To the Editor of Liberty:(75 ¶ 1)

One does not lay oneself open to a charge of disloyalty to the principles of liberty by guarding against extravagant hopes. It seems necessary to keep this mind before saying a word against any anticipations formed by ardent and able advocates of liberty like yourself. It is a hyperbole (possibly open to misconstruction) to imply that some advocates of liberty regard it as a panacea for every ill. It therefore is a great advantage when its expected benefits are clearly defined as in your issue of the 11th. You believe that under liberty a laborer’s wages will buy back his product. This is fortunately a definite issue. It implies that if there be a naked producer or a commodity the complete production of which, including all the outlay needful for its delivery to the consumer at the very moment when he needs to consume it, occupies time and demands the employment of wealth in material, sustenance of producer, and tools, of none of which this producer is possessed, this pauper producer shall retain the full value of his product notwithstanding his partial dependence upon some one who provides the necessaries for his production in anticipation of his fruition. Is not this a fair and correct interpretation of your phrase? and supposing it to be so, does it not show that you expect too much? (1)(75 ¶ 2)

The facilitation of credit and the so-called circulation of debts as a substitute for currency, together with all schemes for mutual banking or schemes for the more rapid development of commerce, imply that valuables shall be temporarily placed at the disposal of others than their owners who meanwhile sustain a privation and also take a serious risk, but that these owners shall obtain no recompense beyond the bare return of their valuables unimpaired. (2) If a complex and therefore intricate scheme or calculation results in producing something out of nothing it opens a suspicion that there is some concealed flaw in the train of thought. Credit without remuneration, debt without cost, unlimited or very plentiful money without depreciation, are the desired and hoped results of the new schemes. It is most important to distinguish between demanding liberty to try these schemes, and pledging liberty to their success. Unfortunately it does not appear to be sufficient to call attention to this distinction. Ardent friends will often unite the cause of the fad with that of the principle unless the fad itself be destroyed. There are faddists who avoid this pitfall. (3) Thus there are some who advocate a reform of spelling, but as advocates of freedom decline to make even that hoped success of reformed spelling, or its hoped rapid progress under a free system of education, a plea or prop for arguments to emancipate teaching from government restriction, or for enforced alienation of citizens’ property for its support. Teaching ought to be free not because it is argued that spelling would be reformed and the reform would be good, but simply that the reform may get a chance and if good may succeed. So government restriction on banking and credit ought not to be repealed, because Westrup’s or Greene’s finance would prevail and bless the people, but so that this and any other device may be tested and if good succeed. (4).(75 ¶ 3)

As against the scheme itself the contention is that wealth originates solely in production, and that with plentiful production the wealth of the poor will increase even though the wealth of some rich people is vastly, and, as it is thought, inordinately increased. But this banking scheme does not add to production. (5) It is but a scheme for destroying one source of income of the rich or appropriating it to the poorer producer. Without any attempt at deduction experience dictates the induction that the chances are in favor of the man with a special faculty for successful financial operations rather than of students of principles. The man who can actually value a horse, a house, a crop of wheat, is more useful in pursuing his function as a speculator than a student who can ably analyze the components of value by prolonged and tardy research. The trader helps society most and at greatest risk, so those of them who succeed have the greater gain, and it is probably cheaper to society to pay this figure for the organization of commerce than dabble in amateurish schemes. The experience of co-operation—both its successes and its failures seem to point in this direction in this country. (6)(75 ¶ 4)

Government interference in finance has broken down whenever it has done serious violence to sound economical principles. At present it does not do so. It needlessly coins some metal. This is in England unaccompanied with the gross error of buying and hoarding increasing quantities of a metal whose production has been greatly cheapened of late. Apart from the silver folly of your government the residual evils of government coinage are infinitesimal, and they are not commercial. They are confined to the loss arising from carrying on a productive or distributive process by government under monopoly rather than by free individuals in combination or separately under the economic control of competition. Here they end. It is pure fancy unsupported as yet by evidence or true analogy that they interfere with the movements of the metal, or materially coerce the markets into using an inferior commodity as its most reliable and most fluent investment. (7) There is not the slightest use for the purposes of this argument in comparing a law enforcing the use of golden drinking-vessels with any laws connected with the use of gold as currency. A true analogy would be found in studying the effect of monetizing iron by law. Such a law would not demonetize gold unless it were much more tyrannical in its mode of prescribing iron as a legal tender than our present law is in prescribing gold. (8) All government income, borrowings, taxes, postage, school pence, court fees, all government outlay in wages, war material, grants to localities, payment of interest upon debt and all accounts, court verdicts, official valuations, bankrupt statements, and so on, would be in terms of iron. But I should be free to promise future delivery, or acceptance of gold, or to sell my services or my products for gold as I now am to promise to give or take iron at an agreed time and place or to hire myself for iron or for board and lodging or any other mode of recompense I can get any one to agree upon. (9) Now it is quite likely the first effect of this would be to raise the price of iron and thereby lower the value of gold in comparison with iron, coal, and other economic components of the value of iron. It is also quite likely it would stimulate the production of iron. But both of these effects would combine to maintain a larger stock of iron hanging as a buffer between producer and consumer. This would steady value, but it would also in time counteract the first temporary effects of the supposed monetization of iron, and neither price nor production would continue to be excessive—with the sole exception of the small increase of consumption from wear and tear of coins. It would not in all probability displace gold as the money in the market, because government, instead of doing as it now does, registering, and taking praise for the best monetary substance, would attempt to monetize an ill-adapted commodity, a task beyond its strength, and would sustain defeat as it has often done when debasement or other anti-economic schemes were undertaken.(75 ¶ 5)

If as you assert the main utility of gold consists in the fact that it is used for currency, then your general position is impregnable. But that this is not sound is somewhat implied by Greene, who recognizes gold and silver as merchandise. Specie is merchandise having its value determined, as such, by supply and demand. The words as such may simply imply therefore or may imply an idea on Greene’s part that the value of specie as money was otherwise determined. But what evidence have we that the very frequent resale of gold—called its monetary circulation—is effectual in altering its price (wear and tear excepted)? Every time gold is bought in or gathered in taxes the tendency is to put up the price, and every time it is thrown into market or spent by government in outlay it tends to lower its value. These operations do not constitute a monopoly. Any one can buy and any one can sell gold coin. There is no monopoly in the matter. The monetary privilege is not a monopoly, and it grows in the open market, not in the fancied forcing-house of government. Greene alleges (in small caps) that mutual money would neither raise nor lower the price of specie. You hold that it would be tangibly reduced by mutual banking? Which is correct? (10) Comparing the reduction in value you anticipate with one which might arise in the price of whiskey if there were unrestricted competition in the sale of it, you overlook the fact tha there is unrestricted competition in the sale of gold buillon and specie. Moreover, though we cannot tell by what amount the price of whiskey would be reduced by unrestricted competition, we can tell of what the fall would consist. It would be limited to such relinquishment of profit as would be forced upon the dealers by competition. If consumption increased, it might raise the price by its effect upon marginal or residual production yielding a diminished return, or it might be lowered by cheapening production by remunerating economic employment of capital. This is a false and inapplicable analogy. It is no more correct to say that gold is in the process of being consumed when it is in use as currency than to say that the inevitable waste or deterioration of commodities on the road from producer to consumer is economically an act of consumption. (11) Production is not complete until the commodity reaches the hands of a person who applies it to the direct gratification of some personal craving. The waste of gold in the function of currency is part of the cost which the consumer has to repay when that coin has been converted into a consumable product which he purchases. The only exception is that this cost may fall upon some other product when the less waste of gold is voluntarily substituted for the waste of any other commodity if one seeks to transport to a distant market mere value irrespective of its embodiment. It is as if one temporarily needed a certain weight to steady a machine, but was indifferent as to whether it was embodied in stone, iron, or gold, all of which he happens to have in stock, but which he can subsequently consume or sell unimpaired, and whose employment for this purpose only infinitesimally deterioriates the ponderable and does not impoverish his trade stock because it does not withdraw the ponderous article from inspection or sale.(75 ¶ 6)

It is not correct to reply to a monetary question by pointing out that government might keep gold as dear as it now is even if it were as cheaply produced as copper, by decreeing that we should drink only from gold goblets. If this could have such effect it would be inapplicable to this discussion, because it would be decreeing consumption while currency is not consumption, but only marketing. But it would fail, because of the durability of the substance. Only by buying up the metal at the desired value could the value be maintained. No purchases of gold with gold would alter its value. Silver, copper, wheat would have to be used to buy up gold at the value it was desired to maintain, and of course no government would have the strength for this. (12) It must be remembered that miners would be sellers at cost. The United States government raises the price of silver now while it is a buyer. If it tipped it in mid-ocean it would then consume it in an economic sense. When it becomes a seller the price must fall. The fact that there is a possibility that the law may change at any moment even now keeps the price from rising as it would if the silver were immediately consumed or destroyed instead of being hoarded. Surely it is a very palpable error to say that when government sells or spends gold it consumes it in an economic sense. If I swap a horse for a cow and kill and eat the cow, do I consume the horse? (13) I took the horse from the market when I bought it, and I return it to the market when I offer to sell it. The question of the metal has demanded so much elucidation that debts as commodities and as currency must wait a future communication.(75 ¶ 7)

J. Greevz Fisher

78 Harrogate Road, Leeds, England.