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GOLD
AND SILVER AS STANDARDS
OF VALUE:
THE
FLAGRANT CHEAT IN REGARD
BY LYSANDER SPOONER.
REPRINTED
FROM “THE RADICAL REVIEW.” BOSTON: GOLD
AND SILVER AS STANDARDS OF THE
FLAGRANT CHEAT IN REGARD TO
THEM. All
the usurpation, and tyranny, and
extortion, and robbery, and
fraud, that are involved in the
monopoly of money are practised,
and attempted to be justified,
under the pretence of
maintaining the standard of
value. This pretence is
intrinsically a false one
throughout. And the whole motive
for it is to afford some color
of justification for such a
monopoly of money as will enable
the few holders of gold and
silver coins (or of such other
money as may be specially
licensed and substituted for
them) to extort, in exchange for
them, more of other men’s
property than the coins (or
their substitutes) are naturally
and truly worth. That such is
the fact, it is the purpose of
this article to prove. In
order to be standards by which
to measure the values of other
things, it is plain that these
coins must have a fixed and
definite - or, at least,
something like a fixed and
definite - value of their own;
just as a yard-stick, in order
to be a standard by which to
measure the length of other
things, must necessarily have a
fixed and definite length of its
own; and just as a pound weight,
in order to be a standard by
which to measure the weight of
other things, must necessarily
have a fixed and definite weight
of its own. It is only because a
yard-stick has a fixed and definite
length of its own that we are
enabled to measure the length of
other things by it. It is only
because a pound weight has a
fixed and definite weight of its
own that we are enabled to
measure weight of other things
by it. For a like reason, unless
gold and silver coins have fixed
and definite - or, at least,
something like fixed and
definite - values of their own,
they can serve no purpose as
standards by which to measure
the values of other things.[*4] The
first question, then, to be
settled is this, - namely, what
is that fixed or definite value
(or something like a fixed or
definite value) which gold and
silver coins have, and which
enables them to be used as
standards for measuring the
values of other things? The
answer is that the true and
natural market value of gold and
silver coins is that value, and
only that value, which they have
for use or consumption as
metals, - that is, for plate,
watches, jewelry, gilding,
dentistry, and other ornamental
and useful purposes. This is
the value at which they now
stand in the markets of the
world, as is proved by the
fact that doubtless not more
than one-tenth, and very likely
not more than one-twentieth, of
all the gold and silver in the
world (out of the mines) is in
circulation as money. All the
rest is in plate, watches,
jewelry, and the like; except
that in some parts of the world,
where property in general is
unsafe, large amounts of gold
and silver are hoarded and
concealed to prevent their being
taken by rapacious governments,
or public enemies, or private
robbers. Leaving these hoards
out of account, doubtless
nine-tenths, and very likely
nineteen-twentieths, of all the
gold and silver of the world are
in other forms than coin. And
as fast as new gold and silver
are taken out of the mines, they
are first carried to the mints,
and made into coins; then they
are carried all over the world
by the operations of commerce,
and given in exchange for other
commodities. Then the goldsmiths
and silversmiths, in every part
of the world (unless among
savages), are constantly taking
these coins and converting
them into such articles of
plate, jewelry, and the like as
they have call for. In this way
the annual crops of gold and
silver that are taken from the
mines are worked up into
articles for use as regularly as
the annual crops of breadstuffs
are consumed as food, or as the
annual crops of iron, and
cotton, and silk, and wool, and
leather are worked up into
articles for use. And
when the coins have thus been
wrought into articles for use,
they for ever remain so, unless
these articles become unfashionable,
or for some other reason
undesirable. In that case, they
are sent again to the mint, and
converted again into coin ; then
put into circulation again as
money; then taken out of circulation
again by the goldsmiths and
silversmiths, and wrought [*5]
again into plate, jewelry, and
the like, for use. They
remain in circulation as money
only while they are going from
the mint to the goldsmiths and
silversmiths. And this route
is a very short and quick one.
An old coin is rarely seen,
unless it has been hoarded.
<fn1> Unless
new gold and silver were being
constantly taken from the mines,
and old and unfashionable plate
and jewelry were being
constantly recoined, these
metals would soon disappear altogether
as money. All
this proves that they have no
true or natural value as money
beyond their value for use or
consumption as metals. If
they were worth more as money
than they are for use or consumption
as metals, they would, after
being once coined, remain for
ever in circulation as money, instead
of being taken out of circulation
and appropriated to these other
uses. In
Asia, where these metals have
been accumulating from time
immemorial, and whither all the
gold and silver of Europe and
America-except so much as, is
caught up and converted into
plate, watches, jewelry, etc., -
is now going, and has been going
for the last two thousand years,
<fn2> very
small amounts only are in
circulation as money. Instead of
using them as money, the people
- or so many of them as are able
- cover themselves with jewelry,
fill their houses with plate,
and their palaces and tern- pies
with gold and silver ornaments.
Instead of investing their
surplus wealth in fine houses,
fine clothing, fine furniture,
fine carriages, etc., as
Europeans and Americans do, it
is nearly all invested in gold,
silver, and precious stones. In
every thing else they are
miserably poor. Even the rich
are so poor that they cannot
afford to indulge, as we do, in
such luxuries as costly
dwellings, clothing, furniture,
and the like, which require frequent
repairs, or quickly decay, or
wear out with use. Hence their
preference for ornaments of
gold, silver, and precious
stones, which never wear out,
and retain their value for ever. In
China, which has at least a
fourth, and perhaps a third, of
all the population of the globe,
gold and silver are not coined
at [*6] all by the Government.
The only coin that is coined by
the Government, and that is in
circulation as money, is a small
coin, of a base metal, worth no
more than a fifth, sixth, or
seventh of one of our cents.
This coin is the common money of
the people. And gold and
silver are not in circulation at
all as money, except some few
foreign coins, and some plates,
bars, or nuggets of gold and
silver that pass by weight, and
are generally weighed whenever
they pass from one person to
another. In
India, among two hundred
millions of people, although the
few rich have immense amounts of
gold and silver plate and ornaments,
very little gold and silver is
in circulation as money. The
mass of the people have either
no money at all, - taking their
pay for their labor in rice or
other articles of food, - or
have only certain shells, called
cowries, of which it takes from
fifty to a hundred to be worth
one of our cents. <fn3> In
still other parts of Asia, gold
and silver have little more circulation
as money than in China and
India. And yet Asia, I re peat,
is the great and final market
whither all the gold and silver
of Europe and America - except
what has been caught up and
converted into plate, jewelry,
and the like-is now going, and
has been going for two thousand
years, and whence they never
return. In
Europe and America, the great
increase of gold from the mines
of California and Australia
within the last thirty years has
added only moderately to the
amount of gold in circulation as
money. But it has added very
largely to the use of gold for
plate, watches, jewelry, and the
like. This greatly increased
consumption of gold for
ornamental purposes in England
and America, and the increased
flow of gold to Asia, to be
there devoted to the same uses,
account for the fact - which to
many persons seems unaccountable
- that the great amounts of gold
taken from the mines have added
so little to the amount in
circulation as money. And
even though the amounts of gold
and silver taken from the mines
should hereafter be still
greater - no matter how much
greater - than they ever have
been heretofore, they would all
be disposed of in the same way;
namely, first be converted [*7]
into coin and put into
circulation as money, and then
taken out of circulation and
converted into plate, jewelry,
and the like. They would
exist in the form of money only
while they were performing their
short and predestined journey
from the mint to the goldsmiths
and silversmiths. These
facts - let it be emphatically
repeated - prove beyond all
color of doubt, or possibility
of refutation, that the true and
natural market value of gold and
silver coins is that value, and
only that value, which they have
for use or consumption as metals.
Consequently it is at that
value, and only at that value,
that they have the least claim
to be considered standards by
which to measure the value of
any thing else. And any body
who pretends to write about the
value of money from any other
basis than this is either an
ignoramus or an impostor, -
probably the latter. II.
But that gold and silver coins
can have no true or natural
market value as money beyond
their value for use or consumption
as metals will still more
clearly appear when we consider
why it is that they are in
demand at all as money; why it
is that they have a market
value; and why it is that every
man will accept them in
exchange for any thing he has to
sell. The
solution of these questions is
that the original, primal source
of all the demand for them as
money - the essential and only
reason why they have market
value, and sell so readily in
exchange for other commodities -
is simply because they are
wanted to be taken out of
circulation, and converted into
plate, Jewelry, and other
articles of use. They
are wanted for these purposes by
all the people on the globe.
Hence they are carried at once
from the countries in which they
are first obtained-the mining
countries - to all the other
countries of the world as
articles of commerce, and given
in exchange for such other
commodities as the holders of
them prefer for the
gratification of their wants and
desires. If
they were not wanted to be taken
out of circulation and wrought
into articles of use, they would
have no market value as money,
and could not circulate at all
as money. No one would have any
motive to buy them, and no one
would give any thing of value in
exchange for them. The
reason of this is that gold and
silver, in the state of coin,
[*8] cannot be used. <fn4>
Consequently, in the state of
coin, they produce nothing to
the owner. A man cannot afford
to keep them as an investment,
because that would be equivalent
to losing the use of his
capital. He must, therefore,
either exchange them for
something he can use-something
that will be productive and
yield an income; or else he must
convert them into plate, jewelry,
etc., in which form he can use
them and get an income from
them. It
is, therefore, only when gold
and silver coins have been
wrought up into plate, watches,
jewelry, etc., that they can be
said to be invested; because
it is only in that form that
they can be used, be
productive, or yield an income. The
income which they yield as
investments- that is, the income
which they yield when used in
the form of plate, jewelry, etc.
- is yielded mostly in the shape
of a luxurious pleasure -the
pleasure of gratified fancy,
vanity, or pride. This
pleasure is the same as that
which is derived from the use of
ornaments generally; such as
feathers, and ribbons, and
laces, and precious stones, and
many other things that have no
value at all as food, clothing,
or shelter, yet bring great
prices iii the market simply for
their uses as ornaments. The
amount of this income we will
suppose to he six per cent. per
annum on their whole value.
That is to say, a person who is
able, and has tastes in that
direction, will give six dollars
a year for the simple pleasure
of using one hundred
dollars’ worth of plate,
jewelry, etc. This
six dollars’ worth of
pleasure, then, or six
dollars’ worth of gratified
fancy, vanity, or pride, is the
annual income from an investment
of one hundred dollars in gold
and silver plate, jewelry, and
the like. This,
be it noticed, is the only
income that gold and silver
are capable of yielding; because
plate, jewelry, and the like are
the only forms in which they can
be used. So long as they
remain
[*9] in coin, they cannot
be used, and therefore cannot
yield an income. It
is, then, only this six per
cent. annual income, this six
dollars’ worth of pleasure,
which gold and silver yield as
ornaments, - that is, as
investments,-that is really the
cause of all the demand for
them in the market, and
consequently of their being
bought and sold as money. By
this it is not meant that every
man who takes a gold or silver
coin as money takes it because
he himself wants a piece
of gold or silver plate or
jewelry; nor because he himself
intends or wishes to work it
into plate or jewelry, - for
such is not the case probably
with one man in a thousand, or
perhaps one man in ten thousand,
of those who take the coin. Each
man takes it as money simply
because he can sell it again.
But he can sell it again solely
because some other man wants it,
or because some other man will
want it, in order to convert it
into articles for use. He can
sell it solely because the
goldsmith, the silversmith, the
dentist, the gilder, etc., will sometime
come along and buy it, lake
it out of circulation, and
work it up into some article for
consumption, - that is, for use. This
final consumption or use, then,
is the main-spring that sets the
coins in circulation, and keeps
them in circulation, as money. It
is solely the consumption or use
of them, in other forms than
coin, that creates any demand
for them in the market as money. It
is, then, only the value which
gold and silver have as productive
investments in articles of use,
- in plate, watches, jewelry,
and the like, - that creates any
demand for them, or enables them
to circulate as money. And
sin cc this value which the
coins have for use or consumption
as metals is the only value that
enables them to circulate at all
as money, it is plain that it
necessarily fixes and limits
their true and natural value as
money. Consequently any body
who gives more for them as money
than they are worth for use or
consumption as metals gives more
for them than they are worth for
any purpose whatever, - more, in
short, than their true and
natural market value. We
all can understand that, if
wheat were to circulate as [*10]
money, it could have no more
true or natural market value as
money than it had for use or
consumption as food; since it
would be its value for food
alone that would induce anybody
to accept it as money. All the
wheat that should be in
circulation as money would be
destined to be taken out of
circulation, and consumed as
food; and if anybody should give
more for it as money than it was
worth for food, he, or some
subsequent owner, would have to
submit to a loss, whenever the
wheat should come to be consumed
as food. For
these reasons, the wheat as
money could be no true or natural
equivalent for any commodity
that had more true or natural
market value for use or
consumption than the wheat. So
anybody can understand that, if
silk, wool, cotton, and flax
were to circulate as money, they
could have no more true or natural
market value as money than they
had for use or consumption for
clothing, or other analogous
purposes. Their value for these
other purposes would alone give
them their value as money. Of
course, then, their true and
natural market value as money
would be fixed and limited by
their value for these other
uses. They could plainly have no
greater value as money than they
had for clothing and other
articles of use. As they would
all be destined to be taken out
of circulation, and converted
into clothing or other
articles of use, it is plain
that, if anybody should give
more for them as money than they
were worth for clothing and
other articles of use, he, or
some subsequent owner, would
have to submit to a loss
whenever they should come to be
converted into clothing, or any
other article of use. The
same reasons that would apply to
wheat, and silk, and wool, and
cotton, and flax, if they were
to circulate as money, and that
would fix and limit their value
as money, apply equally to gold
and silver coins, and fix and
limit their value as money. We
are brought, therefore, to the
same conclusion as before, -
namely, that the value which the
coins have for use for consumption
as metals is their only true and
natural value as money.
Consequently, this value which
they have as metals is the
value, and the only value, at
which they can be said to be
standards by which to
measure the value of any thing
else. III.
Assuming it now to be
established that the true and
natural market value of gold
and silver coins as money is
absolutely [*11] fixed and
limited by their value for use
or consumption as metals, and
that their value for use or
consumption as metals is the
only value at which they can be
called standards for measuring
the values of other things, we
come to another proposition,
-namely, that the use or
circulation of any possible
amount of paper money has no
tendency whatever to reduce the
coins below their true and
natural market value as metals,
or, consequently, to diminish
their value as standards. Plainly
the paper can have no such power
or tendency, because the
paper does not come at all in
competition with the coins for
any of the uses which alone give
them their value. We cannot
make a watch, a spoon, a
necklace, or an ear-ring out of
the paper, and, therefore, the
paper cannot compete with the
coins for those uses. consequently
it cannot diminish their market
value for those uses, or -
what is the same thing - their
value as standards. If
the coins were never used at all
as money, they would have the
same true and natural market
value that they have now. Their
use or circulation as money adds
nothing to their true and
natural market value as metals,
and their entire disuse as money
would take nothing from their
true and natural market value as
metals. Consequently it would
not diminish their value as
standards. In other words,
it would not reduce the coins
below their true and natural
value as standards. Every
dollar’s worth of other
vendible property in the world
has precisely the same amount of
true and natural market value as
has a dollar in coin. And if
every dollar’s worth of other
vendible property was bought and
sold as money in competition
with the coins, the true and
natural market value of the
coins would not be lessened
thereby. They would still have
their true and natural amount of
market value, - that is, their
value for plate, jewelry, and
the like,-the same as though all
this other property were not bought
and sold in competition with
them. The coins and all other
property would be bought and
sold as money only at their true
and natural market values, respectively,
for their different uses. One
dollar’s worth of any one kind
of property would have the same
amount of true and natural
market value for its appropriate
use that a coin, or any other
dollar’s worth of property,
would have for its appropriate
use. But
none of them would have any
additional value on account of
their being bought and sold as
money. [*12] Now,
all the other vendible property
of the world cannot be actually
cut up into pieces or parcels,
each capable of being carried
about in the pocket, and each
having the same amount of true
and natural market value as a
dollar in coin. But it is not
only theoretically possible, but
actually practicable, that
nearly or quite all this other
vendible property should be
represented by contracts on
paper, - such as certificates,
notes, checks, drafts, and bills
of exchange, -and that these
contracts shall not only have
the same value with the coins in
the market as money, but that,
as money, they generally shall
be preferred to the coins. These
contracts are preferred to the
coins as money not only because
they are more convenient, but
also because we can have so many
times more of them. <fn5> Every
solvent piece of paper
that can circulate as money
-whether it be a certificate,
note, check, draft, bill of
exchange, or whatever else -
represents property existing somewhere
that is legally holden for
the redemption or payment of the
paper, and that can either be
itself delivered in redemption
of it, or be otherwise made
available for its payment. And
if every’ dollar’s worth of
such property in the world could
be represented in the market by
a contract on paper promising to
deliver it on demand, and if
every dollar’s worth could be
delivered on demand in
redemption of the paper that
represented it, the world then
could have an amount of money
equal to its entire vendible
property. And yet clearly every
dollar of paper would be equal
in value to a dollar of gold or
silver. Clearly, also, all this
paper would do nothing towards
reducing gold and silver coins
below their true and natural
market values,-that is, their
values for use or consumption as
metals. The
gold and silver coins would be
good standards - as good perhaps
as any that can be had-by which
to measure the values of all
this other property. But a gold
dollar, or a silver dollar,
would have no more true or
natural market value than would
each and every other dollar’s
worth of property that was
measured by it. <fn6>
[*13] Under
such a system of currency as
this, there could evidently be
no inflation of prices,
relatively to the true and
natural market values of gold
and silver. Such a currency
would no more inflate the prices
of one thing than of another. It
would just as much inflate the
prices of gold and silver
themselves as of any thing else.
Gold and silver would stand at
their true and natural market
values as metals; and all
other things would also stand at
their true and natural values
for their respective uses. No more of this currency could be kept in circulation than would he necessary or convenient for the purchase and sale of commodities at their true and natural market values, relatively to gold and silver; for if at any time the paper was not worth as much, or would not buy as much, in the market as gold or silver, it would be returned to the issuers for redemption in gold and silver, and thus be taken out of circulation. <fn7> Thus
we are brought again to the
conclusion that it is only when
gold and silver coins are
suffered to stand at their true
and natural values as metals -
which are also their true and
natural values as standards -
that they can he said to measure
truly the values of other
things. At
their values as metals the coins
serve as standards by which to
measure the value of all other money,
as well as of all other
property. But at any other than
their true and natural values as
metals they will naturally and
truly measure the value of
nothing whatever, - neither of
other money, nor of any thing
else. IV.
We come now to still another
proposition, - namely, that
[*14] no possible amount of
paper money that can be put in
circulation in any one
country that is open to free
commerce with the rest of the
world can affect the true or
natural market value of gold or
silver coins in that country. If
the coins should be entirely
excluded from circulation by the
paper, they still would have the
same true and natural market
value as if they were the only
money in circulation; for, in
both cases alike, their true and
natural market value in that
country would be determined
by their value in the markets
of the world. The
coins can be carried from any
one part of the world to any
other part at so small an
expense that they can have no appreciably
greater market value in any one
part than in any other. And
their true and natural market
value in all parts of the world
depends upon the general
consumption of them as metals,
and not at all upon their
circulation as money. They are
everywhere simply merchandise
in the market of the world,
waiting for consumption, like
any other merchandise. This
fact-that the disuse of the
coins as money in any one
country cannot reduce their
value in that country below
their value in the markets of
the world - was fully tested in
the United States for fourteen
or fifteen years, - that is,
from 1861, or 1862, to 1876.
During the whole of that time
gold and silver were wholly
absent from general circulation
as money. Yet they had the same
value here as metals that they
had in other parts of the world
either as money or as metals.
And they were as much used
during that time for plate,
watches, jewelry, and the like
as they ever were. The
people of the United States
comprise not more than a
twenty-fifth - perhaps not more
than a thirtieth - part of the
population of the globe. And if
they were to abandon the use of
gold and silver entirely, not
only for money, but for plate,
watches, jewelry, and every
other purpose whatever; If
they were even to banish the
metals themselves from the
country, - they thereby
would reduce their value in the
markets of the world by not more
than a twenty-fifth, or perhaps
a thirtieth, of their present
value. How absurd, then, to
pretend that the simple disuse
of them as money by one
twenty-fifth, or one-thirtieth,
part of the population of the
globe can have any appreciable
effect upon their market value
the world over! [*15] These
facts prove that all
restrictions imposed by law in
any one country upon all other
money than gold and silver
coins, under pretence of
maintaining the true standard of
value in that country, are the
merest farces, not to say the
merest frauds; that they have no
tendency of that kind whatever;
that they only serve to derange
the standard in that country by
establishing a monopoly of
money, and giving a monopoly and
extortionate price to the
coins in that country, instead
of suffering them to stand at
their true and natural value,
both as metals and as standards,
and also at the same value that
they have in the markets of the
world. Furthermore,
if any or all other nations have
been wicked and tyrannical
enough to give, or attempt to
give, a monopoly and extortionate
price to gold and silver coins
by restrictions upon any or all
other money, that is no reason
why we should be guilty of the
same crime. So far as such
restrictions may have affected
the price of the coins in the
markets of the world, we may not
be able to save either ourselves
or the rest of mankind from the
natural consequences of such a
monopoly. But we are under no
more obligation to follow the
bad example of these nations in
this matter than in any other.
Because other nations enslave
and impoverish their people by
depriving them of all money and
all credit by establishing a
monopoly of money, that is no
reason why we should do so. All
our efforts in this direction do
nothing towards making the coins
better standards of value than
they otherwise would be. V.
It is an utter absurdity to talk
about gold and silver coins
having any more true or natural
value as money than they have
for use or consumption as
metals. To say that they have
more true or natural market
value as money than they have
for use as metals is equivalent
to saying that they have more
true and natural value for being
bought and sold than they
have as commodities for use or
consumption. And to say that
they have more true or natural
market value for being bought
and sold than they have as
commodities for use or
consumption is just as absurd as
it would be to say that houses,
and lands, and cattle, and
horses, and food, and clothing,
have more true and natural
market value for being bought
and sold than they have as
commodities for use [*16] VI.
Finally, the true and natural
market value of any and every
vendible thing whatever is that
value, and only that value,
which it will maintain in the
market in competition with any
and all other vendible things
that can be brought into the market
in competition with it. This is
the only rule by which the true
and natural market value of any
vendible thing whatever can be
ascertained; and this rule
applies as much to gold and
silver coins as to any other
commodities whatever. Tried
by this rule, we know that the
coins will bear no higher value
in the market as money than they
will for use or consumption as
metals; because mankind have
other money which they prefer to
the coins, and which - if
permitted to do so - they will
always buy and sell as money
rather than give more for the
coins as money than they are
worth for use or consumption as
metals. VII.
To give color to the idea that solvent
notes, promising to pay
money on demand, tend to reduce
the standard of value below that
of the coins, the advocates of
that idea are accustomed to say that
such notes cost nothing, and
have no value in themselves; and,
consequently, that to suffer
them to be bought and sold as
money in the place of coin, and
as if they were of. equal value
with coin, necessarily
depreciates the market value of
the coin at least for the time
being ; that, in other words, it
reduces the standard of value
for the time being. The
answer to this pretence is that
nobody claims or supposes that a
promissory note, simply as so
much paper, has any value.
But the contract written upon
the paper - if the note be a solvent
one - is in the nature of a lien
upon so much material property
of the maker of the note as is
sufficient to pay the note, and
as can be taken by legal process
and sold for payment of the
note. Every
solvent promissory note -
whether it circulates as money,
or not-is in the nature of a
lien upon the property of the
maker, - that is, upon the
property that is legally holden
for the payment of the note, and
that can be taken by legal
process, and applied to the
payment of the note. The
value of the note, therefore, is
not in the mere paper as paper,
but in the property on which the
contract written upon paper
gives the holder a lien for the
amount of the note. [*17] In
this respect, a banker’s note,
circulating as money, is just
like any other man’s note that
is locked up in the desk or safe
of the holder. The fact that it
is bought and sold from hand to
hand as money- that is, in
exchange for other
property-makes no change
whatever in the character or
value of the note. In
the case of a mortgage upon
land, the value is not in the
mere paper, as paper, upon which
the mortgage is written, but in
the land on which the mortgage
gives the mortgagee a lien for
the amount of his debt. So in
the case of a note, if it be a solvent
one, it is in the nature of
a lien upon, or conditional
title to, the property of the
maker of the note, - property
that is legally holden for the
payment of the note, and that
can be taken by legal process,
and applied to the payment of
the note. To
say that such a note has no
value in itself is just as
absurd as it would be to say
that a mortgage on land has no
value in itself. Everybody
knows that neither the mortgage
nor the note has any value as
mere paper; that the value is in
the land, or the property, that
is holden, or liable to be
taken, for the payment of the
mortgage or note. In
every case where material
property is represented by
paper, - as in the case of a
deed, mortgage, certificate of
stock, certificate of deposit,
check, note, draft, or whatever
else, - the value is in the
property represented, and not in
the paper that represents it.
The paper has no value, except
as it contains the evidence of
the right to the property
represented by it. And this is
as true in the case of what is
called paper money as in
all other cases where property
is represented by paper. The
value of the money is not in the
paper as paper, but in the
property represented by the
paper, and to which, or on
which, the contract written on
the paper gives a title, claim,
or lien. The property that is
represented by the paper, and
which constitutes the real
money, is just as real
substantial property as is gold,
or silver, or any other money or
property whatever. And it is
really an incorrect and false
use of the term to call such
money paper money, as if
the paper itself were the real
money; or as if there were no
money, and no value, outside of
the paper. A dollar’s worth of
land, wheat, iron, wool, or
leather, is just as much a
dollar in real value as
is a dollar of gold or silver;
and when represented by paper,
it is just as real money, so far
as value is concerned, as is
gold and silver. [*18] Every
solvent promissory note
is a mere representative of, or
lien upon, or conditional title
to, material property in the
hands of the maker; property
that has an equal value with
coin; that is legally holden for
the payment of coin; and that
can be taken by legal process,
and sold for coin, which must be
applied to the payment of the
note. When, therefore, a man
sells a solvent promissory
note, he sells a legal title to,
or claim to, or lien upon, so
much actual property in the
hands of the maker of the note
as is necessary to pay the note;
property which men have just as
much right to buy and sell from
hand to hand as money, if they
so please, - that is, in
exchange for other property, -
as they have to buy and sell
coin, or any other money that
can be invented. And
it matters not how many of these
notes are in circulation as
money, provided they are all
solvent; since, in that case,
each note represents a separate
piece of property from all the
others; each separate piece of
property being equal in value to
coin, and capable of insuring
the payment of coin. If,
therefore, all the material
wealth of a country were thus
represented by paper, the paper,
- that is, the property
represented by the paper - would
all have the same value as the
same nominal amount of coin; and
the circulation of all this
paper as money would do nothing
towards reducing the coins below
their true and natural value as
metals, or below their value
in the markets of the world. Consequently,
it would do nothing towards
depreciating the true and
natural standard of value. All
this other money would have the
same value, dollar for dollar,
as the coin; and the true and
natural value of the coins as
standards of value would not be
changed. There
certainly can be no question
that a solvent promissory
note that circulates from hand
to hand as money - which everybody
is willing to accept in payment
for other property - is just as
legitimate a piece of paper, and
has just as much value as a
lien, or as evidence of a lien,
upon the property that is holden
for its payment, as any other
promissory note whatever. If
such a note be not legitimate,
if it have no value, then no
promissory note whatever is
legitimate, or has value. And if
the issue of such notes for
circulation as money-that is,
among those who voluntarily give
and receive them in exchange for
other property - be
illegitimate, and ought to be
suppressed, then all promis-
[*19] sory notes whatsoever are
equally illegitimate, and ought
to be suppressed. But if any one
such note, which any one man, or
company of men, can make, be
legitimate, then any and every
other similar note, which any
other man, or company of men,
can make, is equally legitimate. VIII.
But to hide the deception that
is attempted to be practised
under pretence of maintaining
the standard of value, it is
said that there is but a small
amount of coin in comparison
with the notes that can be put
in circulation as money; and
that it is therefore impossible
that any great number of notes,
promising to lay coin on
demand, can be solvent; that
the property that is nominally
holden to pay the notes cannot
be made to bring any more coin
than there really is; and that,
therefore, the notes, if more
numerous than the coins, must be
spurious; that they promise to
pay something which the makers
do not possess, and which they
consequently are unable to pay,
no matter how much other
property they may have. One
answer to this argument is that,
on this principle, no promissory
note whatever - whether issued
for circulation or not - could
ever be considered solvent,
unless the maker kept constantly
on hand an equivalent amount of
coin with which to redeem it.
Whereas we know that all notes
are considered solvent, provided
the makers have sufficient
property to bring the coin when
it is likely to be called for. And
this is the principle on which
all ordinary commercial credit
rests. Another
answer to this argument is that,
however valid it may be against
notes that are either not
solvent, or not known to be
solvent, - that is, not issued
on the credit of property
sufficient to pay the notes, -
it has no weight against notes
that are sol vent, and that are
known to be solvent; because,
first, if the notes are.,
solvent, and are known to be
solvent, the holders usually
prefer them to coin, and
therefore seldom present them
for redemption in coin; and
because, secondly, the notes
issued for circulation are
issued by discounting other
solvent notes that are to be
held by the bankers, and the
circulating notes are,
therefore, all wanted for paying
the notes discounted, and, with
rare exceptions, will all come
back to the bankers in payment
of the notes discounted; and it
is, therefore, only rarely that
any other redemption of the
circulating notes is called for.
[*20] The
bankers soon learn by experience
how often coin will be called
for, and how much, therefore, it
is necessary for them to keep on
hand for such contingencies.
This amount a clue regard for
their own interests will induce
them to keep on hand, because
they cannot afford to be sued on
their notes, or to have their
credit injured by not meeting
their notes when coin is
demanded.<fn8> The
opposers of a solvent paper
currency either ignorantly
overlook, or craftily and
dishonestly attempt to keep out
of sight, the vital fact that,
in all safe, legitimate,
solvent, and prudent banking,
all the notes issued for
circulation will be wanted to
pay the notes discounted, and
will come back to the banks in
payment of notes discounted; and
that it is only rarely that any
other redemption-redemption in
coin-will be demanded or
desired. The
pretence, therefore, that no
more notes can be honestly
issued for circulation than
there is coin kept constantly on
hand for their redemption is
nothing but a pretence, since,
however great the amount of
notes issued, - provided they be
solvent ones, - it is only a
mere fraction of them-probably
not so much even as one per
cent. - that will ever have any
call to be redeemed in coin. IX.
But it is often said that the
panics which have usually occurred
after any considerable increase
of money by the issue of paper
are proof that the paper was not
equal in value, dollar for
dollar, with coin. Those who say
this claim that the panics are
caused by the attempts of the
holders of the notes to convert
them into coin. These attempts
have taken the form of runs upon
the banks for the redemption of
their notes in coin. And it is
claimed that these runs upon the
banks for coin are proof that
the notes are not equal
in value, dollar for dollar,
with coin. And this proof, say
they, is made complete by the
fact that the banks, when thus
run upon for coin, cannot redeem
their notes in coin. But
these runs upon banks for coin
by no means prove that [*21] solvent
notes are not equal in
value, dollar for dollar, with
coin. They prove only that the
holders of the notes have
doubted the solvency of the
banks. These runs have never
occurred in countries where
the banks were known to be
solvent. They have occurred
only in countries where the
solvency of the banks was
doubted, as in England and the
United States. Thus, in Scotland
there is no history (so far as I
know or believe) of a single run
upon the banks in a period of
eighty years, - that is, from
1765 to 1845. There may have
been runs in a few instances
upon some particular bank, but
none upon the banks generally.
And why? Not at all because
these banks kept on hand large
amounts of coin, -for they
really kept very little, -but
solely because the public had a
perfect assurance of the
solvency of the banks; an
assurance resulting from the
facts that each of the banking
companies had a very large
number of stockholders, and that
the private property (including
the real estate) of all these
stockholders was holden for the
debts of the banks. The public,
therefore, knew, or felt
perfectly assured, not only that
the notes of the banks were all
solvent, but also that they
would all speedily go back to
the banks, and be redeemed by
being accepted in payment of
notes discounted. Under these
circumstances, the public not
only made no runs upon the banks
for coin, but even preferred the
notes to the coin. In
England, on the contrary, the
runs upon the banks during the
same period of eighty years were
very frequent. And why? Because
nobody had any abiding
confidence in the solvency of
the banks. The Government, for
the sake of giving a valuable
monopoly to the Bank of England,
had virtually enacted that there
should be no other solvent banks
in England; or at least none
that could be publicly known to
be solvent. This enactment was
that, with the exception of the
Bank of England, no bank in
England should consist of more
than six partners. Rich
men-those who had credit and
wished to use it-could generally
do better with it than to put it
into a company where there were
only six partners, and where the
credit of the partnership could
not be sufficiently known to be
of much value, or to protect
them against runs for coin. The
result was that, with the exception
of the Bank of England, all, or
very nearly all, the banking
business in England was in the
hands of men who were not only
[*22] unworthy of credit, but
really had no credit, except so
long as they were ready to
redeem their notes either in
coin or Bank of England notes.
<fn9> In
many or most of the United
States, up to i86o, the solvency
of the banks was rendered
doubtful, or worse than
doubtful, by legislation that
authorized the banks to issue
notes to two, three, or four
times the amount of their
capital; that authorized the
stockholders themselves to
borrow these notes of the banks,
and then exempted the private
property of the stockholders
from all liability for the debts
of the banks. Of course it often
happened that no reliance
could be placed on the solvency
of such banks, and that runs,
which they could not meet, would
be made upon them for coin. But
clearly the runs upon such banks
as these did nothing towards
proving that the notes of banks,
known to be solvent, were
not equal in value, dollar for
dollar, with coin. But
the panic of 1873, in the United
States, did not proceed at all
from any doubt as to the
solvency of the banks, but
wholly from the insufficiency in
the amount of money. The
destruction of the State banks
by a ten per cent. tax on their
issues; the limitation upon
the issues of the national banks
to the sum of three hundred and
fifty-six million dollars; and
the limitation upon the
greenbacks to three hundred
million dollars, - reduced the
currency to six hundred and
fifty-six million dollars. And
these six hundred and fifty-six
million dollars, being, for want
of redemption, some fifteen
per cent, below par of specie,
reduced the actual amount of
money to about five hundred and
fifty-eight millions. The
population of the country in
1873 was at least forty
millions, and the property
probably forty thousand
millions. This lack of money,
compared with population and
property, compelled traffic of
all kinds to be done on credit,
instead of for cash. Every thing
was bought on credit, and sold
on credit. And the same commodity,
in going from producer to
consumer, was generally sold
two, [*23] three, four, or more
times over on credit. The
consequence was that this
private indebtedness among the
people had become so enormous,
in proportion to the money with
which to cancel it, as to place
the credit of the whole
community at the mercy of a few
holders of money, who had no
motive but to extort the utmost
possible from the necessities of
the community. The result was
the general collapse of
substantially all credit. Had
there been freedom in banking,
nothing of this kind would have
occurred. The bankers would have
been so numerous as to be able
to furnish all the money that
could have been kept in
circulation. They would probably
have supplied three, four, or
five times the amount we
actually had. Traffic between
man and man would have been
almost wholly done for cash, instead
of on credit; and nothing in the
form of a panic would have been
known. The
panic of 1873, therefore, does
nothing towards proving that solvent
notes, issued for
circulation as money, - no
matter how great their amount, -
are not equal in value, dollar
for dollar, with coin. X.
But the argument that is offered
perhaps with the most assurance
as proof that any increase of
money by means of paper reduces
for the time being the gold or
silver dollar below its true and
natural market value is derived
from the rise that takes place
in the prices of commodities,
relatively to gold and silver,
whenever the currency is
increased by the addition of
paper. This
argument, if it be an honest
one, implies an ignorance of two
things; namely, first, an
ignorance of the fact that the
paper is employed as capital to
diversify industry and increase
production; and, secondly, an
ignorance of the effect which a
diversity of industry and
increase of production have upon
the prices of commodities,
relatively to any fixed standard
of value. This effect has been
illustrated in a previous number
of this Review, and need not be
repeated here. <fn10> The
diversity of industry and
increase of production that follow
an increase of currency by
paper, and the effect which that
diversity and production have
upon the prices of commodities,
[*24] utterly destroy the
argument that the rise in prices
results from any depreciation in
the value of coin below its true
and natural value as a metal. A
second answer to the argument
drawn from the rise in prices
under an abundant paper currency
is to be found in the theory of
the very men who oppose such a
currency. Their theory is that,
by the prohibition of the paper,
the coins can be made to have a
“purchasing power as money” indefinitely
greater than their true and
natural market value as metals. They
hold that the coins already have
“a purchasing power” as
money far greater than their
true and natural value as
metals. Now,
inasmuch as every dollar of solvent
paper currency represents-by
giving a lien upon-so much real
property as is equal to the coin
in true and natural market
value, it necessarily follows,
on their own theory, that the
paper has no other effect than
to bring the coins down, from
their unnatural, fictitious, and
monopoly price, or “purchasing
power,” to their true and
natural value as metals; or,
what is the same thing, to bring
all other property up to
its true and natural market
value, relatively to the coins
as metals. XI.
It will now be taken for granted
that the following propositions
have been established; namely, - 1.
That the only true and natural
market value of gold and. silver
coins is that value, and only
that value, which they have; for
use or consumption as metals;
that this is the value at which
they now stand in the markets of
the world; that it is the only
value that has any stability;
and that it is the only value at
which they can be said to he
standards for measuring the
value of any. other property
whatever. 2.
That inasmuch as paper money
does not compete at all. with
gold and silver coins for any of
those uses that give them their
value, the true and natural
market value of the coins cannot
be reduced below their value as
metals, or their value in the
markets of the world, by any
possible amount of paper money
that can be kept in circulation;
and that, consequently, the pa..
per money, however great its
amount, can do nothing towards
reducing the coins as standards
of value below their true and
natural value as standards,
-that is, their value as metals.
[*25] 3.
That the coins, standing at
their true and natural value as
metals, are as much standards by
which to measure the value of
all other money as of all
other property; and,
consequently, that all other
money that has the same value in
the market, dollar for dollar,
with the coins, only increases
the amount of money, without
lowering the standard of value;
and that, if all the other
vendible property in the world
were cut up into pieces or
parcels, each of the same value
with a dollar (or any given
number of dollars) of coin, and
each piece or parcel were
represented by a promissory
note, and all these notes were
to be bought and sold as money
in competition with the coins,
the coins would not be thereby
reduced below their true and
natural market value as metals,
nor, consequently, below their
true and natural market value as
standards. 4.
That to say that the true and
natural market value of the
coins as standards of value is
diminished by increasing the
number of dollars, so long as
the additional dollars arc of
the same value, dollar for
dollar, with the standards, is
equivalent to saying that the
coins have no fixed-nor any
thing like a fixed - value of
their own; and that they are,
consequently, unfit for, and
incapable of being, standards of
value; that to say that
increasing the number of
dollars, all of one and the same
value, is diminishing the value
of the dollar is just as absurd
as it would be to say that
increasing the number of
yardsticks, all of one and the
same length, diminishes the
length of the yardstick; or as
it would be to say that
increasing the number of
pound-weights, all of one and
the same weight, diminishes the
weight of the pound-weight. XII.
The four propositions in the
last preceding section are so
manifestly true that no one, I
apprehend, will even attempt to
controvert them otherwise than
by asserting that the present
market value of the coins does
not rest wholly upon their value
as metals, but, in part, upon
these further facts, - namely,
that the coins are money, and,
secondly, that they are made a
privileged money by the
prohibitions or limitations
imposed by law upon all other
money. If
it should be said -as it
constantly is said - that the
fact of the coins being made
money, and the further fact of
prohibitions [*26] or
limitations being imposed upon
all other money, have given the
coins “a purchasing power”
far above their true and natural
value as metals, the answer is
that such a “purchasing
power” is an unjust and
extortionate power-a mere power
of robbery - arbitrarily granted
to the holders of the coins,
from no motive whatever but to
enable them to get more for
their coins than they are really
worth; or, what is the same
thing, to enable them to coerce
all other persons into selling
their property to the holders of
the coins for less than it is
worth. And this is really the
only motive that was ever urged
against the free purchase and
sale of all other money in
competition with the coins. The
frauds and extortions that are
attempted to be practised by
making the coins a privileged
money, under cover of the pretence
of maintaining the standard of
value, may be illustrated in
this way; namely, -In some parts
of Europe, there is said to be
quite a trade in humming birds.
While living, they are wanted,
I~ suppose, as pets, the sam~ as
parrots, canaries, and some
other birds. When dead, after
passing through the hands of the
taxidermists, they are wanted as
ornaments. Let
us suppose there were such a
trade in this country. And let
us suppose the whole number of
humming birds, already caught,
in the country, to be ten
thousand. And let us suppose
their market value as pets and
for ornaments to be ten dollars
each. The market value of the
whole ten thousand humming
birds, then, would be one
hundred thousand dollars. And
suppose these ten thousand
humming birds to he owned by one
hundred men, each man owning one
hundred birds, -that is, one
thousand dollars’ worth. But
suppose further that, in
consideration of humming birds
being rare, beautiful,
containing much value in small
space, and incapable of being
rapidly increased, the
government should adopt and
legalize them as money, as
standards of value. And
suppose that, under pretence of
maintaining this standard of
value unimpaired, the government
should prohibit all other money,
and should also prohibit all
substitutes and all contracts -
such as notes, checks, drafts,
bills of exchange, and the
like-by which the necessity for
buying and selling the humming
birds themselves - the legalized
money - should be avoided. [*27] Suppose,
in short, that, under pretence
of maintaining this standard of
value, the government should
establish, in the hands of these
hundred owners of the humming
birds, an absolute monopoly of
money, and of every thing that
could serve the purposes of
money. What,
now, would be the market price
of the humming birds? And what
would become of the standard of
value? Why, we know that the one
hundred owners of these ten
thousand humming birds, having
thus secured to themselves an
absolute monopoly of all the
money in the country, would
demand for their birds as money,
a hundred, a thousand, or a
million times more than their
true and natural value, - that
is, more than they were worth
simply as humming birds. By the
monopoly of money, they would be
put in possession of a
substantially absolute power
over all the property and labor
of our forty-five millions of
people. There would be but one
holder of money for every four
hundred and fifty thousand
people. These four hundred and
fifty thousand people could sell
neither their labor nor their
property to anybody except this
single owner of humming birds.
And they could sell to him only
at such prices as he should
choose to give. And he, knowing
his power over their necessities,
would not part with one of his
birds, unless he should get in
exchange for it a hundred, a
thousand, or a million times
more than it was really and
truly worth. In this way this
pretended standard of value
would be made to measure - that
is, to procure for its
possessor- a hundred, a
thousand, or a million times
more than its own true and
natural value. Of
course, everybody in the
country, except these hundred
men, would be robbed of all
their property at once, unless
there should chance to be some
few so situated that they could
contrive to live within
themselves without selling
either their property or their
labor. And these hundred men
would soon make themselves
masters and owners of
substantially all the property
in the country. All the other
people of the country would be
at their mercy, and would be
permitted to live, or suffered
to die, as the pleasure of the
one hundred men should dictate. Such
would be the effect of
establishing a monopoly of money
under pretence of establishing a
standard of value. But
suppose, now, on the other hand,
that all men were allowed [*28]
to exercise their natural right
of buying and selling as money
any thing and every thing which
they should choose to buy and
sell as money. What would be the
result? Why, we know from
experience that, instead of
buying and selling the humming
birds themselves, they would
rarely buy one of them. On the
contrary, they would buy and
sell notes, checks, drafts, and
the like, representing perhaps a
large portion of the property of
the country. These notes,
checks, and drafts would be nominally
and legally made payable in
humming birds, and would be in
the nature of liens upon the
property of the makers. And any
holder of one of them could, if
he chose, not only demand
humming birds in payment, but,
if that were refused, could sue
for, and recover judgment for,
so many actual humming birds
as the note promised. And the
property of the maker of the
note would be taken by legal
process, and sold for humming
birds, and nothing else; and
these birds would then be paid
over to the holder of the note. But
we knew, at the same time, that
the humming birds, when thus
actually paid over to the holder
of the note, would be worth no
more in the market than the note
was before he sued on it; that
they would buy no more of any
thing he wanted to buy than
would the note; that nearly or
quite everybody who had any
thing to sell would rather have
the note than the birds; and
that, unless he wanted to keep
the birds as Pets or for
ornaments, he would have made a
bad bargain for himself; that
even if he wanted the birds to
keep, he could have bought them
in the market with the note at
the same price and with much
less trouble to himself than it
cost him to obtain them by his
suit; and finally, that he had
made a fool and a curmudgeon of
himself by bringing a suit, and
taking trouble upon himself, and
giving trouble to the maker of
the note, in order to get
something that he did not want,
and which it would be a trouble
and loss to him to keep, and a
trouble to get rid of; for all
which he would get no profit or
compensation whatever. As
sensible men would not be likely
to go through such unprofitable
operations as this, the result
would be that men generally,
instead of buying and selling
the humming birds themselves as
money, would seldom or never buy
them, except when they had a
special use for them as humming
birds; but, in place [*29] of
them, would buy and sell such
notes, checks, drafts, and the
like as had an equal value in
the market with the birds, and
were more convenient to keep,
handle, and transport than the
birds. The birds themselves
would continue to stand, in the
market, at their true and
natural value as humming birds,
and, as such, would be very good
standards of value by which to
measure the value of all other
money, as well as of all other
property; and all traffic
between man and man would be the
exchange of one kind of property
for another, each at its full,
true, and natural value, with
no extortion or coercion on
either side. This
supposed case of the humming
birds gives a fair illustration
of the sense, motives, and
honesty of all that class of men
who are continually crying out
for prohibitions or limitations
upon all money except gold and
silver coins, or some other
privileged money, under pretence
of maintaining the standard of
value. They all have but one and
the same motive, - namely, the
monopoly of money, and the power
which that monopoly gives them
to rob everybody else. LYSANDER
SPOONER. NOTES 1.
Old coins - those that are no more
than twenty, thirty, or fifty
years old-are so rare that they
sell for high prices as
curiosities. 2.
That is, from Europe for two
thousand years, and from America
front its first discovery by
Europeans. 3.
I believe the English have
recently attempted to introduce a
small copper coin, called an anna:
but what is its precise value,
or what the number in circulation,
I do not know. 4.
The sale of them as money Is not a
use of them any more than the sale
of a horse is a use of the horse.
For convenience in speech, we call
the busing and selling of money a
use of It, but it is no more a use
of it than the buying and selling
of any other merchandise is a use
of such merchandise. When a man
says he wants money to use, he
means only that he wants to part
with it,-that he wants either to
pay a debt with it, or to give it
in exchange for something that he
can use or consume. 5.
We can have at least a hundred and
fifty times as many paper dollars
as we can gold and silver dollars.
And yet every one of these paper
dollars, if it represents a
dollar’s worth of actual
property that can either be itself
delivered in redemption of the
paper, or can otherwise be made
available for the redemption of
the piper, will have the same
value in the market as the coins. 6.
To say that a gold dollar, or a
silver dollar, has any more true
or natural market value than any
other dollar’s worth of vendible
property is just as absurd as it
would be to say that a yardstick
has more length than a yard of
cloth or a yard of any thing else;
or is it would be to say that a
pound weight has more weight than
a pound of sugar or a pound of
stone. 7.
The bankers have no motive to
issue more of their notes than are
needed for circulation at coin
prices; because their only motive
for issuing their notes at all is
to get interest on them while
they are in circulation. If
they issue no more than are needed
fur circulation at coin prices,
the notes, as a general rule, will
remain in circulation until they
come back to the bankers in
payment of notes discounted; and
the bankers will have no occasion
to redeem them otherwise than by
receiving them in payment of notes
discounted. But if the bankers
issue more notes than are needed
for circulation at coin prices,
the surplus notes will come back
for redemption in coin before they
have earned any interest. Thus the
bankers will not only fail of
getting any profit from their
issues, but will subject
themselves to the necessity and
inconvenience of redeeming their
notes with coin. They, therefore,
have no chance of profit, hut
necessarily subject themselves to
inconvenience, and perhaps loss,
if they issue more notes than arc
wanted for circulation at coin
prices. 8.
The principle named in the text of
course applies only to solvent banks.
It has nothing to do with
insolvent ones, whose business is
to swindle the public. As a
general rule, only those banks can
be relied on as solvent where the
private property of the
stockholders is holden for the
notes of the company. Not that
there may not be other
solvent ones, - for undoubtedly
there may be,- but experience thus
far has been largely against all
others.
9.
One cause that made the English
banking companies - companies
consisting of not more than six
partners-unworthy of credit was
that, although the Vrivatc property
of the partners was holden for the
partnership debts, yet the
condition of land titles in
England was such as to make land
practically unavailable as a basis
of credit. The credit of the
bankers, therefore, rested only on
their personal property.
That is, the credit of each
banking company rested, at
best, only on the personal property
of not more than six persons 10.
See “The Law of Prices” in the
“Radical Review” for August,
1877. |