1*17^^%'^^' .£vrr ■ ■ . ■ I " , ' ! 1 . ' ! ' rtn «ih itiiniiiiwiiin Class tf&ij^ Book : _ Copyright^ . COPYRIGHT DEPOSIT. SCIENCE OF VALUE No 10 The SPHINX CATECHISM By HENRY RAWIE "For the needy shall not always be forgotten: the expectation gf the poor shall not perish forever." — Psalms 9-18. GEO. W. KING PRINTING COMPANY 31 SOUTH HOWARD STREET BALTIMORE, MD. Copyright Secured 1911 by HENRY RAWIE 910 American Building, Baltimore, Md. eial- ists and others, and the idea prevails that the education of the mass of the people along eco nomic lines is absolutely necessary before any general or important change may be under- taken. 578 Q. Do you dispute such an evident propo- sition? It seems inconceivable that without 224 The Sphinx Catechism. education any great forward movement is pos- sible? A. This is begging the question. It is true that without education any great change is impossible, but this does not refer to the kind of education the theory of reform suggests. 579 Q. You mean the education of the mass is not essential, but that the few must acquire a correct knowledge before the change may be made successfully? A. Yes; a very few may succeed in creating marvelous economic changes. 580 Q. How so? A. The few may inaugurate a change at one place which has such obvious money benefits to themselves and to others that the new oppor- tunity to make money will spread like a prairie fire. 581 Q. For example,- mention some such change ? A. The introduction of steam and electricity did not require technical knowledge among the people in order to extend the benefits of such development, but it first met with the violent opposition of the mass. 582 Q. Do you mean that the discovery of Conclusion. 225 correct economic principles will afford new and great opportunities to make great sums of money for those who put the correct principles in operation ? A. Yes; and such opportunity will not be restricted to introducing new lines of enter- prise, but will offer great profits in prevailing enterprises, by having them conform to correct financial and economic laws. 583 Q. Mention a single example? A. Any new corporation may issue its stock so as to make it redeemable in cash on demand, principal and interest, and it would at once establish the superiority of such an issue. 584 Q. But the present heavy debts and long time bonds of existing corporations could not well be suddenly changed? A. Each of the great corporations is rapidly being confronted by the danger of their own debt, and by the fact that they will soon be unable to secure the new money they require, and by the further fact that they can not meet new changes demanded by progress, unless they may secure new money from some source. 585 Q. The present disorder in distribution of wealth is a result of long continued abuses, whereby wages have remained stationary, while 226 The Sphinx Catechism. wealth has developed in enormous proportion. Money circulates in artilicial channels instead of natural ones, and the volume and rate of profit is much too low for the new order to replace the old? A. In unwinding the rope, it is true we have a short end of rope to begin with in our tight line of debts, but each turn in unwinding will increase the ease with which subsequent lengths of credit may be liberated. 586 Q. Your proposition of unwinding the rope is of this character: we are now bound close by credit being tightly wound around the stake by debts. We suppose it is necessary to pay these debts, and when some of them must be paid on account of all of them destroying the outstanding credit, we have a period of bankruptcy and hard times. You propose to pay them all without any liquidation to speak of, and not only release a small part of credit to circulation, but to release all of it? A. The new proposition is to secure a path whereby this temporary relief from debt will change to a permanent relief and debt will be abolished without stopping industry, and with great advantage to all concerned. 587 Q. The great evils of debt have always been recognized by every writer on public quefe- Conclusion. 227 tions, but any remedy was forestalled by the apparent necessity of requiring debts io be paid in order to prevent any sacrifice in the time-honored and sacred rights of property, ihe writers forgetting all the time that debt itself was working a fearful destruction in the sacred rights of property for the mass of mankind? A. Yes. 588 Q. According to the scheme proposed, the corporation is not to be required to pay its debts, but is to be allowed to make such value perpetual by creating a reserve fund which will be but little more than one year's interest money on the present debt? A. Yes; that is the manner in which the change proposed will be of great advantage to labor and capital. 589 Q. This no doubt would require govern- ment regulation of corporations? A. Yes; but only to protect the investments of the public. The government could safely guarantee the redemption of capital stock on demand by taking charge of the reserves, and in case of any failure to keep its stock at par the company would at once be operated by a government receiver and its securities held at par and reduced in volume to conform to the established standard of value. 228 The Sphinx Catechism. 590 Q. In abolishing all but commercial debts, the general and municipal governments should be first to make the change, and to do so would probably require extensive changes in the system of taxation? A. The new system of taxation has already been put into successful operation in e^ery pro- gressive city in the United States and in many other countries. 591 Q. Do you refer to assessments accord- ing to benefits? A. Yes; the debts of both the general and municipal governments arise wholly on account of defective tax methods. Every government expenditure is a benefit to some property owner by increasing the price of his buildings; to assess the expenses of government upon the property benefited will not only abolish all other forms of taxation, but will provide a cash basis for conducting the government. 592 Q. If a city desires to improve a street, instead of issuing bonds, you would have it issue a corporation stock, which would be a lien upon all the property benefited by the improvement, the same as is now being done with bonds ? A. Yes; except no provision would be made Conclusion. 229 to retire the stock, because if the stock was retired the benefits derived from the improve- ment would never become a part of the wage fund, but would permanently add to the value of abutting property, at the expense of labor. 593 Q. You mean to say that streets, sewers and all other forms of permanent improvements need to be represented by liquid capital? A. Yes, most decidedly, and in such forms as are demanded by the requirements of trade. 594 Q. The issue should be in such denomi- nations of one hundred dollars and its multi- ples as circumstances would demand? A. Yes ; in order to keep the volume of money and capital equal to the demands of the cash market, it is necessary to have all valuable property represented by its own value in the circulation. 595 Q. Would a part of this capital stock circulate as money? A. Yes ; all currency above fifty dollar denom- inations should consist of one hundred certifi- cates, bearing interest, so as to draw the re- quired volume of them into circulation. 596 Q. In this manner you would rapidly increase the money in circulation at a uniform 230 The Sphinx Catechism. standard of value and in local quantities to fill up local requirements, and would pave the way for a marvelous season of unending prosperity? A. Once the system obtains general headway, it would gain speed and power constantly, and capital would increase rapidly until the check came from a rise in wages. 597 Q. But with wages rising, profits would rise and would again expand capital? A. Not necessarily, because the time will come quickly when the volume of capital and the price of capital will reach the limit of price determined by the standard of value, and wages continuing to rise will require the rate of profit to advance. 598 Q. Then the reason we must now conform to existing rates of profit is because the present standard of wages is below the natural stand- ard, and wages can not rise until after we secure the increase in circulation, which a cash market for capital will introduce? A. Yes, and because we must begin the change under prevailing low rates of profit, gov- ernments will have an enormous advantage over other corporations and can not be hampered by them in introducing the new order, but, on the contrary, will be eagerly solicited by them to Conclusion. 231 be permitted to issue insured stock in place of debts and to have the government supervise their finances. 599 Q. Suppose a railway corporation desired to secure the assistance of the general govern- ment in changing its present system to con- form to the new regulations, how would the volume of capital be determined? Would a physical valuation of the railway property be required to fix a basis of value for securities? A. No; the standard of value for capital is not directly determined by what is known as physical value, because of the wide variation between cost and selling price, and the capital to be issued to the public should be governed by a selling price standard without regard to cost, be the cost more or less than the true sell- ing price. 600 Q. Suppose a railway system having now a variety of bonds and stocks in circulation should desire to conform to the uniform system you outline, and issue only two kinds of securi- ties, which are to be guaranteed by the general government at par and interest on demand, how would the capital value be determined in your judgment? A. The gross receipts is the basis of all pay- ments, either of wages or dividends or liqui- 232 The Sphinx Catechism. dating excess capital, and making it conform to a uniform standard of value. 601 Q. The first charge upon gross receipts is for wages and the cost of maintenance, which must be deducted before there is a surplus for capital at any price? A. Yes; the past experience of railways, for example, under good management, will prove that sixty per cent, of the gross receipts is re- quired for current accounts and forty per cent, may be set aside as the income for capital account. 602 Q. The railway seeking to take advan- tage of the new system offers no other balance sheet to the government than an accurate state- ment of its average gross receipts for a ten year period, for example, together with its expenses ? A. Such would be sufficient, and if its aver- age gross earnings were ten million dollars per year, of which forty per cent, would be allotted to capital account, its selling value would be easily estimated. 603 Q. In such case four million dollars a year would apply to capital, and the total issue of a standard six per cent, security would fix the value of the railway at about sixty-five mil- Conclusion. 288 lion dollars, and five per cent, of this sum must be set aside for the reserve or insurance fund? A. If the rate of interest was six per cent, the reserve must be maintained at five per cent, above interest accumulations, and eight per cent, would probably be required in this case, allowing six months' interest in advance to be held in the reserve fund in addition to the five per cent 604 Q. In such case the government would exercise a trustee's supervision over the finances of each corporation, as is done by corporation bankers ? A. Yes. 605 Q. Could the government debt be elimi- nated in the same way ? A. Yes; the government should replace its debt with national stock at a uniform rate also at a rate higher than the prevailing one, and make the exchange for its present debt, and stop interest on the original debt after oppor- tunity to exchange securities had been given. 606 Q. In each municipality the issue of cor- poration stock would bring about the much to be desired local supply of capital held to a local circulation? A. Yes. 234 The Sphinx Catechism. 607 Q. The tax system must necessarily change by an extension of the present system of assessments according to benefits until it includes all manner of taxation, national, state and municipal, in order to maintain the various departments of government on a cash value basis ? A. Yes. 608 Q. And all that is at present required to revolutionize the distribution of wealth is for governments to open the way; to change their own debts into credits, and offer opportunity and assistance to other corporations to follow their example? A. That is all. Baltimore, Md., April, 1911. r 16 1911 One copy del. to Cat. Div. Hit 19 i9ir