Money: Speech of Hon. John P. Jones, of Nevada, On the Free Coinage of Silver Part 13

In all the broad range of articles that, in a state of civilization, are needed by man, the only absolutely indispensable thing is money. For everything else there is some subst.i.tute--some alternative; for money there is none. Among articles of food, if beef rise in price, the demand for it will diminish, as a certain proportion of the people will resort to other forms of food. If, by reason of its continued scarcity, beef continue to rise, the demand will further diminish, until finally it may altogether cease and center on something else. So in the matter of clothing. If any one fabric become scarce, and consequently dear, the demand will diminish, and, if the price continue rising, it is only a question of time for the demand to cease and be transferred to some alternative.

But this can not be the case with money. It can never be driven out of use. There is not, and there never can be, any subst.i.tute for it. It may become so scarce that one dollar at the end of a decade may buy ten times as much as at the beginning; that is to say, it may cost in labor or commodities ten times as much to get it, but at whatever cost, the people must have it. Without money the demands of civilization could not be supplied.

Money was the most potent instrumentality in the evolution of society from a low to a high plane of civilization. It is valueless to man in isolation. It is indispensable to man in organized society. It is as necessary for the proprietary distribution of wealth as railroads and steams.h.i.+ps are to its physical distribution. The aggregate force of the demand for money in any country depends upon the numbers of the population; with a stationary population the demand is steady, with an increasing population the demand increases, and in order to maintain undisturbed the equation of supply and demand the volume of money should be increased in at least a ratio corresponding to that of the increase of population.

There are certain circ.u.mstances that to some extent disturb the relations between population and money supply, such as the broadening of the areas of population, and the multiplication of money centers. These circ.u.mstances might render necessary a larger percentage of increase in the money volume than would be indicated by the increase of the population.

But under any circ.u.mstances the smallest money-increase that will suffice to maintain the equity of time contracts is an increase corresponding to the increase of numbers of the population.

Under conditions of unvarying demand and unvarying supply the value of the unit of money would be unvarying. If as population and demand increase the supply of money be proportionately increased, there is no possibility of a change in the value of the unit of money.

The constant and unceasing effort to exchange services and all forms of property, which have but limited command over the objects of human desire, for money, that sole instrumentality that has unlimited command over such objects, is, and ever will be, eager, intense, and unwavering.

With population and consequent demand rapidly increasing how do the advocates of the gold standard expect to increase the money volume of the country in this proportion, while the yield of gold, instead of increasing in proportion to demand, is every day becoming less and less capable of meeting the requirements of the arts alone?

THE QUANt.i.tY OF MONEY IN CIRCULATION SHOULD INCREASE IN A RATIO NOT LESS THAN THE RATIO OF INCREASE OF POPULATION.

It will be admitted that if the population of a country be increased by any given percentage there will be a proportionate increase in the demand for all articles that supply human needs. If the population increases by 3 per cent., there will be needed 3 per cent. more house-room, 3 per cent. more furniture, 3 per cent. more food, 3 per cent. more of all things that enter into consumption. These things can only be got by a demand first made on money. Then why not 3 per cent.

more money?

The present monetary circulation of this country including gold, silver, and paper, is represented to be $1,700,000,000. As our population doubles in thirty years, the rate of increase is 3-1/3 per cent.

If the money volume be not increased by a proportion at least as great as this, the true relation between the supply of money and the demand for it will not be maintained. The demand increasing as the population increases, while the supply either does not increase at all or increases in a degree incommensurate with the demand, the money volume shrinks and the purchasing power of the unit becomes greater by reason of the increased keenness of compet.i.tion to get it. This is but another mode of stating that the prices of all products of human labor decline. Prices falling, business ceases to be profitable, stores and work-shops close, and men are relegated to idleness.

THE QUANt.i.tATIVE THEORY OF MONEY--THE VALUE OF EACH DOLLAR DEPENDS ON THE NUMBER OF DOLLARS OUT.

Thus by the universal compet.i.tion to get it the value of the dollar is made to depend upon the number of dollars that are out. This is a principle that lies at the very foundation of the science of money. The law, stated broadly, is that the value of each unit of money in any country at any given time depends on the whole number of units in circulation in that country. The larger the number of units out, population remaining the same, the less must be the value of each unit; the smaller the number of units out, population remaining the same, the greater the value of each.

Notwithstanding the variance sometimes found between the premises and the conclusions of economic writers, there is no economist of repute who does not admit this to be a fundamental principle.

On the theory I have propounded therefore 3-1/3 per cent. of $1,700,000,000, or $56,000,000, is the minimum amount of money that should be added to the currency of this country during the present year.

a.s.suming the population of to-day to be 65,000,000 and the ratio of its annual increase 3-1/3 per cent., the population of next year will be 67,166,600. The percentage of monetary increase to be provided for that year should therefore be baaed on the increased number. And so on for each succeeding year.

I have thought best to collate a variety of citations from the most distinguished authorities on financial economy to support my contention that, _ceteris paribus_, the value of each dollar depends on the number of dollars in circulation.

John Locke, in his "Considerations," etc., published in 1690, said:

Money, while the same quant.i.ty of it is pa.s.sing up and down the kingdom in trade, is really a standing measure of the falling and rising value of other things in reference to one another, and the alteration in price is truly in them only. But if you increase or lessen the quant.i.ty of money current in traffic in any place, then the alteration of value is in the money.

Locke further said:

The value of money in any one country, is the present quant.i.ty of the current money in that country, in proportion to the present trade.

The historian, Hume, says:

It is not difficult to perceive that it is the total quant.i.ty of the money in circulation, in any country, which determines what portion of that quant.i.ty shall exchange for a certain portion of the goods or commodities of that country.

It is the proportion between the circulating money and the commodities in the market which determines the price.

Fichte says:

The amount of money current in a state represents everything that is purchasable on the surface of the state. If the quant.i.ty of purchasable articles increases while the quant.i.ty of money remains the same, the value of the money increases in the same ratio; if the quant.i.ty of money increases, while the quant.i.ty of purchasable articles remains the same, the value of money decreases in the same ratio.

James Mill, in his treatise on political economy, says:

And again, in whatever degree, therefore, the quant.i.ty of money is increased or diminished, other things remaining the same, in that same proportion the value of the whole, and of every part, is reciprocally diminished or increased.

John Stuart Mill (Political Economy) says:

The value of money, other things being the same, varies inversely as its quant.i.ty; every increase of quant.i.ty lowering the value, and every diminution raising it in a ratio exactly equivalent.

And again:

Alterations in the cost of the production of the precious metals do not act upon the value of money, except just in proportion as they increase or diminish its quant.i.ty.

Ricardo (reply to Bosanquet) says:

The value of money in any country is determined by the amount existing. * * *

That commodities would rise or fall in price in proportion to the increase or diminution of money, I a.s.sume as a fact that is incontrovertible. * * *

Ricardo further says:

There can exist no depreciation in money but from excess; however debased a coinage may become, it will preserve its mint value; that is to say, it will pa.s.s in circulation for the intrinsic value of the bullion which it ought to contain, provided it be not in too great abundance.

In this case Ricardo's ill.u.s.tration is the supposed case of a country actually using one million gold pieces each containing 100 grains. He maintains that they would be of the same purchasing power, if the Government took out 1 grain, or even 50 grains, the quant.i.ty remaining the same, but that if, from the grains so deducted, an additional number of pieces were struck, a corresponding depreciation would result.

William Huskisson ("The Depreciation of the Currency," 1819), says:

If the quant.i.ty of gold in a country whose currency consists of gold should be increased in any given proportion, the quant.i.ty of other articles and the demand for them remaining the same, the value of any given commodity measured in the coin of that country would be increased in the same proportion.

Sir James Graham says:

The value of money is in the inverse ratio of its quant.i.ty; the supply of commodities remaining the same.

Torrens, in his work on Political Economy, says:

Gold is a commodity governed, as all other commodities are governed, by the law of supply and demand. If the value of all other commodities, in relation to gold, rises and falls as their quant.i.ties diminish or increase, the value of gold in relation to commodities must rise and fall as its quant.i.ty is diminished or increased.

Wolowski says:

The sum total of the precious metals is reckoned at 50 milliards, one-half gold and one-half silver. If, by a stroke of the pen, they suppress one of these metals in the monetary service, they double the demand for the other metal, to the ruin of all debtors.

Cernuschi says:

The purchasing power of money is in direct proportion to the volume of money existing.