In the organization of our government, certain functions that would facilitate, or encourage trade between the several states, known as interstate commerce, was conceded to the federal government.

These included money, the medium of exchange ;  the post office for the transmission of intelligence ;  and the public highway for transportation.  On money we find Art. I, Sec. 8, No. 30 :  “to coin money, regulate the value thereof, and of foreign coin.”

The constitution also prohibits any state unit from making anything lawful money except gold and silver coin, and they are prohibited from coining either.

Heavy penalties are imposed for counterfeiting money, or even having the means of counterfeiting in possession.

This should settle the question as to where the power rests, and resting with the federal government, it is their duty to coin or issue all the money needed for the purpose of exchange and distribution of the products of labor, in the most efficient manner and in sufficient volume, without private profit.

In the past and present, the practice in administration has been exactly the reverse, hence the confusion in the public mind.

The national bankers have so long, wrongfully enjoyed the profits of the administration of this public utility, that they have grown to regard it as a vested right, and resent any attempt to regulate or control.  They will not even concede that “the rule of reason” should apply.

Can Congress by legislation, delegate a power reserved in the constitution as a public function, to a private business to be operated for private profit ?

A Deceptive Legislative Trick 55

President Taft in an address at the Waldorf-Astoria, New York, February 14th, 1910, in discussing the proposed postal savings bank system, took the position that unless the law contained a provision for the investment of the deposits in government bonds that it would be unconstitutional, “Because the postal banks would then clearly be an instrument of the national government.”

Again he said :  “A provision that when the money is not needed to invest in government bonds, or to redeem the same, it may be deposited in the national banks, in the neighborhood of the place of deposit, will avoid the great danger of a panic, and will strengthen a banking system, which is an arm of the federal government.”

A public service corporation.  What a travesty in practice !

Mr. Herrick says :  “The federal reserve system is charged with the issue of currency—a function of the government.”  Which is true.

Secretary Houston, page 36, 1914 Year Book, says :  “The federal reserve act was passed with a view to the improvement of the banking conditions of the country in the interest of all classes.  It is not a bankers’ law, it is a law for all classes—for all the people.”

Senator Owen in introducing the bill, and he should know, said (Congressional Record, p. 6766) :  “All of these consideration urge that the federal reserve banks should be a bank for banks ;  a bankers’ bank ;  and not a public bank competing with the banks for business.”

George T. Shibley, expert to the Senate committee on banking and currency, in his explanation on page 17, says :  “In brief, the federal reserve system is to be a ‘bank of banks.’ "

President Wilson, in his currency message to the Congress, December, 1913, said :  “The control of the system of banking and of issue which our new laws are to set up, must be public, not private, must be vested in the government itself, so that the banks may be the instruments, not the masters, of business and of individual enterprise and initiative.”

56 A Government Department
Note.—That sounds good ;  but the law as enacted with the President’s approval, makes the federal reserve banks “absolute masters of business and of individual enterprise and initiative.”

Thomas Jefferson said that “the issuing power should be taken from the banks and restored to the people to whom it properly belongs.”

And Andrew Jackson restored it.

The Civil War gave the bankers the opportunity to take advantage of the necessities of the nation, and since then they have gradually advanced, step by step, usurping the functions of government, until they now have a complete monopoly of this vital public utility.

We need and must have another Andrew Jackson.  All political parties agree that the issue and coinage of money is a constitutional function of the federal government.

The national banks are chartered as an “arm of the federal government.”

The federal reserve law was made not only an “arm of the government,” but the whole thing, so far as money is concerned, now that we have practically ceased to coin money, by making the federal reserve banks fiscal agents of the government, government depositaries and delegating to them the power to issue money, and “to regulate the value thereof.”

How regulate the value thereof ?  By regulating the quantity issued, or rather in circulation.  There is no other way.  That is, the supply must equal the demand for use.

That proposition has been ridiculed in the past, but we now have the admission of what should be considered the very best authority in the United States, viz :  the federal reserve board.  In their report issued February, 1916, we find :  “The reserve banks have not been greatly encouraged to indulge in such commercial banking operations as the law permits, because thereby the danger of inflation might have been increased and money rates further depressed.”

Unlimited Power Delegated 57

The object of the federal reserve board is to increase the value of the dollar, and this includes all outstanding obligations, payable in dollars.  Just keep that in mind.  We will refer to it later.

Unlimited Power to Fix Rate of Interest.

The federal reserve bank law, Sec. II-b, confers the power on the federal reserve board to fix the rate of interest one federal reserve bank may charge another for rediscounting the paper of another federal reserve bank.

They have the power to fix the rate of interest the federal reserve banks may charge a member bank, and the rate the member bank may charge the customer, so the very important factor of fixing the rate of interest to be charged for the use of money or currency rests with Congress.

They have delegated this power to the federal reserve banks without fixing the maximum rate of interest to be charged, or the volume issued.

The responsibility is fixed.  Congress is responsible.

And you, Mr. Voter, are responsible for Congress.

This is by far the most important branch of our government, because, whoever, or whatever system controls the money of a country is complete master of the labor, industry and commerce of that country.

It has been said that our government was composed of three branches :  the legislative, the executive and the judicial, in the order named.

I think that five divisions would better represent our present system in actual practice, and in the following order of influence and power :  The independent (?) American voting citizen, the legislative, the executive, the judiciary, and the SOVEREIGN HOUSE OF MORGAN.

In every other department of our government the employes are paid fixed salaries, or commissions.  Even in the other branches of the Treasury Department, the smallest misappropriation of public funds for private use is relentlessly prosecuted.  This is true

58 A Government Department
of every branch of every department, except this one branch of banking as conducted under the inspiring influence and practice of The Sovereign.

What would be thought of our permitting a postmaster to charge each customer all he thought they could, or would, stand for each stamp sold, the least able to pay the most ;  the receipts above the cost of the stamp to go into his private till, for his own private use in lieu of a stated salary.

A grave temptation for the weak, or those inclined to graft.

The cases are exactly parallel.  Each is an “arm of the federal government” organized for the purpose of operating a public utility.

No individual, combination of individuals, or state unit is permitted to make either a postage stamp, or a dollar of money.

The postage stamp is good for the transmission of a letter or parcel to any part of the United States, the rate being the same for every person using them, and estimated at a price that will cover the actual expense of the service, without any private profit.  The system is operated as a public utility.

The dollar is supplied to the federal reserve bank at the bare cost of printing, about one mill.  Every state in the union except three has fixed the maximum rate that can be charged legally at from six to twelve per cent.

Gross Violations of Banking Laws.

The national banks are prohibited by law from charging more than the legal rate, Section 5197.  The Comptroller of the Currency, on page 29, of date December 6, 1915, says :  “The sworn statements of condition of a great many national banks show that section 5197, United States Revised Codes, against usury has been grossly violated by these banks.”

The report indicates that about one-third of the national banks were violating the law by charging usury, running all the way from legal rate to 2,400 per cent.

The Bankers Defiant 59

The banks that did not violate the law should at least insist that the list be published, and violators be punished.

But why not follow the system of every other department, and every other branch of the Treasury Department, and pay a fixed salary for services, no private profit, or graft, and apply the same rigid rules to punish violations of the law.

There is no other department of government that would permit such gross violation of laws to go unpunished.

There is no other department of our government, whose only remedy for perjury, peculation and violation of laws governing their department is threatened publicity.  Up to the present time we have had only one Comptroller of the Currency, the present incumbent, who has had the courage to even protest, and that is all he can do.

The Bankers Defiant.

But that is not all the sinners can do.  They boldly denounce the Comptroller as a “pernicious meddler,” and the counsel of the federal reserve board in session have unanimously recommended that the office be abolished, which, if acted upon, would legislate him out of office.

If they make the attempt every honest voter, regardless of party, should make an earnest protest.  Special privilege is, as a rule, a temptation to dishonesty, which the tempted rarely resist.

In the interest of the bankers themselves we should repeal their special privileges, and administer banking as a real public utility.


There are a good many earnest, intelligent students of political economy who know that the government is the sole source of money, that it cannot be legally issued by any other body, unless Congress delegates the power, as it has to the Federal Reserve Board and banks, without a constitutional amendment.  But who will raise that issue ?  The law has been accepted, and is in operation ;  so let it pass.  The constitution is no barrier to private monopoly, anyway.

When it has been advocated that the government should issue money direct without interest, it has been ridiculed as impossible and absurd and by none so earnestly as by “our natural pilots,” the national bankers.  The question to consider is, is it impossible, or absurd ?

The facts are :  that all money and currency in the United States are issued now, and always have been, direct by the government, without interest.  Now let us go over the list of present money and currency, and see if that statement is not true.

The law of 1873 provided a charge of one-fifth of one per cent for the conversion of standard gold bullion into coin ;  ninety per cent paid when deposit was weighed, eight per cent after trial assay, and two per cent after final assay.

Now that the national bankers are anxious to decoin money in large amounts, and to save them loss of interest, the rules were modified in 1915, see report of Director of the Mint, p. 7:  “In order that no injustice might be worked to depositors of foreign coin because of the delay incident to the melting and refining of it, the regulations governing the handling of precious metals were so modified, with your approval, as to permit the payment of ninety-nine per cent of the value of said deposits, ascertained upon their

Money Without Interest 61
being weighed immediately after receipt, when presented in sums of $1,000,000 and over.”

Wherein the injustice ?  There was no compulsion.  They could have secured gold certificates on foreign coin immediately.  But here was an opportunity to demonetize a lot of gold coin, and they did it for an object.

It will be noted that the producer, who seldom has a million at one time, can get only ninety per cent “immediately after receipt.”

There is no interest charged for the issue (coinage) of gold, nor can I see that there is any charge at all for the coinage.

There was a tax of one-half of one per cent on the issue of national bank notes, which were issued direct to the bankers, but no interest.

There is neither interest nor tax on the Federal Reserve Bank notes issued direct to the reserve banks.  The government paid out the greenbacks, direct, without interest, and everybody, except the banker, received them gladly.  I think that covers every dollar in circulation, or hoarded in the banks.  The great wrong and injustice in the system is that our money is issued direct, without interest, to one special class,

62 Government Money Direct
to whom is given an uncontrolled monopoly of a public utility, and as public servants they are appropriating too much for their services, and are using their power to control all production, industry, and commerce.

The advocates of “issuing money direct without interest” reason that the government should issue full legal tender money in payment for public service and public improvements, and redeem same by receipt for dues and taxes assessed by the government.  To the extent of money issued this would save the present interest charges now raised by taxation.

"Impossible ?” Certainly not ;  it is the past and present practice.

The men who control have enjoyed the privilege so long that they seem to look upon it as a vested right, and claim that the government should issue all money direct to them without interest, and delegate to them the authority to issue all the currency needed, they to be the judges of the need.  That takes the government out of the banking business, restores confidence, and insures prosperity to one class.

To defray expenses, the government can issue interest-bearing bonds, and the bankers will take them at three and four per cent, paying for same in money or currency issued to them free of tax or interest, and the people pay the interest in taxes.  If the people were not taxed, how else would they know they were governed ?

Again, there is the danger that the government might issue so much for public improvements, such as state owned railroads for transportation at cost, that it would deprive them of another profitable source of revenue.

Then, again :  there is the danger that the government might issue direct, without interest, a sufficient volume of money to enable the people to exchange their labor, and the products of their labor, without having to pay tribute to a private corporation, as we can now do, to a limited extent, by parcels post.

Money Without Interest 63

After all, it is a very simple question.  Can the government issue a medium of exchange direct, without interest, to the individual units composing the government, and redeem same, at less expense than is being paid under the present system ?  That is the question to be considered.


Paul Warburg’s plan, as illustrated by Mr. Reynolds in his national speaking tour, explains the Federal Reserve Bank system.  I quote from his address at Sioux Falls, South Dakota, June 7th, 1911 :

"I say that the amount of money we have is a secondary matter to that of whether we can in times of distress, extend credit.  The average man will be confused between the two, for the reason that the average person who has not given the subject consideration, is very apt to say that the deposits in banks are money.

"The proprietor of one of the largest newspapers in America sent the associate editor to me with a letter of introduction, and he said that he wanted to write a series of articles on the financial condition of America, and wanted me to steer him right.  The gentleman began by making the statement that ‘The people of this country are being fooled.  They think they have been having an era of prosperity, but we have been investigating in our office and we find that the deposits in our banks are very little, if any, greater than two years ago.  The people are being fooled, and I propose to write a series of articles and warn them.’  He said, ‘The banks of the state have twenty-five million dollars less than two years ago.’  I said, ‘You are wrong.’  He said, ‘I am not.’  And he pulled out of his pocket a financial journal, and he pointed to a column of figures which showed twenty-five million dollars less than two years ago.  I said, ‘That is not money.’  He said, ‘Do you mean to say the banks’ deposits are not money ?’  The associate editor of one of the greatest papers in the country was going to warn you people and was going to put you right in your financial course, because he knew you were wrong.  I said, ‘That is not money.  That is credit.’

Deposits Mere Bank Credits 65
He said, ‘How can you get credit without depositing money ?’  I said, ‘Can you not get credit without depositing money ?  We will assume that you have stock worth one hundred and twenty-five thousand dollars.  You don’t want to sell that stock.  You see a building across the street which you need in the operation of your business.  You say, “ ‘I need that building, but I don’t want to sell my stock.’ "  I say, “ ‘All right, I will take your note, and place the amount to your credit.’ "  Did you deposit any money ?’ He said, ‘No, I guess I did not.’  I said, ‘You go across the street and buy the building and give a check, you have not deposited any money.  That check is washed out tomorrow morning at the clearing, and so is ninety-five per cent of the business of the country.’ * * *

"I submit to you if it was not an afternoon well spent if I prevented a metropolitan daily, one of the largest in the country, from coming out with a series of articles of that kind.”

There are several texts in that interview well worth developing, but the one I wish to apply to the text of this article more especially is that $95,000 credit on the books of the bank was drawn against by a check and it paid for the building.  The check was presented to the clearing house next day, AND WASHED OUT.

Now see how easily and nicely that can be duplicated under the system proposed in this article.  The government issues money, a note, or a due bill if you please, today ;  in payment for public service ;  it redeems the same tomorrow in payment of taxes, or dues assessed by the government, and the money, note, or due bill is “WASHED OUT.”  We thank you, Mr. Reynolds.

Another thought worthy of development is suggested.  The borrower was the owner of $125,000 worth of good stock.  He gave his note to the banker for $95,000 with this stock as collateral ;  now in reality, whose credit was that loan based on ?  Not the banker’s.  It was on the borrower’s $125,000 stock.  The banker drew interest on the borrower’s credit.  Do

66 Deposits Mere Bank Credits
you wonder now why they are so persistent in eliminating all money from circulation, and substituting therefor their bank credit ?

A second thought or text would be, where the editors of great metropolitan dailies go to be set right on the money question, and is it not reasonable that they should ?

Another text might be, the, very clear exposition that this vast increase in cash bank deposits, boasted of as evidence of great prosperity, is an evidence of increased indebtedness and based on fickle bank credit.


I am in favor of eliminating any provision for a gold base, or gold redemption for our national investment system.  The federal investment bank notes are not intended specially to be “good in Europe";  but as a medium of exchange for home use.  If they will not be good for foreign development, so much the better for home development.

If it be true that gold in itself is the natural world’s money, because of its commodity value, then why not let it prove itself as such on its own merits ?  What should be necessary more than to stamp the weight on the piece of metal to make it pass current as money the world over ?  That should be the acid test.  Instead, these gold-mania theorists insist that the value of gold must be bolstered up by an unlimited demand at a fixed price per grain of metal, and each nation using it as its standard, limiting this special favor to this one uncertain commodity.

That is not a fair test.  As Herrick would say, it is “giving it a fictive value.”  In addition, they insist on each nation making it compulsory on every citizen of the nation accepting this one favored commodity as a full legal tender for all debt obligations ;  thus showing their own “lack of confidence” in the commodity value, and natural money absurdity.

The only true test would be the free, open, uncontrolled and unfavored world’s market for the metal.  There is not now, and never has been, a money of the world, or world’s money.

One of the strong arguments in favor of the Federal Reserve law was, that if enacted it would enable us to extend our world’s trade.

My plan for a federal investment bank does not interfere with the present commercial system.  If they must have gold coin, a gold base, or a promise to redeem in gold, to promote foreign trade, let them

68 Gold :  The Money of the World
have all the gold ;  but I do not want American agriculture, or American labor, sacrificed by them to get it.  This should surely satisfy the foreign traders.  But the absurdity and insincerity of the claim was clearly demonstrated when the large increased importation of foreign gold during the summer of 1915 caused a near panic in the ranks of these same foreign traders.

If gold is necessary to develop foreign trade, the more gold, the more trade ;  and they promptly stopped the importation of this foreign trade necessity, by loaning the Allies of Europe a thousand million of dollars on mere government bonds “without any security whatever back of them.”


I look upon the attempt to force a world’s money upon us as the most dangerous to our more highly civilized nation.  I cannot do better even now than to quote from “The New Monetary System” published by me in 1893, page 62 :

“This has been presented to us very forcibly in the last few years.  First :  Local difficulties in the little republic of Argentina embarrass a banking firm in England, that came near causing a panic, not only in England, but the United States as well.

“Then Austria wants to strengthen her gold reserve and another panic is barely averted.  Now at this writing, a political scandal in France is unearthed causing a run on local banks.  The result is a heavy drain on us through England for gold, followed by the inevitable result of lowering of prices as usual.  The nation needing gold worst will pay most for it in the products of labor.  Labor always pays the bill.

“The farmers, practically unorganized, are at the mercy of the organized classes, and the inevitable result is that in that struggle and scramble for our share of the money of the world, it is the products of the farm that must be exported to be sold in the

A World’s Money Dangerous 69
world’s markets in competition with the poorer paid labor of Europe, Asia, Africa and South America, at the world’s prices, for our share of that world’s money, be it gold, or silver, or both combined ;  and when a monetary disturbance or change of financial policy, or political upheaval, occurs in any part of the world using the same kind of money, every nation in the circle is bound to suffer from its effects.

“A so-called money of the world is a VERY DANGEROUS THING, and of advantage to the money-changers, speculators and usurers only.

“It will thus be seen that even on a gold and silver basis, the supply is unequal to the demand, therefore we must have an additional basis for our money if our civilization is to be preserved and fostered.

“Not only that, but we must have a distinctive money of our own.

“That is what we mean by a NATIONAL CURRENCY—a currency that will remain with us to transact our own business—the exchange of the products of our labor.  That will not be competed for by the pauper labor of Europe, Asia, or any other foreign country.  It is only because of the great, natural, new resources of our own country that we have thus far been able to keep our labor above the common level.  A money of the world will eventually force us down to that common level of prices, misery and degradation.  It can and must be averted.”

“In answering one of my critics, in The Farmers’ Open Forum last July, I think, I said :  ‘A world wide money is a very great fallacy.  There is no such thing, and I hope there never will be.  The attempt to make gold such, is fraught with gravest danger to the more highly civilized and enlightened nations.  It would inevitably drag us down to the world’s level of labor conditions.  Given a world’s money, limited to one commodity, depending wholly upon the chance of discovery, at present monopolized by a very few, and the result regardless of the tariff or any other consideration or restrictions would be a competition,

70 Gold :  The Money of the World
by the world’s producers, for this essential thing—gold.  The country offering most of the products of labor for the dollar, would get it.’ ”

In the “Commercial West” of Minneapolis, of date September 4th, 1915, in a market review, I find full confirmation of this view of mine expressed twenty three years ago :  “If the Dardanelles be opened, Russia has a surplus from two crops to export and her financial condition is such she will gladly exchange wheat for gold at a lower price than any other country, no matter how low that price may be.”

Wheat and Cotton Our International Money.

There is no question about it, our farmers will have to meet their prices, and the pity of it is, that the small amount we might have to export would fix the price for the whole crop.  I want a free American dollar for the exchange of the products of American labor, that will respond automatically to the demand for use.  To paraphrase the greatest statesman of Europe, Lloyd George, who recently said that “coal was Great Britain’s international coin,” I would say that wheat and cotton are our international coins.  It is with these that we pay our foreign bills.  Let me repeat :  It will always be the great unorganized and unprotected industry that will be sacrificed in the world’s markets for a share of a wholly unnecessary metal on which to base a medium for the exchange of our own home products.

How much more simple, safe and sane, to base the medium on real wealth, or on the products to be exchanged.

It is very absurd, when you come to think of it, that the most advanced and highly civilized nation on earth, and we will all admit that we are IT, and with unsurpassed inventive genius in production, we have never yet been able to devise a system of exchange of labor, and the products of labor, except that one of thousands of years ago, when it was decided by some one, who probably owned a gold or silver mine, that there could be no exchange beyond personal barter,

The Pound Sterling Fake 71
until some one accidentally found a piece of rare yellow or white metal, or a little yellow dust.

If we could only realize the object lesson so plainly taught us in the gold and silver certificates, had they truly represented the coined metal, that money based on value is just as good as money stamped on value, and much more convenient ;  but they are merely a promise to pay in the coin ;  and the further fact that it is immaterial what that value is, so long as it is value, we would solve the problem very quickly.  JUST READ THAT ONCE MORE.

The Pound Sterling and Foreign Exchange.

The “pound sterling” is a piece of gold weighing 123.274 grains eleven-twelfths fine, stamped by the British government, and called a sovereign.  I used to wonder why it was called a “sovereign.”  I do not any longer.  What is the definition ?  “Sovereign ;  possessing supreme excellence or greatness ;  preeminent ;  paramount ;  superior in efficiency ;  most potent ;  to rule over as a sovereign ;  to exercise sovereign power.”

A true definition of the power of money monopoly to rule over us.

During the year 1915 for several months the great disturbing factor in American business was the value of the unchangeable “sovereign,” the “pound sterling.”  For ages we had been told, and believed it—that is, most of us did—that gold was the one thing that never changed in value, and because it was the only commodity, unchangeable in value, it must be used as the measure of all other values.

They forgot to mention that if all the gold standard nations agreed to pay one dollar per bushel for wheat, wheat would never go below that price, so long as the nations continued to pay that price.  It might go higher, to a premium, as gold has so often done, but never lower.  The same is true of silver, cotton, or any other commodity.

72 Gold :  The Money of the World

Our forefathers had the courage to break away from Great Britain’s political sovereign, but they did not realize, and their descendants do not yet, that their gold sovereign has been an infinitely greater tax collector than was King George.

Now that we have long outgrown the mother country, and boast of our superiority, we are still in bondage to Great Britain’s bit of metal, the “pound sterling,” a sovereign.

During the summer months, and more especially with the reports of our wonderful increase of farm products, that was so badly needed by the warring nations of Europe the fly in the blessed ointment of prosperity, was the unbelievable, unheard of, daily change in value of this hitherto unchangeable commodity.

Who raised this cry of alarm ?  Was it the producers of wealth ?  The farmers and laborers ?  Professional men ?  No, strange to say, it was our bankers and money-changers who had always in the past insisted that the gold metal, the British sovereign, the world’s money, the pound sterling, never changed and could not change in value.

The reasons given by our banking journals would be amusing, if it were not for the effect it had on the value of uncontrolled products.

The trust controlled products increased in price, because protected by a tariff and a community of interests, but the uncontrolled, unprotected farm products decreased in price.

This in the United States where we were at peace with all the world, and industry enjoying the greatest boom ever known, exports unprecedented, and yet the daily change in the value of the British sovereign seriously affected our industries.  What an invincible argument in favor of an American dollar.

The value of the sovereign declined from $4.85 to $4.50, declined 11 cents in two days, and, strange to say, this change in value not only of the “pound sterling,” but American products, without the coin

Gold the “Mollycoddle” 73
itself being visible to the general public ;  in fact it had gone out of circulation in Europe and practically so in the United States.

That is a trick this cowardly sovereign has always played at the first note of real need.  It is the greatest coward known to history.  I think it must be the “mollycoddle” for which so many of us have been looking.

August 28th Great Britain ordered the post office to discontinue gold payments.

September 9th a special from Petrograd said the largest hoard of gold in the world is that held in the vaults of the Russian state bank, amounting to $850,000,000.  Yet a visitor may travel from one end of the Russian empire to the other and not see enough gold to buy a pair of shoes.

Minister of Finance Ribot of France issued a patriotic call for the peasants and all others to bring in their little hoards of gold, and it disappeared not only from circulation, but was also taken out of the secret hiding places and given up for paper currency and francs.

The same was true of Germany, Austria-Hungary, Italy, and all of the other nations.  Will the people never learn a lesson so plainly writ ?

If paper currency, based on the faith and credit of the nation in its hour of greatest weakness and need, will pass current and serve all the functions of a medium of exchange, is it not absurd to claim that it cannot serve the same purpose in the days of peace and greater prosperity !

From the Grain Growers’ Guide, Winnipeg, Canada :

“In normal times one pound in London is worth approximately $4.85 in New York.  Recently the value of the pound has fallen considerably and the last quotation showed the pound sterling worth only $4.67 in New York.  This means a loss to the producer of 18 cents on $4.85, which works out approximately three and one-half cents per bushel of wheat.”

74 Gold :  The Money of the World

Then when the pound sterling dropped to $4.50, as it did in September, the loss on wheat was seven cents per bushel.  Just because a foreign coin changed in value.  The same was true of the German mark, the French Napoleon, the Austrian crown, the Jap yen.  Spurned, discredited, and dishonored, as they came to the United States, they were all dumped into the assayer’s pot and decoined.  “How have the mighty fallen”!


The average reader will be surprised to learn that the conspiracy to contract our currency and lawful money by withdrawal and decoinage should have included the sacred joss—gold—but such is the case.

I do not know what the pretense was for the enactment of the law of July 12th, 1882, authorizing the issue of gold certificates for gold coin, stored in government vaults, but I presume that it was in the interest of economy, or convenience, or something of that kind.  If economy and convenience, it proved so for the bankers, in the saving of gold coin by abrasion, and economy, especially in transportation charges.

But if that was the real reason—and this is a very important question—why was not the gold certificate endowed with the same quality of lawful money as the gold dollar it was supposed to represent ?

The general public was led to believe that it did, and from inquiries I have made I think I am safe in saying that nine out of ten bankers believe so today, and store them in their inner vaults as lawful money reserves.

Well, they are not lawful money.  It would not have cost them a nickel a million dollars to make them so.  Just added the words “A full legal tender for all debts, public and private.”  They are simply a note ;  a promise to pay a gold dollar if you present it to the United States Treasurer in Washington, or an Assistant Treasurer.  They pass current, as money, under a false pretense.

Gold Certificates not Money 75

They will not pay an obligation, calling for lawful money, or even “gold coin” if the holder of the obligation insists on being paid “according to the contract.”

Now do not jump at the conclusion that it is all right, that you can send them down to Washington and get the genuine gold dollars for them.  Just wait until I finish.  Remember the bankers’ panic of 1907.  “There is a reason.”

The great victory of 1907 encouraged The House of Morgan to rush matters all along the line.  Twenty odd years ago, I predicted that if the time ever came when there was danger of gold becoming more plentiful than silver, the national bankers would not hesitate to ask for the change back to silver, and demonetize gold.

They hold up their gold joss for you to worship, and they laugh, while you bow in reverence.

The world’s production of gold in 1873 was $96,200,000, and had been declining for the previous thirteen years.  By 1890 it had increased to $130,650,000.  The striking down of silver in 1873 had encouraged the production of gold.  Then it began to increase more rapidly and by 1908 had increased to $442,476,900, almost 500 per cent.  This was a real annoyance.

The production of gold was almost twice that of silver.  To go back to silver would mean a revival of silver mining.  To ask for the demonetization of gold would give their case away.

We will give credit to Mr. Warburg for the plan of accomplishing the same result, without the knowledge of the people, or even of Congress, and I fear too few know it yet.

The first notice we have of the move was in the report of the Secretary of the Treasury for 1909, when he recommended that the Secretary be authorized to issue certificates against gold bullion and foreign coin.  This was renewed strongly in his 1910 report and enacted in March, 1911.

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Mr. Warburg has proven that you can eat your cake and have it.

They can now destroy gold as money by decoinage, and still have a certificate promising to pay in gold dollars, not in existence, based on the uncoined bullion, to use if they wish.  Or they can use the gold bullion, or certificates based on it, for their cash lawful money reserves.

They can also use the uncoined bullion which is not money, as a base for the issue of two and a half times as much currency in the form of Federal Reserve Bank notes.  So for all practical purposes they can demonetize, by melting, and yet use as money, paper bank notes, based on a mere commodity—gold bricks—by the decoining of gold.

They are accomplishing one of their purposes, the contraction of the volume of money, but the greater object will appear later.

Now note how quickly and effectively they make use of the law.

For the four years prior to the enactment of the law there was an average coinage of $117,980,714.  The year following the enactment ;  that is, for 1912, there was only $12,749,090 coined.  The average since then has been $32,405,785.  About one-fourth the previous coinage.  The production for the five year period showing a small increase.

We are using in the arts annually over $40,000,000 of which $3,500,000 is coin.  We are decoining—demonetizing—annually $121,480,714.

In the law for the decoinage of gold coin, which is nothing more or less than demonetizing gold, the conspirators overlooked one very important point, which should be a good object lesson to every citizen, viz.:  that this government note, a promise to pay a dollar although not lawful money, is performing all the functions of a medium of exchange, except that of lawful money ;  to the full value of the bullion.

Or to put it another way, that money based on value is just as good as money stamped on value, and much more convenient.

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Although the gold certificates are not lawful money for the debtor, they are for the banker, who can and does use them as lawful money in his cash reserves.

A special privilege, and gross discrimination, in line with the uniform custom, in all our monetary legislation, and in strict accord with the plan outlined by Warburg.

Then, if that be true, and it is, money based on any other stored commodity and made an obligation of the government, would prove just as good, and just as convenient.

Keep that in mind.  It is the true solution of the money problem.

Lawful Money in Circulation.

The Comptroller of the Currency secures the reports of all other than national banks but once a year and publishes them as of date June 30th.

This data is gathered from his report, and the monthly reports of the Treasury Department, and will be as of June 30th, 1915.

General stock of money in the United States July 1st, 1915 (this includes all forms of currency as well as lawful money) ... $3,997,368,468
For the purpose of this chapter we must deduct all currency :
Minor coin (legal tender limited to $10) $ 158,934,817
Gold certificates ..................... 1,076,637,759
Silver certificates .................... 482,713,988
National bank notes .................. 786,643,647
Federal reserve bank notes ........... 80,501,710
Currency to be deducted .............. $2,185,431,921
Lawful money in United States June 30th, 1915 ..................$1,811,936,547

There are two very important factors to be considered in this connection :

First.  Is this lawful money in actual circulation ?

Second.  Can it be secured promptly in case of another “bankers’ panic” like that of 1907, by the

78 Gold :  The Money of the World
debtor who has an obligation to meet, payable “in gold coin of the present standard, weight and fineness” or even in lawful money ?

I maintain that money hoarded, whether in bank vaults, or in the proverbial tin can, or stocking, is not in circulation, and useless as a medium of Exchange, or for debt paying purposes.

Lawful Money Located.

Where was the lawful money on that date.  I, of course, cannot locate all, must depend on official reports.  On page 121 we find the report of 27,062 banks of all kinds reporting.  This does not include all.

Gold coin .............................$208,612,342
Silver coin ............................ 62,084,534
Legal tender notes (greenbacks) ........ 179,076,993
Cash, unclassified ...................... 73,543,011
Federal reserve banks (p. 136) gold..... 321,068,000
Other lawful money ................... 37,212,000
Held in U.S. Treasury as assets monthly report .. 206,526,508
Held by Federal Reserve Agents against notes ... 12,445,564
Standard silver dollars ............... 7,910,351
United States notes (greenbacks) ....... 14,645,022
Total located ......................... $1,123,129,325

This would leave unaccounted for $688,807,222.

Only a little over half of the greenbacks are accounted for, the rest are probably lost or destroyed.

When we deduct from that the greenbacks lost or destroyed, the money hoarded by private individuals, and the money in the 3,003 banks not reporting, and in the tills and pockets of business and traveling men, we have it about all accounted for.

True, by December 31st there had been an increase of money in the United States reported, principally from gold imports, but that will not help the situation as it was promptly decoined at the

Demonetizing Gold Coin 79
New York assay office, and within a very few years, that and several hundred millions more will be returned to Europe.

Now look over that list carefully, and you will see that it is practically all tied up in reserves, or held out of circulation.

Our public and private debts are estimated as between one and two hundred billions of dollars ;  call it one hundred billion.  The greater part of the obligations are payable in “gold coin of the present standard, weight and fineness.”

This is especially true of farm mortgages where neither greenbacks nor silver will apply.  The balance is payable in lawful money.  And on the smaller estimate there is one dollar of lawful money to pay $100 of debt.  But, you say, we can get the money to pay if we have the goods, etc.  Yes, at present.  But the House of Morgan must control more than half of those obligations ;  suppose they decide the time is ripe for another “ingathering” like that of 1907, then what ?  Do they want those obligations paid in gold coin ?  If so, why did they rush all gold imports to the assay office to be melted for bullion instead of having them coined.