There is, however, a theorem which applies to all money, but which was recognized long before Gresham's time--although it has been erroneously called an "extension" of the law or theorem of Gresham.

That theorem is this: If, in any country, there are two forms of money, each of which is a full legal tender, and one of which can be obtained with less sacrifice than the other, the one requiring the least sacrifice will be the cheaper, and if the unit of that cheaper money will perform in every respect the same function in the payment of debts and settlement of all obligations that can be performed by the dearer money, then, for obvious reasons, the cheaper money will come into universal use, and the dearer money will disappear. But it does not follow that the cheaper money is bad money nor the dearer money good money.

The best money is always the money of the contract, that is to say a money whose dollar, whatever it may be made of, is equal in value to the dollar of the contract. If the money of the contract is the cheapest money, then that is the best money, that is the honest money, and that is the only tolerable money.

If that be the sort of "cheap" money that drives out the dear money, then manifestly the dear money is bad money.

A distinguished official of the Government, who was before a committee of this body the other day, insisted that the proposed Treasury notes should be redeemed in the "best money." I asked him what was the "best money." "Why," he said, "the money that is worth the most." Now, it strikes me, Mr. President, that if you have borrowed a dollar, and, through a badly regulated money-system, are made to pay a dollar worth 25 per cent. more than the dollar you borrowed, you are not paying the best money, but the worst money; not an honest dollar, but a swindling and dishonest dollar.

THE CREDITORS' DEMAND FOR THE "BEST MONEY."

The creditors tell us that all they want is "good money." They and their friends glibly insist that all obligations must be paid in "the best money." This is the delicate and plausible euphemism resorted to in order to gloss over and, if possible, hide from the world the odious and repulsive fact that what the creditors always want is the _dearest_ money--the money that costs the people the most sweat and toil to obtain and which, as time pa.s.ses, grows dearer and dearer.

This cry for "the best money" is at last beginning to be recognized for what it is--the cunning device of creditors to "catch the conscience" of the people and play upon the sense of fairness that characterizes the great ma.s.s of mankind. These interested parties affect to believe that gold is, by nature, the only money metal, ignoring the fact that until silver was displaced by hostile legislation it was, and for four thousand years had been, the princ.i.p.al money metal of the world. But they will no longer be permitted to hide their sinister purpose under the cloak of a demand for the "best money." The ma.s.ses of the people are aroused on this subject and are beginning to understand it.

According to all fair canons of construction the best money should be and is a money of unchanging value, a money that exacts from the debtor the same amount of sacrifice that he bargained for, and which is all that the creditor is equitably ent.i.tled to receive. In other words, the money of the contract, not a money whose exactions are increasing at the rate of 2 per cent. per annum. As McCulloch says, debts being stated in dollars and cents, it is not possible for the creditor openly to augment his debtor's obligation by changing the figures of the debt.

But, Mr. President, while they can not change the figures of the debt, they are enabled, by a crafty manipulation of the money-volume, to do that which, to the debtor, means the same thing; as the following story will ill.u.s.trate:

A usurer of the coa.r.s.er type had lent $10,000 on a neighboring farm, for which amount he took the farmer's note, secured by a mortgage on the property. He coveted the farm, and in his anxiety to secure it took his banker into his confidence. He informed the banker that he wanted to get possession of this farm, but it would bring $15,000 under the hammer, and he did not care to pay so much for it. "I have a subtle chemical,"

said he, "by which I can obliterate from the note and mortgage all trace of the rightful amount ($10,000), and that done, I can insert $15,000.

Then, with the genuine signatures on the note and mortgage I can bring suit, and as the farm will not bring more than the face of the note, I shall succeed to the property."

His friend, the banker, however, advised against this course, which he characterized as not only dishonest, but vulgar, and as subjecting the perpetrator of the act to serious penalties. "Honesty" said the banker, "is the best policy." "But," he continued, "I can suggest a plan by which you may accomplish the same end without running counter to law, or the views of society. Why not join our propaganda in advocacy of 'honest money.' Gold is decreasing in quant.i.ty, and as the world has been ransacked for it in vain, it is likely to continue decreasing. If we can strike down the twin metal, silver, and devolve the entire money function on gold, it will double the purchasing power of money. Then the foreclosure of your mortgage will be sure to take your neighbor's farm, and probably leave him in your debt besides. Instead of being punished for this, you will receive the plaudits of the 'best society' for the _finesse_ you have displayed and the firm stand you have taken in favor of honest money, and you will take high rank among 'the wisest and most conservative of our financiers.' If your neighbor makes any objection to your action, you may be able to secure his incarceration as a lunatic, but if not, he will come to be regarded in the community as a dishonest 'crank' who wishes to pay his debts in a depreciated money; for it is the constant and a.s.siduous care of our guild to teach that only the dearest money, that which is the most difficult for the laborer, the farmer, and the mechanic to get, is honest money, and the dearer it is the more honest it is."

ALL MONEY SHOULD BE LEGAL TENDER.

To be of the fullest service to civilization whatever medium is used to do the work of money should have full money power; that is to say, it should be a legal tender. It is not sufficient that it will satisfy the demands of the Government for taxes.

Whatever is given out by the Government in payment for services rendered (and there is no other way by which payments can be made from the Treasury) should carry with it to him who has rendered the service and receives the payment, the absolute a.s.surance that in any need, or in any contingency, it will serve him as money. There is no other means by which society can be saved from the effects of panics and monetary crises.

With a watchful and intelligent regulation of the money volume, and with the legal tender function attached to everything that is in use as money, and doing the money work, so that it will serve as a universal solvent, panics will be impossible. Under present conditions when panics come, credit money--money not endowed with the legal-tender function, which, under ordinary circ.u.mstances, has always been accepted, is refused, and thousands of millions of dollars' worth of property have been confiscated by creditors, because of the scarcity of legal-tender money. As time advances and the method of doing business on credit becomes more and more extended, the more palpable it becomes that society can preserve itself from these periodical convulsions only by broadening, under proper regulation, the legal-tender basis on which, in the ultimate a.n.a.lysis, all business rests.

MONEY A MEASURE OF VALUE.

There is nothing upon which the prosperity and happiness of a people so much depend as on the integrity of their measure of values.

It is universally admitted that after the making of a contract requiring future delivery of a specified number of pounds, bushels, or yards of any commodity, it would be subversive of all equity and justice to change the capacity of the measure const.i.tuting the foundation of the contract. These measures, to be just, must remain unchanged. But how infinitely more important is it that money, which is the measurer of all other measures, should itself be unchanged? Of what avail is it that the subordinate measures remain intact while this, the supreme measure, into which all others are finally resolved, is constantly changing? Its "value" is but another name for its purchasing or measuring power. In the case of all time contracts, therefore, any change in the value of money works a destruction of equity, and one of the first objects of society should be to maintain and enforce equities at all times and in all places. This, so far as money can effect it, can only be done by an intelligent regulation of the volume in circulation.

In a note to his edition of Adam Smith's "Wealth of Nations," (page 502) Mr. J. R. McCulloch says:

Money is not a mere commodity, it is also the standard or the measure by which to estimate and compare the value of everything else that is bought and sold, and if it be, as it undoubtedly is, the duty of Government to adopt every practicable means for rendering all foot-rules of the same length, and all bushels of the same capacity, it is still more inc.u.mbent upon it to omit nothing that may serve to render money, or the measure of value--a measure which is undoubtedly of the greatest importance--uniform or steady in its value.

Though a measure of value, money is a much more complicated instrument than a yard-stick, pound weight, or bushel. Were it not so, a child could fix value with the same precision as an adult.

As value resides in human estimation, it will frequently vary as to the same object. An intending purchaser may have one notion of the value of an article, an intending seller another. Money, therefore, is a measure of value in the sense that it is a measure of the average human judgment--from which results price. As Mr. McCulloch says, no means known to science or art should be left untried to keep the value of money unchanging.

When a man promises to deliver money or makes any time contract, he makes a mental calculation as to what amount of property, or of the product of his labor, will enable him to meet his engagement. If he be a farmer, raising wheat, there pa.s.ses through his mind the sacrifice and toil necessary to raise it, and the quant.i.ty he can raise; if a cotton manufacturer the cost of spindles, of looms, and steam-engines; the wages of labor and interest on plant.

I knew a cotton manufacturer who wanted $10,000. His business was good.

He was sober, honest, and industrious; had a thorough knowledge of his trade; managed his employes himself, and took the greatest pains to conduct his business on the strictest business principles. He wanted the money to make some improvements in his factory. He knew how many spindles and looms he had; how much could be done with a pound of cotton, how much it cost, and how much each spindle and loom would do.

He said to a capitalist, "I know all about cotton spinning and weaving, and do not know anything about this thing called money, but I want $10,000 of it." Said he, "My cloth is worth 10 cents a yard; it sells at that rate in unlimited quant.i.ties by wholesale; n.o.body can make it any cheaper; but I am not working a gold mine; I am not manufacturing legal-tender paper money, and the only way I can get money is to swap my cotton cloth for it. I will give you my note for 100,000 yards of cotton cloth, which will be equal to $10,000, and will pay 2 inches a yard each year as interest."

This was satisfactory to the capitalist, and the note was made, signed, and delivered accordingly, and the improvements were made in the factory.

During the year everything went smoothly; the spindles and looms worked well, repairs to machinery were light; cotton had been bought at proper rates; and no improved processes had been discovered or applied in the production of cotton-cloth. There was no hitch in any direction.

At the appointed time, the creditor called for his cloth. "I am ready,"

said the debtor, "to pay the hundred thousand yards of cotton cloth, with interest." When he came to measure it off, however, he was astounded to find he was short. Some painful suspicions crossed his mind. It seemed as though somebody had either robbed him of cloth, or else he had not manufactured as much of it as he had supposed. There did not seem to be so many yards of the cloth as there ought to be. He knew he had used the same number of pounds of cotton that it had been his custom to use for 100,000 yards of cloth and for 200,000 inches of cloth in addition; still, there was no denying the fact of the shortage.

He measured it again and again, and had finally to admit that he was unable to keep his engagement. This was a source of great distress to him. He could not sleep that night. But, the creditor being importunate, the cotton manufacturer next morning borrowed enough cloth from the proprietor of a neighboring factory and paid his obligation. But, not understanding how his carefully made plans had failed, and in order to avoid similar mistakes in the future, he had an examination made of the yard-stick and found that instead of being 36 inches long the yard-stick he had used was 40 inches.

In talking the matter over with his neighbor, the cotton manufacturer said: "I have been swindled; they 'rung in' on me a lengthened yard-stick, by the measurement of which I have paid my debt, and I have therefore paid in reality more than I contracted to pay."

"Well," said the friend, "I do not see that you are any worse off than I am. I borrowed as much as you did, and at the same time; but I agreed to pay my debt in money, and gave my note for $10,000 with interest. The increased command over cloth acquired by the dollars I have had to pay, caused by the demonetization of silver, has juggled me out of as much cloth as you have been juggled out of by the lengthened yard-stick. But you have one recourse; you can put into the penitentiary the man who 'rung in' the lengthened yard-stick on you, while the increase in the value of the dollar which I have paid has been effected in the name of the gold standard and honest money, and leaves me without recourse."

In its ultimate a.n.a.lysis, money is the yard-stick, the bushel and the pound weight of commerce.

When you shrink the volume of money, and so increase the measuring power of the dollar, you lengthen the yard-stick, enlarge the specific gravity of the pound and the cubical content of the bushel, in violation of all equities.

It is utterly impossible to secure a proper regulation of the money volume with gold alone, the yield of which has declined from an average of $130,000,000 a year between 1851 and 1873 to $105,000,000 a year between 1873 and 1889.

THE VALUE OF MONEY FIXED BY THE COMPEt.i.tION TO GET IT.

Everybody admits that the value of all other things is regulated by the play against each other of the forces of supply and demand. No reason has been or can be given why the value of the unit of money is not subject to this law.

WHAT IS THE DEMAND FOR MONEY?

The demand for money is equivalent to the sum of the demands for all other things whatsoever, for it is through a demand first made on money that all the wants of man are satisfied. The demand for money is instant, constant, and unceasing and is always at a maximum. If any man wants a pair of shoes, or a suit of clothes, he does not make his demand first on the shoemaker, or clothier. No man except a beggar makes a demand directly for food, clothes, or any other article. Whether it be to obtain clothing, food, or shelter--whether the simplest necessity or the greatest luxury of life--it is on money that the demand is first made. As this rule operates throughout the entire range of commodities it is manifest that the demand for money equals at least the united demands for all other things.

While population remains stationary, the demand for money will remain the same. As the demand for one article becomes less, the demand for some other which shall take its place becomes greater. The demand for money therefore must ever be as pressing and urgent as the needs of man are varied, incessant, and importunate.

WHAT IS THE SUPPLY OF MONEY?

Such being the demand for money, what is the supply? It is the total number of units of money in circulation (actual or potential) in any country.

The force of the demand for money operating against the supply is represented by the earnest, incessant struggle to obtain it. All men, in all trades and occupations, are offering either property or services for money. Each shoemaker in each locality is in compet.i.tion with every other shoemaker in the same locality, each hatter is in compet.i.tion with every other hatter, each clothier with every other clothier, all offering their wares for units of money. In this universal and perpetual compet.i.tion for money, that number of shoemakers that can supply the demand for shoes at the smallest average price (excellence of quality being taken into account) will fix the market value of shoes in money; and conversely, will fix the value of money in shoes. So with the hatters as to hats, so with the tailors as to clothes, and so with those engaged in all other occupations as to the products respectively of their labor.

NO ALTERNATIVE FOR MONEY.

The transcendant importance of money, and the constant pressure of the demand for it may be realized by comparing its utility with that of any other force that contributes to human welfare.