Conspiracy Nation -- Vol. 11 Num. 07 ======================================= ("Quid coniuratio est?")
Synopsis by Conspiracy Nation
When demonetization of silver took place (1873), the supply of primary money was reduced by about one-half, and the half that was demonetized became credit money. At this point there was very little supply of primary money (gold) compared to (1) credit money, (2) checks, drafts, etc., payable on demand, and (3) notes, bonds, etc., payable in the future. (See categories 1, 2, and 3, CN 11.06.)
All property gradually declined in value as compared to gold. (Gold rose in value, as compared to property.) The decline was painfully steady. These conditions caused new debts to be contracted to pay old debts, and the volume of new debts increased rapidly. Money began to be borrowed on property as collateral. Falling prices continued -- there was not enough real money behind the credit money, the checks and drafts, and the notes and bonds. Borrowing continued. By 1890, notes and bonds -- debt -- in circulation had grown enormously. Every town and city felt the weight of debt. Farms were mortgaged. Property in the cities was nearly all mortgaged. A panic began. An unprecedented financial storm was now on the country; it involved not only categories (1), (2), and (3), but primary money itself was involved under the enormous strain placed upon it.
During the last 30 years (1865-1895), our South American republics have been getting deeper and deeper into debt to England, and during the last 25 years these debts have been made payable in gold. At the present time they must pay England $2 in silver for each $1 (gold) owed. So that a bond for $100,000 executed by them when silver and gold were at a parity, must now be met by the payment in principal of $200,000 in their money. That is -- to raise the $100,000 in gold, they must sell 200,000 of their silver dollars.
We are now (1895) an ally of England in depressing the price of silver and enhancing the value of gold. We are paying England 200 million dollars annually in gold in the payment of interest on our bonds, and to meet this annual interest we are giving up about 400 million dollars in property that is required in the market to secure the 200 million in gold.
The value of the property of the world, as expressed in money, depends on what money is made of, and how much money there is. (QUALITY and QUANTITY.) If the quantity of money is large, the total value of the property of the world will be correspondingly large (inflation) as expressed in dollars or money units. If the quantity of money is small, the total value of the property of the world will be correspondingly reduced. [CN: Inflation is not caused by rise in pay; it is caused by rise in quantity of money. Note current stock market inflation, caused by rise in quantity of money. In the past 6 years, ca. 1991-1997, M3, a broad measure of the money supply, has gone up by about 20 percent. According to The Wall Street Underground, "...the Fed is supplying enormous amounts of credit liquidity to the markets... You can see this in the huge increase in the money supply. As measured by M2 and M3, money supply is the largest it's ever been. It is growing by record amounts."]
Until 1873, the primary money of the world was both silver and gold -- at a parity. Then came the abandonment of the use of silver as primary money by the United States, followed by other major nations. (England demonetized silver in 1816.) The demand for gold became greater; silver was thrown aside. The purchasing power of gold increased; prices declined. [CN: Prices declined because the quantity of primary money had been cut in half.]
Our daily expression is that wheat or some other property has declined so much. It would be a more intelligent understanding of the situation to say that the gold crop of the world had appreciated in value.
Suppose you keep adding gold to the dollar, until it takes one thousand grains to make a legal unit or dollar. Go on making it larger until you have all the gold in the world in one thousand units, or dollar pieces. Suppose you owed a note calling for $100 payable in gold -- how could you pay it? Think of the property that would have to be slaughtered to get it.
When you reduce the number of primary dollars (or, in the current situation, the number of Federal Reserve Notes), you reduce the value of property as expressed in dollars, and make it that much more difficult for debtors to pay their debts. And yet this is the kind of injustice that was committed when silver was demonetized. It struck down one-half the number of dollars that made up our primary money and standard of values for measuring the values of all property.
It is commonly known as THE CRIME OF 1873. A crime, because it has confiscated millions of dollars worth of property. A crime, because it has made thousands of paupers. A crime, because it is destroying the honest yeomanry of the land, the bulwark of the nation.
It is one of the wonders of the world -- how the people have been so slow in grasping the financial problem -- in learning what it is that measures values, and that the lesson should have to be learned through an experience so bitter.
-+- Afterword -+-
Many years after 1895, William H. Harvey, a.k.a. "Professor Coin," was living in Arkansas. In 1924 he was building a 130-foot high concrete pyramid on a peak in the Ozark Mountains. The center of the pyramid was designed "to preserve at its center, for the benefit of the archaeologists of 10,000 years from now, a document telling why American civilization fell." (Our Times by Mark Sullivan. New York: Scribner's, 1926.)
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