Money Creators

of creating money. It is for individuals, as acting, exchanging persons, to “create” money, and even this “creation” is not by fiat—not by voice acclamation as God created the world, but merely by personal preference and use. This is a far cry om the fiat creation of money as propounded by Coogan.

What, then, can be said for the book, Lawful Money Explained? First, it is statist in outlook, collectivistic in its view of the functioning of money, and certainly not a representative of anything resembling a ee market approach to the money question. Second, the book is Keynesian in many of its monetary recommendations. It is a crude, simplistic form of Keynesianism, but still as dangerous as the more “orthodox” Keynesianism.

Third, because the author provided no clear theory of value, the book cannot be called an economic treatise at all.

At best, Miss Coogan was a chronicler, a gatherer of data—in short, a statistician. With no theory of value, she could propose no theory of price. Without a theory of price, it is impossible to understand supply and demand, and it is equally impossible to explain money and its functions.

The book has no consistent economic theory of any kind holding it to-gether. It is a hodgepodge of fallacious reasoning, inaccurate definitions, and socialistic panaceas. Except for her explanation of the actional reserve banking system and the aud involved in it, Coogan offered nothing of any value whatsoever. Her book is non-economics, useless at best, and highly dangerous at worst. Nothing could be further om the truth than to regard this book as a statement of a conservative case for honest money.

Money Creators

T  book to be considered here is her study, Money Creators, published in 193⒌ It is more historical in approach, and for that reason it is considerably longer than Lawful Money Explained . It contains no statement of “first principles,” and is therefore even less of an economic investigation than is the other, if such a thing could be imagined. The lack of any systematic statement of her economic principles does not exempt the book om any of the fallacies reviewed earlier; it only makes them less apparent. It also helps to hide her lack of economic reasoning. The book has little to say about economics or economists; it

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is based ostensibly upon juridical law rather than on economic law. She scorned economic law. The book’s starting point is the Constitution of the United States.

Constitutional Money

The Constitution was written by a committee in 1787, in an age of little that could be called modern economic science. In fact, if we are to take Coogan seriously, economics was no science at all in those days. Economists, she wrote, were all mere tools of the international banking establishment, and Adam Smith was in the same camp as was Adam Weishaupt, the founder of the revolutionary secret society, the Illumi-nati.23 Nevertheless, Coogan accepted as the absolute standard of economic truth, Article I, Section 8 of the Constitution, in spite of the fact that if the men who wrote it had read any economists at all, they had read Adam Smith. This standard of reference, which Coogan and all American

Greenback writers regard as absolute, is that Congress shall have the power “To coin Money and regulate the Value thereof, and foreign Coin, and fix the Standard of Weights and Measures.” That is what the Constitution says, unquestionably. Unfortunately, the Greenbackers who cite it haven’t the slightest idea what it means.24

Paul Bakewell, a conservative lawyer whose works on money are quite good, did understand what it means, since he understood monetary theory and American legal history. Because this “lawful money” argument is at the center of the Greenbackers’ economic analyses, Bakewell’s research is extremely important, for it destroys the inaccurate legal scholarship that undergirds Greenbackism. He pointed out that, in 1850, before the Supreme Court was such a willing tool of party politics, it unanimously declared the meaning of the words of Article I, Section ⒏

They appertain rather to the execution of an important trust invested by the Constitution and to the obligation to fulfill that truston the part of the government, namely, the trust and duty ofcreating and maintaining a uniform and pure metallic standardof value throughout the United States. The power of coiningmoney and of regulating its value was delegated to Congress by

2324Ibid., p. ⒏Gertrude Coogan,Money Creators(Hawthorne, Calif.: Omni, [1935]

1963), pp. 205–⒎

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the Constitution for this very purpose as assigned by the amersof that instrument, of creating and preserving the uniformity andpurity of such a standard of value. . . .

Whatever the functions Congress are, by the Constitution,authorized to perform, they are, when the people’s good requiresit, bound to perform; and on this principle, having emitted a circulating medium, a standard of value indispensable for the purposeof the community, and for the action of the government itself,they are accordingly authorized and bound in duty to prevent itsdebasement and expulsion . . . (9 Howard, p. 568).

As Bakewell pointed out, even Alexander Hamilton, a political cen— tralist who designed America’s first national central bank, knew better than to tamper with the metal content of the monetary unit. Jefferson, on this point if on no other, agreed with him.

Aer citing statements by Supreme Court Justices Washington, Clif-ford, and Story that confirm this point, Bakewell concluded: “Thus the earlier opinions of the Supreme Court and of the Founding Fathers clearly indicated that our government has no power to debase the standard of value.” His warning, offered to New Dealers, Keynesians, Chicago School monetarists, and Greenbackers, was straightforward: “If Congress has power to debase the standard of value, there is no limit to that power.”25 Written in 1962, there is little that has happened in the United States’ monetary affairs since that time to indicate that his warning was not in order. It is unfortunate that Greenback advocates have been unwilling to see this warning as applying to their own policies of monetary expansion and currency debasement.

Miss Coogan understood neither legal history nor economic theory. She informed us that capitalism is the economic and political system that permits private citizens to own and control their own private property.

Yet the most important property of all in an urban, industrialized society, om an economic standpoint, is money. Nevertheless, Coogan did not regard money as a form of private property that may legitimately be controlled by a ee market. She implicitly denied what she proclaimed to be the glory of capitalism: the right to hold property. Naturally, she saw no contradiction here, and therefore she failed to comment upon it.

25Paul Bakewell,13 Curious Errors About Money(Caldwell, Idaho: Caxton, 1962), p. 5⒈

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She called for “equitable” price levels 2627 and “decent” prices. She did not mention the idea of balancing supply and demand through the price system.28 She recommended the creation of a board of National Monetary Trustees. It would set all prices at the “desired price level.”29 Yet she called herself a capitalist. But then again, so did Keynes.

Coogan rightfully referred to private counterfeiting as “the.” 30 She did not call the State’s printing press money counterfeit, yet the private bills are counterfeits. Naturally not; in her view the very ink of the State’s presses turns cheap paper into valuable money. Private counterfeits do not have this “mystical something” that turns paper into money. That special something is possessed only by the Sovereign Authority. Somehow (she could not explain why), the State’s bills are money, but the private bills are not, in spite of the fact that both look alike and both circulate just as easily. The private bills only act as money, but they are not really lawful money. This is not economics; it is mysticism.

Counterfeiting is the for one reason, and only one reason. Paper bills are issued that look exactly like bills that are backed by 100% of their face value in money metals, but these bills do not have such a backing. In other words, if all the individuals went to claim their money metals at the same time, some people could not collect. The storage warehouse, whether a Treasury building or a private bank, would have been emptied because some people possessed counterfeit claims to the gold and silver, and collected the goods illegally om the rightful owners. This is why counterfeiting is the. It is a claim on goods which do not exist. A bill that is counterfeit, by definition, is a bill that tells the bearer that he is the owner of a certain amount of a money metal, a unit of metal which does not really exist. It does not matter who has issued it—a State Treasury, a bank, or Junior with his homemade printing press—if there are no

2627Coogan, p. 9⒏Ibid., p. ⒉

28The same failure of understanding marred the economic thinking of the colonial

Puritans of New England. They tried, unsuccessfully, to legislate “fair wages” and“reasonable prices.” By 1676 this policy had failed so many times that it was no longerattempted. Only with the coming of the American Revolution did the political authoritiesre-institute price controls, and the immediate result was the devastating shortage of goodsat Valley Forge: Percy L. Greaves, “From Price Control to Valley Forge 1777–1778,”TheFreeman(February 1972). On the development of Puritan economic thought, see North,Puritan Economic Experiments(Tyler, Texas: Institute for Christian Economics, 1988).

2930Coogan, p. 33⒏Ibid., p. ⒕

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reserves behind the claim, then the bill is counterfeit.31

Coogan saw the truth of this analysis when it is applied to the banking world. If banks, through the actional reserve method, issue bank notes or credit demands above the actual quantity of gold and silver held in storage, they are practicing the. But, in her view, even private backed notes must not be permitted to circulate as currency. In fact, the original public error was to permit private bank notes to circulate as money, even when backed by 100reserves32 ! The State’s notes, however, are to be unbacked notes, and these are to be the only lawful money to circulate in society.33 In other words, honest, 100% reserve notes, which are a form of private property, are made illegal, and the State counterfeit notes are to be the standard of price measurement, the only legal money. This is anti-economics with a vengeance.

Money, meaning lawful (i.e., State counterfeit) money, is not built on confidence, she hastened to add. In fact, only the illegal money of today is built, as she put it, “3% on gold and 97% on ‘confidence,’ ‘courage,’ and other purely psychological and irrelevant factors.” 34 She continued: “We are dishonestly told that a money system depends upon ‘Confidence.’ This is the case under the existing scheme; but it is perversion brought down on us om centuries of deceptive practice.”35 Money supposedly must be built neither on public confidence nor on gold and silver. Gold and silver are not even to be used as coins; they are to be reserved for international payments alone, not for domestic purposes. “They are not necessary as bases for the issuance of domestic money. . . .”36 Money is based solely upon the imprimatur of the State. Lawful money must be “divorced om all metals.”37 There is to be no private coinage whatsoever: “No private individual should ever be allowed the privilege of creating and recalling money at will.”38 The right to own property in the form of money metals or IOU notes for these metals is hereby revoked. And this is put forward as if it were consistent with the principles of the Founding Fathers of our nation! It is not just a travesty of economics; it is a total rejection of political history.

31Murray Rothbard wrote: “Counterfeiting is evidently but another name for inflation

—both create new ‘money!’ that is not standard gold or silver, and both function similarly.And now we see why governments are inherently inflationary: because inflation is apowerful and subtle means for government acquisition of the public’s resources, a painlessand all the more dangerous form of taxation.” Rothbard,What Has Government Done toOur Money?(Colorado Springs: Pine Tree Press, 1964), pp. 27–2⒏

323334Coogan, p. ⒗Ibid., p. 29⒍Ibid., p. 29⒌

35363738Ibid., p. 10⒐Ibid., p. 25⒊Ibid., p. 24⒉Ibid., p. 23⒐

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State Monopoly Money

The State must have a total monopoly of all money creation.

What, then, is to prevent mass inflation? The government is not legally limited in its printing of money by the necessity of 100% specie backing. There should be no such reserves.39 The State is not limited, in Coogan’s view, by the confidence that people will have in the money, for lawful money (statist money) is not like regular money; it is not based on confidence.40 She based her whole system on the premise that only State-printed money is true money, a clearly preposterous historical fact, and also a theory refuted by Mises, Hayek, Hazlitt, and other ee market economists. Her faith was based completely on the hypothetical honesty of State bureaucrats, not on the truth of economic logic or the sanction of private contracts. Her hope was in the State, not private property.

Here is the most fantastic statement I have ever read in any piece of literature that professes to be conservative in orientation. It is almost impossible to take it seriously, yet it is presented as a statement of fact.

Another fear fostered by the money creators (in their efforts tostrangle money) is the fear very commonly held that once thegovernment starts to issue money there will be no end to it. Butlet us reflect upon this libel of the people’s own chosen representatives. . . . Statesmen would fill our Congressional Halls if themoney system were honest.41

All power to the absolutely reliable elected representatives of the People! They are above all suspicion. Only private bankers are to blame for government corruption, for sin in high places. They alone bear the responsibility for the evils of our age! Am I exaggerating? Make the money lawful, she argued, by turning its control over to the State, and “Corruption and ‘legal’ rackets would practically disappear. They existbecause we have a dishonest money system.42 ” Furthermore, we would have no more depressions, and “Poverty could be eliminated om the United States. . . .” 43 And to top it all off: “Were the money system honest, bribery could be practically eliminated.”44

3940Ibid., p. 24⒉Ibid., pp. 263–6⒋

41Ibid., p. 26⒏

42Ibid., p. 25⒍

43Ibid., p. 25⒍

44Ibid., p. 26⒋

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This is not economics; it is paranoia. It is also messianic. If conservatives have ever thought that Karl Marx was stark raving mad in his visionary promises for the communist society, they should re-examine the literature of this ostensibly conservative movement. All evil, for Coogan, is literally incarnated in the international bankers, just as Marx viewed bourgeois industrialists. These men cause depressions, all by themselves.45 Undoubtedly they can trigger depressions, but to charge them with the whole crime is absurd. Inflation of any kind, whether bank credit inflation or State Treasury note inflation, is the cause of depressions. Anyone doubting this need only read the first chapter of Murray Rothbard’s book,

America’s Great Depression46 , to see the truth of the statement. Governments can cause depressions just as easily as can the bankers, but this Coogan would not admit. Depressions are personal in her view; they have nothing to do with economic theory. This personalization of evil into a selected group is a denial of the basic Christian doctrine of the sinfulness of human beings as a species.47 Yet she went so far as to say that bribery could not take place if only statist money were in operation. 48 The whole idea is hardly worth serious refutation.

What is her idea of inflation? Her definition serves as the keystone for all the policies she presents: “Inflating is the act of increasing the money (demand claims) of a nation faster than the volume of consumer goods available for distribution can be increased.”49 This is in accord with her statement in Lecture No. 7 of Lawful Money Explained: “Arbitrary creation of new money as loans without there having been a previous proportional increase in the total quantity of goods and services for sale alters the purchasing power of all already existing money.” That is why she concluded earlier that “The total volume (numbers of money) should always be proportional to all existing wealth on sale” (No. 3). This definition is totally inaccurate, as I have explained. Money is the most marketable commodity.

45Ibid., p. 23–30.

46Murray N. Rothbard,America’s Great Depression(Princeton, New Jersey: Van

Nostrand, 1963). This is available as a ee download:http://mises.org/Rothbard/agd.pdf.

47See R. J. Rushdoony,The Nature of the American System(Vallecito, California: Ross

House, [1965] 2001), ch. 8: The Conspiracy View of History.”

48Coogan, p. 26⒋

49Ibid., p. 1⒚

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