From the PREFACE.
The following dialogue was intended to form part of a work entitled The Political Economy of Great Britain, the United States, and France, in the Use of Money: A New Science of Production and Exchange. As it would swell the book to too great a size for convenience, it is published separately. To some minds this form of arguing economical and monetary questions may be more agreeable than a didactic and formal one; and besides this, a comparison with prevailing opinions can be carried along at the same time. New ideas are thus presented in the most forcible manner possible, and those who offer them have some opportunity of being heard, by being found in company with those who can argue in favor of the old ideas. The dialogue introduces a skilled workman who is in search of work, who thinks the national banks ought to be immediately wound up because they are making money scarce, and their notes replaced by government issues. Absurd as this scheme really is, and as it certainly appears to most men who have any knowledge of practical affairs, some business men, thousands of laborers, skilled and unskilled, and some men who are well known as writers upon economical questions, support it. The minds of ignorant, and, in many instances, vicious, as well as ignorant men, are being filled with false ideas by traveling lecturers and speakers, in some parts of the United States, and there is no organized effort to counteract it. The spirit of destructiveness and Communism is attracted very naturally by such arguments, and the result may be the prostration of industry and commerce for years, by the indefinite postponement of a return to convertibility of bank and government debt now used as money. The dialogue introduces a writer who favors a government currency convertible into funded debt, the latter being reconvertible into currency at the pleasure of the holder. How the government is to loan this currency without turning banker, this writer and his brethren are unable to say, because they have not thought about that. The dialogue introduces also a writer of the prevailing school of economists, who thinks bank credits are likely to liberate gold from banking reserves, until finally, as " clearings " are extended from time to time, the gold required for reserve becomes a mere trifle, and that metal as well as silver is largely exported and sold, for use in barbarous or half-civilized countries. The same writer insists that there cannot be such a thing as overproduction, and that a banking, commercial, and industrial crisis is merely a matter of " over-trading " and " speculation." These economists argue their own case together when they agree, and when they do not, each for himself, in opposition to a banker who has adopted the ideas maintained in the book above referred to. This banker insists that all money is substantially one and the same thing, -- a process for the ex- change and distribution of the products of labor; that gold and silver are the most perfect form and kind of money, and that for all ratios of valuation and all equations of exchange between buyers and sellers, in order to have the true and real benefit which gold and silver are able to confer, a definite portion on short averages, of units of gold or silver, ought to form a part of the total number of units of money (whether units of bank or government debt constitute the remainder) in every ratio and equation. This result is obtained by a metallic reserve, varying in short periods only, from a definite ratio to bank-loans. This banker maintains the proposition that while natural inequalities of condition and of ability are essential to the progress of society and even to civilization, because without them there could be no loans and therefore no production on credit, yet by the uncertain degrees of economy of gold and silver, which a constantly variable banking reserve implies, production on credit is carried to such an excess as to bring about periodically crises which appear in banks, in commerce and in industry. Hence the attempt to establish a bank-note currency by the Act of 1844, in England, "varying as gold would vary," was utterly futile, because Adam Smith's law in respect, to bank-notes, -- that they ought not to exceed in volume the metal they displace, -- is equally applicable to all bank loans. The non-perception of this law, as equally applicable to the loans of all banks, and it may be the impossibility of carrying it out in respect to deposit-loan banks, have caused England and the United States much loss and suffering. Production is subject to a law which is paramount to money, -- the necessity of exchanging the products of labor. The coinage of silver is also incidentally discussed. A conservative banker is introduced, who believes in the doctrines of the economists of the day, but is ready to hear all sides, and anxious to learn the truth.