The inventions of the past one hundred years have established a new
order of the ages. The revolution of industry and commerce, effected by
the adaptation of steam and other forces of nature to the uses of man,
have given to civilization an impetus exceeding anything known in the
former experience of mankind. Under the operation of the new system, the
rapidity and intensity with which, within that period, civilization has
developed, is due in great part to an economic feature unknown to
ancient civilization and practically unknown even to civilized society
until the present century. That feature is the time-contract, by which
alone leading minds are enabled to project in advance enterprises of
magnitude and moment. It is only through intelligent and far-seeing
plans and projections that in a complex and minutely classified system
of industry great bodies of men can be kept in uninterrupted employment.
We have 22,000,000 workmen in this country. In order that they may be
kept uninterruptedly employed it is absolutely necessary that business
contracts and obligations be made long in advance. Accordingly, we read
almost daily of the inception of industrial undertakings requiring years
to fulfill. It is not too much to say that the suspension for one season
of the making of time-contracts would close the factories, furnaces, and
machine shops of all civilized countries.
The natural concomitant of such a system of industry is the elaborate
system of debt and credit which has grown up with it, and is
indispensable to it. Any serious enhancement in the value of the unit of
money between the time of making a contract or incurring a debt and the
date of fulfillment or maturity always works hardship and frequently
ruin to the contractor or debtor.
Three-fourths of the business enterprises of this country are conducted
on borrowed capital. Three-fourths of the homes and farms that stand in
the name of the actual occupants have been bought on time, and a very
large proportion of them are mortgaged for the payment of some part of
the purchase-money.
Under the operation of a shrinkage in the volume of money this enormous
mass of borrowers, at the maturity of their respective debts, though
nominally paying no more than the amount borrowed, with interest, are,
in reality, in the amount of the principal alone, returning a percentage
of value greater than they received--more than in equity they contracted
to pay and oftentimes more, in substance, than they profited by the
loan. To the man of business this percentage in many cases constitutes
the difference between success and failure. Thus a shrinkage in the
volume of money is the prolific source of bankruptcy and ruin. It is the
canker that, unperceived and unsuspected, is eating out the prosperity
of our people. By reason of the almost universal inattention to the
nature and functions of money this evil is permitted, unobserved, to
work widespread ruin and disaster. So subtle is it in its operations
that it eludes the vigilance of the most acute. It baffles all foresight
and calculation; it sets at naught all industry, all energy, all
enterprise.
CONTRAST OF EFFECTS PRODUCED BY AN INCREASING AND A DECREASING
MONEY-VOLUME.
The difference in the effects produced by an increasing and a
decreasing money-volume has not escaped the attention of observant
writers.
David Hume, in his Essay on Money, says:
It is certain that since the discovery of the mines in America
industry has increased in all the nations of Europe. * * We find
that in every kingdom into which money begins to flow in greater
abundance than formerly, everything takes a new face; labor and
industry gain life; the merchant becomes more enterprising, the
manufacturer more diligent and skillful, and even the farmer
follows his plow with greater alacrity and attention. * * * It is
of no manner of consequence with regard to the domestic happiness
of a state whether money be in a greater or less quantity. The
good policy of the magistrate consists only in keeping it, if
possible, still increasing; because by that means he keeps alive
a spirit of industry in the nation and increases the stock of
labor, in which consists all real power and riches. A nation
whose money decreases is actually at that time weaker and more
miserable than another nation which possesses no more money, but
is on the increasing hand.
William H. Crawford, Secretary of the Treasury, in a report to Congress,
dated 12th February, 1820, says:
All intelligent writers on currency agree that when it is
decreasing in amount poverty and misery must prevail.
Mr. R. M. T. Hunter, in a report to the United States Senate in 1852,
says:
Of all the great effects produced upon human society by the
discovery of America, there were probably none so marked as those
brought about by the great influx of the precious metals from the
New World to the Old. European industry had been declining under
the decreasing stock of the precious metals and an appreciating
standard of values; human ingenuity grew dull under the
paralyzing influences of declining profits, and capital absorbed
nearly all that should have been divided between it and labor.
But an increase of the precious metals, in such quantity as to
check this tendency, operated as a new motive power to the
machinery of commerce. Production was stimulated by finding the
advantages of a change in the standard on its side. Instead of
being repressed by having to pay more than it had stipulated for
the use of capital, it was stimulated by paying less. Capital,
too, was benefited, for new demands were created for it by the
new uses which a general movement in industrial pursuits had
developed; so that if it lost a little by a change in the
standard, it gained much more in the greater demand for its use,
which added to its capacity for reproduction, and to its real
value.
The mischief would be great, indeed, if all the world were to
adopt but one of the precious metals as the standard of value.
To adopt gold alone would diminish the specie currency more than
one-half; and the reduction the other way, should silver be taken
as the only standard, would be large enough to prove highly
disastrous to the human race.
The Encyclopaedia Britannica, 1859 (article Precious Metals, by J. R.
McCulloch), says:
A fall in the value of the precious metals, caused by the greater
facility of their production, or by the discovery of new sources
of supply, depends in no degree on theories of philosophers or
the decision of statesmen or legislators, but is the result of
circumstances beyond human control; and although, like a fall of
rain after a long course of dry weather, it may be prejudicial to
certain classes, it is beneficial to an incomparably greater
number, including all who are engaged in industrial pursuits, and
is, speaking generally, of great public or national advantage.
Ernest Seyd, 1868 (Bullion, page 613), says:
Upon this one point all authorities on the subject are agreed, to
wit, that the large increase in the supply of gold has given a
universal impetus to trade, commerce, and industry, and to
general social development and progress.
The American Review (1876) says:
Diminishing money and falling prices are not only oppressive upon
debtors, of whom, in modern times, states are the greatest, but
they cause stagnation in business, reduced production, and
enforced idleness. Falling markets annihilate profits, and as it
is only the expectation of gain which stimulates the investment
of capital in operations, inadequate employment is found for
labor, and those who are employed can only be so upon the
condition of diminished wages. An increasing amount of money, and
consequently augmenting prices, are attended by results precisely
the contrary. Production is stimulated by the profits resulting
from advancing prices; labor is consequently in demand and better
paid, and the general activity and buoyancy insure to capital a
wider demand and higher remuneration.