Book Reviews

The real subject of Mr. Ricken backer's worry is something differ ent. What he is profoundly con cerned about is the inability of the modern breed of politician to realize that Gresham,'s Law, which says that bad money always drives out good money, is just as true and just as inexorable in its workings in our neo-Keynesian days as it was in the time of Good Queen Bess. The reason why Mr. RickenJOHN CHAMBERLAIN p<,/ <L OF SIL VER COINS backer undertook a study of what has happened over a period of two decades to our silver currency is that it offers a classic example of Gresham's Law in operation. This is a witty book about the bungling of so-called statesmen and self styled Treasury experts who tried to go on coining silver for mone tary use at unrealistic ratios while the hoarders were snapping it up. It is the story of how three Ad ministrations, those of Dwight Eisenhower, John F. Kennedy, and Lyndon Johnson, presided over the collapse of our subsidiary coinage without betraying even the most elementary acquaintance with the law of supply and demand. Silver coins started to vanish in the nine teen fifties. Yet even as late as 1965 an Assistant Secretary of the Treasury was still protesting that "our chicken-feed problems," mean ing our troubles in' keeping silver in circulation, would soon be over.

62 THE FREEMAN June The whole fantastic record is summarized by Mr. Rickenbacker in a pithy paragraph that says the Treasury "had to lose three quarters of its free reserves (of silver) before it awoke to the ex istence of an abnormality. Its im mediate action was based on a faulty interpretation of the cir cumstances (first the numisma tists were guilty; then the vend ing machines; then economic growth). Its subsequent actions were inadequate and delayed. It failed to anticipate the price rise in silver after it withdrew from supplying half of domestic indus trial demand. . . . Every official forecast was wrong. Douglas Dil lon's famous prophecy that we have enough silver to last into the 1980's, and almost any statement by poor Mr. (Robert) Wallace, will serve as samples of the unin formed, haphazard, or deliberately deceptive pronouncements that have characterized the Treasury in recent years."

Ample Warning, No Response The real joke on the U.S. Trea sury is that this reviewer, who is the veriest neophyte in coinage rnatters, is hailed as a prophet of the collapse of our silver coinage by Mr. Rickenbacker. Away back in 1955 I undertook to do an arti cle on silver for Barron's Finan cial Weekly. I discovered, by talking with some real experts in the smelting business, that the indus trial uses of silver were increas ing every year. Steadily increas ing supplies of silver were needed for photographic work, for elec trical uses, for brazing and solder ing, for batteries, and for vessels that were corrosion-resistant. Fur thermore, I learned what every mining authority has known for years, that the production of silver is mainly a by-product of the min ing of other metals. The circum stances of its new industrial uses and its limited supply could mean only one thing : that in a short time there wouldn't be enough to go around for coinage purposes at the existing relationships between silver, gold, and the paper dollar.

So I set it down in Barron's more than ten years ago that silver was on the way toward being demonetized. Mr. Ricken backer is good enough to quote me at several points in his book. But I was only a second-hand prophet; I was merely reporting, as an eco nomic journalist, what at least ten knowledgeable metal experts within a stone's throw of Wall Street were saying about silver. Incredibly, the U.S. Treasury peo ple were to let a full decade go by without listening to the metal experts for themselves. Mean while, I had completely forgotten that I ever wrote the article for 1[J(j(j DECLINE AND FALL OF SILVER COINS 63 Barron's. It was with quite a start that I rediscovered my own words in Mr. Rickenbacker's book. The Vital Message Well, the incompetence of gov ernment need never surprise any body. Luckily, as Mr. Ricken backer points out, precious metals are not needed in a subsidiary coinage. We do need, however, a Treasury Department that knows something about Gresham's Law.

The behavior of the Treasury in the prolonged farce of the vanish ing silver dollars and half·dollars is rather terrifying proof that no body in Washington has any savvy about the proclivity of people for hoarding valuable items when adulterated money is flooding the market. Says Mr. Rickenbacker: "We cannot bid farewell to silver with out profound foreboding." For, in its "minor fashion," the disap pearance of silver coins has meas ured "the speed of our monetary debauch." Now that the silver quarter has been replaced by the cupro-nickel quarter, which looks like "a salami sandwich made with moldy bread," the United States is on what amounts to "a com pletely fiat basis." For the "first time since 1792," so Mr. Ricken backer says, "we are on a money ba.cked.by nothing better than the politician's pledge. The stage is set for the final inflationary blow off if that is what our money man agers desire . . . Our leaders have not learned from history." (Mr.

Rickenbacker chooses to ignore what he describes as "the trivial connection between gold and that 20 per cent of our money supply that is composed of Federal Re serve notes.") Rampant Inflation Mr. Rickenbacker is fun to read because of the wit and elegance of his sentences, which are always exquisitely tailored. But the fun becomes macabre when one real izes that Mr. Rickenbacker is in tensely serious in his warning to his readers. He is striving, by playing up the symbolism· of the silver story, to tell us that infla tion itself is nothing more nor less than a dramatic unfolding of Gresham's Law as it is applied to values in general. What happens, in an inflationary blow-off, is that bad money tends to drive every thing of value into hiding along with any remaining supply of good money. As fast as bad money comes into the hands of people, they trade it for anything at all that will serve as a "store of value" while the inflationary blitz continues.

The inexorable working of Gre sham's Law applied to values-as-a whole causes people to hoard land, 64 THE FREEMAN June food, clothing, hardware, common stocks, or anything else they can get their hands on. Gresham's Law, in short, applies to every thing of value in the world. For, in a time of inflation, anything of value is potential money. (See the use of cigarettes as money in de feated and occupied· nations as an example.) Wooden Nickels is Mr. Ricken backer's first book. He has a great talent for economic clarification and for the orderly marshalling of pertinent evidence. Now that he has paid his respects to the story of silver, one wishes he would go on to tell us what is happening to gold, which is a more important matter. ~ THE FREEMAN on Microfilm. An agreement has been entered with University Microfilms to make available to libraries and others who may be interested current as well as back issues of The Freeman since January 1956. Inquiries should be directed to University Microfilms, 313 N. First Street, Ann Arbor, Michigan 48107.

When we all take in each other's washing Utopia will have arrived YET'S tax the whole country so New Yorkers L won't have to pay as much as the true cost of their train rides. Let's all pay more for our break fast coffee so the rich planters of South America will stay rich and won't have to pay the taxes you pay. Let's continue to forgive France the 4 billion dollars we lent them almost 50 years ago (plus the billions we have given them since) so they can drain away our gold. Let's all continue to pay more for gasoline taxes to build super highways for states who refuse to build their own. Let's all keep on paying more for food than it costs to raise it, so some farmers can be paid billions they don't earn. Let's continue to pay billions to "veterans" who never saw a battle. Let's keep on paying more for our homes so building trades unionists can continue to get as much as $30 for a 6 hour day.

Who's kidding whom? If we all did our own work, paid our own bills instead of insisting others pay them, we'd get mote done, and save the billions of dollars every year in handling charges - charges that have so boosted our debt that interest alone is more than 11 billion dollars a year. Sharing the wealth (i.e., socialism) is nothing but sharing the poverty, and don't let any poli tician steal your vote by telling you differently. Cut-off and grooving tools manufactured by Manchester Tools, a Division of Warner & Swasey, solve many difficult metal-cutting problems. YOU CAN PRODUCE IT lETTER, FASTER, FOR LESS WITH WARNER & SWASEY MACHINE TOOlS, TEXTILE MACHINERY, CONSTRUCTION EQUIPMENT SELF-HELP • It has been often said that power corrupts. But it perhaps is equally importantto realize that weakness, too, corrupts. Power corruptsthe few, while weaknesscorrupts the many. Hatred, malice, rudeness, intolerance, and suspicion are the fruits of weakness. The resentmentof the weak does not spring from any injustice done to them but from the sense of their inadequacy and impotence.... Our healing gift to the weak is the capacity for self-help. We must learn how to impart to them the technical,social, and polit ical skills which would enable them to get bread, human dignity, freedom, and strength by their own efforts.

ERIC HOFFER, The Ordeal of Change William Henry Chamberlin 3 Leonard E. Read 9 Willard M. Fox 12 Learned Hand 18 Henry Hazlitt 20 Donald Walter Shorock 36 Clarence B. Carson 38 John F. Gummere 50 William E. Peterson 52 JULY 1966 Constitutions Shou Id Say No . "Creative Federalism" . How to Finance a War . The Spirit of Liberty Income Without Work . An Admission of Failure . The Flight from Reality: 22. Divide and Conquer The Independent School The Businessman - Hero or Villain? Books: Of Men and Not of Law Other Books . John Chamberlain 60 63 Your savings earn 4.970/0 when held one year at current rate of 4.85% I paid semi-annually. To: George Ross, Department FM, Coast Federal Savings and Loan Association 9th & Hill Streets, Los Angeles, California 90014 D Please send me the free brochures Name(s) --on "Law and Order." (Please Print) o Yes, I'd like to open a savings ac count. Enclosed is my check (or money order) for $ _ D Individual Account Street _ D Joint Account D Please transfer my account. City State Zip _ THE FREEMAN JULY 1966 Vol. 16, No. 7 I'" The vital function. of a Constitution is to place limits on the power of gov ernment, says William Henry Chamber lin, and the function of citizens is to know why p. 3 VI Behind the label of "Creative Fed eralism," Leonard Read sees a great deal of coercion p. 9 I'" It's almost impossible to win a war if the fighting men and materials are to be supplied by the next generation, suggests Willard Fox p. 12 VI The times commend repeating and remembering what Judge Learned Hand had to say about the "Spirit of Liberty" in the hearts of men ....p. 18 ,y; Henry Hazlitt explores and deplores the "new" idea of guaranteeing every one an income, whether or not he has tried to earn it p. 20 ", "Isn't an idea a failure if it has to be 'sold' to others by force?" asks this young man p. 36 ", And in this chapter of The Flight from Reality, Professor Carson ex amines the reformist tactic of "divide and conquer." p. 38 II"" The advantages of the independent school are explained by a man who "owns" one - or, at least, puts his trust there p. 50 II"" Dr. William Peterson, business econ omist, suggests that the businessman does a job, for himself, and for his cus tomers, that makes him neither a hero nor a villain p. 52 VI Lyman Garber's Of Men and Not of Law, ~ study of Supreme Court rulings since 1930, affords reviewer Chamber lain an opportunity to revert to the Constitution , , p. 60 VI The Reverend Norman S. Ream commends the several authors who would buck the socialistic trend in Your Church - Their Target ........ p. 63 Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.