Charles Lindbergh
Banking and Currency


All that one needs to do in order to be convinced of the need for reforms is to observe men in their different social conditions.  Study them in their homes, on their farms, in their shops and places of business.  It is in the homes that we find the results of our industrial relations.  All places of industry are simply quarters where work is done and business transacted in order to supply the necessaries of life that are required principally in the homes.  Enter the palaces of the capitalists and you will find them filled with luxuries.  The owners revel in extravagance and waste.  Servants answer every beck and call and do for them the things that healthy people ought to do for themselves.  The world responds to the demands of the rich.  In the home of the average farmer you will find its occupants employing frugality, temperance and self-support.  They have little luxury and no excesses.  The farmer is the mainstay and the balance wheel of humanity, yet the world makes no recognition of him except to demand the food that he is instrumental in producing.  Go into the home of the wage earner.  In most cases he is a tenant.  You will find that, on the average, he lacks many of the necessaries of life.  His product is labor, and it is in demand everywhere, but the world makes no recognition of him except to insist that he sell his labor as cheaply as they demand.  He is forced to live beneath the value of his service.  These statements do not cover all that we should know, but they are suggestions as to where anyone may obtain full information on the results of our present social order.

If one is satisfied to know that such a difference exists between the conditions of people in the different stations of life as a comparison of each class will show to exist, then he need not be interested further in this discussion.  But those who have a sympathy with and a desire for a betterment of existing conditions will be prepared to compare the cost of the remedies proposed with the advantages that would result.

We cannot disregard the established order of civilization.  It is the result of the growth of centuries and all of our institutions are moulded around it The present generation possesses new ideas, but we have old institutions and we know that we cannot put our new ideas into execution without discarding some of the old institutions.  Those who have secured special privileges and are snugly fitted into the old conditions which are a result of old methods will strenuously resist new innovations.  A transition from the old to the new will necessarily create some disturbance because of that opposition.  Moving from an old-fashioned house into a new one which has all of the modern improvements involves the inconvenience of readjustment, but it is the added convenience that they know will come after the adjustment that induces people to make the change.  Likewise in changes involving economic problems we will at first have some inconveniences.  Changes are not justified unless it is evident that an improvement of conditions will be the result.

We have previously observed that the defects of our financial system are fundamental.  It breaks down by its own weight.  Interest computed on the use of centralized capital and enforced on the present basis creates inequality as a matter of course.  This is an absolute fact.  We shall have some inequality under any system because we are not born equal except in theory, but, the very fact that we are not born with equal physical power and brain force, nor into equally favorable environments, and that it is impossible to bring about conditions that would accomplish such equality even within a long period of time, should cause us to seek more earnestly to make the political and social conditions such that the less skillful and the less favorably situated, whether it be in financial affairs or otherwise, will not be robbed of the results of whatever manner of service they are best fitted by nature to perform.  The artificial difference which results from legal and social discrimination it is within our power, and therefore our duty, to overcome.  We cannot expect perfection under any state, but a vast improvement in the conditions of all men can easily be brought about.

In seeking success in life, the main requirement is to have the necessary instruments for a practical application of our time and energy, so that we may secure the things that are necessary and desirable for us to have in order that we may live in a state of usefulness and individual effectiveness as well as of happiness.  That means that in some form or other we should continue in useful activity, that we should fit into some natural station in the social order of things, and because under a state of civilization such as ours is, many things are necessary to each of us, we must rely on each other to supply what we do not individually produce or control.  That means a great interchange of service, material and all manner of commodities.  There must be a means of measuring values so that this exchange may be made on as nearly an equable basis as is possible.  In other words, we require some measure of value.  Most of us immediately associate that idea with money.

The kind of money we have been using has failed to promote justice in our daily relations.  We have had to resort most often to credit because money alone failed and the interest charge on both money and credit has been too great for us to pay.  Still, we must use the present system until we can provide another, because if we do not have some means of exchange there will be stagnation and consequent deterioration.  Industry is necessary, and when one produces more useful things than he can use it is desirable that they be transferred to someone needing them.  But the vendee may at that time have no articles that the vender may be in need of, and while the vender may not be in any need of the goods or services of the purchaser at the time of the sale, it is still necessary for him to secure for his benefit a credit that he may convert at some future time into that which will supply his demands at the time of such conversion.  It is the function of money to supply that credit.  That is the only capacity that money should possess.  Honest money is nothing but credit.

Creating money out of commodities like gold and silver and legislating value into them by making them legal tender is the worst possible policy and the greatest limitation placed upon advancing civilization.  It is the same in principle, though not in degree, as would be the printing and giving of legal tender paper money by the Government to persons who give no consideration in return.  No especial value should be legislated into property.  Neither gold nor any other metal or commodity should be stamped with a value and made a legal tender.  Commodities may properly be stamped with their quality and weight so that the stamp may be accepted as the proof thereof.  After that they may be used as exchange in commerce on their own commercial merits.  Neither person nor property is entitled to any specially conferred governmental privileges.  To coin metal and make it a legal tender gives a special value to the metal which enables those possessing it to take undue advantage of the rest of us.  But I do not advocate the immediate repeal of the law covering this condition, because such an act might disconcert business and do much immediate harm.  I would, however, have men know the truth and seek a remedy.  That will not disconcert business or do harm.

To reverse our financial system and to stop the extortions now practiced would be to make a tremendous change.  If it involved only the parasites—those living on speculation and other parasitic devices—we could in good conscience make the change however abruptly it might end their practice.  But the present system involves also those who are engaged in legitimate business.  It was accepted in good faith and acted upon by them.  All commercial transactions are based upon it.  Contracts which extend far into the future depend upon it for their very value, and many people’s savings have been measured on this basis.  These things cannot be overthrown abruptly without bringing about a state of financial and industrial chaos.  It will readily be seen that this is a most serious matter, involving on the one hand the protection of those legitimately interested in pending incomplete deals as well as business arrangements based upon the present system, and on the other the rank and file of the people, and also the coming generations.  There is equity on both sides, and the problem is to act justly and while making the change to give as little trouble as is possible and yet remain firmly determined to secure a system that will insure stable, lasting and equitable social relations between all of the people.

No one giving this subject intelligent and impartial consideration will claim that mere amendments to the present financial system will cure our economic evils.  We may relieve it of some of its administrative defects by making a few simple amendments and use it during the period of transition from the old system to an entirely new system that shall be based on true economics capable of practical application.

The use of a double system during this transition period would give us an opportunity to adjust by natural selection.  The extension of the old system, modified to remove some of its administrative defects, will protect our old institutions and their concurrent obligations.  The establishment of a true fundamental system of exchange which will gradually displace the old will relieve us of its burdens after such time as will be necessary in order to fulfill existing obligations.  We should immediately get the benefit, and all people both of the present and future generations may in that way be justly dealt with.

We have found that the manipulation of credit has been the most potent of all methods employed by financiers as a means of controlling commerce and fixing prices.  It has made virtual kings of some men in the field of finance, and through its power they support a system that gives to the actual producers the least return and to the consumers the greatest expense possible, considering that they must leave enough for the people to work out a bare subsistence.  We are all consumers and should all be producers, and, therefore, are all interested in the results to be obtained from our activity in whatever form we apply it.

No individual or private concern should be allowed to control credit, except that credit based upon actual production or a service, the results of which practically correspond in value.  To allow individuals to create conditions or take advantage of the existing conditions in such a way that they are enabled to secure a credit that is not based upon actual production equal in value to the credit, is as plainly a tax upon humanity as if government bonds were issued and the people were obliged to pay them.

Take for example the watered stock issued, and the fee received, by J.P. Morgan & Co., for organizing the U.S. Steel Co.  J.P. Morgan & Co.’s fee was $62,500,000 and at least $500,000,000 of watered stock was issued.  Ultimately that stock gets into the hands of so-called “innocent purchasers,” that is, those stockholders who were not parties to the original graft.  While the fees of J.P. Morgan & Co. were in the form of bonds or stocks in the hands of the company and the other incorporators held the rest of the watered stock, at least $500,000,000 of that stock was graft.  But, when J.P. Morgan &, Co. and the others sell their watered stocks and bonds, then the buyers are the so-called “innocent purchasers,” and so, by some closely drawn and refined distinction of financialdom, suavely communicated to the business world, and practically fostered by the courts, it is called an obligation upon the public, the implication being that the public, which includes the children of this and future generations, are negligent or guilty.  They pay the dividends and watered stock by having them added to the price of the necessaries of life.  Of course any one giving this subject proper consideration knows that such a construction is based upon the subserviency to a false system ;  that is, a misconception of the fitness of the rule.  That policy will have to be overruled and the court finally adopt a construction which will not destroy the right of the public to survive.

In the meantime J.P. Morgan & Co. and the others will invest the receipts from the sale of their watered stocks and securities in the securities of railways or other industries in which there is also likely to be more or less water.  But, in both eases, after these sales and purchases take place, we have what are called “innocent purchasers.”  As between the so-called “innocent purchasers” and the general public the decree of the court is that the public shall pay the penalty by having it added to the freight bills, passenger fares and other necessaries required.  One point removed, the original graft seems to be merged into an actual investment—so-called bona-fide.  In this case the investor who buys to speculate on the public demand, and who had the privilege of investigating before he purchased, is by the rules of procedure placed in a more secure position than the public which could not investigate.  We cannot expect anything approaching social justice as long as we tolerate such a condition as this, or any system which enables private concerns, individual or otherwise, to appropriate credit that is not based upon a service or production that corresponds in value to the credit created.  All honest credit is the result of social conditions and belongs to the public, and should be used by the public for the common welfare.

It is clearly evident that if we are to correct the social evils we must first have an honest means of exchange.  When we have an honest means of exchange the complications of government will be almost infinitely simplified.  When the individual citizen knows that his service to other citizens is generally compensated in proportion to its value, the whole social fabric will be inspired with confidence, and individual initiative will everywhere be manifested and general prosperity permeate all departments.  It is because we have allowed individuals to appropriate the public credit that we are now in an industrial chaos in so far as doing equity is concerned.  We have the motive powers and there is sufficient in nature to supply our reasonable requirements, only the means of distribution have been misapplied and the waste appalling and the majority of us are unable to supply our reasonable requirements.

We shall have to revert back to fundamental principles in order to secure a foundation on which to build intelligently and satisfactorily, and reach a proper social and financial condition.  There is no escape from that course and we should not seek any, because it is the natural thing to do, but it is what we have failed to do in the past.

We are now face to face with problems pertaining to legislation and the making of provisions for administrative measures.  If these problems are to be properly solved they must receive the attention and concentration of men whose faculties of judgment are based upon experience in personal and business contact, and proceed from calm minds with no fear.  All should join this great undertaking, but all should remain wholly uninfluenced by personal or political prejudice.  No right of preference exists in favor of persons, property, or business.  The nation as a whole should establish administrative measures which will foster conditions that will prove satisfactory for the greatest period of time.  It should, however, give due regard to the fact that the proper exercise of individual initiative and freedom is the greatest inducement to industry and that personal claims and ambitions must yield in favor of whatever best serves the general welfare.

The Gold Standard.

On March 14, 1900, the Money Trust, after carrying on an adroit campaign covering a considerable period, secured from Congress an act which called for the permanent establishment of the so-called “gold basis” for all of our money.  Since then there have been new inventions made for mining gold which make the available amount more plentiful, with the result that the “gold basis” is puzzling the Money Trust.  But there is a still further complication and that is that the people are becoming familiar with the fallacy of the “gold standard” and they are becoming dissatisfied in proportion to their understanding of its bad effects.

The dollar is worth less now than it was in 1900, that is, it will buy less.  That fact, particularly, does not satisfy the creditor class.  They have had enormous interest returns, but they have lost a part of that advantage because of the depreciation of the purchasing power of the dollar.  To a greater or less extent all of the people are dissatisfied with it ;  many for selfish reasons and they only desire a remedy to be adopted which will help them alone, but there are fewer of these than there are of those who seek a reform which will better the conditions of all.  Such a remedy would not satisfy the Money Trust.

We have seen many comments in the press lately in regard to a plan devised by Professor Irving Fisher of Yale University.  Mr. Fisher is no doubt an honest and earnest worker who is trying to reform the gold standard.  He has arrived at the inevitable conclusion that every capable student must finally accept, and that is that the present gold standard is not the standard by which we can secure honest money.

Professor Fisher has given a most thorough analysis of the production and supply of gold and shown quite extensively the effect of its present use as a money standard upon the prices of commodities.  The Fisher plan is now prominently before the country.  The professor is a man of eminent ability and reputed to be thoroughly honest in his purpose.  I have given below a synopsis of his plan as stated in the Boston News Bureau of Dec. 28, 1912.  It is as follows :

* * *

“Professor Fisher is one of the most distinguished economists in this country, if not in the world.  He is eminently practical and not merely theoretical in all his work and writing.”

* * *

“All who have to do with long-time contracts recognize the desirability of a monetary unit of fixed purchasing power.”

“The following is Professor Fisher’s plan for converting the gold dollar into such a composite unit, thus standardizing the dollar.  Such standardization would be effected by increasing or decreasing the weight of gold bullion constituting the ultimate dollar in such a way that the dollar shall always buy the same average composite of other things.”

* * *

“Every dollar in circulation derives practically its value or purchasing power from the gold bullion with which it is inter-controvertible.  Every dollar is now inter-controvertible with 25.8 grains of gold bullion (nine-tenths fine), and is therefore worth whatever this amount of bullion is worth.”

* * *

“The very principle of inter-controvertibility with gold bullion which we now employ could be used to maintain the proposed standardized dollar.  The government would buy and sell gold bullion just as it does at present but not at an artificially and immutably fixed price.”

* * *

“At present the gold miner sells his gold to the mint receiving $1, in (say) gold certificates, for each 25.8 grains of gold, while, on the other hand, the jeweler or exporter buys gold of the government, paying $1 of certificates for every 25.8 grains of gold.  By thus standing ready to either buy or sell gold on theme terms ($1 for 25.8 grains) the government maintains exact parity of value between the dollar and the 25.8 grains of gold.  Thus the 25.8 grains of gold bullion is the virtual dollar.”

* * *

“The same mechanism could evidently be employed to keep the dollar equivalent to more or less than 25.8 of gold, as decided upon from time to time.”

* * *

“The change in the virtual dollar (bullion weight of gold inter-controvertible with the dollar) would be made periodically or once a month, not by guesswork, or at anybody’s discretion, but according to an exact criterion.  This exact criterion is found in the now familiar ‘index number’ which tells us whether the general level of prices is, at any time, higher or lower than it was.  Thus, if in any month the index number was one per cent above par, the virtual dollar would be increased 1%.  Thus the dollar would be ‘compensated’ for the loss in the purchasing power of each grain of gold by increasing the number of grains which virtually make the dollar.”

My manuscript for this book was about completed when I first saw the notice of Professor Fisher’s plan and I wrote him for the details of his plan.  He sent me full information and among other things the article, a part of which I have quoted above.  Professor Fisher has performed a great service to his country and to the world by discrediting the gold standard so convincingly.  When a man of his prominence and ability has the courage to state his beliefs, the more timid of those holding like views, of which there are many, ought to take an active part in supporting the indictment of the gold standard.

While the Professor has clearly indicted the gold standard and conclusively shown that it is a false one, I do not agree with the remedy that he proposes.  Instead of proposing to abandon gold as a standard, and relegating it to its natural place among the articles of commerce, he advocates its reform and would still retain it as a standard by making the weight of the dollar variable and determining its value from time to time according to a commodities index.  The Professor is surely correct in his assumption that commodities have actual value worth considering in connection with the establishment of a true exchange system based upon the actual value of services and commodities.  I regret that Professor Fisher has complicated the conclusions he arrives at by continuing to consider the gold standard entitled to any greater recognition than is accredited to commodities in general.  After proving its falsity, I believe he should have suggested the abandonment of the gold standard.

If we were compelled to change the weight of the dollar monthly, quarterly, or even annually, as we would have to do with a commodity dollar, if we tried to keep it of the same purchasing power all of the time, it would give us more trouble than we now have in changing the tariff schedules.  But while Professor Fisher has performed a world service in being instrumental in giving general publicity to the falsity of the gold standard, that publicity is pushed by the influence of the selfish interests, because they are pleased with the remedy he proposes.  If he had not proposed to standardize the gold dollar, his proof that it is not an honest measure of value would have received no publicity greater than he himself and his friends and a few others could give to it.  It would have been ridiculed if he had not proposed a remedy that suited the interests, for the money sharks demand some measure that is favorable to them and not fair to the people.  They have always sought to make the world believe the gold standard to be sacred and, therefore, that the people were bound to support it no matter how much it wronged them.  These selfish interests have simply seized on this proposed remedy, which I believe Professor Fisher to have erroneously suggested without his having given as much thought to the remedy as he had to the facts which conclusively prove gold to be a false money standard.

It may seem strange to some people that this remedy suggested by Professor Fisher should be advertised all over the world now, but there is nothing strange about it, for the all-powerful Money Trust interests are quick to observe anything that might be made use of by them, and immediately upon its appearance they seized upon the idea of standardizing the Gold Dollar and were instrumental in having the plan advertised in order, if possible, to induce the people to accept it as a remedy. It may not be generally realized by the people that this is a critical period in the establishment of governmental policies, but the interests are especially alert to that fact.  Everything is being done to make the people accept some worthless, makeshift, and in some cases actually harmful, so-called “remedies,” which, if accepted, will delay the adoption of real substantial remedies until another generation shall enter public life.  Simultaneously, in all countries where they have the gold standard (and that is in most countries, and in the others equally unjust standards are used) articles were published which were substantially the same in substance as the following which was published in the Washington Press, on April 12th, 1913.

To Ask International Gold Dollar Agreement.

“One of the features of the proposed currency legislation which will be considered by Congress is the initiation of a movement for an international agreement for the purpose of preventing the depreciation of the gold dollar.

“Such action has been suggested by eminent economists.  It is widely held that the enormous increase in gold supply and the consequent depreciation of the gold dollar is the real cause of the high cost of living and high prices.

“Democratic leaders, especially Senator Owen, chairman of banking and currency, feel that if the cost of living is to be reduced the gold situation must be taken into account.”

Not all of the articles appearing in the press directly discuss the gold standard, but many of them are adroitly written in order to impress the reader and fit him to receive the fact that the gold dollar is not now a good standard, but further designed to make the reader come to a wrong conclusion on the question of a remedy.  When the first half of an argument is true, unless the reader is very careful it goes far toward making him believe that the second half is also true, and that is frequently the case even when the conclusions are wholly erroneous, as long as the material is adroitly handled.  That is where the danger to the people comes in this discussion of the gold standard.  Innumerable articles are now published, in fact the plan is systematically advertised, for that very purpose.  But there are other articles which are written and published in good faith and in these there is no intention to deceive.  An article was published in Collier’s Weekly, also on the date of April 12th, 1913, which I quote below, by permission.  The article is well written and true, but does not suggest a remedy.  It leaves the reader at sea as to what shall be done.  Readers may fall into the hands of other writers who will mould their opinions and cause them to draw wrong conclusions unless they possess the time in which to make a thorough study of the problem.  Very few actually have sufficient time.  No one will deny that it requires a great deal of time and patience to understand the banking and currency problems and its relations to business and speculation.

Following is the article from Collier’s :

The Discouragement of Thrift.

“The people of the United States have now saved up well over a hundred billions, as measured by current money standards.  The aggregate is amazing, and, while the amount per capita is not large, nothing like it was ever known before in any country.  This saving takes on many forms—the largest, of course, being in the rearing of children—which shows itself in the steady increase in the value of land.  The next is ownership of enormous amounts of securities, of railway and industrial companies, and the like.  Then probably comes life insurance.  The savings in banks are relatively small.  The increment in land values goes to much less than one-half of the population, even in theory, and a comparatively small number of people get the benefit which is made up of the efforts of all.  The larger amount of the securities outstanding represents a more or less fixed value.  The eighteen billions of insurance in force is of absolutely fixed value.  While these securities and insurance obligations were being created, the relative worth of the dollar has been rapidly declining.  The forehanded folk who saved and loaned this money get for it an average return of less than 5 per cent, and if they received back the principal now it would buy, of land or food, one-third less than twelve or fifteen years ago.  This is a savage penalizing of thrift.  We believe that events will soon focus public attention upon this serious problem.  The procedure of the insurance companies, which in part is enforced by law, is of special interest.  The companies collect above $600,000,000 annually from policy holders and from this loan largely on long-time notes.  They act simply as money brokers;  but with this effect, that with the rapid depreciation of the currency in the last fifteen years, they are now returning to their policy holders, on death claims or matured policies, relatively far less than the average amount of money which the policy holders have paid in.  Roughly speaking, the policy holder has been paying in one-dollar bills;  he will get back sixty-six-cent pieces.  Theoretically, the compounding of the interest on premiums ought to pay the companies expenses and yield the policy holders a profit on the average payment.  In point of fact, with the extravagance of the companies and the decline in the purchasing power of the dollar, there is a serious loss.  This ie not as it should be.  A remedy might lie in a radical change of investment.  A larger part of the insurance money is loaned directly or indirectly on land.  Actual ownership of the land ought to be as safe as loans, and, if gold inflation is to continue, more profitable.  It is something to think about.”

Surely Collier’s states the truth when it says that it is something to think about.  We have indeed been buncoed long enough, so long that we ought to think about it seriously now.  But we ought not to be led to postpone a real remedy by giving any credence to this so-called standardization of the gold dollar.  If we adopt that idea we shall go on with as many troubles as we have now and with that one added.