Edward Kellogg
A New Monetary System

Part I
The Principles of Distribution

Chapter I
Of Value

Value consists in use; it is that property, or those properties, which render anything useful.  A house that could not be occupied would be worthless, unless its materials could be employed for some other purpose.  A horse is valued for his useful qualities; if he becomes disabled, he is worthless, for his use is destroyed.  So of everything necessary to the support and comfort of man, it is valuable because it is useful.

The same is true of ornaments.  They are valuable because they are useful for ornamental purposes.  If diamonds were deprived of their beauty, their use, and therefore their value, as ornaments, would cease to exist.  A valuable portrait might be rendered worthless by erasing the features.  The canvas and the paint, the material of the picture, would remain, but its use would be destroyed.

The value of all property is estimated by its usefulness.  For instance, the income that a city lot can be made to produce, determines its value.  The interest on the money that its improvement will cost, must be first deducted, together with the taxes, insurance, and repairs necessary to keep the improvement permanently good.  The surplus it will yield after making these deductions, determines the true value of the lot.

There are two kinds of value :  actual value, and legal value.  Actual value belongs to anything that inherently possesses the means of affording food, or which can be employed for clothing, shelter, or some other useful purpose, ornamental or otherwise, without being exchanged for any other thing.

Legal value belongs to anything which represents actual value, or capital.  Its existence depends upon actual value.  The worth of things of legal value depends upon their capability to be exchanged for things of actual value.

The following illustration shows the distinction between actual and legal value, and the dependence of the latter upon the former.  The national debt of England exceeds 800,000,000 sterling, say $4,000,000,000.  It bears interest at about an average of three percent per annum, amounting to an annual sum of $120,000,000.  A hundred and twenty millions of dollars' worth of the products of labor, of actual value, must be sold annually to pay the interest; to pay the principal would require a large proportion of the wealth of the country.  If the paper, the legal value which represents and secures the debt and interest, were collected and burned, it would not diminish the real wealth of the nation.  It would merely cause a change in the individual ownership of property.  But alter the circumstances, and suppose a similar amount of actual value to be consumed, houses, manufactories, machinery, fences, grain, etc., to the amount; of $4,000,000,000, and nearly every improvement would be swept from the British Islands.  Destroy merely the three percent interest of actual value or the debt for one year — i.e., products to the amount of $120,000,000, and a famine would ensue; for actual value, the products of labor, would be destroyed, instead of a legal representative, as in the case of the conflagration of the paper securing the interest.

The power of money, like the power of a bond and mortgage, is legal.  A mortgage upon a specific piece of land gives the owner of this paper instrument a right to a certain portion of the value of the land.  A mortgage is a specific lien, by which one individual binds a certain portion of his property to another.  A lien on property, in the technical acceptation, is a judgment recorded on the docket of a court, or a mortgage recorded in the county clerk's office.  These instruments hold a right over the property of the debtor, in defiance of him, or of any other person who may have the property in possession.  Money is a public lien upon all property that is for sale in the nation; and the bolder of money can, at all times, procure with it the amount of property which it represents, as much as the holder of a mortgage can procure the specified amount of property upon which the mortgage is a lien.  Money is, however, a lien superior to all mortgages and judgments; because, if the specified amount of money be tendered, the owner of the mortgage, or judgment, is compelled to cancel it.

Notes of hand are deemed by all business men to be liens upon the property of their drawers; otherwise, although a man owned ten thousand dollars' worth of property, his note for five thousand dollars would be deemed no better secured than if he owned no property.  If money were not a lien on property, it would be valueless, and people would cease to part with their property for it.

The value of notes of hand, bonds and mortgages, book accounts, and money, depends upon their capability of being exchanged for property.  Their power to accumulate is given by law, and they accumulate a mere legal representative; that is, interest in money, which is valuable only because, like the principal, it can be exchanged for a certain amount of actual value.  Hence, the value is in the property, and not in the money or in the obligations.  Money, and all obligations, are mere representatives, and depend upon property for their value.