The true money standard of any country is not the material of which the
money is made. The standard is not a concrete object, but a numerical
relation. It is the relation between the number of units composing the
monetary circulation of the country and the numbers of the population.
It is the legal-tender function that constitutes money. It is the power
which the law imparts to any material to pay debts and liquidate
obligations. It can not for a moment be doubted that the money function,
being conferred by the supreme authority, is the all-sufficient
guarantee of the money value. There is no necessity for re-enforcing
that value with any inferior value that may attach to the material on
which the money stamp is placed. The money function is immeasurably the
most important that can be conferred by society upon any material, and
it is absurd to urge that that function is not of itself sufficient for
the maintenance of the value of money. All the value that money can
possibly have--the totality of value that can exist in the shape of
money in any country--will attach to anything upon which the sovereign
authority stamps it, whether the material on which the stamp is placed
be gold, silver, paper, or anything else. Legislators or executive
officers of the Government, by increasing or decreasing the volume of
money, correspondingly decrease or increase the value of each unit of
that money. For no matter how many or how few the units may be, the
total value of the money of the country will be comprised within the
total number of those units. A change in the number of the units effects
a proportionate change in the value of each unit, and whatever the value
of the unit may be, it is of the utmost importance that that value
should remain undisturbed.
It is absurd to maintain that a gold unit, which, as time goes on, is
constantly increasing in purchasing power; is a better unit than a unit
of any other material that maintains unchanging value through time.
Whenever the business of the country accommodates itself to a given
number of units, the only question for the Government to deal with is to
maintain that value as free from disturbance as possible; and according
to all authorities on political economy that can only be done by
increasing or decreasing the number of units in circulation in
accordance with the demands of increasing or decreasing population.
If it be admitted that one of the most important offices of government
is to see that the equities are preserved between its citizens (and if
this be not so, to what purpose are our courts of equity instituted?),
then it can not be denied that it is one of the highest offices of
government to see that money, which measures all equities, and which
must for all time continue to be the principal measure in the service of
civilized society, shall be of unchanging value. It is impossible to
secure this characteristic of uniformity in the value of money if we are
to select as the only material on which to stamp the money function a
substance whose yearly production is becoming more and more limited, and
the prospect of whose sufficient yield becomes less and less
encouraging.
IF SILVER REMAIN DEMONETIZED AND GOLD CONTINUE DECREASING, WHERE IS THE
WORLD'S FUTURE MONEY SUPPLY TO COME FROM?
If the distinguished authorities I have quoted are correct, that a
diminution of the volume of money increases the value of the money
unit--which is but another form of stating that it lowers prices and
produces stagnation, distress, and discontent,--what good reason can be
offered by the advocates of the gold standard for confining the business
of this rapidly growing country to a basis of gold, when it is well
known that the entire stocks of gold and silver together are now
insufficient to serve the purpose of the world's money, and have to be
supplemented and re-enforced by large issues of paper notes? Do they not
reflect that the production of gold is constantly diminishing and is
likely to continue to diminish? And do they not know that our population
is growing at the rate of over 3 per cent. per annum and will double in
thirty years? Do they mean that the money volume which serves a
population of 65,000,000, and is far below the needs of that population,
will suffice for the 130,000,000 of the next generation? To be sure, if
we are to take no note of prices, the question is a simple one.
But prices must be taken into account. The entire money question is one
of prices. When it is said that money is scarce, what is meant is that
business is depressed and that money is difficult to get, at the present
range of prices. Should prices fall 25 per cent. money would be found
plentiful enough to conduct exchange at the lower range. But when prices
fall, goods sell below cost, business is unprofitable, workshops are
closed, and men are thrown into idleness. If lowering prices do not
affect injuriously either the business or the prosperity of the country,
then it makes no difference what the volume of money may be; a small
amount will meet the requirements as well as a large amount. In that
case, the gold standard is as good as any.
But if gold alone is sufficient to bear all the enormous monetary
burdens of the Western world, why do the advocates of the gold standard
admit the necessity for any more circulation? To be logical, instead of
favoring an increase of credit money, which has always lurking within it
an element of danger to the business of the community, they should
demand the retirement of the $347,000,000 of greenbacks and the
$350,000,000 of coined silver, and base the business of the country
exclusively on what they call "honest money." If that should be done all
that could happen would be a fall in prices. Judging by the experience
of the past it would not be surprising if the next move of the
gold-standard men would be an agitation for the retirement and
cancellation of the greenbacks. Such a movement is fully in harmony with
the opinions of the gold-standard advocates for the past twenty years.
Indeed, the Secretary of the Treasury who took charge of the finances at
the opening of the last Administration, himself a banker, recommended
the demonetization of the greenbacks almost as vigorously as he opposed
silver.