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     SOME NOTES BY JOHN ZUBE, 30  DECEMBER 1997, TO :
     ANDREW DICKSON  W H I T E :  
     Fiat Money Inflation in France, written 1876, revised 1912.

I had long postponed microfiching this book, although it isconsidered to be a libertarian classic. Firstly, it is probablystill available, in print on paper, from FEE, same address, atone of its usual low prices or from one or the other of its twoAustralian representatives. ( See Australian Freedom Addresses. )Secondly, I wanted to add some notes, since A.D. White seemed tome to be far better in describing the effects than the causes ofinflation. In my rush to fill more fiche for my libertarianmicrofiche publishing pilot scheme, I do usually prefer to addtitles which do not require, in my opinion, a comment from me.

For the unique revisionist point of view of Ulrich von Beckerathon the monetary side of the French Revolution, see the lastpages, of his 1937/38 book "Public Insurance and CompensationMoney", reproduced in PP 11, on pages 258-266.

On the legal tender aspect of inflation, I want to refer to mybrochure in PP 19 A : "Stop the $ X00 Million Legal TenderCrime."

White mentions many interesting details but seems to believe thatlack of confidence and non-redemption in rare metals were moreimportant aspects of this and other inflations than are legaltender and the issue monopoly. 

He does not discuss an alternative and sound paper money with taxfoundation only, one that measures taxes, currencies and pricesin gold or silver weight units and is subject to a free marketrating and voluntary acceptance - for all but the tax offices,which would have to accept it at any time at par with its nominalvalue.

Acceptance in payment for confiscated estates could have been anADDITIONAL security to assure the reflux of a paper money issuedbut it should not have been an exclusive one and could not be oneas reliable as as regularly levied taxes are or the "readiness toaccept foundation" is for shop currencies, that are in dailydemand for survival goods and services

Almost all "land banks" were failures in practice and had to be,according to monetary theory, since they did not offer the basicfoundation required for any currency, namely its conversion intoready for sale goods and services. Why should the owners of goodsand services deliver them for mortgage bonds? Why should workersdepending on food and drink accept them instead of tickets tofood and drinks? One cannot eat dirt for long and survive. Taxfoundation and contribution or subscription foundation e.g. forinsurance money, can establish a similarly urgent daily demandfor currency among those forced to pay taxes and committed topaying their other dues and providing goods and services. To besound a currency must have "shop foundation". Then it is alsoreadily acceptable in payment of wages, salaries and other debtsas well. These are the main current turnovers for which a"currency" must be suitable or "current". The best comparison is"ticket money". A ticket to a brick or bit of timber within abuilding is not much good as currency, since such a good is notin urgent daily demand nor is a building sufficiently divisiblefor this or remaining sound, if it were. Money acceptable inpayment of weekly or monthly rents is another matter. In this way landlords could liquidize not the total capital value of theirreal estate but anticipate their current rent income by such"rent money" issues. The purchase of large capital goods or theirfinancial securities make up only a fraction of all turnoverspaid for in currency. They are thus not the main or ideal"redemption funds", "convertibility options" or covers requiredfor a liquid currency. Furthermore, large capital deals areusually not settled immediately, in cash but over a period, ininstalments, via credit. Consequently, it is mainly therelationship between the legal tender cash ( or sound andcompetitive and market rated as well as refusable private cash )and the ready for sale consumer goods and services thatdetermines the prices of consumer goods and services. Everythingelse is a secondary effect.

Competitive and sound money is expressed in sound value units inwhich consumer goods and services are priced out. Such units tendto remain sound enough only if not subject to governmentmanipulation and legislation but rather to consumer sovereignty,freedom of choice and freedom of contract.

If any kind of coinage, without rare metal value, or paper money,or credit card or clearing account, on paper or electronic, doesrepresent goods and services ready for sale, and if it is issued& managed by the providers of the goods and services, or theirchosen agent, a local bank of issue, established by thesuppliers, then, under freedom, a balance between the quantity ofgoods and services and the quantity of competing currencies isautomatically established and preserved - if only some stableenough value standards are used for the currencies and prices andwages. 

The balance is then as automatic as is the balance between theprovision of e.g. theatre, cinema, sports stadium, railway, busand aeroplane tickets is with the number of seats provided bythem. More cannot be pushed into circulation nor is adeflationary under-supply to be feared for them - or for soundand competitively issued local currencies provided by thesuppliers of ready for sale goods and services.

The proper, freely transferable issues of certificates for capital goods are not currencies but capital securities, insuitable denominations and quantities, properly market rated andpublicized.  Such securities should never be given any monopolyor legal tender power, especially not in spheres for which theyare not representative or suitable at all.

Capital goods certificates are useful as means of payment only tothe extent that they are daily required as means of payment forthe purchase of capital goods and for such purchases for the nextfew days.  How many of such bonds, shares or mortgage letterscould at any time be issued, and maintain their value at par,would depend upon circumstances. Interest coupons, redeemablewithin a few days, have also sometimes been uses as means ofpayment, when other means of payment were short, especially asmeans of payment towards those who had to redeem them. 

The acquisition of capital goods is not as urgent for mostpeople, most of the times, as their acquisition of bread, milk,meat, vegetables, fruits and other consumer goods and services. 

Sound savings and investments are possible and maximized onlyonce the daily turnovers of goods, services and labour are freelymediated by sound competing currencies. Whenever turnover creditsand currencies for consumer goods and services are in shortsupply ( when there are sales difficulties for shops and degreesof unemployment ) then the capital market is prone to collapseand can never fully develop. 

The ultimate purpose of the capital market is the efficientprovision of goods and services. If the turnovers of goods andservices are insufficient, then the capital markets will,inevitably, be disturbed, too. Who wants to invest in capitalgoods that produce consumer goods which cannot be readily sold?

To then inject new capital securities will not cure the basicinsufficiency in turnovers of goods and services ( includinglabour ).

All monetary legislation that passes new rules, rather thanrepealing the old ones, and that ignores monetary freedomfeatures, is inevitably despotic and thus ultimatelyself-defeating.

Ulrich von Beckerath did also point out that the existingdeflation, worsened by the revolutionary condition, which drivespeople into further hoarding rare metal coins, was not abolishedbut rather worsened when legal tender paper money was issued,since most people still remembered the paper money of John Law'stime. Furthermore, the large denominations in which the Assignatswere issued, at least initially, were not suitable for the dailyneeds of consumers but their very issue was enough to frightenmore coins out of circulation, thus reducing sales and increasingunemployment in the absence of freedom to issue alternative meansof exchange and of knowledge of how best and most safely to doso.

White describes well some aspects and the results of monetarydespotism but not its essential preconditions : legal tender andthe issue monopoly, nor its radical alternative : full monetaryfreedom. He failed to explore and detail alternatives to themoney of monetary despotism - apart from rare metal coinage. Nordid he show much awareness of the clearing options that can makecoins as well as paper money largely unnecessary.

He did not distinguish between "additional purchasing power" thatis coercive and fictitious and additional purchasing power thatrepresents the goods and services ready for sale and is issued bythose providing them, directly or indirectly. 

No government or other monpolist or coercer can rightlysubstitute his "currency" for the monies of monetary freedom. Butwhat he can do is cause inflations, deflations and stagflations. 

On page 27 White quotes M. Matrineau. This constitutionalisttalks as if a forced and exclusive currency were not a sufficientproof for despotism of a monetary kind - never mind otherconstitutional and legal arrangements and "safeguards". If yougive to anyone blank cheques upon your account then allsubsequent safeguards against his abuse of these cheques willsooner or later fail. We make a similar mistake when we allow anygovernment or central bank to draw upon all our property, labourand services with its arbitrarily issued and valued assignmentsupon them.

Page 29 : Only legal tender is easy to issue and over-issue. Onecannot easily issue refusable and market rated competing privatecurrencies nor easily over-issue them. Their acceptance and theirvalue are not enforced. They are tickets, not "requisitioningcertificates". 
In the middle of the same page he shares the usual prejudiceagainst "speculators".

Page 42 : Doubling the money is harmful only if it is legaltender and an exclusive currency. Otherwise it cannot be forcedupon anyone at par but will rather be rejected or discounted,while prices, expressed in sound standards, will remain the same,for all remaining sound currencies. Only in the discountedcurrency, not used as a value standard, will prices rise, untilthis currency is generally refused and replaced by soundcompeting currencies. The general price level, expressed in asound value standard and payable in alternative media, is notinflated by a depreciated and optional, i.e., discountable andrefusable currency.

He hints at "emergency money" issues in Paris, in the middle ofpage 48, but fails to provide sufficient details on them. Withmonetary ignorance and prejudice as wide-spread, most of themwere probably as ill founded as the assignats were. In Note 23 hepoints out that samples of these "confidence bills" can be seenin the Cornell University Library. Who can supply me with goodphotocopies of them? 

Page 50 et al : Like many libertarians today he decries the cryfor more circulating medium, without making a distinction betweencompetitive sound money and compulsory and fictitious"greenbacks".

Page 54 : Among the many definitions, correct and incorrect ones,of "Gresham's Law", to be collected and criticized orappreciated, belongs the unusual one by White : "... the superiorcurrency had been withdrawn because an inferior currency could beused." He does not mention, though, that without legal tender theinferior currency could not be so used but would, instead, bedriven out by the better money. 

Page 55 : When further inflation is anticipated in the setting ofprices then prices tend to run ahead of the printing presses, sothat the current circulation cannot, indeed, purchase all goodsand services at thus inflated prices. Such deflationary effectsare very common in progressive inflations. Only verbally areinflation and deflation absolute opposites. 

Page 78 : Ulrich von Beckerath mentioned a French study of ascholar who had examined the remaining court records. Accordingto this, in the MAJORITY of cases of conviction to punishment bythe Guillotine, some argument about prices and the value ofassignats was involved and of the trusthworthiness or corruptionof those who issued the assignats and made them compulsory andgave them a ficticious value. The value of Louisd'ors gold coinson the black market turned them into effective propaganda piecesagainst this republic and its forced paper currency. If I couldget it, I would gladly microfiche a copy of this dissertation.

In short, Andrew Dickson White teaches us much but not enoughabout inflation, its causes and cure.
                                      PIOT, J. Z., 31.Dec.,1997.