From: "John Zube" To: "Mark Tier" References: <5.1.0.14.0.20020730173531.00b92b20@pop1.attglobal.net> Subject: 020730 Mark Tier CD-Project & Railway Money Date: Tue, 30 Jul 2002 21:10:09 +1000 MIME-Version: 1.0 Content-Type: multipart/mixed; boundary="----=_NextPart_000_000D_01C2380D.7CB59340" X-Priority: 3 X-MSMail-Priority: Normal X-Mailer: Microsoft Outlook Express 6.00.2600.0000 X-MIMEOLE: Produced By Microsoft MimeOLE V6.00.2600.0000 This is a multi-part message in MIME format. ------=_NextPart_000_000D_01C2380D.7CB59340 Content-Type: multipart/alternative; boundary="----=_NextPart_001_000E_01C2380D.7CB59340" ------=_NextPart_001_000E_01C2380D.7CB59340 Content-Type: text/plain; charset="us-ascii" Content-Transfer-Encoding: quoted-printable Dear Mark, from your reply it is still not quite clear whether = you would welcome the inclusion of the few of your articles, that have = stood the test of time, in a libertarian CD-ROM. Furthermore, I suppose that you would welcome the inclusion of some of = your favorite texts, written by other freedom lovers, in one or several = CDs, recommending or persuading some electronic text providers of them = to do so, or perhaps scanning them in yourself, from your own = collection. Nor do I know whether you would be a customer for such text disks.=20 I'm not a webmaster, either, as yet, and may never be one. Zander's articles on railway money are part of my PEACE PLANS No. 9, = which I am attaching in RTF with my compliments. I think that you ought = to read the other 2 books by U. von Beckerath as well, in PP 10 & 11. If one could launch such ideas in the mainland, the remaining despotism = would soon disappear with the disappearance of mass unemployment and = sales difficulties. A monetary revolution could be a quite peaceful one, = establishing win-win situations everywhere. And China could really jump = ahead economically. Naturally, full financial freedom would be required = as well and under full employment it would not longer be greatly envied = and hated in its main figures. Imagine how popular a politician could = become if he managed to repeal repressive laws that had rendered dozens = of millions of people unemployed and poor. Monetary freedom experiments = in China go back to the century of tyranny under the Mongols. Modern = central banking despotism is largely an imposition by Western "experts". The few monetary freedom advocates in the world have still not organized = themselves sufficiently to permanently and cheaply publish, in = alternative media, what they have to offer between them.What the = Internet offers so far on the subject, apart from general sentiments in = favor, is rather poor and incomplete.=20 =20 I have still not got around to update my 1989 free banking bibliography = - probably the longest ever. For a while someone had put it onto the = Internet - but I never got a response upon this. My website provider does check in and outgoing e-mails twice, with two = different virus checkers that are updated, automatically, every 2 hours. But he cannot prevent the Klez virus or its spreader from using my = e-mail address to send e-mail to various addresses, unknown to me and = never written to by me, pretending that I had send them. Recently that = happened ten times in one day!=20 I still do not know whether this abuse of my e-mail address costs me = money, too, not only my reputation. I get an automatic response from = ACENET, which still and wrongly presumes that I am sending these = infected e-mails to strangers, probably because their service providers = complained. Thomas H. Greco, Jr. circ2@mindspring.com is pushing me more and more = towards collaborating with him in a "Monetary Enlightenment Project". = His writings on the subject have become more and more radical, partly = influenced by the German School for monetary freedom. By now you might want to edit your booklet on inflation, written many = years ago, when just out of uni and wanting to make some money with it. I would find it a terrible burden to have to write only for the day and = in order to make some money for others. One's bread-earning job should leave one some time and energy to write = on subjects that one likes and also, as far as one can, for more than = the immediate future. I am still after articles by Dr. Walter Zander on the superiority of the = Chinese tael currency over most modern paper money systems and also = about the issue of electricity money by some power plant, probably in = Shanghai, in the middle thirties and in one of Shanghai's newspapers, in = English.=20 Will copies of these papers have survived the upheavals? Will they be = accessible in microfilm and indexed?=20 So much of the best kind of information remains buried and inaccessible = for decades, even if once it was widely published. PIOT, John ----- Original Message -----=20 From: Mark Tier=20 To: John Zube=20 Sent: Tuesday, July 30, 2002 7:38 PM Subject: Re: 020711 Mark Tier Thanks for various mailings CD-Project, = PEACE PLANS 1-20 digitized, updated literature list Hi John -- good to hear from you. Thanks for the idea about putting my "collected works" on CD. = Unfortunately, most of what I've written was market analysis -- often = out of date by the time it got back from the printer!! There are some articles that have stood the test of time -- painfully = few, unfortunately. And I'm (slowly) in the process of setting up a = website to make them easily available. Remember, years ago, you told me about railroad money during the = German hyperinflation. Can you suggest any easily-accessible = references? -- Best, Mark. =20 ------=_NextPart_001_000E_01C2380D.7CB59340 Content-Type: text/html; charset="us-ascii" Content-Transfer-Encoding: quoted-printable
Dear Mark,
           &n= bsp;     =20 from your reply it is still not quite clear whether you would welcome = the=20 inclusion of the few of your articles, that have stood the test of time, = in a=20 libertarian CD-ROM.
 
Furthermore, I suppose that you would welcome the inclusion=20 of some of your favorite texts, written by other freedom lovers, in = one or=20 several CDs, recommending or persuading some electronic text providers = of them=20 to do so, or perhaps scanning them in yourself, from your own = collection.
 
Nor do I know whether you would be a customer for such text disks. =
 
I'm not a webmaster, either, as yet, and may never be one.
 
Zander's articles on railway money are part of my PEACE PLANS No. = 9, which=20 I am attaching in RTF with my compliments. I think that you ought to = read the=20 other 2 books by U. von Beckerath as well, in PP 10 & 11.
 
If one could launch such ideas in the mainland, the remaining = despotism=20 would soon disappear with the disappearance of mass unemployment and = sales=20 difficulties. A monetary revolution could be a quite peaceful = one,=20 establishing win-win situations everywhere. And China could really jump = ahead=20 economically. Naturally, full financial freedom would be required as = well and=20 under full employment it would not longer be greatly envied and hated in = its=20 main figures. Imagine how popular a politician could become if he = managed to=20 repeal repressive laws that had rendered dozens of millions of people = unemployed=20 and poor. Monetary freedom experiments in China go back to = the century=20 of  tyranny under the Mongols. Modern central banking despotism is = largely=20 an imposition by Western "experts".
 
The few monetary freedom advocates in the world have still not = organized=20 themselves sufficiently to permanently and cheaply publish, in = alternative=20 media, what they have to offer between them.What the Internet offers so = far on=20 the subject, apart from general sentiments in favor, is rather poor and=20 incomplete.
 
I have still not got around to update my 1989 free banking = bibliography -=20 probably the longest ever. For a while someone had put it onto the = Internet -=20 but I never got a response upon this.
 
My website provider does check in and outgoing e-mails twice, with = two=20 different virus checkers that are updated, automatically, every 2=20 hours.
 
But he cannot prevent the Klez virus or its spreader from using my = e-mail=20 address to send e-mail to various addresses, unknown to me and never = written to=20 by me, pretending that I had send them. Recently that happened ten times = in one=20 day!
I still do not know whether this abuse of my e-mail address costs = me money,=20 too, not only my reputation. I get an automatic response from ACENET, = which=20 still and wrongly presumes that I am sending these infected e-mails to=20 strangers, probably because their service providers complained.
 
Thomas H. Greco, Jr. circ2@mindspring.com  is = pushing me=20 more and more towards collaborating with him in a "Monetary = Enlightenment=20 Project". His writings on the subject have become more and more radical, = partly=20 influenced by the German School for monetary freedom.
 
By now you might want to edit your booklet on inflation, written = many years=20 ago, when just out of uni and wanting to make some money with it.
 
I would find it a terrible burden to have to write only for the day = and in=20 order to make some money for others.
One's bread-earning job should leave one some time and energy to = write on=20 subjects that one likes and also, as far as one can, for more than the = immediate=20 future.
 
I am still after articles by Dr. Walter Zander on the superiority = of the=20 Chinese tael currency over most modern paper money systems and also = about the=20 issue of electricity money by some power plant, probably in Shanghai, in = the=20 middle thirties and in one of Shanghai's newspapers, in English.
Will copies of these papers have survived the upheavals? Will = they be=20 accessible in microfilm and indexed?
So much of the best kind of information remains buried and = inaccessible for=20 decades, even if once it was widely published.
 
PIOT, John
 
----- Original Message -----
From:=20 Mark=20 Tier
To: John Zube
Sent: Tuesday, July 30, 2002 = 7:38=20 PM
Subject: Re: 020711 Mark Tier = Thanks for=20 various mailings CD-Project, PEACE PLANS 1-20 digitized, updated = literature=20 list

Hi John -- good to = hear from=20 you.

Thanks for the idea about putting my "collected works" on=20 CD.  Unfortunately, most of what I've written was market analysis = --=20 often out of date by the time it got back from the = printer!!

There are=20 some articles that have stood the test of time -- painfully few,=20 unfortunately.  And I'm (slowly) in the process of setting up a = website=20 to make them easily available.

Remember, years ago, you told me = about=20 railroad money during the German hyperinflation.  Can you suggest = any=20 easily-accessible references?  -- Best, Mark.



 
------=_NextPart_001_000E_01C2380D.7CB59340-- ------=_NextPart_000_000D_01C2380D.7CB59340 Content-Type: application/msword; name="PP9completeRTF.rtf" Content-Transfer-Encoding: quoted-printable Content-Disposition: attachment; filename="PP9completeRTF.rtf" {\rtf1\ansi\ansicpg1252\uc1 = \deff0\deflang1033\deflangfe1033{\fonttbl{\f0\froman\fcharset0\fprq2{\*\p= anose 02020603050405020304}Times New = Roman;}{\f1\fswiss\fcharset0\fprq2{\*\panose = 020b0604020202020204}Arial;} {\f2\fmodern\fcharset0\fprq1{\*\panose 02070309020205020404}Courier = New;}{\f3\froman\fcharset2\fprq2{\*\panose = 05050102010706020507}Symbol;}{\f4\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}Times;} {\f5\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Helvetica;}{\f6\fmodern\fcharset0\fprq1{\*\panose = 00000000000000000000}Courier;}{\f7\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Geneva;} {\f8\froman\fcharset0\fprq2{\*\panose 00000000000000000000}Tms = Rmn;}{\f9\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Helv;}{\f10\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}MS Serif;} {\f11\fswiss\fcharset0\fprq2{\*\panose 00000000000000000000}MS Sans = Serif;}{\f12\froman\fcharset0\fprq2{\*\panose 00000000000000000000}New = York;}{\f13\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}System;} {\f14\fnil\fcharset2\fprq2{\*\panose = 05000000000000000000}Wingdings;}{\f15\fswiss\fcharset0\fprq2{\*\panose = 020b0604030504040204}Tahoma;}{\f16\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Copperplate31ab;} {\f17\fmodern\fcharset0\fprq0{\*\panose 00000000000000000000}MS = LineDraw;}{\f18\fnil\fcharset0\fprq2{\*\panose = 00000000000000000000}Alleycat ICG;}{\f19\fnil\fcharset0\fprq2{\*\panose = 00000000000000000000}Boca Raton ICG Solid;} {\f20\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Boca Raton = ICG;}{\f21\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Chilada = ICG Cuatro;}{\f22\fnil\fcharset0\fprq2{\*\panose = 00000000000000000000}Chilada ICG Dos;} {\f23\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Chilada ICG = Tres;}{\f24\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Chilada = ICG Uno;}{\f25\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Copperplate33bc;} {\f26\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Decotura ICG = Inline;}{\f27\fnil\fcharset0\fprq2{\*\panose = 00000000000000000000}Decotura ICG;}{\f28\fnil\fcharset0\fprq2{\*\panose = 00000000000000000000}Fajita ICG Mild;} {\f29\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Fajita ICG = Picante;}{\f30\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Franklin Gothic = Condensed;}{\f31\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Franklin Gothic No.2;} {\f32\froman\fcharset0\fprq2{\*\panose 00000000000000000000}AGaramond = Bold;}{\f33\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}AGaramond;}{\f34\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}Goudy;} {\f35\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Litterbox = ICG;}{\f36\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}NuptialScript;}{\f37\fdecor\fcharset0\fprq2{\*\panos= e 00000000000000000000}OCRA;} {\f38\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Paisley ICG 01 = Alt;}{\f39\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Paisley = ICG 01;}{\f40\fnil\fcharset0\fprq2{\*\panose = 00000000000000000000}Paisley ICG 02 Alt;} {\f41\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Paisley ICG = 02;}{\f42\froman\fcharset0\fprq2{\*\panose 00000000000000000000}Park = Avenue;}{\f43\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}Prestige Elite;} {\f44\froman\fcharset0\fprq2{\*\panose 00000000000000000000}Bernhard = Modern Roman;}{\f45\fnil\fcharset0\fprq2{\*\panose = 00000000000000000000}Saturday Sans = ICG;}{\f46\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}Stencil;} {\f47\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}Trajan;}{\f48\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Tekton;}{\f49\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}Ultra Condensed Sans One;} {\f50\froman\fcharset0\fprq2{\*\panose 00000000000000000000}Ultra = Condensed Sans Two;}{\f51\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}VAG Rounded = Light;}{\f52\fswiss\fcharset0\fprq2{\*\panose 00000000000000000000}VAG = Rounded Thin;} {\f53\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Whimsy = ICG;}{\f54\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Whimsy = ICG Heavy;}{\f55\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Myriad Roman;} {\f56\fnil\fcharset0\fprq2{\*\panose 00000000000000000000}Wonton = ICG;}{\f57\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Albertus = Medium;}{\f58\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Antique Olive;} {\f59\fswiss\fcharset0\fprq2{\*\panose 00000000000000000000}CG = Omega;}{\f60\froman\fcharset0\fprq2{\*\panose 00000000000000000000}CG = Times;}{\f61\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}Clarendon Condensed;} {\f62\fscript\fcharset0\fprq2{\*\panose = 00000000000000000000}Coronet;}{\f63\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Albertus Extra = Bold;}{\f64\fmodern\fcharset0\fprq1{\*\panose = 00000000000000000000}CourierPS;} {\f65\froman\fcharset0\fprq2{\*\panose = 02020404030301010803}Garamond;}{\f66\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Modern;}{\f67\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Helvetica Narrow;} {\f68\fswiss\fcharset0\fprq2{\*\panose 00000000000000000000}ITC Avant = Garde Gothic;}{\f69\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}ITC = Bookman;}{\f70\fscript\fcharset0\fprq2{\*\panose = 00000000000000000000}ITC Zapf Chancery;} {\f71\fdecor\fcharset0\fprq2{\*\panose 00000000000000000000}ITC Zapf = Dingbats;}{\f72\fmodern\fcharset0\fprq1{\*\panose = 00000000000000000000}Letter = Gothic;}{\f73\fmodern\fcharset0\fprq1{\*\panose = 00000000000000000000}LinePrinterBM;} {\f74\fscript\fcharset0\fprq2{\*\panose = 00000000000000000000}Marigold;}{\f75\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}New Century = Schoolbook;}{\f76\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}Palatino;} {\f77\fdecor\fcharset2\fprq2{\*\panose = 00000000000000000000}SymbolPS;}{\f78\froman\fcharset0\fprq2{\*\panose = 00000000000000000000}Roman;}{\f79\fswiss\fcharset0\fprq2{\*\panose = 00000000000000000000}Univers;} {\f80\fswiss\fcharset0\fprq2{\*\panose 00000000000000000000}Univers = Condensed;}{\f81\fnil\fcharset2\fprq2{\*\panose = 00000000000000000000}Marlett;}{\f82\fmodern\fcharset0\fprq1{\*\panose = 020b0609040504020204}Lucida Console;} {\f83\fswiss\fcharset0\fprq2{\*\panose = 020b0706040902060204}Haettenschweiler;}{\f84\fswiss\fcharset0\fprq2{\*\pa= nose 020b0506020202030204}Arial = Narrow;}{\f85\froman\fcharset0\fprq2{\*\panose = 02050604050505020204}Bookman Old Style;} {\f86\fnil\fcharset2\fprq2{\*\panose 05000000000000000000}MS = Outlook;}{\f87\froman\fcharset2\fprq2{\*\panose = 05050102010706020507}Bookshelf Symbol = 3;}{\f88\froman\fcharset0\fprq2{\*\panose 02040606040505040204}Clarendon = Cn SWC;} {\f89\fscript\fcharset0\fprq2{\*\panose 03020702040402020504}AudreyTwo = SWC;}{\f90\fmodern\fcharset0\fprq1{\*\panose = 02070509030505020404}Courier SWC;}{\f91\froman\fcharset0\fprq2{\*\panose = 02020603050405020304}Dutch801 SWC;} {\f92\froman\fcharset0\fprq2{\*\panose 02020603060505020304}Dutch801 = SWM;}{\f93\fswiss\fcharset0\fprq2{\*\panose = 020e0602030304020304}Flareserif821 = SWC;}{\f94\fswiss\fcharset0\fprq2{\*\panose = 020e0802040304020204}Flareserif821 XBd SWC;} {\f95\fswiss\fcharset0\fprq2{\*\panose 020b0603020204030204}Incised901 = SWC;}{\f96\fmodern\fcharset0\fprq1{\*\panose = 020b0509020202030204}LetterGothic = SWC;}{\f97\froman\fcharset2\fprq2{\*\panose = 05020102010804020806}MoreWingbats SWC;} {\f98\froman\fcharset0\fprq2{\*\panose 02020602050306020403}OrigGaramond = SWC;}{\f99\fscript\fcharset0\fprq2{\*\panose = 03030502040506070602}Ribbon131 = SWC;}{\f100\fswiss\fcharset0\fprq2{\*\panose = 020b0504020202020204}Swiss721 SWM;} {\f101\fswiss\fcharset0\fprq2{\*\panose 020b0603020202030204}Swiss742 = SWC;}{\f102\fswiss\fcharset0\fprq2{\*\panose = 020b0606020202060204}Swiss742 Cn = SWC;}{\f103\froman\fcharset2\fprq2{\*\panose 05050102010607020607}Symbol = Set SWA;} {\f104\fswiss\fcharset0\fprq2{\*\panose = 020b0602050508020304}ZapfHumanist Dm = SWC;}{\f105\fnil\fcharset0\fprq2{\*\panose 00000400000000000000}Mini = Pics Art Jam;}{\f106\fnil\fcharset0\fprq2{\*\panose = 00000400000000000000}Mini Pics Classic;} {\f107\fnil\fcharset0\fprq2{\*\panose 00000400000000000000}Mini Pics Lil = Critters;}{\f108\fnil\fcharset0\fprq2{\*\panose = 00000400000000000000}Mini Pics Lil = Edibles;}{\f109\fnil\fcharset0\fprq2{\*\panose 00000400000000000000}Mini = Pics Lil Events;} {\f110\fnil\fcharset0\fprq2{\*\panose 00000400000000000000}Mini Pics Lil = Stuff;}{\f111\fnil\fcharset0\fprq2{\*\panose 00000400000000000000}Mini = Pics Lil Vehicles;}{\f112\fnil\fcharset0\fprq2{\*\panose = 00000400000000000000}Mini Pics Red Rock;} {\f113\fswiss\fcharset0\fprq2{\*\panose 020b0a04020102020204}Arial = Black;}{\f114\fscript\fcharset0\fprq2{\*\panose = 030f0702030302020204}Comic Sans = MS;}{\f115\fswiss\fcharset0\fprq2{\*\panose = 020b0806030902050204}Impact;} {\f116\fswiss\fcharset0\fprq2{\*\panose = 020b0604030504040204}Verdana;}{\f117\froman\fcharset2\fprq2{\*\panose = 05030102010509060703}Webdings;}{\f118\froman\fcharset0\fprq2{\*\panose = 02040502050405020303}Georgia;} {\f119\fswiss\fcharset0\fprq2{\*\panose 020b0603020202020204}Trebuchet = MS;}{\f120\fmodern\fcharset0\fprq1{\*\panose 020b0509000000000004}Andale = Mono;}{\f121\fnil\fcharset2\fprq2{\*\panose = 01010601010101010101}Monotype Sorts;} {\f122\froman\fcharset0\fprq2{\*\panose 00050102010706020507}Map = Symbols;}{\f123\froman\fcharset0\fprq2{\*\panose = 02020506060301020303}Times New Roman = Condensed;}{\f214\fswiss\fcharset238\fprq2 Tahoma = CE;}{\f215\fswiss\fcharset204\fprq2 Tahoma Cyr;} {\f217\fswiss\fcharset161\fprq2 Tahoma = Greek;}{\f218\fswiss\fcharset162\fprq2 Tahoma = Tur;}{\f219\fswiss\fcharset186\fprq2 Tahoma = Baltic;}{\f514\froman\fcharset238\fprq2 Garamond = CE;}{\f515\froman\fcharset204\fprq2 Garamond Cyr;} {\f517\froman\fcharset161\fprq2 Garamond = Greek;}{\f518\froman\fcharset162\fprq2 Garamond = Tur;}{\f519\froman\fcharset186\fprq2 Garamond = Baltic;}{\f616\fmodern\fcharset238\fprq1 Lucida Console = CE;}{\f617\fmodern\fcharset204\fprq1 Lucida Console Cyr;} {\f619\fmodern\fcharset161\fprq1 Lucida Console = Greek;}{\f620\fmodern\fcharset162\fprq1 Lucida Console = Tur;}{\f628\fswiss\fcharset238\fprq2 Arial Narrow = CE;}{\f629\fswiss\fcharset204\fprq2 Arial Narrow Cyr;} {\f631\fswiss\fcharset161\fprq2 Arial Narrow = Greek;}{\f632\fswiss\fcharset162\fprq2 Arial Narrow = Tur;}{\f633\fswiss\fcharset186\fprq2 Arial Narrow = Baltic;}{\f634\froman\fcharset238\fprq2 Bookman Old Style CE;} {\f635\froman\fcharset204\fprq2 Bookman Old Style = Cyr;}{\f637\froman\fcharset161\fprq2 Bookman Old Style = Greek;}{\f638\froman\fcharset162\fprq2 Bookman Old Style = Tur;}{\f639\froman\fcharset186\fprq2 Bookman Old Style Baltic;} {\f656\froman\fcharset162\fprq2 Clarendon Cn SWC = Tur;}{\f662\fscript\fcharset162\fprq2 AudreyTwo SWC = Tur;}{\f668\fmodern\fcharset162\fprq1 Courier SWC = Tur;}{\f674\froman\fcharset162\fprq2 Dutch801 SWC Tur;} {\f680\froman\fcharset162\fprq2 Dutch801 SWM = Tur;}{\f686\fswiss\fcharset162\fprq2 Flareserif821 SWC = Tur;}{\f692\fswiss\fcharset162\fprq2 Flareserif821 XBd SWC = Tur;}{\f698\fswiss\fcharset162\fprq2 Incised901 SWC Tur;} {\f704\fmodern\fcharset162\fprq1 LetterGothic SWC = Tur;}{\f716\froman\fcharset162\fprq2 OrigGaramond SWC = Tur;}{\f722\fscript\fcharset162\fprq2 Ribbon131 SWC = Tur;}{\f728\fswiss\fcharset162\fprq2 Swiss721 SWM Tur;} {\f734\fswiss\fcharset162\fprq2 Swiss742 SWC = Tur;}{\f740\fswiss\fcharset162\fprq2 Swiss742 Cn SWC = Tur;}{\f752\fswiss\fcharset162\fprq2 ZapfHumanist Dm SWC = Tur;}{\f802\fswiss\fcharset238\fprq2 Arial Black CE;} {\f803\fswiss\fcharset204\fprq2 Arial Black = Cyr;}{\f805\fswiss\fcharset161\fprq2 Arial Black = Greek;}{\f806\fswiss\fcharset162\fprq2 Arial Black = Tur;}{\f807\fswiss\fcharset186\fprq2 Arial Black = Baltic;}{\f808\fscript\fcharset238\fprq2 Comic Sans MS CE;} {\f809\fscript\fcharset204\fprq2 Comic Sans MS = Cyr;}{\f811\fscript\fcharset161\fprq2 Comic Sans MS = Greek;}{\f812\fscript\fcharset162\fprq2 Comic Sans MS = Tur;}{\f813\fscript\fcharset186\fprq2 Comic Sans MS Baltic;} {\f814\fswiss\fcharset238\fprq2 Impact = CE;}{\f815\fswiss\fcharset204\fprq2 Impact = Cyr;}{\f817\fswiss\fcharset161\fprq2 Impact = Greek;}{\f818\fswiss\fcharset162\fprq2 Impact = Tur;}{\f819\fswiss\fcharset186\fprq2 Impact Baltic;} {\f820\fswiss\fcharset238\fprq2 Verdana = CE;}{\f821\fswiss\fcharset204\fprq2 Verdana = Cyr;}{\f823\fswiss\fcharset161\fprq2 Verdana = Greek;}{\f824\fswiss\fcharset162\fprq2 Verdana = Tur;}{\f825\fswiss\fcharset186\fprq2 Verdana Baltic;} {\f832\froman\fcharset238\fprq2 Georgia = CE;}{\f833\froman\fcharset204\fprq2 Georgia = Cyr;}{\f835\froman\fcharset161\fprq2 Georgia = Greek;}{\f836\froman\fcharset162\fprq2 Georgia = Tur;}{\f837\froman\fcharset186\fprq2 Georgia Baltic;} {\f838\fswiss\fcharset238\fprq2 Trebuchet MS = CE;}{\f842\fswiss\fcharset162\fprq2 Trebuchet MS = Tur;}{\f844\fmodern\fcharset238\fprq1 Andale Mono = CE;}{\f845\fmodern\fcharset204\fprq1 Andale Mono = Cyr;}{\f847\fmodern\fcharset161\fprq1 Andale Mono Greek;} {\f848\fmodern\fcharset162\fprq1 Andale Mono = Tur;}{\f849\fmodern\fcharset186\fprq1 Andale Mono = Baltic;}}{\colortbl;\red0\green0\blue0;\red0\green0\blue255;\red0\green25= 5\blue255;\red0\green255\blue0;\red255\green0\blue255;\red255\green0\blue= 0; \red255\green255\blue0;\red255\green255\blue255;\red0\green0\blue128;\red= 0\green128\blue128;\red0\green128\blue0;\red128\green0\blue128;\red128\gr= een0\blue0;\red128\green128\blue0;\red128\green128\blue128;\red192\green1= 92\blue192;}{\stylesheet{ \nowidctlpar\widctlpar\adjustright \fs20\lang2057\cgrid \snext0 = Normal;}{\*\cs10 \additive Default Paragraph = Font;}}{\*\listtable{\list\listtemplateid-705400130\listsimple{\listlevel= \levelnfc23\leveljc0\levelfollow0\levelstartat2\levelspace0\levelindent0 {\leveltext\'01-;}{\levelnumbers;}\fbias0 \fi-360\li360\jclisttab\tx360 = }{\listname = ;}\listid602692032}}{\*\listoverridetable{\listoverride\listid602692032\l= istoverridecount0\ls1}}{\*\revtbl {Unknown;}}{\info{\title = PP9completeRTF}{\author John Zube}{\operator John Zube} {\creatim\yr2001\mo11\dy21\hr7\min45}{\revtim\yr2001\mo11\dy24\min47}{\ve= rsion27}{\edmins2146}{\nofpages114}{\nofwords70349}{\nofchars400991}{\*\c= ompany Libertarian Microfiche Publ.}{\nofcharsws492445}{\vern71}} \paperw11909\paperh16834\margl527\margr527\margt397\margb397 = \widowctrl\ftnbj\aenddoc\makebackup\hyphcaps0\formshade\viewkind1\viewsca= le88\viewzk2\pgbrdrhead\pgbrdrfoot \fet0\sectd=20 \binfsxn283\binsxn283\sbkcol\linex0\headery709\footery709\colsx709\sectde= faultcl {\*\pnseclvl1\pnucrm\pnstart1\pnindent720\pnhang{\pntxta = .}}{\*\pnseclvl2\pnucltr\pnstart1\pnindent720\pnhang{\pntxta = .}}{\*\pnseclvl3\pndec\pnstart1\pnindent720\pnhang {\pntxta .}}{\*\pnseclvl4\pnlcltr\pnstart1\pnindent720\pnhang{\pntxta = )}}{\*\pnseclvl5\pndec\pnstart1\pnindent720\pnhang{\pntxtb (}{\pntxta = )}}{\*\pnseclvl6\pnlcltr\pnstart1\pnindent720\pnhang{\pntxtb (}{\pntxta = )}}{\*\pnseclvl7 \pnlcrm\pnstart1\pnindent720\pnhang{\pntxtb (}{\pntxta = )}}{\*\pnseclvl8\pnlcltr\pnstart1\pnindent720\pnhang{\pntxtb (}{\pntxta = )}}{\*\pnseclvl9\pnlcrm\pnstart1\pnindent720\pnhang{\pntxtb (}{\pntxta = )}}\pard\plain \nowidctlpar\widctlpar\adjustright=20 \fs20\lang2057\cgrid {\b\fs24\lang1033 PP9completeRTF \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 THIS = ISSUE IS THE FIRST OF THREE SPECIAL ONES ON FREE BANKING \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par }{\b\fs144\lang1033\cgrid0 PEACE PLANS \par }{\b\fs32\lang1033\cgrid0 APPEARANCE ON DEMAND = PRICE 20 cents \par }{\b\fs28\lang1033\cgrid0 SUBSCRIPTIONS: A $ 2.00 or US $ 2.50 for = 12 issues. \par }{\b\fs24\lang1033\cgrid0 = _________________________________________________________________________= _____________ \par }\pard \qc\nowidctlpar\adjustright {\b\fs96\lang1033\cgrid0 No. = 9}{\b\fs52\lang1033\cgrid0 MARCH 1967 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = _________________________________________________________________________= _____________ \par }{\b\fs32\lang1033\cgrid0=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs32\lang1033\cgrid0 AIMS \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par }{\b\fs28\lang1033\cgrid0 Gradual publication of an ENCYCLOPAEDOA = OF ALL PEACE PLANS,=20 \par in digest form, gathered from all available sources. \par=20 \par DISCUSSION OF ALL PEACE PLANS, in search for the rightful and = sensible ones. \par }{\b\fs24\lang1033\cgrid0=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs32\lang1033\cgrid0 = TENDENCY \par }\pard \nowidctlpar\adjustright {\b\fs32\lang1033\cgrid0=20 \par }{\b\fs28\lang1033\cgrid0 RECOGNITION OF ALL HUMAN RIGHTS, being = the greatest degree of=20 \par TOLERANCE AND IMPARTIALITY which is morally still justified.=20 \par This implies ANTI\_TOTALITARIANISM or=20 \par condemnation of communist, nazi, and either dictatorships. \par }{\b\fs24\lang1033\cgrid0 = _________________________________________________________________________= ________________ \par=20 \par }{\b\fs28\lang1033\cgrid0 Contributions are welcome. Reprint is = free and desired. Published, edited and distributed by J. M. Zube. = Wilshire Street, Berrima, NSW., Australia. \par }{\b\fs24\lang1033\cgrid0 = _________________________________________________________________________= ________________ \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs36\lang1033\cgrid0 = CONTENTS \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 1.) PLAN = 190: Pages 3 \_ 63: \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs28\lang1033\cgrid0 THE = PRACTICAL REALIZATION OF THE MILHAUD PROPOSALS \par (1934/1935) \par By Ulrich von Beckerath, 1882-1969 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par An essay on the theory and practice of the monetary freedom = required to make the market really free. =20 \par=20 \par "Proposals so simple, leaving the economic foundations undisturbed, = and appealing so little to force! Certai n current symptoms suggest that the world is beginning to get weary of = violent solutions, that is, that part of the world which has come to = know by experience wars, revolutions, blockades, hunger and trade = depressions, and which has come to suspect that a ll these are somehow associated with defects in our monetary system." \_ = U. v. Beckerath, on p. 63. \par = _________________________________________________________________________= _______________ \par 2.) PLAN 191: Pages 65\_74: \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs28\lang1033\cgrid0 THE = CURRENCY FAMINE OF 1893 \par By John DeWitt Warner, 1895 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par A practical instance of free enterprise self\_help against trade = depression and unemployment.=20 \par = _________________________________________________________________________= _______________ \par=20 \par 3.) PLAN 192: Pages 74 - 86: \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs28\lang1033\cgrid0 RAILWAY = MONEY AND UNEMPLOYMENT and \par FURTHER REMARKS CONCERNING RAILWAY MONEY \par \_ with special reference to the Position of the American Railways \par By Dr. Walter Zander, 1933 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par A lucid description of one application of the principles of = monetary freedom,=20 \par = _________________________________________________________________________= ________________ \par=20 \par 4.) PLAN 193: Pages 87 - 100: \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs28\lang1033\cgrid0 A WAY = OUT OF THE MONETARY CHAOS \par By Dr. Walter Zander, 1935 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par A clear exposition of sound value measurements and payments \_ of a = gold standard without the defects of th e classical gold standard, and of the principle of clearing, and of = private and state paper money without legal tender based on gold value = reckoning and clearing \_ together with a criticism of the prevailing statist monetary system = that is based on legal t ender, central banking, redemption or reserve requirements, foreign = exchange legislation and compensation agreements, all contributing to = depressions and international disputes.=20 \par = _________________________________________________________________________= ________________ \par=20 \par EDITORIAL: PAGES 1 &2 = ADVERTISEMENT RATE: Page 86=20 \par SOME RELEVANT ADDRESSES: 63 & 64 & 105=20 \par RELEVANT BOOKS: 101- 105 = RELEVANT MAGAZINES: 64 =20 \par = -------------------------------------------------------------------------= ------------------------------------------------------------ \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = NON\_STATIST MONETARY REFORMERS, UNITE ! - \par ON THE FOLLOWING PLATFORM: \par FULL FREEDOM FOR TOLERANT, HONEST AND \par FULLY PUBLICIZED MONETARY EXPERIMENTS! \par John Zube, 1967 \par=20 \par Alas, by 2,001 we are still far from having achieved such an = agreement and organization, although by now, on a few CD-ROMs, all = monetary freedom writings could be cheaply published=20 \par and monetary despotism still causes the usual problems. \par PIOT, John Zube, 2001 \par=20 \par Monetary freedom is just one of the applications of "panarchism"! \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = _________________________________________________________________________= _________________ \par 1 \par }{\b\fs28\lang1033\cgrid0 EDITORIAL \par }{\b\fs24\lang1033\cgrid0=20 \par The four plans in this issue are an object lesson in = decentralization, in micro-economics, in free economic self\_help = activities of individuals, fully in accordance with free market = principles. \par The theory and practice of free banking is the libertarian = alternative to the communist=20 system of national central banks with a monopoly for the issue of = banknotes and great powers to restrict and manipulate standards of = value, credit, capital transfers, clearing, internal and international = trade and thereby production and employment. Moneta r y despotism prevails now everywhere even in countries which are = nominally anticommunist and in favour of free enterprise in a free = market. It is the main obstacle on the path towards a really free market = though most people professing a belief in a free ma rket have not realized this as yet. \par=20 \par The record shows that the centralized and monopolized banking = system has failed in all its benevolent and legally declared = aspirations: stable currency and a sufficient supply of exchange media = and credit to permit all d esired exchanges of goods and services. \par=20 \par Instead, it has enormously succeeded in impoverishing a large part = of the population in all countries by making inflations and deflations = not only possible, easy and likely but inevitable.=20 \par=20 \par It has been an all too dangerous financial tool for dictators and = other aggressive governments, to permit intelligent and enlightened = citizens to tolerate its existence any longer, tacitly and inactively.=20 \par=20 \par All interested in individual freedom and peace & intelligent enough = to study and understand the monetary despotism of a handful of ignorant = and prejudiced men (who are supposed and pretend to be "know\_ it-alls" or at least "practical men") over all economic affairs and even = the lives of all others, should therefore combine their knowledge, = references and resources towards the aim: \par Full monetary, clearing, value reckoning and financial freedom for = all. \par For this purpose I listed as many relevant publications & addresses = as I could obtain so far. In PEACE PLANS 1,022 you can find an extended = but still far from completed bibliography on monetary freedom.\tab \tab=20 \par In spite of all differences in theories and proposals, all monetary = reformers could combine their forces if only they agree upon and demand = and fight for freedom for tolerant monetary experiments among = volunteers.=20 \par=20 \par Even among those who propose just another despotic monetary system = (naturally, with the best intentions), like e.g., that of Silvio Gesell = or that of Major Douglas, there are many who are intelligent and = tolerant enough t o demand no more than that their proposals may be put to the test of = small scale experiments undertaken at the risk and expense of volunteers = only.=20 \par=20 \par Those advocating full monetary freedom could therefore and should = cooperate to some extent even with the representatives of such monetary = reform movements, for their mutual benefit and enlightenment, at least = through the mistakes made by others.=20 \par=20 \par In this spirit of tolerance for tolerant monetary experiments and = although I disagree with their theory and \par practice, I point out here to you the addresses of two current = monetary experiments in the U.S. :=20 \par=20 \par 1.) Interchange, organized by Mr. Miles T, Roberts, Rte. 2, = Villisca, Iowa, and=20 \par 2.) The Labour Gift Plan, # 2207, 150 Nassau St., New York City. \par=20 \par While the prevailing opinion is that whatever private initiative = cannot do the State must do \_ a saying which is merely a semantic = camouflage for ignorance, despotic aspirations and statist sentiments \_ the contrary is true: Whatever the State cannot at all or not = rightfully or efficiently do \_ and judging by its record it has failed = in all tasks it has been burdened with \_ private enterprise, based on the principles of natural law and without = any State interference, is eminently capable to do. (I use here "free = enterprise" in its widest rightful sense, including e.g. voluntary = cooperative undertakings.)=20 \par=20 \par Here this libertarian idea is applied in the monetary sphere. One = might even go further and state: Whatever private enterprises would not = do, in a truly free market, should not be generally enforced because = this would be unjust and destructive.=20 \par This principle, naturally, does not exclude the possibility for = volunteer communities to apply internally any kind of authoritarian = principles - to their own full satisfaction, as long as they can stand = them. \par=20 \par Ulrich von Beckerath, characteristically, put his ideas forward as = if they were Milhaud's. But he had developed the ideas of monetary = freedom independently and in more details many years before Professor = Edgard Milhaud. Mil haud, in his writings, still retained still a bias in favour of = government action and centralization. But he readily admitted the = originality of Beckerath's ideas, e.g., in the introduction to his \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 2 \par collection: Ending the Unemployment and Trade Crisis \_ "The high = import of Dr. Zander's labours, as well as those of Dr. Rittershausen, = to whose paper in this volume the reader is also referred, is = impressively shown in Ulrich von=20 Beckerath's substantial contribution. This contribution contains a = theoretical analysis of the economic foundations of my proposals. I feel = the more bound to emphasize here its masterful originality as the title = to of his paper and his modesty and magnani m ity mask this. Moreover, he has stressed a series of statements of great = importance by expressing them in a number of formal propositions worked = out in such detail that their immediate realization only depends on = decisive action being taken by those in au thority."=20 \par=20 \par Beckerath had been thinking about monetary freedom ever since, in = 1908, he had heard a top French unionist (Levine?) ask: After the = revolution, what shall we use to buy our bread with? And he did not stop = thinking about this subject up to his de ath in 1969. On his first meeting with him, in 1952, suggested by my = father, he introduced me to the theory and practice of legal tender. I = was 19 then and it has been on my mind ever since. \par=20 \par I ask you to suspend final judgment on his monetary freedom book s until you have read his other two works, in PEACE PLANS Nos. 10 and 11 = as well and will have easy access to all the monetary freedom ideas in = these 3 books by means of a comprehensive index to be printed at the end = of PEACE PLANS No. 11. \par=20 \par When reading these texts, please, remember that a writer under = Hitler's rule had to express himself guardedly.=20 \par=20 \par (These writings did lead to a visit to the Gestapo. He was lucky in = that, with their mentality, they did not take them serious. \par If the decision-makers in the=20 still somewhat free countries had been open-minded, then they might have = introduced monetary freedom and with it could have so rapidly introduced = full employment and prosperity and such a contrast to the two = totalitarian regimes, Hitler's and Stalin's, th a t these tyrants would have lost most of their supporters. Refugees and = deserters would have been welcomed with open arms, also fully employed, = international trade would have rapidly expanded, without frictions, and = WW II might not have happened at all. Th e then unshackled "free enterprise capitalism" would have gained = adherents everywhere. Hitler and Stalin might have been overthrown and a = much more rapid and successful development would have taken place in = Germany than the one described after WW II as its =20 "economic wonder". Alas, so far in history, the best choices are made = only rarely, if ever. Full experimental freedom is still everywhere = interdicted by territorial States. Thus the solutions cannot be = demonstrated by those who understand them. PIOT, J. Z., 20.11.01.) \par=20 \par DeWitt Warner's article received one of the highest compliments = possible "Theft is the sincerest form of flattery!") by\- being quoted = almost verbatim in a volume by an American professor concerning the = history, theory and practice of clearing houses \_ without mentioning DeWitt Warner and his article at all! \par=20 \par Concerning Zander's two articles on railway money, a news report in = DER TAGESSPIEGEL, Berlin, 7/55, is relevant: The army of Ecuador had = then taken over railway services as the railway wo rkers had gone into strike after the government owed them wages for 10 = weeks. The government's excuse was that it would not have the money to = pay the wages. Beckerath commented on this clipping: "Neither the = government of Ecuador nor the railway workers k now the technique of railway money. What fools!" \par=20 \par Dr. Zander seems to underestimate, though, the importance of the = over\--regulation and excessive taxation of American private railways as = hindrances for their optimal economic effectiveness, in the same way a s those who realize the latter faults fail to recognize the importance = of monetary independence for railways. \par=20 \par Dr. Zander, in the last plan, A Way out of the Monetary Chaos, = which is, perhaps, the most comprehensive, clear and concise article on = monetary f reedom which exists so far, is e.g., very helpful in teaching the = adherents of the classical gold standard the important lesson which they = need to learn most of all, in spite of their otherwise strong belief in = a free market, namely, that the metallic red emption of banknotes can and should be transferred from the banks of = issue to the market place, here the free gold market. \par=20 \par These four proposals, contain actually only a single one: the = proposal to establish monetary freedom.=20 \par The importance of this project (all too widely considered as quite = irrelevant!) outweighs that of dozens of other plans.=20 \par The monetary freedom here proposed in detail is directly or = indirectly related to every other economic, social or political = problem; even to military problems, whe ther you realize this as yet or not. It shows e.g. a way how to prevent = the financing of unjust wars and how to finance just uprisings against = despotic regimes which endanger world peace.=20 \par Furthermore, its full realization would make it very difficult for = any new dictatorship to be set up. There would not be enough = impoverished or expropriated people around to support it! \par Dear reader, you are one of the at most 500 people on Earth to whom = I have with this booklet entrusted a number of highly important ideas and proposals. Will you be receptive and capable and willing to = understand and spread them, will you be fertile soil or barren ground = for these seeds?=20 \par I do hope that you will at least treat this booklet with the = respect due to its rarity value which, wit h small impressions like this one, does not require generations to = develop and that you will, therefore, if you are not sufficiently = interested yourself, undertake the slight effort to pass it on to = somebody who is or might be interested. You might even s ucceed in thus delivering it into the hands of the energetic individual = who will appreciate and realize these proposals to your and my own = benefit. \par Ulrich von Beckerath has said repeatedly that the first mutual bank = could even be established in a small village in an underdeveloped = country and from this tiny example the principles and practices of = monetary freedom could spread all over the world.=20 \par=20 \par J. M. Zube, editor of PEACE PLANS, Wilshire St., Berrima, N.S.W., = Australia. \par=20 \par P.S., 2001: I still hope to get a round to develop further the monetary revolution ideas hinted at in = PEACE PLANS 8, to compile a more comprehensive free banking = bibliography, an alphabetical handbook on monetary freedom, a tabulation = of exchange media characteristics, sound as well as fl a wed ones, with hints to their advocates, and a tabulation of value = standard proposals, a listing and discussion on the various ways in = which full monetary freedom might be initiated from the smallest = beginnings, a directory to monetary freedom addresses a nd to somewhat complete my collection of monetary freedom writings = either on microfiche or on CD-ROMs.=20 \par Very desirable would also be a collection of abstracts and reviews = of such writings, and a comprehensive alphabetical index to all such = writings in new e ditions. I still plan to write essays on tax foundation and Gresham's = Law. But the most urgent task appears to be to finally get all the = writings of Ulrich von Beckerath that are in my possession onto = microfiche or CD-ROMs, together with a detailed index=20 to them. \par Another large task consists in transcribing the = 5}{\b\fs24\lang1033\super\cgrid0 th}{\b\fs24\lang1033\cgrid0=20 and still incomplete version of Prof. Rittershausen's MONETARY THEORY = manuscript. - Altogether there is simply too much work in this field for = one person. Some international division of labour is needed in this = sphere as well. - J.Z. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 3=20 \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs28\lang1033\cgrid0 Peace = Plan 190 \par }{\b\fs24\lang1033\cgrid0=20 \par }{\b\fs32\lang1033\cgrid0 Ulrich von Beckerath \par }{\b\fs24\lang1033\cgrid0=20 \par }{\b\fs32\lang1033\cgrid0 THE PRACTICAL REALIZATION OF THE MILHAUD = PROPOSALS \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par Published first in English, German and French by the Annals of = Collective Economy, now re\_ named Annals of Public and Cooperative Economy, in 1934 and secondly in: = "Ending the Unemployment and Trade Crisis", edited by Edgard Milhaud, = London, Williams & Norgate Ltd., 1935. \par Permission for this reprint has been obtained from the present = Director of the Annals of Public and Co\_ operative Economy, Prof. Paul Lambert. The only condition he imposed for = the reprint of the money reform articles of U. von Beckerath, Walter = Zander and Heinrich Rittershausen, publ ished in the Annals, either by me or later by other publishers is that = the Annals are mentioned as source, including the year of appearance. \par Present address of Annals of Public and Co\_operative Economy: = Liege, 45, quai de Rome, Belgium. The secretary of the Annals in Genf, = Frau G. Calame, Acacias 7, 1227 Genf 24, Switzerland, can supply the = volumes required for reprinting. \par Permission was furthermore obtained from Ernest Benn Ltd., Bouverie = House Fleet Street, London E.C. 4, acting for Williams & Norgate, for = the reprint of the English edition. \par Ulrich von Beckerath has transferred his literary rights to me. I = welcome reprints. No charge! \par=20 \par The English translation was made by G. Spiller, London. Ulrich von = Beckerath told me that he is not fully satisfied with t his translation. He always tried to be a perfectionist in his written = expression. I have therefore, with Beckerath's consent, tried to somehow = improve this translation, attempting to achieve an as literal one as I = could but I do not feel sure that I have=20 not introduced some new mistakes thereby. My English still leaves much = to be desired. I would welcome a better translation and hope that this = reprint will help to bring it about. \par=20 \par For technical reasons the numerous italics in the original could = not be reproduced. Some of them were indicated in the original PEACE = PLANS issue by spacing and have now been italicized. \par = John = Zube}{\b\i\fs24\lang1033\cgrid0=20 \par }{\b\fs24\lang1033\cgrid0=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 "Il n'a = jamais \'e9t\'e9 de progr\'e8s sociaux que seux \par con\'e7us par un individu lucide \par et voulus par un individu \'e9nergique.'' \par=20 \par "There has never been social progress than that \par conceived by a lucid individual \par and willed by an energetic individual." \par=20 \par - H. L. Follin in: "Paroles d'un voyant" \par=20 \par }\pard \qj\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 4 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs32\lang1033\cgrid0 = CONTENTS \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 =20 \par (1) PUBLIC REACTION TO THE MILHAUD PROPOSALS . = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 5 \par=20 \par (2) POINTS DIFFERENTIATING THE MILHAUD REFORM PROPOSALS FROM THOSE=20 \par OF OTHERS = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 = 6 \par=20 \par (3) THE MILHAUD PROPOSALS AS AN INTEGRAL WHOLE = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 6 \par=20 \par (4) A BASIC FLAW IN OUR ECONOMIC SYSTEM = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85. 7 \par A) The True Nature of a Money Debt = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85... 7 \par B) Security in Cash Payments and in Non\_Cash Settlements = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 10 \par=20 \par (5) THE MILHAUD PROPOSALS AS A BASIS FOR A NEW SYSTEM OF PECUNIARY = \par SETTLEMENTS = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 10 \par =20 \par A) The Prevailing Money Monopoly as a Cause of Money Shortage = and therefore of the Trade =20 \par Depression = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85... = 10 \par B) Exchange of Commodities without Goods Warrants = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85.= 13 \par C) Exchange e of Commodities with Goods Warrants = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85 14 \par D) The Placing of Orders as a Factor in the Goods Warrants = System \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85.. 16 \par E) Short\_Term Validity of the Goods Warrants = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85 21 \par F) An Improvement in the Civil Law as a Result of the Milhaud = Proposals \par and as a First Step towards a Social Reform = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85... 22 \par=20 \par=20 \par (6) THE REALIZATION OF THE FUNDAMENTAL CONCEPTIONS UNDERLYING THE =20 \par MILHAUD PROPOSALS - SHOULD STATES NOT TAKE THE INITIATIVE = \'85\'85\'85\'85\'85\'85\'85 24 \par A) Purchasing Certificates in External Trading on a Private = Enterprise Basis \'85\'85\'85\'85\'85\'85\'85\'85. 24 \par B) Work Supply Banks As Private Institutions = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85. 29 \par C) Technical. Details concerning the Issue of Goods Warrants = by Work Supply Banks \'85\'85\'85\'85.. 34 \par=20 \par a) Introduction = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 34 \par=20 \par b) Principles and Business Provisions regarding Loan = Transactions of a Work Supply Bank in =20 \par respect of Short\_Term Credits = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85. 35 \par I. Means of Payment = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 35 \par II. Legal Form . = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 35 \par IlI. Guaranties for the Work Supply Bank in Loan = Transactions \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 35 \par IV. Usufruct Charges for Loaned Goods Warrants = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 = 36 \par V. Return of the Loaned Goods Warrants and Sundries = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85... 36 \par=20 \par c) Rules = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'= 85 37 \par=20 \par d) Principles & Provisions Governing the Obtaining of = Credits through the Work Supply Bank .. 39 \par I. Nature of the Long-Term Credits Granted by the = Work Supply Bank \'85\'85\'85\'85\'85\'85\'85\'85\'85 39 \par II. Capital Required for Long\_Term Credits, = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85 39 \par III. Administration of Balances at the Work Supply Bank = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85... 40 \par IV. Notice of Withdrawal of Balances at the Work Supply = Bank \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 40 \par V. Repayment of Long\_Term Credits = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85.. 41 \par=20 \par D) Use of Goods Warrants to Finance Manufacturing Operations = Occupying a Considerable Time 41 \par =20 \par (7) OTHER ASPECTS = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 46 \par=20 \par A) Payment of Rent with Goods Warrants . = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85 46 \par B) Payment of Dividends with Goods Warrants = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85. 46 \par C) General Objections by "Practical Men = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85.. 47 \par D) Issue of Goods Warrants and "Creation of Money" = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85.= 48 \par E) Is a Homogeneous. Circulating Medium the Ideal ? = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85.= . 51 \par F) Security against Inflation of Means of Payment made of = Paper \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 52 \par=20 \par (8) CONCLUSION = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 57 \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 For an = alphabetical index see the end of PEACE PLANS No 11. \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 5=20 \par (1) PUBLIC REACTION TO THE MILHAUD PROPOSALS \par=20 \par Nobody doubts that a practical proposal to re\_employ the = twenty\_five mill ion unemployed of today's world would be of no less (indeed of far = greater) importance than was, in its time, the introduction of railways = or telegraphs. Thus it is surprising that the Milhaud proposals have not = been, on the whole, more warmly received an d more closely examined. Apparently, a staunch partisan of the proposals = has not yet appeared. On several occasions Milhaud has personally = defended his program but without bringing about a positive resolution in = his listeners or readers. It is true that ou r times are not propitious for a scrupulous examination of new social = reform schemes. Probably all Governments have had submitted to them = hundreds if not thousands of projects. It has been stated for instance, = that during the last few years the German Gove r nment received some 50.600 proposals and the Reichsbank over a thousand = during the first months after the 13 th. of July, 1931. In former days, = too there was no shortage of projects. In his article "Property and Law" = published 14/411848, Bastiat reports t hat by that date over 500 proposals for the organization of labour and = as many for the organization of credit had been submitted to the French = Government. \par Hence the first impression created by the Milhaud proposals was = inevitable: \par "What! another reform project? and actually one relating to = monetary reform!"=20 \par But he who is acquainted with even a small proportion of the = hitherto published projects acts will be surprised that the Milhaud = proposals do not include certain points which appear in well\_nigh all = othe r proposals and which, according to current opinion, should on no = account be omitted. Let us examine these points. \par=20 \par (2) POINTS DIFFERENTIATING THE MILHAUD REFORM PROPOSALS=20 \par FROM THOSE OF OTHERS \par=20 \par The total number of post\_war proposals aiming at combati ng the general trade depression, either published or submitted to = governments, exceeds almost certainly 100.000. The Milhaud proposals = differ favourably from these by the following characteristics , among = others:=20 \par=20 \par a) Milhaud desires to retain gold as the=20 standard of value and only bans it as a means of payment. Thus creditors = would receive gold values in the place of gold. Here already Milhaud = stands almost alone. The view that the old standard has "failed" and = should be therefore abolished is held fairly =20 generally to day. As a matter of fact; however, it is not the gold = standard that has failed, but those to whom we entrusted it. Or, as = Rittershausen contends in his Neubau des deutschen Kreditsystems (Reform = of the German Credit System), it is not the gol d that has deteriorated, but the bank directors. \par=20 \par b) Milhaud proposes no re\_distribution of the world's gold, Here = again, Milhaud stands almost alone. Broadly speaking, the countries = possessing little gold hold the countries owning much gold responsible = for the economic crisis. Thus Milhaud belongs to the select few who do not = share this prejudice. \par=20 \par c) Milhaud does not call for an economic autarchy. This is very = old\--fashioned. We had all become accustomed to the idea that a "home" = watch industry in Greenlan d and "home" tea plantations on the Alpine glaciers were just the thing = and that an exchange of Greenland blubber oil, Swiss watches, and = Chinese tea would throw out of employment Eskimos, coolies, and Swiss = factory workers. \par=20 \par Admittedly, these autarchists=20 tend incidentally to demand a forcing of exports and a throttling of = imports (although probably not one of them would voluntarily give up his = morning coffee and his afternoon cigar, simply because they are = imported goods). Milhaud is one of the few econo mists who fervently identify themselves with the old thesis: exports pay = for imports and vice versa; credit and debit balances dwell only in = men's imaginations and in defective trade statistics. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 6 \par d) Milhaud belongs to the very small group of economists who hope = to combat the depression first and foremost by reviving the consumer = goods industries, that is, the industries producing articles in daily = demand. Virtually all other eco nomists ask that work should be found for the unemployed mainly or = exclusively in the industries producing "durable" goods, among which are = to be specially counted means of production and houses. Accordingly, the = official measures in all countries to redu ce unemployment have tried primarily to assist the production of = "durable" goods. \par=20 \par In boldly asserting that production is the servant of consumption, = Milhaud also declines to call on his contemporaries to "return to the = simplicity of their forefathers", so=20 as to grapple successfully with the depression. Few only see the blatant = contradiction of simultaneously stimulating sales and discouraging = consumption. \par=20 \par e) Milhaud submits no proposal for floating a long\_term loan. = Practically all other reformers ask that the State should concentrate on = raising a huge loan, preferably in the shape of an extra issue of paper = money, and build houses therewith. \par=20 \par f) It is true that Milhaud proposes a new means of payment; but = neither does he demand that it should be a forced c urrency (forced rate of exchange) nor that it should be recognized as = legal tender (i.e., compulsory acceptance and compulsory value in = private dealings). The few who still share the classical view of a = forced currency, namely that it is a specialty hein o us form of despotism, may be almost counted on one's fingers. In Germany = they are represented by the small group of the authors of the "Vier = Gesetzentwuerfe" (Four Proposed Laws) (*) and further by the Sparerbund = (League of Investors) among whose leaders=20 Oberlandesgerichtspraesident Best and Justizrat Brink occupy a prominent = place; in France, primarily by H. L. Follin; and in England, by Henry = Meulen. \par=20 \par g) Milhaud calls neither for a raising nor for a lowering of wages = as a condition of reducing unemployment. He shows, however, that when = his proposals shall have been put into effect, real wages will in all = probability rise considerably. \par=20 \par h) Nor does Milhaud demand an immediate reduction of overhead = charges to permit a reduction in unemployment. But he does not overtook = the fact that after the realization of his proposals, they will be = probably decidedly lower, \par=20 \par i) Milhaud does not stipulate as a preliminary the return of = "confidence". He informs the skeptics that a number of persons, that is, = the debtors of the issuing offices, chiefly shopkeepers \_ would be obliged to accept the purchasing certificates, never mind = whether general confidence existed or not. Expressed differently, = Milhaud tells the timid, in effect: "Take your certificates to the shops = and exch ange them for commodities. In the very act, you will have rid yourself = of your certificates and your mistrust." \par=20 \par j) Milhaud deliberately concerns himself with a special problem and = not with the social question as a whole; but he recognizes that once the = mo netary problem has been solved, the social question will have changed = its character. It may be added that only then will its nature be clearly = revealed to us. \par=20 \par Hence Milhaud has little in common with his contemporaries. It is = therefore no wonder that he ma y, for some time yet, be scornfully treated as a "theorizer". It would = also be in accord with a widespread custom if, before his contribution = has come to be appreciated at its true value, critics shall have = insisted that such and such; a thinker once prop o sed this or that part of his plan and such and such another thinker = another other part, just as Bastiat was accused of plagiarizing Carey. = However, the originator of a crucially important conception is not he = who once gave expression to it without determi nedly following it up, but he who successfully challenges therewith the = world, even though his proposals, like all proposals whatever, may = require to be modified in certain particulars. \par=20 \par (3) THE MILHAUD PROPOSALS AS AN INTEGRAL WHOLE \par=20 \par In the last resort, goods and services always exchange for goods = and services. This principle has never been seriously disputed. It seems = though that, apart from Milhaud, \par = _________________________________________________________________________= _________________ \par=20 \par (*) These are: Dr. Gustav Ramin, Dr. Heinrich Rittershausen, Ulrich = von Beckerath, Hans Meis, Walter Unger, Dr. Walter Zander, and Dr. = Munzer. \_ I do intend to reprint this plan; too. - J. Z. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 7=20 \par few have attempted to found thereon an economic plan without at = once falling into primitive barter or African tribal communism. At all = events, among recent reformers of this class, Milhaud occupies now first = place. \par=20 \par The clear recognition of the fact th at payment with Giralgeld (money other than legal tender cash, e.g. = cheques), which is already the common practice on the world market, need = only be consistently developed in order to yield the advantages of both, = a money and a barter economy, has enabled Milhaud to solve simultaneously two problems, seemingly far apart \_ = reviving external trade and finding work for the unemployed \_ according = to a coherent plan that might be realized from one day to another = without causing any disturbance. \par=20 \par In the centre of Milhaud's system stands the idea of the = }{\b\i\fs24\lang1033\cgrid0 purchasing = certificate}{\b\fs24\lang1033\cgrid0 . It may be expressed in this way: = in }{\b\i\fs24\lang1033\cgrid0 small}{\b\fs24\lang1033\cgrid0=20 denominations it serves as a means of payment = }{\b\i\fs24\lang1033\cgrid0 internally}{\b\fs24\lang1033\cgrid0 ; in = }{\b\i\fs24\lang1033\cgrid0 large}{\b\fs24\lang1033\cgrid0 , = }{\b\i\fs24\lang1033\cgrid0 externally}{\b\fs24\lang1033\cgrid0 . \par=20 \par In the current system of payment, debtors must find = }{\b\i\fs24\lang1033\cgrid0 purchasers}{\b\fs24\lang1033\cgrid0 for = their goods or services, so as to satisfy their creditors with the = proceeds of their sales. In Milhaud's purchasing\_certificate\_ system, however, it is the business of creditors to find = }{\b\i\fs24\lang1033\cgrid0 vendors}{\b\fs24\lang1033\cgrid0 in order = to realize their assets. By means of the system of "pro duction on orders placed", to be treated fully in the sequel, the = possible inconveniences of payment by purchasing certificates might be = so reduced that the creditors would not be worse of than they are today. = But in principle, through the Milhaud plan, e very debt becomes a debt which is not tendered but which has to be = collected. \par=20 \par Since everybody is in turn creditor and debtor and since this = mutual relationship represents, indeed, the essential nature of economic = activities, Milhaud's reform, abstract as i t may seem at first sight and little as it may at first affect the = general form of trading, is extraordinarily far\_ reaching. Not one of the numerous "practical men" who daily, on the = basis of their "experience" (which really represents a frog's = perspective ), put forward proposals, have hit upon this fundamental but simple = inversion. This confirms a sapient remark made by the German Secretary = of State, Feder, in a speech delivered on 28 March 1933: "He who desires = to direct a country's economy, must not be=20 engaged in it." \par=20 \par Some of Milhaud's critics have thought that his arguments, which = appear to them rather complicated, would fall if countries adopted = another economic system. Manifestly, the other system they mean is = Bolshevism. Here also, there is a self\_co ntained system aiming at the simultaneous solution of the two problems, = that of unemployment and that of the protection of home industries; but = this very system, in its diverse degenerate forms, has proved unequal to = the task. In Russia numerous machines, and even whole factories, are lying idle, because for instance, a pair = of missing screws worth a few dollars cannot be ordered from Pittsburgh, = due to the Russian foreign exchange legislation.=20 \par Even ten years after the proclamation of the dictatorship of the = proletariat (which is in deeper servitude today than under the Czars), = over a quarter of Russia's non\_ agricultural population was unemployed. The subsequent abolition of this = unemployment recalls in many respects the increase of employment in = ancient Eg ypt by the building of the pyramids undertaken by the Cheops and = Chefren. Moreover, it should be noted that the Russian exchange = legislation is in substance the same as that of "capitalistic" States = and , in fact, altogether a product of what Marx called=20 "vulgar economy" and which he combated. This "economy" dominates = everything in Russia and if freedom of expression were not so restricted = there, this could be proved out of Marx's writings even to those at = present in the saddle in Russia. Happy }{ \b\i\fs24\lang1033\cgrid0 Geneva}{\b\fs24\lang1033\cgrid0 , where these = Annals appear, and where reason may speak without donning the cloak of = authorities! \par=20 \par (4) A BASIC FLAW IN OUR ECONOMIC SYSTEM \par=20 \par A) The True Nature of a Money Debt \par=20 \par In wholesale commerce, and especially in transactions on the = exchanges, it frequently happens that a merchant undertakes to deliver = goods by a certain date, without possessing them at the time. He = }{\b\i\fs24\lang1033\cgrid0 hopes}{ \b\fs24\lang1033\cgrid0 to be able to secure the goods by the date = agreed \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 8=20 \par upon. T hese sales are called short or uncovered forward sales. The legislative = provisions of all countries eye this type of transaction with suspicion. = Frequently, in order to stop such sales, legislative enactments have = prohibited all dealings in futures. Somet i mes such forward bargains only have been permitted where the vendor = reserves to himself the right to cancel the contract, on payment of a = premium. But almost invariably legislative provisions limit the = possibility for legal proceedings in the case of "fut ures" and, above all, uncovered dealings, if they are permitted at all = to contracts among }{\b\i\fs24\lang1033\cgrid0 = merchants}{\b\fs24\lang1033\cgrid0=20 . This limitation is justified, for if any other but a merchant, who = knows his business completely, were frequently to sell goods not yet in = his possession, b ut which he hopes to procure by a given date, he would inevitably sooner = or later be entangled in supply difficulties and thereby would injure = both himself and others. As far back as 1417, the Hansa thus prohibited = "the sale of herrings before they are ca ught, of corn before it is grows, and of cloth before it is woven." = (Roscher, Handel and Gewerbfleiss, paragr. 15.) \par=20 \par Now it is one of the greatest peculiarities of our economic system, = and one only quite recently discovered, that forward bargains and blank=20 sales relating to the most important and commonest commodity, that of = money, are not only not prohibited, but are actually favoured by the = laws of all countries. \par=20 \par Economists have hitherto overlooked the fact that our entire credit = system, as well as labour contracts, leases, and many other agreements = of daily occurrence constitute in reality }{\b\i\fs24\lang1033\cgrid0 = short sales of money}{\b\fs24\lang1033\cgrid0=20 . The very idea that }{\b\i\fs24\lang1033\cgrid0 money as such may be = sold}{\b\fs24\lang1033\cgrid0 , appears foreign to our present\_day = economic theories. It appears that in Europe attention was first=20 drawn to this by Henry Meulen, in a profound work entitled "Industrial = Justice through Banking Reform" ( London, Richard J. James, 1917). = Meulen quotes an American author unknown in Europe, Colonel W. B. Greene = (he died 1878), who in his "Mutual Banking"=20 stated: \par "We must remember that when we sell anything for specie, we = }{\b\i\fs24\lang1033\cgrid0 buy}{\b\fs24\lang1033\cgrid0 the specie; = and when we buy anything with specie we }{\b\i\fs24\lang1033\cgrid0 = sell}{\b\fs24\lang1033\cgrid0 the specie." \par This brief but pregnant remark throws a new light on our economic = system, for Greene's observation refers manifestly not only to ordinary = sales but to every agreement involving a money payment. This aspect = merits a special examination. \par=20 \par Who, before Greene and Meulen would have thought that in an = employment contract the employer }{\b\i\fs24\lang1033\cgrid0 = sells}{\b\fs24\lang1033\cgrid0 his employee blank and on credit go ld or other legal tender? And yet this reflects closely the reality. Or = who, before Greene or Meulen would have perceived that in an ordinary = loan agreement the debtor }{\b\fs24\ul\lang1033\cgrid0 = sells}{\b\fs24\lang1033\cgrid0=20 the creditor blank and on credit gold or banknotes? And yet such is the = fact. \par=20 \par How ever once we recognize the nature of agreements based on future = payments, namely that they are blank sales of money, we shall not be = surprised that in such transactions those difficulties of delivery = become apparent which are inevitable in the case of thi s type of sales. For clarity's sake let us apply the new knowledge we = have here gained to a particular example. \par=20 \par In 1929, the aggregate income of employed persons in Germany was = around 43.000 million marks. What goes this signify? It means that the = employi ng class had bound itself contractually to provide the employed class in = the course of the year with over 40.000 million marks in gold or = banknotes, although when the contract was concluded it did not possess = the gold or banknotes involved. The employing=20 c lass had sold gold or banknotes forward and blank, a transaction which = in the case of cereals and almost all other goods is in most countries = legally prohibited because of the associated risk of non-fulfillment. = And yet goods, e.g., cereals, are more easi ly procurable than money. Indeed, the rule is that goods may be procured = the more easily, the more difficult it is to procure ready money. ( = Similar reflections will be found in Dr. G. Ramin's article on "Non\_ Cash Wage Payments" in the "Deutsche Bergwerkszeitung" (German Mining = News) of 30 September 1931 and in the business report of the German = Festmarkbank in Berlin of 31 December 1931.). \par=20 \par All leases are, in fact\_, short sales of gold or banknotes of = tenants to landlords. Every credit agreement constitutes such a sale: That many sales involve no cash payments, as in clearing = and balancing transactions, leaves the legal basis of the prevailing \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 9=20 \par methods of settling accounts unaffected. In conformity with the = legislation of all countries, creditors are entitled to refuse non\_ cash payments and to insist on receiving legal tender, that is, metallic = or paper money; insofar as these represent legal tender. (The later = applies probably to all countries save China.) \par=20 \par We should probably not be far wrong in assuming that in Germany the = aggregate total of all such time obligations during 1929 amounted to = 100.000 million marks. That would correspond to two\_and\_a\_half times = the aggregate incom e of employed persons. The amount does not appear excessive when we = remember that the total turnover in Germany, inclusive of non-cash = transactions, has certainly exceeded 1.000.000 million marks, whereof = about half was negotiated by the Reichsbank. If we =20 suppose 100,000 million marks as correct, then the amount per head of = time transactions to be fulfilled within a year in Germany is about = 1,500 marks. In other countries the amount may be approximately the = same. If we now consider that the ready money cir c ulating in Germany is not equal to 100 marks per head, we find that the = total of time obligations during a year is over a dozen times greater = than the value in which the time obligations are to be honored. Even the = boldest and most experienced stock excha nge speculator would deem it very hazardous to be burdened permanently = with such time obligations. Strangely enough, the laws, the legal = findings, and the public opinion of all countries regard such = obligations in }{\b\i\fs24\lang1033\cgrid0=20 settlement of ordinary accounts}{\b\fs24\lang1033\cgrid0 as quite no rmal! And yet the probability that all time obligations will be honored, = is certainty not greater than when twelve ball players stand far apart = in a circle, throw the ball to one another, and expect that the ball = will never be dropped. Even if we calculat e the chance of a player throwing the ball correctly at 94%, there = remains a probability greater than 50% that the ball will not pass round = even once without a miss. \par=20 \par By a different route than that followed by Greene and Meulen, = Milhaud reaches practically the same conclusion as they do. He therefore = pleads that at least while the depression lasts, a creditor as regards=20 \par (a) external trading and=20 \par (b) wages contracts \par should not be entitled to payment in gold or in banknotes which are = either convertible into gold or must be legally accepted as the = equivalent of gold.=20 \par Instead, Milhaud would entitle a creditor to such goods or services = as the creditor would have normally bought with the gold or the = banknotes. In practice, this means that a creditor would be onl y entitled to a settlement by clearing (to receive compensation) in the = economically soundest way.=20 \par Naturally, Milhaud would not forbid a debtor to settle foreign = liabilities in gold or pay wages in banknotes when he possesses such = means of payment.=20 \par To begin with, creditors are to renounce voluntarily the right to = be paid in legal tender, and later this right is perhaps to be regulated = anew legislatively. \par=20 \par The popular presentation of this line of thought is rendered = somewhat difficult by the circumstance t hat workers are conceived as creditors and employers as debtors, a = conception alien to popular thought. The common conception is rather = that of regarding "workers" as "poor debtors" and "employers" as "rich = creditors". Naturally, science cannot compromise with popular misconceptions. \par=20 \par Moreover, the difficult insight that an economy based entirely on = clearing, involves in reality a return to pure barter, even though the = inconveniences of }{\b\i\fs24\lang1033\cgrid0 = primitive}{\b\fs24\lang1033\cgrid0=20 barter are avoided, makes it hard to render a popular presentation of = the case.=20 \par The older political economy did not elucidate this aspect; but an = excellent discussion of the subject to which the reader is referred, = will be found on p. 121 of Lexis' 'Volkswirtschaftslehre" (Political = Economy), in the chapter headed=20 "Theoretisch moegliche Ausschaltung des Barverkehrs" (Theoretically = Possible Exclusion of Cash Settlements).=20 \par The purchasing certificates proposed by Milhaud, which, in a very = imperfect form, circulate among the American unemployed, is, in fact, a = clearing note, i. e., an Instrument for conducting business on a = non\_cash basis, as we shall see later on. \par=20 \par A closely related question requires now examination, namely whether = we are faced by a blank forward sale of means of payment when somebody, = for example, bu ys goods and promises payment after three months in Milhaud's purchasing = certificates. The case may seem identical with that where payment in = gold or notes of the central bank is promised. = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D \par 10 \par But in reality there is the following difference. Whether someone = promises to pay with a certain product or a purchasing certificate which = he would redeem with it, is manifestly indifferent. But when two owners = of goods combine and say: "Ea ch of us undertakes to accept the purchasing certificates of the other = up to a certain amount", the legal position of the creditor of each of = the two owners of goods is obviously strengthened and not weakened and = no additional time risk is involved. When, =20 moreover, the two, in order to simplify the legal position do not place = their individual names on the certificates, but the name of the = association they have formed, the position of the creditor is once more = strengthened rather than weakened This is preci s ely the case when an owner of goods promises to pay in Milhaud's = purchasing certificates. In effect, he only promises to pay with his own = goods although he virtually adds: "My business friends, forming the X = bank, do also place their goods and services at your disposal".=20 \par The larger the number of the bank's clients, the greater is the = choice of goods for the creditor and the more he is in the position of a = creditor who receives gold or at least legal tender. \par=20 \par B) Security in Cash Payments & in Non\_Cash Settlements \par=20 \par To judge by general experience, the losses incurred in non\_cash = transactions represent only an insignificant fraction of those which = take place in cash operations: they are practically non\_existent. The = only real danger involved in non\_cash transac tions arises when creditors suddenly refuse to accept non\_cash payments = and demand ready money. This suggests the advisability of generalizing = as far as possible non\_ cash settlements and limiting the right of creditors to demand cash. = Unfortunately, this suggestion is not as self-\-evident as it seems, for = it has occurred to few economists only and to even fewer "practical = men".=20 \par In his work "Money", Jevons reports that the leading London bankers = declined to have anything to do with the Clearing House long a fter it was instituted (see p. 264 of the 1923 edition) and that in his = day (in 1875, that is exactly a hundred years after the establishment of = the London Clearing House) both the Liverpool merchants and the = Liverpool banks would have nothing to do with=20 clearing transactions, and insisted on receiving cash payments (p. 280). \par=20 \par The intellectual barrenness of "practical men" in all economic and = generally also in political matters has often been noted by thinkers. = The Bible is already remarkably clear on this=20 point (Jesus Sirach, ch. 38/39). Adam Smith, in the chapter "Commercial = System" of his classic work, comments severely on the economic views of = merchants. And Rudolf von Mosch, an unjustly forgotten German social = reformer, wrote in the 'eighties: "If prof essional associations were a natural breeding ground for far\_ seeing reform projects, we should have today no lack of these, for = almost all professions have heir special associations, periodicals, and = congresses. What reform projects have these brought to li ght? Virtually none." ("Materialien zu einem Katechismus der = Sozialreform (Materials for a Catechism on Social Reform), Berlin, 1888, = p. 413. (I am still seeking a copy of this book now! - J.Z., 21.11.01.) \par=20 \par (5) THE MILHAUD PROPOSALS AS A BASIS FOR A NEW SYSTEM=20 \par OF PECUNIARY SETTLEMENTS=20 \par=20 \par A) The Prevailing Money Monopoly as a Cause of Money Shortage and=20 \par therefore of the Trade Depression=20 \par=20 \par Milhaud repeatedly states shat he only proposes an emergency = measure and that he has no objection to the disappearance of the = purchasing certificates in external\_ trading and the goods warrants in internal trading once "normal" = conditions have returned. But Milhaud is assuredly more fully aware than = any one else that such an extension \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 11=20 \par of exchange transactions without State money is in reality the = beginning of a new system of settling accounts indeed the beginning of a = new economic order. The retention of the purchasing certificates=20 and the goods warrants would be irreconcilable with the present economic = system \par The most fundamental mark of this \_ after all not very old \_ = economic order of ours is the State's money monopoly.=20 \par Purchasing certificates in external trading and goods warrants in = internal trading would break this monopoly.=20 \par Once Milhaud's means of payment have been introduced, the supply of = money would no longer be dependent on the discretion of the few who are = entrusted with supervising the monopoly, for the supply of money=20 would be regulated by the needs of the general economic life. In fact, = any individual so long as he efficiently conducts his business, would be = able to determine himself the measure of his monetary supply, just as he = determines his supply or air and water . \par=20 \par We live today in a state of society which is no longer even = "capitalistic" and where fewer than a hundred people dictate how much = the world is to produce, how much of its products it may consume, what = proportion of the social product may be retained with in a country, and what proportion may be exported.=20 \par=20 \par In addition, those few scores of human beings also influence = decisively such conditions of exchange and production, as, for example, = commercial treaties and credit supply, and they exercise that influenc e in all cases as far as their sense of duty prompts them to.=20 \par=20 \par Who are these individuals? They are not Rathenau's "four hundred". = Their day has long passed, Some have become insolvent; a few are even in = prison; and perhaps every one of those whom Rathenau knew, has lost in power and wealth during these years of depression.=20 \par=20 \par Who, then, rules the world today? In the first place, the heads of = the central banks; then a few trade ministers and politicians and, = apparently, a few writers whom the former consult \_ all of them loyal, brave, honest, and even cultured individuals, who = are held in high esteem and who, in sharp contrast with the ruling = classes of the pre\_war times, enjoy the confidence of over nine\_ tenths of the population. The only reproach sometimes leveled against = them publicly, is that they make too little use of the authority they = possess.=20 \par Accordingly, day by day proposals are being made to place some as = yet free domain under their dictatorship; to\-day wage contracts = tomorrow, the choice of a prof ession on leaving school; and next, the entire literature of economics. = This tendency is not restricted to one country; t is to be found in = Japan and America, in the Russian colossus and in the dwarf countries = created by the War. China alone appears to fo rm a notable exception, so far. \par=20 \par The opinion prevailing in almost all countries since the War that = the State may rightfully claim a monopoly for all means of payment, not = only for money, has become more emphatic with the development of the = depression. Even=20 noted scholars have asserted that the remnants of private money, as, for = instance, cheque money, were partly responsible for the depression, and = that these also should be therefore taken over by the treasury. This = widespread prejudice, that as many means=20 o f payment as possible should be monopolized by the State, has a very = serious aspect. Indeed, when we examine its results, it suggests a = comparison with witchcraft in the Middle Ages. The new money oligarchy = has sprung out of this prejudice, just as the fe a r of witches gave rise to an oligarchy of omnipotent inquisitors. The = old money aristocracy of the Rothschilds, the Morgans and the = Vanderbilts has been quite eclipsed by the new oligarchy and places = itself at the latter 's disposal, as readily as the man =20 in the street. We have not, perhaps, sufficiently realized as yet that = in no previous economic crisis had the worlds monetary supply depended = on so few people as today and been controlled so exclusively by = doctrinaire State interests. Neither has it as ye t been examined whether this very circumstance involves the danger of = the trade depression becoming permanent. And it has yet to be shown that = the "forces of self\_ recovery" that were active in former crises, were not connected with the = free circulation of gold coins, the existence of private banks of issue, = and other long forgotten facilities. \par=20 \par Some thinkers have justly compared money with language and said = that what language is to human intercourse money is to the exchange of = products. (Roscher quotes Haman n, Adam Mueller, and Schmitthenner.) If the comparison is valid, he who = monopolizes the circulating medium is armed with a similar power as the = individual who may have=20 \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 12 \par succ eeded in monopolizing language and brought men to the pass that they can = only convey important information to one another through him. It seems = that a few primitive tribes ruled by Shamans are not far removed from = this to us almost incredible condition. A ccording to Caesar, the Druids possessed such a monopoly among the = Gauls. Along with these may be classed the law in the old kingdom of = Sardinia which ordained that the lower classes were prohibited from = learning to read and write. \par=20 \par And what is the reason t hat a monstrous monopoly such as that of money is today defended by = almost all writers and without exception by all "practical men"? May a = future sociology explain it! However, the origins of the modern view of = money and of State predominance are not very =20 recent. Herbert Spencer, who is almost forgotten today, prophesied = already decades ago what was in store for us. ("The Coming Slavery", = first printed in April 1884 in the Contemporary Review ), and prior to = him Bastiat raised his voice against the already powerful worship of the State in his day. ("L'etat" \_ The State \_ in = "Sophismes Economiques".) In vain! \par=20 \par The State monopoly of money is one of the basic demands of = Communism. Already the Communist Manifesto of 1847 stated clearly under = point 5 of its progr am: "Centralization of credit in the hands of the State, by means of a = national bank with State capital and an exclusive monopoly."=20 \par In an edition of the Manifesto intended for Germany, which appeared = before the Revolution of 1848, we read under point 10: "The private = banks will be superseded by a State bank whose notes will be legal = tender. \'85 " \par=20 \par The communist demands have been meanwhile realized almost in all = countries, partly by the communists themselves, as in Russia, and partly = by their enemies, who hon estly believed that they thereby combated Communism. One thing is = certain, namely that the communist monetary conception has triumphed = even where all communist literature is prohibited. There is scarcely a = parallel to be found in world history of an idea=20 having so completely triumphed and having been accepted by rulers and = ruled alike as a self\_evident proposition. Only in China \_ where in 1853 the Government granted full freedom for the issue of = notes (Ku Sui Lu, "Die Form bankmaessiger Transaktionen im In neren Chinas" (The Form of Banking Transactions in the Interior of = China), Hamburg, 1926) (Can anyone supply me with a copy? - J.Z., = 20.11.01.) and where full and judicious use is made of this freedom \_ do demands for a monetary monopoly not yet dominate most men's minds = entirely. \par=20 \par (If monetary freedom was legalized for as long in China and if full = and judicious use had been made of it there, why then were conditions in = China not greatly improved? Why is that great experiment not = sufficiently recorded and r emembered now, while Red China experienced up to 200 million unemployed? = I suspect that considerable restrictions did remain and that at least = customs and traditions hindered the full development of monetary freedom = there. Meulen once asserted that goods=20 w arrants, not redeemable in English pounds or in gold could be freely = issued in England. But were they, ever, to any considerable extent? = Meulen himself was not interested in this monetary freedom option - and = almost all other Englishmen were and are even=20 l ess! The "tael" standard, a copper weight, privately agreed upon in = Chinese contracts, was a safeguard against paper money inflation by the = government. - I have still to get Dr. Walter Zander's article on this. = Beckerath said, somewhere, that it was publi s hed in Shanghai newspaper, in 1935, if I remember right. By that time = also, a Shanghai power plant was supposedly issuing its own electricity = money for the payment of bills to it. But, were sufficient private and = competing exchange media issued? I doubt t h at very much. Who knows and can supply references? That a few merchants = made some private payment and clearing arrangements does not suffice to = revolutionize the whole monetary sphere, e.g. the payment of wages, = rents and daily consumer purchases. For me=20 i t was very significant that even after the invention of nail-making = machines, around 1800, the manual production of nails, in supposedly = first and highly industrialized England, went on, to some extent, up to = ca. 1900, although there was no law against us i ng machines for this purpose. As slowly are significant inventions = introduced in many cases! Glass was invented about 14 times. There were = xyz discoverers of America before Columbus! There has not been a rush to = adopt either the very economical microfiche or the ridiculously cheap CD-ROMs for libertarian publishing or any = sort of stampede for the many free banking texts that I offer on = microfiche, towards complete publishing on this subject. - J. Z., = 20.11.01.) \par=20 \par Milhaud is among the very few who venture to doubt the excellence = of a planned economy (economie dirig\'e9e) largely influenced by the = Central Banks. Just like Bastiat \_ one of his spiritual predecessors \_ he recognizes that when once external trading is free, statism would = soon be reduced to its natura l limits. It is true that Milhaud nowhere expressly states this. But he = must pardon his friends if they regard him as a logical thinker, who = could not have failed to notice such an evident inference. Even the = American unemployed, in tentatively, primitive l y and inadequately organizing an exchange of services not based on legal = tender, felt that they were creating a new economic order and were not = afraid to state a this openly. (Report concerning the Natural = Development Association in Salt Lake City, Utah,=20 by Murray E. King, Annals; 1933, No. 2. pp 257\_261.) \par=20 \par Milhaud's appeal to Governments and Central Banks calling on them = to introduce the new system of exchange, is nevertheless tactically = correct. Today only Governments and the Central Banks can take the first = step in the direction of }{ \b\i\fs24\lang1033\cgrid0 relaxing }{\b\fs24\lang1033\cgrid0=20 the present system of economic tutelage. Permission to utilize = purchasing certificates in external trading presupposes such a = relaxation, even if at first sight this permission seems to imply an = }{\b\i\fs24\lang1033\cgrid0 extension}{ \b\fs24\lang1033\cgrid0 of the planned economy. \par=20 \par Milhaud is one of the very first who has deliberately dissociated = the unemployment problem from the problem of the distribution of the = social product and thereby declared that the former may be solved within = the framework of the present imperfe ct social order. This penetrating thought can only be compared with that = which "the age of enlightenment" of over a century ago reached in the = matter of epidemics. Men recognized then that pestilence and cholera = were not at all to be attributed to human n ature as such, not to be regarded as problems to be solved by greater = piety and by pilgrimages. They were problems relating to water, soap, = and the destruction of vermin \_ that is, problems to be solved by purely technical measures, without = the need of changing human nature itself. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D \par 13 \par=20 \par (5) B) Exchange of Commodities without Goods Warrants \par=20 \par Many American unemployed, who helped themselves by resorting to = barter, imagined that they w ere treading an entirely new road. It is, however, precisely in = America, where primitive barter, as once practised on the Congo, is no = novelty. In paragr. 116 of his "Grundlagen der National\_ Oekonomik" (Foundations of Political Economy ) Roscher remarks o n this point: "In some parts of the United States barter was still = widely prevalent near the close of the eighteenth century. For instance, = in Vermont the doctor bartered his medicines for a horse, the printer = his newspapers for corn, butter etc. (Ebeling , Geschichte and Erdbeschreibung \_ History and Geography \_ II. p 537.) \par In Maryland, the Assembly had fixed the reciprocal value of = tobacco, pork, corn and wheat, (Ebeling, V, p. 435ff; Douglas, Summary = of the British Settlements in North America 1760, V., p p 2, 359.) As late as 1815, lads ran through the streets of Corrientes, = shouting: "Salt for candles, tobacco for bread!" etc . \par In paragr. 134 Roscher mentions that in 1843, in the Western States = of America, farmers bartered 2 pounds of raw wool for 1 pound of woolen yarn and 4 bushels of wheat for 3 bushels of flour. Moreover, = in 1618 there was in Virginia a forced rate of exchange for tobacco! = (Paragr. 119.) \par During the inflation period in Germany barter was common among = dealers, e.g., the provision dealer bartered his foodstuffs for shoes. \par=20 \par However, history makes it plain that primitive barter transactions = are quickly abandoned and forgotten when even a bad money, in whatever = form, circulates for a few years in a sufficient quantity. Hence the = barter tradin g of the American unemployed today, without its extension through a = system of goods warrants in accordance with Milhaud's principles, cannot = lead to a new economic order. Economic history will consider such = trading as a curiosity, as it considers the Virg inia edict of 1618 regarding a forced rate of exchange for tobacco.=20 \par=20 \par However, that the goods warrant by itself is not sufficient for = effecting frictionless exchange of }{\b\i\fs24\lang1033\cgrid0 = unordered}{\b\fs24\lang1033\cgrid0 goods (He added later: "for which = there is no strong daily demand" \_ The Ed.)=20 is shown by the history of the barter banks in France, England and = Germany. (Roscher, paragr. 75; Helene Simon, "Robert Owen", Jena 1905, = p. 225.) In the United States these highly informative facts seem as yet = quite=20 \par unknown. \par=20 \par It should be also noted that Adam Smith by no means overlooked the possibility of a return to barter = in the case of a shortage of money. In the chapter headed: "Of the = Principle of the Commercial or Mercantile System" of his "Wealth of = Nations", he remarks on this point: "If money i s wanted, barter will supply its place, though with a good deal of = inconvenience. Buying and selling upon credit, and the different dealers = compensating their credits with one another, once a month, or once a = year, will supply it with less inconvenience. A well\_regulated paper\_money will supply it not only without any = inconvenience, but in some cases with some advantages." (Bk. IV/1) \par=20 \par It is sure that this passage clashes with another, which is far = better known and has often been quoted, a passage which becam e of decisive importance for the monetary doctrine of the 150 years that = followed Smith. Unfortunately, it is held to represent Adam Smiths real = opinion regarding the replacement of gold and silver by paper money. In = the chapter "Of Money" he writes: "The =20 whole paper money of every kind which can easily circulate in any = country, never can exceed the value of the gold and silver, of which it = supplies the place, or which (the commerce being supposed the same) = would circulate there if there was no paper money . \'85" (p 331) \par=20 \par The qualification "the commerce being supposed the same does", not = neutralize the mistake here made by Adam Smith. According to this the = whole turnover of a country nights if necessary, be mediated with gold = and silver, a state of things from which our time is as far removed as were the Middle Ages or any other = epoch. In truth, not all the world's gold and silver could serve as = medium for the entire turnover of one country, like Germany, where the = Reichsbank and the Post together have, even i n bad years, a turnover far exceeding 500.000 million marks. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 14 \par Yet the passage, whereof we have quoted the first portion, has = influenced the monetary legislation of all countri es down to our time. In all probability, the passage was written much = before the one we cited first, although in the work the two passages are = placed only a few pages apart. \par=20 \par (5) C) Exchange of Commodities with Goods Warrants \par=20 \par In an economy based on the di vision of labour, a frequent exchange of immediately consumable goods = for such as are not immediately consumable, is natural and almost = normal. In primitive barter, however, the goods exchanged are almost = always such as are immediately required. That was=20 so in ancient times and is so in our day, In thinking of the barter = associations called into being by the United States unemployed, one is = tempted to recall the basic biogenetic law, according to which the new\_ born progeny, from the moment of its conception, passes through the = stages that marked the evolution of its kind. Thus in inter\_ commerce, peoples who only knew barter, rarely acquired by barter except = what they needed for immediate use. Roscher, in his Grundlagen, etc. = paragr, 118, mentions in this con nection the Goahiro Indians of modern times and the Livonians of the = twelfth century. Similar tendencies were explicably observable when = barter transactions were first resorted to among the United States = unemployed. Thus the transactions were limited to b a rtering what was immediately and urgently necessary for life. Soon, = however, the unemployed discovered that the hours of labour, which they = bartered for urgent necessities, could not possibly be employed in their = entirety on the production of such consuma b le goods. At the same time they recognized that barter might continue = provided the claims of those who were prepared to wait for delivery = could be protected. The introduction of goods warrants solved the = difficulty. This meant a decisive progress. Primiti ve barter signifies a return to an older economic order, whereas barter = by means of goods warrants is undoubtedly the beginning of a new order. \par=20 \par A complete theory of the goods warrant similar to that of = long\_term credits, has yet to be elaborated by our eco nomists. It is certain, however, that the goods warrant by itself is not = enough to ensure in all cases a frictionless exchange of unordered = goods. \par=20 \par A goods warrant can only circulate at par if someone is ready to = accept it at its face value at any time and offers therefore an equivalent which is in urgent and general demand. = The railway, for instance, is such an acceptor. The subject has been for = the first time examined in Dr. W. Zander's "Eisenbahngeld und = Arbeitslosigkeit" (Railway Money and Unemployment ) , which appeared in Berlin in July 1933 and has been reproduced in the = Annals. Zander has dealt so ably with the practical aspect of railway = money that a general theory of the goods warrant might be easily deduced = therefrom. The German Reich Railway fully bears out Zander's reflections, seeing that during the inflation = period, and particularly during the transition time 1923/24, it issued = scrip. According to the Statistisches Jahrbuch fuer das Deutsche Reich = (Statistical Year\_ Book for the German Empire), 44 th annual issue, p, 313, there was in circulation on 31 December 1923 = railway scrip to the value of about 251 million gold marks. Oeser, the = Minister to whom this initiative was due, probably saved thereby the = German economy from grave convulsions.=20 \par=20 \par Germany's entire monetary circulation on 31 December 1923 was = 2,273,6 million Reichsmarks, of which therefore only 11% was in = railway\_ scrip, It might be thought that the absence of so small a proportion of = the whole would have entailed no serious consequences=20 and should have been therefore dispensed with for the sake of = maintaining uniformity in the circulating medium. But it is far from = true that economic difficulties wax and wane in direct ratio with the = supply of money. Indeed, as has frequently been remark ed, money may rightly be conceived as the blood of the body economic. = Just as a diminution, by one\_tenth of the normally required quantity of = blood in the body does not weaken it by one\_ tenth but by far more, so a seemingly trivial deflation may very = seriously affect our economy. Contrariwise, a seemingly trivial increase = in the \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D115=20 \par available means of payment at a critical juncture, may suffice to = produce an economic recovery. Joh n De Watt Warner's "The Currency Famine of 1893" (published in the = periodical "Sound Currency" at New York, 15/2/1895) offers a striking = illustration of this. The quantity of gold, silver, and paper then = circulating in the Union was about 1,700 million do llars, a very considerable amount. But when in August 1893 the "famine" = broke out, even millionaires at the seaside sometimes could not scrape = together \par the few dollars required for a return ticket to New York. At that = time business saved itself \_ a fact not remembered today \_ by also resorting to a kind of goods warrant, of which altogether about = 80 million dollars' worth were issued. That amount constituted only = about 5% of the money in circulation; but this small addition sufficed = to keep the economy going and especially to pay wages with. Without these 80 million dollars of = goods warrants, looting would have probably ensued. The security offered = for the goods warrants varied considerably. Almost everywhere, however, = banks, shops and factories accepted the =20 goods warrants at their face value in settlement, and publicly undertook = to do this. Banks and factories were likewise the issuers. Warner's = study written with keen insight and containing highly interesting = particulars, would be well worth reprinting in o rder to wrest the facts from oblivion. Even more=20 \par remarkable than the effect of the United States goods warrants of = 1893 was that of the Prussian Loan \par Banknotes of 1848, which we shall discuss in the sequel. \par=20 \par Milhaud is fully aware that there must be an acc eptor for the goods warrants, who will accept them at all times at par = and who offers as an equivalent something that is in general demand. = Milhaud proposes to anchor his purchasing certificates in taxation.=20 \par This proposal merits close consideration. Suppose that unemployment = riots endangered the existence of a government and the latter had only = the choice between being swept away or making within twenty\_ four hours a serious and for everyone unmistakable beginning with the = abolition of unemployment. The Gov ernment could not proceed otherwise than by supplying the unemployed = with some form of goods warrants, e.g., as a loan to employers to cover = wage payments, perhaps even as loans to the unemployed themselves, and = to ensure the parity of the goods warrants=20 by validating them for tax payments, as Milhaud suggests. \par=20 \par The tax basis is a security available at any time even when the = Government machinery is no longer intact. In the hour of danger the = government might inform the municipalities by wireless that they a re authorized to establish Work Supply Banks (as Milhaud proposes) and = that all tax obligations may be discharged with the goods warrants = issued by these banks (but that the forced currency only applies to = government pay offices). Most probably, the impen d ing danger would be averted through this, and days and perhaps weeks = might be gained during which the technical arrangements could be = perfected. The menaced Government would be hailed as a social savior = and, as a result, its authority would be more firmly grounded than that of any possible communist dictatorship could ever = be.=20 \par How different, for instance, would have been the recent history of = Cuba and Spain if the overthrown or even murdered rulers had been = acquainted with Milhaud's proposals!=20 \par When will t he great reformer arise in these countries, who will make it clear to = the masses that today believe only in the most brutal force, that an = association of 100 workers, capable of intelligently applying the system = of goods warrants, would be a greater menac e to capitalism than all the world's bomb-throwers combined! \par=20 \par The declarations of the governments now in power in all countries = and of the parties that oppose them, demonstrate however that they do = not view the unemployment problem as a problem of means of payment. \par In these circumstances, it is unlikely that such governments would = provide a tax basis for the goods warrants created through the = self\_help of the unemployed. It will be necessary therefore to dispense = provisionally with such a foundation. \par Thus the idea suggests itself naturally that as = }{\b\i\fs24\lang1033\cgrid0 large a number as possible, especially of = workers, should undertake to accept the goods = warrants.}{\b\fs24\lang1033\cgrid0=20 Of course, we class as workers those unemployed at present, those = working short time, as well as those still fully em ployed but who may any day lose their employment. It may possibly also = be found that the undertaking of the workers to accept the goods = warrants cannot be executed without=20 \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 16 \par guaranteeing the sale of the goods, payable by means of goods = warrants, through the previous placing of orders. \par=20 \par (5) D) The Placing of Orders as a Factor in the Goods Warrants = System \par=20 \par When, a century ago, Robert Owen founded his exchange bank, many of = his=20 followers recognized that rendering the workers independent of the money = market was not enough, and that to a larger extent than heretofore = employment must be linked to orders placed. (Helen Simon, "Robert Owen", = p, 230.) Owen himself does not appear to h a ve stressed this and rather regarded as an essential the replacement of = gold as a standard of value by the working hour. The emphasis by English = workers in 1833, on the placing of orders as one element of a new = economic order, showed great insight, and it is a pity that the economists of that period entirely ignored this = point in the labour program. \par=20 \par The fact that today production is rarely based on = }{\b\i\fs24\lang1033\cgrid0 orders}{\b\fs24\lang1033\cgrid0 and is = mostly for the }{\b\i\fs24\lang1033\cgrid0 = market}{\b\fs24\lang1033\cgrid0=20 is, of course not the sole cause of the marketing crisis. It is, = however a conditio sine qua non of every such crisis. The hitherto = attempted explanations of these crises appear to have done scant justice = to this aspect. \par=20 \par The primary characteristic of a crisis is that the population = }{\b\i\fs24\lang1033\cgrid0 cannot}{\b\fs24\lang1033\cgrid0 repurchase = its own product. But the fact that production is not for firm = }{\b\i\fs24\lang1033\cgrid0 orders}{ \b\fs24\lang1033\cgrid0 , but for the }{\b\i\fs24\lang1033\cgrid0 = market}{\b\fs24\lang1033\cgrid0 , also explains why sometimes the = population is not willing to re\_ purchase its product. Such reserve on the part of purchasers is far from = uncommon. Nor is it in doubt that this reserve often results in the same = individuals who at first }{\b\i\fs24\lang1033\cgrid0 = refuse}{\b\fs24\lang1033\cgrid0=20 to buy; producing the conditions whereby they can no longer = }{\b\i\fs24\lang1033\cgrid0 afford}{\b\fs24\lang1033\cgrid0 to buy. \par=20 \par (Goods warrants promising merely redemption in goods and services = that are in daily demand and, moreover, with a time limit for the ir validity of no more than e.g. 3 months, are unlikely to be hoarded. = Even if they were hoarded, new goods and service warrants could be = issued on the same basis to make up for any currency shortage. Thus, I = do not believe that in the sphere of wage and=20 salary payment means there is much need for a system of placing orders. = Orders for larger purchases, a car or furniture or a holiday, for = instance, are another matter. - J.Z., 21.11.01.) \par=20 \par These interrelations seem to have been but little studied hitherto. = Y et a closer examination would be well worthwhile, although it is evident = that not every marketing crisis has been started by a strike of = purchasers. A fact, however, may be mentioned, one which Irving Fisher = was perhaps the first to stress In economic lit erature }{\b\i\fs24\lang1033\cgrid0 falling }{\b\fs24\lang1033\cgrid0 = prices are frequently confused with }{\b\i\fs24\lang1033\cgrid0 = low}{\b\fs24\lang1033\cgrid0 prices and }{\b\i\fs24\lang1033\cgrid0 = rising}{\b\fs24\lang1033\cgrid0 prices with }{ \b\i\fs24\lang1033\cgrid0 high }{\b\fs24\lang1033\cgrid0 ones. In = conformity with this, it is commonly contended that low prices stimulate = consumption and that, in an undisturbed market, this would be therefore = conducive t o a natural trade recovery. But whilst low prices stimulate buying more = than high prices, }{\b\i\fs24\lang1033\cgrid0 = falling}{\b\fs24\lang1033\cgrid0 prices invariably discourage buying. = So long as prices are falling \_ and this may continue for years - everybody postpones buying in the = hope that tomorrow's=20 prices will be lower still. Hence only when prices are thought to have = become stabilized or a tendency for prices to rise has set in does = buying become "normal". Thus not only is }{\b\i\fs24\lang1033\cgrid0 = production for markets}{ \b\fs24\lang1033\cgrid0 a pre\-condition of every sales crisis, but = }{\b\i\fs24\lang1033\cgrid0 consumption through = markets}{\b\fs24\lang1033\cgrid0 also tends to aggravate, and not to = cure, an oncoming depression. \par=20 \par (Here one should consider that under freedom to issue alternative = and optional exchange media a deflationary tendency could not be large = and could not persist for long. Th us prices would NOT tend to become falling ones, due to potential buyers = postponing as much as they can any further purchases. The more the goods = warrant system is applied the less would orders be required for the = turnover of daily needed consumer goods a n d services. A relatively rapid "consumption through markets" could be = assured through the limited validity period for goods and service = warrants. They stream back before they become invalid - and achieve = corresponding sales for their issuers. In later ye ars B. did not stress the "order system" very much. At when he wrote the = above, he seems to have been still in love with it. - Later on, he = stressed much more that only goods and services already = }{\b\i\fs24\lang1033\cgrid0 sold}{\b\fs24\lang1033\cgrid0=20 , at least by the producers or suppliers to wholesalers, not goods and services to be still produced in a somewhat distant = future, should form the basis for the issue of exchange media. With this = he had in mind e.g. the "shop foundation" or the readiness to supply of = petrol stations, railway and bus services,=20 t he services of tradesmen, professionals, of power plants, water works, = insurance services etc. - Naturally, one can equate an insurance = contract or a water or electricity supply contract also as a placed = order. - While still living in Berlin, and on a min i ature scale, I tried to negotiate a regular fruit supply contract with a = green grocer, promising to purchase monthly at least DM 30 worth of = fruits and vegetables from him, and asking for a small discount on this = firm order. He was good natured but a bit=20 t hick-headed and not amenable to arguments, so the discount was refused - = but I continued my regular purchases from him, whereupon on x-mas I = received, unexpectedly, a large basket of free fruit, with a comment = like: There is your discount! - Here and now=20 m y second son has had an account for many years with a large hardware = store, at which he is a regular customer, while building 3 houses. Thus = he does not have to pay cash for each item but gets a regular monthly = bill for all his month's purchases, with a c onsiderable discount. This comes also relatively close to an order = system. - J.Z., 21.11.01.) \par=20 \par Hence there is much to be said for the demand of the English = workers in 1833, that production should be governed more by orders = placed and less by market considerations. \par=20 \par Call up in imagination Thuenen's famous "isolated State". If in = that State all production were governed by orders placed and every party = ordering were solvent, no sales crisis could occur in that State. This = is obvious from the following considera tions which, however, call for a brief analysis of the concept of = "solvency". \par Let us assume that our isolated State possesses one or more = well-managed banks of issue; that these banks are authorized or indeed = bound to make advances in notes on orders place d, most especially for wage payments and other production costs to be = paid in cash. We should then observe a complete correspondence between = the circulation of money and that of goods. Expressed differently, = solvency would be general and follow from the s ystem of production on, orders placed. \par=20 \par Artisans manufacturers, labourers, farmers and others, would = produce commodities and bring them to this country's sales = establishments where they would lie waiting for the purchasers. Then the = employees would present=20 themselves a second time at the shops, but this time as buyers. They = would buy the goods they had ordered, pay for \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 17=20 \par them in notes, and take them home. With the notes they ha d received the shopkeeper would then pay their wholesalers: and with = their own profits they would also make purchases, i.e., they would get = rid of their notes in other shops. In their turn, the wholesalers would = pay their manufacturers or farmers with the =20 notes they had received and also indulge in purchases with their = business gains. But the manufacturers, farmers, and other producers are = precisely those persons who received the notes in the shape of advances = from the bank of issue. They are now in a posi t ion to repay these advances, and this also in notes. The repayments = having been made, the banks would destroy the returned notes and thus = the circulating process would be at an end. It is true that the country = would have then no saleable goods and no circ ulation media; but the process of production might be at once resumed. \par=20 \par What has been stated here regarding an isolated State, holds very = largely of the non\_isolated State, but proportionately less the smaller = and the less isolated a territory is, However e ven such a small territorial unit as Belgium, for instance, would = probably benefit by the system. If Belgium possessed a few banks of = issue that granted advances in notes on orders from "average customers", = this might secure for every Belgian willing to l a bour 4 or 5 hours' work daily, That would be possible, even though = Belgium, more than any other country, is intimately bound up with the = world economy. The 4 or 5 hours would naturally only produce a mere = subsistence wage and many workers would have, ther efore, also to undertake jobs for which they were not trained. For a = time there would be only "work of Belgians for Belgians", and not work = for the world market. \par To the degree, however, that business circles outside Belgium could = be induced to join the system, production could provide correspondingly = more than a bare subsistence wage. \par=20 \par With a view to properly appreciating the effects of the system of = placing orders, we shall make the following supposition: The textile = workers of the isolated State are to be=20 dismissed because of lack of employment in the textile industry. They = decide to create employment for themselves by each ordering textiles to = the value of one month's wages and this in the shops where they = regularly deal. The aggregate wages for the month =20 amount to (say) 100 million. The shops therefore, receive orders to this = amount. The shops work with a margin (say) of 20 million. Their orders = to the wholesalers are therefore only for 80 million. Suppose that the = wholesalers' margin is 30 million. Thus=20 the textile industry will then inform the textile workers that here is = work, but only for half their number; the other half will not be = required. \par After the workers have recovered from their surprise at the = disappointing results of the orders they placed, th ey will change their tactics. In placing their orders at the shops, they = will say: "We are placing orders for 100 million; but only on condition = that you place orders for the same amount, You may order for 80 million = from the wholesalers, but you must als o place orders for another 20 million. Moreover, you must somehow arrange = that those who receive your orders proceed similarly and produce = satisfactory evidence of having done this. We demand that the full = amount of our orders be passed on and that your or ders shall entail at last labour orders amounting to 100 million." \par=20 \par By deliberately choosing with whom to deal, a people can effect = greater social changes than by the bloodiest revolution. \par=20 \par If the workers proceeded in this way, they wilt probably not entire ty succeed in securing a full 100 million worth of labour to the textile = industry But the labour market as a whole would benefit by 100 million, = and not a few of the textile workers would find employment in other = industries. \par The guaranteeing of the orders placed, both as regards=20 \par=20 \par a) the disposal of the ordered goods, and \par b) the passing on of the orders, so that the total amount involved = in the orders should be felt as a demand=20 \par on the labour market, \par represents an important economic function. Decades w ill no doubt elapse before this system is so developed, as are today the = installment payments system (hire purchase), the discounting of bills, = or mortgage loans. A beginning might be most conveniently made by those = factory workers whose employers are eng aged in mass production and have large and efficient offices. The orders = of these workers could be entered on set forms. E.g., the \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 18 \par orders might be accepted by the workers' cooperative societies, a = procedure which would greatly allay the workers' apprehensions. Most of = the cooperatives, too, have order forms, supervision, etc., and their = members readily fall in with such arrangements. \par Suppose a worker orders a suit of clothes at a store, say either in = the textile department of his cooperative society or at another sales = establishment. His order form might read as follows:=20 \par=20 \par }\trowd \trgaph108\trrh2536\trleft587\trbrdrt\brdrs\brdrw10 = \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 = \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 = \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 = \clbrdrb\brdrs\brdrw10=20 \clbrdrr\brdrs\brdrw10 \cltxlrtb \cellx9859\pard = \fi720\nowidctlpar\intbl\adjustright {\b\fs24\lang1033\cgrid0 1. Firm = accepting the order = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85.. =20 \par 2. Nature of order as to kind = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85 \par 3. Least price to be paid by the person ordering = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. \par 4. Statement as to desired installment rate = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. \par 5. Employer's address, branch of enterprise; etc. = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 \par 6. Other particulars = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85\'85\'85\'85\'85 \par 7. Declaration of person ordering: "I undertake to accept this = order form \par when receiving payments due to me, up to the amount of (insert = sum) \par agreed upon under 3) in lieu of ready money". \par }\pard \nowidctlpar\intbl\adjustright {\b\fs24\lang1033\cgrid0 = \cell }\pard \nowidctlpar\widctlpar\intbl\adjustright = {\b\fs24\lang1033\cgrid0 \row }\pard \nowidctlpar\adjustright = {\b\fs24\lang1033\cgrid0=20 \par Should the worker not call for the ordered goods, the firm that = received th e order would forward the order form to his employer who, when the next = wage payment falls due, would place it into the worker's wage envelope. = After that, here is no doubt that the order will be honored. \par=20 \par The system can here only be barely sketched. A det ailed description would fill a volume, not because the system is = complicated (which it is not) but because it is widely applicable and = because the parthes ordering might escape through many loopholes unless = the legal basis is comprehensive and carefully e laborated. \par=20 \par For all intents, there is noting novel in the principle of placing = orders and in the reflux of paper money through the execution of an = order. The old private banks of issue, first and foremost the Scotch, = habitually applied it, though not always in a form clearly recognizable by us. Frequently the additional = securities were the real ones.=20 \par=20 \par That the "reflux principle" and also the mutual responsibility of = clients of a bank of issue as a" payment partnership" were already = clearly realized by Adam=20 Smith, follows from the chapter "Of Money", in his "Wealth of Nations", = particularly from the paragraph commencing with the words, "Whoever has = a credit of this kind ..." (Vol. I, p. 329 of the World Classics = edition.) \par=20 \par Formerly, the poorer sections of soc iety were not included among "persons ordering", partly because their = intellectual status was too low and partly because their requirements = involved only a bare subsistence standard and therefore could be = calculated and ascertained long in advance. The re gularity in sales, which may be secured as regards the well\_to\_ do classes by the system of placing orders was assured, without such a = system, for the poorer sections of society in the eighteenth century by = their wretched standard of life as well as, frequently, by their = dependence on certain shops. \par =20 \par Bendixen, probably the last exponent of the principle of the old = bank of issue, states definitely: \par "Only }{\b\i\fs24\lang1033\cgrid0 sold}{\b\fs24\lang1033\cgrid0 = goods can form the basis for the creation of mo\-ney." ("Wesen des = Geldes" \_ "Nature of Money", 3rd edition, p. 83.)=20 \par=20 \par Whether a monopoly, such as that of a railway, justifies the issue = of paper money without a }{\b\i\fs24\lang1033\cgrid0 = precedent}{\b\fs24\lang1033\cgrid0=20 sale of the monopolized goods (or services), Bendixen did not inquire = into, because his subject, that of the German Reichsbank, did not = suggest the problem. The gap has, how\-ever been filled by Zander's = "Eisenbahngeld..." \par=20 \par There is for us here no tangible difference between "sold" and = "ordered". One difference as against the teachings of the old\_ bank of = issue theory is, expressed b the fac t that we propose here, the inclusion of the poorer sections of society = among hose who deliberately apply the principle and desire to become its = upholders. Surely, it does not argue an overwrought optimism that the = poorer sections of society should \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 19=20 \par gradually come to understand that }{\b\i\fs24\lang1033\cgrid0 he = who orders goods }{\b\fs24\lang1033\cgrid0 and takes care that the order = is passed on uncurtailed, }{\b\i\fs24\lang1033\cgrid0 orders opportunity = to work}{\b\fs24\lang1033\cgrid0=20 and that he who orders his own livelihood, creates a demand on the = labour market exactly equal to producing this livelihood, We thus place = orders and secure work \par for others; but others also place orders and secure thus work for = us, We become indebted to the extent of the orders we place, and we ac quire assets to the extent that we receive orders. We pay with our = assets, and it is the business of the bank so to break up and = standardize the assets by means of goods warrants that they can serve as = means of payment. We are bound to accept the bank's g o ods warrants to the extent of our indebtedness The person ordering frees = himself from his indebtedness by calling at the shop for the goods he = ordered and handing over therefor the goods warrants which he had to = accept in lieu of money. Instead of a cover =20 in specie, as demanded by an old prejudice, the goods in the shops serve = as redemption fund. The forced currency, which modern prejudice insists = on, is replaced, on the one hand, by the indebtedness created by the = order placed and the undertaking on the o ther hand, to allow one's own debt \par to count against oneself in clearing \par=20 \par It ought to be one of the tasks of economists to convey these at = first somewhat abstract sounding maxims to the poorer sections of = society by means of explanations and illustrations in the same way as they did this for our manufacturers and merchants some = decades back. \par=20 \par Without an alliance with science, the poorer sections of society = are lost They believe they have a }{\b\i\fs24\lang1033\cgrid0 = program}{\b\fs24\lang1033\cgrid0 and even attempt to realize it by = sanguinary revolutions. What kind of program do they possess, on closer examination? For over a = century they have put forward the same demands over & over again, = demands that are vague, have no concrete content, and seem to be = "practical" only because they are divorced' from "theory ", i.e. from deeper insight, Consider, for instance, the reform program = of the French Conf\'e9d\'e9ration G\'e9n\'e9rale du Travail (General = Confederation of Workers), published in "L'Oeuvre" of 22/2/1934: \par=20 \par 1. Integration of the workless in the process of production by = generally reducing the hours of work.=20 \par (This assumes as self\_evident that e. g., unemployed watch = makers and musicians would immediately =20 \par find work if the working hours of farm laborers and of = bricklayers were reduced.) \par=20 \par 2. Stimulation of industrial activity by starting extensive public = works.=20 \par (This assumes as self\_evident that the money spent on this, if = left in the hands of the tax \par payers would not create employment.=20 \par=20 \par 3. Minimum wages for every industry.=20 \par (This assumes as self\_evident that every industry can bear such = mechanical regulation.) \par=20 \par 4. Fixing of remunerative prices for agricultural products. (This = assumes as self-evident that consumers =20 \par can be compelled to pay the prices prescribed by the police, as = house\_owners for instance may be=20 \par compelled to keep the streets clean.) \par=20 \par 5. Nationalization of credit and supervision of the banks.=20 \par (Where the State is to find the means to grant credits, is left = to the reader's imagination. And of what =20 \par use will the banks be, once credit is nationalized?) \par=20 \par 6. Strict supervision of key\_industries by the representatives of = the people and of the wage earners. \par (What the representatives are to supervise is prudently left = unsaid.) \par 7. Introduction in the constitutional apparatus of an economic = organ armed with powers permitting it to=20 \par coordinate production and consumption and to supervise all = eco\-nomic activities.=20 \par (This inevitably calls to mind the edict of Napoleon I., of = 24/11/1807, according to which his minister=20 \par was ordered to remove within one month all eco\-nomic distress = in France! That Chancellor Bruening =20 \par possessed this authority and Roose\-velt still wields it, = should induce the C.G.T. to start thinking!) \par=20 \par 8. Administrative and fiscal reforms.=20 \par (That this demand is very original, not even the C.G.T. would = contend.) \par=20 \par Anyone acquainted with the history of French socialism, will find = that the above quoted program is far less advanced as regards positive = content than some social programs of French workers a century ago. That = uninstructed workers and unemployed \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 20 \par should consider the above demands as constituting a = }{\b\i\fs24\lang1033\cgrid0 program}{\b\fs24\lang1033\cgrid0 is = pardonable but not that their }{\b\i\fs24\lang1033\cgrid0 = leaders}{\b\fs24\lang1033\cgrid0 should h ave formulated it. Since the above eight demands are not the outcome of = reflection but of the want of it, it is not surprising that they should = have sprung up everywhere and sporadically during the last few decades. = Especially during recent years has it f r equently happened that the lower classes have revolted, have had = recourse to brute force, and have proclaimed some one or several of the = above demands. Often the revolt is suppressed, and what do the victors = do then? Equally unreflective as the vanquished , but feeling that something has to be done, they proclaim the same = "program" only couched in different terms. No reforms follow, just = because the program has no factual basis and is only the expression of a = pious wish. \par=20 \par Nobody has more clearly recognized the great, even immediate danger = for the workers, particularly in our age, resulting from the = }{\b\i\fs24\lang1033\cgrid0 indefiniteness }{\b\fs24\lang1033\cgrid0 of = their }{\b\i\fs24\lang1033\cgrid0 programs}{ \b\fs24\lang1033\cgrid0 , than H. L. Follin, one of France's acutest = thinkers. His "Paroles d'un voyant", it is true, appeared only in 1934 = (published by Rivi\'e9 re in Paris), but was in existence before the German Revolution of 1933, = a revolution which Follin regarded as inevitable because the German Left = was without a program. He writes: \par "It is rendering a disservice to the masses to provide them with = vague formulas which they wrongly interpret and which create in them the = illusion that the formulas represent the reality which they do not = understand. This pseudo\_ science, this tendency to be satisfied with mere phrases and to speak = loosely, this aversion again st the degree of intense thinking required to recognize which kind of = reality corresponds to every word, these are scourges of our times and = the press bears the main responsibility for them." \par Potent forces are at work preparing the same fate for French = socialism which has befallen during the last few years Russian socialism = (Bolshevism is not Socialism), Italian socialism, that of the Balkan = countries and of Austria. \par=20 \par One of the few bulwarks against these forces is the C.G.T. But the = present situation reall y calls for something else than programs of the above type. In the = conditions of today this something else must be a movement which has for = its aim the immediate realization of the principles enunciated by = Milhaud. The next step for the C.G.T. should be t h erefore, to set up study committees in all localities where it has = influence. The committees should seek to come to an agreement with the = employers of the district concerning the carrying into effect of the = Milhaud proposals, and this not in general terms , but precisely in the locality concerned. If only = }{\b\i\fs24\lang1033\cgrid0 one}{\b\fs24\lang1033\cgrid0=20 of these series of negotiations were to be crowned with success, the = C.G.T. would have won for France, and not only for France, a second = battle of Valmy, although not against an external enemy, a battle on the evening of which Goethe uttered his memorable\_words: \par "Today and here starts a new epoch in world history, and you can = all say that you were present at it." Nobody will grudge the C.G.T. such = a victory, if indeed it intends to deserve it. \par=20 \par Between the indefiniteness of the }{\b\i\fs24\lang1033\cgrid0 = political}{\b\fs24\lang1033\cgrid0 programs of the past and the many = }{\b\i\fs24\lang1033\cgrid0 wars}{\b\fs24\lang1033\cgrid0 , and the = indefiniteness of the }{\b\i\fs24\lang1033\cgrid0=20 social}{\b\fs24\lang1033\cgrid0 programs of the past and the many = bloody }{\b\i\fs24\lang1033\cgrid0 revolutions}{\b\fs24\lang1033\cgrid0 = there is an intimate connection. \par=20 \par When once the workers instead of erecting barricades, go=20 to the shops and discuss with the shopkeepers the question of becoming = customers and of placing orders for large quantities of goods at agreed = prices, one of the incidental results would be to realize an old ideal, = that of }{\b\i\fs24\lang1033\cgrid0=20 stabilizing the price level. }{\b\fs24\lang1033\cgrid0 =20 \par Wh ilst it is true that, considered purely arithmetically the stabilization = would not be quite perfect, it would go far enough to be satisfactory = for all practical purposes This stabilization would even then ensue if = the part ordering were allowed, against a payment of forfeit\_ money, corresponding to a "call" in wholesale or stock exchange = business, to withdraw its order. (To accord the same concession to = producers, in exchange for a premium, would be just and practicable as = mistakes in calculation could be t hereby compensated.) The stabilization of the price level through the = placing of orders would be probably much greater than that attained by = any of the hitherto proposed index currency systems. The stabilization = would be also greater=20 \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 21=20 \par because it would affect not only the }{\b\i\fs24\lang1033\cgrid0 = average price}{\b\fs24\lang1033\cgrid0 , as the index currency attempts = to, but }{\b\i\fs24\lang1033\cgrid0 individual prices.=20 \par }{\b\fs24\lang1033\cgrid0=20 \par Furthermore, the placing of orders would relieve many owners of = goods of the neces sity of snatching daily from one another their customers, and this would = reduce sales costs. According to statistics relating to American = department stores, the sales costs frequently amount to about half of = what the purchaser pays, in not a few cases eve n more. The system of placing orders will therefore considerably reduce = the price level without any one suffering hereby. \par=20 \par For simplicity's sake it is here assumed that the total production = of a country is based on orders received. In practice, however, the re is no need to go so far. The sale of many goods and services proceeds = with great regularity and almost automatically. It does this = }{\b\i\fs24\lang1033\cgrid0 without}{\b\fs24\lang1033\cgrid0 the = placing of orders as reliably as }{ \b\i\fs24\lang1033\cgrid0 with}{\b\fs24\lang1033\cgrid0 them. For = example, no population today could dispense with the railway=20 services, and a large proportion of railway "goods", that is, of = transport mileage, could be sold without any orders received. Practical = experience might eventually show that the placing of orders for about = one\_ tenth of a country's production would suffice to abolish all = unemployment. But this possibility should not prevent us to apply the = system of placing orders as widely as practicable, at first. \par=20 \par Nor should it be overlooked that whilst an institution such as a = railway, is not dependent on orders receive d by it, the orders it places for rolling stock, etc., and which it pays = for with railway money, indirectly increase its own turnover, as Zander = has shown in his "Eisenbahngeld...". \par=20 \par (5) E) Short\_Term Validity of the Goods Warrants \par=20 \par Since the goods finance d by means of goods warrants are as a rule only moderately durable, it = must somehow be prevented that perhaps 5 years after production somebody = presents a goods-warrant and claims delivery of the goods ordered. = Milhaud has recognized this danger and deman d s therefore that the goods warrants should be valid for a stated period = only. This aspect gave rise to a prolonged discussion. (See: Annals, = Nos. 1 and 2, 1933.) It was, however, generally recognized that the time = restriction of the goods warrants counter s one danger, which, although slight, is greater than zero. It was also = pointed out by some that the restriction might cause inconvenience to = those who accept the warrants shortly before they expire. It might have = been added that many people, without being money hoarders, are bound to accumulate means of payment for certain = dates, e .g., employers and mortgage debtors. By such a time\_ restriction, these might be moved to refuse acceptance of this paper = money in order to be certain to avoid the possibility of missing the = due\_ date. Our remarks in the preceding section have for instance, hinted = that the time validity of the goods warrants might be limited otherwise = than by rendering them valueless after a stated time. This, as we have = seen , might be accomplished by definitely prescribing their passage from the issuing centre to the = worker and thence back to the issuing centre, and this by means of two = contracts -=20 \par a. Engagement contract, wherein the }{\b\i\fs24\lang1033\cgrid0 = worker}{\b\fs24\lang1033\cgrid0 undertakes to accept the goods warrants = in lieu of ready money, \par b. Loan contract wherein the }{\b\i\fs24\lang1033\cgrid0 = employer}{\b\fs24\lang1033\cgrid0 undertakes to accept them in his = capacity as debtor. \par=20 \par These contracts would guarantee the prescribed passage. If this = were done, the format limitation of the time validity indicated through = a corresponding notice on the goods warrants, might be dispensed with. \par This does not assert that in all circumstances the method of a = definite time limit, after which the goods warrants become valueless, is = inferior to the restriction enforced by the contractual method of orde ring. Both methods should be tested and even from time to time re\_ tested. In fact, the time limit proposed by Milhaud is considerably = longer than would be as a rule the time limit under the "bespoke = system". Any serious inconveniences, therefore, are not to be = anticipated in the realization of \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D\sect }\sectd = \pgwsxn12240\pghsxn15840\binfsxn283\binsxn283\sbkcol\linex0\headery709\fo= otery709\colsx709\sectdefaultcl \pard\plain \nowidctlpar\adjustright = \fs20\lang2057\cgrid=20 {\b\fs24\lang1033\cgrid0 22 \par Milhaud's proposal. Moreover, Milhaud has noted that the system of = goods warrants operates the more smoothly the more the placing of orders = appears as an element therein. (Annals 1933, No. 2, pp. 182, 227.) \par That the fine (to be discussed later) imposed by the bank when a = payment is not made in goods warrants but in other monetary tokens, will = greatly accelerate the reflux of goods warrants, is evident.=20 \par Another arrangement will produce a similar effect, namely the = possibility of investing the goods warrants and profiting by the = interest received. Since Milhaud has himself stressed the difference = between saving and hoarding (Annals, 1933, N o. 2, p. 180), it is manifest that few would think of hoarding the = warrants if they could open a savings account with them. The instance = when people would hoard them would not be more frequent than where = somebody buys a railway ticket and deliberately, ou t of stupidity or spite, refrains from using it. \par=20 \par (5) F ) An Improvement in the Civil Law as a Result of the Milhaud = Proposals and as a First Step =20 \par towards a Social Reform \par=20 \par The concept "crisis" is of a highly subjective character. During th e years 1927 to 1929, which present themselves today in a rosy light, = most people were under the impression that there was but a slight = diminution of the crisis over that of the immediately preceding years. = There were still great numbers of wholly and par tially unemployed many difficulties in discharging liabilities, much = spare tonnage, masses of unsaleable goods, and a continuous stream of = new proposals for grappling with the }{\b\i\fs24\lang1033\cgrid0 = depression}{\b\fs24\lang1033\cgrid0 .=20 \par It was hoped that 1930 would see the beginning of a real recovery. = A proposal, such as Milhaud's, would have, therefore, been also = appropriate in 1927 and would certainly not have been rejected on the = ground that all was well economically and that there was nothing amiss = as regards monetary matters. If we are right in thi s respect, it follows that the realization of Milhaud's proposals should = not be made dependent on, for instance, some official body declaring = that we are passing through a crisis or that the crisis is over. Indeed, = we may reasonably surmise that if in the=20 " prosperous" years 1927 to 1929, the part of the business world then = already entangled in difficulties, had been allowed to help itself by = applying Milhaud's system, the economic crisis would never have assumed = its present magnitude and very likely would n ever have developed. This suggests that the essence of the Milhaud = proposals should be regarded as of permanent application. \par=20 \par What then is their essence? The official compensation office for = external trading? The centre issuing purchasing certificates with a view = to paying for relief works? \par=20 \par These proposals are of decided value, but their essence is surely = the abrogation of the right of creditors (whether vendors of goods or = workers) to demand payment in legal tender. This essence is of a = negative nature. Th at which remains as the sole means for satisfying creditors, namely \par a) direct payment with goods or goods warrants, or \par b) balancing (clearing) on a monetary basis,=20 \par may be realized in a variety of ways. \par=20 \par Once it is recognized that the right of=20 creditors to demand gold or legal tender is a main cause of the = depression and that the abrogation of this right if only on a voluntary = basis and for a limited period, perhaps even not in all domains, would = offer an effective means for ending the depressi o n, the idea suggests itself that the said right of creditors should be = altogether abrogated by an amendment of the Civil Law, replacing it by = the right of creditors to be paid by clearing in a form as favorable as = possible to them but economically tolerab le to the community, This would only involve a logical development of = the legislation on time\_ bargains existing in many countries; pursuant to which such bargains are = only protected legally where the debtor is permitted to withdraw from = them on the payment of forfeit\_money or a premium. In fact, such = forfeit\_ money sales are frequently not even legally protected or \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 23=20 \par only on condition that they are concluded among members of the=20 stock exchange. That we are here only contemplating a consistent = development of the existing legislation concerned with dealings in = "futures" will be manifest from the preceding considerations. \par=20 \par For countries like England or the United States such an amendment = of the Civil Law depriving forward sales of gold and banknotes of legal = protection, would not represent anything novel, for non\_ cash payments, that is payments by means of a clearing operation, have = been common there for many decades, even among the masses. The proposed = reform would legalize a custom; that is all. \par=20 \par A modest beginning might be made with bills and cheques in that = such bonds also might be made subject by the drawer to the general bill = or the cheque legislation ,wherein the text only stat es that the drawer will accept them in payment in lieu of money, but = that the holder is not entitled to have them redeemed in money. It is = true that recent international arrangements on bill and cheque = legislation are not favourable to such a solution but they do not exclude it. \par To submit here detailed legislative proposals on the subject would = exceed the scope of this paper. It may be remarked, however, that the = legislation suggested takes up the problem where, more than 1500 years = ago, it was left by Marc us Aurelius, one of the greatest statesmen of all times and countries. = It was Marcus Aurelius who first introduced the clearing principle in = Civil Law (Heilfron, Roemische Rechtsgeschichte, \par History of Roman Law, p 521.) Before his day, only a quite excepti onal and limited use had been made of this principle. It is highly = significant that the next king who after Marcus Aurelius, merited to be = called a philosopher on the throne, namely Frederick the Great, also = recognized the economic importance of the princ iple. If article 6 of his "Reglement der Koeniglichen Giro\_ and Lehn\_ Banko", of 17 June 1765, had been seriously put into force, which was = not the case, the settlement of payments by clearing would have at that = early date become almost generally established in Prussia. Furthermore, the "Allgemeines Landrecht" (Civil Code ), = drawn up in Frederick's reign, pays close attention to clearing and = devotes to it 77 paragraphs, whereto have to be added 37 paragraphs = concerning the union of the rights of creditor and debtor in one person (Confusio ). The German Civil Law today is = satisfied with 10 meager \par paragraphs and the Napoleonic Code, which recent legislation has = unfortunately followed, with 13 paragraphs only. One of these, paragr. = 1290, is so badly drafted that French courts do not apply it. \par=20 \par The effect of the Civil Law on conditions of employment has so far = been left practically unexamined. Probably the only volume that has = appeared on the subject is Rittershausen's "Reform der = Muendelsicherheits\_Bestimmungen,=20 zugleich ein Beitrag zum Erwerbslosen Problem" (Reform of the Provisions = concerning Trustee Investments, representing also a contribution to the = Unemployment Problem", Jena, 1929, which contains valuable suggestions. \par=20 \par That a clearing house curtails the bus iness possibilities of the central banks of issue and even offers the = chance of escaping from their tutelage altogether, has naturally been = observed by their partisans. Owing to this, e.g., the Russian currency = legislation of 1930 has refused cooperatives =20 the right to accept cheques without permission of the Russian Central = Bank. In 1933 another country went even further and declared all = agreements null and void where a creditor of banks and akin institutions = renounces his right to demand payment in ready=20 money. Such a provision, if creditors as a body were to exercise their = full rights thereunder, could in a few hours bring stark ruin to the = most flourishing national economy. \par=20 \par Today the advocates of goods warrants have still to fight for the = right to issue=20 them, The coming ages will stand for the opposite view of obliging every = economic domain to issue as many of its own goods warrants as are = necessary to prevent a disturbance in the monetary circulation of other = economic domains. Indeed every individual wi l l be bound to dispose of his assets through a clearing bank which issues = goods warrants. Others' balances or means of payment issued by others, = would thus be permitted to be used only if the own balances, or the = means of payment issued by the debtor hims e lf, proved inadequate. For Germany, for instance, such a reform would = involve the amendment or abrogation of the following legislative = provisions: paragr. 39 of the Banking Act, which was imposed on Germany = by the Dawes Plan; par. 115 of the "Gewer beordn ung" (Trade Regulations), whereby workers are entitled to demand \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 24=20 \par payment in ready money; paragr. 32 of the Cooperative Societies' = Act; and the Bruening\_Dietrich Legislation concerning emergency money, = with its later supplements. \par=20 \par In an economy not inconvenienced by a money monopoly and regulated = by a system of production based on orders placed, the demand for labour = will always equal the supply, probably even equal all the lab our which can be supplied in it. Such an economy will have no = unemployment problem; but, on the contrary, it will be always concerned = with the problem of how to reduce the burden of labour by means of = machinery and by every other kind of social advance. \par=20 \par T he champions of the monopoly of the central banks of issue will one day = stand before the bar of world history, as in English history the = opponents of William Dockwray, who, in 1680, to the common benefit, = introduced the penny post, but who also amidst the =20 applause of the obscurantists, was compelled by the Duke of York, who = held the postal monopoly, to renounce his project. England had = accordingly to wait another century and a half before this reform was = realized. (Macaulay, "State of England in 1685", His t ory, vol. I.) Or there is the case of the opponents of mechanically = propelled conveyances a century ago, an age which only knew steam = vehicles but these of a decidedly practical character. By an Act of = Parliament, which provide that for the "protection of the public" a man with a red flag must walk in front of every steam = vehicle, social development was arrested for many decades. \par=20 \par (6) THE REALIZATION OF THE FUNDAMENTAL CONCEPTIONS UNDERLYING THE =20 \par MILHAUD PROPOSALS, SHOULD STATES NOT TAKE THE INITIATIVE \par=20 \par A) Purchasing Certificates in External Trading on a Private = Enterprise Basis \par=20 \par As Milhaud has shown, the great shrinkage in world trade had two = principal causes, of which the second was the immediate consequence of = the first: \par }\pard \fi720\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 1. = the right of creditors to demand payment in gold; \par 2. the restrictive foreign exchange laws, of which perhaps a = thousand have been issued during the =20 \par last three years. \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 The = foreign exchange laws have introduced confusion not only in trade but in = men's ideas. They had a legiti mate purpose, namely to restrict the right of creditors to demand = payment in gold. But the method whereby the foreign exchange laws of all = countries are seeking to attain this end, will probably create a similar = impression on our descendants as the anti\_ sorcery legislation of our ancestors. One basic defect of perhaps all = these laws is that they fail to distinguish \par }\pard \li720\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 a) = claims arising out of short\_term deposits utilized for long\_term = investments, the deposits thus =20 \par becoming "frozen" \par }\pard \fi720\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 b) = claims which cannot be met because they call for payment in gold and the = debtor possesses only =20 \par goods; \par c) claims which cannot be met because they call for payment in = notes of a central bank of issue or =20 \par may be demanded in such notes whilst the central bank of issue = will not or cannot place such=20 \par notes at the debtors disposal, although he holds goods that are = in demand. \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 With = regard to a), Rittershausen has dealt with it luminously and = comprehensively, in his work "Neubau des deutschen Kreditsystems" = (Reform of the German Credit Sys\- tem, Berlin, 1932. It suffices therefore to refer the reader to this = work, \par=20 \par b) is the central theme of Milhaud's plan.=20 \par=20 \par (And c) is Beckerath's main theme, seeing that few have any longer = a chance to get their government paper r edeemed by the government in a gold weight value that was originally = promised. Now one can get its paper only replaced by it or any of the = banks it has permitted, in other government paper money of the same = nominal value, on the "principle" of "Mark equal s Mark" or "Dollar equals Dollar", which is quite untrue for Marks or = Dollars that were issued years earlier. The abstract paper money = "standard" of the government is like a very elastic rubber band that = over the years or decades becomes more and more stre t ched - until it finally breaks altogether. Imagine, by analogy, the = weight, length and volume "standards" being made smaller all the time! = How many or how few years will pass before e.g. $ 10 will be the lowest = note or coin issued? On what remains of a fr e e gold market, all government currencies have gone down greatly over the = last few decades, interrupted by some temporary gains, due to = deflationary policies by a government or by a temporary slowing down of = a rapid inflation that forced many to seek refug e in gold, or by sudden sales of some of the gold hoards that = governments had accumulated. - J.Z., 21.11.01.) \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 25=20 \par In some countries, as in Austria, the trouble began with bank = depositors giving notice of withdrawal of their short\_ term deposits. The banks, however, were not in a position to pay because = they had not invested this money in liquid securities. This mistake was = not admitted and many bluntly declared: the gold standard has failed! \par=20 \par Since then agreements have been reached with all the creditors so = that now the deposits are or can be repaid in proportion as money is = received from the banks debtors. The present situation is therefore such = that now foreign creditors in every country could be satisfied with Milhaud purchasing certificates. Three = years ago this would not have been the case. At that time, when an = extraordinary large part of their total deposits was claimed at short = notice, the banks could not have repaid in gol d, banknotes, or, purchasing certificates. \par=20 \par However, not only concerning the bank crisis of 1931 and its = consequences, but quite generally at present, there are views in = circulation regarding currency and foreign exchange which will probably = amaze posterity , but which must be allowed for, if we desire to induce the worlds = actual rulers to cooperate in reforming the present monetary system and = organization of settling accounts. One of these views is that the export = of banknotes may occasion a marked fall in=20 their exchange value abroad, with the result that there would be = 'naturally" an inflation at home.=20 \par It was most probably for this reason that Milhaud proposed to cover = the purchasing certificates with banknotes, but did not enter into a = discussion as regard s whether the banknotes themselves might or might not be as well = remitted abroad. Since the banknotes of almost all countries have become = inconvertible today and since their value rests only on the possibility = of utilizing them internally, a banknote take n abroad has exactly the same effect as a purchasing certificate. Some of = the results aimed at by Milhaud might be therefore also attained if the = export of banknotes were freely allowed. Such a proposal, however would = encounter such a bias among government s, bankers economic periodicals, and the public generally, that it would = not have any chance to succeed. \par=20 \par In this connection it might be useful to inquire how one could = proceed if there were no laws regarding foreign exchange, or at least = tolerable ones, as , for instance, in China England, and Peru. These countries, too, have = every reason to apply some precautions for preventing a sudden big = demand of gold to which their reserves might not be equal. The question = thus suggested is whether in these instances=20 also governmental compensation offices and, as Milhaud recommends, the = covering of purchasing certificates by banknotes, would be advisable.=20 \par=20 \par Experience with compensation offices has not been encouraging so = far. Almost everywhere where such offices have be en established, they have obstructed rather than facilitated trade and = have tended, for one reason or another, to hinder obvious possibilities = of compensation. They mostly argue: "Compensation does not bring foreign = exchange! It also favors imports, whils t the country's interests demand a diminution in imports and an increase = of exports". Thus during recent months the obstruction \par of compensations on the part of the Rumanian Compensation Office = has been widely commented on . Moreover, to cite one more exampl e: When a French group proposed to finance in Latvia the project of the = Duna power works (which had long been under consideration) and to accept = payment in timber, other groups succeeded in preventing this = compensation by having recourse to the simple and naive argument that their volume of trade would be thereby reduced. \par=20 \par The objection frequently heard that compensation brings no foreign = exchange merits special attention. It confirms the experience of ages = that authorities do not easily alter their views.=20 Hence, whilst in almost all countries payments in gold are suspended and = gold coins are scarcely obtainable anywhere, and whilst therefore all = foreign exchange represents for external creditors only purchasing = certificates and most foreign exchange is les s than that, the attitude of the authorities towards foreign exchange is = still the same as in 1913, when they were convertible into gold, The = authorities have thus far continued to act on their old views, naturally = supported (to tell the truth) by at least nine\_tenths of the country's "practical men". What is to be done? \par=20 \par All things considered, the most practicable course to follow might = be this: The traders of the different countries where no, or at least no = extravagant, foreign=20 \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D26=20 \par exchange legislation exists should organize for their own = convenience a private clearing centre. As soon as this centre yielded = satisfactory results, attention should be drawn to its methods and the a dvantages it offers explained. Thus, moved by the pressure of a public = opinion, enlightened by the logic of experience, the authorities might = possibly be induced to revoke the foreign exchange legislation insofar = as it prohibits clearing transactions of t he Milhaud type. \par=20 \par In the meantime the names and addresses of those suppliers would be = noted who are prepared to deliver raw materials against purchasing = certificates, i.e., either against governmentally guaranteed purchasing = certificates, as proposed by Mil haud, or against such as are guaranteed privately. This list of = suppliers would then constitute a perpetual contradiction of the strange = idea developed since the war in some countries, that raw materials can = only be obtained in return for foreign exchange and that "naturally" one would have to export = }{\b\i\fs24\lang1033\cgrid0 before}{\b\fs24\lang1033\cgrid0 one could = obtain the foreign exchange "required" for imports. \par=20 \par Private clearing would also eliminate a danger which has been = hitherto rarely discussed. That the claim of creditors to be paid in = gold shou ld be replaced by a claim to be paid in goods or services is beyond = doubt for every judicious thinker who has followed Milhaud's arguments. = And similar arguments prove that the right to demand payment in the = inconvertible notes of a central bank of issue=20 o r in other forms of legal tender should be also limited to the extent = that its fulfillment is possible. In fact, it is fairly evident that = dependence on the stock of banknotes of a single country involves a much = greater risk for debtors than the possibili t y of utilizing stocks of gold abroad, in an emergency, even at much = sacrifice. It is as if in a restaurant many persons are to eat at a = given table. This is possible when each at any moment may trespass with = his arm or his plate on his neighbor's domain.=20 But if each is strictly confined to his few square inches of space (say) = by partitions, nobody will be able to move properly, the bringing and = removal of dishes will be rendered much more difficult, and the guests = will have much less choice. \par=20 \par The theory, it is true, widely prevails that the central bank of issue of every = country is able to satisfy all "legitimate" monetary requirements. = Havenstein, a former President of the Reichsbank, based on this theory, = which he regarded as a self-evident truth, his dem a nd before the Bank Enquiry Commission, on 15 October 1908 that German = banknotes should be legal tender. Experience however has demonstrated = that the theory is mistaken, although naturally the assertion of the = central banks of issue of all countries, to th e effect that a demand for means of payment not satisfied by them is not = a "legitimate" demand, can neither be proved nor disproved by purely = logical methods. \par=20 \par The risk that a debtor may be obliged to remit means of payment = that are simply nonexistent can only be avoided if the contract itself = allows them, if necessary, to compensate.=20 \par=20 \par Such permission would presuppose a corresponding form of bonds in = external trading. This could be realized in sundry ways. It would be = simplest if the bond ceased to read: \par "On such and such a date I undertake to pay to X., or to his order, = the following amount: \'85" \par=20 \par and if, instead, it read:=20 \par "From such and such a date onwards I undertake to accept this bond = in payments of such and such an amount due to me, in lieu of ready = money; but I also reserve to myself the right to pay the holder, = instead, in legal tender up to the amount stated", \par or: \par "On such and such a date I undertake to pay at my option, either to = X., or to his order such and such an amount or, as an alternative I = undertake to accept this bond in payments due to me at the, increased = amount of \'85. in lieu of ready money.=20 \par From the date mentioned onward, every holder of this bond is = entitled to learn from me how he may realize the bond against me." \par=20 \par This makes it clear that the problem of satisfying foreign = creditors not with gold but with goods is of exactly the same nature as = the problem of paying internal debts not with gold but with goods.=20 \par Hence the measures just proposed resemble those concerned with = finding work for the workless, as in Milhaud's plan. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 27=20 \par The next step to be taken to facilitate for foreign creditors the = use of bonds bearing a text such as that suggested above would be th at several traders should combine, each of them accepting the bond of = any of the others up to the amount of his own debt. This procedure is = also capable of improvement, in that the associations of traders might = agree to exchange a bond for suitably divid e d and standardized bonds that are not made out to a given individual but = to the association and its debtors. Such a procedure would closely = correspond to that resorted to in the discounting of bills by the old = Scotch banks of issue; only that in our case=20 the bank would not bind itself to pay in specie. Today the procedure of = the old Scotch banks is almost forgotten, but old works expound it and = no explanation need therefore be furnished here. \par=20 \par It seems that traders in China, where private banks of issue are still lawful, are beginning to favour such a solution. If this be the = case, the next step would be for Chinese merchants to seek to arrange = that the inconvertible notes of the private banks of issue should be = accepted as foreign exchange in as many count r ies as possible or to induce the central banks of issue formally to = declare that the notes are not foreign exchange but may be quite freely = negotiated. This last remark is not, as might be thought, superfluous. = According to certain legal provisions existi ng in some countries, means of payment not recognized as foreign = exchange, are not, on this ground alone, necessarily allowed to = circulate freely. \par=20 \par On a superficial view, the solution here proposed might seem = diametrically opposed to Milhaud's. Milhaud cove rs his purchasing certificates with banknotes which are deposited at the = compensation offices. Here, on the contrary it is suggested to issue a = kind of inconvertible banknotes which are covered or exchangeable at the = banks by purchasing certificates made=20 o ut to the order of a given firm. The difference between the two = proposals is, however, relatively unimportant and is concerned with the = formally juridical aspect rather than with the concrete side. A more = detailed examination, which must be waived here, w ould prove this, but that everybody can readily undertake for himself. \par=20 \par We have referred to China. That country is possibly destined to = initiate a reorganization of world trade. Its population equals that of = Europe and its civilization is not inferior to th at of Europe and certainly not to that of America. Difficulties arising = from variations in monetary standards, which represent for Europeans and = Americans insurmountable mental impediments do not exist for the Chinese = merchant. From earliest youth he is a c customed to think in multiple currencies that constantly vary in their = interrelations. For centuries copper and silver currencies have = peaceably coexisted in China. At the same time the Chinese merchant is = quite familiar with the diverse foreign gold and=20 p aper currencies. Occasional attempts by Chinese Governments to interfere = in monetary matters, have hitherto been regularly answered by their = edicts being ignored and, at the worst by buying off the "Marshall" = responsible for the issue of such an edict. In times of deflation, merchants have recourse to their own notes and = goods warrants, and in times of inflation they know how to calculate in = stable values. \par=20 \par China's monetary arrangements have repeatedly served as models to = other nations. When in 1770 the clearing bank of Hamburg was = reorganized, Sonnin, a master\_ builder, advised that it would be best to follow the example set by = Chinese traders and his advice was accepted. The New York Act of 1829 = concerning the protection of note owners, was directly suggest ed by the prevailing practice of the Hong merchants of Canton, as is = expressly stated in the reasons adduced for the Act by Governor Van = Buren. Chinese traders have thus far successfully resisted the = introduction of foreign exchange legislation and the co ntrol of external trading. Even lines of thought such as have been first = pressed home on Europeans by Milhaud, find themselves realized in China. = \par=20 \par For instance, the merchants of Newchwang were shrewd enough so to = organize the imports into their city with the aid of their banks that = payments were made in goods and not in specie. H. B. Morse, in "The = Gilds of China" (1932, pp. 60\_ 61), says on this subject: "One method of regulating the trade at the = port in the interest of the gild members is peculiar to Newch wang and, in describing it, it is necessary to use the past tense, since = the influx of foreign interests and the general introduction of foreign = banknotes since 1900, and more especially since 1905, has worked a great = change, \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 28 \par and probably relaxed the grasp of the gild on the trade of the = port. A merchant setting imports nominally for cash, was, unless he was = willing to submit to a discount of from one to five per cent, accord ing to the market rate, compelled to accept payment in 'transfer money' = i.e., by cheque giving him a credit at a bank. Specie too, was attracted = to the banks in this town by the offer of a premium ranging from 0.2 to = as much as 6 per cent., and could be w ithdrawn only on quarter day, four times a year. \par Withdrawal was discouraged by crediting the account quarterly with = premium, if not withdrawn at the same rate as if deposited. During the = deposit while the money could not be withdrawn, cheques could be drawn against it for "transfer" to the account of another, not necessarily at = the same bank, Exports, too could be bought only with "transfer" money = and al quotations for drafts on other places were in terms of transfer = money except for copper coinage, e, ther e never was money in Newchwang outside the banks; members of the gild and = aliens were driven to take, in goods for exports, the proceeds of sale = of their imports, and always through the agency of members of the gild. = No one had cash to offer, except at hea vy cost; and no one was in a position to act independently, even if the = Great Gild had been as weak as it was strong, and if it could be = imagined as permitting what, in fact it never did permit." \par=20 \par The economic history of Europe offers a pendant to this. Roscher = mentions that in the Middle Ages in the north\_ German town Bardowiek it was decreed that peasants selling provisions in = Bardowiek were bound to purchase fish in the town to the amount of their = takings. It would be worth the while of historians to unear th further examples of how formerly some communities adopted measures to = prevent external traders throwing their monetary affairs into confusion. \par=20 \par The weakness of the Newchwang system was that it forced the same = merchants who had sent goods to Newchwang, t o purchase goods from Newchwang. Now normally the trade balance of a = locality is only established in a very circuitous manner, as = illustrated by Milhaud in a number of examples. (Adam Smith also touches = on this aspect in several passages of his "Wealth o f Nations", e.g., in the last paragraph of book 4, chapter III.=20 \par=20 \par In the case of Newchwang, it would have been perhaps more natural = for English merchants to have shipped thereto iron ware and American = cotton goods, and for the compensation to have taken pla ce through an importation of goods from Manchuria (of which Newchwang = was the port) to Japan and for Japan to have settled then with England = and America. \par=20 \par But Newchwang represents but one example of the capacity of Chinese = merchants to trade even where the re is a shortage of money. A merchant class accustomed to grapple with = so many and great difficulties, appears destined to play a leading part = in the coming world economy. \par=20 \par The almost exclusively used method today of paying for imports in = the currency of the importing country and not in that of the exporting = country, is by no means traditional. This method was only invented = during the post\_ war period. It seems that it did not begin to be general until after = 1921, when by an Act of 24 December 1920 German fi rms were prohibited from making out invoices in marks without the = express authorization of the Reichsbank. Shortly before, German = exporters had shipped machinery to America calculated the price in marks = and when, after the expiry of the agreed time limit, =20 payment was tendered in marks, these just sufficed for buying a few = nails! The decree was therefore reasonable and justified. The German = example. was then imitated by other inflationist countries, and that too = was natural. But when the currencies concern ed had been stabilized, the mode of invoicing should have changed. In = 1913, for instance, no Austrian manufacturer exporting to Turkey would = have invoiced otherwise than in Austrian crowns. In the pre\_ war methods of payment this almost meant the evolution of the bill of = exchange, which the Turkish importer accepted, into a purchasing = certificate negotiable in Austria.=20 \par The idea that the balance of payment of countries is adjusted by = gold shipments is only a prejudice to be found in textbooks. (Liefmann = should be credited with having first directed attention to this.)=20 \par Gold shipments were rare and not extensive in pre\_war days and = were intended almost exclusively for supplying the gold industries. It = is also doubtful whether the\_statistics of gold shipments we re accurate. As Locke rightly says, legal provisions relating to gold = exports, to their announcement, etc., are to gold what a fence is to a = cuckoo. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 29=20 \par The Treaty of Versailles has contributed its full share to disseminate false notions concerning = payment in foreign exchange. Article 262 imposed on Germany the = obligation, at the option of the creditors, to provide gold dollars, = gold francs, gold pounds, or gold lire, payable in the capitals of the currency countries concerned, This Article thus = presupposed as self\- -evident that it only depended on Germany's good will to provide these = means of payment regardless of the volume of its trade with those = countries. Relief would obvious ly have been afforded by admitting means of payment also promising a = certain gold value but valid in Germany only, e.g. dollar bills of = German firms, which they were obliged to accept on maturity, precisely = as if they had been legal tender; but this relie f was never granted, neither was it, however definitely claimed. The = monetary views were equally confused on both sides. One of the most = far\_ reaching effects of the Milhaud proposals will probably be that thereby = the understanding of the real nature of inte rnational means of payment has been deepened, so that in future no one = will be willing to undertake or exact monetary liabilithes which can = only be met by a happy chance. \par=20 \par (6) B) Work Supply Banks as Private Institutions \par=20 \par For the exploitation of waterfalls, coal deposits, wind\_ power, yes even of the sun's heat and of the tide, banks and other = private enterprises exist, but for the utilization of unused Labour = power companies have yet to be formed if we leave aside Owen's National = Association of the United T rades of Great Britain and Ireland to Employ the Unemployed and to = Educate the Children of the Working Classes established in 1833, (Helene = Simon, Robert Owen, p 229.) This circumstance will amaze our descendents = probably as much as we marvel at our prede c essors, who for thousands of years preferred to rub millstones against = each other rather than to let this be done by brook or wind. As Milhaud = has shown, such companies may be formed in connection with the system of = goods warrants and the only question is who will take the initiative, if the State and its central bank of = issue should somehow not be available for this purpose. That it is = indifferent for the system who issues the warrants, Mr. Mahaim also = clearly recognized. (Annals, 1933 no. 2 p. 214.) \par The r etail trades would be the most appropriate. Big stores, such as those of = Wertheim, Thetz, Lafayette, Woolworth etc., could, apart from legal = impediments, undoubtedly make the following stipulation to their = suppliers: "Payment will be in good warrants whic h all our departments will accept in lieu of ready money." Even the = remuneration of the employees might be in goods warrants. If a store = took then the precaution to utilize at once every banknote received for = the purchase of goods warrants in general circu l ation, so that a constant additional demand is created for them, the = Goods warrants would certainly always stand at par in the locality where = they were issued and the store would thus contribute to the improvement = of the supply of circulating mediums and=20 would thereby increase the number of employed persons. \par=20 \par It may be estimated that the general monetary circulation could = easily absorb the goods warrants of a department store at least to the = amount of its weekly turnover, probably considerably beyond. \par What would be feasible for a big store, would be even more easy for = an association of small shops, because such an association would offer = the public the advantage of spatially well\_distributed accepting = centres.=20 \par According to Chatters (Annals, 1933, no. 2, p.=20 324) such an experiment was actually tried in Evanston, Ill. Particulars = on the subject would be most desirable. Goods warrants issued by sales = establishments would be no novelty for Germany and Austria. During the = inflation period many businesses issued=20 goods warrants having a gold basis, which found ready acceptance. \par=20 \par In the case both of small shops and of big stores the problem of = supervising the issue of goods warrants would naturally arise. Some = centre or bank could easily undertake this function, plac ing its visa on the warrants, and reporting frequently, at least once = weekly, on its activities. These visaed warrants would assure the public = that they may at any time be readily exchanged for goods or services in = daily demand, \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 30=20 \par or, as Rittershausen has well expressed it, that they have an = adequate }{\b\i\fs24\lang1033\cgrid0 shop foundation = }{\b\fs24\lang1033\cgrid0 (Ladenfundation). In practice, a simple form = of supervision is available, in that the bank might }{ \b\i\fs24\lang1033\cgrid0 loan}{\b\fs24\lang1033\cgrid0 the good s warrants to the stores and shops and arrange with them that they = should not issue their own warrants, e.g., warrants ordered by them from = printing offices. The goods warrants cashed by the shops would be daily, = or at least weekly, remitted to the bank f o r cancellation. Fresh goods warrants would be obtainable from the bank = daily or weekly. Formally this manner of control would be equivalent to = a credit transaction between the band and the retail firms and that to = the amount involved in the loaned goods w a rrants. The bank, too, would take proceedings against borrowers who had = not returned the warrants within the specified period. This might be = most suitably effected juridically, by suing the borrower for the = payment of an amount equal to the illegally reta ined warrants, but permitting, naturally, as an alternative, the return = of these warrants. \par=20 \par This juridical form is not so new or peculiar, as might seem at = first. The old Scotch banks of issue, of which a luminous account will = be found in Adam Smith's "Weal th of Nations", were on the whole organized on this principle, only that = the envious English Legislators compelled the banks to redeem their = notes (the goods warrants of past days) at any time in metallic = currency. (On this subject, see the aforementioned work by Meulen, which throws a completely new light on these = relationships.)=20 \par A great many of the experiences then made in Scotland and = subsequently in the United States might be taken into account today in = connection with the issue of goods warrants by ba nks on behalf of retail firms, although the old Scotch and later, the = American banks of issue counted among their customers not only traders = but predominantly farmers. \par=20 \par Retail dealers would also be specially adapted for making a = beginning with the issue of goods warrants, because their stocks constitute the real working = capital of every country, be it in China or in Europe. Each banknote, = even if issued by a central bank having a very large gold reserve, would = be at once at a discount if the department sto r es and the shops refused to accept them. Indeed in present = circumstances, banknotes really must be considered as warrants on the = stocks accumulated in sales establishments. Every system of goods = warrants must somehow allow for this and every centre issuin g goods warrants will have to come to some agreement with stores and = shops. \par=20 \par Today, unfortunately, sales establishments would not count in the = matter of large scale issues of goods warrants, at least not in Europe. = The reason lies mainly in the extreme depe ndence of retail firms on the existing banks and thus indirectly on the = central banks of issue which naturally will not allow any issue of goods = warrants, if they can help it, There are also psychological impediments = which shall not be considered here, th o ugh. The inclusion of the majority of stores and shops in the = circulation of goods warrants will only be accomplished by making it = clear to them that they have the option either of accepting goods = warrants or of losing their customers and further, that th e system of goods warrants would render them independent of the banks. = It is to be hoped however, that some of the retail firms not dependent = on banks, particularly smaller ones, may act as pioneers in this = connection. \par=20 \par Next to retail firms, their suppliers \_ that is manufacturers, = artisans and other employers, even if they do not work directly for the = retail trades \_ would be suited to promote the goods warrants system. Otherwise = expressed an employers' bank would be almost as appropriate for issuing = goods=20 warrants (and therefore for acting as a works supply bank) as a bank of = retail firms. (Jevons, in chapter XXII of his "Money", speaks of a very = interesting proposal on this subject made by James Hertz. Unfortunately, = Hertz's " "Cheque Bank" indulged in qu ite other operations than those contemplated by its founder and broke up = as a result of a few cheque forgeries.) \par=20 \par To appreciate the influence of a bank of issue, it has to be = remembered that almost all private banks of issue in Germany and in most = other Eur opean countries, with the exception of Great Britain, were first and = foremost employers' banks. The old bank reports make this plain, The = experiences of those banks might still serve as guides today. But the = old private banks of issue, like those of Scotl and were seriously restricted in their operations by the legislation of = that period, which is still in \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 31=20 \par force (in Prussia, by the normative provisions of September 1848) = dema nding that any one presenting a note should at any time be entitled to = receive the equivalent in metallic currency, a stipulation the = senselessness and danger of which has been exposed by no one more = convincingly than by Henry Meulen.=20 \par=20 \par In this connection=20 it may be remarked that Adam Smith only insisted on the convertibility = of the notes because he regarded it as a substitute for the supervision = of banks of issue. To supervise a bank of issue effectively, he = considered impossible. In this he went too far.=20 (See the last paragraph of the chapter "Of Money", in his "Wealth of = Nations".) \par=20 \par Unfortunately, the great mass of employers, and more particularly = our captains of industry, are no more likely to act as pioneers than the = owners of big stores. They, too, are=20 directly or indirect dependent on the central banks and, beyond this, = they are hampered by views which their predecessors of a century ago did = not hold. This becomes obvious when we remember that the private banks = of issue of those days were established b y the employing class. In this essay we cannot further discuss this = point. \par=20 \par However, there might be one way of inducing large concerns to = issue goods warrants. In the "Annals" (1933, no. 2), Prof. Graham has = pointed to it and the American unemployed have h ad it several times under consideration. The shutdown factories might be = leased by the dismissed workers and be run on their account under the = leadership of persons conversant with the system of goods warrants. The = legal form of a cooperative society woul d be also probably the most appropriate here The factories revived in = this manner could then even establish their own banks for the issue of = goods warrants. \par=20 \par The social effect of such action would be decidedly far\_reaching = and would not be limited to findin g employment for a certain number of jobless. It would be, on the = contrary, very important that the wage system with its rigid and = frequent payments to workers, to be made in legal tender, should be = superseded by an elastic }{\b\i\fs24\lang1033\cgrid0=20 partnership system}{\b\fs24\lang1033\cgrid0 . Here the experience of the = Italian farm\_ laborers might be profitably utilized who, some thirty or forty years = ago, leased the large estates from the bankrupt estate owners and = thereby immensely improved their position. (Preyer, "Die Arbeits\_ and = Pachtgenossenschaften=20 Italiens" (The Italian Labour and Lease Co operatives), Jena, 1913.) It = is worthwhile mentioning that these cooperators first assigned a = political meaning to the word "fascio". \par=20 \par In addition to acquiring leases, factories might be purchased with = goods warra nts and this by installment payments. Monthly installments over a period = of about 15 years might be appropriate. (The purchasing price being say = 1 million dollars, the monthly interest rate on the remaining debts and = the amortization period 15 years, ther e would have to be monthly payments of 8,439 dollars.)=20 \par The present moment is particularly auspicious for such purchases, = since purchase prices owing to the depression, are phenomenally low. To = judge by a remark made by Schaeffle ("Quintessenz des Sozialism us", 22nd. edition, p. 18), such proposals had been already put forward = some decades ago. Here we cannot discuss them in detail. \par=20 \par What sort of an issuing centre would an "Immediate Action Program" = call for? If we accept the experience of the American emerg ency associations of the unemployed, as reported in the Annals (1933, = no. 2), and also remember that it accords with the orderly course of = social progress when not those most affected by a social evil, but quite = other persons, ponder over remedies and ind icate the road to be taken, we shall necessarily think of issuing = centres which are not very unlike those of the American emergency = associations. \par In America real estate agents, doctors, upper class women, = officials, scholars, and many others have interested themselves in the unemployed. They themselves were unaffected by the = wave of unemployment. It was they who created the associations. And = almost everywhere it is they who do most of the thinking in the = emergency associations. They represent the new nobili ty which has been in the process of formation during the last few = decades and which has to assert itself against the ruling oligarchies as = well as against those whom these rule, against governments and parties. \par=20 \par However, to organize the exchange of goods and services among the = unemployed in such a manner that one portion of the unemployed works = immediately for the other, is most difficult and calls for business = talent of a special order. It would be safer and \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 32=20 \par much more convenient if the organizers started with themselves and = thus amassed relevant experiences. To express this differently, the = goods warrants system should be, to begin with, developed among those = who are not direc tly dependent thereon. Trivial mistakes, inevitably in the beginning, = could easily be rectified by those who are not without economic = reserves. On the other hand, where such reserves do not exist, the most = trifling error may ruin an undertaking. \par=20 \par A few house\_owners of a block of houses might possibly initiate = the movement. They might say:=20 \par "We have work to give out, repairs and the like. Payment will be = made in goods warrants of the association we have formed. We shall = accept these warrants for rent payments in lieu of ready money."=20 \par It is surely probable that some artisans will undertake the work on = the stated conditions.=20 \par Next, we may imagine a doctor in the same block of houses. He = places orders to be paid in goods warrants and accepts these warrants in = p ayment for his services. In a fairly large block of houses a doctor is = generally kept busy if the inhabitants are able to pay. A solicitor, a = bookseller, a provision dealer, follow. The provision dealer may play = here a particularly important and profitabl e part as a "re\_insurer". He may say to the landlord, the doctor, and = all the others: "I am willing to accept your warrants in lieu of payment = in ready money, if you undertake to make correspondingly large purchases = at my establishment. \par If, for example, the landlord buys of me 50 dollars worth of goods = monthly, I will accept warrants for at least that amount and so with all = the others." \par=20 \par When a tenant intends to pay his rent amounting to 10 dollars, he = will certainly first go to the provision dealer and ask=20 him, "Have you 10 dollars worth of goods warrants to dispose of? I am = prepared to buy them of you at a discount of say 1%." Possibly the = dealer will exhibit a notice in his shop: "The goods warrants of the X = association may be obtained here at 99%." Altho ugh the dealer had accepted them in payment at 100 %, he would willingly = dispose of them at 99%. The increased turnover would easily indemnify = him for that 1%. \par=20 \par In the above cases the discount does not arise in the ordinary = course of making payments but onl y immediately before the reflux. At that point it is innocuous. Indeed, = its indirect effect would be to raise the sum of employment in the = block. It offers all the advantages of Silvio Gesell's "depreciating = money" without carrying with it any of its cata strophic drawbacks. \par=20 \par At its inception, the association would make some mistakes; but = after a few weeks it would function smoothly. As soon as this had = happened, it would become known and its goods warrants would not only be = accepted in that block, but also=20 in the vicinity, thus enabling the provision dealer not only to = negotiate them but to utilize them for making direct payments. The = association would correspondingly extent its local range and soon it = would start paying the workers in the immediate neighbo rhood with goods warrants. Modeling themselves on this association, = other associations would be established and the system would thus = spread. \par=20 \par Since by means of the new system landlords, doctors and others = would be able to dispose forthwith of a portion of=20 their future incomes, they would, in accordance with an uncontested = commercial principle, be so placed as if their incomes had slightly = grown. Moreover, when the first announcement appears, inviting = applications for jobs to be paid in goods warrants, most =20 probably, at first, not those would come forward who were well supplied = with orders for work and could count on receiving payment in legal = tender, but others who had little or no work at hand. An increase in = purchasing power, on the one hand would coincid e with the employment of fallow-lying labour power on the other. Such = would be the initial effect, although, to begin with, actual success = would be of far smaller importance than the setting up of an efficient = organization. \par=20 \par It might be even easier to open=20 an issuing centre to the country than in town. If farmers were placed in = a position to expend in the form of goods warrants about half of what = they have ready any given day in the way of produce or services, their = purchasing power today, when the rural pa r ts are destitute of means of payment, would increase by the full amount = of the goods warrants issued. It is true that within a few days the = warrants would flow back to them to be converted into milk, butter, = vegetables, and the like; but the real object w ould have been attained \_ the farmer would obtain industrial articles = (principally from producers in the locality) and would \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 33=20 \par pay for them with his own. It is also worth ment ioning that the sale of agricultural products thus effected would be = quite regular and not disturbed by distant or foreign competition. An = interference with these regular sales would be only conceivable where = foreign farmers, before they have disposed of=20 their produce, order the industrial products of the locality where they = desire to market. But such endeavors would be frustrated by the = prohibitive duties at present imposed by all Governments. \par=20 \par All countries have experience with credit cooperatives. This l egal form would be best suited for the new associations. The goods = warrants would be passed on by the cooperative bodies in the form of = credits to the landlord, the doctor, the farmer and others, because this = ensures the most effective form of control. Ca re must, of course, be taken that no one shall issue more goods warrants = than he can redeem with his own goods or services. Details on this will = be found in a later portion of this paper. \par=20 \par The form of a credit coop cooperative has the decided advantage = that no working capital needs to be raised before business operations = commence All other legal forms, and especially those most advantageous = in business, postulate in conformity with the legislation of perhaps all = countries, the existence of working capital ( mostly in the form of legal tender) before an undertaking is started. \par=20 \par Many objections however may be raised against the legal form of = cooperatives and it is just those who are familiar with the cooperative = movement, who will have their doubts. It should be remembered, too, that an expert like Meulen does not recommend the = cooperative form for note issuing banks and stresses the superiority of = undertakings managed by single persons, basing himself on the experience = of the old Scotch banks of issue. Add to w h ich that in some countries a veritable detestation is felt in wide = circles for any organization not governed by the leadership principle. = Unfortunately, there exist as yet no leaders in the sphere of banks = issuing goods warrants; these have yet to be trai n ed. This again, can scarcely be attempted outside a cooperative where = every member risks losing part of his savings when mistakes are made and = therefore closely watches the management and compels it to report at = frequent intervals. The discussions that ta ke place on this account, impress on an ever larger number of = cooperators the principle, and some of them who come to grasp it, may = become eventually leaders of this movement.=20 \par=20 \par A beginning might be made by the cooperative issuing a special type = of shares w hich, in case of losses, are liable before others and bring therefore = greater returns. Subscribers to these shares might also be entitled to = greater influence in the management. To permit this development, the = cooperatives should not be too large. In the=20 c ase of the American Building and Loan Associations (which have 10 = million members and should therefore, as a social force, be judged from = a quite different viewpoint than the building cooperatives of Central = Europe), it has been found decidedly practical=20 t o grant credits only to persons who do not reside at more than 25 miles = distance from the cooperative offices. Many Building and Loan = Associations limit the distance to 10 miles, to their manifest = advantage. Only where such a restriction is in force can t h e management really know its clients. From this principle it follows = that the issue of goods warrants cannot be entrusted to a huge centre, = but that, on the contrary, hundreds or even thousands of issuing centres = are required. Clearing centres, resembling a Central Cooperative Finance Department, would, however, be necessary, = and, in the end, a great Clearing Centre, which, however, would in no = way be concerned itself with issuing goods warrants. \par=20 \par This development would be a analogous to that of the old Ame rican and Scotch banks of issue. According to Carey (Principles of = Political Economy), there existed in 1852 in Rhode Island one bank of = issue for every 2,000 inhabitants and, in 1850, in Pennsylvania, one for = every 40.OO0. Carey estimates the population=20 o f all the New England States at that time at 3,2 million and the number = of banks of issue in those States at 491. This means one bank of issue = for roughly every 6,500 inhabitants. Adam Smith reports similar = conditions in Scotland. In 1845 Scotland still p o ssessed 19 banks of issue for 2,7 million inhabitants, or roughly, one = bank of issue for every 140.000 inhabitants. Such a ratio might also be = practicable for Central Europe. The largest Scotch bank of issue in 1845 = (the year when English legislation plac ed further restrictions on the Scottish banks) was the British Linen = Company, which was \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 34=20 \par entitled to issue up to L 438,024 in notes. (Kerr, History of = Banking in Scotland.)=20 \par If such a bank, operating in Scotland, the classic centre once of = private paper money and after an experience of many decades, had in = circulation less than this modest sum, this suggests that for the time = being and perhaps for many years to come, the cont emplated institution should not go farther and that in case of an = increase in turnover, they should preferably increase the number of = banks issuing goods warrants. \par=20 \par Here the following remark may be in place: A recent development in = monetary theory, wherewi th even so renowned a scholar as Irving Fisher sympathizes, demands that = circulating money should steadily depreciate in order not to allow its = circulating speed to fall below the necessary minimum. In German = speaking countries, this development is known=20 as the "Schwundgeld\_ Theorie" (theory of deprecating money) and is associated with the name = of Silvio Gesell (Chatters, in Annals, 1933, No. 2, calls such money = "stamped scrip". Apparently the same idea made its way in America = independently of Gesell.) Gesel l proposed a weekly depreciation of 0,1 %. But the paper money issued by = the old Scotch banks circulated at least 100 times as rapidly as would = depreciating money. Why? Because whilst the Scotch paper money had a = strong }{\b\i\fs24\lang1033\cgrid0 reflux} {\b\fs24\lang1033\cgrid0 , depreciating money has almost none. With the = old Prussian private banks of issue, a note completed within less than = three weeks its circuit from the bank to the public and back to the = bank. \par=20 \par The Scotch banks of issue and even more so the old German private = banks of issue, provided for the reflux of their notes to the banks by = only granting such persons advances in notes who = }{\b\i\fs24\lang1033\cgrid0 had already sold certain goods}{ \b\fs24\lang1033\cgrid0 but had had to wait for payment to be made. The = notes passed rapidly from the vendor of the goods to the purchaser; the = latter paid=20 for the goods with the notes; and the vendor then returned the notes to = the bank. Today it might suffice that the reflux should be guaranteed by = orders placed, instead of by deliveries already made. This, however does = not preclude the goods warrants bank=20 from engaging in all the operations formerly customary for private banks = of issue. (For Europe, the suppression of these banks was a misfortune, = only comparable with one of the great plagues in the Middle Ages.) \par=20 \par=20 \par (6) C) Technical Details concerning the Issue of Goods Warrants by = Work Supply Banks =20 \par=20 \par a) Introduction \par=20 \par For such a bank the legal form of a credit cooperative would = possess some advantages. First, model rules for such bodies exist = probably in all countries. These model rules could be easily adapte d. The cooperative would have further to formulate provisions for the = loan of goods warrants as well as settle the conditions for granting = long\_ term credits and for obtaining the capital required for the latter. In = addition, service regulations and forms w ould have to be drafted which allowed for the fact that these = cooperative credits are granted in goods warrants and not in ready = money. Such a detailed treatment, of course, cannot be attempted in the = framework of this paper. Here we shall only furnish: \par=20 \par a) a series of those provisions not found in present\_day model = rules; \par b) a series of principles and business provisions governing the = loans made in goods warrants; \par c) the same for long\_term credits. \par=20 \par The inclusion of long\_term credits within the scope of th e banks will be discussed in a separate section. From a strictly = juridical viewpoint the principles and the provisions should have been = separated. However, in view of the novelty of the subject, it may be = permitted to present the legal basis in a form res embling the legislation of a century and a half back, where both the = motivation and the executive provisions were placed in the text of the = law. Why we speak here not of interest but of usufruct charges, will be = explained in another section. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 35=20 \par (6) C) b) Principles and Business Provisions regarding Loan = Transactions of a Work Supply Bank in=20 \par respect of Short\_Term Credits \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 I. = Means of Payment \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 a) In = connection with loans. \par=20 \par The Work Supply Bank shall only engage in loan transactions = involving the lending of its own goods warrants \par=20 \par b) In connection with repayments.=20 \par=20 \par If the borrower, instead of returning the goods warrants, remits = other means of payment, the Ban k shall be entitled to demand the same premium which it levies when, in = opening an account, not goods warrants are paid in but other means of = payment, but at least 2% of the amount not paid in goods warrants. \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 II. = Legal Form \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 The legal = form for loaning gad s warrants shall be the cash loan. At the same time that he borrows the = goods warrants, the borrower shall take over, besides the shares he = holds as a member, others, and at least such a number that the total = amount of the additional shares shall equal th e total amount of the loaned goods warrants.=20 \par The amortization of the borrower's debt shall be done in the = following way: \par All goods warrants that the borrower returns which are in excess of = the usufruct charges, shall be credited at their nominal value as p ayment for his shares. When a share is fully paid up, it shall be = considered balanced against the proportional part of the debt. \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 III. = Guarantees for the Work Supply Bank in Loan Transactions \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 The = following shall be the Bank's guarantees: =20 \par (a) Pledged shares. (See II.) \par (b) Sureties. It must be reasonably shown that the goods warrants = of the Bank could be realized as well =20 \par against the guarantor as against the borrower. \par (c) The pledging of the borrower's stocks of goods ready for sale.=20 \par (d) Other usual banking and unencumbered guarantees. \par (e) Bills, first and foremost the borrowers bills on customers. = When the amount of these customer\_bills=20 \par pledged by the borrower is smaller than the borrower's debt, = the borrower shall tender promissory=20 \par notes of his own for the difference. Such notes shall be = inadmissible as guarantees so long as the type=20 \par of business carried on by the borrower suggests that he is in = possession of customer\_bills. Claims on=20 \par the borrower's customers that are not covered by bills, may = be accepted as security by the Bank if,=20 \par additionally, other adequate securities are deposited. \par (f) Loans shall not be granted to persons or firms whose business = or residence is more than 25 kilometers=20 \par distant from the Bank's premises. \par (g) During the Bank's first financial year the loans to single = persons or single firms may not exceed 5 %,=20 \par and in the succeeding years 3 %, of the total loans granted = or definitely expected to be granted, at the =20 \par time. \par (h) For payments due to him, every borrower shall be obliged to = accept instead of money the goods=20 \par warrants of the Bank at their face value, and this at least = up to the amount of the remaining debt. As =20 \par far as practicable, he shall place the same obligation on his = debtors. This obligation shall hold also=20 \par when the payment of the remaining debt may be discharged in = several installments. If a borrower, in=20 \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 36=20 \par accepting goods warrants in payment values these at less than = other means of payment of the same =20 \par nominal amount, or if, in accepting such payments, he does = not grant the same advantageous terms as=20 \par with other means of payment, he shall be liable to a fine for = breach of contract. The fine shall amount=20 \par to one quarter of the remaining debt at the time the fine was = incurred, at least to 50 marks. The Bank=20 \par shall also reserve to itself the right of claiming indemnity. \par (i) The Bank shall not pay to any borrower goods warrants = amounting to more than 10.000 marks. When =20 \par several loans are granted, the total debt contracted by a = single person or a single firm may not exceed=20 \par the said sum. \par (k) The loaning of goods warrants shall be subject to the borrower = proving that he has placed orders =20 \par among the customers of the Bank at least to the extent of the = loan applied for. The dates fixed for the=20 \par delivery of goods or services shall not be longer than those = corresponding to the repayment dates of=20 \par the sums borrowed. After due consideration, the Bank may = agree that the orders shall not be placed=20 \par with the Bank's customers, but with the debtors of those = customers or with the debtors of those=20 \par debtors. In each separate case the Bank shall so determine = the special loan conditions that most=20 \par probably the loaned goods warrants shall facilitate the = fulfillment of the obligations of one of the=20 \par Banks obligors, thus augmenting the security of the Bank. = Employers shall only be entitled to pay the=20 \par wages of their employees with those goods warrants if they = can prove that the employees have=20 \par undertaken to buy from the Bank's customers. This shall be = ascertained by an examination of delivery=20 \par books or in some other satisfactory way. \par=20 \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 IV. = Usufruct Charges for Loaned Goods Warrants \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par The borrower shall pay a usufruct fee for the goods warrants loaned = by him. For the sake of simplicity the fee shall be calculated in = fractions of the initial amount that is, regardless of the progressive reduction in the debt. On = the other hand, the installments on the shares shall yield such interest = as the Bank shall determine from time to time, The payment of the = usufruct charges shall be in weekly install ments, provided that no other arrangement shall have been made. The = usufruct charges shall include: \par a) a contribution to the costs of administration; \par b) a contribution to the reserve fund serving to cover losses;=20 \par c) a contribution exclusively intended to induce the debtor to = pay off his debt as rapidly as possible, with=20 \par payments greater than the minimum installments fixed in the = loan provisions. These payments shall=20 \par also be credited to the borrower's shares. \par If the borrower should fall into arrears with his contractual = payments to the Bank, he shall pay in addition to the usufruct charges, = interest on arrears in accordance with the conditions made known by the = Bank from time to time. \par Should the contributions provided for under a) and b) be insufficient the Bank shall have recourse to special assessments. = These are to be apportioned at the time of their being fixed in the = ratio of the remaining debt of each borrower. The Bank shall determine = the particulars from time to time. . \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 V. = Return of the Loaned Goods Warrants and Sundries \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par a) The Borrower shall return the loaned goods warrants in weekly = installments. I t is not necessary that the numbers and the parceling of = the loaned and of the returned goods warrants should agree.=20 \par The Bank shall not pass into circulation the goods warrants cashed = in the course of the, day, unless it be a question of a simple exchange = or surrender at its counters.=20 \par On the contrary the Bank shall cancel the goods warrants cashed in = the course of a day, at lates t on the day following and shall show this in its returns. When the Bank = receives legal tender, it shall utilize it preferentially for = withdrawing its own goods warrants from circulation. On this matter, = also, the Bank shall report regularly.=20 \par=20 \par (This, too=20 me, seems too much like a redemption promise in legal tender, to the = extent that legal tender is available for this. On the other hand, this = Bank should certainly try to give value to its notes in every way it can = and to avoid paying itself for goods and=20 s ervices with legal tender, as much as it can. It should pay with its = goods warrants whenever possible. So what could it do with any legal = tender notes received? It could and must pay with it those expenses that = it is still obliged to pay in legal tender,=20 e .g. any taxes. If there remains any excess amount of legal tender, then = this should be primarily used to buy up goods warrants WHENEVER they are = suffering a discount in local circulation. As long as they are still at = par the purchase of them would not inc r ease their value further, as a rule. An above par value of the goods = warrants may only occur e.g. when it is expected that the legal tender = paper money will depreciate fast. Perhaps a small legal tender reserve = could be kept for the purpose of restoring d i scounted goods warrants to their par value. Most likely a better method = for removing such a discount fast would be the publication by the bank = of the addresses and offers of all those of its debtors who are under = contractual obligation to it to accept the goods warrants at par from anyone. Moreover, while its goods warrants = suffer a discount, further issues of them should be stopped. - Any legal = tender not needed by the Bank should, as B. suggests, be used to buy up = its goods warrants. - J.Z., 21.11.01.) \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 37 \par b) The number of the repayment installments shall in general not = exceed 13 so as to ensure that after the lapse of three months the = loaned goods warrants shall have been retur ned. The Bank may fix the installment rate in such a manner that for = amortization and usufruct payments altogether combined identical amounts = shall be payable week by week. \par=20 \par c) More favorable return conditions, more particularly return = periods exceeding th ree months, the Bank may only grant when and insofar as its available = assets shall permit. In no case may the time limit for a loan granted by = the Bank exceed the length of notices governing the calling-in of the = Banks outstanding assets. \par=20 \par d) The borrower=20 shall be entitled without previous notice, to return more goods warrants = than he had undertaken to return in conformity with the loan contract or = the business provisions. The borrower may also return simultaneously the = whole of the goods warrants covering the amount of the remaining debt. \par=20 \par e) Should the borrower not fulfil the obligations incumbent on him, = the Bank may, without giving notice, demand the return of all = outstanding goods warrants. \par=20 \par f) Until the borrower has returned all the goods warrants he h as loaned, he shall only transact business with any other bank with the = express consent of the Work Supply Bank. Such business shall comprise = all credit or current account transactions with a banker a financial = enterprise, or a loan agent. \par The particulars of the business transactions between the Bank and = the borrower shall not be deemed business secrets. \par=20 \par h) By accepting the goods warrants, the borrower agrees that any = eventual modifications of the general business provisions or the rules = shall be also binding on him and this retrospectively, including = modifications entailing more onerous terms for him, \par i) When a member shall have formally applied for the loan of goods = warrants but has not within a week after submitting the proposal, = offered guarantees satisfactory to the dank, his application shall be = deemed as not submitted. \par=20 \par j) The Bank may stipulate that all transactions with it shall be = conducted on set forms. \par=20 \par k) Expenses incurred through examining the guaranties offered by = the borrower, as well as thro ugh inquiries, objections etc., on the part of the borrower, may be = debited to him by the Bank which, at its discretion, may demand of him = an advance on account of costs. Correspondence not accompanied by the = business fee fixed from time to time or at lea st by return postage, need not be answered by the Bank. \par=20 \par l) The Bank may stipulate that the borrower shall take out the = insurance for his person and his property required for protecting the = Bank against loss. The Bank shall also be entitled to take out itse lf such insurances and to claim the associated costs from the borrower. \par=20 \par m) The Bank shall be entitled to demand of the borrower proof that = he promptly pays his taxes. \par=20 \par n) The domicile of the Work Supply Bank shall be its place of = jurisdiction. \par=20 \par (6) C) c) Rules \par=20 \par Inasmuch as in all countries the cooperative federations have = elaborated model rules for credit cooperatives, which are as a whole = appropriate for our purposes, we shall only indicate the few = modifications required in the customary rules.=20 \par For Germany the rules reprinted annually in the "Deutscher = Bankbeamten Kalender"(German Bank Officials' Calendar) are quite = serviceable and the subjoined provisions relate to these rules. \par=20 \par Paragr. 1: =20 \par The cooperative shall be called : Work Supply Bank at ... \par=20 \par Paragr. 2: \par 1. The working capital of the Work Supply Bank shall consist of the = assets of the cooperative. This shall be formed of payments for shares, = transfers to the Bank \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 38=20 \par assets, and reserve funds. Payments shall be made by surrendering = the goods warrants of the Bank. Alternatively, when other means of = payment are used for paying in, a premium in favour of the Bank shall be = paid as stipulated. \par=20 \par 2. The Bank shall be entitled to issue goods warrants, bearing the = following text: \par }{\lang1024 = {\shp{\*\shpinst\shpleft49\shptop228\shpright49\shpbottom2100\shpfhdr0\sh= pbxcolumn\shpbypara\shpwr3\shpwrk0\shpfblwtxt0\shpz1\shplid1026{\sp{\sn = shapeType}{\sv 20}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}} {\sp{\sn shapePath}{\sv 4}}{\sp{\sn fFillOK}{\sv 0}}{\sp{\sn = fFilled}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv = 1}}}{\shprslt{\*\do\dobxcolumn\dobypara\dodhgt8193\dpline\dpptx0\dppty0\d= pptx0\dppty1872\dpx49\dpy228\dpxsize0\dpysize1872 \dplinew15\dplinecor0\dplinecog0\dplinecob0}}}{\shp{\*\shpinst\shpleft107= 05\shptop228\shpright10705\shpbottom2100\shpfhdr0\shpbxcolumn\shpbypara\s= hpwr3\shpwrk0\shpfblwtxt0\shpz0\shplid1027 {\sp{\sn shapeType}{\sv 20}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv = 0}}{\sp{\sn shapePath}{\sv 4}}{\sp{\sn fFillOK}{\sv 0}}{\sp{\sn = fFilled}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv = 1}}}{\shprslt{\*\do\dobxcolumn\dobypara\dodhgt8192 \dpline\dpptx0\dppty0\dpptx0\dppty1872\dpx10705\dpy228\dpxsize0\dpysize18= 72\dplinew15\dplinecor0\dplinecog0\dplinecob0}}}}{\b\fs24\lang1033\cgrid0= = xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx= xxxxxxxxxxxxxxxxx \par This goods warrant entitles the holder to present it in payment = for \'85... (at face value to all the=20 \par customers of the Bank in lieu of money. On inquiry at the = counters of the Bank, the holder will be =20 \par informed of the customers bound to accept the goods warrants. \par Those concerned are also referred to the notices posted up in = sales establishments regarding the =20 \par acceptance of goods warrants. \par No. of the goods warrant and series: \'85\'85\'85\'85\'85. = Date of issue: \'85\'85\'85.. Signature: \'85\'85\'85\'85\'85\'85.. \par = xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx= xxxxxxxxxxxxxxxxx \par=20 \par The goods warrants, like money, shall be issued in certain = denominations. The Bank shall make known from time to time the = denominations and text of the goods warrants, more particularly after = modifications have been made. \par=20 \par Paragr. 47 \par The settling of accounts with retired members shall be o n the basis of the annual financial statement. A member's balance shall = be paid out or cleared to those who have retired or to their heirs = subject to the Banks liquid assets and financial position. The retired = member shall be bound to accept the Banks goo d s warrants in lieu of ready money. If the total assets do not suffice = for meeting the Bank's liabilities, the retired member must, subject to = the decision of the Governing Board, either pay his share of the = deficiency of the Bank or wait for the payment o f the sum owing to him. The particulars, especially as regards the = rotation in waiting, the Governing Board shall decide in each case at = their discretion. Payments to a member of less than 50 marks a month may = in any case be made, regardless of the general stipulations. \par=20 \par Paragr. 50 \par Each members share shall be 150 marks. Installments towards this of = at least 1 mark a month shall be permissible. The entrance fee shall be = 3 marks. All payments shall be made in goods warrants issued by the Bank = Should other form s of money be paid in, a premium fixed by the Governing Board, shall be = payable. \par=20 \par Paragr. 58 \par Subject to the Banks business provisions, members and non\_members = may have accounts at the Bank. \par In accord with its business provisions, the Bank shall grant its = members amortization loans by placing at their disposal goods warrants = in accordance with its business provisions \par The Bank shall be, moreover, entitled to transact every type of = banking business conducive to providing work for its members. \par=20 \par Paragr. 60 \par No Loan may be granted to members of the Supervisory Board of the = Governing Board, or to employees of the Bank, not in cash; nor in goods = warrants, nor in goods, nor in any other form. \par=20 \par Paragr. 63 \par No. 4. In addition to the customary profit and loss account, a set = statement of the total turnover of the Bank shall be issued, even if = the turnover has led neither to a profit not to a loss. (Remark: This = type of statement, which is not usual in=20 \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 39 \par continental Europe, is regularly issued as an appendix by English = and American coope\-rative building societies and affords a greatly = superior survey of the management of the undertaking. For instance, an = exchange of one security for another with out altering the assets is not shown to the customary profit and loss = accounts, but in the surveys headed "The money we received" and "The = money we spent" of the American Building and Loan Associations and the = English Building Societies, whose arrangement s are in every way exemplary.) \par=20 \par Paragr. 76 \par Modifications of the rules and provisions maybe decided on with = retrospective effect, \par=20 \par (6) C) d) Principles and Provisions Governing the Obtaining of = Long\_Term Credits=20 \par through the Work Supply Bank \par=20 \par I. Nature of the Long\_Term Credits Granted by the Work Supply Bank \par=20 \par Pursuant to these provisions a credit shall be deemed long\_term = where the borrower is not bound to recognize the Bank's goods warrants = against himself at all times at least up to the amount of his remaining = debt. On the contrary, in respect of long\_ germ credits, the borrower shall be only bound to accept the goods = warrants for (at least) the amount of the next installment due inclusive = of amortization and usufruct charges. \par=20 \par Inasmuch, however as the Bank holds out to every holder of goods = warrants the prospect that in exchange for these warrants he may obtain = from the Bank's customers goods or services as if he paid in cash, it = follows that in the case of the grant of a long \_term credit, another person than the borrower must undertake, at the = request of any holder, to exchange the Bank's goods warrants for goods = or services. \par The Bank shall only and to such extent, grant long\_term credits, = as persons other than the borrower shall declare thems elves prepared to stand security for him with their goods and services = and as, besides, these goods and services are in daily demand. Nor may = there exist an obstacle to the ready disposal of the goods warrants \_ e.g., the business premises of the persons concerned shall not be = situated at such a distance as to impede the ready disposal of the goods = warrants. \par=20 \par II. Capital Required for Long\_Term Credits \par=20 \par A. The Work Supply Bank is not concerned with acquiring legal = tender through acceptance of deposits in ord er to lend it to borrowers, It should confine itself, on the whole, to = cooperating in the disposal of goods and services which are to be = utilized for long\_term credits.=20 \par Individuals, who shall place at the disposal of the Bank goods and = services which would enable the Bank to grant long\_term credits to = others, shall be in the legal position of depositors or bond\_holders = conforming to these principles and provisions. \par=20 \par B. Those willing to place goods or services at the disposal of the = Bank with a view to enabling the Bank to grant long\_term credits, shall = comply with the subjoined provisions=20 \par=20 \par 1. The Individuals concerned, hereinafter called the owners, = undertake to count against themselves, in lieu of cash, a certain = minimum number of the Bank's goods warran ts. The owners, following the Bank's instructions, must cancelled the = goods warrants accepted and surrender them daily to the Bank. The Bank = shall credit the owners with the goods warrants surrendered, Such goods = warrants, if not cancelled by their owners shall be devalued by the Bank. \par=20 \par 2. In order to offer the holders of the goods warrants full = assurance that they may use them \par to pay the owners at any time, as if they represented cash, the = owners \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 40=20 \par must give the same undertaking as if they owed the Bank the amount = they intended to guarantee The Bank shall demand from the owners the = surrender of goods warrants guaranteed by the owners within a specified = time or in fixed install ments, unless the owners can show cause why a longer delay should be = granted them for surrender without prejudicially affecting the = legitimate interests of the holders of the goods warrants. \par=20 \par 3. If an owner will only declare himself ready towards the Bank=20 or other persons to accept the Bank's goods warrants in lieu of cash, = but will not undertake any other obligations, he shall not acquire = thereby a credit al the Bank or any other right against it, Nor may the = Bank, on the basis of such declarations, agree =20 to loan goods warrants to other persons. On the other hand, the opening = of a credit account at the Bank for persons who surrender to the Bank = its' goods warrants, shall be even admissible when the presenter does = not place at the disposal of the Bank any g oods or services and makes no declaration concerning the acceptance of = goods warrants in payments made to him.=20 \par On the strength of the balance in question, the goods may grant = long\_term Loans. \par=20 \par III. Administration of Balances at the Work Supply Bank \par=20 \par In return for the balances created at the Bank by means of the = surrendered goods warrants, the Bank shall provide either pass books or = Bank bonds, as desired. The special revisions made known from time to = time by the Bank shall apply here.=20 \par The balances shall bear interest, but the Bank shall not undertake = to fix any interest rate in advance. \par Pass books and Bank bonds shall be transferable without the consent = of the Bank. But the Bank shall be entitled, although not bound, to = demand proof of the rights of the presenter to such books and bonds. \par=20 \par IV. Notice of Withdrawal of Balances at the Work Supply Bank \par=20 \par A. The Payment of called\_in amounts may, at the discretion of the = Bank, be either in goods warrants, or in ordinary means of payment = received by the Bank. \par=20 \par B. The Bank shall be entitled at any time, even without the consent = of the balance holder or bond\_holder, to repay balances, either in = goods warrants\- or in ordinary means of payment received by the Bank when, and to the = extent that, the Bank receives payment from its debtors for which it can = find no other investment.=20 \par The Bank shall determine such balances by drawings or otherwise, = ensuring a uniform and fair treatment of the balance\_holders and of the = bond\_holders, even if only, one interested party makes such a demand. \par=20 \par C. No balance\_holder or bond\_holder shall be entitled to demand = repayment at a given date. Nor may the Bank, in disregard of these = provisions, undertake to repay a balance at a given date or within a = specified period. \par=20 \par D. If the amount of the balances withdrawn by their holders exceed = the Bank's liquid assets, the Bank shall announce special provisions = concerning repayment: =20 \par either by arranging the repayments in the order the notices were = received=20 \par or by deciding on pro rata payments on all balances called in.=20 \par In any event, the Bank shall determine a smaller amount, one which = it can pay each month to any withdrawing member, apart from the order of = the notices of withdrawal, e.g., 50 marks. \par=20 \par E. As long as a balance holder or bond holder shall not have = received the amount he has called in, allowing for the period during = which it cannot be called in, the Bank shall not be entitled to grant = fresh long \_ term loans except when, simultaneously, new goods and services shall = have been placed at the Bank's disposal for a long-term period. \par=20 \par F. In no case may the Bank pay recalled balances in goods warrants = if the immediate exchange of these goods warrants for goods or services = within the Bank's group of customers is not assured. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D 41 \par=20 \par G. For the rest, the arrangements concerning the calling in of = balances shall be subject to announcements made by the Bank from time to = time.=20 \par If not otherwise stated, each balance and Bank bond shall be deemed = as not recallable for at least=20 \par six months. \par=20 \par V. Repayment of Long\_Term Credits \par=20 \par A. The arrangements made for the repayment of short\_term credits = shall apply to long\_term credits, at least insofar as they have not = been modified by these provisions or through the loan contract. \par=20 \par B. Only amortization credits shall be granted. \par=20 \par C. The payment of the several amortization installments may be made = by the surrender of pass books, writing-off of pass books, or surrender = of Bank bonds. Should the Bank so decide, any advance repayment of = long\_ term credits must be made in this manner. The Bank is authorized to = refuse other modes of advance repayments. \par=20 \par (6) D) Use of Goods Warrants to Finance Manufacturing Operations = Occupying a Considerable Time \par=20 \par The problem of employing the unemployed encounters almost always = one serious obstacle. To remove this sundry proposals have been put = forward from time to time. One effect of re\_ employing the workless is to increase output. Now the chief cause of = unemployment resides precisely in the excessive number of articles = produced. There appears hence the danger that the remedy may actually = aggravate the evil. What, then, is to be done? \par=20 \par (The cause for a build-up of unsold consumer goods is not simply = that too many of them were pr oduced. They were produced for a market that was supposed to be free = enough to buy these goods. However, not enough of them could be sold = under monetary despotism, to those who would have liked to purchase them = if they had the purchasing power to do so, t hat is, mainly by the unemployed and under-employed. The so-called = "over-production" represents largely merely "under-consumption."=20 \par However, if all become suddenly fully employed, because of monetary = freedom, and were to add, among other things, more produ ce, then they could not, between them, rapidly use up all accumulated = stocks from the time when the exchange of ready for sale labour for = ready for sale consumer goods was blocked or made too difficult by = monetary despotism and also the current production . One can consume only so much bread, milk and meat, in the average, per = day and cannot fully make up for past days of hunger. So some of these = accumulated consumables ought to utilized not to produce more food = stuffs but should rather be used up by those=20 producing additional and long-term capital goods. - J. Z., 22.11.01.) \par=20 \par One way out would be for the unemployed only to undertake work for = one another. In fact, many of the American Emergency Associations have = hit on this device. (Annals, 1933, no. 2.) Some=20 economists have also favoured this method. It may be that the Industrial = Homes of the Salvation Army, which have now flourished for decades, are = based on this principle and were remarkably successful, have suggested = it to Americans. Nor are English Worker s unacquainted with this principle. (S. and B. Webb, "History of Trade = Unionism", p. 353 of the German edition.)=20 \par To prevent the products of the Emergency Associations overloading = the market, many Americans have held that these Associations should form = as far as possible a self\_ contained market. To ensure such economic autarchy, it has been proposed = to set up as the measure of value for the Associations, not gold, but = the hours worked. In similar circumstances Robert Owen already made an = analogous proposal.=20 \par=20 \par However, the Associations might retain gold as the standard of = value within their domain, if they adopted the principles underlying = Milhaud's plan. This is of decided importance since the true ideal is = not that the Associations should become self\_contain ed, but the exact contrary. Indeed, even its partisans regard economic = autarchy only as a necessary evil. As the reports in the Annals' show, = the attempted exclusion from the labour market of the workers employed = by these Associations and of their product s from the world market, has met with great and apparently = insurmountable obstacles. This is natural. A re\_ employed unemployed is no longer an unemployed and differs in no respect = from a worker who has never been out of work. To treat these two = categories of workers differently is only feasible for a few days.=20 \par=20 \par There is a much better way, namely to offer the (accumulated - = J.Z.) goods rendered unmarketable by (during. - J.Z.) the trade = depression, in the form of a long\_term credit, i.e., to offer a credit = covering at least a few weeks or even\_ a few years. The unemployed might then be also occupied with producing = articles whose manufacture absorbs some time or payment for which cannot = be expected immediately, as is regularly the case with house building = and a gricultural improvements and very frequently with the manufacture of = ponderous machinery.=20 \par Should it prove practicable to utilize the at present unmarketable = goods for financing such objects, many of the workless could be employed = in their production witho ut disturbing the general capital market (or the market for food stuffs = - J.Z.), affecting normal thrift or placing a burden on tax\_payers.=20 \par In this mode of financing, Milhaud's goods warrants would prove = useful, as will be shown in the sequel. These warrants would be of no = service if their purchasing power were restricted to the goods = manufactured by the (formerly J. Z.) jobless in long\_ term produc\-tion or confined to payments for the \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 42=20 \par use of these goods. \par=20 \par The above proposal to finance, by means of the goods warrants = system, the production of such goods as, in present\_day terminology are = styled "capital goods", should not be confused with the frequent demand = that all unemplo yment schemes should be concerned with bringing once more, and at any = cost, the capita[ goods industries into full operation, most = particularly the building industry. The purpose of this proposal is that = these industries, especially the building industry, should use up the stocks that are now encumbering the market: the = surplus provisions and coal, implements, timber, and various other raw = materials. That, it is held, would render it possible to begin producing = fresh stocks. \par=20 \par Those who press this demand and they are to be found in all = parties, are so firmly convinced that they are right that they believe = they can assume the responsibility for }{\b\i\fs24\lang1033\cgrid0 = every}{\b\fs24\lang1033\cgrid0=20 mode of financing. Thus, a few weeks prior to the German Revolution of = January 1933, the two Socialist parties=20 called for an extension of building activity (house and road = construction), until this industry had absorbed the last unemployed man. = The required. funds were to be raised inter alia, by a compulsory loan. \par=20 \par The Communists, indeed, favoured the proposal, frequently repeated = during the last decades, to finance the building schemes simply by = assignats, their cover to be \_ the houses constructed! \par=20 \par The proposal here put forward is of a quite different nature, The = goods warrants issued are not to be covered by the freshly produced = capital goods. On the contrary, as cover should serve the = }{\b\i\fs24\lang1033\cgrid0 immediately realizable stocks}{ \b\fs24\lang1033\cgrid0 (mainly of consumer goods! - J. Z.) of those = willing to provide long\_term credits by placing their stocks at others' = disposal. (As long term investments. - J.Z.) To the extent that these = stocks have been consumed \_ the provisions eaten, the timber incorporated in buildings and the coal = burnt \_ the goods warrants, which mediated the transfer of the stocks, = should be withdrawn from circulation and cancel led. This necessity follows from Milhaud's proposals. Milhaud has thus = avoided the Scylla of swelling the monetary circulation with actually = uncovered warrants as well as the Charybdis of confining the operation = to classes of work for which short\_ term credit suffices. \par=20 \par If we are clear in our minds that the ultimate purpose of most = "durable" goods is to satisfy somehow, daily requirements or even to = serve recreational needs, we shall not doubt that a large\_scale demand = for new "durable" goods, e .g. houses,=20 ships, big machines, theatres, and the like, can only arise when a new = great demand for consumer goods has appeared and when, as a consequence, = the dwellings at present unlet are occupied, the laid\_ up ships are sailing again, and the stocks of machinery have been = disposed of. But this only becomes possible when the consumer goods = industries are once more working at full capacity.=20 \par It is true that even now the demand for new, "durable" goods is = above zero, although the available, but unsold stocks greatly pr ess on the market. The demand' is, indeed, large enough to make it = worthwhile to cater for it. This means here: to apply from the beginning = the goods warrants system to long-\-term credits as well.=20 \par That there is a demand for such credits is a priori manifest. = Nevertheless, we ought to wait for an effective demand and not like so = many modern reformers, audaciously infer a priori where the long\_term = credits ought to be directed to.=20 \par We are as yet far removed from really }{\b\i\fs24\lang1033\cgrid0 = knowing}{\b\fs24\lang1033\cgrid0 our economy. \par=20 \par For the purpose of elucidating the difference between short\_term = and long-\-term credits in goods warrants, we shall furnish two simple = illustrations. \par=20 \par During the present depression, a well\_off town would like to build = a road which is badly needed, but for which there is no money available. Suppose its construction would. cost 1 million gold = francs. Assume too, that in the town are to be found traders, farmers, = and artisans who, because of the depression, are unable to sell, or only = at a loss, roughly 1 million worth of goo ds and would therefore be content to sell their goods on a long\_ form credit basis. In return, they ask for a reasonable sales price and = interest. Suppose, lastly, that the stocks consist of just such articles = as the workers require during the period of cons truction, e.g., foodstuffs, clothing, domestic articles, and the like. = In that case the procedure might be as follows: \par The town raises a loan of 1 million francs, in (say) 100 francs = allotments, repayable perhaps in 48 quarterly installments at a = quarterly interest rate of 1,5% on the remaining debt at any given time. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 43=20 \par Amortisation tables, e.g. that of Spitzer-\-Foerster, will show = that the town would have to find every quarter 29,375 francs for = interest and redemption. The workmen and the suppliers are to be paid in = goods warrants issued by the municipality. \par Thereupon the farmers, traders, and artisans declare that in = payment for supplies they will accept the goods warrants in=20 lieu of cash. And, on its part, the municipality declares: The = subscriptions to the loan may be made with our goods warrants in lieu of = ready money. We will begin work when the entire loan issue has been = subscribed. \par=20 \par The simple declaration of the farmers,=20 traders and artisans that they are prepared to accept the goods = warrants, should not of itself satisfy the municipality. Why not? = Because the acceptance of the warrants in local shops and by the local = farmers does not in and of itself ensure a }{ \b\i\fs24\lang1033\cgrid0 reflux}{\b\fs24\lang1033\cgrid0 of the = warrants. When the stocks of the value of 1 million francs have been = delivered and the goods warrants are still circulating, depreciation = becomes inevitable since }{ \b\i\fs24\lang1033\cgrid0 after}{\b\fs24\lang1033\cgrid0 the sale of = the stocks nobody will accept the warrants at their face value. Of = course , there might be the possibility of paying with them the local taxes; = but if the town is so small that it cannot repay the million out of its = current revenue, it will not levy sufficient through taxation to afford = every holder of goods warrants an opportu n ity to pay them in at once for taxes due or to find some one forthwith = who has to pay taxes and would relieve him of the goods warrants. Only = one possibility is hence left, namely that everyone who has accepted = goods warrants should at once surrender them =20 to the municipality and should receive a loan allotment for every 100 = francs so surrendered. On its part, the municipality would cancel the = goods warrants surrendered. Thus at any given time no more goods = warrants would be in circulation than would be cov ered by goods and services. \par=20 \par An observation may be in place here. Many supporters of the gold = standard still entertain the antiquated notion that in order to secure a = proper basis for banknotes or paper money generally, there should be the = possibility of co nverting them into gold. However, gold may be replaced without any = disadvantage by shop foundation ("Ladenfundation" as Rittershausen calls = it) and a reflux. Indeed, Dr. R, Just already demonstrated, in 1921, in = his "Die Inflation" (The Inflation) that' t he "classical" form of gold cover is by no means certain not to produce = inflationary effects, effects which cannot occur when there is a = correctly computed reflux.=20 \par=20 \par (It is much more likely to produce deflationary effects, due to the = fact that all transacti ons, in millions of goods and services, between thousands of millions of = people, are then, ultimately, confined to going through the bottleneck = of a single commodity, namely gold and its availability for the = redemption of all exchange media. There is no s o und reason why all exchanges should be so confined, especially when = people are not only free to continue to use gold weight units as a = standard for accounting, pricing and clearing purposes, but also free to = choose any other value standard in their contra cts and when they are free to utilize all kinds of exchange and clearing = media, with all kinds of value standards, apart from those which are at = any time redeemable, in gold metal, by the issuer, upon demand by the = note holder.=20 \par In gold-for-accounting or gold-value-clearing standards the value = reckoning in gold weight units goes on while any redemption into gold = metal is transferred from the issuers to the free gold market.=20 \par Issuers and potential acceptors of such optional and market rated = gold value currenc ies will watch whether, on a free gold market, these exchange media are = rate at par with their nominal gold value - or close enough not to = matter. Others will be widely refused, or not issued at all, in the = interest of the issuer as well as the potential=20 acceptor. \par Most "gold bugs" are blind to the gold standard option in form of = gold value clearing or accounting, as well as to other sound and agreed = upon value standard options that would exist under full monetary and = financial freedom. Rothbard even conside red any deviation from his kind of exclusive and forced currency, the = 100% gold covered and redeemable gold dollar, to be dishonest! According = to him all prices, wages and other payment contracts would simply have = to adapt themselves the quantity of gold=20 t hat has been accumulated and is made available for monetary purposes. He = wrongly assumed that this adaption would, in every case, occur fast and = accurate enough, without causing any friction and difficulties. Some = assumption that, especially seeing the op posite effect of falling prices to that of fallen prices. There are = still all too many wrong and unchecked premises in most "modern" and = "scientific" monetary theories. =20 \par Condemnation of an exclusive and forced paper money exchange medium = and of an exclusiv e and forced paper money "value standard" is just not good enough when = all one wants to do, as most "gold bugs do, is to replace them by an = exclusive and forced gold coin or gold certificate exchange medium and = an exclusive and compulsorily value standard =20 that requires the 100% and any time redeemability of all exchange media, = by their issues, in gold coins or gold bullion. - The deflationary = results of such a "monetary policy", by the monetarily simple-minded, = might be even more catastrophic than are thos e of the governmental money monopoly. It is not enough to ruthlessly = prevent inflation and to assume that the adopted method, gold metal = redeemability is the only rightful and sensible one, but the = deflationary effects associated with any exclusive exchan ge medium must also be overcome by free competition in the supply of = exchange media - and so must be the more or less justified distrust = against gold weight units as the only value standard - by introducing = free choice for value standards. =20 \par This is, natura lly, no argument at all against the establishment of the "classical gold = standard currency" among those who believe in it and are thus prepared = to practise it at their expense and risk only. Then they would not do = any harm to the free and honest exchange s of others but simply make their own exchanges more limited and = expensive - in transaction costs - than they need be. I believe that = free competition in the monetary and financial sphere would rapidly = reduce "the classical gold standard" to its practice a mong a small sect of true believers. - J.Z., 22.11.01.) \par=20 \par Let us assume that, according to the calculations of the civil = engineers, the construction of the road will occupy 5 months and that = the monthly expenditure thereon is estimated at 200.000 francs. The n the obligations of the subscribers to the loan must be such that the = municipality may count on a monthly reflux of 200.000 francs in goods = warrants Thus the municipality may not issue warrants in excess of = 200.000 francs monthly and the reflux must be a s sured under all circumstances. The subscribers to the loan must = therefore undertake to remit legal tender within the prescribed period = if they are unsuccessful in securing goods warrants by the sale of their = goods and services. That would enable the munic i pality to buy up the unreturned goods warrants with ready money. This of = course, would involve a certain risk for the subscribers; but this risk = may be reduced by anterior arrangements with the navvies (road = construction workers) and the suppliers The mun i cipality might further reduce this risk by permitting subscribers on = payment of smart-money, to withdraw their subscriptions, This fine might = be of the magnitude of the premiums customary in stock exchange = transactions and be fixed at perhaps 5% of the p art of the amount not paid up. The municipality should not experience = any difficulty in finding "substitutes". Alternatively, permission to = withdraw might be made dependent on the municipality finding a = substitute. \par In addition to those who bind themselves t o accept the goods warrants and to subscribe to the loan, other persons = will almost certainly exist in the locality who will voluntarily = subscribe to the loan. That would naturally facilitate the financing the = road scheme. \par In Germany the financing of road construction by means of municipal = goods warrants \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 44 \par was frequently discussed before the Revolution and, here and there, = attempted. The mistake however was made not to ensure a n adequate reflux, it being considered that the possibility of paying = local taxes partly in goods warrants would suffice as a guaranty. The = inevitable result promptly followed. The shopkeepers who accepted the = goods warrants from the navvies could no disp ose of them. The annual reflux provided for was, say, one\_fifteenth = only of the construction costs. Such a reflux might suffice to keep at = par a loan bearing a low rate of interest, but not goods warrants that = are not yielding interest. \par=20 \par Our second illustration supposes that the traders, farmers, and = artisans of a locality place their stocks at the disposal of a small = factory on long-\- term conditions and in this make use of a Work Supply Bank, organized = broadly on Milhaud's principles, as an intermediary. To comprehend this illustration properly we will at first assume that a = single tradesman only is prepared to advance his stock and, = provisionally, not through the Bank, either. \par Suppose that in a town a big store is in a precarious situation and = holds considerable cable stocks of unsaleable goods. The following = proposal is then submitted to the store by a master cabinet maker:=20 \par=20 \par "I intend to build in this town a small furniture factory and = require for this purpose 100.000 dollars. Factory premises have to be = built, machinery \_ which I can obtain on credit \_ has to be installed, etc. If, therefore, you would grant me credit to = the extent of 100.000 dollars worth in your goods warrants, both you and = I would profit by this transaction. With the warrants I shall pa y the bricklayers and fitters, as well as my own workmen for the first = few weeks. This may not be very convenient for the parties concerned but = since they have been without work, they will prefer full wages in goods = warrants to a miserable unemployment al l owance in ready money. Many of my suppliers are also willing to accept = your goods warrants, since they prefer to sell their wares for such = warrants to keep their wares unsold. By the grant of this credit in = goods warrants you have the possibility of selli n g 100.000 dollars worth of your goods, which might otherwise deteriorate = or have to be sold at a loss. The credit could be granted for 6 years, = for which I would pay only 0,5% interest monthly during the first year, = but from the second year onwards a supp l ementary sum, so that at the end of the six years period I should have = repaid the whole of the credit granted. According to amortization tables = this would involve an a aggregate monthly payment of 1.933, 8 dollars. = The 100.000 dollars' credit granted me.=20 I shall call on in installments of (say) 10.000 dollars a week. I must = naturally have a guaranty that the store will not discriminate against = individuals paying with goods warrants; also a guaranty that the store = will, without delay, cancel the goods warra nts returned to it, so as to prevent, as far as possible, their = depreciation. Penalties for infringement must be fixed in case you do = not fulfil, or fulfil only in part of your obligations. \par=20 \par "We might also mutually help each other in raising the monthly ins tallments of 1.933 28 dollars. I should post up a notice in my offices = to the effect that I am prepared to accept in payment every month your = goods warrants to the value of at least 1.933,28 dollars in lieu of = cash. This would naturally increase, on the o ne hand, your options to make payments in goods warrants \_ that is with = your own goods - and, on the other, my chances of finding purchasers for = my furniture would be improved thereby."=20 \par=20 \par Such transactions, where stores finance long\_term investments with = their otherwise unsaleable stocks, are practicable under the goods = warrants system. They should be attempted wherever, owing to stagnation = in trade, long\_ term credit is rare and dear. One condition is, however, that a = }{\b\i\fs24\lang1033\cgrid0 big}{\b\fs24\lang1033\cgrid0 store is faced = by a comparatively mo destly situated debtor. In such an instance the aid of a bank might be = dispensed with. Matters are different when a "big" debtor requires = credit and there are only "small" dealers, artisans, and farmers ready = to furnish it. Here the "small" ones should co mbine. That would be best achieved in the form of a bank with rules and = business provisions such as were outlined in the last section. To ensure = that \-the credit can be really paid, the several businessmen would have = to undertake the same obligations \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 45=20 \par towards the bank, as the store had towards the furniture = manufacturer. The business provisions governing long\_term credits, = which were sketched in the preceding section, do justice to precisely = this aspect. \par=20 \par We must underline here an important point in those provisions When = a trader desires to mobilize his stores by means of a long\_term credit = granted by him and seeks the aid of a bank in this connection, it is not = enough for him to inform the bank that he is prepared to accept the goods warrants in = lieu of cash. On this one condition only, the bank cannot grant = long\_term loans. It cannot do this because there would be no = }{\b\i\fs24\lang1033\cgrid0 reflux }{ \b\fs24\lang1033\cgrid0 of goods warrants, whilst such reflux is = indispensa ble for maintaining their value at par. If, for example; in the case of = the furniture manufacturer the bank advanced him 100.000 dollars and he = or his workmen, purchased therewith 100.000 dollars worth of goods at = the store, the direct cover for the goods =20 warrants, seeing that the goods have been sold, would no longer exist. = Hence the store, to prevent their depreciation, must surrender the goods = warrants to the bank with a view to their being cancelled. If this is = not done and if the store utilizes the wa r rants it accepted for making payments on its own behalf, e.g., for = replenishing its stocks, it transfers thereby to the acceptor of the = warrants a claim against the furniture manufacturer. The latter, however = is only bound to a limited degree to accept th e goods warrants. This becomes manifest if misgivings about the bank = should arise and all the warrant holders should therefore wish to = exchange them rapidly for goods, only to find that goods can be obtained = solely from those bound in the matter, which, in =20 our illustration, would be the furniture dealer. This is not a remote = contingency and is the more likely to occur the fewer the precautions = the bank has taken against it, The precaution suggested here is the = compulsory and prompt reflux of the warrants to the bank, or, expressed differently, the store's undertaking to = surrender the accepted warrants to the bank. \par=20 \par Hence the bank must insist that the store which, by placing its = goods at the bank's disposal, has, as it were, subscribed to a loan = raised by the=20 bank, should fulfill all the obligations of a subscriber to a loan, the = most important of which is the tendering of means of payment within a = stated period. Should the store not surrender any goods warrants within = the time specified, the bank must insist=20 that the store shall pay \par the bank in cash wherewith the bank can then buy up a corresponding = number of goods warrants. Should the store desire to avoid this risk, it = must in advance con\-clude a contract with the furniture manufacturer = regarding the purchase of its goods. \par In practice the procedure will be less cumbersome than appears from = a theoretical exposition of the system; but even if the formalities = associated with the application of the system should be deemed = considerable, it ought to be remembered th at they are trivial compared to the burdens imposed on everybody by the = present depression. If trade recovery without sacrifices is feasible, it = cannot, as intimated above, be secured without some additional trouble = and effort in business dealings. \par=20 \par It may happen that owners of goods difficult to market and not = satisfying daily requirements are also desirous of placing their goods = at the disposal of the bank, with a view to the bank granting long\_ term credits e. g., jewelers, toy merchants, and others. But=20 this would entail too great a risk for the bank. However the owners of = such goods may easily overcome the difficulty by agreeing to accept in = lieu of cash the bank bonds mentioned in the business provisions of the = last section. According to the bank provi sions here put forward, the owner of a bank bond may readily exchange it = for goods warrants, mostly perhaps within a few days. \par=20 \par The difference between the short\_term and the long\_term credits = of a work supply bank is, as the preceding explanations have show n, a profound one. Indeed the differentiation between the two types of = credit represents the fundamental theme of a science of banking.=20 \par "The art of the banker consists in this: to be able to distinguish = between a bill and a mortgage", was said by a banker well known in Berlin banking circles, who could actually tell whether a = bill presented to him for discounting would in time be "frozen", i.e., = be transformed into a mortgage, or not.=20 \par The manager of a Work Supply Bank, operating the goods warrants = system, must also be master of this art and should not be deterred from = acquiring it by the great abstractness of its foundations. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 46=20 \par=20 \par (7) OTHER ASPECTS \par=20 \par A) Payment of Rent with Goods Warrants \par=20 \par The reports in the Annals (1933, no.2) suggest that the Emergency = Associations of the American unemployed always experienced serious = difficulties in paying rent by barter methods or by means of goods = warrants. This is intelligible. A large prop ortion of the rents paid have to be passed on by the landlords to the = mortgagees. In America these mortgagees are generally insurance = companies, Building and Loan Associations, or mortgage debenture = associations. Now, an insurance company, for instance, c a nnot accept goods warrants unless its employees or its insured agree to = accept them. Propaganda would have therefore also to extend to this = class of creditors. Such propaganda would be by no means futile, for in = large tracts of America the debtors of the=20 i nsurance companies have officially declared a "payment strike". Hence = the insured are risking to lose entirely a large part of what they paid = in. Should they, however, be prepared to accept insured amounts in goods = warrants, they may avoid losses. That wh i ch is true for the insured, also holds of the owners of the bonds of = mortgage societies. It would be probably easiest to win over the = Building and Loan Associations. In America these associations are as a = rule small cooperatives confined to a single town=20 w hose members are largely without work today. Here might be the point of = departure; but the unemployed should not make the altogether hopeless = attempt to finance houses by means of goods warrants, in the hope of = later paying their rents in goods warrants.=20 (Annals, 1933, no. 2, p. 321,) \par The mortgage banks might aid in popularizing the idea by agreeing = to accept interest payments in interest coupons. Every mortgage bond of = over 100 dollars has actually attached to it a few interest coupons, say = of 3 dollars each, which are every half\_ year exchanged for cash at the counters of the mortgage bank. If, then, = the interest coupons as such were paid in at the bank in lieu of cash, = the bank need not later exchange these coupons for cash. The bank would = even gain thereb y, for normally it must obtain its money from a credit bank and pay = interest itself when the payment falls due! For the owner of a mortgage = bond, on the other hand, it might be highly advantageous to be able to = utilize his interest coupons even prior to m a turity in lieu of cash, especially for the payment of rent. As for the = landlord, it is quite indifferent to him whether he is paid in interest = coupons or in legal tender, if only the mortgage bank agrees to accept = his interest coupons. According to the ci vil law of several countries, the mortgage banks must consent to a = settlement such as is here proposed. But the respective legal provisions = are little known; as indeed modern jurisprudence wholly neglects = clearing operations. \par=20 \par B) Payment of Dividends with Goods Warrants \par=20 \par The surpluses of joint stock companies nowadays accumulate at the = banks in the course of their financial year. After the General Meeting = has passed a motion regarding the dividends, the shareholders come to be = entitled to exchange at the ban k their dividend warrants for legal tender. This, in the aggregate, = involves large amounts. The German joint stock companies, for instance, = paid in dividends during 1927 \_ a good year, certainly \_ about 800 million marks and a year later as much as 1.250 million = marks. ("Statistisches Jahrbuch fuer das Deutsche Reich", 50th. year of = issue, p. 367,)=20 \par The banks, of course, grant short\_term loans out of the surplus = accumulated during the year. When the time for paying the dividends = arrives, the respective cred its are called in, The latter is no trivial matter. Thus the commercial = press has pointed out that the liquefying of the dividends of a leading = joint stock company affects prejudicially the national economy and that = in fixing its dividend rate the company should have regard to the difficulty of providing the dividends in = liquid from. In such circumstances the goods warrants system would bring = great relief. Not only would, \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 47=20 \par in all probability, its realization increase, considerably, the = stability of the money market but it would enable share companies to = declare higher dividends in goods warrants than they could pay in legal = tender. \par=20 \par The text of a dividend goods warrant might read: \par=20 \par }{\lang1024 = {\shp{\*\shpinst\shpleft10705\shptop179\shpright10705\shpbottom2627\shpfh= dr0\shpbxcolumn\shpbypara\shpwr3\shpwrk0\shpfblwtxt0\shpz3\shplid1029{\sp= {\sn shapeType}{\sv 20}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}} {\sp{\sn shapePath}{\sv 4}}{\sp{\sn fFillOK}{\sv 0}}{\sp{\sn = fFilled}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv = 1}}}{\shprslt{\*\do\dobxcolumn\dobypara\dodhgt8195\dpline\dpptx0\dppty0\d= pptx0\dppty2448\dpx10705\dpy179\dpxsize0\dpysize2448 \dplinew15\dplinecor0\dplinecog0\dplinecob0}}}{\shp{\*\shpinst\shpleft49\= shptop179\shpright49\shpbottom2771\shpfhdr0\shpbxcolumn\shpbypara\shpwr3\= shpwrk0\shpfblwtxt0\shpz2\shplid1030 {\sp{\sn shapeType}{\sv 20}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv = 0}}{\sp{\sn shapePath}{\sv 4}}{\sp{\sn fFillOK}{\sv 0}}{\sp{\sn = fFilled}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv = 1}}}{\shprslt{\*\do\dobxcolumn\dobypara\dodhgt8194 \dpline\dpptx0\dppty0\dpptx0\dppty2592\dpx49\dpy179\dpxsize0\dpysize2592\= dplinew15\dplinecor0\dplinecog0\dplinecob0}}}}{\b\fs24\lang1033\cgrid0 = xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx= xxxxxxxxxxxxxxxxx \par=20 \par During the period from \'85 to ... the \'85\'85. works will = accept this warrant in lieu of legal tender=20 \par for the amount of ...., in all payments due to be made to the = said works.=20 \par After the last date mentioned, the dividend warrant can only be = used for establishing a credit at the =20 \par works.=20 \par The provisions relating to calling in this credit and to = interest payments will be fixed by=20 \par the Board of Directors and announced from time to time, in = accordance with the financial position=20 \par of the works. \par = xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx= xxxxxxxxxxxxxxxxx \par=20 \par Suppose: a motor car factory has on its hands a large park of=20 unsold cars. The factory is perhaps not in a position to pay a cash = dividend just because it has so many unsold cars. The company could, = though, perhaps without difficulty, pay a 5% dividend in goods warrants. = That is, it would then pay its dividends in t he form of cars. \par=20 \par If several joint stock companies combined and declared that they = severally agreed to accept one another's dividend goods warrants, these = warrants would be negotiated with the less discount \_ the greater the = number of the companies concerne d. One could also imagine that a bank might specialize in purchasing = dividend goods warrants and setting them to the customers of the = factories concerned. This would probably prove a paying proposition. \par Here, as in most other sections of this paper, legal obstacles to = the application of the goods warrants system stem in various domains, = have been left unconsidered. The economic aspect alone has been our = concern. \par=20 \par (7) C) General Objections by "Practical Men" \par=20 \par Milhaud prefers to leave the elaboration of the t echnical details of his system to businessmen and, in the last resort, = to the authorities. This is one of the few points on which I must = contradict him. Never, since in the Middle Ages the guilds took over the = government of cities (which led to appalling=20 s ocial, technical, and economic retrogression as Roscher has shown), has = the world been ruled more decidedly by "practical men" than during these = last few years. And in all countries today the influence of the = authorities is such that, e.g., the American=20 S enator Glass felt constrained to say of his country that he was not = surprised that the United States recognized Russia but wondered that the = Russian Government recognized the United States, seeing that his country = was far more advanced in Bolshevism than=20 Russia. \par=20 \par A practical method of finding work, based on scientifically tested = experience, has so far not emerged anywhere. This the opponents of the = "theoretician" Milhaud should duly take into account. What the = Governments in virtually all countries today co nsider as finding work, is nothing else than driving bakers, tailors = and carpenters into unemployment through taxing their customers, in = order to provide work for bricklayers, joiners, and navvies; Governments = deprive one class of citizens of their purch a sing power and confer it on another class. Persons who know no other way = out and do even approve of this senseless system, should not be styled = "practical men (although they have been engaged in this foolish pursuit = for years), but, on the contrary, as me n whose practices have failed to solve the task before them. \par=20 \par The "Annals" (1933, no.' 2) report that in America over a million = unemployed have resorted to bartering goods and services and have thus = created work for themselves. They were not led by those wh o claimed to be "practical", but by men and women of all sections of = society who approached the problem with an undoubtedly scientific open = mind. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 48=20 \par Workingmen collaborated an d so did farmers, businessmen and officials, artists and doctors. An = enlightened attorney general refrained from enforcing the laws of = Colorado regarding emergency money. (Annals, 1933, No. 2, p. 290.) A = municipality provided offices and did not protest a gainst "the intrusion of busybodies into relief work", as would perhaps = been the case in old Europe.=20 \par A religions community contributed its protracted experiences with = goods warrants (p.258 ), which were then intelligently applied. Others, = after a few weeks' experience with primitive barter,\- concluded that some goods warrants system is indispensable (p 286). = Here we see at work "practical men" in legitimate sense of the term, and = it testifies to the scientific spirit of the American economists that = they req uested their Government to institute a careful inquiry into the practice = of the diverse barter communities (p.263) and did not pretend that they = knew all about if beforehand. The inquiry would serve a real purpose, = for as regards what is truly of importan ce in the American barter movement\'84namely its juridical position, we = know almost nothing, and this is to be deplored. \par=20 \par (7) D) Issue of Goods Warrants and "Creation of Money" \par=20 \par If a goods warrant issued in Denver by a small association and = circulating freely=20 in that town at par, should stray to New Orleans, it would hardly be = accepted there save at a discount. Here we are not concerned with such = instances, but exclusively with the instance where the goods warrant is = discounted in its place of issue. What are the possible causes of such a discount? \par=20 \par To answer this question, we must be clear as to how discount may be = avoided. If the centres issuing the goods warrants hold marketable = goods, e.g., foodstuffs, then in no locality doing a fair amount of = business would the discount last longer than a day. \par Suppose that in such a locality the market rate of the goods = warrants had dropped from a dollar to 90 cents. In such case everybody, = requiring foodstuffs would naturally se\-cure a dollar goods warrant for = 90 cents an d tender the warrant to its issuer, the provision dealer, in payment of = 1 dollar's worth of goods. The purchaser thus easily saves 10 cents. = Even uneducated housewives would soon discover the possible gain and = hence, within a few hours, the warrants toget her with their discount would have passed out of circulation and = returned to the issuing centre. \par If speculation were the cause of the drop in the market rate, the = speculator who acquired the warrants at=20 \par par and passed them on cheaply, made a bad bargain. He only = benefited the purchasers of food\- stuffs. Hence speculators are = powerless against a system with whose warrants goods and services in = daily demand may be acquired at any time.=20 \par That the demand should also be defensible from the moral viewpoint, = is no t at all necessary. There are people, especially in England the United = States, who look askance at those who frequent restaurants and theatres. = Nevertheless goods warrants accepted in lieu of money in res\- taurants and theatres are well covered because there is a constant = demand for what these institutions offer. \par=20 \par From the above considerations it follows what may entail a discount = on goods warrants in the locality wherein they are issued, namely if = they cannot be at any time exchanged for goods or services in daily = demand: The American\- unemployed who want to finance house\_building with goods warrants (see = Annals, 1933, no. 2.), should ponder this. It s true that they have on = their side popular prejudice whereto governments even have frequently = succumbed, acc ording to which a house or a block of land offers better security for = credits \_ including the credits granted by banks of issue \_ than the = goods stored in them. \par=20 \par The kind of security, however, which is decisive in ordinary credit = operations plays a subsidi ary part in goods warrant credits, as compared with a quite different = kind of security which, in its turn, is not common in ordinary credit = operations, namely the assurance that the goods warrants may be at any = time=20 \par exchanged for goods or services. Indeed , the issue of goods warrants does not, economically speaking, properly = represent a credit operation, even if for the moment it cannot dispense = with the legal form governing such an operation. To remind the readers = continuously of this fact, their issue=20 has, where practicable, been characterized as a loan, subject to a = usufruct charge (locatio, louage, hire) \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 49=20 \par and not as the raising of an interest\_yielding loan in warrants = (that is, no mutuum, emprunt advance).=20 \par In reality, goods warrants are more closely related to theatre = tickets, cloak room counters, or railway tickets than to a gold = certificate such as used to circulate in the United States and were = really money.=20 \par That is, the technical aspect in goods warrants preponderates over = the monetary aspect. \par=20 \par Hence, economically speaking, the issue of goods warrants should be = regarded less as the grant of a loan than an issue of counters, travel = tickets etc., which have also to be=20 returned if they are to serve their purpose, without their owner being = properly a debtor. An excellent name for banknotes, which did justice to = the economic-technical aspect in them, was that invented in Sweden in = 1661, namely "transport\_ notes" (Transport\_Zettel). (Roscher.) \par=20 \par The recognition of the true nature of goods warrants introduced = into the general monetary circulation, involved new tasks for = legislatures. Legislation, from that of Rome to that of modern times, = has hitherto not looked upon goods warr ants as a juridical fact sui generis. Consequently, the present, really = unsuitable legislation must be, for better or worse, applied to goods = warrants. The most appropriate, in the circumstances, is our loan = legislation, although, economically, the issue=20 goods warrants does not represent the grant of a loan. \par=20 \par Goods warrants are likely to have a history similar to insurance. = For centuries the insurance of (say) ships was arranged by the insured = selling his ship to the insurance company for perhaps 1.000 gold pieces, and at the same time arranging for its repurchase at 1.100 gold = pieces, should it safely arrive. This indirectly created a premium of = 100 gold pieces. Traders therefore made the best of the concepts = "purchase" and "sale", until, later, insurance=20 came to be regarded as a legal institution sui generis and was = eventually governed by its own suitable legislation. \par=20 \par To furnish a further example a from a different legislative domain: = The English cooperative building societies (which have thus far financed the building of a quarter of all dwellings in England) were = legislatively only specially provided for in 1836, after they had been = placed in the Act of 1793 under "friendly societies" and previously even = under "common law societies". \par=20 \par When special legi slation for goods warrants comes to be introduced (which our time is = certainty not capable of doing), it will be useful to remember the old = banks of issue. Goods warrants are private notes but without the = senseless undertaking of the banks of issue to exc hange them at all times for precious metals. Our legislators also have = hitherto misapprehended the nature of banks of issue. Their viewpoint = was that of Heilfron, as expressed in his (none the less highly = valuable) work "Geld\_, Bank\_ and Boersenrecht" (Monetary, Banking, and Stock Exchange Law), 2nd, = edition, p. 36. There he formulated the prevailing conception as = follows:=20 \par "The privilege of issuing notes furnishes the bank concerned with = the possibility of securing for itself capital by the issue of = banknotes, for the delivery of which it has to pay no interest to the = seller." \par=20 \par But no privilege, however extensive, with the exception of a forced = currency, can "secure capital" to a bank of issue. It can only permit = existing capital, which cannot be transferred = }{\b\i\fs24\lang1033\cgrid0 as a whole}{\b\fs24\lang1033\cgrid0=20 , to be transferred piecemeal, in accordance with the denominations of = the notes, or to speak more correctly, to aid in transferring them. The = economic effect is nevertheless so great that it makes the impression of = a "creation out of nothing".=20 (See Bendixen's excellent chapter "The Creation of Money", in "Geld and = Kapital" (Money and Capital), 2nd. edition, p. 47.)=20 \par Many people today still believe in the feasibility of economically = creating something out of nothing, and it is therefore not strange when = they demand that the exercise of such a far\_ reaching and dangerous power should be strictly reserved for the State, = just as among the ancient Romans, the exercise of magic \_ in which men = then generally believed - was a State privilege. Indeed, dur ing these last few years a new expression has been coined to express = this power, strictly, reserved to the State, of creating capital out of = nothing in the legal form of credit money: "Kredithoheit des Staates" = (Credit Sovereignty of the State), whereby t he parthes concerned by no means intend to describe the prosaic power to = raise forced loans, in emergencies, but rather the right to resort to = this mysterious power of "creation". \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 50 \par That which the inventors of "credit sovereignty" but dimly = apprehended, is a fact clearly enunciated by Adam Smith: In the chapter = "Of Money", in his "Wealth of Nations", he states:=20 \par "A prince, who should enact that a certain proportion of his taxes=20 should be paid in a paper money of a certain kind, might thereby give a = value to this paper money, even though the term of its final discharge = and redemption should depend altogether upon the will of the prince ..." = (p. 366 ) \par=20 \par The banknotes of almost all c ountries represent actually such a paper money today and are, properly = speaking; no longer banknotes whose value depends on their flowing back = to the bank. As long as the intensity of the reflux to the bank is = decisive for the value of a note, its legal=20 nature is that of a goods warrant, as some economists, among them = Bendixen, have rightly surmised. ("Das Wesen des Geldes" \_ The Nature = of Money, 3rd. edition, p. 77.)=20 \par This recognition throws new light on the goods warrant as well as = on properly supported=20 banknotes; but it would lead us beyond the framework of this paper to = enter into particulars on the subject. We may, however, mention that = when once a banknote is regarded as a goods warrant, we can see why it = should not be covered by frozen possessions,=20 such as houses, since the holder of a goods warrant of a low = denomination cannot possibly claim a house on this with it. (Apposite = and by no means obsolete. remarks on this topic will be found in = Roscher's "National\_ Oekonomik des Handels und Gewerbfleisses.) \par=20 \par The possibility of forthwith exchanging, at its face value, any = goods warrant for goods or services in daily demand, regardless of its = market rate at the time, is therefore decisive for its circulating = capacity. This point is so important that we shall=20 illustrate it by a further example. \par=20 \par Suppose a theatre that pays the actor's fees and other expenditure = items in theatre tickets. This was not uncommon with West American = itinerant theatre companies in olden days, about the time when the = Pacific Railway wa s opened, and occurs even today here and there. The company arrives = (say) in the morning in a small country town, where there are many = theatre lovers, but where, as in Western America generally, there is a = lack of ready money. In the circumstances, the ac t ors help themselves and the inhabitants by making all sorts of purchases = during the morning, for which they pay with, theatre-tickets. In the = course of the day the tickets circulate in the locality and are = eventually retained by those desirous of attendin g the performance. In the evening the theatre\_goers present their = tickets which are then clipped by the attendants. \par It might certainly happen that, for instance, no one accepted the = dollar tickets at a higher rate than (say) 90 cents. It is nevertheless = pos sible and even probable, that the tickets mediated many transactions, if = only among business acquaintances. The baker, who was perhaps the first = to receive a dollar bill from an actor, passes it on to his tailor, to = whom he has long owed a dollar for a mi n or repair, and even adds 10 cents to induce the tailor to accept it. In = his turn, the tailor pays his carpenter an outstanding account perhaps = also adding 10 cents, and the carpenter retains the ticket because he = had long looked forward to attending a the atrical performance. By the evening the tickets have undoubtedly reached = those who desired to see the play, and by 9 p.m. the tickets, with their = possible discounts, have disappeared from circulation \par=20 \par The above example shows that an inflation through goods warrants \_ = to which subject we shall later return \_ is impossible however ill-intentioned the theatrical manager might be. = Suppose the company, instead of issuing tickets for 500 seats, which the = playhouse accommodates, issued 5.000. Great crowds would swa rm around the theatre booking office in the evening and the value of a = dollar ticket among those at the rear of the queue would sink to a few = cents. Many ticket\_ holders would suffer because they could not get into the theatre. The = general price level in the locality would, however, remain quite = unaffected. \par All would be different, of course, if the tickets, like the = historic greenbacks, were subject to general compulsory acceptance. Then = the 4,500 people for whom there was no room in the theatre, would next=20 morning make purchases with their tickets and the price level would = necessarily rise in proportion. It is remarkable that in the whole = post\_ war literature on monetary questions the distinction is almost never = drawn between means of payment with general compulsory acceptance and = without. It is, on the \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 51=20 \par contrary, characteristic of this literature that it applies = statements relating correctly to forced money (fiat or legal tende r money) forthwith and uncritically to every kind of means of payment. A = century and a half back such confusion would have been impossible, but = in a few post\_ war standard works the expression "forced currency" does not occur at = all although they have much to say about inflation!=20 \par=20 \par (Very few, perhaps only one in a thousand, points out the = connection between legal tender and inflation, which was formerly taken = for granted. And the realization that Gresham's Law applies only to = legal tender currency has also r emained an insight of a few only. - J.Z., 22.11.01.) \par=20 \par Our example teaches us a further lesson, namely the advantages of = decentralization. If perchance all West American theatres had belonged = to one big company and the sub-manager at Denver had issued too m any tickets resulting in the tickets selling at a discount, the company = might easily have come to argue mistakenly: "We are issuing too many = tickets. At Denver they are already setting at a discount. We must = therefore everywhere reduce the number issued," =20 This would quite unnecessarily deprive many people of the benefit of a = theatrical performance and, equally unnecessarily the company would have = its takings reduced. But if the theatres were not controlled by one = company but by many, a theatre in Santa Fe=20 would not reduce the number of its performances because there is a = discount on theatre tickets at Denver. \par=20 \par These reflections apply quite generally to paper currency, only = that an understanding of the effects of a centrally organized paper = money issue, possi bly even with compulsory acceptance, is not as easy as an understanding = of the finances of theatres and theatre trusts. But our example does = suggest that the centralized issue of forced paper currency may well = lead to inflation in one portion of the econo m y whilst another portion is at the same time severely suffering from = deflation. The coexistence if inflation and deflation is, indeed, = symptomatic of the economic life of all countries issuing, forced paper = currency. (Already Adolf Wagner noted this in 18 68 in his "Die russische Papierwaehrung" \_ The Russian Paper Currency = \_ p. 13. In our time Dr. Rittershausen seems to have been the first to = direct attention to this. ("Neubau des deutschen Kreditsystems", \_ = Reform of the German Credit System \_ , Berlin 1932) \par=20 \par The supply of a country with means of payment may also be compared = to the supply of a large and hilly park with water, If the gardener is = restricted to using only one large and fixed water pipe, then it is = inevitable that the hills should remain dry an d the valleys become swampy. Today the central banks of issue of all = countries are by their very existence a comparably serious obstacle to = finding work for the unemployed. They ought to disappear, not excepting = the 250 years old Bank of England. \par=20 \par Attentio n may also be called here to a very simple expedient wherewith, in times = gone by some States protected the parity of their paper money even = against small fluctuations common in normal circumstances, and which = could be today also advantageously applied to=20 goods warrants. This expedient consists in the issuer only accepting = means of payment other than his own paper at a discount.=20 \par It seems that this expedient was first introduced in Prussia after = the Napoleonic wars. The Act of 7 April 1815 provided that hal f the taxes should be paid in Treasury warrants. For every thaler of = Treasury warrants missing, even if paid in gold or silver, a fine of 2 = groschen was imposed. The result was that, already in 1816, the Prussian = Treasury Warrants stood a little above par =20 on the German stock exchanges, although, seeing the political and = economic conditions then prevailing, a discount would have seemed more = likely. In the principles and business provisions for a Work Supply Bank = suggested in a previous section, arrangements were also made for "smart\_money" ( a small penalty - J.Z.) when means = of payment other than goods warrants were paid into the Bank. \par=20 \par Historians may be also interested in the following observation. The = Prussian Minister Von Stein was led to the issue of Tre asury Warrants through reading in Adam Smith the passage above quoted: = "When a prince . ." Stein's biography by Pertz contains detailed = statements on this subject, which are particularly interesting for our = time, but which cannot be discussed in this pape r. \par=20 \par (Rittershausen compiled still older legislation on tax foundation = in 1945, when he expected most libraries to be destroyed: Die aeltere = deutsche Gesetzgebung zum Staatspapiergeld (The Older German Legislation = on State Paper Money), 29 pages, in PP 641.=20 - J. Z., 22.11.01.) \par=20 \par (7) E)Is a Homogeneous Circulating Medium the Ideal? \par=20 \par Uniformity in monetary circulation is certainly advantageous but it = must not be bought at too high a price. Germany, for example, possessed = in 1870, over 30 private banks of issue. In addition, 2 railway = companies and several States issued paper money. \par (This leads to the still unanswered question: To what extent did = the then existing degree of monetary freedom in Germany contribute to = its rapid industrialization? - J.Z., 22.11.01.) \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 52 \par Altogether, about 120 different kinds of paper money are said to = have been then in circulation. At the time it was also customary for = interest coupons to circulate, for a whi le, as money. Complaints concerning the heterogeneity of the means of = payment were frequent, particularly in the reports of chambers of = commerce, where special attention was paid to them. When, later, the = Reichs-banknotes became more and more the principa l means of payment, satisfaction was universally expressed among = traders. \par But the numerous centres supplying means of payment possessed a = certain advantage recognized only by the few: monetary crises, such as = we are experiencing in our age, were less frequent and at all evens not = so catastrophic as today. Interest, even on long \_term loans seldom exceeded 4 %, and bills could sometimes be = discounted at 2% at the private banks of issue. More particularly, money = to pay wages with was easier to raise than today. \par=20 \par Then the Reichsbank with its imposing privileges and the high = denominations of its notes, of which the lowest was for 100 marks, was = established. (This is forgotten today.) Parliamentarism, which was then = only in its infancy in German, immediately reveal ed its worst side by passing paragr. 3 of the Bank Act, where the = groundless prejudices of the few members who were esteemed experts in = monetary matters, became authoritative for decades in the economic life = in Germany. Fancy prohibiting notes under 100 m a rks to a country like Germany! Bismarck, who at the time was greatly = preoccupied with foreign affairs, resisted for a few years the proposed = innovations, with their tendency to unify and centralize monetary = matters. Accordingly, the Reichsbank did not ope n its doors before 1876. Almost immediately afterwards a shortage in = means of payment broke out, only comparable with that of to\- day. In 1873 already, the crisis began with a terrible panic on the = Stock Exchange, grew worse year by year, and apparently reac hed its climax in 1878, to judge by the number of forced public = auctions. As many hold, the first good year thereafter was that of 1889. = (Note by the Editor: The Bank Act mentioned here by the author was dated = 14/3/1875. But already the Coinage Act of 9/7 /1873 had prohibited the issue of notes of smaller denominations than = 100 marks \_ and would thus have been a factor in the crisis. ) \par=20 \par America found itself in a similar predicament after the Civil War = of 1861-\-1864. During that war the private banks of issue were paralyzed by an annual tax of 10% on their note circulation, an = Act that, by the way, is still in force. The prevailing money shortage = led in many localities to an open rebellion of the workers. \par An economy has only the choice between reconciling itse lf to a certain inconvenience due to the multiplicity of means of = payment, with the advantage of being well supplied with money and work, = and possessing a homogeneous legal tender and suffering from a shortage = of money and work. Nor should we over\_ estimate this inconvenience, as primarily only tourists and shopkeepers are = affected thereby. But the latter emphatically prefer to sell much, for = somewhat cumbersome means of payment, rather than to sell very little = for uniform means of payment. Furthermore it i s probably true that in 1869 one could travel through Germany, with its = 120 kinds of means of payment, for 4 weeks, with less inconvenience = pecuniarily than would be experienced in a 4 days' journey from London = to Constantinople today, when the currency ch anges 7 or 8 times and this in a most inconvenient manner. \par=20 \par (7) F) Security against Inflation of Paper Money \par=20 \par In order to discover whether a means of payment has an inflationary = tendency, attempts have been made during the post\_war period to = ascertain wheth er the volume of goods produced and marketed fluctuated proportionally = with the volume of paper money issued. If that appeared to be the case, = the danger of an inflation was discounted. Milhaud had also to examine = this criterion and was able to show that=20 h is purchasing certificates withstood that test. It may be noted, = however, that owing to the uncertainty of the underlying facts (which = are scarcely ever ascertainable statistically), the criterion itself is = dubious. On the other hand, a far simpler criter ion exists, one which has proved reliable for decades and even for = centuries, namely the }{\b\i\fs24\lang1033\cgrid0 discount in a free = market }{\b\fs24\lang1033\cgrid0=20 or, what amounts to the same thing, the price of bars of precious metal = in the open market. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 53 \par The attitude of Governments, of public opinion, of a large section = of the scientific world, and above all of "practical men", towards an = open market in precious metals distinguishes perhaps more definitely = than any other m ark our own age from the ages that have preceded it. Here is a subject = for the sociologist!=20 \par=20 \par Fundamentally, this attitude is connected with the passing of = traditionalism which for some decades has no longer dominated the = governmental policies of most coun tries. A government influenced by traditions knows that however great = the economic distress, inflation cannot provide resources which could = not be secured more advantageously, more conveniently, and with greater = justice in other ways and with less danger=20 for the government. Such a govern\-ment has learnt this from the bitter = experience of its predecessors and its neighbors. Nor does it believe \_ = just because it has a tradition \_ in "the altogether different and wholly unprecedented conditions" which = the man=20 without a tradition scents everywhere. It knows, on the contrary, that = in every social order and at all times, the economic laws are just as = immutable as the laws of nature of which they form an integral part. A = government basing itself on traditions that are sufficiently old and embrace public life as a whole, forms with its = people a natural alliance directed against the inflationists and = coin\_debasers who have always existed and will always \par exist. In a country with such a government \_ bad as it may = otherwise be \_ it is con\- sidered a primary right of the people to refuse to accept suspicious = means of payment, paper ones especially. In a country so governed, = science, which is the proper guardi\-an of tradition, will not fail to = brand the suppression of that p opular right as despotic, indeed as an action which, in given = circumstances, releases the individual from \par his duties as a subject. Verily, a Government which inflates is = morally no better than that of some chiefs on the Congo who made raids = on their subjects and sold them into slavery. \par=20 \par We find it difficult today to realize the mentality of such a = ruler, a ruler who }{\b\i\fs24\lang1033\cgrid0 protects = }{\b\fs24\lang1033\cgrid0=20 the critics and the men of science when, alarmed by the imminence of an = inflation they raise their voices in protest, and does not rather = imprison them. \par A concrete illustration is perhaps in place here. Adolf Wagner, in = his day one of the most esteemed economists and a professor at Dorpat, = was able to publish in 1868 his work "Die russische Papierwaehrung" (The = Russian Paper Currency) at Riga, that is on Russian soil, in which work he condemned in scathing = terms forced currencies, without the government of Alexander II, the = noble "czar liberator", exiling him to Siberia. \par Wagner states, on page 27:=20 \par "From what precedes, we learn what a terrible financi\-al power the = issue of paper money may become in the hands of an unscrupulous = Government. What by comparison, are the most exorbitant taxes and forced = loans and the most ex\- tensive applications of force which a Government might possess for car rying these two measures into effect? A forced paper currency represents = a far more powerful and yet far simpler screw for extorting the wealth = desired since, through the medium of the processes of production, = marketing and pricing \_ that is, by means of the ordi\-nary economic laws \_ it places the = wealth of the people at the disposal of the govern\-ment, indeed playing = it into its hands." \par Roscher cites this passage approvingly. Subsequently, Adolf Wagner = settled in Prussia, a country often decried as despotically governed, = but which has played a most honorable part in financial history and = where certainly economic traditions ru\- led, traditions that were still powerful in Bismarck's time.=20 \par=20 \par Here it is not a question of the class prejudices entertained by = the nobility, the church, etc., which the word "tradition" first = suggests, but of something far more important. The world has perhaps = known financial legislation as }{ \b\i\fs24\lang1033\cgrid0 honest}{\b\fs24\lang1033\cgrid0 as that of = Old Prussia, but not more ho\-nest. This is illustrated by the fact that = the ri ght of the people to refuse dubious paper money was recognized and this = not only tacitly but expressly. Prussia's rulers knew that here was the = real re\_insurance of the State against inflation.=20 \par Hence neither during the Revolution of 1848 did Prussia introduce = compulsory acceptance for notes, \par nor a forced currency (as other governments did), nor was paper = legal tender during the wars of 1864 1866, or 1870.=20 \par Already on the occasion of the first issue of notes under Frederick = the Great in 1766, the King point ed out both in the "Gesetzblatt" (Law Gazette) as well as in an edict = addressed to the Supreme Court of Appeal that the acceptance of notes in = private dealings was optional. After quite brief experien\-ces of a = forced \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 54=20 \par currency during the Napoleonic wars, an order of 7 September 1814 = definitely revoked the forced nature of the currency. This was confirmed = on 1 March 1815. When in 1846, new bank regulations appeared, paragr. 33 provided that the acceptance of notes should not be compulsory. In the = coinage treaty of 1857, under pressure from Prussia, all German States = even undertook not to introduce any inconvertible forced currency. The = Act of 30 April 1874, which created the R e ich Treasury Notes (Reichskassenscheine), expressly declared in paragr. = 5 that they were not subject to compulsory acceptance. Similarly, = paragr, 2 of the Bank Act of 875 provided that the Reich banknotes were = not subject to compulsory acceptance in priva te dealings. Indeed, even the Rentenbank Act of 1923 rejected the = compulsory acceptance of Rentenbank notes in private dealings. (State = pay offices in Prussia and, later, in Germany generally were bound to = accept them.) \par Havenstein, Schacht's predecessor, wa s responsible for the break with the old tradition. Havenstein put = trough the Act of 1909, which made the acceptance of Reich banknotes = compulsory, and the same Havenstein created later, with the aid of this = Act and in conjunction with a \_ war order of September 1914, the greatest inflation of all time! \par=20 \par (During the preliminary discussions of this Act it was stated that = the next war could not be conducted without legal tender. That view was = accepted then and it is probably correct for an as senseless and vas t war. Without resorting to the money printing presses - and the issue = of government "insecurities", all governments, engaged in this extremely = wasteful and bloody war, would have been bankrupt within a few weeks to = months at most. As it was, legal tender =20 enabled them to expropriate their subjects' incomes and to an extent = that most of them did not understand and with this plunder or paper = purchasing power - such paper money was aptly called 'requisitioning = certificates', they were enabled to carry on this senseless war for all too many years. And it led directly and = indirectly to the Soviet and the Nazi regimes as well. Under monetary = freedom neither the German Great Inflation nor the Great Depression = would have happened. - J. Z., 22.11.01.) \par=20 \par Unfortunately, through the Dawes Acts of 1924, the compulsory = acceptance was again ordained for German paper money and therewith = Germany was deprived of its best criterion as to whether there was = inflation or not.=20 \par Here we may remark that cases of refusal to accept non\_ inflated paper money are markedly absent where there is no compulsory = acceptance. During the German Bank Enquiry of 1908 only a single case of = this kind could be definitely cited, a case which occurred in 1876 in = Munich. (Protokolle der deutschen Bank\_ Enquete von 1908, volume I, p. 192.) \par=20 \par Old Prussia can also claim the honor of having on several occasions = recognized in time certain social evils as due to deflation and to have = neutralized them through the creation or tolerance of additional means = of payment of a non\_ inflationary character. For example, in 1848, owing to a shortage of = means of payment, a considerable proportion of the working classes could = not be paid their wages and serious political and social dangers loomed = ahead. Thereupon the Prussian Gov ernment, by the Act of 15 April 1848, established 13 loan offices with = 11 sub\_agencies; and these issued loan warrants. (See L. Feuchtwanger, = "Die Darlehenskassen des deutschen Reichs" \_The Loan Offices of the = German Reich \_ , Berlin 1918.) These warrants w ere placed from the first on tax foundation, that is, every citizen was = entitled to pay his taxes with these warrants taken a their nominal = value, regardless of their market rate at the time being. Although = altogether only about 7 million thalers were iss u ed and the monetary circulation was therefore scarcely raised by a = hundredth part, the effect was most gratifying, and, on the whole, the = workers received their wages. (Here should be noted that, contrary to a = widespread prejudice, the workers constituted =20 then almost as large a proportion of the total population as today.) The = Prussian Government, however, was not content with the establishment of = loan offices, and by its "Normative Provisions" (Normativ Bestimmungen) = of 15 September 1848, permitted the es t ablishment of private banks of issue. That by means of legally = unenforced notes or loan office warrants (That is, in the absence of = legal tender for them! - J.Z., 22.11.01.) an inflation might be = engendered never occurred to any noted politician or writer of the time. \par=20 \par Not even as Late as 1907, when a monetary crisis broke out, were = the old traditions forgotten in Germany. Koch, then President of the = Reichsbank, was not the kind of man to be misled by cries such as = "crisis through speculation", and the like . He clearly recognized that the crisis was due to a shortage of means = of payment and acted accordingly. First, he saw to it that Germany = obtained the best cheque legislation in the world, where the clearing = cheque received special attention. (Not to be c o nfused with the English crossed cheque.) He then arranged for the = introduction of the postal cheque system in Germany. After this he = induced the Federal Council (Bundesrat) to increase the number of Reich = Treasury Notes in smaller denominations. Already s h ortly before the depression, which he saw coming, he had carried his = point that 20 and 50 mark banknotes should be issued, contrary to the = old Bank Act which unwisely enough, permitted only the issue of = banknotes of 100 marks and over. We see here how Koc h, within the limits set for him, endeavoured to multiply Germanys means = of payment. He died in the beginning of 1908, all too soon for Germany. = He was succeeded by Havenstein, and two years later Germany saw \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 55=20 \par introduced the compulsory acceptance of its paper money! \par=20 \par It may not be amiss here to call attention to the following = historical facts. Napoleon I. owed his authority at least as much to = steadying the currency as to his v ictories. He never ceased repeating that under his rule there was no = fear of a forced currency and won over thereby the working and the = middle classes. In 1850, shortly before Napoleon III. had himself = proclaimed emperor, he rescinded the forced legal ten der for banknotes introduced in 1848 and made himself thereby popular = among those who were afraid of inflation But on 11 August 1870, he = permitted the re\_ establishment of the forced currency (a wholly superfluous measure, as = events proved ). Three weeks lat er he had lost his throne and his liberty. What turn the history of = Europe would have taken if William II. had opposed the forced legal = tender introduced by the Act of 1909, it would be difficult to say. That = through an edict in 1807, famous in the histor y of Prussia and directed against a forced currency, Frederick William = III. not only saved the Prussian economy, but also his throne, appears = certain. \par=20 \par The policy of the German Government overthrown by the Revolution of = January 1933, was also completely des titute of the realistic and traditional spirit that had formerly = animated German monetary policy, Whilst on the rural markets, owing to = the money shortage, tobacco had long been bartered for pigs and = vegetables for soap, as in Africa, Chancellor Bruening, invested with dictatorial powers, deemed it expedient to intensify the = general money shortage by an order of 6 October 1931 (Reichsgesetzblatt, = S. 562). Thereby the Reich Minister of Finance was empowered to prohibit = all economic self\_ help involving the is sue of emergency money, on pain of the severest penalties. This = Minister, Dietrich, then issued the order of 30 October 1931 = (Reichsgesetzblatt, p. 669) which was so flagrantly inconsistent with = what the economic situation demanded, that it is here reprod uced: \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = Paragraph 1. \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par "For the purpose of this Act and irrespective of whether the = documents shall have been already declared emergency money by other = legal ordinances, the following shall be deemed emergency money: \par=20 \par 1. stamps, coins, warrants or other docum ents, made out for a sum of money and utilized in economic dealings as a = substitute for money issued respectively by the Reich, the Reichsbank, = the German Rentenbank, or a private bank of issue, even when the are = made out in denominations in which money h as not been issued; \par=20 \par 2. cheques or other orders intended or suitable for being used as = means of payment in economic dealings and made out by filling in printed = forms, when in these forms already at the time of their issue a defined = or definable sum of money or a defined or definable quantity of fungible objects is indicated; = equivalent to such cheques or other orders shall be deemed all documents = which in substance serve the same economic purpose, even when they do = not satisfy the requirements of the Civil=20 Law regarding cheques and orders (e.g., compensation cheques, rye = orders); \par=20 \par 3. documents made out in other calculating units than the money = mentioned under no. 1, insofar as they are intended or suitable for use = in economic dealings as a means of payment or exchange (e g., Waera = warrants, building shares, barter slips). =20 \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = Paragraph 2. \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par (1) Forbidden are: \par=20 \par 1. the manufacture, issue, circulation, and acceptance of emergency = money, \par=20 \par 2. the manufacture, issue, circulation and acceptance of printed = forms for cheques and orders of the kind =20 \par indicated in paragr. 1, no. 2, \par=20 \par 3. the invitation to acquire emergency money and printed forms for = cheques and orders of the kind =20 \par indicated in paragr. 1 no. 2, so far as the invitation is made = publicly or through dissemination of=20 \par writings or other statements, \par=20 \par 4. declaration of readiness to accept emergency money, so far as = this declaration is made publicly or=20 \par through dissemination of writings or other statements. \par=20 \par (2) From the prohibition, according to paragr. 1, shall b e = exempted the passing\_on and the acceptance of emergency money, so far = as these acts serve the purpose of withdrawing the emergency money from = circulation. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par=20 \par=20 \par=20 \par=20 \par 56 \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = Paragraph 3. \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 (1) Emergency money of the kind indicated in paragr. 1, nos. 1 and 3 and = already issued prior to the coming into force of this order, the issuer = - and emergency money of the kind indicated in paragr. 1 no, 2, and = already issued prior to t he coming into force of this order, the party indicated \_ shall = withdraw from circulation and destroy within a period not exceeding one = month after this order shall have come into force.=20 \par Emergency money issued prior to the coming into force of this order = and which is not withdrawn from circulation within the time specified in = the preceding sentence shall become invalid after the expiration of this = period, insofar as it shall not have been declared invalid pursuant to = other legal ordinances at an earlier p oint of time. Claims arising out of legal relations governing the issue = and acceptance of emergency money, shall remain unaffected. \par=20 \par (2) Emergency money issued after the coming into force of this = order shall be deemed invalid. \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = Paragraph 4. \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 (1) Anyone = cont ravening the provisions of paragr. 2, 3, shall, without prejudice to any = proceedings taken pursuant to other provisions, be liable to a fine up = to ten-thousand Reichsmarks, in lieu of which, in case of non-\- recovery, imprisonment up to six weeks may be imposed. \par=20 \par (2) Emergency money, whereto the action described in paragr. 1 = refers, shall be seized and withdrawn. The moulds and other requisites = necessary for its production shall be liable to seizure and withdrawal. = Their seizure and withdrawal shall be deeme d lawful, even when the objects do not belong to the producer or to a = participator. \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = Paragraph 5. \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par Claims against the Reich for indemnification are not established by = this order. \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = Paragraph 6. \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 This order = shall enter into force on the day of its publication.=20 \par=20 \par Berlin, 30 October 1931.=20 \par The Minister of Finance.=20 \par H. Dietrich \par=20 \par That the Finance Minister should have prohibited the issue of Waera = warrants, building shares and similar "means of payment", which were to = be "covered" by houses, was natural, although=20 no fresh legislation was required for this. But that he should have = confused means of payment without a sufficient reflux with others like = e.g. Milhaud"s goods warrants, illustrates the measure of economic = insight possessed by that Government and explains =20 why, under its rule, not even half the productive apparatus of Germany = was profitably exploited, Nor did the Government of that day show the = least trace of an understanding that unemployment is not a problem in = dispensing charity but one of organizing the country socially, or, more correctly monetarily, and that hence the = re\_ employment of the workless does not demand sacrifices of the people but = only a little thought on the part of our highest official economic = advisers, which, however, was unfortunately not forthcoming.=20 \par What a difference between the reckless utterances of a Dietrich and = others, and the words spoken by Adolf Hitler on 30 January 1934!=20 \par "The German people" he said "comprise millions of honest workers = who are unemployed although anxious to wo rk. It comprises millions who are intellectually and manually highly = proficient and trained. Its vast masses also yearn for higher ways of = living and learning. And, lastly, its soil offers the possibility of = increasing the quantity of foodstuffs and its r aw materials that of augmenting its output of commodities. It is = therefore a problem of intelligence, will, and determination to = reconcile this call for products with the possibility of producing = them." \par In truth, the danger, even for the best\_intentioned a nd most resolute statesmen, the most determined to grapple with the = scourge of unemployment, is that, being unsuspecting ly prisoners of = hallowed conceptions which appear unchallengeable, they overlook the = dangers inherent in a forced currency and, at the same time, do not appreciate the ease of escaping an inflation by = holding fast to a free exchange \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=20 \par 57=20 \par rate and to a free market for precious metals. Indeed, they are, on = the contrary, encouraged to believe that a free market impedes the = re\-employment of the jobless. \par=20 \par A paper currency which no one is compelled to accept at par is, = what English technicians call "foolproof" against inflation. Even = blunders cannot produce an inflat ion, for when in the open market paper depreciates, the debtors of the = issuing centre immediately take advantage of this, secure depreciated = paper money, and re\_ pay their debts therewith to the issuing centre at par. Thus the = depreciated paper money is withdrawn from circulation, and the issuing = centre and not the general economy suffers.=20 \par=20 \par Apparent exceptions only prove the rule. In 1931 and 1932, for = instance, some municipalities in Silesia financed the construction of a = few highways by issuing goods warr ants to the laborers. At the same time they declined to accept these = warrants, to an unlimited amount and at their face value, in payment of = taxes. The sufferers were the shopkeepers who had accepted the warrants = from the laborers at their face value, but =20 themselves could not purchase anything with those warrants. To enact = special legislation against this, as unfortunately happened, was quite = unnecessary. The current legislation against fraud and that relating to = municipal loans, would have entirely suffic ed. In order to escape punishment, the issuers would have had to prove = that they could not have foreseen the result. \par=20 \par The following observations on compulsory acceptance are apposite in = the above connection.=20 \par=20 \par The right to refuse suspicious means of payment must have for its = complement the obligation of the public pay offices to accept at their = }{\b\i\fs24\lang1033\cgrid0 face value }{\b\fs24\lang1033\cgrid0=20 State banknotes, State paper money, etc., even if these stand below par. = \par But this protection against inflation may be considerably = strengthened. It might, or rather should, be legislatively provided that = the civil list of the head or heads of the State should be paid = exclusively in paper money.=20 \par Where Milhaud's goods warrants may be used for the payment of = taxes, they should be allocated first and foremost=20 to civil list payments. One could, indeed, proceed much further along = this line and pay with these warrants all civil service salaries = exceeding three times the average income. Thus the most intelligent = section of the population would be induced to take a n interest in preserving the parity of the circulating p\-aper tokens = and be inclined to keep a close watch over them. In such a case, too, = the high salaries paid would arouse less envy and would be less exposed = to reduction in times of unrest. \par=20 \par The same sim ple device capable of preventing the inflation of State paper money, = also rules out any inflation of the goods warrants proposed by Milhaud. = Should anything happen that might lead to inflation in the case of a = forced currency, the same cause, when there i s a free market rate for paper money, would merely lead to a discount, = compelling the issuing centre to stop issuing further supplies of goods = warrants. This would constitute a more effective barrier against = excessive issues than any legislation or than an y supervisory authority basing itself on statistics of production. \par=20 \par No discount can be created, save when there is a = }{\b\i\fs24\lang1033\cgrid0 market }{\b\fs24\lang1033\cgrid0 for the = goods warrants. The establishment of such a market should be furthered = in every way. The existing stock exchanges are perhaps not equal to the task of promoting a free trade in goods warrants.=20 \par=20 \par (And naturally, in purchasing certificates and international = clearing certificates used for external trading. The German "Gutscheine" = - goods warrants - unfortunately covers both. - The Editor).=20 \par=20 \par If this is the case some merchants or banks might undertake this = functions and announce at very brief intervals the rates at which they = are prepared to sell or buy the warrants. \par=20 \par From a communist or even a popular viewpoint, the objection might = be raised to this new type of money market that it would throw the gates = wide open to speculation. But speculation, in the sense conceived here, = could only be carried on through }{ \b\i\fs24\lang1033\cgrid0 eliminating}{\b\fs24\lang1033\cgrid0 the = market, be it by deceiving it or by placing it in fetters. Economic = history affords no example in proof of the opposite contention. \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 (8) = CONCLUSIONS \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par In all older text\_books on political economy a chapter will be = found dealing with the cultural significance of metals and particularly = of the precious metals as standards of value. Today the following = reflections on the subject may not be unnecessary: \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 58 \par Culture does not consist in this that from every open window a = loudspeaker should assail our ears, nor in that by means of a telephone we may rouse out of his = sleep at dead of night some acquaintance living a thousand miles away = for the purpose of conveying some unimportant information, but rather in = that every one can live his own life that }{\b\i\fs24\lang1033\cgrid0 contracts}{\b\fs24\lang1033\cgrid0 = supersede }{\b\i\fs24\lang1033\cgrid0 = oppression}{\b\fs24\lang1033\cgrid0 , that }{\b\i\fs24\lang1033\cgrid0 = exchange of services}{\b\fs24\lang1033\cgrid0 replaces }{ \b\i\fs24\lang1033\cgrid0 slavery, free = expression}{\b\fs24\lang1033\cgrid0 of opinion = }{\b\i\fs24\lang1033\cgrid0 adulation}{\b\fs24\lang1033\cgrid0 and = }{\b\i\fs24\lang1033\cgrid0 education mechanical = training.}{\b\fs24\lang1033\cgrid0=20 (This holds also of the armed forces, on which subject such successful = generals as the Prussian leaders of 1813, Scharnhorst and others, may be = consulted.) \par=20 \par That something so purely technical as the use of metals and = especially the use of the precious metals as a standard of value, should = have }{\b\i\fs24\lang1033\cgrid0 cultural }{\b\fs24\lang1033\cgrid0=20 effects at all, is not only forgotten in our day, but has ap parently become quite incomprehensible. No wonder! By far the majority = of individuals living today has never seen a gold coin let alone paid = with it; not even silver coins, far the copper discs, with a slight = cover of silver, which now circulate the world , over do not deserve to be called silver coins. People should make sure = whether their children still understand the fairy tales in the Arabian = Nights where almost on every page gold coins are referred to. But the = last twenty years have seen so many more c hanges in monetary matters than the abolition of gold as a standard of = value.=20 \par The old ideal of a certain school of money theorists, according to = which money should be wholly detached from every concrete content and = built up as an entirety abstract unit, is realized today on the greater part of the globe. Our young people have = only had experience of currency units of an abstract character and they = have seen it pass that every government of every land, never mind what = its platform, claims the right to "regul ate" from time to time the currency unit, The = }{\b\i\fs24\lang1033\cgrid0 legitimacy}{\b\fs24\lang1033\cgrid0 of this = is not questioned by the press nor therefore by the population; only its = }{\b\i\fs24\lang1033\cgrid0 expediency }{ \b\fs24\lang1033\cgrid0 is discussed.=20 \par The terminology used in connection with currency changes has = gradually become very tempting and misleading The expressions employed = are as little understood by the people as is any obsolete ecclesiastical = jargon, but this makes them sound authoritative. \par=20 \par Moreover, phrases such as "protection of the people against foreign = speculators", are judiciou sly interspersed and convey the impression that the incomprehensible = portion of the statements finds in them somehow a logical justification = which cannot be understood by the uninitiated=20 \par=20 \par Consequently, how are the men, and especially the young, of this = generation to divine that the abolition of gold as the standard of value = means that a cultural treasure of inestimable value has been thrown = overboard?=20 \par=20 \par What facts are to suggest to them that they have become the slaves = of narrow-minded financial bureaucrat s and of certain conjunctural doctrinaires, priests of a science which = as regards experiential content stands below that of the old augurs and = astrologers (who also employed mathematics)?=20 \par=20 \par Why are the real conjunctural economists silent, seeing that they = know by experience that trend curves cannot be extrapolated?=20 \par=20 \par What is to teach youth that the rehabilitation of gold as the = standard of value would constitute the first step in their emancipation = and that they will continue in a state of barbarism as long as the = determination of values is left to the value\_ astrologers? \par=20 \par There is another obstacle to the return to gold as the standard of = value. The present generation has clearly perceived a fatal error of the = older generation, namely the error that gold and silver can never be universal means of payment or, expressed = differently, that never will sufficient quantities of precious metals be = at the disposal of mankind, to meet all monetary obligations.=20 \par=20 \par We have learnt that the whole civil law of pre\_war days,=20 insofar as it was founded on this conception, was based on a mistake, = But inasmuch as in their development men have not yet reached the stage = of having developed two brain cells for the two concepts "standard of = value" and "means of payment", they are obl iged to make shift with one brain cell for both concepts (as a future = anatomy will optically demonstrate). Thus, in abolishing the precious = metals as }{\b\i\fs24\lang1033\cgrid0 means of = payment}{\b\fs24\lang1033\cgrid0 , they abolished them also as }{ \b\i\fs24\lang1033\cgrid0 standards of value}{\b\fs24\lang1033\cgrid0 .=20 \par Much Less have they reached the subtle c onclusion that it might suffice to confer a forced rate on gold and = allow a free market to all other currency values and to paper money. = This would even have restored gold as a means of payment, although not = as the universal one, and, of course restored i t also as the standard of value. However, the pressure on the economic = life through every creditor being entitled to \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 59=20 \par claim payment in gold, would have been removed. A propos al, such as that of Milhaud, to abolish gold only as a means of payment = to which a creditor is entitled but to retain it as the standard of = value and as a means of payment always permissible to a debtor, has = therefore immense }{\b\i\fs24\lang1033\cgrid0=20 cultural}{\b\fs24\lang1033\cgrid0 significance.=20 \par=20 \par Here we must also quote H. L. Follin, as one of the very few who = have already visualized the problem. He states:=20 \par "It is amazing to what extent human relations are ruffled and = warped by diverse and so far autonomous institutions interfering in the = name of the n ational interest with monetary matters and by imposing on money the = double function of being the common denominator of values and the = vehicle for their transmission." ("Paroles d'un voyant") \par=20 \par No instance is known of an advanced culture, and above all of o ne which does not exclude the masses, which dispenses with the use of = metals and first and foremost, with the use of the precious metals as = the standard of value. Experience and reflections testify that men = require a standard of value which is at the same time }{\b\i\fs24\lang1033\cgrid0 concrete}{\b\fs24\lang1033\cgrid0 and = }{\b\i\fs24\lang1033\cgrid0 sufficiently stable}{\b\fs24\lang1033\cgrid0 = , admitting thus a comparison of past with present values.=20 \par For this purpose, as Chinas past and present indicate, even copper = will do and is certainly a hundred times preferable to a forced = currency. \par Without a concrete standard of value the past, and largely the = future, of mankind become uninteresting, and a tradition, without which = no culture can exist becomes impossible.=20 \par=20 \par Students of history might be inclined to cite in criticism of the = above the highly cultured Homeric age; but that forms no exception. It = has been noted that everywhere, centuries before coins were in general = use, metals in the form of bars \_ frequently also as rings or simple vessels \_ were employed in commerce = and helped compare values. (Concerning what precedes and follows, = consult Roscher, "Grundlagen der National\_ Oekonomik", par. 118 and 128.) Indeed, Adam Smiths view is by no means = groundless that the payments in "cattle" frequently mentioned by Homer, = unless referred to as "living", really were=20 made in coins called "cattle". Coins showing heads of oxen - belonging, = it is true, to post-\-Homeric times \_ have frequently been found in Greece and Asia Minor. Statements in the = Bible suggest that at least in the countries adjacent to Troy coins were = used long before Homer. \par=20 \par A traditionless society, one which neither concerns itself = consciously with past values nor thinks of bequeathing any to the coming = generations, may freely dispense with a concrete standard of value, = such as gold. (In such societies=20 as on the Congo or in Greenland, long\_term credit is unknown. Their = religions also place the creation of the world in the immediate past and = prophesy the end of the world for the immediate future.) It is also = noteworthy how so many semi\_ cultivated or uncul tivated but not uncivilized tribes, having no metallic currency, utilize = in bartering the '"Makuta standard", a standard which is conceptually = identical with our "index numbers standard". (Montesquieu's account of = the Makuta standard in use among the Negr o es of the African coast must have been regarded as sensational in his = day and has never ceased to be referred to.) The index standard appears = thus as a case of atavism rather than of real progress, although the = idea of an index standard only developed amo n g us in the nineteenth and twentieth centuries partly because of = mathematical considerations. It may be, however, freely granted that = works such as those of Irving Fisher ("The Purchasing Power of Money" = and "The Making of Index Numbers") rank very highly , and have perhaps opened new horizons even to mathematicians. \par=20 \par That the ancient Makuta standard, once probably world\_wide in = distribution, has reappeared in our time and is reaching the masses \_ e = ,g., through the Freeland, Free Money Movement \_ is signifi cant. One is tempted to suppose that it belongs to the order of ideas = inherited from the far\_off past, ideas which normally slumber in our = sub-consciousness and do not dominate us but which, in certain abnormal = circumstances, re\_ emerge, and this not seldom , in the form of fixed ideas. Such an abnormal circumstance (nowise = only commercial, and very largely psychical in nature) is the complete = disappearance of gold as a means of payment, whilst its stocks are = greater than they ever were at any past epoch in world history. \par=20 \par That after some centuries, namely after science had provided it = with stable weights, the metallic currency has allowed men to forget the = concept of an abstract standard of value and even the terms expressing = it in common speech, has been on e of its disadvantages. It is therefore perhaps wholesome that mankind = is \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 60=20 \par again being led to re-conceive that standard.=20 \par For a long time now the }{\b\i\fs24\lang1033\cgrid0 weight = units}{\b\fs24\lang1033\cgrid0 of gold and silver have been implicitly = also regarded as }{\b\i\fs24\lang1033\cgrid0 value = units}{\b\fs24\lang1033\cgrid0=20 . It is as if the concept of a meter had been confuses with the always = inaccurate meter measures used in shops. However, that mistake was far = less mischievous than the diametrically opposed one of the=20 partisans of an index currency, who believe that gold must cease to be = the standard of value because gold coins, in their way, are no more = accurate than the meter and liter measures in shops.=20 \par Furthermore, compared with the mistake of the index currency = extremists, who desire to embody their Makuta in a special paper money, = partly with "depreciation", \_ that is by the weekly affixing of stamps, and partly without, the old = mistake was very harmless. But the demand (frequently urged with almost = religious fana ticism) that not only should all payments be effected with index money, = but also credit transactions, \_ that is the exchange of present values = for future values, \_ ranks the new Makuta below the old. The supporters of the new Makuta = suffer markedly in a co mparison with the Madingo Negroes and others, in that the latter were = quite accustomed to separate the standard of value from means of payment = and in that, among them, the fullest freedom reigned as regards the = means of payment to be used. Not even the wo r st Negro despot, who sold his subjects into slavery, would have dared to = establish a monopoly in means of payment. And yet the demand for such = monopoly is specially characteristic of the index currency supporters of = today. (Compare, e.g., the volume, "Abs atzstockung and Arbeitslosigkeit and ihre Beseitigung - Sales Slump and = Unemployment and their Removal, Berlin 1927, where on p. 22 we read: = "The quantity of cash, of giro accounts and of banknotes may only be = produced by the currency office. \'85 " This volume is roughly the counterpart of Milhaud's volume on the = subject. In brief and pregnant form it records the opinions of many = modern anti\_metallists, together with their pseudo\_ proofs; conveying thus a knowledge of the system and of the mentality of = the partisans of index money. ) \par=20 \par Since the view is widely prevalent that the introduction of an = index money would offer a practical solution of the means of payment = problem and since this view already constitutes a serious obstacle to an = unprejudiced examination o f the Milhaud proposals and will, probably, be increasingly that in the = future, we may here employ against it at least the argumentum ad = hominem: how old in reality the concept of a pure goods currency is and = also how the mentality of men living in a barb aric society was actually able to produce it. \par Montesquieu's account in his "Esprit des Lois", book XXII, chapter = 8, occupies only about ten lines. Meanwhile much fuller accounts have = been published relating to counting money of Negro tribes, whence we = learn that Montesquieu correctly reportrd the facts and did not deserve = Galiani's and Jevons' strictures. That the name for the counting money = among the Madingos means "slave", indicates its origin, in, but does not = prove, as Galiani presumed, that the Negroes did not possess an abstract standard of value. In South Africa \_ e.g., = in Loango \_ the name of the money signified "piece of cotton"; yet the Loango = Negroes also counted in entirety abstract units. In the "Geschichte der = merkwuerdigsten Reisen" (History=20 of the Most Remarkable Voyages), (von Ehrmann, Frankfurt a/M, 1794, 13th = volume, pp. 326\_327) will be found a careful statement concerning the = value in "pieces" of all kinds of goods. 0n this subject the author = quoted by v. Ehrmann, Abb\'e9 Proyart, states e xplicitly: "When it is said that a slave costs 30 pieces, this does not = mean that it costs 30 pieces of stuff but 30 times an ideal value to = which the name of 'piece' is attached. Thus a single piece of stuff is = sometimes valued at two or three 'pieces', just as it sometimes requires several articles to form a single = 'piece'". (Histoire de Loanga, Kakongo, et autres et Royaumes d'Afrique, = Paris, 1819, first edition 1776, p. 116.)=20 \par But counting with counting money does not imply a remote past, as = many surmise. The 1879 edition of the "Muenz\_, Mass\_ , and Gewichtsbuch" (Coin, Measure, and Weight Book) of Noback, still = published the statement that at the mouth of the Niger it was a, general = custom to calculate in value units called "slave", but that the value=20 unit had nothing to do with actual slaves. A "counting slave" was valued = then at 20,000 Kauri shells, a real one at 4.000 to 40,000. It would be = interesting to discover whether eye\_ witnesses of this type of calculating value are still living and to = record their experiences. In Liberia \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 61 \par at that time the counting money was called "basket", quite in = accord with the language of present\_day English cost\_of\_living index = statisticians. According to Roscher\_ Poehlmann, (loc. cit., par 118, note 7), similar counting units have = been in use among numerous African, Asiatic, and even European peoples. = Thus it would be difficult to doubt that money of this kind was = generally known among 'semi\- -civilized peoples and in pre-historic times. In ancient China, too, = there existed not only counting money as among the Negroes, but an index = currency fluctuating with the price of cereals, but this was later = suppressed. (Ku\_Sui\_Lu, loc. cit.) \par=20 \par Counting money and, particularly, index numbers are most useful = inventions, but the latter are useless for currency purposes. However, = for long\_ term debt contracts index numbers may be helpful. One should not, = however, go too far in this respect and should therefore fix an appropriate free limit within which the value fluctuations of = gold as compared with the general price level would be ignored. (Perhaps = the first 20%.)=20 \par To calculate to too great a nicety would be like adjusting a bread = knife with a micro-meter scre w. How indifferent in practice even quite considerable fluctuations in = the value of gold are in relation to goods, was convincingly shown by = Jevons, "A Serious Fall in the Value of Gold" (1863), in the chapter = headed "Is a Remedy Needful or Possible?" \par=20 \par (Researches by Professor Rittershausen, who interviewed the often = only minor clerks, who actually supplied the prices used for price index = calculations, showed to him that this kind of input was quite = unreliable. GIGO applied here, too. - J.Z., 22.11.01.) \par=20 \par Th e concept of a standard of value is highly abstract, not less so than = the concepts of space and time. The concept of a standard of value as = such was first formed, which permitted bartering certain commodities for = certain other commodities. Already at that stage the concept of an index currency arose out of a multiplicity of = goods (Makuta). Later, the concept was formed of a = }{\b\i\fs24\lang1033\cgrid0 stable}{\b\fs24\lang1033\cgrid0=20 metallic standard of value, which permitted not only the exchange of = present possessions but also the exchange of present posses sions for future ones. The evolution of the brain cells for the concept = of the standard of value may have occupied thousands of years. \par However, far more abstract than the concept of the standard of = value is that of means of payment. Its full comprehension becomes only = possible at a very late evolutionary stage. . \par How much more primitive the concept of value is compared to that of = means of payment, is already noticeable in animals. Dogs for instance, = are certainly capable of making value distinctions within=20 their diminutive canine world. (This is not surprising, seeing that they = can form such abstract concepts as space and time.) But as regards = anything relating to barter dogs have not the faintest conception, = although the ideas of property, as well as of th e acquisition of property \_ even including the distinction between just = and unjust \_ are congenital in them, just as much as in human beings. \par=20 \par The dependence of the degree of culture of a people on its system = of means of payment (not of its civilization, bu t precisely of its culture) has as yet been scarcely examined, but was = clear to Goethe, the founder of German culture. (Well, one of them! - = J.Z., 22.11.01.) It is true that but few passages in his works refer to = it but in those he is quite explicit. In c hapter X of his appendix to the biography of Benvenuto Cellini, he = probes the foundations of Florentine culture. He mentions expressly = "exact housekeeping records, the magic language of book\-keeping by = double entry, the }{\b\i\fs24\lang1033\cgrid0=20 fairy-like effects of bill-transactions}{\b\fs24\lang1033\cgrid0 ", and = so on. No one prior or subsequent to Goethe has seen in payment by means = of bills an important }{\b\i\fs24\lang1033\cgrid0 cultural element = }{\b\fs24\lang1033\cgrid0=20 . But Goethe went even further. The nature of non\_cash transactions was = clear to him and he considered the idea of sufficient importance to = insist on it in his "Novelle", intended as something like a text\-book = on culture, where we read: \par "Let us ride through the town, the lady continued, across the = market place where a great number of booths have assumed the form of a = small town, of a cam p, It is as if the wants and occupations of all the families of the = surrounding district were, turned outward, concentrated here and brought = into the daylight. The observant spectator sees here everything that man = does or wants For a moment one imagines t hat }{\b\i\fs24\lang1033\cgrid0 money is unnecessary, that every = transaction could be effected by barter, and so it is in = essence}{\b\fs24\lang1033\cgrid0 ." \par=20 \par Since important ideas never occur to one person only, it is not = surprising that after the invention of bills of exchange, several = thinkers made the attempt to sepa\-rate the function of the precious = metals, and \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 62=20 \par particularly of gold as the standard of value, from their function = as a means of payment. A history of these attempts cannot be furnished = here. It may be noted, however, that Proudhon came near to solving the = problem.=20 \par Unfortunately, Proudhon misconceived the fundamental difference = between an exchange of existing goods, on the one hand and an exchange = of present for f uture goods on the other. He saw clearly that the first should be = accomplished by means of some kind of purchasing certificate which need = carry no interest higher than that required for meeting the = administrative expenses of the issuing centre; but he was =20 not clear on the point that another kind of interest existed, one = corresponding to the difference in value of present and future goods and = which no monetary system can eliminate. Nor did he see that neither = goods warrants nor any other paper money could b e based on future goods. However, in the business provisions of his = people's bank, Proudhon expressly provided for mortgage loans to be = contracted with the goods warrants of his barter bank and intended thus = also to reduce for mortgages the interest rate t o the costs of administration entailed by the mortgage operations. His = famous debate with Bastiat proceeded on this erroneous assumption. = Bastiat spoke always of long\_ term credit only and defended the interest charged for it with = irrefutable arguments. Proudhon on his part, attacked these arguments = with counter\_ arguments which applied only to turnover credits. And Proudhon also = greatly exaggerated the part played by the rate of interest in turnover = credits. Whilst in mortgage credit 1% more or less is of gre at importance, first and foremost for rent payments, in turnover credit, = as an easy calculation will show, even several per cent are of little = consequence; in any case, compared to other trading expenses, they play = an unimportant part.=20 \par By his constant demand for "free credit", without seeing that this = demand can be only realized in turnover credit, Proudhon did more harm = than good to the notion of a real people's bank.=20 \par Hence Proudhon cannot be considered as a precursor of Milhaud, who = is entirely free from this misconception. \par=20 \par One of Milhaud's genuine precursors though, seems to have been King = Hammurabi. In his doctorate thesis, "Altbabylonische Marktpreise" = (Market Prices in Ancient Babylon), (Kirchhain N .L., 1915, p. 6), = Wilhelm Schwenzner writes as fol lows concerning par. 51 of Hammurabi's Civil Law:=20 \par "Similar public-spirited intentions animated Hammurabi, when in = par. 51 he provided that a debtor unable to repay a loan in money, might = repay it in cereals and in sesame according to the value of the silv er he had borrowed, together with the interest, pursuant to the royal = ordinance."=20 \par Hence Hammurabi recognized that the Civil Law should not confer on = the creditor the right to demand payment in precious metal, solely = because the }{\b\i\fs24\lang1033\cgrid0 value}{\b\fs24\lang1033\cgrid0 = of his claim was fixed in metal.=20 \par Hammurabi further recognized that in some way the proceeds of the = debtor's labour (and not his possessions or his person) should be = brought into direct relation with the creditor's claim. He therefore = declared that the debtor's labour product=20 should become a subsidiary means of payment.=20 \par (Those who broadly agree that the culture and the prosperity of a = country are intimately associated with its monetary policy and its debt = legislation will not lightly reject the suggestion that the greatness of ancient Babylon, which also had a capital like London, was the outcome = of Hammurabi's legislative enactments.) \par Some two thousand years after Hammurabi, when his legislation had = been long forgotten, Marcus Aurelius discovered the second possible = method of=20 how a debt, valued in precious metal, may be paid without remitting = precious metal, namely by clearing. Unfortunately, however, he failed to = permit the debtor to clear in those cases, where he did not owe anything = to the creditor but to a third party. \par=20 \par Whilst both solutions were incomplete, they were not erroneous.=20 \par Almost two thousand years had to pass again before a correct = solution of the problem was proposed - applicable both to external and = internal trading \_ that is, a solution not menacing the gener al economic life and capable of being put into practice. Milhaud, in a = sense, combines the ideas of Hammurabi and of Marcus Aurelius. The = debtor pays with his products and the creditor receives his payment by = means of a clearing transaction and this is so \-arranged that he is not dependent on the product of the one debtor.=20 \par=20 \par Closely as other authors had approached the solution of the = problem, }{\b\i\fs24\lang1033\cgrid0 something}{\b\fs24\lang1033\cgrid0 = was lacking in all of them.=20 \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 63=20 \par Most of them confused consumable goods with other goods. \par Some others failed to include external trading.=20 \par Still others needlessly aimed at changing the standard of value.=20 \par A fourth set believed that the creditor's claim to receive metallic = gold shou ld be satisfied, but that it might be postponed for a sufficiently long = period. This group thus placed the necessary separation of means of = payment and standard of value in the realm of time and not of concepts. = In actual dealings much may be achieved in=20 this way, as Henry Meulen showed in his reference to the old Scotch = banks of issue and their option clause. This solution, however, cannot = satisfy the present state of economic science. \par=20 \par Placed as they are at the end of such a lengthy development, what = is the prospect of the Milhaud proposals being soon realized?=20 \par Proposals so simple, leaving the economic foundations undisturbed, = and appealing so little to force. Certain current symptoms suggest that = the world is beginning to get weary of violent solutions,=20 that is, that part of the world which has come to know by experience = wars, revolutions, blockades, hunger, and trade depressions, and which = has come to suspect that all these are somehow associated with defects = in our monetary system.=20 \par On the other hand, of a large proportion of our youth, it is = unfortunately true what Follin says in his "Paroles": \par=20 \par A young generation is growing up threateningly. Whilst aware of the = gross blunders of politicians, it ascribes them in the main, however, to = the normal practice s governing economic dealings, without observing that politicians have = always obstructed and distorted those practices. Disdaining to probe the = eternal foundations and laws of economic life, they believe in the = existence of a 'modern economy' dominated by the conditions of the technical economic forms of their time. They fail = to understand that this modern technique, in order to produce its full = beneficial effects, should remain dominated by the economic laws true of = all time." \par=20 \par These words outline the task of the older people among us. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par=20 \par=20 \par=20 \par SOME ADDRESSES OF PERSONS INTERESTED IN MONETARY FREEDOM=20 \par OR AT LEAST SOME ASPECT OF IT=20 \par=20 \par Compiled by the editor to further an international information = exchange and other cooperation desired by tolerant monetary reformers = believing in freedom for experiments. \par=20 \par More such addresses would e.g., make the reprint of scarce old = tracts easier. \par = _________________________________________________________________________= ________________ \par=20 \par 1. Beckerath, Ulrich von, 1 Berlin 19, Neidenburger Allee 16, bei = Geschw. Bloesz, Germany. He is now, at=20 \par 85, too old and sick to answer letters but would probably still = welcome comments in German, French or=20 \par English. * \par 2. Boardman, George, Ph.D., Philosophic\_Research\_Unlimited, P.O. = Box Zero, Chloride, Ariz. * \par 3. Bray, Richard A. c/o Innovator Box 34718 Los Angeles,; Calif. = 90034. \par 4. Bull, Wendal, Ceto Community, R1.5, BurnsvilLe N.C., U.S.A. \par 5, Carnaghan, Robert, 21 Harford Drive, Watford, alerts, England. \par 6. Cooley, Oscar W., assoc. prof. of economics Ohio Northern = University, Ohio. \par 7. Szmak, G,, industrial economist, 420 Lexington Ave ., N.Y. = 10017. \par 8. Dieudonne, Marcel, c/o Marcel Renoulet, Les Editions de L'Homme = Libre, 11 rue de la R\'e9sistance,=20 \par Saint Ethenne, Loire, France., \par 9. Dowe, W.A., Box 666 G.P.O. Sydney, N.S.W., Australia.=20 \par 10. Hansch, Erich, 203 N. E. 113th. Ave., Portland, Ore. 7220, USA. \par 11. Harper, Martyn, 25 Crown Rd., Queenscliffe, Sydney, NSW, = Australia. \par 12, Horowitz, Irving Louis, Washington University, St. Louis = Missouri, U.S.A. \par 13. Harvey, Arthur, The Greenleaf , Raymond N.H. New England, = U.S.A. \par 14. Hayek, Dr. F.A., Faculty of Law and Political Economy, = University of Freiburg, Freiburg, Germany.* \par 15. Johannsen, C., 825 Walnut St, Rosette Park, New Jersey, U.S.A. \par 16. King, R. J., 62 Davey St., Parkdale, Melbourne, Vic., = Australia. \par 17. Krimerman L. I., State University\_ of Louisiana, New Orleans, = La., U.S.A. \par 18. Labadie, Laurence, 20 De Baun Suffern, N.Y., USA.* \par 19. LeFevre, Robert, Rampart Cott College, Box 158 Larkspur, = Colorado 80118, U.S.A . * \par 20. Loomis, Mildred J., Lane's End Homestead, Rte ,3, Box 235 = Brookville, Ohio 45309. * \par 21. Lotwalla, Miss K. R., Arya Bhavan, Sandhurst Rd, W., Bombay 4, = India. \par 22. Lovelock, Lee, 7 Morrice St., North Caulfield , Melbourne, Vic. = Australia. \par 23. Marshall, Tom, c/o Innovator, Box 34718 Los Angeles, Cal 9034. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 64 \par 24. Martin, Dr. James, Rampart College, Box 158 Larkspur Colorado = 80118, U.S.A. \par 25. Menzies, John, 14 Cowper St., Sandringham, Vic., Australia. \par 26. Meulen Henry 31 Parkside Gardens, London S.W. 19, U.K. * \par 27. Middleton, E.15., 3 A Royalist Rd. Cremorne, N.S.W. Australia. = * \par 28. Mitchell, John, Wickets, Dippenhall St., Crondall Farnham, = Surry, U.K. \par 29. Neumann, Heinz Peter, 1 Berlin 33 Trabener St. 22a Germany, = knows English. * \par 30. Parker: Lloyd L., Box 13406 Houston 19, Texas 7701\'a7, U.S.A. \par 31. Paucitis Karlis, P.O. Box 265, Camp Verde, Arizona, U.S.A. \par 32. Pearce, Dr. H. G., 648 Crown St. Sydney, NSW., Australia. * \par 33. Perry, Lewis, History Faculty State University of New York = Buffalo, N.Y. \par 34. Petro, Dr. Sylvester, Prof. of Law, New York University, NJ. \par 35. Plumb O. T., homesteader, Streator Illinois, USA.=20 \par 36. Poirot, Paul L., The Foundation for Economic Education, = Irvington-on\_Hudson, N.Y. 10533,=20 \par 37. Pruit John, Box 475 Camp Verde; Arizona, USA. . \par 38. Ray Elton, c/o Innovator, Box 74718 Los Angeles 90034, Calif. \par 39, Read Leonard E., The Found. f. Econ. Educ., = Irvington\_on\_Hudson, N.Y.10533.* \par 40. Reichert, Prof . W.0., Wisconsin State University at = Whitewater Wisconsin, USA. \par 41, Richardson 111, Tom W., 445 No Garfield, apt. # 9, Pasadena, = Cat 91106. \par 42. Rittershausen, Prof. Dr. Heinrich, 5 Koeln\_Lindenthal, = Fustenburgstr. 7, Germany.* \par 43. Roseman, Herbert C., 1452 E 85th Brooklyn N.Y . -Knows = English.=20 \par 44. Rothbard, Dr. Murray Box 185 Cathedral Station, New York City. = * \par 45. Shaffer Butler D. Box 452, Palmer Lake, Colorado; USA. \par 46, Spahr, Walter E., economists, National Committee on Monetary = Policy, 79 Madison Ave., N.Y. 16. \par 47. Swann, Robert, director of CNVA, Voluntown, Conn., U.S.A. \par 48. Taggart, Joseph H., 100 Trinity Place, New York City 6; C. J. = Devine Inst. of Fin. \par 49. Templin, Ralph c/o School of Living, Box 235, Brookville, Rte = 3 Ohio 45309. \par 50. Walker, Karl, 5481 Altenahr, ueber Remagen, Engelsley, Germany, = knows English.* \par 51. Watts, Dr. Orval V., Dir. of Econ. Educ., Northwood Instit., = Midland, Mich. . \par 52. Werkheiser, Don, 2609, 9th St., # 5, Sacramento Calif. \par 53. Wilson, Robert Anton 7428 North Paulina St., Chicago, Ill. = 60626=20 \par 54. Winder, George c/o FEE, see above, \par 55. Zander Dr. Walter, 16 Alvanley Gardens, London, N.W. 6. \par 56. Zube, Kurt, Georg Wrede Str. 7, 8228 Freilassing, Germany, = knows English.* \par=20 \par (By now most of the above are probably dead. If not, their = addresses are most likely no longer valid or they may be too old to be = still active. But one might still try to get their monetary freedom = writings together. Those that I am pretty sure of as having died in the = meantime, I marked with an *. - J.Z., 22.11.01.) \par = _________________________________________________________________________= _________________ \par=20 \par=20 \par MAGAZINES WHICH OFTEN OR OCCASIONALLY ADVOCATE SOME ASPECT OF = MONETARY FREEDOM \par=20 \par 1.) AGCOMM Directory, Box 2116, Santa Monica, California, refers to = all libertarian and related publications 8 organizations furthering = economic freedom. \par 2.) Annals of Public and Co\_operative Economy, Liege 45, quai de = Rome, Belgium. Dir. is Prof. Paul Lambert, successor of Prof. Edgard and = Milhaud. \par 3, CHRONICLE, The Commercial and Financial , 25 Par K Place, New = York, N,Y.10007. \par 4. Freedom Magazine, 6313 Franklin Ave . Los Angeles, 28, Calif. = e.g., 9/10/66 issue.=20 \par 5. Gold and Silver Bulletin, P.O. Box 1406, Houston 19, Texas = 71019, ed.: & publisher Lloyd L. Parker. \par 6. The Freeman, The Foundation for Economic Education, (FEE), = Irvington\_on\--Hudson, New York=20 \par 10533, ed.: Paul L. Poirot. \par 7. Good Government, 265 Elizabeth St., Sydney, NSW., Australia, ed. = E. P. Middleton. \par 8. Indian LIBERTARIAN, Arya Bhavan, Sandhurst Rd., Bombay 4, India, = ed. Miss K. Lotwalla. =20 \par 9. The Individualist, 31 Parkside Gardens London S W. 19, ed. Henry = Meulen. \par 10. KAPACO Notes, Box 265, Camp Verde, Arizona, publ. & ed.: K. = Paucitis. \par 11. Monetary Notes, published by Economists' National Committee on = Monetary Policy, 79 Madison Ave.,=20 \par N.Y.C. 10016, ed. Walter E. Spahr. \par 12. Peace Plans, publ, &. ed. by J. M. Zube, Wilshire St., Berrima, = NSW., Australia. =20 \par 13. Rampart Journal, Box 158 Larkspur, Colorado 80118, ed. Ruth = Dazey. \par 14. A Wag Out, publ. by School of Living, Box 235, Brookville, Rte. = 3, Ohio 45309, ed. by Mildred J.=20 \par Loomis. \par 15. INNOVATOR, Box 34718, Los Angeles, Calif. 90034, ed. Richard = Bray, especially the January,1967=20 \par issue. \par=20 \par PLEASE! SEND ME MORE SUCH ADDRESSES! - THE EDITOR. \par (Now somebody could set up a website for such addresses with a = program for self-entries. - J. Z., 22.11.01.) \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par =20 \par=20 \par=20 \par 65 \par }\pard \qc\nowidctlpar\adjustright {\b\fs28\lang1033\cgrid0 PLAN = 191 \par=20 \par }{\b\fs56\lang1033\cgrid0 THE CURRENCY FAMINE OF 1893 \par }{\b\fs32\lang1033\cgrid0 by John DeWitt Warner \par=20 \par }{\b\fs28\lang1033\cgrid0 reprinted from the periodical "Sound = Currency", New York, 15/2/1895 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = _________________________________________________________________________= ________________ \par=20 \par "The experience of August\_September, 1893, was unique. There were = no gradually developed plans for mutual assistance. Mutual helpfulness = there was in plenty between individuals and localities; but it was in = prompt response to sudden appeals and bef ore any general system could be devised, the occasion for it was over. = Financial clouds had long been lowering; but it was within a single = month that currency famine became general, its worst effects felt, such = relief extended as was had, and the crisis w as over, with a tendency toward a glut of circulating medium. In other = cases nations or communities had simply found themselves thrown upon = their own resources. Our people found themselves not merely drained of=20 \par currency but forbidden by most carefully drawn statutes to utilize = the expedients which would have been \par most natural and most effective. No civilized nation has ever = experienced\- such a cur\-rency famine. None has ever found itself so = fettered by positive law in its efforts to rescue itself. None eve r so promptly rose to the emergency. Never was there so prompt a return = to normal conditions." =20 \par = John = DeWitt Warner \par = _________________________________________________________________________= _________________ \par=20 \par With its examples of clearing house certificates and goods warrants = it has been reproduced in PP 350-354, on microfiche only. I will not = bother to scan the illustrations f or this edition, since they would cost too much in memory and would be = too laborious for me. - J.Z., 22.11.01. \par = _________________________________________________________________________= ____________________ \par }\pard \qc\nowidctlpar\adjustright {\b\fs32\lang1033\cgrid0 = Contents \par }{\b\fs24\lang1033\cgrid0=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = CIRCUMSTANCES THAT PRECEDED THE CRISIS \'85\'85\'85. 65 \par=20 \par }\pard \fi720\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = General Conditions = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85... 65 \par The Sherman Act = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85.. 66 \par Hoarding of Gold in the United States = \'85\'85\'85\'85\'85\'85\'85\'85. 66 \par Treasury Expedients = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 67 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par THE CURRENCY FAMINE = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 67 \par=20 \par }\pard \fi720\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 = Failure of the National Bank Currency System \'85\'85\'85\'85.. 68 \par Emergency Currency = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 69 \par Clearing House Certificates = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85.. 70 \par "Clearing House Certificates " = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85. 71 \par Certified Chocks = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 71 \par Miscellaneous Expedients = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85.. 71 \par The Course' of National Bank Currency \'85\'85\'85\'85\'85\'85\'85. = 71 \par Results = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\= '85\'85\'85. 73 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par HOW RELIEF CAME = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85.. = 73 \par = _________________________________________________________________________= _________________ \par=20 \par=20 \par CIRCUMSTANCES THAT PRECEDED THE CRISIS \par=20 \par General Conditions \par=20 \par The circumstances that preceded the currency famine of 1893 are as = yet too recent to be free from controversy as to their causes and = consequences. In a genera way however, the situation has already become = historic, so that somewhat of an apparently sign ificant succession of facts may properly be noted. \par=20 \par For the ten years preceding 1890, though local disturbances had not = been lacking, the commercial, manufacturing and agricultural world as a = whole had been enjoying steady prosperity; until the accumulatio n of raw materials and manufactures was greater than ever before in the = world's history; and ten years of prosperity had made general throughout = the world that state of mind which prompts borrowers to new enterprises = and induces lenders freely to extend c redits. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 66=20 \par From the beginning of the year 1890, however, growing caution and = watchfulness seemed as general as theretofore had been confidence = approaching carelessness. The first symptom was generally an attempt to = dispose of surplus stocks even at a sacrifice. \par This brought about a shrinkage of values, which, in its turn, = lessened margins and increased the apprehensions of creditors. \par On this side of the water a suggestion of the situation is found in = the foreclosure during the first six months of 1890 of no less than = twenty\_one railroad companies, with an aggregate of stock and bonds of=20 \par $ 92,000,000; while the collapse of the Barings in England, during = the autumn of 1890, called attention to the shrinkage in colonial and = South American securities, and to the precarious standing of world = famous houses. \par=20 \par The Sherman Act \par=20 \par It was just at this time, too, that the agitation for cheap money = reached its highest tide in Congress and the S herman Act became a law. By this, instead of coinage at $ 2,000,000 per = month, bullion certificates at the rate of $ 4,500,000 per month were = added to our currency, already out of all proportion to the commercial = wants of our people; while free coinage \_ that is, forced coinage of silver at a par of 16 to 1 of gold \_ was = pressed on every hand, largely by those who confessed their aim to be = partial repudiation. \par It may be questioned how far this last factor contributed to the = gravity of the situation here; th ere can be no doubt that it increased it. For, just at this time, = creditor Europe was forced by her necessities to return in large measure = our securities which she had theretofore eagerly taken, and we were = thrown more and more upon our own resources for=20 c apital wherewith to develop our country. To the flood of our own = obligations, thus thrust upon us, were now added those of holders who = had become apprehensive of American good faith and who hastened to = realize, even at a sacrifice before they should be ma de worse off by the repudiation which some of them though close at = hand.. \par Again, to the sentimental factors noted there was now added what = might almost be termed a physical force, tending to drive gold out of = the country, and, through our currency system dr aining the treasury as well. Just how much currency the business of a = country will absorb at any given moment, it is hard to say; but it is = nevertheless certain that when the channels of finance are full, = additions will cause them to overflow, and that th e overflow will be of that portion which is acceptable elsewhere. As is = pretty generally agreed; the growing dullness of business had left our = currency superabundant as far back as in 1890; white in that year the = rate at which depreciated silver was poured =20 into it was increased from $24,000,000 a year to more than double that = rate. The effect was as though water were poured into a measure already = filled with oil. The Sherman notes, whose circulation was bounded by = national lines, went to the bottom of the m easure \_ that is stayed in this country; the gold, free to move \_ that = is, current everywhere \_ \-overflowed to foreign countries. \par Another effect now began to be prominent. To a small extent our = holders of mortgages (which in this country are usually for sho rt terms; even though intended as permanent investments ) promptly = secured themselves by requiring renewals under contracts payable in = gold; but many lenders \_ to some extent from individual hesitancy in exacting unusual terms of = borrowers, and to some extent from apprehension lest the legislation = threatened in many States against such discrimination might prove valid = \_ refused to make or renew time loans thus forcing a stagnation of = enterprise in many directions and in many others a realization of assets = under unfavorable circumstances. \par=20 \par Hoarding of Gold in United States \par=20 \par Concurrent with this was developed a disposition to hoard gold and = to discriminate in its favor by withholding it from payments. That this = was markedly true in 1893 is universally understo od. It seems to have been forgotten in many quarters how much earlier = than that year this practice became general; though an inspection of = the treasury accounts shows that in September 1890, the first month = after the \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 67=20 \par passage of the Sherman Act, the Treasury lost $ 38, 060, 000 of its = old reserve. \par=20 \par June 30, 1890, the net treasury assets were $ 25, 893, 000, of = which 190, 232, 000 was in old and gold bullion. A year later similar = assets were 176, 459, 000, of which $ 117, 667, 000 was in gold and gold = bullion \_ the "free gold", that is the amount above the $ 100, 000, 000 reserve = for greenback redemption, having been reduced during the year from $ 90, = 232, 000 to $ 17, 667, 000. \par Recalling that the customs receipts are the principal streams which = feed the Treasury, we can investigate one step further. In June 1890, = above ninety per cent, of our customs receipts were in gold, The = proportion of gold steadily declined thereafter un til in June, 1891, but twelve per cent. of the customs receipts were in = gold. \par The circle of investigation is complete for the period. The = Treasury was diluting the currency by silver inflation at the rate of $ = 4, 500, 000 each month and at the same time it was rapidly losing power to maintain its parity in gold; while the = selection by which gold was retained and silver used for payments to = government indicated that gold was being hoarded outside. \par=20 \par Treasury Expedients \par=20 \par The National Administration, though doing nothing to avert the = crisis, was sensib\-le of its approach. In the spring of 1891 the = Treasury, by refusing to furnish gold bars, of which it had plenty, = practically charged gold exporters one\_ tenth per cent. premium; at which price during that year they took above = \par $ 30, 400, 000; and during the summer of 1891 the Government = attempted to gain gold by selling legal \par tender Western exchange at a price sixty cents per $ 1, 000 less = than the normal rates, on condition ,of being paid in gold, some $ 12, = 000, 000 of which was promptly thus secured. \par=20 \par Finally, to accelerate the rate at which we were moving toward = disaster, the joint effect of the tariff revision of 1890 and the = liberal appropriations of the fifty\_second Congress, had been to turn = the late annual=20 surplus, averaging $ 110,000,000 per annum for the years 1888 \_ 1890, = into a deficit which for the year beginning July 1, 1893, amounted to = more than $ 69,000,000; so that a constantly weaker \- Treasury faced a steadily increasing responsibility. The time t hus rapidly approached when the sole resource to maintain our currency = upon a natural basis would be the steadily diminishing gold receipts of = the Treasury; which, so far as concerned customs revenues, had shrunken = to less than four per cent. in Septembe r 1892, and never again rose above ten per cent, until in the currency = famine of 1893 the hoarded gold coin was forced from the bank vaults. \par Such was the course along which the Treasury, steadily drifted for = years, until in February, 1893, the outgoing Admi nistration by private appeal to its friends secured some $ 6,500 000 of = gold from New York bankers, just in time to enable it, going out on the = 4th of March, to escape the breaking of the dam behind which for years = it had seen the waters steadily piling. \par A s the Cleveland Administration settled into its place the flood was = still rising, though not faster than had been the case for months = previous. But soon the actual impairment of the $ 100,000,000 Treasury = gold reserve showed the water trickling over the l evee, and on every side each weak spot seemed about to give way. \par=20 \par=20 \par=20 \par THE CURRENCY FAMINE \par=20 \par For years liquidation had been progressing and really solvent = institutions had been contracting their loans and centralizing their = resources, so that they were never be tter buttressed; but the same process of liquidation had drained the = weaker ones of their available funds and left them with holdings of = unmerchantable assets, enormous in the aggregate, which the first break = would throw upon an already overburdened marke t . The very air was charged with ruin. In April, 1893, business failures = reported by Bradstreet's were 905, as compared with 703 in the same = month of 1892; in May there were 969, as compared with 680 the May = previous, and by June not merely had the ratio o f disaster further increased above the average, but all over the = country, especially in the West, the banks were breaking. Up to May 9th = the number of bank suspensions had not been extraordinary \_ only eleven = of National banks during \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 68=20 \par the preceding six months \_ but on that date the Chemical National = Bank of Chicago closed its doors; on the 11th the Columbia National Bank = of the same city and the Capital National Bank of Indian apolis followed its example; on the 16th the First National Bank of = Cedar Falls, Ia., and on the 18th the First National and Oglethorpe = National of Brunswick, Ga., and the Evanston National of Evanston Ill., = suspended. Before the month was over six others followed suit; while the mortality was equally marked among State = banking associations and private bankers, so that by August first the = condition was one of panic. \par=20 \par Then developed the feature that will forever characterize the = stringency of 1893 - instruct ive to those who have not already learned how immaterial is any ordinary = supply of legal currency when compared with credit in its various forms, = the real currency of the country. For years business credit had been = shrinking in the United States \_ this lar gely, though by no means wholly, as the result of the constant inflation = of our currency by silver legislation, at a time when normal business = demands for currency were growing less and less; and now this credit was = largely destroyed; so that each ( large ly in proportion to the extent to which his lack of information left him = a ready victim to fear) preferred currency in hand to any credit = account, however "gilt\_ edged". Almost between morning and night the scramble for currency had = begun and culminated all=20 over the country, and the preposterous bulk of our circulating medium = had been swallowed up as effectually as, in a scarcely less brief = period, gold and silver had disappeared before the premium on specie a = generation before. Currency was hoarded until it =20 became so scarce that it had to be bought as merchandise at a premium of = 1% to 3% in checks payable through the clearing house; and to enable = their families to meet petty bills at the summer resorts the merchants = and professional men of the cities were fo r ced to purchase, and send by express, packages of bills or coin; while = savings banks hawked their government bond investments about the money = centers in a vain effort to secure currency. The panic was naturally = worst among those of too little financial st a nding to use bank accounts for their ordinary business, so that the = action of bank depositors but inadequately suggests the general = tendency. But the deposits in National banks alone, which had been $ = 1,750,000 000 May 1st, 1893, were but $1,550,000 000 o n July 1}{\b\fs24\lang1033\super\cgrid0 st}{\b\fs24\lang1033\cgrid0 , = and by October 1st but $1,450,000,000. \par It is with the most striking result of this situation that we have = to deal. It involved an absolutely unique experience \_ that of a highly = ingenious and enterprising people, inhabiting a wealthy and civiliz ed country, and brought face to face with an absolute necessity for the = use of an extraordinary amount of currency, at the same time that they = were inhibited by law from ordinary sources of supply. \par=20 \par Failure of National Bank Currency System \par=20 \par Our Laws provided but one resource \_ additional issues of = National\_bank notes, The National banks were urgently summoned to = perform their most important legitimate function \_ that of giving elasticity to a currency admittedly rigid at every other = point. The only result was to demonstrate the worthlessness of the = National banking system itself. \par=20 \par We had had it for thirty years. Its original aim had really been = not to provide bank note currency \_ there was a plethora of that when = the National banking system was established \_ but rather to starve the business public into purchasing government = bonds as a condition of being permitted to do business at all. \par=20 \par So far was it from accommodating itself to the wants of developing = communities that it took $ 11 in funds free for investm ent in any given locality to secure for that locality $ 9 in currency So = far was it from expanding to meet the growing demands of the country = that, white twenty years ago the then outstanding $ 340,000,000 of = National\_ bank note's represented more than 45 per cent. of all our circulation, = ten years later the $ 347,000,000 of similar notes then outstanding = represented but 28per cent. of our currency; and in June, 1893 \_ the = latest date at which conditions were normal \_ the $ 172,000,000 of National\_bank notes, then in circulation outside = of the Treasury, were less than 11 per cent. of our currency, of which = they had ceased to be a material factor. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 69=20 \par So far was it from being elastic that we had come to expect a = period of stringency in each year \_ in the late summer and early autumn = \_ which invariably arrived; while a careful survey of the course of our = National\_ bank note circulation showed that the general tendency, at first to its increase and afterwards to its withdrawal, had absolutely no connection = with present or prospective, however certain, business demands for = currency National banks had long since ceased even pretended obedience = to law, and habitually made discounts times=20 of stringency in the face of depleted reserves. This practice was = possible because the initiative was in the hands of the banks, and the = Government had power only to punish; a power which it forebore to = exercise. \par=20 \par In the other particular, however, that of f urnishing currency, the initiative was in the hands of the Comptroller. = The banks were thus powerless to break the law, no matter how beneficent = might have been such violation. And nothing is more instructive than to = contemplate the futile writhing and co ntortions of our National\_ bank note currency system in the strait jacket with which it had been = pinioned, and to see the not merely inadequate, but positively = ludicrous, results of its strenuous efforts to respond to the most = urgent demands for relief that=20 this generation has heard. \par=20 \par The increase of our currency by additions to National\_bank = circulation during the stringency was only about 1 1/2 percent. and was = far less than the amount by which the banks of a single city virtually = increased it by clearingh ouse certificates alone - little more than half the amount by which = individual bankers increased it by actually buying gold in Europe and = shipping it hither \_ and was in great part accomplished only after the necessity for it was = over, millions of dollars of the additional currency taken out being = returned to the treasury with the packages unbroken. \par=20 \par It was to such a dead fetish that our stricken business appealed = when caught in the panic of August 1893. Never was there offered more = conclusive proof of the=20 self-reliance of our citizens and the superiority of business expedients = over government direction. Not merely by financiers in our great cities, = and by great corporations experienced in handling such crises but in = every part of the country, with the exce ption of the far Southwest, did the people work out their own salvation. \par=20 \par Emergency Currency \par=20 \par The experience of August\_September, 1893, was unique, There were = no gradually developed plans for mutual assistance. Mutual helpfulness = there was in plenty between individuals and localities; but it was in prompt response to sudden = appeals; and before any general system could be devised, (that? J.Z.) = the occasion for it was over. Financial clouds had long been lowering; = but it was within a single month that the cur rency famine became general, its worst effect felt, such relief extended = as was had, and the crisis over, with a tendency toward a glut of = circulating medium. \par=20 \par In, other cases, nations or communities had simply found themselves = thrown upon their own resourc es. Our people found themselves not merely drained of currency but = forbidden by most carefully drawn statutes to utilize the expedients = which would have been most natural and most effective. No civilized = nation has ever experienced such a currency famine. None has ever found itself so fettered by positive law in its efforts = to rescue itself. None ever so promptly arose to the emergency. Never = was there so prompt a return to normal conditions. \par=20 \par It is this that I have found a particularly interesting study. Not = that I have been able to estimate or even trace it in anything like a = full measure. One of its striking peculiarities was the extent to which = \_ partly on account of the suddenness with which it was called for and = the promptness with which the need of it was over \_ partly perhaps, = because everyone assumed that its use was in defiance of law \_ the actual practice in each locality was in general unknown outside of = it, and evidence and mention of it hard to secure afterwards. \par=20 \par The specimens I quote are, ther efore but a few score of the hundreds of cases that careful inquiry = would reveal; and, except in the case of the clearing house certificates = proper, give but a faint idea of the extent to which in all parts of the = country this emergency currency sprung in to being. They are, however, I trust sufficiently varied to illustrate = the methods used and the more characteristic sorts of currency - as \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 70 \par distinguished from more strictly "credit" expedients \_ that were = thus called into being. \par=20 \par Clearing House Certificates \par=20 \par First come actual clearing house certificates \_ new, not in = invention but rather in the novel extent of their use. Their office was = simply to extend indefinitely the brief=20 term of mutual credit involved in all clearing house settlements. = Contrary to the general impression, they were not used as currency; but = their effect was to add just their face to the volume of currency in = circulation, by releasing, for use outside, that =20 which would otherwise have been reserved for clearing house settlements. = So far as the banks using them transgressed law, it was in renewing = loans and extending discounts when their reserves were depleted below = the legal limit. The use of clearing house c ertificates simply enabled this to be done with less risk of other than = legal consequences. \par And to the writer, not the least interesting of the data that he = has gathered in this connection has been the proof \_ in instance after = instance \_ where he has been=20 proudly assured that a particular city had not been forced to = extraordinary expedients such as had been seized upon in their = desperation by the less favoured centers \_ either that the boaster had been saved by aid extended by those whom he = so patronizingly pities, or that the self\_ sufficient town had already adopted such practices that its ordinary way = of doing business left nothing in the way of liberal financing yet to be = exploited. It was to the banks that did use clearing house certificates = in the emerg ency that the country owes its escape from unparalleled disaster; and at = once to anticipate and answer all inquiries as to the form and use of = the legitimate clearing house certificates, I append; in reduced = facsimile, copies of specimens from each city w here they were used (see pp. 345 and 346). \par Denominations were as follows: New York $ 20,000, $ 10,000 and $ = 5,000; Philadelphia, $ 5,000 only; Boston, $ 10,000 and $ 5,000; New = Orleans, $ 500 to $ 10,000; Baltimore $ 6,000, $ 3,000 and $ 1,000; = Pittsburg,=20 $ 10,000, $ 5,000 and $ 1,000; Detroit, $ 5,000 only; Buffalo, $ 5,000 = and $ 1,000.=20 \par=20 \par Their issue, it will be noted, was mainly in the Northeast, New = Orleans being he only Southern and Detroit the most Western example. And = in each case it will be observed=20 that use of the certificates is limited strictly to settlement of mutual = accounts between members of the clearing house association in question. \par=20 \par Other devices of similar character were "Clearing House Due Bills", = [of which the following is a copy: (*)] \par ex changes of clearing house balances, such as are so generally used at = Chicago that an extension of their use made unnecessary special issues = of clearing house certificates and utilization of the custom in smatter = cities of considering exchange drawn on "re serve cities" as equivalent to cash in transactions between banks. \par=20 \par=20 \par=20 \par=20 \par=20 \par=20 \par=20 \par=20 \par = _________________________________________________________________________= ________________ \par }{\lang1024 = {\shp{\*\shpinst\shpleft3361\shptop47\shpright3361\shpbottom4367\shpfhdr0= \shpbxcolumn\shpbypara\shpwr3\shpwrk0\shpfblwtxt0\shpz8\shplid1031{\sp{\s= n shapeType}{\sv 20}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}} {\sp{\sn shapePath}{\sv 4}}{\sp{\sn fFillOK}{\sv 0}}{\sp{\sn = fFilled}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv = 1}}}{\shprslt{\*\do\dobxcolumn\dobypara\dodhgt8200\dpline\dpptx0\dppty0\d= pptx0\dppty4320\dpx3361\dpy47\dpxsize0\dpysize4320 \dplinew15\dplinecor0\dplinecog0\dplinecob0}}}{\shp{\*\shpinst\shpleft177= 7\shptop47\shpright1777\shpbottom4367\shpfhdr0\shpbxcolumn\shpbypara\shpw= r3\shpwrk0\shpfblwtxt0\shpz7\shplid1032 {\sp{\sn shapeType}{\sv 20}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv = 0}}{\sp{\sn shapePath}{\sv 4}}{\sp{\sn fFillOK}{\sv 0}}{\sp{\sn = fFilled}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv = 1}}}{\shprslt{\*\do\dobxcolumn\dobypara\dodhgt8199 \dpline\dpptx0\dppty0\dpptx0\dppty4320\dpx1777\dpy47\dpxsize0\dpysize4320= \dplinew15\dplinecor0\dplinecog0\dplinecob0}}} {\shp{\*\shpinst\shpleft3505\shptop47\shpright3505\shpbottom4511\shpfhdr0= \shpbxcolumn\shpbypara\shpwr3\shpwrk0\shpfblwtxt0\shpz6\shplid1033{\sp{\s= n shapeType}{\sv 20}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}} {\sp{\sn shapePath}{\sv 4}}{\sp{\sn fFillOK}{\sv 0}}{\sp{\sn = fFilled}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv = 1}}}{\shprslt{\*\do\dobxcolumn\dobypara\dodhgt8198\dpline\dpptx0\dppty0\d= pptx0\dppty4464\dpx3505\dpy47\dpxsize0\dpysize4464 \dplinew15\dplinecor0\dplinecog0\dplinecob0}}}{\shp{\*\shpinst\shpleft108= 49\shptop47\shpright10849\shpbottom4367\shpfhdr0\shpbxcolumn\shpbypara\sh= pwr3\shpwrk0\shpfblwtxt0\shpz5\shplid1034 {\sp{\sn shapeType}{\sv 20}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv = 0}}{\sp{\sn shapePath}{\sv 4}}{\sp{\sn fFillOK}{\sv 0}}{\sp{\sn = fFilled}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv = 1}}}{\shprslt{\*\do\dobxcolumn\dobypara\dodhgt8197 \dpline\dpptx0\dppty0\dpptx0\dppty4320\dpx10849\dpy47\dpxsize0\dpysize432= 0\dplinew15\dplinecor0\dplinecog0\dplinecob0}}}{\shp{\*\shpinst\shpleft49= \shptop47\shpright49\shpbottom4367\shpfhdr0\shpbxcolumn\shpbypara\shpwr3\= shpwrk0\shpfblwtxt0\shpz4\shplid1035 {\sp{\sn shapeType}{\sv 20}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv = 0}}{\sp{\sn shapePath}{\sv 4}}{\sp{\sn fFillOK}{\sv 0}}{\sp{\sn = fFilled}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv = 1}}}{\shprslt{\*\do\dobxcolumn\dobypara\dodhgt8196 \dpline\dpptx0\dppty0\dpptx0\dppty4320\dpx49\dpy47\dpxsize0\dpysize4320\d= plinew15\dplinecor0\dplinecog0\dplinecob0}}}}{\b\fs24\lang1033\cgrid0=20 \par No. 695 Number 695 (CLEARING HOUSE DUE = BILL) \par \'85\'85\'85.. 189. ----------------- THE = SEVENTEENTH NATIONAL BANK \par = Philadelphia \'85\'85\'85\'85. 189. \par Due = by the Seventeenth National Bank \par to = the Seventh National Bank \'85\'85\'85\'85\'85.. \par = \'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85\'85 thousand \par Issued to\tab \tab \tab \tab \'85\'85\'85\'85 hundred and = \'85\'85\'85/ 100 Dollars\tab=20 \par Seventh Counter- This Due bill = is only good when signed \par National signed, by one and = countersigned by another au- \par Bank \'85\'85\'85\'85\'85. thorized = person, and is payable only in \par \tab \tab \tab \tab \tab the Exchange through the Clearing = House \par the = day after the issue. \par \tab \tab \tab \tab \tab $ \'85\'85\'85\'85/100 = \'85\'85\'85\'85\'85\'85\'85.. \par \tab \tab \tab \tab \tab \tab \tab \tab \tab Teller \par = _________________________________________________________________________= _________________ \par=20 \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 71 \par=20 \par (*) A person presenting one or more large checks for payment at the = counter of a bank member of the Clearing House Associati on, in the ordinary course of business, would receive for the amount of = such check or checks one of these due bills, signed by the paying teller = and countersigned by one of the officers. In issuing the due bill the = teller would ask the party what bank he=20 d esired to deposit the due bill in and would insert after the word 'to' = the number of that bank in the Clearing House, or if no particular bank = should be named the word 'banks' would be inserted after the word 'to'. = Occasionally a due bill might be drawn t o the order of the party presenting the checks, but that seldom occurs. = It will be noticed that the due bill is intended to be deposited in some = one of the clearing house banks, from which it will reach the issuing = bank through the exchanges of the followi ng day. \par = _________________________________________________________________________= _________________ \par=20 \par "Clearing House Certificates" \par=20 \par Next in order, and in some respects the most interesting of all, = were the notes called clearing house certificates, but in fact intended = for circulation, frequently issued by temporary committees of banks in = towns where no clearing house existed, and \_ though thoroughly effectual for the worthy purpose for which they were = issued \_ a travesty on the paper after which they were named. The term = "clearing house certificates" was, however, used not with the idea of = deceiving anyone, but as the only ready\_ made term that indicated the one fact that the public cared to know \_ = viz., that the associated banks of the locality were bound to make them = good. \par=20 \par (Since all exchange media, coins included, serve to clear mutual = debts between many participants, most of them unknown to each other, the = term chosen was not legally and juridically but economically quite = correct. - J.Z., 23.11.01.) \par=20 \par These=20 cases were practically confined to the Southeast. The denominations in = the cases noted were: Atlanta, $ 100 and $ 500; Albany, Ga., $ 10, $ 5 = and $ 1; Columbia, $ 50, $ 20, $ 10, $ 5 and $ 1; Chester, $ 10, $ 5 = and $ 1; Danville, $ 100, $ 50, $ 20, $ 10, =20 $ 5, $ 2 and $ 1; Newman, $ 10, $ 5, and $ 1; Rock Hill, $ 5, $ 2 and $ = 1; while the Birmingham series, including denominations of $ 1,000, $ = 500, $100, $ 50, $ 10, $ 5, $ 2, $ 1, 50c. and 25c., merits special = commemoration as the most frank and comprehe nsive currency system supplied by the associated banks of any single = locali\-ty. (see pp. 347\_ 350). \par=20 \par Certified Checks \par=20 \par Another expedient, favoured in all parts of the country, was the = sale by banks of certified checks against themselves for currency denomi nations which, when signed by the purchaser, were used by him as = currency. The few given are illustrations of hundreds of instances which = seem to have been pretty evenly distributed in all parts of the country = except the Southwest (see p. 351). \par=20 \par Pay Checks \par=20 \par Most generally used of all, however, were pay checks in currency = denominations, which in scores of manufacturing towns, mainly in the = Northeast, but largely in the West and Southeast, were the only currency = that was available for weekly payrolls and cash purchases by wage earners. (See pp. 352 and 353.) \par=20 \par Miscellaneous Expedients \par=20 \par In addition to these well defined classes, there were others so = varied that but a suggestion of them can be made here \_ negotiable = certificates of deposit; ninety\_day and other s hort time paper in currency denominations, with and without interest; = bond certificates; grain purchase notes; credit and corporation store = orders; improvement fund orders; teachers' warrants; shingle scrip; = specimens of each of which are given below, and which are noteworthy here as the adaption to use for general = circulation, by issue in small currency denominations of paper devised = for other and widely different purposes. (See pp. 354, 355 and 356.) \par=20 \par The Course of National Bank Currency \par=20 \par But the performances of the National banking system turned tragedy = into farce. The table which I now quote is itself a conclusive exposure: \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 72=20 \par = _________________________________________________________________________= _________________ \par=20 \par National\_bank notes outstanding * = Surplus reserve in New York banks week ending: = _________________________________________________________________________= _________________ \par=20 \par June 1st, 1893 $ 177,164,254 = June 3, 1893 $ 20,987,500=20 \par July " " 178,713,872 = July 1, " 1,251,725=20 \par August " " 183,755,147 = August 5, " + 14,017,800=20 \par September '' " 198,980,368 = September 2, " + 1,567,525=20 \par October " " 208,690,579 = October 7, " 28,628,725=20 \par November " " 209,311,993 = November 4, " 52,013,450=20 \par December " " 208,948,105 = December 2, " 76,096,650=20 \par January " 1894 208,538,844 = January 6, 1894 83,796,900=20 \par February " " 207,862,107 = February 3, " 111,623,000=20 \par March " " 207,479,520 = March 3, " ** 75,778,900=20 \par April " " 207,875,695 = April 7, " 80,797,970=20 \par May " " 207,833,032 = May 5, " 82,808,150=20 \par June " " 207,245,019 = June 2, " 77,965,100=20 \par July " " 207,353,244 = July 7, " 72,134,725=20 \par August " " 207,539,066 = August 4, " 69,053,700=20 \par September " " 207,592,215 = September 1, " 65,820,825=20 \par October " " 207,564,458 = October 6, " 59,450,950=20 \par November " " 207,565,090 = November 3, " 63,204,275=20 \par December " " 206,686,337 = December 1, " *** 52,820,800=20 \par January " 1895 206,605,710 = January 5, 1895 35,862,050=20 \par }\pard \nowidctlpar\brdrb\brdrs\brdrw30\brsp20 \adjustright = {\b\fs24\lang1033\cgrid0 February " " 205,297,571 = February 2, " 36,751,500=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 (To get = all alignments straight, with WORD 97, is so far impossible for me! - = J.Z., 23.11.01.) \par * Including those temporarily in the United States Treasury = and subtreasuries. \par ** After $ 50,000,000 loan. \par *** After second 50,000,000 Loan. (+) = Deficit. \par = _________________________________________________________________________= _________________ \par=20 \par June 1, 1893, there was a surplus of about $21,000,000 in excess of = legal reserve lying in New York banks awaiting investment, and the = amount of National bank currency then outstanding was about=20 \par $ 177,000,000. During that month the surplus reserve in the New = York b anks decreased to $ 1,250 000, while the National bank notes outstanding = increased to $ 178,700,000. August 1, the bank funds were drained $ = 14,000,000 below their legal reserve; the demand for money to move the = crops was increasing, the stress was almost =20 a panic; yet the National bank currency had increased but 5,000,000. = September 1, the situation was improving and the deficit had fallen to $ = 1,500,000 and, now that it was less needed, the National bank note = circulation began to expand rapidly and stood=20 at $ 199,000,000.=20 \par October 1, the deficit had turned to an embarrassing surplus of $ = 28,000,000; but the National bank currency expansion was as hard to stop = as it had been to start and aggravated the plethora by an increase of $ = 10,000,000 during September \_ on October 1 standing at $ 208,700,000. November 1, the idle funds had = increased to over $ 50,000,000 but the National bank issues were still = expanding, standing on that date at $ 209,300,000. December 1, the = unused surplus had risen to $ 76,000,000, bu t the National bank circulation had contracted less than $ 500,000. = January 1, 1894, the banks had $ 80,000,000 more than anybody wanted but = the National bank issues had remained stationary for three months at = above 208,000,000. By February 1, the surplus =20 seeking employment had risen to $ 110,000,000, while the National bank = note circulation was still about $ 208,000, 000; during February the $ = 50,000,000 loan to the Treasury was floated, the most of which was taken = from this surplus; yet it stood on March 1 at=20 \par $ 76,000,000; on April 1, at $ 81,???,000; on May 1, at $ = 83,000,000 and meanwhile the National bank currency had remained = stationary at about $ 208,000,000. \par In June 1893, therefore, when there was the greatest demand that = this country had ever seen for currency, the National bank issues = constituted a smaller percentage of our total circulation than any other = time except during the preceding year; the al\- most frenzied efforts of the National banks were utterly futile in = bringing material assistance u ntil after the crisis had passed; and the result of their attempt to aid = us has been to keep an increased volume of National bank currency = outstanding, while the amount of \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 73=20 \par unemployed currency was greater than it had ever been before, at = the highest point it has reached for five years. And this is not all. = The law permits but $ 3,000, 000 contraction monthly in any event. It = will not be possible, therefore, to get back to a=20 normal basis before the annual stringency due next September. \par=20 \par RESULTS=20 \par=20 \par Throughout New England, so generally that it may be deemed to have = characterized its manufacturing centers; in so many portions of the = South that it might be considered general there;=20 in the West and in the Northwest; sporadically in the Middle States, the = necessity for local currency developed at once a supply of it; and, = where this was not the case, from city after city comes the word of how = unfortunate were those who, not assisted b y the enterprise of others, had none of their own to fall back upon. = There is one general exception to be made \_ an exception which, = however, proves the rule. It is this: \par=20 \par To the precise extent that \_ either by the use of clearing house = certificates within the law, or by the violation of law in continuing = discounts when their reserves were depleted \_ the banks of any section thus met the emergency, their customers and = the community dependent upon them were relieved from the necessity which = so generally came=20 upon others of providing a special local currency. It was the New York = banks that issued the greatest amount of clearing house certificates, = and at the same time continued to assist their customers, even while = their reserves were depleted; and, therefore, =20 it was in the neighborhood of New York and her own great manufacturing = establishments, in those of Newark, of Brooklyn, and of Long Island = City, that it was unnecessary to look further for a supply of the = currency they needed. The same was the case in Phi l adelphia, Chicago, Boston and their neighborhoods, in each of which = cases either clearing house certificates, or loans of clearing house = credits, enabled strong banks to aid weak ones. But in every case where = the associated banks of a section were not in=20 a position to supply the lack of currency or obviate the necessity of = its use, individuals and corporations were compelled to do this. \par In this way, after the machinery so carefully adjusted by = Government had utterly failed to work, the business common sense of our people readjusted its finances; and in every part of the land = business started up again, manufacture continued, the laborer received = his hire and the merchant disposed of his goods. In not an instance, so = far as I have been able to learn, did any=20 community find any trouble in the use of what, in the absence of all = restrictive laws, would have been \_ and what in defiance of them = actually was - a perfectly natural bank\_note currency. The whole = American people promptly accepted \_ each locality upon its knowledge of the conditions there \_ the paper = of individuals and institutions. And as a result of this experience \_ most widespread, and had under conditions least favorable to security = other than integrity of those who issued the notes, and the intelligence = of those who were asked to accept them \_ there was not a single dollar = lost. \par Such was the honorable record of the emergency currency of 1893. \par=20 \par HOW RELIEF CAME \par=20 \par By September 1 st., 1893, the passage by the House of the repeal of = the purchasing clause of the Sherman Act had both stopped inflation and quieted the worst = apprehensions; and to $ 30,000,000 additional national bank currency and = the volume of the emergency currency noted, which can be but vaguely = estimated at $ 80,000,000, was already being ad ded the $ 40, 000,000 of gold which had been purchased in Europe for = import hither. The panic collapsed as suddenly as it had blown up; and, = with dull business conditions for a year to come, the currency proved = excessive. \par=20 \par With accession of confidence among the masses, the petty hoards were returned to the savings banks or paid = out to merchants, and by them used to swell their bank credits; so that = from $ 1,450,000,000 in October 1, 1893, the aggregate deposits in = National banks alone rose to $ 1,529,000,00 0, December 19 1893;=20 \par $ 1,586 ,000,000, February 2, 1894; $ 1,671,000,060, May 4, 1894; $ = 1,678,000,000, July 18 1894; and \par $ 1,728,000,000, October 2, 1894. The emergency currency gave no = trouble. By the process of natural \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 74 \par redemption it disappeared so promptly that before the end of the = year specimens became curiosities. \par=20 \par Such was the crisis of 1893, a situation brought about by the = wanton interference of government with busin ess not its own; aggravated by legislation which had to be broken before = the people could help themselves; relieved by enterprise overriding and = evading restrictive law; and turned into a theme for the gaiety of = nations by the grotesque exhibition thus af forded of how depraved was the elaborate bank note currency system, upon = which had been lavished so much of thankless labor. \par=20 \par (Note of the editor: I am sorry but neither the available space nor = my printing techniques permit the reproduction of the facsimile s of certificates which follow the above quoted article in the original. = Later I microfiched them with the whole volume of SOUND CURRENCY, but = only in a weak photocopy form a faded printed original, so that I may = get the filming redone from a better photo copy made later on. - J.Z., 23.11.01.) \par = _________________________________________________________________________= _________________ \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs32\lang1033\cgrid0 P l a n = 192=20 \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs52\lang1033\cgrid0 RAILWAY = MONEY AND UNEMPLOYMENT \par }\pard \qc\nowidctlpar\adjustright {\b\fs32\lang1033\cgrid0 By Dr. = W. ZANDER \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 This paper = appeared first in "Deutsches Volksrecht" (1\_5 July 1 933) and soon afterwards in pamphlet form (Verlag Sparerbund). An = outline of the plan had already appeared in the above mentioned review = on 17 May 1933. \par=20 \par This is a reprint from the English version of "Zahlungsverkehr, = Einkaufsscheine and Arbeitsbeschaffung, Annalen der Gemeinwirtschaft = Genf, 10, Jahrgang, Heft 1, Januar\_ Juli 1934, Herausgeber Edgard Milhaud . The English version was = published by Williams and Norgate Ltd., London 1935, under the title: = "Ending the Unemployment and Trade Crisis \_ by the intro duction of purchasing certificates and the establishment of an = international clearing system". \par=20 \par Permission by the author for a reprint was obtained, likewise the = permission by the Annals of Collective Economy \_ now re\_named "Annals = of Public and Co\-operati ve Economy", Liege 45, quai de Rome, Belgium, for the reprint of this = article and other money reform articles by U. von Beckerath, Walter = Zander and Heinrich Rittershausen, even by other publications, provided = the source is mentioned in detail. \par Ernest Benn Ltd., Bouverie House, Fleet St., London EC4, acting for Williams & = Norgate, expressed likewise no objection against a reprint of U. von = Beckerath's articles by me, nor, I do assume, to a reprint of the much = shorter articles by the other authors. Their re ply did not refer to these. No wonder, for among the wealth of = literature published by this house they could not even trace the = Beckerath articles although they assumed that they had been published in = some selections. \par=20 \par The translation was made by G. Spiller, London. I changed it only = slightly but do not guarantee that my alterations will always constitute = an improvement on the original translation. \_ The Editor \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par=20 \par I. PRESENT POSITION \par=20 \par The German Reich Railway has been seriously affected by the trade = depression. Its revenues shrink. And its orders for materials, etc., = have had to be reduced in proportion. This, in turn, aggravates the = existing depression and the railway revenues cons equently drop still lower. \par At the same time the Railway is in an anomalous position. In view = of its importance in the country's economic life, it is expected to = adopt far\--reaching measures to reduce unemployment, such as placing = huge orders so as to reviv e industry. The Railway, however, can only fulfil these expectations to = a modest degree because it is doubtful whether its future revenues would = suffice for meeting its obligations as regards those orders. Prudence = counsels circumspection. Hence the Railw ay Management \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 75=20 \par inclined to shift the risk involved in placing substantial orders = onto the shoulders of the Central Bank (See the article in the Berliner = "Boersen\_Courier" of=20 11 June 1933: "The Reich Railway and Employment". There it is stated: = "The magnitude of the orders to be placed will depend entirely on the = decision of the Reichsbank President regarding their re\_ financing by our Central Bank.") or, what is today its pract ical equivalent, the State. However, this bank of issue can undertake = the financing of any schemes only in conformity with the law and with = the demands of a sound currency policy, i.e., when they are covered by = short\_ term commercial bills. The Railway is o nly partly in a position to comply with this condition. Hence the = Central Bank is generally obliged to refuse. In fact, the Railway cannot = make itself responsible at present for placing big orders. It can = therefore do little to augment employment. \par=20 \par II. THE PLAN OUTLINED \par=20 \par The Railway is justified in proceeding warily. Cash purchases are = out of the question in present circumstances. On the other hand the = promise to pay at a future date signifies the short sale of means of = payment (On this subject consult Henr y Meulen, Industrial Justice through Banking Reform, London, 1917 p. = 16ff.), for the Railway undertakes to deliver something at a fixed date = which a the time of the promise it only hoped to obtain. Whether its = hope will materialize, is uncertain. The unde r taking to pay at maturity contains therefore a speculative element, = which is particularly hazardous in times of depression. It is therefore = obvious that the Railway must be extremely circumspect in making credit = purchases i.e. in promising to pay at a lat er date with resources which have yet to be secured. \par=20 \par But the Railway may promise something else, namely, to transport = commodities and persons \_ that is, to fulfil its function as a Railway. = There is nothing speculative about that. The means required for this, = rolling stock and other plant, are available. \par This is therefore fundamentally different from a promise to pay at = a future date, for in the latter case the means of payment have yet to = be secured and this by having transported passengers and goods. The=20 capacity of the Railway to act as a carrier is at any rate = unquestionable. \par=20 \par Such is the starting point of the plan. The Railway places orders = to be paid for not in legal tender (Central Bank notes ), but in = transport certificates which the Railway booking=20 offices accept at their nominal value like ready money. The Railway = thus pays its contractors with warrants entitling the contractors to its = own services and thus exchanges the goods it receives directly against = transport mileage. The certificates are ma de out to the bearer and are issued in denominations convenient for free = circulation. \par Of course, no one would be legally bound to accept such = certificates in payment. There is no compulsory acceptance. They are = only legal tender against the Railway which is sued them. Nor have they any legal value, for they do not represent a = forced currency. The market rate is an open one, but the Railway has to = accept the certificates any time, at their\_nominal value, regardless of = the market rate. \par=20 \par III. HISTORICAL PRECEDENTS \par=20 \par Railway money is not a new thing in German. When Friedrich List, = just a century ago, established the Leipzig\_Dresden Railway, he was = authorized to issue 500.000 thaler \_ one third of the Company's capital = \_ in the form of "railway money certificates, s ubject to the provision that no obligation would arise therefrom to the = State". These certificates remained in circulation for about forty years = and fully attained their object. Only after the formation of the Reich, = were they, as a result of certain fina ncial reforms, replaced by Reich treasury notes. \par=20 \par During the inflation period, the German Reich Railway issued its = own money, some of which was on a gold standard basis and retained its = value. These were the so\_called Oeser notes, of which according to the=20 "Statistisches Jahrbuch" for 1924/5 (p.313), there were in circulation = on 31 December 1923, 141,9 million gold marks. \par=20 \par In the plan here submitted, these historical precedents have been = further elaborated. It may a mentioned, finally, in. this connection ion = that whilst these lines were being written, the Italian State Railway = floated \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 76=20 \par a lottery loan including among the prizes 1.000 first class monthly = season tickets. The issue had a very unusual success and was at once = over\_subscribed. It will be evident to the reader that the offer of = free \par season tickets accords with the spirit of the present plan.=20 \par=20 \par IV. CIRCULATION OF THE RAILWAY MONEY \par=20 \par The extent of the circulation of the r ailway money will depend on its applicability. The starting point is the = contractor who received the certificates directly from the Railway. To = the degree that he can profitably utilize the services of the Railway = himself \_ that is by having persons and goods to send by rail, \_ the certificates manifestly have value for him. This value is = equivalent to the payments he would have to make for dispatching those = persons and goods. If for instance, his monthly expenses for freights = and passenger tickets averaged 1.600 marks he could utilize transport certificates to that value as if = they were cash. Insofar the certificates have par value for him. If a = large\_scale supplier were involved such as an Electro\- Trust, it would be able to make considerable use of the certificates. \par=20 \par Insofar as the contractor has no use for the certificates in his = business, he will dispose of them otherwise. His sub\_contractors who = depend on the railway services come here into consideration in the first = place. He will therefore, as far as p ossible, place his orders on the basis of payments to be made in = transport certificates. Beyond this, he can have recourse to the free = market. As practically everybody depends on the railway services, the = market for these certificates is extremely large.=20 H ence not only firms come in question, but all private persons who ever = wish to travel or have goods to dispatch by rail. Moreover, there is the = probability that the manual and clerical workers of the contracting = firms may agree to accept as part of their=20 remuneration railway money, as they could make use of it themselves = (monthly season tickets and holiday travel) or dispose of it in shops = whose owners can utilize it or pass it on. \par=20 \par The value of the circulating certificates will be determined by the = law of supply and demand. Should the market rate once fall below the = nominal value \_ say to 95% thereof, then everybody who has to use the railway services, = be it to travel, now or in the near future, or to forward goods by rail, = would be eager to acquire certifi cates, for the Railway is obliged to accept the latter at their face = value, regardless of their market rate. The customer of the railway = (prospective passenger or forwarder ) could thus obtain an exchange = profit, in this case 5 % of his railway expenses.=20 T he incentive to acquire these certificates thus grows precisely as their = market value drops and, accordingly, a fall in their value stimulates = the demand for them. In turn, the growing demand will raise the market = rate until the demand will slacken, that=20 is until the nominal value is again reached. A free market rate for the = railway money guarantees therefore its soundness. \par=20 \par Hence those who regularly use the railway, including more = especially large firms, would instruct their bankers to purchase = transport c ertificates as soon as they have fallen below par. At the stock exchange = the railway money would be regularly dealt in and retail trading therein = might be facilitated if, in the immediate vicinity of the railway = booking offices, exchange bureaus sold rail way money. The trade in transport certificates would be hence free and = unlimited. \par=20 \par The Railway would naturally undertake not to raise its tariffs as = long as the transport certificates remained in circulation, for = otherwise it might deprecate the value of th e certificates for its own benefit. It is obvious that it would have to = safeguard commerce in this respect. \par=20 \par V. IMPORTANCE FOR THE RAILWAY \par=20 \par The Railway would manifestly profit by such a plan, for it could = freely place orders for any materials it might requ ire. For this purpose, it would have no longer need of legal tender, = which it would have to obtain first. It could, instead, undertake to pay = with a means completely at its disposal. namely transport services, Thus = the Railway would secure the materials i t is short of, in the easiest and most natural manner. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D \par 77=20 \par Instead of an empty sale of legal tender, there would be an = exchange of already existing values. The financial situa tion of the Railway would thus be greatly eased. Here is an advantage = far greater than that involved in an ordinary credit transaction, for = even if the date of payment for materials received should be very = liberally conceived, the Railway would be eventua l ly obliged to offer payment in banknotes, which it must first obtain. = The plan here submitted would relieve the Railway altogether of the = necessity to accumulate cash. The risk is passed on to the contractor, = who on his part, is in a position to bear it,=20 since he received new additional orders he would not otherwise obtain, = and since he can reimburse himself by bringing the certificates into = circulation. The proposed method of settlement would thus carry with it = no dubious consequences for the railway. \par=20 \par The Railway's sole obligation arising out its issue of railway money, would = be to undertake that all its booking offices should accept the transport = certificates at any time at their face value, irrespective of their = current market rate. The Railway would ha v e only to place its services at the disposal of the certificate holders. = It would be in no way bound to redeem the certificates in gold, in = banknotes, or in any other way. The sole mode of redemption is their = acceptance for services rendered. The issue of =20 the transport certificates would involve therefore no risk whatever for = the Railway. The certificates are completely safe against a "run". Even = should there be grave mistrust of the Railway Management, no one could = claim anything beyond the right to have=20 p ersons or goods transported. The worst that could happen, in the case of = a heavy fall in the exchange rate of the certificates, would be that = because of the cheap opportunity thus provided, more travels would be = undertaken and more goods forwarded than ot herwise. This could never imperil the Railway. \par=20 \par In these circumstances the placing of orders will be facilitated = for the Railway. The country's productive activity would thus rise and = with it the Railways turnover. Incidentally, this might lead to a fall = in costs and therefore to an increase in possible profits. \par In order to strengthen its credit, the Railway would be in any case = anxious to increase as far as possible the circulation of its own money. = It would therefore induce firms under its influence to acc ept the certificates in payment. In this category, might be placed = hotels, restaurants, workshops, canteens, ports, and shipping offices. = That, for competitive reasons, would in turn induce enterprises not = controlled by the Railway, also to accept the cer t ificates. There is hence every probability that railway money would not = only be accepted in the refreshment rooms of railway stations, but in = restaurants generally, so long as the possibility exists of making use = of the certificates or of passing them on. The circulation of the certificates might therefore be a very = considerable one. \par=20 \par When the certificate issued by the Railway returns to the railway = offices in the form of payments made for passenger tickets and freight = costs, its mission would be at an end. The circle is closed. The Railway, having rendered in services an = equivalent for the materials it had received, the transport certificate = would now have to be destroyed. \par=20 \par VI. NO DEFICIENCY IN CASH TAKINGS \par=20 \par It might be argued that the Railway would have to re\_ issue the certificates returned to it in order to meet its various = obligations and that thereupon the price of the certificates would fall = and their issue become altogether purposeless. The objection is invalid. = It is founded on a crass misapprehension . It overlooks the fact that the sequence of the contemplated financial = operations is just the opposite to that averred by the objectors In = issuing transport certificates, the Railway would have no intention of = distributing them gratis, but would use them =20 for covering necessary expenditure. For instance, with their aid it = might purchase signal lamps. In this way it would come into possession = of the signal tamps without having to offer legal tender currency notes. = When the certificates had found their way b a ck, then the mutual accounts would have been closed. The Railway would = have the signal lamps and the contractor, having made use of the = certificates, would have been paid. The transaction would be thus = liquidated and the Railway must destroy the returned=20 certificates. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D \par 78 \par It is a mistake to suppose that the Railway would be obliged to = reissue the Certificates for the purpose of purchasing signal lamps. On = the contrary, the sign al lamps would have been already acquired and paid for. No more means of = payment would be required for the acquisition of these signal lamps. = There would therefore be neither a need nor a possibility for the = repeated issue of the returned notes. The certi ficates issued by the Railway had been already expended by it \_ the = common use of the language expresses this clearly \_ and could not = therefore be re\_issued, for no one could make use of one and the same = note twice over. \par=20 \par What of the present system? Here th e Railway has first to acquire legal tender bank notes by selling = transport mileage. If it succeeds in this, it may expend the banknotes = thus acquired for the purchase of signal lamps. The process is therefore = just the reverse of that implied in the syste m of railway money. This also holds where, as is customary, the signal = Lamps are obtained on a credit basis for in this case, too, the Railway = can only settle its account regarding the signal lamps after having = acquired the necessary legal tender means of=20 p ayment by marketing its transport services. Even in this case the = Railway has to use the notes received at its offices to cover its = expenditure. Railway money dispenses with all this. The signal lamps are = already paid for when the certificates return to t he Railway. A deficiency in cash takings, consequently, does not take = place. To assume the contrary, is to misapprehend the principles = underlying the contemplated transactions. \par=20 \par Evidently, in utilizing its transport certificates, the Railway = would have to allow for its general financial situation. It would = therefore plan no purchases whose kind and extent it could not afford. = On the contrary, it would concentrate \- to begin with on securing with them such materials as are indispensable = for the efficient working of its system \_ i.e., coal, oil, other fuels, urgent replacements including coaches and = engines, etc. Subsequently, less urgent needs could be satisfied. There = would be also the possibility of avoiding the dismissal of workers and = officials and of reduc tions of wages and salaries which might otherwise be necessary by an = arrangement with those affected, if legally admissible, to receive part = of their remuneration in railway money. \par Indeed, once railway money freely circulated, the repeal of the = recent redu ctions in wages and salaries and the return to the conditions prevailing = in 1929, might become practicable. However, these are not questions = regarding the nature of railway money itself but the uses to which it = might be put. The Railway Management would b e folly competent to deal with the latter point. \par=20 \par=20 \par VII. HOW MUCH RAILWAY MONEY COULD BE ISSUED ? \par=20 \par For the value of the certificates, the amount issued is of decided = importance. This aspect should be therefore closely examined. A legally = fixed upper limit fo r the issue does not appear desirable. Such limits are necessary in the = case of bank notes which are legal tender, for then there is nothing to = indicate whether too many or too few bank notes are circulating. All is = different, however, where there is an o pen market rate. It would always show whether the market can accept = still more. \par=20 \par The fixing of an upper limit at any time should be hence left to = the issuing office on whom the full responsibility should rest. \par Still, estimates as to the maximum quantity tha t might be reasonably brought into circulation, are possible. The amount = of the capital invested is no adequate measure as list imagined. (*) The = general turnover would be a more accurate gauge. This alone can suggest = the amount of railway money that migh t be profitably issued. It is evident that the number of the certificates = should not be greater than can conveniently return to the Railway = booking offices, for if the reflux is disturbed and blockages occur, the = value of the certificates would necessarily be reduced. Assuming an annual railway turnover of about 3.000 million = marks \_ this roughly may have been the turnover of the German = Reichsbahn during the last year \_ an issue of 1.000 million marks would not seem exaggerated. Naturally, = the amount of the issue would be governed \par = _________________________________________________________________________= __________________ \par (*) Compare his work: "Ueber ein Saechsisches Eisenbahnsystem als = Grundlage eines allgemeinen \par deutschen Eisenbahnsystems sowie den Prospektus des = Eisenbahnkomitees zu Leipzig an das Publikum". complete works, Hobbing, = 3/1 S. 167 f ., 3/2 S. 65 8. \par = _________________________________________________________________________= ___________________ \par=20 \par 79=20 \par by the amount of the railway money that had stre amed back, that is, it would be issued not all at once but continuously, = in strict accordance with its actual employability. On the above = assumption, about 80 million marks, for instance, might be issued = monthly. But the open market rate should govern eve r y step taken. As soon as the market rate fell below a certain minimum = value, say 95%, further issues would have to be immediately stopped, = apart from the actual difficulty for the Railway of bringing fresh = certificates into circulation at a discount. The=20 s toppage would at once lead to a reduction of the circulation. The = certificates already issued would stream back and the market rate, as a = result of the increased demand and the suspension of issues, would soon = return to par. To the extent that a legal reg ulation of an upper limit can at all come into consideration, this would = have to consist in prescribing that the issue of railway money should be = suspended as soon as the market rate has fallen to the above-mentioned = percentage. \par=20 \par The greatest stress should=20 be laid on the returned certificates being immediately destroyed. On no = account should they be brought again into circulation. As at the Bank of = England, every note should be permitted to be issued only once. If fresh = parcels of notes are to be issued, th e principles above enunciated would have to be respected and it would = have to be made quite clear that it is a question of a new issue and not = a matter of putting into circulation again certificates previously = issued. The notes would therefore be numbered=20 consecutively and there would have to be daily reports of the numbers = issued and of those destroyed. \par=20 \par If the notes keep circulating, it may be confidently assumed that a = considerable proportion of them would continue to circulate and would = therefore not ret urn. The experience of the Saxon railway money makes this assumption = feasible. But an alert management will not be tempted thereby to issue = more notes than could actually be returned and will thus avoid any = possibility of the notes depreciating. However,=20 even if the limit here set were once overstepped, the Railway and not = the public would suffer. The Railway would be in the position of a = theatre which had sold its tickets at too low a price. \par=20 \par VIII. FACE VALUE, UNIT, AND STABILITY OF VALUE \par=20 \par The particulars of the railway money are the following: \par Each certificate would have to state that at every railway booking = office and at any time it will be accepted in payment, at its face = value. \par=20 \par Here the question arises how the face value is to be fixed. This = involves=20 a general problem of settlement techniques. The matter will, = accordingly, depend on what monetary standard prevails in the country = where the railway money is issued. In most cases the gold standard would = be the basis. The railway money would in that case=20 b e made out in, say, gold mark or gold pound. In this connection we ought = to avoid the very common confusion of the notes of the central bank of = issue, with the currency unit itself. In principle the note of the = central bank of issue, as for example the po u nd note, should be distinguished from the currency unit, the gold pound. = If this difference is already recognized in a country, the railway = money would be naturally also based on the gold unit. Thus the stable = value notes issued in 1923 by the German Rei ch Railway were based on gold. \par=20 \par If the above distinction is not drawn and if it be impracticable = when introducing railway money to apply the principles of a genuine = stable value reckoning, then it should be linked to the notes of the = central bank of issue.=20 The notes would express, for instance, dollars and pounds, meaning by = that paper dollars and paper pounds. In that case the value fluctuations = of the notes of the central bank of issue would manifestly be reflected = in the railway money. Should, for exampl e , the value of the pound note continue to fall, the value of English = railway money relating to the pound note, would correspondingly fall. = The linkage with the notes of the central bank of issue, instead of with = the currency unit itself, would be especial ly advisable where commerce and particularly the Railway transacts its = business on the basis of these notes. \par=20 \par There remains, lastly, the possibility of basing the nominal value = neither on the currency unit nor on bank notes, but on transport = mileage. Then t he railway tariff would needs have to be on the same basis. This mode of = calculation would correspond to the "rye mark", the "book mark" & = similar standards of value of the inflation period. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 80 \par In every case where the nominal value cannot be determined in gold, = a fixed minimum of transport mileage will have to be guaranteed. This = would afford an effective protection against depreciation. \par=20 \par The denominations of the railway money m ust allow to permit the maximum circulation. They should be therefore as = small as possible and as for the rest correspond to the existing = monetary denominations. If necessary, small change might be issued by = the Railway. All aspects decisive for the manuf acture of money tokens, especially those relating to protection against = forgeries, are to be taken care of. One should strive for a = corresponding extension of legislative protection. \par=20 \par Finally, steps would have to be taken to introduce dealings in = railway money on all official exchanges. \par=20 \par=20 \par IX. THE BOND BETWEEN EXCHANGE OF COMMODITIES AND MEANS OF PAYMENT \par=20 \par The realization of the plan here proposed would enable the Railway = to place more and larger orders than heretofore, for the Railway would = be no longer depen dent on the amount of legal tender it has at its disposal. Indeed, the = orders it might place would be only limited by the passengers and = freights it could transport. The exchange of services would become to = that extent independent of the note monopoly of=20 t he central bank of issue. The situation is similar to a medical doctor, = being short of money, undertaking to treat a sick tailor, similarly = situated, in exchange for an overcoat. Legal tender is not displaced = thereby. It is rather that an exchange of comm o dities has become possible, where no such exchange could have been = possible if it had depended on the supply of legal tender money. The = indissoluble bond subsisting between exchange of commodities and means = of payment, which has in the last few years been seriously misconceived, \_ think in this respect particularly of the = international debts! \_ becomes obvious here. Money proves to be, what = it really is, not a self\_contained something, but a means of payment \_ that is a means for facilitating the exchange of goods, a means to = provide employment. To which should be added that the money issued by = the Railway would necessarily return to it \_ in other words, would increase the Railway's turnover to the same = extent as it furthered the general exchange of goods by the orders it = placed. \par=20 \par X. THE NATURE OF RAILWAY MONEY \par=20 \par Railway money would be based on the same principle as paper money = and bank notes generally. That does not involve that a paper certificate = must be eventually redeemed in gold or silver, as has often b een contended. In our day when the greater number of the worlds paper = currencies have become de facto or de jure inconvertible, no one could = seriously defend the opinion that the value of the notes depends on = their convertibility into metallic currencies, =20 for in that case those notes would be void of value. Their value in fact = lies in their utility. In the last resort it rests on the fact that the = agencies of the issuer are always prepared to accept them in payment at = their face value. Every note-issuing b a nk must therefore in any case accept its own notes in settlements, = especially if it does not redeem them with specie. Hence everyone who = owes the bank of issue anything, can liquidate his debt with notes = issued by this bank. This is the sole basis for the value of inconvertible bank notes. We ought not to be deceived by the = fact that today most bank notes are guaranteed as to their value because = Governments accept them at their face value in payment of taxes and have = thus provided them with the so\_ called "tax\_foundation" (Steuerfundation). The decisive feature, = however, is their return to the issuing agency, This return flow is the = final guarantee of their utility and therefore of their value. \par=20 \par If the principles of a correct issuing procedure are respected,=20 there must always be someone who is interested to obtain the = certificates, be it, as in the case of banknotes, for redeeming a = discounted bill or, as in the present case, for the payment of services = rendered by the railway. The principle of utility has be c ome more widely acknowledged in our day. Thus the German Reich is not = bound to redeem in cash the tax certificates created in 1932. Their = value rests, according to the plain text of the Act, solely on the = provision that the tax authorities must accept the m in payment of taxes. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 81 \par If the Railway issued notes in payment for its orders, this means = nothing but that, in return, it would be ready to accept its own = obligations in payme nts due to it. The supplier passes on the certificates he receives to = his business associates until they reach those who can utilize them in = payment for the transport costs. When a single traveler pays for his = ticket with the certificate issued by the rai l way, he settles by clearing with the railway that part of the supplier's = claim which to the amount of the face value of the certificate has been = transferred to him. The circulating railway notes prove therefore to be = portions of the claims of the contract o rs entitling them to payment for the goods they delivered and it is = therefore natural that the Railway, as a recipient of the goods, should = always and everywhere accept them at their face value, regardless of = their market rate, in payment for the services it can render in return. All this brings out clearly the clearing = \-idea which is also inherent in every bank note, as the final and most = essential factor. \par=20 \par In this sense we may say that the Railway would pay its debts with = its own money. The more it succee ded in doing this, the less would be its costs that is the more the = Railway would prosper. If we once think through this case to its = theoretical conclusion and assume that the Railway could cover all its = expenditure with its own money, it would not need t o trouble about securing cash or credit and it could in this way reach a = height of prosperity only circumscribed by the services it could render. \par=20 \par XI.THE RAILWAY'S INDEPENDENCE OF THE CENTRAL BANK OF ISSUE=20 \par AND OF ITS GOLD RESERVES \par=20 \par To the degree that=20 the Railway issued its own money, it would become independent of the = central bank of issue. This is not only of importance in view of the = great difficulties which most central banks of issue have to face. It is = desirable in and of itself, for there are al ways decided advantages in being independent of an undertaking not = subject to our control. \par=20 \par There is stil another aspect, however. According to present\_day = legislative provisions the amount issued in bank notes partly depends on = the gold reserves held by th e central bank of issue. That means that fresh monetary transactions = cannot be undertaken if they should entail an increase of the minimum = legal cover. This relation to the gold reserve of the central bank of = issue ceases to exist when enterprises, such a s the Railway, may conclude transactions which are neither directly nor = indirectly financed by the bank of issue. There need not be a dependency = on the Central Bank's gold reserve when there is no obligation to redeem = the notes with specie. Where there is=20 a n exchange of goods or services there, as has been shown, such = convertibility obligation is irrelevant. The Railway can pay for = materials with transport mileage, without the need of moving hither and = thither even a single piece of gold. This holds even w hen the value of all services \_ that of the goods as well as that of = the mileage \_ are measured in gold, i.e., where there is a gold = standard. \par The following fundamental observations are pertinent. The complete = centralization of currency maters in central ba nks of issue has not fulfilled the expectations which were associated = with it, especially in Germany, after the creation of the Reich. At all = events nobody believes that centralization could have averted trade = depressions. On the contrary, the grave econo m ic crisis of today has developed under the aegis of the centralized = system and the suspicion cannot be avoided that its intensity is bound = up with that system. There is therefore a growing clamor favoring, on = principle, a return to decentralization. Nor i s this a problem to be dealt with regionally. More important that that = would be an objective decentralization, such as would be introduced for = instance by railway money. Serious dangers are undoubtedly inherent in a = monopoly for the issue of means of payme nt. It confers a rarity value on currency, and it would be therefore = advisable to make an attempt to cautiously reduce this monopoly, at = least in one direction by empowering the issue of railway money. \par=20 \par In this connection it is significant that the Communis t Manifesto of 1847 regarded the complete centralization of the issue of = notes as an effective means of expropriating the middle class and for = this very reason favoured centralization, Therefore it says literally in = the Communist Manifesto: \par "The proletariat will use its political supremacy, to wrest by = degrees all capital from the bourgeoisie, to centralize all instruments = of production in the hands of the State, i.e., of the proletariat = organized as the \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 82 ruling class; and to increase the total of productive forces as = rapidly as possible. \par "Of course, in the beginning this cannot be effected except by = means of despotic inroads on the rights of property and on the = conditions of b ourgeois production; by means of measures, therefore which appear = economically insufficient and untenable, but which, in the course of the = development, outstrip themselves, necessitate further inroads upon the = old social order, and are unavoidable as a me ans of entirely revolutionizing the mode of production. \par "These measures will, of course, be different in different = countries. \par "Nevertheless, in the most advanced countries, the following will = be pretty generally applicable: \par=20 \par " }{\b\i\fs24\lang1033\cgrid0 \'85 5. Centralization of credit in = the hands of the State bank with State capital and an exclusive = monopoly". \par=20 \par }{\b\fs24\lang1033\cgrid0 In 1848 this demand was expressed even = more clearly in a leaflet issued by the Communist Party under point 10. = There it runs: \par }{\b\i\fs24\lang1033\cgrid0 "The private banks will be replaced by = a State Bank whose notes will be legal tender." \par }{\b\fs24\lang1033\cgrid0=20 \par This demand of the Communist Manifesto has since become law. = Central banks of issue have been established and the notes emitted by = them, as Marx and Engels demanded, were made legal tender. If to that is = added that }{\b\i\fs24\lang1033\cgrid0 the=20 middle class in agreement again with the Communist Manifesto, has been = to a large extent expropriated }{\b\fs24\lang1033\cgrid0 by the trade = depression then the maintenance of the monopoly in a deliberately anti\_ communist commonwealth appears at least dubious. Concerning this, it is = of the utmost interest that Bismarck's official financiat adviser Dr, = Michaelis, was a declared opponent of the note monopoly and jestingly = referred to the "}{ \b\i\fs24\lang1033\cgrid0 State Bank theologians for whom the bank note = is the symbol of an all-wise Providence and an impartial = Justice}{\b\fs24\lang1033\cgrid0 ". (Michaelis, "Volkswirtschaftliche = Schriften" \_ Economic Works \_ , Berlin, 1873=3D vol. 2, p. 272, "On Paper Currency".) Thus the idea, = whereon the plan here submitted is based, is by no means new and it is = highly instructive to see to what ex tent Michaelis already expressed similar views. Thus he, too, disagreed = with forced currencies and explicitly stated that the convertibility of = paper money is of in any way connected with its function as a medium of = exchange. He says literally (ibid): \par }{\b\i\fs24\lang1033\cgrid0 "To=20 escape mystification, let us divest all kinds of paper money of all the = adventitious attributes which have obscured its nature. First, we must = certainly dismiss the idea of it as a forced currency, next its bill = characteristics as well as its peculiarity=20 t hat somewhere someone must deliver precious metals for it. For, since it = is to act as a means of payment in the exchange of every kind of = commodity, its intrinsic nature does not necessarily imply that somebody = is obliged to furnish in return for it a cer tain quantity of silver or gold." \par }{\b\fs24\lang1033\cgrid0=20 \par Indeed, Michaelis goes further and explains that the value of paper = notes lies in the obligation of the issuing agency to accept them in = payment at their face value. He continues \par "What is left, therefore, is a piece of pap er which may be made use of in the place of cash when making purchases = or settling accounts. And the question is: what ought to be the nature = of this piece of paper if it is to circulate without impropriety where = gold and silver are the ruling medium of e xchange and express prices? \par And he concludes: \par "So we must take refuge, then, in a final declaration to be found = on every paper thaler. ... This declaration is to the effect that the = paper thaler }{\b\i\fs24\lang1033\cgrid0 'will be accepted by the = Treasury for payments of the value of one thaler'. \par }{\b\fs24\lang1033\cgrid0 "Thus the paper thaler is = }{\b\i\fs24\lang1033\cgrid0 a receipt for services rendered, for which = the counter service has yet to be offered}{\b\fs24\lang1033\cgrid0 \_ a = true medium of exchange," \par=20 \par The classical English science of finance also accords with the = basic conception of railway money. It may suffice here to quote MacLeod = who, in his "Elements of Banking" (London, Longmans, 1897; p. 110), = instructively states for our case: \par "All credit is a promise to pay something in future. And that = 'something', whatever it may be, is the value of the promise. That = something need not be money. It may be something else. \'85 It may be a promise to do anything As an example of this we may take a = postage stamp, which is a promise by the State, to carry a letter. And = this service is the value of the stamp. Now everyone knows that a = postage stamp is a valuable \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 83=20 \par thing, It passes currently as small change. People take postage = stamps as equivalent to pence because, they often wish to send letters = by post. Postage stamps are credit." \par=20 \par Railway money would contribute to restore the natural relationship, = where exchange of services is primary and bank notes are secondary. = Today, on the contrary, not infrequently, urgently desired transactions remain in abeyance, mainly because there is a lack of currency notes = and the central bank of issue cannot augment the supply. In reality, the = medium of exchange should be governed by possible turnover and not the = turnover by the available means of exchan ge. \par=20 \par XII. NO INFLATION POSSIBLE WITHOUT A FORCED CURRENCY \par=20 \par At last, the question may be raised whether the issue of railway = money might lead to inflation. \par No intricate explanations are necessary here. = }{\b\i\fs24\lang1033\cgrid0 Every judicious person is aware that an = inflation presupposes a forced currency and that without the latter the = former is impossible.}{\b\fs24\lang1033\cgrid0 =20 \par (See Rittershausen, "Das andere System" \_ The Other System \_, = 1932, p. 12ff.; and Zander: "Der Kampf der Wertpapierbesitzer" \_ The = Battle of the Owners of Securities \_, Berlin, 1933, and in the explanation to: Vier Gesetzentwuerfe zur Bekaempfung = der' Deflation, Verhinderung der Inflation and Senkung des Zinses" \_ Four Legislative Drafts for Combating Deflation, Preventing Inflation, = and Lowering the Interest Rate, 1932 and Best, "Ueber die Vier = Gesetzentwuerfe" \_ Concerning the Four Legislative Drafts - , Berlin = 1933 p 13. ) \par=20 \par The standard of value, the alteration of which is the principal = sign of an inflation, remains entirely unchanged where the notes are = governed by free mar ket rates. The value is determined legislatively according to the unit = of value, that is in Germany , at the present moment, according to the = price of gold. At the most, the value of the railway notes with free = market rating would be changing. At the wors t when contrary to the principles enunciated in this paper, more notes = are issued than can conveniently flow back to the booking offices, the = notes would depreciate in value. But the standard of value, that is the = Reichsmark as the price of a legislatively =20 fixed weight of gold, would not be affected thereby, That the issue of = railway money should be forthwith suspended when there is a fall in its = market rate, has been already stressed. However, with the suspension of = the issue, the circulation would drop an d the railway money would thus prove its above described capacity to = regain its balance. \par=20 \par Nor would average prices be raised by the issue of railway money, = for there would be no fear of a unilateral or arbitrary multiplication = of note circulation. On the co ntrary, each transport certificate would be a receipt for an actual = turnover of goods which has already taken place, It is based on a = genuine trade with goods. By means of the money it issued, the Railway = would merely convert the supplier's claim into a r eadily utilizable medium of exchange and would replace an inconvenient = by a convenient medium. \par=20 \par Indeed, it may even be anticipated that the increase in the = exchange of goods and services would lead to a drop in average prices. = On the other hand, there would be no longer any so\_ called forced sales, that is sales due to a deficiency in the means of = payment and yielding an unjustifiably low return. \par=20 \par XIII. OTHER FIELDS OF APPLICATION \par=20 \par The adoption of the present plan would tend to raise the country's = wealth thro ugh increasing the turnover of goods and personal services and would, by = the introduction of a free market rate for money, safeguard stable value = reckoning in the legal currency unit. It would benefit both equally, the = businessman and the investor, and su b stantially contribute to safeguarding the currency. It is manifest that = the principle here advocated need not be confined to the Railway. It = might feasibly be extended to other leading undertakings (shipping = lines, general transport companies, electricity companies, etc.). It could possibly even be extended to the = introduction of a general State paper money to be accepted at all = governmental revenue centres, this naturally, like the old Prussian = "Kassenanweisungen", without entailing compulsory \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 84=20 \par acceptance or a forced currency. The transformation of the tax = certificates along these lines has already been proposed; but that may = be left to a later date. To start with, it might s uffice to apply the principle within a restricted field, as we have = done.=20 \par = _________________________________________________________________________= _________________ \par=20 \par }{\b\fs40\lang1033\cgrid0 FURTHER REMARKS CONCERNING RAILWAY MONEY \par WITH SPECIAL REFERENCE TO=20 \par THE POSITION OF THE AMERICAN RAILWAY=20 \par }{\b\fs24\lang1033\cgrid0=20 \par }{\b\fs32\lang1033\cgrid0 By Dr. W. Zander, Berlin=20 \par }{\b\fs24\lang1033\cgrid0=20 \par (Reprinted from the above quoted volume "Ending the Unemployment = and Trade crisis") \par=20 \par I. THE SIGNIFICANCE OF EXCHANGE CERTIFICATES \par FOR FACILITATING THE EXCHANGE OF SERVICES \par=20 \par Division of labour is the foundati on of the modern economic system. This division presupposes an exchange = of services among those concerned if serious business disturbances are = to be avoided. That exchange, however, is today gravely impeded. = Everywhere, exchangeable values and mutual want s abound, but actual exchange meets with obstacles. \par=20 \par In a primitive economy, existing values are directly exchanged. In = our modern economy money serves as the medium of exchange. But the notes = of the central banks are not capable of facilitating exchanges t o the degree demanded by the requirements and productivity of the = present day. This results from their very nature, According to the = prevailing conception a banknote is a substitute for metallic money = (gold). Its value is said to reside in the fact that t h e central bank redeems it or buys it at a standard rate, Hence the = quantity of notes that may be issued is limited by the metallic store at = the disposal of the central bank. Add to which that in most countries = banknotes are legal tender, that is, that the y also represent the measure of value. Hence any multiplication of notes = which might lead to depreciation, jeopardizes the whole monetary system = of a country. Accordingly, no responsible director of a central bank = would assist in a multiplication of such=20 note circulation. \par=20 \par It is quite possible that, regarded from the standpoint of = convertibility, the existing means of payment suffice, but that, from = the standpoint of the exchange or services, they are wholly inadequate. = The reverse may also occur. Thus the=20 gold reserve of the Bank of France, for instance, would be far too large = to serve as a basis for the exchange of services in a small village. The = redemption fund does therefore not necessarily correspond to the = economic requirements. \par=20 \par In our modern economy , not even the largest gold reserve would suffice to satisfy all = exchange demands. Indeed, the world's aggregate stock of gold would = probably be insufficient to transact the multitude of all the exchanges = of services of a moderately large territory. Actua l ly, the mass of business is transacted not through the medium of gold or = banknotes, but by other means of payment such as bills, cheques, = transfers, and above all by mutual clearing. However, all these credit = adjuncts are finally convertible into legal te n der and are therefore ultimately anchored in the convertible notes of = the central bank and in the idea of convertibility. In and of itself the = exchange of goods is nevertheless independent of the magnitude of the = central banks gold reserves. It can and mu s t take place even when here is no cover at the bank or even when the = central bank is paralyzed by war, revolution, or the illiquidity of its = assets. Exchange transactions create their own means of payment, = provided that compulsory legal measures or curren cy monopolies \_ as in bolshevist Russia, where these are extremely = developed but as they exist more or less in every country to\-day \_ do = not prevent this. \par=20 \par Exchange certificates, the nature of which we describe in the next = paragraph, con\- stitute such a medium \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 85 \par of exchange: They are independent of the central bank and its = reserves; Their object is merely to facilitate exchanges. Naturally, no = one is bound to accept them nor ha ve they a legally settled value, Only the parties responsible for their = issue, are obliged to redeem them. They are therefore nothing but a = medium of payment and exercise no influence on the legally fixed = standard of value. Hence the amount of exchange mo n ey current is nowise dependent on its convertibility into gold or = banknotes of the central bank but exclusively on the magnitude of the = exchange transactions which actually took place. Accordingly, exchange = money is able to satisfy the immense demand for=20 a medium capable of facilitating exchanges, \_ i.e., for means of = payment \_ without thereby in any way affecting the standard of value. \par=20 \par If consequently, exchange transactions as such are independent of a = gold reserve, then there is no necessary correlation=20 between redeemable banknotes and exchanges. Such banknotes facilitate = exchange transactions to the extent that they are a substitute for gold, = for gold is the commodity for which all other commodities may be = exchanged. The exchange certificate, on the oth e r hand, is no substitute for gold. Its relation to exchange transactions = is hence of a different nature. The exchange certificate represents an = acknowledgement of the value of services received by the party issuing = it and entitles therefore its holder to=20 corresponding and immediate counter-services It expresses the essence of = a genuine barter relation and has no other function than to facilitate = exchanges. \par=20 \par Herein lies the crucial difference between exchange certificates = and the notes of the central bank: the banknotes may and the = certificates must produce exchanges, whence the superiority of the = latter. \par=20 \par The objection that banknotes standardize the modes of settlement = and are therefore preferable to certificates, is not convincing, for the = objection is only partly valid, inasmuch as the standard, of value remains also the same = with certificates. In fact, the exchange certificates of all countries = might be based on the same standard of value, e.g., on a certain = quantity of fine gold (e.g. 1 or 10 grams). In=20 this way international monetary settlements might be made uniform by the = system of exchange certificates (goods warrants or purchasing = certificates \_ The Ed) and placed on a stable value basis. Moreover, such certificates = would not need to be subject to for eign exchange legislation, for not being convertible into gold, they = could never result in gold shipments. It should be finally observed that = by far the largest and most important part of all means of payment, = viz., bills, cheques, and, foremost, clearing transactions, are even today still unsocialized and unstandardized, and = are therefore, like exchange certificates, subject to fluctuations = according to prevailing circumstances. \par=20 \par II. EXTENSION OF THE EXCHANGE CERTIFICATE SYSTEM TO LONG\_TERM = CREDITS \par=20 \par In its application, the certificate system is by no means = restricted to short-\-term credits, for there is the possibility of = applying it to medium and long-\- term credits. Thus railway companies might issue annuities or bonds, = redeemable or yielding interest not=20 in legal tender, but through being accepted in payment at the railway = booking offices. These securities would closely resemble the tax = certificates of the German Reich. For this purpose it would be opportune = to entitle the holders of railway money to con vert it into railway annuities, Thus there would be established a buffer = organization for the acceptance of railway\_money and facilities would = be created for the Railway for obtaining long\_term credits. \par=20 \par III. THE EXCHANGE CERTIFICATE SYSTEM AND=20 \par THE PRESENT AMERICAN RAILWAY CRISIS \par=20 \par The American railways have been especially hard hit by the = depression. In December 1932, they addressed an appeal to the American = people and its governments, wherein they made clear the hopelessness of = their\_situation Accord ing to that appeal, about 30% of their staffs had been dismissed since = 1929 and die wages of those who remained were severely cut. Some 4.000 = factories employing about 150.000 workers were entirety or almost closed = owing to reduced railway orders. Thousan ds of smaller towns were prejudicially affected by this and altogether = some 14 million inhabitants of the United States \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 86 \par directly of indirectly suffered through the railway crisis. Nor has = the situation much improved since. (See January Report \_ 1934 \_ of the = National City Bank of New York.) \par=20 \par The alleviating measures proposed so far appear to be inadequate. = It is by no means enough to encourage railway travel by offering more c omfortably furnished coaches. Traffic receipts fell, not because railway = coaches were not luxuriously fitted but because the public was short of = money. The taxing of the railways may aggravate their financial = situation but this will not be a decisive fact o r. The same holds true of competition with other forms of transport, for = it may be safely assumed that the railways have still an important part = to play in the economic life of the United States. Nor is the = nationalization of the railway likely to increas e the goods traffic, as the experience of bolshevist Russia proves. \par=20 \par All these proposals ignore the problem of the medium of payment and = yet without solving this problem, that of an unimpeded exchange of goods = is insoluble. \par=20 \par Hence our suggestion to consider the issue of railway money as = proposed above with a view of thereby solving the grave problem facing = the railways. The possibilities would be great for the United States in = this respect. \par=20 \par The depreciation of dollar notes is here of special significance. = It would be advisable that the railway money issued should be based on = some permanent standard of value, preferably the gold dollar. (This = equally applies now that the dollar has been re\_ stabilized, for it is inherently desirable to have a unit of computation = which is independent of the political exigencies of the day.) As a = minimum, a guaranty of a certain freight\_ mileage should be granted. After last year's events, public opinion in = the United States will appreciate and rally to an unfluctuating medium = of payment. The issue of unfluctuating railway annuities, embodying a = freight\_ mileage guaranty, might be also recommended. If one of the American = railway companies had carried out such a plan a year ago, an = extraordinary demand would have arisen for its certificates and it could = have thus floated a big loan bearing no interest. \par=20 \par Nor should it be forgotten that America, too, has known railway = money. Thus in 1834 the Georgia Railroad Company brought into = circulation more than its total capital in railway notes a nd the Baltimore and Ohio Railroad Company issued notes which could be = converted into the municipal loans of Baltimore. These experiments were, = however not successful, and accordingly in 1845 the State of Maryland = prohibited the issue of railway money alt o gether. But these failures are easily explained. At the time of issue, = the Railways in question were not yet constructed; at all events not yet = operating. By means of this money, it was hoped to build the railways. = Hence the sole fundamental presuppositio n for the issue of exchange certificates was lacking, namely the = possibility of tendering the railway money at the railway booking = offices. There was no return current and the depreciation of the money = followed therefore as a matter of course. The money is sued in those circumstances has consequently scarcely more than the name = in common with the money here proposed.=20 \par In this connection it is interesting to note that in the case of = the Leipzig\_Dresden Railway, the Saxon Government, which was intimately = conver sant with the peculiarities of paper money; only granted permission to = issue railway money after the railway was running. \par I \par n view of the numerous railway companies in the United States, it = would be, to begin with, preferable for one company only to apply=20 our proposal. If the experiment succeeded, the companies might form = themselves into larger groups and organize a clearing house bank for the = issue of railway certificates. \par=20 \par There is also the following possibility. According to press = reports, the American G overnment is not averse to assisting the railways financially That = assistance might consist in the government agreeing to accept railway = money in tax payments. This would facilitate matters for the = Administration and would provide another important use fo r railway money (tax\_foundation). About a century ago the State of New = York proceeded once in a similar manner as regards the payment of canal = dues. \par = _________________________________________________________________________= _________________ \par=20 \par MAKE SURE YOU RECEIVE THE NEXT TWO ISSUES ON MONETARY FREEDOM \_ = EITHER BY SUBSCRIBING (A $ 2.00 or US $ 2.50 for 12 issues) OR BY = SENDING $1.00 FOR THESE THREE SPECIAL ONES.=20 \par A D V E R T I S E M E N T SPAC : A $ 2.00 or US $ 2.50 per half = page, A $ 4.00 or US $ 5.00 per full page. No more than 1 page per = advertiser per issue. Condition: Anti\_totalitarian! \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par=20 \par=20 \par=20 \par=20 \par=20 \par=20 \par=20 \par 87 \par }\pard \qc\nowidctlpar\adjustright {\b\fs32\lang1033\cgrid0 Plan = 193 \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs52\lang1033\cgrid0 A WAY OUT = OF THE MONETARY CHAOS \par }{\b\fs24\lang1033\cgrid0=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs32\lang1033\cgrid0 By Dr. = Walter ZANDER \par=20 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 The = subjoined study is the outcome of a lecture delivered by the author on 8 = March 1935 before the National Institute of Geneva (Institut National = Genevois). \par=20 \par The devaluation of the be belga, which supervened in April 1935, is = taken account of here. On the other hand, th e May 1935 crisis of the French franc took place after this study had = gone to press. It forms an additional link in the lengthening chain of = monetary difficulties and offers one more illustration of the dangers to = which every monetary system, even when su p ported by an enormous gold reserve, is exposed under the rule of a = forced rate for the notes of the central bank. The proposals so far made = known for ending the French monetary crisis do not suggest anything = beyond what is implicit in the views generally=20 current today. \par Berlin, 2 June = 1935, Dr. Walter Zander \par=20 \par (This reprint is made from the English edition of the "Annals of = Public and Cooperative Economy", the volume "Organized Compensatory = Trading", edited by Prof, Edgar Milhaud and published by Williams and = Norgate, 1938. \_ Compare page 75.=20 \par I possess only a photocopy of it and judging by the style to of the = translation I assume it has been undertaken, like the other translations = above, by G. Spiller, Lond on. I compared this translation with the German version, a pamphlet: = "Ein Ausweg aus dem Waehrungs\_Chaos", a special reprint from: Deutsche = Sparer\_Zeitung, Berlin, No. 18\_ 20, 1935, and found the translation to be considerably better than those = of plans 190 and 192. I undertook therefore only very slight changes. \par=20 \par Ulrich von Beckerath, made the following annotation to one of the = German copies in my possession: \par=20 \par "Between philosophy and economics there exists an intimate = relationship. Proudhon said rightly: 'L'\'e9conomie c'est la = m\'e9taphysique en action'.=20 \par At present the philosophy of subordination prevails, being = originally already developed by Plato and 'perfected' with regard to = subordination by some scholastics (not by all). Hegel, later on, crowned = this syste m. The subordination of individuals under the central banks of issue is = related to the prevailing philosophy of subordination. Quos ego!" - The = Ed,) \par=20 \par (1) THE MONETARY CHAOS \par=20 \par The States participating today in the world economy may, roughly = said, be divided=20 into two groups. One of these has abandoned the gold standard and has = thus removed the foundations of its currency. The other has introduced = foreign exchange legislation and has thereby abolished the freedom of = settlement operations. The first group inclu d es more particularly England, the sterling bloc countries, the United = States, and Japan; the second group, Austria, Germany, Russia and the = great majority of the remaining countries. Placed between these two = groups, is the steadily disintegrating gold blo c. Italy left it for all intents only recently and yesterday as it were = Belgium followed suit. If we bear in mind that since the War France and = Poland had already devaluated their currencies to a fraction of their = pre\_ war parity, virtually Holland and Switzerland alone may be said to = uphold the pre\_ war monetary system. However, even in these two small countries, which = represent but a tiny fraction of the world economy, certain restrictions = concerning the convertibility of banknotes and the gold market have b een introduced, and the general uncertainty as to the future of = currencies exerts a baleful influence in these countries, also. \par=20 \par (2) DISADVANTAGES OF DEVALUATION =20 \par=20 \par Whether the abandonment of the gold standard is advantageous to an = economy is decidedly problematic. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 88 \par In most cases the object aimed at has not been attained. So far as = devaluation is intended to stimulate exports, we should not forget that = for most countries the m agnitude of their export trade compared to that of heir total trade is = comparatively insignificant. This alone renders it questionable to = embark, for the sake of the export trade, on measures which modify the = basis of a national economy as a whole.=20 \par=20 \par Moreo ver, such measures, if successful, may be imitated by any other country, = thus nullifying heir favourable effect. Accordingly, the abandonment of = the gold standard has led to "a race for the worst currency", in which = the most powerful States are participat ing. It is obvious that in the long run such measures for the = stimulation of the export trade are bound to prove worthless, \par=20 \par Moreover, devaluation does not only affect the export trade of a = country. On the contrary it touches every branch of an economy. Thi s holds most especially of imports since these must become dearer to the = precise extent that exports become cheaper. So far as exporting, like in = Germany for example, presupposes the importing of raw materials, a = portion of the anticipated gain is thus ne cessarily lost. But in general, import restrictions, so popular today in = many countries, lead eventually to a decline in exports, for the simple = reason that in the last resort exports can only be paid with imports. \par=20 \par Furthermore, money debts abroad are augmented by a devaluation of = the currency. \par=20 \par However, what is of crucial importance is the fact that an = abandonment of the gold standard involves the devaluation of the entire = savings of a country, particularly as invested in savings banks, State = loans, bonds,=20 and mortgages. If the effect of a general adjustment of prices to the = fall in the value of money is not visible at first or is deferred by = artificial devices, eventually prices always rise when a currency has = been devaluated, \par=20 \par Thus while the intended advantage for the export trade is = emphatically dubious and at best only of passing importance, the loss in = savings and capital is certain and lasting. \par=20 \par But even if the reason for abandoning the gold standard, as in the = case of the United States, is the desire to devaluate capital savings, = \_ that is, if it is intended thereby to adjust the claims of creditors to = fallen prices and to the shrunken turn-over of the debtors \_ the = success is nevertheless more than doubtful. For what is decisive for the = value of a clai m is not so much its magnitude as the business turnover of the debtor. = Everything depends therefore on increasing trade and this is nowise = assured by attacking the rights of creditors, to say nothing of the = moral and economic disorganization which this cr eates. \par=20 \par The heavy depletions on the capital market, the abrogation of the = rights of creditors, the menace to State credit, and the decline in the = standard of living, represent drawbacks which ultimately outweigh the = transitory advantages. \par=20 \par (3) DISADVANTAGES OF FOREIGN EXCHANGE LEGISLATION \par=20 \par The injuriousness of foreign exchange legislation is even more = patent. Everybody agrees and the President of the Reichsbank, Dr. = Schacht, has repeatedly expressed himself to this effect, that foreign = exchange legislation c onstitutes a great evil, even though in most quarters such legislation = is considered inevitable. \par=20 \par Foreign exchange legislation places obstacles in the way of = settlement operations. These obstacles, in turn, hamper trade. But every = decline in trading leads necessarily to a decline in well\_ being, as the latter, in our age of the division of labour, depends on = commerce. Everything therefore that obstructs trading tends to intensify = want and unemployment. \par=20 \par (4) INADEQUACY OF COMPENSATION AND CLEARING AGREEMENTS \par=20 \par All attempts to surmount the difficulties involved in foreign = exchange legislation have hitherto proved abortive. This is especially = true of the different forms of compensatory trading and is evident as = regards its earlier developments. It could happen th en, for instance, that an instrument manufacturer had to accept in = exchange coffee and was thus compelled to become a produce dealer. In = principle, later developments left matters unchanged. It is the very = essence of a compensatory transaction that there=20 is \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 89=20 \par properly speaking no money payment involved and that the goods = themselves have to fulfil this function. That is, every such transaction = represents a barter operation. \par=20 \par Wh ilst it is agreed that movements of goods (in the broadest sense) = underlay all settlements, nevertheless as much as fifteen centuries ago = the Roman Emperor Justinian explained in his Corpus Juris why barter = operations are necessarily inferior to monetary=20 transactions. And yet the distinguishing mark of the present\_ day international compensatory trade is the abandonment of the monetary = system and the falling back on barter. It is evident that a form of = economy which the Corpus Juris deemed obsolete, must be unequal to the task of conducting efficiently the exchange of goods in = our highly developed age. A serious effort should therefore be made to = re\_instate the system of monetary settlements in international = transactions. \par=20 \par Similarly with so\_called clearing a greements between countries. These have now become very common, but they = cannot remove the difficulties arising from foreign exchange = legislation, for apart from the fact that in most cases, as between = Germany and Switzerland, they have led to a considera b le dislocation of trade, they are necessarily confined to transactions = between two countries while the realities of life demand freedom of = movement in every direction and rebel against bilateral arrangements. = They lack therefore the necessary fungibility=20 a nd the attempts to supersede the monetary system in this way have hence = failed. The League of Nations Committee for inquiring into international = clearing agreements has accordingly drawn attention recently to their = disadvantages and recommended their abol ition. \par=20 \par (5) NEED FOR STABLE STANDARDS OF VALUE=20 \par AND FOR REMOVING RESTRICTIONS TO SETTLEMENT OPERATIONS \par=20 \par Shrinkage of international and of intra\_national trade, want and = unemployment, heavy investment losses; and a general uncertainty and = loss of confid ence, characterize the present situation in most countries. It is = imperative to create once more reliable and stable standards of value = and to secure the removal of the impediments to settlement operations = between countries, The solution of these closely=20 related problems has become a question of life and death for our social = order. \par=20 \par (6) FALSIFYING THE GOLD STANDARD THROUGH BANKNOTES BEING LEGAL = TENDER \par=20 \par Whatever the monetary system of a country, it is essential that the = measure of value should be clearly and unequivocally determined. Thus where there is a gold currency, a silver = currency, or an index currency, the value should be measured by gold, = silver, and the index respectively. This basis of measuring economic = values, and therefore of any monetary syste m , is destroyed when in the case of a gold or silver currency the notes = of the bank of issue are made legal tender, for this compels everybody = to accept these notes in payment regardless of their real value. = Compulsory acceptance renders it even impossible to measure the notes by the unit of value and thus to ascertain their = value within the country. Indeed, it establishes a legal fiction on the = basis of which note and unit of value are identical. For this reason, = the names of the units of value \_ e.g., the terms dollar mark, pound, \_ become ambiguous in that they mean now a fixed weight of gold and then = the note of a bank of issue. Accordingly, the measure of value, on the = unambiguity of which everything depends, comes to have two definitions. = This renders i mpossible any real measurement and thus the whole monetary system is = falsified. \par This falsification is generally hidden from the public as long as = the central bank is legally obliged to redeem its notes. This, however, = only masks the reality, since converti bility introduces in the measurement of value an alien element. Indeed = the fact that convertibility becomes a decisive factor, shows how the = whole problem has assumed a different complexion. \par Where convertibility is suspended, we have only a pure paper = currency, this despite strenuous legislative and administrative efforts = to keep the value of be paper at a certain definite level, for what = counts now \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 90=20 \par is no longer the value of the gold but the question whether the = note of the central bank, measured by gold, changes its value. In fact, = the system that has been in general use since the beginning of the World = War, including the so\_ called gold standard or nominal gold currencies, may be described as = paper currency. \par=20 \par (7) COMPULSORY ACCEPTANCE A RELATIVE NOVELTY \par=20 \par Although the compulsory acceptance of banknotes appears today so = natural that most people cannot imagine a means of payment not having = that character, this system has in reality only come into general use in = recent times. Here are two illustrations: \par=20 \par Par. 2 of the German Bank Law of 1875, provided: \par "Payments statutorily required to be made in money need not be = accepted when tendered in banknotes and the constituent States cannot = enact such an obligation for the State treasuries."=20 \par=20 \par This provision was only replaced by its converse in 1909. Article 3 = of the Act of 1 June 1909 decreed :. \par "The notes of the Reichsbank are legal tender." \par=20 \par The course of development was similar in Switzerland. Here article = 39 of the Federal Constitution of 1874 prohibited once and for all the = compulsory acceptance of banknotes.=20 \par However, already in 1891 the Constitution was amended and they = became legal tender in 1914. \par=20 \par (8) COMPULSORY ACCEPTANCE ESTABLISHES THE DEPENDENCY OF THE = CURRENCY \par ON THE CENTRAL BANK \par=20 \par The statutory obligation to accept the notes of the central bank in = settlement operations involves not only the falsification of the basis = of the currency. It also makes the fate of the currenc y dependent on that of the central bank and frequently on that of the = banking system generally. If for any reason the central bank can no = longer redeem its notes or maintain their parity \_ that is, if the = market rate of the bonds it issues falls \_ then, ow ing to the legal equivalence between the notes of this bank and the = legal standard of value, the calculation of values generally will be = prejudicially affected. Thus it was in the main the situation of the = Bank of England, which led in 1931 to the abandon ment of the gold standard and similarly, it was the National Bank of = Belgium that suggested in 1935 the devaluation of the currency. \par=20 \par Almost a century ago Lord Overstone grasped this interdependence = when he said that if he ruined his private bank, he would=20 be ruined, but that if the Bank of England committed a gross blunder, = the Bank could save itself, but the whole of the community might have to = suffer grievously. \par=20 \par (9) COMPULSORY ACCEPTANCE A CONDITION OF EVERY INFLATION \par=20 \par Moreover compulsory acceptance for=20 banknotes forms the legal and conceptual basis of every inflation. In = the absence of such an obligation, bank crashes, with all their dire = consequences, may occur, but never an inflation, because the destruction = of the standard of value and the falsifying =20 of all monetary relations, which are the mark of every inflation, can = never result from the collapse of a single bank. This confusion is only = possible when a legal equivalence has been established between the notes = of this bank and the standard of value. It was compulsory acceptance that brought forth the ominous slogan of = the German inflation period: "One Mark is as good as another" ("Mark = gleich Mark"). History has not known an inflation not due to the legal = obligation to accept. \par=20 \par (10) THE GOLD STANDARD AS` GOLD FOR ACCOUNT \par=20 \par If then, the pre\_conditions of an inflation are to be eliminated = and a reliable and stable currency is to be assured, if, more = especially, the gold standard is to be restored, the falsification = introduced in recent decades must be era dicated and the earlier separation between standard of value and means = of payment \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 91=20 \par must be re\_established. A compulsory exchange rate excludes a = stable and safe currency. No wonder the distinguished German historian Niebuhr stigmatized = compulsory acceptance as "a legislative provision both ridiculous and = abominable." (Nachgelassene Schriften nichtphilologischen Inhalts, 1842, = p. 485 ff.). \par=20 \par The re\_introduction of the gold stan dard in Germany in October 1923, after the inflation, offers an = impressive and instructive illustration. The notes of the Reichsbank, = which were legal tender, had completely collapsed and their value could = only be stated in astronomical fractions. At long =20 last it was decided to introduce calculating in gold value. First, taxes = were thus calculated. Then a new institute of issue, the Rentenbank was = founded, whose accountancy basis was to be gold units. There was, and = this cannot be too strongly insisted on, =20 no legal obligation for the public to accept the new notes in payment, = and these notes have to this day never become legal tender. They have = therefore never been identified with the unit of value, which was then = the gold mark. This system, which lasted fr o m the passing of the inflation in the autumn of 1923 until the = introduction of the new Bank Act in the summer of 1924 (which Act formed = part of the series of Dawes Acts), was therefore a pure system of = calculating in gold units which was not falsified by=20 any compulsory acceptance. \par=20 \par A similar example, although confined to one domain only, is offered = by China which recently adopted a gold unit for its customs charges. By = a decree of the Minister of Finance of 15 January 1930, counting in = silver in the departm ents of maritime customs, the most important for the Chinese budget, was = replaced by counting in gold. The basis for these calculations in gold = is a weight of 60,186 centigrammes of fine gold and represents the = customs gold unit. This customs unit is excl u sively a calculating unit and the decree specifically provides that the = payment of duties may, as before be made in local means of payment, = that is in silver dollars and in banknotes. Of course, these are only = accepted in payment at the current exchange=20 rate, this being measured by the customs gold unit. \par=20 \par In conformity with the foregoing illustrations it is therefore = suggested here to introduce generally (whilst abrogating the statutory = obligation to accept the notes of a central bank) calculating in gold = value and thus to re\- establish the conditions existing until 1909 in Germany and until 1914 = in Switzerland. \par=20 \par (11) IS THE INCONVERTIBILITY OF NOTES INCOMPATIBLE WITH THE=20 \par ABROGATION OF COMPULSORY ACCEPTANCE? \par=20 \par It might be objected that before the War=20 compulsory acceptance could be dispensed with because then, unlike now, = the notes could at any time be converted into gold. The objection does = not hold for convertibility is not of decisive importance, as will = transpire from what follows. \par=20 \par (12) CONVERTIBILITY AS A BASIS FOR PAPER MEANS OF PAYMENT \par=20 \par It is generally believed that the value of banknotes resides in = their being convertible into metallic currency, banknotes being = considered in the main a substitute for gold or silver. Already Adam = Smith, in a famo us passage in his "Wealth of Nations" (bk, ch 2), declared that all = paper money represented only gold or silver. Similarly the Bullion = Report of the British Parliament of 1810, which was very strongly = influenced by Ricardo, expressed itself to the same ef fect. Probably not a single theory in the whole domain of political = economy has evoked such universal assent. \par=20 \par It is therefore natural that this view should have been = incorporated in legislative enactments. Since paper money is regarded as = a substitute for=20 gold or silver, it must be at any time convertible into these. Banknotes = and convertibility are therefore interdependent conceptions and hence = all bank acts the world over contain definite provisions concerning = convertibility, metallic cover, and the rati o of the notes issued to the current gold reserve. Indeed, every monetary = claim is hence regarded as being in the last resort a claim for payment = in gold, although there is no necessary connection between this and a = gold standard, for a gold standard prima rily presupposes, apart from calculating in gold, that a creditor cannot = refuse \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 92=20 \par acceptance of a payment in gold, i.e., that there is a general = obligation to accept gold but by no means the right of a creditor to = insist, in any and all circumstances, on being paid, directly or = indirectly, in gold. \par=20 \par Firmly based, on the one hand, as seems the general conviction that = convertibility is necessary (and practically everywhere the ra tio of the gold cover is deemed to be of the utmost importance), there = is, on the other, no doubt that today most banknotes have become = legally, or at least actually, inconvertible, without thereby losing all = their value. In fact, for some notes there exi st today no provisions of redemption, and yet they possess value. = Accordingly, there must be, apart from convertibility, another basis for = the value of paper means of payment. \par=20 \par (13) STATE FIAT AS BASIS OF VALUE FOR PAPER MEANS OF PAYMENT ? \par=20 \par All eyes are turned towards the State to see whether, by its fiat, = it is able to confer value on valueless paper. It becomes however = quickly manifest that the power of the State is strictly limited in this = sphere. All large\_ scale monetary devaluations known to history hav e referred to means of payment the value of which rested on a State = fiat. This holds, for example, of the notes which the Scotchman John Law = issued in France at the beginning of the eighteenth century and even = more so of the assignats of the French Revolu tion. In both instances acceptance was at first not compulsory. But = presently the obligation to accept them was decreed and soon re\_ enforced by penalties. On 11 April 1793 the French Government prohibited = the use of all metallic money on pains of six years in chains, and in = September of the same year the decrying \_ that is, the verbal = discrediting of the assignats \_ became punishable with death and the confiscation of property. \par=20 \par These drastic measures proved, however, unavailing. The exchange = value of the assignats declined steadily. At the close of 1793 it was = only 22% and in 1795 it had fallen to under 1%. \par=20 \par Not so dramatic, but not less impressive and instructive, were the = experiences during the two great American monetary devaluations on the = occasion of th e war of liberation and of the civil war. There, too, the fiat of the = State was unable to prevent devaluation. \par=20 \par But by far the greatest financial catastrophe of modern times was = the German postwar inflation. It is common knowledge that the legal = obligation to accept the banknotes of the Reichsbank could not prevent their = complete collapse and it is most significant that the notes of the = Rentenbank, which succeeded in stopping the inflation, have never been = legal tender. \par=20 \par Nor was it different in the case of the Austrian and Russian = inflations. Nowhere, in fact has the power of the State been able to = prevent devaluation. \par=20 \par But this was not only the fate of weak States crushed by defeat. = France and Italy, both victors in the World War, had to suffer heavy = devaluations which annihilated more than four\_fifth of the value of = their currency. \par=20 \par It cannot be therefore the State's fiat which confers value on = inconvertible paper money. \par=20 \par (14) CONFIDENCE AS A BASIS OF VALUE FOR PAPER MEANS OF PAYMENTS ? \par=20 \par Not even confidence and national enthusiasm, revolutionary = determination and religious belief, can accomplish this in the long run. = One example may suffice.=20 \par When during the French Revolution in April 1793 the = above\_mentioned currency law was promulgated, the whole population of = Metz assembled on the Place de la L\'e9galit\'e9 , took a solemn oath, in the presence of the garrison, the National = Guard, and the administrative and the judiciary staff, not to draw any = distinction between the face value of the paper money and silver. Si milarly, from Toulon where analogous ceremonies took place, the = Government received a report stating that the population would carry out = the law with the religious respect (respect religieux") due to it. = However, after a few days the workmen at the arsena l of Toulon petitioned that they might have their wages paid in silver, = for, they declared, "try as we may, we cannot live otherwise". (See = Marion, "Histoire financi\'e9re de la France", vol. 3; p. 47, Paris, = 1921.) \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 93 Even the powers of the soul cannot, therefore, permanently = confer value on paper money. \par (15) ACCEPTANCE BY FISCAL OFFICES AS BASIS OF VALUE FOR PAPER MONEY \par=20 \par The value of inconvertible paper means of payment has a diff erent basis, clearly revealed in the history of German finance. Thus = during the nineteenth century several German States issued paper money = the value of which did not lie in its convertibility, but in that the = State agreed to accept at its pay offices the notes it issued at their face value, regardless of their rate of = exchange. German financial science called this the taxation foundation = ("Steuerfundation"). \par=20 \par This acceptance by the State should not be confused with the = current obligation to accept, for und er the regime of compulsory acceptance the taxation offices, following = the universal custom, accept notes at their actual and not at their = nominal value. Thus the notes of the' Bank of England are worth no more = at the English fiscal offices than anywhere=20 else. The State accepts them at their paper value and not at the value = of the gold pound. Compulsory acceptance\_ and taxation foundation are therefore fundamentally different. The = basis of value of this paper money lay in that it was accepted at the = fiscal=20 offices of the issuing authority at its nominal value and, accordingly, = this obligation to accept was the important element in the wording of = the warrants. Thus the Saxon fiscal notes simply read: \par=20 \par "In conformity with the edict of 1 October 1818, this will be = accepted at the Royal fiscal offices", \par and the Prussian money orders of 1835 and 1856 contain, besides the = value of the order only the statement: \par "Of full value in all payments." \par=20 \par Similarly in most other countries. It is true that in many cases, = as in Baden, Austria, and Wuerttemberg, there was in addition to the = obligation of the fiscal offices to accept \_ that is, to the fiscal = foundation \_ a more or less widely current obligation to redeem the warrants. = However, here also the fiscal foundation was o f prime importance and redemption constituted only a kind of = supplementary guaranty. This is already expressed in the order of the = two undertakings on the notes. Thus we read on the Baden paper money of = 1849: \par "Paper money of the Grand\_Duke of Baden, which all Baden fiscal = offices accept in payments at its full nominal value i.e., as equivalent = to the gross silver money struck at the country's standard of coinage \_ and is exchangeable at sight for gross silver coins at the redemption = office at Karlsruhe." \par=20 \par Likewise, in the Reich Act concerning the issue of Reich fiscal = office notes of 30 April 1874 par. 5, we read: \par "Federal fiscal notes are accepted at their nominal value in = payments made to all fiscal offices of the Reich and all constituent = States. They are redeemable at any time on demand for cash by the = Reich's Central Fiscal Office on the Reich's account". \par In both cases therefore the fiscal foundation comes first. It = covers all fiscal offices, whilst the notes can only be redeemed at one = fiscal office. \par=20 \par The Wuerttemberg Act of 1 July 849 makes this relation still = plainer. Article 2, par 1, provides: \par "This paper money is accepted at its nominal value in payment at = all fiscal offices of the State, as also at the tax collecting offices. = These offices are ins tructed to redeem on demand this money, so far as the available funds = permit, and in amounts not under twenty gulden at a time." \par=20 \par Here the claim to redeem notes is conditional on means being = available. According to the clear wording of the Act, the notes are in = principle only covered by the fiscal foundation. \par=20 \par Later, this principle was further developed in the Rentenbank notes = of 1923. Here no provision at all was made for direct redemption. Apart = from utilizing them in connection with public pay offices, t he holder had only a claim to convert them into annuity bonds, which = fact has played no important part in practice. Lastly, in recent years = the fiscal foundation has been most conspicuously exemplified in the = fiscal warrants of 1932, although these are no t intended to be means of payment proper. They cannot be, either = directly or indirectly, converted into ready money. Nor can they be = exchanged for securities. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 94=20 \par No redemption fund exists nor repayments or amortization. Their = value is entirely due to their being accepted by the fiscal offices at = the indicated value, regardless of their exchange rate. \par From the Saxon pay office notes to the fiscal warrants of the = Reich, the same principle of a fiscal foundation is evident. \par=20 \par (16) COMMERCIAL BILLS AS BASIS OF VALUE FOR BANKNOTES \par=20 \par The principle of the commercial bill for the Scottish banknotes = corresponds to that, of the fiscal foundation for State paper money. = Whilst English banknote s have their origin in the receipts given by the London goldsmiths for = gold deposited with them (which means that redemption is of their = essence), the Scottish notes have a different history. In the latter = case, the banks gave in exchange for commercial b i lls round sums in notes of small denominations, expressing themselves at = the same time ready to accept the notes they had thus issued in payment = at their face value for the commercial bills they had discounted. Thus = the basis of the value of the English n otes was the gold deposited, whereas the value of the Scottish notes was = based on goods sold as expressed in commercial bills. \par=20 \par It is true that the Scottish banknotes were also redeemable in = precious metal, very much as was frequently the case with the State = paper moneys, but redemption played an indifferent part in practice. By = means of a so\_ called option clause the banks frequently reserved to themselves the = right of postponing the redemption of the notes several months after = they had been presented. Thus=20 they could wait until the commercial bills had matured. When on the = withdrawal of the bills, the notes flowed back, they disappeared from = circulation and the question of their redemption did not arise. So far = as the bill debtors redeemed their debts in co in or other means of payment and not in the notes of the bank, the bank, = without drawing on its reserves, acquired thereby the necessary means of = redeeming any floating notes. \par=20 \par Ultimately in any case, the value of these notes lay in their being = accepted by the bank that had issued them. \par=20 \par (17) FISCAL FOUNDATION AND COMMERCIAL BILL AS FORMS OF CLEARING \par=20 \par The fiscal foundation for State paper money and the principle of = the commercial bill for banknotes are therefore basically related. In = both instances acceptanc e by the issuer at their nominal value, regardless of the exchange rate = of the paper, is decisive. The significance of this acceptance (or = reflux) is manifest. If, for example, the State pays an official with = such a warrant, if the official passes this wa r rant on to his baker in payment for bread, and if, lastly, the baker = liquidates his tax debt with it, then the baker clears his debt to the = State with the warrant that the official has passed on to him. In the = last resort we have here a clearing process,=20 i .e., a balancing of mutual obligations. And these settlements, unlike = barter or modern international compensatory transactions, are not made = without resorting to money. On the contrary, the exchange is operated by = means of a clearing process canceling the mutual claims through our monetary system. \par=20 \par An inconvertible paper means of payment assumes therefore a reflux. = It represents, in fact, a clearing certificate and derives its value = from the exchange of economic services. This indicates consequently the = lim it to issues of unredeemable notes. Since the value of freely quoted = money, as for instance of the Reich pay notes of 1814 or of the = Rentenbank notes is, like that of every other commodity, determined by = supply and demand, no more notes may be issued than =20 there is a demand for, that is, than must flow back each time to the = issuing centre. Thus in the case of State paper money, the aggregate sum = to be issued must depend on the aggregate tax claims due or all but due. = Within this limit issues are always just ifiable. If, however, this limit is exceeded by circulating paper money = representing tax claims in the distant future, depreciation will = inevitably follow, even if the State should promise to accept the notes = at their face value in the future. \par=20 \par Similarly with banknotes. In principle, only short\_term = obligations should be admitted as cover. The nearer the due date of the = bill, the greater is the demand for means of payment in order to redeem = it \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 95=20 \par and the more assured is the value of the banknotes issued in = connection with the bill. The more distant the due date and the less = assured the payment the more in jeopardy are the notes having such a = basis. Rightly, therefore, many bank a cts, among them that of German, expressly provided that only sound = commercial bills falling due within three months months at most may be = discounted by banks of issue. Indeed experience teaches that long\_ dated financial bills have hurled whole monetary systems into the abyss. \par=20 \par (18) REDEMPTION OR CLEARING \par=20 \par There exist, accordingly, two entirely independent and wholly = different foundations whereon the value of paper means of payment may be = based: redeemability in precious metal and clearing. There is no third = possibility. \par=20 \par Thus all paper means of payment in every country may be today = actually resolved into these two elements of value. Insofar as notes can = be really exchanged for gold, their value may be attributed to this. So = far, however, as there is no redem ption and there is an inadequate metallic cover, only clearing can = confer value on the notes, and this either by clearing against = commercial bills or against fiscal claims. Moreover, in order to extend = the facilities for clearing and thus to increase thei r value, many countries, at a time when banknotes were not legal tender, = introduced in addition a tax foundation for the banknotes, statutorily = obliging public pay offices to accept them. (See, e .g , the Federal Act = concerning the Swiss National Bank of 6 October 1905, article 23.) \par=20 \par The difference between the two elements of value, convertibility = and clearing which latter means here the clearing of taxes due, is well = exemplified in the Bank of England. Here, since the Peel's Act, the note = circulation is divided into a so\_ called fiduciary and non\_fiduciary issue. The latter must have a 100 = gold cover. It reflects the pure idea of convertibility. The fiduciary = issue however, which at present amounts to 260 million pounds, is based = exclusively on "an eternal de bt of the English State'. It is not covered by any redemption fund. It = rather embodies the idea of a fiscal foundation. \par=20 \par How, then, are these two elements of value related? Although in the = public mind the idea of convertibility predominates, what is actually of = decisive importance for prosperity of a country is clearing. \par=20 \par The idea of convertibility makes the quantity of means of payment = basically dependent on the gold reserve available at any time. This is = an entirely impracticable principle. All attacks on the gold standard, directed against this principle, which more = especially combat the creditor's right to claim from his debtor directly = or indirectly gold, are to that extent justified. For there is never a = possibility of meeting all liabilities by gold=20 p ayments. This holds both of international obligations and of domestic = payments. It was therefore of momentous importance and evinced profound = insight, when Milhaud in his great work "A Gold Truce" (Annals of Public = and Cooperative Economy, Genf, 1933. The Ed.), called for a universal gold truce. \par=20 \par Whether a country possesses a gold reserve, depends always more or = less on chance. Accordingly, the amount of the means of payment in = circulation should never, not even under the most orthodox gold standard = system, be determined by the size of the gold reserve. The economic life of a = country would have otherwise to shrink regularly with the shrinkage of = its gold reserve. In reality, the exchange of goods remains a necessity = and possible, even if there is no gold re s erve at all. On the other hand, as the cases of France and the United = States today show, not even the largest gold reserve of a central bank = can save a people from widespread unemployment and poverty, whilst a = monetary system intelligently based on mutual clearing, can provide a people with work and wealth, even in the = absence of any store of gold. \par=20 \par (19) EXAMPLES OF CLEARING MONEY \par=20 \par The diverse possibilities of issuing inconvertible means of payment = based on the idea of clearing can only be outlined here. \par In the first place, we may mention the inconvertible and freely = quoted State paper money described=20 \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 96=20 \par above. In most countries today this is to be found in a more or = less disgu ised form. Besides States, other corporations, especially local = governments, may also issue clearing notes for the imposts they are = entitled to raise. Thus in the nineteenth century Hanover city issued = notes which. promoted most effectively the towns pros perity. \par=20 \par In the economic sphere, railways enter primarily into account as = centres for the issue of special railway clearing notes. In Germany = there is the noteworthy case of the Leipzig\_Dresden Railway, founded by = Friedrich List. This Railway issued in the=20 thirties of the last century railway money to the amount of 500.000 = thalers and this money, to the general satisfaction, freely circulated = until the establishment of the Reich. After the World War, the German = Federal Railway also repeatedly issued its own =20 means of payment, most of which exhibited the character of goods = warrants, i.e. they were based on the principle of clearing. Naturally, = other undertakings, for whose goods or services there is a general and = constant demand, would also benefit by such fac ilities. \par=20 \par The clearing principle is most particularly useful in international = settlements. Thus leading firms might issue purchasing certificates. For = instance, certificates accepted at their face value by the I. G. Farben = Company or by Siemens, could be di sposed of in London, Cape Town, and generally. To make the certificates = more widely acceptable, whole groups of undertakings concerned with = agriculture, export, or the tourist traffic might agree to issue = purchasing certificates jointly. Issues might also =20 be undertaken by special foreign trade banks, whose clients would bind = themselves to accept the certificates in payments up to a certain = amount. Lastly work provision banks might similarly be established to = combat unemployment within countries. For partic ulars on this subject the reader is referred to the valuable works of = Milhaud and Beckerath published by the Annals of Public and Cooperative = Economy in 1933 and 1934. \par=20 \par The central banks existing at present in most countries ought not = to oppose the issue of such means of payment. In this connection we need not examine here = whether these monopoly banks have fulfilled the hopes placed in them or = have not rather aggravated all financial catastrophes, such as = inflations and deflations. In any case so long as pr ivate enterprise exists at all, mutual clearing cannot be monopolized by = a single central undertaking.=20 \par The idea of a monopoly is most closely associated with the idea of = convertibility. The issue of clearing warrants, which neither affect the = store of gold nor are able, since they are freely quoted, to modify the average price = level, cannot in principle be restricted to central banks. It ought = rather, within the limits drawn by the State, to be allowed to develop = freely. \par=20 \par (20) ABROGATION OF FOREIGN EXCHANGE LEGISLATION \par=20 \par Once it is recognized that the value of inconvertible paper money = depends on the possibility of clearing it with the issuer, the way is = open to abolish the pernicious compulsory acceptance and to = re\_establish the gold standard. This, in turn, would facilitate the abrogation of foreign exchange legislation, for = this, too, is based in the last resort on the idea of convertibility and = of compulsory acceptance.=20 \par=20 \par In every country foreign exchange legislation is in the main = identical. The endless number of laws, regulations, and principles maybe = reduced to the following three aims: \par a) Retention of gold; \par b) Retention of foreign means of payment (foreign exchange proper); = and=20 \par c) Restriction of payments abroad. \par=20 \par Compared with these, all other provisions are of secondary = importance. And these three aims may be reduced to one, namely the = seizure of gold. The retention of foreign means of payment and the = restriction of payments abroad \_ are only means towards attaining that one object. The foreign means o f payment are seized because they are regarded as substitutes for gold = and because it is anticipated that by their redemption or, at least, by = their being sold on the international market, gold might be obtained in = exchange. Inversely, payments abroad are =20 restricted as far as possible because it is feared that through the = efflux of means of payment the gold reserve might be drained and the = maintenance of the parity be thereby endangered. The idea that gold is = not only the standard of value but ultimately t he sole and supreme means of payment lies therefore at the root of this = type of legislation. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 97=20 \par Hence the efflux of gold and the associated threat to the = redemption fund have been invariably the direct cause of the enacting of = foreign exchange legislation. \par Here also the compulsion to accept the notes of the central bank = plays a special part. Thus whilst the State may leave to their fate the = freely quoted notes of a private bank, without the monetary unit being affected in case the bank should suffer = exchange losses, the statutory obligation to accept the notes of the = central bank implies that they are identified with the country's = standard of value. A loss in exchange in the cas e of the latter involves therefore a modification in the monetary basis = itself. Accordingly, the State because of its self\- -imposed equalization is compelled to maintain the parity of the notes = of the central bank as long as it is bent on saving its standard of = value from fluctuations. \par=20 \par The identification of the monetary unit with the notes of the = central bank has, lastly, created another source of danger which has = repeatedly acted as a decisive factor in the introduction of foreign = exchange legislation, nam ely its close association with certain large\_ scale banks at home. Thus the collapse of the Kreditanstalt in Austria = and the Darmstadt Bank in Germany instigated the introduction of foreign = exchange legislation in those countries. Of itself there existed no direct connection between these banks and the monetary standard, and = the example of Sweden, which did not rush to the aid of the collapsed = Krueger undertakings, shows that in such emergencies other methods may = be applied than those chosen by Austria and=20 G ermany. However where through the obligation to accept the notes of a = given bank a statutory bridge has been built between the banking system = and the national currency, the temptation will always exist to shift the = liquidity difficulties of the banks onto the shoulders of the currency. \par=20 \par All these problems assume a very different complexion if we take = inconvertible means of payment to be what they really are, namely means = of clearing in relation to an issuer. A fundamentally inconvertible = note, the value of=20 which lies exclusively in the issuer accepting it and which therefore = really involves no claim to payment in gold but a claim to the services = of the issuer, can never lead to a reduction in the gold reserve. A = State paper money based on such principles co u ld be freely allowed to go abroad without this e prejudicially affecting = the currency. It could never entail liabilities in precious metal. On = the contrary, it would necessarily lead to goods being exported and may = be accordingly even followed by an influ x of gold or foreign exchange.=20 \par What matters is that the means of payment shall not be legal = tender; in other words, that it must be accepted only by the issuer at = its face value. With this condition satisfied and the above\_mentioned = limit to issues being r espected, even the heaviest losses on foreign bourses would involve no = danger; for the lower the market rate falls, the greater the temptation = would be to acquire the warrants, inasmuch as the issuer has to redeem = them at their nominal value, the exchange rate difference being thus converted into a gain. Everybody therefore = who has to meet his obligation with these warrants \_ in our example the taxpayer, will try to benefit by such falls and = thereby produce a steady demand which has the peculiarity of risin g as the market rate falls. This necessary demand provides the suction = power that imparts value to the inconvertible paper money. Such a means = of payment need not dread the throwing open of frontiers. In the words = of a Swiss writer, it will, "like a carri er pigeon", return always to its point of departure and necessarily lead = to a demand for home products abroad, in this way furthering the export = trade. \par=20 \par Since such a clearing warrant has by definition a free market rate = and is therefore not linked to the currency unit, the latter cannot be = affected by any fluctuations in the value of the former. \par=20 \par For clearing warrants of the type described, foreign exchange = legislation ceases to have any meaning, for any stipulations relating to = convertible money would lose=20 their point. In all countries, therefore, sound clearing warrants should = be freed from their fetters, since they were only imposed on them on = account of the unsound ones. Thus one should at last bestow on our time = the freedom of movement denied it today b e cause of the past. That is, foreign exchange legislation should be = abrogated at least for sound warrants. Given this first step and the = basis for a new economic structure is laid. Further progress will be = thereby facilitated, for in most countries the inc onvertible notes could be without difficulty converted into State paper = money, thus investing the present state of things in this matter with = its proper form. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 98=20 \par Should however, one or another central bank have transgressed the = limits that would apply to a fiscal foundation, it will not be difficult = to remedy this, without fettering a country's general economic life by = foreign exchange legislation. \par=20 \par Nor can it be objected that th e national economy requires foreign exchange and can therefore not be = satisfied with clearing transactions, for to begin with, we should = remember that probably in all countries depending on foreign exchange = the supply of the latter has shrunk despite the=20 m ost stringent legislation and that therefore the object aimed at has not = been fully attained. But a more important point is that both commercial = and financial debts, according to firmly and universally established = views, can only be liquidated by the good s or services of the debtor, and it is just these that are offered by = clearing warrants. It must be therefore possible to start again payment = operations on this basis. So far as the importing of raw materials is in = question this cannot be challenged. A cle a ring warrant, unhampered by foreign exchange legislation and made out in = gold units is a fully utilizable means of payment so long as there is a = demand on the world market for the goods and services of the issuing = country. If this condition is not satisfi ed, then foreign exchange legislation also would be of no avail. If an = exchange of goods is actually impracticable, \_ that is, if the country = no longer plays a part in the world economy, \_ no debt can possibly be liquidated, This holds equally of commercial and financial debts. No one can expect that a country possessing no = gold should pay in god. Every creditor should therefore recognize that a = debtor can only offer a lien on (a right to -The Ed.) his goods and = services. \par=20 \par Years ago the Economic Committee of the League of Nations expressed the same idea when it said that = creditor countries must either agree that debtor countries may directly = or indirectly redeem their obligations in goods or services or they must = be resigned to not receiving any payments. Th e clearing warrants described here indicate the way in which even heavy = liabilities may be in time honestly liquidated, to the common advantage = of creditors and debtors. \par Once the banknotes that had become inconvertible have been = superseded by clearing warra nts, the free gold market can be at last reestablished. As soon as gold = has been divested of the property ascribed to it of being the exclusive = means of payment and representing the core of all money claims, it = becomes again a commodity like any other. It s free movement no longer causes alarm and may therefore the better = fulfil the function of a standard of value. And this completes the = circle of our proposals, for the free gold market which here appears as = the result of clearing, at the same time presuppo ses it; since the various means of payment can only be reliably valued = when gold may be freely moved. \par=20 \par It follows, lastly, that under the system above outlined there = would be no objec\-tion to gold coins being minted for private firms and = this not, as seems=20 to be the intention at present in France, as a form of note cover, but = for actual and immediate circulation with a view to measuring by them at = any time the value of all other means of payment. \par=20 \par=20 \par=20 \par=20 \par (21) SUMMARY \par=20 \par Accordingly, we propose \par 1. The introduction of unambiguously determined gold units of = account as a monetary \par basis, e.g.: \par 1 mark \_ 1/2790 kg. fine gold, \par 1 franc \_ y kg. fine gold. \par 1 L - z kg. fine gold. \par=20 \par 2, The transformation of the whole monetary system on the basis of = a gold unit of ac\-count. \par=20 \par 3. The abolition of the statutory obligation of acceptance for the = notes of the central banks. \par=20 \par 4. The removal of the monopoly of the central banks and its = replacement by general regulations=20 \par concerning the issue of means of payment. \par=20 \par 5. The abrogation of foreign exchange legislation and the = re\_establishment of a free gold market. \par=20 \par 6. The unrestricted right to mint gold coins. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D \par 99 \par=20 \par 2.2. THE PRACTICAL REALIZATION OF THE PROPOSALS=20 \par=20 \par a) Through international agreements \par=20 \par Everybody is agreed that something should be done to remove the = monetary chaos and the obstacles to settlement operations. Here also = hope is commonly centered on international conferences which are expect ed to lead to an improvement. However, the value of such conferences for = the solution of economic problems is trifling. Think in this connection = of the World Economic Conference of 1933. This was eagerly looked = forward to by all peoples, and yet, notwiths tanding careful preparation, produced virtually no practical results, \par=20 \par However even if within the near future a monetary conference could = be arranged to meet and if, moreover, full agreement could be reached = among the participating States, the effect would be at best to re\_ establish the parity between the monetary units and to impose an = unconditional obligation on the parties not to modify deliberately this = parity nor to change it without the consent of the other contracting = parties. But that would only disp ose of a comparatively small part of the present difficulties, for only \par most rarely \_ as in the United States recently \_ has the = abandonment of the gold standard been an arbitrary act. In by far the = majority of instances, the gold standard was most reluct antly dropped. Heavy calls on credit institutes, excessive claims on the = central bank; a rising efflux of gold, and, finally the threatening = impossibility, despite all efforts, of maintaining the parity of the = banknotes, were for the most part the really=20 decisive factors in he abandonment of the gold standard. For such cases = an international agreement on monetary parities would offer no solution. \par=20 \par So long as the principle of central banks is retained and their = notes, being made legal tender, are identified with the standard of = value, no international agreement will be able to prevent the recurrence = of present\- -day conditions, for under this system the collapse of a single leading = bank, to say nothing of the collapse of the State finances, may render = impossib le the maintenance of parity. However, even if, to meet such cases, the = several countries concluded a convention providing that the gold = reserves of the diverse central banks should be automatically mobilized = to save the currency of a country in need, a s carcely credible supposition, even this would be insufficient in hard = cases, for the magnitude of the monetary obligations maturing at any = given moment would probably always exceed the quantity of available = gold. \par=20 \par It also remains a moot point how the proble m of foreign exchange legislation could be settled at such a conference, = seeing that the granting of loans, useful as these would be to those = immediately concerned, in no way solves this problem. And yet without = this, even a fresh determination of paritie s would prove unsatisfactory. On the contrary, the object should be to = rebuild on a sound basis the entire system of international payment = arrangements. \par=20 \par b) Through intrastate legislation \par=20 \par From what precedes follows the possibility that each separate = State, having made up its mind, may, by abolishing the compulsion to = accept and by recognizing the reflux principle, could re\_ establish for itself the gold standard and rescind its foreign exchange = legislation; This may seem fantastic. But the reader should reme mber the German inflation period. Then, too, an escape without external = assistance appeared impossible. "The hole in the West", speculation on = foreign bourses, and similar obstacles, which Germans could not control, = were quite generally regarded as the ca u ses of the depreciation of the mark. Eventually, when things were at = their worst, when in some parts of the Reich serious disorders had = broken out, and when external help was out of the question, the country = succeeded, by its own efforts, without the aid=20 o f any foreign Government, without an international conference or = convention, to stabilize the mark, to safeguard it against all foreign = speculation, and even after a few months to abrogate the foreign = exchange legislation then in force. Today, as at that=20 time, the free resolve of any country may determine the fate of its = currency. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 100 \par The country that first finds the way out, that removes insecurity, = and at the same time re\_establishes the freedom of monetary operations, = will march well ahead of the other countries. It may even be assumed = that a mighty stream of capital for long\_ term investment will pour into it from all sides. \par=20 \par c) Through private initiative \par=20 \par Even if, however, no State were for the moment ready to proceed along this line, there = remains the possibility of finding a way out of the monetary chaos = through private initiative or at least to prepare the way for this. When = in the eighteenth century the national monetary=20 u nits, because of alleged State needs, continually fluctuated and when it = was therefore impossible to rely on the value of currencies even for a = moderate time, Hamburg merchants, more particularly, discovered a way = out. By founding the famous Hamburger Gir o bank, they, following the centuries' old Chinese Tael system, made = themselves independent of the debased State coinage, by adopting as the = basis of all their accounts an un-minted definite weight of silver in = the place of State money. This weight called M ark Banko, constituted an unchangeable unit of calculation, which came = to be of the greatest service economically for the whole of Northern = Europe. \par=20 \par There can be no doubt that the application of the same principle, = with gold instead of silver as the basis naturally, might exercise a = similarly far-\- reaching influence today. Just imagine that before the devaluation of = the Belgian franc, a Belgian undertaking of good, repute had declared = itself ready to take up a long\_term loan at its actual gold value, = regardl ess of the exchange rate of the franc. The crowd of would\_be investors = would probably have broken through all barriers. \par=20 \par In this connection the proposed private calculation in gold should = on no account be linked with the national monetary system. According ly, I do not suggest here the appending of gold clauses (gold dollar = gold pound, or gold franc) to a country's currency unit, for experience = teaches that such clauses \_ which hold permanently before the statutory means of payment its ideal = as in a mirror \_ only rarely survive the fate of the national currency. Thus in Belgium, = when the franc was devaluated, the gold clauses were revoked and only = contracts in foreign currencies were left untouched. Private calculation = in gold, like the erstwhile Mark Banko=20 s ystem, should be independent of the national currency. It should be = therefore based on a separate unit, for which a simple calculation in = grams of fine gold suggests itself here. This would also serve as a = basis for an international calculating unit, whic h has been widely desiderated for many decades. \par=20 \par All that would be demanded of the State is not to prohibit = calculating in gold. The State could never suffer through this, for even = if a Government should deem it expedient to devaluate the national = currency, as was frequently the case already in the seventeenth and eighteenth = centuries, there can be no ground for imposing a devaluated currency = unit on those who had freely agreed to use for their economic = transactions among themselves another and constant val ue basis. Investors in all countries would joyfully welcome such a = solution and there are not a few undertakings which, under these = conditions would be decidedly ready to place long\_ term loans at moderate interest rates. Once it is demonstrated however, = tha t the monetary chaos, which seems to most men the work of an inscrutable = fate, may be overcome, the profoundly beneficent effects of this for the = peoples of the world will not fail to become apparent. \par = -------------------------------------------------------------------------= ------------------------------------------------------------- \par THE PURPOSE\_OF THIS PEACE PLANS SERIES might, for new readers, be = summed up with: \par Peace Plans is a magazine of irregular appearance (because it is = still only a one-man enterpri se) which tries to publish the numerous and in the opinions of their = authors desirable & practicable steps to further or achieve peaceful = relations within and between various autonomous and exterritorial = volunteer groups of non\--criminal individuals \_ & to attempt to protect this peace & freedom against other groups which are = based on coercion and possess criminally interventionist intentions = towards such volunteer groups. In other words, Peace Plans tries to = further the greatest possible individual freedo m which agrees with the equal freedom of others.=20 \par Do you know where I could buy or borrow: J. GREEVZ FISCHER, = Voluntary Taxation, London, 1890? - J. M. Zube. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D \par 101 \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs28\lang1033\cgrid0 = LITERATURE WHICH FAVOURS AT LEAST OCCASIONALLY AND PARTIALLY - \par MONETARY FREEDOM \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par (See the much larger bibliography in PEACE PLANS 1022. Feedback is = needed on any references found that are of interest from the monetary = freedom point of view, as a first step to getting a ll of them abstracted, reviewed, indexed, discussed and published. I = find it scandalous that after so much suffering under monetary = despotism, for much of recorded history, the literature on monetary = freedom is still not fully, permanently and cheaply pu blished and easily accessible, in spite of the cheap alternative media = now available for this. Who will help to end this scandal? - J.Z., = 24.11.01.) \par=20 \par Since the editor could not find, read and check out all these = publications, those books and articles are li sted as well which, according to some recommendation, or the title, seem = to favour some aspect of free banking. When the true stand of the = authors is in doubt the reference has been marked with fb? Further = references and corrections are very welcome. \par=20 \par Booksellers! The editor is in the market searching for most of = these publications - but only at moderate prices - and he would be quite = content with getting only excellent photocopies of them. \par=20 \par 1, Alison, Archibald Banking and Currency Reform, 1865, fb? \par 2. Andrews, Stephen Pearl, The Science of Society, N.Y., 1851, = reprint still available from School of Living,=20 \par {\pntext\pard\plain\lang1033 \hich\af0\dbch\af0\loch\f0 = -\tab}}\pard \fi-360\li360\nowidctlpar\jclisttab\tx360{\*\pn = \pnlvlblt\ilvl0\ls1\pnrnot0\pnstart2\pnindent360\pnhang{\pntxtb = -}}\ls1\adjustright {\b\fs24\lang1033\cgrid0=20 The Labour Dollar, first printed in Tucker's Radical Review, 1877. \par {\pntext\pard\plain\lang1033 \hich\af0\dbch\af0\loch\f0 = -\tab}}\pard \fi-360\li360\nowidctlpar\jclisttab\tx360{\*\pn = \pnlvlblt\ilvl0\ls1\pnrnot0\pnstart2\pnindent360\pnhang{\pntxtb = -}}\ls1\adjustright {\b\fs24\lang1033\cgrid0=20 A. believes, though, in cost as the limit of price. \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 3. = Armsden, John, Value, London about 1890. A. was a member of the of Free = Currency Movement.=20 \par See: Seymour.=20 \par 4. Badcock, J., member of Free Currency Movement. See Seymour. \par 5. Bagehot, Walter, Lombard Street London, King 8 Co. 1873. =20 \par 6, Bailie, William, "Josiah Warren", Small, Maynard & Co., Boston. \par 7. Bakewell, Paul, 13 Curious Errors about Money, fb? Available for = US$2,00 from Sandra Jeffries, P.O.=20 \par Box 2023 E. Portland Stn., Oregon, 97214 USA. \par 8. Bastiat,. Frederic. Various articles. For redemption in metals, = though. \par 9. Beck, William, Money and Banking , anonymously published, Ohio, = 1830. Mr. Beck, as Greene said,=20 \par "thought out a Mutual Bank by generalizing credit in account; = Proudhon, by generalizing the bill of=20 \par exchange," \par 10. Beckerath Ulrich von, 1882-1969, Zur gegenwaertigen Lage der = deutschen Wirtschaft, leaflet,=20 \par 15/9/1924. \par Ueber das Geldwesen in Kanada, duplicated paper, 15/10/1924. \par Die Sicherheit der Goddwaehrung, Die Aufhebung der = Geldentwertungsklausel, Aus Volkswirtschaft =20 \par u. Statistik, in Waehrung und Wirtschaft, Mitteilungsblaetter = der Deutschland Versicherungs A .G., =20 \par Berlin, 2.1. 1925. \par Der Reichsbankausweis, Aus Volkswirtschaft u. Statistik, in = Waehrung and Wirtschaft, 31/1/1925. \par Die Sicherung der Kaufkraft des Geldes bei Bausparkassen, = Heim u, Scholle, Berlin, Oct., 1930. \par Der Zins bei Bausparkassen, Der Zins als Ausgteichsbetrag, = HEIM UND SCHOLLE, Nov. u. Dez. 30. =20 \par Eine neue Notverordnung, Wirtschaftsbericht der Deutschen = Festmark\_Bank, Berlin, 31 /12/1931. \par Das Gold als Wertmesser, als Zahlungsmittel und als Kapital, = Wirtschaftsbericht, Deutsche=20 \par Festmark\_Bank, Berlin, 15 /2/1932, \par Vier Gesetzentwuerfe ... , co\_author, Berlin 1932. See = Zander. \par Aus der Votkswirtschaftslehre, in: Fragen u. Antworten, = published by Dr. W. Jaeneke, Berlin, 1935. \par THE PRACTICAL REALIZATION OF THE MILHAUD PROPOSALS, in Ending = the =20 \par Unemployment Unemployment and Trade Crisis, edited by Edgard = Milhaud, Williams & Norgate, =20 \par London, 1935. German issue in Annals (see p 63), already in = 1934. \par DOES THE PROVISION OF EMPLOYMENT NECESSITATE MONEY = EXPENDITURE? \_ The =20 \par Financing of Public Works without Recourse to the Money = Market; as Proposed in the Milhaud Plan=20 \par with Remarks on the latter Williams & Norgate, 1935. \par PUBLIC INSURANCE AND COMPENSATION MONEY \_ The Possibility of = Developing Insurance =20 \par Facilities in n Asia, in Colonies, and New Countries through = Applying the Milhaud System together =20 \par with some Reflections on this System, London, Williams & = Norgate, 1938. \par Goldwaehrung und Immobiliarkredit, Westdeutscher = Immobiliarkredit, 1/9/1950.=20 \par Berlin Programme, an unpublished manuscript, 1952.=20 \par Numerous other unpublished papers and relevant letters. Many = already microfiched by PP. \par 11. Bendixen, Wesen des Geldes, 1909,=20 \par Waehrungspolitik und Geldtheorie, 1916, (See p.18.)=20 \par 12. Best, Dr. Oberlandesgerichtspraesident i. R., Ueber die Vier = Gesetzentwuerfe, Sparerbund, Berlin,=20 \par 1933 (?). \par 13. Bilgram, Hugo & Levy, Louis I., The Cause of Business = Depressions, Philadelphia, 1914. Reprint 1950, =20 \par still available from libertarian Social Institute, Bombay. \par Bilgram, Hugo, Involuntary Idleness. Philadelphia, 1889. = According to Tucker the best English \par language treatise on money since Greene' s Mutual Banking .=20 \par A Study of the Money Question, Phillad., 1889.=20 \par The Remedy for Overpopulation & Under Employment, n.d. \par=20 \par 102 \par 14. Borsodi, Ralph, Inflation is Coming, New York 1945/48, = available from School of Living.=20 \par Pan\_Humanist Manifesto, published in A Way Out Oct. 1963. \par 15. Bullock, Prof ., Monetary History of the U.S., 1912. Recognized = the right to issue private notes as a=20 \par human right. Does not insist on gold cover. \par 16. Carey, Henry Charles. Various writings. Translated some of = Coquolin's works. Did not insist on =20 \par convertibility into precious metals. \par 17. Carnaghan, Robert B., articles in A Way Out Jan/Feb 1966 & = Innovator, Jan. 67. \par 18. Carroll, Charles Holt, Organization of Debt into Currency and = other Papers, Van Nostrand Comp.,=20 \par 120 Alexander St., Princeton, New Jersey, $ 8, for full gold = cover. \par 19. Cohen, Henry, editor of: Proud Proudhon's Solution of the = Social' Problem, N.Y., 1927, Vanguard=20 \par Press. \par 20. Cooley, Oscar W., Private Money =3D Economic Stability, The = Standard, Febr. 63, Lawrance, Kansas, =20 \par Freedom and the Gold Standard, Rampart Journal Fall 66. \par 21. Coquelin, Trait\'e9 sur le banque, du cr\'e9dit et des banques, = 1864. For redemption. \par 22. Courcelle\_Seneuil J. G., Trait\'e9 des op\'e9rations de = banque, Paris, 1864.=20 \par La Banque Libre, Paris 1861.=20 \par Les Operations de banque, Paris, 1909. \par 23. Crawford, John, The Philosophy of Wealth, 3rd. ed., London, = Paisley, 1873. \par 24. Dahn, Prof. Dr. Felix, Deutsches Rechtsbuch, Beck, Noerdlingen, = 1877. \par 25. Dana, Charles A., Proudhon and his Bank of the People, New York = Tribune, 1849, reprinted in H. =20 \par Cohen's "Proudhon's Solution of the Social Problem". \par 26. DeWitt Warner, John The Currency Famine of 1893, "Sound = Currency", N.Y., 15/2/1895, also in 1896=20 \par edition. \par 27. Dieudonne, Marcel, Le n\'e9ant monetaire, pamphlet, 16p., = published 1965 by Marcel Renoulet in Les=20 \par Editions de L'Homme Libre, 11 rue de La Resistance, Saint = Etienne, Loire France. \par 28. Donishorpe, Wordsworth, True Money, London 188? \par 29. Dowe, W. A., Money in a Free Society, in Good Government, Oct . = 1965. \par 30. Duncan, Jonathan, The Bank Charter Act, 1857.=20 \par The Mystery of Money Explained. fb? \par 31. Follin, H. L. Paroles d'un voyant, Rivi\'e9re Paris, 1934. \par 32. Fowler Charles T., The Reorganization of business Kansas City, = 1885. \par 33. Fullarton, John, On the Regulation of Currencies, t\'df44 fb? \par 34. Fulton E. A., Land, Money and Property, Columbus Junction, = Iowa, 1896. \par 35. Gilbart, A Practical Treatise on Banking, London, 1863. \par 36. Graham, W., The One Pound Note in the History of Scotland, = Edinb., 2nd,. ed.1911. \par 37. Grant, Richard W., The Incredible Bread Machine, chapter 2, = against central banking. \par 38. Gray, John, Lectures on the Nature and Uses of Money. \par 39. Greene, William B., Mutual Banking Mass., 1850. For reprint = contact Libertarian Soc. Inst.=20 \par Socialistic, Communistic, Mutualistic and Financial = Fragments, Boston 1875. \par 40. Grubiak, Olive and Jan, The Guernsey Experiment \_\_ with notes = on the Glasgow Rates Voucher=20 \par Scheme, William MacLellan, 240 Hope St., Glasgow C 2, 1960 = and 1963, 2/6, describes tax\_foundation=20 \par practice and project but is otherwise weak in theory. \par 41. Hake, A. Egmont and Wesslau, O. E. Free Trade in Capital, = London, 1890. \par 42. Hansch, Erick S., An Intuitively Perceived Theory of Money and = Interest Taxpayer's Publications, =20 \par Inc., P.O. Box 03066, Portland, Oregon, 97203 \_ with = leanings towards Gesell.=20 \par Furthermore, an article in A Way but January/ Frebruary, = 1966. \par 43. Harding, Robert, How to put 100.000 Persons to Work in One = Week, London, 1893. fb? \par 44. Hayek, F. A., The Constitution of Liberty Univ. of Chicago = Press, 3rd. impr., 1961, chapt. 21 \_ p. 324=20 \par and notes on p. 520/1. \par 45. Henry, Dr. F., The Theory of Money, P. S. King & Son Ltd., = Orchard House, Westminster, 1946, p. 6. \par 46. Heywood, Ezra H., Hard Cash, Princeton, Mass., 1870 period.=20 \par The Word, since 1872. \par 47. Hock, Karl, Ritter von \_, Austrian economist 1808\_1869. = Publications? \par 47a) Hoffman, D. P., 58 Park Rd. Burlingame Calif., The Coming = Culture. \par 48. Holtzhauer, G., Das deutsche Kriegsnotgeld 1914, Ein Beitrag = zum Notgeldproblem der Kriegs\_ and=20 \par Nachkriegszeit, Wissen u. Wehr, Heft 7, 1938. \par Barzahlung in besetzten Gebieten, Fischer Jena, 1939. \par 49. Horn, J. E., Bankfreiheit, Stuttgart u. Leipzig, Kroener, 1867. = For metallic cover. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D103=20 \par 50. Huebner, Otto, Die Banken, Leipzig 1854, II, p. 97, for full = gold cover, though.=20 \par 51. Ingalls, J. K., Social Wealth, 1885, and other writings in the = 1870's and 1880's. \par 52. Isaac, Charles P., The Menace of Money Power, London Jonathan = Cape, 1921, fb? \par 53. Jevons, W.S., Money and the Mechanism of Exchange, = Investigations in=20 \par Currency and Finance, 1875, \par 54. Johannsen, Oscar B., articles in Commercial and Financial = Chronicle, 22/3/56 & 12/6/1958. \par 55. Kitson, Arthur, The Money Problem London, Grant Richards 1903, = excellent against money monopoly! \par A Fraudulent Standard, London, 1917,=20 \par Money Problems, Stamford, Lincs., 1920. According to one = report, in his old age he fell for Social Credit \par notions.=20 \par 56. Krimerman, Leonard I. and Lewis Perry, Patterns of Anarchy, = Doubleday & Co., Anchor Books,=20 \par No. A 501, $ A. 2.45, N.Y., 1966. \par 57. Ku Sui Lu, Die Form bankmaessiger Transaktionen im Innern = Chinas, Hamburg, 1926. \par 58. Labadie, Laurance, Money and your Freedom, chapter 20 of "Go = Ahead and Live", by \par Mildred J. Loomis, available from School of Living. Comment = in A Way Out, Jan./ Feb., 1966.=20 \par Saviours of Mankind and unpublished works. \par 59. Lasker, Leopold, Bankfreiheit, 1871. \par 60. LeFevre, Robert, Money, Pine Tree Press, 25c.=20 \par 61. Levy, Louis E. & Hugo Bilgram, The Cause of Business = Depressions. See Bilgram. \par 62. Loomis, Mildred J., Steps Toward Peace or Developing a Free = Economy, an article in the pamphlet: Who =20 \par is a Liberal?=20 \par Go Ahead and Live, Philosophical Library, N.Y . 1965; & = statements in The Way Out, Jan ./Feb., 1966,=20 \par all available from School of Living. \par 63. Mackay, John Henry; Die Anarchisten, 1891 (The Anarchists, = Boston, Tucker, 1891.=20 \par Der Freiheitssucher, 1920. \par 64. McLeod Elements of Banking, London, Longmans, 1897.=20 \par 65. Marshall Tom, contribution in A Way Out, Jan./Feb., 1966. \par 66. Martin James J., Men Against the State, 1953, Libertarian Book = Club, N.Y., 1957. \par 67. Meis, Hans, co\_author of Vier Gesetzentwuerfe, see Zander. \par 68. Meulen, Henry, Free Banking, London, MacMillan, 1934. First = published in 1917 under title: Industrial=20 \par Justice through Banking Reform. Available from author or = KAPACO, $ 4.50.=20 \par Numerous articles in The Individualist, edited by him, \par 69. Meyer's Konversations \_ Lexikon, 3rd. edition, Leipzig., 1874, = articles Banken and Banknoten. \par 70. Milhaud, Prof. Edgard, A Plan for Immediate Action against = Unemployment and the Economic Crisis; =20 \par Annals ... . 1932. \par A Gold Truce Annals ... 1933.=20 \par Fresh Work Fresh Markets, Annals ... 1933.=20 \par Ending the Unemployment and Trade Crisis, London, Williams & = Norgate, 1935.=20 \par Organized Compensatory Trading, London, 1937. \par 71. Mises Prof, Ludwig von, Theory of Money and Credit, first = German edition Leipzig, 1912 criticizes=20 \par government interventionism but stands only partially for = monetary freedom. (Redemptionist) Yale Univ. =20 \par Press issue, $ 7.50, available from FEE. \par 72. Moran, Charles, Money, N.Y., 1863=20 \par Money, Currencies & Banking, N.Y., 1875. \par 73. Munzer, Dr., Oberregierungsrat, co\_author of Vier = Gesetzentwuerfe, though not mentioned in draft \_ as=20 \par he was DOr. Bruening's advisor. See Zander. \par 74. Nagel, Paul, Geld and Boden, Buchhaus der Schaffer, = Frankfurt/M., 1928, for free note issue, although =20 \par Gesell follower. \par 75. Owen, Robert, founded a barter bank, "The Equitable Labour = Exchange", in 1832, to issue Labour=20 \par Notes" as currency. Reference book: H. Simon, Robert Owen, = Jena ?5, \par 76. Pearce, Dr. H. G., "Coinage", article in Good Government, = 10/65. \par Value. See LMP literature list. \par 77. Perry Lewis, & Krimerman, L. I., Patterns of Anarchy. See = Krimerman. \par 78. Proudhon, General Idea of the Revolution in the Nineteenth = Century, Freedom Press, London. =20 \par Bekenntnisse eines Revolutionaers (von 1848), Laub'sche, = Berlin, 1923. \par 79. Ramin, Dr. Gustav, Das Sparprogramm der "Deutschland" = Deutschland Versicherungs A. G. Berlin, =20 \par 24/11924.=20 \par Bargeldlose Lohnzahlung, in Deutsche Bergwerks Zeitung, = 30/91931 und Wirtschafts\_Bericht der=20 \par Deutschen Festmarkbank, 31/1 /1931.=20 \par Absatznot, Zahlungsmittelnot, in Wirtschafts\-Bericht = Deutsche Festmark\_Bank, 22/1/32.=20 \par Der Sturm auf Dr. Luther, & Die Hamsternoten and die = Wirtschaftskrisis von 1907/08, in=20 \par Wirtschafts\_Bericht, 15/2/1932.=20 \par Vier Gesetzentwuerfe, co\_author. See Zander Various = unpublished papers. \par = =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D \par 104 \par 80. Read, Leonard E., Government \_ An Ideal Concept, FEE, 1954 pp = 80ff. \par 81. Rey, Urjo, Geldanarchie, Effizienz Verlag, Leipzig 1931, For = free note issue, although a follower of Silvio=20 \par Gesell. \par 82. Riegel E. C., The Meaning of Money, 1935.=20 \par Dollar Doomsday, 1941.=20 \par Private Enter\-prise Money, New York, 1944.=20 \par The New Approach to Freedom, N.Y., 60 c + shipping \_ from = C.C.I. Bookshelf, 5641 Beverly Boulevard,=20 \par Los Angeles, Cal. 90022.=20 \par Abundance \_ a pamphlet &=20 \par The Valunist a periodical, Valun institute for Monetary = Research, 226 E, New York 10. The ed. does not=20 \par know presently whether this Inst. still functions. (His work = was later continued by Spencer Heath=20 \par MacCallum and his Heather Institute. - J.Z., 24.11.01.) \par 83. Rittershausen, Prof. Dr. Heinrich, Arbeitstosigkeit and = Kapitatbildung, zugleich ein Bankpolitisches =20 \par Programm, 1930. \par Wege der deutschen Wirtschaftspoliik, artic\-le in = Europaeische Revue, Nov, 1931. \par Das andere System - ein Wirtschafts und Finanzvorschlag in 4 = Geetzentwuerfen, Stilke, Berlin, 1932. \par Der Neubau des deut\-schen Kreditsystems, Stilke, Berlin, = 1932, \par Mutual Marketing as a remedy for Unemployment, in the = Insurance and Finance Review, Calcutta, 1930. \par Bankpolitik, Knapp, F./M. \par Unem\-ployment as a Problem of Turnover Credits and the = Supply of Means of Payment, Annals, 1934. \par Internationale Handels\_ and Devisenpolitik 2. Aufl. Knapp, = Frankf./ M., 1955=20 \par Wirtschaft, Fischer Lexikon, 1956ff. \par Die Zentralnotenbank, Knapp, F./M., 1962. \par 84. Robinson John Beverley, translated Proudhon's General Idea of = the Revolution in the Nineteenth=20 \par Century. \par The Economics of Liberty, 1916, Minneapolis, Herman Kuehn. = Reprint available from Libertarian=20 \par Socialist Institute, Bombay; \par 85. Rocker Rudolf, Pioneers of American Freedom, Rocker = Publications Committee, 1949, Los Angeles, Still =20 \par available for $ 2.00 from Libertarian League, Box 261, Cooper = Station, N .Y. 3 \_ contains very=20 \par comprehensive bibliography. \par 86. Roseman, Herbert C., The Economics of Scarcity versus Economics = of Liberty, in A Way Out, July/Aug., =20 \par 1966. \par 87. Rothbard, Murray N., What has Government Done to our Money? = Pine Tree Press (Rampart College),=20 \par 1964, $ 1.=20 \par America's Great Depression. \par Man, Economy and State. Still believes metallic redemption.=20 \par Comment in A Way Out, Jan./Feb., 66. \par 88. Salomon, Gottfried, introduction to Bekenntnisse eines = Revolutionaers \'85 by Proudhon. \par 89. Samter, was mentioned as favouring free banking within limits = of metallic redemption but l could at=20 \par present find none of his works mentioned. \par 90. Scott, Walter, Sir, Letters of Malachi Malagrowther. Here he = defended the decentralized Scottish Bank=20 \par system. See Meulen, Free Banking, p. 114. \par 91. Sennholz, Dr, Hans F., Regulatory Taxation, Essays on Liberty = VI, FEE.=20 \par The Federal Reserve System, Freedom Magazine, Sep/Oct 1966. \par On Freedom and Free Enterprise, Van Nostrand. fb? \par 92. Seymour, Henry, carried on the Free Currency Movement and = published the periodicals Free Trade and Free Exchange, 1892. \par 93. Smith, Adam, for classic gold stand. and Scottish Banking & tax = foundation, in The Wealth of Nation, although he mentioned the latter = only by the way, in a largely ignored passage. \par 94. Spahr, Walter E., editor of Monetary Notes for classical gold = standard. \par 95. Spooner, Lysander Credit, Currency & Banking, 1843.=20 \par A New System of Paper Currency, Boston, 1961.=20 \par A New Banking Systems Boston, 1873.=20 \par The Law of Prices: A Demonstration of the Necessity for an = Indefinite Increase of Money, Boston, 1877. \par (He wrongly believed, like many people still do today, that = all assets, even long-term capital assets, could=20 \par be fully monetized without this influencing the price level = for e.g. consumer goods at all! - J.Z., 24.11.01.) \par Our Financiers: Their Ignorance, Usurpation and Frauds, = Boston: 1877.=20 \par Gold & Silver as Standards of Value: the Flagrant Cheat in = Regard to them. Boston. 1878.=20 \par Universal Wealth, Shown to be Easily Attainable, Boston, = 1879. \par 96. Spencer, Herbert, criticised state tamperings with money e.g. = in Social Statics. \par 97. Stolper, Gustav, This Age of Fable, London 1943. \par 98. Swartz, Clarence Lee, What is Mutualism? Bombay, 1945, still = available from: Libertarian Socialist=20 \par Institute, Bombay. \par 99. Szmak, G. ,420 Lexington Ave., New York N Y. 10017, various = pamphlets, particularly: Charter of =20 \par Economic Order, obtainable from author. (See addr.) \par 100. Tarn, Albert A., A Free Currency: What it Means, How it Can be = Established, & What it Can=20 \par Accomplish, London 1889. \par 101. Taylor, John, A Catechism of the Currency, 3rd. ed,, 1836, et = at., fb? \par 102, Tooke, Thomas, Considerations of the State of the Currency, = London, 1826. For the Scottish bank=20 \par system, for publicity re note issue, but against notes = under L 5!=20 \par On the Bank Charter Act of 1844, London, 1856, for metallic = cover. \par 103. Tucker, Benjamin R., State Socialism and Anarchism, in = "Liberty", 1888=20 \par Instead of a Book, N.Y., 1893.=20 \par Individual Liberty, Vanguard Press, N.Y. 1926.=20 \par Liberty, numerous articles in liberty. \par 104. Unger, Walter, co\_author of Vier Gesetzentwuerfe, see Zander. \par 105. Unwin, J. D., Hopousia or the sexual and economic foundations = of a new Society, Allen & Unwin=20 \par London, 1940. \par 106. Vissering, Willem, On Chinese Currency, Leiden, 1871. \par 107. Walker, Karl, in various writings and articles, e.g.:=20 \par Demokrathe and Menschenrechte Zitzmann, Lauf, 1947. For = monetary freedom in spite of being a =20 \par Gesellian. Inventor of a game demonstrating internal and = external monetary problems and solutions,=20 \par which he tried to sell, rather expensively, to schools. See = under addresses. \par 108. Warren, G. O., a member of the Free Currency Movement. See = Seymour. \par 109. Warren, Josiah, Equitable Commerce, New Harmony, Ind., 1846.=20 \par True Civilization ... , Clintondale, Mass., 1869. Favours = free exchange \_ but on cost basis. \par 110. Watts, Dr. V. Orval, Money and Free Markets, A Summary, The = Freeman, Jan. 66. \par 111. Werkheiser, Don, various pamphlets published by the School of = Living e.g: Is it Possible to Survive?=20 \par Role of Governments.=20 \par Voluntary Associations. Wee peace plan 139.=20 \par One contribution of him is in: A Way Out, Jan./Feb.66. \par 112. Wesslau, O. E. & Hake, A. Free Trade in Capital, London, 1890. = For metallic redemption. \par 113. Westrup, Alfred B., New Philosophy of Money.=20 \par 114. Wilson, Charles Morrow: Lets Try Barter, Devin\_Adair, 1960, = US $ 3.95 from *. \par 115. Wilson, James, once editor of The Economist, Capital, Currency = and Banking, London, 1847. Favoured=20 \par metallic redemption but against central banking. \par 116. Wilson, Robert A., Review of Proudhon & unpublished works. Was = once associated with School of=20 \par Living. (His popular conspiracy and futuristic books = contain some hints towards monetary freedom - but=20 \par never sufficient details on monetary freedom techniques. = This he has in common with all too many=20 \par montary freedom advocates. - J.Z., 24.11.01.) \par 117. Winder, George, The Source of Money, Essays on Liberty, vol. = VI, FEE, is excellent. \par 118. Wolff, People's Banks, mentioned by Meulen. Deals mainly with = credit coops, not with theory and=20 \par practice of monetary freedom! - J.Z. \par 119. Zander, Dr. Walter, Vier Gesetzentwuerfe zur Bekaempfung der = Deflation, Verhinderung der Inflation=20 \par und Senkung des Zinses, nebst Begruendung. In cooperation = with G. Ramin, H. Rittershausen, Dr.=20 \par Munzer, U.v. Beckerath, Hans Meis, W. Unger. Begruendung = written by W. Zander, Berlin, 1932. \par Der Kampf der Wertpapierbesitzer, Sparerbund, Berlin, 1933. = \par Railway Money and Unemployment and Further Remarks = Concerning Railway Money, in: Ending the=20 \par Unemployment and Trade Crisis ...., ed. by E. Milhaud, = Williams & Norgate, London, 1935.=20 \par A Suggestion for Liberating Foreign Credits by the = Introduction of Clearing Certificates, Annals, 1933 =20 \par and 1934.=20 \par Scrip, Tax Remission Certifica\-tes and Requirement = Certificates in Germany, Annals 1934.=20 \par A Way out the Monetary Chaos, in: Organized Compensatory = Trading, edited b E. Milhaud and=20 \par published in the Annals ...., 1936 and by Williams & = Norgate 1938, \par 120. Zube, J. M., PEACE PLANS pamphlets, Nos. 1\_8, published since = 1964 especially plans: 21, 33, 38, 39,=20 \par 81, 110\_points 10, 31\_34, 130, 133, 139, 145, 157, 168, = 175, 188. \par Was Muss an den Staatsverfassungen geaendert werden damit = ein andauernder Friede moeglich wird,=20 \par und wie koennen these Reformen durch durchgesetzt werden? = \_ Contains 33 pages on monetary=20 \par freedom. \par = _________________________________________________________________________= ____________________ \par }\pard \sb240\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 (*) = Sandra Jeffries, P. O. Box 2023 E. Portland Stn., Oregon 9214, U.S.A. \par = _________________________________________________________________________= ___________________ \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par ORGANIZATIONS WHICH AT LEAST TO SOME EXTENT PROMOTE=20 \par SOME ASPECT OF MONETARY FREEDOM \par=20 \par 1. Association for Good Government, 265 Elizabeth St., Sydney, = N.S.W., Australia. \par 2.. Economic Welfare Council, c/o G. Szmak see addr. above. \par 3. Economists' National Committee on Monetary Policy, 79 Madison = Ave . N .Y 10016. \par 4. Foundation for Economic Education (FEE), Irvington\_on\_Hudson, = New f York 10533. \par 5. Institut fuer Bankwirtschaft and Bankrecht, Koeln\_Lindenthal, = Universitaetsstr. \par 6. Kapaco, P.O. Box 265 Camp Verde, Arizona. \par 7. Libertarian Socialist Institute Arya Bhavan, Sandhurst Rd. (W.), = Bombay 4, India. \par 8. Los Angeles Gold Market, Box 1048 \_ A, Arleta, California 9 = 331. \par 9. Northwood Institute, Midland, Michigan, U.S.A. \par 10. Rampart College & associated Freedom School, Box 158 Larkspur, = Colorado 80118 \par 11. School of Living, Lane's End Homestead. Rte. 3, Box 235, = Brookville, Ohio 45309. \par = _________________________________________________________________________= ____________________ \par=20 \par I BEG YOU TO SEND ME MORE SUCH ADDRESSES AND REFERENCES! - The Ed. \par = _________________________________________________________________________= ____________________ \par=20 \par }\pard \qc\nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0 END OF = PP 9 \par }\pard \nowidctlpar\adjustright {\b\fs24\lang1033\cgrid0=20 \par }\pard \nowidctlpar\widctlpar\adjustright {\b\fs24\lang1033=20 \par }} ------=_NextPart_000_000D_01C2380D.7CB59340--