Prosperity Strangled by Gold

The quantity doctrine, however, means that the value of the currency is a question of supply and demand, and everybody knows that to double or halve the supply does not halve or double the value, or have any other effect which is simple and direct. If it did have such effect spec ulation would not be what it is. 1 Leslie's Weekly, August 20, 1896. 141 142 THE FORGOTTEN MAN AND OTHER ESSAYS Mr. St. John goes on to argue that our population in creases two millions every year, on account of which we need more dollars; that the production of gold does not furnish enough to meet this need, and that, therefore, prices fall. This argumentation is very simple and very glib. Prosperity and adversity are put into a syllogism of three lines. But, if we can avert the fall in prices and ad versity by coining silver, it must be by adding the silver to the gold which we now have. "High" and "low" prices are only relative terms. They mean higher and lower than at another time or place; higher and lower than we have been used to. If misery depends on tencent corn we are advised to cut the cents in two and we shall get twenty cent corn and prosperity. Corn will not be altered in value in gold, or outside of the United States, and, as all other things will be marked up at the same time and in the same way, its value in other things will not be altered by this operation. When we get used to twenty-cent corn it will seem just as low and just as "hard for the debtor" as ten cent corn is now. Then we can divide by ten and get two dollar corn, by adding free coinage of copper. When we get used to that we shall be no better satisfied with it. We can then make paper dollars and coin them without limit.

Million-dollar corn will then become as bitter a subject for complaint as tencent corn is now. The fact that people are discontented is no argument for anything. The fact that prices are low is made the subject of social complaint and of political agitation in the United States. Prices have undergone a wave since 1850. They arose until about 1872. They have fallen again. They are lower than they were at the top of the wave all the world over. This fact, the explanation of which would furnish a very com plicated task for trained statisticians and economists, is made a topic of easy interpretation and solution in political conventions and popular harangues, and it is proposed to PROSPERITY STRANGLED BY GOLD 143 adopt violent and portentous measures upon the basis of the flippant notions which are current about it. But what difference does it make whether the "plane" of prices is high or low? If corn is at forty cents a bushel and calico at twenty cents a yard, a bushel buys two yards. If corn is at ten cents a bushel and calico at five cents a yard, a bushel will buy two yards. So of everything else. If, then, there has been a general fall, and that is the alleged griev ance, neither farmers nor any other one class has suffered by it.

It is undoubtedly true that a period of advancing prices stimulates energy and enterprise. It does so even when, if all the facts were well known, it might be found that capi tal was really being consumed in successive periods of pro duction. Falling prices discourage enterprise, although, if all facts were known to the bottom, it might be found that capital was being accumulated in successive periods of production. It is also true that a depreciation of the money of ac count, while it is going on, stimulates exports and restrains imports. But who can tell how we are to make prices always go up, unless by constant and unlimited inflation? Who can tell how we are to avoid fluctuations in prices or eliminate the element of contingency, risk, foresight, and speculation? It is also true that, although high prices and low prices are immaterial at anyone time, the change from one to the other, from one period of time to another, affects the burden of outstanding time contracts. Men make contracts for dollars, not for dollar'sworths. SeIling long or short is one thing; lending is another. Borrowers and lenders never guarantee each other the purchasing power of dollars at a future time. If the contracts were thus complicated they would become impossible. Between 1850 and 1872 the debtors made no complaint and the creditors never thought 144 THE FORGOTTEN MAN AND OTHER ESSAYS of getting up an agitation to have debts scaled up. The debtors now are demanding that they be allowed to play heads I win, tails you lose, and Mr. St. John and others tell us that they have the votes to carry it; as if that made any difference in the forum of discussion.

Increase in population does not prove an increased need of money. It may prove the contrary. If the population becomes more dense over a given area, a higher organiza. tion may make less money necessary. If railroads and other means of communication are extended, money is economized. If banks and other credit institutions are multiplied, and if credit operations are facilitated by public security, good administration of law, etc., less money is needed. If these changes are going on at the same time that population is increasing (and such is undoubtedly the case in the United States), who can tell whether the net result is to make more or less currency necessary? Nobody; and all assertions about the matter are wild and irresponsible. If it was true that an increase of two millions in the population called for more dollars, how does anybody know whether the current gold production is adequate to meet the new requirement or not? The assertion is arithmet ical. It says that two quantities are not equal to each other. The first quantity is the increase in the currency called for by two million more people. How much more is needed? Nobody knows, and there is no way to find out.

The silver men have put figures for it from time to time, but the figures rested on nothing and were mere bald as sertions. The second quantity is the amount of new gold annually available for coinage in the United States. How much is this? Nobody knows, because if an attempt is made to define what is meant it is found that there is no idea in the words. The people of the United States buy and coin just as much gold as they want at any time. Hence PROSPERITY STRANGLED BY GOLD 145 two things are said to be unequal to each other. when no body knows how big either one of them is. It may be added that it makes no difference how big either one of them is. How much additional tin is needed annually for the increase of our population? Do the mines produce it? Nobody knows or asks. The mines produce. and the people buy. what they want. The case is the same as to gold. We find. then. that Mr. St. John begins with a doctrine which is untenable; then he asserts a relation between population and the need of money which does not exist; then he assumes that this need is greater than the amount of new gold produced. although neither he nor anybody else knows how big either one of these quantities is. This is the argumentation by which he aims to show that prices are reduced and misery produced by the single gold stand ard. It is the argumentation which is current among the silver people. Not a step of it will bear examination. The inference that we must restore the free coinage of silver. to escape this strangulation of prosperity. falls to the ground.

CAUSE AND CURE OF HARD TIMES CAUSE AND CURE OF HARD TIMESl I T is an essential part of the case of the silver men that the country is having "hard times." The bolters from the Republican convention say, in their manifesto: "Dis content and distress prevail to an extent never before known in the history of the country." This is an historical asser tion. It is distinctly untrue. There is no such discontent and distress as there was in 1819, or in 1840, or in 1875, to say nothing of other periods. The writers did not know the facts of the history, and they made use of what is now adays a mere figure of speech. People who want to say that a social phenomenon is big, and who do not know what has been before, say that it is unparalleled in history. There has been an advancing paralysis of enterprise and arrest of credit ever since the Sherman act of 1890 was passed. The bolters say that "No reason can be found for such an unhappy condition of things save in a vicious mone tary system." The reason for it has been that the cumu lative effect of the silver legislation was steadily advancing to a crisis. The efforts by which the effects of that legisla tion had been put off were no longer effective, and it was evident that the country was on the verge of a cataclysm in which the standard of value would be changed. What man can fail to see the effect of such a fear on credit and enterprise? And with such a fear in the market, how idle it is to try to represent the trouble as caused by the fact that the existing standard was of gold, or of silver, or of anything else! Men will make contracts and go on with business by the use of any medium, the terms of which can be defined, understood, and maintained until the contract 1 Leslie's Weekly, September 3, 1896.