Lyman E De Wolf.

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

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thus authoritatively settled,by the mint, ceases to be a matter of
public inquiry, until war, or some such disturbing element, so far
unsettles the mint adjustment, of the money quality, that gold and
silver, as commodities, overleaping all bounds, and all restraints,
their values are only known by the increased demand, in the
shape of premiums, declared, made in the market from day to
day. It then becomes manifest, that the price of gold and
silver, like all other articles, fluctuate in the market, simply by the
law of supply and demand. Not only so, but when the state
fixes her requirement to be paid in coin, not by commodities sold,
but by the sale of bonds, upon which not fifty per cent, of their
face is realized, she thus increases the demand, by the very law
itself, three or four-fold beyond the power of supply, the prices
of the metals, for this use, which have generally been so uniform,
fluctuate much worse than all other commodities. While the
gold gamblers, and stockjobbers, by having control of the cir-
culating medium, are enabled to reap a rich reward by the
depreciation of their own currency, after it gets out of their
hands. On the other hand they are enabled, by the same means,
through governmental aid to concentrate the precious metals, as
they are called, and reap a still greater harvest out of the metals
by the derangement made. When they have sold out their
articles to the government, and people, and taken bonds, bearing
large and bankrupting interest, and at these enormously depre-
ciated piices, then the people are told, the currency and the
bonds thus depreciated are inflated, that it is necessary to go
back to a gold base, in order to cure this inflation — and to be
able again to use gold and silver as standards of value — that
people cannot estimate values by anything else, but that gold
and silver, with the large premiums, are merely commodities.
Gold and silver are at all times simply commodities, subject like
other commodities to the market price, and coinage and currency
laws only obscure or hide not only this fact from the people, but
it also hides the gross outrages perpetrated by this double shield
of villany constructed by law.

This complicated machinery is well understood by dealers in
coin, and bullion brokers, and intelligent merchants ; they very
well know that the mint price is intended to be the market price
of the gold ; they are also well aware, however, that it is the


mint regulations, which upholds the steady price of gold and
silver, throughout the world ; that the moment these gold laws
are removed, these metals will seek a natural level of value very
difierent from present rates, and very possibly an innovation of
just laws in place of monopolizing and unjnst ones, might
occasion the loss of their control over gold and the markets.
But, while these facts are well known to the classes above
named, very few of the business community, or of the people
understand this, nor do they think or know, that they are almost
entirely indebted to the money of account, and not to coins,
for the fiicility with which they estimate their values, and make
all their varied computations.

The derangement of prices and values, which they so much
deplore, are from these coinage and gold bond laws, which they
are taught, are instituted to protect their rights. But for these
unjust laws, markets would uniformly be governed by the law of
supply and demand, and their money of account would always be
a true index of prices and values.

This mental proclivity, thus manifested in these moneys of
account, throughout the world, is a commercial necessity. It
would be next to impossible in the present diversified state of
coinage to carry on business, and to express by the number of
coins, which would be an equivalent for the price, and amount
of business now being done.

The same efibrt, which is necessary to enable persons to
remember the coin and its value is sufiicient to enable them, to
carry the memory of that denominational value in the mind, and
to use it with the same effect abstractly or mentally, as if referring
to the coin itself. It is thus, therefore, that every coin, or certain
weight of gold or silver, or other denomination, or term of value
used for any considerable period of time, becomes the money
of account. This abstract measure, or unit of value, is used
arithmetically to express and estimate all values. It is thus
made as capable of expressing changes, in the value of these
metals, as that of any other commodity When this money of
account has become once established in the mind, it has a fixed
value— it is a permanent mental possession not easily eradicated.
This index of value, too, remains permanent and unchangeable,
independent of the fluctuations and changes of the article from
which it took its rise. A person who is accustomed only to the
use of these denominational terms, estimates values without any


knowledge derived from the use of coins, as readily, and
accurately, as those who have used coins.

This distinction, however, between the money of account, or
between the mental idea and the money itself, is not apprehended
by all persons with equal facility. Indeed, it is a subject, which
requires earnest attention and accurate discrimination fully to
comprehend it. Moliere, says Colwell, introduces a character
in one of his comedies, seeking an education suitable for a gentle-
man advanced in years, who found to his great surprise as well
as pleasure, that without a master all his life time he had been
speaking prose.

Thus, men use mental or abstract moneys to estimate values a
whole life time, without being so much as aware of what they
have been doing.

This mental-money-idea is so fastened in the mind by making
estimates, hourly and daily, that it becomes such a part and
parcel of the mind, that men cannot estimate or comprehend
values otherwise.

The people of Great Britain, France and United States, though
flooded with the coinage of the world, would without any coins
continue to estimate values, for the next hundred years, in the
language of their moneys of account.

It is not the gold sovereign, pounds, shillings, and pence, in
England, nor is it the coin dollar, dimes and cents, in the United
States, but it is the scale of equal parts fixed in the mind by the
use of these various terms, which enables the inhabitants of the
several countries to estimate values so readily. If these coins
rise in the market in England, it would be quoted as £1, 3s. 8d.,
etc., in the United States at $1.05 — 10 — 15, as the market
premium might be ; yet the standard coin, in payment, is £1,

When the pound sterling is used in the United States, it is
estimated in dollars and cents by our money of account — and
the eagle in England in the same manner, in pounds, shillings and

The transactions in business of every country are carried on
by books of account, notes, bonds, and other instruments in
writing and printing, computations are made and all the conver-
sation respecting pi-ices and values, is in this financial or ideal
language of the money of account, whereas coins are seldom used
or referred to in ordinary business.


It is not strange then that men should use this language, or the
language of their every day business, and make all their com-
putations and estimates of value by it. It would be strange
were it otherwise.

If the philosophy of this mode of estimating values has not
been as well understood and appreciated as it ought to have
been, yet the fact that men do thus estimate, is well known to
every thorough business man, accountant and cambist.

But while this language occupies so prominent a place in the
experimental knowledge of the capitalists, merchant and banker.
Statesmen, political economists, and theoretical writers, seem to
be so absorbed in the commodity or barter properties of coin,
that they wholly ignore the essential and indispensible uses of a
money of account, and the chasm of hundreds of years between
civilization and barbarism, is thus continually being bridged over
by legal enactments and financial treatises, which teach mankind
that they must not only measure values by chunks of gold, but
they must keep, and transport them thousands of miles to be
used as a medium, to make a valid exchange of a horse for an

In state papers, and in the discussions of financial questions in
legislative assemblies, it is not an unusual occurrence to find
these high functionaries so frequently confounding the obvious
distinctions between the ofiices or uses of coin, and those of a
money of account — as to raise a suspicion that this subject is not
well understood, or else they are entirely indifi*erent as to the
ideas which language should convey.

Colwell in a note gives a notable instance of the kind from the
writings of Leon Faucher, who says : " The efiective money in
the middle ages varying constantly, and being at the mercy of
every prince to be altered at his will, they devised a money of
account, a sort of abstract or fictitious unit, which might remain
relatively invariable, in the midst of monetary fluctuations,
caused by the unskilfulness or the bad faith of governments, and
the custom is preserved in some states, to-day." Sur Vor et sur
Vargent, page 6.

This is the view of ideal moneys entertained by a minister of
finance, in France. A man of abiUty, who knew full well, or
ought to have known the essential use which is rendered in
business through this instrumentality in every age of the world.
This eminent man was in fact using it every hour in the day ;


could not transact business without it, and yet he ascribes its use
as belonging to the middle ages.

But Monsieur Faucher is not the only man who has made this
or similar mistakes by not fully apprehending the maimer in
which men estimate values. An examination of Presidential
messages, secretaries and finance committees' reports, of Senate
and House, would, it is to be feared, show, that they not only
misapprehended the functions of a money of account, but very
possibly it might disclose a most appalling want of knowledge
upon the subject of money itself. If this knowledge is prevalent
in legislative circles, it is not very clearly perceived, how that
fact is manifest, when coinage is held to be a standard of value,
or why it is imagined, that a return to specie payments can com-
pensate, or remove the losses occasioned by the destruction of
property in a four years gigantic war, and the removal of more
than two millions of men from their ordinary occupations of
useful industry during that long j^eriod of time. Much less is it
understood how the changing of the value of paper, which marks
the increased cost of production, can be improved by reducing
the circulation much below the actual wants of business.

Men must live, and property must be exchanged, whether we
have gold and silver, or not, and the money of account, will, if
let alone, accurately mark the increased cost of production, and
do no injustice to the people.

- When a merchant says a yard of cloth is worth a dollar, the
price and quantity of cloth are instantly known, without either
coin or yard stick. If the payment is made in coin, and that
' agrees in name with the denomination used, that seems to prove
the idea that the price was measured by the coin ; but, if the
payment is made in a different denomination of value, as in
pounds, shillings, and pence, then it clearly would be otherwise.

Salesmen are frequently employed in making sales, in naming
prices and estimating values, in large amounts, who can neither
estimate these values in bullion, by weight, nor in foreign coin.

Whoever examines the subject with care, will find that sales
of large amounts are seldom paid in coin, and when so made,
the coin and bullion, have to be estimated as well as other com-
modities in the money of account. To call these coins standards
of valivi, is not only a great error, but one, which ought every-
where to be condemned as destroying all correct ideas of the
mode of estimating values.


The unit of the moneys of account in France, England, and
tlie United States, agrees with their coins and its functions, are
as well performed here as elsewhere, yet attaching the money
of account, to a coin of changeable value, and thus giving it a
fixed value, by the law of legal tender, is of very questionable
utility, to say the least of it. As the value of the money unit if
the (*oin falls in value, and continues there for any considerable
period of time, will fall with the coin. England has really four
moneys of account— the pound is one unit— the shilling, penny
and farthing, are the others. It has been proposed to change the
three latter, and have them absorbed in the former. But Eng-
lisli statesmen very well understand that the difficulty in the way
of the proposed change, is not a question of coinage, but one
arising out of the mental habitS of the people. Change the unit
value of the shilling by law, and the people will continue to
reckon in shillings, for the next half century.

The principal money of account now used in the United States
is the dollar unit, and its decimals of dimes, etc. It is generally
expressed as llyVV instead of ten cents. Before the Revolution
there were as has already been shown, several different moneys
of account in use, in the different colonies, originating from
various causes, such as unfavorable exchange, but no mint or
coins established these several units.

The lowering of the value of the unit, used in different coun-
tries, originated from very different causes. In England, France,
and the other European nations, abusive and fraudulent changes
in the coinage, caused the value of the units of these several
moneys of account to fall. Whilst in the colonies, which now
constitute the United States, the first settlers brought their
money of account with them from England. In process of time,
over-importation continued unfavorable exchanges, bad crops,
and a worthless paper currency, caused the unit of value to
fall, varying essentially ip different colonies. Pennsylvania had
much the best currency — it was in fact a government money, so
valuable that other colonies used it for purposes of making

When the heavy balances against the colonies were finally
adjusted, it left their moneys of account, where the depreciated
currencies had carried them.

The Spanish dollar formed a common unit, into which all the
various moneys of account in use in the different colonies, could
be readily translated, so as to enable the people to deal with


each other. There cau be no pretense that these ideal moneys
took then- rise from, any coin, for none such ever existed. But
the Spanish dollar probably furnished the unit, for the money of
account of New York and N. Carolina, as it afterwards prepared
the way for the adoption of the decimal system of the United
States, through a general money of account, formed from its use,
and confirmed and made perpetual by subsequent legislative en-

The injuries arising from a deranged money of account are
incalculable. The loss occasioned by lowering the value of the
coin, or changing the unit value of a money of account, deranges
all the business of a nation. In the case of coin, the princij^al
fraud is not in the debased coin itself, but in its application to
express the value of other property ; in this particular the game
effect follows from a deranged money of account. The deno-
minational unit representing one amount, and that a lesser one
than is supposed, to that extent the people are defrauded. Even
when understood, it is difficult to adjust prices to the new scale.
Few men have any conception of the injury, which will be
inflicted in the business of a whole nation, by misapprehending
the value of the unit to the amount of one per cent. If the
annual production of property, in the United States, is
$1,500,000,000, the use of a money unit deranged one per cent.,
will occasion a loss of $15,000,000, in one exchange, and if the
aggregate of the exchanges should amount to one exchange per
week in one year, it would have occasioned a loss of seven
hundred and eighty millions of dollars.

If there is a coin of the same denomination of the unit of the
moneys of account, for instance, gold or silver dollars, and a
depreciation of the coin should take place to the amount of
twenty per cent, a gradual accomodation of the money of
account, if this depreciation should continue for a great length
of time, is sure to follow the downward value of the coin. This
depreciation of the coin, and the consequent derangement of the
money unit, will first be manifested in the great commercial
marts of the world, by the decreased demand for coin; this
change is sooner discovered by dealers in bullion and coin, and,
therefore, they are enabled by their superior knowledge to
defraud the people in pushing out the coin. When this end has
been fully reached through the instrumentaUty of having control
of the currency, they are enabled to enhance the value of the


coin, and at the proper time they defraud them again, by the
reversed process of re-acquiring the coin. These frauds are hid
from the observation of the people through the complication of j
coinage and currency laws. ■

Since the discovery of the new mines, in California, Australia,
Colorado and elsewhere, there has been a general expectation
expressed in financial circles, that gold would depreciate, and
some surprise has been manifested in some quarters, that this
depreciation has not followed as was prophesied. That gold has
fallen in actual value, there can be little doubt— the largely
increased production would surely produce that residt, if nothing
intervened to prevent it. But, that intervention has occurred,
in the form of the mint regulations of the world, and gold has
80 far been held up to the mint standard.

The people, however, are wronged in this, that the increased
value given to gold by these laws does not add to the actual
value of the gold, but their property is obtained at a proportion-
ally less rale, and the only way that the industrial classes are
made to feel eifects of these wrongs, instead of learning the cause,
is in the decreased comforts which they enjoy, and the increased
burdens they have to bear.

These are the means, whereby the named and the unnamed
nobility of the world are supported by law. The question then,
as to the remedy to be applied, can only be satisfactorily settled
by a clear understanding of all the agencies employed in
exchanging property, and in estimating its value and amount.
In tliis enquiry, as we have seen, the money of account holds a
central position, and the effort, therefore, has been to place the
subject in its true light.

In 1816, the British government under the influence ol a very
elaborate Keport, made by the Earl of Liverpool, determined,
that the pound sterhng, their money of account, should be
represented in a coin. They accordingly ordered a coin to be
issued from the mint composed of five penny- weights, three
grains and m of a grain. Let those who ignore a money of
account, as the real method of estimating values, show why a
sovereign contains precisely this amount and quality of gold, if
it was not to represent the pound sterling in a British coin.

The mistake, however, in attaching this numeral of value to
a certain quantity and quality of gold, is the danger of depre-
ciation in the value of gold, and the injury which will ensue by


this arbitrary attempt to hold the price of gold up to the coinage
level, when the actual, or market value of the gold, if left to seek
its own level by its use, would be fifty or a hundred per cent,
below the mint price level. As under the law every person is
obliged to receive this gold at the mint value, and not at the
market value. If gold should depreciate by increased pro-
duction, one hundred per cent., and all the annual surplus
productions of England, should be converted into this gold, at '
the mint price, the people of England would by law be cheated
a hundred per cent., unless they can trade ofi* the cheat to some-
by else ; and, although it has to a great extent been done, and
the injury which has originated from this cause is very little
understood. Yet,' the wrong exists, and it is working results
detrimental to the interests of the working classes, that cannot at
present be estimated.

Upon such gross injustice is the uniform value of gold and
silver erected, and nations continue to wallow in the mud and
mire of iniquity to support the ruling classes, by this false system,
and thereby to defraud and rob the industrial classes out of the
just I'ewards of their honest toil In modern times England takes
the lead in this systemized robbery. She is the centre of
monopoly, and by this financial policy, she makes all nations pay
her annual tribute of all their industries. The sun, it is boasted,
never ceases to shine upon her dominion of gold. The United
States, with all her vast resources, are first and foremost to follow
in her wake, and seem only ambitious to exhaust her untold
millions of natural wealth, and to impoverish the labor classes,
that she may crown her republican institutions, by making them
a first class centralized English money power.

This subject, however, will be more fully unfolded under the
beads of coinage and banking.

The plea for these outrages is, that coinage is necessary to fix
a standard of value, whereas, it has been seen, that this use, if it
ever existed, since the dawn of civilization has long ago ceased,
and that these important uses are performed by moneys of

By an act of Congress, passed on the 2d April, A. D. 1792, it
is enacted : " That the money of account of the United States,
shall be expressed in dollars, or units, dismes, [dimes] or tenths,
cents or hundredths, and milles, [mills] or thousandths, a disme,
[dime,] being the tenth part of a dollar ; a cent, the hundredth
part of a dollar ; a mille, [mill,] the thousandth part of a dollar,


and that all accounts in the public offices, and aU proceedings in
the courts of the United States, shall be kept and had in con-
formity to this regulation.'' United States Statutes at large, Sess.
1, Chap. 16, page 250.

Robert Morris, of Pennsylvania, financier of the confederation,
on the loth January, 1782, made a Report to Congress upon the
subject of establishing a mint. This Report was not acted upon,
but the subject was referred to Alexander Hamilton, Secretary
of the Treasury, in April 1790, and on the 28th January, 1791,
Hamilton made an elaborate Report. See American State papers
Vol. VII. fol. ed. p. 91.

No coinage of any importance had ever existed in the Colonies.
Spanish coins had been extensively used, but the money of
account was very much deranged. Merchants were constantly
using Spanish coins in making payments, and estimating their
value in colonial pounds, shillings, and pence. This was
extremely inconvenient, and a general desire was felt for having
a uniform system, after the Revolution. Mr. Morris wanted to
retain the colonial moneys of account; he well understood the
difficulty with which a people change their mental habits, in
estimating values ; he, therefore, proposed a unit for the con-
templated coinage, which would be a common divisor for all the
moneys of account of the different States. This divisor was the
1,440th part of a dollar, divided as follows:

10 units to be equal to one penny
10 pence " " " bit

10 bits " " " dollar

10 dollars " " " crown.

Under this division of the dollar, 24 parts would constitute a
penny of Georgia — 15, one of New York and North Carolina —
20, of Virginia and the New England States, and 16, of Penn-
sylvania and the middle States. This dollar would have been
two-thirds the value of the Spanish dollar. But Mr. Hamilton was
of the opinion, that the people by the constant use of the Spanish
dollar were better prepared for the adoption of the dollar unit of
a money of account, and Mr. Jefferson, coinciding, the money
of account, here given, was adopted. State papers. Finance
Vol. II. page 105 — Vol. VII. page 105.

This, it is believed, is the first time a money of account was
ever adopted by legislative enactment. It is now thoroughly
incorporated into the mental habits of the people ; all that is


required to preserve this mode of reckoning intact, is first, a
repeal of all coinage and banking-laws, second, the institution of

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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 3 of 19)