CHAPTER XVII
SUMMARY OF PRINCIPLES
Honest Money and an Honest Money System
The people constituting a nation produce and must exchange goods and services with each other. If primitive barter is to be avoided, a convenient mechanism or ticket system must be used. In the last analysis, money is the people’s bookkeeping reduced to its simplest possible form. It has been ably defined as follows : Money is the nothing you get for something before you can get anything.
Let us consider the meaning of this definition, Money is the nothing. It is a piece of paper inherently worth nothing but which entitles you, upon surrendering it, to claim some valuable goods. You received it (unless you are one of the privileged who has a right to create it) by giving up your time and services in some productive enterprise. If you are working for a weekly wage, you gave up so many hours a day of your time, and so much of your mental and physical energy in the production of something useful to society. The money you received in return for your work is of no value to you until you give it up for some physical goods or service.
All producers give up their time and energy to help provide goods and services useful to society. The things which they produce, but do not them selves consume, are made available for society as a whole. They give up goods of value for nothing but a claim to receive other goods upon demand.
Money is a demand claim on physical goods or services. The amount of demand claims (money) must bear a scientific relation to the amount of consumer goods produced and ready for consumption. If the amount of demand claims is either decreased or increased, the holders of demand claims are either secretly benefited or secretly robbed. If a given volume of consumer goods are in the hopper ready for consumption, and some "mysterious" force increases the number of demand claims in the possession of the people, each dollar’s worth of demand claims will be exchangeable for a relatively smaller part of the physical units of goods; in other words, prices will rise and each demand claim becomes exchangeable for physical goods or services of less value. If the opposite takes place — the number of demand claims is suddenly and "mysteriously" decreased — the reverse situation prevails. Then, each demand claim in existence is exchangeable for more units of physical goods than it was previously. Under those conditions, the holders of demand claims gain an advantage.
When private individuals called banks manufacture money (demand claims) they, in reality, rob all of the people then possessing demand claims. Vice versa, when they destroy money they give an advantage to all holders of demand claims, but they work an unfair hardship on all who have borrowed demand claims (money) on long-term contracts, and who are called upon to pay back money which will claim a greater amount of physical goods.
Since every citizen must use money, which is nothing other than general bookkeeping, its establishment is primarily a function of every citizen : that is, every citizen has an inherent natural right with every other citizen to create money. Why should the producers of the nation be victimized by a few private individuals delegated with the unjust power to create money, while other individuals can only obtain it by engaging in actual productive work ?
In order to bring into existence a medium of exchange, which is acceptable everywhere in the land, honesty demands that money be the creation of a representative body which has been authorized by the people to act for them in this respect. The Constitution of the United States is so written, but by perversion, the body authorized by the people to perform that most important function, has abdicated its powers, surrendering them against the expressed will of the people to private individuals; thus giving to privileged persons a right which properly belongs to all. This right has been gained through trickery and stealth, as is perfectly obvious to any one who will study the methods through which monetary legislation has been put through Congress.
Now the creation of money is the creation of purchasing power, for money is a demand claim and will command physical goods upon demand. Therefore, those who are endowed with the privilege of money fiat are endowed with the privilege of creating purchasing power. This power must exist for all money is created — created by man. Money is not a mysterious institution designed and operated by the Almighty. Those endowed with the special privilege of creating money would like to have us believe that money is like the sunshine and rainfall — a part of the designs of the Creator, over which mankind has no control and of which mankind knows little.
The question is, therefore, since all money or purchasing power must come into existence by the act of man, who shall be entitled to so act and thus be given the original power to purchase what the new money will buy ? Obviously, such original purchasing power should rest with the people at large. The people at large, in civilization, act through government.
It is their government which should first create the money, and all of the people should have the benefit of its original purchasing power. Only the people, as a whole, should share the benefits and the advantages involved in a change in the volume of money in existence in a nation. By placing this first buying power in the government, the benefits fall to all of the people, for by whatever amount the new money is issued, tax collections may be correspondingly reduced.
This statement can be twisted into the thought that taxes can be abolished by merely issuing money ad infinitum. This is fallacious, for new money should be paid into use (circulation) only as the total stock of consumer goods — the things the people have produced and need in civilization — has been increased by expanded production.
The point to be kept in mind is, therefore, that since money must be used by all of the people in daily life to effect their exchanges, and since money is merely popular accepted bookkeeping and since it must be created, the original privilege of spending it should in all justice rest with the people as a whole. It should be injected into general use (circulation) via the government buying with it whatever is authorized by the people’s will, expressed in law.
It requires nothing more than a knowledge of simple arithmetic and the possession of plain common sense to see that as a nation grows, and its people, through science and invention, are able to produce more goods and services in civilization, more money is needed to effect the exchanges.
Why should a small group of private individuals have the right to create money originally and, worse than that, the right to manipulate the volume of money in existence; hence, enriching themselves periodically at the expense and to the sorrow of all the real producers of wealth and services ?
The national government — the people as a whole — must exercise the prerogative of money creation and, hence, control over the total volume of money in the nation.
The national government should have nothing whatever to do with the merchandising of real money. Bankers should be merchandisers of real money. Every bank should be privately owned and privately controlled. They should receive real money on deposit and lend real money. They should have no power to create money.
The most dangerous thing that could be done would be to place the merchandising of money in the hands of the national government. Such a step would give the internationalists their final weapon to destroy property and personal rights of loyal Americans. The internationalists are secretly seeking to make just such a move at this time. Watch their movements carefully and be on the alert that they do not put over legislation which would nationalize the banks, as they call it — in other words, make every bank in the United States a branch office of the Federal Government.
The Essentials of an Honest Money System
1. Every bank should be an independent, privately owned corporation, having legal authority to accept United States legal tender on deposit.
2. The power to create money should be vested in a Monetary Trusteeship appointed by and answerable to the United States Congress. This Trusteeship should pay actual legal tender into use. Original issues of money by a sovereignty should always be paid into the money system in exchange for goods or services. Privately owned banks should have the power to loan real money into use, upon its having been deposited with them by people who have themselves earned it. The creation by private individuals of money to lend, is usurping the taxing power of a government.
3. The amount of money paid into use should always be determined by the productivity and price levels existing in the nation. The volume necessary to move the consumer goods in existence in the nation at equitable price levels should be the sole determinant of the amounts of money in use at any time.
4. The Monetary Trusteeship should be completely divorced from the Treasury Department of the United States. The Treasury Department should, properly, be a collector of the nation’s revenues, and the dispenser of the revenues so collected. It should have nothing whatever to do with the issuance of the money in use in the nation.
5. The Monetary Trustees should maintain accurate records of production and price levels of raw materials and finished goods. As soon as general prices, then safeguarded from manipulation, have reached equitable levels, they should be watched, and any increases in the volume of money should be governed entirely by the volume of consumer goods available for distribution. There should be no price fixing whatsoever. Attempting to fix the price of any one product, whether it be raw material or finished goods, is a violation of one of the most basic economic principles.
6. Neither gold nor silver should play any part in the domestic money structure. Only United States legal tender should be used in the settlement of all domestic obligations. Gold and silver (until other nations adopt an honest money system) should be used only for settlement of international balances. It is essential that silver be used with gold for that purpose, in order to destroy the gold controllers’ power to manipulate the financial systems of other countries. It is also essential that the price of an ounce of gold in terms of United States currency, be put on a parity with the price of an ounce of gold in the currencies of other raw material producing and exporting countries. It would be simple to establish a ratio between gold and silver to be used in the settlement of international balances.
7. The use of bank checks should be continued by individuals and corporations for making payments of money. The checking system for the trans fer of bank balances is a convenient mechanism which should most certainly be retained. Banks should settle their clearing house balances with real money, which is what the people, through misinformation, believe is the case today. The individual check user would notice no difference in his monetary settlements. Banks should also be lenders of real money for business purposes. Banks would then actually be doing what most people believe they now do !
8. All unjust artificial restrictions on the flow of investment money must be eliminated. The Securities Act of 1933 must have important alterations. As it is now written, it prevents the flow of legitimate private money into investment channels. The one essential which must be observed in long-term investment loans is that the loans be repaid out of the earnings from the properties during the actual period of usefulness of the property.
9. Federal control of commodity exchanges must be abolished. If the volume of money is not manipulated, the commodity exchanges will be operated in an honest and equitable manner. Federal control causes injury to the producers of raw materials, and places unfair power in the hands of secret forces.
10. The Monetary Trustees will be mandated by Congress to replace bankers’ credit money with United States Government money; to establish man dated price level; and in every way operate as ordered by Congress.
Under a Monetary Trusteeship, with the power to create money vested in that authority, and divorced from all banking functions, the money system would be placed beyond the manipulation of a small group of internationalists, who have operated the raw material markets to suit their own pleasure. Such a money system would be independent and free from foreign intrigue and manipulation. It could be understood, and its operations followed, by every individual capable of reading simple figures.
How much money should be paid into use ? What price levels are equitable ? To know, consider the functions performed by money.
As a country develops, direct barter decreases. The amount of fixed capital in use, division of labor, and the volume of goods in process, increases.
Remember, fixed capital—factories, machinery, etc.—are not consumed directly by human beings. They are instruments to lighten human labor and facilitate production and distribution. They are worthless unless utilized.
The owners of fixed capital share the products resulting from its use. In other words, a flow of new wealth is being created when the fixed capital is in use. Fixed capital represents a debt of the community because its owners are rightfully entitled to claim a part of the goods produced. Fixed capital is actually non-repayable debt as long as it is in use. The fact that fixed capital may change ownership does not alter its status, for the new owner is entitled to the same share in the products. This share is paid in the form of profits or interest. It is profits when the fixed capital is owned. It is interest when the investment in the fixed capital is a loan.
As the fixed capital, the volume of goods in process and the finished goods ready for consumption increases, more money (demand claims) is required to carry out the exchanges involved in the production of new fixed capital, and the production and distribution of consumer goods.
The amounts to be paid into the money stream should be determined by the movement of price levels. Fixed capital owners obtain an equitable share of the products of industry when price levels approximate those prevailing when the major part of the investments were made. If price levels are too low, too large a share of the products goes to satisfy those who own claims on the fixed assets; and those engaged in actual production receive less than would enable them to consume the products of industry.
After the desired price level is reached, money should be paid into the stream by the Monetary Trusteeship only as goods appear ready for distribution, which goods cannot be moved into consumption at the existing price levels without additional money. Given an adequate supply of money, the volume of goods distributable at a given price level would be limited only by the capacity of the nation to produce the goods. The volume of goods produced would be limited only by the amount of natural resources, fixed capital, and the number of workers available.
The money created and paid into use by the nation must be non-interest bearing at source and noncancellable, except by recalling it through taxation.
How would foreign trade be affected by a scientific money system ?
The money of any country is a demand claim on the goods of that community alone. It cannot be used in another country, but can merely be exchanged for the money of another country.
For the exchange ratio to remain constant, without precious metal flowing between the respective countries, the value of sales of goods from one coun try must be equal to the value of the sales of goods by the other. The value of imports must equal the value of exports. In any country, in so far as the value of imports is offset by exports, the trade is really barter and does not involve any exchange of the moneys of the countries at all, for the importers pay the exporters in each country. If they do not offset each other, it is the unbalanced residuum that matters. That residuum may be taken care of by moving precious metals.
Under a scientific money system the exchanges should be left to adjust themselves. There will then be no advantage gained by buying in a foreign coun try products produced more efficiently in one’s own country.
If the foreign exchanges were free to adjust themselves, and a country were importing more than it is exporting, the cost of exchanging for the money of other countries would rise. The ensuing rise would make it more profitable for the buyer to avoid the exchange of moneys and buy the goods in his own country.
In inaugurating the system and reducing foreign exchange to the settlement of actual trade balances, America’s war debt claims could be used to offset money balances in this country belonging to foreigners. If foreign international bankers have large cash balances in this country, let the foreign governments of which they are citizens pay them in the money of their own country and take an offsetting credit on the war debt payments owed to America.
We have only to allow the exchange ratio of our money for other moneys to rise or fall as demand for dollars rises or falls in the settlement of trade balances. The price of gold should rise as the general price level rises, and should be used only as a commodity for ironing out exchange fluctuations. This country could also buy silver in both the domestic and world market, and use it similarly in the settlement of trade balances. A scientific money system would expand our foreign as well as our domestic trade.
We can enjoy the benefits of a scientific age, and restore peace and prosperity in America if we will but make our money system perform its proper function; recognize physical realities and demand that the nation provide an adequate volume of non-repayable money interest-free at source—liberated from secret manipulations—and paid into use in relief of taxation when production makes a larger volume of money necessary. The fundamental principles are very simple.
America stands on the threshold ! The choice is ours—either a permanent state of poverty and degradation, or the full enjoyment of what science has made possible.
Will natural leaders in every community rise to the occasion, spread the truth, and lead their local forces in demanding that our money system be made honest ? Those in control of our government have no alternative but to recognize what the people demand. Do we Americans possess enlightened self-interest, or shall we continue to be willing slaves to intrigue ?
Bibliography
The Open Review, Vols. 12, by Arthur Kitson, published May 1909—March 1910, by Frank Palmer, London, England.
History of the Bank of England, by A. Andreades, published in 1909.
Real Money Versus Banks of Issue Promises-to-Pay, by T. Cushing Daniel, published in 1911.
High Cost of Living, by T. Cushing Daniel, published in 1912.
Banking and Currency and the Money Trust, by Charles A. Lindbergh, Sr., published in 1913.
The Bank of England’s Charters — The Cause of Social Distress, by Thomas W. Huskinson, published in 1912 by P.S. King & Son, London, England.
A Fraudulent Standard, by Arthur Kitson, published in 1917 by P.S. King & Son, London, England.
Wealth, Virtual Wealth and Debt, by Frederick Soddy, M.A., F.R.S., 1st Edition, published May 5, 1926, E.P. Dutton & Co., New York. (Read the revised edition with the Foreword to the American Nation, printed in the United States in 1933.)
The Role of Money—What It Should Be Contrasted With What It Has Become, by Frederick Soddy, published in 1934 by George Routledge & Sons, Ltd., London, England.
The writer suggests that interested Americans club together and subscribe for the Congressional Record. (Write to Superintendent of Documents, Washington, D.C.) The cost is $1.50 per month while Congress is in session — about $7.50 per session. The revelations will be decidedly worth while. One can learn which congressmen and senators are sincere and honest.