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- Joshua King Ingalls, “Correspondence—Paper Money,” The Twentieth Century 11, no. ?? (September 14, 1893): 14.
Correspondence: Paper Money.
Twentieth Century, September 14, 1893, 14.
PAPER MONEY.—Although not a specialist in the line, I am tempted to essay an explanation of the points raised by J. Allen Evans in a recent issue. The treasury notes to which he refers were issued early in the war of the rebellion. They were not greenbacks, nor were they legal tender either in full or in part. And yet they continued at par with gold, and at times at a premium, because more convenient and as serviceable as silver, which was then more valuable than gold. They were receivable for duties on imported goods. The greenback, although a legal tender in the payment of debts, depreciated to a forty-cent dollar, because Shylock demanded his bond to be gold interest bearing, and that duties he made payable in coin, on which he might have a lien in preference to all other claims against the government.
This distinction between legal tender, full or partial, and such issues as were made merely receivable in payment of all dues to the government, is one which no fiat money man seems capable of comprehending. The value of any promise to pay depend primarily upon the confidence which the people have that it will be accepted by the issuer when presented. Legal tender promises do not relate to that matter at all. They circulate simply because they will pay debts already contracted.
Another fallacy of most currency reformers is, that abundance of circulation reduces the rate of interest. But this is not true. Bought up in a corner a man will submit to pay ruinous rates; but this is exceptional. I have observed several decennial panics. They have usually been followed by lower rates than obtained during periods of inflation, and what were regarded as the prosperous times. It is when circulation is active and abundant that the foundation is laid up for the reckless running in debt which begets disaster. When money is plenty it requires more to do a specific business, and there is more to pay interest with.
The form or material of the money is in no way responsible for industrial or business crisis. The great evil of any money, available to the schemes of combining financiers, is the legal tender feature, because the government is pledged to enforce all settlements in that privileged commodity or credit to which it applies. That a credit or "evidence of indebtedness" should be treated as a payment of debt, and such law be decided constitutional, proves only that our supreme court, as well as our president and congresses, have become utterly subservient to the monied power.
The principal function of a circulating medium seems to have been overlooked by most financial reformers. It does, as supposed, facilitate exchange, but its broader use is to divide any commercial transaction. Satisfaction as to the party receiving the money does not become completed until he has employed such money for the desired things for which he parted with his commodity. He does not eat, drink, or wear, nor yet use his money for a shelter. Hence money becomes a lien on all disposable property, and if legal tender a mortgage on as much wealth as is necessary to satisfy it at a forced sale.
The more of such money we have, metallic or paper, the worse will it be for the industry and well being of our country; for its power of exploitation is proportioned to its volume.
Mr. Evans wants to know when our bonds were made payable in coin. Answer: When Shylock demanded that his bond bought at 40 should be paid in 100. It was early in Grant’s administration, "to keep up the credit of the nation, you know, and to aid specie resumption." In 1873 silver was demonetized, or rather deprived of its legal tender power, so that now the bonds must be paid in gold, interest and principle.
But the bondholders only want an honest dollar, worth 100, which they took from the people at 40. That is business! We may some time hear of an honest balance with a shifting fulcrum, an honest yardstick of gum elastic, or an honest gallon with telescope cylinder. These would prove quite as honest as our money now is, regulated by subservient legislative, bureaucratic, and judicial flunkies.
Doubtless commerce is able to provide her own instruments and vehicles of exchange, as she has those of production and transportation. Government "can meddle but to mar" with money as with other things. It might do a useful service, perhaps, by stamping the true weight and degree of fineness on gold and silver coin, and even on nickel and copper, and let them pass for what they were worth in relation to other things. It might make promises to pay in ounces of silver and of gold, and these would pass for their market value on any given day for other commodities. An ounce of silver will buy nearly double the amount of wheat it would when at 16 to 1 it was at a premium over gold. To make an inflexible ratio between gold and silver is as idiotic as to make an unchangeable ratio between wheat and potatoes.
The term dollar signifies nothing definite. It may mean to the needy a bushel and a half of wheat, a bushel or less than a half bushel, as it did at the close of the war. It will sometimes buy two day’s labor, sometimes one, and sometimes a half or a quarter, or only a minute’s time of a millionaire. Is it the wheat and labor or the dollar which fluctuates in value? The government stamp does not make the value stable.
It would be better to denominate our credit money "a day’s labor," and if we must have a legal tender have that. A panic then would be a pressing demand or "run" for all the labor of the country, and each man, worker or exploiter, would know just how many day’s labor or parts of a day’s labor he was obtaining for his useful or useless time, and what was an honest day or a dishonest one.
J. K. INGALLS.