The Circulating Medium
The hope of the poor may perish,
-- Mrs. S. M. Smith
Take not usury of him, nor more than thou payest: fear thy God that thy brother may live with thee.
-- Leviticus xxv:36
Thirty Years of Labor
by Terence Powderly
Chapter 9: The Circulating Medium
THOSE who read the platforms of the National Labor Union and the Industrial Brotherhood will find that the men who attended the conventions of these associations considered the currency question the most important of all that came up for consideration. Mr. Sylvis evidently believed it to be of vital importance. In a document issued by him in 1868 he said:
We must show them that when a just monetary system has been established there will no longer exist a necessity for trades unions.
When the General Assembly adopted the preamble in 1878 it found the XVIIIth section as follows:
To prevail upon the government to establish a just standard of distribution between capital and labor by providing a purely national circulating medium based upon the faith and resources of the nation, issued directly to the people, without the intervention of any system of banking corporations, which money shall be a legal tender in the payment of all debts, public or private, and interchangeable at the option of the holder for government bonds, bearing a rate of interest not to exceed three and sixty-five hundredths per cent., subject to future legislation of Congress.
When the convention adjourned the XVth section of the preamble of the Knights of Labor read as follows:
To prevail upon governments to establish a purely national circulating medium, based upon the faith and resources of the nation, and issued directly to the people, without the intervention of any system of banking corporations, which money shall be a legal tender in payment of all debts, public or private.
In drafting that resolution, originally, it was not the intention to legislate for the workmen of any country beyond the limits of the United States. The Knights of Labor intended to organize in all, countries; hence the substitution of "governments" for "the government" as adopted by the Reading General Assembly. Those who assembled at that convention did not believe in bonds of any kind, and that part of the section referring to government bonds was abolished.
No other section of the preamble has attracted less attention than that, and none other is of more importance to the people. Every Knight of Labor is in duty bound to labor with what ability he is possessed of to abolish the system by which so large a supply of the money of the country is placed under the control of banking institutions. Although the national bank is a creature of the United States government it affords no greater safeguard to depositors than any other banking concern. The gains are
NOT SHARED IN BY THE PEOPLE,
and that institution which flourishes beneath the protection of the government of the people is not in any way subordinate to the will of the people.
The fifth paragraph in section VIII, article one, of the constitution of the United States, says that Congress shall have power " to coin money, regulate the value thereof, and of foreign coins, and fix the standard of weights and measures." Instead of issuing money the government permits private institutions to do so. Instead of regulating the value of money within the boundaries of the United States, banking concerns are practically permitted to do so by controlling the volume. In one part of the country money is worth two per cent., and in others it is as high as twelve, and in some places twenty per cent. The value of the money used by the people is not fixed or regular. It fluctuates at the will of those who have it to lend, or who are enabled, by reason of their control over a large portion of it, to withdraw it from circulation at their pleasure.
The right to issue or coin money is a
HIGH SOVEREIGN PREROGATIVE,
which should not be delegated to any lesser creature than the government itself. The standard of weights and measure is fixed by the government. It is the same everywhere, but sixteen ounces of sugar can be bought much cheaper in a State where the rate of interest is but six per cent., than it can be procured for in one where the rate of interest is twice six per cent. No State can fix the standard of weights and measures; no State can coin or issue money, but an institution, which is subordinate to no power beyond the extent of its circulation, is permitted to transact business beneath the great name of the national government, and regulate the value of the money it loans according to the necessities of the borrower. The credit of the bank is endorsed by the government, while it demands usury from the citizen.
The fact stands squarely before every man who reads, that those who are engaged in speculation, in banking, in note shaving, in managing corporations and trusts, are growing wealthy with amazing rapidity, while those who use the money, those who do the work of the nation, the laborers of the farm, mine, railway, and workshop, are growing desperately poor each day.
The present system is fostered by the government, and is iniquitously unjust. In June, 1888, the First National Bank of New York City published a statement that its circulation was $423,220. In December of the same year it issued another statement to the effect that its circulation was but $45,000, a contraction of the people's money of $378,220 in six months. The government did not authorize the contraction of its currency, although it was charged, and without contradiction, on the floor of Congress, during the late presidential campaign, that $62,000,000 of "the surplus" in the United States treasury was being loaned to
BANKS FREE OF INTEREST.
It is an undisputed fact that this policy was inaugurated years ago, and there is no reason to suppose that the administration which went out of office March 4, 1889, was any better in that respect than its predecessors.
In 1860 the population of the United States was 31,000,000; in 1889 the population is over 62,000,000, or double that of 1860. The population did not increase between 1860 and 1865, owing to the civil war. In 1865 the circulating medium of the nation was about $1,900,000,000, divided as follows: State banks, $142,919,638; one and two year notes of 1863, $42,308,710; demand notes, $472,603; fractional currency, $25,005,828; compound interest notes, $193,756,080; national bank notes, $146,137,860; legal tender notes, $431,066,428; coin, 400,000,000; temporary loan, redeemable on ten days' notice after thirty days, bearing four to six per cent. interest, and paid out by the treasury on account and entering into circulation, $400,000,000 to $800,000,000. At that time the money was being used by the people of the loyal States only. Those lately in rebellion were just beginning to again make use of the currency of the nation.
and the people, individually, were practically free from debt. If the money of the United States had been distributed among the people in 1865 each man, Woman, and child would receive about $61. Since 1865 the circulating medium of the nation has been contracted or reduced to less than $1,600,000,000. Our currency circulation is less by $300,000,000 to-day than it was in 1865, while our population is double what it was then. Then we had $61 per capita; to-day we have but $26 for every person in the nation should it be necessary to give to each one an equal share of the circulating medium.
It is the same with nations as with individuals. If the purchasing capacity is cut down one-half, the power to consume is curtailed to that extent. With every inducement offered to men to employ money to-day, it is absolutely necessary that it be provided for their use. If a man required $60 in 1865 in order to supply his wants, he certainly should have more than that amount to-day, and yet he is forced to do business on less than half of that sum. The cry of inflation has often scared men away from the currency question, but it should be borne in mind that those who demand of the government to issue a
PURELY CIRCULATING MEDIUM
do not ask that any man shall receive one cent of that circulating medium for which he does not render an equivalent. No man is to get what he does not earn. It is because a few absorb the earnings of others now that the demand goes up for new measures, new laws, and a sufficient supply of currency to carry on the business of the nation.
We will liken the nation to an individual who has surrendered his right to handle his own money. He employs ten men to perform labor in his fields. Through their efforts the fields are made to yield double. In a short time twenty men are required to do the required work. When he employed the first ten he could afford to pay them $60 a month, but having surrendered the right to manage his purse, he finds on employing the additional ten men that, while he is richer, better able to carry on farming than before, and more in need of assistance than ever, he is not able to pay the men more than $25 a month. The inevitable result is that he will cramp his effort, try to do the work of twenty men with ten, and make a failure of it, the same as the United States government is now making of its attempt to do the work of 62,000,000 people on a capital which formerly enabled but 31,000,000 to carry on a very limited business, a business which did not bring to its aid the wonderful inventions of steam and electricity which now call for more in effort and means than the world ever dreamed of before. It is not inflation that we need dread, but the grasping of more than man can honestly acquire. Only the nation itself was in debt at the close of the war. Now the people are in debt everywhere.
To contract the circulating medium of a nation to an amount which will not allow the full business capacity of its people to be put to the test, is a
the full extent of which can not be estimated. Such a transaction operates solely in the interest of those who have money to lend. The system which permits it is such as will create a large borrowing class who must of necessity become the slaves of the money changers. So long as national banks exist the volume of money in circulation will not equal the demand for its use.
When money is scarce the borrower will pay a greater price for its use than when it is plenty, and as the chief aim of the banker is to loan money at a high price, it will always be to his interest to keep the volume of currency so low that the wants of the people can not be supplied except through the payment of high rates of interest. The law which permits extortion of that kind is injurious to the welfare of the nation, it is a law which permits one portion of the people, and a mere fraction at that, to take advantage of the necessities of the other, and greater portion. The
CHIEF AIM OF GOVERNMENT,
in a republic, is to do equity to all citizens and residents. In fostering such an institution as a national bank, the congress of a republic shows itself indifferent to the welfare of its people.
The history of the legislation, by the United States Congress, on the currency question since 1862, is one record of partiality to a class that lives on the necessities of others. It is the history of favoritism to Wall Street, New York. Such legislation would not be enacted if industry were consulted as well as that favored class which reaps the greatest reward from its exercise.
When legislation bearing on the money question is presented to Congress, the ink is scarcely dry upon the printed proof before it is expressed to Wall Street for the opinion of its money-changers. Those who make the wealth of the country are never consulted. When a newly-elected president is making up his cabinet, the farmers, laborers, and merchants of the nation are not consulted, but Wall Street must give consent or the Secretary of the Treasury will not be chosen. The press of the United States, without regard to party, always takes it for granted, editorially, that Wall Street has the right to dictate who shall handle the purse strings of a nation which owes everything in the way of prosperity and progress to those who till the soil, dig the coal, operate the railways, and run our factories, while all of misery, hard times, idleness, and starvation that make the nation mourn can be laid. to the door where our presidents seek for men to manage the
FINANCES OF THE COUNTRY.
There is, no doubt, a reason for all of this. Industry can not afford to go farther in the way of bestowing rewards than the giving of the majority of the votes by which the president is elected. Wall Street can afford to be more generous, and if indications are worth anything, she is liberal enough to those who serve her interests. Nearly every prominent official of the government, who was connected with the treasury department for the past twenty years, has been favored with a good position beneath the drippings of Wall Street at the close of his term of office. Many of them did not wait to serve out their full terms, but took the first chance that was offered to them. This system of accepting reward, presumably for favors done, was not confined to one party. Under the recent administration the Secretary of the Treasury, the Treasurer of the United States, and the Assistant Sub-Treasurer resigned to accept similar positions before the close of the first four years of those who "turned the rascals out."
It is high time that the vast territory embraced within the boundaries of the United States, and situated beyond the limits of Wall Street, New York, should enter its protest against a policy which has for years ignored the best interests of the people. The reader has only to pick up one of the daily papers containing the reports of the world's progress to realize that the
UNITED STATES IS AHEAD OF OTHER NATIONS
in its annual average of production. Labor, it is estimated, produces more than in any other country. If this be true it should follow that the necessary amount of money ought to be forthcoming to pay for the labor performed. The demand for money certainly is greater, and the supply per capita ought to be much larger than it is. France, with less natural need for money, has a supply per capita far greater than the United States. Here we have a per capita of $26, while France enjoys and makes use of $50.75 per capita.
The Bland Act of February 28, 1879, directed the purchase of an adequate amount of silver each year to coin not less than $2,000,000, and not more than $4,000,000 annually. In the ten years which have passed since the passage of that act only $20,000,000 have been coined, the minimum fixed by law. This shows that the policy of each administration has been opposed to the full remonetization of silver as well as to affording the people an adequate supply of money. Many people labor under the impression that if silver is coined into money we will have to carry and handle a cumbersome, heavy currency. The phrase "cart-wheel currency" has been applied to the silver dollar.
It does not follow that because the silver is coined into money that it must be used in transacting business, for Congress has by law directed the issue of
SILVER AND GOLD CERTIFICATES,
the same to be made of paper, and with these in circulation we have a paper currency representing the silver and gold which has been deposited in the treasury of the United States. These certificates now represent a material which lies idle in the vaults at Washington. A purely circulating medium is doing part of the work of the nation based only on silver and gold, which the government was forced to purchase from those who were fortunate enough to own gold and silver mines.
Knights of Labor believe that a circulating medium, in sufficient quantity, should be based on the faith and resources of the nation itself, instead of being founded on a gold or silver mine owned and operated by any individual in the United States. They believe, or they ought to believe, that the supply should equal the demand, and if silver dollars to the extent of $4,000,000, may be coined each year, the necessities of the people require that the full sum allowed by law should be coined in stead of the minimum of $2,000,000, which has been issued each year since 1879. Congress believes that the country should have a larger circulating medium, but the money power of the country holds a majority of that body too tightly in its grasp to allow the passage of any laws which will relieve the strain upon the industries of the nation.
An attempt was made in January, 1888, to increase the circulation of the national banks ten per cent., but representatives Weaver, of Iowa, Bland, of Missouri, Anderson of Kansas, and Brumm, of Pennsylvania, took so decided a stand against it that the people of the nation heard the discussion which took place at Washington, and the measure was defeated. All legislation enacted in the interest of the banking fraternity has gone
SILENTLY THROUGH CONGRESS.
If a noise is made it is not so likely to go through, and for that reason the existence of such institutions as the order of Knights of Labor, Farmers' Alliance, and kindred organizations, is a necessity. These associations, representing the people, must counteract the pernicious efforts of the Shylock element which rates six per cent. on money invested as of more consequence than the happiness of toiling humanity.
When the Philadelphia session of the General Assembly adjourned in 1884, the XIVth section in the preamble took the place of the XVth on the currency question. On motion of Ralph Beaumont the following was adopted:
The establishment of a national monetary system, in which a circulating medium in necessary quantity shall issue directly to the people, without the intervention of banks; that all the national issue shall be full legal tender in payment of all debts, public and private; and that the government shall not guarantee or recognize any private banks, or create any banking corporations.
That section speaks for itself. It does not call for any more than enough to do the business of the country. A "necessary quantity" is all that is demanded. It demands that the government of the people shall issue a
PEOPLE'S MONEY DIRECT,
and shall not delegate the authority to do so to any bank or other institution.
Every Knight of Labor, who has studied
principles of the order, realizes that when the transportation
facilities of the nation are managed by the chosen agents of the people
under governmental control, the land system of the country is properly
regulated, and speculation in the earth prohibited, and a national
circulating medium established and issued direct to the people without
rendering a dividend to the middleman,
To properly discuss the currency question would occupy more space than can be consumed in this brief chapter. Instead of quoting authorities I would recommend the reader to study a book called " Whither are we Drifting," published by George C. Hackstaff, St. Louis, Mo. It contains the history of the legislation on the currency question since the breaking out of the civil war, and should be studied by every one.
THE HISTORY OF THE CURRENCY QUESTION
of the United States is being made every day. The legislation proposed and discussed during the Fiftieth Congress on this important issue would, if recorded, occupy more pages than will be contained in this volume. The question is, apparently, very complex, and will continue to be so until it is solved by legislation, which will require that the circulating medium shall be issued direct to the people without let or hindrance from any other institution, foreign or domestic.
420 29th Street
McKeesport, PA 15132