COIN'S FINANCIAL SCHOOL -- IV
Synopsis by Conspiracy Nation
(Based on *Coin's Financial School* by William Harvey (1895))
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
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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