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tingly into the various elements which go to make up prices, so long as the imposition remains undiscovered. He thus not only destroys the healthy principle by which A and C conducted their business, but robs them of a portion of their property by successfully introducing between them a worthless medium of exchange in the shape of a book of credit or a paper note, and imposing upon them the absurd notion that somehow or other trade cannot be carried on without this paper foundation, an idea, the foolishness of which has only been equaled by the extent of its reception. B is thus held to have the power of creating money by a mere effort or determination of the will. He bas brought the community to believe this strange doctrine. The will is naturally determined by the strongest motive, and the motive is, in this case, the desire to earn money without labor. A and C thus place their good name and reputation in pawn or pledge, strike bands, and become sureties for debts. The discounting of a note, and the placing of the proceeds, as a deposit to the indorser's credit, is, in every essential respect, analogous to the payment of money for that note. The indorser can operate upon that deposit just as if it were so much solid gold. And the banker does not act consequently only as simple agent between buyers and sellers. The claims of ibe sellers are transferred to the banker, with this addition, that he holds both buyers and sellers as security for the payment of the note. For the time being, he takes the place of the seller of the goods, yet the debt is not more effectually discharged than if the seller had retained his note in his own hands and received the amount at maturity. So far as discounted paper is concerned, a banker is a dealer in debt, and not an agent between two parties. What may be said of a bank that discharges its debts by means of its credits, may just as truly be said of every one engaged in trade. The immediate work of a bank, therefore, is to furnish to the community a currency or a means of payment. The discharge of balances, or the payment of mutual indebtedness, is a different and more remote affair, which would go on independent of banks, and fare cheaper and better without them.
The public are receiving, every day, the most striking manifestations of the kind of work carried on by the magic books of credit. The magicians of London ever and anon exhibit, on a large scale, the ease and facility with which millions of her majesty's subjects in distant colonies can be robbed by a mere shuffle of the cards. Yet the public are hoodwinked still. Such things would not be tolerated a single day, did the tribute tbus imposed tax the patience of any other class than the laboring and agricultural. It is upon them the burden ultimately falls, and they are patient to endure.
What I have now stated as applicable to these parties will be found to be applicable to nations and communities at large. The true principles of our social and political economy are essentially and unchangeably the same all the world over and in every age. When we come to analyze the various systems which we see at work around us, the mind is arrested at a point beyond which it is neither necessary nor profitable for us to inquire. That point may be detined as the position from which the greatest good for the greatest number is attained. All inquiries which do not tend to this end, or which do not start from this point, are futile and unprofitable. It is by starting from false data that so many inquirers after truth are unconsciously led astray.
every negotiation for the sale of merchandise, the mind has reference to two things: the article to be sold and the money to be given for it. The price of an article points to the power of property to exchange for money. The long and persistent traffic in usury bas given rise to a false association of ideas with regard to price. Nothing is more common than to hear the price of money associated with money itself, or rather associated with a paper medium of exchange. The price of every article of trade is determined by the comparative influences of demand and supply. We do not sell barley for barley, nor wheat for wheat; neither can we sell money for money, nor gold for gold. Unless it can be shown that the laws which regulate the demand and supply of gold, and by means of which its production is attained and its circulation regulated, are, in nature, different from those which regulate the same movements in every other article of trade, we must believe that those principles which profess to regulate the circulation of money under the credit system are fallacious in the extreme. Yet no one has ever presunued to establish or recognize any such differences, simply because it is well known Done such exist. The quotations so often beard, therefore, of the socalled price of the currency in money terms, we may designate as the amusements or deceptions of trade, but they have nothing to do with its realities. The price of an article ever points, true as the needle, to its money value; the value of money ever points, as truly, to the price of commodities. No commodity can purchase itself, neither can money purchase money.
It is well known that the price of labor or rate of wages is determined by the rule of demand and supply. The same bolds good with respect to every article of merchandise. Wierever this great law meets with unrestricted operation perfect equity is secured. It brings the wants of society into immediate contact with the powers of labor and the resources of art, and exercises a vital energy over the whole human race. No drones are admissible into the hive of human industry. We take the world for our platform, and do not speak of mere sectional or particular interests. Society requires, in one way or other, either for the amelioration of its moral or physical condition, the full individual powers of each of its members. Only the aged and infirnı are discharged from this service.
The more full, perfect, and complete the labors of each individual
The mere increase of price does not, of itself, indicate the introduction
any element calculated to disturb or prejudice the means by which
Although it appears that the general tendency of increase of money is to increase prices, let no one suppose that, as thirgs are regulated at present, we are able to see this law exercising its healthy influences upon either the range or fluctuations of prices. The paper money here sieps
in to prejudice this law—that is, to prejudice it with regard to healthy influences, and more particularly with regard to fluctuations. Paper money is now, and has long been, the great instrument of exchange. Gold and silver are not permitted, therefore, to exercise their true and legitimate effects on trade and prices. And if we wish to inquire inio the range and scale of prices for a long series of years past, we must mainly cake into consideration that which bas had by far the greatest esercise in determining these prices, namely, the paper money. The proportion of force exercised in this manner by gold and silver, as compared with paper, may be estimated as one io five. For the same reason the influences of the supply of silver, as compared with those of the supply of gold, cannot now be distinguished, for the paper money acts as a medium of exchange in the place of both these metals. Prices being everywhere expressed in money, and interchange being effected by its means, it needs no argument to show that those prices must be regulated, or rather expressed, other things remaining the same, by the amount of money in circulation used as a medium of exchange. If money, for example, increases ten times faster than population, prices will in general correspondingly increase. The rate of increase of population, as compared with the rate of increase of money, is perhaps the most important of all elements in determining prices. Bank deposits, the proceeds of discounted paper, do not appear to exercise any appreciable etfect. Pure barter, also, does not seem to have any effect upon the prices of commodities, that is, in a state of society where money largely circulates. The probability is that nothing can so operate except what is tangible and passes into the hands of the community, either real money, or spurious money which discharges the functions of irue money.* We cannot hope, in inquiries of this kind, where so many ditlerent intluences are at work, to attain to any thing more than a mere approximation to the truth. Neither can we expect, under a credit system which gives rise to and fosters all sorts of fluctuations, excitements, and speculations in the market, to comprehend in any great measure the effects which increase of money would surely exercise upon prices under a bard cash system. It is obviously absurd to set up an artificial credit systein, with extensive powers lodged in the hands of corporations of contracting and expanding the currency of a whole nation, merely as self interest or policy may dictate, and then to tell us that the operations of such paper institutions present to us the natural and simple movements of the circulation. The fluctuations and contractions in the currenos, now so regularly witnessed, are not to be traced to any absolute scarcity or plenty of money. These results are chargeable mainly to the existence of debt, and to the ebbings and flowings of that confidence with which this debt must ever be associated. Debt creates a keen and never failing demand for money; and should any circumstances arise to call forth universal demand, or shake contidence in credit, or power of borrowing, the contractions in the currency
* Since this was written, Mr. Carroll has an article in this Magazine on the Congressional Morement in the currency Question "which. I trust. its readers have all ca elully perused. Nr. 4 arroll differs from me in opini n as to the influence borne by deposits upon pric s. He cunsiders that all bank deposits exercise precisely the same influence as outside currency. It seems difficult indeed, from the nature of the case, to come to any other conclusion, Still, it seems to me that bank deposits bave not, in effect, exercised this power else we should have seen prices still further greatly augmented. The wbole subject of the infinence of tbe currency upon priees is one of very great importance. It cannot, however, be brought to any satisfactory issue independent of the usury question, for debt is the main element in the disturbance of prices.
which thence follow serre only to aggravate these symptoms. Hence the evils of these fluctuations cannot be charged to the currency itself, but to the improper use which is made of it. For, be it observed, these fluctuations and contractions have a bearing upon the prices of commodties only in so far as they originate in debt. They point directly to the hire of loans, not to the prices of commodities.
The tendency of increase of money is increase of all prices. This, we say, is the general tendency of increase of money; but this circumstance cannot of course exercise the same effects equally on every article of trade. The particular price of any article at any given moment depends upon demand and supply. The scarcity of articles in general use will enhance their price--the scarcity of demand will lessen their price. Many different elements enter into competition before the particular price of any article is established, and it may be a difficult matter, at all times, to trace their varied operation. Still, these may ultimately be all reduced, with regard to fixing a price, to the unfailing rule of demand and supply.
These general remarks may perhaps prove suggestive of further thought in connection with the subjects treated of. The whole has a highly iinportant bearing upon the proper consideration of the export and import trade of the country, regarding which we may at a future period have an opportunity of making some few observations. We now proceed to the more immediate object of inquiry contemplated in this article, namely, the effects of usury, or lending on increase, on the prices of merchandise as established by the laws of demand and supply. We think we will be able to show that the tendency of this system, with regard to prices, or rather with regard to the interests involved in the matter of prices, is evil and pernicious. There are many side issues here dependent, all exercising more or less pernicious influences on trade. But we propose to confine our attention simply to the effects borne by usury on prices. We discard, then, from our view, for the present, the intiuences which the mere increase of money bears upon the advance of prices.
The proposition which I advance is this : that wherever usury is exercised, it establishes, with regard to commodities, a code of prices beyond that which the consumer onght in justice to pay; and, with regard to wages, establishes a rate lower than the laborer and artisan ought to rereceive; or, in other words, it takes, without recompense, a share of the labors of community. This is the invariable tendency of usury, its last and one of its worst results, and here it persistently “ bites," although paper money is the offspring of the usurious spirit, and indicates that spirit very fully developed, yet the evils which I now point out do exist, and would exist, independent of any such outgrowth as a paper currency; The establishment of all banks on a hard cash basis would certainly tend very powerfully to arrest, perhaps absolutely restrain, all commercial panies, but the more serious evils pointed out in this paper as the result of
usury would exist as before, and exert undiminished force. The paper money must be classed simply among the higher masterpieces of imposition and fraud. But the usury, or lending of money on interest, whether paper or gold, leaves its blighting effects persistently, daily, and without abatement on every industrial employment.
It will be admitted by all that the usurer is paid by somebody for the use of his money. The matter is to find out where this tax particularly falls, or in wbat manner it is taken out of the pockets of the community.
Let us suppose that two individuals, placed in about the same relative
position, are about to begin business in the manufacture of steam engines. The one has in hand $40,000 of his own which he invests at once in his business. The other has no money of his own to begin with, but by granting to the money lender some sort of security, he borrows the $40,000 at say eight per cent per annum, which he similarly invests. The credit man is loaded at once with a yearly tax of $3,200, and he looks to no other source than his business to yield the means of paying that tax. It becomes a continued charge upon the business in which he is engaged, and must be paid. There are only two ways by which he can make this interest forthcoming. He must either add the amount to the price of the engines, or deduct it from the wages of his laborers and artisans. There can be no doubt that ordinarily both the consumer or purchaser and Jaborer or artisan experience the effects of this tax upon their industry, though they may fail to appreciate it or trace it to its
The cash man, on the contrary, having no such tax to meet, is not only enabled to sell his engines, if he chooses, at a lower price, but to afford his men a better rate of wages. He is, in every way,
enabled to carry on his business in a more satisfactory manner. We do not of course perceive, as the result of this system, two different scales of wages established in manufactures, or a cash rate and a credit rate. The current rate of wages, like everything else, is determined by demand and supply, and the effect of the mere demand of the cash and credit manufacturer will be distributed equally over both businesses. It would be possible for the cash man either to seil the engines lower or to pay bis workers better wages by an amount equivalent to that which the credit man had to pay for the borrowed money. Or he might hire in more laborers than the credit neighbor and thus produce more material for the same money and reap all the benefit himself. The operations of the cash and the credit manufacturer have a mutual action upon each other in determining the price. As a general thing, cash manufacturers will reap a certain advantage in the impetus given to enhanced prices by the great number of credit manufacturers. IIad these two individuals begun business exclusively on their own means, the current price of their manufactures would have been determined mainly by the rules of demand and supply, the consumers and workers would have been benefited in general to the extent of the $3,200 per annum, and the credit manufacturer would, in every aspect of the case, have been in a better condition.
It is worthy of note, also, that the collateral security, whatever that may be, given by the credit manufacturer, is loaded with a double risk : that which ordinarily and necessarily attaches to business of all kinds, and that which is imposed by the obligations of debt.
Let us now look at the case of imported goods. The importer who buys his goods in Britain, buys them from a wholesale merchant who bas purchased them with borrowed money from a manufacturer whose looms have been moved by borrowed money. That importer himself imports them on borrowed money, in bottoms moved by borrowed money, and sell thein in this country to traders, many of whom are also sustained by borrowed money. If we calculate the various taxes thus heaped upon the same goods, and the additional rates imposed to cover the losses and bad debts incurred to such an extent under the credit system, we are probably short of the reality in stating that imported goods generally are enhanced through usury twenty-five per cent ere they come into the