It is not only for gold that men labor, fight, and die. One labors long
to perfect an invention; another, to illustrate a theory; a third, to
express a sentiment; a fourth, to acquire real estate. With success, the
first has a machine; the second, a treatise; the third, a poem; the
fourth, a deed. Perhaps no other four persons would willingly expend the
same amount of labor on the same objects; yet this difference of
estimate effects no difference in the objects. Estimation, therefore, or
value, is not a quality of those objects, but a state of mind in
relation to them; accordingly, the poem has value as well as the
machine,--the deed, as well as the wealth it defines. The value of the
deed is, however, widely different from that of the wealth. The value of
the wealth is based on desire, that of the deed on right, though in
neither case exclusively, as, in a general sense, value always involves
both desire and right, and is, therefore, a commercial relation,
resulting from a state of society.
Men have the sense of right, and the intellect to define it, the will to
defend, and the power to enforce it; and, for the more perfect
development of these capabilities, they have instituted government. The
functions of government are, therefore, the definition, the defence, and
the enforcement of right.
The exercise of the function of definition led to the invention of two
classes of commercial instrumentalities,--the real, consisting of
weights and measures, and the ideal or representative, consisting of
writing and notation. The exercise of the remaining functions of
government secures the wealth these serve to define. It may, indeed, be
true, in a rude sense, that possession is nine points of the law; but it
is equally true, in a proper sense, that the remaining point is worth
more than the nine; the defence and enforcement of right being an
absolute and well-defined rule of government. In a state of barbarism
men prefer fact to right, for an obvious reason; but as they advance in
science and civilization, as their conceptions become more distinct,
their definitions more exact, their defences more complete, and their
enforcements more powerful, their faith in right increases, and their
esteem increases with their faith, until right becomes of more value
than possession.
Exchange, whether by barter or sale, is the result of differences of
estimate or value. By barter, the articles exchanged are themselves the
mediums; if, therefore, a given article be generally accepted to that
use, it becomes a common medium; and if it be divided by government into
well-defined quantities, suited and intended for that use, it becomes
money. Money, therefore, in its original form, is a common medium of
barter, that is accepted to that use by authority of law,--a medium
which, considered distinctly from that authority, is simply an article
of merchandise possessing qualities that make it preferable as a means
of barter, and which, for convenience of use, bears the stamp of the
government-inspector, defining the exact quantity contained in each
piece, but which, inasmuch as it is authorized, and partakes of the
nature of law, has ideal qualities that make it the means of sale: these
are, right of use, nomination, and numeration. The ideal qualities of
money serve to establish price, to create money of account, to make
credits possible, and ultimately to produce credit-mediums of exchange,
or bills, which, in a given form, though mere declarations of right to
the wealth they are said to represent, become, in the hands of a
civilized people, a species of currency that, with all its defects, has
proved itself to be the most effectual means both of commerce and of
government.
Wealth is that which may be used. Value is that by means of which wealth
may be exchanged. A currency, therefore, should consist of
representatives of value,--of representatives, because value, being
ideal, is known only by that means,--of value, because it is only by
differences of estimate or value that exchanges are possible. But, as
these representatives are wholly nominal, and may, therefore, be issued
in any quantity, and as their increase or decrease affects the value of
credits, their issue requires regulation. The quantity of the currency
may be well regulated by finding the rate per head of population during
a favorable state of trade, and by adhering to that invariably.
That the people of the United States have reached the degree of science
and civilization proper to the creation of such a currency is not yet
evident; but there is reason to believe that they will take the lead in
this as they have in some other actions indicative of advance,--that
they will erelong understand the impropriety of attempting to measure
value by means of merchandise, that is, by a means that is subject to
variations of quantity,--a conclusion that may not appear obvious in
this aspect, but it will be readily understood that in commerce a
variable measure is absurd in theory and intolerable in practice. Yet
this is precisely parallel with using gold, or any other article of
merchandise, as a measure of value.
The elements of currency are value, a commercial relation derived from
persons, and quantity, a property of things derived heretofore from the
precious metals or their representatives. But this quantity is
inconstant, and to use an inconstant quantity as a measure, is absurd.
The quantity of the currency may, however, be rendered constant, both
positively and relatively, by deriving it wholly from persons,--that is,
by giving it an invariable quantitative relation to the population: a
rule that is both simple and easy of practice, because value is already
nominated and numerated, and the population is already sufficiently well
known. The divisions of the currency should be the simplest possible,
that is, binary, and the definitions of the parts should be as simple as
those of coins.
With regard to the legal-tender currency, so called, it serves well for
temporary use,--much better, indeed, than any of its predecessors; and
as long as its promises are ignored, and as long as its quantity is not
increased faster than the increase of the population, it is practically
a value-currency, resting on its own inherent right of use, with the
exception of the limitation defined by the law of legal tender.
One of the duties of the National Government is to supply the people
with a currency. That this is to be used is sufficiently obvious; and
that, being intended for use, and authorized by law, it has the right of
use, is equally obvious; there is, therefore, little need of a law of
legal tender to give it that right. Accordingly, however affirmative
such laws may be in form, their intention is not so much to bestow as to
withhold.
That the currencies of the world have great defects is so well known
that the statement of the fact would be superfluous, except as
introductory to an attempt to ascertain the nature of those defects, and
to propose an adequate remedy,--an attempt suggested by the rapidity
with which the people, profiting by their present tuition, are learning
wisdom by the things which they suffer in the defence and enforcement of
right.
Of a specie-currency the defect is want of constancy. This defect,
derived from its material element, has a particular and a general
aspect. The particular is the reduction of the quantity of metal in
coins. The Roman money-unit--the _as_--consisted originally of a pound
of bronze; that of England--the pound sterling--and that of France--the
livre--consisted each of a pound of silver. The first Punic war caused
the pound of bronze to be reduced to two ounces; the second caused its
further reduction to half an ounce; and what now is the weight of the
pound sterling? where now is the livre? and what of coins generally?
Like these individuals, types of the class, they depreciate. The general
aspect is, the occasional reduction of the quantity of coin in
circulation. The merchant, believing it to be more immediately
profitable, exports the coin,--that is, finding the currency to consist
of an article of merchandise that suits his immediate purpose, he treats
it accordingly,--though by so doing he causes a rise of prices where he
buys and a fall where he sells, and to that extent nullifies his own
business-intentions, and deranges those of others. If this derangement
be sufficient, hoarding commences; and as this action multiplies itself,
the currency is soon reduced to its minimum quantity, and business of
every kind with it, until the industry of the country is reduced to a
state of atrophy, until a mere commercial derangement is converted into
an immense loss; because the rise in the value of the currency, due to
its scarcity, causes a corresponding fall in the value of all the wealth
of the country, and thus checks industry and stays production.
These defects are not pointed out for the purpose of preventing the
adoption of a specie-currency. There is no probability of such a
currency ever prevailing in this country, except in the neighborhood of
the mines, and there only for a time. Much is said about it, as is
usually the case with subjects that are little understood; but the
driblets of specie that may be seen occasionally are not a currency;
neither are those larger quantities held by banks and brokers. Indeed, a
specie-currency in the presence of bank-notes is an impossibility,
because the notes proclaim their own inferiority; consequently, the
specie is retained and the notes circulated. Yet, the operations of the
mint are continued, with the avowed object of creating a specie
currency. This practice is, however, of some use. It serves to show that
mind and matter are governed by the same general laws,--that either
being put in motion wilt continue to move in the given direction, though
the original intention may have ceased. That the original intention of
coining has ceased when the use of the precious metals is confined
almost exclusively to ornamentation and security is a plain case.
The National Government issues coin for currency, and the States create
banks, with the privilege of using the coin as security, and of issuing
in its stead a larger quantity of notes. These, diluted in value to the
extent of the difference, form, with the authority derived from State
laws, a species of currency that, because of its great convenience,
derived from its representative character, has become, notwithstanding
its defects, one of the greatest powers known to man. The defects of a
bank-note currency are, that, being based on specie, it is necessarily
inconstant, and being insufficiently based, it is necessarily insecure.
The precious metals are desired for three distinct uses,--ornamentation,
security, and currency; they have, therefore, three distinct elements of
value. By the creation of banks a portion of the currency is converted
into security, and another portion undergoes the same change by reason
of the insecurity of bank-notes. Thus, by the influence of banks, the
precious metals are deprived of most of the value they had as currency,
the specie and the notes depreciating together, and maintaining an
equilibrium of value, until the exportation of the former to countries
where its value is not thus impaired becomes profitable. Then, if the
notes continue to depreciate, as is sometimes the case, the equilibrium
is destroyed, and specie commands a premium. This causes the remainder
to be hoarded, so that it then commands an additional premium as
security, in view of the increasing insecurity of bank-notes.
A result of the inconstancy of a bank-note currency is exhibited in each
of its several states,--as a diluted, as a depreciated, and as an
irredeemable currency; but more especially in this its third state. But
as it is not intended to be redeemed, except to a very limited extent,
and as these several states are proper to it, and differ only in degree,
it will be sufficient to point out the final result or climax. This is
depreciation in relation to specie, because of the demand for that
article, first for exportation, and then for security; and, at the same
time, appreciation in relation to every other article of merchandise,
because of the reduction of its own quantity, necessary to the
restoration of the lost equilibrium,--necessary to the reestablishment
of its essential element, credit. Thus it appears that the results of a
bank-note currency are similar to those of a specie-currency, but as
much more disastrous as its expansions and contractions are greater and
more sudden.
To avoid these disasters, it is proposed to issue a national currency
that is constant, and that is therefore a standard measure of value,--an
instrumentality that commerce has never yet been furnished with, though
it is the only one capable of affording to the industry of the country
proper, that is, invariable, encouragement. Not being empirical, it will
make no pretence of furnishing the precious metals at less than the
market-rate, either for exportation or hoarding; but it will have the
effect of reducing them to their true position, that of merchandise, so
that they may be exchanged for the products of other countries with
profit. For the same reason it will not be redeemable. To redeem a
currency is to replace it by another. What other? Specie? That is out of
the question. However desirable specie may be as wealth, as a currency,
except for change, it is a nuisance. Accordingly, merchants prefer a
representative currency, even though its representative character be
somewhat problematical. And government failing to supply a better, this
becomes the currency of the country by a species of necessity. In short,
because of its inconveniences and risks, specie is not used as a
currency, and will not be, because, in addition to these obstacles, the
representative currency in use, being without proper regulation, has
increased to such an extent that there is not sufficient coin to replace
it,--a fact that practically settles in the negative the question of the
sufficiency of the precious metals for currency, in addition to their
other use, in a country where civilization has established credit as a
means of trade. Nevertheless, a specie-currency is advocated even by
those who carefully avoid handling it, and who would be the last to
consent to such a reduction of the currency as its exclusive use would
require,--a confusion of mind due to the fact that the difference
between value and wealth is not always distinctly recognized. Moreover,
it is not the function of a currency to be replaced, but to be a means
of payment. This the proposed currency will be by right of use,--a right
inherent in a national currency, and respected as long as the government
respects itself, that is, as long as the people govern wisely.
A dollar, value-currency, will always buy a dollar's worth of gold, but
it may not always buy the quantity of gold contained in the gold dollar.
How much it will buy depends on the quantitative relation of the
currency to the population,--a relation which, though entirely optional,
should never be changed, because, with whatever change, provided the
proper relation of the parts to the whole be preserved, with little
there will be no lack, and with much, there will be nothing over,--and
because any change of that relation is injurious to commerce, inasmuch
as it produces a corresponding change in the value of credits. And
assuming a change to have been made, a return to the former rate,
instead of being a mitigation, will be a repetition of the injury,
except in regard to credits so extended that they embrace both changes.
If, however, a reduction be insisted on, a suitable mode may be
proposed. Twenty dollars per head gives six hundred millions. Assuming
this quantity to be superabundant, if it be adhered to until the
population reaches forty millions, the rate will be fifteen dollars per
head, which may be assumed to be abundant. If it be adhered to until the
population reaches sixty millions, which it will probably do in one
generation, the rate will be ten dollars per head, which may be assumed
to be convenient; and any attained rate may be continued, or made
constant, by increasing the currency proportionately with the increase
of the population. This mode of reduction, however, is possible with a
national value-currency only. A specie-currency is incapable of
regulation. The same may be said of any currency based on specie.
Indeed, a credit-currency will necessarily collapse under a
superabundant issue, unless its promises be ignored, or unless it be
sustained at the expense of the nation,--an expense which the nation
itself cannot sustain permanently.
The rate of the currency governs the value of wealth. It is important,
therefore, that government have time to pay its debts before any great
decrease of currency takes place; otherwise, that decrease will be
equivalent to an increase of taxes, without producing a corresponding
decrease of the public debt. For the portion payable in gold it will be
better economy to pay the premium than to reduce the currency
sufficiently to avoid it; because such a reduction will work a
corresponding reduction of the value of all the wealth of the country, a
sum much greater than the debt. It is scarcely necessary to suggest that
the more currency the less taxes, and the greater the ability to pay
them; or that, when the war is over, government will cease to spend
several hundred millions per annum, and the industry this money supports
will require time to rearrange and adapt itself to pacific demands; or
that, if the currency be suddenly and largely reduced at such a time,
an accumulation of distress will follow, such as is rarely seen. With
the proposed currency, however, and the proposed mode of reduction, if a
reduction be agreed on, the change from the condition of war to that of
peace may take place without producing the prostration of business so
justly anticipated, because so fully warranted by experience of a
credit-currency, and so earnestly to be deprecated, because so evidently
and so easily avoidable by the adoption of a national currency that is
capable of regulation, and that, being properly regulated, cannot fail.
Though this currency, like that of bank-notes, is wholly nominal, the
words of which it consists are those of a nation, and represent power.
Accordingly, they give to the currency power to perform its allotted
function; but they give it no other power. Has any other currency any
other power? A specie-currency may be converted into ear-rings, but it
is no longer a currency; it may be buried in iron pots, or locked in
iron safes, but it is not then a currency; it may be exported to foreign
lands, but it is not there a currency until reauthorized. Currencies,
properly speaking, are ideas clothed in words,--the words of a nation,
otherwise called laws. The merchandise attached to a specie-currency is
an evidence of former barbarism,--a remain of the primitive practice of
barter,--an incongruous element, tending to impede rather than to assist
circulation, to destroy rather than to create a currency.
But is a value-currency possible? It is, to a people enjoying universal
equality before the law, and knowing that every individual has a direct
and immediate interest in it,--knowing that it is a part of the
business-policy of each. And it is only such a people that will dare to
inaugurate, and persevere to sustain it. Nevertheless, as it cannot but
appear problematical to minds that have not given to the subject the
most earnest attention, its adoption will doubtless be most strenuously
opposed, by habits of thought, by modes of action, and by interests, as
ancient, as universal, and apparently as fixed as the race itself. Yet,
as M. Arago justly remarks in one of his biographies addressed to the
French Academy,--"The moral transformations of society are subject to
the laws of continuity; they rise and grow, like the productions of the
earth, by imperceptible gradations. Each century develops, discusses,
and adapts to itself, in some degree, truths--or, if you prefer it,
principles--of which the conception belonged to the preceding century;
this work of the mind usually goes on without being perceived by the
vulgar; but when the day of application arrives, when principles claim
their part in practice, when they aim at penetrating into political
life, the ancient interests, if they have only this same antiquity to
invoke in their favor, become excited, resist, and struggle, and society
is shaken to its foundations. The tableau will be complete, Gentlemen,
when I add, that, in these obstinate conflicts, it is never the
principles that succumb."