Something

any one of a dozen causes, few

larly every ten years. know what sets gold flowing out. Fifty millions withdrawn in a short time from their usual places of deposit is quite sufficient to make the whole volume of coin disappear from ordinary circulation as completely as if it had never existed. The metallic basis is gone, slipped out; the pivot of the system is dislocated; somebody wanted it, and took it; and the pyramid tumbles down, burying in its ruins three-fourths of a business generation."

And Mr. Colwell says:

"The remedy for these evils"-i.e., the insecurity of banknotes "which has been most relied on, is that of placing the banks under stringent obligations to pay their currency on demand in specie. This would be a complete remedy, if compliance were possible; but that is not the case, - far from it. It involves a stock of the precious metals in the country equal to the deposits and circulation of the banks, and applicable to this purpose by remaining in the banks, as a security for their issues. Security, absolute security, should be required of the banks; but it is surely an error to assume that the security must be gold or silver." 1

Mr. Patterson, in speaking of the theory that the amount of currency issued by a bank should always vary in amount as gold varies, illustrates the absurdity of that theory by the following brief statement, which I heartily recommend to the study of those of our American financiers who have expressed a similar notion:

"For many years during the great war with Napoleon, especially from 1808 to 1815, there was hardly a sovereign left in the country. * * * At such a time- and it may occur again the supporters The gold

6

of the variation' theory would have left nothing to vary. being 0, the paper currency should also be 0! To hold such a doctrine is to bid defiance to common sense. "2

On page 282 of the same work he says, on the same subject: "This theory of variation is briefly this: If much gold happens to be brought into the country, the note circulation is likely to be increased to a corresponding extent; if gold is temporarily withdrawn from us, the note circulation also is proportionately diminished. If, owing to a temporary cause, all the gold available for monetary pur

1 Ways and Means of Payment, pp. 11, 12.

2 The Economy of Capital, p. 200.

This we are told

poses were sent abroad, all our paper money would likewise disappear, and the country be left without money of any kind. A more absurd theory was never propounded. If one kind of money fails us, we are upon no account to use any other. If metallic money fails us, we are upon no account to use any other. to regard as a masterpiece of economical science; this is the great discovery which our advances in civilization have revealed to us. * * The gospel of monetary science now is, that when a country does not want paper money, it ought to have a great supply of it; and when it does require paper money, it shall have none. When a country has enough of specie, it ought to double its currency by issuing an equal amount of bank-notes; and when there is no specie, there should likewise be no notes. Is it necessary to discuss such a theory? In order to be refuted, it only requires to be stated; in order to be rejected, it only needs to be understood. It is a theoretical monstrosity which common sense revolts against, a burlesque of reason, which even the present generation will love to laugh at.”

CHAPTER VI.

THE TRUE BASIS OF ABSOLUTE MONEY.

So much has been written, pro and con, on these two subjects of a specie basis and a bond basis, that I will condense my views on it into two distinct propositions:

I. That the pretence of redemption in gold and silver- - whether asserted by a government, or by a municipal or private corporation — is of necessity a delusion and an absurdity.

II. That the holder of an interest-bearing bond whether issued by a government, or by any municipal or private corporation is not a whit more "secured than the holder of a non-interest-bearing legal-tender note of the same government or corporation.

Now I propose that both of these bases, specie and bonds, shall be abolished altogether, by making the national treasury of the nation the general bank of issue, and causing its exchange or money to be issued upon the only safe and sufficient basis" conceivable: first for the payment of the national debt, and subsequently upon their

own total trade, annual products, power, wealth, and sovereignty. The people will support the money that represents their own debts, and the power and wealth of their own country. Their money will not be "a promise to pay," but it will be the medium, and the only medium, where with to interchange all their commodities and transact all their business.

This absolute money, therefore, in the nation that issues it, will be redeemable not only in specie, as ordinary bank-notes are, or rather pretend to be, since they never can be so fully redeemed, - but will be redeemable, or rather convertible into all the commodities of that nation,—into all its products, including gold and silver. No panics, no revulsions in trade can, therefore, affect it; indeed, it will prevent all such panics and revulsions. The present annual productions of the country amount in value to more than $15,000,000,000, of which $76,000,000 are in gold and silver. * All these fifteen thousand millions of products would be, as it were, a security for that national money, since that money would always be a legal tender, and the only legal tender in the country, for the purchase of them; and it must be further remembered, that every year swells the amount of our annual products in enormous proportions, and increases the security of this absolute money in a corresponding ratio. This is another reason why the gold basis is utterly unsuited for the transaction of modern trade and business. Not more than $350,000,000 of gold and silver money now exists in the United States, as a basis for our interstate business, and for our foreign exchanges in the yearly interchange of our products and commodities. This amount of gold and silver money remains comparatively stationary, and hence is evidently altogether too narrow a basis to meet the requirements of our interstate commerce, and for the constant and rapid increase of our business transactions. Hence, I propose to substitute in its place a redemption or conversion of the absolute money so large that it can never fail. It is in our $15,000,000,000 of annual products, and our foreign and interstate trade therein, and in all the other revenues and wealth of the people and the government, its public lands and its taxation, that we find the only basis large enough to support the amount of money needed by our country.

These are the factors that will support and redeem, by perpetual conversion, the absolute national money; and what other redemption should it need? It is the exchange, conversion, and use of the

annual products that makes the absolute-money system necessary; and what greater security can be conceived than its exclusive applicability for that exchange, use, and conversion?

This money, besides, will be based upon the whole bonded debt of the people of the United States; for the whole of that debt will be redeemed by this money gradually, as I shall show more at length hereafter. This money will, therefore, represent in reality only the amount of the national debt now owing by all the citizens of this country. What is the use, then, of trying to redeem in gold and silver coin, and of thereby cancelling a money medium which represents their own debts, and at the same time serves, in its function as a circulation, to carry on all their business operations and the development of all their industries on the safest and most practical basis?

Each citizen being equally interested in the coöperative government of the United States, in proportion to his capital and industry, and bound to accept this money as the only legal tender of the nation, it is absurd to speak of an artificial and deceptive redemption in specie in connection with it. Each citizen at present owes his share of the public debt, and is bound to pay his portion of it out of his share of all the commodities and annual products of the country; and Congress has full power to make such payment legal, and bind all the citizens to liquidate the debt by taxing them. But Congress has also full power to liquidate the debt by substituting in its place an absolute national money, and bind the citizens to take it, by making it the exclusive legal-tender of the country; and I submit that, apart from all the other reasons advanced by me, the immense economy resulting from such a substitution of money for bonds drawing interest ought alone to decide in its favor.

Based thus upon all the products, commodities, the wealth, power, and sovereignty of the nation, this money would operate in representing absolute value without any intrinsic value of its own, somewhat like an execution issued upon a judgment for the collection of, say, $100,000 out of the property of a defendant. This, as an instrument representing values, has no intrinsic value of itself. It is a piece of paper, with the seal of the court attached to it, and an order to the sheriff to levy upon the defendant's property and sell it, to make the amount out of it which is necessary to pay the plaintiff's judgment. The power of the execution and its value, in fact and in

law, depends not upon the value of the material on which it is written or printed, but upon the available wealth of the defendant wherewith to pay or satisfy it, and the authority of the State within whose jurisdiction the writ is issued, to compel the enforcement of the process. The same governmental power that makes the execution so capable of representing value, gives the national money power to satisfy the execution. One piece of paper satisfies the other; in this way the absolute money issued by the government would represent all the available wealth, present and future, of the nation and each one of its taxable inhabitants. The advocates of a specie basis sneer at this proposition of a currency irredeemable in specie. But why call it irredeemable, when I propose that the government shall make it redeemable in all the commodities of the nation, receivable for all salaries, debts, judgments, and taxes, duties and imposts, by constituting it the only legal-tender for all time to come? It seems to me, rather, that specie would be irredeemable, when once deprived of its legal-tender character.

This is by no means an exaggerated statement, put in here for antithetical effect. Gold, for instance, is not "redeemable " in the greater part of Asia. Silver, on the other hand, is not "redeemable" in Germany, and has even in England fallen nine per cent in price during the last three years. Germany has demonetized $300,000,000 of silver coin, and is very anxious now to get rid of it at a considerable discount. Belgium and Holland also evince a disposition to demonetize silver, and if they do there will be another $100,000,000 thrown upon the market. But there is very little demand for it. Nobody wants the "precious metal" in Europe, strange as this may sound to our American specie-worshippers, who are always pointing to Europe as the country we should pattern after in financial affairs. The greatest demand for silver is in Asiatic countries, amongst the lower classes of the populations of China and India. But the commerce of those nations is so limited, that their requirements fall far short of the amount of silver put up for sale in the European market. England last year exported to the East and to Egypt £6,840,000, which is only some £3,000,000 in excess of her average annual export of silver to those countries. These £3,000,000, or $15,000,000, came from Germany; but if the demand grows no larger, the price of silver will probably fall still considerably below its present discount of nine per cent, especially as the supply of that metal from our mines