Socialized Money-Chapter VIII

CHAPTER VIII

Analysis of Provisions Essential to Operation
of This Socialized System, Together
With Their Social Significance

EFFECTIVE operation and protection of this socialized monetary system, after it has been established, calls for coordinated functioning of its indispensable parts—all of them being geared to the purpose of liberating society from non-social monetary servitude.

In order to preserve the power of stabilization, provision is made, first, for an exclusively national medium of exchange. This, in turn, is dependent upon the exclusion of gold and silver as money, and consequently their demonetization. Essential also to preservation of the power of stabilization is the provision that both issue and control of the medium, shall be solely in the government. It also follows, for reasons later to be stated, that in order to preserve all these powers there can be but one kind of major money (wealth certificates).

It should be clear that safeguarding the means of stabilizing the national price level is equal in importance to tariff protection by which the nation saves itself from commercial and industrial despoliation at the hands of every other nation.

Since, as previously pointed out, the medium of exchange is the natural and primary means thus to effect stabilization, it therefore follows that if the medium is not exclusively national, it cannot be controlled in the interest of the people. Consequently there must be excluded other mediums which are foreign to the centralized power of issue and control in the federal government.

There can be in the system neither an international medium from the outside nor a medium put out by minor jurisdictions from the inside. The provision for an exclusively national medium of exchange applies, therefore, without qualification, against issue of "money" of whatsoever nature by states or cities, or by corporations (banks), whose privileges in this respect must not conflict with the sovereign power of the federal government.

There also is wrapped up in the provision for an exclusively national medium of exchange both the sovereignty and the integrity of the federal government itself. Any condition which undermines the stability of the nation, in the same measure discredits the government in power, and sets in motion forces, orderly or violent, for its overthrow. In this connection, it is well remembered how, quite recently, international money and credits at command of financiers of other nations were so deeply intermixed with the financial and securities structure of the United States that a conspiracy involving wholesale withdrawals of gold temporarily upset the economic equilibrium of the nation. Incidentally, it may have had not a little to do with the subsequent retirement of the political party then in power.

THE USE OF THE PRECIOUS METALS as money ultimately will rest upon their fitness to serve a special purpose. Stripped of the fictitious value thrown about them by law, and having lost their distinction as selected forms of wealth, they must take their place with other commodities, of which nine-tenths at least are more indispensable to society than gold and silver.

This special utility lies in the desirability of certain metals—on account of the commodity value which they carry and also owing to their convenience in handling—for subsidiary coins. According to the provisions of this system, therefore, use of the precious metals as money will be reduced to a minimum, the silver half-dollar piece becoming the largest metallic money coined. Other subsidiary coinage will remain the same as now.

The commodity value contained in these subsidiary coins being inferior to their money value, there is removed the objectionable feature which attaches to major metallic money whose commodity as well as money value is established by law.

THE QUESTION whether the supply of certain metals shall dictate the value of all other commodities, having recently been decided negatively in so many influential quarters, it would seem that it is about ready for chronological classification with that other once mooted question as to the flatness of the earth.

The precious metals, however, should have recognition in the economy of the nation. They are not only important in the arts and sciences, but their recovery from primal sources seems to supply a means of satisfying the peculiar urge in the human makeup to prospect, adventure, and to dream in the anticipation of great riches to be had for the finding.

Therefore, this system, in recognition of the part gold and silver have played in monetary systems heretofore in use, provides for the maintenance of a "treasure chest" of all precious metals mined in the United States, so as to conserve this form of wealth to the nation. Propitiously timed, this concentration of precious metals might be transformed into objects of art composing a national exhibit.

WHILE THE EXCHANGE of commodities between peoples of the different nations is a natural and desirable relationship, to be fostered and developed along lines beneficial to all concerned, facilities to that end provided by commercial nations seem to have claimed attention secondarily to the purpose actually accomplished to facilitate the exchange of money and securities between international moneymakers.

The United States, thus opened up and made available, has been a particularly fertile field for "money farmers" of foreign countries. Their surplus wealth planted in our rich investment soil, having returned profit and interest manyfold, is repatriated to support the economies of other nations. In effect upon the United States this diversion of national resources has been little different from that of maintaining on foreign soil a host of pensioners and annuitants.

Provisions of this system, while encouraging the exchange of commodities between nations, are especially designed to discourage foreign participation in our rich natural resources by making less easy the conversion of international surplus wealth wrung from the people of other lands.

It hardly needs be emphasized that under this system the nation will have no need for foreign "capital." In fact, socialized money in circulation would be so much a part of the national economy that inflow of international "loans" and "capital" would be offensively redundant.

GOVERNMENTAL exchange guaranties, facilitating the exchange of commodities between nations, as provided for in this system, could be relied upon adequately to serve all legitimate export and import requirements. These governmental guaranties, affecting transactions between the people of one nation with those of another, would be based upon parities of money values in the respective nations independently arrived at with each nation.

For instance, the respective governments would guarantee to their nationals that, within a given period, a certain stated value in a particular national currency would be the equivalent of a certain stated value in its own. The governments would "clear" international trade by providing national currency of the value agreed upon to cover all transactions coming within the restricted agreement with each nation.

Exchange for speculation in money, investment in securities, or loans of "capital" between the peoples of the United States and other nations would not come within the provisions of these guaranties.

Is it not about time that the peculiar type of Greed afflicting each nation should be quarantined and confined within such nation? Better internationalism, it would seem, should not facilitate the transmutation of dollars into pounds or francs, or pounds and francs into dollars, when the mechanism thus set up is used to impoverish the many and to enrich the few.

WHERE THERE ARE too many kinds of money in a monetary system, there is always the possibility that one, considered better than the others, will be driven out of circulation. This phenomenon is known as Gresham's law, recognized about three centuries ago when Sir Arthur Gresham announced discovery of the truth that bad money drives out good money, but that good money cannot drive out bad money.

The application of this law extends to any and every kind of money circulated in the same system. It applies not only to the weight and fineness of gold and silver, but also to any issue of currency that may be considered inferior.

Within the present year this law was given a fine demonstration right here in the United States. Millions of dollars in gold were driven into hiding in private vaults by the ten other kinds of national money, and the government was able to dislodge part of it only upon threatening the offenders with prosecution.

With stabilized wealth certificates the only major money of this system, there will be no chance for one kind of money to drive another kind of money out of circulation.

It should now be plain why a monetary system, depending upon the inviolability of its medium of exchange to effect stabilization, should not be vitiated by the inclusion of more than one kind of major money.

THE SPECIAL PRIVILEGES which the monopolists of money and credit have, from the very first, enjoyed at the expense of society, also must be swept aside in the interest of this socialized monetary system. The continued exercise of these special privileges is incompatible with (1) an exclusively national medium of exchange, (2) the sole right of issue and control in the government, and (3) major money constituted only of stabilized wealth certificates. All of these provisions are essential to stabilization under this socialized system. Therefore, the Federal Reserve as now constituted would have to be reorganized and its branches converted into regional extensions of the federal treasury, thus compelling banks to pull out and organize anew under the banner of business enjoying no special privilege. There would result, as a consequence, the complete divorcement of the monetary system of the nation from banking participation.