The Pamphlet Collection of Sir Robert Stout: Volume 71
Addendum. — The Funding System
The Funding System.
The history and working of the "funding system" of modem times will demonstrate the phenomenon which causes such enormous wealth to flow to a small unproductive class, and correspondingly impoverishes the class who have produced that wealth. Emanating in Venice in the twelfth century, now that this policy has involved the 400,000,000 inhabitants of Europe and America in a funded debt of £5,000,000,000, the interest upon which has become the perpetual patrimony of a comparatively few fund-holders, it may be, perhaps, worth while to consider the opinions of the eminent men consulted by a certain King of Spain called "Ferdinand the Wise," and who decided that the King—and, therefore by analogy that a Government—is not justified in saddling a funded obligation upon posterity. These fund-holders have been for twenty years past greatly enriched by the appreciation of gold causing a contraction of the measure of value, and resulting "falling prices," and who are now exacting through this phenomenon forty to fifty per cent. more of the entire wealth of the world than they are equitably entitled to—and that on the immense sum of £5,000,000,000 of money! 1 If it be urged that a state of war or the safety of a nation may render necessary a recourse to loans—the reply is—that borrowing money does not necessarily mean to borrow upon a rate of interest exceeding the average earnings of capital, or upon other terms of profit or advantage to the lender than such as equity requires, and it should also be taken into consideration that the lenders' possessions may have been entirely swept away by the same calamity that rendered the loan necessary.
Upon the principle that other property may lawfully be seized by Government for public purposes—provided that an equitable compensation is made—so ought money to be available when the urgency is so great that more deliberate measures are futile.
The whole purpose and object of Government is subverted when any policy is adopted which tends to build up a a class of persons whose fortunes—earned by a stroke of the pen—raise them far above the general conditions of society.
It arises from the mistake of regarding money as a private possession—instead of a public institution—and this again from the fact that money, since the Dark Ages, has been made of a material that is indeed a private possession—over which the public has only a limited and remote control.
Without considering the bond-holder of the Colonial loans in the same light as the European fund-holder—as the Colonial loans have been for the most part for productive purposes: it is, nevertheless distinctly equitable that they should be taxed in a ratio to their present unjust gains—inasmuch as they are not entitled to receive their interest in a greater value as against general commodities than is due by their bond—nothing more and nothing less.
If like the lawyers—a precedent is required—De Laveleye depicts the same effects of "falling prices" in 1820-30—the fall was so severe, page 32 and the consequent distress so cruel therefrom that Lord [unclear: Brought] proposed to reduce taxation proportionately—and to reduce the sovereigs from 20/- to 14/- in existing contracts. Sisnondi also vividly depica the distress, the riots, the petitions to Parliament, and depression ova the whole civilised world culminating in a genuine Reign of Terror and bloodshed in 1848 over the continent of Europe—this widespread depression baffled entirely all efforts of Statesmen to check its progress, and mankind seemed on the downward course to anarchy and barbarism—but at that critical moment the vast golden treasures of America and Australia were discovered and the enormous supply of gold—expanded the measure of value—rising prices and vast prosperity resulted.
The cause—"falling prices"—which has brought on in the past the above described effects is the same cause—"falling prices"—which has shaken the Banking system to pieces—because the basis of their financeis a foundation of shifting sand—gold—are we to be the victims of a superstition and fear to confront the question at any moment—because we quail before the interests of the banking and capitalist power like the Emperor Octavius Augustus, and like William Pitt, who both wished for a National Currency, the latter exclaiming "that a National Currency was to the Capitalist what the Policeman was to the Burglar." The present financial collapse is an economic phenomenon—a gold question—pure and simple—to confront it is to overcome it: neither our wealth, nor our population, nor resources have been swept away, we are more wealthy to-day than at any period before—to confront it is not by re-constructing a private Banking system on the foundation of a shifting sand, but by constructing a National Currency system on the rod of scientific principles and the country would be safe now and for ever.
In considering the soundness of the Currency system examined—the following law must always be borne in mind:—"That cost what it may to produce—the value of money rises or falls in that proportion which its arithmetical value as a numerator bears to the whole volume of money as a denominator—and no device of sophistry can alter this law of nature."
That is—the value of a piece of money whether it be made of gold, silver, brass, copper, paper, leather, or any other substance—no matter what it cost to produce and no matter what the stamp or mark upon it may be—whether such mark promises anything or nothing—or whether it be made by Government or not—depends inversely upon the number of such pieces in use—or liable to come into use—as money—the mark of authority serves indeed to distinguish what is money from what is not But neither does this mark nor the mark of denomination confer any value upon it: this being regulated entirely by number—and the proof is this—that if the number is kept constant the mark of denomination may be changed without at all affecting the value—while on the contrary though the mark of denomination be kept constant—if the number is changed—the value will at once begin to conform in inverse proportion to the latter.
The remedy for the present national financial calamities resulting from "falling prices" rests with the intelligence of the people.
Bock & Co., General Printers, Brandon Street, Wellington.