R 65,J,T 5 SOME NOTES AND A LETTER BY ULRICH VON BECKERATH, 1882 - 1969, on money, written between 1946 & 1959, translated by John Zube, 17 Feb. 1995 ====================================================================== Introductory Note : "About 8 years ago an authoress challenged me to put down theessence of what I had to say in my writings, in at most 3typewritten pages. I did begin the job. Compare the attachedconept. However, while I was still at it, we had another talkwhich revealed that she was quite fundamentally opposed toeconomic freedom and especially to monetary freedom.Consequently, I did not continue this job. Afterwards, I brokecompletely with this lady, who has in the meantime published herown social system. Bth. 3.9.53." ================================================================= "U. v. Beckerath. Some Remarks to the Social System Explained in my Writings. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Varying a wording from the Bible, one could describe thefoundation of the system by the following appeal : 'Strive firstof all for the ability to pay of the individual and hisassociations, so that your WANTS can express themselves aseffective DEMAND. All other social reforms would then becomeeasy. All other achievements, without the ability to pay, willnot help you and you will not be strong enough to preserve themin the long run.' This system is not, like that of e.g. Liefmann, merelydescriptive ( no attempt is made to make a value judgment onLifemann's system ), but revolutionary and socialistic in theolder sense of this word. The system is insofar revolutionary as is declares astyrannical all those laws, regulations and measures which standagainst it and proclaims the right to resist them. On the otherhand, the system rests insofar on the principle of tolerance asit rejects any coercion to enforce its acceptance or realizationamong those who reject it. The system is insofar socialistic as it proclaims the right ofthe individual and his associations to supply himself with workand to enjoy the full proceeds of his labour. But the system isinsofar directed against the authoritarian socialism as it willentrust the measurement of that share in the value of production,which constitutes the full proceeds of labour, to the exchange ina REALLY free market ( which has never as yet existed ). Insofarthe system is liberal in the older meaning of this word. Seeing the importance which the system ascribes toassociations, one could classify it under the term 'cooperativesocialism', which was described in the older language ofeconomists as 'collectivism'. ( Totomianz and Ch. Gide wanted toreplace the term 'cooperative socialism' through 'cooperatism'.But it seems that this term was not accepted, at least not inGermany. On cooperative socialism, as developed in the 60-ties ofteh 19th. century especially by TOLAIN, compare De Laveleye, 'DieSozialen Parteien der Gegenwart' - The Social Parties of thePresent - in the German translation of 1882.) The system is directed against the authoritarian socialism inseveral other ways also, since it denies the right to the Stateto force upon the individual and his associations any serviceswhich the individual can provide for himself, eventually with theaid of his voluntary associations. ( Welfare, social insurance,custom duties - insogar as they are to assure employmentopportunity and a just price, etc.)" [ Note by John Zube : I amnot sure here whether he expresses merely tolerance towardsvoluntaristic protectionists or whether he takes such proposalsfor such aims serious. In all his other writings, that Iremember, he stands up, radically, for free trade, at least amongvolunteer associations. ] "The system also denies the right ofthe State to pass laws and undertake measures which, with moreunderstanding, wisdom, moral sense and consciousness of hisdignity, would not be passed or undertaken by the regent orlawmaker. In this way, too, the system is liberal. By declaring the ability to pay as the most important thing,the system considers it as an ELEMENT OF THE SOCIAL ORDER, one ofno less importance than the property relationships regarding themeans of production. None of the so far offered systems hasrecognized the ability to pay as an element of the social order. The system, by declaring the CONSUMPTION POWER of theindividuals as a mighty, even irresistible weapon to establish anas just social order as possible, but at the same timerecognizing that the consumption power cannot be used as a weaponwithout ability to pay, and, furthermore, by realizing that theconsumption power cannot be fully expressed when the individualcannot freely undertake value estimates, especially upon themarket, does thus reform the older socialistic systems, which,one-sidedly, place LABOUR in the centre, did not want to use itas a weapon but demanded its PROTECTION and wanted to entrust thevaluation of labour and all valuations of every kind to the Statealone, expecting the provision of work opportunities essentiallyfrom coercive measures by the State and wanting to establish theability to pay of the individual through a primitive labourmoney, issued by the State and through which the individualbecomes completely dependent upon the State and is intended tobe. The older systems expected the establishment of socialismessentially through military measures, likewise its maintenance. By rejecting the establishment of values through coercion (forced values ) and by recognizing in the wants (needs) ofindividuals the foundation of value, the system associates itselfwith the 'mathematical" economic school and declares itself as anenemy of 'prescriptionism' ( dirigism, central planning anddirection ). The system declares agreement with the view of ENGELS,expressed in his work 'Die Entwicklung des Sozialismus von derUtopie zur Wissenschaft' ( The development of socialism fromutopianism to a science ), that the final aim of a truly populargovernment must be to make itself as much superfluous as possibleand to educate the people to enable them to manage their ownaffairs. The greatest opposite to the system is fascism and thisespecially in the form of fascist socialism. All other systems that were so far proposed contain fascistelements, from liberalism of the successors of Adam Smith to theparty programme of Erfurt. This present system does not containany fascist elements. Bth. 26. I. 46." ================================================================= A later note, undated : "U. v. Beckerath. Some further details to the economic system detailed in mywritings with some consequences from its principles. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The press confirms at present a very considerabledeterioration of the morals of businessmen and consumers. It alsobrands part of trade as 'black marketeering', and part of thelabour done as 'black labour' etc. From my system it follows that it is not the people who are inthe wrong but the government's departments and that all the"branded" phenomena are merely an expression of the justifiedstruggle of the people against an unhealthy currency, which is forced upon it, in a tyrannical way, although the peoplethemselves may not be aware of the true nature of this struggleforced upon it." ================================================================= "9.XI. 1953 Some Remarks to the Question : 'Can the System Proposed by SilvioGesell, to Assure the Circulation of Money, Replace the Principleof our Society : Securing the SALE of Goods by Means of the Ownerof the Goods Paying with Goods Warrants, which he Obliges himselfto Accept in his Payment Transactions like Cash Money?' - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The goods warrants issued under under the system of oursociety MUST return to the issuer, once even only ONE person hasaccepted the goods warrants. ( Here I will not deal with the factthat the owners of diamonds will probably not find anyone whowill accept their goods warrants from them, which the owner ofthe diamonds will accept in diamond transactions like cash butwith the fact that the KdW ( Kaufhaus des Westens, a largedepartment store ) will find easily acceptors for its goodswarrants and could certainly make even to the diamond ownersmaller amounts of KdW goods warrants available in form of aLOAN.) Of the certificates, issued under the system of Gesell, onlyone thing is certain, namely that the motive, to pass them on,during normal times ( i.e. when one would be least dependent uponthe system ), is greater than in case the 'sticker prescription'did not exist. But in crisis times, when everything becomes dailycheaper, the incentive to pass it on does not exist - wheneverthe expected price falls amount to more than the amount of stampsto be affixed. So much is clear a-priori. But there are otherreasons, especially in crisis times, which make it advantageousto 'remain liquid'. During crisis times Banks pay very highinterest upon deposits and to wait for the offer of bankssuggests itself to every money holder. In the meantime thecorresponding funds are simply hoarded. Furthermore : In the US, during the crises of 1921 and 1931,one could purchase in clothing stores suits for 1/3rd or evenless of the price of the previous year. Those who know theeconomy will foresee this and keep themselves 'liquid'. Theshopkeepers, in their turn, to not pass on any cash received tothose factories which are still working. Instead, they endeavourto pay with the cash for goods at forced sales. These were thennot infrequently obtainable for 10% or less of the prices in theprevious year, so that the shopkeepers did not suffer a lossthrough the reduction of the prices for suits. The trustee of theforced sales did not at all pass on the sales proceeds to thePRODUCERS. Instead, he gave it to the creditors of the bankrupts.And these had quite other uses for the money than to bring it tothe PRODUCERS, who could have kept up their production with it.With one word : The money only serves to sell the (seemingly)over-produced goods, and not to produce new goods. If in 1921 and1931 the Gesell-System had existed, then this system would havechanced nothing in these transactions. Generally one can say : The Gesell-System makes the hoardingof money a little bit uncomfortable, but it does not at alltransport the money there where it is most urgently needed,namely to the employers, who would like to maintain theirproduction at 100%. Only the right of employers ( in our system primarily ofproductive cooperatives ) to help themselves monetarily, canmaintan stability in the production process. It would realy be curious if the suppression of a RIGHT couldbe compensated through a TAX ( for this is what the sticker sytemamounts to ). Beckerath." ================================================================= A handwritten note : "When human beings only instinctively FEEL the wrongfulness ofthe money monopoly but, at the same time, do not MAKE CLEAR tothemselves its true nature, and thus do not demand the right toissue, then and inevitably they arrive at the spartan - platoniceconomic system. Bth. 28.X.54." ================================================================= "In the book 'Das internationale Waehrungsproblem' (Theinternational currency problem ) Hertzka does not show himselffrom his best side. With the MONEY PROBLEM Hertzka has not at alldealt with sufficiently. Where lies the money problem FOR THESOCIAL REFORMER? It consists in answering the question : How canProducers and Consumers be made quite independent from thefollowing cases? : a) Money is hoarded, as happens in every great crisis and evenmerely when there is fear of a crisis. b) The Government simply satisfies its monetary requirements bythe printing of money certificates. d) Some people, who imagine that they, too, are reformers,circulate irrational theories on money and win a part of thepopulation over to them. The Answer to these problems is : a) The producers pay with goods warrants, redeemable in theproducts of the producers. Should their products consist e.g. ofrailway rails then these producers BORROW goods warrants from theshops and pay with them. b) A sufficiently large number of informed producers andconsumers refuses to accept the government's inflationary moneyand does not let itself be deprived by any professor or newsscribbler of the correct concept of inflation. c) The producers and consumers tell the 'true believers' : Tryout your system AMONG YOURSELVES. But when you want to force itupon others - come on - we are armed! - - - - - - Hertzka proposes in his book : Abolition of gold coins and silvercoins and their replacement through coins formed by an amalgam of90% silver and 10% gold weights. It is not worthwhile to provethe insufficiency of this measure in detail. Hertzka says nothingon legal tender, goods warrants and monetary emancipation.'EVERYTHING good is NEVER together', say the Berliners. Bth. 3.6.58." ================================================================= In an unsigned and undated note Bth. made the following relevantremark : " Political freedom is only insofar possible as the citizen ISABLE TO PAY. When he depends for the supply of means of paymentupon others then these are simply his masters, regardless of whatis written in the constitution." ================================================================= "An increased issue of legal tender money, in the sense thatKEYNES proposed to president Roosevelt ( Reiners, 'Die Sache mitder Wirtschaft', S. 92 - The matter of the economy - ) cannotabolish a crisis in case a crisis does occur. No central bank candistribute money in such a way throughout the economy that aneven flow of goods occurs from the shops and that an evenproduction continuously replaces the stocks in the stores. (Shops does here include the stocks of the wholesale traders. ) On the other hand, the right of enterprises to issue, in thesense which John DeWitt WARNER described in his essay 'Thecurrency famine of 1893' ( Magazine 'Sound Currency', N.Y., 1896), will end the crisis without difficulties. The issued clearingcertificates find their way in the shortest possible time spanback to the issuing centre, purchase goods there and then theissuing center destroys the clearing certificates so received. A special CONFIDENCE of the economy, in the sense in whichReiners and Keynes use the word, is not required in the system ofJohn DeWitt Warner. Why not? The clearing certificates, in Berlinissued e.g. by Wertheim, would only be accepted as long as onecan buy something for them at Wertheim, regardless of whether itsmanager would enjoy 'confidence'in the civic sense of the word.GOODS to redeem clearing certificates exist during crisis timesin abundance. What is missing during the crisis is cash. Warnerreminds that during the American crisis of 1893 Americanenterprises issued certificates for several hundred milliondollars. Although they were not legal tender, they wereeverywhere accepted, because they were not to be redeemed in cashbut in goods or services, like at railway stations, and thustheir redemption was assured. Warner's system could be further developed and this by replacing,at least during a crisis, the right of the creditors to paymentin cash through a right to "certificates" like those used in1893. The creditor could, upon acceptance of certificates, claima premium, and this could, at the beginning of the new system,come to 30% of the amount owed to him. Bth. 15.6.58." ================================================================= "Dr. Runge 16.1.59 In your last letter you told me of your intention to publishsomething about monetary theory. The opportunity for this appearsto be favourable especially now. Berlin, according to the Russianpeace programme, is to become a free city and is to gain evenpermission to establish its own currency. Thus a few askthemselves : What could such a currency be like, IF the Russiansrealized their programme. ( Note by J.Z. : He wrote, alreadycarefully, in expectation of the possibility of Sovietoccupation, or by the East German "people's police", i.e. in astyle that would appear to be harmless to them, at least in thisletter. ) Can the modern monetary theory ( Roepke, Hahn and such people )serve as the foundation for a useful currency? The most modern theoreticians of money, whose opinions have beenadopted by almost all German newspapers and journals, do allassert that full employment and stability of the currency cannotbe combined with each other. Keynes, who still rules, proposed todepreciate the currency annually by 1 - 2 %, either by increasingthe issue of legal tender paper money or by a devaluation. Otherspropose higher percentages. The German Bundesbank has increasedits legal tender paper money by much more than 2% p.a. I supposeyou know the figures. The last consequence of the modern theory is that the governmentis obliged to artificially produce unemployment ( 'breaking theoverheated economy') when the degree of employment approaches100%. According to the modern theory the following are essential : a) a continuous deterioration of the currency ( and under this these people understand exclusively the legal tender paper currency ), b) a certain minimum - number in the 'industrial reserve army'. Would you dare to refute these opinions? And to state how acurrency must be constituted so that its stability would not bein the way of full employment, nay even in case of a war onewould not have to inflate it? --------- The non-distinction between price increases that arise from tehmoney side ( inflation through the increase of legal tender moneyor through devaluation ) and dearness that arises from the goodsside, is the great blinders, which all the moderns put on, beforethey begin to write on currency. Both kinds of price increasesare called 'inflation' and now in almost all languages even aword is missing to describe inflation in the original meaning ofthe word. The beginning of this confusion of terms and language was made -as far as I could confirm this - by the Americans, and perhapsPresident Roosevelt was the one who first mixed up the words andthe terms. I wish a German author would undertake a thoroughbrainwashing in this respect and demand a return to the older useof the language and with it to the older terms. Once this would have happened then one could, again, make thefollowing simple truths comprehensible : I. Without legal tender one cannot inflate. II. Without note issue monopoly one cannot deflate. ( Bismarck's Bank Act prohibited legal tender, quite expressly,in Par. 2. Par. 1 anticipated that through law and aside theReichsbank new note issuing banks could be established. Bismarckdid not want a note issue monopoly.) ----------- Full employment is permanently possible and even for longerperiods, only when typified means of payment, free of legaltender and resting upon the clearing principle, are permitted.These means of payment are by their very nature goods warrants.They are covered through ready for sale goods or services ( e.g.at the railway ) of those who issued the certificates. Theissuer, by paying, with the certificates, wages, debts, rawmaterials, taxes, etc., puts them into circulation. Once they arein circulation they do return in the most rapid way to theissuer, thereby realizing a sale and make room for new work.Since the certificates possess neither a forced value nor aforced acceptance ( legal tender ), they cannot act inflationary,not even with the worst intentions. In case of an over-issue theycould get a discount below their par value. But over-issue wouldbe fraudulent. The paragraph against fraud in the penal codewould suffice for such cases. ( The older theoreticians shouldhave pointed this, especially and explicitly.) The issue does not have to occur directly, e.g., without amediator, through a department store or a shop association. Itcan also occur through a bank ( although this words should HEREbe avoided. The bank would then LOAN the certificates to thosecentres which would have to issue them, otherwise. ------ Labour is a GOODS (commodity), whereupon one rightly speaks of alabour market. Price increases of this commodity cannot actinflationary although they can cause a part-dearness. When a fewyears ago all builder's labourers realized their well known andvery considerable wage increases, those who had to pay the newbuildings had to restrict their spending in other spheres. Fromthis resulted, in these other spheres, corresponding pricereductions. Cases are known to me where landlords, afterreceiving increased bills for house repairs, had to do withoutnew clothing, a planned trip and an x-mas celebration in thestyle extent that was previously possible. Analogous cases, notonly among landlords, occurred very frequently. If, however, thewage increase was financed by the note printing press, THEN aprice increase resulted in almost all spheres. ---------- U. v. Beckerath" ================================================================= For several years now I had these short contributions set asideto be translated. While replying to one of my few correspondentswith interest in monetary freedom, I thought that it would beabout time to finally provide at least a rough translation and tomake a few copies for inclusion in such letters. Panarchy means,in the monetary sphere, monetary freedom or experimental freedomfor new or old monetary experiments, all only among volunteers,i.e. voluntary acceptors, leaving out all those who remain freeto refuse any new means or method of payment or any new or oldalternative value standard. I have still a few boxes of Beckerath notes and correspondence toready for microfiching. Since this job, too, would come to manythousands of pages and would require much transcription andcopying and hand-correcting labours, I had postponed it again andagain. If you know of an excellent and affordable scanningsystem, one that I could connect to my laptop, please let meknow. PIOT, John Zube, 17. 2. 96.