A Fraudulent Standard

CHAPTER VI

THE VARIABILITY OF GOLD



COMMODITY values vary both in time and place.  The purchasing power of gold, like that of all other commodities, is affected by supply and demand.  The discovery of a new gold mine could reduce the purchasing power of the sovereign very considerably, whilst the sudden demand for gold for some new purpose would greatly enhance it.

It is also affected by the supply of and demand for substitutes, such as credit notes, bills, bank­notes, etc.  Just as the price of beef is affected by that of its substitutes, so gold may rise and fall in purchasing power merely by the manipulation of bank or national credit.  The results—which are painfully apparent to those who have had experience in financing industries and have given consideration to this important subject—may be seen in the innumerable financial troubles and disturbances with which trade and industry have been so constantly and universally afflicted for the past century.  The economic, social, and political supremacy of the financial classes universally, may be traced very largely to their ability both to create as well as to employ fluctuations in the monetary unit to their own advantage and enrichment.

Let us take an analogy.  Supposing our yard­sticks consisted of certain pieces of elastic rubber, which unscrupulous dealers were permitted to use as they saw fit, so that when purchasing goods they were allowed to stretch their yard measure to cover forty-eight inches, and when selling, to reduce it to thirty inches.  Naturally such methods would, whilst ensuring the enrichment of the dealers, cause endless losses, confusion and discontent in the trade.

Now the gold standard is a very elastic one, particularly since the great bullion dealers and financial speculators of the world have the power to control the gold supplies to a very great extent.  In addition to this we have large volumes of credit in circulation performing all the functions of money and affecting the monetary unit to an incredible degree.  And very much of this credit is, as previously stated, controlled by a few men who can manipulate it in their own particular interests.

Witness, for example, the United States panic known as “ Black Friday,” which a clique of New York gamblers engineered by the simple act of cornering the gold supplies of New York for a few days—a performance which broke no State law and was therefore legally permissible.

A similar trick was practised on the American public in 1893 by a number of bankers who, by presenting national bank-notes for redemption, were permitted to raid the Treasury at Washington and withdraw stocks of gold ;  and by withdrawing a large volume of legal tender notes from circulation and curtailing bank credit, brought on the great panic of that year.


FIG. A. HOW GOLD HAS VARIED IN VALUE, 1850-1917.
Figure A
The heavy line indicates variations in the value of gold as measured by commodities generally.
     (Computed from the Index Figures of Sauerbeck and “ The Statist.”  Figure for 1917 is for 5 months only :  the final calculation will show a smaller result, since prices are still rising.)
     Taking average wholesale prices (Sauerbeck’s) for 1867-77 to equal 100, the figures on the left indicate the relative amounts of commodities required to purchase a given quantity of gold in any year from 1850 to 1917. E.g. gold (i.e. money or credit in gold standard countries) borrowed in 1873 and repaid in 1896 would represent in goods 90 in the former year, but 164 in the latter.
     The War Loans of 1915-6-7 represent a small quantity of commodities (“ cheap money ”) but when they come to be repaid they may represent several times that quantity, if the gold standard is maintained and the present “ inflated ” currency is withdrawn, as bankers and financiers will wish.  That is, producers will probably have to produce, in order that the Loans may be repaid, several times the quantity of goods represented by the same Loans at the present moment.

FIG. B. DIAGRAM SHOWING THE RELATION BETWEEN VARIATIONS IN THE VALUE OF GOLD AND THE NUMBER OF BANKRUPTCIES
Figure B
    X.  Curve showing variations in the value of gold-part of curve given in Fig. A. Units marked on left side.
    Y.  Hand-drafted curve (four-yearly averages) showing variation in the number of bankruptcies :  figures on right from Annual Reports (Bankruptcy) of Board of Trade.

Again, in 1907 a similar conspiracy resulted in the currency panic which affected the markets and industries of the whole civilized world.

In each case the purchasing power of money rose enormously.

Jevons also tells us that the value of gold fell 46 per cent. between 1789 and 1809 (a period of only twenty years), that from 1809 to 1849 it appreciated 145 per cent., whilst between 1849 and 1874 it fell over 20 per cent.

During the past ten years it has fallen nearly 50 per cent. !

The accompanying diagrams, drafted by Mr. Harold A. Grimshaw, of the London School of Economics, graphically illustrate how violent have been the fluctuations of gold during the past sixty­seven years, that is from 1850 up to the fifth month of this year.  The second diagram shows how these fluctuations correspond with the variations in the number of bankruptcies.

To talk of a standard subject to such violent changes is the height of absurdity.  “ So palpable is this objection,” says Francis A. Walker, the well-known American authority, “ that some writers who still cling to the term ‘ measure ’ of value abandon that of a ‘ standard of value’.”

Professor Irving Fisher, of Yale, U.S.A., has suggested a method of overcoming the difficulty of variability by changing the weight of gold in the standard unit from time to time.  He proposes to vary the weight in order to maintain a “ fixed value.”

The suggestion is ingenious, but more feasible in theory than in practice.  It would be analogous to the legal establishment of a mercury-tube as our yard-stick, exposed to atmospheric influences which would involve an alteration in every yard measure and every foot-rule in the Kingdom whenever there was a change of temperature !

In spite of more than a century’s experience in which panics and disasters have demonstrated the utter unscientific character and fraudulent nature of our legal monetary standard, and during which private fortunes have been dishonestly amassed—stolen from the producing classes by the instigators of such panics—no statesman in any country has yet appeared with a proposal for establishing a really scientific system which would be immune from private manipulation and free from fluctuations !  Why is this ?  Certainly no greater public service could be rendered and no wiser legislative Act could be proposed for the public welfare.

Is such a system possible ?

Before answering this question let us see how the present one came to be legalized, and the reasons given by its principal author.