The Pamphlet Collection of Sir Robert Stout: Volume 4
Economy in Currency
Economy in Currency.
If a mixed currency of gold and silver be again established, it would require at least $300,000,000 in gold to properly balance the paper; and as gold coin, when kept in circulation, loses over one per cent, per annum by abrasion, the loss annually would amount to over $3,000,000, and in less than one hundred years the whole $300,000,000 would become a total loss to the people. Gold is a very expensive currency, compared with paper, which loses nothing by abrasion; and a total loss of paper currency by individuals, produces a corresponding gain to the government.
Gold should be used only as a commodity, and it should be cast by the government into piece of one ounce, five ounces, ten ounces, and one hundred ounces, Troy weight; each piece should be stamped with the weight, and the standard in carats; then it could be exchanged by weight, at its market value, whenever it was needed in trade, and the loss by abrasion would be very small.
The great financial question, that many people believe to be beyond the comprehension of man, is as simple as the alphabet.page 18
The rate per cent. on money is the great governing power that controls trade and commerce, and all the industries of the country, and while producers are compelled to pay from seven to ten per cent, on money that does not net them but four or five per cent., trade must continue unremunerative.
Money is earning seven percent, for the lenders, and only five percent, for the borrowers; the result is, the borrowers are running in debt and becoming bankrupt.
If money was earning 3.65 per cent, for the lenders and five per cent, for the borrowers, the profits of labor would be more equitably divided. Reduce the rate of interest to 3.65, or, better yet, to three per cent., and the producers of the country would secure some of the accumulating wealth derived from their labor, and there would be no more complaints of hard times.
The domestic trade of the United States needs a currency of at least $500,000,000 in constant circulation, and that amount should be issued directly from the Treasury to the people; and the interest on loans of currency should be limited to 3.65 per annum.
Usury, directly or indirectly, should be punished by a heavy fine, and forfeiture of principal and interest.
An additional $500,000,000 in legal tender notes should be issued, with an equal amount of introconvertible bonds, as proposed by Judge Kelley, bearing 3.65 interest, payable in currency. $500,000,000 in currency should be kept in circulation, and the reserve could be drawn on when the business of the country needed a larger volume. The 3.65 bonds would regulate the volume of currency between the minimum $500,000,000 and the maximum $1,000,000,000, to suit the requirements of trade. Forty million people, in such an extensive country as ours, need, and can afford to carry, at least $500,000,000 in currency, in their business. It is but a trifle over twelve dollars per capita, and the law should require that amount, at least, to remain in the hands of the people; otherwise speculators would convert the currency into bonds, which would cause a stringent money market, and thereby force down the price of all commodities for the purpose of speculating in them. The people must be content to carry a little money in their business without interest; their carts, plows, and other utensils do not yield any interest, and money is just as necessary in exchanging the products of the page 19 country, as the utensils are in producing them. If utensils are loaned, the party loaning them should receive pay for their use; and if money is loaned, the party loaning it should receive pay for the use of it. If a man loans all his tools or implements of industry, he cannot produce anything; and if he loans all of his money, he cannot expect to do an exchange business on a cash basis. Producers use all their implements in their trade, except, in too many instances, the implements of exchange, which they loan on interest. Speculators loan out a large portion of their implements of trade, money, and conduct their business on a credit basis; this leads to buying what they cannot pay for, and to selling what they have not got, thereby causing great inflation in trade, and frequent financial panics.
When the rate of interest is high, people will loan their money, and conduct their business on an inflated credit system; this is axiomatic.
One of the greatest drawbacks to trade arises from the avidity of the people to secure interest on money. They resort to all manner of devices to carry on trade without money, when they have plenty of it loaned out at a high rate of interest. Many merchants buy goods on sixty days' credit, when they have funds in bank drawing but a trifle more interest than the discount on the goods would amount to if they paid cash for them. Their deposits in many cases are loaned to speculators, who use the money to "corner" and unsettle the value of the goods that the merchants are dealing in. With a currency in government notes, restricted to a low rate of interest, and its volume regulated by introconvertible bonds, merchants could forecast their business with a fair prospect of success, and without any fear of a sudden change in values, which might destroy all their profits and perhaps bankrupt them, as it often happens when gold is the measure, and "Wall street the ganger."
How are importers to pay for foreign goods? They must export as much as they import, or buy gold to settle the balance. They have done this for fourteen years, and they will continue to do it, unless the government attempts to balance gold and paper again, for the especial benefit of foreign trade, and to the destruction of domestic industries.
When gold is no longer a legal measure of values it will lose its fictitious value and decline to its intrinsic value; then page 20 the gamblers in currency will lose their most potent tool, and be forced to seek some other means of livelihood. Cheap money promotes trade on a cash basis; and dear money promotes inflation, extended credit, grand transmutation scenes, and financial panics. These are truisms that the people should not forget.