation at the rate, and under the circumstances, as above : TABLE OP THE INCREASE AT SIX PEE CENT. OP THE WEALTH OP A HUNDRED FAMILIES WORTH $250,000 EACH, DURING A PERIOD OF ONE HUNDRED AND FIFTY YEARS, WITH A DEDUCTION OP THEIR ANNUAL EXPENSES. 100 families worth $250,000 each $25,000,000 Yearly expenses of each family, $3,000, or the income on $50,000 at six per cent. total for 100 families. . 5,000,000 Deduct $5,000,000 for expenses, and there are left to accumulate 20,000,000 The interest at six per cent, paid half yearly, and re- loaned, will equal the principal in llf years ; but allow 12 years, and then add 20,000,000 40,000,000 Add 25 per cent, increase to 100 families in 12| year? i. e., 25 families, and deduct $50,000 for the sup- port of each of the 25 .~ 1,250,000 Left to accumulate 38,750,000 Add 12J years interest, at 6 per cent 38,750,000 77,500,000 Add 25 per cent, increase to 125 families i. e., 31 fami- ] es and deduct $50,000 for each of the 31 1,550,000 fat to accumulate. . 75,950,000 THE WEALTH OF CITIES 103 Left to accumulate (brought forward) $75,950,000 Add 12 years' interest at six per cent. . 75,950,000 151,900,000 Add 25 per cent, to 156 families i. 6,293 73 132 INCREASE OF PROPERTY BY LABOR Amount brought up $6,293 73 j Amount brought up $6,299 00 1 month's interest. ..... 5 27 1 mouth's labor . 50 00 5,299 00 I 6,349 00 In the first ten years and one month, the two men would earn by their labor the same sum as in the former case, viz : $6,050 00 Interest during that period at 1 per cent, on the money earned. . , 299 00 6,349 00 2d ten years and one month's interest at 1 per cent., re- loaned half yearly 671 73 7,020 73 2d ten years and one month's labor, with interest thereon at 1 per cent 6,349 00 13,369 73 3d ten years and one month's interest at 1 per cent 1,414 53 14,784 26 3d ten years and one month's labor, with interest thereon 6,349 00 21,133 26 4th ten years and one month's interest at 1 per cent 2,235 87 23,369 13 4th ten years and one month's labor, with interest thereon 6,349 00 $29,718 13 In the above forty years and four months, the two men earn by their labor the same sum as when interest was at 7 per cent., viz $24,200 00 Interest at 1 per cent, upon this sum during a period of forty-four years and four months 5,518 13 $29,718 13 COMPARED WITH LEGAL INTEREST. 133 Brought over $29,718 13 Interest on this sum at 1 per cent, for twenty years and two months, or until the men arrive at the age of eighty- one years and six months first ten years and one month's interest 3,144 17 32,862 30 2d ten years and one month's interest 3,475 80 Total amount of earnings, and interest Jhereon at 1 per cent, for sixty years and six months 36,338 10 As in, the former case, suppose the men to live the last twenty years and two months of their lives upon their money, and deduct for their expenses 14,995 00 $21,343 10 With interest at seven per cent., at the age of eighty- one years and six months they have a fortune of $500,000, while with interest at one per cent, they have but $21,343, making* a difference of $478,656. If in the former case they decease at the age of eighty-one years and six months, their fellow-citizens are indebted to their estates or heirs, $500,000, with an annual interest of $35,000 ; and in the latter, the citizens are indebted to them $21,343 with an annual interest of $213 44. Even at one per cent., the interest legally accumulates for them more than one-half as much as they earn by labor. Let us now suppose another case, of two men who be- come of age at the same time as the former two, and who are equally good workmen. They likewise earn a dollar per day over and above their own support ; but they marry, and have the expense of supporting their families. Each rents a house at $100 per annum ; and thus one- third of their surplus earnings is paid for tenements. Their earnings must also supply their families with food, clothing, fuel, etc. Although these two men work as diligently and as skillfully, and earn as much as the former two, yet, instead of being able to lend money 134: INCREASE OF PROPERTY BY LABOR. upon interest, they are obliged to pay interest on the houses they occupy. Strict economy is requisite to make one dollar a day, over and above their personal expenses, school their children, pay rent, and furnish neces- sary supplies. These two men labor as much as the former two, and contribute at least an equal share to the public good. All their^earnings are devoted to the pay- ment of artisans, teachers, and others, whose services they require. The former two, without performing more labor than the latter two, live twenty years and two months without labor, and leave fortunes to the amount of $250,000 each. The latter work as long as they are able, but in old age are, perhaps, compelled to seek an asylum in the poor-house. If the former two men as they earned their money had invested it in farming land, or in houses and stores, and had rented the property at seven per cent, on its cost, they certainly could not have oppressed the producing classes more than they wtfuld by lending them money at seven per cent. In either case they would compel others to earn for them more than nineteen out of twenty parts of their fortunes.* The amount to which nations and individuals are in- debted, is a subject of general complaint. The above illustration exhibits the cause. The difference in the amounts due to the estates of these men, under the sup- posed circumstances, can be traced directly to the differ- ence in the rates of interest. At the rate of seven per * We do not dispute the right of the bachelors to use all the money that they can earn by their labor, and to lend their money on interest to others ; but the interest which they have a right to receive from others, should be restricted to the necessary expenses of furnish- ing and supporting a money representative of value. If a just rate ot interest be maintained, landlords and tenants, in voluntary agree- ments, will naturally fix upon a just rate of rent ; because the foun- dation upon which agreements will then rest will be just. TWO PER OKNT. INTEREST. 135 cent., a sum of $500,000 is due to their estates. I 4 would take the labor of a single man for more than 1,666 years to pay this principal ; and it would require, at one dollar per day, the constant toil of more than 116 men to pay the yearly interest of $35,000. From gene- ration to generation, they might continue to pay the interest, and still the burden be undiminished. In the short space of sixty years and six months, two men entail this debt upon this small nation. Not the laboi of these two men entails this evil, but the law which fixes the unjust rate of interest. It is the natural result of the law, and must be alike disastrous to large and small communities. SECTION" VII. TWO PER CENT. PER ANNUM TOO HIGH A ^ATE OF INTEREST. However fertile a country may be, interest even at two per cent, per annum will inevitably oppress the pro- ducers. In the following table interest is calculated at two per cent., under the same circumstances and for the same period as in the former cases. The interest will be found far to exceed the principal. TABLE. INTEREST AT TWO PKR CENT. ON $300. Amount brought up. $609 03 3d half year's labor 300 00 1st half year's labor. . . 6 months' interest at 2 per cent $300 00 3 00 ( 2d half year's labor 303 00 800 00 6 months' interest . . . 603 00 6 03 609 03 6 months' interest .... 909 03 909 918 12 4th half year's labor. . . 300 00 1.218 12 J36 A BATE OF INTEREST Amount brought up 6 months' interest 5th half year's labor. . . 6 months' interest 6th half year's labor.. . 6 months' interest. . . . 7th half year's labor.. 6 months' interest. . . . 8th half year's labor. . 6 months' interest. . . . 9th half year's labor. . 6 months' interest. . . . 10th half year's labor. . 6 months' interest ... llth half year's labor. . 6 months' interest .... 12th half year's labor.. $1,218 12 12 18 1,230 30 30000 Amount brought up 6 months' interest. . . . 13th half year's labor. . 6 months' interest 14th half year's labor. 6 months' interest. . . . 15th half year's labor.. 6 months' interest. . . . 16th half year's labor. . 6 months' interest. . . . 17th half year's labor.. 6 months' interest 18th half year's labor.. 6 months' interest. . . . 19th half year's labor.. 6 months' interest. . . . $3,804 76 38 05 3,842 81 30000 1,530 30 15 30 4,142 81 41 43 1,545 60 300 00 4,184 24 300 00 1,845 60 18 46 1,864 06 300 00 2,164 06 21 64 2,185 70 300 00 4,484 24 44 84 4,529 08 80000 4,829 08 4829 4,877 37 300 00 2,485 70 2486 2,510 56 30000 5,177 37 5177 2,810 56 28 11 2,838 67 300 00 5,229 14 30000 5,529 14 55 29 3,138 67 31 39 5,584 43 300 00 3,170 06 300 00 5,884 43 58 84 3,470 06 3470 5,943 27 800 OC 3,504 76 30000 6,243 27 0243 3,804 76 6,oOo 70 OF TWO PER CENT. PER ANNUM. 137 Amount brought up $6,305 70 20th half year's labor. . 300 00 Add one month's inte- rest. . 6,605 70 11 06 6,616 76 Add 1 month's labor. . 60 00 6,666 76 Add 10 years and 1 month's interest at 2 per cent 2d 10 years and 1 month's labor and interest 6,666 76 14,815 07 Amount brought up $14,815 07 10 years and 1 month's interest. 3d 10 years and 1 month's labor and interest 6,666,76 24,774 18 10 years and 1 month's interest 5,50588 30,280 06 4th 10 years and 1 month's labor and interest 6,66676 $36.946 82 Add the interest at two per cent, for twenty years and two months longer, until the men reach the age of eighty-one years and six months. 1st 10 years and one month's interest 8,210 69 2d 10 years and I month's interest. . 45,157 51 KM 35 35 55,192 86 In forty years and four months the two men earn by their labor 24,200 00 The interest upon this sum for a period of sixty years and six months, even at two per cent., amounts to 30,992 00 This is $6,790 more than they earn by their labor. $55,192 00 When it is considered that this interest or rent is paid for the mere use of money or of capital, every reflecting, honest mind must be convinced that two per cent, is a higher rate of interest than a people can afford to pay. It is surely most unreasonable for the laws to compel 138 TWO PER CENT. INTEREST. producers to pay for the use of the property which a man may acquire by forty or fifty years' . labor, twice or thrice the sum of the property so earned. The thing produced is more highly estimated than the power that produces it. If an interest of two per cent, upon a well regulated currency would accumulate the property of a nation in the possession of a few, can it be considered strange that the rates of three, four, five, six, and seven per cent, and even higher rates, which are exacted in different countries, should have concentrated property into so few hands ? The only wonder is, that producers have continued to live under this oppression. A rate of interest of even two per cent, per annum, would put it out of the power of the people to fulfil their contracts. The establishment of this rate of interest would be equivalent to the passing of a law, compelling the laboring classes to double the capital of a nation, in favor of capitalists once in thirty-four and a half years, besides producing their own support. Suppose a foreign nation owned all the real and personal estate in this nation, and a fair estimate were made of the value of all ; and then our people were legally obliged to pay two per cent, yearly upon this valuation, besides maintaining themselves, would not a tribute or tax like this keep us forever in poverty ? Our laws enforce much higher rates of interest on capital, which are little less oppressive to the great body of our producers, because they are paid to a few capitalists in our own land instead of to foreigners. It may be objected that some of the illustrations of the accumulative power of interest are based on so long periods as to present exaggerated results ; but it must be borne in mind that interest, and rents, at too high rates are continually accruing to the capital of nations, and are producing their evil effects upon the people whether the loans be for longer or for shorter periods. REDUCED INTEREST A BENEFIT. - 139 SECTION VIII. THE REDUCTION OP INTEREST WOULD BE AN EQUAL BENE- FIT TO THE PRODUCING CLASSES, WHETHER PROPERTY SHOULD RISE OR FALL IN PRICE, IN CONSEQUENCE OF SUCH REDUCTION. It may be supposed that if interest were diminished to one per cent., property and labor would rise in the same proportion, and therefore, the producing classes would receive no benefit from the reduction. But whether property should rise, or fall, or maintain its present price, producers would have the same relative advantage ; their gain would be from the lessened per centage on capital. If a man borrowed a hundred dollars for a year, he would pay out one dollar for the use of one hundred, instead of paying seven dollars. If he hired a hundred acres of land, he would have to earn only one acre to pay for the use of one hundred, instead of being obliged to earn seven to pay for their use ; for the per centage on money governs the rent of land. This principle of the adequate reward of labor, by the decrease of the interest on money, although property and labor in con- sequence should rise in price, will be illustrated in the following table. The price of labor is calculated at six dollars per day, and the interest on money at one per cent, per annum. The men earn their money, and loan it as in the former cases. TABLE. INTEREST AT ONE PER CENT. LABOR AT $6 PER DAY. 1st 6 months' labor. . $1,800 00 Amount brought up $1,809 00 6 months' interest at 1 2d half year's, labor. , . 1,800 00 per cent , . 9 00 3,609 00 1,809 Op 140 REDUCED INTEREST A BENEFIT Amount brought up. . . 6 months' interest . $3,609 00 18 04 Amount brought up. . . 6 months' interest. . . . $18,410 44 92 05 3d half year's labor. . 3,627 04 1,800 00 llth half year's labor. 18,502 59 1,800 00 6 months 7 interest. . . . 5,427 04 27 : 14 6 months' interest. . . . 20,302 59 101 51 -tth half year's labor. , 5,454 18 1,800 00 12th half year's labor. 20,404 10 1,800 00 C months' interest. . . , 7,254 18 36 27 6 months' intereat 22,204 10 111 02 5th half year's labor. . 7,290 45 1,800 00 13th half year's labor. 22,315 12 . 1,800 00 6 months' interest .... 9,090 45 45 45 6 months' interest . . . 24,115 12 120 58 6th half year's labor . . 9,135 90 1,800 00 14th half year's labor. 24,235 70 . 1,800 00 6 months' interest. . . . 10,935 90 54 68 6 months' interest. . . . 26,035 70 130 18 7th half year's labor. . 10,990 58 1,800 00 15th half year's labor. 26,165 88 1,800 00 6 months' interest. . , 12,790 58 63 95 6 months' interest. 27,965 88 139 88 8th half year's labor . . 12,854 53 1,800 00 16th half year's labor. 28,105 76 . 1,800 00 6 months' interest. . . . 14,654 53 73 27 6 months' interest 29,905 7(i 149 53 9th half year's labor . . 14,727 80 1,800 00 17th half year's labor. . 30,055 29 1,800 00 6 months' interest. . . . 16,527 80 82 64 6 months' interest 81,855 29 159 28 10th half year's labor. . 16,610 44 1,800 00 18th half year's labor. 32,014 57 1,800 00 18,410 U 33,814 57 WHETHER PRICES RISE OR FALL. Amount brought up. . $33,814 57 6 months' interest . 16907 33,983 64 19th half year's labor. . 1,800 00 35,783 64 6 months' interest. . 178 92 35,962 56 Amount brought up. . $35,962 56 20th half year's lacor . 1,800 00 37,762 56 1 months' interest. ... 31 47 37,794 03 1 months' labor 300 00 $38,094 03 10 years and 1 month's labor and interest $38,094 03 2d 10 years and 1 month's interest 4,030 44 42,124 47 10 years and 1 mouth's labor and interest 38,094 03 80,218 50 3d 10 years and 1 month's interest 8,487 24 88,705 74 10 years and 1 month's labor and interest 38,094 03 126,799 77 4th 10 years and 1 month's interest 13,415 34 140,215 11 10 years and 1 month's labor and interest 38,094 03 $178,309 14 In 40 years and 4 months, the two men earn at $6 per day $145,200 00 Interest thereon for 40 years and 4 months at 1 per cent. 33,109 14 178, 309 14 Let the interest on $178, 309 14 accumulate 20 years and 2 months, until the men arrive at the age of 81 years and 6 months. Interest on $178,309 14 for 10 years at 1 per cent 18,865 02 197,174 16 2d 10 years' interest 20,8548'.* 218,028 9ri 142 EFFECTS UPON PRODUCERS Amount brought up. $218,028 96 The men cease to labor at the age of 61 years and 4 months, and expend during 20 years and 2 months, six times more than when labor was at $1 per day. They expend six times $14,995. Deduct 89,970 00 $128,058 96 With interest at seven per cent., and labor at $1 per day, (see Sec. VI.,) the two men leave to their heirs $500,000 ; while with interest at one per cent., and labor at $6 per day, they leave to their heirs $128,058, only a fraction over one-fourth as much as in the former case. The interest on $500,000 at seven per cent., would be $35,000 annually. It would take the labor of one man at $1 per day, one hundred and sixteen years to pay the in- terest for a year. The interest on $128,058 atone per cent., would be $1,280. The labor of one man for two hundred and thirteen days, at $6 per day, would pay the interest for a year. SECTION IX. EFFECTS UPON PRODUCERS OF HIGH AND FLUCTUATING RATES OF INTEREST. The following illustration, based upon land, will show the effect of high and varying rates of interest upon producers, and the safety with which money could be loaned, if interest were reduced to a just and uniform rate. Suppose W. owns a thousand acres of land, which he has bought from the Government, and upon which he is paying the taxes. The land will produce no income, un- less he cultivates it himself, or sells or rents it to others, who will cultivate it. He sells the land in five tracts, of two hundred acres each, at five dollars per acre. A., B., OF VARYING RATES OP INTEREST. 143 C., D., and E., are the purchasers, and move upon and cultivate the land, and pay the taxes. No other payment is to be made for five years, at the expiration of which period, A., B., C., D. and E., are to pay up the interest on their respective tracts of land, and after that to pay the interest annually. All the land sold is of nearly the same quality. Each purchaser agrees to pay a thousand dollars, and gives a bond and mortgage upon his land to secure the payment. W. takes A.'s bond and mortgage, bearing two per cent, interest; B.'s bearing four per cent. ; C.'s bearing eight per cent. ; D.'s bearing sixteen per cent. ; and E.'s bearing thirty-two per cent, interest. At the end of five years, A.'s bond and mortgage will have drawn $100 ; B.'s $200 ; C.'s $400 ; D.'s $800 ; and E.'s $1,600 interest. Yet W. sells the land to all at the same price, and all the difference in the indebtedness of A. and E. is caused by the difference in the rates of interest that W. charges them. This difference makes E. in- debted to W. $1,500 more than A. All the debtors must pay the interest with the products of their respective farms, and W. does none of the labor toward making the production. Now let X. sell the same land to the parties on a credit of one year, and charge them six per cent, in- terest. Suppose money to be so scarce, that at the end of the year they clear only the interest, and are com- pelled to lose their farms by foreclosure, or else to borrow the money and pay off their mortgages. A., B., C., D. and E. borrow on the best terms possible, on mortgage of their farms and stock. A. procures the money at two per cent, interest ; B. at four per cent. ; C. at eight per cent. ; D. at sixteen per cent. ; and E. is compelled to pay thirty-two per cent, per annum, or two and two-thirds per cent, a month. This amounts to the same thing as if they had bought their farms of W., agreeing to pay him these rates of interest. The money enables them to 144 EFFECTS UPON PRODUCERS keep possession of their farms. From the sales of their products they must pay the different debts and interest! The rate of interest in each case decides what propor- tion of the products shall go to pay for the use of the farm. When the farmers borrow the money to pay off their mortgages, they do not keep the money. It con- tinues to circulate, and to decide what rents others shall pay for the privilege of keeping the use of property for a given period. But suppose the rate of interest to be fixed at one per cent., and that money could always be obtained on the offer of good security. Those who had money to lend would ascertain whether the property offered as security would make the interest safe. If so, the security would be deemed good. When interest is liable to rise from six to twelve per cent., the lenders of money require securities that will make their loans safe if the interest should rise to the latter point. But if the supply of money were such that the interest could not rise, a less security would always keep loans safe. Suppose, then, the rate of interest to be at one per cent., and W. to sell the land to A., B., C., D and E., as before. They purchase two hundred acres apiece at $5 per acre, and pay only the taxes until the end of five years, when they pay the interest for the whole period. The interest at one per cent, on $1,000, for five years, amounts to $50 ; and on the whole $5,000, to but $250, instead of $4,100, the amount in the former case, when the money was loaned at the various and higher rates of interest. The tenants have as much the use of the farms to enable them to pay the $250 as to pay the $4,100. If they make any reasonable improve- ment on them, W. can incur no hazard of losing his money, for each farm would certainly rent for $10 a year. Even if at the close of the five years the farmers should not have paid the interest, and each farm would rent for $10 50 a year, over and above the taxes, each farm OF VARYING RATES OF INTEREST. 145 would still be as good as $1,050, at interest, at one per cent. ; therefore, in either case, the tenants would keep the sale of the land good, or the loan safe for W., with- out his personal labor. But if W. sell the farms, when interest is at six per cent., at the end of the five years each of the farmers would owe him $300 interest, which, added to the principal, would make $1,300. The interest on this sum, at six per cent., would be $78 annually, and unless each farm would rent for this sum, W.'s debts would not be safe. The per centage rent on the valua- tion of property must be equal to the rate per cent, interest on money, or the property cannot be good security for the payment of the money. It is commonly said and supposed that borrowers pay a certain rate of interest for the use of money. But they do not use the money ; they part with it in some way for property, and the rate of interest determines what rent they shall pay for the use of the property. A few illus- trations will show the effect of increased rates of interest upon the welfare of producers and distributers whose property is in their products. Suppose a planter raises a hundred bags of cotton, in doing which he becomes indebted for bagging, rope, clothing for his workmen, etc. Let him be compelled to realize the money for his crop as soon as he can get it to iharket, and at a time when money is very scarce, and the price of cotton extremely low. He is obliged either to sell for cash, or to offer a commission to some one to accept his draft on the pledge of the cotton ; and is forced to pay for his acceptance, say two and a half per cent. This will take the proceeds of two and a half bales of cotton. If the draft be drawn on three months' time, and the scarcity of money compel the planter to sell the draft at two per cent, a month, six bales more will be taken from his one hundred bales. He must lose eight and a half bales for the privilege of keeping the remainder three months in 146 EFFECTS OF VARIOUS RATES. store, besides the storage, cartage, and the commission on sales. The proceeds of the eight and a half bales of cotton are gained by the capitalist by means of the high rate of interest, and without any adequate labor on his part. Under a true monetary system, the planter would be^able to hold his cotton a year without losing even two bales of it for the advance of money. Again, a manufacturer makes a package of a hundred pieces of cloths, and sends them to market. Six months pass before the goods can be sold, and, with interest at six per cent, per annum, he loses three pieces as the inter- est on the ninety-seven which he has left. If, at the end of six months, the commission merchant sell them on a credit of eight months, at the above rate of interest the manufacturer must lose four pieces more, in all seven pieces of cloth. But suppose the manufacturer is greatly in need of money, and must have the eight months' note cashed. Let the commission merchant, in consequence of a rise of interest, sell the note in market at two per cent, a month discount, and the manufacturer must lose sixteen pieces of cloth on the note, instead of four pieces, the loss at six per cent. Add these to the first three, and it will make nineteen pieces, paid to others out of the one hun- dred pieces, to enable him to keep eighty-one pieces, or their proceeds, for fourteen months. These are a total loss to the manufacturer. Besides, he has to pay cartage, storage, commission and transportation. The proceeds of the nineteen pieces of goods go into the hands of the money-lender. Now let us see the result in the same transaction, with interest on money diminished to one per cent, and main- tained at that rate. The manufacturer sends the hundred pieces of cloths to market, and they lie six months unsold. He loses only half a piece of cloth for the six months' interest on his goods. The commission merchant sells them on eight months' credit, as before, and gets the HIGH KATES OF INTEREST. 147 note discounted at the rate of one per cent, per annum. This amounts to two-thirds of apiece of cloth, and added to the half piece, is a loss to the m:m ifarturer of one piece and one-sixth of a piece during the fourteen months, instead of being a loss, as in the former case, of nineteen pieces. This difference is caused solely by the difference in the rate of interest. Although the bales of cotton or the pieces of goods lie unused and uninjured in the store- house, yet a number of bales of cotton or pieces of goods are taken from their owners by the legal growth of the money, or by the growth or accumulation on the paper obligation given to obtain the money. The rate of inter- est decides how many bales of cotton shall be owned by the planter how many pieces of goods shall be owned by the manufacturer ; and the proportion of them that shall be given to those who lend the money to represent their value. SECTION X. THE OPPRESSION OP LABOR BY A MONOPOLY OF LAND NOT AS GREAT AS THE OPPRESSION BY HIGH RATES OF INTEREST ON MONEY. It is supposed by many that the monopoly of land is the cause of the centralization of wealth, and that land- owners are the greatest oppressors of the laboring classes. They think that if all had access to a certain portion of land, the means of support would be within reach of all. But if the land were equally divided, many persons are not qualified to improve it to good advantage, nor are all, or nearly all, capable of manufacturing the imple- ments which must be used in its cultivation. The mecha- nical arts are absolutely necessary to the improvement of the land ; and men who are engaged in these arts require very little, if any land, to cultivate, because their time is 14 14:8 HIGH KATES OF INTEREST occupied with the various trades by which agriculturists and others are supplied with houses, implements of indus- try, clothing, and so forth. A monopoly of manufac- tured articles would be as likely to cause the evil as a monopoly of land ; for if all implements of agriculture were held by a few, it would be nearly impossible to culti- vate the land ; and should all owners of houses refuse to receive tenants, more than three-quarters of the people in our large cities would be turned into the streets. Doubtless it is for the interest of landlords to rent their houses, but it is equally for the interest of landowners to lease or rent out their lands : for, if they keep them in their own possession, neither the houses nor lands can be useful to their owners, except so far as they can cultivate the one, and live in the other. The same is true of all kinds of implements and merchandise. Neither lands nor products have any natural monopolizing power. The monopolizing power is an artificial one, instituted by our national laws, and is in the money which represents the property and products. The monopoly is one of the effects, it is not the cause of the evil. If the land and wealth were now to be equally distributed, the same cause which has thus far centralized them would accumulate them again in the hands of a few. In the illustration of the one hundred families and their descendants, (see Chap. III., Sec. II.,) no laud is bought except the two hundred acres for their personal residences ; yet they take from the people as large a quantity of their products, by the inU'r- est on money, or on their obligations, as ifthey had invested the twenty millions in farming land, and let the land out to tenants at six per cent, interest on its cost, reinvesting the interest half-yearly in land during the hundred and fifty years. The tenant of leased land pays the rent by the sale of its yearly products. If he cannot support himself well besides paying the rent, it is evident to all that the rent is too high. The landlord and the tenant WORSE THAN LAND MONOPOLY. 149 come in direct contact, and the wrong done by the former to the latter is manifest. But nothing grows upon mo- ney with which the borrower can pay the interest. He exchanges it for merchandise or lands, and expects to make a profit on them which will pay the interest on the money. If, however, he be not able to pay the interest, it is set down as bad management on his part, instead of being attributed to the too high rate of interest on the mo- ney. The owner of money, by the legal interest, imposes as great hardships upon the borrower, as if he hd lent him land or merchandise at the same per centage or> its valuation. The following illustration will show the different esti- mates put upon the leasing of land at a certain per centage on its value, and the lending of money at the same rate. K. is the owner of $100,000. He expends this sum for well-improved farms, which he leases in perpetuity at six per cent, per annum on their cost. His tenants are, therefore, obliged to pay $6,000 a year for the use of the farms. They would find it very difficult to pay so high a rent ; and it would be deemed very oppressive to them and to their heirs who must work the land. If the owner of the lapd should require from each tenant security for the rent, so that one must become responsible for the payment of another's rent, he would be thought a hard landlord. And if in time of drought or disease, which rendered the tenants unable to pay their rent, the land- lord should sell the stock from their farms, he would be deemed very oppressive, although his tenants had volun tarily entered into the engagement. Now, suppose M. to own $100,000, which he lends on interest at six per cent, per annum payable half-yearly. To secure the loan, he requires double its value in land, so that he is twice as well secured as the landowner. He allows the principal to remain outstanding as long as the interest is regularly paid. He annually receives 150 HIGH RAT KB OF INTEREST $6,000 interest on his money, the same sum that the land- owner receives for the rent of his land, and he is much better secured, for in some years the crops may fail ; but the mortgage on land of twice the value of the loan, is a double security, and will force the sale of the farm if the interest be not paid. It takes as many of the products of labor to pay the interest to the money-lender, as to pay the rent to the land-owner ; yet the money- lender is deemed a just and honorable man, because he takes only six per cent, interest for his money. If at any time the scarcity of money and the low price of pro- ducts prevent the payment of the interest, and the money-lender foreclose some of his mortgages, buying in the property, worth double the amount lent, at half price, no stigma rests upon his character, especially if the legal rate of interest be seven per cent., and he charge but six per cent.* Although these cases are so differently regarded, the oppression by lending money at six per cent, interest greatly exceeds that by leasing property. The following illustration shows how tenants of land are affected by high rates of interest on money. N. owns a farm which he cultivates. He is, therefore, the rightful owner of the products. If, however, {. lets the farm to O., and O. cultivates it, then N. and O. are joint owners of the products. This principle, that labor and capital are together entitled to the products, is in accordance with the laws of nations, and must continue to be so as long as the rights of property are recognized by civil authority. The question which- arises for settle- ment is, what proportion rightfully belongs to the capital, and what to the labor what proportion of products N. should receive for the use of the farm, and what propor- tion O. should receive for his labor in cultivating it. It will be said at once that the proportion which O. is to * People seem to look upon money as a sort of sa