March 29th, 1895

Here is a book which disturbs classifications, which is unorthodox, which sets aside some very widely received opinions as of little worth, and which presents its own side of certain vital questions with a persistency and logical force from which it is hard for an unprejudiced reader to escape.

Despite the fact that we have long since learned to discredit the school of Adam Smith and Ricardo, we cling desperately to certain fallacies which lie at the base of their systems.  We perceive that Adam Smith enunciated theories which, whether true or not at his time and under the conditions which he had in mind, are utterly false as applied to the United States to-day.  Yet we continue to regard Adam Smith with a sort of filial piety as the father of political economy, whose every utterance bears the stamp of inspiration.  We know perfectly well that Ricardo’s Theory of Rent is as untenable as Malthus’ Theory of Population ;  yet we hesitate to relegate both to the same limbo.  Tradition is nowhere more powerful than in that experimental bundle of theories which we misname the Science of Political Economy, yet it is of the first importance that tradition be not suffered to blind us to the invaluable results of experience.

It is against tradition that Mr. Kitson squarely sets his argument.  He sees—what many of us have been seeing for a long while—that the great source of traditional error is in the conception of the nature of value.  If he had done nothing more than point out the broad distinction between the terms value and Purchasing Power, he would have deserved well of a long-suffering people.  And even here, we think, he stops a little short of the truth, for not only is it true that value is a mere relation established by a process of exchange, while purchasing power exists independently of it, but (as has been previously insisted upon in this column) the purchasing power of a commodity is wholly a utility, so that its relation to value is not only different, but opposite.  The power of a dollar to purchase bread is as truly a utility as is the power of the bread to sustain life.  When once we have grasped this truth, the theory of money becomes enormously simplified.  The idea that a dollar must embody value to the extent of a dollar vanishes into thin air, because it is seen that the dollar derives its purchasing power from circumstances having nothing to do with the value of the commodity of which it happens to be composed.  Moreover, that money becomes the best money which is not complicated with the question of commodity values.  It is this latter fact which leads Mr. Kitson to announce the utter fallacy of what is called “ Gresham’s Law.”  It will be remembered that Sir Thomas Gresham, founder of the Royal Exchange, seeing that a less costly currency always drove out a more costly one, laid down the principle that “bad money always drives out good money.”

What he meant was that a cheap currency drives out a dear one, which is a simple fact of observation.  His error lay in the use of the terms ”good and “bad.” For, as matter of fact, that currency which is least complicated with the question of commodity values is the nearest to an ideal currency ;  that is to say, it comes nearest to being a simple title to wealth, and not wealth itself.  This line of argument leads to the admission that paper is a “better” money than gold.  And, theoretically, this is true, just as the deed to a house is a “better” deed when written on parchment than when engraved on a gold plate.

Remembering always that money is merely a title to wealth, we are forced to the conclusion that it should not lock up or contain within its substance wealth itself :  because in the latter case the fluctuations in value which pertain to all articles of wealth affect the purchasing power of the money, and so disarrange the primary conditions of trade.

But what is equally to be remembered—though Mr. Kitson has not been equally eager to point it out—is that the argument here advanced presupposes ideal conditions.  The money which is advocated in the volume under notice is ideal money.  Theoretically, we believe the argument to be a sound one ;  the condition which it presupposes is one towards which we ought to strive—towards which legislation should tend.  But it becomes a question of grave moment how far we may safely go in reducing theory to immediate practice.  Just now the mercantile community is deeply perturbed over the struggle of mono-metallism and bi-metallism.  That struggle would sink into nothingness the moment we realised Mr. Kitson’s ideal of a paper currency bottomed solely upon public confidence and redeemable in the general wealth of the nation.  The ratio of silver to gold would speedily settle itself if both were demonetised ;  and, after all, does not the fact that the legislative power can establish an arbitrary ratio for the coined metals prove conclusively that their purchasing power as money is something wholly apart from their value as commodities ?  This is the very point which Mr. Kitson seeks to establish.  Of course, the answer which the practical man of affairs always makes to the theorist is the answer which Mr. Kitson must expect to receive to his very pertinent queries, and it is this :  “ While it is perfectly true that an irredeemable paper currency * is the ideal medium of exchange in a society of the highest civilisation, yet the civilisation to which we have attained is not the highest conceivable one ;  we have not yet reached the point where public confidence will remain unshaken after the outward and physical wealth behind a currency is removed.  Of course it ought to ;  of course the locking up of millions of specie in order that millions of paper promises may circulate is an absurdity ;  of course the specie locked in a vault makes us not richer, but poorer, than if it were released.  But we must take men as we find them, and that is just what the theorists do not always do.  The utmost that we can accomplish is to point out the way, and trust to advancing education to bring public opinion to a just conception of the facts as they exist.

Mr. Kitson’s several chapters treat of “Economics and Ethics,” ”The Factors of Production,” “Wealth,” “Exchange-Barter,” “Value,” “The Standard of Value,” “Purchasing Power,” “ Money,” “ Gresham’s Law,” “ Price,” “ Currency,” “ Credit,” and kindred topics.  But the end and aim of his whole argument is to build up a theory of money upon the lines of a purely mathematical induction.  He follows Professor Jevons in the endeavour to show that all the terms with which political economy deals involve the consideration of quantities.  But he diverges from Jevons at the point where the latter becomes illogical :  for, indeed, it is illogical to define value as a “ratio of exchange,” and then to talk about “a standard unit of value.” It is manifest that we cannot have a “standard unit” of a “ratio.” The notion that such a thing is possible is responsible for the theory that gold and silver can be at once a standard of value and a medium of exchange.  When economists get rid of that theory the community will get rid of panics—not before.  “Values are ideal creations, and can only be properly expressed in terms of the ideal—numbers.” Such is Mr. Kitson’s remarkable announcement, and it is one which entitles him to a front rank in economic discussion.  His volume will be poohpoohed by the orthodox philosophers, and all the fogies will hold up their hands in horror.  But Mr. Kitson has got hold of the truth, and his theory cannot be permanently subverted.  He has only to wait till education shall bring men up to his own level of thought, and so make it possible to conform practice to theory.

* The writer of this review, who has evidently intended and endeavoured to do justice to the work, has failed to understand the proposals suggested in this book for an Ideal Monetary System.  The Author has not advocated the issuance of irredeemable currency.  On the contrary, he has insisted that money must be backed by wealth, and his objection to our present monetary system is that it compels commerce to use credit and substitutes for money, at the back of which there is not sufficient security.  (See chapter on Rational and Irrational Banking.)






MOST of the matter contained in this book was written in Philadelphia during the years 1893 and 1894—a time which will long be remembered as one of the most disastrous in the history of American Commerce.  A radical departure from what had hitherto been the financial policy of the United States was inaugurated, and from this date commenced the period of a restricted monetary system with its make-believe gold basis, accompanied—as it must inevitably be—by a baseless credit system.  This was also the commencement of the present era of Combines and Trusts, and it was largely through the new policy that what is now called “Morganism” became possible.

It will be interesting to review briefly the events which led up to this period, and culminated in such a series of disasters.

In 1892 Grover Cleveland was elected President of the United States on practically a Free Trade platform.  The great issue between the two parties at that time was the protective measure known as the McKinley Bill.  In fact the fundamental difference then existing between the Republican and Democratic parties, related to the Tariff.  Both parties endorsed bi-metallism.  The Republicans had passed the Sherman Silver Purchasing Bill, and “pointed with pride” to this measure as one of the great accomplishments of the Harrison administration on behalf of the country’s business interests.

Up to that time, business in the United States had been fairly prosperous, and the monthly addition of several millions of dollars to the currency, provided by the Sherman Silver Purchasing Act, increased the facilities required by the nation’s growing industries.  But these facilities were viewed with great disfavour by the banks, since they served to lessen the demand for bank credit-upon which bankers thrive.  To their complaints and direful prophecies the business community paid little heed, since the Treasury Silver notes were circulating as readily as Gold notes.  From neither of the two great political parties could the banks expect any sympathy or support.  One course only remained, and that was to capture the successful candidate for the Presidency and depend upon his influence to procure the necessary legislation.

Mr. Cleveland was elected by a considerable majority as a rebuke to the high Protection party.  It was expected that immediately after his inauguration in March, 1893, the President would convene Congress to repeal the obnoxious McKinley Bill.  In obedience to the wishes of the people, Congress was indeed summoned, but to the amazement of Republicans and Democrats alike, the President’s message was confined entirely to the Money question, and Congress was told that the measure fraught with the greatest possible danger to the nation was not the McKinley, but the Sherman Bill—a measure that had scarcely been honoured with discussion during the campaign !  The Democrats had a majority in both Houses, and it was soon evident that since no better measure favourable to silver would receive the President’s sanction, there was no likelihood of the Sherman Bill being repealed.  It was discovered that the President was at issue with nine-tenths of the members of his own party on this question, and that nothing short of a “scare” would give the President the majority in Congress that he needed.  The next step, therefore (which it is believed was devised by certain New York bankers to give the country an “object” lesson), was to hold a convention of representatives of the leading banks of the country, and arrange to restrict loans and call in those existing.  Treasury notes were also collected and presented for payment, for which gold was demanded, and the gold reserve—usually maintained at $100,000,000—was steadily reduced.  No attempt was made by the new Administration to stop this drain by refusing to pay the notes wholly in gold—a legal privilege which the Secretary of the Treasury held.  Up to this time the Government had always used its discretion as to whether it should redeem Treasury notes in gold or silver, and the bankers knew perfectly well that there was no law to compel the redemption of these notes entirely in one metal.  It was plain that the “capture” of the Administration had been accomplished.  This sudden shrinkage of the gold reserve, accompanied by the curtailment of banking accommodation, produced, needless to say, the necessary “ scare.” The effect was probably the most serious the nation had ever witnessed.  Thousands upon thousands of manufacturers and merchants were ruined.  Depositors were unable to withdraw their funds, and business was conducted by means of Clearing House cheques.  Business men naturally sought to learn the cause of so sudden and unexpected a disaster.  The information was volunteered by certain inspired newspapers that the trouble was due to the Sherman Silver Bill, and citizens were told that if they desired things to be restored to their normal condition they must write to the Members of Congress requesting them to vote for a repeal of this Bill.  The plan succeeded, and when Congress again met, the President had little difficulty in getting the Bill repealed.  It took the American people with all their natural resources four or five years to recover from this blow.

Whether the events which have since transpired as a natural sequence were or were not foreseen by the panic organisers it is impossible to say, but the consolidation of capital—which before 1892 was a somewhat difficult problem—became very simple under the so-called gold-standard régime.  With the Government no longer a competitor, the banks rapidly combined for purposes offensive and defensive, and for all practical purposes the control of the currency under a single head became a possibility.  Having the ability to employ so vast a power, the exploitation of the industries of America was readily accomplished.  Undoubtedly the simplest and surest way for obtaining control of the industries of a country is to first get control of its currency.  For the blessings or evils (whichever view one chooses to take) resulting from the formation of the great Trusts, we must credit the financial policy of President Cleveland.  In addition to having placed the nation’s industries at the mercy of the bankers, another result of this policy was to indefinitely postpone the Free Trade era which was about to dawn upon the United States.

When the low tariff Wilson measure finally replaced the McKinley Bill, public interest in that question had disappeared, and was centred on the much more important one of finance, which afterwards became the main issue between the two parties.*

It is but fair to say that President Cleveland had no conception of the results that would follow the policy he inaugurated, for no one has denounced the system of Monopolies and Trusts more strongly than he, who was instrumental in creating that greatest of all—the Money Monopoly.

One beneficial result achieved by the panic of 1893 is yet to be mentioned—namely the exposure which was made of the dangers attending Monopolistic Banking.  If the disasters of 1893 could be produced by a small body of men acting conjointly for a definite end, at a time when competition was keener than it is now, how infinitely greater are our present dangers, and how much easier to engineer a panic !  But apart from the increased dangers to which commerce is now subjected by artificially created panics, periodic failures are inherent in our monetary system itself.  As I have endeavoured to show in this work, the commercial world is forced into liquidation once every decade.  Another serious financial panic is now imminent, and, under our present system, as inevitable as the rising and setting of the sun.

It is unnecessary to seek an explanation of panics in the theory of the solar system or the appearance of sun spots !  The application of simple arithmetic is quite sufficient.  Those who have given this subject careful and intelligent study must admit that our monetary systems cannot safely support the world’s expanding trade and commerce for a much longer period.  A breakdown is inevitable.  One has but to examine the foundation supporting a building to realise its degree of stability or instability, and it surely needs no gift of prophecy to predict that the man who undertakes liabilities ten or twenty times greater than the total available assets procurable within the time of the maturity of his obligations, must fail.  The same is true of nations.  The obligations undertaken by governments and municipalities, and by the industrial and commercial world exceed to an almost incredible degree the total available material in which these obligations have to be redeemed ! !

Neither mono-metallism nor bi-metallism will save the world from financial disturbances.  Those who have the patience to follow the reasoning in the succeeding chapters of this book will see that nothing short of the abandonment of the theories and heresies which now pass current, and upon which the world’s financial systems are built, will put an end to these disasters.

The experience of the past ten years which have followed the period above referred to, emphasizes most strongly the necessity for reconsidering the laws governing the monetary systems of the civilized world.  This subject must necessarily become the most important with which political parties will have to deal in the near future.

The principal part of this work was written after a careful study of all the books and treatises on the subject available, and was originally published under the somewhat pretentious title of “A Scientific Solution of the Money Question.”  Its reception was much better than I had reason to expect, and the press dealt with it in a far more tolerant spirit than is usual where established customs and traditions are challenged and radical innovations proposed.

Certain critics, however, objected to the introductory chapters as irrelevant to the subject matter which occupies the main portion of the work.  They described the discussion of the theories and statements of Adam Smith, John Stuart Mill, and Jevons as “the threshing of old straws.”

One critic remarked that “the author seems to be ignorant of the fact that economics has become a new science during the past twenty years.”

I am quite aware that the discussion of the assumptions upon which Political Economy is based is not new, and that these have been the subject of attack again and again.

I am also aware of the fact that many new and ingenious arguments have recently been furnished by Economists to shew the necessity for existing institutions, and the impossibility of preventing financial and industrial crises and ridding society of the scourge of poverty.  But so far as its fundamental principles and assumptions are concerned, Political Economy stands where it did in the days of Adam Smith.

Another critic charges me with asserting that existing social evils are directly attributable to the Economists, and remarks that “it would be just as rational to charge the Geologists with being responsible for earthquakes ! ”  This critic has failed to grasp my meaning, and the analogy is not well taken.

If the phenomena with which geology deals could be changed by human actions so as to affect beneficially or disastrously the human race—if earthquakes were the direct result of human operations—then Geologists would surely incur a grave responsibility by failing to point out what those acts were that caused such disasters, and how they might be averted.

Unfortunately, most writers on Political Economy regard poverty, financial panics and industrial crises as the inevitable result of natural laws, and as uncontrollable as earthquakes, or the motion of the heavenly bodies.

I have taken the objects of the science to be those propounded by its great exponent—Adam Smith.  He says :  “The science proposes two distinct objects, first, to supply a plentiful subsistence for the people—or more properly to enable them to provide such a revenue or subsistence for themselves ;  secondly, to supply the State or Commonwealth with a revenue sufficient for the public services.  It proposes to enrich both the people and the sovereign.

My main contention in the first chapter is that the science as it has been and is now taught in the educational institutions of the world, has not fulfilled those objects, and is therefore a failure.

To overestimate the importance to social life of Political Economy (of which money is a special branch) seems impossible, since it deals with the distribution of those material things that go to support life, and our aim should be to raise this study—if possible—to the position of an exact science, an accomplishment which will do more to rid society of the scourge of poverty than all the poor laws and philanthropic schemes ever devised.

Just now urgent appeals are being made throughout Great Britain on behalf of the unemployed.  England is again afflicted with business depression, and able-bodied men tramp the streets daily begging for assistance—a condition similar to that prevailing in the United States when this work was originally written.

These afflictions will continue to reappear in spite of all our philanthropic measures until a general public interest is created leading to an intelligent study of this science in all its branches.

It is a deplorable fact (and one to which is accountable the continuance of a system which has been a failure many times during the past century) that not one person in ten thousand has any really intelligent idea of the science of money—a subject which is usually treated as one of profound mystery, and which only a banker is capable of understanding.

To one not blinded by custom and prejudice, the money question is quite comprehensible.  But because of the prevalence of false and contradictory theories, students find the subject hopelessly involved in ambiguities and intricacies.

It is with the hope that it may evoke a spirit of inquiry leading to a clearer understanding of this most important subject that I am encouraged to republish this work.

LONDON, January, 1903. A.K.

* It will doubtless surprise many to learn that this was the only time when the question of Protection v. Free Trade was submitted to the people of the United States during the past twenty years as a single direct issue—unaccompanied by any other disturbing question—with the result that Protection was defeated.  At every other Presidential Election during this period the issue has been confused by questions such as bi-metallism, the negro franchise, etc.



“IF this so-called science, Political Economy, did not busy itself with that with which all juridical sciences are concerned,—with furnishing an apology for violence,—it could not fail to overlook the strange phenomenon that the distribution of wealth and the exploitation of some men by others are dependent upon money, and that only by means of money do some people command the labor of others nowadays,—that is, to enslave them.

“ In antiquity, with its frequent conquest of nations and the absence of human equality, personal slavery was the most wide-spread method of subjugating men.

“ In the Middle Ages the feudal system,—that is, landed property and the accompanying serfdom partially supplants personal slavery, and the centre of gravity of subjugation is transferred from the person to the land.

“In modern times, since the discovery of America and the development of commerce, with the overflow of gold made the universal money token, the money-tribute has become, with the strengthening of governmental authority, the chief means of the subjugation of men, and by it are determined all the economic relations of men.”








IT is almost a quarter of a century since Professor Jevons gave to the world his now celebrated work, “The Theory of Political Economy,” in which he demonstrated the possibility of treating economics as a purely mathematical science.  He showed how all the terms with which it deals involve the consideration of quantities—are, in fact, strictly quantitative terms—such as utility, value, capital, interest, supply, demand and so on.

His treatment of the very ambiguous and hitherto mysterious subject of value, was the beginning of a new era in economic science, and it is to Professor Jevons that we are indebted for having rescued this most important subject from what seemed to be utter chaos, and for having brought the two terms, utility and value, into some sort of coherency.  Notwithstanding the importance of his contributions to theory, however, his labors do not appear to have conferred any practical benefit upon the social affairs to which they relate,—to money, trade and industry ;  to those things which it is the aim of the science to both elucidate and facilitate, Nor do I believe any better showing can be made—anything of what Lord Bacon called “fruit” will be found—from all the labors of economists in this science during the past twenty years.

And yet there is nothing of more importance to the human race, nothing that stands in greater need of the light of science, than the subject of exchanges.  Society is as much divided, and the opinions of the learned are as contradictory upon commercial and financial questions, as they were when Jevons commenced his famous work.

In spite of the able and voluminous contributions to the theory of Value, the Money Question—which is indissolubly associated with it, and depends almost wholly for its solution upon a correct interpretation of this word—remains in the same unsettled, unsatisfactory condition as it did prior to the rise of the modern English and Austrian Schools.

The question arises, then, is the science of economics incapable of solving the all-important social problems with which it deals ?

Is the science to begin with and end in mere theories—theories which apart from the mental exercise they afford, have no practical bearing upon the affairs of life ?  I think not.  I believe that a true science of economics can and must answer satisfactorily and conclusively all the riddles that have been for ages propounded by the social sphinx.  I believe such a science will enable mankind eventually to abolish want and the fear of it ;  to create such an abundance of wealth that all will have enough and to spare ;  a condition where over-production will mean a profusion of wealth, and its antidote will be found in satiety instead of starvation.  I see no reason why economics should not do for trade and industry what the science of mechanics has done for the mechanical arts, or medicine and surgery for human life.

In the following pages I have attempted to sketch the direction in which a true science of wealth must inevitably lead, as well as the foundation upon which it must be built.

Although dealing mainly with what I believe to be the greatest problem of this age,—the Money Question,—I have digressed somewhat in the opening chapters, in order to enunciate a few leading principles to which the science must of necessity conform.  I have also pointed out where, in my judgment, economists have invariably gone astray—a fact which explains the cause of the barrenness of the science, and its failure to bear tangible fruit.  One error which prevented Jevons from developing his theory of value into a practical reform of the highest importance, I may be allowed to touch upon in this preface.

After defining value as the “ratio of exchange,” and showing that it can be expressed only in terms of the ideal—numbers—he commits an almost unpardonable solecism in writing of “ a standard unit of value” as “a fixed quantity of some concrete substance defined by reference to the units of weight or space.” What “a fixed quantity of some concrete substance” has to do with a “ratio,” and how a substance can become a standard “ratio,” are questions that Professor Jevons failed to answer.  The truth is that in spite of the clear definitions with which he set out, he afterwards confused his subject by employing the word “value” in a double sense :  first, as the ratio of exchange ;  second, as purchasing power.  Thus when speaking of a “standard unit of value,” he evidently means purchasing or exchange power, i.e. the power conferred upon a commodity whereby it can be exchanged for a certain quantity of some other article of utility.

Again, how can “a fixed quantity of some concrete substance” represent a power not possessed by, nor residing in any substance, but merely conferred upon certain objects by human desires—a power that varies and fluctuates, that appears and disappears with those desires ?  To my mind there is only one way in which a commodity can be rationally considered to represent a unit of “value,” i.e. purchasing power.  We may select a given quantity of a certain commodity, 25 grains of gold, for example, and say that whatever the purchasing power of this amount of gold happens to be upon a certain day, or at a given time, shall represent the unit of purchasing power.  But this is a very different thing from selecting 25 grains of gold as a permanent unit.  No fixed quantity of any substance—not even gold—represents a fixed quantity of purchasing power for any length of time.  It is only at any given instant that we may consider a commodity to have a certain amount of exchange power.  If then, we follow the variations in the exchange relations of commodities from any given instant, having first priced them all at that time in terms of the commodity selected as a standard, we have an absolutely correct and scientific system by which fluctuations in values may be registered with mathematical exactness, and which will be independent of the fluctuations in gold or any other single commodity.*

The mistake of Jevons and other economists was in omitting the element of time from their definition of a standard unit—an error similar to that in disregarding the degree of temperature at which the metallic bar that serves as the standard of length is to be taken.  Of course the introduction of time destroys all hope of our ever possessing a material unit of value or purchasing power—a thing to which altogether too much importance has hitherto been given.  Values are ideal creations and can only be properly expressed in terms of the ideal—numbers.  In Chapters V to VIII, as well as XI and XII, I have dealt fully with this question of the ideal, and have shown how an absolutely invariable ideal unit of purchasing power may be obtained, and how impossible and unnecessary it is to employ “a fixed quantity of some concrete substance” as a unit.

The difficulty that the monometallists and bimetallists are vainly contending against, but which they are unable to perceive, is, attempting to do with the material what can, from the very nature of things, only be performed by the ideal, viz., express and register fluctuations in values.

To those who may think the conclusions arrived at in this work visionary or impracticable, I would say that so far as the use of an ideal monetary unit is concerned, we already possess one, and fully 999 out of every 1000 persons use money to-day in this ideal sense.  Probably not one per cent. of the population could tell what the dollar or the pound sterling represents in bullion.  What everybody does know, however, is that a dollar and a sovereign represent just so much purchasing power, and that this is not due to the metal they contain, but solely on account of the credit of the issuer, and of the fact that the exchange relations of all goods are expressed in pounds, shillings and pence, dollars and cents, or some similar ideal units.

The universal employment of token coins, paper money, etc., is an unanswerable argument to those who believe an ideal monetary system impracticable.

It may be thought by some that I have explained certain points with unnecessary prolixity, and the criticism of repetition may likewise be urged with a certain amount of justice.  My answer to this is, that as far as I know, my treatment of this question is in the main entirely novel, and the subject one of an exceedingly abstract nature ;  and in striving to make the subject clear and intelligible to the average reader, I have preferred incurring the charge of repetition to that of ambiguity.  The reiteration of a truth will harm no one.  The evil to be avoided, especially in a subject of this nature, is obscurity.

The title of the book may seem somewhat pretentious.**  I do not wish it to be inferred that I am vain enough to believe this work to contain anything more than an indication or suggestion of the direction in which we must necessarily look for the final solution of this problem, which has been the great social riddle for centuries.

In this discussion I have endeavored to show the necessity for dealing with the question wholly from a scientific standpoint.  As a general rule its discussion has hitherto been confined to those who may be regarded merely as representatives of private interests—advocates of certain schemes, monometallists, bimetallists, free-silverites, green-backers, etc.—whose labors consist in attempts to create a science that shall harmonize with pre-organized, pre-arranged institutions.  My aim has been simply to arrive at the truth, irrespective of any interests which it may favor or condemn.

If this work should in any way lead to a reconsideration of the laws under which the greatest and most dangerous monopoly of the age is maintained, and by which millions of men are doomed to suffer inevitable failure—if it should assist in freeing money—that most useful and ingenious of all human inventions for facilitating commerce,—from legislative restraints, and thereby emancipate industry from the bondage into which legislators have placed it, the object for which this book was written will have been fully accomplished.


PHILADELPHIA, August 15th, 1894.

* See illustration on page 94 (Purchasing Power).

** The original title was “ A Scientific Solution of the Money Question.”



“For my part, I have sworn fidelity to my work of
demolition, and I will not cease to pursue the truth
through the ruins and rubbish.”—


THE period commencing with the year 1890 and extending to the present time* will long be remembered as one of almost unparalleled business disaster throughout the civilized world.  No nation has escaped the wave of industrial depression which, commencing with the failure of a London banking house, a few years ago, has swept over the entire globe.  And nowhere have the effects been more severe than in the United States.  “No other country,” says a magazine writer,** “has ever incurred in so short a time such an amount of financial and industrial disturbance and disaster.” Mills, factories and workshops have closed, banks have suspended, and thousands have been suddenly reduced from affluence to poverty, whilst hundreds of thousands of wage-earners have been cast adrift to beg, starve, or join the ranks of those numerous bands of malcontents who, from almost every State in the Union, are now marching towards Washington.***  This period has been marked by no extraordinary natural calamities, such as famines, fires or floods, which occasionally precipitate whole communities into destitution.  The factors in the production of wealth have been as prolific and as responsive as during any previous years of industrial prosperity.  Men have been none the less eager to labor, machinery none the less efficient, and nature has not failed to respond as readily to the call of labor with bountiful harvests of wealth.  There never was a period in the world’s history when the factors of production were, as a whole, more efficient, when so much wealth could be created in so short a space of time and with so little expenditure of human energy, as now.  Notwithstanding all this, we are to-day experiencing calamities greater in degree and more extensive than any that nature has ever produced.  Millions of the world’s inhabitants have been reduced to a condition as bad as though the fruits of their labor had been suddenly swept out of existence, or pestilence and famine had held undisputed sway.  Although severer and more universal in its ravages, the present panic belongs to the same order as those of previous years.  Appeal to those whose business it should be to investigate and interpret this class of phenomena, discloses a rather humiliating state of things, for the opinions of statesmen, financiers and economists are as diverse regarding the cause of financial panics as it is possible to imagine.  Be the cause, however, what it may, the fact remains that after more than a century’s experience, during which there have been not less than ten severe panics, no scientific explanation has yet been offered by either statesmen or economists for these decennial commercial crises, nor has a satisfactory remedy for their recurrence been suggested.

Since the trouble evidently does not arise in the production of wealth, we may reasonably expect to find it somewhere in the mechanism of distribution.  Complicated as is the machinery of modern commerce, it requires but the least reflection to perceive that the money question is the mainspring of the industrial world.  That panics are known as financial panics is indicative of the fact that these troubles originate from disorganization of the mechanism of exchange.  Panics never arise in the industrial world unless precipitated by financial disorder.  In other words, instead of finance being the servant of industry, industry is the tool of finance, and the entire production and exchange of wealth is now controlled by those who control the money of the world.  Startling as it may seem, it is nevertheless true that the power to paralyze industry is in the hands of a comparatively few individuals, amongst whom concerted action can be effected at any time.  This is a serious and menacing condition of things, and so long as it exists the lives and fortunes of almost the entire human race are virtually at the mercy of these men.  The manner in which this condition of things has been brought about is largely due to two or three fallacies underlying the world’s monetary systems—fallacies which have become strongly entrenched by law, and with others equally false, form the basis of the present so-called science of economics.  To fully perceive these errors we must examine them in both root and branches.  I shall therefore first of all briefly discuss a few of the premises and assumptions of the present system of political economy.  Following that I shall proceed to a discussion of the money problem.

Let us at the outset clearly understand what the money problem is.  Fundamentally it is merely a question of commercial equity.  It is the establishment of a system by which justice shall be meted out to wealth-producers.  The great and pressing demand for money which has been so acute during the past century, is due to the specialization of industry.  Few men at the present day are employed in making goods for their own consumption.  Speaking generally, all production is now carried on by individuals for society, and the great function of money is to register the proportion which each producer’s commodity bears to the total quantity of goods brought to market.  It is likewise a certificate, entitling him to receive that same proportion of wealth in any form he may desire.

Here, for instance, is an engine builder.  He and his men devote themselves to the manufacture of a machine for which they have no personal use.  To society the engine is indispensable.  In order that engine building may continue, it is necessary that those so engaged shall receive food, clothes, shelter, and all the necessaries and comforts of life—products which others are engaged in furnishing for exchange.  Engines are sent to market to exchange for these other forms of wealth.

The question that really concerns the engine builder is, in what relation do his engines stand to all those things which he needs ?  How much of them will they purchase ?  This proportion is determined by the law of supply and demand, a law which under free conditions makes for justice.  A scientific monetary system should register these exchange proportions of commodities faithfully, without affecting the natural law of supply and demand in the slightest degree.

In the following chapters I shall endeavour to describe a method by which the proportion of each man’s produce to the whole mass of wealth may be determined.  This system is nothing more than a numerical system.  It ranges all commodities, one above another, in terms of a common denominator.  It furnishes a neutral price scale upon which the fluctuations in the supply of and demand for goods are accurately recorded.

I shall shew that no commodity can possibly perform these functions, and that financial disasters are the inevitable results of endeavouring to substitute the material for the ideal.

Let us proceed at once with our task.

* This was originally written in 1893.  See Preface to English Edition.

** David A. Wells, in “The Forum.”

*** Cow’s Army.