K3 AB. &tate CoIIegr of Agriculture iSt Cornell ©nibcrsitp Hiftrarp Cornell University Library HG 351.K3 A new monetary systemithe only means of 3 1924 013 816 123 Cornell University Library The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013816123 A NEW MONETARY SYSTEM: THE ONLY MEANS OP SECURING THE RESPECTIVE RIGHTS OF LABOR AND PROPERTY, PROTECTING THE PUBLIC FROM FINANCIAL REVULSIONS. EDWAED KELLOGG. KEVI8BD FROM HIS WOEK ON "LABOR AND OTHBB CAPITAL,' ■WITH NUUEBOTJS ADDITIONS FBOM HIS MANDSCKIPTS. TO WHICH IB FB£FIXED A BIOGBAFHICAL SKETOH OF THE AUTHOB. EDITED BY HIS DADGHTEB, NEW YORK: UNITED STATES BOOK COMPANY, 310-318 SIXTH AVENUE. 6'., H a^V- It) Entered according to Act of Congress in the year 1861, MARY KBLLOaa PCTNAM. In the Clerk's Ofilce of the District Court of the United States for the Southern District of New Yorlt. TABLE OF CONTENTS. Biographical Sketch of the Author xi Preface xxv Introduction 17 PART I. PRINCrPUBS OF l>ISTIirBT7TION. CHAPTER I. Of Value 41 CHAPTER IL MONEY, THE MEDIUM OP DISTRIBUTION. SECTION I. The Nature and Properties of Money 45 SECTION n. The Power of Money to Represent Value 46 SECTIOH lU. The Power of Money to Measure Value.. .». 56 IV CXJNTENTS. •AM SECTION ly. The Power of Money to Accumulate Value by Interest, © • SECTION V. The Power of Money to Exchange Value, 6 J SECTION Tl. The Material of Money, and the Distinctions between Money and the Material of which it is made, ' ' CHAPTER III. THE RATES OF INTEREST THE GOVERNING POWER OF DISTB. BUTION TO LABOR AND CAPTTAL. SECTION I. ■'■ The Power of Capital to accumulate Property and Labor, according to the Rate of Interest, 79 SECTION n. The Wealth of Cities, and the Means of its Accumn- lation, 97 SECTION ra. Interest received by the Citizens of New York on Loans to the Country, 101 SECTION IV. The per centage Actual Increase of the Value of the Property of the States of New York and Massa- chusetts, compared with the per centage Legal In- crease on the Property of these States for the same periods, ID CONTENTS. 1 rial SECTION V. nterest on ]Siational and State Debts, 121 SECTION VI. No Accumulation of Property by Labor equal to the Accmnulation by the Loan of Money at seven per C«nt Interest, 126 SECTION vn. Two Per Cent, per annum too high a Rate of Interest, 136 SECTION vm. The Reduction of Interest would be an equal benefit to the Producing Classes, whether Property should Rise or Fall in Price, in consequence of such reduction, . 139 SECTION IX. Eflects upon Producers of High and Fluctuating Rates of Interest 1*2 SECTION X. Tha Oppression of Labor by a Monopoly of Land not 80 great as the Oppression by High Rates of Interest on money 147 SECTION XI. The Rate of Interest determines the Price of Property, and a Rise of Interest increases the Power of Money to command property, 168 SECTION xn. The Rise of the Rate of Interest increases the Liabi- lities of all Debtors '64 Vi OONTENIS. SECTION xm. Rents, whether High or Low, bear the same Relatire Value to their Principal; bat when the Per Centage Interest on money is Increased, not only is its Rela- tive Proportion to the principal Increased, but each Fractional Fart has Increased Yalue, 15 S SECTION XIV. To Cheapen Prices by an Unjust Rate of Interest and a Scarcity of Money, is but to Cheapen the Labor of all producers, and Give their Earnings to Capital- ists without an equitable equivalent, Ifil SECTION XV. Voluntary Agreement no Test of a just Rate of In- terest, 164 SECTION XVI. The Law of Interest on Money an Accumulative not a Producing power, 133 SECTION xvn. Estimate of a just Rate of Interest, 175 SECTION xvni. Beneficial Results to Laborers and Merchants from the Reduction of the Rate of Interest, If g SECTION XIX. The Low Prices of Labor in European countries not caused by their Low Rates of Interest, 1 85 CONTENTS. VU CHAPTER IV. TBS BANKING SYSTEK. SECTION L fbe Kature of Banks, their Institution, and the Prin- ciples by which they are governed 193 SECTION n. The Amount of Specie owned by the Banks, and the Interest paid by the people on Bank Loans, 203 SECTION m. Basis of the Bank of England, 215 SECTION IV. The Balancing Power of Bank !N^otes and Deposits,. . 217 SECTION T. The Management of the Banks, and the Effects of tjjeir (^ration upon the Prosperity of Trade and Productive Industry, 219 SECTION vt Remarks on the Repeal of the Usury Laws, 249 CHAPTER V. The Amount of a Currency should be Limited onJy by the Wants of Business 264 CHAPTER VL The Necessity of Credit, 261 VUl CWNTENTS. nam CHAPTER VII. A well regulated Currency Impossible under Present Laws, 263 Recapitulation, SM PART II. CHAPTER I. The Security of a Paper Currency, 269 CHAPTER n. THK SAFETY FUND. SECTION L The Formation of the Money, and the Mode of Issae, m\S SECTION XL Tne Security of the Safety Fund money, 218 SECTION in. The Rate of Interest on the Safety Fund money, .. . . 282 SECTION IV. Organization and Management of the Safety Fund, . . 286 SECTION V. The probable Amount of Safety Fund money, 288 CONTENTS. U CHAPTER III. The Advantages of the Safety Fund money OTer Specie 290 CHAPTER IV. OBJECTIONS TO THE SAFETT FUND CONSIDEKm), SECTION I. Objections to a Paper Currency on account of Foreign Trade considered, 296 SECTION II. Sundry Objections — ^the Effects of the Safety Fund on our Banking Institutions, etc., considered, 300 CHAPTER V, Advantages of the Safety Fund, 307 Conclusion, 318 AiTKNCix, 885 BIOGRAPHICAL SKETCH OF THE AUTHOR. As an introduction to the fifth edition of my father's work, and in compliance with repeated requests, I shall offer a sketch — though it must be an imperfect one — of his life ; chiefly for the sake of telling why and how this book was written. Edward Kellogg was born at Norwalk, Conn., on the 18th day of October, 1790. He was the son of a substantial farmer, enjoying the comforts of life ; each child of the numerous family, however, was expected to do its part toward the common support ; and he was early set at work, bringing the cows from the pasture, riding the horse while his older brother ploughed, and doing, when he was ten years old, half a man's work noeing corn. The hired men who haryested for his father, observing the lad's deep set, deep blue eyes, said to each other in their homely phrase that he would make a smart man. Soon after he was of age, he began to buy goods in New York and sell them to country storekeepers in New Jersey, Pennsylvania, Maryland and Virginia, learning a great deal about men and things in the journeys he made for this purpose. In 1817 he married Esther P. Warner, daughter of Lyman Warner, of Northfield, in his native State. Two or three years later he was established in New York as a wholesale dry goods merchant ; soon as senior partner of the firm of Kellogg & Baldwin, and later as chief of the firm of Edward Kellogg & Co. of Pearl street. When he was about thirty years old his mind was deeply wrought upon by questions of theology and morals, and reading the Bible only, he abandoned the so-called orthodox tenets ; when mat- ters of business were not immediately before him, he studied ardently in his own thoughts the relations of man to his Creator and to his feilow-man ; on his way from one engagement to another, he usually pondered the meaning of some text of Scripture. He read very few books, but he talked much with other men, and xi XU BIOGEAPHICAL SKETCH OP THE AUTHOR. always weighed new thoughts that were thrown out. Singularly fearless and free in mind, he was continually investigating opinions to ascertain whether they were true ; and whenever he had learned anything he was quick to communicate it to others. But he chiefly sought to draw out their minds and induce them to think for themselves. To this end he used to talk much with young per- sons ; and, in the intervals of business, with the young men who were employed in his counting-house. His thirst for knowledge was BO great that he seriously contemplated giving up business and devoting himself to study. At the same time he was eminently practical. No facilities then existed for ascertaining quickly the commercial, standing of men, and the firm often sold on credit to persons living in remote parts of the South and West. When a new customer appeared the clerks would call Mr. Kellogg to talk with him a few minutes, and then he would say whether to sell or not. One of these young men, who learned business under him and is now the president of a national bank in the city of New York, says of him : " He was the best judge of men that I ever knew ; his judgment of them was almost infallible." A man of stainless char- acter and reputatioHj he conducted a large business with honor and success. His advice was frequently sought by younger men ; and he was called upon to fill various offices of trust. During those years he did not speak of business matters at home, but he talked much with friends and neighbors about theological doctrines, principles of morality, about political questions and the man- agement of the banks. As a child I used to sit down near him to listen, being greatly attracted by his animated and earnest discourse. In 1837, the financial panic occurring, he was unable to make collections from his debtors, and, though having assets largely in excess of his liabilities, was obliged to suspend payment, and saw his affairs thrown into what seemed to be almost inextricable con- fusion. But, gifted with indomitable energy and courage, he met misfortune for himself unflinchingly ; maintaining his Integrity and reputation, saying afterward, " If I lost everything I had, I was determined not to lose myself." When an old acquaintance, who died a few years ago leaving a princely fortune, came one evening with his wife to drink tea and said, in lugubrious tones, " Mr. Kel- logg, what are we coming to?" my father instantly replied in his pleasant way, " It is plain what you and I are coming to Mr. P. ■ we are coming to our tow trousers again ; " whereupon the ques- BIOQEAPHICAL SKETCH OP THE AUTHOR. Xill tioner laughed heai'tily for the firat time since the panic, and they spent a cheerful evening. Yet, while he thovight carefully and anxiously of his obligation!! and attended faithfully to all that was to be done, his mind turned with earnest ;ind eager inquiry to the cause of the great calamity in which he saw so many involved. He perceived that it was the result of the existing monetai'y system, and he began to study out the origin of the evils. He soon became convinced that the money of a country, being a public medium of exchange, ought not to be put under the control of private corporations, but ought to be instituted by the government for the benefit of the whole people, and so managed that usury could not be exacted, and that losses in exchange in sending money ft-om one part of the country to another should not be incurred. His soul was moved with indignation at the extortions of usurei-a, which came continually under his notice ; and he caused a friend to write a pamphlet setting forth some facta that he furnished. This was printed in 1841 by Harper & Brothers, and was called " Usury and its Effects : A National Bank a Eemedy. By Whitehook." His idea then was that a, national bank should be created with a capital of fifty millions, with branches in every State, limited in dividends to five or six per cent., and compelled when its surplus profits exceeded five per cent, on the capital to reduce the rate of interest on its loans. He had not Ttt ascertained the real nature of money nor devised the true remedy. He still worked in his mind at tlie problem, for he knew he had not solved it. He saw that money ought not to be made of gold and silver, which cannot be had in sufiicieiit quantities to meet any great financial crisis, and which nobody wants when confidence exists ; that it must be a legal representative of value, and thought it ought to be founded on real estate, or on the public credit resting on the national resources; he saw how to issue it in exchange for mortgages of productive real property — there was no great public debt — but how to redeem it? He tried it in every way he could imagine ; he knew there must be some right way of doing it, but what was it? it was of no use to point out the evil unless he could show a remedy for it. He thought upon it by night and by day, and at last, after looking for it three yeai-s, one night in the spring of 1843, as he lay in his bed revolving once more his problem, it dawned upon him like an inspiration, " Redeem it with a bond BEARING INTEREST." He turned it to and fro for a moment 2 xiv BIOGRAPHi:CAL SKETCH OP THE AUTHOR. and exclaimed, in the very words of the old philosopher, " / have fowndit!" Deeply impressed with the value of his discovery, he began at once to write out his ideas. He had had only a common school education, and, as he used to say, " very little of that." He thought himself " the furthest man in the world from writing a book." He disliked to write letters, and made his clerks write for him if pos- sible. But now, morning and evening in the midst of his family, and in moments snatched from basiness at his counting-house, he set down upon paper the new and stirring thoughts with which his mind overflowed. He had ever been apt to teach, adapting him- self carefully to the minds of others, and taking the greatest pains to make facts and ideas intelligible to them ; and he wrote simply and vividly. But thinking some revision was desirable, and not having the time nor the practice to do it easily himself, he caused one of the young men in his employment to copy and amend for him. One evening — I was then seventeen years old and was always hovering about him — he showed me some leaves of the manu- script. In my secret heart I thought the amendments were not well made ; but I only said to my beloved father, " I think I could do that." A little surprised, he rejoined, " Do you ? well, you may try." The next morning he left some pages with me ; at night I had a copy ready for him, which he altogether ap- proved ; and from that day I became his " scribe," and presently his devout disciple. He was intensely moved by the wrongs that he saw everywhere weighing on the workers of the world through this gigantic, hidden power of money; he knew he had devised the means to overthrow this power, so he worked on at a white heat, tfow his relatives and friends began to remonstrate with him. One man of mark, a lifelong friend whom he greatly valued, said to him: "Mr. Kellogg, this is the most difiBcult part of political economy ; no one has ever understood it. It has puzzled the wisest heads from the beginning until now, and you cannot solve it : you will only succeed in bewildering yourself. Besides, your own affairs are in a very perplexing condition and reqi'irp. all your attention ; and it is against your interest to do anything about it." To which he replied: "I have an interest in the human family B,nd I have discovered sometliing that is for their benefit. I shall write it ; I should if I knew that I could make a million of dollars Jf I did not ; and that if I did, I should live on a crust of bread and die in a garret." So the writing went on. BIOGEAPHICAL SKETCH OF THE AUTHOE. XV About the last of July, 1843, enough had been written to cover, as he thought, the important points. He cast about to see whom he could interest in it, and how he should get it printed. Having a high opinion of Mr. Horace Greeley's character and benevolent aims, he invited him to come and hear it read. Mr. Greeley, ever prompt to consider any proposition for bettering the condition of mankind, accordingly came twice to Brooklyn — whither the author had removed in 1838 — and my father assigned to me the pleasant task of reading the manuscript to him. The good man heard it through, and said it oj^ght to be published : he seized upon it and carried it away with him, giving it, with my father's consent, to Burgess & Stringer, 222 Broadway, to be published. It was printed at the author's cost, in newspaper form, of which, so far as I know, only the one copy now in my possession is extant. It was entitled, " Usury : the Evil and the Kemedy ; " and contained the following paragraphs, this being the original of what is now attri- buted to many different persons and called the interchangeable bonds and money proposition. I quote as follows : " For the purpose I have before mentioned [to supply the people with a good and sound currency], the United States should establish an institution, which I shall here call a Safety Fund. I give it this name because I think it will be the means of securing to the producers a fair remuneration for their productions. It will save us from the power of any foreign nation over our Internal Improve- ments, or anything else of great importance. It will enable the nation — as far as man can have such control — to decide its own destiny. Therefore it will be a National Safety Fund. " In order to explain the nature of this Safety Fund, I will here write out, in full, two bills, one for a circulating medium, the other for a Treasury Note. By reading these the system may be almost entirely understood. Should such an institution be established, the bUls might be more brief, as the laws on the subject would be known, and it would be mmecessary to have as much expressed as in the following ; (Circulating Medium, or Safety Fund Note.) " The United States promise to pay to A. B., or bearer, at their Safety" Fund, in the City of , One Hundred Dollars, in a Treasury Note, bearing interest at the rate of two per cent, per an- num, payable half-yearly in gold or silver coin; and imtil such XVI BIOGRAPHICAL SKETCH OP THE AUTHOE. payment is made this note shall be a legal tender for debts, the same as gold and silver coins are now a tender.'' (Treasury Note.) "One year from the first day of May next, or any time thereafter, the United States promise to pay to A. B., or bearer, in the City of , One Hundred Dollars, in Safety Fund Notes ; and untU such payment is made, to pay interest thereon half-yearly on the first days of May and November, at the rate of two per cent, per annum in gold or silver." "It will be perceived that the note intended as a circulating medium is made a tender for all debts, that it is issued by Govern- ment, and payable in Treasury Notes. The Treasury Notes are to bear interest ; hence there can be no money in circulation but what the holder can at any time put on interest where the loan would be entirely safe, and the interest payable half-yearly in specie ; so that money can, at all times, be loaned for a certain income secured by the nation. One year after the first of May ensuing, the holder can convert the loan again into the legal currency of the country, so there never can be a surplus of money which may not be made productive." The newspaper contains no date of publication, but the leading article of the New York Tribune of August 17, 1843, evidently from the pen of Mr. Greeley, had the beading, " Usury : the Evil and the Eemedy," and began, " Such is the title of a powerful essay which has recently been published in this city, in a cheap news- paper form designed for general circulation. The intent of the author is evidently to probe the evil to the bottom, and not to rest in mere grumbling at it, but devise and suggest adequate means for its removal." The main features of the plan are clearly and forci- bly stated in this article, with a recommendation to all who think excessive interest an evil to procure and read the paper. My father then did his utmost to circulate the essay. He sent it to many editors, the paper itself containing a request that they would copy parts of it for the good of the public. On the 28th of October of the same year, a synopsis of it in four columns was printed in the Tribune ; and, in December of the same year, it was issued, at his cost, as a supplement to the New York Cbmmercrol Advertiser. Then he had it put in pamphlet form, with some addi- tions, and stereotyped. It was called "Currency: the Evil and , BIOGEAPHICAL SKETCH OF THE AUTHOR. XVII the Eemedy,'' by Godek Gardwell, these words containing the let- ters of his name. About this time or a little later, he gave up business as a mer- chant, and, retaining an office in New York, spent his time in the care and improvement of his property. He continued to think and to write on the money question. Sometimes he wrote at length, but oftener a few pages only on any point that was in his mind. When a " good idea " occurred to him he set it down. Sometimes the same in slightly varied form appeared often, especially in regard to the representative value of money. The subject was so important, the need of clear ideas and simple illustrations to combat the old errors so evident, it was all so urgent that he could not say it too emphatically or too much. Then the subject ramified in such a way ; it was so vast, touching upon most of the material interests of men ; it lay at the foundation of public justice and good morals : the new system was capable of effecting a beneficent revolution, and would, too, by and by. All these things and more were seeking expression. His mind worked so deeply that he often went along the street, noticing nobody, seeing only the idea that he was pur- suing and endeavoring to eize. Some time after the essay was published, when he had a mass of papers thus written, various in subject and length, he told me he wanted me to " arrange them in some order," copy, and get the whole ready for the printer. Though dismayed at being called upon to set in order the subject-matter, it did not occur to me to say I could not do it; I must at least try, if my father expected it. After a time I thought I saw the proper sequence of the argu- ment, and sorted and arranged the papers in chapters and sections accordingly. Perhaps a less formal mode might have been better ; but the author himself found no fault with it : he, with his origin- ating mind, "would rather write ten than arrange one ; " and he was occupied in searching out ideas and principles. Almost every day there was something new ; a page or two came home on the back of a letter or on a sheet of paper doubled up in his pocket, and must be assigned to the proper place ; sometimes a section re- written because the new was better, or to introduce fitly a fresh idea or illustration ; then a large part of the chapter on the banking system was written. I used to go over it all again and again by myself during the days while- he was away at bis office, occasionally suggesting the writing of something on this or that point to fill out the course of thought ; and in the evenings and on Sundays he read xviii BIOGRAPHICAL SKETCH OF THE AtTTHOR. it over, or we read it over together ; sometimes spending hours on a single paragraph, to make it clear and simple. Unwearying thought and care were bestowed on the whole ; but the chapter on the nature of money received specially vigilant and repeated revision. For recreation we used to talk together, often into the midnight hours, of the blessings that would flow to mankind from this grand new truth ; and we said, that some day the nature of money would be so well understood, and the system so much a matter of course, that people would wonder it had ever been needful to write such a book, or take such pains to argue the question. When it was nearly finished he invited a friend to hear it read, who suggested further omissions and condensations. Then my father went over it several times more, always making some emendations, and five years from the time he began to write it, it was copied out for the printer ; con- taining then in substance all and in length about one-third of the origioal matter. The book was p'-blished in the winter of 1848-49, under the title of " Labor and other Capital : the rights of each secured and the wrongs of both eradicated ; or, an exposition of the cause why few are wealthy and many poor, and the delineation of a system which, without infringing the rights of property, will give to labor its just reward. By Edward Kellogg." It was stereotyped and printed at his expense, and he had it for sale at his office, then at 47 Stone street. He hoped he had now written something that would awaken the public attention and direct it to this momentous question ; but his book failed to attract much notice, and his plan was called visionary, impracticable, Utopian. Here and there a man read it who per- ceived its power. One old friend of his, president of a bank in Maryland, said, " Mr. Kellogg, I have read your book, and it is all true, every word of it ; but nobody will buy it, nobody will read it, and it will lie on the shelf: but if you will write one on the other side of the question, it will go like hot cakes." A year or two after it was printed, a gentleman, to whom he had lent a copy, said to him, " Mr. Kellogg, your book is true ; it is in advance of the time, and the people of this generation do not appreciate it ; but future genera- tions will raise monuments to your memory.'' An editor, too, said to him, " Do you know that this book of yours is the most radical one that ever was written ? " Yes, he knew it ; nothing was new to him in regard to the deep-reaching nature of his work. He remarked, " This will break down every despotism. As soon as the system is BIOGEAPHICAL SKETCH OF THE AUTHOE. XIX adopted in this country and its results are seen, the people of other countries will compel their governments to establish it ; these prin- ciples are of universal application, and will be ultimately adopted by all nations ; then ' a nation shall be born in a day.' " This last was a favorite expression with him ; he often quoted texts of Scrip- ture in connection with his plan. He said, too, " They cannot bring me any question relating to this subject that I cannot answer, when I have had a little time to consider it." At various times he had written papers expressly for certain public men, setting forth the advantages of his project, hoping to gain the ear of some one who might speak of it effectively to the people. He wrote to Henry Clay, and paid him a visit, making a great effort to interest him ; but nobody cared for this newly-dis- covered truth. He spoke often of the oppression of the laboring classes of England, and wrote an article showing how to remedy it, which he sent to the London Economist, but it was not printed. When the book was first published he sent it to Proudhon, and the prominent members of the French Assembly, as well as to other statesmen in foreign countries ; ever hoping somebody might perceive its worth, who would endeavor to put it in practice for the good of the people. He placed it in the hands of editors, members of Con- gress, and Cabinet officers at home. He used to say, " Some men tell )iie this is a very good theory, but it would not work in practice ; but a theory is of no value unless it can be put in practice ; the practica- bility of a theory and the good results flowing from it are what make any theory valuable." It burdened his soul that he could not make men understand, nor even fairly look at a subject laden with the liberty and well-being of mankind. The few instances I have noted are almost the only ones I can recall of a cordial recognition of his work. He continued to write occasionally when some fresh thought or striking illustration occurred to him ; and he spoke of making a new book ; thinking again that perhaps he could produce something different in expression and illustration, yet the same in principle, which would reach the public ear. But when he considered that the people were not yet alive to the importance of a better monetary system, and that a great deal of thought and labor had been given to the book, he resolved to take it as a basis, and make it more valu- able and interesting by incorporating the new matter with it. Re- marking to him once in reference to a passage, "Father, that is so simple it does not seem as if there were any need of saying it," he XX BIOGRAPHICAL SKETCH OF THE AtTTHOE. replied, " It is perfectly simple ; but people do not know it." And, " What astonishes me is that no one has ever found this out before. I cannot see how the world has gone on so long without any one understanding the real nature of money." " I do not need to hear the history of the monetary laws of nations. If I take the present condition of the people, I can teU pretty nearly what sort of money they have had." "Political economists fill their books with ac- counts of things as they are, but they do not show us any means by which the old evils they depict can be done away." Sometimes he used to call money, because of its present elasive, deceitful, and hidden power, a money-devil, and say that it ought to be chained, so that it could not devour the substance of the producers. He was the most companionable of men : and though his conver- sation naturally turned to matters of government, law, or religion, he liked lighter topics too ; was quick at repartee, could tell a good story, was fond of games, and ever loved a joke. He had a great respect for the common mind ; he loved little children and tenderly drew out their thoughts ; he had a lively sympathy for the pleasures and occupations of others, and everybody could do his best in that cheerful and inspiriting presence. He was withal a man of an un- usually beautiful and dignified aspect ; of a manly form, above the middle height, having finely cut features, a pure red and white complexion, dark blue eyes, a firm mouth, and soft gray hair lying in abundance on a noble head. His countenance was expressive of power, refinement and benevolence. When he was conversing on some of his favorite topics, and especially when speaking of the exceUent results to flow from just laws, his face sometimes assumed the innocent and joyful expression of a child. The moral effect of his system was always uppermost with him. While he foresaw, perhaps as few others can, the physical benefits to follow upon its establishment, the prospect of peace and good-will among men was the one which most delighted him. " The millennium can never come," he would say, " until this system goes into operation ; but then it can come ! " The foundation of contracts being laid in jus- tice, order and beauty in the state and in society could arise. As I listened day by day to his conversation, I often thought of making a written memorandum of it, but did not. In arguing a question he frequently began at a distance so remote that one did not see the connection ; and as he approached the point, he brought by means of the train of thought, an unexpectedly great force to bear, carrying conviction to the mind of his hearer. He talked of BIOGEAPHICAL SKETCH OP THE AUTHOR. XXl righteousnesa, and of justice and mercy, drawing much from the Bible: how often he quoted, "Justice and mercy have met to- gether ; " adding, " There is no justice without mercy ; it is just to be merciful." He said he had thought a very great deal more about religion than he ever had about the currency, and that he could not have written the book if his mind had not been free on religions subjects. He spoke of writing a book on faith, but he never began it. He said, too, that he could write a code of laws ; but he always added, " When my system goes into operation the laws will be very simple ; they will be few and easily understood ; there will be much less litigation.'' He remarked that if the laws were just it would not make much difference which political party administered them. He conceived that party strife would be diminished ; that legislative bodies would come together less fre- quently, and he inclined to favor direct taxation for government expenses. He said it was supposed that a country might be so wide, and a nation so numerous as to fall apart because of the bulk, but if the laws were just, and a true system of money were instituted, the country might enlarge and the people multiply without dis- advantage. It was during the later years of his life, whUe hS mind was occupied with these subjects, that a committee of gentlemen in- vited him to take the presidency of a bank, urging that if he would consent, such confidence was felt in his management that the stock would be taken immediately ; and the United States Government appointed him to appraise the value of some lands ; but he declined these offices, as he had previously declined a minor political one. I mention these otherwise trivial incidents to show his reputation as a practical man. In the summer of 1857 it became evident that his hitherto vigor- ous health was declining, and a few months later the presence of a painful and fatal disease was disclosed. During the financial pres- sure of the autumn he felt intensely for the general suffering, which, in his then weak condition, seemed almost beyond his endurance ; and said, " It is not the trouble in my own affairs, but it is the cattse of these calamities that wears me out." He wrote an article for the New York Tribune, copied in the appendix of this book. The an- nouncement of his approaching departure he received with the equanimity that distinguished him ; saying, " It is usually our duty to prepare for life, but circumstances change ; there is a debt of nature that we all must pay, and I have considered our duty in re- xxii BIOGRAPHICAL SKETCH OF THE AUTHOE. lation to it for many years ; and it does not alarm me at all — not a bit. I shall still be in the presence of the same Being before whom I have lived ; there will be no change in that." He continued to go to his office as his strength permitted, and to attend to his affairs. At home he caused me to read his book through to hixn, after the lapse of seven or eight years listening to It with marked satisfaction, and saying that it was much better than he had thought it. When we came to the passage where it is said that those who neither lend nor borrow money, and have not the mental grasp to understand how the rate of interest affects the re- ward of their labor, shall yet benefit by the institution of the new system, he was visibly affected, and said, " If I did not know who wrote that book I should say, that sounds like Christian legisla- tion ! " He changed the title for the present one, made some amendments, dictated a few paragraphs, and from time to time spoke to me of some points which he desired to have enforced ; es- pecially that the rate of interest ought not to exceed the expense of instituting and circulating the money ; but he added that at one per cent, it could not be made oppressive to the producers. He had previously said that no doubt an attempt would be made to lower the rate of interest gradually ; but, in his judgment, it would be much better to bring it at once to the just standard ; then every thing would adjust itself to that, and there would not be a series of readjustments consequent upon lower and lower rates. He said, " If there should be a war in this country, my system would be much more likely to go into operation ; for the government would be com- pelled to issue a large amount of paper money to carry it on." * In those days of physical weakness and suffering, when greatly oppressed by the general lack of appreciation for this truth, it soothed him to have me talk to him with feith and hope of the coming day of recognition for it. I promised bim that I would print a new edition of his work, and make additions to it from his manuscripts. He gave me all his manuscripts, though long ago I had often said to him that those were my perquisite, valuing them highly, and he had assented, remarking. "There are some good ideas in those old papers that you have not got out yet." But now he gave them to me definitely, and the copyright, and all the * Those who proposed and carried the legal tender act can tell what streaffth they derived from the facta and arguments of the Neui Moiwiary Si/slem which was freely circulated among memhers of Congress and others at "Waahlngton. BIOGRAPHICAL SKETCH OF THE AUTHOR. XXIU remaining copies of the essay and the book— and I received thero as one who takes a sacred trust for the people. He said, " Mary, 1 love my friends, I love my family ; I take a great interest in theii welfare ; but I care more for that book than for any thing else, it is of such vast importance to the world." Soon after this he could no more go out, nor go to his writing- room, and for three weeks his family watched beside his dying-bed. He bore intense suffering with resolution and uncomplaining forti- tude. Once as he lay apparently asleep I heard him say, " That is shortly expressed," and asking what he said, he replied, smiling, "I was dreaming — about usury, I guess." Again when I heard some word, he said again, " I was dreaming — pleasant dreams — all my thoughts are pleasant." To an old and valued orthodox friend, who, knowing he did not hold the usually received religious opin- ions, asked him how he should appear before a just God, he replied, in tones of solemn sweetness and serenity, " In regard to that I feel a perfect peace. You may think strange of it. Judge, but I do." Each day until the very close he gave directions respecting his affairs; in the extremity of death he did not neglect to greet a, friend ; and in perfect possession of his faculties up to the instant of his departure, on the 29th day of April, 1858, this great soul went hence. We who sat beside him day and night, and saw his grand com- posure, could but think of the old philosophers, to whom, in mind, he always seemed to me akin. My spirit went up with him to the company of the saints and reformers of every age. We laid the wasted body in a grave on Chestnut Hill in the Greenwood Cemetery ; but not until a cast of his head had been taken, that the sculptor might reproduce in marble his lineaments, for those who shall some day desire to see his face. I have now told, according to my ability, who and what he was who wrote this book, and how he was moved thereto ; trusting that it may comfort and encourage those who are to endure the stress of the coming struggle ; that they may know more intimately their pure and benign leader, to whom was denied this conflict which he so ardently sought ; that he was not a closet thinker, as some have called him, but up to the close of a long life actively engaged in affairs ; mingling freely with men and partaking of the ordinary cares and joys ; though having endured toil and hardship, not a dis- appointed, but, in the main, a successful man ; known to most of his business acquaintances in no capacity but as one of themselves, yet, XXIV BIOGRAPHICAL SKETCH OF THE AUTHOR. with his deep nature, having, as he himBelf said, " an inspiration of the truth " on this all-important subject. In closing I must add, that a few days before his death I said something to him, I do not remember what, about writing some recollections oi' his life, and he answered me, " I don't think much of these biographies. Every child thinks its own father and mother the best in the world. My book will show what my character was." M.K.F. Elizabeth, N. J., December, 1874. PEEFAOE. Thk laboring classes of all civilized nations have beea, and are, as a body, poor. Nearly all wealth is tlie production of labor ; therefore, laborers would have possessed it, had not something intervened to prevent this natural result. Even in our own country, where the reward of labor is greater than in most others, some cause is operating with continual and growing effect to separate production from the pro- ducer. The wrong is evident, but neither statesmen nor philanthropists have traced it to its true soiirce ; and hence they have not been able to project any plan sufficient for its removal. The design of the present volume is to show the true cause ; and to illustrate its operation so plainly and variously, that any ordinary miad may easily perceive how it has produced and continued this un- natural oppression of laborers. It will also be shown, with equal clearness, that a simple and effectual rem- edy can be applied to the removal of the evil, A good government must have some system by which it can secure the distribution of property according to the earnings of labor, and at the same time strictly XXVI PKEPACE. preserve the rights of property : and no government, whether repubKcan or not, that fails in these particu- lars, can insure the freedom and happiness of the people and become permanent. The plan proposed to secure this distribution is obviously safe and cer tain ; and it contemplates no agrarian or other similar distribution of property, nor any interference in con- tracts between laborers and capitalists, or in the usaal course of business. Fulfilling these requirements, it can hardly fail to recommend itself to all thinking men. Therefore, it is confidently believed that when the plan shall become generally knovm, it will be quickly put into operation, and thus save the produc- ers of this nation from the oppression, degradation and misery which have befallen the laboring claseea of all other countriea. A M¥ MONETARY SYSTEM. INTRODUCTION. All civilized nations enact certain fnndamental laws. These are governing powers, and subsequent laws are intended to carry them out into practical use. The most important fundamental law in any nation is that which institutes money ; for money governs the distribution of property, and thus affects in a thousand ways the rela^ tions of man to man. If wrongly instituted, it cannot be rightly governed by any subsequent laws ; and the wrong distribution of property consequent upon it must corrupt society in aE its branches. The evils engendered can never be remedied except by altering the funda- mental law. Changes in the subsequent laws, so long as they are founded on a wrong base, can only result in the exchange of one evil for another. The proposition that wrong premises will produce wrong conclusions is often stated, yet it is seldom fully understood and properly appreciated. We will therefore, by means of one or two simple illustrations, show the governing power of a fiindamental principle. — ^A good house cannot be built except upon a good foundation. The mason-wck above may be laid of the best material and by the be«t work- men ; but if the foundation be not souna, and sink at ea(!h corner from five to twenty inches, although thf II 18 narEODUcnoN. house should not fall, yet this movement of the founda. tion will distort the floors, ceilings, roof and rooms from their proper shape ; and no propping or patching up of floors, ceilings, roof or rooms will ever make the house a good one. It will be directly the opposite, it will be a poor one ; and as the foundation continues to move, will constantly need repairs. A valuable machine cann it be invented except upon true mechanical principles. Let a man invent a machine founded upon a false principle. Every part of it may be well made of the best ma- terial, and when finished it may present a plausible ap- pearance, yet it either wUl not work at aU or it will work imperfectly, and can never be good until it is founded on true mechanical principles. The stability of a house shows the character of its foundation ; the results produced by a machine show the worth or worth- lessness of the principle on which it was invented ; and with equal certainty the centralization of property in a nation shows the character of its monetary laws. If great wrongs prevail while there is a general conformity to laws apparently designed to secure justice, there must be, in spite of appearances, some defective law or institution, which is a sufficient cause of those wrongs. The general evils naturally and inevitably flowing from it are easily seen, like the parts of the building above ground, and Hke the wheels of the machine that are open to view, while the great radical defect in the ground- work may be so hidden from public sight as to attract comparatively little attention. One of the chief objects for which governments are constituted, is to insure the protection of the rights of property. The security of these rights is essential to the welfare of a people. Their infringement is the cause of nearly all legal procedures. Such crimes as theft, gambling, fraud in business, bribery in courts of law, etc., consist in unjustly obtaining property without ren raTKODDCTION. 19 dering an equiTalent. To obtain labor without rendering a fair equivalent, is also a violation of the rights of property. Property is almost entii-ely the product of lahor, for even food of spontaneous growth in the seas or on tho land cannot be gathered without labor. Labor has effected every improvement in our country ; it has built our cities ; cleared, fenced, and improved our farms ; constructed our ships, railroads and canals. In short, every comfort of life is the fruit of past or present labor. If any one is in doubt whether labor is the actual pro- ducer of the wealth, let him consider what would be the situation of this or any other civilized nation, if the laborers should cease their toil for the brief term of five years, letting the earth for that period bring forth only her spontaneous productions. Let man neither sow nor reap, let manufacturing cease, commerce be suspended, and what would be the condition of our country at the end of the five years ? Would not a large proportion of the people have sunk into their graves from starvation ; and would not many who were living be almost naked like the barbarians ? K the earth should open her chasms and spew out pure and malleable gold and silver, as plenty as the rocks in the mountains, it would afford no rehef. But if she should cast out wheat, com and vegetables, beef, pork, mutton, poultry, besides gar- ments, houses, furniture and so forth, the people would be supplied with the means of subsistence. In such a case we might do without the labor of man. But if we had all the gold and silver money and all the paper obli- gations that have been made from the creation of the world to the present day, they would not be the least substitute for the productions of labor ; and yet our laws make these legal instruments in the hands of the few to trample in the dust the rights of the laborer, on whom we depend for every morsel of food that we eat. 80 INTEOD0OTIOM. for the clothing -we wear, the houses we live in, and in fact for every comfort and luxury of life. A moderate amount of labor readily produces an abun. dant supply of necessaries and comforts for man ; but the present distribution of these products is such, that a lat fe number of those who labor much more than their sh^ e in the production, receive a very small proportion of tl e products, while the larger proportion accumulates in the possession of those who are employed neither in produo- ing nor in distributing them. The greater portion of the human family toil day by day for a scanty subsistence, and are destitute of the time and means for social and in- tellectual culture. The industrious poor, as a class, do not obtaLa even a competence. Their destitution often in- duces them to trespass against existing laws, to obtain a small proportion of that, which, under just laws, would be abundantly awarded to them as a fair compensation for their labor. AU candid men will acknowledge this truth, that the wealth is not distributed in accordance with either the physical or the mental usefulness of those who obtain it. Opposed to the masses who live in toil and poverty, is a small proportion of the human race, sur- rounded by all the appliances of luxury, and living in comparative idleness ; while their abundant means of so- cial and intellectual culture are too often neglected, or ren- dered useless by indolence and self-indulgence. These extremes of wealth and poverty, of luxury and want, of idleness and labor, are great, somewhat in proportion to the antiquity of a nation, or the length of time that its monetary law, or system, has been in operation. The wealth of this nation, like the wealth of other na- tions, is rapidly accumulating m the hands of a oompara- tively few persons in our large cities. Still it is indispu- table that cities are great consumers of wealth, while they are comparatively small producers. The labor of the country furnishes nearly the whole support of tht tHTEODTronON. 21 oitieB. The rewards of labor paid by the cities and th« country respectively to each other, to be justly recipro- cal, ought to be in proportion to the services rendered to each other ; but the immensely greater amount of wealth flowing to the cities, iUid the less to the country, is clearlj opposed to this just reciprocity. This wiU be more ap- parent by supposing the large Atlantic cities to be cirt off from all interchanges with the country. In a short time their citizens would be destitute of food, fuel, and clothing, for exchanges of their productions among them- selves would do very little toward supplying their wants ; while the people of the country and the small manufac- turing towns, if they had a just medium by which they could exchange their productions with each other, would have an abundant and vastly more bountiful supply than at present of nearly every necessary and luxury of Ufe. They would save for their own use nearly the whole dif- ference between what they now produce for the large cities, and what these cities produce for the country. But even in these cities, where a great part of the na- tional wealth is owned, a majority of the people toil for a scanty subsistence, and thousands of miserable poor are dependent on public charity. In all probability, four thousand of the most wealthy citizens of the city of New York own a greater amount of real and personal property than the whole remainder of its inhabitants. Their wealth is vested in real estate in the city and country, in bank, railroad. State, and other stocks, loans of money, etc. Allow five persons to form a family, and the four thousand men and their fami- lies would form a population of twenty thousand, or two and a half per cent, on eight hundred thousand, the pres- ent population of the city. Upon this estimate — and a little observation and reflection will show that it is not an extravagant one — two and a half per cent, of the popu lation are worth as much as the remaining ninety-seven MS DfTEODUCTlON. and a half per cent. Take the disproportion of wealth on a greater amount of population. We may reason- ably estimate that a hundred and fifty thousand of the wealthiest men in the United States own as much real and personal property as the whole remainder of the nation. Allowing five persons in a family, these hun dred and fifty thousand men, with their families, make a population of seven hundred and fifty thousand, or twc and a half per cent, on thirty millions, the present popu- lation of the country. This calculation will make two and a half per cent, f the population own as great an amount of wealth as the remaining ninety-seven and a half per cent. Our government professes to establish laws for the benefit of the whole people ; and such laws, if justly administered, should secure to every individual a fair equivalent for his labor ; yet probably half the wealth of the nation is accumulated in the possession of but about two and a half per cent, of the population, who to say the most, have not done more labor toward the production of the wealth than the average of the ninety- seven and a half per cent., among whom is distributed the other half of the wealth. Let those who doubt whether two and a half per cent, of the population own half the property of the nation select in their own neighborhood, or in a village contatn- ing, say, four thousand inhabitants, the twenty most- wealthy men, and see if the twenty are not worth as much as all the rest. Or, if the village contain ten thou- sand inhabitants, take the fifty most wealthy men, and see if they are not worth as much as all the rest. Allow- ing the families of the fifty men to average five persona each, they would amount to two hundred and fifty indi- viduals — just two and a half per cent, of the population. If it be found that the fifty men and their families own one-half of the property, then see if Ibey have contri- buted more labor physically, intellectually, or morally, rNTEODTTCnOW. 23 for the general benefit, than tlie rest of the villagers. We do not now speak of what their wealth may have done in hiring others to make improvements, but of the improvements that the fifty men and their families have effected by their personal labor. If they have not accom- plished as much as all the rest of their townsmen, and yet own half the wealth of the town, some wrong to the majority of the people has been done. Not that these men have not acted in as good fdth, or with as upright intentions as other citizens ; or that others would not be equally glad to accumulate wealth in the same manner ; but we ask Jiow it occurs that the comparatively few have so large a proportion ? They have not earned it, for they could not have performed the labor of building half the town, nor of providing half its inhabitants with food and clothing ; nor could they have given half the instruction in the various trades and in the school educa- tion of the villagers. And if they have not done one- half the labor, why is it that they possess one-half the property ? Why is it, too, that we see one industriousf man rise from poverty to wealth, apparently because his business is prosperous, and another man, who is equally diligent in an equally useful employment, remaining with a mere subsistence ? These facts are sometimes attributed to the ignorance and extravagance of the laboring classes. But if all our people were learned in Greek and Latin, as well as in other languages and in the sciences, the ground must continue to be tilled, and railroads, houses, and so forth, built by labor. Not all the education, nor all the money in the world, would make these improvements without the physical labor ; and it ought to secure to those who perform it a just and much larger share than it at pre. sent does of all the comforts of life. Many good scholars aud industrious and intelligent men are poor, while very iudifferent scholars and rather ignorant men have oftet 24 tNTEOBtrarioH. accumulated fortunes. The ignorance ot the laboring classes does not account for their poverty. Nor does want of economy better account for it. What oppoi^ tunity has the laborer to be extravagant, when the price of his day's work would hardly pay that day's board and lodging in a comfortable house in our cities ? Do the actory operatives ia England, Fi-ance and Germany live extravagantly, or the seamstresses in London and New York ? They earn three, four or five times more products than they actually consume, and these go into the pos- session of that class of persons who live comfortably or luxuriously without performing much, if any, productive labor, or advancing the moral and intellectual well-being of society. The wealthy men of a nation are not usually those whose genius makes improvements in the mechani- cal arts, or who, by any species of labor, contribute much to actual production. Their attention is generally directed to the accumulation of wealth by indirect means, which do not require labor.* The injustice of the present distribution of products is still more conspicuous, when we consider that present labor is indispensable to human existence. Although all discoveries, inventions, and improvements, made by all previous labor, are transmitted, free of expense, to suc- cessors, yet the property, thus improved and inherited, cannot give support without present labor. The sponta- neous productions of the earth cannot supply one-twen tieth part of the population with food. Clothing can last but a few years, and buildings, unless repaired, must decay. Therefore, each generation must in the main provide its own means of subsistence. If a generation enact laws through which one-third of the succeedincr * Labor signifies toil, which produces or distributes something actually useful ; and this is the sense in which the term is used in this volume. When toil is directed to wrong ends, it does not deservt duction is a subject of national lamentation, the people who produce by their labor the very things which they need for their own use and comfort, are the ones who are often destitute of them; while a few capitalists who do little or nothing toward the production and distribution, are supplied with all the comforts and luxuries of life at half, or less than half their usual price ? But a surplus of cotton has never remained because no one needed it. In 1844, nearly sixty thousand citizens of New York received the aid of pubho charity. All these needed additional cotton cloth- ing. At least one-half the population of the whole country Avould have made a yearly purchase of Jive dollars' worth of additional cotton clothing, if they could have spared the means from their earnings. In one year ten mUliona of persons would have consumed $50,000,000 worth of cotton clothing, in addition to the previous quantity. Cotton would then have maintained a good price, and the crops would have been consumed. If, during the years included between 1837 and 1844, the laborers in the city of New York and its vicinity, whose occupation was the building of houses, had been furnished with the work which they would have been willing to perform, they would have built a house for nearly every poor family in the city. If the unemployed laborers in the districts where the materials for building, bricks, mortar, timber boards, nails, etc., are usually prepared, had been set al work, the materials might have been furnished, and the buildings erected and paid for by labor. Th-^ laborers nrrEODiroTioN. 31 too, -would have been much happier, for they begged fof work without obtaining it, and many were dependent on public charity. It is plain that there can be no real over-production unless a large surplus remains after all the people havt been fully supplied with the necessaries and comforts ot life. The public cannot over-trade by distributing each year's productions among those who really need them to use. Too high prices cannot be paid for labor, unless the laborers in general actually gain more than their equitable share of the year's productions. Neither can there be an over-stock of laborers so long as thousands are suffering for want of the very articles these laborers would gladly produce, if they could be employed. There cannot be too many houses, when they would be filled with tenants able to pay the rent if work could be obtained. We must look for the real cause of these calamities, not in over-production, but in the power that governs the distribution of the products. But, taking another view of the subject, it may be said that we are a free people, and many suppose we enjoy all the rights that a government can confer. Every one employs himself in labor, trade, speculation, or other- wise, according to his own choice ; sells his labor or products at such prices as he can obtain, and buys the labor and products of others at prices that he agrees to pay. Our government is also deemed beneficent because poor-houses and schools * are provided for tho * In the Tarioua States, a tax ia levied to provide schools for the children of the laboring classes. Under existing laws, this species of charity ia, doubtless, very important. But wealth being the pro duct of labor, the laborers should have abundant means to educate their children; and if a fund be established for the purposes of education, it should be necessary for those -^nly who are unable or unwilling to labor. It ia unreasonable for the laws to be such al to compel the producers of wealth to ask alms of lon-eroduoera. 4 28 DSTEODUCnCN. needy. If a farmer or a mechanic should be told that our laws oppressed him, probably he would say, that he worked at what he pleased, and sold either his labor or its products to whom he pleased, and had no law suits, and therefore, the laws did not in the least Infringe his rights, and would not those of any other man Avho was upright in his dealings. The laboring classes make their own bargains with capitalists, and one another; and all are equally protected in the property which they lawfully acquire. Why then do not laborers get all they are justly entitled to receive ? Looking at the matter in this Ught, it wears an appearance of freedom and equal justice ; yet results prove the existence of some radical wrong lying below this surface view. For we all know that wealth is produced by labor, and uUat the people of the country send the best products of their incessant toil to supply the luxuries of the wealthy in cities ; and that the laborers in these cities build splendid mansions for the opulent, and poor tene- ments for themselves, most of which are also owned by capitalists, and rented to their occupants. True, all this labor is paid for by capitalists according to their agree- ments with laborers ; yet, notwithstanding these volun- tary agreements according to the law of supply and demand, the wealth of the nation continues to aocumulat in large fortunes in the hands of a comparatively few non-producers, leaving a very large number of its actual producers in poverty. These are facts that stand out to public view, and cannot be denied. Freedom of contract, choice of location and occupation, and protection of property, are manifestly proper and right, and ought to be enjoyed by every people ; yet we see they fail, anj entirely fail, to secure any equitable distribution ol property, and any adequate compensation for labor. They fail for the same reason that good materials and workmanship on a bad foundation fail to make a good INTBODtTOTION. 2^ house. Their foundation is unsound and variable, perverting their natural good tendencies, and engender- ing defects corresponding with their wrong basis. A bad foundation for a house affects the edifice above, au'l the few individuals who are interested in its building and use. A machine not founded on true mechanica principles, affects the few who own it, and those interestea in its working. But a national standard of value iika money, which forms the foundation of contracts, and regulates the award of property, thus greatly modifying and limiting all minor rights of freedom of contract, location and occupation, and which a whole nation la compelled to use, must, if it be variable and uncertain, affect injuriously the interests of every individual, femily and association, as far as the money circulates. The present ratesof interest on money enable the owners of property to demand an imdue proportion of the products oflabor for the use of property, and laborers are compelled to make their agreements with them under these circum- stances. Undoubtedly both parties are governed by their own interests in making their agreements ; but the circumstances under which contracts are made, render them very unjust toward laborers. Suppose one of the contracting parties to be in water, where he must drown unless he receive assistance from the other party who is on the land. Although the drowning man might be well aware that his friend on shore was practising a very grievous extortion, yet, imder the circumstances, he would be glad to make any possible agreement, to be rescued. The monetary laws of nations have depressed the producing classes to a similar state of dependence upon capitalists, and they are similarly obliged to make their contracts with them under great disadvantages A very large proportion of the people are actually wronged out of their property, and the earnings of theii labor, by the operation of the laws, although tieir con. 80 INTRODUCnOlT. tracts are voluntarily made, and honestly fUfilled. Neither of the contracting parties may know that either IS injured by the laws, although both ma,j be sensible that justice is really not done them. In all ages and nations, philanthropic men have endea- vored to devise some means of securing to labor a better compensation. Labor-saving machines have been in- vented ; associations have been formed for the purpose of producing with less labor, the earnings being equitar bly distributed, according to the work performed. But these benevolent efforts have failed of any general success. The reason is this : no individuals, nor associations of indi- viduals, can withdraw their labor or their products from the influence of the national laws which regulate distribu- tion. The great disparity in the conditions of the rich and poor is the natural result of imjust laws, and, there- fore, this disparity must continue so long as these laws are in force. I^ however, a father should so dispose of his property, that all his children, except one, should be compelled to work twelve or fourteen hours a day for a mere subsistence, while one son should receive an im- mense fortune, which would supply him with every luxmy without toil, the injustice and injuiy to both parties would caU forth the censure of every right thinking per. son. A government is no more justifiable in legislating so as to produce these results, than a father is justifiable in a similar treatment of his children. Governments are established to protect the just rights of the governed, as much as a father holds his position to protect the just rights of each child. Present laborers, who produce present products should receive a very large proportion of them, and capitalists who do not labor, should receive a corre- spondingly small proportion. How shall this chano-e in the reward of labor and capital be effected? Shall laws be made to detorm/ne the prices of various kinds ot IHTEODtrOTrON. 31 duction. Improvements in implements of husbandry have materially lessened agricultural labor ; and most articles manufactured by machinery are made with less than one-fourth of the labor that was formerly required. We should naturally suppose that these improvements would be a great relief and advantage to the laboring classes ; and that they would feel gratefiil to those who have studied out the laws of nature and invented the machines. Yet both the inventors of machinery, and the operatives, in general, continue to toil on in want, and many of them have neither means nor leisure to educate their children. Increased facility in production seems to increase the number and multiply the wants of those who live in idle luxury, instead of affordiag the desired relief to actual producers. Fifty years ago, the farmers raised, carded and spun their wool ; they raised flax and spun most of their linen ; and cotton was also mostly carded and spun by each family to supply its own wants. Now, farmers who raise wool, cotton and flax, sell the raw materials, which often pass through a number of hands Defore they reach the manufacturer. The manufactured goods again pass through several hands before they reach the consumer. Machinery has collected the people into towns and villages to work in large factories, where they sell their labor, and buy their board and clothing This greatly augments the necessity for the exchange of goods — ^the more machinery the greater the necessity foi exchanges of products — yet there has been no new inven- tion in financial affairs, by which the exchange may be more equitably and easily made. True, we have increased 38 INTKODUCTION. the amount of gold aud silver coins, and the number of banks, bank-notes, and money-brokers, but this is no more an improvement in the medium of distribution, than an increase in the number of pack-horses on the old muddy roads would be au improvement in conveying products, while it would still take the same muscular power to convey a given weight. A railroad made and a steam-engine substituted for horses and oxen, are great improvements in the mode and means of transportation. Though the quantity to be conveyed may be increased tenfold, railroads and steam-engines will fulfil all re- quirements ; whereas if we depended on an increased number of horses and oxen, want of teams and bad roads would often cause great inconvenience. But no inconve- nience of this kind could equal that experienced by the producers in consequence of the defects of our monetary system. Just monetary laws are of more importance to the laboring classes than all the machinery that has been invented during the last fifty years. And when the needed reformation is made, the producing classes, who will gain the benefit of aU improvements, will rejoice at every advance in machinery, and the inventors wiU be hailed as the benefactors of man. Many people seem to be opposed to innovation. They do not consider that all improvements in the mecha- nical arts, or in laws, are innovations upon former things and former laws. The estabhshment of our repubUcan government was an innovation upon monarchies. Peo- ple do beheve that changes may be made for the better, for each year they assemble legislative bodies to remodel old laws, and to make new ones. Every modification of a law is an innovation, and every new law is an innova- tion upon former laws. Every moral improvement is an innovation upon the previous evU. Those who talk against innovation are often great innovators. They are doing, or advocating something to improve the conditio* of man. INTEODUOTTON. 69 The ar.tiquity of laws and customs is not a proof of their excellence. In all ages, and in all nations the pro- ducing classes have been ill paid for their labor. Let us no longer recur to ancient laws and usages to uphold our unjust standard of distribution. Our producing classes ire vastly more interested in knowing how the products of their own daily labor are disposed of, than in knowing Aow the ancients disposed of theirs. We cannot alter the evils of the past ; we must act for the present and the future. Suppose a legislature enact a law which gives a certain part of their constituents great advantages over the remainder. They discover the error, and amend the law so as to operate equally upon all. The alteration is not an infringement of the rights of those who received undue advantages from the former law. It only renders justice to those previously injured. Money is as much the representative of the property of the people, as the legislature are the representatives of their constituents. Its erroneous construction and undue power have made a few rich, and have plunged thousands into poverty. They have sent hundreds to premature graves, starved the widow and the orphan, and given untold wealth to the raiser. They have been the cause of incalculable moral and social evils. It is not to be understood that those who now possess the wealth are worse than others who do not possess it, or that others, if they could have obtained it, would not have appropriated it in the same manner. But oce thing is certain, that an enormous and universal wrong exists, which nothing but an entire change of our laws, respecting money, can remedy. Money is the national standard of distribution, there- fore the evils inevitable upon its present institution, are national evils, which can only be removed by the action of the general government. A defective standard will, doubtless, appear to many an inadequate cause for the wide spread wrongs of unjust 40 mTEODTJOTlON. distribution ; but the fact can be established by the cleai est proof, and such will be adduced in the progress of the work. It will also be shown, that a safe and just monetary system can be easily established by the govern- ment, which will so regulate the standard, that the general distribution of products will be in accordance with actual earnings. When the farmers and mechanics, and other producers, and laborers, understand the system which is to be developed, and perceive its adequacy to secure to them a just compensation for their labor, they will as surely cause it to be put in operation, as they would send their products to Philadelphia or Boston, rather than to New York, if in the former markets they could sell them for a third more than in the latter. The correction and due regulation of money will make no change in the present ownership of property. The changes effected by the establishment of a sound mone- tary system wiU be gentle, immediate, gradual, sure. Only such will ensue as will naturally result from secur- ing to the laborer a fair compensation. Its object will be to protect producers in their rights, and not to re- taliate for past injuries. No agrarian distribution wil! be necessary, but a just standard, that will at once begin to regulate the distribution of products, so as to reward the labor performed, and which will in process of time distribute property in accordance with individual and general rights and interests. Although the bearings of money upon labor may be deemed a somewhat dry sub- ject, yet, under its present new aspect, it is believed that it win prove deeply interesting to all classes. The patient and continuous attention of the reader is soli- cited to the important facts and principles now to be presented relative to the uses and abuses of money, and to the new plan to be suggested for its institution and regulation. PART I. THE PRINCIPLES OF DISTRIBUTION. CHAPTER I. OF TAI,TrHi, VAiiTTK consists in use ; it is that property, or thos< properties, wMch render anything useful. A house that could not be occupied would be worthless, tmlesi its materials could be employed for some other purpose. A horse is valued for his useful qualities ; if he become* disabled, he is worthless, for his use is destroyed. So of everything necessary to the support and comfort of man, it is valuable because it is useful. The same is true of ornaments. They are valuable because they are useful for ornamental purposes. If diamonds were deprived of their beauty, their use, and therefore their value, as ornaments, would cease to exist. A valuable portrait might be rendered worthless by erasing the features. The canvas and the paint, the material of the picture, would remain, but its use would be destroyed. The value of all property is estimated by its useful- ness. For instance, the income that a city lot can be made to produce, determines its value. The interest od t2 OP VALUE. the money that its improvement will DOS';, must be first deducted, together with the taxes, insurance, and repairs necessary to keep the improvement permanently go o d The surplus it wUl yield after making these deductions, determines the true value of the lot. There are two kinds of value : actual value, and Ug(A value. Actual value belongs to anything that inhe- rently possesses the means of affording food, or which can be employed for clothing, shelter, or some other use- ful purpose, ornamental or otherwise, without being exchanged for any other thing. Legal value belongs to anything which represents actual value, or capital. Its existence depends upon actual value. The worth of things of legal value depends upon their capability to be exchanged for things of actual value. The following illustration shows the distinction be- tween actual and legal value, and the dependence of the latter upon the former. The national debt of England exceeds £800,000,000 sterling, say $4,000,000,000. It bears interest at about an average of three per cent, per annum, amounting to an annual sum of $120,000,000. A hundred and twenty millions of dollars' worth of the products of labor, of actual value, must be sold annually to pay the interest ; to pay the principal would require a large proportion of the wealth of the country. If the pa] ler, the legal value which represents and secures the debt and interest, were collected and burned, it would not diminish the real wealth of the nation. It would merely cause a change in the individual ownership ol property. But alter the circumstances, and suppose & similar amount of actual value to be consumed, houses, manufactories, machinery, fences, grain, etc., to the amount of $4,000,000,000, and nearly every improve- ment would be swept from the British Islands. Destroy merely the three per cent, interest of actual value or OF VALTTE. 43 the debt for one year — i. e., products to the amount ot $] 20,000,000, and a famine would ensue ; for actual value, the products of labor, would be destroyed, instead of a legal representative, as in the case of the conflagration of the paper securing the interest. The power of money, like the power of a bond anA mortgage, is legal. A mortgage upon a specific piece o^ land gives the owner of this paper instrument a rigut to a certain portion of the value of the land. A mortgage IB a specific lien, by which one individual binds a certain portion of his property to another. A lien on property, in the technical acceptation, is a judgment recorded on the docket of a court, or a mortgage recorded in the county clerk's office. These instruments hold a right over the property of the debtor, in defiance of him, or of any other person who may have the property in posses- sion. Money is a public lien upon aU property that is for sale in the nation; and the holder of money can, at all times, procure with it the amount of property which It represents, as much as the holder of a mortgage can procure the specified amount of property upon which the mortgage is a lien. Money is, however, a lien superior to all mortgages and judgments ; because, if the specified amount of money be tendered, the owner of the mort- gage, or judgment, is compelled to cancel it. Notes of hand are deemed by aU business men to be liens upon the property of their drawers ; otherwise, although a nian owned ten thousand dollars' worth ot property, his note for five thousand dollars would be deemed no better secured than if he owned no property. If money were not a lien on property, it would be value- less, and people would cease to part with their property for it. The value of notes of hand, bonds and mortgages, book accounts, and money, depends upon their capabi- lity of being exchanged for property. Their power to 44 OP VALCB. accumulate is given by law, and they accumulate a mere legal representative ; that is, interest in money, which is valuable only because, like the principal, it can be ex- changed for a certain amount of actual value. Hence, the value is in the property, and not in the money or in the obligations. Money, and aU obligations, are mere representatives, and depend upon property for theu value CHAPTER II. MONEY-THE MEDIUM OF DISTRIBUTION. SECTION I. THB ITATUEB AJTD PEOPEETIES OF MONBT. Moirarr is the national medium of exchange for pro- perty and products. It must he instituted, and its value must he fixed hy the laws of the nation, in order to make it a public tender in payment of debts. No debt can be paid with property or with individual notes, except by consent of the creditor ; but when money is tendered, all creditors are compelled to receive it in full satisfac- tion of debts. The aim of legislation in regulating the value of money is to insure to all individuals, in making exchanges of their property for money, the full value of their products or property. Debts are postponements of the time of payment for the property or products received ; and loans of money, and all rents of property are mere rents of the use of certain amounts of legal or actual value, which use is to be paid for at the expiration of a specified period. Money is the legal tender, and must be offered and received in payment for all these debts. Certain properties are by law given to some substance, which bears the name and performs the functions of money. The term money, then, signifies a legal, public 4:6 THE POWER OF MONET medium of exchange, which possesses all tL<3 qualifications necessary to effect a just exchange of property. In the discussion of the nature of money, it will appear that its properties are, in truth, the creation of law, and entirely different from the properties of the things which it ex changes. Money has four properties or powers, viz. : power to rop^esent oahie, power to measure value, power to acon' mutate vakte by interest, and power to exchange value. These properties are co-essential to a medium of ex- change : it is impossible that any one of them should exist in such a medium independently of the others. The material of money is a legalized agent, employed to express these powers, and render them available in trade. The powers of money, which alone render it useful, are created by legislation ; therefore, money can possess none but legal value. As all legal value depends upon the actual value which it holds or represents, money must represent actual value — that is, the value of property or labor. SECTION" n. THE POWEB OP MONET TO EEPEBSBNT VAIUE. Money must be a legal representative of property, for ^t is impossible to find any light and portable material possessing the requisite inherent value to equal and balance the value of the property and products to be exchanged. The real value is in the property and pro- ducts, and the money is only the legal medium by which this value is represented and by which exchanges of the property and products are made. Every representative is distinct from the thino- which it represents ; and its presence implies the absence of the thing represented. A representative has power to act for, or m lieu of something else. The power to represent TO EEPBE8ENT VAltJE, 47 IS always independent of the natural or inherent powers of the representative; it is superadded and delegated, and cannot alter the original capabilities and qualities of the agent. Delegated authority gives the agent, the person or thing, power over other persons or things, which, with merely his natural capabilities, he cannot possess. Actiag for himself alone, his acts are all indi- vidual, and incapable of blading any but himself. For instance, he cannot give a note, bond or deed, which will bind others, or the property of others, unless the power be expressly delegated to him. He may receive authority to give a note or bond binding the property of the peo- ple for its payment. This authority does not diminish or alter his capabilities as an individual ; it is superadded to his natural endowments. An ambassador represents our nation at a foreign court. If he be lost at sea, the nation loses but one individual, although he represents and acts for thirty millions. But if the nation should be annihilated, and the ambassador should reach his des- tination in safety, he would cease to be a representative : he would have nothing to represent. He would, how- ever, possess all his powers as an individual — he would lose only his delegated authority as a representative. A representative in Congress is chosen by the people, and is empowered to act for or in lieu of them. Still it is not supposable that he possesses as much knowledge and skill as aU his constituents. They are farmers, mechanics, manufacturers, and merchants. Of many of the arts with which they are familiar, the member of Congress is ignorant. He is their representative for one specific purpose — i. e., to make laws to govern the peo- ple. He has a moral perception of justice con-esponding to their perceptions of justice, and this fits him to be their representative in making laws. Money is made solely to facilitate the exchange of products. To be capable of efiecting this exchange, it must be endowed ^ THB POWEK OF MONBT with a legal power to represent actual value ; for it pOB^ sesses no inherent quality which makes it equivalent to products or labor more than the representative in Con- gress possesses all the knowledge and abilities of ^is con ■ stituents. It is held for the time being in lieu of property ; we cannot use it as property, and if we wish to use actual property we must obtain it by giving the legal representa- tive, money, in exchange for it. A representative in Congress has the sole authority to act there ; and the people whom he represents can neither control him, nor be heard in lieu of him. They have no authority nor voice in making the laws except through their repre- sentative ; but the laws which he helps to enact have a binding force on his constituents and others. So of money ; when it is made a representative of value it con- trols and determines the value of labor and property, while these have no power to control and regulate the value of the money. The money is the only legal tender for debts ; and all property and labor are as powerless to discharge an obligation as the constituents of a repre- sentative are to act in Congress after they have delegated their power to their member. The representative of value should no more have power to accumulate pro- perty in the hands of a few than the representative of the people should be allowed to legislate for the benefit of a few of his constituents. Both are mere representatives, endowed with powers for specific purposes ; the former to exchange products, the latter to enact laws. The producing classes elect and support the members of Congress, who are bound to make laws for the equal benefit of the people. The people also furnish the material of money and the property which it represents; and the representative of value should be such as to con- duce in the highest degree to their welfare. The following is another example of delegated or re- presentative powei : A man gives a note for a thousand TO EEPKB8ENT VAITJB 49 dollars. He thus delegates to the paper on which the note is drawn a power that increases its legal value mil- lions of times. Before the drawing of the note, the paper possessed a small amount of actual value, but waa not a legal representative of other property; for, as paper only, its worth depended upon its inherent qual- ities. But when the note is drawn, the paper becomes a representative, and has, according to law, a delegated control of a thousand dollars' worth of the property of the drawer. The di-awing of the note does not add a fraction to the actual worth of the paper ; its value in holding the property is legal, and superadded to its in- herent qualities ; the same value might be superadded by law to a plate of steel, or of any metal. The note and the property are distinct existences ; but the legal value of the note depends on the actual value of the property. The paper material of a note good for a thousand dollars, is not as valuable as an ounce of flour ; but it has a legal power which makes it capable of being exchanged for two hundred barrels of flour, worth five dollars each. A trifling labor will provide the repre- sentative note, but a great amount of labor is required to produce such a quantity of flour, or actual wealth. AH individual notes are, however, payable not in flour, nor in actual products or property, but in money, the legal representative of aU commodities and property. According to law, the owner of an estate represents the value of the estate in his own person ; but by a simple power of attorney, he can give to another the entire control of his property during his life-time. The receiver of the power may not be worth a dollar, but the power of attorney may make him the representative and controller of millions of dollars' worth of property. The paper that secures to him the control of the pro- perty has no greater inherent value after the writing of the instrument, than it had before ; it is merely made 50 THE POWEE OF MOITET to represent the property and control its use. The actual value which the paper represents, exists in the property, and, without the property, the pcaper would be worthless. The power of attorney is confined to an individual ; but if a man, instead of making the power to a single person, should make it to bearer, whoever held the paper would have power over the property con- trolled by it. The negotiable power of money is in- separable from it, otherwise it would not be money. The holder of money has power over a certain amount of property for sale, and can appropriate it to himself. Money has a legal power or value as much superior to the natural value of its material, as a paper which secures authority over property has a value superior to blank paper. Money is, then, a legal existence, being constituted a national representative of property ; consequently it is a public lien on aU property for sale in the nation, a pubUo medium for the exchange of products, and a tender in payment of debts. If money be made a representative of the earth and its productions, it cannot fail to be permanently valuable, for the earth and its products are necessary to the existence of man ; and anything which legally represents them, and can be exchanged for them, must be valuable to its holders. It is a popular error that the value of money depends npon the material of which it is made. As this miscon- ception of the nature of money is of long standing, we shall endeavor to point out its inconsistency, in connec- tion with each property of money. The value of money perpetually depends upon its power to represent value, and not upon its material, because money never reaches a point at which it can be used as an article of actual value. Suppose twenty-six individuals owe $100 each payable on the same day : A. owes B., B. owes C, and 80 on through the alphabet to Z. In the morning, A. TO EEPEE6ENT VALUB 51 borrows from a bank a bank-note for 8100 and pays it to B., B. pays it to C, C. to D., and so on, until it passes down to Z., who owes and pays it to the bank from which A. borrowed it. The same bank-bill pays twenty- six debts, and in the evening is in the ownership, and possession of the same bank as in the morning. Suppose that, instead of money, each of the twenty-six persons owes IE the same order a loaf of bread, and each must have the loaf to use on the specified day or suffer from hunger. In the morning A. goes to a baker, borrows a loaf and pays it to B., B. pays it to C, C. to D., and so on through the alphabet to Z., who pays it over to the baker. The money in passing through this routine an- swers every man's purpose, and in meeting the contract fulfils the ftmction for which money is designed, but the bread does not fulfil the purpose for which bread is de- signed, nor can a single loaf short of twenty-six answer the purpose. But one bank-note pays the twenty-six debts, and is ready to fulfil as many contracts more the next day, whereas twenty-six new loaves would be re- quired to meet an equal number of contracts. It may be objected that the comparison is not a fair one, because bread is consumed by use and money is not : take then any other article valuable for its material and not con- sumed in the use. Twenty-six individuals have land to plough on the same day ; can they borrow one plough and mafce it answer the purpose of twenty-six ? The f articles of actual value, their properties do not change, or become useless. Fot example, cloth is useful to make a garment, and when made, is a cloth garment. The nature of the cloth does not change; it is only apphed to a specific purpose, and the cloth retains its properties of durability, etc. Metal buttons are used upon the garment, and continue to be metal buttons. But silver money converted into a spoon, makes a silver spoon, and not a money spoon. The silver is no longer a legal representative of actual value ; it is no longer money, for it has ceased to have the properties of money, which are creations of law. Neither a spoon nor bullion can legally represent, measure, accumulate nor exchange property; and the mere metal is, consequently, not a medium of exchange, nor a tender in payment of debts. The sole value of gold and silver coins, when not used for a currency, con- sists in the worth of their materials for spoons, ornaments, etc., which are a very smaU part of our actual wealth, and not indispensable to human existence. The metals cease to be money, as the power of a representative ceases when the term for which he was elected expires. He may be reelected and receive his former power ; and the gold may be recoined by the government, and thus be endowed with its former power as money. So, if the paper of a bond or note be ground to dust its value ceases ; but it may be remade into paper, and by the requisite writings receive its former value. The laws of nations have established money as the standard of value. These laws are immaterial ; they are principles, and not material substances. The power of money is also immaterial : it is its legal authority, and not its material substance that establishes its value and power. The laws have professedly established the value of money in its material substance, but the groundwork TO REPEESENT VALTIE. 53 being false, they have failed practically to establish money upon this basis ; yet they have so far succeeded as grossly to deceive the public. That the worth of money to exchange property does not reside in its material, but in its legal power to represent value, will appear in the following illustrations : A. hires B. and C. to work for him at ten dollars per week each. At the end of the week he pays B. a ten-dollar gold piece, and C. a ten-dollar bank-note ; taking in both cases a receipt in full for the week's work. B. is now the actual owner of the gold, and C. the actual owner of the paper in the bank-note. C. can buy in the market just as many of the necessaries of life with his paper money as B. can buy with his piece of gold. B. gave no more labor for the gold money than C. gave for the paper money, and can buy no more products with the gold than C. can buy with the paper. 1£ there be any intrinsic value in gold money which does not exist in paper money, B., when he parts with his piece of gold, loses all the difference between the intrinsic value of the gold money and the intrinsic value of the paper money. But all the difference in the intrinsic value of the gold and paper disappears when both are used as money ; hence it is evident that it is the immaterial power, that it is its legal authority over other things, and not the intrinsic value of its sub- stance, that establishes the market value of the money. B. did not work the week because he needed the gold, neither did C. work the week because he needed the paper. They both labored for the same object, which was to procure the necessaries of life ; and they both knew that either kind of money was legally competent to pay for these things. A yard of cloth measured with a gold yard-stick is neither longer nor shorter than if measured with a wooden one; and property purchased with gold or silver money is neither more nor less valuable than if bought with paper money. A person 54 THE POWEE OF MONEY intends to purchase a farm and settle in OHo. He has a thousand dollars in silver, but, as it is inconvenient to transport the specie, he exchanges it at a bank in New York for a thousand one-dollar bank bills. The bills readily purchase the farm. The individual who receives them in payment lends them on interest, and the bor- rower purchases wheat with them. Thus the bills circu- late as money, and can be loaned for as good an income, or will purchase as much grain, as a thousand dollars in sUver. They jEiilfil every purpose for which money is designed as well as the silver would. If the notes should remain permanently in Ohio, and the people should believe the bank secure, the notes would be a much better cur- rency than coins, for they would make purchases as well, they could as well be loaned for an income, and could be much more easUy transported. Why could not a thou- sand axes be deposited in Wall street, and a thousand pieces of paper be taken for them, on each corner of which was engraved " one axe," and in the body a written promise to pay one axe on demand, and these paper axes be taken to Ohio, and made to answer every purpose for which axes are designed, in clearing forests, etc., in lieu of the steel axes ? There is as much resemblance between a paper axe and a steel axe as there is between a paper dollar and a silver dollar. If a paper dollar, that repre- sents a silver dollar, is as good for all the purposes for which money is designed as a silver dollar, why is not a paper axe, that represents a steel axe, as good for all the purposes for which axes are designed as the steel axe ? The reason that the paper dollar wUl answer as well as the sUver dollar is, that the silver and the paper dollar are both representatives, the silver dollar equally with the paper doUar. (See Ghap. III., The Banking System.) If the value of money be in the worth and weight of i-^8 material, it cannot be representative ; acd if its value be not representative, 't would be as impos- TC EEPEK8ENT VALtTE. 55 Bible to make paper money fulfil, as it now does, the ftmctions of coins as to make a paper promise to pay a loai of bread on demand as nutritioxis as the bread ; or to make paper representatives of ploughs promising to pay real ploughs on demand capable of tilling the ground. If a city bank have $100 in coins and issue $600 in bank- notes, the amount of money is as much increased as if $600 in specie had been issued. Each dollar of the bank- notes will pay for as much labor and for as many of the necessaries of life as any one dollar in specie ; and so long as these bank-notes continue to circulate and to be on a par with specie, they continue to hold the same power and value in the market that are held by gold and silver money. Hence, if the value of money is inherent, this must prove that it inheres in bank-notes as well as in coins. The fact that it takes many thousand times more labor to mine the gold and silver and coin them into money, than it does to make the paper and engrave the bank-notes, makes no difference in the market value of the money, because the value of the money depends on its immaterial power — ^that is, upon its legal authority, and not at all upon its material substance. The law can and does designate the substance out of which money shall be made, but human laws do not in the least alter the intrinsic value of any substance. We might as well undertake by legislation to make saw-dust as nutritious as bread, as to undertake to make paper money on a par with specie if the value of the specie were dependent on its material substance. It takes as much labor and material to make a one-dollar bank-bill as it does to make a one thousand dollar bUl; yet the latter is worth m the market precisely one thousand times more than the former. The reason that the value of bullion is equal to that of coins is, that coins are made at the expense of the natit»u. The government coins aU the gold and silver offered at 56 THE POWER OF MONET the mint free of ctarge. It will give, in exchange foi them, an equal weight in coins. If the government would take wool, and make cloth at the pubUc expense, and return to those who famish wool an equal weight in cloth, the cloth and wool would command the same price, because the expense of manufacturing the cloth would be borne by the government. If a charge were made for manufacturing, the wool would be worth less than the cloth ; and if a premium were charged for coinage, the value of bullion would depreciate below that of coins. It is clear that gold and silver have no special inherent value which makes them naturally money ; for they are not money until made so by conversion into coin. SEOTION in. THE POWER OF MOKBT TO MBASXTEE VAIXTB. The power to measure value is another property of money. Measures are definite quantities of length, weight, bulk, and value, by which the amount of length, weight, bulk, and value in any substance is defined and ascertained. Length, weight, bulk, and value, must necessarily be mdefinite, unless some limit be fixed upon fbr a standard to which all other lengths, weights, quantities, and values may be referred, and by which they may be computed. Length may be the circumference of the earth, or the unknown distance to a star, or it may be tho one-thou- sandth part of an inch ; therefOT-e, to convey any definite idea of length, reference must be made to a fixed standard. Weight, quantity, and value, are equally indefinite ; hence the necessity for some limit or standard. to which they may be referred, and by which theii amount may be ascertained. TO MEA8UKB VAitlE, 67 The length, weigbt, quantity, and value of all articles, in business transactions, are settled by certain measurei" fixed upon by the government. The length of the yard- stick measures and determines a before undefined length of cloth; the size of the bushel measures and defines the before undefined quantity of grain ; and so of the pound weight, it defines the quantity of cotton or other sub- stances. The cloth does not define the length of the yard-stick, neither does the grain determine the size of the bushel, nor the cotton the pound weight. The value of the dollar measures and determines a before undefined value of land, labor, or products ; the value of land, labor, and products, does not measure and determine the already defined value of the dollar. When the yard- stick measures cloth, it does not determine its own length ; and when money exchanges property, it does not deter- mine its own value. Both the length of the yard-stick, and the value of the money, were previously determined by the laws which instituted them, and gave them power to measure length and value, which are their sole objects and uses as measures. The pound weight, or the standard of weights, deter- mines the amount of the weight of all commodities ; and the doUar, or money, the standard of value, by its own fixed legal value, determines the amount of the value of all other things. The weight of the pound, the length of the yard, and the value of the dollar, are presumed to be invariably fixed by national laws, and, therefore, every variation from their legal standard is a fraud upon the public. If the yard be variable, the measure of length will commit frauds when it is used ; and if its value be fluctuating, the measure of value will commit frauds whenever it is used to measure the value of labor or property. If measures be strictly just and uniform, they will equitably determine quantities and values, -whether of land, labor, or commodities. 58 THE POWEB OF MONET It appears that the government considers the dollar of more importance than any other measure, for it reserves the right to coin it, and makes it a criminal offence for individuals to coin or issue money, even if it be equal to the government standard in purity and weight. Indivi- duals are also prohibited from making and issuing paper money as a substitute for gold and silver money, unless especially authorized by law ; and when this privilege is granted, the amount that may circulate and the security that shall be given to secure the public against loss, are also prescribed by law. But any individual may make and use any other measures, or may make and sell them in market, the government having merely a supervision over them as to weight, size and length.* Money measures its own amount or value of actual property as often as it passes from one individual to another, as the yard-stick measures its own length as often as it passes over the cloth ; consequently a given sum of money measures in a given time more or less pro- perty, according to the frequency of its transfer. In one morning, a dollar, passing through several hands, may be laid out for food, buy various articles of clothing, be loaned out with other dollars on bond and mortgage, and then purchase a dozen articles more. Every time it passes, it determines the market value of the thing that it buys. If there were no distinction between measures of value and articles of value, the same principle would apply to both ; one yard of cloth, rapidly measured, would answer the purpose of two, slowly measured ; a pound of food, rapidly weighed, would answer the purpose of two, slowly * Notwithstanding the care the government has taken to guard the use of money, there is in this nation more litigation, fraud and oppression, growing oii of thj corrupt use of money, in one vreek, and often, doubtless, in a single day, than all the evils that occur iu o ce^itury from the fraudulent use of all other measures. rO MEABURK VALTTB, 89 ■weighed. The value of money cannot consist in the amount or kind of the metal in -which its properties are embodied ; for, in its rapid circulation, it can be used neither as a utensil nor as an ornament, and is only useful to exchange property. Eagles and dollars are seldom used for ornamental purposes : and when they are so employed they cease to exchange products. The value of money balances the value of the commo- dity sold, as the weight of the pound balances the weight of the thing weighed ; or the yard, the length of the cloth measured. Measures of quantity remain stationaiy, their only function being to determine the exact quantities of the commodities transferred from the seller to the pur- chaser. But the measure of value passes into the posses- sion of the seller, who holds it as a representative of value in lieu of his commodity. And it is on this account that the measure of value is frequently confounded with articles of value. Money, like all other measures, is divisible. The yard is divided into feet and inches, that it may determine any required length. The pound weight is divided into half- pounds and ounces ; the bushel into the peck, quart, etc., that they may accurately determine the various weights and quantities of various substances. Money is divided into pounds, shillings, and pence, dollars, half-dollars, dimes, etc., that it may determine the precise amount of the value of all commodities. The government reserves the right to fix the length of the yard, the weight of the pound, the size of the bushel, and the value of the dollar, that they may be fit- ted for public use. Money is the public measure of value ; and the government is bound to make it just and uniform, that it may correctly determine the value of all commo- dities. 60 THE FOWEK OF MOITBTX SECTION IV. THB P0W:EE of MONET TO ACCUMULATE VALUE BT INTBKBST. Money, the representative and measure of value, ha§ also the power to accumvlate value hy interest. This accu- mulative power is essential to the existence of money, for no one will exchange productive property for money that does not represent production. The law making gold and silver coins a public tender, imparts to dead masses of metal, as it were, life and energy. It gives them certain powers which, without legal enactment, they could not possess, and which enable their owner to obtain for their use what other men must earn by their labor. One piece of gold receives a legal capability to earn for its owner, in a given time, another piece of gold as large as itself. Or, in other words, the legal power of money to accumulate by interest compels the bor- rower, in a given period, determined by the rate of in- terest, to mine and coin, or procure, by the sale of his labor or products, another lump of gold as large as the first, and give it, together with the first, to the lender. If the borrower of the gold pay interest half yearly at the rate of seven per cent, per annum, he must double the lump in about ten years. If he pay interest half yearly at the rate of six per cent, per annum, he must double the lump in less than twelve years ; at three per cent., in less than twenty-four years ; and at one per per cent., in about seventy years. In popular phrase, money is said to be a proditcer of value; but this expression conveys a false idea, for money possesses no power to produce. The earth pro- duces by actual increase— by the growth of additional quantities of the seed sown. But money possesses no TC ACOUMULATE VALTJB BT INTEREST. fit natural capability to produce its like. It can only accu- mulate things already produced. When a loan of a Hun- dred dollars is repaid with interest, the six or seven dollars given as interest have not grown upon the ori- graal one hundred, Nothing grows upon the mortgage that bears interest. The interest on the money, or on the mortgage, must be paid in money received in ex- change for property, products, or labor. The worth and amount of the interest on the dollar constitute and determine the value of the dollar, and make it equal to a certain amount of actual value or pro- perty, as much as the amount and kind of labor that a man can perform, determine his value as a workman ; or as the quality and quantity of the fruit of a tree deter- mine the value of the tree. In the same manner, and for the same reason, if the interest on the dollar be good, the dollar will also be good. The value of the workman and of the tree is natural to them, and consists in their power to produce ; the value of money is artificial, and consists in its arbitrary power to represent actual value and to accumulate by interest. Demand and supply are sometimes said to give value to money ; but it would be as reasonable to assert that demand and supply fix the length of the yard, the weight of the pound, or the size of the bushel, as that demand and supply regulate the value of money. One is a legal instrument to determine value, its own value being fixed bylaw; the others are legal instruments to determine length, weight, and quantity, their own length, weight, and size being fixed by law. Money is valuable in proportion to its power to ac- cumulate value by interest. A doUar which can be loaned for twelve per cent, interest, is worth twice as much as one that can be loaned for but six per cent., iusi as a railroad stock which will annually bring in twelve per cent., is worth 1 wice as much as one that annualljr 62 THE POWEE OF MONET brings in six per cent. The value of state, bank, rail road, or any other stock, is estimated by the dividends it will pay during the time it has to run. Any increase or diminution of the power of money to accumulate by interest, increases or diminishes proportionably its value, and consequently its power over property. Money becomes worthless whenever it ceases to be capable of accumulating an income which can be ex- changed for articles of actual value. Take the following example. Suppose, during the Revolutionaiy war, A. had lent to B. a thousand dollars in gold or silver coin, at six per cent, interest, for a term of fifty years, and had taken as security a mortgage on B.'s farm, which was worth 110,000. A. had agreed to receive the six per cent, interest from B. in Continental money. This currency soon after proved to be worthless ; and the interest proving worthless, the principal would have been worth- less to A. during the fifty years for which he lent it, al- though the loan was made in gold and silver coin, and, at the expiration of that period, the principal would have been paid him in coin. Now reverse the circumstances, and suppose A. had lent to B. a thousand dollars in Continental money on the same farm for fifty years, and had made the interest payable in gold and silver coin. Although the principal was lent in Continental money, which soon after became worthless, it would have continued as valuable to A. for fifty years, as the interest in coin which he received upon it. The interest continuing valuable, the mortgage would have been a binding Uen upon B.'s farm for the fifty years, and would have taken a part of the yearly produce of the farm for that period. At the expiration of the fifty years, the principal would have become worthless, for it could not have brought in a further in- come. But in the former case, in which specie was lent and the interest made payable in Contmental money, the TO AOOiranrLATE VAIiTTB BY INTEREST. 63 interest being worthless, the contract would not have been an encumbrance upon B.'s farm ; for no part of its yearly products would have been required to pay the interest. At the expiration of fifty years, the priacipal could have been demanded in specie. The value of money as much depends upon its legal power to be loaned for an income, as the value of a farm depends upon its natural power to produce. If the Continental money, or the assignats of France, had been made representatives of property, and capable of being always loaned for a good and uniform income, they would have been as pei-manently valuable as a mortgage in perpetuity on a farm, which could yearly collect from the farmer a certain quantity of products, as interest, or income. The value of a horse depends upon his ability to perform useful labor for his possessor ; and the value of money depends upon its capability to earn for its owner by being loaned on interest. Take twenty mort- gages for ten years on twenty different farms. Suppose each of these farms to rent for sixty dollars a year, just the interest on each of the mortgages. It would take the whole produce of each farm to pay the interest on each mortgage. The twenty mortgages would take the rent or produce of the twenty farms for ten years. In one month, one thoasand doUars could be easily loaned so as to take the entire income of twenty farms for ten years. Consequently, each time the money was lent it would accumulate an income which would be as valuable to its owner as a farm of equal value leased for the same period ; for the income on tha money would yearly purchase the whole yearly produce of the farm. The difference between money and the farms is, that the former is a legal representative and measure of value, and the latter are of actual value. The money is as capa- ble of representing and measuring its own amount of value a hundred times in a year, and creating a hundred 7 64 THB POWEE OF MONBT incomes, as the pound weight is of deter minin g its ow» amount of weight a hundred times. The quantity of cloth measured, and the weight of things weighed, can not be increased by the number of times that the mea sure is applied to them. But money being a representa- tive of value, and being endowed by law with the power to accumulate by interest, makes an income whenever it is transferred from one to another as a loan. Anything that exists ia perpetuity, is valuable in exact proportion to the income it wiU yearly biing to its owner. The market value of a house, store, or farm, rises or falls with the rise or faU of its yearly rent ; and the value of the dollar rises or falls with the rise or faU of its rent or interest. If we admit both the property and the money to be merchandise, this principle cannot be true in one case without being equally true in the other ; therefore, whether we assume money to be of actual, or of legal value, to keep its value uniform, the rate of interest must be kept uniform. Doubling the capability of the dollar to accumulate, doubles the value of the dollar. Its nominal value may, and does remain the same — ^that is, it retains the name of dollar, although it possesses twice its ordinary value, or power over property and labor. The same principle applies to all measures. The length of the yard-stick being doubled, although it might still retain its name, it would measure twice as much cloth as with its present limits. And money, whUe its denomina- tions remain the same, measures more or less property, according to the rat^ of interest. We may imagine a measm-e fluctuating, expanding and contracting between certain points; as a yard-stick, made of some elastio material, susceptible of being stretched to twice or thrice its ordinary limits, and still called a yard-stick, and used as such. But no one would deem himself acquainted with the actual length of anything measured by thi* TO ACOtJMTJLATB VALUE BY INTEREST. 65 yurd-stick, although, if it were the legalized one, it could, and must be used in business.* Measures of quantity are instituted, and their length, bulk, and weight are fixed by law, and not by individuals. The measure of value is instituted and made by law ; and, consequently, it is fraudulently used when the rate of in- terest upon it, which determines its value, is altered by individuals. The fundamental proposition of Jeremy Bentham, in his " Defence of Usury," is as follows : " No man of npe years, and of sound judgment, acting freely and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargain, in the way of obtaining money, as he thinks fit; nor (what is a necessary consequence) anybody hindered from supplying him, upon any terms he thinks proper to accede to." According to Mr. Bentham's theory, when money is loaned, the rate of interest to be paid must be a matter of agi'eement between borrower and lender. This makes the rate of interest belong to the system of free-trade, whereas it no more belongs to this system than the length of the yard-stick or the weight of the pound. By in- creasing the rate of interest, both the principal of the money and the interest upon it have an increased power over property, just as the pound increased in weight would call for an additional quantity of products to balance it. The right to fix the value of money is as much reserved by the government as the right to fix the length of the yard or the weight of the pound; and the regulation of its value is a thousand times more impor- tant to the people.f The value of money is no more fixed • See Appendix, A. ■j- Although the value of money is now professedly fixed by the go vernment, we can form uo correct idea of what its value will be at the end of three or six months. But we should think it ridiculous to as* what would be the length of the yard, or the weight of the pou'id, o« 66 THE POWEE OF MOITET or regulated by the laws ordering each piece of money to be coined of a certain weight and kind of metal than the length of the yard would be fixed by ordering it tff be made of a certain weight and kind of wood, without regard to its length. The value of money depends upon its power to accu- mulate value for its owner, by interest, and not upon the worth of its material ; as the value of a paper instriunent, which secures a ground-rent, depends upon the produc- tiveness of the land on which it is secured, and not upon the inherent qualities of the paper. If the land were per- manently unproductive, the lien could command no pro- ducts, and would be worthless, except so far as the paper on which it was drawn possessed inherent value. Sup- pose the Uen to be engraven on a silver plate, instead of on paper, and to be made in pei-petuity for $10,000, at six per cent, interest per annum. Let the annual pro- ducts of the land be sufficient to pay for the labor expended upon it, and to pay the ground-rent, and the silver on which the ground-rent was engraven would be the size of the bushel three or six months hence ; or to express great anxiety when the crops were coming in and the fall trade commencing whether enough measures could be procured to measure the grain, or scales and weights to weigh it, or yard-sticks to measure the cloth manufactured. We should think farmers, manufacturers and mer- chants crazed, if they should come to New York to ascertain whether enough measures could probably be had to determine the weight and quantity of their products ; and under a just and sound monetary system, it would be equally absurd to ask whether enough money could be obtained to buy or exchange the goods, or to make any in- ternal improvement ; and it would appear as ridiculous to ask what the rate of interest would be at the end of three or six months as to ask how many feet it would then take to make a yard. Money pro- perly instituted would be as definite and uniform as the latter measure, and would no more govern the amount of production tliau the yard- stick does the quantity of cloth manufactured. It could be about at easily procured to facilitate all desirable production, trade and in* pi'Ovements as yard-sticks to measure any quantity of cloth. TO AOOTrM:0Ll.TE VAIUE BY INTEEEBT. 67 worth ten thousand dollai-s, whether the plate of silvei on -which it was drawn were three feet square, and weighed three hundred pounds, or whether it were three inches square, and weighed hut three ounces. If the ground-rent on each plate were in perpetuity, and it were necessary to preserve eauh in its proper form, to keep the title good, although so great a difference existed in the weight, there would he no difference in the value of the two plates, for both would secure the same annual amount of interest. If, however, the ground-rent should fail because of some defect in the title, of course the larger plate of metal would he worth more than the smaller, for it would make more useful and ornamental articles. A ground-rent made in perpetuity for $10,000, secured on good property by paper instruments, would be as valuable to any owner as the larger silver plate. For this and for similar purposes, the paper is as much superior to the silver as, in manufacturing, the power- loom is superior to hand-weaving. The value of these liens on specific pieces of land, does not more depend on the productiveness of the land than the value of money depends upon its power to acciunulate an income from the labor or property of borrowers. The value of the papers which secure the National Debt of England would cease if the government should pass a law to pay no more interest upon the debt. A mere legislative enact- ment could annul the value of the papers. Laws, then, give them their worth, and their worth consists in theii power to collect a yearly income, which may be exchanged for the products of labor. Money could not answer the purposes of a medium of exchange unless it were necessary to part with it to make it valuable. For this reason it is made to accumulate no interest in the possession of its owner ; for if it would accumulate interest in his hands, it would be legally equivalent to a bond ind mortgage bearing interest, oi THE POWEB OF MONET to productive property, and the owner would not need to part with it to make it productive. SECTION V. THE POWEE OF MONET TO EXCHAlfGB VAIiXTE. Another power of money is to excTiange property When it is made the public representative of value, and the interest is fixed at a just rate, it is fitted to perform the duty of money, which is the equitable exchange of property. All goods, wares, and merchandise, although they may be exchanged for money a number of times, soon find a place where they are consumed ; but money never reaches a point where it can be used except as a tender in exchange for property. Making a silver dollar an equivalent or tender in payment for a debt contracted by the purchase of a bushel of wheat, does not make the dollar possess the nutritious qualities of the wheat, more than giving a note upon the purchase of a hundred bushels of corn makes the note of as great actual value as the corn. The value of the note depends upon its power to exchange itself for the property of the drawer, and not on the worth of the paper upon which the note is drawn. But the value of the com depends upon its nutritious qualities and not upon any power to exchange itself for the property of the person who raised or sold it. The note must be exchanged for property before it can be useful to its owner ; money must also be exchanged for property to become useful. This, then, is the distinction between articles of actual value and the medium of exchange. The former are designed to ba actually used or consumed ; the latter is designed to be continually exchanged for articles for actual use and consumption. Hence money is not mor TO EXOHANGK VALUE. 69 chandise, for if its material be used as a commodity — if coins be converted into watch-cases and ornaments, the owner must keep them to make them useful. The object of the institution of money is to facilitate the exchange of commodities ; and this it could never do tmless it were possessed of as much legal value as the thing for which it is to be exchanged possesses actual value, K a farmer has five hundred bushels of wheat, with which he wishes to buy sugar, coffee, tea, molasses, clothing and so forth for his family, he wiU not sell the wheat for five hundred dollars, unless the money will be a legal equivalent for all the articles for which he wishes to exchange his wheat. He does not want the money to keep ; he wants it to exchange for other articles that he needs to use or consume, and he sells his wheat foi' money because the money is a legal equivalent for every species of property. It would be very difficult for him to divide up the wheat and barter it for various articles in different places ; and the wheat is not a tender. But he can divide up his money in amounts to suit all his purchases, and the money is a legal tender in payment. A man may carry a piece of paper money in his pocket that is a legal equivalent for a valuable farm in any part of the country, when if he had the same amount of actual value, it might be impossible for him to move it ; but he can sell it for money, and the money he can carry in his pocket and buy with it where he pleases. Some writers, instead of considering money as a medium of exchange, call it capital seeking investment. If money be capital, it is already invested ; because the capital would consist in the inherent value of the mate- rial of the money, and not in the thing the money seeks to obtain. But, when money has found one investment, it is as much a seeker for a second and a third investment as if it had not been invested at all. It is always seeking 70 THE LSGAL POWERS OF MONET. investment, without being invested.* It is no more rea capital than a very poor horse, of which the appearance ia such that he will do very well to exchange off. But if he should finally fall into the hands of a person who had not the good fortune to exchange him again for something else, the owner would have to depend upon his few useful quahties. And if a currency were formed in the various nations independently of gold and silver, and coins should cease to be a tender in payment of debts, the value of coins would depend upon their inherent qualities, as metals, as much as the value of the horse when he could be no longer exchanged for more than his actual worth, would depend upon the little labor that he could perform, or upon his hide and bones. The price of the gold and of the horse would then depend upon their actual useful- ness, and not upon any capabilities for exchange. Money is, then, a combination of legal powers, ex- pressed upon metal, paper, or some other substance ; its value is the standard or determiner of the value of all other things, and it serves as a public medium of ex- change for land, labor, and all commodities. * We are accustomed to say that money is invested in property, but this is not true. Money is no more inyested in property than the yard-stick is invested in the cloth that it measures. When money has passed from one person to another either as a loan or in payment for property, it is ready to be lent again or to be paid for another piece of property. The money is no more used up by passing from one person to another than the yard-stick is used up by measuring a single piece of cloth. We are often told in the money articles of the iaily newspapers, that the money of the country has been used up in railroads ; but upon travelling over these roads we see evidences that K great deal of labor has been expended in grading them, furnishing the iron and timber and so forth, but we do not see anv money. If the money has been invested in these roads, it has now gone some- where else ; and it is still going to and fro in the earth, and up and i]owii in i t. THE MATEEIAIi OF MONET. 71 SECTION VI. THB MATEEIAl OF MONET, AND THB DISTINCTIONE BK- TWKBN MONET AND THE MATBKIAI, OF WHICH I la MADE. The material of money — gold, e?ilver, paper, or any other substance — is a legalized agent, made to express the four properties, or powers of money, and render them available in business transactions. Common usage has applied the term measure to the material, by means of which, length, weight, etc., are ascertained ; as, for instance, the yard, pound, and bushel, instantly suggest the stick, iron, and wood, the means employed, rather than the abstract length, weight, and size, which are, in reality, the things signified by the terms. It matters not whether the yard-stick and pound weight be of wood, iron, or gold — length and weight are the only properties necessary to be expressed by them, and possessing the standard limits, their material is a matter of indifference. Of course, som,e materia, is indispensable ; but the only thing that makes one sub- stance preferable to another, is its superior convenience. So of money ; it is a matter of indifference by what material the powers or properties of money are ex- pressed, for the material is merely a substance fixed upon by law. The natural powers of any material do not make it money. Its powers and agency as money are delegated to it by law, in addition to its natural capabilities When gold is used, the powers conferred upon it make It an equivalent for every species of property. If ^old had not been selected for the material of money, and a legal power given to it to exchange property, ar d tc T2 THE MATERIAL OF MOITET accumulate interest for its use, a man would have as little occasion for more gold than he needs for utensils and or- aaments, as for more clothes than he can wear, or more tools than he can use. It would have been subjected to the same laws of trade as other merchandise, and must have waited a demand for consumption before it could have been sold. It is clear that gold possesses no pe- culiar or inherent excellence to endow it with power to determine the value and control the use of all other things. But when it is made the agent of these legal powers, it becomes necessary to acquire the gold in order to discharge debts ; and the quantity of the metal being limited, its owners are enabled to extort from the necessitous a very high price for its use. If gold were not used as the material of the currency, its abundance would cause no inflation of business, nor would its scarcity produce distress, because, compared with other metals, its use is very limited. The following statement will show the different effects upon our own people of the use of the precious metals as utensils, and their use as the material of money. All will probably admit that there were, in 1846, twelve thousand families in the city of New York, owning, on an average, $800 worth of gold and silver ware, such as tea, coffee, and dinner services, vases, ornaments, etc. Including jewelry, the amount of the metals probably far exceeded the sum named. But calculating the twelve thousand families to have owned |800 worth each, they owned, in the aggregate, $9,600,000 ; while, according to the Bank Reports, the specie in all the banks in the State of New York on the 1st day of November, 1846, amounted to but $8,048,348. Suppose the twelve thou- sand families owning these silver and gold utensils and ornaments, had in one week collected them together, and shipped them to England. The shipping of these wares would have had no more effect upon the monetary affairs A LEGAUZED AGENT, 7S of the State or nation, nor upon business, than the ship, ping of the same amount in cotton and tobacco. But had the people drained the $8,048,348 of coins from the banks, and shipped them abroad, the banks throughout the State, and throughout the United States, would have been compelled to suspend specie payments, and hun- dreds of thousands of our people would have been bankrupted or thrown out of employment. Yet, by shipping the gold and silver wares, more than one million and a half more of the precious metals would have left the country, than by shipping the coins. The shipment of the smaller amount would have shaken the country to its centre, while the shipment of the larger amount, could not have unfavorably affected busi- ness. And yet om- gold and silver utensils and orna- ments are more in use than our coins ; for the coins are mostly in kegs and boxes in the vaults of banks, and if they are moved at all, it is usually from one bank vault to another, without even emptying them from the kegs. If money is merchandise, why would not the shipment of our gold and silver utensils affect the business of the nation, as much as the shipment of our coins ? The same twelve thousand families were doubtless the owners of a much larger amount of the capital stocks of the banks than the $9,600,000 ; and could at any time have sold stock enough to draw aU the specie from the banks, and thus have caused a suspen- sion of payments, and distressed producers, even with- out shipping the specie. If the value of money inhere in the precious metals, so that a certain weight naturally possesses a certain amount of power to exchange property, and still is itself a commodity, the value of which is fixed by law, other com- modities made of the same naturally precious metals, watch- cases, spoons, etc., should likewise be subject to the scrn. tiny and restriction of government, that the pub'ic may nol 74 THE MATERIAL OF MONET be imposed upon in the receipt of them by any mixture of alloy. If money be a commodity, why do governmenta pretend to fix a value upon coins, and not upon any other commodity, although it be made of gold or silver ? If a definite value be assigned to one commodity by legal en- actment, a definite value should also be legally assigned to every other commodity, that each may sustain a just relation according to the amoimt of labor necessary to manufacture or produce it. If money be a commodity, goods sold might as well be made payable in other com- modities, sugar, beef, etc., as in money. Why not as well sell money on time payable in goods, as goods on time payable in money? If money be a commodity, why should the government force the public to convert every other commodity into this one to pay debts? If the sale and purchase of all other commodities will cause debts to exist, why should one commodity only be competent to pay them? And why should the value of every other commodity be determined by this one commodity ? If money be a commodity, why does the government reserve the right to coin it, making its private coinage a criminal ofience ? Why not let any one make it, and dispose of it in market as of any other commodity ? If money be merchandise, why is it, that it can be at all times exchanged for property and products, in any part of the country, and that all other more necessary commodities are at certain times esteemed ahnost worthless, compared with it? It is answered, that it is because it is made by law a legal tender in payment for debts— that it has this superiority over every other commodity. But the very answer proves that it is not a commodity; for a legal tender is a creation by law of certain properties which do not naturally belong to any substance, but which are mada to represent all substances, and to control their exchange. Governments have enacted their monetary laws upoi. the A tEGAUZED AGENT. 75 false principle that tlie gold and silver metals had an intrinsic value, and consequently a power in their material, before they were instituted as money, equal to their legal power and value after being so instituted. It is sometimes said, that commodities are a sort of currency, because they can be and are exchanged for money. But though a bushel of wheat may be exchanged for money, it does not possess any of the legal and distinc- tive properties of money. The wheat does not become money more than a watch would become land by being given in exchange for land. Some argue that the doUar derives its value from the labor required to mine and coin the silver for it. They say that if a day's labor be required to mine the silver for a dollar, and a day's labor be required to raise a bushel of wheat, the silver and the wheat are of equal worth, and that the legal acts of the government cannot alter the value of either. But if the equal amount of labor expended make the doUar and the wheat of equal value, why will the dollar at certain periods buy two or three times more wheat, or more labor, than it will at other periods ? Why does not the value of la- bor and of wheat increase equally with the value of the deUar ? When the products of labor command a high price, labor also commands a high price. A given quantity of wheat or of other products will pa|' for nearly the same amount of labor every year. But if the price of products be low, the employer cannot pay to labor a high price in money. In seasons of depressed prices, a doUar will purchase double, treble, or quadruple the amount of labor that it ordinarily will, and this difference occurs when no more labor is required to mine and coin the silver. Let those who maintain the theory, that the labor required to pi-ocure money constitutes its value, account, if they can, for these facts, so as to satisfy 8 76 THE MATERIAL OF MONET laborers and producers, the reward of whose labor, and the price and sale of whose products it so nearly affects. Because money is held in heu of labor performed, and in heu of everything valuable, the public have been accustomed to consider money an actual equivalent in value to the commodity or labor it will pay for ; whereas in fact, it is only a legal equivalent or balancing power. Air, water, food, clothing and a vast variety of other things are essential to the existence and comfort of man, and no one thing can be an actual equivalent for them. It is as impossible that ten pounds' weight of gold should possess equal actual value with the four thousand bushels of corn, or four thousand days' labor which the gold wO purchase, as that a small quantity of poison, frequently necessary as a medicine to restore man to soundness and health, should be of equal value with the corn or labor. As many elements for the support of man exist in the poison, as in the money. Both are usefiil in their spheres, the former to remove obstructions to health, the latter to facilitate the exchange of products. Poison is of little value compared with food ; and money is as little valuable compared with property. It would be as reasonable to esteem the comet which appears once in a century, more valuable to us than the sun that daily sheds its fertilizing beams upon the earth, as to esteem the actual value of gold and silver equivalent to that of all the necessaries of life. K the quantity of gold were unlimited, not a thou- sandth part as much of it would be used as of iron. The notion that gold and sUver are endowed by the Creator with some mysterious value and capabilities, which render them of greater importance than the ordinary products of labor, is an erroneous and pernicious one. Legal enactments cannot alter the inherent proper ties of metals. The common opinion that the material oi' a currency must be something sciuce and diificult to inocure, thai A LEGALIZED AGENT. 77 the limited amoun ; may render it permanently valuable, arises from a misconception of tlie nature of money, the properties of which are entirely independent of the matei-ial. Money consists in the legal powers to repre- sent, measure, accumulate, and exchange property and products. It receives its powers from law. If gold and silver should become as abundant as iron and lead, the only diflSoulty in maintaining them the materials of a currency, would be the difficulty of protecting them from counterfeit. Could they be protected, it would be as unnecessary to abandon them for a currency on account of their abundance, as to abandon the use of paper in making obligations, because more exists than can be used for that purpose. If the quantity of gold and silver were unlimited, and that part of it which was needed for a currency were made a hen upon and representative ot property, there would be nearly as great a difference between the value of the metals so used and bullion, as there now is between a paper obligation that is a lien upon valuable property and a piece of blank paper. For ages gold and silver have been esteemed precious metals, containing a large amount of intrinsic value, al- though their inadequacy to supply natural wants is mani- fest, when we imagine a man, with a bag of coins, on a desert island, and without the power to exchange them for other articles. These metals have intrinsic, or actual value, and this value consists in their utility for utensils and ornaments ; their malleability, ductility and beauty rendering them, for some purposes, superior to all other metals. But it wiU be confessed, that we could far better dispense with them than with any of the abundant metals, which are in more general and constant use, and the loss of which would seriously impair our com- fort. In early ages, gold and silver were, doubtless, selected for the material of money on account of their scarcity. 78 THE MATERIAI, OF MONET. and the amount of labor necessary to procure them; the same reason that led the American Indians to seiect the beaver-skin for a standard of value, by which the value of all other skins and commodities was estimated. It has been already explained, that gold and silver, when used «s money, cease to have any other use. These metals have, however, received the sanction of governments as the material of money. The laws require that coins used as a pubhc tender shall contain a certain weight of the au- thorized metal — without which they are illegal, and can- not be enforced as a tender. But the only reason that they are not received is, that they are unsanctioned by law. K coins of base metal were endowed by law with the properties of money — ^that is, were made representatives of actual value, capable of accumulating by interest, and a public tender for debts, they would answer every purpose of money, equally well with coins of pure metal. They could represent, measure, accumulate and exchange pro- perty, and these are the sole properties and uses of money. Therefore they would be money, for anything that pos- sesses the properties of money, without division, subtrac- tion, or increase, is money. But if the metal were used for purposes of dentistry, the difference between the pure and the base would at once appear ; for the metal would then be used otherwise than as the material of money, and its utility would not depend upon its legal powers, but upon its natural capabilities as a metal. The value of money, then, depends upon its powers to represent, measure, accumulate, and exchange value. These powers, given to any convenient material by Con- gressional enactment, wUl qualify it for a medium of ex- change, and in every particular constitute it money. CHAPTER m. THE RATES OF INTEREST THE GOVERNING POWER OF DISTRIBUTION TO LABOR AND CAPITAL SECTION 1. THE POWEE OP CAPITAI, TO ACOUMUXATB PEOPEETY AUD liABOE ACCOEDING TO THE BATE OF INTEEEST. In the introduction, labor was said to be the chief producer of wealth, and the preceding chapter has been devoted to the consideration of the nature and powers of money. The present chapter wiU exhibit the laws which goyern the distribution of the wealth, and will show the practical effects of certaiu rates of interest upon producers. The Constitution of the United States, Art. I., Sec. Vlil. 5, declares, " The Congress shall have power to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures." Money is the legal standard of value, by which the value of all articles for sale must be determined. The rate of interest fixes the value of money. Its value is no more fixed by the quantity or the quality of its material, than the size of the bushel is fixed by the quantity and quality of its wood. The rate of interest maintained upon loans of money, determines what proportion of the earnings of laoor shall be paid for the use of capital, and what pro- n 80 THE BATES OF UrTEEEST GOVEEN portion shall be paid to the laborers for their prodactioni If interest on money be maintained at a high rate, renti on property will also be high. There are but two purposes to which the yearly pro- ducts of labor can be apphed. One is the payment of the yearly rent or interest on the capital employed, and the other is the payment of labor. K laborers pay to capital, as use or interest for the year, their whole surplus pro- ducts, the laborers, as a body, work for a mere subsist- ence, and the capital takes their whole surplus earnings. The laborer receives for his year's toil, food, clothing and shelter only, and these perhaps of the poorest kind ; while the capitalist lives in luxury, increases the number of his bonds and mortgages, or with his income buys land or builds houses to let, which will, in succeeding years, take a still greater sum from the laborer. The law of interest, or per centage on money, as much governs the rent or use of aU property, and consequently the reward of labor, as the law of gravitation governs the descent of water. If the interest on money be too high, a few owners of capital will inevitably accumulate the wealth or products of the many. With the present accumulative power of interest, there is no more chance of the laboring classes gaining their rights by combining their labor to increase production, than there would be hope of success that by combining their labor they could reverse the course of the rivers, and make them run to the tops of the moun- tains, and pile up the waters on their summits. The law of gravitation, in the latter case, would not be more sure to overpower all their labor, and frustrate aU their plans, than the present governing power of the interest on money is sure to gather up the increased production and add it to the wealth of capitalists. The fault is in the law which governs the distribution of property ; and combi- nations to increase production would no move effect any general change in the distribution, than combinations THE DI8TEIBUTI0N OF WEALTH. 81 agaiiist the law of gravitation would effect a change in its general governing powers. The evil is legislative, and the remedy must be legislative. Money loaned on interest or invested in property, is doubled in a certain length of time, determined by the ate of interest. When this rate is too high, it requires the principal to be doubled in so short a time, that the borrower is compelled to give all his surplus products as interest or rent ; whereas, justice requires that he should pay only a moderate per centage for the use of capital, and himself retain the chief surplus of his labor. The following illustrations, calculating property to accumulate or double at certain rates of yearly per cent- age, in the same manner as money, wiU clearly exhibit the various results to laborers from various rates of inte- rest. A., B., and C. are young men, who have just come of age. C. is heir to $10,000, while A. and B. are mecha- nics, without capital. C. contracts with A. and B. to build a house which shall cost $5,000, on a lot for which he paid $5,000. The house and lot together are worth $10,000. C. leases this property to A. and B., and charges them seven per cent, upon its cost, clear of insu- rance, taxes and repairs. The interest is payable onoe a quarter. A rate of interest of seven per cent, per annum, paid quarterly, wiU accumulate a sum equal to the principal loaned or invested in property in ten years. At this rate, in ten years A. and B. are compelled to buy another lot, build upon it another as good a house, and pay the lot and house to C. for the use of the house they occupy. In twenty years, if A. and B. retain the use of the house and its accruing rents, they must pay C. three houses ; in thirty years they must pay him seven houses ; in forty years, fifteen houses ; in fifty years, thirty-one houses ; in sixty years, sixty-three houses ; and in seventy years, one hundred and twenty-seven houses. In seventy years all these must be built by A. and B., and paid to Sa THE BATES OF INTEEEST GOVEBN C. as the accumulation on the one that he leased to them, The one hundred and twenty-seven lots which A. and B. earn the money to buy, cost $635,000, and the buildings cost an equal amount, making together, $1,270,000; ■which sum is paid to C. for seventy years' rent of one house and lot worth $10,000. At the expiration of the lease, the original house must be returned to its owner, as well as the rent. If, instead of being invested in the house and lot, the $10,000 were loaned on interest at seven per cent., and the interest were collected and reloaned quarterly, the money would accumulate in a given period precisely the same amount as the pro- perty. Now, suppose interest to be at three per cent, per annimi, and A. and B. to build the house, and pay C. three per cent, annually on its cost of $10,000. This is $300, instead of $700 a year ; and, at this rate, the in- terest on money, collected and reloaned quarterly, re- quires nearly twenty-four years to accumulate a sum equal to the principal. Therefore, in twenty-four years A. and B. would give C. another house ; and, in seventy- two years, seven houses, instead of one hundred and twenty-seven, which they are compelled to do at seven per cent, interest. The laboi- of building the houses is Deither increased by a high rate, nor diminished by a low rate of interest. If C. let his house to A. and B. at six per cent., in about twelve years the income or rent will equal the principal ; therefore, at the expiration of that period, A, and B. must pay C. another house, and in twenty-four years, they must pay him three houses. But if C. lease the house to them for twenty-four years at three per cent., A. and B. retm-n him his house, adding one to it as its rent, and retain two houses as their own surplus. With interest at three per cent., in twenty-four years A and B, would each own a house and lot worth $10,000 ; THE DI8TEIB0TIOK OF WEALTH. 83 while, ■with the interest on money loaned or invested in property at six per cent, both would still be tenants, al- though they would have performed, in both oases, the same amount of labor. With interest at three per cent., in forty-eight years they would give C. three houses, instead of fifteen, as at six per cent., and they would own twelve as the surplus product of their labor. But at six per cent., C.'s capital would compel A. and B. to con- tinue his tenants, and to buUd for him sixteen houses more during the next twelve years. Take another example of the accumulation of property at seven per cent, interest. At the age of twenty-one, D. owns a well improved farm of one hundred acres. He leases it to E. at an interest of seven per cent., payable in land, as the interest on money is payable in money. At the close of the year, E. pays D. seven acres of as good quality as the one hundred rented, and with a. pro ratd proportion of buildings upon them. D. continues to let the farm to E. requiring him to pay the rent in land half-yearly, as interest on money is paid half-yearly in money ; and to pay rent on the land so paid, as the borrower of money pays interest on the interest which he adds half yearly to the principal. In ten years, E. must pay one farm ; in twenty years, three farms ; in thirty years, seven farms ; in forty years, fifteen farms ; in fifty years, thirty-one farms; in sixty years, sixty- three farms ; and in seventy years, one hundred and twenty-seven ferms ; all in as good a state of cultiva- tion as the one originally leased. At the age of ninety- one, D. can bequeath to his posterity one hundred and twenty-seven farms, from the mere rent on one. These, farms E. must earn by the labor of seventy years, and pay to D. for the use of one farm. K it were possible for him to earn the one hundred and twenty-seven farms to pay to D., and the rate of interest were reduced to one per cent., he need pay to D. only about one farm as 84 TBB KATES OF INTEEEST GOVEBN rent for the seventy years, and could retain one nundred and twenty-six as the surplus of his labor. Again, suppose John and Richard to be poor boys, each ten years old, who expect to be bound out at the proper age to learn the carpenter's trade. But a rich uncle bequeaths to John a house worth ten thousand dollars. It is worth so much, because it will rent for seven hundred dollars a year over and above taxes, in- surance and repairs. John's guardian is a lawyer, and will collect the rent, and loan it out for him at seven per cent, per annum, getting his fees from those who borrow the money. John likes Richard, and learns his trade with him, and earns his living by his labor as Richard does. John instructs his lawyer to purchase another house, whenever the rent of the one accumulates to enough to buy a second equal to the first. If the in- terest be regularly collected and loaned at seven per cent., and the interest be collected half yearly, it will equal the principal in ten years and one month ; when his lawyer can buy for John a second house, so that when he is twenty years and one month old, he will be the owner of two houses. These two houses, rented for ten years and one month more, wUl buy for John two houses more ; so that at the age of thu-ty years and two months, he will own four houses : at forty years and three months, he will own eight houses : at fifty years and four months, sixteen houses ; at sixty years and five months, thirty-two houses; at seventy years and six months, sixty-four houses ; and at eighty years and seven months of age, he wiU own one hundred and twenty- eight houses, each of which is rented at seven hundred dollars a year ; and all of them together are bringing in a clear yearly income of eighty-nine thousand six hundred dollars. Now what has John, or his uncle, or his guardian, done, that the public should be obliged to give John one himdred and twenty-seven houses for seventj THE DlSTEIBtJTION OF WEALTH. 85 years' use of one house ? These one hundred and twenty-seven houses are all legally his; and our laws maintain that John has as equitable a right to them as it he had bought the lots and built the houses by his own labor. Yet, if we allow labor to be worth a dollar a day, It would take the entire earnings of sixty men for over seventy years to pay for the one hundred and twenty- seven houses, which the use of the one house has in seventy years legally acquired for John, without the per- formance of any labor on his part. Let us see how different would be the results in this case if the interest on money, and consequently the rents on property, were at one per cent, per annum, instead of at seven per cent. John's uncle bequeaths to him the house worth ten thousand dollars ; but, inst*od of renting it at seven per cent, on its value, John can rent it at but one per cent, over and above taxes, insurance and re- pairs, and regularly collects and loans out the rent as in the former case. It would be about seventy years before the rent and the accruing interest on the rent would equal the principal, and buy for John a second house as valuable as the first. With interest legally fixed at one per cent, the use of one house for seventy years would accumulate for John, out of the earnings of others, one additional house of equal value, whereas, at seven jier cent, it would accumulate for him one hundred and twenty-seven houses. Whether the government nx the rate of interest at seven or at one per cent, the public must provide the same quantity of material and perform precisely the same amount of labor to build the one hun- dred and twenty-seven houses ; but with the interest at seven per cent. John would lawfully own them all, whereas with interest fixed at one per cent, he would lawfully own Dut one house out of the one hunared and twenty- seven houses, and otherswould lawfully own the remain- ing one hundred ami twenty-six houses. To furnish the S6 THE RATES O^ INTEREST GOVEBB materials and build these houses, requires not only skill ii the mechanical arts, but also the performance of an immense amount of manual labor. But to give the one hundred and twenty-seven houses to John, who is fairly entitled to but one of them for the use of the one he rented, is the legitimate operation of the law fixing the interest at seven per cent. "What chance have the pro- ducing classes by any combination of labor to contend successfully against such an accumulating and centraliz- ing power ? They might as well venture into the sea, with the wind blowing a hurricane, and expect by their bodily strength to turn back the waves. The sea would not be more certain to sweep over them, and pursue its on- ward course, than the accumulative power of money at seven per cent, interest yearly to gather up the surplus earnings of labor despite all combinations of labor against it. If the producers ever gain their rights, it will be by legally controlling the power of money, and not by any combinations of labor. If a hundred dollars can be lent at seven per cent, inte- rest, the borrowerpays seven parts of the whole forthe use for one year. The borrower must invest the money (for it is of no use to keep) in land or other property, and therefore must pay seven parts of the value of the property for the use of one hundred parts for a year. But if money be borrowed at one per cent., of course the borrower pays but one part for the use of one hun dred parts either of money or property for a year, hence at this late laborers would receive six parts of their net yearly earnings now paid to capital. A man who labors on his own property gains for himself its whole product. The rate per cent, interest determines what proportion others shall pay him for the use of capital, which he does not need for his own use. Suppose seven per cent, to be the fixed rate of interest, and V. to be a farmer, who, at the age of twenty-one, inherits five farms, worth ten thousa d THE BISTKIBUTION OF WEALTH. 87 dollars each. He wishes to cultivate one himself, and to sell or rent the remaining four. A., B., C. and D. are farmers without property, and are obliged to hire their farms. They cannot expect V. to rent them his for less than tlie interest on the money for which they would sell. Suppose these men to rent V.'s four farms at seven hun- dred doUai-s a year each ; and V. to collect his rent yearly, and lend the money to others at seven per cent., and yearly to collect and reloan this interest. The rent and accruing interest upon the rent, in ten years and three months, would enable V. to buy four additional farms, worth ten thousand dollars apiece, which he could rent to four more tenants. In ten years and three months, the rent and interest upon the rent of these eight fanns would furnish V. with money to purchase eight farms more of equal value, which he could rent to eight other tenants ; in a third period of the same length, the rent and interest upon the rent of the sixteen farms would buy sixteen additional farms ; in a fourth period, the rent and interest upon the rent of the thirty-two farms, would pur- chase thirty-two more farms ; in a fifth peiiod, the rent and interest upon the rent of the sixty-four farms, would buy sixty-four more ; in a sixth period, the rent and interest upon the rent of the one hundred and twenty- eight fanns would buy one hundred and twenty-eight more ; and in a seventh ten years and three months, the rent and interest upon the rent of the two hundred and fifty-six farms then owned by V., would buy for him two hundred and fifty-six farms more, of equal value with the first farms which he rented to A., B., C. and D. Thus v., in seventy-one years and nine months, would become the owner of five hundred and twelve farms, worth ten thousand dollars each, and bringing in a yearly income of seven hundred dollars apiece. Five hundred and eight of these farms would be added to V.'s wealth by the labor of his tenants, not to mention the improvement 9 88 THE RATES OF INTEREST GOVERN mad( on their original T ilue by the lahor ; and V. would have had besides, the entire produce of the one farm re- served for his own cultivation. We will now see what would be the result to V. and his tenants from the simple change of the rate of interest from seven to one per cent. Suppose V., as before, to in- herit five farms, each worth ten thousand dollars, one of which he cultivates himself. If he should sell the remain- ing four for ten thousand dollars each, he could lend the money at one per cent., that is for four hundred dollars ; but he rents the farms to A., B., C. and D., at one per cent, on their value, and thus receives the same income. If V. should loan this yearly rent of one hundred dollars on each farm, yearly collecting and reloaning the interest, nearly seventy years would elapse before the rent paid him by A., B., C. and D., and its accruing interest, would buy four more farms of equal value with those rented ; whereas, in about the same period, at seven per cent, the rent and its accruing interest would buy five hun- dred and eight farms. Whether the interest were at one or at seven per cent., V. would equally receive the products of his labor on the farm that he kept for his own use ; but at seven per cent., he wotdd gain by the labor of his tenants five millions and eighty thousand dollars' worth of land ; while at one per cent, he would gain by their labor but forty thousand dollars' worth. The agree- ments between V. and his tenants appear on the surface as fair where they pay the larger as where they pay the lower rent ; because, in each case, they conform to the groundwork or foundation established by law ; but, in the latter instance, V.'s tenants would as much pay to him the fuU yearly market rent of his farms by paying one hundred dollars apiece, as in the former by pay- ing seven hundred dollars apiece. If one acre of land would produce twenty-five bushels of wheat worth one flollar per bushel, each of V.'g tenants must yearly sow THE DISTEIBUTIOH 01 WEAITH. 89 gatlier and sell twenty eight acres of wheat to pay seven hundred dollars rent. Suppose wheat to continue worth one dollar per bushel, and the rent to be diminished to one per cent. ; with the same industry and economy, each tenant could pay the one hundred dollars rent, and re- tain for himself six hundred bushels of '\\lieat as the sur- plus of his labor. If V.'s tenants, in about seventy years, could earn and pay to him five hundred and eight farms, in the same period, with the interest at one per cent., they could earn for themselves five hundred and four, for the other four farms would pay all their rent to V. Having the entire produce of one farm for his own sup- port, the low reut of the other four could do him neithei injustice nor injury; while compelling A., B., C. and D. to pay the larger rent would deprive them and otliers of the just reward of their labor ; and V. would not be really benefited by the hardships imposed upon them. The interest on money at seven per cent, is as opjwes- sive as the same rate per cent, rent on land. Suppose v., instead of renting his four farms, should sell them for $ J 0,000 each, and loan the money at the legal rate of sevsn per cent., collecting and reloaning the interest yearly. In ten years and three months, the principal and interoat together would amount to $80,000; in twenty years and six months, to $160,000: in thirty years and nine months, to $320,000 ; in forty-one years, to $640,000; in fifty-one years and three months, to $1,280,000; in sixty-one ye. us and si.v months, to $2,560,000 ; imd iu seventy-one years and nine months, to $5,120,000. Mul- tiply $10,000 by five hundred and twelve, the number of farms, and it will give the same sum. If V. should soil the four farms for $40,000, and lend the money on bond and mortgage at seven per cent., requiring, as is usual, double the v:duo in land ;is security, he would liave luort- 1,240,000 worth of landed estate; and 90 THE BATES OF INTEEEST GOVEEN the people ocoupving this land would be hard at work to pay him the interest; thus rapidly concentrating wealth in his hands, instead of diffusing it to supply their own wants. But with interest at one per cent., |40,000 loaned fol seventy years, would accumulate but $40,000 more ; ■whereas, at seven per cent, it would accumulate $5,080,000. This difference in interest of $5,040,000 would be added to y.'s wealth from the earnings of others, while V.'a accumulation of money or increase of lands would not add either a dollar to the quantity of money, or an acre to the quantity of land. It would only have monopolized it foi V.'s benefit. It would have caused the people to owe V. $5,080,000, and make them $5,040,000 poorer than if interest had been at one per cent. The contracts be- tween V. and his tenants being made in conformity with Ihe standard at seven per cent., they must pay him the $5,040,000, or defraud him of what is legally his due ; and if he voluntarily take less than this from them, it is an act of charity. Seven percent, is not the standard for V. only ; it is a public standard that favors other capital- ists equally in the various branches of business, and imposes upon the producing classes generally obligations similar to those it imposes upon V.'s tenants.* * We do not question the right of V. to inherit the five farms, and to enjoy all the produce of the one he cultivatea : nor do we object to his receiving a just rent for the use of any other farms which he may own ; but the rent of the latter should be only equivalent to a pro- per support of the money by which their value is represented ; and we claim that one, or one and one-tenth per cent, is ample to pay for the necessary material and labor to furnish a representative that shall be and remain perfectly secure and good. ... As labor in all useful departments should be fairly compensated, so also the neces- sary labor to furnish and issue the money of a nation should be justly remunerated; and the per centage interest on the money should be equivalent to pay for the needful material and labor to furnish and lend it. The interest ought not to exceed the expense of the institution an* circulation of the money ',See Sec. XVII. and Part II., Chap. ll.\ THE DISTEIBUTION OF WEAITH. 91 To give some idea to what extent the power of interest operates, it can only be necessary to say, that all the money lent on bonds and mortgages by indivi- duals, by insurance and trust companies ; all the money lent for United States, State, County, City Railroad, Canal and other bonds, made to raise money for public improvements, whether these improvements be made by corporations, by the States or by individuals ; also all the money lent by banks, brokers and individuals on promissory notes — all these loans are operating with a like centralizing power against the producers and in favor of money-lenders. This power also establishes a like rate per cent, rent to be paid for the use of all property, real and personal. The rent of houses and lots in cities, and of farms and houses in the country, must conform to this standard. All the goods, wares and merchan- dise on hand in the nation, and that are in process of being produced and manufactured, are governed in their value by money, and are under tribute to its centralizing power. It is an xmavoidable power, because it is insti- tuted, upheld and enforced by the national laws, and is the basis upon which all market values are founded. The following statement shows the effect upon pro- ducers of a rate of interest on capital of six per cent, per annum. The yearly income of our most wealthy citizen from dividends on State, bank, and other stocks, money lent on bonds and mortgages, and rents of property, is said to amount to |2,000,000. Take the farmers of the six New England States, include those of New York and New Jersey, and it is very doubtful whether, after paying necessary expenses, each makes a yearly gain of more than one hundi-ed dollars. According to this calculation it would require the use of twenty thousand fanns, and the surplus earnings of twenty thousand farmers and their families, to clear $2,000,000 a year. However difficult it might be to trace the ways and means bj f)2 THE BATES OF INTEKEST GOVERN which this income is gathered, it takes $2,000,000 worth of the surplus products of labor to pay the legal accumu- lation on the capital. Suppose able-bodied men to earn one dollar per day, for an average of two hundred and seventy-five days in each year — i. e., $215. Two millions of dollars would annually hire and pay for the labor of seven thousand two hundred and seventy-sis men. Allow the receiver of the income to expend yearly for his own support as much as seventy-three laborers earn, and he will still receive a clear gain of $1,980,000 yearly, the entire earnings of seven thousand two hundred and three men. Calculate the interest on $1,980,000 at six per cent., and the next year it will make an addition to his income of $118,800; which sum woula pay for the labor of four hundred and thirty-two men, in addition to the number employed in the preced- ing year. What is the probable surplus that each of these laboring men would yearly retain, after deducting from the $275 their own expenses, and those of their families? Can any laboring community be prosperous, and pay so great an amount of interest on capital ? The legal power of money to accumulate an undue rate of interest, com- pels these laborers to give all their surplus products to one man for the use of capital, while they and their families are dejDrived of a good subsistence, and are obliged continually to increase that capital, which yearly exercises a greater power over their labor. In order that the power of the ordinary rates of inter- est to concentrate property in the hands of capitalists may be more clearly seen, in the following illustration the con- tracts shall be based upon wheat instead of upon money. Take the yearly income of Mr. A., say $2,000,000. If his money be loaned, or his property be leased at six per cent. on its valuation, he must be worth thirty-three and a third millions of dollars. Suppose Mr. A., instead, la own thirty-three and a third millions of bushels of wheat, THE DISTKrBDTION OF WEALTH. 93 Let him lend the wheat instead of the money at six per cent., and the interest will be precisely two millions of bushels. The farmers who borrow the wheat, and give their bonds and mortgages upon their farms to secure the payment of the principal and interest, must sow, reap, and thrash out two millions of bushels, transport them to New York, and put them into Mr. A.'s storehouses, to pay the interest for one year. What a pile of wheat is this for one man's use, gained too, without his sowing or harvesting a bushel of it. But suppose the interest to be at one per cent, instead of at six per cent, and Mr. A. ta lend these same fin-mers the thirty-three and a third mil- Uonsof bushels of wheat at this percentage; at the end of the year they wUl have to pay him only three hundred and thirty-three thousand three hundred and thiity- three and a third bushels of wheat, to satisfy the interest. The farmers will then retain one million six hundred and sixty-six thousand six hundred and sixty- six and two-third bushels for their own use, or to sell to others, or to pay toward the principal of the debt. With Interest at one per cent, they will as much satisfy Mr. A.'s yearly claims, by paying him the smaller quantity of wheat, as they would at an interest of six per cent, by paying two millions of bushels. If each acre of land produce fifteen bushels, and the farmers cultivate on an average ten acres each, it will take the labor of thirteen thousand three hundred and thirty-three farmers, and the use of one hundred and thirty-three thousand three hun- dred and thirty-three and a third acres of land to pay the yearly interest of six per cent, on the thirty-three and a third millions of bushels of wheat borrowed of Mr. A. But if interest be at one per cent, and the farmers con. tinue to pay Mr. A. the two millions of bushels yearly, in eighteen years and four months they will pay off loth the principal and the interest of the debt. Suppose the farmers to pay six per cent, interest, i. e., 94 THE BATES OP INTEREST OOVEEN two millions of bushels of wheat on the loan for twenty years, they will pay forty millions of bushels to satisfy the interest, and will still owe the thirty-three and a third millions principal. If Mr. A., as he yearly receives the interest from the farmers, say two millions of bushels of wheat or $2,000,000, should lend it out to mechanics at six per cent, interest, and continue to do this for twenty years, adding yearly to the loan the interest so accrued, it would accumulate, in the twenty years, to $73,571,180. The interest on this interest for a year amounts to $4,414,270, which would yearly be due from the mechanics. If the mechanics, instead of paying the interest in wheat, should pay it in manufactured articles, they would pile up an enormous quantity of goods in Mr. A.'s storehouses for his yearly use. With interest at six per cent., at the end of twenty years, the farmers would owe Mr. A. $33,333,333, or the same number of bushels of wheat, and the mechanics would owe him $73,571,180; together, $106,904,513 ; which would annually require from the farmers and mechanics $6,414,270 worth of their products merely to pay the interest. Now let interest be at one per cent, per annum, and let Mr. A. lend $33,333,333 at this rate, and in twenty years the interest compounded yearly would amount to but $7,339,666, instead of $73,571,180 ; making by this sim- ple alteration of the rate of interest for twenty years, a saving to the farmers and mechanics of $66,231,514. These calculations of the centralizing power of money are not based upon any usuiious rates of interest, but upon six and seven per cent., and the latter rate is estab- lished by the State of New York as just and equitable ; and judgments in the courts of law aj;e rendered and entered upon the records accordingly. These rates of inter est are certain to take the wealth from the pro- ducers and give i(. to the financiers. It wiU be hereafter shown that the rate of interest may be easily reduced tc THE DISTEIBinON OF WEALTH. 96 one per cent., or to any other per cent, that shall be deemed most conducive to the general welfare ; and ii the people think it more just that the interest should cease to accumulate wealth so rapidly in a few hands, they win enact laws to prevent it. K they will stop such accumulation by interest, they will live upon the pro- ducts of their own labor, instead of living upon the charity of capitalists. If in twenty years Mr. A. should bestow on the needy 1(56,231,514, or the same number of bushels of wheat, it would be an unheard-of liberality. But if the law of interest were such that he could not legally take this amount from the people, they would retain it in their own possession, as the natural product of their labor, instead of being compelled to receive it as a charity. Mr. A. now uses the most of his cajjital by investing it in State and other stocks, buying business notes at large discounts, lending money on bond and mortgage, buying up mortgages bearing seven per cent, interest be- low their par value, purchasing property under foreclosure, etc. Doubtless his object is to obtain the best possible per centage income for the use of his money or property. All that he gains by these means above six per cent, interest, takes a still greater sum from the earnings of producers. Now suppose from this time forward Mr. A. should determine to puraue a different com-se, and to lay out his capital in such a manner as to conduce in the highest degree to the welfare of the people around him. To support them in idleness would be a disadvantage ; but to employ them, and pay for their work such a price aa would give them a good subsistence, and furnish them with the means of educating their childreD, and to pro- vide for the aged and needy, would be a very benevolent disposition of his wealth. To do this he invests all his property in the manufacture of cotton goods. With thii'ty-three and a third millions of dollars he could caiTy 96 niTEEEST GOrEENS DI8TKIBUTI0N. on an extensive business. He builds his manyifactories, and purchases maohinerj. He contracts with a number of planters to supply him for a certain number of years with a given quantity of cotton. He also contracts with workmen to perform the labor in his mills, and agrees to give to all such prices as will afford them and their families a comfortable subsistence, make suitable pro- vision for the education of their children, and support those who are unable to work and dependent upon them. The cotton wUl, of course, be always furnished at a uni- form price, and the price of labor will be about the same each year. Mr. A. now fixes the prices of his goods so as to sustain the various people in his employment. Let Mr. A. invest all his means in mills, in stock, and labor, on these terms, while the planters hire their plantations, and the mechanics, manufacturers and laborers employed by Mr. A. hire houses to live in, etc., from others at a rent of seven or eight per cent, per annum, and it will be impossible for him, with all his capital, to sustain himself. In a very few years he wUl become bankrupt, for he must enable his workmen to pay their rents, and give them, besides, a comfortable support. This obliges him to use his own property at a low rate of interest, whUe, through his workmen, he is compelled to pay a high rate of rent or interest for the use of the property of others. The operation is, virtually, that the owner of thirty-three and a third millions of dollars borrows an equal or large amount at six, seven, or eight per cent, interest, and reloans the borrowed money, together with his own, at an interest of one, or one and a quarter per cent. By so doing, hia fortune wUl soon pass into the hands of other capitalists. The present monetary laws of all nations are opposed to the reward of labor ; and no individual or national at- tempts justly to reward it, except by changing thes« taws, can secure any permanent success. THE WEALTH OF OITIEB. 9? SECTION 11. IHB WHAXTH OP CITIES, AND THE MEAN'S OF ITS ACC0- MtTLATION. The following illustration shows the capability of money, at an interest of six per cent, per annum, to cen- tralize the wealth of nations in large cities. Suppose an uncultivated island, ten miles square, and a few miles distant from the coast of the United States. Ten thousand wealthy citizens of the States intend to build a city upon it. These citizens are worth $150,000 each ; in the aggregate, $1,500,000,000. The legal interest on money is fixed at six per cent, per annum. For two years previous to their removal to the island, the people prepare upon it houses for themselves, and suitable accommodations for merchants and mechanics. Each of these families expends $3,000 yearly for its support. Each fenuly being worth $150,000, the interest on which, at six per cent, would be $9,000, each has an income of $6,000 a year, over and above expenses. They expend their surplus income for two years, i. e., $12,000 for each family, in the aggregate $120,000,000, in making improve- ments on the island. They dispose of their property on the main land on credit, securing it by bonds and mortgages. State stocks, or otherwise, so that they insure an interest payable half yearly of six per cent, per annum, on the whole amount of their property. These obliga- tions merely represent the value of the property they leave upon the main land, and must yield an income from the products of the land and labor of the purchasers. The annual interest on $1,500,000,000, amounts to $90,000,000. The paper obligations held by the creditors legally empower them to demand an interest of $90,000,000, in ipeiue. The mere giving of obligations is all that is ve 96 THE WEALTH OF OITIEB. quired in the transfer of property. The conversion of their property into bonds and mortgages and other secu- rities, may not have required the use of a million of dol- lars of money. But the payment of both principal and interest must be made in money. The ten thousand families contain, on an average, five persons each, making, in the aggregate, a population of fifty thousand. They employ, on an average, three domestics in each family, increasing the population to eighty thousand. The yearly expenses of each family amount to $3,000; or, for the whole, to $30,000,000. Hatters, tailors, shoemakers, cabinet-makers, mechanics of every sort collect about them to supply their wants, and receive the sums which they expend in living. More than fifty thousand laborers and artisans are needed to supply their wants. In a few years the centralization of capital collects a city of three or four hundred thousand inhabitants. The ten thousand families expend $30,000, 000 yearly, and draw besides, from the people of the main land, a clear income of $60,000,000 a year, which they can reloan. The debtors cannot send the $60,000,000 in money, and are therefore obliged to send the products of the soil, manufactured articles, etc., to this city fov sale, to procure money to meet their payments of interest. The city soon becomes the market-place of the nation, and engrosses the principal business. The people are astonished at its wealth and prosperity, and congratu- late themselves on having so fine a mai-ket for their products. In the course of a century or two, the ten thousand famihes and their descendants can, if they choose, with out labor on then- part, buUd a wall around their city as high and as broad as the walls of ancient Babylon. Meanwhile, the people upon the main land are obliged to supply all the wants, the food, clothing, etc., not only ot the ten thousand families and their descendants who dc THE WEALTH OF OmES. 99 no work, but also of the laborers employed in the erection of the wall, in the building of houses, and in all other im- provements. Producers and manufacturers from differ- ent parts of the country carry their goods to the city, and the citizens, after selecting the choicest for their own use, resell the remainder to laborers, who are only able to purchase the poorer kinds. If an accoimt were kept of those sold to the country, it would be found that they were minus nearly the whole support of the people of the city. Now what compensation is received by the people of the main land for the supplies which they furnish ? The citizens, indeed, pay money for the supplies, but this money is the interest on capital loaned to the people, without whose labor it would have been useless. In a similar manner, under the present monetary laws of the United States, a few rich men in cities engross the wealth of the country. It is as natural under these laws for the wealth to fall into a few hands as for water to find its level by its own gravitation ; and while our present rates of interest prevail, no combination or suc- cess in production, either by machinery or the muscular power of labor, will ever effect any important change for the better. But when the laboring classes combine to have good national monetary laws in lieu of the present evil ones, their united efforts will effect a change in these laws, and thus accomplish the object they have so long and so anxiously sought after. If the interest in the case supposed were limited to one per cent., the income for each family would be only |1,500, or one-half of what they each year expend ; consequently, they must either labor for the other half, or take a portion of their princi- pal each year for their support. It would, therefore, be impossible for them to build or sustain such a city. The ten thousand most wealthy men in the United States are probably worth, on an average, at le'ast $300,000— in the aggregate $3,000,000,000. The annual 10 100 THE WEALTH OF OmEB. interest on this sum at six per cent, "would be $1 80,000,000, If these men should sell their property, and invest ths proceeds in bonds and mortgages bearing six per cent, interest per annum, and remove from the country, they would impose a tribute on the productive industry of the nation which would impoverish it for ages. It is doubt- ful whether the people would ever be able to pay and satisfy the interest and principal of the debt. They would pay 1180,000,000 of their products yearly, without receiving any equivalent. And yet, without the labor of the buyers or borrowers, the property would be use- less ; and if the owners received any benefit from it, they would be obhged to remain and cultivate it themselves. Ought the laws to be such, that ten thousand wealthy men, on leaving their country, could impose such a bur- den upon the millions left behind? If interest were reduced to one per cent., and the ten thousand men should sell their property, leaving the proceeds on in- terest at one per cent., this nation would pay them $30,000,000 interest annually. And this would be quite enough for producers to pay for the mere use of capital. To show conclusively that the present rates of interesl are the cause of the accumulation of the wealth in our cities, we will enter at length into a calculation which each can test and examine for himself. No one will dis- pute that in the city of New York there are several hun- dred families whose collective wealth is equal to $250,000 *or each family. For our illustration, however, we will take but one himdred families, and supppose each of them to be worth equal to $250,000 — ^in total, $25,000,000 As five or six of our citizens might be pointed out who are, in the aggregate, worth at least double the sum total, this calculation is a moderate one. Suppose these one hundred families to emigrate to some desirable sec- tion of the country, and settle upon two hundred acroa of land, so that each family owns two acres. They con- THE WEALTH OF cniEB. 101 vert all their property into money, or into bonds aiul mortgages bearing six per cent, interest, the lowest legal rate of interest in any State of the Unioa. Each family expends yearly for its support $3,000, or the interest at six per cent, on $50,000. This sum would supply each family with the necessaries and luxuries of life without the performance of labor by any of its members. Be- sides the $50,000 of which they expend the income, each family has $200,000— in the aggregate, $20,000,000— loaned at six per cent, interest, the annual income of which would be $1,200,000. The yearly expenditure of $300,000 (the interest on $50,000 for each family) soon collects near them merchants, mechanics, laborers, and others, to supply their wants ; and farmers find here a market for their produce. These families and their posterity live without labor, being determined to incur no hazard of business. They intermarry for five generations, thirty years being the average duration of each. Upon marriage, each couple receives $50,000, the income on which, at six per cent., amounting to $3,000 a year, is appropriated to their sup- port. They also receive their average proportion of the principal. They are forbidden to exact a higher rate of interest than six per cent, per annum, payable half-yearly, and are not at liberty to call in the principal so long as the interest upon it is regularly paid. The families con- sist of five persons each, exclusive of servants, amount- ing, in the aggregate, to five hundred individuals. Sup- pose them to increase twenty-five per cent, every twelve and a half years. Each family at the emigration had $200,000 loaned at six per cent, interest, amounting to $12,000 per annum; and, in the aggregate, on the $20,000,000 owned by all, to $1,200,000 per annum. This interest, collected and reloaned half-yearly, wiH double the principal, $20,000,000, in about eleven and 102 THE WEALTEI OF tlTIES. three-quarl.er years ; but, to leave time for the collection and reinvestment of the interest, allow it twelve and a half years to double, The following calculations exhibit the sum which would be owned by the families at the end of five generations of thirty years each, or at the end of one hundred and fifty years. This calculation of the centralization of wealth by interest is no idle theory, but a mathematical demonstration of facts, based upon the lowest rate of interest established by law in any State — a much lower rate, too, than the average one at which money is actually loaned. The following table exhibits the accumulation at the rate, and under the circumstances, as above : TABLE OF THE INCBEASE AT SIX PER CENT. OP THE WEALTH OP A HUNDRED PAMILIES WORTH $250,000 EACH, DURING A PERIOD OP ONE HUNDRED AND FIFTY TEARS, WITH A DEDUCTION OF THEIR ANNUAL EXPENSES. 100 families worth $250,000 each $25,000,000 Yearly expenseB of each family, $3,000, or the income on $50,000 at six per cent. — total for 100 families. . 6,000,000 Deduct $5,000,000 for expenses, and there are left to accumulate 20,000,000 The interest at six per cent, paid half yearly, and re- loaned, will equal the principal in 111 years ; but allow 12J years, and then add. 20,C00,00t 40,000 WO Add 26 per cent, increase to 100 families in 12 J year* — i. «., 26 families, and deduct $50,000 for, the sup' port of each of the 25 1,250,000 Left to accumulate 38,760,000 Add 12J years interest, at 6 per cent 88,759,000 77,500,000 Add 25 per cent, increase to 125 families — >. «., 31 fami lies, and deduct $50,000 for eacli of the 31 l,56O,O0C Left to accumulate 76,950,000 THE "WEALTH OF CITIES 103 Left to accumulate (brought forward) $76,960,000 Add 12J years' interest at six per cent 76,960,000 161,900,XO Add 25 per cent, to 156 families — i. e., 89 families, and deduct $60,000 for each of the 39 $1,960,000 Left to accnmulate 149,950,000 Add 12J years' interest at 6 per cent 149,960,000 299,900,000 Add 25 per cent, to 195 families — i. «., 49 families, and deduct $50,000 for each of the 49 2,450,000 Left to accumulate 297,460,000 Add 12J years' interest at 6 per cent 297,450,000 594,900,000 Add 26 per cent, to 244 families — t. e., 61 families, and deduct $50,000 for each of the 61 3,050,000 Left to accumulate 591,850,000 Add 12J years' interest at sir per cent 591,850,000 1,183,700,000 Add 25 per cent, to 805 families— i. «., 76 families, and deduct $50,000 for each of the 76 3,800,000 Zieft to accumulate 1,179,900,000 Add 12J years' interest at six per cent. 1,179,900,000 2,369,800,000 Add 26 per cent, to 381 families — t. «., 96 families, and deduct $50,000 for each of the 96 4,750,000 Left to accumulate 2,365,050,000 Add 1 2 J years' interegt at 6 per cent 2,356,050,000 4,710,100,000 Add 26 per cent, to 476 families — ». «., 119 fami'les, and deduct $60,000 for each of the 119. . , 6,960,000 Left to accumulate 4,704,150,000 Add 12J years' interest at 6 per cent 4,704,150,000 9,408,300,004 Add 26 per cent, to 696 families — i. «., 148 families, and deduct $60,000 for each of the 149 7,450,00C Left to accumulate 9,400,850,0UO 104 THE WEALTH OF OITIEB. Left to accumulate (brought forward) $9,400,850,000 Add 12 J years' interest at 6 per cent $9,400,860,000 18,801,700,000 Add 25 per cent, to 744 families — i. e., 186 families, and deduct $50,000 for each of the 186 9,300,000 Left to accumulate 18,792,400,000 Add 12J years' interest at 6 per cent 18,792,400,000 37,584,800,000 Add 26 per cent, to 930 families — i. «., 233 familiea, and deduct $60,000 for each of the 233 1 1,650,000 Left to accumulate 37,573,150,000 Add 12J years' interest at 6 per cent 37,573,160,000 75,146,300,000 Add 25 per cent, to 1,163 families — i. «., 291 families, and deduct $50,000 for each for the 291 14,550,000 Left to accumulate $75,131,760,000 Add the two hundred and ninety-one families to the eleven hundred and sixty-three, and their sum is a thou- sand four hundred and fifty-four, which is the increase of the one hundred families, by the addition of twenty- five per cent, every twelve and a half years. The cal- culation is continued for a hundred and fifty years, or for five generations of thirty years each. The sum of $50,000 is assigned to each family, which, loaned at six per cent., secures to each a yearly income of $3,000. Each family has an income of ten dollars per day for three hundred days in the year. If each family average five iadividuals, each man, woman and child receives an income of two dollars per day. This is twice as much as a laborer can cam in a day, and the single dollar must support both himself and his family. Besides this yearly income, the people of this nation would owe the fourteen nundred and fifty-four families $75,131,750,000. Suppose this sum to be equally divided among the familieB, each THE WEALTH OF CITIES. 105 would have $51,672,455. The interest upon the sum total, at the rate of six per cent,, would amount to more than $4,500,000,000 annually. An immense amount of the products of labor must be yearly sold for money to pay this interest. Is the law which thus accumulates interest or products, a power for actual production? No — ^the law which exacts this interest does not increase the quantity of money, nor of products ; it simply re- quii-es that the proceeds of $4,500,000,000 worth of products shall be given over to the fourteen hundred and fifty-four families to satisfy the interest. More than half the present valuation of the whole property of the United States, both real and personal, would be required to pay the interest for one year. And yet these families exact less than our laws permit, for they take but six per cent, interest, and in a number of our States, the legal rate is seven or eight per cent. Now let one per cent, be the legal rate of interest ; and suppose the families to loan the twenty millions for the same period of a hundred and fifty years at one per cent., instead of at six per cent., and to collect and reloan the interest half yearly. The people have the same amount of money to use ; and at the expiration of the hundred and fifty years, the sum of the principal and interest does not exceed $90,000,000, while at six pei cent, it amounts to $75, 131, 750,000. At one per cent., the piinoipal and the interest do not amount to one eight-hundredth part as much as at six per cent., nor doea tht! sum require one eight-hundredth part as much labor to pay it. J£ the people borrow the money at six per cent., at the end of six months they give back a portion of the borrowed money to pay the interest. The in- terest is reloaned to them, and thus continually increases their indebtedness. With interest at one per cent., the people would have the same quantity of money, and at the end of six months w juld give back a half per cent. 106 THE WEALTH OF CITIES. to pay the interest, and the families would relom the half per cent, to the people, instead of reloaning the three per cent. A high rate of interest cannot increase the quan- tity of money, but it increases the indebtedness of the people. If interest were at one per cent., each of the one hun- dred families would have but $2,500 income on its whole capital ; and if they should continue to expend $3,000 apiece yearly, each family, in order not to encroach on its original capital, would have to produce, by its labor, $500 worth of products yearly, for its own use or for sale, instead of being able to lay up $12,000 yearly, without labor. The producing classes could never be oppressed by the capital of these families. But with interest at six per cent., in less than a century and a bal^ the whole nation would be subject to their control, be- sides being obliged to support them and their posterity in idleness during the hundred and fifty years.* • It is not reasonable to suppose that man's morals will be pure so long as we make laws which deprive him of his physical rights. A standard that will deprive producers of what they justly earn, and bestow on non-producers what does not belong to them, cannot fail to corrupt tlie morals of both parties. No ingenuity in the invention of machinery, and no physical force or combination of labor, has power to change this wrong ; because the evil is not in the produc- tion, but ii the wrong distribution, which proceeds from the invisible power or law that governs it. For all laws are spiritual or mental powers, which operate upon and affect visible things ; and their effects can only be altered by altering the spiritual or mental law. This power of money is not the product of labor, nor even a visible thing, more than the attractive power of the magnet is visible. Money, whether of gold, silver or paper, is visible, but the power of interest Is invisible, and yet gathem to itself things visible as metals ar« attracted to a magnet DJTEKEST EE0KlO!D IN NEW YOEK. 107 SEOTION m. CNTEEEST RKCEIVED BY THB CUTIZENS OP THE CITY OP NEW YOEK ON LOAlfS TO THB COUNTRY. Doubtless the city of ZSTew York has at this time more than $50,000,000, and probably more than $100,000,000 lent in various ways to the country at six or seven per cent, interest. Some part of it is invested in State bonds, bank and railroad stocks, stocks of manufacturing compa- nies, etc. ; and some lent on bond and mortgage, the divi- dends or interest on all of which mast be paid in New York. Estimate this sum at only $25,000,000, and allow it to draw seven per cent, interest. Suppose the citizens to support themselves iudependently of the income from this loan, and allow it, by collecting and lending the interest half yearly, to accumulate for a century. It matters not in what way the capital may be lent, pro- ducers are compelled to add all the iaterest from the proceeds of their products. In ten years and one month the $25,000,000, wiU increase to $50,000,000 ; in twenty years and two months, to $100,000,000 ; in thirty years and three months, to $200,000,000 ; in forty years and four months, to $400,000,000 ; in fifty years and five months, to $800,000,000 ; in sixty years and six months, to $1,600,000,000; in seventy years and seven months, to $3,200,000,000 ; in eighty years and eight months, to $6,400,000,000 ; in ninety years and nine months, to $12,800,000,000; and, in one hundred years and ten months, to $25,600,000,000. This is as certain as any other mathematical calculation, and nothing can prevent the accumulation of enormous sums in the hands of a few capitalists in this city, unless it be the inability of the inhabitants of the country to pay the interest on their loans. This rate of interest compels farmers to give the 108 mTEEEST EEOEIVEB £N ITEW YOKE value of one farm el ery ten years for the use of another ; the tenant of each manufaotory to give the value of another manufactory, once in the same period, for the use of the one occupied ; and the passengers and trans- porters upon each railroad and canal, to pay a sufficient fare or freight to construct, at the expiration of that period, another raikoad or canal. It is manifest that the producing classes are unable to fulfil such requirements. Each additional railroad and canal must be added to the original one by the producing classes, and is given to the capitalist without labor or production on his part. He gains them by the legal power of money to accumulate, which is equally great, whether the money be lent on interest or invested in property. If farmers, manufactur- ers, mechanics and merchants, were compelled to pay only a just rate of interest, they could devote the labor now expended in the payment of high rates to non-producers, to the supply of their own wants and of general comforts and conveniences. Large cities accumulate the wealth of nations mthout earning it. According to the State Register, in 1845, the city of New York contained a population of 371,233, and the State of New York contained a population of 2,604,495. The population of the city was less than one- seventh part that of the State. And yet the assessed valuation of the real and personal property of the city at that period was $239,995,517, while all the other property in the State was valued at only $365,650,574. This esti- mate does not include Brooklyn and Williamsburgh, which are in fact parts of the city of New York, as they have grown up and are sustained by its business. Tak- ing the city of New York alone, it appears that it owns more than two-fifths of the assessed property in the State, while it contains less than one-seventh of the State popu lation. But it is doubtless true that its citizens are worth more than all the other inhabitants of the State. Thej ON LOANS TO THE COUNTET. 109 own large tracts of land in different parts of the State, and these lands are taxed in the counties in which they are located. If these taxes were estimated as being paid In the city, where the property is owned, and were taken from the taxes of the country, the transfer of taxes on the amount of $62,827,530, would make the valuation of the property of the city equal one-half the property of the whole State. The citizens of the city of 'New York own large tracts of land in other States, which are taxed in those States. They have also a large amount of money lent to the country on bond and mortgage, and large amounts invested in United States, State, and bank stocks, and in stocks of manufacturing and railroad com- panies, etc., in various States, all of which property, if taxed, is estimated and taxed as belonging to the country. There are doubtless many loans of money and much per- sonal property, which, although lent and used in the city, escape any taxation. The people of other parts of the State own a considerable amount of property, stocks, etc., in the city ; but the amount owned by them in the city is very small compared with the amount owned by the citizens of the city in the country — probably not one- twentieth. It is reasonable to conclude that the inhabi- tants of the city and county of New York own as much, or even more property, than all the people in all the othei fifty-eight coimties in the State.* Does any one suppose • If, to show the relative gain in wealth of the city and the State, from 184fi to 1859, we include with the county of New Torkthe neigh- boring counties of Kings and Westchester — which are, in fact, s iburbi of the city of New York — we have the following result: Assessed talue >f real and personal property. OOUITTT. New York, Kings, WMtchMter, . 1845. . »«89,998,61T 80,T60,4T2 10,086,817 16S9. 1652,008,742 106,914,629 40,487,671 Other OoDDtles, 280,782,806 . 824863,789 699 411,042 716,879,795 Total State Valuation, (605,646,096 »1, 416,290,887 110 INTEEEST RECEIVED IN NEW TOHK. that the citizens of this city earn more by theii labor than all the other inhabitants of the State ? Do they do more toward supplying the people of the State with food, clothing, building materials, etc., than the people of the State do toward supplying them with these things ? If they do not, why should they possess and continue to accumulate so great a proportion of the wealth ? The means of arriving at the truth in relation to this, would be to take for a series of years an exact account of aU the products which are sent out of the city, and see if the products that leave the city are increased above, or diminished below the products that are sent from the country into the city. If the money be taken into account, the interest and dividends on both sides should be excluded. Allowance should be made for the labor performed in exchanging goods, in shipments, etc., in the city, equal to the allowance for the same amount of labor on a farm, so that the population of the city should be fairly compensated for their labor. If it be found that toe 3T1,233 citizens of the city have not performed one-half the labor for the 2,604,495 inhabitants of the State, and yet have obtained more than one-half the whole property, it is evident the distribution has been unjust. Our pro- ducers are continually endeavoring to overcome their poverty by their industry, but while our present rates of interest prevail, capital will continue to take their surplus earnings, and leave them poor. It appears that, in 1845, these three counties owned 46i per cent, of the wealth in the State, and, in 1859, they owned 49^ per cent. But, unquestionably, their actual proportion of the wealth was far greater than is shown in the statistics ; for their citizens own very large amounts of real estate and other property beyond the limits of these counties. The property, too, of many persons whose wealth was acquired in the city, and who have removed their residences beyond the counties named, might properly be included in this calculation ai belonging to the city. — [M. K. P.] INOEKAflE OP STATE VALUATIONS. HI SECTION rv. niE PEK CENTAGE ACTlTAr, INCREASE OP THE VALTTK OP THE PEOPEETT OP THE STATES OP NEW TOBK AND MASSACHUSETTS, COMPARED WITH THE PEE CENTAGB IJtGAL INCEEASE ON THE PEOPEETT OP THESE STATES POE THE SAME PEEIODSS. The State of New York is deemed very prosperous, and thought to be rapidly increasing in wealth by its in- dustry and enterprise. The following table, taken from the New York State Register for 1846, will exhibit the actual gain of the people of the State for ten years, viz, from 1835 to 1845, according to the assessed value of the property : TABLE or BBAL AND FEBSONA^L ESTAIB IN TBE STATE 07 NEW TORE, Ag TAKEN FBOM THE STATE BEOISTER FOR 1846. Oorrected aggregat« Real estata Personal estate, valuation. 1836 $403 166,094 $128,626,103 $530,653,624 1836 639,756,8T4 132,615,613 1837 498,430,054 122,021,033 1838 602,864,006 124,680,778 1839 619,058,782 131,602,988 1840 517,723,170 121,447,830 1841 631,987,886. 123,311,644 1842 604,254,029 116,595,233 1848 476,999,430 118,602,064 1844 480,027,609 119,612,343 1846 486,490,121 116,988,896 606,646,096 $74,992,571 J13 mOEEASB OB STA-TE VALUAlTOKa The table shows that in 1835, the whole valuation of the taxed real and personal estate in the State of New York, was $530,653,524 ; and that in 1845, it had increased to $605,646,095. In the ten years, the people of the State added to their wealth $74,992,571 — equal to $7,499,257 a year, or a fraction over one and four-tenths per cent, a year on the capital employed. This calcula- tion is made without any payment of interest until the expiration of the ten years. Taking the above as a feir valuation of the property, the people of the State added only about one and four- tenths per cent, per annum to their capital, and the legal interest of the State is seven per cent., and is usually paid oftener than yearly. If we had rented the State of a foreign nation, and at the end of every six months had taken up our obligations and added in the six months' interest, at the end of the ten years we should have added to the principal over $524,000,000. We should have owed the foreign nation, in interest or rent, a sum seven times greater than all that we earned above our own support. If we earned only $74,992,571 more thaii our own maintenance, how could we return the property to its owners, and pay them $524,000,000 of rent, or seven tioies more than our labor would have produced ? Tet the laws of the State, fixing the iaterest at seven per cent., make a requisition equal t) this upon laborers in favor of capital COMPARED WITH LEQAL ENTEEEST. 119 The average of the yearly loans of the baika in the State of New York, according to their own reports, amounts to $70,000,000 According to the annual report, the debt of the State on the 30th September, 1846, was 24,784,080 Debts of the principal cities in the State in 1846, as taken from the State Register : City of New York $14,476,986 " Brooklyn 646,000 " Albany 600,000 " Troy 772,000 " Kochester , 108,000 " Buffalo 67,181 16,459,117 $111,193,197 The interest on this sum at 7 per cent, per annum 7,783,528 Yearly average of the surplus earnings of the people of the State, according to the assessed valuation of the property, from 1836 to 1845 7,499,267 $284,266 It appears that the intei'est on these debts alone, at seven per cent, ■would amount to $284,266 more than the surplus earnings of all the people in the State, and this too without compounding the interest. It must be borne in mind, that this debt of $111,193,197 is contracted for money borrowed by the people, or by the State, and the interest paid upon it goes into the hands of a few capital- ists, who furnish the capital for banking, and lend the money to the State and its incorporated cities. All the debts contracted by the sale of lands, agricultural pro- ducts, and merchandise — all the money lent by individ- uals on bond and mortgage, and aU business debts, bear- ing interest, are additional to the reported debts. The debts yearly contracted in the State by sales of land merchandise etc., amount to several hundred millions of dollars, and two, three, or four hundred millions bear interest. Must not the payment of so great an amount of interest, by the producers, concentrate the wealth of 114 mOEEASE OF STATE TALUATIONS the State in the hands of a few capitalists, and ooEtinua more and more to oppress the producers ? We might as -well expect by labor to dam up the mouths of our rivers, so that they could not empty into the ocean, as to expect by labor, to contend successfully against the power of capital, even at two and a half per cent, interest, and much less against six or seven per cent. An inter- est on capital of even two and a half per cent, per annum would as certainly break down productive industry, and accumulate the wealth La favor of capital, as the rivers would certainly break down the dams, and force their waters and the obstructing dams into the ocean. According to the assessed valuation of the property of the State of New York, the increase of its wealth from 1835 to 1845 was about one and four-tenths per cent, per annum, without compounding the interest. This was a period of only ten years. It is probable that, in 1 835, property was estimated higher in proportion to its actual worth than in 1845. This statement, then, would not be an exactly fair criterion of the actual increase of wealth in the State. During that period, according to it, we gaiaed, beside our own support, only a fraction over one per cent, a year by all our labor. If this was a correct estimate, the per centage we gained in wealth was only three-fourths as great as our per centage increase in pop- ulation, for, during the ten years, our population increased from 2,1*74,517 to 2,604,495, or a fraction less than two per cent, a year. This calculation would make the aggre- gate wealth of the State in proportion to its population less in 1845 than it was in 1835 ; and this, we presume, was not the fact. Still there is little doubt that at least one-half the people of the State were poorer in 1845, and are now poorer, than they were in 1835. The increased wealth is accumulated in fewer hands. More and more of the earnings of the producing classes are required to pay the yearly rent, or interest, on the yearly increasing capital. If the men who are now rich had in 1835 an in COMPARED WITH LEGAL INTEREST. 116 eome that abundantly supplied their wants, an increase of wealth has not added to their happiness ; and the increase has been taken from those who toU, and yet are suffering for the necessaries of life. Without improving the con- dition of the rich, we are continually doing a wrong to a arge class of industrious and worthy citizens.* * In 1859, the valuation of the real and personal property in the State of New York had increased to $1,416,290,837, showing an increase in fourteen years of $810,644,742, or less than seven per cent, added annually. But property was probably estimated lower in proportion to its value in 1845 than it was in 1835 or 1869, and a calculation einbraciug the twenty-four years, would give a truer criterion of the actual increase of wealth. The property of the State in 1835 was valued at $530,653,524, and the increase in twenty- four years was $885,637,313, or for the whole period an average ol not quite seven per cent, per annum ; and, added yearly, of about four per cent, per annum. At seven per cent., with the interest com- pounded yearly, the State would have added to its wealth during the twenty-four years, over $2,100,000,000, that is, over $1,200,000,000 more than was actually added to the wealth of the State by the labor of all its inhabitants. The legal rate of interest demanded from laborers over $1,200,000,000 more than they actually earned. Of course, as a body, they could have bad only a bare subsistence, and large numbers of them must have been reduced to the condition of paupers. The following extracts are taken from the Report of the New York Association for improving the Condition of the Poor, foi the year 1859. James Brown, President; James Boorman, James liCnox, Horatio Allen, A. R. Wetmore, John 0. Green, Vice Presi- dents. " It was shown in the Thirteenth Annual Report of this Association, that, according to the ratios of population in the two countries there were about two paupers in the wealthy and prosperous State of New York, to one in Ireland, whose very name has long been a syn- onym for poverty and wretchedness. The statement appeared so improbable, that it was received with a general expression of incredulity. Since that period, pauperism appears to have augmented more rapidly in our own State than it has decreased in Ireland. If any reliance, therefore, is to be placed in Governmental Reports, that unwelcome fact, so humiliating to our pride, having been confirmed by the statistics of each succeeiing year, can, with no show of rea 116 niOEEASB OF STATE VAX,UATI0N8 An estimate of th 3 increase of wealth in the State ol Massachusetts, for fifty years, is contained in an article in the May number, for 1847, of that deservedly celebrated eon, be longer denied or evaded. The Annual Report of the Secretary of the State of New York, to the Legislature, of the paupers relieved in the several counties, at the public expense, during the past year, affords a basis for a comparison of our own pauperism with that in Great Britain and Ireland, for the same period, of whiclr the following is the result : PopoJation, Paapera. England and Wales 19,046,000 888,000 Scotland 8,085,000 115,218 Ireland 6,500,000 66,910 New York State 8,600,000 261,165 " In other words, the pauperism of England and Wales was in the ratio of four and six-tenths per cent, of the whole population ; in Scotland, three and nine-tenths per cent. ; in Ireland, about nine-tenths of one per cent.; while in the great State of New York, which is fore- most in population, enterprise and resources, the ratio is seven ana four-tenths per cent. Making, therefore, every reasonable allowance for hypothetical inaccuracies in our State Statistics — for the figures assumed are less than the returns would justify — and we are con- fronted with the appalling fact, that the pauperism, in this State is some five per cent, in advance of that in Ireland ; that is to say, there are, according to the ratios of population, five paupers in this State to one in that country. It is unnecessary to extend the con- trast, or it might be farther shown, that the legal provision for the relief of the New York paupers is greater per capita, than the govern- mental allowance in Ireland, but proportionately less than the poor rates both of England and Scotland. '* Let it not be supposed that this dread phenomenon of pauperism has come suddenly upon us. Statistics, on the contrary, show that it has reached its alarming prevalence by a steady, gradual growth. The census of the State from 1831 to 1851, and the pauper iitatistica for the same period, exhibit the following results : Increase of population it 20 years 61 per cent. Increase of pauperism from annual tables during the same period 706 per oent " ' Id '831, there was one pauper to every 123 persons : in 1841, COMPARED WITH LEGAL mTERBST. 117 periodical, Hunt's Merchants' Magazine. A few extracts are made to show the difference between the amount of property produced by the labor of Massachusetts during there was one to every 39 persons ; in 1861, there was one to every 24 persons; and this year (1856), there is one to every 17 persons. Let the same ratio continue 16 years longer, and there will be one pauper to every five persons ; that is, every five persons in the State must support one pauper. Twenty years, reaching from January, 1831, to 1851, furnish as just a scale as can be obtained, by which to gauge the succeeding 20 years. Indeed, the five years since 1851 show a still larger increase in the ratio of pauperism, so that at the end of 16 years more, the 20 years from 1851 to 1871 would exhibit even a sadder result than the number of years between 1831 and 1851. It is submitted, whether we should act from a blind confidence in the perpetuity of our institutions, or from statistics gathered from the steady action of a quarter of a century, on our history.' " Since 1856, when the above statement in substance was first pub- lished, pauperism has increased in the State above the ratio then an- ticipated, so that the present proportion to the population is one pauper to about 13J persons. Is it not astonishing that such facts are unheeded 1 It is idle to reason against facts, for if there is any reliability in statistics, the facts themselves stand boldly in evidence. "Ireland and other foreign countries have doubtless been benefited at our expense, by the deportation of their poor, and to them we owe the bulk of our pauperism "But, in conceding this, let not the momentous fact be overlooked, that pauperism, so long regarded as an exotic, is actually germinating in our own soil, with baneful luxuriance. The humilatiug proof of this is placed beyond dispute by official statistics. Of the 130,150 paupers relieved in this city, in 185S, 60,251, or 38 per cent., were natives ; and that this result was not attributable to the demoraUzing infiuencies of city life, is shown by the fact that, of the 261,166 State paupers, 104,744, or 41 per cent., of the whole number, were natives of the United States. It is evident, therefore, that exclusive of emigration, the ratio of our native-born paupers to the population of our city and State is far beyond that of England and more than double that of Ireland "It is the certain tendency of every financial revulsion, to throw multitudes of the self-supporting, industrious classes down to a lower level than they before occupied. Nay, in the ordinarv annual opera- I'i S INCEEASE OF STATE VALUATIONS fifty years, and tae amount which would have accumu- lated upon the capital employed during that period at ah per cent, interest. " It is the object of this article to exhibit the progress of wealth in Massachusetts during the fifty years, from 1790 to 1840, as deduced from the six State valuations, taken at intervals of ten years each. These valuations have the legislative sanction of the General Court, and are the bases of apportionment of all State taxation for the ten years foUowing. They are prepared from the returns furnished by the assessors of the several towns and districts, and are intended to embrace all the taxa- ble property of the Commonwealth. They may be re- lied upon as sufiiciently correct for the purposes of comparison, or of showing the progress of wealth during these fifty years ; at least they furnish the nearest approx- imation we have to the true amount of wealth in the State." The assessors' valuation of the property in the State of tlona of labor, as affected by the seasons, and by the fluctuations of supply and demand common in the most prosperous times, every winter is full of perils to thousands of the respectable poor. Such Deing the laws of labor, what schemes of economical science will prevent their operation ? "But the subject presents itself in another aspect. The times are always hard with large families, whose miserably insufficient wages |ust keep them above starvation. By wonderful energy and manage- ment, they contrive to live on, unaided, the greater part of the year. But let them be overtaken with sickness, or by the usual contractions of labor during the winter, which takes away their slender pittance, and what is there between them and starvation f They have no work, no savings to fall back upon, and their children and themselves are perishing with cold, and hunger, and nakedness. It is not in buman nature to endure such an ordeal, unharmed, especially when driven by stern necessity to consort with the outcast, and to be de- graded by public relief Yet such, alas ! is often the condition of many of the deserving poor."— [M. K. P.] COMPARED WITH LEf interest than a people can aiford to pay. It is surely most unreasonable for the laws to compel 138 TWO PEE CENT. INTEKEB'l, producers to pay for the use of the property wuich a man may acquire by forty or fifty years' labor, twice oi thrice the sum of the property so earned. The thing produced is more highly estimated than the power that produces it. If an interest of two per cent, upon a well regulated currency would accumulate the property of a nation in the possession of a few, can it be considered strange that the rates of three, four, five, six, and seven per cent, and even higher rates, which are exacted in different countries, should have concentrated property into so few hands ? The only wonder is, that producers have continued to live under this oppression. A rate of interest of even two per cent, per annum, would put it out of the power of the people to fulfil their contracts. The estabhshment of this rate of interest would be equivalent to the passing of a law, compelling the laboring classes to double the capital of a nation, in favor of capitalists once in thirty-four and a half years, besides producing their own support. Suppose a foreign nation owned all the real and personal estate in this nation, and a fair estimate were made of the value of all ; and then our people were legally obliged to pay two per cent, yearly upon this valuation, besides maintaining themselves, would not a tribute or tax like this keep us forever in poverty ? Our laws enforce much higher rates of interest on capital, which are little less oppressive to the great body of our producers, because they are paid to a few capitalists in our own land instead of to foreigners. It may be objected that some of the illustrations of the accumulative power of interest are based on so long periods as to present exaggerated results ; but it must be borne in mind that interest, and rents, at too high rates are continually accruing to the capital of nations, and are producing theii- evU effects upon the people whether the loans be for longer or for shorter periods. REDD JED 1NTEBE8T A BENEFIT. 139 SECTION vin. niEi BEDTTCnON OP ESTEBEST WOULD BE AN EQUAL BjeHSTK- FIT TO THE PKODUCING CIASSBS, WHETHBE PEOPEETT SHOULD EISE OE PALL IS PEICE, IN CONSEQUENCE OP SUCH REDUCTION. It may be supposed that if interest were diminished to one per cent., property and labor would rise in the same proportion, and therefore, the producing classes would receive no benefit from the reduction. But whether property should rise, or fall, or maintain its present price, producers woidd have the same relative advantage ; their gain would be from the lessened per centage on capital. If a man borrowed a hundred dollars for a year, he Would pay but one dollar for the use of one hundred, instead of paying seven dollars. If he hired a hundred acres of land, he would have to earn only one acre to pay for the use of one hundred, instead of being obliged to earn seven to pay for their use ; for the per centage on money governs the rent of land. This principle of the adequate reward of labor, by the decrease of the interest on money, although property and labor in con- sequence should rise in price, wiU be illustrated in the following table. The price of labor is calculated at six dollars per day, and the interest on money at one per cent, per annum. The men earn their money, and loan it as in the former cases. TABLE. ISTKEEST AT ONB PEK OBNT. — LABOB AT $6 PBB DAT. l8t 6 months' labor. . $1,800 00 6 inontliB' interest at 1 per cent 9 00 1,809 00 Amount brought up $1,809 00 2d half year's labor. . . 1,800 00 3,609 OU 140 BEDtrOKD INTEBEST A BBNEFIT Amount brouglii up.. $3,609 00 6 months' interest. . . , 18 04 3,62'7 04 3d half year's labor . 1,800 00 6,427 04 6 months' interest. . . 27; 14 4th half year's labor. . £ months' interest. . . . 6,454 18 1,800 00 7,264 18 86 27 6th half year's labor. . 7,290 45 1,800 00 6 months' interest. . . . 9,090 46 46 46 6th half year's labor. . 8 months' interest. , , . 9,136 90 1,800 00 10,935 90 54 68 7th half year's labor. 10,990 58 1,800 00 6 months' interest . . 12,790 68 63 95 8th half year's labor . 12,854 63 1,800 00 6 months' interest. . . . 14,664 53 73 27 9th half year's labor . . 14,727 80 1,800 00 6 months' interest. . . . 16,527 80 82 64 10th half year's la tor 16,610 44 . 1,800 00 18,410 44 Amount brought up . 6 mouths' interest . . . .$18,410 44 92 05 11th half year's labor 6 months' interest. . . 12th half year's labor. 6 months' interest. . . . 13th half year's labor. 6 months' interest . . . 14th half year's labor . 6 months' Interest .... 16th half year's labor, 6 months' interest. . . . 16th half year's labor . 6 months' interest .... 17th half year's labor. 6 months' interest. . , . 18th half year's labor. 18,502 59 . 1,800 00 20,302 59' 101 61 20,404 10 1,800 00 22,204 10 111 02 22,315 12 . 1,800 00 24,116 12 . 120 58 24,235 70 . 1,800 00 26,036 70 . 130 18 26,166 88 , 1,800 00 27,966 88 139 88 28,105 76 . 1,800 Oft 29,905 76 149 63 30,065 29 . 1,800 00 81,855 29 . 159 28 82,014 67 . 1,800 00 83,814 57 WHSTHEB PEI0E8 HI8B OB FALL. 141 AiQouat brought up. . $33,814 67 6 months' interest ... 169 07 83,983 64 19th half year's labor. . 1,800 00 36,783 64 months' interest 178 92 36,962 66 Amount brought up. . $33,962 66 20th half year's lacor . . 1,800 00 87,762 66 1 months' interest. .... 81 47 37,794 03 1 months' labor 300 00 $38,094 03 10 years and 1 month's labor and interest $38,094 08 2d 10 years and 1 month's interest 4,030 44 42,124 47 10 years and 1 month's labor and interest 88,094 03 80,218 60 8d 10 years and 1 month's interest 8,487 24 88,706 74 10 years and 1 month's labor and interest 88,094 03 126,799 11 4th 10 years and 1 month's interest 13,415 84 140,216 11 iO years and 1 month's labor and interest 38,094 03 $178,809 14 In 40 years and 4 months, the two men earn at $6 per day $146,200 00 Interest thereon for 40 years and 4 months at 1 per cent. 83,109 14 178, 809 14 Let the interest on $178, 309 14 accumulate 20 years and 2 months, until the men arrive at the age of 81 years and 6 months. Interest on $178,809 14 for 10 years at 1 per cent 18,866 02 197,174 16 ad 10 years' interest 20,864 80 218,028 9>i 142 BFFE0T8 UPON PEODtJOEES Amount b'.ought up $218,028 91 The men cease to labor at the age of 61 years and 4 months, and expend during 20 years and 2 months, six times more than when labor was at $1 per day. They expend six times $14,996. Deduct 89,970 01 $128,068 96 With interest at seven per cent., and labor at $1 per day, (see Sec. VI.,) the two men leave to their heirs $500,000 ; while with interest at one per cent., and labor at $6 per day, they leave to their hens $128,058, only a fraction over one-fourth as much as in the former case. The interest on 1500,000 at seven per cent., would be $35,000 annually. It would take the labor of one man at $1 per day, one hundred and sixteen years to pay the in- terest for a year. The interest on $128,058 at one per cent., would be $1,280. The labor of one man for two hundred and thirteen days, at $6 per day, would pay the interest for a year. SECTION IX. EFPBCrS UPON PEODtrCEES OP HIGH AND FLTJCTUATING BATES OP rNTEEBST. The following illustration, based upon land, will show the effect of high and varying rates of interest upon producers, and the safety with which money could be loaned, if interest were reduced to a just and uniform rate. Suppose W. owns a thousand acres of land, which he has bought from the Government, and upon which he is paying the taxes. The land will produce no iacome, un- less he cultivates it himself, or sells or rents it to others, who will cultivate it. He sells the land ia five tracts, of two hundred acres each, at five dollars per acre. A., B., OF V A EYING KATES OF TJTERE8T. 143 C, D., and E., are the purchasers, and move upon and cultivate the land, and pay the taxes. No other payment is to be made for five years, at the expiration of which period, A., B., C, D. and E., are to pay up the interest on their respective tracts of land, and after that to pay the interest annually. All the land sold is of nearly the same quality. Each purchaser agrees to pay a thousand dollars, and gives a bond and mortgage upon his land to secure the payment. W. takes A.'s bond and mortgage, bearing two per cent, interest; B.'s bearing four per cent. ; C.'s bearing eight per cent. ; D.'s bearing sixteen per cent. ; and E.'s bearing thirty-two per cent, interest. At the end of five years, A.'s bond and mortgage wiQ have drawn $100 ; B.'s $200 ; C.'s $400 ; D.'s $800 ; and E.'s $1,600 interest. Yet "W. sells the land to all at the same price, and all the difierence in the indebtedness of A. and E. is caused by the difference in the rates of interest that W. charges them. This difierence makes E. in- debted to W. $1,500 more than A. All the debtors must pay the interest with the products of their respective &rms, and W. does none of the labor toward making the production. Now let X. seU the same land to the parties on a credit of one year, and charge them six per cent, in- terest. Suppose money to be so scai-ce, that at the end of the year they clear only the interest, and are com- pelled to lose their farms by foreclosure, or else to borrow the money and pay oflT their mortgages. A., B., C, D. and E. borrow on the best terms possible, on mortgage of their farms and stock. A. procures the money at two per cent, interest ; B. at four per cent. ; C at eight per cent. ; D. at sixteen per cent. ; and E. is compelled to pay thirty-two per cent, per annum, or two and two-thirds per cent, a month. This amounts to the same thing as if they had bought their farms of W., agreeing to pay him these rates of interest. The money enables them to 144 EFFECTS OPON PE0DU0EE8 keep possession of their farms. From the sales of theij products they must pay the different debts and interest. The rate of interest in each case decides what propor- tion of the products shall go to pay for the use of the farm. When the farmers borrow the money to pay off their mortgages, they do not keep the money. It con- tinues to circulate, and to decide what rents others shall pay for the privilege of keeping the use of property for a given period. But suppose the rate of interest to be fixed at one per cent., and that money could always be obtained on the offer of good security. Those who had money to lend would ascertain whether the property offered as security would make the interest safe. If so, the security would be deemed good. "When interest is liable to rise from six to twelve per cent., the lenders of money require securities that will make their loans safe if the interest should rise to the latter point. But if the supply of money were such that the interest could not rise, a less security would always keep loans safe. Suppose, then, ihe rate of interest to be at one per cent., and W. to sell uhe land to A., B., C, D and E., as before. They purchase two hundred acres apiece at $5 per acre, and pay only the taxes until the end of five years, when they pay the interest for the whole period. The interest at one per cent, on $1,000, for five years, amounts to $50 ; and on the whole $5,000, to but $250, instead of $4,100, the amount in the former case, when the money was loaned at the various and higher rates of interest. The tenants have as much the use of the farms to enable them to pay the $250 as to pay the $4,100. If they make any reasonable improve- ment on them, W. can incur no hazard of losing his money, for each farm would certainly rent for $10 a year. Even if at the close of the five years the farmers should not have paid the interest, and each farm would rent for $10 50 a year, over and above the taxes, each farm OF VARYING RATES OF INTEREST. 14:5 would Btill be as good as $1,050, at interest, at one per cent. ; therefore, in either case, the tenants would keep the sale of the land good, or the loan safe for W., ■with- out his personal labor. But if W. sell the farms, when interest is at six per cent., at the end of the five years each of the farmers would owe him $300 interest, which, added to the principal, would make $1,300. The interest on this sum, at six per cent., would be $78 annually, and unless each farm would rent for this sum, W.'s debts would not be safe. The per centage rent on the valua- tion of property must be equal to the rate per cent, interest on money, or the property cannot be good security for the payment of the money. It is commonly said and supposed that borrowers pay a certain rate of interest for the use of money. But they do not use the money ; they part with it in some way for property, and the rate of interest determines what rent they shall pay for the use of the property. A few illus- trations will show the eflfect of increased rates of interest upon the welfare of producers and distributers whose property is in their products. Suppose a planter raises a hundred bags of cotton, in doing which he becomes indebted for bagging, rope, clothing for his workmen, etc. Let him be compelled to realize the money for his crop as soon as he can get it to market, and at a time when money is very scarce, and the price of cotton extremely low. He is obliged either to sell for cash, or to oflfer a commission to some one to accept his draft on the pledge of the cotton ; and is forced to pay for hia acceptance, say two and a half per cent. This wiU take the proceeds of two and a half bales of cotton. If the draft be drawn on three months' time, and the scarcity of money compel the planter to sell the draft at two per cent, a month, six bales more wiU be taken from his one hundred bales. He must lose eight and a half bales for the privilege of keeping the remainder three months in 146 EPl'EOTS OF VARIOUS EATE8. Store, besides tlie storage, cartage, and the o )mmi8sion on sales. The proceeds of the eight and a hah' hales of cotton are gained by the capitalist by means of the high rate of interest, and without any adequate labor on his part. Under a true monetary system, the planter woiAd be able to hold his cotton a year without losing even two bales of it for the advance of money. Again, a manufacturer makes a package of a hundred pieces of cloths, and sends them to market. Six months pass before the goods can be sold, and, with interest at six per cent, per annum, he loses three pieces as the inter- est on the ninety-seven which he has left. If, at the end of six months, the commission merchant sell them on a credit of eight mouths, at the above rate of interest the manufacturer must lose four pieces more, in all seven pieces of cloth. But suppose the manufacturer is greatly in need of money, and must have the eight months' note cashed. Let the commission merchant, in consequence of a rise of interest, sell the note in market at two per cent, a month discount, and the manufacturer must lose sixteen pieces of cloth on the note, instead of four pieces, the loss at six per cent. Add these to the first three, and it will make nineteen pieces, paid to others out of the one hun- dred pieces, to enable him to keep eighty-one pieces, or their proceeds, for fourteen months. These are a total loss to the manufacturer. Besides, he has to pay cartage, storage, commission and transportation. The proceeds of the nineteen pieces of goods go into the hands of the money-lender. Now let us see the result in the same transaction, with interest on money diminished to one per cent, and main- tained at that rate. The manufacturer sends the hundred pieces of cloths to market, and they lie six months imsold. He loses only half a piece of cloth for the six months' interest on his goods. The conmiission merchant sells the- on eight months' credit, as before, and gets tb« HIGH RATES OF INTEREST. 147 note discounted at the rate of one per cent, pei* annum. This amounts to two-thirds of a piece of cloth, and added to the half piece, is a loss to the maniifaoturer of one piece and one-sixth of a piece during the fourteen months, instead of being a loss, as in the former case, of nineteen pieces. This diflference is caused solely by the difference in the rate of interest. Although the bales of cotton or the pieces of goods He unused and uninjured in the store house, yet a number of bales of cotton or pieces of goods are taken from their owners by the legal growth of the money, or by the growth or accumulation on the paper obligation given to obtain the money. The rate of inter- est decides how many bales of cotton shall be owned by the planter — how many pieces of goods shall be owned by the manufacturer ; and the proportion of them that shaU be given to those who lend the money to represent their value. SECTION X. THE OPPRESSION OP LABOR BY A MONOPOLT OF LAND NOT AS GREAT AS THE OPPRESSION BY HIGH RATES OF INTEREST ON MONEY. It is supposed by many that the monopoly of land is the cause of the centralization of wealth, and that land- owners are the greatest oppressors of the labormg classes. They think that if all had access to a certain portion of land, the means of support would be within reach of alL But if the land were equally divided, many persons are not qualified to improve it to good advantage, nor are all, or nearly all, capable of manufacturing the imple- ments which must be used in its cultivation. The mechar nical arts are absolutely necessary to the improvement of the land ; and men who are engaged in these arts require very little, if any land, to cultivate, because their time is ii 148 HIGH BATES OF INTEEEBT occupied with tlie various trades by ■which agriculturijtf and others are supplied with houses, implements of iadus- try, clothing, and so forth. A monopoly of manufac- tured articles would be as likely to cause the evil as a monopoly of land ; for if all implements of agriculture were held by a few, it would be nearly impossible to culti- vate the land ; and should all owners of houses refuse to receive tenants, more than three-quarters of the people in our large cities would be turned into the streets. Doubtless it is for the interest of landlords to rent their houses, but it is equally for the interest of landowners to lease or rent out their lands : for, if they keep them in their own possession, neither the houses nor lands can be useful to their owners, except so far as they can cultivate the one, and live in the other. The same is true of all kinds of implements and merchandise. Neither lands nor products have any natural monopolizing power. The monopolizing power is an artificial one, instituted by our national laws, and is in the money which represents the property and products. The monopoly is one of the effects, it is not the cause of the evU. If the land and wealth were now to be equally distributed, the same cause which has thus far centralized them would accumulate them again in the hands of a few. In the illustration of the one hundred families and their descendants, (see Chap. HI., Sec. II.,) no land is bought except the two hundred acres for their personal residences ; yet they take from the people as large a quantity of their products, by the inter- est onmoney, or on their obhgations, as ifthey had invested the twenty millions in farming land, and let the land out to tenants at six per cent, interest on its cost, reinvesting the interest half-yearly in land during the hundred and fifty years. The tenant of leased land pays the rent by the sale of its yearly products. If he cannot support himself well besides paying the rent, it is evident to all that the rent is too high. The landlord and the tenant WORSE THAN LAND MONOPOLY. 149 eome in direct contact, and the wrong done by the former to the latter is manifest. But nothing grows upon mo- ney with which the borrower can pay the interest. He exchanges it for merchandise or lands, and expects to make a profit on them which will pay the interest on th money. If, however, he be not able to pay the interest, It is set down as bad management on his part, instead of being attributed to the too high rate of interest on the mo- ney. The owner of money, by the legal interest, imposes as great hardships upon the borrower, as if he had lent him land or merchandise at the same per centage on its valuation. The following illustration wiU show the different esti- mates put upon the leasing of land at a certain per centage on its value, and the lending of money at the same rate. K. is the owner of $100,000. He expends this sum for well-improved farms, which he leases in perpetuity at six per cent, per annum on their cost. His tenants are, therefore, obliged to pay $6,000 a year for the use of the farms. They would find it very diiScult to pay so high a rent ; and it would be deemed very oppressive to them and to their heirs who must work the land. If the owner of the land should require from each tenant security for the rent, so that one must become responsible for the payment of another's rent, he would be thought a hard landlord. And if in time of drought or disease, which rendered the tenants unable to pay their rent, tlie land- lord should sell the stock from their farms, he would be deemed very oppressive, although his tenants had volun tarily entered into the engagement. Now, suppose M. to own $100,000, which he lends on mterest at six per cent, per annum payable half-yearly. To secure the loan, he requires double its value in land, so that he is twice as weU secured as the landowner. He allows the principal to remain outstanding as long as the interest is regularly paid. He annually receives 150 HIGH BATES OF INTEREST $6,000 interest on his money, the same sum that the land owner receives for the rent of his land, and he is much better secured, for in some years the crops may fail ; but the mortgage on land of twice the value of the loan, is a double security, and wiU force the sale of the farm the interest be not paid. It takes as many of the products of labor to pay the interest to the money-lender, as to pay the rent to the land-owner ; yet the money- leader is deemed a just and honorable man, because he takes only six per cent, interest for his money. If at any time the scarcity of money and the low price of pro- ducts prevent the payment of the interest, and the money-lender foreclose some of his mortgages, buying in the property, worth double the amount lent, at half price, no stigma rests upon his character, especially if the legal rate of interest be seven per cent., and he charge but six per cent.* Although these cases are so differently regarded, the oppression by lending money at six per cent, interest greatly exceeds that by leasing property. The following illustration shows how tenants of land are affected by high rates of interest on money. N. owns a farm which he cultivates. He is, therefore, the rightful owner of the products. If, however, N. lets the farm to O., and O. cultivates it, then N. and O. are joint owners of the products. This principle, that labor and capital are together entitled to the products, is in accordance with the laws of nations, and must continue to be so as long as the rights of property are recognized by civil authority. The question which arises for settle- ment is, what proportion rightfully belongs to the capital, and what to the labor- — what proportion of products N", should receive for the use of the farm, and what propor- tion O. should receive for his labor in cultivating it. It wUl be said at once that the proportion wliich O. is to * People seem to look upon money as a Bort of sabred thing, »nd su laooi 13 a mere tool that is subservient to it. W0E8E THAN LAND MONOPOLY. 151 give to N". is a matter of agreement between them ; and, therefore, whatever N". agrees to take, and O. agrees to pay for the rent of the farm, is the right proportion ; and that no laws should interfere in such contracts except to compel their falfihnent. This would be right, and just to both the contracting parties, if the public stand- ard of value on which they are compelled to found the contract were equitable. But if the standard or rate of interest be such that O. is obliged by its legal operation to pay nearly the whole surplus products of the farm to N". as rent, the contract is a manifest wrong to O. ; because, although he work diligently aU his life, the legal standard will keep him forever poor, while N., by the action of the same standard, without labor, will constantly increase in wealth. We declare that aU men are born free and equal ; but N. may be bom heir to a dozen farms, while O. may be bom without property ; and, under present laws, by hiB labor alone he cannot acquire it. Therefore, N. is actually born to live in luxury without labor, and O. is born to be a servant to IST. O.'s children are born servants to N., and to his posterity, and live ia perpetual toil and hardship, that N.'s children may be supplied with aU the luxuries of life without labor. IST. and his children receive these luxuries from the rent that O. and his children pay for the use of the land owned by N. If all men are by nature free and equal, why has legislation reversed the order of nature so as to secure the greatest possible inequality ? It is not in the power of man io continue a more effectual method of concentrating pro- perty in a few hands, than by high rates of interest. This method works rapidly and securely, because it extorts consent as it operates. If civilization require that property should descend from father to son, it certainly does not require that legislation should do its utmost to magnify the inequalities arising from this right 162 HIGH BA.TB3 OF INTEHE8T. of inlieritance. These inequalities only exist becau8>3 the whole body of producers are obliged to pay an exorbitant price for the yearly rent of every description of property ; and why are they obliged to pay this price ? Because the rent is determined by the legal interest on money, he standard of value, to which no individual, nor class of individuals, can offer successful resistance. If N"., instead of leasing the farm to O., lend him money with which to purchase a farm, O. rents the money from N". instead of renting the farm. But he is as much compelled to pay the interest on the money with the products of the farm, as he is to pay the rent of the farm with the products. K the interest on money were at one per cent., N. covdd not let his farm to O. at such a rate as to compel O. to give him in rent a sum equal to the princi- pal of the farm in less than about seventy years. But if interest on money be fixed at seven per cent., N. can compel O. to give a rent for the farm which wiU equal the principal of the farm in about ten years. At thia rate, in seventy years 0. must give N. the value of one hundred and twenty-seven farms as the legal rent of one. High rates of interest under any form of govern- ment will centralize the wealth of the nation, and degrade and impoverish its producers. In fixing the rate of interest, governments determine what proportion of their earnings the producing classes shall pay for the use of capital. Laborers have no means of resisting the jverwhelming power of accumulation thus given to capital, except by a change in the monetary system, an^ the establishment of a just rate of interest. Then the inequalities of birth and condition will be greatly dimin- ished, and no class of laborers can be kept, for any length of time, subservient to capital. BATE OF INTEEEBT DKTEEMINES PEI0E8. 153 SECTION XI. THE BATE OI" INTBEKST DBTEEMINES THE PRICE OF PEO- PBETT, AND A EISE OP IXTEEEST IKCEEASES THE POWEE OP MONET TO COMMATTO PEOPEETT. The value of money is determined by the interest that it will accumulate ; and the value of all property is deter- mined by the rent that can be obtained for it. The market value, or price of property must conform to the legal standard. If the rent of any property be not sufEcient to accumu- late a sum equal to the estimated value of the property itself, in as short a period as money loaned, the property win fall in price until the rent bears the same proportion to the value of the property that the rate of interest bears to the principal. It is perfectly right that the interest on money should govern by its own per centage the rent of all property, because money is the legal representative of all property, and the standard by which its value is estimated. This interest is of the same quality as the principal loaned, and each fractional part is of proportional value ; aud the rents of property must conform to this rule. For ex- ample, if the per centage be in the proportion of one to one hundred, the tenant of a hundred acres of poorly cul- tivated land must pay as rent a sum in money equal to the value of one acre of land of the same quality. If he improve the farm and make it produce double, he must pay the value of one acre of improved land for the use of the improved one hundred. He pays move value, but no greater per centage on the value of the land. Money is the standard ; if the per centage interest on it be fixed at a just rate, it wUl equitably regulate the run* of all property, aud also secure to labor its earnings. 154 THE RISE OF UTTEBEST The value of property depreciates in proportion to the increase of the value of the dollar that measures it. Whenever the value of money increases by a rise of in- terest, there is a corresponding decrease in the value of property. The diminution of the market value of pro- perty, by a rise of interest, may be compared to the moving of a fulcrum on the beam of a scale. As one end of the beam is lengthened, the other end is shortened, so that a pound weight, on the long end, may balance as many products as three, four, or five pounds would before the fulcrum was moved. So, with the rise of in- terest on money, property falls in price, and one dollar, in money, balances two, three, four, or five times more property than it did before the rise. Enough property must be added to make the rent equal to the interest on money; for no man wiU invest his money in property unless he supposes that the property will yield as good an income as the money he pays for it. Therefore, the price of property must fall whenever the interest on money increases, that the incomes from property and from money may be equal. When the power of the dol- lar to accumulate is increased, no alteration is made in its form, weight, or external appearance, as when the ful- 'Orum is moved no alteration is made in the weight, but the power of the weight is increased.* SECTION XII. THE EISB OF THE BATE OF INTEEEST INCEEASE8 THE LIABILITIES OF AT.T. DEBTOBfi. AH obligationB for the payment of money are based npon money, and hold the same position, with respect to labor and property 'jhat money does. They are private See Appendix, B, mCKEASES DEBTS. 155 representatives of their amount of money, and, being secured on property, call for the payment of a definite sum of money as principal, and a definite rate of interest. When the interest on money rises, property falls in price, so that the value of the bonds, notes, mortgages, etc., payable in money, is increased with respect to property, for they will purchase more ; but their value is diminished, compared with money, for the interest on money is greater than the interest on the obligations. Hence the obligations fall below, and will not seU for their par value, although they continue to bear the same rate of inteiest, and to call for the same amount of money as at the for- mer period. The value of money has increased above its former value, instead of the value of the obligations being diminished, except relatively. The obligations still de- mand the same amount of money, which will now draw a higher rate of interest, and command a greater amount of property. But the amount of interest which the obli- gations at present draw, is not increased, and is less than that on money. For example, if interest rise from six to twelve per cent., a State bond, bearing the former rate, wiU fall below its par value, but wUl continue to bear the same rate of interest that it did previously to the rise of interest on money ; yet the bond can be exchanged for more pro- perty than before the rise of interest. Hence the liabUi. ties of all debtors whose means of payment are in their property, or in their ability to labor, are increased in pro- portion to the increase of interest upon money, because the full amount of all debts must be paid in money, of which the power to purchase property has thus much in- creased — or, in other words, the rise of interest has decreased the market value of property and labor, so that two, three, four, or five times the quantity formerly re- quired, must be sold to procure money to cancel debts. Labor, however low its price, is no tender for debts, and 156 THE EI8E OF INTEEEST must be disposed of for money before it can be a lega equivalent in payment for anything. When goods an sold on time, the property of the purchaser, both real and personal, is legally bound for the payment of the debt ; and although the purchase of the goods caused the debt to exist, no kind of property is legally competent to pay It. The debtor must convert his property into money for this purpose, or the creditor can legally enforce the sale of a sufficient amount of the debtor's property to satisfy his claim and pay the costs of suit. The debtor's property is collateral security to the money, and is made subject to its power, but the property has no legal authority over the money. The injustice done to debtors by increasing the value of the measure by which their debts were contracted, is evident. It has already been shown that the dollar is the measure of more or less property, according to the rate of interest. Therefore, debts contracted when in- terest was low, and falling due when interest is high, will require a much larger quantity of property to pay them than was understood in the contract. The following is a familiar illustration of this principle. A man agrees to make and deliver to another nine yards of cloth. He brings the usual amount of cloth to fulfil the contract, but in the meantime, the length of the yard-stick is in- creased to four and a half feet, and the cloth falls a third short of the required length. The debtor weaves a third more on the end of the piece, and presents it. The length of the yard-stick is again increased to six feet, and the cloth again falls short. The construction of the yard- stick may allow its length to be increased without addi- tional labor, but the debtor is obliged to add both labor and matej-ial to produce the required length of cloth. The additional cloth is fraudulently taken from him by the increase of the length of the measure. To exemplify the principle with respect to nione;^, tae mOBBASES DEBTS. 157 measure of value. The rise of interest on money increases the liabilities of all debtors. A man lends on mortgage of a bouse and three vacant lots, $1,000 at six per cent. interest. The interest on the money for a year is $60, and the house of the borrower rents for $60 a year. The rate of interest increases to nine per cent., conse quently the interest on the $1,000 increases to $90. To make the loan safe at the advanced interest, the bor- rower is required to erect another house on one of the lots covered by the mortgage. He builds one costing $500, and lets it for $30. The two bouses now bring $90 a year, just the interest on $1,000. Interest rises to twelve per cent., and the holder of the mortgage requires the borrower to erect a second bouse, costing $500, on another vacant lot covered by the mortgage. This house is likewise let for $30. The three houses rent for $120, and the mortgage for $1,000 draws twelve per cent. The mortgage now brings in as much income as the three houses. The $1,000 as much balance the value of the three houses now, as they did that of the one house when the money was loaned ; for it now takes the rent of three houses, as it then did that of one house, to pay the in- terest on the mortgage. Two houses are added by material and labor, and no material or labor is added to the mortgage or money ; yet the mortgage or money at twelve per cent, interest, is worth as much to the holder as the wiole property. As the value of money increases, the market value of the things to be measured by it decreases, so that it works in a double ratio against producers, for rents of property diminish as interest on money increases. But La the foregoing example, this feature has not been ex- hibited, no diminution of rent being supposed to take place in consequence of the rise of interest, although ex- perience proves that this is the invariable result. 158 INTKEE8T mOEEASES SECTION XIII. KBNTS, WHETHER HIGH OE LOW, BEiJt THE SAME HKLA TIVE VALUE TO THEIE PEINCIPAl ; BUT, WHEN THB FEB OBNTAGB INTEEBST ON MONET IS INOEEASED, NOT ONLY IS ITS EELATITE PBOPOETION TO THE PEINCIPAt INOEEASED, BUT EACH FEACTIONAL PAET HAS IN- OEEASED VALUE. It is proposed to show that there is a wide difference between renting property and lending money, and that the rent and market value of property decrease in pro- portion to the rise of interest, whereas the market value of money, and of the interest upon it, increases La du-ect proportion to the rise of interest. If the rent of a farm, store, or house rise to double, the price of the farm, store or house is doubled. If the rent of the farm before the rise be $300 over repairs, etc., and money be at six per cent, iaterest, the farm is worth $5,000. But if the rent rise to $600, the price of the farm will be increased to $10,000. Therefore, if the owner invest the income or rent in other land before the rise of rent, he can buy as much land with the $300, as he can buy after the rise with $600. K the rent faU again to $300, the price of the farm will fall again t« $5,000 ; but the $300 will buy twice as much land as it would if the rent had been maintained at $600. Neither the rise nor the fall of the rent alters the actual value of the farm, for its productiveness is neither in- creased nor diminished by either. The nutritive proper- ties of its wheat and corn cannot be altered by the rise or fall of its rent. But the dollar received when the rent is $600, is worth only one-half as much as the dollar when the rent is but $300 ; for when rents are low, one dollar will buy as much land as two will when rents m OEOMETEIOAL PEOGEESSION. 159 are double. The intrinsic value of the property under- goes no material change, but the standard changes by which its market value is estimated. ISqw note the differ- ent effects of the rise of the rent on property, and the rise of the interest on money. Let the rate of interest on money rise from six to twelve per cent., and the rent on property will inevitably fall in about the same ratio. The price of property will of course fall in proportion to the faU o£ its rent. When the interest on money is doubled, the value of every doUar received as interest is doubled ; for each dollar of interest will buy double the property that it would before the rise. But when the rent on property is doubled the dollar is worth but half as much as it was before, for it will not purchase more than half as much property as it would before the rise of rent. If the rent on land rise to double, the land itself will Bell for double its former price ; therefore, the rent will not double its principal of land in any shorter time in consequence of the rise. But when interest on money rises to double, the interest will double the principal in half the time that it would before the rise of interest. When the rent on land rises, the rent continues to hold the same relative value to its principal of land that it did previous to the rise. But when the interest on money rises to double, the relative proportion of the interest to the principal is doubled. For example : P. lends to Q. for a year $20,000 at six per cent, interest. The interest amounts to $1,200. P. invests this income in a farm at the then market price of land. At the commencement of the following year, there is a scarcity of money, and P. reloans to Q. the same $20,000 at twelve per cent, interest. At the end of the year, Q. must pay to P. as the interest on the $20,000, $2,400, twice the sum that he paid the previous year. Scarcity of money and high rates of interest invariably depreciate the price of property. Its price falls one-halfj 15 160 GSOMBTEIOAL INCEEASE OF UTTEEEST. SO that each dollar of the $2,400 received as the ir terest on the money when interest is high, will purchase twice as much property as it would before the rise of interest. Hence, if the interest at six per cent, on $20,000 will buy a farm worth $1,200, when the interest on the $20,000 rises to twelve per cent. — i. e., to $2,400, — and the price of the farm falls one-half, the $2,400 wiU buy four farms, all as good as the first bought at $1,200. The income from the $20,000 will be worth four times as much as it was before the rise of interest. Making the calculation in dollars and cents, we shall arrive at the same result. The interest on $20,000 at six per cent, is $1,200. Loan the $1,200 at six per cent, and it will accumulate in the ensuing year $72. Now loan the $20,000 at twelve per cent, and we have $2,400 as its interest for the year. Loan the $2,400 at twelve per cent, and it will accumulate in the ensuing year $288, just four times $72. Thus the value of the income at twelve per cent, is four times greater than at six per cent, whether it be invested in land, or whether it be reloaned on interest. With interest at twelve per cent, per annum the capitalist possesses power to monopolize property four times greater than with interest at six per cent, per annum. The centralizing power of money increases in geometrical proportion to the rate of interest. This is a practical as well as a mathematical truth or law ; which is constantly operating to centralize wealth in the hands of a few at the expense rf the producers. HIGH mTEEBST LOWEBS FKIOEB. 161 SECTION XIV. TO CHEAPEN PEICBS BY AN UNJUST EATB OP INTEEEST AND A SOAECITT OP MONET, IS BUT TO CHEAPEN THE LABOB OP ALL PEODUCEES, ANT) GIVE THEIE BAEN- INGJS TO CAPITALISTS WITHOUT AN EQUITABLE EQUI- VALENT. When low prices are paid for labor, the prices of pro- ducts are proportionally low. It is, therefore, generally supposed that the laborer can as readily procure all need- ful supplies when labor is at a low price, as when it is at a high one. But the articles whose price is diminished by the lowering of labor, are the productions of labor; and the producing classes suffer great injury from this depression of both their labor and products. The following illustration will exhibit the advantage of high prices for labor. -A man raises a hundred bales of cotton, sends them to market, and receives three and a half cents per pound. A laborer in New York receives fifty cents a day for his labor ; with a day's work he can purchase fourteen pounds of cotton. K labor be at a dol- lar per day, and cotton at seven cents per pound, with a day's labor he can purchase the same quantity. If labor rise to a dollar and fifty cents a day, and cotton to ten and a half cents per pound, a day's labor will still pur- chase fourteen pounds of cotton. Thus far we do not observe the difference of price to have any influence upon the ability of the laborer to purchase ; but we have yet to notice the condition of that class of producers who raise the cotton at the first price, three and a half cents per pound. After paying for the use or rent of the plan- tation one-half the price at which a loan of money can be obtained, say three or four per cent, interest on the cost of the plantation, they do not earn fifty cents a day, but. 162 HIGH INTEEEST L0WEE9 PRICiRS in fact, receive little or no compensation for their laboi The same labor and land are required to produce cotton when it brings three and a half cents, as when it brings fourteen cents per pound. Suppose a workman in New York to buy cotton at fourteen cents per pound ; a barrel of flour at $8 ; wheat at $1 50 per bushel ; potatoes at 40 cents ; com and rye at 80 cents ; brown sugar at 10 cents; coffee at 12 cents; boots at $3 a pair; shoes at $1 ; a fur hat at $3 ; brown sheeting at 10 cents per yard ; and good calico at 1 2 cents per yard. If labor fall to 50 cents per day, and he have full employment, to be as well off as when labor was at $2 per day, he must buy flour at $2 per barrel ; wheat at 37^ cents per bushel ; potatoes at 10 cents; com and rye at 20 cents; brown sugar at 2J cents per pound ; coffee at 3 cents ; boots at 75 cents per pair ; shoes at 25 cents ; a hat at 75 cents ; brown sheeting at 2 1 cents per yard; good calico at 3 cents ; and everything else in proportion. Travelling expenses, rents and taxes, must be diminished three-quar- ters. All the necessaries of life must be reduced in price three-quarters, or the laborer who is out of debt will not be as well off when labor is at flfty cents per day, as when it is at two dollars per day. But suppose one class of the laborers to buy at these low prices, what will the producers of wheat, rye, corn, etc., receive for their labor ? The reason that the laborer can buy as much cotton when labor is at fifty cents per day, as when it is at two dollars, is, that he buys a fellow- laborer's products at a price which will not pay a cent a day for the toU of producing them. So when the prices of labor are reduced in this ratio, laborers, as a body, are unable to provide themselves with the necessaries of Ufe. The reduction of the prices of labor and products, consequent upon a scarcity of money and a rise of inte- rest, forces producers and merchants to suffer great losses, because the diminution of the prices of products does n ot TO THE L08B OF PEODtJCEES. 163 diminish the amount of their debts, nor their legal obliga- tions to pay them ; while the capitalists who own these debts will compel laborers and owners of land and prodnicts to Bell double, treble, and quadruple the quantity of these, to obtain money to satisfy the debts. Thus wealth passes with great rapidity into the hands of a few capitalists. If the merchant has bought goods at as low a price as they can be afforded by the manufacturer, it is no safe- guard against loss by the fall of goods in the market, be- cause the market price of the goods does not depend upon the labor necessary to their production, but upon the ever-varying value of the dollar. Our laws make th" dollar the real value, and producers and aU kinds of pro perty are controlled by its power. The objection is often urged, that to make monej plenty would destroy the value of products. But how would or could it destroy their valu«, to allow the needy to earn the means to purchase them ? WUl not a stai-v- Ing people buy products ? Does any one suppose that the people of Ireland would live upon their present scanty food, if their labor would afford them the means of pur- chasing more and better ? Was there ever a bad market for products when labor was receiving what are called high prices, or a good market when labor was at a low price ? The market is made poor by the inability of the laboring community to earn enough to make purchases. If labor were well paid, the market would always be good, and the laborer, assured of a just reward, would work cheerfully. Large production, at a fair price, gives a better com pensation to producers, than half production at double price. The families of producers require as many pro- ducts for their own consumption when the crops are diminished one-half, and their jsrice is doubled, as when products are abundant. The producers cannot then spare a sufficient quantity to sell for their usual profits, even at 164 VOLUNTARY AGREEMENT the increased price, and capital makes tlie same icquisi' tion upon theu" labor for rent or interest as if their crop* were abundant. SECTION" XV. TOLUNTAET AGEBEMEMT NO TEST OF A JUST BATE OJ niTEEBST. The laws do and ought to restrict some contracts and give freedom in others. Restrictions should apply to transactions upon a wrong basis, and those made upon a right one should be entirely free. Agreements founded upon a just basis would naturally be mutually beneficial to the parties contracting them, but no agreements founded upon a wrong one can ever do equal justice. Lotteries and various kinds of gambling are rightly prohibited by law, although the buying and selling of lottery tickets, and betting on games of oards; are volun- tary transactions. If mere voluntary agreement makes contracts just, why do the laws annul those made in gambling, while they enforce the fulfilment of other less voluntary agreements ? A man without property must become a pauper unless he agree to work for others, or have the property of others to work upon. He is not aa free in his contracts as the gambler, in whose case there is no such necessity ; for the latter must have money or property to stake, or others will not bet with him. The only reason for making gambling contracts void in law, is, that no equivalent is rendered to losers for what is gained by winners. If, then, wealth is the product of labor, and it passes into the hands of a few capitalists by agreements less voluntaiy than betting and buying lottery tickets, is not the former even more contrary to justice than the latter ? Wrongs of this kind to the labeling classes are surely as greatly to be depreciited as KO TEST OF A JUST BATE. 163 those to gamblers ; and as no mutual agreements will ever make gambling just, so no mutual agreements founded on a wrong money standard can ever be fair and equal. If R. be a hatter, and T. a shoemaker, the products of their labor must be exchanged, in order to supply both their families with hats and shoes. If X. hold the medium by which this exchange must be effected, and by its power and use can obtain without labor more hats and shoes from R. and T. than they can together retain as the reward of their labor, X. evidently holds an unjust power over them and their products. R. and T. are not only obliged to exchange their hats and shoes with each other, but are also obliged to exchange them for every necessaiy of Ufe, and even for the materials out of which the hats and shoes are manufactured. They cannot make these exchanges without an agreement with X. for the use of the legal medium. Neither the shoemaker nor the hatter can refrain from the use of money as a man can from gambling ; and, under the operation of the pre- sent monetary system, by using it they are certain to lose the greater share of their surplus hats and shoes. They do not even stand the same chance for winning by their labor that the gambler does by gambling, for the dice may turn in his favor, but a rapidly accumulating power will never turn in favor of producers. When money shall be rightly instituted, and a just rate per cent, interest maintained, agreements among R., T. and X. wUl naturally award to each his equitable share of pro- ducts ; but until this medium of exchange is rectified, the legal rights of property must continue at variance with actual justice. The income power will absorb what the producing power earns, and no voluntary agreements according to demand and supply, can prevent this result; for the suffering is caused by injustice in the laws, and not by faults in the agreements. 166 VOLUNTAKT AGBEEMENl Public opinion appears to lean toward less legal cestrauit upon trade. This would be well, if the foundation of trade were made just. But first to fix upon an unjust money basis, and then to make laws enforcing the fulfilment of voluntary agreements made upon it, is first to establish an evU, and then trust to a competition in doing the evil to produce a good. It makes the grossest corruption legal and gives it the greatest freedom. But financiers assert that laws cannot be enacted which will regulate the rate per cent, interest, and thus keep money at a uniform value ; and that the rate per cent., like the market value of commodities, can only be regulated by supply and demand. Under this law of supply and demand, agree- ments according to the necessity of the borrower and the avarice of the lender, are considered tests of a just rate of interest, and must regulate the standard by which all values are determined. Under this system, directors and the favored few borrow money from banks at five, six, or seven per cent, per annum, and lend it at three, four or five per cent, a month ; and if mutual agreement makes justice, all these rates are equally just ; although one class pays from six to ten times more than the other, and the favored class gains the difference by a mere ex- change of paper, without in any way benefiting the suf ferers. A broker borrows money from a bank at the rate of six per cent, per annum, and lends it on the same day to a merchant who is " cornered " at one per cent, a day — just sixty times as much — and according to this great law of supply and demand, as it is often called, each party pays exactly the right and just rate per cent, in- terest. The broker demands the money from the bank, and the bank supplies him at the rate of six per cent, per an- num : but the merchant demands the money from the broker, and the broker supplies him at the rate of 365 per cent, per annum. If a man fall into the water and de- mand help to get out, the person who supjtlies assistanot so TEST OF A JDST RATE. 16t has a perfect right, according to this law of supply and demand, to take all the property a man may own ; foi who but a miser would not give all his wealth to save his life ? In Europe, laborers, by voluntary agreement, work for ten or fifteen cents a day, and are often thankful to get work at these rates to save themselves and their chil- dren from starvation. If mere freedom of agreement, or supply and demand, constitute the justice of contracts, independently of their basis, tliese prices must be a stand- ard whereby to estimate the true value of labor, which, therefore, would depend on the price the capitalist would pay for it, and not on its utility. This wrong basis of contracts also causes a competition among laborers themselves according to their necessities; the tendency of which, under present systems, is to re- duce the price of labor to the mere subsistence of the laborer. But the reverse of this is true of competition in lending money. Whenever a strife occurs in the money market, and one bank begins to run upon another, and capitalists strive for the highest rate per cent, for the use of their money, the tendency is at once to increase the rates of interest. The greater the strife the higher the interest rises, until the whole business of the counti^ is paralyzed ; for the rise of interest increases indebted- ness, destroys credit, diminishes the wages of labor and throws it out of employment. It is probable that every man, woman, and even every child over five years old, in this nation, has seen and handled more or less gold, silver or copper money. If we tell the pubhc that the legal power of money is the great- est, the most controlling and influential of all earthly powers ; that it determines the rate per cent, that shall be paid for the use of aU property ; that it decides who shall be bom in the lap of wealth, and live in luxury, and who shall be born in poverty and want, and be subjected 168 VOLUNTARY AGREEMENT. to a life of the severest toil and servitude in ordei to sub- sist ; that it also rules governments and the destinies of nations, and that its present power is directly opposed to virtue and in favor of vice ; if we tell the people all this, we shall only tell them the truth. But will they believe us ? Will they not say, " We, and our children, and our fathers before us, have seen and handled more or less money all our lives, and we have never seen in it any such power." It is true they have no more seen this power than they have seen the law of gravitation, because it is just as invisible ; yet they have as sensibly felt the effects of the centralizing power of money as they ever have the effects of the law of gravitation. People work hard aU their lives, without considering by what laws the pro- ducts of their labor are governed, and they are taught to believe that as the mining and coining of the gold and pilver are the products of labor, that this labor performed is what constitutes the value of the money. These corns are only the material of money, they are not its power. The power of money is to collect a per centage income, and this is a legal power, and not a material thing. This power is the product of law, and not the product of labor. Yet this invisible, legal power of money as much controls and centralizes the productions of labor, as the mind directs what the physical man shaU perform. By its unjust power the wealthy few govern the destinies of man. When they lend money liberally to the public, at what is called a low rate of interest, it sets the multitude at active production, so that they are as busy as bees in a warm summer morning. But when the few call in their loans, and raise the rate of interest, the producing classes are paralyzed, like the bees when the thermome- ter is at zero. The financial sldll of a few Rothschilds, wielding the power of money, as much determines where the wealth of a nation shall be centralized, as the captain »nd pilot of a steamship direct at what point or wharf THE LAW OP INTEREST. 163 the passengers shall be landed. Not only the producing public, but the government itself, is about as much directed by a few money-lenders as the crew of the ship by the captain and pilot. If the commanders of the ship run her upon the breakers, they endanger their own pro- perty and hves as well as those of the passengers ; but the managers of this financial power, by calling in their money and reloaning it at higher rates of interest, not only cripple the government, and compel it to sell its own credit at usurious rates of interest, but they also paralyze the business of the producing classes, deprive them of the means of subsistence, drive multitudes of them into distressing poverty, despondency and suicide, and by thus wrecking the public they gather large gains out of the spoils. Money, as now instituted, is the most deceitful power that ever has been or can be established. The groundwork for its first mstitution is false, and sub- sequent laws for the regulation of such money can no more remedy its evil power, than a good house can be built on a foundation previously laid upon a quicksand, where every tide of the ocean would cause some part of the foundation to change its position. SECTION XVI. THE LAW OF INTBEEST ON MONEY AN ACCUMULATIVE, NOT A PEODUCING POWBE. Money loaned is universally spoken of as bearing in- terest ; but this is a mistaken idea. It is the borrower's obligation, and not the lender's money, that bears in terest. It is generally believed that borrowers have tlie use of money for the time that they hire it, just as a tenant has the use of a farm for the time that he rents it This also is a mistaken 170 THE LAW OF INTEREST tenant's hands, but money is not usable in the borrower'i hands. If a man borrow $10,000, and give to the lender his note payable Ln one year, with seven per cent, in- terest, at the end of the year he will owe to the lender the principal and $700 interest. Now what does he have to use during the year out of which he is to gain the interest? It certainly cannot be the $10,000 ; for if he keep the money in his own pocket, there can be no increase in quantity, and at the end of the year, he will not have enough by $700 to pay the debt. But the borrower's obligation in the lender's pocket has increased the debt $700. The $10,000 must enable the borrower to have something else to use for the year, or certainly he would not borrow the money, and agree to pay th* interest. As soon as he has the money in his possession, he either pays a debt previously contracted, or buys land, or some kind of goods, wares or merchandise with it. If he buys land, he has the use of it for the year by paying $700 rent. If he is a manufacturer, and has been disappointed in the sale of his goods, and owes $10,000 that has become due, he pays the debt, and this enables him to keep $10,000 worth of his goods for the year. It gives him a year's time to sell these goods, and turn them into money to pay the debt. Thus the so-called interest on money is the rent that he pays for the use of the goods for a year : it is not paid for the use of the money. The money and the interest are both re- presentatives of value. The value is in the goods, or land, and the labor that makes the property productive. The money is always dead, and strictly speaking, people never pay a fraction of interest for its use. The practi- cal effect of the per centage called interest, is simply to determine the per centage rent of property. A tree bears fruit, because the fruit grows out from the vitality of the tree. But money is authorized and organized by human laws, and human laws do not oi> NOT A PROD0CING POWEK. 17l ganize or create vitality, taerefore money is of necessity a dead power, and has no vital energy to produce other money. Money loaned accumulates by interest, but the money produces no interest. All the money in this nation will be kept over from to-day until to-morrow, and wOI bear no interest to those who keep it ; it will gain nothing by interest for him who may keep it a week, month, year, or any other longer or shorter time. AU the money in the country is barren of interest in the hands of somebody to-day, and will be barren of interest in the hands of somebody to-morrow. It may change owners a hundred times, but it is always a dead power in the hands of somebody. Borrowers, whether for a longer or shorter period, always pay out the money aa soon as possible ; they do not keep it. The money is not usable as property, it is not susceptible of being im- proved by labor, nor is it competent in itself to supply any want of man, or to make any improvement. It is dead in their hands, and they at once part with it for something which is usable, such as materials that can be improved, or houses that wiU shelter themselves and their families, or lands upon which they can raise crops, or goods, wares and merchandise which they can use, or can exchange for a profit. As we have said, the per centage interest that borrowers agree to pay for the use of money, simply determines what per centage rent they shall pay for the actual use of a certain itmount of property for a given period. Bor- rowers use the property, not the money ; and from the property they must produce or gain the means to pay the interest. If F. be a farmer, and borrow from A. $1,000 at seven per cent., F. must raise one hundred and forty bushels of corn, and sell it at fifty cents a bushel to pay the yearly interest of seventy dollars. It is then the pro ductiveness of F.'s farm coupled with F.'s labor, that pro- duces the money to pay the interest. The thousand del- 172 rHE LAW OF 1NTEEE6T lars lent by A. to F. do not prciuce anything : but th« money, by a legal, arbitrary power, takes one hundred and forty bushels of corn from F., and appropriates them to A.'s use. If A.'s thousand dollars possessed vital instead of legal power, and could hire land, buy the seed, plant, cultivate, gather, shell and sell the corn, it would then actually produce for A. what the money now legally compels F. to produce for him. But as no human law can make the dollar a naturally productive thing, it is impossible to gain wealth by finance, unless the labor of others produces what is gained by the financiers. Money, then, earns for its owner by an accumulative power ; by a power to gather things already produced, and not by a natural power of growth, like that contained in the germ of wheat or grain. Where this power to accumulate by interest is made greater and more rapid than the natural power of production by labor, this law of interest becomes a most powerful engine of evil. It gathers into the hands of a few capitalists the productions of labor, and often deprives the producers of the neces- saries of life. All nations have considered money to be wealth, be- cause it possesses this power to accumulate ; but whether made of gold or of paper, it really contains a very small amount of actual wealth. The laws make money a legal equivalent for all property, and give it the power to accumulate by interest. They make $100,000, loaned at six per cent, interest, earn for the owner $6,000 a year, without labor on his part, while the labor of twenty men, for three hundred days in the year, at a dollar a day, will earn no greater sum. The labor of twenty men, for a year, would make a visible improvement on a farm ; but the interest makes no visible improvement on the money loaned. Nothing has prevented, nor now prevents, the fuU em NOT A PftODUOING POWER. 173 ployment, and adequate compensation of labor, but the monopoly of money, and unjust rates of in- terest. All nations and all political parties profess to legislate for the protection of industry, but in reality, they have from time immemorial legislated to support exorbitant interest on money. And since the interest on money governs the rent or use of all property, legis^a tion, by fixing high rates of interest, has always sop- ported and increased capital, and depressed labor. This enormous per centage interest on money has reversed the true order of nature ; for the increase of the earth is tht natural reward of labor, but the too great income power gives the reward to those who neither plant nor water, and often starves the laborers on the soil which their own hands have cultivated. By this exorbitant interest, the bounties of God are made a sacrifice on the altar of Mam- mon, and the poor are oppressed because they are poor, and in their toil there is little salvation from want and misery. This income power, established by the laws of nations, has not in the least altered the laws of pro- duction. Production has always been made by labor upon the soil, and by mechanics and artisans ; but the unj ust Income power is a mere human contrivance, by which actual producers are made slaves to non-producing capi- tal, and by which the few monopolize what the many produce by their labor. It is impossible for the producers of a nation to pay tkree, four, or five per cent., or more, for the yearlv use of property, and also furnish themselves with the com- forts and conveniences of life. All the per centage col- lected for the rent on property, or as the interest on money, must be paid by sales of the yearly productions of labor, which remain over and above the support of the producers. If a very few rich men, in any civilized nation, should live fi:ugally, and their posterity should do the same, in the course of a few generations they would 174 THE LAW OF INTEREST. reduce to poverty nearly every other iudividnal in thi country. Consequently, under present monetary laws, extravagance in the rich, and the frequent ineflSciency and imbecility of their children, are great advantages to producers. The second evil is necessary to modify the overwhelming power of the first. The income or interest, legally fixed and maiatained upon money, governs not only the rent of property, and the dividends on stocks, but also the entire general in- come on all other things, because the interest on money is the standard. This income is a yearly tax levied upon producers, which at the present rates is enormous and oppressive. Laws may be made to prevent the entail- ment of property, to compel banks to divide yearly or half-yearly their earnings, and various other laws may be made to prevent the unjust accumulation of property in the hands of the few, and to give the laborer what he really earns ; but all these will be of little avail to amelio- rate the wrong. But as the per centage interest is dimi- nished, producers will be benefited ; and when it is re- duced and maintained at the just rate, the laboring classes will receive the chief part of their own products. The currency is the national standard by which the value of the labor and products of all citizens is estimated, and all are obliged to use it and fonad their contracts upon 't. If a fundamental law, like that of the rate of interest on money, be made just, it will be easily supported by other just laws; but if it be made unjust, it will be difii- cult to support it, for all the laws which sustain it must necessarily be unjust. A man who utters a falsehood must support it by other false assertions. A hundred lies may be required to give the first the semblance of truth. So if a nation fix an unjust standard of value, every law which sustains that standard must be unjust. An unjust standard has been used from the earliest ages of which we have a record ; but the long use of it wiU A JUBT EATK OF HJTEKEST. 175 never make it just, more than the long use of a falsehood with a hundred lies to support it, will make the false hood truth ; or the long use of evil make the evil good. When governments make money unlimited in quantity, at a just rate of interest, laws will he simple, debts paid, labor rewarded, and peace and happiness will pervade the country. Money wiQ be easily obtained in exchange for labor, instead of labor being superabundant, and money scarce. Non-producing capital — i. e., anything wliich requires the expenditure of labor to make it pro- duce — should bear a low interest. Actual production ■will then receive a suitable reward. SEOTION" XVIL BSTTMATE OP A JUST BATE OF tNTEEEST. From what has been said of unjust and fluctuating rates of interest, it must not be inferred that money loaned should bear no interest; for the accumulative power of money is as essential to its existence as food to the support of life. Without this power money would not represent production, and, consequently, could not be made an equivalent in payment either for labor or pro- ductive property, and therefore could not be maintained as a medium of exchange. We are, then, seeking no extreme measures, but that just rate of interest which shall secure to the whole people the greatest good. We do not advocate the annihilation of interest, but we urge that the amount should not be so great as to oppress the laborer whose toil produces every necessary of life, and even the material for the medium of exchange. The rate of interest fixed upon money determines what proportion of the value produced by labor shall be awarded to the capitalist for the use of his capital, and what proportion the laborer shall receive for his toil in 176 ESimATE OF A makiag the prodaction. It is, therefore, impfrtan to ascertain what per centage the people of a nation can paj to capital, and still receive a due reward for their labor. To arrive at a just conclusion, we must form an estimate on a large scale, and for a term of years. Take the fol- owing as such an estimate : Suppose a country lay off our coast equal in every respect to that of the United States, but in its primitive wildness. Allow those classes of people whose labor makes all improvements to have the use of the United States in their present condition, with their cities, raUroads, canals, farms, goods, wares aud merchandise, bank. State, and other stocks, money, etc., for the term of seventy years. At the close of this period, they are to return the property uninjui'ed by use, perishable articles replaced by new ones, and decayed buildings and machinery repaired and renewed. And for the use or rent of aU these, they are meanwhile to make in the adjoining new country every improvement already in this ; cities, railroads, canals, shipping, improve farms, make money, stocks, etc., etc., and render the country in every respect equal to the United States. At the end of seventy years they must give up the United States, together with the new country and all its improve- ments, and this would only be paying for the use of the property an interest half-yearly, at the rate of one per cent per annum. We will repeat the length of time in which money doubles at certain different rates of interest the interest being p.iid and reloaned half-yearly. At two per cent, per annum, it will double in about thirty-fiv years ; at three per cent., ia less than twenty-four years at six per cent., in a little less than twelve years ; and at seven per cent., in a little more than ten years. If the laboring classes can make as many improvements in a Dew country as now exist in this, and can afford to give the whole improvement for the use or rent of this country for ten years, seven per cent, would be a just rate o: JUST RATE OF INTEREST 177 interest. If the people require twenty-three and a half years to perform this labor, beside making a comfortable provision for themselves, three per cent, would be the just rate ; if thirty-five years, two per cent. ; and if sixty- nine and a half years, one per cent, should be the rate. Take the same estimate under a different form. Sup- pose all species of property in the coimtry to receive a fair valuation, and its owners sell it on a credit of one hundred years, the interest or rent to be paid half-yearly, at the rate of seven per cent, on the amount of valuation. At this rate, the purchasers must pay every ten years to the sellers a value in interest equal in amount to the value of the whole property of the nation. If, however, the property were sold upon the same credit, bearing an in- terest of one per cent., nearly seventy years would elapse before the purchasers must pay to the sellers an amoimt in interest equal to the value of the principal. If the distinctions between the value of gold and of paper disappear when both are used as money, it follows that the value of gold and silver money cannot be regu- lated by the quantity of metal in each piece, any more than the value of paper money could be regulated by the quantity of paper in each bank-note. The power of money over property and labor is increased or diminished just in proportion to its accumulative power, hence the only possible way to affix a true value to money, is to regulate a right rate per cent, interest for its use. A nation should not allow any money to circulate that is not perfectly good, and at par, and also a legal tender in payment for debts in every part of the country. Good money is a representative of value, and must be oerma- nently secured by property that possesses intrinsic value ; for if the property which formed the basis for the issue of the money, should cease to be valuable, the money ol course would cease to represent value, and would be worthless, except for the actual value of the material out i78 BENEFICIAL EE6IILTS OF of which it was made. Money to be good must also r& present production, hence it must always be susceptible of being loaned for a rate per cent, interest. Now, aa labor in any useful occupation should be justly compen- sated, so also the necessary labor to fiirnish and issue the money of a nation should be fairly remunerated ; and the per centage interest on the money furnished and loaned by an Institution established by the Government for that purpose, should be equivalent to pay for the material and labor employed in producing and loaning it. Thus the borrowers of the money would pay the cost of the production and issue (see Part II., A True Monetary System), and this would form the rate per cent, inte- rest to be charged by any subsequent owners of the money when they should reloan it. Money thus organ- ized would always pay for its own support, without aid from the Government.* SEOTioN xvm. BBNEFICIAL EESUITS TO LABOEERS AND MERCHANTS PROM THE REDUCTION OP THE RATE OP INTEREST. It may be said that the reduction of the interest on money would cause property to rise in price in proportion to the decrease of interest, and, therefore, the condition of the laborer would not be improved. Tt will be sup- posed that if the market value of property should rise in proportion to the decrease of interest, speculators and owners of property would be the gainers by the reduc- • The two modes of estimating the just rate of interest, set forth In this chapter, do not differ in their result ; but the author considered the latter (which is taken from his more recent writings) the fina) criterion ; and spoke of it repeatedly, during the last winter of his Ufe, a point to which ie attached great importance.— [M. K. P.J A REDUCED KATE OF INTEREST. 179 tion ; that interest being reduced from seven to one per cent., V.'a four farms (see Section I.) would rise in tlieir market value from $10,000 to $70,000, and a rent of one per cent, on the $70,000 would be $700 — precisely the same sum as seven per cent, on $10,000 — and thus the tenants would gain nothing by the lessening of the inte- rest, but V. would gain by the rise in the market value of his farms. By looking a little deeper into this matter, we shall see that such would not be the fact. For, if V.'s farms rise to $70,000 each, and A., B., C. and D., hire them at one per cent, on this valuation, that is, at $700 a year for each, which V. on its receipt, loans out at one per cent., yearly collecting and reloaning the interest, it would be seventy years before the rent and its accruing Interest would buy four other farms. Hence the relative gain of the laborers by lowering the rate per cent, inte- rest, would not be altered by any rise in the market value of the farms. To show this yet more clearly, suppose the market value of each farm increase from $10,000 to $70,000, and let V. instead of renting sell them, and loan out their proceeds on bond and mortgage at one per cent, per annum, yearly collecting and reloaning the in- terest, it would still be seventy years before the interest would equal the principal, and amount to $280,000 ; and the $280,000 gained by interest, would buy for V. only four farms woi'th $70,000 each ; whereas, with interest at seven per cent., if V. should sell the same four farms at $10,000 each, loaning out the $40,000 proceeds at seven per cent., and yearly collecting and reloaning the interest at the same rate, in seventy-one years and nine months he would gain $5,080,000, which woijd buy five hundred and eight farms. Whether property rise or fall, or maintain its present price, the reward of labor would be equally increased by the diminution of interest. Suppose H. has a lot that 180 BENEFICIAL EKSCLT8 OF • cost him in cash $1,000, and builds a house upon it cost bg $1,000 — together wd rth $2,000. Interest on money is at six per cent, per annum; therefore to make the pro perty worth the money it cost, H. must let the house for $120 a year, clear of insurance, repairs, and taxes. Labor is then at one dollar per day. Reduce the interest on money to one per cent., and, in consequence of this re- duction, let the lot and house rise to six times their former price— that is, from $2,000 to $12,000. The in- terest on $12,000 at one per cent, would be $120, the same as when the property would sell for but $2,000, The house could not rise from $2,000 to $12,000, unless labor should rise proportionally — that is from one dollar a day to six dollars a day. The same amount of labor would as readily build the house at one time as another. With labor at six dollars per day, the tenant could pay the $120 rent with twenty days' work; whereas, with interest at six per cent., and labor at one dollar per day, it would take one hundred and twenty days' labor to pay the rent, six times more than when the interest on money was at one per cent. Now suppose the change in inte- rest to produce no effect upon property, and the house and lot to continue worth only $2,000. The interest on the $2,000 at one per cent, would be $20. If property did not rise, labor would not rise, because it would require the same number of days' labor to build the house, and it would take twenty days' labor to pay the rent — the same number of days that it would if the property should rise to $12,000. A just per centage on money being established, the rise or the fall of property would not affect the relative posi- tions of labor and capital. If property should rise in price, the tenant would not be obliged to build another house for the use of one, any sooner than if property should fall in price. He could pay the rent in the one A EEDtJOED KATE OP INTBEE8T. 181 case as easily as in the other, and with the same amount of labor ; hut a change in the rate of interest would im- mediately affect him. The amount of products required as the rent of land would be diminished by reducing the rate of interest. Suppose G. owns a farm of one hundred acres of well improved land worth $100 per acre. H. rents this farm at seven per cent, interest on its cost, and consequently must pay to G. $700 a year. If the land produce twenty- five bushels of wheat to the acre, and wheat be worth $1 per bushel, H. must sow, reap, and sell the products of twenty-eight acres, and pay the whole proceeds to G. as the rent of one hundred acres for the year. If interest were at one per cent, instead of at seven, the rent of the farm, or of the $10,000 for the year would be $100, instead of $700 ; and H, would be obliged to cultivate and sell the products of four acres only to procure one hundred bushels of wheat, or $100 to pay the rent. If he performed the same labor when interest was at one as when it was at seven per cent., he would retain the products of twenty- four acres — i. e., six hundred bushels of wheat as the surplus earnings of his labor, instead of paying them to G. for the use of capital. The reduction of the rate of raterest would not lessen the quantity of products, nor decrease their value ; it would only give a larger propor- tion to producers. If G. should cultivate his own farm, he would receive the whole of its products as the earn- ings of his labor, whether interest were at one or at seven per cent. But if interest were at one per cent., and H. should rent the second farm, G. could exact but a small proportion of the products of the farm as rent. G. would receive a more just sum for the use of the farm, and H. would likewise receive a more just reward for his labor upon it. A low and uniform rate of interest would have a most beneficial effect on trade ; and of this the following is a 182 BENEFICIAL EEStJLTS OF practical illustration. Suppose a merchant in the citj now pays $2,000 rent for his store, and $800 for his house. His rents must be paid from the profits on his goods before he can gain anything for his own support. Reduce the rate of interest to one per cent., and his rents would be reduced to $400. The interest on his stock of goods would also be but one-seveiitli its present amount. Estimate his stock at $40,000 and the interest upon it at seven per cent, would be $2,800 a year. But reduced to one per cent., the interest would amount to but $400. The saving of interest on the goods, and of rents on the house and store, would amount to $4,800. Suppose the merchant to sell $250,000 worth of goods in a year, he must calculate at least two and a half per cent, for guar- antee of bad debts. This per centage would be $6,250. Reduce interest to one per cent., and probably it would not be worth a tenth of one per cent., to guarantee the debts. In this item, there would be a clear saving of $6,150. Add the $4,800; there would be saved $10,950. The cost of the transportation of products from one part of the country to another would be greatly reduced; because the per centage to be paid for the use of capital to make internal improvements would be reduced to one per cent. All this difference of interest would be gained and saved by producers and distributers. That a low rate of interest would drive specie from the country, is a false supposition. Do the lower rates of interest in England drain that country of its specie ? Does six per cent, interest in the New England States drive their specie into the southern and western States, in which the legal interest is eight per cent, per annum ? Such is not the fact. Where interest is the lowest, money and specie are the most abundant. If products pay a profit by shipment to England, they go forward rapidly to meet the demand. Not so with money. In England, money is often lent for months together at from two tc A EEDrOED RATE OF 1NTEEE8T. 183 three per cent, per annum, while the New York banks lend at six and seven per cent, per aanum. For years past, the people of the United States have paid, nearly or quite, double the per centage for the use of money that has been paid in England. Why does not money from England flow in and supply the market, so as to equalize the rates of interest of the two nations ? Why do the States which pay the highest rates of interest go abroad most frequently to borrow money, and still have not enough ? It is because the rates are so high that the people of these States cannot produce a sufficient surplus to pay the interest to capitalists among themselves, and to other States where the interest, though lower, is still oppressive, to procure the money required to carry on their business. Money is a legal representative, and serves to fix an income, but not to produce wealth Loan it twenty or thirty times where the interest is high and ereiy time it is lent it makes an income for tht lenders for a longer or shorter period, which impoverishes the borrowers, because they must sell their products to pay the interest. The principal borrowed must soon be re- turned to the lenders in interest, and the interest is relcianed to the people. These high rates of interest serve to make the people paying them tributary to a few Tic-ney-lenders amoug themselves, and in other States. For a few years previous to 1851, the State of Wisconsin made all rates of interest legal; that is, the rate of jiterest was a matter of agreement between borrowei and lender. The consequence was, that the rate of Jiterest varied from 12 up to 100 per cent, per annum. We are credibly informed that the highest rate was, in manyinstances, exacted, and good landed security obtained for its payment. Let us see what effect certain rates of interest on money borrowed abroad muwt have upon the circulating medium of the State. If the rale of interest were at one per cent., and T., living in New York, should 17 l84 A EEDUCED BATE OF INTEEEBT. lend $10,000 in Wisconsin at tlia: rate, the borrower, ai the close of the year, must send T. $100. The people of Wisconsin would have $9,900 of the money borrowed remaining among them as a circulating medium. But if T. lend his money at twelve per cent., the borrower must send T. at the close of the year $1,200, and but $8,800 would be left circulating in Wisconsin. If he lend at fifty per cent., the borrower must duly send T. $5,000 to pay the interest, so that one-half of the borrowed money is returned to T. in New York, and only $5,000 are left in Wisconsin. But if T. lends the $10,000 at a hundred per cent, per annum, the borrower must send T. at the end of the year $10,000, and not one dollar of it is left in Wisconsin. Still the borrower would be indebted to T. for the principal of $10,000 and in another year would owe T. $10,000 more in interest. It would not take a very large amount of money lent at this and approximate rates by the citizens of 'Sew York to those of Wisconsin, to throw the balance of trade against Wisconsin and in favor of New York : nor, in such a case, would it be strange that money should be scarce in Wisconsin while it was plenty in New York. In the United States, if interest were reduced to one, or to one and one-tenth per cent., useful productions would probably increase from twenty-five to fifty per cent. The wealth, instead of being accumuLated in a few hands, would be distributed among producers. A large proportion of the labor employed in building up cities would be expended in cultivating and beautifying the country. Internal improvements would be made to an extent, and in a perfection unexampled in the history of nations. Agriculture, manufactures, and the arts would flourish in every part of the country. Tha se who art now non-producers would naturally become producers, The production would be owned by those who per tow PEICE8 OF LABOR IN EUBOPB. 185 formed the labor, because tbe standard of distribution would nearly conform to the natural rights of man. SECTION XIX. THB LOW PRICES OF LABOR IN BUROPKAN OO0NTRIHS XOT CAUSED BY THEIR LOW RATES OP INTEREST. In answer to the principle advanced, that the establish- ment of a low rate of interest will secure a better com- pensation to labor, it will be said that money is plenty in all old countries, at a low rate of interest, and that labor is very poorly paid; whereas, in new countries, in which interest is always high, high prices are paid for ^bor. In England, France, and Germany, money is loaned at two, three, four, and five per cent, per annum, and in all these countries the prices of labor are very low ; while in the United States of America, in which the lowest legal rate of interest is six per cent., and the average rate double that of European nations, the prices of labor are also double. In former ages, the rates of interest in these now old countries were very high, and by this means the property was early accumulated in the posses- sion of a few. These few owning the property, and letting it to those who were destitute of the means of pay- ing the rent or interest except by the products of their labor on the property, the lenders could no longer collect the high rates ; and a reduction of interest necessarily fol- lowed, because the laws could not enforce the collection of the higher rates, where the ability to pay them did not exist. As a general thing, emigrants to new countries are in dustiious and enterprising persons, Avho have little pro perty, and seek a new home because they have not the means of purchasing farms, etc., in old settlements. H these pioneers hire laborers to assist them in clearing and preparing their lands for use, they must pay higher i86 LOW PEI0E8 OF LABOE IN ETJEOPK wages tnan are usual in older countries, for the laborers have many hardships to encounter. The first settlers im- port their provisions untU they can raise a crop. The new soil produces largely. All fresh emigrants being compelled to buy provisions until they can raise their own, constant market is afforded for the surplus products of earlier settlers, and they are, consequently, able to pay good prices for labor. Emigrants to new countries raise the pnncipal part of their provisions, but depend, in a great measure, on older countries for clothing, imple- ments of husbandry, etc. Their products are consumed among themselves ; and they have few, if any, to send to cities or manufacturing towns, to exchange for neces- sary articles. They must send money to buy them ; or, if they purchase on credit, the money must be had at the maturity of the debts. This drains off their money. Al- though they make great improvements, add immensely to the value of their land, and the wealth of the country rapidly increases, yet money is very scarce, and the peo- ple are compelled to contract debts for clothing, imple- ments of husbandry, etc. Any one who has money to lend can obtain exorbitant interest, and those who are in debt win offer high rates to their friends in older countries, to Induce them to lend their money in the settlement. The scarcity of money is so great, that capitalists require the best security that can be offered, to quadruple the amount of their loans. Interest is maintained at ten twenty, or a higher rate per cent, per annum, and this rapidly draws property into the possession of capitalists. Every money-lender thinks himself justified in demand- ing as high a rate of interest as his neighbor. When mortgages become due, property, in many cases, is sold for less than half the cost of the labor to make the im- provements upon it. The holder of money can buy pro- perty at one-fourth of its actual value, and another who has not the money to pay, will perhaps repurchase it at KOT CAUSED BY LOW EATES OF DTTEEBST. 187 a large advance, paying a small portion down, and agreeing to give a high rate of interest on the remainder, He makes what is termed a good bargain in the pur- chase. In this vray interest is maintained at enormous rates, and lands and improvements pass rapidly into he hands of capitalists. In new and thinly settled countries, where fertUe lands are at low prices, the people do not starve, even when they are charged ten, twenty, or even thirty per cent, per aimum on boiTOwed money and property ; but these rates of interest concentrate the property rapidly into the hands of a few, and break up and keep hundreds of thousands of laborers poor. They can, however, gene- rally find employment by which they may obtain their food. But as coimtries grow older, the population more dense, lands higher in price, and concentrated in fewer hands, the mechanical arts begin to flourish, and manu- factories are established, in which hundreds of workmen labor for their daily support. The manufactories are carried on by individuals, by firms, or by incorporated companies. If money become scarce, and interest increase to double, treble, or quadruple the ordinary rate, the prices of goods inevitably fall, the wages of the workmen are reduced, and great numbers are thrown out of employ- ment. The demand for goods rapidly decreases, for pro- ducers generally have become impoverished, and are unable to purchase their usual supplies, and many of them must subsist on charity. K the scarcity of money and the high rates of interest continue, the manufacturers too must break ; for to pay the same amount of debt, they must sell twenty-five or fifty per cent, more of their goods than when interest was at the lower rate. Although the rates of interest in all old countries are much lower than in newer countries, yet they are suffi- ciently high continually to centralize the wealth, and to ■'ncrease more and more the number of the poor. In all 188 LOW PEI0E8 OF LAJBOK IN E0EOPE the old countries the established rates of interest are high enough to concentrate the wealth in a few hands, even iin a nev3 country ; not, however, so rapidly as the higher rates of interest which are usually paid in newer coun- tries. In consequence of our higher rates of interest the property of the United States is accumulating in the hands of a few men much more rapidly than in the older countries. This accumulation will continue until the rates of interest are reduced below the rates obtained in the older countries. The fluctuations of the rates of iaterest, in all countries, render it difficult to offer any very clear illustrations of their bearing upon labor, except upon general principles. In England, the rates of interest vary according to the necessity of the borrower, from one, two, or three per cent, per annum, to four, five, six, seven, eight, nine, ten, eleven, and twelve per cent. ; and similar variations of interest, though at much higher rates, occur in our own large cities, and to a considerable extent in our towns and villages. But let twelve nations fix twelve different rates of interest, maintaining the rates uniform, the first at one per cent., the second at two per cent., and so on to twelve per cent., and the concentration of wealth in few hands, in the different nations, would increase in nearly the same ratio with the rates of interest. The ratio would be almost exact, except for the profligacy and extravagance of many of the rich, and the benevo- lence of others. This general principle wiU hold good, whether the country be new, rich and fertile, or whether it be old, or poor, because the accumulation is according to the rate per cent. A copper cent, loaned at six per cent, interest per annum, will double its principal in pre- cisely the same time that a gold eagle, at the same rate of interest, would double its principal. It is a mistaken idea, that it is right to pay a higher rate of interest in a new and fertile country, because production is mor« HOT OAUBED BT LOW BATES OF niTEBEST. 189 easily made. If labor will produce a greater quantity of products, capital has no right, through an unjust stand- ard of accumulation, to take them without rendering a fair equivalent ; but if the rate of interest be too high, it wiU inevitably do so. There is no more justice in increas- ing the rate of interest, on account of facility in produc- tion, than there would be in increasing the size of the bushel, because labor would produce more bushels of grain. In all ages and nations, the rates of interest maintained have been so high as continually to concentrate the wealth in a few hands. When the wealth of a nation becomes thus centralized, the producers and distributers who are destitute of property, are compelled to borrow money, and rent property from its holders. Suppose the whole property of a nation to be accumulated in the possession of one man (for this shows the principle mor< strongly), then all other individuals would be compelled either to buy the property on credit, or to rent it. K he should charge three per cent, per annum on the money or property, it could hardly fail to keep nineteen-twen- tieths of the people in perpetual poverty. For a few years they might appear to be prosperous, but their prosperity could not possibly be permanent, because the rent, or interest, would certainly absorb more than the people could earn. A rate of interest of even two per cent, would produce the same results, but in a less degree, because there would be many more owners of property, and the general indebtedness of the people would not be nearly so great, as it is at the higher rates of interest. It caimot then be true, that the low rates of interest maintained in the old countries, are the cause of the low prices of labor, and the poverty of the producers, but on the contrary, the former high rates of interest accumu- lated the property in a few hands, and the present rates of interest are s ifficiently high to continue th« 190 LOW PEICE8 OF LABOE IN EUEOPB. accumulation and prevent the reward of labor. High rates of interest have been, and are, the cause of the poverty of producers in all nations. In England, where the average rate of interest is three per cent, per annum, the labor is compelled to double the entire capital of the nation, in the hands of its holders, in twenty-three and a half years, besides which, the labor- ers must furnish their own support. But this is not the only cause of the depression of labor in Britain. An enormous sum of money was borrowed by the govern- ment of its wealthy citizens, and expended in wars. This National Debt amounts to about $4,000,000,000, the annual interest on which, at an average of three per cent., is $120,000,000, which the people must pay by an annual taxation of their products. Labor receives no benefit from it. The money is not invested in land, nor in anything else of which the labor has the use by the annual payment of the interest. This interest on the National Debt is additional to the too high rate of inter- est ah-eady charged on all the capital actually em- ployed. It is commonly supposed that the laud owners of Eng- land are tlie oppressors of the toiling multitude. The power to lease land, at the present rates, is given by the law, fixing the rate of interest on money. The op- pression by lending money, however, is greater than that by leasing land, because the rates of interest on money are continually fluctuating, and the oppression of the producing classes by its power, being indirect, can be made greater. The income of the holder of English government securities is earned by the operatives in the mines and factories, and by the seamstresses and various workwomen in the cities. But the bondholder comes in direct contact with none of these. His income is paid by the government, which gathers it from every branch of industry in the country by grievous taxations. Ddeg KOT OiUSED BT LOW RATES OF INTEKEBT. 191 it not beggax the producing classes to pay the interest to the money-owner, as much as to pay the rent to the land owner ? Are the operatives in the manufactories and mines any better provided for than the laborers on the soil ? Overgrown landed estates have generally been acquired through exorbitant interest on money. The only way to eradicate the oppression caused by holding them at high rents, is to reduce the interest upon money to such a rate that the products of labor will legally go to those who perform the labor, instead of going to the owners of capital. Every dollar that passes into the hands of the receiver of interest, is representative of products, and all the excess, above a just rate of interest, is taken from the rightful earnings of the laborer. Without the mtervention of the government, which collects the inter- est by various taxations, so that the means of oppres- sion are somewhat concealed, the people would refiise to submit to the injustice, and revolution in this system would naturally foUow. If the natioLal rate of interest, in Great Britain, on aU bank and private loans, and on the National Debt, were reduced to one per cent., and the interest were regularly paid, the bonds of the government would always be at par. A hundred pounds of the National Debt would be worth as much as a hundred pounds in coin, or a hundred pound note of the Bank of England. Now this Bank and private bankers continually vary the rates of interest. At some periods they charge two, three, or four times more than others, whUe the bonds of the government bear a regular rate of interest. Therefore, when the Bank and its Branches lend at a low rate, the govern- ment securities rise in price ; and when they lend at very high rates, the government bonds depreciate. Suppose the interest on the National Debt were re- duced from three to one per cent, per annum. This simple procedure would save to the laboring classes 192 LOW FBICES OF LABOB IN EUTROPB. eighty millions of dollars' worth of their products. If the interest on loans of money by the Bank of England, and by capitalists, and brokers, were also reduced to one per cent., it would increase the saving to the laboring classes to some two or three hundred millions annually. The per centage income upon capital can only be paid with the proceeds of labor ; therefore this reduction of the per centage income would be equiralent to the dis- tribution of several hundred millions of dollars among the producing classes, according to the labor per- formed. The effect of so large an annual distribution among this class would be to diffuse, in a few years, com- petence and happiness where now exist only poverty and misery. The maintenance of the interest on money at one, or at some other rate per cent, lower than this, would soon and forever end the periodical depressions of trade, labor, and the prices of products, and the general oppression oi the lab:)riag classes. CHAPTER IV. THE BANKING SYSTEM, SECTION I, THE NATOEE OP BANKS, THBIE mSTITDTION, AND THK PRINCIPLES BY "WHICH THET ARE GOVERNED. Banks, lite other incorporated companies, receive their chartered powers by legislative enactments. Thesa charters make it incumbent upon the banks to divide their gains in dividends to their stockholders, and to re- port to the legislature yearly, or oftener, their situation and standing. Tt is'presumed that the publishing of these dividends and reports will keep the people informed of the doings and utility of the banks. Yet the practical operations of bankiag, and their special and general influ- ences for good or for evil, are hidden fi-om the public view. Causes are felt to be in operation which the peo- ple cannot compi ehend — the changes in the market value of property, and in the prices of labor, are accounted for by the abundance and scarcity of money ; but why money is scarce at one time, and abundant at another, is to the great body of the people utterly unknown. It is the intention of the author to place the institution and operation of our banking system fairly before the producers of the nation, that they may jlearly understand w» 19* THE NATURE OF BANKS its eflfects upon their interests. Tlie producers them- selves will then determine whether they will change the system for one to be established on right principles, and that wiU act for the good of all, or continue the present one, the effect of which, for ages, in this and other countries, has been tc accumulate wealth in the hands of R few, to the constant injury and hopeless poverty of the many. The Constitution of the United States declares. Art. L Sec. X., " No State shall emit bills of credit, make any- thing but gold and silver coin a tender in payment of debts." A bill of credit is a representative of property A bank bill is a bill of credit ; it is taken for the amount of value, or property, set forth upon its face, and if it does not actually represent that value, the owner must suffer loss. The General Government has reserved to itself the right to coin money and emit bills of credit. It has, at least impliedly, assumed the obligation to provide a representative of property to the extent required. It has, however, neglected to supply the necessary kind and quantity of money to effect the exchanges essential to the interest and welfare of aU civilized communities. Th« consequence has been an attempt of the State governments to supply the deficiency by the establishment of banks. The mode of instituting banks has been various, but however instituted, experience has shown their unfitness to fulfil the public purposes of their institution, and also their unequalled power as instruments for gathering the earnings of labor tocapital, without any adequate return. The nature of banks is sometimes said to be similar to that of manufacturing companies. The chief point of resemblance in their constitutions is, that the stockhold- ers, both in manufacturing companies and in banks, a;-e bound only for ths amount paid in as capital stock, and are net liable for any further debts of the institutions. thb: natuee of banks. 196 In this particular they are on tlie same fooling. But iu other respects they clifFer A\idely. Banks are chartered in order to furnish the people Vt'iih a pubhc representative of value, that is, with a currency by which their soil and products may be exchanged. Manufacturing companies are chartered in order to facilitate the production of use- ful articles for the support and comfort of man. Banks deal in representatives of property, and the interest on these representatives is the source of their gains Manu- facturers gain by mcreasing the amount of actual produc- tion, for combinations of machinery diminish the expense of producing useful articles. Still, although manufactur- ing companies may have an equal amount of capital with banks, say from $100,000 to $2,000,000, yet any man may manufacture articles made by comjianies, or any number of men may combine for the same purpose, without a charter or any other legislative authority ; and they have as much right to sell their articles in market as chartered companies. If banking institutions and manufacturing companies be of the same nature, why do not legislatures allow individuals, however small their capital, to manu- facture and circulate their notes as money, as well as to manufacture goods and sell them to any one who wUl purchase them ? Why, too, do they limit the amount of business that banks may transact, and leave manufactur- ing companies to be governed by the discretion of their directors ? If bank-notes be merchandise, why not allow banks to sell their notes for other merchandise, instead of lending them for an interest in money? Why do legislatures limit the interest that banks may charge for the use of their bank notes, more than they limit the price of goods manufactured by chartered companies ? It is because the notes issued by the banks are made a public medium of exchange for all property, even for the goods of chartered manufacturing oomjianies, that their quantity, and the interest upon them, are legally re 18 196 CHAETEKFD BANKS. stricted. It is true tliat legislative action has thus fat accomplished very little toward the regulation of a cur- rency ; but these restrictions upon it, and the necessity for legal authority to create it, prove that it is not regarded as merchandise. The business of the public generally is made greatly dependent on that of. a comparatively few individuals and corporations, who are empowered to issue bank-notes ; for all the debts of the people must be founded upon and paid in money, most of which these individuals and cor- porations are alone authorized to furnish. It is generally understood that the banks provide a very large amount of capital for public use, and it is therefore thought just that they should receive large amounts of interest. But if it be found that the public furnish all the security to make the bank-notes a safe currency, and that the bankb gain immense sums in interest merely for their labor in manufacturing the bank-notes, and exchanging them foi indorsed notes of the people, it will be evident that th« public is suffering a great and unnecessary loss, and could have this labor performed, and the same results ac- complished, or rather a far more equitable currency main- tained, at a comparntively small expense. Formerly, all our banks were conducted under special charters, granted to each ; and their capital was profess- edly all specie. More recently, several of the States have passed General Banking Laws, under which United States and State stocks, and bonds and mortgages are substituted as part of capital stocks. To establish a bank under the first system the persons desirous of banking petition their State government for a charter granting them the privilege. The petition states that the bank is needed by the public, yet we shall see presently that it is not only for private purposes, but that it is to be con- ducted solely for the')enefit of the stockholders. The rbarter, according to law, requires the parties, or tha OIIARTiLK;;D BANKS. 197 tocklioldcTS, to furiiisli a certain amount of money, which sonstitiites the capital stock. Wlieii tliis is paid in, the Dank becomes an cffice of discount and deposit, and is authorized by its charter to issue and lend bank-cotes to circulate as money. The chartered banks in the State of New York are authorized to discount two and a half times the amount of their capital : that is, a bank that has, say one million of dollars paid in as capital stock, is at liberty to discount or lend to the people two and a half millions of dollars. Without a bank charter, the men who own the million of money whicli constitutes this capital, could lend only one million of dollars. In granting the charter, the legislature grants to these few individ- nals the privilege of charging the people seven per cent, interest on one and a half millions of dollars never owned by the stockholders. The bank issues bank-notes bfaar- ing no interest, and exchanges them for the indorsed notes of the people, bearing interest.* The bank pays no interest upon deposits, and charges interest on all the indorsed notes given in exchange for its bank-notes. The interest upon one and a half millions of dollars' worth of indorsed notes, at seven per cent., amounts to one hundred and five thousand dollars a year. This interest is paid on a capital which is entirely ficti- tious, so far as the bank is concerned. If there be any cajjital underlying this one and a half milhons of dollars, it is furnished in the indorsed notes given by the people in exchange for the bank-notes. The solvency of the bank for one and a half millions, depends upon the good- ness of the indorsed notes received from the people, and not upon its own capital ; for however safely its one mill- • Money is popularly said to bear such a rate of interest, as if the money itseli bore the interest. But, in fact, mjney bears no in- terest ; the obligatiojts given for tlie use of money biar the interest ; for «hen money circulates in making cash pure jases of commodities and property, in which no obligations are given no interest is paid. 198 CHAETEEED BANKS. ion of capital may be loaned, it can redeem but one mill ion of liabilities. If the bank should lose a million of dollars, by bad debts, or otherwise, the entire loss would fall upon the stockholders, for this amount is comprised In the capital of the bank ; and, by the charter, is made first Uable for the losses which may be sustained. But the remaining $1,500,000 of bank-notes loaned could not be redeemed unless the indorsed notes received in ex- change for the bank-notes were against responsible per- sons. If the drawers and indorsers were able to pay only a part of these notes, then only a part or a certain per centage of the bank-notes could be paid; and, if no part of the indorsed notes could be collected, the million and half of bank-notes would be a total loss to the holders. The original $1,000,000 of capital has little basis of specie, and the surplus $1,500,000, issued over and above the capital, has none. The latter is based upon a priv- ilege granted by the government to a company of men to m.a»ke bank-notes bearing no interest, and exchange them for the indorsed notes of the people bearing interest. True, all bank-notes are made payable on demand in specie, and if banks refuse to pay specie they are liable to forfeit their charters. But all obligations between individuals, even to book-accounts, are also legally payable in specie ; and all debtors are liable to prosecution if they refuse to pay their debts in specie. The law which requires the banks to redeem their notes on demand in specie, no more furnishes them with specie for that purpose than it furnishes individuals with specie to redeem their notes and pay their debts. Nearly three times the whole amount of specie in the banks in the State of New York, from 1835 to 18 45, would have been required to pay their deposits, at any one time during that period, and this without redeeming in specie a dollar of their circulation. If specie should be gener- ally demanded, the laws could not enable the bajiks to OBAETEKED BANK8. 199 pay their notes and deposits in coins, nor individuals to pay their notes and debts in coins. The principle upon which the contracts between the banks and the people are made, may be illustrated by supposing the government to fix a value upon ten silver spoons belonging to John Doe, and make them a tender in payment of debts. As they are not sufficient in amount to form a currency, John Doe is empowered to make twelve paper spoons on the credit of each silver one, all of which paper spoons he is to redeem on demand with silver spoons. lie retains the ten silver spoons, and lOans at seven per cent, interest the one hundred and iwenty paper spoons, charging interest on them at seven per cent., and receiving in exchange for them good indorsed notes payable in two, three, or four months in sUver spoons. All the paper spoons loaned to the people are payable in silver spoons on demand at John Doe's office, who has but ten silver spoons to pay the one hundred and twenty paper ones. If the holder of ten paper spoons, should demand and take the ten silver spoons, John Doe would be obliged to make the indorsed notes which he had received from his customers for paper spoons redeem the remaining one hundred and ten paper spoons which he had issued. All these were based upon paper, and must be paid again in paper if they are paid at all. StiU, he would receive from the people interest upon a hundred and ten silver spoons which he never owned, and this by means of a legislative charter granted to him because he was the owner of ten silver spoons. If the legislature would not sanction the balancing of these debts with paper, the people could never pay Doe in sUver spoons the indorsed notes they owed him ; nor would Doe be able to redeem his paper spoons with sUver epoons. The drawer of the ten silver spoons would have engrossed the whole tender upon which all the contracts' were founded. 200 (JKKEEAL BANKING LAW. lu general, debts are contracted for land, labor, and products ; but none of these is a tender in payment of debts. Debts are payable in a tender established by law, but are generally paid in bank-notes which are used as a substitute for the tender. Admitting, then a silver dollar o possess intrinsic value equal to its nominal amount, how is it possible for it to make twelve representatives of itself, and make each one of the twelve as valuable as itself, when at the same time any one of the twelve has power to demand and take the sih'er dollar, and thus to leave eleven destitute of any basis of silver, and incapar ble of being paid in it ? If paper money be allowed to pass as representative of specie, there should be a silver dollar for every paper dollar. Otherwise, the paper money cannot represent specie. A silver dollar cannot be represented by two paper dollars, each of which would be as valuable as itself, more than the owmer of one acre of land can give two deeds, each for the one acre, to different individuals, and make both deeds good. The first deed must take the entire acre. If the second be of any value, it must be made so by offsetting the consider- ation given in payment for the deed, and not the land which the deed purports to secure. If paper money be allowed to circulate, it should not be under the pretence that it represents what it does not and cannot repre- sent. In April, 1838, the State of New York passed a Gene- ral Banking Law, allowing any number of individuals to associate together and establish a bank, provided they furnish a capital of not less than $100,000. To secure the public from loss by the issue of bank-bills under this law, tlie banks deposit with the Comptroller an amount in bonds and mortgages, or State stocks, equal to the amount of bank-bills which they are authorized to issue, The bills are then countersigned by the Comptroller. If any bank fail to redeem its bills, the Comptroller is em QENEEAL BAPTKING LAW. 201 powered to sell the Londs, and redeem the bills with the proceeds. This mode of supplymg the public with money is ieemed by many a very safe one. Still, during the first six or seven years in which this new system was in ope- ration, thirty-four banks failed, and did not redeem theii notes at par. Some paid only twenty-five or thirty «ent8 on the dollar. Others paid a per centage varying from thirty to ninety-four cents. Of forty banks closed by the Comptroller, only six redeemed their circulation at par. At the time of the Comptroller's sale of the secur- ities given for the redemption of their bank-notes, the forty banks had a circulation of $1,233,374. The circu lation of the six banks of which the notes were finally redeemed at par by the Comptroller amounted to $120,729, leaving a balance of circulation of $1,112,645, which was compromised at rates varying from twenty-five to ninety-four cents on the dollar. Doubtless a large amount of these notes was bought up by brokers at much greater discount than that at which they were eventually redeemed by the Comptroller, so that the public lost probably from $700,000 to $800,000, besides the losses of depositors which do not appear. It may be said that the securities placed with the Comptroller were not the bonds of the State of New York, but those of other States ; that these States failed to pay their interest, and consequently their bonds depre- ciated greatly below their par value, and were not good security. True ; but at the time they were taken by the Comptroller they were deemed good security for the redemption of the bank-notes. It must be remembered, too, that in 1837 the bonds of the State of New York, bearing an interest of six per cent., sold at about thirty per cent, below their par value. The securities pledged with the Comptroller at the present time are of the same nature as those then pleiged. If the interest on money 202 GENERAL BAlfKING LAW. should now nae as high as then obtained on loans of bank notes, the bonds of the State would again depreciate a* much as iu 1837. The same loss of confidence in the ability of the State to pay its debts would exist, because rates of interest at two, three, and four per cent, a month so rapidly increase the indebtedness of the people, that their wealth is soon transferred to a few capitalists, who are wjabled to control the rate of interest, and conse- qurr. ings of the public, while the public furnishes all the secur- ity necessary to make the bank-notes safe to circulate as money. The people furnish double the security to make the bank-notes safe that they give to each other in the ordinary purchase and sale of products. The farmer sells his produce to the miller or merchant on credit; the miller sells liis flour, the wool-grower his wool, and the manufacturer his goods mostly on two, four, six, eight, ten and twelve months' credits to city merchants, who resell them on like credits to other city or country merchants, and these dispose of them chiefly on credit, tff farmers, mechanics and other consumers. Farmers, mechanics and merchants, in ordinarily good credit, can buy goods on their own responsibility ; and their pur chases are generally limited only by their own discretion. But they cannot take book accounts to the banks, and get bank-notes in exchange on the responsibility of the man who owes the money. Notes offered for discount must have only a certain time to run, must be drawn by men known to the directors to be responsible, and indorsed by one or two others in equally good credit. Thus the people do give at least double the security to make the bank-notes safe to circu- late as money that they do to secure themselves against loss in the sale of the products of their own labor. Yet they pay to the banks five or six times more than a fail equivalent for the material and labor to make and eX' SECTJKrrr fob bank loans. 200 change the bank-uotes for the indorsed notes ; and thw is a total loss to the producing classes, and a clear gain to the banks. We will now estimate the propoi'tioa of capital stock furnished in specie by the stockholders of the banks in the State of New York, and the proportion furnished by the balancing power of paper against paper. The follow- ing table, taken from the State Register, shows how much of the State currency, in 1844 and 1845, was based upon specie, and how much was based upon paper notes : BANK REPORTS FOR 1844-45. COMPARISON OF THE PRINOIFAL ITEMS, AT QITARTERLT PERIODS, FROM FEBRITART, 1844, TO FEBECART, 1845, INOLUSITE. Capital OlrculatioQ . Canal Fund. Deposits .... Due Banks.. February 1, 1814. $43,64»,S8T 16,835,401 1,488,848 29,026,415 15,610,664 Loans and Dlscoui'se Stocks and promiS' sory notes Specie Cash items Bank-notes Dae from Banks »T0,036,T84 11,062,458 10,086,642 4,502,4X9 2,275,172 10,267,207 Mayl, 1844. $48,462,311 18,866,031 1,506,167 80,742,289 15,467,494 $74,527,358 10,862,880 9,455,161 6,999,952 8,148,421 8,817,179 August 1, 18M. $43,443,006 18,091,824 1,210,794 28,757,112 16,102,922 $75,646,692 10,648,211 10,191,974 tlov. 1, $48,618,007 20,152,219 1,534,558 80,891,022 14,431,108 February I, ■^ 1845. $43,674,146 18,518,402 1,607,672 25,976,246 11,501,102 $77,847,718 10,773,678 8,968,092 4,916,8621 6,047,523 2,611,826 2,368,467 8,359,828' 8,767,513 $70,888,578 10,244,048 6,898,286 4,889,886 2,887,1'OS 7,684,308 From the foregoing table, it wiH be perceived that the banks were indebted at the above period to the amount of from $101,272,468, up to $110,128,104. Their average indebtedness, including the reftinding of the capital stock to the stockholders, was $106,931,004. The average amount of their specie at the different periods as above, was $9,119,001. Deduct the specie from the indebted- ness — i. e., $9,119,001 from $106,931,004 — and we have left $97,812,003, which sum must have been cancelled by paper. Our banks have specie enough to redeem only about one-fifth part of their capital stock. The balance of their capital stock, the redemption of the bank-notes 210 SPECIE OWNED BY THE BANKS. in circulation, and the payment of the deposits, ar« secured by the indorsed notes of the people, binding the property of the drawers and indorsers. Their property as much secures the bank-notes, as it does their own notes. The bank-notes are representatives of the pro- perty of the people, and not representatives of the pro- perty of the banks. Not a single dollar of the paper issued over and above the actual amount of specie, is secured by their capital stock, because, if none of these indorsed notes and bonds of the State were ever paid, not a single dollar of the indebtedness of the banks, either for bank-notes or deposits, above their actual specie, would ever be paid. The $97,812,003 would be a total loss to the holders of the bank-notes, to the depositors, and to the stockholders. The interest collected on the indorsed notes and State bonds supports the banks, and pays all their extravagant expenditures in granite buildings, salaries of officers, etc. They can pay their presidents and cashiers from $3,000 to $5,000 each, and other expenses, house-rent, etc., in proportion, to the amount of $40,000 or $50,000 yearly. They can also pay to the stockholders from three to five, six, or seven per cent, in dividends every six months. The banks under legislative authority make the public furnish the capital, and then pay interest on this capital. But although the industry of the people supports the whole, they have no voice in the management. The directors in the banks can at any time call upon them to pay off their notes and cancel the bank-notes ; and if they fail, they are blamed for over-production and over-trad- ing. When the banks contract their loans rapidly, ami distress the people, the directors are said to be prudent and judicious managers. Yet if the people should demand specie, the banks could not pay it, unless they could collect it out of the indorsed notes of the people, Bu'' these indorsee^ notes were never founded upon SEOUEITY FOB BANK LOAUS. 211 specie, and could not be paid in it, because the drawing and indorsing of the notes by the people, and the en- graving of the bank-notes by the banks, and the exchange of the bank-notes foi- the indorsed notes, do not ci eate gold and silver coins to pay either the bank-notes oi the indorsed notes. There has never been a time when the banks could have paid specie for a week, for their aver- age deposits are more than three times their whole amount of specie. The table shows that the average amount of the capital of the banks in the State of New York, during the period mentioned, was $43,569,591, and their average indebtedness was 8] 06,931,004. The difference of these two sums is $63,861,413. The annual interest upon $63,361,413, at seven per cent., was $4,435,333, which the people of the State paid to the stockholders and officers of the banks for furnishing bank-notes above the amoimt of their professed specie capital. The people wrote their own notes, had them indorsed, and took them to the banks to be discounted. The banks engraved their bank-notes, and gave them in exchange for the indorsed notes. For engraving these notes, and making these exchanges, the people of the State paid to the banks annually $4,435,333, or as much as the farmers of the State receive for four millions four hundred and thirty-five thousand three hundred and thirty-three bushels of wheat, at $1 per bushel. The labor of pro- ducing such an amount of wheat was great ; the labor of producing the bank-notes was very small, yet the interest paid on these bank-notes would have bought this quantity of wheat. At the end of the year the people of the State returned all the bank-notes to the banks, together with the value of this large amount of wheat to pay the year's interest. The same amount of interest accrued every year, and called for the same amount of their pro- ducts They soK' their products in market, and paid the 212 SPECIE OWNED Br THE BANKS. interest to the bauks with the proceeds of the sales, the same tc them as if they had carried their wheat and products directly to the hanks to pay the interest. If the entire capital of the banks had been specie, the people would have paid the same amount for the use of the banknotes which would have been issued over and above the specie. The mterest yearly paid for the use of $63,361,413, in bank-notes, was a legal equivalent for the four millions four hundred and thirty-five thousand three hundred and thirty-three bushels of wheat yearly raised upon a certain quantity of land ; and the legal value of the $63,361,413, in bank-notes, was equal to the actual value of the land and labor necessary to produce the wheat. The power of the bank-notes was an exact balance against these products and the land upon which they were produced. If the quantity of money was at any time diminished, and the rate of interest increased, a larger amount of products was required to balance the smaller amount of mone}', and a larger amount of products to balance the interest on the smaller amount of money. Still this money must have been used to balance products, for it was the only public representative of value, and must have been employed as a tender, or as a substitute for a tender, in payment of debts. The promise of the banks to pay specie for their bank-notes on demand, does not enable them to pay the specie, nor does it alter the monopolizing power of the interest on the money over products. If our bank-notes are good for the purchase of pro- perty by the people, certainly they should be equally good for the purchase of property by the banks. Let us reverse the relative positions of the banks and the people. Sup- pose instead of lending their money to the people to buy property, tlie banhs should buy property with their bank- notes, and le'. it out to the people. This would put the SEOtJElTY ton BANK LOANS. 213 bank Doles into circulation, and the banks would be the landlords of the property, instead of beincr the owners and lenders of the money. Let the people then call upon the banks for th° redemption of the bank-notes in specie, and in default of payment sue them ; and if they wish to borrow bank-notes to save their property from Bheriff's sale, charge them one, two, or three per cent, a month for the use of the bank-notes. Let the banks try to rent their property so as to make the rents pay these rates of interest. This would only place the stockholders in a position similar to that in which they now often, though indirectly, place the people. It is evident that it would be impossible for them to redeem their bank- notes in specie, or to redeem them in any way except by selling their property and taking these bank-notes in payment, as the people now give their notes to the banks and pay the discount, and when their notes become due, collect these bank-notes together, and take them to the banks to redeem their indorsed notes. If the banks should buy the property with their bank-notes, and their friends should guarantee the property worth the piicp paid, the property and the guarantee would secure the bank-notes. It would only place the banks under the necessity of cultivating their property, and selling the products to pay the interest. It would be as possible to redeem the bank-notes with specie, under the supposed circumstances, as it now is. If the banks were called apon to redeem them now, they would crowd the people, and sell their property, and in the supposed circumstances, T.he people would cif owd the banks, and seU their property. In both cases the debts must be cancelled by offsetting the property against them, for they could not be re- deemed with specie. It is perfectly obvious that our legislative bodies have founded our banking system on false pretences — upon promises the banks do not even expect to fulfil. The 214 SPECIE OWISTET) BY THE BANKS. only reason wl v the banks can exist upon such a basis is, that the peoiile do not demand the specie for their notes and deposits. The government enacts a law binding all debtors to make their papnents in specie, when it is per- fectly well known that specie does not exist in sufficient quantities to enable them to fulfil the requirement. More than eleven-twelfths of the debts between the banks and the people are contracted with a jjaper balance, and have no reference to specie. Of course, the only means of paying them is by balancing one p.iper note with another. If the banks, or the people, or the goveinment should in every case exact what the laws require, it would be impossible to meet the demand. If the three should ex- act specie in payment for their obligations, it would inevitably banki-upt them all, and almost certainly cause starvation in the midst of abundance, if not civil war. If the governments of the States as well as the General Government should refuse to take bank-notes in collect- iag and disbursing their revenues, probably the people could not pay their duties and taxes. The necessary withdrawal of specie to meet these engagements would at once cause the banks throughout the Union to suspend specie payments. The need of money would then compel the people to petition the legislatures of their respective States to sanction this suspension, and allow the banks to continue to discount without paying specie on demand. They would, however, still be allowed to charge interest upon all the indorsed notes of the people received in ex- change for the bank-notes, which would then be avow- ndly destitute of any basis of specie. • Can anything be more directly opposed to every prin- ciple of justice, than laws requiring the performance of impossibilities ? Laws which, if the people should attempt to execute them, instead of promoting peace and happiness, would cause the greatest calamities that could possibly befall a nation. It is essential to good goverit THE BANK OF ENGLAND. 216 ment ttat the interest and welfare of the people should requii-e thci execution of its laws, and whenever their vio- lation becomes necessary to the public good, it is self- evident that there is something radically wrong in the government itself. A government should never allow anything to pass as a substitute for money ; the tender itself should be equal in amount to the wants of business. The law making gold and silver the only tender ia pay- ment of debts is well adapted to build up and sustain monarchical governments, because it must infallibly accu- mulate projjerty in the hands of a few, constituting aris- tocracies, which are essential to this form of government ; but the same reason that qualifies it so admirably for this purpose, renders it incompatible with a government hav- ing for its sole object the welfare and happiness of the people. SEOTION m. BASIS 07 THE BXSE. 07 EKGIiAND. The Bank of England is established upon a basis simil. ics and tbe merchants who have sold their wares oi goods to the country, are compelled to pay not only one, two three or four per cent, a month upon the money they have to borrow, but the scarcity prevents the collection of the debts due by their country customers ; and if they have had any of their notes discounted before the pres- sure, they come back upon them to pay in addition to theu- other payments. The payment of these exorbi- tant rates of interest for the use of money, is sufficient to account for all our commercial revulsions. When a scarcity of money commences in Wall street, the offerings of paper to be discounted at the banks are greatly increased, sometimes fifty, sometimes a hundred per cent. The reason is this : when banks stop discount- ing long paper, and confine their loans to paper having thirty, sixty, or ninety days to run, in order to maintain their circulations, the discounts must be increased just in proportion to the shortening of the paper. If the banks discount paper having only sixty days to run, then in the sixty days they will collect in the whole amount under discount. If their loans have on an average only ten days, then in ten days they will collect -aU their loans, and will not have a doUar under discount unless they lend out as well as collect in daily. If they should discount no paper having more than one day to run, they would collect in all their loans every day, and must reloan the same amount daily to maintain their circulations. There- fore, it is evident that if the banks maintain their lines oi discount they must be increased exactly in proportion to the shortness of the paper that is discounted. Suppose a merchant has $1,000 to pay, and holds a business note for $1,000, payable in six months. To obtain a discount he is compelled to procure another note, having not more than sixty days to run. At the end of sixty days he must procure a second discount for a thousand dollars to pay the first, a-id in sixty days more athird to pay th*" 226 MANAGEMENT OF THE EAITKS. second. In six months lie is obliged to procure thres loans of a thousand dollars each, and pay three thousand dollars, whereas, if the bank had discounted the six months' note he would have procured but one discoimt for a thousand dollars. Consequently, during the six months he would have offered but one-third as muah paper at bank, and but one-third as much money would have been required to make his payments. The interest on money will sometimes rise in a few months from six or seven per cent, per annum, to two or three per cent, a month. In 1837, a broker in Wall Btreet sold the post-notes of the Delaware and Hudson Canal Bank, having four months to run, at a discount of five per cent, a month ; and sold more notes the next day, for the same person, at six and a quarter per cent. a month. Six and a quarter per cent, a month, for four months, would take one-fom"th from the principal of the note. This is equivalent to compelling a tenant to pay in advance one-fourth of the value of a house, or farm, for the use or rent of three-fourths during a period of four months, at the end of which he is responsible for the return of the whole ; for the return of the fourth of which he had not the use, as well as of the three-fourths which were in his possession. The borrower of the money received but three-fourths of the par value of the notes. If at the end of the four months, when the post- notes became due, the bank had not paid them, the borrower would have been bound to pay their par value. As well might the tenant pay as exorbitant a rent for a house or a farm, as the borrower of money so high a rate of interest. These high rates of interest are not paid by all. Doubtless, favorites at bank could and did borrow money the same day in "Wall street at seven per cent. per annum. The Delaware and Hudson Bank was solvent and good at the period named, and has so con- tinued. At theii laaturity, if not before, the post-notes MAirAQEMENl' OP THB BANKS. 227 were jj.'iid. The money lent at six and a quarter per cent, a month was no better than that lent at seven pei cent, per annum. Take from a $1,000 post-note $250, and there remains $750, of which the borrower had the use for four mouths, by paying the lender $250. The favored one who borrowed at bank $750 at seven per cent, interest per annum, paid for its use for four months $18 40. The first borrower paid thirteen times more than the second for the use of the same article, in the same street, and on the same day. Neither bought any- thing but the use of the principal, for at the end of the period the principal was returned to its owner. A man who was obliged to borrow money was charged thirteen times more than one who had no use for it except to gain the difference in interest. This procedure was as unjust as it would have been to charge men suffering for food $6 50 a bushel for potatoes, and to charge those who possessed an abundance only fifty cents. Such exactions do not occur in sales of products, but it is no uncommon thing in Wall street for money to be lent to the needy at a quaiter per cent, a day, or ninety per cent. a year, which is fourteen times more than the banks are allowed to charge for discounting short paper. If a government agent should be directed to sell a quantity of flour to a needy people at six dollars per barrel, but for certain considerations, should sell it all to a capitalist, knowing that he would compel the people to pay $90 a barrel or starve, it would be similar to the abuse of the power conferred on the banks, and wielded by them in favor of capital. Some of the large capitalists in the city of New York, during the years included between 1836 and 1840, bought up bonds and mortgages perfectly well secured, and bearing six and seven per cent, interest, at from ten to thirty-three and a third per cent, discount from their par value. They also bought millions of dollars' worth 228 MANAGEMUNT OP TITE BANKS. of well mJorserl notes at from one and a half to five per cent, a montli from the face of the notes. Some will say that tlie paper sold at these rates was of doubtful character, but such was not generally the fact. Indi viduals of known wealth, extensively engaged in business, and in want of money, sold large amounts of their paper indorsed by men in equally good standing, at three pei cent, a month discount. These notes were, to say the least, quite as safe as the bank-notes for which they were exchanged. The following illustration will show the bearings of these speculations in money upon the welfare of the pro- ducing classes. H. is a wealthy broker, and a bank director. His income, as also the income of the bank, depends ujjon the interest on money. He is worth $100,000, $20,000 of which are in bank stock. He uses $80,000 as a broker in buying mercantile paper. Sup- pose him to be able to effect a change in the rate of interest, fl'om six per cent, per annum, to two per cent, a month, and the interest on his $80,000 wiQ be increased from $4,800, to $19,200, making a clear gain of $14,400. At the bank in which he is a director, and at other banks he obt.ains discount for $80,000, at six per cent, interest per annum, on short paper, and pledge of his bank stock. Loaning this at two per cent, a month, he makes a clear gain of $14,400 more, making with the former, in one year, a clear gain of $28,800 over the six per cent, inter- est. By the rise of interest from six per cent, per annum to two per cent, a month, H. increases his income from $6,000 to $34,800. This increase is paid to him by merchants for money to meet their engagements, and, consequently, their debts are increased this sum. If interest had remained at six per cent., the broker would not have boiTowed of the banks, for there would havo been no inducement to borrow money which he could not reloan at a higher rate of interest. The mc.noy MANAGENENT OF THE BAIJK8. '^29 Would, tiierefore, have been loaned by the banks directlyto the merchants at six per cent, per annum, and the merchants would have saved $28,800, which they paid to the broker. When the banks curtail their discounts, numerous con- tracts depending on their loans must lie over unpaid. Those who are desirous of meeting theu- engagements wUl suffer themselves to be defrauded m the rate of in- terest, rather than have their paper protested ; for in a large city, if their paper lies over, their credit is gone, and their business ruined. They are compelled to pay these exorbitant rates of interest, however sensible they may be of the injustice. Good and evil are not set before them to choose between ; but two evils are placed before them, and they must choose one or the other. If they wish to do right, they will choose the one which they thiuk will do the least injury to themselves and their neighbors ; but to one or the other of the evUs, to usurious interest or to bankruptcy, they are compelled to submit. Such are, however, by no means all the evil conse. quences of speculations in money. Money is the standard of value, by which the products of the soil, all merchan- dise, and the labor of the people are estimated. The in- comes from labor and products diminish in proportion to the increase of the income from money. The change of the rate of interest compels the producers to labor four times more to clear $100, than before the rise of interest. Each sum of $100 contained in the $28,800 gained by the broker, will purchase as many products of labor, as the $100 gained by the four-fold toil of the producers ; and yet the broker has done nothing to aid production or dis- tribution, but has retarded both. City merchants sell goods to country merchants, and country merchants sell ihem to farmers and mechanics, from whom they must collect the money. But the diminished price of products puts it out of the power of the mechanics and farmers to pay, and thus the merchants are bankrupted. Meanwhile 230 MANAGEMINT OF THE BANKS. brokers aud capitalists, wlio are neither engagiid in pra ductive labor, uor iu the distribution of products, grow rich on the spoils. Tbey are reverenced for thek wealth, while mechanics, farmers and merchants, who have be- come correspondingly poor, are despised for their poverty, and blamed for being unable to fulfil their engagements. The nature of money is not understood by the public, nor by the farmers, mechanics, and the great masses of the laboring classes ; for if they did uu derstand it, they certainly never would submit to its overwhelming and oppressive power. The newspapers in the City of If ew York devote several columns daily to giving the state of the money market, the prices of various stocks, and their fluctuations from day to day, according to the state of the money market. Now if money were properly insti- tuted and regulated, there would never be such a thing as a money market. There wovdd be a market for the productions of labor ; and these would doubtless vary more or less in their market value or price, but there would be no variation in the market value of money. It is as unreasonable for people to gain great wealth by fluctuations in the market value of money as it would be for them to gain great wealth by fluctua- tions in the length of the yard. Money is as much a standard of value as the yard is of length ; and devia- tions in the market value of money are as much a fraud upon the public as deviations in the length, weight and size of other measures. No matter how long this gross wrong has been practised upon all nations, it is no less an evil ; and it has showm itself to be such by the centrahzation of wealth in every nation, and the poverty of the people whose labor has produced the wealth. It is now quite generally admitted that money is onjy a representative of value ; and we presume many of the wnters of the money articles in our daUy papers would acknowledge that its value Jis only representative. Tet MAUAQEMENT OF THE BAHKS. 281 in the next breath they will tell you, that the country is rich in all the productions of labor, but what the people need is capital to get their products to market : that the manufactui'eis have plenty of goods, but there is a great want of capital to buy them, and therefore there is no market for the goods— just as if the money was the actual capital, and the labor and the productions of labor, merely represented the value of the money. The reason why money thus appears to be the real capital is, that all agreements for the sale or the exchange of property are fomided upon it, and it must be had to meet the payment of these debts, for nothing else is legally competent to j)ay them. When money has been made by law a standard of value and a tender in payment of debts, it has the entire control over the value of the labor and property of the nation. The money has legal value, but pro- perty and labor have no legal value, and are solely de- pendent upon the value and power of the money. Hence we often see a nation in great prosperity, the labor busily employed, and all branches of business remunerative. But suddenly there comes up a crisis in the money market, and the business of the nation is prostrated. The power of money has brought a blight upon trade and industry. Money has suddenly become worth every- thing, and the laborers have suddenly become beggars in the streets of our cities, and the products of labor almost worthless in the market. The following illustration shows the eifect of differing rates of interest in different sections of the country. A merchant in New York for goods sold, holds a $1,000 note against a merchant in Alabama, which note he indorses and has discounted at bank. The southern merchant is not able to take it up when due, and it is 'eturned to the New York merchant, who, to preserve his credit as indorser, must raise the money and pay it Money is so scarce that he is obliged to sell a note hav 21 232 MANAGEllENT OF THE BANKS. ing six months to run, at a discount of tiiree per cent, a month. Tlie Alabama customer had abundant means to pay his debts, but tlie scarcity of money made it impos- sible for him to pay the note when it was due. Some time elapses, and the New Yoi'k merchant sends out the note for $1,000 to Alabama for collection. Meanwhile, xmtil the note is collected, he must borrow the money at three per cent, a month. He raises the money, and pays the returned notes by selling other notes having six months to run at a discount of three per cent, a month. Discounts thus : Note at six months $1,219 61 Three per cent, a month ofif for six months is eighteen per cent 219 61 $1,000 00 The note for $1,219 51 falls due, and he sells another note having six months to run at three per cent., and with the proceeds takes up the first note. Note ; $\,i61 20 Three per cent, a month for six months^eighteen per cent 267 69 $1,219 61 This note falls due, and he sells another six months' note at three per cent., and with the proceeds takes vy the second note for $1,487 20. Note $1,81£ 65 Three per cent, a month for six months=eighteen per cent S26 36 $1,487 20 This note fells due, and he sells another six months' note at three per cent., and with the proceeds takes u]i the third note for $1,313 55. MAKAGBMENT OF THE BANKS. 233 Note $2,21164 Three per cent, a month for six month8=eighteen per cent 398 09 $1,818 56 This note falls due, and lie sells another six months' note at three per cent., and with the proceeds takes up the fouith note for $2,211 64. Note $2,697 1 1 Three per cent. » month for six montha=eighteen per cent 486 47 $2,211 64 Two and a half years have elapsed since the note in Alabama fell due. Being disappointed in its collection, the New York merchant, to save his credit, has raised and paid the money for two and a half years. From this has grown the note now due for $2,697 11. The Ala- bama merchant pays every dollar of this note with inter- est and costs in New York current funds. Thus : Note $1,000 00 Two and a half years' interest at seven per cent 17S 00 $1,176 00 From the increased note of the New York merchant $2,697 11 Deduct the note and interest received from the Alabama merchant 1,176 00 Balance due by New Torli merchant $1,622 II The difference of interest on $1,000 for two and a half years, causes a loss to the New York merchant of $1,522 11. The interest amounts to more than one and a half times the principal. The dollar is said to be the product of labor; but is this difference of interest the product of labor, or is it a change in the measure of value ? Certainly, if the Alabama measure and the New iTork measure were the same, the debts would balance 834( MANAGEMENT OF THE BANKS. each other. They balanced each other two and a half years before, but in this period the thousand dollars in New York have increased |1,697 11, while $1,000 in Ala^ bama, during the same time, have increased but $175. One has accumulated nine and a half times more than the other. The Alabama merchant pays all he owes the New York merchant, and the latter appropriates it to the pay- ment of the $1,000 which he raised to take up the note of the southern merchant ; but he still owes on this transaction $1,522. The third person who gets the 11,522, gains it without producing or distributing any products. The following table exhibits the discounts on six months' notes for a term of sixty years. A thousand dol- lars in money are taken, and with this sum a note payable at osy. months is discounted. When the first note is paid, a second note having six months to run is discounted with its proceeds, and a third note with the proceeds of the second. This calculation is continued on six months' notes for sixty years. The table shows the accumulation on $1,000 for sixty years, at the various rates of 1, 2, 3, 4, 5, 6, 1, 8, 12, 18, 24, and 30 per cent, per annum, tak- ing off the discount, as is always done by banks and bro- kers. The highest rate calculated is thirty per cent, per annum, or two and a half per cent, a month, a rate not nearly so high as is often paid in Wall street. MANAGEMENT OF THE BANKS. 235 TABLE OF DISCOUNTS. bbowino the accdmulation on $1,000 for a. pkbiod of bixtt teas8 by lisc07milna notes hatinq siz months to kun, at 1, 2, 3, 4, 5, 6, 7, 8, 12, 18, 24, and 30 per cent, per annum. I 1 10 years . . 80 " .. I «0 " . . 40 " .. 60 " .. 1 PBR OBHT. $1,106 46 1,222 02 1,850 8T 1,493 83 1,680 78 1,824 87 2 PER CENT. lOyeara $1,222 64 1,494 83 1,827 68 2,231 52 2,732 00 8,340 23 3 PKB CENT. 10 years $1,852 93 "" ■ 1,880 46 2,476 43 3,350 44 4,632 91 6,182 78 411 60 60 6 PER CENT. $1,659 24 2,753 06 4,567 97 7,679 88 12,575 87 20,866 86 6 PER CENT. 10 years $1,888 93 10 years 20 ■■ 80 40 60 60 8,881 66 6,218 65 11,435 67 60 " 21,029 89 60 10 years 20 SO 40 50 60 88,671 58 7 PKR CENT. $2,089 17 4,158 22 8,479 82 17,290 79 86,268 90 71,898 92 10 years $1,497 89 20 " 2,243 66 .... 8,860 75 . 5,084 01 .... 7,540 36 I ... 11,294 60 8 PER CENT. 10 years $2,262 43 6,118 59 11,580 46 26,199 97 69,276 70 184,107 05 10 years 20 •• 10 years 20 " 80 " 40 " 60 " 60 " 12 PER CENT. $3,447 IS 11,881 90 40,957 07 ' 141,177 95 486,644 91 ' 1,677,481 46 18 PER CENT. $6,594 85 43,485 48 286,758 62 1,890,988 71 12,469,881 63 82,230,496 79 10 years 20 80 40 60 60 24 PER CENT. $12,892 78 166,223 76 2,143,086 89 27,630,338 24 356,281,914 18 4,592,819,317 86 80 PER OKlfl'. 10 years $26,800 11 665,646 68 17,178,781 66 448,084,166 99 11,431,620,222 06 294,986,059,207 87 la the foregoing table it appears that interest at one per cent, would transfer $824 worth of the products of labor to the capitalists to pay for the use of $1,000 foi sixty years; at six per cent., $37,671 58; at seven per cent., $70,898 92 ; and at thirty per cent., $294,- 936,058,207 37. In any community the rise of the rate of interest on all the money used, whether for a longer or a snorier period, transfers from producers to capitalists a sum proportioned to the increase of the rate per cent., as demonstrated in this table. 236 MANAGEMENT OP THE BANES. VThen money becomes scarce, and interest rises to ex- orbitant rates, the rates of exchange between one city and another, and between one State and another, always increase. These exchanges are merely a cover under which the banks obtain a higher rate of interest than thi one allowed by law, and a means to enable them greatly to increase their dividends. In 1836, the banks in New York began to do a business of considerable amount, by collecting notes on the South and "West, and charging various rates of exchange, from one to three or four per cent. The discount at seven per cent, on a note having three months to run, would be one and three-quarters per cent. ; and by charging three per cent, exchange on Georgia or other southern States, it would amount in the three" months, to four and three-quarters per cent. If their money was returned free of expense, these ex- changes were much more profitable to the banks than lending money at seven per cent, interest per annum. To secure the return of the money without loss or trouble, when another person applied for a discount of a note payable in New York, it was very easy to tell him that the bank could not discount, that its funds were locked up in Georgia or elsewhere, and that if he were willing to take a draft on a Georgia bank, it would discount his note. Being compelled to have the money or break, the appli- cant would take the draft on Georgia, and through a broker sell it in market. If the bank did not then buy the draft back at a discount of three or four per cent., at all events by the two transactions it would have made its funds payable in New York. It would have saved the exchange of three per cent, on the first note discounted and this would have amounted to about double the legal rate of interest. The banks sometimes made seven or eight times more in this way than by interest. Thin mode of exchanging s]iread through the Union ; and in the spring of 1837, when the New York banks and the MANAGEMENT OF THE BANKS. 237 banks generally suspomled specie payments, the rates of exchange still increased.* To show that the banks profited largely by the em- barrassments and fluctuations in 1836 and 1837, we have only to notice the per centage profit gained by them in the State of New York at different periods. The published statements in the New York Assembly docu- ments show that the average dividends of the Bank of America, for ten years, from 1818 to 1828, were 5.30 per cent annually. But in the years 1836 and 1837, money was very scarce, and the difficulties of the coni- mmiity proportionably great. During these years the profits of the bank averaged more than 16.14 per cent, amiually. More in one year of embarrassment than in three years of general prosperity. The same pub- lished statements of the following six banks, viz., Bank of America, City Bank, Mechanics' Bank, Merchants' Bank, Bank of New York, and Union Bank, show a re- sult as follows. During the same ten years, from 1818 to 1828, their average dividends were 5.70 per cent, per annum. But in the two yeai'S 1836 and 1837, their profits were 13.35 per cent, annually. The same statements rendered by fifty-nine country banks in this State, show that in the same two years, their average profits were 11.36 per cent, per annum. To effect a rise of interest, it is not necessary for the banks to allow their money to lie dormant any length of time. Let the New Y(irk banks for one week refuse to * I know of other instances whore paper has been discounted foi ninety days and drafts given on Philadelphia at par, when the ex change on tliat city was over thirteen per cent, discount. Tlie parties borrowing h;id to sell the Philadelphia funds and lose this exchange, be- sides the ii\( crest ; and banks have discounted paper, paying in Phila- deiphift funds when at as largo discount as the above mciilionod; if they have not done this in Now York, it has been done in i ni'igl.hor ing State. — Cun-ency, the Edl and the Remedy. 238 MANiGKMENT OF THE BANKS. discoiuit a single note, and the want of money would probably be as great, and as severely felt, as during the most difficult periods in 1837. By this refusal the banks would only lose the interest on the amount collected for half the week. But by the end of the week those who needed money would be obliged to sell paper having three, six, nine, and twelve months to run, at a discount of two or three per cent, a month, and would be sub- jected to a great loss. The banks in the city of New York keep an average of about $50,000,000 loaned. If the notes thus discounted have an average of fifty-sis days to run, the citizens pay into the banks six and a quarter millions of dollars every week. If for one week the banks should refuse to discount, and draw in the six and a quarter millions, they would lose the interest on this sum for an average of three and a half d ays. This interest at six per cent, would amount to $3,557 69. If this cur- tailment of the circulation for one week should compel merchants and mechanics to seU their business paper, having but sixty days to run, at two per cent, a month discount, they would lose four per cent, on the ^6,250,000, i. e., $250,000. The merchants and the mechanics would sustain a total loss of $187,500 over and above interest for sixty days, at the rate of six per cent, per annum on $6,250,000. Let us extend this calculation, and suppose the banks to stop their discounts for two weeks, and collect in their dues. In the course of two weeks, they would collect in $12,500,000. They would lose the interest upon this sum for an average of one week, in which time the interest would amount to $14,230 77. These curtailments would produce an extreme scarcity of money. Suppose the merchants and the mechanics to be compelled to sell their business paper having six months to run at a discount of two per cent, a month fo. that period. They would lose twelve per cent, on $12,500,000, i. e., $1,500,000. Their actual loss 'verani? MANAGEMENT OF THE BANKS. 239 above the interest, at the rate of six per cent, peranaum, for six months, would be $1,125,000, while the banks would lose only $14,230 77. If, instead of curtailing their discounts, the banks should refuse to loan to merchants and mechanics, and lend their money to brokers and capitalists, who should reloan it at the above rates to the people, the same results would be produced without any loss of interest by the banks, or any curtailment of their discounts. The $1,125,000 would be lost to business men and gained by brokers and capitaKsts, The banks can curtail their discounts as much and aa rapidly as they please without violating the laws. In 1837 and 1838, there were not only twelve and a half mil- lions of dollars loaned at two per cent, a month, but probably some hundreds of millions were loaned at much higher rates. One or two per cent, a day was often ex- torted from the needy. Many merchants and mechanics in New York might be mentioned, who paid from $10,000 to $50,000 in extra interest, that is, interest over seven per cent, before they were compelled to suspend payment. Besides, when collections were made for them in the various States by banks and otherwise, they were subjected to great losses in exchanges on their drafts. Millions of dollars' worth of the best paper was sold at a discount of three per cent, a month. Take the discount off in advance, at this rate, from six months' paper, and $1,000 will buy a note for $1,219 50. At the maturity of this note, its proceeds, i. e., $1,219 50 will buy a secondnote having sixmonti>storun for$l,487 18. Thug it is seen that the indebtedness of those paying this rate of interest was increased, in one year, almost fifty per cent. on all the money they borrowed to meet their engagements. Curtailments of bank discounts, made under pre- tence of getting the people out of debt, serve only to increase their indebtedness. They inevitably retard the sale of products, and destroy the regularity of 940 MANAGEMENT OF THE BAKKB. business. If the inhabitants of the State of N tw York ordinarily pay interest on four hundred millions of dol- lars, and one-half this sum, i. e., two hundred millions, were loaned at two per cent, a month, their indebtedness would be increased on this one item thirty-six millions of dollars above the interest at six per cent, per annum ■ and this, too, without taking the interest in advance, which is usually done in cases of this nature. In all these transactions, by which thirty-six mUlions of dollars would be taken from producers and distributers, and transferred to capitalists, there would be no exchange of products, and the people would receive no consideration for their money. Besides the suffering caused by the in- crease of indebtedness upon loans of money, the prices of products would be greatly diminished. Those sold would not, perhaps, cancel more than one-half the debts that they would if the rate of interest had not increased. Therefore, the money engrossed by the capitalist would be worth to him double the same sum at the usual in- terest, for he could purchase with it nearly double the quantity of products that he could under ordinary rates. A man who owns a farm cannot rent it for thirty oi sixty days, and force its return, and keep constantly re- letting it, so as to inconvenience his tenants ; because, in these short periods the farm would not produce a crop] but money will gather an income when it is loaned for thirty or sixty days, or for one, two or three days. Many men now devote their time to the loaning of money for one-eighth, one-quarter, one-half, and one per cent, a day, fixing a higher or a lower rate, according to the necessity of the borrower. In this way they extort the largest possible interest. This they say they do " to keep peo- ple from breaking." * Douljtless many of those engaged • We feel confident in saying tliat no intelligent business man in the city of New York will doubt, that there hare been many millions of dollars loaned the past week (Sept. 9th, 1864) by the banks in thij MANAGEMENT OF THE BANKS. 241 in biokerage are ignorant of the effects of their stock jobbing and loaning operations upon the welfare of their ellow-men, and not any of them fully appreciate the evils they occasion, or, it is to be hoped, they would cease to pursue an employment so blighting to their own moral characters, and so pernicious to the welfere of others.* In 1837, rents on stores fell to one-half or one-quartei of their former prices, and many stood untenanted. At the same time, bank-notes which a year or two before could be rented at but six or seven per cent, per annum, were rented at from three to ten times more than before, although at the former time the bank-notes were profess- edly based on specie, and at the latter, no pretension of this sort was made. Was the rise of interest on the Dank-notes, or money, caused by an increase of labor to city, at the rates of six and seven per cent, per annum. Nor will any intelligent business man doubt, that several millions of this same money have been reloaned during the week by brokers and othei financiers at one, two and three per cent, a month, and from this rate to a quarter per cent, a day. A quarter per cent, a day is seven and * half per cent, a month, while six per cent, per annum, is but a half per cent, a month. It makes » very wide difference in the rent of property, if one pay seven and a half times more than another. Whether money be loaned at a high rate per cent, interest for one day, oue month or for ten years, the loans are all governed by the same principle; it is a certain rate per cent, to be paid just in proportion to the time for which the money is borrowed. There- fore if it be just at any time to loan for a quarter per cent, a day, it would be equally just to loan at the same rate per cent., for a month or for ten years. It is such a notorious fact that money is loaned at usurious rates of interest, that these impositions are daily published in the newspapers as a constant practice, and the man who can obtain the highcF'; rate is looked up to iis a first rate man of business financiers talk of the borrowing and lending of money at usurious rates of interest, as if they were buying and selling commodities at a profit or loss. Yet the borrowing and lending money is not buying and selling money, any more than renting and hiring a house if buying and selling the house. • See Appendix, C. 242 MANAGEMENT OF THE BANKS. engrave and secure the notes, or was the fall of rent on stores caused by a diminution of the niunber of bricks, or the amount of labor necessary to buUd them ? No ' it was an arbitrary rise of interest to increase the gains of banks, brokers, and capitalists. Our producers were not idle : we had a superabundance of j)roducts for our market : yet, strange as it may seem, thousands in our midst were suffering for the very things of which the abundance was the subject of lamentation. One had raised a surplus of some products, and was in need of surplus products owned by others. But it was nearly impossible to effect any exchange of these products, on account of the scarcity of money. At this juncture, the situation of the producers in Europe was similar to that of the producers in the United States. The Bank of England was openly authorized to increase the rate of interest on its loans in order to check over-production and over-trading, * * Financial power is instituted by governments; and when a money crisis occurs and prostrates business, governments, to be consistent, must sustain the power thoy have established, and, con- sequently the financiers who wield it. But the revulsion must be attributed to some cause in order to satisfy the public mind, and financiers are always ready with hosts of reasons for it. They will teU you that the people one year produced too many agricultural products, and next year too few ; that another year they manufactured too many goods, and another year too few : that another year they built too many railroads; another year they imported too many goods ; etc., etc., etc. There is no end to the subterfuges resorted to in the endeavor to show that these crises in the money market are caused by the laboring classes, either by not producing enough, or else by over-production, over-trading, etc. Yet all these have never really satisfied the public on this subject ; for their common sense tells them, that labor is the producer of wealth, and that there can be DO great surplus of products unless this surplus remains after sup- plying every man, woman and child with all the necessaries of life. It is no proof of a surplus, that the merchants have their stores filled with unsold goods when thousands of the laboring community around tbei. >re suffer ng for the want of these very goods, but casuot sell MANAGEMENT OF THE BANKS. 243 How different would have been the condition of the producing classes if the banks had pursued an opposito course. If, instead of raising the interest on their loans, and increasing their dividends to double their amount in previous years, they had lowered the rate of interest so as to diminish their dividends to one-half their previous amount, the prosjierity of the producing classes would have as greatly exceeded their prosperity in former years, as it was by the rise of interest diminished below their former prosperity. The amount of bank loans would have been less. Probably money would have circulated with more than double its former rapidity. One million of dollars circulating rapidly will accomplish as much in a given time as two millions wiU if the latter circulate but half as fast. If in January, 1836, the banks throughout the Union had reduced their rate of interest to four per cent., and had lent their money to business men for good indorsed notes, if they had made no loans on pledge of stocks as security, or to any one who they knew desired to lend the money again at an advanced rate of interest, business would have been attended with increased pros- perity ; country products would have maintained good prices; the State bonds of every State in the Union, bearing an interest of five per cent, per annum, would have been above par ; every State would have paid the interest on its bonds promptly, and in January, 1837, the people would not have owed as much by a very large amount as they were compelled to owe under the actual circumstances. The producing classes would have been comparatively well off, and large capitalists would not their labor to pay for them. So long as labor commands a fair price in money, there is a ready market for the products of labor ; and it is only high rates of interest and a scarcity of money that make labor and the products of labor unsalable. KeTulsions in trade are caused by the money power, by financiers, and not by the producing classes. 22 244 MANAGEMENT OF THB BANKS. Lave become so immensely rich. State stocks would not have been crowded upon the market, nor would capital- ists have become competitors with the buaiaess community for loans at banks. The producing classes cannot afford to pay even four per cent, per annum, but there would be less distress among them at this rate, than at six per cent., or a higher rate. Their subsistence will always become scanty in proportion to the increase of the rates of interest.* Kthe English government should raise the interest on its debt to four per cent, the taxes of the producers would be increased in the same proportion. But if it should lower the interest on its debt to one per cent., and com- pel the Bank of England and all bankers to take only one per cent, on the indorsed notes of individuals, and to make no loans on pledges of stocks as security, the pro- ducing classes of England would be elevated, and their share of their own surplus products would be increased in proportion to the diminution of the rate of interest. The curtailments of bank discounts seem to be made that producers may know and consider the great value of money, and the comparative worthlessness of the pro- ductions of labor. It would seem that the principal wealth of a nation may be dug out of some obscure place in the earth, collected into a very small compass, and placed in the vaults of banks. It there remains as inactive as it was in the mines before it was excavated. This gold and silver money gives power to the banks, the Board of Brokers and a few large capitalists, to compel the people to cultivate the earth, and to gather and market its pro- ductions mainly for their use, reserving for themselves of the poorer kinds a bare subsistence. Do the farmers, mechanics, and the laboring classes in general, believe that the majority of the surplus wealth • See Appendix, D MANAGEMENT OP THE BANKS. 245 which their labor yearly produces, ought in justice to be owned at the end of the year by a few finanoierB ? Does their common sense teach them that a few, for the use of the money necessary to exchange the commodities produced, ought to gain double, treble or quadruple as much of the surplus production as those who furnish the skill and perform the labor to make the produc- tion ? Does it accord with their sense of justice, that the bankers, brokers, and financial stockjobbers in the city of New York, should realize each year more clear gain in wealth than all the agriculturists and mechanics in the State can gain by their year's toil ? Do our pro- ducers and the public generally really believe that the principal wealth of the nation is stowed away in the vaults of the banks in our large cities, and that the prosperity of this great nation ought to depend on the quantity of specie in the vaults of these banks ? If the people from the highest to the lowest do really believe this, who can wonder that the Babylonians believed that the golden image set up by Nebuchadnezzar was the true God, and that Daniel deserved to be cast into the lions' den for his unbelief; for there was in that golden image as much of the life-giving spirit of God, and ability to provide for the tcm]ioral and spiritual necessities of its worshippers, as there is now in our gold and silver money images to provide for our temporal and spiritual support. The law of Babylon which attributed to this image the power of God, and commanded the people to bow down in adora- tion before it, was hardly a greater imposition upon their credulity and rights than is now practised upon nation* by legally authorizing certain gold and silver images to be set up, and attributing to them an innate value equiva- lent to that of all other things.* Every man's common sense must teU him, that the • See Appendix, E. 246 MANAGEMENT OF THE BANKS. present distribution of wealth is radically unjust. But as similar wrongs have existed in every civilized nation, from the earliest ages, it seems to he taken for granted that they are necessary evils — in other words, that there can be no remedy for them. Yet their continued exist- ence only proves that an evil cause continuing to act will continually produce its evU effects, and that this cause must be removed before the evils will cease. Although the effects produced are exceedingly complicated, these enormous evils of unjust distribution originate in every civilized nation from one and the same fundamental cause, namely, the unjust and uncontrolled power of money. If it be possible to institute money with only a just power, and that power such as can be controlled and regulated by national laws, the fundamental cause of these evils can be easily removed. But if it be impossi- ble thus to institute and govern money, the fundamental cause cannot be removed, and the consequent evils are entailed upon us. Nations have assumed that the value of gold and silver money is innate, and have established their mone- tary laws upon this false assumption. Thus, according to law, all innate value is in gold and silver money, and there is no innate value in anything else ; for the laws have made this money a legal balance in payment for everything that is bought and sold, while no other thing is any tender or legal balance in payment for money. Neither is any other thing a tender in payment for any- thing that is bought or sold ; hence if a value be at- tached to anything besides money, it is this innate value of money which must determine what that market value shall be ; for other things have no legal value except by the permission and determination of this innate value of money. This innate value, assumed by law for gold and silver money, is not like that of any created tliiu'^- in the mineral, vegetable, or animal kingdom, for it over- MANAGEMENT OF THE BANKS. 247 rales and controls the value of all these things. Accord- ing to our laws, it is an independent, uncreated power, having an inherent right to govern and settle the value of all things.* This money power is not only the most governing and influential, but it is also the most unjust and deceitful of all earthly powers. It entails upon millions excessive toil, poverty and want, while it keeps them ignorant of the cause of their sufierings ; for, with their taoit consent, it silently transfers a large share of their earnings into the hands of others, who have never lifted a finger to perform any productive labor. The same power has grossly deceived our public teachers ; for not being able Nationally to account for the great inequalities of wealth and condition existing iii society, and being expected to furnish a satisfactory explanation in some way, they tell the people that these great wrongs are providential, that they are the mysterious workings of the providence of God : that all these evils are governed and controlled by ffis power and goodness. This method of accounting for the gross political wrongs in society has covered up and hidden from view a multitude of heinous sins. Not- withstanding the number of those who now live in luxu- rious idleness, performing little, if any useful labor, and the great number of those who remain idle because the scarcity of money renders it impossible for them to obtain work, yet with all these impedin^ ents, there is generally enough produced each year in each nation to give to every man, woman and child a comfortable liv- ing.t Every person of common sense must see, that • See AppeDdix, F. 4 A nation in which each indiyidual should devote four or five hours daily to labor in useful production, would probably be better supplied with the comforts and luxuries of life than any people now on the globe. Not only is a moderate amount of manual labor necessary to the full development and health of the body, but 248 MANAGEMENT OF THE BAITKS. God in his providence has bountifully provided for man and that there is some other power working against him, and diametrically opposed to the righteous distribution of his bounties. It is the providence of the national laws, establishing this unjust power of money, which obs the producing classes of their rights. As the boun- ties of God are abundant, so must the money for their distribution be abundant, or they can never be justly distributed. If the scarcity of money or its centralizing power retard the production and the distribution of the products of labor, the power of the money is unjust and oppressive, and instead of being in unison with the providence of God, it is the most powerful opponent of his righteous laws, as well as the most powerful and bitter opponent of justice and beneficence among men. It would be as reasonable to expect sweet waters to flow from a bitter fountain, as to expect just distributions of property if the standard by which it is valued is unjust, "We are not depicting an unknown evil. Legislators, financiers and the producing classes all know that money is possessed of some mysterious evU power, which has never been clearly explained and defined. We have in- tended to remove this mystery concerning the nature and operations of money, and to show what laws must be an- nulled, and we shall proceed to show what other laws must be enacted, in order to establish money that wiU be endowed with an equitable power. The evil power of money has been politically established, and it must be poUtically annulled. It is a public wrong, and the public must administer the remedy. it contributes in no slight degree, to tli e moat ennobling exercise of the moral and mental capabilities. THE rSUBl ULWS. 84fl SECTION VI. REMAKES ON THE RBPEAI, OF THE USrRY LAVTB. In the course of the few past years, numerous petitions have been presented to the legislature of the State of New York, praying for the repeal of the Usury Laws. It is proposed that in loaning money the rate of interest should be agreed upon between borrowers and lenders, as the prices of merchandise are agreed upon between buyers and sellers. The position assumed by those in favor of abolishing the Usury Laws is, that the competi- tion between the lenders of money would be so great as to reduce the rate of interest below seven per cent. But Buch would not be the result. There is now no law against competition at, or below, seven per cent. ; there- fore the competition at seven per cent, and under this rate, could not be increased by annulling the restriction. Another argument for the abolition of a legal rate of interest is, that the laws against usury are continually violated. In large cities, money is often loaned at from one to three per cent, a month, at a quarter and a half per cent, a day, and sometimes even at one or two per cent, a da.j, and the legal rate of seven per cent, per annum does not govern the money-market ; it is, there- fore argued that the law must be wrong ; and that if the price to be paid for the use of money were left ojien to competition, the demand and supply would equitably regulate the rate of interest. The idea noramonly held out is, that the rates of in- terest would be lower if the Usury Laws were abolished j and anticipating this result, many are induced to sign the petitions. There is reason to believe that the principal originators of these petitions are those who are now in 850 THE 0SUET LAWS. fringing the laws by exacting extra rates of interest, and who would like to have their extortions legalized. They do not advocate the chartering of banks without restric- tions upon their rates of interest. Banks should lend money at the legal rates. Then a few capitalists would borrow large sums from them, and discounts would be refused to business men, who would be compelled to borrow money from these capitalists at the rates of inter, est for which they would agree to lend it. The necessity of the borrower, and the avarice of the lender, would fix the rate of interest. If a capitalist could borrow from a bank $10,000 for ninety days, at six per cent, per annum, and reloan it at three per cent, a month to a man who must have the money or break, he would make by the operation a clear gain of $750. Annul the laws against usury, and this kind of business would be far more extensive than it now is ; but under the existing laws, more of it is done than is for the benefit of the public. Other arguments advanced in favor of abolishing the Usury Laws, are such as these. It is said when goods are sold on a credit, a greater difference is made in their price than the interest at seven per cent, per annum for the time of the credit, and it is therefore right that lenders should receive higher rates of interest for their money. People are not aware that the high and fluctu- ating rates of interest on money are the cause of the extra prices charged for credits on sales of goods. Sup- pose a merchant is obhged to turn his goods into money to pay a debt. He sells them on six months' credit, taking the purchaser's note, on which he pays two and a half per cent, a month discount to obtain the cash. He could as well afford to take fifteen per cent, from the goods as fifteen per cent from the note. The purchaser of the goods who cannot pay the money even when offered this large discount off his note, is not as safe for the payment of his note as he would be if others could THE UStJEY LAWS. 261 not get so large a discount by paying cash. It gives a man who can pay the money great advantage over one who cannot, for if the latter pay fifteen per cent, on the cost of his goods for six months' possession, the buyer for cash can imdersell him. If money could be always easily borrowed at a uniform and low rate of interest, the difference between sales for cash and credit would vary but little from the rate of interest ; for if interest were at a just rate, there would be few bad debts, and a very small per eentage on goods would guard against all losses from this cause. Another proposition is, that the Usury Laws should be taken off from all four months' paper, and the rates of in- terest on longer loans restricted, as if four months' paper were governed by different principles from that having six or eight months to run. It would be hard to show how selling four months' notes at exorbitant rates of in^ terest would save the credit and property of business men. If, at the end of the first four months, the mer- chant be obliged to sell a second four months' note at the same rate, is he any better off than if he had at first sold one of eight months, instead of the two four months' notes ? If it were legal to demand as high rates of ia- terest as could be obtained on paper not having more than four months to run, paper for longer dates would be unsalable whenever interest on the short paper was high. Usurers now say that they take a higher rate of interest on account of the risk they incur by lending at a rate not allowed by law. Hence, if they could legally demand two, three, or four per cent, a month discount on four months' paper, they would ask still higher rates for dis- counting six months' paper, to pay for the hazard of the illegal act. Besides, if any rate of interest which people would agree to pay for money for four months were made legal, whenever the rate of interest was high those who owed money on bond and mortgage would probably bo 252 THE FBUET LAWS. caLed upon for payment. If they could not pay, the holders of the mortgages -nould give them four months' time, and take a new bond, very likely at two or three per cent, interest a month. In the city of New York there is probably a larger amount loaned on bond and mortgage, that is now due, than the amount of aU the capitals of banks in the city. Nearly all our Insurance Companies loan their money thus on one year's time, but do not expect to call for it so long as the interest is re- gularly paid, unless they meet with great losses. A large proportion of these mortgages is due. Many millions are loaned by individuals and executors of estates, and per- haps a very large proportion of these would be called for, in order to obtain the higher rates of interest. The people would be obliged to pay almost any rates that the owners of the mortgages chose to exact ; otherwise theii property would be sold to satisfy the debts. Either course would break up a large proportion of the debtors, and their property would pass over to their creditors for half, or less than half, its valne. Another proposed modification of the law is, that if the money-lender obtain from the borrower an agree- ment to pay more than seven per cent, interest per annum, and prosecute his claim for the recovery of the debt, ho shall be allowed to collect no more than the sum loaned and seven per cent, interest. Could any honest man propose a law for the prevention of theft, the only penalty of which, in case of detection, should be the restoration of the goods ? If the people desire a more rapid centralization of wealth and power, and to increase the depression and poverty of the producers, let them annul all Usury Laws, and they will be sure of success. But if they wish to perpetuate a democratic government, and elevate the producing classes, they must reduce the present power of money, or it will surely make this nation a practical THE retTET LAWS. 253 aristocracy, even though we professedly continue to be a democracy. A righteous government must rule over money, instead of allowing the money to over-rule the government. To do this, it must furnish a sufficient supply of money, and regulate a right rate per cent- interest.* *Seei9pendix. O, CHAPTER V. THE AMOUNT CF A CURRENCY SHOULD BE UMITED ONLY BY THE WANTS OF BUSINESS. It is indispensable to the regulation of the currency that the amount of money should be limited only by the wants of business. It has been already shown that the value of money is detennined by its iacome, or rate of interest. This proposition being established, it follows, that if the interest be regularly maintained, the amount of money may be unrestricted without decreasing its value. The following illustration will show, that no laws against usury can prevent the oppression and evil conse- quent upon a limited amount of money. Suppose one hundred thousand persons forming a nation to frame their own government and laws. They make gold and silver coins the legal currency, and fix the rate of interest at six per cent. Severe penalties are affixed to the exaction of a higher rate, and to the exportation of money from the country. This nation has in coin $12 to each inhabitant ; probably as much as any people, however wealthy, can keep in active circula- lation. The specie in the nation amounts to $1,200,000. Twenty men become worth $100,000 each, together $2,000,000. One million is loaned on bond and mort- gage and business notes at the legal rate. When all the money of the nation is in active use, the twenty men determine to call in thirty per cent, of their loans, anr" hold the money for a week or a month in order to maks THE AMOUNT OF A OUBEENOT. 265 a more profitable reinvestmtnt. This takes out of ckculation $300,000, one-fourth of the whole cii-culating medium, and causes a great scarcity of money. One- fourth of the debts in the nation Ue over unpaid, for all the money was before required to meet contracts. The twenty men hold only their own money, and no law can, or should compel them to use it. They do not take more than the legal rate of interest. Let these men hold their money for six months, until the unpaid debts are mostly collected by suits at law, and the twenty men and other owners of money can buy the property of debtors at less than half its value. All securities depre- ciate, and confidence is lost in the value of property, and in the ability of debtors to discharge their obligations. Yet no money leaves the country, nor is any change made in the rate of interest. Twelve hundred thousand dollars is an abundance of money for a population of a hundred thousand persons. If we allow it to pass from one individual to another three times a week, (and money passes much oftener in cities,) the $1,200,000 would pay $3,600,000 of debts every week, and in a year $187,200,000. Notwithstand- ing this abundance, these few individuals can easily affect the money market, and greatly increase their wealth by purchasing property at reduced rates, and selling it when the depression ceases. If the amount of money for each inhabitant were increased to $20, the aggregate amount would be but $2,000,000, and the twenty men would be worth as much as the whole currency of the nation, and could easily keep enough in theii- own possession to effect the same results. The government is powerless to pre- vent these evils, for the amount of money is Hmited, and a few individuals have the control of it. In the United States within a few years, in times of scarcity of money, cows were sold at sheriffs sale at from $2 to $5 ; good horses at from $3 to $10 ; and cui 856 THE AMOUNT OF A CtTEEElTOl tivated lands for a few cents an acre, when they cost their owners nearly as many dollars. When money be- came plenty again, these cows, horses, and lands rose to perhaps quite their former price. No nation shonld fix upon a standard of value of limited amount. For a limited amount of money, even at a uniform interest, will enable the owners of money to monopolize the property of the nation. The State of New York has a population of 3,500,000. Multiply this by 12, and we have $42,000,000, a much larger sum, doubtless, than is kept in active circulation iu our State. Still, there are probably two men in the State who are worth more than this sum ; and who can, whenever they choose, affect not only the money market of this State, but also that of every State in the Union. Neither the State government, nor the General Govern- ment has power to prevent it, nor to relieve the people. A comparatively small sum of money must pay all the debts now existing in the country. It must also pay for the year's crops. When the crops arrive in market they are no more money than while they were in the hands of the farmers, and if they will not sell for money the debts cannot be paid with them. Neither labor nor the products of labor are any salvation from a money crisis. A power is given to money that is totally different from all other powers, and this does not seem to be at all understood. There is not a particle more natural power in the gold, silver and paper out of which money is made, than there is in ii-on, tin and wood. Consequently the power of money is not in its material substance, but in its imma- terial legal authoi-ity, which constitutes both its power and market value. The material part of the money only represents the immaterial, and this immaterial power is exerted to an enormous extent where there is nothing in the shape of money to represent it. Hence this power is wofully oppressive ; it calls for a THE AMOtlMT OF A OtTERENOY. 267 material substance, and there is no material substance in existence to meet its demands ; and the labor and property must be diminished in their market value so aa to conform to the material quantity of the money. Money has legal authority to crush the value of labor and property, but property and labor have not a particle of legal authority over money. When a national government has established money as a standard of value, so far as the jurisdiction of the laws extend, the money is clothed with an omnipresent power, such as no other earthly thing possesses. This om- nipresent power of money is used a hundred times more in the entii'e absence of its material substance than it is when and where the material substance is present. Manufacturing companies, in this country, mostly send their goods to commission merchants in the city. These goods are credited to the manufacturers, who draw upon the merchants at such dates and times, and for such amounts as are agreed upon between the parties. These goods are sold on four, six, eight and ten months' credit to jobbers in the city, who sell them again to merchants in the country, upon perhaps equally long credits. All these sales are founded upon money, and yet all these agreements are made without any use of the material substance of the money. The material substance is not necessary in making these sales. In running accounts at stores, the goods are extended, summed up, and the amount is a balance against the debtor of so much money : but not the labor of the debtor nor any product of labor has legal authority to pay this balance. There is a certain amount of money due, which the creditor can force the debtor to pay, no matter how much the latter may have to sacrifice, of his labor or products in market in order to exchange them for money. Yet in incurring the indebtedness, not a penny of the material substance of money may have been 258 THE AMOtJlTT OF A CUEEENOY used. It is simply the legal authority aud power oi mouey -o'liich are used in making all these obligations and agreements ; but in order to pay these debts money must be had in its material form. It is obvious that all agreements for the sale of pro- perty and labor are founded upon money, and that no price could be fixed upon any property or labor ■without first having a standard of value. When this standard is established, it is not a matter of choice but of necessity that the people use it in aH business transactions. If individuals barter one kind of property for another, they fix a price for each kind of property, and they must use the power of money in order to estimate the value, so that even in a barter, where not a dollar of the material substance of money is present, its power is used ; and the balance may be adjusted by the addition of more pro- perty on one side or the substitution of less on the other ; but if a balance be left unsettled, the creditoi? can eomptel the debtor to pay it in money. Again, the banks in the city of New York publish weekly statements of the amount under discount, the amount of specie on hand, of money on deposit, and of bank-notes in circulation. These weekly statements are given under oath of the officers of the banks, and the people suppose there is actually so much money deposited in the banks belonging to depositors. Now, are these deposits all money ? If they are, the power of money is not in its material substance, for all the specie and all the bank-notes held by the banks would not, in ordinary times, pay even one-half of these deposits as reported. Then in what does the other half conrist? It consists in a mere balance of accounts ; and if these balances are money, it follows that the power of money is not in its material substance. But this power has the ability to call for the material substance to satisfy its re- quirements. Let the banks in the city of New York THE AMOUNT OF A CUREENOY. 269 curtail their discounts, so that they shall not exceed the actual amount of their specie and the bank-notes which they have received from the Comptroller, and it would paralyze the business of the nation, and make a far more ruinous crisis than that of 1837, or the one of 1857. The property and labor of the country would sink into insig- nificance before this overwhelming power of money. The usurers would get almost any price they chose to charge for the use of money, and thus monopolize the great wealth of the nation without even lifting their hands in any productive labor. Under our present mone- tary laws the people would be compelled to submit to these extortions ; for the money has the legal power, but property and labor have no legal authority over the money. The holder of a mortgage for $1,000 on pro- perty worth $50,000, if the mortgagor could not pay the money, might buy in the property worth $50,000 for even $100, and enter up a judgment against his debtor for $900. A debtor placed in these circumstances would doubtless try his best to boiTow the $1,000, even if he had to pay one or two per cent, a day, in order to pre- vent this great sacrifice of his property, and in the hope that there would be more ease in the money market. This endowment of money with an immaterial, omnipre- sent power, which can be, and is, used to any extent without the presence of the material substance, and this immaterial power having the legal right to call for money in its material form to fiilfil its requirements and satisfy its demands, when the government has neglected to pro- vide the necessary material substance, is a gross outrage upon the rights of the people. A certain amount of money is required to fulfil the business engagements of a nation. If one-fourth of that amount be withheld from circulation, one-fourth of the contracts must remain unpaid. A high price charged for the remaining three-fourths, will not enable them to 260 THE AMOUNT OF A CUEBENOT. supply the place of the absent one-fourth, which is iudls- pensablc to the prosperity of business. No country can be prosperous, while capitalists can cause a scarcity of money. Their legal right to withdraw their money from circulation cannot be denied ; but the exercise of this right should not operate to the injury of others. Some public means must be devised whereby the requisite amount of money for the people may always be supplied, at the legal rate of interest. No government should make a currency of a material of which it cannot supply a quantity adequate to the wants of the people, for it can not be necessary to have a representative of value scarce BO long as there is an abundance of actual value suscepti- ble of representation. It will be hereafter shown, that in all sections of the country, a certain part of the actua. value of the property may be so represented by money as to supply an abundant, uniform and good currency, and that a rate of interest may be adopted and main- tained, which will reward labor, and promote the publia wel&re. CHAPTER VI. THE NECESSITY OF CREDIT. To credit is to trust our property, or the rewara foi our labor, in the hands of others for a limited time. Grovernments could not exist, nor legislative bodies meet, without credit. The members of Congress trust the Government to pay their travelling expenses, and the nation trusts the Government with funds for that pur- pose. We contiaually trust our fellow-men. The laborer who works by the day trusts his employer until evening for his wages. K the employer pay in advance, he trusts the laborer. Daily laborers are supposed to incur little risk by trusting their employers, but in the city of New York they have lost large amounts in this way. The clergyman trusts his parish for his salary ; the teacher the parents of the children ; colleges their students, etc., etc. Houses could not je rented without credit ; the owner credits the tenant with the use of his property ; the tenant may injure or destroy it. If it be insured, he trusts the insurance company to indemnify him for loss by fire. If the tenant pay rent in advance, the house may be burned, and he may lose his money. Banks could not exist without credit. The people credit the banks on their bank-notes, and the banks credit the people on their indorsed notcsi The people, too, trust the banks with deposits. A very large proportion, at least ninety or ninety-five per cent, of the exchanges of productions, is made on a longer or shorter credit. All merchandise sent by manufacturers to commission mer- 262 THE NKCESsrrr of ckedit. chants in our cities, is trusted in the hands of the latter A very large projiortion of this merchandise is sold on a credit of six or eight months to jobbers, and is then resold by them to retailers on credit, who again sell to consumers mostly on credit. N"early all our internal im- provements are contracted for on a certain time of credit. A considerable proportion of these contracts is paid for by bon-owing money on Eiortgage of the improve- ments. Even goods sold for cash are usually delivered before pajrment. Except on an exceedingly Umited scale, exchanges of productions could not be made without credit. Neither the General Government nor the State governments could raise money at home or abroad with- out it. Onr country could never have achieved its ind^ pendence without the money it obtained upon credit. CHAPTER Vn. A WELL-REGULATED CURRENCY IMPOSSIBLE UNDER PRESENT LAWS. OuE whole banldng system is b.ised upon a credit g^ven by law to bank-notes, for which the people furnish the security in their indorsed notes and State bonds. For the legal representative lias no value in itself; it rests upon actual capital, the earth and its productions, and not upon the inherent value of its material. It may then pe asked, why the State governments cannot bank on the same security, and appropriate the gains to the publio benefit, instead of allowing a few individuals to acquire large fortunes by private banking. But bank-notes issued by a State would soon depreciate. The currency must be national, and pass equally well in all sections of the ".ountry. If a State should make paper money a tendei' (and this is forbidden by the Constitution), the money, like the money of the banks chartei'ed by the States, must necessarily be redeemed with specie to secure publio sonfidence. But this local redemption would make the money of unequal value in different sections of the Union. Another difficulty would be incurred by a State bank, that unless a few of the largest capitalists were included as stockholders, and the interest of the wealthiest men identified with the bank, it would soon be compelled to suspend payments. A United States Bank could not regulate the currency. Before the General Government could estabhsh the insti- tution, it would be obliged to consult a few large capi- 264 A GOOD CtTEEENOY IMPOSSIBLB talists to ascertain whether they would take the stock If the charter were not one which would probably secure an income quite as good as any other investment, they would refuse the stock, and the Government could not establish the bank If the Government should deem three per cent, a just rate of interest, and should limit the dividends at this rate, the stock would not be taken. But should it allow six per cent, interest, and leave the dividends unlimited, both native and European capi- talists would call it a good investment for money, if they could retain sufBcient control of the institution. If under our present laws making all notes redeemable in specie, the General Government should establish a bank, and issue enough paper-money for all business transactions, at a low rate of interest, our large capitalists Would array themselves against it by collecting their debts in bank-notes, and demanding specie from the bank. Such a bank, established on a specie basis, could not be sustained a month. The Government and all the produ- cers could not prevent its total failure. Monetary laws are the most important subjects for legislation. It is the duty of every national government to institute and regulate the medium of exchange ; but that this duty has been imperfectly discharged, appears from the fact that where specie is made the only tender in payment of debts, neither the government nor the mass of the people have had or can have, any adequate control over it. Capitalists control the money, and through the money control the Government. The defect of the present monetary laws, further appears from the variations in the rates of interest on Government stocks, perfectly secured at all times, but constantly fluctuating in value. If the Government does not secure a uniform value to money for its own use, how can it be said to regulate the currency of the country. It is impossible to secure to labor its earnings, under UNDEE PBE8BNT LAWS. 265 systems by wh'ch the Goverument and the people depend upon a few capitaHsts to furnish the medium and stand- ard for the distribution of the productions of labor. In the plan about to be developed, the whole people, through Congress, would hold the power, and fix the rate of interest. They can by a vote put the system in suc- cessful operation without consulting capitalists, banks of brokers. EEOAPITULATIOiJ. RECAPITULATION. In the foregoing chapters the following propositions have been considered, and, it is believed, fully sustained. 1. That there is an essential difference between intrin- gic value and the value of money. 2. That any material may be made money, by endov- ing it with the foUowing legal powers, namely, the powers to represent value, to measure value, to accumu- late value by interest, and to exchange value. 3. That money which does not represent its full amount of actual value, carries upon its face a false pre- tence ; nothing can in fact be money, that does not represent property. 4. That money, as a measure of value, is controlled by the rate per cent, interest that it bears. 5. That the necessary effects of the present rates of interest, are to accumulate property in large cities, and in the hands of a few capitalists. 6. Tihat the present rates of interest greatly exceed the increase of wealth by natural production, and conse- quently, call for production beyond the ability of produ- cers to supply. 1. That the rate per cent, interest determines what proportion of products shall be awarded to capital, and what to labor. 8. That in proportion as the rate per cent, on momey is increased, the value of property and labor is decreased. 9. That a currency constantly fluctuating in value, by varying rates of interest, is no more suitable as a medium of exchange than an elastic yard-stick is fit for a measure of cloth ; that justice requii-es uniformity of value, and that our present currency is devoid of this quality. 10. That our present banking system rests upon a fic- titious basis, is unsafe, and is productive of many and EEOAPirULATION. 267 great injuries ; and while it calls upon producers for a large sum of money to pay for the use of its bank-notes, at the legal rate of interest, it assists capitalists, brokers, etc., in monopolizing money, and enables them to extort large sums from merchants, mechanics and other, beyond the legal rate. 11. That the currency, to be of uniform value, must be limite'. only by the wants of business. 12. Tmt credit is indispensable. 24 PART 11. A TRUE MONETARY SYSTEM. CHAPTER I. THE SECUEITT OP A PAPBS CPEKENCT. Wb now enter upon the most important and yet the simplest part of this subject ; namely, the institution oi a true monetaiy system, by which the distribution of wealth can be properly regulated. It has been proved in our foregoing arguments, that the amount of a currency should be equal to the wants of the people, and that gold and silver, of which the quantity is necessarily limited, are not the proper mate- rials. It remains to be proved that a paper currency can be established, which shall be always adequate in amount, and which can be maintained at a uniform valua. The present chapter will offer some considerations of the security and competence of a paper currency, as a medium of exchange. First, we may notice some of the ways in which paper is now used, and in which a legal power expressed upon it is deemed sufficient security. All titles to land, all loans of money on bond and mortgage or otherwise, the paymentE for all lands, and for every other species of 270 A TEUE MONETAET BTSTBM. property on a credit, are secured by paper. These papers must, of course, be made legal liens upon property of they would be worthless, for their value must consist in their control of real property, and not in any worth in- herent in their substance. Money, of every description, gold, silver and papep, is created by the laws, and ita value consists in its being made by law a public lien upoa aU property for sale. The diflFerence between a private obligation, such as a mortgage, or note of an individual, and money, is, that the two former are private liens, one on a specific piece of property, the other on any or all the property of an in- dividual ; while money is a public hen on all property for sale, whether that property be owned by individuals or by the Government. Between individuals and the Gov- ernment, the law secures the fulfilment of contracts by mortgages and other paper instruments. If paper in- struments can be made safe representatives of property between two individuals, no good reason appears why paper instruments cannot be made safe representatives of property for any number of individuals. If paper instruments can be made representatives of property for Umited periods of time, no good reason is perceived why they cannot be made safe representatives of property when made payable on demand. And if made payable on demand in something capable of producing an imme- diate income, they are then made competent to folfil all the uses of money; for money can have no other use than to exchange for property, or to loan for an income. Governments have falsely assumed that the value of money consists in the inherent worth of the gold, silver and copper materials out of which it has been coined. This is not only palpably a false assumption, but the laws of nations prove it to be so ; for in nearly ev(!ry civilized nation, the governments have authorized paper money (when secured by State and National stocks, bonds and eECUKITT OF A PAPEK OtJEEENOT. 271 mortgages, and so forth,) to be issued in the form of bank- aotes and to circulate as money. England has made paper money a tender in payment of debts ; and in other countries, where paper in the form of bank-notes is authorized to be used as money, although it is not a tender, it is generally received as such. Bank-notes are called money, although the laws do not make them a ten- der for debts. Banks are, however, chartered by law, and, therefore, the bank-notes issued by them are generally considered as money, and answer aJl its purposes. They are founded, or based on a proiiiisfe to pay specie on de- mand. Let us see, however, if they are not practicflilly money, instead of being merely representatives df gold and silver coins. A man exchanges at a bank in New York a hundred dollars in specie for a one hundred dollar bank-note, and takes it to the western country to buy land. The note is thus put in circulation there, is loaned and reloaned on interest, and is used in the purchase of property and products. It is continually active, while the silver for which the bank-note was taken in lieu, lies dead in the vault of the bank, and is neither used to purchase property or products, nor to fulfil contfacts, nor to produce an income. The bank-note has perfoiined all, while the specie has performed none of the functions of money. K the former should circillate for any num- ber of years, and should be loaned for an income, and used to purchase property thousands of times, and when it was returned to New York, there should be no specie in the vault of the bank to redeem it, still, every purchase made by the bank-note wduld be valid, and every mortgage for which it had been received would be a binding lien upon the property of its drawer for the payment of specie both for the principal and the interest. Coins and bank-notes have a legal power to accumulate, not natural to either of them. Both are generally re- eeiv ed in tender for debts, so that one is practically aa 372 A TEUE MONETARY SYSTEM. much money as the other. In fact, if either is to be de» spoiled of its character as money, it must be the spede, for this is mostly deposited in the vaults of the banks, and while so deposited is not practically money ; but the bank- notes which perform more than ninety-five hundredths of the exchanges, are really the money of the country, and fulfil all its uses with greater convenience and celerity than could gold and silver. Paper made to represent landed property instead of specie, and endowed with legal power to accumulate, measure, and exchange pro- perty would answer every purpose of money, and would be money. The abundance of paper is not an objection to its use as the material of money, more than to its use for deeds, notes, bonds and mortgages. It would be a better mate- rial for money than gold and silver, for these metals are limited in amount, and are troublesome, expensive, and hazardous to remit. If a sufficient gold and silver cur- rency were presented to this nation free of cost, the inconvenience and expense attending the circulation and transmission of the coins, would far overbalance the whole labor and expense to provide and circulate a paper currency. The question to be settled then, is this ; can a currency be formed entirely of paper, which will buy the produc- tions of labor as readily as gold and silver coins — not whether a silver spoon can be made out of a paper dollar, or whether a gold watch-case can be made out of a ten dollar bank bill as well as it could be out of an eagle We do not want money to make utensils and ornaments. We want money for a medium of exchange, to buy sucb articles as are useful to us, and if it cannot be made of paper so that it will be as good to the man who sells his labor or his products as gold and silver coins, we must not have a paper currency. CHAPTER n. THE SAFETY FUND. SECTION I. IBB FOBMATION OF HONmr, ASD TECB MODS OF ISSITIL The Constitution declares, Art. I., Sec. VIII., 5, " Thai the Congress shall have the power to coin money, regu- late the value thereof, and of foreign coin, and fix the standard of weights and measures." Sec. X., I., " No State shall coin money, emit bills of credit, make any. thing but gold and silver a tender in payment of debts." It is clear that Congress has the Constitutional right to coin money, and regulate its value ; to emit bills of credit, and to make anything it chooses a tender in payment of debts. This reserved right makes it the duty of the General Government to provide the money of the nation ; and it is, accordingly, bound to make money in quantities adequate to the wants of business, and to institute it in a way which will secure the effectual reg- ulation of its value. The Constitution as plainly calls for the exercise of the Federal power for this purpose, as for the fixing of the standards of weights and measures. Sec. X., I., declares that the States have no right to coin money, emit bills of credit, or make anything but gold and silver a tender in payment of debts. Bank billi are bills of credit, and very hazardous ones too ; for mill- «8 274 A TEUB MONETAET SYSTEM. ions of them are issued without being representatives ol property, and many holders have sustained great losses by their failure. According to the Constitution, the State governments have no right to establish banks, and impose this hazard and loss upon the people ; they have infringed the province of the General Government. Having themselves no Constitutional right to issue bills of credit, they can certainly have no power to delegate such right to others. In the plan we are about to propose for the formation of a National Currency by the General Government, all the money circulated in the United States will be issued by a national institution, and will be a representative of actual property, therefore it can never fail to be a good and safe tender in payment of debts. It will be loaned to individuals in every State, county, and town, at a uniform rate of interest, and hence will be of invariable value throughout the Union. All persons who offer good and permanent security will be at aU times supplied with money, and for any term of years during which they will regularly pay the interest. Therefore, no town, county, or State, need be dependent upon any other for money, be- cause each has real property enough to secure many times the amount which it will require. If more than the necessary amount of money be issued, the surplus wUl be immediately funded, and go out of use without injury. It will be impossible for foreign nations, or any number of banks, or capitalists, to derange the monetary system, either by changing the rate of interest, or by inducing a scarcity or a surplus of money. It will be the duty of the Government to ascertain as nearly as possible what rate of interest wOl secure to labor and capital their respective rights, and to fix the interest at that rate. The plan requires the General Government to establish an institution, with one or more branches in each State. This institution may appropriately be called the National BX)EMATION OJf' THK MONEY. 278 Safety Fund : iiist, because the money ol this inslitu- tion will constitute a legal tender of uniform value for the whole people, and will always be safe ; second, because the interest being fixed at a just rate it will secure the respective rights of labor and cajjital ; and third, thp supply of money being always commensurate with the wants of business, it wiU eflfectually protect the nation from financial revulsions. To make this currency a true representative of prop- erty, the Safety Fund must issue its money only in ex- change for mortgages secured by double the amount of productive landed estate. The money ought not to be issued on perishable property, nor on the credit of indi- viduals, because such property might be destroyed, or the indi\'iduals become bankrupt, when the money would cease to be a representative and become worthless, except for the guarantee of the Government, and the loss would fall upon the nation. The money, then, when put in circulation, wiU represent and be secured by the first half of productive property, and the interest upon the mort- gages will be secured by a portion of the yearly products or income of the property. The Safety Fund will issue its money, bearing no interest, for the mortgages bearing interest. We have shown that money to maintain its value must not only represent property, but must always be capable of being loaned for a uniform income. It is therefore necessary to provide not only for the issue, but also for the funding of the money. No government can regulate the value of money unless it provide means for funding it ; this being the only way in which tha interest upon it can be kept uniform. The first of the following obligations will be the money of the institution ; the second will be a note bearing in •icrest for the funding of the money : 27«5 A TRUE MONBIAET SYSTEM. Ko. Money. Dated —-— $500. $500. The United States wiU pay to the bearer five hundred dollars in a Safety Fund Note, on demand, at the Safety Fund Office in the city of No. Safety Fukd Note. Dated $500 $500 One year from the first day of May next, or at any time thereafter, the United States will pay to A. £., or order, in the city of five hundred dollars; and, until such payment is made, will pay interest thereon on the first day of May in each year, at the rate of one per cent, per annutn. The money will bear no interest, but may always be excbanged for the Safety Fund Notes, which will bear interest. Those who may not wish to purchase property or pay debts with their money, can always loan it to the Institution for a Safety Fund Note, bearing an interest of one per cent, per annum. Therefore the money will always be good ; for it wUl be the legal tender for debts and property, and can always be invested to produce an income. The money being loaned at one and one-tenth per cent., and the Safety Fund Notes bearing but one per cent., the difference of one-tenth per cent, in the interest will induce owners of money to lend to individuals, and thtis prevent continual issuing and funding of money by the Institu- tion. The Safety Fund Notes are made payable a year aftei date, to prevent the unnecessary trouble of funding money for short periods. It is not probable that the Institution FOEMATIOS' 01' THE MONET. 277 will issue Notes for a less amount than $500. People having small amounts will seldom wish to fund them. They will loan to individuals or purchase property. If, however, it be deemed desirable to fund small amounts, they may be received, and credited in a small book, aa in savings banks, and the interest paid upon these credits as upon Safety Fund Notes. Having given an outHne and brief explanation of the proposed system of currency, we will proceed to show that the money issued by the Safety Fund will possess all the properties, and be capable of performing aU the functions of money. We have said in our description of money that it must be a representative of property. The Safety Fund money being based on productive landed estate to double its amount, wiU be an undoubted repre- sentative of property. Second, money must have power to accumulate. The provision made by the Safety Fund for funding the money will secure an income beyond all contingency. Third, it must have power to measure value. The Safety Fund money will not only possess this power equally with coins, but it will possess the additional quality of being a unifonn and perfect measure. By establishing a uniform rate of interest, the dollar wUl be of invariable value, and cannot be made to fluctuate more in the measure of property than the yard-stick in the measure of cloth. Fourth, it must have power to exchange value. Being instituted by the General Govern- ment as the legul tender, and its income power estab- lished, all persons will be compelled to receive it in exchange for property and labor. We have elsewhere shown that any portable substance possessing these prop- erties will be mtney. The Safety Fund money will possess all the properties adapted to its use as money that belong to coins, and can be counted and carried with greater convenience, and can be more easily transmitted from one section of the country to another. The effeot of 278 A TEUE MONETAET SYSTEM. its adoption will be to annihilate all difference of exchange between different commercial points, or to reduce it to the merely nominal expense of letter postage. SECTION n. THE SKCUEITT OF THB SAFETY FITNT) MONTrY. It wUl be perceived that since the rate of interest on the money will always be uniform, and loans can always be obtained from the Safety Fund on productive prop- erty, it will be impossible to induce a financial crisis, and depreciate the value of the property on which the money is issued, so that it would not be good for the interest. Therefore the mortgages will always be ample security for the loans of the Safety Fund; and the money will always be a fair equivalent for property and labor, because it will always truly represent their value. For, if the money can be loaned for a per centage interest which will buy a certain portion of the yearly products of land and labor, the legal value of the princi- pal of the money will be equal to the actual value of so much land as wUl produce what the interest will purchase. When Branches are established in all the States, every individual can borrow money, at the usual rate of inter- est, to the amount of half the value of his productive land. Every dollar thus borrowed will be added to the amount in circulation, as much as if it had been imported from a foreign country or coined. The Safety Fund will actually create all its money. It will require a very small proportion of the property of the country to secure a sufficient currency. The prop erty in Massachusetts, according to the assessed valua- tion in 1840, averaged $406 50 to each individual. The average wealth in property of our whole population ia SBOtrETTT OF THE MOTTKT, 279 from tliree to five liimJrod dollars. The amount of money needed will not, probably, exceed ten or fifteen dollars for each inhabitant. Therefoi'e, only three or four pel cent, of the property of the country will be necessary to secure an ample supply of money. The Government can m this way provide a portable legal value to any extent that may be required. The people can borrow money from the Safety Fimd in larger or smaller sums at pre- cisely the same rate of interest. The mortgages may be drawn payable one year after date, with one and one-tenth per cent, interest ; and so long as this interest shall be regularly paid, the principal may remain, in whole or in part, at the option of the mortgagor. So, whenever a mortgagor shall have the means, he can pay ofi" any part of the mortgage, and stop the interest. But he will never be compelled to pay the principal so long as the interest shall be regular ly paid. No aid from large capitalists will be required to establish the Safety Fund, for the money wiU be made a balance against the landed estate of the people, without a specie basis. It is no more necessary to make money of gold and silver to render it a just balance against property, than to make a mortgage of gold or silver to render it of equal value with a piece of land. The value of the mortgage depends upon its legal power over the land and its products. The Safety Fund money will have a legal representative value which will be capable of purchasing the mortgage, or the laud, or the products of the land. The mortgage, or the money as such, can be no more valuable made of gold than of paper. As paper mortgages amply secure individual loans of money, so paper mortgages will secure the money issued by the Safety Fund. K people will readily loan gold and silver coins for pai)er mortgages on property, they must esteem the paper mortgages as valuable as the coins. A mort- 25 280 A TRUB ItCKETAET SYSTEM. gage is a lien upon a specific piece of property. The Safety Fiuid money will be a general lien upon all pro- perty for sale, and a legal tender in payment for all debts. The mortgages given to the Safety Fund -will be indivi- dual obligations for the payment of money, and will be necessarily locaL But the money issued for them will be neither individual nor local. It will be equally good in Maine, New York, Ohio, and Florida. If its o^ner does not wish to lend it to individuals, he can lend it to any Branch of the Safety Fund at an interest of one pei cent. It has already been stated that it is no more necessary to make money of gold and silver in order to make it good, than to make a bond or note on a silver or gold plate in order to make it good. StiU, if the people shall insist upon a mixture of specie in the currency, it can be easily provided. It will only be necessary that the interest to be received and paid by the Safety Fund shall be paid in specie. By loaning money at one and one- tenth per cent., the Fund will always be in receipt of many times the interest in specie that it can be called upon to pay. This will preserve the use of coins as money. It appears evident, however, that the money of the Safety Fund will fulfil all the functions of a public medium of exchange without any admixture of coins. The Safety Fund money wiU probably be compared by some to the assignats of France, or to the Continental money issued by the United States during the Revolution. But they are no more alike than a good productive soil and a desert. There is as much difference between the paper assignats issued by France and the paper money to be issued by the Safety Fund, as between two perpetual mortgages, one bearing interest, and the ether bearing no iut'?rest; the first would be good, the second worthless. If, as heretofore stated, the French Govern ment had secured the payment of the assignats issued t« SECUEITT OF THE MONEY. 281 her citizens by mortgages on productive landed estate, not exceeding half its value, and when payment was demanded had funded them with government bonds bear- ing a yearly interest, they must have continued good, lioth the mortgages and the assignats would have been representatives of property, and the yearly productions of the land would have secured the annual interest, anJ made them safe. The assignats became worthless because they were not representatives of property. If the Government of tlie United States, instead of issuing the Continental money, had established a Safety Fund, and had lent money for mortgages on productive land worth double the amount of the loan, and had provided notes bearing interest to fund the money, such paper money would have been a representative of property, artd invariably good. The Continental money not being a representative of property, of course proved worthless. Had our Go^•ernment instituted a Safety Fund, it would have had an abundance of money for the transaction of all business ; we should have saved the many millions we paid to France for a representative of our own property, and besides, should have prevented the great injury suffered by the country from the scarcity of money and high rates of interest, which then so much retarded business and production. The objection may ai-ise that if the loans of the Safety Fund be confined to the owners of land, it will place in their hands a groat monopolizing power, and instead of diffusing wealth in accordance with the labor performed, will give it to the landholders. But a little reflection will make it e^^dent that the abundant supply of money and the reduction of the rate of interest will be of equal benefit to those who are without property, and depend on their daOy labor for their support. The owners of land will obtain loans fi-om the Fund, cither to purchase property, or to discharge debts, or to pay for labor j anq 283 A TKTTE MONETAET 8T8TBM. all the money borrowed for these pui-poses will go into circulation, and be used by others. The owners of land will not borrow in one j to keep, for they would lose the interest on it, and be paying interest on their mortgages to the Safety Fund. Every farmer owing money oa mortgage of his farm, and p.aying seven per cent, inter- est, wiU probably borrow money fi'om the Safety Fund and pay the debt. The difference between seven and one and one-tenth per cent, on his mortgage will be in favor of the earnings of his own, or others' labor on his faiTO ; the interest will absorb but a comparatively small proportion of the products. The receiver of the pay- ment for the mortgage cannot obtain a higher rate of interest than that charged by the Fund : he must either purchase property with the money, or lend it to individ- uals at one and one-tenth per cent., or to the Safety Fund at one per cent, interest. If he finds that he can rent out land to others for a term of years so as to secure one and one-tenth, or one and one-quarter per cent, interest, of course he will purchase the land in preference to funding the money ; and the laborers who can have the use of land at these low rents, will soon lay up the means to buy farms for themselves.* SECTION III. THE BATB OF INTBREST ON TELE SAFETY FUND MONET. The law granting to all the privilege of lending money at the same rate, has an apparent fairness which is de- • If a laborer who had no property to be represented except hit power to labor, could borrow moaey from the Safety Fund, and hia power to labor should fail by sickness or death, the Safety Fund would still be bound to redeem this money with a Safety Fund Note bearing interest, and this loej would fall upon the people. (See Appendix, H.) KATE OF IXTBRE8T ON THE MOKET. 283 ceptive. The fairness depends upon the justicfr of the rate of interest, and not upon the universality of the grant. The illustration of the one hundred families clearly shows the accumulative power of money at six per cent, interest, (see Part I., Chap. III., Sec. 11.) The same chap- ter shows this power at various rates, from seven down to one per cent. The Safety Fund can maintain any rate of interest which shall be deemed for the public good If it lend money at six per cent., and fund at the same rate, there will be an abundant supply at a uniform in- terest in all parts of the country; this currency will therefore be greatly superior to any that has ever been in use. If $300,000,000 be required, and the interest be at six per cent., the Government will gain a revenue of $18,000,000 annually, less the expenses of the Institution. If the Branches be made oiEces of discount and deposit, and the deposits be reloaned, the gains will probably be doubled, and amount to say $36,000,000. There ia hardly a doubt that this latter or a larger sum is annually paid by the producers to the banks for the use of bank- notes. It will certainly be more just for the Govern- ment to gain this for the general benefit, than to have the banks gain it for their private purposes. But a rate of interest that wUl lapidly concentrate the wealth of the nation into the hands of the Govern- ment or of individuals, cannot be just. The Government cannot institute money and lend it at six per cent., with- out giving power to individuals to lend at the same rate, and the loans of the latter will be much greater in amount than those of the Fund, even if its Branches should be made offices of discount and deposit. Besides, as has been already shown, money is a standard, and the rate of interest governs the per centage rent on all property. No way can be devised of establishing a high rate of interest, and doing justice to producers. The evt 284 A TKUE MONETAET SYSTEM. dence adduced in this volume upon tlie different rates of interest, appears suflSeicnt to prove that one and one- tenth per cent, is as high a rate of interest as money can bear, and secure the rights of producers. Money at this rate ■wUl have power to buy property ; for in England it has often been lent even at lower rates, after business had been paralyzed by maintaining interest at exorbi- tantly high rates. Money is national in its character, and ought therefore to be authorized only by the General Government. The Government should never allow any money to circulate that is not permanently safe and good, and a legal tender in pay« ment of debts. The money should be a just legal equiva- lent in exchange for labor and property, and at par value in every section of the country. To be thus a fair equivalent of uniform value throughout the country, the rate of interest must be made just and uniform ; and it is, therefore, of the first importance to arrive, as nearly as possible, at what would be a just rate per cent, interest. As money is designed for public use, and is not in itself a producing power, we think the interest on the money should not only be sufficient to pay for the necessary material and labor to manufacture the money, but also for the necessary labor of loaning it, as well as for the safe keeping of any money that might remain on hand un- used. Whatever rate per cent, interest would be re- quired to defray the necessary expenses of furnishing and issuing a fuU supply of money for the use of the pubUc, should be the established legal rate of interest, at which aU subsequent owners of the money might lend it. The first borrowers of the money would directly pay it over to others to cancel debts, or to pay for property and pro- ducts. Hence they would seldom be subsequent owners and lenders of the money, because if money should after- ward come into their hands, they would be more likely to pay off their own debts, and stop the interest, than to RATE OF mTEKEST ON THE MONEY. 285 lend the money on interest, and still continue •:o pay in- terest on their obligations. If it should take $500,000,000 of the new currency to supply this nation with money, and the rate of interest should be fixed at one and one-tenth per cent., the income from the Safety Fund would be $5,500,000. If it should take $600,000,000, it would make an income of $6,600,000. At all events, we think this rate of interest would be sufficient to supply the material for making the money, and pay for the labor ; as well as to pay the officers and clerks employed in the principal Institution and in the various Branches of the Safety Fund. A just rate ot interest would be one that would supply the money and keep the Safety Fund in operation. Thus the Safety Fimd would be a self-supporting institution. No good reason can be shown why the interest should be greatei than is necessary to furnish the money and keep in operation the means of supplying it. There is as great a diflference in their effects between a well regulated currency with a low rate of interest that will justly distribute productions, and a currency with high and fluatuating rates, as between the fire limited to the domestic hearth, subserving the wants of the house- hold, and the same element exceeding its useful limits, and destroying the house. Steam kept within proper bounds is usefully employed in facilitating production^ but increased beyond these, it becomes a powerful agent in destroying life and property. Money with the in- terest kept within propei- limits, will distribute the pro- duction rightfully to the producers; but increased in- terest will deprive them of their rights, and entail upon them poverty and misery, 286 i. TRUE MONETABT SYSTEM, SBJTION IV. OEGAiaZA.TI0N AND MANAGBMENT OP THE SAFETY FUHl). The Safety Fund may consist of a Principal Institution with Branches. The first may be located at Washington, or some other central town, and the latter wherever con- TOnience may require. The Principal Institution should issue money only to the Branches, and they should be required to make weekly reports to the Principal of their loans, and also of the money returned to be funded. The Principal, at certain times, should report the money in circulation. For the management of the Principal, one director may be appointed by each State, and one or more by the General Government. The States may elect the directors of the Branches by Congressional Districts, or otherwise. The directors should receive salaries for their services, and should not be allowed to borrow money from the In- stitution, nor be interested in any of its loans. They may hold their offices during good behavior, or until a certain age. All officers and clerks may be required to give bonds, with such securities as may be deemed necessary to secure fidelity and safety. All money loaned may be paid, in whole or in part, ai the option of the borrower after one year, but the in- terest should be punctually paid. In case of failure for a certain time to pay the interest, the directors might advertise the property covered by the mortgage, and sell it at auction, giving the debtor timely notice of such advertisement and sale. Twenty-one different denominations of money will form an ample currency: viz., Three Cents ; Four Cents; Five Cents ; Ten Cents ; Twenty-five Cents ; Fifty OEGANIZATION AND MANAGEMENT. 287 Cents ; One Dollar ; Two Dollars ; Three Dollars ; Five Dollars ; Ten Dollras ; Twenty Dollars ; Fifty Dollars ; One Hundred Dollars; Two Hundred Dollars; Three Hundred Dollars ; Five Hundred Dollars ; One Thoueand Dollars ; Two Thousand Dollars ; Three Thousand Dol- lars ; Five Thousand Dollars. With these denominations of money any change can be made to a cent. Our present bank-notes are frequently altered from one denomination to another ; as, for instance, by ex- tracting " Two " and inserting " Ten." Against this fraud the money of the Safety Fund may be effectually guarded, by making the size of the paper conform to the denominations. The value of each piece wiU then be known at a glance by its size, as well as by the engrav- ing. The three cent pieces may be made an inch and a half long and an inch wide ; and the size may be increased for each successive higher denomination by adding a quarter of an inch to the width and half an inch to the length. The different denominations may also be of different plates as well as of different sizes. The people throughout the country will soon become familiar with the money, and there will be little danger of deception lij- counterfeits. The paper for the money and Notes may be manufac- tured by the principal Safety Fvmd, and farther guarded from counterfeit by water marks, and by the kind and quality of the paper, which should be of the best material for durability. In preparing the money for circulation no necessity will exist for the signatures of the president and cashier, more than for such signatures on coins. Proper care in regard to the material and making of the paper, and the engraving of the plates, etc., will guard the nioney against counterfeits more effectually than the quality and coinage of the precious metals can protect coins. 288 A TEDE MONETABT STBTElt. A simple nnd short form of a mortgage may be pro- vided, so drawn as to save the necessity of a bond, and prevent a multiplicity of papers. With ordinary care ia the institution and direction of the Safety Fund, there will be incomparably less danger of frauds than now exists in banks. The money for the amounts under a dollar will prob- ably be called by the opposers of the Safety Fund, shin- plasters, rag-money, a very unsafe currency for laborers, etc., but every one of these small notes wUl be a repre- sentative of its nominal amount of property. They will maintain their relative value to every other piece of money in every section of the country, and will soon be esteemed far preferable to the small silver and copper coins now in use. SECTION Y- THE PEOBABLB AMOUNT OF THE BAPETT FUND MONBT. The quantity of money used in business is very small compared with the amount of business transacted, for it is only the average balance kept on hand. If a man receive |10,000, keep it one hour, and then pay it out, he uses the money only one hour. A man may be worth half a million of dollars and transact a business of a million a year, and yet his average balance may not exceed five thousand dollars. If he deposits his money in bank, the bank makes an estimate of his balance and lends it to others ; so that even this balance is constantly in use. The amount of money used compai'ed with the con- tracts fulfilled by it, is not much greater than the number of bushels used compared with the bushels of grain mea- sured by them. The amount which can be kept in active circulation is comparatively small. If the Safety Fund be established, and loan at an interest of one and one-tenth PBOEABLE AMODMT OF THE MONET. 289 per cent, on all good security, money will circulate rapidly ; and if all other money be swept from the coun- try, it IS doubtful whether the Safety Fund can keep out a sum exceeding from twelve to fifteen dollars for each inhabitant. Estimate the population of the United States at thirty millions, and $15 to each inhabitant will amount to $450,000,000. Allow this sum to change Lands four times a week, and it will cancel $1,800,000,000 of debts each week, and in one year $93,600,000,000. The assessed value of all real and personal property in the United States in 1860, was $16,000,000,000. The $450,000,000 passing four times a week, will in one year pay for nearly six times the assessed value of the whole property of the nation. It is not intended that the Safety Fund and its Branches shall be made ofSces of discount and deposit. If they should be made such, they would more than double the amount of their loans ; but the increase of loans would not augment the amount of money. They would lend the money left on deposit, and thus increase their income, as banks now lend their deposits and gain the interest.* " With the Safety Fund money, if fifty millions were hoarded and withdrawn from circulation, the amount could be at once supplied ; and it would not in the least disturb the regular interest or the value of the money. The Fund would still receive the interest on the fifty millions ; and those who hoarded it would lose the interest, and could gain no advantage over others by again laying out the money, because their hoarding would not have made money any less plenty, and when they put it again in use, it would not in the least alter the rate of interest, but would find its way to the Safety Fund, and pay a debt due to the institution, or it would be loaned to the Fund for a Safety Fund Note bearing interest. When money is hoarded it is taken out of use, and it is, therefore, as necessary to supply the amount thus withdrawn as if it did not exist, for it is of no use to the public so long as it is hoarded. The Safety Ftnd would be as independent of capi- talists as of laborers ; nor could the Rothschilds with the aid of the Bank of England affect our money or disturb the business of 'hi aation. (See Appendix I.) CHAPTER m. THE ADVANTAGES OF THE SAFETY FMD MONEl OVER SPECIE. The follo-ft'ing illustrations will show the dififerent effects of a specie and a paper currency upon the pros- perity of countries having materials for the formation of either. Suppose two fertUe islands to exist, each con- taining a silver mine as productive as the average of those now worked. Two parties, of a hundred thousand settlers each, emigrate to these islands, taking with them miplements of husbandry, a stock of cattle, merchandise, tools, etc., and provisions for a year, in procuring which chev nearly exhaust their money. Arrived at thi3ir respective destinations, they locate their lands, etc., and each party begins to make exchanges among its mem- bers. The want of money is soon severely felt. The inhabitants of one island determine to have a metal cur- rency, and accordingly prepare to work their silver mine. One-fifth of the whole population, i. e., twenty thousand, are men capable of labor. Three thousand engage in working the mine, and with their families constitute a , copulation of fifteen thousand, who consume the pro- ducts of others. Suppose each man to earn or make half a dollar a day ; total in a year four hundred and fifty thousand dollars. This sum being exchanged by the miners for food, clothing, etc., goes into immediatt> circulation. It will require nearly three years to supply the money necessary for their internal exchanges, saj $12 for each inhabitant, i. e., $1,200,000 ; and during this THE MONEY SUPERIOR TO SPKOIE. 291 period money must be very scarce. The shipment of any specie abroad to pay for goods, will increase the want ol mcney at home. Suppose the population to increase three per cent., that is, three thousand a year, they must continue to mine $36,000 yearly, to maintain the propor- tion of $12 to each individual. The inhabitants of the other island detennine not to work their silver mine, but to establish a Safety Fund, and lend the paper money as heretofore stated. All have the opportunity to borrow to one-half the value of their productive land. This money costs nothing but the comparatively trifling labor of the paper and engraving. If a surplus be in circulation, its owner can at any time pay off a mortgage to the Fund and stop the interest, or fund the money and receive interest. The exact amount required will always be in circulation, and the interest being regular, the value of the money will be invariable. The difference between the labor to mine and coin the silver money, and the labor to make and engrave the paper money, will be a clear savmg to the island using the paper money ; and aU this difference of labor can be appUed to the production of articles for export. The island using the paper money can export about as great an amount of products as the other island will coin in money. If the latter island require the products of the former, and exchange coins for them, the former island will use the silver money for manufactures, or for export; it cannot need them for money. If the Fund lend at one and one-tenth per cont. interest, the island will always have an abundance of money at a low and uniform rate, so that every branch of industry can be carried on to the best advantage, and the property will be distributed to those whose labor shall earn it. But the business and productive industry of the island using coins will be con- stantly retarded for want of money, and the high and 292 A TRDE MONETAKT SFSTEM. fluctuating rates of interest will inevitably concentrata the wealth in the hands of a few capitalists, and leave the producers in poverty. The people of the island using the paper currency will be rich, virtuous, and happy, while those using the silver money will be poor, wicked, and miserable, because poverty and avarice wiU lead to crime. If the two islands, instead of trading with each other, maintain trade with other nations, it must be obvious that the one using the paper money will have a great advantage over the one using the silvei money. Suppose the same number of emigrants to settle on 9 third island, and borrow their whole currency of a for. eign nation, say $1,000,000 in gold, silver, or paper, money, at an interest of eight per cent, per annum, pay- able half yearly. If their imports equal their exports, and they be obliged to issue bonds every six months at eight per cent, to pay the interest, ia fifty-three years the island will become indebted to foreign nations $64,000,000 ; $63,000,000 of which wiU be mterest on the $1,000,000 originally borrowed. The people must lose this amount in consequence of defective legisla- tion. If the emigrants through their government estab- lish a Safety Fund, and provide their own currency, instead of importing it, they will save the whole interest, besides having great advantages by the abundance of money. Paper money can be as easily made to exceed coins in value, as coins to exceed paper money, because the value of all money is governed by the per centage interest. Let the Safety Fund lend paper money, and fund it with Safety Fund Notes bearing six per cent. ; let it lend coins, and fund them with Safety Fund Notes bearing but four per cent., and the paper money wiU always be the more valuable, and command a premium in exchange for the coius. The paper money will as certainly command a THB MONEY 8UPEEI0K TO BPEOIK. 293 premium above the coins, as a ground rent at six per cent, will command more than one at four per cent. If this nation had a sufficient quantity of specie for a cur rency, it would stiU be necessary to have an institution similar to the Safety Fund ; fo^the interest upon it could only be kept regular by the estabhshment of an institu tion to make loans at a uniform rate of interest whenevei good security was offered, and to fund the specie when ever it was redundant. A government may obtain an immense power ovei the property of the people by furnishing a paper currency at six per cent, interest. Suppose om* Government to establish a Safety Fund, and make its paper money the only tender in payment of debts. Let the Safety Fund lend an amount equal to say |15 to each inhabitant for a population of 20,000,000, that is, $300,000,000, and money would become plenty. This sum lent on double its amount of landed estate, would cover $600,000,000 worth of property. If the Government should leave the prin- cipal outstanding during the regular payment of the interest, it would receive from the interest, after deduct- ing say $1,000,000 for the expenses of the Safety Fund, an annual revenue of $1V,000,000. After a year or two let the Fund refuse to make further loans, and yearly collect its net gam of $17,000,000 for ten years, i. e., $170,000,000, and the whole business of the nation must be transacted with the remaining $130,000,000. This would cause a great sacrifice of the mortgaged property and greatly depress the price of other lands and products. In six years more, the Government would collect in $102,000,000 additional interest, thereby reducing the currency to $28,000,000. The interest for two years more would amount to $34,000,000, but only $28,000,000 could be paid, because the whole amount of money would be exhausted. By foreclosing its mortgages, the Government could buy the $600,000,000 worth of 294 A TRUE MONETARY STSTKM. pro]>erty for the $6,000,000 which would still be due. Hence it is evident that the law has power to make paper money control property as effectually as gold and lilver ooina. CHAPTER IV. OBJECTIONS TO THE SAFETY FUND CONSIDERED. SECTION I. OBJECTIONS TO A PAPEB CUEKENCT ON ACCOUNT OF rOEEIGN TRA.DB CONSIDEEKD. When the adoption of a paper currency within our own limits is advocated, questions arise concerning the adjustment of our debts with foreign nations, among whom gold and silver are the only legal tender. Great embarrassments are apprehended because our paper money would not be received in payment of debts con- tracted and payable abroad. The exports and imports of the United States are nearly equal ; probably our whole exports do not amount to more than a twentieth part, or five per cent. of the yearlj productions of our labor. Certainly the disposal of five per cent, of our productions is not a suffi- cient reason for maintaining a metal basis for our cur- rency, which must inevitably afiect the market value, and disturb the regular and just distribution among ourselves of ninety-five per cent, of our productions. The chief object of a currency is to efiect the internal exchanges of products with facility and justice. Such a one could 296 A TRUE MONETARY SYSTEM. not impair foreign trade, nor do injustice to other nations.. The following illustrations will make it eviden* that the use of a paper currency at home, instead of disturbing foreign trade would greatly facilitate it. Trade between nations is carried on by individuals, and not by govern- ments. The governments simply make the laws, and fix the standards by which the value, weight and quantity of articles of trade are to be determined, as also the tariffs of duties on imports and exports. Individuals, then, export or import goods as their interests dictate, and receive for them the money in use where the goods are sold. For instance, importers of goods for the "New York market, take in payment for their sales the money current in the city. They do this when the banks pay specie. They did the same in 1837, when the banks had suspended specie payments. If they must remit the proceeds of the goods, they buy cotton, or other produce for shipment and sale abroad, or bills of exchange, or specie, as may best subserve their interest, English ex- porters to New York receive in payment for their goods our current money, and invest the money as they deem most profitable. If we had none but paper money, English exporters to New York would sell their goods for our paper money, buying with the proceeds our pro- ducts, cotton, flour, or tobacco, or bills of exchange on England, or bullion. Or, they could lend the money here as they now do and purchase products for shipment to England with the interest, or reloan the interest. If our paper money would buy our own calicoes and broad- cloths, it certainly would buy English calicoes and broadcloths in our own market. There is no reason why we should provide a currency to pay for the products of foreign labor different from that which pays for home labor. If we import fifteen millions more than we export, this balance will draw interest against us until we can pay it OBJECTIONS OONSIDBEED. 297 m specie or products. If Slate or United States stocks be sent abroad and sold to pay tbe debt, it is still a form of credit for which we must pay the interest. There is certainly no greater necessity for our Govern- ment to provide means for our merchants to pay their debts to foreign merchants, in such cases, than to provide means for southern merchants to pay their debts to eastern merchants, in cases of a partial failure of the cotton crop. When in any year southern merchants buy of eastern merchants more goods than their crops will pay for, the latter must wait for the next crop, mean- while receiving interest on the amount due. If our Gov- ernment maintains a currency which a balance of imports over exports demanding a shipment of specie must neces- sarily derange, and subject debtors to extravagant rates of interest, this legal act must cause greater loss to the people than the failure of the crops which would turn the balance of trade against them. The only embarrassment which could occur in om' foreign trade, I'rom the use of paper money, would be delays in payments when the ex- ports should exceed the unports; and the occurrence even of this would be rendered much less probable by the use of paper money, at a low rate of interest, than it is with our banking system, and high rates of interest. The greater facilities afforded to production would yearly save an immense amount of unports ; and the difference in the interest account between the United States and England, would save our people many millions of dol- lars every year. If we had a sound paper currency, and did not depend on gold and silver, to make our internal exchanges, we could send aU our gold and silver coins out of the coun- try to adjust our foreign balances, without deranging our monetary affairs, or enabling foreign or native capitalists to embarrass the exchanges of our products among our- A TRUE MONETAET SYSTEM. selves. If we now have $50,000,000 * of coins, we could ship them, and cancel this amount of our debt to Eng- land, hy paying our Government and State bonds, and thus save $3,000,000 interest, annually paid to the foreign holders of our bonds, for the use of a representative of our own property. The money, too, on which we pay this interest, goes mostly into the vaults of our banks, and lies there dead, while our bank-notes make the exchanges. It previously lay idle in the vault of the Bank of England, while the notes of that Bank performed the exchanges in England. But suppose, upon its arrival here, every dollar of the specie should go into active circulation, what service would it render us ? It would only assist us to effect our internal exchanges ; we should still be obliged to make all our products by our labor, as much as if we had used our own paper money to make our exchanges. If the Bank of England should send $50,000,000 of her bank-notes to the United States, and our laws should make them a tender for debts, they would be no more useful to us than $50,000,000 of our own currency ; and we should be compelled to pay to England $3,000,000 worth of our products yearly, in interest. If we sent the bonds of our Government to procure the notes of the Bank of England, or to procure the coins, the property of the United States would secure the money while it re- mained here. The money would become a representa- tive of our property. Before it could again become a representative of the property of Englmid, we should have to send back the $50,000,000 to England and take up our bonds. As long as the money remained here we should pay to England $3,000,000 yearly, in interest, because the bonds of our Government bear the iiilerest, and not the money. Money is always adend capital in the hands Written before the introduction of gold from California — [M. K. P.] OBJECTIONS CON6'A,EEED. 299 of the holder. Even after its arrival here, every person who kept it a day, would keep it at the loss of the in- terest for that day, because money has no power of growth beyond that given by law, which is as impotent for actual production as the picture of a horse is to per- form the labor of the horse. We might as weU pay to England $3,000,000 yearly for a man to represent uj in Congress, as to pay this sum for a representative of our property. With a just monetary system, we should no more de- pend upon a foreign nation for money to represent our own property in our own country, than for the air we breathe. When we make our own property the basis of our currency, and furnish all the money we need for the exchange of our own products among ourselves, no for- eign nation will have power to affect our money market, and derange the internal exchanges of our products, more than it could induce a scarcity of air, and thus disturb our breathing. No scarcity or abimdance of money in foreign nations would affect our monetary system. Gold and silver coins would be imported only to convert into utensils and ornaments, or for re-exportation — these metals could never be needed for money. If a paper currency in this nation were properly instituted, it would become known in England, and it would be a thousand times more likely to be received there than our bank paper. But if it would not pass there at all, many advan- tages are to be anticipated from its adoption. Bills of ex- change, on foreign nations, could be much more easily obtained than at present, because balances, under this system, would probably be Ln our favor. If our mone- tary system were such as always to supply the necessary quantity of money at a just and uniform rate of interest, 80 that production should never be impeded by a scarcity of money or high rates of interest, no one acquainted with the trade and resources of our country can doubt 300 A TEUE MONETABY STSTKJI. that the amount of our yearly productions would be increased several hundred millions of dollars. THo greater the amount of our productions, the greater the amount that we should have to export, and the less we should need to import, and the balance of trade would necessarily be in our favor ; and this balance we should be compelled to take in gold and sUver, or leave on in- terest in foreign nations. The foregoing considerations make it evident that no unfavorable results are to be ap- prehended to our foreign trade from the adoption of a paper currency at home. SECTION n. STJNBET OBJECTIONS — THE EFFECTS OF THE SAFETY FUITD ON CUB BANKING INSTITUTIONS, ETC., CONSIDERED. It may be well to examine a few more of the prominent objections which will be urged against the adoption of the Safety Fund. Our banking institutions will probably complain that its establishment wiU infringe the chartered rights granted to them by the States. But in instituting the Safety Fund, the General Government will not with- draw their charters, nor pass any law preventing them from banking. Doubtless it has the right to prohibit the issue of such bills of credit as bank-notes ; but this wUl not be necessary. The Government will simply provide a means whereby the people in every section of the country can obtain a fair representative of their produC" tive landed estate, at one and one-tenth per cent, interest, instead of being compelled to procure from banks and individuals an imperfect and unsafe representative of their property, and at' six, seven, or eight per cent, inter est ; as much for the use of a representative as the ■jrops of then- land are worth. OBJECnONS CON8IDESED. 301 It is a frequent remark that legal enactments have no more effect upon the value of money than upon the price of wheat, and that competition in lending money will equitably regulate the rate of interest. By establishing the Safety Fund to lend money at one and one-tenth per cent, to aU who offer the required security, and not interfering with the chartered privileges of the banks, we shall ascertain whether legal enactments have any power, and the advocates of regulating the rate of interest by competition among the lenders of money, wiU also have an opportunity to test the correctness of their opinions. Banks will object that they do business on a specie basis, and the Safety Fund on a land basis. It may be difficult to show that the former is better than the latter ; for all kinds of money must be as useless without land and products to be exchanged, as yard-sticks with nothing to be measured. It will be fair towards the farmers, mechanics, and merchants, for the Government to institute a paper currency, and equally fair towards the banks ; for their bank-notes are no more legally pay- able in specie than the indorsed and other notes, and even the book accounts of private citizens. If the Safe- ty Fund money will be a safe medium of exchange for products, it will be a just equivalent to pay debts to banks, because the stockholders can buy products or land with it ; therefore the issue of a tender based on landed estate cannot do injustice to our banking institutions. The Safety Fund money being made the legal tender, the banks cannot refuse to receive it in payment of debts. They can easily and safely collect in their dues, with- draw their circulation, and wind up their businesa without causing a scarcity of money, or any panic in th^ money market. We shall then have nothing circulating as money which is not a legal tender. If the banks shall still deem their speci" more valuable than the papei 302 A TRITE M02>rETABY SYSTEM. money of the Safety Fund, and in closing up their busi- ness shall not have as much specie to divide among the stockholders as they originally paid in, or if they shall have to pay the whole capital stock in Safety Fund money, stiU no injustice will be done to them, for the law making paper money a tender in payment of debts, gives to it a value equal to that possessed by gold and silver money regulated at the same rate of interest. While the establishment of the Safety Fund can do no wrong to the banks, it wiU greatly benefit those en- gaged in production and distribution. Believers in the great intrinsic value of gold and silver coins, have nothing to apprehend from the adoption of paper money as a tender in payment of debts, and the reduction of interest. The institution of paper money, and the rejection of coins as a tender, can have no more effect on the intrinsic value of the precious metals, or upon the desire to possess them on account of this value, than the enactment of a law that wheat shall be transported only on horseback will alter the nutritious properties of the wheat, and the desire to use it for food. One would suppose that those who so highly prize gold and silver coins for their intrinsic value, would be strong advocates of paper money; the coins being released from their use as money, the gold and sUver would easily and naturally fall into their hands. * It may be objected that if money be made so plenty, the people will run into extravagant speculations ; but a little thought will make it evident that the system will prevent great fluctuations in the price of property, and of course remove the mducements for speculations. * • For thoueandf) who *re now compelled to have them to pay debts would not use tb.em ; and those whc love them for their inherent value, could easily obtoia them, and )ould keep them to look at for a lifetime without injury to others. \ See Appendix, J. OBJEOilONS CONSIDKEED. 303 It may be objected that so great an alteration in the medium of exchange and measure of value, will derange and unsettle the value of property, introduce confusion into the various branches of business, and break down all existing relations between money and property. But in substituting a better for a worse, the means to effect the change must be improvements ; and every stage, from the commencement to the entii'e exclusion of the present currency, will be a succession of benefits to the mass of the people. The change wUl only lessen the power of capital over the future productions of labor. It wUl deprive no man of the use of his property or money ; both wiU be at his disposal as much as under the present monetary system. Another objection wiU be the risk incurred by un&ith fulness in the officers appointed to manage the Institution Every iustitution must have officers, and a certain amount of power must necessarily be confided to them ; conse- quently a risk of unfaithfulness must be incurred. But other circumstances being equal, the risk is greater or less, in proportion to the action of self-interest ; and ac- cording to the plan of the Safety Fund, no officer wUl be allowed to borrow money fi-om the Fund, nor to be inte- rested in any of its loans. Bonds wiU also be required for the faithful dischiirge of duty. But, granting there may be risk, yet it will be almost nothing compared with that now incurred under the banking system, where the officers have theu- own interests to serve in various ways, and especially by increasing the rates of interest and using the funds of the banks for their private ad- vantage. It may also be objected to the Safety Fund, that it wiU lessen the incomes of widows and orphans ; but there are very few of this class who have iacomes. Objectors on this ground wUl therefore do well to extend their sym- pathy so as to embrace the nine-tenths whose only means 301 A TEtJE MONETAET STSTEM. of support is the scanty compensation for their ddUy and excessive toU, and whose condition, and the reward of whose labor, as well as the earnings of those who have incomes, wiU be greatly unproved by the reduction of the interest on capital. Their sympathies will then lead them to advocate the Safety Fund, unless they are actuated by some other motive than commiseration for the needy. The greatest difficulty, however, to be apprehended in the introduction of the new currency, wiU be found in the attachment of the people to ancient laws and customs, sanctioned by the greatest statesmen of the past, and ages of experience ;* but this feeling operates with the • Is the fact that these unjust monetary laws have been in force from the earliest ages, and produced in every civilized nation their natural evil effects, any good reason for the continuance of such laws ? Are evils any less evils because they are sanctioned by the laws of ages ? On the contrary, do not the evils increase as countries grow older ; and do not the wealth and power become more and more centralized, and the laboring classes more and more impoverished until oppression in- duces civil wars and the overthrow of governments ? This has been the experience of nations for ages. There is now in every civilized nation a continual strife between capital and labor. Has there ever been a nation in which the wealth has centralized with more rapidity than during the last ten years iu this free Republic ? How can we ex- pect to continue this centralizing power and yet ward off its evil effects? Common sense teaches, and experience proves, that like causes pro- duce like effects; and if we persist iu giving to money this unjust centralizing power, it will eventually seal the fate of this nation as it has that of other nations in past ages. People do not seem to con- sider that the laws of right existed before human laws were instituted, but seem to take it for granted that the institution of these monetary laws gives existence to justice and truth ; and therefore all men are Dound to look upon them with the same awe and submission as if they were founded upon the eternal principles of justice. But justice and truth are prior to all human laws ; and these monetary laws are in direct opposition to every act of God s providence, and every just right of man ; and are the most egregious national sin that was ever srganized, or instituted, because the ev>l extends as far as these monc' tary laws extend, corrupting all coutraets between man and man, and OBJECTIONS CONSIDERED. 806 name force in other things, and has heen found to yield in favor of improvements introduced by the progress of discoveries in the arts and sciences. There needs only undoubted proof that an evil exists, and that a remedy can be applied for its removal, in order to secure the re- formation. "We have already shown that great evils have arisen from the unjust monetary laws of the past, and to our mind, conclusive proof has been offered to sustain this pQint. It is now incumbent on objectors to show, for instance, that the inhabitants of cities produce more for the people of the country than the latter produce for the former ; that a man by standing on the corner of a street a few hours in a day to lend the legal representa- tive of value to the necessitous at exorbitant rates of in- terest, produces more of the necessaries of life than a hundred industrious farmers and mechanics ; that the yearly use of the present bank-notes in the State of New York is really worth as much to the people as the $4,435,333 worth of products which they are compelled to sell annually to pay the interest ; or that one and one- tenth per cent, interest would secure to producers a greater proportion of the products of their labor than they are entitled to receive. If they can prove that the productiveness of land and labor is in proportion to the rate of interest, or that the public good requires that the wealth should be concentrated in a few hands, they will then have shown the superiority of our present monetary system. These are things of which farmers and mechan- ics and other producers can judge as well as any states- man or lawyer in the country. If scarcity of money and high rates of interest do not affect the market value of between nation and nation, making the individuals who earn the wealth tributary to those who possess this monetary power ; and eren making one nation tributary to another that merely furnishes a repr» sentatiTe of the wealth. 306 A. TEUE MONETAET SYSTEM. labor and products, let it be clearly shown to tbe pro- ducing classes. If such questions be evaded, it is but fair to infer that the advocates of existing monetary laws are willing or desirous that the oppression of the pro- ducers should be continued, and the people be kept igno- rant of the causes of their poverty, instead of having the reward of their labor and their business transactions regulated by a standard which they will perceive to be just, and of which they can understand the operation. It may be admitted that the theory of the Safety Fund is good, but impracticable at present ; it is calculated for some future generation, when men shall have become more intelligent and virtuous. If the same faith shall be held by the generations which are to follow us, it will be difficult to point out at what period this desirable re- formation wiT occur, because the evil of our present sys- tem will always be in the present, and the good of the plan proposed in the future. We are, however, per- suaded that a large majority of the people are aware that their present depressed condition may and should be exchanged for something better, and the Safety Fund will be regarded by them as neither too Utopian nor visionary to be made immediately operative for their bene- fit. All the objections to the proposed currency, upon the ground that it will lessen the incomes of capitalists who are supported by the labor of others, only serve to show the true working of the Safety Fund system ; for its object is to furnish a standard of distribution which will cause men to sustain such mutually just relations as to render it generally necessary for all to render an equivalent in nseful abor for the labor received from others. CHAPTER V. ADVANTAGES OF THE SAEETT EUND. The Safety Fund will lend money at a low I'ate of interest to all applicants furnishing the requisite landed security ; hence every town, county, and State, which has the power to perform the necessary labor, can make inter- nal improvements without pledging its property to large cities or to foreign nations to borrow money. A few years since, the high and fluctuating rates of interest so depressed the prices of products, that a number of the States were unable to pay the half-yearly interest due on their bonds ; consequently, they fell to a very low price, and many of the holders suffered great losses, while large capitalists were enabled to take advantage of the fall, and to buy the bonds, in some instances, at less than one-fifth of their real value. The canal bonds of the State of Illi nois were bought at from sixteen to thirty cents on the doUar. A short time after this, in 1845, the purchasers of these bonds made a negotiation with the State to fur- nish it with a further sum of money to complete the canal, on condition that a mortgage should be given to them on the canal and adjacent lands, securing the money so advanced, and also securing the par value of the bonds bought at these reduced rates, and the interest. It seemed as if the people thought this money would actu- ally excavate the canal, quarry the stone, and build the locks. But when they had received the money, they were obliged to build the canal by their own labor, and now that it is completed, to collect the tolls for the trans <0T 308 A TBTJE MONETAET SYSTEM. portation of their own products, and from all the mer- chandise passing on the canal, and give this income to the foreign and other holders of the bonds for merely furnishing a representative of Illinois property. If the Safety Fund had been established, and money had been issued representing the property of the people of Elinois at an interest of six per cent., their property would not have been more encumbered than by being pledged to foreigners at the same rate of interest. The property that secured the loan to foreigners would have been good security to the Fund. The interest on the loan would have been gained by the people of the State, instead of being paid to foreigners. All the interest that Illinois pays to other States or nations, is paid for the use of money, and not for the use of actual capital. If the people of Illinois had had no capital, they could not have borrowed the money; if they had ample capital, they certainly ought to have had the power to obtain a proper representative of it at home, instead of being compelled to go abroad for it. How much greater would have been the prosperity of this State had the Safety Fund been established before she began to make her internal improvements. The necessary money to carry them through without delay could have been obtained from the Fund at one and one-tenth per cent, interest, and no embarrassment from a scarcity of money would have been felt in any department of industry. The improve- ments would have remained in her own hands, and she would long since have been receiving the advantages of them in tolls and increased facilities of transportation. But under the present monetary system, she has suffered the loss of credit, and to complete her improvements has been compelled to mortgage her canal and canal lands, and thp labor of coming generations. Millvjns of money are now paid in interest to foreign nations on our Government and State debts. Besides, ADVANTAGES Off TttE BAFETT FmiD. 3()9 in all our large seaport towns, many foreign capitalists have agencies or banking houses for drawing bills of ex- change, dealing in stocks, discounting notes at enormous rates, etc., and in this way immense fortunes are accumu- lated from our labor. These capitalists exercise a great influence upon our money market. When our people shall have an ample national currency, at a low and uni- form rate of interest, these capitalists and agents will dis- appear. Money-brokers and stock-jobbers, who now live by fluctuations in the money market, will abandon an occupation no longer profitable. The value of money being made uniform, all kinds ot stocks will maintain a uniform value, determined by the per centage interest which they wiU yield, and the time they have to run before the payment of the principal. If they bear a higher rate of interest than the legal one, of course they will be above par. AU the State stocks which the States have reserved the right to pay before maturity, wUl be paid with money borrowed at one and one-tenth per cent. Even if the bonds of some of the States have a number of years to run, these States can much more easUy pay five, six, or seven per cent, inter- est per annum upon them during the period, than they can under the present monetary system, because the value of their labor and products will be increased. The same will be true of all private bonds and mortgages having a number of years to run. A few years will ex- tinguish aU these old loans, and then there Avill be a nearly uniform rate of interest on all obligations through out the nation. From what was said in the Introduction, it appears that the farmer or planter is very dependent upon the mech* nic for his implements of husbandry, for his house, furni- ture, books, etc., etc. The mechanic is certainly not less dependent on the farmer for the materials of his food and clothing, and these are indispensable to his fcxistence. 310 A TBUE MONETABT SYSTEM. There is no such thing as independence among men ; they are and must he helps to each other. Although all useful trades and occupations are mutually beneficial and neces- sary, yet in most nations a jealousy exists between the agricultural and manufacturing interests. But in reality the natural tendency of the prosperity of one is to increase the prosperity of the other. The object of both is to supply themselves and each other with food, clothing, and the other comforts of life. If an ample supply of money were at all times in circulation, at a uniform and sufficiently low rate of interest, both the farmers and the mechanics would find a ready market for their products ; and the prices of their products would naturally adjust themselves so that both parties would receive an equitable share of the proceeds of their labor. Each would be justly contributing to the welfiire of the other, and each would be benefited by the labor of the other, and would receive an equitable proportion of the products, because the representative power by which the distribution was made, would not be capable by its income of engrossing the products of either party. But so long as the income power is the all-absorbing power which takes the larger portion of what both these parties earn by their labor, a third party that holds this legal power of income, wUl take without labor the larger share of what both the others jiroduce. While the poverty of producers is supposed to be caused by over production, and the sale of too many products, the evil win be attributed to laws favoring one class of pro- ducers to the disadvantage of others. But when the real cause of the oppression, that is, the monopolizing power of money over aU the productions of labor is pei-ceived and rectified, the various branches of productive industry will harmonize, and promote one another's welfare. Some may not understand how the rate of interest on money affects the compensation of labor. Suppose tha ADVANTAGES OF THE SAFETY FtTlID. 311 owner of a small farm is now obliged to work early and late for a mere subsistence. He has little or no meana to spare for the education of his children, and in fact cannot give them time to attend school. If this man Bhould be told that the high rate of interest at which money is loaned deprives him and his family of the com- forts of life and the means of education, he would very natui-ally ask: "How can that be? I never borrow money and pay interest, nor do I lend money and re- ceive interest. The payment of a high rate of interest by others does not affect me ; it does not diminish my crops. I raise food for my family, and the produce that can spare I sell, and buy such other articles as we need, and the storekeeper does not charge me any inter- est. I have enough to do to live, without troubling myself about the interest on money." He is indeed aware that many people live with far less labor than he does, and have many more comforts, and this he attri- butes to their good fortune. He does not grasp the sub- ject sufficiently to perceive that the interest on monej is a standard or governing power, which compels him to contribute his proportion of the products required tc support all the non-producers in this country, and pro- bably some of the capitalists of Europe. He does not see that a large per cent, is taken from the price of his products by the purchaser, in order to enable the latter to pay his interest and live by the purchase and sale ; and that, for the same reason, when he purchases, a large per cent, is added to the price of every article pro- duced by the labor of others. This difference in price must be sufficient to support all who live upon income without labor. Let the Safety Fund be established, and interest be reduced to one and one-tenth per cent., and after a year or two let inquiry be made of the same farmer about his welfare. He would probably say, " I am doing very 312 A TKUE MONKTAEY SYSTEM. well ; I am much better oflF tlan I was two or three years ago. I send my children to school, and have a good living." Should he be told that his prosperity was owing to a sound currency and low rate of interest, he might say : " I do not borrow any money from the Safety Fund, and I have no money to lend upon interest. I raise corn and potatoes as formerly, and sell them to the same merchants. I do not see how the reduction of the interest on money that other people borrow is any bene- fit to me." Although he do not perceive the causes of his past privations or of his present comforts, he will be as sensible as any one of the improvements in his condi- tion. If a man suffering intense paui were informed that it was caused by the disorder of a nerve, he might not understand this, nor think so small a cause could occasion such acute suffering. Apply the proper remedy, let the nerve recover its tone, and the pain cease, and he would be conscious of health, although he might not understand how the pain was removed. Whether a man understand the laws relating to his physical system or not, he wiU suffer if any organ do not perform its duty , and whether laborers understand the constitution of money or not, they must suffer all the consequences of its imperfect or deranged organization. There will doubtless be a class of objectors to the Safety Fund who wiLL contend that it is by the use of greater talents, and not by the unjust power of money, that a few gain the majority of the wealth in a nation. But it is evident, that if the greater talents of the few are not dependent upon the unjust power of money and the love of gain by its exorbitant rate per cent, interest, that diminishing the power of money and greatly lower- ing the rate per cent, interest, cannot in the least Lniringe upon the full and fi-eest use of their greater talents, either for the production or the acquisition of wealth, or for any other just and lawful purpose. ADVANTAGES OF THE SAFETY FUND. 313 When the natural reward of labor is secured to the laborer, poverty cannot exist in any family whose mem- bers are able and willing to work. And those who can so easily provide for their own wants, will cheerfully con tribute to the support of the sick and needy. They will be able to supply themselves amply with the comforts of life, and have an abundance of time for intellectual and moral culture. The incentives to vice will be compara- tively few. Avarice first arises from the fear of want ; to remove want v\t11 therefore in a great measure re- move this vice, and the unnumbered evils which are its attendants.* It is frequently said that the people must reform, and that not until then may we hope for good laws. Not so : we might as weU expect families to grow up virtuous where the parents are cruel, profligate, and vicious, as to expect nations to be virtuous under op- pressive laws. Make the laws a standard of right, and their benefits must secure an improvement in the morals of the people. It is often said that men are naturally lazy, and will not labor unless compelled by an urgent necessity ; and it may be objected to the Safety Fund that if laborers are suppKed with all the necessaries and comforts of hfe with far less labor than at present, the effect will be tc induce indolence. This opinion is held mainly by men who have accumulated large properties, and by those who have been placed in easy circumstances by theii ancestors, and who, under the present system have the power to impose the necessity to labor. This class seem to think it their right, if not their duty, to take all the surplus earnings from laborers, that the latter may be kept at work. If it be true that man is naturally indo- lent, it win be difficult to show any good reason for com- pelling the larger part of the race to labor excessively tfl • See Appendix, K. 314 A TEUE MONETAET SYSTEM. keep from starvation, while the greater and better por tion of their productions is applied to support a sm;iller class without labor. There are those, however, who be- lieve that man is naturally industrious. They know that healthy children are continually active, and that when motives of comfort or pleasure ai-e offered, they are ever ready to make great exertions to possess themselves of the desired objects. Hence they believe that if the pro- ductions of labor ^vere fairly awarded to the producers, the prospect of the comfort and elevation in store for the industrious, would present sufficient motives to secure all necessary and desii-able exertion. This certainly is trae unless the natures of the child and the man are radi- cally different. But if, when a child had made great exertions to obtain some desired object, others should by a secret or visible power prevent his receiving three- fourths of his well-earned reward, and the same exertions should be repeatedly followed by the same results, doubtless he would be discouraged from ftirther at- tempts. If under these circumstances he should become idle, or seek to acquire without laboi', it ought not to be attributed to natural indolence, but to the want of a reasonable assurance that his labor would be successful. The situation in which the producing classes of aU nations are placed, seems analogous to that of the disap- pointed child. It has hence become a very common I'emark that man is naturally indolent. If discourage- ments were perceived by the minds of children equal to those famihar to the laboring classes, they would be so disheartened in their efforts as apparently to change their natures, and we should then have lazy children. Their efforts also would depend on necessity ; and men and children would be found to have the same natures, and to be governed by similar motives.* • See Appendix, I», ADVANTAGES OF THE SAFETY FUND. 315 As a further illustration of the foregoing principle, we may notice briefly the policy which our Government should pursue in the sale of the public lands. If a country is to become wealthy, facilities must be aflbrded to those who perform the labor necessary to make it rich. It is generally admitted that a free people will perform more labor, and make greater production than an equal num- ber of slaves. This seems to prove that those who expect to own and enjoy the proceeds of their labor wiU pro- duce more than those who are stinted in the necessaries of Ufe by having their products appropriated to the use of others. When large estates are rented, and the land- lords take a great share of the earnings of their tenants, the farms are not generally as well cultivated, and the buildings and other improvements are seldom if ever as good as where the farmers are the owners of the soil which they cultivate. The difference is doubtless owing to the hopelessness in one case that even by severe toil they shall materially improve their condition, and to the prospect in the other of enjoying the fruits of their labor. To the former labor is a burden, while the latter cheerfully perform a greater amount. If then our Gov emment desires the improvement of the public lands, encouragement must be offered to those who wiU. pur- chase and cultivate them. Speculators who buy and sell them at a tenfold profit, and make no improvements on the lands, add nothing to the wealth of the country ; but purchasers who go upon the land and improve it by their labor, increase the public wealth. Let then the Government sell the lands to actual settlers only, in parcels not exceed- ing half a section to any individual. Let a small part of the purchase money be paid down, and let the balance remain on mortgage at one and one-tenth per cent, inter- est until the occupant is disposed to pay it. In this way the land will at once biing an income to the Government as good as if the whole purchase money were paid and 316 A TETTE MONETAET SYSTEM. reloaned at the legal rate of interest. The Government will be perfectly safe, and the people will pay for and improve the lands. This will at the same time buUd vip a prosperous and happy people, who wiU soon add im- mensely to the wealth of the nation, and who, in improv- ing their own condition, will contribute to the comfort and happiness of others by supplying them with food, and receiving their surplus products in return. If the laws be such that the people can secure a good living and a handsome surplus without labor, and can earn only a scanty subsistence and no surplus by it, they will seek to exempt themselves from labor. But if the laws be made such that labor will secure to them a good living and a handsome yearly surplus, while without it they can obtain only a poor living and no surplus, people will incline to labor. If interest be reduced to a just rate, almost the entire population of the country wUl be en gaged in some species of productive industry, and the laboring classes will be relieved from the support of a numerous body who now live by their wits — ^that is, by contriving to obtain the products of others without toU. When money is made a just standard, the injustice of contracts founded upon it will cease, and many laws necessary to support the present unjust standard wUl dis- appear. So long as monetary laws continue a standard that will wrest products from producers, and place and pro- tect them in the hands of non-producers, they will require for their support the aid of the sword and bayonet, be- cause man's natural sense of right revolts against the usurpation and the injustice of such protection. But when monetary laws shall sustain a just standard of value, which will place and protect products in the hands of their producers, they will of course conform to the natu ral laws of production, which were ordained by a highei than human power. The distribution then being accord ADViillTAGES 01" THE SAPETT FUND. 817 ing to justice strife -will cease, because a man having his own rights respected and protected, will naturally respect and protect the rights of others. The time is not far dis- tant when this truth will be known and appreciated by all ciAnlized nations, and the mistaken power of legal Might which has such dominion over man, will wither before the meek and peaceable power of Right that exists in the natural laws of a wise and beneficent Creator. OONCLJSION. In the previous pages we have discussed the rights of labor and capital for the sole purpose of convincing the public that the rapid increase of capital by per centage, now favored by monetary laws, while it stimulates the enterprise of the few, and naturally and inevitably secures to them great wealth, represses and cripples the enterprise of the great mass of the people, tending to pau- perism, crime, and indirectly, but certainly, to the over- throw of the Government, which, disregarding the ratio of the actual increase of property by labor, has given the preference to capital : that justice to labor, while it wiU secure individual comfort and happiness to all who are able and wUling to work, will rapidly develop the highest qualities of our nature, and all the resources of our coun- try, and greatly increase the national wealth ; that it will give to civilization an impetus such as the world has never seen, and relieve it from one of its hardest condi- tions, that of creating desires and necessities which it pro- vides no means to gratify ; that it will silence at once and forever the doubt so often felt and spoken, whether the happiness of the mass of men has been promoted by the change from the savage to the civilized state. It has been shown that labor constitutes the real trea- sure of a nation, and without claiming for it anything more than its natural rights, we insist that these should be guarded by the most jealous care of government. It kas also been shown that under existing monetary laws, labor is not and cannot be properly rewarded. Change is indispensable, and fortunately it can be effected with- out altering the Constitution of the United States, with ooNOLtrsioN. 319 out tb* slightest disturbance to the present institutions of soeViy, or real injury to any one. It ie ^ow for the American people, who have founded their government upon the principles of equality and free- dom, to establish the rights of labor, which have been nearly disregarded in all previous time, and only cared for as they have served to minister to the ambition and luxury of courts and nobles. Let the social position of the laborer, to which he is entitled by the ordination of God in the laws of nature, be ascertained and recognized, and poverty, crune, and most other political and social evils, will give place to competency, virtue and happi- ness. The facts contained in this volume show plainly that our monetary system favors the rapid concentration of capital in opposition to the rights of labor, and we deem it warrantable to assume, that nearly all who shall care- fully examine the subject, will be convinced that our present laws of distribution are continually doing a great wrong to the people. Nothing more simple than the Safety Fund need be desired, and the more it is considered, the more adequate it wiU appear to distribute the wealth to those whose labor earns it. This system will as certainly reward labor, as the one now in force has oppressed it. It will infringe no rights of property. The owners of wealth wiU continue in undisturbed possession. They will be able to lend their money and rent their property as readily at one and one-tenth per cent, as now at six or seven per cent. The dollar received by the rich man in int^est or rent will purchase as much as the doUar earned by the laborer ; precisely as at the present rates of interest. Landowners will be at liberty to rent their land to tenants, work it themselves, or leave it untilled, according to their own pleasure : the low rate of interest will not prevent it from .yielding crops. Capitalists will 320 CONOLUSION. not be required 'to favor laborers, nor to give them en> ployment, nor to diminish the hours of toil. Capitalists and laborers ■will be free to make their own agreements on these points. The Safety Fund contemplates no agrarian distribution. It asks for no distribution of lands nd property, and for no contributions of money by either the Government or individuals to the support of laborers. Laborers will need no favors. They only re- quire that the Government establish a just standard of value, which wUl allow them to possess an equitable share of the fruits of their labor.* Who are those directly interested in the adoption of the Safety Fund? All agriculturists, manufacturers, mechanics, planters, in short, all who wish to earn a support by honest industry. Merchants wiU do a safe business in exchanging products, and their profits wiU be moderate and sure. Nine-tenths of our whole population will receive the pecuniary benefit which is justly their due, and the remaining one-tenth will be left in undis- turbed possession of their present wealth, and like their feUow-citizens, at liberty to increase it by any usefiil employment. The desire of capitalists to accumulate is often owing to the wish to leave large fortunes to their children. But if they lightly consider the instability of wealth, they cannot expect all, or even one-fourth of their posterity to remain rich. Will it not be, to reasonable men, a thousand times more consoling to leave such laws as with a moderate amount of labor will secure to their whole posterity the comforts of life and the means of education, than to leave to their children the money and the present monetary laws, which must in a few yearr compel the larger part to toU incessantly for a scanty subsistence, and deprive them of mental and social culture? Are not just laws a far greater blessing to transmit than any amount of wealth? We believe that many among * See Appeiulix, M. OONOLUSION. 321 the rich, perceiving the justice and beneficence of this system, will be found iunong its most ardent supporters. In all civilized nations much attention is now directed to the enormous evils of society ; and thousands, yes, we may say, millions of good and benevolent men are en deavoring to do something for their removal. But there is a great variety of evils, and a corresponding variety of opinions as to the means to be used to accom- plish the desired objects; hence reformers split into numerous societies ; and one society combats drunkenness, another slavery, another land monopoly and the oppres- sion of labor, another war. These are admitted to be great evils, and all who are truly desirous of their removal are the good men of the age ; because they are striving to alleviate the sufierings of mankind, and to improve the moral character and condition of society. Yet their work wUI only serve partially to modify these evils, and will never eradicate them, because they are working not at the cause but at the eifects. To remedy the wrongs they must begin at the foundation which supports them, and make that just and right, and then the evils will be easily removed ; as a good house may be easily erected on a good foundation, but on a bad one, the people might always work at the effects produced by it on the work above, and the most that could be done would not prevent its being a rickety, poor building ; while the same labor on agood foundation would have built up a splendid edifice. And had the foundation of con- tracts been just, the labor performed during past ages would not only have provided amply for the physical wants of the race, but would have supplied the best means for their moral and intellectual culture. The root of a tree produces a trunk ; the trunk naturally divides Itself into branches, which subdivide themselves into thousands of smaller branches and little twigs. All these rf22 00N0LTJ8I0N. are supported by the root and trunk. If we girdle one of these little twigs, it will die off above ; but will be likely to sprout out below. A large branch cut off will die, and in dying will impart new vigor to the other branches ; but kiUing the root will destroy the tree. So with the evils of society, most of them spring from one root, and they have become a great tree. The trunk divides itself into many branches, which subdivide into many other branches, and little twigs. Girdling this twig, or this or that branch, will never destroy the evil ; but kill the root, and then these large, and thousands of smaller branches and twigs will wither, decay and drop off, and the trunk will die. We desire to call the attention of phUauthropists of every nation, chme, and sect, to the great, hidden evil which lies at the root and below the surface, that they may combine their strength, and by one joint effort directed at the root, slay the thousand great sins of a nation, so that they will at once begin to wither and decay, Uke the branches and twigs of a tree kUled at the root. If the philanthropists who are now engaged in their works of kindness, and the producing classes who so wrongfully suffer by the present system, would but use their united efforts to have a just currency substituted for the present unjust one, it would be speedily accomplished ; and the consequent moral and physical improvement would be without a parallel in the history of man. When any nation shall adopt a just monetary system, the abundant supply of comforts, and the good will, peace and happi- ness which wUl ensue, wiU form such a contrast to the present condition of society as to astonish the world ; and all will wonder that the power of money was adequate to the production of so much evil. By the unjust power of money tyrannies have been built up and sustained, and by making it a just standard of value, and CONCLUSION. 323 an equitable balance against actual production, it wiU again demolish them, giving to man his rights throughout the civilized world.* The means necessary to put in operation and sustain the Safety Fund are not confined to the few capitalists who now control the currency, and furnish the Go.vern- ment and the people with money. Our farmers and mechanics alone have sufficient landed estate to secure several times the amount of money necessary for our currency. The only thing required is a law of Congress adopting this system. The passage of this law must be effected by direct petition, and by making the measure a leading question, the people voting only for men who wiU use their influence in favor of it. Every one, thoroughly convinced of the truth of the positions taken in this book, can do something to diffuse a knowledge of them among his friends and neighbors. The most effectual way to ex- cite interest in the system, and give it prominence, would be to call public meetings and lecture upon the subject. The objects which will be secured by its establishment, are so evidently in accordance with the principles and aims of the Christian religion, that ministers of the Gospel cannot fail to advocate it with the same zeal that they advocate jjeace, justice, and good-will among men ; nor can states- men who legislate for the well-being of their countrymenj refuse it their support. The public newspapers have • If we could put an end to its unjust use there is no danger of our Government ever becoming a monarchy, the predictions of Europe to the contrary notwithstanding. But should the interest on money be regulated by our Government, at just and equal rates, there would be a Union in this country stronger than any govern- ment ever yet established, and, instead of our becoming a monarchy, the governments of Europe would be obliged to adopt our form of government, or very much better their own, for I am persuaded that this oppression of the people who earn the wealth of nations by thei- industry must, from its severity, cease. — Currency the Evil and th4 Remedy. 324