MeulenBthSection four

9. 12. 1950. Your letter of 23. 11. 50.

Dear Mr. Meulen,

when I read the excellent article "Humpty Dumpsky" in "The Economist" of 11.11.50., I remembered your remarks under the heading "socialism", page 2 of your letter. You say: "… notice how quickly the process is occurring in Russia today" … " and really, all words concerning political economy or political science must now be used in the sense prescribed by the Russian government and now fixed in the new dictionary of Liokhin and Pestrov.("- ? - J.Z.)

(Must they? Who bothered to read Soviet-Russian economics texts and about their propagandist interpretations? - J.Z., 21.3.03.)

But from this fact (? - J.Z.) I do not derive:

1.) that the Russian government had a right to deform the Russian language (which Turgénieff called the great

consolation of his life) as it did,

2.) that the deformations are used by the Russian people if they talk entre eux,

3.) that these deformations will be continued one day, if there will be a real revolution in Russia.

I think that an intelligent Russian now speaks two languages,

a.) the prescribed and

b.) the normal, created before 1917 by the Russian scientists, poets, etc. The fact that the latter is not spoken in public does not annul the other fact that it exists and is used.

When in Germany, in the year 1878, firstly by the socialist Hoedel and, a short time later, by the socialist Nobiling (both sympathising with anarchism), shots were fired at the emperor William I, the word "socialism" was used, by official papers, by members of parliament, by government officials etc., as a synonym for murder, robbery, etc. But the German scientists were not in the least impressed. Also, when Bismarck in a then celebrated speech at the Reichstag remembered the burning of Paris by the Commune, in May 1871, and stated, that he had seen the smoke and smelled it and that since that day he knew, from his own experience, what socialism is, for - - he said - - he had seen it, and now all officials used still more so the word "socialism" as a synonym of arson and murder, the German scientists (all non-socialists, with few exceptions) continued to use the old word in its former meaning. At last their terminology won. Bismarck himself, when conservatives reproached him for his "Sozialversicherungspolitik", as being merely socialism (in the 80's) answered: I do not fear a word, style it as you like! So the word "socialism" was used in Germany exactly in the same meaning in which Benjamin R. Tucker used it, and that until about 1914.

During and after the first world war, the word "socialism" was understood as "state socialism". One of the reasons was, that the other socialist groups had disappeared, some - - like the anarchist group - - simply by imprisoning the members or killing them. But my impression is that the old meaning of the word in Germany is not yet quite forgotten. I myself do not intend to yield to the ignorance or the illogical thinking of the German article writers and book makers, a great part of them being government officials, who dare not to use another language than their ignorant superiors. (Many of them are not masters of the German language and their opinion on this point does not carry weight.)

In all spheres, where now the word "socialism" is used as a synonym for State socialism or State capitalism, there does not longer exist a word for a movement whose aim it is to reduce the exploitation of men by men to the technically possible minimum, where the means to be applied are to be expressed by an attribute to "socialism". The consequence is, that also the notion of such an aim has been quite lost, for the existence of a notion depends - - for average people - - upon the existence of a word, which indicates this notion.

By what word would you now express a movement with the aim to abolish, as far as possible the exploiting of man by man, by other means than State socialism or State-capitalism? You have none, although the work of your life is devoted to such an aim.

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Duration of bank loans. You say: "If it (the bank) confines itself to unusually short-date loans, it will lose profit".

a.) "unusually short-date loans". For decades the normal duration of loans granted by a note-issuing bank in notes has been the time of transportation of an existing good, from the place where the good was manufactured or stored to the place where it was expected to be consumed and paid by the last hand which took over the goods.

In general - - and here you are right - - the profit of such a business is not great. W. B. Greene, who knew note- business from the several thousands of note-bank in the USA, therefore - - quite logically - - proposed to do the note-issuing business by non-profit-making cooperatives. He went so far for the reasons we often discussed. I might add to these reasons that a note-issuing banker has always an opportunity to provide other services to his customers than the issuing of notes and that these other services are of the greatest profit for the customers, for the society as a whole and that they also leave a good profit to the banker.

An example for our time would be the financing, of wind-motors in agriculture, to the same extent as this is done in the USA. There the peasants are much more independent from coal than in Europe and, especially, in Germany. The financing cannot simply be done by handing over notes to the amount of the price of a wind-motor and saying to the customer: return me the notes within 15 years! I explained in my books the only possible way in which a note issuing bank may involve itself in the financing of long term investments.

b.) I now, that you consider the time elapsing between the beginning of the transport mentioned above, and the end of this transport, as unusually short. At least it is not unusual, for it was normal even for the great monopoly-banks such as the Reichsbank.

I know, too, that you do not acknowledge the distinction of exchange

I.) of present goods against other present goods by means of transportation (and exchange media issued only for this purpose! - J.Z.)

(J.Z.: Somewhere else B. pointed out that Swedes originally had for such notes the suitable name: "transport tickets". Such notes are turn-over credit or clearing notes, or "cut-up" sound commercial bills, in convenient denominations, circulating only until these bills are due. - J.Z., 21.3.03.)

II.) of present goods for future goods still to be produced,

as essential.

(J.Z.: "Notes" representing the future goods are medium or long-term investment certificates, bonds, shares or other securities. They are acquired with spare current goods and services or savings, invested for longer terms and, ultimately, repaid out of future goods and services produced or offered then. While one can buy shares with cash and often sell them rapidly for cash, they are not cash. Nor are genuine banknotes merely shares in productive capital and future earnings. They can be immediately turned into goods and services or used for debt payment and therefore they are called "currency". Share certificates, bonds and mortgage letters are not currency and cannot be used as currency even if they are called banknotes, printed like banknotes and issued under the assumption that they are banknotes. They do not have a corresponding and immediate readiness to accept them for goods and services. Why should the current goods and service providers accept them, when they have not issued them themselves, are not contractually obliged to accept them and do not want to invest their goods and services or sales proceeds from them, on long terms, in such securities? It takes two to tango! An issuer and an acceptor. In the absence of legal tender such "banknotes" would be widely refused and suffer a large discount as currency, among the few remaining acceptors, no matter how profitable they might be as long-term investments. People who think only in terms of forced value and forced acceptance do not consider this freedom alternative and its consequence. - Even tax foundation money suffers a discount when issued beyond the near-future tax receipts. So does railway money or bus money, when issued beyond its near future reflux in fares. - Current mutual sexual satisfaction is different from the promise of sexual intercourse many months or years in the future. Notes and securities are as different. - J.Z., 21.3.03.)

Many economists are of your opinion. Few of mine. Experience, made under conditions where cours forcé does not prevail, will teach both groups.

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Financing in old times, say, in the years before 1844, is not yet fully explained. Example: When Marx tried to get examples of how the purchase of machines was financed by employers, he could not get any information. But there still exists a letter of Marx to Engels (owner of a great textile factory) in which he begged his friend to inform him and to tell him at what intervals his machines were written off. The literature of that time did not furnish sufficient information. Engels' answer is not preserved. I am convinced that the purchase of machines was not financed in the simple way of handing over notes to the manufacturer, to the amount of the price of the machine and saying to the manufacturer: Repay the notes in 60 monthly intervals or so (with interest - - high or low).

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Very faithfully Yours - signed: U. v. Beckerath.

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Dear Mr. Meulen, 10. 12. 1950.

in itself the fact is of no great importance, but as a symptom it is. You will have read in your papers that now the great furnace at Watenstedt, Germany, will be dismantled by the decision of the British authority. The Greek government shall get the debris as reparation goods. I am convinced, the officials of that "State" (remember the reports on the Greek concentration camps in "The Word") sold this debris already as scrap-iron to an English concern. But that's not so important. Important is that:

Certainly, at the moment an increase in the production of iron is more desirable than any other things That the English government distrusts German workers and refuses to hand over to them the high furnace of Watenstedt, I can understand, although I think that such a distrust is today no longer justified. But here opinions may differ. What is not to be understood (or too well understood) is, that the British government did not send for English workers or other non-German worker, whom it trusts, so that these furnaces might again produce iron, as much as possible and as soon as possible.

The expression of thoughts may be prohibited, but the thoughts themselves cannot be prohibited and, unavoidably, these thoughts, in the minds of Germans, must be:

If the British government really had the intention to protect the Eastern frontier of Germany, then it would do all in its power to produce iron for the army that shall be ranged at the frontier. If it stops iron production or dismantles high furnaces, then, quite obviously, it has not the intention to protect the German frontier.

The Germans themselves, at the moment, cannot do it. Against a Russian army of more than 2 000 000 and excellently armed soldiers, with an abundance of tanks and planes, the Germans are defenceless, whether there are 100 000 German soldiers merely armed with rifles and a few cartridges or 200 000 or 250 000, numbers which were discussed in the last weeks in England. Also, in this connection, the Germans cannot possibly forget the very numerous cases where people were detected in England, who were bribed by the Russians or doing unpaid services for them or defecting to Russia. It is clear that for each case detected there must be about 1,000 or so people not detected.

(There might be as many more collaborators than the discovered ones, but I highly doubt it. Sometimes B. seemed to used "poetic licence" in his letters or simply exaggerated to make a point. - J.Z., 21.3.03.)

Is the dismantling of the high furnace of Watenstedt such a case? (I tell here only what unavoidably must be the thoughts of the Germans, but assert nothing.) What is the matter with those who now decide England's and the world's fate?

In Korea, at the beginning of the war, the American army was practically without ammunition. (Ammunition for 2 days!!) The intelligence service of the Americans did not discover, that a few miles from them an army of a million Chinese troops was marching against the Americans. Atom bomb secrets are handed over to Russians. (They certainly, are no secrets any more, in all details.) Has fighting any value in such a situation? The war, although not yet declared, is practically already lost.

The situation reminds me of the situation in the USA before the Civil War in 1861. The war minister at that time was a Southerner. He sent the fleet, all ammunition and as much artillery as possible to the South. When the war began, the North was almost unarmed. (B. wrote: "quite" unarmed! - J.Z.)

Is the administration of England and of America "divided" as the administration of the USA was in 1861???????

Very faithfully Yours - signed: U. v. Beckerath.

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Dear Mr. Meulen, 11.12.1950.

Gold coins again: The individualist monetary system - - at the moment defended in the whole world by a dozen men or less - - says: a monetary system should contribute as much as technically possible to the economic, social and political independence of the citizens.

All other systems say: a monetary system should contribute as much as possible to strengthen the government's power and to facilitate planning of production, of consumption and all other functions of government today considered as necessary or desirable.

Individualists agree that possible abuses of an unlimited right to issue notes are most effectively prevented by an unlimited right to refuse the acceptance of notes. That issue and refusal are to be limited, too, by that what the German law calls "Treu und Glauben im Verkehr" and "Gute Verkehrssitte" is self-evident. (Honesty and faith in trading & good commercial customs. - J.Z.)

The question is: Does an unlimited right of issue suffice to guarantee the highest degree of economic, social and political independence? Although I cannot exactly prove it, I assert: No! But I appeal to your knowledge of business, of men and of monetary history.

Let us consider business conditions among populations like, say, in Tennessee and suppose that there would be permitted an unlimited issue as well as the absence of cours forcé in all forms.

(The obligation of an issuer to accept at par the money, which he had issued, cannot be considered as a form of cours forcé.)

Suetonius reported that Nero coined silver so that he made many more sesterzes out of a pound of fine silver than his predecessors. But he ordered, that these new coins were not to be accepted by the tax collectors, and that taxes must be paid in old the old coins. There are also examples of later governments which proceeded in the same way or issued notes and did not accept them at par from the taxpayers. That cannot be defended by saying: The government used the common right not to acknowledge any cours forcé!

(J.Z.: For the same reason that you cannot discount your own IOU's, when someone pays you with them, but must, instead, accept them at their par value. Everything else would be obvious fraud. - J.Z., 21.3.03.)

Now you know that the people of Tennessee are as pious as any in the world. You know, too, the laws of that State whereby Darwin, Herbert Spencer and similar revolutionaries are strictly prohibited at schools, universities, etc. of that glorious State. Let us suppose, that in a small town of Tennessee there lives an agnostic and one

who possesses courage enough to publicly confess his opinions. From reports of travellers we know what that would mean. The role of the agnostic would not be any better than that of a Jew in Nazi Germany.

(J.Z.: Well, at least he could migrate to a more tolerant US State. - J.Z., 2.6.03.)

Do you believe that the agnostic will find a banker who grants him loans? The banker would tell the agnostic: If I would grant you a loan, then all my customers would stop all business with me. I would be ruined. And the banker would tell the truth. W. B. Greene's monetary cooperatives would not help here. As you quite rightly pointed out, such cooperatives would, probably, be at least as tyrannical as a banker would be.

In such a situation an individual should have the possibility to procure for himself gold coins (or silver coins) and pay with them. There, where such coins circulate, that is - - practically - - no great problem, except in times of a crisis.

I represented here a very extreme case, but certainly not an impossible one. You know yourself of simpler cases, where a man, quite trustworthy from your own standpoint, was not trustworthy from the standpoint of his contemporaries. But his case was tolerable, because he had the possibility to pay with coins.

Very faithfully Yours - signed: U. v. Beckerath.

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15. 12. 1950. Your letter of 12.12., received today.

Dear Mr. Meulen,

quinine. Your son-in-law is insofar excused as, really, quinine for decades was generally used in the whole world, as a proven means to regulate digestion, also to appease disturbed nerves. From experiences of persons I know, I saw how seldom physicians take into consideration what in German is called the "Nebenwirkung". (My dictionaries do not translate the word. "Nebenwirkung" [side-effect, J.Z.] is an effect beside the intended effect and not always foreseen.)

One shall not give advice and if I give you, nevertheless, the advice to come again, next spring, to Germany (supposing she still exists next sprint) to visit your physician at Frankfurt am Main, you will say: The old fox, of course, means that I will visit him again at Berlin. I must confess, that you are right. Lecture at the British Information Centre!

Payments abroad. In the case we discuss, the American (or the person to whom the American sold the pound note) must buy English goods for the amount of one pound, and every day delay costs him interest, whether he like to buy something or not.

After the imported goods are paid, the possessor of the English notes are no longer free to reduce their purchases from England.

Decisive is that: Whenever owners of commodities are as hard pressed to sell the commodities, as Americans were in the years 1946-1950, they take as means of payment what the buyer offers and certainly do not insist on dollars, although - - of course - - they prefer dollars. (At the conditions prevailing in these years. If the American government performs the announced inflation - - the word taken in the sense of 1913 - - the Americans will beg the English not to pay in dollars, but in pounds or anything else.)

Consider also this: In the previous centuries every creditor had the right to demand gold coins (or silver coins). This right of creditors was one of the essential details of the "gold standard", the latter word taken in the sense of 1913. It is strange that this right, as an essential detail of the old gold standard (or silver-standard) escaped the attention of all economists, except - - it seems - - W. B. Greene.

The effect of this right of creditors could be, that a country might be deprived of its stock of precious metal. Coins are not endowed with the tendency to return to the spot where they are manufactured.

(J.Z.: In the medium and long run the go or return only to the country in which they are most highly valued. - J.Z., 21.3.03.)

But if the said right of creditors is abolished and the creditors must take notes or clearinghouse certificates, all is fundamentally changed and conditions are established not comparable to any previous conditions in economic history. (Except Persia, of which I will not write here.)

Every note or certificate, etc. is endowed with the tendency to return to the person or concern who issued it.

Once people become aware of this great change in monetary conditions and the "portée" of it, they will also become aware that import and export are now on a quite other basis than they were before. While imports and exports are still performed by the means of an "exclusive currency"- - at the moment the dollar - - it is either by prescriptions of ignorant governments or by the no lesser ignorance of average merchants.

What average merchants are like, may be seen from Jevons' amusing report about the resistance of English merchants against clearing, decades after the London Clearing-House was opened. (See: Jevons, "Money".)

The right of creditors to demand gold coins is a much more essential detail of the (old - J.Z.) gold standard than the right of note holders to get the notes redeemed in gold coins, on demand, or with the delay fixed in an option clause.

This right was until now not acknowledged, by economists or monetary theorists, as an essential detail of the gold standard, because this right is established not in the monetary laws but in the civil laws, where an average economist does not seek them. But the German Civil Law of 1900 did not grant creditors the right to demand in all cases gold coins. It only said that agreements must be fulfilled as good faith and customary kinds of payment demand.

Par. 242 of the "Buergerliches Gesetzbuch":

"Der Schuldner ist verpflichtet, die Leistung so zu bewirken, wie Treu und Glauben mit Ruecksicht auf die

Verkehrssitte es erfordern." (The debtor is obliged to effect his payment in a way as trust and faith, with regard

to commercial customs do require. - J.Z.)

The immense progress here established was quite overlooked at the conferences of bankers convoked by the Reichsbank in the year 1908. Experts as well as university-economists took it as self-evident that all creditors were entitled to demand gold coins if they liked them.

The question arose, whether workers as well were entitled to demand gold coins for their wages. It aroused very much attention. An economist like Adolf Wagner said: Of course, they are. Very probably the answer of Adolf Wagner contributed to the decision taken, to increase the issue of small denomination notes and not to repeal the cours forcé for silver thalers. (Later they were replaced by other silver coins, which were endowed with cours forcé up to an amount of 40 Reichsmark per payment.)

Gold standard. A few days ago, I had something to do in the vicinity of the British Information Centre and used the opportunity to reread the article "gold standard" in the latest edition of the Encyclopaedia Britannica by Prof. Graham, Princeton University. I do not agree with Graham. (He, too, overlooked the right of creditors to demand gold coins as an essential detail of the gold standard.) But I saw from the article that Kitson's terminology is by no means the general one. Graham's definition is different from that of Kitson, and much resembles the definition in use before 1914.

The redemption of notes on demand is one detail and may be absent, although the gold standard (the word taken in the sense of 1913) still is the currency standard.

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Value. England's currency before 1913 were gold coins. They never suffered a depreciation, also not - as far as I know - - notes of the Bank of England. When England, before 1913, lost sometimes many gold coins by her external trade, the main difference was another one than a depreciation (existing or foreseen) of the legal currency.

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Purchase of gold. I refer to my letter of the 19^th of May 1950, where I spoke of Jevons' experiences with coining gold ingots.

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Free Banking.

a) To promise redeeming the notes in gold at the market price of the gold, expressed in the notes to be redeemed, or to send the owner of the notes to the market and tell them: "Purchase yourself the gold", that's, economically, the same thing.

Technically no other kind of redemption is possible than by handing out standardised ingots, and such ingots are coins, whether they are privately manufactured or by the government's mint.

b) I cannot share the tacit supposition that notes of well known banks always will be fit as a means for redemption. In a case of a run, such banks will probably be more exposed or at least as well exposed to the run than are smaller banks.

c) I still do not yet see a reason for why merchants will not price their commodities in the shops in terms (multiples or fractions) of gold coins, if such coins are permitted to be manufactured and to circulate.

Not trust (the word used in the sense in which bankers used it in 1843) but continual distrust in the future, in politicians, in parliaments, in governments and (since so many people are now strong believers in astrology) in the stars, will be the basis of the note issuing business of the future.

All details of the old note issuing business will be changed by this circumstance and some others.

In the old days, the obligation to redeem notes was essential and note issuers themselves considered it as essential. The intention of the option clause had not the effect to enable bankers to issue notes without a stock of precious metal as cover. The question was only: In what proportion should the cover be taken in relation to circulating notes.

I can understand that your standpoint is: Even if all this is true - - I will, nevertheless, keep from the old system as many details as possible. A state of affairs, where the obligation to redeem (not at par but at the terms you proposed) is discarded, does not interest me.

Well - - but for Germany and many other countries only such note issuing business is technically possible (at least for the years after restoring liberty in the economy) where no obligation for metallic redemption exists in any form, but where a free bullion market exists. Russia, India and China are in the same condition as Germany. That is the reason for which I am first of all interested in the conditions of a note issuing business not restricted by any obligation to redeem notes, may it be at parity or not.

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Foreign interference in internal affairs. While we discuss the matter, Mao - - are really great statesman, although cruel and probably gifted with other gifts necessary for great statesmen, such as Peter I and such people displayed - - solved the problem. The army now fighting against the West is an army of volunteers. Also the armies now fighting in Vietnam etc. are armies of volunteers. That many of the volunteers do not fight quite voluntarily and - - most important - - have not the right to retire from the army, is a matter which Asians will certainly still discuss. Europeans and Americans, obviously, lost the capacity to talk reasonably about such things.

If there is a future for mankind, volunteers from the whole world will interfere - if the rights of man and citizen are violated in any part of the world.

The acts of anarchists in the 19^th century - - although committed on false suppositions - - show that volunteers fight for that what the individual understands by liberty. (Until now individuals erred here.) But this is not beyond the limits of the human mind.

Also the fact of the Kamikaze-pilots of Japan showed that self-preservation is by far not always the guiding principle of human conduct.

Such are all the first beginnings of a new age. (If there will be a new age.) We have here to do with facts and not with hypotheses without facts.

Salazar - - he does not seem to be a tyrant and until now I head nothing of Portuguese concentration camps. Volunteers will hardly fight against Salazar, not because they do endorse his system (few will endorse it), but because they say: It's not worthwhile. There are other people to be removed, people of more importance.

India. Certainly, there exists now a law by which an Indian can (or should have the possibility) to vote if a party presents him with a candidate. If the candidate wins and proves to be a good man, the Indian was a wise voter and justified the system. If the candidate becomes a Hitler (something that he will not reveal before he is in power), the voter is much to blame for his country's misfortunes. What is there to say against such reasons???????

But I cannot discover in this state of affairs anything that deserves the term independence. You can?????

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Russia & Success of Chinese armies in Korea. A pious Jew would answer: Your word in God's ear!! You know my opinion about the military strength of Russia. Regarding the successes of the Chinese armies, I think that the mountains of Korea are the least circumstance that favoured the Chinese.

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Deutsche Partei. You are right. The credit program of the DP shows that the people had at least the idea that there exists also a credit problem. If the DP would work out the idea and express it in clear words, it could win the next election, however small the party is at the moment. Probably the DP means the system by which the Nazis promised to provide employment for the unemployed. The Nazis, in 1932 and 1933 were prudent enough not to give details. Details frighten away voters of the kind to which the Nazis appealed. But the general impression was: The Nazis really possess a means not yet detected by others. Therefore (not for their antisemitism) so many millions voted for Hitler.

It world be interesting to reconstruct the promises of the Nazis in the years 1932 and 1933. But the whole and immense literature was destroyed by the Allies in the year 1945. Everyone was obliged to deliver all literature of Nazi origin. The effect is, that many people in Germany still believe: Hitler and his economics staff really possessed the device to create employment, and if it would not have been so good and so effective, the Allies would not have insisted upon destroying the whole literature. I think that among those youths, who never read Nazi literature, this opinion is still widespread.

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Believing that Hitler saw the disadvantages of a gold standard - - the latter word used as in our discussions - - would be very much over-estimating Hitler and his Staff. The opinion of leading Nazis was: The use of gold for monetary purposes is a Jewish invention. That should be sufficient to prohibit the use of gold coins.

Very wide-spread was also this opinion, although it was hardly expressed in literature:

In America there exists an immense stock of gold. The Jews possess this gold. From the gold they get, as interest, the greatest part of the world's production - A secret Jewish king in the USA organises that.

I asked a Nazi, how that would be possible: To store the gold (that is: not lending it out) and, nevertheless, get interest from a store of gold. He answered: that is a great secret. The party should catch a prominent Jew and torture him until we would, at last, reveal the secret.

Silliness may become a political power as well as high intelligence. (Crusades, and similar "movements", which the Malthusians now try to explain by lack of food in Europe.

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Social order. Agreed.

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Mixed marriages. I congratulate Mr. Churchill. He had very much good luck. I know Germans whose experiences were of a very different kind.

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Malthusians, Pacifists. Since both do not see that the West's under-population created the present danger of war, they resemble the pre-diluvian animals who, certainly, died out because nature implanted in them false opinions about the real conditions of their lives. In future museums their skeletons will be placed beside those of the Ichthyosaurs and similar blunders of nature.

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Yesterday I got a "Zentner"(= 50 Kilos) of coal!!!

Very faithfully Yours - signed: U. v. Beckerath.

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29. 12. 1950. Your letter of 26. 12. 50., received today.

Dear Mr. Meulen,

(I wish - ? - illegible! - J.Z.) a happy New Year to you, too! With pleasure I learn that your health is still improving and that you are now able to eat things of which the doctors disapprove. If one is as old as we are and has got so much experience, one may say: to each such things and not only rarely, is the very best diet.

My Christmas was nice and my friends gave me much cake. So much, that yesterday I bought some collared (? - J.Z.) herrings and black rye bread to get a change.

A chicken in London = 7 s 6d!!! In my nest letter I hope to write to you what it costs in Berlin; I know it is much cheaper. Within a week or so, London could get the same chicken prices as Berlin, if London would at once introduce a free market for chickens, chicken forage, etc. That competition brings the prices down to the economically possible minimum and, at the same time, supplies the people fully, much better than an army of price controllers and the best organised nourishment offices, that we saw in Berlin and see it daily.

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In my chamber: 6 degrees Celsius = 48.8 degrees Fahrenheit. If it remains so, I am content. (On the street: = minus 7 degrees Celsius = 19.4 degrees Fahrenheit.) The papers predict that in 1 1/2 weeks or so it will be warmer in Berlin.

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Socialism - Individualism. If you would call yourself an anti-capitalist Individualist, it would be distinct, I think. Certainly, you have the right to call yourself an anti-capitalist. The work of your life has been to create the possibility to get capital for non-capitalists and to break the monopoly of the class now called capitalistic. If one would introduce into economic terminology the words "Tuckerian socialism" it would be a good thing. I think is impossible - - at the present state of things - - to express by one word exactly the "Richtung" (tendency - J.Z.) to which one belongs. Two words at least are necessary.

If you would not have changed the title of your book from "Industrial Justice by Banking Reform" into "Free Banking", you would, perhaps, have become the creator of "Banking Socialism". Rittershausen and I have stated several times that we agree that "Bank Socialism" would not be a bad word for what we want.

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Annales d'Economie collective. I published two books on unemployment, the one in the volume you cited. ("The Practical Realisation of the Milhaud Proposals", 1934, and in the following year: "Does the Provision of Employment Necessitate Money Expenditure?". A third book: "Public Insurance and Compensation money", 1938, offers a further application of the principles at first established by Milhaud. Rittershausen wrote on his copy of "Public Insurance etc.": Camouflage title and was quite right. I think, Williams & Norgate, Great Russell Street, still possess copies, if their shop has not been destroyed.

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Long term loans. (Exchange for future goods against present goods.) Our difference may be - - I think - - stated in a few lines:

1.) I say: Long term loans should be financed by bonds, interest-bearing, but the purchase of the bonds should be made so easy as economically possible by a note-issuing bank. The loans granted for that purpose -

(J.Z.: i.e., the purchase of the bonds. E.g., the loans could be subscribed with short-term shop foundation money, earned in the usual way, by the sale of goods and services for them. - The term "loan" is here misleading. The bank does not lend the subscriber the short-term private money issued by it, to enable him to buy the long term bonds. But it makes its short-term goods-warrants etc., also available to him, for such subscriptions. He will have to earn that private money and be willing to so invest these earnings. He may offer a certain fraction of his total goods and service offer for this purpose and oblige himself to accept the free bank notes for it and to deliver them as his long-term loan subscription to the issuing bank. Upon this obligation by him, the free bank can issue an additional amount of "shop foundation" notes, corresponding to his readiness and obligation to accept and use them for this purpose. It sounds complicated but is, in essence, the same process as a loan subscription with State paper money - but makes the investor independent of the availability of State paper money. On repayment of the loan, this process is reversed. The loan is then repaid with then issued goods and service warrants, for which the long-term loan debtor has then to make his goods or services available. - For more details see his books & other writings. His "short-hand" expressions were clear to him, and, possibly, Henry Meulen, but, probably, not to all other readers. - J.Z., 21.3.03.),

- can be short-dated. The note-issuing bank is necessary to enable investors to buy the bonds even in times when "normal money" has disappeared.

2.) You say: Long-term loans can be granted by a note-issuing bank without the detour of bonds and interest.

I do not give up the hope that, one day, we will here come to fully agree.

The majority of note-issue theorists is on my side. (But both of us do not trust in majorities.)

-----------------

I do hope that you have in London the possibility to get Scratchley's economics books, including his dissertaion on "Local Enterprise Societies". I had this book. Burnt. A. Scratchley was a famous mathematician and is the theorist of modern "Building Societies".

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Gold coins. I do think that you underestimate the power of gold coins. All theologians complain - - quite justly - - that their god, in nearly all cases, cedes if gold coins are in competition. I personally think, that the future religion

will be partly founded on gold coins. Constantine - - one of the greatest rascals, but also great as statesman and reformer, created a very good gold coin system nearly at the same time that he declared Christianity as the State religion. So he connected, in the minds of his subjects, the two notions of

a) honest money,

b) new religion,

both imperial characteristics, and the subjects said:

That the money is good we see every day, although we do not conceive how it is connected with the emperor's religion. Let us, provisionally, accept both.

Without the connection of 1.) religion and 2.) good gold coins, the new religion would have remained a belief like the religion introduced by Elagabalus and would have been long forgotten.

You will posses books in which the pre-Constantine money-system is described. From the chapters concerned

with it, one may learn what a good reform Constantine performed in the monetary sphere.

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Are you quite sure that a note-issuing banker in such a pious country as old Scotland would have granted loans to an atheist?????

You are right: The atheist can get gold coins in a priest-ridden country only by selling goods or services. But that he can is important.

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In the years 1923 and 1924 there was established, by nationalists, a note-bank in Pomerania, which issued rye-notes. (Gold was then already considered as a Jewish invention by 100 % nationalists.) On these notes was printed:

"This note loses its value in the hands of a Jew!"

The effect was not quite the expected. Nobody accepted the notes, because he did not know, whether a Jew had formerly possessed the notes and the bank had forgotten to add: "but the note becomes valid again, if a German accepts it." All that is impossible (practically) with gold coins.

In our time no act of monetary craziness or fanaticism can be considered as impossible. In Germany not and in many other countries.

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I do hope that you got my letter on Strasser.

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A friend of mine knows personally the author of one of the numerous proposals, made 1947, for monetary reform in Germany. He gave me the book and begged me to review it. I did and added some general remarks, including an imperfect sketch of the individual's monetary rights. I invite you to publish a better sketch in the next issue of the "Individualist". It will be the first printed collection of man's monetary rights. I enclose here my own sketch. Some items are to be found in my proposals to Korean monetary revolutionaries.

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Very faithfully Yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

2. I. 1951. Your letter of 31.12.50., received today.

Dear Mr. Meulen,

Otto Strasser cannot be considered as an associate of Hitler. He was one of his most dangerous enemies. If one considers, too, that he is a single man, without connections of importance, also, obviously, without the qualities of a great party leader, one must say that it would not be worthy of so great powers as England, Canada or the USA to fear him. They should let him return and that, first of all, because the formal right is on his side: The par. 13 of the rights of man. (UN declaration of them. - J.Z.)

Italian elections. No - - the fact that Fascist votes increased did escape my attention. Probably, the Allies did the same as they did in Germany and prohibited all kinds of literature, considered by them as Fascist. Would they not have done so in Germany, the literature would still exist and daily arouse new concempt for a movement based on such crazy arguments. In Italy, probably, the same would be the case. Destroying the Fascist literature is clearly the way to a new Fascist movement.

Payments abroad. Most of what you say is quite right, but it is not the main point of the question.

1.) You say: "The dollar shortage in Europe means simply that Europe is importing more from the USA than she exports."

Better than I could do it: Adam Smith, David Hume and many other Free Traders pointed out that such a thing as "the country imports more than it exports" cannot exist. If statistics (commercial statistics always to be accepted with great and for many decades well deserved distrust - - believe an old statistician) seem to indicate a considerable difference, it is to be expected that many commodities were bought on long-term credit, that's all. This agreed, the "dollar shortage" cannot mean that Europe is importing more from the US than she exports.

2.) Really, the term "dollar shortage" is by all governments, the English included, interpreted in a different manner than you interpret it. Governments, backed by the professors paid by the governments, say: That we must export before we can import, that's self-evident. But exporting is difficult. The difficulty causes a shortage of dollars which would at once disappear when the difficulties of export would disappear.

3.) If it is true, what the English government says (and I believe it to be true), then it is not quite so as one may derive from the passage in your letter and the situation is to be judged in a different way.

"Our banks keep a store of dollars, …" - The government says: Well - - the banks do keep a store of dollars, but this store is by far not enough to meet the demands of importers. And really: that's the point.

(J.Z.: Why should the banks keep a store of dollars sufficient to satisfy the demands of importers? If importers want dollars, in the belief that they really needed them, then they should buy them, on an English or US Exchange. To supply with any foreign currency, i.e., the foreign exchange money market, is not necessarily the business of the banks or an important business for them. Moreover, at the free market price, or freely floating exchange rate, always enough dollars could be bought. Naturally, if many dollars are wanted than usual, and they are paid for with pounds, while pounds are not in great demand on the money market, then the value of the pound in relation to the dollar would fall. The very fall of the pounds exchange rate would make the pound again attractive to buyers of pounds. - J.Z., 22.3.03.)

4.) If the government's assertion is true (and it is true), that the dollar-store kept by the banks is quite insufficient for the needed imports, then it is right if a non-believer in the present system says: Dollars are not at hand, but pounds are always at had as a means of payment for imports to England. And that's the point which is decisive.

I assert: If the country which must import, is in the position to wait one hour longer than the country which must export, then the country, which must export, will accept, with all the readiness desired, every means of payment,

ice from Eskimos and promises from anywhere. The necessity us all possible means to provide employment - - for which exporting has always been considered as one of the most effective - - is to the same degree more pressing than importing, as the secretion part of our metabolism (Stoffwechsel) is more pressing than the intake: eating. But in times of war this observation - - of course - - does not always apply.

In times of peace the buyer largely prescribes or is able to prescribe the means of payment; in times of war the seller prescribes it.

Value. You say: "Before 1913 our gold coins never suffered depreciation simply because the Mint was legally compelled to buy all gold offered to it at a fixed paper price."

Indeed, thus this matter is now generally understood in science and by non-scientific people, but:

1.) gold coins could not depreciate because gold coins themselves were the legal measure of value (not only in England),

2.) if a Mint is ready to coin offered ingots and leaves the one, who brings the ingots to the Mint, for his convenience, the choice to accept coins for his ingots or paper money (in practice the Mint will have offered a cheque), then it does not correspond to legal side of the transaction to style it a purchase of gold ingots by the Mint, although the commercial effect for the ingot owner is that of selling the ingot.

The general use of language proves nothing here. That the common usage of the English language does not correspond to the real legal proceedings was stated by Jevons, and the manner in which he stated it is worthwhile to be read in his paper. (As far as I know, reprinted in his "Investigations in Currency and Finance".

All this is not "hair-splitting", at least not in a discussion on the standard of value.

The opinion, so wide-spread in the world at the present time, an in the Anglo-Saxon countries most, that paper money is the natural measure of value, that it is also the natural measure for gold, this erroneous opinion is closely connected with the opinion, that also before 1914 the Mints of the world and that of England especially, bought the gold for paper money, so as they do now. (Now the legal situation is toto genere different.)

The more far-going opinion, that gold coins au fond are a superfluous and even useless instrument of trade and unfit to measure values, is also closely connected with the opinions indirectly expressed in our above quoted sentence.

By a natural measure of value I understand (with all scientists before 1914), that measure of value which businessmen use, when they are free to choose it, as the best one known to them. Until after the Napoleonic wars, gold was obviously the best in a great part of the world.

If the laws in the whole world would not forbid the use of gold as a measure of value in commerce, e.g., to price commodities in the shops in gold, within less than a year gold would again be used as it was used in the year 1913.

Natural measures are not always the best possible ones. Admitted. The measure of value invented by you and represented in your book offers advantages.

You know the numerous other measures of value proposed by scientists, say, to compare values for historical purposes (e.g. in old Egypt and in our times) or even for commercial purposes in our time.

They may be superior to natural measures of value in many respects, but most of them require:

a.) a calculation, not free from individually chosen methods, such as the index-number measures,

b) determinations of another kind than calculations, but also chosen by individuals, subject to errors and seldom in harmony with other individuals, who are likewise appointed to make decisions like those here in question and who feel themselves to be competent. Such are the measures of value used or proposed by adherents of the Keynesian theories.

I prefer a measure of value free from individual decisions.

I assert that until now gold - - as imperfect as it may be - - has proven to be better than all artificial measures of value.

I claim for all men, who prefer gold, the right to use it and I know that I claim this right for more than 9/10 of all men.

The right of others, who prefer other measures of value, should not be violated by adherents of gold.

Such ideas are more easily expressed in the German language than in English. The German word "Goldwaehrung" - - like the French "Etalon d'or" - - still expresses what the word "gold standard" expressed in England in the 18^th century. Now, for most Englishmen, the world "gold standard" expresses merely one detail of what formerly was a gold standard, namely, the obligation of an issuing bank to redeem its notes at par upon demand.

For a monetary situation, where all commodities are priced in gold coins, the English have no longer a noun, while Germans and French have it.

Was it progress, when about 1914 the "jacks in office" began to use the world "gold standard" in its present sense and to proscribe its former sense? (J.Z.: They outlawed the free use of gold rather than merely the improper use of it. - J.Z., 18.6.03.)

Let me add here, that about 100 years ago in England, as well as in Germany, the possibility was discussed of a paper money not redeemable in gold or silver coins but accepted at its face value for taxes etc. (Greene mentions such a paper money. In Germany it was widely used, and invented in Saxony in the 18^th century. the first idea seems to have been conceived by the manager of a bond-issuing mortgage bank in America in the 18^th century.)

But at that time nobody pretended that the country was no longer on a gold standard when such a paper money was introduced. All scientists and all businessmen at that time thought, that for a gold standard the pricing of commodities in gold coins was the most essential detail and for a silver standard the pricing in silver coins. Thus has the language changed!! (In England.)

Now you may see, too, for what reasons I insist on gold coins and on the right of individuals to manufacture gold ingots in the shape of gold coins if there are no State Mints or if they do not provide this service.

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Gold in USA. You ask: What makes you think that the store of gold in Fort Knox is owned by Jews?"

I hope, by the world you are here meant some of my countrymen and not I. And what made them think so??? For a similar reason they thought so for which all oxen of a herd bray if one ox begins. One antisemite may have believed it himself or may have invented it: the nonsense was quite corresponding to the general antisemitic mentality and, therefore, believed by many thousands. Certainly, among the followers of Mosley there are still numerous people who believe it as well.

Chicken price. (Your letter of 26. 12. 50.) I begged my neighbour, Miss Trampe, who greets you heartily (you will remember her), to look for chicken prices at the shops. She reported to me that in Germany a pound of chicken (500 grams) now costs 2,60 West marks. For an English pound (453 grams) that would be 2.34 West marks. The present quotation of a pound note at Hamburg is DM 13.50, or 1 shilling is worth DM 0.675.

So one pound avoir dupois of chicken would be worth 1.56 Shillings. The 3-pound average chicken you ate would have cost 4.68 Shillings. - Yesterday I heard from a lady that some months ago a chicken was priced in Berlin at 2 marks per German pound. (500 g.)

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Free Banking. Is it your opinion that a system of note-issuing banks, founded on a general and not restricted right for every individual, to issue notes, does no longer deserve the name "Free Banking", if a considerable number of these banks declare: We do no longer redeem our notes, neither at their face value nor at another value, but, instead, refer the note bearer to the bullion market if they want gold in form of coins or in another form? They would add: But our debtors are obliged to accept our notes as their face value, at least for the amount that they are indebted to us. Posters, in the case of our debtors, will inform everybody of the opportunity to so utilise the notes. Addresses are given by our offices.

Whether the system (that of the Four Bills) is called a Free Banking system or not: certainly, it is independent of that kind of trust which you mean.

In cases of a general run (the word "run" used in the sense of 1913), your system breaks down - - admit it! - - but under the system of the Four Bills nothing else happens than a run on the shops, which, for shopkeepers, means a boom.

That this must be the effect of a system of notes not redeemable is not a new knowledge.

Several times it was proposed to offer those, involved in a "run" on the bank, public bonds endowed with good interest and on a gold basis (or, in silver countries, on a silver basis).

I encountered this idea at first in an old Danish law enacted at the times of Napoleon I, then a similar law was enacted in Prussia, some years later. Still, when the German "Rentenmark" was created in the year 1923, the possibility to purchase gold bonds with it was provided for by the law and for the "runners".

(The Danish law and the Prussian are, perhaps, due to the same man: Niebuhr, the famous historian and formerly manager of the Danish State Bank and later of the Prussian. On the other hand, I read in a biography of the Prussian Minister, Freiherr vom Stein, that King Friedrich Wilhelm III. proposed it.)

Certain is: To the extent to which a "running" public buys bonds with the notes that it distrusts, the run on the banks is diminished.

You say, that in the past such crises (here runs) were mainly caused by the operation of the gold standard. You here use the world "gold standard" in the now generally used sense (English usage), where it means: obligation of the note issuing bank to redeem its notes at par on demand. You know, that several times before 1914 the Bank of England was freed from this obligation by an act of Parliament, but that time nobody asserted, that then (1825 etc.) the country would no longer be on a gold standard. Prices in the shops continued to be fixed in gold coins, and that was considered as essential.

Concerning the commercial value of gold coins, I repeat my opinion, that the greatest observed fluctuations in times of war, revolution, etc., were considered, by the public, as quite unimportant - compared with the fluctuations of any kind of paper money. Therefore, the public, especially in such times, preferred gold coins to any other means of payment. I claim for the public the right to continue in this mentality, but - - of course - - for anybody the right to express a quite different opinion on the constancy of the value of gold and to act as he thinks fit.

Here, also, is to be remembered, that if gold itself is the measure of value, then it does not possess a price.

(Ingots may be sold at a price, coins of domestic origin are not sold and do not possess a price - if the gold standard - - the word used as Adam Smith used it or Jevons - - is legal.)

Do you know of one example that sovereigns in England were sold, say, in the years from 1860 to 1910????

Therefore, I cannot acknowledge that the advisability of gold coins as exchange medium (why not include their function as measure of value in the shops??) depends on the stability of the free price of gold.

Consequently, I do not think that the price of gold coins will be stable if governments do not interfere with it.

But its usefulness, purchasing power and abundance will reach their maximum if governments do not interfere with imports, exports, possession and transfer, supply and the demand for gold coins.

Further, I cannot agree with your opinion on bank reserves. I demand the legal possibility to issue notes without any reserves, the latter word taken in the usual sense of bankers. I assert, that the readiness to accept the notes at par, by the bank's debtors and by the bank itself, is quite sufficient to keep the notes at par at the bullion market.

(That's a very important point!)

But if a bank wants to do business with bank reserves, it may do so - - of course I do not demand the prohibition of such a business. But let me remind you of this historical fact:

The merchants of Amsterdam and of Hamburg - - although no blockheads - - thought it absolutely necessary to clear debts, fallen due, with the help of a stock of silver-coins. The example of the clearinghouses at London, Edinburgh, etc. did not impress them in the least. And then arose circumstances, which prevented them from using their silver. And - - wonder - - now they saw that clearing was possible without a stock of silver.

A note in the system of the Four Bills is essentially a clearing-certificate. And, therefore, this note does not require a bank reserve.

Furthermore, I cannot agree with what you say on the necessity to keep a gold reserve for use in external trade. Today no creditor demands gold in external trade. When he demanded gold before 1914, he did so because the law entitled creditors of all kinds to demand gold when the debt fell due. If such a bad law would not have been enacted, or such an interpretation of the legal state would not have been given by the courts, then the debtors would have answered:

You demand gold? Very sorry - - I have none!

In commercial affairs it is not usual to do more than is formally agreed. I often pointed that out. If you will refute me: for facts and reasons I am - - I hope - - susceptible.

What you say about the situation of Germany in external trade is what I daily read in papers. I contend and have often pointed it out, that Germany's situation would be quite different if there would exist:

a.) a free bullion market,

b.) a free market for foreign exchange,

c) the legal possibility to use Milhaud bonds.

Average writers may be excused for not knowing the Milhaud bonds, but what a free market for bullion and for foreign exchange is, that they do know.

They should know that a country's situation in external trading is much more influenced by prohibiting such a market than by any other circumstance. A note for The Economist and some others, for their note books!

You say: "Germany is forced to do it now because she cannot sell enough on short credit."

In several letters I pointed out to you:

1.) From all sides commodities, victuals, etc. are offered to Germany on the best conditions and that the government is now endeavouring to keep these commodities out of Germany.

The government's slogan seems to be, as Zander expressed it:

"Drohend steht der Feind mit Brot und Speck an der Grenze! Lasst ihn nur nicht herein!"

(The enemy stands threatening with bread and bacon at the frontier: Do not let him in at all! - J.Z.)

2.) Credits on a gold basis are formally prohibited in Germany. But no foreigner is so blocked as to grant credit to Germans on another basis than the gold basis. Let this impediment be removed and then let us see if credits on long terms would not be possible in Germany.

Here, too, I am open to a refutation based on facts and reasons.

------------------------

Salazar. You are right, he is not an aggressor, but for a similar reason for which a wolf among lions is not an aggressor.

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India. "… a parliament can prevent him, provided that parliament has the support of the majority of voters …"

For the next Indian dictator the majority of voters will be as a flock of bleating sheep. The events in India prove, that the system of parliamentary government - - invented in England at a time very different from our time - - is quite unfit to protect the people against dictatorship. A new system must be worked out. The basis is given by Benjamin R. Tucker. Our task should be to complete it.

When Hitler proposed dictatorship, he said: Listen, people! I propose it merely:

a) to protect you against a war,

b) to remove the obstacles to full employment,

c) to give you the best administration the country ever had.

A parliament cannot achieve that. (There he was right!)

That the Germans did not discover the impossibilities in Hitler's promises may be an objection against their asserted capacity to govern themselves. But many other people became the prey of dictators under circumstances incriminating them much more than those of the Germans were (without a doubt), incriminated by their elections in the year 1932.

Must I point out the reasons for which I believe that every single Indian of the 400 millions was much more independent under the Pax Britannica and the government as it was - - say - - under Curzon, than he is now?????

I know well (and you know it, too) that many millions of well-informed and patriotic Indians fully share my opinion.

Very faithfully Yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

Dear Mr. Meulen, 4. I. 1951.

I wrote nothing about the many printed matters I get by your kindness in the last weeks. Ascribe it to the cold in my chamber and the chilblains on my hands, which compel me to reduce my correspondence.

I received inter alia:

1.) "The Economist" of 23. 9., 11.11. & 2.12. 50,

2.) "Frontiers", 10.5.50, pages 6 & 7,

3.) "Truth" of 17. 12., 1.12. & 24. 11. 50,

4.) "International Financial News Survey", 10. 11. & 17. 11. 50,

5.) "The Interpreter", 1. 10. & 15. 11. 50,

6.) "City Press", 8. 12. 50.

7.) "Malthusian", November 1950.

8.) " The Economic Digest", of May, April and November 50,

9.) "United Nations Experts Propose USA-Finance Nationalistically Planned Economies", by Phil Courtney, with an interesting letter by you to Courtney.

The day before yesterday I received:

1.) "The Economist" of 9. 12. 50, 23. 12. 50,

2.) "L'Unique", Nos. 47, 51, 53,

3.) "analysis", June 1950, November 1950,

4.) "The Literary Guide", Jan. 1951,

5.) "Economic Intelligence", August 1950,

6.) "International Financial News Survey", 1.12.50,

7.) "The London Newsletter", 23. 11., 14. 12., 21. 12.,

8.) "The Monthly Record", October 1950,

9.) "National News-Letter", No. 752,

10.) "City Press", 15. 12. 50.

Several clippings, too.

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Clipping from 'The Times" of 24. 11. 50: "German Local Government".

As the last elections in Berlin as well as in the Western Zones prove, National Socialism in the form of Hitlerism is practically dead. Why? One of the many reasons is: Hitlerism lived on a very small basis, and that basis was destroyed in 1945. What was the basis? It was the power of the government to compel all government officials to enter into the party or into its organisations. That power was not only the normal government power. The whole economy was subdivided by the Nazis into "Fachschaften", about what Cole, 30 years ago proposed, when he demanded the organisation of England by subdividing it into "national guilds". Perhaps the Nazis learned that idea from Cole; the interest for "Gilden-Sozialismus" was very great in Germany 30 years ago and translations of Cole's book were widespread. But important ideas seldom - - perhaps never - - come into being in one brain only. In most cases they arise in several brains at the same time, a fact realised in the most surprising manner by all patent offices. So the idea of "national guilds" was also proposed by Catholic economists and approved by the pope, who published the famous Encyclica "Quadragesimo anno" in the year 1930 or so.

It's a very bad idea, and Cole proved to be an intelligent man by abandoning it completely, perhaps after he saw what the Nazis had realised with the help of their "Fachschaften". Their proceeding was this: The leader of the

"Fachschaft"- - say insurance - - compelled the managers of the great companies to become members of the party. Then he demanded from time to time the names of the heads of the departments, who were not yet members, the reasons for which they were not, if they had formally declined to become a member, etc.

If such a circular was known in the factory of office, all chiefs trembled and crowded before the door of the party delegate to become a member. The effect was not the expected. When the people were members of the party, opposition was less dangerous than before. At last it became necessary to gather the real Nazis in special organisations.

When the war began, compelling people to join the party was stopped for a reason I do not know. I knew some members of the party, who told me freely, that they had voted for Hitler and then had been compelled to become members. The said: "Had I known, what I know now, I certainly would not have voted for him!" That I heard often. On the other hand - - to tell the truth - - I met very intelligent men, who were real fanatics and went to the party meetings like pious Christians go to their church.

In May 1945 the many millions compelled to become members, became suddenly free. It was a great mistake by the Allies to treat all these men and women as "Nazis" and dismiss them. Man of them had been excellent officers and had been in their jobs for decades. so it was with the members of the "Rechnungshof" in Potsdam, the court for financial revision. One day the manager had made known: I incorporated the whole office into the party; is there one man, who will not belong to the party? Of course, there was none. The objector would have been sent to a concentration camp at once.

Without the system of the "Fachschaften" (national guilds), the Nazis could not have won so many members in so short a time. As far as I know, this system is also accepted by the Kremlin.

The sudden dismissal of some hundred-thousands of competent officials and their replacement by "democrats", who knew nothing, made Germany in a few weeks into one of the worst administrated countries in the world, and in many respects she still is. Twenty years ago she was one of the best administered.

(J.Z.: Even the best administrators cannot turn bad laws, systems and institutions into good administrations. "We do not want to get all the government we pay for!" - J.Z., 23.3.03.)

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Clipping from "The Times" of 4. X. 50. "Dollar surplus". The spectre "Dollar gap" is disappearing - - well - - but Dr. H. C. Hillman, M.A. of the University of Leeds said, at lecture in the British Information Centre, that it disappeared in connection with the war. After the war - - supposed the war does not become a world war - the dollar gap will arise again. I asked him in the discussion, what he thought about the possibility that England paid in Pounds and Germany in Marks. The idea was quite new to him, although he was a very well informed man and knew all important economic events of the last 20 to 30 years, with dates and numbers connected. (He spoke an excellent German and at last by his sympathetic manner won even the nationalists among the listeners.)

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Clipping: "Rearming Germany". There is - what no paper dares printing - - a deep distrust in the military qualities of the present commanding generals. Concerning Eisenhower, many remember that he needed many months to clear Italy from the German Armies, although his superiority was (it is said) about 4 : 1, at least in aeroplanes and tanks, perhaps also in artillery.

In such a quite abnormal situation perhaps a right of armies to choose their commander would be a solution.

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Very faithfully Yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

9. I. 1951. Your letter of 4. I., received 6. I. 51.

Dear Mr. Meulen,

considering only the economic point of view, the investment of paper-shillings in chain store shares seems excellent. I do not know any better. If stores priced their commodities in gold units - - a reform that must come - - you will profit not only as a buyer but also as an investor.

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My sister writes me from Wiesbaden, that there chicken cost 2 DM per German pound. That's less than presently at Berlin (2.60 DM), although Wiesbaden was and still is ill-famed for her high prices.

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Temperature in Berlin has much improved. At the street 6 1/2 degrees Celsius = 43 1/2 degrees Fahrenheit. My window is open. I dislike the closed-in air of a room and consider one or two additional chilblains as the lesser evil.

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Gold coins again.

You say - - not expressis verbis, but indirectly - - the measure of value, say for the purpose to express prices in shops, should be a paper money, managed by an honest, trustworthy, intelligent, etc. man. Gold coins are a bad measure of value.

I say: gold coins daily offered and demanded at a free bullion market (the latter condition is quite essential) are the best means to express prices in shops which have been invented until now. All in all, they are the least evil for that purpose.

When now paper money is used as a means to express prices in shops, it is because it is endowed with cours forcé. (Please invent an English word for cours forcé!) It is not because people trust in that paper money.

They do distrust it, as is proven by the occurrences in the savings business.

If the cours forcé would be repealed, within a few weeks or months all shops would have introduced gold prices (in the sense of 1913) and, consequently, the workers would demand gold wages.

If on the same day, when the cours forcé is repealed, freedom of note issue is admitted, then there will be at least 100 honest, trustworthy, intelligent etc. men who issue notes, but every man would pursue a system different from the systems of his colleagues. A most interesting time of experience would begin. Within less than a year all paper money would be refused, by the public, which is not at par with gold coins.

There may be organised special "Zahlungs-Gemeinschaften" - - to use an expression invented by Knapp (his daughter married the Bundespraesident Heuss), which prefer a special paper money - - say, that issued by you - - as measure of value and as means of payment and, perhaps, one of these Zahlungsgemeinschaften survives as the best and at last becomes the Zahlungsgemeinschaft of the whole people. That will be a process for years.

But the next consequence of repealing the cours forcé and admitting Free Issue of Notes, will be that gold coins as a measure of value are accepted by about 99 % of the population.

That is to be foreseen with the certainty of a lunar or other eclipse.

Economists speaking of the "gold standard" should distinguish (what very few did and do):

a.) gold coins continually exposed to offer and demand at a free market, as a measure of value and means of payment in shops,

b.) the obligation of a bank of issue to redeem its notes on demand, or with a delay, in gold,

and they should foresee:

c.) the possibility to keep standardised means of payment at par with gold coins, not by the obligation to redeem notes but by quite different (an in practice simple and easily to be applied) means.

The terminology of some recent economists (Kitson, etc.) to reserve the word "gold standard" for b.) should be quite abolished as contrary to scientific and even common language and to logic.

In this connection I read with great pleasure the article marked by you in the April issue of "The Economic Digest": "The Growing Influence of Gold". In this article the expression, "free gold market" is used as it was ever used in the USA and was used in England in the 19^th century. My impression is that the illogical and in no way established terminology of Kitson is now abandoned. In none of the journals, that you were so kind to send to me, did I find the expression "free gold market" used in the sense of Kitson.

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Long-term loans again.

We both say: Long-term loans should be possible quite independent of a-given state of supply with currency, whether this currency be gold coins or paper money, privately or government-issued.

In a case of general hoarding, e.g. banks and other institutions should have the right to issue, at once, fresh and standardised means of payment; as many as are in demand; while, on the other hand, the right of the public, to refuse suspect or undesirable means of payment offers a sufficient protection against over-issues.

The freshly issued and standardised means payment should be also suitable for use in financing long-term loans. But from here on we differ.

You say: The financing of long-term loans should be performed by handing over notes to the debtors. There is, practically, no upper limit for note issues, although the fresh notes are not endowed with cours forcé.

(J.Z.: Perhaps B. should here have asked: What is the function of capital market securities at all, of saving for them and investing savings, if that were possible and a sound policy? Could governments banks or privileged note-issuing banks really "finance" all medium and long term capital requirements merely by their note issues? What was the effect whenever this was attempted? Are savings and the purchase of capital securities with them, quite superfluous? - J.Z., 24.3.03.)

I say: The possibility for issuing standardised means of payment without cours forcé is limited. Experience shows that the limit is about the value of a month's production of the country. (3 to 5 weeks, or so.) It is, in practice, not possible to finance long-term loans by simply handing over freshly printed notes to the debtor. Such a "financing" would involve over-emission, and such over-issues produce a discount of the notes in a free market. The discount produces wide-spread refusals of the notes.

But long-term loans for useful purposes are always possible through interest-bearing bonds.

The purchase of interest-bearing bonds and the sale of such bonds can easily be performed with the help of a note-issuing bank, shop-association, etc. (under certain conditions. - J.Z., 24.3.03.)

Loans should be so organised, that the bonds, when falling due, are not redeemed by currency but are accepted by the debtor in his normal business, a procedure wide-spread in German before the currency reform of 1908.

(That would be just one of the repayment option. The standard one would be the repayment of the loans with the standardised goods and services vouchers then issued and accepted by the debtor in his business and used then to repay his loan. In anticipation of his shortly upcoming repayment obligation, more such notes could be issued, based on the goods and service capacity of the debtor. In this way, not only the debt certificates of the long-term debtor, in the hands of a few, could be used as means of payment against him, but suitable currency, issued for that purpose and being in the hands of many of his customers, making them and thereby him more "liquid". Here B. does not mention the precautions to be taken when those, who are prepared to grant the long-term loan, use shop foundation money (privately issued notes) to subscribe to the loan certificates, or declare their readiness to undertake such an obligation. Here, too, the bond-issuing bank would merely act as a mediator and facilitator between those really granting the loan, with their goods and services, and those receiving it. Long-term notes must have the backing not only of the good will and intentions of the issuing bank but that of those, who with their goods and services do really support the loan and do undertake corresponding obligations and obtain corresponding rights, in certified form. Otherwise, under the Meulen-system, the bank would write out a "cheque" upon their goods and service supply capacity, and this without their consent and without granting them certified capital investment rights. Naturally, they are free to discount and refuse such issues. They are under no obligation to accept them, no more so than they are under obligation to accept the bonds, shares, mortgages or other securities that others have issued. That these appear would then in the form of freshly printed banknotes, of supposedly trustworthy banks, does not change their nature. They are then merely camouflaged capital securities - which do not even promise any interest payments. The obligation to publish the issue and reflux details of all free banks would rapidly reveal this kind of fraud. So would the note-exchanges between issuers and acceptors and, naturally, the free market for competing private money issues. - But B. was quite right in pointing out this alternative repayment option as well, as he did here. - J.Z. - 24. 3. 03.)

The same should be the case for coupons when they fall due. (In the shop of my father, I often saw such coupons (at Duesseldorf); in Rhenania they served as currency. (J.Z.: B. never told me about the shop of his father or about his father. Apparently, there was a very serious clash between them, which, according to Mrs. Rittershausen, even led to a court case between them. B. must have felt that he had been greatly wronged but thought it better to never talk to me about it. - J.Z., 24.3.03.)

By such provisions a complete independence of the economy from the supply of currency with gold coins or State or other conventional notes is guaranteed.

Even if, within an hour, the whole currency is hoarded and has thus disappeared from circulation, within the next hour a fresh currency can supply the disappeared one.

(J.Z.: Well, even instant printing does take some time. However, under competitive note-issues forms and printing facilities for new issues are always ready, just waiting for new orders, which might be given by telephone. - J.Z., 24.3.03.)

Experience in a society free from the note monopoly, free from cours forcé of the currency and from similar restrictions will teach us both.

(J.Z.: A polite way of making his point here, seeing that M. habitually ignored such experiences and hints towards them. Faith or fixed ideas over facts, as happens all too often. However, the defects of Meulen banks would make themselves rapidly known to those who tried to establish and conduct them and who dealt with them. Then even M. could not have ignored the facts any longer. Like so many, he was a well-meaning and benevolent pragmatist or practical man, who relied all too much on false ideas, principles, defective premises and traditions and without a thorough enough knowledge of relevant experiences. Nevertheless, he did manage to keep the general ideal of Free Banking and Free Trade alive, for decades, however flawed his own ideas about them still were, in their details. - J.Z., 24.3.03.)

We both agree that everyone should have the right to try his systems and to offer to his fellow citizens means of payment of a system which he things to be the best.

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"Individualist" and currency reform.

Individualism is an "Ism" as are many others and in itself is no more interesting than, say, the doctrines of the old Eleates or of the Pythagoreans. But Individualism leads to enormous consequences and for this reason it is more important and interesting than any other Ism ever invented. There is a immediate connection between Individualism and currency. Also connected with individualism are internal trade, external trade, the wage system, the standard of value. There are, perhaps, few sides of practical life not connected with Individualism. If I had the possibility to write a book, I would insert chapters like:

1.) Individualism and currency, a new aspect of the problem.

2.) Individualism and the until now tried means to remove unemployment - a quite new aspect of unemployment.

3.) Individualism and control of foreign exchange, an unexpected connection. Etc., etc.

Certainly, it is possible to consider Individualism without its consequences, but that is like considering attraction without regard to the stars's mutual attraction. ( J.Z.: … that is like considering gravity without regard to the mutual gravitational attraction between starts and between stars and planets and between planets and moons. - Perhaps that is what he may have meant with these words. - J.Z., 24.3.03.) Then it would be interesting only for a few people, some mathematicians and some philosophers.

Individualism not only supplies quite new aims and new views, it supplies also the technique to attain the aims and supplies reasons against false techniques. That an unlimited right for individuals to issue standardised means of payment, combined with the right of other individuals to refuse these means of payment, is the best monetary technique, can only be discovered by starting from Individualism. Starting from any other Ism, one comes to State inflation (the word used in the sense of 1913), to Keynesian managed currency and such monsters.

If until now some readers were not content with the monetary articles of "The Individualist", it may have been because the articles were not always individualistic enough. E.g.: The right to refuse means of payment is as important as the right to issue them, but I never met an article on the right to refuse paper money.

Special interest in money questions: I assert that in England there is much interest for money questions and in the ranges of readers of The Individualist certainly not less than among readers of - - say - - The Economic Digest, which frequently publishes articles on money questions. Concessions to modern money theory or Keynesian theories are in all cases contrary to Individualism and not only may frighten readers aware with their Anti-Individualism but also because they read them daily in their papers.

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My modest contribution to a system of monetary liberty was for your personal information, not for being published in The Individualist. For that purpose it must be more carefully worked out.

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Your remarks on right. That's a very interesting point and goes deep into philosophy. In the German language the problem would represent itself in a different aspect.

The German scientific language distinguishes:

a) Recht, and (Right - J.Z.)

b) Befugnis. (Authorisation, Permission, Licence, Privilege. - J.Z.)

The first is that kind of right which is, as Schiller says, "mit uns geboren" (born with us. - J.Z.) It is independent of a grant by any powers.

One may say: A Right not granted or at least acknowledged is an "idea" and has nothing to do with reality. That would be an error. Repeatedly in history rights believed to be inborn became the most effective powers. Carlyle, in his history of the French Revolution represented this fact in a most convincing manner.

Some time ago I read the following little historical story, which happened 100 years or so ago.

At a little German settlement - - numerous at that time, when, after 1848, so many Germans emigrated to the USA - - appeared one day a Negro. He was a slave and had fled from a Southern State. The German peasants gave him food and the advice to go to Canada, where he would be in perfect safety. This Negro went North, but a few days later reappeared in the company of two Southern policemen, who had pursued and caught him. He was covered with blood dirt, for he had fought before they could arrest him. The policemen demanded from the sheriff food and assistance. The law of this Northern State was that a policeman in legal service of another State could demand assistance of any sheriff. But the first thing that these Germans did was to liberate the Negro and to badly beat the two policemen. Then the sheriff arrested them and send the Negro, with a villager, to Canada. Only once that guide had returned and informed the sheriff, that the Negro was safe, did the sheriff let the policemen free and gave them the advice to leave Minnesota as soon as possible. If he saw them again, he would accuse them before the inhabitants of kidnapping. All that was against the law, which was here on the side of the policemen. But the Germans took the standpoint, that the inborn right of every man was on the side of the Negro. And thus this seemingly uninteresting right here had become a power.

If I say in German: "Jeder Buerger soll die Befugnis haben, Noten auszugeben" (Every citizen should have a permit to issue notes. - J.Z.), the sense is: the government shall permit it. And if the government does not permit it, every good citizen helps the government to suppress private note issuing.

But if I say: "Jeder Buerger hat das Recht Noten auszugeben" (Every citizen has the right to emit notes. - J.Z.), then this means, the government acts as a tyrant if it suppresses this right, and every good citizen helps to remove such a tyrannical government.

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In my next letter I hope to continues. The matter is of very great importance.

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Very faithfully Yours - signed: U. v. Beckerath.

(J.Z.: B. liked the method of Jesus Christ, of telling little stories with a message, and, likewise, the method of Socrates, who asked leading questions. He blamed Socrates for not having asked a simple question during his "trial", namely: Can you point out to me even one Athenian citizens, whom I have, supposedly, "corrupted" by my talks?" - Since thousands of Athenians had listened to him, and, obviously, had not become "corrupted" by him, this question would have brought them forward, in their own defence against that libel and also in defence of Socrates. Alas, the best reply is not always readily at hand - until the best replies are finally combined in a vast encyclopaedia of the best refutations so far found of all popular errors, myths, fallacies and prejudices - which are obstacles to human progress. - J.Z., 24.3.03.)

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13. I. 1951. Your letter of 10. cr., received today.

Dear Mr. Meulen,

chicken could be imported to England from Germany. They could be paid in Pounds, if there were not the prescription not to pay them in Pounds. Certainly, the German exporters would gladly accept Pounds. The cost of the transport to London is hardly greater than the cost of transport from the village, where the chicken are hatched, to Wiesbaden or Berlin. I do not know about the English duties on imports.

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Payments abroad. You say: "The point of our discussion was: Is it better that London should pay for American exports Pounds or dollars?

I think, the point was another one. I affirm (thank you!) that if there is a dollar-gap or a similar gap, it should at least be tried to pay imports by a money that is at hand, so as in England's case Pounds are at hand and in Germany's Marks. At least one party should ask the other: Will you accept that and that money? I know now, from the discussion at the lecture of Dr. Hillmann, that that possibility was never discussed England.

(J.Z.: I once participated in a large meeting dealing with foreign exchange rates and their difficulties, under foreign exchange regulations, in which the alternative of freely floating exchange rates was rejected out of hand. And in another lecture, by Robert Conquest, to a large crowd, mainly of teachers at Sydney University, in which this speaker admitted that he had never considered the possibilities of education without all its compulsory and monopolistic features! And that aroused no protest in these circles of vested interest in compulsory miseducation. How narrow-minded can specialists and "experts" get? - J.Z., 24.3.03.)

I do not deny that sometimes it may be profitable for England to pay in dollars, and if Germany possesses enough dollars, it may be profitable for Germany to pay not in Marks but in Dollars.

I did not affirm that the rate of the exchange would be affected by offering dollars for pounds or pounds for dollars at London or at New York.

You say (indirectly): There are enough dollars available to English importers, so that they do not need to offer pounds. But all English papers say the contrary and always speak of a dollar gap, and Dr. Hillmann came from Leeds to Berlin to deliver a lecture on the existence of that gap. He spoke so well and convincingly, that I must believe in the existence of the gap. I differ from Hillmann only insofar as he said: To remove that gap we must reduce our prices and get new possibilities to export. My standpoint is: Before you do that, offer to American exporters Pounds. If they refuse them, then it will still be time to scrape together the needed dollars by exporting.

The now used procedure demands: First export, then import, by the thus earned foreign exchange.

The natural procedure would demand: First import, provided the foreign exporters are content with our domestic currency. If they are not content with it, then they may keep their commodities.

(They burn to sell for pounds in England and for Marks in Germany.) (They are most eager to … - J.Z.)

Then await the return of the domestic currency and give the people, who present it, what the people demand.

Here all great libraries are burnt. If not, I would have stated, for years, which American law prevents Americans from accepting other currencies than dollars, and which English law forbids the export of Pounds. The German law, which forbids payments in Marks was published (if my bad memory does not deceive me) in the Reichsgesetzblatt of 1934.

Gold coins again. Certainly, I admit that today the price of gold, expressed in paper money, is affected by fear of war or political upheaval. But the prices of all commodities of the wholesale trade are so affected. The relation of the paper price of gold to the paper price of wholesale commodities is much more stable than the purchasing power of paper money. Expressed in other words:

The "gold prices" of commodities are more stable than their paper money prices. That is by no means a new discovery.

Why gold, after being minted, shall be a worse measure of value or in any respect less useful than ingots, I do not see. To melt government-manufactured coins into bullion is prohibited in England, yes but:

I.) Replacing this melting by exporting the coins to countries, where they may be legally melted, is a very old practice and

II.) the law does not prohibit the melting of privately standardised ingots (medals), such as I proposed them.

We must not overlook the fact, that the State has failed in all spheres, also in providing the people with standardised ingots of precious metal. But - - calumny even of the devil would be wrong - - it may be that the mints even today continue to provide the gold industry with standardised ingots in the shape of legal gold coins, but without stamping them. (A good thing, which in normal times protects the gold coins from being melted.) From a report of the Reichsbank (1908), I learnt that this expedient has probably been invented by the American Mint.

Concerning the price of coins one must distinguish

a.) times when coins are legal tender, are uses as measure of value in shops and paper money is not legal tender, also is not acknowledged by merchants, etc. as legal tender, and

b.) times when paper money is legal tender or acknowledged as legal tender.

In the case of a.) a price of gold coins is impossible and has never been observed.

In the case of b.) a price of gold coins is normal.

I suppose, that also during the crises of 1857, 1866 and 1890 gold coins will have had their price and a higher one than L 3. 17. 6., the latter in paper or silver or copper.

Interesting is your information, that in 1812 the English Government paid its troops in Guernsey with guineas and gave them for 23 s., the latter obviously against the law of 1811. (Free Banking, page 106.)

What I said above under a.) and b.) is not affected (I hope we agree on this) by the English law, that Notes of the Bank of England are legal tender as long as the Bank redeems its notes on demand at par.

(Keynes, in his tract on monetary reform - - burnt - - reports that during the first world war the Bank of England left those people to wait, who came to change their notes for coins, for days and longer, and opened only one counter for the purpose of redemption.)

Free Banking. You say: "… shopkeepers will not find it so easy to replenish their stocks."

Here you are right, for many kinds of crises. But it has nothing to do with the notes in my system. Here the shopkeepers get short-term loans from the bank and the interest is so high, that shopkeepers use every note received primarily to repay their debt to the bank.

The replenishing of stocks of shopkeepers is never financed by note-issuing banks and insofar has nothing to do with our discussion.

Let me remark here, that I the crisis of 1932, one of the severest ever observed, the wholesalers applied urgently to shopkeepers to buy commodities on the most easy terms.

Since you prefer your system to mine (you will excuse this short expression), please tell me, to what extent, in your opinion, England's circulation will absorb your notes under circumstances favourable to your system.

And, if you have estimated the amount, please tell me how long-term loans will be financed in your system once this limit is attained.

You style "my" system as less delicate than yours. Your system is much simple to manipulate than mine. But the disadvantage is - - in my opinion - - that the system does no longer function once the quantity of notes per capital surpasses an amount of 5 or 6 guineas per head, expressed in paper money. That would be (correct me, if I am wrong) the highest amount per capita - - coins + paper - - ever observed in England.

But the need for long-term credit is much greater than that sum. It may be 5 guineas per capita and per annum. England will leave your system if your notes get a discount at the market because of over-issues.

Once the discount arises, then the circumstance that your notes are not endowed with cours forcé will become effective. Then the thing becomes delicate for you!

If the enemy has occupied the territory, then neither my system nor yours will be applied but military notes of the invading army will be used.

If military notes are not used, as in the war of 1870/71 in France, and at the times of the Napoleonic wars, the most delicate commercial operations are executed, as in times of peace, as is reported in many memoirs; local histories, etc. of those times.

In Prussia, in the years from 1807 to 1815, times of great misery and troubles, bills of exchange, trading in futures and many complicated other methods, as were used in that time in the Netherlands (the commercial teacher of Prussia), were also used in Prussia.

At this time, the idea arose in Prussia to diminish the commercial risk by a transport insurance. I will not enter here into the details, since they are found in every good textbook on insurance.

By the way: From old laws and old textbooks I learnt that commercial business and credit business, in old times, say 150 years ago, was much more complicated than, say, in 1913.

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The business of future note banks will, primarily, be to provide means of payment for wages, so that workers, employees and artisans become able to buy.

Before 1844 note banks had nothing or nearly nothing to do with that business. Many considerations, quite right for old times, are no longer applicable to the future note business.

Moreover, in old times note issuers handicapped by redemption obligations. Their business was limited by the store of precious metal they could secure. The optional clause protected (not theoretically but practically) the stock of precious metal, but did not enable bankers to issue without such a stock. That is a very important point. The seven authors of the Four Bills often spoke of that circumstance and at last we agreed:

1.) The abolition of the redemption prescriptions and replacing them by keeping the notes at par at the market, creates a quite new moment, one until now not discussed in theory.

2.) More than 3/4 of the experiences of the old note banks (In Germany more widely spread than in Scotland) are not applicable to the new business, seeing the old experiences were primarily concerned with the possibilities to protect the bank's precious metal.

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Balance of trade. You are - - I see - - on this point and adversary of Adam Smith, David Hume and some others of that rank. that is a very bad position. It is like standing at the top of a steeple and this in a storm of 30 yards per second. He, who dares that, must fall. You mast here fall, too.

Do you know the German statistics (probably repeated abroad) on the balances of trade? Some decades ago a German economist - - I forgot who - - said: If the balances, reported in the statistics, are right, then the sum of all imports in the world must equal the sum of all exports, with slight differences. He found, in the average, a difference of 15 % in favour of the imports. The next year was the same and so it went for many years. Always the imports of the world were greater than the exports. Einstein's relativity theory was not yet known at that time and so the man dared to say: The laws of arithmetic remain valid and those of logic, too. There must be a systematic error in the statistics.

If I had in this cold (5 degrees Celsius at the street = 41 degrees Fahrenheit), and no coal, the possibility to write more, I would here reproduce the investigations of Liefmann in his excellent "Gold und Geld", 1916. Liefmann proved by numbers what Adam Smith and David Hume proved by reasons. He demonstrated, that the doctrine of the balance of trade is an agreed upon fable ("convenue" says B., from French usage. - J.Z.) and has nothing to do with facts.

The gold movements in the world - - he says - - were seldom caused by trade movements.

Liefmann said nothing of the law empowering creditors to demand gold instead of referring them to the clearing possibilities. But, certainly, that law was the conditio sine qua non of the gold movements.

You do not believe that the said law had much to do with the gold movements. I will share your opinion if you will be so kind as to present me with your reasons.

But you are right: If gold would not have been sent, then the value of paper would have fallen still further than it fell, and imports were reduced and exports were encouraged.

I say: Why not???

When the exchange rates are lowered by a devaluation, all people say: We have a prudent government!

And if the effect is produced by the market, exactly in the measure required and for the time required - - something impossible to perform for a government - - then the same people say: The market is an evil thing. It must be counter-balanced by gold exports and similar nonsense. (The latter from a philosopher's standpoint.) According to popular opinion, the best way is, to abolish the market and replace it by a planned economy!

Commodities offered to Germany. No - - at the moment Germany is much better off - - the chicken price proves it, although the price, immediately before Christmas, may have been some Pfennig higher than later. But you will have your revenge. The Professor Noelting, "Grosse Kanone" (famous expert - J.Z.), demands energetically the reintroduction of the Zwangswirtschaft (planned economy), "before it is too late". (How do you consider this "excellent reason"????)

You say: "… political relations are so uncertain that creditors are not inclined to give long-term credits. If Germany, as people believe (I am not sure) imports more than she exports, there must be creditors who wait until they are paid. If the payment is performed soon, then the credits are short-term credits and if not soon, then the credits are long-term credits, and a third possibility does not exist. But, if you will demonstrate to me, by examples, a third option, then I will accept your opinion.

India. You say: "The best government in the world is no substitution for self-government."

You are very right, but if the present regime of Nehru and his court is a self-government, then the governments of "Emperor Henry I" of Haiti (established 1811) and of "Faustin I" (established 1849) were self-governments, too.

Parliament? Come to Berlin, go to a Russian Cinema and be impressed by the parliamentary scenes of Eastern Germany, which are often represented there. Two days ago, I saw them in the cinema at Bahnhof Friedrichstrasse. (50 Eastpfennig = 10 Westpfenning.) But, to tell the truth: I seldom saw a better film-technique, even at the non-political films, which were very good. The music was good, too.

Britain held all the executive posts??? The number of British officials was smaller than in a small English town - - at last only 600 or so.

Colour bar: Here you are right. But is it removed? Has the Pariah the right to work side by side in factories with the Hindoo? (Theoretically, he has. Practically, the workers go on strike when a Pariah is admitted.

Before, there was established a "Bank of India, with its privileges, there was a right of private institutions to issue standardised clearing cheques. The "National" government repealed this right. I do admit, however, that this right was rarely or never practised.

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Thank you, beforehand, for the Punch, which I expect with pleasure. I have always been an admirer of British wit, although - - to understand the Punch well, a very good knowledge of the English language and English conditions is required. The old German "Simplicissimus" was so full of allusions that could only be understood by contemporaries and Germans, so that even young Germans of today do no longer understand all its jokes. I observed that personally.

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Very faithfully Yours - signed: U. v. Beckerath.

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14. I. 1951.

Dear Mr. Meulen,

the clipping from "Times: of 17. 11. 50: "Korean War and after", II.) "A Mixed Legacy from the People's Government", is very interesting.

One gets the impression that in North Korea the landlord in agriculture has simply been replaced by the government's tax collector, so that the peasant still does not keep more than 50 % (or so) of the crop. Nevertheless, the peasant is thankful, for before the agrarian revolution he could keep much less for himself. It was unpleasant to read, that conditions of life in North Korea were not worse than in the South and in some respects (e.g., taxation) better. Obviously, in both territories a great part of the taxes was levied in natura. Already Adam Smith points out what a bad system that is. This fact is also acknowledged by all experts.

I estimate that, if there were agrarian banks of issue and if the governments world permit the peasants to pay taxes in the notes of these banks, the peasants would keep at least 70 % of the crop and the yield of taxes would be at least doubled. The immense waste, inseparable from a tax system based on taxes in kind, would be much reduced or would even disappear. It would be a valuable contribution of monetary individualism (the name would have to be changed; the Asians misunderstand the name) to the Korean problem and not only to the Korean.

(How to perform that? No paper would print such a contribution, which is, necessarily, in contradiction to the whole modern money theory, primarily to the Keynesian, now dominant.

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The clipping from the "Times" of 10. 11. 50: "Excess Population in Italy, Large Scale Emigration as the only Solution", displeased me very much. I state:

1.) Nobody, neither the Time's "Rome correspondent", neither the "population experts", nor the Italian government have considered the possibility to free the import of victuals to Italy from all restrictions, to permit every means of payment for victuals coming from abroad (At the moment - - its seems - - the government permits only dollars), and to stop all kinds of planned economy for victuals.

2.) Even under the present conditions the bakers are looking for customers, not the customers for bakers.

3.) The "experts" take it as self-evident that the quantity of employment opportunity is a given one and cannot, essentially, be increased by human influence - - in other words, they did not read

page 342ff of "Free Banking", which might have taught them, that Italy could even receive Chinese etc. as immigrants and do so without lowering its standard of living, but - it would have to give up her present crazy monetary system.

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Clipping: "Rearming Germany". No paper - - it seems - - dares to print the real opinion of most Germans:

1.) That the Allies neglected to re-enforce their divisions at the Eastern front and that now their military position is hopeless.

2.) That, therefore, a re-arming of Germany would be a useless measure.

e.) That, in view of the present military situation of the Allies, the Germans have to choose between submission to the Russians or suicide (the latter is much discussed) and that joining an Allied military unit would be nothing than a form of suicide, but certainly worse than a cut with a blade over the artery.

Whoever thinks that I exaggerate may visit the Western zones or West Berlin and talk with the people.

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Very faithfully Yours - signed: U. von Beckerath.

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14. 1. 1951.

Dear Mr. Meulen,

in the following I reproduce the German text of a communication which 1 read today in the Tagesspiegel, published by the "dpa", a semi-official telegraph-agency.

"Laender wollen keine Ostzonenfluechtlinge aus Berlin."

Die mit den zustaendigen Bundesbehoerden vereinbarte Umsiedlung von Ostzonenfluechtlingen aus Berlin in das Bundesgebiet is durch den Widerstand der Bundeslaender gescheitert. Mit einem Hinweis auf die eigne Notlage lehnten es die Laender ab, monatlich insgesamt 1500 Fluechtlinge aus Berlin aufzunehmen, wie es mit dem Bund Ende des Jahres vereinbart worden war."

(The federal States of German do not want any refugees from Berlin, which came form the Eastern Zone. Their intended resettlement, first agreed-upon with the responsible authorities of the Federal Government, failed due to the resistance from the federated States. Pointing out the own emergencies, the States refused to accept the altogether 1500 refugees a month, as they agreed with the Federation at the end of last year. - J.Z.)

The monthly number of refugees from the Eastern Zone is about 2,000. The great danger is, that already in these days the Magistrate of Berlin, as well, will refuse to accept these refugees. Then they will be sent back to the East, which for everyone means at least torture in a concentration camp and, for many - - or most - - death as a consequence. Everybody knows that, the Western governments, the Magistrate, the people.

An action by the people is as good as impossible, there is no legal possibility and hardly any illegal one.

Concerning the governments, I must say that their resolution is one of the meanest acts that I know of from the whole of history. One must consider, that here concerned are governments of countries which got, from their former enemies in war, not only millions but many hundreds of millions of marks, in the form of victuals and other things of greatest value for them. Probably some hundred-thousands of people were saved by these victuals. And now these governments refuse to help a quite insignificant number, compared with the help they got, and it is a help not for their former enemies in war, but for their own countrymen. Daily their proclaim their "solidarity" with these countrymen, and now the world sees the practice of that solidarity.

What the governments now does is simply murder of several hundred people monthly. If there would be justice in the world, they must be accused as much greater criminals than the war criminals condemned at Nuremberg.

(Greater? Much greater?: These Nuremberg criminals murdered millions of their own countrymen by their activities, not only millions of foreigners. The total losses due to the involuntary return of refugees to the Eastern Zone are, possibly still unknown. But I remember reports that e.g. deserters from the Red Army, involuntarily returned to the Soviets, were shot before the assembled troops, with the declaration that all deserters would suffer the same fate if they tried to escape to the West. Anyhow, morally the involuntary repatriation of even one refugee to the not so tender mercy of a totalitarian State is already the same as the same victimisation of millions. - J.Z., 25. 3.03.)

If the people in the West would be less indifferent, there would be mass meetings in every town, in which would be demanded the immediate resignation of all ministers in the West and their impeachment. What a difference between them and the noble Marshall Bersarin (not forgotten, neither in the East nor in the West of Berlin), whose first care was to supply the conquered Berlin with victuals! And that, although - - I estimate - - the supply difficulties for the Russian Army in April of 1945 were very much greater than they are now for the governments of the West.

Are ministers, who deliver, in cool blood, many hundreds of their countrymen to death by torture, still morally able to govern?

You and I, we know, that there are no economic difficulties, and that by a few strokes of the pen there would be created the possibility to supply every man, able to work, with employment, and more: there could, by the same strokes of the pen, be created a situation, where every fugitive is a welcome help for West-Germany's reconstruction.

It seems, old Voltaire is in the right, at least for our time:

"Nous laisserons ce monde-ci aussi sot et aussi mauvais comme nous l'avons trouvé en y arrivant."

Very faithfully Yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

15. 1. 1951.

Dear Mr. Meulen,

you know that the Soviets started an international action to "outlaw" atomic bombs. Many people take that quite serious and subscribe to the call. From time to time members of the Eastern youth organisations here try to gather signatures for this call. I think that to be an innocent pleasure. Many people in the Western sectors gave their signature because they believed it was an action considered to be illegal in the East, for it is known in Berlin that the Russians possess atomic bombs and, obviously, are very far from destroying them or declaring their use as "unlawful". Then it was published that this action comes from the East and the public was warned against participating. That was very stupid. If the Berlin parties would have put up posters:

Berliners - - you may sign for such calls, but add: "Russian Bombs, too!", that would have been a good thing and many Berliners would have added the three words, certainly not to please the Soviets. But the West-Berlin Magistrate punishes the boys and girls who try to get signatures.

You can imagine, that thereby a great fanaticism arises. The effect must be quite the contrary of the intended one. Moreover, it is - - I think - - against the Berlin constitution, which proclaims freedom of expression.

I'm very astonished that the Oberbuergermeister Prof. Reuter, an intelligent and liberally thinking man (member of the Social Democratic Party) tolerates such a political nonsense and violation of freedom of expression.

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Thank you for the clipping from the "Times" of 28. X. 1950:

"Discount Rate in West Germany - - restrictive effect on economy." The discount for bills was by the "Bank Deutscher Laender", raised from 4 % to 6 %. The importance of this is very much overestimated. Statistics teach that the part of interest in prices is for most commodities so small, that it is difficult to detect it statistically. There are very few exceptions, e.g. those, in which new machines are bought with long-term credit. Even here the repayment of the credit is a much greater burden than the interest to be paid for the not yet repaid part. Say, a factory bought machines for a million marks, with the obligation to repay the credit within 60 months and pay an interest of 1/3 % monthly. That would be a monthly instalment of 18,417 marks. If an interest of 1/2 % is charged, then the instalment is 19,333 marks. Nobody will affirm that difference of 1,000 marks monthly, roughly, is really dangerous for such a great factory. Concerning the short-term credits of the factory, they will probably be even less influenced by a difference from 4 % to 6 % p.a.

Very faithfully Yours - signed: U. v. Beckerath.

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18. I. 1951.

Dear Mr. Meulen,

before me is the book "A History of Economic Thought" by Erich Roll(rest cut off! - J.Z.), 24 Russell Square, Faber and Faber, 1945. I got it from the British Information Centre. The book is excellent. I do not quite agree with the title. "Contributions to the history etc." would have been better. It is impossible to write a history of all

economic thoughts.

I miss a history of the legal tender idea, of Free Banking, of clearing.

But the book offers on 506 pages so much information that it can hardly to be kept in mind upon first reading.

Interesting are the explanations on the balance of trade idea.

By the balance was always understood:

Imports including precious metal = Exports including precious metal.

The "balance" was considered as favourable when the sum of imported precious metal surpassed the sum of the exported.

That will not be a new point of view for you. But I beg to ask you, is it permitted to speak of a favourable or unfavourable balance of trade, when the precious metals are no longer used as means of payment?

When people today speak of an unfavourable balance of trade, they mean, that a part of imports was not paid by exports but that credit replaced the exports. That is a situation quite different from the situation formerly called an unfavourable balance of trade.

As I wrote to you, the possibility to pay a foreign creditor with currency of domestic origin, may create a third situation in foreign trade, where, for a short time, a deficiency of exports is filled up by currency of domestic origin, but not consisting of precious metal but of irredeemable paper money.

Such a currency possesses an irresistible tendency to return very quickly to the point from which it started and to exercise there a purchasing power.

Coins of precious metal were quite free from such a tendency, and the fundamental difference, obviously, is not yet considered with due attention by economists. Certainly, that is the case for Germany. If you know an author in England or elsewhere, I would be obliged to you, if you would be so kind and communicate to me his name and the title of his work.

The system of using as a means of payment (collaterally with bills of exchange, which are later cleared) currency of domestic origin, creates an oscillation, insofar as at a time, when more currency is imported than exported, it seems as if there would be a gap; while two days later, when the returned currency has exercised purchasing power, the gap is filled and the exports may now even surpass the imports, if only commodities are taken into consideration.

Similar considerations take place in the opposite case, when more currency is exported than imported.

Here one may reply:

It's an old truth, that a balance of trade always is zero if long spaces of time are considered. (I do not speak of statistics, which always deserve distrust.) Agreed.

The third possibility is not yet an economic factor simply because it is prohibited in nearly all countries. ( I know no country where it is permitted.)

I would think it useful to invent quite new words for possibility s and possibility 3. The old world "balance of trade" should be reserved exclusively for that what it meant when the word was firstly used.

What do you think?

Very faithfully Yours - signed: U. v. Beckerath.

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20. I. 1951. Your letter of 18. I. 51.

Dear Mr. Meulen,

I am quite touched! You offer me bed and board, if I come over to London, fleeing from the cold in Berlin. I thank you very much.

Probably, I exaggerated the climatic conditions of Berlin. At the moment, we have on the street 5 degrees Celsius (= 41 degrees Fahrenheit) and my window is open. It was open the whole night.

Perhaps the Heaven is preparing my soul to become an Eskimo in my next existence. Eskimos are an anarchistic people. There are neither chieftains nor currency regulations nor any other statist mischief. Exactly what I want! The fur of the first polar bear I kill is for you. And if you come to my snow hut, you will be very well received and get a gallon or the best seal-oil as draught of honour.

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Very interesting, that in London, too, coal is scarce. Obviously (I think), it's one of the consequences of the present English economic and monetary system.

In Berlin, where at the moment prices are pretty free, we would have coal enough, if the great lock at Magdeburg would not have been closed, right at the moment when a fleet of coal barges for Berlin was ready to pass the lock. At that day the lock suddenly had to be "repaired". The Russians do not consider that such chicanery is not a good propaganda for the Kremlin. The general mentality here is: Rather freeze to death than be occupied by the Russians.

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Gold coins.

I.) I invite you to consider also the monetary situation of a country, whose prices in shops are expressed in gold coins or multiples or fractions of gold coins. (The whole of Europe and North America before 1914.)

To such a situation your considerations cannot be applied. You only consider the situation in a country, where prices in shops are expressed in notes.

For our time this kind of pricing is normal, just as it is normal that notes are a forced currency.

History does not offer an experience that shops priced their commodities in a paper money not endowed with cours forcé. Even where such a paper money (private or government) prevailed, prices in shops were expressed in units of precious metal.

II.) I think we agree that a trade in gold is facilitated if ingots are standardised. If People desire to trade in such ingots as coins, why not permit it and facilitate it?

For Germany, at the moment, ingots in multiples of grams would be best, not in multiples of old gold mark (= 0.3584 grams of fine gold), but in England, perhaps, ingots in the size and fineness of the old sovereigns would be best (1sov. = 7.988 grams gold of 11/12 fineness.)

The public itself should decide what kind of ingots are used at the free bullion market and every one should be permitted to manufacture ingots as he thinks fit, provided that every one, who takes the ingot in hand, knows exactly what he took in hand.

In some former letters I expressed my opinion about a private ingot manufacture and I refer to them.

It may be that, as you think, a trade in fine gold is not important. But, certainly, you concede to those, whose opinions differ here, the permission to facilitate their trade.

III.) You say: "… that gold is more sensitive than ordinary commodities because:

1.) in times of unrest it is preferred to any other commodity and

2.) because there are few substitutes for it."

In 1.) and 2.) you are right. But why is gold, in times of unrest, preferred to any other commodity??

Because its purchasing power is more stable than that of any other commodity, although this stability is not a 100% one and may even fluctuate considerably.

People prefer it as the least evil.

That, in these months or weeks, the purchasing power of gold is more stable than that of the paper-pound or the paper-dollar, you may easily ascertain (but you do not have the leisure to do this) it you compared the average gold price (the word taken in the sense of monetary theory) of, say, 20 commodities with their paper-money prices.

If in Beirut the $-price of an ounce of fine gold rose from 38.5 to 44, that may either announce a change in the economic value of gold or a change in the economic value of the Dollar, if there is no further information. But in this case, the further information is available: the news from the USA are numerous and quite fit to raise a general distrust in the Dollar. The Dollar is inflated, the latter word used in the sense of 1913. Remember, that the Dollar is a paper currency and that an official selling price for gold, expressed in paper-dollars, does not exist in the USA.

The often quoted relation: $ 35 = 1 troy ounce fine, means the purchase price of the government and may remain unchanged when the market sells 1 ounce for 350 paper-dollars.

It may also happen in the USA what was done in Germany, from 1918 to 1923, where the Reichsbank used two kinds of purchasing prices for gold: a published one and a secret one, which even today is not known. (The old registers are burnt, it seems.)

You were so kind as to send to me the Economic Digest of April 1950. There, on pages 164 ff, is reprinted a passage from Dr. W. J. Busschau's book: "The Measure of Gold". Obviously, Dr. Busschau is a master of the subject. Busschau says, that the quotations from "free" gold markets must be accepted with the greatest caution. At some places private persons are not permitted to possess other currency than the official domestic one, at other places the possession of gold is prohibited, at some places the trade with gold is restricted to a few privileged

banks. Also: the published quotations are not always reliable, very much the contrary is the case.

Busschau presents examples of very great differences in the quotations of gold, to be explained by such circumstances.

Rittershausen, too, who understands the subject well, affirms that there is in the whole world only one really free bullion market: Tangier. But the bullion dealers of Tangier are not interested in communicating the real prices they get or pay. One must offer or demand as committor if one wants to get reliable information.

When a currency is inflated by the government, then the subsequent order in which prices rise is invariably this: Precious metals, other metals, wool, cotton, and then other wholesale commodities. Then begins a scarcity in the shops and then prices rise in the shops. Regularly, the journals affirm, that there is no real inflation or only a moderate one, because prices in the shops did not follow the metal prices. The connoisseur knows: In a short time, they do.

In the light of these facts one must consider the observation, that prices of many commodities only rose 1 % or 2 %, while gold rose 16 % in a month.

(What official exchange quotations are worth, I learnt in the years 1926 and 1927, when I had to do with operations at the exchange of Paris. The published quotations always differed from the really paid prices. Reliable are the quotations of New York, where every single operation is published. )

III.) You say: "… in a time of strong foreign demand, your ingots would also disappear from circulation."

If in the country concerned the circulating medium is a forced currency, then gold ingots - - also in the form of gold coins - - disappear from circulation the very day when the cours forcé is declared. Then they wander from circulation to trade. From trade they cannot disappear.

But, probably, you mean the case when foreign creditors use their right to demand gold coins. Here one must not be misled by vulgar expressions like: "The country owes gold, and now etc."

The country owes nothing, it is some concerns of merchants who owe. Their power is not great enough to dispose of the gold coins in other people's pockets. If they cannot pay, then they are bankrupt, and the gold remains where it was before the bankruptcy.

If the Central Bank, with its great gold store, resolves to help the debtors, then this Bank may lose gold for a few weeks or months. That would do no harm if bad laws, for issuing institutes in all countries before 1914 and in some still later, would not prescribe to the Bank a maximum for the issue of notes, say, the threefold of its gold stock.

If then the Bank gave a considerable part of its gold stock to the said debtors, then it would be compelled to considerably reduce, at the same time, its note circulation:

1.) by calling in loans which it otherwise would not have called in and

2.) by not providing fresh discounts, which it would otherwise have granted.

This caused the crises, not the temporary reduction of the gold stock.

(I do not speak here about the cause for which, in a case like the here considered, the reduction was for a few weeks or months only, so that the gold stock was or could be replenished to the extent that the concerns of merchants repaid their loans to the Bank.)

(J.Z.: I tried to "improve" this passage but still do not find it clear enough myself. Perhaps you should try to write, like B. often did, with semi-frozen figures, in an unheated winter-room! Would you do any better? - J.Z., 25.3.03.)

There is another case possible, in which the inhabitants of a country fear an inflation of the domestic currency and offer it in other countries at the free bullion market. If their offers are favourable, then the gold ingots or the gold coins in the pockets of private persons will not wander off to the free bullion market. Average people do not observe the quotations of that market. But the gold mines will observe the bullion market and will offer their gold by wire. You know better than I do, to what extent London, before the second world war, was a centre for such operations and how little the domestic currency and domestic gold stores were affected by offer and demand of foreigners.

Long-term loans. Let me remark that if

a ) there should really exist an upper limit for each country, for the quantity of standardised means of payment without cours forcé, which the country's circulation can still absorb, and, finally,

b.) once this upper limit is attained, then neither your point 1.) nor your point 2.) nor your point 3.) will enable any bank to continue business based on the issuing of non-cours forcé notes.

Payments abroad. We do agree if the following is now your standpoint: "Surely, it is better for US to continue exporting but to accept pounds only at a discount". We do not agree, if you say, that US does accept pounds. She does not, and it would be interesting to learn why she does not. I hope to find it out one day. But I know from the eminent expert, Dr. Hillmann, Leeds, that the possibility is not discussed, neither in the USA nor in England. Important is the percentage of the discount. I estimate it at 1 % or so.

Free Banking. You say: "In England, before 1844, the issuing banks always issued notes for wage payments."

I think, that in the average, in the decades before 1844, the weekly wage of a worker in England was 15 shillings a week or so and it was paid weekly.

From the book "Social Reform", by W. H. Mallock, London, 1914, I learnt that in the year 1801 more than 9/10 of the working class got less than 22 shillings a week. In every case, the smallest notes in England before 1844 and long after, were L 5 notes, in Scotland and Ireland L 1 notes. It would be interesting to know, how an employer paid wages of 15 s or 20 s. a week by notes of L 5.

Adam Smith relates nothing on payment of wages in banknotes in England. (Ex nihilo nihil fit, well.) He mentions the payment of wages in paper money in the American colonies. But his numbers (interesting - - pages 76 of my 1/2 of "Wealth of Nations", The world's classics, are stated before 1773, and the paper money he speaks of must have been State paper money.

From books about the economic conditions in England in early Victorian days, that I read in the now burnt State Library (author forgotten), I learnt that one of the many complaints of Chartists and other reformers was the bad currency used for wage payments. They complained, that employers bought at shops and pubs silver coins that were debased by rubbing and wear, at a discount and gave them in payment as if they were full value coins.

Interesting is what you say of the intention of the 1844-act: to prevent manufacturers from giving long-term loans to merchants. But do you not overestimate, here, Lord Overstone and his adherents? The act of 1844 and the reasons of its authors were carefully analysed by such eminent writers as Adolf Wagner and Lorenz von Stein (Vienna). They confirm what you point out in your book - - although in polite words - - that there was less a system of thoughts which produced the act but, on the contrary, a lack of thoughts.

The whole act is - - that's still my conviction - - a conglomerate of exhibited ignorance and presumption, an ignoring of fundamental rights and the beginning of that centralist mentality which began to prevail in every sphere of life, created Marxism in one sphere and bank monopoly in a (seemingly) different sphere.

If Lord Overstone and the others were really led by thoughts as you assume now, then this fact must be mentioned in the next edition of your book, so that the reader may learn there was still one real reason that these men had in their head and not merely vain prejudices.

What I said, about long-term credits in Germany during the crisis of 1932, did not mean that every manufacturer suddenly granted credits of several years or so to shops. The average credit, say, for victuals, is about 4 weeks. It was probably not longer in 1932. But credits to car-yards, radio-shops, sewing-machine dealers and for musical instruments may well have been a year and longer, which is long for commercial credits. In England it will have been the same.

Balance of trade. When I mentioned, that for decades the commercial statistics seem to show an excess of imports over exports for the world's trade, it was my intention to demonstrate the untrustworthiness of commercial statistics in general. It was never my opinion that you would ever have doubted the equality of imports and exports (with slight differences) in the world.

The connection of balance of trade (supposed that such a balance exists) and commercial crises is affirmed in many books. I believe it to be a "fable convenue". Take Germany as example. No foreign creditor can claim German notes as a means of payment. All commercial contracts are concluded on the base of foreign currency, in most cases dollars. How can there be, under such conditions, a connection between the quotation of German Marks abroad and the balance of trade? To sell German Marks at foreign exchanges, to get dollars, etc., is strictly prohibited. The sinking tendency of the German Mark (which, of course, I do not deny) must be caused by other influences than by the balance of trade.

India. I would be glad if experience would confirm your opinion that I exaggerated the defects of the Indian system, which you call a democratic one. I am a friend of India and every news that things go well in India and that the people have reasons to be content, does please me. What objections I have against the Indian parliamentary system and the elections it provides??????? Nothing else than that I know very well this kind of elections. But this theme is treated by travellers and other people, who know India well. I think you know this literature.

Set apart the 200,000 or so nationalists, probably the majority of the others do daily beg the gods: Let the English return and with them the Pax Britannica. Take our politicians into heaven (or hell), but let them never return. The English rule was - - now we see it - - the by far least evil.

(J.Z.: In the Laissez Faire Books catalog of May-June 2003 http://laissezfairebooks.com 800-326-0996, I just read a review of; Rayasam Prasad, Collapse of a Dream, paperback 372pp, $ 14.25,: "Having witnessed socialist politics, Prasad has few illusions about government doing good. In India, he writes, "Many criminals have found politics a safe haven. They joined one political party or the other, acquired money and influence, and used them to cover up their crimes and the crimes of their followers. Seventy of 108 candidates in one election had criminal backgrounds. Every political party has its share of criminals." - Already Prof. Sorokin pointed out that politicians, as a class, have the highest percentage of criminals with victims among them. He did not stress that most territorial politics is in itself criminal and victimises productive people for the benefits of looters and parasites. The present India might just be an extreme case and their Indian victims have long been accustomed to be exploited by criminal rulers. The English rule was just a short and relatively benevolent interlude. - J.Z., 2.6.03.)

The bar between Hindus and Pariahs is styled as a religious one. But German ethnographs are convinced that the Pariahs are the remnants of the subdued Dravidian race and that, consequently, the seeming religious bar is really a colour bar. I know that many English ethnographs share this opinion.

You are right, that now the former colour bar between Indians and English is removed. I admit also, that this colour bar (as all colour bars) was a nonsense and created much unnecessary political and economic resistance. Concerning the lower class Indian people, Pariahs and others, the bar between them and the upper castes is hardly less than before the colour bar.

You will not contest that the caste bar, under the 250 years of English rule was much diminished. The objective of the caste bar were not only the Pariahs or the Weddah of Ceylon, but many other castes. The upper castes have now learnt to ride with others in the same railway, which, 100 years ago, was quite impossible. I know stories from the first years of Indian railways, when such a high-class Brahman occupied a wagon for himself and his servants and when he found in the wagon a man of low caste, then he said to his servants: Clean the place of that dirt! - and the traveller of low caste was turned out and his place was washed with cow-urine. Then the traveller, perhaps a rich man and in every case quite peaceable, complained to the station-master. The latter simply expelled the haughty Brahman, and when he shouted that an "uncaste" ( Paria or "untouchable" ? - J.Z.) had touched him, he told him to shut up or get beaten up. That effectively destroyed the caste-prejudices. (J.Z.: It may have reduced them, but did it effectively destroy them? - J.Z., 27.3.03.)

Human rights. They repose not in the individual as a bearer of such rights but in the individual so organised, that his organisation leads him to acknowledge the rights. But in common language it is better to express the rights as if the individual would be the bearer of the rights. Philosophers know better, but they will - - if they talk to other, non-philosophical people - - speak in their language.

(J.Z.: Compare the distinction in the Human Rights Draft in PEACE PLANS 4, 61-63 & 399-401) between rights of rational beings and rights of all human beings. As rational beings are there classed those, who know, appreciate and respect individual rights in others. - J.Z., 27.3.03.)

And from this standpoint a sheep has its rights as well as a man and I, for my person, drew the conclusion which, 2,000 years before me, the noble Plutarch drew and do not buy mutton. In the eyes of carnivores, human and others, the sheep has no rights. But I think that you had, during the 69 years behind you, an opportunity to be quite near to a sheep and get an impression from it. Perhaps at this moment you would have felt an inhibition to cut its throat and eat it. Perhaps; perhaps not.

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21. I. 1951.

By your kindness I received yesterday:

1.) Punch of 3. I. 51,

2.) Truth of 5. I. 51,

3.) The Economist of 6.I. 51,

4.) City Press of 5. I. 51,

5.) The Interpreter of 15.9.50,

6.) The London News-Letter of 4. I. 51,

7.) International Financial News, 8.12.50,

8.) A pamphlet: "Preference by Devaluation Will not Solve Dollar Problem",

9.) National News-Letter of 4. I. 51,

10.) The Malthusian of December 1950, of which I could only say that Punch is to be taken much more serious than The Malthusian, but that does not prevent it from being very interesting.

11.) L'unique of 31. VIII. 50.

I thank you very much and read much of the interesting contents in my bed, until the 8 chilblains on my right hand said: Now be so kind and put us under your blanket. (I do not understand that this year my left hand is quite free of chilblains. A lady, who stated the fact yesterday, said: The explanation is that you are asymmetrical in every respect, mentally and in connection with chilblains.)

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What "The Malthusian" says about trees is 1/2 false and 1/2 true. When it states, that the world has not enough timber and, especially England, has not enough, because she is "overpopulated", one must ask: Has The Malthusian never read of currency difficulties that until now prevented Sweden from sending timber to England - - which she did already at the times of Child and Petty - - ??? But, on the other hand, the Malthusian is in the right when it (indirectly) says, that humanity may, by devastation of its forests, get into a very bad situation and that, if it continues to neglect afforesting, then it may, one day, be really without timber.

(J.Z.: A really free market for timber would make the growing of trees rather profitable, the more so, the rarer forests would become. Until now, at least in some countries, there is still all too much timber, which no one is willing to pay anything for. Thus it is just rotting away or burnt, not even used to produce wood chips. - J.Z., 27.3.03.)

In this connection: Among the few good laws of the Nazi-government was the prohibition to use timber in the reconstruction of German towns. It was the intention to increase new houses which, in the case of air attacks, may burn out but cannot burn down. In France I saw, from 1915 - 1918, many houses built without timber. The French used concrete-beams, which are much better.

The Malthusian reprints a letter of William Townshand (Townsend? - J.Z.) to the editor of the Sunday Express of 29. 10. 50, on the tyranny of trade unions. It may be that the union-rules will cause a military debacle during the next war. The only solution is cooperative socialism, in the sense of the old International Working Men's Association. If "The Malthusian" itself would have known a solution, it would, probably, have announced it.

The Malthusian published a letter of Mr. Y. Bevan to Drysdale about Egypt and states that Egypt is a rich country but that its peasants are robbed - - a fact which every visitor without blinkers has observed. The standpoint of D. is - - of course - - facts, social conditions and social robbery do not matter! There are too many fellahs! And that he "proves" by his "statistics" and does not in the least care that today, also, one of Egypt's problems is to sell her victuals and not to get victuals.

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Stephen King-Hall confirms, in the issue of 4. I. 51, the news of the general despair of Germans in the West and their profound distrust in the military and other necessary capacities of the Allies. I refer to my last letter. The Allies neglect - - inter alia -- the "human factor".

St. K.-H. says many good things but he is no economist and neither is he aware that the propaganda methods of Mao and other Asian leaders have created a quite new situation. It's impossible to meet this situation by means of old strategy, au fond still that of Napoleon.

S. K.-H. says that the West is able to arm 100 divisions without being assisted by American troops. Such a statement is astonishing. A very old rule says that a country can arm about 1/10^th of its population. The West of Europe has a population of at least 200 millions. What would allow an army of 20 millions - - or - - a division counted as 12,000 men - - 160 divisions. Germany, in the last war, had more than 1/10^th of her population under arms.

The main point is: Will the Russians wait until the West is rearmed? The Kremlin declared, officially, that it will not wait. What's to be done?

There is no other possibility than the Mao method. Offer to every Russian soldier, who comes voluntarily to the Western army, what Mao offered, with such a success to the Chiang Kai Shek soldiers. I wrote to you in a former letter about the detail.

How great is to the probability that such a program is seriously talked about?

In Western Germany and at the moment it is zero. The almighty ministers if finance declared, that even the Germans that come from the East will be sent back. If these gentlemen will hear, that not only Germans but also Russians shall be admitted and on conditions that are favourable, they will answer: "Impossible, we - - the experts - - declare it impossible and we will do what we can to prevent it!

And England? I am convinced that the trade unions will never, voluntarily, give up their trade union rules and will rather become slaves of the Kremlin.

And the French workers? And the others? The same mentality!

Now judge the probability that the West will win.

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I forgot to answer your question whether forced currency would be a good translation for "cours forcé". I think not. Forced currency means "Zwangskurs-Geld" but not "Zwangskurs" or "cours forcé".

The German sentence: "Der Zwangskurs fuer deutsches Papiergeld sollte aufgehoben werden." - can be translated by: "The cours forcé for German paper-money should be repealed."

But a "forced currency" cannot be repealed - - correct me if I am wrong.

"Zwangskurs" is a monetary quality. "Forced currency" is the sum of notes endowed with cours forcé, that is: forced currency is a quantity.

Italians, too, posses a word for "Zwangskurs": Corso forzoso. In a discussion with Mr. Spiller, the translator of my 3 books, I stated, that at present the English language does not possess a word for Zwangskurs, one that, if retranslated, would again produce the world Zwangskurs.

Professor Milhaud, certainly an expert, confirmed my opinion.

Professor Buriot-Darsiles at Moulins, who speaks and writes German and English as well as his French, said the same.

(J.Z.: Perhaps the terms "forced acceptance" and "forced value" would be suitable terms. The first to indicate the compulsory acceptance and the second term to indicate "cours forcé". I have used them with that meaning and found no contradictions so far. But they are not terms to be found in dictionaries. - J.Z., 27.3.03.)

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Some days ago, an acquaintance of mine had a visit by friend from Denmark. He looked at the display cases of Berlin shops and was very astonished to see that all the victuals could be bought without restrictions. He begged my acquaintance to come with him into the shop:

"Please, could I get one pound of butter??"

"But certainly." He got the pound and paid for it. Then he saw, that it was Danish butter: "Yes, the girls responded, the greatest part of butt49 for Berlin comes now from Denmark."

"Oh - - and what must I pay, if I buy a second pound???"

"What you paid for the first!"

"That's magnificent!!! - Now tell me: How much can I get without a card???

"That depends on your purse. At the moment, we have more butt49 in store than you could carry away!"

"And if I buy five pounds?????"

"If you will pay for it - - at once!!"

And then the man bought 5 pounds of Danish butter, sent it to Denmark, to his wife, so that the family might at least once get enough butt49.

I do assume that this man gained at least some doubts regarding the mercantile theory: Man produces not to consume the product but to export it.

(In Denmark, at least at that time, the government practically expropriated most butter, probably at a fixed price, rationed a small quantity, that Danes were allowed to buy and consume and used most of the butter gained to export it. I believe that one could also buy it more cheaply in Germany than in Denmark. Danes were practically forced to use mostly margarine and oils etc. One of those man-made "facts" of present life that most people just laugh about but do not really ponder. - J.Z., 27.3.03.

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Very faithfully Yours - signed: U. v. Beckerath.

___________________________________________________________________________________________

28. I. 1951.

Dear Mr. Meulen,

if it may be supposed, that the quotations of the Bombay market for precious metals ("Economist", Statistical summary)

1.) are honest and correspond to real sales,

2.) are those of a really free market (the word used in the sense of Adam Smith),

then they may be used, in some cases, to detect hidden inflations.

The word "inflation" I use here in the sense of 1913, that is: An over-issue of cours forcé - money, which would not be accepted by the public at par, if there would not be the cours forcé.

The "Economist" of 6. I. 1951, you were kind enough to send to me, contains these Bombay quotations:

Rupees. Annas Rupees. Annas

Gold Silver

per tola. per 100 tolas.

27.12.50. 111 14 187 0

28. 113 9 188 4

29. - Market closed -

30. 112 11 187 2

1.1.51 - Market closed -

2. 112 8 186 7

3. 111 13 185 12

After the first world war, the quotations at most exchanges were for fine gold and for fine silver. Before they were for standard gold and for standard silver, if not expressly for fine metal. I do not know how quotations are done now in Bombay.

In this Abdera, called Berlin, there is (for me) at the moment no possibility to ascertain it.

But the difference of quotations is not great and may be neglected for many purposes.

An ounce of standard silver is 37/40 of an ounce fine silver and an ounce of standard gold is 11/12 of an ounce of fine gold. The relation is:

11/12 x 40/37 = 110/111, which may, for many purposes, be considered as equal to 1.

(J.Z.: I make it 11/12 x 37/40, which comes to: 407/480, divided by 4, to, roughly: 102/120, i.e. a higher difference than indicated above. B. had reversed the second fractions. Even a mathematician and statistician can make mistakes. But, please, consider the conditions under which he wrote, mostly in an unheated room, in Berlin Winter weather. - J.Z.)

1 tola = 180 troy grains = 3/8 troy ounces = 11.664 grams.

1 rupee = 16 annas.

The average of the above stated quotations is pretty exactly: 60 ounces silver = 1 ounce gold.

If one supposes this relation as the true relation for the time in question, then the American price for once ounce of silver (= 80 cents) must be multiplied by 60 to get the real price of gold, expressed in paper dollars.

0.80 x 60 = 48 dollars. (paper)

The quotations for fine gold at the London Exchange, expressed in paper dollars, and reported some days ago in German papers, could have been expected for a long time from the Indian quotations.

On the 16^th of January the quotation was ("Die Welt" of 18.I.51.) = $ 40 - $ 45 per ounce, at London. This price was still "too low".

The "Welt" of 18. I. reports a silver price of 78 1/2 d. 78.5/12 = 6,5416666 s. per ounce in London. Multiplied by 60, one gets 392.5 shillings = 1 ounce of fine gold.

The price of the Bank of England is 248 shillings.

Such an incongruity lets expect great changes in England's monetary standard in the next months or earlier.

Very faithfully Yours - signed: U. v. Beckerath.

Addendum.

On 3. I. 51 the Bank of England's outstanding notes amounted to L 1332.2 millions or 26.664 million shillings.

If the Bank's shilling-price for gold (248s = 1 ounce troy gold) could be considered as real, the outstanding notes would be worth 107.5 million ounces fine gold.

If the population supplied with currency by the Bank of England would be 50 millions, then this would be 2. 1 ounces per capita.

For the year 1885 Haupt, "Arbitrages et parités", VIII-ième edition, 1894, found 4 L per capita = 1 ounce.

If one would consider this amount as "normal", then one must say:

The gold value is now too high. But if 392.5 shillings is taken as the "real" price of gold, then one gets about one ounce in circulation per capita, as at the end of 1885.

Bth.

For centuries the relation between silver and gold was more stable than any other value relation between goods. There were, inter alia, these reasons to maintain the stability:

1.) The practice to express all prices in quantities of precious metal.

2.) The practice to use standardised ingots of precious metals as means of payment (coins) and measure of value.

3.) The immediate relation between coins and prices of goods.

4.) The very great quantity of precious metals accumulated, so great, that the current production and the current consumption (industry, wear and tear) did not affect the quantity much.

No. 1 is now done secretly in many economic spheres.

No. 2 and 3.) do no longer exist, but

No. 4.) is still sufficient to maintain a certain stability, as may be seen from the quotations at Bombay. I took at random the following quotations:

Silver (100 tolas) Gold (1 tola)

1949, March 24. 180/8 105/0

25. 179/8 108/4

26. 180/12 110/4

28. 179/4 108/8

29. 179/4 108/8

30. 182/10 108/8

___________________________________

1081/14 650/8

Relation: 1 : 60.

1949, Sept. 23. 160/4 114.0

24. 163/0 116/9

26. 166/10 117/0

27. 163/4 118/4

28. 171/2 119.4

___________________________________

824/4 584/8

Relation: 1 : 61.

1950, March 30. 187/10 116/0

April 1. 185/10 115/7

3. 186/9 114/14

4. 184/8 114/8

___________________________________

744/5 460/13

Relation: 1: 62.

1950, Aug. 10. 179/12 114/3

11. 179/14 114/5

12. 178/7 114/2

14. 179/2 115/5

16. 178/14 114/3

___________________________________

897/1 571/2

Relation: 1 : 64.

1950, Dec., 27. 187/0 111/14

28. 188/4 113/9

29. 187/2 112/11

1951, Jan. 2. 186/7 112/8

3. 185/12 111/13

___________________________________

934/9 562/7

Relation: 1 : 60. Bth. 31. I. 1951.

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30. I. 1951. Your letter of 27. I. , received today

Dear Mr. Meulen,

I, whose English is not above a little Pidgin-English and do require, to be understood, a reader of your benevolence, am certainly not competent to deliver to you a lecture on the true meaning of an English word, such as currency.

I can only tell you what I found or missed in dictionaries and encyclopaedias.

In the Columbia Encyclopedia, 1945 edition, I read:

"Currency, any medium of exchange having a legalised physical form."

In the following text the word is not used in another sense.

In the article fiat money, of the same work, is said: "money that is made legal tender by the decree or fiat of the government, with no other backing. In the text following no word is used corresponding to "cours forcé" or "Zwangskurs". The notion is expressed by a paraphrase, as I found it in all English books treating the subject.

What Webster says in his dictionary of 1880, that "currency" may also express a quality, corresponds better to your opinion. W. gives three characteristics:

1.) "The state or quality of being current; a continual course or passing from person to person, or hand to hand, general acceptance; circulation." As an example W. gives:

The currency of time to establish a custom ought to be with a continuance from the beginning to the end of the term prescribed. (Ayliffe.)

2.) Current value; general estimation: the rate at which anything is generally valued. Example:

He takes greatness of kingdoms according to their bulk and currency, and not after intrinsic value. (Bacon.)

3.) That which is in circulation, or is given and taken as having value, or as representing property; as the currency of a country; a specie currency.

My impression is: Although Webster here states, that "currency" may signify also a quality, it is not his opinion, that it may also be an economic quality. If this were his opinion, then he would - - I think - - have stated it under heading 3. But if your opinion differs here, then I will not quote Webster as an authority against your opinion.

When you say: "No money has inherent forced currency", you are right insofar as the Zwangskurs of a forced currency can have no other origin than:

1.) legislation,

2.) jurisdiction of the courts without a preceding legislation,

3.) a general opinion of the commercial world, that the currency is to be considered as fiat money.

I could cite historical examples, but they would contribute nothing to our present discussion. The Zwangskurs is not a quality given by the nature of a means of payment; the Zwangskurs must be added to its other qualities, by one of the three mentioned causes. But it is an economic quality.

(J.Z.: Rather a serious flaw that should disqualify it for any true economy. It establishes anti-economics or neo-comics rather than an "economy". - J.Z., 27.3.03.)

I can only say, that in no English book, ancient or modern, did I find the notion of "Zwangskurs" expressed otherwise than by paraphrases, such as the one the Columbia Encyclopedia uses.

In this connection: The definition in this encyclopedia is erroneous. The author forgot what the German economists at the time of Lorenz von Stein (who invented the expression) called the "Steuerfundation". That the readiness of a government, to accept a paper money at par, is often quite sufficient to endow the money with parity at the market, is very well pointed out, inter alia, by W. B. Greene. (J.Z.: In one short passage in his "The Wealth of Nations", Adam Smith recognises it, too.)

Steuerfundations (an English word is lacking) (J.Z.: Literally: tax-foundation.) is a much better backing than the "classical" backing of 1/3 or 1/4 of the whole amount by coins of precious metal and then promising to redeem every note at par and on demand or with a short delay.

(Nero - - as Suetonius reports - - debased the coins but refused to accept his debased coins as a means of payment for taxes. That may - - I think - - have contributed much to raise a general resistance against his government. His cruelties did not affect the people.)

Fiat money is no paper promise. The proclamation of Zwangskurs regularly involves the repeal of former promises to redeem the paper.

Discount rate in West Germany. My opinion is: Before Professor Hirsch's valuable investigations into the part of interest in the observed prices of commodities, economists grossly over-estimated the importance of interest , including the discount rate.

(J.Z.: They still do! Sometimes they talk or write as if only it mattered or as if they had nothing else in their brains.)

In Germany they could have learnt it long before Hirsch by the reports of the Reichsbank and other banks. The sums won by the banks, when the discount was increased, were quite insignificant in relation to the Gross National Product.

In the Economist of 6. I. 51, which you were so kind to send to me, I find a report of the brewery Joshua, Tetley & Son, Ltd.: The gross income of L 5 810 070 was spent, e.g., for interest: 0. 4%m for wages and salaries: 5%. The interest was less than 1/10 of the wages. Doubling the expense for interest would have hardly influenced the price of Tetley's beer. I read again with much pleasure pages 160 - 165 of your book. But for our time I think that a balance like that of Tetley as being typical for many producers.

Payments abroad. We are still at cross purposes. Do you know cases, say, where a firm of Birmingham bought cotton from a Savannah concern for pounds???????? That Pounds are quoted in New York and Dollars in London, proves no more than the regular quoting of German Marks at the exchanges of New York, Zuerich, London, etc. Both of us know: The imports to Germany are not paid by German Marks.

Long-term loans. To fix the amount, is - - here you are right - - impossible. Very different is the task to estimate an upper limit.

(J.Z.: That would involve a) knowing the total of current consumer production, which is largely dependent upon the degree of monetary despotism that is practised, b) knowing how much of this output the owners of these products and services, or of claims to them, would be able, with the best of will, to invest on long terms and c) what fraction of that maximum savings and investment amount they are willing to invest on long terms, under the then existing conditions of e.g., inflation, taxation, regulations, war and revolution threats, threats of nationalisation, difficulties caused by monetary despotism for the sale of the new goods and services so achieved, etc. - J.Z., 27.3.03.

Free Banking. Your quotation from Attwood is decisive. But it follows from Attwood that the pay cannot, possibly, have been weekly. Wages of 15 shillings per week were quite common at that time. You may ascertain that easily from any book referring to wages of the time of about 1800 and the following decades. At the moment I find that Roscher speaks of a spinner's weekly income in the year 1842, working at the mule of 400 spindles and producing yarn No. 70, as being 20 shillings.

The income rose when the spinners of that class were placed at the improved mule of 1600 spindles, in the year 1859, to 30 s. 10 d.

The time of the Napoleonic wars was a time of relatively "good" wages, and in the following decades wages remained for a long time stable. Nassau W. Senior says, in a lecture delivered 1830, that at his time a daily wage of

1 s 6 d or 2 s was common, while at the time of Henry VII the daily wage was about 4 1/2 d. (He investigated the relation of wages to the price level, which, for our discussion, is not important.)

I think that the law of 1826, abolishing one pound notes in England, must have produced very much unemployment, which was ascribed, by the ignorance of that time, to other causes.

I re-read your quotation from Lord Overstone on page 123 of your book. But I cannot find that Lord Overstone thought it was "the aim of the act (1844) to restrict credit in order to prevent merchants from buying"- - the sentence to be understood as you meant it as answer to my reply. My opinion still is that you here overestimated old Lord Overstone.

India. The figure of 200,000 was the estimate by an author who wrote in "Truth" or in "The Economist". I believe it to be fairly right. The "Indian opinion" of which you speak is on the level of the French girl, whose sentence Carlyle quotes in his "French Revolution": This daughter of the independent people said:

"Nous ne sommes guère plus heureux depuis que l'on a inventé la nation".

"Truth" of 5. I. 51, page 2, says inter alia:

"If Pandit Nehru's reformist zeal demands an outlet, it would be better employed cleaning up the corruption which, since the ending of British rule, has spread through-out the sub-continent like a pestilence."

Everybody, who knew something of India, from reports of informed travellers, expected that corruption. You did not???? Certainly, you expected it too, and we both know that the coming of the corruption was as certain as a moon eclipse calculated from the usual data.

I am a strong opponent of the opinion that Gandhi produced anything really good in the world and, especially, in India. He consented to the movement against the caste spleen but hardly contributed to it. The caste spleen was as far from being a religious spleen as antisemitism was and is in Germany and other countries.

The British meddled insofar with caste affairs as they did not acknowledge the inferior cases as men of inferior rights. The station master of whom I reported, did much more against the caste mania in a few weeks of ordinary railway service, than Gandhi did in his whole life. Since both of us do not live in India, none of us can here prove or refute anything. (J.Z.: That is an insufficient argument and B. rarely confined himself to trying to prove anything only regarding those countries in which he had actually lived. He took the observations of others, who had visited them and made some records of their experiences, as proofs. - J.Z., 27.3.03.)

Danish butt49. I do not know whether the Dane's money was Danish, when he bought butt49 in Berlin. The main folly of Denmark's government was - - in my opinion - - that it forbade the Danes to consume their own butter, at home.

The "International Financial Survey" you were so kind to send me, reports in its issue of Dec. 8, 1951, that now British exporters need no longer turn over, to the Bank of England (I demanded the repeal of its charter in one of my books.) Danish, Swedish and Norwegian currencies received from the sale of goods to these countries. I am surprised that the English did not organise a thanksgiving procession as peoples in despotically governed countries would do. (In Germany dedicated to Schacht, in Spain and Ireland to the church and in Russia to Stalin's statues.)

Human Rights. I do not agree with you that rights do not exist before that crowd, politely called "society", granted them. It is also my opinion that "society" is too dull to grant such important things as human rights.

The rights of others are founded in my mind, and if my mental organisation would be so, that it produced similar feelings towards men, as towards carrots, then I would eat them both, but the former with a little more salt.

My feelings for sheep are quite different from my feelings for some men. I could never kill, with my own hands, a sheep, such a nice, non-aggressive, pacifist being. But men - - I can easily imagine situations where I would kill men without hesitation.

That will not prevent an old warrior like you to visit me in Berlin during your next voyage.

-----------------------

I continue next month.

Very faithfully Yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

31. I. 1951. Your letter of 27. I. 51.

Dear Mr. Meulen,

you say on page 1:

"But if the demand for gold is big enough, paper will still fall in terms of gold, even without a maximum legal issue."

We must distinguish:

a.) demand for gold at the free gold market (the word this time used in its old sense, that is: a department of the

free bullion market),

b.) the claim of creditors, to whom debtors promised gold coins, as they regularly did in all countries before

1914.

Before 1914 it was impossible for a great demand to arise for gold in the case of a.) and for notes to be offered in such quantities that they could get a discount, compared with sovereigns. Why? The possessors of notes would have gone to the Bank of England and would there have converted their notes into sovereigns.

But once the Bank of England was freed from its obligation to redeem on demand and at par, the situation was changed. Here I will not consider this case.

Much more important, and in times of the well-known crises exclusively important, was the case b.).

Great concerns had promises on bills of exchange to pay gold at a fixed date. That date came and they had neither gold coins nor notes. What they had, were unsold commodities or bills of other debtors in the same situation. Then these "dishonoured" bills fell in value, considerably. But - - and that's important for our discussion - - the quotation of notes remained unchanged as long as the Bank of England was ready to redeem the notes.

Even when the Bank was freed from the obligation to redeem, the quotation of notes at foreign Exchanges was quite different from the quotation of unpaid bills of exchange.

The reason was quite simple: One could e.g., pay taxes at par with the notes, railway tickets, all kinds of debts, etc. But unpaid bills of exchange could only by used in one manner at par, as a means of payment: Paying debts to the debtor, who at the moment could not pay.

Say: Lyons could not "honour" its bills of exchange. Its bills get a discount. But if a merchant bought from Lyons

1000 pound av. tea, the he could use the "dishonoured" bill of exchange as a means of payment and this at par.

(The Krefeld banker and Reichsfinanzminister in the year 1849, Hermann von Beckerath (stressed by me. J.Z.), earned much money by systematically using, as means of payment, the creditor's own due bills. At that time even bankers did not always comprehend this simple procedure. )

Although it is arithmetically the same to say: gold rose or the bills of exchange fell in value, it is not the same economically. Economically the bills fell and gold coins remained stable. I hope we agree here.

A low price of "dishonoured" bills of exchange probably never tempted gold out of hoards. Observations seem even to teach the contrary.

-------------------------

Interpreter. I expect your two copies with much curiosity, and thank you beforehand. In one of the last issues the lady editor affirmed, that the American Revolution was financed by King George with the help of Rothchild. And this not as a joke but quite seriously.

Very faithfully yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

1. II. 1951.

Dear Mr. Meulen,

you know the works of Lombroso and many others who tried to gain from photographs and exact descriptions a type of the "asocial" man. They all were at last convinced that the missing capacity to acknowledge rights (especially those of others! - J.Z.) is expressed in the whole organisation, not only in the man's head or face. The fingers of the born murderers resemble much those of a gorilla, are also much more hairy than those of a normal man. On the contrary, the hands of saints, in paintings, are always beautiful, long and slender.

Schopenhauer says: Moral qualities, or the lack of moral qualities, a man inherits primarily from his father. When a woman declines to marry a man with bad "social" qualities - - which she will do, if she can - - she contributes towards the improvement of the human race. That is the secret reason for which we read with pleasure stories, where a girl prefers a poor man with good social qualities (capable to acknowledge rights) to another, who is rich. She sacrifices her personal advantage to that of the human race. The head of the reader does not know it, but his feeling knows it.

----------------------

I hope you read the excellent articles of J. F. Eggleston in "City Press" of Jan. 5, 1951. Title: "Socialist planners say Free Trade would bring chaos … - Then give us this chaos."

One almost believes to hear one of the old Free Traders, 100 years ago, who did not restrict themselves to merely explain the advantages of Free Trade, but claimed it as a right.

Eggleston demands

1.) a free dollar market,

2.) a free gold market

in London. He uses the world "free gold market" not in Kitson's sense but in the old sense, still retained in the USA. (Obviously, Kitson's misleading terminology is now quite abandoned, also in England.)

Does Eggleston do what the Germans call: "offene Tueren einrennen"?? (J.Z.: Running against doors, thinking they would be locked, while really they are open.)

E. expresses the greatest contempt for "currency experts", which pleased me very much.

E. demands the right for Britons to pay in the whole world with pounds. (We want one area for sterling - the world.")

If E. is in the right, then the English have not the permission to pay - - say - - American cotton with Pounds.

----------------------

For decades you have been the only man England who demands the right of issue as a personal right. Neither Alexander nor Eggleston go as far. One day, which I hope to be near, they will demand the same personal right. But you will remain at the top of the movement if you:

1.) explain to your countrymen that the right to refuse means of payment is not less essential than the right of issue and that it is the best and even an infallible means against over-issue (inflation in the sense of 1913).

2.) protest against the pretended "right" of governments to prescribe the denominations of notes and other certificates, e.g.: prohibit notes of smaller denominations than L 5 or L 1.

-----------------

Very faithfully Yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

2. 2. 51. Your letter of 27. I. 51.

Dear Mr. Meulen,

human rights, the rights of animals and - - if one is a Hindu - - even of plants, depend upon the mental and psychical organisation of those who judge on these rights.

The capacity to acknowledge these rights presupposes the existence of certain cells in the brains or the nerves of men or women. (J.Z.: Or certain connections between them.) Where the cells do not exist, there exists no capacity to acknowledge these rights.

Gall gave many examples. Men, in whom these cells are missing, are born murderers. On the other hand: animals possessing the cells do jeopardise their own life or sacrifice it to help or to save others. Darwin, in his "Descent of Man", reports, how a little ape saved his keeper from death, when the keeper was attacked by a great and very strong ape. The little ape bit at once the great ape's throat, before the great ape became even aware, that the little one made a move. Darwin reports other actions of apes that are, obviously, to be valued as moral actions.

Here is valid the Delphian "Knohi Sayton", "Know yourself".

A man so organised, that he must acknowledge other men's rights or even animals' rights and acts as a criminal, feels a deep repentance which may lead to suicide, and another, not so organised and missing his advantage - - and may it be by a crime (theft or murder) - - feels the same degree of repentance. Schopenhauer explained the latter very nicely.

A man, able to acknowledge rights, and suffering wrongs, will fight for his right. Experience teaches that such men are dangerous enemies. (J.Z.: They can be as dangerous if they merely believe in imagined rights.)

A man not able to acknowledge rights and suffering wrong, feels that wrong only as a disadvantage. Often such men are reconciled by a little gift. But such natures are seldom to be found. The rule is, that even a brutal and cruel man, if offended, pursues his vengeance and is not reconciled by a little present.

This fact proves a moral tendency even in such men. And tendencies can be developed.

Kant, in his (seldom read) "Tugendlehre", which he wrote at the age of 73, says:

(Par. 12) "Werdet nicht der Menschen Knechte. Lasst euer Recht nicht ungeahndet von anderen mit Fuessen treten." (Do not become the serfs of men. Don't let your rights be stepped upon, unavenged! - J.Z.)

That's an appeal not to slaves but to men, able to acknowledge rights, the own rights and those of others.

Claims, not founded on rights, remain merely claims and are, for those who ward them off, settled after their victory. But claims, founded on rights, are often granted, even if the claimant is completely defeated. In "King Lear" Shakespeare gives us an example.

Explanation: The rights were no less founded on the mental and psychological organisation of the claimant than on those of the defendant. (J.Z.: I believe that the last word should here rather be: aggressor."

This organisation is not or only to a very small degree our own work. It is given, like the form of one's nose. Here a mystery is hidden.

Very faithfully Yours - signed: U. v. Beckerath.

(Here a herd instinct might be involved, which we class as "moral sense". It does not always give clear enough instructions but motivates our actions often enough in the right direction, which is here: Those actions which promote the survival of the herd. But it can also greatly mislead, e.g., when non-members are considered and attacked, indiscriminately, as "enemies", even when they have not acted aggressively but merely some others, of their herd, have. I do not know, whether in such misdirected actions, instincts or false ideas prevail. Often people are not even aware that they act upon the principle of collective responsibility. - J.Z., 27.3.03.)

____________________________________________________________________________________________

4. II. 1951.

Dear Mr. Meulen,

by your kindness I received yesterday:

1.) a pamphlet "Rights for Robots", by Sir Ernest Benn,

2.) "National News-Letter" No. 757 of Jan. 25, 1951,

3.) "Individualism", Jan. 1951, with an advertisement of Foyle, Bookshop, 119-125 Charing Cross Road, London W.C. 2, Gerrard 5660. Many of my burnt books I bought from Foyle. But I forgot the address until today. Certainly, Foyle will sell you any work of Bastiat, including that on "Gratuité du crédit". (J.Z.: When I finally got around to visit this bookshop, it offered mainly only new books, not the scarce old titles that I was searching for. - J.Z., 27.3.03.)

4.) "Truth" of 19. & 26. I. 51,

5.) "The Economist" of Jan. 20, 1951,

6.) "International Financial News Survey" of Dec. 15, 1951,

7.) "Economic Intelligence", Dec. 1950,

8.) "The London Newsletter", 18. & 25. Jan. 1951,

9.) "The Interpreter", 15. 12. 50 & 1. I. 51,

10.) A cutting from "Times" of 29. I. 51, "Premium Gold Sales",

11.) A cutting from "Times of 29. I. 51, "Shortage of Capital", with a copy of your letter to Engineering Industries Association,

12.) A cutting from "Daily Telegraph & Morning Post" of Jan. 26, 1951: "Keynes, a Self-confessed Utopian", by Malcolm Muggridge,

13.) A cutting from "Times of 26. I. 51, "John Maynard Keynes", by Lionel Robins,

14.) A cutting from "Times: of 29. I. 51, "Indian Stocktaking",

15.) "City Press" of 26.I.51.

That was an interesting mailing. Thank you very much.

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As interesting as the pamphlet of Benn is: it displeases me very much. Benn belongs to a class that nature has condemned to die out. The first symptom in such cases is always: no interest for the own affairs, no serious will to resist. Benn, formerly a businessman, does not see that at the bottom of all trouble is the money questions. He is neither interested in the cours forcé, nor interested in the monopoly of issue and what it involves. Instead of being occupied with these radical faults of political, economic and personal life, he speaks of character. Businessmen of this kind must, in the long run, cede to bureaucrats. (J.Z.: Firstly: Benn went through stages towards large degrees of individualism. That his individualism wasn't complete is an accusation that could be levied at many individualists. I found his individualist writings still worth reading and reproducing on microfilm in my series, for those who, like me, might come to like them. This particular essay of Benn was reproduced by FEE and then by me in PEACE PLANS 957. - J.Z., 27.3.03.)

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Stephen King-Hall is no economist, although a very intelligent man. Now he reports a letter of one of his correspondents, also a very intelligent man, but no economist, who writes on the improvement of the wage system. I suppose you read it. I read such propositions about 50 years ago (when they were no novelty, either) and since that time often. If one were to tell him, that his ideal was realised by the Italian "Arbeitsgenossenschaften" (work cooperatives - J.Z.) (presently, I do not remember the Italian word), he would not listen.

St. K.-H. should talk about the possibility of warfare with a financial system as the Western world uses now. He never did and he never will. He does not see, that at the moment like the present, this is a personal affair for everybody.

I see only one group of men in the world, who are seriously investigating what their own affairs are and who are interested in the own affairs: The State capitalists in Moscow!

(J.Z.: Stresses on "this", "their" and "interested" inserted by me. Alas, they considered our affairs also to be their affairs and that made them our enemies. If they had been only interested in their own affairs and those of their voluntary followers, then I would have welcomed them as fellow-panarchists! - J.Z., 27.3.03.)

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"Individualism" contains an article: "The Issue of Freedom". If one would expect to find here something on the freedom of note issue or the freedom to refuse suspect means of payment, one would be much mistaken. But on page 3 one finds an advertisement of Sandeman, who recommends his Port and Sherry. Two days ago, I visited a Russian cinema. There I saw a film where a Russian scientist recommended the renunciation of alcohol and of tobacco as well and their replacement by sport. A heart was shown as attacked by alcohol. It was provided by the anatomical institute of a university. For me, abstainer for 50 years - - all that was no news. But it pleased me very much. I remembered the order of Suchomlinoff, the minister of war, to the Russian army in August 1914, where he forbade any alcohol. "That's the end of Tsarism", I predicted to my friends. "Once the Russians become sober, they will chase out their Tsar". They did that. Now we have a quite similar situation. If the anti-alcohol propaganda in Russia becomes successful, then the Soviet-system is lost. (I do ascribe the complete change of the Chinese mentality in the last three decades to the elimination of opium from Chinese life. At least it was a conditio since qua non.) Abstinence propaganda in Russia and alcohol propaganda in an "individualistic" paper. It does not please me.

On page 15 I read an advertisement of a mineral water manufacturer. The first words I read were: "Socialism is State capitalism". (You notice the influence of abstinence.) But I also read: "Almost any form of government will work, if the governors will remember that they have a master in heaven." Here the man - - who does not know that he is no Individualist - - is wrong. Certainly, very many of England's prescriptionists are pious men and convinced to act in the sense of their Jehovah.

At page 9 the "Individualist" defends the Bank of England as a private institution and deplores its "socialisation". Says nothing about the monopoly of note issue and the cours forcé, also nothing about the Act of 1844. Goethe say, in his "Sprueche in Prosa" (Sayings in Prose - J.Z.):

"Allgemeine Begriffe und grosser Duenkel sind immer auf dem Wege, entsetzliches Unglueck anzurichten.

"(General notions and great conceit are always on the road to cause terrible disasters. - J.Z.)

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In Truth of 19. I. 51, page 71, says a man "P.D.S.H." of Kenya: "If I were a patriotic German, I should hate the British more than any other nation."

Always the old mentality: The man is born under that or that rule, ergo, he is to be hated or to be admired, etc. Truth should try to find out the truth on the subject and that is: In the East of Germany, the English would be welcomed as liberators, if they ever came there, what many doubt. In the British zone the English are hated, because the people, like all people in the world, are in the habit of "collective thinking", that is: they hold responsible the subjects for all what their government does, as bible, imperialism, Hitlerism and some other Isms teach it. But they hate the Russians much more, simply because they have concentration camps, which the Germans know very well from their own experience.

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Truth of 26. I. 51: On page 88 is reported, that Britain's internal consumption of coal was 191 million tons in 1949. House coal = 30.9 m. tons and miners' coal = 4.9 million tons. That would mean, about 1/4 of the internal consumption is for houses. In Germany it is about 1/10. (J.Z.: If I transcribed his figures right, then I do not know how he arrived at about 1/4 for 30.9 from a total of 191. Nor am I aware of what he meant by "miners' coal". - J.Z., 27.3.03.)

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Economist. The first part at which I looked was the Bombay quotation for gold and for silver. The average was: 60 ounces of silver from 11. I. - 17. I. I am sorry, that I have no possibility to ascertain the values at other free markets.

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At page 129 is announced a book of Pigou on Keynes' "General Theory". Pigou, also, does not notice that Keynes knows no other "money" than forced currency. As the old Greek proverb says: "Der eine melkt den Bock, der andere haelt das Sieb unter". (The one tries to milk the billy goat and the other holds a sieve under. - J.Z.) (I cite from Kant.)

On the same page is announced a book of an ignotus (ignore = a person unknown, or ignoramus? - J.Z.): Lloyd W. Mints, "Monetary Policy for a Competitive Society". Cours forcé, monopoly of issue, the well known Keynesian clap-trap. (J.Z.: As if competition would have to be based upon the biggest and most anti-economic monopoly! - I got turned off from paying attention to most modern writings on "economics" after once, during a big book exhibition, going through the index of hundreds of just published economics texts and found in none of them a hint towards a sound comprehension of cours forcé and its relationship to inflation. Seeing that they did not even understand these phenomena, what wisdom can one expect from them on other subjects? - J.Z., 27.3.03.)

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International Financial Survey. You marked the information that in Greece, from June to 2. XII. the rate of the Dollar note fell from 17,000 Drachmas to 16,,400 Drachmas. That would involve a stability of the Drachma for 6 months. Is that possible, in Greece, where the note printing press has always been an important means of government financing? Also: I distrust all reports from Greece. How will a correspondent of the journal "To Vima", appearing at Athens, know the true quotations of the free ("black") market?

Interesting is what you marked about Germany. Foreign exporters demand prepayment of orders!! The means of payment which they demand is not reported. Certainly, the German Mark is excluded.

The report on Canada confirms my conviction, that the Sterling plays no role in Britain's external trade in countries like Canada and USA. The report runs thus:

"Under an order in Council of December 5, Canadian residents may now accept payment in either Canadian or U.S. dollars or a convertible currency for services rendered to residents of the U.S. dollar area; heretofore payment was permitted only in U.S. dollars. The measure does not affect payments for Canadian goods exported, which must still be made in U.S. dollars or a convertible currency. This move is part of the progressive relaxation of Canadian exchange restrictions, which has been evident in the past few months."

I suppose that here goods exported to England are included. But if that should not be the case (the information seems much abbreviated) the information would not be in my favour.

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Economic Intelligence brings a little article: "What Is Inflation?" It quotes Webster's "… disproportionate and relatively sharp and sudden increase in the quantity of money or credit or both, relative to the amount of exchange business. Inflation always produces a rise in the price level." Economic Intelligence adds: "In popular language and now in policy thinking, Webster's definition has been telescoped to read: "Inflation … is a rise in the price level."

Ec. Int. does not say whether it accepts the popular (should be styled vulgar) language. In my edition of 1880, the text of Webster's Dictionary differs a little:

Inflation: 1.) The act of inflating,

2.) The state of being inflated, as with air; distension,

3.) The state of being puffed up, as with vanity or pride; conceit,

4.) Undue expansion or increase, from over-issue; - said of currency.

Both explanations are insofar false, as they do not consider that only a forced currency can be inflated.

(J.Z.: The enforcement can be by the issue monopoly, even if this exclusive currency has no cours forcé. Then, theoretically, all prices and contracts could still be priced in a sound value standard and thus not the prices etc. would be inflated but the currency would be inflated or depreciated. However, that defence is usually not permitted to the victims of monetary despotism. - J.Z., 27.3.03.)

Also ignored is that what is called "credit inflation" is only possible if the credit is expressed in fiat money.

If the currency is not endowed with cours forcé, then it gets a discount, not only at foreign markets but also at domestic markets. If the inflations goes so far that the shops finally refuse the money, then the public pays its taxes with the fiat money and so it disappears, firstly from circulation, then from the pockets of the people. Fiat money never disappears from circulation.

The later edition is, obviously, more incorrect than the old one.

It is not necessary that the increase in the quantity of money is sharp and sudden and that it must be relative to the amount of the exchange business. It may happen, that at a foreign market the discount is only 1 %. That's an inflation, although only a small one.

Moreover, it need not be sudden. It may happen that, from week to week, only 1/1000 of the circulating medium is added. At the end of the year that would be a little more than 5 % and it must be felt.

Inflation need not even and necessarily an increase of the circulating medium relative to the amount of the exchange business. It may be that, quite gradually, a distrust arises in the public towards the circulating medium but that business remains the same. What will happen then? More will be bought than before and less will be saved. In other words: The velocity of the circulation increases. If there exists no cours forcé, then that increased velocity of circulation and the general tendency to get rid of the money would produce a discount, although business would remain the same.

Vulgar economists attribute the depreciation to the distrust as an immediate cause, but in reality the way leads over the increased velocity of circulation.

All ambiguities are avoided by the right definition:

"Inflation is an increase of forced currency beyond the amount at which the economy would begin to refuse it or

cease to accept it at par, if there were no cours forcé."

Even an increase of the price level need not always be the effect of an inflation. Take the example of the Assignats. In the year 1788 there was a very bad harvest in France. Hail destroyed a greater part of the crop than was ever before observed. All prices for victuals rose considerably. In the following years prices would have fallen, if the issue of the Assignats would not have happened. In the first weeks or months of the issue, the sinking tendency of prices, the latter expressed in silver, and the contrary tendency by the Assignats counterbalanced one another - - a phenomenon not understood by many and explained by the "great trust" of the public in the Assignats.

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The London Newsletter. In the issue of 18. Kimmitt recommends attacking the State-socialist leaders personally. K. is much mistaken. To be attacked is what neither he nor the State-socialists take serious and for which they do not even possess suitable words: The monopoly of standardised means of payment and cours forcé are to be attacked!!

In the issue of 25. I.: "Wanted - a British Defence Policy", Kimmitt is afraid of the American warfare methods. K. conceives that destroying a country like Korea has been destroyed, could be the American warfare in Western Europe, too. He is aghast and gives counsels (of a very general nature).

There are much more effective methods possible: Apply to England and to Western Europe such economic methods that every fresh hand is highly welcome, all rally cheap goods as well, and the West will be all the more rich as it is supplied with labour and with goods.

Then, instead of a daily influx of a mere 150 refugees - which we have now in Berlin - - we should have 1,000 (and many more! - J.Z., 27.3.03.). Every intelligent man and woman would come to the West and, in a year, the East would have a corpse without a soul, quite incapable of performing anything that requires knowledge, intelligence and the known other qualities of technicians. But what does the West do?

The Allied High Commissioners forbade (three days ago) the acceptance of more than 75 refugees daily!!!!!!!

Now the responsibility for such actions, which until a few days ago, was only a German affair (and one less honourable than anyone reported for 12 years) is now and international shame.

And as for us: I read, in Herodotus' Histories, book "Kalliope", chapter 16, last lines, what a Persian said to his Greek friend. (I aquote the German translation of F. Lange):

"Der bitterste Kummer aber auf der ganzen Welt is der, wenn man bei aller Einsicht keine Gewalt in Haenden hat."

(The most bitter sorrow in the whole world consists in this, that in spite of all insight one is totally powerless to change things for the better. - J.Z., 27.3.03.)

Kimmitt would hardly be interested in a policy like the one here hinted at. He would say, on the contrary: It is very good that this lad is without power. He would produce a devastation more evil than that by the Americans in Korea.

Very good is what Kimmitt says: "A real Prime minister will do what Pitt did. He will tell the world that England proposes to make an immediate and practical contribution to world peace - - not by more talks and parleys - - simply by offering a market for the exchange of goods and services." Very well, but will Kimmitt stand by his words? Will he immediately repeal all prescriptions restricting imports? Will he repeal all prescriptions on immigration, on foreign exchange, so that the use of Sterling or any other currency is not prohibited and no currency will be proscribed??? Will he remove all colour bars, so that Negroes, Chinese and all others may freely migrate to England? (I demand it for Germany - - there is more work for them than 150 million can do in 30 years!)

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The Interpreter announces in its issue of Dec. 15, that W. B. Greene's "Mutual Banking" is on sale at its office for 50 cents!!!!! The fault of the Interpreter is, that it thinks the cooperative element in Greene's plan is essential. It is by no means. Essential is the right of issue and the breaking of the government's monopoly for standardised means of payment. Also the interest is a thing without importance. If the interest of a Greene-Bank is redistributed, so as the dividend of a life insurance company is, then the interest may be, nominally, as high as possible. Customers, who apply to the bank for loans of average time, will get back their interest (less the costs of administration, about 1 % p.a.), while those, who delay the repayment of the borrowed notes, will get back very little or nothing and those, who repaid their loans quickly will win. That is just distribution and, in practice the only possible one.

Riegel proposes standardised cheques instead of notes. That is the system of the Four Bills. The trouble is, that the USA do not know what the Germans had for many decades and called: "Verrechnungsscheck" (clearing-cheque - J.Z.), that is a cheque which can be made good only by clearing and not by redemption in cash. Redemption in goods is or leads to clearing, as is pointed out by Zander in his explanation of the system of the Four Bills. (Not translated into English. That is a real loss.)

(J.Z.: In my microfiche PEACE PLANS series they and references to them can be found in PP 40, 315, 394, 428ff [S. 385ff, 390ff, 421ff], 523, 534, 598, 785, 806, 890. [French edition in: 778-783.] - J.Z., 27.3.03.)

Other items of Riegel displease me. I hope to write about the subject in another letter.

(J.Z.: B. never mentioned R. to me. So I assumed, until I found this passage today, that he did not know about R.'s writings. - J.Z., 27.3.03.)

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I hope to write, in my next letter, about the interesting clippings you sent me.

What concerns the critics of Keynes, I must state that none of them touched the main point: Keynes took the cours forcé and the State money monopoly for standardised means of payment as a thing so self-evident, that he never talked about it. The critic's standpoint is that of Keynes. Also here: "Der eine melkt den Bock, der andere haelt das Sieb unter". (Quoted and translated already above! - J.Z.)

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Very faithfully Yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

8. II. 1951. Your letter of 5. II. 51., received today.

Dear Mr. Meulen,

there your are right in every respect: Thinking too far ahead is a bad thing, and I must confess that I incline towards that bad habit. Your words are confirmed by Schopenhauer, who reminded, that we do not live in the future but in the present and should never forget it. He adds, that women are rather inclined to live more in the present than in the future (Not when they go after a potential husband, who is rich or powerful, i.e., potentially a good provider for her future children! - J.Z., 27.3.03.) and, insofar, it is not merely useful but necessary to let women have a share in one's own affairs. Probably, they will find out some point which is presently important but which men overlook. In his "Aphorismen zur Lebensweisheit", chapter V: "Paraenesen und Maximen", Nr. 53, Schopenhauer says:

"So lange der Ausgang einer gefaehrlichen Sache nur noch zweifelhaft ist, so lange nur noch die Moeglichkeit, dass er eine gluecklicher werde, vorhanden ist, darf an kein Zagen gedacht werden, sondern bloss an Widerstand; wie man am Wetter nicht verzweifeln darf, so lange noch ein blauer Fleck am Himmel ist."

(As long as the end of a dangerous matter is still merely doubtful, as long as the possibility exists that one will be lucky, one must not think of holding back but only of resistance, just as one should not despair about the weather - as long as there is still a blue speck to be seen in the sky. - J.Z., 27.3.03.)

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Payments abroad. If you are right, many of your countrymen are in the wrong, so also Mr. S. W. Alexander. I am here in a strange situation. You know that I esteem you as an expert, no less in rank to any other, on the other hand, Mr. Alexander understands these matters, too. He supposes a state of foreign exchange regulations where e.g. Americans do not accept pounds. In City Press, issue of 17. XI. 50, page 8, column 2, line seven, Alexander says: "Given a sound government in this country the time should not be far distant when the Americans would be willing to accept pounds in payment or exchange for dollars on a free market basis."

What I cannot find out with certainty, in this Abdera, called Berlin, is: Do the Americans not accept pounds

a.) because the English authorities do not permit the English merchants to use the pound freely in commercial intercourse with the USA, or

b.) because the American authorities do not permit American merchants to use the pound freely in commercial intercourse with England, or

c.) does it simply lie in the present mentality of American merchants, not to accept pounds freely, e.g., because they altogether distrust the pound and say: Well, today it is worth so and so much and tomorrow it may be considerably depreciated.

If I would live in London, I could look at the British as well as the American law collections. Such collections are not to be found at the British Information Centre and at the American Information Centre. The German libraries are destroyed and the new library of the West-Berlin University hardly possesses such literature. (But if I find time and opportunity, I will try to talk to the librarian.)

Sentences as the quoted by Mr. Alexander, I find not seldom in the journals you are so kind to send to me. All agree, that there is (or was, until some weeks ago) a real scarcity of Dollars in England. If the Americans would accept pounds, then an opinion, that a dollar-scarcity exists, would be unfounded, insofar as the missing dollars could, without difficulty, be replaced by pounds.

There would be no difference between using pounds and dollars, if a British concern would pay imported goods

with a bill of exchange containing the clause:

"We owe to Mr. Smith in New York xyz dollars and redeem the present bill of exchange with so many pounds as corresponds to the quotation of the pound at the exchange of New York when the present bill of exchange falls due."

All governments which impose a regulation of foreign exchange upon foreigners and their own subjects, did prohibit similar clauses. For instance, it was strictly forbidden by Schacht for German merchants to protect their creditors and themselves by such a clause. The Schacht regulation is still valid.

If there were a free commercial intercourse between England and America, so that American merchants would freely accept pounds or other currencies, not being dollars of American origin, then such a clause would long since have been introduced.

All scruples by Americans concerning the stability of the Pound would be removed by such a clause. Only in case of the Pound suffering a depreciation as e.g. the German Mark did and the Chinese Yüan, would the clause not be sufficient.

It would be interesting to learn to know for what reasons clauses like the above are now not applied in the exchanges between England and the USA.

Very important is the question raised by you: Why are Pounds quoted in New York, seeing that Americans do not accept pounds in the British-American commerce?

The answer to this question may be a similar one as the answer would be if one asked: "Why are German Marks quoted at foreign exchanges, when the German Mark is not used as a means of payment in foreign commerce?"

The answer would be: "There is a very small sector in commerce, where the German Mark is permitted. Example: Travellers are permitted to have some marks in their pocket when they travel to Switzerland, etc. There are some other times, which I will not enumerate here, for to do this, I would have to study the regulations. These regulations are contained in a book of a size like the Bible. There are very few men on earth who understand this book."

From a report of Lloyd's Bank's Review, article: "The Dollar Siege", of 1950, author Honor Croome, I learnt that there exist restrictions of the commerce between Britain and America. What restrictions they are, Croome does not say. Over-valuation of the Pound is, obviously, a part of the restrictions. (Pare 35, line 11 from the bottom.) It seems that Croome writes for people quite concerned with these things, that means, in this case, the special laws and regulations.

You write: : Exporters here have often been urged to quote their prices in francs, marks, lire or pesetas, to make it easier for the foreign importer." - Well - - why don't they do it????????

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Long-term loans. An upper limit of the quantity of note's or coins, that can possibly circulate in a country, can always be estimated.

If the quantity is equal to the quantity of goods (and services! J.Z.) for sale in the country, the amount of notes or coins is certainly too great. That means: It is to be expected, that soon a part of the coins or notes will disappear from circulation.

Example: For Germany, Prof. Hirsch (a good economist) estimated in 1930 the quantity of goods for sale to possess a value of 30,000 million gold-marks. (Perhaps I do not remember the exact number, but I know that 30 milliards was not far from his estimate.) The quantity of circulating notes and coins at that time may have been 5,000 millions or so. That was not unsound, but 30 milliards, certainly, would have been unsound.

If one supposes, that economic conditions in Germany and England were about the same, in the year 1930, then the value of goods ready for sale in England would have been about 30,000 million gold shillings or 1500 million Pounds. That would, quite obviously, have been too much as the total amount for the circulating currency. The real amount was about 400 million Pounds, and this amount was already so great, that a devaluation was to be foreseen by a "connoisseur".

Considerations like these extended, do lead to estimates of an upper limit of currency bearable in a country.

Why should this be less true today than it was at the time of Petty, who (as far as I know), for the first time gave principles for estimates like these? And you might say, about Petty's estimate, what Corregio is said to have spoken before a painting of Rafael: "Anch io son pittore!!"

Free Banking. You are right: "The Economist" is to be seen in the British Information Centre.

India. I do not consider India's present government as a self-government.

Denmark. Here is an example, that exportation prices very seldom have to do with the shop prices of the country. Germany's exporters were ill-famed for their very low prices for exported goods. Sometimes they exported at a real loss. Then the inland consumer had to pay this loss and the inland price for the same goods was, therefore, correspondingly higher.

In the new order of things, imports will be all the more welcome the cheaper they are. Unemployment by cheap imports will be as impossible as disease is by the introduction of oxygen into a smoky room.

Gold coins and foreign exchange.

You say: "… it was only Britain who rigidly promised creditors payment in gold before 1914."

Before me is the record of the deliberations of the "Gesamt-Kommission" concerned with the "Bank-Enquête" of 1908. All bankers took it as self-evident, that foreign creditors, who had in hand bills of exchange, signed by German debtors, must be paid in gold. They proposed means to avoid metallic gold, say, by clearing, say, by using foreign means of payment ("Devisen"), etc., all well-known things in all countries. From the deliberations reported, I see, that the legal situation of foreign creditors was the same in the USA, in France and in Italy. In France the Central Bank redeemed notes in silver, but foreign creditors were paid in gold, even by the Banque de France. Examples are reported, where the Banque de France borrowed very great sums from the Bank of England to meet its foreign debts payable in gold.

Zwangskurs, Cour forcé. Forced currency. Consider the German sentences: "Deutsche Noten sind Zwangskursgeld." "Deutsche Noten haben Zwangskurs." I think the English translation would be: "German notes are a forced currency". "German notes possess cours forcé."

"Im Jahre 1883 wurde in Italien der Zwangskurs nach 17-jaehrigem Bestehen aufgehoben." Translation: In the

year 1883 in Italy the cours forcé was repealed, after having been in operation for 17 years.

Would the following translation be possible: In the year 1883, in Italy, the forced currency was repealed etc."? If yes, then you are in the right, that cours forcé and forced currency in English are the same thing. But in German "Zwangskurs" and "Zwangskursgeld" would be different things.

(J.Z.: The "force" of the "forced currency" can either mean:

a) acceptance is enforced,

b) a certain value is enforced and

c) both, acceptance and value are enforced. The term does not say, by itself, which of these three characteristics is meant. - J.Z., 28.3.03.)

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Human Rights. Give me some time to reflect on your replies. But what concerns the atoms, to which the moderns reduced development (Schopenhauer was in doubt whether they exist) - - perhaps it was no real development - - I remember well that when I began my existence as an atom, then, already at that time, the laws of my behaviour were in me. When I did not blow up other atoms, although it was in my power (if modern naturalists are in the right), the reason was in my constitution.

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Very faithfully Yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

15. II. 1951. Your letter of 13. cr., received today.

Dear Mr. Meulen,

cours forcé - - your triumph is a 100 % one. In the British Information Centre I discovered these lines in "Currency and Credit", by R. G. Hawtrey, 4^th edition, chapter: Assignats, page 246:

"The notes of the Caisse d'Escompte", an institution founded by Turgot in 1776, had been given forced currency in August 1788. Necker was driven to follow this example of his predecessors in borrowing from the Caisse and in November 1789, when the forced currency was prolonged to the 1^st of July, 1790, the debt of the government to it had reached 155 millions."

Here by an author of high rank and certainly competent in the matter, the word "forced currency" is clearly used in the sense of "cours forcé", brilliantly confirming your opinion.

About 100 years ago, in German sometimes the word "Zwangsumlauf" was used instead of "Zwangskurs", which is now used. (By the very few who still understand what it means. Rittershausen was, since 1924, the only author using the word in the whole financial literature, but in the last years I saw the word sometimes in print, obviously revived by Rittershausen. Before the 1^st world war it was quite common.)

"Zwangsumlauf" is still nearer to "forced currency" than "Zwangskurs".

(J.Z.: "Zwangsumlauf" = "forced circulation", implying: "forced acceptance" in every case, in general circulation. "Zwangskurs" = "forced value" or: "forced rate" or: "to be accepted at par with its nominal value, regardless of its free market value". - J.Z., 28.3.03.)

In all of the writings of Keynes that I have read, the words "forced currency" were not to be found. Obviously, for him it was self-evident that a currency was always forced.

Gold coins. The Reichsbank's steps to discourage demands for gold in greater quantities were not very effective, although tried. The Reichsbank-President Havenstein confessed that openly before the Currency Commission of 1908 and, inter alia, demanded, therefore, that his notes should become legal tender. Although experts like the Notenbank Praesident of the Bayerische Notenbank protested, the great majority of the commission and, later, of the Reichstagm agreed with Havenstein and, since 1. I. 1910 the Reichsbanknoten were legal tender.

(J.Z.: One argument, then widely accepted, was, that the next war could not be financed without legal tender! - JZ., 28.3.03.)

By a prescription of September 1914 all former debts, also those with a gold clause, could be repaid by notes.

The Reichsbank had no influence on the relations between foreign creditors and German debtors, so that, when foreign creditors had granted credits on the basis of foreign gold currency, say dollars or sterling, the German legal tender laws were of no use.

(J.Z.: Ultimately, when the depreciation of the German notes had become very great and rapid, the internal German legal tender and forced value laws and their systematic abuse for over-issues, had the effect that German notes were altogether prohibited, by foreign governments, as means of payment to foreign merchants. Thus many of the "foreign exchange controls" may have started or, if they already existed and the foreign government had committed itself, for all to long, to keep up a fictitious exchange rate, and finally could no longer afford to do so, the foreign government simply prohibited the acceptance of German and similarly inflated paper money. - J.Z., 28.3.03.)

There is - - I think - - a difference between the claim of note-holders to get their notes converted, on demand and at their face value into gold and the claim of creditors against merchant debtors, to pay - - if demanded - - their due debts in gold coins.

I read with interest (re-read - and not for the first time - it's an interesting chapter) the pages 178 - 182 of your book. The expression "free gold-market" is now - - as you perceived earlier than I - - used in England so as it was ever used in the USA, that is: "bullion market", department gold. In other words, the expression relates to ingots, may they be in the form of coins or not.

In a booklet of the Banque Tangéro - - Suisse at Tangier, which Rittershausen sent me some days ago, I read that now gold ingots are usually sold in quantities of 400 ounces - one ingot. The Banque offers to its customers ingots in the weight of 100, 500 or 1000 grams. The gold-market (the word used as in the USA) is quite free at Tangier. The freedom of its gold market consists in the freedom of everybody, using the facilities of the Tangier market, to offer as many notes for 1 ounce, or several ounces of gold, as he likes and to offer as much gold as he likes for notes. So it should be!

Long-term loans. Do you think that England's quantity of currency, per capita, was much more than one ounce of gold in 1846? In London, where not all great libraries are destroyed, it must be possible to get estimates of the currency per capita at that time. I believe that all estimates are in relatively narrow limits the same and the average of some good experts' estimates will be about 1 ounce.

The quantity of goods, ready for sale, was 200 years ago, considered by many economists as nearly equal to the quantity of money. But it is clear, that the quantity of goods, ready for sale, estimated in money, must always be much greater than the quantity of money in circulation. This was found out - - as far as I know - - in the 18^th century, but I have forgotten who discovered this first.

I do agree with No. 3 of your explanations.

Alexander. Certainly, you have know his opinions for a long time and, therefore, I will not contradict you when you say, that by a free market for Pounds and Dollars he does mean the contrary, that is, a condition that is neither free nor a market. As long as somebody is found - - at a Central Bank or another, who is able and also compelled to exchange, at a fixed rate, paper pounds or paper dollars into another currency, then there is certainly neither freedom nor a market in relation to paper pounds and paper dollars, as long as such an unnatural condition prevails. But I must confess that I did not get this impression from his articles and believed, until now, that he meant by a "free market" the same as what Adam Smith would have understood by these words.

I also read in one article of the "City Press" that the pound must "find its own level". This - - I think - - is possible only in a really free market, so as Adam Smith understood it, one where all regulations and prescriptions are discarded.

German mark as means of payment towards foreigners. Rittershausen sends me an extract of an article in the "Financial Times" by "Lombard", Nor. 19 260, February 7, 1951, "Trading in Marks".

Lombard says, quite justly, that the announcement by the Bank Deutscher Laender, to grant, in some cases - - each to be investigated - - the DM as means of payment in foreign trade, is of no practical value. Lombard is in doubt whether the quotations of sterling in Germany, although daily reported, are to be taken serious and thinks that, probably, no real market for sterling exists in Germany. My impression is: the man knows theses things well.

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I am very curious to read your correspondence with Kimmitt, Johnston and Alexander. I promise to return the

correspondence within two days after receipt. (I did not yet receive it.)

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Human rights. I hope to write to you in detail. I think: Right is an expression similar to "sun rise". Everybody knows, that the sun does not rise and, nevertheless, the expression is quite distinct and, insofar, useful and certainly better than an expression which gives the real conditions. It would be too long.

Rights do not adhere to the man who is said to possess them. The greatest part of our property does - - the matter taken quite exactly - - not belong to us. Other people respect it, that's all.

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Very faithfully Yours - signed: U. v. Beckerath.

____________________________________________________________________________________________

18. II. 1951.

Dear Mr. Meulen,

by your kindness I received yesterday:

1.) "Individualist", No. 1, 1951,

2.) "Economic Digest", December 1950,

3.) "The London Newsletter", No. 451, 8. II. 51,

4.) "analysis", December 1950,

5.) "Truth", 9, II. 51,

6.) "City Press", 2. II. 1951,

7.) "Financial News Survey", 12. I. 51,

8.) Your correspondence with Kimmitt, Johnston and Alexander.

I thank you very much.

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You could get no better idea than to enlarge your "Individualist" to 12 pages.

Very important is your article: "The falling value of money". Your proposal: " ... let long-term debt contracts be made out in terms of the free market price of gold" will, I hope, arouse a discussion among your readers. The result of the discussion must be the best form of a gold clause.

What is to be understood by "long-term" depends on the rapidity with which the money is depreciated by the government.

Example: Quotation of 1 dollar at the Exchange of Berlin (demand):

15 October 1923 = 37 506 000 marks,

16. 40 897 500

17. 54 862 600

18. 81 396 000

19. 119 700 000

20. - - - no quotation

21. - - - no quotation

22. 399 000 000

23. 558 600 000

24. 628 425 000

(Taken from: "Das Gelbbuch der Devisenkurse, Vorlag des Berliner Boersenkurier.)

The above quotations are the "official" ones. Those of the free market were much higher.

Salaries and wages were, at that time, generally paid out daily. A difference was made between payments before the close of the Exchange and afterwards.

The possibility of such depreciation reveals also an important detail: To divide the difference between creditor and debtor would have been obviously unjust here and even economically impossible in the case of wages. The workers would all have starved if the difference would have been divided between them and the employer.

(Prices followed the dollar quotation, not exactly, but in general. Often prices rose quicker than the dollar.)

China, Hungary and others successfully competed with Germany in the quickness by which they depreciated their money.

(J.Z.: According to some hints I received, the Hungarian depreciation went even much further than the German inflation, although in the latter the mere printing costs came already to 48 % of the purchasing power of the newly printed notes. - I would like to see a leaflet, giving details like the above for, say, a dozen central banks and their inflations of their legal tender money, then just adding: Can one trust such "guardians of the currency"? Without seeing such facts in black and white before them, all too many people managed to forget about them and to tolerate the wrongful and harmful system of monetary despotism, which produces them, again and again. - J.Z., 28.3.03.)

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You say - - very justly - - of the members of the Erdington C.L.P. that they are certainly fools. The effect of the resolution, which you report, must and will be, that even after the restoration of a sane value standard in England, nobody will be ready to finance houses for workers. That resolution will not be forgotten. Even intelligent workers will not be such fools as to finance, with their savings, the houses of other workers. They will say: While such a mentality prevails among my comrades, there exists the danger that one day it finds its expression in corresponding laws (maximum rents, etc.). If I finance a house by my savings, then it will be my own house, if there is the chance to get one.

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You were so kind as to mark the article "How gold reaches black market" in the "Economic Digest", which took it from "The Statist".

I was a subscriber of "The Statist", 25 years or so ago. At that time the journal was excellent. Obviously, it is no longer. It speaks of the "black market" for gold. It cannot or will not see, that the "black" market is the only honest market. Also, it cannot or will not see that people, who today buy gold are no "speculators" but the very contrary. To trust in the policy of modern governments (excepting not one) is speculation. But to buy gold is protecting oneself against speculation. An economist would see that.

Interesting is that gold finds its way into households now in the form of wire. Indeed: wire is here superior to ingots. Subdividing wire is not a problem. Subdividing ingots is.

(In China silver wire served for decades as an auxiliary currency. During the Tai Ping rebellion the government's soldiers were paid in silver wire. They refused copper or paper.

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"The London Newsletter" contains a good article: "Words, words words", and reports that Mr. Leonard Read, in his book "Outlook for Freedom", tries to better define the freedom concept.

I am now in a correspondence with Rittershausen on a similar subject. The world "freedom" is not sufficient. What is wanted, too, and often meant, if one speaks of freedom, is "anti-monopolism". Anti-monopolism (do you know a better word?) is needed to create independence, and independence is not quite the same as freedom.

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"analysis" is a truth-seeker and, therefore, deserves esteem. But - - like most others - - analysis does not see reality. "How avoid depressions?" is the theme of the article "The Last Bust". Russia - - analysis believes - - is free from depressions. Is acceptance of the Bolshevist system the only possibility to avoid depressions?

First of all, "analysis" is greatly in error when it thinks that Russia is free from depressions. Although, in some sectors of Russia's economy, labourers are as scarce as they were, sometimes, in England's navigation, 200 years or so ago, in other sectors prevails depression. A quite similar situation was to be observed in England. The goods not saleable in England, were sent abroad and there sold for low prices. But for that purpose ships were needed and the ships needed men. Sailoring, at that time, was not an attractive occupation and few unemployed accepted such jobs as the mercantile fleet offered. What did the captains do? They "pressed" the men where they found them, first of all in the pubs. Originally, this method was a privilege of men-of-war, but the mercantile fleet used it as well, without asking the lawyers. (During the next days I will send you a nice pamphlet on the subject, printed in the 19^th century.) The Russians do the same. Under the pretext, that they are politically suspect, they caught - - as estimated - - about 15 million men and women and brought them to concentration camps. There they work for the government. Simple "pressing".

And what do the Russians do with the people out of work? This very numerous class is used for political purposes, too. It serves in the political police, observes the workers in the factories, reports discussions in the street, in one word: They are informers. All governments use this system. It is said that the percentage of spies has been greatest in Turkey under Abd ul Hamid II., the 1908 deposed sultan. But in the Italy of Mussolini and the Germany of Hitler the same system was used.

It is said that one of the causes of unemployment in Russia is "planning". Planners err sometimes, and their errors, if noticed, lead to the removal and transfer of the man in power. That requires time. Before that time has elapsed, the men are unemployed.