GETTING SOBER.
It was expected that this new and immense volume of currency,
poured at once on to the wheels of trade, would immediately start the
wheels. But, somehow, it didn't seem to have that effect at all. The
wheels not only would not revolve, but the friction on them seemed
to have become more persistent and chronic than ever. In fact, the
doubling the volume of the currency, instead of increasing the before
existing instrumentalities for facilitating exchanges, had really
diminished them; for all who were willing to exchange commodities
for the new currency either doubled the price of their commodities,
or gave only half the quantity for what they regarded as half of the
former money; so that with all this class the abundance of currency
was relatively the same as before. But the majority who had any thing
to sell would not accept the ideal money in exchange at all. They
did not claim, they said, to be financiers, or philosophers, or even
special friends of humanity; but they did think that they were not
such fools that they could be made to believe that the half of a
thing was equal to the whole, or that one bushel of grain could be
converted into two by putting one bushel into two half-bushel measures.
The only really positive effect of the doubling of the volume of the
currency in the manner authorized by law was, therefore, to scale
all debts to the extent of fifty per cent., and in such a manner
that creditors were wholly unable to help themselves; for by terms
of the act every one dollar of old legal tender was now made two
for all new legal-tender purposes. In this way the people on the
island soon learned a most important elementary lesson in finance,
which was, that the only one attribute of legal tender which is
imperative and unavoidable [32] is its inherent power of canceling or
liquidating debts or of tapping creditors--and this, too, irrespective
of the endowment of the legal tender with any real or representative
value. So that a truthful designation of the act in question would
have been "An act to relieve debtors from half of their obligations,
and swindle creditors to a corresponding extent of what was due them
by the debtor's acknowledgment."
To the credit of the people of the island it must be recorded that,
as a general rule, they were too honorable to take advantage of
the law to do so wrong and mean a thing; [33] but the knowledge
that every debtor had it in his power to so act, and the fear that
some would take advantage of their unquestionable legal privileges,
contributed still further to bring all business to a stand-still.
There was also a curious phenomenon incident to the situation,
and pertaining to the rate of interest, which excited no little
comment and attention. Every body took it for granted that with an
unlimited supply of money a low rate of interest would prevail, and
that, however much the financiers and philosophers might disagree
about other things, this one result would be certain. An eminently
practical man in one of the public debating societies of the island
thought he had definitely, and for all time, settled the question by
authoritatively remarking that "an abundance of money does produce
enterprise, prosperity, and progress;" "that when money was plenty
interest would be lower," just as when horses and hogs are abundant,
horses and hogs would be cheap. He, for one, "put aside all these
old theories, these platitudes of finance." There was "no vitality
in them." He preferred "to take the actual results, and the actual
condition of the country, and let theory go to the dogs." [34]
There was so much of originality and home sense in these remarks, so
much of a lordly contemning of the teachings of musty old experience,
that the friends of the orator thought him much more worthy than
ever of the executive chair formerly filled by the wise Robinson
Crusoe. But, unfortunately for the orator, he hadn't got far enough
along in his financial primer to appreciate the difference between
capital and currency; and in the simplicity of his heart imagined
that it was all the same, whether we had pictures of horses, hogs,
and money, or real horses, hogs, and money, which represent and are
accumulated by labor. So the things which he thus settled in opposition
to theory and experience wouldn't stay settled; and the islanders
in due time came to a realizing sense of the following truths:
that the more of a redundant, irredeemable paper that is issued, the
more it depreciates, and the more it is depreciated, the more there
is required of it to transact business; and that if any one borrows
depreciated money to do any thing, he has to borrow a greater nominal
amount than he would of money that was not depreciated; and that it is
on the number of nominal dollars, and not on their purchasing power,
that the rate of interest is always calculated. The invariable rise
in prices consequent on the depreciation of money (price as already
explained being the purchasing power of any commodity or service
expressed in money), furthermore stimulates borrowing for the purpose
of speculation; and the more borrowers, the more competition; and the
more the competition to obtain an article or service, the higher the
price demanded for it.
Again, the currency of the island having been made artificially
abundant, its exchangeable value was always uncertain; and capital,
therefore, as it always does at such times, locked up its pockets,
hesitated to take risks, and, if it consented to loan at all, demanded
extra pay by reason of the increased risk or induced scarcity. [35]
After testing all these principles experimentally for a considerable
time, the people on the island came to see that the possession of
money was the consequence rather than the cause of wealth; and that,
except under special circumstances and conditions, the rate of interest
depends on the abundance or scarcity of that part of the capital of
a community which does not consist of money; and that it can not be
permanently lowered by any increase in the quantity of money. [36]
In this way, through the school of hard experience, the people on the
island came gradually to understand that there were certain economic
truths which had got to be accepted and lived up to in order to insure
either individual or national prosperity. They came to understand that
property is a physical actuality, the result of some form of labor;
that capital is that portion of the results of production which
can be reserved and made available for new and further production;
that money is an instrumentality for facilitating the distribution
and use of capital and the interchange of products and services; that
production alone buys production; that when one buys goods with a paper
representative or symbol of money, the goods are not paid for until
the representative is substituted by a value of some sort in labor,
or money, or some other commodity; and, finally, that a country and
its inhabitants increase in wealth or abundance by increasing their
products, rather than by inordinately multiplying machinery for the
exchange of products. They also saw that the promises to pay which they
had been using and regarding as money were debts; and that debts, as
well as all other forms of title, are but shadows of the property they
represent; and that, in endeavoring to all get rich by first creating
debts, then calling the debts money, and the money wealth, they had
been led, successively, into speculation, extravagance, idleness,
and impoverishment; and, like the dog in the fable, which let go of
the meat in crossing a stream for the sake of grasping its shadow,
they had lost much of real wealth resulting from previous industry by
trying to make the shadow of wealth supply the place of its substance.
Coming to gradually realize, also, that one of the first requisites for
an increase of trade was that confidence should exist between the buyer
and the seller, but that such confidence never would exist so long
as the representatives of value, or other intermediate agencies made
use of for facilitating exchanges, were of an uncertain, fluctuating
character, they also came finally to the conclusion that there was no
economy in using cheap money; or, in other words, that the loss and
waste inevitably resulting from the use of poor tools (money being
a tool) was many times in excess of the interest accruing from any
increased cost of good tools. So reasoning, gold, or undoubted promises
to pay gold, gradually came once more into use as money on the island.
There were some prophecies, and a good deal of apprehension, that
there would be difficulty experienced in obtaining sufficient gold
to serve as money or as a basis for currency, especially when it
was remembered that the influence of all that had recently happened
had been to encourage the export of all the gold that was owned
or produced on the island. But as the goldsmiths and the jewelers
never experienced any difficulty during the war with the cannibals,
or afterward, in obtaining all the gold they wanted, no matter how
scarce and valuable it was as compared with currency, and could have
had a hundred times more than they actually used, if their customers
had been willing to pay for it; so the merchants, traders, and people
at large on the island, as soon as they became satisfied that it was
economical to use gold, and determined to have it, experienced no
difficulty in obtaining an ample supply.
One circumstance which, pending this result, tended to greatly
relieve the popular apprehension on this score, was the reading in
foreign newspapers that the people in certain comparatively poor
countries--as Oregon, Arizona, Nevada, and Washington Territory--had
no more difficulty in obtaining and retaining all the gold that they
found it desirable to use for the purpose of money, than they had in
obtaining and retaining all the wheelbarrows and steam-engines that
they desired to use in conducting their business; and laughed when
any body talked of depriving them of their gold money.
The first step having been thus taken in the right direction,
a sequence of other proper acts occurred as naturally and with the
same favorable results as in the celebrated case of the old woman
and the kid; in which it will be remembered that as soon as the
water began to quench the fire, the fire began to burn the stick,
the stick began to beat the dog, the dog began to bite the kid, and,
as a consequence of this sequence and its concluding act, the old woman
got safely home with the kid, though at a period of the evening much
later than was desirable or proper. And so, by a succession of events,
prosperity slowly but surely came back to the island.
As for the Friends of Humanity, who had been the authors of so much
financial and commercial disturbance and national misfortune, they
soon ceased to command attention from any one, then became objects
of laughter and derision, and finally passed out of the remembrance
of the people, who were now all too busy in restoring their fortunes
to give a thought to bygone and mortifying experiences. Some became
convinced of their errors, and made good citizens; but in the case of
the majority, the belief that the calling of things of no intrinsic
value by the name of money was equivalent to the creation of wealth,
became chronic, and finally developed into a harmless insanity. On
pleasant days they might often be seen on the corners of the streets
gathering leaves and bits of sticks and straws, and telling the
children that assembled about them that all that was necessary to
make these worthless gatherings money was to simply have confidence
that they were so. But this was asking for a simplicity of belief
that was a little too much, even for the children.
It only remains to add that, as memorials of this eventful history,
there is still exhibited in one of the public buildings on the island
an exact model of the cave in which the venerable Robinson Crusoe
dwelt, and, what is even more interesting, the identical chest which
he brought from the ship, and which contained the pins, needles,
knives, cloth, and scissors, and the three great bags of what was
then useless, but now good and true, money. Numerous specimens of
the "ideal money" may also be seen in the same room, together with a
picture of the barber who papered his shop with it, and of the dog
which the people paraded in the streets covered with a plaster of
pitch and currency. [37]
NOTES
[1] That the inconveniences experienced by a community attempting to
conduct its exchanges exclusively by pure and direct barter as here
depicted, are not only not imaginary, but have their exact counterpart
in the present every-day experiences of countries of great geographical
area and population, is proved by the testimony of Barth, Burton,
and other recent travelers in Eastern Africa. Thus Barth, for example,
says (see "Travels," vol. i., p. 568; vol. iii., p. 203) that he was
repeatedly prevented from buying what he absolutely needed--corn,
rice, etc.--because he did not have, and could not get, what the
people wanted in exchange; and, again (vol. ii., p. 51), he states
that so great was the difficulty of getting things in some of the
African towns which he visited, in consequence of the people having
no general medium of exchange, that his servants would often return
from their purchasing expeditions in a state of the utmost exhaustion.
[2] "The precious metals have many qualities which fit them for use as
coin money. Their defects are their weight, their intrinsic value as
commodities."--Social Science and National Economy, by R. E. Thompson,
Philadelphia, 1875.
"The moment it is perceived that money is nothing but a token,
it becomes evident that any token currently accepted in exchange
of useful services and products of labor will perform the proper
functions of money without regard to the material of which it is made;
and that the less costly the material out of which money is made,
the better for the community that uses it."--Money, Currency, and
Banking, by Charles Moran, New York, 1875, p. 42.
[3] "To my mind, the great and immediate need of the day is the
issuance of more legal-tender notes, in order to impair the confidence
in them to an extent as to cause the owners of them to desire to
exchange them for other kinds of property, or man's wants--not simply
to loan out on short or long date paper, with fire-proof security,
at low or high rates of interest, which can now be done to any
extent required--but absolutely part with them for other kinds of
property."--Views of Enoch Ensley, of Memphis, Tennessee, on the
National Finances, Memphis, September, 1875.
[4] "In the midst of the public distress, one class prospered
greatly--the bankers; and, among the bankers, none could, in skill or
in luck, bear a comparison with Charles Duncombe. He had been, not many
years before, a goldsmith of very moderate wealth. He had probably,
after the fashion of his craft, plied for customers under the arcades
of the Royal Exchange, had saluted merchants with profound bows,
and had begged to be allowed the honor of keeping their cash. But so
dexterously did he now avail himself of the opportunities of profit
which the general confusion of prices gave to a money-changer,
that, at the moment when the trade of the kingdom was depressed to
the lowest point, he laid down near ninety thousand pounds for the
estate of Helmsley, in the North Riding of Yorkshire."--Macaulay's
History of England, State of the Currency in 1694-'95.
[5] "Beyond the sea, in foreign lands, it (the greenback)
fortunately is not money; but, sir, when have we had such a long
and unbroken career of prosperity in business as since we adopted
this non-exportable currency?"--Speech of Hon. William D. Kelley,
House of Representatives, 1870.
"I desire the dollar to be made of such material, for the purpose,
that it shall never be exported or desirable to carry out of the
country. Framing an American system of finance, I do not propose
to adapt it to the wants of any other nation."--Speech of General
B. F. Butler before the New York Board of Trade, October 14th, 1875.
[6] "Some years since, Mademoiselle Zélie, a singer of the Théâtre
Lyrique at Paris, made a professional tour round the world, and
gave a concert in the Society Islands. In exchange for an air from
'Norma,' and a few other songs, she was to receive a third part of the
receipts. When counted, her share was found to consist of three pigs,
twenty-three turkeys, forty-four chickens, five thousand cocoa-nuts,
besides considerable quantities of bananas, lemons, and oranges. At
the Halle (market) in Paris, the prima donna remarks, in her lively
letter printed by M. Walowski, this amount of live stock and vegetables
might have brought four thousand francs, which would have been good
remuneration for five songs. In the Society Islands, however, pieces
of money were very scarce; and as mademoiselle could not consume any
considerable portion of the receipts herself, it became necessary in
the mean time to feed the pigs and poultry with the fruit."--Jevons's
Money and Mechanism of Exchange.
[7] In 1658, it was ordered by the General Court of Massachusetts
that no man should pay taxes "in lank cattle."--Felt's Massachusetts
Currency.
[8] This incident is related by Burton, in his "Explorations of
the Lake Regions of Central Africa" (1858-'59), as one within his
knowledge of actual occurrence.
[9] In one of the mints there is exhibited as a curiosity a case
in which this fact is demonstrated in the most striking manner. It
contains some fifty or more very thin ribbons, or strips, of gold,
half an inch wide by three inches in length, placed in a row,
parallel to, but separated from each other by a slight interval. The
first ribbon is composed of gold of the highest standard of purity;
the second differs from the first to the extent of one per cent. of
admixture with a baser metal; while the third contains two per cent.,
the fourth three per cent., and so on, until in the last ribbon, or
strip, the amount of gold and alloy is equal. The color of the first
ribbon is, in the highest sense of the term, golden or typical. The
color of the second differs from the first by a shade, which shade
in every successive ribbon changes and becomes more and more marked
as the proportion of alloy entering into its composition increases:
and so peculiar are these differences of color that it is possible
for an individual unskilled in metallurgy, but having access to the
standard, to make a comparatively accurate test of the purity of any
article of gold in his possession by a simple comparison of color.
[10] In 1862 Mr. Eckfelt, then principal assayer at the mint in
Philadelphia, communicated to the American Philosophical Society the
result of some exceedingly curious examinations demonstrating the
very wide distribution of gold. The city of Philadelphia, he stated,
was underlaid by a bed of clay having an area of about ten square
miles, with an average depth of about fifteen feet. Specimens of this
clay--all natural deposits--taken from such localities as might furnish
a fair assay of the whole--the cellar of the market on Market Street,
near Eleventh, and from a brick-yard in the suburbs of the city--all
yielded, on careful analysis, small amounts of gold; the average
amount indicated being seven-tenths of a grain--or about three cents'
worth--of gold for every cubit foot of clay. Assuming these data to
be correct, the value of the gold, according to Mr. Eckfelt, which
lies securely buried underneath the streets and houses of Philadelphia
must therefore be equivalent to $128,000,000; or if we include all the
clay contained in the corporate limits, the amount of gold contained
in it must be equal to all that has yet been obtained from California
and Australia.
"It is also apparent," says Mr. Eckfelt, "that every time a cart-load
of clay is hauled out of a cellar in Philadelphia, enough gold goes
with it to pay for the carting; and if the bricks which front our
houses could have brought to their surface, in the form of gold-leaf,
the amount of gold which they contain, we should have the glittering
show of two square inches on every brick."
[11] On the Rhine, near Strasburg, a good able-bodied laborer can
earn on an average one franc seventy-five centimes per day, washing
gold from the sands of the river; but, as under most circumstances he
can earn ten sous more by working in the fields on the banks of the
river, and without so much risk of getting rheumatism, gold-washing
on the Rhine is not often adopted as a regular employment.
[12] "And when the substitution is made" (of a silver for a paper
fractional currency), "what will be the consequence? The metal
currency will have to be considerably debased, or else every old
woman in the country will fill her stockings with it and bury it. It
will be hoarded, sir; hoarded to the extent of removing millions
from the currency of the country." The general paused, glared at a
village wrapped in rain, by which we were rattling, chewed his cigar
vigorously, and lapsed into silence.--A Newspaper Reporter's Interview
with General Butler, September, 1875.
[13] Gold in its crude state, and uncoined, was until recently in use
as money in some parts of California, Mexico, and on the West Coast
of Africa.
[14] Historically, bills of exchange probably originated with the
Jews of the Middle Ages, who, ever liable to persecution, adopted
a system of drafts, or written orders, upon one another, which each
agreed to honor and pay to the person named in the draft.
[15] It was in this manner that the first bank of which we have
any record originated in 1171, namely, the Bank of the Republic of
Venice. Venice in that year was at war and needed money. The Council
of Ten, or the Government, called upon the merchants to bring in their
gold or coin into the public treasury, and gave credit on the books of
the state for the amounts so deposited; which credits carried interest
(always promptly paid) at the rate of four per cent. per annum. Soon
after the establishment of this bank one of the depositors died; and
it becoming necessary to distribute his estate among five children,
his bank-credit was divided into five portions and transferred to
five new owners. A system of transferring bank-credits was thus
introduced, and proved so useful that in a brief time the merchants
adopted it very generally as a means of paying balances in all great
business transactions. The banks of Amsterdam and of Hamburg were also
subsequently established on substantially the same basis, and are
doing business to-day successfully. The Bank of Venice did business
for five hundred years; during which period the state was prosperous,
and there were few failures among the mercantile classes.
[16] If to any it may seem puerile and unnecessary to enter into such
explanations, it may be well to remind them that one of the schemes
for a new currency, which has of late found some earnest advocates
in the United States, is that of Josiah Warren, of Ohio, who proposed
that currency "should be issued by those men, women, and children who
perform useful service"--i. e., grow corn, mine coal, catch cod-fish,
pick up chestnuts and the like--"but by nobody else;" such results
of service being deposited in safe receptacles, and having receipts
of deposit issued against them to serve as "equitable money." A
further axiom of Mr. Warren was, "that the most disagreeable labor"
(not the most useful) "is entitled to the highest compensation;" and,
therefore, inferentially entitled to issue the most money. A specimen
of this equitable money before the writer reads as follows:
The most disagreeable labor is entitled to the highest
compensation.
$1.00
Cincinnati, Ohio.
Due to Bearer,
EIGHT HOURS' LABOR,
In Shoe-making, or a Hundred Pounds of Corn.
William Morton.
No. --, F---- Street.
Time is Wealth.
Of course, to make this money equitable, and its issue, as claimed,
"the satisfactory solution of the great problem of labor and capital,"
there must be some presupposed equitable relation between eight hours
of shoe-making and a hundred pounds of corn. But one hundred pounds of
corn in Illinois are the result of only a quarter as much labor as a
hundred pounds in New England; and what comparison is there between
eight hours' work of a skilled mechanic and that of a mere cobbler
in making shoes? or of the man who performs a disagreeable, slavish
piece of work, and of the genius who invents or makes a machine that
makes this disagreeable work unnecessary?
E. D. Linton, of Boston, one of Warren's most eminent disciples,
improves on Warren's ideas, and proposes that the United States
Government should prepare and issue a currency, which should read
as follows:
The United States will pay One Dollar to Bearer, on demand, in ----
bushels of Illinois Fall Wheat, at United States No. 1 Store-house,
No. 12 River Street, Chicago, Ill.
This note is receivable for all debts due the United States.
And the same inferentially in respect to pigs, coal, shoes, and
the services of doctors, lawyers, and cooks. So, then, if the note
is not to be on its face a lie, and the promise is to be actually
performed on demand, the necessity will be absolute on the part of
the Government of the United States to have store-houses for wheat at
Chicago, pig-pens at Peoria, coal-mines or dépôts at Pottsville, and
trained professionals ready on call to plead a case, preach a sermon,
cure a cold, and cook a dinner; and all of these last must take their
pay in pigs if required. But as a pig has one value at Peoria, and
another value at almost every other place, the dollar's worth of pig
which the United States would pay might be a whole pig in one place,
a half in another, and possibly only the snout in another.
[17] Although, to all who have investigated the subject, the
evidence is conclusive that an irredeemable fluctuating paper money
is always made an agency for taxing with special severity all that
class of consumers who live on fixed incomes, salaries, and wages,
it has, nevertheless, always been a somewhat difficult matter to find
illustrations of the fact so clear and simple as carry conviction by
presentation that it does thus act to the classes most interested. With
a view of obtaining such an illustration, application was made some
months since to an eminent American merchant, whose large and varied
experience abundantly qualified him to discuss the subject; and the
result of the application may be thus stated:
Q. In buying in gold and selling in currency, what addition do you
make to your selling price, in the way of insurance, that the currency
received will be sufficient--plus profit, interest, etc.--to replace
or buy back the gold represented by the original purchase?
A. We do but very little of that now; hardly enough to speak about.
Q. But still you make insurance against currency fluctuations an item
in your business to be regarded to some extent?
A. Why, yes, certainly; it won't do to overlook it entirely.
Q. Well, then, if you have no objections, please tell me what you do
allow under existing circumstances?
A. I have certainly no objections. We buy closely for cash; sell
largely for cash, or very short credit; and, within the comparatively
narrow limits that currency has fluctuated for the last two or three
years, add but little to our selling prices as insurance on that
account--say one to two per cent. for cash, or three months' credit;
and for a longer credit--if we give it--something additional. During
or immediately after the war, when the currency fluctuations
were more extensive, frequent, and capricious, the case was very
different. Then selling prices had to be watched very closely, and
changed very frequently--sometimes daily. My present experience,
therefore, is exceptional; and to get the information you want,
you must look further. I think I can help you to do this. We buy
regularly large quantities of a foreign product--let us suppose,
for illustration, cloth, for the large manufacturers and dealers
in ready-made clothing. We buy for gold, and we sell for gold, and
do not allow the currency or its fluctuations to enter in any way
into these transactions. But how is it with my customers? I allow
them some credit; and the amount involved being often very large, I,
of course, must know something of the way in which they manage their
business. They transform the cloth, purchased with gold, into clothing;
and then sell the clothing, in turn, to their customers--jobbers and
retailers--all over the country, for currency, on a much longer average
credit than they obtain from me for their raw material. As a matter
of safety and necessity, these wholesale dealers and manufacturers
must add to their selling prices a sufficient percentage to make
sure that the currency they are to receive at the end of three, six,
or nine months will be sufficient to buy them as much gold as they
have paid to me, or as much as will buy them another lot of cloth to
meet the further demands of their business and their customers. How
much they thus add I can not definitely say. There is no regular
rule. Every man doubtless adds all that competition will permit; and
every circumstance likely to affect the prospective price of gold is
carefully considered. Five per cent., in my opinion, on a credit of
three months would be the average minimum; and for a longer time,
a larger percentage. If competition does not allow any insurance
percentage to be added, there is a liability to a loss of capital,
which, in the long run, may be most disastrous--a circumstance that may
explain the wreck of many firms, whose managers, on the old-fashioned
basis of doing business, would have been successful. The jobbers and
the retailers, to whom the wholesale dealers and manufacturers sell,
are not so likely to take currency insurance into consideration in
fixing their selling prices; but to whatever amount the cost price of
their goods has been enhanced by the necessity of insurance against
currency fluctuations, on that same amount they estimate and add
for interest and profits; the total enhancement of prices falling
ultimately on the consumer, who, of necessity, can rarely know the
elements of the cost of the article he purchases.
Q. So Mr. Webster, then, in his remark, which has become almost a
proverb, that "of all contrivances for cheating the laboring classes,
none has been more effectual than that which deludes them with paper
money," must have been thoroughly cognizant of the nature of such
transactions?
A. Most undoubtedly; for such transactions are the inevitable
consequence of using as a medium of exchange a variable, irredeemable
currency.
The illustration above given, therefore, in the place of being
imaginary, is based on the actual condition of business at the present
time--January, 1876.
[18] In 1864, a ship was built in New York, at the time when labor
and materials, reckoned in currency, had touched their highest
prices. In 1870, another ship was built in the same place and on the
same model--like the former in every particular. It was expected that,
as wages and the cost of materials were less in 1870 than in 1864,
the cost of the latter ship would be much less than that of the former;
but the result showed that this was not the case.
[19] When the Japanese embassy visited the United States, in 1872,
they were seriously advised to create, by some means, a national debt
as soon as they returned home, and make use of it as a basis for the
creation and issue of currency.
[20] Machiavelli, in his "Discourses on the First Ten Books of Livy,"
book ii., chap, iii., in explaining the great difference in the
relative growth of the Roman and Spartan republics, relates that
"Lycurgus, the founder of the Spartan republic, believing that
nothing could more readily destroy his laws than the admixture of
new inhabitants, did every thing possible to deter strangers from
flocking thither. Besides denying them intermarriage, citizenship,
and all other companionships (conversationi) that bring men together,
he ordered that in his republic only leather (non-exportable) money
should be used, so as to indispose all strangers to bring merchandise
into Sparta, or to exercise any kind of art or industry there, so
that the city never could increase in population."
[21] Examination will show that the United States, for one-sixth part
of their existence as a federated nation, have been in a state of war;
and, for the future, there is no good reason for supposing that the
country is to be any more exempt from the vicissitudes of nations
than it has been in the past. With irredeemable paper, violation of
plighted faith, gold demonetized and banished, in what condition is
the nation for maintaining a great national struggle?
[22] In a case often overlooked (Bank vs. Supervisors, 7 Wallace),
the United States Supreme Court decided that "United States notes
are engagements to pay dollars; and the dollars intended are coined
dollars of the United States." Refusal to pay such notes in coin is
clearly, therefore, repudiation.
[23] Irving's "Conquest of Granada."
[24] In every cabinet of rare coins in Europe there will be found
specimens of what are known as "obsidional" coins, or coins struck
in besieged places to supply the place of coined money. These coins
appear, in all instances, to have been regarded as obligations sacred
in their nature, and their repudiation a high crime against morality
and patriotism.
[25] Speech of General B. F. Butler, United States House of
Representatives.
[26] Letter of Wendell Phillips to the New York Legal-tender Club,
1875.
[27] Charles Moran, New York Commercial Bulletin, October 5th; 1875.
[28] Opinion of the United States Supreme Court, by Justice
Strong.--Wallace, 12, p. 553.
[29] The Indians on the Atrato River (Central America), when first
visited by one of the recent inter-ocean-canal exploring parties,
were found to be unaccustomed to the use of much, if any, clothing;
but after a little intercourse with civilized man, some of the more
intelligent of the natives presented themselves with their bodies
painted in close imitation of clothes, which they claimed to be
superior in every respect to the genuine articles worn by their
visitors.
[30] This was what actually happened in Connecticut in 1704 and
thereabouts. See "Madame Knight's Journal," quoted in Felt and
Bronson's "Histories of New England Currencies."
[31] Whatever may have been the immediate effect of the
gold-discoveries in California and Australia, no economist of repute
now holds to the opinion that the average purchasing power of gold
all the world over is any less than it was in 1849-'50; or, in other
words, that any increase in the quantity of gold since 1849-'50 has
resulted in any present depreciation.
[32] This is the American interpretation. The English interpretation
of "legal tender" was brought out in a debate in the House of Lords,
in June, 1811, when it was shown to mean, in its application to
Great Britain, no more than this: that in a suit between creditor
and debtor, if a judgment went against the debtor, he was allowed to
plead a tender of bank-notes in arrest of execution, but he could not
claim that the notes should be forced upon the creditor in discharge
of the debt. During the long suspension of specie payments in Great
Britain, therefore, bank-notes were never made legal tender in the
American sense.
[33] After the Revolutionary war it was considered disgraceful to take
advantage of the legal-tender character of the depreciated Continental
or State paper money to liquidate debts with it; and the Society of
Cincinnati expelled a member for so doing. The State of Rhode Island
also, which longer than any of the other States endeavored to maintain
by law the legal-tender character and use of such money, was often
spoken of in consequence as "Rogue's" in place of "Rhode" Island.
[34] To any who may desire to know how far imagination has been
drawn upon for this picture, reference is made to the speech of
Hon. O. P. Morton, United States Senate, "Congressional Record,"
vol. ii., part i., Forty-third Congress, First Session, p. 669.
[35] The pertinacity "with which a mind befogged on the subject
of money and currency holds on to the delusion that the making and
issue of promises to pay, and calling the same money, is equivalent
to the creation of wealth; and, vice versâ, that the cancellation
or withdrawal, by payment, of such promises is the same thing as the
destruction of wealth, and also tends to make money--in the sense of
capital--scarce, and interest high, finds many amusing illustrations,
which for educational purposes are better than arguments.
For example, we have, first, the assumption of a leading Senator of the
United States (already referred to, and which, if not on record, would
seem incredible) that because an increased supply of horses and hogs
made available to a market make horses and hogs cheap, therefore an
increased supply of evidences that capital had been borrowed, used, and
never paid, would tend to increase the quantity and rate of interest
of loanable capital. A corresponding illustration is also to be found
in the case of the member of the Continental Congress mentioned by
Pelatiah Webster, who, when the subject of increased taxation for
the support of the war was under consideration, indignantly asked
"if he was expected to help tax the people, when they could go to
the printing-office and get money by the cart-load?"
The experience of the Irish mob also finds an appropriate place
under this head, which made a bonfire of all the notes issued by an
obnoxious private banker that they could gather, little imagining,
as they shouted and capered with wild delight about the fire that
consumed them, that, in place of impoverishing, they were really
enriching, their enemy.
The following story, also illustrative of the same popular fallacy,
passes current in one of the towns of Eastern Connecticut: During
the severe financial panic of 1857, an honest country farmer and
deacon, who, by virtue of being a considerable stockholder in one
of the local banks, had been placed as a figure-head on its board of
directors, was applied to by a farmer friend to help him in procuring
from the bank a small loan. Knowing that the times were hard, and
money scarce, the deacon, although desirous of obliging his friend,
did not at once commit himself, but promised to go to the bank,
and make his action contingent upon the state of affairs which he
might there find. The two friends, accordingly, went into town the
next day (which happened to be the culminating day of the crisis,
when every promise to pay issued by any bank was, in the general
distrust, gathered up and rushed in for redemption); and, while the
applicant for the loan waited outside, the director entered the bank
to reconnoitre. Passing into the directors' room, and thence behind
the counter, he said little, but, keeping his eyes wide open, did not
fail to notice the extraordinarily large packages of bills, filling
safe and drawers, which, to the annoyance and strain of the bank,
had been recently sent in for payment. Seeking no further proof of
the financial strength of his institution, he returned to the street,
and, informing his friend that every thing was all right, the latter
next entered, and confidently asked for his discount. To his great
surprise, he received the usual polite answer, that "they would be
too glad to oblige him, but that, really, they had no money." "Out
of money!" said the deacon, when the result of the application was
made known to him. "Out of money! How can they lie so, when I have
just seen the safe and drawers full of it? As a Christian man, and
an officer of the church, I can't conscientiously be a director and
stockholder any longer in such an immoral institution." And yet, if,
on returning home, the good deacon had found in his table-drawer a
number of his individual promissory-notes, signed and ready to issue,
but not issued, he would not have thought himself any richer by their
existence, but, on the contrary, would have felt much more comfortable
at such a time to know that the notes were all under double-lock
security, or, better, if he saw them vanishing into ashes. And yet,
in the case of the bank-notes, he couldn't understand why they were
not money, to be used at all times and under all circumstances!
[36] Between the years 1860 and 1870, the United States doubled the
quantity of currency available for use by its citizens, and yet the
rate of interest was as high in the latter year as in the former.
[37] Such were some of the uses finally made of the Continental
currency. See Sumner's "History of American Currency," p. 46.
End of Project Gutenberg's Robinson Crusoe's Money;, by David A. Wells