The Pamphlet Collection of Sir Robert Stout: Volume 4
Changeable Value of Gold
Changeable Value of Gold.
The prevailing idea of the unchangeable value of gold is entirely hereditary. Very few people have endeavored to acquaint themselves with a true history of this metal. Because it has been the custom with many nations to use gold as a measure of values, many people take it for granted that nothing else can be used for that purpose. This inherited idea and custom has been instilled into the minds of the people; not that gold has any qualities that are suitable for an equitable measure of values, but simply because money speculators find it the most potent tool to secure the profits of labor. It is the best material for a changeable measure of values that has yet been found; therefore, the people have been compelled by class legislation to use it, and custom has cultivated the idea that nothing else will answer the purpose. It has never been used exclusively as a currency by any nation; but, at different periods, where it was plentiful, it has been used quite extensively. When it was scarce, people were compelled to barter their wares or exchange them for all manner of materials that have from time to time been used as a substitute for gold, or as money. Gold possesses inherent qualities which make it intrinsically more valuable than any other metal, and those qualities render it the most suitable material for hoarding up accumulated wealth, and the most unsuitable material for a standard measure of values. If Congress should repeal the legel tender act, and make gold the standard measure of values again, that would largely increase the demand for it; and the increased demand would increase its value, for its value is regulated by supply and demand, like all other commodities. Congress cannot regulate the value of any natural commodity that possesses intrinsic value; that is self-evident. How then can it regulate the value of one of the most intrinsically valuable commodities that the earth produces? Congress can enact that 254/5 grains of gold, cast into a coin, shall be denominated a dollar; but it has no power whatever to regulate the value of gold, in coin or in bullion. Any body of men that assume to regulate, by legal enactments, the value of gold, assume a prerogative that belongs only to the Great Power that regulates all natural laws. Then in order to obtain an unchangeable measure of values, some material must be employ- page 10 ed that is devoid of intrinsic value; then Congress can give to it an arbitrary legal value of the standard required. An article possessing only a legal value, cannot be affected in its value by natural laws; consequently it would remain unchangeable in value, except by the will of the creating power.
The most convenient material for a currency, and the least in intrinsic value is paper. Treasury notes with a legal standard of value stamped upon them, making them a lien upon the material wealth of the whole nation, are implements as necessary to the welfare of the country as plows and reapers.
G. L. Comstock, author of a history of gold and silver, says: "The estimated amount of those metals in circulation at the date of the discovery of America was $170,000,000. What had become of that vast amount of gold that the ancients had been fighting for, from fifteen hundred years before the Christain era up to the fall of the Roman Empire? War and abrasion had done its work upon that idol, and it had become nearly extinct; but the discovery of gold in America and Australia gave it a new lease of power, which in time will fade away and be known no more."
In Rome in the fourth century, gold was so plentiful that beef cost one dollar and fifty cents a pound, and wine was sold for five dollars per quart; whereas in England in the tenth century, an ox could be purchased for one dollar and forty cents; wheat sold for eight cents per bushel; bread four pounds for a cent, and laborer's wages were only seven cents per day.
In the fourteenth century, Edward III fixed, by law, the salary of a parish priest at fifty dollars a year, or twenty dollars and board. Thirty dollars a year for board! That would not pay a week's board in one of our fashionable hotels. When we consider that produce and labor have held nearly the same relative value from the first to the present century of our era, and the relative value of gold and produce has fluctuated, in seven centuries, more than one thousand per cent., we can realize how worthless gold is as a measure of values. One thousand per cent, was an enormous advance in value even for so long a period as seven centuries; but Wall street has changed the value of gold twenty-five per cent, in one day.
It is plainly evident from the foregoing facts that the value of gold is regulated by supply and demand, the same as all other commodities; and as the supply of gold cannot be regulated by page 11 human power, it should never be used as a measure of values.
A measure of values should be susceptible of regulation, otherwise it will be as changeable in its measure as its own value. Engineers regulate the regulators of steam engines, and watchmakers regulate the regulators of watches; the sun regulates our planetary system, and a greater regulator regulates the sun. We should act in accordance with the laws of nature, and establish a measure of values that can be regulated by a regulator that is susceptible of regulation; otherwise great irregularities must continue in our finances.
In 1550 nearly one hundred million dollars in gold and silver had been brought into Europe from America.
From 1545 to 1600 the Potosi mine in South America yielded one hundred and twenty million dollars, mostly silver.
This great increase in gold and silver caused a corresponding increase in the price of produce and labor. In 1600 wheat had advanced to eighty cents per bushel, and all other products had advanced in an equal proportion.
There is not much probability that within the next two centuries gold will become as scarce throughout the world as it was in Europe from the tenth to the fifteenth century; but in this speculative age, and with the enormous and steady increase in trade and commerce, fifty million in gold could be carried at as high a standard of value as one million in the fifteenth century; especially if gold continues to be the measure of values for all other products.
The legitimate trade of the country should be relieved from the incubus of a gold measure of values, and Congress should legislate to prevent a gradual combination of circumstances whereby gold hoarders can say to farmers, your wheat is worth only fifty cents per bushel by our gold measure of values; and to laborers, ten hours of toil is worth only fifty cents of this precious metal.
It is clearly the duty of Congress to provide some means for exchanging the products of the country, whereby producers and consumers can be relieved from the enormous tribute that they now have to pay to speculators in money. The nebulous legislation of Congress on financial questions gives speculators a great advantage over honest traders, especially when the laws are construed upon a gold basis.page 12
The six per cent, government subsidy National Bank act, is too great a tax on the industries of the country; and that act, and the resumption act, should be repealed immediately. Let the money come from the National Treasury directly to the people. There is no necessity for subsidizing middlemen to deal out government currency to producers. What is wanted is a self-regulating currency that will give an even and unchangeable measure of values to all products. A legal token, that will measure values as accurately and equitably as we arrive at quantities by legal weights and measures.
Labor should be the only standard of values; and National Treasury Notes the only measure of values.
There is no more necessity in making a measure of values out of gold, than there is in making a measure of quantities out of that metal. If a bushel of wheat is exchanged for a one dollar legal tender note, the receiver of the note holds a legal representative of the intrinsic value of the wheat, which is exchangeable at anytime for a quantity of any commodity equal in intrinsic value to the bushel of wheat; therefore it is not necessary to have the exchanging medium of the same intrinsic value as the commodity for which it is exchanged. If the exchanging medium has a high intrinsic value, and its volume cannot be controlled, it will furnish a very uneven measure, and cause frequent derangements in trade. On the contrary, if the medium has little or no intrinsic value, and the volume can be perfectly controlled, it will furnish an unchangeable and equitable measure of values.
But, say the hard money advocates, government notes may be legal tenders, exchangeable for wheat, beef, clothing, etc., but if a dollar note cannot be exchanged for a gold dollar, "the money of the world," as they boastingly term it, it will not answer as a measure of values.
A fair amount of reasoning on the theory of currency and exchange, will amply refute this bold assertion; besides, we have practical evidence of the superiority of government notes over gold as a measure of values. For nearly fourteen years they have been our only currency; and since the war business has prospered to a much greater extent than it ever did under a gold measure of values, with its accompanying worthless paper auxiliary. The depression in trade for the past year is entirely owing to the page 13 attempt of Congress to force a resumption of specie payment, and thereby shrink the value of labor and products to the vacillating standard of the speculators' gold measure. The people have conducted exchanges without gold since 1861; and, if Congress does not compel them to use that juggling measure of values again, the country will continue to prosper, and gold will no longer be potent in shrinking the value of labor and products; on the contrary its own value would shrink, and the loss would fall on the gold hoarders instead of the producers.
It is utterly impossible to give a steady measure of values to the products of the country under a gold standard, for its value is continually changing under the operation of speculators; and through frequent changes in the measure of values they secure the profits of labor. With a mixed currency of gold and paper it is equally impossible to maintain a steady measure of values.
Trade requires a volume of currency ten times greater than gold can furnish; hence it is absurd to expect any government to furnish a paper currency redeemable in gold; and a partial redemption is a source of great evil. It is class legislation in favor of a money aristocracy. It is a legal advantage given to speculators over producers. And any public man that advocates the restoration of this advantage to a money oligarchy, will be politically damned, when the people become throughly posted on the subject.
Government should not issue demand notes; its notes should be legal tenders, in payment of all debts, public and private, including duties on imports, and whenever gold is wanted, it should be bought in the market, the same as oilier merchandise. (Payment of the interest on the public debt having been authorized in gold, it should be bought for that purpose.) The people should understand that legal tender notes are to be used in paying their debts to the government, and in purchasing merchandise from each other; and not as demand notes on the government for gold. When they want legal tender notes redeemed, they should purchase some commodity with them, and then they will receive intrinsic value for representative value. Bakers will redeem them with bread; millers with flour; farmers with wheat; and laborers with labor; and if any one wants gold, they can purchase it with legal tenders, the same as they purchase tin or any other metal. Gold hoarders, who think there is no wealth page 14 in any thing but gold, would seek to employ their treasure in some way in order to derive an income from it. The demand for gold would be light if it were no longer a legal measure of values, and its own value would shrink accordingly. The people should look upon government legal tender notes not as their own property, but as a loan to be used in exchanging their commodities: they should look upon them as a loan that government could call in at any time by levying a gold tax upon the people, equal in amount to the currency in circulation. They should remember that they received the greenback notes from the government in payment for supplies that the government had a right to take from them by taxation, and without any money equivalent. They should remember that when they ask to have government notes redeemed in gold, that they are virtually demanding the government to levy a gold tax upon themselves, which they are utterly unable to pay. It should also be remembered that government paid out large amounts of legal tender notes to speculators for almost worthless supplies, during the war, and in return those patriots purchased from the government gold interest bearing bonds, and paid for them in legal tender notes. Many of the government bonds were secured by the present holders for forty percent., in gold, upon their nominal value. $40,000 in English Consols could have been exchanged for $100,000 in United States six per cent, gold bearing bonds, and a handsome profit realized from the transaction—and no doubt many availed themselves of the opportunity. $40,000 in English Consols at three per cent, would amount in fifteen years, interest and principal, to $58,000; whereas, the interest alone on $100,000 in United States bonds, at six per cent, would amount in the same time to $90,000—leaving a balance of $32,000 in gold in favor of the interest on United States bonds, against the principal and interest of English Consols; and yet some of our Congressmen are very much troubled about the credit of our government abroad.
We produce more than we consume, and there is no reason why we should not pay cash, or its equivalent, for all that we receive from foreign countries.
The bondholders are now soliciting Congress to pass a law that will allow them to gather up the balance of the greenback notes, at from eighty-five to ninety per cent, on a dollar, and exchange them at par for gold interest bearing government bonds. And Senator Sherman advocates this measure.page 15
Is it weakness in our government that compels it to offer from ten to fiften per cent, discount to secure a loan that will remove from circulation a currency that does not cost the government or people anything, but will, if removed, ruin the business of the country?—or is it a weakness in Senator Sherman that induces him to advocate the payment of such enormous discounts to still further increase the bonded debt of the country?
Senator Sherman is a man of acknowledged abilities, and he deserves to be severely rebuked for advocating the perpetration of so palpable a fraud upon the industries of the country. The people of Ohio would deserve the thanks of the whole nation if they would retire this champion of a money oligarchy to private life. General Grant also bids for the support of the money oligarchy, by recommending Congress to repeal the legal tender act, and thereby force the funding of the currency at a still greater discount, and with a corresponding increase in the profits of the bondholders. If General Grant was an expert in financial matters, his recommendations on a financial question would he worth criticising; however, the people will have an oportunity to show their appreciation of his financial abilities at our next presidential election, for he will undoubtedly be the candidate of the money oligarchy.
Within the present century the leading commercial nations of the world have contracted debts amounting in the aggregate to $20,000,000,000; or in other words, a money oligarchy, chiefly through class legislation, has succeeded in securing bonds, against the chief commercial nations of the world, covering this enormous amount; and the producers are now compelled to appropriate the profits of their labor to pay the interest thereon.
How long this state of affairs will continue, in our country, depends entirely upon the wisdom of our legislators. If, by their greed for gain, they swell our debt to an amount that the profits on the industries of the nation will be insufficient to pay the interest thereon, then revolution will "wipe out" the debt, as all national debts have been "wiped out" when they became too great a burden upon the people.
To live comfortably, or luxuriously, without labor, is the problem that a large portion of the people are trying to solve.
Those who have a large capital in money or land generally succeed in solving the problem, with little or no labor; but a page 16 poor man must procure life sustaining commodities with labor; and his labor must necessarily command a price that will purchase a sufficient quantity of those commodities to sustain not only his own life, but the lives of a family of two or three persons depending upon him for support; this is a fundamental law of nature, and without it life could not exist. If a laborer produces no more than he consumes, his labor, and the product of his labor, are of equal value; but generally the products of the labor of one man are sufficient to support five or six persons.
The profit in free labor regulates its price almost exclusively, and the price of free labor regulates the price of its productions to a great extent The nonproducer cannot legally secure any of the profits of free labor except through a system of exchange, and if the medium used for exchanging products has a shifting value, those speculators who deal exclusively in exchange secure a very large portion of the profit of labor. If the measure of value is gold,' its scarcity admits of sudden changes in its own value which, with an arbitary rate of interest, legally robs producers of their profits.
In some cases the nonproducers secure the entire profit of labor, and the producers are barely able to exist. This state of affairs causes a large decrease in consumption, and a consequent stagnation in trade. Producers must be liberal consumers, otherwise trade and commerce will languish.
If nonproducers secure the entire profits of labor, leaving producers barely enough to sustain life, then surplus productions must be consumed by the nonproducers or remain in their hands without profit.
We have daily examples of the evil of under-consumption in the disposal of perishable products. Speculators generally hold those products at such a high value that the laboring classes are unable to purchase them for consumption, the result is that a considerable portion of those products are entirely lost; the speculators making up for the portion lost by large profits received on what is consumed. A fair profit would probably lead to the consumption of the entire product, thereby giving to the speculators an aggregate profit greater than the profits received from a partial consumption.
The moment that the profits in production are unequally divided, that moment under-consumption commences, and a page 17 general derangement in trade follows. It is clearly evident that middlemen and merchants are necessary, especially in a country like ours, where large quantities of produce are consumed from one to three thousand miles from the place of production. Merchants are just as necessary as mechanics. If a Kansas wheat-grower had to bring his wheat to Massachusetts, to exchange it for cloth, to supply his family with clothing, he would find that the cost of the trip would amount to considerable more than the profits that a merchant would receive in exchanging those commodities.
Legitimate mercantile business is indispensible in a true system of political economy; but gambling in produce is a curse to any country, and should be prohibited by stringent laws.
Capitalists should be allowed to establish banking houses and loan deposits of National currency at a legal rate of interest; but no other system of banking and loaning the currency of the country should be allowed—any other lawful system is a legalized fraud upon the people.