HON. JOHN P. JONES, (continued 3)

Our silver dollar is not money in foreign countries—and it is to our advantage that it is not—for were it money anywhere else than in this country, we could not rely on its remaining here to maintain that steadiness of prices indispensable to prosperity. But if any of our silver dollars are found abroad, let no one suppose he can get them by tendering 412½ grains of silver bullion for each dollar. He will find it will cost him precisely as much gold as it passes for in the United States.

SOME EFFECTS OF THE RISE OF GOLD.

If a cotton planter in 1873 owed $10,000 he could then have paid it with 60,975 pounds of cotton. To-day, by reason of the increased command which gold has over commodities, it would take 101,010 pounds of cotton to pay that $10,000; not withstanding that the money in which the debtor has paid the interest has each year become more valuable than it was at the time he contracted to pay it.

The cotton manufacturer of the East who in 1873 owed $10,000 could then have paid it with 70,422 yards of uncolored cotton cloth; to-day owing to the rise in the value of gold it would require 147,059 yards to pay that debt, without taking into account the amount lost by the debtor in the greater sacrifice he had year by year to make to pay the interest.

The farmer of the North and West who in 1873 owed $10,000 could then have paid it with 8,733 bushels of wheat; to-day it would require 11,446 bushels of wheat to liquidate that debt, though he, too, has year by year been "cinched" through the progressive increase in the value of the money in which the interest has been paid. Or he could, in 1873, have paid his debt with 1,514 barrels of flour; to-day it would take 2,126 barrels of flour to pay the same debt.

The property of the country is fast passing into the hands of the creditors, and if the iniquitous system is not reversed the condition of our American farmers will be that of the farmers of gold-standard countries. Instead of owning their farms they will be tenants and rent-payers—a condition but little in advance of that which prevailed in feudal days.

Machiavelli, describing a turbulent period in the history of Florence, said:

The brigandage of the Middle Ages, whether in Italy or elsewhere, was a criminal defiance of law, but it was pursued at some risk, and under manifest disadvantages. The brigand took his life in his hands. He knew that his calling was unlawful; and, although ruthless in his work, the method by which he exacted ransom of his occasional victim was less destructive to the prosperity of the community than the legalized brigandage of to-day by which, through a vicious system of money, the great mass of the people are despoiled of their property. The distinguishing characteristic of the brigandage of the nineteenth century is that it scrupulously observes all legal forms, and is conducted in the name of honor, honesty, good morals and "sound finance." Mortgages are foreclosed only in accordance with law, and the unearned increment which results from the increased and increasing value of the money is transferred from the debtor to the creditor, with punctilious regard for the statutes.

The demands of the brigand were enforced with guns and pistols; those of the creditor are enforced with bonds and mortgages; both exactions cruel and unjust, one by violence, the other by law. But, in the latter case, so indirect is the method of operation that many of those who are benefited by it are unaware of the perpetration of any wrong. So subtle is the process that the change seems to be only a change in the price of commodities, and thousands of men who would scorn consciously to exact from any one more than a just return for money loaned are beneficiaries of this vicious and ruinous system.

With regard to the great body of the working masses it is sometimes said they have no cause for complaint, that their condition now is better than ever before.

But, Mr. President, it is not enough that men are better off than they have been. When we reflect that nine-tenths of the inventions and improvements constituting all the material features of the civilization of this century have been made by working men, it is manifest that they are entitled to much more of the comforts and convenience of life than are now accessible to them. By watchful, repeated, and aggressive efforts through their trade organizations, the working men in many branches have been enabled to keep wages from sinking, and occasionally to secure an advance; but, during a period of falling prices, what is gained in this way by those who are kept at work is lost to the working class as a whole by the remission to idleness of part of their number.

The statisticians who seem to be employed by some propaganda to prove by figures that prosperity prevails, point exultantly to the fact that the wages of the working people seem constantly to have increased while prices are falling, and they cite this to prove that low prices are consistent with prosperity. They leave entirely out of the account the large numbers of workmen who of necessity are relegated to idleness on account of the lack of profit in business.

If you go into the workshops of any large manufacturing enterprise, while prices are low and lowering, and ask the managers what they now do when a strike occurs among the workmen, they will tell you they find it impossible to shut down, because they have contracts extending through time that they must fill, but, they add, "We pay the wages demanded and we reduce the number of the employed."

If there are a thousand workmen employed, getting $2 each per day, that would be a wage fund of $2,000 a day. If, when prices fall and business becomes dull, the employer should want to reduce the pay of each workman to $1.50 a day, and if the workmen, by striking, should prevent that decrease, and if, then, 25 per cent. of their number should be discharged, the loss to the working class, as a body, and to the community at large, would be the same as though the wages were reduced to $1.50 a day. Until these people who present statistics can show us how many laborers are left out of employment there is no possibility of arriving at any correct conclusion as to what the wage fund is and how much wages are paid.

The loss to society is much greater when 25 per cent. of the people are unemployed than if all continued at work upon a 25 per cent. reduction of wages, because the relegation to idleness of 25 per cent. of the workmen reduces the producing force, and lessens correspondingly the aggregate annual production.

THE INTEREST OF THE MINING STATES IN THE REMONETIZATION OF SILVER.

Those who in the Senate and in the other House of Congress, represent mining constituencies are taunted with the selfish purpose of advancing the interests of their own States at the expense of those of the country. It is sought to discredit the State which I have the honor in part to represent on this floor, on the ground that the people, being largely silver miners, have a personal interest in the remonetization of silver.

The silver miners, Mr. President, need no defense here or elsewhere. They have asked no favors from the Government, and ask none now. They are bold, adventurous, and self-reliant men, who have wandered across alkaline deserts, and over pathless mountains, braved the assaults of hostile savages, the miasma of the Isthmus and the storms of the Cape, and have planted the flag of a high civilization on the western confines of this Republic. No more patriotic or public-spirited class of citizens can be found within the borders of the Union. Their business is an honorable one. When they entered upon it they, in common with other citizens, had the warrant of time, and the authority of all writers and thinkers on political economy, for the belief that silver was, and would ever be, a money metal, entitled to that full credit which from time immemorial had been accorded to it. Silver, equally with gold, had been consecrated by all the ages to the money use, and was dedicated to such use by the Constitution of the United States.

When the Constitution declared that Congress should have power "to coin money and regulate the value thereof" and that "no State shall * * * make anything but gold and silver coin a tender in payment of debts," it warranted the belief on the part of all who adopted the calling and undertook the business of mining, that gold and silver would continue to be money metals in the sense in which they had been for thousands of years in the past. The silver miners were warranted in presuming that when the Constitution esteemed so highly the legal-tender function in the two metals, gold and silver, as that it prohibited the States from making anything a legal tender except coin of those two metals, it would not warrant the Congress of the United States in taking from one of those metals the power of legal tender and conferring that imperial function exclusively on the other. Silver mining is a business requiring for its successful prosecution skill, experience, and energy, while nine-tenths of the gold of the world has come from placers; requiring neither organization, capital, nor skilled labor.

The production of gold is much more a matter of accident and much more liable to fluctuation than is the case with silver. The silver miners therefore had a right to believe that so long as 23.22 grains of pure gold should be entitled to recognition as one dollar, 371.25 grains of pure silver would continue to be entitled to like recognition as one dollar, and would possess the legal-tender function as such, for the liquidation of all debts, public and private. On the strength of this warranty of the Constitution, and of the unbroken experience of the ages, large sums of money were invested in mining property and in the employment of labor to develop the mines of the country. On the strength of this belief and conviction, shared in by all the people of the United States, that gold and silver would both remain the money metals of the world, debts to an enormous extent were incurred, and it was confidently believed that both metals would for all time be available for the payment of those debts.

The silver-miners had learned from the history of mining, as well as from hard and bitter experience, that the mines might at any moment cease to yield, in which case their occupation would be gone and the capital invested would be a total loss. But they did not suppose that the verdict of all time would be reversed, or that the implied warranty of the Constitution of the United States would be disregarded. They did not believe that either one of the money metals would ever be demonetized. And if a doubt had entered their minds on that subject, they would naturally suppose that gold rather than silver would be demonetized, gold being too limited in quantity to answer alone the purposes of money in a rapidly advancing civilization; its yield being uncertain and capricious and the prospect of a continued and sufficient supply becoming less from year to year.

But, Mr. President, the degree of special interest which the mining States have in this measure is not to be compared with that of the other States of the Union.

According to the report of the Director of the Mint, the total quantity of silver produced in the United States in the eleven years from 1878 to 1888 inclusive was 406,210,000 fine ounces. According to the same authority the commercial value of that silver was $436,260,000, and the coinage value $525,145,000. A very simple process of arithmetic shows that the difference between the commercial and the coinage value of that silver was $88,885,000, or an average of $8,080,544 each year. Assuming that amount to have been the annual difference between the coinage and commercial value of silver for the five years preceding 1878, we must add to the $88,885,000 the sum of $40,402,220, making a total of $129,287,220 as the amount which the silver miners, not of Nevada but of the whole United States in the seventeen years ending 1889, lost by the demonetization of silver.

Having thus demonstrated in dollars and cents the degree of selfishness which, as is charged, is the motive of the miners in advocating the remonetization of silver, let us glance at the degree of selfishness which may be said to impel other classes of the community to advocate the same cause.

THE INTEREST OF THE NON-MINING STATES IN REMONETIZATION.

The price of cotton for the year 1873, in gold or silver (then of equal power), was 16.4 cents per pound. The price in 1889 was 9.9 cents.

The yield of cotton for 1889 was 7,000,000 bales, or 3,500,000,000 pounds.

Had not silver been demonetized that cotton would have brought as good a price to-day as it did in 1873. At the price of 1873 the account would have stood 3,500,000,000 pounds, at 16.4 cents, $574,000,000. At the price of 1889 the account stands 3,500,000,000 pounds, at 9.9 cents, $345,500,000, showing a loss in debt-paying and tax-paying power on cotton alone (only one article of merchandise) in the single year 1889, by reason of the fall in prices caused by the demonetization of silver, of $227,500,000.

Having shown that the loss to the silver miners by the discount on silver for the seventeen years from 1873 to 1889 was less than $130,000,000, it will be seen that the loss in one single year to the cotton planters of the United States is greater by $90,000,000 than the total loss for the entire seventeen years to the silver miners of the country.

But inasmuch as the cotton crop of 1889 was exceptionally large, I will, for the purpose of my computation, discard it, and assume instead that an average yield for the years between 1873 and 1889 would be 5,000,000 bales per annum—which is a fair average and by no means high—5,000,000 bales, of 500 pounds each, are equal to 2,500,000,000 pounds.

At the price of 1873 the result of each year would be 2,500,000,000 pounds, at 16.4 cents, $410,000,000.

According to the figures given by the Bureau of Statistics the average price received each year of the seventeen was 13.1 cents per pound; 2,500,000,000 pounds, at 13.1 cents per pound, equal $327,000,000, showing a difference of $83,000,000; that being the average each separate year for seventeen years, or a total sum for the entire period of $1,411,000,000, which represents the loss in debt- and tax-paying power suffered by the cotton planters by reason of the demonetization of silver.

This is the enormous tribute which has been exacted of the cotton industry of this country in behalf of the gold "standard," and of those who, for their own pecuniary advantage, cunningly induced the Congress of the United States to demonetize silver. This is the sum which the planters of this country have lost in debt-paying and tax-paying power by that mad act of folly. As will be seen at a glance, it is a loss vastly in excess of that suffered by the silver States in the discount on the price of silver bullion.

So that, if the silver miners are taunted with having a personal interest in the success of the movement for the full remonetization of silver, the cotton planter must be placed in the same category, and with ten-fold more reason.

A like computation with regard to wheat will show a loss in debt-paying and tax-paying power of not less than $100,000,000 a year to the farmers of the North and West, by reason of the demonetization of silver—a total of $1,700,000,000 in the article of wheat alone in seventeen years.

Thus a loss, wholly unnecessary, of more than $3,000,000,000 in debt-paying and tax-paying power is shown to have been inflicted on the farmers and cotton planters of this country.

In comparison with this enormous loss to farmers and planters, how paltry is the loss of $8,000,000 a year suffered by the silver miners.

But, however large the direct loss to the debtors and to the country by reason of falling prices, the losses that are indirect are of infinitely greater magnitude, and stand out like a great mountain of wrong superimposed upon the most deserving class in the community, whose interests it should be the paramount duty of Government to protect, a wrong more calamitous in its consequences than any of the multitudinous wrongs which a shrinking volume of money inflicts upon society.

THE ENORMOUS LOSS OF POTENTIAL WEALTH THROUGH INVOLUNTARY IDLENESS.

The political economist, Mr. President, deals with property in esse, and producers employed. I propose for a moment to deal with property in posse and producers unemployed. The wealth which the political economist discusses is realized wealth; that to which I now briefly invite your serious consideration is the wealth that might be, and would be, brought into existence were the energies of all the people utilized. For, while it has attracted but little attention from writers on economic science, it will be found upon examination that the non-employment of its members is incomparably the greatest loss which an increase in the value of money and the consequent disorganization of industry inflicts on society.

The great writers and thinkers on economic subjects discuss with care the elements that enter into the production and distribution of wealth. They follow in detail the manufactured article through all its stages, from the crude material to the finished product; and, when completed, they conduct it through the intricate channels by which it reaches the hands of the consumer. The greatest consideration is bestowed upon the labor employed and the wealth resulting therefrom, but scarcely any thought is given to the immeasurable mass of potential wealth not produced, but lying latent in the brains and hands of the millions who are condemned to involuntary idleness.

While no mere sum in arithmetic can represent the enormous loss suffered by a nation through this cause, let us see whether we can arrive by figures at an approximate conception, at least, of the loss of wages which it entails upon the working masses, and the corresponding loss of wealth to the country.

The most thorough and painstaking investigation into the conditions of labor in this country has been that which for many years has been conducted by the Massachusetts Bureau of Labor. Its work has been universally admitted to be free from bias, and devoid of all attempt to establish any special hobby, or to force, by figures, the proof of any preconceived theory.

SOME STATISTICS OF THE UNEMPLOYED.

An examination of the work of that bureau shows that, in 1887, there were 816,470 persons engaged in wage earning in the State of Massachusetts. Of those, 241,589, or nearly 30 per cent., were idle during some part of the year—ranging from one to six or more months. The average of their unemployed time was about four months, or one-third of the year.

Now, 240,000 people idle for one-third of their whole time is equivalent, in money loss, to the total idleness of one-third of that number, or 80,000 people, for the entire year. The whole number of persons enrolled for labor in the State being 816,470, this is equivalent to the total idleness of one-tenth of the people engaged in all occupations.

If a number equivalent to one-tenth of the people in all occupations are idle twelve months in the year in a State like Massachusetts, where labor is better organized, better classified, and more efficiently ordered than elsewhere in this country, it can not be presumed that any other State of the Union will exhibit a smaller proportion of unemployed laborers.

The Census Report of 1880 states the number of persons employed in all occupations as 17,392,099, out of a population of 50,155,783, or a percentage of 34.68 of the entire population. Our present population being not less than 65,000,000, if we assume, as we are warranted in doing, that a like proportion of the population is engaged in occupations of all sorts, it is clear that we have to-day a working population of 22,254,000 persons.

Accepting as correct the careful deductions from the Reports of the Massachusetts Bureau of Labor that a number equivalent to ten per cent. of the people are always out of employment we find that at the present time there are 2,250,000 persons involuntarily idle in this country. How faintly does the term "the army of the unemployed" describe this vast number of eager and willing men seeking in vain the opportunity to earn a livelihood for themselves and families.

Were the business of the country in the active condition in which it could not avoid being if our money system were perfectly adjusted to industry, and if employers were competing for laborers with the same degree of eagerness that laborers are competing for employment, the average wage of a day for a working man would not be less than $2. This would make but the moderate sum of $50 a month for each workman, which, under the most thrifty system of household economy, can not be considered more than enough for the support of an American family.

THE WAGE LOSS FROM INVOLUNTARY IDLENESS.

By multiplying the number of persons thus shown to be idle, by this moderate average wage, we arrive at the amount of $4,500,000 as the daily sum which is lost to the wage earners of the United States by the non-employment of labor. This is a money loss of $27,000,000 a week, $117,000,000 a month, or the amazing sum of $1,404,000,000 a year. A saving of this sum for a year and three months would pay our entire national debt. This being the loss in a single year, we can imagine (making due allowance for difference in the numbers of the population) how stupendous has been the loss to the nation during the past seventeen years, a loss exceeding incomparably all other losses whatsoever.

If a crop of wheat be lost, it is appropriately noted as a public misfortune; if a city be burned down, or swept away by flood, it is properly regarded as a great national calamity, and the sympathies of all the people go out in unstinted measure to the sufferers. But here is a loss as real and as deplorable as any ever caused by flood or fire—a loss whose consequences, while not so apparent, are as destructive to national prosperity as the burning of ten cities, or the occurrence of one hundred and forty Johnstown disasters every year, and always to the people who can least afford it. Yet it passes almost wholly unheeded except by the sufferers.

A war that would take a million of men from industry and deprive the country of the production which would result from their labors, would be regarded as a calamity of unsurpassable magnitude, yet a shrinkage in the volume of money relatively to population withdraws much more than that number from productive pursuits, and without the salutary discipline and restraints of military life, subjects them to conditions of which the unavoidable results are poverty and crime.

Imagine, Mr. President, the unhappiness, discontent, and even despair implied in the mere statement that 2,000,000 men are constantly out of employment; (or, what amounts to the same thing, that three times that number are idle for four months in the year!) Imagine, what it means to the working people of this country to be deprived of the enormous sum of $1,400,000,000 a year.

But, aside from the effect on the individual, what benumbing consequences are entailed upon the nation by the idleness of so large a number of its people. The loss of the wealth which the labor of those men might have created is a loss never to be retrieved. When the money volume of a country is sufficient to keep prices from falling, and thus to encourage capital to seek productive enterprises, in which labor is employed, every willing man is kept at work, and no country can enjoy any higher degree of prosperity than when all its people are employed, and the products of their labor equitably distributed.

Much, I believe, of the prejudice against silver money arises from an idea, conscientiously entertained, by many, that gold money has the greater "intrinsic value." I shall, therefore, Mr. President, at the risk of being a little abstruse, discuss that point.

THE MEANING OF VALUE.

No discussion of the subject of money can be intelligently conducted without a correct conception of the meanings attaching to the terms employed. For a misconception of those meanings is the root of much of the confusion and difficulty by which the subject is surrounded.

"Value" is a word which, of necessity, is more frequently used—and, I will add, more frequently misused and misunderstood—than any other employed in the discussion of economic science. Volumes have been written upon it, and yet, from the daily misapplication of the word in leading magazines and newspapers, it is evident that its meaning is very imperfectly understood.

The idea involved in the word "Value" is so broad and pervasive that within the limits of a speech it would be impossible to discuss it in all its bearings. I shall not, therefore, at this time, do more than present what I conceive to be a basic definition of it.

Value is human estimation placed upon desirable objects whose quantity is limited, and whose acquisition involves sacrifice. In order that an object may have value it must not only be the subject of human desire, but there must be a limitation of its quantity, and its acquisition must demand a sacrifice from him who would obtain it. The term "intrinsic value" is used by many writers with a total disregard of the idea involved in the word value. An article may have estimable qualities that are intrinsic, but no article whatever can have intrinsic value. Its "value" is the mental estimation of its qualities, as modified by the limitations of its quantity and the amount of sacrifice necessary to obtain it. In other words, value is subjective, not objective. In economic discussion, however, value is treated as though it resided in the object, rather than in the mind, and while, for convenience, I may occasionally use it in that sense, it is important to bear in mind the distinction.

In that acceptation, value is usually divided into value-in-use, and value-in-exchange. Certain esteemed qualities of an object may make it of great value-in-use; but unless its acquisition demand sacrifice, it can have no value-in-exchange. It is only with this class of value that economists deal. No matter how important the intrinsic qualities of any article may be, if there be no limitation of its quantity and its acquisition requires no sacrifice, it can have no value in the sense in which the word "value" is used in political economy. The air has qualities inestimable to mankind; it must be regarded as incomparably the most useful of all the objects of human desire; yet it has no value because there is no limitation of its quantity. By reason of its universality and accessibility, air requires no sacrifice to get it. If, however, circumstances should render air limited in quantity it is conceivable that it might become of surpassing value. A man confined in the "Black Hole" of Calcutta would give a fortune for free access to air. So water, where freely obtainable, without sacrifice, although indispensable to life, has no value in the economic sense—no value in exchange. But when not so obtainable, as in populous cities, where sacrifice of time and labor would be necessary to obtain it from river, lake, or spring, people pay for the convenience of having it in their homes. The indispensable prerequisites of value in all objects are utility—either actual or attributed—combined with limitation of quantity and the sacrifice necessary to be made in order to obtain it.

But value is not a property inhering in any article itself. It is not intrinsic. If the value were inherent or intrinsic it could not be taken away.

To illustrate: A generation ago the cradle with which wheat was harvested was said to possess intrinsic value. It was undoubtedly one of the most useful of all the articles needed by man. All that was then in that machine is in it still, yet the value is gone. Had the value been something that was intrinsic, had it resided in the object, and not in the mind, that cradle would still be worth all that it ever was. So, on the other hand, an article may possess most estimable qualities, but if those qualities are not known or recognized by the human mind the article will have no value.

A few years ago cotton seed had no value as an article of general commerce. To-day it is exceedingly valuable, because it has been found to possess estimable qualities not before suspected.

Indeed so strongly does the idea of value rest upon the estimation of the mind that it is not even necessary for an article to possess in reality any desirable quality whatever in order to have value. It will be sufficient if such quality is popularly attributed to it. Numbers of instances could be cited in which there was present no element of value except limitation of quantity, added to a mere belief, or conception of the mind, that the article had desirable qualities. Many will remember that a few years ago a herb called "Cundurango" was introduced into this country from Central America. It was generally believed to possess healing qualities in cases of cancer, and so came to have great value. As soon as this popular illusion was dispelled the article ceased to have even the slightest value.

Land being indestructible and irremovable, is believed to be the embodiment of the idea of intrinsic value. Take, then, a lot on Madison Avenue, New York; it is worth perhaps a thousand times as much as a lot of equal size in a village remote from the city. What proportion of its high price is derived from what is called its greater "intrinsic" value? A lot on that fashionable thoroughfare has no intrinsic attribute, or quality, that is not equally the attribute or quality of the village lot. The difference in its value, or, more correctly, the difference in the estimation in which it is held, as compared with that attaching to the village lot, is derived wholly from circumstances that are extrinsic, not from qualities that are intrinsic.

The action of society in utilizing land in the neighborhood of the city lot by building up around it gives that lot a value greater than one of equal size elsewhere.

But in order that a thing may subserve a useful or beneficent purpose it is not necessary that the quality which enables it to subserve that purpose should be intrinsic or inherent in the thing itself.

To apply this reasoning to the subject under discussion—whatever intrinsic qualities the metal, gold, may possess, they confer no force whatever on gold-money.

WHAT IS MONEY?

The money of a country is that thing, whatever it may be, which is commonly accepted in exchange for labor or property and in payment of debts, whether so accepted by force of law, or by universal consent. Its value does not arise from the intrinsic qualities which the material of which it is made may possess, but depends entirely on the extrinsic qualities which law, or general consent, may confer.

Money is of transcendent importance to civilization. It is the physical agency to which society has assigned the function of measuring all equities, and it is the sole agency upon which that incomparable function has been conferred. It is in terms of money that society computes the material value of all human sacrifice, alike the highest effort of genius and the daily toil and sweat of the millions who labor.

In order to measure equitably the natural and inevitable mutations in the value of other things, money should itself be of unchanging value. That is to say, any given amount of money should, so far as human foresight can regulate it, require at all times an equal amount of sacrifice for its acquisition. Thus, in the case of a contract made to-day, requiring the payment of a dollar twelve months hence, that dollar when due should exact from the debtor precisely that amount of sacrifice, and no more, which would be required had he paid the debt the day after contracting it.

No one will deny that the most important quality that money can possess is that it shall truthfully measure and state equities.

As I have shown by the figures heretofore cited, gold has risen in value between 30 and 40 per cent. since the demonetization of silver. It is not therefore so faithful a measure of value as is silver, which as illustrated by a variety of examples, has maintained almost undisturbed its relation to commodities.

THE VALUE OF MONEY, AS SUCH, NOT IN THE MATERIAL BUT IN THE STAMP. MONEY IS AN ORDER FOR PROPERTY AND SERVICES.

The logic of the situation, and the reasoning of all the leading authorities on money, lead irresistibly to the conclusion that its value does not reside in the material, but in the stamp; in other words, on the legal-tender function impressed on that material. It is an order for property and services.

Aristotle, writing of money, says:

Money by itself * * * has value only by law, and not by nature; so that a change of convention between those who use it is sufficient to deprive it of all its value and power to satisfy all our wants.

And again he says:

But with regard to a future exchange (if we want nothing at present) money is, as it were, our security that it may take place when we do want something.

John Locke, in "Considerations," etc., regarding money, published in 1691, says:

Mankind, having covenanted to put an imaginary value upon gold and silver, by reason of their durableness scarcity, and not being very liable to be counterfeited, have made them, by general consent, the common pledges, whereby men are assured, in exchange for them, to receive equally valuable things to those they parted with, for any quantity of those metals; by which means it comes to pass that the intrinsic value regard in those metals, made the common barter, is nothing but the quantity which men give or receive of them; they having, as money, no other value but as pledges to procure what one wants or desires.

Baudeau, reputed one of the most eminent of an early school of French economists, says:

Coined money in circulation is nothing, as I have said elsewhere, but effective titles on the general mass of useful and agreeable enjoyment which cause the well-being and propagation of the human race.

It is a kind of a bill of exchange, or order payable at the will of the bearer.

Adam Smith says:

A guinea may be considered as a bill for a certain quantity of necessaries and conveniences upon all the tradesmen in the neighborhood.

Jevons's "Money and Exchanges," chapter 8, says:

Those who use coins in ordinary business need never inquire how much metal they contain. Probably not one person in two thousand in this kingdom knows, or need know, that a sovereign should contain 123.27447 grains of standard gold.

Money is made to go. People want coin, not to keep in their own pockets, but to pass it off into their neighbors' pockets.

Henry Thornton, in his work on Paper Credit, says:

Money of every kind is an order for goods. It is so considered by the laborer, when he receives it, and it is almost instantly turned into money's worth. It is merely in instrument by which the purchasable stock of the country is distributed with convenience and advantage among the several members of the community.

John Stuart Mill says:

The pounds or shillings which a person receives are a sort of ticket or order which he can present for payment at any shop he pleases, and which entitle him to receive a certain value of any commodity that he makes choice.

McLeod, Elements of Banking, Chapter I, says:

When persons take a piece of money in exchange for services, or products, they can neither eat it, nor drink it, nor clothe themselves with it. The only reason why they take it is, because they believe they can exchange it away whenever they please for other things which they require.

On that view of money McLeod feels justified in styling it credit, and he quotes in support of such a use of the term credit, Burke's description of gold and silver as "the two great recognized species that represent the lasting conventional credit of mankind."

Prof. Francis A. Walker, Money, Trade, etc., page 25, speaking of carved pebbles, glass beads, shells and red feathers, used as money in certain countries at certain times, says:

They were good money, though serving no purpose but ornament and decoration. They were desired by the community in general; men would give for them the fruits of their labor, knowing that with them they could obtain most conveniently in time, in form, and in amount, the fruits of the labor of others.

On page 30 he says:

Men take money with the expectation of parting with it; this is the use to which they mean to put it.

Again, Mr. Walker says:

Money is that which passes freely from hand to hand throughout the community, in final discharge of debts and full payment for commodities, being accepted equally without reference to the character or credit of the person who offers it, and without the intention of the person who receives it to consume it, or enjoy it, or apply it to any other use than, in turn, to tender it to others in discharge of debts or payment for commodities.

Even Bonamy Price, who is wedded to the gold standard, in his Principles of Currency, says:

Gold, in the form of money or coin, is not sought for its own sake, as an article of consumption. It must never be regarded as valuable except for the work it performs, so long as it remains in the state of coin. It can be converted at pleasure into an end, into an article of consumption, by being sold; till then it is a mere tool.

How many people ever so "convert" it that earn it?

The great philosopher, Bishop Berkeley, one of the most acute reasoners, in my judgment, that modern times have produced, in the "Querist," published in 1710, propounds the following pertinent and suggestive questions:

Whether the terms "crown," "livre," "pound sterling," etc., are not to be considered as exponents, or denominations? And whether gold, silver, and paper are not tickets or counters for reckoning, recording, or transferring such denominations? Whether, the denominations being retained, although the bullion were gone, things might not nevertheless be rated, bought, and sold, industry promoted and a circulation of commerce obtained?

Dugald Stewart, professor of moral philosophy in the University of Edinburgh, in his Lectures on Political Economy (Part I, Book II), said:

When gold is converted into coin, its possessor never thinks of anything but its exchangeable value, or supposes a coffer of guineas to be more valuable because they are capable of being transferred into a service of plate for his own use. Why then should we suppose that, if the intrinsic value of gold and silver were completely annihilated, they might not still perform, as well as now, all the functions of money, supposing them to retain all those recommendations (durability, divisibility, etc.) formerly stated, which give them so decided a superiority over everything else which could be employed for the same purpose.

Supposing the supply of the precious metals at present afforded by the mines to fail entirely the world over, there can be little doubt that all the plate now in existence would be gradually converted into money, and gold and silver would soon cease to be employed in the ornamental arts. In this case a few years would obliterate entirely all trace of the intrinsic value of these metals, while their value would be understood to arise from those characteristical qualities (divisibility, durability, etc.) which recommend them as media of exchange. I see no reason why gold and silver should not have maintained their value as money, if they had been applicable to no other purposes than to serve as money. I am therefore disposed to think, with Bishop Berkeley, whether the true idea of money, as such, be not altogether that of a ticket or counter.

Appleton's Cyclopedia, defining money, says:

Anything which freely circulates from hand to hand, as a common acceptable medium of exchange in any country, is in such country money, even though it ceases to be such, or to possess any value in passing into another country. In a word, an article is determined to be money by reason of the performance by it of certain functions, without regard to its form or substance.

BASTIAT'S DESCRIPTION OF THE CROWN PIECE.

Bastiat, in his "Harmonies Economiques," describing money, used the following illustration:

You have a crown piece. What does it mean in your hands? If you can read with the eye of the mind the inscription it bears, you can distinctly see these words: Pay to the bearer a service equivalent to that which he has rendered to society. Value received and stated, proved and measured by that which in on me.

No words could more correctly describe the unit in a properly regulated system of money. And notwithstanding the attempt to discredit silver coinage, no piece of money, as I have already shown, would better answer, by its steadiness of value, this description of Bastiat's than would the American silver dollar if silver were remonetized.

So far as it applied to gold Bastiat's description was much nearer accuracy in his day than it is in ours. In his life-time the mints of France and of the Continent were open for the coinage of silver equally with gold, and the money supply of the world was not constantly narrowing by being limited to the yield of a single metal whose annual output would hardly more than meet the demand for the arts.

Were Bastiat alive at this time he would reform his description so as to make it read as follows: "You have an American gold piece. You have had it hoarded in a bank vault for fifteen years. What does it mean in your hands? If you can read with the eye of the mind the inscription it bears, you can distinctly see these words: 'Pay to the bearer 50 per cent. more service than he has rendered to society; value not received or stated on me, but resulting from a cunning manipulation of the law of legal tender, through the influence of the holders of gold and of obligations payable therein, and as a reward to the bearer for having had this money hid away and for depriving society of its use for seventeen years.'"

When people are found everywhere working for money and not for the things which they really need, it is clear that they are working for money, not because of the material of which it is composed, but because it is an order for property which they can at any time obtain by parting with the money. To modify and elaborate Bastiat's description of the crown piece, it might be said of the Money Unit of the United States under a properly regulated system:

"You have a dollar. What does it mean in your hands? If you can read with the eye of the mind the inscription it bears, you can distinctly see these words: To all to whom this may come: Greeting. This is a dollar—a unit of money—part of the great instrumentality created by society to effect the multitudinous exchanges of property and services among men. The amount of its command is constant, because the increase in the volume of money is regulated by the sovereign authority of the nation, with strict regard to the increase of population and demand—hence the value of this unit remains unchanging through time. It is an order for all property on sale, and all services for hire; the proportionate amount of such property and service to which its possessor is entitled being fixed by the universal competition to get it."

GRESHAM'S LAW.

Many persons fear an outflow of gold from the operation of what is known as "Gresham's law," namely, that "bad money will expel good." Sir Thomas Gresham, a financier of Elizabeth's time, stated that if a number of the gold or silver coins of any given denomination were deprived of part of their pure metal, and so made cheaper than the remainder, a successful circulation of the coins thus deprived would result in the melting up or exportation of the coins of standard weight. Writing of this, Mr. Jevons ("Money and the Mechanism of Exchange," American edition, page 84) says:

Gresham's remarks concerning the inability of good money to drive out bad only referred to moneys of one kind of metal. * * * The people, as a general rule, do not reject the better, but pass from hand to hand indifferently the heavy and the light coins, because their only use for the coin is as a medium of exchange. It is those who are going to melt, export, hoard, or dissolve the coins of the realm, or convert them into jewelry and gold leaf, who carefully select for their purposes the new heavy coins—

and avoid the light or abraded coins.

There is, however, a theorem which applies to all money, but which was recognized long before Gresham's time—although it has been erroneously called an "extension" of the law or theorem of Gresham.

That theorem is this: If, in any country, there are two forms of money, each of which is a full legal tender, and one of which can be obtained with less sacrifice than the other, the one requiring the least sacrifice will be the cheaper, and if the unit of that cheaper money will perform in every respect the same function in the payment of debts and settlement of all obligations that can be performed by the dearer money, then, for obvious reasons, the cheaper money will come into universal use, and the dearer money will disappear. But it does not follow that the cheaper money is bad money nor the dearer money good money.

The best money is always the money of the contract, that is to say a money whose dollar, whatever it may be made of, is equal in value to the dollar of the contract. If the money of the contract is the cheapest money, then that is the best money, that is the honest money, and that is the only tolerable money.

If that be the sort of "cheap" money that drives out the dear money, then manifestly the dear money is bad money.

A distinguished official of the Government, who was before a committee of this body the other day, insisted that the proposed Treasury notes should be redeemed in the "best money." I asked him what was the "best money." "Why," he said, "the money that is worth the most." Now, it strikes me, Mr. President, that if you have borrowed a dollar, and, through a badly regulated money-system, are made to pay a dollar worth 25 per cent. more than the dollar you borrowed, you are not paying the best money, but the worst money; not an honest dollar, but a swindling and dishonest dollar.

THE CREDITORS' DEMAND FOR THE "BEST MONEY."

The creditors tell us that all they want is "good money." They and their friends glibly insist that all obligations must be paid in "the best money." This is the delicate and plausible euphemism resorted to in order to gloss over and, if possible, hide from the world the odious and repulsive fact that what the creditors always want is the dearest money—the money that costs the people the most sweat and toil to obtain and which, as time passes, grows dearer and dearer.

This cry for "the best money" is at last beginning to be recognized for what it is—the cunning device of creditors to "catch the conscience" of the people and play upon the sense of fairness that characterizes the great mass of mankind. These interested parties affect to believe that gold is, by nature, the only money metal, ignoring the fact that until silver was displaced by hostile legislation it was, and for four thousand years had been, the principal money metal of the world. But they will no longer be permitted to hide their sinister purpose under the cloak of a demand for the "best money." The masses of the people are aroused on this subject and are beginning to understand it.

According to all fair canons of construction the best money should be and is a money of unchanging value, a money that exacts from the debtor the same amount of sacrifice that he bargained for, and which is all that the creditor is equitably entitled to receive. In other words, the money of the contract, not a money whose exactions are increasing at the rate of 2 per cent. per annum. As McCulloch says, debts being stated in dollars and cents, it is not possible for the creditor openly to augment his debtor's obligation by changing the figures of the debt.

But, Mr. President, while they can not change the figures of the debt, they are enabled, by a crafty manipulation of the money-volume, to do that which, to the debtor, means the same thing; as the following story will illustrate:

A usurer of the coarser type had lent $10,000 on a neighboring farm, for which amount he took the farmer's note, secured by a mortgage on the property. He coveted the farm, and in his anxiety to secure it took his banker into his confidence. He informed the banker that he wanted to get possession of this farm, but it would bring $15,000 under the hammer, and he did not care to pay so much for it. "I have a subtle chemical," said he, "by which I can obliterate from the note and mortgage all trace of the rightful amount ($10,000), and that done, I can insert $15,000. Then, with the genuine signatures on the note and mortgage I can bring suit, and as the farm will not bring more than the face of the note, I shall succeed to the property."

His friend, the banker, however, advised against this course, which he characterized as not only dishonest, but vulgar, and as subjecting the perpetrator of the act to serious penalties. "Honesty" said the banker, "is the best policy." "But," he continued, "I can suggest a plan by which you may accomplish the same end without running counter to law, or the views of society. Why not join our propaganda in advocacy of 'honest money.' Gold is decreasing in quantity, and as the world has been ransacked for it in vain, it is likely to continue decreasing. If we can strike down the twin metal, silver, and devolve the entire money function on gold, it will double the purchasing power of money. Then the foreclosure of your mortgage will be sure to take your neighbor's farm, and probably leave him in your debt besides. Instead of being punished for this, you will receive the plaudits of the 'best society' for the finesse you have displayed and the firm stand you have taken in favor of honest money, and you will take high rank among 'the wisest and most conservative of our financiers.' If your neighbor makes any objection to your action, you may be able to secure his incarceration as a lunatic, but if not, he will come to be regarded in the community as a dishonest 'crank' who wishes to pay his debts in a depreciated money; for it is the constant and assiduous care of our guild to teach that only the dearest money, that which is the most difficult for the laborer, the farmer, and the mechanic to get, is honest money, and the dearer it is the more honest it is."

ALL MONEY SHOULD BE LEGAL TENDER.

To be of the fullest service to civilization whatever medium is used to do the work of money should have full money power; that is to say, it should be a legal tender. It is not sufficient that it will satisfy the demands of the Government for taxes.

Whatever is given out by the Government in payment for services rendered (and there is no other way by which payments can be made from the Treasury) should carry with it to him who has rendered the service and receives the payment, the absolute assurance that in any need, or in any contingency, it will serve him as money. There is no other means by which society can be saved from the effects of panics and monetary crises.

With a watchful and intelligent regulation of the money volume, and with the legal tender function attached to everything that is in use as money, and doing the money work, so that it will serve as a universal solvent, panics will be impossible. Under present conditions when panics come, credit money—money not endowed with the legal-tender function, which, under ordinary circumstances, has always been accepted, is refused, and thousands of millions of dollars' worth of property have been confiscated by creditors, because of the scarcity of legal-tender money. As time advances and the method of doing business on credit becomes more and more extended, the more palpable it becomes that society can preserve itself from these periodical convulsions only by broadening, under proper regulation, the legal-tender basis on which, in the ultimate analysis, all business rests.

MONEY A MEASURE OF VALUE.

There is nothing upon which the prosperity and happiness of a people so much depend as on the integrity of their measure of values.

It is universally admitted that after the making of a contract requiring future delivery of a specified number of pounds, bushels, or yards of any commodity, it would be subversive of all equity and justice to change the capacity of the measure constituting the foundation of the contract. These measures, to be just, must remain unchanged. But how infinitely more important is it that money, which is the measurer of all other measures, should itself be unchanged? Of what avail is it that the subordinate measures remain intact while this, the supreme measure, into which all others are finally resolved, is constantly changing? Its "value" is but another name for its purchasing or measuring power. In the case of all time contracts, therefore, any change in the value of money works a destruction of equity, and one of the first objects of society should be to maintain and enforce equities at all times and in all places. This, so far as money can effect it, can only be done by an intelligent regulation of the volume in circulation.

In a note to his edition of Adam Smith's "Wealth of Nations," (page 502) Mr. J. R. McCulloch says:

Money is not a mere commodity, it is also the standard or the measure by which to estimate and compare the value of everything else that is bought and sold, and if it be, as it undoubtedly is, the duty of Government to adopt every practicable means for rendering all foot-rules of the same length, and all bushels of the same capacity, it is still more incumbent upon it to omit nothing that may serve to render money, or the measure of value—a measure which is undoubtedly of the greatest importance—uniform or steady in its value.

Though a measure of value, money is a much more complicated instrument than a yard-stick, pound weight, or bushel. Were it not so, a child could fix value with the same precision as an adult.

As value resides in human estimation, it will frequently vary as to the same object. An intending purchaser may have one notion of the value of an article, an intending seller another. Money, therefore, is a measure of value in the sense that it is a measure of the average human judgment—from which results price. As Mr. McCulloch says, no means known to science or art should be left untried to keep the value of money unchanging.

When a man promises to deliver money or makes any time contract, he makes a mental calculation as to what amount of property, or of the product of his labor, will enable him to meet his engagement. If he be a farmer, raising wheat, there passes through his mind the sacrifice and toil necessary to raise it, and the quantity he can raise; if a cotton manufacturer the cost of spindles, of looms, and steam-engines; the wages of labor and interest on plant.

I knew a cotton manufacturer who wanted $10,000. His business was good. He was sober, honest, and industrious; had a thorough knowledge of his trade; managed his employés himself, and took the greatest pains to conduct his business on the strictest business principles. He wanted the money to make some improvements in his factory. He knew how many spindles and looms he had; how much could be done with a pound of cotton, how much it cost, and how much each spindle and loom would do. He said to a capitalist, "I know all about cotton spinning and weaving, and do not know anything about this thing called money, but I want $10,000 of it." Said he, "My cloth is worth 10 cents a yard; it sells at that rate in unlimited quantities by wholesale; nobody can make it any cheaper; but I am not working a gold mine; I am not manufacturing legal-tender paper money, and the only way I can get money is to swap my cotton cloth for it. I will give you my note for 100,000 yards of cotton cloth, which will be equal to $10,000, and will pay 2 inches a yard each year as interest."

This was satisfactory to the capitalist, and the note was made, signed, and delivered accordingly, and the improvements were made in the factory.

During the year everything went smoothly; the spindles and looms worked well, repairs to machinery were light; cotton had been bought at proper rates; and no improved processes had been discovered or applied in the production of cotton-cloth. There was no hitch in any direction.

At the appointed time, the creditor called for his cloth. "I am ready," said the debtor, "to pay the hundred thousand yards of cotton cloth, with interest." When he came to measure it off, however, he was astounded to find he was short. Some painful suspicions crossed his mind. It seemed as though somebody had either robbed him of cloth, or else he had not manufactured as much of it as he had supposed. There did not seem to be so many yards of the cloth as there ought to be. He knew he had used the same number of pounds of cotton that it had been his custom to use for 100,000 yards of cloth and for 200,000 inches of cloth in addition; still, there was no denying the fact of the shortage.

He measured it again and again, and had finally to admit that he was unable to keep his engagement. This was a source of great distress to him. He could not sleep that night. But, the creditor being importunate, the cotton manufacturer next morning borrowed enough cloth from the proprietor of a neighboring factory and paid his obligation. But, not understanding how his carefully made plans had failed, and in order to avoid similar mistakes in the future, he had an examination made of the yard-stick and found that instead of being 36 inches long the yard-stick he had used was 40 inches.

In talking the matter over with his neighbor, the cotton manufacturer said: "I have been swindled; they 'rung in' on me a lengthened yard-stick, by the measurement of which I have paid my debt, and I have therefore paid in reality more than I contracted to pay."

"Well," said the friend, "I do not see that you are any worse off than I am. I borrowed as much as you did, and at the same time; but I agreed to pay my debt in money, and gave my note for $10,000 with interest. The increased command over cloth acquired by the dollars I have had to pay, caused by the demonetization of silver, has juggled me out of as much cloth as you have been juggled out of by the lengthened yard-stick. But you have one recourse; you can put into the penitentiary the man who 'rung in' the lengthened yard-stick on you, while the increase in the value of the dollar which I have paid has been effected in the name of the gold standard and honest money, and leaves me without recourse."

In its ultimate analysis, money is the yard-stick, the bushel and the pound weight of commerce.

When you shrink the volume of money, and so increase the measuring power of the dollar, you lengthen the yard-stick, enlarge the specific gravity of the pound and the cubical content of the bushel, in violation of all equities.

It is utterly impossible to secure a proper regulation of the money volume with gold alone, the yield of which has declined from an average of $130,000,000 a year between 1851 and 1873 to $105,000,000 a year between 1873 and 1889.

THE VALUE OF MONEY FIXED BY THE COMPETITION TO GET IT.

Everybody admits that the value of all other things is regulated by the play against each other of the forces of supply and demand. No reason has been or can be given why the value of the unit of money is not subject to this law.

WHAT IS THE DEMAND FOR MONEY?

The demand for money is equivalent to the sum of the demands for all other things whatsoever, for it is through a demand first made on money that all the wants of man are satisfied. The demand for money is instant, constant, and unceasing and is always at a maximum. If any man wants a pair of shoes, or a suit of clothes, he does not make his demand first on the shoemaker, or clothier. No man except a beggar makes a demand directly for food, clothes, or any other article. Whether it be to obtain clothing, food, or shelter—whether the simplest necessity or the greatest luxury of life—it is on money that the demand is first made. As this rule operates throughout the entire range of commodities it is manifest that the demand for money equals at least the united demands for all other things.

While population remains stationary, the demand for money will remain the same. As the demand for one article becomes less, the demand for some other which shall take its place becomes greater. The demand for money therefore must ever be as pressing and urgent as the needs of man are varied, incessant, and importunate.

WHAT IS THE SUPPLY OF MONEY?

Such being the demand for money, what is the supply? It is the total number of units of money in circulation (actual or potential) in any country.

The force of the demand for money operating against the supply is represented by the earnest, incessant struggle to obtain it. All men, in all trades and occupations, are offering either property or services for money. Each shoemaker in each locality is in competition with every other shoemaker in the same locality, each hatter is in competition with every other hatter, each clothier with every other clothier, all offering their wares for units of money. In this universal and perpetual competition for money, that number of shoemakers that can supply the demand for shoes at the smallest average price (excellence of quality being taken into account) will fix the market value of shoes in money; and conversely, will fix the value of money in shoes. So with the hatters as to hats, so with the tailors as to clothes, and so with those engaged in all other occupations as to the products respectively of their labor.

NO ALTERNATIVE FOR MONEY.

The transcendant importance of money, and the constant pressure of the demand for it may be realized by comparing its utility with that of any other force that contributes to human welfare.

In all the broad range of articles that, in a state of civilization, are needed by man, the only absolutely indispensable thing is money. For everything else there is some substitute—some alternative; for money there is none. Among articles of food, if beef rise in price, the demand for it will diminish, as a certain proportion of the people will resort to other forms of food. If, by reason of its continued scarcity, beef continue to rise, the demand will further diminish, until finally it may altogether cease and center on something else. So in the matter of clothing. If any one fabric become scarce, and consequently dear, the demand will diminish, and, if the price continue rising, it is only a question of time for the demand to cease and be transferred to some alternative.

But this can not be the case with money. It can never be driven out of use. There is not, and there never can be, any substitute for it. It may become so scarce that one dollar at the end of a decade may buy ten times as much as at the beginning; that is to say, it may cost in labor or commodities ten times as much to get it, but at whatever cost, the people must have it. Without money the demands of civilization could not be supplied.

Money was the most potent instrumentality in the evolution of society from a low to a high plane of civilization. It is valueless to man in isolation. It is indispensable to man in organized society. It is as necessary for the proprietary distribution of wealth as railroads and steamships are to its physical distribution. The aggregate force of the demand for money in any country depends upon the numbers of the population; with a stationary population the demand is steady, with an increasing population the demand increases, and in order to maintain undisturbed the equation of supply and demand the volume of money should be increased in at least a ratio corresponding to that of the increase of population.

There are certain circumstances that to some extent disturb the relations between population and money supply, such as the broadening of the areas of population, and the multiplication of money centers. These circumstances might render necessary a larger percentage of increase in the money volume than would be indicated by the increase of the population.

But under any circumstances the smallest money-increase that will suffice to maintain the equity of time contracts is an increase corresponding to the increase of numbers of the population.

Under conditions of unvarying demand and unvarying supply the value of the unit of money would be unvarying. If as population and demand increase the supply of money be proportionately increased, there is no possibility of a change in the value of the unit of money.

The constant and unceasing effort to exchange services and all forms of property, which have but limited command over the objects of human desire, for money, that sole instrumentality that has unlimited command over such objects, is, and ever will be, eager, intense, and unwavering.

With population and consequent demand rapidly increasing how do the advocates of the gold standard expect to increase the money volume of the country in this proportion, while the yield of gold, instead of increasing in proportion to demand, is every day becoming less and less capable of meeting the requirements of the arts alone?

THE QUANTITY OF MONEY IN CIRCULATION SHOULD INCREASE IN A RATIO NOT LESS THAN THE RATIO OF INCREASE OF POPULATION.

It will be admitted that if the population of a country be increased by any given percentage there will be a proportionate increase in the demand for all articles that supply human needs. If the population increases by 3 per cent., there will be needed 3 per cent. more house-room, 3 per cent. more furniture, 3 per cent. more food, 3 per cent. more of all things that enter into consumption. These things can only be got by a demand first made on money. Then why not 3 per cent. more money?

The present monetary circulation of this country including gold, silver, and paper, is represented to be $1,700,000,000. As our population doubles in thirty years, the rate of increase is 3¹⁄₃ per cent.

If the money volume be not increased by a proportion at least as great as this, the true relation between the supply of money and the demand for it will not be maintained. The demand increasing as the population increases, while the supply either does not increase at all or increases in a degree incommensurate with the demand, the money volume shrinks and the purchasing power of the unit becomes greater by reason of the increased keenness of competition to get it. This is but another mode of stating that the prices of all products of human labor decline. Prices falling, business ceases to be profitable, stores and work-shops close, and men are relegated to idleness.

THE QUANTITATIVE THEORY OF MONEY—THE VALUE OF EACH DOLLAR DEPENDS ON THE NUMBER OF DOLLARS OUT.

Thus by the universal competition to get it the value of the dollar is made to depend upon the number of dollars that are out. This is a principle that lies at the very foundation of the science of money. The law, stated broadly, is that the value of each unit of money in any country at any given time depends on the whole number of units in circulation in that country. The larger the number of units out, population remaining the same, the less must be the value of each unit; the smaller the number of units out, population remaining the same, the greater the value of each.

Notwithstanding the variance sometimes found between the premises and the conclusions of economic writers, there is no economist of repute who does not admit this to be a fundamental principle.

On the theory I have propounded therefore 3¹⁄₃ per cent. of $1,700,000,000, or $56,000,000, is the minimum amount of money that should be added to the currency of this country during the present year.

Assuming the population of to-day to be 65,000,000 and the ratio of its annual increase 3¹⁄₃ per cent., the population of next year will be 67,166,600. The percentage of monetary increase to be provided for that year should therefore be baaed on the increased number. And so on for each succeeding year.

I have thought best to collate a variety of citations from the most distinguished authorities on financial economy to support my contention that, ceteris paribus, the value of each dollar depends on the number of dollars in circulation.

John Locke, in his "Considerations," etc., published in 1690, said:

Money, while the same quantity of it is passing up and down the kingdom in trade, is really a standing measure of the falling and rising value of other things in reference to one another, and the alteration in price is truly in them only. But if you increase or lessen the quantity of money current in traffic in any place, then the alteration of value is in the money.

Locke further said:

The value of money in any one country, is the present quantity of the current money in that country, in proportion to the present trade.

The historian, Hume, says:

It is not difficult to perceive that it is the total quantity of the money in circulation, in any country, which determines what portion of that quantity shall exchange for a certain portion of the goods or commodities of that country.

It is the proportion between the circulating money and the commodities in the market which determines the price.

Fichte says:

The amount of money current in a state represents everything that is purchasable on the surface of the state. If the quantity of purchasable articles increases while the quantity of money remains the same, the value of the money increases in the same ratio; if the quantity of money increases, while the quantity of purchasable articles remains the same, the value of money decreases in the same ratio.

James Mill, in his treatise on political economy, says:

And again, in whatever degree, therefore, the quantity of money is increased or diminished, other things remaining the same, in that same proportion the value of the whole, and of every part, is reciprocally diminished or increased.

John Stuart Mill (Political Economy) says:

The value of money, other things being the same, varies inversely as its quantity; every increase of quantity lowering the value, and every diminution raising it in a ratio exactly equivalent.

And again:

Alterations in the cost of the production of the precious metals do not act upon the value of money, except just in proportion as they increase or diminish its quantity.

Ricardo (reply to Bosanquet) says:

The value of money in any country is determined by the amount existing. * * *

That commodities would rise or fall in price in proportion to the increase or diminution of money, I assume as a fact that is incontrovertible. * * *

Ricardo further says:

There can exist no depreciation in money but from excess; however debased a coinage may become, it will preserve its mint value; that is to say, it will pass in circulation for the intrinsic value of the bullion which it ought to contain, provided it be not in too great abundance.

In this case Ricardo's illustration is the supposed case of a country actually using one million gold pieces each containing 100 grains. He maintains that they would be of the same purchasing power, if the Government took out 1 grain, or even 50 grains, the quantity remaining the same, but that if, from the grains so deducted, an additional number of pieces were struck, a corresponding depreciation would result.

William Huskisson ("The Depreciation of the Currency," 1819), says:

If the quantity of gold in a country whose currency consists of gold should be increased in any given proportion, the quantity of other articles and the demand for them remaining the same, the value of any given commodity measured in the coin of that country would be increased in the same proportion.

Sir James Graham says:

The value of money is in the inverse ratio of its quantity; the supply of commodities remaining the same.

Torrens, in his work on Political Economy, says:

Gold is a commodity governed, as all other commodities are governed, by the law of supply and demand. If the value of all other commodities, in relation to gold, rises and falls as their quantities diminish or increase, the value of gold in relation to commodities must rise and fall as its quantity is diminished or increased.

Wolowski says:

The sum total of the precious metals is reckoned at 50 milliards, one-half gold and one-half silver. If, by a stroke of the pen, they suppress one of these metals in the monetary service, they double the demand for the other metal, to the ruin of all debtors.

Cernuschi says:

The purchasing power of money is in direct proportion to the volume of money existing.

Prof. Francis A. Walker, in his work on "Money" (page 57), says:

The value of money in any country is determined by the amount existing.

Its [money's] power of acquisition depends not on its substance, but on its quantity. [Paulus, author of the Pandects, sixth century.]

Professor De Colange, in the American Cyclopedia of Commerce, article on "Money," says:

The rate at which money exchanges for other things is determined by its quantity. * * *

Supposing the amount of trade and mode of circulation to remain stationary, if the quantity of money be increased, its value will fall, and the price of other commodities will proportionally rise, as the latter will then exchange against a greater amount of money; if, on the other hand, the quantity of money be reduced, its value will be raised, and prices in a corresponding degree diminished, as commodities will then have to be exchanged for a less amount of money. * * *

In whatever degree, therefore, the quantity of money is increased or diminished, other things remaining the same, in that same proportion the value of the whole and of every part is reciprocally diminished or increased.

A curtailment of the volume of money in a country will, ceteris paribus, increase the value of the money of that country. All the authorities agree that this law applies to all forms of money, whatever the material; so that it applies to paper money with precisely the same force that it applies to metallic money.

Mr. Stanley Jevons, in his work on "Money and the Mechanism of Exchange," says:

There is plenty of evidence to prove that an inconvertible paper money, if carefully limited in quantity, can retain its full value. Such was the case with the Bank of England notes for several years after the suspension of specie payments in 1797, and such is the case with the present notes of the Bank of France.

Mr. Gallatin said:

If in a country which wants and possesses a metallic currency of seventy millions of dollars, a paper currency to the same amount should be substituted, the seventy millions in gold and silver, being no longer wanted for that purpose, will be exported, and the returns may be converted into a productive capital, and add an equal amount to the wealth of the country.

In his Proposal for an Economic and Secure Currency Ricardo says:

A well regulated paper currency is so great an improvement in commerce, that I should greatly regret if prejudice should induce us to return to a system of less utility. The introduction of the precious metals for the purposes of money may with truth be considered as one or the most important steps toward the improvement of commerce and the arts of civilized life; but it is no less true, that with the advancement of knowledge and science, we discover that it would be another improvement to banish them again from the employment to which, during a less enlightened period, they had been so advantageously applied.

Mr. J. R. McCulloch, in commenting on the principles of money laid down by Ricardo, says:

He examined the circumstances which determine the value of money * * * and be showed that * * * its value will depend on the extent to which it may be issued compared with the demand. This is a principle of great importance; for, it shows that intrinsic worth is not necessary to a currency, and that provided the supply of paper notes, declared to be a legal tender, be sufficiently limited, their value may be maintained on a par with the value of gold, or raised to any higher level. If, therefore, it were practicable to devise a plan for preserving the value of paper on a level with that of gold, without making it convertible into coin at the pleasure of the holder, the heavy expense of a metallic currency would be saved.

It appears, therefore, that if there were perfect security that the power of issuing paper money would not be abused; that is, if there were perfect security for its being issued in such quantities, as to preserve its value relatively to the mass of circulating commodities nearly equal, the precious metals might be entirely dispensed with, not only as a circulating medium, but also as a standard to which to refer the value of paper.

In adopting a paper circulation—

Says Lord Overstone—

we must unavoidably depend for a maintenance of its due value upon the adoption of a strict and judicious rule for the regulation of its amount.

Lord Overstone further declared that:

The value of the paper currency results from its being kept at the same amount the metallic currency would have been.

Alexander Baring, in his evidence before the secret committee of the House of Lords in 1819, said:

The reduction of paper would produce all those effects which arise from the reduction in the amount of money in any country.

Prof. F. A. Walker says:

Let me repeat, money is to be known by its doing a certain work. Money is not gold, though gold may be money; sometimes gold is money, and sometimes it is not. Money is no one thing, no group of many things having any material property in common. On the contrary, anything may be money; and anything, in a given time and place, is money which then and there performs a certain function. Always and everywhere that which does the money-work is the money-thing.

Sir Archibald Alison says:

The suspension of specie payment in 1797, making bank notes a legal tender receivable for taxes by providing Great Britain with an adequate internal currency, averted the catastrophe then so general upon the Continent, and gave it at the same time an extraordinary degree of prosperity. Such was the commencement of the paper system in Great Britain, which ultimately produced such astonishing effects, and brought the struggle [of the Napoleonic wars] to a triumphant close.

THE TRUE MONEY STANDARD.

The true money standard of any country is not the material of which the money is made. The standard is not a concrete object, but a numerical relation. It is the relation between the number of units composing the monetary circulation of the country and the numbers of the population.

It is the legal-tender function that constitutes money. It is the power which the law imparts to any material to pay debts and liquidate obligations. It can not for a moment be doubted that the money function, being conferred by the supreme authority, is the all-sufficient guarantee of the money value. There is no necessity for re-enforcing that value with any inferior value that may attach to the material on which the money stamp is placed. The money function is immeasurably the most important that can be conferred by society upon any material, and it is absurd to urge that that function is not of itself sufficient for the maintenance of the value of money. All the value that money can possibly have—the totality of value that can exist in the shape of money in any country—will attach to anything upon which the sovereign authority stamps it, whether the material on which the stamp is placed be gold, silver, paper, or anything else. Legislators or executive officers of the Government, by increasing or decreasing the volume of money, correspondingly decrease or increase the value of each unit of that money. For no matter how many or how few the units may be, the total value of the money of the country will be comprised within the total number of those units. A change in the number of the units effects a proportionate change in the value of each unit, and whatever the value of the unit may be, it is of the utmost importance that that value should remain undisturbed.

It is absurd to maintain that a gold unit, which, as time goes on, is constantly increasing in purchasing power; is a better unit than a unit of any other material that maintains unchanging value through time.

Whenever the business of the country accommodates itself to a given number of units, the only question for the Government to deal with is to maintain that value as free from disturbance as possible; and according to all authorities on political economy that can only be done by increasing or decreasing the number of units in circulation in accordance with the demands of increasing or decreasing population.

If it be admitted that one of the most important offices of government is to see that the equities are preserved between its citizens (and if this be not so, to what purpose are our courts of equity instituted?), then it can not be denied that it is one of the highest offices of government to see that money, which measures all equities, and which must for all time continue to be the principal measure in the service of civilized society, shall be of unchanging value. It is impossible to secure this characteristic of uniformity in the value of money if we are to select as the only material on which to stamp the money function a substance whose yearly production is becoming more and more limited, and the prospect of whose sufficient yield becomes less and less encouraging.

IF SILVER REMAIN DEMONETIZED AND GOLD CONTINUE DECREASING, WHERE IS THE WORLD'S FUTURE MONEY SUPPLY TO COME FROM?

If the distinguished authorities I have quoted are correct, that a diminution of the volume of money increases the value of the money unit—which is but another form of stating that it lowers prices and produces stagnation, distress, and discontent,—what good reason can be offered by the advocates of the gold standard for confining the business of this rapidly growing country to a basis of gold, when it is well known that the entire stocks of gold and silver together are now insufficient to serve the purpose of the world's money, and have to be supplemented and re-enforced by large issues of paper notes? Do they not reflect that the production of gold is constantly diminishing and is likely to continue to diminish? And do they not know that our population is growing at the rate of over 3 per cent. per annum and will double in thirty years? Do they mean that the money volume which serves a population of 65,000,000, and is far below the needs of that population, will suffice for the 130,000,000 of the next generation? To be sure, if we are to take no note of prices, the question is a simple one.

But prices must be taken into account. The entire money question is one of prices. When it is said that money is scarce, what is meant is that business is depressed and that money is difficult to get, at the present range of prices. Should prices fall 25 per cent. money would be found plentiful enough to conduct exchange at the lower range. But when prices fall, goods sell below cost, business is unprofitable, workshops are closed, and men are thrown into idleness. If lowering prices do not affect injuriously either the business or the prosperity of the country, then it makes no difference what the volume of money may be; a small amount will meet the requirements as well as a large amount. In that case, the gold standard is as good as any.

But if gold alone is sufficient to bear all the enormous monetary burdens of the Western world, why do the advocates of the gold standard admit the necessity for any more circulation? To be logical, instead of favoring an increase of credit money, which has always lurking within it an element of danger to the business of the community, they should demand the retirement of the $347,000,000 of greenbacks and the $350,000,000 of coined silver, and base the business of the country exclusively on what they call "honest money." If that should be done all that could happen would be a fall in prices. Judging by the experience of the past it would not be surprising if the next move of the gold-standard men would be an agitation for the retirement and cancellation of the greenbacks. Such a movement is fully in harmony with the opinions of the gold-standard advocates for the past twenty years. Indeed, the Secretary of the Treasury who took charge of the finances at the opening of the last Administration, himself a banker, recommended the demonetization of the greenbacks almost as vigorously as he opposed silver.

MONEY VALUABLE ONLY FOR THE IMPORTANT SERVICE IT PERFORMS.

Money is valuable rather for the service which it performs than for the material of which it is composed.

When we consider the transcendantly important character of the service which money performs—when we reflect that, without it, the achievement of an advanced civilization would be impossible, we can not escape the conclusion that, compared with the value of that service, the commodity value of any material on which the money function may be stamped is too trifling to merit serious attention.

This will be made clear by reflection on the necessities of the situation.

So long as society chooses to maintain the automatic or metallic money-system, it must be obvious that to escape the evils that would result from a sudden and overwhelming increase in the supply of the money-material as compared with the entire stock in existence, and the infinitely more serious evils that would result from a wholly insufficient yearly addition to that stock, it must have on hand an enormous accumulation of the metals on which the stamp is placed. It must be manifest that no material would be fit for universal acceptance for so important a function as money unless there were available so great a quantity of it that no sudden shock could be inflicted on society by ordinary fluctuations in the current yield, or in the current consumption in the arts.

But, in the nature of things, a supply sufficient to effect that result would be so enormous as practically to destroy the market value of the material as a mere commodity if the money function and use were withdrawn from it.

THE MONEY DEMAND, NOT THE COMMODITY DEMAND, THAT GIVES GOLD ITS VALUE.

Mr. Giffen the statistician of the London Board of Trade, in an article recently published in an English magazine, berating and deriding the bi-metallists, maintains that it is not the demand for gold as money, but for gold as a commodity, to be used in the arts, that determines its value.

To prove his case, Mr. Giffen states that the supply of gold is about $95,000,000 per annum, the annual demand for the arts $60,000,000, or about two-thirds of the annual supply; while the demand for money is only $35,000,000, or about one-third that supply. He therefore argues that the art demand, being the greater of the two, contributes more largely to the maintenance of the value of gold than does the demand for that article as money. It is hardly necessary to point out the absurdity of this claim.

The commodity demand in any one year is not made upon the current year's supply, but upon the entire amount in existence, which, is estimated to be about $4,000,000,000. If the demand for the arts entirely ceased, would the addition, to the money volume, of the $60,000,000 now used in the arts produce any appreciable effect on the value of the $4,000,000,000 in existence?

On the other hand, what is the demand on gold for the money use? All the labor and all the salable property of the western world are constantly offered in exchange for it. It is a moderate estimate to assume that each dollar is earned, demanded, and paid once a week, or fifty times in each year. This constitutes a total annual money demand of $200,000,000,000, compared with which colossal sum how inconsequential is the commodity demand of $60,000,000 in maintaining the value of gold.

The amount of gold annually used in the arts is not very definitely ascertained, but in 1886 it was estimated by the then Director of the United States Mint to be $46,000,000 per annum. Mr. Giffen estimated it at $60,000,000. It is my opinion that the arts forage on the money-stock of gold to the extent of about the entire annual yield. The bullion or commodity value of that metal being determined by its money value, whoever desires to use it for any purpose other than money, takes the bullion at its coinage value, or else melts up the coin.

Were gold demonetized and deprived of its money function, and its demand confined solely to that arising from its adaptability for various other purposes, the present stock of that metal on hand and in use as money would, according to the estimates of the director of the mint, supply the art demand for more than seventy-five years to come. But, assuming that the estimate of the Director of the Mint is too low, and that my own is nearer the truth, there is at least fifty years' supply on hand. Were there fifty or seventy-five years' supply of any other commodity on hand in the market, what would be the commercial value of that commodity? What would be the value of copper, of brass, or of iron, if there were fifty or seventy-five years' supply of either of those metals in the market for disposal at one time? Nobody can pretend that any commodity of which there is an available supply on hand equivalent to the whole demand for fifty or seventy-five years can have any but the most trifling value.

Contrary, therefore, to the generally received conviction that the commodity demand is the dominating force in fixing the value of gold I maintain and insist that the commodity demand, if entering into the account at all, is insignificant. It is the supremely important money-demand, as correlated to the supply, that fixes the value of all money of every description whatsoever.

The demand for gold as a commodity is limited and fluctuating, but when that metal is invested by law with the higher function of money, and thus constituted a common denominator of all values, that limited and fluctuating demand is changed to an unlimited and constant one, which fixes its value for other and inferior uses. If the commodity-demand for gold were, as many believe it to be, essential to its acceptance as money, it would be a great misfortune to society. The happiness and prosperity of the world, if not wholly dependent upon, are largely influenced by, steadiness in the value of money, and this can not exist without steadiness in its volume. Whatever demand exists for gold as a commodity can only affect the volume of money injuriously—that is to say, by decreasing it. The admonition of history is that a deficiency in the money-supply is more probable, and infinitely more to be feared than an excess, and this deficiency is, in great measure, caused by the insidious and constant encroachment, upon the precious metals, of demands for them for other than the money use. When we contrast the magnitude of the world's interests and equities, which rest on steadiness in the value of money, with the comparative unimportance of the uses of the metals as commodities, it becomes apparent that the subjection of the value of money to disturbance from the demands for gilded signs, looking-glasses, bangles and breast-pins, is an evil for which society is but poorly compensated by the benefits derived from such uses.