The Pamphlet Collection of Sir Robert Stout: Volume 71
The history of great civilisations in all ages of the world shows that the most important institutions which, form the framework of social order are land and money—the first determining the relations of the citizens to the State, and the second determining their relations to one another.
Land, as a social and political question, has been the subject of such universal discussion and political action in our day that few would now deny the "rights of the people in the land."
But money—that is, the currency or mechanism of money—a subject in which the people have as great and equal rights—is to the majority a dead language, as far as any general conception of its economic principles, or that it is the right and prerogative of the State alone to control it, and wield its mighty power equitably in the interests of the people.
Great reforms—political and social—are generally evolved in times of national calamities, arising from abuses of power, privilege, or monopoly; and the recent financial disasters in Australia marks the time to reform our monetary system, and the time to assert and establish the prerogative of the State (the people) to control the currency of the country.
The recent suspension of twelve important banks in Australia has a national and world-wide significance, far beyond any ordinary great bank failure from commercial causes. That the deposits were too liquid, and the liabilities were too fixed—a departure from what is termed strict principles of banking—may have contributed, but it certainly was not the sole or even the real cause of this general and utter collapse of the modern banking system.
The hardship to thousands of innocent people, deplorable as it is, may, nevertheless, be the means of turning this great financial phenomenon into a national and permanent object-lesson to the people—if from it should result the determination of all classes to understand for themselves the true economic principles of money—that is, the whole system of currency—of which principles the modern banking system is utterly devoid.
The subject is one usually beyond the scope of popular agitators and politicians, and hence never has been a popular subject of discussion or thought; but when the principles which underlie it are thoroughly understood "money is perhaps the mightiest engine to which man can lend his guidance unfelt, unheard, almost unseen, it has the power to 80 distribute the burdens, gratifications, and opportunities of life, that each individual shall enjoy that share of them to which his merits en- page 4 title him, or to dispense them with so partial a hand as to violate even principle of justice, and perpetuate a succession of slaveries to the [unclear: es] of time."
The cause of this banking collapse is not local, it is obvious, [unclear: b] world-wide, and the present seems to have marked the boundary or [unclear: lin] at which our heterogeneous system of metallic moneys and paper [unclear: no] convertible into them, issued without regulation by Governments [unclear: as] private bankers, must come to an end, and a "national currency" [unclear: bas] on a more scientific and equitable basis substituted.
Gold has now become only the measure of the [unclear: "measure] value"—With an expanding Empire and expanding commerce, [unclear: needi] an expanding money which could be made by regulation, to keep [unclear: eve] pace with increasing exchanges at the present day over one-half the entire volume of currency in the world consists of paper-notes [unclear: co] vertible into gold, and the production necessary to uphold the [unclear: sto] of the gold portion has been gradually and greatly decreasing [unclear: fo] twenty years, until the appreciated fluctuation of gold value is [unclear: now] per cent. as against commodities.
The following table—Mulhall—will show the great expansion commerce:—
The commerce of the world has increased five-fold from 1850 1887, and the gold prodnction stationary for many years; and [unclear: th] world is now in a worse plight of disastrous low price-level than [unclear: i] 1848, and prices are still falling in the most persistent and [unclear: omino] manner.
The accumulated stock of coin from past ages is estimated a over £600,000,000. "Yet unless the proportion of paper to gold [unclear: an] silver in the moneys of the world is still further increased—a great anthority says—we must be prepared to witness a permanent and indefinite 'fall in prices,' and to incur that era of commercial depression and industrial distress, and perhaps these political [unclear: commotions] which ever accompany "falling prices.'"
The monetary problem is:—How much further is this [unclear: incres] of convertible paper-notes possible? And is it either justice [unclear: o] economic policy to continue further to rest our industrial and [unclear: social] structure on a system based on the fluctuating value of a metal-gold—whose supplies are dependent on the chance discovery and fertility of mines and adventitious causes, and which is also [unclear: susceptibl] to the control and monopoly of great capitalists and bankers, [unclear: the] interest and avarice?page 5
It is imperative in the interests and welfare of the people to assert the "prerogative of the state" to control the currency and abolish all bank issues of notes and money, and to solve the monetary problem on those scientific principles on which Rome and other of the highest civilisations of antiquity built up their greatness—a purely symbolic system of "numeraries" regulated by the State—which would open to us a brilliant and prosperous career, unfettered by the drags and obstacles, the fears and uncertainties of a dwindling metallic system—that is, a national paper currency—the "state note," the "sole legal tender"—the "measure of value," not based on a fluctuating metal, but on "the whole numerary volume," on specific limitation and regulation to the "volume of exchanges;" an institution of law, controlled, registered, limited and regulated exclusively by the State, and demonetising gold and silver (except for change) to the position of mere merchandise—for foreign service—like wool, wheat, etc.
Under this system every exchange is rendered an equitable one. The "measure of value" being regulated—expanded and contracted—in ratio to commerce and population. Loans—national and private—would remain at the same ratio of value as that in which they were borrowed-not increased by 40 per cent., as now experienced, by the fluctuation of the "measure of value"—thus adding enormous burdens to industry, and enormous corresponding gains to the unproductive class.
The experience of most enlightened civilisations has proved this currency system during centuries of intellectual and industrial splendour. It has been advocated by the greatest of men in all ages to preserve freedom and to guard the people against the monopoly of wealth. Under this system there could be no more violent and unforeseeable fluctuations of prices; no industrial nor commercial crises; no paralysis of trade, no pauperising of labour, but an era of such unparalelled prosperity, wealth, and advancement of the material and social condition of the people would take place, as is now undreamt of, so long as these principles were adhered to, and guarded by the power and integrity of the State.
McCullock says:—"So long as any individual, or set of individuals, may usurp the prerogative of the State, and issue paper-money without let or hindrance, so long will it be issued in excess in periods when prices are rising and confidence high, and be suddenly withdrawn when prices are falling and confidence shaken."
The Financial Record, New York, says:—"Banks will be abolished as issuers of notes when we have lived through this administration of bankers and brokers that at present Run the Government to suit their interests."
McLeod says:—"The prices of things are estimated by the aggregate of gold, silver, copper, and credit. Hence the creation and use of credit. Thus bank notes act upon prices in the same way as an equal quantity of gold."page 6
Speaking of gold as a fluctuating measure of value, Mr. R. [unclear: Hogari] Patterson, the London banker, says:—"It seems probable that the magic of the gold spell will be broken, and civilised communities will find that man can make for himself, by mere agreement and legislation that indispensible thing money, the medium of exchange and measure [unclear: o] value, for a supply of which hitherto he has been often painfully dependent upon accidental discoveries in the treasure beds of the earth. [unclear: D] not blame statesmen and politicians, who as yet comprehend so little of these things, for the continuance of a system of recurrent trade suicides from which the industrial classes suffer most, yet which is hardly of permanent advantage even to that portion of the moneyed classes [unclear: when] can turn these periods of depression to their advantage."
Mr. Gilbart, inspector of the London and Westminster Bank admits "that it is a superstition to suppose that gold can be a [unclear: standar] of value." Mr. Dyld, the geographer, writing on gold distribution, [unclear: says] "Gold is a premium for robbery," as a measure of value.
These authorities affirm the principles of money, as above advocated—that the value of money is in its volume or aggregate quantity [unclear: i] currency, and the issue, control, and regulation of that volume should be by the State. That the State alone can maintain an equitable measure of value, and that currency thus circulates and maintains its purchasing power, not from its substance or material, but from its quantity; and that a metallic basis as gold exposes the "measured of value" to great, sudden, and unforeseeable alterations.
Del Mar, the most profound of modern authorities, and advocate of the "numerical system" of currency, has also proved to be an utter fallacy the doctrine taught by the economists "that the precious metals circulate in exchange for commodities, on the basis that the value of gold and silver is represented by the economic cost of their current production," and that in fact the precious metals were never produced under such conditions: it was true enough in some portion of the medæval period, under exceptional circumstances and low level of prices, but it is not true permanently.
But if this doctrine be a fallacy, the foundation of the present monetary system is gone, and all the economic phenomena deduced from it—the proofs of this fallacy will appear further on.