HB 171 .B72 Copy LIBRARY OF CONGRESS. §|ap. ©ujii^ng^t !f a* Shelf .M-Bj 7 h 1 tB 1^ UNITED STATES OF AMERICA. TWO ESSAYS ECONOMICS JOHN BORDEN CHICAGO. S. A. MAXWELL & CO. 134-140 Wabash Ave. i8go. COPTRIGHT 1890. BY JOHN BORDEN^ CONTENTS. I. WEALTH, - - Pages i to 75. II. AMERICAN MONEY, Pa(;ks 77 to 139. WEALTH. I. DEFINITION AND UNIT. According to the common and general opinion anything is wealth which admits of ownership and has a money value. If a man possesses anything which has no money value; or, in common parlance is not worth a cent, it is not wealth. But if he can sell it, he infers that it is wealth although he may be ignorant of the cause of its value. As for instance, one may gather ginseng and sell it, and therefore regard it as wealthy although he may have no knowledge of its virtues — if indeed it has any. The word wealth as commonly used is the name given to each one of a class of objects, which answer to the above definition separately, and also, to the entire class col- lectively. As the word is often used it implies abundance, affluence, opulence, riches; but quantities are comparative, and under the definition (Webster) is quoted the expression, I have little wealth to lose (Shaks). Therefore, it is proper to use the word to designate a thing as wealth, or as belong- ing to a class of objects so called, whether the quantity or value of the article is great or small. The above definition requires that all objects, which are en- titled to be called wealth, must possess a value common to them all, and which is called money value. This definition, although it is directly deducible from the actual use of the word, wealth, demands for its elucidation an explanation of the word value, and especially of money value. Anything which is either necessary, useful, or agreeable to a man has value to him. It has utility to hira — utility being the state or quality of being useful (Webster). The man has a desire, or want (a demand) and the thing has a capacity to satisfy it (a supply). Therefore, the thing has utility to him; it possesses in itself a capacity to satisfy his desire or serve his purpose, and he furnishes the desire or purpose. Utility, therefore, expresses a relation between a person and 2 WEALTH. an object, or more generally, between a desire or purpose and the capacity to satisfy it. Use value or value in use, are phrases, which, as defined by their inventor (Adam Smith), express or signify the utility of the object or thing referred to. If a thing has utility it has a use value, and vice versa. The two words are synonymous. One expresses the relation objectively and the other subjectively. In order that utility or use value may exist, there must be a desire or purpose and also the means to satisfy it. Water has no utility to quench thirst unless there is thirst, nor fire to ward off cold unless there is cold. Food has the capacity to appease hunger if it exists — But food has no utility or use value for that purpose if there is no hunger. By chemical analysis a comparison may be made of the nutrition contained indifferent kinds of food. And thereupon it might be said that one kind had more utility for that purpose than another. But although horseflesh may be as nutritious as beef or mutton, yet to those who want or desire the latter, they have a greater use value. In food, and in everything else, the consumer ex- ercises his choice, and the thing which he prefers has the greater use value to him at that time. The intrinsic prop- erties which a thing has or is supposed to have and which en- able it to be useful would continue to exist if mankind were extinct, but in such case the thing would have no utility or use value because there would be no wants to satisfy. It has been said (Cairn es) that, utility has been understood to mean the quality of being suitable for human purposes generally, and the degree of utility to be measured by the im- portance of the purposes to which the useful commodity min- istered; as, that water is more useful than alcohol; coal than a diamond; and iron than gold. It may be true that water is more useful to quench ordinary thirst, or for washing, cook- ing, irrigation or navigation than alcohol, yet the latter is more useful than water for many important purposes in the arts and in medicine. Coal may be more useful to generate heat than diamonds, and the latter more useful to cut glass, point a mining drill, or for ornaments, than coal. Iron may be more useful for horse shoes and many other purposes than gold; but gold is more useful to plug a decayed tooth and for many other purposes than iron About the comparative im- portance of many of these uses opinions might differ. But WEALTH. 3. it is obvious that the above meaning loosely given to utility is too indefinite and fails to bring into view the true signifi- cance of the word; because "the quality of being suitable for human purposes generally" depends upou the existence, na- ture, and amount of human wants, as well as upon the capa- city to satisfy them. Since utility and use value depend for their existence upun wants (the demand) and the means to satisfy them (the supply)^ and both of these vary, then it follows, that utility and use value are variable and not constant quantities. The capacity to be useful may vary. 1. It may be lost in whole or in part, the food may spoil or decay; the air become foul; the water stagnant; the bouquet may wither; the gem become cracked, broken, or lose its lustre; the watch cease to keep good time; and the goods may deterio- rate, get out of style and become old stock. The capacity to be useful may not exist in fact, but be only imputed to the object; the patent medicine may not be a panacea in reality; nor the hair restorer a restorer in fact; and the picture or gem maybe bogus. 2. The quality of the article may vary; the cloth may be homespun, shoddy or fine goods. All kinds of articles vary through all degrees of quality. 3. The quantity may vary. The supply maybe scant or the contrary. Crops may be short or over abundant. It is some- times reported that in remote localities Indiaii corn is, or has been used for fuel. Although the corn had the same nutri- tive properties and would make as much whiskey, glucoj belong to the class of unearned increments. If those who enjoy them would forsake the city and retire to the solitude of the country they would probably find that the value of land at a great commercial center was not due to their pres- ence but to the trade and business of the world. 62 WEALTH. The argument brought against the land owner founded upon the small size of the earth and its limited productive- ness is quite premature and too far fetched for this country, where land is of small value and vast regions are offered to Tbe given away to actual settlers. Land here is merchandise. It is held by simple forms of title and stands substantially upon the same footing with goods and chattels. Everywhere land is for sale, and throughout the public domain is offered as a free gift. If any one desires to share in any increment or profit from land, let him save a part of his earnings and invest them in real estate, or go west and take up a home- stead. The man or woman, who means to win, saves some- thing. Dr. Franklin saved money out of his wages while at work in London learning the printer's trade. The Chinaman saves money, no matter how small his wages. There is spent annually in Chicago in smoke and drink more than fifteen millions of dollars — a large part of it by the wage laborers. A part of this might be saved. In this country, wealth is offered as the reward of industry, frugality, temperance and knowledge; and, barring misfortune is attainable by everyone to a moderate and quite sufficient extent by the practice of even a part of the cardinal virtues. And also here, any man can be his own landlord and master, if he chooses, and thus earn natural wages, i. e. the entire product, less taxes. Mr. Benton (Thirty Years, &c.,Vol. 1, Chap. 35) in a speech in the United States Senate in favor of gifts of land to actual settlers related the story of Granny White. At the age of sixty, she had been left a widow in one of the tide water counties of North Carolina. Her poverty was so extreme that when she went to the County Court to get a couple of little orphan grand children bound out to her, the Justice re- fused to let .her have them, because she could not give security to keep them off the parish. This compelled her to emigrate and she set off with her two little boys upon a journey of eight or nine hundred miles to what was then called, the Cumberland Settlement. And there this aged widow with her two little grand children of eight or nine years old, ad- vanced herself to comparative wealth by her industry and raised up the little children to honor and independence. WEALTH. 63 If a poor old widow could do this, no man need sit down and whine. Instead of crowding into the city and posing as an object of charity, and demanding in the name of ethical and sentimental political economy a confiscation of land and capital on his behalf, if he would take to the country and es- pecially go west, he might in time by the practice of industry and frugality, become almost as much of a man as Granny White. When the Pilgrims first landed in New England they tried communism; hut it failed. And thereupon a certain portion of land was annually alloted to each house holder for the cul- tivation of corn. Then the community began to thrive. The authority of the Governor and assistants were no longer needed to enforce industry; and those who had previously professed themselves unable to work now toiled zealously for the benefit of their own families. Wives were no longer compelled to act as public servants and cook and wash for any members of the community the government might ap- point. Yet this was not enough. The industrious man saw the plot of ground he had laboriously cleared and manured pass after the expiration of the year to another, it might be an idle and improvident neighbor. Then application was made to the Governor for permanent holdings, the request was granted and one acre was alloted in severalty to every freeman. (Doyle, Puritan Colonies.) Communism taught even these pious and industrious peo- ple to feign sickness and become idle and improvident. They had fled from their homes in England and sought for liberty in Holland. They faced the wilderness and its hardships in' order to enjoy liberty on English soil. And when each one was allowed out of a broad continent to plant his foot upon one acre of land as his own soil and freehold, the American home took root in the rocky and barren soil, and the Ameri- can system of land ownership, liberty, and free government was its legitimate consequence. The plan above adopted finally became the general practice and has been continually pursued. And now vast regions still remain to be given away in tracts of half a mile square to every man who wants a homestead. And on forefathers day, the sons of the pilgrims by descent or adoption, get together and rejoice, for sundry reasons, and among others, because 64 WEALTH. they consider the above mentioned one acre and other acres adjoining and thereto annexed, jvistly belong to them, to- gether with all the increment which has accummulated there- on during the period of two hundred and seventy years. The manhood that brought the pilgrim to his home here, enabled him in due time to stand up and say, I am the State. And all the coheirs of American liberty and free government worthy of the name subscribe to that doctrine. And the question is, whether a man is lit to be a ruler, who, being of good health and sound body, feels unable or unwilling to take care of himself and his family and wants to rely upon *' fraternity" for a subsistence. If any one acquires property lawfully, he thereby acquires an exclusive command or possession of it: ownership, there- fore, is a monopoly. A man's labor in a free country is his monopoly. In the original state of things, (savagery) he be- came the owner of the entire product, whether it was a wig- wam, field, tree, or any other material object. In this coun- try, if a man works for himself he owns the entire product; if he sells his labor for wages, then he owns his wages. His savings are his, whether invested in land, or any other properly. If a man has no property or monopoly in his savings, he has none in his wages. If a man has any property he can either use it himself, or allow another to use it for a consideration. If it is capital he may charge lawful interest; if land, rent; if labor, wages. Hence it fails to weaken the just claim to call either rent, or interest, the effect of monopoly, or the price of monopoly. Wages is the price of the monopoly which a man has in his labor; interest, the price of the monopoly which he has in his capital: and rent, the price of the monopoly which a man has in his land. Land on the plains pays no rent for pasturage because it is public domain and open to all, land in the Cherokee strip pays rent for pasturage because of the Indian title. Land which is too elevated, dry, or rocky, to be fit for cultivation will pro- duce pasturage and therefore rent; or fruit or forest trees, and, therefore, rent. According to the method of coppice growth, the wood is cut off at stated periods and a new growth allowed to spring up from the roots and stumps. By another method, the large trees are cut out leaving the smaller ones to grow. In 1876, fifteen acres of Scotch fir WEALTH. 65 timber, eighty years old, near Perth, Scotland, sold for £132 per acre. A handsome revenue liad been previously obtained from the thinnings (Hough, Elements of Forestry). Swamps will raise cranberries, rice, willows, &c. If a man owned the desert of Sahara, the rent might be small per acre or per square mile without irrigation. It is said in political economy, (Mill, Book 2 Chap. S.) "Private property being assumed as a fact, we have next to enumerate the different classes of persons to whom it gives rise, whose concurrence, or at least, whose permission is nec- essary to production, and who are, therefore, able to stipulate for a share of the produce." " The three requisites of pro- duction are labor, capital and land; understanding by capital the means and appliances which are the result of previous labor; and by land, the materials and instruments supplied by nature. Since each of these elements may be separately appropriated the industrial community may be considered as divided into land owners, capitalists and productive laborers. Each of these classes, as such, obtains a share of the produce, no other person or class obtains anything except by conces- sion from them. The remainder of the community is, in fact supported at their expense, giving, if any equivalent one con- sisting of unproductive services. These three classes, there- fore, are considered in political economy as making up the whole community." If private property were not a fact, the land owners and capitalists would be wiped out and the above three classes would be reduced to one. If, however, the productive laborers had property in their earnings, some might and probably would save a part of their shares of production; and thus the capitalists would reappear. In order to prevent this, such a scheme requires that nothing should be divided except con- sumable and perishable commodities. Also all loans made should bear no interest. And so it is in socialism. If the earth belonged to all men alike, and not to the pro- ductive laborers only, it would seem to follow that every one ought to receive something whether he worked or not, viz., a share of all spontaneous products or pure gifts of nature, such as clams, oysters, fish, game, eggs, herbs, grass, fallen timber, &c. But if wealth is the sole product of labor, then the earth furnishes no usufruct or profit in excess of the just 66 WEALTH. wages of labor, and therefore no one is entitled to anything unless he is a productive laborer. Who then are the produc- tive laborers? One great authority (Adam Smith, Book 2, Chap. 3) excludes from the i-anks of productive labor all officers of the government, all churchmen, lawyers, physicians, nurses, teachers, men of letters, menial servants, musicians, players and buffoons. They are said to be tax eaters, tithe eaters and feeders off of revenue. All such persons, therefore, fall into the class who are supported at the expense of the productive laborers, "giving, if any equivalent, one consisting of unpro- ductive services." But the other great authority, (Mill, Book 1, Chap. 3) has essentially modified this; for he says, "I shall not refuse the appellation productive to labor which yields no material product as its direct result, provided, that an increase of material products is its ultimate consequence." This lets dow^n the bars and admits everybody. It lets in the woman who cooks the victuals of a productive laborer and mends his clothes; those who nurse and heal him when sick, or make him healthy and strong, wiser and more skillful, more industrious and efficient, more honest and lawabiding, and more cheerful and happy. Even the buffoons might get in under this proviso. Still its author has cast a doubt over its application by saying that, saving souls is not productive labor, nor saving a man's life unless he is a productive laborer and produces more than he consumes. Perhaps he would have allowed that the act of procreation is productive labor, if the result as its ultimate consequence was a productive laborer who produced more than he consumed. All labor which is socially necessary muf-t be productive, when socially considered. It is laid down by the authority last quoted that labor is not productive unless it produces an increase of material pro- ducts directly or remotely. Hence if by labor and sacrifice a less amount of utility was produced than consumed, such labor is not productive, and is entitled to nothing in distri- bution. And for a stronger reason, all labor no matter how great, which ends in failure, or produces nothing of value, is not productive labor and therefore entitled to nothing. But this is measuring labor by utility, instead of the latter by the former. In any fair system of distribution, the things to be WEALTH. 67 distributed, the persons entitled, and the respective shares of each ought to be accurately ascertained. Unless wealth is correctly defined the subject of distribution remains uncer- tain. And if correctly defined shall it be measured by a unit of toil and trouble, or a unit of utility? Instead of considering the subject from a socialistic point of view and regarding wealth as produced, collected and warehoused, and awaiting distribution, the matter might be looked at from the individual standpoint. From this point of view the total wealth is the sum of the wealth of the in- dividual members of the community, and distribution is made to everyone who pursues a lawful calling and obtains a reward therefor, whether he makes or cobbles a shoe, cures the jumping toothache, sets a broken bone, heals the sick, or saves souls. And every one who pursues his own personal in- terest in a lawful manner is productively employed both individually and socially, if he earns a reward. In this way wealth is naturally distributed, or tends so to be, among those entitled according to their several gifts and merits. Experi- ence has caused mankind to adopt this method of distribution and while it may operate to some extent unequally and the lame and the lazy may get left out altogether, yet this is an imperfect world in which the tendency is for the early bird to get the worm. Even if it were desirable to confiscate the land and capital, one or both, yet it cannot be done in this country now, because the property owners are in the majority. Until recently the community consisted chiefly of those who combined the three classes into one, They owned the land and capital and performed the chief part of the labor themselves, physical and mental. The professional wage laborers as a numerous and powerful class are comparatively newcomers. If a person owns both land and capital and performs all the labor himself, are any others entitled to share in the proceeds? If he hired another person to work for him, ought the latter to have more than his wages? If the industrial community be divided into two classes, viz., those who work for themselves, and those who Avork for hire, then the thing to prove is that the latter are entitled to the entire product. All labor is not manual labor; nor is all productive labor, hired labor. €8 WEALTH. Since the wage laborers are in a minority and therefore cannot at this time confiscate the land and capital directly, the same result is attempted to be brought about indirectly, by means of labor unions backed b}^ intimidation and force. Their point is gained if they can make the legal owners of the land and capital merely trustees holding for their benefit. The farmers still own their own farms and ciiltivate them chiefly by their own labor; consequently it is not easy to reach them. But in the other industries the wage laborers by unions and the capitalists by syndicates, concur in raising the price of their products as against the farmer. As the wage laborer treads upon the toes of the manufacturer he cries out for more tariff legisation. In order to get even, the Farmers' Alliance ought to adopt into their platform the eight hour day, and the prohibition of the importation from abroad of all subsistence. If this is not done, then some of the farmers in the piney woods of North Carolina and on the barren and rocky soil of New England ought to seek other employment, or else change places with the hired man. If the ofiicers of the government are merely tax eaters, then their numbers ought to be reduced to a minimum, and not allowed to multiply like maggots in an old cheese. Ac- cording to this idea government is an incubus and at best, merely a necessary evil. In taxation the most important question would be, whether all the taxes levied, or proposed so to be, were necessary: the question who should pay them would be a, secondary matter. Contra, however, if the people can be taxed rich, and the community also benefited by distributing the money in pensions or dividing it among the States so as to give their legislatures a whack at it. Still the army and navy might claim to be productive laborers, because they spent their time and risked their lives in keeping, off other nations who might rediscover this country and claim it under the pretence that the earth be- longed to all men alike and that its present occupants had possessed and enjoyed it as their own quite long enough. And the executive and judiciary might assert that they enabled the productive laborer to enjoy in peace and security such utilities as were lawful acquisitions on his part and that ownership in security was an essential element in wealth. And the legislators might insist that in legislation they had WEALTH. 69 a panacea for all hard times, poverty, and all the ills which conti-nually afflict the body politic. And in proof of their claim they might point to the fact that they had benefited the manufacturer, ex-soldier, &c., by taxing the consumer, and could enrich the farmer by making the dollar smaller. If the business of production were conducted after the manner of running a mill, into which material objects (raw material) were dumj^ed by labor as into a hopper at one end and the "utilities embodied r MONEY. lOi money, a currency panic is liable to occur and a large part of the money prove to be worthless. The currency ought to be such that the reserves of the banks and of individuals micfht be entirely trustworthy. The superstructure of credit requires a secure foundation. A system of money ought to be such that a currency panic would be impossible. Such a one would be a currency com- posed entirely of gold; or, if silver were the standard, then entirely of silver. In either case, no one could get into a fright about the goodness of his money. Not so, if the cur- rency consists mainly of tokens or of bank bills; for the tokens may cease to be current, or the banks fail or suspend payment. With the best kind of money a credit panic might occur. That is, a fright, not about the goodness of the money, but about getting it. Banks of deposit may fail to pay their depositors and debtors fail to pay their creditors but if the money is good somebody will have it; and property will not be sold for a mere song. A combined currency and credit panic is fatal to all business and nearly all wealth. the labor of a lifetime may become a total wreck at once. In such case there is neither money nor credit. A currency panic is very liable to culminate into one of the combined sort Behind it follows grief and poverty. Hence the importance of a currency about which there can be no fear. If anything which will operate ^s a medium of exchange is good enough for money, then an inconvertible paper currency issued out of the public treasury and made a legal tender, is the best kind. It would be cheap, light, and entirely free from loss by Avear. There would be no expense or trouble in redeeming it, exce23t to issue a new bill for an old one. Such was the currency of this country previous to the resumption of specie payments in ISYO, when the whole of it, even to five cents, was in paper. The credit panic of 1873 occurred during this period. The banks failed to pay their depositors on demand, and other debtors failed to pay also. But there was no panic about the paper money. Bank bills had been inconvertible ever since 1861; and the ultimate payment of national bank notes was secured by government bonds. The objection to such a currency is that expansion is too easy and is liable to be too popular. Money cannot be made too abun- dant for debtors and speculators. But the amount of a specie 102 AMERICAX MONEY. currency has its limits; when it becomes redundant, exporta- tion takes place. At this time the currency consists of the fractional and. minor coin, gold coin, silver dollars, United States notes (greenbacks), Treasury notes, national bank notes, and coin certificates. Gold certificates are issued out of the United States Treas- ury for gold coin, and silver certificates for silver dollars de- posited there, and are made payable to the bearer in the kind of coin deposited, which is required to be retained in the treasury in order to redeem the certificates issued thereon when presented for payment. Coin certificates and also greenbacks are redeemed by the Treasurer or any assistant Treasurer if not mutilated, otherwise by the Treasurer only according to certain regulations concerning mutilated paper. Both kinds of certificates are receivable for customs, taxes, and all public dues, and when so received are to be reissued. The gold certificates are issued in denominations not less than twenty dollars and upwards, to correspond with the United States notes. The silver certificates are issued in ones, twos, fives, tens and upwards, to correspond with the United States notes. The amount of the silver certificates on September 1, 1890, was $808,423,071; gold certificates, $157,388,269. United States notes, or greenbacks, are in such form and for such amounts as the Secretary of the Treasury may pre- scribe, do not bear interest, are payable to the bearer at the Treasury, and are lawful money and a legal tender for all debts, public and private, except duties on imports and inter- est on the public debt. Their total amount is, as fixed in 1878,1346,681,016. One hundred millions of dollars in gold is retained in the treasury as a fund for their redemption, and when redeemed they are to be re-issued and kept in circula- tion. They have been issued in denominations of $1, $2, $5, $10, $20, $50, $100, $1,000, $10,000. The Treasury notes to be issued for the purchase of silver under the recent act, have been already mentioned. National bank notes are issued in circulation by banks or- ganized under the national free banking system. The notes are prepared and issued to the banks by the United States Treasurer to an amount not exceeding ninety per cent of the value of the United States bonds deposited with the Treas- AMERICAN MONEY. 103 urer as security for the redemption of the notes. Each bank is required to keep on deposit with the Treasurer an amount in laAvful money equal to five per cent of its circu- lation for its redemption, if presented in amounts of one thou- sand dollars or any multiple thereof; otherwise payment must be demanded at the counter of the bank during business hours; if not paid a protest is necessary and a report made to the Comptroller of the Cui'rency at Washington, who has thirty days allowed to him to inquire into the facts and decide what to do. Since these banks number more than three thou- sand, scattered all over the country, no one, unless a banker, would be likely to have as much as one thousand dollars in the notes of any one bank. If redemption were sought for any less sum the bank might be one thousand miles away. These provisions are evidently intended to make redemp- tion costly and difficult. It is a method to evade pay- ment and enable the banks to enjoy the benefit of their circu- lation without disturbance. National banknotes are receiva- ble for all public debts and demands due to the United States except duties on imports. Ever since it was seen that the National Government could lawfully emit bills of credit in a form suitable for common use as a medium of exchange, there has been no reason for the existance of bank notes. A greenback is redeemed in gold at the Treasury, and if not mutilated at any of its offices, while a national bank note is redeemable in any kind of lawful money in manner as hereinbefore stated. Even if bank notes were always redeemable without any cost or delay, such purely theoretical bank notes would be no better than a coin certificate or United States note. The average circulation of bank bills from 1862 to 1890 was over three hundred millions of dollars. If the people had used their own notes, instead of this bank paper, they would have saved the interest upon the above amount for all that time; and during a part of it they paid interest at the rate of seven and three-tenths per cent, per annum, and for a longer time at six per cent, per an- num. Taking five per cent, as the average rate, the people would have saved by the use of their own notes, in lieu of bank paper, over fifteen millions of dollars annually during the whole of the above period. Instead of this, they admin- istered an elaborate and expensive ^ree banking system for 104 AMERICAN MONEY. the benefit and profit of the private owners of these banks of issue and donated to them annually the above vast sum, which Justly belonged to the people themselves. Fortunately, the field of circulation occupied by bank note& has been needed, or supposed to be so, for the silver certifi- cates heretofore issued, and hereafter for the Treasury notes to be issued for the purchase of silver under the recent act. All schemes to alter the National banking law so as to admit of bank infiatlon, have been nipped in the bud by the friends of silver. So that the prosiDect now is. that in a few years, bank notes will entirely disappear, and the currency will be no longer a source of private gain. A currency consisting of gold coin and gold certificates would be almost panic proof. If the National Treasury lost the gold upon which the certificates were issued, the whole people would be liable for the loss. And even if such a cur- rency were composed of United States notes, in lieu of gold, to the extent of about three-fifths of its sum total, it would be quite safe and reliable, and at the same time more economi- cal. The currency as it now exists carries the silver dollars, silver certificates and National bank notes as so many tokens for a gold dollar. If the recent act for the purchase of silver shall cause a sufticient inflation, a change of standard will occur. The same may be said of the free coinage of silver, or an ex- cessive issue of bank notes or Treasury notes. The effect of such a change of standard will depend very much upon the gold price of silver at that time After the silver dollar shall become the standard, and all values have been adjusted to it, then silver dollars and Treas- ury notes issued for the purchase of silver, will make a cur- rency quite panic proof. But the probability is, that in such ease not a few who had incurred debts in silver dollars, would want to pay back something cheaper, and call for legislation to that effect. IV. THE VOLUME OF THE CUERENCY. All the uses for money require a certain amount of it to sat- isfy a permanent and unexcited demand. In estimating this amount, it is not sufiicient to include in it only the money AMERICAN MONET. 105 which is, or is supposed to be, in active circulation. As a store of wealtli, money is just as mucli needed as for a medium ■of exchange. The money held by banks, railroads, insurance companies and other corporations, trustees, dead men's estates, and privatelj^ among the people is all a necessary part of the total amount required. 1 he State and National treasuries re- quire some money to be constantly on hand. Even the money which a man carries in his pocket, if allowed to stay there, is not in active circulation. If money were made too poor to keep, so that everyone would be afraid to hold it over night, its circulation might be more active and a less amount of it sufficient. But if it be composed of gold coin, a large part of it is liable to lodge somewhere in the hands of the people, and in various eddies and pools. According to the Director of the Mint, on July 1, 1889, the National banks held in gold coin $73,907,610; other banks and the people, |293,- 829,958. Very little of this is seen in circulation: it lies at the bottom of the reserves. It is regarded as trustworthy and reliable in a time of extreme need. Silver is too bulky for hoarding purposes, and paper is too perishable. Ever since 1878 the currency has been upon a gold basis, and in part composed of that metal. It is a product of this country to the extent in value of about thirty three millions of dollars annually. Deducting about one-third of this amount for the quantity annually consumed here in the industrial arts, the residue remains for use as money or for exportation. When the currency is redundant, gold is exported, and when deficient, it is imported. These are the limits of the fluctua- tion in the amount of the currency arising from natural causes. Casual demands for money affect the rapidity of its circula- tion and the rate of interest. Excessive speculation in stocks, or other commodities, may cause a great stringency in the money market. Very often, in such cases, the lame ducks raise such a cry that it sounds like a panic, and the National Treasury is called upon to interfere, and make money easy for their benefit. Even when the currency is redundant and the exportation of specie is going on, great complaint is made about the scarcity of money. Speculators for a rise want money very abundant and the articles dealt in scarce. Debtors always complain of 106 AMERICAX MONEY. the scarcity of money, especially if they are short of collat- erals. And all those who have no money want some. There- fore the constant cry for more money is no proof that its quantity is deficient. If money is made redundant by thrusting into the circula- tion more than is really needed, its value declines, and the metallic part is exported until the excess is disposed of. Previous to the late civil war, a large part of the specie was continually driven off by excessive issues of State bank notes- The war inflation caused all the specie to disappear, except a certain amount in gold needed to pay duties on imports. Up to 1889 there had been coined, in gold, 11,010,900,324; in sil- ver dollars, $8,031,238; in fractional silver coins,$214,554,683; and yet all the money at that time in common use was of pa- per. Up to June 30, 1889, there had been coined at the mints, in gold, $1,500,666,297; in silver dollars, $341,533,888; and in fractional silver coins, $225,757,363.45. Only about one-third of the gold, and also of the fractional silver coins are now in the country. Paper inflation in time past expelled even the small silver tokens. In order to make specie abundant, it is not enough to run the mints hot. In any system of money two things must be kept in view, to wit: the money unit and the currency volume. If money be made artificially, very abundant, the dollar will grow small in proportion: l)ut the value of the standard coins cannot be carried below their exportable value. With an exclusively paper currency the value of the money unit may be carried by inflation to a nominal amount, as in continental money, assig- nats, and the like. The nxmierical amount of the currency has a definite rela- tion to the magnitude of the money unit. For it is obvious that if such unit were a cent, the same quantity of money would be numerically one hundred times as great as if the unit were a dollar; and that if the unit were an eagle, would be only one-tenth as much. If the money unit be denoted by d,sdl the money by 7i. d, and the volume of the currency by U, then T =«. a (9) In which if U is constant, d varies inversely with n. AMERICANS MONEY. 107 The limit of iuflation of a currency having a metallic basis being the exporting point for the standard coins, it follows that if the money unit were altered in size from d to d^, so that d^ — r. d, then V=,i.d=n\d' :7i'=— (10) If d were the gold dollar and d^ the silver one, and i: = 0.l2, then ji'^ = = ?^X1.394-. That is to say, if the volume of the currency were filled up with silver dollars worth |0.72 in gold, to the exporting point for silver dollars, it would require an increase in the number of dollars to the extent of over thirty-nine per cent. This is the same as to say that if 371.25 grains of pure silver were the unit of wealth, and its value 10.72 in gold — being its average value during 1889 — then the same wealth would measure about thirty-nine per cent, more in nominal amount Avhen measured thereby, than if measured in gold dollars — credits excepted; as to them, the smaller the dollar the smaller the debt. After the same manner as above, it appears that a ninety cent standard would allow of an inflation to the extent of about eleven percent.; an eighty- five cent standard, to the extent of about seventeen per cent.; the smaller the standard, the greater might be the inflation. But if 371.25 grains of pure silver were worth a dollar in gold, viz., if silver were worth $I.29-|- per ounce fine in gold, then (Eq. 10) d=d^ : n=n^. In such case the nominal amount of the money would be the same by either standard, and wealth would measure the same in amount by the one dollar as the other. And money would be no cheaper nor abundant with such a silver standard than with a gold one. Silver dollars would be then exported as readily as gold coin. This state of things is hoped for by the producers of silver. On the other hand, debtors and speculators want money abundant and cheap: they want the dollar made smaller. If the currency be metallic, and its volume so full that specie is exported, then the standard coins are at their bullion value: for other nations use their own systems of money. Bullion is not suitable for a medium of exchange; it requires 108 AMERICAN MONEY. division into parts with the proper authentic stamps thereon, to indicate its purity, weight and value. Hence money may have, if it be deficient in quantity, a greater value than the bullion contained in it. Owing to this fact, it has bet^n be- lieved that if a certain part of the precious metal were ex- tracted out of the standard coins, they would have the same value as before; that, in fact, their use value as money, would make good their loss in bullion value. Acting upon this pleasant and lucrative idea, currencies have been, at various times, greatly debased. But this left an opportunity for infla- tion, and the precious metal extracted being used for that purpose, the result was to sink the value of the money. Un- der the act of 1878 for the monthly purchase and coinage of silver into dollars, they occupied the place of the same number of dollars in gold and passed as tokens for them. Hence it might be said that the silver dollars acquired a use value as such tokens which nominally at least made up their shortage in bullion value. According to this reasoning, if these dollars had been made out of base metal or even leather instead of silver, and they could have been made cur- rent, they would have answered the same purpose as if made of silver. If a silver dollar of the bullion value of $0.72 in gold will pass at par, why not a dollar made out of some material only worth one 'cent or less? Whatever token dol- lars may be really worth, if they were increased continually and would remain current, they would first expel all the stan- dard coins and afterwards cause the value of the money to sink until such tokens became worth only their bullion value. In other words, the token dollar would finally become the standard and furnish the unit of value. From the foregoing it is quite evident that inflation of the currency depreciates the value of the money unit, and that contraction produces the contrary effect: also, that any altera- tion made in the standard, admits of a corresponding change in the currency volume. At this time, the gold dollar is the standard, and the volume of the currency cannot be inflated beyond the point where the exportation of gold sets in, until after it is driven away. How much money now constitutes the volume of the currency? On November 1, 1889, all the money, including therein bul- AMERICAN MONEY. 109 lion in the mints and assay offices, was, as given by the Director of the Mint and the Comptroller of the Currency: Gold coin $ 619,640,450 Gold bullion, . 64,554,236 Silver dollars 343,638,001 Silver bullion 10,918,171 Fractional silver coins 76,628,781 Minor coins 18,758,228 United States notes 346,681,016 National bank notes 202,023,415 Total $1,682,842,298 From this total is to be deducted one hundred millions of dollars in gold held in the Treasury as a fund for the redemp- tion of the United States notes, and which is counted twice in the above statement; also, there is to be deducted not less than twenty millions of dollars in fractional silver coins lying in the Treasury uncalled for. Deducting these two items from the above, leaves the total amount of money at $1,562,842,298, On July 1, 1889, the paper money was: Gold certificates 1154,048,552 Silver certificates 262,629,746 United States notes 346,681,016 National bank notes 202,023,415 Total ..$965,382,729 So that the relative amounts of coin and paper were: Specie $ 597,459,569 Paper 965,382,729 Total $1,562,842,298 Of the paper money, $448,704,431 was a credit currency; the residue represented specie on deposit in the Treasury. Besides the surplus in the Treasury in excess of the amount needed to meet ordinary demands, there was also an amount to the extent of five per cent, of the bank note circulation held to redeem it as before mentioned; also, an amount held in lieu of bonds deposited by the banks to secure their circula- tion, and which had been withdrawn, and which on October 31, 1889, was $71,816,130. When bank notes were presented 110 AMERICAN MONEY. for cancellation, the)^ were paid out of this fund. By the recent act for the purchase of silver, this fund has been abol- ished and the bank notes, when presented for cancellation, .are to be paid out of the general cash in the Treasury. The ' amount of this fund on Sept. 1, 1890, was 155,059,296. This money, when put in circulation by the purchase of bonds or otherwise, was expected to ease the money market and help speculation, especially in silver bullion. The excess of frac- tional silver coins lying in the Treasury uncalled for was caused by a speculation in trade dollars which were put upon the Treasury at a profit, under an act passed for the purpose- No other use could be made of them except for coinage into small money. If the money system were more simple the currency might possibly consist of a smaller amount. But with a people rich enough to afford the best kind of money, economy as to its amount is a secondary consideration. If a currency based on gold is the best kind, it would constitute no objection to it that every old woman in the country had at least one eagle safely nested somewhere. Poor money is poor economy; and the saying that poor people have poor ways is especially ap- plicable to money. Poor money is only suitable to pay toll on the road to the poor house. Assuming that the sum of $1,562,842,298 is all needed at this time for some purpose or other — and if it were not some of the gold coin would be exported — then the requisite amount per head is about twenty-five dollars. As population increases the currency volume will increase. Hence, if population in- creases hereafter at the rate of two millions of people per annum, a yearl}' increase of about fifty millions of dollars will be continually required in order to keep the volume of the currency brimming fall. A moderate estimate would be^ perhaps, twenty dollars per head, involving a necessary an- nual increase of forty millions. Before the rebellion, in 1860^ the currency amounted to about fifteen dollars per head. But the people were much poorer then than now; they had always theretofore been kept poor by broken banks and dishonest money. The annual amount of Treasury notes to be issued for the purchase of silver under the recent act, will depend upon its price, probably over sixty millions. Cut the excess of this AMERICAN MONEY. 11] amount over the increase annually demanded by the growth of the country will cause no inflation of the currency imtil after the bank notes are all withdrawn; nor thereafter, until all the gold coin is exported or hoarded. The JB'armers' Alliance, which has become powerful enough at the polls to be very dangerous to present and prospective statesmen, demand by their national platform recently adopted " the unlimited coinage of silver, the abolition of national banks, and the issue of Treasury notes in lieu of national bank notes, in sufficient volume to meet the business demands of the country and the constantly increasing demands of trade." This platform is sound as to bank money. The national Treasury can fully supply all demands for paper money in the form of coin certificates, treasury notes, or greenbacks. Con- gress can tamper quite enough with the currency without any assistance whatever from thousands of banks of issue con- ducted by private enterprise under anj- banking law, State or national, and free or otherwise. The demand for the free coinage of silver, and also for the issue of Treasury notes in addition, indicates that this Alli- ance regard an annual increase to the curi-enc}^ of over sixty millions of dollars as an amount entirely too small to suit their views. The history of paper money might be studied to a good advantage by these farmers, who want abundant and cheap money now, and not at some indefinite time in tlie future as a slow consequence of the recent act for the purchase of silver. As there is now no fund actually existing for the redemp- tion of the bank notes, they might be lawfully redeemed by an issue of greenbacks or other Treasury notes under an act passed for the purpose. But if the farmers, or "the growing demands of trade," require an additional amount, how can the bills of credit be lawfully emitted? After the treasury surplus is exhausted perhaps they might be paid out for pensions. Some " loyal " platforms declare that the country owes the ex-soldiers a (money?) debt so great that it never can be paid. And a governor bearing the mar- tial name of Fifer is reported to have named at a soldiers' re- union the sum of Ihree hnndred millions as a quite reasonable amount to be paid out annually for pensions. After the limit 112 AMERICAN MONEY. of taxation is reached, perhaps the ex-soldiers might consent to take notes in part pay on account of the balance due to them. Others, less loyal, have advocated a loan office at the Treas- ury for the benefit of the poor farmers, for whose benefit bills ■of credit should be issued upon real estate security at a nom- inal rate of interest to all applicants. This plan is much favoi'ed by the wealthy owners of the Pacific railroads, who desire to have the government debts thereon reduced in their rate of interest from six per cent, per annum to two per cent, or less. The platform of the Farmers' Alliance leaves it quite in- definite as to the amount of Treasury notes which would be sufficient, in addition to the free coinage of silver, " to meet the business demands of the country and the constantly in- creasing demands of trade." Probably the amount demanded is a quantity such that no one could complain of the scarcity of money. Some agricultural platforms have named fifty dollars per head of the population as about the correct amount. Why not say five hundred and make money easy at once? Money must be very scarce now when the treasury is com- pelled to pay over twenty-five per cent, premium for four per •cent, bonds having only a few years to run, and aft offer to prepay a j^ear's interest upon the public debt is very slowly accepted. The farmers might well question the right of the Secretary of the Treasury to wet-nurse Wall street. Why should soothing syrup be applied there exclusively and the cries of the poor farmers be allowed to pass wholly unheeded? V. MONEY AS A STORE OF WEALTH. According to the report of the Comptroller of the Currency for 1889, the deposits of individuals were: In National Banks $1,475. 46 <,560.3Y State Banks 507,084,481.00 Loan and Trust companies 299,612,899.00 Savings Banks 1,444.391,325.00 Total 13,726,556,265.37 The deposits in savings banks as above, consisted of "sav- ings deposits," excepting $19,160,976 due on demand to other AMERICAK MONEY. 113: individual depositors. To the above may be added all the money stored away privately among the people. ; Wealth is not saved and hoarded up in perishable products,, such as butter, cheese, beef, pork, grain, goods, &c., but in money. And for use as a store of wealth, money ought to be composed of some durable material, so that savings will not spoil, sour, grow musty or rotten, or otherwise lose their value. All wages are paid and saved in money; and savings usually accumulate in small sums, to be afterwards invested in houses, lands, bonds, stocks and other property. Hence the necessity for good and durable mone}^ It ought to be not only good to use as a medium of exchange, but also to lay away as a store of wealth against sickness, old age, misfortune, or a wet day. A man who has saved up a store of such material is never without friends. If the right kind of money is in use among the people, it will continually accumulate in their hands. It is said that the hoards of the French peasantry paid the one thous- and millions of dollars in gold, demanded by the victorious Germans. England adopted a single gold standard in 1816, and has since adhered to it. There wealth is great. The lender seeks a place where the rule is, with what measure ye mete, it shall be measured to you again; and he is satisfied with a less rate of interest. Here the money has been upon a gold basis ever since 18Y8, and the country has prospered to an extent unknown before. Indeed there has been no cur- rency panic since 1861. Any such figures as those above given were impossible in the days of State bank money. Such a superstructure of credit requires a solid foundation. With a dishonest currency what would become of the mass of wealth represented by the above figures? If the money were worthless and the banks suspended and insolvent, all this wealth would vanish like the baseless fabric of a vision. There are no statistics to show how much wealth must have perished in the currency panics of 1809, 1819, 1837, &c. Those who held the notes of the Farmers' bank of Gloucester, hereinafter mentioned, to the extent of $580,000 and lost it all, furnish an illustra- tion. At a certain time before the great rebellion a friend re- ceived three hundred dollars in bank notes for farm products, and in a few days afterwards the money was worthless. The bank or banks had failed. 114 AMERICAN MONEY. The amount of the above deposits tells a tale of industry and economy. It embodies a vast amount of toil. It repre- sents the hopes and expectations of a vast number of people. These deposits were made upon the faith that the money would stay good, and would be repaid in money equal in actual as well as nominal value with that deposited. A difference of one cent in the money unit would make a difference in these deposits of |3'7,2(i5,562. If a change of the standard hereaf- ter occurs the difference will probably be much greater than one per cent. In 1889 the average value of the silver dollar was $0.'72 in gold. Any one may compute the nominal amount but not the consequence, of paying all these deposits at a discount of twenty-eight per cent. It may be good law to say that all these deposits can be paid in something cheaper than that deposited, if before such payment the cheaper money has been made a legal tender, — but to do it is contrarj^ to Deuteronomy. In such case, per- haps, it would be a smart thing to say to some poor woman who had her little store of wealth deposited in a savings bank, that, as to money the law of Moses was not in force in this country, but that the doctrine here was, the devil take the hindmost. ^' I . PAPER MONEY. This kind of money is preferred for common use and to pass from hand to hand. It is easier to carry, count and con- ceal than specie, is not subject to the objections of bulk, weight and wear, and when propeily made is more difficult to •counterfeit and tamper with than coin. No one desires to