Staunton vindicator. [volume] (Staunton, Va.) 1860-1896, 1896-08-28
The Quantity Of Primary Money
in use Governs Prices,
Editor of Staunton Vlndicator

Editor of Stanton Vandicator:
STAUNTON, Aug. 21st,
1t may not be worth the time and trouble to
correct misstatements made by Gold Mono
metalists, in discussing finance, or even to try
| to instill into their minds some of the 'fun-
damental' principles agreed on by all politi
cal economists.
The writer in letter to Yosu's Weekly
stated truism agreed on by all writers of
| repute on finance, that, under the system now
prevailing where coin is used for redemption
prices of commodities are governed by the
amount of primary or redemption money
used. The editor misstates the position as
follows:
according to the advocates of free silver,
the aggregate value of gold and silver, used
as money, (what they are pleased to term
primary money! must be equal to the ag9re-
gate value of GW other property. and any i'm
pairment of the one necessarily means
shrinkage in the other, inasmuch as the taoo
| must always be evenly balanced
Here are two misStatementS, doubtless I'M
Intentional, but used to build up an answer
to our statement that the present small
amount of primary money in use necessitates
correspondingly low prices and all the evils
attendant on falling market.
| The first misstatement is that Bimetalists
call all the gold and silver used a
| money.
| Under the practice of Secretaries Foster
and Carlisle nothing but gold" is consider
ed primary money. Silver, silver certificates
National Bank bills. treasury notes and
| legal tender notes being held as secondary
money to be redeemed with gold only.
The second misstatement is 'that the az
gregate amount Of primary money must ,ke
! equal to the aggregate value of all Gthe,
which would be e9uiyalsAtyto saw
the Ct SCI gold ii this country (probabiy
less han $3.50, ooOooO) equals the value O
over So, 900, OOO, 900. the estimated wealth Of
the county,.
"We stated, "that the amount of lawful OF
primary money must finally govern prices
Eve refer to thu actual amount in use per
forming the exchange Of commodities)." In
other words that III credit or token money
must be kept in SAFE proportion to its final
redemption fund, (waich fund is not used fol
measuring values, but 1ept out of use to re
deem the credit money AID to pay depositors
which today probably is over Five Billion
of dollars) and necessarily retires all the
gold and silver coined dollars and legal ten
ders issued by the government as redemptive
money leaving in actual use to measure val
ues, only the silver certificates and National
Bank bills issued by the government, less
the amount lost and withdrawn from use,
held in the National treasury and elsewhere
| Which is less than 81 per capita.
The large transactions done by checks OIL
through clearing houses are equally govern
ed by the amount of primary money in use
Gold certificates being issued to clearing
houses specially for that purpose.
I Whenever the redemptive money fails to be
sufficient by less OF confidence OF panic, ther
clearing house certificates are issued by banks
based on bills receivable deposited with a
| committee of their body. These for time,
| takes the place of lawful money. but imposes
| loss and failure upon all country banks and
| their depositors. while the city banks reap a
rich harvest in getting high rates on thei1
credit money, Illegally issued by them, buy
| ing in securities at low prices, to be sold
again when confidence is restored and prices
are inflated by larger volume of money put
| out IOr WSS very purpose.
If the editor of Yosts Weekly Will read
our article to which he replies, he will find
we stated, little or none Of the primary money
issued. is being used for exchanging values;
but only the silver certificates and National
bank notes. la
The comparison made as to the amount OF
redemption money in use in 1873 (when we
were doing business on a paper basis without
redemption fund, gold and all other kinds
being used) is misleading. The money then
used amounted to Sl7.17 per capita, or nearly
three times the present amount in use, with
no reserve whatever Then there was no re-
demption money necessary, for we had sus
pended specie payment and all kinds were in
use, there was no necessity for a redemption
fund Not till about 1879 did we resume
specie payment and retire for redemption
fund the gold previously used, for exchanging
values.
| The writer during that entire period was
doing business in New York and kept sepa-
! rate deposit accounts in bank, of specie and
paper money. The specie being used mainly
for foreign transactions, and the irredeema-
BILE money for domestic bushes. This we
think was customary with all merchants do
ing any foreign business, buying OF selling
| foreign merchandise.
That all writer's of reputation agree that
prices are governed by the volume of money
| used, we make a few quotations Adam
Smith says: From higher or lower prices
of goods in general or of corn (wheat) in par.
ticular, we can infer only that the mines
which at that time happened to supply the
commercial world with gold and silver were
fertile OF barren. Any rise in the money
price of goods which proceeded from the deg
relation OF the value of silver would affect
all sorts Of goods equally, and raise the price
universally third, OF fourth, OF a fifth
part higher, according as silver happened to
lose third, fourth OF fifth of its former
value.''
John Stuart Mill says; ':That an increase
OF the quantity of money raises prices, and
dimunition lowers them, is the most elemen.
tary proposition in the theory of currency,
and without it we should have no key to any
other"
Ricardo, Jevons, Wayland, Walker, and
all other political economists of any reputa-
ton, agree upon this although the editor of
1ost's Weekly would seem to ignore it. Is it
any wonder he is lost whenever he undertakes
to leave his hobby, ''protection,'' and discuss
finance, without this fundamental principle
kept in view.
O. K. LAPHAM