It is the legal-tender function that constitutes money. It is the power which the law imparts to any material to pay debts and liquidate obligations. It can not for a moment be doubted that the money function, being conferred by the supreme authority, is the all-sufficient guarantee of the money value. There is no necessity for re-enforcing that value with any inferior value that may attach to the material on which the money stamp is placed. The money function is immeasurably the most important that can be conferred by society upon any material, and it is absurd to urge that that function is not of itself sufficient for the maintenance of the value of money. All the value that money can possibly have—the totality of value that can exist in the shape of money in any country—will attach to anything upon which the sovereign authority stamps it, whether the material on which the stamp is placed be gold, silver, paper, or anything else. Legislators or executive officers of the Government, by increasing or decreasing the volume of money, correspondingly decrease or increase the value of each unit of that money. For no matter how many or how few the units may be, the total value of the money of the country will be comprised within the total number of those units. A change in the number of the units effects a proportionate change in the value of each unit, and whatever the value of the unit may be, it is of the utmost importance that that value should remain undisturbed.
It is absurd to maintain that a gold unit, which, as time goes on, is constantly increasing in purchasing power; is a better unit than a unit of any other material that maintains unchanging value through time.
Whenever the business of the country accommodates itself to a given number of units, the only question for the Government to deal with is to maintain that value as free from disturbance as possible; and according to all authorities on political economy that can only be done by increasing or decreasing the number of units in circulation in accordance with the demands of increasing or decreasing population.
If it be admitted that one of the most important offices of government is to see that the equities are preserved between its citizens (and if this be not so, to what purpose are our courts of equity instituted?), then it can not be denied that it is one of the highest offices of government to see that money, which measures all equities, and which must for all time continue to be the principal measure in the service of civilized society, shall be of unchanging value. It is impossible to secure this characteristic of uniformity in the value of money if we are to select as the only material on which to stamp the money function a substance whose yearly production is becoming more and more limited, and the prospect of whose sufficient yield becomes less and less encouraging.
IF SILVER REMAIN DEMONETIZED AND GOLD CONTINUE DECREASING, WHERE IS THE WORLD'S FUTURE MONEY SUPPLY TO COME FROM?
If the distinguished authorities I have quoted are correct, that a diminution of the volume of money increases the value of the money unit—which is but another form of stating that it lowers prices and produces stagnation, distress, and discontent,—what good reason can be offered by the advocates of the gold standard for confining the business of this rapidly growing country to a basis of gold, when it is well known that the entire stocks of gold and silver together are now insufficient to serve the purpose of the world's money, and have to be supplemented and re-enforced by large issues of paper notes? Do they not reflect that the production of gold is constantly diminishing and is likely to continue to diminish? And do they not know that our population is growing at the rate of over 3 per cent. per annum and will double in thirty years? Do they mean that the money volume which serves a population of 65,000,000, and is far below the needs of that population, will suffice for the 130,000,000 of the next generation? To be sure, if we are to take no note of prices, the question is a simple one.
But prices must be taken into account. The entire money question is one of prices. When it is said that money is scarce, what is meant is that business is depressed and that money is difficult to get, at the present range of prices. Should prices fall 25 per cent. money would be found plentiful enough to conduct exchange at the lower range. But when prices fall, goods sell below cost, business is unprofitable, workshops are closed, and men are thrown into idleness. If lowering prices do not affect injuriously either the business or the prosperity of the country, then it makes no difference what the volume of money may be; a small amount will meet the requirements as well as a large amount. In that case, the gold standard is as good as any.
But if gold alone is sufficient to bear all the enormous monetary burdens of the Western world, why do the advocates of the gold standard admit the necessity for any more circulation? To be logical, instead of favoring an increase of credit money, which has always lurking within it an element of danger to the business of the community, they should demand the retirement of the $347,000,000 of greenbacks and the $350,000,000 of coined silver, and base the business of the country exclusively on what they call "honest money." If that should be done all that could happen would be a fall in prices. Judging by the experience of the past it would not be surprising if the next move of the gold-standard men would be an agitation for the retirement and cancellation of the greenbacks. Such a movement is fully in harmony with the opinions of the gold-standard advocates for the past twenty years. Indeed, the Secretary of the Treasury who took charge of the finances at the opening of the last Administration, himself a banker, recommended the demonetization of the greenbacks almost as vigorously as he opposed silver.
MONEY VALUABLE ONLY FOR THE IMPORTANT SERVICE IT PERFORMS.
Money is valuable rather for the service which it performs than for the material of which it is composed.