Conspiracy Nation -- Vol. 11 Num. 06
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("Quid coniuratio est?")
Synopsis by Conspiracy Nation
Credit money is a title to commodity money (e.g., gold, silver). In the exchange value between commodity money and all other property, credit money does not add anything -- it facilitates -- makes convenient the transaction of business.
Three lines of credits are built up on primary or redemption money (gold and/or silver):
(1) Credit money -- paper bills and all forms of token
money -- all redeemable in primary money.
(2) Checks, drafts, bills of exchange, and other forms of
like paper, payable on demand.
(3) Notes, bonds, accounts, and other forms of credit,
payable at a particular day in the future (debt), or upon
the happening of some contingency.
Thus we have three categories of credit built up on primary money.
Over-confidence causes an expansion in categories two (2) and three (3). A man finds he can easily float $5,000 in debts and, since times are good, he increases his debts to $10,000. This expansion becomes contagious. Cities, counties, corporations -- all increase their debts. 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 (category (1), above). 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.
It is practical to maintain a purely greenback system. The only theory, however, on which a purely greenback or paper money system might be maintained would be to do away with a redemption money entirely. You cannot have both without the redemptive principle applying. The money with its own intrinsic value (e.g., gold, silver) becomes the most preferable. You cannot maintain two kinds of money at a parity, when one has a commercial value and the other has none, except by making one redeemable in the other.
But you might have a purely paper money. Limit it in quantity by fixing the amount at so much per capita. Maintain the volume at that as population increased, and from time to time provide for what had been destroyed. The fact that it was limited in quantity would give it a value.
The objection to the greenback system is this: So long as there was confidence in the government, it would be a sound, stable money. But as soon as confidence in the government was shaken it would depreciate in exchangeable value.
[CN: Put differently, to prop up the greenback, confidence in the government must be maintained, no matter what. Our current paper money is sort of a greenback system: what is now called "the dollar" is not redeemable for, e.g., gold and/or silver. From "greenback system" follows, ipso facto, that "the government can do no wrong."]
When the danger became imminent that the government was not able to enforce the greenback's legal tender character, the greenback, having no commercial value, would become more or less worthless.
Combined capital all over the world have been using (1895) professors of political economy to instruct the minds of the young to a belief in the gold standard. This is not hard to do, as these students, being young, their minds are easily molded. The error is planted deep and strong. But the gold standard, now (1895) fitted to a shivering world, is squeezing the life out of it. The workers of the country, the backbone of the republic, are delivering over their property to their creditors, and going into beggary. This is the test proof of the "beneficence" of the gold standard.
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