Part 02, Chapter 35

[Liberty, December 13, 1884.]

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To the Editor of Liberty:(86 ¶ 1)

The Picket Duty remarks of November 22 in regard to the importance of free money (with which I mainly agree) impel me to say a few words upon the subject. It is desirable, it seems to me, that Liberty should give its ideas upon that subject in a more systematic form than it has yet done (1). To be sure, it is easy for those who think to see that, if all laws in regard to money were abolished, commerce would readily provide its instruments of exchange. This might be promissory notes, or warehouse receipts, bills of lading, etc.; but, whatever it might be, the Anarchist could not doubt it would be better than that ever issued under monopoly.(86 ¶ 2)

Theoretically, at least, Liberty expressed the idea that any circulating medium should be made redeemable; but in what? If in gold, or in gold and silver, does it not involve the principle of a legal tender, or of a tender of common consent? and they do not greatly differ (2). It seems to me that the great fraud in regard to money starts just here, and vitiates all forms of finance as of trade (3). I define money to be a commodity or representative of a commodity, accepted by or forced upon the common consent, as an invariable ratio and medium of exchange. Now, since the price of all things else is variable and subject to extreme fluctuations, the dollar in exchange, and especially where the exchange is suspended as in borrowing, or buying on credit, becomes, as friend Pink suggests, a war club rather than a tool or instrument of commerce.(86 ¶ 3)

Pardon me if I inflict some technicalities upon the readers of Liberty. I would discard the use of the word value from questions of exchange, or else divide its several parts, as value in use, value in service and compensation, and value in exchange. But ratio is a much better word. I would then define the Ratio of Utility to be the proportion in which any thing or service effects useful ends, in sustaining human life or adding to human enjoyment,—a constant Ratio.(86 ¶ 4)

The Ratio of Service, the proportion in which different services, of the same duration in time, effect useful ends.(86 ¶ 5)

The Ratio of Exchange, the proportion in which one commodity or service will exchange for another service or commodity at the same time and place. This is a variable ratio, whose mean is the ratio of service.(86 ¶ 6)

I cannot stop now to argue the correctness of these definitions. It must be seen, unless a commodity could be found which would answer every useful purpose, and could be readily obtained by all, it could not be made a tender without inflicting a great injustice on the many. But as such commodity cannot be found, a commodity, gold, has been assumed to have an invariable value, although the most variable in value of all the metals, and about the least useful; of a limited and irregular production and widely varying demand. With the addition of silver to the standard, the great injustice to labor is only divided, not changed.(86 ¶ 7)

As defined above, the only invariable ratio is that of use. A pound of flour of the same quality will at all times and places satisfy the same demand for food. The hundredweight of coal will at all times and places give off the same amount of heat in combustion, etc., having no reference either to the money or labor cost. Now, since labor is the only thing which can procure or produce articles of use, that is naturally the controlling element in exchange, and the only thing that commands a stable price or furnishes a stable ratio.(86 ¶ 8)

Though gold is assumed as the standard of value, it is well known that for ages the promise to pay this has constituted mainly the currency and medium of exchange of most nations.(86 ¶ 9)

The method of issuing this promissory money has been a great injustice to industry, and its almost infinite extension of the usurpation of the gold-tender fraud is now robbing labor of a large share of its production by the control it gives to the usurer and speculator, who can make the rate low when produce is coming under their control, and high when it is being returned for use to the people; and can make money scarce and dear when they loan it, and plenty and cheap when they gather it in.(86 ¶ 10)

I think I have shown that the base of the money evil lies mainly in the monstrous assumption that the value of one of the most variable of things should be assumed to be an invariable quantity, and the standard of measurement of all other things. A gum elastic yardstick or gallon measure, or a shifting scale-beam, would suggest far more equitable dealing.(86 ¶ 11)

I know of but one invariable standard, and that is labor; but what is its unit? And by what method shall it be expressed? Can Liberty give us light upon this subject? (4) I have yet seen no feasible method by which credit or debt can serve safely as money, nor any honest way in which fiat money can be put in circulation. It appears to me now that, while men seek credit, they will have to pay interest, and that only by restoring opportunity to those who are now denied it by our monopolies of land, of money, and of public franchises, and so relieving them of the necessity of borrowing, can we hope to mitigate the evils of our money and trade iniquities. (5)(86 ¶ 12)

Credit being an incompleted exchange, in which one of the equivalents is not transferred, if we are to acknowledge it as an economic transaction, I see not why we should not accept that also where neither of the equivalents are transferred, as in produce and stock-gambling. (6) McLeod, I think, saw this dilemma, and therefore holds that the negotiable promissory note is payment for the things for which it is given. Yet, nevertheless, at maturity it will require a transfer of the counterbalancing equivalent, just the same as if a mere book account.(86 ¶ 13)

Credit is doubtless necessary under an inverted system of industry, finance, and trade; but I am unable to see that it has any place in an honest state of things, except to conserve value, as where one puts things in another’s care. It is vastly convenient, no doubt, for the profit-monger and speculator, as for the usurer, and without it neither could well thrive. In agreeing with the Anarchists that the State should not interfere to prevent, regulate, or enforce credit contracts, perhaps I go beyond them in excluding it from any economic recognition whatever, except as a means of conserving goods from decay and depreciation, involving always a service for which the creditor should pay.(86 ¶ 14)

J. K. Ingalls.

(1) Liberty is published not so much to thoroughly inform its readers regarding the ideas which it advocates as to interest them to seek this thorough information through other channels. For instance, in regard to free money, there is a book—Mutual Banking, by William B. Greene—which sets forth the evils of money monopoly and the blessings of gratuitous credit in a perfectly plain and convincing way to all who will take the pains to study and understand it. Liberty can only state baldly the principles which Greene advocates and hint at some of their results. Whomsoever such statements and hints serve to interest can and will secure the book of me for a small sum. Substantially the same views, presented in different ways, are to be found in the financial writings of Lysander Spooner, Stephen Pearl Andrews, Josiah Warren, and, above all, P. J. Proudhon, whose untranslated works contain untold treasures, which I hope some day to put within the reach of English readers.(86 ¶ 15)

(2) Yes, it does involve one of these, but between the two there is all the difference that there is between force and freedom, authority and liberty. And where the tender is one of common consent, those who do not like it are at liberty to consent in common to use any other and better one that they can devise.(86 ¶ 16)

(3) It is difficult for me to see any fraud in promising to pay a certain thing in a certain time, or on demand, and keeping the promise. That is what we do when we issue redeemable money and afterwards redeem it. The fraud in regard to money consists not in this, but in limiting by law the security for these promises to pay to a special kind of property, limited in quantity and easily monopolizable.(86 ¶ 17)

(4) It is doubtful if there is anything more variable in its purchasing power than labor. The causes of this are partly natural, such as the changing conditions of production, and partly and principally artificial, such as the legal monopolies that impart fictitious values. But labor expended in certain directions is unquestionably more constant in its average results than when expended in other directions. Hence the advantage of using the commodities resulting from the former for the redemption of currency whenever redemption shall be demanded. Whether gold and silver are among these commodities is a question, not of principle, but of statistics. As a matter of fact, the holders of good redeemable money seldom ask for any other redemption than its acceptance in the market and its final cancellation by the issuer’s restoration of the securities on which it was issued. But in case any other redemption is desired, it is necessary to adopt for the purpose some commodity easily transferable and most nearly invariable in value.(86 ¶ 18)

(5) Does Mr. Ingalls mean that all money must be abolished? I can see no other inference from his position. For there are only two kinds of money,—commodity money and credit money. The former he certainly does not believe in, the latter he thinks fraudulent and unsafe. Are we, then, to stop exchanging the products of our labor?(86 ¶ 19)

(6) It is clearly the right of every man to gamble if he chooses to, and he has as good a right to make his bets on the rise and fall of grain prices as on anything else; only he must not gamble with loaded dice, or be allowed special privileges whereby he can control the price of grain. Hence, in a free and open market, these transactions where neither equivalent is transferred are legitimate enough. But they are unwise, because, apart from the winning or losing of the bet, there is no advantage to be gained from them. Transactions, on the other hand, in which only one equivalent is immediately transferred are frequently of the greatest advantage, as they enable men to get possession of tools which they immediately need, but cannot immediately pay for. Of course the promise to pay is liable to be more or less valuable at maturity than when issued, but so is the property originally transferred. The borrower is no more exempt than the lender from the variations in vaule. And the interests of the holder of property who neither borrows nor lends is also just as much affected by them. There is an element of chance in all property relations. So far as this is due to monopoly and privilege, we must do our best to abolish it; so far as it is natural and inevitable, we must get along with it as best we can, but not be frightened by it into discarding credit and money, the most potent instruments of association and civilization.(86 ¶ 20)