Postcard from the past: The Money Situation
By: Dick Perue
An editorial in the May 23, 1895 Saratoga Sun relates:
We have two kinds of money. One is money of redemption, and the other is credit money. Up to 1873, gold and silver was our redemption money, and paper money was our credit money.
Since then, gold alone is our redemption money, and silver and paper money are both credit money.
Redemption money is that which is used as a basis for a monetary system. Thus, when we had a bimetallic system, the government exercised its option to redeem credit money in either, but adapted its practice in this respect to the convenience and requirements of business.
It could easily throw its great influence toward increasing the use and popularity of either metal if it saw fit to do so.
This gave a double standard and a double quantity of redemption money, adapted to both the wants of the people and the large transactions of commerce.
“Demonetizing” silver was caused by taking away from its free coinage, its legal tender character and its right to be used as money of redemption.
It is still coined into money, but it is now used as credit money, the same as paper money. No number of “purchase acts” could restore it to its old position. These purchase acts have been used to pile silver up, while prejudicing the people against it.
Nothing but free and unlimited coinage, the same it enjoyed before 1873, can restore silver to its proper position as redemption money.
The less redemption money, the less credit money can be safely floated, so under a gold standard, only one-half as much paper or credit money can be issued as under a bimetallic standard.
Many ingenious statements are made by monometallists that are confusing, and among them is the statement they are in favor of bimetallism.
But, when questioned, it is found they are in favor of buying one metal with the other using gold to buy silver. They lose sight of the distinction in one case silver is redemption money and in the other is credit money and as credit money, is no more useful than paper money.
Wheat, cotton, corn and all commodities would immediately advance under a bimetallic system, and under a single standard system, will remain low and unprofitable as at present.
When considered in connection with the rapidly increasing debt of the country, now amounting to about $40 billion, conditions will grow worse.
Under a free bimetallic system, it will take years to undo the evils which have reunited and reduce this accumulated indebtedness. And, in doing so, we will need all of the gold and silver we can induce to come into the U.S., and it may be necessary to reproduce the old laws of Washington and Jefferson who made silver coins of other nations legal tender in this country.
It may also be necessary to reduce our ratio to 15 to one, less than that of other nations – 15.5 to one – as an inducement for their silver to come to this country. – Coin’s Hand Book
Spooky, isn’t it. Reading this article is like my grandkids trying to explain to this old geezer the meanings and workings of cryptocurrency, Bitcoin and AI. Last I remember, AI stood for artificial insemination which the kids didn’t understand – as well as the present day national debt.
