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Lyman E De Wolf.

Money; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained online

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one that .augurs so much good for the people, that its kindly
offices should be accepted without qualification or enquiry.

Like the serpent, it whispers in our ears of the good time
coming, when gold shall reign supreme ; besides that it is
" pleasant to behold, and good for food." But alas ! the smiling
invitation and cheering pi'omises are delusive. If we hear not
the prophetic declaration " that in the day thou eatest thereof^
thou shalt surely die." It is nevertheless true, there is death in
the bowl — death to political, civil and religious liberty.

Let no one be deceived by these gold-base pretensions — no
gold base, gold bonds, nor bankers redeemable currency can fill
up the terrible chasm of a four years war — they may load down
the productive industry of the country with the overwhelming
burthens of their oppressive system, but no concessions will be
made to the people which does not bring to the financiers a
greater private gain.

But when these oppressive bvn-dens, and their attendant evils
become almost insupportable. When the public mind is begin-
ning in earnest to enquire into the causes of these grievous



177

wrongs ; the financiers, politicians, public journals, political,
commercial and even the religions press are not exempt from the
contagion, of delivering homiletics upon national honor. This
demands at the bidding of the capitalists, an unconditional sur-
render of the rights of the people, and teaches that genuine
honesty and an uutarnislied public faith requires the payment of
a financier's forty per cent, national paper debt, in a people's
hundred per cent, interest bearing gold bond. Learned disserta-
tions too are written by savans and political economists, to prove
that this mode of extortion with a gold-base, and under the
financiers' control, are all that is needed to give elasticity and
convertibility to the banker's national cm-rency.

Now it is well known that all the industrial and useful classes
desire, is a just and equitable adjustment of the National debt,
and an honest, safe and uniform medium of exchange at actual
cost. As they furnished all the values and did and do, all the
actual, useful business, they certainly have a right to demand
this much from the government. But this demand should not be
met by licensing hordes of foreign and home gold speculators,
stock-jobbers, and bankers to plunder them.

How can " elasticity " and '^ convertibility " be permanently
attained, or how can the people be benefitted or secured their
rights, under a system, which, while it establishes a double and
high interest, requires a correspondingly decreased pi-ice of
products to support it. Under such a system what is not reached
by discounts or by interest, must be absorbed by brokerage.
Hence every large banking establishment includes in it these
two elements — discounts and brokerage — profits from discounts
made, while trade is being stimulated by excessive paper-issues,
are endurable only in anticipation of a greater harvest of depre-
ciated pi-operty by brokerage. Burdens are thus stored by law
for the people, and increased benefits for the capitalists. How
can anytliing else but evil flow from such a system. As we have
repeatedly shown, it is not gold or silver, not even tlie capital of
the stockholders which enables them to redeem their notes, but
it is the avails of the people's property through the artificial
channels of trade thus ai'bitrarily and unjustly created by
National and State financial laws.

Whenever therefore there is a large increase of staples with
an increased foreign demand, the banks immediately expand
their issues, speculations soon becomes rife, bank-paper is its



178 •

natural element. Increased demand raises prices, and the high
price of products, increases the price of labor. Then manu-
factured goods, and every other commodity experiences a pro-
portionate rise, until at length the home demand cuts off the
foreign, and what little was gained by that demand is absorbed
in interest and profits which through this bank medium is
gathered into a few hands. Thus the great productive industry
of the country is on the whole injured more than benefitted,
especially that of the middle and lower classes of labor. These
depend upon labor entirely for their support. Increase of prices
by these means are generally first and highest on manufactured
goods — products last — and the same observations apply to the
whole routine of labor and business. The boasted elasticity of
the currency never operates any other wa}'. It is perfectly
immaterial from what stand-point the subject is viewed. It is
false to the interests of the people, in its origin, principles and
results.

That the governmental land monopolist and feudal baron of
Europe, could see nothing valuable but in lands, bonds, gold and
silver is not strange. His grandeur and his power was sustained
by it. Hence he fostered every device which increased these,
and was jealous of that which might impair his seignory, or
reduce his substantial wealth in lands, silver and gold. But the
state in support of these not unfrequently exorbitant claims of
royalty was frequently obliged to anticipate their annual tax or
tithe in advance by representatives of paper. Hence two other
classes began to sssume importance in the civil state, dealers in
stocks and other representatives of value, and the world's
traders. Side by side these several classes grew up and were
fostered and fed not by labor, not for services rendered, but by
prerogatives of State. The first by land and governmental
monopoly. The two latter classes, stock-jobbers and traders
became its purveyors — one sought governmental ' stocks and
grants — the other by them commercial facilities.

Hence the governmental land monopoly class and their retain-
ers, seeing the substantial character of the land and gold
monopoly, naturally became bullionists — this to them never
depreciated. But the dealers in paper and gold lived on the
substantial shadows of land and gold, in representatives, which
drew interest, or afforded profits.

But even bonds and other securities when they brought the



179

gold and silver to the bullionists were substantial — when they
demanded these, beyond their power of supply, then these
pictured classes of wealth were unsubstantial and unreal. But
all these classes agreed in this, that the difference or losses must
be taken out of labor. The governmental and banking class
charge the wrong to over-trading. Over-traders charge it back
to bad financial laws and want of gold. One class claims that
gold and silver are the only reliable currency. The other that a
" gold-base " convertible " currency " is all that is desirable.
But all agree that whether a gold-base, or gold, it must be
reached through the strong arms of labor. Thus between these
classes, bullion and anti-bullion, gold-base, or by an elastic, gold
convertible currency the rights of the masses are ground to
powder.

The bullionists robs by a monopoly of gold, and the anti-
bullionists by his gold interest bond and gold-base currency, but
so far as speculation is concerned, the bullionist-theory has the
advantage of the paper-theorists. So long as exchanges are
made in gold, there is no danger of serious over-speculation at
. home or abroad. Trade in barter is a quid pro quo transaction
— this thing for that — and there is not much chance for excess or
loss.

If the barter irade fails that ends the injury — the evil is not
aggravated by failures of money, or currency based on that
trade.

Even wars and legalized governmental robberies by gold do
not create a demand for gold for home consumption beyond the
supply. The pressure only comes to meet the foreign demand —
it is not two-fold, the one to meet the demand of a gold-base
law, the other to meet the foreign demand, for that has already
been met.

If there is a demand for staples abroad, the prices at home
will not be suddenly enhanced by an increase of the currency,
so as to destroy the advantage of the exportation, and thus make
it a losing business.

These are some of the advantages claimed for an inflexible
non-elastic gold-money. As against the elastics on the score of
honesty and uniformity of value, the "non-elastics" or bullion-
ists have the advantage.

Both systems however are an odious monopoly. Gold as
money is too expensive. Although paper-money can be fur-



180

nished at one-eighth the cost of coin, yet under this bank regime,
it is even more expensive. Losses by insolvency, exorbitant
rates of interest, an irregular supply and constant derangement
of business, makes it a most expensive luxury — the gold-base
furnishes an apology for extortionate interest If the gold was
actually kept on hand, then the public are entirely deprived of
its use. Thus the use of the coin is a dead loss, and the cost of
the paper-issue, is just that much excess of expense, over what
it would cost to circulate the coin,

A paper medium therefore, which legally and honestly denotes
the commodities exchanged under government control, without
havincr to pass through this dishonest gold-base circumlocution
office would not cost exceeding uue-eighth of the present cost of
currency and coin.

One million dollars worth of wheat, furnishes as good a base
as coin, for all the money requhed in exchanging that amount of
property in the ordinary channels of trade. The wheat equally
with gold is a property base, and the grain on the principle pro-
posed is not diverted from its natural use in supplying the wants
of man — Whereas the gold if a fund for the redemption of the
money, is so much value, miser-like, withdrawn from its appro-
priate sphere of use. But in truth no currency or money is
erected on a gold base — practically, money or currency, denotes
the property sold or exchanged. It is both a certificate of value
of the property or service furnished or rendered and a legal
order for the amount of property thereby indicated, subject to
payment of the cost of production which is determined by the
market price of the article.

To illustrate this. Suppose the West has one million dollars
of wheat which she desires to exchange for one millions dollars
worth of Eastern goods. The West takes from the wheat pur-
chasers the wheat paper-money, and the east takes the money for
the goods and exchanges the money for the wheat. The West
gets the goods and the East gets the wheat. The account
between the two sections of country and the respective parties,
is balanced through the medium of the wheat-money. Xo gold
or silver is required to give value to this wheat paper-money.
Storing up gold therefore, and attempting to connect the money
with it, if actually done, would be a useless expense — if it is not
done the pretence is an outrageous fraud.

The latter is generallv the result — connecting gold or silver



181

with paper-money as the only fund for redemption, under any
and every form, has ever been and must continue to be, a potent
agency for deranging business, and thereby it lias proved a most
effective instrument of wrong and oppression.

But to illustrate this elastic gold-convertible money theory and
its operation, as connected with foreign commerce — let it be sup-
posed that the United States have had a plentiful harvest this
year — the bankers and dealers are eager for the trade. Money
is plenty at low rates of interest. Trade soon becomes unna-
turally stimulated. Unusual bank facilities are the sure forerun-
ner of vast commercial enterprises at home and abroad. The
same principles govern all branches of trade. Exchange to be
useful must be mutual. Articles not desired, must pay for those
which are needed, and at the least expense. To effect this how-
ever, shipments and transhipments may be necessary. Yet each
branch of busmess should be made to tarnish its own appropriate
medium of exchange — at least the home trade should not unne-
cessarily through its money medium interfere or derange the
foreign trade, neither should the foreign trade be permitted
through tills same medium, to interfere with, or derange the
home industries and exchanges.

Such being the huanciai and commercial laws which ought to
govern, no violation of these fundamental principles of justice
can be tolerated with impunity.

If then A. E. and C, being supposed to represent the import-
ers, through National and State bonds, or some of the other
devices necessary to support this gold-base system, should import
$1 2,000, OuO more goods than could be paid for with exports,
then paper-money must supply the coin or bulUon to pay the
deficit. This demand might occasion a contraction of the
currency $60, or $70,000,000. Hence a financial crash would
inevitably ensue which would spread disaster and ruin broadcast
throughout the land.

We have put this case upon hypothetical grounds, but the
financial history of this country and of England is teeming with
facts condemnatory of the whole system much stronger than
anything here presented.

The crash of 1857 sheds much further light upon this question.
Colweil in his book on " the ways and means of payment," thus
presents this subject. He says, " Our banks are so constituted,
that when the ignorant and alarmed multitude commence a run



182



for coins, they have no resource but to withdraw the usual facili-
ties of banking from the very men of business to whose custom
they owe all theii- profits, and to whose forbearance they owe
every day's existence. When this race begins, the banks,
whilst they are daily receiving, in their own notes and credits,
(checks on deposits,) the sums payable to them, withhold the
customary faciUties or discounts from their customers, and by
this means create such a strong demand for bank-notes and cre-
dits for payment of debts as checks their presentation for specie.
The stream of bank-notes and deposits sets strongly and steadily
towards the banks, and returns to the public in a constantly
decreasing volume. The demand of the banks upon the public
may conthiue unabated for some sixty days, in which time in a
commercial community, the stringency may become such, that
few, if any, can have bank-notes or credits upon which to make
demand for specie, and those who have, will be tempted by the
debtors to the banks to accept at the rate of twelve, eighteen,
twenty, or thirty per cent, per annum; and thus these bank-
notes and bank credits will be returned to the banks in payment
of debts, in place of being presented for payment in specie.
The contraction in New York, in the panic of 1857, is a speci-
men of what the banks are constrained to do to save themselves.
They can only protect their coifers by refusing to issue the usual
supply of currency. The diminution of loans and deposits in
the banks of New York City, stood thus in August and October,
1857:

Loans. Deposits.

15th of August. . . .1121,241,472. . . .$92,356,328

19 th of September.. 108,777,421 75,772,774

17th of October... 97,245,826 5.',894,623

This exhibits a reduction ot discounts, ni one month of
$13,000,U00, and in the succeeding mouth ol $11,000,000; that
is $24,000,000 in sixty days ; in one month deposits ran down
under this operation, $17,000,000; in the succeeding month,
$23,000,000; making in the two months a reduction in the chief
medium ot payment of $40,000,000. Deposits were thus reduced
nearly one-half. It cannot be surprising that under such a pro-
cess of contraction, interest went up to between fifteen and
thirty-six per cent., and exchange down to nine or ten per cent,
below par. What the banks did in New York, Avas done in a
greater or less degree in other cities; bankruptcy, ruin and
destruction followed. It is estimated that irom five to six



183

thousand failures occurred, involving an indebtedness of from
$280,000,000 to 1300,000,000 with u loss to creditors of more
than 1150,000,000. But this loss bears no comparison with that
arising from the depreciation of securities, and from the fall in
price of real and personal property, which, judging from the
results of estimates carefully made, cannot be less than
$500,000,000, and may not improbably be twice that sum. The
loss sustained by the men who labor for their living is even more
severe in its consequences, if not equal in pecuniary amoxmt.
A million of men idle for six months involves a loss upon the
machinery, shops, tools and factories, which stand idle when
tlie workmen are unemployed.

The late panic has inflicted, in all its bearings and ramifica-
tions, a loss upon the country which is variously estimated from
$500,000,000 to $1,000,000,000. No doubt the ill-effects of the
panic were much enhanced by the previous abuse of credit, and
that a considerable portion of this devastation should be set
down to that account. With every allowance in that respect,
we shall have a vast sum of loss to charge to the panic ; and
whether this sum be $400,000,000 or $800,000,000, matters not
to our view. The loss was, to a great extent, unnecessary,
cruel, terrible — a loss which has carried privation, distress and
ruin to a million of homes. For a time, at least, not yet passed,
it reduced hundreds of thousands o^ the best people to a state of
entire dependence, if not beggary.

What was the occasion of these dire calamities ? The banks
of the United States had a reserve of specie for several years
previous to 185 7, and during the first half of that year, amount-
ing to somewhat over $50,000,000 ; and of this, the banks of the
City of New York held a little more than one-fifth. To save
this amount of specie, the banks contracted the currency one-
half, denied the usual facilities upon their books, put up the rate
of interest from twelve to thirty-six per cent., put down exchange
upon England to nine or ten per cent, below pai', reduced the
revenue from customs to less than half of the usual amount, drew
a surplus of $20,000,000 of gold out of the public treasury, and
drove the government to an issue of paper px-omises to pay its
current expenses, deprived hundreds of thousands, pei-haps ot
their customary employment, caused some five or six thousand
failures among men of business, and finally inflicted a loss on
the country, in the depreciation of securities, in the reduction of



184

prices and by insolvency, of several hundred millions. Not to
save this sura of fifty millions from being lost, sunk in the ocean,
or thrown away, were all these encountered, but merely to
prevent it from passing into circulation among the people, or at
the worst, to prevent it from being exported in payment of debts
due in foreign countries. Nine-tenths of the debts of the country
are paid, as we have seen, by the agency of discounts and
deposits, with some aid from the circulation of the banks ; but
the banks have been placed under such heavy penalties to pay
all their liabilities in specie on demand, that when they are
threatened with a panic, a commercial revulsion, or a heavy
export ot specie to foreign countries, they are compelled, like
Samson in the temple of the Philistines, to pull down the whole
fabric of credit, public aud private, about the ears of the people,
to disturb and check the progress of industry in all its depart-
ments, to make bankrupts of their customers, and to sow pauper-
ism broadcast in the field of labor.

This compelled policy of the banks, under the stringency of
the laws which govern them, has been called paying specie. But
with how little propriety. Instead of paying their liabilities with
commercial promptness and the faithfulness of those who are
discharging a legal and moral obligation, they resist it with all
the power and weapons they can command. In the struggles
incident to this resistance they strike down friends as well as
enemies and deprive the public ot an amount of currency neces-
sary to business^ ten times greater than the specie they are
unwilling to pay out.

And this is the convertibility so long aimed at, and to secure
which so much legislation and so much thought has been
expended ! This is the triumph of banks which pass through a
season of panic and revulsion without suspending ! a triumph
like the victory which leaves 100,000 dead bodies on the
field of battle, which makes 10,000 widows, 50,000 orphans, and
200,000 paupers !"

This " elastic convertible gold-base " system, is the one which
is proposed as a cure for a pretended "irredeemable and
inflated " government money, but which is in fact a good money.
Though the country is suffering considerably under the effects
produced from a long and bloody war, very largely increased by
the extortions and other iniquities practiced upon government
aud people, by the financiers and bankers through this wicked



185

financial system ; yet with all these accumulated evils upon the
nation, the "greenback" carried the government triumphantly
through the war, and to-day honestly marks the price of 2)ro-
ducts increased in the cost of production, by the losses occasioned
by war, and by the greater robbery perpetrated upon the nation
by these very financiers and bankers.

Whenever the people therefore consent to surrender the entire
money-power of the government into the hands of this Philistine
crew of " capitalists," to the destruction or gold interest fund-
ing of the " legal tenders, and to the perfecting of the organiza-
tion of the present National Banking system — then surely we
shall need no blind Samson to pull down the pillars of Freedom's
consecrated temple, for we shall have effectually accomplished
that suicidal work with our own hands — that dread alternative
is even now awaiting the decision of the American people.

It is not " convertibiUty," it is not a " gold-base," nor a
reliable money for which these men are clamoring, but it is for
the supreme control of the government through a bonded and
money system assimilated as near as possible to that of the
Bank and bond system of England.



CHAPTER XIV.



INTEREST ON MONEY.



Interest is the sum paid for what is technically called the us
of money. The origin of this term as applied to this charge, it
might be difficult to ascertain, and if ascertained the knowledge
would not probably be very useful. For a long period of time
it was denominated usury. The Hebrew word nashach^ which
we translate usury, means to bite as a serpent, and in psalms
Chap. XV., 5 verse it is said that "he that putteth not out his
money to usury nor taketh reward against the innocent. He that
doeth these things shall never be moved,' upon which text the
commentator remarks that "here nashae must signify that biting,
or devouring usury, which ruins the man who has it to pay."
" The increase of usury is called neshec, because it resembles the
biting of a serpent. For as this is so small at first as scarcely
to be perceptible, but the venom soon spreads and diiFuses itself
till it reaches the vitals : So the increase of usury which at first
is not perceived, nor felt, at length grows so much as by degrees
to devour another's substance." Middoch's Ed. of Leigh's
Critica Sacra Sub voce — Nashach — Adam Clark's Comm's.

Dr. Clark confines the term usury to excess of interest, but
all interest between Jews was unlawful, they wei-e only allowed
to charge interest or rent to strangers. There was substantial
justice in this law — he, being a member of the commonwealth
of Israel was obliged to pay his full share of exj^enses for pro-
tection to property and life, and was thus entitled without further
charge to enjoy all the blessings of the social, religious and civil
order — but with the stranger or gentile it was otherwise — he
might enjoy these for a rent, but even to him extortionate excess
of charge, was not allowable.

The Church in its infancy prohibited usury, and good men in
every age of the world, have not failed to lift their voices against



187

it, but the state has legalized certain rates as " interest " and
anathematized any excess over those rates as usury, under this
salvo of state, the consciences of a great many pious men are
quieted, and are frequently not disturbed with any usury, where
the interest does not exceed two or three per cent, per month.
The right at least to receive the legal rate, of from six to ten per
cent, interest, is generally unchallenged in this country. Thus it
is seen how easily the voice of reason and conscience is stifled,
and the revealed, as well as the natural law, is made void by
human statutes and human traditions.

But among all the grave crimes that governments and despots


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Online LibraryLyman E De WolfMoney; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained → online text (page 18 of 19)