Currency and Government.

Currency and Government.

[Liberty, August 15, 1891.]

To the Editor of Liberty:(74 ¶ 1)

There is not the slightest analogy between allowing theatres to be consumed on Sundays and allowing silver or iron to be sold on the same terms as gold. Currency is only buying and selling; it is not consuming. The customary adoption of gold as currency and the endorsement of this custom by edict involves only a very insignificant increase in its consumption. Most other commodities waste much more than gold in the processes of stocking, marketing, and distributing from points of production to points of consumption. An admission that if government allowed an increase in the consumption of theatres it would raise the price, in no way affects any known proposal or enactment in regard to gold as currency, because currency laws have so little effect upon the consumption of gold. There are laws which possibly affect the value of the precious metals. There are such as prohibit mixing them freely in all proportions, producing utensils or other articles of consumption. Thus, if the removal of the present restrictions should lead to a larger consumption of silver in culinary articles, this would slightly raise the price of silver.(74 ¶ 2)

But what is the use of pursuing a false analogy? If government simply facilitated the sale of theatres, how would that affect their price in the market? A comparison of the effects of facilitating consumption does not illustrate the effects of facilitating exchanges. It is in the power of government to alter the values of the precious metals enormously within the areas of their dominion by prohibiting their importation or exportation or by duties or bounties. It will be time enough to discuss these matters when they are proposed. They are not analogous to the attempts to fix the value of silver by the schemes of the bi-metallists, and they have still less analogy to the statutes which are supposed to determine the value of gold, but which, as a matter of fact, do nothing of the sort. To state that one-fourth an ounce of gold shall exchange for one-fourth ounce of gold is simply to cumber the statute books with a chestnut. No government ever does stipulate that all money shall be made of or issued against gold or silver, and it is in supposing that it does so that some of our comrades get wrong. What is called money in the above sentence means a bond or promise to deliver coin. There is nothing to prevent any one from issuing bonds or promises to deliver something else, such as petroleum, pig-iron, wheat, lard, and so on. If you promise delivery of petroleum on demand or at a date named, you only discharge your bond by legally tendering the petroleum as specified. The law of England allows this. To prevent it would disorganize all trade. What is prohibited is the production and issue of notes in one particular form,—namely, promises to pay gold to bearer on demand. It is a most vicious equivoque to call such instruments money, and to exclude checks, drafts, bills, notes, whether drawn for gold, silver, iron, lard, or even labor.(74 ¶ 3)

Space prohibits (even when a condensed statement, which will be misnamed dogmatism, is employed) showing that even under our truck laws no one is prohibited from using or taking as a payment, flour, bread, meat, calico, boots, and so on.(74 ¶ 4)

The analogy as to an enactment that all plates should be made of tin is equally misleading and unsound. Government does not enact that all marketable articles shall be made of gold, or that all articles capable of being sold for future delivery shall be made of gold. There is no benefit to this argument in confounding acts which would seriously affect consumption with acts which have little or no such effect. The gold embodied in coins is marketable stock; it is not in consumption, as the tin would be if it had a monopoly on plate production. We want plates to use; we carry coin always to sell. It is not withdrawn from the market so as to raise its price, but is constantly brought afresh to market so as equally to lower it. Besides this, the illustration assumes and implies that for gold there is no other use of great significance but coin-making. If this were so, then the Westrups, the Tarns, and the Tuckers would have the argument all on their own side. The fact is, however, that the gold mines are not kept open to supply coin, but to supply the arts.(74 ¶ 5)

There is yet another fallacy in our comrades’ position. It would be no monetary disadvantage if the facts really were as they suppose. If gold were twice as dear, or twice as cheap, its merchants would make just the same profit, bankers and financiers would not lose or gain—neither would anybody except the producers and consumers of gold. Grocers’ profits are not affected by the price of sugar, but the growers and users are both vitally concerned.(74 ¶ 6)

There would seem to be nothing whatever in English law to prevent the establishment of a bank without any specie issuing inconvertible paper, which the customers mutually agree to accept at par value, but there is little likelihood such a scheme would be workable. It would tax the powers of a very clever master of legal or Anarchical phraseology to specify upon the notes the responsibility of each customer and to preserve the power of these customers fulfilling their agreements. Before one could use such notes to buy a breakfast or a railway ticket there would have to be a rather involved and tedious disquisition upon economics. No Anarchist would propose to embody such arrangements in a statute like our limited liability laws. Such notes would therefore be simply of the nature of mortgage bonds, for which there would possibly be a market and a price. The price would probably be below rather than above par.(74 ¶ 7)

Free trade in gold and in credit is desirable. Its desirability is proportionate to the restrictions which exist, but these are not very great or grievous. The field for their discussion opens only when our comrades’ present mists have rolled away. But they bear no comparison with acts for the purchase by government of great quantities of silver, acts for repairing worn gold coin at public expense, and, above all, acts for tariffs designed to hamper trade and acts for raising public revenue in general.(74 ¶ 8)

Let our comrades in Liberty, Egoism, and The Herald of Anarchy rise to more vital matters when they touch upon the economics of coercion. The evils of coinage are greatly overstated, and to them are attributed effects with which they have no connection.(74 ¶ 9)

J. Greevz Fisher

78 Harrogate Road, Leeds, England.

Mr. Fisher’s article, printed above, is nothing but a string of assertions, most of which, as matters of fact, are untrue. The chief of these untruths is the statement that in exchanging gold we do not consume it. What is consumption? It is the act of destroying by use or waste. One of the uses of gold—and under the existing financial system its chief use—is to act as a medium of exchange, or else as the basis of such a medium. In performing this function it wears out; in other words, it is consumed. Being given a monopoly of this use or function, it has an artificial value,—a value which it would not have if other articles, normally capable of this function, were not forbidden to compete with it. And these articles suffer from this restriction of cmopetition in very much the same way that a theatre forbidden to give Sunday performances suffers if its rival is allowed the privilege. Mr. Fisher may deny the analogy as stoutly as he chooses; it is none the less established. This analogy established, Mr. Fisher’s position falls,—falls as surely as his other position has fallen: the position that government cannot affect values, which he at first laid down with as much contemptuous assurance as if no one could deny it without thereby proving himself a born fool. So there is no need to refute the rest of his assertions. I will simply enter a specific denial of some of them. It is untrue that gold is not withdrawn from the market to raise its price. It is untrue that the gold mines are kept open principally to supply the arts. It is untrue that, if gold were twice as dear or twice as cheap, bankers would not lose or gain; the chief business of the banker is not to buy and sell gold, but to lend it. And I believe it to be untrue—though here I do not speak of what I positively know—that English law permits the establishment of such banks as Proudhon, Greene, and Spooner proposed. Mr. Fisher certainly should know more about this than I, but I doubt his statement, first, because I have found him in error so often; second, because nine out of ten Massachusetts lawyers will tell you with supreme confidence that there is no law in Massachusetts prohibiting the use of notes and checks as currency (yet there is one of many years’ standing, framed in plain terms, and often have I astonished lawyers of learning and ability by showing it to them); and, third, because I am sure that, if such banks were legal in England, they would have been started long ago.(74 ¶ 10)