The Foundations of Trade

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K. "The Foundations of Trade." Liberty. 2, 24 (September 6, 1884), 4.

The Foundations of Trade.

In a Connecticut court, some time ago, a man was tried for obtaining money by false pretences. He had sold some diamonds which the buyer took to be old mine stones, but which, when washed, proved to be Cape diamonds and not worth the price paid. The judge, whose name was Deming, discharged the man, and gave his reasons for so doing in these words :

If a teller knows of a defect in his goods and does not reveal it, he may be and probably is guilty of a moral fraud, but the moral fraud has not yet grown Into a legal fraud. There must be active fraud, for the law does not compel a seller to disclose all that he knows; If it did, it would sap the foundation of trade.

I am forced to admire the candor of the judge who so freely admits that the law has failed in all these thousands of years to get itself into complete accord with right, when the claim of jurists, legislators, and rulers the world over is that the law is the crystallization of human wisdom, and that it is necessary as a means of forcing men to be moral. This judge is apparently something; of a liberal in law, as the first New England " come-outers were liberals in religion, and I advise him to cast aside some more of his legal superstition and inquire whether the law itself is not a moral fraud. He seems to understand the principle, or rather the lack of principle, which lies at the foundation of the disorderly system of exchange called trade. All our haying and selling is based upon fraud. The best business man is he who belt conceals what he knows, obtains goods for less than their value, and sells them for more than their cost. To eliminate moral fraud from the system of exchange would, in the opinion of a learned judge, sap the foundation of trade. It would make cost the limit of price, abolish interest, and make it Inexpedient for one man to cheat another. And such a condition of business, thinks the learned judge, would be incompatible with the prosperity of traders. The traders themselves think the same thing, or rather they imagine that disaster would follow honest dealing because they do not think at all. If they could be induced to think without prejudice on this subject of exchange, they would nee that the great moral fraud which pollutes all the channels of commerce is the monopoly of credit protected by the conspiracy against prosperity called government Every existing bank of issue is a legalized fraud. It banes money which is a fraud on the people, and cheats them by charging them interest for service which is wholly imaginary. When the bank gets four per cent. interest, it swindles the borrower out of three and one-half per cent., for the cost of its service is not more than one-half of one per cent. The merchant who borrows of the bank must figure the interest in the cost of his goods, and the merchant who does not borrow figures imaginary interest the same way. And so everybody cheats everybody else, until the process gets down to the laborer, who has to bear the burden without being able to shift it. That any honest condition of trade is possible does not occur to the merchant, who sees that, in order to steer clear of bankruptcy, he most practice the moral fraud which the law sanctions. If the merchant would take the trouble to read the series of articles on "Liberty and Wealth" written by "H " for Liberty, he would discover how banking and trading can he carried on without fraud, moral or active, and would learn that the foundations of trade based upon the cost principle could not be sanned bv full disclosure of the truth about everything connected with a business man's affairs.


  • Alan P. Kelly, “The Foundations of Trade,” Liberty 2, no. 24 (September 6, 1884): 4.