The Redwood gazette. [volume] (Redwood Falls, Minn.) 1873-1940, 1896-08-13
FIAT AND REAL MONEY.
A Correspondent Discusses Actual
and Representative Value.
To the Editor of the Globe:

ana Representative tdIuc.
To the Editor of the Globe:
Please pardon this first intrusion of a close
reader of the Globe for twelve years past in
an effort to answer the question you ask
Anybody in your editorial of the 2Sth inst
commenting on a communication of r. j.
Fasset. You ask if the government can
make" money, why it should not make
enough to give a million dollars to each
citizen and so enrich all, Money is of two
kinds-money of actual value and repre-
sentative value. If the government could
by law make the first kind it could enrich as
you suggest but it cannot. The silver
money of the land, as it's actual value is
measured in gold is made of bullion worth
about SO cents, and the rest of each dollar is
as clear a case of fiat money as can oe
imagined
The silver dollar is now then partly fiat,
About the power of a strong government to
issue and force into circulation a money
partly or purely fiat there can be no doubt.
Its adviSability, however, is entirely another
question. Various countries to-day, notably
Brazil and the Austrian empire have cur
rent volume of circulating irredeemable pa
per money The value of such money de-
ponds on three things. the stability of the
government issuing it, it's volume and the
difficulty of counterfeiting. The only excuse
| can see for an issue of such money is the
inability of the government to provide
sufficient volume of better money. The
ideal money is that in which the represented
value agrees exactly with the actual value of
the material constituting it provided, how
ever, that the volume current in the country
is sufficient for the business of such a
country.
If any money at all is needed for the trans
action of the business of a specific country
(and think the check and draft theorists
do not yet deny this,D it is but logical to pre-
sumo that specific volume bearing a GER
tain definite relative ratio to the population
and business of such country will answer
the purpose better than either a larger or
smaller volume. A more advanced stage of
the science of political economy will no
doubt clearly ascertain what the relative
volume is. If gold and silver should both
ever become insufficient for this ideal vol
ume of money we can easily then imagine
case where fiat money could come to the
rescue.
But to revert to the precise point of your
question: Congress can by its enactments
create no specific value, neither grain of
wheat or dram of silver. Neither can it
create money having actual value, but it can
create money having representative value
only,
Could it create actual value money it
might then enrich the nation or it's citizens
as you suggest If it be fact that the vol
ume of actual money is deficient in a nation
so that it's commerce and business Ian
quiSheS. the representative or pure fiat
money might raise the value of all money to
such a degree as to stimulate and facilitate
general business. In this manner it might
create wealth indirectly in nation. But
when the ideal volume suited to the best re-
suits was reached it's power in even this in
direct manner of creating wealth would end
This dispOses of the power of congress to
enrich the nation Furthermore supply of
fiat money, pure, would require reasonable
limit to maintain even its representative
value. Congress might give a portion of
such an issu. direct to some individual and
it would without doubt enrich them, but it
would be only at the expense of the other
citizens, and hence an in Justice. If given in
equal sums to every citizen, no one would be
enriched one iota, as the money is without
actual value, and its exchange value would
not carry it, but temporarily beyond the
confines of the government, whose legal
tender law supported it. If such a money
could be circulated in outside nations till
there lost or destroyed the country issuing
it would be enriched to the amount of the
money so destroyed or lost. But permanent
outside circulation is a feat never to be ex-
peCted of money even partially fiat. 1 be-
lieve 1 have answered your question. Re-
spectfully. w. j. MCLEOD.
p. Spy the words value" 1 have no.
where meant value absolutely unvarying.
l know nothing on earth having this quality,
though silver and gold seem to somewhat
approach it.
Redwood Falls, July 2Sth, 1896.
A letter which we publish elsewhere
this morning from Mr.. w. j. Mcleod,
of Redwood Falls, is so carefully
thought out and so we'll expressed,
that we can hardly conceive that there
would be any difference between our
correspondent and the Globe when
they had reasoned the matter over to-
gether. Mr.. Mcleod essays to an
swer our question why, if the govern
ment can create values by putting a
stamp on bits of metal or paper, or OF
anything else, it should not give each
of us million dollars. That question
was put to those who assert that it is
the stamp which makes the money
and gives its value. 1t is one which
they cannot answer. Mr.. Mcleod
does not believe anything of the kind
and, therefore, the question is not per
tinent to his view of the subject. HI
seems to us to hold, with appreciative
clearness, principles which are fun
damentally correct. His money O.
Representative" value is, as he say.
himself, money partially fiat. TIL.
silver dollar is fiat coin to the extern
in which its nominal exceeds it's bull
lion value. 1t is true that any natio1