72 



stamp from one to the other. As an example 

 the iron money of Sparta only exchanged for its 

 market value as iron, of which it took nearly 

 the weight of an ox or a horse to pay fer his 

 purchase. 



vu. Paper money a term that very well de- 

 fines the circulating notes of a solvent bank, or 

 nation, when payable in lawful coin on demand, 

 will not depreciate or fall below the market 

 value of the metal in which they are made con- 

 vertible ; nor will any more of such money re- 

 main in circulation than is needed to meet the 

 requirements of industry for this description of 

 tools, because of their costliness to the present 

 holders. Any more than is so needed will return 

 to the issuer for conversion. Hence there can 

 not, in the long run, be a redundancy of convert- 

 ible paper money. Hence, also, the great advan- 

 tage of convertibility in paper money, as a reg- 

 ulator of the quantity actually needed by the 

 people. 



Viii. Paper money, not convertible into metal 

 on demand, when made a legal tender by the 

 Government, will not depreciate below the value 

 of metal (and may even possess a higher value, 

 because the people must have a circulating medi- 

 um), unless issued in excess of the requirements 

 of industry, con vertiblity, therefore, is not need- 

 ed to sustain its value, but to regulate its volume 

 with accuracy, so .as to prevent fluctuations 

 above or below the market value of the most 

 staple of metals into which it is convertible. 



ix. When the Government is the issuer of in- 

 convertible paper money, it is a fundamental 

 error, and a fraud on the public, to make it legal 

 tender between individuals, and refuse to accept 

 it in payment of a large proportion of taxes. 

 Such a Government discredits its own obliga- 

 tions, and lowers the character and credit of its 

 own paper, and, hence, it is responsible for the 

 serious fluctuations of its paper currency, the 

 market value of which is dependent wholly on 

 supply and demand. 



The foregoing propositions have been framed 

 in language intended to make the principles they 

 contain strike the reasoner as self-evident truths 

 or postulates, and I regret that my limits will 

 not permit me to give the whole series. I will 

 only cite two more to define the nature of capital 

 as distinguished from money. 



x. Commodities in transit from producers to 

 ultimate purchasers or consumers, represented 

 by their title deeds, such as bills of lading, ware- 

 housemen's receipts, bills of exchange, cheques, 

 bankers credits and other devices, invented and 

 used by bankers for the transference of debts 

 and credits, constitute a large, if not a control- 

 ling, proportion of the floating capital dealt in 

 in the loan market, improperly called the "money 

 market." 



xi. Floating, or trading capital, other than 

 that representing commodities themselves, sup- 

 plied to the loan market, consists of realized 

 profits of trade, and the savings of labor, not yet 



invested in more permanent undertakings, such 

 as houses, factories and lands, and steamships, 

 railways, mines and numerous other things not 

 consumable, or which are net destroyed in use. 

 Such investments are sometimes called "fixed," 

 in contra distinction to "floating capital." 



xn. Floating capital, which is defined in the 

 two last postulates, the la^er of which (No. 11) 

 embraces money (which forms only from three 

 to five per cent of the general mass), constitutes 

 the true "circulating medium of commerce." 



xin. Floating capital, by the facilities afford- 

 ed by modern banking, and the expedients of 

 merchants, abolishes barter, or the exchange of 

 commodities in specified or measured quantities. 

 It is therefore incorrect and illogical to say that 

 money, or capital, " facilitate exchanges." They 

 simply render exchanges unnecessary, by facili- 

 tating the distribution of the products of labor 

 from producers to consumers. The idea of an 

 exchange of commodities is the father of much 

 bad logic in economic science. 



This method of eliminating what is clearly er- 

 roneous, or is unsupported by proot of any kind, 

 or in other words, what rests on nothing but 

 assertion, from what is self-evident, or has been 

 proved by logical deduction, or induction, to be 

 fundamental, as far as I am aware, is new in eco- 

 nomic science, and some friends in England, 

 whose opinions I value, have paid me the com- 

 pliment to say so. 



On the appearance of a portion of my " postu- 

 lates and principles" in the Anglo American 

 Times, Professor Bonamy Price, of Oxford, in a 

 spirit of great frankness wrote me as follows : 

 " So many thanks for your letter in the American 

 " Times. It is exceedingly good, and I rejoice 

 "over it much, especially the Postulates and 

 " Principles. The 21st' (10th in this communica- 

 "tion) 'is capital. I had the thought, but not 

 " definitely and vividly expressed. The meaning 

 'jumps on the reader and masters him, and it is 

 ' most true." * 



It will thus be seen, 1, that money, metalic and 

 paper, constitute only an insignificant propor- 

 tion of the floating capital used in conducting 

 the business of the country; 2, that the pro- 

 ducts of labor, themselves, by the processes of 

 modern banking and the facilities of distribu- 

 tion afforded by railways and steam vessels on 

 the ocean, the lakes and the rivers, possess an 

 inherent power in proportion to tJieir market 

 value, to circulate and distribute themselves, 

 with the use of only a small supply of money 

 and a greater or lesser amount of realized capi- 

 tal from profits and savings; 3, that the most im- 

 portant function performed by money is that 

 which it exercises in its character as a tool to 

 measure values and mete out capital between 

 ender and borrower and dealers in general, and 

 to adjust the wages of labor ; and 4, that its 

 market value depends on the market value of 

 the material of which it is fabricated, or, if 

 paper, on what it rests for security, and that all 



