THE 
 
 U. S. Senate 
 
 ASKS 
 
 James D. Holden 
 
 To Solve the Financial Problem: 
 
 His Replies to Questions Propounded by the 
 Senate Committee on Banking and Currency. 
 
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 QUESTION 1. WHAT ARE THE ESSENTIAL 
 DEFECTS OF OUR BANKING AND CURRENCY 
 SYSTEM? 
 
 1 
 
 Answer: Our currency system Is one thing, our 
 banking system another. They should not be con¬ 
 founded, but should be considered separately. Our 
 banking system exists only because of our imper¬ 
 fect currency system. 
 
 The essential defect of our currency system is a 
 currency deficit exceeding the enormous sum of 
 fourteen thousand million dollars (about $140. per 
 capita), as shown by a correct interpretation of 
 the latest report of the comptroller of the cur¬ 
 rency. 
 
 The defects of our hanking system are due to 
 this dearth of government money. 
 
 QUESTION 3. WHAT ARE THE CHIEF PUR¬ 
 POSES TO BE ATTAINED IN AN IMPROVED 
 SYSTEM? 
 
 Answer: A perfected currency system would 
 eliminate the universal interest-paying custom— 
 the custom of paying “interest” for a circulating 
 medium when obtained on pledge of security. 
 
 The following reasoning justifies this conclus¬ 
 ion, viz: 
 
 The individual “borrows” only such things as he 
 needs and does not own. When It is impossible to 
 own, he must borrow'the thing he needs, or do 
 without it.' The thing that everyone needs in com¬ 
 plex society is a circulating medium. It cannot be 
 generally owned so long as a sufficient supply is 
 
— 3 — 
 
 not in existence. Those who have it not must 
 borrow and pay “interest” to those who have a 
 surplus. Thus the universal currency shortage 
 begets the universal interest-paying custom. What 
 an insufficient currency begets, a sufficient cur¬ 
 rency will eliminate. 
 
 “Credit” is the only available substitute for 
 money. “Bank credit” is the best substitute, be¬ 
 cause the most available. It is the commercial 
 equivalent of cash. It dwells in the leaves of the 
 bank ledger. It circulates in the form of “checks” 
 and “drafts.” The dearth of government money 
 creates a great demand for this private substitute 
 —a demand which enables those who can supply it 
 to exact for its use a charge called "interest.” 
 Thus we literally force ourselves to use and pay 
 interest for bank credit by failing to provide a 
 sufficient volume of government money—a volume 
 that would permit the followers of useful pursuits 
 to acquire and own the money they need to gratify 
 their reasonable wants and to “finance” their com¬ 
 mercial undertakings. 
 
 So long as there is a currency deficit only a 
 small percentage of society can possess and own 
 the currency each one needs. Were a sufficient 
 supply in existence, however, the industrious 
 would naturally acquire their own quota—be it 
 much or little. • 
 
 To realize that the interest we collectively pay 
 each year on the fourteen billions of bank credit 
 now in daily use exceeds the value of the entire 
 surplus product of our every industry (as indicat¬ 
 ed by the annual increase in national wealth), is 
 to partially appreciate the defects of our financial 
 system. 
 
— 4 — 
 
 Our fourteen billion dollar currency deficit is 
 traceable to the fact that we grant to owners of 
 wealth in the form of gold bullion and national 
 bonds a right we unwittingly deny ourselves, i. e„ 
 the right to have our property values monetized 
 by the certificate process, on application, free 
 from an interest charge. 
 
 When the owner of gold bullion wishes to have 
 his form of wealth converted into coin or repre¬ 
 sentative money (coin certificates), the present 
 currency law permits him to do so at a nominal, 
 charge. Owners of government bonds were given 
 the same right in 1864 under the national banking 
 act. Every other wealth owner, however, is de¬ 
 nied this ^essential right by the provisions of the 
 currency law; a law which enables gold owners 
 and certain bond owners to have their wealth con¬ 
 verted on application from a form in which it will 
 not command “interest” in the market into a form 
 in which it wilh^ 
 
 Our currency system, therefore, is defective 
 in the particular that it unduly restricts the. sup¬ 
 ply of representative money by wrongfully confin¬ 
 ing the issue to the owners of these two forms of 
 wealth, thus rendering the indispensable circulat¬ 
 ing medium so inaccessible to the many to whom 
 it is a necessity, that it and its credit substitute 
 commands a price in the market that absorbs the 
 surplus fruit of toil as fast as it is produced. 
 
 “Representative money,” whatever its material, 
 is absolute money when invested by law with all 
 the legal powers of specie;, that is to say: when 
 endowed with the full legal tender quality that is 
 imparted by law to metallic coins. Such currency, 
 
like coin, then has a market value for an excep¬ 
 tional use equal to its denomination ,viz: for ad¬ 
 justing accounts, for facilitating exchanges, and 
 for conserving individual earnings. 
 
 Because of its unchanging value for these uses, 
 legal tender currency effects exchanges on the 
 basis of the relative and fluctuating value of tho 
 articles exchanged. Being the only thing that has 
 a fixed value for any purpose, we utilize it as an 
 exchange medium. Worth one, five, or ten dollars 
 for adjusting accounts the money symbol is the 
 exchange equivalent of commodities worth a like 
 sum for other uses. It is worth its face value for 
 paying debts and taxes, whether “redeemable in 
 gold” or not! ; 
 
 Certain forms of imperishable wealth have over 
 been the basis of the currency issues of tho civil¬ 
 ized world viz: gold, silver, and (in the United 
 States), government bonds. To increase the cur¬ 
 rency, without departing from the accepted princi¬ 
 ple of currency issue, it is only necessary to en¬ 
 large the property basis against which currency 
 certificates are issued for commercial uses on ap¬ 
 plication of the owner. 
 
 A simple, conservative and practical method of 
 supplying the present deficit would be to enact a 
 law making improved real estate in town and 
 country eligible to monetization by the certificate 
 process, at a permanent, arbitrary, valuation, in 
 addition to gold, silver and government bonds. 
 Note the fact that gold and silver are monetized 
 i by the certificate process as effectually as by tho 
 coinage process. 
 
 | 1 f 
 
 The spectre of an “inflated currency” which tho 
 
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 proposal to Issue fourteen billions of new govern¬ 
 ment money suggests to the average intellect 
 gradually fades away as the inquiring mind real¬ 
 izes that such an increase of tangible currency 
 does not necessarily mean an equal increase in the 
 circulating medium. To appreciate the fact that 
 the circulating medium with which the present 
 business of the country is transacted consists of 
 about three billions of cash, and some fourteen 
 billions of bank credit is to perceive that a substi¬ 
 tution of cash for the bank credit we are using 
 would not increase the actual circulating medium, 
 and therefore would not unduly inflate prices. 
 
 QUESTION 6. SHOULD AN ELASTIC CUR¬ 
 RENCY BE AUTHORIZED BY LAW? IF SO, 
 SHOULD IT BE LIMITED, AND TO WHAT 
 AMOUNT? 
 
 Answer: The “elastic currency” idea is based 
 upon a false assumption; the erroneous assump¬ 
 tion that the volume of currency required is one 
 that will respond only to the demand for currency 
 as a medium of exchange. Those who entertain 
 this idea are seemingly unconscious of the fact 
 that the first and probably the most important use 
 to which currency is put is to conserve the earn¬ 
 ings of the individual in an available and non-per¬ 
 ishable f-6rm; and that itids ever performing this 
 office while performing its-'minor functions. With 
 this truth in roindy it is- not •; difficult* ;to perceive 
 that there will be "a legitimate use for all repre¬ 
 sentative money that will be called into .existence 
 by an automatic and scientific system of currency 
 issue. 
 
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 QUESTION 7. SHOULD SUCH CURRENCY 
 BE THE NOTES OF THE INDIVIDUAL BANKS, 
 OR OF A CENTRAL RESERVE ASSOCIATION, 
 OR OF A NUMBER OF REGIONAL RESERVE 
 ASSOCIATIONS, OR OF THE UNITED STATES 
 TREASURY? 
 
 Answer: Neither “notes” or “bills of credit” or 
 other form of credit currency should be emitted 
 by the government. All future issues should be 
 absolute paper money—a full legal tender—issued 
 as representative currency against the imperish¬ 
 able wealth of the individual offering it for mone¬ 
 tization. Such a currency system will protect the 
 collectivity, provide a sufficient supply, and pre¬ 
 vent an overissue. All issues should be direct 
 from the government to the money user. Every 
 issue should be against the imperishable wealth of 
 the applicant, upon which the government should 
 take a primary lien to secure payment of the nom¬ 
 inal annual tax required to make the system self- 
 sustaining. 
 
 QUESTION 9. SHOULD ALL CURRENCY BE 
 BASED UPON GOLD? IF SO, HOW SHOULD 
 IT BE ISSUED AND WHAT PER CENT OF GOLD 
 RESERVES SHOULD BE REQUIRED? 
 
 Answer: A nation’s full legal tender currency 
 need not have a gold basis if it have a property 
 basis; not. a property “basis’” for the purpose of 
 giving value to the currency, but a property basis 
 for the purpose of restricting the supply, regulat¬ 
 ing the volume, and for making the issue conform 
 to the natural law governing the production of 
 wealth by labor. To elucidate: 
 
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 Government money being the exchange equiv¬ 
 alent of labor products, the general welfare de¬ 
 mands that there be no means whereby the equiv¬ 
 alent can be obtained by any one with a less ex¬ 
 penditure of effort than is necessary to acquire 
 the product itself. Hence no discretionary power 
 over the emission of currency, or the volume 
 thereof, or the manner of its issue, should be 
 lodged in the government official. The currency 
 rights of the citizen should be clearly defined in 
 the law, as are his other civil rights. Only through 
 the issue of a representative currency can a just 
 and practical currency system be inaugurated. 
 
 Respectfully, 
 
 JAMES D. HOLDEN, 
 
 214 Kittredge Building, 
 Denver, Colo. 
 
 The Book of the Hour! 
 
 “THE DISTURBING FACTOR IN HUMAN 
 ► AFFAIRS." 
 
 A book every intelligent victim of present con¬ 
 ditions should buy, study and distribute. 
 
 Mailed-post-paid for 25c. 5 copies $1. Address 
 
 James D. Holden, Secretary Land Currency 
 League, Headquarters 214 Kittredge Building, 
 Denver, Colo. 
 
 SELIGMAN LIS