LETTER IV
My dear Judd:
We are studying our money system, with the idea of understanding how it causes the rich to grow richer and the poor poorer.
Money, in its relation to the price of goods, is like a pair of scales in balance. If you add to the weight in the right-hand pan, it will go down; also, the same thing will happen if you take away the weight in the other pan. A bushel of wheat is worth, let us say, one dollar; and if anything should happen to double the quantity of wheat in the world, the price of wheat would go to half a dollar. On the other hand suppose that without changing the amount of wheat in the world, you were to cut in half the amount of money in the world; then the same thing would happen, the cost of a bushel of wheat would go to half a dollar. By reducing the money supply, you lower prices, and make “tight” money; by increasing the money supply, you raise prices, and make “soft” money.
Now, the people of our country are divided into two classes, those who own money, and those who owe it; the creditor class and the debtor class. It is evident that there is a conflict of interest between these two classes, as to how much money shall be put into circulation. If the money supply is increased, money is cheaper, and wages go up, so it is easier to get money and pay your debts. But the creditor loses correspondingly, because he cannot buy so much goods with the money he gets; thus, for the government to put more money into circulation, is to cancel a percentage of all debts. But on the other hand, if the amount of money in circulation should be reduced, money will be harder to get, and it will buy more goods; thus all creditors will be getting more than is really due them, and a great many debtors will be ruined, because they cannot pay this extra amount.
All through our history there has been a struggle between these two classes. Whichever side controls the government, will shift the currency supply to favor itself. And which side has controlled? The answer is, the rich; they have had the money to subsidize political parties and name candidates and carry elections. Here is a rule of politics, Judd, which I set down for you to paste in your hat and study while you are sawing timbers and mixing cement:
Out of fifteen presidential elections since the civil war, fourteen were carried by that party which had the biggest campaign fund.
The struggle has centered about what is called the “gold standard.” All money of our government is supposed to be exchangeable for gold. Prior to 1873, silver also counted as a standard; but in that year silver was “demonetized,” and of course that made money very “tight.” The “Crime of ’73,” this action of the creditor class was called; it produced a frightful panic, and tens of thousands of men were ruined, and hundreds driven to suicide. Since poverty breeds poverty, the great mass of the descendants of these people are still poor, and are told in the churches that it is the Will of God, and in the newspapers that it is Economic Law.
In 1893 we had another severe panic; I was a boy then, and remember it well. Millions of men were out of work and starving, and the mass of discontent piled up, and three years later we had the Bryan “free silver” campaign. I was just beginning to think about politics, and if today I can be patient with the mass of our deluded workingmen and farmers, voting for “Coolidge and Prosperity,” it is because I recollect exactly how I was bamboozled in 1896, so that I would have voted for “McKinley and Prosperity,” had I been of age. Mark Hanna, the millionaire corruptionist and banker-boss who paid McKinley’s personal debts and set him up for our puppet-president, raised a campaign fund of $16,750,000, and bought that election for his puppet, quite openly and obviously; so Bryan, who had only $675,000 for his campaign fund, did not succeed in his scheme of making silver money, and letting all the business men off with half payments to the bankers. So here again you see how the “actions of men” kept the rich rich and the poor poor; and God had nothing to do with it—unless you believe that God was buying votes for Mark Hanna!
The maintaining of the “gold standard” as in 1896 would by now have put the bankers in possession of the entire wealth of our country; and that was what the bankers intended. But an accident happened—the discovery of new gold, and the development of large-scale, commercial mining of low-grade ore. So we got the very thing Bryan had wanted—more money in circulation; and so the bankers have got only one third of our wealth, and a mortgage on another third. Also, they have their Federal Reserve System, whereby they manipulate the currency; they can make “free silver” today, and “gold standard” tomorrow, and when the next smash-up comes, they will sweep the board clean.