To the Editor of Liberty:(86 ¶ 1)

The Picket Duty remarks of November 22 in regard to the importance of free money (with which I mainly agree) impel me to say a few words upon the subject. It is desirable, it seems to me, that Liberty should give its ideas upon that subject in a more systematic form than it has yet done (1). To be sure, it is easy for those who think to see that, if all laws in regard to money were abolished, commerce would readily provide its instruments of exchange. This might be promissory notes, or warehouse receipts, bills of lading, etc.; but, whatever it might be, the Anarchist could not doubt it would be better than that ever issued under monopoly.(86 ¶ 2)

Theoretically, at least, Liberty expressed the idea that any circulating medium should be made redeemable; but in what? If in gold, or in gold and silver, does it not involve the principle of a legal tender, or of a tender of common consent? and they do not greatly differ (2). It seems to me that the great fraud in regard to money starts just here, and vitiates all forms of finance as of trade (3). I define money to be a commodity or representative of a commodity, accepted by or forced upon the common consent, as an invariable ratio and medium of exchange. Now, since the price of all things else is variable and subject to extreme fluctuations, the dollar in exchange, and especially where the exchange is suspended as in borrowing, or buying on credit, becomes, as friend Pink suggests, a war club rather than a tool or instrument of commerce.(86 ¶ 3)

Pardon me if I inflict some technicalities upon the readers of Liberty. I would discard the use of the word value from questions of exchange, or else divide its several parts, as value in use, value in service and compensation, and value in exchange. But ratio is a much better word. I would then define the Ratio of Utility to be the proportion in which any thing or service effects useful ends, in sustaining human life or adding to human enjoyment,—a constant Ratio.(86 ¶ 4)

The Ratio of Service, the proportion in which different services, of the same duration in time, effect useful ends.(86 ¶ 5)

The Ratio of Exchange, the proportion in which one commodity or service will exchange for another service or commodity at the same time and place. This is a variable ratio, whose mean is the ratio of service.(86 ¶ 6)

I cannot stop now to argue the correctness of these definitions. It must be seen, unless a commodity could be found which would answer every useful purpose, and could be readily obtained by all, it could not be made a tender without inflicting a great injustice on the many. But as such commodity cannot be found, a commodity, gold, has been assumed to have an invariable value, although the most variable in value of all the metals, and about the least useful; of a limited and irregular production and widely varying demand. With the addition of silver to the standard, the great injustice to labor is only divided, not changed.(86 ¶ 7)

As defined above, the only invariable ratio is that of use. A pound of flour of the same quality will at all times and places satisfy the same demand for food. The hundredweight of coal will at all times and places give off the same amount of heat in combustion, etc., having no reference either to the money or labor cost. Now, since labor is the only thing which can procure or produce articles of use, that is naturally the controlling element in exchange, and the only thing that commands a stable price or furnishes a stable ratio.(86 ¶ 8)

Though gold is assumed as the standard of value, it is well known that for ages the promise to pay this has constituted mainly the currency and medium of exchange of most nations.(86 ¶ 9)

The method of issuing this promissory money has been a great injustice to industry, and its almost infinite extension of the usurpation of the gold-tender fraud is now robbing labor of a large share of its production by the control it gives to the usurer and speculator, who can make the rate low when produce is coming under their control, and high when it is being returned for use to the people; and can make money scarce and dear when they loan it, and plenty and cheap when they gather it in.(86 ¶ 10)

I think I have shown that the base of the money evil lies mainly in the monstrous assumption that the value of one of the most variable of things should be assumed to be an invariable quantity, and the standard of measurement of all other things. A gum elastic yardstick or gallon measure, or a shifting scale-beam, would suggest far more equitable dealing.(86 ¶ 11)

I know of but one invariable standard, and that is labor; but what is its unit? And by what method shall it be expressed? Can Liberty give us light upon this subject? (4) I have yet seen no feasible method by which credit or debt can serve safely as money, nor any honest way in which fiat money can be put in circulation. It appears to me now that, while men seek credit, they will have to pay interest, and that only by restoring opportunity to those who are now denied it by our monopolies of land, of money, and of public franchises, and so relieving them of the necessity of borrowing, can we hope to mitigate the evils of our money and trade iniquities. (5)(86 ¶ 12)

Credit being an incompleted exchange, in which one of the equivalents is not transferred, if we are to acknowledge it as an economic transaction, I see not why we should not accept that also where neither of the equivalents are transferred, as in produce and stock-gambling. (6) McLeod, I think, saw this dilemma, and therefore holds that the negotiable promissory note is payment for the things for which it is given. Yet, nevertheless, at maturity it will require a transfer of the counterbalancing equivalent, just the same as if a mere book account.(86 ¶ 13)

Credit is doubtless necessary under an inverted system of industry, finance, and trade; but I am unable to see that it has any place in an honest state of things, except to conserve value, as where one puts things in another’s care. It is vastly convenient, no doubt, for the profit-monger and speculator, as for the usurer, and without it neither could well thrive. In agreeing with the Anarchists that the State should not interfere to prevent, regulate, or enforce credit contracts, perhaps I go beyond them in excluding it from any economic recognition whatever, except as a means of conserving goods from decay and depreciation, involving always a service for which the creditor should pay.(86 ¶ 14)

J. K. Ingalls.