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The Pamphlet Collection of Sir Robert Stout: Volume 71

The results of a Currency System on a Metallic Basis Controlled by the Banking Power

The results of a Currency System on a Metallic Basis Controlled by the Banking Power.

The economic results of a monetary system on a metallic basis will now be instanced—the fluctuation of gold at present is appreciated 40 per cent. since 1872. In "falling prices," miscalled values(all values cannot fall (or rise) together for value is a relation of one thing to another) it is only the relation of commodities to money—which has altered—and the price-level of commodities falls. Then the following, takes place—the weight of taxation increases automatically, and the burden of all debts, national and private, are steadily aggravated, all property and stocks are depreciated; the burden of fixed charges is page 7 increased at the ratio that gold has risen, and the producer finds the margin of profit disappear and wages fall. In falling prices the rich become relatively richer, and the poor become relatively poorer.

The price of wheat stands lower in England this year than at any time for a century before—falling prices fall ultimately on wages, and wages have fallen in England from 7 to 25 per cent., agricultural the lowest.

From the West is heard the cry of distress from the American farmer, revolting against a monetary system whose economic effect upon him is to rob him of half his property, and the product of his labour and capital; in whose case a life of toil has been in vain to save him from ruin or serfdom through the increased crushing burden of his mortgage debts, the result of gradually "falling prices" during the last twenty years caused by the fluctuations of a "currency on a metallic basis," which has increased the purchasing power of gold 40 per cent. since 1872, and he must therefore now sell 40 per cent. more produce to meet his mortgage debts or interest, than was the current equivalent of produce to gold when the debt was contracted.

The aggregate mortgage debts of the United States farmers amounts to the enormous sum of £800,000,000. Now these debts in equity should be estimated, not at their present gold value (arising from an adventitious appreciation) but in the value of the staple products of America at the average prices current at the period or different periods of the contraction of the debts; whereas to now pay off the principal sum of their mortgage debts, they would be mulct of some £300,000,000, measured in products at the difference of current prices to-day and the current prices before the gold rising.

The "alliance" of 4,000,000 farmers and planters has been formed to obtain a remedy by legislation of the results of this vampire monetary system, and they have apparently joined forces with the "knights of labour," and the "silver ring," to influence the legislature in passing a Bill for the unlimited coinage of silver, in order to inflate the currency and raise prices, and thus decrease their debts to their original terms, but this remedy would be very uncertain and ephemeral. The only permanent and just remedy would be to raise from its grave the "National Currency," or "Legal Tender Bill" of the great commoner Thaddeus Stevens, the Chairman of Ways and Means in the Civil war, as passed by both Congress and Senate in 1862. But profiting by increased knowledge of principles and past experience, the legal tender note should now be made symbolic, not intrinsic, and gold and silver demonetised.

Under the original Bill twelve million legal tender notes for all debts, etc., national or private, were issued. The same committee brought forward a further Bill for thirty millions for carrying on the war, which also passed Congress, but when the Bill went to the Senate, meetings of capitalists and bankers were held in New York, Boston and Philadelphia, and a committee of powerful gold interests was formed to oppose the Bill; they go to Washington—the Senate Committee then had the Bill under consideration—their influence page 8 succeeded, and the Bill was amended by exception clauses, "except interest on the public debt and duties on imports, payable in gold;" also further amended to create a bond bearing 6 per cent. for twenty years, so that the legal tender money could be funded into a bond, and thus taken out of circulation. Thus emasculated the Bill was sent back to the lower house, the patriot Stevens did not know his own Bill again, and exclaimed:—"This Bill creates two kinds of money, one for the bankers, and one for the common people," but it became law, the bankers ruled the day, the Bill was killed.

From henceforth when a merchant imported goods, he must go to the banker for the gold to pay the duties, for there was none in circulation, and the banker charged him whatever he thought fit; the merchant then pays the gold into the treasury. The banker having bought the bonds of the Government, the interest payable in gold; every six months the banker drew the gold out of the treasury for interest on his bonds back into his safe, he then sold it back again to the merchant at an increased premium, and whenever the prospects of the war looked down they raised the price of gold higher and higher, until in the darkest hour of the war they raised it to 285 per cent.! The usurers of Wall Street were worse enemies of their country than the brave enemies of the south who were fighting against her.

To pay the soldiers for service of war, every dollar of bounty and pensions from the beginning of the war in 1861, up to 1886, the Government had to pay 420 millions. To pay the bondholders for service of gold from 1865 to 1886, the Government had to pay 470 millions, that is 50 millions more than they paid flesh and blood for putting down the rebellion.

Further, after the country paying off 230 millions of these bonds to the banker-pensioners it would take more of the products of the country, more wheat, more cotton, more iron, more days' labour to pay off the remaining 240 millions still due, than would have paid the whole debt at the close of the war! (owing to the rise in gold).

By means of the "exception clauses" these vampires had basely calculated that, having "cornered" the gold, they could suck their country's life-blood; and after the war, looking back on this "stroke of business," they doubtless exclaimed, in the lofty sentiments of Horace, "Dulce et decorum est, prô patriâ Mori," translated with their parenthesis "'Tis sweet and decorous (for others) to die for one's country," while we have pocketed the money.

Had the "National Currency"or "Legal Tender Bill," as Stevens framed it, and as originally passed by both branches of the Legislature, remained law, how many millions of money—of blood-money—to the bondholders would the American taxpayer have been spared? And at the present time how many millions of unjust liabilities to the mortgagee would the American farmers have been spared? The "National Currency Bill," of Thaddeus Stevens, with an addition clause demonitising gold, and silver, can alone render them justice, and give prosperity to the country.

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In the East is heard the same cry of distress from our Indian Empire, of national and industrial loss through the fluctuations in exchange, caused by the depreciation of the silver rupee, and the appreciation of the gold sovereign, whereby the consumers of English goods, the taxpayer, and revenues of India have been mulct of £25,400,000 a year during the last eighteen or twenty years—in the aggregate £600,000,000—through loss in the exchanges; and which vast sum is correspondingly gained by the import merchants, and the bankers and financial firms who purchase the council bills from the Secretary of State drawn upon the Indian Government, without their raising a finger to earn such enormous gains.

The extent to which New Zealand farmers and others have suffered from the vampire of fluctuation in the value of gold, our monetary basis, is but too plain. The burden of our national and private debts, amounting to say £80,000,000, which should in equity be estimated in the value of the staple products of New Zealand, at the average prices current at the period or different periods of the contraction of the debts, are now simply increased 40 per cent. over that because of an adventitious appreciation of gold, and we are required to export or sell 40 per cent. more produce to meet the interest on our national and other debts than the current equivalent of values when the loans were contracted—in other words, because of the gradually increasing purchasing power of gold over commodities since 1873, to repay the different loans contracted, say £80,000,000, we should to-day have to pay back in produce £112,000,000, measured by the current prices at the time the loans were contracted. And in the ratio that these enormous sums have impoverished and oppressed the taxpayer and producer, etc., the bondholders and mortgagees have been unjustly enriched. And yet when Sir George Grey proposed that in equity the bondholder should be taxed, that great statesman's proposal was howled down by the nominees of the bankers who then ruled the New Zealand Parliament, as repudiation and breach of faith. The extreme virtue of self interest was quite blind to the circumstance that the New Zealand producer and taxpayer had been robbed of probably £30,000,000 of money, which had correspondingly and unjustly enriched the bondholder and mortgagees, by the adventitious alteration of the "measure of value." The only relief to the tax-payers and farmers from burdens of our foreign loans imposed upon them by this financial phenomenon, is by Sir George Grey's proposal—by taxation of the bondholders and foreign mortgagees, in some equitable ratio to the unjust gains which they have obtained for fifteen or twenty years past, and which are still augmenting, this year, 1893, to over 50 per cent.

The relief from the same effects—on the local loans—would be obtained by a "numerary national currency," which could be regulated to expand the "volume of currency,"—the "measure of value"—in harmony with increased population and trade, and thus "raise prices," which would relieve the increased weight of taxation and debts, which the appreciation of gold has unjustly caused the taxpayer and farmer to carry.

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A good deal is heard, and which is emphasised in the speech from the Throne, of the calamity of falling prices of our exports, but it must not be forgotten that "falling prices"are affecting the products of other countries equally with our own products—that "falling prices" an general. The price-level of commodities has greatly fallen over the world—against gold; hence in exchanging New Zealand products or commodities for other countries' products or commodities, the falling price equally affecting both cannot affect either. New Zealand products have not fallen in value against other countries' products, but both against gold, therefore in exchanging our exports for imports we can make no loss.

But, herein comes the calamity. When we exchange our products for gold (money), which we must do to pay the interest on our foreign loans, the process makes a loss of 40 per cent. to the producer, and bin done for a period of years. That is because an adventitious fluctuation of gold has altered the "measure of value," the New Zealand farmers and taxpayers have been and are mulct in some £1,600,000 a year, and the bondholders and foreign mortgagees are in the same ratio enriched The hard earned wealth of industry is wrung from those who produced it, and diverted to an unproductive few, who neither produced nor earned it, and who have thus received and are receiving 40 per cent. more than their bond.

But New Zealand has been a producer of gold to the value of £45,000,000, this metal which as the measure of value and medium of exchange has so increased in purchasing power, therefore New Zealand should have greatly benefited by such a product. We have not. But the banks have, for they were the sole purchasers of gold, and they paid in exchange for it their private paper notes, whereby for every £1,000 of gold they thus purchased, they were legally enabled to issue £2,000 more private paper notes, and purchase more ad infinitum. They practically got the gold for nothing to enrich foreign capitalists. Had there existed at that period a "national currency," and the "State note," the sole and exclusive legal tender, and gold a mere commodity, this £45,000,000 of gold would have been shipped home like our wheat or wool among our exports to exchange for our imports, greatly to national advantage; or if the Government had purchased the gold and remitted it home as bullion to pay interest on our national debt, to a country which used gold as a currency, the benefit accruing from the increased value of gold would have gone to the taxpayer.

What really happened was, our national and other loans (ostensibly borrowed in gold) were not received in gold, but in the shape of railway material, &c, and other imports of commodities during "falling prices," and instead of repaying these loans (or the interest thereon) by exporting our £45,000,000 of gold which was greatly "rising in price," as against commodities, the gold has been given away to the banks (as far as the benefit of the rise in exchange value) and they practically also purchased it for nothing, and we have been, and are now paying the interest on these loans, by exporting produce page 11 at "falling prices," to be exchanged for gold at 40 per cent. loss, in order to repay in gold our gold loans which were received not in gold, but in commodities at "falling prices."

Is this problem beyond New Zealand's statesmen? And is the superstition of the golden calf, set up by those who have obtained enormous power and riches by its control as a currency basis, to be still believed by the people, who have been impoverished and enslaved by its action.