Die Systemkrise als Chance

"Die Mark Banco war eine 100% silbergedeckte Waehrung, die die "Hamburger Bank" in der Zeit ihres Bestehens von 1619 bis 1875 emittierte, nicht als gepraegte Muenzen, sondern als mit Silber gedecktes Giralgeld. Mit dieser ueber lange Zeit stabilsten Waehrung in Europa haben Hamburg und seine Kaufmannschaft Krisen stets besser ueberstanden, als andere Regionen, in denen das Geld inflationiert wurde. Ehrlichkeit waehrt am laengsten." - Hamburger Mark Banco Anlegerseminar May 2011, info@ifaam-institut.de - www.ifaam-institut.de - From the file pointed out by C.B.

Somewhere in the writings of Ulrich von Beckerath he pointed out that during the Napoleonic Wars the silver stock of that bank was confiscated and that, nevertheless, it managed to carry out its extensive business just as before, but without the pretence or reality of any silver cover and redemptionism, just going on, honestly reckoning with its clearly defined silver weight unit as its value standard for all its transactions.
This is the most important lesson which this historical bank has to teach us and yet it is not frankly pointed out to this coming up conference, in its introductory material, from which I took the above quote.

With such redemptionists notions, uttered as if they were the only sound and honest ones, full monetary and financial freedom or free banking and free exchange is still being attacked, even by many libertarians.

Anyone still living in Hamburg, with easy access to its libraries, should not have it too difficult to find out the important facts from local references:

For how many years was this bank forcefully deprived of its supposedly necessary cover and redemption fund and whether, if at all, its business was stopped or significantly diminished by this confiscation of its silver stock or whether it was able to carry on, largely, as before, without that supposedly necessary backing, just by continuing to use the weight unit of Silver that it had adopted as its stable and honest value standard for all its clearing and loan transactions.

In Hamburg it might be still possible to easily find out the volume of transactions it mediated before this confiscation, during the years while it was deprived of this silver stock and afterwards, when it had restored it, still thinking that it would be necessary for stable value reckoning, ignoring its own experience during these years.
Probably notions of the supposed necessity of trust, to be achieved through such a reserve, induced the restoration of this silver stock.
Seeing the total volume of its annual turnovers, the silver stock was, probably, not all that large and thus could be easily restored, without pondering whether it was really necessary.

Necessary was not only the adoption of a sound value standard, like silver was then, still, but of a sound lending and repayment policy, to honest and productive firms or to honest and efficient merchants.

Necessary was free clearing, to turn over goods and services, including labor.
To the extent that physical means of payment were still preferred, clearing certificates, IOUs and banknotes in monetary denominations, all with a clearing foundation, would have sufficed. To a large extent also merely credit and debt-accounting would have sufficed, using a stable value standard, like the agreed-upon silver weight unit.

Although its value standard was not coined out by that bank, under free coinage it could have been coined out by that bank or other minters, for those willing to pay the costs.
The coins could have been privately minted, with numbers and mints expressed on them and with sufficient publicity assuring honesty in this business.
After some wear or wilful clipping of these coins, they would have to be withdrawn and minted into full weight silver coins again.
The abstract silver weight unit as a value standard could have been kept easier and at no such extra costs.
The abstract but measurable silver weight unit, constantly measured in all free silver markets, could have served as a sound and honest value standard for many more transactions than a physical silver coin or bullion stock could have mediated, making thus the production and exchange of other goods and services, including labor, independent of the stock of silver, apart from the then prevailing payment habits, which required, usually, coins for wage payments, especially since bank notes in small denominations were usually outlawed.

The same considerations apply, naturally to reckoning in gold weight units and to gold coins.
Freedom to use rare metal weight units as optional, honest and rather stable value units is, indeed, very important.

Using rare metal stocks as covers for clearing accounts or clearing certificates, or as reserve funds and redemption funds for any exchange media is neither cheap nor necessary.

Rare metal weight value reckoning, without possessing corresponding amounts of rare metals, is also possible and economical.

However, the means of payment involved, although not rare metal coins, but in form of clearing certificates, banknotes, book accounts or digital account credits, or any kind of tokens, must be covered and redeemable in or exchangeable for wanted consumer goods and consumer services, including labor, whose prices are also expressed in rare metal weight units.
Moreover, all these means of payment must be saved and made available for loans for certain periods. Such loans must also be repayable in such means of payment.

This sound and honest alternative clearly distinguishes between means of payment and value standards and is more economical than the rare metal cover, reserve and redemption system for issuers of exchange media in much cheaper materials than rare metals.

It can cope with any increase in the volume of goods and services produced and exchanged, without the rare metal production being increased to the same extent.

We should honestly explore this alternative and make use of it in future.

In free competition between rare metal redemptionist note-issuing banks and those, which retain their rare metal weight unit as their value standard, but without redeeming their notes in rare metals, the latter would win through their lower costs.

All that would be needed, to uphold this kind of rare metal accounting or rare metal clearing value standard would be free markets in rare metals.
They exist anyhow, when and wherever they are not outlawed.

By all means, do explore all historical experiences with rare metal value accounting and clearing instead of rare metal value redemptionism and arrive finally at the same conclusion.

While sound rate metal value standards are very important, and should always be among our options, one can use them without stockpiling cover, reserve and redemption funds and redeeming notes, clearing certificates etc. upon demand in these covers.

Whatever metallic conversion of means of payment is then still wanted by some, could be achieved on the rare metal markets.

John Zube, 10.4.11
jzube@acenet.com.au