channels of diplomacy, that, far from giving any support to
silver, he was preparing to urge on Congress the repeal of the
silver-purchase clauses of the Sherman act. Mr. Cleveland's
intention became known in official circles in Calcutta. That this
was the case I learned at the time and at first hand. The
government of India believed that the cessation of all silver
purchases in America would still further reduce the exchange
value of the rupee, and therefore, in advance of the pending
anti-silver legislation anticipated from Washington, the Indian
mints were closed.
Mr. Cleveland may well be deified in the gold-standard cult, for
clearly he has been the arch-enemy of bimetallism.
One of the characteristics of the discussion now going on between the
advocates of gold monometallism and those of bimetallism is the
disingenuousness of the former. They will rarely consent to a clear
definition of the issue, but seek to evade it both by preëmpting the
use of moral labels and catchphrases which satisfy their partisans
without inquiry, and by stigmatizing their opponents with such vile
imputations and base epithets as seem to place them beyond the pale of
moral and intellectual tolerance. "Sound" and "honest" they write
above their creed. They pose as consecrated guardians of public honor
and private property. We are depicted as dishonest and imbecile,
repudiators of national and individual obligations, communists or
anarchists bearing the torch and axe. This specialty is Mr.
Cleveland's long suit. Little wonder that his school should place him
at its head. His preëminence in the field where self-admiration is a
supreme virtue and ribald abuse passes for irrefutable argument will
scarcely be denied by anybody who shall have read the following
characteristic specimens from this Waldorf essay, carefully written
down and calmly delivered: "We are gathered here to-night as patriotic
citizens anxious to do something toward ... protecting the fair fame
of our nation against shame and scandal." It is not recorded that
anybody smiled at this. Indeed, the astonishing thing about this
business is that these people seem able to impose successfully on one
another. But Mr. Cleveland is even better at the other kind, as for
example: "Agitators and demagogues," "ruthless agitators," "sordid
greed," "inflamed with tales of an ancient crime against their
rights," "unfortunate and unreasonable," "restless and turbulent,"
"reckless creed," "boisterous and passionate campaign," "allied forces
of calamity," "encouraged by malign conditions," and so on _ad
nauseam_.
This is the attitude of nearly all the defenders of the gold standard
who have the hardihood to say anything at all. Undoubtedly in many
cases it is assumed because of ignorance on the merits of the case, so
that nothing remains but to "abuse the other fellow." But occasionally
this course is adopted by men who are well informed, and who know that
the gold standard is incapable of meeting bimetallism in an honest
contest of argument with any hope of success. The strategy of these,
therefore, is to avoid fair discussion by so prejudicing the public
mind against their opponents as to forestall a hearing.
The result has been surprisingly successful. In many localities, and
in fact in nearly all localities in the East, the most intolerant
spirit has been manifested by the most prominent persons in the
community, who had never taken the pains to examine the subject on
which they so violently and fanatically expressed themselves. To
people of any acquaintance with the literature, the history, and the
science of money, it has seemed most marvellous that business men of
large affairs, of much general information, and of excellent natural
abilities, should be content to remain absolutely ignorant of
fundamental monetary principles and the overwhelmingly attested
lessons of past experience. It is infinitely pitiful to see men of
affairs led away in so-called "business men's sound-money
associations" and other similar movements, when a knowledge of the
conditions on which their welfare depends would send them in an
exactly opposite direction.
Why? Because business men are men who do business, or at any rate who
want to do business; and all legitimate business consists in the
performance of some appropriate function in connection with the
production or the exchange of commodities. It is apparent to even the
dullest apprehension that whatever prevents or discourages production
is destructive of business, and that a money system which provides a
measuring unit that constantly demands, as an equivalent, an
increasing quantity of everything produced, is the greatest burden on
production that could possibly be devised. But it is precisely this
kind of a unit that the gold standard furnishes. No one economic fact
is so conclusively established and so generally conceded as that of
the progressive fall of average prices throughout the gold-standard
world during the last twenty-four years. This fall amounts to almost
fifty per cent, and indeed, in respect to the great staple products of
the country, exceeds fifty per cent; so that, to state the same fact
in its converse, the purchasing power of gold has increased since 1873
one hundred per cent.
The significance of this awful fact is deftly obscured behind the
deceptive and specious plea for "a dollar of the greatest purchasing
power." This is one of those artful expressions that are used by the
advocates of the gold standard as a kind of thought-deterrent. It
seems so obvious, at the first suggestion, that the best dollar is the
dollar that will buy the most, that it is hard for a man to get even a
hearing who asserts that, on the contrary, such a dollar is the very
worst dollar conceivable. But a moment's reflection will satisfy any
sane mind that such is the case. The demonstration is so simple that
one feels like apologizing for making it. Yet it is in respect to
principles just as plain as this one that people are constantly
allowing themselves to be taken in by the supporters of the single
standard.
The demonstration is this: whatever is bought by a dollar, itself buys
the dollar. For example, when a dollar exchanges for a bushel of
wheat, the dollar buys the wheat, and the wheat buys the dollar. To
say, therefore, that a dollar that buys two bushels of wheat, being a
dollar of greater purchasing power, is better than the dollar that
buys one bushel, is to say that the dollar which it requires two
bushels of wheat to buy is a better dollar than that which can be
bought with one bushel. Consequently, to increase the excellence of
your dollar all you need to do is to increase the scarcity of the
stuff out of which dollars are made, so that each one shall constantly
stand for more and more wheat, or, using wheat merely as
representative of commodities in general, so that it shall constantly
require more and more of all other things on earth to get a dollar. It
is wholly credible that the man with dollars should profess this
philosophy, but it is absolutely inexplicable how it should receive
the support of men interested in getting dollars with things, who
comprise about seven-eighths of society.
Now as it continually takes more products to get a given quantity of
gold, is it not clear that the producer who becomes liable for taxes
and gets into debt must constantly bear an increasing burden of
taxation, and that his debt, payable in more commodities than it
represented when he incurred it, needs only to run long enough to grow
beyond the hope of his ability to pay it? Such a policy cannot but be
fraught with certain ruin to producers. It is causing in the United
States a condition frightful to contemplate. The mass of debts is
piling up at a ratio that absolutely threatens, if a halt in the
automatic process is not soon called, a universal insolvency. Indeed a
general liquidation is already impossible. He is no alarmist who
counsels a timely and rational remedy as not only demanded by justice,
but as anticipatory of violent readjustment. Under such disquieting
conditions is it not as criminal as it is unscientific for men to go
about prating of the system that has occasioned these things as
"honest money," and "sound money," and denouncing its opponents as
repudiators and anarchists?
In the presence of epochal and fundamental disturbance, when men,
patient beyond example and willing to argue the correctness of their
claims, are crying out against the injustice of a money system that
day and night and year upon year, with unerring and pitiless
precision, takes from the producing many and hands over to the idle
few that which it ruins those to lose and but pampers these to gain,
our ex-President offends decency and insults millions of his
fellow-citizens with this reference to their contention: "Honest
accumulation is called a crime." Where does he find anybody calling
honest accumulation a crime? Men indeed stigmatize the maintenance of
this odious money system as a crime, but only because of the things
they claim it to be guilty of. Why does he not join issue on these? He
knows that nowhere in all this world is there, or has there ever been,
a more honest body of citizenship than the millions of Americans who
to-day are toiling on the farms and in the workshops of the country
and who demand from the laws they obey nothing but equity and justice.
It was easier, and more pleasant to those who heard him, to wrong
these men with a sneer than to answer them with an argument. He might
possibly have done well to relinquish this task to one who sat near
him, his ex-Secretary of the Treasury, who had himself, in 1878,
discovered something that _he_ thought a crime and had thus denounced
it: "According to my views of the subject the conspiracy which seems
to have been formed here and in Europe to destroy, by legislation and
otherwise, from three-sevenths to one-half the metallic money of the
world, is the most gigantic crime of this or any other age."
The speech of Mr. Carlisle was notable for stating his position more
extremely than he had previously done since his apostasy. He boldly
takes the stand logically demanded by consistency in the man who
opposes silver coinage and denies the arguments based on the
appreciation of gold. He comes out squarely for the gold standard and
places bimetallism of any and all sorts under a common ban. But alas!
what a sorry appearance he makes. Nowhere in our political history do
I find quite so pathetic a figure as that presented by this once
strong and virile champion of the people's rights in his contrasted
role of defender of their oppressors. Where now is that compact and
cogent argument, that sincere and moving eloquence, which made his
forensic style so singularly effective; which marked him the
parliamentary darling of his party, a predestined president of the
republic? Shrunken to the dreary platitudes of the gold-standard
catechism, babbling of "sound currency" and "intrinsic value."
This talk of intrinsic value was not confined to Mr. Carlisle. Mr.
Patterson, of Tennessee, and Senator Caffery, of Louisiana, were
likewise guilty of it. It is, indeed, the characteristic folly of
their school. Having destroyed the money demand for silver while
adding almost incalculably to that for gold, they have caused an
increasing disparity in the values of the two metals; and now, when it
is sought to restore the parity by restoring the equivalence of use
and demand on which alone it depends, they pretend to have discovered
some inherent perfection in gold and an original sin in silver which
forbid all attempts to reconcile them. In the face of monetary
principles whose nature has been understood for more than two thousand
years, and of historic and economic facts which every college freshman
knows, Mr. Carlisle has the appalling audacity to use the following
language: "Natural causes have separated the two metals, and while it
is possible that natural causes may hereafter change their present
relations to each other, it is certain that these relations cannot be
changed by artificial means."
It is difficult to speak with becoming moderation of such stuff as
this; and it is really pathetic to see the dominant opinion of whole
sections of the country taking its cue from men who assume superior
airs and rebuke the presumption of thinking on the part of some
millions of Americans, while they peddle such insufferable nonsense as
this just quoted from Mr. Carlisle. "Natural causes" indeed, when we
can turn to the statute books of half the world and put our fingers on
the "artificial means" whereby the hoarders of gold have legislated
demand into one metal and legislated it out of the other. Let once a
wrong be achieved by artificial means, and instantly those who profit
by it represent it as the inevitable decree of evolutional forces.
"Natural causes," we are asked to believe, have made gold dear and
silver cheap during a period when the cost of producing gold has been
cheapened more than any other mechanical process; when both metals
have continued on substantially their old relative planes of use in
every respect save as money; when their relative production has been
from three to twenty times less disproportionate than at any other
similar period in the past four hundred years; and when in actual
weight the stocks of coin and bullion available for coinage have risen
from a proportion of thirty-two of silver to one of gold up to that of
sixteen of silver to one of gold coincidently with a fall of the
so-called market ratio from fifteen and one-half to one, when the
mints were open to both, down to thirty-three to one when only the one
can be freely coined. It is simply an incredible and impossible
proposition.
Intrinsic value is as unthinkable as intrinsic distance. Both distance
and value are relations. Neither can exist or be stated except by
comparison. The value of a thing is what it is worth; and it is worth
what it will bring. Value in exchange is the only value that political
economy knows anything about; and what a given thing will exchange for
depends on the ratio of the supply of it to the demand for it. A piece
of money is worth what it will buy. Other things remaining the same,
it will buy more when the stuff out of which it is made is plentiful,
and less when that is scarce. The proposition of the bimetallists
rests on only time-honored doctrines of political economy as justified
by the experience of mankind. We desire to restore the parity of gold
and silver by perfectly "natural causes" set in operation by
"artificial means." We propose to invoke the law to equalize their
opportunity and to make them interchangeably and indifferently
responsive to the same money demand.
Space has not permitted reference to all the errors committed at this
wonderful banquet, nor a complete discussion of even those cited. I
have endeavored only to point out the most glaring ones in the hope
that some persons inclined to accept, somewhat carelessly, the
assumedly authoritative statements of these eminent men, may be led to
study this great subject whose proper understanding and wise
management are of such vast importance not only in American politics
but in the progress of the race. For the cause of bimetallism must
commend itself to the intellect and the conscience of the country or
it cannot win. Those who have spent some time in an earnest and
thoughtful investigation of the matter and are convinced that the
success of silver coinage is the first step in a series of rational,
safe, and necessary reforms, are ready to be judged as much by the
reasonableness of their doctrine as by the sincerity of their motives.
They intend from now on to force the fight. The enemy will be sought
out and assailed wherever found. No pretentious claims of
infallibility will be accorded immunity from criticism. No authority
will be permitted to shelter folly. It is time to expose the
preposterous assurance of the gold-standard pundits. Nonsense will be
called nonsense whoever utters it, and, what is more, it will be
proved to be nonsense.
DOES CREDIT ACT ON THE GENERAL LEVEL OF PRICES?
BY A. J. UTLEY.
It is conceded by all standard writers on political economy that the
value of money--that is, its purchasing power--is fixed and regulated
by the amount of money available for use.
John Stuart Mill says:
If the whole money in circulation was doubled prices would be
doubled. If it was only increased one-fourth, prices would rise
one-fourth. There would be one-fourth more money, all of which
would be used to purchase goods of some description. When there
had been time for the increased supply of money to reach all
markets, or (according to conventional metaphor) to permeate all
the channels of circulation, all prices would have risen
one-fourth. But the general rise of price is independent of this
diffusing process. Even if some prices were raised more, and
others less, the average rise would be one-fourth. This is a
necessary consequence of the fact that a fourth more money would
have to be given for only the same quantity of goods. General
price, therefore, in any such case would be one-fourth higher.
The very same effect would be produced on prices if we suppose
the goods diminished, instead of the money increased: and the
contrary effect if the goods were increased, or the money
diminished. If there were less money in the hands of the
community, and the same amount of goods to be sold, less money
altogether would be given for them, and they would be sold at
lower prices; lower, too, in the precise ratio in which the money
was diminished. _So that the value of money, other things being
the same, varies inversely as its quantity; every increase in
quantity lowering the value, and every diminution raising it, in
a ratio exactly equivalent._
This is known as the quantitative theory of money, and is recognized
by Ricardo, Jevons, Macleod, John Locke, James Mill, John Stuart Mill,
Senator John P. Jones, David Hume, William Huskisson, Sir James
Graham, Prof. Torrens, Prof. Sidgwick, J. R. McCulloch, Mr. Gallatin,
Prof. Fawcett, Prof. Perry, N. A. Nicholson, Earl Grey, Prof. Shield
Nicholson, Lord Overstone, and, in fact, by all writers on political
economy of any prominence since Adam Smith. Formerly it was supposed
that the value of money depended upon the cost of production; that the
reason why a dollar in gold or silver was worth 100 cents was because
it took 100 cents' worth of labor to produce metal enough to make a
dollar. This theory, however, has been abandoned by the best writers
and speakers; in fact, by all economists of any standing, and it is
now conceded that the cost of producing the metal has no influence on
its money value, only as it may tend to increase or reduce the amount
of money, and that it is the quantity of money, the number of units,
available for use that determines and regulates its value; that is, if
the quantity is increased its value will fall, and if the quantity is
diminished its value will rise, and that it will fall or rise in value
in a ratio exactly equivalent to the increase or diminution of the
volume of money; and that if sufficiently reduced in volume, a dollar,
whether stamped on gold, silver, or paper, would buy a plantation or
pay a man for the labor of a lifetime. There can be no doubt as to the
correctness of the quantitative theory of money.
John Stuart Mill says:
That an increase in the quantity of money raises prices, and a
diminution lowers them, is the most elementary proposition in the
theory of currency, and without it we have no key to any of the
others.
Prices, however, are not fixed by the total amount of money in
existence; only that part of the money that is available for use can
act on prices.
Mr. Mill says:
Whatever may be the quantity of money in the country, only that
part of it will affect prices which goes into the market of
commodities and is there actually exchanged for goods of some
description. Whatever increases this portion of the money in the
country tends to raise prices. Money kept in reserve by
individuals to meet contingencies which do not occur, does not
act on prices. Money in the coffers of banks, or retained as a
reserve, does not act on prices until drawn out to be expended
for commodities.
It is also conceded that in fixing prices not only all the money
actually available for use must be taken into consideration, but the
rapidity of circulation must also be regarded; and due allowance must
be made for the number of times commodities change hands before
consumption.
The same dollar may, by passing from hand to hand, make a number of
purchases, and the same goods may be sold repeatedly before
consumption. It is, probably, correct to say, that the money available
for use multiplied by the rapidity of circulation, or, as Mr. Mill
expresses it, by its efficiency, equals the total money to be
considered; and the commodities sold multiplied by the average number
of sales equals the total commodities to be taken into consideration
in fixing the general level of prices.
Are there any other elements that act on the general level of prices?
Of course an abundant yield, or a short crop, or an over-production,
so called, or under-consumption, of any particular commodity may
depress or raise the price of that particular crop or commodity; but
are there any elements other than those above enumerated that act on
the general level of prices? I think there are none.
If, then, prices are controlled by the volume of money available for
use; and if the general level of prices will rise as the volume of
money is increased, and fall as the volume of money is diminished, and
rise or fall in an exact ratio corresponding with the expansion or
contraction of the volume of money, it becomes important to ascertain
what money is, and also whether there is anything which can be used as
a substitute for money in such a manner as to affect the general level
of prices.
Senator John P. Jones, than whom there is no one better informed,
says:
The money of a country is that thing, whatever it may be, which
is commonly accepted in exchange for labor or property and in
payment of debt, whether so accepted by force of law or by
universal consent. Its value does not arise from the intrinsic
qualities which the material of which it is made may possess, but
depends entirely on extrinsic qualities which law or common
consent may confer.
Aristotle says:
Money has value only by law and not by nature; so that a change
of convention between those who use it is sufficient to deprive
it of its value and power to satisfy our wants.
Adam Smith says:
A guinea may be considered a bill for a certain quantity of goods
on all the tradesmen in the neighborhood.
Henry Thornton says:
Money of every kind is an order for goods. It is so considered by
the laborer when he receives it, and it is almost instantly
converted into money's worth. It is merely the instrument by
which the purchasable stock of the country is distributed with
convenience and advantage among the several members of the
community.
John Stuart Mill says:
The pounds or shillings which a man receives are a sort of ticket
or order which he may present for payment at any shop he pleases,
and which entitles him to receive a certain value of any
commodity that he may choose.
Appleton's Cyclopædia defines money in the following words:
Anything which freely circulates from hand to hand, in any
country, as a common, acceptable medium of exchange, is, in such
country, money, even though it ceases to be such, or to possess
any value, when passing into another country. In a word, an
article is determined to be money by reason of the performance by
it of certain functions, without regard to its form or substance.
Francis A. Walker says:
Money is that which freely passes from hand to hand through the
community in final discharge of debt and in full payment for
commodities, being accepted equally without reference to the
character or credit of the person who offers it, and without the
intention of the person who receives it, to consume it, or enjoy
it, or apply it to any other use than in turn to tender it to
others in discharge of debts or in payment for commodities.